The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-05-30
SAY UNION PACIFIC
FACED BANKRUPTCY
Preferred Stock Holders, Fight.
ing S82,OOO,OOO Melon, As
sert Road Has Lost Money.
FALSE PROFITS CHARGED
Company Insolvent, Were 1t
Not for Interest on Invest
ments, Court Is Told.

| An allegation that the Union Pacific
Railroad has been operating at such q
loss for the last five years that the COM
pany would have been bankrupt but for
Its profit and interest on investments
was made yesterday before Supreme Court
Justice Page In the application by certain
preferred stockholders to restrain the cut.
| ting or the Union Pacific's $4,000, 900
| melon for the benefit of common stock
holders. Counsel FOR the plaintiffs con-
| tended that the railroad had no surplus
| TO distribute and that II a distribution
were made It would come out of capt.
tai.
The suit heard yesterday was broueb,
through the law firm Of Holmes. Rogers
Carpenter. and the argument was made
by Delavan A. Holmes. He contended
that the book surplus Of the company
was not true one, and said that as n
result OF an inspection OF the Union
Pacific books under an order of the court
he found substantial verification for his
allegation that tho road has credited H.
self with millions OF profits when thers
were none.
Mr.. Holmes insisted that one item Of
s5S,OO0.O00 which appears as profit Ina I.
disappeared entirely and should he
stricken from the estimated surplus. Thl.
Is the SUM with which the compsuy
credited itself after the company was
compelled to divest itself OF Its Northern
Pacific holdings following the decision in
the Northern Securities case
The company has not earned other
sums claimed In the surplus" he said.
we make no charge of fraud against tn so
officers In this respect and are willing
TO accept their statement that the books
show what they say they do, but we
insist that the conclusions drawn az TO
Hta
pursuance OF Mr.. Harriman's ambition to
control the railroads OF the West the
Union Pacific constructed many little
branch lines In Oregon and washin ton
with Its own money, consolidated them into
one and then had an appraisal made
or the properties at s6,1e0.O00 more than
they cost. This sum was credited as
profit and enters into the present claimed
surplus.
1T was also the company's practics
when building new lines to charge up all
the money spent for construction as a
loan and then credit itself with millions
or dollars interest for money spent on its
own property Thus We show that the
S0S.00O.O00 profit is gone and that the
s6.1eo.o0o profit wasn't profit at ALL"
John G. Milburn, appearing for tho
Union Pacific. declared that the company
had a surplus of $3.50. 0O0. 900 and that
the only question was whether there was
euincient surplus TO make the distribution
out OF II. He declared that IL made no
odds how the surplus came about, and
that In declaring the distribution the d.
rectors were not required to determine
whether It came from profits OF operation
or in the investment and resale OF stocks.
Therefore. being a surplus, It Is dis
tributable according to the judgment OF
the directors" said Mr.. Milburn. He also
contended that the case made by the
plaintiffs was no different from that of
the Equitable Life Assurance Society.
which had been decided favorably to the
Union Pacific.
In reply Mr.. Holmes declared that in
the Equitable case il was admitted that
the company had the surplus claimed.
while the plaintiffs IN the present case m
sisted that there was no surplus.
THE income and earnings from opera
ton have rapidly declined from year to
year, while the expenses have increased.
and the books show It," said Mr.. Holmes
1.-THE loss in one year on operation after
paying dividends was slo.000.000. They
have so wasted the assets that II Is no
longer possible to pay dividends by the
honest operation of the railroad company"
Justice Page reserved decision.