Omaha daily bee., 1909-02-20
SMITH ON TOBACCO TRUST
Cooperation Commissioner Reviews
Formation Big Combination.
RING OF OFFICERS GETS CONTROL
Bonds of Consolidated Company Of
fered for stock OF old Concern,
Giving Proats 20 Small
Cotefie at Head.

WASHINGTON Feb. M.-In a repor
transmitted to President Roosevelt today,
Herbert Knox Smith. commissioners Of
corporations, presents some highly inter-
Getting history OF the organization OF the
''robacco combination which In the mag
nitude OF it's business operations, is one
Of the greatest organizations in America
The report Is a result, In part, OF an ex-
tensive investigation into the tobacco In
dustry made by the bureau Of corporations.
subsequent reports win deal with the con-
troll 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 transmittai, Commissioner
Smith says that 1t deals with the history.
from the standpoint Of its organization, OF
the great Tobacco combination. Starting
in 1880 as the American Tobacco company,
a manufacturer OF cigarettes. with q capital
OF s2s, 900, 900. the combination has now a
net capitalization (excluding inter-company
h~oldings) OF $sl& .s2l. 1t has absorbed
about $50 separate concerns and now con-
fAls substantially four-fifths OF the output
OF each important kind OF tobacco manu-
featured in the United states, with the ex-
ception Of cigars.
Ring Controls stock.
Its history also presents important fea-
lures OF stock manipulation. The financial
transactions centering around the organ
isation Of the Consolidated Tobacco COM
pany In 1901 are especially noteworthy. At
that time a small body OF directors an
stockholders in the combination believed
that the profits of the combination could
be greatly increased in the immediate flu
a.s. rrh.v o1oantaaA fkA COnaNlldntad no
bacco company and offered its bonds In ex-
change for the common stock Of the Amer
lean and the Continental In order thus to
secure for themselves most of the increased
profits about to accrue. The profits accru-
ing to the common stock OF the American
and the Continental after It's acquisition by
the Consolidated increased greatly and the
small body OF men controlling the last
named c~ompeny-so small, IN fact, that six
Of them held a majority OF It's stock and
thus controlled the entire combination-be-
came entitled to nhhIions OF dollars which
had It not been for the Consolidated trans
action would have gone to the original
common stock holderaS
Commissioners Smith AVS that In fairness
Il should be added that this offer OF ex-
change was made with no eoneeaimsnt OF
the fact that that offer came from the
principal officers and directors OF the two
companies. but he adds;
Smith Criticises Organiser.
THE conduct OF this group OF men 10 a
proper subject for criticism. however, be-
cause they could foreses much better than
outside stockholders the large profits about
TO accrue. They occupied q fiduciary rela-
ton to the outside stockholders and should
have shared with them equally the special
knowledge acquired by their position"
TIL report discusses at length the meth
DDS by which the tobacco combination haA
been developed. including the bogus In
dependent concerns" OF the combination.
II points out clearly that ''the leading pur-
pose Of the men who have controlled Il
has been to dominate the tobacco industry.
The report contains not only the details Of
the financial operations Of the combina-
ton in tts rise. but also many interesting
ssdeiights on the schemes employed to make
the combination paramount In the tobacco
industry.