The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-10-03
BANKER ATTACKED In
ROCK ISLAND FIGHT
Bondholders' Lawyer Charges
James n. Wallace With
Juggling"
ASSAILS REORGANIZATION

In arguing a motion before Judge Julius
NJ. Mayer in the United States District
Court yesterday Samuel Untermyer. at
torney for the holders Of more than 81
100000 of the bonds OF the Rock Island
company, charged James N. Wallace.
president of the Central Trust Company
and chairman OF the Rock Island reorgan-
ization committee, with keeping the bond
holders VI the road in ignorance concern
ing It's actual financial condition. Mr..
Untermyer also declared that the object
of the present management of the road Is
to divert millions OF dollars from its treas
ury.
Attorney Untermyer appeared in oppo-
stiOn to the foreclosure OF the Rock
Island mortgage held by the Central Trust
Company and the consequent sale OF the
collateral securities deposited under the
mortgage agreement This foreclosure
proceeding. brought by the Central Trust
Company and acquiesced in by the rail-
road company. is part OF the reorganiZa-
ton scheme.
Mr.. Untermyer charged that tho bond
holders protective committee, or reorgani-
cation committee, was formed by the same
interests responsible for the shrinking OF
the old railway company's stock from over
$500 to $3.50 a share. lie explained,
however. that no blame attached to James
Brown, Bernard VI. Baruch. Henry Evans
and Frederick Strauss. Men OF their high
standing, ne said, are always selected to
serve on such committees to give an APP
pcarance OF responsibility.
The committee, said the lawyer, made
no attempt to acquaint the bondholders
with the details of the financial "jugglery"
by which S7,500,000 was taken from the
treasury OF the Rock Island company.
This, he said. was done in connection with
n n nd Gup
Francisco Railway Company by the Chi
cago. Rock Island and Pacific Railway
company OF Iowa, the holding company
for the Rock Island road, which was
dominated by the Reid and Moore inter
ests
Although, according TO Mr.. Unterfnyer,
the 81. Louis and San Francisco was pay
ing no dividends. the holding Company
bought II in for $29. 0O0. 900, and in order
to make payment mortgRged the same
stock. When therefore he said the Iowa
holding company was required by law and
Their considerltions to part with the stock
II had 20 HIT the mortgage in order to
make the necessary delivery. Being a
holding company, he said IL had no prop
crty save that belonging to the railroad.
SO Il took the necessary s7,500.000 out
OF the treasury of the road and In its
place nut debenture bonds II had issued.
payable in 1918.
1Nesc bonds being worthless. said Mr..
GntCrmyer, tho iraL-llcI II was a fraud
upon tho. stockholders. and vet the reor-
ganizatian committee has at no time in
formed tho bondholders that the directors
OF the road are liable for tho return of
that $1,000. 900 to the treasury Nor.
said Mr.. Untermyer. have they made any
attempt to get back the money
The interests Of J. y. Wallace as presi-
dent OF the Central Trust Comp ny. which
II tho trustee OF the mortgage. and As
chairman OF the protective committee are
conflicting according to Mr.. Untermyer.
In the former capacity, he said. II Is the
duty ~ Mr.. Wallace to get as much as pos
slhle for the stock OF the old railway
under tho foreclosure proceedings.
whereas the object Of the protective com
mttee -as to buy In the stock as cheaply'
as possible.
Mr. Untermyer asked that the form of
sale he amended so as TO permit each
bondholdcr TO participate In the sale 81
the collateral securities TO the extent Of
his holdings. He also suggests that the
distribution OF $1,000 par value Of stool,
for each $1,000 Z bonds would be a sim.
pie matter He 7sked the court in any
event T. postpone the signing OF the decree
Z foreclosure until his clients could make
a thor ugh investigation Of their road
Judge Mayer reserved decision,