The Washington times., 1933-06-08
TAX ON S13, ,ooo 900 AVOIDED BY VAN SWERINGENS

IAH ON 01 5
Ferdinand Pecora, counsel for
the Senate Banking and Currency
Committee in its Morgan banking
investigation, developed at the
hearing today that the Van Swer-
angen brothers escaped paying
taxes on $13,433, ,014.77 in profits
accruing from the purchase Of
225, 900 shares of C. & o. Railway
stock. This stock was acquired
by the Van SwerengenS' personal
company" the Van ESS Co., for
$31,128,23
It wound up another Van Swer-
ingen corporation, the CheSa-
peake Corp. The transfer was
effected so as to avoid payment
of taxes as the stock value in
creased, through a third medium,
another Van Sweringen corpora
ton, the General Securities Corp.
Details Brought Out
Then Pecora brought out the
details of the formation of the
Allegheny Corp, the ultimate
railroad holding company formed
by the Van SweringenS for their
railroad securities, which was
later financed by J. P. Morgan
and Co.
At its outset the Van Swerin-
gen personal company, the Van
Ess Company, turned over to the
new holding company 100000
shares of Nickel Plate railroad
common stock carrying a $1,029,-
900 indebtedness and 440,386
shares of Chesapeake Corporation
stock.
For this stock the Van Ess
Company received from the
newly-formed Allegheny Corpora
ton 2,250,000 shares of it's COM
mon stock and 1,725,000 options
warrants each emitting the holder
to buy at any time within Is
years a share of Allegheny COM
mon stock at $50.
Third Concern Used
After this transfer the Allegheny
Corporation booked the Nickel
Plate stock at $13,O35, ,560.15 and
the Chesapeake stock at $34,718,-
1895. Pecora then developed
that this transfer, too, was made
through a third corporation, the
General Securities Company.
Pecora asked:
"Was not the third firm used
this time to avoid payment of
taxeS?"
Van Sweringen said:
II wouldn't go quite that far.
It was to avail ourselves of in
come tax exemption as pro.
vided by law"
Van Sweringen revealed that
later, February Is, 1929, the Van
Ess Company sold direct to Al
leghany 51,714 shares of Chesa-
peake Corporation common stock
for $4,090,747.5O, 26,100 shares of
C. and o. railway common stock
for $5,421,2 ,205 and 215,000 shares
of Erie railroad common stock
for $12,900,000. Allegheny paid
for the stock with money bor-
rowed from j. P. Morgan & Co.
Maze II Figures
Pecora led the witness into >
maze of figures which confused
committee members and Specta-
tors alike. He came up COR air
finally with figure showing that
out of a series of Van ESs Co.
Allegheny Corporation deals, the
power concern got a little / ore
than $36,0O0,0O0 cash and some
securities. Pecora asked:
"At this time, in February,
1929, when these Van Ess-
Allegheny Corporation trans
actions were completed, was
there any Indebtedness out
standing for the Van Ess Coz"
Tht witness revealed then that
on february Is, 1929, the Van
Ess Co., paid $22,000,0OO it owed
to j. P. Morgan and Co.
Right after this, however, the
Van EsS Co. turned around and
borrowed more money from the
MorganS. Two of the loans
totalled $10,194,277.50, Van S7er-
ingen revealed. He and Pecora
then dived back into their figures
and committee member and
spectators were again at sea.
They saw light again only when
Van Sweringen said that the Al
1eghany Corporation during the
period from its formation in Jan
uary, 1925 to March, 1880, pur-
chased $139,0O4,00O in securities
in all.
At one point Van Sweringen
protested that investigations we're