DUKE UNIVERSITY LIBRARY REPORT AND PROCEEDINGS OF THE JOINT COMMITTEE OF THE Senate and Assembly APPOINTED TO \ INVESTIGATE TRUSTS. TRANSMITTED TO THE LEGISLATURE MARCH 9, 1897. ■ +< '4 S y WYNKOOP HALLENBECK CRAWFORD CO., STATE PRINTERS, ALBANY AND NEW YORK. 1897. Digitized by the Internet Archive in 2017 with funding from Duke University Libraries https://archive.org/details/reportproceeding01 newy State of New York I N NO. 4 : 0 . SENATE), March 9, 1897. REPORT OF THE JOINT COMMITTEE OF THE SENATE AND ASSEMBLY APPOINTED TO INVESTIGATE TRUSTS. To the Legislature of the State of New York: The joint legislative committee appointed pursuant to a certain concurrent resolution, dated January the 20th, 1897, as follows: “ Whereas, Combinations of capital in the form of trusts or other- wise appear to exist and to be increasing in number and influence in this commonwealth, resulting in concentrating in the hands of a few, various important branches of industry, creating monopolies, shutting out competition, displacing labor and driving the citizen ■of moderate means out of business, with the effect that production and price are regulated not by the natural laws of supply and 4 [Senate, demand, or the rules of normal and healthy competition, but by the arbitrary decision of combinations operating together to destroy competition and exact unreasonable charges from the people; and, “ Whereas, It is charged that combinations of capital enjoy special and peculiar privileges and advantages detrimental to public inter- ests, and that the laws hitherto enacted are inadequate to furnish relief; therefore, “ Resolved, (if the Assembly concur), That a joint committee of the Legislature, consisting of three Senators and four members of the Assembly, be appointed to draft such remedial acts as may be neces- sary, and in order that this may be intelligently done the said com- mittee shall have full power and authority to institute and conduct an investigation for that purpose; and the said committee is empowered to hold sessions wherever necessary, to employ counsel, a stenog- rapher and such other assistants as may be necessary, to send for persons and papers, issue subpoenas, and exercise and enjoy all the powers, privileges and authority of a legislative committee; and it is further, “ Resolved, That the committee make a report accompanied by a bill or bills on or before the first day of March next.” — hereby reports: In obedience to the direction of said resolution, your committee met, and thereupon decided that in order to draft remedial acts designed to correct existing abuses of the character described in the preamble of said resolution, a more accurate understanding of the system and methods pursued by combinations in the nature of trusts was v idispensable, and that such information as might be obtained from :orrespondence and public hearings would aid in securing intelh j-ent legislation upon the subject. No. 30.] . 5 A general request was issued, which was published throughout the State, inviting the fullest and freest communication of facts and propositions, and steps were immediately taken looking to the hold- ing of public sessions of the committee in the city of New York. These began on the 5th day of February, and were continued with such interruptions only as the legislative duties of the members of the committee required, until the 25th day of February, 1897, when by resolution of the committee public hearings were discontinued. The period of time limited by said resolution was so unequal to the task that careful preparation was impossible, and examinations were necessarilv confined to a few conspicuous examples of combina- tions operating within this State that promised to develop distinctive features, and proof was taken in respect of plan and details of organ- ization, and of the business methods pursued, first, by the constituent companies when existing independently, and then by the combination after it went into full operation. In the record which we submit concurrently with this report, we have succeeded in presenting a comprehensive disclosure of the origin, development, aims and methods of that so-called modern commercial evolution popularly denominated “ Trust.” In this connection it will be useful to direct attention to the fact that a trust in the sense in which it is popularly taken is a misnomer. Trust agreements no longer form the basis for the union of the con- stituent elements of a combination, whether of corporations or of individuals, which has for its purpose the repression of competition or the control of product or market. When in 1890 the Court of Appeals in this State pronounced its final judgment against the system of trust organization then in vogue, the “ trust ” became a thing of the past, existing trust agreements were dissolved and under the permission of existing laws the constituent elements held 6 [Senate, together under such agreements, became incorporated in the State of New Jersey and in other jurisdictions, where, either by accident or design, the law of incorporation was so adjusted that by the sim- plest formality a trust declared unlawful and a conspiracy against public welfare might continue its career, operating through the same agencies, pursuing the same methods and actuated by the same aims and purposes as before, but within the permission of the local law based on a mere change in form of organization. The corporation laws of the State of New York at that time dif- fered essentially from the laws of the State of New Jersey in that they did not, as did the latter, permit the acquisition by one cor- poration of the capital stock of another, and consequently there fol- lowed an immediate migration of trusts to the State of New Jersey to secure corporate charters there and thus avoid complications in which the decision of the Court of Appeals threatened to involve them. Wherever during the subsequent consideration of this ques- tion we speak of trusts, we mean an incorporation created by the laws of this and other States which manifests the purposes, methods and characteristics of the original “ trust.” We include the State of New York, because in 1892, due probably to the migrations before mentioned, the corporation laws of this State were radically revised and amended, so that for all practical purposes of this discussion they coincide with corresponding laws of the State of New Jersey. It will avoid confusion of terms and ideas to define a combination in the nature of a trust. A witness of marked intelligence, and pos- sessing all the qualifications of an expert in commercial affairs, defined a trust to be any combination or concentration of capital. He claimed that all aggregations of capital were in popular estima- tion “ trusts,” and thereupon dissented from that interpretation by insisting that no trusts exist in fact, because aggregations of capital No. 40.] 7 were now operating in the form of legally organized corporations. He was thus merely epitomizing the history of the past decade and the adaptation of “trusts” to judicial decision and legal enactment. It is sufficient for the purposes of this report to say that we do not concede the generalization he insists upon, but maintain that the true definition is of much smaller compass. If all aggregations or combinations of capital were trusts, it would be unnecessary for us to continue the discussion, because that would imply that all combinations are harmful or prejudicial to the interests of the State, and that all alike would come properly under the ban of the Legis- lature. The mere statement of this proposition is its sufficient answer. Any association of partners, whether two or more, being an aggregation of capital, however small, would be a trust. Any joint stock association or limited liability business corporation, in fact any form whereby, under the permission of the law and of the constitutional privilege of contract, man endeavors to escape the limitations of isolation and seeks the pursuit of lawful gain by means of combined effort, combined intelligence, combined skill and combined resources, operating together to secure greater perfec- tion, larger results and higher progress, would be a trust. Genius which resolves successfully the most difficult problems of the natural forces and by dint of brains and originality adapts them to the service of man, and, in order to make them practical and useful, calls to his aid the intelligence of the business man and the resources of the financier, would fall under the weight of criticism. Results achieved within the last century in every department of invention, in every field of intellectual conflict, in every phase of commercial progress, whereby the human race has been enabled to cast aside limitations and proceed with mighty strides along the path of a higher and broader development, whereby the ocean has 8 [Senate, become peopled with a vast merchant marine, obstructions of nature have been turned into channels of intercommunication and the land has been covered with a net work of railroads, distributing the conveniences and comforts of life more largely and generally among the people, would be terms of reproach. These are the results not of individual effort, not of isolated action, but of that proper combination of skill and capital which has gathered together the different elements necessary to commercial success and utilized their united forces to accomplish the largest results. Combinations of capital starting with small partnerships and terminating with large aggregations, based on corporate organizations representing the contributions of innumerable stockholders to a common fund, thus investing for the purpose of reaping the reward arising from econo- mies growing out of the concentration of resources and the employ- ment of the best skill, the highest intellect, the most approved ma- chinery and the most qualified labor, are not in themselves, in our judgment, reprehensible or against any known principle of public policy. , That the latter have been increasing in size, in wealth and rela- tively in influence within recent years, is a sign of the times which naturally gives rise to discussion, to conjecture and in some cases to apprehension as to the future. But it is a situation which seems to be the natural evolution growing out of the fierce contest for su- premacy in the fields of commerce and finding a reflection in almost every department of human activity. That it is a natural evolution seems clear from the fact that it is the universal concomitant of pro- gress, marking in fact, to a very large extent, the progressive stages of commercial development created by the natural impulse toward better conditions, and in its turn creating that complex system upon the proper adjustment of which the welfare, comfort and prosperity of the people so largely depend. No. 30.] 9 The present agitation against all forms of combination is, we believe, attributable to a confusion of the relative meaning of com- binations of capital and trusts, as we define them, in that, whether accidentally or by design, all forms of combined human effort are sought to be brought within the proscription of trusts. Capital and labor operate and should continue to exist under the laws of mutual dependence. The one is essential to the other. There should be no irreconcilable conflict between them. The safety of the State and the welfare of the people depend upon their harmonious and unin- terrupted co-operation. The relation between the two is so delicately and inextricably interwoven, that injury to the one necessarily in- volves harm to the other. Unemployed or illrequited labor signifies a precisely similar condition with regard to capital; and it is only { when the two are fully employed that the largest results are obtain- able and the greatest benefits accrue to the State and to the people. While the State should not exercise parental authority or unduly interfere with the operations of the natural law, it is its obvious duty on broad principles of self-preservation and under constitutional mandate to protect every citizen in the pursuit of happiness, which means the protection of property on the one hand, and of work, that is, the ability to acquire property, on the other. Both labor and capital should be permitted the utmost freedom of liberty and action, limited only by regard for the other and for the safety and welfare of the State. But while the State should not impose any undue re- straints upon its people or their opportunities, it should not permit others to impose any undue restraints upon its citizens. Liberty does not imply license. It cannot co-exist with license. And it is just at this point where combinations of capital, as ordinarily understood, differentiate from trusts as we define them. 10 [Senate, Interpreting combinations of capital to be the gathering together under one management of the collective contributions of many for strictly business purposes, involving economy in the several stages which result in the final distribution of the product to the consumer, we define the trust to be an aggregation brought about for the pur- pose of operating against the natural law of supply and demand, destroying competition by combination and unfair methods in order to secure control of both product and market, or permitting compe- tition to exist only colorably and to the extent of refuting the charge of absolute monopoly. The one moves with the natural law; the other is designed to and does operate against the natural law. It is unnecessary, however, that absolute monopoly exist or be the objective point in order to create a combination in the nature of a trust. In United States against Knight (156 U. S. 16), Chief Justice Fuller says: 1 ; “All the authorities agree that in order to vitiate the contract or combination it is not essential that its result should be a complete monopoly; it is sufficient if it really tends to that end, and to deprive the public of the advantages which flow from free competition.” Conceding the definition we have indicated to be accurate, we deem it timely to ask attention to another distinction in order that no confusion may arise. Monopolies may for convenience be sub- divided into three classes: First. Those that are natural, depending upon the use of a public franchise, in a sense exclusive, such as railroads, telegraphs and kindred organizations performing quasi-public functions and in re- spect of which the State has long exercised a general right of regulation; or depending upon the ownership of the source of supply of some article or product. No. 40.] 11 \ Second. Those that are legal, depending upon some special privi- lege conferred by law, such as patents, trade-marks and so forth. Third. Those that depend wholly upon the use of capital and where the monopolies exist not naturally or by legal permission, but by reason of the acquisition of control by capital. The latter has been aptly described as “ capitalistic monopolies,” and defined to be such, as “ So control the business, whatever it may be, as practically to regulate competition and to fix the price of their products on the whole with little reference to competitors or to the cost of production, but mainly in reference to securing the greatest net results.” And it is this class of monopoly only which is here considered. It was the aim of your committee to pursue its investigation with the strictest impartiality and fairness, but with the determination to elicit all the facts necessary to secure a complete disclosure of the economic systems which came under our observation. It should be borne in mind, that those whom we examined were, almost without exception, officers in the control and management of the respective combinations; that consequently they proved to be reluctant wit- nesses, desirous of evading direct answer, solicitous to conceal all the facts which might injuriously affect their interests, and anxious always to disclose only the best side of the systems which they repre- sented. Being in the nature of cross-examinations it became neces- sary at times to proceed with unusual severity. But we conceive that the State owes no duty of delicate or sym- pathetic treatment of interests which are designed to operate against the natural law, and seeking the protection and shelter of charters of other States, develop under their permission systems within our bor- ders which cause the dissatisfaction and resentment of our people. 12 [Senate, It is rather in the interest of the industries and the capital of the people of our State, that effective legislation ag'ainst trusts, as we define them, should be had. A system which permits of the creation of monopolies among us, operating under foreign charters, arro- gating practically undisputed control over the sources of supply, the volume of product and the price to the consumer based upon an aggregation of capital so large and powerful as to defy assault, dis- courage competition and impose an insuperable barrier to the en- trance of lesser capital on terms of fair and equal competition, is, in our judgment, indefensible on any grounds of public policy. We are not unmindful of the importance of the interests, both public and private, which are here concerned. We recognize as a fundamental principle that no restraint should be imposed by legis- lative action upon the unrestricted use and enjoyment of vested rights and property; that no limitation should be placed upon relations of trade and commerce not absolutely indispensable to public welfare. The commanding position of this State in the financial and commer- cial affairs of the Union, the causes that have contributed to her undisputed supremacy and the responsibility resting upon the Legis- lature to conform its conclusions to the demands of justice and con- servatism, are all considerations which have been duly weighed. Neither progress nor prosperity will be permanent unless accom- panied by confidence, and the latter will not abide with us in the absence of an inviolable guarantee that every person, natural or arti- ficial, shall have the enduring protection of just and equal laws. Genius, capital and labor are each and all alike entitled to the fullest opportunity of employment and expansion and the law, which pro- fesses to protect their immunities in this regard, defeats itself and becomes a hollow mockery when it permits the absolute control of an industrial pursuit to become monopolized by an aggregation. No. 30.] \ 13 which has for its fundamental object the destruction of all then exist- ing competition by combination or coercion, coupled with a control so strongly entrenched as to be impregnable against the assaults of any capital of lesser magnitude. It is because the policy of this State requires that skill and genius shall have full play; that the capital and resources of its citizens shall have the freest opportunity of employ- ment, and that labor shall retain the privilege of offering its services to a multitude of employers, that here, as elsewhere throughout the Union, the expansion of capitalistic monopolies is condemned. A field of industry, controlled by the irresistible power of a gigantic combination, possesses no attractions for the capital of the people. And any system, which complacently suffers such combinations to con- quer and hold field after field of industrial activity, offers no guar- antee of security in the employment of the resources of our citizens; and in proportion as the capital of our own people, or the resources •of those who would invest here under conditions of fair competition, find entrance to the field of industry attended with greater difficulties and graver peril, the investment of competing capital will become smaller and the opportunities for the employment of labor will shrink accordingly. Without going into unnecessary detail as to the origin and devel- opment of particidar combinations, we may generalize the situation in this way: In every case of combination which presented itself to your committee, independent concerns represented either by part- nerships or by corporate organizations, or both, had been competing against each other in the markets of this State and nation, when, by promotion or otherwise, they combined together, generally under the laws of the State of New Jersey, into one large corporation controll- ing approximately 80 per cent, of the production of a particular product of common use. Every combination thus made was accom- 14 [Senate, panied by an enormous capitalization and was generally followed by a successful effort to distribute its stock to the public through the channels of speculation. Every such combination was followed by the closing and dismantlement of factories, the discharge-of labor, and the concentration of the business of many separate organizations into a few of the many factories controlled by the combination. Every such combination was followed by the substantial control of product and by the ability of the combination to fix a price upon its own product as well as on that of ostensible competitors. Every such combination was followed by a system of factor’s agreements, which enabled it to control the means of distribution and maintain a fixed price without regard to ostensible competition or to the normal rules of supply and demand. Finally, every such combina- tion was followed by increasing difficulties of new competition by lesser capital and increased ability to destroy or absorb any existing competition or new competition that might arise. Thus, where previously a large number of independent concerns, competing among themselves freely and fairly, where moderate capital could find entrance into the particular field of industry and compete on equal terms; where a multitude of concerns employed each its separate staff of officers, clerks, salesmen and employes, we find now great combinations of these under one management, with one staff of officials and subordinates, presenting a concentration of power and resource that defies present competition and discourages any attempt by moderate capital to embark in a competitive enter- prise. It is a fact which should be referred to in this connection, that the pioneers in this method of concentration have proved financially so successful that a great impetus has been given to this method of business development. One after another, industrial pursuits are No. 40.] 15 surrendering to similar combinations, and it is safe to predict, that unless this movement subsides, most, if not all, of our industrial pur- suits will reach a similar concentration and will be followed by results similar to those indicated in this report. If these capitalistic monopolies are defensible on the ground, that they are in line with modern progressive evolution, that they are a distinct advance in the right direction, that their advantages outweigh any weaknesses that they exhibit; that their methods, whether coer- cive or restrictive, are but a means to an end justified by benefits to the people, then it must be conceded that every industrial pursuit except such, if there are any, as possess characteristics which render absolute combinations impracticable, will become gradually absorbed by capitalistic monopolies, competition will become a matter of his- tory, and the affairs of the people will be regulated and controlled by a few. What the result of such a situation would be may best be left to conjecture. Certain it is, that in the consideration of this sub- ject now it becomes our duty to view it in the light of its probable and logical results. If the system is lawful and beneficial with respect to the industrial pursuits now under monopolistic control, it must be equally lawful and beneficial when applied to all industrial pursuits without discrimination, and if not hostile to public interests and bene- ficial to the people it would become the duty of the Legislature to foster this movement rather than retard it. It behooves us, therefore, to consider this question not only with respect to the present, but with particular reference to future results. Let us consider some of the chief advantages that are claimed to exist in favor of these combinations so far as they affect the public. The main advantage is stated to be that of economy in production reflected in lower prices to the consumer. The fact that large econo- mies must of necessity accrue, admits of no denial. But are these 16 [Senate, followed by lower prices to the consumer? We find nothing upon the record to justify any such conclusion. It is true that sugar, for example, costs less to-day than it did prior to the time when the competing companies combined. But it is equally true that the cost of the raw material has declined to a greater extent than has the price of the refined article. Hence the consumer has not received the full benefit of the decline in the raw material, while he has had no share whatever in the diminished cost of production. In other cases combination was immediately followed by an advance in the price of the product. In fact there is nothing upon the record which indicates that combination itself effected any reduction in the price to the con- sumer, or that the latter was considered with reference to any share in the profit, all elements of economy being credited rather to the upbuilding of the earning capacity of the capital stock. The record does show, on the other hand, that a combination con- trolling 80 per cent, of a staple product, hence a purchaser of 80 per cent, of the raw material, could and did exert substantial influence on the price of raw material, and could, by dint of that influence force down the price of raw material to a point which enabled it to appear as having decreased the price of the finished product to the consumer. We point to this as a noteworthy incident indicating the power of a combination thus organized, and illustrating the influence of all simi- lar aggregations on the price of raw material wherever the effect of combined resources can not, from the nature of conditions, be offset by similar combinations between widely distributed producers. Another advantage which is said to flow from combination, is that of a more perfect product. There is nothing upon the record to justify this conclusion. While it may be that the normal tendency of business is to secure the largest market, and with that end in view to give the greatest satisfaction to the buyer, it is quite clear that No. 30.] IT substantially undisputed control of both product and market enables a combination to economize in quality without fear of pernicious results. Another advantage is alleged to be that of better wages and more constant employment of labor. We are equally unable to reach this conclusion. No part of the profit arising from admitted economies, and resulting in large dividends on inflated stocks, has reached labor in the form of increased wages, while the claim of constancy of em- ployment is negatived by the fact that factories in operation for a generation have been closed, and that workingmen, more or less continually employed for years in a factory independently operated, have been discharged upon its absorption by the combination. Com- binations owning factories located in different States are thereby enabled to and do at will, here and there, close factories perma- nently or for long periods of time; possessing factories of a capacity sufficient to supply all demands, with a surplus of 40 per cent., they may at any time cause factories in many localities to remain tem- porarily or permanently idle and thus reduce the worker to a con- dition of absolute uncertainty. Still another alleged advantage is that of stability of price to the consumer. This must be admitted. But the question is whether the fixing of a stable price operates to his advantage. It is an abnormal and not a natural condition — a price fixed at the maximum that the consumer will pay consistent with the marketing of the largest volume of product practicable. The fixing of the price, whereby the producer is able to retain all the benefits of economy and concentration for himself, is not that kind of stability in values which appeals with special force to the consuming public. The kind of stability which revolutionizes the law of supply and demand and enables the com- bination to hold its products at a fixed price without regard to the 2 IS [Senate, tendency of prices and through times of depression such as have been experienced for the past four years, when commodities generally have fallen ratably in the markets, to maintain prices fixed by its arbitrary decision, produces an inequality among the people which may scarcely be described as an advantage except to the combination itself. i. OVER-CAPITALIZATION. Another incident worthy of mention relates to the system of capi- talization which seems to lie at the foundation of this class of com- binations. Sufficient appears upon the record to justify the conclu- sion that, of at least co-ordinate importance with the plan of industrial concentration, was the scheme of the issue of stock certificates of greatly inflated nominal values. That this was a purpose definitely formed and not merely incidental to industrial development is sub- stantially admitted by the spokesmen for at least two of the principal combinations of the five which were examined. In one case corporate assets acquired by an officer of the combina- tion for the sum of $350,000 were capitalized over night in the new combination by the issue of certificates of a nominal value of twice that amount, less 15 per cent. Other corporations, organized for the distinct purpose of absorption by the combination on the basis of a stock issue of a nominal value of $800,000, were simultaneously re- capitalized in the combination by an issue of a nominal share value of about $14,000,000. Corporations representing in the aggregate share issues of less than $7,000,000 were recapitalized in the combination by a nominal share issue of $50,000,000, less a rebate of 1 5 per cent. In another case live assets were valued at about $5,000,000, and made the basis of an issue of about $25,000,000 of stock, the difference being made up in the assumed value of “ good will,” “ brands,” No. 40 .] 19 “ trade-marks,” etc. In another instance the live assets were capital' ized in so-called debenture stock, while the common stock was issued upon the basis of computing the average percentage of profits over a period of years and multiplying these by 16. In another instance both common and preferred stock were issued in bulk for the several properties acquired, studious care being exercised to conceal the details of payments for particular properties and to avoid the dis- closure of the processes whereby values represented. by stock issues were computed. The net result of each of these methods of capitalization was, that large over-issue of capital stock was the important, if not the main, V purpose of consolidation. One' of the witnesses, whose experience and intelligence were especially marked, when interrogated upon this question, stated that the stock issued represented the “ prospective earning capacity” of the combination, that is to say, its earning capac- ity considered from the viewpoint of all those advantages attributable to a perfected consolidation, the control of product, the ability to fix its price, and the economies so eloquently described by all the witnesses flowing from concentration of production, management and dis- tribution. It is worthy of note, that while these properties were separately competing with each other their stock issues w T ere small and in a few hands, and that as soon as the combination was effected and the nominal values were inflated, the shares were listed on the stock ex- change and distributed among the public. In one case properties controlled by not to exceed ioo owners and stockholders became at once speculatively active and their shares were distributed in a short time among upwards of 9,000 distinct stockholders; in another, the holdings of not to exceed 35 people became subdivided among about 6,000 stockholders, while in a third the properties of a few men were 20 [Senate, finally represented by share certificates held by upwards of 2,000 people. This has been pointed to as one of the beneficent results of large combinations; namely, the diffusion of ownership whereby the con- trol of a few has been subdivided among many. This argument would have some force were it not for the methods adopted in the capitalization of the properties before indicated. The diffusion of shares does not necessarily carry with it the control by many of the properties thus represented. Stockholders satisfied with the profits they receive are willing to leave the original management in perma- nent control. Realization of dividends is the father of contentment; and the supreme effort of management must be directed toward main- taining earnings proportionate to the amount of stock issued whether for live assets or for properties closed, abandoned or dismantled. All this tends to indicate that the net profits of a corporation thus organized must be held at an abnormally high figure in order to justify the payment of dividends upon live, dead and inflated capital; and that correspondingly, labor on the one hand and the consumer on the other must relatively bear their proportion. And this without reference to the fact that the change from a strictly industrial pursuit to one intimately coupled with speculation in the certificates repre- senting that industry, must naturally have some effect; and volume of product, price and all the incidents of a purely industrial manage- ment must be affected by the requirements of fluctuating stock values on the exchange. What should be purely industrial becomes the tender of speculation, and the law of supply and demand instead of remaining the constant regulator of output and price, finds itself de- termined and disturbed by the exigencies of speculation. No. 30.] 21 It is claimed that shares represent only the proportionate owner- ship of the holders in the assets of a corporation, whatever they may be, and while this is true in a strictly legal sense, still they are not so held in the estimation of the public. It seems to us that this is one of the evils to which, in a large measure, this tendency towards combinations in the nature of trusts is due. The owners of property, who see in this method a medium for the capitalization of their interests on an inflated basis of value, and recog- nize availability for sale and transfer, avail themselves in the pursuit of easily and rapidly acquired wealth of this method rather than wait the longer processes and greater delays of returns from a purely in- dustrial pursuit. Combinations thus effected are not the result of normal evolution, but arise from greed and the desire for rapid accumulation of wealth. We cannot at this time suggest a remedy. The placing of restric- tions upon the issue of capital stock by limiting the amount of issue or requiring, as in the case of moneyed institutions, its absolute pay- ment in cash, may be altogether too radical. While other States permit the latitude they now do such a change would probably result in driving capital from this State and interfere with its commercial development. FOREIGN INCORPORATION. A point of interest which came to light incidentally is the practice of foreign incorporation. The most extreme example furnished by the record is one where a combination owning factories in several States, including this, but without the semblance of any interest in the State of New Jersey, secured a charter there and assumes to carry on its business in this State, free from compliance with the beneficial restrictions of our laws. 22 [Senate, It appeared from the testimony that in one case lower rates of taxa- tion was the moving cause ; in another, the desire to avoid legislative inquiry or the visitorial powers of the State; in a third, the absence of all requirements as to annual reports. But whatever the grounds, real or pretended, the fact remains, that the mere incorporation in a foreign jurisdiction is supposed to operate so as to relieve the cor- poration so formed of some duty or obligation which would have rested upon it had it been organized under the laws of this State. Hence, although for all practical purposes a corporation of this State, operating here, receiving the protection of our laws, and the opportunities of our markets, it is permitted by a mere fiction to escape duties and obligations imposed on corporations similarly situ- ated but created in our own State. That any State in the Union should permit its system to be thus abused is due probably to the fact that it is in ignorance of the uses to which its laws are put. We do not believe that the State of New York, for the mere purpose of securing colorable incorporations here and receiving annually a pittance for permission to avoid those rea- sonable and salutary requirements which our laws impose, should alter its system so as to meet the competition of any other State for this kind of corporate organization. We cannot afford to offer our corporate charters to be trafficked in by those who refuse to submit to reasonable restraints and search the land over for the most com- placent jurisdiction which holds its corporate franchises so cheaply that they may be had for the asking on the payment of a trifling tax by those who shun regulations devised to secure honesty of manage- ment, resent visitorial powers exercised by the State for the benefit of the people, and avoid provisions designed for the safety of the investing public and the security of creditors. No. 40.] 23 The laws of this State are as liberal in the treatment of corporate interests as they should be made consistently with the rights of the public and the ordinary requirements of honest management, and it seems to us to be far better for this State to continue its policy of reasonable regulation and proper scrutiny of the affairs of corpora- tions, trusting that, with such light upon the subject as experience may shed, all other States will impose the same salutary restrictions and refuse to permit their laws to be used as a shield and cover for the organization of alien corporations. FACTORS’ AGREEMENTS. One of the methods adopted to maintain fixity of price and per- manently establish a monopoly by control of every economical chan- nel of distribution, is the plan or system of “ factors’ agreements,” according to which, in lieu of direct sales, the fiction of consignment is adopted to support a transaction, which, in every essential element, is an absolute sale. Time did not permit of an extended inquiry into this subject. But the light that has been shed upon it justifies the conviction, that the system thus established places convenient agencies at the disposal of combinations with monopolistic tendencies to secure just that con- trol over the distribution of product, which, coupled with a practically exclusive control of the producing capacity of the nation, enables it arbitrarily to fix and maintain the price of the product to the people. This is the last link in the completed chain and an integral part of the whole scheme, which in some respects, clinches the system and makes monopoly permanent by rendering competition impossible. An interesting feature was the almost painful effort of the Whole- sale Grocers’ Association on the one hand to claim absolute respon- sibility for the system, and of the combinations, on the other hand to 24 [Senate,. disavow any responsibility for it. That the effect of the system was, and was intended to be, the extinction of competition, was admitted with refreshing candor. In fact, the president of the association de- nounced competition as tantamount to ruin, yet, could give no logical reason why normal competition should govern the great bulk of human transactions and be ruinous only as to products controlled by capitalistic monopolies. The fact that the association existed only in name, and for the purpose of holding annual dinners; that its president knew naught of its concerns; had called no meetings; appointed no committees; had no knowledge of repeated changes made in the system, the phraseology of agreements, the punishment of violations; while the combination itself phrased the agreements, established the terms and conditions, invited by circular the execution of the contract, estab- lished the relation of factor, provided discounts and rebates in order to make that relation attractive, punished violations by withholding rebates, withdrawing contracts and consequently destroying the busi- ness of the violator; clinching the business by requiring formal affi- davits of non-violation before allowing the rebate which represents the only profit to the factor, proves beyond reasonable peradventure that the combination is responsible for the system directly, and not merely indirectly, as was pretended. Certain it is, that its effects destroy competition at the only point where a capitalistic monopoly would be powerless to prevent competition, and supplement the con- trol of production by another combination which controls the methods of distribution, and fixes the price without regard to com- petitors or to the law of supply, and demand. We have in evidence factors’ agreements in use by each of the combinations investigated, which may be classified under three dis- tinct heads: No. 30.] 25 First. That adopted by the American Sugar Refining Company, which, in its third clause, provides as follows: “ None of the sugar shall be sold or disposed of by you, either directly or indirectly, for less than our daily quotations, with freight added from refining point to point of sale (as per equality rate book), nor on more liberal terms as to credit or cash discounts.” The “Equality Rate Book,” subdivision 3, provides: “ Changes in price of sugar shall take effect as follows: In that district known as the eastern time district, the price shall take effect at the same moment that the American Sugar Refining Company makes the change in price. Factors in the central division of time shall make change of price 30 minutes later than that of points in the eastern division. Factors in the western division shall make change one hour later than that of points in the eastern division.” Upon compliance with this and other conditions relative to dis- counts and payments of invoice within thirty days, the factor at the end of three months becomes entitled to a rebate of three-sixteenths of a cent per pound. It should be remembered in this connection that the ostensible competitors of that company operate under the same system, the agreements being alike in phraseology, and that it was the representative of the competing concerns who produced the “ Equality Rate Book ” as part of the system under which they oper- ated, which contains the clause above quoted. Second. That in use by the Soda Combination which provides for the sale of its particular brand on a basis of five cents per pound for pounds and three and one-half cents per pound for “ kegs in bulk; ” and then provides: “ It is also understood that we are not to sell any soda or saleratus in boxes under our private or other brands at less price than ‘Arm and Hammer.’ If we are compelled to purchase cheap bulk soda in 26 [Senate, kegs, barrels or casks, we agree not to push the sale of such goods, but to sell as limited a quantity as possible, and that only because required by our trade.” “Arm and Hammer ” is the designation of a brand prepared by that combination. Failure to perform these conditions results in the forfeiture of all rebates. Third. That of the American Tobacco Company, which provides in clause 7, as follows: “ If you do not discriminate against our cigarettes in favor of those of other manufacture, and if you do not sell or dispose of any of our cigarettes at less than the list price, and if, in all respects, you comply with the terms of this agreement, we will pay you a commission of two and one-half per cent, on the amount realized by you from the sale of the cigarettes which we may consign to you.” And in the eighth clause: “ If, however, you handle the cigarettes of our manufacture ex- clusively, and do not sell or distribute, or in any way aid in the sale or distribution of cigarettes of other manufacture, and if you in all respects fully comply with the terms and conditions of this agree- ment, we will pay you an additional commission of per cent, on the amount realized by you from the sale of cigarettes which we may consign to you.” It should be borne in mind that in each of these three classes the rebate allowed is the only profit accruing to the supposed consignee. Moreover, that the particular brand or brands considered, have by combination been gathered together into one control, so that the combination has absorbed products in common use by the people, the sale of which has become indispensable to the successful opera- tion of the business of a wholesale grocer, who, in association with others, thus controls every available channel of economical distribu- No. 40.] 27 tion to the retailer. The evidence shows that the wholesale grocer who refuses to join the association and submit to the terms and conditions of that agreement, is completely shut out from the pur- chase of commodities in such general use that his failure to deal in them means business extinction. It will be remarked that while the phraseology of the three classes differs, the purpose and motive are substantially identical. The first class, coupled with the “ Equality Rate Plan,” permits the combina- tion to fix the price not only of its own product but of all refined sugars of every manufacture absolutely and with mathematical cer- tainty; and the system is refined to such a nicety that prices on the Mississippi must, within one hour, respond to the arbitrary decision of the combination here. The second class is less guarded in terms. And upon the face of one document definitely fixes the price of the product of the com- bination at a permanent arbitrary figure, and establishes at that point the minimum price of every competitor, whether the article be of inferior quality or not; hence closes the market completely to lower-priced products and prevents their competition. With perfect frankness it imposes upon the contractee the duty of discriminating against all other producers. The third class is more candid in its expression of purpose. The additional commission of per cent, provided for, and which, for all business purposes, constitutes the profit of the so-called consignee, is payable only if he handles the product of the combination exclusively, and does not sell or distribute, or in any way aid in the sale or dis- tribution of similar products of other manufacture. It is unnecessary to argue at length that combinations which have been formed for the express purpose of controlling within a fraction of the entire product represented by brands which the original com- 28 [Senate, peting companies have, under conditions of free competition, pushed into the market and popularized with the people until they have, under one name or another, become necessary to public comfort, convenience and enjoyment, destroying by combination that compe- tition and operating through channels necessary for the ultimate distribution of any product to the people under such systems as are here disclosed, not only arbitrarily fix the price of their product, but assume to, and do fix the price of the competing product and assume to, and do compel the retailer and the consumer to buy their pro- ducts at the price thus fixed. They, moreover, establish a commercial system clearly in restraint of trade; one which if permanently per- mitted to exist, must be followed by absolute monopoly and the ex- clusion of moderate capital and lesser means from all opportunity of practical competition. REMEDIES. In determining the nature and scope of the remedies to be applied, we are met at the outset by the difficulty that combinations such as those considered here, operate from their very nature over the whole or a very large portion of the territory of the Union. Distinct acts of oppression or repression committed in other jurisdictions, cannot be successfully attacked by local authority. No State law will operate extra-territorially, nor may we bring within the scope of our punitive power any acts committed in other jurisdictions. Chief Justice Taney, in United States against Booth (21 Howard, 524), says: “ No judicial process, whatever form it may assume, can have any lawful authority outside of the limits of the jurisdiction of the court or judge by whom it is issued; and an attempt to enforce it beyond these boundaries is nothing less than lawless violence.” Combina- tions existing in this State and exercising all the attributes of a No. 30.] 129 monopoly here, may commit every assailable act in other States. There seems to be no remedy here for the closing of factories in Philadelphia, New Brunswick, Camden, Naugatuck or Baltimore as part of an original plan of combination designed to secure a mo- nopoly. There seems to be no remedy against the acquisition of competing factories by an established monopoly for the distinct purpose of dismantling them and thus destroying competition and limiting production; and yet each of these acts is one step further either in creating or maintaining that control of price and product which results in fastening a monopoly upon this State. The con- trol of product, the fixing of prices, the shutting out of competition, resulting in a situation whereby lesser capital is powerless to enter, is driven from the field, or is absorbed, and an area of contracted opportunities for the many is produced, is in some part attributable to or strengthened by acts of oppression or repression committed elsewhere, which by local law we are unable to reach. It is unfortunate in this aspect of the case that the limitations upon the federal power as determined by the United States Supreme Court practically annul the force of the so-called “ Sherman Anti-trust Law,” because it is clear that federal authority, in view of the con- siderations above stated, would be the only jurisdiction with adequate power to afford a complete remedy. In the case of United States against Knight Co. (156 U. S.), after holding that acts whereby several Philadelphia refineries were acquired were purely those of a local nature committed in the capacity of transacting business as a manufacturer and not necessarily appertaining to interstate com- merce, the court says: “ Commerce succeeds to manufacture and is not a part of it. The power to regulate commerce is the power to prescribe the rule by which commerce shall be governed, and is a power independent of 30 [Senate, the power to suppress monopoly. But it may operate in repression of monopoly whenever that comes within the rules by which com- merce is governed or whenever the transaction is itself a monopoly of commerce. * * * The fact that an article is manufactured for export to another State does not of itself make it an article of interstate commerce and the intent of the manufacturer does not determine the time when the article or product passes from the con- trol of the State and belongs to commerce. * * * The object in purchasing the Philadelphia refineries was to obtain a greater influence or more perfect control over the business of refining sugars in this country. * * * But the contracts and acts of the defendants relate exclusively to the acquisition of the Philadelphia refineries and the business of sugar refining in Pennsylvania and bear no direct relation to commerce between the States or with foreign nations. The object was manifestly private gain in the manufacture of the commodity, but not through the control of inter- state or foreign commerce.” > It is obvious that the federal courts have placed so narrow a con- struction upon the limits of their authority, that, in the absence of a constitutional amendment little or no relief may be expected from that quarter, unless the Supreme Court of the United States shall greatly modify the conclusions above referred to. It seems to us that the system here criticised can be satisfactorily reached only by the exercise of a power of general jurisdiction throughout the United States and that any attempt to prevent the evil by local legislation assailing a system of general application in all the States must prove •abortive or at least insufficient. Moreover, we are confronted not merely by difficulties incident to the commission of acts of unlawful combination, oppression or re- striction extra-territorially, but which affect the interests of the State No. 40.] 31 directly, there is another consideration which contracts the limits of possible relief. That part of the XIV Amendment of the Federal Constitution which reads: “ No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty or property without due process of law, or deny to any person within its juris- diction the equal protection of the law,” has been held in a large number of authoritative decisions to apply with special force to legis- lation of the character here considered and to restrict the authority of the several States in dealing legislatively with this subject. In a recent decision rendered by Judge Swayne of the Federal Court annulling the Texas Anti-Trust Law on the ground that it violated the foregoing provision of the Constitution, the law is set forth with great force and perspicuity, and the conclusions reached are amply fortified by authoritative decisions of the highest courts of the various States and of the nation, and as to one conclusion reached by him there is little room for discussion. The right of contract inheres in the individual as a constitutional privilege. A full and free right of contract, so far as the same may not conflict with public policy or be prejudicial to public interests, must a priori be conceded. The right of contract coexists with and is incidental to the right of liberty and property, and is recognized in the natural law as the very foundation of human progress and devel- opment. It is a sacred privilege of the citizen which is carefully guarded by the Constitution: “ The right of liberty embraces the right of man to exercise his faculties and follow any lawful avocation for the support of life. “ Liberty in its broad sense, as understood in this country, means the right, not only of freedom from servitude, imprisonment or 32 [Senate, restraint but the right of one to use his faculties in all lawful ways, to live and work where he will, to earn his livelihood in any lawful calling, and to pursue any lawful trade or avocation. “ If there is one thing more than another public policy requires from us, it is that men of full age and competent understanding, shall have the utmost liberty of contracting, and their contracts when entered into freely and voluntarily, shall be held sacred and shall be enforced by courts of justice.” A review of the decisions rendered in this State would seem to emphasize the conclusion that this constitutional freedom of con- tract may not be interfered with unless accompanied by or resulting in acts of oppression or in restraint of trade which trench upon the constitutional liberty and privileges of others. Judge Swayne quotes approvingly from “ Tiedman’s Limitations of Police Power.” “ One of the most sacred rights of liberty is the right of contract. All the rights of contract which are necessary for the carrying on of ordinary business affairs are protected by the Constitution and are not capable of being restrained by legislative action. Among these rights is that of forming business relations between man and man. A man may form business relations with whom he pleases and in the conduct of such business he may fix and limit the character and amount of his business, the price he will charge for the produce which he offers to the public or about which he contracts. It is part of the natural and civil liberties to form business relations free from the dictation of the State; and a like freedom should be secured and enjoyed in determining the conditions and terms of the contract which constitutes the basis of business relations or transactions. It is, therefore, the general rule that a man is free to ask for his wares or his services whatever price he is able to get and others are willing to pay. * * * No. 40.] 83 “A man has a constitutional right to buy anything in any quantity, provided he uses only fair means and sets his own price on it, or refuses to sell it at all. And what one man may lawfully do as an individual, two or more may also do when combined as partners. Combination for business purposes is legal. Combinations are bene- ficial as well as injurious, according to the motives and aims with which they are formed. It is, therefore, impossible to prohibit all combinations. The prohibition must rest upon the objectionab , e character of the object of the combination.” Judge Swayne then asserts as a general rule that: “ The right to combine, to form partnerships and joint stock asso- ciations, the right to agree as to prices and production, the right to fix prices, to raise and lower them as business may require, is not oppressive to the public, nor unjust to the individual, nor contrary to public policy. It is an essential right, as part of the liberty of the citizen, of which no Legislature can deprive him.” We have referred to this decision, because it is the latest exposition of the law governing the subject, and bears every evidence of careful preparation. The prohibition must rest, therefore, not upon the fact of com- bination, but upon the objectionable character of the object of the combination. And the first question which presents itself is, whether acts otherwise lawful may become objectionable, against public policy and outside of the constitutional sanction because of their magnitude. It is intelligible that acts innocuous in themselves when committed by individuals, by partnerships or by the normal aggregations contemplated by law may bear an entirely different aspect when done on an enormous scale by an enormous aggregation which has or assumes to have control of product and market. Acts perfectly harmless in themselves, standing alone, permit of a differ- 3 34 [Senate, ent interpretation when they form part of a system which as a whole in plan and scope operates injuriously to the public interests, espe- cially when conducted upon a scale and magnitude amounting to practical monopoly. Assuming the statement to be accurate that: “ Combinations are beneficial as well as injurious according to the motives and aims with which they are formed,” it follows that a series of acts, each lawful in itself, but tending toward and set in motion for the purpose of securing an object prejudicial to public interests, may be declared unlawful, especially if the object sought to be obtained was one of the underlying causes for the creation of the combination itself. Applying these principles to the question here considered it would seem that combinations formed on a scale or magnitude involving the control of 80 per cent, of the productive capacity of the nation in a necessary of life or an article in daily use which has become neces- sary to the comfort and convenience of the public, formed with the preconceived intention of securing that control by means of com- bination, formed for the purpose of restricting production and anni- hilating competition by a combination of all competitors capable of practical competition and embracing in the original plan the design of a limited production by the closing of factories absorbed with that object in order to remove their competition, is a combination the motives and aims of which are injurious to public interests. When to this is added the system of distribution under factors’ agreements, whereby agencies are created in name only, for the purpose of maintaining a fixed price for the product and incidentally controlling every practical channel of distribution to the people, we have the type of combination which in original plan of aim and motive, in magnitude, and in the methods pursued to carry its pur- poses into effect, embodies objectionable characteristics so prejudi- No. 40.] 35 cial to public interests that a clear distinction may be drawn between them and lawful combinations within the Constitution. Combina- tions which are able to and do successfully put in operation a system such as has been here described, and for the purposes above indicated, are clearly oppressive. And while no State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States, neither should it permit others to estab- lish systems which effectively abridge the privileges of citizenship, oppressively restrict or destroy the area of opportunity and find no sanction in law, human or divine. Combinations of capital from the crudest forms of partnership to the highest perfection of corporate organization have been fostered by the State in the enactment of laws aiding and encouraging the proper concentra'ion of the resources and energies of the many for business purposes. We recognize that in the progressive stages of an advancing civilization primitive forms of individual activity must suffer because the requirements of a higher and universal develop- ment demand a volume and facility of supply and a contraction of price that renders concentration of skill, energy and resource indis- pensable to successful competition. We can find no valid reason for any departure from the policy of the State in the encouragement and protection of combinations thus made; on' the contrary, every consideration of public interest and policy demands that the most generous invitation, the widest latitude, the utmost freedom and the largest opportunity be extended to capital in any form of lawful combination to embark in every field of industry and commerce. It is because of the indisputable fact, that the class of combina- tions herein criticised acts as a barrier to the free employment of capital in -individual control or in moderate and normal association, 36 [Senate, which imposes upon the State the duty of exercising any prohibitive and punitive authority it may possess to check the former. So far as the criminal jurisdiction of the State may be invoked, the law can reach effectively only specific acts of oppression or specific acts in restraint of trade committed within our jurisdiction. It may be advisable on the granting of corporate charters to im- pose limitations upon the volume of stock to be issued; but in the absence of similar provisions in the laws of other States a discrimina- tion would exist injuriously affecting domestic corporations. A’s to foreign corporations, provision should be made to remove the inequalities which now exist between domestic and foreign cor- porations transacting business in this State. Our corporations have a right to expect that there shall be no discrimination against them and in favor of foreign corporations having the protection of our laws and the freedom of our business and commercial opportunities. Inequalities in taxation should be remedied, and foreign corporations should be compelled to comply with all those provisions of the local law governing domestic corporations which may be practically ex- tended to them. All requirements of the local law especially de- signed for the protection of creditors and shareholders should be imposed upon foreign corporations operating here. In this way the main incentive for foreign organization of domestic interests will be removed. Compliance with these provisions may be enforced by suit by the Attorney-General, or by providing that the license now re- quired by law to enable a foreign corporation to transact business here shall be revoked in the event of the refusal or a continued default by the foreign corporation to obey these suggested requirements. A bill is in preparation to accomplish this recommendation and will be submitted. No. 40.1 37 As to foreign corporations in the nature of monopolies, provision may be made for the refusal or revocation of licenses to transact business in this State. But this would seem to be too radical a remedy in the absence of a prior judicial determination that a mo- nopoly in fact exists. Another suggestion, which should, however, be carefully considered, would be to invest the citizen, under proper restrictions, with the right to maintain a civil action against any capitalistic monopoly, conferring upon the Supreme Court, in an action of that character, the authority to issue an injunction against such corporation and its agents, prohibiting the continuance in this State of acts or the transaction of business under the system and by the methods criticised in this report. This is a method so drastic that it will be further considered before any bill is' presented. As to remedies addressed to the correction of specific acts com- mitted in this State, existing legislation, with the additions suggested in the bill submitted, appears to us to be ample. An important difficulty seems to be that of securing the testimony necessary to a judicial ascertainment of the act itself. This may be obviated by investing the Attorney-General with ample power for the examination of witnesses under subpoena to be issued on his application ex parte by a justice of the Supreme Court, conferring the constitutional guarantee of absolute immunity on those testify- ing, and providing that such examination shall be had in the presence of a justice and shall be conducted pursuant to the usual rules gov- erning the admission of evidence to be applied by such justice, the testimony when taken to be filed in the office of the Attorney-General. It seems to us that all the authority that the Legislature may confer upon the prosecuting officer of the State is thereby provided. In concluding this report we deem it proper to refer to the declara- tion made by some of the witnesses before us that competition was 38 [Senate, ruinous to legitimate enterprise and was becoming obsolete. There was no attempt to conceal the purpose of controlling or regulating competition by combination. We prefer to stand upon the proposition stated in Bishop’s New Criminal Law, volume 2, section 230: “ Competition in the various activities of life is one of the most beneficent forces among men. It strengthens the race and keeps individuals from mischief by stimulating activity; promotes the hap- piness of all and prevents famine and other like suffering by causing commodities to be in plentiful supply and at prices not unjust; and it preserves trade, labor, manufactures, finance and all like things at an even and equitable balance. In the nature of affairs it is so seldom in the power of a single individual, unaided, to do any effectual act toward the destruction of competition that the common law has not heretofore very clearly and certainly defined any offense of this sort if committed by one — the facts not having furnished the needful cases — but conspiracies to impair competition, by monopolies and other like combinations have always been regarded as criminal, and when to this sort of conspiracy is added, as in the facts of most cases, some unlawful means, its indictability is beyond question.” Political oppression is the refusal of equal rights; commercial oppression is the denial of equal opportunities; both are repugnant to the people. The spirit that resisted the one and wrote the shib- boleth of equal rights into the organic law of the nation, will not permit the other to take enduring root by tolerating the substitution of monopoly for equal opportunity. The field should be free to all. In the conflict of commercial rivalry, genius, labor and capital should have the largest liberty of expansion and employment, and the fullest opportunity of entrance into every field of industrial activity. No one interest should be permitted by unfair and oppressive methods 39 No. 40 .] to build an impregnable trocha around any industrial pursuit, and rest its claims to special privilege on abuse of power of concentrated wealth of abnormal magnitude. The law which protects the indi- vidual in the acquisition and use of property and guarantees to him the fullest opportunity for its enjoyment couples with this protection a guarantee and condition that such use shall not be oppressive. And the statute which permits the combination of the resources of many into one, presupposes that the permission to combine shall not operate to the prejudice of public interests. Sic liter e tuo ut alienum non laedas, is a maxim as old as civilization itself, and illustrates the proposition that the sacred right of contract and the incidental privi- lege of combination are both subject to the qualification that they shall be exercised so as not to prejudice the rights of others or the interests of the people. In submitting this report we append the record of the proceedings of the committee together with a summary of the laws of the United States and of the other States of the Union upon the subject here discussed. Dated March 9, 1897. CLARENCE LEXOW, Chairman. CORNELIUS R. PARSONS. LOUIS BEDELL, HENRY E. WARNER. ROBERT MAZET. P. H. McCARREN. Dissenting only from the findings and conclusions so far as they relate to the American Sugar Refining Company. MINORITY REPORT*. I dissent from the findings and conclusions of the majority of the committee in so far as they relate to the American Sugar Refining Company. The testimony elicited on the investigation shows that prior to the organization of the American Sugar Refining Company a number of so-called “ independent refineries ” were engaged in the refining of sugar and, in many instances, by reason of competition, were reduced to a condition of insolvency and bankruptcy, and that during the ex- istence of these so-called independent refineries the price of sugar to the consumer was on an average of about 30 per cent, higher than it is to-day, which shows that the existence of the American Sugar Refining Company has resulted in reducing the price of sugar to the consumer about 30 per cent, and prevented that demoralization in the industry of refining sugar that formerly disturbed the financial affairs of such enterprises. The testimony also shows that in the aggregate a greater number of men have been employed in the sugar industry since the formation of the American Sugar Refining Company than were employed prior to its existence, and that the labor employed has been better paid. The report of the majority of the committee does not emphasize the fact that the testimony of the president of the Wholesale Grocers’ Association, or in other words the factors engaged in the distribution of sugar, shows conclusively that the American Sugar Refining Company did not solicit the co-operation of these wholesale grocers, 42 [Senate, or factors, for the purpose of aiding the American Sugar Refining Company in distributing its product or regulating and maintaining the price of its commodity, but on the contrary, the testimony shows that these wholesale grocers, or factors, importuned the American Sugar Refining Company to fix a price below which these factors would not sell its product. This arrangement was desired by the factors because they had been for a long time disposing of refined sugar at a loss, and inasmuch as the amount of sugar sold by these factors represented about 30 per cent, of the commodities sold by them, they were compelled in many instances to do business at such a loss as to result ruinously to their trade. It was after such experi- ences that the factors concluded that self-preservation required that some understanding should be reached with the American Sugar Refining Company in order to protect them against themselves. The testimony also shows that there are a number of outside or independent sugar refining companies having no connection of any kind with the American Sugar Refining Company, and that these outside or independent refineries maintained the price of refined sugar at about the same figures set by the American Sugar Refining Company for the sale of its product, and while that would seem to be a circumstance traceable to the influence of the American Sugar Refining Company, no testimony was adduced to show that it in any way seeks to influence the actions of these independent refineries. For that reason it cannot be said that the American Sugar Refining Company is in any way guilty of a violation of the statute which pro- hibits restraint in trade, nor does it in any way interfere with free and fair competition. The testimony of Mr. H. O. Havemeyer shows that the American Sugar Refining Company at its refineries in the city of Brooklyn, employs about ten times as much labor in handling sugar in that city No. 40 .] 43 as is required to handle the same amount in cities adjacent to New York in which the American Sugar Refining Company operates its plant, and also that of the entire freight, west bound, leaving the port of New York, about 40 per cent, goes from Brooklyn and of that 90 per cent, is sugar. Those are circumstances that illustrate the im- portance of the sugar refining business to the people of the city of Brooklyn. The testimony of Mr. Searles shows that while sugar is to-day lower in price than it ever has been to the consumer, if it were not for the operation of our tariff laws the price would be reduced one cent, or in other w T ords the price to-day to. the consumer would be about three cents per pound. In response to a request the American Sugar Refining Company filed with the committee a statement of the taxes paid by it in the cities of New York and Brooklyn, showing that in the former city for the six years inclusive from 1891 to 1896 they paid $33,615.15 and in the latter city in the same time $457,260.65, total $490,876.19. This amount represents taxes paid upon property owned by the American Sugar Refining Company, the assessable value of which has been enhanced by reason of the great amount of territory covered. If we are to conclude what the value of the property now owned by the American Sugar Refining Company would be if it were not used for the purposes to which it is now devoted from a comparison with other property along the Brooklyn water front, the revenue of the city of Brooklyn would be considerably diminished. In my opinion the presence of the American Sugar Refining Company and the location of its plant in the State of New York has resulted in developing our commerce, increasing our taxable prop- erty and benefiting our people. P. H. McCARREN. MINORITY REPORT OF THE JOINT COMMITTEE OF THE SENATE AND ASSEMBLE APPOINTED TO INVESTIGATE TRUSTS. In Assembly, March 18, 1897. To the Legislature of the State of New York: The committee’s report shows that what was predicted at the outset was not for the purpose of suggesting effective remedies. I do not feel the tender solicitude, nor yet the open admiration, for monopolistic combinations which characterize the respective re- ports of my associates of the joint committee to investigate those evils, and I therefore beg leave to submit an independent report. It is quite true, as the majority report says, -that your committee was given inadequate time for the accomplishment of its mission, and it is at least doubtful whether the ostensible purpose of the Legislature can ever be realized through the medium of a legislative committee, whose members will, during the session, usually be dis- tracted by other legislative duties, and, after the session, by the demands of private business often too long neglected. Such a com- mittee, therefore, is not best calculated to deal with the subject under consideration. Its transcendent importance, its intricacies, techni- calities and ramifications would seem to demand for their proper investigation and solution a commission unrestricted as to time, invested with plenary powers, supplied with unlimited facilities, and 46 [Senate, embracing in its membership the highest statesmanship, experience, patriotism and courage to be found in our State. In the course of its labors, however, your committee adduced a considerable amount of testimony in support of facts which have long been a part of the common knowledge of the merest wayfarer in the realms of commerce or of politics. Had its practice been to call as witnesses the victims, rather than the victors, in commercial strife, some new and useful facts might have come to light. Nevertheless, it has been established as the sum of common knowledge plus the results of your committee’s inves- tigations: First. That domestic and foreign corporate monopolies in the necessaries' of life have been created, or permitted to operate, in this State. Second. That such monopolies exist and operate principally by means of the enormous amount of capital actually employed; or capitalization permitted. Third. That there is no limit in this State to the amount of capital which may be so employed. Fourth. That the stock of such monopolies is*made the subject of general sale, speculation and manipulation. Fifth. That there is no sufficient provision in the laws of this State for the curbing, expulsion or dissolution of monopolies operating in this State, or operating in other States, against the welfare of citizens of this State. The existence of the conditions here enumerated will not be, ques- tioned. To discuss their effects would be to re-employ the over- worked platitudes of a decade. The single duty of the Legislature is to find a remedy. In addressing itself to this duty the Legislature will undoubtedly be met by two venerable but untenable objections. No. 40.] 47 The first of these will be that capital will take flight at the approach of reform, and the second that the monopolies are safeguarded by the operations of the doctrine of vested rights. There are wise and patriotic men who will answer in reply to the first of these objections that capital employed in monopolistic combination is an enemy to society, whose flight from our State should not only be desired but accelerated. To answer the plea of vested right it is only necessary to say that a corporation is always subject to the supervision of the State and that present conditions demand the exercise by the State of that long-suspended power. The true solution of the situation, however, will be found in a return to the almost forgotten doctrine that great corporate powers can safely be granted only in aid of undertakings which are quasi- public in their nature, necessarily gigantic in their proportions and desirable in their perpetuity. Banking, railway and great construction enterprises are familiar and proper recipients of such aid. To com- binations designed to deal in the necessaries of life, corporate powers are never indispensable. The practice of granting those powers for such purposes and without stricter limitations is dangerous to society. It should be curtailed in the future and the State powers of super- vision and amendment over corporations which are or may become monopolistic should be rigorously exercised and enforced. To the end that the ideas above outlined may be put into operation, I have the honor to recommend to the Legislature the adoption of a course of legislation on the following lines : First. A bill to absolutely limit the amount of capital which may be employed by a corporation heretofore or hereafter organized in this State for the purpose of manufacturing or dealing in any of the necessaries of life. 48 [Senate, No stock or bonds of such a corporation shall be issued except at par, and for moneys or property actually going in the treasury of said corporation. By no other means can individual, or even moderate corporate enterprise, in the ordinary vocations be saved from annihilation. In no other way may our people escape from an evil which threatens the perpetuity of the republic itself. With such a law on our statute books the evils of over-issue, stock-watering, absorption of competi- tors, and acquisition of the stock of other companies would cease forever. Second. A bill to prohibit the locating in this State of foreign corporations organized for the purpose of manufacturing or dealing in any of the necessaries of life, whose capital shall exceed the limits placed on the capital of domestic corporations. Common justice to our own citizens would, of course, demand a measure of this latter kind, but it will be apparent to all that general measures of the character above indicated would need to be supple- mented by — Third. A bill to limit the number of such corporations which an individual or a group of individuals may organize or control. Such a bill would be necessary to prevent, even in a measure, the organization by say, half a score, of men of half a score of such cor- porations, designed to operate together, with an aggregate capital of io times the statutory limit. The danger could be completely avoided, however, only by — Fourth. A bill to require that incorporators and directors shall be the actual and continuing (the latter term to be interpreted with reference to the mutability of human affairs) owners of a large majority of the stock of such corporations. No. 40.] 49 The familiar and pestilential dummy director would then disappear from a field long dishonored by his subservience to corporate rapacity. It would, of course, be essential to extend these provisions to foreign corporations by requiring them to show substantial com- pliance with our laws before admitting them to do business in this State. When it is reflected that corporations neither organized nor located within this State, and exempt from all of the restrictions above recom- mended, may yet by contract with citizens of this State and contrary to public policy, obtain control within the State of one or more of the necessaries of life the need at once becomes plain for — Fifth. A bill providing that any citizen of this State who shall further the operations in this State of such a corporation shall be guilty of a crime. Far-reaching as such laws would undoubtedly be, it may well be doubted if they would bring the relief required by present conditions without — Sixth. A bill to prohibit the listing or general marketing of the stock of corporations organized for the purpose of manufacturing or dealing in the necessaries of life. There can be no honest motive and no reasonable excuse for placing the stock of such a corporation on the market. The pro- moters of such corporation should be required to use their own money for the purpose of the enterprise and required also to take all the attendant risk. The present widely employed system of mar- keting such stock permits such promoters to obtain from confiding or speculative outsiders the money with which to float their schemes to a position where manipulation of the stock may be taken up with great profit to therriselves and with the almost certain result that the confiding are made desperate by loss, the speculative confirmed in 4 50 [Senate, the gambling habit, and society at large to that extent wronged and injured. No speculation by directors or officers in stock of said corporations. The foregoing recommendations, designed as they are, are to effect the complete control of monopolies by the State, would still prove ineffective in the absence of — Seventh. A bill to give local authorities, as, for example, the boards of supervisors, the power to initiate actions at the expense of the county, to dissolve or expel monopolies. A law of this nature would place the responsibility for the proper supervision of such corporations with officials who are directly and continuously in touch with the people. Such a provision as to the expense would operate as a check on merely vexatious actions, and the people would no longer be dependent for relief on the slow and cumbrous methods of the Attorney-General’s office. There undoubtedly are those who will reject the above recom- mendations as revolutionary, and who will maintain that they are certain, if enacted, to paralyze the commerce of the State. To such I would reply that whatever of revolutionary nature may be found in the situation is contained in the evils complained of not in the remedies proposed and that it were far better that trade should temporarily languish than that substantial liberty should perma- nently perish. Furthermore, the recommendations are directed not against legiti- mate corporate enterprise, however gigantic, nor against corpora- tions of moderate size and lawful motive engaged in general trade. Such enterprises are usually beneficial to society, or at least do not threaten the State with overthrow nor the people with bondage as do the unbridled, unconscionable and unlawful monopolies with which your committee has had to do. 51 No. 10 .] While it may be somewhat aside from the exact province of your committee, yet I cannot refrain at this time from directing the attention of the Legislature to that contemporary and companion of the corporate monopoly — the department store. The passage of this recent commercial invention across the mercantile field is marked by the ruin of numerous previously prosperous tradesmen and the desolation of an army of employes. There is no need and no place for such an institution in the commercial economy of our State. It is the expression of personal greed made possible by un- limited capital. Every corrective provision above sought to be applied to other monopolies may well be used against this later enemy of society, with an added provision, however, to limit the number of distinctive wares which may be dealt in by one manage- ment under one roof. I desire to add that the recommendations of the above report should apply as far as practicable in restricting all monopolies of any character or nature whatsoever. Once again, and in conclusion, I assert that the above recommen- dations are not even innovations. They seek only to point out the path whereby we may return to that condition of things under which the term “ equality before the law,” was not, as it now is, an antiqu- ated figure of speech. Respectfully submitted, THOMAS J. BARRY, Minority Member Committee on Trusts. Dated March 18, 1897. ; - ' ' BILLS SUBMITTED BI THE Committee and Accompanying the Foregoing Report, in Their Final Form, as Approved by the Gov- ernor, Known as Chapter 383 and Chap- ter 384 of the Laws of 1897. CHAP. 383. AN ACT to prevent monopolies in articles or commodities of common use, and to prohibit restraints of trade and commerce, providing penalties for violations of the provisions of this act, and procedure to enable the attorney-general to secure testimony in relation thereto. Became a law May 7, 1897, with the approval of the Governor. Passed, three-fifths being present. The People of the State of New York, represented in Senate and Assembly, do enact as follows: Section 1. Every contract, agreement, arrangement or combina- tion whereby a monopoly in the manufacture, production or sale in this state of any article or commodity of common use is or may be created, established or maintained, or whereby competition in this state in the supply or price of any such article or commodity is or may be restrained or prevented, or whereby for the purpose of 51 [Senate, creating, establishing or maintaining a monopoly within this state of the manufacture, production or sale of any such article or com- modity, the free pursuit in this state of any lawful business, trade or occupation is or may be restricted or prevented, is hereby declared to be against public policy, illegal and void. § 2. Every person or corporation, or any officer or agent thereof, who shall make or attempt to make or enter into any such contract, agreement, arrangement or combination, or who within this state shall do any act pursuant thereto, or in, toward or for the consum- mation thereof, wherever the same may have been made, is guilty of a misdemeanor, and on conviction thereof shall, if a natural person, be punished by a fine not exceeding five thousand dollars, or by imprisonment for not longer than one year, or by both such fine and imprisonment; and if a corporation, by a fine of not exceeding five thousand dollars. § 3. The attorney-general may bring an action in the name and in behalf of the people of the state against any person, trustee, director, manager, or other officer or agent of a corporation, or against a corporation, foreign or domestic, to restrain and prevent the doing in this state of any act herein declared to be illegal, or any act in, toward or for the making or consummation of any con- tract, agreement, arrangement or combination herein prohibited, wherever the same may have been made. § 4. The provisions of article one of title three of chapter nine of the code of civil procedure relating to the application for an order for the examination of witnesses before the commencement of an action and the conduct of such examination shall apply, so far as practicable, to an action or proceeding by the attorney-general insti- tuted pursuant to this chapter; and for the purpose of determining whether an action or a proceeding should be commenced hereunder, No. 40.] 55 the attorney-general may examine and procure the testimony of witnesses in the manner herein prescribed. § 5 . Whenever the attorney-general deems it necessary or proper to procure testimony before beginning any action or proceeding under this chapter, he may present to any justice of the supreme court, an application in writing for an order directing such persons as the attorney-general may require to appear before a justice of the supreme court, or a referee designated in such order, and answer such relevant and material questions as may be put to them, concerning any alleged illegal contract, arrangement, agreement or combination, in violation of this chapter, if it appears to the satis- faction of the justice of the supreme court to whom the application for the order is made that such an order is necessary, then sucli order shall be granted. Such order shall be granted without notice, unless notice is required to be given by the justice of the supreme court to whom the application is made, in which event an order to show cause why such application should not be granted shall be made containing such preliminary injunction or stay as may ap- pear to said justice to be proper or expedient, and shall specify the time when and place where the witnesses are required to appear and such examination shall be held either in the city of Albany or in the judicial district in which the witness resides or in which the prin- cipal office within this state of the corporation affected is located. The justice or referee may adjourn such examination from time to time and witnesses must attend accordingly. § 6 . The order for such examination must be signed by the jus- tice making it and the service of a copy thereof, with an endorse- ment by the attorney-general signed by him, to the effect that the person named therein is required to appear and be examined at the time and place, and before the justice or referee specified in such 56 [Senate, endorsement, shall be sufficient notice for the attendance of wit- nesses. Such endorsement may contain a clause requiring such person to produce on such examination all books, papers and docu- ments in his possession, or under his control, relating to the sub- ject of such examination. The order shall be served upon the person named in the endorsement aforesaid, by showing him the original order, and delivering to and leaving with him, at the same time, a copy thereof endorsed as above provided, and by paying or tendering to him the fee allowed by law to witnesses subpoenaed to attend trials of civil actions in a court of record in this state. § 7. The testimony of each witness must be subscribed by him, and all testimony taken by such justice or referee appointed must be certified and delivered to the attorney-general at the close of the examination. The testimony given by a witness in a proceeding or examination under this act shall not be given in evidence against him in any criminal action or proceeding, nor shall any criminal action or proceeding be brought against such witness on account of the testimony so given by him, nor shall any person be excused from answering any questions that may be put to him on the ground that it may tend to convict him of a violation of the provisions of this act. § 8. A referee appointed as provided in this act possesses all the powers and is subject to all the duties of a referee appointed under section ten hundred and eighteen of the code of civil procedure, so far as practicable, and may punish for contempt a witness duly served as prescribed in this act for non-attendance or refusal to be sworn or to testify, or to produce books, papers and documents according to the direction of the endorsement aforesaid, in the same manner, and to the same extent as a referee appointed to hear, try and determine an issue of fact or of law. No. 40.] 57 § 9. Chapter seven hundred and sixteen of the laws of eighteen hundred and ninety-three and chapter two hundred and sixty-seven of the laws of eighteen hundred and ninety-six, are hereby repealed. § 10. This act shall take effect immediately. STATE OF NEW YORK, j Office of the Secretary of State. \ SS ' ' I have compared the preceding with the original law on file in this office, and do hereby certify that the same is a correct transcript therefrom and of the whole of said original law. JOHN PALMER, Secretary of State. CHAP. 384. AN ACT to amend the stock corporation law, relating to annual reports and liabilities of officers, directors and stockholders of foreign stock corporations. Became a law May 7, 1897, with the approval of the Governor. Passed, three-fifths being present. The People of the State of New York, represented in Senate and Assembly, do enact as follows: Section 1. Section seven of chapter five hundred and sixty-four of the laws of eighteen hundred and ninety, entitled “An act in relation to stock corporations, constituting chapter thirty-six of the general laws,” as amended by chapter six hundred and eighty-eight of the laws of eighteen hundred and ninety-two, is hereby amended to read as follows: § 7. Combinations abolished. — No domestic stock corporation and no foreign corporation doing business in this state shall combine with any other corporation or person for the creation of a monopoly or the unlawful restraint of trade or for the prevention of competition in any necessary of life. 58 [Senate, § 2. Section thirty of article two of such act is hereby amended to read as follows: § 30. Annual report. — Every domestic stock corporation and every foreign stock corporation doing business within this state, except moneyed and railroad corporations, shall annually, during the. month of January, or, if doing business without the United States, before the first day of May, make a report as of the first day of January, which shall state: 1. The amount of its capital stock, and the proportion actually issued. 2. The amount of its debts or an amount which they do not then exceed. 3. The amount of its assets or an amount which its assets at least equal. ! Such report shall be signed by a majority of its directors, and verified by the oath of the president or vice-president and treasurer or secretary, and filed in the office of the secretary of state, and in the office of the county clerk of the county within this state where its principal business office may be located. If such report is not so made and filed, all the directors of the corporation shall jointly and severally be personally liable for all the debts of the corpora- tion then existing, and for all contracted before such report shall be made. No director shall be liable for the failure to make and file such report if he shall file with the secretary of state, within thirty days after the first day of February, or the first day of May, as the case may be, a verified certificate, stating that he has endeav- ored to have such report made and filed, but that the officers or a majority of the directors have refused and neglected to make and file the same, and shall append to such certificate a report containing the items required to be stated in such annual report, so far as they No. 40.] 59 are within his knowledge or are obtainable from sources of informa- tion open to him, and verified by him to be true to the best of his knowledge, information and belief. § 3. Section fifty-three of such act is hereby amended to read as follows : § 53. Stock books of foreign corporations. — Every foreign stock corporation having an office for the transaction of business in this state, except moneyed and railroad corporations, shall keep therein a book to be known as a stock book, containing the names, alpha- betically arranged, of all persons who are stockholders of the cor- poration, showing their places of residence, the number of shares of stock held by them respectively, the time when they respectively became the owners thereof, and the amount paid thereon. Such stock book shall be open daily, during business hours, for the in- spection of its stockholders and judgment creditors, and any officer of the state authorized by law to investigate the affairs of any such corporation. If any such foreign stock corporation has in this state a transfer agent, whether such agent shall be a corporation or a natural person, such stock book may be deposited in the office of such agent and shall be open to inspection at all times during the usual hours of transacting business, to any stockholder, judgment creditor or officer of the state authorized by law to investigate the affairs of such corporation. For any refusal to allow such book to be inspected, such corporation and the officer or agent so refusing shall each forfeit the sum of two hundred and fifty dollars to be re- covered by the person to whom such refusal was made. § 4. Article three of such act is hereby amended by adding at the end thereof a new section to be known as section sixty, and to read as follows: 60 [Senate, No. 40.] § 60. Liabilities of officers, directors and stockholders of foreign corporations. — Except as otherwise provided in this chapter the officers, directors and stockholders of a foreign stock corporation transacting business in this state, except moneyed and railroad cor- porations, shall be liable under the provisions of this chapter, in the same manner and to the same extent as the officers, directors and stockholders of a domestic corporation, for: 1. The making of unauthorized dividends; 2. The creation of unauthorized and excessive indebtedness; 3. Unlawful loans to stockholders; 4. Making false certificates, reports or public notices; 5. An illegal transfer of the stock and property of such corpora- tion, when it is insolvent or its insolvency is threatened; 6. The failure to file an annual report. Such liabilities may be enforced in the courts of this state, in the same manner as similar liabilities imposed by law upon the officers, directors and stockholders of domestic corporations. § 5. This act shall take effect immediately. STATE OF NEW YORK, * Office of the Secretary of State. } ss " I have compared the preceding with the original law on file in this office, and do hereby certify that the same is a correct transcript therefrom and of the whole of said original law. JOHN PALMER, Secretary of State. PROCEEDINGS OF THE JOINT COMMITTEE OF THE SENATE AND AS- SEMBLY OF THE STATE OF NEW YORK IN RELA- TION TO TRUSTS AND UNLAWFUL COMBINATIONS OF CAPITAL. In Senate, March 9, 1897. RESOLUTION - APPOINTING COMMITTEE. Whereas, Combinations of capital in the form of trusts or other- wise appear to exist and to be increasing in number and influence in this commonwealth, resulting in concentrating in the hands of a few various important branches of industry, creating monopolies, shut- ting out competition, displacing labor, and driving the citizen of moderate means out of business, with the effect that production and price are regulated not by the natural laws of supply and demand, or the rules of normal and healthy competition, but by the arbitrary decision of combinations operating together to destroy competition and exact unreasonable charges from the people; and Whereas, It is charged that combinations of capital enjoy special and peculiar privileges and advantages detrimental to public interests, and that the laws hitherto enacted are inadequate to furnish relief; therefore. Resolved, (if the Assembly concur), That a joint committee of the Legislature, consisting of. three Senators and four members of the Assembly, be appointed to draft such remedial acts as may be neces- 62 [Senate, USTo. 40.] sary, and in order that this may be intelligently done the said com- mittee shall have full power and authority to institute and conduct an investigation for that purpose; and the said committee is empow- ered to hold sessions wherever necessary, to employ counsel, a stenographer^ and such other assistants as may be necessary, to send for persons and papers, issue subpoenas, and enjoy and exercise all the powers, privileges and authority of a legislative committee; and it is further Resolved, That the committee make a report accompanied by a bill or bills on or before the first day of March next. Pursuant to the above resolution the following committee was appointed: Senate. Senators. — Lexow, Parsons and Gallagher. Assembly. Assemblymen. — Bedell, Warner, Mazet and Barry. The committee organized by selecting Senator Lexow as chairman and Assemblyman Bedell as secretary. PUBLIC NOTICE ISSUED BY COMMITTEE. The Joint Committee of the Legislature appointed to investigate trusts, for the purpose of recommending remedial legislation, has now organized to carry into effect the purposes of its appointment. It is obvious that the success of the investigation depends, to a very great extent, upon the co-operation of the people. All are inter- ested in a practical solution of the questions involved. It is the desire of the committee to establish, at the outset, a relation of mutual con- fidence between committee and people; and to that end the fullest and freest communication of facts, views and proposed remedies is .solicited. The opportunity is now presented of meeting the serious problems confronting our economic system squarely, and the committee is de- termined to leave nothing undone that may enable it to reach just, fair and adequate conclusions. Where there is a wrong that should be righted, an evil that should be removed, or a remedy that should be applied in connection with this subject, the facts, conditions and proposals should be laid before the committee, in order that they may be considered upon the question of the character of legislation to be finally reported. All requests for hearings and communications generally should be addressed to the chairman of the committee, at Albany. 64 SNATE, No. 40.J COMMUNICATION TO THE COMMISSIONER OE LABOR STATISTICS. Albany, N. Y., January 29, 1897. Mr. J. T. McDonough, Commissioner of Labor Statistics, Albany, N. Y.: Dear Sir. — The committee, appointed by the Legislature for the purpose of investigating trusts in this State desires to obtain from you, at the eadiest moment practicable, such statistics as you may have on file or be able to secure on the following subjects: 1. Number of trusts so-called, their general character, business, capitalization, origin and development from 1892 to date. 2. Production during that period. 3. Labor employed during that period and character of labor. 4. Comparison between number of laborers employed then and now and wages paid. 5. Price of the product then and now. Any other general information in reference to the subject-matter of the investigation which may be of interest upon the general ques- tion of remedial legislation. You are urgently requested to furnish us these facts as soon as possible. Yours very truly, CLARENCE LEXOW, Chairman. FIRST PUBLIC HEARING HELD BY THE COMMITTEE ON THE FIFTH DAY OF FEBRUARY, 1897, AT THE CITY HALL, NEW YORK CITY. Present. — Senators Lexow, Parsons, Assemblymen Bedell, Warner, Mazet, Barry. Theodore A. Havemeyer being duly sworn testified as folllows: Examined by Chairman Lexow. Q. State your full name? A. Theodore A. Havemeyer. Q. Are you connected with the American Sugar Refining com- pany? A. I am. Q. In what capacity? A. Yice-president. Q. How long have you been Vice-president of that company? A. Since its organization. Q. That was when? A. In 1891. Q. Where was it organized, Mr. Havermeyer? A. In the State of New Jersey. Q. As a corporation? A. As a corporation. Q. Can you give the exact date of that organization? A. lean not without — 5 G6 [Senate, Q. You cannot — A. Without reference. Q. Do you remember it in the year 1891? A. Yes sir. Q. You have continued in the office of Vice-president of that company since its organization? A. Yes sir. Q. Previous to that time were you connected with a sugar re- fining company or companies that were consolidated into the present company? A. Yes sir. Q. What companies were you connected with? A. Previous to 1^91, we were consolidated with the American Sugar Refiner- ies Company, the Havermeyer & Elder— let me understand the question — Havemeyer & Elder, Dick & Myer — no — the Matthies- sen & Wiechers, De Castro & Donner. I believe that is all. Q. Did the American Sugar Refining Company contain or em- brace other corporations or associations than those you have men- tioned? A. There may be one or two more. I don't recollect them just now. Q. Were you connected with or an officer of all the companies that were consolidated into what is now known as the American Sugar Refining Company? A. Yes, sir. Q. Were there eight of them? A. I think so. Q. You are actively engaged as trustee and director of the American Sugar Refining Company, and know its business? A. Yes, sir; I think so. Q. Do you devote yourself and time to that company and follow Its business transactions? A. Only as far as regards its manu- facturing department. Q. Are von familiar with the circumstances that led up to the consolidation of companies forming the American Sugar Refining Company? A. Pot particularly. Q. Who is? A. Well, I presume my brother would be more familiar than I am. Q. Mr. H. O. Havemeyer? A. Yes, sir. Q. He is President, is he not? A. He is President at present, yes, sir. Q. Subsequent to the consolidation of the eight companies into the American Sugar Refining Company, were any other compan- No. 40.] 67 ies absorbed or consolidated by or into that company? A. T ihink not. sir. Q. Since 1891 then, the American Sugar Refining Company, as originally constituted, remains the same? A. I think so — I have not — I might say in this case that I am not as familiar — because it is out of my line entirely. Q. What particular branch of the company's business do you attend to? A. 1 am simply the refiner, the manufacturer; have nothing whatever to do with its commercial side; so that I am a little unfamiliar with the details to which your examination thus far has alluded. Q. Have you anything to do with the fiscal concerns of the company? A. Not at all, sir; no more than — Q. The financial concerns? A. Not at all; that is, I give no at- tention to it. Q. What was the capital stock of the eight companies that were consolidated into the American Sugar Refining Company at the time of the consolidation? .V. I should have to refer to give you that information later; I could not give it to you now, Mr. Chairman. Q. Who or what officer in the employ of the company, or occu- pying an official relation to the company, would be able to give information with reference to the capitalization of the old com- panies that were consolidated into the new company? A. I sup- pose, Mr. Searles, the treasurer and secretary of the company. Q. Was he the treasurer and secretary at the time of the con- solidation? A. Yes, sir. Q. You were a stockholder of the eight consolidated compan- ies, were you not? A. I was a stockholder of some of them; yes. Q. Were you not a stockholder in all of them? A. I don’t think so. Q. In the consolidation did the share interests represented by individual stockholders in the consolidated companies find repre- sentation in the stock issue of the new company upon exchange of certificates therefor? A. I don’t know how that was arranged exactly. 68 [Senate, Q. Do you know whether or not the stock of the consolidated company represented more nominally than did the aggregate stocks of the companies that were consolidated? A. I could not tell you. Q. Have you no knowledge on that subject? A. I really have not given much thought to it; it was out of my line. Q. Would Mr. Searles be able to answer that question? A. I think so; fully. Q. Do you know or not know whether you as a shareholder in the corporations that were taken into the consolidation received more nominally in the form of stock than you held in the old companies in the aggregate? A. I don’t think we did; I don’t know; I should prefer — Q. What is your recollection about that; have you any recol- lection at all? A. Not at all; I had very little to do with it; nothing at all. Q. You don’t remember, then, or do you, what your share hold- ing was in the old company? A. Not without reference to my books. Q. Have you got memoranda to which you can refer, Mr. Have- meyer? A. I think so. Q. Will you be good enough to produce them to this commit- tee? A. Yes. ; Q. Do you or they transact any other business than the busi- ness of sugar refining and selling? A. I think not. Q. Have you not recently gone into the manufacturing of cof- fee? A. Yes, sir — I beg pardon — Q. When? A. I think it was about a month or two ago. Q. Where? A. We bought an interest in the Woolson Spice Company of Toledo, Ohio. Q. And are manufacturing coffee there? A. We are. Q. What was the purpose of your organization in 1891? A. To refine sugar. Q. Any other purpose? A. No, sir; not that I know of. Q. How many companies outside of this consolidated company were transacting the business of sugar refining in the United No. 40.] 69 States of America at tlie time of your consolidation; do you re- member the number? A. Well, I would have to think — I should say there were ten or twelve. Q. Are you incorporated under the general law of the State of New Jersey? A. I think we are; yes. Q. You have a special charter? A. I do not think so. Q. You have no special charter? A. I think not, sir. Q. Now besides the refining of sugar has your corporation any other definite object? A. No, sir. Q. Was it not organized, in addition to the mere refining of sugar, for the purpose of preventing illegal combinations of la- bor? A. No, sir. Q. Is that not one of the purposes stated? A. No, sir; I don’t think so. Q. Are you sure of that? A. I am pretty sure. Q. Wasn’t it organized to control the refining and sale of sugar throughout the United States? A. I think it was not; it is or- ganized to refine and sell sugar. Q. Was not one of the purposes of the organization the con- centration of those companies into one consolidation for the pur- pose of securing the control of the sugar market in this country? A. No, sir. Q. You do control it, do you not? A. No, sir. Q. Do you not fix the price at which refined sugar is sold in the United States? A. We fix the price at which we sell it. Q. And at which it is sold? A. I do not know about that. Q. Are you able now to recollect how many refining companies outside of your consolidated company are now transacting busi- ness in the United States? A. I should say, just to guess, six or eight. > Q. Can you give their names? A. The Mollenhauer Refinery, the National Refinery, the American Refinery. Q. Where is that last refinery? A. Philadelphia; the Hender- son Refinery of New Orleans, a refinery in Galveston, a refinery in California, in China; I think refined sugar is made in Nebras- ka; I think there is also an establishment in Michigan; there may be one or two more. 70 [Senate. Q. Those are all that you can now recollect? A. Yes, sir. (,). Are they competing with you in the markets of this State in the sale of sugar? A. Yes, sir. Q. Are they actually competing? A. Yes, sir; so far as I know. Q. Isn't it a fact that you fix the price at which sugar is sold in this State by the only one other refinery in this State that is not under your control, to wit, the Mollenhauer? A. No, sir; we fix no price except for ourselves, at which we will sell. Q. Have you no agreement or understanding with that refinery according to which they charge the same price for sugar that you charge? A. No, sir; not that I know of; as I said before, this is out of my line; I should say so; but as I say before, this mercan- tile part is out of my department; I do not bother myself about it. Q. Have you not consulted with Mr. Henry O. Havemeyer? A. No, sir. Q. In regard to the policy of the company about fixing prices? A. No, sir; because, as I say, he runs his department and I run mine. Q. The fixing of the price; is that any part of your official duty? A. Not at all, sir; I do not know it. Q. You do not know what price is fixed? A. I seldom trouble myself about the price; I could not tell you, to-day, what the price is. Q. Then the fact is that you do not know whether there is any existing agreement between these other concerns and your con- cern as to price? A. I have never heard of it, sir. Q. What percentage of the total product of sugar do the com- panies included within the American Sugar Refining Company produce and sell in the United States? A. I should say about — roughly speaking — of course this varies every day — I should say about between seventy-three and seventy-five per cent.; it may be less. Q. You mean about three-quarters of the total product? A. Probably; I should have to verify that statement by an examina- tion. No. 40.] 71 Q. Have you books which will show these facts? A. I have no books with me — I have no books that would show the fact; because we do not know what it amounts to. Q. Have you any knowledege of the amount that is produced by the American Sugar Refining Company? A. No, sir; I have not. Q. This seventy-five per cent, that you speak of, means how many barrels of sugar per day? A. I should have to look that up. Q. You were examined, were you not, upon other occasions of investigation, both here and in Washington? A. I think so, sir. Q. Have you increased the capital of the American Sugar Re- fining Company since its original organization in 1891? A. I think it has been. Q. To what extent? A. I believe to the extent of twenty-five million dollars. Q. When was that increase made? A. I couldn’t give you the date of that. Q. Can you state generally, in what year? A. Well, I should rather fortify my memory; I don’t think I could tell you the date without — Q. You can’t state in what year; 1892, 1893, 1894, 1895, 1896? A. I have an idea that it was in 1895. Q. Was that it? A. I think Searles could give you all these facts of the case better than I could ; I have not charged my mem- ory with it. Q. Is that the only increase made since you were an official of the company? A. I think so. Q. Do you know the purpose for which that increase was made? A. I think for the acquisition of other refineries. Q. It was for the acquisition of other refineries? A. I think so. Q. Were they acquired? A. They were. Q. In what year. A. Well, I think it was in 1896. Q. Will you name the refineries that were acquired by this ad- ditional use of capital stock? A. I think the Franklin Refinery, the Knight Refinery, the Spreckels Refinery. 72 [Senate), Q. Of Philadelphia? A. Yes; and the Delaware Refinery. Q. Is that all. A. I think so. By Mr. Bedell: Q. Where is the Franklin Refinery situated? A. I am giving this only from memory; it is entirely out of my department, and 1 know very little about it. Q. If there is any correction about it, you can make it at any time, Mr. Havemeyer; — where was the Knight Refinery? A. Philadelphia. Q. There were three or four of these that were Philadelphia concerns, and the other a Delaware concern? A. All were Phil- adelphia concerns. Q. They were competing with you in the market at the time? A. I presume — yes. Chairman Lexow: Will the stenographer read the names of the refineries? Mr. Stenographer: The Franklin Refinery, the Knight Refinery, the Spreckles Refinery and a Delaware refinery. By Chairman Lexow: Q. The effect of which was to depress the price of sugar to the consumer, was it not? A. Why, I don’t know about that. Q. Isn’t it a fact that before the acquisition of these properties by you, there was free competition in sugar, and the price of sugar to the consumer was lower than after that consolidation produced by the issue of that increased capital stock was made? A. I think the price is lower now than it was then. Q. I am not speaking of now; I am speaking of that time? A. T don’t know much about the prices; I couldn’t say that. Q. Isn’t it true that these properties were acquired in this is- sue of capital stock, made for the purpose of removing the com- petition then had between you and these four concerns, which you say depressed the price of sugar to the consumer? A. I don’t think so. Q. Will you state that it was not a fact? A. Yes, sir. No. 40.] 73 Q. You do so state? A. Yes; I don't think it was. Q. Was the price of sugar lower or higher prior to the consoli- dation of these four additional companies as compared with the time subsequent to consolidation? A. I don't know, sir. Q. Don't you keep yourself posted about that at all? A. No, sir; I have not kept up any memory — the price list will show. Q. Was that acquisition of these four companies the purpose of securing a monopoly of the market? A. No, sir. Q. What was the purpose of the acquisition of these four com- panies in Philadelphia? A. I suppose the people that owned them wanted to sell. Q. You bought simply because they wanted to sell? A. I sup- pose so. Q. Were you not competing with them at the time, and were they not competing in price against you? A. I suppose they were. Q. Was it not to remove that competition that these proper- ties were secured? A. I do not think so, because competition was elsewhere, too; a little more or less didn't make any differ- ence. Q. Where else did you have theu. or do you have now, compe- tition in the price of sugar? A. New York, Philadelphia, New Orleans, Michigan. Q. You mean with reference to the other parties whom you first mentioned that were not in the consolidation? A. Yes, sir. Q. In each of these cases? A. Yes; the same competition now as we had then. Q. Isn't the price of sugar charged by the only New York con- cern that is not in your consolidation precisely the price charged by you for refined sugar of the same grade? A. I couldn't tell you, sir. Q. Don’t you know that it is? A. No, sir. Q. Don’t you keep posted with reference to prices? A. No, sir; I told you before; I know very little about it. Q. Did you issue all of this twenty-five millions of increased capital stock for the purchase of these additional companies? A. I don’t know, sir. 74 [Senate, Q. Don't you know what was done with that stock issue? A. No, sir; Mr. Searles is the man who will tell you all about that concern. Q. How many factories that went into that consolidation have been closed up since the consolidation? A. Perhaps three or four. Q. Can you name them? A. I think Donner & De Castro and Havemeyer & Co; I believe that is all. Q. Has your production of refined sugars decreased since the last consolidation that you mention? A. I should say it had in- creased. Q. Did it increase as the result of the making of that consolida- tion? A. No, sir; not necessarily. Q. After the consolidation was made did you continue the busi- ness by the consolidated companies? A. We refined in the same refinery. Q. You continued? A. Refined it in the same refinery. Q. When did you close these three refineries that you have mentioned? A. I think — I should have to refer to my — Q. Was it before or after the acquisition of these four Phila- delphia companies? A. I couldn’t tell you; I should have to find out about that. Q. I understood you to say that you conducted the manufac- turing department of that business? A. Yes, but you asked me dates, you know; and I can’t recollect the dates. Q. You may recollect it with relation to the question of ab- sorption of these four companies? A. No, sir; I only know in a general way that we had refineries sufficient to produce the con- sumption of sugar — to supply the consumption. Q. What was the date of your examination before the Senate Committee of the United States Senate? A. I can’t tell you the date; I don’t remember it. Q. It was in the year 1894, was it not? A. Let us see — this is 1897— was it 1895? Q. Was it June 15, 1894? A. I presume so, if you have it there. i No. 40.] 75 Q. Is that your recollection? A. I don't recollect the date. Q. Now, did you give testimony on that occasion before or after you had acquired these four Philadelphia properties? A. I don't think I testified to anything about it. Q. No, but did you — I am asking of the fact of testimony being given; did you give that testimony before or after you had ac- quired these four Philadelphia companies? A. I could not tell you. Q. You testified then, Mr. Havemeyer, didn’t you? A. I tes- tified. Q. (Continuing) — that the product of the refineries controlled by you amounted to 80 per cent, of the total refined sugar produced in the United States — that is true? A. I suppose so, at that time. Q. At that time — I understood you to say a few moments ago that your production had increased x’ather than diminished since the absorption of those four Philadelphia companies. Now t , if your product is only 72 to 75 per cent, now of the total product how could it have been 80 per cent, then unless you are mistaken in reference to your figures? A. Well, the total consumption of the country may have increased; at that time our pro rata may have been 80 per cent, and less now; we have more competition now. Q. Now, if the figures given by you in 1894 were correct, to wit, that you produced 80 per cent, of the total sugar in the United States, and if you have increased since that time, then you pro- duce more than 80 per cent, of the total product of the United States; now, do you? A. I don’t know about that; I would rath- er have the figures to guide me in making a statement. Q. Well, what is your best judgment? A. I should say, as I said before, that we are now producing about 75 per cent, of the consumption of the United States; the balance of the sugar pro- duced in the United States is produced by competitors or im- ported from abroad. Q. And by comparison with what, Mr. Havemeyer, how did you reach the figure in 1894 that you were producing 80 per cent.? 76 [Senate, A. Because we did not get then the refilled sugar from abroad we have been getting lately, and there was not competition ex- tended as it is now. Q. I mean how did you reach the conclusion that you were then producing 80 per cent, by referring to figures that you had in mind? A. Because we have statistics which show the consump- tion of the United States and go beyond what we produce; and it was very easy to ascertain the percentage which our production bore to the total consumption. Q. And that is part of your system, to keep statistics with ref- erence to that question? A. They are kept by my statistician. Q. In your employ? A. No; not in our employ ; but by Willets & Gray and other people; I can give you those facts. Q. I mean for your purposes? A. No, sir; for iiublic purposes. Q. You do not, or do you, keep a record of the production in the United States of sugars in competition with yours? A. No, sir; not that I know of; I don't think we have. Q. Would that come within the manufacturing department? A. No, sir. Q. Do these questions not come up for consideration before your board of directors? A. Yes, sir. Q. In conformity with law? A. Yes, sir. Q. Under the laws of the State of New Jersey? A. I presume so. ; Q. And these questionsof business import to your organization, are they not subject to conferences in your directors’ meetings? A. No sir. Q. Nor the fixing of prices? A. No, sir; I never heard it men- tioned. Q. Nor agreements made with competing companies? A. No, sir. Q. And the board does not discuss any of these questions that I have referred to at its meetings? A. Never heard a discussion in the board of those questions. Q. What other part of the business does the board transact? A. Well, simply the mercantile part, the purchase and sale of No. 40.] 77 sugars; the refining part; and with committees to which these things are referred. Q. Who fixes the price, Mr. Havemeyer? A. My brother. Q. The President? A. Yes, sir. Q. Has he full power to fix it, or does he fix it after consulta- tion with the other directors? A. That is not my part of it; I don't know what he does. Q. I mean in an official way in the meeting of the board of directors? A. He has authority to fix the prices, purchase, buy and sell — do the mercantile — govern and control the mercantile part of it, and that strictly comes under his department. Q. How much of the total product consumed in the State of New York do you manufacture and sell? A. I could not tell you, sir. Q. Do you know what the daily output of the Mollenhauer place is? A. No, sir. * Q. What is your daily output? A. It varies, according to the demand and supply. Q. Can you give an average? A. I could, if you will allow me to refer to the figures that I have. Q. Have you got any figures in mind? A. It varies, day by day, according to supply and demand. Q. You designate the capacity of a factory, or the factories that you took into the combination by reference to their output in barrels of sugar per day, don't you? A. No, sir. Q. How do you do? A. Pounds melted; pounds raw sugar melted. Q. Well, what is the capacity of your companies in pounds of raw sugar melted per day? A. Twenty million, perhaps. Q. How many barrels would that make? A. Oh, it would average about seven barrels per thousand pounds — well, to a ton — 25,000 or 30,000 barrels a day, perhaps more. Q. How much is the capacity of the Mollenhauer place? A. I could not tell you. Q. Have you no knowledge on the subject? A. No knowl- edge whatever ; never bothered myself to see. 78 [Senate. Q. Or any figures? A. No figures. Q. Why were those four concerns that you have mentioned closed? A. Because we could do the supplying of the demand of the country in the other refineries at less cost. Q. How long after your acquisition of those properties under the consolidation was it that they were closed? A. I couldn’t tell you that without referring. Q. Have you any figures that you could refer to? A. I can let you know when they were closed. Q. Prior to consolidation, they were in active business, were they? A. I could not tell you whether they were all at work or not. Q. Have you any recollection on the subject? A. They did not belong to us, so I could not know. Q. Under consolidation, you did not close then, any of your own refineries, but closed the refineries that had been acquired by you? A. We closed the refineries simply when we thought the working refineries could supply the demand of the consumer; demand and consumption. Q. I will ask you, however, whether you closed any of your own refineries that were yours before consolidation? A. We closed the Donner & De Castro. Q. That was situated where? A. Brooklyn. Q. What was its output? A. It could refine about 1,200,000 pounds a day. Q. How many men were employed? A. I suppose, about, al- together, from 800 to 1,000. Q. Were they discharged when you closed down that factory? A. Some of them were. Q. What percentage? A. I could not tell you that. Q. Can you state about? A. No; I couldn’t; a great many v ere taken at Havemeyer & Elder’s, to be used there. Q. Were as many as half of them discharged permanently? A. Perhaps; I could not tell you, though. Q. Would you say it was more than half? A. When the re- finery shut down, they all were discharged. No. 40.] 79 Q. Some of these got work afterwards in the Consolidation? A. Most of them got work afterwards; had to increase capacity of Havemeyers & Elder's Refinery. Q. Was the same true with reference to the other three refin- eries that were closed? A. Yes, sir. Q. All were discharged? A. I think so. Q. How many men were at work in the four refineries? A. Oh, I don't know that. Q. Can you approximate? A. I could not; no. Q. Was it as many as 3,000? A. Oh, no, sir. Q. 2,000? A. No, sir. Q. 1,500? A. I should say not. Q. I understood you to say that 1,000 alone were discharged when the Donner A Ue Castro Refinery was closed; did the other three contain less than 500 operatives? A. Well, that is more than — Q. Did they contain less than 500 operatives? A. I suppose about 500. Q. So that the total number of men discharged as the result of the cessation of work in these four refineries was about 1,500? A. Yes; and those men, or an equal quantity of men, -were em- ployed elsewhere to work on the increased output of other refin- eries; in other words the production of sugar w r as just the same without these refineries, and the same number of men were need- ed to make the production of sugar; in other w T ords the stoppage of the refineries did not lessen the production of sugar; sugar was simply made in some other refinery. Q. Then was your former statement incorrect when you said that you believed that as many as 500 of the original thousand were permanently discharged? A. I didn’t say ‘‘permanently.” Q. I asked particularly whether it was a permanent discharge? A. I doubt whether fewer men were employed to produce sugar than there were when those refineries were running; the produc- tion of sugar was simply distributed over three or four refineries and the same number of men were employed; that production afterward, on account of the economy that could be introduced, 80 [Senate, was confined to one refinery, and the men instead of being em- ployed in four refineries, an increased number were employed in one refinery; what proportion that was I cannot say. Q. Did the production at the time or immediately after the time of the closing down of these four refineries equal the produc- tion that had been made previous to the closing down of these four refineries? A. I think so, sir — Q. Are you certain about that? A. Pretty certain. Q. What was the necessity of closing the four refineries? A. Because we could do the same work in one refinery much cheaper. Q. Do you mean to say it was simply a transfer of men and not a lessening of product? A. Simply a transfer of men and not a lessening of product. Q. Are you certain about that? A. Pretty certain, sir. Q. Well, are you quite certain? A. Quite certain. Q. Have you figures that will show the product of the consoli- dated company immediately prior and immediately subsequent lo the closing of these four refineries? A. I think Mr. Searles could give them to you. Q. Is Mr. Searles here? A. He will be here; I understood Mr.— Q You can produce them in case Mr. Searles cannot? A. Oh, I think they can be produced. Q. Why did you go into the coffee business? A. Well, because my brother thought it was a good business, and he would like to go into it. Q. Thought it was a paying business? A. I think so. Q. And you were not making money enough in sugar and thought you would try coffee; was that the idea? A. The Ameri- can Sugar Refining Company had nothing to do with the coffee business. Q. Oh, you did not go into it as a corporation, but went into it as individuals? A. Havemeyers & Elder. Q. You organized in the State of New Jersey, yesterday, a corporation to do the coffee business in that state? A. In any state, I presume, to do the business. No. 40.] 81 Q. Well, a corporation of that state? A. Yes, sir. Q. You were one of the organizers appearing in the certificate of incorporation, yesterday? A. Yes. Q. I understood you to say that you had acquired an interest in the Woolson Company; is that true? A. Havemeyers & Elder have; yes, sir. Q. Havemeyers & Elder? A. Yes, sir. Q. One of the original members of the consolidated company? A. No, sir; nothing to do with them. Q. But a firm? A. Havemej r er & Elder are a partnership. Q. Oh. I see; of which you are a member— A. Of which I am a member and my brother and m} r son. (]. Have you any litigation now pending in the State of Ohio with reference to that Woolson Company? A. The newspapers tell me so. Q. You know nothing of it? A. Nothing at all, except in a general way ; I have an idea that there is something pending. Q. Are you manufacturing coffee in the State of Ohio at pres- ent? A. The Woolson Company are; yes, sir. Q. Are you certain that the acquisition of stock in the Woolson Company was no part, and is no part, of the assets of the Ameri- can Sugar Refining Company? A. Yes, sir. Q. Certain of that? A. Yes, sir. Q. Are the directors of the corporation organized yesterday for the manufacturing of coffee, in the State of New Jersey, the same directors who are directors in the American Sugar Refining Company? A. If you will name the incorporators I will — I pre- sume they are; I believe the incorporators were Henry C. Have- meyer, Theodore Havemeyer, John E. Searles, John E. Parsons, and another, I don’t know the name. Q. Are there any officers of the American Coffee Company who are not officers and interested in the American Sugar Refining Company? A. Well, H. O. Havemeyer, one of the incorporators, is President of the Sugar Refining Company; Theodore A. Have- meyer, another one, is Vice-President; John E. Searles is treas- urer; John E. Parsons is director. 6 82 [Senate, Q. They keep the same relative positions in the American Sugar Refining Company that they occupy in the American Cof- fee Company? A. I don’t know that they occupy any positions as incorporators in the coffee company; they occupy these other positions in the American Sugar Refining Company. Q. You have not gone, then, to the extent of a permanent or- ganization of the new company? A. No, sir; I think not. Q. Has the organization of that company anything to do with competition in the markets of this State in the price of sugar? A. Not at all, sir. Q. Or any other State? A. Not at all, sir. Q. Nor the State of Ohio? A. Not at all, sir. Q. Nor any relation to any open competition in the sugar busi- ness by gentlemen now engaged in the prosecution of the coffee business? A. I believe not, sir. Q. Y r ou say you believe not; are you Avilling to state under oath that the purpose and object of the organization of the American (toffee Company was not to remove competition of a coffee com- pany now engaged in the refining and selling of sugar in com- petition with you? A. I would say so. Q. Will you state positively, under oath, that there is no inten- tion of that kind entering into the organization of that company? A. Yes, sir. Q. Yes, you do? A. Y r es, sir. Q. Why do you hesitate, Mr. Havemeyer? A. Because I have to think. Q. Are you in doubt about it? A. Not at all; your questions are rather long, and I have to give them a little consideration; the company is organized to transact the coffee business, that is my impression as to that; not to compete with anybody, or any- thing of that kind. Q. Or to remove any competition against you in the sugar business? A. No, sir; how could we do it? Q. We are not inquiring here as to any competition in coffee except so far as it relates to the use of competition in coffee to destroy the competition in sugar? A. I — no — No. 40.] 83 Q. Now are you willing to state under oath that the organiza- tion of the American Coffee Company by gentlemen connected with the American Sugar Refining Company has not for one pur- pose the removal of competition in the field of sugar? A. So far as I know, I am willing to state so under oath. Q. Are the secrets connected with the transaction of business of the American Sugar Refining Company withheld from you, Mr. Havemeyer? A. No, sir; not withheld. Q. Do you consider that you have full access to all the com- mercial secrets of the company? A. No. Q. Who has? A. My brother. Q. Will he know with reference to this coffee company? A. 1 suppose so. Q. Don't you know anything about the law suit now pending in Ohio? A. Only the newspaper reports. Q. Between the Arbuckle Company and the Woolson Company and yourselves? A. Only from the newspaper reports. Q. Are you defendants in that suit? A. I could not tell you. Q. Are you defending that suit by counsel? A. I believe we are. Q. Is the same counsel who represents and appears for the American Sugar Refining Company and for the American Coffee Company the counsel who defends you in that Ohio suit? A. I think not, sir. Q. Has no relation to the case? A. I think not, sir. Q. Who acts as your counsel in Ohio? A. I don’t know, sir. Q. Does Mr. Parsons? A. No, sir; I don’t think so; that is on our part. Q. Has Mr. Parsons no relation to that suit? A. I don’t know; but as I have said, those are questions that I have not troubled myself about; they are mercantile questions with which I have nothing to do. Q. But you knew of the acquisition of the stock of the Woolson Company by your firm? A. Yes, sir. Q. Why did you acquire that stock? A. My brother said it was a pretty good business to go into, and asked me whether I was not willing, and I said “Go ahead.” 84 [Senate, Q. How long did you come to that conclusion after you had ascertained the gentlemen who were stockholders in that com- pany were competing with you in the price of sugar? A. I never knew that they were competing in the price of sugar. Q. Didn’t you know that they were selling sugar? A. No, sir. Q. Don’t you know to-day that the Arbuckle Company are sell- ing sugar? A. I thought you referred to the Woolson Company just now; I know nothing about Arbuckle’s business. Q. Did you know that they had any connection with the Wool- son Company? A. No, sir. Q. Did you know that they were competing with you in the manufacture and sale of sugar? A. No, sir. Q. Is it because you are not familiar with the surroundings of the company with reference to questions of that kind that you say no, or do you state it as a fact that they were not? A. I never knew that the Arbuckle Company were refiners of sugar. Q. Did you know that they were selling sugar in competition with you? A. Yes, I think I did in general. Q. And how long after you knew that fact was it before it oc- curred to you that it would be a good enterprise to engage in the manufacture of coffee? A. I never thought of it. Q. How long had you known the fact that Arbuckles were sell- ing sugar in competition with you before you undertook to en- gage in the coffee business? A. I did not know that Arbuckle & Co. were competitors of ours in selling sugars; I had an idea, and have always had an idea, that they simply were taking sugar to use in their coffee business; I understood for sugaring their coffee, or some sugar and white of eggs, and I understood they used a large quantity for that, and recently I learned that they had a little sugar put up in two pound packages, or something of that kind, and distributed it with their coffee; I have never really troubled myself about Arbuckle & Co.’s business, and know very little about it. Q. The competition was so insignificant that you did not deem it worth while to notice? A. I don’t pay much attention to that branch of the business, that is, the mercantile branch, and I No. 40.] 85 really pay no attention to it whatever; I have just as much as I can do to attend to my own business. Q. Was it, then, a coincidence merely that you deemed it ad- visable to buy stock in a coffee company in Ohio and then to or- ganize the American Coffee Company in the State of New Jersey; was that merely a coincidence occurring at the same time that Arbuckles were competing with you in the sugar market? A. My brother said to me, “I think this coffee business is a good business; will you go in?” and I said, “Go in;” and since then I have not bothered myself about it; whatever arrangements he made and whatever steps he took are entirely satisfactory to me; I know nothing. Q. Is there any other business except the coffee business that you have thought it proper for you to engage in since the organi- zation of the American Sugar Refining Company? A. Well, I don’t know. Q. Do you transact any commercial business but that? A. Well, we have real estate; lots of things. Q. I mean, any mercantile competitive business? A. No; I don’t think we do. Q. When was it that you purchased stock in the Woolson Company? A. Well, I will have to refer you to my brother for that; I couldn’t give you the date. Q. Wasn't this question of the purchase of the Woolson stock, and the transaction of the coffee business a matter that was dis- cussed among the directors at their board meetings of the Ameri- can Sugar Refining Company? A. No, sir. Q. Never? A. No, sir; not to my recollection; I may not have the memory — Q. Do you remember when you purchased the Woolson stock? A. No; I think my brother can give you the date. Q. Now, Mr. Havemeyer, without beating around the bush, didn't you substantially, or your company substantially, inform the Arbuckle concern, that if they competed in the field of sugar you would compete in the field of coffee? A. Not that I know of, sir; I never had any correspondence or conversation with him or any one else. 1 86 [Senate, Q. I am not speaking of conversations, but was not tlie policy of your company not only determined but communicated, that if Arbuckle’s chose to compete with you in the sale of sugars you proposed to compete with them in the sale of coffee? A. Not by me, sir. Q. And wasn’t that threat made for the purpose of preventing and destroying competition in sugar against your company? A. Not by me, sir. Q. Do you know any member of your concern that did? A. No, sir. Q. Have you no information from any person in the company of such an occurrence? A. No, sir. Q. But isn’t it a fact? A. No, sir; I don’t think so; I know nothing about it; I have not had the conversation. Q. Isn’t it a fact that you acquired the Woolson Company and that you organized the New Jersey American Coffee Company for the purpose of compelling Arlmckle & Co. to cease competing with you in the field of sugar? A. That is not my idea of it, sir. Q. Where does the American Sugar Refining Company pay its taxes? A. I suppose in New York. Q. On its capital stock of $73,000,000? A. You will have to ask Mr. Searles, the treasurer, about that. Q. Do you know whether your taxes are paid in the State of New Jersey or in the State of New York? A. I don’t know; Mr. Searles will tell you that; he is the Secretary and Treasurer, and tends to that department. Q. Do you do any of the commercial business outside of the sale of your product in other states, in the State of New Jer- sey, or do you conduct your business, your commercial business, and have your main office in the State of New York? A. We have an office in Jersey City and also one in New York. Q. You know what I mean when I say, have you the main of- fice of the corporation for the transaction of the important busi- ness in the city of New York? A. We buy and sell sugars in New York; No 117 Wall street is the office of the American Sugar Re- fining Company ; we also have an office in Jersey City. No. 40.] 87 Q. Tlie office in Jersey City is one required by the statute of New Jersey to be maintained for the purpose of maintaining you corporate existence there, is it not? A. I suppose so; I don’t know; I suppose so. Q. As a matter of fact, the business of the company is trans- acted in the city of New York; you know what I mean, Mr. Have- meyer, don't you? A. We have an office for the sale and pur- chase of sugar at No. 117 Wall street now — Q. And that is unequivocally the office of the corporation — I am not speaking of the local office of the corporation, but is it the business office? A. It is where the officers of the company have their offices and where the business of buying and selling is transacted. Q. And all the business of the American Sugar Refining Com- pany, although organized in the State of New Jersey, is trans- acted — all the commercial business, is transacted in the city of New York in the office you have mentioned? A. I suppose so. Q. Why did you organize in the State of New Jersey? A. Be- cause, I suppose, our legal adviser told us it was the best place to organize. Q. Wasn't it because in 1891, the Statute Law of New Jersey permitted the consolidation of companies which was not permit- ted under the statutes of the State of New York? A. I don’t know enough about the legal question to answer that. Q. Was there any other object? A. Not that I know of. Q. It was not the object to evade taxation, was it? A. I don’t know. Q. You don’t know? A. I don’t know; we were simply told, I suppose. Q. I am asking you as a director of the company? A. I don’t know. Q. Did you contemplate, or consider organization in the State of New York at any time? A. I did not; the lawyers may — Mr. Parsons may, or whoever acted for us at that time. Q. On what part of the capital stock of the American Sugar Refining Company or its property does it pay taxes to the State 88 [Senate, of New York? A. I can’t tell you that; it is not in my depart- ment. Q. How muck? A. I can’t tell you; Mr. Searles, the Secretary and Treasurer, can answer that. Q. Don’t you keep yourself informed with reference to any of those vital facts regarding the management of your business? A. I don’t consider them vital facts. Q. A tax on seventy-three millions of dollars is a fairly large business transaction, is it not? A. Fairly so, yes; but I don’t see — Q. Don’t you keep yourself informed with reference to matters of that kind? A. No; it has nothing to do with my department; it is a matter for investigation on the part of the treasurer, and if it is proper to pay it, I suppose he pays it; I never bother — Q. You don't know then, as a matter of your own knowledge, although you have stated the business of this company is trans- acted in the city of New York, whether it pays any taxes to the State of New York A. I don’t know anything about it; it is en- tirely outside of my department; I don’t know whether it trans- acts all its business in New York; I don’t know what tax it pays; I know it pays taxes. Q. Where does the board of directors meet? A. They meet in New York, at 117 Wall street. Q. Does it ever meet in the State of New Jersey? A. Yes. Q. Yes? A. So I think; they have a meeting there. Q. Once a year? A. Yes; perhaps oftener. Q. What books of the company are kept in the State of New Jersey, if any, excepting the stock book? A. You *will have to ask Mr. Searles about that. Q. Don’t you know anything about it? A. No, sir. Q. What business has ever been transacted by the American Sugar Refining Company in the State of New Jersey outside of that required by the statutes of the State of New Jersey, in order to maintain its corporate existence? A. I can’t answer that question. Q. You don’t know? A. No, sir. No. 40.] 89 Q. Will Mr. Searles be able to answer all these questions? A. 1 presume so. Q. What has been the aggregate of your profits since 1887, if }ou know? A. I do not know, sir. Q. What percentage did it bear to the capital invested? A. I don't know, sir. Q. What percentage did the capital actually invested bear to the nominal face of the stock issued by the Consolidated Corn- pan}’? A. I don’t know, sir. Q. What dividend has been declared in those years, from 1887 to 1896, including 1896? A. I should have to look up the records. Q. Who has charge of those records? A. I suppose any bank- er; I suppose the secretary can give it to you or the treasurer would know. Q. What proportion do the dividends declared bear to the actual value of the property? A. I don’t know, sir. Q. What proportion do they bear to the stock values of the properties? A. Will you repeat that question, please. Q. What proportion do the dividends bear to the stock issued by the company representing the stock value to the company? A. I should have to look that up; 12 per cent, was declared last year, I believe. Q. What is the value of the American Sugar Befining stock now in the market? A. I do not know, sir. Q. Can you state approximately? A. The papers told me last night; it was about 114 1-2. Q. Does that 114 1-2 cover the entire stock issue of the com- pany or is it divided into different classes of stock? A. There are two classes of stock, preferred and common; half of each, I believe. Q. Can you state the amount? A. Yes; I thing there is 37 1-2 millions of preferred and 37 1-2 millions of common. Q. Making $75,000,000? A. I think so; yes, sir. By Mr. Bedell: (*. What is the interest on the preferred, fixed? A. 7 per cent. 90 [Senate. By Mr. Lexow: Q. What is the divideud that is paid upon the common? A. That has been 12. Q. Have you a bond issue? A. Makes 91-2 average on the total. Q. 9 1-2 average since 1887 ? A. On the total ; well, I don’t know that; I am speaking of last year; seven per cent, on the pre- ferred and 12 per cent, on the common — yes, just 9 1-2 on the total. Q. Have you continued the payment of 12 per cent, dividend on the common stock since the organization of the consolidated company in 1891? A. I should have to look that up. Q. Don’t you know whether you have been receiving 12 per cent, dividend on that stock? A. I think so. Q. Have you made any extra dividends? A. We may have done that. Q. Well, is it your recollection that your profits have exceeded 12 per cent, since 1S91 on the capitalization in force? A. I don’t know much about that, only what they have — Q. You have paid 7 per cent, on the preferred? A. Yes, sir. Q. Anything on the bonds? A. We have no bonds issued. Q. You have a bond issue provided for, have you not? A. I think so; yes. Q. But you have not issued any of the bonds? A. I don’t think so. Q. Can you state, Mr. Havemeyer, from your knowledge of the company’s assets as a Director and Vice-President what the value of those assets were in money prior to or at the time of the con- solidation in 1891? A. No, sir. Q. When these properties were taken into the consolidation was any committee of appraisement appointed or any authority that made an appraisement of the value of the property? A. I had not much to do with that part of it; as I say before that was the mercantile part of it; and I hadn’t anything to do with that; nothing at all. No. 40.] 91 By Mr. Bedell : Q. But do you know the fact whether or not there was such an appraisement made? A. No; I do not. By Mr. Lexow: Q. You acted, didn't you, as one of the organizers of the Amer- ican Sugar Refining Company? A. Yes, sir. Q. You undertook the assets of the various concerns that were consolidated? A. Probably. Q. You acted in a fiduciary capacity as a director? A. Per- haps. Q. And in the issuance of stock, you issued stock under the laws of the State of New Jersey to the value of the assets under- taken, didn't you? A. I suppose we did — if that was the thing to do— Q. You did not issue stock for money? A. I don't know about that; you will have to ask Mr. Parsons how that was arranged. Q. Was Mr. Parsons the counsel? A. I think so — I do not — I really know very little about it — I did not — those are things that other people can do a great deal better than I can, and I let them do it. By Mr. Mazet: Q. Were all the profits divided in the dividends, or did you have a surplus, besides? A. I don’t know. Q. Whether the profits were divided up into dividends, or whether there was a surplus, in addition thereto? A. My im- pression is there is a surplus. By Mr. Lexow: Q. Do you know how much, or how long this surplus has ex- isted, or is it a continuing and accumulating one? A. I presume there is a surplus; I do not examine those things. Q. Well, don’t you know that every year since 1891 you have not only made 12 per cent, upon the stock issued, common 92 [Senate, stock, but there has been an accumulating surplus each year from your operations? A. There may have been; I don’t know whether it has been each year or each month; the question is is there a surplus? Q. Do you declare dividends monthly, or half-yearly or quar- terly? A. No — quarterly. Q. You have no idea now of the amount of your surplus? A. I haven’t looked into it. Q. On the books of your company, instead of “surplus,” do you call it “reserve?” A. Well, I have never — I don’t really know what they do call it; I should call it surplus; I don’t know what they put it down there. Q. I will read you some figures, and state whether or not they are correct; capital stock — referring to your company — A. Yes, sir. Q. Capital stock, 1893, $73,936,000; 1894, $73,936,000; 1895, $73,936,000. Debts, 1893, $22,201,407; 1894, $21,394,000; 1895, $25,130,000. Reserve, 1893, $3,943,000; 1894, $7,694,484; 1895, $13,112,560 — Are those figures substantially correct? A. I don’t know where they were obtained. Q. They were obtained from the Financial Chronicle’s state- ment of January 30, 1897? A. Well, if they are obtained from Mr. Searles they are probably correct. Q. Is that your recollection that approximately those figures are correct, and that in the years 1894 and 1895, you increased the then existing surplus of about eight millions to over thirteen millions, besides paying 12 per cent, upon your stock, seven per cent, upon your preferred stock, and all the liabilities, fixed charges and operating charges of your concern? A. I do not know where those figures have been obtained; if Mr. Searles gave them, they are probably correct; he is in charge of that de- partment. Q. Does the $73,936,000 of stock contain the twenty-five mill- ions of stock that was issued for the four Philadelphia concerns of which you have spoken? A. I think so. Q. Were you present when the stock issue was made? A. Probably not. No. 40.] 93 Q. Do you know whether or not the stock was issued at 50 per cent.? A. No; I know nothing about it. Q. That is to say, you issued part of the stock for 50 per cent, in value of the property? A. I know nothing about it; in fact I couldn’t tell you whether that stock was issued by the Refinery — you still have to ask somebody else about tliiat; all these trans- actions were entirely out of my line. Q. Do you consider, Mr. Havemeyer, under the conditions pre- vailing during the last four years that a profit of 12 per cent, upon common stock, and the accumulation of a surplus at the rate of four millions a year, is placing a fair commercial value upon your product, whether under conditions of competition or non-competition? A. I would not go into business if I could not make 16 per cent. Q. Sixteen? A. Fifteen to twenty per cent, out of it. Q. Does any business not in its nature a monopoly make any such profit as that? A. Plenty of them. Q. Under the conditions that have existed within the last four years? A. Plenty of them. Q. When I speak of a monopoly I mean one that may ojjerate under the privilege of patents, as well as a monopoly that oper- ates by the extinction of competition? A. I should say plenty of them. Q. Now, excluding patents from your answer, are there busi- nesses that during the last four years have been able, in your judgment, to make 16 per cent, upon the capital invested, that are not themselves monopolies, and control both price and market? A. I think so; coffee is one of them, I think. Q. Is that why you went into the business? A. That is one of the reasons. Mr. Lexow: That will be all, Mr. Havemeyer. In case the com- mittee would like to continue the line where you have refused or failed to give an answer, we will be obliged to you if you will at- tend again; we don’t subpoena you. Witness: May I have the privilege of revising the testimony. You know, the questions are rather long, and sometimes perhaps 94 [Senate. I did not grasp them. You will understand I am not accustomed to cross-examination and perhaps I did not grasp the meaning of Ihe question . Mr. Lexow: I understand. We do not want to take advantage of any misapprehension on the witnesses’ part. The Witness: My department is not the mercantile, and so I am a little ignorant in regard to a great many of these matters. By Mr. Warner: Q. You generally attend the meeting of the board of directors of your company, do you not? A. Yes, sir. Q. How often do you meet here in the city? A. Meet once a year . Q. At those meetings, the manner of conducting your company is brought up before the directors and passed upon by them, is it not, and discussed? A. Well, we have two committees, a mercantile committee and a refining committee, and where there are subjects connected with the different branches of the busi- ness, they are referred to these committees and they are supposed to run it; for myself, I would have to consult on my part the committee upon refining, and I would not consult the committee upon mercantile position. Q. Don't those sub committees report to your board of direc- tors A. Once in a while, yes, sir; but the sub-committees are the board of directors. Q. Well, you hold meetings here more or less in regard to the general transactions of } r our business, as I understand it? A. I think so, yes. Q. Can you tell how many trust certificate holders there are in your company? A. I could not; how many stockholders. Q. Yes? A. You will have to ask Mr. Searles; I should say it was about 8,000 stockholders; but that is a mere matter of report. Q. What was the aggregate of the capital stock of these dif- ferent companies that were taken into your £5ugar Refining Com- pany originally? A. I can’t tell you. No. 40.] 