New-York tribune., 1909-02-19
HELD TOBACCO TRUST
CONTROL By SIX MEN
Herbert Knor Smith Reports on the
Combination.

Washington Feb 1S-In a report transmitted TO
President Roosevelt to-day Herbert Knox Smith.
Commissioner OF Corporations presents
highly interesting history of the organization Of
the tobacco combination which. in the magni-
tude of its business operations OF the great
est organizations In America. The report is 4
suit in part of extensive investigation into the
tobacco industry made by the bureau of corpora
tions. Subsequent reports will deal with the
troll OF the tobacco industry, with prices and pro-
ITS. and with competitive methods.
In dis letter of transmittal Commissioner Smith
says the report deals with the history, from the
standpoint Of its organization of the great tobacco
combination" Starting in 1890 as the American To-
bacco Company, manufacturer OF cigarettes. with
a capital OF S2S.0o0O0o. the combination has now
capitalization (excIuding intercompRny hold
ings) of S315546S21 1t has absorbed about two hun
dred and fifty separate concerns. and now controls
substantially four-7fths of the output of each i'm
portant kind of tobacco manufactures in the United
States, with the exception OF cigars. Mr. Smith
continues:
Its history also presents important features Of
stock manipulation The financial transactions
Ging around the organization OF the Consolidated
At that time a small body of directors and stock
of the combination could be greatly increased in the
In anIed2te dutus Iey GTsa[ed s1d in nne b IN
exchange for the common stock OF the american S
themselves most OF the Increased profits about to
The Consolidated Tobacco Company had at the
outset capital stock of S3OoO6,y0o. which was
at the ead Of Iso2 ON The basis OF the rate Of
earnings Of the American and Continental prior pIl9T
O Consolidated X would
scarcely have been possible TO pay dividends on
solidated bonds. During the three years and four
months following the organizatio9 OF the the Con Con
panies were sufficient to pay those charges and
soiidated on its investment Of 100000 part of
the time 81 ~ That a 5 S9mPa9s iSdsns fFs aceumu mus
lated surplus x7eooooO end substantially e 19e be-
of the American and Continental companies
amounting TO over, s7,Oooo0 oe,s ,os nv
Of the IL @ lands of the Of ew
This is seen in the fact 1sojidaad tnas more than
BvaD Duks r B. widener SFnqy al and wnanS G Whney
TSa; TSaongh the o. ownership of the stocks Of the
American and Continental by 1he C0nsGnIS'e1; so5 a.
dominate the entire combination. .,
The EE men 0f the Raq stocks eks Of the
and apparently very little OF the h Sonht!teL,sSt e
though hsy boeS haS 0en Most TeX 6
the the Gag Tbe Te haa and few as
sociates had supplied the greater paF f OF EXPANSION
GocT. hut they did SO only because X was eyideRt
that through the organization od sne their power
ana their share IN the prospective pron'S VI N'e
he PROFITS aocring the common stock cIs OF te
American and the ContlnenntaI; e.s VTest!T and
tbe Un small body of men controlling the last I nSge
company became &c me een for The consodatea tran
saction would have gone TO the "rlti"''i
stock holders
Commissioner Smith that. in fairness ~
sbouId be added that this offer OF eNchehse VI
stock was made with no concealnent OF inc a.
that that offer came from the priholpA' o''
- s,rac+ors Of the two companies =; but ne
adds:
The conduct Of this group OF men Is proper popid suI
5ect for criticism. however because tlief &C ~
5oresee much better than outside stoGknct1Ti isI %
large proit6 about to accrue 1hey oSgupiea Tg 10
sSfSc,ar-- TeIa1Ion TO outside stockhodels anu
sT1onId have shared with them eQlahy the sPSc4Ai
ISnoyIedge acquired by their position
Tho report discusses at length the methods Dy
which the tobacco combination mas peeh ~ ~oevet.
go Including the bogus independent concerns"
Of the combination II says that the leading pur-
nose OF the men who have controlled 1t has been
70 dominate the tobacco industry. The report con-
,ains not only the details of the financial operations
~ he coub1rs in its rise. but also many inter
esting sidelights the schemes employed 10 make
the Combination paramount IN the tobacco industry