The sun. [volume] (New York [N.Y.]) 1833-1916, 1903-10-08
mp cos DEAL WITH SCHWAb
roy DRESSERS STORY TOLD
nv THE WITNESS STAND.
. Tells OF the Purchase OF tho Bethlehem
steel Con,pany--AEreement by which
the stock Of Mr.. Schwab and j. r.
worxan a. Go. Was to He Sold First.


n Ia Roy Dresser was witness yeeter-
aov in the proceedings brought by some
s,st mortgage bondholders to secure the
commitment of a permanent receiver for
the United States Shipbuilding Company,
a, Senator James Smith, Jr.. having al
ready been made temporary receiver. A
bearing was held by United States Examiner
Henry D. OHphant In the Office of Guggen-
he,r,er. Utermyer & Marshall, counsel
,or the complainants. Mr.. untermyer
conducted the examination and Mr.. Dresser
vas under cross examination by w. D.
Guthrie when the case was adjourned for
the day.
Mr. Dresser began his testimony by
telling Of how the scheme to underwrite
A. 600 of the United States Shipbuild-
inp Company's bonds by the Trust Com
many of the Republic, of which he was then
nr,4ident originated. He said that he
frst learned of the plan Of the ship COM
panv when Col. John j. McCook proposed
that the trust company underwrite that
amount of the bonds for the Mercantile
Trust Company, also act as transfer agent
of the stock and eventually be the hank
of deposit for the ship company. Z
1t was understood then that s3,OOO, 900
had been taken in London and $4,000, 900
in Paris. The London scheme fell through,
Mr.. Dresser said, and his company agree d
10 take sl,75O,OOO more on the represent :
ton that the French capitalists would take
like additional amount.
Dresser said he had no written report
on the value Of the plants, only statements
made by John w. Young and Lewis Nixon.
The prospectus to the public, he said, was
drawn mp at a conference OF Col. McCook
James Duane Livingston, Mr.. Deming,
counsel for the ship company. and himself,
on information furnished by Young and
Alexander & Gresn.
The witness testified that almost daily
assurances that the foreign underwriting
would be completed were shown to him by
Col. McCook in the form of cables from
c. B. Alexander, then in Paris. All of this
correspondence was offered in evidence by
Mr.. untermyer, subject to veri6cation, as
Mr.. Guthrie refused to concede that 1t was
correct.
The entire underwriting was not to be
binding, said Mr.. Dresser, unless all the
$4,000 900 of bonds were sold, and the en-
tire response from the public here was not
over 5000 900.
Mr. Dresser said he didn't know whether
Col. McCook or Mr.. Deming had furnished
the directors names, but it was Col. McCook
who asked him to be director. After Mr..
Schwab came into control there were some
changes. Mr.. Dresser, when asked whether
some of the men named in the prospectus
we're ever directors. said he didn't know.
The Trust Company Of the Republic, the
witness said, got into trouble by taking
up the bonds of the French underwriters
on assurances that they would be paid.
whereas they never were paid.
Q. Who fixed the capital of the shpbuild-
ing company at $50, 09o. 900? A. Col McCook,
contracts nor the prices at which the different
concerns went in. We had nothing to do
with the promotion OF 1t.
Q. Was the underwriting scheme COM
peted before the transaction with Mr. Schwab?
A. 1t was. They had no connection.
Mr.. Dresser said that on June IL, 1902,
he and Mr.. Nixon were lunching at the
Lawyers Club, when Mr.. Schwab came over
to their table and asked them why they
uluQ Duy Lilo DtIlLltutH olccl WOIh5.
The witness then proceeded:
controlled BY the Steel Corporation and
wasn't for sale. Mr.. Schwab said that he
controlled 1t; that it was for. sale. and that
he thought the proper place for it was with
M It '1 WAS Arranged ed that Mr. Nixon and
were to meet Mr.. Sohwab next morning at
his office. We went there alone Mr.. sohwab
should belong to the shipbuilding company
because OF the armor plate industry, and
would be Of more strength there than with
s ee ne of s soe
and that he thought he could get those.
Q. Did he say he owned the company or
controlled it.? A. He said he owned It.
Q. Did he show you any statement OF It's
affairs? A. Not that day. He told us to
come in the next day, as he had to communi-
cate with Mr.. Morgan. who, was in Europe.
that the stock had cost him .s7,200,0oo or
thereabouts, and that Its earnings. and &C
cumulated interest would bring this up to
81 100000 That was what he wanted,
He said there were some liens ahead Of
his stock, and gave US the figures. He agreed
to take, the slo0ooooo bonds at 80 ana said
he would leave the stock bonus to Nj M Mixo9
He said he thought this would be salts
G s5 but R to f S o IN 'f have nef t 6 nave
give 81. 500 900 Of each kind to J. P. Morgan
/ Co. He did not say what for then.
Mr.. Dresser said that he and Mr. Nixon
thought it good bargain, on the state
ment, made by Schwab and Jones Caesar,
accountants, and that as the earnings were
sl,i0O,O00 a year and only $780, 900 would
be required to pay interest on the bonds,
it would give the shipbuilding company a
million more in earnings.
Mr.. Dresser said Max Pam was asked to
draw up the contract, but that when this
was submitted few days later 1t was found
to be- very different agreement from
what they had talked over. He continued:
Instead of Mr.. schwab selling his stock
Tor the securities agreed upon. the contract
WAS between myself and Mr.. Nixon on the
one hand and Morgan 4 Co. on the other,
from Morgan X Co. for S,25O.OOO, objected
TO this, and said 1t wasn't what we had agreed
upon and that I wouldn't obligate myself.
Mr.. Schwab said that for personal reasons
i would have to be done that way and that
he would supply us with money. l finally
agreed to this II il was changed to an option.
and he consented
The contract, dated July 2, was put in
evidence. 1t provided for the sale Of
29sgl0 shares Of Bethlehem steel stock
by Morgan h Co. as syndicate managers.
The witness said that Mr.. Schwab agreed
that on the day the option was to close,
Aug II. he would supply the money to
Nixon ard himself; that Morgan Il Co. were
to receive this tor the shares, and that he
and Mr. Nixon We're To turn over the shares
70 the shipbuiIding company. get the securi-
ties and turn them over to Mr.. Schwab.
- ON the day of the closing said Mr..
Dresser, the transaction took place in
Mr. Morgan's Office. We had asked for
a postpOnement. and they had refused to
fhrz, ,yI r.. Do hn tod