Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-02-25
RAILROAD DEALS MRED
{, H. Hartman Before Com
merce Commission.
RIGID INQUIRY IN PROGRESS
Magnate Tells Of the Union Pacific
Transactions.
PURCHASED B. AND O.. SHARES
Result Of the Dissolution by the q.
Supreme Court Of the Northern
Securities Company.
RIGID INQUIRY IN PROGRESS
PURCHASED B. AND o. SHARES


NEW YORK, February 2J.-The investi-
| cation of the financial operations of the
| Hartman group through the Union Pacific
| railroad, undertaken by the interstate COM
| merce commission in behalf of the United
| States government, was resumed at the fed
| eral building at 10 o'clock today.
f. H. Hartman, president of the Union
! Pacific, was the first witness, and under ex-
/ animation by Frank kellogg began at 1910
| O'Clock an explanation Of the financial oper-
| atoms of his company, commencing with
| the issue of one hundred millions converti-
| BILE bonds in 1901 for the purchase Of stock
in the Southern and Northern Pacifics.
The government was represented by KEEL
| logg & Severance, and the Hartman par
Alton 80 per cent dividend was paid
| D. Cravath and Maxwell Evarts. The COM
| missioners on the bench were Chairman
Knapp, Lane, Prouty, Clements and Har-
| Ian.
The B. and O. Purchase.
Mr.. Hartman testified that the purchases
| of the Union Pacific in Baltimore and Ohio
| amounted to $4,000, 600 and were to be paid
| for in March and September. He identi-
| fed statement prepared by Controller
| Mahl showing that the value of stocks ac-
| quired by the Union Pacific and the Oregon
| Short Line since July last amounted $131, -
! 100000.
Mr.. Milburn of Harriman's counsel In
! terrupted Mr.. kellogg in an effort to OBJ
| tain from Mr. Hartman the names of the
| individuals who sold Alton stock to the
| Union Pacific. Mr.. Milburn said the policy
| of his clients, himself and his associates
| was to be as liberal as possible, but he
must deny that this question was within
the of Interstate commerce. wide
| though that proposition be: it was purely
a private matter. He said he wanted to
| raise the question in a general way at this
| time, because it would arise often during
| the inquiry. He asked that the inquiry be
| limited to interstate transactions
In answering Mr.. Milburns contention
Mr.. Kellogg declared that the value of
the Alton had been inflated beyond all
| reason-"a conspicuous example of inf1a
tion,'' he declared. He insisted that it was
clearly within the power of the commission
to inquire into the entire transaction.
The commission announced that 1t would
confer on the question of it's power raised
by Mr.. Milburn and would decide in the
afternoon. Meantime the examination of
Hartman as to the Chicago and Alton pro-
ceeded.
Discussed With Cassatt.
Mr. Hartman said he met the late Pres
ident Cassatt of the Pennsylvania railroad
in August or September, at Bar Harbor,
and discussed the purchase of the Balti-
more and Ohio. He did not think he dis
cussed the price with Cassatt. There were
| no conditions with Kuhn, Loeb & Coz as
to the purchase Of the Baltimore and Ohio
and no outside understanding. It was a
clean transaction. 1t was continuous
line through other companies.
The witness denied that he and his asso-
ciates had been specializing in securities.
Their purchases were the renvestment of
the proceeds of their sales of Northern Pa
Clflc. They not made for the
of securing control of the roads in question.
The investments had been made for the
purpose of improving income. The witness
had no plans to the future sales of pres
ent holdings.
Mr.. Hartman denied knowledge of or par
, ticipating in the sale of s1OOOOOOO of the
bonds of the Chicago and Alton at 96, to
the New York Life Insurance Company He
testified that out of the proceeds of the sale
of $4O, 100000 in bonds of the Chicago and
Alton, that a 80 per cent dividend was paid
to the stockholders.
The Northern Securities Case.
The inquiry developed the fact that after
| the decision of the Supreme Court of the
United States dissolving the Northern Sc
curities Company, the interest Of the Union
Pacific Company in that corporation was
returned to them in shares of the North
ern Pacific and Great Northern Company.
These subsequently were sold, as Mr.. Har-
riman explained, because the revenues de-
rived from them were limited, and the
proceeds were invested in stock Of the
Illinois Central Railroad Company, the
Atchison, Topeka and Santa Fe Company
and the Baltimore and Ohio Company
I'm the arst place." said Mr.. Hartman,
I'VE had as the result of the Northern Pa
cific purchase ss2,OOOOO0 of Northern Sc
curities stock at a cost of about $40 600 600
Our annual report, our statements, all show
that. Then we were forced to take, by the
decision of the Supreme Court, unjustly-it
| may have. been legaEGreat Northern,
| which we did not want, and a lesser amount
of Northern Pacific than we had deposited
with the Northern Securities and for which
| we received the Northern Securities stock.
ern, and the Northern Pacific was given to
| us-forced upon us-it had a market value
| of about $1O0,O0O,OO0. I will go back just
a minute. We had subscribed In the mean
which had been offered to the stockholders,
making the total cost of whatever Great
Northern and Northern Pacific we had,
| about $s2,OOO.OOO Instead Of disposing of
it at that time we held 1t until the market
price increased in value to somewhere near
$145, 100000 to $15O,000,OOO. We sold some
of it gradually as it went up, but at that
value the returns from the Northern Pacific
and Great Northern were less than 3 per
cent on the stomk held. Therefore, we con-
cluded that 1t was better to sell these
stocks and invest the same money in other
securities that would give US greater re-
turn"
No Speculative Deals.
Throughout his examination Mr.. Harri-
man insisted that none Of these transac-
lions were speculative.
Il do not wish to give the impression
that we have been specializing" he remark
ed as Mr.. Kellogg pressed him for replies
concerning the purpose of the acquisition
of stock of the Illinois Central, the Balti-
more and Ohio, the Chicago and Alton and
other roads. "They are Tor income, rein
vestment of the proceeds of the Great
Northern and Northern Pacific" said the
witness.
Are they for permanent investment or