Twice-a-week plain dealer. (Cresco, Howard County, Iowa) 1895-1913, 1909-02-26
ASKS TRUST PROBE
Smith Reports on Tobacco
Combine.
LEARNS OCTOPUS SECRETS
Commissioner of Corporations DcIves
Deeply Into Industry and Tells of
Millions Controlled by Few Men
History of Concern Is Told.

Washington Feb. 19.-In a report
transmitted to President Roosevelt
last night Herbert Knox Smith, COM
missioner of corporations, presents
some highly interesting history of the
organization of the tobacco comHna-
tion," which, in the magnitude of it's
business operations, is one of the
greatest organizations in America.
The report is a result, in part of an
extensive investigation into the to-
bacco industry made by the bureau of
corporations. Subsequent reports
will deal with the control of the tobac-
co industry, with prices and profits,
and with competitive methods.
Growth of Great Combine.
The report sets forth the rise of one
of the great combinations of the coun-
try. In his letter of transmittal, Com
missioner Smith says that it deals
with the history, from the standpoint
OF its organization, of the great tobac-
co combination. Starting in 1890 as
the American Tobacco Company,
manufacturer of cigarettes, with
capital of $25,00O,0O0, the combination
has now a net capitalization (exclud-
ing inter-company holdings) of $780,
346,S21. 1t has absorbed about $50
separate concerns, and now controls
substantially four-fifths of the output
of each important kind of tobacco
manufactured in the United States,
with the exception of cigars.
Tells of Naturalization.
Its history also presents important
features of stock manipulation. The
financial transactions ccntering 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
profits of the combination could be
greatly increased in the immediate
future. They organized the CONSOLE
dated Tobacco Company and offered
its bonds in exchange for the common
stock of the American and the Con-
tinental, in order thus to secure for
themselves most of the increased
profits about to accrue.
Points to Great Profits.
The profits accruing to the COM
mon 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 company-so small, in
fact that six of them held a majority
of its stock and thus controlled the en-
tire mbination-became entitled to
millions of dollars which, had it not
been for the Consolidated transaction,
would have gone to the original COM
mon-stock holders.
Subject to Criticism.
''The conduct of this group of men
is a proper subject for criticism, how
ever, because they could foresee much
better than outside stockholders the
large profits about to accrue. They
occupied fiduciary relation to the
outside stockholders, 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 combi-
nation has been developed, including
the bogus independent concerns" of
the combination. 1t points out clear
ly that the leading purpose of the
men who have controlled it has been to
dominate the tobacco industry" The
report contains not only the details of
the financial operations of the combi-
nation in its rise, but also many inter-
esting sidelights on the schemes EN-.
ployed to make the combination para
mount in the tobacco industry