New-York tribune., 1918-08-05
International Co.
Asked to Explain
Its Paper Profit
Publishers Question $7.56 a
Ton Claim in View Of Fed
eral Report Of $16.52
Same Methods Used
Trade Commission Experts
and Factory Accountants
Followed Identical Rules

l.. E. Palmer, secretary treasurer of
the Publishers Association of New
York City, made public yesterday let
ter he sent on Saturday to w. (.
Haskell, assistant to the president Of
the international Paper Company, sug
gesting that the company explain how
1t arrived at the figures of 1856 ton,
wh'ch, 1t asserts, were It's profits on
newsprlnt paper in 1917, when ac
countants of the Federal Trade Com
mission reported the company's profits
in that year to be 1852 a ton.
Pointing out that the accountants
employed by the trade board and
others employed by the newsprint
manufacturers agreed upon the prin-
clpes involved in the accounting task,
consolidated the accounts of thirteen
subsidiary companies, thus eliminating
interdepartmentai profits; eliminated
items charged tc repairs and arrived
at the same figures-$16.52 d ton
Mr.. Palmer continues:
Asks Company for Proof
"ln view of these facts, it woud seem
that you should support with proof
your bare assertion of the Incorrect
5.
his letter follows:
august 3, 1918.
w Z: Haskell, Esq, ass. tant to the
president, International Paper Com
pany, so Broad Street, New York
City.
Dear Sir: Some time since the as
sociation issued a statement 10 the cf-
feet that the International Paper Com
pany had during the year 1917
1Gai'zed net income from newsprint
paper Of $6,616,S57.24, equivalent to a
net profi- of $l625 a ton.
"Following the publication of the
above staten ent there was published
IN the newspapers Il letter addressed
ny you TO the president of this asso-
clatlon in which, among other things
you claimed that no theoretica. ac-
counting of costs can give the actual
results of any manufacturer's opera
tons, because accounting systems diff
Ter and because of the difficulty of
finding two accountants who viii agree
on cost sheet. You also claimed
mat your company's records ostab-
nshed by able specialists, are salts
factory - your directors and stock
hHIders IN showing 4 profit for the
year 1917 Of 1886 ton.
Reached Same Figures
to the fact that the Federal Trade
Commission, which investigated your
company and others during MANY
months, employed able accountants for
the purpose of determining the profits
OF your company, and that those ac-
countants and the accountants of the
neWsprlnt manufacturers agreed on
the principles involved in the account
ing OF your company, and each of them
certified to the correctness of the fig
ure OF Sl6.52 ton as showing in
me case of the international Paper
Company the net income from sales of
newsprlnt during the year 1917.
In arriving at this figure. however.
they consolidated the accounts of thjr
teen Of your subsidiary companies and
thus eliminated all intercompany and
lnte1departmental profits. They a so
eliminated from cost items charged to
repairs which were proper additions to
the plant account, thereby finding the
true profit, not including excess profit
taxes or taxes on wood lands.
In view Of these facts it would seem
that you should support with proof
ness Of the figures of the accountants.
Bookkeeping Practice
"You will remember that the report
of the Tariff Board, dated 1911, stated
a bookkeeping practice quite general in
recent years, and by no means confined
TO the pu p and paper industry, is to
run each department of plant or of a
company as separate entity and con-
duct 1T on paying basis, precisely as
though 1t were separate industry
SUBSIDIARY companies are oper-
ated to sell to the parent company. In
a c1Jh 4 a 4
take over the water power, and there
after the pulp and paper company paid
some $4,000 year for water power
that had formerly been considered a
pant of capital investment
This IS only part of the report.
The rest of the report from which this
is quotation is equally important.
May we suggest that you read it? We
would be glad to send you copy.
1T would seem that practices similar
to the above must have been EMPLOYED
by your accountants in order to reduce
your book profit to the amount claimed
by you. And, if so, of course your
figures are useless and misleading If,
however, such practices have not been
employed, you may be good enough to
state what method has been emp owed
to reduce the profit shown by the Fed
eral Trade Commissions audit from
Sl6.52 to the amount claimed by you.
Reference to Publishers
"Another statement made by you in
referring to the publishers is that their
memories have freshened to the old
relationship of unity, mutual helpful
ness and good viii between the pub
fishers and the manufacturers They
have been convinced that their old
friends, who have always been accom-
modating, helpful and fair in all their
dealings, have not overn ght become a
band of predatory profiteers. but are
the same men in every respect, dealing
bravely and optimisticaliy with difficult
problems.
"In this statement presumably you
refer to the group of manufacturers,
Of which the president Of your com
rany was one, who recently were in
dcted and fined by the Federal courts
for practices which were exposed in
the report Of the Federal Trade Com
mission on the newsprint industry
dated June 13, 1917, on pages 1877 to
l3l, of which you will find printed
various evidence of violations of the
antitrust laws by newsprint manu-
facturers. The sections are as follows
Section /, referring to the News-
NJ