Evening star., 1933-06-07
IVAN SWER|NCENS'
TAX DODG|NG Barred
Created Corporations fol
Stock Transfers, Pecora
Gril|ing Develops.
Continued From First Page.)

Continued From First Page)
hearing of the subcommittee agreement
on terms OF a resolution designed t
cover objections raised by John w
Davis. Morgan counsel. that the com.
inittee was without authority to go intc
income taxes Of Morgan partners.
Davis contends. however, that ever
with additional authority the committee
is prevented by law from going into
the ircome-tax question publicly.
o. P. Van Sweringen's testimony thai
he and his brother began with only
s1,0000o0 cash caused a murmur ir
| the room. 1t was the climax to which
Pecora had been driving through two
! days of crosS-examination.
| Van Swcringen said the railroad
properties were developed into some
thing very different than when they
| acquired them; and that development
of the Nickel Plate gave a back
ground" for other acquisitions.
I'VE were poor when we started out
| in life he said. I've never beer
reluctant to admit that"
Pecora asked:
Now, wasn't the money used to pay
the New York Central S2,000,000 in
cash for Nickel Plate stock borrowed
from the Guardian Savings & Trust OF
Cleveland"
Possessed Other Assets.
I'VE borrowed the money" Van Swer-
ingen replied, but we had other assets
! to put up for the loan. assets we had
acquired through marking and saving.
"At what stage did you put up the
81 900 ,O00?" the counsel inquired.
lzn4 h
scription was made to the Nickel Plate
Securities Corporation in refund of the
81. 900 900 borrowed from the Guardian
Savings & Trust" Van Sweringen said
In contrast to his testimony yester-
day. Van Sweringen was answering the
questions promptly and with little hesl-
tation.
He conferred occasionally with asso-
ciates, but was not pleading failure OF
memory on virtually every question as
he did on previous days.
Then as understand it. the Nickle
Plate Securities Co. was organized To
take over the New York Central stock,
Pecora said 1T issued 2,075.000 OF
preferred stock for which you under
took to get subscriptions.
Did the million you and your asso-
ciates put in go to buy any OF that
preferred stock?'
That's exactly 1t, yes" Van Swerin-
gen said.
Did you retain any of that pre-
ferred?" -
yes, that is, my brother and I, o. p.
and NJ j."
Van Sweringen explained that he and
his brother took S500,000 Of the Nickel
Plate securities preferred, while their
associates took another 100000. This
made up the original 81 ,000, 900 invest
ment to which he originally referred.
Van Sweringen said the 100000
Guardian Trust loan wss repaid by the
securities company out Of the proceeds
of the preferred stock.
Unification Plan Recalled.
That 5000 cash was borrowed by
my brother and on collateral we had
accumulated over many years." Van
Sweringen said.
Did you repay that loan7" Barkley
asked.
"Out of profits and the sale Of some
properties" Van Sweringen said
Pecora asked about an I. c. G. de-
cision in 1916 which turned down a
unification plan presented by the Van
Sweringens involving the Chesapeake g.
Ohio, Pere Marquette Erie and Hooking
Valley.
The counsel said the commission
ruled it could not escape the fact that
the plan was to allow a minority to
control the road through denial to pre-
ferred stockholders of the right to vote.
do you recall that?" he asked
"All two WELL ! do" the witness re-
piled
He added that the plan was not put
forward, however, "to enable us to hold
our jobs and control" but for the bet
terment of the roads involved. He said
the preferred stockholders in the road
were earning substantial dividends and
often opposed "betterments."
I'VE have conflict of private and
the public interest" he said Our in
terest in this case was the public in
terest"
Which comes first?'
'The public interest" Van Sweringen
said without hesitation.
Pecora asked II the Van Sweringens
had conformed to the I. c. C. deci-
sion.
The witness said it was studied care
fully and treated as worthy sug-
gestion.'
His attitude was a reversal of his
manner on previous days
He went into details smilingly, where
as he had on the other days protested
almost every step. He now seemed
almost eager to answer.
Defends Trust Agreement.
Pecora asked about a trust agreement
entered into February II, 1924, by. the
Van Sweringen brothers, c.. L. Bradley
and J. r. Mutt, by which the four were
named managers Of the trust into which
railroad stock was put.
Then he quoted the Interstate Com
merce Commission as criticizing this
trust agreement as permitting its par
t1c1pantS to exercise management con-
troll over rail lines without ownership
directly or indirectly-in the lines.
That trust was made just as you
would draw your last will and tesla
ment and provide for the handling of
your estate after DEATH" Van Sweringen
said. Shortly afterward we Cancelled
it because it hadn't occurred to us in
the light mentioned by the commission
That angle hadn't occurred to u.s."
The witness readily detailed forma-
ton of the Chesapeake Corporation in
May, 1927.
1t was formed, he said, to divest the
Nickel Plate of holdings in the c. & O.
in order to make the latter the basis for
the proposed consolidated system.
He said 100000 capital shares were
issued originally, and this went to the