The Wenatchee daily world. [volume] (Wenatchee, Wash.) 1905-1971, 1909-02-19
Of TO-
bACCO TRUST
COMMISSIONER SMITH MAKES
PUBLIC THE HISTORY OF ONE
OF THE GREATEST MERGERS
IN u. s. HISTORY.
(By Associated Press.)

Washington, D. c., Feb. 19.-Ir
report transmitted to Presiden
Roosevelt today, Herbert Kno1
Smith, commissioner of corporations
presents some highly interesting his
tory of the organization of the ITO
bacco Combination" which, in the
magnitude of it's business operations
| is one of the greatest organizations
| in America. The report is result
in part, of an extensive investigation
into the tobacco industry made by
the Bureau of Corporations. Subse
quent reports will deal with the con
troll of the tobacco industry, with
prices and profits, and with competi
tive methods.
Today's report sets forth the rise
of one OF the great combinations OF
the country. In his letter of trans
INITIAL Commissioner Smith says thai
it ideals with the history, from the
standpoint of it's organization, of the
great tobacco bination. Starting
in 1890 as the American Tobacco Co.
a manufacturer of cigarettes, with 6
capital of 100000, the combina
ton has now a net capitalization Tex
GLIDING inter-company holdings) o.
S316.346,S21. 1t has absorbed 25(
separate concerns, and now controls
substantially four-ffths of the out
put of each important kind of tobac
co manufactured in the United States
with the exception of cigars.
Its history also presents impor
tant features of stock manipulation
The financial transactions centerins
around the organization of the Con
solidated Tobacco company in 1891
are especially noteworthy. At thai
time a small body of directors ant
stockholders in the combination
believed that the profits of the com
bination could be greatly increased
in the immediate future. They or
ganized the Consolidated Tobacco
company and offered its bonds il
exchange for the common stock o.
the American and the Continental
in order thus to secure for them
selves 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 las
named company-so small, in fact
that six of them held a majority Of
it's stock and thus controlled the en-
tire ination-became entitled
to millions of dollars which, had il
not been for the Consolidated trans
action, would have gone to the orig
inal common stock holders"
Commissioner Smith says that ''ir
fairness, it should be added that this
offer of exchange was made with nc
concealment of the fact that thai
offer came from the principal Off
GERS and directors of the two com
panies;" but he adds:
'The conduct of this group OF
men is a proper subject for criticism
however, because they could fore
see much better than outside stock
holders the large profits about to &C
crue. They occupied fiduciary re-
lation to the outside stockholders
and should have shared with them
equally the special knowledge &C
quired by their position"
The report discusses at length the
methods by which the Tobacco Com
bination has been developed, includ-
ing the bogus Independent con-
Germs" of the Combination. 1t points
out clearly that 'the leading pur-
pose of the men who have controlled
it has been to dominate the Tobacco
industry The report contains not
only the details of the financial opera
tions of the combination in its rise,
but also many interesting sidelights
on the schemes employed to make
the ombination paramount in the
tobacco industry.