Evening star., 1933-06-05
MORGAN AID GIVEN.
TO VAN SWER|NGENS.
Formation of Huge Dominion
of Brothers Outlined at
Senate Inquiry.
Continued From First Page,)

Cleveland we wanted to use part OF
the Nickel Plate
Having bought the road. the brothers
decided ito make the most of it. y
The move for rail consolidation was un-
derway by 1920 The Van Sweringens
thought fast, figured there should be
four Eastern rail systems and started
to consolidate one. In 1922, they pur-
chased stock control of the Toledo, St
Louis & Western and the Lake Erie q,
Western, consolidating them with Nickel
Plate. Along came the chance to ac-
ouire a major interest in the Chesa-
peake g. Ohio. The Morgans felt 1t
wasn't the time for us to make the
expenditures. We were going to have
to have some money. We took their
advice. ."
But "a year or so" later the Van
Sweringens were back at % Wall street.
This time the Morgan firm agreed
with us and we closed the deal, the
Nickel Plate buying 10000 of the
Huntington shares, the total OF which
was 10000"
They had to pay more than the
market so the Nickel Plate bought only
a portion of the shares, the Van Swer-
ingens with associates personally hold
ing the rest, themselves paying all that
had to be paid above market price for
the entire 10000. This block was not
control so they went after more. The
road was in difficulties but they be-
lieved they could put it on its feet.
when we went into the manage
frIent of It. we conferred with Morgan
& Co. as to those improvements we felt
should be made. and through their AID
financed large purchase OF new equip
rnent. 80 We were correct In our be-
lief It is the one railroad that has
earned and paid its full dividend
throughout the period Of this de-
preston"
eve were on our way" observed Van
Sweringen at this point. going on to
tell how they then eyed the Er1er Rall-
road, and won the cooperation Of the
late George F. Baker, SO that together
they wound up with half the common
and much of the Erie's preferred. They
needed new outlets for coal, so bought
into the Pere Marquette. 1t was 1923,
and the brothers went to the l.. G: G.
with their first plan for the Nickel Plate
unification.
THE plan was rejected. but since the
I. C. C.. regarded the c. g. 0. as logical
backbone of their system they built
link through Ohio to give it contin-
uous line from Newport News, va, TO
Toledo
Holding Company Appears.
Here appeared the first of the hold
ing companies. G. d Q, was TO De now
xhe nucleus of the consolidation and
Nickel Plate was big stock owner in
it, prospective parent. To change this
and stiI keep the Nickel Plates G. &, o.,
shares in the group, Chesapeake Cor
poration was created and its shares ex-
changed for the C. g. O.'s Nickel Plate.
The Van Sweringens' own c. & 0. hold
ines went into the pot upon the same
basis.
This took money
AChesapeake Corporation went to j. P.
Morgan 81 Co. for this financial aid and
realized it by the sale to them in the
Spring OF 1927 of $48, 900 900 of 20-year
s per cent bonds"
The Chesapeake & Ohio asked then
for Interstate Commerce Commission
permission to acquire control Of the
Erie and Pere Marquette, was granted
the latter, but not the Erie The Van
Sweringens, faced then witn need for
some manner of. holding IN unified
fashion all the interests they had ac-
qaired for formation OF the fourth sys-
tenn of the rail consolidation plan. in
1873 DIouelt ultos osHcAiS 4fAACeiohy W.
poration, the imnlediate objective Of the
present investigator.
Into it they rrh their holdings, he
said, taking common stock only in ex-
change Here Van Sweringen's state
ment made no reference to the Morgans,
no mention of the flotation which
already has figured in the investigation
through distribution OF Allegheny shares
at cost to Morgan selected list OF
customers.
He pointed out that in 1882 the Inter
state Commerce Commission handed
down a four-system consolidation plan
coinciding with their structure and
added:
we are stfll expecting to get these
railroads together. physically and finan-
cially speaking, in spite of the many
difficulties We have encountered"
for expansion, desiring, said O. p.
to secure diversiication of freight, since
their Eastern business was so largely
coal. Unification of a transcontinental
system, he insisted, was not the aim.
They picked on the Missouri Pacific
system and bought by 1880 majority
of its shares through Allegheny Cor
poration. They thought themselves
strong enough financially to swing it,
but the depression came and wrought
its accompanying havoc to investments
and its violence TO Allegheny Corpora
ton"
Yet. he predicted Missouri Pacific will
be lone of the best and most prosperous
in this country" once 1t is through its
present receivership reorganization.
No Interruptions.
Members listened to Van Sweringens
long statement in silence and without
interruption.
Only a few of the Senators were
present including Senators -Goldsbor-
ough (republican) of Maryland; ~Byrns
Democrat), South Carolina; Adams
DemocraU of Colorado and tkean.,
(Eepublican) of New Jersey, In addi-
tion to Chairman Fletcher.
Van Sweringen emphasized his read
Ing with mild gestures and smiled when
he mentioned the Chesapeake g. Ohio
and its coal haulage.
He said the statement gave an outline
of the purpose" of the Allegheny Cor
poration.
You formed the Allegheny Corpora
tion to acquire control or part control
of various railroad lines?" Pecora asked
as Van Sweringen completed his state
.ment.
That was its purpose, I think" Van
Sweringen said.
You invaded the railroad field in
1852"
Yes
Through purchase of the Nickel
Plate?"
Yes we bought into the Nickel
Plate.
Who was associated with you in this
venture" Pecora asked.
Brother and Others.
MY brother c. R. Bradley, ]. R.
Mutt and quite a few Others" Van
Sweringen replied.
Pecora then asked a series of ques-
tions as to who wrote his opening state
ment and who aided
Van Sweringen answered in a low
voice He leaned back in his chair a,
the end of almos: every reply.
He said he drew the statement. that
several in his Office aided in framing