New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-08-08
ATTACK MERGER
OF LAKE SHORE
Minority Stockholders
Ask Injunction Against
Roads Absorption.
SAY N. Y. CENTRAL
TAKES DIVIDENDS
Petition Declares Profits of
Combination Will Come from
Line Taken Over.

The minority stockholders of the
Lake Shore & Michigan Southern Rail-
road filed a petition in the federal dis
trict court late yesterday for an in
junction to prevent the merger of that
road with the New York Central. The
compliments allege that the Central
will soon be operated at a loss, and the
earnings of the consolidated property,
to be known as the New York Central
Railroad Company, will have to come
out Of the increasing profits of the
Lake Shore.
Allegations designed to show cook
ing of accounts" such as conversion of
dividend earnings of the Lake Shore
property into vast expenditures on the
New York City terminal and other i'm
provements and failure to furnish ac-
curate information to the stockholders
about the actual earning capacity of
the road, are also set forth in the COM
plant.
The petition was filed by former At
torney General George w. Wickersham,
of the firm of Cadwalader, Wickersham
& Taft, in behalf of Annie L. De Koven
and Cecil Barnes, OF Chicago, trustees
under the will of John De Koven and
holders of 500 shares of capital stock
of the Lake Shore, and other minority
stockholders.
Petition Once Denied.
A similar petition was filed by Mr..
Wickersham in the federal court at
Detroit last month for Charles j. Spen-
Ger and others. On the ground that the
New York Central, which was a party
to the suit, could not be forced to an
swer in Michigan, Judge futile denied
the petition. At that time Mr.. Wicker
sham announced that the action would
probably be taken up to the United
States Supreme Court.
Since the Central acquired 452,892
shares of Lake Shore stock it has had
absolute control of the operation and
accounting of the Lake Shore, according
to the complaint. The net income of
the Lake Shore and subsidiaries is ST.
100000, while the Centrals is only
S6,000,000, and, the petition sets forth,
the 5 per cent annual dividends which
the Central has declared since 1900 to
large extent have been derived from
dividends on the Lake Shore shares.
creasing and net earnings are decreas-
ing, while net earnings are growing
anC operating charges are shrinking on
the Lake Shore, the compliments say,
insisting that the Central soon will be
showing a deficit and the value of the
consolidated property will be less than
the present value of the Lake Shore
property alone.
The merger, the compliments allege,
is conceived for the purpose of improv-
ing the credit of the Central, that it
may be reimbursed for the enormous
outlays in New York and elsewhere.
According to the complaint, the con-
solidated company is TO be capitalized
for $500, 100000 and is TO be distributed
so that holders of each share of Lake
Shore stock will have five shares of
consolidated stock TO one share for
each Holder of Central stock
Call Consolidation Unfair.
As the minority holders of Lake
Shore stock say their shares are WORTH
81 900 instead of $500, the amount
offered for it in stock of the con-
solidated corporation, they say the
terms of the consolidation agreement
are inequitable end unjust.
Since the Central got control Of the
Lake. Shore, in 1898, determination Of
the value of Lake Shore stock has been
difficult for several reasons, the CON-
plainants say, principally because the
policy dictated to the Lake Shore by
the Central has Disseminated against
the minority stockholders of the Lake
Shore, and has resulted in a conceal
ment Of the actual extent of net earn
ings through the application of large
amount of dividend earnings to outlays
which should have been charged to
capital and not 70 income,
According TO me complaint the Lake
Shore since 1870 has earned for avail
able dividends upward of 1929, 200, 900,
but this, it is alleged, has been eX-
pended for capital accounts. OF this
amount Sls7, 100000, the petition al
leges. has been thus diverted since
1897. when the Central acquired 90
per cent of Lake Shore stock.
Il is also alleged that the income OF
the Lake Shore for 1912 was $4,000
600. of which only s16,5s4,384 was re-
ported "a net income for dividend .pur-
poses. The balance, the complaint
says, was expended for capital pur-
poses.