Omaha daily bee. (Omaha [Neb.]) 187?-1922, 1910-09-21
MORE OF RAILROAD FINANCE
Alleged Manipulation Of Securities
Feature Of Rate Hearing.
STOCKS SOLD BELOW REAL VALUE
IIlInois Central sells New Issues ~
Par 90 Shareholder when open
Market H. very Mach
Higher.

CHICAGO. sept @-Controuer N. P.
Bauvelt Of the Illinois Central railroad
again was the target for the questions re-
lsting TO the alleged manipulation Of stocks
and bonds OF his company when the Inter
state Commerce commission resumed the
rate hearing today.
The attack of the shippers was made on
the company's statement Of capitalization,
dividends and bond interest Attorney n.
c. I.usk. representing the Illinois Manu-
facturers' association. sought to show dis
crepancies between the roads reports tc
the Interstate Commerce comm ssion and
those To the Illinois Grain and Warehouse
commission.
Attorney Frank Lyon of the Interstate
Commerce commission questioned the cor
rectness OF several items given BY Mr..
BlAuvelt Of cash expenditures by the MI
nois Central by which the witness in part
seeks to show a disproportionate drain on
revenues and the justice Of the proposed
advances in freight rates.
Attorney Lyons interroHations brought
out mention Of the car repair graft" for
which three former officials Of the road
are now on trial in the munlcipa court.
The lawyer referred 70 a statement that
during the fiscal year 1910, 1900 cars OF
total Of Oc0Oo were repaired" and that
the discovery OF the alleged swindle would
probably take care of the normal increase
in wages during the present fiscal year.
DO you expect the cost Of car repairs to
be less this year, inquired Mr.. Lyon.
we certainly do. by about 81 0O0. 900 or
81, 600 OOo" replied the witness. That was
about the excess we paid last year by rea-
son OF deferred maintenance snd-er-er-
other reasons" he added, alud'ng to the
alleged graft and smiling grimiy.
| sale of stock Below Value.
! The commissioners next directed Mr..
! Blauvelts testimony back to the matter of
disposal Of stock OF the road TO stock
holders at par instead of the open market
whore the price averaged considerably
above parity. Attorney Horton Of the rail-
road sought testimony TO Justify this
method OF disposing OF stock.
do you consider IL was better business
policy to dispose of the stock at par TO
stockholders because open sales would de-
press values?" he asked
Il certainly do" responded the controller.
Here Attorney John Atwood Of Kansas
City, representing the general shippers
committee, interrupted with some heat:
Now. let me say just what we mean
! here" he exclaimed I'VE maintain that
/ when the Illinois Central sees fit to sell
stocks at 81, which could have been sold at
$3.50 and giving the difference TO its stock
1 holders and when $40 900, 900 par value of this
| Is sold in ten years, the company choosing
to sell stock when It was not necessary the
| company has no right to come in here and
ask for a raise in rates"
This line was dropped for the time being
at least, and Attorney Horton sought to
company is allowed to accumulate sur
plus II will not be able to borrow money.
Duplication of stocks.
Commissioner Clements asked the witness
do understand you to say that rail-
road should be allowed to charge more than
a reasonable rate in order to secure a sur
plus?'
'oh, no; not more than reasonable
rate"
IF the Dubuque & Sioux City road, al
though a subsidiary line of yours should
have a rate controversy" the commissioner
resumed" it would claim the right to earn
Z per cent dividends. wouldn't it?"
Yes" admitted Mr.. Blauvelt
| And you say that the Illinois Central
owns about &l1,5OO.O 900 of the 81, 900 900 stock
OF the Dubuque & Sioux City, having paid,
Well say, about 100000 Of it's own stock
| for ito"
| Yes"
Then do you maintain that the Illinois
Central should earn per cent on the
fs00O,0OO Of its stock, and also per cent
on its Dubuque & Sioux City stock?"
Not at all; there should be no duplica-
tlon," replied the witness.
Park Tells of Earrings.
| William L. Park. vice president and gem
eral manager of the Illinois Central, was
the next witness He testified whereas the
ratio of expenses to income in 1901 was
64.75 to 100 IL is now H.21 to 100, In spite of
every effort to economize He acknowl-
edged that traffic has grown from 22l tons
per train in 1901 to 432 tons in 1910 and the
/ "a vara GA carload from th{rtaan tnps to tuyan