The producers news., 1926-12-17
LOOTERS OF ST. PAUL ROAD
PLAY FAMILIAR GAME
By LELAND OLDS, FP.

Final sale of the Chicago, Milwaukee &
st. Paul railroad to Kuhn Loeb & Co., the
Standard Oil and copper trust bankers, at
their own terms, recalls the tale of multi
millionaire corruption which brought the
road to bankruptcy. 1t is the same old
story, fitting except for a few details into
the history of every major carrier. The
railroad is plucked; the millionaires get
out from under before the stock takes its
worst plunge; then repurchase when
threat Of an assessment forces small stock
holders to sell out for next to nothing.
A 1924 interstate commerce commission
report provides the first chapter. 1t shows
the financierS, in control during the period
when the road was extended to the coast,
Initiating the cost Of construction by charg-
ing in operating expenses. They reported
to the commission an investment in road
and equipment S100,000,000 in excess Of
the true amount in order to support an
excessive bond issue. They inflated pre-
war profits by setting up an entirely made
quate charge for depreciation of equip
ment. This series of crooked practices
swelled the roads bonded debt by more
than will be shaved off in the bankers re-
organization.
Testimony of these same multimillion-
aire directors in the federal investigation
of the receivership furnishes the next chap
ter. Percy Rockefeller, during hours
crosS-eXaminatiOn, admitted that through
private finance corporation he received
$4,000 as his share of the commission to
Samuel Pryor for aiding the st. Paul s pur-
chase of the Chicago, Milwaukee & Gary
This mistaken purchase has already cost
the St. Paul more than S3,300O0O. To-
gether with the purchase of the Chicago
Terra Haute & Southeastern it meant an
added burden of more than S1O.000,000
and added S22,OOO,OOO to the St. PauPs IL
abilities.
Rockefeller also admitted that he con-
tinued to sit informally as a director after
resigning to conform with the Clayton act
admitted family control of at least $4,000
shares Of st. Paul stock, and could recall
no important instance in which the direc
/ tors ever opposed his wishes.
/ John Ryan, copper king, testified thai
while director of the St. Paul and also oil
/ Anaconda Copper, Montana Power Co. anC
Great Falls Power Co., he had favored elec
/ tr1fying the St. Paul, to the great profit o.
the last 5 concerns but at a cost of 5000,
! 100000 to the road. Other directors made
similar startling revelations.
AS final chapter Roosevelt & Son, New
York brokers, showed statistically that tn
st. Paul'S swollen debt was no valid excus
for throwing the road into bankruptcy a
this time.
The completion Of the Kuhn Loeb reol
ganization will force an assessment. of S28
share on holders of preferred stock and So
a share on the holders of common. Sma
owners, unable to meet this, have been sci
, ing out as low as $40 share. Millionair
purchasers can acquire a share which Wi
eventually be worth S100 plus a S28 bon
| for a total investment Of S42 and at tn
same time cement their control of rOa
which will eventually become one of tn
: leading profit-makers of the country.
The reorganization, put through by til
r same gang that bankrupted the st. Pau
will increase the total capitalization.