New-York tribune., 1907-11-28
PROFIT IN BOND ISSUE,
Brokerage Firm and B. r. T. Direc-
tors on Right Side of Market.

Directors Of the Brooklyn Rapid Transit Com
pany ana the brokerage firm OF Flower d CO.
made fat profits 100000 issue Of Brook
I'm, Queens County g. Suburban bonds issued in
1898 according 20 testimony before the Public
Service Commission Yesterday. Colonel Timothy
s. Williams, vice-president Of the Brooklyn Rapid
Transit said these bonds sold 70 the insiders
including directors and the Flower people, for
s7lA minus n 2ts per cent commission for cash.
on that came date some OF these bonds held by
the company were written up on the books OF
the railroad company at par, and very short
time afterward were selling IN the market NJ
premium.
The Flower firm took about thres-quarters Of
the issue It received a commission amounting
to s57l2s The total % these prohts paid 20 IN
elders was $4,000 Colonel Williams said that
the bonds were appreclstins in value so rapidly
that he himself bought hundred az 20 and sold
them a few days later 1T 97ia
Stnl another point in the peculiar financial deal
ings between railroads and Wall Street operators
was shown when Mr.. Wins brought out that these
same bonds year or two previously had been
taken over by the Brooklyn Rapid Transit from
the r. q. Houins s. CO. syndicate as the result
Of threats by that concern OF throwing the road
into a r4ceiveTship II the company defaulted on
its bonds In 1895 The railroad conditions were
sadly disturbed, and the Hoins people. who held
almost all Of the bond issue. feared that the
interest would not be forthcoming Thay made
threats the Brooklyn Rapid Transit finally took
over 1921 Of the bonds To do this the company
had to borrow about sl,25oooo from the Kntck
erbocker Trust Company a. per cent interest
and l.. cf per cent commission On the tran
saction the Holins hrm made for commission
and expenses the sum of s136 oo0.
Nj WINS took UP the history OF the BROOKLYN,
Queens County q Suburban from its Incorporation
IN 1893 That company trst leased the Broadway
Railroad Company. tha Broadway Ferry & Metro
politan Avenue road and che Jamaica & Brooklyn
Railroad Company. but later thess properties were
merged into the Brooklyn Queens County & Sub
urban when that company had acquired al their
outstanding stock This was done through syn
dicate composed Of r. ". Clark & Co. J. & ".
seugman and II. p. Hollins & Co. Incidentally. in
the transaction there increase In the stock
and bond capitalization of little than s5 CO..
CO. This water SIN remains in the Brooklyn Rapid
Transit Company, since the Long Island Traction
Company took over the road after reorganization
on the inflated value and passed it along 20 the
present company.
There existed. OF course, eminent authority for
the increase in capitalization DR.. ". 2. Barnard
an expert, made a detailed examination of the
property. Ex-Judge Noah Davis and S. c. 7
Dodd later general counsel for the Standard OIL
Company gave their opinion the propriety Of
the issues from legal point Of view. Davies
Stone s. Auerbach advised the directors that the
issue was proper They gave two estimates on the
value OF the properties-one 100000 the other
S9.10o0O0 So. naturally, the new securities were
issued. OF the bonds, 81 6i60 $50 are held by the
trustees for extensions. This road recently has
Rapid Transit Company, which in turn has issued
its own bonds. for equipment purposes. Certain
extensions and improvements made on this line
have not yet been paid for in bond issues the cost
remaining on the Brooklyn Rapid Transit cornpsny's
books. Colonel Williams testified that once a divi-
dend OF per cent was paid the capital stock to
reduce taxation, since the corporation tax law then
imposed greater tax those corporations not
paying dividends than those which did. The
total surplus OF the company is S5a550 loaned TO
the Brooklyn Rapid Transit Company on the notes
Of that company.
Then after side trip, IN which he discussed the
profits OF various Brooklyn lines and the amounts
they set aside yearly for reserve against depre.
clation and reaeWal of equipment, Mr.. WINS eot
back 10 the Hollins syndicate transa ion In 1895
Colonel Williams said the market .adtions were
blue Railroads. especially the Brooklyn, Queens
County & Suburban, were earning little money and
there was abroad general heritage from the panic
OF 1898. Hollins & Co. owning at least two.thirds
OF the bond issue we're anxious 10 sell and threat
ened 10 throw the company into the hands OF a
ceiyer If il defaulted in payment of the interest
charges, which seemed probable Prior 10 election
Mr.. rollins gave option 10 the company to sell
approximately $20000O Of bonds AT about 70, good
until tAi-y days after clf fcton. The railroad peo-