New-York tribune., 1912-02-29
SHOWS STEEL TRUST
HOLDS BULK Of TRADE
House Committees Accountant
Says 1t Has 80 Per Cent, Not
so. of Country's Business.
PROMOTION COST $50, 300, 600
Greatest Profits in Raw Mate
rails and Restraint of Com
petition by Varied
Means Revealed.
From The rribue Bureau ]

From The Tribune Bureau
Warrington. Feb &.-Tn an exhaustive
report on the methods Of the United States
Steel Corporation. Farquhar J. McRae. ex-
pert accountant for the Stanley Steel in
vestigating committee. declares that the
corporation controls 80 per cent of the
rountry's steel trade; that prices are ma
nipulated through the famous Gary din
ners"; that ]. p Morgan & Co. realized
so 10000 in profits for promoting the cor
roratlon. and generally supports the con-
tentions OF the government in its suit
against the trust.
Mr.. McRae's report was fled with and
made public by the Stanley committee TO-
day 1t covers more than two hundred
typewritten pages and is caustic in its
criticisms Of the operations Of the Steel
Corporation. Mr.. McRae asserts that his
Investigation of the company's books and
records. which required several months,
has convinced him that the Steel Corpora
tion is in control Of 50 per cent OF the
steel producing properties In the United
States. The price agreements made at the
Gary dinners" the expert accountant re-
ports. are as binding as were the pooling
agreements, discontinued through fear of
the Sherman antitrust law.
Would Not Produce Books.
Steel Corporation officials objected to pro-
ducing their books before the committee in
this city, but consented to place them at
the disposal of an expert accountant to be
named by the committee Mr.. McRae made
thorough study Of the books and min
utes and in his report to the committee
he pointed out these salient features:
That ]. p Morgan & Co, heading the
syndicate which organized the Steel Cor
poraton, received a cash profit of s69, 800, 900,
OF which $62 100000 was for promotion, with
an additional commission of $,SOO,OO for a
bond conversion scheme.
That the net earnings Of the corporation
for period of nine years were Sl,U29, ,6So, SoS,
or an equivalent of approximately N3 a ton
on finished product, instead Of @S0,0oO3n as
claimed by the corporation in its report.
That the Steel Corporation, contrary to
the statement made by Judge Gary ana
H. e. Frck to President Roosevelt in 1897
that il did not control more than 60 per
cent of steel properties in the country, con-
trolls about so per cent OF the steel holdings.
The section OF the report dealing with the
Gary dinners" where independent as well
as corporation steel men assembled to dis
cuss conditions in the trade. contains an
analysis of the legal effect of the golden
rule" policy prepared by Anthony j. Ernest,
a New York lawyer, in which it is declared
that the conventions agreed 10 and en-
forced would be Objectionable as regards
their effect upon competition" The report
says:
Il can be no justification of the co-opera-
ton of the participants in the Gary din
ners" that no penalty attaches to viola
ton OF the declarations mutually eX-
changed, because perforce the antitrust
act would prevent the enforcement OF any
penalty for reducing prices or exceeding
ones share Of the business. Previous pool
agreements may have been broken and
penalties inflicted by the members them
selves. although this was soon discontinued.
j viii be assumed, even II fund had not
hcen deposited, that the men in the old
pool would have paid their fines. IL this
he assumed IL can also be assumed that
the word Of the participants in the Gary
dinners is ample security for the profes-
SioHS Of cooperation in the policy almost
unanimously subscribed TO at the dinners.
on the other hand, any contract may be
broken; any conspiracy may be upset by
reoalcitrants. 1t is surely no excuse for the
ilcEality of any arrangement I'm restraint
of trade that il can be departed from by
tho participants.
Shows Restraint Of Competition.
Stress Is laid in the financial section Of
ureS that the Steel Corporation restraints
competition by making the greater portion
Of fts profits in raw materials and in
plants producing sem-hnished materials
while the finished product plants make
very low profits. This operates, 1T is de-
clared, to keep the price of raw materials
ore, coke and pig iron, on a high plane. TO
the advantage Of the corporation and dis
says:
| find the approximate net earnings Of
S13 ton of finished product TO have been
as follows:
BY manufacturing companies. IS Of a ton;
by coal and coke companies, 20 cents ton :;
nv iron mining companies, 50 70 ton; by
transportation companies, 81 81 a ton; by
miscellaneous companies, rs cents ton.
Total, S3.
This the report says, is equivalent 10 an
earning Of 70 per cent on cost As showing
the result of the policy Of the Steel Cor
poration to make the bulk Of it's profits in
the raw and semi-inshed material, Mr..
McRse submitted a condensed statement Of
the dividends paid by the subsidiary COM
panies TO the Steel Corporation and the in
terest paid by the Carnegie company on its
collateral trust bonds from April I. 1901, to
April l. 1910 showing a total of $50. s.124,SSG g.
lie says:
The income from the Carnegie company,
IN dividends and bond interest, amounted
10 sos, ,239, ,537 40, or about 10 per cent of the
total. The American Bridge Company paid
the holding company dividends on it's pre-
ferred stock during this period to the
amount of $1s,1S,57 90. or 26-l0 per cent Of
the total
The table Of dividends for the nine-year
period follows:
The Carnegie Company .......... .$227 $50. 900 90
FEDERAL Steel Company common b.. JI4sl6. 1S2 90
Federal Steel Company preferred. 81, l5I, l2s 90
National Tube Company common. 9.7s3. 905 so
National Tube Company preferred -, 29g, 737 50
American Steel and Wire Company
Of New Jersey common. ......... b1,1lO, leO 2S
American Steel and Wire Company
OF New Jersey preferred. ........ 1929, 1853 Is
National Steel Company common. 100000 90
National Steel Company preferred 3,779, 1853 90
American Tin Plate Company com
mon ...................... 7,149,esO 90
American Tin Plate Company pre-
feFred ................... 1884 ,s72 90
American Sheet Steel Company