The sun., 1910-01-29
STETSON STIRRED TO ANSWER
LAWYER REPLIES SHARPLY To
COMMERCE COMMISSIONER.


ION and L. a. N. FInanclnx-says That
Latter was at Least Morally wrong.
sharp debate not down on the pro
vranrne between Francis Lynde Stetson
and Interstate Commerce Commissioner
ndson c. Clements enlivened the dinner
A the Economic Club st the Hotel AssoT
ast night Mr.. Stetson was presiding a.
president of the club and Commissioner
Clements aroused him by referring to the
raorganixation OF the Alton and Louisville
and National Railways some years ago
s scandalous proceedings.
Commissioner Clements, a big man
With a positive manner who closely re-
embles ex-senator Foraker OF Ohio, said
hat he believed that there was great need
for more regulation OF railroad corpora
lions by the Federal Government, par
tcularly in the matter Of rates and CAPT.
taliIation or the two he believed that
stricter aston in fixing capitalization was
the more important because when rail-
road companies were sued on the ground
Of excessive rates they always brought to
the attention Of the court the fact that their
capitalization was so great that rates had
10 he raised In justice to stockholders.
Nov the Court" said Mr.. Clements,
cannot go into the question Of how the Z
capital was spent. whether it went for
the benefit of the property or the benefit
Of fsw powerful persons in the COM
many. The Court finds that the capital
is actually what is claimed and there its
function ends.
There ought to be a way of stopping
the financial exploitation of railroad COM
nanies deals in which both the general
public and the majority Of stockholders
The widow and the orphan, II you please
suffer. Why should railroad corpora
tions be allowed to sell their stock for
less than parl'
Commissioner Clements said he had
two instances OF unjustifiable expIoita-
ton to present, the case Of the Chicago
and Alton and the case OF the Louisville
and Nashville.
Der 81. 1898, showed" he said. that the
value OF the property was $50 .e3S. .ss7.
and that the stock and funded debt and
other liabilities amounted to SIS. ISL ,4O7.
About this time the Hartman syndicate
purchased this at 5000 preferred and ATS
common. at a total cost OF o,042 200.
From then on until June 30, 1909. the
capital Indebtedness OF the c. a A.
expanded from SS3, ,o51, ,4O7 to Sl14, ,6lO, ,o37, ,
an increase of about $50, ,OOO. 900. OF this
only Sls,OO0.0 900 was actually expended in
improvements, &C, leaving t62 $50. 600
increase Of stock and liabilities without
ore dollar of consideration.
This was done by placing a $40. .OOO. 900
. per cent mortgage on the property to
take up s., 500 900 of first mortgage bonds
and TO make improvements. additions
and for other corporate purposes
These bonds sold to stockholders at 65
cents on the dollar. the syndicate obtain
in a M iUnn 4
shares OF stock out OF 222 500 outstanding
But only $50 600, 600 OF the $40. 600, 600
issue was sold. the syndicate disposing
OF what they had obtained at a profit OF
about s. 900 600. OF the remaining $780,
OOO issued $1,000, 900 was pledged as Sc
curity for q. .O0O. 600 loan and the remain
ing million was retained in the treasury.
Out OF 65 cents on the dollar realized
by the railroad the principal stockholders
voted themselves a dividend of 30 per
cent, amounting to 80 .o69. .lSO. which was
never reported to the Interstate Commerce
Commission"
There was buzz over the room when
Commissioning, Clements got through
reading hs figures on the Alton deal, but
Ine interest grew when he came to the
Louisville and Nashville reorganization.
John w. Gates he said, robtained a
and Nashville by purchase at an average
price Of i2s. When il was ascertained
that he had q majority OF the stock Mr..
Morgan was able to get Charles M. Schwab
10 go at 1 or , o'clock at night to Mr.
Gates's hotel and wake him up to know
upon the stock or buy il, and they found
Mr.. Gates and got him to give an option
by which he agreed to take $50 for all
majority OF the stock. The option was
taken and handled. with the outcome that
the Atlantic Coast Line agreed to take IL
over at $50 and to do so issued ss5, 900 900
i'll new bonds. ~, 500. 600 in new stock
&c, the then stockholders and 5000 900
of stock further, resulting in an increase
Of bonds and stocks Of the Atlantic Coast
Line Of a little less than $SO:oOO. 900 in
order to enable the Atlantic Coast Line
to,tske control OF the Louisville and Nash
vile out Of the hands OF Mr. Gates.
In his testimony Mr. Morgan expressed
4 in this way I do not wish to impugn
any mans ability. but | did not consider
that Mr.. Gates was proper person TO
manage the Louisville and Nashville
Railroad
Now, gentlemen, in both Of these cases,
Alton and Louisville and Nashville. this
added amount IN stocks and bonds was
taken out OF the pocket OF the public in
didn't think that Mr.. Gates was a suitable
man to control the Louisville and Nash
vile The truth is they didn't want
competition"
Federal law 10 just as necessary to
stop this sort OF manipulation and exploi-
tIuon as Federal laws are needed TO Sc
cure pure. foods and to secure the integrity
OF our national banks. The Federal Gov
eminent should perform the function for
which it was organized. and that Ia to pro-
tect the people. As IL is now, any State
can paralyze the efforts OF all the other
States by granting loose charters that
allow OF reckless and improper conduct on
the part Of exploiters."
Francis Lynde Stetson stopped the
gproar with a few emphatic whaclxs OF
his gavel on the railing OF the tribune
rhere he and Commissioner Clements
we're seated.
lam not at all informed as to the Alton
matter he said. but in connection with
what our very distinguished guest has
sald | fail utterly to see how capitaliza-
hon affected the rates, unless the rates
we're increased after capitalization was
increased. That has not been demon
strated. fail also to see how the widows
and the orphans were made to su1eT
II the dividends were paid regularly.
As it happens / am thoroughly in
formed as to the Louisville and Nashville
purchase. ! had accurate knowledge OF
It seven years ago. Every detail Of the
Transaction was reported TO the Inter
state Commerce Commission and the
o.