The Mitchell capital. (Mitchell, Dakota [S.D.]) 1879-1918, 1909-02-25
TOBACCO TRUSTS
HISTORY IS TOLD
Stock Manipulation and Bogus
Concerns Figure in Commits
sioner Smiths Story.

transmitted to president Roosevelt to-
day. Herbert Knox Smith, commits
sioner of corporations, presents some
highly interesting history of the organ
ization of the Tobacco Combination"
which. in the magnitude of it's business
operations, is N of the greatest or
CARNATIONS in America. h report ls
a result. in part, of an extensive In
v~estigation into the tobacco industry
made by the bureau of corporations.
Subsequent reports Will deal With tha
control 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 tho
country. In his letter of transmittal,
commissioner Smith says that 1t deals
with the history, from the standpoint
of its organization. of the great To-
bacco Combination. Starting in 1890
as the American Tobacco mpan a
manufacturer of cigarcts. with a cap
!tal of 500, 600. 900, the combination has
now q net capitalization excluding IN
ter-company holdingsl of $31G, Assn.
1t has absorbed about go separate con-
Germs. and now controls substantially
four-ifths of the output OF each i'm
portant kind of tobacco manufactured
in the United States. with the excep-
ton Of cigars.
Its history also presents important
features Of stock manipulation. The
financial transactions centering around
the organization of the Consolidated
Tobacco company in 1901 are especially
noteworthy. AT that time a 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 Consolidated To
bacco company and offered it's bonds In
exchange for the common stock OF the
American and the Continental, In or
der thus to secure for themselves most
of the increased profits about to ac-
mon stock of the American and the
Continental. after it's acquisition by the
Consolidated. increased greatly; and
the small body of men controlling tho
last named companN-so small. In fact.
that six of them held a majority of its
stock M thus controlled the entire
OBSERVATION-DISCLOSURES entitled to mil
ions of dollars which. had 1t not been
for the Consolidated transaction, would
have gone to the original common
stock holders"
Commissioner Smith a that I'm
fairness. it should be added that his
offer of exchange was made with no
c~oncealment of the fact that that offer
came from the principal officers and
directors of the two companies" but,
he adds:
The conduct OF this group Of men
Is a proper subject for criticism, how
ever, because they could foresee much
better han outside stockholders the
large profits about to accrue. They oc-
cupled a fiduciary relation to the out
side stockholders. and should nave
shared with them equally the special
knowledge acquired by their position"
The report discusses at length the
methods by which the Tobacco Com
bination has been developed, including
the bogus independent concerns OF
the combination. 1t points out clearly
tina the leading purpose of the men
who have controlled ii has been to
dominate the tobacco industry. The re
port contains not only the details OF
the financial operations OF the com
bination In its rise, but also many in
teresting sidelights on the schemes en-
ployed TO make the combination para
mount in the tobacco industry"