95 Q. You were a stockholder and director? A. No; I was a stockholder in one or two of them. Q. I understood you to say you were a stockholder in five of them? A. No, sir; those were the companies that went in at the time of the organization; I think at that time I was a stockholder in Havemeyer & Elder's and Donner & De Castro’s; that is my impression ; I don’t thiuk I was a stockholder in any of the others. Q. Can you not give the aggregate amount of capital stock of those different companies that went into the organization origi- nally? A. Not without reference. Q. Well, substantially; approximately? A. I think Mr. Searles could give; I refer to him for information. Q. Is this one Brooklyn firm — one firm that has been shut down here in the State of New York? A. Sugar refinery. Q. Yes? A. Yes, sir; understand there has been no less sugar produced in the State of New York than there was before; we do the same thing now in — we are producing more in our refinery, and we can do it at less cost than we would if that same produc- tion was scattered over four or five different refineries; these re- fineries are kept intact. Q. Who are the trustees of that company? A. H. O. Have- meyer, John E. Searles, Mr. Dick, Wm. P. Thomas, John E. Par- sons, F. O. Matthiessen. Q. Six? A. I think so. Q. What are the terms of their office? A. They are elected by the stockholders for different periods; some two, three and four years, I think; two or three years. Q. Has any of the capital been created by certificates of divi- dends? A. No, sir; not to my knowledge. By Mr. Lexow: Q. In addition to the Mollenhauers isn’t there a Yonkers con- cern. did you mention that on your former examination? A. Yes; that is the National. Q. Those are the only refiners in this State not in your combi- nation? A. I think so. 96 ' [Senate, Q. Arc- you prepared to say under oath that there is no agree- ment arrangement, verbal or written, between these concerns and yourself, as to the maintenance of price or as to the fixing of price of sugar ? A. So far as I know, sir, I am willing to swear that there is no such agreement; I know of no such agreement. Q. Who of >our company would be the officer entrusted with the making of such an understanding or arrangement? A. My brother has charge of the mercantile business; he would be the • me. By Mr. Mazet: Q. In regard to the refinery that was closed, who passes upon that question as to the advisability; does that come in your de- partment? A. Yes. Q. How much of a saving was made to the company by closing that refinery? A. Oh, I suppose; I don’t know the figures, but quite largely. Q. What is the average weekly pay roll of the refinery? A. I couldn’t give you that; I couldn’t tell you. Q. Just approximately, if you can give it? A. Quite large; you mean the one that was closed? Q. Yes? A. Oh, as I say whqn you spoke of the other concern, that is in Brooklyn. Q. Yes? A. (continuing) I will let you know if you will give — Q. Can you ghe us any approximate figures now? A. No; but in a general way those men were employed in another refinery to do the same work; the economies of doing it in one refinery and production on a large scale were sufficient. Q. You have not capacity in the other refineries? A. We have capacity; it would mean that we would have to run uj)on half capacity; we preferred to keep the other practically; we work one refinery full and can do that more economically than work- ing the half time. By Mr. Warner: Q. Do all the members live in the city of New York? A. I think my brother lives at Greenwich, and I live in New Jersey — No. 40.] 97 that is at least my home; I believe Mr. Dick lives in Isiin or in Brooklyn; Mr. Matthiessen, I think, lives in Irvington. Q. You hold just one meeting in New Jersey? A. Well, we sometimes are called there. Q. Well, generally to elect officers? A. An annual meeting. Q. What proportion of the trust certificates are held by the trustees of the company? A. Oh, I couldn’t tell you that. Q. More than half? A. I can’t tell. Q. Can’t you tell whether more than — A. No; how should I know other people’s business? I couldn’t tell what the trustees in their private affairs are; what their interests are in the com- pany; is that what I understand you? — you want me to tell you, for instance, what Mr. Matthiessen has in stock of the company? Q. What proportion of the trust certificates are held by the trustees of the company? A. Well, there is no — you mean to say a ruling, or anything of that kind? Q. No; what proportion is held? A. I could not tell you. Q. Held by the trustees? A. I would not dare ask one of them. By Mr. Lexow : Q. Mr. Warner means this: Do the trustees control a majority of the certificates of the American Sugar Refining Company? A. I don’t know. Q. You don’t know whether they hold the balance of stock and control the organization at its annual meeting? A. No, sir, I don’t know anything about it. Q. You do not know? A. I know nothing about it. Q. You, in connection with your friends, control that com- pany at the annual meeting of stockholders; is that so? A. I don’t know. Q. Don’t you vote yourselves in as directors? A. No. Q. Who does it? A. The stockholders. Q. Well, don’t you cast your ballot as a stockholder to vote in meetings? A. A proxy is sent out requesting the stockholders 7 98 [Senate, to send their proxies to certain people, and the proxies are re- ceived; that is how we vote; that is all I know about it. Mr. Lexow: That is all. The committee does not wish to be unaccommodating in insist- ing that its subpoenaes issued be obeyed. We will insist that Mr. Searles be here at two o’clock this afternoon for examination. We will now take a recess until two o’clock, and the witnesses subpoenaed will please attend again at that time. Henry O. Havemeyer being duly sworn, testified as follows: Q. Where do you reside? A. Greenwich, Conn. Q. Are you President of the American Sugar Refining Com- pany? A. I am the President of the American Sugar Refining Company of New Jersey, incorporated under the laws of the State of New Jersey. Q. The American Sugar Refining Company of New Jersey — is that the name of the company? A. Yes, sir. Q. And have been President since the organization of the com- pany? A. Yes, sir. Q. Your company is a consolidation of four existing compan- ies, or rather of eight existing companies? A. It is not. Q. What is it then? A. It is a company organized under the State of New Jersey, the corporation laws. Q. And the assets that were transferred to the New Jersey cor- poration were the assets of the eight existing corporations? A. They were the assets that were bought of the different corpo- rations that originally formed the Sugar Refineries Company, known as the Sugar Trust; there were fifteen instead of eight. Q. Firms and corporations? A. Those that had been firms were formed into corporations and these made up the Sugar Trust; the assets, the real and personal property, were bought by the American Sugar Refining Company, a corporation organized under the laws of the State of New Jersey. Q. Did there not exist prior to the organization of the New Jersey Company an agreement between the various interests which were organized into that company, did there not exist an No. 40.] 99 agreement? A. There existed an agreement between the stock- holders of the various companies known as the Sugar Trust; there was no agreement between those stockholders and that company, so-called, and the American Sugar Refining Company. Q. There was an agreement between the owners of the assets of the companies that were purchased by the American Sugnr Refining Company to undertake this organization in the State of New Jersey, was there not? A. There was some sort of a re- organization committee and an agreement between the certificate holders, I believe; what the exact legal phase of it was I have forgotten. Q. When did this so-called Sugar Trust come into existence? A. In October, 1887. Q. And operated as such until when? A. The first of January, 1891. Q. At the time of the organization of this New Jersey com- pany? A. Yes, sir; the New Jersey Company was organized in January, 1891. Q. What constituted the elements of the so-called trust, corporations or firms? A. Only corporations, the stock of which was held by the so-called Sugar Trust. Q. Firms were existing prior to that time and were incorpo- rated at the time of the organization of the Sugar Trust and the stock of the various corporations were placed in the hands of the trustees; is that not true? A. Correct. Q. That was the principle upon which it was organized? A. That was the actual form. Q. How many organizations were there that were part of the so-called original Sugar Trust? A. I believe about fifteen. Q. What was the capital stock of those fifteen concerns? A. I am not able to say. Q. Have you any data that will enable you to state? A. I think it may be furnished; yes, sir. Q. Those figures are obtainable? A. Yes, sir. Q. Are they in the custody or possession of the American Sugar Refining Company? A. I think they are embodied in the testimony given before previous legislative committees. 100 [Senate. Q. Is that the only place where you know they are obtainable now? A. I think they can be obtained from those who are in- terested in these different companies. Q. Where is the original document or agreement that you have mentioned? A. I doubt its existence at present. Q. When did you last see it? A. About eight years ago. Q. Have you seen it since? A. No, sir. Q. Where was it then? A. In the custody of Counsel John E. Parsons. Q. You have not seen it since? A. No, sir. Q. What did the capital stock of those various corporations represent at the time the so-called Sugar Trust, as such, was organized? A. It represented the assets, both real and personal, of the respective companies. Q. How have these figures been fixed? A. They have been fixed by the individual preferences of those who formed the com- pany without regard to actual value. Q. How many of those fifteen companies were you interested in at the time of the organization of the Trust? A. Two. Q. Those who compose the Board of Directors of the American Sugar Refining Company — were they the controlling spirits in the fifteen companies that were in the Sugar Trust Combination? A. I think the power was invested by the deed; that would ex- plain exactly what their power were; I have forgotten what their powers actually were. Q. What I mean is this: Were those who constituted and were directors of the American Sugar Refining Company the controlling spirits in the original fifteen companies that com- posed the Sugar Trust? A. I think it may be so assumed. Q. Don’t you know it as a fact? A. I know that when you operate under a deed that it ought to be produced; you should not tax the memory of a witness on such matters; I don’t know it as a fact. Q. Where is the deed? A. I don’t know where the deed is, I told you. Q. Is that all that has governed for years what is called the No. 40.] 101 Sugar Trust, a deed; you say you have no personal recollection— I am asking not about the contents of tbe deed, but about your personal recollection; have you, as one of tbe present officers and trustees of tbe American Sugar Refining Company, any recollection as to whether tbe present officers and trustees of tbe American Sugar Refining Company were tbe controlling spirits in tbe fifteen companies that composed tbe Sugar Trust, originally? A. Whether tbe Board of Directors of tbe Ameri- can Sugar Refining Company of New Jersey were tbe same Board of Trustees as the Sugar Refineries Company, so-called? Q. I am asking you now as to your recollection, not as to tbe con- tents of tbe deed? A. I should say that six of tbe present di- rectors of tbe present company were in tbe Sugar Trust deed, and tbe seventh has been added since, Mr. John E. Parsons. Q. You say your recollection is that Mr. Parsons was tbe only addition to tbe Board? A. They have been diminished; tbe for- mer deed bad nine; tbe present Board has seven, six of which were with tbe nine and they with Mr. Parsons constitute tbe seven in tbe Board of Directors of tbe American Sugar Refining Company. Q. You were active in the creation of that Sugar Trust? A. I was not particularly active; I tvas one of tbe parties interested. Q. Were you a member of tbe Board or Committee that made tbe appraisal of tbe value of tbe properties that entered into that Sugar Trust combination? A. No, sir. Q. You were not? A. No, sir. , Q. Can you state who they were? A. I don’t know of any such Board. Q. Who fixed tbe values of the properties that entered into that combination? A. So far as Havemeyer & Elder and tbe De Castro & Donner companies, tbe only ones with which I bad any contract whatever, the members of tbe Board, by repre- senting tbe stockholders of tbe different companies. Q. And did you accept without investigation or inquiry tbe appraisals fixed by the other thirteen concerns that became part of that Sugar Trust? A. We operated under a deed, which was presumably satisfactory to everybody that went into it. 102 [Senate. Q. What I desire to elicit from you is just howi you reached the valuation or figures then entered into that Sugar Trust com- bination? A. By agreement between the stockholders of the different companies. Q. You were a party to that agreement representing your in- terest? A. Yes, sir. Q. You fixed the value of the interests pooled by you and your associates? A. Yes, sir. Q. Did any of the other thirteen concerns fix the valuations of their properties without inquiry or investigation to ascertain whether those values were reasonable, fair and proper valua- tions? A. They did. Q. Without any inquiry or investigation? A. Without the slightest. Q. Are those figures contained in that deed to which you have referred? A. I believe so. Q. And that is the only document, do I understand you, that contains any reference to the values upon which the various properties were taken into the Trust? A. So far as I know. Q. Can you recollect the total of these valuations? A. I be- lieve it was $50,000,000, less 15 per cent. Q. What did the 15 per cent, stand for? A. Something to re- main in the treasury for the acquisition of other plants. Q. Do I understand you to say that 15 per cent, of the total remained in the treasury as a fund for acquiring additional plants? A. For additional plants and the necessary improve- ments of the business. Q. Can you give the date of that transaction; do you remem- ber? A. I believe it was in October, 1887. Q. Did you have before you at the time, or was there in exist- ence to your knowledge any schedule, report or other document showing the actual amount of invested capital of the fifteen or any of the fifteen companies that went into that combination? A. I never saw any. Q. Did the $50,000,000 of capital represented by the trust cer- tificates represent an equivalent amount of the stock of those No. 40.] 103 fifteen companies to which you have referred? A. It was largely in excess of the par value of the stock, but not of its actual value. Q. How much was the par value of the stock? A. I am not able to say; it was very small compared to the aggregate of the certificates issued against it. By Mr. Mazet: Q. Was that an arbitrary sum, or how did you reach that par- ticular sum? A. They thought it was the value of the property that was going to be issued against it. By Mr. Lexow: Q. Less 15 per cent.? A. Yes, sir. Q. Did you fix the amount by reference to the actual value of the assets or by any quotations of the stock of the companies con- cerned? A. I think the assets coupled with the good will made up the aggregate. Q. And without reference to the market quotations of the stocks of those companies? A. Without regard to whether there was any market quotations for any of them. Q. Was anything beyond the share certificates of those fifteen companies turned over to the Trust? A. The entire stock of those different corporations was turned over to the Trust. Q. So all that the Trust had was the share certificates of those fifteen companies, and the trustees issued against those share certificates $50,000,000 of trust certificates, less 15 per cent.? A. Yes, sir. Q. Have you any data whereby you can furnish the committee with the face value of the stocks of those subsidiary committees? A. I have not. Q. Were the trust certificates increased from 1887 until 1891? A. No sir. Q. Remained the same? A. Yes, sir. Q. The constituents — the constituent companies? A. There might have been an addition; I cannot recall. 104 [Senate, Q. Did any of those subsidiary companies increase their capi- tal stock during the continuance of the trust? A. No, sir. Q. There was no change in the capital? A. No, sir. Q. Did you acquire any additional properties? A. Very likely. Q. Do you remember whether you did or not? A. I can not recall. Q. You have stated that you organized the American Sugar Refining Company of New Jersey in 1891; that took the place of the Trust, did it not? A. It succeeded to the Trust property. Q. By a transfer of the assets? A. By a purchase. Q. A purchase from the subsidiary companies of the assets held by those companies? A. I believe that was the form. Q. You dissolved the Trust by giving back to the shareholders another lot of stock certificates which were given in proportion to the representation of the subsidiary companies in the trus- tees’ hands? A. No, sir; I don’t think that was the form in which it was done. Q. How was it done? A. I think the certificates of the Sugar Trust were surrendered to a reorganization committee which incorporated this new company in New Jersey and then bought out the assets, bought real and personal, of those different com- panies and so acquired under a legal title what those different companies had held under a legal title in the different states in which they were incorporated. Q. There was a receivership at the time for the North River Refining Company? A. I believe there was a receivership ap- pointed for that company. Q. And the court had adjudicated against the Trust in that suit? A. That had no reference to the formation of this new company; the Court of Appeals decided the legality of the Trust; it was under that decision that we reorganized. Q. Was there any change except in form? A. It depends up- on what you call legality, as against illegality; the Court of Ap- peals held that we were illegal and we became legal. Q. By the transfer of assets to this New Jersey corporation? A. After a purchase at actual values. No. 40.] 105 Senator Lexow: I assume that. Q. You organized with a capital stock of $75,000,000? A. No, sir; $50,000,000 was the amount. Q. Originally? A. In 1891; subsequently increased to $75,000,000. 1 Q. Did you receive at the time of the organization any assets other than those theretofore controlled by the so-called Sugar Trust? A. The corporations of those different companies that went into the Trust are not controlled by the Trust; I have al- ready said that the deed gave power to the trustees of the Sugar Trust to take over the property, together with the properties ac- quired after the formation of the Trust and before 1891, that con- stituted all of the property that went into the New Jersey cor- poration. Q. So that there may be no mistake: then the New Jersey cor- poration acquired by purchase all the property held by the then existing or theretofore existing Sugar Trust and nothing beyond that? A. Precisely. Q. It issued $50,000,000 of stock? A. About that. Q. Was an appraisement made at the time of the issuance of the stock, or before its issuance, of the value of the properties received? A. I cannot answer as to that; I have no recollection. Q. Were you one of the directors of the Refining Company, originally; I mean the New Jersey Company. A. Yes, sir. Q. One of the incorporators? A. Yes, sir. Q. You were active in securing the transfer? A. Yes, sir. Q. Do you remember whether in the making of that transfer and the issuance of the stock of that company, any schedule or appraisment of the value of the properties of the so-called Sugar Trust was made prior to the issuance of the stock? A. I cannot say exactly the form it took. i Q. What is your best recollection? A. My recollection of that is that the board of directors considered the property that was to be transferred fully equal in value to the stock to be issued against it or for it without additional appraisement. Q. Do you know how they reached that conclusion? A. They 106 [Senate, had been familiar with the concerns for four or five years; I think through the several investigating committees that had ex- amined into the value of this property and had satisfied them- selves that it was fully if not more valuable than the price they paid. Q. The capital stock remained at $50,000,000 until when? A. I believe that it was in 1893 that it was increased. Q. About how much? A. $25,000,000. Q. You heard the testimony of your brother this morning with reference to the purchase of the four Philadelphia concerns; was that $25,000,000 of stock issued for that purpose? A. Consid erable of it was; the greater part of it. Q. Was all that was issued issued for that purpose? A. Yes, sir. Q. Then you have some two or three millions of stock still in the treasury? A. The issued stock-capital I don’t think was $75,000,000. Q. It is $73,936,000 — is that right? A. Undoubtedly. Q. Then all this additional stock went into the transfer of that property? A. I think so. Q. When you issued stock for that purpose and fixed the value of the Philadelphia concerns did you have an appraisement or investigation made for the value of those Philadelphia proper- ties? A. I believe there was something of the kind. Q. Was a committee appointed? A. I am not sure about that. Q. Or were you the committee? A. I was not the committee. Q. Did you transact the business and make the deal? A. No, sir. Q. At what figure was the stock put into that transfer or pur- chase? A. What stock? Q. The $73,936,000 of stock? A. It was put in at par. Q. Was it not put in at fifty cents on a dollar according to the valuation of the property as then fixed by you and your asso- ciates? A. It was not; it was put in at par. Q. Do you mean that you and your associates estimated the No. 40.] 107 value of that Pennsylvania property at §23,936,000? A. Yes, sir. Q. Were those incorporated concerns? A. Yes, sir. Q. What was the stock capital of those concerns? A. I have forgotten. Q. Has that been the subject matter of inquiry by any other investigating committee? A. Yes, sir. Q. Have you given any figures as to the stock of those four conpanies? A. I believe so. Q. To what committee? A. Perhaps I am wrong; in the Pennsylvania courts where the legality of this thing was at- tacked by the state all that data was furnished, I think; we are willing to furnish the committee with anything of that kind it desires to have. Q. If you will then furnish the committee, to-morrow, with the data referring to the amount of stock originally issued by the fifteen constituent companies of the Sugar Trust and the amount of shares in capital of the four companies absorbed by the New Jersey Company in 1893, we would like to have the testimony to-morrow without subpoena? A. I shall furnish the testimony but you must give me more latitude than to-morrow; those peo- ple are not accessible. Q. Is it not in the archives of your company? A. I think not. Q. What those original companies represented? A. It may be. Q. We would like to have you furnish that information to- morrow? A. If such information is in our possession we will furnish it; it is in the custody of Mr. Searles; we will furnish it to the committee. Q. Have you any recollection of the shares, par value, of the four companies that were absorbed by you in the year 1S93? A. No, sir; it had no fixed ratio to any actual value; one company might have a million and a half and ten times the assets of another company with two millions; so that I have not that amount in my mind. Q. Can you state what the share value or the par value of the 108 [Senate. shares of the fifteen companies and the four companies that have been mentioned — the original par value of their stock, approxi- mately? A. I cannot; that I propose to furnish. Q. It was very much smaller than the capitalization of the New Jersey Sugar Refining Company? A. Very much. Q. You control the sugar market, do you not? A. We do not. Q. You fix the price then, don't you? A. We do not. Q. Is it not true that the American Sugar Refining Company has, since 1893, fixed the price of refined sugars for the United States? A. It is not the fact. Q. Have you any arrangement with the Mollenhauer concern in this State? A. None whatever. Q. Or with the National Company? A. None whatever. Q. Nor with the St. Louis? A. None whatever. Q. You testified before the United States Senate Committee in 1894? A. Yes, sir; I rely upon you for the date. Q. It was in June, 1894? A. (No answer). Q. Did you organize the American Sugar Refining Company for the purpose of controlling the product and fixing the price of refined sugar in the United States? A. We did not. Q. Nor was that one of the objects of your organization? A. It had nothing to do with it. Q. Are you able to control the product in the United States? A. We are not. Q. Are you able to fix the price for the product in the United States? A. We are not. Q. I now read from your testimony given before the United States Senate Committee in answer to questions of Senator Al- len, “The American Sugar Refining Company is able to control the price of sugar sold in the United States, Mr. Havemeyer, is it not? A. No, sir; up to the importing point it is.” Q. Were you correct when you made that answer? A. I think we were at that time. Q. You were at that time? A. Yes, sir. Q. What change has arisen between the conditions of manu- facture in 1894 and the conditions in 1897 which has altered your No. 40.] 109 testimony given at that time? A. There has been an increased competitive capacity due to the building of new refineries. Q. How many new refineries have been built? A. I think the Mollenhauer and the McCahan; the National was built since then. Q. You state that the Mollenhauer, the McCahan and the Na- tional; what is the total product of those three competitive con- cerns? A. That I don’t know. Q. Have you any knowledge on that subject? A. None. Q. Do they compete with you in the markets on the question of price? A. They do. Q. Is their price exactly the same as the price you charge for the sugars? A. It is not. Q. How does it differ? A. It is generally a little lower. Q. And is it so now? A. Yes, sir. Q. You keep yourself informed with reference to the product of competing concerns, do you not? A. No, sir; I do not. Q. Who in your business does? A. I don’t think that is the function of anybody in our business. Q. You keep no statistics officially with reference to the prod- uct of competing concerns? A. No, sir; we do not Q. Either by the day, the week, the month or the year? A. We do not. Q. You state that the New Jersey Sugar Refining Company was not organized for the purpose of controlling the price, prod- uct or markets; is that your positive recollection? A. Certainly it is. Q. And that is as true to-day as it was in 1891 when you incor- porated the American Sugar Refining Company? A. It has been always so. Q. There has been no change in the situation ihat would change that object? A. You ask if it was the object for which the company was formed; that object has not changed. Q. It never entered into the organization of the company or the conduct of its business? A. Not that I am aware of. Q. I call your attention to the testimony that you gave before The United States Senate Committee in answer to Senator Allen: 110 [Senate,, “ Q. When you sell in this country you control the price? A. “ Yes, sir. “ Q. And it was organized, as I understand it, with a view of “ controlling the price and output to the people of this country? “A. That was one of the objects of consolidation. “ Q. And you have succeeded in doing it? A. Yes, sir. “ Q. That was the principal object in organizing the American “ Sugar Refining Company? A. It may be said that that was the “ principal object.” Q. Mr. Havemeyer: To control the price? A. Mr. Lexow: Yes, sir, “ Q. And making money incident to that control? A. Yes, Fir.” Mr. Havemeyer: Did I say “control of price” or “control of output?” Mr. Lexow: “Control of the price and the output.” Mr. Havemeyer: I don’t think that is right. Q. Do you wish to change the testimony that you gave before the Senate Investigating Committee? A. I would have to read it myself. (Witness reads testimony given before Senate Committee.) A. It certainly does appear that at that time that was my un- derstanding of one of the objects of the formation of the Ameri- can Sugar Refining Company. Q. You say there that it was the principal object; do you mean to say now that your recollection of the object of the organization of the American Sugar Refining Company in 1891 — do you mean to say now that your recollection is better as to the main and principal object of that organization than it was in 1894 when you gave this testimony? A. I would answer by saying that when I gave that testimony that was in my mind; and I answer now what is in my mind; that is not in my mind now. Q. Then this testimony was true that you gave before that com- mittee? A. That is the way that I -felt at that time, undoubt- edly. Q. Therefore we start out with the proposition that the main No. 40.] Ill object of the organization of tbe company was to control the pro- duct and to control the price of refined sugar in the United States? A. No, sir; I think that is too broad; the intention was to control the output of their product and the price of their pro- duct. Q. That would control, under the circumstances, as you control the company? A. Undoubtedly. Q. Therefore the organization of a combination of interests, all of which you controlled at the time of the organization, could not have been for the purpose of controlling their output or their price? A. How could I control the output or the price of any other refinery? It goes without saying that a man who produces SO per cent, of an article can control the price by not producing; the price must advance if he does not produce; and it must de- cline if he does produce, if he produces more than the market will take; I do not see any significance in contrasting the evi- dence. Q. You were asked by me as to whether or not one of the ob- jects of the organization of the New Jersey Company was to con- trol the price and the product. You said in answer to my question that it was neither; that you had no intention of controlling the price nor the product. In the United States testimony you state that that was the main object of consolidation; that is to say, to control the price and the product and the refined sugar of the United States? A. I am willing to admit either phase; as far as the object is concerned it goes without saying that a corporation that controls SO per cent, of the product does control the market price up to the importing point, if he chooses to exercise that power, for it goes without saying that that same power can be exercised to diminish the price; when you ask whether it was the idea in mind on the formation of the company, I would say that I do not think it was; that testimony wants to be read in connec- tion with what went before it and with the objects of that inves- tigation. Q. Then, according to your present version of it, in any event, whether it was your object or not, that object was reached by 112 [Senate, reason of jour controlling 80 per cent, of the product; you do in fact control the product and price in the United States? A. We undoubtedly do. Q. You do it by reason of the consolidation of the interests which can produce 80 per cent, of the refined sugar of the United Staes? A. I do not know what the consolidation of interests has done; we do through the fact that we refine so much sugar. Q. You have brought under one head and under one direction, through your company, the agencies that produce 80 per cent, of the refined sugar? A. We might do as we did at one time, control 95 per cent, of the sugar; and the Supreme Court has de- cided that it is perfectly legal to do it. Q. I understand you to say that you produce 80 per cent, of the refined sugar? A. From 75 to 80 per cent. Q. When you entered upon the Sugar Trust arrangement in 1887 you had numerous competitors in the market, did you not? A. In amount greater, so far as output, than to-day; in numbers fewer. Q. That is to say that each of those fifteen companies was un- deniably competing in the market for the sugar trade? A. Do you mean when we formed the Trust? Q. Before? A. Yes, sir. Q. And the formation of that Trust removed that competition? A. To a very great extent. Q. To the extent of those fifteen companies? A. Not absolute- ly; the companies were all controlled by separate members and they had their own views of matters; but practically yes. Q. Didn’t the price of sugar decline materially prior to 1887 — prior to the time of the formation of this so-called Trust? A. A year or two previous it was slightly lower; for a period of ten years it was slightly higher. Q. After the formation of the Sugar Trust the price of I’efined sugars was increased? A. Slightly advanced. Q. As a matter of fact the price of refined sugar — I am speak- ing with reference to your particular interests — has increased from the time of the organization of the Trust down through the No. 40.] 113 organization of the American Sugar Refining Company, has it not? A. Oh, no; it has been up and down. Q. I am not speaking now of the price of sugar itself; I am speaking of the difference between the price of raw material and the refined sugar, which is the margin of profit that you have; is it not true that the price, although sugar has declined, has either remained stable or has increased during that period of time? A. I should answer that question by saying that the margin upon raw and refined sugar since the formation of the Trust has been considerably lower than it was for a corresponding period before; I cannot go into details of three-quarters of a cent; to-day a cent and a quarter; last summer it went up; but the average price to the consumer, that is to say, the margin between the raw ma- terial, out of which the manufacturing expenses are to be paid and a profit paid to the stockholders, has been considerably lower than it was for a considerable period before the formation of the Trust, irrespective of all statements to the contrary. Q. Have you got figures, or do you keep figures, that show the price of raw material during the years from 1887 down to the present time contrasted with the prices of the refined product as put upon the market by you? A. Yes, sir. Q. Will you furnish those figures to the committee? A. Yes, sir. Q. To-morrow morning? A. I presume to-morrow morning; I do not want to come down unless I am urgently requested. Q. You have those figures, of course? A. They have been made up for Washington. Q. How many of those constituent companies were closed up after they became part of the American Sugar Refining Com- pany of New Jersey? A. I guess half a dozen. Q. Located w 7 here? A. I think there were two in Boston; the Donner & De Castro Sugar Refining Company was not in operation at the time of the formation of the Trust; that was an error of Mr. Havemeyer on the stand this morning; it was closed and remained closed; I think there was one in New Jersey. 8 114 [Senate, Q. When you bought out those Philadelphia concerns, did you buy out Mr. Spreckels in Philadelphia as well? A. Yes, sir. Q. He was an active competitor against your company at the time? A. Yes, sir. Q. And most active at that time? A. No, sir; the Franklin was more than he. Q. And paid him in stock of the American Sugar Refining Company? A. Yes, sir. Q. At what valuation? A. Do you mean what he obtained? I do not exactly know. Q. Do you compete with Mr. Spreckels now? A. Mr. Spreckels has no refineries. Q. Does your sugar come into competition with his? A. He has no refineries. Q. Has he not one? A San Francisco refinery? A. Yes, sir. Q. He has one in San Francisco, California? A. Yes, sir. Q. Do you ship sugar west of the Mississippi in competition with him? A. Yes, we ship sugar to the Missouri river. Q. When did you stop shipping west of the Missouri? A. We never shipped a pound there in our lifetime. Q. Did you have any understanding or agreement at the time you bought out the Philadelphia concerns that you would not compete -with him west of the Missouri river? A. Nothing of the kind. Q. No agreement? A. No, sir; we cannot compete geographi- cally or physically. Q. It depends on that entirely? A. It depends on the Rocky mountains; it costs us a cent and a half where it costs him one- half that; the idea of competition is out of the question. Q. Have you any sugar refineries in Louisiana? A. Yes, sir. Q. Are there factories in Louisiana competing against you? A. About 250. Q. Refineries? A. Yes, sir. Q. In Louisiana? A. Yes; located on estates. Q. Small affairs? A. That is a question of what is small and what is big. Xo. 40.] 115 Q. Do you know how much they produce? A. They produce more than we do. Q. In Louisiana? A. Yes, sir. Q. You don’t mean to say that; do you fix the price there? A. Only for our own product. Q. Do you fix it for the rest of the refineries? A. We fix it for nobody but ourselves; it goes without saying that when we fix the price they do not undersell it but a very little. Q. The situation is substantially this: When you fix the price, whether you desire to do it or not, you actually do fix the price for the rest of the country? A. There is no doubt about it. Q. And whether you do it directly or indirectly the fixin g of the price by you means the fixing of the price of every other com- pany, whether competitive or not? A. That is undoubtedly sub- stantially the way it works. Q. So you have reached that condition in your development where you exercise a practical monopoly of product and price? A. Well, fortunately, the term "monopoly” has been decided by the Supreme Court, and under that decision there can be no mo- nopoly in the sugar business; they have held that there can be no monopoly without restriction; I do not care to put my person- al judgment against that of the court on this particular word; we do not restrict anybody from going into the business; so that we may control ninety-nine per cent, and yet not be a monopoly. Q. I understand that distinction ; you mean the Supreme Court distinction? A. Yes, sir. Q. You say now you have adopted it? A. Yes, I have adopted it. Q. You undertake to control the price of the product and the output? A. We don't; we undertake to control what we want to market; what we want to sell; we have our exclusive business, irrespective of what anybody else does; how it operates, that is for them to determine ; we look out for our own interest. Q. You admit that it operates that way whether you under- take it or not? A. I candidly confess that I think it does. Q. You know the Woolson Company of Ohio? A. I do. 116 [Senate, Q. Were you active in securing an interest in the capital stock of that company? A. I was. Q. When I speak of your being active — you were the gentle- man who did it? A. I did it. Q. Did you do it on behalf of the American Sugar Refining Company of New Jersey? A. I did not. Q. You did it in what capacity? A. Member of the firm of Ilavemeyer & Elder. Q. The Woolson Company is a coffee concern? A. Yes, sir. Q. Do you know Arbuckle & Co.? A. I do. Q. That is a concern that is competing against you in the sale of sugar — of refined sugar? A. No, sir. Q. Do you mean that their competition is so trifling that you do not call it competition? A. It is not in competition in any way; they are wholesale grocers; they sell our product as factors, as agents. Q. Only your product? A. I don’t know what other business they do; I only know their relation to our company. Q. Did they engage in the refining of sugar? A. No, sir. Q. At no time? A. No, sir; at no time. Q. Did you refuse to sell them sugar? A. Never. Q. Do they buy sugar from others except yourself, that you know of? A. I understand they do, largely. Q. And do? A. And do. Q. Is that sugar in competition with yours? A. In competi- tion with our product as grocers. Q. In whatever capacity, the effect of it is that they entered into active competition with you and sold the product of refiner- ies in competition with your sugar? A. As everybody else does; in no other respect. Q. They do in small quantities? A. Their business with other companies is very much in excess of what they do with us. Q. They sell considerable sugar? A. Yes, sir. Q. They have sold it in competition with your product? A. If you call that competition; I was presuming that you meant the competition of sugar refining; I do not consider that if a No. 40.] 117 grocer buys somebody else’s sugar that you regard him as a com- petitor; we have over 3,500 competitors on that line. Q. Have you any agreement with grocers requiring them to buy from you and no other refining concern? A. No, sir Q. Did you threaten the Arbuckles that unless they refrained from further competition that you would engage in the coffee business? A. No, sir. Q. How long ago was it that you discovered that the Ar- buckles were buying refined sugars largely from your competi- tors and selling it in competition with your product? A. It has been their practice for twenty years. Q. Didn’t it increase lately? A. Not at all; you mean their purchase of others? Q. Yes, sir. A. I presume it did. Q. Don’t you know as a matter of fact that it had increased largely prior to your purchase of the interest in the Woolson stock? A. Yes, sir; I know all about it. Q. And you bought the Woolson stock on that account. A. Not at all. Q. Have you not stated that that was your object in purchas- ing that stock? A. I have not so stated; it is not a fact. Q. How long after you ascertained that the Arbuckles were increasing their purchases largely from competing refineries was it that you purchased this interest from the Woolson Company? A. The purchase of the Woolson Company had nothing to do with any such action; I cannot give dates. Q. When was it that you discovered that the Arbuckles were purchasing very largely of competing companies? A. I think it was about six months ago. Q. When did you buy the interest in the Woolson Company? A. About two months ago; one had no relation to the other; I can tell you what induced the Arbuckles to shift the bulk of their trade; you better have it from me while I am here and not take it all from him; you will please excuse the suggestion; in consid- eration of our barrel factory taking empty barrels from John Arbuckle for twenty cents each he continued his business with 118 [Senate, us; a competing refinery, Mollenhauer, offered him twenty-two cents and he shifted his trade from us to them; it had nothing whatever to do in any shape or manner with the purchase of the Woolson plant. Q. You found out the fact of his shifting about sis months ago? A. I think it was that; we were much surprised to lose his trade, as our relations have been close for twenty-five years. Q. His trade is a large and valuable trade? A. Undoubtedly; is to-day. Q. And three months after you discovered that fact you bought an interest in the coffee concern in the State of Ohio; was that simply a coincidence? A. That is all; it had nothing to do with it. Q. Did you engage in any other commercial enterprise of a mercantile character excepting the sugar business? ■ A. No; never had any such desirable business presented to us. Q. Had the profits in the coffee business increased so largely prior to this purchase of yours that it presented an extremely de- sirable field of operation? A. Yes, sir. Q. Just before? A. It was brought to my attention and I dis- covered that it had been for a long time. Q. And is now? A. No, sir; it is not now. Q. Then why did you organize the American Coffee Company to-day in the State of New Jersey? A. Because under the lower- ing of prices we have so increased the demand that we must put up another plant to supply it, which is under construction at this present moment. Q. But if your sole inducement in buying that business arose from the fact that the coffee field presented such a large profit, and you have since ascertained that there is no money in the business, how did you come to organize a large coffee concern in the State of New Jersey to-day? A. I did not say there was no money in it; if it reduces the price there will be a very large amount of money in it. Q. Notwithstanding the fact that the profits are not as large now as they were when you bought the Woolson stock? A. No. 40.] 119 They are not over one-third as large and yet it yields a magnifi- cent income and the innovation has been of incalculable advan- tage to the consumer, over two cents per pound; a monster monopoly in fact has been put upon legitimate business prin- ciples to serve the consumer at the ver3 r slightest amount of profit consistent with fair returns on the capital invested and the brains required to run it. Q. Do you apply that same principle to the American Sugar Kefining Company? A. That is the basis of the whole success. Q. Do you think that is consistent with a situation which discloses during the last four years the earning of a profit of 12 per cent, upon common stock largely beyond the face value of the stock exchanged for it and the putting aside of a surplus in the treasury at the rate of .$2,000,000 a year besides? A. That is the true and rightful significance; and because of that great imposition, the doing of a large business at a very slight profit, the consumer gets the advantage, because the busi- ness can be done at such a slight margin. Q. Then you think the coffee field presents a trade more allur- ing than the figures suggested in my last question? A. I do and propose to continue the coffee business on the same basis and so enlarge the business that instead of a profit of three and four cents a pound, which has prevailed for years, the public will have the benefit of a half cent per pound profit and the invest- ment will still produce a magnificent return; I make that open declaration in court. Q. In what way did the suggestion come to you to buy this interest in the Woolson Company? A. I wrote Mr. Arbuckle a letter when I heard that he was going into the sugar business, telling him that I heard that he was going into the business and asking him if there was anything in our relations that he would like to have changed, and he wrote a cordial letter in which he stated that he was going into the sugar business for mercantile reasons; I then had Mr. Silliken, of the firm of Crosstein Bros., brought to me and I examined into this coffee business and found that the price of coffee had declined six cents during the 120 [Senate, year 1S96, but that Arbuckle bad kept tbe price of roasted coffee so that it only declined three cents per pound; I made up my mind that be bad taken this extra three cents per pound; and I said “ there is a field for me,” and I immediately despatched the gentleman and bought the stock, 1710 out of 1800 shares; he then sent an emissary out there with full knowledge of what had transpired in the reduction of prices and bought sixty-one shares; the court has the matter in abeyance now as to what the decision shall be; we have now increased the output of that plant a thousand bags a day to three thousand bags per day; the profit when we went into the business was three cents per pound and now it is one cent, and the consumer has the benefit and we have trebled the business and the profit is over a cent a pound; is on that basis that it will be continued. Q. Of the Woolson Company you say that you control all the shares but sixty, except what the directors themselves own; now, the illustration that you have made with reference to coffee and Mr. Arbuckle’s relation to it, applies with absolute exacti- tude to the sugar business and your relation to it? A. That is the reverse. Q. Is it not true that the price of sugar has declined very largely and yet the price of refining sugar has been the same or almost the same? A. That is the reverse; the raw has declined and the refined is probably as low as ever known in the history of the country. Q. What was it six months ago? A. It was a cent a pound, if not more; I cannot give the exact figures. Q. What was a cent? A. The margin between the raw and the refined. Q. What was it three years ago? A. About a cent a pound. Q. What is it now? A. Three-quarters of a cent. Q. So that it has not been materially decreased in three years spoken of? A. Yes; there is a greater reduction owing to the difference in the tariff; under the McKinley tariff we had one- half; under the Democratic tariff we had one-eighth. Q. Your price was regulated to some extent by the import duty upon sugar? A. Yes, sir, on refined sugar. No. 40.] 121 Q. If, therefore, there has been a reduction in the price of re- fined sugar, it has been due to the removal of the tariff? A. Re- duction in the duty. Q. Then, so far as your concern is concerned, you have main- tained always the same relative figure as to the value of the raw material and the value of the product sold by you, except with reference to duty? A. That is exactly it; barring the ups and downs of trade it does not vary over one-half cent. Q. Then, notwithstanding the consolidation of those numerous concerns, into one, you have not, to the consumer, reduced the margin of your profit? A. I told you that we had. Q. You stated that it was to maintain the percentage of 1 per cent, between the raw and the refined articles? A. Yes, sir. Q. And the only advantage to the consumer has resulted in a reduction of the tariff? A. I said that the price had been some- what reduced by the reduction in the tariff. Q. The only changes are changes made by reduction or in- crease in the tariff? A. I said that the price had been somewhat reduced by the reduction in the tariff; I said that the price to the consumer was much lower than before the formation of the Trust. Q. Much less to the consumer than it was in 1887? A. Yes, sir. Q. Since the formation of the Trust and the New Jersey Com- pany, the margin of profit to you, or the margin between the val- ue of the raw material and the value of the refined article sold, has remained about the same? A. About the same; allowing for variations. Q. Subject to fluctuation owing to changes in the tariff? A. And the ordinary fluctuations of trade and the supply and de- mand. Q. There have been large improvements in the handling of the stuff in the way of improved machinery and in other items that have led to more economical results in the manufacture? A. Yes, sir. Q. So that maintaining that margin during that period of time 122 [Senate, the margin of profit has been very much larger? A. Yes; the net result. Q. Due to these circumstances — the concentration of much of the business in one hand, and the control of the price and the out- put? A. Better machinery. Q. And less expense in the handling; is that true? A. That is it precisely, if you qualify in reference to the maintenance of the output and the price. Q. I was simply using your own expression. A. I said “ our own prices and our own output”; you are using the expression that you charged me with some years ago. Q. Was it simply a coincidence, Mr. Havemeyer, that you learned of the value of this coffee business just after the time that Mr. Arbuckle withdrew his large trade from you? A. No, sir, it had nothing to do with that. Q. Was it simply a coincidence? A. I did not learn it at that time; he withdrew his trade some time last summer, as I was informed; I went into the Spice Company about the first week in December. Q. I understand you to say that you had received a letter from Mr. Arbuckle, friendly in its character, about the same time that you heard of the enormous profits to be made in the coffee business; that six months ago Mr. Arbuckle had withdrawn his trade; that three months ago you purchased the stock in that Woolson Company — is it simply a coincidence that you have gone into the coffee business in competition with the Arbuckle firm a short time after that concern withdrew its trade, or largely withdrew its trade from you? A. Simply a coincidence; it has simply nothing to do with that matter. Q. W T here does your company pay its taxes? A. We pay taxes wherever the real estate is located, and pay taxes on personal property wherever the personal property is located; in New York, Philadelphia, New Jersey, Louisiana — wherever it may be. Q. It does not pay to the State of New Jersey the tax upon the whole of its capital stock? A. No, sir; it pays wherever the property may be. No. 40.] 123 Q. As a matter of fact, although incorporated in New Jersey, your company is, to all intents and purposes, a New York cor- poration? A. Far from it. Q. Have you not your main offices in New York? A. No, sir; the main office is in Jersey City. Q. What do you keep in Jersey City in the way of main offices? A. We keep books, clerks, accounts; the mercantile department is principally in New York. Q. How does the office in Jersey City compare with the New York office? A. The New York office is more magnificent; I would much rather be in New York. Q. How many clerks hare you in New Jersey A. I should say twenty-five. Q. In the city — in Jersey City? A. In Jersey City; that is over the river. Q. Is that the place where your main office is located according to your certificate of incorporation? A. Yes, sir. Q. Is any business of the corporation outside of the transfer books transacted there? A. Oh, yes. Q. Have you a refinery there? A. Yes, sir. Q. And your office is kept in connection with that refinery? A. Yes, sir. Q. Is it on the premises? A. Yes, sir. Q. But your business office where you make your eschanges, where you transact the business of all these companies, all these original companies now included into one, is in New York? A. Where we buy and sell. Q. It is in the city of New York? A. Yes, sir; except that the Philadelphia business is done in Philadelphia; the Louisiana business is done in that State; the New Jersey business in that State. Q. But the clearing house is here, is it not? A. We have no clearing house; the business is not on that order. Q. But you clear for these different concerns through your New York office, do you not? A. No, sir; only the business in New York and Jersey City is run here. 124 [Senate, Q. You mean the books of the .company are kept in Jersey? A. No answer. Q. Do the reports of the other concerns in the company come to your New York office? A. Yes, sir., Q. They are received here? A. They are received here. Q. Isn’t a big part of the business of the whole corporation transacted here in the city of New York; don’t the reports come here to the city of New York? A. I think they go to Jersey City for the corporation books, but they go through the New York office; I think that is the way, but I aru not familiar with that; I don’t pay attention to that part of the business. Q. Do you not keep transfer stock books and books in which you keep reports from the refineries located in other places? A. I think the principal books of the company are kept there. Q. Do you mean books of account? A. No; the books that show the sales and the purchases; the journal and the ledger and presumably the cash book is kept here because our deposits are mostly made here. By Mr. Warner: Q. In January, 1891, when you reorganized, did you change the name of the company; did you change the corporate name? A. We organized a company with a corporate name; the Trust was known as the Sugar Refineries Company. Q. Has your company that same name? A. It is known as the American Sugar Refining Company. Q. Now, these fifteen companies you speak of as having en- tered into this combination or consolidation in 1887— did all the capital stock go into the consolidation? A. There was no con- solidation; there was no combination; there was no capital stock about it. Q. It was a transfer? A. There was a purchase and transfer of the property. Q. There was a transfer of more or less of the stock to the trustees in 1887? A. No, sir; the stock remained in the posses- sion of the trustees of the different companies and the companies were dissolved. No. 40.] 125 Q. Now, these fifteen companies do not retain their corporate character? A. No, sir; they are out of existence. Q. That was done in 1891? A. Yes, sir, or shortly after that they consolidated. Q. Can you give the capital stock of the two companies out of the fifteen that were controlled by you in 1887? A. I cannot. Q. Can you give an approximate idea? A. I cannot. Q. In 1887? A. I cannot. Q. Have yoxi any idea of the approximate capital of those fif- teen companies? A. They all varied; no, sir. Q. You were one of the promoters of the undertaking? A. I promoted my own business, and no others. Q. You know the capitalization of the different companies? A. No, sir. Q. Had no idea? A. It had no significance. Q. You didn't take that into consideration? A. Not the slightest; it had no bearing on it. Mr. Mazet: Q. How was the purchase of those companies paid? A. In certificates of the American Sugar Refining Company. Q. How was the amount fixed? A. By agreement between the buyer and the seller. Q. Irrespective of the actual value of the plant? A. They all thought they obtained full value. Q. You had a valuation? A. No, sir; I merely sold my own; I never thought that I got adequate compensation for mine. Q. You were not interested in what others got? A. No, sir. Q. As a director of the new company did you not have an interest as to whether they were getting more for theirs in proportion? A. I was satisfied with the amount paid for the whole. Mr. Warner: Q. Did those Philadelphia companies give up their corporate character and dissolve? A. No, sir. 126 [Senate, Q. They still hold it, do they? A. Yes, sir; a foreign corpora- tion can hold the stock of a Pennsylvania corporation. Mr. Lexow: Q. AYhat was the object in organizing your company in the State of Yew Jersey when your main business is in the city of Yew York? A. The advantages of organization were very much greater than in Yew York; there was less tax upon the fran- chise; and there was less scrutiny and less investigating into corporate companies; there were many other advantages which the counsel stated; right after the decision of the Court of Ap- peals the legislature of the State of Yew York broadened its corporation act; I think it is now broader than in New Jersey. Q. That in 1892? A. Yes, sir. Q. Was the fact that the Yew Jersey law contained a provi- sion which permitted the purchasing and acquiring of the stocks of other companies and holding them in your treasui’y that you organized in the State of Yew Jersey? A. I believe it had a great deal to do with it. Q. You hold the stocks of these Pennsylvania companies in your treasury under that permission of the Yew Jersey law? A. There is a statute authorizing that. Q. The statute is the same in Yew York? No answer. Q. When you mentioned a suit brought in the State of Penn- sylvania did you mean the Knight suit? A. Yes, sir. Q. Have you got the documents in that case? A. I could get them for you. Q. Will you produce them here to-morrow? A. Monday of next week, you mean. Q. Yo, sir; I mean to-morrow; please make a memorandum of that. Mr. Havemeyer: Will you let me ask the committee whether they attach any importance as to whether the Woolson stock is owned by a New York or a Yew Jersey firm or by a firm of individuals. Senator Lexow: Not at all Q. The simple question was the intent; whether, after finding that the Arbuckles were competing against you in the sugar No. 40.] 127 trade, you purchased the Woolson stock so as to destroy their competition against you in the sugar business? A. That had nothing whatever to do with it; Mr. Arbuckle lias never been a competitor w T itk us in the sugar business; my purpose is, and the American Sugar Refining Company have under serious consid- eration the same proposition, to engage in the coffee business whether the Arbuckles are in it or not; but a three or four cent margin on roasted coffee is at an end. Q. This committee would want to see the utmost competition both in coffee and sugar; and this is interesting because it prom- ises to hold out to the people the benefit of competition in coffee; but if that competition in coffee arises from the fact that you went into it for the purpose of destroying competition against you in the sugar business is an important one for us as legis- lators to know? A. There is no truth in any such statement; nor is there any foundation for it. The Chairman: With the exception of the production of those documents we think that we are through with you, unless Mr. Searles’ testimony should develop some facts about which we should like to interrogate you again. John Arbuckle, being duly sworn, testified as follows: By Mr. Lexow: Mr. Arbuckle, please step aside for a moment. Mr. Havemeyer will please take the stand again. Q. You stated that you had no agreement with customers ex- cluding other sugars? A. We have none. Q. Have you a system of rebates which accomplishes the same purpose? A. We have not. Q. Don’t you give rebates to customers under certain condi- tions? A. We give rebates to factors under certain conditions — our agents. Q. Men w r ho operate between you and the customer, the con- sumer or the retailer, which? A. Either — both. Q. You have factors with whom you have an agreement to give a rebate under certain contingencies? A. Yes, sir. Q. Have you a copy of that agreement wfith you? A. I have. Q. Please hand it to me for a moment. 128 [Senate, Q. This document which I now hand back to you is the notice that you send to your customers? A. Yes, sir. Please hand it to the stenographer. (Marked exhibit A.) THE AMERICAN SUGAR REFINING COMPANY. H. O. HAYEMEYER, PRESIDENT. JNO. E. SEALRES, SECT. AND TREAS. NEW YORK, ,189 . Dear Sir. — We enclose herewith invoice of even date, from which you are entitled to our usual deductions of one per cent, trade discount on one hundred barrel lots, and one per cent, for cash if paid within seven days. Should you so desire we shall be pleased, upon receipt of with- in written request, to constitute you one of our agents, in which case sugar will be consigned to you for sale as our factor, upon the following terms, the title to remain in us subject to your ad- vances and return to you of your necessary outlay: 1. You are to advance to us within thirty days the amount of the invoice, which will be made up at our daily quotations, less one per cent, trade discount on one hundred barrel lots, with the right to deduct one per cent, additional if invoice is made cash in seven days ; the advance to be without recourse to, or reclamation upon us, and to be due in any event. 2. The sugar when sold is to be billed in your name, although in fact as factor for us, and you shall without reclamation upon us, at your own cost, pay all expenses and assume all risks of the property and of payment or collection. You are not to incur any expense on our account. 3. None of the sugar shall be sold or disposed of by you, either directly or indirectly, for less than our daily quotations, with freight added from refining point to point of sale (as per equality rate book), nor on more liberal terms as to credit or cash dis- counts. So long as the foregoing conditions are observed by you we will, upon an affidavit to that effect, pay you a commission of No. 40.] 129 tliree-sixteentlis of a cent per pound, and in addition thereto you shall retain the profit, if any, over the advance made as above provided. In ease of any failure to comply with either of the above conditions no commissions will be payable. Settlements will be made for each month's commissions at the expiration of three months thereafter. All commissions payable for the period preceding the three months will then become due. Payments will only be made as above. This agency is terminable at the pleasure of either party, on written notice. Yours respectfully, THE AMERICAN SUGAR REFINING COMPANY. Mr. Lexow: Q. That is the answer that you expect to get back from your factor or customer before you enter into final arrangements? A. Before we pay money. Q. This affidavit that you require the customer to make be- fore you give him the rebate mentioned in two other documents will be marked (Exhibit C); you require him to make such affi-' davit? A. Yes, sir. State of ss. County of being duly sworn, says: I, as factor of the American Sugar Refining Company, claim from the company a commission of three-sixteenth of a cent per pound (less one per cent, where trade discount has been allowed), upon pounds of sugar consigned by the company to me by invoices, the dates of which cover the period from to inclu- sive. In compliance with the conditions upon which the sugar was consigned to me. and to entitle myself to the commission, I do hereby make affidavit that none of the sugar mentioned in the said invoices has been or will be sold or disposed of by me, either directly or indirectly, for less than the daily quotations of 9 130 [Senate, the company, with freight added from refining point to point of sale, as per Equality Rate Book, nor on more liberal terms as to credit or cash discounts. Sworn to before me this day of , in the year 189 . . Mr. Lexow: Q. Do you and those who constitute the board of the American Sugar Refining Company hold the control of its stock A. I don’t; I don’t know about what they do. Q. Are you iu control? A. I think not. Q. You and your associates? A. I think not; the stock of the American Sugar Refining Company is held by over S,000 stock- holders; it will be perfectly impracticable for anybody to control the business. The Chairman: We desire those papers and figures produced, to which we made reference during your examination. The stenographer will mark this document (Exhibit C). 189.. THE AMERICAN SUGAR REFINING COMPANY, P. O. Box No. 2036, New York City. Gentlemen : W T e are in receipt of yours covering invoice for sugar. We de- sire to be enrolled as your agents and to receive sugar on consign- ment, in accordance with the terms of your letter, and we hereby agree to faithfully maintain the terms and conditions therein pro- vided on all sugar received by us. Yours, truly, No. 40.] 131 Arbuckle, John, recalled. Mr. Havemeyer: As to the amount of stock of these different corporations, I am unable to furnish that. Mr. Searles has that in his custody. As soon as we can get him I will furnish them. By Mr. Bedell: Q. Is Mr. Searles in town? A. I think he is in Washington; I am not aware, however, where he is. Mr. Bedell: I desire to have the stenographer enter upon his minutes the fact that Mr. Searles has been called for here in open session this afternoon, and that he was also called for this morning, and that he has failed to attend, pursuant to the subpoena. Mr. Havemeyer: I may be mistaken in locating him. Mr. Bedell: But he is not here. Mr. Havemeyer: No, sir. Mr. Lexow: Mr. Arbuckle will now take the stand. Q. You have heard some of the questions propounded in rela- tion to the Woolson Company? A. Yes, sir. Q. Are you acquainted with the facts in connection with the matter? A. Some of them. Q. Are you engaged in the coffee business? A. Yes, sir. Q. And sold the sugars of the American Sugar Kefining Com- pany? A. Yes, sir. Q. In connection with your coffee? A. Yes, sir Q. Were you a large dealer in their product? A. Yes, sir. Q. To what extent? A. I do not know really; I do not attend to the buying of the sugars; but it amounted to a large amount. Q. Have you any idea, approximately, of the amount? A. No, sir; I could not give it to you; I could get it from the books; may I explain to save you time; a large amount of this sugar that we bought from that and other companies has been packed into two pound packages by a packing machine and the barrels are returned to the refinery; that is where the great part of our sugar goes to. 132 [Senate, Q. You take the product of the American Sugar Refining Com- pany, or did, and pack it into two pound packages by machinery and sold it in connection with your coffee? A. Yes, sir; separate companies, of course; we have a house in Pittsburg and they buy and sell it by the barrel; but most of our sugar is put into these two pound packages by machinery. Q. Can you give any approximate idea of the amount that you purchase from them? A. We have only one machine run- ning, but when we double our capacity we can pack 60,000 pounds per day; that is during twenty-four hours; some times we run double turn and sometimes only single turn; it depends on the demand. Q. You pack from thirty to sixty thousand pounds per day? A. Yes, in twenty-four hours; in ten hours we can pack 25,000 pounds. Q. And this other concern to which you referred sold it by the barrel; that is in Pittsburg, Pa? A. The firm of Arbuckle Brothers. Q. They also deal with the American Sugar Refining Com- pany? A. Yes, sir; I thing we are dealing with them now. Q. Did you have any misunderstanding with the company? A. To amount to anything, I think once or twice when we didn’t get as much sugar as we wanted; they cut down our orders; that is all. Q. You withdrew your business from the company? A. 1 don’t think so; I think we are buying from them yet. Q. Which member of your concern knows about this? A. The books will show; the books of the broker that buys the sugar. Q. Who operates through the American Sugar Refining Com- pany? A. We generally buy through Mr. Taylor, the sugar broker. Q, Do you do that part of the business? A. No, sir; I have not for a number of years; Mr. Jarvie or another member usually bought the sugars; Mr. Jarvie is here. Q. Do you know anything about the Woolson Company stock? A. Yes, sir. No. 40.] 133 Q. Did yon buy it? A. We have bad one share for a number of years, several years, I think; last June when this trouble arose we bought sixty additional shares; we hold sixty-one shares of the stock of that company. Q. Had you previous to the buying of those sixty additional shares severed your connection with the American Sugar Refin- ing Company, so far as purchasing from them? A. I think we are still buying from them. Q. I am speaking of buying this sugar that you put up into two pound packages, not sugar by the barrel? A. That had no connection with it at all; our buying of that one share was simply curiosity to see how the company was doing; that was held in the firm’s name; they were large competitors of our house and that was the only object that we had in buying that one share; the buying of the other shares were different; we felt that the American Sugar Refining Company was using that as a club to bring us to terms, so that we would not build our re- finery that we now have in the process of erection. Q. You are about constructing it? A. We are working at it now. Q. You bought the sixty shares of stock in the Woolson Com- pany because you believed that the American Sugar Refining Company had purchased the balance of the stock for the pur- pose of holding it as a club over your firm? A. I believe that we can prove it Q. Because you built this refinery? A. Yes, sir. Q. Or because you stopped purchasing? A. We are still buy- ing of them; it is because of our building the refinery; I can ex- plain this; several months ago Mr. Matthiessen, a director of the American Sugar Refining Company, called to see us about pur- chasing the packing machine, and we told him that we had decided not to sell the machine and that we were going to build a refinery ourselves and use these machines; so after talking back and forth he asked how we would like it if they went into the coffee roast- ing business; well, we said that we could not object if they went into it in a legitimate manner; that of course the field was open 134 [Senate, to everybody and that we could not object; but from the way it was spoken we felt that it was an implied threat that if we went on with our sugar refinery that they would go into the coffee roasting business. Q. You went on with your sugar refinery? A. Yes, sir; we are working at it now. Q. They went into the coffee business? A. Yes, sir. Q. Did you have any conversation with any other director of the Havemeyer — the American Sugar Refining company? A. No, sir; not that I know of. Q. Don’t you know that prior to that time you had turned a large percentage of your sugar trade over to a concern competing against the American Sugar Refining Company? A. I suppose the books will show that we are buying as much from them as from any of the others; I think it is so; we can bring you those fig- ures. Q. You heard Mr. Havemeyer’s statement that you had turned over to a competing company, competing establishments, the trade that you had been doing with his company, which was large? A. I don’t think we ever did; we bought from several. By Mr. Bedell : Q. Mr. Havemeyer stated that the reason for that was that they had been allowing you twenty cents for barrels returned and that this competing company had agreed to allow you twenty-two cents? A. I don’t know about that; we always buy our goods where they can be bought cheapest; if we could buy cheaper we would go. Q. Who would know about it? A. Mr. Jamison. Q. Is he here? A. No, sir. Q. Does Mr. Jarvie know? A. I don’t know. Jarvie, James M., being duly sworn, testified as follows: By Mr. Lexow: Q. Are you an employee of the Arbuckle Brothers? A. No > sir; I am a member of the firm. Yo. 40.] 135 Q. Are you familiar with the circumstances surrounding the controversy with the American Sugar Refining Company? A. I believe I am. Q. I asked Mr. Arbuckle questions as to whether you had with- drawn your sugar trade from the American Sugar Refining Com- pany, or diverted it to some other concern ; have you any knowl- edge of the facts? A. I think Mr. Arbuckle’s answer was sub- stantially correct; we buy sugar through Taylor & Co., brokers concern; we leave it pretty much to them whose sugars they buy; there are only two concerns, B. H. How y ell & Co., and the Ameri- can Sugar Refining Company. Q. B. H. Howell & Co., is a Yonkers concern? A. They are the purchasing and selling agents of the Yonkers and Mollen- hauer Companies. Q. Do you know r a western concern competing in this market? A. Yot that I am aware of. Q. Yone of the concerns outside of the American Sugar Refin- ing Company except the tw T o that you have mentioned in this State? A. Yot that I am aware of. Q. You don’t know 7 then from w r hat source your broker' pur- chases his sugar? A. I see every contract that he buys; he sends the contract to our office; and I usually check them off, or Mr. Jamison. Q. You heard the testimony of Mr. Havemeyer that you had withdrawm your trade and turned it over to a competing concern? A. He may be mistaken about that; I am under the impression that he is wrong; I think that we buy some sugar from the Amer- ican Sugar Refining Company. Q. As to volume, w 7 hile you may get some through the broker, don’t you buy the bulk from other concerns? A. I should say that we buy moie from How^ell & Co., than from the American Sugar Refining Company just now. By Mr. Bedell: Q. What w y as the situation prior to six months ago as to the volume that you purchased? A. We bought more of the Ameri- can Sugar Refining Company at that time. 136 [Senate, By Mr. Lexow: Q. Now more of Howell & Co.? A. Yes; I think we buy more of them. Q. You alluded to a misunderstanding between you and the American Sugar Refining Company? A. I would not want to say that; I do not know what they thought of it. Q. State what you know; there was a statement made here that you were allowed twenty cents per barrel by the American Sugar Refining Company and that you got twenty-two cents per barrel from a competing company? A. That is the first that I have heard of it. Q. Is it because you have heard nothing about it; do you state that it is not a fact? A. I would not state that it was not a fact; I know nothing about it; but I am sure that two cents on a barrel did not enter into our buying from another house; we cannot fig- ure quite as close as that. Q. State now, without my putting specific questions to you, what you know about this controversy between your concern and the American Sugar Refining Company; Mr. Arbuckle spoke about an interview that he had with Mr.Matthiessen of the Amer- ican Sugar Refining Company. A. That was in September. Q. Were you present? A. Yes, sir. Q. Wha’t did Mr. Matthiessen say? A. He ended the conversa- tion by saying, “How would you like it if the American Sugar Refining Company went into the coffee roasting business?” Q. What had there been said that led up to that statement of Mr. Matthiessen? A. That we were going to build a refinery; we had made that statement to him. Q. What official relation, if any, does he occupy with the Amer- ican Sugar Refining Company? A. I am under theimpressionthat he is a Trustee or Director; I presume that he is chairman of some of the important committees; I have heard it so stated. Q. F. O. Matthiessen? A. I believe that is his name. Q. Had he come down to you to speak with reference to the business between your concern and the American Sugar Refining Company? A. I think he came with the intention of talking No. 40.] 137 about tiie sugar packing machine; and we had several conversa- tions with him previous to that; they wanted to buy that ma- chine, and he apparently came with the idea of wanting us to name what price we would take for the machine; we told him that we had carefully considered the matter and that we found that we had a good demand for sugar in packages, that particular package, and we concluded that we would build a small refinery so as to manufacture our own sugar. Q. Did you make that statement or did Mr. Arbuckle make it? A. Either one of us made it. By Mr. Bedell: Q. Is that machine patented? A. Yes, sir. By Mr. Lexow: Q. It was in answer to that that he made this implied threat about coffee? A. Yes, sir. Q. What else was said? A. I cannot say anything else than that we told him that he was the first one to know that we had thought of going into the refining business outside of the part- ners of our own firm; that we preferred that the American Sugar Refining Company know it from us rather than from rumor out- side — from outside parties. Q. How long ago? A. In September. Q. Of this year? A. Yes, sir; it might have been in October. Q. How long after that was it that they acquired the Woolson interest? A. I am under the impression that it was early in De- cember. Q. Within sixty days after that proposition? A. That would be ninety days I should say. Q. Are they competing now in the market against you in cof- fee? A. Yes, sir; their business is tied up for the time being in court under an injunction. Q. In the Ohio court? A. Yes, sir. Q. You have no competition with the New Jersey concern? A. No, sir; the first that we heard of it was yesterday. 138 [Senate, Q. Was any word or conversation used beyond what you have mentioned that implied a threat that if you went into the sugar business that they would go into the coffee roasting business? A. Yes, sir; there has been a gentleman whose name has not been mentioned, but whose business was mentioned by a former wit- ness — the man who has charge of the barrel business; he told me that if we insisted on going into the sugar business that they would certainly go into the coffee business, and that the Have- meyers had more millions than the Arbuckles and that it would be a fight to the end. By Mr. Bedell: Q. What is that gentleman’s name? A. L. M. Palmer. Q. When was that? A. It was about the middle of Septem- ber; he called on me at the office and he had some conversation with another gentleman, and friend of ours, and he tried to get him to use his influence to prevent us from going into the sugar business; and he insisted that if we did persist in going into the sugar business that they would go into the coffee business be- cause we were going to compete with them in the sugar busi- ness; I talked the matter over with my partners and they sug- gested that I go to see them and say that we were not going to compete, but that we were going on with the business as an ad- junct to our coffee business; that we had some customers with different wholesale grocers throughout the United States; that was the reason that I called on Mr. Palmer. Q. That is what you said to him? A. Yes, sir. By Mr. Lexow: Q. What did he say? A. He said that he yms sorry; that he had known us for a long time; that the result would be that we would lose lots of money, because it would result in a fight. Q. Was anything said, substantially, to the effect that if you withdrew your competition against them in the field of sugar that they would not enter into competition with you in the coffee business? A. Yes, sir. No. 40.] 139 Mr. Lexow: That is all. Arbuckle, John, recalled. Mr. Havemeyer: Will the committee let me make a statement? I desire to say that no such man as Mr. Palmer has authority to make statements for the Havemeyer & Elder Company, nor anybody else interested in that company; the gentleman appears to have the impression that he is an emissary from us because he told him something or other. Q. What relation has Mr. Palmer to your company? Is he your cooper? A. He is the head of the cooperage department. Q. Is that a separate business? A. Yes, the stock of which is controlled by the American Sugar Refining Company; it is a collateral interest of our company. Q. Where was that company incorporated? A. I think it is a New Jersey company. Q. And the bulk of the stock is held by the American ISugar Refining Company and Mr. Palmer is President of the Company? A.. Yes, sir. * Mr. Bedell: Q. Mr. Palmer is also a trustee of the American Sugar Refin- ing company? A. No, sir. Q. Is he appointed by the Board of Directors of the company to look after the interests represented by the cooperage concern? A. He is elected by the stockholders — by the directors in the usuul form; he is President of that company. Q. Has he any official relation to the American Sugar Refin- ing Company, as such? A. None whatever. Q. Are the directors of the Cooperage Company the same as the directors of the American Sugar Refining Company? A. Four of them are. Q. With the exception of Mr. Palmer, the other directors of this Cooperage Company are directors in the American Sugar Refining Company? A. Yes, sir; but he had no authority to say what he did, if he did say it; I wish to disabuse the minds of the committee of that impression; he was not an emissary of the company. 140 [SENATE. Q. How many directors are there in the American Sugar Re- fining Company? A. Seven. Q. Then the four who are on the Board of the Cooperage Com- pany are a majority of the Directors of the American Sugar Refining Company? A. Yes, sir. Q. Mr. Matthiessen is on the Board of Directors of the Ameri- can Sugar Refining Company? A. Yes, sir. Q. Is he on the Board of the Cooperage Company as well? A. Yes, sir. Mr Jarvie: I desire to make a statement; in addition to the two gentlemen whose names I have mentioned, Mr. W. F. Mc- Laughlin, of Chicago, stated to us that he had authority to say that if we were willing to go out of the sugar business that the sugar people wrnuld not continue in the coffee business; and he said the statement came from one high in authority. Q. Did he give the name? A. We could not get the name. Q. Did he mean somebody high in authority in the American Sugar Refining Company? A. Yes, sir; we have several memo- randums in regard to testimony that was brought out at Toledo in the action; we were hoping to have that here this afternoon,, but it may not come before Monday morning; the affidavits, fig- ures and facts are in the possession of the court. By Mr. Lexow: Q. And a motion was argued with reference to an injunction? A. Yes, sir. Q. Do you mean those papers? A. I couldn’t say as to that fact. Q. But the deposition taken on the trial? A. Yes, sir. Q. Will you be able to produce those to-morrow? A. Yes, sir; if they come here by mail; probably not until Monday morning. Q. But if they should come we can have them to-morrow morn- ing? A. They show who the stock was bought for, to whom paid, by whom the checks were signed, etc. Mr. Havemeyer: Let me contradict; I deny absolutely that anybody was authorized to speak to Mr. Jarvie, or anybody else No. 40.] 141 in behalf of Havemeyer & Elder threatening anything; we never would do it in that way; if we had any threats to make we would fell them direct; we never said anything of the kind; I likewise desire to say that the business of the company testified to by Mr. Jarvie as having been enjoined, is not so; there has been an in- junction against the transfer of stock and the election of a new board, but the business has been especially exempted; there ap- pears to be a great effort to create the impression that the Amer- ican Sugar Refining Company is not going into the coffee busi- ness; the American Sugar Refining Company is to go into the ■coffee business and have taken the matter under serious consid- eration; they have not, but they probably will. By Mr. Mazet: Q. In what business is the Havemeyer & Elder Company? A. They have real estate; they have no active mercantile busi- ness whatever. Q. No business? A. Lighterage business and milling machines. Mr. Havemeyer: It might as well be understood that the com- pany intends to go into the coffee business whether they are in The sugar business or not, or in any other business, unless we are enjoined by the courts. Q. Do I understand that you substantially admit what your brother refused to admit on the stand this morning, that while under the guise of the Havemeyer & Elder Company, the real fact is that the American Sugar Refining Company is contempla- ting going into the coffee business in competition with the Ar- Ruckle? A. There is no misunderstanding that fact whatever; they bought this stock; they are at perfect liberty to sell this stock; and the American Sugar Refining Company is at perfect liberty to go into the coffee business; and it will, probably; it has the matter under serious contemplation; but it has not been act- ed on yet. < Mr. Lexow : It was the expectation of the committee to take up the examination of Mr. Searles; but I am informed by Mr. 142 [Senate, Shepherd that Mr. Searles is not in the city, although he was subpoenaed last night or yesterday afternoon; I hope that it will not occur again; if a witness is subpoenaed by our committee hereafter, he will either be here in attendance or the authority of the law and the authority of the Legislature will be invoked to secure attendance. Mr. Shepherd: I suggest that if subpoenas are issued they be given to the persons twenty-four hours ahead of the time for appearance. Those gentlemen will be here if they receive suit- able notice; serving him last night was not suitable notice. By Mr. Bedell: Q. Mr. Searles does not present any reasonable excuse as to why he is not in attendance and there is nobody representing him here; does that justify Mr. Searles attitude on this matter? Mr: Shepherd: I am not justifying him; I simply stated that I did not think twelve hours suitable notice for a business man to attend; he could have been found a week ago and notified that he would be wanted to-day; he will be here on reasonable notice. Q. He will be here to-morrow morning? Mr. Shepard: I think so; so I am informed. Mr. Lexow: That there may be no question about this the stenographer will note the fact that Mr. Searles’ name was called and that he failed to attend; that before the adjournment the name of Mr. Searles was again called and he failed to respond. The committee, however, in case Mr. Searles appears to-morrow will waive any default on his part. The committee will now adjourn until eleven o’clock to-morrow morning. No. 40.] 143 SECOND PUBLIC HEARING, COMMON COUNCIL CHAM- BER, NEW YORK CITY, SATURDAY, FEBRUARY 6, 1897. Present: Senators Lexow, Parsons; Assemblymen Bedell, Warner, Mazet and Barry. Absent: Senator Gallagher. Mr. Lexow: The Sergeant-at-Arms will call the name of John E. Searles, Jr. Mr. John E. Parsons: Mr. Searles is not here. He was served with a subpoena as he was on his way to the train to keep an en- gagement out of town. It is perhaps generally known that mat- ters concerning the sugar company are somewhat in charge of myself as counsel of the company. I was compelled yesterday to be before the Court of Appeals in the argument of a case that is unfinished. I got back here last night and found that you de- sired Mr. Searles. I made every effort to see whether I could have him here this morning by telegraphing. I understand that you desire from him data, the preparation of which will require some little time. Instructions have already been given for the data, and if the committee will make some appointment when Mr. Searles can be examined he will be here with such data. I have not yet been able to look over the report of the proceedings. That will somewhat facilitate matters. Mr. Lexow: Do I understand you to say that he left the city immediately after the service of the subpoena upon him on the street ? Mr. John E. Parsons: The committee will recognize that a gentleman engaged in large business enterprises is entitled to some reasonable time. He was on his way to the train and was served in the street. Mr. Lexow: Did he communicate with you before leaving the city? Mr. John E. Parsons: He stopped at my office and left the subpoena there, with the request that I make his excuses, and I am here to do it. 144 [Senate, Mr. Lexow: Is his present whereabouts known? Mr. John E. Parsons: He is in Washington. Mr. Lexow: Was he yesterday? Mr. Parsons: Where he was yesterday I don't know. All I know is that this morning I had a telephone from him from Washington. Mr. Lexow: The committee does not seem inclined to take the situation for granted and relieve Mr. Searles of the necessity of appearing here. But we will consider the statement made by you, Mr. Parsons, in executive session after the session here to- day. We will then notify you whether the committee will insist upon the contempt already apparently perpetrated or give Mr. Searles an opportunity to attend on Monday. Mr. John E. Parsons: I suppose even if Mr. Searles is treated as being in contempt of the committee the committee will come to no conclusion upon that subject without an opportunity being given for a more full statement in a more formal way than I am making at this time. Mr. Lexow: We will give you full opportunity on Monday. Mr. John E. Parsons: I take it for granted that what the committee wishes, is to get such information as may contribute to this investigation; that he is not only willing but desirous of doing and it seems to me that would be facilitated by permitting him to give his testimony; he can be summoned to Albany. Mr. Lexow: And in case we hold the contempt as having been perpetrated we will decide whether we will bring the matter to the attention of the legislature or allow Mr. Searles to purge himself of the contempt by his appearance. Mr. John E. Parsons: I understand, sir. Mr. Lexow: I understand, Mr. Parsons, that you stated that Mr. Searles will appear before this committee on Monday, either here in Albany, according to the necessities of the case. Mr. John E. Parsons: I reached him by telephone about half past ten o’clock this morning and told him the situation; he said that I would appear here and say that, if necessary, he would come to Albany so as to facilitate the convenience of the Xo. 40.] 145 committee; he said it would be an inconvenience to him; but I suppose you would not care for that; he will come to Albany to keep his appointment, or here if you desire. Mr. Lexow: Are there any witnesses in attendance here who were subpoenaed to appear here’ yesterday with reference to the Arbuckle question? A Voice: Mr. Jennison is here; Mr. Arbuckle is here. Mr. Lexow: Mr. Arbuckle will please take the stand again. Mr. Lexow: We desire Mr. H. O. Havemeyer here again as soon as we can get him. Mr. Mazet: He said he might be in town to-day. Mr. Parsons: I may be able to find him by telephone. Mr. Mazet: He said that he would be in town and if desired he would be here. Arbuckle, John, recalled. By Mr. Lexow: Q. Is there anything that you desire to change in the testi- mony that you gave here yesterday? A. I desire to make a statement; Mr. H. O. Havemeyer said that the reason that they had gone into the coffee business was that we were making three or four cents per pound profit; it is false; I desire to make a statement of the profits in the year 1896. Q. Where did you get that statement that you are now mak- ing? A. We take the price of coffee from William Scott & Sons’ circular every Tuesday and figure what the cost is on that day; then we average the year on that basis; in the year 1896, cal- culated on that basis, our profits on roasted coffee was a little less than three-quarters of a cent per pound; in 1895, a little less than six-tenths — why I say a little less is because we do not take into calculation what the bad debts will be; we cannot tell what these will be at the time; in 1S94, six-tenths; in 1893, a lit- tle less than six-tenths per pound of roasted coffee; Mr. Have- meyer said that they are now making a profit of a cent per pound on coffee, which I doubt very much. 10 146 [Senate, Mr. Lexow: He stated that bis investigation of the subject led him to the conclusion that the profit was three cents, and that his competition had forced it down to one cent? A. We are not making anything iiow t ; we are not making any profit; they are selling their coffee at half a cent less than ours; I think they are losing from $500 to $1,000 per day; they claim that their package coffee is composed of Java, Mocha and Eio, a com- bination of three kinds of coffee. Q. What do you mean by package coffee? A. Put up in one pound packages; a great deal of this coffee is sold in pound packages to the trade; now they claim that their coffee contains a combination of Java, Mocha and Rio; the lowest price on the market to-day for Java is tw r enty-one cents; the lowest price of Mocha is tweDty-one cents, the same as Java; and the Rio nine and seven-eighths, about the grade they are using; so if these things are true they must be losing several cents per pound on their Rio coffee. By Mr. Mazet: Q. At what price are they selling packages? A. At thirteen cents. By Mr. Lexow: Q. You are selling at the same price? A. At thirteen and one-half cents per pound; ours has no Java or Mocha either. Q. The fact is that they do not w T ant your firm to manufacture sugar in competition with them, and you do not want them to manufacture coffee in competition with you? A. Not exactly, as long as they carry on their business in a legitimate way. Q. What do you mean by that? A. It means that we are working for a profit, and not a loss; everybody is in business in a legitimate way to make money. Q. Your original venture was designed for the purpose of aid- ing you in the sale of coffee; I mean that your sugar interests aid- ed you in the sale of coffee in the market and was subsidiary to No. 49.] 147 .your general product? A. Well, we expected to make a profit; I don't think that had much to do with it; each stood on its own basis Q. You were using that as an agency through which to estab- lish the sale of your coffee and to make a profit on sugar as well? A. Yes, sir. Q. Your conclusion is that they wanted to destroy all com- petition against them in sugar? A. That is my belief. Q. You heard the testimony of Mr. Jarvie given here yester- day? A. Yes, sir. Q. Have you any desire to change the testimony that you gave on the same subject? A. No, sir; we shall present before you, Monday, testimony taken in this trial, which I think is very con- clusive that that stock is really owned by the American Sugar Refining Company. Q. I don't think that there is much question about that; it has been practically admitted; while not in particular terms, the cir- cumstances all point that way. Q. Is that all the testimony that you want to introduce? A. Mr. Jarvie is here if you wish to call him. Mr. Barry: We are to understand that the American Sugar Refining Company is in the business to drive you out of it? A. That is our belief; if we would say to-day that we would stop building our refinery I think they would stop roasting coffee. By Mr. Lexow : Q. When did this competition between you and the American Sugar Refining Company indicate itself? Did they first put down the price of coffee and did you follow, or did you put down the price of coffee and they follow? A. I think it was about the 17th of December that we got our telegrams that the Woolson Spice Company had reduced the price of coffee; we heard later that the American Sugar Refining Company had bought a con- trolling interest in that company; we did not change our price and then they put it down another half cent; and then we did not reduce our price until about the first of the year. 148 [Senate, Q. Then how much did you reduce the price? A. One cent a pound. Q. That put you a half cent under them? A. No, sir; that brought it to the same level; then they immediately reduced their's another half cent a pound less than our price to-day. Q. You assert that it is not fair business competition, but for the purpose of destroying you as a competitor against them in the sugar line? A. No matter at what price we might put our coffee they would put a lower price; they intended to drive us out of the market. Q. Have you any further information or knowledge of the circumstances leading to the purchase of the stock in the Wool- son Company by the Sugar Refining Company? A. Mr. Jarvie can give that much clearer than I could. Q. Additionally? A. I think so. Jarvie, James N., recalled. By Mr. Lexow: Q. Do you wish to add to the testimony that you gave yester- day, Mr. Jarvie? A. 1 was told to bring here memoranda of the purchases from the different refineries. We have received them from our brokers this morning. Q. Purchases from sugar refineries? A. From B. H. Howell & Co., agents for two outside refineries, and for the American Sugar Refining Company. Q. Will you explain that paper; what is it? A. This is a memorandum of the purchases by Arbuckle Brothers in New York, and Arbuckle & Co., in Pittsburg, to January, 1807; from the American Sugar Refining Company we bought in September, 1200 barrels; Pittsburg bought 1180; in October New York bought 1100 barrels; Pittsburg bought 1075; in November New York bought 200; Pittsburg 725; in December and January, New York bought none; in the same months Pittsburg bought 727 1-2 barrels and 325 barrels. Q. Making a total of what? A. 6,532 1-2 barrels. No. 40.] 149 Q. Then you discontinued, so far as New York purchases were concerned — you had discontinued trading with the American Sugar Refining Company in December and January, 1896 and 1897? A. So far as New York is concerned; from outside refin- eries we bought in that time 4,500 barrels and Pittsburg bought 1,080, making a total of 5,5S0. Q. How about purchases of your company in New York during December and January? A. 700 barrels in December and 1,800 barrels in January. Q. From what company? A. B. H. Howell Sons & Co., as agent. Q. So that practically in December and January — December, 1896, and January, 1897, you had discontinued your trade with, the American Sugar Refining Company and transferred it to H. B. Howell Sons & Co.? A. So far as the New York office is con- cerned; yes, sir. Q. Is there anything further that you wish to state with refer- ence to the communication received by you from the American Sugar Refining Company? A. I have nothing at the moment. By Mr. Mazet: Q. In regard to the purchase of the Woolson mill? A. All that I can say in regard to that is as to the profitableness of the busi- ness as spoken of here yesterday; I desire to call the committee’s attention to the fact that the stock of the Woolson Spice Com- pany sold for $1,500 per share in 1S94. By Mr. Lexow: Q. Par of what? A. Par of $100; in December, 1896, the Amer- ican Sugar Refining Company were supposed to have paid for eleven-eighteenths of the stock at $1,150 per share; after buying that stock it got noised abroad for what purpose it was bought; the seven-eighths, less 61 shares which we won, was sold for $950 per share. Q. Then this additional value of the stock represents a surplus in the Woolson Company? A. That I am not able to answer. 150 [Senate, Q. You say that you bought 61 shares; have you not familiar- ized yourself with the condition of the Woolson Company? A. We believe that the stock is worth on the books $950; our belief of that comes from statements which we have heard in Toledo. Q. Based upon the surplus in the treasury? A. I presume so; yes. Q. Could it be in any other form? A. It might be machinery acquisition. f Q. That would be a surplus in the treasury whether repre- sented by machinery, material or cash? A. I should say it was In the treasury. Q. That would indicate very strongly, wouldn’t it, that there is some profit in the coffee business? A. I should think it would indicate that during the last three years there has been no profit. Q. How old is the Woolson Company? A. I imagine it is 20 or 25 years old. Q. At what period of its history was it that it was able to ac- cumulate this surplus, so far as you know? A. 1887 was an ex- traordinary year in coffee; we had great fluctuations; in 1891-92- 93; those were other years when there were great fluctations in the coffee trade; and if they hit the market it would not be at all surprising if they made a great deal of money. Q. You mean buying the raw material and selling the finished product at high prices? A. At an advance upon the raw mater- ial, based on the advances of the market; coffee has fluctuated during the last ten years at pretty nearly an average of six cents per pound per year; some years a great deal more than that. Q. What is the capital of the Woolson Company? A. Nominal capital, $800,000; paid in $180,000, I believe. Q. What distinction do you draw between nominal and paid In capital? Do you mean that there are unissued shares in the treasury that have not been paid for, or that the stock was issued originally at lower figures than the face value? A. I am not able to answer that. Q. When you acquired your original share in that company — what year was that? A. I think in March, 1896. No. 40.] 151 Q. Do you know whether there was any surplus in the treasury of that company represented by any assets, cash or otherwise, as early as 1887? A. I could not answer that question. Q. What dividends have been paid on the stock? A. I can an- swer for the last year; 50 per cent. Q. On profits made during the current year or division of part of the already existing surplus? A. I have heard from the sur- plus; I have no definite knowledge. Q. Don’t it strike you that 50 per cent, is a fairly large divi- dend for an investing public? A. Not on the value of the shares; that would only be about five per cent, if the shares are sold for $ 1 , 000 . Q. That surplus represents earnings that have been made by the company during the period it has been operating, not divided among the stockholders? A. I presume so. Q. During the period of time covered by the creation of this surplus the company was earning far in excess of what would be a reasonable dividend to its shareholders, assuming 50 per cent, was a reasonable dividend on the invested capital; that is a fact, is it not? A. I presume so. Q. Don’t you think, then, that Mr. Havemeyer's statement of yesterday that coffee was a fairly lucrative business was well founded? A. It has been a lucrative business. Q. Is your company a firm or a corporation? A. We are a firm. Q. Are there outside of the Woolson Company competitive cor- porations in the coffee field? A. Yes, sir; firms and corporations both. Q. How many are there in the field; I mean in the roasting cof- fee business? A. I cannot answer that. Q. Generally? A. There may be a thousand; almost every wholesale grocer in the West has a little plant of his own where he can roast one bag or five bags. Q. I mean reasonably large concerns? A. There are three concerns that are looked upon as being large in the package line, the Woolson Spice Company, W. F. McLaughlin of Chicago and ourselves. 152 [Senate, Q. That Mr. McLaughlin was referred to by you in your testi- mony yesterday ? A. Yes, sir. Q. How do you compare the three, relatively, to each other? A. We are the leading house in coffee; I think the other two con- cerns do about the same. Q. Relatively to yourself what proportion of the business do they do? A. I should think more than half. Q. The others that you have mentioned are individual roasters that roast small quantities for the use of their particular locali- ties, the localities in which they transact their business? A. Yes; but they compete for our business. Q. I am speaking of small concerns? A. I have reference to that. Q. They compete with you? A. Yes, sir. Q. But not beyond the localities in which they have their of- fices? A. Practically not. Q. Is it a fact that you, the McLaughlin Company and the Woolson Company can practically handle the roast coffee busi- ness in the United States? A. In packages; yes, sir. Q. What distinction is there between coffee in package and other coffee in the way of sale? A. Coffee in packages, when we speak of that we mean pound packages, 100 pounds, or 60 pounds, or 36 pounds in a case; the other coffee we speak of as bulk coffee. Q. That is in bags? A. Yes, sir. Q. Is there any competition against you in what is called bulk coffee? A. Yes, sir. Q. To what extent? A. There are firms that do a larger bulk business than we do. Q. Relatively to your package business are there persons or concerns engaged in the bulk coffee business who do as large or a larger business than you do in the package quality? A. No, sir. Q. What proportion of the business does the bulk coffee show as compared with the package coffee? A. That is a pretty hard question to answer. Q. Is it half or quarter? A. I should think so; yes, sir. Q. Half of the business? A. Yes, sir. No. 40.] 153 Q. Is tliat simply a guess or is it fairly approximate? A. I was startled at the figures that I heard yesterday about the mag- nitude of it; and probably that is the reason why I am not capa- ble of judging accurately. Q. Have you got any figures that you can present to this com- mittee showing the condition of the coffee business as to the number of concerns engaged in it, whether bulk coffee or package coffee, and the prices obtained from 1S87 down to the present time? A. It would take a very long time to get up those kind of statistics. Q. Have they been gotten up? A. No, sir. Q. Is there anybody who gets up statistics of that character? A. No, sir; not that I am aware of; I can give you the quotations of the Coffee Exchange; that is about all. Q. I understood Mr. Arbuckle to say that you handle neither Java nor Mocha coffee? A. No, sir; he didn’t make that state- ment; he said that we used no Java and Mocha in packages. Q. Then you use it only in bulk, which is a small proportion? A. Yes, sir. Q. How does Java and Mocha get on the market; through what medium? A. It is shipped by different importers; we import somewhat ourselves. Q. What large concerns handle it? A. There are several. Q. Will you name them? A. I would rather go to the office and look them up before attempting to name them. Q. Will you endeavor to furnish this committee substantially the same statistics with reference to the coffee business that we have requested those interested in the sugar business to furnish with reference to refined sugar? A. I do not know what those were. Q. The names of all important concerns engaged in the busi- ness; second, the price of the raw product with its variations from 1887 down to the present time; the price at which the re- fined or manufactured product has been disposed of, with its vari- ations during that period of time'; will you be able to furnish that statistical information? A. It will take some time; it is only 154 [Senate, fair to say about coffee that Brazil coffee sells at eight cents per pound; some Java coffees at thirty cents per pound; there is a great range in the price of coffee; if you ask for the price of any one grade I can give it to you; but for all the grades I cannot; it would be the work of months. Q. How have the prices in the coffee line been maintained dur- ing this period of time, by understandings, arrangements or agreements between the various coffee houses? A. I will speak for ourselves; we have no agreement nor understanding what- ever with anybody. Q. With none of those competing concerns? A. None what- ever. Q. With the Woolson Spice Company? A. None whatever. Q. Have they agreements between themselves? A. That I don’t know. Q. Have you any information on the subject? A. I have no in- formation on the subject. Q. Do the prices that they sell their product for agree precisely with the prices at which you sell your product with reference to the various grades disposed of? A. I have never compared the prices of the different grades; I can speak of standard package coffee, which they have usually followed up or down; up to the middle of December, with the exception of one instance, where they advanced their price and we didn’t; that was some years ago. Q. Is the McLaughlin concern a corporation or a partnership? A. I believe it it a partnership or an individual concern. Q. Have you any of the annual statements or reports of the Woolson Company? A. I have not. Q. Have you seen any? A. I have not. Q. What was the price of the grade of coffee that you dealt in most largely at the time that the American Sugar Refining Company went into the coffee business through the Woolson Spice Company? A. I should say about ten cents. Q. Do you mean that that was the purchasing price or the selling price? A. I mean to say that it was the purchasing price of the Rio coffee. No. 40.] 155 Q. To the consumer? A. No; that was the purchasing price for us. Q. What was the selling price to the consumer? A. I couldn’t tell you. Q. Do you know what that grade of coffee sold for in the market? A. Not to the consumer; we' do not sell to consumers. Q. Well, to the middle men? A. I think our net price at that time to the jobber, through whom we sell our goods, was fifteen cents. Q. Fifteen cents net? A. Less cash discount. Q. With or without rebates? A. Less cash discount. Q. How much would that amount to? A. Two per cent. Q. Cash within thirty days? A. Cash within seYen or ten days. Q. Within thirty days after the American Sugar Kefining Com- pany went into operation as a coffee producing influence, what was the price to the consumer of that same grade of coffee to the middleman? A. Do you haYe reference now to green coffee or roasted coffee? Q. The coffee that you bought for ten and sold for fifteen? A. I should say it was about ten cents then. Q. And sold at what? A. They are to-day selling coffee at thirteen cents; their price has been about the same since Jan- uary first; I may be wrong. Q. Your price is half a cent higher than theirs, thirteen and one-half cents? A. Yes, sir. Q. You are not charging now to the middleman thirteen and a half cents per pound for the same product that three months ago you were selling to him for fifteen cents? A. No, sir; I cannot say that. Q. What do you mean? Three months ago I am talking about; from the 15th of December, which is six or seYen weeks; that is a still shorter time; what you sold six weeks ago to the middleman at fifteen cents you are now selling to him for thir- teen and one-half cents? A. Yes, sir. Q. And the Woolson Spice Company for thirteen? A. Correct. 156 [Senate, Q. Does that difference between ten and thirteen and one-half cents or ten and thirteen cents represent profit, or does it repre- sent increase in roasting the coffee? How much of it, if any, is profit? A. It represents the cost of doing the business, the maunfacturing cost and its selling. Q. Is there not profit in addition? A. We cannot figure it to-dayi Q. Then at thirteen cents if you cannot figure a profit with thirteen and one-half cents there must be a loss to the Woolson Spice Company? A. I judge that. Q. And a corresponding gain to the consumer? That is true is it not? A. Yes, sir. I presume so. Q. What period of the year does this 50 per cent, dividend of the Woolson Spice Company cover? A. I am not able to say that. . , Q. When is it declared? A. I couldn’t tell. Q. Is it declared in lump or in fractions? A. I am under the impression that it is declared semi-annually; it may be quar- terly; I cannot answer that. Q. 25 per cent? A. If it is semi-annually, yes; if quarterly, 12 1-2 per cent. Q. When was the last part of this dividend declared? A. I am unable to answer that. Q. Was it this year or last year? A. Last year. Q. First of January? A. No, sir. Q. Can you remember any more definitely than you have stated? A. I cannot. Q. You must have received your proportion of that dividend on the amount of stock that you held? A. Yes; $50; it was not a very large amount and I did not follow it. Q. You had not secured the 60 shares at the time of the dec- laration of the last dividend? A. No, sir. Q. When did you secure those 60 shares? A. I am under the impression that it was the last week in December or the first week in January, the first few days in January. Q. Since that time no dividend has been declared? A. I be- lieve not. No. 40.] 157 Q. Now, as to the difference between the 13 cents now charged by the Woolson Spice Company and the 15 cents which you say was the prevailing price heretofore — would that difference amount to a 50 per cent, dividend on the basis of the business done by the Woolson Spice Company? A. I am not able to an- swer that. Q. From your knowledge of the business of that company, you have knowledge of the amount produced and the amount sold, in a general way — would the difference of two cents per pound on their output justify a dividend of 50 per cent, in one year? A. I presume it would. Q. Do you, Mr. Jarvie, consider that a reasonable and fair com- mercial profit? A. What? Q. A 50 per cent, dividend on the original stock of the com- pany, one half of which was paid in. which means a 100 per cent, dividend upon the original capital invested? A. The business has largely increased and it would be impossible for them to do the business that they do to-day on the capital stock of the com- pany. Q. But the original capital contributed, say 50 per cent, of the nominal capital stock; whatever else there is in the treasury, ac- cording to your statement, has been an undivided profit, a sur- plus made during the period, practically between 1887 and now, a period of ten years — do you think it is a fair commercial profit to be able within practically ten years to reach a situation where a corporation can pay in earnings and dividends to its stock- holders yearly the whole amount of the capital stock originally contributed? A. Well, I want to correct the impression that you evidently have; I did not make the statement that only 50 per cent, of the capital stock had been paid; I said the capital nom- inally was |300,000; I understand that their cash capital is $180,- 000 ; I am not so sure that that amount was paid in ; I do not know the affairs of the company close enough to make a positive state- ment in regard to that. Q. Do you mean that the capital stock has been increased from the original capital stock contributed of $150,000 to $180,000? 158 [Senate, A. I do not know what the original capital was; it has been in- creased from time to time; I know what it is to-day. Q. What is it? A. $180,000; those share were issued to that extent; the nominal capital was $300,000. Q. Then there has been an increase over the original invest- ment of $30,000? Now I ask you, do you think that that is a fair commercial profit to make; to create a situation whereby the consumer is bound to pay to the manufacturer a profit which will enable him to divide in dividends practically 100 per cent, of the investment yearly? A. I probably can answer for our own busi- ness better than theirs. Q. I am asking you whether in your opinion as a manufacturer, is it fair to create a situation such as I have named? Do you ex- pect the people to tolerate it for any considerable length of time? A. I should think that the earning capacity of the plant should be based on the value of its certificates; and according to my fig- ures it is only five per cent, on the value of the stock as shown by the treasury; it is about $950 per share. Q. That is the market value of the stock reached by the calcu- lation of its face at this time; now the question I want to ask vou and want you to answer, if you will, is, whether you, as a manufacturer, think a condition should be maintained which per- mits a corporation within ten years to accumulate from the con- sumers a profit upon the original investment which enables that corporation to pay 100 per cent, upon the original investment an- nually back to the stockholders? A. It is a very profitable cor- poration, I should judge. Q. Don’t you think it is that tendency, that desire to secure money, that brings corporations in the bad odor and grace in which they stand to-day? A. I presume so. Q. You are a large manufacturer, Mr. Jarvie, and don’t you think the present situation, the attacks upon corporations, the attacks upon the money power, are due to the development and the knowledge by the people by just such situations, where the necessaries of life are made the subject of barter, enabling those who deal in them to make enormous profits that could not be No. 40.] 159 made in any other department of business? A. Judging from our own business, we do not make such profits. Q. I am not criticising your business; I am criticising the busi- ness of this Woolson Company? A. It shows that it has been well managed and well handled; they must have able men in the corporation, because others have not made that money. Q. Don't it show that they have been charging for ten years an unreasonable price upon their product to the consuming public? A. No, sir; not necessarily. Q. You assert the proposition that this company not only pays 50 per cent, dividends upon the original capital invested yearly, but in addition to that accumulates a surplus which makes its stock worth $950? A. I do not say that; I say that they have shown extraordinary ability, probably in the purchasing of their raw material; as the market price of the raw material has ad- vanced. they have been able to get more than ordinary profit on the cost of their raw material; owing to the action of the market the value of the raw material ou hand advances or declines. Q. How long do you carry raw material in stock before you realize upon it? A. I can answer for ourselves; not for the Wool- son Spice Company, if you want to know that; we have some- times had coffee in store for three or four years. Q. That is to say, you buy the raw product at a low price and keep it in stock until you can sell it at a profit? A. We have sometimes; and sometimes we manufacture it the very day it ar- rives. Q. So that your margin of profit consists not only in the differ- ence between the cost of roasting, but also between the market price of the raw product purchased at a lower price and the pre- vailing market price? A. A great many times, I am sorry to say, we could have bought coffee on the spot cheaper than the cost of importation; it is not on every purchase that money is made. Q. Then you have been less fortunate than the Woolson Com- pany? A. I would not say that; I desire to say that it is not every roast coffee concern that has made money during the last 160 [Senate, ten years; it is not universally so, because everybody would come into it. i Q. The situation is: that the Woolson Spice Company would not have been able to make the money that it did make if it charged a fair commercial profit instead of charging a high and arbitrary price to the consumer; and all the other coffee concerns would have come down in their price to meet that competition, and the price of coffee would have been much less to the con- sumer than it was? A. I don’t think that they charged an arbi- trary price or high price; they have gotten a fair return on the cost of the raw material at the time in which that was manu- factured. Q. You don't wish to be understood that the accumulation of a surplus nine times as large as the original capital and the making of 50 per cent, dividends in the meantime is nothing but a fair profit upon the investment? A. Not where the in- vestment is worth $1,000 per share. Q. I am speaking of the Woolson Company? A. I do not think it is too much — 5 per cent. Q. I understand you, that you claim you have paid $1,000, and that it would be only a fair return upon that amount? But so far as the original investment is concerned, you don’t claim that that is a fair profit, do you? A. I don’t want to express an opinion of a competitor’s business. Q. You would rather not answer that question? A. I will answer it in that way, that I do not want to express an opinion of a competitor’s business. Q. Have any coffee concerns been forced out of business by the competition? A. I do not recall any. Q. Have any failed? A. Several. Q. Recently? A. I don’t think within the last year. Q. How long ago was the last, do you remember? A. Two or three years ago. Q. What concern? A. In the West; I prefer not to mention any names until I can look over a book which I have, which will give the names. No. 40.] 161 Q. Wliat is the price of Java coffee? A. There are various grades; I should saj from twenty-one to thirty cents. Q. Mocha? A. About twenty-one to twenty-two cents and a half or twenty-three cents. Q. Rio? A. Rio varies from nine to fourteen or fifteen cents. Q. I believe that Mr. Arbuckle stated that the package put up by the American Sugar Refining Company consisted of Java, Mocha and Rio — in what proportion? A. I cannot answer. Q. Do you know what proportion? A. I have no idea. Q. Isn't it a fact that they are putting up at less price a better grade or brand of coffee than you, or more expensive coffee, and selling it at a less price for the purpose of driving you out of the business? A. On the face of the package it says “ This coffee is a compound of Java, Mocha and Rio;” they will have to answer whether it is or not. , Q. Have you examined it? A. Yes, sir. Q. Don’t you know about what the ingredients are? A. I may be wrong in my opinion. Q. What would judge to be the actual value of the package put up by them in competition with you? A. Well, I presume ours is better; we think it is; better value for the money; gives the consumer more satisfaction ; drinks better. By Mr. Warner: Q. Has your company any contract with the American Sugar Refining Company providing that you will not sell their product for less than a stated price? A. We are a factor for the Ameri- can Sugar Refining Company. Q. You have a contract with them to that effect? A. I think there was handed in yesterday an agreement which all factors or agents sign. Q. Did you see that? A. I have seen it; I presume it is correct. Q. You have a similar contract? A. I presume that we have. Q. Has your company such a contract with your factors as an agent? A. We are not a company. 11 162 [Senate, Q. Well, partnership; have you any such contract for the sale of coffee? A. I think the American Sugar Refining Company copy their factor’s agreement from ours; they certainly get copies of ours. Q. Will you let the committee have a copy of your contract? A. Yes, sir; there is no reason why I should not. Mr. Lexow: Q. Will you produce it Monday? A. I will, or send if. AFTERNOON SESSION. NEW YORK, SATURDAY, FEBRUARY 6, 1897. Mr. Lexow: Mr. Parsons, the committee have decided to defer the conclusion or decision of the question presented by Mr. Searles’ absence until Monday at ten o’clock, when the committee will reconvene with the expectation that Mr. Searles will then appear before the committee and give his own reasons for his absence. Henry O. Havemeyer recalled. Examined by Mr. Lexow. Q. Mr. Havemeyer, certain questions were put to Mr. Theodore A. Havemeyer with regard to the discharge of labor from the re- fineries in this State at the time of the organization of the origi- nal Sugar Trust; can you state how many refineries closed down at that time and the number of workingmen who were dis- charged? A. I think he was in errpr about that; I do not think there were any refineries closed. Q. Are you sure about that? A. I think the only two refin- eries in New York State that did not continue work were the De Castro & Donner and the Oxnard, and my recollection is that * both of those were closed before the formation of the Trust. Q. There was the North River Sugar Refining Company? A. That was not in operation. No. 40.] 163 Q. That was dismantled, was it not? A. In process. Q. In process of dismantling? A. So I understand; was not working. Q. At that time? A. Yes. Q. The Oxnard Bros. Co.? A. I do not think they were work- ing. Q. They were also in process of dismantlement? A. No; I think that they discontinued operations for some reason. Q. How long previous to the organization of this Trust? A. I cannot say. Q. Give your best recollection? A. Oh, I have no knowledge. Q. A year? A. I have no knowledge. Q. Absolutely none as to time? A. Absolutely none. Q. But they were concerns that were taken into the Trust, were they not? A. Yes. Q. So that they were in life to the extent of forming part of the assets of the Trust, although they had been practically aban- doned and dismantled previous to the organization of the Trust? A. Oh, no; they had just discontinued operations; suspended operations. Q. Have they ever undertaken operations since? A. No, sir. Q. How about Moller & Sierck Company? A. I don’t think they were working. Q. Does the same criticism apply to them as to the others— the same state of facts? A. I think they were in suspension; the business was very ruinous just immediately prior to the Trust, and I think these refineries were laying idle. Q. How about the Boston Sugar Refining Company? A. That is the Boston corporation? Q. Yes. A. I think that was in operation and subsequently closed. Q. How long after the organization of the Trust? A. Imme- diately. Q. Immediately? A. Yes. Q. It was closed simultaneously with the organization of the Trust? A. About that. 164 [Senate. Q. How about tlie Forest City Sugar Refining Company? A. I have no recollection of that ever being worked; it is so many years ago; that was a sort of defunct; they had valuable property up there, but it had not been in operation, I think, for some years Q. That became part of the Trust, did it not A. Yes. Q. Was it in operation at the time of the organization of the Trust? A. I think not. Q. And was not operated after the organization of the Trust? A. No. Q. How about the St. Louis Sugar Refining Company? A. I think we operated that. Q. How long? A. I believe it was a year; sufficient to see that it could not live in competition with the Eastern refineries and then we discontinued it altogether. Q. About one year? A. I believe so. Q. And it has not been put in operation since? A. No. Q. What was the number of workingmen employed in these six refineries which you have testified to were closed at the time of the organization of the Trust, or immediately after its organi- tion? A. I am unable to state that. Q. Were there as many as 10,000 operatives employed? A. Oh, I should not think there were over 3,000. Q. Is that upon a guess or is it upon facts that you know of? A. It is a good deal of a guess. Q. What was the total product, output or capacity of all the refineries forming part of the original Sugar Trust? A. I am unable to say that now. Q. Was it 32,300 barrels daily at that time? A. I am unable to state that accurately. Q. What is your best recollection as to the amount — would that about cover it? A. Do you mean the output or the total capacity? Q. The capacity? A. I should think it would. Q. What was the capacity of those that after the organization of the Trust were permitted to operate — I mean immediately af- ter the organization of the Trust; let me give you figures; was No. 40.] 165 Iheir total capacity 28,500 barrels daily? A. I could not tell you what the capacity was. Q. Would that be about the capacity? A. I could not at this time tell you anywhere near whether that was so or not. Q. Were the four refineries subsequently acquired by the Sugar Refineries Company in Philadelphia closed after the acquisi- tion or permitted to operate? A. They continued operations. Q. All of them? A. Yes. Q. And do yet? A. Yes. Q. All of them? A. Yes. Q. To the same extent as before? A. To a greater; very much greater. Q. The demand, output and product has increased since the organization of the Trust? A. Some. Q. With the increase of population? A. Yes, sir; increase of consumption. Q. To what extent of the average increase as the result of the increase of population, comparing 1887 to 1896? A. I have not those figures. Q. Have you no idea of the sum? A. I should think the in- crease was at least — in how many years? Q. From 1887 until now? A. Ten years — well, roughly guess- ing I should think it was 20 per cent. Q. Now, notwithstanding this increase of 20 per cent, in the demand, you have not reopened any of those refineries that were closed at the time of, or immediately after, the organization of the Sugar Trust, have you? A. No, sir. Q. How many men did you employ in the State of New York in the refining of sugar and its various branches at the time of the organization of the Trust? A. I am unable to state that. Q. Did you employ as many as about 10,000 operatives on the east side of the East river? A. I should not think so. Q. About that? A. Actual working men? I should not think so. Q. I mean all employes taken together. A. I should not think so. 106 [Senate, Q. Is it not true that after the organization of the Sugar Trust you discharged about 7,000 men on the East side of the river and only a few ‘of those 7,000 have been re-employed? A. That is absolutely false; there never were 7,000 men employed by the Sugar Company in the State of New York and in all its collateral interests. Q. We are asking to get at the facts, Mr. Havemeyer; how many in your best judgment? A. Well, I am unable to state; I am able to state, however, in my judgment, that there is at least 25 per cent, now more employed in the State of New York than there ever was before the Trust, owing to the increase in the business carried on in New York. Q. You cannot give the figures, though? A. No, sir. Q. Will Mr. Searles be able to furnish these figures? A. He would not unless he has an opportunity to compile them. Q. You have this data? A. If the books are in existence dat- ing back to ten years; I don’t know that. Q. It is not your custom to destroy the books? A. It is not our custom to destroy the books whatever — but you can arrive at it in the same way — the number of laborers employed is gen- erally in proportion to the amount melted, and you can easily get at the meltings for that time and to-day, and a comparison of which will be a guide as to the number of men employed in the same period. Q. Have you not introduced improved machinery that to some extent takes the place of labor? A. I don’t think we have, ex- cept on the docks, where it is done by an electric motor instead of by hand. Q. You stated yesterday that the difference between the value of the raw product and the added percentage or increment at which you sold the refined averaged about one per cent. A. What did I say? Q. One cent per pound. A. No, no; I said the profit — exist- ing profit. Q. The existing profit? A. Yes. Q. Between the value of the raw product and the cost of the refined? A. And the market price of the refined to-day. No. 40.] 167 Q. Would be what? A. Would be one cent a pound profit. Q. What was it in 1886? A. I don’t know. Q. Do you know whether or not it was an average of about seven-tenths? A. No, I know nothing about it. Q. Have you never looked at the figures? A. Never. Q. Do you know whether in 1887, immediately prior to the organization of the Trust, it was .68? A. Are you speaking of coffee or sugar? I understood it was coffee. Q. I am speaking of sugar now? A. Well, then, you will have to scratch that testimony of mine out, because I presumed it alluded to coffee— I understood you to say the difference between the price of raw sugar — and raw coffee and roasted coffee. Q. Raw sugar? A. Oh, excuse me; then be kind enough to re- peat the question. Q. Do you remember whether in 1886 that increment of profit was six hundred and eight one-thousandths? A. No; but I have a table here that gives the wdiole business. (Witness produces publication of Willet & Gray “Analysis of Sugar Refining Business for 1888-89.”) Q. Well, will you look at .that table and see whether it was — what is the date, Mr. Stenographer? Q. 1886? A. Sixty-eight one-hundredths cent; sixty-eight and a half one-hundredths cent. Q. 1887? A. One cent and twenty-six one-hundredths. Q. 1887? A. Yes; no, no — six hundred and seventy-three one- thousandths cent. Q. Now after the formation of the Trust and in 1888 what was it? A. One cent and twenty-six one-hundredths. Q. 1889? A. One cent and twenty-one one-hundredths. Q. 1890? A. Seven hundred and nine one-thousandths cent. Q. 1891? A. Eighty-four one-hundredths cent. Q. 1892? A. One cent and three-tenths. Q. 1893? A. One cent and fifteen one-hundredths. Q. 1894? A. Eight hundred and eighty-four one-thousandths cent. Q. 1895? A. Eight hundred and eighty-two one-thousandths cent. 108 [Senate, Q. Have you got the figures for 1890? A. Ninety-eight one- hundredths cent; now I have got the average for the nine years preceding the Trust and nine years since. Q. Yes? A. One cent and nine-tenths — and for the nine years preceding the Trust, and nine years of the Trust, and the Ameri- can Sugar Refining Company of New Jersey ninety-eight one- hundredths. Q. Now — A. Do you want to mark this? I would like to have it marked if } 7 ou wall let me have it one moment, Mr. Havemeyer, before it is marked. (Witness hands paper to Chairman.) Q. Now that difference has been made, notwithstanding tne fact that in the meanwhile new improvements, better machinery and economies in business transportation and other directions have prevailed; that is so, is it not? A. Yes, sir; that difference. Q. Do you regard Willet & Gray as an authority upon this question; upon statistics? A. Yes, sir; I think so. Q. They are so regarded in the business world? A. In the sugar community; yes. “Analysis of Sugar Refining Business for 1888-89 by Willet & Gray, Sugar Statisticians,” marked “Exhibit A,” Feb. 6, 1897. Q. Will you look at this so-called deed and state whether It is the deed or agreement referred to in your testimony of yesterday, a true copy of it (indicating). A. Yes; it is. Deed of Sugar Trust put in evidence. DEED. The Sugar Refineries Company. The undersigned, namely: Havemeyer & Elder, the De Cas- tro & Donner Sugar Refining Company, F. O. Matthiessen & Wiechers Sugar Refining Company, Havemeyer Sugar Refining Company, Brooklyn Sugar Refining Comany, the firm of Dick & Meyer, the firm of Moller, Sierck & Co., North River Sugar Re- fining Company, the firm of Oxnard Brothers, the Standard Sugar Refinery, the Bay State Sugar Refinery, the Boston Sugar Re- fining Company, the Continental Sugar Refinery and the Revere No. 40.] 169 Sugar Refinery, for the purpose of forming the board hereinafter provided for, and for the other purposes hereinafter set forth, enter into the following agreement: NAME. The board herein provided for shall be designated by the name of the Sugar Refineries Company. OBJECTS. The objects of this agreement are: 1. To promote economy of administration and to reduce the cost of refining, thus enabling the price of sugar to be kept as low as is consistent with reasonable profit. 2. To give to each refinery the benefit of all appliances and pro- cesses known or used by the others and useful to improve the quality and diminish the cost of refined sugar. 3. To furnish protection against unlawful combinations of labor. 4. To protect against inducements to lower the standard of re- fined sugars. 5. Generally to promote the interests of the parties hereto in all lawful and suitable ways. BOARD. The parties hereto who are not corporations shall become such before this deed takes effect. Each corporation subscribing hereto agrees, and the parties hereto who are not corporations agree as to the corporations which they are to form, that all the shares of the capital stock of all such corporations shall be transferred to a board consisting of eleven persons, which may be increased to thirteen by a vote of the majority of the members of the entire board, and two addi- tional members to belong respectively to the first and second classes hereinafter provided for. Any member of the board may be removed by vote of two- thirds of the members of the entire board in case of incapacity or neglect or refusal to serve. 170 [Senate, Any member may resign by filing written notice of his resigna- tion with the secretary of said board. Vacancies during the term of office of members shall be filled by appointment by vote of the majority of the members of the entire board. A member appointed to fill a vacancy shall hold office until the expiration of the term of the member in whose place he is ap- pointed, which new appointee shall succeed to all the rights, duties and obligations of his predecessor under this deed. Vacancies by expiration of office shall be filled at the annual meeting of the holders of certificates herein provided for, or at such other times as shall be prescribed by the board. Such annual meetings shall be held in the city of New York in the month of June, and notice shall be given to each certificate holder of record of every meeting of certificate holders by mail- ing to him, at least seven days before said meeting, a notice of the time, place and objects of such meeting. Holders of certifi- cates shall vote according to the number of shares for which they hold certificates. They may vote by proxy. The board may make by-laws. All arrangements for meetings, elections and all details not herein specifically provided for, shall be made by the board. A member of the board may act by proxy for any other member with like effect as if he were present and acting. A majority of the members of the board shall constitute a quorum for the transaction of business. The action of the board meeting, by a majority vote of such meeting, shall have the same effect as the unanimous action of the board except as herein otherwise provided, and that to authorize the appropriation of money, or shares shall require the assent, either written or ex- pressed, by vote at a board meeting, of at least a majority of the members of the entire board. No member of the board shall, during the time that he holds office, buy or sell sugar or be interested directly or indirectly in the purchase or sale of sugar, whether for the purpose of specu- lation or otherwise, without a vote of a majority of the members of the entire board. For any violation of this provision he may No. 40.] 171 be removed as a member of tbe board, and shall be liable to ac- count for all profits which shall be realized by him to the board for the purpose of pro rata benefit of the certificate holders. As it is desirable that the board shall consist of members who are largely interested in the properties and the business contem- plated it is hereby agreed that all members of the board shall be free to join in or become parties to agreements and transactions which the several Boards of Directors hereinafter referred to, or this board may arrange, to the same extent and in the same man- ner and with like effect as if they were not members of the board. This board may transfer, from time to time, to such persons as it may be desired to constitute trustees, or directors or other of- ficers of corporations, so many of the shares as may be necessary for that purpose, to be held by them subject to the provisions of this instrument. Such transfers may be executed by the presi- dent and treasurer of the board in behalf of and as attorneys for the board for that purpose, and be re-transferred when so re- quested by the board. The first board shall consist of the persons hereinafter men- tioned; they shall hold office as follows, and until their success- ors shall be elected: Members of the First Class. — Harry O. Havemeyer, F. O. Matthiessen, John E. Searles, Jr.. Julius A. Stursberg; to hold office for seven years. Members of the Second Class. — Theodore A. Havemeyer, Jo- seph B. Thomas, John Jergensen, Hector C. Havemeyer, to hold office five years. Members of the Third Class. — Charles H. Senff, William Dick; to hold office three years. At the expiration of the terms of the third class, and of eacti successive class, their successors as members of such class shall be elected for seven years. OFFICERS. The board shall appoint from its members a president, vice- president and treasurer, and it shall also appoint a secretary. 172 [Senate, who may or may not be a member of the board. The board may from time to time create other offices, and appoint the persons to fill them. It may appoint committees. It shall designate the duties and prescribe the powers of the several officers and com- mittees. PLANS. The several corporations, parties to this agreement, shall main- tain their separate organizations, and each shall carry on and con- duct its own business. The capital of each corporation shall be transferred to the board, and in lieu of the same, certificates not exceeding $50,- 000,000, divided into 500,000 shares, each of $100 shall be issued by the board and distributed as hereinafter provided. The certificate shall be in the following form: No ) (Shares (Shares One Hundred Dollars Each.) THE SUGAR REFINING COMPANY. This is to certify that is entitled to shares of the Sugar Refineries Company. This certificate is issued under and subject to the provisions of a d ied dated the 16th day of August, 1887. The shares represented by this certificate are transferable by the bolder and his personal representatives in person or by attor- ney, upoE the books of the board and not otherwise, and only upon the surrender of this certificate. They entitle the holder to the rights and are subject to the pro- visions mentioned in the deed. The interest of the holder is in the proportion of the number of shares represented by this certificate to the entire number of shares outstandiug. The total amount represented by outstand- ing certificates and the terms of the deed may be changed from time to time by a majority in interest as therein provided. No. 40.] 173 In witness whereof the board has caused this certificate to be s'gned by its President and Treasurer, and the seal of the board to be affixed hereto, the day of , 188. . For value received do hereby assign, transfer and set over unto shares of those represented by the within certificate, and do hereby constitute and appoint attorney irrevocable for and in name and stead to transfer the said shares upon the books kept for the purpose under the direction of the within board. The assignee, by accepting this transfer, assents to the terms of the deed referred to in the certificate as the same shall be changed frcm time to time. Witness my hand and seal this day of 188 . . TITLE. The shares of the capital stock of the several corporations to be transferred to the board as herein provided shall be trans- ferred to the names of the board as trustees, to be held by them and b.y their successors as members of the board strictly as joint tenants. By the death, resignation or removal of any member of the board, the whole title shall remain in the others. All members ceas’ng to be such shall execute such instrument as may be neces- sary, if any, to keep the title vested in the persons who from time to time shall be members of the board. The board shall hold the stock transferred to it with all the rights and powers incident to stockholders in the several corpo- rations, and subject only to purposes set forth in this deed. DIVISION OF INTEREST. The several corporations shall be entitled to the shares in the following proportions of the $50,000,000, viz: Havemeyer & Elder. De Castro & Donner Sugar Refining Company. F. O. Matthiessen & Wiecher’s Sugar Refining Company. 174 [Senate, The Havemeyer Sugar Refining Company, The Brooklyn Sugar Refining Company. Dick & Meyer. Moller, Sierck & Co. Oxnard Brothers. North River Sugar Refining Company. Standard Sugar Refinery. Bay State Sugar Refinery. Boston Sugar Refining Company. Continental Sugar Refinery. Revere Sugar Refinery. Each refinery and the corporation to which it belongs shall be freed from liability and indebtedness by the parties interested in it; or such parties, if the board shall approve, may provide in cash for such indebtedness or liability, leaving the same to stand at the pleasure of the board, except that the employes’ contracts shown in the schedules hereto annexed, and the contracts with Havemeyer & Elder and the F. O. Matthiessen & Wiecher's Sugar Refining Company, and the Bay State Sugar Refinery pending for improvements and enlargements shall continue as liabili- ties. Annexed hereto are scheduled in general terms of the proper- ties of the several refineries. The properties are guaranteed to correspond with the schedule by the parties interested therein, who are to make good any deficiency. On the complete execu- tion of this agreement each of the said parties shall make a full inventory of the property not embraced in such schedules, and useful for the conduct of the business, on hand or contracted for, including raw and refined sugars, molasses, sugars in process, syrups, bone-black, fuel, barrels, packages, charcoal and other supplies; and such inventory is to be examined and the articles appraised at their present cash value (except as to sugar and molasses to arrive, which are to be appraised at their market value on arrival) by a committee of five persons, as follows: Theodore A. Havemeyer. F. O. Matthiessen. Julius A. Stursberg. No. 40.] 175 John E. Searles, Jr. Joseph B. Thomas. The value of such property as fixed by four-fifths of the ap- praisers shall be paid for in cash by the said board to the treas- urer of each corporation. Bone-black may at the option of the said board be paid for in cash or in bonds hereinafter provided for or in certificates at a rate for bonds or certificates to be fixed by vote of a majority of the members of the entire board. The property shall remain with the refinery, where it is to be used by it, except as such refinery shall make a different disposi- tion of it. In consideration of the transfer of their stock to the board, the board shall also pay to Havemeyer & Elder the sum of to the F. O. Matthiessen & Wiecher’s Sugar Refining Company the sum of , and to the Bay State Sugar Refining Company the sum of on account of payments already made on pending contracts for improvements and enlargements. Additional shares to the amount of $400,000, less 15 per cent., to be left with the board as hereinafter provided, shall be re- ceived by Moller, Sierck & Co. for improvements and enlarge- ment of capacity of their refinery now in progress, when said im- provements are completed and the increased capacity demon- strated. The shares assigned to the several refineries shall be distrib- uted by them to and among the parties interested therein. Each holder of stock in a refinery company shall be entitled to so many of the shares allotted to such refinery as shall be in proportion of his stock to the capital of his company. Shares for stockholders of any refining company who shall not surrender their stock, may, under the direction of the board, be deposited for their account, with the right to receive the same upon the surrender of their stock. Of the shares allotted to the several refineries they shall leave 15 per cent, with the board and these shares and any shares not allotted of the $50,000,000, except as herein otherwise provided 176 [Senate, shall be subject to be disposed of by the board either for the ac- quisition of other refineries to become parties to this deed, pay- ment for additional capacity, or by appropriations to the several refineries. But in no case shall any appropriation be made to or any ac- tion taken by any corporation without the approval of its Board of Directors, and no action be taken by the board which shall create liability by it or by its members. PROFITS. The profits arising from the business of each corporation shall be paid over by it to the board hereby created, and the aggregate of said profits, or such amount as may be distributed by said board, at such time as it may determine, to the holders of the certificates issued by said board for capital stock, as hereinbefore provided. FISCAL ARRANGEMENTS. The funds necessary to enable the said board to make the pay- ments herein provided to be made by it may be raised by mort- gage to be made by the corporations, or either, any or all of them, in their property, and by such other means as shall be satisfactory to such board. In case any mortgage shall be paid on the property of any cor- poration by its directors or stockholders, the holders of certifi- cates shall, within a time to be fixed by said board, have the right, at such uniform rates as said board shall arrange, to have the bonds, certificates, or other evidence of debt or interest in proportion to their respective holdings. Any parts which shall not be thus taken may be disposed of by said board. CHANGES. The number of shares and the total amount thereof issuable by said board may from time to time be increased or diminished No. 40.] 177 by deeds executed by a majority in value of the certificate hold- ers. The provisions of this deed may from time to time be changed by deed executed by uoi less than a majority in intere-c; of the certificate holders, provided no change shall be made which shall discriminate to the disadvantage of the certificate holders as be- tween themselves.. ACQUISITION OF OTHER REFINERIES. The capital stock of other sugar refining companies and of com- panies whose business relates directly or indirectly to sugar re- fining (in every instance to be incorporated) may be transferred to said board with the consent of a majority thereof at valuation and upon terms satisfactory to it, to be held by said board under and subject to all the terms of this deed and certificates may be issued therefor by said board, and may be sold by it to provide funds for such purchase or purchases, and any such cor- poration or corporations shall thereupon become a party to this deed upon causing the same to be duly signed in its behalf. CUSTODY OF DEEDS. This deed, when executed by the parties hereto, shall be de- livered to the president of the board, who shall have the sole and independent custody and control of the same, and the said deed shall not be shown or delivered to any corporation, firm, person, or persons whatsoever, except by the express direction and order of the board. A copy of the said deed shall also be lodged with a member of the board residing in Boston, Mass., which shall be held by him under the same condition and in the same manner as the original deed. In witness whereof the parties have hereto set their seals and affixed their names, these presents to become binding when com- 12 178 [Senate, pletely executed by all the parties and to take effect from October 1, 1897. Dated August 16, 1887. HAVEMEYER & ELDER. DONNER & DE CASTRO SUGAR REFG. CO. Per H. O. Havemeyer, Manager (subject to confimation stock and scrip holders). E. O. 31 ATTHI ESSEN & WIECHERS SUGAR REFG. CO. F. O. Matthiessen, P. HAVEMEYER SUGAR REFINING COMPANY, John E. Searles, Jr., Treas. DICK & MEYER. NORTH RIVER SUGAR REFINING CO., Geo. H. Moller, Secretary. OXNARD, BROS. MOLLER, SIERCK & CO. BROOKLYN SUGAR REFINING CO., Henry Offerman, Treas. STANDARD SUGAR REFINING CO., By Charles O. Foster, Pres. BAY STATE SUGAR REFG. CO., Per Edwin F. Atkins, Pres. CONTINENTAL SUGAR REFINERY, By Silas Piree, Pres. The undersigned hereby agree to become parties to the fore- going deed in accordance with the terms and condition therein No. 40.] 179 stated, they to receive without discount the amounts in certifi- cates set opposite their respective signatures : FOREST CITY SUGAR REFINING CO., By H. J. Libby, President. Geo. S. Hunt, Treas. ST. LOUIS SUGAR REFINING CO., By W. L. Noott, President; A. D. Cunningham, Sect, and Treasurer. PLANTERS’ SUGAR REFINING CO., New Orleans, John Barkley, Prest. LOUISIANA SUGAR REFINING CO., John S. Wallis, President. Q. Will you look at page 78 of this record in the case of the United States against the E. C. Knight Company and state whether or not that is a copy of a contract entered into between the parties named, the American Sugar Refineries Company and Harrison? A. I believe it to be. Q. You have no doubt that it is? A. 1 have not the slightest doubt about it. Contract of purchase of Franklin Refinery put in evidence. CONTRACT OF THE AMERICAN SUGAR REFINING COM- PANY WITH CHARLES C. HARRISON, REPRESENT- ING THE STOCKHOLDERS OF THE FRANKLIN SUGAR REFINING COMPANY. New York, March 10, 1892. Gentlemen : Having heretofore proposed to buy the refinery and all build- ings, wharves and plant connected with the establishment of the Franklin Sugar Refining Company, of which you are owners of all the stock, in order that we might take the title as stockholders of the corporation which owns the property, instead of directly, as originally proposed, but not varying in substance the property intended to be sold and that intended not to be sold, the Ameri- can Sugar Refining Company offers to purchase from you the en- tire capital stock of the Franklin Company for the sum of $10,- 180 [Senate, 000,000, payable in shares of the American Company at par, one- half common and one-half preferred. Provided that the consent which is required to authorize an increase in the capital of llie American Company of $25,000,000 is obtained. This offer, sub- ject to the above proviso, is to become a binding contract upon the acceptance of the same by Mr. Chas. C. Harrison in behalf of himself and his associates, owners of all the stock of the Frank- lin Sugar Refining Company, when the American Company will, with all reasonable despatch, proceed to complete the required consent for the increase of capital. No property is intended to pass by this sale of shares for f!10,- 000,000, payable in shares other than real estate, plant and bone black. (142). The title to the real property of the Franklin Company shall be marketable and clear of all encumbrances and liens. In- cluded in this property is a wharf, the title to which stands in the name of Win. W. Frazier (the title to be transferred to the Frank- lin Company), and excluded from this sale is the title to the prop- erty south of Almond street and west of Swanson street, and two houses north of Bainbridge street, 618 Swanson street, and 619 Tenn street, standing in the name of the Franklin Company, which we understand to have been placed in the name of that company by mistake. The bone-black that shall have been received at the refinery on the 5th of March, 1892, will pass as property of the Franklin Company to the American Company. All running contracts connected with the business for the year 1892, or any part of it, such as those for coal, bone-black, pack- ages tight or slack, blood, hauling and all similar contracts for supplies will be assumed and performed by the American Com- pany, the sellers paying all liabilities under said contracts so far as the same shall have been executed by delivery or performance, and also paying wages and salaries up to the 5th of March, in- stant, which is to be the day on which the transfer takes effect, if this contract is completed, the account of stock having been taken on that day. There will also pass by the sale the lease of the city wharf at the foot of Almond street and the Philadelphia office of the company at No. 101 South Front street. The Ameri- No. 40.] 181 can company will also perform all existing contracts for 1892, for the sale of the empty hogsheads, bags and packages, or things of a similar nature, and the contract with C. A. Brinley for ser- vices. All contracts for future delivery of bone-black, all mer- chandise and supplies on hand, to be payable as of the 5th of March. 1892, at cost, and the price of the future deliveries to be cost, as required by contracts with the respect) re sellers. Re- fined sugar and sugar in the process of manufacturing will be paid for on the basis of the market value of refined sugar at rlie close of business on Saturday, March 5, 1892, when an account of stock was taken and the price will be payable, as of that day; and all expenses, rents, insurance and taxes shall be apportioned as of that date. All property of the Franklin Company not intended to pass by the sale of the shares shall be deemed to be the property of Mr. Harrison and his associates, and shall be transferred to them by the Franklin Company immediately. Included in the property which is thus to pass to Mr. Harrison and his associates shall be all debts due the Franklin Company and all bills, notes, open ac- counts, bank and bankers deposits and securities, and all books of accounts, records and the minute book of the Franklin Com- pany, and a quantity of machinery intended for experimental pur- pose; these are to be retained by Mr. Harrison and his associates as their property. Mr. Harrison and his associates shall pay and shall protect the Franklin Company against all the debts and liabilities of that company down to the 5th of March, 1892. All the debts and lia- bilities which shall be incurred by the Franklin Company from and after that date shall be paid by the American Company; and that company shall protect Mr. Harrison and his associates from all liability by reason thereof. Taxes on real property of the Franklin Company for the year 1892, shall be apportioned between Mr. Harrison and his associ- ates and the purchaser of the shares to the 5th of March, 1892, as between vender and vendee. Mr. Harrison and his associates will continue to transact the business of the Franklin Company, in- cluding works and office for one month after the purchase money 182 [Senate, is payable, for account of the purchasers, and all the business from and after the 5tli of March will be conducted for account and at the risk of the purchasers. But until the purchase money is paid Mr. Harrison and his associates are to have the right to keep the refinery fully supplied with all things requisite for the fullest operation of the same and to continue the business of sell- ing in their discretion. After the payment of the purchase money, the raw sugar will be supplied by the American Company on notice of the requirements by the managers of the Franklin Company and sales made as directed by the American Company, and all then existing contracts of sale made after that time will be filled by the American Company at the contract prices. At any time after one year after the completion of this pur- chase by the payment of the purchase money the American Com- pany. will upon thirty days written notice, from Mr. Harrison and his associates, or a majority of such of them as may then be liv- ing, dissolve the Franklin Company and surrender its present charter and will secure the performance of this contract by stamping upon the certificates of the stock of the Franklin Com- pany notice that the same are subject to this provision, so that Mr. Harrison and his associates can enforce this and the next stip- ulation of the contract there will also be given to Mr. Harrison and his associates a covenant by the American Company that all debts incurred by the Franklin Company, or obligations for which it may be liable, which debts or obligations shall be cre- ated or incurred after the acceptance of this proposal will be dls charged or extinguished at any time upon request of Mr. Har- rison and his associates or any of them representing a majority in interest of the sellers. Until payment has been made to Mr. Harrison and his associ- ates of the purchase money all the property covered by this of- fer and the proprietorship of the same shall be and remain In them and they shall be at liberty to conduct its operations as though this agreement had not been made. All said operations in case of payment as herein provided shall be at the risk and for account of the American Company. No. 40.] 