Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1909-02-19
Growth of One of Great Combi-
nations Revealed in Govern
ment Report
BOGUS COMPANIES FORMED
Stock of Concerns Manipulated in In
terests of Favored Holders Con-
duct of Affairs of Combine Subject to
Criticism by Corporations Bureau.

Washington, Feb. 19-In a report
transmitted to President Roosevelt to-
day, Herbert Knox Smith, commission
err of corporations presents some high
~ interesting history of the organlza-
ton of the tobacco combination"
which. in the magnitude of its bust
ness operations. is one of the greatest
organizations in America. The report is
vestigation into the tobacco industry
made by the bureau of corporations.
Subsequent reports will deal with the
control of the tobacco industry. with
prices and profits, and with compet-
tive methods.
Todays report sets forth the rise OF
on of the great combinations of the
country. In his letter of transmittal,
Commissioner Smith says that 1t deals
with the history, from the standpoint
of its organization. OF the great tobac-
co combination. Starting In 1890 as
IHe american obatCO Company, u
manufacturer of cigarets. with capi-
tai of s25, 100000, the combination has
now net capitalization Excluding in
ter company holdings of s316,346,S21. It
has absorbed about $50 separate con-
Germs. and now controls substantially
four fifths of the output of each I'M
portant kind of tobacco manufactured
In the United States. with the excep-
tion Of cigars.
Stock Manipulation.
Its history also presents important
features OF stock manipulation. The
financial transactions ceutering around
the organization of the Consolidated
Tobacco Company in 1901 are especial-
ly noteworthy At that time small
body Of directors and stockholders in
the combination believed that the prof
It's OF the combination could be greatly
increased in the Immediate future.
They organized the Consolidated To-
bacoc Company and offered it's bonds
In exchange for the common stock of
the American and the Continental, in
order thus to secure for themselves
most of the increased profits about to
accrue. The profits accruing to the
common stock of the American and the
Continental, after its acquisition by
the Consolidated, increased greatly: and
the small body of men controlling the
last named company--so small. in fact,
that six Of them held a majority Of its
stock and thus controlled the entire
Observation-Disclosures entitled to mil
lions of dollars which, had it not been
$o, Consolidated fror ca cfi uyn1l11
have gone to the original commons
stockholders"
Bogus Independent Concerns.
Commissioner Smith says that "in
fairness. 1t should be added that this
offer Of exchange was made with no
concealment of the fact that that Of
fer came from the principal officers and
irectors of the two companies but.
he added:
"The conduct of this group of men
Is proper subject for criticism, how
ever, because they could foresee much
better than outside stockholders the
large profits about to accrue. They oc-
cupied a flduciary relation to the out
size stockholders. and should have
shared with them equally the special
knowledge acquired by their position"
The report discusses at length the
methods by which the tobacco combin-
alton has been developed, including the
bogus independent concerns" of the
combination. 1t points out clearly that
"the leading purpose of the men who
have controlled it has been to DOM
mate the tobacco industry. The report
contains not only the details Of the
financial operations of the combination
in it's rise, but also many interesting
,sidelights on the schemes employed to
make the combination paramount in
the toha coo ministry.