Evening star., 1933-06-07
Created Corporations for
Stock Transfers, Pecora
GriIIing Develops.
RAIL EMPIRE LAUNCHED
lon MILLION "SHOESTRING"
Cleveland Operator Readily De-
scribes Beginning of Advent
Into Transportation.
BY the Associated Press.

BY the Associated Press.
Setting up of corporations for stock
transfers to remove income tax liability
was brought out today in testimony by
o. P. Van Sweringen in the Senate
investigation of the j. P. Morgan & Co.
role in erection of the widespreading
Van Sweringen railroad command.
Asserting readily to questions where
before he had repeatedly pleaded faulty
memory, the Cleveland operator first
revealed that 100000 cash was the
total he and his brother, M. j., and
associates put up in their 1916 advent
into transportation.
"You may say that is starting on a
shoestring," he drawled, to the interest
of another crowd on hand "I agree
that is so, but we made what he have
today out of that shoestring"
His brother listening closely nearby,
as was j. P. Morgan, he thereupon
made quick reply to questions by
Ferdinand Pecora, committee counsel
These developed that General Secur-
tiles Corporation" and later q Geneva
Securities Corporation" were specially
set up to effect transfers of stock to
holding companies in a way "to avail
OF income tax exemption provided by
Congress in connection with corporate
reorganization"
"The Economic Way"
Eve have shown for the first time
the advantage in effecting a transfer
of stock through the medium Of a thirC
corporation" Pecora told reporters.
by this means the payment of taxes
on profits is avoided It shows a weak
ness in the tax laws that Congress may
want to strengthen"
Van Sweringen testified that a huge
block of Chesapeake & Ohio stock was
taken on the books of one Of the organ
izations of his interests at over $104,-
100000, or $175.75 share.
Having direct sale in mind, Pecore
asked "If you had sold, there would
have been big prof1t?"
That's like saying if the dog hadn't
stopped running he would have caught
the rabbit" returned Van Sweringen.
Wasn't the purpose Of the Geneva
Securities Corporation to evade-hy
lawful means-this tax?" Pecora pressed
subsequently.
1T seemed the economic way of
handling it," the operator replied.
Finally, the witness pointed out that
he had already said the transaction
was so carried out to take advantage
Of income tax exemption
I'VE did it according to law" he put
in mildly
"Oh, it was legal enough" Pecora
rejoined.
Wider Power Sought.
This morning the investigators had
agreed unanimously on terms Of a
resolution to be presented to the Sen
ate later in the day seeking wider
power to go into income tax returns of
Morgan partners and their stock trans
actions pertinent thereto. Chairman
Fletcher predicted it would be ap-
proved by the Senate without delay.
Are you satisfied with the commit
tees action?" Pecora was asked.
II think So" he smiled.
The. matter -of-fact answer by Van
Sweringen as to the amount of cash
put up to get start in railroading
attracted the audience to closer at
tention than he had been given since
he first took the stand.
The noted railroad operator listened
more intently to Pecora's questions to-
day
He pointed a finger at the counsel
as he replied
Opening Delayed.
Opening of the hearing was delayed
an hour by the committee session to 60
into the income-tax matter.
The witnesses gave little notice on
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