New-York tribune., 1920-02-12
I. II. T. Subways
Net Big Profit,
Experts Assert
Continued from pnge 1
revenue was shown during the last
six months of 1919, the witness said.


Revenue Steadily Increases
ut shows n steady and persistent
increase of revenue over expenses,
does 1t not?" asked Corporation Coun-
sci Burr.
"lt shows what l would describe as
trend of growth throughout the
period" said the witness.
Mr.. Reed made an estimate based on
the reports Of the company to the
Public Service Commission and allow
ing for growth in traffic, etc, and de-
Quoting rentals, taxes and operation,
including maintenance and deprecia-
ton, that the Interborough would earn
$l1 100000 during the current year.
Mr.. Bauer, when called as q witness,
was asked by Corporation Counsel
Burr if he had made study of the
various exhibits presented at the hear
ings by the lnterborough. He said he
had.
"Now, briefly, do you find certain
items stated in those exhibits which,
In your opinion, arc improperly
claimed as Subway investments under
contracts Nos. / and %" asked Mr..
Burr.
The witness said he had.
care they described as follows 2
asked Mr.. Burr. excess cost of
Brooklyn extension, $11 ,006,4 Bel
mont and greensboro tunnel, ST.
1891 cost of acquiring lease on
Contract No. /, S6,323, 900; stock is
sued to August Belmont & Co. for serv-
ices and property, $1,500,0OO; excess
o)
quiremcnts, $6,30000O; contractors
expense account $740,317; unamortized
discount and expense, $6,588,174; or a
total of $40,217,7 ,700?"
Improperly Classified
The witness replied that that was
correct, and that he contended all these
items were improper claims as subway
investments. At the request of the Cor
poration Counsel, he took up each item
and gave the reasons why he had
questions by Mayor Hylan. Mr.. Bauer
said that these items should have been
written off the books of the INTERIOR
ough, instead of using the money to
declare dividends. The witness re-
fcrred to the third item, S6,323 900. for
acquiring OF the lease on Contract No.
l., as stock watering, pure and sim
pie"
Mr.. Bauer, in concluding his testi-
mony, added that there were also a lot.
Of statements in the Interborouph ex
hlbits of outside investments (which
are all but worthless and should not
nave been carried on the company's
books as assets but should have been
10 very large extent written off out
of income"
Comptroller Craig wanted to know if
1T wasn't a fact that the interest on
the moneys required for the securities
ISSUED for these outside investments
mad been made up out of the earnings
OF the lnterborough. The witness said
that was true.
I'm other words" said the Comptrol
Ter, the public has been carrying, out
Of the five-cent fare, the Improbable.
speculations of the Interborough.'
Mr. Bauer, in answer to a long series
or questions by the Comptroller, de-
clared that if the Interborough had
written off the $4,000 900 which it i'm
properly carried as assets it could still
nave PAID 712 per cent dividend. in
stead OF the large dividends which we're
paid during that period. The witness
also discussed "leaky allowances for
depreciation"
Edward F. J. Gaynor, auditor Of the
lnterborough, was recalled as a witness
yesterday. Mr. Gaynor was examined
IN regard to the minutes of various
meetings of the board of directors of
the company, in 1918 and 1919. when it
was resolved to declare regular quar-
terly dividends on the capital stock
from the company's surplus. These
dividends amounted to about II per
cent during the war period and later.
Mr.. Burr brought out the fact that the
lnterborough had an application be-
fore the Board of Estimate for in
creased fares and one before the Pub
nc Service Commission for an extra
charge for transfers during 1918, when
the company continued to declare divi
dends. He wanted to know if the wit
ness thought it was good business
ponsy to declare these Excessive divi-
dends' during the period when the
country was at war and all business
was confronted with abnormal condi-
tions.
Mr.. Gaynor said that if the directors
could have anticipated the effects of
the war they probably would not have
declared these dividends. He declared
that the company did not really bepin
to feel the effects of the war until
1919. '''''4
"Do you think it was fair for tbe
PETERBOROUGH to ask for an increased
fare when they were paying dividends
to the stockholders ?'' asked Mavor
Hylan.
II do" was the reply, to which the
Mayor made no comment
Bookkeeping Criticized
Duncan Machines. chief acountant
o. the city finance department. sub
mltted long preliminary report of
an investigation he had started at
the direction of the Comptroller of the
lnterborough's and the city's actual
cash interest in the subway contracts.
He strongly criticized the system Of
bookkeeping employed by the Inter
borough and said it would take an in
definite time to dig out of the com
plicated bookkeeping all the 1niorma-
tlon wanted by tho Comptroller.
Mr.. Quackenbush produced q list Of
the holders of the S35, 900, 900 of In
terborough Rapid Transit stock. There
were 6.295 names on the list. and
the average holding was $9,617.
Radicalis,n i'm the Nax,v