The Sentinel=record., 1914-01-27
WAS THE RESULT OF SALE OF PROMOTED LINES TO THE
 FRISCO RAILWAY COMPANY.
REPORT OF THE COMMISSION
Shows That 92.63 Per Cent of capi. tai Stock Was Funded Debt-Offi- cers Profited by the Sale of Many Lines to the Frisco.

Washington, Jan. 2G.-Financial op- erations. which included the acquire ment of lines through syndicates which profited to the extent of more than sS,000 GOO, some of which was pocketed by the roads own officers, are cited as among the underlying causes for the insolvency of the St. Louis and San Francisco railroad com pany. in a report to the senate today by the interstate commerce commis- sion. the chairman, E, E. Clark, stat ing in a letter of transmittal address. ed to the president, that thief were not called for in the resolution adopt cd by the senate last summer direct ing the investigation.
 The report shows that the funded debt of the railroad May 27, 1919, when the receiyership was ordered, amounted to S2.G3 per cent of the to- tai capital liability. The total capital at that time amounting to $275,G33,- 933.72, of which Cnly S5I3G4,100 was capital stock and $244,269 S33.72 was funded debt, including equipment trust notes.
 That the interest bearing liabilities Of the Frisco system exceeded the stock liability by S75 per cent and were wholly disproportionate when compared with the capitalization cf other carriers. including those in the territory west of the Mississippi riy, CT" is asserted by the commission, which submits figures for eight select cd railroads showing the average "a, tio of funded debt to capital liability to he 53G5 per cent.
 The report further declares that tNe Inability of the Frisco 10 meet is obligations seemed to have been ap- parent for some time pricr to the ap- nlication for receivership that strenuous efforts were made by it's Of fcers to tide over financial difficulties from day to day; that money was bor- rowed from all available sources until every avenue of assistance was eX- hansted. mark etable securities being sold and that notwithstanding this exhausted financial condition the Frisco sold to Speyer and company of New York $3,000.000 of its general lien five per cent bonds, transaction which the commission declares war ranted condemnation.
 The requirement through a syndi- cate operation of the St. Louis Brownsville and Mexico railway com pany. the report says, represented a profit of 75.66 per cent on the sub scription of each syndicate member. The syndicate was composed Of 99 members, who contributed $39So'- 999.2O toward the construction Of the railroad and. the report adds the ei- feet of the entire transaction was that the syndicate secured profit Of S3'- 0l1929.75, which amount included the profits on land, the cash donations and syndicate operations
 The original Brownsville line l4l miles in length, was turned over TOT operation July 4, 1904 and extended to Sinton. Texas in April, l90h- In l9V5' the report says, a committee or hNe was organized composed of B. F. foa- kun, Samuei w. Fordyce, Thomas H. West. Robert H. Brookings and hu- ward Whitaker, for the purpose ol constructing the railroad rom hopS' town. Texas to Brownsville. This com mittee received about 90000 acres or land and large sums of money donated for the purpose of aiding in construc- tion of the road and development ul the land. The land deals, the cash bonuses and the syndicated eNploi'a tions resulted in profit to the syn dicate of 92,4S712.
 After the Brownsville issued its securities, amounting to $lO,756'ooo as authorized by the Texas railroad commission,' the report continues an agreement was executed between the St. Louis Union Trust Company as syndicate manager, and the FITS CO dated December 1, 1903, unue' which the Frisco was to purchds' these and additional securities nav ing par value of $455,450, for the sum of $11 ,S27 200, with interest iron December 1, 1909 Payment wa made by the Frisco May 26' l9lV in the sum of $12, 122 ,S97.12."
 The principal difficulty with tn Brownsville company has been III ability to meet the interest on bonus