The Topeka state journal., 1904-06-13
FATE OF A MONOPOLY.
Cripple Creek Railroad Killed the
Goose That Laid the Golden Egg.

Cripple Creek Railroad Killed the
Goose That Laid the Golden Egg.
No better demonstration of the self
destructive tendencies of monopolies
has been shown to the financial com
munity and to the public at large for
some time than that afforded by the
Denver and Southwestern Railway
cOmpanys ignominious collapse, which
has just resulted in the bringing out
of the most radical plan for reorganiz-
alton of which there is any record.
The Denver and Southwestern was
formed in 1899, so that its career has
only lasted for six short years. Its for
nation was brought about by the con-
Solidation of four small railroads, which
operated some eighty-four miles of
track in the Cripple Greek mining reg
ion. 1t was capitalized on a liberal
basis, with S3.000,0OO common and 81
OOO 600 preferred stock and a funded
debt of S5,414.000. The track of the
road was mainly narrow gauge, with
many spurs to mines and entirely de-
pendent for traffic on the mining enter
prises in that valley.
The men who controlled the destinies
Of the road were: w. K. Gillett, who
was the president; c. F. Aver and NJ.
Rollins of Boston; A. Kessler J. P.
Cobb, G .Dunscomb and John W. Her
bert Of New York; K. K. McLaren of
Jersey City, E. w. Rollins of Denver,
A. Jarvis of Toronto, and w. F. Day of
New Haven. Few of these men are
prominent in the administration of
railways. With the exception of the
president of the road, John w. Herbert,
and A. Kessler, they are not prominent
in the financial world. Herbert is a di-
rector in several smaller railroads and
Kessler is mead of the banking firm of
that name and also a director in the
Cincinnati, Hamilton and Dayton.
These men, however, proceeded on
the theory that the mining companies
were a good thing, and in the knOwl-
r-r.11T %
oily of the transportation facilities in
the Cripple Creek region they put the
rates on freight and passenger traffic
so high that the mine owners began to
protest The railroad company, how
ever, turned a deaf ear to all the rep
resentations of the men on whose bust
ness it depended for its receipts and
continued to charge what the miners
considered eXorbitant rates.
Besides charging excessively for the
service it performed the railroad gave
such poor accommodations that the
burden finally became too much even
for the long-suffering mining compan-
les. They threatened to build a road of
their own, hoping that the threat would
bring the railroad company to terms
The managers of that road were, how
ever, under the mpressiOn-Which later
proved to be costly and erroneous-that
this threat was only a bluff So they
proceeded in their accustomed monOpO-
listic ways until they woke up one
morning
were going to make their threat good.
The rival road was built and at once
began to cut the rates so that the bus
mess of the older road began to fall OIL
alarmingly. In order to retain even
share of the traffic the Denver and
Southwestern was compelled to make
the same low rates as it's competitor
but even then it failed to get more than
a small share of the business, the mine
owners preferring to patronize their
own road
In this way earnings dwindled rapidly
and soon the railroad was no longer
able to pay dividends on its capital
stock, which had been created on the
basis of the earnings computed at the
monopolistic rates. The road which in
1900 and 1901 had been paying 8 per cent
on the preferred and 6 per cent on the
common was in 1902 compelled to sus-
pend the payment of dividends entire
ly.
In 1902 it did not even earn enough
to pay interest on the funded debt, but
a surplus carried over from former
years enabled it to tide things over un-
til 1903, when, bad earnings continuing
and no surplus being at hand on which
to fall back, it had to default on the
interest of the mortgage bonds.
Having thus killed the goose that laid
the golden eggs, there has now been
announced the plan of reorganization
which not only wipes out all the stock,
but reduces the first mortgage bonds to
stock in the new company which is to
take the place of the Denver and
southwestern So drastic is the reor-
ganization that the bondholders do not
even get all preferred stock, but have
to be satisfied with a distribution of
partly common stock.
When the road was first organized
the belief seemed warranted that the
monopoly it enjoyed would, if wisely
used, guarantee the prosperity of the
railroad for many years, but the desire
to earn dividends on watered stock
made the management shut its eyes to
the possibility that it might lose the
monopoly. It's greed proved its undo
ing-NeW York Times.