New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-08-30
[. r. 7. Said TO Have Paid
&4, 500, 900 Last Year
Into Overhead Lines to
Cover Operating Deficit
Securities Break
Sharply in Price
Charge Made of Illegal
Bonuses TO Directors
in Action by Continent
tai Securities Company

n setoilu suit III equity, asking
that a receiver be appointed for the
lnterborough Rapid Transit Com
pany, was filed yesterday in the
United States District Court 1t was
brought by the Continental Securi-
ties Company, New Jersey corpora
ton, of which Clarence H. Venner Is
president, and in addition to the In
terborough names the Manhattan
Railway Company, the City of New
York and the Guaranty Trust Com
pany and the Bankers Trust Com
pany, the financial institutions be-
ing trustees.
The petition alleges that the In
terborough is about to become in
solvent, that "by financial legerde~
main" it has converted a discharged
liability for interest on debt into d
book asset; that the Interborough'
lease on the elevated lines is g great
burden. and largely responsible for
the company's present difficulties,
and that bonuses and commissions
have been illegally paid to some OF
the directors"
Transit Board Not to Act
Other developments yesterday in tho
double effort to have the Interborough
thrown into a receivership were:
it had decided to take no action in re-
gard to the pending application of the
American Brake Shoe and Foundry
Company asking that a receiver be ap-
pointed for the transit company.
George McAneny, chairman Of the
commission, said that the plans of the
commission world not be affected to
any appreciate extent, whether the
lnterborough remains under the con-
troll Of its corporate officers or is man
aged by q receiver
1t was officially said that the COM
missions report would not be made
public before September Is unless an
earlier showing was deemed necessary
in the public interest
AS result of the move for a re-
ceivership, stocks and bonds of the
lnterborough and affiliated companies
showed marked decline on the Stock
Exchange.
It was reported that holders were
complying with the request of the In
terborough that they deposit notes
which fall due September l, so that
order to ward off a receivership.
Hedley Refuses to Talk
Frank Hedley, president of the tran
sit company, declined to discuss fur
thor the report that the receiversh,r
actions were of "friendlv' character
Corporation Counsel O'Brien issued
statement in which he said it was
startling to behold the same creditors
who initiated receivership proceedings
Of the New York Railways Company
launching into another receivership ac
ton.
President La Guardia of the Board
of Aldermen declared there was no
need for receivership for the Inter
borough at this time and that he be-
lieved the transit company could give
a better service at five-cent fare and
still pay dividends.
1t was announced that definite
policy of action would be determined
upon to-day by the directors of the
lnterborougn at their regular weekly
meeting.
The Continental Securities Company.
it is stated in the complaint, is the
owner Of 25o shares Of capital stock
of the Interborough, par value S100. ac-
quired in January, 1906, at 1924
share in the form of voting certif-
Gates. which were exchanged for certi-
fcates of stock; also $4,000, par value,
first. and refunding mortgage per cent
bonds, and $4,000, par value, of per
cent collateral notes due September /.
Debts More Than s5,000,000
After setting forth that the debts Of
the lnterborough are upward Of So O0O.-
600, due on account of wages bills pay
able and accounts payable for supplies
and that there are also $1,000 900 :
cember 30, 1921, the complaint states:
These notes, which were originally
issued in December, 1919, to raise
money 70 pay interest on debts and
rentals under the Manhattan Railway
lease. nave been three times extended
owing to the inability Of the defend
ant TO pay them a. maturity. On or
about October l, 1921. there Will be
payable another large instsllment OF
sS-tal under the Manhattan lease of
81 ,SS0.c-jc. ,shjch the orator pe;teves
the Interborough will not have funds
to pay"
The complainant furraer alleges on
information and belief that the 'acsa~
deficit has been much more than set
forth in the annual reports OF the COM
pany in that only q portion of the
annual interest and sinking fund
charges paid out on the bonds and
notes have been charged against the
income.
1t is then set forth in the petition
that the total of such payments is
SIS. .397 1872, the payments nav.ng Seen
made as follows:
Juno 80. 1916 xasso,so
1une s. lsis .-.......s s.-....... ss5s.7S4
June 81. 1915 1q....... cSen'..sso
June SO. lsso. ................... s.SsS.7si sssS7s
-, ,.Ihe result Of the financial lcgcrde-
continues, is that the Interborourh
mas converted discharged Liability
'of 10. interest on debt into book asset
thereby creating any property
and then capitalizing such flctftiors as,
sets by Issuing moro bonds to ronrs.