The New York herald., 1921-11-30
Hedges Agrees With He'd
ley's Transit Views, but
Is Not Optimistic.
EXPERT HITS BUSES HARD
More About Evolution of $3.50
Cash Corporation Into $780,
100000 Inter-Con. Co.

The Finance and Holding Corpora
ton, which played so important part
in the revelations made by the Transit
Commission In it's examination last
Monday into Interborough high
finance, enjoyed. it was learned yes
terday, brief but brilliant career.
August Belmont. when he takes the
witness chair this morning to testify
as chairman of the I. r. T. board.
probably will be asked some pertinent
questions concerning his possible
knowledge Of this corporation which
played such big part.
Clarence J. Shearn, counsel for the
commission, placed in the record on
Monday the story Of the evolution of
the METROPOLITAN into
the Interborough Consolidated in June.
1915. So precarious prior to that time
was the Inter- Nets balance between
actual assets and actual liabilities that
1t could not distribute any dividends
to its preferred stockholders In excess
of the per cent. needed to carry the
interest on It's Az per cent. collateral
trust bonds without an obvious VIOLA
ton of the law. It's only chance to
pay higher dividends was to scale
down the amount Of its capital stock,
with the holders of the common stock
bearing the brunt naturally OF the
scaling process.
Common Stock Loses Par Value.
A reorganization" by means Of q
merger with some other corporation be-
came the approved means to desirable
end. SO the Inter- Met. was consolidated
with the "F'inance and Holding Corpora
ton" to form the new Interborough-
Consolidated In that process the secu-
rifles of the new concern were issued.
dollar for dollar. in exchange for the
preferred stock of the Inter-Met to the
extent of s45.00o,ooo. and the desired
reduction Of capital from s14s.o0o.oo0 to
only $50.000.000 was achieved BY simply
issuing the common stock OF the merged
corporation without par value"
BY a singularly fortuitous circum-
stance the State Legislature in 1912 had
passed law making 1t permissible to
issue corporate common stock without
par value"
Counsel for the Transit Commission
holds that this Reorganization" was
mere ''scheme," a device to enable the
holders of the marlborough preferred
stock to release to themselves larger
dividends. If 1t was only shallow
subterfuge, Mr.. Shearn contends then
subsequent large dividends were paid out
OF impaired capital which Is crime.
Counsel for the commission has learned
that the Finance and Holding Corpora
tion was Incorporated February IL. 1915.
with cash capital of $3.50, consisting of
ten shares of stock, OF which five were
preferred and the remaining five were
common shares with no par value"
The only business address of the con-
cern named in the papers Of incorpora-
ton was Borough Of Manhattan" It's
ostensible incorporators were Eamcd as
being Charles Maitland Connfelt of 40
East Eightieth street, Phillips Allen
Clarke OF 10 East Ninetieth street and
Seth Hodfield of 67s Seventy-fifth street
Brooklyn
Corporation Crows swiftly.
This was the concern with its paltry
capital of $3.50. Incorporated In Feb
ruary. which in the following June blos-
somed into marlborough Consolidated
with its s50,oOO.oo0 capital
In addition TO Mr.. Belmont, members
of the old board of directors who have
been summoned to the commissions ex-
animation to-day are Edward J. Ber-
wind, chairman of its executive commit
tee; Daniel @. Reid. and Guy Tripp, who
is said to have represented In the board
the Westinghouse interests. Mr.. Bel
mont Is TO be sworn first
These directors were to have appeared
yesterday, but when the examination
was convened James l.. Quackenbush,
general counsel for the ]. r.. T., asked
that they be permitted a day to consult
their personal counsel before testifying.
Mr.. Quackenbush pointed out that at
the time these transactions occurred
he had not yet become general counsel
to the corporation and was not in posi-
tion to advise on questions of policy.
fffs predecessor was Richard Reid Rog-
ors, Mr.. Quackenbush not having be-
come general counsel until after the
death OF T. +. Shonts.
ct feel therefore," said the counsellor.
that injustice to the individuals who
were directors during those periods,
who might be subject TO civil liability
arising out of their transactions, or
might not---as to which ] express no
opinion--are entitled to have the advice
OF their own private counsel II any
action should be taken against them.
az TO which they have been threatened
by Mr.. Clarance venner. I would be
in no position to represent them In such
action. My business Is to represent the
evaporation"
Mr.. Shearn interposod no objection
and Chairman McAneny acquiesced. In
view OF the situation in which these
directors find Themselves said the ex-
aminer. ut is only fair that they have
opportunity to consult with their own
counsel before being examined"
Frederick w. Lirdars. chief account