New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1904-01-05
SAYS SCHWAB CONSPlRED
SMITH CHARGES FRAUDS.
ShpbHilding Receiver Calls s16,-
900 900 Mortgage Illegal.

Trenton. y. T., jan As reoeiser OF the United
States shipba:!diug Company and the Samuel /.
Moore E. Sons Company. Ia mes Smith. r., to-day
flec answer ana cross hin the suit Instituted
by the Mercantile Trust Company Of New-York as
trustee Tor the sl6CJoGo0 mortgage and deed OF
trust executed BY the original directors OF the
Tinted States shipbund:ug Company, who have
become famous the ''cun1ny'' directors
lie challenges tie validity Of the entire proceed
:rPs ~ these directors. Both in his answer and
cross bill he insists that The issues OF 100000
preferred stock and 100000 common stock IN
connection with the Bethlehem purchase were
fraudulent and void and that The mortgage and
deed Of trust were executed By fraudulent con-
Fprscy. IN which Charles II. Schwab. his assocI-
ates suo the complainant trust company We're
mutually engaged.
Mr. Smiths concluding prayer IN his cross bill is
thai Nj Schwab all OF his associates in the al
legged Wreckiug scheme and the compliments he
required 10 appear before Judge Andrew Kirk
patrick % the United States Court. TO testify and
give answer 20 such matters may be pertinent
q the issues set forth.
The answer tells Of the purchase by Charles NJ
schwab OF the Bethlehem Steel Company for $40
90 cash. his assumption OF liabilities TO mort
cages upon that property. making the total maxi
mum price % the great plant $4,000. These fol
lowing charges are then made
IN or about June. 1902 Charles N. s-hwab and
his associates conceived the fraudulent scheme Of
fraudulent consideration. and upon such conditions
beneGt ali Of Us ,,roIri and ssets 10 the injury
stockholders and thereupon, for the purpose of a.
complishing such intent and purpose, Charles N
represented 10 the defendant shpbuildinS company
100000; that the steel company had, during The
fiscal year ending July q. 1902 made a net pro1t
amounting 70 PCS %; that its surplus assets on
July q, 1902 amounted 70 the sum Of aoll.olb IS
whereas N fact the TeresenIations We're Ease aIlG
sTsb 5 Sis ss. h, t he SOCK bf1 voyh
he Of -1gF
on INV ri Iqa nor EXCEEDING The sum OF s. o56 0y5
$1,000 So o., ''-' 'e-s'
After relating how John ". Young proposed 20
the dummy" directors the plan OF organization by
which SlO0JoO00 OF preferred stock and $1,000 90
Of common stock was turned over for the 100000
shares of stock OF the Bethlehem Steel Company.
the answer says that the preferred and common
shipbuiidng stock received by Charles NJ Schwab
and his associates represented an amount greatly
exceeding the value OF the Bethlehem stock trans
ferred and constituted fun payment for it. and the
S0O]8000 Of bonds which We're issued to SchNab
and his associates were issued without considera-
tion ana Illegal and void, and the $1,000 90
mortgage executed 10 secure the bonds likewise be
came void
The answer charges fraud and conspiracy be-
tween Alr. Schwsb his associates and the dummy"
directors. whereby Mr.. Schwab and his associates
were enabled 10 obtain absolute control OF the
sbipbuildiRg company and Of The Bethlehem COM
rauy, with power 10 manipulate these properties
as 10 cause The shipbuiIdinE company 10 be IN ap-
parent default IN the payment of interest upon It's
bonds and 10 apparently insolvent, and thus
20 make it possible acquire all the properties
Of the company for q sum much less than their full
value. anG defTaud the creditors
The cross bin says ia part
The assets OF the shpDuildng company are less
IN value than its debts 10 the extent or at least
100000. Tho capital OF the sliphuildlnS company
paid in was. 10y reason OF the acts = Schwab and
those coufedeTated with him. tuSuf Gent 10 satisfy
its debts and obligations.
The cross bill prays that the NeUYork Security
and Trust Company and Charles N. schwab be en-
3oined from foreclos.rg or attempting TO collect the
mortgage or deed o. trust from enforcing any OF
the bonds secured thereby. ana from aTallnG them
selves Of any Of the alleged defaults Of the United
States Shipbuilding Company in the payment OF H.
terest sinking fund charges thereof or Other