Omaha daily bee., 1907-02-26

He said the books might have shown a
surplus. Of only $4,000, but the books
were wrong and had been corrected. Twelve
million dollars had been taken from the
profits OF the road and expended Ia inn
provements. Mr.. Kellogg pointed out that
the old management had never increased
its capital stock. and then questioned the
witness at length as to the action Of the
new company. endeavoring to show among
other things that the stock standing In
the names of the new directors really be-
longed to the syndicate.
The witness then told Of the transfer OF
the property Of the Alton Railroad company
to the Alton Railway company. When the
stock was placed in the treasury OF the
latter company a mortgage OF S22,000OO0
was placed on II and preferred stock to
the value OF SO. $4,000 and common stock
to the value OF Sl9,542SOO at par issued
against IT,
"ln other words you capitalized the $780,,
10000 Of the Alton stock for $4,000, OOO."
asked Kellogg
THAT is as you put IT," answered Har-
riman.
The witness said the new company as
sumed the mortgage of S4O,cO0,Oco issued by
the old one. and Mr.. Kellogg declared that
has thus bee nswelled to S122.OO 900. Coun-
sci for the railroads insisted that these
figures were 100000 in excess of the
correct ones, and Mr.. Kellogg, saying that
he would admit the difference, asked what
the road had to show for the increase
of more than SOOOO,OOO in liabilities except
the S22,000Oo0 spent in betterments. He
declared that the difference was water.
There was a long discussion Of the man.
ner in which certain accounts had been
changed In the statement OF the Alton,
and while the witness could not explain
the matter. he denied that 1t represented
an attempt at concealment.
Hartman Makes Explanation.
Mr. Harriman's general explanation of
the Alton deal was as follows:
The syndicate found itself in the position
of having paid $42,000,000 for the stock
and property mentioned, less $bOOO,OOO
which 1t had received in dividends on the
stock of the railroad company, or 1885, O0O,
OUO. Now, the return OF about N,6OOOOQ
year Is less than AZ per cent, on that
amount invested. 1t would seem as though
IL were not very liberal distribution, but
we took the chances of what the markets
might be and the common stock that was
issued by the railway company was some
what in relation to what you might say
discOunttng the future, and to enable us
to put out a securitywhich might be a
| prior hen-that is, our 3h per. cent bonds.
by dividing the risk we could sell a 31a
per cent bond to some advantage and still
retain either the preferred or common
stock for purposes of control, or we could
sell the whole OF the preferred stock of
part of it and still retain common stock
for the purposes of control.
In 1898 we were just beginning to emerge
from a series of years of depression re-
sulting from the panic of 1893, and might
say the shock of 1S96-that is, the political
campaign and the result of the Venezuela
message, which l think probably you will
remember had a very serious effect, be-
/ cause of the possible difficulty 1t might
get us into with England. In 1898 we were
Just beginning to emerge from those con-
ditions, which were conditions of economy
and restriction and timidty on the part
of capital and II was doubtful whether
we with all the stock of the Chicago &
Alton Railroad company would have been
able at the time to have sold our per
/ cent bonds as high as Go in the market,
but 1t was the change I'm conditions be
which brought about a condition which
/ enabled the marketing of the 3k per cept
| bonds, the 3 per cent bonds and the pre-
/ ferred stock, which the syndicate sub
! scribers held to advantage to themselves,
/ without any disadvantage to the shippers
| on anybody that was using the Chicago &
| Alton Railroad company, as shown by the
| figures have given you.
| Examination as to purchases of Alton
4 stock by the Union Pacific commenced just
! before adjournment. The witness said the
/ first purchase of Alton by. the syndicate
was made without any reference to the
/ Union Pacific, and when Mr.. Kellogg pro-
| duced a circular issued in 1899 setting forth
/ the advantages of Union Pacific connec-
/ ton to the stockholders of the Alton the
| witness denied knowledge of its issuance
4 Mr.. Hartman will continue his testi-
| mony tomorrow. .... 70 -....s-. . -t. ,.f..-