The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1904-01-07
MARIE CAHILL.

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his connection with the affairs of the
Bethlehem Steel and United States
hipbuildng companies, Schwab de-
tails the history of his relations with
the two concerns. He says that after
making a contract for the purchase of
the entire capital stock of the Bethle-
hem company he communicated with ].
p. Morgan & Co., stating that he was
willing to turn over the contract to the
United States Steel Corporation with
out any profit whatever"
Morgan & Co. assumed the contract
as syndicate manager, with authority
to turn it over to the steel corporation.
If, however, the Morgan firm disposed
of it to other parties lIr. Schwab was
to receive the greater part of the pro-
fit. He says that on June 8, 1902 Lewis
Nixon and D. Leroy Dresser asked him
to underwrite S9,OOO,OOO first mortgage
bonds of the United States Shipbuilding
Company. Prior TO that he had no con-
nection with any such combination. On
this matter he continues: Nixon and
Dresser informed me that the properties
We're of great value; that they had been
appraised by competent appraisers"
In view of this Schwab took the
underwriting upon the same terms
as other underwriters, providing the
new company would give preference
tC the steel corporation in the pur-
chase of materials" Subsequently the
bonds were offered to the public in the
United States and Europe.
On June 1, 1902, Nixon and Dresser
told Schwab they wished to acquire
the Bethlehem Steel Company in order
to transfer it to the shipbuilding com
pany. making payment therefor in
bonds and stock of the new company.
They offered $1OOOO,OOO each of bonds,
common and preferred stock. Schwab
then opened negotiations with Morgan
&; Co., offering to provide the capital
necessary to reimburse them, the ac-
tual cost of the shares of the Bethle-
hem company to the syndicate and
$5,O00,000 in stock This offer was ac-
cepted, and Nixon and Dresser We're so
Informed. Then followed Schwabs ill
ness and his absence from the United
States Upon his return he found the
shipbuilding company in financial diff
culties, and learned for the first time
that many of the representations in the
prospectus of the shipbuilding plants
We're false.
Last April George r. Sheldon and
Charles w. Wetmore of New York, rep
resenting a syndicate which had pur-
chased $1S, $50 900 of the bonds and stock
of the shipbuilding company, conferred
with Schwab, looking to a recognition
of the company Schwab said he desir-
ed to take back the Bethlehem stock
returning to the shipbuilding company
the bonds and stock he had received
Subsequently, for that purpose, he pur-
chased from j. p. Morgan & Co. $4,000,
600 Of stock which had been delivered to
them for the United States Steel Syn
dictate, and arranged to acquire all the
remaining bonds and stocks. Schwab
adds. Il was then and have ever since
been, and am now, able and willing to
return all the securities received by me
or Messrs. Morgan & Co. and to rescind
the whole transaction, and 1 hereby
tender the same for that purpose"
Sheldon and Wetmore declined to con-
slider such a proposition, as they stated
the principal value Of the whole enter
prise consisted in the Bethlehem Com
pany. Schwab then agreed to a plan
of reorganization with them, suggest
ing an assessment upon frst-mortgage
bondholders. He said:
LAS to the charges in the cross bill
that I acted in collision with the re-
organization committee of the ship
building company i'm an attempt to
force the insolvency Of said company
and to wreck it. I aver that such char
ges are false and malicious. aver that
James Smith, Jr., receiver of the ship.
building company, knows that such
charges are untrue.
Il am informed and believe thai
upon such an examination and apprais.
al it will appear that the net working
capital of the seven constituent com.
panies excluding the Bethlehem Com.
pany, does not exceed the sum of 81,
100000; that a great part, if not the
greater part thereof may be wasted and
lost by the continuance of the receiver.
ship, and that such shipbuilding plant.
| cannot be operated and kept working as
going concerns without the addition OF
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