Evening star. [volume] (Washington, D.C.) 1854-1972, 1907-02-27

understood that they did so as bankers
and at no time ceased to be bankers and
that in dealing with the Union Pacific
they did SO at arm's-length. At no time
had they ever charged the Union Pacific
more than a bankers regular commits
sion, and often rendered valuable services
for nothing.
About a year ago they felt that the
necessity, which caused them to go on the
board had passed, and also the demands
of their own banking business had in
creased; the credit of the Union Pacific
had become firmly fixed. and he and Mr..
Schiff resigned from the board of the
Union Pacific.
Hartman Looks On.
Mr.. Kahn said his firm had purchased the
Southern Pacific stock control which after
ward passed to the Union Pacific, but he
insisted that it was not bought with the
understanding that the Union Pacific would
take 1t, the only understanding being that
it was to be offered to the Union Pacific.
Mr.. Hartman, he thought. was in favor
OF the purchase. but his firm took a big
risk in buying the Southern Pacific stock,
as the remainder of the board might not
approve of its purchase and it would be
left on their hands.
While Mr.. Kahn was on the stand Mr..
Hartman remained in the court room.
At first he found a vacant chair among
the newspaper men, who occupied the jury
box, and after remaining there about
half an hour he went over and sat between
his own counsel and Mr. Severance.
The witness said that Kuhn. Loeb & Co.
were paid commission of 2la per cent
on the purchases Of Southern Pacific stock
made for the Union Pacific. Mr.. Sever
bought at so and the commission was on
the par value the commission was really
at the rate of 5 per cent.
The witness said the usual bankers COM
mission had been charged and that his
firm had taken a risk on securing the
stock.
The witness said Kuhn Loeb & Co. had
received commission of 217 per cent for
guaranteeing the success of the issue of
$40.000,000 of bonds by the Union Pacific.
Protecting the Underwriters.
Mr.. Severance showed, for the purpose
of minimizing the risk to the underwrit-
ing syndicate, that the shareholders of
Union Pacific had taken $25, 900, 900 of the
issue. but the witness insisted that there
had been risk in the issue, which was a
novel one. Lawyer and witness fenced
over the matter Of questions, and Mr..
Kuhn said Mr.. Severance was unfair. Mr..
Severance denied desire to be unfair.
The witness said that in no negotiations
with the Union Pacific where Kuhn, Loeb
of the firm been determining factors.
NJ Severance then went into the matter
of the acquiring of the Northern Pacific
control by the Union Pacific.
Mr.. Kahn told of the inception of the
idea, when the Northern Pacific, by its
purchase of the Burlington, seemed to
threaten the best interests of the Union
Pacific. He had a talk with Mr.. Hartman
and they agreed that it would be wise il
the Union Pacific should try for control
of the Northern Pacific, with the resulting
affiliations with the Great Northern and
Burlington. In 1901 Kuhn. Loeb & Co.
off he TTpioD Pacific 90 OO0 ON
of Northern Pacific.
Again Mr.. Kahn denied that there was
any agreement that the Union Pacific
should buy the stock. His firm regarded
it as a good buy, but the situation was
much the same as that attending the origi-
nal Southern Pacific purchase.
Mr.. Kahn Was Emphatic.
Much the same testimony occurred re-
garding subsequent sales of Northern Pa
cific to the Union Pacific. His firm con-
tinued to buy Northern Pacific. They felt
a moral obligation to offer 1t to the Union
Pacific, but at the same time he insisted
that If the Union Pacific failed to buy, his
firm was perfectly willing to keep it. Their
opinion was that it was a good security
selling at less than its real value.
AS Mr.. Severance pressed for an admis-
sion that all these transactions were cut
and dried agreements with the Union Pa
cific, Mr.. Kahns manner of denial became
quite emphatic, and again and again he
explained that these transactions were
made by his people as bankers.
The witness said that Kuhn, Loeb & Co.
took the next $25, 100000 of the issue of
500, 100000 of convertible bonds made by
the Union Pacific under an agreement by
which the firm was to have the bonds at
a discount Of s per cent.
Acquiring the Alton.
Mr.. Severance here turned suddenly from
this phase Of inquiry, calling Mr.. Kahn's
attention to the circular Of December %,
1903, and asking regarding the deposit
with his firm of the outstanding Chicago
and Alton preferred stock
In response to questions witness said
that this action was in a measure initiated
by Mr.. Hartman, who said 1t might be
wise for Kuhn. Loeb & Co. to get hold OF
this stock, as there was probability that
the Union Pacific might want 1t. 1t was
with that end in view, Mr.. Kahn said, that
his firm took steps to acquire the Chlcago
and Alton stock, although he denied that
there was any agreement that the Union
Pacific would take it.
There were many contingencies hedging
in that disposal Of stock. AS matter of
fact, it was not taken by the Union Pa
cific until September, 1904, and In the mean
time the firm had a perfect right to sell
it to any one who wanted It,
Refused to Answer.
Mr.. Severance wanted Mr.. Kahn to pro-
duce list Of the Alton shareholders who
sold their stock to the Union Pacific
through his house. Mr.. Cravath Of coun-
sci for the witnesses objected to the ques-
ton on the same general grounds put
forth previously by Mr.. Milburn, and on
the special grounds that the witness was
a banker
Severance then asked if any Of the d.
rectors Of the Union Pacific were owners
of the Alton stock sold to the Union Pa
cific and the objection was renewed.
The commission ruled that he must an
swer and there was formal refusal.
Witness said that Kuhn, Loeb & Co.
owned an Insignificant amount of the Alton
stock sold to the Union Pacific. but as to
the holdings and sales of clients of his
firm he must regard all that relationship
as confidential
The witness denied connection with or
knowledge of the sale Of the Alton bonds
to the New York Life Insurance Company.
The commission took recess at 1890
STATEMENT OF MR.. FISH.