The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1907-01-25
FORFEIT CHARTER.
An Action Is Begun Against
Great Northern Hallway.
Aandamus Proceedings by At
torney General of Minnesota.
ISSUE WATERED STOCK
Public Has Been Paying Large
Dividends on It.
Says Company Was Created to
Initiate capitalization.
ISSUE WATERED STOCK


General Young today began man
damus proceedings in the supreme
court to compel the st. Paul. Mime
apolis & Manitoba Railroad company
| to show cause why it's charter should
not be forfeited. This company. for
merly known as. the Minnesota & Pa
cifc company, is really the parent
company of the Great Northern Rail-
way company and the Great Northern
is Joined in this issue as it the owner
of the Manitoba company's stock.
Attorney General Young has given
| the Associated Press a digest of the al
legations set up in the bill filed in the
supreme court. The complaint covers
about eighty type written pages and
goes into all transactions of the Great
constituent companies forming the
merger known as the Great Northern
| Railway company
Attorney General Young says:
! I'VE have commenced an action in
the name of the state against the St.
Paul, Minneapolis & Manitoba Rail-
way company to compel forfeiture of
| its charter for the reason that ever
| since it transferred its railway with
! all its equipment and appurtenances
! to the Great Northern Railway COM
| pany on February L, 1890, it has
| ceased to perform the functions for
which it was created and has there
| fore forfeited its right to exist under
! our laws as a railway company. We
have Joined the Great Northern Rail-
way company a party to this action
because 1t is the owner of all the stock
of the Manitoba company and for the
further reason that in the alleged pur-
chase of the property the assets of the
Manitoba company by the Great
a large
amount of watered stock was issued
by the latter company which we claim
is void under the law of this state.
upon which the public are now and
ever since its issuance, have been pay
ing large dividends We ask that this
stock be declared void and the pay
ment of further dividends thereon be
prohibited.
1--WE have proceeded with delibera-
tion in this matter on account of the
magnitude of the interests involved
and the great importance of the Ques-
ton, both aS to the state and the
companies affected. 1t will assist in
understanding the transactions be-
tween the Manitoba company and the
Great Northern company to know that
the Great Northern company was
created by the stockholders of the
Manitoba company, and at the time of
the transfer of the properties the
stockholders in both companies were
identical. 1t seems that the Great
Northern company was created solely
for the purpose of making it possible
to initiate the capitalization of the sys-
tenn by making a sale of the properties
to the Great Northern at a price in
excess of their value. 1t is easy to see
why, under these circumstances, the
Great Northern should pay a premium
Of FIVE million dollars on the purchase
of the stock of the Manitoba company.
when the gross earnings tax on
railways was raised from three to
four per cent in 1905. the Great
Northern company refused to pay the
increased rate on that portion. of it's
road in this state. which was originally
constructed by the Minnesota and
Pacific company. The latter company
had a charter from the territory in
which it was provided that the COM
pany never should be called upon to
pay more than per cent on its gross
earnings. The company became bank |
rupt and in 1879 the Manitoba COM
pany purchased its road and fran
chise, with the approval of the legis- |
lature. and ever since the purchase
the Manitoba company has claimed
that it acquired, by the purchase, the |
same immunity from any rise in it's
rate of taxation that the Minnesota |
and Pacific held.
Last March, when the taxes for
1905 became due on this road. the
Great Northern, which operates the |
road under an alleged lease from the |
Manitoba company, paid only per
cent and soon afterwards the state |
commenced an action against it TO. |
$120,00O, being the unpaid one per
cent of it's taxes under the new law. |
In that suit the claim to immunity |
from any increase above 3 per cent in |
it's taxes is claimed under the charter |
of the Manitoba company by virtue of
the rights it claims to have acquired |
at the purchase of the road in 1879. !
The suit is not yet disposed of and it |
will probably take many years to get |
it through all the courts. The rail- |
road taxes for the year 1906 will be |
due in a few days and there will be an I
additional amount greater than that |
above mentioned, in dispute for that
year.
I'VE are convinced that the Mani |
toba company is no longer entitled to |
exist as a railway company and that !
the speediest way to dispose of it's |
claim to exemption from the rate of
taxes paid by other railway companies |
is to have its charter wiped out, in |
which event the Great Northern would |
be obliged to pay taxes at four per
cent, the same as other companies.
I'VE are also of the opinion that the
Great Northern should not be allowed |
to continue to pay dividends on watered |
stock heretofore issued and that il
should be required to show whether
the large amount of stock which. ac-
public appears to be fictitious. has any
right to further recognition as part
of its capitalization.
This suit will involve also the ques-
tion of the company's right to create a
lot of subsidiary companies, composed
of its own stockholders to build all ex-
tensions and then issue stock and bonds
at will without any public supervision
and the right OF the Great Northern
company to divert the proceeds of the
sale of its capital stock to the pur-