The Birmingham age-herald., 1914-03-07
Tend to Create More Favor able Market for the
 Roads Securities
VARIOUS INSTANCES
 OF INCOME CITED
Disclosures Described as Serious Irregularities" by Commissioner Harlan in RepOrt-General
 Admonition Issued

Washington. March s.-Charges that the book accounts of the Chicago, Mill waukee and St. Paul Railway company and of it's subsidiary, the Chicagos Mil waukee and Puget Sound Railway com pany, have been so manipulated as to mislead the public and tend to create more favorable market for the se- curities of the roads, were contained in a report made public today by the interstate commerce commission after an exhaustive investigation of the financial affairs of the roads
 Various instances of unlawful over statement of income were cited. While criticizing and condemning the ac- counting methods followed by the com panies, however, Commission Harlan, who prepared the report, said:
 We do not mean to be understood by anything here said as intimating that the St. Paul company is not valuable property and is not achieving ',he results reasonably anticipated from the extension of it's line to the Pa cific coast"
 Serious Irregularities
 The disclosures by the investigation of what Commissioner Harlan describes in the report as serious irregularities in the accounting system of the roads were regarded by the commission as indefensible, although the officers of the St. Paul company explained that they resulted from negligence mat tention and lack of familiarity on the of fha "a those under him with the require ments of the commission
 There is no sufficient basis of rec ord says the commissioners report ''to enable us to condemn or acquit the comptroller. either of full respon- sibility or of his share of responsi- bility for the condition of the accounts of these companies. but these grounds for thinking that his responsibility was very materially qualified and minimized by the instructions and directions given , him by the executive and other off, cials. Whatever may be the fact in ], that regard the commission now feels that a more careful observance of our rules and regulations is promised for the future. This we confidently antici- pate will be realized"
 General AdmonitiOn
 A general admonition contained in the report made it clear that the com mission hereafter will hold to strict ac- countability all common carriers for the accuracy and truthfulness of the statements contained in their reports or financial operations.
 Tn some instances today's report ex- plained "a financially strong road mal.- ing large net earnings would not hes- tate to conceal the facts by adding to it's operating expense accounts sums disbursed in improving it's property; on the other hand financially weak road seeking to enhance its credit by a good showing of operating results, would in- clude in it's property accounts sums ex- pended in operation The result was that carriers annual and monthly statements of net revenue often re- fiected nothing more than the particu- lar showing desired by it's executive. These reports often were used for speculative purposes, and the stock holder and the general public were left without any assurance as to whether the dividends declared were paid from income or surplus or out of capital Accounts "Stuffed'
 Under the accounting rules of tte commission, the St. Paul company was permitted to include in it's accounting proper revenue TOT the tfanSporta- ttion of men and materials, rents for Equipment and other of it's facilities used in the construction of the Puget Sound. and interest the funds ad- vanced That course, however. was not pursued On the contrary. the St. Paul company included in its income ac- counts for the year 1910, all the inter est, rents and revenues assignable to the period prior to July 1, 1899. the sum total amounting to over $4,G00,000 In the same year it also decreased its operating expense accounts by crediting thereto more than s500,000 on account of the salvage of cars destroyed pre- vious to the year 1907. By means of these entries the income of the Chicago, Milwaukee and St. Paul Railway com pany for the year 1910 was oyerstatec by more than s5,O00.000. As a result of this overstatement of income. the report of the St. Paul for the succeeding year showed an apparent falling off in rev enue and income of more than S2,000,- OOO In it's report to it's stockholders for the year 1911, the explanation of fered by the officers of the company was that the large decrease in the net