The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1915-02-26
ROADS SHUFFLED
In Big rail- PLOT
Scheme to Build Up Vast Sys-
tenn Told in |. &C. Valu-
alton Hearing.
BUYS STREAK OF RUST
ID. c. Reid Says Rock Island Pur-
chase Led to Formation of
Holding Companies.
BUYS STREAK OF RUST

|
i Leeds bought up me .toc;z OF the Rock
Island road in the latte. part Of 1901
\ with profits cleaned Up il selling tin
plate companies to the United States
Steel Corporation, secured control OF
| the road in 1902. participated in the
| formation of the Rock Island Company
| of New Jersey. and the Chicago. Rock
| Island. and Pacific Railroad Company,
of Iowa. holding companies, with the
object of building up a large railroad
system. according to the testimony Of
Mr.. Reid, a witness before the Inter-
state Commerce Commission yesterday.
in the physical valuation investigation
of the Rock Island.
Mr.. Reid declared that after he and
his associates had purchased about one
third of the stock OF the Chicago. Rock
| Island, and Pacific Railway Company
at from SITS to $500 a share. they dis
covered that they had bought "a streak
of rust" and that this was what really
led to the formation of the holding
companies, the object being to build
up the Rock Island and obtain feed
ers.' Mr.. Reid said that things were
different in those days" and that rail-
reads changed hands over night.
Paid TO withdraw Suit.
1t developed yesterday. that Clarence
H. Nenner, of New York. obtained
$3.50, 900 in cash and a block OF stock
for withdrawing A suit he instituted
in Chicago in 1904, seeking to enjoin
consolidation, and that Senator
James Hamilton Lewis of Illinois, was
NnerS attorney at the time. The
money and stock were paid to Nenner
apparently. for stock of railroad and
a construction company. but the testi
,,,nn cd ha cd nj
on paper.
MIR. Reid. when called to the stand
by Chief Counsel Folk. said he met
William II. Moore and J. II. Moore, IN
1897 or 1898 and that he had known
William B. Leeds in Richmond as
boy. All were associated with him in
buying up tin plate companies, he
said. and all sold out to the United
States Steel Corporation in 1901. Then,
he said, all purchased blocks of stock
Of the Rock Island. He said that he
bought some and later discovered"
that the others had done likewise.
Mr. Moore said that in round numbers
he and his associates purchased about
one-third Of the stock of the Rock island.
and early in 1902 they became members
R. r. Gable and Marshall Field requested
them to go on the board. Later Leeds
was made president of the company. and
year Two ldleT beCdlnt
chairman Of the board. Mr.. Reid said
that later the two holding companies. the
Rock Island Company of New Jersey
and the Chicago. Rock Island and Pacific
Railway Company. Of Iowa, were
formed.
Common Stock Exchanged.
Then YOU made an arrangement
whereby the New Jersey Company eA-
st,1
Iowa holding company and both issued
stock as full paid. while as matter of
fact not dollar was paid for either. did
you not%' asked Mr.. Folk.
Rock Island stock about that time
sold for approximately 500 a share re-
sponded Mr.. Reid. There was 1000.
COG outstanding. This had a market value
Of $50. 900. 600
Mr. Reid added that the new securities
were offered up to a par value Of $40.
and he said that the railway company
on its earnings could have paid per
cent on the securities issued. At the
time of the formation of the two hold
ing companies. Mr.. Reid said. the stock
of the Rock Island, valued at $500.
600. was deposited in escrow with the
Central Trust Company of New York.
When We bought the Rock Island
it was a streak of rust and We did not
mo" IL, Sdlu we star ltO "
build it up and get some feeders"
Mr.. Reid said that what he and his
associates wanted to do was to protect
the railway.
Yet the control of the Jersey company
controlled the system. and not single
dollar was paid for that Stock said Mr..
Folk.
Says Money Was Paid.
it," said Mr.. Reid. THE stock of the
Rock Island was locked up
Mr.. Reid admitted that the only earn
ings to pay dividends and interest or
stocks and bonds issued by the two hold
ing companies came from the actual
earnings Of the Chicago, Rock Island
and Pacific Railway Company. and that
as the result of the exchange something
like 500 10000 securities were issued.
There were $50. 600 900 of these securi-
ties that were never outside of the box
of the Central Trust Company" ex-
planned Mr.. Reid when Mr.. Folk insisted
that the reissue had all been loaded on
the back of the Rock Island Railway.
Mr.. Reid admitted that dividends on
the New Jersey company stock. came
from the dividends on the Iowa COM
pany stock. and the dividends of Iowa
company stock. was the excess divi- |
1enQS from tne railway company StOCh
over the amount needed for interest |
on the Iowa company's bonds.
= Frederick c. Sherwood. an account |
tant of the commission was on the |
stand nearly all day. and it was
during his testimony that it developed |
that Clarence II. Venner received \
s250.oOo and stock from the Rock Is
land railway.
You were asked about some sum |
being paid to Venner to get rid of
him." said Commissioner Clements.
Give us a little more detail"
shows copy of Receipt.
From the books of the railway
company. l have the information that
he journal entry in April, 1904. re-
,ords the acquisition by the railway
of securities of the Ne
,raska companies and that these Sc
,urities were received in a settlement
With c. Fl. Venner." said Mr.. Sherood.
He exhibited a copy OF this receipt
signed by C II. Venner Co. and also
:. II. Venner for $250.00o-
SO the railway company. in order to
,et rid of Mr. Venner's suit to prevent
his consolidation or formation Of these
NO holding companies. paid Mr.. Venner