183 Within ten days after the consent to the increase of the capital Stock of the American Company shall have been obtained the purchase money which will be due as of the 5th of March, 1892, will be paid by the American Company and at the same time set- tlement of all other stipulations in this contract will be made and the amounts due to or by Mr. Harrison and his associates will be paid as if the sale had been completed on the 5th of March. 1892 If the American Company fail in obtaining the assent to the increase of capital hereinbefore provided for within thirty days from the time this offer becomes a contract Mr. Harrison and his associates or a majority in interest of them who shall then be living, may terminate the same on thirty days’ written notice to the American Company unless before the time named in such notice the American Company has completed the payment of the ten million dollars in shares as above staed. Whenever the American Company by this contract agrees that tho\ will perform a contract tff-il has been made by the Franklin Company it is intended dial the American Company undertakes that the Franklin Company will perform the contract. (Signed) THE AMERICAN SUGAR REFINING COMPANY, By Jno. E. Searles, Jr., Secretary. To Mr. CHAS. C. HARRISON and others: 10th March, 1892. We accept the above (Signed) CHAS. C. HARRISON, For self and associates. Any amount which shall be actually paid to F. C. Newhall in case of breach of his contract with F. Company shall be borne in equal shares by American Company and C. C. Harrison and his associates. 10th March, 1892. (Signed) CHAS. C. HARRISON, For self and associates. (Signed) THE AMERICAN SUGAR REFINING COMPANY, By John E. Parsons. 184 [Senate, By Mr. Bedell: Q. Will you look at this contract which is on page 81 in this book and state whether that is a copy of the contract between the parties therein named? A. I believe it to be. Contract of purchase of the E. C. Knight Refinery put in evi- dence. ' CONTRACT Of John E. Searles, Jr., with E. C. Knight and E. C. Knight, Jr. The undersigned, Edward C. Knight and Edward C. Knight, Jr., being the sole owners of the entire capital stock of the E. C. Knight, comprising the entire plant used by said company and the firm of E. C. Knight & Co. in carrying on the business of sugar refining in the city of Philadelphia and comprising the property described in a general way as follows: The two blocks of ground bounded by Delaware avenue, Bain- bridge street, Penn street and South street, with the exception of that portion of block on Penn street and Bainbridge street, owned by the Franklin Sugar Refining Company (but to include the lot on the corner of Penn street and South street now owned by said company, but to be purchased by them and delivered with the beforenamed property), together with lot on Penn street, run- ning to Front street, and two piers and bulkheads connected with the same, opposite property, together with all appurtenances, in- cluding whatever has been used in connection with, or part of, the beforenamed refinery, hereby agree in consideration of the sum of one dollar to each of them in hand paid to sell to John E. Searles, Jr., for account of whom it may concern all the above named property for the sum of two million and fifty thousand dollars in the stock of the American Sugar Refining Company, one-half common and one-lialf preferred, upon condition that the requisite assents to the twenty-five millions increase of the capital of the company are obtained and upon the following conditions: 1. The sale shall be consummated on or before March the 31st, at the option as to the time of the purchaser if the assents are obtained, and if not, as soon thereafter as they are obtained. No. 40.] 185 2. The title to the real property shall be a good title in fee, free from all liens and incumbrances, except taxes of 1892. 3. With the sale shall be included all bone black in use, trade marks and patents, rights belonging to the said company or said firm and used in connection with said refinery. 4. The sale shall be consummated either by a deed conveying the property or by a transfer of the stock of the E. C. Knight Company, or both, at the option of the purchaser; if by transfer of stock the seller shall guarantee the buyer against all debts and liabilities of the company and shall have the right to withdraw and retain all property not coming within the foregoing descrip- tion. 5. It is a further condition of this sale that the purchaser shall also purchase at their cash value on the day of the consummation of the sale all raw’ and refined sugars, including sugars in pro- cess, and all new supplies such as barrels, new filter bags, fuel, etc., and shall assume all contracts of the said E. C. Knight Com- pany or E. C. Knight & Company for raw sugar’s, barrels, bone black and such other supplies as are contracted for delivery dur- ing the year 1894. 6. Mr. Searles, for account as aforesaid, hereby agrees upon the foregoing conditions to make said purchase. From the time that the sale shall be consummated Messrs. Knight shall for thir- ty days continue if desired to carry on the business for account of the purchaser., E. C. KNIGHT, E. C. KNIGHT, JR., JNO. E. SEARLES, JR. Philadelphia, March 4, A D., 1892, J. M. B. Contract of purchase of the Delaware Refinery put in evidence CONTRACT. John E. Searles, Jr., with J. Vaughn Merrick and others, stock- holders in the Delaware Sugar House. The undersigned stockholders of the Delaware Sugar Refinery, in consideration of the sum of one dollar to each of them in hand 186 [Senate, paid, hereby agree with Jno. E. Searles, Jr., for account of whom it may concern, to exchange the number of shares of Delaware Sugar Refinery stock set opposite their respective names for shares in the American Sugar Refinery Company, they to receive for each of said shares of the Delaware Sugar Refinery (said shares being of the par value of one thousand dollars each), twen- ty-two and one-half shares of the stock of the American Sugar Refining Company, one-half each in common and preferred stock, the stock of both companies to be full paid and non-assessable upon the following terms and conditions 1. The said Delaware Sugar Refinery stock is guaranteed by the sellers to comprise the entire plant used by said company in the carrying on of the business of sugar refining in the city of Philadelphia, and comprising the property described in a general way as follows: The buildings and sheds and lots of ground bounded by Reed, Swanson and Meadow streets and the Pennsylvania Railroad Company yard, and all the machinery and apparatus contained therein, known as “The Delaware Sugar House,” together with all appurtenances, including whatever has been used in connec- tion with, or part of, the beforenamed refinery. 2. The sale shall be consummated on or before March 31, at the option as to time of the purchaser, if the necessary assents of the Stockholders of the Delaware Sugar House are obtained, and if not, as soon thereafter as they are obtained. 3. The title to the real property shall be a good title in fee, free from all incumbrances, except the ground rent of Twelve Hun- dred Dollars per annum, which is to be assumed by the pur- chaser. 4. The sale shall include all bone black, trade marks and patent rights belonging to the said company and used in connection with the said refinery. 5. The sellers shall guarantee the buyer against all debts and liabilities of the Company and shall have the right to withdraw and retain all property not coming within the foregoing descrip- tion. No. 40.] 187 6. It is a further condition of this sale that the purchaser shall also purchase, at their cash value on the day of the consummation of the sale, all raw and refined sugars, including sugars in pro- cess, and all new supplies, such as barrels, new filter bags, fuel, etc., and shall assume all contracts of the said company for raw sugars, barrels, bone black and such other supplies as are con- tracted for delivery during the year 1892; also a contract for the sale of empty bags for 1892 and 1893, and a lease of a lot west of Swanson street, until July, 1893, and then at Two Thousand dol- lars per annum. 7. It is further agreed by the sellers that from the time that the sale shall be consummated, George E. Bunker shall for thirty days continue, if desired, to carry on the business for account of the purchaser. 8. Mr. Searles for account as aforesaid hereby agrees upon the foregoing conditions, to make the said exchange subject only to the condition that the requisite assents to the Twenty-five Mill- ions increase of the capital stock of the American Sugar Refining Company are obtained. J. Vaughn Merrick, 35 shares. W. H. Merrick per J. V. Merrick, attorney, 35 shares. The Philadelphia Trust Safe Deposit and Insurance Company, trustees under will John E. Cope, deceased, W. L. Debois, secre- tary and treasurer, 30 shares. Helen T. Cope, per J. V. Merrick, 5 shares. Dated Philadelphia, Geo. R. Bunker, 14 shares. March 8, A. D., 1892, S. Georgiana Crabb, by Geo. R. Bunker, 25 shares. Cassine G. Wilson, by George R. Bunker, 12 shares. Geo. R. Bunker, guardian of Wilson Minels, 12 shares. Albert Bunker, 4 shares. Estate of John Birkbeck, Herbert Worth, executor, 22 shares. R. H. Howell, 4 shares. Thomas A. Howell, 4 shares. F. H. Howell, by T. A. Howell, attorney, 4 shares. Henry B. Howell, 1 share. 188 [Senate, James H. Post, 4 shares. Accepted on conditions above stated, JOHN E. SEARLES, JR. “Case on Appeal from Judgment, The People of the State of New York, Respondents, against The North River Sugar Refining Company, Appellant,” printed book, 1890, marked “Exhibit B, February 6, 1897” — containing previously inserted. Book “Transcript of Record U. S. Circuit Court of Appeals for the Third Circuit, March Term, 1894, No. 15, U. S. of America, and E. C. Knight Company, etc., marked “Exhibit C, Feb. G, 1897” — containing contracts previously inserted. Q. And will you also look at the one on Page 83 of this book and see if that is a correct copy of the contract between the par- ties therein named? A. I believe it to be. (Being Contract of Purchase of Delaware Refinery.) By Mr. Lexow: Q. So that there may be no misapprehension, Mr. Havemeyer, we understand, as regards questions of value of the original prop- erties, with regard to contracts and questions of statistics, that Mr. Searles is posted with reference to these matters and the proper person to inquire of? A. I think as to values I have already testified; I thing I am qualified to testify to that as much as Mr. Searles; as to statistics and the capital stocks of these constituent companies of the Trust, Mr. Searles has the data; 1 have not. Q. Well, who can give the committee information as to the capital stocks of the original companies forming the Trust? A. Mr. Parson has it in preparation now. Q. All right? A. It has to be obtained from the certificates of incorporation. Q. Yes; and also the amount of taxes paid the State of New York on the corporate property, whether real or personal? A. For how long a time? Q. For the last — since the organization of the company in 1891? A. In 1891? Well, we will furnish that likewise. No. 40.] 189 John Bergin, having been duly sworn, testified as follows: Examined by Mr. Lexow. Q. Were you employed by the American Sugar Refining Com- pany? A. I was, sir. Q. When? A. Well, I started in to work for them some time around in the Fall of ’76 — in the cooper shop. Q. In the cooperage department? A. Yes, sir. Q. In what capacity? A. A laborer. Q. Laborer? A. Working in the cooper shop. Q. Is that a branch of the American Sugar Refineries Com- pany? A. Yes, sir. Q. How long did you remain there? A. About five or six years. Q. Until when? .A. I should say 1S84. Q. Until 1884? A. I think so; some time around that. Q. Were you then dismissed from the employ of the company? A. No, I was not dismissed; I found employment elsewhere for a time, and then I returned to the sugar refinery. Q. When was that? A. That was sometime around 1886, I should say — 1885 or 1886. Q. That is to say you were in the department of refining sugar? A. Yes, sir. Q. How long did you stay there?? A. Until 1892, in the ca- pacity of foreman on the docks. Q. Of foreman on the docks? A. Yes, I was a portion of that time — I should say about six years — a foreman on the docks. Q. Did you then leave the company’s employ or were you dis- charged? A. I was — I should say I was discharged. Q. How many were discharged with you? A. Oh, between four and six hundred men. Q. In what refinery? A. The American Sugar Refining Com- pany. ! Q. What particular one? A. Havemeyer’s ; formerly it was. Q. Do you mean Havemeyer & Elder, so-called? A. Yes, sir, the one that is running there now. 190 [Senate, Q. Can you give the precise number of men discharged at the same time you were? A. Well, I could — I have not — I could not give them to you now, but I could later on. Q. How many men were discharged altogether? A. Well, I should say there were four hundred. Q. From all the refineries? A. All at that time. Q. On the East side of the river? A. I don’t understand that. Q. Were there others discharged at the same time? A. Oh, no; only from this particular house at that time. Q. Do you recollect any other time when labor was discharged in number? A. I — only when the formation of the Trust took place. Q. And how many were discharged at the time of the forma- tion of the Trust? A. Well, I should say there was — so many refineries closed down, I should say there was between 5,000 and 0,000 left unemployed after the formation of the Trust. Q. Do you remember what the year was? A. I don’t exactly remember, but I think it was around 1887 or 1888. Q. Do you remember whether it was at the time of the forma- tion of this so-called Sugar Trust? A. Yes. Q. You were in the sugar refiner’s business, then? A. Yes, sir. Q. Engaged then? A. Yes, sir, Q. You were not discharged at that time? A. No; I remained in the house that is working now and was there emploj^ed at that time. Q. That house continued operations? A. Continued opera- tions. Q. Now, do you remember the number of refineries that were closed down at the time of the organization of the Sugar Trust? A,. Well, I remember all there was on the water front for the past twenty-six years; they were all closed down; all but one — that is the one that is continuously running. Q. They were all closed down but one? A. Yes, sir. Q. Had they been in operation prior to the formation of the Trust? A. Yes, sir. No. 40.] 191 Q. Employing how many hands to your best recollection? A. Oh, I suppose on an average they must have employed eight hun- dred men in each of the refineries that were closed down ; eight or nine hundred men. Q. And what is you recollection of the number of refineries? A. Well, I should say there was — I guess seven or eight. Q. Have those men been re-employed? A. No, sir. Q. What? A. No, sir. Q. They were discharged permanently do you mean? A. Were left unemployed; there was no place to give them when the refineries closed down. Q. And have not since been employed? A. I suppose they took their places along with all the rest of the employed; that was the only way I can see. Q. Well, what became of them? A. They must have scattered, I suppose, over the country to tramp and look for employment when they could not seek it in the sugar industry. Q. Have you any personal knowledge that they were not re- employed elsewhere — I mean by the American Sugar Refineries Company? A. W T ell, I have nothing; only in Brooklyn for the refinery that was running; they were not employed there; that was the only one left running. Q. Has anything been done to reopen these refineries in Brook- lyn? A. No, sir. Q. Does this property, do you know, still belong to the Ameri- can Sugar Refinery Company that was closed down then? A. That is what I understand. Q. How many men are employed there now? A. None what- ever, except a watchman, I suppose. Q. Well, do they employ men in Havemeyer & Elder’s? A. Oh, yes; the one that is running, yes. Q. How many? A. Oh, I could not give you the exact number. Q. About, we are asking? A. Oh, I suppose they employ any- how 2,500 to 3,000 men. Q. Twenty-five hundred or 3,000? A. Something that way. Q. Don’t they employ as many as were in Havemeyer & Elder’s 192 [Senate, principal factory at the time these others were closed down? A. Well, that I could not say. Q. Well what do you think about that; do you know the num- ber that were employed? A. That I could not answer. Q. Don’t you know how many were employed in the factory of Havemeyer & Elder at that time, which factory is now in oper- ation? A. No, I could not. Q. You were employed, were you not? A. Yes, sir. Q. Well, don’t you remember how many were employed there at the time you were employed? A. Well, I always understood there was at least about — always something over 2,000 employed; 2,300, something that way; that is what I always understood. Q. Well, you mean to say, then, that they employ to-day about the same number they employed then, in the Havemeyer & Elder? A. I don’t know if they engaged any more men or employed them; I don’t think so. Q. Your recollection is that they employed about twenty-three to twenty-live hundred men? A. That is what I understood al- ways when I worked there. Q. Do these factories lay along the water front? A. Yes, sir. Q. From what street to what street on the other side of the river? A. Well, there has two of them been dismantled since and the rest of them are in South Seventh street and North Third, and Greenpoint. Q. Is that all? A. That is all, belonging to the two that is taken away. Q. And with the exception of the two that have been disman- tled, the original factories are standing there as they were, but closed? A. Yes, sir. Q. Are they doing any other business on these properties? A. Why — only what I know from the newspapers, that they are starting a coffee mill in one of them ; I don’t know anything to my own knowledge. Q. I mean is any other business being transacted on the spot of those manufactories? A. No, sir. No. 40.] 193 By Mr. Barry: Q. After all those other factories were closed, don’t you know whether they ever employed the men in the factory they kept running? A. I never knew that they did. Q. You would come pretty near knowing it, if they did? A. I would sir; yes, sir. By Mr. Lexow: Q. You keep yourself posted on labor matters? A. Yes, sir; very w T ell posted for a number of years. Arbuckle recalled. By Mr. Lexow: Q. I understand that you desire to make some explanation; will you take the stand again? You stated you desired to make some explanation of the testimony that was given? A. Oh, it was about that 50 per cent.; I thought you might get a wrong im- pression; that company has only been pajfing 5 per cent., really, on the market value, and I dont really think that all that money was accumulated in the manufactory; the coffee business, as everyone knows, has its ups and downs; sometimes you strike a lucky streak and make a great deal of money, and others it must go against you, occasionally; and that is the only way; while I don’t know anything of the interest of their business, they must have met with great success or they could not have run up that capital from a hundred dollars to fifteen hundred dollars at one time, and then drop back to nine hundred and fifty dollars. Q. You mean in the market value of the stock? A. Yes; I say the ups and downs are so great; some find it to improve; here, now, for instance, I remember one time coffee, No. 7, was 5 3-4, and it ran up and up and a pound of the same coffee was worth 27 1-2; there was between three and four hundred per cent, advance; another time, I remember, it started from 8 and went up to 23; well, now, if a person was lucky, they could make a great deal of money by the advance of the raw material. Of course, other 13 194 [Senate, times it goes down, as you see in this stock; this stock was selling at 1500 and went down; they were seeking buyers at 1,000 and we paid 1,000 for that first stock we bought, and it went down to $950. Q. Don’t you consider that that explanation rather makes the matter worse than better? A. No; I — Q. Because if you permit speculation, and the profits made out of speculation to be added to the capitalization of a company and then pay 50 per cent, on that capitalization it becomes still worse? A. No; it is not the nature of the coffee; there will be a failure of the crops, in the principal growing crops; for instance, in Brazil, and the price will run way up; they will have a big crop and it goes way down; the fact is, since I have been in the business here, since 1870, 19-20 of the men have failed on that account; it is such a speculative business you can’t — there ap- pears to be no help for it; coffee is the most speculative business in the world; the ups and downs are so great. Q. Well, you mean that they have capitalized their speculative profits? A. Yes; they have been fortunate; yes. Q. And capitalized? A. That is my — Q. I understand; capitalized fund; speculative profits; profits made in speculation instead of profits made by roasting? A. Not necessarily. Q. Or selling the roasted product? A. Not necessarily specula- tion ; you have to have a large stock to carry on this business. Q. I understand. A. You may have several hundred thousand bags, and if the value appreciates you make an enormous amount of money; then, again, it may go against you and you cannot help it; they have to make some — Q. I understand; now, the situation is that instead of dividing these profits as made among the stockholders, they have capitalized those profits and then to pay a dividend upon those profits must necessarily increase the price to the consumer in paying these dividends? A. No; not necessa- rily; I think for a number of years they did not issue — did not pay any dividends at all; they let the profits accumulate; that is my impression. No. 40.] 195 Q. What proportion of the coffee trade of the United States, Mr. Arbuekle, do you control? A. Well, we don't control any of it; we do about one-quarter; we handle about a million bags, or have been handling that, and the consumption is between four and five millions; something over four millions I think it Weis last year. Q. Well, does this handling of one-quarter of the entire demand enable you to fix the price? A. No, sir; no, sir. Q. Or, do you fix the price by agreement with your personal competitors? A. We have no agreement — never have had ; we fix our price. Q. Are the prices that you fix from time to time followed by the other concerns in the same business? A. They generally fol- low us, yes, sir; as we are the largest concern, they generally fol- low us, up or down. Q. So, whether you desired to control the price or not, the fact that you fixed a price, substantially fixed it for the rest of those engaged in the business? A. Well, they usually set the same price; sometimes they go under us, but usually they did fix the same price; yes, sir. Q. Do you have to keep large stocks of coffee on hand? A. Yes, sir; we have houses in Eio de Janeiro, we have houses in Stantoz, and we have it coming all the time; we cannot depend upon this market; we use so much of it that we must have a large quantity either here or in transit. The Committee here adjourned, to meet at 10 o’clock on Mon- day morning, Feb. 8, 1S97, in the Council Chamber of the City of New York. THIED PUBLIC HEAEING OF THE COMMITTEE, COUNCIL CHAMBEE, NEW YOEK, N. Y., FEB. 8, 1897, 10 A. M. Mr. Lexow: A quorum being present the committee will now come to order. The Sergeant-at-Arms will call John E. Searles. John E. Searles appeared. * Mr. Lexow: Mr. Searles, before taking the stand will you ex- 196 [Senate. plain to the committee the reason for your absence from Friday’s session and Saturday’s session of the committee? Mr. Searles: Mr. Chairman, I received the subpoena of this committee after leaving my office to leave the city on a very im- portant business engagement, which I did not feel that I had the right to defer. I called upon Mr. Parsons, my counsel, on my way to the train and explained the situation to him and asked him to appear before the committee and make my excuse, and state that I would appear before the committee on my return to the city. Mr. Lexow: Your name has been called both at the Friday and the Saturday sessions of the committee, and it seemed to the committee, and I think this goes without saying, that the sub- poena of this committee, representing both branches of the Leg- islature of the State of New York, is superior to any private busi- ness, and stands beyond even the subpoena of a court of record. This committee do not wish to make any distinctions. Before the committee the millionaire and the man of affairs stand ex- actly on the same footing as the poor man or the beggar, and we shall insist from all classes of the people the same respect and obedience to the process of this committee, as we have a right to do under the circumstances. The committee will not pass upon the question of disobedience until the end of the witness’ testimony. If the witness gives tes- timony that is helpful to the general subject under investigation and answers questions put by the committee, as he is bound to do under the law, the committee will then consider whether the wit- ness has purged himself of the contempt. Mr. Searles, will you take the witness stand? John E. Searles, having been duly sworn, testified as follows: Examined by Mr. Lexow* Q. What is your age? A. Fifty-six. Q. Your occupation? A. Well, sugar refining business. Q. Any other occupation? A. Yes, sir; I am a bank president and president of several other corporations. No. 40.] 197 Q. You are a gentleman of large affairs in this city, are you not, sir? A. I am supposed so to be. Q. What was your relation to the so-called Sugar Trust at the time of its organization? A. I was one of its organizers, and from the commencement the secretary and treasurer of the — Q. Of the Trust? A. What was called the Sugar Trust. Q. You were mentioned in the body of the Trust deed as one of the trustees under that deed? A. I was. Q. Have you the deed, the original trust deed? A. I have not. Q. Where is it? A. I have no knowledge as to where it is. Q. Where did you last see it? A. The last I saw of it was in connection with the North River case, when it was surrendered to counsel for use in connection with that litigation. Q. Is the instrument contained in the papers on file in the North Kiver Sugar Refining case a true copy of the original trust deed? A. So far as I know it is. Q. Have you examined it? A. I have not recently. Q. Did you examine it at the time of the trial of that case? A. I presume I did. Q. The original document was. produced and put in evidence in that case, was it not? A. I think it was. Q. Don’t you know it was, Mr. Searles? A. I think the origi- nal document was given to the court and by him used in connec- tion with that case. Q. And as part of the evidence in that case? A. That is my impression. Q. Now, what was your relation to any of the component com- panies that formed the Trust prior to the organization of the Trust? A. I was an officer of one of the corporations. Q. Which one? A. The Havemeyer Sugar Refining Company. Q. Had you any relation to any other of the component com- panies? A. No. Q. Are you certain about that? A. I am. Q. I do not wish to mislead you, but I ask you the question, was there any other company which you had any relation to that formed part of the Sugar Trust? A. Well, you mean prior to the ■organization of the Trust? 198 [Senate, Q. And at the time of the organization of the Trust? A. At the time of the organization of the Trust I was also interested in the North River Sugar Refining Company. Q. You held stock of the North River Sugar Refining Com- pany? A. I did. Q. How did you obtain that stock? A. I purchased it. Q. You purchased it from the old holders? A. Yes, sir. Q. For how much? A. I disremember the figures — Q. Was it $325,000? A. Could not testify positively as to the price. Q. Was it $350,000? A. I could uot say. Q. Is it not a fact that you paid $325,000 for the stock of the North River Sugar Refining Company, and $25,000 for its real estate, making altogether $350,000? A. I don’t remember the figures; I purchased the entire property. Q. You testified in the North River Sugar Refining Company case, didn't you? A. I did, I think. Q. Didn’t you state in that case that you had purchased the property for these figures? A. I can't remember as to what fig- ures I did testify to. Q. Do you remember whether or not an agreement was drawn up between you and the holders of the interests in the North River Sugar Refining Company for a sale of its stock to you? A. Such an agreement was made. Q. And the board of directors of the North River Sugar Re- fining Company approved the agreement, did they not? A. I think they did. Q. And desired its Secretary to execute it on behalf of the com- pany? A. I so remember. Q. Is that an agreement reciting that you purchased the entire plant of the North River Sugar Refining Company for $325,000? A. I do not remember the figures; it is simply a matter of mem- ory; that is nine years or more — Q. But quite a large transaction, Mr. Searles? A. Yes, a large transaction, but — Q. And one involving a number of embarrassments to the No. 40.] 199 Sugar Trust afterwards — it was that purchase, was it not, that destroyed the Sugar Trust in the Court of Appeals in this state? A. I was not aware that it was that purchase. Q. Was it not the decision of the court? A. In the North River case — - Q. Of that transaction? A. I don't remember that it was based upon that transaction. Q. Well, that was one of the steps leading up to the transac- tion, you will remember, the Sugar Trust secured that property, which was declared to be illegal by the Court of Appeals? A. That is correct. Q. I will read now from the appeal book in that case: “Where- as, John E. Searles, Jr. — That was your name then, was it not? A. It was. Q. (Continued) “ has offered to purchase all the capital stock of said North River Sugar Refining Company for the sum of $325,- 000, this consideration not to include six lots of land on the South West corner of Corlears and Water streets, for which $25,000 has been allowed out of the consideration of $350,000 originally men- tioned, the property known as No. 11 and 13 street, books and accounts, bills receivable, and all other personal prop- erty belonging to the refinery of the North River Sugar Refining Company, and the lease of the stables, and the lease of office No. 92 First street, except office furniture and safes at the refinery; Resolved, That Peter Moller, Jr., George S. Moller and Girt Mar- tens be, and they hereby are, appointed a committee to deliver the said stock to said John R. Searles, Jr., or at his request, to John E. Parsons John R. Dos Passos and Franklin Bartlett, trus- tees, on receipt of $325,000, and the proceeds to be divided among the stockholders on this deed according to their respective shares.” Now I ask you to refresh your recollection: do you re- member that that was the transaction that was carried into ef- fect by you? A. I do. Q. Now, Mr. Searles, what was the par of the certificates of the Sugar Trust that were delivered to you in exchange for the $350,- 000 worth of property? A. I do not remember. 200 [Senate. Q. You have testified, have you not, in the North River Sugar Refining case upon that question? A. I presume I did. Q. Let me refresh your recollection in the decision of Judge Finch in that case: “Q. What organization? A. The Sugar Refining Company, the board; well, the board got the stock from one Searles, a stockholder, and gave in exchange certificates for $700,000, or a little more than double the purchase price.” Now, is that statement true or false? A. I don’t know as to the state- ment of Judge Finch; my testimony in that case, if you have it, would give the exact figures. Q. Don’t you remember, Mr. Searles, whether within a short period of time after receiving or paying for property of the value of $325,000 you received Sugar Trust certificates of the nominal face of $700,000? A. I presume the figure is correct, but I am not — I have no knowledge of it except what you have read. Q. Now you presume the figure is correct, do you not, from the fact that this transaction was typical of every other transaction concerned with the formation of the Sugar Trust, to wit, that the original properties were stocked in trust certificates at just 100 per cent, more than they actually stood upon the books in the way of values? A. That maybe correct in connection with the North River Sugar Refining Company without being true con- cerning any other. Q. I know it may be, but is it? A. It is not. Q. Was this North River transaction typical of the other trans- actions with reference to the exchange of certificates in the Sugar Trust? A. As to the comparative acounts, no. Q. Was the differene between the value of the properties pur- chased and the Sugar Trust certificates exchanged therefor larger in other cases? A. There was no definite relation between the capital stock in any of the subsidiary corporations and the amount of certificates they received in exchange for that stock. Q. How, then, was the ratio of values arrived at? A. Each property was estimated as to its real value to the whole regard- less of its capitalization. Q. Then in estimating the value of the North River Sugar Re- No. 40.] 201 fining Company the real value of the property was estimated with reference to its value to the whole, was it not? A. It was. Q. And the value of the property with reference to the whole issue of certificates was fixed at double the amount of the cash paid for the refinery? A. In that transaction, yes. Q. Well, if that was the basis of valuation, if that was the measure for judgment, and you say that applied universally, the same process of mathematics must have been applied to all the other properties that went into the Sugar Trust, must it not? A. It was not. Q. Do you mean to say, then, that you, receiving property of $350,000 cash payment, acting as trustee, received for your bene- fit more proportionately for the property that you turned in as trustee than you paid for property that was turned in by others for which you were not trustee? A. if you will Kindly tepeat that question ; I do not think I got the full meaning of it. (Question read.) A. The purchase of the North River property was an individual purchase; it had no relation whatever to the value of the property to the Sugar Refineries Company; the circumstances under which the North River property was purchased were peculiar and did not fix the real value of the property; it was placed in the Sugar Refineries Company at its estimated value to that company in cer- tificates. Q. In other words, immediately after paying $325,000 for the North River Sugar Refineries Company, receiving its shares as trustee, you estimated its value, without any addition to the pur- chase, without any lapse of time after that purchase, at just double in certificates than you paid in cash, is that true? A. It is not true that the property was received for $325,000 as trustee; it was turned over to trustees, and through those trustees ex- changed for certificates; it was received by me as a personal transaction. Q. Does this resolution then, of the North River Sugar Refining Company lie? A. I don’t know what you mean by that question. Q. Have you read the resolution? A. No; the resolution pro- 202 [Senate, vided, as I understood, that the stock should be turned over to me, or at my direction to certain trustees. Q. John E. Parsons, John R. Dos Passos, Franklin Bartlett, trustees? A. Yes, sir; I had the option that the stock should be delivered to me, or should be delivered to them under my direc- tion. Q. You were a trustee of the Sugar Trust, were you not? A. A trustee — the Sugar Trust was not at that time organized. Q. But it was in contemplation, and the agreement looking to its organization had already been formulated, had it not? A. It had — Q. Then you claim that as trustee of the Sugar Trust you could nevertheless act as a private buyer of property, and water its value in selling it to the concerns of which you were trustee 100 per cent, practically over night? A. No, sir; I do not admit that in that statement. Q. That was done, wasn’t it? A. I purchased that stock as a private transaction with the owners of the property; I bargained for that property with the trustees and disposed of it to them under an agreement. Q. When you speak of trustees, do you speak of the trustees mentioned in the resolution? A. Yes, sir. Q. They were trustees of the Sugar Trust, were they not? A. They were — represented the organization. Q. They represented the purchasing trustees of the organiza- tion of which you were also a trustee, did they not? A. Of which I was a contemplated member. Q. Yes; the agreement had already been signed, had it not? A. I think not, at that time. Q. Was it in contemplation? A. It was. Q. The terms of it had been fixed, and these purchasers of out- side refineries were being made in pursuance of the terms of that agreement, were they not? A. The negotiations were in prog- ress; I do not think they had been completed. Q. Just let me read you a few more lines — this may probably refresh your recollection as to whether or not it had been con- No. 40.] 203 templated: “Whereas, on or about the 5th day of December, 1SST, George H. Moller, secretary of the North River Refining Company, signed a deed of consolidation of the various sugar re- fining companies of the United States” — that immediately pre- cedes this resolution to sell this stock to you ; now, after hearing that embodied in that resolution, and in the opinion of Judge Finch of the Court of Appeals, will you say that the agreement of organization of the Sugar Trust had not been signed at tfie time that you contracted for the purchase of these shares? A. What was the date of that resolution, Mr. — Q. 25th day of November, 1887? A. My recollection is at fault in reference to the date if that is correct; I had the impression that the matter was consummated prior to the organization of the Sugar Refineries Company. Q. Mr. Searles, was not the agreement looking to the organi- zation of the Sugar Trust in existence as early as the 22d day of April, 1887? A. No, sir. Q. Were not the steps looking toward the perfection of an agreement of that kind being taken by the various corporations as early as the 22d day of April, 1887? A. No definite steps had been taken ; the matter had been for two years prior to the organ- zation of the Trust discussed under various forms, but nothing of any definite character took place at as early a date as that. Q. Let me read now from the record of that case: “Meeting of the stockholders of the North River Sugar Refining Company, held April 22, 1887. Peter Moller, Jr., in the chair. Mr. Moller offered the following preamble and resolution: Whereas, it is contemplated that the several sugar refineries in New York and other states shall consolidate their several refineries in one large concern or company. “And whereas, it may be for the interests of the North River Sugar Refining Company to participate in the above said consol- idation, “Therefore, be it resolved” — followed by the appointment of a committee to take the steps to secure the consolidation of the North River Sugar Refining Company with that contemplated , 204 [Senate, concern — after refreshing your recollection upon that subject will you not now say whether or not the Sugar Trust agreement was being brought in contemplation as early as the 22d day of April, 1887? A. No definite agreement of any kind had been reached at that time; for a year previous to that date various projects for consolidation had been discussed, and doubtless one was under discussion at that time; but the matter took no defi- nite form in the shape of an agreement until the autumn of that year. Q. That is your answer to the question, Mr. Searles; I ask whether or not as early as the 22d day of April, 1887, the Sugar Trust consolidation was not in contemplation and understood between you and the several refineries of the United States? A. Efforts to bring about some consolidation were doubtless un- der discussion at that time, but no definite plan for a consolida- tion; the consolidation which was subsequently effected had not been formed at that time. Q. Were similar resolutions to the one I have read not adopted by the other corporations which subsequently formed the Sugar Trust at about this same time? A. I think no other was ever taken of that character. Q. Are you prepared to swear so positively? A. I have no knowledge as to what was done by the other corporations except that there being at that time no definite proposal, and there be- ing no proposal subsequently which involved corporate action; I have no knowledge of any such resolutions. Q. Where are the books of the companies which afterward formed part of the Sugar Trust? A. They were all retained by the original owners of these corporations. Q. Where are they now? A. I have not the slightest idea. Q. Where are the books of the Havemeyer Sugar Refining Com- pany of which you were manager? A. I do not know. Q. When did you last see them? A. They were left with the president of that company at the time the consolidation was ef- fected. Q. Who was he? A. Mr. Hector C. Havemeyer. No. 40.] 205 Q. Where is he? A. He is deceased. , Q. Do you mean to say that at the time of the consolidation of the various companies into the Sugar Trust each separate com- pany retained its books, its minute books, books of account and all other books showing the assets and transactions of each of the several companies? A. I do. Q. What became of them upon the formation of the American Sugar Refineries Company of New Jersey? A. The books of the corporate companies? Q. Of the subsidiary companies whose interests were, as I un- derstand, bought out by the American Company? A. They, I presume, are in the hands of the former officers of those subsi- diary companies.^ Q. Not turned over to the American Sugar Refining Company of New Jersey? A. Some of them may have been placed in its archives; others, I do not think, were; I think they are still re- tained in the places where the properties are located. Q. Mr. Havemeyer testified that all the assets of the companies forming the original Sugar Trust were bought by the American Sugar Refining Company of New Jersey; did those assets not in- clude the books of account? A. They did. Q. Therefore those books of account are now the property — the minutes of the old companies are now the property of the Ameri- can Sugar Refining Company? A. Properly so. Q. Are you their custodian? A. I am not. Q. Well, what is you official relation to the American Sugar Refining Company of New Jersey? A. I am its secretary and treasurer. Q. Is not the secretary and treasurer the custodian of the books of the corporation in which he occupies that office? A. I have the custody, under the direction of the Directors, of the books of the American Sugar Refining Company. Q. Does that not include the books of the constituent com- panies? A. It does in so far as they are accessible. •Q. Well, now, do not let us misunderstand each other, Mr. Searles; if this committee has to ask the Legislature for an in- 206 [Senate, crease of time we propose to know what was paid for those origi- nal companies; now you might just as well tell us; we want to know the price that was paid and see whether the same ratio ob- tained, and the same price was added to the actual value of the property of the various companies, as obtained in the North River Sugar Refining Company’s case; we want that testimony; we want that evidence; we do not want to put you to unnecessary trouble, but we are going to have it if it is in this world? A. Well— Q. Now, can’t you tell us — A. (Interrupting) Is that a ques- tion? Q. I ask you, can’t you tell us what the transaction was, what the prices of actual value of these old companies was, and the amount of Sugar Trust certificates issued for them? A. I have no figures at the present time from which I could give you the accounts of certificates received by the stockholders of the corpo- rations which formed the Sugar Refineries Company; the capi- talization of those companies did not represent their value; the property — the company’s property in each case was taken over at its estimated value in certificates; in the case of the North River Company — if you will allow me to explain this transaction —the North River Company were to receive $700,000 — now that you have given me those figures it comes to me — in the certifi- cates for their property; that was its estimated value; the direc- tors of that company subsequently, were unwilling to accept the certificates, because they were doubtful as to the value of the cer- tificates, and stated that they would only sell their property for cash; on their own estimate of the value of the certificates I pur- chased their property and took the certificates to which they were entitled. Q. Personally? A. Yes. Q. Personally; although at that time, Mr. Searles, you were trustee of the Sugar Trust issuing those certificates? A. I was one of the trustees of the Sugar Refiners Company, or was to be if it was prior to that date. Q. And represented under your trust the interests of the other stockholders forming the Sugar Trust? A. Yes, sir. No. 40.] 207 Q. Is that transaction typical of the other transactions that culminated in the perfected Sugar Trusts, or does it stand on its own bottom? A. It stands on its own bottom; and for the reason that the owners of the North River property placed a dif- ferent estimate upon the value of these certificates from that of other parties who were surrendering other property in exchange for certificates. Q. Now, Mr. Searles, if your recollection of that is true, and I assume that you know whether, as trustee of a company, you made an individual profit over night of $350,000 — if that is true, why did this resolution read: “or at your request to John E. Parsons, John R. Dos Passos and Franklin Bartlett, trustees?” A. For this reason: The representatives of the North River Sugar Refining Company had agreed to transfer their property to these trustees and receive in exchange for same these certificates — they had subsequently refused to do this. Q. Who had? A. Some of the members of this North River Sugar Refining Company, stating that they were not satisfied as to the value of the certificates they were to receive; I therefore agreed that I would take the certificates and give them a certain amount of money for their property; I estimated the value of the certificates at a higher value than they did, which was the only difference in the transaction; if there was no market value — you said that I made $350,000 over night; it is not correct, for the reason that you assume that this $50,000,000 of certificates which were issued were wmrth their par value. Q. I ask what you stated, Mr. Searles, only in your testimony, and that is that this issue of $700,000 of certificates to the North River Sugar Refining Company bore the same ratio to the whole issue of Sugar Refining certificates that the other property did; hence, that if the $50,000,000 Sugar Refining certificates issued were issued for actual values that, therefore, you had made an actual profit of $350,000 over night on the transaction; that is proper, is it not? A. You must, however, remember that those certificates had no market value, and were not convertible into cash; that the matter of their value was purely prospective, and 208 [Senate, depended upon the faith of the various parties in the success of the company. Q. Did I understand you to say that you considered the actual value of the North River Sugar Refining Company’s property $700,000 in relation to the certificates of this company? A. I considered it was worth that. Q. Then you considered the certificates of this company were watered about 50 per cent.? A. No, sir; I did not. Q. You say now you consider the property worth about $350,- 000, valuable in proportion to the ratio of certificates issued, didn’t you? A. I don’t think that I stated it in that form. Mr. Lexow: Mr. Stenographer, just read the statement of the witness. The stenographer reads the following testimony: “ Answer. For this reason, the representatives of the North “ River Sugar Refining Company had agreed to transfer their “ property to these trustees and receive in exchange for same “ these certificates; they had subsequently refused to do this. “ Question. Who had? “ Answer. Some of the members of this North River Sugar “ Refining Company, stating that they were not satisfied as to “ the value of the certificates they were to receive. I therefore “ agreed that I would take the certificates and give them a certain u amount of money for their property. I estimated the value of “ the certificates at a higher value than they did, which was the “ only difference in the transaction. There was no market value “ — you said that I made $350,000 over night. It is not correct, “ for the reason that you assume that this $50,000,000 of certifi- ■“ cates which were issued were worth their par value.” Q. I have assumed that those $50,000,000 certificates were worth their par value, not that the law of the state had been dis- obeyed; but you say in making this transaction you issued certi- ficates to a greater extent than the actual value of the properties as you understood them? A. No, sir. Q. Then I repeat my question: Then you concede that the cer- tificates which you received represented the true and actual value of the properties of the North River Sugar Refining Company, to wit, $700,000? A. Yes, sir. No. 40.] 209 Q. And that you were paving one-half of the real value of the North River Eefining Company property? A. I was buying their certificates with faith. Q. (Interrupting) You say the certificates were worth $700,000? A. In my judgment they were. Q. You paid $350,000 for the property? A. Yes. Q. Can you dispute now that you considered that you were making $350,000 over night on that transaction? A. I do. Q. You dispute that? A. Yes; for the reason that my $700,000 was not convertible into cash for $700,000 — my recollection is be- tween 70 and 80 — somewhere in the neighborhood of SO, and I could not dispose of this $700,000; I had to hold them for a future value; that is what these North River directors were un- willing to do. Q. You are talking now of speculative values of — A. (Inter- rupting) I am talking about realizing on the stock exchange at that time; I am talking about realizable values. Q. I am speaking now of actual values; we assume for the pur- poses of this question that the trustee of a company don’t buy the capital stock of his company to sell it on the stock exchange within a day or two, or a week, or a year, but does it as a trustee, as an investment; now I ask you, didn’t you consider in taking the $700,000 worth of Sugar Trust certificates that you were get- ting $700,000 in the equivalent of money or property? A. In its iuture value, yes; but not in its present convertible value. Q. Then, Mr. Searles, in the issue by you as trustee of the Sugar Trust, you did not issue certificates which honestly represented the present actual values of the property, but the future specu- lative values of that property in your judgment? A. We had no relation to the speculative value. Q. Are you not now speaking entirely of realizable or speculat- ive values, values in the future, as your own terms express it? A. I spoke of the value of this property in certificates as being part of this general property; that as part of that property these certificates would be worth the $700,000 they represented. 14 210 [Senate, Q. That is future value, is it not? A. It would be their value when they became a part of this consolidated company. Q. That was speculative, was it not; dependent upon the suc- cess of the scheme that you then had in mind? A. If you may so characterize it. Q. Well, isn’t that right? A. I do not so estimate it myself. Q. Were you not speculating on these Sugar Trust certificates received by you being for their face value at such time as the scheme which you had in mind would bear fruit? A. It was with my faith in their ultimate value that I was willing to take them. Q. Not in their present value? A. Well, it was their present value for the purposes of this consolidation. Q. Do you insist that you can stand on both alternatives; that you took them because of their ultimate value, and that you took them because of their present value, relying upon the ultimate success of the scheme? Which is true? A. They are both the same in my judgment. Q. That is speculative, is it not? A. It might be so considered. Q. And the real value of the certificates that you had in mind was the ability that the trustees of the Sugar Trust would have to dispose of those certificates afterwards to the public? A. No, sir; it had nothing to do with the public; it was based — Q. How did you realize on them except by selling them to the public? A. It would be based on their value as to earning capa- city. Q. And a property that you paid $350,000 for, you put in the form of certificates representing $700,000 then, believing that you could give an earning power to that company that would enable you pay dividends not upon the original investment of $350,- 000, but upon the nominal face of seven hundred; is that right? A. Not exactly, Q. Where is the fallacy in the argument? A. The fallacy lies in this, Mr. Chairman; I purchased the North River property at less than its real value in cash, because its directors desired to sell their property; the real value of the property was more No. 40.] 211 nearly represented by the certificates, but these gentlemen were very desirous to sell their property; they were unwilling to ac- cept the certificates which they had agreed to accept, but were very desirous to realize what they could in cash, and I agreed to take their certificates off their hands. Q. And you then, occupying the relation of trustee of the Sugar Trust, those certificates were issued, received for a cash payment of $350,000 certificates upon which the Sugar Refining Company is now paying dividends at the rate of 12 per cent, on $700,000, or 24 per cent, upon the original investment; is that true? A. The amount received, in the first place, was not $700,000; 15 per cent, of that amount was retained in the treasury of the company. Q. I understand that? A. So that the real amount that was received was $595,000 in certificates. Q. Say $600,000? A. Well, a trifle less than $600,000. Q. Now the same question applies to the $600,000; you are re- ceiving, if you have not parted with the stock, or if you have the holders of those certificates are receiving the 12 per cent, upon $600,000 annually, besides an extra dividend of 10 per cent, in 1894 paid in cash, and have been so receiving eversineethe formation of the SugarTrust and the American Sugar Refineries Company upon an investment of $350,000; is that true? A. What originally cost me $350,000 was represented by $595,000 in certificates, which have received variable dividends from 8 per cent, per an- num and 10 per cent, per annum, finally to an average of about 9 1-2 per cent, per annum, which is the most they have received. Q. Part was preferred stock, was it? A. There was no pre- ferred stock at that time; but when the American Sugar Refin- eries Company was organized the certificates of the Sugar Re- fineries Company .received one-half common and one-half pre- ferred; the preferred receiving only 7 per cent. By Mr. Bedell : Q. Will you tell me in what year prior to 1891 the Sugar Trust paid less than 10 per cent, dividend? A. My impression is that they paid only 8 per cent, the first year. 212 [Senate, Q. The first year? A. That is my impression; I am not abso- lutely certain as to the date, but that is my impression. By Mr. Mazet: Q. They have a surplus besides? A. Yes, sir. By Mr. Lexow : Q. And that surplus is applicable proportionately to this cer- tificate issue that you received? A. Certainly. Q. In 1891 on the formation of the American Sugar Refineries Company of New Jersey the issue of $50,000,000 of Sugar Trust certificates, in which was contained this $595,000 worth of cer- tificates issued for your purchase of $350,000 worth of property, were exchanged par for par for the stock of the New Jersey Com- pany to take in? A. One-half in common and one-half in pre- ^erred; yes, sir. Q. Par for par? A. Par for par. Q. So that this $595,000 worth of Sugar Trust certificates was exchanged for one-half in preferred stock and one-half in common stock of the New Jersey Company? A. That is correct. Q. And dividends have been apportioned to that stock upon the basis of its nominal value since that time? A. That is cor- rect. Q. Equally with all the other stock of the company? A. Cer- tainly. Q. Did your associates in the Sugar Trust know at the time of this independent personal transaction of yours in regard to the North River Sugar Refining Company property? A. It was known to every person interested in the transaction. Q. And it was done with their acquiescence? A. It was done with their full knowledge and — Q. And acquiescence — Q. And acquiescence — A. And acquiescence. Q. And these $700,000 Sugar Refining Trust certificates were issued by you and your associates to yourself individually, with No. 40.] 213 the full knowledge of all jour associates of the details of the- transaction? A. They were of the $595,000. Q. I understand; now, did they object to it? A. Not at all. Q. They did not object to it because they were getting the same for their own property, proportionately, were they not? A. No, sir, that had no influence in the matter, I think; they did not ob- ject to it, because it was simply carrying out the agreement of the North Eiver Company, or the stockholders of that company, and it was a matter to them of indifference as to whether the North Eiver directors or myself received those certificates; any one else would have had a right to purchase them if they had seen fit. Q. Do you dispute the veracity of this resolution of the North Eiver Sugar Eefining Company? A. What — which resolution? Q. The resolution commanding the trustees to take $325,000 in cash? A. Not at all. Q. Then why do you say that the agreement proposed a trans- fer to the North Eiver Sugar Eefining Company of $700,000 of Sugar certificates? A. I mean to say that a prior agreement had been entered into by one of the officers of that company to accept $595,000 in certificates for the stock of their corporation on be- half of their several stockholders; my recollection is — By Mr. Bedell: Q. With whom? A. With those three trustees that have been named. Parsons and the others. Q. But I thought, Mr. Searles, that you testified in the early part of your examination, that this was an individual transaction of yours that took place before the formation of this so-called Sugar Trust? A. This is the difference — the point is this: the negotiations had been going on for some time; preliminary ne- gotiations — to see whether this proposition could be gotten to- gether; during these negotiations the North Eiver directors, or stockholders — the North Eiver stockholders, through one of their officers, had agreed that if the negotiations were consummated, they would turn over the stock of their company on receipt of $700,000 less 15 per cent, in certificates; when it came to the com 214 [Senate, summation of tlie arrangement one of their directors who had been absent in Europe at the time that agreement had been made, having returned, objected to carrying out the transaction, and he being a considerable stockholder, the officer of the company who had made the negotiations reported that he was unable to comply with his agreement on behalf of his stockholders; and it was at that time that they came in and said that if they could sell their property for cash — the firm having been unsuccessful and losing money for two years — that they would entertain a whole cash of- fer for their property in lieu of accepting these certificates con- cerning the value of which they seemed to feel doubtful; with the knowledge of other gentlemen who were connected with the matter, it having come to this point, I proposed that I would pur- chase the stock of that company and accept in lieu all the cer- tificates to which they would have been entitled if it was carried out, their agreement; and that negotiation resulted in the pur- chase for $350,000 of their property, and my taking the $595,000 in certificates. By Mr. Lesow: Q. But the fact was that the North River Sugar Refining Com- pany considered the certificates receivable by them as worth 50 cents on the dollar, or rather that they were getting two for one in value of nominal value of Sugar Trust certificates? A. Well, I don’t think that is a fair statement of the case; the facts are: One of the largest owners unwilling — retiring from business and unwilling to put his property or money into Sugar certificates, was willing to make a sacrifice on his property and take an amount of cash in lieu of those certificates. Q. Well, do you mean to say then, that you were pressing and forcing the North River Sugar Refining Company out of the mar- ket as competitors, by compelling them to take a low cash value for their property, or receiving your certificates at twice the nominal of the cash offered? A. Not by any means; there was no compulsion about it; it was simply a question of their volition in the matter; they had preferred to go out of the business; to sell No. 40.] 215 tlieir property for a casla valuation, and named this figure them- selves. Q. Was not the preference that you speak of due to the fact that there was a sugar war on, and that your company and the other companies were respectively cutting each other’s throats, and that sugar had gone down to a price where no money was being made, and that that situation was made use of by the stronger sugar men to press the weak ones to the wall? A. That is not true. Q. That 15 per cent, that you have referred to was not that issued as a stock dividend a year afterward? A. It was not. Q. Was not a 15 per cent, cash dividend declared? A. No, sir; there was 15 per cent, of the original $50,000,000 retained in the treasury for improvements to the properties, for the purchase of any additional property which might be deemed in the interest of the company; it w T as by the direction of the counsel. Q. Wasn’t it divided afterward either by stock scrip or cash dividends among the stockholders? A. That probably was not; no, sir; no, sir; I think not. Q. That was not? A. No, sir. Q. Well, is it because you paid so many dividends that you cannot now tell which particular class of property it came from? A. My recollection is that that stock was issued for the purchase of additional properties and for. the improvements to the proper- ties of the company., Q. Where is it now? A. It was issued in payment for addi- tional properties and improvements. Q. What additional properties were purchased that were not paid for by increased issue of the capital stock of the company whereby your capital stock was raised $75,000,000? A. I think that at that time the St. Louis property had not been purchased and neither the New Orleans properties. By. Mr. Mazet: Q. Was the North River Company a corporation? A. A cor- poration under the laws of this State; yes, sir. 216 [Senate,. Q. Were you a Director or stockholder in that company? A. Not prior to the purchase of the stock. By Mr. Lexow : Q. Not prior to the purchase of this stock; but were these com- panies not taken into the original Sugar Trust agreement at the time of the final formation of the Sugar Trust? A. I think it was subsequent to the organization of the Trust. By Mr. Mazet: Q. Were there any of the stockholders in the North River Com- pany the same as were interested in the Havemeyers & Elder Company? A. No, sir. Q. It was a rival concern? A. Yes, sir. Q. A competitor? A. It was owned by half a dozen people, all in one family or two. By Mr. Warner: Q. Isn’t it a fact that the St. Louis Company was one of the first fifteen companies that went into that Trust? A. It was in the fifteen companies, but I don’t think the fifteen companies were in at the time of our organization; my recollection is that neither of the two companies, the New Orleans nor the St. Louis Company were in at the time. Q. How soon after the formation of the Trust were they taken in? A. I think within about sixty days, to my memory. By Mr. Lexow: Q. Did they contribute also 15 per cent? A. On the same basis; that is to say, the values of their properties were fixed with that in view. Q. Now, Mr. Searles, you say that all your associates knew the details of this North River Sugar Refineries transaction, and that none of them objected to the issue to you of Sugar Trust certifi- cates representing about twice the amount of the cash purchase; No. 40.] 217 were these associates of yours and you representing others than yourselves in the making of these transactions and the issue of those certificates? A. I do not think I understand who you mean by “others;” each one of these parties who represented the stock- holders of the various corporations was informed of the fact that the North River Company had declined to accept the certificates. Q. Were informed of the details? A. Of the details, yes sir. Q. I ask you again — they and you represented stockholders of the various companies which composed the Sugar Trust? A. Yes, sir. Q. Were the stockholders informed of the details of that trans- action? A. There were no stockholders of the Sugar Trust at this time. Q. But there were stockholders of the various companies that composed the Sugar Trust? A. Oh, they did belong to the com- panies. Q. Were those stockholders informed of the details of this North River Company’s transaction? A. They were. Q. How many stockholders were there? A. But very few. Q. How many? A. Well, I don’t know exactly how many stockholders there were in the various corporations, but in many of them, two or three, or four stockholders; at the time of the or- ganization of the Sugar Refineries Company, Mr. Chairman, the sugar refining business was all in the hands of a few people; these large interests, take the largest interests, they were represented sometimes by half a dozen persons who were the only persons in- terested in these large properties; in some of the smaller compan- ies there may have been a dozen or fifteen stockholders; but my judgment is that there were less than one hundred persons inter- ested in the sugar refining business at that time in the compan- ies that were embraced in this consolidation; and those persons, the stockholders of each corporation, appointed some one to rep- resent them in this negotiation, and to those representatives ev- erything was made known that was done, and they were kept in- formed and they were informed of this transaction. Q. And do you mean to say that those persons to whom was 218 - [Senate. confided the interests of the stockholders in their several corpo- rations, representing them upon this deal, permitted you to re- ceive an issue of almost double in face or nominal value of Sugar Trust certificates, as compared with the cash paid by you for the property, without demanding similar treatment for their bene- ficiaries in the other companies? A. In the first place, bear in mind that only TO per cent., instead of double, was the amount of the certificates represented in excess of the money paid; and in the second place — Q. 85 per cent, isn’t it? A. No, 70 per cent, on the amount paid on the $50,000,000 certificates — 85 — so that not double, but 70 per cent, was the amount paid over and above any certificates on the amount of actual cash. Q. Why, you received double, less 15 per cent, didn’t you? A. Yes; that made 85 per cent, for what I paid 50. Q. Yes? A. Now, 70 per cent, of 50 makes 35 per cent. Q. 35 per cent, additional? A. Yes, sir. Q. Now, do you mean to say, Mr. Searles, that these trustees permitted their beneficiaries, with full knowledge of that par- ticular transaction, to be treated any less generously in the issue of Sugar Trust certificates, than you had been treated personally in the issue of certificates to yourself? A. My recollection is that I offered to any gentleman interested in the transaction the proposition which I submitted, which was possible to myself, and offered to any one who was willing to pay the money, the pur- chase of the stock, or any part of it, on precisely the same terms, but found no one was willing to put up the cash and take the stock. Q. Was, then, the same offer open to every one of the other constituent concerns, that they could either have cash to the ex- tent of 50 per cent, of their property or 50 per cent, of the nomi- nal value of the certificates issued, or certificates of the amount representing twice that amount of cash? A. No, sir. Q. Nobody else received that permission, or that option? A. The whole matter was based on the issue of certificates; it was the failure to carryout this negotiation in certificates which made No. 40.] 219 this case a peculiar one; and the transaction was simply the pur- chase of these certificates at a valuation. Q. Now, isn't it true, Mr. Searles, that the actual value origi- nally estimated by those who went into the Sugar Trust arrange- ment was $15,700,000 for all the properties that were trans- ferred? A. I have no knowledge of any such figures. Q. Will you swear that those figures were not made at the time? A. I have no recollection of any such figures. Q. Will you swear that at the time the amount of actual values estimated for the properties that were taken into the Sugar Trust were not less than $20,000,000? A. I don’t know what you mean by “actual values.” Q. The actual cash value of the property, not the certificated value, but the cash value of the property? A. By cash value of the property do you mean brick and mortar and machinery and real estate, merely? Q. I mean this: That taking $50,000,000 as the measure of issue of the Sugar Trust certificates, you figured the actual cost of the property for which this $50,000,000 of cer- tificates were issued at less than $20,000,000? A. That would depend entirely upon the limit you put upon the words “actual value;” the properties were taken — all of them — at their esti- mated value; each property was estimated on the basis of its property and earning capacity. Q. Was it not estimated, Mr. Searles, with reference to the statement you made, in regard to the North River Sugar Refining Company, as to its ultimate value, in view of the contemplated consolidation? A. It was estimated as to its value in the con- solidation based upon its earning capacity. Q. It ultimate earning capacity? A. No; its then earning ca- pacity. Q. Its then earning capacity? A. Yes, sir. Q. Well now, we will consider that the standard of values; why was it then that you issued for the refineries that were closed up, and the earning capacity of which you absolutely destroyed, pro- portionately the same amount of certificates in value as you did 220 [Senate, for the others? A. They were not issued in proportionately the same value, by any means. Q. Taking fifty millions as the type of issue? A. No, sir. Q. As the standard of issue? A. No, sir. Q. How much did you issue for the four Brooklyn refineries that you closed up? A. I don’t remember the amount which was received by them. Q. Have you the figures obtainable? A. I have not at present. Q. Do you know where they are? A. They are in the books of the Sugar Refineries Co., I should judge. By Mr. Mazet: Q. Who fixed those values? A. They were fixed by agreement with the owners of the various properties. Q. They consented to the valuation? A. They consented to the valuation; there is this which ought to be estimated in fixing the value of a manufacturing property, when property with the same amount of real estate and bricks and mortar and machinery may have an earning capacity of double the amount of another growing out of the perfection of its work and the accretions of fifty years of experience, and the earning capacity based upon all the conditions which appertained to each of these properties was the basis on which these values were calculated. Q. Then Mr. Havemeyer was mistaken, was he, when he testi- fied here that the estimated values upon which these certificates were issued were furnished by the stockholders and the direc- tors of the companies that were consolidated, each company fur- nishing its own estimate of value and they accepting same with- out inquiry or investigation of any kind — was he in error when he gave that testimony? A. The representatives of each company did furnish some data as to the amount of their business and the earnings of the companies and the property which they had, all of which were used in estimating the value of the property, or in checking the value which they put upon the property. Q. That is not as complete an answer to the question as you might give, Mr. Searles; the question implied whether Mr. Have- No. 40.] 221 merer was right or wrong in his answer when he said that the Sugar Trust trustees accepted the figures and estimates of the officers and stockholders of the component companies without inquiry or investigation and issued Sugar Trust certificates upon that basis? A. I think the statements of the representatives of the various companies were generally accepted as the basis for estimating the values of the properties. Q. Do you know any ease in which they were not? A. I think that concessions were made by some of these people from their original estimates, but in the main that was the basis. Q. Then there was inquiry and investigation as to the actual value of the properties? A. No investigation but what was based upon the statements of the gentlemen connected with the com- panies. Q. Is it not true that the total capital stock of all the com- panies affiliated afterward with the Sugar Trust amounted to $19,760,000? A. I have not the figures which go to make up that sum. Q. Is it your recollection that these figures are at least approx- imately true? A. Do you refer there to the companies that were taken in the original Trust? Q. Yes. A. My recollection is that the capital was not nearly so large of those corporations. Q. Was not nearly so large? A. No, sir. Q. Perhaps you leave out the capital of those companies whose properties which were abandoned and dismantled, amounting to $4,110,000. A. The capitalization of the companies which origi- nally organized in the Sugar Refineries Company did not repre- sent that amount of money; the capital was very much less than that. Q. It was less than that? A. It was less than that; the capi- tal in no wise represented the value of the properties or the mag- nitude of the business. Q. We understand that it may not? A. Did not. Q. What was the original capital of all the companies forming the Sugar Trust? A. My recollection is that it was about $7,000,- 000; less than $7,000,000. 222 [Senate, Q. When were these corporations formed with that capital? A. Some of them were formed with the commencement of the companies; others were formed with the organization of the Sugar Refineries Company. Q. Of the Sugar Trust? A. Yes; so-called. Q. Now, how many of them were formed prior to the organi- zation of the Sugar Refineries Company, or Trust, and how many were organized at the time of the formation of the Trust? A. I think three or four of them were organized in connection with the formation of the Sugar Trust, so-called. Q. Can you give their names, Mr. Searles? A. Havemeyer & Elder, Dick & Meyer, and my impression is, the Oxnard; I am not sure as to that. Q. I think you are right; and what other? A. Well, I don’t recall any others that were organized in connection with it. By Mr. Mazet : Q. Were the Wiechers incorporated then? A. Yes. By Mr. Lexow- Q. And after investigating the business? A. They were incor- porated under the laws of New Jersey several years previously. Q. Prior to that? A. They were originally organized as a cor- poration, Q. What was the capitalization of these four companies that were organized simultaneously with the organization of the Su- gar Trust? A. I think Havemeyer & Elder’s was $500,000, and Dick & Meyer $200,000; the Oxnard was $100,000. Q. Yes, and the other one? A. Matthiessen & Wiechers? Q. No; the other one that was organized at the time? A. Well, I don’t recall now for the moment. Q. Do you remember the capital of it? A. I don’t remember the other one — three — I don’t recollect the fourth company. Q. Well, we will assume then that there were only three; and what was the value of the Sugar Trust certificates that were issued against the capital stock of the three corporations that No. 40.] 223 were organized at the time the Sugar Trust was? A. I don’t re- member what those figures are. Q. Don't you remember how much in Sugar Trust certificates were delivered to the concern of which you were Manager — Have- meyer & Elder? A. I was not connected with Havemeyer & Elder; I was with the Havemeyer Sugar Refining Company, I stated. Q. Don’t you remember what was delivered to Havemeyer & Elder? A. I don’t recollect the amount they received. Q. Were they not one of the largest concerns in the Sugar Trust? A. The largest. Q. Have you the figures showing the amount of Sugar Trust certificates issued to Havemeyer & Elder? A. I have not at present. Q. Now the capitalization of Havemeyer & Elder and Dick & Meyer and the Oxnard Company, made simultaneously with the organization of the Sugar Trust, must have represented in your judgment and their judgment, then, the true value of the prop- erties that they controlled. A. Not at all. Q. Less? A. Less, by all means. Q. Then in the case of the organization of the companies at the time of the organization of the Sugar Trust they capitalized for less than they were worth, and received Sugar Trust certi- ficates for more than they were worth; is that true? A. They capitalized for very much less than the real value of that property. Q. Well, why was it that simultaneously in the ratio, or about the ratio obtained by the North River Sugar Refining Company, Havemeyer & Elder received their proportion of the $50,000,000 of the Sugar Trust stock and yet capitalized at the same time for less than the actual value of their property in a separate and independent corporation, which stock was transferred to the Sugar Trust trustees? Will you answer that conundrum, please? A. Under the organization of the Sugar Refineries Company it was necessary that all properties should be in the form of corporations, and the Havemeyer & Elder, which was a 224 [Senate, private firm, transferred their property for the convenience of transfer, to the Sugar Refineries Company, into a corporation with a capitalization of $500,000; Dick & Meyer did the same thing on the basis of $200^000 — simply to comply with require- ments. Q. And the Oxnard also? A. I think the Oxnard Company was taken at that time; I am not sure. Q. Only $100,000? A. That was only at that time; a small refinery. Q. Have you any idea of the amount of Sugar Trust certifi- cates issued for this $800,000 worth of capital stock of those three companies? A. I don’t recollect the amount was issued to those companies. Q. What value proportionately to the whole property taken by the Sugar Trust did the assets of these three corporations bear? A. Well I don’t think I could answer that question defi- nitely. Q. One-quarter? A. Fully that. Q. One-half? A. Hardly; no, sir; not so much as that. Q. Between a quarter and a half? A. I should think so. Q. Would you make it one-third? A. I should not want to attempt to fix definitely the proportion. Q. Would it be about one-third? A. More or less; one-third, I should think. Q. But, about approximately that? A. Approximately. Q. Within reasonable limitations, one-third? A. Yes, sir. Q. Was the corporation organized at the time of the organiza- tion of the Sugar Trust itself for the purpose of transferring its property to the Sugar Trust, for the purpose of transferring the certificates of its stock to be held by the trustees of the Sugar Trust, organizing on a basis of $800,000 worth of capital stock, nominal value, receiving in exchange therefor, about $17,000,000 worth of certificates of the Sugar Trust? A. One-third would be about $14,000,000. Q. Well, was fourteen millions — would that be right; that is less than the fifteen per cent.? A. Yes, sir. No. 40.] Q. About fourteen millions of face value in the certificates of the Sugar Trust? A. Approximately, I should think. Q. Then either the stock issued of these three original com- panies was a misrepresentation as to its taxable value to the tax officers of the State, or else the issue of the Sugar Trust certifi- cates by the Cugar Trust trustees was very largely in excess of the actual value of the properties transferred; is that true— as an alternative? A. As to the taxable value, the property which was transferred was all taxed, as all property in Brooklyn, re- gardless of the capital stock; there was no tax on the capital stock of a manufacturing corporation at that time. Q. Yes? Well, it was a representation that was untrue, was it not? A. No, sir; I don’t think that it is customary to repre- sent that the capital stock of a corporation represents the entire value of its property, Q. You, then do not consider that the nominal value of the capital stock has anything to do, in the way of representation or otherwise to the public or to the authorities of the State? A. Not necessarily, Q. You hold that it is simply a certificate representing the proportionate interest of the stockholder in the property of the whole? A. I think that is the custom in corporations generally. Q. Don’t you think that is one of the vices of the present situ- ation, Mr. Searles; I am asking you now as a business man — and one of the reasons for the present situation — this false issue of capital stock, representing to the public and believed by the pub- lic to represent actual values, whereas by those issuing them they are not considered as representing values at all, but simply pro- portionate interests? A. I scarcely think that is correct, for the reason that the Corporation Law is availed of among parties who are associated in business simply to provide a distribution inter- est, which will not be interfered with as in the case of a firm by death, and ordinarily, I think, in a very large proportion of in- terests it is simply for that purpose, that the matter may be dis- tributed and without attempting to place a valuation on the prop- erty. 15 226 [Senate, Q. As a matter of convenience? A. As a matter of conven- ience; I think that where the public suffers it is where they are over capitalized and not where they are under capitalized. Q. That is it; whether this situation that appears to be? A. I hardly know what that is, what you refer to. Q. Over capitalization; now is it not a fact that when you give utterance to those views you do utter the general view of those dealing in corporate interests; that is, the general view of those engaged in corporate enterprises? A. I think it is the view of very many. Q. Of those that you know? A. Many that I know. Q. And you are a gentleman of large experience in these oper- ations, are you not? A. I have considerable experience. Q. I believe you are so considered; do you overlook entirely, in reaching that conclusion, the law of the State, which says that capital stock shall not be issued, excepting for cash, or it may be exchanged for property of the actual value of the capital stock issued in exchange therefor, so that if your view is the view shared by those engaged in corporate enterprises, it means that they have closed their eyes and evaded the statutes of this State in the organization of corporations? A. I do not understand that the law provides that you shall capitalize for all the prop- erty that you have got, but that it provides that you shall not issue stock which does not represent either actual property or cash. Q. Yes? A. Not that you shall make your capital so large as — Q. (Interrupting) But you should not issue capital stock for property in excess of the actual fair market value of the property received in exchange for it? A. I think that is correct; I think that is proper. Q. But it is just that which is entirely overlooked, is it not, or which is absolutely violated in the organization of corporations and in the making of a transaction such as has been disclosed here? A. Not in the making of a small capitalization; I don’t consider that that is an evasion of that law, inasmuch as it is No. 40.] 227 true of every such corporation that the capital stock does repre- sent every dollar of value which it states to represent. Q. Iso; but in the making of an over-issue; I mean by an over- issue, an inflated issue? A. I think you are quite correct as to any inflation of value. v v By Mr. Bedell: Q. If you are making another issue by that means, you are then avoiding the tax upon corporations in this State, are you not? A. I think not; I think that if you tax a corporation here on a capital of $100,000, the value of which is fl, 000, 000, the value of the stock and not its capitalization, is what is taxed by the law. Q. Well, it would be very possible for a close corporation to keep the value of its stock down — they owning the majority of it and not putting it on the market; then would the State be able to form any basis for the value of the stock beyond the par? A. They place every officer of such corporation under oath as to the value of the property. Q. That is true; it might not reveal it always? A. That is a pretty serious charge. Q. I said “always”; I did not say that it would not sometimes. By Mr. Lexow: Q. Well, the fact that a foreign corporation is taxed in this State only upon the capital actually in usd in this State opens the door to an evasion of taxation, with reference especially to large manufacturing concerns, does it not? It is a very easy matter, is it not, to forget conveniently, just the amount of capital that is used by a foreign corporation in the transaction of business in this State, and if only that capital which is used in this State can be taxed by the State, that offers a loop-hole for escape in the way of taxation? A. It might operate in that way, I should think. Q. Don't you think, Mr. Searles, from your acquaintance with loivigu corporations, that if they were compelled, upon apnli- 228 [Senate, cation for a license to the Secretary of State, to do business in this State, to make an exposure of the amount of capital upon which they propose to do business, that that would to some ex- tent, relieve the situation? A. Well, I could scarcely say im- promptu, what would be the effect of such a law as that; my feel- ing is, the better course for the Legislature is to encourage the formation of corporations in this State, rather than to force them out of the State by adverse legislation. Q. There is nothing in the statutes of the State to-day that does not operate as favorably for the organization of corporations here as there is in any other State in the United States, excepting possibly in West Virginia? A. My impression is that the tax upon capitalization of corporations here is greater than it is in some other States. Q. Is it not simply that the method of obtaining an honest statement of the property of the corporation upon which to lay the taxes is, under the recent amendments of the Tax Law, more efficient in this State than it is in others, and that simply they are not avoiding taxation here as thoroughly and completely as as they are evading taxation in New Jersey and other states isn’t that true? A. I would hardly consider myself competent to discuss that question; I notice this fact — that in the State of New Jersey a franchise tax is demanded upon the capital of the corporation that is fixed and determinable and my understand- ing is that such a tax would be very much greater in this State than it is in the State of New Jersey. Q. Now, Mr. Searles, you have testified that the figures I gave you, with reference to the capitalization of these original cam- panies, were approximately true ; would the value — not the capi- talization, but the actual value — of the property that was thus capitalized be about $12,000,000? A. The value of the corpora- tions named a few moments ago? Q. The actual cash; appraised cash value of the properties for which fifty millions of Sugar Trust certificates were issued? A. There was no cash appraised valuation of these corporations. Q. Adding to the question I put a moment ago, the Philadel- No. 40.] 229 pliia companies that were acquired in 1892 — I believe in March, 1S92 — and for which $23,960,000 worth of additional stock — I be- lieve, if my recollection serves me — was issued — as part of the general question; did this issue of $73,960,000 worth of certifi- cates of the New Jersey Company represent more than an actual value of $12,060,000? A. That is no fair estimate whatever of the value of the property. Q. I am speaking now not of an estimated value by others, but the appraised value, fixed by those who owned and controlled the properties at the time they were taken in? A. There never was any such appraised value. Q. Did you ever see those figures before? A. No, sir. Q. Will you swear that the actual cash market valuation of the properties represented more than a total of $12,060,000? A. I should, most assuredly. Q. To what extent would you add to that figure and be justi- fied to swear to the actual cash value? A. Well, I scarcely know how to answer that because I think the designation of “ actual cash values ” — if you can tell me what you mean by that? Q. I mean — I am speaking of the value that the North River Refining Company put upon its property and agreed to take cash for it, applying the same rule or standard to the other proper- ties taken in by the Sugar Trust, would you say that the value of all the properties combined representing $73,960,000 worth of sugar certificates, was to exceed $12,060,000? A. If I under- stand your question it is whether the $73,000,000 of outstanding capital of the company represents in value more than the $ 12 , 000 , 000 . Q. No — I am speaking now of the time of the issuance of the certificates and asking you, on the basis of an estimated cash value of the North River Sugar Refining Company, whether all the properties taken in by the New Jersey Sugar Refining Com- panies, for which $73,960,000 worth of stock certificates were issued, had that kind of value to exceed $12,060,000? A. It had undoubtedly. 230 [Senate, Q. How much more will you swear to? A. Well, it would be impossible for me to fix the actual cash value of those properties. Q. Will you swear it was $20,000,000? A. That is very much less than the value undoubtedly. Q. Will you swear that this property exceeded in cash value on the basis of the estimated cash value of the North River Sugar Refining Company, to exceed $20,000,000? A. Will you let me ask you, M. Chairman, whether when you talk about $73,000,000 as representing the capital of the company, that the capital in- cludes all the real and personal property of the American Sugar Refining Company? Q. I understand that. A. Now, that being the case, do you ask me what the real cash value is? Q. Is that what its real cash valuewasatthetimeof theissuance of these $73,960,000 worth of certificates; whether you will swear that its real cash value, estimated on the basis of the North River Sugar Refining Company, exceeded $20,000,000? A. Well, I could not give any figure, estimated on the basis of the North River Company, as that is no criterion for anything connected with the properties of the company. Q. That was a cash transaction? A. That was a cash trans- action, under peculiar conditions. Q. Was any other transaction a cash transaction? A. No, sir. Q. All the others were certificate transactions? A. Altogether. Q. And no cash passed at all? A. None whatever. Q. All that the original Sugar Trust received was the real es- tate, and the plant of the respective companies? A. That was all. Q. No cash? A. No cash. Q. Not a dollar? A. No, sir. Q. The fifteen per cent, that was deducted was retained by the treasury temporarily as cash — as a working capital? A. As a working capital. Q. And absolutely nothing in the way of cash was contributed by the original companies? A. No, sir. Q. Now, Mr. Searles, will you not aid the committee in getting No. 40.] 231 at the figures that were established by these component com- panies upon which basis the Sugar Trust certificates were ex- changed for their property? A. I will endeavor to get that in- formation. Q. That was one of the questions put by me to Mr. Havemeyer and he testified that you were the proper person to answer a question of that kind. I asked Mr. Parsons whether it would be necessary for me to serve a Subpoena Duces Tecum to produce that evidence and it was stated No, that the evidence would be produced on Saturday before the committee and it was then ad- journed until to-day; we would like to have it as soon as it can be made accessible; I do not want to take advantage of you and 1 will call your attention to the Deed of Trust which Mr. Assembly- man Bedell has just handed to me and which recites that upon completing the execution of that instrument the parties, being those various subsidiary companies, “shall make a full inventory of the property, including raw and refined sugars, molasses, sugar in process, syrups, bone black, fuel, barrels, packages, charcoal, and other supplies, and such inventory is to be examined and the articles appraised at their present cash value except as to the sugar and molasses to arrive which are to be appraised at their market value on arrival by a committee of five persons, as fol- lows: Theodore A. Havemeyer, F. O. Matthiessen, Julius A. Sturz- burg, John E. Searles, Jr., and Joseph V. Thomas;” was that done? A. That was done. Q. Where is the document or where are the papers showing the appraisal of the values then had? A. I could not say what has become of those papers since, those, papers — that appraisal which you refer to — was an appraisal of the personal property of the various refineries for which each company was paid in cash. Q. Yes. A. That had nothing whatever to do with the ap- praisal of the properties of the company but simply its cash assets. : Q. You mean paid by the Sugar Trust to these various cor- porations? A. No, sir; paid by each of the corporations; for 232 [Senate, instance, if in the North River Company there were $200,000 of these cash assets, the re-organized North River Company repaid the old stockholders of the North River Company that $200,000 for those call assets, in addition to its sale of plant for certifi- cates; that had nothing to do with the transfer of the properties. Q. Well, it had to do with the transfer of this personal prop- erty? A. This was simply a transfer of the personal property from the old to the new corporation. Q. Yes. A. Of the individual corporations. Q. And a payment of cash by the new corporation for this transfer? A. Yes, but that had nothing to do with the property. By Mr. Bedell: Q. Then not all the personal property was taken into consid- eration in the fixing of the value of the property taken by the Trust? A. No, sir. By Mr. Lexow: Q. Inasmuch as you have stated that the Trust did not re- ceive from any of these component companies any cash what- ever, how was the cash raised with which to pay for this ma- terial turned over under the provisions of this Trust Deed to the Trust? A. It was contributed by the managers of the various corporations who loaned to the company. Q. Loaned to what company? A. T6 the individual company. Q. What, to the new company? A. Yes, sir. Q. And what did they receive for it? A. They received for it those personal assets which are provided for in that inventory. Q. They remained owners? A. They remained owners. Q. Of that personal property? A. A new company was started for each of those corporations; that is to say, a new set of books were opened; the new company took over these cash assets of the old company and liquidated them, and paid the money to the stockholders of the old company. No. 40.] 233 Q. By declaring a dividend? A. No; simply turning it over; it was liquidated for their benefit. Q. Well, in what other way can a stockholder get any money out of a corporation on dissolution except in the way of dividend? A. Well, the old stockholders received in liquidation for their old companies these monies which were appraised for in that inventory. Q. Do you mean to say that the actual money was taken out of the treasury of the old companies and paid over to individual stockholders without going through the form of declaration of dividend? A. No, Sir; I mean to say that the managers who were appointed to manage the new company provided funds to liquidate these personal assets and they were paid over to the old stockholders — the stockholders of the old company. Q. Well, what did the managers get? A. The managers had the property for which they exchanged the cash. Q. Didn't the Sugar Trust get the property? A. The personal assets they didn't get until they liquidated them. Q. Until they liquidated when? A. Until they liquidated these personal assets referred to in that inventory. Q. Do we understand you correctly as saying that the mana- gers of the subsidiary companies paid for this personal property and received money back from the Sugar Trust when the prop- erty was sold? A. Yes, sir. Q. They paid their own companies for that property; they paid their own companies, did they not? A. The managers of the new company, the oflicers of the new company, assumed these personal assets to liquidate them, and turned the proceeds over to the stockholders of the old company or to their represen- tatives. Q. How did they do it? A. By realizing the assets. Q. These assets were represented in the trust by certificates? A. Not at all; the certificates had nothing to do with these assets whatever. Q. There was no issue of certificates at all for them? A. None whatever; no sir. 234 [Senate, Q. Do you mean to say then, that the managers of the Sugar Trust liquidated these assets and turned them over— the results — to the various companies; paid originally for these assets? A. They furnished the money to pay for these assets in cash, and turned the proceeds over to the old stockholders. Q. And that was divided among the old stockholders? A. Certainly. Q. In the form of a dividend? A. I presume it was divided iu that form; the corporation itself having been turned over by the transfer of is stock, all of its assets in the way of these personal assets, were ordinarily, I think, placed in the hands of a trustee for the benefit of the old stockholders; these were taken over by the new company who paid to that trustee or rep- resentative of the old stockholders the amount of these assets, and it was by him distributed to the old stockholders. Q. Do you make annual reports? A. No, sir. Q. Do you make any reports? A. We make no public reports. Q. Do you make any private reports? A. No, sir. Q. Have you since the organization of the Trust and the subse- quent organization of the New Jersey corporation made any re- port of a public character in this State? A. We have not. Q. Or in the State of New Jersey? A. The law of New Jersey does not require any report. Q. I understand that; I asked for the fact? A. The company made a report to its stockholders at an annual meeting made, I think, in 1891 or 1892. Q. Where is that report? A. It was published at the time. Q. In the newspapers? A. Yes, sir. Q. What newspaper do you know it was published in? A. All the city papers, I think. Q. You have made one report to the State of Massachusetts, haven't you? A. We make an annual report to the State of Massachusetts. Q. Have you a subsidiary company there? A. The American Sugar Refining Company has a refinery there; not a subsidiary company at all. No. 40.] 235 Q. Now, why is it that you make a report to the State of Mas- sachusetts aud don’t make one to the State of New York? A. The laws of the State of Massachusetts require the making of a report in the matter. Q. The laws of the State of New York require the making of a report? A. I do not so understand it. Q. You believed that it is entirely optional and refers only to the liability of directors? A. I don't understand that the law of this State requires a report concerning a foreign corporation. Q. But where you have a corporation, which is a New York Corporation, don’t you consider that the law of the State requires you to make a report here? A. We do not have such a corpora- tion. Q. Well, you have five or six New York corporations merged in the New Jersey corporation? A. None at all. Q. Haven't you? A. No, sir. Q. You make the distinction that you purchased their assets? A. Those corporations have all been dissolved long since. Q. In the report that you made to the State of Massachusetts 1 find in the year 1895, “Investments in other companies .825,692,- 000"; does that represent stock purchased of other companies? A. It does. Q. Competing companies? A. No, sir; the companies owned by this company. Q. I thought that you had purchased the assets and properties of the companies that went into this company and dissolved them; are there others that you have not dissolved, the stocks of which you own? A. All of the companies constituting the origi- nal Sugar Refineries Company were dissolved after the organiza- tion of the American Sugar Refining Company, which purchased their properties. Q. I see? A. The investments in other corporations referred to are investments that have since been made. - Q. Subsequent to the 1st of January, 1891? A. Yes, sir. Q. Does that include investments in the Western Sugar Re- fineries Company? A. I think it does. 236 [Senate, Q. Of one-half its stock? A. Yes, sir. Q. That is the Spreckels Company, isn't it? A. No, sir; it is not the Spreckels Company. Q. That is the company — A. Spreckels owned part of the stock. Q. That is the company that practically controls the product of the Hawaiian Islands? A. Yes, sir. Q. And practically controls the sugar fields west of the Mis- souri river? A. In part. Q. Don’t it substantially control it? A. I don’t consider that it controls that market. Q. What other company except the so-called California Com- pany is there in competition with the Western Refining Com- pany? A. There are three beet sugar companies there which make sugar for consumption ; there are also — Q. You don't consider that beet sugar under the present tariff comes in competition with your cane sugar? A. Unfortunately it does. Q. Haven't you stated that it doesn’t? A. No, sir. Q. What are the names of the three beet sugar refineries that are in competition with the Western Refineries Company? A. There is the company at Almeda, California. Q. With what daily output? A. I don't remember their daily output. Q. What other companies? A. The China Company. Q. That is two, and the third one? A. Well, the third one is a Watsonville Company, the product of which this company has; therefore, it is not in competition with them. Q. Then there are only two companies? A. That and the Hong Kong refineries; the refineries in Hong Kong; imported su- gar from China are the principal competitors. Q. Then you have two competitors in the Western market; what is the total product of these two competitors? A. I think about — well, I haven’t the figures, but I think about 10,000 tons. Q. Ten thousand tons in what space of time? A. In a year. No. 40.] 237 Q. Ten thousand tons as against about 1,600,000 tons? A. Oh, no. Q. What is your product? A. As against the consumption on the Pacific coast; you can put it as against that only? Q. I am speaking of the consumption of the whole United States; what is the consumption of the whole United States? A. About 2,000,000 tons. Q. Then you have in actual competition west of the Missouri to the extent of 10,000 tons against the product of two mills, is that it? A. No, sir; it is 10,000 tons against the product of the Pacific coast. Q. Yes; well, what is the total competing product, assuming that you haven’t got any underlying agreement with any refinery that is not included in the Sugar Trust ; what is the total compe- tition in tons against you in the whole United States of America? A. About 700,000 tons out of two millions. Q. Then you only manufacture about 65 per cent, of the prod- uct? A. A part of the consumption of the country — of 2,000,000 tons, is domestic production ; there is a cane crop in Louisiana. Q. How much is that? A. 250,000 to 300,000 tons. Q. Does it exceed 100,000 tons? A. Oh, yes. Q. Didn't Mr. Havemeyer testify that it was 100,000 tons ap- proximately; was he in error if he so stated? A. No; I say un- doubtedly it is over 200,000 tons; between 200,000 and 300,000 tons., Q. How much of that do you produce; none of it? A. The re- fining part of it. Q. How much of that do you refine; I am speaking now of re- fined sugar? A. Oh, I ask your pardon; I didn’t understand you. Q. I am speaking of refined sugar; go on. A. Well, the con- sumption of refined sugars is not 2,000,000 tons then; I should correct those figures. Q. Are the figures correct when I estimated it at 1,500,000 tons? A. Refined sugars; yes., Q. And of that you produce how much? A. About 80 per cent. ; between 75 per cent, and 80 per cent. 238 [Senate, Q. That would be in tons how much? A. About 1,200,000 tons. Q. Then you produce 1,200,000 out of a total of 1,500,000 tons? A. Of refined sugars., Q. And you fix the price? A. We fix the price on what we purchase. ; Q. You so testified before the committee in Washington, and since that time Mr. Havemeyer has on two occasions stated that you fixed the price on all the product in this country; does he make an error when he makes that statement? A. In my judg- ment; that statement is not an accurate statement. Q. Whether you do it directly, by subsidiary agreements or contracts or understandings, you do it indirectly by the fact that the price that you fix is the controlling price for sugar in this country, don’t you? A. That is not correct, except in so far as we make so low a price that no competitor can afford to sell it cheaper, that is the only way in which we can control the price. Q. But they do sell it cheaper, don’t they? A. At times. Q. And that is the rule when they get a chance to sell it, isn’t it? A. Ordinarily; I don’t think they undersell the price of the American Sugar Refining Company. Q. Isn’t it true, that you control the market so absolutely that you can prevent competition even if that competition is ready to take a less price than you are willing to sell for? A. No, sir. Q. Don’t you control, by reason of the output that you make; don’t you control the price of the raw product and control the market of the raw product, the price of sugar for your competi- tors in the market and for the trade in the raw sugar? A. No, sir. Q. You buy about three-quarters of the total raw product, don't you? A. Yes, sir. Q. Do you mean to say that with a purchase of that amount that you are not able to control the price of that raw product? A. Not at all; when we are not in the market, our competitors have the market entirely to themselves; we cannot buy all the sugar. Q. But you practically do? A. We buy three-quarters of it as you state. No. 40.] 239 By Mr. Mazet: Q. Are you working to tlie full working capacity of your re- fineries? A. No, sir. Q. Wliat percentage of tlie full capacity are you working? A. I should judge at this time of tlie year, 60 per cent, perhaps. Q. Well, on the average, during the whole year? A. Well, not over SO per cent. Q. What is to prevent your working them to 100 per cent, of capacity if you only buy 75 per cent, of the raw material? A. Well, the 75 per cent, of the raw material simply represents the 75 per cent, of the sugar consumed, that is to say; but unfortunately the refining capacity — taking our competitors and our own— is largely in excess of the requirements of the country; therefore, a large part of the plant has to remain idle. By Mr. Lexow: Q. Now, Mr. Searles, let me call your attention to your testi- mony before the Investigating Committee at Washington; Sen- ator Allen then put to you the following question: “ Q. Your purpose then, is to control the output and not “ manufacture more sugar than the country demands at any “time? You answered — -“Precisely.” “ Q. And by that means get rid of the competition that “would otherwise exist between free factories? A. Undoubt- edly.” “ Q. Is that true? A. Undoubtedly.” Q. Is it true? A. Yes. Q. Then the various steps that you have taken which have led up to this consolidation of interests, to this acquisition of stocks of other companies, to this closing of factories in various parts of the country, have been designed for the purpose of controlling the output of sugar and getting rid of competition that would otherwise exist between free factories? A. No, sir. Q. How can you get away from that conclusion? A. The ob- ject of consolidating these factories was to enable us to produce sugar more economically than it can be produced under any other 240 [Senate, form; and to the extent which that gives us the control of the market we have the advantage of it Q. The question that was put to you by Senator Allen was, whether that was your purpose, not whether that was an inci- dental advantage that accrued to } r ou, but whether your purpose was to get rid of that competition which would otherwise arise through free competition between free factories; I ask you how can you bring into consistency that statement then made by you and your present denial that your organization — that the steps that have led up to the present situation were all part and parcel of that purpose to destroy that competition which would other- wise prevail between free factories? A. I think you will find in the context in connection with that investigation something which further explains it, if you will read it a little further on. Q. You have given back of that the same general explanation — A. Yes; well, what is following that sentence? Q. — 1 may say that you have given to-day — A. I think there is something that follows that. Q. But do you think that one is consistent with the other; do you think it is, Mr. Searles? A. Yes, sir. Q. Mr. Havemeyer has stated before that same committee, speaking of this consolidation, in answer to the question: “It was organized, Mr. Havemeyer, as I understand it, with the view of controlling the price for that product to the people of this coun- try A. That was one of the objects of the consolidation.’’ is that true, or was Mr. Havemeyer mistaken? A. I should not make myself responsible for Mr. Havemeyer’s statements on that line. Q. He was the controlling spirit in the consolidation, was he not? A. He was one of the trustees and one of the officers of the company. Q. And the President of the company? A. Yes, sir. Q. And always the President since the organization of the Sugar Trust down to the present time? A. Well, since the or- ganization of the American Refineries Company. Q. His brother, Mr. Theodore A. Havemeyer, testified that all No. 40.] 241 the facts in connection with the consolidation were known by his brother, who had charge of them; is that statement justified or not by the facts? A. I presume they were within his knowledge. Q. From your knowledge of the situation, was that statement of the brother justified? A. I think the successive steps in the consolidation were known to Mr. H. O. Havemeyer. Q. And he was actively engaged in carrying them into exoeu- tion? A. Yes, sir. Q. (Reading) that was one of the objects of the consolidation — and you have succeeded in doing it? A. Yes ” Was that true? A. Only in a qualified sense. Q. It is an absolute statement; do you mean to say that in its absolute form here, it is not true? A. I do in my judgment. Q. (Reading) That was the principal object in organizing the American Sugar Refining Company? A. It may be said it was the principal object.” Now, can there be any question about that being either true or false; it must be either one or the other; if it was not the principal object, we would like to know what the princi- pal object was? A. The principal object in organizing the origi- nal Sugar Refineries Company was to eliminate certain costs and expenses incidental to the maintenance of all these different properties and corporations independently, which would enable, w ithout increase of the cost of the sugar to the consumer, a profit to be made in the business where a loss was being made; that was the argument which led to the consolidation of the sugar inter- ests. Q. Then, you do not agree with Mr. Havemeyer in stating that the principal object was to prevent competition? A. No, sir. Q. Another question put to Mr. Havemeyer — he having an- swered “We issued increased stock and used it in buying in other refineries ” — Q. By which means, Mr. Havemeyer, you were able to control the price and output of those other refineries that were brought into the trust? A. Yes. Q. That is true? A. Yes, sir. Q. “Before that you had not been able to control the price of “sugar; there was competition between the American Sugar Re- 16 242 [Senate, “finery and those outside companies? A. Yes, sir; that is true. A. Yes, sir. Q. “By that competition you succeeded in destroying or bring- ing them into the Trust? A. Yes, sir.” A. It is correct. Q. And that was the object, was it not? That was incidentally the result. i Q. Do you mean to say that that was not the motive and the underlying object of the creation of that consolidation to buy in those additional companies and remove their competition? A. That was the case undoubtedly. Q. “And that made the price of sugar to the American Sugar “Refining Company much more favorable than it had been be- “fore that time? A. Precisely.” That is true, is it not? A. Yes, sir. Q. Have any refineries been built since the organization of the New Jersey concern? A. Yes, sir. Q. I mean not that in process of building by Mr. Arbuckle, but any others? A. Yes, sir^ Q. What others? A. I think the National and the Mollen- hauer have both been built since that time. Q. Here in this State? A. In this State; yes, sir. Q. Have you any agreement or understanding with them with reference to price? A. No, sir. Q. Do you swear that as a fact of personal knowledge or from your own information on the subject? A. I have no knowledge of any such agreement. Q. You would be the person who would make the agreement if any were made? A. Not necessarily. Q. Who would? A. The President of the company. Q. Have you or has your company to your knowledge any ver- bal understanding with those two concerns or either of them as to the price at which sugar should be sold in this State? A. No, sir. Q. Do you state that as a matter of personal knowledge or as a matter of information? A. So far as I know there is no such ar- rangement. No. 40.] 243 Q. Who would have the authority to make such an arrange- .ment? A. The president of the company if any one. Q. Isn't it true that you control the price of their product? A. It is not. Q. Isn’t it true that you control the price of the product in the same way that Mr. Havemeyer and you have admitted you control the product of the whole country and set its price? A. We con- trol no price except the price of our own goods, except that other refineries usually follow our prices, because it is in their interests to do so doubtless — to get all they can — but the only way we can control the price is by selling at a cheaper price; as fair a price as they can afford to make it. Q. Isn’t it true that they are compelled to follow your price or be destroyed in the competition? A. Not at all. Q. Have you not, where you have had competitors in the field, put down the price of sugar in their particular localities and forced them to the wall and then bought their capital stock and brought them into the Trust? A. No, sir. Q. Didn't you do that in Philadelphia? A. No, sir. Q. Didn't you so operate with regard to the four factories that you took into the Trust there? A. No, sir. Q. You issued twenty-three million dollars of certificates for the property, didn't you? A. Yes, sir. Q. What was its fair cash actual value at the time you bought it? A. We estimated its value to be the twenty-three millions of dollars that we paid for it. Q. What were the certificates ruling at that time in the mar- ket? A. Something under par. Q. How much under par? A. I think between eighty and ninety. Q. That was in ’92? A. Yes, sir. Q. Immediately after the formation of the New Jersey Com- pany? A. A year or more later. Q. About a year later? A. Yes, sir. Q. Mr. Spreckels received half of that stock which was trans- ferred for the Spreckels refinery in Philadelphia, or the whole of it? A. He received stock for his half — 244 [Senate, Q. How much? A. I don’t remember the amount. Q. Was it ten millions? A. No, sir; I don’t think it was. Q. Are you sure about the figures? A. I am not. Q. Have you any figures in regard to that transaction? A. I have not here. Q. We would like to notify you, Mr. Searles, to produce at the next session of this committee the minute books of the American Sugar Refining Company, showing the meetings of directors from the time of the organization of that company, and also any data or memoranda showing the transaction with these four refineries that were purchased in ’92; I believe in March, was it? A. March, ’92. Q. And I would ask you whether you require a subpoena duces tecum or whether you will produce those books without the ne- cessity of a subpoena? A. The books of the company are not in my control to the extent that I have any right to produce them; I will present to the directors of the company the request of this committee. Q. Whose control are they in? A. They belong to the com- pany. Q. So far as an officer has any control over the books and the facts inquired of, or memoranda inquired of, you have it — so far as any officer has? A. Well, in so far as any one has. Q. Except for the general control of the Board of Directors, you have the special control of the books in your capacity as sec- retary and treasurer? A. That is correct. Q. Are you willing to produce them? A. I have no right to produce them without the consent of the Board of Directors. Q. I am asking personally as to whether you are personally willing? A. Personally I have no objection. Q. Further on Mr. Havemeyer stated — after explaining about these Louisiana concerns, and the product made there or pro- duced near there — Mr. Havemeyer stated, in answer to this ques- tion, “Is it not true that you control, that is, the American Sugar Refining Company controls the price of sugar in all the Louisiana refineries? And the answer was, “Directly we do not; indirectly No. 40.] 245 we do;” is that true? A. It is only true in the sense which I stated a short time since, that we control only the price of our product, and that may be taken by the other refineries as a basis for their business, but it is entirely within their control ; we have no control over it whatever. Q. Then you differ from Mr. Havemeyer on that question? A. I do. Q. He further answered, “We undertake to control the price of refined sugar in the United States; that must be distinctly under- stood.” Do you disagree with him in that statement? A. I dis- agree with any statement which implies that we control more than the price of our product. Q. Now, the consumer has not been particularly benefited, has he, in the organization of these companies? A. Of the American Sugar Refineries? Q. Yes? A. I think he has; very materially. Q. Well, now, let us see how that is; what was the price of the raw product in 1886? A. Well, I have not the figures here with which to answer that question. ( Q. What was the price of refined sugar in 1886? A. I have not that price here. Q. Is it true that in 1886 and in 1887, before the organization of the Sugar Trust, so-called, your margin of difference in the value of the raw product and the cost of the refined sugar was a fraction of 69-100 of a cent per pound? A. In the years 1886 and 1887 it was abnormally low; the business was done at a loss. Q. Did that result from this situation disclosed by you on your previous investigation, “The business has been very disastrous “for a few years; it has been disastrous from the standpoint of “profit on the capital invested in the industry.” Do you remem- ber making that statement? A. I doubtless made that state- ment. Q. And that is the fact? A. That was the fact. Q. Now, that was conducive to the benefit of the consumer, was it not? A. No, sir. Q. It resulted from competition, didn't it? A. It did; a ruin- 246 [Senate, ous competition which inevitably would have resulted in the crushing out of all the weaker refineries and the placing of the business in the hands of a few people — Q. (Interrupted) I am not speaking as to what the future would bring, but the present at that time; it was a fact, was it not? A. Temporarily, doubtless it would; yes. Q. Then, at that time, your profit on sugar was about one-half of what it became immediately after the organization of the Su- gar Trust? A. “One-half;” I think it is not a correct statement; it was less than it was immediately after. Q. It was quoted at 69-100; then immediately after the organi- zation of the Sugar Trust it was from 1.22 to 1.30, wasn't it? A. I don’t remember the figures. Q. That is within a fraction of one-half; the consumer got a benefit of that, didn’t he? A. He did. Q. And your operations from that time on have been for the purpose of enhancing the cost of this article to the consumer over the price that prevailed at the time immediately preceding the organization of the Trust? A. No, sir; I do not think that is a fair statement^ Q. It has been to change the situation that then obtained, to prevent that competition that was then considered as being dis- astrous for capital invested, and incidentally, therefore, enhanc- ing the price to the consumer of the product that you made? A. Well, there are two ways of looking, Mr. Chairman, at the inter- est of the consumer; the interest of the consumer lies in the pro- duction of the sugar at the lowest possible cost, coupled with the purchase and delivery of the raw supplies in the interest of the consumer ; the difference between the raw and refined can scarcely be judged by any one year or two years as a result of the sugar refining business; an average must be taken in order to show what is a fair comparison; you take the comparison of the nine years preceding the organization of the Trust and the nine years subsequent, and the average is below during the last nine years during the existence of this organization. Q. You mean that the price of the refined product to the con- No. 40.] 247 sumer is lower within the nine years after consolidation than it was the nine years before? A. I mean that the margin between the raw and refined sugar is smaller— the price has been very much less — about one-half; but the margin to the refiner has been diminished during the nine years, as compared to the previous nine years. Q. To what extent? A. My recollection is by 2-100 cent, or 13-100 pre cent. ' Q. Have you figured it out? A. Yes; I have not the figures here. Q. Was there any margin or difference favorable to the con- sumer, taking the five years previous to the organization of the Trust and nine years after its organization? A. I have not made a comparison; I have taken the same number of years in making the comparison. Q. Haven't you taken the nine years which included the first two years — including the first two years where the margin of dif- ference was abnormally high? A. I have taken the first two years of the Trust, you mean? Q. No, the first two years of the nine years precedingtheTrust? A. Well, the first two years preceding the Trust were abnormally high, also. Q. The first two years preceding the Trust? A. No — the first two years of the Trust were the only two years where any large margin was shown in this business. Q. But you are creeping up now, again, aren’t you? A. Oh, not at all. Q. Well, isn't it a fact that you have increased the margin of profit, nowithstanding your facilities, as stated by Mr. Have- meyer, have enabled you to manufacture more economically, not- withstanding the hard times, you have increased the margin of profit in the last three years so that it has run from .70 up to .88, which was the prevailing price or margin last year? A. It has varied from year to year, I should think, from .70 to .S6. Q. It sprang from .70 to .82, from .82 to .88, notwithstanding the depression of the times and the economies made, according to 248 [Senate, Mr. Havemeyer, in the conduct of your business, so that the con- sumer is not gaining by theeconomiesthatyouarepracticingorthe consolidations you are making; but you are increasing the price now to the consumer— and what is the cause of it? A. The price to the consumer varies with varying conditions surrounding the raw sugar refineries; on a declining market there will be a varia- tion from what there would be on a rising market; and the con- dition of the European markets, to which we have been beholden for our raw sugar supplies, especially during the past two. years, have created a condition of things which was abnormal — the de- struction of the crop of Cuba, and our being obliged to go to Europe for sugars. Q. What particular effect has that upon the difference between the cost of the raw material and the refined product, which con- stitutes the element of your profit? A. Because of the character of the raw product which we have been obliged to purchase; we have been obliged to go to the European market for beet sugars which are worth less proportionately, than cane sugars, but we have been forced there for a certain percentage of our needs, and obliged to pay more for those sugars really than they were worth. Q. Is it not the real fact, Mr. Searles, that having destroyed the competition in Philadelphia, and having destroyed competition in every other direction where you could, you have now reached a point where you can again put up your sugar, and propose to put it up to just that point where the people will stop buying, and only be limited by that figure? A. On the contrary, Mr. Chair- man; the policy of the American Sugar Refining Company is, and has been,- since its organization, to furnish the sugar to the con- sumer at the lowest possible price, not for philanthropic reasons, but because it is good business to do it; what the American Sugar Refining Company aims at is to purchase the largest number of pounds of sugar, and increase the consumption to the largest pos- sible extent; the fraction of per cent, which it makes on each pound is its object, rather than to make a large profit on a cer- tain amount of production; the policy has always been to keep No. 40.] 249 its production in advance of the consumption, and in that way to protect the consumers of this country; if you will — Q. Why was it, then, Mr. Searles, that in 1892 and in 1893, al- though there was no tariff on sugar and that did not enter into an ingredient of cost, you increased the limit between the value of the raw material and the price of the refined product, from less than .70 of the year before to one cent and thirty one hun- dredths that year and the year after? A. Well, the price during the preceding years was abnormally low; it was below the proper cost of production; it did not admit of a profit. Q. Well, one moment, please; on .69 of one cent in that year you were able to pay 7 per cent, on your preferred stock, 12 per cent, upon your common stock, and an extra cash dividend of 10 per cent., making 22 per cent, on your common stock and 7 per cent, on your preferred; if, with the margin of .69 of a cent you can accomplish that, please state to' me what the profits of your concern will be at the margin prevailing last year of .88 cents A. It does not follow that the 10 per cent, extra dividend declared was the proceeds of those years; but it was an accumu- lated surplus of preceding years. Q. Is it your present recollection that it was an accumulated surplus? A. Yes, sir. Q. That is your recollection? A. Yes, sir. Q. And that surplus you accumulated in the years 1891 and 1892, when you charged the consumer one and thirty-one hun- dredths cents between the cost of the raw materials and the re- fined product; you were accumulating that surplus during that period of time; is that it? A. Probably a part of it was accumu- lated that time. Q. You have accumulated two and one-half millions of dollars a year surplus, haven't you? A. Well, I don’t remember the fig- ures, now. Q. Well, you have made, in addition to a surplus of eight mill- ions of dollars, which prevailed in 1894 — you have got now a sur- plus of thirteen millions, in 1895? A. You take this from the Boston Report? 250 [Senate, Q. Yes? A. That is correct; whatever that says. Q. So that you have accumulated twelve millions of dollars, besides paying ten per cent, upon your stock? A. If you will notice one item in that same report that you have there, showing that surplus — there is offset against that, for the account of im- provements yade, to a very large amount — several millions — Q. That was about five millions of dollars? A. Yes; money paid back into the properties. Q. In other words, you are using up your surplus or using it for the purpose of making improvements upon the property? A. Yes, sir. Q. But the fact remains that that surplus is accumulating? A. We use the surplus accumulating during that time. Q. Now, if you can afford to pay dividends on a limit be- tween raw material and manufactured product in the neighborhood of 80 per cent, upon your product of 1892 and 1893, when that limit was 1.31 cents, how much addi- tional tax were you levying upon the consumer— -how much addi- tional profit were you able to accumulate under a charge of sev- enty to eighty one-hundredths as the margin of difference be- tween the cost of raw material and manufactured product? A. Well, that would depend entirely upon the conditions of the re- fining; the cost of refining in this year as compared with previ- ous years. Q. Wasn’t the difference that obtained in the three years from 1891 to 1894, as testified by Mr. Havemeyer before the Senate Committee, between twenty and twenty-five millions of dollars? A. I think twenty millions of dollars was stated as the net amount of earnings. Q. That was a tax on the earnings that you charged against the consuming public? A. During that time. Q. Have you paid any higher wages since the consolidation than you had before? A. Yes, sir. Q. You do? A. Yes, sir. Q. What is the increased scale of wages? A. My recollection is it was about ten per cent, increase. No. 40.] 251 Q. In what departments? A. In the manufacturing depart- ment. Q. Do you mean, spread over the entire department? A. I think that was particularly in this State, in the refineries here. Q. Have you any statistics upon that subject? A. I have not — that belongs in the manufacturing department. Q. Is that increase represented by salaries to officers or by in- creased wages to workingmen? A. Wages to workingmen I re- fer to. Q. You refer entirely to wages to workingmen? A. Yes, sir. Q. Was there any increase in any other State beyond New York? A. I think the same is true of New Jersey. Q. When did you make that increase? A. Well, I don’t recol- lect the date; it was some time since; I think it was soon after the — Q. Well, recently? A. (Continuing) — organization of the Trust. Q. Of the original Trust? A. Yes. Q. Have you increased since that time? A. I think not; I am not aware, however, definitely of that, as those increases are not in my department. Q. Have you decreased since that time? A. No, sir; we never reduced the wages. Q. Were they increased as a result of voluntary action on your part or the result of a strike or demand by the workingmen? A. I think it was voluntary action. Q. Had you decreased the price of labor? A. No, sir. Q. Prior to the organization of the Trust? A. No, sir. Q. During those years of depression which you speak of, you did not decrease the — A. Well, I don’t know what it was in the several companies during those years, or individually. Q. The company of which you were the manager, did you make a decrease? A. They were not decreased. Q. Are yofi certain that there is an advance of 10 per cent.? A. That is my impression. Q. I now refer again to the question of competition, and ask 252 [Senate. yon whether you remember the testimony you gave before the Senate committee, in which you state at page 3S3 of the record, “Our purpose is to control the output and not to manufacture “more sugar than the country demands at any time, and by that “mean to get rid of the competition that would otherwise exist “between free factories.” Was that statement true when you made it? A. That statement referred only to our own produc- tion, to the control of our own production; that we should not over-produce. Q. Was it a true statement when you made it? A. Undoubt- edly. Q. And is it a true statement to-day? A. I think so. Q. In those words? A. I think so; but I am not trying to tes- tify those are the precise words; will you kindly read it again? Q. “Our purpose is to control the output and not to manufac- ture more sugar than the country demands at any time, and by “that means to get rid of the competition that would otherwise “exist between free factories.” A. I think that “free factories” was a mistake, which was corrected a little later in the same hearing; is there some reference there to a correction? Q. W T ell you may have corrected it in the following sentence, which I will read, and ask you also whether that is true, “We “have naturally the purpose of eliminating the competition under “which there was waste in management of the business”; that is true? A. Competition under which there was waste? Q. Yes? A. Yes; I think that is qualified still further on, Mr. Chairman., Q. This qualification, do you mean, “One of the purposes of our “company was to have a steady market for sugar and eliminate “all that kind of competition”? A. There is some reference there to the kind of competition, I think, in another question and an- swer., Q. “Competition which undersold your price”? A. That was not so stated, I think, in the interview. Q. “It is frequently sold lower than ours” — this proceeds — and again, “The Mollenhauer and New York Companies have all with- No. 40.] 253 “in the last sixty days been underselling our price”; now, is that true? A. That was correct. Q. And your criticism upon that is true, that you proposed to get rid of that kind of competition? A. My criticism did not re- fer to that at all — that is the very point. Q. What does it refer to, then; what kind of competition? A. Well, there is in the context there some conversation in reference to; which made it clear, my impression is. Q. Well, what is the explanation you have to make? A. The only thing referred to in that testimony was the question as to whether we controlled the output of sugar, to which I replied that we controlled the output, referring to our own refineries of sugar to the extent of manufacturing only such sugar as was needed for consumption; that we calculated to keep abreast of the consumption of the country; we never allow the consumption to exceed the product of our refineries, so that we may always supply the demand; and I illustrated before those gentlemen that very point; you will find it in that interview or that hearing. By Mr. Mazet: Q. What proportion of the sugar consumed in the United States is manufactured here? A. You mean is raised in this country? Q. No; of refined sugar? A. The refined? Q. Yes. A. Well, during the last year the importations of re- fined sugar from Germany and from China have been something over 100,000 tons. Q. What proportion is that of the entire amount? A. Of the entire amount of refined about 6 per cent. Q. And then 94 per cent, of the sugar consumed in this country is manufactured here, is it? A. By American refineries; yes, sir. Q. And how is the amount manufactured here limited; is it owing to the lack of raw sugar on hand? A. No; it is limited by the fact that the present tariff admits of the importation of re- fined sugars in competition with the sugars here. Q. But there is only 6 per cent, of the refined sugars consumed 254 [Senate, imported. A. That is up to this time; if the present tariff should continue we shall have a steadily increasing amount of that su- gar, which is only limited now by the facilities of the German refineries and the Hong Kong refineries to turn out. By Mr. Lexow: Q. To what extent can they undersell you, Mr. Searles? A. Oh, they can undersell us from a quarter to three-eighths of a cent a pound for their product. Q. Then, if your present profit is 88-100 of one cent, per pound, and they can undersell you only to the extent of one-quarter to three-eighths there would still be a large resulting profit to you, would there not? A. No, sir; none at all. Q. There would be the resulting profit if you proposed only to pay dividends on the original investment, assuming as a standard the actual value of the properties taken in, wouldn’t there? A. That depends upon the value that you put upon the property. Q. I mean the actual cash value of the property, as distin- guished from the certificated value? A. 1 do not think thatthere would be a profit to the American Refineries under those con- ditions if they were to continue. Q. Now, these plants and factories that have been abandoned, and for which the certificates, the Trust certificates were issued, they are still abandoned, are they not, in their— A. They are not abandoned. Q. They have no earning power? A. Some of them are not in commission at the present time. Q. Well, some of them are absolutely dismantled, aren’t they? A. Yes. Q. How many of them? A. Three of them. Q. Those three are represented by — A. Four of them. Q. (Continuing) Certificates issued by your company? A. Yes, sir. Q. Based, as you say, upon the value of the plant and its earn- ing capacity, there being absolutely no earning capacity; now, No. 40.] 255 those certificates issued are still carrying their proportion of dividends, extra and general? A. This ought to be said on that — Q. Is that true, Mr. Searies? A. That is true, and yet it is hardly true, to leave it in that way. Q. Well, if you want to correct your testimony afterwards, we will give you an opportunity; you can receive a transcript from the stenographer and make any explanation afterwards that you please; but we will get more quickly to an end if you won't ex- plain quite so much, but give positive answers; now, you were the manager of the Havemeyer Sugar Refining Company, weren’t you? A. I was an officer of that company. Q. The President? A. Yes. Q. At the time of its being taken into the pool? A. Yes, sir. Q. What was the capital stock of that company? A. One million dollars. 1 Q. What did you receive in certificates? A. I don't remember now, the figures; I will furnish those with the other figures that you call for. Q. Can’t you state now what the amount was? A. I cannot. Q. A million dollars is a good deal of money to plain people like us, Mr. Searies; we would remember it? A. Well, I have handled a good many millions since. Q. Don’t you remember what you got in the way of certificates? A. I do not. Q. Never referred to it since? A. No, sir. Q. You have the figures, however, somewhere? A. Yes, sir. Q. Was that Havemeyer Refining Company organized at the same time that those other three companies were organized, to be taken into the Trust? A. No, sir; it was organized in 1880. Q. Was its stock capital increased? A. No, sir. Q. Did it have a surplus in its treasury? A. It did. Q. In what form? A. Simply, a surplus which had been accu- mulated in the business and which had been invested in addi- tional plant. Q. Any cash surplus? A. It had a cash surplus. . 256 [Senate, Q. How much? A. Why, I don’t recollect now; but it was something approaching a million dollars; not in cash, but in ad- ditional property which had been accumulated since the com- pany was organized. Q. I ask you now whether there was any cash surplus in the treasury— there was not? A. There was some — there was cash assets— and some cash; certainly Q. No cash was turned over? A. No, sir. Q. The certificates you received represented the capital stock of that company, which was first turned into the treasury of the Trust? A. Yes, sir. Q. How much in total did the properties represent in Sugar Trust certificates, the earning capacity of which have been de- stroyed after consolidation? A. I could not answer that ques- tion. Q. Can you state approximately? A. I could not. Q. As much as ten millions? A. No, sir. Q. Less than ten millions? A. I should think not. Q. Less than ten millions? A. Oh, yes, I think very much less. Q. If you did not consider the earning capacity and value of the property enough to keep it going after the Trust was organ- ized, why did you give anything for it at all? A. It was found after the organization of the Trust that the manufacturing of the same amount of sugar could be transferred from some of these plants to other plants where an economy could be made, and the sugar could be produced more cheaply than by the continuing of those plants; and after a very careful investigation it was decided to transfer that refining capacity to other plants and so econo- mizing the cost of production. Q. Hid the dismantling and abandonment, I mean, in the way of manufacture, of those plants take place simultaneously with the organization of the Trust? A. No, sir. Q. How long after? A. Oh, some of them were operated for one or t\u> years; some of them longer; a good deal of business was transferred to others, as it could be done more advantage- ously^ No. 40.] 257 Q. How long did it take to accomplish that in Brooklyn? A. I could not answer definitely as to that; it was some time. Q. Well, can you state was it weeks or was it months? A. Months and years, I think. Q. Years? A. Yes, sir; in some instances. Q. The report of 1887 made by Willet & Gray shows the aban- donment of these companies in the report of that year, 1887, of the organization of the Trust? A. Of which companies? Q. Of those four companies on the other side of the East River? A. Some of these companies were operated after that date; the balance were remodelled and were operated the year after 1887 ; improvements were made on them. Q. You reduced nineteen active companies to eight active com- panies? A. There are fifteen companies reduced to eight; eight or nine. ( Q. But there were nineteen or twenty altogether in the busi- ness; is that it? A. I think that was it. Q. You reduced from fifteen to eight? A. Ultimately not at once^ Q. In other words you reduced about half of the factories with- in a fraction of half of the factories? A. No; well, it was a trans- ference, as I stated before, of the refining capacity from one to another, and a merging in the larger companies for the sake of economy; I think some of these plants are maintained; take, for instance, the plant that I spoke of — the Havemeyer Sugar Refin- ing Company; that plant has been thoroughly remodelled, and is to-day one of the finest refining plants in the country, but it is not in operation; it is held by the company as a reserve plant to provide against accidents, if we have to have — Q. That is in Brooklyn? A. That is in Brooklyn; that plant is held there ready to start at twenty-four hours’ notice in case of a fire which would destroy — as we have had such instances — some of our large refining capacity; we maintain it for that purpose, and it is a plant involving a very large amount of investment and it is — 17 258 [Senate, Q. (Interrupting) Is that shown? A. (Continuing) First-class in every particular. v Q. Is that shown by the issue of certificates? A. No, sir; it is not; it is shown — Q. (Interrupting) Has that been paid out of surplus operating expenses? A. That is shown in that item of $5,000,000 there for improvements; it was a plant originally taken in and paid for in certificates; it was doubled in capacity and remodelled in all its appointments. Q. Do you own any stock in the Mollenhauer Companies? A. No, sir. Q. In the Howell Company? A. No, sir. Q. Do you own any stock in any competing company, not re- ferring to the Western Refining Company? A. No, sir. Q. You own $10,000,000 stock in the Western Refining Com- pany, don’t you? A. No, sir. Q. How much? A. We own half a million. Q. 500,000? A. That is all. Q. Well, the stock of what companies then are included in that investment item of $25,000,000? A. That includes the Philadel- phia companies. Q. The four Philadelphia companies? A. Yes, sir. Q. For which you have issued capital stock in that company? A. Yes, sir; that is the offset in the statement of the capital stock of $73,000,000. Q. You said that you taxed the capacity of your factories only 60 per cent.? A. No; I was asked — I misunderstood the question — I was asked as to the percentage of our properties running, and I stated at the present time GO per cent. ; by that I meant to state that the consumption is only 60 per cent, at this time of year; we are producing, all of the refineries taken together are producing to-day about 60 per cent, of what they produce in the summer time, growing out of the season of the year. Q. So that in summer time you produce to the full extent of your capacity? A. No, sir; unfortunately we never use all our capacity, as there is more capacity than consumption of the coun- try demands. No. 40.] 259 Q. You then hare a capacity that would enable you to furnish the entire demand of the United States in your factories? A. We could do it very easily. Q. A factory is profitable in proportion as it is permitted to operate its entire capacity? A. Much more economically run if it can be run to its full capacity. Q. Is there any considerable variation in the price of the raw material? A. There is. Q. To what extent have these certificates which have been Is- sued been sold to the public ? A. They are very largely in the hands of the public. Q. How many stockholders did you have at the time of the formation of the original Trust— how many have you now? A. I think at the time that — I don’t recollect definitely, but my Im- pression is there were not over — there were only a few hundred at the most at the organization; the dividend checks that were sent out on the 2d of January were 9,000. Q. Have you any recollection of the exact number of stockhold- ers the original Trust held? A. I have not. Q. Am I out of the way in saying 32? A. I don’t think that would represent the real number of stockholders; I thiuk that possibly the original certificates issued may have been 32, but those were subsequently split up in dividing them among the stockholders in some of these corporations there were compara- tively very few. Q. Is your recollection that the original issue of certificates was 32 in number? A. No, sir; I have no recollection on that point; it may have been so. Q. I mean 52 not 32? A. I have no distinct recollection of the number, but it is very small. Q. Well, there were not 52 companies; there were only fifteen companies; do you mean to say that if there were a stock issue of 52 that that don’t represent the individual stock holding at the time? A. I have no knowledge on that point. Q. Can you furnish the committee the number of certificates originally issued? A. I could not; I don't know whether I could do that or not. 260 [Senate,. Q. Where are the transfer books of the original Sugar Trust? A. I do not know. Q. Who had control of them? A. The company went into the hands of a Receiver sometime in 1890, and what became of those original books after that time I do not know at the present time. Q. Were not all of the assets in the hands of the Receiver by consent of all the parties interested transferred to the New Jersey Company? A. I think they were, but I say now I have no pres- ent knowledge as to what became of those books you spoke of. Q. Those books were a part of the assets in the hands of the receiver? A. I should judge so. Q. Have you any knowledge outside of the dividend checks sent as to the number of stockholders you now have? A. No, sir; these dividend checks represent the transcript from the stock ledgers of the company when the books are closed. Q. These stock certificates have been purchased by the public of all classes? A. Yes, sir. Q. What is your smallest stock holding? A. One share. Q. One share is held by an individual? A. Yes, sir. Q. And your highest? A. Well, I couldn’t tell you that. Q. Do you know as to whether or not your associates in the board hold a majority of the stock? A. I do not think that they hold a majority., Q. The same spirits who organized the original Sugar Trust and acted as its trustees are still the directors of the present sugar refining company? A. Some of them; only five of those who were originally in the Trust are now directors of the sugar refining company. Q. The others have died, have they not? A. No, sir. Q. Or gone to Europe; is that a fact? A. Well, I think some of them have died; I don’t know of any of them that are in Eu- rope. Q. Mr. Stursburg — A. He is not dead or in Europe. Q. Is he here? A. I don’t know where he is. Q. He is not in the board, is he? A. No, sir. Q. Don’t you know whether a majority of that stock is held No. 40.] 261 by or represented by a majority of those who are now trustees? A. I don’t think it is. Q. Or by the trustees? A. Or by the trustees; no, sir. Q. You have been a self-perpetuating body from the time of the organization of the original Sugar Trust, have you not? A. No, sir; the directors are elected from year to year by the stock- holders. Q. Haven’t you controlled sufficient of the stock to cause the re-election from year to year of that same board? A. No, sir. Q. You make the transfers? A. Yes, sir. Q. Send out to the stockholders proxies? A. Everyone. Q. In your name? A. In the name of a committee of three, two of whom are not connected officially with the company in any- way. Q. Have the minority stockholders any representation at all? A. I don’t know who you mean by the minority stockholders. Q. Has there ever been an attempt by a minority to secure ac- cess to the books, knowledge of the business or representation on the board? A. Yes; we have been unanimous from the or- ganization of the company. Q. They have been satisfied with their profits? A. Yes, sir; apparently. , Q. Has no request been made for a statement of the company’s annual affairs by the stockholders? A. No, sir; the stockholders have expressed themselves as perfectly satisfied to leave the management in the hands of their directors. Chairman Lexow: It is necessary for us to take an adjourn- ment now, as we will have to be in Albany this evening; so, it will be impossible to complete your examination, Mr. Searles; and it would be any way impossible before we have these docu- ments that we have requested. Now, we asked for certain information from Mr. Havemeyer; have you a copy of his testimony? A. I have seen a copy this morning; yes, sir. Q. Well, if you will read through the testimony of Mr. Have- meyer, you will find that we asked for certain information with 262 [Senate, regard to tlie value of that property in this State; the amount of taxes paid; the question of capitalization ; the original capitali- zation value; the basis upon which the Trust certificates were issued; whatever I have meutioued to the witness or included in the request made to Mr. Havemeyer and stated in his testimony, we will consider repeated to you; will you produce the papers re- quired? A. I will in so far as I am able to do so. Q. I understand now that we are addressing the witness who has special charge of all these matters, according to the state- ment of Mr. Havemeyer? A. In so far as I have control of them, sir, they are at your service. Q. It is simply a question whether we serve you officially with a subpoena duces tecum , or whether you will voluntarily bring those papers with you? A. No subpoena is necessary; anything that I have it in my power to produce, I shall produce in answer to your request. Q. Well, I assume that you are not going to say that you have not control over a particular document, if it is in existence; if it is in existence it will be produced? A. Well, I want to say this, in reference to the books of the company, that I have no control over the books of the company, to take them out of the custody of the company, except by vote of the board of directors; I have custody of them in the ordinary transaction of the business; they are in my custody for that purpose; but when it comes to producing the books in court, it will be my pleasure to produce them if it is within my power to do it. Q. You do not want us, do you, to subpoena the whole board of directors — as we certainly will do, if there is any disposition to keep those papers back? A. I do not think it will be necessary at all; but I am simply explaining my position personally, as re- lates to your committee and your request. Q. Could Mr. Shepard notify me here in the city whether those books will be produced? Mr. Shepard: I think, Mr. Chairman, we will be able to produce I think, all that you wish on Friday, and will let you know ex- No. 40.] 263 actly what will be produced. If you want to serve a subpoena, this gentleman will be here ready to be served. Chairman Lexow: Then, we will stand adjourned until next Saturday morning, Friday being Lincoln’s birthday, at nine o’clock. FOURTH PUBLIC HEARING. MORNING SESSION. NEW YORK, N. Y., SATURDAY, FEBRUARY 13, 1897. Mr. Lexow: A quorum being present, the committee will now come to order. Calls out George R. McDougall. Mr. Mynderse: I appear for Mr. McDougall; he was served just as he was leaving the city, and went to Boston on urgent busi- ness; he could not abandon his business without great loss, and is willing to appear at any time that the committee will name. Mr. Lexow: He was regularly subpoenaed? Mr. Mynderse: He was regularly subpoenaed. Mr. Lexow : And there was no complaint that he was not prop- erly served? Mr. Mynderse: No complaint that he was not properly served. Mr. Lexow: He will be expected to be here at the opening of the session on Monday morning. We have not fixed the time yet, but it will probably be 9:30. The following names were called out and answers given as stated below: Michael Callaghan, “Present.” J. E. Connell, no response. E. E. Beardsley, “Here.” Joseph Turnen, “Here.” James H. Post, “Here.” George Moller, “Yes, sir.” Lawson N. Fuller, no response. , Mr. Lexow: George R. McDougall, then, will be excused until Monday morning, 9:30. 264 [Senate, The other witnesses just called will remain. Henry Byrne and Samuel A. Maxwell did not respond. (Continues calling): Enos B. Smith, “Here.” James W. Duke, no response; Josiah Brown, no response. Mr. Lexow: Are neither Mr. Duke nor Mr. Brown in the room, nor anybody representing either of those gentlemen? No answer. (Continues calling): James B. Ford, “Here.” Charles R. Flint, “Here.” M. C. Martin, “Here.” William H. Trenholme — A voice: I will answer for Mr. Trenholme; he will be here when it is necessary. Irving R. Fisher, “Here.” Mr. Lexow: The gentlemen last called, Mr. Ford, and Mr. Flint, Mr. Martin, Mr. Trenholme, Mr. Fisher, will not be required to remain to-day, and will be expected to be back here on Tues- day morning next at 9:30. We understand that the gentlemen waive any informality in the subpeona and will be present at that time. A. Voices: Yes, sir; I will. The Sergeant-at-Arms : Henry Byrne, Samuel A. Maxwell. If either of the gentlemen are present they will please answer to their names. No answer. The Sergeant-at-Arms similarly called out the names of James E. Duke and Josiah Brown and no response was received. Mr. Lexow: The stenographer will make a note accordingly. Is Mr. Searles in court? Mr. Parsons: Mr. Searles is absent from the city, and not within reach. He understood that the committee would not want to ex- amine him to-day, and he had important business engagements which he had to attend to unless he was to very much inconven- ience other people. Last week he returned simply to accommo- date the committee and to be examined, and he will do so next week on any day which the committee will name. If the com- No. 40.] 