The daily morning journal and courier., 1903-12-23
SCHWAB FILES HIS ANSWER
NEVER 4 PROMOTER OF SHIP
 BUILDING TRUST.


 Bethlehem steel Cempany-Nevsr
 blade Any False Rsprese atations Re-
 garding That Concern-Denies That
 Bonds Were Issued without constd-
 eration.
 New York, Dec. 22.-Charles NJ. schwab to-day filed his answer to the cross-bill of the United States Ship building company and James Smith, IT,. its receiver, in the United States circuit court for the southern district of New York The case is that of the company and it's receiver against the New York Security & Trust Co. and MT. Schwab. After admitting certain of the funda- mental facts which have heretofore been established, MT. Schwab takes up the various allegations and charges of the cross-bill. He says:
 T deny that ever was or became one of the promoters of the shipbuilding company, or that I and a number of persons associated with me acquired the capital stock of the Bethlehem Steel company as averred in said cross bill
 T admit that the property of said Bethlehem Steel company was on the 18th day of August, 1902, encumbered by first mortgage executed by the Bethlehem Iron company, the predeces- sor in title of said steel company, to secure bonds aggregating one million three hundred and fifty-one thousand dollars, being interest at the rate of per cent. per annum and purchase money mortgage executed by said steel company to secure the payment of seven million five hundred thousand dollars, bearing interest at the rate of per cent per annum."
 Emphatic denial is made that he ever conceived any scheme of trans ferring to the shipbuilding company the stock of the above company at an ex- cessive rate or upon conditions permit ting him or his associates to control the shipbuilding company or to absorb for his benefit '.all of its property and as- sets. to the injury of it's creditors and of it's bona fide bondholders and stcok- holders, or otherwise. I deny that with any purpose of accomplishing such in- tent and purpose, or otherwise, or any associates of mine represented to the shipbuilding company that the said shares of stock were worth the sum of thirty million dollars, that the said steel company had during the fis- cal year ending July 31, 1902, made q net profit in it's operations amounting to the sum of $1,441, ,20S.03, that it's said surplus assets on July S1, 1902. amount cd to S4.11s. .ooO.46."
 MT. Schwab denies that he ever made any false representations regard ing the Bethlehem Steel company and denies that his stocks on July SI, 1892, was not worth to exceed $7,500000. He believed that the net earnings of the shipbuilding company for the twelve months ending July 31, 1902, exceeded $1 600 900 and that the surplus current assets exceeded $s,50O,Ooo. MT. schwab repudiated any connection with John W. Young and says he never caused the latter to propose to the shipbuilding di- rectors to transfer 500,000 shares of Bethlehem stock, ten millions each of bonds, preferred and common stocks of the shipbuiIding company.
 He says: T admit that I am the owner and holder of upwards of nine million dollars of the ten million dol- lars of the bonds and upwards of nine million dollars of the ten million d0l- lars of the preferred stock and upwards of nine million dollars of the ten nil- lion dollars of the common stock of the shipbuilding company issued for the <@1 55 that any associates of mine are the owners of the remainder of the pre- ferred and common stocks so issued for the stock of the Bethlehem Steel com pany except that I sold and transferred some of said bonds and stocks to third parties.
 MT. Schwab is of the belief that the stocks received in exchange for the steel stock did not exceed the value of the steel stock. He denies that the bonds were issued without consideration.
 The defendant ayers that if the first mortgage bonds be declared null and void or be repudiated as obligations of the shipbuilding company the assets of the company, including the shares of the steel company, will greatly exceed the total amount of it's remaining debts and obligations, and will be ample, not only to pay the bonds secured by the mortgage of the New York Security and Trust company, but all other claims whatsoever. besides substantial divi- tdend upon the stocks of said shipbuild- ing company"
 MT. Schwab says the shipbuilding company is not entitled to enforce any alleged indebtedness against him. He ayers that neither he nor his associates conspired with the dummy directors of thes hipbuilding company to have in serted in the mortgage to the security and trust company and in the charter of the shipbuilding company, provisions which would give him or them absolute control of the shipbuilding and steel companies, with the power to so manip- ulate the corporations as to cause de- fault in the payment of interest, thereby defrauding creditors, stockholders and bondholders of the shipbuilding com pany.
 Mir SchWab admits that according to the terms of the mortgage to the securi- ty and trust company, as trustees, the latter should assign the proper persons a sufficient number of shares held by the trustees to qualify such persons to act as directors or in any official rela-