The sun. [volume] (New York [N.Y.]) 1833-1916, 1916-06-14
SEEK EVIDENCE FOR
$1,99O,SOO ACTION
AGAINST THE B. R. 7.
Thompson and slower Dclvc
Into subway "Prior Deter
minatiOn" Allowance.
j. p. MORGAN ASKED
TO APPEAR TOMORROW

The Thompson Committee obtained
evidence yesterday In connection with
the 3. r. It's contract with the city
under the dual subway plan. which the
committee and Assistant Corporation
Counsel Josiah A. Slower are consider
inG n the basis for a suit to recover
Between $3.50. 900 and s1.o90.sO0 allowed
- the y n. r. in its prior determine
don" account. The city instituted q
similar suit against the marlborough
n the Public Service Commission sew
eral months ago, intended to recover be-
tween $4,000. 900 and $4,000. 900 from
TIE 1nterborough's prior dctermination'
account.
In An effort TO unravel the intricacies
q the u. II. It's contract with the city
TOR It's part Of the dual subway work
M the allowances made on that ac-
count. Howard Abel. auditor Of the COM
Deny. occupied the witness stand all day.
He refused to acqulesce in the conclu-
eions drawn by the committee and it's
counsel regarding the r. n. It's subway
accounts. Senator Thompson and his
associates have an idea that they may
be able to show that the y. II. #. was
stlc 10 reduce by considerably more thar
u 900. 900 its contribution Of s13. 900 600
toward the subway construction.
The gist of the evidence on which the
prospective suit will he based, II It is
begun. was this:
In a prior determination Of March IS,
1918. the b. n. r. was allowed $1,000
500. which the company maintained rep
resented interest paid on $40. 900. 900 par
value Of six year 5 per cent. notes is
sued by the r. r. 7. for the account. OF
the New York Municipal Railway Cor.
poration. the company formed for the
subway partnership with the city in the
subway work. This sum was Above
the r. r. T. as n prior determination
by a special resolution of the Publ,
Service Commission, dated June 80. 1919
The disputed question is whether thi,
sum is actually interest or discount. Thu
contract with the city provides that dis
count shall be allowed up to 3 per cent
II Is the contention of the Thompson
committee that instead OF being interes
the 1890. 500 really Is discount and rep
reeents ! per cent. more thar the Il. r. T
would be allowed II II we're entered a
discount. The committee was informe
by the b. r. T. representatives that I
was prepaid interest" but the commit
tee expects hat the b. II. 7. II Above
this charge will then put In an iter
Of 3 per cent. for ~discounting its fnan
DIAL issue.
The notes themselves bore 8 per cent
interest on their face. but the explana
ton Of Col. Timothy S. Williams of IN
D. r T. VAS that the company had so!
the s per cent. notes o ma s per cen
interest basis. It seems that the bank
preferred Il that way to facilitate thei
sale. Inasmuch as the sl.9eO.sOO, &C
ccrding to the committees theory. neve
was in the hands OF the r. r. T..
really was discount when the notes wer
sold and represented l per cent, NOR
than the company is allowed in tn
contract.
The committee commended IN It's que'
tioning Of Col. Williams and Mr.. ABB
that the r. r. T.. had entered TIL
amount as interest in order TO evade IN
discount limitation provided in the cor
tract, and that therein lies a suit fc
recovery. Both Col. Williams and III
auditor denied these insinuatlons. an
maintained that the item was proper|
an interest charge. The contract doe
not specify what the interest charge
on financing shall lbe. but limits them
Interest actually paid or necessarily II
CURED.
Senator Thompson will continue wit
the r. r. T. to-day after a brief hearin
Of Acting Police Commissioner Lee
Cooley on the tapping OF labor unio
telephone wires. A letter has been sci
nv the committee to ]. r. Morgan askir
him TO appear before the committee 4
morrow. Senator Thompson called {
Charles r. Hughes yesterday to tell hi
something about the Public Service Con
missions and 70 assure him OF the sul
port OF the western part Of New Yoi
Dtate,