New-York tribune., 1921-11-18
/. r. T. Stocks
Paid Millions
Over Receipts
tcontlnucd from page ono)


lnterborough, who recently brought
bankruptcy proceedings against the
transit company when it deferred pay
ment ON it's notes.
"The truth will never assist Mr.
Venner," said Mr.. Shearn, "and all
am after is the truth. l do not expect
to draw conclusions about solvency or
insolvency, but am anxious to demon
strate the significance Of these ac-
clear and that the differences we we're
reachiug out for are very clear. Never
theless think the attitude of the wit
ness was evasive to the point of being
contumAcious, aud I will require him to
answer the question at the next ses-
sion."
Returns to Stockholders
The question of the accuracy of the
Interboroughs books was brought up
earlier in the hearing when Mr.. Quack-
enbush offered an explanation Of GER
tain figures.
81 would not interrupt" he said, "if
it did not involve question Of crime"
referring to the inference that divi-
dends had been paid out Of capital.
1t had been shown that no dividends
had been paid on Interborough Rapid
Transit common stock in the fiscal
years 1920 and 1921, but that for the
period from 1904 to 1919 the stockhold-
ers had received dividends of $685.
600 Oh an Investment Of $21 100000.
Referring to the years 1917, 1918
and 1919 Mr.. Shcarn said that div
idends Of $7,000,000 had been disbursed
in payment of dividends that were not
earned during that period.
On this point Mr.. Shearn said later:
"Mr. Quackenbush calls my attention
to the fact that there may have been
misapprehension from statement of
the payment of these dividends having
been made out of; surplus, instead of
out of earnings, and that it might be
assumed to be paid out of capital. I
said that they were paid out of surplus,
but that It there was no surplus they
were paid out of capital. am making
these suggestions, whether there was
a surplus or not"
II did not want to have any misun-
derstanding that there has been a pay
ment out of capital" said Mr.. Quack-
enbush.
Payments Made from Surplus
"1n other words" interposed Chair
man McAneny, "the statement is that
no payments of that description were
made out of capital. They were made
years"
"That is the idea," replied Mr..
Quackenbush.
"The fact remains" Chairman Nc
Aneny remarked, "that out Of the op-
erations of each of these years a
greater amount was paid in dividends
than the earnings indicate were nor
mally payable"
"No doubt" said Mr.. Quackenbush,
"but the whole point is that the pre-
vious years supplied the dividend pay
ments."
Prior to the rebuke administered to
Mr.. Gaynor, Mr.. Shearn pressed the
witness on the accuracy Of accounting
for securities as assets when the worth
or worthlessness was open to question,
it having been shown that the value
Of the stocks had dropped like the
German mark.
Mr.. Gaynor declared he believed the
stocks in question might be valued at
much less than cost at the present
time, but that something. might hap
pen to make them valuable.
''You mean to say" queried Mr..
Shearn, "that they might be worth
something if the commission raised
the rate Of fare?"
Something might happen to make
them valuable"
"But there were no indications up
to the end Of the fiscal year June 30,
1912, that that was going to be done %
"None that know Of"
Balance Sheet Questioned
"'Now," continued the commissions
attorney, ~ ask you again to make a
candid answer to the question that
where you have set down an item of
100000 of stocks, for stocks of as
sociated companies as an asset, II
those stocks were worthless, that item
would not give true statement of ac-
tual facts, would it p
eff any other figures than that were
in the balance sheet they would be
wrong" replied the witness.
"Mr. Gaynor," interjected Chairman
McAneny, "the commission must direct
you to answer the question. 1t is per-
fectly clear"
what is the harm in asking thing
that is obvious 2" inquired Mr.. Shearn.
"There is nothing obvious in the
statement" spoke up counsel for the
Interborough. ~
The witness continued to parry Other
similar questions, and the climax came
when he said: IL do not know any Other
answer that can make"
In his subsequent Interrogation o1
the Interborough auditor Mr.. Shear
brought out that while the INTERIOR
ough had carried on its books "assets'
similar to those Of the New York
Queens road the Third Avenue system
auditors had written off their invest
ments in subsidiary companies which
had proved to be worthless.
Mr.. Shearn asked the witness hov
the Interborough ascertained during
the years it was paying out dividend
in excess Of earnings if it was payin,
the dividends out Of surplus or capital
Mr.. Gaynor explained that so long al
accumulated earnings in the past justi
fed dividend it could be paid, ever
though earnings during the dividend
period fell short.
Law Violation Alleged
Continuing, Mr.. Shearn asked: rs,
that if, as matter of fact, your ne
assets were worth $2000O,O0O less tha,
shown here, and thus turned surplus
) Of $2,000,000 into deficit of $4,000.
:, 600, and you declared a dividend O
$7,000000 in that year, you would b,
running counter to law, would 70,
not?"
con that state of facts, yes," replie
Mr.. Gaynor.
"And was any valuation of the as
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