The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1907-04-05
Harriman's Lawyers Explain
to Commerce Commission.
WATERING STOCK HELPFUL"
Attorney Cravath Declares Over
capitalization Was Necessary Dur
ing Times After Depression of 1898.
Bitter Fight Against Prosecution
Under Sherman "Anti-trust" Law.

the government decides to prosecute the
Hartman railroad consolidation as
combination in restraint of trade, under
the provisions of the Sherman antitrust
act, was made clear yesterday during
the progress Of the argument before the
/ Interstate Commerce Commission, By
/ counsel for Hartman. of the question
| as to whether the Union Pacific and the
Southern Pacific are competing roads
within the meaning Of the law.
This question, as well as that regarding
! Harriman's manipulation Of the securi-
ties Of the Chicago and Alton Railroad
Company, were argued at length by Paul
D. Cravath. Judge r. S. Lovett. and John
G. Mnburn, counsel for the interests
under fire.
Harriman's attorneys. with the excep-
ton of Mr. Milburn. who had not COM
pleted his argument at the hour Of ad-
jounment, had their innings yesterday.
Mr.. Mllburn will finish his argument
early to-day, when Frank B. Kellogg and
c. a. Severance, special counsel for the
/ commission, VIII be heard. The case
will then go TO the Attorney General,
who viii decide whether the Hartman
! lines shall be prosecuted under the terms
of the antitrust act.
Decision Expected on Monday.
On Monday the commission is expected
to announce IFS decision whether or not
to file in the Federal Court for the South
ern district of New York an application
for an order requiring Mr.. Hartman TO
answer certain questions concerning stock
transactions that he declined to answer
when on the stand as witness before
the Federal body in New York City some
weeks ago.
Mr., CTavath began his argument with
an explanation OF Harriman's manage
ment and conduct Of the Chicago and Al
ton. and then entered into discussion
of the ACCESSIBILITY Of enacting laws pro-
viding FOR Federal supervision over the
4 Issuance Of railroad securities.
Il think any fair-minded man must
recognize he said. that under existing
conditions, there Is a necessity for closer
regulation OF the issues Of stocks and
bonds by semi-public corporations. The
liberal laws that exist in this regard have
materially aided in the development and
growth of the country. The strict laws
| of England. for example, would have re-
tarded such development and growth.
Watering stock Is Helpful.
Watering Of stock, in my opinion. has
been helpful in the past. The time has
come, however. in the progress Of our
country, IN balancing the advantages and
evils, when the advantages would be in
favor of "a much stricter regulation over
the issuance Of stocks and bonds. I wish
you to bear in mind that transactions We
now have under consideration took place
in the period following the depression Of
1888, the period Of the most remarkable
development in the history Of the United
States"
Discussing the much-talked-of bond is
sue engineered by Hartman IN handling
the Alton. Mr.. Cravath declared with
great emphasis:
There can be no doubt Of the legality
Of railroad using the proceeds derived
from the sale OF bonds in the payment Of
dividends"
MIR. Cravath stated that testimony taken
at recent hearings had resulted In a
widespread misunderstanding of the facts
respecting the capitalization of the Chi
CagO and Alton.
Few Owners of Alton stock.
There were two important facts. he
said, which seem not to have been gem
orally understood and which should con-
stantly be borne in mind:
First. that Messrs. Hartman. Gould.
Schiff. and Stillman were not the sole
owners of 81 per cent of the capital
stock Of the Chicago and Alton. which
was purchased in their name in 1889. The
stock was in their name for a syndicate
of 100 people
second-In all the benefits of the
transactions in question. all the stock
holders shared equally. No one was
frozen" out.
Mr.. Cravath's conclusions with respect
to the various proceedings in the Chicago
and Alton recapitalization were as fol-
lows. They were conducted lawfully.
they were conducted openly; they were in
accordance with the approved methods
which were at the time in vogue; they
were conducted for the equal benefit of all
stockholders, and the Chicago and Alton
transactions may be regarded as typical
Of class of financial transactions which
have been common in the past and which
have generally been regarded as proper.
IndOrses Public Utilities Bill.
During the course Of his argument, Mr..
Crayath took occasion to indorse the pub
lie utilities bill pending in the New York
/ legislature
our interests believe In the principles
OF xrhfak L.
ing, he said. This statement was brought
out in reply TO a question put by Commits
sioner Lane.
zone Of the chief features Of the bill"
continued Mr.. Cravath, SIS a strong pro-
vision for the control of new issues OF
stocks and bonds Of railroad, gas, and like
companies"
Would you give commission power
to determine whether certain issues
should be made by corporations" asked
Commissioner Lane.
THAT is a hard question to answer.
The matter probably should be intrusted
to a body having discretion. You cannot
adopt hard and fast rules for such trans
actions"
LOvett Defends Hartman.
Judge Lovett argued that Harrinaan's
reeapitalization Of the Alton did not put
greater burden on the public than had
already been charged under the old man
agement Taking up the relations OF the
Union Pacific with the Southern Pacific.
he stated that this was not another
Northern Securities case"
1T is different in matters Of fact and in
matters of law. The Great Northern and
Northern Pacific We're, and are, not only
parallel but competing. Any union of