New-York tribune., 1920-05-06
B. r. T. Said to
Make Deficits
Its Specially
James W. Reed Says Com
pany Takes Money From
Subsidiaries and Lends
1t Back at 6 Per Cent
Arnold's Report Is Cited
Securities Outstanding Said
To Be Twenty-one Times
Present Property Value

The watered stock in the seven troll
ley companies In the Brooklyn Rapid
Transit system, as disclosed by wit
nesses at the investigation of the trac-
tion situation before the Board Of Esti-
mate yesterday, "has the onrushing of
Niagara beaten to DEATH" according to
Mayor Hylan.
In the case Of the Brooklyn Heights
Railroad Company, which formerly
operated several of the disintegrated
companies, testimony was adduced to
show that its outstanding securities
were twenty-one times the present val
uation Of its property. This valuation
Bion J. Arnold In 1917 and brought
down to June 80, 1919. Mr.. Arnold
was employed for the appraisal by the
Brooklyn Rapid Transit Company.
Always Showed Deficit
James W. Reed, engineer of the
Board of Estimate, testified as to the
financial condition of various surface
operating companies of the B. r. T.
system and drew most of his conclu-
sions from the Arnold appraisal, which
naturally would have been more in
favor of the companies than otherwise.
Mr.. Reed endeavorcd to show that by
manipulation Of stock and dividends
the companies never failed to show q
big deficit In many cases, he said, it
appeared the Brooklyn Rapid Transit
Company had taken money from the
constituent compsnies and then lent it
back to them at the rate of six per
cent.
"The two things they seem to try to
do in operating their lines and their
books" said Mayor Hylan, "is to give
the people no accommodations and to
show deficit"
William B. Carswell, Assistant Cor
poration Counsel, who conducted the
hearing, pointed to the Coney Island
and Gravesend Railway Company as
the worst offender in excessive out
standing securities.
This" Mr. Carswell told the Mayor
lis the company that has the worst rec
ord with respect to excessive outstand-
ing securities. The witness testified
here that outstanding securities were
s2,987,ooO and the Arnold appraisal
cost, less depreciation-tha is, the
value of the property back of the Sc
curities-is only S311117.
"That is an excess of about 900 Per
cent. In other words, your outstanding
securities are nine times the value
fixed by Arnold on appraisal after he
makes his depreciation and in view of
the fact, nevertheless, that the earn
ings are such on corporate income in
the past six months that it can make
yield of 1875 per cent on the valua-
ton of the property as fixed by Mr.
Arnold"
Securities Above Appraisal
Mr.. Reed further testified that the
outstanding securities of Coney Island
and Brooklyn Railroad Company were
exactly 100 per cent in excess Of the
appraisal cost, less depreciation made
by Mr.. Arnolad, and that the earnings
of the company for the past six months
were sufficient to pay per cent on
that appraisal cost, less depreciation.
In tire case Of the Nassau Electric
Company the outstanding securities
were 375 per cent over and above the
appraisal.
Wood D. Loudoun, Deputy Commits
sioner of Accounts, testified that the
South Brooklyn Railway Company, as
appeared from their own records, had
made a profit of S738,986 in 1914 out
of the payment of S1,o0OOOO by the
New York Municipal Railway Company
for an easement between Fourth and
Tenth avenues, Brooklyn, which was
conveyed to the city pursuant to the
provisions Of the dual subway contracts,