265 mittee wish to serve a subpoena on him, if they will serve it at Mr. Parsons’ office — Mr. Lexow: I think that Mr. Parsons is in error — Mr. Searles is in error in supposing that the life of the subpoena had expired with the last hearing, after Mr. Searles left the witness stand. Mr. Searles was distinctly informed upon his request to be ex- cused then, that he would be called for examination again, and especially with reference to the documents and books that had been required to be produced before the committee. Is there any reason — Mr. Parsons: Well, the reason that I have given. But if the committee will name a day next week when he is to be called, he will be here, and will waive any irregularity in the service of the subpoena. Mr. Lexow: Is there any of the documentary evidence here? Mr. Parsons: That I cannot say — I cannot — Mr. Lexow: There is no claim that there is any irregularity in the service of the subpoena, is there? \ Mr. Parsons: No; I think not. I did not know about the docu- mentary evidence that there has been any subpoena about it. Mr. Lexow: I understand you and also Mr. Parsons to stipu- late to have Mr. Searles here next Monday morning. Mr. Parsons: Yes, sir. Mr. Lexow: And how about the documents and books that were! — • Mr. Parsons: Well, that I do not know. If the committee will wish to serve a subpoena for them, why we will admit service of the subpoena. I do not know anthing more than that. Mr. Lexow: Mr. Shepard, representing your office, and Mr. Searles, promised to have those documents and books here to-day. Mr. Parsons: I do not know what Mr. Shepard did. Mr. Mazet: That is precisely what he promised, and it was with that understanding that he was informed distinctly that he waa to be here this morning. Mr. Parsons : I cannot say. Mr. Warner: Who informed Mr. Searles that he was not re- quired to be here to-day? 266 [Senate, Mr. Parsons: The — I cannot say. Mr. Bedell: We would like to have you say. Mr. Parsons: Well, the — No, I will not say. The chairman, per- haps, knows something about it. Mr. Lexow: About what, sir. Mr. Parsons: About Mr. Searles being assured that he should not — that he would not be needed to-day. Mr. Lexow: Mr. Searles did not receive any notice that he would not be needed to-day. Mr. Parsons: Well, Mr. Parsons for him. Mr. Lexow: No; nor Mr. Parsons for him; you do not say that he did, do you? You do not say that he received any assurance that he would not be needed to-day? Mr. Parsons: No. Well, I won’t say it went as far as an as- surance. But I will say that to a man who had important busi- ness engagements it was sufficient to have him understand that he would be excused from to-day’s session. Mr. Lexow: Well, we do not want to be unfair. If Mr. Searles has got an important engagement and is so far away that he can- not reach the committee it seems only fair that he should have one day in which to get back. Mr. Parsons: That is exactly the situation. Mr. Lexow: And as far as non-attendance is concerned there cannot be any question about that; of course no permission was given and none could be given. Mr. Searles is under subpoena and is expected to be here. It was expected at the last meeting that he would be here. Mr. Shepard promised to produce those books and those documents. Now Mr. Searles may be excused until Monday morning at 9 :30 o’clock, and he must be here then, and we shall expect the books and documents that Mr. Searles has under the promise made by Mr. Shepard. If Mr. Shepard will read the stenographer’s report he will find that he made an absolute promise to produce them. Mr. Parsons: You will meet at what hour? Mr. Lexow : 9 :30 Monday morning. Mr. Samuel H. Randall of the West Side Republican Club se- No. 40.] 267 cured the privilege of addressing the committee and read a reso- lution denouncing the gas combines and calling upon the com- mittee to investigate it and give the people of the city some relief. While Mr. Randall was proceeding with his address Mr. Lexow said such an investigation was now being held by the Standing Committee of the Senate and the Standing Committee of the As- sembly, and while it was true they had not the right to issue sub- poenas, still until those two committees deemed it advisable for the special committee to undertake an investigation it would come with bad grace from the special committee to undertake the work. (Mr. Randall’s speech was not to be incorporated with the min- utes.) George H. Moller, being duly sworn, testified as follows: Examined by Mr. Lexow : Q. What is your name? A. George H. Moller. Q. Where do you live? A. City of New York. Q. How old are you? A. Seventy-seven years. Q. Are you now in business? A. No, sir. Q. When you were in busilness, what was it? A. Sugar rein- ing. Q. You were one of the pioneers of the sugar refining business? A. Well, you might call it so; I have been in it for thirty odd years. Q. Was yours one of the concerns that went into the so-called Trust? A. Sir? ( Q. Was yours one of the concerns that went into the so-called Trust? A. Well, we did not exactly go in; it was contemplated, but it was not accomplished. Q. What was the name of your concern? A. The North River Sugar Refining Company., Q. It was controlled by Mr. Searles, was it not? A. Yes; I don’t know whether it was sold to Mr. Searles; I believe he paid for it through somebody; sold. 268 [Senate, Q. He paid for it, didn’t he? A. Well, I forget now who signed the check, but Mr. Searles was the principal man, and we, as the trustees, met, and they appointed other trustees in our place; but it was fixed so that our corporation went over into an- other corporation. Q. What office did you occupy in the North River Sugar Re- fining Company? A. I was the secretary. Q. At the time of this transfer? A. Yes, sir. Q. And how long had you been connected with the company? A. Ever since — could not recollect — ever since 1873. Q. As secretary? A. Yes, sir; let me see, hold on; yes, I think I was secretary all the time Q. From 1873 to 1887? A. 1887; yes, sir. Q. Aud during all that period of time engaged in the sugar refining business? A. Yes, sir. Q. And that was the only business you had? A. Yes, sir. Q. Do you know the concern the Havemeyer Sugar Refining Company doing business at the same time? A. Yes, sir. Q. Do you know the value of its plant and property? A. Which? Q. At that time the Havemeyer Sugar Refining Company? A. Ydfe; they had two plants; one in Jersey City, and the other in Brooklyn, Eastern District. Q. Do you know the value of those two? A. No. Q. Can you state what they were worth? A. No; I don’t know;, hard for me to say. Q. As compared with the property of the North River Sugar Refining Company, which was the more valuable? A. I don’t know, sir; I never was in their concern; I never was in their houses, Q. Do you know any of these other companies that formed part of the Sugar Trust, so-called? A. Yes, sir. Q. Do you know the value of any of their property? A. No. Q. It is stated that you are an expert on questions of value of this character; is that so, or not? A. I don’t know; I don’t think I was ever in those houses. No. 40.] 269 Q. Do you know tlie value of any of them? A. No. Q. Was that the fair market value of your property, the North River Sugar Refining Company’s, that you received from Searles? A. Our company thought so, thought it was a good sale. Q. Thought it was a good sale? A. Yes, sir; otherwise we had taken the other chances. Q. That is to say, you thought you were getting all that the property was worth? A. As we considered it; yes, sir. Q. How much had you invested in that property at that time? A. Myself? Q. No; the whole property? A. Our capital was $350,000. Q. How much had you im-ested? A. Well, that — Q. Had you put all that money in? A. Yes, sir. Q. In money? A. Well, I will tell you how it was; there were two concerns; one was the North River Sugar Refining Company, and then there was a company, the Holler & Martens; Holler & Martens owned three-quarters of the stock of this — of the North River Sugar Refining Company; then we amalgamated the two together; the North River bought Moller & Martens out, although Holier & Martens was the larger concern, and so make it a com- pany, and the difference that the North River Company had to pay the Moller & Martens concern, that was paid in stock; we took stock for that in the concern. By Mr. Warner: Q. Were the Moller & Martens Company the so-called Hollers & Sierck Company? A. Moller & Martens, that was a private company; they sold out to Moller & Martens Sugar Refining concern — Q. Is that the Moller & Martens Company? A. No; that was Moller & Martens. By Mr. Lexow: Q. The Moller & Sierck Company was a New Jersey concern? A. Yes; that is a different company altogether; yes. Q. Yours was a New York concern? A. Yes, sir. 270 [Senate, Q. And yon say that you took stock for it? A. Yes, sir. Q. Now, were you getting only just the actual value of your property in the nominal face of the stocks that you received, or were you then getting what you considered a pretty good bargain when you made this transfer of the property to the new coropra- tion? A. No; I think we did not make — get any advantage at all; it was — we were all friends and relations, and it was as nicely adjusted as it could be; there was no dickering. Q. You know the Havemeyer & Elder Sugar Company? A. Yes, sir. Q. Do you know the value of their property? A. No, sir; I never was in their house.' Q. Didn’t you keep yourself informed at the time of the value of these various sugar properties, at the time when you were in business? A. No, sir. Q. Did not; you were competing together — Havemeyer & Elder and Havemeyer Sugar Refining Company, just prior to your sale to Searles, were you not? A. Yes, sir; well, we were in business at the same time. Q. And you had an active competition in this State? A. Yes, sir. Q. And there were competing in this State a large number of sugar refining companies? A. Yes, sir. Q. And the price of sugar had gone down to .67 of a cent, re- fining profit, had it not? A. Well, I don’t recollect the figures, but it was pretty hard pulling, I know that. Q. Do you remember, particularly, after you sold your property to this so-called Trust, or through Mr. Searles to the Trust, that the price of refining went up? A. Well, I don’t remember that; it is nine years ago. Lawson N. Fuller, having been duly sworn, testified as follows: Examined by Mr. Lexow: Q. What is your residence? A. 155th street and Amsterdam avenue. No. 40.] 271 Q. And age? A. 73. Q. Wliat was your business in 18S7? A. I was in the real es- tate business in 1887. Q. Did you ever have anything to do with the sugar business? A. Yes, sir. Q. When was that? A. From 1854 to 1873. Q. Do you know the various companies, or have you kept your- self informed with reference to sugar matters since that time? A. Fairly so. Q. Values of properties? A. Yes, sir. Q. Do you know the value of the sugar property or the sugar factory property included in the so-called sugar trust? A. No, sir. Q. Do you know the value of any one of those properties? A. The approximate value? Q. That is what I mean? A. Pretty hard to tell the value of the Sugar Trust property. Q. What particular property have you in mind? A. The North River for one; Moller, Schotter & (?); Win. Mollenhauer, I’addish, Johnson's, Booth & Edgar. Q. I am speaking now more particularly of the property that was consolidated in 1887, into the so-called Sugar Trust? A. Well, I could not approximate the value of the property at that time. Q. Do you know what the value of the property of the Have- meyer Sugar Refining Company was? A. I would not like to state. Q. Do you know? A. I do not know positively, so I could not state. Q. Do you know the value of the sugar property that was con- solidated into this Sugar Trust of Havemeyer & Elder A. Some of it. Q. What part of it? A. Well, the North River. Q. Any other part of it? A. Well, there is the Brooklyn Sugar Refining Company. Q. Of Brooklyn? A. Yes, sir. 272 [Senate, Q. Who owned that? A. Well, there was Cato Horn; he was one of the principal men. Q. Was that the property of the Sugar Trust after 1887? A. I understand so. Q. Under any other name? A. Called the Brooklyn Sugar Re- fining Company. Q. Do you know the value of the Brooklyn Sugar Refining Company or the value in 1887? A. No, sir. Q. Do you know the value of the property of De Castro & Donner? A. No, sir; not in 1S87. Q. Of Matthiessen & Wiechers? A. Not in 1887. Q. In what year do you know its value? A. About 1872-’73, an estimated value of the Brooklyn property. Q. Was it added to in the years 1872 to 1887? A. That I do not know. Q. Then you are not able to form any judgment about the value of the sugar properties there as a whole that went into the Sugar Trust or separately in 1887? A. As a whole, I have heard it estimated, and I have estimated it myself. Q. You estimated it yourself? A. Yes, sir. Q. How? A. Well, with the value of sugar houses at the time that I went out of business, in 1873. Q. Did you estimate the value in 1887? A. No, sir. Q. Of the properties that went into the Sugar Trust, or any of it? A. No, sir; only in a general way. Q. Well, what do you mean? Did you make any formal esti- mate? A. I calculated as closely as I could from the time that I went out of the business; it is pretty difficult for anybody out- side of a sugar house to tell very closely the value of the property, but in a general way any sugar refiner should know. Q. Is the estimate of the value of a sugar refining property made according to its output or capacity? A. Generally. Q. You estimated the value of the property according to the output, daily output or capacity of the factory? A. Yes, sir; and its location., Q. What has its location to do with the value of the plant? A. No. 40.] 273 Well, property over in Jersey on the river is not as valuable as property on the North River. / Q. The real estate? A. Yes, sir; the real estate. Q. Did you, iu 1887 or thereabout, make any estimate, formal or otherwise, of the value of the property that composed the Sugar Trust? A. I made up my own mind about what it was worth. Q. How did you come to make this estimate? A. By calculat- ing the output of each house as I understood it and what the house cost that I was a partner in ; in fact, I was an accountant of this very house of Havemeyer & Elder when it was formed into the copartnership of Havemeyer & Bertrand. Q. When was that? A. That was somewhere between 1856-’58 and ’59 ; I don’t remember exactly. Q. You familiarized yourself then with sugar statistics, did you? A. Yes, sir. Q. As an accountant? A. Yes, sir; but there have been great additions made to that house since then. Q. Now, I will put a few questions that I had not expected to, but if you will do a little calculating for me; this is the recog- nized authority, is it not, in sugar statistics; Willets & Gray, rec- ognized by the sugar men (showing witness publication in the form of a paper). That is right, isn’t it, Mr. Fuller? (Yvitness examines paper). I should judge so. Q. Now, will you look at the column which recites the value of the raw material of the manufactured product, and the differ- ences for nine years before and nine years after the organization of the so-called Sugar Trust? Have you got that column? I handed it to you with that column toward you (indicating). A. Yes, sir. Q. You have it? A. Yes, sir. Q. You see the deductions that these experts drew from those figures? A. Yes, sir. , Q. That the cost of the refining or the charge of the refinery is smaller in the nine years succeeding the organization of the Trust so-called than for the mine years before; is that so? A. It seems so here. 18 274 [Senate, Q. Now, Mr. Fuller, will you oblige us by taking the five years prior to the organization of the Trust and five years after the or- ganization of the Trust and state whether or not the price of re- fining, the profit of the refinery, was not larger in the aggregate after the organization of the Trust than it was before the organi- zation of the Trust; take the five years before 18S7 and compare them with five years after 1887 and state whether or not the dif- ference between the raw material and the manufactured article, showing the limits of profit of the Trust were not larger after the organization of the Trust than they were before? A. That would require some calculation. Q. If you will add up the figures; if you will say whether these figures are correct five years prior to 1887, the average of the raw material was — A. (interrupting) One moment, if you please. Q. (Continuing) Five cents and 918-1,000 of one cent per pound? A. 1887.. Q. Just look at these figures, instead of referring to this; see if they compare with the figures upon that statistical record and whether the additions are correct. (Assemblyman Mazet compares the figures with the witness.) A. The average is larger five years after. Q. Now, I want to ask you whether you have compared these figures (indicating on paper) with the statistical figures given upon that? A. No, sir — yes., Q. You have? A. Yes, sir. Q. Is it true that the average of the price of the raw material for the five years preceding the organization of the Sugar Trust was five cents and 918-1000 of one cent per pound? A. Yes, sir. Q. That the price of the refined article was six and 772-1000 of one cent per pound? A. Yes, sir. Q. That the difference for those five years between the raw ma- terial and the manufactured product was 853-1,000 of one cent per pound? A. Before 1887? Q. Before? A. Yes, sir, Q. That for the five years after the organization of the Trust the average cost of the raw material was four cents and 961-1000 No. 40.] 275 of one cent per pound; the cost of the manufactured product was five cents and 971-1000 of a cent per pound, and the profit to the refinery was one and 10-1000 of one cent per pound? A. Yes, sir. Q. Then the increased charge made by the refinery for the five years after the organization of the so-called Sugar Trust was 157-1000 of a cent per pound more than for the five years preced- ing the organization of the Sugar Trust? A. Yes, sir; that would go without saying, I think. Q. And that in the meanwhile the raw material had dropped in price 957-1000 of one cent? A. Yes, sir; according to these sta- tistics. Q. Is it true that this increase placed upon the product of the refinery has cost the consumer annually upward of $4,200,000? A. I should judge it has. Q. In view of these figures, given by gentlemen recognized as authorities by the sugar refiners themselves, is their statement made upon the stand here that the consolidation of these various interests into one has caused a cheaper product to be put before the consumer by them, true or not? A. I don’t think it was true. Q. It is absolutely false, isn’t it, as shown by these figures? A. Certainly. Q. Now, won’t you take the whole nine years subsequent to the organization of the so-called Trust and compare the figures of those nine years with the figures shown for five years before the organization of the Sugar Trust so-called, and isn’t it true that the cost of the raw material has dropped within a fraction of one cent per pound to the refiner, the cost of refining computed over the whole of the nine years subsequent to the organization of the Sugar Trust, has actually increased 128-1000 of one cent per pound; will you please look at that list again and see whether those figures are correct (indicating); have you got the figures now, sir? A. I have, sir. Q. Now, I will repeat the question, and computing the figures covered by nine years’ operations after the formation of the Sugar Trust, comparing them with the five years before the formation of the Sugar Trust, and is it not true that both the cost of the 276 [Senate, raw material has dropped within a fraction of less than one cent per pound, and the charge of the refined product has increased from 853-1000 of one cent to 981-1000 of one cent, or 128-1000 of a cent, and at the rate of $3,400,000 annually additional to the con- sumer? A. That appears so, sir., Q. And this, notwithstanding the fact, testified by the wit- nesses on behalf of the sugar refining company, that in the mean- while the consolidation had produced large economies in the manufacture and in distribution, due to better machinery and greater concentration; that is true, isn’t it? A. Yes, sir. Q. It appears, therefore, that the labor which has produced the raw material as shown by the price of the raw material has been steadily dropping while the cost charged by the refiner has been as steadily increasing; is that true? A. Yes, sir. Q. And whatever benefit the consumers have derived in the reduction of the price of sugar to them has been that they have shared fractionally at least in the reduction of the cost of the raw material but that they have not even got the benefit of the reduction of the cost of the raw material, because the cost of the refined product has been increased? A. Yes, sir; that is so; I think that — Q. You claim to be an expert on — A. Not particularly so. Q. I understood you to say that you had been for years in the sugar business? A. Twenty-five years; but it seems as though men in business then were not experts compared with the men to-day. Q. Now, in making these statements you have not relied upon any expert knowledge of yours but you have taken your figures and drawn your deductions from the statistical record of Willett & Gray, which the sugar refining company says is authority; is that not true? A. Not entirely; I have kept the run of the thing myself, upon the form. Q. But in answering the questions that I have put to you? A. Yes, sir. Q. You have simply directed your knowledge as an account- ant? A. Yes, sir (interrupting.) No. 40.] 277 Q. (Continuing) As an expert accountant to the figures fur- nished by Willett & Gray? A. Yes, sir. Q. That have been produced here as authority by the sugar re- fining company? A. Yes, sir. Q. And the deductions that you have made are based entirely upon these figures? A. Yes, sir. Q. How many buyers of raw material were there in the market when you were in the sugar business, Mr. Fuller? A. There were forty-eight sugar refineries. Q. How many buyers of raw material are there in the market to-day? A. In the State of New York? Q. In the United States of America? A. Well, I couldn’t tell you that. Q. Are there to exceed four? A. I think not. Q. And in that four do you include the Western Sugar Refin- ing Company of which the American holds one-half of the stock? A. Yes, sir. Q. Is it, therefore, within the power of the American Sugar Re- fining Company absolutely to control the price of the raw ma- terial? A. It is. Q. According to whether they buy or not, they can fix the price? A. Yes, sir Q. In this country, up to the importing point? A. Yes, sir. Q. Now, is it true that they can even control to the extent of the imported sugar? A. I could not say as to that. Q. Then your answer is limited entirely to domestic refined sugars? A. Yes, sir. Q. Raw material? A. I am speaking now more particularly of sugars imported from Cuba. Q. Not beet sugar? A. Not beet sugar. Q. Do you mean that inasmuch as they control eighty per cent, of the output of refined sugars, they being buyers to that extent in the market, they control absolutely the market for raw sugar? A. I should judge so. Q. Well, do you know as a sugar man whether they do or not? A. Well, if I was in the sugar business, and if I controlled eighty 278 [Senate, per cent, of the output of sugar, I should think I virtually con- trolled the market in the sale for that; it depends upon the elas- ticity of the conscience in regard to that. Q. Who buys the raw material, do you know, for the American Sugar Refineries Company? A. I do not know; a man by the name of Stursburg did buy it. Q. Julius A. Stursburg? A. So I understood. Q. When you were in the sugar business, was there anything then known as a factor’s agreement? A. No, sir. Q. Did you have factors? A. No, sir. Q. Transact your business, instead of selling directly to con- sumers, through the agency of factors? A. Very rarely; there were brokers, when I was in the business, used to sell sugars. Q. Under a factor’s agreement? A. Well, what do you in- clude in that? By a general agreement among all the refineries? Q. By an agreement such as this, that the person receiving the sugar from the consigning company, should hold it merely on consignment, and should receive a rebate of say 3-16 of a cent per pound? A. Nothing of that kind. Q. Was there anything then in the financial or commercial situation that took the place of the present wholesale grocers’ association? A. No, sir. Q. There was free and fair competition? A. Yes, sir; fierce competition. Q. Between forty-eight refineries? A. Yes, sir. Q. Were those forty-eight all over the United State? A. Yes, sir; principally Boston, Baltimore, Philadelphia and New York. By Mr. Warner: Q. Do you know how many refineries there were in the United States in 1878? A. Well, from about 1868 to 1878 twenty-eight refineries had to go out of business. Q. To 1878? A. Yes, sir; had to go out of business on account of the low price of refined sugars. Q. Then, how many refineries would you say that there were No. 40.] 279 in the United States in ISIS? A. Well, that would leave about twenty, as there were no others built. Q. Did I understand you to say that you knew what the value was of the North River Sugar Refining Company in 1878? A. Well, I should judge that it was worth just what it brought. Q. What was that? A. $325,000. Q. Do you hold any Trust certificates in the American Sugar Refining Company? A. No, sir. Edward J. Duggan, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. What is your residence? A. Albany, N. Y. Q. How old are you? A. 41 years of age. Q. What is your business? A. Grocery business. Q. Grocery business in Albany? A. Well, I am just winding up the grocery business. Q. In Albany? A. Albany. Q. As part of your business, have you been in the habit of selling sugar? A. I have. Q. How long? A. About 18 or 20 years — about 18 years. Q. Have you sold sugar for the American Sugar Refining Com- pany? A. I have. Q. Were you a factor, so-called, of the American Sugar Re- fining Company, under an agreement, a copy of which is in evi- dence and which I hand you? A. I was a factor for one of its branches, known as the Franklin Sugar Refining Company. Q. The Franklin Sugar Refining Company, which was one of the companies taken into the so-called Trust? A. Of the Sugar Trust. Q. How long were you a factor for the American Sugar Refin- ing Company? A. I should say close to a couple of months. Q. What was that last answer? A. I think nearly two months. Q. What? A. That I was a factor. Q. Then you did not get any rebate? A. No; not yet; I haven’t. Q. Just explain your experiences with the American Sugar Re- 280 [Senate, fining Company or with the Franklin Sugar Refining Company, which is a branch of the American Sugar Refining Company? A. With the Few York refiners, before the Trust was formed, I could buy from any of them that were in the refining business; after the Trust was formed, I refused to join the Wholesale Grocers’ Association, and was shut off from getting any sugars from the Few York end of the Trust; I went to Philadelphia then. Q. What do you mean by you were “shut off” from getting the sugars, or do you say you couldn’t buy any sugars? A. I couldn’t buy any from them. Q. They would not sell you sugar? A. They would not sell me under any consideration. Q. What did they say to you? A. Well, on two occasions, they told me that there were complaints from Albany that I had been cutting prices. Q. And that was a crime, eh? A. It seemed to be. Q. Was that all? A. There was — there isn’t anything else that I know they objected to it for; but they questioned my credit at one time, and after giving them a statement they sold me goods, for they filled a couple of orders; and complaints came from Al- bany, they said, again, and they were compelled to shut me off. Q. Well, the fact is, that you had been selling imported sugar, had you not? A. I bought some imported sugars. Q. And as soon as you bought imported sugar they closed their connection with you as a factor; is that right? A. I was told that by a broker. Q. Well, I mean, is that the fact? A. I suppose it is — I couldn’t give you any — Q. Within how long a time after you had purchased imported sugar was it that you received notice that your relation to them as a factor had been concluded? A. I did not receive a written notice, but when I sent an order to a broker, they refused to take the order. Q. Was anything said to you about the purchase of imported sugar? A. Except by the broker. Q. What did the broker say? A. He said that I had ought to No. 40.] 281 buy all the sugars that I needed from the American Sugar Refin- ing Company, and not be running around to other places. Q. What is the name of the broker? A. Robert S. Russell. Q. Where is his place of business? A. No. 107 Water street. Q. Where? A. New York City. Q. Now, explain how it is that no grocer or dealer in sugar can live unless he becomes a factor of the American Sugar Refining Company; if that is a fact? A. Well, the object of the factor is to protect the broker and the wholesale grocer; that means that before sugar comes to a consumer, there is two or three profits to be gotten out of it after it leaves the refinery; the broker first gets his brokerage; he buys for the wholesale grocer; the whole- sale grocer then gets his profit; he sells to the retail grocer; the retail grocer is supposed to get a profit before it goes to the con- sumers, and it is in order to protect all those interests that the Sugar Trust make factors, as well as to control the trade. Q. Now, do you mean to be understood, then, that the Sugar Refining Company takes all these interests under its wing, and for the purpose of protecting the profits of these various subsidi- ary agencies, creates this factor arrangement that you have spoken of? A. I do; I think it is a protection to themselves also. Q. Well, how does it work so far as protecting the American Sugar Refining Company is concerned? A. Why, the profits that they are receiving won't be questioned by the wholesaler since his interests are protected. By Mr. McCarren: Q. I understand you to say that the object of the factor was to protect the interest of the broker and the wholesale grocer? A. The wholesale grocer and broker. Q. That is the object of the factor? A. It seemed that is the only — that can be the only object. By Mr. Lexow: Q. You said that in addition to protecting the wholesale gro- cer and the broker, the factor's agreement was for the benefit of the refiner? A. Well, it certainly is; I should think. 282 [Senate, By Mr. McCarren: Q. Is that your conclusion, or have you any personal knowledge in that direction? A. Why, I have had a chance to form a knowledge since. Q. Well, you had a chance, but have you any knowledge? A. I have the same knowledge that any merchant would have that came in contact, that was driven out of the business for it. By Mr. Lexow : Q. Isn't it true that this rebate of 3-16 of a cent per pound and a discount of 1 per cent., if not allowed by the sugar refining com- pany, would make the business of selling sugar absolutely un- profitable? A. I don’t think so. Q. You don’t think what? A. I don’t think it would make it unprofitable. Q. If this rebate was not allowed, would there be any profit in it for the seller of sugar, the retailer? A. Would there be a profit? Q. Yes? A. I think there would; there would be the same profit that there was before the factor system came into vogue. Q. I mean — you don’t get my meaning; as between two men, one receiving the rebate of 3-16 a pound and the other not re- ceiving it; one, therefore, being a factor under this arrangement, and the other being an independent buyer without the factor’s agreement, would the man who was not a factor be able to make any profit on sugar at all? A. Why, he couldn’t stay in the busi- ness; he couldn’t make any profit on to it. Q. Then the only profit that comes to the factor comes to him under this arrangement of rebate? A. The only profit. Q. And unless he gets that rebate he cannot live? A. He can- not exist in the grocery business or sugar business. By Mr. Warner : Q. Is there anything that prevents the retailer from selling at a higher price than the market price or fixed price? A. There is No. 40.] 283 nothing that prevents him, but sugar is something that is known all over the world, about the price of what it is, more than any other article in the grocery trade, and it will be pretty hard for you to get any more than — Q. (Interrupting) The rebate? A. Than what the market price is for it. Q. Or to derive any more profit than the rebate? A. Not any more. Mr. Lexow: The fact is that under the terms of this agreement you must sell at the daily quotations fixed by the refiner, and you must sell on the terms fixed by them as to credits and discounts? A. Yes. Q. And you must make an affidavit as factor showing that you have done that in order to secure this rebate of 3-16 of a cent a a pound? A. You must. Q. Must you not, and do you not, get that rebate if you do not make that affidavit? A. You do not. Q. Have you made that affidavit in your case? A. I have not. Q. What? A. Not yet; I have not. Q. Well, why have you not made that affidavit? A. Well, when they stopped me from getting sugars under the factor sys- tem it practically collapsed my business ; it stagnated it, and in a very short time I was not able to handle it ; my bank turned me dowrn, and I am just now closing it up; if I do not have any sugars in the grocery trade I cannot do any business in the grocery trade. Q. And you cannot buy sugar now from the American Sugar Refining Company and receive the rebate which would enable you to make a profit on it? A. I cannot. Q. Do you know the system called the “equality system?” A. In regard to what? Q. In regard to the sugar business? A. I know something of it, I think. Q. Do you know what they call the “equality” book? A. In regard to freight rates — Q. And the prices of sugar? A. I do. Q. Have you one? A. I have received one from the wholesale 284 [Senate, grocers, but I haven’t got it with me; never paid any attention to it. By Mr. Warner: Q. When was it that you entered into this contract with the sugar company, the American Company? A. Shortly after the factor system was put in use; I think it was about three months afterward. Q. In 1892? A. The factor system is later than that. Q. Well, when? A. Why, the date of the factor agreement there will tell. Q. The dates are in blank, I take it? A. There is a date on that, I think, Senator. Mr. Lexow: No, there is no date on to it. It is blurred; this on the factor agreement, it is blurred; but there is a date on to it; there is no date on this (looking at factor agreement). (Witness indicates date on paper). By Mr. Warner; Q. The date of the agreement, then, between you and the Amer- ican Sugar Refining Company is that of October 25, 1895? A. The factor agreement it was. Q. Factor’s agreement October 25, 1895; you say that one of the objects of the making of this factor’s agreement is also to control the trade? A. Yes. Q. And to stifle competition between these wholesale grocers and retailers, etc.? A. Yes, sir. Q. Did any member of the American Sugar Refining Company call to see you with reference to your violation of the contract? A. From the New York end there was not any. Q. Were you, under this contract, able to buy sugar directly of the American Sugar Refining Company? A. There are some in- voices there to that effect., Q. And you did? A. I did, Q. Buy directly of the company? A. Yes. No. 40.] 285 Q. Who did you see of the company when you came to New York, as I understand it? A. When I came to New York? Q. When you came to New York to see them about buying sugar of them? A. Always went to my broker. Q. Well, after they refused to sell you sugar? A. Who did I see? Well, I saw Mr. Barstow, who was alive then, but is dead now; he is the only one of the sugar refining company that I — Q. What position did he hold in the company? A. He was salesman and had charge of the credit system. Q. What did he tell you in regard to selling you sugar? A. He told me that the grocers in Albany were complaining that. I was cutting into their trade and cutting prices, and that if there was any more complaint that they would not sell me sugar. By Mr. Lexow : Q. Did he say anything about the purchase of foreign sugar? A. Not at that time; foreign sugars were not used at that time as much as they are now. Q. How many affidavits did you make under this agreement and receive rebate? A. I did not receive any. Q. Have you never received any rebates of any kind under this factor's agreement? A. Not under the factor's agreement; have received it under those invoices. Q. I see the factor’s agreement is dated October 25, 1895, and that there are bills attached to it dated February 11, 1896; also that this factor’s agreement calls for the settlement within three months; now didn’t you make an affidavit that you had been working for three months under this factor’s agreement? A. Well, when — as I have said a few moments ago, when I was about six -weeks or two months working they shut me off as a factor. Q. And then you went on purchasing as an ordinary purchaser without agreement? A. Well, for a certain kind of — I had to have a few sugars. 286 [Senate, Q. Had to have wliat? A. I had to have a few preparatory to going out of business; I did not want to be altogether; I bought a few sugars of them. Q. And received no rebate from them? A. Not yet. Q. You do not expect to, do you? A. Well, I don’t suppose I will; but I might possibly. By Mr. Warner: Q. It is a matter entirely within their discretion whether you receive it or not? A. Yes. Q. Under your factor’s agreement with them? Mr. Lexow: No. Mr. Warner: No? Mr. Lexow: If he lives up to this factor’s agreement they have to pay him the rebate of 3-16 of one cent. By Mr. Lexow: Q. Now do we understand you to say that unless a man makes an agreement of that kind with the American Sugar Refining Company, or one of its branches, as a grocer, that he cannot live and do business? A. He cannot do business. Q. That sugar is essential in the grocery business, and unless you can get this rebate of 3-16 of a cent a pound you cannot do business, is that true? A. That is true. Q. Look at this factor’s agreement (handing witness paper), and state whether or not the only difference between that which is in the case and this is that the one comes from the American Sugar Refining Company — the one involved here — and this comes from the Franklin Sugar Refining Company. (Assemblyman Mazet compares agreements with the witness.) Mr. Mazet: He says it is the same except the signatures. Mr. Lexow : They are precisely the same except the signatures. No. 40.] 287 By Mr. McCarren: Q. I understand that the factor’s agreement there says that you entered into an agreement sometime in October, 1S95? A. I did. _*• Q. 1S95? A. Whatever the date is there. Q. 1895? A. Yes. Q. And about six weeks thereafter your contract with the Sugar Refining Company was broken; that you have been in the grocery business since that time, since six weeks subsequent to October 1895? A. I am partially in it yet. Q. Well, have you been in the grocery business since that time? A. Ever since that time, and am yet. Q. Well, and have you been selling sugar since that time? A. Very little of it; not selling any now. Q. Well, when did you cease selling sugar? A. Partically when the last — as the last invoice will show there, except some — Q. What date was that? A. Some time in February. Mr. Mazet: February 11, 1896. By Mr. McCarren : Q. Have you been selling any sugar since February 11, 1896? A. I am selling a few foreign sugars; not to amount to anything. Q. Where did you buy your sugar? A. My foreign sugar? Q. The sugar that you sold; where did you buy it? A. I bought some in Albany, and some in Xew York. Q. Who did you buy it from in New York? A. Robert Crooks. Q. Is he a broker? A. No; he is an importer. Q. That was foreign sugar, was it? A. Yes. Q. When did you buy your last domestic sugar? A. The last domestic sugar — probably a couple of months ago; that I used in the store. Q. A couple of months ago; who did you buy that from? ? A. Some of the grocers in Albany — which would come in this way, when a customer would come in and say that positively he had to have a barrel of sugar, I would go out and get it for them; but not at all into it; I have not kept it in stock. 28S [Senate, Q. At what price would you buy it? A. At what the market or refiners’ prices was at that time. Q. At the refiners’ price on that day? A. Yes, sir. Q. Was any of the sugar that you bought put to yop at a high- er price than that you bought from the American Sugar Refin- ing Company? A. Was it put at a higher price? Q. Yes? A. Well, it was when you come to consider the re- bates and the double discount. Q. Well, did you pay any higher price to the grocer or the other person from whom you bought sugar than you would to the American? A. Well, that would depend on whether I was a factor or not. Q. Did you do that; did you pay any higher price to the person you bought the sugar from? A. I did. Q. Who are they? A. There was Woodward, and Quinn Bros, and Hart. Q. You paid them a higher price? A. I paid them a higher price than if I was a factor, because they had made the difference between— they got the factor’s 3-16. Q. Well, that is where the difference exists; you did not get the rebate of 3-16? A. Or the two one per cents. Q. Well, it was because you did not get the rebate from the American Sugar Refining Company, wasn’t it? A. The Ameri- can Sugar Refining Company would not sell me sugars unless I was a factor. Q. Well, that’s not answering the question — the reason why you did not get the 3-16 rebate was because you did not buy from the Sugar Refining Company; was that it? A. No. Q. Well, why was it? A. Because that is the short price that the Sugar Refining Company asks for a wholesale grocer. Q. Well, was that wherein the only difference was, 3-16 in your purchasing from the wholesale grocer, or the Sugar Refining Com- pany? A. Or the two one per cents, that is allowed. Q. The only difference was the rebate and the percentage? A. That is all. Q. The price, the intrinsic value was the same price, wasn't it? A. The same thing. No. 40.] 289 By Mr. Lexow: Q. With the difference that if you get the rebate you can make a profit, and if you don’t get the rebate you make a loss, is that a fact? A. That is so. Michael Callahan, being duly sworn, testified as follows: By Mr. Lexow: Q. Where do you reside? A. In the city of New York. Q. What is your business? A. Raw sugar broker. Q. How long have you been in that business? A. Thirty-one years; ever since I was a boy. Q. Do you act as broker or in any capacity for the American Sugar Refining Company? A. No, sir. Q. You act as broker for what sugar concerns? A. Merchants and importers. Q. How many customers were there for raw sugar prior to the organization of the so-called Sugar Trust? A. That I could not answer. Q. Were there many? A. I guess there were quite a number. Q. Can you approximately state the number? A. Well, the refineries in the East, I think — Mr. Lexow: Will you please speak a little louder? A. I can- not speak louder because I am troubled with laryngitis; in Boston four, Philadelphia two, five or six in New York. Q. Competing in the open market on the price of raw material? A. Yes, sir. Q. Since the organization of the Sugar Trust how many are there in the market for the purchase of raw material? A. Out- side of the Trust there are four in the North; I think there are two or three in New Orleans and Texas. Q. Who fixes the price on raw material? A. It depends on the markets; the price of the raw material is the price ruling in Eu- ropean markets for beet sugars. Q. Up to the importing point? A. Yes, sir. Q. Below the importing point? A. It is governed by the price 19 290 [Senate, ruling in the European markets; some of them have a preference for cane sugar over beet sugar, but the price in the European markets governs the price here. Q. But the price of the European market does not govern the price of raw material below the importing point? A. I do not understand what you mean* Q. If the price of the raw material here is below the importing point for beet sugar, then the price in the European market does not govern the price here? A. Not always; generally it does. Q. Is it not a fact that practically the only purchaser of raw material is the American Sugar Refining Company? A. Of course they purchase the largest majority. Q. They take about SO per cent, of the total product? A. I don’t know as I understand you. Q. Does not the fact that they are consumers of 80 per cent, of the total raw product enable them to fix the price of the raw ma- terial here? A. Not always. Q. Does it not substantially work that way? A. I don’t think so, Q. What is your best judgment on the subject? A. It depends on the quantity of sugar in stock, Q. Haven’t the American Sugar Refining Company fixed, dur- ing the last three years at least, the price of raw material in this country? A. They haven’t fixed it. Q. Haven’t they controlled the market for raw material by buying the largest quantity of sugars? A. They cannot control the market when other buyers are willing to buy sugars. Q. Have they not got such control over the market by reason of the size of their purchases, which are so large that they sub- stantially control the market? A. Well, I don’t think that they can control it positively; they cannot positively control the mar- ket at all times. Q. Not positively, I understand that, but don’t it operate that way; that they substantially control the product here in this country? A. No, sic; they do not. Q. Didn’t they control it last winter? A. No, sir; they didn’t. No. 40.] 291 Q. Didn’t the operations of the American Sugar Refining Company last winter control the market for sugar in this country? A. No, sir. Q. And the operations of importers and brokers? A. No, sir. Q. Is it true that owing to the Cuban war, the supplies from Cuba having diminished, importers and brokers of importers bought largely from other directions until they had accumulated a very large supply of raw material in the market last winter? A. Last year, not in the winter. Q. Last spring? A. Yes, sir. Q. In March, April and May? A. Yes, sir; speculators bought as early as January last year. Q. Now, having refreshed your recollection to that extent, didn’t the American Sugar Refining Company at that time con- trol the sugar market in this country? A. No, sir; they did not control — Q. Didn't they, by refusing to purchase in the quantities that they usually bought cause an enormous depression in sugar? A. They are continuous buyers of sugar. Q. Are you sure about that? A. Yes, sir. Q. Did you buy for them? A. I sold to them. Q. Didn’t they cease buying in April and May, after they had a large supply for themselves? A. Yes, sir. Q. They accumulated 150,000 tons or more and stopped buy- ing immediately upon that accumulation, whereby there was absolutely no demand for sugar? A. There was a demand right along; the price in Europe kept declining and that is what caused the price to decline here; the immense crop of beet sugar caused a decline in sugars. Q. Was it not the result of the stoppage of purchase by the American Sugar Refining Company during those two months that a large number of dealers and brokers were seriously crippled? A. Some people were seriously crippled, but the American Sugar Refining Company was not responsible for that. Q. Was it not due to the fact of the sudden stoppage of all 292 [Senate, purchasing by that company? A. They evidently had a pretty large stock. Q. That does not answer my question; the stenographer will please repeat the question; (question repeated.) A. No, sir, I should say. Q. Do you state that as a positive fact of your own knowl- edge? A. Yes, sir. Q. Was there any demand for sugar, the raw material I am speaking of now, in the months of April and May? A. Yes, sir. Q. Of last year? A. Yes, sir. Q. To what extent? A. I couldn’t tell you exactly; of course there was a pretty good demand. Q. What was the cause of this demand and the crippling of so many importing houses and brokerage houses in sugar? A. At that time they were not crippled. Q. Immediately following? A. No, sir, not until last fall, be- cause a great many sugars were purchased to arrive last fall, and when they arrived the price had declined, so they naturally had to sell out at the market price or store the sugars. Q. They were compelled, after the cessation of the buying by the American Sugar Refining Company, to sell to them at the price fixed? A. No, sir; at the market price as governed by the price ruling in Europe. Q. Did they buy from you? A. Yes, sir. Q. During all this time? A. Yes, sir. Q. Do you sell them now? A. Yes, sir. Q. Have you been in the habit of selling the American Sugar Refining Company? A. Yes, sir; all the time. By Mr. McCarren : Q. Do you represent any foreign sugar interest? A. I repre- sent the importers here in New York city; we have about fifty constituents. Q. You represent the importers? A. Yes, sir. No. 40.] 293 By Mr. Warner: Q. Have you any stock in the American Sugar Refining Com- pany? A. No, sir. Q. You say that you are still selling them raw sugar? A. Over 300,000 tons of sugar last year. By Mr. Lexow: Q. You practically sell them one-quarter of the entire amount they buy? A. They have been increasing the last few years very materially. Connele, James S., being duly sworn, testified as follows: By Mr. Lexow: Q. What is your full name? A. James S. Connele. Q. What is your business? A. Sugar broker. Q. Are you a broker in sugars? A. Yes, sir. Q. Do you supply the American Sugar Refining Company, as did the last witness, with a large amount of the raw material? A. Yes, sir. Q. To what extent? A. I don’t know in regard to the quan- tity. Q. About? A. I should think in the neighborhood of quarter. Q. Quarter of the whole amount of purchases? A. Yes, sir; that is, in this market. Q. Do you act as broker for the importers or as broker for the American Sugar Refining Company? A. For the importers. Q. The sugars that you sell are imported from where? A. From Java, Phillipine Islands, Cuba, Demerara, Barbados, Ja- maica, and Brazil. Q. The American Sugar Refining Company is the largest pur- chaser of raw material, is it not? A. Yes, $ir. Q. Do you sell, practically, all the sugars that you do sell, or raw material, to the American Refining Company? A. Well, we sell them the greater portion, but we also sell to several others 294 [Senate, who are independent of the American Sugar Refining Company; we sell to B. H. Howell, Son & Co., who represent two refineries, one in Brooklyn, called the Mollenhauer; Nash and Spalding & Co., of Boston; and the McCahan, of Philadelphia. Q. Any others? A. No, sir. Q. How does the amount that yon sell to the American Sugar Refining Company compare with the amount that you sell to all the others collectively? A. I cannot give you any exact figures. Q. I mean approximately? A. I should say five-eighths, possi- bly; from five-eighths to three-quarters. Q. Who fixes the price? A. The merchant who buys his goods to sell through his broker. Q. Is not the American Sugar Refining Company able, by rea- son of its large purchases, to practically fix the price? A. Well, they have not control of the goods. Q. Don’t they substantially fix the price? A. Not with compe- tition; we have competitors; they have competitors. Q. Do their competitors fix the price? A. No, sir; the mer- chant fixes the price in all cases. Q. Purchasing the large amount that they do, by refusing to purchase, and by accumulating stocks, are they not in a position, and do they not substantially fix the price of the raw material? A. I should not call it fixing the price; I should say it inter- fered with our getting, sometimes, as big a price as we could. Q. That is the same thing, only put in a different way? A. I don’t know. Q. They can substantially compel you to submit to the price they make? A. No, sir; they may give cheaper sugars at times to the competitors; they may let them get cheaper sugars if they hold out of the market entirely; being large consumers, the com- petitors are apt to get occasionally a little lower figure, if the merchant is forced to sell or wants to sell. Q. Do you know whether there is any active or actual compe- tition between those outside competitors that you have named and the American Sugar Refining Company? A. I think they are independent, so far as I know. No. 40.] *295 Q. Have you ever known that there was any active competi- tion in the price of raw material? A. I have been able to get one-sixteenth more for sugars, and even on the same day. Q. Has that occurred frequently? A. Quite frequently. Q. You know what I mean, Mr. Connele, and you must be able to say whether or not in your business as sugar broker there are conditions which disclose to you that there is actual competition between those various companies and the American Sugar Re- fining Company on the one hand, and those independent compan- ies on the other, in the price of raw material? A. I don’t know it; I don't know any such thing. Q. Have you observed any competition? A. Well, I may say several times I have observed competition; for instance, I have found that if I did not offer goods to one refinery, the American Sugar Refining Company if you please, and the other bought them, that they seemed to be very much annoyed if they were not shown to them; so there was apparent opposition. By Mr. Warner: Q. But no real opposition? A. I should judge that there was; it showed considerable feeling in the matter; they wanted to know why goods were not offered to them; whereas, we choose to offer them to somebody else outside of the Refining Company, and we did it because we thought we could get a little more money. Q. Than other outside concerns were paid by the American Sugar Refining Company? A. Not always. Q. Generally so? A. They started out to buy at what is called the market price, but their necessities required that they should buy cane sugars, and the market is dependent partly on the necessities of the refiner. Q. Does not the American Sugar Refining Company control the market? A. They do to a certain extent, but not altogether. Q. Almost entirely? A. No, sir; the merchant controls his own sugars. 296 [Senate, By Mr. Lexow: Q. What did you mean when you said that the American' Sugar Refining Company allowed those others to purchase sugars at lower prices; they were merely supplied and were not in the mar- ket to buy? A. If they were not buying and had purchased large- ly from buyers of raw material at the time, they thought that the market might go up; we are not infallible, although I have had an experience of forty-six years in the business. Q. How does the tariff work in reference to this? A. I don’t know; for a time we had no tariff on sugars and for several years the markets declined in consequence and affected refined sugar; we had no tariff for a while and the market was lower for raw sugar. By Mr. Mazet: Q. What percentage of the raw sugar used in this counrry is imported? A. Do you mean outside of what is raised in this country? We had a bounty on sugars raised in this country of two cents per pound. Q. What proportion of the raw sugar consumed in this coun- try is imported? A. I should say about seven-eights. Q. From other countries? A. Yes, sir. By Mr. Warner: Q. The raw material? A. Yes, sir. Q. What is the percentage imported now? A. I should say that there was fully that now; there is a little increase in the crop of New Orleans; that is about all; that does not amount to much. Q. The manufacturers have to get imported raw sugar to make sugar? A. Yes; they depend on that. By Mr. Lexow: Q. If a consumer using 80 per cent, declines to buy, that neces- sarily affects the price one way or the other? A. It has an affect on the lack of competition. No. 40.] 297 Q. And the man who is using 80 per cent, of the sugar fixes the price? A. To that extent, yes. Q. And the extent to which they buy or refrain from buying affects the cost of sugar? A. That would be natural. Q. In that way this company can fix the price of sugar? A. I would hardly put it that way, because the merchant can hold his goods; we are now holding goods that we got last spring and we expect to sell them next fall; we think we will get more for them.. By Mr. Mazet: Q. Don’t they deteriorate? A. Some grades do. Q. And there is the cost of storage and insurance? A. They increase their cost; yes, sir. Q. It is to your interest to sell as quickly as possible? A. Mer- chants are now holding their sugar; one cargo has been held two years now, expecting to get a better price later on. By Mr. Lexow: Q. You have not answered the question yet as to what the ef- fect of the tariff upon the sugar industry is — I am speaking now especially with reference to refineries; how does it affect the con- sumer? A. In taking off the price. Q. With the duty on, or with no duty, or with a small duty? A. Just as it happens; sometimes the consumer gets maybe three-quarters if the duty is taken off; if the duty is put on he probably doesn’t have to pay much over half the advance in the duty; it is distributed between the grower of the sugar and the refiner probably wouldn’t make quite as much; the merchant must also put up with a little less, and in that way the consumer gets the benefit, but not to the whole amount, nor does he have to pay a further amount — the full amount — of the duty put on; that is my experience^ Q. Is it not a fact that the American Sugar Befining Company buys now largely abroaditself without operating through brokers? A. Yes, sir; they purchase very largely of beet sugars; they pre- 298 [Senate, fer to buy cane sugars; they miss the Cuban market very much, as it compels them to get sugar elsewhere; the crop there has been cut down nearly a million tons and they feel the effects of that very much, and they are thus forced to buy beet sugars abroad, and they buy very largely in consequence. Q. Did you hear the questions that I put to the gentleman that preceded you on the stand? A. I think I heard some of them. Q. In reference to the proceedings of April and May of last year? A. I think I did., Q. Is it not a fact that the American Sugar Refining Company absolutely controls the price of sugar in this country? A. No, sir; I do not think that they control it; there were other buyers that bought.; Q. Didn’t they buy very freely just prior to that time and then cease being buyers in the market? A. No, sir; they never ceased buying, Q. They bought from you, I understand? A. Yes, sir. Q. And from the witness who preceded you? A. Yes, sir. Q. I am speaking of general buyers; didn’t they stop buying of general buyers in the market with the result that a large number of brokers and importers were crippled? A. I don’t think that was the cause; I can give you the reason; we were deceived in regard to the statistical condition of the beet market to the ex- tent of six or eight hundred thousand tons, which was a pretty considerable quantity, and we were humbugged; and when the people began to realize what there was of beet sugars held over they were pushing those on the market, and that put the market down; the refiners had imported sugars as well as other importers and they lost money as well as the regular importers; and as the sugars came along they bought only as they required instead of anticipating their wants; they were buyers to a certain extent all the time, but not heavy buyers during these months that you speak of. Q. You do not dispute the general proposition that buying or non-buying by the American Sugar Refining Company practically controls the price of the product here? A. I think that is a No. 40.] 299 pretty strong position ; it has its effect on the sugar market for the time being if they do not buy. Q. Isn't that effect so far reaching that it means the practical controlling of the price within reasonable limits? A. It is with- in 80 per cent, of their purchases; if they didn’t buy it would; but they are buying to a certain extent all the time. Q. The use of the power that proceeds from the ability to buy §0 per cent, of the total output, one way or the other, is the factor in the market that controls the price within certain limits? A. It does within limits as long as they do not pur- chase; but the importer has the same privilege of holding sugar that he does. Q. I understand that as a business proposition. By Mr. Warner: Q. What effect would it have upon you if the American Sugar Befining Company should refuse to take any more sugar from you? A. It would interfere very largely with my business; in fact there would be no business; we sell our sugar to refineries only in Philadelphia, Boston and New York. Q. It would drive you out of the business; I mean from that one? A. If they refused to buy sugars through me individually they probably would not refuse to buy from other merchants; if they refused to buy from me individually it would affect me. Q. Very largely? A. So much so that I wouldn’t be in busi- ness. By Mr. McCarren: Q. In your experience as a sugar broker during the past year do you know of any instance where buyers other than the Ameri- can Sugar Befining Company paid a larger price for raw sugar obtained than that company? A. They did largely; there was a great deal of sugar sold on speculation during 1896; there was profit made at times; very considerable profits; and there has been very large losses made since by some people. Q. I asked you that question to bring out the fact as to 300 [Senate, whether there was any competition or not? A. Lots of competi- tion in speculators purchasing sugar abroad; very largely so; they bought more last year, I think, than they ever bought in one year before. By Mr. Lexow: Q. That is for the speculators to hold? A. Regular importers bought for the future expecting that crops would be smaller than they were on the other side, and because of the Cuban crop being out of the market on account of the disturbance down there, they went in and bought sugars. By Mr. Mazet: Q. The refiners? A. The refiners bought also; and the re- finers lost money as the price declined; but probably not to the same extent, because they were constantly using up their sugars; but a man putting his goods into store would lose a much larger amount of money. By Mr. Lexow: Q. Was the decline that you speak of mainly due to the fact that this great consumer of raw material stopped buying in the market after accumulating a large stock, so large that the others had to sell at the price fixed by that large consumer? A. There was a great deal of sugar held — Q. You can give a categorical answer to that question, can you not? A. That was not the fact. Q. That the fall in price was largely due, not entirely, but largely due to the cessation of purchases after that product was secured by this one large consumer, which company was able to buy in that product at its own price; was not that substantially the situation? A. It had its effect; I think it virtually had its effect; when a man does buy 80 per cent, that has its effect. Q. Isn’t the situation such that owing to the fact that this No. 40.] 301 STATE LIBRAE x . one consumer takes 80 per cent, of the product it is in a position at any minute, within limits, to produce that same situation? A. Well, of course. Q. That is a fact, is it not? A. But as soon as they withdraw from the market the merchant has the same privilege and he acts upon it and says, “ we will wait ” and they buy when their interests require. Q. That indicates stronger than I put it, that they control the situation; that the brokers and the importers all follow them? A. To a certain extent. Q. That if they are not buyers in the market and accumulate a stock there are no buyers? A. No, sir; we sell all the time. Q. I am speaking in quantities? A. That they withdraw en- tirely; they do not do that at any time — Q. You mean that you have outside of this one customer 20 per cent, in the whole United States of America? A. That is about it. , Q. So that by reason of their control of 80 per cent., do you mean that they are not in a position at any time to give rise to or to create a situation such as was devoloped in April or May of last year? A. Well, to a certain extent. Q. That is a fact? A. It is to a certain extent; if they with- draw entirely; we have had them hold off when they had large stocks of their own. Q. You can speculate against the future demand of the Ameri- can Sugar Refining Company, but they have got you in thetr power nevertheless whether they will buy or not; and being in control of 80 per cent, of the product they have the broker and the jobber and the importer absolutely in their power by with- drawing their demand, if they please? A. For the time being, yes. Q. Practically for all times? A. No, sir; no; soon as they are required to buy; it is a question as to how long they can hold out; they are doing this year considerable importing; they are carry- ing a large stock; if they ceased to buy from me individually It would drive me out of business. 302 [Senate. By Mr. Barry: Q. You said that you would have to go out of business if they ceased to buy from you? A. Yes, sir. By Mr. Lexow: Q. That is true with reference to you as it is substantially with reference to every large broker in the sugar business, is it not? A. There would probably be others that would please them bet- ter than we would. Q. You are getting away from the question; theposition you hold is such that if they cease to buy from you it substantially closes your market; that same thing is true with reference to every large broker, is it not? A. You mean it closes my business? Q. Yes, sir? A. If they cease to buy it will close; I do not sell to anybody except refiners. Beardsley, E. S., being duly sworn, testified as follows: By Mr. Lexow: Q. Are you a broker for the American Sugar Refining Com- pany? A. I am selling them sugar; I am an importers’ broker. Q. Have you know any competition to exist in the demand for raw material; I mean raw sugars? A. Yes, sir. Q. Between what concerns? A. Between the Yonkers, The Mollenliauer Sugar Refining Company, the American of Phila- delphia, and the Spaulding & Nash, of Boston. Q. Those are all? A. Yes, sir. Q. Since 1891, you mean? A. Yes, sir. Q. Those are all the companies outside of the so-called Sugar Trust, the American Sugar Refining Company? A. Yes, sir. Q. The statement was made a month ago, and I think erro- neously, that 80 per cent, of the demand came from the Ameri- can Sugar Refining Company; it is more than 80 per cent, when you exclude the Western Refineries Company of California, is it not? A. I do not think it is; no, sir; I think it is considered to be 80 per cent- No. 40.] ■303 OTi'k ^dvdllM StaM o Q. The testimony here is to the effect that the American Sugar Refining Company does the business to the extent of 80 per cent, of the whole country; that includes Louisiana and the Western Refineries Company, excluding Louisiana and the Western Re- fineries Company, the demand for raw material by the American Sugar Refining Company must be in excess of 80 per cent., so far as you are concerned? Witness: Do you mean this part? Mr. Lexow: Yes, sir. A. I do not know as I am familiar enough with the statistics; I have generally understood 80 per cent. here. Q. What portion of the business that you do do you do in con- nection with that company? A. Probably one-eighth. Q. One-eighth of the business? A. Seven-eighths with others. Witness: Do you mean the American? Mr. Lexow: Yes, sir. A. Probably three-fourths. Q. Have you noticed any competition in the price of sugar be- tween these various companies? I am speaking of active com- petition, bidding against each other, such as takes place among other products? A. Yes, sir. Q. When? A. Day before yesterday; day before that. Q. In the price of raw material? A. Yes, sir. Q. What companies? A. B. H. Howell, Son & Co., and the American; we will say within the last ten days. Q. How often has this competition been experienced by you? A. I could state — off and on, frequently. Q. Is it not a fact that the American Sugar Refining Company fixes the price within limits? A. No, sir; the price is governed by Europe. Q. Is not the demand of the American Sugar Refining Com- pany practically that which fixes the price within the limits of European competition? A. No; they do not fix the price; it is Europe that fixes the price, and they do not fix the price by withholding their orders, or by purchasing, as the case may be; they do not fix the price; of course, that has its influence. 304 [Senate, Q. I understand that; but I want you to put a reasonable inter- pretation upon my question; is not their demand practically what fixes the price? A. No, sir. Q. To what extent does it influence? A. It might shade the market a trifle; 32d or 16th; it does not fix the price; it depends on the price of beet sugar. By Senator Cantor : Q. Explain that? A. The price of beet sugar on a higher par- ity than cane makes a strong market; if beets are low, the prices here are susceptible to that; if the stocks are large here and the prices of beets in the European markets are low, the cane is low. By Mr. Lexow: Q. You do not understand the question; I am speaking of the price as between these diffei’ent companies that are outside of the Trust and the Trust itself; doesn’t the demand of the Trust, either by withholding it, or making it, fix to some extent the fig- ures that are placed upon the product for the other companies that are not in the Trust? A. No, sir. Q. Is there free open competition in raw material? A. Yes, sir; within the last ten days the Trust has bid within a thirty- second less than I finally sold goods to their competitors. Q. Was this the circumstance that you mentioned a moment ago? A. One of them. Q. How frequently have you known that to occur in your ex- perience since 1887? A. I couldn’t tell you; frequently. Q. Is there ever such a thing as an auction sale in the raw sugar line? A. No, sir. Q. No competitive bids in that way? A. No, sir. Q. Isn’t the reason for that very fact, Mr. Beardsley, that you have never had an auction sale because of the fact that you have really only one customer, and that that customer can fix the price and does fix it? A. I do not understand what you mean; no, sir; I don’t think the importers want to sell their goods at auction. No. 40.] 305 Q. Do you know of any other branch of business not controlled by one concern, in which there are no auction sales of raw mate- rials; is there any other business that you know of in this coun- try, not controlled by a combination, in which there are not auc- tion sales, or public auctions of raw materials? A. To my per- sonal knowledge, no, sir; I do not know of any that are or that are not that I can think of at the present moment. Q. You don’t know of any auction sales in this city of raw ma- terials in other directions? A. No, sir; not at the moment. By Mr. McCarren: Q. Do you know about auction sales of fruits from the Medi- terranean? A. I don’t know positively. By Mr. Lexow: Q. Dry goods? A. I don’t know; I think there are, but I don’t know it. Q. You do know that there are no auction sales of sugar? A. Yes, sir. By Mr. Warner : Q. Do you know of any case where the American Sugar Refin- ing Company has paid more for raw sugar than competing com- panies since 18S7? A. I cannot recall; I think I do, but I am not sure; I think it is very likely; it seems so. Q. It has paid to other companies? A. I would not say that; we sell it to others; to the firm that will pay the most. Q. Y"ou don’t know that is the case? A. I say it is not the case. By Mr. Lexow: Q. When was the last time before the one that you have men- tioned when you knew of active competition between other com- panies and the American Sugar Refining Company as to the price of sugar, the raw material? A. I couldn’t state exactly the time; probably within thirty days, roughly speaking. 20 806 ' [Senate. Q. How frequently lias that occurred in your experience since 1887? A. I couldn’t say. Q. Can you state any other instance that you remember? A. I think that there have been plenty of other instances; but how often I do not know; I do not know how many. By Mr. McCarren: Q. I understand you to say that the reason why raw sugar is not sold at public auction is simply because the foreign owners of the raw material do not desire to have it sold that way? Is that your opinion? A. Yes, sir; we tried a sugar exchange here but we could not bring the sugar refining companies together; there was such an exchange but we could not make it work. Q. Is sugar generally considered a perishable article? A. If it is poor sugar it will run away. Q. Will it spoil? A. No, sir. Q. It can be held for an indefinite time in a state of preserva- tion and still remain sugar? A. No answer. By Mr. Lexow: Q. Does it deteriorate? A. Yes, sir; I mean to say that some grades of raw material deteriorate; there are a great many grades. Q. The grade in common use does that deteriorate? A. There are two grades in common use. Q. I mean that which is most generally used; do you speak of a particular grade from a particular country? A. There are different grades from different countries; a low grade sugar would lose in weight if it was a low test sugar; the centrifugal sugar would not. Q. That is a standard sugar? A. Yes, that of the hard sugars is the standard. Q. That is the sugar generally used, the sugar that you gener- ally sell? A. No, sir; we sell all grades, molasses and centrifu- gal and all the raw sugars; sugars from different countries and the different kinds. No. 40.] 307 By Mr. Warner: Q. What proportion of the raw sugar sold by you do you sell to the American Sugar Refining Company? A. Three-quarters, roughly speaking. Q. What effect would it have upon your business if that com- pany should refuse to buy from you? A. I don’t know; I think we could find an outlet with competitors. Q. It would injure you very greatly? A. Yes, I think it would; it has never occurred. Q. You don’t think it would drive you out of business? A. No, sir. By Mr. Mazet: Q. Why is it that there is no more raw sugar raised in. this country in proportion to the amount sold? A. That I can not answer; I do not know. Q. Can’t we compete with the imported raw sugars? A. We can not; we haven’t the soil. Q. Seven-eighths of the raw material is imported? A. All those figures I answer to are very rough. Q. Approximately? A. Yes, sir. By Mr. McCarren: Q. Do you consider this procedure of buying sugars by the American Sugar Refining Company and other domestic refiner- ies from foreign owners a test between the American and for- eigners as to who shall get the better price? A. I do not quite understand you. Q. You understand this practice of buying sugars by the American companies from foreigners to be a test between the American and the foreigners as to which shall get the better price? A. Do you speak of the beet sugars? Q. All imported sugars that come into this country. In other words, is it not sharp competition between the foreign owners and domestic manufacturers as to who shall get the better price 308 [Senate, ‘for tlie raw material? A. I do not comprehend what your reply must be. Do you mean foreign sugars here in New York? Q. It is a sharp business competition between the buyer and the seller? A. Yes, it certainly is. By Mr. Warner: Q. Is it not a fact that the American Sugar Refining Company get a better price from you on sugars than the other companies? A. No, sir; on the contrary, if they do not pay as much for the sugar they do not get it. By Mr. McCarren: Q. That makes it a business competition? A. Why, certainly, as I told you; B. H. Howell, Son & Co. paid a thirty-second more than the American Sugar Refining Company, and I sold to B. H. Howell, Son & Co. By Mr. Warner: Q. You said you couldn’t remember of any case where they had given you more? A. To the best of my knowledge and belief I will say that it has occurred often. Q. More often the other way? A. I would not say that. By Mr. Lexow: Q. The two witnesses who have preceded you said that if the American Sugar Refining Company withdrew its trade they would have to close up business; does your business so differen- tiate from their business that you can be so independent and not sell them if you don’t want to? A. I think it would depend con- siderably on the magnitude of their business; my business is not so large that that competition could consume it. Q. I understand you to say that 75-100 of your business is done with that company? A. I could take that 75 per cent, and place it with competitors very easily. No. 40.] 309 Q. That is to say that you could as an individual; but suppose all the brokers attempted to do the same thing? A. It would be different. Q. So that practically you are in the same shape that the other two witnesses were, that the American Sugar Refining Company, by reason of its large demands, controls the business even in the hands of the importers? A. No, sir; they do not. Q. You wouldn’t go out of business if they ceased buying? A. No, sir; I would not. Mr. Lexow: Owing to the absence of Mr. Searles, who ex- pected to be examined this morning, and rather than depart from the present line of investigation and take up another line before concluding with the American Sugar Refining Company, we have concluded to take an adjournment at this time until Monday morning, February 15, at 10 o’clock. FIFTH PUBLIC HEARING. COMMON COUNCIL CHAM- BER, NEW YORK CITY, FEB. 15, 1897, 10:30 A. M. Chairman Lexow : A quorum being present the committee will please come to order. Chairman Lexow: Mr. Post will please take the stand. Post, James H., being duly sworn, testified as follows: Examined by Mr. Lexow: Q. You answer the oath administered by saying “to the best of your own knowledge and belief.” There is no use of making any reservation. You solemnly swear that the evidence you shall give will be true? A. Yes, sir. Q. In what business are you engaged? A. Commission mer- chant in sugar, molasses, etc. Q. Where? A. No. 109 Water street, New York city. Q. How long have you been engaged in that business? A. I have been with the firm for twenty-three years. 310 [Senate, Q. General commission merchants? A. Principally sugar and molasses. Q. Is it not exclusively sugar and molasses? A. No, sir; some coffee and tea at times; sometimes we do a banking business; we loan money on articles of merchandise. Q. You are a representative of B. H. Howell, Son & Co., and the Mollenhauer Co., are you not? A. No, sir. Q. Don’t you do their business? A. I don’t know of D. H. Howell, Son & Co.; I am a partner in the firm of B. H. Howell, Son & Co. Q. The same concern? A. Not the same as D. B. Howell & Co. Q. You are a representative of that firm? A. Commercially, yes, sir; I am a partner in H. B. Howell, Son & Co. Q. You deal in the Mollenhauer concern’s sugars, do you not? A. We sell their sugars. Q. Do you buy and sell for them? A. Buy their raw material and sell their refined. Q. Do the same with reference to Howell, Son & Co.? A. The National Sugar Refining Company; I guess that is what you refer to. Q. Then you are representing as one person both these eastern concerns that are stated to be competing against the American Sugar Refining Company? A. Commercially we represent these concerns. Q. Do these two firms compete against each other in your of- fice in the sale and purchase of sugar? A. They do at times. Q. Then you represent yourself, as agent, one of those concerns against the other? A. Some times one wants to buy and the other doesn’t. Q. There are stocks of those concerns on hand at all times? A. We must carry a large stock. Q. How much do you carry; what is the average? A. Fifteen thousand tons of sugar in various parts of the world; of course it is not all here. Q. Do you carry this as agent or broker for the Mollenhauer No. 40.] 311 Sugar Refining Company or for the National concern, or for both? A. We carry them as owners of the sugar. Q. As yourself owner? A. Yes, sir. Q. And sell them to those concerns that are competing with B. H. Howell, Son & Co.? A. Yes, sir. Q. Are you interested in either of those sugar refining compan- ies? A. Yes, sir. Q. In both? A. No, sir; we might be interested in this way; that we deal in sugars for them; we have stock in the National Sugar Refining Company; I have personally. Q. Have you any financial interest in the other? A. Except- ing in raw sugars. Q. Have you general authority from both of these concerns to deal in sugar? A. We sell to them from day to day and hour to hour. Q. Your relations are the closest and most intimate? A. Yes, sir. Q. Does anybody outside of yourself represent them? A. There are other partners in the firm. Q. Outside of your concern is there any other general repre- sentative of those two concerns in the city of New York or in the State of New York? A. No, sir; except as brokers sell their sugars from the mill. Q. When they do it is through you? A. Yes, sir. Q. So that their business practically goes through your com- pany? A. Yes, sir. Q. Have you ever known anybody representing the National Sugar Refining Company or the Mollenhauer Refining Company attempting to compete with you in the sale of their sugars? A. No, sir; we have a contract with them to handle their product. Q. With both concerns? A. They necessarily do it through our office. Q. Upon the same terms? A. Sometimes it varies; sometimes we sell one house and then the other. Q. How frequently have you varied prices? A. From day to day; at times it varies on certain grades; we have from 25 to 30 different grades of sugar. 312 [Senate, Q. I am speaking of that in general use; granulated, say? A. It varies from time to time. Q. Do you mean to say that you compete against yourself in the sale of this sugar? A. Sometimes one wants to buy one brand and sometimes another; sometimes we cannot sell to one, but we can sell to the other._ Q. Does your contract include an obligation on your part to keep the price of material of the same character of both these concerns at the same figure? A. Not at all; no, sir. Q. Then you mean to say that you have the product of these two concerns competing in your own office at different times? A. Yes, sir; it may seem strange, but it is a fact; it is easy to demonstrate. I Q. With other words, if you have two stocks on hand, one for the Mollenhauer Sugar Refining Company and the other belong- ing to the National Company, simultaneously in your office, you occupy the position that you permit competition between the two concerns, for both of which you act as confidential agent? A. We cannot help it; sometimes a grocer comes and says that he wants Mollenhauer and sometimes he says he wants the National. Q. Do you mean to say that that is competition in any sense? A. I think, so. Q. It depends simply upon the demand created for one as against the other; is that the way the competition makes itself apparent? A. At times there is competition; there are two differ- ent articles. Q. Is the kind of competition that exists between the two con- cerns for which you act the same kind of competition that exists in the general market between the American Sugar Refiniug Company and these two companies that you represent? A. At times some of their brands are wanted in one place and not in another. Q. That is all there is of the competition? A. Yes, sir. Q. When you speak of competition that is what you mean? A. Not entirely so. Q. What other ingredient is there of competition? A. I mean No. 40.] 313 there are times when one refiner wants to sell and the other does not; at times one grocer wants one brand and does not want the other. Q. Let us go back to the original proposition; there are times when one refiner wants to sell and the other does not ; is that the kind of competition that you say prevails in the sugar market? A. In our particular business; yes, sir. Q. Then there are times when refiners don’t want to sell? A. Yes, sir. Q. What are those times? A. When they have paid a big price on a high market they hold the sugars expecting to do bet- ter, just as any other merchant does with any other product. Q. The testimony here is that the margin of difference between the raw material and the refined product is held at about one cent? A. It varies, of course. Q. That is right, is it not? A. No, sir; just at present it is less than that; it has been at different times during the year. Q. It was a great deal more at times in 1S96 than one cent per pound? A. I should think it would be. Q. Don’t you know that in September, October and November the difference between the refined product and the raw material was one and one-half cents owing to the fall of the raw material? A. I don’t know positively; I would have to look it up. Q. Don’t you remember such a remarkable circumstance as that? A. No, sir; I do not at the time. Q. The margin between the refined article and the raw material would be almost equal to the value of the raw material in the market? Don’t you remember that circumstance? A. No, sir; I do not without referring to our records. Q. Was the raw material more than three cents per pound? A. It has been as low as three cents, duty paid; yes. Q. Did a condition obtain November when the refined sugars were selling in the market at about 4J and 4|? A. You have the long price of refined sugar. Q. I am speaking of the price at which the refiner bills it to the factor? A. I would have to look at our records to be sure as to the price. 314 [Senate, Q. Don’t you know that an abnormal profit was being made; that an enormous profit was being made? A. It does not follow that an enormous profit was being made; we may have paid a great deal for the raw; in fact I think we did. Q. If the raw material was three and one-quarter cents and the refined product four and three-quarters, that means one and one- half cent margin? A. No, sir. Q. You mean that you had to put in the stock in advance? A. Yes, sir; everybody did that and they were all deceived; we were deceived; it does not follow because you see quotations that way that they are positive proof. Q. Mr. Havemeyer explained that the margin of difference was kept at about one cent per pound; was that testimony true? A. I don’t doubt that it was. Q. Don’t you know? A. I could tell you by referring to our records; in a general way I would say — Q. I am not asking you to swear to the one-tenth part of a cent; I am asking you whether the general average obtaining was not kept at one cent? A. I think when they bought it it was only nine-tenths of one cent. Q. It is nine-tenths now? A. Not so much as that. Q. How much? A. What? The price of granulated is 4.10; for raw we have paid three and one-quarter. Q. The price of refined is what? A. 4.10. Q. What would be the difference between the refined and the raw? It would be .85, would it not? A. No answer. Q. How much does it cost to refine? A. I am not a refiner. Q. Don’t you know? A. I do not know from my own knowl- edge. Q. Are you a factor? A. A factor? In what respect? Q. Do you occupy in addition to the position that you have mentioned the position of a factor of the company? A. No, sir; not as I understand a factor. Q. How do you fix your own profits? A. We are paid a com- mission for doing the business. Q. On the bulk of the business? A. We do all their business. No. 40.] 315 Q. Don't you know liow much it costs to refine sugar? A. No, sir; I don’t know; I am not a refiner; I don’t know; it varies greatly. By Mr. Mazet: Q. Do you know that the cost of refining varies greatly? A. Yes, sir. By Mr. Lexow: Q. In what way? A. I think at certain seasons it costs more than at others. Q. It costs you more to refine when the mill is running at less than its full capacity? A. Yes, sir. Q. Have your two mills been running to their full capacity? A. No, sir. Q. The testimony here is to the effect that profits on sugar amounted to in the vicinity of $12,000,000 or $14,000,000 per year, and have so amounted for the past ten or fifteen years; is that not an enormous profit to make upon sugar? Explain how it is that your mills do not run at their full capacity? A. I do not believe they made any such profit. Q. Then you dispute those figures? A. I do; I do not be- lieve them. Q. Do you know anything about it? A. In a general way; just as anybody else would. Q. What is your knowledge? A. As to the profits; I have not figured it out; I could not tell. Q. Are you not guessing? Do you know what the profit would be if they got one cent a pound, as they did, as the difference be- tween the price of the raw material and the refined product? A. No, sir. Q. Can you specifically approximate the profit? A. I should say about a quarter of a cent per pound. Q. Is that it? A. That is about it. Q. That is to say with a margin of one cent per pound? A. Yes, sir. 316 [Senate, Q. Where did you get those figures? A. Well, in a general way, it is my knowledge of the business; but as I have said, I do not give exact figures. Q. Do you mean now that the margin of profit 1-4, is the mar- gin of profit of the two concerns you represent or of the Ameri- can Sugar Refining Company? A. I think our house last year made less than a quarter of a cent. Q. Which is it? A. I think if they made one-eighth they were lucky; one-eighth of one cent per pound. Mr. Lexow: Please answer my question and do not beat around the bush? A. I am not beating around the bush; I do not be- lieve that our house made three-quarters of a cent per pound; I mean one-quarter of a cent per pound; I refer to our particular house. Q. You don’t refer to the American Sugar Refining Company? A. I have no knowledge as to what their profits are; no more than any other person has. Q. How long have you been in the business of dealing in sugars? A. I have grown up with this firm; twenty-three years. Q. How long have you acted as the representative of these two concerns that you speak of? A. Our house has for thirty odd years; of course, in different relations; they have grown from one kind of business to another; we have been associated with them that long. Q. Do you do business through the same factors that the American Sugar Refining Company does business through? A. Yes; to a great extent; they are wholesale grocers. Q. You have the same understanding with the wholesale gro- cers as with the American Sugar Refining Company? A. We have practically the same method. Q. And the same understanding? A. Practically so. Q. Same factors’ agreement? A. Not exactly; but to all pur- poses the same. Q. Do these wholesale grocers selling the product of the American Sugar Refining Company sell your product simultane- ously under the same agreements, thus permitting those pro- No. 40.] 317 ducts to compete with each other in the market? A. They do, because some brands are more popular than others. Q. It is brand against brand? A. To some extent; yes, sir. Q. What is the name of your brand? A. The Mollenhauer Sugar Refining Company, and we have the National Sugar Re- fining Company; they have at least twenty-five brands of the different kinds of sugar. Q. Is not sugar sold according to grade in bulk, without any reference to the brand? A. I think not; no, sir. Q. Is it not put into packages under a brand? A. Yes, sir Q. How much? A. Barrels, principally; and in bags of 100 pounds and 340 pounds. Q. I am speaking now of the consumer who does not buy bags and barrels in the sale of sugars; is any particular brand sold or is it sold simply as sugar of a certain grade? A. I think a great many have different brands; some prefer one brand, and some prefer another. Q. Do you know anything about it? A. Yes, sir. Q. Do you know the fact to be as you state? A. I know such cases. Q. Many? A. Yes, sir; quite a good many here in this city. Q. Have you named all the instances where you compete in price against the American Sugar Refining Company? A. In raw sugar; I think so. Q. Refined? A. It happens in some cases, I suppose, nearly every day. Q. Through what channel? A. Through various brokers here and throughout the country Q. Through factors? A. Yes, sir; and those who are not fac- tors. Q. Representing both sides? A. There are wholesale grocers that sell both products. Q. Is it not a fact that you have the same facilities to operate through the same channel, employ the same persons, as does the American Sugar Refining Company? A. To a great extent; yes. Q. Have you any other medium of selling your sugar than 318 [Senate, through that medium? A. We have our particular brokers; the* same brokers; they are each competing for the business. Q. I am speaking now of the distribution of the product through the agency of wholesale grocers? A. They are practi- cally the same, Q. They are exactly? A. No, sir; there is some variation. Q. Name a man in the whole United States that you do not operate through and the American Sugar Refining Company does. A. There are some people that we would not sell our sugar. Q. It is a question of credit? A. Yes, sir; sometimes. Q. You operate through the same men, through the same chan- nel, the same agencies? A. Practically the same. Q. Does anybody else? A. There are other refineries in other States. Q. Who operate conjointly with the American Refining Com- pany through the same agencies? A. W. J. MeCahan of Phila- delphia. Q. Outside of Philadelphia? A. Nash, Spaulding & Co. of Boston; Henderson, of New Orleans; Cogswell, of New Orleans; Cunningham, of Texas; and there are a great many smaller ones; several hundred, I think, that make grocers’ sugars and distrib- ute through the same means exactly. Q. Are there any besides those you have mentioned that have been called competing concerns? A. I think you have before you the names of all there are. Q. Do you utilize the same factors’ agreement, so-called, that was put in evidence? A. It is nearly the same. Q. With the exception of a change in the name is it not exactly the same? A. There is some difference in the wording. Q. What is the difference? You would have to compare them, I suppose? Have you them both here? I hand witness copy of factors’ agreement put in evidence the other day. Q. Have you a copy of your agreement? A. No, sir. Q. You will probably remember if there is any change in the phraseology? No. 40.] 319 By Mr. Warner: Q. Have you a copy of your factors’ agreement? A. No, sir; I have not; but I would be very glad to give it to you if I had it; I can send for one for you. By Mr. Lexow : Q. How long would it take to send for one? A. I don’t think it would take more than half an hour; I will employ a messenger and send for one if you wish. Mr. Lexow: If you will please give an order for a copy the messenger will take it to your place of business. Q. Now, for the purpose of getting this on record, will you state whether or not there is any substantial difference between your agreement and the one I just handed you? A. I understand it says “affidavit”; we do not require an affidavit in ours. Q. You do not require an affidavit? A. No, sir; of course I would not like to say in what way it differs; that is principally the difference, I think. Q. It is therefore under substantially the same agreement? A. Substantially the same., Q. That you make your sales on consignments? A. We sell sugar without consignment; we sell both ways; we sell to some and consign to others; I am willing to state, in regard to those that it is practically the same as our method of doing it even if worded somewhat differently; it is practically the same; I have not looked ours over for a year or so. Q. There is no rebate when you sell direct? A. No, sir. Q. When you sell them to anybody not a favored factor mak- ing that agreement, there is no rebate of 3-16? A. We have no favored factors; they are glad to sign our agreement. Q. Any wholesale grocer submitting himself to the terms of your agreement can get this rebate? A. Yes; and they are very glad to submit themselves to that agreement; it is no benefit to the refiner, particularly. 320 [Senate,. By Mr. Mazet: Q. You mean others that do not get a reduction? A. They do not get their commission; if they choose to buy it right they do. By Mr. Barry: Q. If you sell a man sugar he will get the same rebate? A. He gets it at the market quotations; if we consign it to a man and he takes no risk we pay 3-16 per pound. By Mr. Lexow: Q. Therefore, the man who puts up no money, takes no risk of any kind, he gets 3-16 per cent, profit; whereas the man who puts up his money and buys the material outright gets none? A. That is not correct because the factors’ agreement calls for payment within thirty days or seven days, so that he does not put up the money. Q. He gets a reduction of one per cent.? A. Yes; but while he does put up money he takes risks, so far as the market is con- cerned; if that market goes down he loses. Q. But he does not take a risk until thirty days? A. No, sir; if the market goes off the next day he takes a risk. Q. Isn’t it simply an evasion of sale? A. No, sir. Q. And for the purpose of holding a club over these factors? A. It is not for the “purpose of holding a club over them;” that profit, in my opinion, is little enough. Q. Do you figure that as being little enough as compared with what you say is the profit of the refiner when you say it is only one-quarter? A. I did not say that the profit of the refiner was a quarter; you asked me on raw sugar; whether I considered that the profit; I didn’t say that the refiner makes a quarter of a cent; I said I didn’t know what they made last year. Q. Then the factor who takes sugar and transfers it to another person, to a third person, receives, in your judgment, a small profit, even when they get 3-16 per cent, and the refiner only re- ceives one-quarter or less? A. I didn’t say that the refiner re- No. 40.] 321 ceived one-quarter or less; the grocer takes the risk of credit; has salesmen, pays cartage, and sells to people on thirty days’ time; he has the risk of debts and many things that enter into the profit which must be small. Q. Does it compare with the risk taken by the refiner? A. He doesn't have any such large amount. Q. No such large investment? A. No, sir. Q. I mean comparatively to the refiner? A. Yes, sir. Q. And you think the 3-16 per cent, is small although the other does not receive a quarter? A. Yes, sir. Q. Are you giving honest testimony on this subject? A. I wouldn't take my oath if I was not. Q. Do you candidly think this statement of yours is a reason- able or honest statement? A. I am giving my opinion when I say the profit is little enough. Q. Then you think the refiner ought to have more than 3-16 per cent.? A. Yes, sir. Q. Did you testify before the United States Senate Committee, the Ways and Means Committee? A. Never. Q. Do you know what the testimony is there on the subject of the profit of the refiner? A. I have seen it quoted in the papers; but if it is not nearer correct than the reports of what is said here, it has no basis of foundation. Q. You have not kept yourself informed? A. I have so far as the papers are concerned; I have no other means of information. By Mr. Warner: Q. How do you know that the reports are not accurate? A. I am judging from what I do know of reports. By Mr. Lexow: Q. Who is the person connected with the Mollenhauer on the one hand and with the National on the other who knows the cost, of refining sugar? A. They have their records in the office; I suppose they would know. Q. Don't you know? A. I do not know. 21 322 [Senate, Q. Do you mean to say that after having been for several years a general agent you don’t know the cost of refining? A. They have a record in the office; they would know. Q. Who are “they”? A. They are matters of record which they, the President and Vice-President have. Q. Do you know who they are? A. Yes, sir. Q. The general officers of a corporation? A. Do you want to know which one? Q. I want to know the man in charge of the Mollenhauer con- cern, the' man who knows the cost of refining? A. J. Adolph Mollenhauer is Vice-President, Fred Mollenhauer is Secretary. Q. Has he charge of the refinery? A. In a general way. Q. Do you know the man able to give the cost of refining? A. They would be able to give it., Q. Who? A. Nathaniel Bucker is the President of the com- pany. Q. I am not asking you who is President of the company; I want to know who is the person who will be able to give the fig- ures? A. I would have to give the names of the officers; I am willing to give them Q. Do you know the person in charge of the refining? A. Mr. George R. Bunker; he is the General Manager. Q. Has he charge of the refinery? A. Yes, sir. Q. What is the capacity of the National Refining Company? A. About 2,300 barrels per day. Q. What was the cost of the property? A. It cost $750,000; I think a great deal more. Q. How much more? A. Do you mean the real estate, the bricks and the machinery? I think $1,000,000 would be nearer. Q. Don’t you know that it cost from $750,000 to $1,000,000? A. Yes, sir; there is margin enough there. Q. Is it the custom in estimating the value of a refinery to es- timate according to its output, its capacity? A. I do not think there is any great distinction. Q. Isn’t that the way to get a fair average estimate of the value No. 40.] 323 of a refinery? A. I think that would be a fair way to get the value. Q. According to its barrel capacity? A. Yes; that would be a fair way. Q. Has the National Refining Company been running to its full capacity? A. No, sir. Q. Has the Mollenhauer Refining Company? A. No, sir. Q. To what extent of its capacity has it been running? A. I should think about half its capacity, perhaps. Q. Since when? A. Since last November, I should think. Q. It wms not running to its full capacity prior to that time? A. I don’t think to its full capacity. Q. Has it ever run to its full capacity? A. Yes, sir. Q. When? A. I suppose within the last year ; some time when there was a demand for sugar, Q. When w T as that? A. The largest demand is during the summer months, along through the fall. Q. How often since then has it ever run to its full capacity? A. How frequently? Q. Yes, sir. A. I suppose three-quarters of the time. Q. Does it run to its full capacity at the same time that the Mollenhauer concern runs to its full capacity? A. It varies somewhat. Q. And the McCahan concern runs to its full capacity? A. I don't know anything about that concern. Q. And the American runs to its full capacity? A. I have no knowledge on that. Q. Don't you keep yourself informed? A. Only in a general w r ay; sometimes from rumors around the street; w 7 hen a refinery closes, we sometimes hear about — Q. Does the American run to its full capacity at any time when the Mollenhauer and the National does not? A. I don’t know. Q. Don’t you know that w ? hen one slacks up that the other does? A. Not necessarily so. 324 [Senate. Q. Isn’t it a fact that during the winter months when they can’t sell their product, they do; don’t you know that when the American decreases its output you decrease your output? A. No, sir; we don’t know that. Q. Don’t you do it? A. No, sir. Q. Isn’t it the fact? A. Probably the same reason why they would have to restrict their output w T ould have its influence upon us. Q. Don’t argue the proposition; isn't it a cold-blooded fact that when they decrease their output, you decrease yours? A. No, sir; not always. Q. Do you know a single case? A. I don’t know whether they are running full or not. Q. General rumors come to you directly? A. No, sir. Q. Have you ever known a time in your connection with those two companies that you have been running full when the Ameri- can was not? A. Yes, sir; lots of times; they don’t run their re- fineries when they can’t sell their product; maybe, within the last year. Q. Do you keep the same percentage of sugar in proportion to your capacity that they keep? A. No, sir; not to my knowledge. Q. Why is it that you cannot get the entire capacity of your product taken when there is forty times as much as your product used in the eastern States? A. Foreign sugar can be sent here very much cheaper at certain seasons of the year; certain seasons of the year when the beet sugars come from foreign countries; they can be sent here at a much smaller margin; then, there is less loss in closing than in trying to do business. Q. Isn’t it a peculiar coincidence that you do that closing about the same time that the American Sugar Refining Company does its closing; the same time they close, you close? A. The same reason that would apply to them would apply to us. Q. The fact remains, nevertheless? A. I told you there is the beet sugars from foreign countries; there is also the Louisiana beet sugar crop; there are times when we must curtail and re- No. 40.] 325 strict; the same reason that would apply to them would apply to us. Q. The American Sugar Refining Company has an annual out- put of 1.200,000; it disposes of that amount of refined sugar an- nually; you know that? A. I don’t know that; those figures are given. Q. Is it possible that we know more about it than you do; that we have learned more about the sugar business in three days than you have learned in ten years? A. Apparently, you do. Q. How much do you produce during the year in both of your concerns? A. I would have to figure it out; do you mean in pounds? Q. Or tons? A. I haven’t any figures; I could guess some- where near it. Q. Make as close a guess as you can? A. I should say from 450,000,000 to 500,000,000 pounds. Q. How much is that in tons? A. Divide it by 2240. Q. Will you do that for the benefit of the committee; I as- sume you are skilled at figures? A. I don't claim to be skillfcl. By Mr. Mazet: Q. We will assume that you are; we may be mistaken. (Wit- ness figures.) A. It is about 200,000 tons. Q. 200.000 is the product that you make, approximately; it is the total of your possible capacity, if you run at full capacity during the year? A. I don’t know. Q. How much capacity has the Mollenhauer concern? A. About 3,300 barrels per day, I believe. Q. Will you please figure out its total capacity? A. That would be about 900,000 barrels for Mollenhauer. Q. How much for the National? A. About 600,000 barrels. Q. That is 1,500,000 barrels, which would represent how much? A. About 200,000, I should say. Q. 200,000 tons? I thought you said that the amount that you actually produced amounted to 200 and odd thousand tons? A. You could figure it out. 826 [Senate, Q. You stated that your production was about one-half of your total? A. I said that it varied from one-half to three-quarters. Q. I misunderstood you, then; what are the figures of the amount that you do produce? A. I would have to figure it out exactly ., Q. Approximately? A. From 175,000 to 200,000 tons; about 200.000 tons is what we produce. Q. How much is your capacity? A. About 230,000 or 240,000. Q. Then you produce within 30,000 or 40,000 of your full ca- pacity? A. I would have to get the figures from the refiner. Q. Is that your best judgment? A. I am perfectly willing to give you the exact figures. Q. We will get those afterward; the testimony before this committee is — and I ask you whether you accede to it — that in order to get the most economical result the full capacity of the factory must be utilized? A. I don’t know about that. Q. It is a general proposition of universal application? A. Yes, sir., Q. That being the case and your having a capacity of 250,000 tons, why do you manufacture only 190,000 tons annually, there- by running below your capacity, when the American Sugar Re- fining Company, operating through the same agents, can market 1.200.000 and make profits on stock amounting to $75,000,000 of an average of 9 per cent, and create a surplus besides? A. I do not believe they made any such profits during the last year. Q. That doesn’t answer my question. (Question repeated). A. You said surplus. Q. You don’t claim that they have not paid such dividends; that they have not accumulated a surplus? A. I don’t believe they have; they know it., By Mr. Mazet: Q. You don’t believe that? A. I have not seen it so stated; if I knew who told it I could tell. No. 40.] 327 By Mr. Lexow: Q. I have not asked you about your belief; I ask you the ques- tion aud want an answer; assume that the statement in question is true. ‘A. I cannot answer it because I do not know that it is true. Q. I am asking you to assume that the statement is true? A. I do not believe they have paid 9 per cent, on the stock and ac- cumulated a large surplus during the past year. Mr. Lexow: The stenographer will repeat the question which I put a minute ago. “That being the case and you having a capacity of 250,000 tons, “why do you manufacture only 190,000 tons annually, thereby “running below your capacity, when the American Sugar Refin- ing Company, operating through the same agents, can market “1,200,000 tons and make profits on stock amounting to $75,000,- “000 of an average of 9 per cent, and create a surplus besides?” Q. Please answer that question. A. I should think that the question should be separated, there being two questions — - Q. You refuse to answer? A. I cannot understand — Mr. Lexow: The witness is directed to answer the question. A. I would have to answer it in one way in the first instance and in another way in the second. Q. You may separate your answers if you wish. A. Why we don’t run our full capacity; well, there is more profit for a refiner during certain seasons of the year to not run his full capacity, because there are times when you cannot market the product, when we cannot sell the sugar; the American Refining Company may be able to sell its sugar; it has a great many more facilities than we have for doing it; as to the last part of the question I would say that I do not believe from my knowledge of the busi- ness that they have accumulated a large surplus in addition to paying dividends of 9 per cent. Q. You say “you believe?” A. That is my belief. Q. How is it that the American Sugar Refining Company can market through the same channel, the same agents, the same factors, and under the same agreements, 1,200,000 tons and you 328 [Senate, can't market more than 200,000 tons? A. They may have more skillful salesmen and brokers than we have. Q. You have the same? A. Not brokers and salesmen; no. Q. Isn’t the bulk of the business done through factors under the factors’ agreement? A. It is done through brokers and vari- ous wholesale grocers throughout the United States. Mr. Lexow : • The stenographer will please repeat the question. (Question repeated.) Q. You can answer that question “yes” or “no.” A. It is done through brokers who give orders from different wholesale gro- cers; the bulk of the business is done through factors under the factors’ agreement. Mr. Lexow: It has taken ten minutes to get that simple an- swer; A. It does not follow that it comes from the grocer direct. Q. You have expressed some doubt as to whether the figures given by the American Sugar Refining Company are correct? Do you bear that doubt because your profits have been less? A. I don’t know what our profits have been. Q. Then why do you doubt? A. I doubt because I have a gen- eral knowledge as to the business; I do not think it is possible to make that profit and accumulate a large surplus. Q. Your general knowledge extends more particularly to the business that you represent? A. Yes, sir. Q. Then I repeat: Is it because the business that you repre- sent has not made a quarter of a cent profit per pound that you dispute the correctness or express your disbelief in the correct- ness of the earning capacity of the American Sugar Refining Company? A. Yes, sir. Q. Is it because there are underlying agreements that you shall make the same profits? A. There is no agreement as to profits. Q. It has been the custom? A. No, sir. Q. You maintain the same prices? A. Yes; we might be less; to some extent; it varies; they control a larger capital, greater factories as compared with ours; because they can purchase at a greater advantage than we do. No. 40.] 329 Q. Do you mean speculating? A. Sometimes they carry very heavy stocks; sometimes we carry 20,000 tons; sometimes the market goes one way and sometimes another; they may carry six or eight times that amount. Q. How much do you carry on the average? A. I suppose about 15,000 tons, probably. Q. Right along? A. From 15,000 to 20,000 tons. Q. How many tons does the American Sugar Reilning Com- pany carry? A. I have no knowledge. Q. When you speak of these tons do you mean both of your companies? A. Yes, sir. Q. Do you mean that is the average amount carried per day? A. Every year; we have that stock practically most of the time. Q. How much of it do you use per day? A. From 800 to 1,000 tons. Q. Then you have fourteen or fifteen days stock on hand all the time? A. Yes, sir; during the last three years thirty days stock at times. Q. When I say between you, I mean between the two compan- ies that you represent and the American Sugar Refining Com- pany; you fix the price of the product, don’t you? A. No, sir; I don’t think we do. Q. Don’t you fix the price of the raw material? A. No, sir; we do not; I don’t think we do. Q. Don’t you fix the price of the raw material? A. No, sir; we do not; how could we? Q. Don’t your demand? A. It has its influence; it certainly does not fix the price. Q. Well, when you speak of your demand, isn’t that all the de- mand there is in the market? A. Oh, no, sir; the whole world uses sugar. Q. Well, I mean America; I am speaking of the American mar- ket? A. No, not America; if they can’t get the price here for the raw material they ship it somewhere where they can get the 330 [Senate, price; the whole world, fixes the price of raw sugar; the law of supply and demand. Q. Well, after sugar has once been on storage here, then it de- pends entirely on the American market? A. Well, of course it doesn’t; if the market and the price are not here it is shipped else- where; to all parts of the world; we have bought sugar in London that was brought here from Peru; the freight rates are very low; from one-sixteenth to one-eighth would carry to any part of the world. Q. I am speaking of the American market? A. There are lots of people who believe in sugar and they buy. Q. For speculation? A. Yes, sir; lots of them. Q. Well, for normal, natural consumption, are there any be- sides the concerns that I have mentioned? The demand for sugar is always here? A. In this particular market it is likely to help fix the price of sugar. Q. Do you mean to say that there are fluctuations in the money market during the fourteen days that you hold the sugar that would warrant you shipping to other parts of the world for the one-sixteenth or the one-eighth? A. Yes, sir. Q. Do you know anything about it except the period of last April and May. A. Of how much per pound? Q. From one-eighth to one-sixteenth? A. Lots of times they have records that will show you; it is quoted from day to day in the papers. Q. Was not refined sugar shipped abroad last year? A. There was some through the American; but very little. Q. How much? A. I think we shipped 200 barrels, so far as we are concerned. Q. Two hundred barrels? A. Yes; to South American coun- tries. , By Mr. Warner J Q. I understood you to say that there are persons to whom you do not sell? A. I did not say that we would not sell to persons; we will not sell to an individual whose credit is not satisfactory. No. 40.] 331 Q. Does that include persons who do not consign? A. We will sell to anybody whose credit is satisfactory. Q. You do not require factors’ agreements from those persons who purchase sugar from you? A. No, sir. By Mr. Mazet: Q. You have a difference in price on the same day for the same grade of sugar? A. We do — Q. Let me finish my question — as between the Mollenhauer and other companies? A. There have been times. Q. Does that happen frequently? A. No, sir. Q. What is your explanation of this difference in grades? A. At one time we might happen to have a certain grade that they would not want. Q. I mean the same grade? A. Sometimes they want one grade and sometimes another, and we sometimes have to shade the price. By Mr. McCarren : Q. You spoke about the output in capacity of the refineries in which you are interested; do you know whether the output in capacity of the refineries in which you are interested bears the same ratio as to the output and capacity of the American Sugar Refining Company? A. I do not know. Q. Then I understand you to say substantially that you don’t know anything at all about the output of the American Sugar Refining Company? A. Only as published from week to week in the trade journals; they are gotten up by people who get the best information they can get. Q. Were you familiar with the status of the sugar refineries prior to the formation of the Trust; that is to say, from the stand- point of output and capacity? A. No, sir. Q. Have you any knowledge as to whether the refineries in ex- istence prior to the formation of the Trust always produced to their mill capacity? A. I don’t think they did; they were often closed up for months at a time, 632 [Senate, Q. There were periods in the year when they shut down? A. Yes, sir. Q. Is there any agreement between the companies that you represent and the American Sugar Refining Company as to what the price of sugar shall be? A. Not a particle; no, sir. Q. Do you know whether the American Sugar Refining Com- pany refuses to sell to wholesale grocers or retailers below a cer- tain number of barrels of sugar? A. I think the minimum is 25 barrels. Q. Are any of the refineries outside of the American Sugar Re- fining Company willing to sell less than 25 barrels? A. Maybe of different grades ; we try to have that as a minimum ; they may take five or six different grades. Q. Well, Mollenhauer sells less than this? A. They would to the regular people. Q. How much less than five barrels? A. I suppose, of course — well, we don’t get orders of that kind. Q. Do you consider that competition between the Mollenhauer Sugar Refining Company and the American Sugar Refining Com- pany, when each sell a different number of barrels? A. We sometimes do anything to get trade that the others wouldn’t do. Q. Do you consider that competition? A. I think it is, to some extent, even in that particular. By Mr. Lexow: Q. When have you done that? A. Of course I am not a sales- man ; I cannot give the exact date. Q. Are you guessing or telling facts? A. If you have any question — Q. Don’t your own agreement preclude an arrangement? A. No, sir; it does not; we sell them to anybody that we choose. Q. You don’t give them the only living profit that you give to other people in the business on factors’ agreement, and that is only living profit — have you what is called an “equality book?” A. No, sir; the wholesale grocers have one. Q. Have you got one yourself? A. No, sir. No. 40.] 333 Q. Don’t you make it a part and parcel of your trade? You know the equality books that are used by the American Sugar Kefining Company and by every other refiner in the United States; don't your companies use those books as part of the factors’ agreement? A. It does say so in the factors’ agreement. Q. Don’t you want to change your statement of a moment ago? You said that the price was not fixed under any arrangement with the refineries? A. It is not fixed under any arrangement with other refineries. Q. Don’t that “equality book’’ fix the price? A. It only fixes the freight rate; it doesn’t fix the price. By Mr. McCarren: Q. Is there any arrangement between you and outside refiners? I mean those outside of the American Sugar Refining Company; that they take advantage of the fact of the American Sugar Re- fining Company’s large business, such a large percentage of the business as it does; being enabled, so to speak, to fix the price, that outside refiners take advantage of that fact and refuse to sell to the consumer for a price less than that fixed by the Amer- ican Sugar Refining Company? A. As a matter of fact we do not pretend to sell to the consumer at all; we sell to the wholesale grocers. Q. Well, through the wholesale grocers? A. The wholesale grocers have this agreement; it is for their benefit. Q. I am speaking now from a business standpoint; isn’t it a fact that the outside refiners regulate their prices, to a very great extent, to that fixed by the American Sugar Refining Company? A. No, sir; as in any other line of business, if it be fixed by the large dealers and large handlers of sugar, it regulates the price to an extent. Mr. Lexow: I don't want to mislead you, and I don’t want to have you give testimony that will prove troublesome — A. I am not afraid of any testimony that I give. Q. I call your attention to this statement (reading): “The sugar shall not be sold or disposed of by you, either directly or indirect- ly, for less than daily quotations, with freight added from the 334 [Senate, refining point to the point of sale, as per equality rate book.” Is that equality rate book the same book used by all the refiners? A. It is issued by the wholesale grocers, not by the refiners. Q. But you adopted it in your trade? A. Yes, sir; we did. Q. Do you claim that to make any less of an issuance by you, you having adopted the book as a book to regulate. your price; does that make it any less of an agreement, that you don’t issue it? A. It is a part of the agreement under which they sell our sugars on consignment. Q. Is the price fixed by you? A. The price of the sugar is fixed by us. Q. In the equality rate book? A. No, sir; that book does not have the price; I have not seen one for many years; I don’t think it has the price at all. Q. I will show you one? A. I have not seen one for over a year, perhaps. Q. This comes all the way from Kentucky; they seem to be taking some interest in this investigation down there? A. Why don’t you get one nearer home; we don’t sell very much sugar down there; it is supplied from other markets; I can get one for you by sending to the wholesale grocers. Q. Do you know Willet & Gray? A. Yes, sir; they are sugar brokers. Q. Are they nothing more? Are they not an authority in the sugar business? A. I do not think they are, except in so far as they publish this paper; they get the best information they can and publish it as the best information they can obtain. Q. Don’t they get information from you? A. I don’t think think they do. Q. Are they not employed? A. I don’t remember that they are. Q. Of the American Sugar Refining Company? A. I should think they wofild be; they sell both foreign and refined sugar, and they publish this paper and give the best figures obtainable; and they are very often out of the way; I know that they have been from experience. No. 40.] 335 Q. You do not regard them as an authority in the sugar busi- ness? A. Except in so far as they publish that paper and get information as to stock; but they don’t know what our stock is. Q. As to figures; as to the difference between the price of the raw material and the price of the manufactured article? A. They take the purchases from day to day and average the price; they take the price of the refined and average that. Q. Mr. Havemeyer has stated on that question that Willet & Gray are the refiners’ authority in the sugar world? A. He may so consider them. Q. Did he state what was true or false? A. I believe that he stated what was true, in his opinion ; there is room for difference of opinion on that question. Q. Is it the only recognized authority of the American Sugar Refining Company; is it only recognized as an authority by that company? A. There are a great many dealers that issue circu- lars as to stock, etc., all over the world ; there are a great many that make estimates, etc. Q. (Reads) “Discount of one per cent, thirty days, on not less than one hundred barrel lots,” a discount not less than that is not given to — it is thirty days or one per cent, for cash, and if a man buys less than 100 barrels he loses his discount? A. Yes, sir. Q. One per cent, additional for cash? A. Yes, sir. Q. Allowed factors only? A. In selling it is allowed to any- body; it is allowed to anybody that will buy sugar. Q. Do you mean to say that one per cent, on hundred barrel lots and the one per cent, for cash is allowed to anybody but fac- tors? A. Yes, anybody that buys sugar. Q. Then this is a false statement? A. No. Q. On the part of Willet & Gray that you give discounts of less than one per cent.? A. I think it is a misstatement. Q. The commission of 3-16 paid to factors at the end of three months under certain conditions? A. They have a condition there; yes. Q. That is the factors’ agreement referred to in Willet & 336 [Senate, Gray’s bulletin? A. If it states that it is not allowed to any- body but factors it is mistaken. Q. Look at this equality rate book and see whether this one from Kentucky is the same substantially in terms as the one that circulates in the State of New York? (Witness examines book.) A. I believe that the grocers throughout the country have prac- tically the same thing; although I would like to get one to com- pare with it. Q. I am speaking now of the rules of the members? A. They are the same throughout the country. Q. The rules governing a traveling man? A. They are the same. Q. Don’t you know whether these rules state in this equality rate book — the rules stated in this equality rate book as being the rules governing the State of Kentucky also govern the State of New York? A. I don’t know; there may be some variation. Q. Your factors’ agreement dictates the price? A. As to the freight; I don’t know without comparing. Q. Cannot you say whether these rules agree with the rules of the New York agreement? A. I haven’t a copy of the New York rules here. I • Q. Don’t you know them? A. No, sir. Q. You mean the equality rate book, not equality freight book? A. It is a freight book, of course., Q. Now, let me read for you, “Must not be sold for less than the “daily quotations, with freight added from refining point to point “of sale”? A. That is right. Q. “As per equality rate book, nor in more liberal terms as to “credit or cash discount.” A. That is right. Q. Will you answer me how a man in the interior part of the State can get the daily quotations for sugar as made unless he gets it in compliance with the terms of the equality rate book? A. That has nothing to do with the price except as to the freight added; the price he gets through the published reports and the brokers who post him as to the market. Q. Don’t your book say the way in which he shall get the price? No. 40.] 337 A. He adds this rate to the price; for instance, he adds 60 cents to the price. Q. Don’t that equality rate book show how the man who sells your sugar shall get your daily quotations? A. No, sir; it only shows as to the freight that is to be added, so far as I can see. Q. You don’t seem to know very much about the business? A. I am not a wholesale grocer; I don’t pretend to know as to the rules that they may adopt. Q. Is this a rule; when a notice of a change in the price of su- gar is received by you, or shown to you by another, you must ac- cept such notice and adopt the price? A. It says that; that must be the rule, Q. That is the rule? A. In that particular book? Q. Yes, sir. A. It probably is the same in every one; I am willing to say that. Q. That rule governs every salesman selling the sugar of all these so-called competing companies? A. Yes, sir. Q. Then, where is the competition? A. That has nothing to do with the competition of refiners; it is only competition of grocers. Q. Was not the American Wholesale Grocers’ Association started at the instance of the refiners of the country? A. It was not started at the instance of the refiners of the country, in my opinion. Q. Do you know anything about it? A. Yes, sir; it was brought about because the grocers wanted to make a little profit, instead of selling at a loss, as they had been doing. By Mr. Warner: Q. Why do you compel the signing of this factors’ agreement before you will consign sugar? A. We choose our own factors as any other merchant would do.: Q. You compel them to sign this contract? A. Yes, sir; they make application to be appointed as factors. Q. You would not sell sugar without that? 22 A. Yes, sir. 338 [Senate, By Mr. Mazet: Q. You would give them the 3-16? A. No, sir; unless they acted as our factor; but they can sell at any price they please. By Mr. Lexow: Q. Isn’t it a fact that instead of applying to you for the posi- tion of factor that you send out a circular requesting them to make application? A. We never have; it goes through their brokers; they make the first application, and we send them an application blank if they wish to be appointed factor, and they sign this blank if they wish. Q. Now, the fact is that no man can act as agent unless he be- comes a factor? A. No, sir; I don’t think so. Q. If he depends entirely upon selling sugar? A. They don’t depend upon sugars, Q. I mean to say that so far as sugar is concerned this 3-16 en- ables them to live and the man who does not get that cannot make a living? A. He can sell other goods; if he is a factor he can sell any other kind of goods he chooses at any price he chooses. Q. He cannot sell sugar without profit; he cannot sell in com- petition with a man who gets a rebate of 3-16 per cent, from you and make a profit? A. No, sir; that is very evident. Q. If every other business in the United States were carried on on the same principle would any business man in competition make any profit in anything unless he became a factor? A. It is the object of every business man to make a profit. Q. Why do you make that agreement in the form of an affi- davit? A. I suppose it is for the purpose of protecting the hon- esty of men ; it also protects the consumer because he knows that he is not paying any more for his sugar than his neighbor; they all get the same freight rates on 25 barrels and they are satisfied to sell at that little profit. Q. In order to obtain an absolutely fixed certain price? A. In order to obtain a profit, not a fixed price. Q. And in order that the consumer may know that he is getting No. 40.] 339 the goods for the same price that anybody else is? A. He is per- fectly satisfied to do it. Q. If that same principle applied to every business in this coun- try would there be any competition? A. Yes, sir. Q. How could there be? A. Because some have more facilities and they are all competing for the business in various ways. Q. Do you consider that it is a good business proposition or a good business pifinciple that there should be one concern in the United States, or two or three concerns operating together under this equality rate book and factors’ agreement, when they can ab- solutely fix and determine what the price to the consumer shall be? A. I believe that the consumer is better off under that agree- ment than before. By Mr. Warner: ' Q. Wouldn’t the people get sugars cheaper if this system did not exist? A. They might temporarily; possibly at times 1-6 of a cent a pound cheaper. Q. You don’t mean that this system is for the benefit of the people? A. For the benefit of the wholesale grocers. Q. And for the benefit of the people also? A. Why doesn’t it? Q. I am not on the stand; it is for your benefit also? A. How does it? Q. I am not on the stand. A. I don’t see where it benefits us. Q. Why do you insist that they shall sign this contract and make this affidavit before you allow them a commission of 3-16 per cent.? A. Because it gives them that profit per pound. Q. It is entirely at their instigation that you enter into this contract? A. Yes, sir. Q. Is it not to destroy competition? A. It does to that extent. Q. Absolutely and entirely? A. They have their different fa- cilities for distributing; some are located better than others. Q. You say they are intended to prevent competition among wholesale grocers on refined sugars? A. Yes, sir. 340 [Senate, By Mr. Lexow: Q. Where do they get the benefit; don’t you as the result of this factors’ agreement absolutely control through your factors the naming and the fixing of the price of sugar, they surrendering and losing their commission of 3-16 per cent, under that agree- ment unless they act in conformity with its provisions, which pro- vides that you shall from day to day fix the price? A. Somebody must fix the price, of course. Q. And in doing that you operate through the same men that fix the price of sugars for every refiner in the United States? A. It has its influence; yes, sir. By Mr. Warner: Q. Before you allow this commission to grocers under this fac- tors’ agreement of 3-16 per cent, don’t you require an affidavit? A. Yes, sir; we do now. Q. Have you one of those here or in your office? A. Yes, sir. Q. Will you produce it for this committee? A. We will be glad to send it; I will do it with pleasure. By Mr. Lexow: Q. I desire to put this paper in evidence (marked exhibit A, Feb. 15, 1897). By Mr. Warner: Q. In the affidavit that they are required to make they have to swear- to the fact that they have not sold or disposed of any of the sugar for less than the daily quotations of your com- pany? A. With freight added; yes, sir. Q. From the refining point to the point of sale as per equality rate book? A. Yes, sir. By Mr. Mazet: Q. I understood you to say that you didn’t require any affida- vit? A. At the request of the grocers, we have an affidavit now. No. 40.] 341 By Mr. Warner: Q. That is exactly the same form as the affidavit of the Ameri- can Sugar Refining Company? A. I think it is worded differ- ently, but it has the same effect. By Mr. Lexow : Q. Will you produce also the equality rate book that has been mentioned? A. I will ask the grocers to give me one; they have an office across town. Q. Do you know of any change being made in the rules of the equality plan? A. I do not know of any. Q. Recently, you mean? A. I don’t know of any. Q. Now, this equality plan, in rate, without reference to the agreement, is for the purpose of producing, according to its terms, an absolute equality? A. Yes, sir. Q. In the price of sugar? A. Yes, sir; in the price at which it is sold. Q. So that you don’t even want a distributing element of com- petition in the freight rates? A. The grocers do not want it. Q. And by adopting in that agreement you don't — A. Wo help them to make that profit of 3-16. Q. With other words, after having fixed the price of sugar and keeping the price of the sugar itself in the hands of the whole- sale grocers, through your factors’ agreements, you go one step further and equalize still more by preventing any competition in the freight rates as well? A. Yes, sir. By Mr. Warner’: Q. Then, this agreement is entirely for the benefit of the gro- cers, that you require this affidavit? A. It is for their benefit to help maintain the price. Q. You won’t allow any commission unless they make an affi- davit? A. No, sir; you can see it is very plain. Q. Out of regard to their wishes? A. Out of regard to their wishes. f 342 [Senate, Q. They are very desirous of making this affidavit before they get this commission? A. Yes, sir; it helps them to get a profit on sugar. Q. In that way they are desirous of making the affidavit? A. Yes, sir. By Mr. Bedell : Q. Is your company the solicitor or do the people who desire to become factors solicit you? A. They solicit us through their brokers. Q. I desire to read to you from your circular letter? A. That we send out after we learn that they have made a proposal to act as such; if a firm wants to become factors, we send them this application. Q. Then there is some desire upon your part? A. Yes, through their brokers. Q. You, also? A. Yes, it helps them. Q. Don’t you prefer to do business with factors? A. Yes, sir; we do. By Mr. Barry: Q. Notwithstanding the fact that you would save 1-16? A. How would we save it? By Mr. Lexow: Q. They couldn’t sell because they hadn’t established fhis plan; you cannot sell to the general public? A. We don’t want to sell to the consumer direct. Q. Why? A. Because we believe that grocers have better distributing facilities; we couldn’t afford to sell to every man that comes to us for a barrel of sugar. Q. If they desire it, why shouldn’t you do it? A. Why should we? I don’t know any reason why we should; we simply could not undertake to manage our business in that way. Q. It is simply to keep up the price of sugar? A. No, sir; it helps the grocers to make a profit. No. 40.] 343 Q. And prevent competition at the same time? A. To restrict it. Q. And to stamp it out completely? A. No, sir. Q. Isn’t that the practical result? A. I don’t know — I think that there are just as many handling sugar now as there were before it was formed. By Mr. Warner : Q. You are incorporated under the laws of this State? A. The National under the laws of the State of New Jersey; the Mollen- hauer in this State. Q. Do you think that you get an advantage by incorporating under the laws of a State whereby you can refuse absolutely to sell to anybody that may make application? A. Yes, sir; in one barrel lots we could not undertake to do our business; the ex- pense would be too great; we could do it by charging more money to make up the extra expense. By Mr. McCarren : Q. Some reference is made in the agreement that has been re- ferred to here about daily quotations; who regulates the daily quotations? A. We put them up every morning; we have a paper printed and the brokers can get it if they want to, and so can the salesmen. Q. That is the way the quotations are regulated? A. Every morning about nine or ten o’clock we put up our list of prices. By Mr. Lexow : Q. And send them where? A. Brokers can get them and we telegraph to some markets. Q. Do you telegraph your price daily to the different wholesale grocers throughout the country? A. We don’t. Q. Who does? A. I think the association has secretaries at dif- ferent places and they could perhaps do the telegraphing. Q. From what center? A. I think New York; in different States they have cities that are centers. 344 [Senate, Q. How do you get your current daily quotations into the hands of the various traveling salesmen and factors through the country? A. We have no traveling salesmen throughout the country. Q. Well, traveling salesmen representing factors that you have appointed? A. There are thirty or forty different brokers who are paid to keep them posted as to the price and they telegraph; sometimes one broker will tell two or three others. Q. The brokers are intermediaries between you and the fac- tors? A. They are paid a brokerage of so much a barrel; there is great competition between them to sell sugar; I suppose there are fifty brokers in refined sugar here. By Mr. Warner: Q. Don’t your factors get their quotations from the American Sugar Refining Company and accept those as quotations? A. Sometimes. Q. When was the Wholesale Grocers’ Association established? A. It has been an association for many years; the factors’ agree- ment went into effect a year ago last October; but they have had an association for many years throughout the different States. By Mr. Lesow : Q. Did they use factors’ agreements prior to that time? A. No, sir; they regulated their own prices and profits under an agreement. Q. When did you issue the first factors’ agreement? A. I think it was October 10, 1895; I would have to refer to a record to be sure as to the date. By Mr. Bedell: Q. There is nothing to indicate it; it simply says “1-8-9, blank; nothing to indicate the year? A. I think it was October, 1895. Q. How had you been operating prior to that time? A. By selling sugar to the different grocers at the long price, less 3-16 per cent. No. 40.] 345 Q. Yon had been operating substantially in the same way but without requiring an affidavit? A. We didn’t require any fac- tors' agreement; we sold the sugar outright at a price, less d ! s- count. By Mr. Lexow: Q. Then, according to your statement, about October, 1895, you changed to an agreement of consignee with consignor? A. Yes, sir. ■ ’ Q. And provided for the making of this affidavit? A. Yes, sir; we didn’t at first, but we have since adopted that part; I think some six months afterward. Q. Now, why did you adopt these affidavits? A. They thought it to be for the benefit of the grocers in helping to maintain the price; it was as a protection to each other. By Mr. Warner: Q. Why should not a common certificate or statement be suffi- cient without an affidavit? A. That is all that we call for at the time; I suppose because some of the grocers are apparently afraid to trust one another., Q. You don’t regard the affidavit necessary in every case? A. We do. Q. Why wouldn’t a common statement do? A. That is all we required for several months; but the grocers preferred to give that affidavit because they felt safer. By Mr. Lexow : Q. Do you have access to those affidavits? A. No, sir. Q. Who has access to the papers and documents showing your agreement with factors and the extent to which they are living up to the agreement? A. No answer. Q. isn’t it true that this change from an ordinary agreement to an affidavit was made because there was competition in sugars, aDd the wholesale grocers throughout the United States wanted 346 [Senate, to destroy it? A. They thought there were some grocers who wouldn’t have any scruples about making out a false certificate, and that they would hesitate before making an affidavit. Q. When you speak about the delicate scruples of brokers you mean they were exercising their right to compete freely in the market? A. They made an agreement that they would maintain the price; after making that agreement they thought they would change it to an affidavit., By Mr. Warner: Q. Isn’t it a fact that the reason why you require this affidavit is because you want to keep the wholesale grocers from selling imported sugar? A. No, sir; there is nothing in it about foreign sugars; some of them do do it. John E. Searles, recalled. Examined by Mr. Lexow: Q. You stated on your former examination that the production of sugar has been depressed during the last year; how long was it depressed? A. I don’t remember testifying in those terms. Q. Was it or was it not? A. To what do you refer, the raw or the refined? Q. Refined sugars? A. There was no particular depression last year that I am aware of; I may have stated that at certain seasons, or during a certain period there was less business than at others; that the business was depressed; that occurs at inter- vals every year. Q. Was it more marked last year than the year before? A. I think not., Q. Or the year previous to that? A. The year previous to that there was a very marked depression, growing out of the financial troubles. Q. Times were fairly bad last year? A. Yes, sir; it had its effect. i Q. And yet you increased the margin of difference between the No. 40.] 347 value of the raw material and the price of the refined product quite a considerable number of points to the consumer? A. There was a slight increase. Q. There was a steady increase during the last three years, was there not? A. There was an increase during that period. Q. Is it still increasing? A. On the contrary; there has been a decrease during this year. Q. To what extent? A. I should judge about one-eighth of a cent per pound. Q. That would make the margin of difference between the raw material and the refined product what, Mr. Searles? A. From three-quarters to seven-eighths of a cent per pound. Q. How much does it cost to refine sugar? A. That depends altogether upon varying conditions; there is no fixed figure of cost; it depends upon the class of sugar refined and the quality of the product. Q. I am speaking of the granulated type? A. It is a type of refined sugar, but the product, or the raw sugar from which that granulated is made, makes all the difference in the world as to the cost of its production, whether it is made from a high grade of raw sugar or from lower grades. Q. But the average; what is the cost of refining per pound? A. From a half to three-quarters of a cent per pound. Q. Do you now speak of your own experience or the experi- ence of others? A. I have no other knowledge than our own ex- perience. Q. When you say your own experience, you mean the Ameri- can Sugar Refining Company? A. That is what I mean, the American Sugar Refining Company. Q. How is this computed? A. That is the result of several years of observation of the cost of refining Q. And over how many years has this estimate been made? A. Several years. Q. How long has it been carried back? A. Over the last nine years. Q. That is to say, ever since the original Trust? A. Yes, sir. 348 [Senate, Q. And you keep a record upon which you have estimated this cost of the refined material? A. We have records of dif- ferent factors which enter into the cost of refining; it varies in every house because of varying conditions and it depends on the grades of sugar they make; there is a difference in cost in differ- ent refineries. Q. Now, that cost is estimated, is it not, between the opera- ting expenses of the factory, the charges of the office and the charges of distribution? A. Yes, it covers those; but there is an average item of wasteage which must also be taken into ac- count. Q. That is another item taken into that computation? A. Yes, sir. Q. Then when you say from 50 to 75, you have taken into ac- count every element of expense and cost attending the refining of sugar? A. With the exception of one very important fac- tor; that is the depreciation of the plant, for which allowance should be made in addition. Q. Do you make that allowance? A. We do; that is the way we estimate; it is not included in these figures; of course, these figures do not cover depreciation of plant. Q. In any of the estimates of values given against which the stock was issued, there has been no charge for depreciation, has there? A. As an offset, we have expended very large sums of money in the improvement of the plant which stands on our books as an offset, which would properly, perhaps, be charged to depreciation; one offsets the other; there has been no definite charge to depreciation of plant. Q. The American Sugar Refining Company is able, is it not, to refine and produce the completed product cheaper than any other similar concern in the United States? A. I have no knowledge of what it costs other concerns iu the United States; I can only state our own experience. Q. Have you no knowledge at all? A. No, sir; none what- ever. No. 40.] 349 Q. Have you any knowledge of the cost of the seventeen con- solidated concerns represented by the American Sugar Refining Company? A. I have a knowledge of everything that apper- tains to the American Sugar Refining Company. Q. And that includes the separate businesses of the seventeen consolidated concerns? A. There are no seventeen concerns; there is but one concern. Q. Originally? A. There were originally fifteen different re- fineries. Q. You have added to those since? A. Yes, sir. Q. How many? A. Five. Q. Making twenty altogether? A. Yes, sir; going back to the original plants. Q. Will you tell us whether or not the American Sugar Refin- ing Company is able to produce the product at less cost than any other refining concern in the United States? A. I have no knowl- edge of the cost of other refining concerns; therefore, I cannot answer your question. Q. Isn’t it a fact, and haven’t you so testified, that the consoli- dation of these fifteen companies was for the purpose of economy in production; and do you now mean to say notwithstanding the consolidation of these fifteen original companies and the five since acquired, that you are still not able to manufacture the pro- duct cheaper than the smaller concerns, comparatively, that are competing against you? A. I do repeat what I have testified to heretofore, that the object of consolidation was economy in pro- duction; as to the comparison between the American Sugar Re- fining Company and other companies, I have no knowledge by which to base a statement under oath. Q. If you are not able to refine more cheaply than other con- cerns that have not been consolidated but are independent, then one of the principal objects of your consolidation has proven a failure; is that true? A. I think that statement is a very good one. Q. That is correct; that unless you are able to produce the pro- duct cheaper than smaller concerns, then one of the main objects 350 [Senate, of your consolidation has proven a failure; is that right? A. I think it is fair to assume that would be the case. Q. Do you know Mr. McCahan? A. I do not. Q. Have you ever met him; you know whom I mean? A. I may have met the gentleman; I don’t remember positively; I think I may have done so some time since. By Mr. Warner: Q. Was the profit of the American Sugar Refining Company greater last year than the year before? A. I think not. Q. Quite a falling off? A. Yes, sir. By Mr. Lexow: Q. I understood you to say that you acquired twenty separate refineries since the organization of the Trust? A. Yes, sir. Q. You acquired one last year, didn’t you? A. No, sir. Q. Didn’t you acquire one at Camden, N. J.? A. The Camden refinery was purchased by a Mr. Hawley. Q. And turned over to the American Sugar Refining Company? A. No, sir; it has not been turned over to that company. Q. You have a contract for that? A. I am not aware of such contract. Q. Have you no understanding that the American Refining Company is to get an interest in that refinery at Camden, N. J.? A. At the present time; no, sir. Q. No agreement? A. No, sir; to that effect. By Mr. Barry: Q. Is it in operation now? A. It is not a complete refinery. Q. It is not in operation at all? A. No, sir. Q. From whom — who did you say purchased it? A. Mr. Haw- ley. Q. Member of your company? A. No, sir. Q. What are the other two companies that you have purchased, the last two? A. There are five that I have referred to; they in- clude the four Philadelphia refineries and the Baltimore refinery. No. 40.] 351 By Mr. Lexow: Q. You know the McCahan refinery, don’t you? A. Yes, sir. Q. Do you know its output? A. No, sir. Q. Do you know whether its output is 3,000 barrels per day? A. I should think not. Q. 2,500? A. I don’t know its capacity. Q. Less than 3,000? A. I should think so. Q. Haven’t you sufficient general knowledge of that concern to know whether it exceeds that? A. That is my impression. Q. Don’t you know? A. I don’t know what its capacity is. Q. Your best information is that it is 3,000 barrels or less? A. I have no information as to its capacity. By Mr. Mazet: Q. Do you know its production? A. I don’t know. By Mr. Lexow : Q. Have you no figures? A. I think that is approximately cor- rect; but I have no definite knowledge as to it. Q. Is there any condition surrounding the McCahan refinery that would cause the expense of refining sugar to be greater or as large as the expense of the American Sugar Refining Com- pany? A. I have no knowledge whatever of their facilities for refining or as to the cost of refining. Q. Unless the cost of refining to you is smaller than the cost of refining to the McCahan concern your consolidation has, in the direction of economy, proven a failure; is that not true? A. I should hardly be prepared to say that. Q. Isn’t it true substantially that your concern is a type of about twenty McCahan factories put into one for the purpose of economy, among other things? A. Hardly so many as that. Q. Didn’t you say twenty companies? A. Yes, sir; they w'ere not all of the capacity that you assume for that factory. Q. Say fifteen? A. That would be more nearly correct, I should judge. 352 [Senate, Q. Now, unless the consolidation of the fifteen concerns, each as large as the McCahan concern, has led to an economy in pro- duction considerably greater than the cost of production tt> the McCahan as a single concern, your consolidation to the extent of economy must be a failure, must it not? A. I should expect that there would be some advantage to the larger concern. Q. Was not that one of the objects of consolidation, economy of production? A. Undoubtedly- Q. Now, let me read to you the testimony of Mr. McCahan be- fore the Senate Committee in Washington in answer to Mr. Payne. “You stated that you wouldn’t say as to the cost of refining in “your factory after you had answered my question, Mr. Mc- “Cahan? A. I answered that it was 56 cents per hundred; there “is 26 cents waste to come out of that, which brings down the “cost of refining to 30 cents, I think; when I said 56 cents I in- cluded waste.” Q. Now, if Mr. McCahan can manufacture the refined product at a cost to him in a factory, with a total output of 3,000 barrels per day, at 56 cents, including waste of 26 cents, is it possible that it takes from 50 to 75 cents for production in your factory, where your consolidation has brought together and centralized a production of 30,000 barrels a day? A. Mr. McCahan testified in that hearing that he had used only the highest grades of raw sugar; and the cost of refining to Mr. McCahan would be the mini- mum cost to anybody in the sugar refining business; the differ- ence between 56 cents and 50 cents a pound would be a profit. Q. But the cost of raw sugar and the purchase of the cheaper grade would offset that? A. No, sir; it has nothing to do with the cost of refining it. Q. Do you wish, then, to be understood that you cannot man- ufacture refined sugar at the same price, notwithstanding your centralization of factories, as can Mr. McCahan, if his testimony before the Ways and Means Committee is to be considered true? A. Undoubtedly, under the same conditions. Q. And cheaper? A. Possibly so. \ No. 40.] 353 Q. Don’t you know you can? A. I don’t know; I don’t know what it costs him. Q. Do you mean to say that you don’t know as a general prop- osition that you can manufacture cheaper; as an abstract proposi- tion do you mean to say that you do not know that you can manu- facture cheaper than the McCahan concern, which has an output of less than 3,000 barrels per day? A. Under the same condi- tions we could undoubtedly manufacture as cheaply as Mr. Mc- Cahan and possibly somewhat cheaper. Q. Have you not grouped all the possible conditions in the su- gar trade together under the concentration of factories situated in different localities all over the Eastern States and surrounded Mr. McCahan himself in the city of Philadelphia? A. We have. Q. Isn't that the object of your consolidation? A. Undoubt- edly, it economizes the production. Q. Now, I ask you, as an abstract proposition, can’t you state whether or not you can, and do, produce the refined sugar at a cost less than that produced by Mr. McCahan? A. We do our sugar refining on a totally different basis from that done by Mr. McCahan; there can be no comparison between the cost of re- fining by him and the American Sugar Refining Company, for the reason that he restricts himself to the refining of “ ’90 -cen- trifugal sugars,” while the American Sugar Refining Company in its refining, uses a diversity of sugar, and uses various grades; there can be no comparison between the workings of the two as to cost. Q. That is the only answer that you can give? A. Yes, sir. Q. Is there any other gentleman in the sugar refining trade whose conditions are different from yours? A. Different from ours? Q. Yes. sir; in the same way that the McCahan conditions are different? A. 1 think there is no one else in the sugar refining business that works the same grades of sugar and the same va- riety that the American Sugar Refining Company does. Q. Then, you have really no competitors in that business at all? A. We have. 23 354 [Senate, Q. The conditions surrounding the other manufacturers are entirely different? A. That is not true. Q. How do you bring into consistency with your former state- ment that there is nobody in the business doing the same kind of business? A. My former statement was that no one else used the same variety of sugars that we use; therefore, the cost of re- fining as between those houses and ours would not be a parallel case. Q. Then there is no other manufacturer in the United States surrounded by the same conditions that surround the American Sugar Refining? A. No other that has absolutely the same con- ditions. Q. And no analogy can be drawn from the comparisons be tween other houses and yours as to the cost of refining? A. No, sir. Q. Is the resultant product of yours equal in purity to the Mc- Cahan product? A. It is. Q. The same product? A. It is the finest product made in the world, that of the American Sugar Refining Company. Q. I have no doubt about that? A. That is the fact. Q. Mr. McCahan so considers his own product? A. I have no knowledge as to that, except your statement. Q. Does Mr. Mollenhauer run under the same conditions that you do? A. No, sir. Q. Or the National? A. No, sir. Q. By that you mean they cannot be compared with your com- pany? A. No, sir. Q. Then you are sui generis? A. I accept your knowledge of the law. Q. Do you know General Sypher? A. I do. Q. Is he an authority on sugar? A. Not the slightest; he has no knowledge whatever on the subject. Q. He has investigated the subject? A. No, sir. Q. Do you know of the statement made by him before the Ways and Means committee? A. I recollect that he made a statement; I do not remember what it was. No. 40.] 355 Q. That after some examination into the subject he had reached I the conclusion that the difference between the cost of the raw and the refined product did not exceed twenty-five cents? A. I should think very likely he made such a statement; but he has no knowledge upon which to base that statement. Q. You challenge the correctness of that statement? A. I do, most assuredly. Q. Did you run your factories last year to their full capacity? A. No, sir. Q. At no time during the year? A. No, sir. Q. How many factories were idle during last year? A. I think four or five. Q. Can you name them? A. The Greenpoint refinery was idle; one of the Louisiana refineries was idle; two of the smaller re- fineries. Q. Which ones? A. The Continental Refinery in Boston and the DeCastro & Donner Refinery. Q. During the whole of last year? A. The Continental Refin- ery in Boston was run for a period of sixty days, perhaps. Q. During what part of the year? A. During the time when the consumpton of sugar was largest. Q. These factories that were idle are in addition to the factor- ies that were closed up immediately following the organization of the so-called Trust? A. They were part of the original plant. Q. How many active refineries of the 19 or 20 refineries that you owned on the first day of January, 1896 — how many were in operation during the year 1896? A. Active refineries? Q. No; of the 20 refineries that you purchased by transfer of property or transfer of stock to the American Sugar Refining Company; how many of these 20 properties were in operation on the first day of January, 1S96? A. I think eleven or twelve — twelve, I think. Q. Twelve were operated and eight were closed? A. Y r es, sir. Q. And that was true during the latter part of the year 1896? A. The twelve refineries were only in operation during what we call our busy season. 