The Black Hills union and western stock review. [volume] (Rapid City, S.D.) 1904-19??, 1909-02-26
TOBACCO TRUST HIT
Commissioner of Corporations Smith
Presents Interesting Report.

Presents Interesting Report.
Washington, d. c., Feb. 1S.-1n
report transmitted to President
Roosevelt today, Herbert Knox
Smith, commissioner of corpora
tons, presents some highly inter-
esting history of the organization of
the Tobacco Combination" which
in the magnitude of its business OPP
erations, is one of the greatest or
CARNATIONS in America. The report
is a result, in part, of an extensive
investigation into the TOBACCO 6n-
dustry made by the Bureau of Cor
porations. Subsequent reports will
deal with the control of the tobacco
industry, with prices and profits,
and with competitive methods.
Today's report sets forth the rise
of one of the great combinations of
the country. In his letter of trans
snLttal, Commissioner Smith says
that 1T IDEALS with the history,
from the standpoint of it's organiza-
ton, of the great tobacco combina-
ton. Starting in 1890 as the AM
erican Tobacco Company, manu-
facturer of cigarettes, with a capt.
tai of $25,000,000, the combina-
ton has now net capitalization
Excluding inter-company holdings)
of 316,346,S21. 1t has absorbed
about ESQ separate concerns, and
now controls substantially four
fifths of the output of each i'm
portant kind of tobacco manu-
featured in the United States, with
the exception of cigars.
Its history also presents i'm
portant features of stock manipula-
tion. The financial transactions
centering around the organization
of the Consolidated Tobacco Com
pany in 1901 are especially note
worthy. At that time small body
of directors and stockholders in the
combination believed that the prof
its of the combination could be
greatly increased in the immediate
future. They organized the Con-
solidated Tobacco Company and Of
fered it's bonds in exchange for the
common stock of the American and
the Continental, in order thus to Sc
cure for themselves most Of the in
creased profits about to accrue.
The profits accruing to the common
stock of the American and the Con-
tinental; after its acquisition by the
Consolidated, Increased greatly;
nd no 20
trolling the last named company
so small, in fact, that six of them
held majority of it's stock and
thus controlled the entire combina-
tion-became entitled to millions of
dollars which, had it not been for
the Consolidated transaction,
would have gone to the original
common-stock holders
Commissioner Smith says that Sin
fairness, it should be added that
this offer Of exchange was madp
with no concealment of the fact that
that offer came from the principal
officers and directors of the two
companies" but, he adds:
The conduct of this group of
men is proper subject for crlti-
cism, however, because they could
foresee much better than outside
stockholders the large profits about
to accrue. They occupied fiduci-
airy relation to the outside stock
holders, and should have shared
with them equally the special
knowledge acquired by their posi-
ton"
The report discusses at length
the methods by which the tobacco
combination has been developed, in
Guiding the bogus Independent con-
Germs" of the combination. 1t
points out clearly that "the loading
purpose of the men who have con-
trolled 1t has been to dominate the
tobacco industry. The report con-
tains not only the details Of the A.
nancial operations OF the combina-
ton in its rise, but also many inter
esting sidelights on the schemes en-
ployed to make the combination
paramount in the tobacco industry.