New-York tribune., 1910-09-20
CHICAGO RATE HEARING
illinois Central Stock Imitation
and Manipulation.
ST0cKHoL LDERS' WINDFALLS
Got Large Sums with No Record
of More than Passing Fair
Dividends.

dence Of more than passing fair dividends
was the subject delTed into here to-day by
-he Interstate Commerce Commission al
the continuation OF its hearing following
the suspension OF the general advance OF
freight rates OF Western lines which had
been scheduled 10 take effect oE SepteIl-
Der !.
The stock manipulation feature OF me
INQUIRY. which aims TO bring out what
grounds the railroads have for asking the
increase, was suggested by Commissioner
Judson c Clements. and was Immediately
taken up by the commissions attorney
Frank Lyon and John II. Atwood, OF Kan
Sas City. Mo. who appeared for the gen
eral shippers committee. which is fighting
the increase. Controller NJ. p BlauVelt, OF
the Illinois Central Railroad. was the wit
ness from whom the startling disclosures
which followed were obtained
Bic Capital stock Increase.
Commissioner Clements called the wit
,1ess-s attention 10 figures he had furnished
on direct examination by the railroads
counsel. ". H. Horton The commissioner
said
You say. Mr.. Blauvel;. that in 1891 your
rarjtsl stock was s40.9ee go on 2,s75 miles
of road. and 1910 on only about LOO miles
more II was slOs, ,0o0.oe0. Also. that in 1891
7he bonded Indebtedness was only S62,GeO,-
90 while IN 1910 it had reached SIG, 0oo,0e0
Why is this?"
Well was the answer, what would
appear 10 be the excess went TO improve
the roadway and 70 equipment and pur-
chase Of other roads
And how was the stock raised for these
purposes sold2~ continued the commission
er Was It on the open MARKET
-rs TprfF of va
e. the stockholders at par
WAS there ever declared a stock divi-
oendc~
''Oh. no. Tn sure there wasn't That
s~oflld amount 10 the same as any other
dividend. YOU see The Illinois Central
stock sales represented real values, you
must see. in dollars and cents"
Hero Frank Lyon. for the commission.
cook a hand in the cross-examination, seek
ing 10 have the witness differentiate be
tween giving stockholders a stock dividend
or giving them stock worth more than par
g. parity The controller insisted there
was 4 vast difference. even II the result was
zhe same IN cash 10 the stockholders. which
he admitted.
This mart Of the testimony opened a new
disposition " a corporations stock. and
Cor7rnissioner Lane, after asking If st was
% make the stock value approach the cash
value and being Informed il was not, al
lowed tho attorney to delve into the par
stock deals.
IF your stock sold st $50 In open mar
izet." asked the sttorne-, and you gave 1t
20 YOUR stockholders II 100. what became
OF the extra r. per cent Of IFS value?'
Stockholders Got It.
-why. it went to the stoclholder." was
CHE answer.
Then the upshct NJ it was your company
ndded 10 its capital stock bv letting stock
20 ~ par when it needed money, when il
could have sold Jess stock on the open mar
;zet. satisfied its need aad kept the capital
stock dewn giving less capital 10 figure
dividends upon, isn't that so?' was the
next question.
Controller Bleuvelt was unwilling that
such an impression should prevail, he said.
and he explained hy adding: suppose We
dumped sI5.00e,0o0 IN stock on the market
st once. II would send its value away be
low mar I consider it 2 good business
policy to sell where we were sure Il would
bring par. and keep control Of the read
where il was
John Il. Atwood. Of Kansas City. repre-
.entin- the general shippers committee.
-zs anxious 10 know. he said. how much
rf the oonapsnys ses5. .0e0.00 in stocks and
bonds had thus been sold al par since 1909.
Can you give me the figure?" he asked.
The reply caused other attorneys for the
shippers hastily n examine the records that
had been submitted hv the company. Mr.
Bsuvelt answered. 4 find the sum was
100000 par value
That, sold in small dabs on the market
~ y Il sI could have heen sold at market
prices would have amounted 10 about a
- -1,,-
figure. wouldn't it?"
y don't know" replied the witness.
7 think can help you,' answered the
ettorney. He read from a stock and bond
compsry's pamphlet which quoted the high
and low market prices In the period coy
cred as between 122 and ia. with an aver
ese OF abozt $50.
New Line OF Questions.
After further questioning along the same
fine, which brought out no new facts. Com
missioner Clements interposed an inquiry
which directed the questioning along d new
sine-that of the uses 10 which stock sale
money was put. and the possibility OF
sctual gains OF the company being hidden
.n its owning stock and bonds in subsidiary
companies The controller answered this
question by insisting that when the parent
company paid out maintenance costs for
subsidiary companies and the subsidiaries
paid hack dividends those returns were not
properly sources of income. TO be consid-
cred in computing dividends.
The commissioner said: Some OF this
additional property which your company
ecquired was purchased by earnings, wasn't
lt2'
1T was" was the reply.
Then" interrupted Mr. Lyons, does the
sncome include returns from those outside
scompanies %
NO, certainly not replied Controller
Blauvelt Few ot them pay any dividends.
ana return revenue is consumed in pay
rnent OF expenses on their separate lines.
sne doesn't furnish the parent company
with any excess for income