The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-03-12
.BONDHOLDERS SUE
ALLIS-CHALMERS co.
Say $11,148,OO0 in Securities
Was Fraudulently Ignored
in Reorganization.

A complaint alleging fraud against tbs
bondholders OF the Allis-Chalmers Com
pany In the receivership proceedings two
years ago which resulted in reorsaniza-
tion Of the company under the name OF
the Aliis- Chalmers Manufacturing Com
pany was filed In the Supreme Court yes
terday by Augustus @. Paine n Co, o.
200 Fifth avenue. owners Of $4,000 OF
bonds. In behalf Of themselves and other
bondholders.
The plaintiff charges conspiracy par
ticipated In by the Chalmers bond
holders protective committee. OF which
James N. wallace. president Of the Cen
trail Trust Company. was chairman the
common stockholders' committee. OF which
Alexander J. Hemphili was chairman. and
tho preferred stockholders committee. OF
which w. Emlen Roosevelt was chair
man, These committees made up the
reconciliation committee which formed
the Ailis- Chalmers Manufacturing Com
, pany, which 10 named as defendant. The
| plaintiff asks that . receiver be appointed
| for the company II necessary to carry out
the courts orders.
| The complaint recites that during the
| year and q half prior to December 81
| 1911, the Aits CHALMERS Company. In
common with many other manufacturer
Of heavy machinery and engines, suffered
a business depression. competition was
keen and prices were cut to get orders
The Allis- Chalmers Company was ham
| percd by extravaGant organization and
iaxity Of management" II IL alleged. and
In the latter part of 1911 the directors
were trying to convert the assets into
cash In order TO pay OF the Indebtedness
prior to reorganization. ~ result the
eighteen months previous showed q book
loss OF $6O0.597.
The plaintiff alleges that In the fall Of
1911 the company and Its officers. who
either held Its notes for doans or were
connected with financial institutions which
held them. conceived q plan OF paying OF
the unsecured creditors In full and then
through the device of foreclosure and
reorganization to transfer all the assets
to the new company without paying of
the old bonds.
Pursuant to this plan the indebtedness,
was reduced from S5. ZOO. 900 to $4,000. 900
and with cash Of ssSi.047 on hand thu
company decided to default on the pay
ment OF S27S.7O0 interest on the bonds
II Is alleged that tho members of tn,
bondholders committee were large ho.d
ers Of the company's notes and that the!
acts were opposed to the interests OF tn,
real bondholders.
The complaint charges that to carr,
| Out puTpUoc phytu8 uTbcCuTeS
creditors at the expense Of the bondholderi
the company caused q friendly receiver
ship proceeding to be instituted In New
Jersey, and Its president, Delmar W
Call. was appointed receiver. For a veal
later the net earnings were 100000. bu
instead OF beirg applied to payment o
interest. as would have been done had tn,
trustee under the bonds filed the re
ownership action, tho money was uset
for other purposes, This resulted In al
immediate loss OF 100000 to the bond
holders, II 10 alleged.
The plaintiff also alleges that the re
organisation committee bought the prop
erty. worth Sl9.s30.2ss. with additiona
quick assets OF Ss.50o.00o. for q total o
only S7,250.000. The committee then hxes
a value Of $40 900 900 for the same prop
erty and issued 3I6.b0o.o0o OF preferrst
stock and S26. 900. 900 OF common stock
An assessment of S6.ls3.000 was mad
against the security holders Of the com
psny.
The complaint asks that the new com
p&ny be compelled to pay the principa
and interest OF the 3ll,I<s.Q00 In bonds
or that a new mortgage be executed.
also asks an Injunction TO prevent an
acts which would render . Judgment To-
The PLAINTIFF " ths suit ins8sctual