356 [ Senate, Q. How many of these twelve that were active on the first day of January, 1896, were closed during some part of the year 1896? A. I misunderstood your question; the twelve were not active on the first day of January; they were active during the year 1896; the first day of January in every year, or thereabouts, is the period of smallest consumption, when our consumption as a busi- ness is restricted; but in order to understand this you ought to know that the consumption of sugar, refined sugar, in the coun- try, is at this season of the year, or in the winter time, only about 50 per cent, of the summer season. Q. I asked you what is the largest number of factories of the twenty that you own that operated during the time of highest pressure; the largest consumption in 1896? A. I think twelve. Q. What was the smallest number of factories operating at the time of lowest consumption during 1S96? A. Six. Q. Then the situation during 1896 was this; that at all times during the year eight of your factories were closed, and during some portion of the year fourteen? A. I stated in my previous testimony that of these eight a portion of them had been merged into other plants; so that they are not properly counted as idle factories; for instance, the North River Sugar Company property was taken by the city for a public park and that plant was de- stroyed; some of the other plants were consolidated; two of these in Boston were consolidated, or at least one of them was consolidated and the other was held as reserve property; some of the properties have not been operated in the last five or six years, but are held in reserve for the emergencies of the business. Q. So far, however, as the properties originally acquired are concerned, that w T as the situation in 1896, that during the time of least consumption fourteen were out of operation, and during the time of highest consumption eight were out of operation? A. I should correct that figure of six to seven; I remember now. Q. Thirteen? A. And the original statement seven instead of six. Q. That is thirteen and eight? A. Yes, sir. Q. When did you buy the Uuited States Sugar Refining Com- No. 40.] 357 paiiy property, the Camden property? A. We have not pur- chased that property. Q. Don’t you hold that property? A. No, sir. Q. It is held by whom? A. By a Mr. Hawley. Q. Has it not been bought from him? A. It has not as yet; no, sir. Q. What did you mean when you made that answer? A. I mean that it is contemplated to take that property. Q. By the American Sugar Refining Company? A. Yes, sir. By Mr. Warner: Q. Yv'hat is the object of that purchase? A. To use it if we can find use for it. Q. To stamp out competition? A. No, sir. Q. To make your control a little more complete east of the Mis- souri River? A. The object is to use it for manufacturing pur- poses if we can make any money out of it. By Mr. Mazet: Q. You have more now than you are using? A. That is true; but this is said to be very advantageously located. Q. All of the Philadelphia refineries are not in operation? A. No, sir. Q. Are they at any time during the time of largest consump- tion? A. They were during last autumn. Q. To their full capacity? A. Not to their full capacity; no, sir. 1 By Mr. Lexow: Q. Doesn’t the same purpose exist in connection with your company purchasing this United States Sugar Refining Company as there existed in the purchase of the other companies; I mean contract for purchase? A. There is no contract existing con- cerning it. Q. An tinderstanding? A. I might say there is an understand- ing. 358 [Senate. Q. Price fixed? A. Yes, sir. Q. Ready for delivery? A. Not as yet. Q. Awaiting determination of incumbrance before delivery is made? A. Awaiting various matters of detail. Q. That is the situation, is it not? A. Yes, sir. Q. That you want the property if you can get a good title, and that is what you are waiting for? A. Shouldn’t want to take it otherwise. Q. If the title can be made good? A. That is the only thing we are waiting for. Q. And an agreement from Mr. Hawley not to put up another plant? A. There is no agreement provided for. Q. Isn't that the understanding? A. No, sir. Q. When did you buy the Baltimore Refining Company, the in- terest in that company? A. We have had an interest in that company for three years or more. Q. Didn’t you buy it sometime in the year 189G, a stock inter- est, or add to a stock interest held by you in that company? A. Yes, sir. Q. Thus obtaining control of the Baltimore Refining Company? A. Yre had that before., Q. You added to your purchase? A. We did. Q. Will you explain how it is that with a total productive ca- pacity idle of your own exceeding the total producing capacity of all the so-called competing companies against you in the United States, you still find it necessary to add to your purchase of sugar refining properties? A. The Baltimore property was purchased because it was thought to be a good investment for the American Sugar Refining Company. Q. Is that in operation? A. It is not; it was in operation, but it was destroyed by fire after the property was purchased by the American Sugar Refining Company; it was remodelled; it com- menced operations, but it was burned down within a very short time after the operation had commenced; it is now in the process of rebuilding, but is not yet completed. Q. If you need in your business producing capacity the United No. 40.] 359 States Company at Camden and the producing capacity of the Baltimore Refining Company of Baltimore, why is it that you leave from thirteen to eight of your own refining companies idle? A. It was claimed in the case of the Baltimore Refining Company that by reason of special railroad facilities we should be able to distribute sugar from that point better than from New York or Philadelphia, and especial inducements were made for the estab- lishment of a sugar plant in Baltimore for the South and the Southwestern business; and we thought it was advantageous to try that experiment, and we took an interest in the property and rebuilt it. Q. The same is true with reference to the Camden property? A. We have made no determination concerning that, as yet. Q. You had arranged to purchase and you wanted to make the title good? A. We have made no determination of the use of it; that has not yet been determined. Q. Then, please explain, if you have not determined what use you are going to make of the property that you are about to purchase, with a producing capacity of your own already idle, equal to the total producing capacity of all the competitive com- panies in the United States, what in the world prompted you in making the purchase of this United States Company, at Cam- den? A. It may be desirable for us — it may be necessary for us to transfer from Brooklyn a part of our refining capacity to Camden or Philadelphia. Q. For what reasons? A. The East river bridge people are threatening to take a very important block of our property, which will limit our warehouse facilities, and the limit of these facili- ties is liable to limit our output, and we may find it advantage- ous to use those facilities here, which are more advantageous in many respects than in Brooklyn. By Mr. Warner: Q. You will purchase that, whether it is necessary or not? A. They have not decided whether it is necessary, and we purchase 360 [Senate, with a view of utilizing it as best we can in the interests of the American Sugar Refining Company. Q. Whether it is necessary or not? A. We are the judges as to that. By Mr. Lexow: Q. Answer that question a little more positively; why, if you don't yourself use within 60 per cent, of your total capacity now, did you find it necessary to add the United States Refining Com- pany to your business? A. For the reason, as previously stated, that we may be able to utilize that property in the interest of the company. Q. You have the Franklin Company now, have you not? A. Yes, sir. Q. That is closed? A. Temporarily; it runs during the busy season. Q. It was closed during the month of last September? A. Not at all. Q. Are you sure about that? A. It did not close until about the latter part of October, that is my impression, or November, when the demand slackened; it run through the summer season. Q. Isn’t it a fact that of the four refineries in Philadelphia, the so-called Spreckels is the only one in operation? A. The Spreckels Refinery was consolidated with the Delaware Re- finery, making the two into one; that concern is running. Q. That is the only concern running? A. The Franklin Re- finery and the Knight Company are the only ones that are idle and those are idle by reason of the shortage of consumption. Q. Notwithstanding the fact that in the city of Philadelphia you found it necessary to consolidate two sub-companies into one, and notwithstanding the fact that you are not running the other two companies, you deem it necessary to make this pur- chase of the additional company, the United States Refining Com- pany, of Camden, across the river? A. We do not base our business upon existing conditions, as to the amount of sugar being refined to the maximum consumption required during the No. 40.] 361 rear; we must be prepared, and we are obliged to maintain a large plant to meet tlie expected demand. Q. But you have answered that at the time of jour extreme consumption you have- eight factories idle? A. Yes, sir. Q. That at the time of the least consumption you have thirteen idle factories; now, I ask you why, with a capacity idle at all times equal to the total competitive capacity of all the companies competing against you in the United States, you nevertheless find it necessary not only to buy this United States Company at Camden, but to buy it in a State where you now have three factories closed? A. As I have previously stated, of the eight refineries that you have referred to, that one of them has been taken for public park purposes, that others have been disman- tled and consolidated, so that it is not a correct statement that we have eight refineries idle. • Q. How many, then; I will take your own figures? A. We have of the eight you have referred to; the North River Refinery was entirely abandoned; the Bay State Company has been en- tirely dismantled and consolidated; the only idle refineries are four; those are held as reservation refineries for special locations. By Mr. Mazet: Q. What is the capacity of those four as compared with the others now in operation? A. Probably 30 or 40 per cent. By Mr. Lexow: Q. That is 60 per cent, in operation and 40 not in operation? A. 30 to 40 per cent, of those not in operation; out of the total. Q. You state that 30 to 40 per cent, of the total number of fac- tories are not in operation? A. What I stated was that about 30 or 40 per cent, of the capacity of the active refineries in addition was idle, and that would make only of the whole about 20 per cent, of the total capacity. Q. How is this United States factory to be acquired; by the issue of stock? A. There is no provision for any issue of stock for it. j 362 [Senate, Q. Issue of stock certificates? A. There has been no deter- mination arrived at concerning that. Q. Is it a cash transaction? A. It may be so. Q. Have you not yet determined the particular way in which payments shall be made for the property? A. No, sir; not the ultimate payments. Q. Are you building any refineries? A. We are not with the exception of the completion of the Baltimore Refinery. Q. How is it that the acquisition of factories by you has been invariably in the line of purchase of competing concerns, or con- cerns that threatened competition? I understand that the United States Company is no yet doing business? A. That has not been the case; it was not in Baltimore. Q. Was not that a competing concern? A. The concern had practically failed. Q. It had competed against you? A. It had done some busi- ness; it had been a competitor, that is true. Q. The point I want to get at is this: If you need this large capacity how is it that we don’t find you building factories, but always buying competing concerns? A. We deem that the better business of the two. Q. Incidentally then to the main object of thepurchase is to get rid of the consumption of these factories which are run by others? A. Of course that is simply incidental; it would be incidental un- doubtedly. By Mr. Warner: Q. You testified the other day that the capacity of the refiner- ies owned by the American Sugar Refining Company was suffi- cient for the entire consumption of the United States? A. I do. Q. What are the future conditions that you may be called upon to meet that you referred to in your testimony? A. There is a steadily increasing consumption, which amounts practically to the capacity of an ordinary refinery every year. Q. You wanted to acquire a sufficient number of refineries with capacity to meet the entire consumption? A. We should be glad to supply the entire consumption. No. 40.] 363 By Mr. Mazet: Q. You have that capacity now? A. For the present; but the consumption is increasing from year to year by about one re- finery. By Mr. Warner: Q. In view of the fact that you have 80 per cent, and a number of your factories closed? A. As I stated in my testimony the other day, we are obliged to maintain a reserve capacity in re- fineries, and we do not feel willing to risk our productive capacity to the extent which we would be crippled if an accident occurred to one of our refineries, our large refineries; we have to-day fully equipped refineries that can be started at 24 hours notice in case of an accident to an existing plant in operation. By Mr. Lexow: Q. Have you since the organization of the original Trust either through the medium of the Trust of through the medium of the American Sugar Refining Company built any factory? A. We have built a number. Q. I am not speaking about that; have you added to your ca- pacity by building any new factories? A. We have by enlarg- ing, not by any new plants. Q. Every plant acquired by you has been a plant then com- peting in the market against you? A. That is correct, I think. Q. How many men were discharged when the Knight and the Delaware and the Franklin factories were closed down in Sep- tember? A. I have no memorandum as to the number of men; the Delaware factory never was shut down ; that is a part of the Spreckels plant and has been running fully. Q. It was closed down as the Delaware factory? A. It was merged into the Spreckels factory and its business transferred to it. Q. Do you mean that the machinery of the Delaware factory was transferred to the Spreckels? A. So far as it could be utilized. 364 [Senate, Q. In that transfer, how much of the capacity of the Delaware factory was destroyed? A. None of it; it was increased, prac- tically; the two were joined, the Delaware and the Spreckels; there was only a street between them and the two properties were combined and enlarged, so that the capacity is greater; the added capacity was increased so that the capacity of the Spreck- els capacity is increased by more than the amount of the Dela- ware capacity. Q. How many men are employed in the new consolidated fac- tory as compared with the number of men employed in the two factories acting independently? A. I haven’t the exact figures; there are certainly as many men. Q. Don’t you know that by closing down these factories in September and October of last year that upwards of 1,000 men were thrown out of employment that have not been re-employed? A. Do you mean out of the Franklin Refinery? Q. As the result of the closing down and consolidation, or use any finesse of expression that you please, in the Philadelphia con- cerns? A. There is no finesse about it; the fact is that there is only market for the product of one factory, and this factory is closed until there is an increase in the demand; I don’t know how many men were thrown out of employment; I don't think there were 1,000, for the reason that many of the men were taken from the Franklin Refinery and placed in the Spreckels Refinery, that being run to its full capacity. Q. Isn’t it a fact that men were discharged who had been in the employ of the Franklin concern for a great many years with- out notice of any kind, except the sudden discharge of the men and the closing down of the factory? A. I don’t think that is correct; it has always been the custom to give some notice. Q. Was the factory ever closed down before when so many men were thrown out of employment as were last year? A. I don't know; I have no definite control of the manufacturing de- partment and no knowledge as to details as to the method in which the factory was closed. Q. Has not the method adopted in the closing of the factories No. 40.] 365 been the result of a determination to close the factories down permanently; that factory? A. No, sir; that has not been deter- mined at all, to close the factory; I presume the factory will be reopened. Q. Those men who had been in the constant employ of the company for years were discharged last year for the first time? A. I know nothing about that; I have no knowledge on that sub- ject. Q. Who uould know? A. The officers of the company. Q. Have they independent officers? A. They have. Q. Iiut they operate through the board of directors of the American Sugar Refining Company? A. They have their own board of directors. Q. Rut they take orders from the American Sugar Refining Company? A. They do. Q. You control the stock? A. We do. Q. And hold it as assets in your treasury? A. We do. Q. Are the directors of the Franklin the directors of the Amer- ican Sugar Refining Company? A. Not all of them. Q. A majority? A. Yes, sir. Q. Then, so far as the Franklin Company is concerned, its closing down has been at the dictation of the American Sugar Refining Company? A ft has. Q. You are in a position, are you not, as between New York State, New Jersey, Maryland, Pennsylvania, with the capacity that you have, to discharge all the men in one State and open up to your full capacity in another State, or vice versa, whether in the State of New York or New Jersey, or in any of the States in which you have factories? A. But, understand that we could close factories without curtailing the production. Q. Your excess of productive capacity is such that you are able to. at any one time, to close all the factories that you have in one State, discharge all the labor you have in one State, and still have productive capacity enough in every other State to meet the demand? A. That is not correct. Q. What State is there in which your producing capacity is so 366 [Senate, large that you could not meet the demand? A. The State of New York. Q. What factories? A. Brooklyn factories. Q. How many? A. Two. Q. What capacity? A. Capacity of about 20,000 barrels per day. Q. How do you estimate as between the two? A. As between the two; what do you mean? Q. As between the two factories, Havemeyer & Elder? A. They are doubled and worked as one property; the Havemeyer & Elder and the Brooklyn Refining Company. Q. They are two distinct properties? A. Yes, sir. Q. They have a distinct capacity? A. Yes, sir. Q. Have you ever estimated before this answer of yours the capacity of these two concerns to exceed 10,000 barrels per day? A. Oh, yes. Q. Where? A. I never made any public statement concerning it that I am aware of. -> Q. I asked you before on your examination what the capacity was? You said that you didn't know; have you refreshed your recollection? A. I have not. Q. Do you say that the capacity is now 20,000 barrels? A. Ap- proximately; that is the impression that I have in reference to it; I do not know as to positive figures. Q. Are you able to ascertain the productive capacity of these two? A. I could do so. Q. I wish that you would? Q. How much money does the American Sugar Refining Com- pany pay annually to keep its idle factories in idleness? A. I don’t know what you mean by that question. Q. How much money does it cost the American. Sugar Refining Company yearly to support and maintain, including property charges and interest upon the investment, these factories that have never been worked? A. I have no figures from which to answer your question. No. 40.] 367 Q. Can you get the figures? A. I presume I can make an estimate. Q. ! wish that you would. Q. Are there any salaries paid to those interested in these idle factories under an agreement that those properties should remain idle? A. No, sir. Q. Any compensation paid to the owners, the original owners of these properties, with the understanding that the properties shall remain idle? A. There are no owners except the American Sugar Refining Company; there are no other officers. Q. No other organization maintained? A. No, sir; than these. Q. No payment on account of idle factories to anybody? A. No, sir. Q. The factories that are in operation have to bear the burden of the extra charge and the expense of maintenance of the idle factories? A. The expense account of the company must provide for the care of the properties not in use. Q. That is a definite charge against the earnings of the com- pany? A. It enters into its expense account. Q. Do you know how much? A. I don't know. Q. Mr. Havemeyer stated on the stand that an enterprise deal- ing in staple products, the raw material of which is liable to de- pressed production, should not be judged on the basis of a single year's production; do you accede to that; is that true of sugar, as it was stated to be of coffee? A. I have no knowledge of the coffee business; it is true of the sugar business. Q. It is conceded that you buy 80 per cent, of the raw material? A. I think we do. Q. Does the profit in the purchase of that raw material after it advances go into the treasury of the American Sugar Refining Company and the earnings of the company? A. Certainly. Q. And become part of the dividend that is paid to stockhold- ers? A. It is a part of the earnings of the company, and the div- idends are paid from the earnings, Q. That becomes part of the property of the company; are you sure about that? A. Undoubtedly. 368 [Senate, Q. And the American Sugar Refining Company buys a large amount of raw material in bulk? A. What do you mean by “in bulk”? Q. I mean in large quantities and keeping it on storage A. It buys large quantities of sugar necessarily. Q. How much does it keep on hand on the average? A. That depends altogether upon the markets. Q. What is the average? A. It varies from one to three hun- dred thousand tons. Q. That is from one to four months’ supply? A. No, sir. Q. From one to three months’ supply? A. From one to three months; about that. Q. With other words there is a margin of speculation in the purchase of raw material covering a period of from one to three months; and the company is practically speculating upon the value of the raw material during that time? A. The company is obliged to carry a large amount of sugar; we have to buy, for instance, six and three months in advance in order to have the sugar here at a given time; we cannot buy sugar in this market; we buy it all over the world. Q. You buy it from these brokers? A. We buy it all over the world; we buy some from them v Q. You buy directly from Europe? A. Yes; it is impossible for us to provide our wants in sugar without having large amounts coming from distant countries during periods of months. Q. Do you keep or make any statement showing the profits that you derive from refining on the one hand and the profits chargeable to the purchase of raw material on the other? A. It goes in a lump sum into our earnings account. Q. Does it show specifically upon the books? A. It does. Q. So that it is determined from your books what, if any, profits or losses were made by the purchase of raw material, and what the profits are on the manufacturing or refining of sugar separately? A. Yes; the books show that. Q. Can those figures be provided? A. They might be. No. 40.] 369 Q. Will they be? A. That would be a matter I should have to submit to others., Q. How many stockholders were there in the Trust when or- ganized as the original Trust? A. I don’t remember. Q. Have you any way in which you can ascertain? A. No, sir. Q. I believe that was one of the questions that I put to you at the last hearing, and with reference to which I asked the informa- tion; have you no method of ascertaining? A. I have none. Q. You were the Secretary and Treasurer of the original Trust? A. I was. Q. Can you not state from recollection the number of stock- holders or certificate holders in the original Trust after the con- solidation of the fifteen companies? A. I stated as my best rec- ollection that it would probably be limited to about 100. Q. Was it more than fifty? A. My recollection is that it was in the neighborhood of not to exceed 100; that is the only recollec- tion that I have in the matter. Q. Are you willing to swear that it ever exceeded sixty? A. I have no definite knowledge on which to swear at all ; I could only give you. Q. Assuming one hundred was the number, then each corpora- tion contained an average of seven stockholders? A. That is proper; that would be pretty nearly the average. Q. And that was practically the average number of stockhold- ers? A. I couldn’t say as to that; there were some partnerships where two or three people were interested in the largest proper- ties. Q. Like Havemeyer & Elder? A. Yes, sir; and some other cor- porations were owned by a few individuals; but I have no definite knowledge. Q. What is the largest stockholding that you can remember in any one of these companies? A. I have no recollection. Q. Assuming it was ten? A. I could not attempt to say defin- itely. Q. How many stockholders in the American Sugar Refining Company of New Jersey when organized? A. I don’t recollect, 24 370 [Senate, but I think — I don’t recollect; I should say three or four thou- sand. Q. Wth other words, between November, 1887, and March or April, 1891 — Mr. Searles interrupting: January, 1891. Mr. Lexow: January, 1891, there had been floated upon the market the certificates of the so-called Sugar Trust, so that the ownership had been divided between three and four thousand people, instead of the original one hundred holders, or there- abouts? A. I think approximately that is true; but I am not at all certain as to the figures. Q. Then you organized the Sugar Refining Company in New Jersey, started you say with a stockholding of about three thou- sand share holders? A. From three to four thousand, I should think. Q. And from that time until now there have been floated an ad- ditional amount of stock, or the same stock, so the distributive holders amount to how many stockholders? A. I stated the other, I think; that the dividend checks in January were over nine thousand. Q. Or near ten thousand? A. No, sir. Q. It is between nine and ten? A. Over nine thousand, Q. Who sold them that stock? A. It was bought on the Stock Exchange. Q. From holders of these original certificates? A. The shares were traded in on the Stock Exchange and divided among and distributed according to the pleasure of the holders. Q. Explain to me why it was that when corporations were cap- italzied for an aggregate of less than $7,000,000, the people own- ing those corporations amounted in the aggregate to one hundred or less, while after they had recapitalized so that the $7,000,000 of the original capital had been increased to $50,000,000 of Sugar Trust certificates, the distributive ownership was increased by sale to the public to the extent of three thousand owners of the property — why was not the public permitted to share in some of the benefits of the Sugar Refining Company prior to the time No. 40.] 371 when the stock was so largely increased in nominal value? A. The ownership was then not accessible to the public; the public had no means of interesting itself in the private property of gen- tlemen who were in that business; when the Sugar Refineries Company was organized the public saw fit to invest in these cer- tificates and they were accessible, as they never had been before. Q. But. Mr. Searles, why is it that those original hundred own- ing the stock for which Trust certificates seven times in amount wese issued, were willing to dispose of properties that pay an average of 9 per cent, upon seven times the original face of the investment? A. I have no explanation different from my previ- ous testimony, that the original capital stock of these companies had nothing whatever to do with either the value of the property or its earning or dividend capacity; therefore there is no signifi- cance in the seven times. Q. It is mathematical? A. It is; that is all there is to it. Q. There is this much: That while the shares held remained at about f 7,000, 000, one hundred people kept the stock; when the shareholding was increased to the face of $50,000,000 represent- ing the same property, the stock was divided among the people; that is a fact? A. In the first instance it was not accessible to the people; in the second it was. Q. Why did the original holders of the stock prefer to give up an investment paying on the common stock 12 per cent, on seven times its original face with an extra dividend of 10 per cent, in 1894, and permit the public to share in these profits when the return on the other investments open for the public is les* than 5 or 6 per cent.? A. Was it out of a philanthropic desiwe to have the public get rich? A. Tou will have to ask the people that sold the stock. Q. Those people who sold the stock were the original investors in the Sugar Companies, including yourself and Mr. Havemeyer and his friends: is that not true? A. The original holders were the persons who first sold the stock. Q. They have been keeping on giving it to the public the ad- vantage of this great dividend paying property and disposing of 372 [Senate, the stock to the public at large from that time until now, as evidenced by the constantly increasing numbers of stockholders of the company; is that true? A. Undoubtedly it is true. Q. And they are doing it to-day? A. I have not heard to-day. Q. I mean by that at the present time? A. There are trans- fers of stock being made every day in the year almost. Q. And the managers, those who manage the concerns of this company, are themselves dealing out this stock to the public, notwithstanding its dividends of 12 per cent, on more than you can receive on any other investment? A. I know nothing about the private affairs of the managers of these other concerns other than my own. Mr. Lexow: We will take an adjournment until 2:30 o’clock. On the reconvening of the committee we would ask you to pro- duce the books, papers and documents which have been inquired for before. AFTERNOON SESSION. NEW YORK, N. Y., MONDAY, FEBRUARY 15, 1897. John E. Searles recalled. Examined by Mr. Lexow: Q. Does the American Sugar Refining Company sell to retail- ers? A. Jt does not. Q. Has it ever made a sale to retailers? A. To some large retailers. Q. Has it ever, since the establishment of what is called the Y quality plan” described by Mr. Post this morning, sold to re- tailers? A. It has. , O. In lots of 100 barrels or more? A. Yes, sir. Q. Do you remember any instances? A. Oh, yes; several. Q. When? A. We are doing it every week; have been doing at ever since that plan was inaugurated. Q. To what is known as a retailer? A. Yes, sir. Q. Not a factor? A. To retailers who are strictly retailers. No. 40.] 373 Q. Not wholesale grocers? A. Not wholesale grocers at alL Q. Is that a solitary transaction? A. There are only a few such; it is only to large retailers who have a very large con- sumption of sugar; we do not ordinarily care to sell to retailers. Q. Isn’t it a fact that you have an arrangement with the Wholesale Grocers’ Association which debars you from selling to retailers? A. We have no arrangements with any wholesale grocers’ association in this country of any description. Q. You make equality, the plan so called, a part of the feature of your business in the sale of your product? A. We accept rates of freight prepared by them as fixing a basis for sugar de- liveries at certain points; in order to equalize the market. Q. Have yon any agreement with individual grocers, as distin- guished from the association? A. We have. Q. You have? A. We have. Q. Of the same general character? A. We have a form of agreement; I think you have what we call a factor agreement. Q. Yes. A. That agreement exists with a large proportion of the wholesale grocers of this country east of the Missouri River. Q. And these agreements with factors are the basis of the dis- tribution of your product? A. In the main; yes, sir. Q. You recognize as part of the system, do you not, the “equal- ity plan” established by the Wholesale Grocers’ Association? A. We recognize only so much of it as relates to rates of freight from the refining points to given points in certain territory. Q. Does that apply to the State of New York? A. It does. Q. As well as to the other States in the Union? A. To all States. Q. And when you speak here in the agreement that you make with your factors “as per equality rate book” you mean that equality rate book which goes out from the Wholesale Grocers’ Association? A. We refer in that document to rates of freight fixed by the equality rate book, and that refers to the rate books published by the associations.. Q. I will read from your contract, “None of the sugar shall be “sold or disposed of by you, either directly or indirectly for less 374 [Senate, “than our daily quotations, with freight added from refining point “to the point of sale, as per equality rate book, nor on more lib- eral terms as to credit or cash discount.” Now, that is right, isn’t it? A. Yes; that is correct. Q. You wish to be understood that these words “as per equal- ity rate book” refer exclusively to freight from point of refining to point of sale? A. Precisely; that is so expressed in the docu- ment. Q. Well, that is your interpretation of this document? A. It is. Q. Will you look at this and see whether this is the New York, equality freight rate plan that is spoken of in that document? (Showing witness small book). A. It seems to be; I have no knowledge concerning that book whatever. Q. Well, look at the book; have you any doubt that that is the authorized and authentic rate book? A. I have no reason to question it; I presume it is. Q. Do you mean to be understood that the American Sugar Refining Company, selling 80 per cent, of the product used in the United States, permits an equality rate book, which fixes the freight from the point of refining to the point of sale, and con- tains other important directions to traveling agents and factors to be used without reference to you, without consultation with you, and that you are not even aware of the contents of the book? A. I do not claim any such statement as that; what I do claim is that the only thing in our contract which refers to the equality rate book refers to the use of the rates of freight, which have been examined by the American Sugar Refining Company and have been adopted by them., Q. I will call your attention to the 13th provision in this equal- ity rate book, and then ask you whether or not that 13th pro- vision has met with the acquiescence of the American Sugar Re- fining Company: “Factors may, if they choose, sell to one an- other at refiners prices and terms, providing purchasing factors “maintain full list prices.” A. What is the question? Question repeated. A. That provision has met with the acqui- escence of the American Sugar Refining Company; that is to say, it has never been objected to. No. 40.] '375 Q. It has been more than passively received; it has been ac- tively acquiesced in, has it not? A. I remember that factors have inquired of us whether they were at liberty to sell to one another in the manner prescribed in that section, and we have granted them that permission whenever applied to. Q. Provided they maintain the rate, as per list price? A. Precisely. Q. The 12th provision, and I ask you the same question with reference to that: “All refined sugars must be credited and sold on the basis of New York card price,” that means your card price, doesn’t it? A. I presume so. Q. “For corresponding grades, except in that portion of the country tributary to and rated upon New Orleans, which shall use the card price of the American Sugar Refining Company of New Orleans”; has that met, before its adoption, with the ac- quiescence of the American Sugar Refining Company? A. I do not remember that that question was ever raised; it may have been with our sales department; the question may have been asked as to whether that would be objected to. Q. That means, Mr. Searles, does it not, that under the equality plan which you say here is to be considered as adopted by you onh* with reference to freights, your price list in New York for the eastern States and your price list in New Orleans for that part of the country, is to be considered the price list at which sugar should be sold? A. At which our sugars shall be sold; certainly. Q. At which all sugar shall be sold? A. No, sir; we do not attempt to dictate to anybody, but about our own sugar. Q. Mr. Searles, I ask you now, with reference to the equality plan, which forms not only the part of your factor agreement, but under the testimony of Mr. Post to-day, a part of the agree- ment of all the sugar refineries of the country, and I call your at- tention to the 12th clause, which says: “All refined sugar must be credited and sold on the basis of your New York quotations here and on the basis of your New T Orleans quotations in the West”; I then ask you does that refer only to the American 376 [Senate, Sugar Refining Company’s sugars, or does that include all refined sugars, according to the phraseology of this article? A. Those articles, Mr. Chairman, are prepared by the Wholesale Grocers’ Association; they are not prepared by the American Sugar Re- fining Company; the American Sugar Refining Company’s con- tract with those factors has no relations whatever to anyone else’s sugars; we hold no factor responsible for selling Mr. Mol- lenh'Hier’s sugars at our prices; we have nothing to do with it, 'whatever; we simply hold them to the selling of sugars they re- ceive from us to the conditions provided in our factor contract. Q. Now, this equality plan being based upon the price that you fix your sugar at here for the East, and New Orleans for the West, is the price which all factors operating from and through the association of wholesale grocers fix all their competing sugars, isn’t it? A. Not at all. Q. How can you explain it, excepting in that way? A. Why, in this way; if we sell sugar to-day at 4 and 1-4 cents, the man who buys our sugar is held to that as the basis of sale; he may buy Mollenhauer’s sugar at 4 and 1-8 cents and sell at the basis of 4 and 1-4; it has nothing whatever to with our contract. Q. Your contract makes this equality plan part — this equality plan requires that all sugars, whether yours, Mollenhauer’s, the National, or any other refined sugars in the United States shall be sold at the prices fixed by you here in the East and at the prices fixed by you in the West; now do you mean to say that that does not govern so far as all factors are concerned throughout the United States, absolutely the price of sugar, as fixed by you? A. I do most assuredly; it does not govern anything of that kind; our contract governs only the invoice of sugar to which that con- tract refers, and that is the invoice of the American Sugar Re- fining Company; but it has nothing to do whatever with any other sugar. Q. Mr. Post has sworn this morning that this equality plan is made the basis of all sales of sugar by the two companies repre- sented by him and by all other sugar refining companies in the United States; now, if that is true, this equality plan requires No. 40.] '377 that the price shall be fixed of all sugars according to the prices fixed bv you here in the East and the prices fixed by you in New Orleans for the West, how can you claim that you do not absolutely fix, under the equality plan, the price of sugar for the whole United States? A. I simply reiterate what I have said, that the contract which we have with the factor goes no further than to provide for the terms under each specific in- voice of ours is sold — and that in so far as it relates to the equal- ity rate book it only refers to rates of freight. Q. How can it be, Mr. Searles, when you say that these pro- visions governing the factors’ cases under this equality plan, have met with your concurrence and acquiescence? A. I have stated to you that the section read to me, one of them, was con- sidered by the American Sugar Refining Company, and assented to, but I disclaim all responsibility whatever for those rules form- ulated by the Wholesale Grocers’ Association. Q. Do you mean to say that you did not know until this time and have not either passively or actively acquiesced in this 12th provision of the Wholesale Grocers’ Association equality plan? A. I mean to say that none of those rules are a condition under which the American Sugar Refining Company's sugars are sold. Q. I understand the distinction you draw; but the effect of it, is it not, inasmuch as the prices are fixed under this equality plan at the prices you make here and in the West, the other competing refineries acquiescing and making this equality plan part of their system of sales — the effect is that you fix the price of sugar for every refinery in the United States? A. In so far as the other refineries adopt our prices the same rates would doubtless ob- tain; but they are under no obligation to adopt our prices. Q. The Wholesale Grocers’ Association by reason of these rules adopted by them constrain and compel every refiner in the United States ostensibly competing with you to adopt the same prices that you fix, is that not true? A. I am not aware that there is any such compulsion. Q. Does it not proceed from the literal interpretation of this 12th and 13th articles of the equality plan? A. Not at all. 378 [Senate, Q. I will call your attention to the first provision of what is headed “Sugar Factors’ Code of Rules.” In other words, here is an association, if you are to be understood literally, which pre- sume to make for agents employed by you, under separate agree- ments from you, presume to make a code of rules that shall gov- ern your employees; do you wish to be so understood, Mr. Searles? A. That is not the fact. Q. What is it, then? A. The fact is that under this factor agreement which we made with the wholesale grocers, they found if necessary, for their own purposes, for the instruction of their salesmen, to formulate similar rules, which should explain the working of this plan; the wholesale grocers of this State held a convention and prepared these rules for the government of their salesmen, in order that there might be no conflict among them- selves, and these are rules formulated by them and published by them for the instruction of their employees. Q. When you speak of no conflict between themselves, do you mean no competition between themselves? A. No, sir; I mean no conflict as to the interpretation of what was intended under the factor agreement; they came together to see what they would agree among themselves, that would do under this agree- ment; and they formulated these rules. Q. Then, it is your agents throughout the country, operating together and forming an association, that have formulated these rules and regulations for the distribution and sale of your pro- duct? A. It is the wholesale grocers of the State which has done that. Q. You say that those are the factors who have agreements with you for the sale of your product? — A. They are — Q. (Continuing) and therefore, there is under you an associa- tion formed of your own employees as agents, forming rules and regulations for the conduct of the business of distributing and selling your product; is that right? A. It is true that they have formulated these rules for the government of their own em- ployees in the distribution of our product. Q. And this is the logical outcome of the factor agreement No. 40.] 379 that you make; that is to say, the step that they take to prevent conflicting interpretations of the duties and obligations that they are under to you? A. It seems to be logical. Q. Is that right? A. It so seems to be. Q. Now, adding to that the fact that these same factors are also factors for the competing companies, and these rules and regulations are adopted not only with respect to yours, but also with respect to every other refining company in the United States, is not the conclusion irresistible that by the adoption of the factor contract system, coupled with these rules, competition has been absolutely destroyed as soon as the product leaves your hands? A. Only in so far as the other refiners may see fit to adopt our prices. Q. In as much as they in their factor contracts adopt the equal- ity plan, do they not adopt your prices absolutely as a system? A. Not at all. Q. How can it be otherwise? A. As I have already explained; the difference in the price makes the difference in the value of sugar with the equality plan; the variation in the price at the refining point changes the price at the point of delivery, and the factor is only obligated to carry out his agreement as it relates to his purchase at whatever qirice it may be made. Q. Do you mean to say that in addition to this equality plan there are other equality plans issued with rules and regulations referring to the Mollenhauer concern or the National Sugar Re- fining Company? A. I know of no other equality book, but I — Q. That is enough — A. Well — Q. Now, in as much as this equality book fixes as the basis of the price of sugar the quotations made and fixed by you, and this equality plan forms part of the system of your competing com- panies, how can you say that there is any competition when you send, or any of your competing companies send, their product' to the factors? A. You simply do not state the matter correctly when you say that it fixes the price; it fixes only the rate of freight to be added to the price. Q. I will read again the 12th provision of these articles and 380 [Senate, regulations: “All refined sugars.” Do you mean to say that when they use the words “all refined sugars,” and this equality plan is part of the system of the competing companies, that that word, or those words, “all refined sugars,” do not include all the sugars made by refiners? A. I understand it to mean all sugars purchased under the factor contracts, the price of which is fixed by contracts., Q. Whether that sugar be made by you or the Mollenhauer or by the National? A. And whatever be the price. Q. You admit that? A. Undoubtedly. Q. Now it says: “All refined sugars must be credited and sold “on the basis of refiners’ New York card price for corresponding “grade; and in that portion of the country tributary to and rated “upon New Orleans shall use the price card of the American Su- “gar Refining Company, New Orleans.” Now, do you mean to say that that rule and regulation adopted as a duty and obliga- tion on the part of all factors operating under the equality plan does not give you the absolute fixing of the price of sugar for every refinery acting upon the factors’ plan? A. I do. Q. You dispute that? A. Undoubtedly. Q. How? A. It explains it in the text you there read; it is fixed by the refiners’ card price in New York; now if there are two refiners’ card prices it refers to the prices of those refiners. Q. But it says — A. In New Orleans — Q. The American Sugar Refining Company — A. The New Orleans for that^section, because that is the only refinery in New Orleans which makes a quotation for sugar. Q. Who fixes the card rates for New York? A. We fix our own, and the Mollenhauer fix theirs, the National fix theirs; one does not necessarily control the other. Q. Are three card prices sent out? A. The Mollenhauer and National put their own prices on sugar from day to day and we put ours. Q. Are three card prices sent out to the factors? A. There are no prices sent out. Q. How do the factors get the daily quotations? A. Through brokers and through the public press. No. 40.] 381 Q. Are those quotations the same? A. They vary. Q. When have you known them to vary? A. Frequently; it depends altogether upon the condition of the market. Q. Do you mean to say that the factor selling the same grade of sugar under agreement with you, with the Mollenhauer and with the National discriminate when they make the sale between those three producers? A. Undoubtedly. Q. Is not this equality plan for the specific purpose of not per- mitting them to discriminate? A. It is simply for the purpose of insuring a price at a point remote from New York by adding a certain amount of freight to the New York price, whatever that may be., By Mr. McCarren: Q. Do I understand you to say that you regard all factors as your employees? A. They are not our employees at all; They are simply our consignees. By Mr. Lexow: Q. The retailers that you sell to are obliged also to sign a fac- tors’ agreement? A. I presume they have done so. Q. Are they allowed the 3-16 per cent, and the discount of one and one per cent.? A. In some cases I think they are. Q. Do you talk now as a matter of information or absolute knowledge? A. That is my impression on the subject; I think they have the same terms — the large buyers I refer to who buy in 100 barrel lots. Q. Now the fact is that this factors’ agreement of yours in con- nection with the rules and regulations adopted by the Wholesale Grocers’ Association and referred to in your factors’ agreement, places every refining company on an absolutely equality, and is so intended; isn't that true? A. No, sir; only as to terms of sale, not as to prices. Q. As to freights? A. As to freights; yes. Q. As to discounts? A. The discounts, I think, are the same to all the refiners. 382 [Senate, Q. As to allowances? A. Allowances — there is no rule what- ever. Q. Isn’t there an allowance of five cents a barrel under certain conditions? A. There is a brokerage; we pay brokers five cents a barrel under certain conditions. Q. Yes; as to rates of discount and times of credit? A. That is uniform whether to factors or any one else. Q. The value of the sugar refinery is fixed, is it not, within rea- sonable limitations by its capacity in the way of output? A. Not altogether by its capacity. Q. Isn’t it true that within reasonable limitations you fix the value of a refinery by its possible output in barrels of sugar per day? A. There are many other things which would enter into the estimate of its value. Q. Such as more valuable real estate? A. Yes; location and facilities. Q. That is it; but as a general thing the value of a refinery is calculable on the basis of its output, its capacity for the output of sugar? A. Its capacity for the output coupled with facilities for an economical manufacture — Q. Is the basis? A. Yes, sir. Q. Mr. Post stated here this morning that the National Sugar Refining Company had been built with an output of 2,500 barrels daily for between $750,000 and $1,000,000; would you say that was a reasonable figure to place upon that refinery? A. I have no knowledge as to the value of the refinery, or as to its perfec- tion for the purposes of sugar refining. Q. How long has it been built? A. Some two or three years, I think. Q. Is it not supplied with the best machinery? A. I have no knowledge as to its machinery. Q. From the quality and nature of its product would you not say that it was well equipped? A. For the manufacture of cer- tain sugars, doubtless. Q. For granulated sugar? A. Yes, sir. Q. It runs that principally? A. I presume so. No. 40.] 383 Q. That is your principal manufacture, too, isn’t it? A. It is only a part of our business; we manufacture every grade and vari- ety of sugars. Q. But the granulated sugar is the major part? A. That is the larger element in the trade. Q. Would you hold that to be a fair ratio for the estimate of value, the ratio between a capacity of 2,500 barrels a day and an expense of between $750,000 and .$1,000,000? A. Well, I should hardly be able to compute that; I do not think in the first instance that their capacity is quite as great as 2,500 barrels; I am sur- prised to hear that statement. Q. 2,000 barrels — A. About perhaps 2,000 barrels; yes, sir — Q. That was a mistake — I meant to say 2,000 barrels — A. (Con- tinuing) — a refinery can be built to make 2,000 barrels of sugar at half the cost of another refinery to make 2,000 barrels of sugar; it depends upon the facilities for working various grades of \ sugar; a refinery making high grade sugars, and working high grade sugars, may be built for much less than a refinery which is equipped for all kinds of sugar. By Mr. Mazet: Q. Isn’t it customary to build a refinery for the purpose of man- ufacturing a particular grade of sugar; don’t you have that in view when you put the machinery in with a view to economy of manufacture? A. Some; the smaller refiners, yes; but we can’t do it that way, we have to equip ourselves to melt all grades of sugar coming from all portions of the world. Q. Then in that respect your plant is not so economical as the others? * A. It requires a very much more extensive plant. By Mr. Lexow: Q. Are you able to furnish the committee to-day with the fig- ures showing the original investment? A. The original invest- ment ? Q. Yes; the original cost of the properties that went into the Sugar Trust? A. I have no figures which show the original cost; I have the original capitalization, if that is what you refer to. 384 [Senate, Q. You mean the capitalization of $7, 000, 000? A. Yes, sir. Q. Have you got the items of that capitalization? A. I have. (Witness hands paper to chairman.) Q. It foots up $6,590,000? A. Yes, sir. Q. And would you be kind enough to read these hieroglyphics for me? A. The hieroglyphics are typewritten, but they are ab- breviations: The Havemeyer & Elder Sugar Refining Company. . $500,000 The Dick & Meyer Company 200,000 The De Castro & Donner Sugar Refining Co . 350,000 The Holler & Sierck Company 210,000 The Oxnard Brothers Company 100,000 The F. O. Matthiessen & Wiechers Sugar Refining Co. 400,000 The Brooklyn Sugar Refining Company 300,000 The Havemeyer Sugar Refining Company 1,000,000 The Forest City Sugar Refining Company 300,000 The Boston Sugar Refining Company 650,000 The Standard Sugar Refining Company 1,000,000 The Bay State Sugar Refining Company 225,000 The St. Louis Sugar Refining Company 755,000 The Louisiana Sugar Refining Company 450,000 The Planters’ Sugar Refining Company 250,000 Making a total of $6,590,000 Q. That was the capitalization, was it, at the time of the exe- cution and delivery of the original Sugar Trust agreement form- ing the syndicate? A. I think it w 7 as. Q. Now 7 , what was the volume of certificates of the Trust is- sued separately for each one of those properties? A. Those fig- ures I have not been able to obtain. Q. How is that? A. Well, I have no record of them by which I can give you those figures. Q. Who issued the stock? A. The stock was issued by the Su- gar Refining Company. No. 40.] 385 Q. Wliat position did you occupy in that company? A. I was secretary and treasurer. Q. Charged with the certificate book of the company? A. Generally so; that is, I was in charge of the transfer department, which was one of my departments. Q ; In other words, that department, the receipt of certificates to be transferred and the certificates transferred was peculiarly within your province? A. It was. Q. Where is that book? A. I have no knowledge of what has become of those books. Q. When did you last see it? A. In 1890 — at the time the new company was organized. Q. 1891? A. 1891. Q. Where did you last see it? A. I saw it — well, I did not see the book so recently as that, but all the books were in my control up to that time, when the company went into the hands of a re- ceiver. Q. You mean it went into the hands of a receiver just prior to the organization of the Yew Jersey Sugar Refining Company? A. In 1890. Q. That was just prior to the organization— A. Some months prior. Q. And it was the result of that receivership that gave birth to the New Jersey Company? A. It was. Q. What did you do with it when you last saw it? A. I have no knowledge of what became of the books of the old company after the new company was organized; those books were put away somewhere and I have no knowledge as to where they were put. Q. Did you issue the certificates of stock of the New Jersey Company? A. I did. Q. In your capacity as secretary and treasurer of the New Jer- sey Company? A. I did. Q. So that you hold to the New Jersey Company precisely the same legal relation and are charged with the same duties and the custody ot the same books that you held to the original Sugar Trust? A. I do. 25 386 [Senate, Q. Now, is your recollection positive that you did not see that certificate book at the time of the organization of the New Jersey Company? A. I did not; there were — Q. You did not see them? A. There had been a very large number of certificate books used between that original book in 1887 and 1891, several thousand certificates had been issued, and the original book had been lost sight of from the first year; but I have seen no books of the Sugar Refining Company’s certificate books since the organization of the new company. By Mr. Mazet: Q. You keep the same stock ledgers, don’t you? A. Oh, no; everything was opened new entirely. Q. Independent of the old organization, from 1887 to 1891? A. There were several series of them, transfers were so many. By Mr. Warner: Q. Where are those books? A. I have no knowledge as to where they are . Q. No idea at all? A. None whatever. Q. Would they not be at your office in Jersey City? A. I have no knowledge as to where they are; I have never seen them nor heard of them since the new company was organized. By Mr. Mazet: Q. Where were they when you last saw them? A. They were, when I last saw them, in the office of the Sugar Refining Com- pany. Q. Under your control? A. Yes, sir. Q. Were they removed with your knowledge? A. No, sir; I never gave any order concerning them; I never knew what did become of them. Q. Did you know that they were removed? A. I abandoned all the old books and started fresh with a new set of books and new certificate books, and what became of the old I have no knowledge. No. 40.] 387 Bt Mr. Lexow: Q. Mr. Searles, were the original Sugar Trust certificates all surrendered and new certificates issued prior to the first day of January, 1891? A. The original certificates— Q. Were all the original certificates retransferred prior to January the first, 1891? A. The certificate holders of the old Sugar Refining Company had deposited their certificates with the Central Trust Company under the control of a reorganization committee and they had been surrendered and cancelled; the Central Trust Company held the sugar certificates — Q. Who cancelled them? A. They were cancelled in the trans- fer office of the Sugar Refining Company. Q. Isn't it one of your duties as treasurer and secretary of the company to see that no certificate is issued except by compari- son with your stock certificate book? A. It is the duty; it is my duty as an officer, and for that purpose I have a corps of clerks, employees, whose business i't is to attend to that. Q. So that upon the transfer of all these certificates in 1891 and their cancellation, you were in control? A. Not personally. By Mr. Mazet: Q. Who signed the certificates? A. I did. By Mr. Lexow: Q. Do you mean to say that you issued any of the certificates f the new company to stockholders who had surrendered and cancelled certificates of the old Trust until you had established the fact that the surrendered certificates and cancelled certifi- cates were valid and subsisting certificates of the Sugar Trust? A. Oh, no; not at all. Q. I thought you had established that practice? A. That is the transfer office; that which is under my direction. Q. Now, in doing that you had recourse to the certificate books of the old Trust, did you not? A. To the last certificate books of that Trust; the last of the series; the original books had been lost sight of previously. 388 [Senate, Q. And to the first book provided one or more of the first is- sued certificates had not been transferred upon the books? A. Yes. Q. Do you know whether that fact obtained? A. I do not. Q. You don’t remember now whether or not any of the old first issued certificates of the Sugar Trust were outstanding at the time of the cancellation of all Sugar Trust certificates and the de- livery of the stock of the Yew Jersey Company? A. I do not re- member as to those original certificates. Q. Well, then, you must have had the old first certificate hook of the Sugar Trust before you to establish that fact at that time? A. I had no books before me personally, as I have explained; I have in my transfer office a corps of six or seven clerks who have the entire charge of the transfer department, under the charge of a chief, and those people have the charge of the detail ; I never see the certificate books myself. Q. Then the certificates that were surrendered and cancelled formed the basis, did they not, for the receipt of certificates of stock of a like amount in the New Jersey Company? A. They did and they did not; the original certificates were deposited with the Central Trust Company; they were by them cancelled, and a single certificate, or two certificates, were issued to the Central Trust Company, and when the exchange was made from the old Sugar Refining Company to the American Sugar Refining Company a single, or two certificates, were issued to the Central Trust Company in exchange for the certificates which they held; those certificates were subsequently divided and distributed in accordance with lists furnished by the Central Trust Company and by the owners in interest; without regard to the old certifi- cates. Q. Who could have taken that certificate book from your pos- session? A. I do not know who would have had, or who could have taken it. Q. Are you positive in your recollection that you haven’t seen it from the time of the transfer of those certificates until now? A. I am. No. 40.] 389 Q. What makes you so positive in recollection of tliat par- ticular fact? A. The fact tliat I have seen none of the hooks pertaining to the old Trust and its certificate book since the or- ganization of the new company, when everything was started afresh. Q. Were they destroyed? A. They were cancelled; I do not know whether they were destroyed. By Mr. Warner: Q. Have you made any efforts to find the books? A. I do not know where to look for them. By Mr. Lexow: Q. Have you between the year 1891 and now had any occasion to look for that certificate book? A. No, sir; there never has been an occasion to look for it. \ Q. Is that book the only record that contains the mathematics of the distribution of those original Sugar Trust certificates among the various companies composing the Trust? A. I know of no other. Q. That information you say is locked up in that one book? A. Yes, sir; that and the Trust deed. Q. And the book showing an increase of capital, nominal in- crease of capital, of $43, 000, 000 and odd dollars from a capital of $6,000,000 and odd dollars, is not in existence, as far as you know? A. Not to my knowledge. Q. Wasn't there any memoranda made of an appraisement in any book of the company? A. Never; as to the plant for which the certificates were issued; appraisement was made of the per- sonal property, but no appraisement of the plant, which was the basis of the certificates. Q. Do you mean to be understood, Mr. Searles, as saying that here was an issue of $50,000,000 worth of certificates to fifteen different companies without anything showing the basis of that issue to the various companies, excepting the mere certificate 390 [Senate, ■book stub? A. There was originally the basis of the whole transaction the Trust deed, which specified the interest of each of the stockholders of each of these companies, but with the ex- ception of that deed and the certificate book there would be no record to my knowledge. Q. Where is that deed? A. That deed I have no knowledge of, as I testified last week. Q. Did you lose sight of that deed also, about the same time the certificate book was lost sight of? A. My last recollection of the deed was in connection, I think, with the North River suit, when it was placed in the hands of counsel for use in court, and I have never heard of it since. Q. The copy of the deed contained in the appeal book contained no designation of the relative amounts of stock apportioned to each company; do you know why that omission was made? A. I think I remember that when the presentation of the deed was asked for that the court ruled that the matter of division was a matter entitled to privacy, that the amount of certificates was a matter which interested only the parties in interest, and at. the request of the counsel in the case it was expunged. Q. And that is the reason why it is not contained in the record? A. That is my recollection of it. Q. Have you no personal recollection, Mr. Searles, being the one who signed the certificates and delivered them to the various holders, have you no personal recollection of the respective amounts that went to each company? A. I have not; it is a long time ago. Q. Or of the basis of ratio upon which the division was made? A. No, sir. Q. Was there any ratio between the companies? A. None ■whatever. , Q. No established ratio for the issuance? A. None whatever. Q. Where, then, did you get your information from upon which you issued those certificates? A. From the trust deed. Q. From the deed itself? A. From the deed itself. Q. Were you the depository or custodian of that deed? A. I was for a time until it was produced in court. No. 40.] 391 Q. And you didn’t receive it again? A. I never received it again. Q. Do you know in whose custody it last was? A. I do not; I think it was placed in the custody of the counsel of the company for use in the North River case; that is my recollection of it. Q. Do you mean Mr. Parsons? A. Mr. Parsons. Mr. Lexow: Have you that deed, Mr. Parsons? Mr. Parsons: I have not^ By Mr. Lexow: Q. Was there any other record or book of the company in which, or stock ledger in which these respective holdings as they first appeared was noted? • Mr. Parsons: May I change my answer? I have not as I rec- ollect; I have no knowledge at the present time; I have made no examination of my papers in my office to ascertain. Mr. Searles: I know of no other record than that connected \ with the stock itself and the deed. By Mr. Lexow :i Q. Don’t you have a stock ledger? A. Stock ledger; that was a part of the transfer that appeared in that connection? Q. That was separate from the certificate book? A. From the certificate book, certainly. Q. What has become of that book? A. They went with all the certificate books at the time of the organization of the new company. Q. And was surrendered to the new company? A. No, I think not. Q. Who had it in control then? A. It was originally in the control of my transfer department, as was the certificate book. Q. And your transfer department was simply from a transfer department of the Trust to a transfer department of the New Jer- sey Company? A. That is correct. 392 [Senate, Q. Now, can’t you explain to this committee how it is that books of that importance can disappear from an office such as yours without any explanation? A. When the new company was organized and the old certificates had been received and can- celled there was no further use for them whatever, and they were entitled to be destroyed; there was no necessity for preserving them, as they had all been turned in and cancelled with the Cen- tral Trust Company. Q. Have you any recollection as to whether they were de- stroyed or not? A. I have not. Q. Have you searched for them? 'A. I have not. Q. You have not? A. I have not; I have no knowledge as to where to look for them. Q. Well, you know where your own transfer office is? A. Ido; they are not there that I know. Q. Have you searched in any other part of the company’s prem- ises or property where they would be likely to be? A. They should be, if they are in existence, in the transfer department; they are not there. Q. Does that apply to all the books, accounts and records of what was known as the old Sugar Trust? A. That is true; it is true of them all. Q. Also of the minutes of the meetings of the directors? A. Of the old Trust; yes, sir. Q. Yes; so that you wish to be understood as stating that you have not in your possession, or under your control, and do not know the whereabouts of any paper, document, paper, book, of the old Sugar Trust? A. I have none of those papers. Q. Have they disappeared accidentally, or on purpose? A. I do not know of any purpose in their disappearance, Mr. Chair- man, except that they were absolutely of no use. Q. Don’t you think it is rather remarkable that books bearing upon such important transactions should all disappear? A. No; I think not, under the circumstances; after this length of time. Q. Six years? A. Six years. Q. Have you the books showing sales of the old Sugar Trust? No. 40.] 393 A. Those books may be in connection with the various refineries — I do not know that they are — do not know that they are or not; I have not seen them. Q. General account books? A. I have never seen them. Q. Where did these experts in figures get their figures from as to production, and as to the cost of refining, or the margin of dif- ference between raw material and manufactured product for nine years before the organization of the Sugar Trust? A. From their own files; from their own publications. Q. Not from your books? A. Not at all. Q. Taken originally from your books? A. Not all; those are original compilations of Willet & Gray, made on the basis of their market reports from week to week. Q. But then the difference between the refined product and the raw material must have been by examination of your own records? A. Not at all. Q. Do you certify to them the amount of your product? A. Never; we never give them any figures. Q. How can they make that compilation then without having a basis of figures from your company which makes 80 percent, of the product? A. If you will read their circular you will find that they estimate the meltings of the refineries based on the arrivals of sugar; they take the importations and check up against that the sales of refined sugar, but their figures are all based on impor- tations and sales in the open market. By Mr. McCarren: Q. I see, Mr. Searles, in the estimate of these fifteen different refining plants that the Havemeyer & Elder refining plant is fixed at the value of $500,000; I understand you to say that that valua- tion was made in 1891? A. No, sir; that was made in 1887. Q. 18S7? A. Yes, sir; before the organization of the original Trust, the Sugar Refining Company. Q. What did the Havemeyer & Elder plant consist of at that time? A. Of all the property of Havemeyer & Elder; the refining property iu Williamsburg. 394 [Senate, Q. And of wliat is known as the large sugar house in the South Fourth street? A. I have explained, Senator, at the previous hearing, that those capitalizations do not refer whatever to the value of the property; that they were made of necessity in order to organize the original Sugar Refining Company which required that all properties be put in the form of corporations; at that time Havemeyer & Elder property was owned by the firm of Havemeyer & Elder; they put it in a corporation with a nominal capital of $500,000 for the purposes of the transfer, but it had no reference whatever to the value of the property which was in- volved. Q. I understand its value to be merely nominal? A. Its value is merely nominal; that is the case with several other corpora- tions mentioned there; those figures do not represent values at all. By Mr. Lexow: Q. Mr. Searles, you say that capital was merely nominal ; three of those companies were organized simultaneously with the form- ation of the so-called Sugar Trust, were they not? A. Two of them, as I stated the other day, that I thought the Oxnard Bro- thers Company was also, but my impression is that that had been previously organized. Q. That was a very small concern, was it not? A. A very small concern. Q. With what output? A. Oh, a few hundred barrels. Q. And with a capital stock of $100,000? A. Yes. Q. Now the other two concerns were organized with a capital stock of $700,000? A. Yes, sir. Q. Simultaneously with the formation of the Sugar Trust? A. A. Yes, sir. Q. There was no increase of value; there was no increment added to the value of the properties represented by that capitali- zation between the date of the organization of these companies and the formation of the Sugar Trust, was there? A. No, sir. Q. They remained absolutely the same? A. I think so. * - IA ST A TE LIBR/ Ui _ No. 40.] 395 Q. And vet for those $700,000 of capital stock then credited yon issued about $14,000,000 par of the certificates of the Sugar Trust? A. More or less. Q. About that? A. I think that is approximately the figure. Q. Why were these companies if they represented a value of $14,000,000 not organized with a capital of $14,000,000 instead of $700,000? A. Well, it was deemed desirable that they should have a small capitalization. Q. Why; what was the purpose? A. No other purpose than a matter of convenience; it was entirely unnecessary to make the capital larger. Q. Have you any books here, Mr. Searles, in conformity with the promise that was made in the prior hearing? A. I did not understand that I made any promise, Mr. Chairman, to produce any books. Q. You said that certain books of the company to which we referred were in your keeping, subject to the control of the board of directors? A. I think that referred to one book — the minute \ book of the American Sugar Refining Company. Q. Yes; have you brought that book? A. I have not; no, sir. Q. So as not to embarrass you, we wanted simply to look at the minutes of the company, showing its transactions in the purchase of companies whose stocks were acquired by the American Sugar Refining Company; we have no desire to see any part of your business operations, but simply for the purpose of fixing the questions involved in capitalization; now are you prepared to give the committee access to those minutes? A. I submitted to such of my directors as I could reach the request of the commit- tee for the production of the minute book itself and was unable to get their permission to produce the book in court; if what you desire is figures relating to these properties merely that would be another question which I should be willing to present to them, but so far as the minute book is concerned, they declined to allow me to present it., Q. Will you state who the directors were who declined to per- mit the books to be produced here? A. I was only able to reach 396 [Senate, a part of our directors, the Messrs. Havemeyer and Mr. Dick; they were the only persons present during last week. Q. When do you hold meetings of the Board of Directors? A. A. Monthly; on the third Wednesday of the month; that would be this week. Q. This next Wednesday? A. Yes, sir. Mr. Lexow: The stenographer is requested to make a note of the fact that the committee called upon the witness, who had previously waived any requirement as to the service of a subpoe- na duces tecum of the irregularity of the notice and request to produce the minute book of the New Jersey Company, showing the transactions in the purchase of other companies whose stock was acquired by the American Sugar Refining Company of New Jersey, and that the witness declines so to do. By Mr. Lexow t Q. Do you put your declination, Mr. Searles, upon any other ground than that you are acting as the custodian of those books under directions of the Board of Trustees, who refuse to give you the power to produce? A. That is my reason. Q. That is your only reason? A. They are not within my con- trol otherwise, except with the consent of the directors. Q. That is your only reason? A. It is. Q. Where are those books? A. At the principal office of the company, I presume. Q. 117 Wall street, in the city of New York? A. No, sir; I think in Jersey City. By Mr. Warner: Q. Don’t you know? A. I think it is in Jersey City. Q. Don’t you know where the minute book of the company is? A. I answer, I think it is in Jersey City. Q. I ask you if you don’t know? A. That is my judgment in reference to it. No. 40.] 397 By Mr. Mazetr Q. Where do you have your meetings of the Board of Direc- tors; do you have them at 117 Wall street? A. Sometimes. Q. How often? A. Monthly. Q. In Wall street? A. In Wall street. Q. And yet the minute book is in New Jersey? A. Sometimes in New Jersey and sometimes in Wall Street; it is brought to Wall Street for the purpose of business when required. Q. It is customary to bring it there and read the minutes ol previous meetings of the board? A. Unless they are dispensed with by consent of the board of directors. By Mr. Warner: Q. As I understand the testimony of Mr. Havemeyer the other day, he testified that they held meetings here weekly in the city; now, was that the meeting of the board of directors? A. No, sir; that is not the meeting pf the board of directors; there are meetings of the executive committee weekly, but the meetings of the board of directors are monthly. By Mr. Lexow: Q. Do you use those minute books in the meetings of the ex- ecutive committee? A. No, sir. Q. Mr. Havemeyer testified that the only meeting that was held by the company in the State of New Jersey was its annual meeting; that the directors’ meetings were all held, with the ex- ception of the annual meeting, in the State of New York, at your office No. 117 Wall street; was he in error when he made that statement? A. They are usually held there; there are some meetings held in New Jersey. Q. Was Mr. Havemeyer’s statement true that only one meeting per year is held in the State of New Jersey? A. I think that is ordinarily the case; most of the meetings are held at 117 Wall street 398 [Senate, Q. And the minute book is in use at 117 Wall street at its di- rectors’ meetings? A. Usually so; not always. Q. Isn’t it always used? A. Not always; no, sir. By Mr. Warner : Q. How long since has that book been in New Jersey? A. It was in New Jersey at the January meeting. Q. And been there since then? A. It has been there since then; the February meeting has not yet been held. By Mr. Mazet: Q. Where are the minutes usually written? A. The minutes are usually written in Wall street. Q. In the book, in the minute book? A. In the minute book, certainly. Q. And then it is taken over to Jersey City? A. When it is required there. Q. If you have the meetings of the board in New York, you don’t require them in New Jersey? A. We have the minute book here at such times, usually. Q. Isn’t it the fact that the minute book is here at all times except when you require it in New Jersey? A. It is usually here; not always. Q. Is it in New York now? A. I could not say as to that. Q. Have you any knowledge at all — A. I have not seen the book recently. Q. When did you last see it? A. At the January meeting. Q. In Jersey City? A. Yes. Q. In whose custody is that book? A. It is in my custody; that is, nomihally in my custody; it is in the custody of the clerk who has the writing of it up. By Mr. Warner: Q. Is it not a fact that you have lately taken it to Jersey City within the last two weeks? A. No, sir. No. 40.] 399 Q. Or three weeks? A. Well, that would go back to January. Q. Is it not a fact that you have taken the book, or transmitted that book to Jersey City for the purpose of avoiding the process of the law to compel you to bring that into court? A. No, sir. By Mr. Hazet: Q. Where are the transfers of stock made? A. Made in New York and in Jersey City; the law requires that we shall make them in Jersey City, but for convenience certificates are made at odd times in New York. Q. And necessarily the stock book and stock ledger are in New York? A. They are used here, and they are at the same time at times in Jersey City. Q. Are they in New York now? A. The transfer books, yes; I think to-day they are. By Mr. Lexow: Q. Is there any other book, Mr. Searles, in the possession of \ the company that contains a record of its transactions in the purchase of properties acquired for which certificates of the com- pany have been issued? A. Those records would be in the min- ute book of the company of the directors. Q. Is there no other book? A. I think no other. Q. Have you minutes of the meetings of the Executive Com- mittee? A. We have minutes of its meetings usually. Q. Do those contents not refer to the acquisition of properties? A. No, sir; those are the actions of the directors. By Mr. Mazet^ Q. Is there only one copy of the minute book? A. That is all. Q. You don’t keep a duplicate at each office? A. No, sir. By Mr. Lexow: Q. Can you remember, or do you now remember, the trans- actions with reference to those various refineries that were pur- 400 [Senate, chased subsequent to the incorporation of the New Jersey Com- pany not contained in the original Trust? A. I do not. Q. Of the amounts of stock issued for them? A. No, sir. Q. Or the basis of the computation of value? A. I do not. Q. Is all that contained in this minute book? A. The fact of the amounts authorized would be contained there; nothing more. Q. You distributed $23,000,000 of sugar certificates after the incorporation of the New Jersey Company; do you mean to be understood as saying that the only record showing any basis for the issuance of those certificates to that enormous amount is con- tained only in the minute book of the directors? A. The action of the Board of Directors would be the only basis of that delivery. Q. Were there no preliminary agreements in writing? A. My impression is that there were, in one or two instances. Q. Where are they? A. I don’t know; I think those agreements when executed were destroyed; I have no recollection of them; I think they were only preliminary agreements, and when they were once executed they were destroyed. Q. Is that true of all the transactions surrounding thepurchase of properties and the distribution of this stock, that as soon as the transaction is over, the agreements and memoranda relating thereto are destroyed? A. No, sir. Q. What transaction is there that is of record, so that it may be ascertained by this committee? A. Well, there was in exist- ence the Trust deed for some time. Q. I am speaking of subsequent to that? A. Oh, recently — oh, there are no other transactions that I know of except those which are matter of record. Q. A matter of record where? A. In the minute book of the company, where the authorization is given. Q. There is nothing in existence beyond the naked authoriza- tion of the board of directors to issue a certain amount of capital stock of the company in payment for these acquired properties? A. I think that is all. Q. Any appraisements? A. None. Q. Were committees appointed to appraise the values of the Ho. 40.] 401 properties purchased? A. I have no recollection of any such committees. Q. Or was it one man who conducted the operations to a con- clusion? A. I think the operations were conducted through dif- ferent parties. Q. And you mean to be understood as stating that this $23,- 000,000 of additional stock was issued without any appraisement of the yalue of the property purchased? A. There was no for- mal appraisement of the properties. Q. Was that stock also issued upon the basis of computing what you term the ultimate earning capacity of the property? A. It was based on the earning capacity of the property in each case. Q. That is to say, you took as a basis for stock transfer and payment what was figured out as the ultimate earning capacity of the property undertaken? A. I think in the case of the Phil- adelphia properties it was taken on the actual capacity at the time; they were working properties, the capacity of which was known. v Q. How could you issue stock upon or in payment for proper- ties which were closed down just as soon as they were made part of the company? A. They were not closed down. Q. A number were, were they not? A. Of the Philadelphia properties? Q. Yes? A. Ho, sir. Q. What in this new and recent deal are you estimating to be the earning capacity of the United States Refining Company, which has not yet commenced business? A. We haye not deter- mined yet what its earning capacity will be. Q. How can you determine it? A. We have certain infor- mation concerning the capacity of the house; but if we run it as a refinery, we shall make some considerable changes in it in or- der to adapt it to the purposes of the business and to do it to the best advantage. Q. You have issued stock for a large number of companies that as soon as they were successively undertaken, were closed; how 26 402 [Senate, did you compute the earning capacity of those properties as a sub- ject for the basis of stock issue? A. We took into account the value of the property as transferring it to other properties. Q. It had no earning capacity, had it? A. It had earning ca- pacity in each case, but we transferred the property from one to another and increased its earning capacity by making the transfer. Q. If it was closed as soon as acquired, how is it possible that it should have earning capacity? A. The houses that were closed as soon as they were acquired were closed by reason of the fact that they were received at a time of year when the demand for sugar was diminished, the houses that worked with the greatest economy were kept running, and those which worked to a disad- vantage were first closed. Q. A large number have remained closed from that time, the time of their acquisition? A. Some have. Q. Now I would like to know how you compute the earning ca- pacity of those you immediately closed upon taking them into the Trust and which have remained closed ever since? A. As I have previously stated, we have transferred the earning capacity of those refineries to other properties where the same amount of sugar could be more economically produced. Q. Having therefore based your stock issue upon the earning capacity in the conduct of your business, do you regard that as the standard for charge, to wit, a dividend upon the assumed earning capacity of the aggregate of the properties whether ac- tive or inactive? A. Yes, sir. By Mr. McCarren: Q. Mr. Searles, are you familiar with the testimony given by Mr. Bergin before this committee, or that part of it in which he spoke about a number of employees being discharged after the forming of the Sugar Trust, I believe in which he said there were some 600 or 700 men discharged, is that true? A. I have read the testimony; he testified that there were 5,000 or 6,000 dis- charged. No. 40.] 403 \ Q. Is that true? A. Not at all. Q. Do you know whether there are more men now employed in the Sugar Refining business in the State of New York than there were before the formation of the Trust? A. I think there^are more men employed in the State of New York in the sugar refin- ing business than there was, or during the present organization than there were prior to the Trust. Q. Well, where are your refineries located now in this State? A. In Brooklyn. Q. Suppose you contemplated an extension of your plant, would you consider Brooklyn more advantageous for that purpose than any other point? A. I do not think we should for any further ex- tension. Q. Why? A. Well, there are other places which offer greater attractions than Brooklyn for sugar refining business at the pres- ent time; we can do better in Philadelphia, and in Camden than we could do in Brooklyn; Mr. Spreekles, when he built his sugar refining company, was very strongly urged to come to Brooklyn; he went to Philadelphia, and there they gave him exemption from taxes and free water, and several other exemptions and privi- leges in the way of railroad approaches, and entirely free from all charge, as an inducement. Q. Well, then, I understand you to say, substantially, that you do not regard the inducements in this State for the manufactur- ing business as great as they are in other States? A. I do not; under ordinary conditions they might be, but under existing con- ditions I do not think they are. Q. Do you know* Mr. Lawson N. Fuller who testified before this committee last Saturday? A. I do. Q. How recently have you known him to be engaged in the sugar refining business? A. I think Mr. Fuller went out of the sugar refining business 24 or 25 years ago. Q. Would you consider his experience 24 or 25 years ago such as to qualify him as an expert concerning the sugar business of to-day? A. Not by any means; the business has been revolu- tionized since his day entirely. 404 [Senate, Q. Mr. Fuller testified that the people do not get the benefit of the reduction in the price of raw sugar; is that true? A. That is disproven entirely by the statistics themselves; they show that the people have gotten it. Q. What is the price of granulated sugar to-day? A. I think four and a quarter cents. Q. What part of that price is paid to the United States Gov- ernment in the form of duty? A. About one cent a pound or a litttle morg., Q. Suppose there was no- duty on raw sugar what would the price of granulated sugar be? A. If there were no duty to-day granulated sugar would be sold at somewhere about three and a quarter cents a pound., Q. Three and a quarter cents? A. Yes, sir. Q. Can you give an approximate idea of the amount of sugar manufactured by the so-called Sugar Trust and the American Sugar Refining Company since consolidation? A. I think that the Sugar Refining Company and the American Sugar Refining Company together have distributed fifteen hundred million dol- lars worth of sugar the last nine years. Q. Fifteen hundred million? A. Yes. Q. In reading over Mr. Havemeyer’s testimony I see that he gives some figures to the committee to show the margin between the cost of raw sugar and the price of refined sugar; now, what does that margin represent? A. That margin represents first the importation of the sugar from every country in the world; second, the refining, the cost of refining, the loss in waste be- tween the raw and the refined product, and the cost of distribut- ing the sugar, refined sugar, in barrels or in packages, and the profit to the refiner; it is all embraced in those figures, that mar- gin. Q. What market controls the price of the raw sugar? A. Of raw sugar; well, it is more nearly controlled by the London market than any other market; there is a speculative sugar market in London which really controls the price of raw sugars all over the world; the London quotations fix the values in our market prac- tically., No. 40.] 40a Q. Is the American Sugar Eefining Company a large purchaser from European markets? A. We buy very largely iu Europe; we have been obliged to, especially since the shortage of the Cuban crop; the Cuban crop two years ago was 2,000,000 tons; this last year it was only about 250,000 tons; we have gone to make up that difference of three-quarters of a million tons; we have been obliged to go to the markets of the world, and we have imported from the European market in beet sugars perhaps 300,- 000 tons of that deficit. Q. Mr. Searles, don’t you believe that the increase in the num- ber of large corporations and the aggregation of capital therein has a tendency to work to the disadvantage of the workingman? A. No, sir; on the contrary; I think that there is an entirely mis- taken idea concerning that; you can't have the employment of labor without capital, and all the efforts that are made to de- preciate capital are against the interests cf labor; I think every movement that is made to destroy confidence in capital is work- ing diametrically against the interests of the laboring man and the working people; there have been in this State hundreds of millions of dollars worth of business that have been driven away by the fact that capital is considered unsafe here. Q. Well, what kind of legislation in your opinion would be necessary to a greater amount of employment, and to a larger benefit to the people of the State? A. Well, I think, sir, if we had less legislation we would be a great deal better off; I think that if you will make laws that will invite capital to the State of New York you will increase very largely its manufacturing industries and the the employment of labor; but I think that so long as investigations like this are fomented, which make capital unsafe and uncertain, capital is put on a defensive position, as though parties employing capital were guilty of some crime against the working people; I believe that while that is the case you will not be able to increase the industries of this State. Q. Well, don’t you believe that by encouraging the combina- tions of capital that the consumer is very largely placed at the mercy of the manufacturer? A. No, sir; no, sir; there is a law 406 [Senate, higher than the Legislature of the State of New York that regu- lates all those things; there is a law of supply and demand, and no trust has ever been organized and no corporation has ever been big enough to violate that law; there are hundreds of mil- lions of dollars of capital here to-day in the city of New York which is ready to be put into any enterprise that shows large profits, and no corporation can make an excessive profit without inviting competition which in the end will destroy it; the con- sumer is amply protected by the legitimate laws of supply and demand. By Mr. Lexow : Q. Did you not answer on your first examination, Mr. Searles, that you conceded that one of the reasons for the lack of faith and for the present situation was overcapitalization of enter- prises? A. No, sir; I do not think I testified to that; I think you asked me whether the capital, the undercapitalization of these companies was not a violation of the law, and an evasion of the law of the State, and I stated that I did not think it was. Q. Or to the question in the alternative at the time, whether it was not equally true that an overcapitalization which did not represent the fair market value of the property capitalized was an evasion of the law, and to it very largely was attributa- ble the present situation? A. I think I did testify that over- capitalization was criticisable. Q. Now, you have stated that the consumer has had the full benefit of the fall in raw material; you make that statement, do you not, upon the comparison of nine years before the Trust with nine years’ operations after the Trust? A. Yes, sir. Q. When you take the figures of five years before the Trust compared with five years after the Trust, does the same state- ment hold true? A. If you take the first five years before the Trust and the first five years after the Trust it does, only to an increased extent. Q. Do you dispute, Mr. Searles, that the difference between the value of the raw material and the value of the refined product No. 40.] 407 for the first five years before the Trust was 853-1000 of a cent? A. I haven’t the figures, so I can’t — Q. (Continuing) Per pound? A. I haven’t the figures at all. Q. You have stated that the consumer got the full benefit of the fall of the raw material? A. Yes, sir. Q. Don’t you know that the difference in the price between the raw material and the manufactured product in the five years be- fore the Trust was S53-1000 of one cent per pound? A. I have not the figures before me; what I referred to a moment ago was this: that if you will take the first five years of the nine before the Trust and compare it with the first five years of the nine after the Trust you will find that the saving to the consumer was about thirty-seven cents a hundred. Q. I am just doing that, and I am showing the reverse of it. A. Well, you can’t show it in figures. Q. I am taking from the years 1883 to 1887 inclusive. A. That is the last five years prior to the Trust instead of the first five. Q. Oh, the first five; now I am speaking of the five years inline- \ diately preceding the formation of the Trust, and is the statement that you made to Senator McCarren that the consumer got the benefit even of the fall in the raw material as compared with the first five years after the formation of the Trust true? A. The comparison of the last five years prior to the Trust and the first five years after the Trust is not a fair comparison, for the reason that the last five years prior to the Trust were years of disaster, during which the sugar refineries were ruinously hurt and some of them driven out of the business entirely. Q. I am not asking now whether it is a fair comparison, but I am making that comparison of the first five years immediately previous to the Trust and the first five years immediately after the Trust, and ask you whether during those ten years the con- sumer — comparing the five first with the five second — the con- sumer got even the benefit of the reduction in the price of the raw material? A. I think that the consumer got a great deal more than that difference. 408 [Senate, Q. Then, I will ask you whether the difference in those first five years between the price of the raw material and the price of the manufactured product was not 853-1000 of a cent per pound? A. I haven’t the figures and therefore cannot answer. Q. Do you dispute those figures? A. I don’t know anything about it; I haven’t the figures. Q. I will ask you whether the difference or limit between the raw material and the manufactured product for the five years im- mediately after the Trust was not one cent and 10-1000 of a cent per pound? A. I haven’t the figures. Q. These are the figures taken from Willet & Gray’s; do you dispute their accuracy? A. If your statement is correct as to the figures the figures are correct. Q. You don't know what the figures were during those years? A. I haven’t the aggregate of those five years; no, sir. Q. Well you then kindly furnish to this committee to-morrow morning your figures based upon Willet & Gray’s statistics for those ten years, and make also a comparison between the five years immediately preceding the Trust, with the whole of the nine years subsequent to the Trust, for the purpose of stating under oath whether the consumer has had even the benefit of the fall in the raw material that has occurred during that time; will you kindly do so? A. I will make these figures for you, if you wish^ Q. We would ask you also to on Wednesday at the meeting of the Board of Directors to call their attention to the request of this committee with reference to the books, so that we then can know officially from the board whether they will furnish them? A. You want the books, or do you want those figures which you asked for from the books, which you previously stated was all you wished to know? Q. Provided the statement will cover everything in connection with those transactions that are contained in the minutes. By Mr. Mazet: , Q. How much has the consumption of sugar increased within the United States in the last ten years? A. Well, I think — No. 40.] 40a Q. Percentage? A. I should think about 40 per cent. Q. Well, that accounts largely for the additional number of men employed in the manufacture, does it not? A. Not in this State, for the reason that refineries have ben multiplied in other States very considerably which has met that additional demand. Q. What proportion of the output of the American Sugar Re- fining Company is manufactured in the State of New York? A. Oh. I thnk somewhere between one-third and a half. Q. Do you know how many men are employed by the American Sugar Refining Company? A. I don’t know at present. Q. Approximately? A. Well, you mean directly or in the col- lateral industries as well as in the refining of sugar? Q. Yes; I don’t mean only the men employed in the factory, but on the dock and in barreling it, etc.? A. Well, I don’t know as to what they would be. Q. Can’t you approximate the figures? A. Well, probably — 6,- 000 or 7,000 — Q. (Interrupting) Can you furnish this committee with the number of men employed and the wages paid? A. I will try to get that information from the parties who have charge of it; that is not in my province. Q. Mr. Theodore Havemeyer will furnish that , will he not? A. 1 think that he would be the party to furnish that. Q. You have that in your books in Wall street, have you not? A. We do not have as to the number of men employed; those de- tails they belong to the manufacturing department. Q. Will you kindly endeavor to obtain that information? A. I will make that request. By Mr. Warner: Q. Mr. Searles, you understand — A. (Interrupting) If it is pro- posed to place before the community through this committee the secrets of its business and all its affairs— Q. That is one of the advantage which a foreign corporation has in this State over a domestic corporation of the State, is it not — A. (Continuing) I think that any such proposition as that 410 [Senate, is not in the interests of the State or anybody else; if a man feels that his books are not safe, and he is going to have them spread before his competitors, I do not think anybody would want to do business in this State. By Mr. Lexow: I j Q. You understand that there is no such object on the part of this committee. Mr. Searles: When the committee get so that it comes into a man’s private affairs and asks for all the details of his business and displays them to the public — I do not think — that is hardly a fair proposition. “B. H. Howell, Son & Co., Ho. 109 Wall street, Hew York. Messrs Hew York 189 Dear Sirs: We herein enclose an invoice, from which you are entitled to the usual deductions of one per cent, trade discount on one hun- dred barrel lots, and one per cent, for cash if paid within seven days. We will be pleased, upon receipt of your written request, to ap- point you one of our agents, in which case we will consign sugar to you for sale upon the terms mentioned below, the title however to remain in us subject to your advances and necessary expenses incurred by you. You are to advance to us within thirty days the amount of the invoice less one per cent, trade discount on one hundred barrel lots, an additional one per cent, if payment is made within seven days, this advance to be without recourse to or reclamation upon us, and to be due in any event. No. 40.] 411 When you sell the sugar it is to be billed in your name, al- though in fact as agent for us, and you shall at your own cost, and without reclamation upon us, pay all expenses, and assume all risks of the property, and of payment. No expenses are to be incurred for our account. The sugar shall not be sold or disposed of by you, either direct- ly or indirectly for less than the daily quotations with freight added from refining point of sale (as per quality rate book) nor on more liberal terms as to credit or cash discounts. If these conditions are observed by you, we will upon a cer- tificate to that effect, pay you a commission of three-sixteenths of a cent per pound, and in addition thereto you shall retain the profit, if any, over the advance made as above provided. If you fail to comply with any of the conditions we will decline to pay the commission. Payments will be made for each month’s commissions at the expiration of three months thereafter. Upon written notice from either party this agency will be dis- continued. v Yours very truly, B. H. Howell, Son & Co.” Marked “Exhibit A, Feb. 5.” Fourth Edition, New York Equality Freight Bates, Effective August 17, 1896/ — Sugar Factors’ Code of Buies. Marked Ex- hibit A, February 15. Form as follows:! — 189 Messrs. B. H. Howell, Son & Co., 109 Wall street, New York City, Gentlemen: We have received your letter enclosing invoice for sugar. We wish to act as one of your agents and to receive consign- ments of sugar from you upon the terms mentioned in your letter, and we agree to conform to the conditions as therein stated on all such consignments. Yours truly. Marked Exhibit B, February 15. 412 [Senate, Form as follows:. State of ss: County of , being duly sworn, declares that in claiming a commission of three-sixteenths of a cent per pound (less one per cent.) where trade discount has been allowed on all sugar con- signed to by B. H. Howell, Son & Co., from September 1, 1896, to October 1, 1896, that all conditions as agreed to when requesting such consignments, have been and will be faithfully carried out, and that none of the sugar has either directly or indirectly been or will be sold or disposed of upon any other terms. Sworn to before me this — day of , in the year 189-. Marked Exhibit C, February 15. Mr. Lexow: I understand there is no such proposition on the part of the committee. Mr. Warner: I simply asked what there was in these books that you did not want to show to the committee; that was all. Q. I understood, I think, Mr. Havemeyer testified yesterday that your corporation made no annual report to the Comptroller? A. We make uo report to the Comptroller here of our business; no, sir. Q. That is another advantage the corporation seems to enjoy over domestic corporations, isn’t it? A. I do not know what the laws on domestic corporations are, whether they would require it or not, a report as to its business. Q. Does your company refuse to sell to any retailers who are able and willing to buy a hundred barrels? A. As a rule we do not sell retailers; we prefer to do our business with wholesalers; our business is of that magnitude that it would he impossible for us to attempt to distribute it through the retailers. Q. Isn’t it a fact that you have refused to sell to any retailer who was able and desirous of taking the sugar in hundred barrel lots? A. We would sell to any retailer for cash who buys a hun- dred barrels at our regular price.. No. 40.] 413 Q. Have you never refused to do so? A. I do not — well, that would go to the sales department; I do not have charge of the detail of the business of sales. Q. What is the object of this factors’ agreement? A. I will tell you what is the object of the factors’ agreement; the whole- sale grocers have for years made a leading article of sugar, and they have sold it absolutely without profit and without paying anything to cover the absolute cost of doing that business; uoav, the wholesale grocers reported this; they said, “Sugar constitutes “about 40 per cent, of our sales; while that is the case if we are “forced to sell sugar without getting back the actual cost of dis- tributing that sugar, simply a loss, which leaves our whole busi- ness very unsatisfactory”; and the wholesale grocers urged very strongly that some arrangement be made by which they should receive the commission as our factors, which wrnuld be equal to the expense of doing the business; now, I took personally a great deal of interest in the matter of the wholesale grocers beyond my evidence to show that it cost them on the average 5 per cent, to do their business; 5 per cent on 4 1-4 cents a pound is 21 cents a hundred pounds; they wmnted an agreement under which they should get a quarter of a cent a pound for distributing that sugar, which would be the cost of distribution, and leave them a frac- tion of profit; and it finally resulted in our agreeing that we would pay them a commission of 3-16 a cent a pound for distrib- uting our product to the retailer; I had a very careful computa- tion made and found that we could not distribute our product ourselves to the retail trade, taking into account the character of the trade, of the difficulties of consumers, the losses, etc., at cost to us less than 3-16 cents a pound; we therefore agreed that we wrnuld pay the wholesale grocers, or rather the factors, that com- mission of 3-16, they to take all the risks and distribute our prod- uct; now, that 3-16 cents a pound simply covered the expense of distribution, and they get out whole, according to their own tes- timony, for the sugar they handle, and it leaves them a profit on the rest of their business; this thing was not instigated by the re- finer, but it was urged by the wholesale grocers as a matter of 414 [Senate. life and death; in fact, it came to the point that they said they could not handle sugar any longer unless an agreement could be made by which they could cover the cost of retailing. Q. As the secretary of the company, you took sufficient inter- est in the matter to organize the wholesale grocers of Chicago, didn’t you? A. No, sir; I went by request to the wholesale gro- cers of Chicago; I went to confer with them, to hear what they had got to say in reference to various plans that were proposed; I suppose there were twenty different propositions, and this plan finally resulted, after very many conferences. Q. Well, of course, it had the result of stifling competition be- tween the grocers? A. It is hardly fair to say that. Q. Well, it does, does it not? A. No, it does not result in that, anything more than this. Q. There is no competition between the people that go into that agreement with you? A. There is no competition over their commission; that is all; the price— the operation of it is this — Q. But your company took such an interest in this matter of agreement that you compelled these men to make thatthey would not sell less than your quotation price? A. Why, we took this interest in it, that if they agree to do a thing, we want to know if they have done it. Q. And it is for your interest to do it? A. It is for our interest to do it; the thing had come to a pass that the wholesalers were suffering in credit; we did not know who was safe; we can’t af- ford to sell these people if they lose money; we, as a matter of self-protection in the matter of credits, more than anything else, we were interested in it. Q. The people don’t get any particular benefit out of this, I take it? A. Undoubtedly, they have; they have had a uniform sugar, and lower price in sugar than they would have had with- out it. Q. How do you make that out? A. For these reasons: the prices of sugar were — ordinarily, the retail dealers paid all kinds of prices for sugar; now, every retail dealer takes our card price and he says, “This is the price at which I want to buy my sugar”; No. 40.] 415 and goes to bis wholesaler with it and demands that he get his sugar at that price; I believe that the sugar is placed to the con- sumer to-day as cheap as it ever will be — Q. Isn’t it a fact that people who have done business with you under these factors’ agreements, having violated the agreement in some respect, for selling foreign sugars, have been put off en- tirely by the company? A. Olg no, sir; we cut off some people on account of their credit not being good; we cut off people be- cause they have violated their agreement — we will do that. By Mr. Lexow: i, Q. Violated this factors’ agreement? A. Violated this fac- tor’s agreement — a man who agrees to do it, and doesn’t live up to it, we don’t want to trust that man ; you had a Mr. Dugan tes- tify, I saw by the paper; I inquired in the office; I find we have never refused Dugan to sell him sugar except in 1894 on the ground that we questioned his credit; I find that he had a factor’s agree- ment with the Franklin Sugar Refining Company in Philadel- phia; that he hasn’t paid for his sugar and that he is owing for it yet; that they have given him an extension and his notes, but that the notes are still unpaid. Q. You haven’t paid him any rebate — offered to, rather? A. They have credited his rebate against the invoice. Q. Have you offered to do that? A. Why, undoubtedly, he has been credited it. ' Q. Do you know that to be a fact? A. Certainly; I am so in- formed from Philadelphia. Q. How can you testify, Mr. Searles, that any system that sub- stantially creates a monopoly by factors, giving them rebates at the rate of 3-16 per cent, per pound, when the purchasing public eannot receive those rebates unless they sign the factors’ agree- ments? A. The purchasing public that do not perform the ser- vice are not entitled to the factor’s agreement; the men who per- forms the service for us, of distributing our sugar, we pay him the commission. Q. The service that he performs under the terms of the agree- 416 [Senate, ment is to have maintained the prices fixed by you? A. We make our price; yes; we insist that he shall not sell them at less. Q. The mere consideration moving between you and the factor is that the factor shall maintain the price? A. He shall maintain our price. Q. And for that you give him 3-16 of a cent rebate, if he by affi- davit shows that he has lived up to the terms of the rebate? A. That is rather — Q. Nov/, how can you justify that as not being in restraint of trade when you refuse to give like conditions to the public at large, even if they are willing to pay the price that you set on your article? A. We do not restrict. Q. But unless they will take a factor’s agreement from you and make affidavit that they have lived up to it, they cannot get the sugar at the same price? A. They can by keeping the agree- ment. Q. I say, unless they sign that agreement and unless they make that affidavit which constitutes them factor, even though they are willing to assent to every other condition imposed by you, you won't give them the rebate that will enable them to live? A. That is the only condition that we impose. Q. That is true? A. By reason of the factor agreement. Q. That is true, isn’t it; now, how can you justify that as some- thing which is not in restraint of trade? A. Well, it is not in re- straint of trade, in the sense that we pay a man to perform for us a certain service; we pay him for the distribution of our product a commission which is equal to the cost of that distribution. Q. I understand that the agreement is so worded, but when you come down to the real English of that agreement it is prac- tically and substantially a sale to the factor, who must pay you the amount of the invoice within thirty days? A. It is not a sale; it is purely a consignment; it is recovered — in cases where parties have failed to pay we recovered these sugars; they are our sugars. Q. But assuming the case where they have paid? A. Yes. Q. Then, the factor’s agreement will still be operative, al- though the sale itself has been consummated, and the factor may No. 40.] 417 uot hare sold the product that he bought of you and which he paid for? A. We receive from him this money for the amount of his invoice under conditions that he sells those sugars in accord- ance with his agreement and only under those conditions. Q. Isn’t it really a sale? A. Not at all; it is not completed un- til he has sold the sugar. Q. Isn't it completed when he pays you the invoice? A. Not at all. Q. Then, although he has paid you the whole lien that you would have upon articles in the hands of the factor, he still re- mains factor under that agreement, in order to compel him to maintain the price, as a condition precedent to receiving his re- bate? A. He has not completed his agreement. Q. That is the theory of it, isn’t it? A. He has not completed his agreement until he disposes of the article in accordance with his contract. Q. Even though he has paid you the full price of the sugar? A. Even though he has paid the amount of his invoice. By Mr. Mazet: Q. We will assume this condition ; here are two men in Chicago, one of whom, who is your factor, the other is not; each wants to buy from you 500 barrels of sugar; now, the man who buys from you and who is not your factor does not get the 3-10 of one per cent., does he? A. He does not. Q. In other words, his sugar costs him that much more? A. Yes. Q. Which pays the freight from here there, in addition to what he pays for the sugar to you? A. Yes, under terms and obliga- tion; the other does not; one is free to do what he likes with his sugar, the other is under contract. By Mr. Lexow: Q. You reserve at all times the right to accept a factor’s agree- ment or reject it, do you not? A. We do. 27 418 [Senate, By Mr. McCarren: Q. Have you ever, at any time, Mr. Searles, refused to enter into an agreement with a factor without any other reason than sus- picion of his financial condition? A. We will not allow — take any factor where we do not believe that he is financially respon- sible; we have some factors that we give the benefit of the fac- tors’ agreement that they pay the cash on the deliverey of the sugar; whom we will not credit we will still give the benefit of the factor agreement. Q. Is there any other reason why you would refuse to accept a factor than the one I have stated? A. No, sir. Q. Have you ever refused? A. I do not know of any case. By Mr. Lexow: Q. Have you refused to sell to retailers, even in lots of 100 bar- rels unless they executed a factor’s agreement? A. I do not know that we have ever refused to sell in lots of 100 barrels to any one. Q. Have you or the agents of your company refused to sell to factors who have been found to be dealing in imported sugars? A. Giving that as a reason? Q. No, not necessarily? A. By reason of their selling im- ported sugars? Q. Yes? A. No, sir. Q. Never in the State of Illinois? A. I do not know of any such instance. Q. In the city of Chicago? A. I have no knowledge of any such instance. Q. You would know it if it were true? A. I think I should. Q. Do you follow that part of the company’s affairs? A. I did for some time; I do not in detail now. Q. This entire factors’ agreement, which has the effect of con- solidating the business throughout the whole country, is a ma- chinery which has been put in operation within the last two years, is it not? A. The present form of factors’ agreement? Q. Within — the appointment — A. Certainly — No. 40.] 419 Q. Of agencies, the form of agreement, the affidavit and the o-eneral system? A. It is all within the last two years; yes, sir. By Mr. McCarren : Q. Do I understand you to say, during your examination, that the idea of the factors’ agreement originated, in the first in- stance, with the wholesale grocers? A. Yes, sir; it is really for their benefit, the whole system; it protects them against each other. By Mr. Warner: Q. Do you know whether the factors sell any imported sugars? A. Some of them do. Q. Your factors? A. I think some of them do; I don’t know in detail as to those matters. Q. Are they allowed to sell imported sugars? A. I don’t know of anything to the contrary. By Mr. Lexow : Q. Will you produce those figures to morrow morning? A. To-morrow — or Wednesday— did you say? Q. I should prefer to have this matter complete before going into another — and it won’t take more than a few minutes to have those figures — comparison between the first five years preceding the organization? A. The last five years and the first five years preceding? Q. Yes; and the last nine years as well; the first computation will be five years before the organization of the Sugar Trust and the last nine years after? A. That is not a fair showing. The committee thereupon adjourned till to-morrow morning at ten o’clock. . i j 420 [Senate, SIXTH PUBLIC HEARING. COMMON COUNCIL CHAM- BER, NEW YORK CITY, FEB. 16, 1897, 10:30 A. M. Chairman Lexow: A quorum being present the committee will please come to order. Chairman Lexow: Mr. Searles will you please take the stand. John E. Searles, recalled, Examined by Mr. Lexow: Q. Have you gone over the figures, Mr. Searles? A. Yes, sir. Q. With what result? A. I find the average margin during the last five years preceding the Trust to have been .8534. Q. Or .853? A. Yes, or .853. Q. And the margin after? A. During the next five years the margin was 1.096. Q. And Mr. Fuller stated it was 1.111; there is only a very trifle of a fractional difference, then, between your figures and the figures of Mr. Fuller; so that substantially upon these two points Mr. Fuller’s testimony was correct? A. It was. Q. Namely, that there was an increased margin of difference between the raw material and the manufactured product five years after the formation of the Trust to five years before the formation of the Trust of .157 of a cent per pound? A. It would amount to that, I should think. Q. Now, compare the five years prior to the formation of the trust, which was .853 of a cent per pound with the nine years subsequent to the formation of the trust; what was the differ- ence between the value of the raw material and the manufac- tured product during the nine years? A. It would be .128. Q. That is to say the cost, or rather the difference between the value of the raw material and the value or cost of the refined product exceeded in the nine years after the formation of the Trust the difference for the five years before the formation of the Trust by .128 of a cent per pound? A. Yes, comparing the nine years with the five years immediately preceding the Trust. No. 40.] 421 Q. During that period of time the raw material had decreased in price under the first comparison to what extent? A. I have not the figures as to the raw material; I think I have them in my pocket (witness examines paper); the raw material varied during the first nilie years from 7-£ cents to 5§ cents; and be- tween 1SS7 — Mr. Lexow (interrupting) : What was the average value of the raw material for five years preceding the formation of the Trust? A. I shall have to compute that. Q. Was the average 5.91S of a cent per pound? A. I have not computed; I should think likely it might be. Q. In your judgment would that be correct? A. I should think it were more than that during the first nine years. Q. Do your figures show for the five years from 1883 to 1887, inclusive, an average per pound of 5.918 of a cent? A. I assume that is correct. Q. And an average of cost for the finished product of 6.772 of a cent? A. If that makes the difference? Q. Leaving exactly .853 per cent, per pound? A. If it makes that difference it would be right. Q. Take the five years subsequent to the Trust, do you find that the average price of the raw material was 4.961 of a cent per pound? A. I should think it might be. Q. And the cost of the refined article, or the difference be- tween the raw material and the refined article — no, the cost of the refined article, 5.971 of a cent per pound? A. If that makes a difference of 1.096. Q. It makes a difference of 1.111? A. Yes, sir. Q. Then you admit those figures? A. Yes, sir. Q. Now, looking at those figures, has the consumer received even the benefit of the fall in the raw material during that period of time? A. Why certainly. Q. How do you figure that out? A. The consumer has had the entire benefit of the fall in the raw material, paying the slight difference in the cost of refining; the cost of refining, by your own figures, has followed down the price of the raw material, 422 [Senate, the only difference being that the margin between the raw and the refined was a trifle more during those years. Q. Is it not true that the average price of the raw material after the creation of the Trust dropped .957 of a cent per pound while the charge of the refiner increased an average of .157 of a cent per pound? A. Undoubtedly. Q. So that the consumers did not get the full benefit of the drop in the raw material to the extent of the difference between those two figures? A. They didn’t. Q. So, that notwithstanding your consolidation had for its ob- ject the introduction of economies in the manufacture of the ar- ticle by better machinery and the concentration of facilities, the consumer did not receive even the benefit of the drop in the raw material, but the price of refining increased to the extent of .157 of a cent; is that correct? A. The margin — Mr. Lexow (interrupting) Is that true; you can answer that question? A. I do not understand the question. Mr. Lexow: The stenographer will please repeat the question; (Question repeated). A. He did not receive the entire benefit upon that difference of margin making the comparison between the years you name. Q. With other words, the conclusion from these facts is this: that while the price of sugar to the consumer dropped in that period of time, it did not drop even to the extent of the drop in the raw material, but your price of refining, notwithstanding your increased facilities and economies, increased, so that to the extent of the increase of the price of the refined product he did not receive the benefit of the drop in the raw material? A. He did not receive the full difference in the cost of the raw material; your comparison being made on a totally unfair basis. Q. Didn’t you make that statement? We might as strongly argue that your comparison, or the comparisons of Willett & Gray are not made on a fair basis; do you mean to say that taking a period of five years prior to the organization of the Trust and five years subsequent to the organization, and nine years subsequent to the organization, is not a proper criterion to judge by, or do you want the consumers of this country to grow gray haired before they receiye the benefits of your organization ? A. I mean to say that the comparison that you haye made is to- tally unfair; the free years that you haye compared with the years prior to the organization of the Trust were years of disas- ter to this business; there is a difference between doing business at a loss and at a profit. Q. Let us assume that the two years haye been omitted? A. Four years. Q. Four years that haye been omitted ; in these four years there were two years in which the difference between the raw mate- rial and the refined product was in the neighborhood of one and one-half cents; is that true? A. It was not one and a half cents. Q. Not approximately; it was one and a quarter? A. Yes, sir. Q. That would leaye almost one cent profit upon the pound of sugar to the refiner? A. No, sir. Q. lias it not been stated that the cost of the refined product is about 50 cents or 56 cents? - A. You quoted that from Mr. Hc- Cahan's testimony, yesterday, I believe. . Q. That is true, is it not? That would leaye almost one cent per pound as clear profit to the refiner? A. If the refiner of that day made his sugar on that basis. Q. Your output is about 2,800,000,000 pounds, is it not? A. About that. Q. Wh ch would leave to your concern a profit of $28,000,000 annually? A. If we made a cent per pound. Q. Is that so? A. If your premises are correct, yes, sir. Q. Do you consider that these figures form a fair estimate for comparison with the succeeding years? A. I claim that if you are going to take an ayerage that you must take an average in the years in which there was a profit with the years in which there was a disastrous loss in order to make any comparison which is fair to the refiners. Q. I understand that you said that in the capitalization of the so-called Trust you took as a basis of estimate the earning ca- paciry of the companies? A. Yes, sir. 424 [Senate, Q. Do you mean to say that for five years previous to the crea- tion of that Trust there had been a loss and absolutely no earning capacity which you capitalized at the rate of seven times the original stock of the company? A. I mean to say that there had been very little profit, and to many concerns no profit during that period. Q. On what then did you base your seven-folding of the original stock that you mentioned when this elimination of any profits in the business occurred? A. First; there was no seven-folding; in the second place — Mr. Lexow, interrupting: Then, within a fraction? A. Only about six-folding; there were only 42,000,000 issued. Q. You capitalized 7,000,000? A. 6,590,000; in the second place, the earning capacity of the properties was not the money which they had lost working under the conditions which then ex- isted; the property was not estimated at its value based on those conditions by any means; it was based on the capacity of the re- finery to earn money under proper management and under proper conditions. Q. Then you didn’t base it on anything that had occurred in the past, but on something that was to be in process of formation for the future? A. Based on capacity to earn under given conditions. Q. So that notwithstanding that you now state that for five years previous .to the Sugar Trust there had been no profit in the concern, and that therefore it was an unfair basis for estimate; you say that you were justified in six and a half-folding the capi- tal stock of the company to the volume you have mentioned un- der the circumstances related? A. Undoubtedly. Q. You said yesterday, and since I see it in cold type I think it is proper that it should not pass unchallenged, that it should be the policy of the State to invite rather than discourage capi- tal, and that it was investigations like these and general inter- ference with corporations that unsettled business affairs and drove capital out of the State; do you consider, Mr. Searles, that the capitalization in the way you have mentioned of future earn- ing capacity based upon a state of facts such as has been devel- No. 40.] 425 oped here, whereby you create either a monopoly, or a quasi-mon- opoly. acting in conjunction with others, in placing the consumer absolutely at the mercy of aggregations of capital of this kind, is the kind of business that should fix itself permanently upon the body politic and that it should not be interfered with by legisla- tion? A. I can scarcely remember all of that statement; but in general terms — Mr. Lexow: The stenographer will repeat the question. (Quesion repeated.) A. In so far as that refers to the American Sugar Refining Company I see no objection to it. Q. Do you think that — and I am not asking you these questions as a matter of curiosity — but for the purpose of forming a basis for legislation; do you think that large aggregations of capital should be allowed to control the necessaries of life, whether oper- ating alone or operating in combination with others, whereby they substantially control a given commodity and remove compe- tition either by purchase of facilities or arrangements with com- peting companies? A. Well — I can’t remember all that — Mr. Lexow, interrupting: The stenographer will repeat the question. (Question repeated.) A. I don’t know. Q. I mean sugar? A. In reply to that question I do not deem it possible for any such combination to be made against the in- terest of the consumer; it is impossible to control any product in an aggregation of capital because competition alone will prevent the possibility of any abuses to the consumer, in view of the fact that large amounts of capital are always awaiting to go into any enterprise which promises a profit. Mr. Lexow: That is a fair answer; but when that awaiting capital goes into competition and the aggregate capital is strong enough, either to crush or by the issuance of certificates to buy up the awaiting capital as soon as it appears and then permanently establish its monopoly or quasi-monopoly, do you think the laws of this State ought to permit a system of that kind to be encour- 426 [Senate, aged? A. I do not think, in any event, that such purchase or such action can result to the damage of the consumer. Q. Does it not result to the damage of the consumer when it is shown that the agriculturalist and the producer of the raw ma- erial, not acting in combinations and not able to combine for the purpose of controlling the price, has the price of the raw material forced down upon him, and that the hold of such an aggregation upon the consumer is such that the consumer cannot even get the benefit of the reduction in the raw material? A. I must dispute your premises. Q. I am not applying this now to the American Sugar Refining Company; I am asking it as a general proposition; if this is the situation do you think the laws of the State or of the nation ought to permit it? A. I cannot imagine a case of the kind you refer to. Q. Well, imagine it; I imagine you have a fairly good imagina- tion; now, just try it; you have a thoroughly well developed im- agination. A. Will you please repeat the question? (Question repeated.) If such a condition existed as to raw material and such an aggregation existed as to produce that result, I should scarcely think that it would be in the interest of the State. Q. Then you admit that if there are any aggregations of capi- tal — the records of which demonstrate a situation of that kind — that no matter what effect it may have on the financial interests of the country, the State or the nation should intervene to stop it? A.“ I do not admit that; I think it is a matter which will cure itself by the competition of business more quickly than it can be cured by any other means. Q. And what in the meanwhile, the State, which represents the whole people, should close its eyes to the situation and per- mit that kind of evil if it can prevent it? A. I do not believe that any legislation which can be formulated will as effectively reach it as will the law of supply and demand and the law of le- gitimate trade. Q. Is that precisely what those who make these combinations are speculating on, that the Legislatures and the people will No. 40.] 427 stand passively by until after years and years the law of supply and demand shall dually regulate the situation? A. I know nothing about the expectations of speculators; I have no interest with them. Q. You have a general knowledge of the financial system of the world? A. I have a general idea. Q. Do you believe that the situation that I developed in that question exists? A. I don’t, Q. Then, why is it, in your judgment, that these large aggrega- tions designed to control prices are formed? A. They are formed for the more economical production of certain articles produced, which can be secured with greater economy by a combination of capital, giving it a buying power which no single company can have, and enabliug it by concentration of its business to make a profit, whereas, under ordinary conditions, there would be none. Q. And therefore, if that purpose is not secured and the econ- omy does not develop itself your design does not exist; that even that excuse for its existence is not present? A. If that does not result the companies fail and there are records of that kind all along the street, of organizations which have been formed and which have become wrecks because they failed to recognize the legitimate law which governs all businesses, and they have come to grief ; there are several of the kind in the city. Q. And others not recognizing their duty to the public have in- creased the price to the consumer as between the value of the raw material and the manufactured product, and therefore should either be controlled or should not exist? A. I know of no such instance; the only company which has come under my business observation particularly has been the American Sugar Refining Company, and that has rescued a great industry from disaster. Q. And incidentally made profits to an extent which have not even permitted the consumer to get the benefit of the fall in the raw material; that is a fact, is it not? A. The consumer has had the benefit of the fall in the raw material in every instance con- sistent with the small margin of profit to the people who have done the business. 428 [Senate, Q. A small margin on the fall? A. The profit has nothing to do with the cost of the raw material whatever. Q. You stated a few moments ago in answer to a question from me that the consumer did not receive the full benefit of the fall in the raw material, let alone anything else; is that not true? A. Not in the case of the Sugar Refining Company; you asked whether the margin — a Mr. Lexow (interrupting): Was that true? The stenographer will repeat the question, (Question repeated.) A. I stated in my answer that he had not received the full dif- ference between the price of the raw material — in the fall of the raw material., Q. Not taking into account any of the economies which con- centration, aggregation and consolidation have produced in the way of economical manufacture and distribution of the product? A. That is a question in economies., Q. Isn’t it true? A. No, sir; it is not true in that statement. Q. Where is the fallacy? A. The fallacy is in stating that the consumer has not received the benefit of these economies, in that the margin between the raw and the refined sugar could not be as low as it is to-day, but for these economies. Q. With other words, he would not have had the benefit of even as much the fall in the raw material if you had not made this consolidation? A. He would not. Q. You are willing to leave that statement there in that form? A. Undoubtedly. Q. Where the State or nation permits, or its laws permit, the creation of a monopoly or a quasi-monopoly, do you not consider that there is at least an underlying engagement to give labor on the one hand and the consumer on the other hand its aliquot share in the profits of such monopoly? A. If such a monopoly existed I should think there would be some such obligation. Q. And no monopoly would be justified excepting upon that general proposition that it would work advantageously to labor on the one hand and the consumer on the other? A. I think that would be the necessary result. No. 40.] 429 Q. You admit that the laws of the State should not favor or foster or permit a monopoly or a quasi-monopoly in any event un- less beneficial to the consumer on the one hand and to labor on the other? A. I do not know T what you mean by a monopoly or a quasi-monopoly. Q. I mean the American Sugar Refining Company? A. The American Sugar Refining Company is neither a monopoly nor a quasi-monopoly, as I understand the word. Q. Do you think that a system such as the American Sugar Refining Company has developed itself to be, on the examination here, should be permitted or fostered by the State in the absence of those two underlying considerations mentioned in my former question? A. I think that the American Sugar Refining Com- pany as organized and conducted is in the interest of the con- sumers of this country, and that there is no reason why the State should interfere with its business in any particular Q. That labor on the one hand and the consumer on the other now receives an aliquot share or proportion of the economies sup- posed to be the result of the monopoly or quasi-monopoly? A. In the case of the American Sugar Refining Company the laborer and the consumer do receive an aliquot share. Mr. Lexow: Please answer the question. The stenographer will repeat the question. (Question repeated.) A. I do not understand, Mr. Chairman, that the investigation here, which is referred to in that question, has developed the con- dition which you have named in that question; the American Sugar Refining Company — Mr. Lexowq interrupting: Assuming for the purpose of your answer, and without any direct reference to the American Sugar Refining Company, but as a general proposition, that the proposi- tion I made is true; that such a system should carry with it the consideration that labor on the one hand and the consumer on the other hand should receive an aliquot share in the benefit of economy? A. I cannot remember all that. Mr. Lexow: The stenographer will repeat the question. (Question repeated.) 430 [Senate. A. I can scarcely follow that question as a basis for an answer,, because I can scarcely conceive of the conditions existing from a business standpoint. Q. Then you are unable to answer that question? A. As put; yes. Q. Do you conceive that after the establishment of a system permitted by the State, indicated by the buying of competing factories and their consolidation into one, by factors’ agreements and arrangements, which, to the extent of the Wholesale Grocers’ Association of the nation, removes competition as between them, whereby you can, on substantially the same terms as your com- petitors sell their sugars to the consuming public under restraints mentioned, that if such a system is permitted, the consumer on the one hand and labor on the other should not be considered and receive an aliquot share in the profit? A. I think they do; they have received adequate recognition. Q. I am not asking you that; I ask you whether you admit it as a general proposition that they should? A. Undoubtedly. Q. The evidence will speak for itself as to whether they do. Q. I want to ask you another question in regard to those fig- ures; computed on the output of the American Sugar Refining Company of 1,200,000 tons, the increase of the difference between the price of the raw material and the manufactured product of .157 of one cent per pound — means what? Means how much added to the cost of the product? A. On that output the margin of .157 would be $4,396,000, approximately. Mr. Lexow: You see, I don’t discriminate against you; I had only $4,200,000? A. Probably my figures are wrong. Q. I will give you the benefit of the doubt; and computing over 1896, after the formation of the Trust as compared with the five years before, the raw material has dropped a fraction less than one cent per pound; the charge for the refined product has increased from .853 to .981, or .128 — how much, computed on your product of 1,200,000 tons would that make annually added to the price of the product? A. $3,584,000, I make it. Q. That is $184,000 less than I do? A. I will take your fig- ures, then. No. 40.] 431 Mr. Lexow: I only wanted to show that I do not discriminate against you. Mr. Searles: Your consideration is thoroughly appreciated. Q. Mr. Searles, have you since yesterday, given the matter of the production of those books any further consideration? A. No, sir. Q. I want to call, before concluding the testimony of this wit- ness, the attention of the witness and Mr. Parsons to the state- ment made by Mr. Shepard. “I think, Mr. Chairman, that we will be able to produce all that you wish on Friday, and will let you know exactly what will be produced.” Mr. Lexow: That was. in answer to a question as to the produc- tion of certain books required of Mr. Havemeyer; one of the books was the minute book referred to a moment ago; another with reference to the question of the number of workmen dis- charged by the closing down of the various refineries; another as to the amount of taxes paid in this State; another with refer- ence to the documents in the Knight suit, which Mr. Shepard agreed to produce. Will it be necessary in all of these matters — I mean those in addition to the books which you have refused to produce, to serve a formal subpoena duces tecum, or will we receive the informa- tion without such service? Mr. Parsons: Do you address that question to me? Mr. Lexow: Either; Mr. Shepard answered before. Mr. Parsons: With reference to any statement upon the sub- ject that may have been made by Mr. Shepard, I prefer to speak to him before assuming to make an answer. I have not seen Mr. Shepard since then to have any conversation with him upon the subject. I had supposed that the documents in the Knight suit were in evidence. I was present when Mr. H. O. Havemeyer was examined; and I understood that the chairman called his atten- tion to this document as printed in the Knight record and that they were put in evidence from that record. Mr. Lexow: The trouble is that copies were not made at the time and the book does not appear to be at hand now. 432 [Senate, Mr. Parsons: Is this all that you desire from the company? The directors of the company will meet to morrow and bring this matter up for consideration, and then the committee can be au- thoritatively answered upon the subject. Mr. Lexow 7 : Have you reason to believe that there will be a quorum of the directors present to-morrow? Mr. Parsons: I have no doubt but that there will be a quorum present. The American Sugar Refining Company has never shirked an investigation or examination of any kind, and has never refused, when necessary, to defend itself when brought into litigation. Mr. Warner: Mr. Shepard has no authority to produce books here, as he promised. Mr. Parsons: I have no information that Mr. Shepard made such a promise. Mr. Searles: His statement was that he would probably pro- duce what was wanted. Mr. Parsons: It is for that reason that I prefer that Mr. Shep- ard shall be conferred with before I assume that any assurance was given by him, as to ■which there may be some misapprehen- sion. Mr. Lexow: If we will let the matter stand until Thursday, we will receive an answer from Mr. Searles? Mr. Parsons: From w T hom? Mr. Lexow: From Mr. Searles. Mr. Searles: I will be here on Thursday if necessary. Mr. Lexow: I think, inasmuch as we would like to examine Mr. Searles, it w’ould be better for Mr. Searles to be here Thurs- day morning. Mr. Parsons: Mr. Searles made some suggestion with refer- ence to being here Thursday., Mr. Searles: It is almost impossible for me to be here Thurs- day. I have tried to be in attendance during the days that I have been requested to be here and to answer all questions put. Bur. I must be absent Thursday if it is possible, although I do not w 7 ant to show any lack of courtesy to the committee. No. 40.] 433 Mr. Parsons: What time Wednesday do you hold your meet- ing? Mr. Lexow: Wednesday at one o’clock. Then if we should remain in session until four o’clock we could get your answer. Mr. Searles: I was going out of town, but Mr. Havemeyer will appear and answer for these documents in reference to any mat- ter that your committee may desire.. Mr. Parsons: Mr. H. O. Havemeyer is the President of the Company and he will answer quite as well; he will be here Thurs- day. Mr. Mazet: Mr. Havemeyer has stated that they would be pro- duced. t Mr. Parsons: Mr. Theodore disclaimed knowledge of it. Mr. Mazet: Both of them?; Mr. Parsons: Does not the committee think that it has had enough of Mr. Searles? Mr. Mazet: I don’t know what the committee thinks. Mr. Parsons: So far as this subject is concerned Mr. H. O. Havemeyer will be able to give every information which can be given by anybody. It will be almost impossible to have the mat- ter considered and have the documents or other data here by four o’clock. Mr. Lexow: Mr. Searles, so that there may be no misunder- standing as to what we want, have you a copy of the testimony? Mr. Searles : I have not. Mr. Shepard has. Mr. Lexow: Down to to-day’s examination? Mr. Searles: I do not know; probably it does not include the examination of yesterday. He has it so far as the stenographer has delivered it. Mr. Lexow: We would like to have you produce the various documents and papers, the production of which was asked for in the testimony of the two Mr. Havemeyers and Mr. Searles. Mr. Searles: Can you state exactly what it is that you want? Let me take a fresh memorandum. Mr. Lexow : Inasmuch as you have the testimony you can go through it. 28 434 [Senate, Mr. Parsons: It cannot be gone through with between now and one o’clock to-morrow. I will ask the stenographer to give me a statement. A memorandum can be sent to me calling my attention to the testimony that can be considered to-morrow. Mr. Bedell:' I believe Mr. Shepard took a memorandum, or some one took one at the time of the examination of both of the Mr. Havemeyers and of Mr. Searles; they have a memorandum of just what we desire. Mr. Parsons: If he has such memorandum it will answer the purpose. Mr. McCarren: Mr. Searles, there is a hypothetical question that I desire you to answer. Suppose that these fifteen refineries that were originally consolidated had never been consolidated what, in your opinion, would be the price of raw sugar? Mr. Searles: The price to-day would be more or less the same; but during the last nine years there have been many times when the price of raw sugar and the price of refined sugar would have been a cent a pound higher than it was if there had been fifteen refineries working under competitive conditions. Q. The result would have been a rise in the price of sugar? A. I believe that the average during the nine years would have been at a cost to the consumer of one cent per pound greater than it has been. Q. Suppose the fifteen refineries had never been consolidated would the wages of the employes have been higher or any lower? A. They certainly would not have been higher ; and under compe- tition they doubtless would have been lower rather than higher. Q. Would there have been so many men employed if there had been no consolidation? A. There may have been as many; there would have been no more.. By Mr. Lexow : Q. Doesn’t the closing of factories as the result of a combina- tion mean the reduction of the output in capacity, and is not that represented by just so many items of labor? A. There is no re- duction of the output by the closing of these, refineries; the out- No. 40.] 435 put is controlled absolutely by the consumption ; we make all the sugar that can be sold. Q. You have stated in your examination that one of the ob-- jects of consolidation was to control the demand so that the pro- d action should not exceed the demand; do you mean to say that the same labor will be employed under a system that controls production so that it shall not exceed the demand that would be employed under conditions of free and open competition? A. I mean to say that the output being the same there is a more uni- form employment of labor, and that there is no dimunition in the actual labor. Q. Will you swear, Mr. Searles, that for the same amount of output you employ the same amount of labor under conditions of combination that you did for an equivalent output prior to the combination? A. I have no knowledge of the amount that was employed prior to the combination ; but my judgment is that there are as many men employed under present conditions as there were prior to the combination. Q. Yes. and hundreds of thousands of tons more manufactured I because the consumption has increased? A. Independent of that. Q. Do you mean to say that for the same output you employ to- day the same amount of labor that you did prior to consolidation? A. I cannot swear positively as to the amount employed before consolidation; but my judgment is that there is as much labor employed now as then. Q. Per ton of output? A. Per ton of output. Q. Is that simply a guess or do you speak from knowledge? A. I have knowledge as to the comparison as before stated. Q. We will ask you, Mr. Searles, or Mr. Havemeyer, in case he proposes to produce those figures, to produce a statement show- ing the amount of labor per ton of product now employed as com- pared with the labor per ton prior to the combination? A. You want the amount per ton? Mr. Parsons : I will request Mr. Havemeyer to produce figures for that comparison; but I do not pledge myself that Mr. Have- meyer will be able to testify to the figures relating to an earlier period. 436 [Senate, Mr. Lexow: The chances are that those have been destroyed. Mr. Parsons: It pleases the Chairman to say so. Mr. Lexow: I understand, Mr. Searles, that all the books in connection with the business prior to the Trust were destroyed; now I ask whether— Mr. Warner: Or missing. Mr. Searles: I did not testify that prior to the Trust — it was the books of the Trust prior to the organization of the American Sugar Refining Company which you were questioning me about. Q. Then you have got the books that ante-date the Trust; but those books that came between the Trust and the organization of the New Jersey Company have disappeared? A. The books prior to the Trust were the property of the different corporations, the old corporations, and were retained by them and never came into the possession of the American Sugar Refining Company, and we have no knowledge of those whatever. Q. Then you will be unable to furnish these figures? A. I can- not; perhaps Mr. Havemeyer can. By Mr. Mazet: Q. What percentage of the cost of refined sugar is represented by labor? A. That I couldn’t tell. Q. Can you ascertain that? A. I cannot give those figures; they are in the possession of the manufacturing department of the business. Q. Have you any general knowledge about it? A. Not definite enough to make any statement. Q. Is it not 90 per cent.? A. The labor. Q. The cost of producing the refined from the raw sugar; is not about 90 per cent, made up of labor? A. I should scarcely think so much as that; still when you contrast the labor in all the de- partments, the barrels and all those things, it would make a large percentage. Q. You think it is not so much as 90 per cent.? A. Hardly. Q. 75 per cent.? A. I could not give you definite figures; I would not want to hazard an answer — a guess. No. 40.] 437 By Mr. Lexow: Q. You have given it as your statement here that the effect of the combination has been to decrease the price of the raw mate- rial ; that if it had not been for this combination that the price of the raw material would have been one cent per pound more, in your judgment? A. In some instances; at certain times. Q. Then do you now insist that your combination, to that ex- tent, influenced the price of the raw material and the product of the producer of raw sugars? A. To some extent. Q. To that extent? A. Mr, Chairman, if you will — Mr. Lexow (Interrupting) To that extent, one cent per pound? A. Oh, no; I didn't say that; I stated that there had been times during the last few years when I thought there would have been a difference on a cent a pound; I can make that clear if you will give me an opportunity. Mr. Lexow: Certainly. A. I stated yesterday, Mr. Chairman, that the prices of raw sugar are controlled by the London mar- ket — the London speculative market; and the fact is that during the last three years the London market has been in a position where they supposed the necessities of the American Sugar Re- fining Company were such that they could control our price; and the price of the raw sugar has been advanced in the London mar- ket as much as four shillings a hundred weight in anticipation of forcing this company to come into the market; you read the sugar journals of the London market and you will find that there are no obstacles to their advancing the price of the raw product; that market speculates in sugar all over the world; they speculate against our country's need for the commodity; it is a great speculative market; they make paper sales and yet they control the markets of the world; and in order to compete with that market it means that we must have immense capital; by reason of cur immense purchasing power, we have been able to accumulate sugars and hold the price down, and the result has been a break in the London market, when they discovered that they hadn't us in their power; it is in that way that the Ameri- can Sugar Refining Company has lessened the cost of raw sugar; 438 [Senate, efforts have been made, and they are made periodically; there is not a year passes that there is not an effort in the London mar- ket to take advantage of the necessities of the American Sugar Refining Company; and it is this aggregation of capital and the power it has to come into the markets of the world and purchase sugar in large quantities which enables us to hold it down; the policy of the company has been, and is, to hold it down to the lowest possible price to the consumer in order to increase the consumption of sugar; its profit being in the manufacture of the greatest number of tons at a fractional profit. Q. Inasmuch as that profit, according to your own statement, has increased in nine years subsequent to the Trust over what it was before, where does the profit to the consumer come in; that is the conundrum I want answered? A. The profit is in this: That prior to the Trust the business was conducted at a loss; that since then it has been conducted at a profit; and that profit has been a reasonable one and has been used to facilitate the purchase of sugar, and to reduce the cost to the American consumer. By Mr. McCarren : Q. What was the price of sugar prior to 1891? A. I have the price here; the average price in 1879 was 8.78 for granulated; Mr. Searles read the following figures: Cents. 1870 1880 1881 1882 1883 1884 1887 1S88 1889 1890 8.88 9.66 9.71 9.28 8.55 6.81 6.40 7.15 7.80 6.79 No. 40.] 439 Q. What is it in the present year? A. About four cents per pound; on that we pay a cent duty. By Mr. ^Warner: Q. You do not claim that the American Sugar Refining Com- pany is an eleemosynary institution? A. I have distinctly stated that we are not running a philanthropic institution; but we find that our interests and our profits lie in the production of sugar at the lowest possible cost to the consumer. By Mr. Lexow: Q. Where do the economics of this large centralization come in? A. In the production of the refined material; in various ways; in the first place, in large outlays for machinery, for im- proved machinery; but perhaps the greatest of all benefits in the centralization is the concentration of technical knowledge and ability of the people connected with the business; at the time the original Sugar Trust was organized each one of the refineries had some method or plans which they kept secret, and which were supposed to be of value, and which had value; when the Trust was organized, these gentlemen were brought together and this technical knowledge and skill was concentrated and utilized for the common good. Q. Where does the economy come in, the economy resulting from the combination? Economy I am speaking about, not tal- ent. What percentage of economy is there in the production of the raw material as contrasted with 1887? A. 1 could not give the percentage upon that subject. Q. Is it possible that with all this genius and talent and tech- nical knowledge you cannot give us figures of increased economy over the time of non-combination as compared with now? A. No figures which would give intelligently what that economy has been ; we are working at it constantly. Q. Have you no figures going to show how much it cost to re- fine per pound of sugar in 1887 and how much to-day, in order to 440 [Senate, determine whether the spirit of your combination as to economy in manufacture has been secured? A. The price of refining prior to the combination was known only to the individual refiners in each case; that they always kept to themselves. Q. But you were a refiner? A. Yes, sir. Q. Has it never struck you, or have you not been curious enough to find out, whether, after all these years of concentration for the purpose of economy, you have actually secured economy as between the production of the refined article by your company in 1887 and by the American Sugar Refining Company in 1S96? A. That there have been such economies I am very sure; when you ask, what those economies have been I am not prepared to answe^ Q. Have you a statistician in your company who can give an answer to that question? A. No, sir. Q. Do you know of any other large concern dealing in a manu- factured product of this kind that doesn't keep an accurate ac- count of the cost per pound of manufacture? A. I think that is customary in all large manufacturing industries. Q. Have you such a computation? A. We have a computation which shows our cost; but no computation. Q. Have you any computation made by the refinery of which you were manager? A. I was an officer of a company, but not manager; I was treasurer, Q. Have you a calculation of what it cost to produce the re- fined article by that company? A. I have no such calculation now. Q. Nothing of the kind preserved in the archives of the Ameri- can Sugar Refining Company, or of the New Jersey Trust? A. They have nothing whatever to do with the archives of the old company; they had nothing to do prior to the consolidation. Q. Did the Trust not keep such calculation? A. No, sir. Q. If that is true and you have not preserved any such figures how have you been able to answer to this committee that you now employ just as much labor per ton of product as you did before the combination? A. I have stated that to be my impression, without stating that I had definite knowledge on that point. No. 40.] 