Atlanta Georgian. [volume] (Atlanta, Ga.) 1912-1939, 1913-06-22
F RISCO CASE
RECALLS MANY
SIMILAR TALES
If WinCheII is 0usted as Receiver,
1t Will Not be First In
stance of Kind.

NEW YORK, June 21-If b. F..
Winchell should resign as one Of the
Frisco receivers it will not be the
first time that the president of a
railroad has met with such an expe-
rience.
In January of 1898 the PhiIadel-
phia & Reading Railroad, supposed
ly in a sound financial condition,
sold a block of S5OOOOO0 bonds
without any difficulty, and on Feb
ruary l the company distributed its
regular 100000 dividend. on Feb
ruary 20, or three weeks later. A A.
Mcleod, president of the company,
was appointed receiver. after hav-
| ing confessed to the court that an
unwieldy floating debt had been
incurred.
In reply to that announcement the
surprised bondholders appointed an
Investigating committee which re-
suited in the discovery that the
company was a hopeless bankrupt.
because Of the reckless policy which
had been pursued by it's president
Mcleod, it was found, had not only
secured control of the Jersey Cen
trail, the Lehigh Valley, and several
coal companies, and vast coal land
holdings in the anthracite district
but he had bought up the Pough-
keepsie bridge and acquired control
of the New England, the Boston &
! AIaaau Il
England railroads on a margin. As
a result Of these disclosures Mcleod
resigned as president and receiver
He was succeeded by Joseph J. Har-
ris, representing the bondholders
Atchison History.
Among the receiverships of the
early nineties. Atchison affords one
Of the most interesting examples of
concerted action on the part of
| bondholders. Early in December of
| 1898 j. W. Reinhart, president Of the
| AtChison, returned from Europe to
| be confronted by collapse in the
stock market prices of his compa-
/ ny's securities on rumors that he
had gone abroad on an unsuccessful
! hunt for funds to prevent receiver
ship In reply to those reports.
Reinhart issued the following state
ment:
! My mission abroad has been
| success in every respect The inter
est on the general mortgage bonds
| Of the AtChison, due January 1, will
| he paid. II seems hardly necessary
to make this statement, because
doubts as to its payment have, in
my judgment, been created solely by
spectators who have no substan-
tial interest in the property"
The foregoing statement was is
sued on December Is. On December
| % Reinhart was appointed receiver
for the company.
A Real Protective Committee.
For weeks holders of Atchison Sc
Curities We're stunned. In February
of 1884, however, a number of bond
holders here and abroad formed a
! protective committee and employed
, stephen Little to make an investiga-
| ton of AtChisons accounts On as
suranCes from Reinhart that the
property was in good condition.
physically and financially. and only
In need OF temporary assistance, a
reorganization plan was proposed.
Ihat plan was receiving serious CON
sideration from Atchison's security
holders when Little completed his
report. The publication of that SEN
satiOnal document showed that AtCh-
ison and its subsidiary company. the
st. Louis x San Francisco, were car
rying rebates which had been paid
to shippers and unearned interest of
branch roads to the extent of $500
600, as an asset in the balance sheet
under an item called auditors sus-
pense account" In other words. ac-
cording into the Companys balance
shee, the more IT paid out in rebates
ana unearned interest the richer Ii
grew.
Titles report was published Au-
gust 3, 1894, and Reinhart resigned
as president and receiver on August
10. He was succeeded by A. F.
Walker selection of the bondhoId-
erS
As long as a railroad continues to
pay interest on its bonds and notes.
the stockholders have a right TO elect
the president. In case of default,
however the court should appoint a
receiver to operate the property for
the benefit of the bondholders A
number of cases can be found where
bondholders were willing and anx-
ious to have the president of a bank
rupt road appointed receiver How
ever, when the stockholders name a
receiver despite protests of the bond
holders, the receiver can easily be