The sun. [volume] (New York [N.Y.]) 1833-1916, 1911-10-27

ID
combination and became member Of
the first board Of directors.
Norman Is. Ream was a diractor OF
the Federal Steel Company, took part in
bringing about the combination and
became member of the first board of
directors OF the corporation.
RoCKEFELLERs ON THE LIST.
John d. Rockefeller and John ID.
Rockefeller. Jr.. were largely interested
Mines, John ID. Rockefeller being direc-
tor In that company. Both Of them par
ticipated In bringing about the COM
bination and became members of the first
board Of directors of the corporation.
p. A. b. Widener was a director in the
American Steel and Wire Company of
New Jersey. took part in bringing about
OF the first board Of directors Of the cor
poration.
william p. Palmer was president and
director Of the American Steel and Wire
Company OF New Jersey, took part in
bringing about the combination and con-
tinued as president OF the Steel and Wire
Company after the transfer Of that com
pany to the corporation"
5000. 900 900 EXCESS CAPITALIZATION AL
LEGGED.
After showing the basis upon which
the various properties were taken over
by the Steel Corporation, the petition
charges that its capitalization was not
less than $500. .0OO. 900 in excess Of the
values Of the properties. Upon this point
the bill says:
The capitalization was vastly In excess
OF the amount upon which those prop
critics under normal conditions could earn
fair return. The earnings Of the cor
poration were not commensurate with
IT'S actual capital. nor were they entirely
the legitimate fruits of the earning capac-
ity. Of those properties separately con-
were TO avery large extent. approximately
one-hals, the result brought about by the
power exerted over trade and commerce
by such a vast combination of capital,
the restraint imposed upon trade and
commerce, the suppression of competi.
tion. the influence upon the control Of
prices and the many direct and indirect
advantages derived from the cooperation
OF SO many men OF influence in trade and
commerce, who formerly acted In rivalry,
drawn together by the combination in a
common interest. Consumers and the
public at large were. through the power
created and exerted by such vast COM
bination. compelled to pay an unlawful
tribute OF many millions OF dollars an
nually to the corporation.
Much stock was Issued on an inflated
basis in exchange for stock acquired in
absorbed companies. which stock itself
had been issued upon partly inflated
basis. and Of the balance many millions
OF dollars were IA reward for mere promo
tion and underwriting. In the direct ex-
change OF securities the corporation issued
81 ,l9l .ss2 ,532 of stock and bonds in ex-
change for a total Of Sssl .2?4. iO5 stock s
OF the constituent companies and Car
neGie company bonds.
PAYMENT TO MORGAN SYNDICATE cRIr1.
The carrying through of consolidation
was entirely under the supervision of
j. =. Morgan 4 Co. as syndicate man
ayers. The syndicate turned over to
the corporation s?5 Ooo. 900 in cash, which
constituted all that was added of in
trinsic value 10 the properties combined
except for 50 900 cash paid in by the in
corporators and sundry STOCKS OF par
value OF Sl'+.Ooo. For this consideration
and its expenses. services and risk the
syndicate received $84 ,99s, ,78s. par value.
oi preferred. and ssi, ,99s, ,s3' of common
stock of the corporation. This enormous
takeout was possible because the syndi-
cate managers and those most influential
in efecting the combination were promi.
nently identified with the management
OF several Of the constituent COMPANIES
and atterward with the control Of the cor
porat ion itself
The underwriting syndicate included
directors of the companies which were
combined The total amount Of the new
capitalization. representing PAYMENTS in
stocks 10 syndiCatas as promoters for
organizing the new corporation and the
previous combinations which IL took
over. exceeded SIS 0D.OD after allowing
for new capital contributed and reason
able expenses. The new inflated capi-
tallZatlon OF the corporation exceeded the
o.d lnnated capitalization of the constit-
uent concerns, plus the new cash cauital
provided and sundry stocks as above
mentioned, 10y $4l5,4s 1872, or hy over IS
per cent
FICTITIOUS BASIS PoR DIVIDENDS
The main prospect for maintaining
earnings on the many millions given for
promotion and Issued in excess of valua-
tlOI was the power in the business
achieved by combination, the potency
OF vast aggregation Of capital the
affiliations brought about with powerful
banking and transpor ,at;bn Companles
and the direct and indirect control of
trade that thereby ensued Tni, was a
fictitious basis resting on unlawful COM
hlnatlOu, The value of stock thu, issued
largely depended upon earnings largely
based upon subJec'Ing tho public to con
dtions which could only continue hv an
abuse Of the public
100 MICH FOR CARNEGIE
lie hD,bol,pJD IN bonds of the Car
n"gle company except S5JU, ,OOu were
exchanged for a like amount Of tho bonds
of the corporation. The stock holdings
IN this company of Andrew Carnegie,
Ny Lucy {. Carnegie and George Lauder,
mounting a. 500 900 .0OD par value We're
exchanged for $l44.tOO 900 par value in
first mortgage bonds of the Steel Cor
poratiun. The remainder of the Car
negie stock, $84. .nH.o1 par value. was
exchanged for sos. .277. l20 par in preferred
stock and S9H,21g.ol0 par in the common
stock of the corporation. Thus was
given for $3.50 900 par value of stock
and $3.50. 40" 900 bonds of the Carnegie
Company $3D3 i5D. 900 of bonds and slSs
$50, 100 Of stock Of the CORPORATION, making
"A capitalization of S4a2 ,Oo8, l6O in exchange
for one Of S3l9, $4,000.
~ The value Of tho tangible property
Of the Carnegie company did not exceed
$50 600 900. The books of the Carnegie
Steel Company, Ltd. showed that the
net value on December 81. 1909, of the
assets was s75,ol0los. This. to n large
extent, represented the actual cost of
the property as shown in the balance
sheets ot the company, and the same
was a full, fair and accurate valuation.
This statement from the books was veri-
fed under oath by Andrew Carnegie
and other members of the company.
Before the Steel Corporation was formed
ana "lthin three years prior thereto
u. 1. lrck obtained an option on the
tarnegi" property at the price of $3.50 OO1,-
600 lie proposed the purchase to j.
T. Morgan. who declined il upon the
ground mat the pripe was too HIGH And