441 Q. Was it a mere guess? A. It is my judgment, if you call that a guess. Q. Was not one of the underlying principles of your combina- tion to economize in labor? A. Economies in cost; not neces- sarily in labor. Q. Is not the principal cost of the product the element of labor? A. That depends upon the product. Q. Is it not in the case of sugar? A. It is a large factor. Q. Now, the purpose of concentration was for the purpose of economizing in all directions, including labor, was it not? A. Not necessarily in labor., Q. What did you mean when in one of the articles of incorpora- tion of the Sugar Trust you said that one of the purposes of the organization of the Trust was to prevent illegal combinations of labor? A. The original Trust? Q. Yes. A. Prior to the organization of the Trust the various corporations had been subjected to strikes, which were organized by combinations of labor., , Q Those strikes were for increased wages, were they? A. I think they were. Q. Now, that being one of the purposes of the organization of the Sugar Trust, to prevent what you call illegal combinations of labor or strikes; is it possible that you have not after that com- bination made any statistics showing how the question of labor has been affected by 4116 combination or the economies secured in that direction? A. I have no statistics of comparison as to the cost of labor between the old regime and the Trust. Q. Has anybody? A. Not that I know of. Q. Would you know if there was anybody? A. No; not neces- sarily. Q. Have you statistics showing the price of the manufactured product the first year of the combination? A. No, sir. Q. Any year of the Trust? A. No, sir. Q. The first year of the organization of the New Jersey Com- pany? A. I think there are statistics existing concerning it. Q. Statistics showing the price of the product and the amount 442 [Senate, of labor employed? A. I think in the manufacturing department they have those details. Q. Would you secure for the committee such details as you may have on the question of the price of the refined article in 1891 as compared with the year 1896? Also the amount of labor employed and the wages paid during the year that you had no combination compared with 1896? A. I will refer these figures to Mr. Havemeyer who has charge of these statistics. By Mr. Warner: Q. Mr. Searles, can you not give them to us by Thursday morn- ing? Has there been any increase iu the wages of laborers by your company since 1887? A. After the organization of the Trust there was an increase in the price of labor. Q. How much? A. My recollection is that it was about 10 per cent. Q. When was that? A. I think it was the first year after the organization of the Trust, ( Q. Has there been any increase since then? A. No general in- crease; there have been increases in the different departments from time to time, I think. By Mr. Mazet: Q. Any reduction at any time? A. None whatever. Q. How are your men paid; by the day? A. Yes; by the day. By Mr. Warner: Q. Did I understand you to say that there are now firms on the street who, not recognizing the laws of trade, will be pushed or forced out of business? A. I stated that there were trusts which had been organized and which had failed to recognize the true basis of the organization and that they had come to grief; that there were such in New York. Q. There is no firm in New York now dealing in sugar that is liable to come to grief? A. Not unless they have been speculat- ing in raw sugar. No. 40.] 443 Q. You have none in mind? A. No, sir. Mr. Parsons: With reference to the time when you desire those statistics; it is manifestly impossible to have them here Thurs- day. Fuller, Lawson N., recalled. Examined by Mr. Lexow: Q. You have been sworn? A. Yes, sir. Q. Your competency as an expert in the sugar business seems to have been questioned; will you please state to this committee what your connection with the sugar business has been, your knowledge of the business, your general experience in the sugar business as a competitor with other concerns; your general knowl- edge of what led up to the creation of the Sugar Trust? A. Has my knowledge of the business been called in question by the com- mittee? Mr. Lexow: No, sir. Q. In making your statement limit yourself to the general question of competition prior to the organization of the Trust, showing the character of the competition and the nature of the business? A. Between 1860 and 1865 there were 48 sugar re- fineries refining sugar and competition was fierce, as I said the other day; and in my opinion a great many more men were em- ployed in the running of 48 sugar houses than the Trust employed in the running of two; it strikes me that that don’t want much showing; I think that 28 sugar refining houses going out of busi- ness reduced the labor list from 10,000 to 15,000 men unquestion- ably; and if that Sugar Trust was not formed to reduce expenses, then I don’t know for what it was formed; labor was a large fac- tor in that business. Q. Have you any definite personal knowledge of the number of men employed when the 48 factories were in operation as con- trasted with the number afterwards employed by the Trust and after the closing of the factories closed by the creation of the Trust? A. I have no knowledge of the number of men that the 444 [Senate, Sugar Trust now employs; but I take it for granted that they must employ a great many less men or they could not have re- duced the expense of refining sugar; that will go without saying; I do know pretty nearly how many men were thrown out of em- ployment when the 28 houses went out of business. Q. The impression has been sought to be given that the remain- ing factories increased their facilities or output, and therefore employed more labor, and in that way made up for the labor dis- charged by the closing of the factories? A. They may have em- ployed a small percentage more labor, but they have better facili- ties and machinery; they have discovered that they can produce sugar a great deal cheaper with less men, there is no question about that; so how could they employ the same number of men and make more money than the 48 houses? Q. Do you know how many men were employed by the 48 houses? A. Not nearly so well as I know about the 28 that went out; they employed — I forget the exact number — between 10,000 and 14,000, as nearly as I can get at it. Q. Who were discharged at the time of the cessation of busi- ness? A. Yes, sir. Q. How much was the product of all the factories together at that time as compared with now? A. I don’t remember the fig- ures; that was some 30 years ago; of course there has been a large increase in the product. By Mr. McCarren: Q. Do you say that you have no knowledge of the number of men that were employed by those 48 refineries in the year 1869; do I understand you to say that you have no knowledge of the number of men that were employed? A. I should judge there were 25,000 or 30,000 men. Q. Do you know whether they were employed continuously ah the year around or whether there were periods of idleness? A. Usually in the winter season we reduce the number of men. Q. What would be the average number of men employed tak- ing into consideration that fact? A. There were times in the No. 40.] 445 winter season when the factories were idle and w T e usually took that time to take an account of stock and clean up the factory. Q. In what way do you arrive at your knowledge of the num- ber of men employed before that? A. In the 28 houses? Q. Yes, sir. A. Well, by counting up the number of men that different houses employed. Q. Where were you a refiner? A. The corner of Washington and Canal streets., Q. Where were the other 27 or 47 situated? (Witness reads list of sugar houses.) Mr. McCarren (interrupting) : That is sufficient. Q. Within a radius of this city? A. Yes, sir. Q. You took the trouble to ascertain the number of men that were employed in all of them? A. It was the general knowledge of all sugar refiners to know about how many men were employed in the other houses, etc., in order to know how to compete with them successfully. Q. I understood you to say that you could not state exactly the output at that time of all those refineries? A. No, sir; I don’t remember. Q. You don’t know what the average capacity per refinery was at that time? A.' What refinery? Q. The average capacity of each refinery? A. I do not recall now; I did know at the time within a few barrels. Q. Do you know the average capacity of the refineries now that are owned by the American Sugar Refining Company? A. No, sir; that is an unknown quantity. Q. Then you know nothing at all about those figures? A. No, sir. Q. Do you know anything about the number of men employed by that company? A. No, sir. Q. It is simply a conclusion on your part as to the fact that there are a less number of men employed now than at that time? A. My dear sir, two refineries could not employ as many men as 48 refineries or 20 refineries; and the fact of their forming into a Trust was to decrease the labor that they employed. 446 [Senate, Q. If men were thrown out of work was it not simply because they did more work by machinery and that they employed less help in consequence? A. They can employ less help in large houses. Q. How do you know they do more work by machinery? A. They say so; and I believe it. Q. Do you believe every thing you hear? A. No, sir. Q. How is it that you believe that part and discredit other? A. Because I have some knowledge of the methods employed 30 years ago and now. Q. Suppose that one refinery covered ten blocks, would it not follow as a mathematical proposition that there should«*be more employed than in two refineries that occupied but one block? A. Undoubtedly there would be a few more men employed. Q. Wouldn’t there be a greater number employed? Suppose one refinery occupied a half a dozen blocks and was ten or twelve stories high and a number of men employed on each floor, would it not follow as a matter of course that the number of men em- ployed in that refinery would be greater than the number of men employed in two refineries of two or three stories high? A. The machinery for carrying coal black over 17 lots is smaller than it would be to carry it over three; there are no more men employed to do that. Q. Have you any idea of the number of men that are employed in any of the leading sugar refineries in unloading sugar from foreign countries as contrasted with the number that were em- ployed in your time? A. I have not; that wouldn’t amount to many more men. Q. You have no knowledge on the subject? A. On the subject of unloading ships? Q. On the number of men employed? A. Yes, sir. Q. I understood you to say that you had no knowledge? A. I have no knowledge of the entire number of men they employ; I have knowledge that they employ probably ten per cent.; it may be 20 per cent, more now than before they enlarged the factories and swallowed up the other factories; from 1860 to 1865 and to No. 40.] 447 1S75, it was stated by Mr. Searles that the combination, the Sugar Trust, was not for the purpose of driving weak refiners out of business, as he worded it; the weak refiners did go out of busi- ness; there is no question about that; and the weak refiners, such men as R. L. Stuart, the New York Sugar Refining Company and twelve or fifteen others; they were the strongest men and the men of largest experience in the business at that time. Q. Explain how they were driven out? A. That is a ticklish business; but if you want me to explain I will; he stated it was to get the weak men out; I think it was to get the honest men out. Q. How were the honest men separated from the dishonest men? A. Simply because it cost them half a cent per pound more than it did the men who had their factories on the water’s edge. Q. Was there any such thing as determining their honesty by the price of the raw material? Was their honesty determined by the price they paid for sugar? A. It was the price they paid upon the duty of sugar; and in January, 1879, I had to stand a suit, where the able and amiable gentleman, Mr. Parsons, acted as counsel, for declaring that some sugar refiners got through their sugars cheaper than others; I had made that charge two or three months previously; there was a committee sent here from Washington to examine into the frauds in the Custom House; Fernando Wood was appointed by the committee; he came here and held a long session; and most of the sugar refiners were in- vited here by Mr. Wood; among others there were members of this Trust. Q. Was the Trust in existence at that time? A. No, sir; we called them a “ring” then; the evidence was taken down and pub- lished in pamphlet form; I read the evidence and then called a public meeting at which Cyrus W. Field presided; I made a statement in regard to the frauds at the Custom House; I read from the testimony of one who is now a prominent man in the Sugar Trust; his brother occupied a seat in front of me at the time; and while I assured him he gave that testimony, he said it was a lie; I told him that I thought his brother would swear to it. Q. I understand you to say that he charged his brother with 448 [Senate, being a liar? A. The testimony that I was reading was his brother's testimony, and he didn't know it; I was prosecuted for $100,000 damages, which suit was tried in 1881 and dismissed; I proved upon that occasion that certain refiners got their sugars through the Custom House at a half a cent per pound lower than some 15 or 20 other refiners; and they said that I could not prove it; I bought two cargoes of sugar in bond; I paid the duty of a cent and three-quarters, if I remember correctly; then I told our sampler to go to the Custom House and sample the sugars; to get a Custom House sampler to go over and sample the sugars; that is, he would sample them for the ring; he did I suppose; I got his sample and instead of being sampled out of the foots, heads and sides it was taken out of the foot entirely; and I got a notice from Colonel Burt in the Custom House that I had overpaid duty to the amount of $2,200; the money is there in gold; I took my samples which were correct down to Colonel Burt and told him those were correct samples; there was nothing said about it, but the $2,200 is there to our credit. Q. Was that investigation by a Congressional committee? A. It was by Fernando Wood. Q. What was the report of the committee? A. It was not much of a report; I suppose you gentlemen know of Fernando Wood. Mr. McCarren: I was quite a young politician at that time. Q. Did the report of the committee sustain the charge? A. They didn't give it — it was impossible to get at them — only those not opposed to the ring. Q. Did they sustain the charge? A. No, sir. Q. Then it was not sustained? A. No, sir; that didn’t change the fact, though. Q. It did in the estimation of the committee? A. Of Fernando Wood. Q. Then the charge was not sustained? A. Not by Fernando Wood; I want to say right here that these gentlemen in the sugar business are neighbors of mine; they are bright men; you can see that. No. 40.] 449 Q. Your eulogy on tlie Sugar Trust only. Mr. Lexow: Allow me to suggest that we confine this investi- gation to live issues; this tariff question is a matter for Congress; we will stick to the sugar refining business. Mr. McCarren: You are in favor of Federal legislation? A. I am in favor of electing men to Congress who will legislate in the interest of the people; I think sugar is taxed enough now; it might be cheaper; there is no question about that; there should be proper legislation in regard to this matter; and from what I have seen and known and read in regard to legislation is to in- vite this state of things; and that is not the worst feature; it is creating distrust, and unless stopped, I am afraid that if this thing continues it will bring about a revolution in the end; it will be viewed from a higher plane than now. Mr. Lexow: Those are pretty severe terms to use. Mr. Parsons: Before Mr. Fuller leaves the stand may I ask the committee to ask about the number of laborers employed in his refinery when it was running, and the output of that refinery and the difference between the raw and the refined at that time; those are matters about which Mr. Fuller ought to know; and I assume he does know; I would like to have him com- municate the facts. > Mr. Lexow: How many men did you employ in your factory compared with the output per ton of sugar produced? A. I told you how many; it was about 300 barrels; about 250 men per day. Q. The average number that you employed? A. Yes, sir. Q. With an average output of about 300 barrels per day? A. Yes, sir. Q. How about the other question; I ask you now with refer- ence to the first year and the last year's production; how large then, and what was the difference between the value of the raw material and the price of the refined product, as produced by you? A. During the war we had three cents per pound margin; after the war it went to less than a cent per pound. Q. What year was that? A. I think it was in 1871 and 1872. Q. Do you mean to say that in 1871 and 1872 a small inde- 29 450 [Senate, pendent concern, producing 300 barrels per day of sugar could produce tliat sfigar and did produce it within the margin of one cent per pound between the raw and the manufactured product? A. No; we could not produce at one cent per pound; it cost about a cent and a half per pound; the gentlemen in the Brooklyn Sugar Refining Company claimed that tliej 7 refined on a margin of five-eighths; he said they got their material cheaper; and it ■was only a question of time when -we should have to go out of business. Q. You claimed that they had an advantage of one-half a cent per pound? A. Yes, sir. Q. Where did you get your figures from, according to which you make a statement that they can produce the manufactured article at a cost of five-eighths of a cent per pound? A. That was so stated by them. Q. Who ? A. I don't remember all of them ; they claimed that we w r ere making the cost of manufacture cheaper. Q. Where did you get your figures of five-eighths of a cent per pound? A. Prom the statements of those w T ho said they could turn them out. Q. Can you particularize any person who made that statement? A. I could. Q. Mr. Havemeyer? A. One of the Havemeyers. Q. Which one? A. Not the one that is living now; Mr. Elder of the firm said so repeatedly. Q. To you? A. Yes, sir; I believed they could do it. Q. Did Mr. Searles ever make such a statement? A. He was not in the business then. Q. What year was that? A. 1865. Q. Was it later? A. Sometime between ’65 and ’70; I couldn’t tell you; I think all through that period. Q. Was that true of the situation in 1875? A. We were not in business in 1875. Q. In 1873? A. Yes, sir. Q. Do you mean to say that the concerns then competing against you could produce the manufactured article at a differ- No. 40.] 451 ence between the raw material and the manufactured product of five-eighths of one cent per pound? A. Yes; that is what they claim now. Q. What did they claim? A. They claimed that then. Q. Large economies have been introduced since then? A. Yes, sir. Q. In the direction of machinery? A. Yes, sir. Q. And processes? A. Yes, sir. Q. Not to speak of the benefits of concentration and consolida- tion? A. Yes, sir. Q. That is true? A. Yes, sir. Mr. Lexow: We will now take an adjournment. SEVENTH PUBLIC HEARING. COMMON COUNCIL CHAM- BER, NEW YORK, FEBRUARY 16, 1897, 10:30 A. M. Flint, Charles R., having been duly sworn, testified as follows: Examined by tylr. Lexow: Q. What is your full name? A. Charles R. Flint. Q. What official position do you carry in the United States Rubber Company so-called? A. I am the treasurer and a mem- ber of the Board of~ Directors. Q. Were you one of the original organizers of the Company? A. I took part in bringing about the organization. Q. Were you one of the incorporators? A. No, sir. Q. One of the first directors under the certificate of organiza- tion? A. No. Q. Have you a copy of the certificate of organization of the United States Rubber Company? A. I haven’t a copy with me; I will send you a copy if you wish. Q. Will you produce one after the adjournment? A. I will send you one. 452 [Senate, Q. Where was your company organized? A. Under the laws of the State of New Jersey. Q. When? A. In 1892. Q. About this season of the year; what time of the year? A. About the middle of the year. Q. With a capital of what? A. With an authorized capital of $50,000,000; but the original issue, I don’t remember that. Q. Do you remember the issue first made, not that made in your certificate; but the issue made afterwards, or immediately afterwards, upon the acquisition of the property? A. I don’t re- member the exact amount; the first property that we purchased was a plant in New Brunswick, N. J. Q. The New Brunswick Rubber Company? A. No, sir; the New Jersey Rubber Shoe Company; that was the first property that we purchased; and the value of that property was submitted to appraisal; one of the appraisers was named by the United States Rubber Company, another was named by the New Jersey Rubber Shoe Company, and these two named the third; and upon their report the amount of the capital stock was issued; I think the amount was about $2,000,000; shall I go on and give the steps taken ? Mr. Lexow: Yes, sir. A. At a later period, say in the fall of 1892— Mr. Lexow, interrupting: You say that the first was about $2,000,000? A. About that; I don’t remember the exact amount it was issued to the stockholders of the New Jersey Rubber Shoe Company of New Brunswick; in the fall, after the acquisition of the New Brunswick, or New Jersey plant, we opened our office and became a New Jersey corporation in fact, being a company not having any properties in New York; then appraisers were secured, who examined the different rubber companies which we thought of purchasing and finally a committee was appointed, the directors of the company selecting a man of well known con- servatism, the present president of the New York Clearing House being chairman of the committee, and that committee examined the reports of the experts and appraisers and obtained informa- No. 40.] 453 tion as to the business, as to the value of the trade mark, pat- ents, etc., and made a report to the Board of Directors recom- mending the purchase of certain properties for about $22,000,000. Q. What were those properties; those in addition to the $2,000,- 000 originally authorized? A. I am not able to remember all the properties. Q. The New Brunswick Bubber Company? A. It was in- cluded. Q. The National India Bubber Company? A. The purchase of the stock of the New Brunswick Bubber Company was one of the reasons why we organized under the New Jersey law; we were advised at that time that there was some question as to whether a company could hold stock in another corporation under the laws of the State of New York; since then, I understand that legislation has been passed that will permit a New York corpo- ration to hold the stock of a corporation organized under the laws of another State; under the New Jersey law there was a specific right to hold stock in another corporation; and under that law the United States Bubber Company acquired stock in other corporations; stock in the New Brunswick Bubber Com- pany; the Myer Bubber Company; the Lycoming Bubber Com- pany of Pennsylvania; the New Brunswick Bubber Company of New Brunswick, N. J.; the Myer Bubber Company of Milltown, N. J. Q. Is that near New Brunswick? A. Within a few miles; also, El Cande of New Haven, Conn.; the Goodyear Metallic Bub- ber Shoe Company, of Nantucket, Conn.; the National Bubber Company, of Bristol, Bhode Island; the Boston Bubber Company, which had a factory at Franklin, and another factory in Chelsea, Mass.; the American Bubber Company of Cambridgeport. Q. That is near Boston? A. Yes, sir. Q. Those were the original? A. And a mortgage was pur- chased on the Colchester Bubber Company and a majority of the Bubber Manufacturers Selling Company. 454 [Senate, By Mr. Mazet: Q. Where is that located? A. That is located at Colchester, Conn.; that is my impression. By Mr. Lexow: Q. The Colchester Rubber Company and the Rubber Manu- facturers Selliug Company go hand in hand? A. The Rubber Manufacturers Selling Company handles the product of the Col- chester Rubber Company. Q. Were these companies, this mortgage and stock that you have referred to, all part and parcel of the first general stock is- sue? A. Of the stock issued? Q. I mean the first, that $22,000,000? A. Yes, sir. Q. And all included within the $22,000,000 of a stock that you have testified to? A. All included in about that figure. Q. When was this transaction made? A. This transaction was made in September, 1892; and in further explanation, Mr. Chairman, this purchase did not include all the stock of these corporations; the company purchased the stock of the minority stockholders at a later period. Q. What part of the output or product of these concerns was sold or bought; what part of the output or product did these con- cerns control? A. I should think about 50 per cent. Q. Of the total product of the United States? A. Yes, sir. Q. The concerns that you had acquired by September, 1892, controlled a total of one-half the entire product? A. About that. Q. You then continued your purchases, didn’t you? A. We took in some shares after that; minority shares. By Mr. Warner: Q. Of these same companies? A. Of these same concerns; the idea being, so far as it was possible, to treat the majority stock- holders, practically all the stockholders in these corporations, ex- actly alike. No. 40.] 455 By Mr. Lexow : Q. How long after did you acquire this additional stock? A. It was acquired from month to month; I don’t remember the ex- act period. Q. Do you mean picking it up? A. In individual lots as par- ties desired to dispose of it. Q. What was the basis of computation upon which this first issue of |2,000,000 and the subsequent issue of $22,000,000 was made? How did you reach those figures? A. That matter was reached by appraisers and by a committee appointed for that pur- pose; in making their report, as I understood it, they took into consideration the value of the plants and the productive capaci- ties; there were experts in real estate, experts in machinery, in rubber machinery, experts in motive power, experts in the rubber business, called in and they made full and complete reports as to the condition of all these different properties. Q. Had the rubber manufacturing business been remunerative just prior to the making otf this consolidation? A. In some cases it was remunerative and in other cases it was not. Q. These various concerns that were taken into this combina- tion were prior to their consolidation independent competing con- cerns, were they not? A. Yes, sir. Q. So that by this combination the competition of ten or eleven concerns then freely competing in the open market were re- moved? A. Yes; but there were concerns manufacturing 50 per cent, of the product that were not in the combination. Q. I understand tHat ; but these concerns that were taken into the combination were freely competing as between themselves at the time of the combinat j.on ? A. They were. Q. And immediately after the consolidation, so far as competi- tion was concerned, it was limited to the 50 per cent, not consoli- dated into this one company? A. Well, perhaps competition may have been eliminated to some extent as between those con- cerned; but on the other hand, in some respects it continued; they had separate salesmen for each concern and there was a natural competition between the salesmen. 456 [Senate, Q. Didn’t the central organization fix the price at which the product should be sold to the consumer? A. No more in a gen- eral way than it had been fixed heretofore; since I have been con- nected with the rubber shoe business there has always been some understanding, or rather there has been the same uniformity in regard to the price of manufactured goods; that has existed, I am informed, for twenty years back, as it exists in a great many lines of manufactured goods. Q. If there was an understanding which substantially fixed the price between the independent companies prior to the consolida- tion what was the purpose and object of consolidation? A. The object of consolidation was to centralize, manufacture and to se- cure economies by means of such centralization. Q. The fact is, however, you have had one central Board of Directors governing and controlling what had formerly been ten or twelve independent companies; that is a fact, is it not? A. To a certain extent; not to the full extent. Q. The policy of those companies whose stock you have ac- quired, and which is in your treasury, was governed and dictated by a central Board of Directors and the president of the central organization held the stock? A. To a very considerable extent. Q. Was it not absolutely? A. Not absolutely. Q. To what extent was it not controlled? A. It didn’t work that way from the fact that there remained in the organizations of the different companies the old officers and the policy con- tinued of the concerns being run under the management of the former officers of those corporations; one reason for that was that the rubber shoe industry — the product is variable and the conditions are complex — and it was found advantageous to con- duct the business in that way. Q. But so far as. uniformity of price was concerned the de- termination of that question rested with the president of the United States Rubber Company as regards the companies taken into the combination, didn’t it? A. The president of the com- pany could have exercised that control, I suppose, having as the United States Rubber Company has a majority of the shares; but No. 40.] 437 that policy was not carried out in full; it was carried out to a con- siderable extent. Q. To what extent did you utilize at that time the entire ca- pacity of the various factories which came into the combination? A. I suppose that about one-half of the producing capacity of those companies was used. Q. About one-half? A. Yes; 50 per cent, of the capacity of the concerns that we took over. Q. And that would average during the entire year, 1892 and 1S93, at that point? A. About that. Q. In 1895 what, if any concerns, did you acquire? A. I don’t remember; in 1893 we acquired the Woonsocket Rubber Com- pany; the Woonsocket Rubber Company of Rhode Island. Q. Of Woonsocket, R. I.? A. Yes, sir; and the Marvel Rubber Company, of Woonsocket, R. I. Q. Any others? A. No others. Q. Were not in 1S93 four then competing concerns acquired by the United States Rubber Company? A. I don’t know of any more that I have in mind; there was the Woonsocket Rubber Company, including two factories, one in Woonsocket and one in Millville; and then we built a rubber reclaiming plant at Nan- tucket. Q. Was that in 1S93? A. That was in 1893. Q. That you built the one in Nantucket? A. Yes, sir. Q. I have not the names, but I have either correct or erroneous information, that you purchased four concerns in 1893; will you kindly think the matter over carefully and see whether or not your statement is correct, that you only secured two? (Witness examines book.) A. There was an interest obtained in the Hammond Buckle Company. Q. How much of the Hammond Buckle Company did that in- terest represent? A. It represented the full amount; the entire capital stock. Q. Then you bought the whole of that company? A. We bought the whole. 458 [Senate, Q. Was there not another company that you purchased? A. The Lawrence Felting Company. Q. Hoy/ much of that? A. Entire; that was not a stock com- pany; it was owned by individuals and we bought it all. Q. Did you buy it all incorporated or did you have it trans- ferred directly to the United States Rubber Company A. It was transferred directly to the United States Rubber Company. Q. What amount of stock did you issue in the purchase of those four properties acquired by you in 1893? A. About $12,- 000,000. Q. Which added to the former issue made altogether, if I am correct in my figures, $39,566,500 of stock issued? A. That is the total amount of capitalization. Q. At that time? A. That is the total amount now; about $40,- 000,000. Q. Will you explain to this committee why, with mills on your hands of which you cannot utilize more than 50 per cent, of the capacity, you acquired these additional mills at a cost to you of about $12,000,000? A. With the idea of a larger centralization of the business and the economies that would result therefrom. . Q. What amount of business had the Woonsocket and the four companies acquired by you in 1893 done as compared with the whole trade? A. I should say that the four companies manufac- tured perhaps one-fifth. Q. Twenty per cent. ? A. About that. Q. So that with the companies originally acquired and the com- panies acquired in 1893 you had secured about 70 per cent of the total rubber product of the country; is that right? A. I could not say; I should think that we had about 60 per cent.; I am giv- ing these figures as my opinion; I do not give them accurately; I am not regularly engaged in the rubber shoe business, so that I have not the figures in mind as would a man who gave his con- stant attention to the business; I should say that we are produc- ing about 60 or 65 per cent, of the total business of the country, or the total consumption. Q. I would like to have you inform the committee why, with a No. 40.] 459 capacity in band, more than 50 per cent, of which was unavail- able. you still deemed it necessary to acquire an additional 20 per cent, of the producing facilities of the country? A. Our object was to secure a business that was sufficiently large so that we could get the advantage and economies that would result from the centralization of manufacture. Q. And incidentally to destroy competition to that extent? A. No. Q. It did do it; it did have that effect, didn't it? A. I don’t know; I don’t think so. Q. After you had secured control of the product and the facili- ties represented by these four companies in 1893 you didn’t allow them to continue a competitive business as against the other con- cerns that you had acquired, did you? A. I think that a competi- tive business was continued to some extent. Q. When you speak of competitive business do you mean that competition exists in this way : That certain brands had become well known in the market, and that instead of destroying those brands you still continued to push them in the market? A. In the rubber business the value of the trade mark is one of the principal items of value. Q. That is what I mean by brand? A. And making sales of rubber goods — inasmuch as it is practically impossible for the consumer to form an accurate idea of the quality — the merchan- dise is bought largely on brands, and there is a difference in the price not largely dependent on the bi’ands of goods. Q. Do the factories have different brands? A. Each factory has different brands., Q. And each brand was competing in the market against the other brands? A. To an extent. Q. After acquiring this property all that was left of the compe- tition was that you pushed one or the other of the brands accord- ing to the exigencies of the case, and controlling all brands you didn’t permit any one brand to compete against any other brand controlled by you in the market, did you? A. It was within the power of the company, to the extent of the United States Rubber 400 [Senate. Company, to control : but there was a certain amount of compe- tition; I think there was some competition on price; in reference to that business, Mr. Chairman, I have taken no part. Q. Who is there in your company who knows about these ques- tions of competition between what otherwise were free and inde- pendent factories? A. The gentlemen in the sales department; we have a department of sales, with which I am not familiar. Q. Who is he? A. Mr. Charles L. Johnson. Q. Has he been subpoenaed? A. No, sir. Q. Where is his office? A. At the office of the company. Q. Where is that? A. 88 Reade street. Q. Does Mr. Ford, who is here in the room, know anything about that particular branch of the business? A. I think not. Q. Would you explain the way in which you figured the val- ues in reaching the amount of stock that was issued to those va- rious companies? A. Which companies do you mean? Q. The original companies included in the first distribution of the two million dollars; and then in the second distribution of a little over $22,000,000? A. As I stated before, the committee was appointed by the directors of the company, the United States Rubber Company — Q. I understand that; you need not go over it again. Q. Was there any basis of computation upon which you pro- ceeded in fixing the values, and if so, what was that general basis? A. That basis, Mr. Chairman, was put upon the value of the plants, the value of quick assets over liability of concern^ which quick assets were guaranteed and secured by deposit of stock; and also the value of the patents, trade marks and busi- ness franchises; all the elements were taken into consideration and a report rendered by Mr. Simmons as chairman of the com- mittee that recommended the purchase by the United States Rubber Company. Q. You have stated that once before; when you speak of the value of a franchise, what element of value was given in reach- ing the value of the various acquired properties proportionately to the whole? A. The franchise represents the value of trade- No. 40.] 461 marks and patents in tlie concern, some of which had been run- ning for 25 or 50 years. Q. Goodwill? A. Value of trade-marks, patents and business organization; one interesting fact in this business is owing to variety of product, and to give you some idea of this variety, one of the factories turns out 30,000 different shoes; and in addi- tion to that we manufacture clothing, belting, packing material and hose and other rubber goods; our principal product is rub- ber boots and shoes; one of the elements of value is the cost of creating an organization for the conduct of the business — a busi- ness of infinite variety. Q. Do you estimate what is called the ultimate prospective earning capacity of the various plants in the distribution of the stock? A. I personally made no estimate; I was not a member of the Board of Directors and was not a member of the commit- tee of which Mr. Edward Simmons was chairman. Q. Do you remember, however, from the general interest you had in the plan of organization that there was issued, or rather that the basis of issue was the general ultimate prospective earn- ing capacity of the plants? A. I should think that was taken into consideration; undoubtedly. Q. Do you know how much stock was issued for that? A. I don’t. Q. Do you know whether it was based upon the then earning ca- pacity of the business, or upon an estimate of the possible earn- ings under the plan of consolidation? A. I do not think that the basis was upon the then earnings of the companies; examina- tion was made in certain companies to ascertain what the earn- ings were; but in determining the value they took into consider- ation all the different elements, the trade-marks, the patents, tan- gible property, real estate, etc.; undoubtedly in making those values they made them with a view to their future earning ca- pacity. Q. And the system upon which the companies are conducted under their centralized management justifies this original esti- mate of the prospective earning capacity, does it not? A. It is 462 [Senate, the policy of the company to earn for its stockholders — and by the way, I might say that the number of stockholders has in- creased; originally, there were only three or four hundred; now, there are three thousand preferred and three thousand common stockholders — and it is the policy of the directors of the com- pany to earn mone} r for those stockholders, without especially considering the capitalization; as trustees we earn for those stockholders all the money that we lawfully can. Q. In fixing the issue of stock the appraisers, approved by the Directors of the United States Rubber Company, gave to the properties acquired what has been termed here a prospective ultimate earning capacity; from that time has the system upon which the company is conducted, been in line to justify that ap- praisement or decision of the directors in the issue of the stock? In my judgment that matter has not received the consideration of the Board of Directors in the conduct of the business. Q. You have been endeavoring in the conduct of that business to make and earn dividends for the stockholders upon the stock issued in the manner indicated? A. It has been endeavoring to earn all the money that it lawfully could for the stockholders of the United States Rubber Company. Q. Holding both preferred and common stock issued upon the general plan referred to? A. We have endeavored to earn all the money possible; all the money that we could lawfully earn for the stockholders in general under our plan; the preferred stock is 8 per cent, non-cumulative stock; of course profits are divided in ac- cordance with the provisions of the stock issues. Q. The common stock in case the company makes any divi- dends, carries everything beyond the eight per cent, earned upon the preferred stock? A. That is the condition ; the preferred stock si non-cumulative. Q. That is to say it only gets dividends in the year in which it is earned and don’t carry a credit of dividends from year to year, from one year to another if not earned? A. That is correct. Q. Do you remember the assets and property that were pre- formed on the first two million dollar issue of the stock? A. That No. 40.] 463 was the New Jersey Rubber Company; the New Jersey Rubber Company, of New Brunswick; we started — Mr. Lexow interrupting: Was that a corporation? A. Yes, sir. Q. What was the amount of the capital stock of that corpora- tion? A. I don’t remember; I think the amount of capital stock was exceedingly small. Q. What was it? A. I don't remember; I think it was consid- erably less than the amount issued. Q. Do you know what proportion it held to the amount issued? A. I do not know the proportion; I think that the great bulk of the property of this concern was owned by a few individuals, who had held it for a great many years; and they had pursued a simi- lar policy to that of the Chemical Bank of New York city; the amount of capital stock had no bearing or significance as to the intrinsic value of the business or the property. Q. But you cannot state what the original stock issue of that company was? A. I cannot; I know it was not very much. Q. Will you be able to give that figure to the committee? A. I think I can ascertain it. Q. The New Brunswick Rubber Company of New Brunswick; what was the capital stock of that company at the time it was taken in to the consolidation? A. I don’t remember; but I think it was — although the concern was of less value than the New Jer- sey Company, I think the capital stock was more; I know that the aggregate capital stock of all these corporations, in which I had no interest, would not amount to the $22,000,000 issued. Q. How much less than the $22,000,000 of all the stock issued was the aggregate of the capital stock of the companies acquired? A. I don’t know; but I know that many of these concerns had been running for a long time, for many years — perhaps from 30 to 50 years in the hands of men who found it convenient to run the concerns with the original capital ; so that as the concerns ac- cumulated profits the value of the properties increased; but they did not increase the volume of the capital stock; the case being precisely like that of the Chemical Bank of this city, whose capi- tal stock, I understand, is about $300,000, and it is selling at about the rate of a million and a half dollars. 464 [Senate, Q. Have you got the figures and can you give us the amount of the capital stock of each of these companies acquired? A. I think I can obtain that information, Mr. Chairman; I haven’t it with me. Q. I would like to have it if you can secure it; the date of the organization of each one of these sub-companies, together with the amount of capital stock? Q. Did the issue of the common stock, or the general stock, bear any relation to the issue of the preferred stock? If so, what? A. In the report made by the committee that advised the pur- chase of the property which I have enumerated they stated what the amount of the preferred should be and also what the amount of the common should be. Q. Was the common issued for any specific class or character of property? A. The entire issue was made in accordance with the recommendations of the Simmons Committee. Q. Do you understand my question? Was the preferred stock issued for any particular class of property, and was the common stock issued for any particular class of property or any particular kind or class; and if so, which? A. In that matter I would have to refer you to the committee that made the report. Q. Have you got a copy of the report of that committee? A. Copy of the report is in the archives of the company. Q. Will you produce it? A. I will if the directors approve. Q. Is it in your custody? A. It is not; I am not the secretary of the company; it is in the custody of Mr. Samuel P. Colt. Q. Who is he? A. The President of the Industrial Trust Com- pany of Providence, Rhode Island. Q. Is he here in the city of New York? A. He is at the present time in Providence. Q. Where is the book itself that shows the original appraise- ment of the property? A. It is in the company’s office in New Brunswick, New Jersey, as I understand it. Q. Has the company an office in the city of New York? A. It has an office in New York and in the principal cities of the United States. No. 40.] 465 Q. Is the main office of the company in the city of New York? 1A-. No; its main — Mr. Lesow (interrupting) : I do not mean main office in a legal sense; I mean in a business sense. A. The business is very wide- ly distributed; we have no factories in the State of New York; we have an office at S8 Eeade street, where we conduct consider- able business. Q. Are your general accounts kept in the office in Reade street? A. The general accounts of the company are kept in New Bruns- wick. so I am informed., Q. Do you keep an account in the city of New York showing the business being done, the general accounts of your affiliated companies? A. I don’t think so. Q. Where do you hold the meetings of the Board of Directors of your company? A. We hold them over in New Jersey; some- times we hold them in New Brunswick and sometimes in the city of New York; at times we hold them in Boston, Providence and New Haven; our by-laws provide that our official meetings shall be held in New Brunswick and in the city of New York. Q. I ask you as a matter of fact if the proposition is not true that you do hold your directors meetings, as a rule, in the city of New York; arid that the meetings that are held elsewhere are held but very seldom in places other than New York? A. Since the company was organized I would say that a majority of the meet- ings of the Board of Directors have been held in the city of New York; but we have held A very large number of meetings outside of New York city. Q. Where was the meeting at which the report of the ap- praisers of the value of these respective properties was offered? A. In the city of New York, Q. Where was the action taken which resulted in the issue of this stock by resolution of the Board of Directors? A. In the city of New York., Q. Where was the transaction made as a whole that resulted in the transfer of the $22,000,000 of stock issued by the United States Rubber Company to these different purchased or acquired 30 466 [Senate, concerns? A. The central point was in the city of New York; most of the stockholder receiving that stock were not residents of the State of New York; as I have stated before, we have no factory in the city of New York; and most of the stockholders of the United States Rubber Company live in Pennsylvania, New Jer- sey, Connecticut, Rhode Island and Massachusetts; and those stockholders received their stock at their respective places of residence; but the central point of business was in the city of New York. Q. And has continued to be from the time of the organization of the United States Rubber Company down to the present day? Is that a fair statement? A. Not quite; we have conducted and held more meetings in New York than any other point; but large meetings have been held in Boston, Providence, New Haven and New Brunswick., Q. Those were not in the nature of annual meetings of the sub- sidiary companies, were they? A. No, sir; they were not. Q. When the Board of Directors of the United States Rubber Company met at these other points it was at times when the sub- sidiary companies were holding their annual meetings? A. No, sir. Q. Do you remember any time when that was not the case? A. I can remember twenty times when that was not the case; and probably many more; in fact, there was no coincidence be- tween the meetings of the directors and the meetings of the sub- sidiary companies. Q. Now, Mr. Flint, if all the transactions that resulted in the issue of this stock were had in the city of New York, why is it that the minutes which those transactions have been removed from the State of New York? A. We have understood that un- der the New Jersey law that we should keep our records in New Jersey; and as this is a New Jersey corporation, and as the original business of the corporation was in New Jersey, it is unlike many organizations which have only nominal property; but in this case we have our actual business in the State of New Jersey, in New Brunswick, and we have been advised that our records should be kept there. No. 40.] 407 Q. Does that apply to more than the minute book and the stock certificate book, under the law of the State of New Jersey? A. I am not familiar with the law; but in a general way I under- stand that we should keep our records in New Brunswick, N. J. Q. Does the law not simply require that upon demand the re- cord book of the company shall be produced in the State of New Jersey; do you know of any affirmative requirement in the New Jersey law that compels you to keep any of the books mentioned in the State of New Jersey, except upon demand? A. I have understood that it was the spirit of the law that we should keep the records there; we have been exceedingly careful to comply with the conditions of the statute under which we were organ- ized. Q. Have you any objection to this committee becoming pos- sessed of the general facts upon which this appraisal committee estimated the value of the companies that were taken by the United States Rubber Company? A. I have no objection whatsoever. Q. Or of the form in which the issue of certificates was had, as to the ratio of value and the particular class of property? A. I have no objection; that data is very voluminous; that data I think can be obtained; it covers, perhaps, about three thousand pages of detail and estimates; but there is no reason that I can see why there should be any objection to giving the committee that information. Q. Is it true that common stock of the company amounting to about $20,160,000 was issued exclusively for what is called “good will'’? A. That matter can only be answered by the committee recommending the purchase. Q. Do you remember whether it was a fact? A. I don’t re- member; I was not a member of the board or of the committee; I was not present at their deliberations. Q. Do you remember what class of property the preferred stock was issued for? A. I answer the same way; I was not a member of the committee; as I have stated, this Simmons committee went into the matter very fully; they had experts. 4GS [Senate, Q. We understand that very well ; have you not acquired prop- erty since the acquisition of the four companies in 1889? A. We have acquired stock in the Goodyear Rubber Company, of Nan- tucket. Q. Glove Company, India Rubber Glove Company? A. Yes, sir. Q. What else? A. I don’t remember. Q. When did you acquire the stock in the glove company? A. It was obtained at different times. Q. When did you first acquire stock in that company? A. I don’t remember the date; it may have been acquired in 1893 or 1894; some may have been bought in 1893 and 1S94. Q. Did you acquire control or all the stock in 1894? A. I think we acquired all of it in 1894; that is the balance of it. Q. What portion of the business did the Goodyear Glove Com- pany do? A. Perhaps five per cent. Q. So, that until the first acquisitions you controlled fifty per cent, of the business; under the second, twenty per cent., and un- der the third five per cent., making a total of seventy-five per cent, of the business; do you now mean to say that it has been re- duced to sixty-five per cent.? A. In figuring the percentage, you must take into consideration that some of those concerns manu- facture other articles than rubber boots and shoes; so, that in thinking of this output I have had in mind just roughly the total output; in addition to shoes, we make clothing, mechanical goods and bicycle tires. Q. Did the Goodyear Rubber Company manufacture shoes as well as gloves? A. They manufacture a great variety of goods; rubber sundries. Q. Didn’t they manufacture the same kind of rubber goods that you were manufacturing previously through the other concerns that you had acquired? A. No, sir; that is to say, they were man- ufacturing the same goods; but they manufactured an average line of goods entirely different from the goods manufactured by any other concerns through the United States Rubber Company. Q. Was it because of these other grades of articles manufac- tured that you acquired that company? A. That was one reason. N o. 40.] 469 Q. What was the other? A. The other was that the company was doing a good business; it had an excellent reputation; and we thought it would be in the interest of the six thousand stock- holders to acquire this property, the stock of that corporation. Q. You wanted its business? A. We wanted its manufactur- ing facilities. Q. You are on record here as testifying that you had 50 per cent, of your facilities that you could not use; and, therefore, you didn't want the facilities of the Goodyear Rubber Company; it must have been something else that you wanted? A. In this busi- ness, Mr. Chairman, there are certain concerns that have special points of advantage owing to the complex character of the busi- ness; we do not realize the points of business as quickly as con- cerns manufacturing one product, like sugar, for instance; but each concern has some point of advantage; that is true of the Goodyear India Rubber Company; that company had points of advantage that none of the others had. Q. You said that that was one of the reasons, but that there were others; I desire to know the other I’easons that operated? A. Advantages in connection with the processes of manufacture; they had certain advantages in that regard; also the value of trade-marks and the value of patents and the value of organiza- tion. Q. What do you mean by the value of organization? A. The trained persons that conduct certain branches of the business; certain branches of the rubber trade. Q. Was not the primary object in securing the business of the Goodyear Rubber Company the removing to that extent the com- petition that you were then having to meet? A. No, sir. Q. Didn’t that enter into consideration at all? A. Undoubt- edly; the value of the business; and the fact that the Goodyear Rubber Company had a good business entered into the value of the stock which we purchased. Q. I am asking you directly the question as to whether the com- petition in the market of the Goodyear Rubber Glove Company was not one of the elements that induced you to purchase that factory? That admits of a categorical answer? A. I think — 470 [Senate, Mr. Lexow interrupting: Was that one of the elements that entered into the consideration? A. I don’t think so; I desire to explain that the Goodyear Rubber Company had a good business; a profitable business; that it had advantages in manufacture and had valuable patents and trade-marks. Q. They were competing against you in the open market, were they not? A. They were selling their goods; as I understand — Mr. Lexow interrupting: You know what I mean; were they competing or were they not? A. They were in the same market; yes, sir. Q. And competing in price against you? A. Yes, sir; they were competing. Q. That was one of the elements that entered into the arrange- ment that you made; that you wanted to get rid of that open market competition which you were having to face; is that true? A. That may be one; allowing for the fact that that glove com- pany was selling its goods for higher prices than we were selling ours; but still they made very superior goods and we wanted that business. Q. You wanted to get rid of the competition that enabled them to secure a higher price for their product than you were receiving for yours? A. We wanted to get the benefit of their facilities; in purchasing that stock we were purchasing a profitable busi- ness; they were in the market selling goods, but they were not in- terfering with our making profits; there was no interference on the part of that company as against our trade; although there was competition in a certain sense; they were parties to it. Q. If there was competition there was necessarily interference? A. Well, that is a matter — Mr. Lexow (interrupting): There was? A. You could answer that question as well as I. Q. I am not in the business? A. Well, I am not; I am an ex- port commission merchant, and have an investment in the United States Rubber Company, Q. You are the treasurer of the company? A. Yes, sir. Q. Always taken an active part in its affairs? A. I have taken No. 40.] 471 an active part in connection with the financial affairs; I have never sold any goods; I have never seen a jobber. Q. The treasurer does not sell goods; we understand that. By Mr. Mazet: Q. You attend the meetings of the directors? A. Yes, sir. By Mr. Lexow: Q. Are these questions not discussed there? A. Yes, sir. Q. Questions of properties? A. Yes, sir. Q. Questions of competition? A. Yes, sir. Q. Wasn’t the question of competition between your company and the Goodyear Rubber Glove Company one of the reasons that actuated the board of directors in making that stock transac- tion? A. I don't think that idea was ever expressed in the meet- ings; the purchase of the glove company was considered on its earning capacity; we thought it was good business to buy that property and we thought we made a very good deal when we pur- chased it. Q. When you purchased the other companies that represented 20 per cent, of the producing capacity did the question of compe- tition as between you and them enter into the transaction? A. In recommending the purchase of that stock the committee may have taken into consideration that question; I don’t know what they— ; Mr. Lexow (interrupting): Didn’t you in making that trans- action seek to get the business then competing for the purpose of introducing economies in your own plants and thereby get rid of that free competition that existed against you? A. Our pri- mary object was to securem profitable business, and we thought that in time the character of the business would progress and that we would be able to secure economies and advantages by ac- quiring these properties. Q. In the two directions mentioned by me in my questions? A. I suppose that the committee considered the matter; certainly they had data enough and they took time enough fn om every point of view. 472 [Senate, Q. Whether that point was the one that entered into this gen- eral system of the acquisition of property, you don’t know? A. I was not a member of the committee; I was not a director in the United States Rubber Company. Q. Were you not a director of the company at the time of the acquisition of the Goodyear Glove Company, which represented 20 per cent, of the output in 1S93? A. I was not a director of the company in 1893. Q. And were you not treasurer of the company? A. I was. Q. And had control of the stock books and the certificate books of the organization? A. Yes, sir; nominally. Q. So that the transaction was practically made through your instrumentality? A. No. Q. Through the issuance of the stock? A. I was not a member of the committee that arranged that business; I don’t think that I signed any certificates. Q. Did you as treasurer of the company consent to the issuance of about $12,000,000 of stock without knowing the business propo- sition upon which that transaction was based? A. In a general way I had a certain general knowledge; but I carried out the or- ders of the board of directors; the board of directors gave in- structions to me as an officer of the company; I do not think that I personally gave it attention; the assistant treasurer of the com- pany carried out the order. Q. Is it not a fact that you, while not in name, are in fact the head of this United States Rubber Company? A. I cannot claim that distinction. Q. Is not that understood? A. Some people may have that idea. Q. Isn’t it generally understood? A. I cannot say. Q. Why, don't you care to take that flattering unction on your soul? A. I shouldn’t like to admit it. Q. You know all about the steps that led up to the acqui- sition of these properties? A. In a general way. Q. Do you mean to say here under oath that the element of disposing of competition was not the reason for the purchase of that property? A. I cannot admit that it was. No. 40.] 473 Q. You don't deny that it was? A. It may have been an ele- ment. Q. How many factories have been closed since the acquisition? A. In answering that question, do I understand that you mean practically a permanent closing? Q. How many are closed now? A. I don’t know; we close fac- tories at certain times of the year for the purpose of repairs ; but understanding your question as I have stated, I will calculate three factories. Q. Are any of those permanently closed? A. They are all permanently closed. Q. Which are they? A. The Colchester Rubber Company, the Franklin plant, formerly owned by the Boston Rubber Company, and the Para Rubber Company. Mr. Lexow: The Board of Aldermen want the chamber and I will have to suspend; but I will ask you another question: Q. What percentage of the business did those companies do before being closed up? A. About one-fifteenth. Q. Of the whole? A. Of the whole, at one time. Q. Not the whole business; I am speaking of the whole rubber business of the United States Rubber Company? A. At one time the aggregate business of the three plants must have amounted to one-fifteenth. Q. So that you have closed up since this combination went in- to effect 25 per cent, of the total capacity that you have acquired? A. One-fifteenth of the w T hole wouldn’t be that percentage. Q. Would it be about 25 per cent, of 65 per cent.? A. No. Q. What would it be? A. One-fifteenth of the whole; that would be in round figures — well, I will figure it out. (Witness figures). Q. I think that you will find that I am pretty close to the mark — there may be a fractional difference? A. That would be one- half per cent.; one-fifteenth of the whole; it would be one and a half per cent, of the whole. Q. One-fifteenth of the whole is fifteen per cent, of the whole? A. One-seventh of the whole; to answer your question without 474 [Senate, going into mental arithmetic I should say that they did a busi- ness at one time of, say five per cent. Q. Of what? A. Of the whole. Q. But you say it was fifteen per cent, of the whole? A. I said one-fifteenth per cent., not fifteen per cent. Q. One-fifteenth; instead of seven per cent, you reduce that to five per cent, of the whole? A. I do it for the reason that in considering the business of the Para Rubber Company, I have in mind that that company had just lost in attempting to establish a new trade-mark about three-quarters of its capital stock; prior to the organization of the United States Rubber Company it was doing little or no business. Mr. Lexow: Will you please report here to-morrow morning at ten o’clock? Q. Does the report made by the appraisers cover all the finan- cial features of that transaction, the value of the property, its original stock, and the amount of stock to be issued in exchange for it? A. I think it practically covers everything in detail. Q. Then, if you have it, we would like to have all of the ap- praisers’ details? A. It was hardly an appraisers’ report; the appraisers made a detailed examination, and then the Simmons committee with that data in view then made its report; and that report embodies the entire financial operations. Q. We would like to have that? EIGHTH PUBLIC HEARING. MORNING SESSION, WED- NESDAY, FEBRUARY 17, 1897. Mr. Lexow 7 : Is Mr. Flint in court? If he is in court at present the committee will come to order. Those subpoenaed in the matter of the Wall Paper Company need not attend further to-day; their matter will be heard to-mor- row — the witnesses subpoenaed need not attend further to-day. No. 40.] 475 Charles R. Flint, recalled: By Mr. Lexow: Q. Mr. Flint, have you come to any conclusion with reference to the production of the documents inquired of yesterday? A. Mr. Chairman, I produce herewith the certificates of organiza- tion of the United States Rubber Company; the information in reference to the capitalization of the different companies referred to yesterday, or the companies purchased under the recommenda- tion of the Simmons committee were not in the archives of the United States Rubber Company, and I was obliged to telephone, to send to the different companies in order to obtain the informa- tion; I think it is accurate, Mr. Chairman, perhaps with one or two small items. (Witness produces paper.) Mr. Lexow: Will the stenographer mark this “Exhibit A” in this case? Q. Now this is in answer to the request to produce information relative to the amount of capitalization of the original companies that went into the so-called rubber combination, the United States Rubber Company? A. Yes, sir; and you also requested me to ascertain the date of their organizations. Q. Yes? A. The E. L. Candee & Co. was organized in 1842 — Q. Where? A. New Haven, Connecticut. Q. Their capital? A. §600,000. Q. Now, the next one? A. The Goodyear Metallic Rubber Shoe Company was organized in 1843. Q. Yv'here? A. Of Naugatuck. Q. Capital? A. One million. Q. The next one? A. The Meyer Rubber Company was organ- ized in 1844; of New Brunswick, New Jersey. Q. Capital? A. §200,000. Q. The next one? A. Mr. Chairman, if you will permit me to ask Mr. Martin when the New Jersey Company was organized? Mr. Lexow: Certainly; does he know? Mr. Flint: I infer so. Mr. Martin, what year was the New Jer- sey Rubber Company organized? Mr. Martin : 1877. 476 [Senate, By Mr. Lexow : Q. Which company is that? A. The New Jersey Rubber Com- pany, of New Brunswick, New Jersey. Q. 1877? A. Organized in 1877; capital $200,000. Q. The next one? A. The New Brunswick Rubber Company, of New Brunswick, New Jersey; organized 1849; capital, $300,000. Q. The next one? A. The Woonsocket Rubber Company — Q. Well, leaving out all that went into the first combination — won't you get at those you have left out; the American Rubber Company? A. Oh, yes; the American Rubber Company was or- ganized 1877 ; of Cambridgeport, Mass. Q. Capital? A. One million; the Boston Rubber Company of Boston and Chelsea, Mass., organized 1888; capita! $300,000. Q. That was Chelsea, did you say? A. It was a factory in Chelsea; yes sir. Q. Lycoming? A. I — (to Mr. Martin: Do you remember the capital of the Lycoming?) Mr. Chairman, we were unable to get the Lycoming Rubber Company last night, but the company was organized, I think, about ten years ago., Q. 1886? A. I don’t remember about that — Q. About that? A. About that; and the capital, I think, is $400,000. Q. Have you any distinct knowledge as to the amount of the capital? A. No; I don’t know — Q. Organized in the State of Pennsylvania? A. In the State of Pennsylvania. Q. Are those all the companies that entered into the original combination, representing an issue of $25,000,000 of preferred and common stock? A. There was the Rubber Manufacturing Sell- ers’ Company, organized in 1891; capital $300,000. Q. No; that was after the issuance of the first two millions and the following twenty-two millions of stock; these companies that you have now mentioned include all the companies that partook of those first two issues? A. Mr. Chairman, in the issue which you have referred to there was included 1,500 and odd shares of the stock of the Rubber Manufacturing Sellers’ Company — So. 40.] 477 Q. Ob, of the first purchase? A. Of the purchase under the Simmonds Committee recommendation. Q. You state that the Rubber Manufacturing — A. The Rub- ber Manufacturing Sellers’ Company of Connecticut. Q. How many shares? A. Fifteen hundred and odd. Q. Of what par? A. $100. Q. One million five hundred thousand dollars — A. Total cap- ital $300,000. Q. Then it could not have been par at a hundred? A. This did not include all the stock. Q. That was $150,000? A. In round figures. Q. Now for all the companies that you have mentioned, leaving out those acquired in 1S93, how much of the capital stock of the United States Rubber Company was issued? A. In round fig- ures $26,000,000. i Q. How much of that stock was issued in purchase of the Bos- ton Rubber Company? A. The total amount of stock was under the recommendation of the Simmonds Committee, was issued for all of the properties; there was no subdivision; the committee re- ported or recommended the purchase of all the properties men- tioned for a stated amount of stock and all of the properties were purchased for a round amount of stock under that recommenda- tion. Q. Do you mean to be understood as stating that a syndicate had control of all those properties prior to the purchase and re- ceived a lump amount of stock? A. Not a syndicate, but a bank- ing house was in a position to offer to the United States Rubber Company all of the properties referred to. Q. In a lump? A. In lump. Q. But in reaching the amount of capital stock of the Rubber Company to be distributed over the whole there must have been some appraisement or calculation as to the value of each of the ingredients; can you state how much value was placed upon the property of the Boston Rubber Company? A. I cannot. Q. Who can? A. That work was done by the Simmonds com- mittee; it was a very laborious work; as I stated yesterday, there were some three thousand pages of data obtained by experts and 478 [Senate, others, and it was on the basis of all these detailed reports and examinations that the Simmons committee recommended the | purchase of all these properties at the figure mentioned. By Mr. Warner : Q. Haven’t you got that data easily accessible whereby you can tell how much capital stock was issued to each of these compan- ies? A. I have not; the fact is that that data was never in my possession, the possession of the parties making — Mr. Lexow: All the witnesses in the matter of the Soda syndi- cate so-called are dismissed now, to return at two o’clock this afternoon. Witness (continuing) : All that data has never been in my pos- session; I have never had access to it; the position of these par- ties was one where they didn’t deem that it was proper that I should have access to that information; and those detailed re- ports and that information has not and never has been in the possession of the United States Rubber Company, has never been in my possession, and I have not any access to it. By Mr. Warner: Q. Why would it be impossible that you should have access to it? A. From the fact that they were acting as independent parties, independent purchasesrs, and they thought that it was, that they should have that data for their own use in coming to the conclusions which I have stated. Q. Your company of which you were the treasurer issued this stock to them; now do you mean to say that you have not in easily accessible form the data whereby you can tell how much stock was issued to these separate companies? A. At the time that this transaction was made I was not the treasurer of the com- pany — I was not a member of the committee; I was not a director of the company. By Mr. Lexow: Q. You have been a director of the company ever since, have you not? A. I can give — I was elected afterwards, but as to how No. 40.] 470 long after that period I don’t remember; I can get that informa- tion. Q. Can't you give that — A. It was sometime after — Q. Can’t you give us this information? Were you not the prin- cipal actor in producing the result, to wit, this combination? A. I would not feel that it would be proper for me to claim that dis- tinction. Q. Waiving all questions of modesty, Mr. Flint, were you not, as a matter of fact, the leader in the movement with reference to this combination? A. Others might dispute with me that posi- tion. L Q. But you don’t dispute it, do you? A. I would not like to say that I was, but I took an active part, Mr. Chairman. Q. From the beginning? A. I took an active part, Mr. Chair- man, in the work of organization.. Q. Isn’t it a fact that it was through your instrumentality that the United States Rubber Company was organized? A. Well, I should be very glad if I could answer that question in the affirma- tive; but I would not want to take the position that I did that work. Q. Were you present? A. I was; yes, I was in New York. Q. Were you present at the time of the organization of the United States Rubber Company? A. At what time, Mr. Chair- man? Q. Time of the organization? A. Well, I was in New York, and I was having to do with the matter; I was informed; I kept informed in regard to it. Q. Were you not in touch — A. I was interested; I expected to be interested in it. Q. Were you not in touch with counsel who were drawing up the papers? A. I was. Q. Did you not, with them, follow every movement that was made in the direction of organization both before the organiza- tion and afterwards? A. Not every movement, Mr. Chairman. Q. Leaving out unimportant details? A. Oh, in general, I was informed as to the organization. [Senate, ^80 Q. Expected to take an interest in it? A. I expected to. Q. Expected to become a director in and the treasurer of it? A. No. Q. Leaving out treasurer, then ; expected to become a director in it? A. I hoped to. Q. Expected to, did you not? A. I think 1 had reason for ex- pecting that. Q. Wasn’t that part of the original plan? A. No; but I ex- pected to become a director. Q. Were the conferences that led up to the organization of the United States Rubber Company not held in your office? A. No. Q. Where were they held? A. They were held at; the work was done in the office of Lowery, Stone & Auerbach — of organi- zation — Q. Your counsel? A. No. Q. Acting for you? A. They never have acted for me in any capacity; I never had any relations with the firm. Q. But you met at their office in connection with the organiza- tion? A. I did; I was in their office — Q. Frequently? A. Frequently. Q. During the time immediately preceding and subsequent to organization? A. Oh, yes. Q. Were you active in the appointment of the committee on appraisal whose report was made? A. No; that committee was appointed by the original directors; I saw some of the parties, but the committee was appointed by the then directors of the United States Rubber Company. Q. Friends of yours? A. Some of them; some of them not; some of them unfriendly. Q. You kept yourself informed as to what was being done? A. in a general way, as far as I could, but I didnothaveaccess,and the parties making up this report did not give me the data to which I have referred. Q. Was the capital stock of the company that was issued in payment of the properties mentioned, issued by you as treasurer and secretary of the company? A I never was secretary. No. 40.] 481 Q. Or treasurer of the company? A. I think not; I don’t think I was treasurer, Mr. Chairman, at the time; in fact, I am quite well satisfied that I was not. Q. Don't you remember whether you signed certificates amounting to twenty-five millions of common and preferred capi- tal stock? A. I don’t remember that I did. Q. Do you remember that you did not? A. I am satisfied that I did not. Q. Who was the treasurer before you? A. Can I ask my as- sociates? Q. If that wmuld give you any information or refresh your re- collection. (Witness goes to side of room and talks with some- body). A. John P. Townsend, then president of the Knicker- bocker Trust Company. Q. What relation did he bear to you? A. He was the presi- dent of the Knickerbocker Trust Company. By Mr. Mazet: Q. He was the treasurer of this company? A. He was the treasurer of this company. By Mr. Lexow: Q. As a temporary or permanent appointment? A. That de- pended on the Board of Directors; as I stated, I was elected treasurer afterwards; I could not give the exact date, but I think it was in the fall of 1892. By Mr. Mazet: Q. Soon after the organization of the company? A. Not long after. By Mr. Lexow: Q. This issue of stock occurred in July, 1892? Witness: I want to correct that statement which I have just made to a member of the committee. 31 482 [Senate, What was the date of the organization; you have it there? Mr. Bedell: The acknowledgment or verification; 29th day of March, 1892. Witness: It was some time after the organization of the com- pany that I was elected treasurer; perhaps, say six months after the organization of the company. By Mr. Lexow: Q. This stock was issued in June or July, 1892, was it not? A. I think not. Q. When was it issued? A. It was issued in the fall of 1892; perhaps, along the month — in early September. Q. Just prior then to your election as treasurer? A. I don’t remember the exact date, but I was elected treasurer shortly after. Q. After the issue of the stock? A. After the issue of the stock. Q. Was it because of the issue of that stock and the acquisi- tion of those properties that you were elected treasurer of the company? A. No; I don’t think that that had any special bear- ing on the minds of the directors in giving me that distinction. Q. Why was it, immediately after the issue of the stock of the company, amounting to twenty-five or twenty-six millions of dol- lars, that the President of the Knickerbocker Trust Company ceased to be treasurer of your company and you commenced to be treasurer? A. I infer, although not knowing the views of the directors in the matter in detail, I infer that they considered that I perhaps had had more experience in some branches of the busi- ness. Q. Were you in the importing rubber line at the time? A. I have been since 1878. Q. Do you mean to be understood here as saying that you as- sumed the duties of treasurer of that company immediately after the issuing of twenty-five or twenty-six millions of dollars of its capital stock without inquiring into the legality or validity or the propriety of that issue of stock? A. When I accepted that No. 40.] 483 position I felt that the stock had been issued legally and properly; every precaution was taken to have the matter done in a legal way, and the most eminent counsel that could be retained were retained to my knowledge by the United States Rubber Company in order that the organization might be formed absolutely in ac- cordance with the law, and every precaution has been taken in every way — Q. That is the basis upon which you assumed your position without inquiry into the issue of stock; is that your explanation; otherwise it is unnecessary to put this life history on the record? A. Yes, sir. Q. (Question read). A. Mr. Chairman, I depended in that mat- ter — Q. (Interrupting) Is that true? A. (Continuing) On the su- perior wisdom of counsel. Q. That is it; now why state that fifteen times over; do you mean to be understood as stating that as the fiscal officer of this company you have never demanded to see whether the values and figures certified by that committee on appraisement were proper and justifiable — A. The — Q. Now, answer yes or no, Mr. Flint; did you or did you not? (Question read.) Did you or did you not? A. I understood that the data was not accessible to me; I made no demand in regard to it, but in general I knew as to these properties as to their value. Q. Yes, that is right; we assume that (have known them since). Didn’t it occur to you as a badge of very considerable suspicion that data should be withheld from the directors of the company .going to indicate the actual value of the properties received — A. No; from the fact — Q. No; that is enough. Have you in your experience as a mat- ter of business in connection with companies ever known of a case where the report of appraisers have been surrounded with such secrecy and guarded so carefully from directors and stock- holders? A. I have had comparatively little experience in that class of business. 484 [Senate. Q. Have you ever known of a case? A. My business is that of an export merchant — Q. We have heard that twenty-five times now, Mr. Flint. Have you ever in your experience whether large or small known of a similar case? A. My experience as — I have not known as* to the appointment of appraisers under like conditions. Q. This is a case solitary in your experience? A. I have had very little experience in corporate matters; it is a new field. Q. Has it not occurred to you that the fact that so far as you and your associates in the directorate were concerned these fig- ures were kept from you, or hedged in so that you could not dis- cover them, was in itself sufficient to raise a suspicion in your mind? A. Not at all; the men who had charge of those figures were among the leading men of this city; the chairman of the committee is the present president of the clearing house — Q. We know all their names; they are on the record now two or three times — A. And I relied on their wisdom and conservatism. Q. Do you mean to say that they are the persons who have in- sisted upon the secrecy of their estimate of appraisement? A. I do. f Q. And not the United States Rubber Company? A. I do. Q. And that the United States Rubber Company is unable to secure or its officers are unable to secure an inspection of those appraisements because of the objections of the committee of ap- praisement? A. I do not think the United States Rubber Company have made any demand; the United States Rubber Company buy under the recommendation, as before stated — purchased all these properties for a given amount, approximately as stated; they made the purchase under the conditions as before stated, and there has been no reason to attack or go over these data; the general condition of the business has been familiar to those in interest and the values of the properties were generally known to them. Q. What interest have the committee on appraisement to keep concealed from the directors and stockholders of the company the facts and the figures upon which the appraisement was made? A. That I can’t answer; they gave their decision, and they didn’t see fit to give up the data on which it was based. N o. 40.] 485 Q. You mean then now to be understood that instead of that appraisal" report being in the archives of the company in New Jersey it has been kept by the committee on appraisement? A. No, Mr. Chairman. Q. Where is it? A. That is a part of the archives of the United States Rubber Company in New Jersey. Q. Under your control? A. No; not under my control. Q. Whose control? A. Under control of the directors of the corporation. Q. One moment: Let me ask you about that; are all of the records and documents of the United States Rubber Company, pursuant to the by-laws of your company, under your control? A. Eh? Q. Answer yes or no, Mr. Flint; they must be or must not be. A. No; under provision of the by-laws the papers of the corpora- tion are deposited in a safe deposit vault in New Brunswick, New Jersey. Q. Subject to whose order? A. (Continuing) And under the by-laws, and I think I remember correctly Mr. Chairman, those documents can only be obtained by two officers of the corporation, so that there are two keys — Q. Are you one of them? A. I am one of the officers. Q. Who is the other? A. I think that the provision is that the president or vice-president has access to those, to that deposit with either the treasurer or another officer — I don’t remember the name of the fourth officer. Q. You mean it requires four to get into that safe deposit vault? A. No, Mr. Chairman; it requires either the president or the vice-president, or either the treasurer or one other officer. Q. Have you ever gone to that vault? A. I never have. Q. Never looked at any of the documents contained in it? A. I have; but I saw them before they went in; but not living in New Brunswick, and not being convenient to go there, that de- posit vault has been visited by other officers of the company un- der the by-laws as stated. Q. You went there once? A. I have not been there as yet. I 486 , [Senate, Q. Did you make the original deposit? A. I did not. Q. Was it made in your presence? A. It was not. Q. It was just after the original deposit was made that you went there? A. I have never been there. Q. You never have? A. Never have. Q. Have you ever made an effort to see that report? A. I have; and I am generally as — familiar with its conditions — as I have already testified. Q. You are familiar with its conditions? A. In general, as I have already testified. Q. Well, can you give us, according to the tenor of that re- port, the amount of capital stock that was distributed over each of these companies separately? A. The report did not — Q. Can you, Mr. Flint, or can you not? A. I will give the facts — Q. Can you give the figures? A. I will give the facts. Q. I ask you whether or not you can give those figures; can you, or can you not? A. Approximately — Q. Separately for each company? A. If you will permit me to explain, Mr. Chairman — Q. Well, you are explaining at the rate of a volume every fif- teen minutes, and we will never get through at this rate? A. Well, I can’t answer your question unless you permit me to say that the report recommending the issue of a round amount of stock as I before testified, for all of the properties, as stated — the report did not name an amount for each company; the re- port provided that there should be issued an amount of stock, as before stated, for all the properties — Q. In bulk? A. In bulk. Q. To whom? A. To the bankers. Q. Who were they? A. H. B. Hollins & Company. Q. Did they own the property? A. They offered them in bulk. Q. Did they own them? A. They had the right to offer them. Q. Did they own them? They must have owned them, or have not? Yes or no? A. They had the right to offer them; as to the legal position, as to ownership, or the exact legal position at that point I am not certain about. No. 40.] 487 Q. Now, if you are drawing such fine hairs, Mr. Flint, don’t you know that they had the right to offer them? A. No, sir; I assumed that when they made an offer. Q. Why did you assume that on the one side of the case and you won’t assume anything on the other? A. I assumed that they had the right to offer them inasmuch as they formally made the offer; they made the offer to the United States Company. Q. And they received the stock in bulk? A. I think they did. Q. Do you know how much they distributed, or they were per- mitted under the receipt of that stock, to distribute over the separate companies? A. I do not. Q. Did they make a distribution over the separate companies? A. No; they didn’t distribute to the companies; what they offered was the stocks of these corporations in the main with certain exceptions that we have explained and accounted to the stock- holders. Q. To the stockholders? A. All these corporations that have been mentioned, not to the corporations themselves. Q. Do you mean that they received the individual sharehold- ings of stockholders and then distributed the stock to the stock- holders directly, instead of through the medium of the corpora- tion? A. They had no relations to the corporation. Q. Is that true? That question can be answered yes or no; did they make the distribution directly to the stockholders in pur- chase of several stockholdings or did they make the distribution through the channel of the corporation itself? A. As far as I know, and I think I am correctly informed in regard to it, they distributed the stock to the stockholders and not through the corporations. Q. Now, you might just as well have said, “I think they did it in the form of distribution through stockholders and not cor- porations”; if you continue this form of answer it will take two weeks to examine you. A. Mr. Chairman, I am endeavoring to anstver as well as possible — Q. Well, don’t trifle, or go round Robin Hood’s barn — A. I have spent more time ir. this room than I have in all my life in a court room before. 488 [Senate, Q. Well, you will spend a good deal more unless you answer positively. A. 1 have had no experience as a witness in my life; I am endeavoring to give you the exact facts; I have not spent ten hours in court in my life either as a juror, a witness or a party. Q. Now, have you ever ascertained as treasurer of the company or personally the amount of stock paid for any one of the corpora- tions mentioned in this schedule? A. There has been no pay- ment for corporations; as I have stated before these properties were purchased from the bankers, and the bankers dealt with the stockholders of corporations. Q. Do you know what was paid per share for any of the stock of any of the companies mentioned in this schedule? A. I do not. By Mr. Warner: Q. Not even your own company? A. I never had a company. By Mr. Lexow . Q. Well, that answers the question, Mr. Flint. A. I want to give the whole truth as sworn to do. Q. Well, if you never had a company that must be true or false? A. That is true. Q. Was there no company that you had an interest in or that you owned capital stock in represented in this schedule? A. I had no direct interest; but as a party interested in a crude rubber company I had an interest in that way; that is, indirectly. Q. What companies were you indirectly interested in in the way you mention ; I mean beyond those contained in this sched- ule? A. I was interested in the Lycoming Rubber Company. Q. To what extent? A. Perhaps a half of one per cent of the capitalization. Q. Of the capitalization of the Lycoming Rubber Company? A. Of the Lycoming Rubber Company. Q. In stock? A. Interested as a stockholder? Q. Yes; now, don’t you know what you got for that stock? A. No; I don’t. No. 40.] 489 Q. Yon don't know what you got for your stock? A. I do not; I can ascertain. Q. Don’t you remember the proportion of stock in the United States Rubber Company that you got, as compared with your nominal holding in the Lycoming Company? A. I dcm 7 t know; but I can get that information, and will be very glad to obtain it and give it to you. Q. Well, we want to get the facts as rapidly as possible, Mr. Flint. A. Mr. Chairman I think I can get them for this after- noon; I think I can get that information, but it is — with a variety of interests — I have not got that information in hand; but I will be very glad — Q. I am speaking more particularly of your examination; it has taken just about fifteen minutes now to ascertain, I mean, that you have an interest in one of these companies; you absolutely and positively denied any interest in the first instance? A. I had no direct interest and I was not an original — Q. Do you call it a direct interest when you were a stockholder in one of the companies that were taken into this pool, the stock of which was all bought? A. Well, I was not a stockholder of record of the company, but I was interested in a crude rubber company which had an interest. Q. We have that, all — that you had a stockholding, and you re- ceived your proportion in the United States Rubber Company for that stock? A. I received a proportion from the crude rubber company of a certain interest that I had. Q. Now, we would like to know what you received proportion- ate to the amount of stock held by your company in the Lycom- ing? A. I will look it up, Mr. Chairman, and give it to you this afternoon. Q.- Do you know of any other exchange of certificates and the basis or proportion of that exchange for stock represented in this schedule? A. I can ascertain. Q. Can you ascertain it with reference to each one of the sep- arate companies? A. I will endeavor to. Q. Do you understand that this syndicate or banking firm ap- portioned the stock that was delivered to the United States Rub- 490 [Senate, ber Company over the stock of these consolidated companies and turned the stock of the consolidated companies or sub-compan- ies over into the treasury of the United States Rubber Company; was that the proceeding? A. The proceeding was that the bank- ers offered the stock of these corporations to the United States Rubber Company, the bankers received the stock of the United States Rubber Company and accounted for it to the stockholders of the corporations mentioned. Q. Then the bankers represented the United States Rubber Company as well as representing the individual stockholders of the companies the stock of which was purchased? A. They did not represent the United States Rubber Company; they acted as principals in offering those stocks to the United States Rubber Company; and distributed the stock to the stockholders of those companies. Q. Now, isn’t it true that the United States Rubber Company paid them a commission of 2-| per cent, upon the transaction? A. No— Q. Did they or did they not? A. When the bankers — Q. Did they or did they not, Mr. Flint? A. Mr. Chairman — Q. Is it fact; it must be or not? A. No; but I state that — Q. Well, then, say no? A. But Mr. Chairman, I desire to ex- plain — and you don’t give the correct— you ask me to answer specifically, when you state the wrong amount; now, if I say no, I may be misunderstood; now, you ask whether they were paid a commission of 2 \ per cent ; I say, Mr. Chairman, that they did not pay a commission of 2J per cent. Q. (Interrupting) But they did pay — A. They paid a commis- sion — Mr. Chairman; I want to answer in good faith — I want to give you the facts; now, then — Q. If I am incorrect in my question, you have a perfect right to answer categorically, “No;” that is your right, and nobody can criticise it; now, did they — I would have followed that up with this question — which I am going to do now; did they pay any commission? A. When the bankers — • Q. Did they or did they not? A. If you will allow me to an- No. 40.] 491 swer — I want to state when the bankers offered these stocks to the United States Rubber Company the bankers provided for a certain compensation for themselves. Q. And they provided for the compensation with the United States Rubber Company? A. That was made part of the offer; when the offered the properties they provided for a compensation for themselves and that w 7 as embodied in their offer and made a part of it. Q. And was paid by the United States Rubber Company? A. The United States Rubber Company in paying for these proper- ties paid the amount provided by the bankers under the offer. By Mr. Warner: Q. Was that a commission? A. I think — that is to say — there was a certain amount which was figured — a percentage; I should say it was a commission. By Mr. Lexow: Q. Wasn’t it called commission? A. I don’t remember. Q. And wasn’t that commission made expressly payable by the United States Rubber Company? A. In making the offer — Q. Was it? A. They provided a compensation and it was paid by the United States Rubber Company. By Mr. Warner: Q. How much was that compensation? A. I don’t remember the amount. Q. Now, Mr. Flint, this is only four years ago, and do you mean to say that having been a promoter of that company, and knowing all of its affairs and details, that you cannot tell us what that commission was? A. I cannot give the exact amount. By Mr. Mazet: Q. Well, it was not 2 1-2 per cent.? A. I will be very glad to ascertain. i j.. 492 [Senate, Q. Was it more or less than 2 1-2 per cent.? A. In stating that I could not give the amount I inferred that it was not; I was going to give the total amount of the commission received, and would be glad to get that information; or the total amount of the stock received. By Mr. Lexow : Q. Well, it was five hundred thousand dollars, wasn’t it? A. Oh, it was — Q. Wasn’t it five hundred thousand dollars? A. Of stock? Q. Commission? A. Well, do you — it was; I think it was. By Mr. Warner :i Q. In money or stock? A. In stock — payment made in stock. By Mr. Mazet: Q. At par value? A. There was a provision made in this offer of a certain amount; I will ascertain the exact conditions; I have not them in mind now. By Mr. Lexow: Q. Was it in a printed pamphlet or in a typewritten instrument that this agreement was made? A. The offer was in writing, or in a typewritten statement; there was no printed offer. Q. Have you a copy of the offer? A. I have not. Q. When did you last see it? A. Not for some time; not for a year or more. Q. Now, who in that transaction protected the interests of the United States Rubber Company? A. The directors and the com- mittee specially appointed to investigate the matter, the Sim- mons committee. Q. You mean the Simmons committee? A. The Simmons Committee. Q. Is Mr. Simmons a director of the company? A. He was one of the incorporators and was a director of the corporation at that time. No. 40.] 493 Q. Is he now? A. He is not. Q. He resigned? A. He resigned. Q. Because of the issuance of this stock? A. No; he did not; I don’t think he resigned for perhaps a year after the issuance of the stock. ( Q. Because of the issuance of any stock? A. No — I — he re- signed because his duties in connection with the clearing house and banks didn’t enable him to give the time to remain in the corporation as a director; I think a year after the issuance of this stock. « Q. Will you produce to us immediately after the adjournment of to-day the figures involved in the transaction with this bank- ing concern and the amount of stock apportioned over each share of the stock of these sub-companies that were purchased? A. I will endeavor to get the information. Q. We must have it, Mr. Flint. A. Mr. Chairman, I shall en- deavor to get it from the bankers — Q. If you can’t get it from the bankers we must have it from the report of the Simmons committee; we don’t want to proceed to severe measures and deprecate them, and will go as far as we can to avoid them; but we regard this question of capitalization as one of the important questions of this investigation, and whether vour company be a New Jersey corporation or a New York corporation you do business here and your system affects the economic conditions of our State, and we are entitled as a legislative committee to know it, and will know it if there is any authority in the Legislature to get it. A. Mr. Chairman, I was advised that through being a New Jersey corporation, not having any factories in this State, that I might refuse to testify; instead of acting under that advice I have voluntarily come before this committee and am endeavoring to give the information that you desire. By Mr. Mazet: Q. You were subpoenaed, were you not? A. I was subpoe- naed, but as I ha\e stated, 1 have come before the committee. 494 [Senate, By Mr. Lexow : Q. You don’t wish to withhold anything — that is what you mean — A. I do not; I think my testimony shows that. Q. Here is an opportunity to show your good faith; and it does seem to me that concealment by these companies of essen- tial questions would make the public suspicious of their good faith and the character of their management? A. Mr. Chair- man, I am desirous of giving the information; of course, in the conduct of business, you well appreciate that there are many matters of a confidential nature. Q. Certainly; we have not asked a question of that character, have we? A. Mr. Chairman, I think that you will give me the consideration that I am entitled to in that regard. Q. Your case is exactly similar to that of the American Sugar Refining Company upon this proposition; we do not propose to undertake an inquisitorial investigation into your business, but so far as your official acts are concerned as a corporation, whether of the State of New York or of the State of New Jersey — so far as they affect legislation in this State, we propose to get at those facts. A. I desire to give all the information that I consistently can. Q. Now, you understand the situation, and we ask you to pro- duce those documents? By Mr. Warner: Q. Will you produce the documents; this appraisers’ report, which is in the Safe Deposit, of which you have the key, and to which you have access? A. I will obtain the information that has been asked for, or endeavor to obtain it. By Mr. Lexow: Q. And this afternoon, Mr. Flint? A. I will endeavor to do 80 . Q. How many bookkeepers are there in the Read street office? A. There is a great — I don’t remember the number, Mr. Chair- No. 40.] 495 man, but there is quite a number; inasmuch, as in that office a great deal of detail work is done in connection with the dispo- sition of goods, which, as I have stated, has been of a great vari- ety. Q. Have you about thirty bookkeepers in your New York Read street office? A. I could not say, but— Q. About that? A. There are quite a number of them. Q. About that? A. Well, say twenty bookkeepers. Q. How many have you in the New Brunswick office? A. I do not: I should say five bookkeepers, or five men connected with the office. Q. And they do the bookkeeping for that special branch of your business which is located in New Brunswick, do they not? A. They do. Q. The bookkeepers in the city of New York attend to the business of the United States Rubber Company as a central or- ganization, do they not? A. Well, the reason for — Q. Do they, or do they not? A. Well, they attend to it as an organization selling the goods. Q. And that is? A. That is the detail. Q. And with general direction over the affairs of the company? A. No; the companies, Mr. Chairman, are — except those compan- ies that we expect, where we own the plants and have taken them from the companies, are run independently; they are run as independent organizations; they have got in general the original officers, the original bookkeepers and accountants in each corpor- ation and the business is being run by them, as it has been run for ten or twenty or thirty years. Q. Is not the business run in the name of the United States Rubber Company? A. No; it is not; the business — Q. I mean the general business of the company with reference to factors, factor agreements, contracts and matters of that de- scription? A. In that connection I desire to explain that recently the United States Rubber Company has acted as sales agent of some of these companies; they have occupied the same relation to these companies that a commission house would occupy to any 496 [Senate, manufacturing concern; that has caused the employment of many bookkeepers here in New York, to look after the details of sales. Q. You mean to be understood that the United States Rubber Company, owning the stocks of these various companies and con- trolling their organizations by the ownership of that stock, is an agent for these other corporations? A. I mean to say that the organizations or the companies are under the control and direc- tion of their respective directors ; that in the main the same offi- cers still hold office as have held office for many years, long before the organization of the United States Rubber Company, and un- der an arrangement for the purpose of securing economies in the sale of goods and doing away with the — Q. (Interrupting) We have had all that — A. (Interrupting) You haven't had that, Mr. Chairman — Q. (Interrupting) Yes, we have had it — a number of times — A. (Continuing) Economies of manufacture is in — but this is economies in selling — j Q. Now, look at this, and state whether that is the agreement that the United States Rubber Company makes with those who purchase from it? (Showing witness paper.) Q. Is it, or isn’t it? A. I don’t know, Mr. Chairman, as I stated yesterday — Q. (Interrupting) Look at these documents, and state whether or not these are the documents issued by the United States Rubber Company? (Showing witness papers.) A. It has the United States Rubber Company name upon it; but as I stated yesterday, I am not familiar with sales — I never have sold any goods; I never have taken any part in it. Q. Who has? A. Charles L. Johnson, the director of sales. Q. Is Mr. Martin? A. He is not. Q. Mr. Ford? A. They are not; Mr. Charles L. Johnson is the director of sales. Q. You disclaim any knowledge about these documents; is that true ? A. And I have requested Mr. J ohnson — Q. Do you disclaim any knowledge about these documents? A. In detail; yes. Q. Well, now, just let it rest there? No. 40.] 497 By Mr. Mazet: Q. Has this company an office in Chicago? A. Yes; they for- merly had — they have an office there; have sales agents there. By Mr. Lexow: Q. Do you know the New Brunswick Rubber Company that was made part of this combination? A. I do. Q. How long had it been iii business prior to the combination? A. Been in business since 1849. Q. In constant business during that period of time? A. I think so; I am not — Q. (Interrupting) Employing how many men? A. It was only 1894 when it commenced. Q. I mean from your general knowledge of the trade? A. In general? Q. Employing how many men? A. I suppose they employed perhaps four — I should suppose at different times from one to four hundred men — or employees, Mr. Chairman. Q. Making how many pairs of rubber boots and shoes yearly; one-half million pairs? A. If you will excuse me, I will get that (Witness leaves the stand and inquires of some person in the audience); they have made from several hundred thousand to perhaps a million pairs; I don’t know of my own knowledge. Q. Has it not been as high as a million and a half, and was not that the regular trade output of that factory? A. I do not know. Q. Was it not the custom of that factory to run full time ex- cepting for two or three weeks during the stock taking period in March and April of each year? A. That I could not say; but they run regularly as a rubber manufacturing concern. Q. They did? A. They run regularly. Q. They did? A. They did. Q. Before they were absorbed by the United States Rubber Company? A. They did. Q. Now, since the absorption of that company by the United 32 498 [Senate, > States Rubber Company, were these operations restricted? A. Asa matter of economy. Q- I am not speaking about the reasons for it yet; we will get to ihat in a few minutes; were the operations restricted? A. Mr. Chairman, if you will let me give you the facts — Q. I will get the facts; do not be alarmed; we are after the facts; were the operations restricted? A. I cannot say; I cannot answer the question. Q. Were the operations of that- company restricted to the manufacture of certain lines of goods and the output very largely reduced? A. I do not know. Q. Don’t you, as treasurer of the company, keep yourself post- ed with reference to the operations of the several factories? A. I do not. Q. Do you know whether the year after the absorption they worked only nine months, and the year after that only seven months, with a restriction of the character of goods, and a reduc- tion of the output? A. The business of the New Brunswick Company was put in the New Jersey plant, which was enlarged, fo p the purpose of economies, and they are manufacturing in the New Brunswick Company, at present, bicycle tires, and the la- borers — Q. Isn’t it true that you closed down the New Brunswick fac- tor}" after working seven months in the year 1895, in the dead of winter, and discharged all your hands? A. We enlarged — Q. Is that true? A. I don’t know; I know that we enlarged the New Jersey plant, and I know that the hands of the New Brunswick Company went into the New Jersey plant, and there the manufacture of rubber shoes was conducted, and I know that in the New Brunswick plant that that was used for the purpose of manufacturing bicycle tires. Q. Do you mean to say that the New Brunswick plant, speak- ing of ike New Brunswick Rubber Company’s plant, has been running, compared to the time previous to the formation of the United States Rubber Company, as to number of hands, amount of output, or number of men engaged, comparable to what it did No. 40.] 499 prior to the organization of the United States Rubber Company? A. I have no specific information on that point, Mr. Chairman. Q. Can you ascertain it? A. I can. Q. Isn’t it a fact that the President of the New Brunswick Rub- ber Company offered orders for what you know as or call third quality goods that would have enabled you to have kept that fac- tory running at a profit during the entire winter, that you re- fused the offer, closed the factory and discharged all hands? A. Well, Mr. Chairman — Q. Is that true or false? A. I don’t know, and I would like to explain — Q. Now, I would like to have a definite statement from you whether you have any knowledge on that subject at all? A. I have not; I don’t know about that part of the business. Q. Never heard of it? A. I have not — that I remember. Q. Isn’t it a fact that in the following spring you fitted up a small factory belonging to the United States Rubber Company and that since that time the average time of employment has been about five months in the year? A. In general I know that owing to the depression of business — Q. Now, is that a fact? A. I know that — Q. Isn’t that a fact? A. As I have explained I am not in the details of the business; I do not give detailed attention to it; I have got — I am in another line of business; I have got a general knowledge which I can state in regard to these plants, but, Mr. Chairman, I have not specific knowledge, and I don’t know. Q. Don’t know? Well, but you do know, do you not, that at the very time when you were discharging these men you pur- chased the Colchester factory, closed that down and dischargel 500 men there, don’t you? A. Mr. Chairman — Q. Is that a fact or not, Mr. Flint? A. I want to make a state- ment — Q. Is that a fact or isn’t it? A. I want to make this statement, Mr. Chairman, with reference to the capacity; the United States Rubber Company has a larger productive capacity to-day than it has ever had; we have put in new machinery, we have extended 500 [Senate, plants and we are manufacturing all the goods that we can mar- ket; in fact, we are manufacturing more, in order to keep our la- borers employed and in order to keep up our organizations; when I stated yesterday that we were not working to a greater extent than 50 per cent, of the capacity I stated what was strictly cor- rect, but I will explain that owing to the variety of our output we never can work to the full capacity; we are making a great variety of shoes; we have an order for some particular kind; we will run a factory on that kind, but we will not run it to its full capacity; where we closed factories, on the other hand, we have put in new machinery and increased plants; we have extended buildings, w T e have put in new machinery and we have increased our productive capacity in order to make this great variety, in order to be prepared to do it, to supply the demand made; we have got to supply the variety; in one factory there are thirty thousand different shoes made — ■ Q. We understand that — A. (Continuing) And this excessive productive capacity has got to be held by the company in order to be prepared to supply this great variety; we may have lasts on hand and facilities to manufacture that may not be used — Q. We understand all that — A. Well, that was not under- stood — ’ Q. Yes; you have explained that — A. I have not explained that — Q. You have made that statement at least ten times. A. Well, we have, when you consider brands, we have got' five hundred thousand different shoes; when you consider brands, sizes, shapes, styles, and we have got to have an excessive productive capacity in order to supply that variety; furthermore the busi- ness is a season’s business; if we should have good times and en- terprise was revived by a revival of confidence and a snowy win- ter, we would have to work our factories pretty nearly to their full capacity to supply the demand, but we haven’t been having very good times. Q. Now, Mr, Flint, if you have got into that condition would you increase the average dividend orprofit upon your goods 20 — 44 per No. 40.] 501 cent, as you did in 1893, immediately after the consolidation was made? A. It is the policy of a well managed corporation. Q. Would 3 on do that I am asking — A. To give, to supply the trade with goods at a price that will encourage consumption — Q. If that is the policy why did you increase the price of the goods that you made immediately after the consolidation in 1893, so that you added from 20 to 44 per cent, to the value of rubber shoes and boots in the market? A. Mr. Chairman — Q. Now, did you or did you not, Mr. Flint? A. I don’t know of any such increase, and I want to explain — Q. Well, then, say you didn't do it if it isn’t true? A. I have to explain in order to make myself understood ; I can't — the posi- tion is this that — Q. Did you increase the price of rubber boots from $1.90 to $2.60 in the Spring of 1893? A. I have no specific knowledge as — I don't know the price of any product of the United States Rubber Company; I don’t know the price of boots or shoes; I never have sold a pair; I never have talked with a jobber about it; I never have talked with a customer of the United States Rubber Company about buying goods; I have no detailed information. Q. Can't you give an answer to the question we ask with an answer of your own knowledge? A. I don’t know. Q. Did you say that you don’t know that in the Spring of 1893, after the acquisition of the Woonsocket Company, you increased the price of rubber goods to the consumer from $1.90 to $2.60? A. I don't know; and I don’t think it was done. Q. Will you state as a fact that that was not done? A. I can’t state it from the fact that I am not familiar with that department of the business; I know in general that we have increased the quality of the goods — • Q. We have had that over fifty times now? A. I think this is the first chance I have had to speak of it. Q. Why, everything that you can say about the rubber busi- ness has been said, and you never answer the question. A. I can’t answer these detailed questions because I have not the knowledge; but I have a general knowledge which I am willing to state. , , i 502 [Senate, Q. Was there any increase in the price, that you know, m the Spring of 1893? A. I don’t know as to the details of that; I know this — we have made a great variety of goods; I know that we have improved quailty; there are differences in styles, differences in conditions, but I can’t answer — Q. Now, Mr. Flint, I want you to say everything upon that sub- ject, so you can’t say hereafter that you haven’t said that before. Go ahead. The stenographer will take down the whole state- ment of the witness. A. Mr. Chairman, I want to make the point that since the or- ganization of the Unite States Rubber Company the quality of rubber boots an shoes has been improved; that new conditions have arisen in regard to styles, and owing to that fact there is a greater variety of product, and in arriving at the question of price it is necessary, as every buyer knows, to take into consideration the question of quality; I know in general that the price lists of the rubber shoes has been reduced; I don’t know the price of any specific article; I am not familiar with the business; I never have talked with a customer of the company ; I never have seen any of the jobbers; I never have taken part in any of the details of the business; I am in another line of the business; but in general I know that the quality has been improved and that the public have been receiving better goods; as to the exact conditions I have stated to you the name of the gentleman who is in charge of sales — Q. Mr. Johnson? A. (Continuing) And he will have that spe- cific information — Mr. Johnson, and as soon as I left here yester- day morning I wrote to get all the facts ; I had to go to my office in Broad street — I haven’t even a desk in the office of the United States Rubber Company — and I at once wrote a letter to that office asking Mr. Johnson to appear here; I have not yet heard from him, but he has got that specific information. Q. Now, Mr. Flint, have you told all about the benefits and the advantages and the reasons for the rubber consolidation that you know, so that hereafter you can answer a question categorically? A. I don’t think I have told all the advantages from the fact that — No. 40.] 503 Q. Please complete the story, because we want categorical an- swers hereafter — A. From the fact that I can’t state the bene- t fit — all the benefits that arise; I will state one point, Mr. Chair- man, that during the years of depression that I am informed on good authority that the United States Rubber Company have not reduced the rate of wages; that the United States Rubber Com- pany owing to its facilities has been in a position where it could do business to advantage without reducing the wages of its la- borers; and that in order to sustain our organizations, although the trade has been bad, owing to the general want of confidence existing in the community and the indisposition on the part of men to go into industrial or business enterprises, trade, as you know, has been dull owing to lack of confidence, while we have kept up our organizations and have manufactured all the goods that we possibly could; and while on the other hand I think that on investigation you will find that this point — which I think will interest you and the committee — and that is that the existence of labor saving machinery and superior facilities through central- ization promotes the sustaining of the American wage earner; and I am satisfied that on investigation, if you will look into those properties where they do not have those facilities that they have been obliged to cut the wages of labor owing to the fact that they haven’t had the facilities which can be created through the cen- tralization of manufacture. Mr. Lexow: That is interesting; but isn’t it a fact that these combinations of interests place in the hands of a compact organi- zation the ability to close factories in one direction or another, scattering its work in factories in other States at will — A. There are — Q. Isn’t it a fact that you have got that power; have you not? A. I can’t say. Q. You can practically close every factory in the State of New Jersey and continue your operations in Massachusetts and other States? A. I don’t think we can. Q. To what extent not? A. I don’t think that we can do that. Q. Now, if you have maintained the rate of wages in the inter- 504 [Senate, ests of labor, explain to the committee, if you will, bow it came that with a surplus productive capacity of 50 per cent, you bought the Colchester works and closed them down, throwing 500 men out of employment; immediately proceeded from there to the Goodyear Glove concern at Naugatuck, absorbed that and closed that down, after some of your employes in the Colchester works had secured employment there, and they were thrown out for the second time after that was absorbed by your company? A. Mr. Chairman, we have run — Q Is that a fact? Am I stating something that is not a fact, or is it a fact? A. I don’t think ii is a fact. Q. Will you swear that it is not a fact? A. I don’t think so. Q. Will you swear that it is nor a fact? A. In all its details T will swear that it is not a fact. Q. Will you swear that you didn’t close the Colchester works? A. The Colchester works were closed. Q. And 500 workmen, or thereabouts, thrown out of employ- ment? A. I don’t know. Q. How many? A. I don’t know. Q. Were there as many as 400? A. I don’t know. Q. Half as many as that? A. I don’t know. Q. Did you not have control over the Colchester works? A. I never have. Q. Did you not, through the agency of the Manufacturers’ Selling Company, have the practical control over the Colchester works? A. 1 did not. Q. Didn’t you purchase the Colchester works? A. Well, the United States Rubber Company purchased a mortgage ou the Colchester Company and the Colchester plant came under its control. Q. Yes — A. It was an industrial. Q. Were you not operative? A. No; it was purchased from the bankers. Q. Rrom what bankers? A. H. B. Hollins & Company. Q. Did they also control the Rubber Manufacturers’ Selling Company? A. That was included in the list, as I have before stated. No. 40.] ,509 Q. Were you not interested in that company? A. No. Q. Not at all? A. Not at all. Q. For advances made? A. I made advances; I had security. Q. To a very large amount, was it not? A. Well, it was con- siderable. (). And you were interested in the turning of this Colchester property, which was then practically bankrupt, and the Mer- chants' or Robber Sellers Selling Company which was then in a condition of financial prostration — you were interested in both of these concerns being turned over to the United States Rubber Company, were you not? A. I can’t— Q. Were you, or were you not? A. Under the impression that I was not; made advances, but I had no stock in either of these concerns. Q. 1 understand that; but you were interested in securing your advances, were you not? A. They were already secured. Q. Well, I mean in a general sense, you wanted to put them in better shape than they were? A. No — I am always interested about investments — Q. Well, that is natural; don’t you know, with- the interest you had in those two concerns, the number of workingmen that were engaged in the Colchester works, and that were discharged as the result of the sale of the property to this rubber combination? A. I want to state that we haven’t reduced the number of labor- ing — of wage earners. Q. I am not saying that you did; I ask you whether in refer- ence to this particular matter that from 400 to 500 men were dis- charged? A. I don’t know that they were; I know the Colchester was closed. Q. Will you swear that they were not? A. I will swear that to the best of my knowledge they were not. Q. You will? A. Yes; if you pin me down accurately to your question; the difficulty, Mr. Chairman, is that your question is not accurate in every particular. Q. I will make it so accurate that you can’t mistake it; as a result of the closing down of the Colchester works were from 400 or 500 men discharged? A. No. 506 [Senate, Q. From those works? A. If you want me to answer yes or no, no. 7 I Q. From those works? A. No. Q. Employees? A. There may have been; I don’t know. Q. Were from 400 to 500 working men, employees, bookkeepers and any other class of labor employed upon these works discharged from those works? A. I don’t know as to the number; but there were considerable; when the works closed down, naturally the laborers and employees were not wanted. Q. You then proceeded to Naugatuck and absorbed the Good- year Glove Company, did you not? A. To be specific, we did not proceed to Naugatuck; we bought, Mr. Chairman, the stock of the Goodyear Glove Company. Q. Yes, and absorbed it? A. No; we did not absorb it. Q. Did you hold a mortgage on the stock of that company in your treasury? A. We did. Q. Did you close down the Goodyear Glove Company? A. Not to my knowledge; the Goodyear Glove — not to my knowledge. Q. Will you swear that you did not? A. I will swear that to my knowledge I do not know that we closed it down. Q. Is the Goodyear Glove Company of Naugatuck running now? A. I don’t know; but in general I want to state that the Goodyear Glove Company, like the other companies, is managed by the original officers, officers originally appointed; it is a dis- tinct and separate and independent organization. Q. Do you wish to be understood to state that the United States Rubber Company is not accountable for the companies that it absorbed by purchase of stock, holding the stock in its treasury ? A. Yes; not fully. Q. Not responsible? A. No; they are interested as stockhold- ers; these corporations have independent existence, managed by independent officers. Q. Now, is it possible, Mr. Flint, that as treasurer of this United States Rubber Company you don’t know whether your factory at Naugatuck is running now or not? A. I do not. Q. You know that the Setauket factory of a competitor is not running, do you not? A. I have understood it is not. No. 40.] 507 Q. Now, is it a fact that the United States Rubber Company which had refused the president of the New Brunswick Company the right to manufacture third quality goods and closed down in the Winter of 1S94-95, started to manufacture third quality goods so-called in the Spring of the next year for the purpose of com- peting with the Setauket Company, driving down the price and closing the Setauket Company, which remains closed to-day? A. Personally, I do not know. Q. Will you swear that was not the operation? A. I will swear that I do not know as to it. Q. Will you? A. That is a part of the business, Mr. Chair- man. that I have no knowledge of. Q. Who has knowledge of that? A. I think that in a general way, Mr. Charles L. Johnson. Q The same gentleman — - A. The same gentleman who is in charge of the sales. Q. Can his attendance be secured here? A. I think so. Q. You say you have requested him to come? A. I asked him to come; I told him that on these points that I was not familiar with them, and he told me that he would come, and I have re- quested him to come before the committee. Mr. Lexow: I would like to examine Mr. Johnson before put- ting tnose final questions to you that I would like you to answer. Mr. Flint: I will endeavor to arrange to have him present, Mr. Chairman. Mr. Lexow: Then, as far as your testimony is concerned, I will discontinue further examination until I have answers to these questions. By Mr. Warner: Q. Do you mean to say that these independent companies are entirely independent of the United States Rubber Company? A. I mean to say that they are under independent management; they have got their old officers, and in the main they have got independent directors, and are run independently. 508 [Senate, Q. Do you mean to be understood as stating that they are inde- pendent of the United States Rubber Company? A. I mean to say that they are independent organizations; they have got old control — the United States Rubber Company holds the majority of more of the stock, and in that sense is the largest stockholder, but I mean to say that the management is independent; under independent management. Q. Were any of the directors of the United States Rubber Company directors in any of the subsidiary companies? A. Yes, to some extent; I am a director in one company; I am a director of the Glove Company, but I have only attended two meetings. Q. Is it not a fact that it has been the plan of the United States Rubber Company to have their directors elected directors in these different companies, so as to control the affairs of those companies to a very large extent? A. There are members who have been elected also directors of the United States Rubber Company, but those corporations are under separate and inde- pendent management and control. Q. But is it not a part of the plan and purpose of the United States Rubber Company to control those different companies by having their directors elected directors of these different com- panies; you know that? A. Not in the sense of control; there has been an endeavor to secure harmony of management in order to secure the economies, as I have before stated. Q. There is an entire harmony in management? A. Not al- ways; no; at times there are differences of view; and as I under- stand — I am not familiar with it in detail — -the parties connected with those corporations take positions that they hold — Q. What has become of the stock of these different companies? A. The stock of these corporations is in the box that I have be- fore referred to in New Brunswick. Q. Turned over to the United States Rubber Company? A. The United States Rubber Company bought that stock — Q. Yes — A. And paid for it. Q. I understand that you purchased a mortgage on the prop- erty of one of those companies? A. Yes. No. 40.] 509 Q. Was that mortgage purchased before any part of the stock of that company was purchased? A. I think it was. Q. Why was it purchased? A. From the fact that it was looked upon — it was offered by the bankers in connection with all the other properties, and the Simmons committee recommended its purchase. Q. Do you mean to say that the bankers owned that property before any movement was made to organize this Trust? A. I didn’t say that; but I mean to say that the mortgage was offered in conjunction with all the other stocks by the bankers to the United States Rubber Company, and it was purchased under the recommendation of the Simmons committee. Q. It was purchased by the bankers for the United States Rub- ber Company? A. No; it was offered by the bankers to the United States Rubber Company. Q. Wasn’t it a part of the plan that that was purchased by the bankers for the purpose of offering it to the United States Rubber Company? A. I can’t say that; what was done — it was offered as part of the properties which was offered to the United States Rubber Company by the bankers, and the Simmons committee recommended its purchase with all the other properties. By Mr. Lexow: Q. Are you sure of that? A. Well, I haven’t — I haven’t any doubt of it, Mr. Chairman; I might be mistaken. Q. When did the Simmons committee file its report? A. I think in early September, 1892. Q. Did they not file their report prior to the 12th day of May, 1893? A. Yes; I think they did. Q. You are certain of it? A. Yes; I am certain I said in the fall of 1892. Q. Now, isn’t it a fact that the mortgage and the stock of the Colchester Company and this Sellers’ Company were acquired about the 18th of August, 1893? A. The — as I have said be- fore — Q. Is that a fact or not? A. As I have before stated the Sell- 510 [Senate, ers’ Company stock, or a majority of it, was purchased in the offer made by the bankers and under the recommendation of the Simmons committee. Q. Then it was the balance of the stock of that Sellers’ Com- pany that was purchased about August the 12th, 1893, was it? A. It was purchased in 1893; I don’t remember the date. Q. And after the works of that company had been closed down? A. I don’t remember as to that. Q. Don’t you know that the works of the company were closed down? A. I do not. Q. Do you not know that the works of the company were closed down about simultaneously with the receipt of the majority hold- ing in the stock and the purchase of the bonds and mortgage re- ferred to by you? A. I don’t think they were closed until a long time after that. Q. Were they not closed in the early part of the year 1893? A. I don’t think they were. Q. Will you swear that they were not? A. Will not; I will not swear that they were not; but I don’t think they were; I can as- certain exactly. Q. These Colchester works had been in operation uninterrupt- edly from 1845 until they were closed immediately after the ac- quisition of the property by the rubber combination? A. I know that they were not. Q. When had they stopped? A. Those works were formerly in the possession of the Heywood Rubber Company, and the Hey- wood Rubber Company failed owing to the severity of the com- petition of the companies having better facilities, and then the works must have closed down for a considerable period. Q. Are you now simply guessing, or do you know this as a fact? A. I am — I know that they must have closed down after the fail- ure of the Heywood Rubber Company which owned them. Q. For how long? A. Well, I should think for a year or two, and I — Q. Do you know this? A. I do not; but I know it must have been for some period. No. 40.] 511 Q. How long had they been running prior to the acquisition of the works by the Trust? A. Several years. Q. How many? A. I don’t remember. Q. The Rubber Manufacturing Sellers’ Company was organ- ized for the specific purpose of floating the goods made by your company, was it not? A. I should not say “ floating.” Q. Dispose of them? A. It was a selling company, and sold other goods besides the Colchester, but that was the largest pro- duct that they sold. By Mr. Warner: Q. Was not this mortgage over the Colchester property turned over to the bankers with the view to give the United States Rub- ber Company the ultimate control of that company? A. I don’t know with what view; it was a large mortgage that was offered, as I have before stated, and purchased in the bankers’ agreement with the United States Rubber Company. Q. Now, the bankers purchased this mortgage as the agents of the United States Rubber Company? A. No; they did not. Q. You have testified that you gave them a commission for their services? A. I have answered the question. Q. All right; and wasn’t it with the view of coercing the stock- holders in entering into the Trust combination? A. No; I do. not think it was. Q. But it did; it did result in a majority of the stockholders transferring their stock to the bankers? A. I do not think that they did. Q. Did what? A. Transfer their stock to the bankers. Q. To whom did they transfer their stock? A. I think the stock was transferred to the United States Rubber Company. Q. So there was an instance wherein the bankers did not pur- chase the stock for the company? A. Yes. Q. Did they buy the mortgage? A. They purchased the mort- gage. Q. With the view — A. No; I have not answered that before; that they did not purchase it for the company. 512 [Senate, Q. For what did they receive the $500,000 worth or stock then? A. They purchased — the bankers had possession of certain prop- erties, certain stock, this mortgage; they offered it to the United States Rubber Company for a certain consideration, and that of- fer was accepted by the United States Rubber Company and pur- chased. Q. And that consideration was a commission for their services as you have testified, was it not? A. The — Q. Wasn’t it? A. They were not — they were not in any sense the agents of the United States Rubber Company; it was an inde- pendent offer of securities by the bankers; they were on one side of that trade and the United States Rubber Company was on the other. Q. Was it purchased by the bankers with the view of turning over to the United States Rubber Company? A. I do not know as far as the views of the bankers are concerned; that is a matter that they will have to answer for themselves. Q. Don’t you. know that it was a part of the scheme? A. I am they should buy these properties with a view of turning them over to the United States Rubber Company? A. I think that they were. Q. Don’t you know that it was a part of the scheme? A. I am satisfied that they purchased these properties with the view of disposing of them to a rubber company that could avail of the advantages of having these corporations under one control so as to avail of the economies that result — Q. Then these properties were purchased by them with the view to turn them over to the United States Rubber Company at a fixed price which was understood at the time they purchased the properties? A. I — Q. Now, isn’t that the case? (Question repeated.) A. No. Q. Then there was an understanding that the United States Rubber Company was to purchase these properties of the bankers at the time they purchased the properties of these different cor- porations? A. That was expected. No. 40.] 513 Q. There was an understanding? A. It was anticipated that they would. By Mr. Bedell: Q. Wasn’t there an agreement that they would? A. No; there was no agreement entered into by the United States Rubber Company until the Fall of 1892, when the United States Rubber Company appointed a committee, the Simmons Committee, and under its recommendation bought these properties; but there was no agreement of any kind or nature whatsoever on the part of the United States Rubber Company to buy any properties prior to that. By Mr. Warner: Q. But there was an agreement, was there not, on the part of the promoters of this Trust, with a company to be formed called the United States Rubber Company, that a company be formed for the purchase of these properties of the bankers at a fixed price which was understood? A. No; not that I know of. Q. Or at the price which was to be fixed by the appraisers? A. Not that I know of. a Q. Now, why was it that they went around in this roundabout way of transferring the property to the bankers first before it was turned over to the Trust? A. That is a matter that the bank- ers are the best judges of; but they were in the banking business; they saw an opportunity of securing certain securities and certain property; they saw an opportunity of making a legitimate bank- ing profit; they obtained these properties and offered them to the United States Rubber Company in the way in which I have stated. Q. Then you will swear now that there was no understanding? A. There was no understanding with the United States Rubber Company. Q. Between them and the promoters of the United States Rub- ber Company that the company would take these properties of 33 514 [Senate, the bankers at the time they purchased the properties from the different corporations? A. Not that I know of. By Mr. Bedell: Q. You say, Mr. Flint, that there was no' understanding with the United States Rubber Company; now, who was the under- standing with? You don’t mean to have this understood; that those bankers entered into a purchase of all these respective sub- sidiary companies, took their stock, without having a full knowl- edge upon their part that that stock was to be taken off of their hands by some one; now, who was that some one? A. Naturally, when the bankers — ; Q. Answer my question; who was that some one? Don’t you know? A. I know that there was no agreement with the United States Rubber Company. Q. Well who was the agreement with? A. There was no agreement* (Question repeated.) A. There was no agreement ; I know that they expected to dis- pose of these securities to the United States Rubber Company. Q. What reason had they to expect that? A. That you will have to ask them. Q. You say that they had reason to expect it? A. I think they did. Q. How did you know they had reason to expect? You must have had something upon which to base your ideas? A. From the fact that it would be natural for a corporation engaged in — Q. I don’t want you to tell me what would be natural; you base your statement upon some fact; what is that fact? A. The fact is the general fact that the United States wanted to buy rubber shoe plants, rubber manufacturing plants, and the bankers were naturally aware of that fact. Q. They were aware of it, but still — A. (Interrupting) Or an- ticipated — Q. (Continuing) Simply from the fact that they knew that the United States Rubber Company wanted to purchase, they pur- Ko. 40.] 515 chased, reiving upon the very fact that because the United States Rubber Company wanted it that they would take it. A. They anticipated — (Question repeated.) A. I mean to say they anticipated they would take it; there was no agreement. Q. What was their foundation for anticipation? A. You will have to ask them. Q. You state that you knew they anticipated it; where did you reach that conclusion; upon what facts? A. By the develop- ments as they have been brought out here by the testimony. Q. Here? A. Well, by the developments that I have already stated. Mr. Lexow: We have no testimony but yours. A. Well, you have my testimony that these properties were offered and that they were accepted. Mr. Bedell. I would like to ask you, Mr. Flint, if you are willing to swear positively that you have no knowledge on your part of any existing agreement, either verbal or in writing, be- tween the bankers and the United States Rubber Company, or any officer of that company, or any person who proposed to be- come an officer or director of that company, to the effect that the stock purchased of these subsidiary companies was not to be taken by the United State Rubber Company, or a person inter- ested therein, or for the benefit of the rubber company at a fixed price? A. I have no knowledge of any agreement. By Mr. Warner: j Q. Any understanding — A. I have no knowledge. By Mr. Bedell: Q. Written or oral? A. I have no knowledge of any agree- ment, no knowledge of any understanding until the purchase was made; naturally, it was anticipated, but I know of no agree- ment; I don’t see how — Q. All done on conjecture? A. All done on conjecture. 516 [Senate, By Mr. Warner: Q. With no idea that these properties should be turned event- ually into this — A. The idea, as I have stated, probably was in the minds of the bankers — Q. And they are the promoters of this Trust, then? A. I don’t — no, I don’t think you can say that; you have got before you — the document I have furnished the committee- — the incor- porators of this company. Q. Now, as I understand, they purchased these properties at a given price, which was much less than the capitalization, the aggregate capitalization, that is the aggregate price of these dif- ferent properties — much less than the capitalization of the Trust — and still they turned these properties over to the United States Rubber Company, and only received $500,000 in stock of the com- pany? A. I have already explained the capitalization; that they didn’t represent the value; these properties were appraised, the value was appraised, and it was appraised at a certain figure. Q. This stock was turned over to the United States Rubber Company by the bankers, was transferred to them with the view of having them turn it over to the individual stockholders of these several corporations, was it not? A. I don’t think there was any view’ with regard to it — Q. Did they turn it over; didn’t they? A. The bankers offered stocks and properties; they received a certain amount from the United States Rubber Company; that stock, to a very large ex- tent, they turned over, so I am informed, and believe, to the stockholders of the different companies mentioned. Q. Now, Mr. Flint, you don’t mean to have this committee be- lieve that the bankers had no understanding with the people who were to take the property ultimately that they were not acting as agents for this Trust Company; either you don’t want us to believe there w r as any understanding with the view of turning this property over before they purchased the different proper- ties— A. They were acting as vendors, and the offer was very clearly defined in the offer of the bankers and the report of the committee and acceptance of it by the United States Rubber Company. No. 40.] 517 Q. That is so understood— A. I have explained that fully and plainly; there was no understanding; the transaction was con- ducted regularly in the way I have stated; I think I have covered that point. Q. At the time of the formation of this Trust in how many companies did you own stock? A. I didn't have a direct inter- est in any; but through a crude rubber company in which I was interested, I did have some small interest, but that was exceed- ingly small. Q. You were not a director in any of the companies? A. I was not a director in any of the shoe companies; was never con- nected with any of them; I was not in the manufacture of rubber boots and shoes; I was a crude rubber merchant importing crude rubber, and I was selling crude rubber to these concerns; that is the way I made their acquaintance. Q. How long after the acquisition of this mortgage by the bankers was it that they obtained a control of the major part of the stock of the Colchester Company? A. I don't know how long, but I should suppose it was quite a number of months; 1 could not give the date; I will be glad to look it up for you. Q. And did it not result in forcing the stockholders of that company to transfer that stock to the bankers? A. I think they did it voluntarily; but the man who did that was George Wat- kinson; he is a manufacturer of rubber boots and shoes; he can answer that question; but I know of no coercion. Q. It did result in the stockholders holding a majority of the stock, disposing of their holdings eventually or subsequently? A. The stock of the Colchester Rubber Company was purchased; all of the stock there was purchased by the United States Rubber Company. Q. That is eventually? A. Eventually. Q. But in the first instance they purchased a major part of it as you have testified now? A. I don't remember of testifying that they did., Q. Well, that is a fact, isn’t it? A. No. Well, you did testify to it. A. That is a matter of record? 518 [Senate, Q. Yes. A. I don’t think I did; in fact, I am satisfied I did not. Q. Well, you mean to say that all the stock of the Colchester Company was turned over at one time? A. I think it was. Q. To whom? A. To the United States Rubber Company. By Mr. Bedell r Q. Didn’t the bankers acquire a majority of the stock first and afterward acquire the minority part? A. I don’t think they did. Q. They acquired it all at once? A. I think the United States Rubber Company purchased all. Q. I am not speaking of when the United States Rubber Com- pany purchased that; I am speaking of when the bankers took it; did the bankers acquire all this stock at one time? A. I don’t think that the bankers — they may have been a party to the trans- action. Q. Don’t you know it as a fact whether or not they did? A. I don’t remember; but I remember this, that the United States Rubber Company purchased, I think, all of the stock — - Q. I would like to have an answer to my question. The ques- tion that I ask you is whether the bankers did not first purchase a majority of the stock, not the entire amount of the stock; do you know? A. I don’t think they did — I don’t know; I don’t think they did. Q. Are you willing to swear that they did not? A. No; I will get the facts. Q. I repeat; are you willing to swear that they did not? A. I will get the facts. Q. We would like to be furnished with the facts with respect to it. A. I will get the facts on that point. By Mr. Lexow : Q. The facts were, were they not, that on the 18th of August, 1893, $323,400 of common stock and $149,000 of preferred stock of the United States Rubber Company were exchanged for the whole capital stock of the Colchester Company, amounting to $400,000; is that the fact or isn’t it? (Question repeated.) No. 40.] 519 A. To give a specific answer I should say no; I will explain it. Q. Didn't you make a declaration to the New York Stock Ex- change in the following words, you and Mr. Evans — you as treas- urer and Mr. Evans as president: “These shares have been is- sued in payment of $400,000 of stock, the total capital stock of “the Colchester Rubber Company of Colchester, Connecticut, and “for $149,000 of the stock of the Rubber Manufacturers’ Sellers’ “Company of Colchester, Connecticut, being the balance not pre- “viously purchased by us, making, with the $151,000 formerly pur- chased its entire capital stock of $300,000.” Witness : That statement does not agree with your first ques- tion. Mr. Lexow: I see it does not. Witness: I think the latter statement is — By Mr. Lexow: . Q. That is the statement you made to the stock exchange? A. I don’t remember specifically, but in general I think it is cor- rect, and if desired, I can ascertain the facts. Q. Now, didn’t you file in your official capacity as treasurer with the New York Stock Exchange for the purpose of listing these securities this statement which I have now repeated, signed by Mr. Evans and vice-president of the company, and by Mr. Flint as treasurer? A. I think — I do not recollect. Q. Don’t you know? A. I don’t remember. Q. Is it possible, Mr. Flint, that you issued $500,000 worth of stock without knowing wdiether you made a statement in connec- tion wdth it or not? A. I might not be able to remember all the facts; I am engaged in other business, but I will be very glad to verify it, and I think your statement is correct. Q. That implies, or does it not, that you bought all the stock of the Colchester Rubber Company at once; that you had acquired previously the mortgage on the Colchester works; that you had acquired previously $151,000 worth of capital stock of the Sellers Company, so that with this transaction added you acquired full control of both the Colchester Rubber Company and the Sellers 520 [Senate, Company? A. My testimony already in general confirms those views. Q. Well, that is a fact, is it not? A. I think so. Q. I don’t know whether your testimony confirms that or not? A. I think that is correct. Q. Well, it would be a natural inquiry, when you understood that the Colchester Company was in straits, bankrupt practically, why so much capital stock of the United States Rubber Company was issued in purchase of the shares of that company of which you then owned the first mortgage; why did you issue stock of the United States Rubber Company in purchase of worthless shares of the Colchester Company when you already owned a mortgage of $149,000 upon the Colchester works? A. They were not considered as worthless shares; they were considered valu- able, and the best evidence that they were so considered was in the fact that the parties representing the United States Rubber Company in making that purchase, had no interest directly or in- directly, of any kind whatsoever, in the Colchester Company, or the Rubber Manufacturers’ Sellers Company, except in the owner- ship of interest in the mortgage and in the 1501 shares as before stated; a committee was appointed, of which Mr. Robert D. Evans was the chairman, a man thoroughly well informed as to values, and Robert D. Evans made that purchase representing the United States Rubber Company. Q. Don’t you know that at the time of the issue of that stock, that is to say, that previous to the 18th of August, 1893, this Col- chester factory had been closed? A. I don’t know it; I can as- certain. Q. Will you say that it was not? A. I can say positively that I don’t know. r Q. Now, will you state to the committee what element of value there was to the United States Rubber Company in a property in which was either closed down, or intended to be closed down by the United States Rubber Company upon acquisition? A. These companies were doing a very large business; they had a great many customers; they had trade-marks; they had processes that No. 40.] 521 were of value to the United States Rubber Company; the machin- ery cf the United States Rubber Company was desired — the ma- chinery that was in the Colchester Company’s plant was desired by the United States Rubber Company or used later in order to increase the capacity of other plants, as I have before explained. Q. What possible element of value for the United States Rub- ber Company was there in the acquisition of the stock of the Manufacturers’ Sellers Company, which, as you have stated, was simply a company to sell rubber goods of the Colchester make? A. I have stated that they sold other goods; but the Manufacturers’ Selling Company had a great many correspondents, was doing a large business; there was also — Mr. George Watkinson w r as an officer of the Rubber Manufacturers’ Selling Company, and he was appointed the assistant general manager of the United States Rubber Company, under a service contract, whereby at that time he agreed to give his services and facilities to the United States Rubber Company; he was one of the best known men in the rubber business; and the committee, of which Mr. Evans was chairman, determined that it was to the interests of the United States Rubber Company to buy this property. Q. Is that your complete answer? A. As far as I can — Q. Will you please explain what element of value there is in a factory that you propose to close, except as it may arise from the desire to destroy its competition as a free factory? A. The consideration as to the value of that property was one that only an expert in manufacturing and in the rubber shoe business could base a proper opinion on; Mr. Evans, one of the most suc- cessful men in the rubber industry, was the chairman of a com- mittee that passed on that question; and he evidently saw and recognized the value, and he had no interest of any kind or nature in the Colchester, or the Selling Company, and he deemed it to his advantage, and on the lines of enlightened selfishness, he recommended or brought about the purchase of those proper- ties. 522 [Senate, By Mr. Warner : Q. How large was this mortgage on the Colchester property? A. It was over $100,000. By Mr. Lexow: Q. Was it not $149,000? A. I don’t remember the exact sum. By Mr. Warner: Q. Was any suit ever brought to foreclose that mortgage? A. I don’t think there was; I don’t think any foreclosure suit was ever brought. By Mr. Warner: Q. Now, as I understand it, this appraisal committee made the appraisal at t the instance of the United States Rubber Company? A. They were regularly appointed by the directors of the United States Rubber Company. Q. And the understanding was that the company was to be bound by their appraisals? A. No; the understanding was that they should make an investigation of the affairs of these corpo- rations, and that they should make a report to the directors of the United States Rubber Company as to values; they made that recommendation which the directors of the United States Rub- ber Company acted on. Q. Yes; and there was an understanding that the bankers were also to act on their report and on their appraisal, was there not? A. The bankers made the offer; the bankers were the ven- ders; there was no — Q. Yes, I know; but the appraisal was made, was it not, be- fore the bankers purchased the property? A. No, sir. Q. Was not the appraisal made by the appraisal committee be- fore the bankers acquired this property? A. I don’t think it was; I think the properties were offered by the bankers in the early part of September; and the bankers were the venders and the vendees purchased under the recommendation by their commit- tee. No. 40.] 523 Q. Yes; it so happened, did it not, that the bankers purchased at the figures suggested by the appraisal committee, that were to be given — A. The directors of the United States Rubber Com- pany— Q. Isn’t that the case; didn't the bankers purchase at the fig- ures that were given by the appraisers as to the values of these different properties? (Question repeated). A. I can’t answer as to that. Q. Wasn’t it a fact that that appraisal was made before the bankers had purchased these properties? A. I can’t answer on that point. Q. You ai’e one of the promoters of the whole undertaking, were you not? A. I don’t know what you call a “promoter”; I was interested in the organization; I had an interest in it; but I don’t style myself a promoter; I am a merchant having an inter- est in this class of business, or in this specific business. Q. The bankers were in the rubber business, I take it? A. The bankers were not; the bankers were in the banking business, do- ing a regular banking business, and they took an interest in this organization, as has been done by many other bankers in a simi- lar way. Q. And they went out and purchased all these different prop- erties at sums fixed by themselves, and turned them over to the Trust without any understanding between them and the promot- ers of the Trust? A. I know of no understanding; they secured these properties; offered them — they made a regular offer of them; the Simmons Committee recommended the purchase at a certain price and the directors of the United States Rubber Com- pany— Mr. Lexow: We all know about that. Witness: Well, I think I have testified as fully as I can on that point and that it has been covered — Mr. Lexow: I think you have covered that twenty times; the only question that you have not covered is one that arises as a natural inference from the transaction; that there was an under- 524 [Senate, lying agreement of some kind that operated upon the bankers on the one hand and the purchasing committee of the company on the other hand; that it was not simply a coincidence that this stock had been accumulated together for the purpose of its trans- fer to your company. Now, you don’t dispute the proposition that there was an underlying agreement? A. I have stated the facts; I don’t know of any underlying agreement; I have stated the position, but of course every one is free to draw such infer- ences as they choose. Q. And although you were active in every stage of the organi- zation of that company you don’t know whether there was or not personally? A. You can understand — Q. Do you, Mr. Flint? A. I don’t know of any such agreement, but a great deal was left to counsel; this was a business with which I was not particularly familiar — in this class of business; I am a merchant — an exporter of American manufactured goods. Q. Well, who authorized the collection of these various stock interests which were afterward appraised and for which the capi- tal stock of the United States Company was issued? Who au- thorized that? A. The stockholders themselves. Q. Didn’t you? A. I didn’t authorize — Q. You were not a party to it? A. I made no authorization of it. Q. Were you not a party to it — don’t split hairs — you must have been a party or not? A. You want me to answer specifi- cally, and — (Question repeated.) A. There was no authorization; the Hollins Company received the stock; they received the stock from the United States Rubber Company; then they settled with the stockholders of these re- spective companies, and as to the details of that you will have to ask the bankers. Q. Was it simply a coincidence that all the stockholdings of these various companies found their lodgment into one hand for the purpose of its offer to you? A. I think the bankers — I don’t think it was a coincidence, that effort on the part of the bankers Ko. 40.] 