Evening star. [volume] (Washington, D.C.) 1854-1972, 1905-01-30
LOCAL CORPORATIONS
Message of President on the
Subject.
SENATOR GALLINGER
TELLS WHAT HAS BEEN DONE BY
DISTRICT COMMITTEES.
House Bill Which Passed on 23d In
slant Better Than Senate
Measure.
SENATOR GALLINGER

porations in the District Of Columbia was
the subject of consideration in the Senate
today. This matter was brought to the
tice of the Senate by a message from the
President, and Senator Gallinger' stated
that he had bill which would remedy the
abuse complained of ready to be intro
duced.
The Presidents message, which was read,
follows:
Il have been informed that the atten-
ton of Congress has been drawn to the
effect of the law authorizing the formation
of corporations in the District of Columbia.
The evils growing out of the existing law
were brought to my notice by a member Of
the bar of the District and 1 directed the
Attorney General to make to me a report
upon the subject.
From that report it appears that with
in the past two years there have been in
corporated under the laws of the District
2,211 companies, with total authorized
capital of nearly $4OCO,COoOOO. Many Of the
companies thus Incorporated represent no
actual investment, and may be used by un-
scrupulous persons to perpetrate frauds
upon the public and upon those who may
be deluded into investing in their stock. The
increase of these corporations is going on
with alarming rapidity. On one day of last
cles for the Incorporation of fourteen COM
panies. Another person presented for filing
articles of Incorporation for thirty-eight
companies. In each of these the same per-
sons were named as trustees.
''The aggregate authorized capital pro-
posed for these thirty-eight companies
amounted to S43, 100000 On one day of this
week one person presented for filing arti-
cies of incorporation for f1fty-four COM
panies, in each of which the same three
persons were named trustees. The au-
thorized capital proposed for these COM
panies was over $500, 900 OOO The Attorney
General closes his report with the statement
that:
The law governing the formation and
control of corporations in the District of
Columbia is not, as it should be, a model of
its kind but the other hand is hope
lessly vicious
The evil growing out of these laws is of
such magnitude and the necessity for ac-
ton is so urgent that recommend to Con-
gress the immediate consideration of the
subject. The case calls for the most radi-
cal remedy. The right of incorporation
| ought to be suspended at once until Con-
gress can devise proper legislation for
| guarding its exercise. Moreover measures
| ought to be taken to annul the charters
which have already been issued, either by
| their direct repeal, if that be possible under
| the Constitution, or by what other legisla-
| tive action may be deemed necessary. l
doubt not that Congress has already seen
/ the necessity of replacing these vicious in
| corporation laws by those which are gov
| erned by sounder principles which will for
| bid the issuance of stock bonds in eX-
cess of the actual investment and permit
proper public supervision. When such a
law shall have been enacted all legitimate
| corporations which may have been formed
| under the existing law may readily be re-
Incorporated.
(Signed) THEODORE ROOSEVELT"
Senator Gallenger's Comment.
"The committees on the District of Co
| lumbia of the two houses" said Senator
| Gallinger, after the Presidents message
had been read, have not been Indifferent
| to the abuse that has been going on in the
| District in reference to the Incorporation of
| companies under the general law 1t will
| be remembered that a distinguished COM
| mission of lawyers was employed to pre-
| pare a code for the District, and the only
! law we have on that subject now is en-
| braced in that code. 1t is under the terms
| of the code that these companies. have been
| organized.
| 1.-The committee on the District of Column
| bia of the Senate has had this matter under
| consideration, and on the 9th day of April,
| 1Jbf, Dill WAS IdNOTdDly reported the
] committee by Senator Dillingham;, propos-
| ing to amend section 552 of the District
| code, relating to corporations.
| 'It escaped my attention that that bill was
| on the calendar or / should have asked for
| its consideration before now. Perhaps it is
| well that l did not do SO for the reason
| that the House very recently passed a
bill on the same subject. which while it fol-
| lows the line of the Senate bill, enlarge;
it and in my judgment 1t is better bill
than the one reported from the Senate COM
| mittee. Two or three days ago l was au-
| thoriZed to make a favorable report on the
| House bill. l have withheld this for the
| purpose of making little further
vestigation along the line that the Pres
| ident calls attention to. and that is the
possibility of dealing with the corporations
that have already received charters.
Object of Organization.
.'The President suggests that they are
probably organized for the purpose of sell
ing stock. Beyond doubt that is so, but
it is also very likely that they are created
for the purpose of selling the charters, the
promoters going out from the District of
Columbia to the several states and soy
ing: Here is a corporation chartered by
Congress, and selling the charter for a
comparatively small amount of money and
in that way making profit.
1T costs, think, under the code only
about one dollar to get company incor-
porated. When the aggregate of their
capitalization had reached $3,00O,OO0 the
District of Columbia had received only
about 5000 in fees. The whole thing is
q scandal-nothing less than that--and it
ought to be torn up by the roots.
''It occurs to me that there may be some
difficulty, and l speak as layman, about
dealing with the companies that are al
ready chartered but have consulted with
some distinguished lawyers and they think
there is a remedy. For the purpose ofnen-
deavoring to find that remedy / have with
held the bill, which 1 will continue to with
hold until the matter has been taken up
with view TO amending it SO as to reach
the fraudulent companies that have already
been Incorporated. and deal not only with
the future incorporation which the bill does
of companies of that kind. but likewise, II
possible, to deal with those that have al
ready been incorporated and in some way. ii
it is possible thing to do it, arrest them In
their career.
Il simply wanted to say this to show the
Senate and also the chief executive that
Congress has not been unmindful of this