New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1903-06-24
RAPS SHIPBUILDING co.
TNTERHYER USES LASH.
Judges Statement May Shoe Re
ceiuer Is To Be Named.

T-ri+ad States Cfrcuit Court at Newark yesterday
the hearing begun on Monday at Trenton. of argu-
ments on the application for a receiver Tor the
United States Shipbuilding Company. brought by
Roland f. Conklin Max Nathan Jacob w Mack
and James d. Mcguire. Robert H. McCarter' ot
Newark; Charles l. Corbn. of Jersey CITY ana
Charles c. Deming appeared for the Defendant IL
was rurnored in the of the day that Il re-
ceiver should be appointed. United States Sen
ator James Smith IT. might be selected. Judge
Kirkpatrick said 10 Tribune reporter that score
of prominent want the position Of receiver
The compliments were in court. and so was
George R. Sheldon. chairman Of the reorganization
committee of the shipbuilding concern; but A =
Gary. the treasurer of the company, ana Lewis
Nixon the president, did not appear
When Mr. UnteImyer began his argument MT
McCarter asked leave to present af1davits or hold
ers of 100000 of the first mortgage bonds. all OF
whom desired to 1oin in the defence under The re-
organization plan. Messrs. Lindabury and Ohter-
myer objected but Judge Kirkpatrick said the
addition of $4,000 bonds to the S0GoWo aredoS
represented by Mr.. Sheldon would make no special
difference and he admitted the new aftdaVits
THREATENS TO PROVE INSOLVENCY.
Mr. Untermyer then said he would show by facts
IN the case that the corporation was insoiVent'
and he hoped to prove attempt to wreck IT. he
said he would try to show insolvency uhoer tile
statutes Of New-Jersey, and If insolvency could
not be shown he believed the attempt to wreck the
corporation was so plainly evident as TO DEMAND
relief in equity.
..The corporation was conceived IN iniquity,
he said maintained by fraud and cheat, and Is
ending in crime and 1 believe my clients are per-
forming a public duty. This corporation was or
ganized as a mere paper corporation WIN
CAPITAL Of 5000 one year ago. The plaintlHs say
they were induced Ia June 1902. to SUBSCRIBE Ior
these bonds and stock upon prospectus WHICH
was false in every particular.
THE circular presented TO the New-York STOCK
Exchange was the statement which induced the
compliments to invest in the bonds OF the CUM
pany"
..There IA nothing warranting that statement in
the bill Of complaint" interrupted Mr.. Corbin
81 will show that there IS" replied Mr. Inter
myer, "by reading copy OF the circular WHICH Is
made part Of Mr.. Conkn's affidavit
Mr. Untermyer turned to his papers ana IN
moment handed the circular over to opposing
counsel. who thereupon made no further remark
WORKING CAPITAL. OF MILLIONS
Mr. 7rntermver pointed out that the prospectus
named working capital Of 100000. and now
the defendants admitted 1t was little over 5000
coo and he asked why the directors had not cor
rected the error or informed the public OF 1t In
some way. The prospectus put the earnings al
g 225 900 but In the October statement this was
reduced 10 81 600 and in the reorganization state
ment the earnings for eight months were ony
$685. 900 This after the stock had oeen SUD-
scribed for. Finally it was found the company
could not go on, and then the zeal Win CharISs ~
SChwab was made.
Referring to the purchase by Mr.. Schwab OF the
Bethlehem Steel Company and the subsequent
execution OF a 100000 mortgage as collateral
guarantee on his sale and transfer of that prop
ertv TO the United States Shipbuiding Company
Mr. Irntermyer declared it as picturesque
proceeding as any of those made by the directors
of the Sixth National Bank who bought and sold
the stock of their own corporation. He added;
What had the creditors Of the s deff peda
was It to the complainant in this suit? The RECORDS
fh9T that cn9 59Ta Was and this prop
erty was turned over to for sSoOoo.oo0 after Mr.
securing this 100000 mortgage the very prop
erty 50 transferred.
Mr. Untermyer asserted that after the SchWao
deal the shpbuildng company sent out later imam
cal statements about the concern, and ne declared
there was no doubt that the directors authorized
these statements He contended that Mr.. schWao
controlled the affairs of the corporation and that
this was Mainly shown by the attitude assumed by
his interests in the present suit 1t was natural
he said that he should direct its affairs to his own
best interests
we hold that the corporation" he said. as in
solvent as business corporation in that it is I'M
able TO meet its obligations and. secondly. We
hold that it is insolvent in broader sense in that
it's assets are far less than its liabilities
Mr. Untermyer then proceeded to cite cases on
which he depended in his contention that he had
established insolvency
Mr. Irntermyer contended that stronger proof
of insolvency could be submitted than the proposed
plan to raise S3OO000 by first mortgage in place OF
second mortgage, and $500.00O new preferred stock
and s., eco coo of common stock
CALLS sCHWAB's ATTEMPT UNJUsTIFIABLR
The attempt of Mr. Schwab." he said rs one of
the most unjustiiable attempts to wreck corpora
ton that ever heard Of
Mr. I-ntermyer asked who was to control the new
company which the plan for reorganization pro-
posed to take the property. and answered that
it would be Charles NJ Schwab. two of his lawyers
and Mr. Sheldon and Mr.. Wetmore all members of
the reorganization committee In spite of this. said
he Mr. Schwab had not seen At even TO answer
the charges of this suit
In closing, Mr. Untermyer declared that less than
year ago the company asserted it had cash assets
of s10OO0OOO but that by series of brilliant ex
pIoits without parallel in the realms of higher
finance the treasurer of the company was forced to
state that by reason of the use of this money for
the purchase of plants and subsidiary corporations
the company was unable to pay maturing
fixed charges due August SOIL 900 and S421. 900
additional liabilities due outstanding notes and
accounts By its own admissions. Mr.. Untermyer
declared the defendant had proved the insolvency
charged by the complainant
Mr. Corbin began the argument for the de-
PENDANT corporation. He said he proposed to show
that insolvency had not been proved, any
fraud or mismanagement or waste of assets. IN
order to have a receiver appointed, fraud and In
solvency must be proved. 1t also necessary
to show that part of the business had be
discontinued His clients maintained that the APP
pontment of Il receiver would be detrimental to
the interests of the stockholders and creditors.
There was no proof whatever Mr. Corbn con
tinued, of the contention that Mr.. Nixon organ
lied the company with the intent defraud the
public nor any that the officials of the company
were responsible for publications in the newspapers
by which the complainant alleged ne was inter-
ested In making his purchases of stock The pros
pectus to which the complainant referred. he said