The sun. [volume] (New York [N.Y.]) 1833-1916, 1908-04-21
RYAN ON The METROPOLITAN
GIVES FINANCIAL HISTORY TO
SHOW STOCK ISN'T WATERED
And cites Figures 10 Prove Insiders Got
No Fronts Through Construction Ton
trACts-11le Company ThrOttled Into
Misfortune. Net Looted, lie says'

publication the following blateipenL'
When appeared before the Grand jury
recently 10 t6li what 1 knew about the past
history and presenN dihlgblties OF the Metro
politan Street Railway Company told
them that when | returned from Europe
five or six months ago ! had had prepared
n snccinct statement covering the chief
features Of the past history and Of the
present situation Of this road TO the best
OF my knowledge and recollection, with
the intention Of publishing It Immediately.
did not 80 publish It because was in
formed that the matter was 20 be brought
under official investigation and was advised
that il would be improper for me to do 80
then. II / had realized the extent OF the
misrepresentation and utilization TO which
l have been subjected during these five
months / doubt IT, could have been deferred
from making the publication, but. as old
the Grand Jury, | had not done 80 for the
reason stStbd, | then submitted the state
ment to them. and asked the privilege,
which they granted Of placing Il before the
bubble. The statement submitted to the
Grand Jury e%mbodying the facts, TO the best
OF my knowledge and belief, Is as follows:
The current accusations against the
former management and directorate Of the
Metropolitan Street Railway Company may
be summarized as follows:
/. That the stock Of the company consists
chiefly OF water
?. That enormous profits were made by
so-c.nsd insiders" through construction
contracts and Otherwise.
3. That in the purchase by the Metropoli-
tan Securities Company Of the Wa. and
Cortlandt Street Railway the insiders
appropriated Sill 900 each to his personal
uB"
Each of these charges is false. Taking
them in order;
l-ovERCAPITALIzATIoN
Ca1 In 1885 the Metropolitan Traction
Company Of New Jersey was formed to ac-
auire street railways in New York, Its
capital waa so, OOO, 900. there was paid into
the treasury in cash $4,000 ,OOO, Subse-
uuently the capital was doubled and issued
| 10 the shareholders upon the same terms.
Result. total capital issued, S2O.OOO,OOO,
/ representing 81, 100000 Of cash paid in,
!! me sale Of the stock at 90 was wholly legiti-
mate. II was q new venture and subscrip-
tons were obtained with difficulty even upon
the terms offered.
() In 1902 the Metropolitan Traction Com
many Of New York was formed with an
authorized capital OF S9O,OOO.OO. ltOought
all OF the stock Of the Metropolitan Traction
Company OF New Jersey, paying 500 per
| share In its own stock. amounting in the
aggregate to S24,OOO, OOO, and sold the re-
naming 80 ono, 100 for cash at par. Result,
| total caoisal issued, $50, 900 900, repre-
| senting SIS, 900, 600 Of cash paid in.
(c) In 1898 the Metropolitan Street Rail-
way Company was formed as an operating
! company and acquired from the Metro
p%olitan Traction Company the following
stocks:
Houston. west Stleetd Payonia fcrryco. Gs00@
broadway r. :. ca. ........... lVUVU
South Ferry n. n. O.-.........,' ...' iooVoI
Lexington Avenue Il. r. CO-....,..... . 10000
Metropolitan CrnsStoTn CO.. 1900
To,,, ...... $40 500. 900
These stocks had been bought from time
TO time by the Metropolitan Traction Com
many directly from the original owners
and were sold by IL to the new operating
Netropoltan Street Railway Company for
the same par amount (Sl8 .500.OOl OF its
own stock, which e into the treasury OF
the Metropolitan Traction Company. he
| suit, so far as outstanding shares we're
concerned, unchanged, to wit: Total capt.
tai issued, $50, OOO,tUO, representing Ne,OOO,-
OOO of cash paid In.
Cd In 1896 the stock Of the metropolitan
Street Railway Company was increased
from SiB, 5000 ~ to $50, 900 600 n the addi-
tional $i9, jUO, 900 was issued 10 the Metro
! politan Traction Company In exchange Tor
| Broadway and Seventh Avenue and other
stocks appraised at 50, 900, 1000 and In settle
ment Of Indebtedness, 70 Va
500, 900 for construction. Result a. " out
standing shares, unchanged. TO wit: Total
capital issued $50, 1000, 900. representing
SIS, 1000 900 Of cash paid in.
(el In 1897 the Metropolitan Traction
Company was dissolved in order that the
shareholders might come into possession
Of stocks resting directly upon the prop
erties and franchises; its assets, consisting
OF $40. 600 900 Of Metropolitan Street Rail
way stock and 5000, 600 Of ~debentures,
representing enhanced values Of securities
owned, were distributed to its stockholders,
shnp and share alike. The Traction COM
many thereupon became extinct and was
sucoeeded by the Metropolitan Street Rail
way Company. Result: Total capital is
sued, $50, bon. 90, representing Sls,OOO,OOO Of
cash paid in.
III Ill 1879 uilu loou 1lOtNVltONN VI NV HlOfh
was sold to stockholders at par and 81, co.
900 OF the proceeds was used 10 retire the
debentures. Result: Total capital issued,
S45, 900. OOO. representing sSS.OOO,OOO Of cash
paid In.
to the shareholders l.; 100, Result: Total
capital issued, $50, 10000. representing
S4i, 200, 700 Of cash paid In.
To the cash paid in should be added in
terest for the period during which II yielded
no return in the form Of dividends upon
the stock which represented It. This
a~mounted-from 1855 to iS04-to S5,040, 600,
thus making the total cash investment
so 100000. From this sum, on the other
hand. should be deducted 5000, 900 rep
resqnted by the debentures distributed
pro rata among the shareholders. This
leaves SIs, 24O, 900 Of actual cash investment,
representing So. OOO.O 900 Of stock now out
standing, or SIS. 10 per share OF 500 each.
?. ALLEGED PROFITS To INSIDERS
The common accusation IL that many
millions we're made by insiders" through
construction contracts and otherwise. The
cost of the Lexington Avenue franchises.
proDerty consents, construction first Of
cable and then OF electric power), equip
ment, DC, for example, Is estimated by the
critics at s.. 500. OOO. as against which there
we're issued 1000, 900 Of stock M S,OOO,OOO
/ of bonds. thus apparently leaving a net
profit TO the insiders" Of $780, 900 from
this single transaction.
The facts are as follows
Cal The Lexington Avenue and Pavonia
Ferry Railroad Company was Incorporated
in 1893 and authorized TO issue 5000, 900
OF bonds and s., 100000 Of stock. The Metro
~politanu Traction Company contracted TO
construct the railway, power houses. de-,
and t. obtain for the Lexington Avenue