Evening star., 1933-06-08
Van Sweringen then said business
u-oe ;,,,proyinp steadily


was improving steadily.
Let me mention monthly earnings
for one of our roads not yet published" ;"
he said. I'VE estimated a net of
81 .4OO, ,00O I find that will be $2,000,000
l see that same thing all the way
through. Some of our roads are earning
a little more than this time last year,
think see improvement all the way
through"
After his remark describing investiga-
tions as "terrifically destructive" Van
Sweringen listened intently as Fletcher
said these investigations are showing
that wealth rests on the soil and not
'on inflated stock values
II want to amend my statement about
the investigation" Van Sweringen said.
Perhaps, shouldn't have said what /
did. 1 didn't mean Investigations, but.
of course, to investigate and to know is
desirable, but through the press the
public gets the idea that something is
wrong. That drift is there I realize
that all you are trying to do Is to see
and know and be helpful.
We want to prevent the recurrence
of some of the things that have hap
pened in the past" Senator Adams,
Democrat, of Colorado, said.
Van Sweringen nodded and said the
market values of today are not the true
values, adding he felt market prices
much too low in many instances.
Take the Missouri Pacific" he said.
we can do 80 per cent less business
than We did in 1929 and under present
conditions we will have net capital
account equal to 1929 We have had
some losses, of course, that reflects itself
in debt. but if we go on upward, as we
are going now, I'm confident that will
be taken care of and things will be all
right"
Tax Dodging Disclosed.
The hearing yesterday moved on for
further development Of the methods
r which the Van Sweringen brothers
lily got around paying income taxes
a. several steps in the formation OF
their gigantic railroad network.
The committee heard o. P. Van
Sweringen, whose sudden recovery OF
memory yesterday enabled the investi-
gators to learn how the brothers avoided
showing a profit from the sale Of
S44. .000, 600 block Of stock.
Pecora wanted completed the story
Van Sweringen had begun of the forma-
ton Of the Allegheny Corporation,
which now controls the Van Sweringen
group Of roads.
J. p. Morgan and the other members
Of his firm sQuirmed impatiently in
their chairs while Pecora led the rail-
road operator through a maze OF COM
plicated transactions.
Finally the counsel brought out testi-
mony that third corporation had been
used In the sale of huge block of
Chesapeake g. Ohio stock in 1927 to
escape payment of income taxes.
At first the witness was vague as
to the reason for transferring the $44,-
600 ,000 block of stock from the Vaness
Corporation to the Chesapeake Cor
poration through the General Secur-
tiles Corporation, but after bringing out
that the market price Of the securities
at the time of the transfer was higher
than when they were acquired, Pecora
asked:
That profit would have been a tax
able profit, would it not, to the
Vaness company"
IF there had been q profit it would
have been taxable" the witness re-
piled 1T was the economical way Of
handling this matter lawfully from a
tax standpoint"
Wasn't it because you would have
had to pay tax on the resultant
profit to the Vaness company by the
direct exchange?" Pecora finally asked.
Yes
s1,000,O 900 "Shoestring."
Later Van Sweringen said the Geneva
Corporation was used for the same
purpose in forming the Allegheny Cor
poration in 1929.
Pecora then had questioned him
about $48,000.000 issue of bonds for
the Chesapeake Corporation through j.
P. Morgan g. Co. and the Guaranty
Co. in connection with the Chesa-
peake holding concern in 1927.
He developed that under collateral
agreement the Vaness company agreed
to pay the bankers s240,000 If the
issue were consummated and $480, 900
II 1t was not.
why did the Vaness company make
this agreement" Pecora asked. Did
the bankers ask for this agreement or
did Vaness offer it?"
"It is a safe bet it was a conces-
sion on our part" the witness replied.
Further questioning developed that
the collateral posted for the bonds was
already partially pleged on loan Of
s35000 900 by the Morgan house to
the Veness company.
About S15.000,000 of that debt was
paid from the bond ISSUE the testi-
mony showed
$50 the parent Vaness company"
Pecora remarked, took care of its
child. the Chesapeake Corporation. by
transferring to it a part of the in
debtedness which the loving father
owed Morgan & Coz"
Yes, sir, it did have that effect, "
Van Sweringen replied.
Early testimony yesterday revealed
that the Van Sweringen brothers had
founded their gigantic rail empire on a
"shoestring" start of only $1,000, 900
cash