New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-07-14
New Haven Stockholders
Call on Directors to
Start Suits.
DECLARE OLD BOARD
LIABLE FOR LOSSES
Lawyers for Victims Argue That
Recovery Can Be Obtained
Under Law.

Boston, July 10. Preliminary to the
threatened restitution suit IN sbehalf
of New Haven stockholders, the law
firm of Whipple, Sears & Ogden has
sent letter TO the New Haven direc-
tors. asking them to enforce the liabil-
ity Of former directors for about $780,
100000 of WASTED funds.
The letter outlines the basis on
which the stockholders will claim that
tho directors are liable for S9i.00O,OoO
on one ground and for Sl55,0OO.Ooo
undor another Interpretation, ana
should be required 10 restore the
funds to the New Haven treasury.
Under date of July 10, the letter
says: ,
at appears from recent Official iuves-
,igations Of affairs Of the New York,
New Haven & Hartford Railroad Com
many that former boards of directors
have expended more than Sl92,OOO.OOo
in the purchase Of trolley and steam
shin lines. Boston & Maine sAares ana
in the "Westchester deal so-called.
Tho nresent value of the acquired
properties. according to the best inioi.
nation accessible. does not and dld
not al the date Of the respective pur-
chases. exceed S9S.0000Q0. The loss,
therefore. which has been imposed
upon the company By these eNpendi-
lures amounts TO nearly $lOO,OOOOoO
Vital Question for Stockholders.
Naturally. this unfortunate situa-
ton is one Of supreme interest TO the
stockholders. II is a vital question "i,h
them whether they must submit as a
6nalitv to these losses, or whether in
some way they may compel the dIrec-
tors. who alone are responsible Tor
these disastrous expenditures, TO maze
restitution.
"This question is also Of scarcely
less interest to the New England pun
lie. The railroad is engaged in public
TRANSFORMATION, and its system afeciS
all New England. It's present aimos,
bankrupt state seriously impalfs IT'S
efficiency. The problem of ITS finances
is critical. If restitution Of It's funds
which have been wastefully and I'M
properly expended may be compelled
the efficiency of the railroad for pub
lie service will be restored and rs
financial problems solved.
AT the request of clients, We nae
Investigated the question Of the rieht
of the corporation 20 recover these eA-
penditures. Ii il our opinion that tie
directors of the railroad who promoted
or permitted. these transactions are
legally liable to the corporation FOR the
losses which have been thereby osta'
stoned and may be compelled by L."
to make restitution
AT present we do not suggest pro-
ccedlngs uD0n the a sumption tndt the
directors have necessarily been sujir
of condue, amounting TO fraud. j. Us
quite true that many facts now DIS
closed point to the probability that
some Of these transactions are tainted
by fraud.
"The terms of the purchase OF the
Rhode Island Company, upon which MI
Commissioner Prouty so severely com
ments in his recent opinion. certalnlF
Justify unfavorable inference. ne
payment of $4,000 600 for securities
of a value clearly not in excess OF 81
600. 900 an absolute waste, as he says
of Sl3.50O000 of the companys money
in a single transaction seems dlihcuII
to reconcile with honesty Of purpose or
Judgment on the part of those direc-
tors responsible for such expenditures.
dishonest and a Fraud
THE recent testimony Of Mr.. Mcllen,
also before the Interstate Commerce
Commission. justihes the inference
that the conduct of officials and direc-
tors. especially in connection with the
.Westchester deal was dishonest ana
fraud upon stockholders.
at IS our judgment that directors
are liable for those losses when 50
Mainly have resulted from their neg
lect Of fduciary duty. On tins ground
tho corporation is entitled 10 recover
from its directors the difference be
tween what was actually paid out for
these investments and their actual
value-a sum amounting 10 not less
than $9i,00o,0OO. ~.
"It is our opinion, therefore tnst
the directors who expended the iund'
Of the New Haven road for these m
vestmcnts which the law prohibited me
from acquiring or holding
became personally responsible and may
be compelled to make restitution 10 the
treasury of the entire fund thus eA-
pended
"On this ground. in our opinion. the
is entitled TO recover from ~
directors sl55.0OO. 900 the aggregate
amount paid for the Boston & Maine
shares and steamship and trolley lines.
eve. therefore, in behalf OF our
clients who are and during all inc
neriod Of the transactions herelh
pboyo referred TO have been stock
LoIdcrs' respectfully demand that you
in titute proper legal proceedings 10
enforce the liability OF directors 10
,ba coronation which we have pointed
ont and such other liability as may
Ho disclosed as result of careful
and thorough investigation OF the
company's affairs"
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