The watchman and southron. [volume] (Sumter, S.C.) 1881-1930, 1918-02-27


which a ilnancier holds when he
uses a railroad for a COW.
"There were two of these compa-
nies, one i'm Iowa and one in New
Jersey. The Rock Island was capital
lied at S75.O00,000. The holding COM
panies were capitalized at $35O.OOO,-
900. They issued their stock as fully
paid, but actually no payment was
made on either. Then upon motion
of ID. G.. Reid, the entire stock issue
of the New Jersey company and the
entire bond issue of the Iowa company
were placed with the Central Trust
company of New York, under an
agreement that they were to be ex-
changed for railway company hold
inGs on the basis of $27O in the hold
ing companies stocks and bonds for
500 of railway stock.
Under this agreement, ID. G.. Reid,
w. b. Leeds. j. III. Moore and w. H..
Moore disposed of about $4,000, 900
of railway stock for which they re-
ceived over S55,O0O,O0O i'm the other
securities. The only revenue of the
holding companies stock came from
the dividends of the railway COM
pany, and the stockholders stamped
ed, as expected. to exchange their Sc
| curities. All but s4,O0O,OOO of the
| original Rock Island stock was thus
exchanged.
Now, under the agreement, the
railway stock was to be held by tbs
trust company as security for the
Iowa company's bonds. If the in
terest on the bonds could not be paid,
the railway stock would be sold; and
four men who had held only about a
fourth of the railway stock had
wormed themselves into position
where they could make the road pay
or not pay as it suited their interests
best.
'"rhe road paid, That is, it paid
somebody. How much it paid these
four men. the interstate commerce.
commission was unable to tell. When
the series of deals which resulted in
receivership was finally investigated
Mr. Reid testified that he always
burned his books at the end of each
mcnth.
But the road didn't pay the stock
holders. Note this letter from o
Poughgeepsie girl She was working
to help support her father, who was
nearly blind. Her father had invested
a few hundred dollars in Rock Island
which had been drawing 10 per cent
dividends. When the dividends stop
ped. because of financial difficulties
which the girl didn't understand, She
couldn't bear TO tell her helpless faith
er. She paid the dividends out of her
own earnings. she kept up this deceit
as long as she could, year after year.
while Mr.. Reid and others were burn
ing their books.
"Or this from Concord, n. H.: 81
am widow. and the loss Of $3.50
which l paid for my bond means a
good deal to me, as am too old to
earn a living now
why wasn't the interest being
paid? Was it because wages were
higher every year and because the
road could not raise it's rates to meet
them? 1t is far more to the point TO
read the history OF the Frisco deal. 4
precious bit of financing by which
the Rock Island had $4,000, coo
drawn out of it's treasury to meet an
obligation of the Iowa holding COM
pany, an obligation for which the
railway company was i'm no wise re-
sponsible and from which it received
no benefit.
when the small investors in
Poughkeepsie and Concord read, away
back in 1908, that an agreement had
been made between the holding COM
panies and the j. +. Morgan company
to exchange the stock of the st.
Louis and San Franscisco Railway
company for their securities, the in
formation didn't mean anything tam
gible to them. But under this agree
ment $2S,940,300 of Frisco stock was
exchanged for $34,72S,36O Of the
holding companies stocks and bonds,
and the Frisco stock was deposited as
collateral for the bonds of the Iowa
company. Then in December, 1909,
this stock was resold 10 Il. f.. Yoakum
Tor $3.50 share. or $1O,S52,OOO, an
amount insufficient to redeem the
iowa company's bonds. The Iowa