New-York tribune., 1908-01-17
HARTMAN MUST TELL.
I. c. c. WINS DECISION.
Judge Hough Says 1t Has Right to
.KnOzc about Il. Il. Stock Dedts.

Edward Henry Hartman VIII nave TO teli 'ie
Interstate Commerce Commission what 1T wants
to know about various purchases of stocks of
other railroads made by the Union Paclhc IN the
commissions endeavor to find out whether these
stock sales seriously affected the movement OF IN
terstate commerce The relation existing between
the banking firm of Kuhn, Loeb & Co. and It's
clients will not avail Otto II. Kahn. a member OF
that firm, in seeking TO withhold from the COM
mission the information it is after in trying 10 ma
out whether the various deals engineered by Mr.
Hartman and his associates to sell stocks to the
Union Pacific to their advantage and the
roads detrment. Neither fnancier however, ac-
cording to Judge Hough's decision handed down
in the United States Circuit Court yesterday, need
tell the commission whether he speculated IN Union
Pacific stock advance information that the IL
per cent dividend OF August, 1906, was to be de-
clared
. Such speculation, Judge Hough thinks, would
not tend to defeat the purposes of the Interstate
commerce act. But far from agreeing with Mr.
Harriman's contention that the Union Pacific
Company could mortgage its interstate railway
fer anything it pleased ard invest the proceeds OF
the hypothccation in anything permitted by the
laws of Utah. in which state it incorr 1rated,
prices and from sellers not open to nvestiga-
ton criticism by the commission. Judge Hough
makes the pointed remark that if Mr. Harrimans
ruling to prevail any interstate carrier ncor-
porated by state law could ruin itself by mprovi-
dent investments and therefore fail to fulfil its
carrying functions
Judge Hough sides with the commission in its
contention that Congress has the power itself. and
the right, to delegate the commission the
power to inquire into the financial transactions
and management of state corporation which is
engaged in the business of common carrier among
several states. The chief thing the commission
wanted to find out was whether community of
interest between common carriers tended TO de-
feat the purposes of the Interstate Commerce regu
latons. Judge Hough says that the ownership by
one such common carrier of large blocks of stock
of other common carriers certainly creates com
munity of interests between the corporations in
volved, and that IF such relation is produced and
community OF interest created by expenditure of
assets at inflated prices, primarily the bene-
fit of these directors who both buy and sell the
stocks purchased such unwise. immoral and per
haps unlawful investment of trust fund does most
effectually tend defeat purposes of the
state Commerce regulations"
Judge Hough says there is no doubt whatever
that the power of Congress extends over all the
nstrumentalftes of commerce. No person or COM
pany can engage in commercial occupation
without capital, the management and investment
OF which is as much commercial instrumentality
as locomotive engineer On this point he
makes the important ruling that financial regula
ton of corporations engaged in interstate com
merce is regulation of that commerce by regu-
latng its most potent instrumentality. Congress,
he holds. has ample power to guard against the
recurrence of obnoxious practices the part of
corporations engaged in interstate commerce and
to take action to prevent methods which may di
nllISn tner SOVency and therefore their efficiency
and economy in interstate transportation. Once
the subject under investigation is found to be
within its powers, Congress is its judge of
what collateral and incidental inquiries in the sub
ject in hand may be pertinent.
Judge Hough lays down the principle that when
state is unable to control the child of it's
creation, the so-caled visitatoriaI power of
trolling or arresting abuses must be lodged with
the sovereign that control the occupation
Such power according to the of Hale agt.
Henkel, is in the courts opinion, lodged with the
federal government
AS to Mr.. kahn's plea of privilege between
banker and client Judge Hough dismsses it briefly
after remarking that if the rule were SO extended
anybody who had stolen securities might deposit
them with banker with assurance of being safely
screened from the consequences of the theft
1t is unlikely that Mr. Hartman and Mr. Kahn
will be called upon to answer the questions put TO
them until appeal from the decision is taken
to the United States Supreme Court. John G.
Milburn, of counsel for Mr. Hartman said yester-
day that such appeal would undoubtedly be
taken. Henry L. StmsOn and Frank B. kellogg.
who argued the for the commission, both de-
clared they regarded the decision most i'm
portant in settling the right of the federal
Congress inquire into and legslate in regard
TO abuses in the financial management of state
corporations engaged in interstate commerce