Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1924-04-16

o00) dollars 7cS preferred stock and
eight hundred thousand ($S00,000)
dollars common stock were to be
issued.
"The report Of the public account
ants on November 9. 1928, states
that None of the cash paid for the
$1,500,000 Of bonds, 100000 Of pre-
ferred stock and 100000 of common
stock issued July II 1917. was paid
to the corporation There Is
no accounting or account showing
investment or value received as con-
sideration for the stocks and Donos
issued = .. Thus the $2,S00,00 IN
crease in liabilities and capital slOs..
was largely offset in the accoueG
and a showing Of surplus man oiue
solely by increasing the DOCK 70
of the assets .. There appears
to have been no added capital az
ouired by the corporation IN cunsiu
Grafton Of its increase Of i.s coiiilioh
stock, preferred stock anu o.
GAS this matter has Oee fa,. ot ~
to my attention ! na at;ra aei o,, =. my
DUTY to report the entlre question
tbe RANKING and legal depart
,ts ~ the state for Investigation,
- da+ernine II any action by the
stota can be taken to protect the
tr,st companies and savings banks
wh;cb according to the report of the
hank commissioner, hold S385,000 of
the securities Of this company. In
addition to this the company owes
certain loans held by banks both
within and without the state.
GAS the Bank Commissioner says
in his report to me: The sum and
substance of this circuitous financing
operation was that these three bank
ing houses bought Mr.. Hyde's stock
100000 par value, for s2,S00,000 and
realizing that it was impossible to
market this stock at fourteen times
its par value, they went through the
fiction of creating these new securi-
ties for the market and giving out
to the public the impression that
there had been a reorganization and
that new capital was needed to en-
large plant facilities The Bank
Commissioner also says: The finan-
cling methods adopted in 1917, how
ever, appear to have been unique and
are aptly characterized as high fl
nance" y" The issue of the new
securities clearly gave the impression
that they were to furnish additional
capital to increase plant facilities
II have informed the Bondholders
Protective Committee that If there is
any way that the State authorities
can help the scattered security hold
ers conserve what is left, and afford
protection to the banks and trust
companies I desire to do SO.
'When q large company like the
Iron Works fails more harm is done
to Names progress than can be re-
paired in n decade. Confidence is the
basis Of prosperity, and once shaken
1t is hard to restore it. This Is the
sort of advertising that hurts Names
progress. Our people often are ap-
pealed to to buy Maine securities and
it is unfortunate that once in awhile
these prove to be unsound.
"In all business it is of vital I'M
portance to have directors who real
iZe what it means to accept positions
oe trust, who know the details of the
business enterprises they manage and
whose securities they offer to the
public. and who know the real value
of their properties. There are alto
gether too many companies here and
elsewhere who have on their director
ships men who do not direct. but who
simply reflect the acts of others and
who enjoy the empty distinction Of
serving as directors hut who never
function as such. No man should ever
accept a dictatorship unless he is
willing to give freely Of his time and
thought.
"To the investors of Maine I say
that security Is more to be desired
than increased income. If a man
seeks an extra one or two per cent,
he takes a proportionate risk in the
safety of his investment. This means
more to the person of small means
than to the man who has more than
he needs, for the former cannot afford
to lose while the latter sometimes
can. This warning applies to banks
and trust companies equally as to in
dividuals. The temptation to sell
Liberty Bonds and other securities of
sisted when some plausible salesman
offers others that will yield a larger
return. Above all else look to the
character of the man behind the bust
ness enterprises that are offered.
'"The citizens of Westport and
neighboring towns who had money in
the Trust Company have innocently
suffered because they nut their trust
III those who failed them"
l make this statement as a reply
to the Westport resolutions, for both
the trust company and the Bath Iron
Works cases have become matters
of public concern. The first was a
public banking institution, the second
n Maine enterprise; in both of which
the funds of our citizens were depos-
tied and invested and through both
Of which heavy losses have accrued