New-York tribune., 1921-11-29
Impairment of $50, ,OOO,-
900 Stock Alleged in rs
Deal, Which Directors
Must Explain To-day
Dividends Violated
Morgan Agreement
Higher Fare Needed, Says
Hedley; Warns of Peril
to Public in Bankruptcy

Inc question Oh Tue legailty or
maze OF financial transactions sur
rounding the merger in 1915 of the.
marlborough Metropolitan Company
and the Finance and Holding Corpora
ton into the Interborough Consoli-
dated Corporation, parent company of
the marlborough Rapid Transit Com
pany, was raised yesterday before the
a, Transit Commission.
! This turn in the investigation came
during the testimony of Horace M.
Fisher, secretary of the Interborough
: Rapid Transit, after the commission
paved the way for the examination to-
day of directors of the company, by
Introducing the minutes of the board
Tor 1917, 1918 and 1919, period dur
ing which it was shown that dividends
amounting to ST,00O,000 were distribu-
ted from revenues swollen through the
borrowing of S14,OoOGO0 from New
York banks.
Stock Juggling Charged
Clarence J. Shearn. special counsel
OF the commission, charged that the
amalgamation of the Jnterborough
Metropolitan and the Finance and Hold
ing Corporation impaired capital stock
to the extent of sso,000,OO0 He main
tanned the latter concern was a name
Only and described the merger as a
bald, admitted maneuver to permit the
declaration Of dividends on INTERIOR
orgh Metropolitan preferred stock.
Another sensational statement Of the
commission's attorney was that the
fnterborough in September. 1918, vio-
lated a covenant with J. p Morgan G.
Co. which undertook to dispose of the
per cent notes by voting dividend in
face of = red ink" dedcic of $1,179, 900
Sharing interest with yesterdays
new disclosures concerning the many
phased deals of the Interborough was
the further testimony of Frank w.
Feflsy, president and general manager
to c'a3orgte upon his statement of last
week, HAT he did not expect to get
more than a 5-cent fare for quite a
white" MIR Hedley declared that if
the ccmpa.,v were to provide better
service at this price it would be driven
into bankruptcy.
Split in Systems Feared
~ reccivership." he said, "would
mean the separation of the subway and
elevated systems. Then God help the
public Of New York."
Mr.. Hedley declared a higher fare
would be necessary in order to afford
the public an improved and adequate
70 ok, loI
cxD!ained that the public now was ac-
tealy paying more than five cents,
p9inting out that the city was COM
PEELED to pay the interest on the sink
ing funds Of the traction enterprises.
This mears," he said. chat the
rc7tpayers, the people who pay the
csrfares, have to pay higher rents so
thc landlords may meet the higher
taxes required"
Turning up the inside history of the
old Metropolitan Street Railway Com
rany and the Securities Company,
which went into the hands of receivers,
Mr. Shearn showed that all the Inter
borough otropo politan Company got out
Slo0o0,0o0 in the stock of the recrean-
izcd New York City Railway Company.
SO that the capital OF the INTERIOR
ugh-Aletrorolitan Company was there
oF impaired to the extent Of $80,0O0,-
VVoo, wasn't it?' Mr.. Shearn asked Mr..
YES, sir"
And you understand that a COM
pany with an impaired capital stock
cannot legally declare dividends?"
Yes, SIR"
Dividend Payments Reviewed
But, beginning with 1912, the In
terborough Rapid Transit Company
changed its policy of merely declaring
y, per cent dividends, sufficient to pay
the interest on the collateral trust
o,onds and began paying dividends at
lhe rate Of 16 per cent?"
II any one has gotten that opinion
INTO his head" laughed Mr.. Hedley, che
is certainly wrong. What I meant to
make clear was that the nickel would
have to go round until something is
gone. As I have stated before, if the
interoorough has a receivcrship the
citys transportation system will take a
step backward"
;, Questioned by Mr.. Shearn as to why
me interborcugh had paid $7.35 o ton
ior coal, whereas the 4. r. I paid
s6.o3 and the Hudson & Manhattan
paid S3.S2. Mr.. Hedley said he did not
oeiieye tho fuel was of the same stand
Mr. Sheara called attention to the
Continued on saue six,