Evening star. [volume] (Washington, D.C.) 1854-1972, 1912-02-28
PROFIT OVER Billion GUNS FOR MEXlCANS
Made by Steel Corporation n Rifles and Ammunition Sent
First Nine Years. Across the Line.
REPORT ON INQUIRY MADE ARRESTS MAY FOLLOW
Morgan Secret Service Men Upon
for Forming Combine. the Matter
GARY DINNERS DISCUSSED EFFORT TO BAR OUT SUPPLIES
Of Is garded a -Poss-
BILE Danger
Made by Steel Corporation in
First Nine Years.
REPORT ON INQUIRY MADE
Says Morgan 4 Co. Got SIC, ,00o, 600
for Forming Combine.
GARY. DINNERS DISCUSSED
Statement Of Gary and Frick as to
Control Of Properties Is
Contradicted.

The House steel trust investigating
committee today made public the result
of the inquiry into the books and min
utes of the United States Steel Corpora
an expert accountant.
The McRae report reaches the con-
clusion that the steel corporation oper-
competition through a manipulation of
prices, through the influence of the So
called Gary dinners" by control of raw
materials and through a system of inter-
locking directors in various companies.
1t also tends to contradict some Of the
testimony given by steel trust officials.
Some of the figures dealt with in the
report are startling. 1t is shown that
J. P. Morgan & Co. received approxi-
mately $7O.OOO.OOO in cash profits for or
ganizing the big steel combine, and that
the net profits of the concern for the
first nine years of its existence were
more than billion dollars.
Steel corporation officials objected to
producing their books before the commit
tee in this city. but consented to place
them freely at the disposal Of an
expert to be named by the committee.
Mr.. McRae made q thorough study OF the
books and minutes, and In his report to
the committee he pointed out these sali-
ent features:
Profits of Morgan & Co.
That j. p. Morgan & Co.. heading the
syndicate which organized the steel cor
poration, received cash profit Of $00.-
100000, of, which 1850. 900 was the pro-
motion. with an additional commission
Of 81, ,SOO, 900 for a bond conversion scheme.
That the net earnings of the corporation
for a period of nine years were $l.O29.-
mately $13 a. ton on finished product. IN
stead of $9SO,UO.311, as claimed by the
corporation in Its report.
That the steel corporation, contrary to
the statement made by Judge Gary ana
H. c.. Frick to President Roosevelt in
1907 that 1t did not control more than ID
per cent of steel properties in the coun-
try, controls about 10 per cent OF the
steel holdings.
The section Of the report healing with
the Gary dinners" where Independent
an we'll as corporation steel men assem-
bled to discuss conditions in the trade,
contains an analysis 0f.the legal effect
Of the golden rule" policy prepared by
Enss HeM ssst fss nSsk
tions agreed to and enforced would be
Objectionable as regards their effect upon
compstition."
Discusses Dinner Plan.
"rhe Gary dinner arrangement" says
the report, ''whereat the so-called inde-
pendents are influenced to reduce their
production conformably to their estimate
of the reduction In the demand existing.
and to maintain prices. is objectionable
as far as it operates to exclude free COM
petition. The arrangement is designed
and intended to operate. and has operated
admittedly, as to standard steel rails, al
though it Is claimed that the sO-called
independent participants can cut prices
without fear OF penalty. except the dis
honor of declaring in favor OF a named
price and then selling at some other price.
"It can be no justification of the CO.
operation of the participants in the Gary
dinners that no penalty attaches to
violation of Ohe declarations mutually
exchanged. because perforce the anti
trust act would prevent the enforcement
of any penalty for reducing prices or ex-
ceeding ones share of the business.
Previous pool agreements may have been
broken and penalties inficted by the
soon discontinued. 1t will be assumed.
even if fund had not been deposited,
that the men in the old pool would have
paid their fines. II this be assumed, 1t
can also ioe assumed that the word Of the
participants in the Gary dinners is ample
security for the professions of co-opera-
ton in the policy almost unanimously
subscribed to at the dinners.
''On the other hand. any contract may
be broken. any conspiracy my be upset
by recalcitrants. 1t is surely no excuse
for the illegality Of any arrangement in
restraint Of trade that 1t can be departed
from by the participants.
Restraint Of Competition.
Stress Is laid in the financial section Of
the report on the demonstration by fig
ures that the steel corporation restrains
competition by making the greater por-
ton Of its profits In raw materials and
in plants producing finished ma
terials, while the finished product plants
is declared. to keep the price Of raw ma
terials, ore. coke and pig iron, on q high
plane, to the advantage OF the corpora
tion and disadvantage Of the independent.
1902, to December 81. 1910." the report
says, ''the productions Of the corporation
in rolled and other finished steel amount
ed to .267.36S TONS and the adjusted
net earnings for the same period
amounted to $1.O29. .6s5.3S9, or an equiva-
lent Of approximately $13 per ton. In
order that an idea may be had OF the
net earnings in dollars per ton of the
several operating groups OF the corpora
ton, have calculated these figures and
find the approximate net earnings of $13
per ton Of finished product to have been
earned as follows:
by manufacturing companies, $S01 per
ton; by coal and coke companies, 20 cents
per ton; by iron mining companies, $212
per ton; by transportation companies
$1.81 per ton; by miscellaneous COM
panies, SO cents per ton. Total $780,"
This, the report says, is equivalent to
an earning Of 10 per cent on cost.
Discrepancy Accounted For.
In accounting for the discrepancy be-
tween the earnings claimed by the steel
corporation. $3.50. .O00. .311, and his estimate
of $1,1O8, 146O8S. Mr.. McRae restored to
net earnings what had been eliminated
by the steel corporation in its accounting,
including such things as Interest on
bonds of subsidiary companies, the locked
up intercompany profits In inventories,
special depreciation admittedly charged to
construction, employees bonus funds and
special compensations. account preferred
stock subscriptions, which have been
treated as dividends from earnings and
not in the nature OF additional wages to
employees, and lastly interest on bonds,
mortgages and purchase money obliga-
tions Of subsidiary companies"
AS showing the result Of the policy OF
the steel corporation to make the bulk Of
material Mr.. McRae submitted q con-
densed statement OF the dividends paid
by the subsidiary companies to the steel
and the interest Maid hv fhA