525 to secure such securities — I think it was a work that they took up; they saw an opportunity — Q. In conjunction with the United States Rubber Company? A. No; not in conjunction with the United States Rubber Com- pany. Q. Isn't it a fact that the presidents of the sub-companies are all directors in the United States Rubber Company? A. No. Q. What exception is there to that — is it a rule? A. No. Q. You state that positively? A. State it positively; that Is to say, when you speak of a rule— there are many of them that are. Q. Isn’t it a fact that almost every president of every sub-com- pany is a director in the United States Rubber Company? A. I can think of cases where they are not in my own company. Q. They are the exception not the rule? A. I can take the time to go over the list and give you the facts. Q. Those factories that are closed have no representatives through their respective presidents on the board of the United States Rubber Company, but those factories that are operative have that representation, do they not? A. No; not all; some of them have. Q. Is not the president of the National India Rubber Company a member of the board? A. Yes. Q. The secretary of the New Jersey Company? A. No. Q. Julius Heslen? A. No. Q. Is not? A. No. Q. Has there been lately a change in the directorate? A. Not lately. Q. Was Mr. Evans president of the American Rubber Com- pany when he was a director on your board or not? A. Yes. Q. Mr. J. Hobbs Ford, president of the Mutual Rubber Com- pany? A. Yes. Q. Mr. Henry L. Hotchkiss, president the L. Candee Company? A. Yes. Q. Mr. George H. Hood, president of the Boston Rubber Com- pany? A. No. 520 [Senate, Q. Has be left the board? A. He is not in the board. Q. Has he left the board? A. He was not elected. Q. Never was? A. Not at the last meeting. Q. Who took his place on the board? A. I don’t know; there was no special place; there was a re-election of directors. Q. Any representative of the Boston Rubber Company? A. No. Q. Or of the L. Candee Company? A. I don’t think they acted as representatives. Q. I am not asking that? A. They were individuals; you asked if there was any representative of L. Candee Company. Q. Yes? A. Why, these men are individuals, elected as direc- tors of the United States Rubber Company. Q. I understand; that a gentleman serving in that capacity in the sub-company serves as director upon your board in the United States Rubber Company? A. In what capacity? Q. As director? A. A gentleman — well, to be specific, Mr. Henry L. Hotchkiss, who is director of the U Candee Company, is also a director of the United States Rubber Company. Q. Isn’t he president of the L. Candee Company? A. I think he is; in fact, I know he is. Q. Mr. Hood, president of the Boston Rubber Company? A. Is not a director of the United States Rubber Company. Q. Who has taken his place? A. He was not re-elected; there was no special place; there was a re-election of directors — Q. Has not a director of the Boston Rubber Company been elected director upon the board of the United States Rubber Company? A. I think so. Q. James P. Langdon, president of the New Brunswick Com- pany ; is he a member of the board? A. No. Q. Is any director of the New Brunswick Rubber Company now a member of your board? A. I don’t know; but I think there may be. Q. George A. Lewis, president of the Goodyear Metallic Rub- ber Shoe Company, is he a member of your board? A. I think not. No. 40.] 527 Q. Any director of tlie Goodyear Metallic Rubber Shoe Com- pany a member of your board at present? A. I think so. Q. M. C. Martin, president of the New Jersey Rubber Shoe Company, is he a member of your board? A. M. C. Martin is a member of the board, but I don’t think he is an officer of the New Jersey Rubber Shoe Company. Q. President or treasurer? A. I think not. Q. Well, are you positive about that? A. Not positive; but that is my opinion. Q. Director of the New Jersey Rubber Shoe Company? A. I don’t think he is. By Mr. Bedell: Q. When did he cease so to be? A. I don’t know — Q. He was? A. Yes; he was a director. By Mr. Lexow: Q. Frederick L. Shepard, president of the Goodyear Rubber Company and Rubber Clothing Company? A. Frederick L. Shepard is a member of the Board of Directors, but the United States Rubber Company has no interest whatsoever in the Good- year Rubber Company, or the Union Company, or the Lambert- ville Company in which Mr. Shepard is largely interested. Q. Are they competing companies? A. They are competing companies. Q. Are there essentially any competing companies? Or is it not the fact that the price of goods by an agreement between the companies is definitely fixed at the same rate? A. There is no agreement between the companies. Q. Does the fact remain that the goods offered by the various companies competing, ostensibly competing with your company have the same price in the market for the same grade? A. There are certain standard grades that are alike; on the general eco- nomic principle that the lowest price fixes the price of a market, but in no other way. 528 [Senate, Q. Samuel L. Williams, president of tlie Lycoming Rubber Company, is he a member of the board? A. He is. Q. What company is there, then, that is active — that is not closed — that has not a representative on the board of the United States Rubber Company who is a director in the active company which forms a constituent of your consolidation? A. Mr. Chair- man — i l (Question repeated.) A. They are not as representatives. Q. I understand that? A. Well, there ape no representatives of these companies in that sense that are members of the board of the United States Rubber Company; I have answered your in- quiries as to each corporation except that you didn’t ask me in regard to the Goodyear India Rubber Glove Company; Mr. Ver- meule is president of that company and Mr. Van Yleet treasurer, and neither one of them is in the board of the United States Rub- ber Company. Q. Is that the only active company — A. No. Q. Is no director of that company a member of the board? A. Yes; there are directors. Q. Is there any active company in the consolidation a director of which is not upon your Board of Directors? A. I think that — at present I do not recollect any companies where there is not some member of the Board of Directors of the United States Rub- ber Company; we have to get men who understand the rubber business to be in these concerns., Q. And do you still maintain the position that the United States Rubber Company, although its Board of Directors is com- posed of directors of the constituent companies, does not control the policy and the business of those constituent companies? A. I do know that there is an independent management, and that there are many directors in the United States Rubber Company who have no connection with any of these sub-companies. Q. Was there not, prior to the 1st day of April, 1893, an ar- rangement or understanding reached between you and the various companies ostensibly competing against the United States Rub- No. 40.] 529 ber Company for uniformity and equality of price of the goods sold? A. No; there has always been, as long as I have been in the business, some nineteen years, a certain uniformity that re- sults from the fact that the consumer buys at the lowest figure the standard goods ; there has been for twenty odd years a certain uniformity of price; it has been necessary; the rubber shoe busi- ness is one where quality depends on trade mark; rubber shoes can be made for any price; there are from half a dozen to twelve compounds in every shoe, and those compounds are made up of twenty or thirty different kinds of rubber, whiting, lampblack, litharge, rosin and sulphur in varying quantities; you can’t tell as to the quality, you can’t analyze the component parts, and for the purpose of sustaining the quality of rubber boots and shoes; for that purpose there has been a certain understanding in order that a rubber shoe can be given to the public of a proper qual- ity — this is coincidence — I won’t say there was an understanding. Mr. Lexow: You understand that we are not through with your examination; that we would like to examine you after the production of the information that we have requested. A. I un- derstand that, sir. By Mr. Warner: Q. As I understand the report of this appraisal committee shows the values of these different properties? A. I have never •seen it. Q. As appraised by them? A. I have never seen it; I have al- ready explained that I think fully that these properties were offered by the bankers in lump, passed on by the Simmons com- mittee, and bought for a lump sum from the bankers. Q. And also in arriving at this lump sum they estimated the value of these properties? A. That was the work of the Sim- mons committee; they had full and complete reports, as I hare stated, amounting to some 3,000 pages of data on which they based their opinion; that data as far as I am concerned, I would be very glad to have the committee see it — I don't think there i3 •any reason why it should not be seen. 34 530 [Senate, Q. Will you produce that? A. It is not in my possession; it is not in the possession of the United States Rubber Company, and never has been in the possession of the United States Rubber Company, and never has been in my possession. By Mr. Lexow: Q. I understood that it was in New Jersey, in the safe deposit vault of the company; that was 3 T our testimony before? A. What do you mean by “that?” Q. The report of the Simmons committee? A. The report of the Simmons committee, I have already stated, is in the archives of the United States Rubber Company; it is with the important documents; but it was and is in the possession of the United States Company. By Mr. Bedell: Q. What did you mean by saying, what did you refer to when you stated the United States Rubber Company did not have the possession of it? A. I understood that you referred to certain expert data on which that report was based; there are some three thousand pages of expert data on which this committee based their report. Q. We understand that; you have the report, but not the data? A . I have the report but not the data. By Mr. McCarren: Q. I understand you to say that prior to the purchase or the absorption of some of the companies purchased or absorbed by the United States Rubber Company that they were in a condition of bankruptcy? A. They were; the Para Rubber Shoe Company to which I referred yesterday, — I think the investment there was one million dollars; in their endeavor to establish new trade marks I think they lost, say about three-quarters of a million of dollars, and that company was — had lost the greater part of their capital, and it was closed down before the United States Rubber Company was organized. No. 40.] 531 Q. What was the name of that company? A. The Para Rub- ber Shoe Company of South Framingham. Q. Well, was there any other company in a condition of in- solvency or bankruptcy at the time of the organization of the United States Rubber Company? A. I have not any in mind at the present time — but I know that in the attempt to establish new trade-marks, to create organizations, that companies — cer- tain companies, new companies, were at a disadvantage in com- peting with these companies that I have stated, that were organ- ized from 1S42 to 1S49 — these older companies had advantages, and in that competition, as I have stated, the Para Rubber Shoe Company lost three-quarters of a million dollars, and other com- panies suffered in that extreme competition, and the result was that those companies were not only forced to reduce the wages of laborers, wages of workmen, but in addition to that, many of those companies made what I would call counterfeit goods; they could not get a profit making honest goods, and they turned out counterfeits. Q. What was the financial condition, if you know, of the Col- chester Company, when purchased by the United States Rubber Company? A. I don't know as to its financial condition, but the men familiar with the boot and shoe business, who knew as to valuing properties, and who understood this business, went there with expert accountants, made an examination, went through and looked into the affairs; but personally, I don’t have the detailed knowledge that would enable me to form an opinion. Q. How long had the Para Company been in existence at the time of its suspension; at the time of its purchase by the United States Rubber Company? A. I think it had been in existence then five or six years, and during which period it lost this money, as 1 have stated. Q. Had it been a competitor with the United States Rubber Company? A. Well, it had competed with these older concerns, some of which went into the United States Rubber Company, and in that competition they lost three-quarters of their capital. Q. Well, was the United States Rubber Company in any way 532 [Senate, responsible for the insolvency of this Para Company or its losses? A. The United States Rubber Company did not exist until after the Para Rubber Shoe Company lost about three-quarters of a million dollars. Q. It came into existence subsequent to that time? A. It came into existence subsequent to that time. Q. Are you very largely interested in the export trade? A. That is my business; I can give full information on that subject; I think I am one of the largest buyers of manufactured goods for export in the United States; I am dealing in every line of manu factured products, and marketing them in Africa, South America and in all parts of the world. Q. What is the effect on the various companies of the export trade? A. The effect is that in times of depression such as we have had during this period of uncertainty as to legislation on financial and other subjects during those periods of depression, the export trade takes a considerable, a large amount of manu- factured goods, so that many factories were running during the past year that would otherwise have been closed; and further- more I want to make this point: that being thoroughly familiar with the export trade — I want to make the point that of our two hundred and twenty-eight millions of exports of manufactured goods, that the greater part of those goods are produced by these large manufacturing organizations; they are enabled to compete with the pauper labor of the densely populated countries, owing to the fact that they utilize labor saving machinery; while the articles that — where there has not been this centralization of manufacture and the consequent ‘improvement of organization, that are produced by hand, are almost altogether produced in the cheap labor countries and we are not able to compete; to-day the American wage earner in this country is enabled to sustain his rate of wages so that — owing to the existence of these su- perior organizations of manufacture — Q. Well, then, you mean to say that the question of quantity produced has considerable to do with the cost of the merchandise? A. I mean to say that through large production and the centrali- No. 40.] 533 zation of manufacture which is going on in every industry — I mean to say that we are thus enabled to pay the American wage earner full rates of wages and at the same time compete with the cheaplabor countries of Europe, of Asia and of Japan, audin those branches of industry where that benefit, that advantage — where the articles are produced by hand labor without the utilization of labor saving machinery — in those cases the principal trade is done by the cheap labor countries of Europe and Asia. Q. What in your opinion is the effect of combinations on labor? A. I think that the only way in which the wages of the American wage earner can be sustained is by the centralization of manu- facture and the economies that result from superior organization in connection with the utilization of labor saving machinery and devices and methods. By Mr. Lexow : Q. That means the saving of labor and the displacement of labor instead of the additional employment of labor, does it not? A. I mean to say that the drudgery performed by the Chinaman and the Japanese and the poor people of Europe is performed by labor saving machines ; I mean to say that this country has prac- tically unlimited resources for development for the present and for many years to come; that there is ample opportunity in the United States for laborers, and if we can get labor saving machin- ery to do the drudgery and the laborer can boss that, those ma- chines — I mean to say that that is in the interest of the American workman. By Mr. McCarren: Q. Mr. Flint, you stated yesterday, as I remember, that in the assets of these companies absorbed or purchased by the United States Rubber Company, that the trade-mark was of considerable value; what do you mean by that, explain that? A. I mean to say that in this business the consumer is dependent upon the trade-mark; the trade mark represents the integrity of the manu- 534 [Senate, facturer, or it represents the reverse; the successful manufactur- ers — these manufacturers that have stood the test of time over the forty years down to the present day, have made honest goods for a period of over fifty years ; I mean to say that that trade-mark is, that the public are dependent on that trade-mark for a satis- factory quality of rubbers; there is no man living that can ana- lyze the component parts of rubber; most every other product, the productions of these other industries that you are investigating, can be analyzed by a chemist; but in the case of rubber shoes there is a case where the quality cannot be judged of by a con- sumer, and the trade-mark that has stood the test of half a cen- tury is of immense value, and when I tell you that three-quarters of a million was lost by the Para Rubber Company; it was owing to the fact that they could not establish that standing, a position that would enable them to compete with these concerns who had turned out honest goods for such a long period of time; and dur- ing the past — I will say this: During the past, say five years prior to the organization of the United States Rubber Company the greater part of the capital which was used in an endeavor to establish new trade-marks was lost. Q. lias not the closing of some of these factories by the com- bination resulted in driving out of employment a large amount of labor? A. It is in the interest of every one — the United States Rubber Company — to employ just as many laborers as possible; that is to say they don't want to employ labor as useless labor, and the American wage-earner don’t want to be employed unless he can render a proper service, and we make, not only have we made all the goods which the country will take, but owing to the periods of depression through which we have been passing we have found it impossible to market all the goods we could make; we have had to carry big stocks and we have kept our factories running in order to keep our labor employed; I do not mean to say when I say that, but what it has been in the interest of the corporation, because it takes seven years to educate a workman to manufacture rubber shoes, and it has been our inter- est to take care of those workmen; we have not reduced the No. 40.] 535 wages although during this period — we have kept our wages — and we have given them more work than the market would take the product for, hoping for better times, and realizing the neces- sity of taking care of our experienced laborers. By Mr. Lexow : Q. Isn’t it a fact that you have increased the price of that pro- duct, and that may have something to do with the diminished de- mand? A. I think— the fact of it is that you can’t consider price unless you consider quality; there never has been a time in the history of the rubber business when so large an amount of rubber boots and shoes have been sold as cheap as they have been sold by the United States Rubber Company. Q. Do you state that as a fact, Mr. Flint, of your own knowl- edge.? A. I state it — no; not from my own knowledge, but Mr. Johnson will verify it I am satisfied, but I state it on what I hear; but on the other hand the public want quality. Q. Is it not a fact that you have advanced the price of rubber boots in 1893, above what they ruled before from $1.90 to $2.00 and $2.60, and isn’t the price of rubber boots to-day $2.55? A. Now, in general, Mr. Chairman — Q. Is not that a fact? A. I don’t know; I know that the price is generally. Q. Now, when you say that you have made more goods than the market will buy isn’t it possible that the element of demand may be lacking because you have advanced the price of your goods to the consumer? A. No, sir; on the contrary — as far as — for an intelligent management of any industrial no man can be a successful manager who does not consider the interest of the con- sumer; I would predict that any organization that did not take that into consideration and make that his principal aim, that any such organization is bound to fail — it is only a question of time. Q. Isn’t the principle upon w 7 hich the organization is conducted the making of a dividend upon the stock issue, and are not prices fixed with reference to that fact? A. No; we make all the money for our 6,000 stockholders that we lawfully can, and in order to 536 [Senate, make the most money for tliem we have got to consider the in- terest of the consumer, and that we have done, and every one knows it who wears shoes, knows that since the organization of the United States Rubber Company that we have very substan- tially improved the quality. Q. The fact is, is it not, that you desire to operate in combina- tion a number of otherwise free and independent concerns com- peting against each other so that you will not produce more than the public will buy at the prices that you fix? A. That is not the desire. Q. Isn’t that the whole system upon which the concentration of these industrials is based? A. That is not the controlling idea of an industrial that is properly managed; the idea of an industrial properly managed, and it is in their interest and they are dependent upon the consumer, they are dependent upon him, and the ultimate idea is to create manufacturing facilities to manufacture goods lower than they could be manufactured in any other way. Q. If the object is to create manufacturing facilities why is it that you have destroyed them? A. We have not destroyed them; on the contrary the plant, the machinery of the Colchester Rubber Company is taken to another factory; we have enlarged that factory; we have spent a large amount of money on several factories, increasing their capacity, for the purpose of centraliz- ing the manufacture and realizing economies; now, I will admit, Mr. Chairman, that the rubber shoe business, owing to the great variety, 30,000 kinds, or 30,000 different shoes in one factory, I will admit that it is more difficult to bring about these economies than in the case of industrials producing one article; it is a more complex problem; we are having more difficulty in dealing with it, but ultimately that is our endeavor. Q. Is it any more complex than the leather shoe business, where there is no combination and where shoes have never beeD sold to the American public as cheaply as they are to-day? A. Infinitely more complex; the products of the United States Rub- ber Company will far outnumber — and the conditions are more No. 40.] 537 complex, as I have stated; in some shoes there are twelve com- binations, composed of ten different elements and many different kinds of those elements. Q. Just as there are many different kinds of leather. When you speak of 30,000 different kinds of shoes you mean that you have 30,000 different lasts practically upon which you make those shoes, isn’t it? A. Well, that is an element. Q. And isn’t that exactly the reproduction of the leather shoe situation? A. In the rubber shoe there are from half a dozen to a dozen compounds; there are from 20 to 30 different kinds of rubber; there is whiting, litharge, lampblack, rosin, and all in varying quantities in each combination. Mr. Lexow: We will ask you to produce to-morrow statistics of the labor employed under the independent factories system and the amount of labor employed under the consolidation sys- tem 1 . Mr. Flint: I will endeavor to obtain that. Recess until 2 o’clock. AFTERNOON SESSION. WEDNESDAY, FEB. 17, 1897. Mr. Lexow: A quorum being present, the committee will come to order. William I. Walker, having been duly sworn, testified as fol- lows: Examined by Mr. Bedell: Q. Are you connected with the company known as the Church, Dwight Company? A. Yes, sir. Q. What is your official position? A. Treasurer. Q. Did I get the correct name, the Church & Dwight Company? A. Yes, sir. Q. Is that a corporation formed under the laws of the State of New York? A. Yes, sir. Q. And doing business where? A. At 63 and 65 Wall street. Q. That is the principal place of business for the transaction 538 [Senate, of business matters, but you have some establishments in the State, have you not? A. Yes, sir. Q. Will you please locate them? A. We have a — what do you mean by “establishments?” Q. I mean manufacturing concerns? A. Yes, sir; we are at present running one corner of 112th street and 1st avenue; also one at Greenpoint; also one, partially — we are not really running it — it is — we are intending to run it when it is finished, at Syia- cuse; also, in a small way, one at Trenton — or, at Trenton, Mich- igan. Q. Trenton, Michigan? A. Yes, sir. Q. What are you producing at these factories’ A. We are producing soda. Q. Well, please designate the kind of soda. A. We are produc- ing bicarbonate of soda and salaratus, sal soda, concentrated sal soda. I think that is all. Q. At which of these factories are you producing bi-carbonate C'f soda? Well, we have been producing in a small way at Harlem, and a’so at Greenpoint. Q. In a small wav ' A. Yes, sir. Q. Where do you get the bulk of your supply? A. You are speaking now of the Church & Dwight Company? Q. Yes? A. We get the bulk of it at Syracuse. Q. From the Solvay Company? A. Yes, sir. Q. What is the name of that company? A. The Solvay Pro- cess Company. Q. Is that company under contract with you for the supply of bi carbonate of soda? A. Well, just what do you mean by a con- tract. Q. I mean, by which you are to take their product, and they are to supply it to you? A. Yes, sir; we do, I think. Q. How t much of their production? A. All of it. Q. Will you speak a little louder? You take the entire produc- tion of that Solvay Company? A. We take the entire produc- tion. Q. Of the bicarbonate? A. Of the bicarbonate. No. 40.] 530 Q. They produce something else besides bicarbonate, do they not? A. I suppose they do, but I do not — Q. Haven’t you ever been there? A. No, sir. Q. What is your best knowledge on the subject? A. I un- derstand they produce soda-ash and other articles, but I am not familiar with all they produce. Q. They have what would be termed a bi-product; is that true? A. I suppose so, but I do not know; really I could not answer; I know nothing about the rest of their business. Q. Now, Mr. Walker, please name the corporations or the com- panies consolidated into the Church & Dwight Company? A. There was no consolidation, as I understand it. Q. Well, the firm or the corporation? A. There were three members of the firm of John Dwight & Co.; the old Church & Co. firm, with two others; individuals. Q. Two other individuals? A. Yes, sir. Q. Were they engaged in the manufacture of bicarbonate of soda? A. They were — one was a son of James Church that died a year ago; and one is a son of E. Dwight Church; that is the sur- viving member of Church & Co. Q. When was the incorporation of the company? A. The in- corporation was about the 1st of July, 1896. Q. What is the capital stock of that corporation? A. Two millions. Q. How much of it is paid in? A. It is all paid in. Q. In cash? A. In cash, and in — Q. Well, how much cash? A. Well, I can’t tell yet. Q. You can’t tell yet? A. No, sir. Q. Why? A. Because we are not — haven’t the — we have not finished the factory, and there are other expenses that are to come yet; it is supposed to be full paid stock. Q. How many stockholders are there in that corporation and; who are they? And give their connection? A. John Dwight, president. Q. What is his place of residence? A. He lives at No. 31 Mt. Morris Park, West; E. Dwight Church, first vice-president; resi- 540 [Senate, deuce, Greenpoint, L. I.; John E. Dwight, second vice-president, No. 32 Mt. Morris Park, West; myself, treasurer, No. 32 West One Hundred and Thirtieth street; E. Dwight, Jr.; I am not sure where he lives; he has just moved, in Brooklyn; I can’t say. Q. In Brooklyn, however? A. Yes, sir; James A. Church, Or- ange, N. J., I think it is; South Orange or Orange; I am not cer- tain which. Q. Now, Mr. Walker, won’t you please explain just what pro- ducts your corporation company puts out on the market? A. Bicarbonate of soda, saleratus, which is the same thing; sal- soda; concentrated sal-soda. Q. And then you have particular brands or trade-marks under which you put those goods out on the market, particularly, the bicarbonate of soda? A. Yes, sir. Q. What are those trade-marks known as in the general trade? A. They are known as Arm and Hammer Brand, and Cow-Brand. Q. And you have a large sale of those two brands of bi-carbon- ate of soda, both in the States of New York and New Jersey, and in the other States of the Union, have you not? A. Yes, sir. Q. Can you inform us what your sales amount to in round numbers or in tons? A. Well, I can’t recollect; I don't know; we have been going under the new concern only about four months, and we have not yet any figures and really do not know. Q. What company were you associated with before the forma- tion of the new company? A. John Dwight Company. Q. What was their output? A. You mean everything, or rnere- i Q. I mean the bicarbonate of soda particularly now? A. Any brand? Q. What brand did they have? A. Cow-brand. Q. Well, we will take the Cow-Brand? A. Well, I can’t re- member on that. Q. Well, approximately? A. I do not think I could tell any- where near it. Q. Is it within your power to furnish us the figures of their product for the last two or three years, in round numbers? A. Now you are speaking of John Dwight & Co.? No. 40.] 541 Q. Yes? A. I presume I could. Q. Will you do so for tlie benefit of tlie committee? A. If you ask it. Q. Now, Mr. Walker, in wliat way do you get your goods on the market to the retailer; I wish you would explain that in detail. A. We sell them to the wholesaler and he sells them to the re- tailer. Q. The wholesaler — -you mean the jobber? A. Yes, sir. Q. Well, under what circumstances do you sell to the whole- saler? A. I don’t know exactly what you — Q. Do you have special agreements; what is known in common parlance now as a factors’ agreement? A. Oh, we have no agree- ments except in New York and New Jersey. Q. You do have agreements in the States of New York and New Jersey? A. Yes, sir. Q. Have you a copy of one of those agreements with you? A. I ha Ye not with me; I could get it. Q. Are they substantially the same for the new corporation as those that were in existence and used by the respective companies John Dwight & Co. and Church & Co.? A. The new corporation have never signed any contracts. Q. The new corporations have never signed any? A. No, sir. Q. But have the wholesale grocers signed contracts with you? A. No, sir. Q. Then, you are still operating under the contracts of the old corporations or the old company; is that so? A. I don’t know, I am sure, whether we are or not; the new concern has made no contracts. Q. Well, are you operating under the old contracts? A. I don’t know whether we are or not. Q. You know wdiether the general line of business is the same that is being carried on now by your new corporation as was car- ried on by those two companies before they consolidated in this one company; don’t you know the fact? A. I do not really know how to express it. Q. Well, you ship to the wholesale grocer or to the jobber? A, Yes, sir. 542 [Senate, Q. On what conditions? A. On what conditions? Q. Yes; under what conditions; under some agreement; under some contract? A. No, sir; not any agreement. Q. Are you shipping the same as you were before the consoli- dation of the two companies? A. Yes, sir. Q. And there has been no agreement made with these respec- tive parties? A. No, sir. Q. You were with John Dwdght & Co.? A. Yes, sir. Q. I wish you would look at this paper and inform me if that is a copy of the factors’ agreement which you require from the jobber? (Showing witness paper). A. That — can I explain re- garding this — this is the agreement that was used; but you said to me that we “require” from the jobber. Q. Well, I mean that was used in your business transactions with the jobbers; is that the agreement? A. That is the agree- ment that the wholesale grocers requested us to make with them. Q. But that is the agreement that you did make with them, isn’t it? A. Yes, sir; that is the agreement. FOLLOWING FORM WAS MARKED “FEB. 17, EXHIBIT B.” Signed copy to be returned immediately to John Dwight & Co., No. 11 Old Slip, New York city. In consideration of one-half cent per pound rebate, to be paid us by John Dwight & Co. on each pound of their Cow-Brand Soda and Saleratus we purchase from them, the undersigned faithfully promise not to sell, or to allow any person connected with our es- tablishment to sell Dwight’s Cow-Brand Soda or Saleratus in boxes to the trade of New York State or New Jersey at less than basis of 54 cents per pound for pound packages, or 4 cents per pound basis for bulk in kegs at jobbing points in the States of New York and New Jersey; neither will we allow or countenance any indirect evasion of above agreement. The price for Cow-Brand Soda or Saleratus to us is to be on net basis of 5 cents per pound for pound packages, and 3J cents per pound for kegs bulk, F. O. B., in New York city; terms 6 days, or less 1| per cent, for cash. Goods will be billed by John Dwight No. 40.] 543 & Co., basis of 54 cents per pound for pound packages and 4 cents per pound for kegs bulk, F. O. B., in New York, and a rebate of \ cent per pound to be paid on the first of the following months- January, April, July and October. It is also understood that we are not to sell any soda or saleratus in boxes under our private or other brands at less price than Cow-Brand. If we are compelled to purchase cheap bulk soda in kegs, bar- rels or casks we agree not to push the sale of such goods, but to sell as limited a quantity as possible, and only such limited quan- tity as is absolutely demanded by our trade. It is also understood that if we fail to maintain the above agree- ment we are to forfeit any and all rebates coming to us from John Dwight & Co. We would also say that we realize that the above agreement is intended by John Dwight & Co. to be for our best interest, and to secure for us a moderate profit, therefore we cheerfully enter into it and pledge ourselves to use every effort to see that it is maintained. Date • Extra blanks of this agreement furnished upon application to JOHN DWIGHT & CO., No. 11 Old Slip, New York city. Q. Now, that agreement applied to the States of New York and New Jersey, did it not? A. Yes, sir; by the request of the wholesale grocers, who — Q. Is that another copy of the agreement which you used? (Showing witness paper). A. Yes, sir; I think this is a former one, which was first used, I think, in about 1889; and this was merely a renewal. FOLLOWING FORM WAS MARKED “FEB. 17, EXHIBIT C.” Signed copy to be returned immediately to John Dwight & Co., No. 11 Old Slip, New York city. March, 1889. In consideration of one-half cent per pound rebate to be paid us quarterly by John Dw : ght & Co. on our purchases from them 544 [Sex ate. of Cow-Brand Saleratus, also Soda, we faithfully promise nn 1 : to sell, nor allow any person connected with our establishment or under our control, to sell D vi gilt’s Cow-Bran4 Saleratus or Soda to the trade of New York city and vicinity, New York State or New Jersey at less than the basis of 5 cents per pound in one pound packages in boxes, or 4 cents per pound bulk in kegs, F. 0. B., in New York city; other packages in proportion (jobbers out- side of New York city will add one-eighth (•£) of a cent per pound to ihe invoice prices for freight). Neither will we allow or counte- nance any evasion directly or indirectly of this agreement. The net price to us of the Cow-Brand Saleratus and Soda is to be on the basis of 44 cents per pound for one pound packages in boxes, and 3| cents per pound for bulk in kegs; other packages in pro- portion. Terms, 60 days or less, one and one-half (1£) per cent for prompt cash. Cow-Brand goods will be billed to us by John Dwight & Co. on basis of 5 cents per pound for one pound pack- ages in boxes and 4 cents per pound for bulk in kegs, and the re- bate of one-half cent per pound to be paid us on the first of the following months: January, April, July and October. It is also understood that we are not to sell any saleratus or soda in bulk or in boxes under our private brands at less price than Dwight’s Cow-Brand. If we are compelled to purchase cheap bulk soda in kegs, barrels or casks, we agree not to push the sales of such cheap goods, but to sell as limited a quantity as possible, and only such limited quantity as is absolutely de- manded by our trade. It°is also understood that if we fail to maintain the above agreement we are to forfeit any and all re- bates due us from John Dwight & Co. We are convinced that this agreement is for our interest, as it will secure for us a moderate profit; for this reason we heartily enter into it, and hereby pledge ourselves and our representatives- to use every effort to see that it is maintained. (Signed) Extra blanks of this agreement furnished upon application to , JOHN DWIGHT & CO.. No. 11 Old Slip, New York city.. No. 40.] 545 FOLLOWING FORM WAS MARKED “FEB. 17, EXHIBIT D.” Arm and Hammer Brand (symbol of uplifted hammer in arm, surrounded by words “Church & Co.’s Soda”). Church & Co., Soda Manufacturers, 129 Pearl and 82 Beaver streets, New York. Chemical Works and Docks, Oakland, Ash and Box streets, Brooklyn, N. Y. 189 In consideration of one-half cent per pound rebate, to be paid us by Church & Co., on each pound of their Arm and Hammer Brand of Soda and Saleratus we purchase from them, the under- signed faithfully promise not to sell, or allow any person con- nected with our establishment to sell Church & Co.’s Arm and Hammer Brand of Soda or Saleratus in boxes to the trade of New York State or New Jersey at less than basis of 5^ cents per pound for pound packages, or 4 cents per pound basis for bulk in kegs, all F. O. B. in New York; or at above prices by jobbers in our re- spective cities, or any other jobbing point in New York or New Jersey. Neither will we allow or countenance any indirect evasion of above agreement. The price for above article to us is to be on basis of 5 cents per pound for pounds, and 3^ cents per pound for kegs bulk, F. O. B., in New York city; terms, 60 days, or less per cent, for cash. Goods will be billed by Church & Co., basis of 5^ cents per pound for pound packages and 4 cents per pound for kegs bulk, F. O. B. in New York, and a rebate of £ cent per pound to be paid us on the first of the following months: Jan- uary, April, July and October. It is also understood that we are not to sell any soda or saler- atus in boxes under our private or other brands at less price than Arm and Hammer. If we are compelled to purchase cheap bulk soda in kegs, bar- rels or casks we agree not to push the sale of such goods, but to sell as limited a quantity as possible, and that only because re- quired by our trade. 35 546 [Senate, It is also understood that if we fail to maintain the above agree- ment we are to forfeit any and all rebates coming to us from Church & Co. We would also say that we realize that the above agreement is intended by Church & Co. to be for our best inter- est, and to secure for us a moderate profit; therefore we cheer- fully enter into it and pledge ourselves to use every effort to see that it is maintained. Q. Then you continued to use it in your respective companies up to the time of the incorporation of the new company, did you not? A. Yes, sir. Q. You are shipping to these same people now that you were shipping to before? A. Yes, sir. Q. And upon the same terms as to payment? A. Yes, sir; that is — I would modify that — I suppose it is; as I say we have made no agreement under the — Q. I would like to read to you from this contract: “In consider- ation of one-half cent per pound rebate, to be paid us by John Dwight & Co., on each pound of their Cow-Brand Soda and Sal- eratus we purchase from them, the undersigned faithfully prom- ise not to sell, or to allow any person connected with our estab- lishment, to sell Dwight’s Cow-Brand Soda or Saleratus in boxes to the trade of New York State or New Jersey at less than basis of cents per pound for pound packages, or four cents per pound basis for bulk in kegs, at jobbing points in the States of New York and New Jersey; neither will we allow or countenance any indirect evasion of above agreement.” That was the substance of the agreement? A. Yes, sir. Q. Why did you limit to the States of New York and New Jer- sey A. Because we considered it a great nuisance to us and did not wish to go into it at all. Q. Outside of these two States? A. Yes; we did not wish to go into that in New York State. No. 40.] 547 Q. You do sell soda in other States than the States of New York and New Jersey? A. Yes, sir; we sell it in every State in the Union. Q. You sell only in the State of New York your bicarbonate of soda of the Cow-Brand or the Arm and Hammer Brand to the jobbers at cents? A. Yes, sir. Q. That is the price now, is it not? A. That is the price in pound packages; we have covered — Q. And if he lives up to the terms of your agreement then he is to have a rebate of one-half cent per pound; is that true? A. If he lives up to an agreement that he made himself, he does; yes, sir. Q. Now, I read further from this: “The price for Cow Brand Soda or Saleratus to us is to be on net basis of 5 cents per pound for pound packages, and 3 1-2 cents per pound for kegs bulk F. O. B. in New York city; terms 60 days, or less U| per cent, for cash. Goods will be billed by John Dwight & Co., basis of cents per pound for pound packages and four cents per pound for kegs bulk, F. O. B. in New York, and a rebate of 1-2 cent per pound to be paid on the first of the following months: January, April, July and October.” That is part of the agree- ment? A. Yes, sir. Q. You have become a party to that agreement by shipping orders thereunder and accepting orders thereunder, haven’t you; you consider yourselves parties to the agreement to supply these people with soda they may order at 5 1-2 cents per pound? A. I suppose — I don’t know about the legal points of it, I am sure; I haven’t asked anything about it. Q. Now, I will read further: “It is also understood that we are not to sell any soda or saleratus in boxes under our private or other brands at less price than Cow-Brand.” A. Yes, sir. Q. That is contained in that agreement? A. Yes, sir — except further than that bulk there at which they have the right to sell at any price. Q. Thus, any jobber that is dealing in your Arm and Hammer Brand or your Cow-Brand of bicarbonate of soda must sell all 548 [Senate, other sodas or saleratus that are in packages, no matter under what brand they may be designated, for 5 1-2 cents a pound, in order that they may claim from you the rebate of one-half cent; is that true? A. I presume that is what it amounts to. Q. Now, at that price does the jobber sell these goods to the retailer? A. I don’t know, I am sure. Q. Oh, he can charge more? A. He can charge anything — Q. But he cannot charge less; that is the idea, is it? A. That is the idea. Q. Then you are fixing the price not only of your own soda and saleratus, at which it shall be sold by the jobbers, but you are also fixing the price of every other brand of soda or saleratus that may be put up in packages; that is, if the jobber wants to do business with you? A. That is it. Q. That is the fact, isn’t it? A. I don’t know — well, the — Q. Now, Mr. Walker, it is a fact that the Cow-Brand of soda and of saleratus and the Arm and Hammer Brand have a very large and extensive sale, in both the States of New York and New Jersey, is it not? A. I think it has. Q. What would you estimate to be the proportion of the soda that is used that is Arm and Hammer, done up in pound pack- ages; I am speaking now in these two States? A. I could not tell. | Q. Well, have you any idea or any facts upon which to base an opinion? A. No, sir; I have not. Q. Well, can you approximate? A. I don’t think I could; no, sir. Q. You know liow much you sell in this State, do you not, of your own brand? A. No, sir. Q. You have no idea? A. I haven’t any idea — Q. What officer of your company could furnish that informa- tion? A. I think perhaps Mr. Dwight could. Q. Which Mr. Dwight? A. Mr. John E. Dwight. Q. Has he been subpoenaed? A. Yes, sir. Q. I will read further in this contract: “If we are compelled to purchase cheap bulk soda in kegs, barrels or casks, we agree No. 40.] 549 not to push the sale of such goods, but to sell as limited a quan- tity as possible, and only such limited quantity as is absolutely demanded by our trade; it is also understood that if we fail to maintain the above agreement, we are to forfeit any and all re- bates coming to us from John Dwight & Co.; we would also say that we realize that the above agreement is intended by John Dwight & Co. to be for our best interest, and to secure for us a moderate profit, therefore, we cheerfully enter into it, and pledge ourselves to use every effort to see that it is maintained.” That is correct, is it not? A. Yes, sir. Q. Now, Mr. Walker, if a jobber having this agreement with you, should sell the soda of another party under another brand done up in pound packages, at 5 cents per pound, to the retailer, instead of 5^ cents, you would then consider that jobber was not entitled to the rebate called for in that agreement — is not that true? A. Yes, sir. Q. You would then refuse to furnish any more goods to the jobber? A. No, sir. Q. Then you would furnish them to the jobber at what price? A. Furnish him at the 5^ cent price. Q. Then there would be no rebate? A. No, sir. Q. Don’t you know as a fact that the jobbers to-day, are selling your bicarbonate of soda, these two brands that I have named, at 5£ cents to the retailer, and that the only margin of profit that exists for the jobber is \ cent per pound rebate, which would come to him under the agreement? A. No, sir; I don’t know that. Q. You don’t know it? A. No, sir. Q. Well, will you say that that is not the fact? A. Yes, sir. Q. Well, what is the fact? A. We give the jobber a still fur- ther rebate, not only in New York State but every other State. Q. What is the other rebate? A. Give him 5 per cent, and 2£ per cent. Q. Well, suppose you sell to the jobber who has not the factor’s agreement with you, does the jobber then get that 5 per cent, and the 2^ per cent? A. Yes, sir. Q. Then, that is the only reduction from the price of 5-3,- cents 550 [Senate, that lie gets, if lie is not under agreement with you as a factor and an agent for you? A. Yes, sir; we make no difference what- ever in the price over every State in the Union. Q. Yes; you sell in every State of the Union at the same price? A. We sell in every State in the Union at the same price that we do in New York; of course, we do not pay the freight; there is no discrimination in any State, whatever. Q. Then, the jobber, who has an agreement with you by which he gets his rebate of one-half cent per pound, and the addi- tional 5 per cent., and the additional \ per cent., which I presume is based upon the time of payment, is in the position where he can undersell at any time a jobber w'ho has to pay his five and a half cents per pound and receives no rebate, is he not? A. The jobber who pays five and a half cents does receive a rebate. Q. I am speaking now of the jobbers who do not enter into this agreement? A. Yes, sir; if the jobber does not enter into the rebate he gets the 5 per cent, and 2^ per cent, any way. Q. Very true, but he does not get the one-half cent per pound rebate? A. In New York State he does not. Q. Now, in New Jersey? By Mr. Lexow: Q. The fact is that no man who has not this jobber’s agree- ment can compete handling your goods with a man who is and acts under the jobber’s agreement? A. Will you state that ques- tion? j (Question read.) Q. They can compete on any one’s else goods, so far as that is concerned. By Mr. Bedell: ( Q. How can he? A. Perhaps he can’t on ours. By Mr. Lexow: Q. I mean with reference to yours; have you not produced a situation in this State, according to which every jobber must handle your goods of necessity? A. No, sir; I don’t see that we have. No. 40.] 551 Q. Do you operate through the Wholesale Grocers’ Associa- tion? A. I do not know as I understand that exactly. Q. Are the factors who sign your agreements those who are connected with the Wholesale Grocers’ Association of the State? A. 1 presume the most of them are; there may be others; I do not know about that. Q. Now, the man who signs your factor’s agreement, receiving the rebate, is in a position of superiority to the man who does not sign vour factor’s agreement to just the extent of the rebate that jou will allow, is he not? A. I suppose he is. Q. And must, therefore, compete with the man who receives the rebate, in the open market? Isn’t that true? A. I don’t know whether it is or not ; he doesn’t get the rebate. Q. And can he without receiving that rebate compete in the open market? A. I don’t suppose he can, but I am not prepared to say whether he cannot. Q. That rebate is a profit that you speak of that you fix in favor of the factor? A. It is rebate that the factor fixed in favor of himself. Q. If the factor fixes this profit, why is it that you take the trouble to have these agreements signed? A. The wholesale grocers told us that they couldn’t make any money on the goods and could not handle them without we would protect them in this way. Q. You were acting as the protectors of the factors to this agreement? A. I suppose we do. Q. Now, while you do, why do you incidentallly compel these factors not to sell any other product at any lower price than that fixed by you in your price-list? A. It was their own pro- position that they would do it. Q. It was their proposition that they should be constrained not to compete against your brands with any other brand that is in the market? (Question read.) A. I don’t know that I fully grasp the whole of that question. Q. Do you mean to be understood as saying that the factors 552 [Sexatb, who sign these agreements with you voluntarily ask you to re- strain them from putting a lower price on the product of men who compete with you in the sale of bicarbonate of soda? A. Yes, sir. Q. Why can’t they refuse to sell that bicarbonate of soda with- out binding themselves to you by agreement? A. Why can’t they? Q. Why can’t they undersell your product in the market, if they choose, without binding themselves under a formal agree- ment? A. Why, they can, if they want to. Q. They can’t as soon as they have signed this agreement, can they? A. They ought not to. Q. They can’t if they want the rebate? A. No, sir. Q. Now, explain to this committee, how it is, that men who are free agents when they start ask you to place restriction upon them in the free traffic with reference to bicarbonate of sodas, that were in competition with yours in this State? A. May I make a long statement on that? — not very long — Q. Not as long as some of this morning’s statements? A. I wasn’t here this morning; I think it was in 3889; about that time; as near as I can recollect, when that committee of the Wholesale Grocers’ Association of New York visited us and re- quested that we put a price on our goods and give them a rebate, agreeing at that time if we would make such a price, or would hold our price where it was or would advance it by a small amount, and give them a rebate — By Mr. Bedell: Q. Did you advance it? A. No, sir; w 7 e did not at that time. Q. Have you since? A. We have — we advanced some time in — I should think about five years ago; a small amount — Q. How much? A. I think it amounted to about 13 cents; something of that kind. Q. A hundred? A. A hundred. Q. Was that on the bulk or on the package? A. No, only on the packages; the bulk was reduced; the cheap soda was re- No. 40.] 553 duced; the wholesale grocers agreed that if we would put our price at 44 cents, I think it was then, and give them a rebate, we would be entirely satisfied; that they had been selling the goods for a long time at cost; competition was so keen they could not make any money on it; and that if we could not give them some protection they did not see how T they could handle the goods; well, we said to them we were afraid if we gave them the rebate, that they would merely hold our goods in stock and push other brands, sell other brands; then, to the best of my recollection they suggested that they -would sell all brands alike if we would give them this rebate; that is the history of the rebate, of that circular, so far as I can recollect; it was a nuisance to us; we did not wish to go into it; it has taken time and trouble to make it up. Q. (By Mr. Bedell). And your agreement of 1S89? A. Yes, sir. ] V '' J Q. (Continuing) Only restricted them as to their own private brands, compelling them to maintain the price at the same price as yours only on their own private brands and had no referece whatever ever to other makes; when did you insert in your con- tract, “ and other private brands? ” A. Well, if it was not there at the time it was talked on and was left out of the contract, because that was a thorough understanding so far as my recol- lection goes of the contract. By Mr. Lexow: Q. Do you mean to be understood as stating that these factors signing this agreement in which they engaged not to sell their own brands or put their own brands upon the market at a less price than that fixed by you for your stuff, asked you to so re- strict them with reference to their own brand? A. Yes, sir; I think they did. Q. Wasn’t it a fact that at this time before the factor’s agree- ments were signed there were a number of brands in the market which were selling at lower prices than the Arm and Hammer Brand and the Cow Brand? A. You mean in 1889? 554 [Senate, Q. Yes? A. I presume so; there has always been lower priced goods. Q. Wasn’t this agreement or factor’s arrangement of 1889 con- ceived and put into practice for the purpose of stopping these factors from selling their own brand at a lower price than that fixed by you for yours? A. No, sir. Q. What? A. No, sir. Q. How then can you explain that phase of the contract? A. I can explain it only in the way that I have; there was never any idea of driving these other manufacturers out of trade in New York State. Q. Then why that clause in the contract? A. As I have ex- plained, the wholesalers agreed to hold all the goods at the same price if we would give them this rebate on our goods. Q. But the subsequent agreement restricted not only the sale of the factors’ brands but also the sale of any other brand? A. Well, that was intended to be in the original agreement. Q. And you wish to be understood as stating that an agree- ment that you as a merchant or representative of a corporation cause to be signed, fixing your own price upon your product and preventing the factor from selling any other product at a less price, was not your own discovery but was insisted upon by the factors themselves? A. I think it was. Q. Well, are you sure about it? A. Well, I am reasonably sure; yes, sir; it is quite a number of years ago we had that conversa- tion; I am quite positive that was the way it came about. Q. Isn’t it a fact that if a factor now sells any other brand of bicarbonate of soda in packages at a lower price than that fixed by you in the factor’s agreement for the sale of yours, that the factor’s agreement is withdrawn, and he loses rebates that would otherwise flow to him from it? A. Well, we have had no such experience since the corporation was formed. Q. Not one? A. No, sir; not that I recollect of; I don’t think we have had any. Q. Do you mean, therefore, that you have raised the price of every competing brand with yours up to the point of the price fixed No. 40.] 555 by you on your brand, and that that has never been departed from? A. We have not departed from that contract on package goods; bulk goods have been sold down to a point — Q. I am speaking of package goods now entirely; do you mean to say that after the institution of this system of factors you have succeeded in raising the price of every competing brand so that no competing brand is now sold by a factor at a less price than that fixed by you in your factor’s agreement; that is a plain ques- tion? A. I don’t know whether we have or not; I have not in- quired of them whether they have lived up to the agreement. Q. You say the agreements have not been violated? A. So far as I know. , Q. Then the fact is as stated in my question? A. That we have succeeded in raising the price on all these goods? A. On all others handled by the factors who sign your agreement? A. I should — I don’t know about that; certainly not. Q. Then you don't know whether your agreements have been violated or not? A. I know they have been to some extent in years past; I dont know anything about it now; I haven’t heard anything recently about it. Q. And on violation the factor’s agreement has been with- drawn? A. I don’t know whether it has been or not. Q. Don’t you know whether or not you have followed out the principles established in this system? A. I know that we would hear that it was violated in some respects; but when we wrote the man and asked him, or wrote the wholesale grocers and asked them they were very urgent to have it continued. Q. And did you continue whether a breach had occurred or not? A. Did we what? ; Q. Did you continue the factor's arrangement with the particu- lar party having broken it? A. I presume we did. Q. Do you know whether you did or not? A. I haven’t any dis- tinct recollection, but I — I think we did probably. Q. Don’t you know that there are cases where you did not? A. I think there may have been one, possibly two in the whole time, as near as I can recollect. 556 [Senate, Q. The fact is, is it not, that you having established a large demand for these two brands have by the making of these fac- tors’ agreements practically limited the sale of bicarbonate of soda to your two brands in this State? A. 2s o, sir. Q. What is sold in competition with you? A. You mean in the State of New York? Q. In the State of New York? A. Why, I guess every manu- facturer sells in the State of New York. Q. I am speaking of bicarbonate of soda in packages? A. I presume there are packages of soda sold by most of the other manufacturers, and private brands. Q. To what extent? A. I don’t know, I am sure; I have heard of them; I don’t — Q. Do you notice that there is any competition against you in this State? A. Yes, sir. Q. In package goods? A. Yes, sir. Q. To what extent? A. I don’t know to what extent. Q. Very small, isn’t it? A. Well, it is comparatively small; yes, sir. Q. You have practically secured a monopoly of the market in bicarbonate of soda in packages? A. In New York State? Q. Substantially? A. Well, I wouldn’t say that; no, sir. Q. When I say substantially I mean with reasonable limita- tions; is it not true that you have secured a practical monopoly of the sale of bicarbonate of soda in packages? A. I wouldn’t say we have a monopoly; I presume we sell more packages in New York State than any other brand. Q. And you have done it under this system of factors agree- ment, whereby you have fixed the price of every competitor in the market? A. No, sir; I don’t think we have. Q. How else? A. Because it is the same condition of affairs in every other State in the Union, where we have no contract whatever. Q. Now isn’t it a fact that the wholesale business of the State is transacted through these factors acting in connection with the Wholesale Grocers’ Association of the State; isn’t that true? No. 40.] 557 (Question read.) , A. Operating through the Wholesale Grocers’ Association? Q. Yes. A. Well I don't know whether the wholesalers of New York State are members of the Association. Q. I am speaking now within reasonable limits. A. I presume that most of the grocers, nine-tenths of them at least, were very ■anxious to continue this agreement. Q. Nine-tenths A. Nine-tenths, about that, that is about the number. Q. And that being the fact and they representing nihe-tenths of the business of the State and they having requested you to perfect these factor's agreements, isn't it a fact that operating nnder that system you have practically excluded every other brand from the State of New York that wants to sell at a less price than fixed by you upon your list? A. No, sir. Q. How can they get their goods upon the market? A. The same way they get them on the market in every other State. Q. How can they? A. They would find them in the other States in the same way they do in New York State; there has been no change in that I think. Q. When you testify, as you do, that nine-tenths of the whole- sale grocers of the State, are operating under this factor agree- ment, will you explain how it is that any other brands can come in competition with yours at the price you fixed in this State? A. Why any wholesale grocer — and there are many of them in the State — that have not these agreements, can sell any goods for any price that they have a mind to; but the public calls for these two brands and has for years, even before 1889 and the people want them and buy them; that is all. Q. And you have eliminated competition by compelling new brands and brands less favorably known or largely known throughout the community to be sold by these factors at the same price that you have fixed for yours, haven’t you? A. No, •sir, we have not compelled them to do it. Q. Haven’t you eliminated competition by compelling under jour factor’s agreements those factors to sell competing brands 558 [Senate, less favorably and largely known than yours at the same price that you have fixed for yours? A. No, sir. Q. Explain how not? A. Because there is not a wholesaler in the State if he could make more money on one brand of goods but that would buy it in preference to ours or any one’s else. Q. Then why limit the price of competing products to the price fixed by you on yours? A. We did not limit it; they did it themselves. Q. That is your agreement, isn’t it? A. Yes, sir. By Mr. Bedell: Q. (Showing witness agreement.) You had this agreement printed yourselves, didn’t you? A. Oh, yes. Q. You sent it out when the orders came to you? A. Yes, sir; yes, sir. By Mr. Lexow: Q. And you punish the offenders if he offends? A. Well, we — I presume we say we do there. By Mr. Bedell: Q. Now Mr. Walker at what price do you sell your bulk soda bicarbonate? A. In what package? Q. Well, if there are different packages, name the different prices? A. We have bulk packages in — as kegs. Q. Yes? A. As barrels. 1 Q. Well how much by the barrel, and how much by the keg per pound? A. Cheap bulk? What I — Q. I mean of the same class of goods as your Arm and Hammer brand and vour Cow brand? A. As the same class of goods? Q. The same class of goods as you put up in pound packages, and where you sell it by the bulk what do you charge for it? A. Do you mean the Arm and Hammer kegs and the Cow kegs — Cow brand kegs; these made with the brand — Q. I mean with the brands on them? A. Yes, sir. Q. At what price? A. Three and a half cents a pound. Q. Suppose you put the same soda in kegs that haven’t the brand on, w r hat do you sell it for? A. Well, that is — would be a queer — No. 40.] 559 Q. Don’t you do that? A. If we put the same soda in a. keg we sell it for three and a half cents. Q. Well, do you only sell Cow brand and Arm and Hammer brand of soda when the kegs are branded or barrels are branded with that particular brand? A. When the Cow brand or the Arm and Hammer soda is on a keg it has our guarantee and always has had. Q. Yes, but that is not quite the question that I am trying to have you answer; I want to know whether you do not take the identical same soda with no difference existing between them and put it in kegs and not put any brand on it, Cow brand or Arm and Hammer brand — then I want to know when you sell that soda what price you ask for it? A. Well I am not the factory man, I can’t answer you. Q. Don’t you know? A. No, sir. Q. How is it that you are well acquainted with the fact of the prices of other sodas and you can’t tell me as to that? A. Price of which sodas? Q. Well the Arm and Hammer brand in kegs and barrels, and in packages, you know the price you charge for those? A. Our price list give that; I am not the manufacturer; I don’t — Q. At what price do you sell bulk soda that has no brand? A. A dollar and a half in kegs of a hundred. Q. That is a cent and a half a pound? A. Yes, sir. Q. Is there any difference between that soda and the soda that you put in your packages, and mark with your brand? A. Well, I can’t answer that; you will have to — Q. Well, what is your best opinion? A. I am not a manufac- turer. Q. Well, what is your best opinion? A. My opinion is that I can’t answer. Q. You must have some opinion — whether or not there is any difference between this soda that you sell in bulk without any particular designation at a cent and a half a pound, and that which you sell with a designation at three cents and a half a pound; and put up in packages at five and a half cents a pound; 5G0 [Senate, don’t you know whether there is any difference or not? A. I know there is a great difference in cost between the kegs and boxes. Q. You recognize the fact that there is a difference in cost, but is there a difference in quality? A. You will have to ask the man- ufacturer. Q. What member of your company could give that informa- tion? A. Mr. Church or Mr. Dwight. Q. Any one else besides Mr. Church or Mr. Dwight? A. No, sir; they are the — they have had to do with the manufacturing. Q. Now, Mr. Walker, can you tell me what it costs per pound to put this soda in packages? A. No, sir. Q. Who could give that information? A. Either one of the two gentlemen that I have named. Q. I would like to ask you if you are positive that you sell these same goods — Cow Brand and Arm and Hammer Brand — in pack- ages all through the United States in packages at five cents and a half a pound? A. No; I said we did not. Q. Where do you sell it cheaper than that? A. We sell it to the jobbers. Q. Where? A. In New York State and in New Jersey and every other State at five cents a pound. Q. I am taking into consideration, and in my asking you the questions, we will consider that we are allowing for the discount of five per cent, and two and a half per cent, which you say you have granted? A. Yes, sir. Q. And the half cent rebate? A. No; we have no rebate outside of New York State; that is no half cent rebate. Q. Well, then, at what price do you sell outside of New York State? A. In pound packages. Q. Yes? A. Five cents; just what the New York jobber pays for the goods, with the half cent rebate which he receives every two months. Q. Then the other States of the Union get it without this re- bate added? A. Yes, sir. Q. So your own home State where you have your own manu- facturing interests pays half a cent a pound more for your soda No. 40.] 561 than all the other States of the Union except New Jersey, per- haps? A. Not if they bay bulk goods, which they can buy very cheap. Q. But if they buy package goods they do? A. If they buy package goods I suppose they do; but they don’t buy so very much — but I presume get more profit on it than New York State does which is nearby home, which has to pay very little freight and all that kind of thing. Q. Don't you have these factor agreements outside of this State? A. Not outside of New York and New Jersey; no, sir. Q. Haven't you agreements that are in force in Pennsylvania? A. No, sir. Q. Applying to sales by jobbers within the State of New York? A. Oh, we may have; we have a few, not many; I had forgotten it. Q. Haven’t you contracts with jobbers in all the States that surround New York State where those jobbers ship into New York to the trade? A. I don’t think for anything — Q. For instance, in Pennsylvania, Vermont, Massachusetts, Connecticut; haven’t you those factors’ agreements with the wholesalers? A. I think possibly we have when they come into New York State; I had forgotten that. Q. And they are restricted to sell your goods at five and a half -cents per pound provided it is to go into the State of New York, is that true? A. Yes, sir; in the package goods. Q. Yes? A. Yes, sir. Q. But there is no restriction placed on them if they are going to sell it in the State of Pennsylvania or the State of Vermont? A. No, sir. Q. That is true? A. That is true. Q. Do you also have these factors’ agreements with druggists, wholesale druggists? A. Well, not that I know of ; we would not have them without they handled the package goods; I don’t know whether they do or not; I don’t know whether there are any wholesalers of that kind that handle package goods. Q. The entire amount of soda that you had put up in packages under the Arm and Hammer Brand or Cow Brand is manufac- tured in this State, is it not? A. Yes, sir. •36 5G2 [Senate, Q. And all by the Solvay Company at Syracuse? A. Nearly all; yes, sir. Q. Didn’t you have manufacturing concerns of your own at which you produced your bicarbonate of soda up to within one or two years ago? A. Yes, sir; we have had manufacturing con- cerns where we produced a good deal of soda right along for a good many years ; yes, sir. Q. You didn’t buy of the Solvay Company until a few years ago, did you? A. We bought all their product for five years. Q. Well, prior to that time you produced your own, didn’t you? A. Yes, sir. Q. What is the Solvay process? A. What do you mean? Q. How do they produce bicarbonate of soda ; is it a secret pro- cess? A. Yes, sir. Q. Is it what is known as the ammoniated process? A. I am not a chemist, but I understand that is what it is; it is the best soda in the world. Q. That produced by that process? A. Yes, sir. Q. Have you always been of that opinion? A. No, sir; the soda was not always as good as it is now. Q. Well, have you always been of the opinion that the soda thus produced was the best soda in the world? A. No, sir. Q. When did you change your opinion? A. Changed our opin- ion when the soda was made pure. Q. How long ago was that; you have been handling it for five years? A. Well, just about the time we took hold of it they per- fected it, so that I understand the chemical analysis of it now — as I asked to-day — was about 99 7-10 pure; purer even than the so-called bicarbonate of soda which you buy in drug stores; it is the finest soda made in the world. Q. You know the Natrona soda , do you not? A. Yes, sir. Q. Is that a fine soda? A. It is a good soda, I understand. Q. Isn’t it a pure soda? A. I can’t say; I am not sure; it is not as pure as ours, I think; I don’t think there is any soda that is. Q. Is your soda produced by filtration? A. I can’t tell you anything about the manufacture of it; I am not a manufacturer. No. 40.] 563 Q. Haven't your companies, yourselves, before you entered into the contract to taketbe entire product of tbe Solvay Process Com- pany asserted that your soda, as you produced it by other meth- ods, was a purer soda than theirs? A. Yes, sir; and it was then. Q. And it has changed when you gained control of the com- pany? A. No; not that idea at all — Q. Well, how long ago did the soda change? A. It is a fact (that perhaps twelve years ago the ammonia process soda — bicar- bonate of soda — had contained a good deal of ammonia; but that has been eliminated from it entirely, and it is now, as I say, the finest soda in the world, and has been for years. Q. Is there any other company in the world that is producing soda to-day by what is known as the Solvay process? A. In the world? Q. In the world? A. Yes, sir. Q. Where are those located; are there any others in the United States? A. I don’t know; there may be by the ammonia process. Q. I am speaking of the Solvay process? A. Yes; that is what I mean — no ; not by the Solvay process. Q. They are the only manufacturers in the United States? A. I believe so. Q. Is there a company in England that manufactures by the Solvay process? A. Yes, sir. Q. What is that known as? A. Bruner, Mond & Company. Q. Well, do the United Alkali Companies produce by the same process? A. I don’t know. Q. Is the Bruner, Mond Company to-day shipping its soda into this country? A. I don’t know. Q. Don’t you know? A. No, sir. Q. Do you know r whether there is any contract existing between your company or between John Dwight & Company and Church & Company, with the Solvay Company at Syracuse by which they undertake to prevent the Bruner, Mond Company from shipping soda into this market to come into competition with your pro- duct? A. I know there is no such agreement. Q. You know there is no such agreement? A. Yes, sir. 564 [Senate, Q. Nor any such understanding? A. No, sir. Q. Do you know of any difference in the soda produced on the other side by the Solvay process and the soda produced here at Syracuse by the Solvay process? A. I don’t know anything about it. Q. It is the same process on both sides of the water, is it not? A. I don’t know. Q. Well, this Solvay Company here is an offshoot of the Eng- lish Company? A. I presume it is; I don’t know whether they manufacture their bicarbons the same way; I can’t tell anything about that. Q. And this Solvay Company produces what is termed the “bi- product,” they produce the bicarbonate of soda, and they produce the sal soda, and the produce the soda ash, do they not? A. I don’t think they make any sal soda; they make ash, I believe. Q. They make soda ash? A. Soda ash; yes. Q. And that is done at the same time they produce the bicar- bonate of soda? A. Well, I am not a manufacturer. Q. You don’t understand the technical part of that? A. Not at all. Q. Do you know the J. Monroe Taylor Company? A. I know of them; yes. Q. Are they manufacturers of soda? A. Have been; yes, sir; are now, I think. Q. They are a reputable concern, are they not? A. Yes, sir. Q. Do you know the Deland Company? A. Yes, sir. Q. They are a reputable concern, are they not? A. Yes, sir. Q. Now, is there any other manufacturer in this State of bicar- bonate of soda? A. Yes, sir. Q. Who? A. A. J. Howell & Son. Q. That is a reputable concern? A. Yes, sir. Q. Now, Mr. Walker, do you consider it a sound business prop- osition that the Legislature of this State should endorse that, you by your statements having created an enormous demand for your particular products of soda, the public having used it for years, No. 40.] 565 been accustomed to its use and demanding it, that you attempt to- wipe out competition of other reputable concerns producing a soda that is on a par with yours? A. No, sir; there is no soda on a par with ours. Q. But you told me you did not understand the technical part of this; how do you know? A. Well, I know there is not, because I have seen the analysis of it time and time again. Q. Oh, you have seen the analysis of it? A. Yes, sir. Q. Well, then, I will say — who, producing a soda which they wish to put upon the market, and according to your position is of an inferior quality, that you shall make contracts with the wholesale dealers in this State — and according to your state- ments nine-tenths of them have made these contracts — whereby you are going to compel these firms to sell their soda, or have their soda sold, at the same price as your, when they may desire to enter into a reasonable competition, and dispose of this soda to the public at a less price than you charge — what is your opinion of that? A. That is too long a statement for me. Q. Well, have the stenographer read it? (Question read.) A. I can’t answer that; it is too long for me. Q. You have an opinion, have you not? A. I haven’t got the sense of it; it is too long. By Mr. Lexow: Q. If these other products are inferior why don’t you permit your factors to sell them at a lower price? A. Well, I don’t know in the first place whether they really are our factors; I know one thing; we shall be very much pleased to do without the contracts, if the grocers would allow it; it is not pleasant to us to send them rebates; it takes time and expense and so on. By Mr. Mazet: Q. Were you coerced into making such an arrangement as that? A. Practically — I wrnn’t say coerced. 5G6 [Senate, Q. By whom? A. (Continuing) Oh, yes; I don’t know but I will, too; yes, sir. Q. By the grocers? A. Yes, sir. By Mr. Bedell : Q. Can you tell the number of sixty pound boxes of soda and saleratus that you sell per month? A. No, sir. Q. Your books would give that statement, would they not? A. I presume they would. Q. Will you furnish them to the committee, please, covering last year? A. Are you speaking now of Church, Dwight & Co. -or John Dwight & Co.? Q. Of both? A. Or Church & Co.? Q. Of both. A. I will try to, if you want them. Q. All of the members of this company are related, are they not? A. Yes, sir. Q. So that you have the whole thing within the family, so to speak, and there are no outsiders? A. No, sir. Q. That are interested in the company — well, up to the time of your formation or consolidation of the John Dwight&Co., and the Church & Co. in 1896 you were competing firms, were you not? A. Yes, sir; John Dwight & Co., together with the principal — I with John Dwight, together with the principal in the Church Company firm, were together fifty years ago. Q. Yes? A. Started in business in this country, made the first goods that were ever made here, and they have continued the business down to now., Q. Now, Mr. Walker, I would like to ask you a question: You have asserted here that the making of these contracts and the desire to have these contracts flowed entirely from the Whole- sale Grocers’ Association; is it not a fact that within this last year you have had a representative going through this State and calling on the jobbers who had not returned your contracts signed, and this representative w r as instructed to get the signa- tures of each one of these jobbers, if possible? A. We had — we No. 40.] 567 sent out during sometime last rear letters to the wholesale gro- cers asking them whether they wished to continue that contract. Q. Yes? A. Or that paper, whatever you call it — agreement — I do not know what it is called; and as I say, the large majority of them urged us to continue it; they did not wish to put it down; as I say it was an annoyance to us to handle. Q. What did this man do? A. I don’t know what he did; I presume that is our salesman going through and asked them to give him the paper. Q. Asking them to sign the contract? A. I suppose, so; I don't know anything of this case. Q. What was this man’s name? A. I don’t know. Q. Was it William S. Lyons? A. William S. Lyons — are you speaking now of John Dwight & Company, or Church Company? Q. Well, either one? A. William R. Lyons is with us; yes, he may have done so. Q. You have spoken of reports of this date in respect to the jobbers — whether or not the jobbers are violating any of the terms of this agreement? A. No, sir. Q. Don’t you instruct your agents who are out on the road; are not the agents of the wholesalers directed to gain informa- tion in that direction and communicate it to you? A. Well, I never knew of one being so instructed; it is possible; it is pos- sible. Q. Do you know, Mr. Walker, of any other sodas having been put on the market within the past two or three years in this State that came in competition with you, sold at a less price than yours? A. Do you mean now in bulk goods, or in packages? Q. In package goods? A. I don’t remember; no, sir; there may have been some. Q. If there has been any competition? A. Yes, I know of one or two; there is one at Fairport, a chemical company puts one on. Q. The Fairport Chemical Company? A. I think so. Q. But the competition that they gave you was so slight it was scarcely noticed, is that it? A. Well, I don’t know; they seem to be doing pretty well, as near as I can state. 568 [Senate, Q. But you have not noticed competition from any other direc- tion? A. I don’t recollect — there may have been some. Q. Now, Mr. Walker, I would like to know what— A. (Inter- rupting) There are a great many private brands, you know, that are put up and sold in New York State. Q. Yes? A. A great many of them. Q. But your jobbers cannot sell them for less than five and a half cents a pound? A. Well, not in this State, no sir. Q. Now will you tell me in what light you hold men who enter into this agreement with you; in the light of an agent? A. I don’t; I can’t answer that; I am — Q. What is your opinion? A. I haven’t any opinion; I don’t know in what light we do hold them. Q. Absolutely no opinion on the subject? A. No, sir; no, sir. Q. You enter into this factor agreement with the jobbers en- tirely for the benefit of the grocers? A. Went into it at their request. Q. Entirely for their benefit? A. Yes, for their benefit en- tirely; yes, sir. Q. And you have this system whereby you require that they shall keep up the price of your goods entirely for their benefit? A. Yes. Q. Couldn’t they perfect that same agreement among them- selves? A. We asked them to do it, and they told us they couldn’t do it; they would cut each other’s prices, and so on, and it was utterly impossible to keep track of them. Q. What particular interest has your company to enter into this contract with the jobbers? A. Nothing whatever. Q. It puts you to a great deal of trouble? A. Yes, sir. Q. With these contracts, but it does have the result of stamp- ing out competition among jobbers, doesn’t it? A. Well, it was not entered into with any such object; not at all; it was merely with these men as I said. Q. I know, but it does have the result of eliminating competi- tion between the jobbers? A. I don't know whether it does or not. No. 40.] 569 Q. Do they handle other people’s goods, these other jobbers? A. Yes, sir; as I understand, they do, and as I say, the same con- dition of affairs affects any other States where they have not this contract. j By Mr. Bedell: Q. What do you pay to the Solvay Process Company Tor your soda? A. I don’t know. Q. Is it as much as a cent and a half? A. I can’t tell. Q. You have no knowledge on the subject? A. No, sir. Q. And still you are secretary and treasurer of this company? A. I am not the secretary; I am the treasurer; yes, sir. Q. And you have no knowledge as to the amount per pound that you pay the Solvay Company for their bicarbonate of soda? A. No, sir. Q. You don’t know? A. I don’t think anybody would. Q. Well, would you please tell me how you arrive at a basis of calculation? A. Because we cannot tell until we have been in business one year; we have only been going about four months. Q. Why can’t you tell? A. Because it depends on the amount of goods we sell. Q. The purchase price? A. Yes, sir. Q. Well, is it graded then? A. Somewhat; yes, sir. Q. What is the highest price per pound that you are to pay the Solvay Company? A. I can’t tell that. Q. Don’t you know? A. No, sir. Q. You know something of the terms of your contract? A. Yes, sir. Q. Is it as high as a cent and a half? A. I can’t tell what it is. Q. Will you furnish the committee with that statement? A. I don’t know whether I can or not. Q. Why? A. Because I don’t think anybody could tell. Q. You must have some agreement or some arrangement with the Solvay Company? A. There are certain reasons, Mr. Chair- man, why, if I could answer that question, I should certainly take 570 [Senate, counsel before I did answer it; the reason is that we have com- petitors in this — Q. Is that the reason that you cannot answer the question now? A. No, sir; it is not — w T e have competitors in this room; we have one man here -whose name is Walsh whom we discharged for good cause in 1895 who is suing us at present; I should not want even though I could, to give the price, in view of all this; and I don’t really think that the committee ought to ask me to do it. Q. Well, that will be a subject for discussion among the mem- bers of the committee; what is the duty now on bicarbonate of soda? A. I think it is three-quarters of a cent per pound. Q. Three-quarters of a cent? A. No; half a cent; half a cent. Q. Isn’t it a quarter? A. No, sir; I believe it is half a cent. Q. Will you tell me what your package soda is sold for to the retailers by the jobbers, at what price? A. I don’t know, sir; it is sold for all the way from four and a half to six cents. Q. Your package soda? A. Yes, sir. Q. By the jobber to the retailer? A. Yes, sir; you mean in New York State? Q. I mean in New York State? A. I don’t know; I don’t look at those things; I mean all around the country they sell. Q. But in other States it is sold from four to what price? A. They give it — oh, you mean package goods entirely; packages? Q. Yes. A. Well, I was thinking of kegs when you first spoke; from four and a half to six cents they sell package goods, I pre- sume for anything they are a mind to from what it cost them in freight, I suppose; they can sell it for two and a half if they see fit; that is not part— none of our affair. Q. Do you know what the usual retail price of your goods — ■ A. I don’t know; I presume it is from eight to ten cents; from seven to ten cents; somewhere along there; yes, sir; it has been for twenty years, as near as I can understand, in packages, pound packages. Q. In what form do you pay this rebate in this new corpora- tion? A. In what form? Q. Yes; how do you pay it? A. We pay it every three months. Q. By check? A. Yes, sir. No. 40.] 571 Q. What proof has the jobber to make to you to entitle him to receive this rebate? A. We have it printed on the back of a check that — I would say printed on the back of the check some- thing like “our signature on here” — “on this check is our word that we have not broken the price” — or something of that kind; I don’t recollect exactly. Q. That is to say a certification by the act of endorsement of the check that they have lived up to the terms of this factors’ agreement? A. Yes, sir. Q. Is that the substance of it? A. Yes, sir Q. Can you tell me what the price in bulk, the market price in bulk of bicarbonate of soda was in 1889? A. 1889 I think it was — let us see — Q. Well, about what? A. I don’t recollect. Q. Was it about two and three-quarters to three cents per pound? A. I presume so, if you have the figures there; I don’t recollect exactly what it is. Q. And was that price reduced by the fact that the tariff duty on bicarbonate of soda was reduced from three-fourths of a cent to a quarter of a cent a pound? A. I don't know whether that was the reason or not; I know the price was reduced right along. Q. But notwithstanding that fact your prices increased for the package goods; is that true? A. No, sir. Q. Did you swear to the statement here awhile ago that a few years ago the price of your package goods was five cents; it was then afterward increased by you to five and a half? A. Oh, no; it was four and a half, and increased to five with a rebate. Q. Yes; and it is five and a half now? A. No. Q. Confine yourself to New York State? A. Oh, yes; in New York State. Q. Then you did not increase it in New York State one-half cent a pound? A. Well, we increased the price in New York State from five to five and a half and gave them one-half cent back. v Q. By rebate? A. In rebate, yes. Q. And it was an increase; to any one wiio wanted to purchase 572 [Senate, your goods and would not enter into the factors’ agreement, isn’t that so? A. Well, I don’t know, but that would be so; yes, I think it would — I do not — Q. (Interrupting) This increase was made notwithstanding the fact that the price of bulk soda had been reduced? A. We re- duced the price of bulk goods along on that — yes, sir. Q. You had considerable competition in bulk goods, hadn’t you? A. Yes, and in box goods, too. Q. But your long established trade-marks of Cow brand and Arm and Hammer brand enabled you to keep the price up of pack- age goods, but in bulk soda, without any designation or without any brands, you had an open competition? A. Yes, we had an open competition. Q. Therefore you reduced your price on the bulk goods? A. So we did on bulk goods; in the former. Q. I say on bulk goods? A. I would say, ou package goods, Q. When you reduced your price? A. I say we had that same competition on package goods. Q. But you haven’t it now? A. Yes, we have a good deal of competition on package goods. Q. Not as much as you had a few years ago, have you? A. Well, I don’t know that we have as much as we had; I don’t know, too, but we have; there are as many manufacturers, I think, or even more than there were then. Q. Now, Mr. Walker, isn’t it a fact that no manufacturing con- cern can do business in this State and sell its package goods in this State in competition with you? A. No, sir. Q. At the price of five and a half cents per pound? A. No, sir; it is not. Q. And that the men who are engaged in your business have to rely almost entirely for the disposition of their goods on States other than the States of New York and New Jersey? A. No, sir; it ought not to be. Q. Isn’t it a fact that you do business with almost nine-tenths of the wholesale grocers of this State? A. I presume it is. Q. Then it follows from that, under these agreements? A. Yes, sir. No. 40.] 573 Q. Then it is a fact that nine-tenths of the wholesale grocers of this State cannot sell any of these other brands of goods and live up to their agreement with you, for less than five cents and a half per pound to the retailer; isn't that true? A. The retail- ers can sell other brands. Q. I am speaking now of the wholesalers; the wholesalers are obliged to sell to the retailers at five and a half cents per pound, no matter what brand it may be, isn’t that true? A. Yes. Q. Then you are practically wiping out all competition in this State by every competing manufacturing concern in the State on package goods, are you not? A. No, sir; I don’t think we are. Q. Are you not placing the public in that position — in the position — of — A. No, sir. Q. Why, you place the jobber in the position that he has your goods to sell at five and a half cents per pound, and he must sell everything else at five and one-half cents per pouud? A. The jobber — if you will allow me just a moment — the jobber doesn’t sell goods to the consumer. Q. I realize that fact very plainly? A. The retailer can buy those goods if he has a mind — we never restrict him in any way whatever; haven’t anything to do with him. Q. No; but you restrict the jobber — and is not nine-tenths of the business done through the jobbers in this State? A. Well, I presume it is, on such staples like Hour and those things — Q. Isn’t it on soda? A. Yes, it is on soda, too — Q. Isn't it a fact that no manufacturing concerns could start out and endeavor to deal with the retailers direct and make a success of his business? A. No, sir; there is where the majority of them start in and make a success. Q. But you swear here that they must trade through the job- ber if they want to trade with you? A. They can do it in every other State. • By Mr. Lexow: Q. Do you think that any system should be tolerated in this State whereby under the laws, if you are permitted to do so by 574 [Senate, law, you can compel the consumer in this State to pay more for your product, although a New York State corporation, than is paid for it by other States — consumers of other States? A. No, sir; I don’t think they do. By Mr. Warner: Q. Don’t the retailers pay more in other States than they do in the States of New York and New Jersey? A. Pay more for goods than they do in the States of New York and New Jersey? Q. Yes? A. Yes, I think they do, because the freight is higher, and they are obliged to; a little more freight. Q. Pay less, I mean? A. I don’t think they do; I think they pay more. Q. Don’t you know? A. No, I don’t know, because there is such a competition that, for instance; in the far west they will even sell goods for just what it costs in order — Q. On account of the competition? A. On account of compe- tition. Q. And on account of lack of competition in this State they pay higher? A. Well, here they have no freight to pay— Q. Don't they pay a higher price here in this State; on account of the lack of competition, as I understand you? A. They don’t pay any higher price on our goods. Q. The retailers don’t? A. No, sir. Q. You are incorporated, are you, under the laws of this State? A. We are; yes, sir. By Mr. Bedell: Q. You stated earlier in your examination that you had a fac- tory at Harlem — John Dwight & Co.? A. Yes, sir. Q. There you manufactured bicarbonate of soda, at one time, didn’t you? A. Yes, sir. Q. What did you do with that factory? A. Have it now. Q. Are you operating it? A. Yes, sir. Q. What are you producing there? A. We are producing sal- soda, and using it to pack our goods in just the same as we did be- fore. * . . No. 40.] 579 Q. Are you using all the factories — are you usiug your factory at Greenpoint? A. Yes, sir; expect to continue using it. Q. And so far as the production of bicarbonate of soda was concerned they dismantled it, didn’t they? A. Well, they are not dismantled, but we are not using them for that now. Q. You do not employ as many men as you did before? A. I think we employ considerably more. Q. In proportion to the business that you did? A. Yes; I pre- sume we did employ a great many more since we are building — Q. That is due to the manufacture of other products? A. Yes, air. By Mr. Mazet: Q. Since you have used this agreement with the wholesalers or the jobbers in New York, have any cases come to your knowledge of violation of the agreement by them? A. By the grocers? Q. Or sellers — yes; the factors who signed this agreement? A. I think there have; yes. Q. In what respect; by selling your goods at a lower rate, or selling goods of other grades? A. I think both, as near as I can recollect; I don’t recollect now just how they are. Q. How many cases? A. There are not many. Q. How many cases of that kind that you know of? A. We heard from— how many cases? Q. Yes? A. I don’t recollect; it is not — it is some years ago. Q. You said there were not many; I presume you know approx- imately? A. No; I don’t recollect how many; there may have been perhaps half a dozen in as many as ten years, or eight years; I don’t know. Q. How long has this agreement been in force? A. Since 1889. Q. What is your method of treatment of those cases? A. Well, the usual manner with Dwight & Company was to not hear of it for some time (laughter) — was to make sure that he was not doing it. Q. But after they established that? A. It took a long time to find that out. 576 [Senate, Q. What would that result in, as far as your treatment of them was concerned? A. I don’t recollect we ever kept a man’s rebate back or not; we may have done that, one or two — I don’t believe there were any more than that even. Q. You did it in one or two cases? A. Well, we may have done it; I won’t say we did; I am not positive about it. Q. Will you swear that you did not? A. Did not what? Q. Will you swear that you did not? A. Did not, eh? Q. Refuse to return the rebate, that you retained the rebate? A. Will I swear that we did not return to him the rebate? Q. Yes, sir? A. No; I won’t swear that I did not return it to him. Q. In cases of that kind did you still continue to sell those peo- ple goods? A. I don’t think — I don’t know whether we ever had one that we ever did refuse to sell; we may have had — that we have refused to sell. Q. Not? A. I don’t think that "we ever refused to sell any one — as far as I know. Q. I mean after you have discovered a violation of the contract of your agreement? A. No, sir; I don’t think we ever refused to sell any one; I never recollect of any such; certainly it never was our idea to. Q. Have you to-day among your customers people who have violated your agreement and you are still continuing to sell them goods? A. Without any agreement did you mean, or under a new agreement? Q. No; those who have violated the agreement? A. I think of the people that we have in New York State that we sell we have agreements with; but I have an — I think also that nearly all, as I have said before the grocers — Q. I don’t think you understand my question; are you to-day selling any one goods who has violated your agreement? A. I think we are; I don’t recollect the individuals; if we are they have new agreements. Q. Oh, not under agreement — once having violated your agree- ment you are not selling them under the terms of the agreement? No. 40.] 577 A. Well, we may have, but I don’t know; I am not sure of that; we wouldn't refuse a man goods under any circumstances, and never have. Q. But you refuse him rebate? A. We would refuse him re- bate; yes, sir. Q. Therefore, he would not be as favorably situated as far as return is concerned if he is not selling under your agreement? A. No, sir; I don’t think he would. By Mr. Warner: Q. You never thought in making these contracts with the job- bers here in the State whereby they are not to sell goods of other concerns less than what they sell yours for is in violation of the law of the State as illegal combination and restraint of trade, did you? A. No, sir; I never knew it. By Mr. Mazet: Q. You don’t consider it so, do you? A. Why, we never had any such idea; we never restricted bulk goods; it has been sold for years — was sold just as freely as the package goods are. By Mr. Bedell; Q. E-xcept when the bulk goods had the Arm and Hammer brand on and the Dwight soda brand; then they agreed to main- tain the price? A. Yes, sir; but there are just as many goods handled without any brands on as there are with; a great many more; on which there is no restriction whatever, and never has been. Q. Now, Mr. Walker, I wish you would furnish to this commit- tee a statement of the Church-Dwight Company, through the two companies that went to make up this concern, of the number of pounds of Cow Brand and Arm and Hammer Brand of soda that was sold i the last year from January 1, 1896, to January 1, 1897? A. Yes, sir. Q. Mr. Walker, in what way was the stock of this new company divided? A. In what way? 07 O ( 578 [Senate, Q. Yes? A. Half of the stock goes to Church Company, the people that were in that company; half to John Dwight & Com- pany. Q. Each put their respective properties in upon an equal basis? A. Yes, sir. Q. And then the stock was divided? A. The stock has not been divided yet. Q. The stock has not been issued? A. No; I told you that we were not ready to go on with the business; we had hardly started; I couldn’t tell you as yet. By Mr. Warner: Q. Well, they have transferred their property, as I understand, to the new corporation? A. Yes, sir. Q. And have the other two corporations been dissolved? A. They were not corporations. Q. Oh? A. They were merely firms; just two old firms who were brothers-in-law came together; two firms coming together into a corporation, or rather the individuals in each firm forming a corporation, the other two firms coming in. By Mr. Lexow: Q. And everything has been accomplished except the formality of the division of the capital stock, which has been agreed to on an equal basis as between the two concerns? A. Yes, sir. (Church & Company document marked “February 17, Exhibit D.”) John Dwight, being duly sworn, testified as follows: Examined by Mr. Bedell: Q. What is your official position with this company? A. I am the second vice-president. Q. Are you familiar with the business details of the company? A. I think so, more or less. Q. Are you familiar with the price of soda; that is, price that you have to pay for soda of the Solvay Company? A. Why, I don’t know what price we have to pay them. No. 40.] 579 Q. You make the same answer to that question as Mr. Walker? A. I presume so. Q. Now, Mr. Dwight, there is one contract that I failed to identify by Mr. Walker, and I would like to identify that (show- ing witness paper); I wish you would look at this paper that bears Church & Company at the head and tell me if that is the form of contract that has been in use by Church Company and Dwight Company in dealing with the factors in this State? A. I presume about the same; and that looks to me like it, though I couldn’t tell unless — I have no reason to doubt it. Q. I wish you to examine it carefully to be sure; I want to es- tablish its identity (showing witness document previously marked “ February 17, Exhibit D ”). A. I presume that is their form, al- though I am not familiar with it. Q. Are you able, Mr. Dwight — I don't want to call you back again to the stand to-morrow — I would like to finish up this case — are you able to give us an estimate of the amount of your pro- duct of bicarbonate of soda in the Arm and Hammer Brand and ■the Cow Brand, for the last year? A. No, sir. Q. Can you approximate it? A. You mean the Church & Dwight Company? Q. Both, or either company; that is, I mean both — the separate companies, and then the consolidation? A. Well, I presume it is about twenty-five thousand tons. Q. Twenty-five thousand tons? A. About twenty-five thousand tons, easily enough. Q. That is in fact one particular branch of your industry, the bicarbonate of soda? A. Yes, sir; the bicarbonate. Q. That would be in the neighborhood of forty million pounds a year? A. Forty millions — well, I presume that is about it. Q. Now let us make a little arithmetkical calculation, Mr. Dwight; it is fair to assume, is it not, that the cost of this bulk * rsoda — of this soda in bulk — will not exceed one and a half cents per pound? A. Well, you might assume that. Q. Well, you could do that with safety, could you not? A. Well, sir, I don’t think we know what the cost of it is. 580 [Senate, Q. Well, I am speaking now, it is recognized that the Solvay company can produce soda as cheap as any other company? A. We sell it for a cent and a half. Q. You do sell it for a cent and a half? A. Yes, sir. Q. Well, then, it isn’t likely that it will cost you more than a cent and a half, is it? A. Why, it is very likely to, yes, sir. Q. Even though you sell it for a cent and a half? A. Yes, sir. Q. Why is that? A. People do sell below cost occasionally — I mean, it is possible. Q. Are you selling below cost now? A. Well, I don’t know. Q. You don’t know? A. No, sir. Q. But you are selling at a cent and a half? A. We are sell- ing for a cent and a half. Q. Now what does it cost per pound to put up these packages? A. Do I have to answer these questions with our competitors here; do you think it is — Q. Well, approximately? A. Well, I don’t — Q. I don’t mean literally? A. Well, it is rather — (The members of the committee here held a consultation.) By Mr. Bedell: Q. You as a company have not yet declared any dividends, have you? A. No, sir. Q. Well, I will abandon that line of examination, because we do not desire to have brought out here by this investigating com- mittee anything that will be of service to your competitors, and I think that we can get all of the information that we desire through other channels. A. I am much obliged. Q. Now, Mr. Dwight, you heard Mr. Walker’s testimony as to the practical operations of this agreement in this State? A. Yes, sir. Q. Have you any changes to make in the testimony that he gave? A. Why — Q. I want to consolidate this if I can? A. Why, I feel that in those contracts with the wholesaler, the jobber was made a factor, the jobber was made a factor, for the consideration of his doing a certain work for us he received the consideration. No. 40.] 5S1 Q. You consider him then as your agent? A. We considered him as our agent; we have certain work which he does for us; we pay him the compensation. Q. That is the point that I wanted to get at, and which Mr. Walker did not seem to understand; I thought that you would understand that situation. Charles F. Pope, being duly sworn, testified as follows: Examined by Mr. Bedell. Q. What is your name? A. Charles Fairview Pope. Q. Where do you reside? A. One hundred and tenth East Thirty-first street, New York city. Q. Are you a member of the J. Munroe Taylor Chemical Com- pany? A. Yes, sir. Q. What position do you occu-py in that company? A. I am junior member of the concern; I take care of the salesmen and part of the business advertising. Q. How long has your firm been in business? A. Since 1S44. Q. Do you manufacture soda and saleratus, that is bicarbonate of soda? A. Yes, sir. Q. About how much capital is invested in your business? A. Well, about $300,000. Q. Did you previous to the year 1S89 have a large business in soda and saleratus throughout the State of New York? A. Yes, sir. Q. Do you know of these contracts which have been mentioned here which the former firms of John Dwight & Company and Church & Companj’ have between the jobbers and the whole- sale grocers? A. Yes, sir. Q. How has the enforcement of this contract by Dwight & Co. and by Church & Co. affected your business? A, Well, to a cer- tain extent it hurts it. Q. To what extent? A. Well, now, I could not tell how largely. . Q. AY ell, approximately; what is the effect upon your business here in this State? A. Well, our price to the retailer is natur- ally — or is lower than their price. 5S2 [Senate, Q. What is the price to — I don’t mean to the retailer, but to the jobber? A. Our price to the jobbing trade in less than 100 box lots is two-twenty; in 100 box lots is two — Q. That is two and seven-tenths cents a pound? A. No; there is only sixty pounds to a box. Q. Well, how much would that be? A. That would be a little over four and a quarter cents; about four and a half cents; and in hundred box lots about four and a quarter cents. Q. Well, you do not sell to any of the jobbers that sell the goods of the Ohurch-Dwight Company, do you? A. That I couldn’t say positively., Q. Well, so far as your knowledge extends? A. No, sir. By Mr. Lexow: Q. You do not? A. Not that I know of; I can’t state that posi- tively, because I don’t know exactly how they are used by that firm. By Mr. Bedell : Q. Are you any way connected with the Church-Dwight Com- pany by any agreement as to the price of soda in packages in this State? A. No, sir. Q. What is your opinion as to the benefit to the consumer of wiping out these contracts that exist in favor of the Dwight- Church Company; would that leave his soda at a less price or at a greater price? A. Well, that depends, of course, entirely upon the state which the market may be in; you take a time like this— Q. I am speaking now of packages — A. Well, that is in the same case; if English soda is coming to this market it will affect the American product; we are naturally obliged to meet it even at a loss and hold on to our trade in that way. Q. Assuming that the same conditions exist that exist now? A. Well, then, package soda is much cheaper. Q. The consumer would buy package soda cheaper than he is buying it to-day? A. Decidedly. No. 40.] 583 By Mr. Lexow: Q. How much do you think? A. Possibly, well, possibly a cent and a half a pound. Q. Instead of it being five and a half cents it would be four cents a pound? A. It would be from three and a half to four and a half cents a pound; in fact, soda has been sold in boxes and packages as low as two and a half cents a pound. Q. You wish to be understood that these factor agreements that have been put into circulation by the Dwight-Church Company have the effect of increasing the price to the consumer to the ex- tent of one to one and a half cents per pound? A. Well, I can’t state, because it would depend upon whether the retailer knocked off his profit to the housekeeper or not; if the retailer fixes the price at ten cents a pound or eight cents a pound to the house- keeper, and sells at that whether he buys his soda for four cents or five cents, you could not tell whether it was going to make a difference to the consumer or not. Q. You do not know therefore whether the difference in price would redound to the benefit of the retailer or the consumer? A. No, sir. Q. But there would be a difference of probably one to one cent and a half per pound on this product either to the retailer or the consumer were it not for the existence of these factor agree- ments? A. Well, I believe so; in New York State; yes, sir. Q. I am speaking now of the State of New York? A. Yes, sir. By Mr. Bedell: Q. Now, can’t you give us any figures as to the value per pound of the soda that was used by the Dwight-Church Company which they packed under the name of Cow Brand and Arm & Hammer Brand? What would you consider it in bulk? A. I rather not answer that question; I don’t feel as though I — Q. What is the average price of bicarbonate of soda in bulk? A. Well, it is selling as low as one and a half cents a pound. Q. Is that pure soda? A. Yes, sir. 584 [Senate, Q. Do you consider it as good as the soda produced by the Sol- vay Company of which the Dwight-Church Company take the product? A. Most certainly, sir. Q. Equally as good? A. Yes, sir. Q. Do you know the Natrona soda? A. Yes, sir. Q. How is it recognized by the people who are skilled in the business — as pure soda? A. Yes, sir. Q. As pure as theirs? A. I believe so; yes, sir. Q. What can that be purchased for in bulk? A. I couldn’t an- swer that positively. Q. Do you know approximately? A. Well, I have an idea that it has been sold as low as a cent and three-quarters, and one in- stance as low as a cent and a half. Q. Is that considered to be as high-priced a soda as there is on the market? A. Yes, sir. Q. Now, can’t you give me an estimate of what it costs per pound to pack soda in these one-pound packages? A. Well, it can be packed for — if I have got a piece of paper about I can tell you in a very few minutes; (witness makes a computation on a piece of paper.) By running full capacity, I would say, car load after car load, half a day, it can be packed for about a cent or a cent and a half per pound. Q. From a cent to a cent and a half per pound? A. Yes, sir. Q. What has been the effect of these contracts upon your busi- ness in this State? A. Well, they have hurt us more or less; we have to-day, we have one or two cases whereby we have had our orders turned down, where we turned in jobbers’ large orders — comparatively large orders in retail trade, and refused to sell them unless we — Q. Put the price of five and a half cents per pound? A. Yes, sir. By Mr. Lexow: Q. Whether you wanted to sell at three and a half, or four, or four and a quarter? A. Our price from here was to the retail trade $3 per box, that is five cents per pound; that we charged the retail trade in New York city at the time. No. 40.] 585 By Mr. Bedell: Q. That is the retail trade? A. Yes, sir. Q. What was your price to the jobbers? A. In less than 100- pound boxes §2.70. Q. And now you cannot sell to the jobbers’ trade and compete with the Church-Dwight Company for less than five cents, can you? A. We can sell them at no price. Q. And they cannot sell to the retail trade for less than five and a half? A. That is the way I understand it. Q. Do you believe your trade would be larger in this State if it were not for the fact of these agreements? A. Yes, sir. By Mr. McCarren: Q. Mr. Fope, I understand you to say that your trade was affected by Church & Company by lowering the price of your goods, did I understand correctly? A. Yes, sir; we lowered our price to the trade — these agreements — we lowered our price to the retail trade to sell them direct for cash accompanying orders. Q. That was one effect of the operation of the Dwight-Church Company as I understand it — to lower the price of your goods? A. No; I don’t think that they intended to lower the price of our goods. Q. But that was the result of it? A. That was the result. Q. I understand you to say also that if it w y ere not for this company or similar companies, that the price to the consumer would be lower? A. I think it would. Q. How do you reconcile those two statements? A. I think that the — if soda was being sold at — by the jobbing trade under their own brands, trade-mark brands at a less price than which they now sell it, the retailer would get the benefit of that and incidentally the housekeeper. Q. Well, how could that apply, if the effect of the trade of the Dwight-Church Company has been to lower the price of your goods? A. I don’t catch the gist of that. Q. I say how do you argue that the price to the consumer would be less when you admit that the effect of the Dwight- 580 [Senate, Church opposition has been to lower the price of your goods? A. Well, the consumer don’t get our goods now; they are paying a higher price than they would to — Q. Do you sell to the wholesalers at any less price than the Dwight-Church people do? A. Yes, sir. Q. At the present time? A. Yes, sir. By Mr. Lexow: Q. Do I understand this to be the situation; that in order to put your goods on the market at all you have got to trade now direct with the retailer? A. Yes, sir. Q. That in order to trade directly with the retailer you have to decrease the price of your product? A. Yes, sir. Q. Or you can’t get it out into the market? A. Not all — through some of the jobbers — Q. That is it; the system herefore introduced has been that you have to sell to the jobber who increases the price of your product in conformity with the requirements of this factor’s agreement? A. Yes, sir. Q. And inasmuch as your brand is not as w : ell known as the other brand you cannot get itpOut to the consumer there; so that you are stopped in both ways from reaching the consumer. A. Yes, sir — unless you go to the consumer directly. Q. And can you afford to go to the consumer directly, A. No, sir. By Mr. McCarren: Q. What was the price of your goods prior to the opposition of the Dwight-Church Company, higher or lower than at pres- ent? A. It was in New York State — it was higher. Q. Then the practical result has been to lower the price of your goods? A. Yes, sir. Q. In that case the Dwight-Church people would seem to be good Samaritans? A. Not exactly. (Laughter.) • > No. 40.] 537 P "T By Mr. Lexow: Q. Do I understand tliat you annex a qualification to that that you cannot get the goods out? A. We cannot get the goods out in the same quantity as we got them out before, in New York State. Q. So that notwithstanding the decrease in the price that you put upon your goods, you cannot circulate your goods through- out the State? A. No, sir, we cannot as much as we could be- fore. By Mr. McCarren: Q. But also in the same connection that if the Dwight-Church company was not in existence your goods would be higher than they are? A. Yes, sir. By Mr. Lexow: Q. Just let us understand so there can be no question about what the true situation is; do you mean to say that as the result of these factors’ agreements you are compelled to put down your prices to the retailer, but owing to the establishment of the sys- tem you cannot reach the retailer? A. Yes, sir. Q. That then, if you trade through the wholesaler your price is increased to the extent of from one to one and a half cents per pound by the factor operating under this factor agreement? A. Well, now, I can explain — Q. So that in each case when your product reaches the retailer from one to one cent and a half per pound has been added owing to the prevailing of this system of factor’s agreements; now is that true or isn’t it? A. Well, in that case if the Church-D wight Company did not have these contracts we should go out to the retail trade with salesmen the same as they do, and solicit their trade; for the benefit of jobbers in that case, we could do it as cheap as we can do it by circulars — and we would make more money out of it possibly in the total; as it is now, we are obliged to send out circulars and ask the retailer to send cash with his order, and there isn’t one in a hundred that will pay the cash for goods. 588 [Senate, Q. (By Mr. Bedell) The fact being that you are enabled to sell cheaper — A. (Interrupting) Yes, sir. Q. (Continuing) Because there is a great difference in expense of the market of your business between now — A. (Interrupting) Yes, sir. Q. (Continuing) But if you engaged in open, active competition you would have your men out on the trade, and also this expense would make the price higher? A. Yes, sir; there is a large dif- ference between putting up trade mark brands and putting up brands for other parties; to put up trade marks you have got an expense to sell it to your retail men and advertising; in putting up a brand of goods for the jobber you deduct that right from the cost of the goods. Q. Has the effect of the contracts been to wipe out your busi- ness in putting up brands for other people? A. Yes. Q. When you make private brands for the jobbers that is marked with their particular brands? A. Yes, sir'. Q. You had no dealings whatever with the retailer, then? A. No, sir. Q. You simply worked through the jobber? A. Yes, sir. Q. These contracts have had the effect of wiping out that busi- ness to a large extent? A. Yes, sir. Q. To what extent? A. Well, we used to pack for four houses here in New York city possibly a hundred boxes a month, as I recollect now, which have not since ordered. Q. They are parties to an agreement with the Church-Dwight Company? A. So we understand. Mr. McCarren : Q. Have you any reason for a suspicion in your mind that the Dwight-Church people in any way influence the wholesale grocers to prefer their brand to yours? A. Not any more than by honest competition; sometimes we try to influence the retail trade that our goods are better than theirs. Q. You have no reason to believe that they coerce or threaten or intimidate the wholesale grocers in any way? A. Not as I No. 40.] 5S9 know of, except by this agreement; and I don't know whether that is on the part of the -wholesalers or on their part. Mr. Lexow: The other witnesses subpoenaed with reference to this pai’ticular matter may be deemed dismissed unless they are notified to appear again. The committee will now adjourn until to-morrow morning at 10 o’clock. NINTH PUBLIC HEARING. COMMON COUNCIL, NEW YORK, THURSDAY, FEBRUARY 18, 1897, 10 A. M. Mr. Lexow : A quorum being present the committee will now come to order. Mr. Lexow: Is Mr. Parsons in the room? Mr. Parsons: I desire to inform the committee that Mr. H. O. Havemeyer is attending the funeral of the late Mr. St. John, but will be here later. I am here to answer to the request of the com- mittee to produce certain documents. The directors of the Amer- ican Sugar Refining Company had a meeting yesterday afternoon, and the request of the committee that the company would furnish a statement of taxes paid in New York, certain labor statistics, a certified copy of the minute book of the company authorizing the purchase of the Philadelphia refineries, and the agreements for these refineries was presented. It was resolved that I should be, and I was authorized to, and I do furnish to the committee the ex- tract from the minutes, copies of the agreements or authority (for the purchase of the Spreckels stock there was no written agree- ment), and a statement of taxes. The statement in reference to labor statistics which the committee desires is being prepared and will be presented as soon as ready. Mr. Lexow: Will Mr. Havemeyer be here so that we can put these various documents in evidence? Mr. Parsons: They are sworn to; but he will be here to an- swer questions concerning them. Mr. Lexow : I think we will be ready for him after recess. 59Q [Senate, Mr. Parsons: I took the precaution to have them certified and sworn to. Mr. Warner: Were you served yesterday with a subpoena duces tecum to produce the books? Mr. Parsons: I was not. Mr. Lexow: Mr. Flint will please take the stand. Flint, Charles R., recalled: Examined by Mr. Lexow: Q. You were requested to produce certain documents yester- day; what answer have you to make to the request of the com- mittee? A. I have sent for a copy of the Simmons report and expect it will be here within a short time; it was not convenient for me to get the original document, but I shall certify that the copy produced is a copy of the original report; I was also asked to bring statements in reference to the rates of w r ages paid by the United States Rubber Company and the rates of wages paid by competitive plants; I have that data and will now read it if the committee desires. Q. Covering what period of time? A. Covering the past year; I am willing to testify that there has been a substantial differ- ence for two years or more; but the figures that I have now are the figures that have prevailed within the past six months. Q. Have you got the comparison between the figures paid by the independent companies previous to the consolidation with those now paid? A. I have not, except that the gentleman familiar with that branch of the business, the president of the company, has stated to me that he had not reduced wages; that there has been no reduction since the organization. Q. Who is there that is qualified to speak on the subject? A. Well, there would be several persons in the concern; if the com- mittee desire I will obtain that information more in detail; I will send you that information if you desire it. Q. You have said that you received information from somebody in the company qualified to speak upon that subject; please give No. 40.] 591 the name of that person? A. There would be several parties; there would be Mr. Evans, and all the superintendents. Q. He is away? A. Yes, sir. Q. What person is there in the State of New York that can speak with authority upon that subject? A. We have no factor- ies in the State of New York; but the superintendents of any of the mills would be able to give the information, and I will be very glad to furnish it. Q. Have you kept statistics showing the price of labor of the independent companies prior to consolidation and after con- solidation? A. No. Q. You have not? A. No, sir. Q. What other figures have you there? A. I have a comparison between the wages paid by the United States Rubber Company and a competitive company; they are as follows: Q. What competitive company? A. A company on Long Isl- and, at Setauket. Q. They no longer pay any wages at all, do they? A. They have within perhaps a few days. Q. It is a few weeks? A. I don’t think so; I think they have been running until within a few days. Q. Are you prepared now to answer the question that was put to you yesterday on the subject, as to whether or not, after refus- ing in the winter to run the New Brunswick factory on, “ third quality goods ” and closing that factory during the winter, you resolved in the spring to run a small United States Rubber Com- pany factory on third quality goods for the purpose of reducing the price of some brands manufactured by the Liberty Company of Setauket and pressed that company to the wall and compelled it to close and discharge its employees? A. I cannot testify on that subject, but I can give the rates of wages paid. Q. Let us follow out that; did anybody in your employ, or rep- resenting you, destroy factory property at Setauket, L. I.? A. What do you mean by factory property? Q. I mean the facilities for the production of rubber goods? Did you destroy facilities there? A. I personally have no knowledge of the subject. 592 [Senate, Q. Wliy do you not answer “yes” or “no?” A. No. Q. Have you any information about it? A. No. Q. Do you know a man by the name of Joseph W. Elverson? A. Yes, sir. Q. What relation did he bear to your company? A. J. W. Elverson has never been an officer or director of the United States Rubber Company. Q. What relation did he bear to the Company, if any? A. He may have had stock in it; but no other reason. Q. He was interested financially? A. He may have had stock in the United States Rubber Company. Q. Do you know a man by the name of Gardner? A. I don’t remember any such person. Q. Do you know a property belonging to the United States Rubber Company at Brookhaven ? A. I do not. Q. Didn’t the United States Rubber Company ever have any property there? A. I think not; they had stock in a corporation that had property there. Q. What was that corporation? A. The Brookhaven Rubber Shoe Company. Q. That is what I have in mind. A. Well, I give you the in- formation. Q. Did the United States Rubber Company cause rubber maiju- facturing facilities to be destroyed at Brookhaven? A. Not to my knowledge; rubber shoes are being manufactured there. Q. Yes; I know that; did it cause facilities that were then in existence belonging to the company in which it had this stock in- terest to be dismantled or destroyed, either wholly or partially? A. Not to my personal knowledge. Q. Why did you put in the limits of your personal knowledge? A. Not to my knowledge. Q. Have you any information on the subject? A. No, sir. Q. Do you know that about $50,000 worth of property there was rendered inoperative by order of the United States Rubber Company? A. I don’t know it. Q. Have you any doubt of it? A. Yes, sir. No. 40. j 593 Q. You never heard of a man by the name of Gardner? A. I do not remember him now; if you give me his full name I may be able to tell you., Q. Do you remember anything occurring on the 29th or 30th day of October with reference to the property of the Brookhaven Eubber Company? A. Of October last? Q. Yes, sir. A. No, sir; I don’t remember. Q. What interest did you have in the stock of the Brookhaven Eubber Company? A. The United States Eubber Company owned all the stock of the Brookhaven Eubber Company. Q. Then you owned the whole company? A. All the stock. Q. Did you do anything to the property of the Brookhaven Eub- ber Company on the 29th or 30th day of October? A. Of which year? Q. 1896. A. Not to my knowledge. Q. Was it in 1895? A. Not that I know of. Q. You absolutely know nothing about any incidents occurring to the Brookhaven factory on the 29th or 30th day of October of any year? (No answer.) :Q. Since the organization of the United States Eubber Com- pany, then? A. Not that I remember. Q. Never heard of it? A. I don’t remember. Q. Was the plan of operations of the Brookhaven Eubber Com- pany changed in any particular at that time or thereabouts? A. I have no knowledge of any date; I know in a general way that the plant of the Brookhaven Eubber Company was sold to Mr. Elverson personally or to a company in which he was interested. Q. That was sold? A. Yes; the plant of the Brookhaven Rub- ber Company. Q. Was sold to him? A. Or a company of which he had con- trol. Q. By the United States Eubber Company? A. By the Brook- haven Eubber Company, the stock of which the United States Eubber Company owned. Q. Do you mean to say that you held and the United States Eubber Company held any stock of the Brookhaven Eubber Com- 38 594 [Senate, pany that was sold to Mr. Elverson? A. I mean to say that the United States Rubber Company owned and now owns all the stock of the Brookhaven Rubber Company; I mean to say that the Brookhaven Rubber Company sold to Mr. Elverson or a company of which he was the manager or the majority holder the plant of the Brookhaven Rubber Company. Q. So that while keeping the stock of the Brookhaven Rubber Company as an asset in the treasury of the United States Rubber Company you sold its assets to Mr. Elverson or the Brookhaven Company; did you operate that company? A. No; the United States Company didn’t, nor did the Brookhaven company sell its assets. Q. Who did? A. As I stated the Brookhaven Rubber Company sold its plant and not the stock, as you can appreciate, represent- ing other assets, namely: Account, bills receivable, etc. Q. But its manufacturing plant and appurtenances, its factory known as such; was it sold to Mr. Elverson? A. That was sold either to Mr. Elverson or a company in which he was largely interested. Q. What was that? A. I don’t know the name of the com- pany; because there were several companies; there was the Man- hattan Rubber Company and another company, the North Ameri- can Company; I don’t remember now to which company the plant was sold, to a company or Mr. Elverson; I don’t remember just which; for as I have said, I didn’t attend to it. Q. When did this occur? A. I don’t remember; it was over a year ago. Q. Was it not just prior to the 30th day of October? A. I cannot state; I did not personally attend to the matter. Q. How long have you been owners of the stock of the Brook- haven Rubber Company? A. I don’t remember the time. Q. Was that taken in in the original syndicate? A. I will produce the Simmons report. Q. Don’t you know whether it was part of the Simmons re- port? A. I am not sure it was; it is a comparatively small plant; I am not clear about that. No. 40.] 599 Q. When will that report be here? A. I expect it every mo- ment; I have sent for it. Q. What is your best recollection as to the time? A. I have an idea that it was taken in at the time of the Simmons report; I think it was. Q. And operated by the United States Rubber Company? A. I don't remember. Q. You don't remember? A. I don’t know; it was not a large establishment, and I don’t remember whether it was operated by the United States Rubber Company. Q. As treasurer of the company don’t you remember whether after securing the assets represented by the capital stock or the former independent companies, you operated that company or closed it down? A. I don't remember, Mr. Chairman, whether it was operated; if so, I can state in a general way that it was not operated for a long period. Q. It was not? A. No, sir. Q. Had you closed it down before the sale by the Brookhaven Rubber Company of its plant to Everson? A. That f don’t re- member. Q. Well, if you remember that you closed it down at all, you must remember about the time, as to whether it occurred before you sold it out? A. I was impressed by the fact of the sale — Mr. Lexow (interrupting): As treasurer of the United States Rubber Company do you only attend to its purely fiscal matters, as to its money exchanges and credits and debts, and pay no attention at all to the workings of the company as such, although a director of the company? A. I have a general knowledge of the business as I have shown in the statements made. Q. I ask you this question now, whether that company was running or closed down; as a director of the company you ought to know? A. I know the essential facts that this stock was pur- chased; I know that if it w T as run at all by the United States Rubber Company it was run but for a short time; I know that the plant was sold to a company which Mr. Elverson either owned or had control of; there is the essential fact, Mr. Chairman. 506 [Senate, Q. Why did you sell it to Elverson? A. Elverson wanted to buy and we felt, as I think that the facts have shown, that they didn’t have there as good facilities for manufacturing as the United States Rubber Company had at its other plants, and that in order to make money it would have to be done on low price labor, and we preferred to use labor saving machinery and the methods of the more economical plant. Q. What was done with the plant? A. Mr. Elverson operated the plant; the statement that I have made in regard to wages I obtained from him; in order to meet the possibilities — Mr. Lexow (interrupting): One moment, do not side-track the other; you said Mr. Elverson operated the plant. A. I did. I Q. On your property? A. No; he bought the property; he bought the plant from the United States Rubber Company. Q. Did he buy the realty as well as the running plant? A. He bought the realty as well as all the machinery, its engines, the manufacturing plant. Q. Did he destroy, tear up or dismantle that plant? A. Not to my knowledge. Q. Have you no knowledge on the subject? A. I don’t know; I know the plant has been in operation until within a very short time, say within, as I understand it, a few days; it is merely closed up — I don’t know that it is closed; if it is closed I under- stand that it is merely temporarily; the property is in operation; I have no information to lead to the conclusion that there is any intention of closing the business. Q. Was not at least a portion of the plant dismantled? A. Not to my knowledge. Q. Was not the manufacture of rubber boots and shoes dis- continued? A. I understand the manufacture was continued for a time; but they have been manufacturing rubber boots and shoes at Setauket for a year or more and have a very consider- able capacity for manufacturing them there. Q. Didn’t Mr. Elverton as part and parcel of that transac- tion agree with you or the United States Rubber Company Trust No. 40.] 597 not to manufacture boots and shoes upon this premises? A. Not to my knowledge. Q. Who made the transaction? A. That is a business that would have been attended to— naturally it would have been at- tended to by those in charge of manufacturing and by those in charge of the legal business of the corporation, if done at all. Q. Is it not true that in July of last year an order was issued by the United States Rubber Company closing that factory and dis- charging between 400 and 500 hands? A. In, July, 1S96. Q. Yes, sir? A. I am very well satisfied that the United States Rubber Company didn’t own the plant. Q. Make it 1S95? A. That they had no control over it then. Q. Make it 1S95? A. Not to my knowledge; I think that that plant has been under the control of Mr. Elverson, that he had ab- solute control; the United States Rubber Company sold the plant and parted with all interest in it and have no interest to-day whatsoever; they sold it to Mr. Elverson or a company which he controlled. Q. Was that not made upon the stipulation that he would not manufacture upon those premises any goods that came in compe- tition with your line of manufacture? A. Not to my knowledge. Q. Will you swear that that was not part of the understand- ing? A. I will swear that I do not know it. Q. Who made that understanding? A. That business would naturally be attended to by those in charge of manufacturiug and by legal counsel. Q. I am asking who they are? A. The president of the com- pany; Robert D. Evans, a gentleman who has charge of legal mat- ters in the company; he has not acted as counsel, but as a man who consulted on behalf of the company as counsel with Samuel P. Colt. Q. Where does he live? A. He is president of the Industrial Trust Company of Providence, R. I. Q. Has he an office in the city of New York? A. He resides in Providence; he is president of the National Rubber Company of Bristol, and lives there during the Summer; among the offices. 598 [Senate, he fills is the position of president of the Industrial Trust Com- pany of Providence; he is a member of the board of directors of the United States Rubber Company. Q. Is Mr. Evans in New York city? A. I don’t know; I don’t think he is; I think he is in Boston. Q. Has he been here since this investigation started? A. Yes, sir. Q. When is he expected back? A. I don’t know; I will be glad to ascertain. Q. Will he appear before this committee prior to its adjourn- ment? A. I hope so. Q. When do you expect him here? A. I don’t know; I will communicate with him if you desire. Q. Please do so; at the time that I have referred to, were not all the dies and moulds for the manufacture of rubber shoes and boots destroyed in that factory? A. Not to my knowledge. Q. W T hat is the number of the office of the United States Rub- ber Company? A. No. 88 Reade street, New York. Q. Does Mr. El verson have an office at No. 88 Reade street? A. I don't know where it is. Q. That is in the next building, is it not? A. I have never been in it and have never seen it; I understand that he has an office in Reade street. Q. Do you know whether orders were issued from there to de- stroy this plant SO' far as its boot and shoe facilities were con- cerned? A. I do not; Mr. Chairman, please excuse me for a mom- ent; I want to make inquiry in regard to the Simmons report. (Witness leaves stand.) Mr. Flint: I have the Simmons report here. Q. Before going into that is if not a- fact that in this sale of the property ot Elverson you reserved all the movable parapher- nalia for the making of boots and shoes, and that after Elverson took possession it was your agent and not his who destroyed that paraphernalia? A. Not to my knowledge. Q. Have you any knowledge on the subject? A. No, sir. Q. Never heard of it? A. I have no positive knowledge on it. No. 40.] 599 Q. I ask you whether you have ever heard of it; there seems to be a doubt in your mind? A. I may have heard it, but I don’t know. < Q. Do you think that it is possible for you not to have heard of a transaction involving the sending of agents by the United States Rubber Company to destroy movable property upon prem- ises sold by that company to another? A. Yes, sir; it might have been; whatever the facts are they can be readily obtained; it is a branch of the business that I do not attend to; there are parties in the company; I will be glad to obtain the information; but I have no personal knowledge in regard to it. Q. Have you any particular branch in the business that de- stroys facilities for manufacture as well as creates them? A. We have a branch in charge of manufacturing; I can get at any facts in that connection that are desired. Q. Row, let us turn to this Simmons report, the report of Sim- mons and his associates; have you got it there? A. It will be here in a few moments ; I understood that it was here, but I will have it in a few moments. Q. Give the rate of wages paid during the last six months and the number of workingmen employed. A. In giving the rate of wages, Mr. Chairman, I desire to state that the larger percentage of the wages are paid on the basis of piece work ; so that I could not — so that in giving the rates of a considerable portion of the business I will state the amount paid for certain products; the United States Rubber Company pays for men’s boots 16 cents, Setauket pays 10 cents; the United States Rubber Company pays for “lumbermen’s perfection” 10 cents, Setauket pays 5J cents; the United States pays for arctic 7 cents, Setauket pays 4J. Q. Who asked you to compare with Setauket? A. I under- stood that you wanted to know the price of wages paid by the United States Rubber Company as compared with that paid by a competitive plant. Q. Why did you pick out a plant that is not in operation and does not pay wages? A. The plant has been in continuous oper- ation for the past year; as I am informed it only shut down for a GOO [Senate, week or two for repairs; it is a going concern, doing business and making contracts for goods; selling goods for the next season. Q. When you speak of shutting down for repairs, isn’t it a fact that the Setauket factory has shut down permanently so far as any competition in the boot and shoe business is concerned, under an arrangement with you, and that it proposes to continue its business as a “tawny” shoe manufacturing concern? A. It is not the fact, Mr. Chairman; as I am informed, and I thoroughly be- lieve, that the Setauket factory is a going concern, and I believe they are selling goods for delivery during the present year; that there is no idea of limiting their production or closing down the factory. Q. They have an arrangement with you now? A. They have not. Q. Isn’t one now in contemplation and under discussion? A. No-, sir. Q. Do you swear to that positively? A. I swear that — Mr. Lexow (interrupting) : Do you mean to say that there are no negotiations and have been no negotiations between your com- pany and the Liberty Company of Setauket? A. I mean to say that there is no arrangement; there is none under discussion; that there is no arrangement existing of any kind. Q. And none under discussion by the representatives of your company with the representatives of the Setauket Company? A. The idea has been talked of of forming a selling company; Mr. Elverson has wanted to extend his business larger than per- haps his present financial position would warrant, and there has been talk of the idea of organizing a selling company that would make advances against his merchandise; but no arrangement of any kind whatsoever has been made to my knowledge. Q. Are you waiting until this investigation is over? A. No; I would say that I have decidedly advised against any such ar- rangement as we have talked of. Q. You are opposed to it? A. I am opposed to it. Q. But you know of the instance of the arrangements under consideration by your company in connection with the Liberty No. 40.] 601 Company of Setauket? A. There are no considerations and no negotiations; and the idea that you indicate of the possibility of any arrangement being made after the adjournment of this com- mittee there is no intention or reason to contemplate such a con- dition. Q. You have developed before this committee the general fea- tures of the arrangement which is in contemplation, the proposi- tion to make this company a selling company in harmony with the United States Rubber Company; there are negotiations in shape that offer promise of speedy fulfilment? A. No, sir. Q. What is the inducement for this alliance with the Liberty Company of Setauket? A. The inducement would be a com- mission paid to the selling company on sales. Q. And the absorption of the Liberty Company’s plant as a competing concern? A. Iso such idea has been contemplated to my knowledge as to the absorption of the plant. Q. Isn’t that substantially involved in the proposition to make them selling agents for you? A. No. Q. Do you mean to say that you would create as selling agents those who are competitors in the open market against your goods? A. We recognize that there has got to be competi- tion. Q. Advances are made to Rubber Company? A. This selling company might advance — Mr. Lexow: We understand that perfectly well; then, you not only permit them to exist as a competing concern but you will put a premium upon their competition by making advances on their goods? A. We might. Q. Is that in order to preserve enough competition to deceive the public into the belief there is actual and active competition between companies? A. No, sir; that is not for that purpose. Q. Is the same situation that applies in this State with refer- ence to the Mollenhauer Company against the American Sugar Refining Company; a competition that might be destroyed at once by the larger concern but is kept in existence in order to establish a presumption of competition. A. There is no such idea contemplated. 602 [Senate, Q. Then how in the world can you explain that you not only will suffer a competing concern in the throes of bankruptcy to compete with you, but that you will foster an infant industry by advances upon its goods? A. We recognize that there must be some competition. Q. Would you rather have that kind of competition than ac- tive, aggressive, strongly backed financial competition against you; is that the proposition? A. We think that competition is desirable; the way we feel is this: That the business is pre- judiced by the manufacturing and output of poor and inferior goods; we feel that it hurts our larger product; that I have ex- plained before; there is no way for a consumer to ascertain the quality of rubber goods; a poor shoe has the same appearance as a high quality shoe; and we think that it is prejudical to the general interests of the rubber industry turning out a poor qual- ity of goods; for when the consumer buys a poor boot or a shoe, a lumberman for instance, he is prejudiced against rubber shoes in general; and as our trade was very much larger than Elver- son’s trade a consideration of that kind would lead us to try and facilitate the output of better goods. Q. Has that company the reputation of making poor goods? A. It has. Q. If it has the reputation in the trade of making poor goods it cannot hurt you; it is only where a concern makes poor goods when it is supposed to make good goods, that it can hurt your trade? A. I will explain how it hurts us; it would not hurt us perhaps with a jobbing trade, but it would hurt us with the consumer; a great many consumers buy rubber shoes and boots without examining the trade mark; the jobber examines the trade mark, and the retailer examines the trade mark, and as a rule the value of the trade mark is owing to the fact that the retailer insists upon the best goods which are known b} r the trade marks; but the consumer, take a man who does not buy rubber boots or shoes very often, he buys them without knowing any- thing about the trade mark; when they get a poor shoe or a boot it will wear out quickly and then the rubber boot or shoe is No. 40.] 603 generally condemned; and our plan is to make good goods; they may make a million pairs a year without their making money, and to the great prejudice and injury of our industry. Q. And now you propose, in order to prevent the competition of inferior goods, to destroy the boot and shoe manufacturing facilities of that plant, and you propose to act as selling agents for that independent company in order to secure a uniformity in the goods? A. We do not propose to act as selling agents; the suggestion was made by Mr. Elverson that a selling company should be established, and there was an indication that the quality of goods could be improved. Q. You went further than that and proposed to advance money upon their goods; did the agreement not imply that you should handle the total product of that factory? A. There was no agreement. Q. Isn’t that the proposition? A. No, sir; the proposition was made by Mr. Elverson — he may have anticipated it — but the pro- position was made in connection with th£ fact that the standard of the quality would be raised. Q. The proposition in connection with the fact that you would make advances; that you would therefore control the sale of the product; isn’t that true, Mr. Flint? A. When you speak — Mr. Lexow (interrupting): Is that true? A. When you use the expression you Mr. Lexow (interrupting): I am speaking of the Lmited States Rubber Company? A. That would involve an explanation, if you will allow me to make it. Q. The fact can be easily answered categorically; the stenog- rapher will please repeat the question. (Question repeated.) Q. The creation of the selling company, and the making of ad- vances upon the goods of the Liberty Company of Setauket, in- volves the proposition that you control the product of that fac- tory, does it not? A. I would like to advance certain informa- tion which I think will throw light on this situation; it was not proposed that Mr. Elverson — didn’t propose that the selling com- 604 [Senate, pany should be controlled by the United States Rubber Company; I desire to explain that a concern in which I am interested, prior to the organization of the United States Rubber Company, before this Rubber Company was thought of, made advances to the com- pany controlled by Mr. Elverson; those advances have not been fully paid; therefore, in my relation to this business I have an independent interest in advances to that property; and am there- fore, from that point of view, a man with a conflict of interests, which I frankly explain; this results from advances made prior to the existence of the United States Rubber Company; in fact — Mr. Lexow (interrupting) : What has that to do’ with this ques- tion? A. It has to do in this way; that personally it would be in my interests to facilitate the establishment of the selling com- pany, perhaps taking an interest therein if I can do so with the consent of the directors of the United States Rubber Company, and facilitate the operation of that plant, because interested there largely as creditor. Mr. Lexow: The stehographer will please repeat the original question. The stenographer repeated the following question: “The proposition in connection with the fact that you would make advances, was that you would control the sale of the pro- duct; isn’t that true, Mr. Flint?” A. It was not the proposition of Mr. Everson that the selling company should control the sale of the product; on the contrary, he took the position that — Mr. Lexow (interrupting): I am not speaking of the proposition with Mr. Elverson; I am speaking of the theoretical proposition; that the one would be necessarily followed by the other? A. The theoretical proposition, Mr. Chairman, was that thei sale of the Elverson goods would continue under the direction and control of Mr. Elverson; there are two brothers — several in the family — and they were to control the price and the disposition of the goods; they would be employed by the selling company. Q. Do you mean to say that the United States Rubber Company contemplates entering into any arrangement that involves the No. 40.] 603 advance upon goods of a competing company, the sale of the goods of that competing company under the orders of the owners of the competing company's factory? A. They have never — no; they have never committed themselves to any such idea. Q. Do you mean to say that an insane notion of that kind has been entertained for a minute? A. I don’t think it is. Q. Don’t you consider it insane on its statement as a business proposition? A. Not from a cei’tain point of view; I think that it would be a great advantage to the United States Rubber Com- pany if the character of the E Iverson product could be improved; I think that the organization of a selling company would facili- tate that; and, personally, I am willing to admit that having made advances, I -would be very glad to see that business facili- tated. Q. I understood you to say that you w T ere the one who was op- posed to it, and that the others were in favor of it. A. Not to an arrangement on proper lines; I would personally take an interest in the selling company to facilitate it. Q. Is that arrangement now pending before the board of di- rectors of the United States Rubber Company ? A. It is not. Q. With whom is Mr. Elverson conferring? A. I have talked with Mr. Elverson from the standpoint of a creditor of his con- cern. Q. Are you the only one who has been discussing the matter with him? A. No. Q. Is the company, as a company, discussing the proposition? A. Not officially. Q. Are the directors discussing it, or any number of them? A. It is being discussed by a representative of the company. Q. Do you mean by a director of the company? A. Yes, sir. Q. Or its counsel? A. Being considered by counsel and by its counsel. Q. Do you mean outside of yourself? A. I am not in a position in that business to represent the United States Rubber in any way; I have explained that I have an interest as a creditor; I can- not represent it in any form; I have so stated to the directors. 606 [Senate, Q. Isn’t this substantially the same situation that has devel- oped itself at the factory at Colchester and the selling company there; were your interests not the same and was not the same situation prevalent there? A. No. Q. There is a great similarity between the two transactions, is there not? A. There has been no transaction at Setauket. Q. I mean the proposed transaction? A. There is similarity in the idea of the formation of the selling company. Q. Then, with other words, there you formed a selling company to undertake the product of the Colchester works; you had made advances, and the Colchester Selling Company, which owed you a large sum of money, was turned over into the United States Rub- ber Company; now, is not the general proposition that is being considered with reference to the Liberty Company at Setauket practically on all fours with the Colchester operation? A. I de- sire to state — < Mr. Lexow (interrupting): Is it or is it not? A. I ask for a division of the question; in what sense do you use the word — Mr. Lexow (interrupting) : I am speaking in a general sense, representing the United States Rubber Company? A. No. Q. Then as an individual? A. No. Q. Then in both capacities? A. No, sir. Q. Or either? A. No. Q. Why do you make the distinction “personally”; why did you ask me a moment ago “in what sense do you use the word ‘you?’ ” A. I wanted to ascertain in order to make an explanation in ref- erence to this credit business; the position I occupy in the selling company is as an individual ; the selling company never owed me any money — the Colchester Company never owed me any money. Q. The Commercial Company? A. They owed the Commercial Company, in which I was a minority stockholder. Q. And of which you were a director? A. Of which I was a director. Q. I am not going into this Colchester business, except that I want you to testify whether, leaving out your own personality, the general proposition is not on all fours with the transaction No. 40.] 607 now in contemplation or suggested as Setauket? A. There is a similarity. Q. And the Colchester transaction ultimately developed into the purchase of a bankrupt concern and the issue of a large amount of stock of the United States Rubber Company in pay- ment for it, didn't it? A. No; not to my knowledge; the Colches- ter Company was run a year and a half after its purchase. Q. Have you not testified that prior to the acquisition of the Colchester Company by the United States Rubber Company it was a bankrupt concern? A. No, sir. Q. Is it a fact or not? A. Not to my knowledge; the Colches- ter Company and the Selling Company — Mr. Lexow (interrupting): In order to acquire the Colchester Company didn’t you first buy a first mortgage upon that Com- pany, amounting to §149,000? A. We bought a first mortgage. Q. And more than a year after that you bought §400,000 of the stock of that company upon which you held the first mortgage, is that so? A. That stock was purchased by the United States Rubber Company. Q. Did the Colchester Company pay any interest upon that first mortgage? A. Not to my knowledge. Q. Do you mean to say, then, that it was not a bankrupt con- cern at the time you purchased that stock? A. Not to my know- ledge. Q. What did you get for the property that you sold with the Brookhaven Company? A. I don't remember the transaction; I can get the price; I personally didn’t attend to it; I remember that there was considerable; I understand that there was con- siderable drop of cash; I don’t remember the details of it. Q. The United States Rubber Company paid a considerable amount of cash? A. I think so; but I don’t remember the de- tails. Q. Do you know what it paid for it? A. I don’t; I don't re- member. Q. Originally? A. The Simmons report that I will produce may show that. * 608 [Senate, Q. Do yon mean to dispute the proposition that you haven’t an agreement w^h this Brookhaven concern according to which it shall be run only on “ tawny ” shoes? A. I have stated that there is no such agreement in existence; because if there had been it would have been presented to the directors; there is no such agreement. Q. Why was that property originally purchased? A. They were doing business at manufacturing as my testimony shows; but the amount paid to them was comparatively small and they were bought at a lower price than other concerns; but they had a certain value; they were in business and doing business to a certain extent. Q. If it had a certain value for your combination why did you sell it last year? A. From the fact that through the enlarge- ment of other plants and the greater economies introduced, we felt that we could manufacture to better advantages at other points. Q. You were buying at other points, were you not? A. Yes, we bought at other points in order to get the advantages of special processes, special prices, special trade and the control of special lines of goods; better trade marks. Q. Now, the business operation with reference to this one Long Island concern in which we are most interested, being a domestic concern, is that you buy it because you need that concern; that then you sell it because you do not need it and destroy part of its operating plant, and now you propose to enter into an agency or selling agreement whereby advances shall be made upon this product of a competitor to whom you have sold? A. That is Mr. Elverson’s proposition; he wants us to do it; he wants to make that arrangement. Q. You are considering that proposition? A. We are listen- ing to what he has to say. Q. Now, will you continue the figures that you were about to give us? A. Sandals and overshoes, United States Rubber Com- pany, three and one-quarter cents; Setauket, two and one-half cents. No. 40.] 609 Sandals and overshoes, self-acting, United States Rubber Com- pany, four and one-half; Setauket, two and three and one-quar- ter? Q. What do you mean by from two to three and one-quarter? A. Cents per pound. Witness continuing; Crooks, United States Rubber Company, three cents; Setauket, two and one-half cents. Instep slippers or storm slippers, United States Rubber Com- pany, three and one-half cents; Setauket, two and one-quarter cents. Cutting soles, per hundred pairs, United States Rubber Com- pany, 31 cents; Setauket, 12 cents. Gum uppers, per hundred pairs, United States Rubber Com- pany, 40 to 50 cents as compared with 17 cents paid at Setauket. Several prices in proportion in different departments: The United States Rubber Company pays mill men $9 to $10; Setauket pays from $5 to $6. Calender men the United States Rubber Company pays from $1.75 to $3; Setauket pays from $1.25 to $1.50. Calendar-help men United States Rubber Company pays $1.50 to $1.60; Setauket pays from 75 cents to 90 cents. (Blank room), United States Rubber Company pays from $1.50 to $2.50; Setauket pays 75 to 90 cents. United States Rubber Company pays boys and girls from 75 cents to $1.25; Setauket pays 30 cents. Q. I would like to ask you how much of the ingredient in the manufactured product is labor; what percentage is it? A. I don’t know; it is a larger percentage than in most industries. Q. I understood you to say that the statistics show that labor bore a proportion from 80 to 90 per cent, of the manufactured product; do you mean to say that that average is still larger than that of the normal? A. I mean to say that I don’t think it is. Q. What is the average? A. But, Mr. Chairman, these prices — Mr. Lexow (interrupting): You have stated that your labor items exceed the average; what is the average? A. I am not in- formed. 