The New York herald., 1921-12-07
ASSETS OF B. R. 7.
SHRINK ON INQUIRY
Continued from First Page.

after the dawn Of the war years when
the omens Of rising costs alike in labor
and material were written so clearly
that he who ran might read
The examiner elected the fact that
the last dividend declared bv the New
York Consolidated, which is the b. r
Il. subsidiary operating it's elevated and
SUBWAY lines, was payable on December
81. 1913, which was she very day tiat the
corporation. at the order OF the Federal
court went into tie hands OF Lindley M.
Garrison, receiver. The usual "a per
cent. quarterly dividend had been voted
by the directors in the previous Septem-
Der.
Attempting 10 analyze the 1918 ball
ance sheet of the B. f. r.. the examiner
found in the last annual report issued
| by the company in that year that q
! large proportion OF its assets, consist
ing OF its numerous subsidiaries, are
carried. as in the case OF the Inter
| borough, at their cost price and not
with any attempt TO assess their pres
ent value. From the records of the in
quiry conducted fourteen years ago by
the late William NJ. WINS it was shown
| that when the Nassau Electric Company
and its allied properties were reorgan-
( ICED in 1899 the Nassau received total
securities and other considerations to
the amount OF S11. 6SS,372.50 and there
upon issued s17,947610, all securities
except $3.50 cash.
Mr.. Shearn agreed with the WINS re-
port that this showed an overcapitali-
zation OF s6.259.237.50. justification for
which fact, however, was sought in the
fact that the securities issued bore 4
per cent, while those retired bore D.
The witness admitted those figures had
been taken from the OH books and had
stood in the B. r. T. asset accounts ever
since as fixed capital.
We'll, just that one item. for ex-
ample, of S6,Oo0,0 900 Of water there on a
comparative balance sheet Of assets and
liabilities would wipe out that surplus
by over s5.o00,000, wouldn't it?' asked
MIR. Shearn.
''If you take s6,O0o.O0o from one side
and have only g. million on the other.
| surely" the witness admitted.
Commissioner Hardness inquired: "Of
what value is a statement made up that
way to the investing pubiic?
| II don't think an investor is guided
| by balance sheets in making his in
vestments." replied the Is. r. T. comp
! troller. "a balance sheet is not sup
posed to show what physical properties
are worth, but only to record what tht
roperty Is carried at on the books.
Mr.. Shearn pointed out in the early
history Of the B. R. II. what he said was
"a very clear instance of over capitaliza-
tion on the part OF that corporation to
the amount Of moro than S15,00O.oOO."
The instance cited had to do with the
acquisition Of the Brooklyn Heights Rail-
road Company and the Brooklyn, queens
County and Suburban.
Mr.. Shearn took UP the record of divi-
dend payments by the New York Con-
solidated Railroad Company. Referring
to 1918, when there was per cent
annual dividend declared. although a
bare book surplus of s2,O14,6oZ was
shown in excess of assets over liabilities
he asked: when the surplus is so small
and so close to the line, before large
dividend is going to be declared, almost
eaualling In one year the amount or the
surplus, is it customary in your company
TO make any scrutiny Of the value OF the
assets, to be assured that you. are not
paying dividends out OF capital?
'I presume the directors do that
when they declare dividends. mat I
would not be within my province.
1t was In this connection MIR. Shearn
revealed that the last dividend paid |
by the New York Consolidated was on |
December 81. 1918. end that Mr.. Gar
rison was appointed receiver of the 1
company later in the same day. The
dividend was the second quarterly IN
stalment on pei cent. annual dis
tribution. 1t hau been voted In the |
previous September.
James Il. ShefIield, trustee in bank
ruptcy of the Interborough Consolidated
Corporation, was the morning witness.
He explained the terms, sanctioned by
more than one-half of the Interborough's
bondholders as well as by Judge julius |
NJ. Mayer OF the Federal Court, where
by he agreed not to press repayment or
to challenge the legality of the borrow
ing of 100000 by the /. r i. from its
holding corporation, the Consolidated,
day before the latter went into the
hands OF a receiver as an insolvent con-
Germ. It was revealed also that there |
was another sum OF 100000 borrowed
by the Interborough from the Consoli-
dated without interest. making $780,
900 eventually to be returned to Mr..
Sheffield as trustee in bankruptcy for
the Consolidated.
On December 81, 1919 ii was brought
out the Interborough Consolidated loaned
another S1,000000 to the /. X. r.. the
original sum borrowed having been re-
paid. This transaction, again to avoid
a receivership for the I. r. T., had the
sanction of Judge Mayer. But 1t was
not until late in the final hours of the
old year that the saving order was re-
ceived from the Federal court Alfred
r. Cook OF counsel for the Consolidated's
receiver summed UP the suspense of the
moment when he said:
1T was hectic New Years Eve, Judge
Shearn. 1t was question OF a receiver
ship or a happy New Year -