The New York herald., 1921-12-08
N.F.BRADY DEFENDS
B.R,T,D|VIDENDPAID
AT LINES COLLAPSE
He and Col. Williams Sign
Waivers, Talk Freely in
Transit Inquiry.
PUBLIC FAITH SOUGHT
Former President Makes
Broad Criticism of Trac-
tiOn Plan.
FEARS Z MAN BOARD MOST
Wants City to Buy Companies,
Lease Them Out Again and
Collect All Profits.

Both Col. Timothy S. Williops, fol
many years president, and Nj ,nolas f
Brady, chairman Of the board and o1
the executive committee, of the Brook.
lyn Rapid Transit Company, cheerfully
signed waivers of immunity yesterday
and testified fully and frankly IN the
Transit Commission examination al
10 Lafayette street.
They defended the course of the
company in declaring the 1917 divi-
dends and even the action of the New
York Consolidated-the B. r. T.. sub
sioiary operating its elevated and sub
way lines-in having. made quarterly
dividend payable on fhe very day both
the operating and the parent com
panies went into receivership.
They denied that those dividend
payments had any material affect on
the corporate troubles which culmi-
mated on December 81, 1919 in the
appointment Of Lindley M. Garrison
as receiver. The sum paid out in divi-
dends, they said, was only a drop in
the bucket compared with the amount
needed to save the company's solvency
Mr.. Brady, who was sworn late in
the afternoon, said he had felt not a
particle of hesitation in signing the
formal waiver of immunity. Cla 'ence J
Shearn, counsel to the commission, as
su-ed him the request for himself and
Col. Williams to do so carried with il
no implication of any sort.
In questioning witnesses yesterday"
said Mr.. Shearn, II was somewhat
critical of the declaration of dividends
by the parent company during the year
1917. l emphasized the conditions in
the business world. what you knew was
ahead. your knowledge of the fact chat
the compant was making q poor show
ing in comparison with the year before,
and especially your realization of
the fact that in the following 2ear you
had this enormous burden of s57.-
100000 notes to face. Now. what expla-
nation have you to offer OF your policy in
these circumstances of paying out divi-
dends when you were in such difficulties
and when the margin between your as
sets and liabilities was so small?'
LAS a matter of fact, / doubt whether
we would have been justified in passing
dividends before we did," SAID Mr..
Brady. '~rhe company had earned them.
There was sufficient surplus sh own on
the balance sheets and the situation was
not nearly SO gloomy as you assume"
Admitting that the bulk OF the +. II. T.
revenues came from its subsidiary, or
operating companies. Mr.. Brady replied
yes" when the examiner inquired: so
that you were obliged to compel them
to declare dividends for the benefit of
your company?''
Dividends Above Earnings.
well, even II you felt you were justi-
fled in taking the rosy view Of the pros
poets of the r. r. r., the parent COM
pany. don't you think you went pretty
close to the line in the matter of the
New York Consolidated and the Nassau
Electric In 1917"
Mr. Brady replied. mo, sir, I don't
think we did" He admitted, however,
that in 1916. 1917 and 1918 the Consoli-
dated was declaring dividends In excess
of earnings.
"In the case OF the Nassau and the
New York Consolidated" said Mr..
Shearn, their excess of assets over la
bilities which was very slight. depended
almost entirely on the validity of the
fixed canitnl accounts. Had you then
al any time seriously looked into those
balance sheet figures and determined
whether they represented real values or
not?"
"It was my understanding that the
figures repreeented much less than the
true value of the property. Otherwise
we should not have done as we did"
The examiner pointed out that in 1917
the Nassau's surplus had been cut down
10 s23s. 5000. "This," he asked. rs very
small surplus for big company like
that. isn't III"
'It would be n small margin II that
connnany were depending on its own
credit. but all the subsidiary companies
were depending on the credit Of the
holding company fB. II. To and conse-
ouently the best thing to do was to put
all the srrpluses into the treasury Of
the holding company so long as 1t did
not cost too much In taxes"
well, then. II the New York Consoli-
dated were not owned by the r. r. r
and did not have behind Il the financial
strength OF the u. r. r. You would
not have had the property paving ont
more in dividends in 1916. 1917 and
1919 than the New York Consolidated
earned. would your
Probably not"
"Rccefvershfp Coincidence.-