The Birmingham age-herald., 1912-02-29
STEE[ CORPORATION ! SCORED BY EXPERT ACCOUNTANT M'RAE
 Says Corporation Is Operat-
 ing in Restraint of Trade
SCORES MERGER OF
 TENNESSEE COMPANY
Says Intention Was to Eliminate Competition-Treats of Gary Dinners-Big Profit on
 Stores at Plants

Washington, february 2s.--The House steel trust investigation committee '9- day made public the result of the lnauiis y into the books and minutes or the uhi'eo states Steel corporation conducted os Farquhar J. McRae. an expert account ant.
 The McRae report reaches the con clusion that the steel corporation oper- ates in restraint of trade and prevents competition through manipulation or nrjees. 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. It also tends to contradict some of the ,ostimonv given by the steel trust of ficlals.
 Figures Are Startling
 some of the figures dealt with in the report are startling. It is shown that J. p Morgan & Go. received approximately s7o0oo,000 in cash profits for organizing tn. big steel combine. and that the net profits of the concern for the first nine years of it's existence were more than z s1, 900, 600.
 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 10 be named by the committee. MT. Me Rae made 4 thorough study of the books and minutes, and in his report 10 the committee he pointed out these salient features:
 That J. F. Morgan X Co., heading the syndicate which organized the Steel cor poraton, received a cash profit of sSs,Soo, ooo of which ss2 5oe.ooo was for promotion, with an additional commission of $e,Soo,Oo0 for a bond conversion scheme.
 Net Earnings Reach Billion { That the net earnings of the corpora tion for a period of nine years were sl .o2o. .es5. .ss9., or an equivalent of approxi- . aaatelv sl. .. ten ou. finished nroduet, irr <, s; ii J1fe s9s0 GOO 37l as Claimed by tne Cof- poration in it's report
 That the Steel corporation. contrary 10 the statement made by Judge Gary and II. C. Prick to President Roosevelt Tn iso'' that it did not control more than O per cent of steel properties in the country controls about 80 per cent of the steel holdings
 The section of the report dealing with th. "Jsary dinners where independent as well as corporation steel men assem- bled to discuss conditions ir the trade. contains an analysis of the legal effect of the golden rule" policy prepared by An thony ]. Ernest. a New York lawyer, in which 1t is declared that the "conyen- Ntions agreed to and enforced would be objectionable as regards their effect upon competition"
 Gary Dinners Scored
 'The Gary dinner arrangement says the report "whereat the so-called inde- pcndents are influenced to reduce their production eonformable 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, all though it is claimed that the so-caed in- dependent participants can cut prices without fear of penalty except the dis honor of declaring in favor of 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 a vio- lation of the declarations mutually ex- changed, because perforce the antitrust act would prevent the enforcement of any penalty for reducing prices or exceed ing ones share of the business Previous pool agreements may have been broken Y and penalties inflicted by the members themselves, although this was soon dis continued. It will be assumed. even if a fund had not been deposited, that the men in the old pool would have paid their fines. If this be assumed. 1t can also be assumed that the word of the participants in the Gary dinners is ample security for the professions of cooperation in the policy almost unanimously subscribed to at the dinners.
 Contracts May Be Broken
 "On the other hand. any contract may be broken any conspiracy may be up- set of recalcitrants It is surely no excuse for the illegalty of any arrangement in restraint of trade hat it can be departed from by the participants"
 Stress is laid in the financial section of the report upon the demonstration by fig ures that the Steel corporation restraints competition by making the greater DOT tion of it's profits in raw materials and in plants producing semi-finished ma- ! terials. while the finished product plants make very low profits. This operates, it is declared, to keep the price of raw ma terials, ore. coke and pig iron. on high plane. to the advantage of the corpora ton and disadvantage of the independent During the nine years From January l. 1902, to December 3l. 19l0' the report says, ''the productions of the corporation in rolled and other finished steel amount ed to 79267,3s3 tons. and the adjusted net earnings for the same period amounted ! 10 q ,029 6S5. .3s9 or an equivalent of approx ipatey $l3 per ton. In order that an idea may be had of the net earnings in dollars per ton of the sevsral operating groups of the corporation, I have calcu- lated these figures and find the approxi- mate net earnings of SIS per ton of fin 4shed product to have been earned as follows:
 Earnings Per Ton By manufacturing companies. $S.0l per tom by coal and coke companies. 70 cents per ton; by iron mining companies. R.l2 per ton: by transportation companies q .s1 per ton; by miscellaneous companies, 36 cents per ton-total, sl3"
 lhls, the report says. is equivalent to al earning of 40 per cent on cost. In accounting for the discrepancy be- tween the earrings claimed by the Steel corporation, s0.O00,31l and his estimate Of a.109 146o9s. MT. McRae restored to net earnings what had been eliminated by the Steel corporation in its accounting. including such things as interest of 'pnds of subsidiary companies. the locked up iDfercompany profits in inventories. special depreciation admittedly charged to A~>>re-~><~>~~~>>~ UH senru n1nn a