Evening star., 1933-06-07
Of the Nickel Plate and Of

:
stockholders Of the Nickel Plate and Of
Vaness
He read a letter setting forth other
details of the involved deal.
Just prior to the luncheon recess,
Van Sweringen testified that the Vaness
orporation-personal stock holding
company-did not pay income taxes on
a transfer of stock with a market value
of S44 625 900. 1t was at this point
that it was brought out that the trans
fer was made by means of a third
corporation set up to effect 1t: and
under this procedure the transfer oc-
Cured without showing any of the
profit which would have been marked
on the books by direct sale.
I'VE have shown for the first time the
advantage in effecting a transfer Of
stock through the medium of a third
corporation" Pecora told newspaper
men.
Weakness in Tax Laws.
by this means the payment of taxes
on profits is avoided 1t shows weak
ness in the tax laws that Congress may
want to strengthen"
Pecora did not disclose how much Of
a profit was involved In the trans
action, but he brought out that the
stock was a block of 255, 900 shares
Of Chesapeake & Ohio with a market
value at the time of about SITS.
That profit would have been a tax
able profit?" he asked Van Sweringen.
After a repetition of the question, in
which the counsel emphasized 1t was
a legal transaction, Van Sweringen
finally agreed that otherwise it would
have been a taxable profit.
On formation Of the Chesapeake Cor
poration, in which 900 1000 shares went
to Nickel Plate and Vaness stockhold-
ers, the data Van Sweringen read
showed 345, 900 shares of c. & o. and
174.9OO of Pere Marquette went to
Chesapeake.
The corporation also was to acquire
$4,000 odd shares of the common
stock of the Chesapeake & Ohio from
the Vaness company
Van Sweringen testified that the
Chesapeake Corporation had been
formed as a holding company and had
remained So.
The letter said the Chesapeake Cor
poration would assume an Indebtedness
of $6750 on each share of Chesapeake
e. Ohio stock by means Of S48,00o,000
5 per cent bond issue through j. P.
Morgan & Co.
The transfer of stock was arranged
on the basis of IT shares of Chesapeake
Corporation for each share Of c. & o.
stock held by Nickel Plate stock owners.
The Nickel Plate, or the New York.
Chicago & ST. Louis Railroad, as it is
held 345,000 shares of c.
& o. common?" Pecora asked.
Yes"
Held by Subsidiary.
Questioning brought out that the
345, 900 c. g. o. shares actually were
poration, a subsidiary of the Nickel
Plate
Formation of this special corporation
was detailed.
John P. Murphy, Cleveland attorney
and secretary of several Van Sweringen
companies, took the stand, and from
records before him testified that on
April II, 1926, the special investment
corporation bought $4,000 shares of
g. Ohio common and 120,
900 shares of Pere Marquette common.
The Investment Corporation paid for
this with 304,065 of its common stock.
did the Investment Corporation &C
quire other shares of the c. & O., until
May 10, 1927, 1t held total Of 345,0 900
shares?" Pecora inquired.
Murphy replied he was not an officer
Of the Special Investment Corporation,
but thought this was correct.
Pecora went through an involved
series of stock transactions with Van
Sweringen that members of the COM
mittee did not pretend to. understand.
1t was so complicated that even Pc
cora and Van Sweringen had difficulty
making clear to each other which COM
pany and which stock they were refer
ring to.
Pecora asked about the exchange of
c. & 0. stock between Nickel Plates
Special Investment Corporation and the
Chesapeake Corporation.
Van Sweringen said the Special In
vestment Corporation held 345,000
shares of C. &, o. stock, subject to the
$67.50 Indebtedness.
The Nickel Plate delivered to the
Chesapeake Corporation thc 304 .065
shares of the Special In
vestment Corporation. In return for
this delivery the Nickel Plate received
$50 shares of Chesapeake Corporation
stock, while 516.911 shares of Chesa-
peake Corporation stock were stimuli
taneously distributed to Nickel Plates
common stock holders.
So involved was the testimony that
as the lunch hour approached the
hearing room was not half filled with
spectators.
Hearing Tires Morgan
During the tedious detail, Morgan
vawned broadly. He listened only at
intervals
Van Sweringen said the Securities In
vestment Corporation was dissolved soon
after 1t had transferred the c. & O.
stock
Pecora turned to another part of the
series of transfers, the ar