The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-10-17
S2OO,OOO,OOO HUNT
IN ROCK ISLAND CASE
Commerce Boards Expert
Charges stock Watering in
Fivcfold Degree.
FALSE ENTRIES ALLEGED

NAsuNGroS. oct 1G.--Thc Interstate
Commerce Commission investigation into
the financial affairs and management OF
.ha Rock island Railroad system sjt under
way to-day.
A charge that the Rock Island stock was
"watercd" o. hvc times its original capi-
tanlatiuu through the organization OF
holding companies was one Of the hrst
s,rusatous made by the COMMISSIONS eN-
p'Fss who has examined the books OF Inc
company
Tnc same expert declared there had been
"a lass Of $40 Ouu. uOO to the Rock Island
Ir the purchase of the Frisco and chicago
and Alton roads He added That ther"
were false entries on the books, apparently
designed to boost inc hdTh'' N"'u' Va
the stock
Freder,ck G. Sharuod was the commits
Sims expert accountant VINO wac called
o. the stand to las the foundation Tor an
Investigation which officials "i the com
mission believe VIII Yield results As IN
tcresting as the recent inquiry INTO the
financing u the Sew Haven system .
Mir Shar1od had been on the stand only
, bri.f TIM. when he disclosed the dlrec-
ton in WhIcu the commissions inquiry ~
aiming lie testified that soon after the
u,td. Moore. syndicate obtained control OF
creased i've times It's Original ''pla"""-
ton. 49,.
Iowa and Sew jersey holding companies,
the directors of which were employees OF
the Rock Island road. The total stocks
and bonds issued for the two holding CON
rnri,s we're $4,000 .OuO. These. Accord
ing o. the witness. had no earning power
az their own but we're dependent tntlttH
for their earning power upon the - wv;
600 capital stock of the Rock Island rodu
The commits siou's Investigators intend
TO find out In the cours" II their inquiry
what became OF about $500 100000 which
they contend IL the difference between the
original capltal and the amount OF secun-
ties finally issued by the Rock Island
Mr. Sharood was on the stand nearly
all the day and put In the record a com,
pletc history of the chicago, ROCK IsIanu
and Pacific Railroad Company In sun
stance he SAID that I'm 1902 there were or.
ganIzrd the Chicago. Rock Island ana
Pacific Railroad Company NJ Iowa ana
also the chicago. Rock Island and racine
Company If New Jersey.
II, said the stock OF the latter company
10 the extent of Sl25.0o0.000 was deliv-
cred t. the former company on par Tor
stock exchange basis The first COMPANY
issued, he sad, in addition s7"oO0,OOO or
collateral trust bonds The stock OF the
Chicago Rock Island and Pacific Hallway
known az the operating company. agsre-
eating $7b. 900, GOO. was to be paid by the
promoters Of the holding companies.
An arrangement was entered into be-
tween the stockholders OF the railway
company and the officials Of the railroad
company Of Iowa whereby each snare or
railway took was 20 be- delivered to the
Central Trust Company and the holder
thereof was to receive In exchange NloO
par value bonds of the railway company,
= L. aFNNfN "a N
and $40 In stock of the Iowa company or
IN other words $27o in par value for 800
in stock Of the railway company
Mr. Sharood said the stock Of IN" rail-
way company was paying approx mately
per cent. At this time and It was quoted
IN the rcighborhOod Of sl7b and that the
bonds Issued and outstanding were de-
pendent entirely upon the dividends OF the
stock Of he railway company.
Mr. Sharood placed In the record con
tract between officials Of the Rock Island
Railroad and l.. T.. Loree, formerly pres
ident Of the Baltimore and ohio Railroad
dated December II. 1903, under the terms
% which Mr. Loree was to become prest-
dent ~ the Rock Island NJ "A salary OF
$4,000 a year and ~ the expiration IF
i've years he was TO receive 100000 IN
bonds.
I, appeared that Mr.. Loree remained
as president about ten months, then was
forced our. but nevertheless received be-
w. ~ , , "', n, 'd,nosit "a mar,
", nav ,, ''"'0' va '''
Va ."e '"',,, AZ i.,.....,,. ,.,o,o,,,,,,,, 4,
~" 'il p''a' ,,'' 81, tsia,'I mo-,
wrecked partly through the purchase at
WIZ ~ NI""l ~ we - cuV, -
'U."uH" t,' '"!e"'1' ~ ~, tS 1os'' +,
A''uu. ~ ','. .o' r.,.''' IL, ~ 40
w Pu' mas, "l w &c 80 onn ~, ~ ,nr
NV anu ,"S Ut o,U S ,i,o ,'' nv Nv,
mas "' we .''"s' a,u ,N'I'' tIrr