Omaha daily bee. (Omaha [Neb.]) 187?-1922, 1907-04-08
PROFITS IN The ALTON DEAL
Hartman and His Associates Said to Have
Cleared Twenty Four Millisn.
STATE OF ILLINOIS PowERLEss TO ACT
Attorney General Recommends That
Stockholders Bring Action 20 Re-
cover Amount from Those
who wrecked Company.

| to whether II Is the province Of the state
Of Illinois to proceed against e. H. Harri-
man and his associates for the alleged
manipulation OF the Chicago & Alton rail-
road properties. II the state should revoke
the companys charter the loss would fall
on the stockholders, the Hartman people
already having disposed OF n large por.
tion OF their holdings The attorney gen
eral concludes therefore that the best plan
would be for the company itself to seek
a remedy for the situation, or even for one
or more stockholders to act At the same
time Mr.. Stead assures the governor that
should he become convinced on further In
vestigation that the state can relieve the
roads condition he will make the neces-
sary moves at once.
Notwithstanding his convictions as to the
wisdom OF immediate action, Mr.. Stead
insists there is not the least doubt but that
a civil remedy exists against the "hnanciers
who have wrecked this prosperous railroad
company, and, at the expense Of innocent
stockholders and bondholders, have gath
cred to themselves harvest OF millions
OF dollars"
Attorney General Stead reviews the testi-
mony given by Hartman recently before
the Interstate Commerce commission at
New York and from the records OF the
Illinois Railroad and Warehouse commits
sion obtained the various resolutions, GER
tificates and documents pertaining to the
Chicago & Alton Railroad company and
the Chicago G. Alton Railway company and
the consolidated company, all of which
figure in the manipulations.
Big Profit to Syndicate.
The profits made out Of the Alton deals
by Mr.. Hartman and his associates are
placed by Mr.. Stead at S24,64S,60o
"As a result Of this enormous profit to
themselves" he declares, the railroad
companies are thrown into hopeless bank
ruptcy."
The indebtedness Of the companies as
shown by the figures in the opinion, has
been increased a total Of $SO,6 646,2lS since
they fell into Mr.. Harriman's hands. or
this amount only $22 10000. according to
Harrimans own testimony. says Mr.. Stead,
was incurred for improvements, betterments
or extension Of the road.
"Over S57,OOOOOO of this indebtedness"
concludes the opinion, "or more than 70
per cent of the entire Indebtedness created
by this syndicate upon the properties OF
these several companies, was not created
in furtherance of any legitimate purpose
for which a railroad company is OF can be
organized under the statutes of the state
OF Illinois"
Composition of Syndicate.
|
great detail, bringing ont the fact that I'm
1895 the company paid all Its operating ex-
penses and per cent dividend on its
common and preferred stock and had $780,
900 left The company's credit was good
and then the syndicate took hold, purchas-
ing 34722 shares of preferred and 1SS, 24
Of common stock distributed as follows:
George J. Gould. 54.535 shares E. H.. Har-
, riman, 64535 shares Mortimer l. Shin,
54,5S5 shares; James stillman, Sass shares,
including smaller numbers of shares taken
by others,
Mr. Stead dates the Atoms difficulties
from 1899 when its new owners ordered the
issue Of $4O,OOOOO0 in 8 per cent bonds for
improvements. OF these bonds $32O00O00
were SUBSIDIZED by the new stockholders at
IS cents on the dollar OF which the syn
dicate received q per cent. Part OF the
bonds secured by the syndicate afterwards
were sold at 96, representing a largo profit
The next move in the series OF manipu-
lations, says MI Stead, was TO add S12,-
444,I77.66 to the cost and capitalization of
the road. This consisted in part of the
income which the stockholders of the COM
pany in former years had been content to
apply to betterments and permanent i'm
| provements and which, by order OF the
Board Of Directors had been charged upon
the books OF the company to the operat-
ing expenses, and consisted in part Of
losses sustained by the stockholders of
other companies. The next step was to de-
clare a 80 per cent dividend on May 81
1900 The dividend on the stock owned by
, the syndicate, paid by check to Kuhn
Loeb & Co, amounted to 81, $50 lsO and was
charged up on the books OF the company
p against construction expenditure capital
ICED" The syndicate's profits, up to this
time, all told. were S14,9 600 Then fol-
lowed the lease of the Chicago & Alton
! railroad company's property to the Chi
cago & Alton Railway company, and the
syndicate ostenslbly transferred it's stock
to Louis L. Stanton. dummy. This trans
fer included the st. Louis, Peoria &
Northern railway.
Louis L. Stanton" then sold to the syn
dicate the stock transferred and the short
railroad line, which necessitated the issue
of 1900 31l per cent gold bonds. amount
ing to 100000. This made the syndicate's
profits S24S5s6OO.
Growth of Debt.
When the syndicate gained control IN
1899 says Mr.. Stead, the roads liabilities
, amounted TO $4,000 CO., In 1906 the la
biuties OF the consolids ted company reached
Sl9O46 6.21s, representing an Indebtedness Of
| ! $50, O46,2lb created Dy the syndicate. only
S2z5 900 of this was created 10 improve
the road, the remainder not being the re-
suit OF any legitimate purpose, adds the
attorney general. But in addition to the
company's bonded Indebtedness, which
amounts to over $1,000 a mile its capital
stock liabilities are over S4s 900 a mile, its
present outstanding Indebtedness on ac-
count Of equipment, trust obligations, is
over 5000 a mile.
AS 10 the possible remedy. Mr.. Stead
says:
Even II the company's charter should be
, revoked by the state, the innocent stock
; holders would suffer most.
"The bonds OF the company are in the
! hands of innocent purchasers, for a VAL
liable consideration. and under the decisions
, OF our supreme court and the supreme court
, Of the United States, in my opinion, can
not be attacked.
Il am inclined TO the opinion that the
remedy lies with the company ITSELF or
: in the event OF It's refusal to act, with
some one or more Of the stockholders
Should I become satisfied, however, upon
further investigation that an effective rem