The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1903-04-17
Financial Operations of an Unusual
Nature That VIII Interest Pro-
mOters and Stockholders.
NOVEL WAY TO PAY DIVIDENDS
ELEVEN MILLION OF BONDS ISSUED
BY THE METROPOLITAN.
Proceeds Turned Over to the 1nterur-
ban Company to Enable 1t to Meet
Guaranteed Dividends.

NEW YORK, April 16.-The Evening Post
to-day prints the following: The complete
findings Of Eugene A. Philbin, formerly
district attorney of New York county. as
for certain stockholders of the Met
ropontan Street-railway Company. were
made public to-day. This paragraph oc-
ours: 1T is clear. therefore, when the
company's own statements are analysed,
that the interurban lease was calculated to
provide and has actually provided many
millions of dollars in excess of the honest
requirements of the Metropolitan conf
pany." The report also finds that in 1888,
1899. 1900 and 1901 the Metropolitan company
stated in its annual reports to the State
Railroad Commission that it had expended
for construction and equipment a sum in
cash exceeding by millions of dollars the
actual sum in cash which is proved by the
company's general balance sheets to have
been so expended
Mr.. Philbin says the company asked for
$23, 00o, 900 to pay the unfunded debt incurred
In the purchase of stock of the Third-ave-
nue. company and to defray the expense of
extending the electrical system to upwards
Of eighty miles still operated with horse
cars, and upon analysis the report showed
only s14. GA was required for these two
purposes. The report further says the
company proposed to create a refunding
mortgage to secure an authorized issue of
SIS, 100000 of per cent OBSERVATION-DISCLOSURES
refunding bonds, of which about $4,000 900
were to be reserved to retire and refund the
twenty-seven isues of existing bonds Sc
cured by liens upon the various parts of the
Metropolitan system, excluding the Third
avenue lines. The total issue of such is
co., and not about s54.OO0.OOO 1.-The differ
ence," the report says, between S096, 900
and se5, 0OO, 900 is SIG, SO4, OOO."
GREATER THAN APPEARED.
The report continues that, while $65, 00O, 600
was provided for the Central Cross-town
Railroad and its outstanding bonds and for
change Of motive power, a new $1,000, 600
mortgage was issued on the Central Cross
town Railroad lines to take up that COM
pany's outstanding bonds and pay for
changes of motive power from horse cars
to electric traction, so that the increase in
bonded debt. instead of being about $11 Co.,
600, as appears to have been pretended,
turns out to be exactly $19, SO4, 900.
In 1900 the company, says Mr.. Philbin.
made application for an increase of capital
stock from s45,O00,0O0 to $52.0OO,OO0. OF this
Increase $3OOO,OO0 1t was claimed, would be
required to pay the expenses of the change
and 100000 to pay the floating indebted
ness of the company contracted for the
purchase of stocks in other street-railroad
companies in the city. The sum of $40, 500 42O
was received from the sale of this addition
al stock. which was offered to the stock
holders of the company at 160. In 1901 s., 700.
600 was expended on new construction and
loans amounting to S,1A.906 were paid.
the purchase of the Third-avenue Railroad
Company was contaminated. shows
that loans to the amount
cash was disSarsed e0n'f for sto aRs
and bonds of other companies in the
sum of 7,402,2 S4 1T is apparent, there
FORE" says the report, when all these facts
are considered that the sale of 5000 900 of
new stock provided sufficient sum of
cash to pay for new construction and to
pay In full the debt incurred in 1900 for the
purchase not only of Third-avenue stock
but of other street-railway stocks"
This follows the statement that the COM
pany. in 1902 asked for s23. 900. part of
which was to be used in paying the un-
fact" Mr.. Philbin says, 1T can be con-
clusively shown by the companys sworn
statement that the Metropolitan on that
of unfunded debt Incurred in the purchase
of Third-avenue stock"
THE INTERURBAN'S LEASE.
Dealing with the interurban's lease, the
report says: while the Metropolitan COM
pany has been continuously since the date
of the lease and is at. present a creditor
of the interurban company, yet in July last
the Metropolitan company issued $i1, 0OO, OO(
of its own bonds and turned the proceeds
thereof over to the interurban company In
accordance with the arrangement described
in the interurban circular, and as agreed
upon by the two companies in the lease
1t is clear that this ST., 100000 was provided
for the purpose of enabling the interurbar
company to carry out its contract to pay
per cent. guaranteed dividends on the $50
100000 Of Metropolitan stock for the inter
urban company has no earning capacity
of its own, and its only earnings are rep
resented by the earnings of the Metropolis
tan company itself. which never had beer
and are not at present equal to per cent
on it's capital stock. Accordingly tn,
anomaly is presented Of the Metropolitan
company, although creditor of the inter
urban, increasing its own liabilities by
| $l1, 900 900 so TO enable the interurban com
| pany to carry out its guarantee of payins
| dividends upon Metropolitan stock"
During 1898, 1900 and 1901, the report says
| the company reported expanding for con
4
| the actual expenditures, according to tn,
| balance sheets, were Sc, 355,572
On the subject of excessive valuation O
| investments Mr.. Philbins report says: ''Th
| total value of investments set out in tn,
general balance sheet of June 30, 1901 wa
s21. 6S3, 1886. and year later $50 565, All 76
| These values are represented by more thar
SAP, 100000 of Metropolitan stock issued II
| 1897 for the requirement of a part of tn
| stock and bonds held at present as invest
| ments and by the cash proceeds of othe
| shares of stock devoted TO the purchase O
| such Investments. The total of such stool
| issued Is about s20,000,0O0 face value, oil
| which the company is paying per cent
dividends, or at the rate OF 81, 400. 900 a year
| But the company's income from these in
| vestments, as its own annual reports prove
is but about 100000 a year. In other words
| the company is paying out annually 81, 400.
| 600 to receive in return 100000. No on
could possibly doubt. after consideration o
| these and other pertinent facts bearin
| upon the subject. that the company's In
| yestment account has been manipulated I
| the advantage of some person or persons
| for il is clear that If the company is losin
| over 100000 annually through these In
| vestments some one is necessarily profitin
| to an equal extent.
Mr. Philbin contends. the Post continues
| that entries on the company's reports O
| 500. 900 in 1900 and $2035.000 I'm ] 7. pal
| by lesser companies" are preteI.-ed. II
/ saws none OF the lesser. companies wa
| Obliged to pay the Metropolitan any sur
| of cash on account of additions and better
| ments On leased lines. In conclusion h
| saws calculations and estimates clearly in
| dictate that the Metropolitan Company ha
| change OF motive power. exceeding by NOR
| than se 90 90 the true cost thereof.