39 610 [Senate, Q. Then, how could you say that it exceeded the average? what figure had you in mind when you spoke of the average? A. I had in a general way, without any detail, in mind the fact that the inferior plant had to reduce wages to compete; and you re- quested me to bring data showing that point; now I have shown it. Q. I didn’t want the data to show any point; I want the data that covers the situation, without reference to any point? A. This covers it, with the explanation that I will make. Q. What I want is to get at the element of proportion — how much of the finished product is the percentage for labor? A. I will try and get those figures of the gentleman; I know it is larger in our industry than in most others; the labor is a larger element of cost owing to the character of the business — owing to the great variety and character of the business. Q. Do you speak of larger with reference to the United States census statistics? A. I speak of larger, knowing in a general way about manufacturing and in a general way from general knowledge that I have of manufacturing industries; I am satis- fied that we pay a larger percentage for labor than most other manufacturing industries. Q. Where did you get those figures of the Setauket Company? A. I got them from Mr. El verson. Q. When, yesterday? A. I asked for them yesterday and re- ceived them this morning. Q. Did you receive the papers from him? A. Yes, sir. Q. Please show it to me. (Mr. Lexow examines paper.) Q. Then, Mr. Elverson has been kind enough to figure out the amount that you paid your workingmen as well as the amount that he paid? A. No. Q. It is all in his handwriting. A. No, sir; it is not; those fig- ures I obtained from an employee of the United States Rubber Company. Q. Then this is a copy of the paper that Mr. Elverson gave you, and not the original? A. No; this paper, as a matter of conveni- [No. 40.] 611 ence. I sent him. and asked him to give me these figures; I got the figures of the United States Rubber Company and then I got the figures of Elverson, and I had him put his initials to the pa- per and had him write a letter stating that those were the figures; I don’t know in whose handwriting the paper is; but I am willing to state that those are the wages paid by the United States Rub- ber Company; I have got Mr. Elverson’s initials that those are the wages paid by him. Q. When you speak of the wages of the United States Rubber Company do you mean the wages paid by all the affiliated com- panies forming the United States Rubber combination? A. I mean to state that the prices which I have named are the wages paid on similar classes of goods, those produced by the United States Rubber Company and by the company at Setauket; that the wages paid on the high quality of goods are higher; that is to say, that the high quality goods where girls are making shoes, earn from one dollar to two dollars a day. Q. Do you mean to say that your figures are confined to the same grade of shoes or product made by the Liberty Company at Setauket? A. We claim to make a better product; it is the lowest product which we make. Q. What is called “third quality”? A. It is the lowest quality we make. Q. Is that what you call “third quality” goods? A. That I don’t know; it is the lowest product; yes, sir. Q. Do you mean to say that you have no information as to the designations your company gives to its goods? A. I don’t know what these are designated; I do know that it is the lowest quality that the United States Rubber Company make; in making this comparison I wanted to show the wages paid for first quality and for lowest quality ; therefore I took the goods or the wages made for the lowest grade of goods; on the first quality boot the boot- makers earn from $2 to $3 per day; cutters earn from $2 to $3.50 per day; I wanted to show the fairness of the comparison. Q. Please answer my former question as to whether this is a summary average covering all your factories, or whether this is 612 [Sexatej, the result of the operations of one factory; and if so which? A. I believe that these prices are below the average; I think the prices that I first gave, being for lower grade goods, is below the average — Mr. Lexow (interrupting): That must be true or false; they cannot be below; they are the figures from some factory of yours? A. I have stated that the prices I have given in detail in com- parison with the Setauket factory are the prices paid for making the lowest grade of goods we make, and w r e pay higher wages for making a higher grade of goods; therefore the price paid for the lower grade would naturally be below the average of the total wages paid by the United States Rubber Company. Q. Do you pay these wages at Setauket? A. We have no plant there. Q. The wages paid by the Liberty Company are the wages paid after the factories had been closed at Setauket? A. Those are the wages which have been paid at Setauket for the past year; of course there are no wages paid when a factory is closed. Q. When factories are closed the excess of labor results in low- ering the price to the workingmen ; isn't that the situation at Se- tauket? A. I don’t know. Q. Do you know anything about it? A. I know T this; I am sat- isfied, and Mr. Elverson stated to me that these prices were paid when both factories were running, when they were running to the full capacity. Q. Your figures show the average of wages to be lower in Se- tauket than in your factories by how much percentage — the aver- age? A. I haven’t the percentage, but Mr. Elverson stated that he thought he got labor 25 per cent. less. Q. What is his name? A. Joseph W. Elverson. Q. 84 Reade street? A. I don’t know where his office is; I un- derstand that it is in Reade street. Q. He is interested in the United States Rubber Company? A. Not that I know of. Q. Didn’t you say that he has stock? A. No; I said that he may have had stock ; I think very likely he has. No. 40.] 613 Q. Then you know something about it? A. I don’t know; no. Q. The wages th,at you have quoted in making these statistics are paid at what factory of yours? A. I haven’t that informa- tion; I asked for the wages paid for the lowest grade of goods. By Mr. McCarren ; Q. Then they are paid at the factory where that particular class of goods are made; at the factory or factories? A. I should say at the factory making the lowest class of goods that the United States Rubber Company makes. Q. Do each of these factories that are run by the United States Rubber Company on the same quality of goods pay the same wages to the workers? A. I don’t know that I am informed about that; but I should say they may have been uniform. Q. Do you know whether they are or not? A. No, sir. Q. Have you any general uniform price list established? A. For the payment of wages ? Q. Yes. A. We have not; many of the plants are run by the old superintendents and the concerns are run on an independent basis; there is no general arrangement or uniform arrangement as to wages; that is left to the superintendents of the different fac- tories. Q. Do you know where Mr. Elverson is since he handed you that paper? A. I don’t know. Q. Where was he when he handed it to you? A. He handed it to me uptown. Q. This morning? A. (No answer.) Q. Where? A. I asked him to meet me at the Holland House. Q. This morning? A. Yes, sir. By Mr. Lexow: Q. A subpoena was issued for him yesterday and again this morning and he has not been found; the fact is, then, that you don't know what you pay for your work in a particular factory? A. I have not that information with me; I gave you substantially the wages as paid. Q. Can you figure out for the benefit of this committee what the average difference, as shown by your figures, is between the 614 [Senate, wages of workingmen at Setauket and the workingmen in your factory, wherever it may be? A. Owing to the variety of goods it would take a day to make that calculation. Q. Approximate it? A. In round figures I understand that we pay — the United States Rubber Company pays — 25 per cent, higher wages than is paid at Setauket; but I will have the cal- culation to which you refer; I will have it worked out for you. Q. And yet the Setauket company is closed and you are doiug the business? A. The Setauket Company has stopped; its busi- ness is not closed; it is doing business and they are active in the market. Q. I mean business with reference to the boot and shoe produc- tion. A. I mean with reference to the boot and shoe production; they are actively engaged in the business, as can be ascertained at their office; they are selling goods. Q. Are they producing goods? A. Until within a very short time. Q. Now will you kindly explain how it is possible that a con- cern which pays 25 per cent, less for labor — which forms the largest ingredient of the product — can not compete with you in the open market, but has to come to you to make advances on its goods and close its factory and discharge its men? A. The reason is owing to the advantages that I have explained, which result from the centralization of manufacture; better manufac- turing methods; the larger utilization of labor-saving machinery, all the advantages which are familiar to you and which I will not enumerate, that comes from the centralization of large manu- facturing businesses. By Mr. McCarren: Q. Has the value of the trade-marks anything to do with it? A. Undoubtedly; we have on the higher grade of goods; they are a safeguard; many of our concerns have been in existence for a half century or more; some of them for more than a half century, and they always give the public good goods. No. 40.] 615 By Mr. Barry: Q. With all your centralization of labor your labor costs you more than the labor in the smaller factory by 25 per cent.? A. Yes; we utilize our labor; of course there would be a difference between ours and that of Mr. El verson; but we claim that our labor, with the facilities that we have in the way of improved methods and labor saving machinery that the laborer earns 25 per cent, more than under inferior facilities and conditions. By Mr. Bedell: Q. Will you explain how it was that when you had a labor mar- ket at Setauket, where labor could be secured 25 per cent, cheap- er than anywhere else, you closed up and sold that factory? A. I cannot answer that definitely; but my general impression is that after investigation it was found that we could get good labor of higher intelligence at other points; men that had been thoroughly trained in the business and more efficient; our aim has been to produce goods of the highest quality; and we endeavor to sell goods of the highest quality — the highest grade — and we im- prove that grade from time to time; one of the advantages of centralization is that we have learned a great deal in this busi- ness since we came together; in almost all of the old concerns there is some one point of advantage of others; the business is one that is largely experimental; it is not: subject to analysis; the chemist cannot come in and assist us; we must experiment with different kinds of rubber and various elements; in every one of these plants there are parties working out on independent lines of advantage; and since coming together we have been able to avail ourselves of those advantages; and, in a general way, the idea has been to improve the quality of the goods; we have found it more convenient to develop at places where there existed superior manufacturing facilities. By Mr. Lexow: Q. I would like to have you answer a little closer to the ques- tion I have heretofore put, to wit: Inasmuch as labor forms the 616 [Senate, largest ingredient of the manufactured product, and you had a large factory in operation -at Setauket, where labor costs you 25 per cent, less than anywhere else, why was it that you closed and finally sold that factory and operated elsewhere? A. I have not stated that labor was the largest percentage; I have stated that in my opinion we paid a larger percentage to the laborers than in most manufacturing industries; but that does not mean the largest percentage of cost; and if the United States census makes that report, I think the census report is wrong. Q. I am not saying that the United States census report makes that report with regard to rubber? A. Excuse me. Mr. Lexow: I said it made it on an average of all manufac- tures. I simply drew the inference, inasmuch as you said that it was higher than others — that it must come pretty near being the whole amount. Q. Can you answer that question? A. No; the answer is this; that we claim that our wage-earners produce more than the wage- earners at Setauket, because we have superior facilities— better organizations — and that through these organizations we are get- ting more for our money, although we pay 25 per cent, more to the laborers; and that has been one of the great benefits of this centralization o-f manufacture. Q. Why was it, then, when you increased your facilities that you found it necessary, as you stated, to dismantle some factories and add to others; why was it that you did not add to the factory which you then owned in a place where labor was 25 per cent, cheaper than anywhere else; in a place where rubber goods had been manufactured for thirty years, according to your testimony? A. I did not state that they had been manufactured there for thirty years. Q. I understood you to say that that company had been in operation for thirty years under one name? A. I didn’t so tes- tify; we had large plants of machinery at other points; and perhaps in some cases advantages of location in connection with transportation facilities; and after taking the matter into con- No. 40.] 617 sideration the United States Rubber Company determined that it was better to develop and enlarge its larger properties. Q. Notwithstanding labor was 25 per cent, dearer? A. Not- withstanding labor was 25 per cent, dearer; for instance, a plant which we have enlarged cost originally $1,300,000; the cost of the plant at Setauket may have been $150,000 ; it was found more advantageous to develop the plant which cost $1,300,000; fur- thermore, our objective point is higher quality. Mr. Lexow: I understand. We have had that a number of times. We don’t want you to advertise your goods here too often. Q. What was the price of labor in 1S91 as compared with the price of labor within the last six months in the factories owned or controlled by the United States Rubber Company? A. I am informed by those best able to give information, that the wages are the same to-day as before the organization of the United States Rubber Company. Q. Then, the economy which was, as you say, the main object of centralization, has not redounded to the benefit of the laborer? A. In my judgment, it has. Q. Can you say whether it is or has not? A. I think it has. Q. It has not increased the wages? A. No, sir; but it has redounded to the benefit of labor, from the fact that during the periods of depression which have prevailed, owing to the want of confidence and on account of the uncertainties in the financial and business world, I think that if it had not brought about these advantages that competition in manufacture in order to meet the conditions of depression, the price of labor would have declined the same as has been the case at Setauket. By Mr. McCarren: Q. Has it furnished steadier employment for labor? A. To some extent; I think that the organization, the larger organiza- tion, has idealized the wisdom of keeping together the labor it has taken so many years to educate in this industry; owing to the depressed times there has been a reduced consumption; in refer- 618 [Senate, ence to the capacity for manufacture; if we had good times — what the rubber men call a “ good winter,” that is, plenty of snow, we might have run our factories to their full capacity; or as near thereto as the business would warrant; we have to have extra capacity in this business in order to provide for the un- usual conditions of seasons; and also to be ready for an improve- ment in the business of the country, what the business world is looking for. Q. That does not answer the question; please repeat Senator McCarren’s question; the following question was repeated. “Has it furnished steadier employment for labor? ” A. I think on the whole, to some extent it has. By Mr. Lexow: Q. Are not more men out of employment to-day than there were in 1892 before the organization went into operation? A. Eighteen hundred and ninety-two was a prosperous year; 1896 has been a year of depression ; for that reason I think that there are not as many men employed in the industry as in the year of prosperity, 1892. Q. Then, we will compare 1898; were there as many men em- ployed in 1893 as there were in 1892? A. Eighteen hundred and ninety-three was a year of depression; it was a year of panic; I think that our business, like all other manufacturing businesses, was affected by the depression in 1893 when the silver question was being agitated. Q. So you substantially admit the proposition that since 1892 there has not been as much labor employed by the United States Rubber Company as there was employed prior to the organiza- tion of that company by the independent companies now com- posing it? A. I admit that we have suffered from bad times. Q. We understand that as one reason; I am asking for the fact? A. I have so stated. Q. It is true? A. I will state that I think there were more laborers employed in 1892 than during the period of depression in 1892, 93-96. No. 40.] 619 Q. Eighteen hundred and ninety-five, 1896? A. Eighteen hun- dred and ninety-three, 1894, 1895. By Mr. McCarren: Q. In other words, the Cleveland administration? A. It is convenient for me to make that reference. Mr. Lexow: Q. Now, periods of depression called for decreased price to meet the lessened demand, did they not? I am putting that ques- tion to you as a business man? A. It depends — Mr. Lexow: I mean that would be the normal consequences? A. In times of depression it may be. Q. Were normal conditions to obtain instead of forced and extraordinary conditions, the price of goods would come down under the lessoned demand; is that true? A. I would have to explain of an extraordinary condition that has prevailed in this industry. Q. I am speaking of industries in general; is that true as a general proposition; the stenographer will please repeat the ques- tion? (Question repeated.) A. As a general economical principle I think that is true. Q. You say that you are the most extensive importer or ex- porter in the country? A. I said one of the largest buyers of manufactured goods for export to foreign countries. Q. Isn’t the proposition that I have made heretofore, one of universal application? A. Yes; in general, you can buy cheaper in times of depression. Q. How is it then that under the operations of the United States Rubber Company, in violation of this rule which you say is of universal application, the price of the manufactured product has increased to the consumer, while labor was discharged and factories closed down? A. I do not admit that the price has in- creased. Q. Do you dispute it? A. I have stated that there exists a 620 [Senate, complex situation owing to the fact that we have improved the quality — Mr. Lexow (interrupting): Why? A. In this industry extraordinary conditions have prevailed; in the first place, Mr. Chairman, the bicycle came into very ex- tensive use in the spring of 1892 or in the spring of 1893; there was an industry that formerly consumed a few hundred tons of rubber; owing to the great demand for bicycle tires there has been a consumption of thousands of tons of rubber for that in- dustry; that has had a bearing. Q. To what extent? A. That would have to be determined by long calculations; to a considerable extent. Q. Would the increase in the price of Para rubber have justi- fied an increase of from 8 to 10 per cent, if justified at all? A. You asked me why in one question; I desire to answer that. Q. Then you have not finished your answer. The stenographer will please strike out the last answer. I will put the question later. Mr. Flint (continuing): The United States Rubber Company sells articles that are patented, and also articles that are repre- sented very largely by trade marks; consequently, a general economical question that might apply to the sale of staples like w r heat, cotton, sugar, coffee, etc., might not apply in the same degree to the product of factories that are putting out goods under patents and trade marks. Q. Does that cover the whole extraordinary situation? The stenographer will please repeat my last question? (Question repeated). Q. You are a great importer, you ought to know. A. I have been one of the largest of crude rubber. It has a bearing that crude rubber would not have upon a variety of manufactured goods. That is a complex question that I cannot answer, because that involves the knowledge of a manufacturer who knows the de- tails. Q. You have been a member of your firm thirty years? Is it not a fact that when you spoke about thirty thousand you meant No. 40.] 621 to say shoe lasts? A. I meant thirty thousand different shoes in addition to other products. Q. Different fashions? A. Fashions, styles, qualities, etc. By Mr. McCarren: Q. Do you mean of one texture. A. No; that would include two qualities. By Mr. Lexow: Q. Excuse, if you can, the system that in violation of natural economical law, in a period of depression, of the closing of fac- tories, the discharge of workmen, creates a situation whereby you can increase to the consumer your products by from 20 to 44 per cent.? A. I do not know of any such increase; there- fore, I cannot work it out. Q. Do you admit that if it is shown that under those condi- tions the Fluted States Bubber Company increased its price from 20 to 44 per cent., that a system which would permit of that should not be tolerated? A. That is a very complex question that only men who have had large experience in legislation can deal with. I know this — Mr. Lexow (interrupting): All right. We will leave that. By Mr. McCarren : Q. To what extent does manufactured goods deteriorate or depreciate in value if they are not sold? A. They deteriorate very largely; they deteriorate in many ways; in the first place, the change of style; in the second place, the fact of their being old goods: and the result of it is that a very large amount of goods have been sold during the past year; perhaps a quarter of the product of the FTnited States Bubber Conpany has been sold at lower prices than have ever prevailed in the history of the rubber trade in connection with the disposing of goods that were not in the latest fashion; the general desire to wear the “pointed toes” had an effect; so that in considering the cost of our goods we have to take into calculation every year these questions; we also have to have large auction sales and must 622 [Senate, sacrifice very large quantities of goods in order to keep our stocK up to date. Q. Is that one of the reasons for the reduction of the price to the consumer? A. The reason for the reduction of the price list which circulates among the retailers was with a view of putting out a lower price list which, through the realization of economy, we would ultimately hope to realize. By Mr. Lexow : Q. You have answered every question except the question put by Mr. McCarren. A. In referring to this large sale of goods, consisting perhaps of one quantity of our product, it was depre- ciation in style, and for other reasons during the period when goods were being held by the manufacturer. By Mr. McCarren. Q. What I want to bring out is, whether in cases where you have an excess of many articles, if your apprehension of the de- terioration or depreciation of the manufactured goods will force you to sell? A. We make sales in order to keep our stock up to the latest point of quality and style; we sell enormous quanti- ties of goods verj much below the price of high quality goods in order to place goods that are going out of style; they do not deteriorate in wearing quality; they deteriorate owing to the change of style. Q. What I want to get at is, does that force a sale of your surplus stock? A. It does. By Mr. Lexow: Q. Are you not under contract with your factors not to under- sell the price fixed by your concern from year to year? Don’t you from the 31st of March of each year have an agreement with your factors according to which, for the whole of that year, you fix a certain price upon your rubber goods? Is that the fact or not? A. In answer to that I would say that I desire to produce for the committee the memorandum of agreement of sales which gives all the facts; it is an agreement with which I am not famil- No. 40.] 623 iar; I sent for it in order that it might be here and put in the testimony. Q. That is a copy of the same paper I handed you day before yesterday? Do you not, according to that agreement, fix the price for all material in the hands of your factors for each year on the 31st of March for the succeeding year? A. Mr. Chairman, in that agreement you have all the conditions; as I stated, I am not familiar with that branch of the business; but I testify that that is the agreement in use by the United States Rubber Company. Q. How can you account for it, that notwithstanding the in- troduction of economies that you have suggested here were the main purposes of the centralization, that immediately after that centralization you have increased the price of your product, that that increase has obtained from that time until now? A. I have stated that the rubber industry is entirely different from that of most of the other consolidations, that it takes much more time to realize the economies owing to the variety of output. Q. Mr. Searles has stated here that it might take more than fifteen years to realize the advantages of the American Sugar Refining Company’s economies? Rut you say that it would take more in the rubber combination than that? A. I stated that it might take a hundred years to reach the last economy, and even longer than that; but that the economies cannot be realized in the manufacture of a great variety of products in anything like as short a time as they could be realized in a hundred other products; in one instance I know where a large percentage of economies have been realized in five years; but that was an in- stance where there was one product being turned out. Q. Now, in reference to your ultimate economy that you cannot state as occurring within 100 years, is it not a fact that while the consumer will not have the benefit from it you are still able to pay your full 8 per cent, upon the preferred stock and at least divi- dends of 12 per cent, upon your common stock? A. On general principles — do you mean the United States Rubber Company — I felt that I am under obligation to earn what money I can for the 6,000 stockholders. 624 [Senate, Q. Is that considered fair — I mean is that considered by you gentlemen Who make these consolidations as a fair and reason- able dividend upon the preferred and common shares, which in connection with a reasonable amount for a surplus, should be earned by these industrial associations before the public can get the advantage of the economies from centralization and consoli- dation? A. Well — I can’t remember all that — Mr. Lexow (interrupting): The stenographer will repeat the question. (Question repeated.) A. As a matter of intelligent management it is in the business interest of the 6,000 stockholders that the compauy should study the interests of the consumer in every way that will result in giv- ing them better goods, better quality of goods and styles and meeting their wants in order to extend the volume of its business; it is through such enlargement of the volume of business that the greatest economies are reached; we have been at a disadvan- tage for the last four years because we have not been able to run our factories to full capacity; it has made an enormous difference in the cost of the production of goods; if we are running at full capacity we could manufacture much cheaper; it is in the interest of the trustee to manufacture and sell his goods so* as to increase the consumption, and while at first jhat may not result in the largest dividends to the stockholders the ultimate result will be to the benefit of the stockholders and to the benefit of the con- sumer. Mr. Lexow: The stenographer will repeat my last question. (Question repeated.) Q. Now, Mr. Flint, please answer that question? A. The best answer to that is to state to you the facts; you ask my views as to the payment of dividends of 12 per cent, and I state to you that the United States Rubber Company has only paid a little over 1 per cent, on its common stock since the concern was organized. Q. I have not asked that. A. That shows the policy; instead of the company paying large dividends it has paid only a little over 1 per cent, per annum upon its common stock. No. 40.] 625 Q. Notwithstanding the increase in the price of the product to the consumer? (No answer.) Q. Then there was no value in that general stock which should have permitted the issue on that basis, on the basis of its fair earning capacity ? A. Simmons Committee report — Mr. Lexow (interrupting): We have the evidence here from the American Sugar Refining Company that it is capitalized on its fair and reasonable earning capacity; I ask whether that same proposition applied to the United States Rubber Company, and whether in view of its experience the capitalization as made has squared with that proposition? A. I answered that when the Simmons Committee recommended the purchase of this property— it was in the fall of 1S92, during a period of great pros- perity; but since the organization, or since that proposal, we have had two panics, general want of confidence and general distress; men of enterprise have been contracted and business has suf- fered — the prejudice of the wage earners and all others in the land. Q. Notwithstanding that you increase the price of your prod- uct? A. I have already testified on that point. Q. May that not have had some influence upon the earning ca- pacity of the company? A. It is natural that we should have managed the business to what we considered the best advantage; and I have stated that we paid only a little over 1 per cent, on the stock. Q. Isn't that one of the reasons for the situation which you have disclosed, that you have capitalized your company upon the basis of value in the form of stock certificates issued, attributed to the properties which you not only closed after the combination, but which were designed to be closed and thereby avoided com- petition? A. That is not the case. Q. How much of the capital stock of your company has been is- sued for properties which were closed? (Witness makes compu- tations.) A. Less than 2 per cent, of the total capitalization of the United States Rubber Company. Q. Is now represented by properties which are closed; do you 40 626 [Senate. mean to say that? A. I mean to say that the present capitaliza- tion of the United States Rubber Company which was issued for factories which had been closed will not amount to 2 per cent, of the total capitalization of the United States Rubber Company; and that the machinery in the principal factories has been re- moved to other plants in order to increase the capacity of such plants and to secure consequent economies. Q. Do you mean to say that prior to this combination the prop- erties forming it were then indicating an earning capacity which justified the issuance of the general stock of the company as made? A. That is a matter that was devolved upon the Sim- mons Committee to take into consideration; as I have stated— Mr. Lexow (interrupting): To put it plainly, isn’t the fact that the entire general stock of the company is what is familiarly known as “water?” You know what the term implies, don’t you? A. Not as a specific condition; I have already stated the basis of the issue; how it was done; they were conservative men; one of the most conservative men in New York was chairman of the com- mittee; and the issue of the stock paid was for the purpose of quick capital trade-marks; we have, for instance, the United States Rubber Company, has a working capital of $12,000,000, among other items. Q. In cash? A. In what are known as quick assets; realizable assets; we have a large number of plants. Q. I ammot questioning you or doubting the financial standing or independence of your company; I assume it is all right; we are not here for that purpose; is it not a fact that in the issuance of the general stock a somewhat similar custom has been observed as existed in the case of other combinations; that is to say, that it represents nothing but water, which afterwards was accepted by the directors to be developed into an earning capacity suffi- cient to beableto secure dividends, reasonabledividends, upon that amount; is that not true? A. I haven’t any interest, and never have had, in so-called industrials outside of the United States Rubber Company; I can answer for the United States Rubber Company. No. 40.] 627 Q. Limit your answer to that? A. It was for trade marks, etc. Q. Trade marks of the Setauket Company? A. I wouldn’t con- sider those of great value. Q. And the good will of the various companies represented in the consoldation? A. I think the word good will is the general expression. Q. That covers the proposition? A. That largely covers plants, trade marks, business franchises, organizations. Q. That is the basis of the issuance of all of the general stock of this company? A. As I have before stated — Mr. Lexow (interrupting): Isn’t it; can’t you state? A. I was not on the committee. Q. Have you that report here now? A. (Witness hands docu- ment to Mr. Lexow.) Mr. Lexow: The stenographer will please mark this document “Exhibit A” of this data and incorporate it in the testimony of Mr. Flint. Q. From your knowledge as a business man, engaged in busi- ness pursuits, is it not true, that it is just this tendency to issue a large amount of the capital stock of a company representing what is called good will, that has brought these industrial asso- ciations into the repute in which they now stand? Is that not true, Mr. Flint? A. Like all — Mr. Lexow (interrupting) : Is it not? A. I will have to ask for a division of the question; in the first place, the question as to the repute in which they do stand, I think they are like individu- als; some stand well and some do not; I think the United States Eubber Company stands well ; w T hen that issue was made it was made for businesses that had been running for 50 years or more; and the fact of it is that the trade marks, patents and business organizations are quite as valuable intrinsically as bricks and mortar; the fact of it is that a factor that has no organization in its business is of little value. Q. We understand that; isn’t this part of a general system of evolution which is manifesting itself? A. There is no doubt I 628 [Senate, about that; during the last year in England there has been a capi- talization to the amount of $700,000,000. Q. If you will only answer that question? A. It is the general tendency of the age. Q. Isn't it the fact that those engaged in these industrial pur- suits are utilizing that evolution for the purpose of increasing the nominal values of their properties with a view of its distribu- tion among the public at large? Mr. Lexow: Stenographer will please repeat the question. (Question repeated.) A. They are using it for the purpose of increasing actual val- ues; and it is natural that men as they get on in age should desire to distribute their interests in these old enterprises, inasmuch as they cannot live to continue the management; that is one of the strongest arguments in favor of this method. Q. I understand that there is some strength in that argument; isn’t it a fact that those who have in the past held these indus- trial pursuits in a few hands have capitalized them upon the basis of a supposed good will very largely in excess of the original in- vestment, and after such capitalization are willing to permit the public to share with them in the enterprise; isn’t that the fact? (Question repeated.) Q. Is it the fact? A. In our case, the issue, as I believe, has been on actual values. Q. You accept good will as actual no matter whether it is one million or a half million? A. Whatever an impartial party puts it after looking into the value of the business, I consider its actual value. Mr. Lexow: The stenographer will please repeat my question. The following question was repeated: “Isn’t it a fact that those who have in the past held these industrial pursuits in a few hands have capitalized them upon the basis of a supposed good will very largely in excess of the origi- nal investment, and after such capitalization are willing to per- mit the public to share with them in the enterprise? Isn't that the fact? A. In answer to another part of that question; I have Xo. 40.] 629 stated tliat I believed there has been a large and very wide dis- tribution of interests in these industrial companies; there cer- tainly has in ours. Q. Why is it that there has been no general distribution of these properties represented by shares or otherwise until they had been capitalized at enormous advances? A. It is practically impossible to sell the stock in an isolated manufacturing com- pany; there is no general market for it; furthermore — Mr. Lexow (interrupting) : Then, is it for the purpose of distrib- uting the stock that these industrial enterprises are thus organ- ized and capitalized? A. I was going on to state — Mr. Lexow (interrupting) : Please answer that question. (Question repeated.) A. The value of these properties are enhanced by centralization through more economical manufacturing and otherwise as I have explained. Q. If that is the case, why don’t the investors hold the stock instead of distributing it after adding, as vou sav, to its value, to the general public? A. I infer that it is for the reason that they do not want to have too many eggs in one basket. Q. Why is it, Mr. Flint, that it is immediately following this increased issue of nominal values that the public is permitted to share, in the enterprise? A. From the fact that through consolida- tion it has increased value and from the fact that the parties have been unable to dispose of their interest heretofore at actual value; by listing the securities the securities become generally known and can be sold from hour to hour; that in itself gives the securities an additional value. Q. That is to say, Mr. Flint, that is is a changing of legitimate industrial pursuits into speculation? A. Xo; parties may specu- late in shares, but — Mr. Lexow (interrupting) : Isn’t that the object of these concen- trations and consolidations? A. I am not familiar — - Mr. Lexow (interrupting): Xow, is.it? A. I will answer your question; I am not familiar with the con- ditions existing in other industrial enterprises, as I have no interest in them. 630 [Senate, Q. Then, explain how it is that the owners of the original prop- erties represented by this consolidation amounted to 300 and in less than five years you have built up the stockholding to 6,000? A. I desire to explain that in the case of the United States Rub- ber Company that the present members of the executive com- mittee hold about $10,000,000 of the stock of that corporation; the rest of that stock has been disposed of by parties desiring to dispose of it. Q. By those whose properties were capitulated in the manner stated by you in this consolidation; they received the stock and then disposed of it; now, is that true or not? A. It is not true in general; that is not true — Mr. Lexow (interrupting): Is it the fact? A. The fact is this; that in one case there has been one party who has made a very large sale of the stock, Mr. Banigan made a large sale of the stock which he had; but the men who are now managing the United States Rubber Company and composing the executive committee have not reduced their holdings; the members of the executive committee have not speculated in the stock; I can state from knowledge that there has been no speculation on the part of the members of the executive committee, six in number; I also state that the members of that committee hold about as much stock as they ever have held. Q. I didn’t put that question; I don’t want to inquire into per- sonal affairs? A. I stated from the fact that this is one of the industrials that I know of and I am not familiar with general conditions. Q. The fact is then, that of the $39,650,000 of the capital stock issued originally the insiders still hold $10,000,000 and those who were originally on the inside have disposed of $29,- 650,000 of the stock? A. I have stated that all the original large holders, the men who originally held the stock in these companies, now, substantially hold all the stock they originally held. Q. You refer to the executive committee? A. One other party who has a very large holding; but those holdings have not been so. 40.] 631 lisposed of; and the best evidence of their belief in the home companies is the present large holdings of the men who are run- ning this business. Q. Isn’t it a fact that immediately after the organization of this consolidation effort was made to distribute this stock among the public, excluding from the question yourself and the other members of the executive committee that you have mentioned as retaining their stock? A. There was a certain amount of stock offered for the purpose of securing additional working capi- tal; but no concerted effort was made for distribution by the greater number of large holders, as evidenced by the fact that only one large holder has disposed of his holdings. Q. And that is the general purpose of these consolidations, industrial consolidations, is it not, under the pretence of sup- posed economies flowing from the concentration and consolida- tion, to secure a public interest in your enterprise by an invest- ing public? A. I can only answer for the United States Rubber Company. Q. I am asking that; the stenographer will please repeat the question; (question repeated)? A. No. Q. You say “no?” A. I say “under the pretence.” Q. Under guise, then? A. I cannot accept the word guise; the trouble — Mr. Lexow (interrupting): Under the color? A. I cannot accept that. Q. Well, upon the strength of, will that satisfy you; I do not want to put a discreditable sense to the word; the stenographer will repeat the question as amended; (question repeated as amended). “ Q. And that is the general purpose of these consolidations, industrial consolidations, is it not, under the strength of sup- posed economies flowing from the concentration and consolida- tion, to secure a public interest in your enterprises by an invest- ing public? ” A. The word “ supposed ” “ economies ” puts your question in a position so that I cannot answer categorically. 632 [Senate, Q. In place of “supposed” put “assume.” A. Assumed is not strong enough; they are actual economies. Q. On the strength of the proposed economies; put the word “proposed;” (the question was repeated in the following lan- guage). “Q. And that is the general purpose of these consolidations, in- dustrial consolidations, is it not, upon the strength of proposed economies flowing from the concentration and consolidation, to secure a public interest in your enterprises by an investing- public.” Mr. Lexow: I don’t want to admit in my questions that there are actual economies until the consumer recognizes the exist- ence of such economies as a fact. The stockholders may see it, but there are two parties to get the benefit. The wmrd “pro- posed” will suit your purpose probably just as well. The ste- nographer will repeat the question as amended. (Question repeated). A. I could not subscribe to the idea that it is a general pur- pose; it is undoubtedly one of the purposes to give the stock a market value; and on the part of some parties desiring to dis- tribute their interest it is an element that they consider the op- portunity in case of death, or for other reasons that their stock could be disposed of; if you could put one of the — Mr. Lexow (interrupting): Is that last statement of yours true? A. Making the stock more realizable. Q. Give us a case in existence as a corporation before con- solidation? A. It being isolated. Q. Therefore, in the making of these consolidations there en- ters as an element of substantial strength a desire to sell the securities of the corporation to the general public? A. There enters a desire to put their property into marketable, realizable value, realizable form; to-day an isolated property, if it had to be consolidated suddenly, might not bring 60 per cent, of its value. If that same property be represented by a listed security which is generally 7 known, perhaps its full value or very nearly its full value could be obtained. Ko. 40.] 633 Q. Then to the industrial feature of the enterprise is added as one of the important elements the ability to sell and dispose of certificates of stock representing the properties in the mar- ket? A. That is undoubtedly an element. Q. Of substantial value? A. Of substantial value. Q. A purpose? A. A purpose. Q. And that purpose enters into the volume of stock issued? A. The stock — Mr. Lexow (interrupting): You understand the question? A. I will answer it; the stock should represent the actual value of the property; and I infer that the Simmons committee in recom- mending this issue took into consideration the actual values of the property at the time. Q. And in doing so figured the good will of the consolidated companies at $20,000,000? A. I was not a member of the com- mittee. Q. Is that the fact? A. I don’t know. Q. When you went into that company didn’t you understand that the common stock of that company had been issued for what is generally known as good will, wdiick common stock rep- resents about $20,000,000? A. I understand, Mr. Chairman, that a very large element of value w r as — and I knew it to be a fact, what is generally called “good will;” the trade marks, organiza- tions, etc. Mr. Lexow: The stenographer will please repeat the ques- tion. (Question repeated). A. I know that the common stock was issued to a very large extent for the “good will;” I mean stock; I didn’t say common stock; the Simmons committee recommended an issue for all those properties, a round amount; I would say unhesitatingly, although not a member of the committee, that they must have considered the good will; as it really is a very large element of value. Q. I will put that question in another way: Lumping the transaction, isn’t it a fact that for every share of the preferred there was issued as a bonus representing “good will” one share of the common stock or general stock? A. As you will see by examining the Simmons report, there was a round amount of the stock for all the properties; and that represented, Mr. Chair- man, — that report contains substantially the facts in regard to the issue. Q. Cannot you answer the question any clearer than that? Is it possible that you, as treasurer of this company, don't know to-day the principle upon which its stock was issued? A. I have stated the principle. Q. And don’t you know anything further than that with ref- erence to the principles underlying the issue of the stock? A. I have already handed in the report covering the full transactions. Q. Do you mean to say what is contained in this report is all that you know about the transaction? A. I have knowledge of the details; but as to the plan of organization we had the very best counsel to advise us; we had several thoroughly well in- formed men and they made that report. Mr. Lexow: We have had that a number of times? A. That report, Mr. Chairman, covers the whole position, that a round amount, $20,000,000 was issued for the specific properties, includ- ing “good will.” Q. $26,000,000? A. In round figures over $20,000,000. Q. Do you know how much of that represented good will? A. I don’t know; I haven’t an accurate knowledge. Q. Do you know from any of the transactions made substan- tially what the policy was, the policy of the company in the is- suance of the stock in purchase of “good will”? A. There could not have been any policy. Q. You bought the Woonsocket property, didn’t you? A. Yes; the United States Rubber Company. Q. What was the capital stock of that company? A. I gave that to you yesterday; but for the purpose of this question it was less, very much less than the amount issued for it. Q. Do you liyiow how much it was that was issued to the Woon- socket Company for its assumed “good will”? A. I will fur- nish — i No. 40.] 635 Q. Do you know? A. I don’t know; but I can furnish a copy of the figures; a statement of them. Q. Have you them? A. I haven’t them with me. Q. Will you bring them with you after the recess? A. I will endeavor to do so. Q. Could you let me have them this afternoon? (No answer.) By Mr. Mazet: Q. Isn’t it a fact that to every subscriber or stockholder to whom preferred stock was issued an equal amount of common stock was issued? A. It is not the fact. Q. Was the proportion of the preferred and common stock equal to the capitalization of each? A. No; in round figures the present capital is $40,000,000, common; there is less of one kind than that of the other; there is a difference of perhaps half a mil- lion dollars. By Mr. Lexow: Q. Stockholders wdio hold the stock; are they divided or do the holders of the preferred shares hold common as well? A. In some instances. Q. What is the difference? A. I don’t know; I haven’t any accurate figures— three thousand preferred stockholders in round numbers and three thousand common; in some cases parties hold both preferred and common stock. By Mr. Mazet: Q. When the stock was originally issued the original issue was both common and preferred stock to all of them; a proportion of preferred and a proportion of common stock? A. There was a round amount, as you will see by the report; they recommended buying this large number of properties enumerated for a certain number of shares of preferred stock and a certain number of shares of common stock; it was not in equal amounts; it was a general recommendation that the properties should be taken for a certain number of shares of preferred and a certain number of shares of common. 630 [Senate, By Mr. Lexow: Q. You stated, didn’t you, that attached to this report of the “appraisal committee” were schedules showing these matters covering about three thousand pages? A. I stated that any de- tails on which that report was based would cover say three thou- sand pages in the way of experts’ reports on machinery and on trade marks, etc.; they were perhaps detailed; there may have been perhaps ten persons employed in making up this data on which the Simmons recommendations were based; all that data has never been in the possession of the United States Rubber Company. By Mr. Mazet: Q. Isn’t it a fact that the amount of preferred stock that was issued in payment of the price of these several properties repre- sented the actual value and cost of them, and that the common stock was issued as a bonus in addition thereto? A. The Sim- mons committee report gives all that; I was not a member of the committee. Q. Have you no knowledge on the subject? A. I was not a director of the company. Q. Have you no knowledge on the subject? A. I haven’t suffi- cient to give an answer. By Mr. Lexow: Q. What is your full name? A. Charles Ranlett Flint. Q. Why didn’t you produce the schedules in connection with the report of the committee? A. I was not able to obtain them; I didn't have them and have not been able to obtain them; I fur- nished the report which is in the archives of the United States Rubber Company; but the other data, as I have explained, is not in the possession Of the United States Rubber Company; if the committee desires to have detailed information I will endeavor to secure it. Q. Do you mean to say that the schedules are not in the posses- sion of the United States Rubber Company? A. Not that I know No. 40.] 637 of; I don't remember of their being; I know that the data on which that report was made up is not in the possession of the United States Rubber Company; but in case of data being desired I shall be glad to obtain it. By Mr. Mazet: Q. You are able to obtain it? A. I don’t know, but I shall cer- tainly endeavor. By Mr. Warner: Q. You have a key to the safe deposit bos? A. That is only ac- cessible and can only be entered by two officers at a time; no one person has access to the deposit bos in New Brunswick; there must be two officers; I think that is a provision of the by-laws. By Mr. Mazet : ( Q. How was this copy of the report obtained? A. That was not in the deposit; I sent for it; I don’t know how it was obtained; it was just handed to me by Mr. Davies. Q. Was it in the original deposit — was it originally deposited? A. The original is in the archives of the company. Q. Is in this deposit vault? A. I don't know; I don’t have have charge of such documents; the documents of that kind are in charge of the secretary, Samuel P. Colt. Q. Do you know whether this copy was made from the origi- nal? A. There is every reason why I should so state; I am will- ing to testify that that is a correct copy of the report, a full copy. By Mr. Warner : Q. Who is the other person besides yourself that has a key to the box? A. Robert D. Evans, the president; there is a vice-presi- dent, Mr. James B. Ford; there is one other officer I forget now. Q. These gentlemen live here in New York? A. (No answer.) By Mr. Lexow: Q. Do you mean Mr. Ford? A. I infer he has a key to the box; I have never been there and have never seen the box; I don’t ■638’ [Senate, know where the key is; that has always been attended to by the assistant treasurer. Mr. Lexow: We will stand adjourned until quarter after two o’clock when we will take up the National Wall Paper Com- pany; Mr. Flint will be here to-morrow morning; also, all the wit- nesses in connection with the United States Rubber Company will be here to-morrow morning at ten o’clock. The following are copies of the exhibits referred to in the above testimony of Mr. Flint. To the Board of Directors of the United States Rubber Com- pany: Your committee appointed to enter into negotiations with Messrs. H. B. Hollins & Co., and to conduct and complete the same, as set forth in the resolution of your board appointing such committee passed July 14th, 1892, respectfully report as follows: After negotiations with Messrs. Hollins & Co. pursuant to our instructions, we received from them and now submit to your board the following proposition: To Messrs. J. Edward Simmons, M. C. Martin and John I. Water- burv, a Committee of the Board of Directors of the United States Rubber Company: FIRST. 1. We will transfer and deliver to your company shares of the capital stock of certain other rubber manufacturing corpora- tions, as follows: Six thousand, two hundred and ninety-two shares of the stock of the American Rubber Company, a Massachusetts corporation, whose capital stock consists of 10,000 shares of the par value of $100 each. Twenty-two thousand, nine hundred and ninety-seven shares of stock of the L. Candee & Company, a Connecticut corpora- tion, whose capital stock consists of 24,000 shares of the par value of $25 each. No. 40.] 639 Forty thousand shares of the stock of the Goodyear’s Metallic Rubber Shoe Company, a Connecticut corporation, whose total capital stock consists of 40,000 shares of the par value of $25 each. One thousand and one shares of the stock of the Meyer Rub- ber Company, a New Jersey corporation, whose capital stock consists of 2,000 shares of the par value of $100 each. Two thousand, nine hundred, sixty-seven and one-half shares of the stock of the Lycoming Rubber Company, a Pennsylvania corporation, whose total capital stock consists of 4,000 shares of the par value of $100 each. Three thousand shares of the stock of the Boston Rubber Com- pany, a Massachusetts corporation, whose total capital stock con- sists of 3,000 shares of the par value of $100 each. Two thousand, seven hundred and forty-five shares of the stock of the New Brunswick Rubber Company, a New Jersey corpora- tion, whose total capital stock consists of 3,000 shares of the par value of $100 each. Seven thousand, two hundred and forty-five shares of the stock of the National India Rubber Company, a Rhode Island corpora- tion, whose total capital stock consists of 7,500 shares, of which 5,000 are preferred shares and 2,500 common. One thousand, two hundred and fifty-one shares of the Brook- haven Rubber Company, a West Virginia corporation, -whose to- tal capital stock consists of 2,500 shares of the par value of $100 each. Also One thousand, five hundred and ten shares of the Rubber Man- ufacturers’ Selling Company, a Connecticut corporation, v-hose total capital stock consists of 3,000 shares of the par value of $100 each. 2. We will also produce the conveyance, transfer and delivery to your company of the entire factory, tenements and all other buildings and all lands and real estate on -which the same are erected, situate in the village of South Framingham, in the town of Framingham, county of Middlesex, commonwealth of Massa- chusetts, now or formerly constituting or owned and used as part 640 [Sex ate, of, or in connection with the plant of the Para Rubber Shoe Com- pany, a Massachusetts corporation, together with all tools, lasts, machinery and fixtures forming part of or used in connection with said plant, and also the good will of the business of said Para Shoe Company. 3. We will also procure the proper assignment and delivery to your company of two certain mortgages now liens upon the plant and property of the Colchester Rubber Company, a Con- necticut corporation, doing business at Colchester, Conn., both dated August 21st, 1891, securing the payment of $100,000 and $50,000 respectively, with interest on said principal sums at 6 per cent, per annum, and both recorded in the office of the town clerk of Colchester, Conn., in Colchester Land Records, Volume 34, pages 363 and 364 and pages 363 and 366 respectively, on the 14th day of September, 1891. 4. We will subscribe for and take forthwith, at par, and pay for in cash, preferred stock of your company to the amount of one million dollars. 5. In order to the more complete establishment in your com- pany of the good will and full value of the business of the sev- eral manufacturing concerns, interests in which we have offered as above to sell and transfer to your company, we will procure from each of the following named persons the execution of his agreement in writing with your company, that he will not at any time after executing such agreement during such period as may be agreed, either directly or indirectly, engage or be in any manner whatsoever interested in the manufacture or sals of rubber goods in any one or more of the States composing the United States of America, except in the States of Nevada, Idaho and Montana, unless your company consents thereto in writing. Name. Office. Henry L. Hotchkiss President L. Candee & Co. Charles L. Johnson .Treasurer L. Candee & Co. Samuel N. Williams Treasurer Lycoming Rubber Co. M. C. Martin President New Jersey Rubber Shoe Co. Samuel P. Colt President National India Rubber Co. Jo. 40.] 641 jeorge A. Lewis. .President Goodyear Metallic Rubber Shoe Co. lames P. Langdon President New Brunswick Rubber Co. tames Deshler Secretary New Jersey Rubber Shoe Co. Jeorge H. Hood President of the Boston Rubber Co. We submit herewith a form of contract with your company, the execution of which we are willing to undertake to procure as above stated by each of the above named persons. 6. We will also devote our best efforts hereafter if and when thereunto requested by your company from time to time, towards the purchase or other acquisition by or for the benefit of your company, of the manufacturing plants or of interests therein, of rubber manufacturing corporations doing business within the United States or Canada, other than the corporations above named, and also towards the acquisition of additional interests in those corporations which are above named; your company to be the sole beneficiary of each such purchase or acquisition and to become and remain the sole owner of any plant or interest so hereafter acquired by us, and no profit or compensation aris- ing out of any future purchase or acquisition to be derived or detained by us, other than the general compensation reserved to us as herein below mentioned. SECOND. In consideration of the foregoing, we are to receive in payment, and your company is to transfer and deliver to us: A. Four hundred and twenty-eight thousand and sixty-four dollars and thirty-four cents in cash payable the 10th day of Sep- tember, 1892. B. Ten million fourteen thousand six hundred dollars par value in the preferred stock of your company; this amount, in- cluding the $1,000,000 in such stock to be subscribed for by us as above. C. Ten million, six hundred and sixty-nine thousand seven hun- dred dollars par value in the general stock of your company. 41 642 .[Senate i D. Cash to the amount of 5 per cent, of the par value of sc much of the capital stock of your company, general and pre- ferred, as may be issued at any time, or from time to time, after issue is made by your company, pursuant to the terms of this proposition; it being understood and agreed, however, that as each such cash payment shall become due and be received by us, we will, in case your company so elects, subscribe and pay for at par shares of the general capital stock of your company to the amount of such payment. E. Pursuant to Subdivision 6 of our foregoing offer, your com- pany will contract with us in substantially the form following: Memorandum of agreement made this day of 1892, between the United States Rubber Company, a New Jersey corporation, hereafter called the “ company,” party of the first part, and H. B. Hollins & Company, a co-partnership, of the city and State of New York, hereafter called the “ Bankers ” party of the second part, witnesseth: Whereas: The bankers have performed valuable services for the company as set forth in their proposition, dated 1892, made to and accepted by the company; and Whereas: The Company is desirous to avail itself of the ser- vices of the bankers hereafter, and also to make compensation to them for their services, past and future; and Whereas: The bankers are willing to perform services for the company hereafter, and when requested by it, as hereinafter mentioned. Now, therefore, in consideration of the premises and of the agreement herein contained, and of the sum of one dollar, law- ful money of the United States of America by each of the parties hereto, to the other in hand paid, I’eceipt 'whereof is by each hereby acknowledged, it is agreed as follows: First. The bankers shall and will hereafter as and when there- unto requested by the company, devote their best efforts to the purchase or other acquisition by or for the benefit of the com- pany of rubber manufacturing plants and properties, or interests No. 40.] 643 therein situated in the United States or Canada, the company to be the sole beneficiary of each purchase or acquisition, and to become and remain the sole owner of any plant or interest so acquired, and no profit or compensation arising out of any such purchase or acquisition by or through the bankers, shall be de- rived or retained by them except as hereinafter mentioned. Second. The company agrees to and will from time to time hereafter make payment to the bankers, as compensation for their services heretofore performed, and as well for those which may be performed hereunder, of cash to the amount of 5 per cent, of the par value of all shares, preferred and general, of the capital stock of the company, which may at any time hereafter, be issued, in excess of the present outstanding amount of the capital stock of the company, to wit: $11,219,600 in preferred and $11,874,700 in general shares, whether such additional issues be made for cash in payment for additional properties or inter- ests, acquired through the bankers, or otherwise. Third. The bankers agree that as each cash payment shall become due to, and be received by them, as above mentioned, they will, in case the company so elects, subscribe and pay for at par, shares of the general capital stock of the company, to the amount of such payment. Witness, the corporate name of the company hereunto sub- scribed by its president and its corporate seal hereunto affixed and attested by its secretary, and the co-partnership name of the bankers hereunto subscribed by one of the mem- I bers of the said co-partnership, on the day and year first above written. Very respectfully, (Signed.) H. B. HOLLINS & CO. Sealed and delivered in the presence of 644 [Senate, The various matters treated of in the foregoing proposition were fully considered and discussed by your committee among themselves and with Messrs. H. B. Hollins & Company before the proposition assumed its final form. In considering these matters, your committee availed them- selves of the special knowledge of experts familiar with the plant and business of each of the various concerns, interests in which are now offered for sale to this company by H. B. Hollins & Co. We have also examined certain reports made by Messrs. Charles S. Smith Henry W. Cannon and Charles H. Dalton, who, with the assistance of experts, have fully and carefully appraised for Messrs. H. B. Hollins & Co., the plants of each of the corpora- tions whose shares of stock are now offered by Hollins & Com- pany to this company. Each of these plants was personally in- spected by the appraisers above named, as well as by the experts who assisted them. We have had the benefit of personal consul- tation with these appraisers and experts. One of the latter, Mr. E. F. Bickford, has been for upwards of twenty years practically in charge of the factories of the Boston Rubber Shoe Company. Another, Mr. Charles Whittier, is the president of the Whittier Machine Company, one of the leading manufacturers of boilers and of rubber and other machinery. The third, Mr. George Bar- rus, is a mechanical engineer of standing and experience. These gentlemen, as well as the appraisers, expressed to us their con- viction that the actual consolidated value of the interests now offered to you company by Messrs. H. B. Hollins & Company tak- ing into consideration the advantages which will naturally flow from the acquisition by one company of the several interests now offered, which may hereafter be ’operated harmoniously in com- bination, having the benefit of secret processes in use by the sev- eral concerns together with the benefit of their good will is more than twice their value as based upon the aggregate value of the several plants, with machinery, tools, fixtures, as appraised for Messrs. H. B. Hollins & Co., plus the present amount of other as- sets of each concern over liabilities as ascertained for Messrs. H‘. B. Hollins & Company by expert accountants and guaranteed. No. 40.] 045 Your committee found that the price fixed by Messrs. H. B. Hol- lins & Company upon the interests now offered by them to you is within the estimated value of these interests as so expressed to us as above. It was deemed best, however, to supplement these opinions by those of competent and disinterested persons, having no connection with this company, or with Messrs. H. B. Hollins & Company, or with any one or more of the manufacturing compan- ies. interests in which are the subject of the offer now under con- sideration. Your committee therefore submitted the necessary facts and figures to Mr. John H. Cheever, president of the New York Belt- ing and Packing Company, the largest manufacturer in this coun- try of mechanical rubber goods, Mr. E. Thomas Sawyer, president of the Easthampton Rubber .Thread Company, and Henry C. Morse, treasurer of the Rever Rubber Company, of Boston. These gentlemen have been engaged in the manufacture of rubber goods, other than boots and shoes, for many years, and are busi- ness men of high standing and great experience. Your committee’s examination has shown that this business has been built up under most difficult conditions involving the outlay of large capital for its establishment and continuance, as well as great experience and special knowledge of manufacture, and that as now successfully established it is protected wholly by trade marks and partly by patents; and further, that there is scarcely one of the several concerns which has not as against the others, one or more important trade secrets now to be disclosed for the common benefit. The advantages to be derived from such a communication alone, will, in our opinion, result in the saving of very large amounts annually, while furnishing as cheap if not a cheaper product to the consumer. Our examination further shows that there is, in this field of manufacture less opportunity than in almost any other for the operations of new concerns, whether organized or equipped to manufacture in good faith, or for a guerilla warfare upon vested interests, with the design of coercing the established industry 646 [Senate, into purchasing them, not on the basis of what they are worth, but upon an estimate of the injury they may be able to do. It is the opinion of your committee that the proposition of Messrs. H. B. Hollins & Company is one, acceptance of which by this company, will enure to its great advantage and your com- mittee, therefore recommends the acceptance of the proposition as made. Sept. 6, 1892. Respectfully submitted, j J. EDWARD SIMMONS, M. C. MARTIN, ; JOHN I. WATERBURY. MEMORANDUM OF AGREEMENT. Between the United States Rubber Company, selling agent, hereinafter called The Company, and of hereinafter called The Purchaser, whereby rubber boots and shoes (except tennis, which are not included in this agreement) sold by The Company are purchased by the said subject to the following terms, discounts and conditions: Gross Price List Season 1896-1897, Ending March 31, 1897. First Discounts. First Quality Brands : American, Boston-Bell, Candee, Lycoming, Meyer, New Brunswick, United States Rubber Company, Wales-Goodyear and Woonsocket, at 15 and 8 per cent, •discount from above stipulated gross price list. Second Quality Brands: Para, Neptune, Federal, Keystone, Essex, Jersey, Connecticut and Rhode Island, 15, 12 and 8 per cent, discount from above stipulated gross price list. Third Quality Brand: Columbia, 15, 12, 12 and 8 per cent, dis- count from above stipulated gross price list. Cash discount of 8 per cent, per annum to be allowed for pre- payment. Interest, 6 per cent, per annum, will be charged on overdue accounts. It being understood that the agreement by No. 40.] 647 the company to deliver under this contract is limited to the fol- lowing brands:. First Quality Second Quality Third Quality Second — Terms. — Deliveries of all goods made hereunder to November 1 will be payable December 15, 1896; deliveries in No- vember payable January 15, 1897 ; deliveries in December payable February 15, 1897 ; deliveries in January payable March 15, 1897 ; deliveries in February payable April 15, 1897 ; deliveries in March payable May 15, 1897. The company shall have the right to call for, and purchaser agrees to give upon such call, cash or notes acceptable to the company for the net value of the goods deliv- ered under this contract before the accounts therefor are due. Third. — The purchaser agrees to be governed in his selling price and terms by the instructions of the company, and hereby promises not to depart from or evade, by any direct or indirect means, all the conditions set forth in Section Fourth, Selling Price. It is also understood and agreed that these conditions, for sale of these goods by purchaser, apply to all on hand April 1, 1896, as well as to present or future purchases under this con- tract. The company, on its part, agrees that if any change is made in the selling price immediate notice shall be given. And the said purchaser, in case of his failure at any time to faithfully observe all the terms and conditions of this contract, or any con- tact made with the company, hereby consents to the cancelling by the company of all its unfilled orders then in the hands of the company, and in case of such default on the part of said pur- 648 [Senate, chaser the company also hereby reserves the right to cancel all said purchaser’s orders then unfilled, and in case of such cancel- lation the accounts of said purchaser with the company shall thereupon become immediately due and payable. Fourth — Selling Price. — Until further notice the prices and terms fixed by the company for the sale by the said purchaser of the within named goods (except to jobbers as per Article Seventh) are as follows: Discounts. — First Quality Brands, 15 per cent.; Second Quality Brands, 15 and 12 per cent.; and Third Quality, 15, 12 and 12 per cent, from gross price list of 1896-1897. Terms. — Bills for delivery between April 1 and October 31, 1896, both inclusive, shall be dated not later than November 1, net thirty days, 1 per cent off for cash in ten days. If paid prior to November 10, 8 per cent per annum to Novem- ber 10, and the above mentioned 1 per cent, may be allowed. If paid between November 10 and December 1, 8 per cent, per annum only may be allowed. Bills for deliveries between November 1, 1896, and March 31, 1897, both inclusive, shall be payable, net, thirty days from date of shipment, or 1 per cent off for cash in ten days. Freight. — Actual freight may be allowed by said purchaser from any point to any other point of railroad or steamboat deliv- ery at his own cost and expense. Fifth — Liability as to Orders. — The company will not be obli- gated to 'deliver more goods than contracted for in this agree- ment, notwithstanding it may have received and acknowledged orders which exceed amount of cases contracted for in this agree- ment. It is also mutually agreed, in case of labor strikes, fire or other casualty that may curtail or stop the production of goods contracted for, that the company shall not be held responsible for non-fulfillment of orders beyond the capacity to produce, hav- ing reference to the whole business, and, on the other hand, should fire or other casualty overtake the business of said pur- chaser, then the company will cancel his orders, if he so desires. No. 40.] 049 In contracting for certain number of cases the company does not obligate itself to supply all in the particular style of boots and shoes which the orders detailed may call for, but only such quan- tities of the particular styles embraced in the orders detailed as the company can supply, having reference to the capacity to pro- duce and its obligation to all of its customers. Two weeks’ no- tice of any changes by the purchaser in detailed orders is required to cover goods in process of manufacture. Sixth — Guarantee. — In consideration of the faithful per- formance of this contract on the part of the purchaser, the com- pany hereby guarantees that in case it shall, prior to December 1st, next, reduce the selling price to retailers below the price herein named, a corresponding reduction shall be made to said purchaser ou all goods shipped or delivered to him prior to that date. But in case any reduction is made in the price to retailers between December 1st, 1896, and March 31st, 1897, both inclu- sive, then the said purchaser shall be entitled to a corresponding reduction only on goods actually on hand in his own store at the time of such reduction, a statement of which he shall furnish, under oath, if desired. It being understood that this guarantee shall not be affected by the sale of out-of-style, damaged or im- perfect goods, and that the company reserves to itself entire freedom as to the classification of dealers to whom it may sell its goods direct as jobbers. Seventh — Exchange of Goods. — Nothing in this agreement shall prevent customers of the said company from exchanging with each other or purchasing from each other, at prices mutu- ally agreed upon, and with written approval of the said com- pany, its goods may be exchanged with, or sold to other jobbers, provided such goods bought, sold or exchanged, shall not be re- sold at any better discounts or terms than are stipulated in this agreement. Eighth. — Damaged or out-of-style goods which cannot be sold at full discounts, may be disposed of at reduced prices, with the consent of the company, upon sending to the company a list of such unsalable goods. To avoid any confusion with discounts on standard styles, all damaged and out-of-style goods must be sold 650 [Senate, at net prices. The company may sell damaged or out-of-style goods at reduced net prices. Ninth — Orders. — It is understood and agreed that all the fore- going conditions are to apply to all goods purchased by the said of the company, for the season ending March 31st, 1897, excepting that the discounts named in Section 1 ap- ply only to cases, the detailed order of which the said purchaser promises to give immediately upon request. In case the said purchaser shall fail to send in detailed orders for the goods herein contracted for, within fifteen days after re- ceipt of such request, in writing, then the company shall be re- leased from the delivery of any and all goods not so ordered in detail. All orders unfilled March 31st, 1897, will be understood as cancelled at that date. The company cannot undertake to mark or ship goods to the purchaser’s customers. Tenth — N. B. — It is hereby understood and agreed to that this contract is absolutely between the seller and the purchaser, and annuls, cancels and obliterates any and all contracts, agree- ments, understandings or practices heretofore in vogue, under which the purchaser has heretofore bought goods of the brands herein contracted for, and it is distinctly understood that no other contract, agreement, understanding or previous practice prevails in respect to the subject matter of this contract, ex- cept those herein specifically provided. Dated at this first day of April, 1896. (This contract is not binding until approved by Director of Sales.) Approved: Director of Sales. No. 40.] 651 SUPPLEMENTARY AGREEMENT. The United States Rubber Company, selling agent, hereinafter called The Company, in consideration of a certain agreement be- tween it and , hereinafter called The Purchaser, dated at April 1st, 1896, hereby covenants and agrees w T ith said purchaser, that if said purchaser shall have well and faithfully kept and performed all the undertakings on his part, to be performed in said agreement contained, and shall not have directly or indirectly violated the same or any provi- sion thereof while it continues in force, The Company will, as soon after the first day of April, 1897, as The Company is satis- fied that said agreement has been faithfully kept and performed by said Purchaser, and account settled in full, pay or credit him with 7 per cent, on the net amount of his purchases under said agreement. This 7 per cent, shall form no part of settlement between The Company and said Purchaser, but it is to be regarded purely in the light of a rebate, and payable only subject to the conditions herein stated. Provided, howmver, that if, in the opinion of The Company, which is to be final and conclusive, said agreement shall have been in any material respect violated by said Purchaser, he shall not be entitled to said rebate of 7 per cent., but shall pay for all goods purchased by him under said agreement, upon the terms and at the discounts therein mentioned, without further discount or rebate. It is mutually understood that any freight or cash discount made by said Purchaser, other than as stipulated in said agree- ment, shall be deemed a violation of its terms as completely and to the same extent as a concession in terms or discount. 652 [SENATE) And it is also nutually understood that said Purchaser is to be held responsible for any violation of said agreement by his employes. Dated , this first day of April, 1896. (This contract is not binding until approved by Director of Sales.) Approved: Director of Sales. AFTERNOON SESSION, COMMON COUNCIL CHAMBER, NEW YORK, FEBRUARY 18, 1897, 2.30, P. M. Mr. Lexow: Mr. Henry O. Havermeyer will please take the stand. Havemeyer, Henry O., recalled. Examined by Mr. Lexow: Q. This document that I hand you is a correct copy of an agreement that was made between the Knight concern and the American Sugar Refining Company, under which the Knight Company sold its property to the American Sugar Refining Com- pany of New Jersey. A. It is. (Marked Exhibit 2, February, 1887.) Q. Is the paper that I now hand you a correct copy of the con- tract of sale of the Delaware Refining Company to John E. Searles as representative of the American Sugar Refining Com- pany? A. It is. (Marked Exhibit 3, February 18, 1897.) Q. Is this a correct copy of the resolution passed by the board of directors of the American Sugar Refining Company, March 10, No. 40.] G53 1892. whereby they authorized the issue of capital stock in pur- chase of the Franklin Sugar Refining Company, the E. C. Knight Company, the Delaware Sugar Refining Company, and the Spreckles Sugar Refining Company? A. It is. (Marked Exhibit 4, February 18, 1897.) Q. Is this a statement of the amount of taxes paid to the Sta.te of New York by the American Sugar Refining Company from the year 1891 down to and including the year 1896? A. It is. (Marked Exhibit 5, February 18, 1897.) Q. Do I understand, Mr. Havemeyer, that the figures con- tained in this last statement, marked Exhibit No. 5, is a correct statement of all the taxes paid by the American Sugar Refining Company to the State of New York during those years? A. Yes, sir. Q. Representing taxes on real estate and personal property included? A. Yes, sir. Q. The Brooklyn item of $457,260.65, does that represent merely the taxes paid upon the real property of the company situate in the city of Brooklyn? A. Yes, sir. Q. And the item of $33,615.54, does that represent the tax levied by the State upon such personal property or assets of the corporation as were employed in the State of New York? A. It does. Mr. J. E. Parsons: And the lease-hold property, which consti- tutes the office of the company. Q. That is to say, that this item of $33,615.54 includes the lease-hold or office property of the corporation in addition to all the tax levied upon the corporation upon that part of its capi- tal stock which is in use in the State of New York? A. That is correct. Q. Is the statement made by Mr. Searles that the factory prop- erty of your corporation in the city of Brooklyn represented a total producing capacity of 20,000 barrels per day? A. I think that is correct. Q. What proportion does that producing capacity represent as 654 [Senate, compared with the total producing capacity of all corporations owned by you and situated elsewhere? A. About one-half. Q. Doesn’t it follow from that statement that one-half of the capital of the American Sugar Refining Company is in use in the State of New York? A. Not necessarily. Q. Doesn’t your capital follow your producing capacity? A. Not necessarily. Q. While not necessarily, is it a fact that it does? A. I doubt it. Q. You doubt it? A. Yes, sir. Q. On what proposition do you doubt it? A. A great deal of the capital might be invested in raw sugar that might be in another State. Q. Do your investments in raw sugar principally consist in stores situated upon your Brooklyn properties? A. I don’t think we have the relative storage capacity in Brooklyn that we have elsewhere. Q. As a matter of fact though, without reference to the capa- city of the particular stores, isn’t it a fact that the principal stores of raw sugar that you have are located on your Brooklyn properties? A. I have already stated that I do not think they are. Q. Have you any knowledge on the subject? A. Yes, sir. Q. What proportion is obtained in storage elsewhere, on the average? A. I should say that in Boston we had fully as much storage as in Brooklyn, and in Philadelphia twice as much; I have stated that one-half of the business was done in Williams- burg; when you come to storage capacity that is a matter of square feet of area; I think, as I have stated, that Philadelphia exceeds it twice. Q. I am speaking now of actual storage? A. Storage capacity is the same thing. Q. Not necessarily; you may have capacity that you don’t use; I am speaking of the amount of raw material that you keep on storage; how does that compare with the amount, so far as Wil- liamsburg is concerned, with the amount that you keep on storage No. 40.] 653 in other localities; I am speaking of general values? A. It is impossible for me to tell you exactly the relative amount that we keep on storage; I have told you that one-half of the melting ca- pacity was done in Brooklyn, which naturally carries with it one- half of the total amount of sugar received and disbursed; we might have four times as much sugar in Philadelphia as in New York. Q. One half, therefore, of your business in refining is done in the State of New York? A. About that. Q. How comes it that you do not pay to the State of New York taxes upon the authorized $30,000,000 of the capital stock? A. I don’t see any relation between the amount of business done and the relation of taxation to capital stock; we might have nine- tenths of our capital in Philadelphia and do all the business in New York. Q. You know, don’t you, that the laws of the State of New York lay a tax upon that part of the capital stock of a corpora- tion which is used within the limits of the State; that is a fact; you know that, don’t you? A. I have an indefinite knowledge of what the law requires in that particular; we rely entirely upon Mr. Parsons for a consideration of those matters. Q. The only document that has not been produced with refer- ence to which inquiry was made by this committee, is the original deed of the Trust, of the Sugar Trust, and the figures which it contains showing the amounts apportioned between the various companies forming that Trust of the certificates of the so-called Sugar Trust; Mr. Searles has testified that he does not know where that paper is; do you, Mr. Havemeyer, know where it is? A. I do not; the last that I saw of that deed was at the time of the State investigation, known as the Arnold Investigation, Mr. Arnold being the presiding officer; the deed was produced and Mr. Parsons, who had it in his possession; was allowed to cut out the distribution of those certificates; and I know it was done. Q. Then, at that time, if my memory serves me right — it was in 1888? A. I think it was some time ago. Q. Between 1888 and 1889? A. I believe so. G56 [Senate, Q. The figures inquired for by this committee were, by permis- sion of that committee, cut from the original record? A. Yes, sir. Q. Were you present when that was done, Mr. Havemeyer? A. I was not present; Mr. Parsons told me and subsequently I saw it published in all the daily papers, that those figures had been cut out of that document. Q. Have you seen that document since the day when those fig- ures were erased? A. No, sir; I have not. Q. Have you heard of its existence anywhere? A. I have not. Q. Was the document itself surrendered to the keeping of the committee? A. I think it was not; it was returned by the com- mittee to counsel. Q. Might I ask you, Mr. Parsons, whether that was before or after the time that the document was admitted in evidence in the North River Sugar Refining case? Mr. Parsons: I don’t want to testify as to my recollection of it; but I think it can be easily supplied. Q. Y"ou remember the time it was put in evidence, don’t you, Mr. Havemeyer? A. No, sir. Mr. Parsons : The record in that case was put in evidence here in this investigation. Mr. Havemeyer: I think the North River case was later than the Arnold investigation; but I am not clear enough on that to make a statement. Q. You have stated here now that those figures we r -e cut from the original Trust deed at the time of the Arnold investigation, so-called? A. Yes. f Q. The testimony of Mr. Searles goes to show that by consent, on the introduction of that deed in the North River Sugar Refin- ing case, the figures were cut from the record in that case; now, have you refreshed your recollection in that regard? Do you still say that those figures were cut out at the time of the Arnold in- vestigation? A. I do ; I say they were cut out at the time of the Arnold investigation, irrespective of what occurred before or afterward. No. 40.] 657 Q. Who had been the custodian of that instrument previous to that time? A. Mr. Parsons. Q. And at the time of the trial of the North River case? A. Mr. Parsons. Q. And when you last saw that deed, or knew of its existence, in whose hands or custody was it? A. Mr. Parsons. Q. Were the figures that had been cut out at the time of the Arnold investigation erased in the deed afterward? A. Never to my knowledge, Q. Do you know of anybody else that had the right of control or custody of that deed except Mr. Parsons? A. By the terms of the deed he was the custodian of it. Q. Why was it, Mr. Havemeyer, that you and your associates were so solicitious in reference to the secrecy or non-discovery of these particular items? A. I had no secrecy about it; there were a hundred and one people that were parties to that deed and they put it into the custody of Mr. Parsons on certain conditions, and I presume that he respected their wishes. Q. Inasmuch as those figures formed so substantial an item or provision in that agreement how does it come that you have so completely forgotten it? A. It became an executed contract and that was the end of it; the proper thing would have been to de- stroy the deed; instead of that it was kept and it has kept up this fuss and turmoil ever since; that is my private judgment, bear in mind; I am not expressing the judgment of anybody else; we agreed to do certain things and those things were accomplished; and then the deed should have gone out of existence. Q. What was there surrounding that deed that seemed to make it necessary to destroy it? A. I saw nothing about it that made it necessary to destroy it. Q. You give the opinion that it should have been destroyed; was that your individual opinion? A. It was; at the time I thought it should have been destroyed; it was on the basis of that deed that all this hostile legislation was attempted and the inter- ference of the courts; and all this fuss and interference has been swept away by a decision of the Supreme Court of the United 42 658 [Senate, States; it never would have occurred if that deed had not been the basis of it all. Q. What do you mean by being swept aside by the Supreme Court of the United States? A. I presumed that you were fa- miliar with reference to what occurred in relation to sugar; first one judge decided that it was a “criminal monopoly”; they had an Appellate Court confirm the decision ; then we had interference in other States in the matter ; but when it reached the power that decides forever they swept all that stuff out of existence and put us in a legal position; all of which, allow me to say, arose from that deed, which, had it not been in existence, would not have given occasion for this persecution. Q. Prosecution? A. Persecution; they are very much allied at the present day. Q. Inasmuch as the Supreme Court of the United States had decided that you are not a monopoly the production of that deed rather benefited you, did it not? A. I don’t think that it did; the Supreme Court took the fact ; it didn’t take the deed. Q. Who ever told you, Mr. Havemeyer, that the Supreme Court of the United States had declared that the system under which you transacted business did not constitute a monopoly? A. I say that in all legal matters we are governed by our counsel. Q. You simply reflected his views in that statement? Q. I am giving my opinion. Q. Without knowing whether or not the Supreme Court of the United States passed directly on the question of monopoly or di- rectly on questions of jurisdiction in that case? A. The Supreme Court passed directly upon monopoly and held it was a fact that the American Sugar Refining Company was not a monopoly. Q. Did you receive that from your counsel? A. I received it from the decision. Q. As a judgment upon that decision? A. Yes, sir. Q. As his judgment? A. Yes, sir. Q. Then you are not reflecting your own views? A. I am; like- wise my own views. Q. To what part of that decision do you refer in which the No. 40.] 059 United States Court has held as you state? A. It held, as I understand, that there could be no monopoly without restriction; the American Sugar Refining Company restricted nobody from coming into the business; how could we be a monopoly? Q. Do you mean to say that the Supreme Court held, upon the facts established in that case, that there was no monopoly in your system of doing business? A. Yes, sir; and' having all the facts in the case they decided as they did. Mr. Lexow: That is a matter of opinion. By Mr. Warner: Q. Do I understand you to say that this paper, or this data, that was cut out of the North River case has been destroyed? A. I am not aware that it has. Q. Didn’t you say that it was submitted in the North River case? A. This mutilated deed; my testimony was that it was cut out in the Arnold investigation, the part that related to the dis- tribution of shares was cut out; I don’t see how it could appear in the North River case; I don’t believe that it did, nor in any other case. Q. You say that the papers that were cut out have been de- stroyed? A. I don’t know anything about it. Q. Will you swear that they have not? A. I swear that I don’t know. Q. Why do you swear that it would have been well if that paper had been destroyed? A. All this litigation and all this fuss about trusts was based upon that deed; if that deed had not been produced there would have been nothing to fight about or investigate. Q. That was the only document out of those that came into your possession that was not kept; if the figures were cut out why do you say that it would have been well if that document had been destroyed? A. You mean the deed before it was cut? Q. Well, this deed that you claim has caused you so much trouble; you said it would have been well if that deed had been 660 ■ [Senate. destroyed? A. If it bad been there would have been no excuse for investigating committees or for litigation. Q. Was it by reason of the fact that other papers were de- stroyed that gave you the idea that it would have been well if this deed bad also been destroyed? A. That bad no significance; it bad no significance in the matter; I presume that it was with that view that your predecessor put the question. Q. Where is the original minute book? A. In New Jersey. Q. With the proceedings of the Board of Trustees of the Trust? A. I don’t think those books are in existence. Q. They have been destroyed? A. I think they went out of ex- istence in 1891. Q. Don’t you know that they were destroyed? A. I don’t know anything about it. Q. You won’t swear that they have not been destroyed? A. I won’t swear to anything I don’t know; I am very particular about my oath. Q. Your company is not particularly anxious to have those books put in evidence? A. I don’t think that the company has those books. Q. You say that you “don’t think?” A. I don’t know that they have; I don’t know anything about those books; I am sure that if I did know about them I would tell. Q. Doesn’t it seem a little peculiar that all the minute books, the stock certificate books and the stubs of this original Trust were destroyed or have suddenly gone out of being where no one can get at them? A. I don’t think so; those companies each had their own books; when the companies were dissolved the books went to the owners. Q. What became of the minutes of the trustees of the Trust? They kept minutes, didn’t they? A. The books belonged to those separate companies. Q. What became of the minute books? A. I don’t know any- thing about any books; the Trust didn’t operate these refineries; each separate company had a board which operate its own re- finery. No. 40.] 661 Q. Did they keep a record of their proceedings? A. I wouldn’t say that they did. Q. Did they destroy the record after each meeting? A. Oh, no. Q. After they were read? A. No, sir. By Mr. Lexow : Q. Mr. Searles stated on the stand here that an investigation such as this operated to destroy or impair confidence in the prop- erty of the American Sugar Refining Company. Do you share that opinion with him? A. Well, my answer would have to be rather lengthy. Q. Can you not answer either “yes” or “no”? A. I could not. Q. I want to ask you this question: Do you believe that the value of any property honestly conducted has anything to fear from an investigation, no matter how rigorous or searching? A. I do; but you will allow me in this connection to make a state- ment; there has been an apprehension on the public mind that there would be some interference by the State of New York with the sugar interest; I mean with the actual melting and refining of sugar in this State; and as a result they have advanced the price of sugar one-eighth cent per pound to the consumer; of course this investigation may be beneficial ultimately, but its immediate effect has been injurious to the consumer; I think New York State occupies a foremost position in the Union; and you will have this trouble in all the other States which have not the discretion of the Legislature of this State; it will operate to the ruin and disaster of property and manufacturing interests of the different States. Q. Would you be kind enough to explain how this investigation can by any method be tortured into an instrument to advance the price of sugar? A. Apprehension on the part of the public that there will be a strike against the sugar industry, half of which is conducted in New York, has lead the people of the United States dealing in sugar to buy very extensively; that has pro- duced an inordinate demand; that inordinate demand has ad vanced the price; it will probably recede. 662 [Senate. Q. It could not have advanced, Mr. Havemeyer, except that your factors, operating under your arrangements, have increased the price of your sugar to. the consumer? A. No, sir; probably they have not put the price up yet. Q. How, then, has the price of sugar increased? A. By the inordinate demand. Q. Which must necessarily have largely benefited, instead of injured, the American Sugar Refining Company? A. I dare say that pecuniarily the immediate effect of this investigation will be to the benefit of the treasury of the American Sugar Refining Company. Q. Then you don’t agree with the proposition urged by Mr. Searles that investigations of this kind are destructive of the in- terests of the American Sugar Refining Company? A. I certain- ly do not; we invite the fullest investigation; the immediate ef- fect is rather injurious to the public; but I am quite confident that the ultimate effect will be beneficial to the public. Q. How do you hold that it has been prejudicial to the public when you are the producer and distributor of 80 per cent, of the entire product of the United States; your factor must have put up the price of it to the consumer? A. It has given rise to apprehension in the sugar market and everybody dealing in it buys twice as much as they need; and the result is that the holders of raw sugar demand more. We have to meet that ad- vance and we have) to exact it out of the consumer. Q. Do the raw sugar interests claim more from you? A. Un- doubtedly. Q. 8fo that as a matter of fact, in the first instance, you have to pay more for the product as the result of this investigation? A. Yes, sir; that is the way it has worked in this case. Q. Mr. Searles has stated that the power of concentrated de- velopment by -*our organization has been such as to force down the price of sugar by one cent per pound; do you now maintain that, notwithstanding that power of concentration and develop- ment — that power of concentrated capital — an investigation of this kind can put up the price of sugar by one-eighth of a cent No. 40.] 063 per pound? A. I tiiii k it has somewhat; I think it has put down the raw by about one- sixteenth. Q. If Mr. Searles’ statement is correct, do you agree with him in his statement that by reason of your combination of capital you are able to force down the price of raw sugar by one-half to one cent per pound: do you agree with that statement? A. 1 do not. Q Then, in your judgment, your combination of capital has not had the effect of reducing the price of the raw material by one cent per pound? A. I don’t think that it has had the effect of producing that — I don’t think it has much effect or much power. By Mr. McCarren. Q. Have you any knowledge of the amount of freight — the percentage of freight that goes from the city of Brooklyn as the result of the sugar refining business in that city; I mean by that, the percentage of freight of the whole port of New York? A. 1 think that 40 per cent, of the entire w T est bound freight goes from Brooklyn; and of that I should say 90 per cent, comes from the sugar business; there is not a more valuable industry in the State of New York than that of the sugar industry. Q. Have you any knowledge of the amount of labor actually interested in the sugar industry in the city of Brooklyn employed in the handling and distribution of sugar, as compared with other distributing points? To make the question more clear — A. There is ten times as much labor rejuired in handling. Q. Explain why? A. The refineries in different localities are located on the line of railroads and the cars come right into the storehouses and the sugar is loaded directly into the car; in Brooklyn it requires at least ten times more men; there is more labor; there is more labor entering into the production of sugar in the city of Brooklyn than in any other city in the Union; and New York State should be the last one to interfere with that in- dustry. Q. TV as there any necessity for a further existence of this doc- 664 [Senate, ument that was extracted from the paper put in evidence in the Arnold investigation? A. No, sir. Q. Were you served with a subpoena duces tecum with refer- ence to this particular document? A. Yes, sir. Q. Have you that subpoena in your pocket? A. I was ordered to bring the deed. * By Mr. Warner: Q. Were you ordered to bring the minute book? A. I was or- dered to bring extracts, which I did bring; I have complied with every request of this committee most willingly and cordially. Q. We don’t want to take any unnecessary advantage of you. By Mr. Lexow : Q. There is nothing in that subpoena requiring you to produce the original Trust deed; you have produced the other documents required by this committee? A. I have only to say with refer- ence to that deed that I do not believe it is in existence; I have not seen it since the Arnold investigation; there has never been but one custodian, and that custodian has been Mr. Parsons. J. E. Parsons, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. You were the custodian of the Trust deed that has been re- ferred to in the examination of Mr. Havemeyer? A. I was not the legal nor official custodian of the Trust deed; I think that if you will examine the document you will find that the official cus- todian of the paper is the President of the Board of Trustees; but as occasion required the document was in my custody from the fact that I was counsel of the American Sugar Refining Company; and on any occasion when the document was before an investi- gating committee or inquired for it was in my possession as coun- sel of the American Sugar Refining Company. Q. You have heard the testimony of Mr. Havemeyer in regard to it, that there was cut out of the document several items show- ing the distribution of certificates of the Sugar Trust after the No. 40.] 6G5 various properties were absorbed; you have heard this testimony on that point? A. I have. Q. Do you say that your own knowledge of the facts agree with his statement on that subject? A. The subject had gone entirely out of my recollection until reference was made to it upon this investigation; Mr. Havemeyer sent to me a clipping from a con- temporaneous newspaper of the proceedings by the Arnold In- vestigating Committee and that recalled to me what Mr. Have- meyer has testified to. Q. Is that your present recollection? A. That is my present recollection. Q. What became of that portion of the original deed wdiicli was thus erased or extracted? A. I have no recollection of seeing the parts of the paper or any portion of it from that time down to this; I think that I ought to say that at that time it was claimed that that was evidence of transactions which were asserted by those who were attacking the refining company as an illegal com- pany; there was every reason why that paper should not have been preserved; the statement had been cut out of the instrument; the various constituent companies had been purchased by the American Sugar Refining Company and there was no further rea- son or purpose which would warrant the preservation of that paper. Q. Have you any knowledge to-day of the present existence of that paper or where it is to be found? A. I have not. Q. Have you any knowledge of the fact that it is not in exist- ence and cannot be found? A. I wouldn’t like to say that I have that knowledge; I have no recollection of ever having had my at- tention called to it from the time of that investigation down to the present investigation. Q. Does the copy of the so-called Sugar Trust agreement, with the exception of the figures referred to in the appeal book in the North River Sugar Refining Company case, contain an accurate statement of- the original deed? A. I have every reason to be- lieve that it does; I have no doubt but that statement was fur- nished by me at the time; although I have not made recent ob- servation I am quite willing to assume that the copy is accurate. 666 [Senate, Q. Do you wish to be understood by this committee that the non-production of this Sugar Trust deed is not due to any desire to evade or prevent this committee from securing its production, but that it has either disappeared or been destroyed? A. I have no wish upon the subject; I state the facts and the rest is infer- ence. Q. Is that the inference that you wish drawn from the fact that you have? A. I have no wish upon the subject, Mr. Chair- man; there was a time when I would have felt that I had no right to be instrumental in the promulgation of that document in the form in which it existed or in any form; I suppose that I would have violated my professional obligations if I had been instru- mental in making that public after it came into my possession; but so far as that paper came into the possession of the various investigating committees and into the North River Sugar Refin- ing case, of course that obligation ceased and since then I have had no wish upon the subject. By Mr. Warner: Q. You were subpoenaed to produce the minute book of the directors of the company? A. I was not; I have already stated that I was not subpoenaed. Q. Do the directors of the company refuse to allow the secre- tary of the company to produce the minute book before the com- mittee? A. The directors have taken no action upon the sub- ject of which I know; the committee requested certain informa- tion from the minute book; the presentation of that information was considered at a meeting held yesterday and that information has been furnished ; and I have heard the statement here, that so far as any request has been made, it has been complied with; that is all I know upon the subject. Q. In order that there may be no misunderstanding, Mr. Have- meyer was subpoenaed to produce the minute book and he has not done so. A. You asked whether I had been subpoenaed. Q. You said that you would produce all the document; that No. 40.] 667 there may be no misunderstanding, Mr. Havemeyer has been sub- poenaed to produce the minute book? A. I interpret the sub- poena served differently from the interpretation that you put upon it. By Mr. Lexow: Q. As I understand the situation, Mr. Parsons, prior to the service of this subpoena, you asked whether it would be sufficient instead of producing the book itself, to produce sworn copies of that memoranda which was connected with the subject matter about which we inquired, and that we stated that would be suffi- cient; the copies have been presented and the subpoena has been complied with; and the only question is to the production of this deed of trust, and that will stand upon the record as made; those who have been subpoenaed may be excused upon the ground that it no longer exists; it is a question of fact and law that will follow from a perusal of the testimony. The undersigned Edward C. Knight and Edward C. Knight, Jr., being the sole owners of the entire capital stock of the E. C. Knight Company comprising the entire plant used by said com- pany and the firm of E. C. Knight & Company, in the carrying on the business of sugar refining in the city of Philadelphia and comprising the property described in a general way as follows: The two blocks of ground bounded by Delaware avenue, Bain- bridge street, Penn street and South street, with the exception of that portion of block on Penn street and Bainbridge street owned by the Franklin Sugar Refining Company, (but to include the lot on the corner of Penn street and South street not now owned by said company, but to be purchased by them and de- livered with the before named property) together with lot on Penn street running to Front street and two piers and the bulk- head connected with same opposite said property, together with all appurtenance including whatever has been used in connection with, or as part of, the before named refinery, hereby agree in consideration of the sum of one dollar to each of them in hand paid, to sell to John E. Searles, Jr., for account of whom it may 668 [Senate, concern all the above-named property for the sum of $2,050,000 in the stock of the American Sugar Refining Company, one-half common and one-half preferred, upon condition that the requi- site assents to the $25,000,000 increase of the capital of the com- pany are obtained and upon the following terms and conditions. 1. The sale shall be consummated on or before March 31st, at the option as to time of the purchaser, if the assents are obtained and if not as soon thereafter as they are obtained. 2. The title to the real property shall be a good title in fee free from all liens and encumbrances, except taxes of 1892. 3. With the sale shall be included all bone-black in use, trade- marks and patent rights belonging to the said company or said firm and used in connection with said refinery. 3. The sale shall be consummated either by a deed conveying the property or by a transfer of the stock of the E. C. Knight Company, or both, at the option of the purchaser; if by transfer of stock, the seller shall guarantee the buyer against all debts and liabilities of the company and shall have the right to with- draw and retain all property not coming within the foregoing de- scription. 5. It is a further condition of this sale that the purchaser shall also purchase at their cash value on the day of the consummation of the sale all raw and refined sugars, including sugars in process, and all new supplies, such as barrels, new filter bags, fuel, etc., and shall assume all contracts of the said E. C. Knight Company or E. C. Knight & Co., for raw sugars, barrels, bone-black and such other supplies as are contracted for delivery during the year 1892. 6. Mr. Searles for account as aforesaid hereby agrees upon the the foregoing conditions to make the said purchase. From the time that the sale shall be consummated Messrs. Knight shall for 30 days continue if desired to carry on the business for account of the* purchaser. Philadelphia, March 4, A. D., 1892. E. C. KNIGHT, E. C. KNIGHT, JR., JNO. E. SEARLES, Jr. No. 40.] 669 The undersigned stockholders of the Delaware Sugar Refinery in consideration of the sum of one dollar to each of them in hand paid, hereby agree with John E. Searles, Jr., for account of whom it may concern, to exchange the number of shares of Delaware Sugar Refinery stock set opposite their respective names, for shares in the American Sugar Refinery Company, they to receive for each and said shares of the Delaware Sugar Refinery (said shares being of the par value of one thousand dollars each) twen- ty-two and one-half shares of the stock of the American Sugar Refining Company, one-half each in common and preferred stock, the stock of both companies to be full paid and lion-assessable upon the following terms and conditions: 1. The said Delaware Sugar Refinery stock is guaranteed by the sellers to comprise the entire plant used by said company in the carrying on of the business of sugar refining in the city of Philadelphia and comprising the property described in a general way as follows: The buildings and sheds and lot of ground bounded by Reed, Swanson and Meadow streets and the Penn. R. R. Co.’s yard, and all the machinery and apparatus contained therein, known as “The Delaware Sugar House,” together with all the appurte- nances including whatever has been used in connection with, or as part of, the before named refinery. 2. The sale shall be consummated on or before March 31, at the option as to time of the purchaser, if the necessary assents of the stockholders of the Delaware Sugar House are obtained, and if not, as soon thereafter as they are obtained. 3. The title to the real property shall be a good title in fee free from all incumbrances, except a ground rent of $1,200 per annum which is to be assumed by the purchaser. 4. The sale shall include all bone-black, trade marks and pat- ent rights belonging to the said company and used in connection with the said refinery. 5. The sellers shall guarantee the buyer against all debts and liabilities of the company and shall have the right to withdraw 670 [Senate, and retain all property not coming within the foregoing descrip- tion. 6. It is a further condition of this sale that the purchaser shall also purchase, at their cash value on the day of the consummation of the sale, all raw and refined sugars, including sugars in process and all new supplies such as barrels, new filter bags, fuel, etc., and shall assume all contracts of the said company for raw sugars, barrels, bone-black and such other supplies as are con- tracted for delivery during the year 1892; also a contract for the sale of empty bags for 1892 and 1893 and a lease of a lot west of Swanson street until July, 1893, at $2,000 per annum. 7. It is further agreed by the sellers that from the time that the sale shall be consummated George R. Bunker shall for thirty days continue, if desired, to carry on the business for account of the purchaser. 8. Mr. Searles for account as aforesaid hereby agrees upon the foregoing conditions, to make the said exchange subject only to the condition that the requisite assents to the $25,000,000 increase of the capital stock of the American Sugar Refining Company are obtained. J. Vaughn Merrick 35 shares W. H. Merrick, per J. V. Merrick, Attorney 35 shares The Philadelphia Trust, Safe Deposit and Insurance Company, trustees under the will of Jno. E. Cope, deceased, W. L. Dubois, Secretary and Treasurer. ... 30 shares Helen T. Cope, per J. V. Merrick 5 shares George R. Bunker 14 shares S. Georgiana Crabb, by Geo. R. Bunker 25 shares Cassine G. Wilson, by Geo. R. Bunker 12 shares Geo. R. Bunker, guardian of Wilson minors 11 shares Albert Bunker 4 shares Estate of John Birkbeck, Herbert Worth, Executor. . . 22 shares R. H. Howell 4 shares Thos. A. Howell 4 shares No. 40.] 671 F. H. Howell, by T. A. Howell, Attorney 4 shares Henry B. Howell 1 share Jas. H. Post 4 shares Accepted on conditions stated above JNO. E. SEARLES, JR. Dated Philadelphia, March 8, A. D. 1892. THE AMERICAN SUGAR REFINING COMPANY. Extract from minutes of Board of Directors, March 10, 1892: Resolved, That if the $25,000,000 increase of capital is assented to as required by law the company will purchase the real estate and plant, either by conveyance of the property or transfer of the stock, of the following refineries, either, any or all, or any part of either, any or all, at prices payable in stock, half common and half preferred, not to exceed the following rates: For the Franklin Sugar Refining Company $10,000,000 For the E. C. Knight Company 2,050,000 For the Delaware Sugar Refining Company 472,500 For the Spreckels Sugar Refining Company 10,000,000 I hereby certify the above to be a correct extract from the min- utes of the company. JOHN E. SEARLES, Secretary. City and County of New York, ss: John E. Searles, being duly sworn, says: I am the secretary of the American Sugar Refining Company. The foregoing is a true extract from the minute book of the company. JOHN E. SEARLES. Sworn to before me this 17th day of February, 1897. P. Fox, Notary Public, N. Y. Co. Taxes paid by the American Sugar Refining Company in New York, 1891 to 1896: 672 [Senate, New York city, 1891 $563.73 New York city, 1892 4,529.73 New York city, 1893 4,326.30 New York city, 1894 6,353.32 New York city, 1895 7,629.76 New York city, 1896 10,212.70 $33,615.54 Brooklyn, 1891 $74,761.99 Brooklyn, 1892 76,247.75 Brooklyn, 1S93 78,157.90 Brooklyn, 1894 72,717.00 Brooklyn, 1895 78,041.66 Brooklyn, 1896 77,334.35 457,260.65 Total $490,876.19 City and County of New York, ss: Henry O. Havemeyer, being duly sworn, says : I am tbe Presi- dent of the American Sugar Refining Company. The foregoing is a statement of the taxes paid by that company in the State of New York. I believe that it is a correct statement. H. O. HAVEMEYER. Sworn to before me this 17th day of February, 1897. P. Fox, Notary Public, N. Y. Co. New York, March 10, 1892. Gentlemen. — Having heretofore proposed to buy the refinery and all buildings, wharves and plant connected with the es- tablishment of the Franklin Sugar Refining Company, of which you are the owners of all the stock, in order that we might take the title as stockholders of the corporation which owns the prop- G73 jo. 40.] ;ty instead of directly as originally proposed, but not varying 1 substance the property intended to be sold and that intended ot to be sold, the American Sugar Refining Company offers to urchase from you the entire capital stock of the Franklin Com- any for the sum of $10,000,000, payable in shares of the Ameri- an Company at par, one-half common and one half preferred, ‘rovided that the consent which is required to authorize an in- rease in the capital of the American Company of $25,000,000 is btained. This offer, subject to the above proviso, is to become i binding contract upon the acceptance of the same by Mr. Iharles C. Harrison in behalf of himself and his associates, •wners of all the stock of the Franklin Sugar Refining Company, vhen the American Company will, with reasonable despatch, Droceed to complete the required consent for the increase of capital. jtfo property is intended to pass by this sale of shares for jpl0,000,000 payable in shares other than real estate, plant and bone-black. The title to the real property of the Franklin Company shall be marketable and clear of all encumbrances and liens. In- cluded in this property is a wharf, the title to which stands in the name of William W. Frazier (the title to be transferred to the Franklin Company), and excluded from this sale is the title to property south of Almond street and west of Sw r anson street, and two houses north of Bainbridge street, 618 Swanson street and 619 Penn street standing in the name of the Franklin Com- pany, which we understand to have been placed in the name of that company by mistake. The bone-black that shall have been received at the refinery on the 5th of March, 1892, will pass as property of the Franklin Company to the American Company. All running contracts connected with the business for the year 1892, or any part of it, such as those for coal, bone-black, pack- ages, tight or slack, blood-hauling and all similar contracts for sup- plies, will be assumed and preformed by the American Company, the sellers paying all liabilities under said contract so far as the 43 G74 [Senati same shall have been executed by delivery or performance, am also paying wages and salaries up to the 5th of March instant which is to be the day on which the transfer takes effect if this contract is completed, the account of stock having been taken on that day. There will also pass by the sale the lease of the city wharf at the foot of Almond street and the Philadelphia office of the company at No. 101 South Front street. The Ameri- can Company will also perform all existing contracts for 1892 for the sale of empty hogsheads, bags and packages or things of a similar nature, and the contract with C. A. Brinley for services. All contracts for future delivery of bone-black, all merchandise and supplies on hand or contracted for use in the refinery, such as raw sugar, will be performed and paid by the American Com- pany, the price of that on hand to be payable as of March 5, 1892, at cost, and the price for future deliveries to be cost as required by contracts with the respective sellers. Refined sugar and sugar in the process of manufacturing will be paid for on the basis of the market value of refined sugar at the close of business on Saturday, March 5, 1892, when an account of stock was taken and the price will be payable as of that day; and all expenses, rents, insurance and taxes shall be apportioned as of that date. All property of the Franklin Company not intended to pass by the sale of the shares shall be deemed to be the property of Mr. Harrison and his associates and shall be transferred to them by the Franklin Company immediately. Included in the property which is thus to pass to Mr. Harrison and his associates shall be all debts due the Franklin Company and all bills, notes, open accounts, banks and banker’s deposits and securities, and all books of account, records and the minute book of the Franklin Company and a quantity of machinery intended for experimental purpose; those are to be retained by Mr. Harrison and his associ- ates as their property. Mr. Harrison and his associates shall pay and shall protect the Franklin Company against all the debts and liabilities of that company down to the oth of March, 1892. All debts and liabilities which shall be incurred by the Franklin Company from S T o. 40.] 075 md after that date shall be paid by the American Company; and ;hat company shall protect Mr. Harrison and his associates from ill liability by reason thereof. f. Taxes on the real property of the Franklin Company for the rear 1892 shall be apportioned between Mr. Harrison and his as- sociates and the purchaser of the shares to the 5th of March, 1892, as between vendor and vendee. Mr. Harrison and his asso- ciates will continue to transact the business of the Franklin Com- pany, including works and office for one month after the pur- chase money is payable for account of the purchasers, and all the business from and after the fifth of March will be conducted for account and at the risk of the purchasers. But until the purchase money is paid Mr. Harrison and his associates are to have the right to keep the refinery fully supplied with all things requisite for the fullest operation of the same and to continue the business of selling in their discretion. After the payment of the purchase money, the raw sugar will be supplied by the Amer- ican Company on notice of the requirements by the managers of the Franklin Company, and sales made as directed by the American Company, and all then existing contracts of sale will be filled by the American Company at the contract prices; and all contracts of sale made after that time will be filled by the American Company at the contract prices. At any time after one year after the completion of this pur- chase by the payment of the purchase money, the American Com- pany will, upon thirty days’ written notice from Mr. Harrison and his associates, or a majority of such of them as may then be living, dissolve the Franklin Company and surrender its present char- ter, and will secure the performance of this contract by stamp- ing upon the certificates of the stock of the Franklin Company notice that the same are subject to this provision, so that Mr. Harrison and his associates can enforce this and the next stip- ulation of the contract. There will also be given to Mr. Harri- son and his associates a covenant by the American Company that all debts incurred by the Franklin Company or obligations for which it may be liable, which debts and obligations shall be created or incurred after the acceptance of this proposal will be 676 [Senate, discharged and extinguished at any time upon request of Mr. Harrison and his associates or any of them representing a major- ity in interest of the sellers. Until payment has been made to Mr. Harrison and his asso- ciates of the purchase money all the property covered by this offer and the proprietorship of the same shall be and remain in them, and they shall be at liberty to conduct its operations as though this agreement had not been made. All said operations, in case of payment as herein provided, shall be at the risk and for account of the American Company. Within ten days after the consent to the increase of the capital stock of the American Company shall have been obtained, the purchase money which will be due as of the 5th of March, 1892, will be paid by the American Company, and at the same time settlement of all other stipulations in this contract will be made and the amounts due to or by Mr. Harrison and his associates will be paid as if the sale had been completed on the 5th of March, 1S92. If the American Company fail in obtaining the assent to the increase of capital hereinbefore provided for within thirty days from the time this offer becomes a contract, Mr. Harrison and his associates, or a majority in interest of them who shall then be living, may terminate the same on thirty days’ written notice to the American Company, unless before the time named in such notice the x\merican Company has completed the payment of the ten million dollars in shares as above stated. Whenever the American Company by this contract agrees that they will perform a contract that has been made by the Franklin Company it is intended that the American Company undertakes that the Franklin Company will perform the contract. (Signed) THE AMERICAN SUGAR REFINING CO. By John Searles, Jr., Secretary. To Mr. Charles C. Harrison and others, 10th March, 1892. We accept the above. (Signed) CHARLES C. HARRISON, For self and associates. No. 40.] 677 Thursday, Feb. 18th, 2.30 P. M. Earn, Henry, being duly sworu, testified as follows: Examined by Mr. Lexow: Q. What relation, if any, have you to the National Wall Paper Company? A. I am its president. Q. How long have you been its president? A. Since the lat- ter part of 1892. Q. Since the organization of the company? A. No, sir. Q. When was it organized? A. Organized in June, 1892. Q. You have been president since when? A. Since November or December, 1892. Q. Who was the first president of the company? A. A gentle- man named Cory. Q. You succeeded him? A. Yes, sir. Q. Were you one of the original incorporators? A. Yes, sir. Q. Were you one of the original directors? A. No, sir. Q. Did any company that you were connected with become part of that consolidation at the time of the original incorpora- tion of the company? A. Well, the National Wall Paper Com- pany, after it was formed, purchased the business with which 1 was then connected. Q. What company was that? A. That was the Robert Graves Company. Q. What other businesses did it purchase? A. Do you wish them stated in detail? (Witness refers to paper.) I wish to state right here that these were not all acquired at one time; some were acquired at that time and some subsequently. Q. Perhaps I can help you; did you acquire the S. E. James Company? A. I cannot remember whether that was the first one acquired; they acquired a number in the first few months after the incorporation of the company; among them was included — Mr . Lexow reads list of companies acquired by the United States Wall Paper Company. Mr. Burn answered in the affirma- tive as each name was called. 078 [Senate, Q. You were president of the Robert Graves company? A. I was manager and treasurer. Mr. Lexow continues reading names of companies acquired; and Mr. Burn answered in the affirmative as the name of each company was called. Q. Any others? A. Those constituted all the factories. Q. Were any other concerns, firms or agencies included in the consolidation? A. Yes; we also purchased the S. A. Maxwell Company of Chicago. Q. Any others? A. Subsequent to the purchase of the majority of these factories, we purchased the factories of Janeway & Car- penter, of New Brunswick, N. J., and Creswell & Co., of Philadel- phia. Q. Any others? A. Still later on we purchased the Boucher Paper Company, of Wisconsin. Q. Any others? A. Before these we purchased the business of M. H. Burgess & Sons; I think that constituted the entire pur- chases. Q. Added together that includes how many corporations, agen- cies and firms all engaged in the manufacture or sale of wall paper? A. I make it 28. Q. And purchased or acquired within what period of time? A. Within three years. Q. Were these as originally constituted actively competing among themselves in the wall paper business in this country? A. Yes, sir. Q. What territories are covered by the respective concerns thus consolidated? A. They canvass the entire United States and part of Canada; very little outside of that. Q. Was the purpose of this consolidation, in effect, to secure within the consolidation the interests representing that branch of industry covering the entire United States and Canada? A. Not the entire industry; no, sir. Q. So far as you could acquire it? A. No, sir; we decline to purchase certain factories from time to time. Q. How many factories competing against this concern of so. 40.] 679 yours, or among themselves, were left out of this syndicate or Consolidation after the last that you have mentioned had been purchased; how many were left out? A. About 17. Q. What proportion of the trade in the country did the 17 not made part of this consolidation represent? A. I have no knowl- edge regarding the operations of our competitors. Q. Do you not know from your own statistics what amount of the business of the United States was secured inside of this con- solidation by this combination of interests? A. No, sir; I have no means of knowing and have never heard an estimate of what our competitors made; I can only tell about the capacity by the numbers of machines. Q. You can tell? A. That is the only basis. Q. You judge by the number of machines in operation the amount of output of wall paper; what amount of wall paper is controlled within this organization as compared with that com- peting against it? A. About 60 or 65 per cent. Q. Are you underestimating the output or are you making a liberal estimate? A. I can give you the facts and you may draw your own conclusion; there are about 188 machines operated by the company and about 88 by competitors. Q. One hundred and eighty-eight as against eighty-eight? A. Yes, sir. Q. Now, these 1SS were operating in competition against each other as well against the 88 not taken into the combination at the time or immediately preceding the combination of interests, were they not? A. Yes, sir. Q. What is the amount of capital of this National Wall Paper Company that was authorized by your certificate of incorporation on the one hand and that that was issued for the last factory that you have acquired on the other? A. The original issue of stock was $14,000,000. Q. What was the authorized capital in the first instance? A. Fourteen million; it was subsequently increased to $30,000,000. Q. There were issued of that for the last purchases about $27,000,000 or $2S,000,000. 680 [Senate, Q. And now outstanding? A. Yes, sir. Q. Is the stock of one class or more than one class? A. The capital stock is all of one class. Q. Known as general stock? A. As common stock. Q. Organized under the laws of what State? A. Under the laws of the State of New York; I trust we will have con- sideration at their hands in consequence. Mr. Lexow: You are entitled to some consideration on that account. A. We paid $37,500 for the privilege. Q. You didn’t believe that it was necessary to go over into the State of New Jersey and organize there? A. No, sir; we didn’t care to shirk any responsibilities; we were engaged in a legiti- mate enterprise. Q. Has this corporation of yours any other class of security than the common stock that you have referred to? A. Yes; it has stock called debenture stock. Q. How much of that? A. The authorized amount was $ 8 , 000 , 000 . Q. How much issued? A. Seven million five hundred thou- sand dollars. Q. This debenture stock is substantially or essentially what is known as preferred stock? A. No; it is in the nature of an obli- gation bearing interest, at the rate of 8 per cent, per annum, provided that interest is earned. Q. In the nature of a mortgage upon the property? A. t No, sir; it ranks pari passu with all other creditors. Q. It is preferential to of the company? A. No, sir; it stands on the same basis. Q. What was this $7,500,000 of your capital stock called de- benture stock issued for? A. Mainly for the assets of the con- cern acquired. Q. For -what is known as tangible assest? A. Tangible assets; real estate. Q. Personal property other than what is known as “ good will?” A. Yes, sir. N T o. 40.] 081 Q. What was the general or common stock of the corporation issued for? A. It was issued for ‘‘good will,” patents, trade marks, etc. Q. Was there any division made at the time of the issuance of that stock between that which was issued in the form of de- bentures and that which was issued in the form of common stock? A. I suppose you mean by that did the vendors receive a portion of each stock? Q. Yes? A. They did; in most cases they did; in some cases there was debenture and no common stock. Q. Was the common stock issued separately from the issue of debenture stock for “good will” as compared to the tangible prop- erty? A. The amount of common stock that was issued bore no relation to the amount of debenture that was issued to the vendors. Q. There was no proportion between the two? A. No, sir. Q. You figured the tangible property of a certain company or firm and issued for that tangible property the debentures? A. Yes, sir. Q. Then you figured on the “good will” and issued for that common stock? A. No, sir. Q. Just state the process by which you reached the amount of common stock issued for “good will?” A. We calculated the value of a business by its earning capacity; we multiplied the net profits of a certain year by 16 and that became the total issue of stock to the concern for its business; from that total we deducted an amount for tangible assets; for that we issued de- benture stock and for the balance we issued common stock. Q. With other words, you capitalize the earning power of each separate concern at the rate of 6 per cent, and fix that capital so ascertained as the basis for the issuance of common stock? A. Of common and debenture. Q. Do you mean that the earning capacity of the concern was also a basis for the issuance of debenture stock? A. It was ex- pected that the capitalization of the concern, in basing the divi- dends on the debentures and on the common stock, would yield 682 [Senate, the same amount of profit to the vendor as it had done in previous years; I could best answer by illustrating a case; we will assume that a concern had been earning $50,000 per year as profit; multi- plying that by 16 would give $800,000; we will assume that the tangible assets of that concern amounted to $400,000; they con- sequently receive $400,000 in debenture and $400,000 in common stock. Q. Then, you didn’t estimate the issue of debenture stock with reference to the earning capacity of the plant, but the issue of common stock in that connection? A. Yes; I think that is about right. Q. You estimated on the proposed tangible assets of the con- cern and issued debenture stock for that; you then estimated the earning capacity of the plant by multiplying its profits of the pre- vious year by 16 and that formed the basis for an issue of common stock, deducting the amount of debenture stock from the total? A. That is right. Q. Was that rule observed in each case in the issue of your common stock? A. In nearly every case; when we came to in- vestigate some of the concerns we found that they had made no profit and were not entitled to common stock, and they were given no common stock, but simply given debenture stock for the tangible assets. Q. Whenever you found that no actual profit had been made did you in every case refuse to issue common stock? A. Most de- cidedly. Q. But did issue the full amount of the debenture stock cover- ing the appraised value of the properties of that non-productive concern? A. They were non-productive of profits; they certainly produced wall paper., Q. I mean that; you wish to be understood now on the record as having followed this plan or system without departure? A. Not entirely; in a few cases we issued no debenture stock, but paid cash for the assets, or part cash and part debenture stock; and possibly, in one case we placed an estimate on the value of the property acquired — - No. 40.] G83 Mr. Lexow (interrupting): And paid for it in cash? A. We might; partly in cash. Q. In how many cases did you make that distinction? A. I can recall only one case. Q. What case was that? A. M. H. Burg & Sons of Buffalo, N. T. Q. Where it was paid for in cash? A. Partly in cash, part in debenture and part in common stock. Q. Do you wish to be understood as stating that at the time of the issue of the capital stock, according to the figures as they ap- peared upon the books of the respective companies, they indicated an earning capacity in the form of actual net profit of the amount of stock that was issued for them or in purchase of their proper- ties? A. Positively; the results were ascertained by accounts; we didn't take anybody’s word for it; we made a thorough inves- tigation in each case. Q. Do you mean to say that the books of the respective con- cerns were examined and their actual net profits determined and the stock issued in compliance with the plan or system referred to by you in each case except the one that you have referred to? A. Yes, sir. Q. Have you a system of factors’ agreement? A. We have no agreement known as factors’ agreements. Q. Have you any agreement under which those who purchase your goods sell them to the public? A. Yes; we have a few. Q. A few? A. Yes. Q. Don’t you operate under a system of agreements which are signed by those who handle your goods? A. Only with parties buying above a certain amount of goods. Q. What does that amount to? A. About $10,000 a year. Q. Is there any fixed rate established which will entitle the seller to the agreement mentioned? A. No, sir; there are certain sections of the country where it is to our interest to distribute our goods through parties of this kind and save ourselves the ex- pense of sending salesmen through those sections; and in consid- eration of that we give those parties a discount. GS4 [Senate, Q. That doesn’t answer my question. (Question repeated). Q. Do you mean a rebate? A. No, sir; it is an absolute dis- count from the face of the bill. Q. Have you a copy of that agreement with you? A. No, sir; I have not. Q. Will you be able to furnish this committee with a copy of such an agreement? A. Yes, sir. Q. Are the agreements uniform in character? A. Yes; uni- form in character. Q. And operate through what sections of the country? A. Well, I don’t know that I can give the particular sections of the country, except that I presume most of them are in the west. Q. Don’t you know, Mr. Burn? A. I cannot recall them all. Q. Were all these properties that were taken into this com- bination active working properties at the time of their acquisi- tion? A. Yes, sir. Q. Are all of them actively engaged in properties to-day? A. No, sir; the smaller ones have been consolidated with large fac- tories to avoid an excessive expense for management. Q. How many then going concerns or subsequently acquired concerns in operation at the time of their acquisition have been discontinued or stopped by the National Wall Paper Company? A. About ten. Q. Forming what proportion of the whole? A. In percentage of output, perhaps 15 per cent. Q. Fifteen per cent, of the whole? A. Yes, sir. Q. When were these concerns closed? A. We consolidated four of them immediately upon our incorporation and the others later on. Q. When you speak of consolidation, what do you mean? A. I mean transfer of the machinery to> our other factories. Q. Did that consolidation increase, limit, or restrict the pro- duction of the goods theretofore manufactured in the respect- ive concerns? A. It had no effect whatever upon the result, ex- No. 40.] 685 cept to reduce the cost of management; it had no effect upon the output. Q. Do you mean to say that immediately after the organiza- tion of the National Wall Paper Company the aggregate optput of your concern equalled the aggregate output of the independent concerns before consolidation? A. The output was increased. Q. Have you the figures? A. I can give you the figures; I can- not give you the data from which they were made up. Q. You have the figures? A. They are embodied in an affida- vit before me. Q. What is that book that you have there? A. That is some evidence in one of the suits that was brought to maintain the legality of our agreements. Q. Of what agreements? A. Of our agreements with the vendor. Q. Of the respective properties? A. Of the respective bills of sale, you might say. Q. Were those properties undertaken under bills of sale exe- cuted by the owners of the independent firms or companies? A. Y T es, sir. Q. What are the figures that you have there? A. Well, we es- timated that the independent concerns had made about 10,000,- 000 rolls from 1891 to 1892, and our books indicated that we had made from 125,000,000 to 130,000,000 the first year of our incor- poration. Q. And now? A. We have been suffering at the present time from the depressed condition of business, but I assume that we shall probably make very close to the amount this year that the companies made prior to their incorporation by the National Wall Paper Company. Q. Have you any figures showing the output of the consoli- dated concerns during the year 1896? A. Yes; we made consid- erably in excess of 100,000,000 rolls. Q. Have you the actual figures. A. No, sir; my impression Is that there was about 120,000,000. 686 [Senate, j • Q. Have you any statement that will show those figures. A. I have none. Q. Can you have one prepared within a reasonable period of time? A. Yes, sir. Q. How long will it take? A. Twenty-four hours. Q. Where is your general office located. A. No. 416 Broome street. Q. In the original bills of sale was there a stipulation by the seller to the effect that he should not engage in the same busi- ness in competition with you after the sale? A. Yes, sir. Q. Have you a form of the bill of sale there? A. I think it is embodied in this document. Q. Can you turn to it? A. Yes, sir. (Mr. Lexow examines document.) The stenographer will mark it Exhibit 6, page 40. Q. Would you mind our putting this in evidence? A. No, sir. Q. Was that form of bill of sale executed by each one of the competing concerns consolidated under one management? A. Yes, sir. Q. In the stoppage of the various concerns that were consoli- dated into others did you discharge labor? A. Not to any ex- tent. Q. To what extent? A. Very trilling extent; I can best illus- trate that point by stating that we have found it difficult to get sufficient competent labor to supply our wants. Q. Without reference to what is called particularly skilled la- bor, didn’t you, in many of those various consolidations, dis- charge unskilled labor? A. Very little; very little, indeed. Q. To what extent? A. Oh, I don’t suppose 20 men were thrown out of employment. Q. Have you within 20 men employed to-day of the number that were employed by those independent concerns prior to the con- solidation? A. I think we have more. Q. Do you mean that the business has increased? A. Yes, sir; consolidation brought about an increase in the factories that we continued to operate; they were increased in their output by the No. 40.] G87 placing of machinery in them that had been in use in connection with the factories that were closed. Q. The output of 125,000,000 required more labor, do you mean, than 100,000,000? A. Yes, sir. Q. What was the effect upon the price of the product? A. The first step we took in regard to the prices was to reduce them 10 per cent., with the expectation that we might make good that re- duction by increased product. Q. What is the effect upon the prices to-day? A. Do you mean in the way of lowering or raising the prices? Q. How do the prices that you charge for your goods compare with the prices charged by the independent factories previously existing? A. I should judge from 20 to 25 per cent, lower. Q. Is there any lessening in the^amount or value of raw ma- terial? A. Slight. Q. To what extent? A. Oh, I cannot remember exactly; per- haps 10 per cent; that is not in all material; a number of ma- terials have advanced in price and are higher to-day than they were at the time the company w r as formed. Q. Any reduction in the rate of wages? A. No, sir; instead of that the same wages and more continuous employment. Q. Are you certain about that? A. I know it. Q. Have you any statistics going to show the amount of wages paid as compared with the wages paid by the independent con- cerns? A. I have to say this in regard to that; before the incor- poration of this company we operated our factories about six or seven months in the year; that under agreement with the labor unions we are now giving those men employment for eleven months and paying them full rates. Q. Determined by a scale fixed by the labor union? A. Yes, sir. Q. In every case? A. Yes, sir. Q. Both as to skilled and unskilled labor? A. There is no union of unskilled labor. Q. That refers then only to skilled labor? A. Which com- prises the greater number of our employees. 688 [Senate, Q. What proportion of your employees is represented by skilled labor? A. Outside of boys and girls, I should say 75 per cent. Q. What proportion of boys and girls? A. I really couldn’t say, because more of that class of help is employed in some fac- tories than in others. Q. What, in your judgment, would be the average? A. I don’t think that I could answer that satisfactorily. Q. How many men have you altogether in the employ of the National Wall Paper Company? A. That I couldn’t tell you with- out making a calculation. Q. Can’t you make it now? A. I should estimate, roughly, about 5,000. Q. Scattered throughout the United States and Canada? A. Scattered throughout the United States. Q. How many in the State of New York? A. Well, about half of that number. Q. About 2,500 in the State of New York? A. Yes, sir. Q. Do you operate in the State of New York under a system of agreements with the sellers of your product? A. In perhaps one or two cases we do. Q. What cases are those? A. They are jobbers located at dif- ferent points in the State. Q. Jobbers? A. Yes, sir. Q. Have they an association? A. No, sir. Q. The jobbers in your particular trade? A. The jobbers of our competitors have an association, but we have not. Q. There is one operating against you, you claim, in this State? A. Yes, sir; there are two organizations operating against us. Q. Under agreements? A. I presume so; one of them is in- corporated and the other is not. Q. What is the name of the incorporated one? A. I couldn’t tell you the name just now. Q. Are the argreements that you have, the system established by you, similar to that, which operates against you? A. I don’t know just the methods that our contemporaries use; I don’t know that they have a system; I only know that the wall paper jobbers No. 40.] 689 so-called, have an organization of some kind; I presume they are associated for mutual benefit. Q. You claim that you are not a trust? A. No, sir. Q. The agreement that you have with the sellers of your pro- duct does restrict them to the sale of your product? A. Yes, sir. Q. In terms? A. In terms, yes; practically act as our agents. Q. Under what is known as factors’ agreements? A. Well, I don’t know that I quite understand what that is. Q. Do you send your goods to them on consignment? A. No, sir. Q. They are absolute purchasers? A. Yes, sir. Q. And pay you for your product absolutely? A. Absolutely. Q. With an underlying agreement restricting them to the sale of your product? A. Yes, sir. Mr. Lexow: We will have to discontinue your testimony until we can get a copy of that agreement, Mr. Burn. Will you have one here by 10 o’clock to-morrow morning? Mr. Burns: Yes, sir. Mr. Lexow: We stand adjourned until 10 o’clock to-morrow morning. There is no necessity for the service of a subpoena. Mr. Burns: No, sir; I will bring it. TENTH PUBLIC HEARING, MORNING SESSION, FRIDAY, FEBRUARY 19, 1897. Henry Burn, recalled. Examined by Mr. Lexow: Q. Have you brought with you the statistics inquired of? A. Well, I was requested to bring with me a copy of the agreement we made with jobbers. 1 Q. Have you that with you, that is your so-called factors’ agreement? A. Well, I don’t regard it as a factor agreement, simply an agreement to handle the goods of the company at a certain discount based on a certain volume of business. 44 090 [Senate, Q. I read clause 3 of your agreement: “The purchaser ex- pressly guarantees and agrees that between September 1, 1S96, and June 30, 1897,” — blank for he, or she, or they — “ will not purchase or acquire any wall paper or hangings, the product of any person or corporation other than the company;” has that been a part of your agreements ever since the organization of the National Wall Paper Company? A. No, sir; it is a form we have used during the past two years only, and that is the only contract that we ever issued. Q. That you ever issued? A. Yes. Q. Did you two years ago have any other contract excepting the one which I now hold? A. No contract; no, sir. Q. Any other plan or system of transaction? A. Yes, sir; we had, we issued an option, the first three years of our company’s formation, entitling the dealer who purchased all of his goods from the company, all of his requirements for the year; we issued an option to the trade, and to those who availed themselves of it, we gave a rebate at the end of the season, varying from the first year of 10 per cent, to the last two years of 20 per cent. Q. Is that system still in operation? A. No, sir. Q. That system was superceded by this? A. That system was — yes, sir. Q. About how long ago? A. Since July 1, 1895. Q. What caused a change in your plan or system of opera- tions? A. The rebate system was not entirely satisfactory to all of our customers; we desired to meet their views, and abolished it. Q. You did not abolish it, did you, until after you had driven a large proportion of the jobbers of the country out of the busi- ness? A. We never drove a single jobber out of business. Q. Isn’t it true that as the result of the plan or system that your company developed two years ago more than sixty of the largest jobbers in the country were compelled to close? A. It is absolutely untrue. Q. Do you know of any cases where they were constrained to stop? A. I know of no cases where they were constrained to go out of business. No. 40.] 691 Bv Mr. Mazet: Q. Do you know any cases where they did go out of business? A. There was a few cases where men went out of business volun- tarily; some cases due to old age and in other cases owing to bad judgment. By Mr. Lexow : Q. Did in the other cases the bad judgment consist in the fact that you put up an establishment next to the jobber and under- sold him until you had forced him out of the business? A. No, sir. Q. Did that not occur at all? A. No, sir. Q. Jnno individual case? A. No, sir. Q. Positive about that, Mr. Burn? A. Yes, sir. Q. You were president of the company at the time? A. Yes, sir. Q. Isn’t it true that the change in system that was introduced two years ago was due to the fact that you had secured control of the trade, and that the rebate system was no longer necessary in order to give you that market which you required? A. No, sir. Q. Did you give jobbers, then, any option of doing business, or option either to sell out to you or go out of business? A. No, sir; we never intimated any such thing. Q. In no case? A. In no single case. Q. Do you know Mr. Smith? A. I do; very well. Q. Enos B. Smith? A. Yes, sir. Q. Did you give him the option either to sell to you or to go out of business? A. No, sir; on the contrary, Mr. Smith requested our company to purchase his business, which we very reluctantly did; I will tell you the transaction, Mr. Chairman, if you like. Q. Did you make it impossible for Mr. Smith to compete? A. No, sir. Q. Did you withdraw your deliveries to him because of his pur- chasing or dealing in the goods of competing concerns? A. We have never withheld any goods from Mr. Smith; he could have had all the goods he wanted at any time. 692 [Senate, Q. Is that your side of the transaction, then, Mr. Burns? A. Why, in the — at the end of our first years’ business we did away with all special discounts to jobbers; or in other words, we gave the entire trade the benefit of the discounts that we had been al- lowing the jobbers alone; the discount that Mr. Smith could have obtained the second year was identical with the discount that he had obtained the previous year; but the same discounts we also gave to the general trade. Q. What was the reason, Mr. Burns; explain the reason why you changed the system? A. Well, we did it to win public favor. Q. Wasn’t it because you found the jobbers dealing in and dis- posing of the product of competing concerns? A. No, sir; be- cause under their agreements with us they could not do so. Q. But did you find that they did do so? A. No, sir. Q. And that they had carried on a struggle against you all through the United States? A. No, sir; I never heard of any such th : ng. Q. Do you absolutely deny that; is that a fact? A. I have no knowledge of any such condition of affairs. Q. Did you not have a struggle with the jobbers of the country? A. When?/ Q. Two years ago. A. Struggle? Q. Yes? A. Not that I am aware of. Q. They giving the goods of competitors a market through their establishments? A. Well, if they were all killed off I don’t see how they could give a market to the goods of our competi- tors. Q. Didn’t you then proceed to try and kill them off? A. No, sir. Q. Wasn’t that the reason of your changing the system? A. On the contrary, we tried to secure their business. Q. Are you certain with reference to the figures that you gave yesterday as to the amount of wages paid and the number of men employed? A. Yes, sir. Q. Before proceeding with that line of inquiry — When you state that you gave the trade the same discount that you gave the No. 40.] 693 jobber, didn’t that — isn’t that synonymous with destroying the jobbers? A. No, sir. Q. How can the jobber live if you give the general trade the same discount that you give the jobbers? A. The jobber isn’t compelled to sell at the company’s road prices; he has the advan- tage of locality and the trade tributary to the city in which he resides; he has a better opportunity of obtaining that than the manufacturer. Q. This form of agreement (showing paper) that you have pro- duced here this morning, is that the general form in use through- out the United States? A. Yes, sir. (Question repeated). Q. Now, haven’t you a detailed statement of the amount of labor employed and the wages paid? A. No, sir; it would take at least two weeks to prepare, Mr. Chairman. Q. How was it that you could swear on the stand yesterday that there was the same amount of labor employed, and that as good wages as before the consolidation — A. Well, I know that every one of the factories is fully manned; I know that we have an agreement with the labor unions whereby those people are employed eleven months of the year. Q. Do you mean that that is the general system? A. That is the system prevailing in every one of our factories. Q. Without any exception? A. Without any exception. Q. Have you the wage list from the factory of the Badge Wall Paper Company at Kaukauna, Wisconsin? A. That is one of the factories that is closed. Q. No wages paid there? A. No, sir; no wages paid there. Q. How many men were employed there? A. I can't remember exactly, but it was a very small plant. Q. Approximately? A. Probably not over twenty. Q. Skilled or unskilled? A. Some skilled and some unskilled. Q. Are your figures based upon any wages paid in the facto- ries of the Bartholomew Company? A. No, sir; that factory is one of those I reported yesterday as being closed; consolidated with some other factories. 694 [Senate, Q. How many men were employed there? A. Possibly fifty. Q. Are you simply guessing, or do you know? A. I am judg- ing by the size of the plant and probable number of men that would be maintained. Q. The number of machines that must be at work? A. Yes, sir. Q. Are your figures based upon any wages paid in the concern of Leisler, Middleton & Hughes — I think? A. No, sir; that was also consolidated, and most of the labor of the consolidated con- cerns was absorbed by the other factories. Q. How many men were employed there? A. Possibly forty. Q. You judge that from the number of machines in operation? A. Yes, sir. Q. Were your figures based upon the wages paid in J. J. Lind- say Company? A. Well, I should say that as far as that factory was concerned, we transferred to it the business of another branch whose factory was destroyed by fire. Q. Which branch was that? A. That was the Nevius & Havi- land branch. Q. Nevius & Haviland? A. Yes, sir. Q. Also a New York city concern? A. They were of New York city, yes, sir. Q. The last three that I have mentioned were all New York city concerns, all that were closed, were they not? A. The Kau- kauna was not a New York concern. Q. I say the three, and that was the fourth? A. Bartholo- mew, Leisler, Middleton & Hughes — Q. And J. J. Lindsay? A. That was located in Brooklyn. Q. Is it located there now? A. Yes, sir. Q. In operation now? A. Yes, sir. Q. Under that name? A. Under the name of the Nevius & Haviland branch. Q. Where was the Nevius & Haviland branch? A. They were formerly at the corner of Forty-second street and Tenth avenue — the premises were destroyed by fire. Q. In New York city? A. Yes. No. 40.] 095 •WertZ, Q. They were not, that branch was not continued, was it, ex- cept as it was transferred and took the place of the J. J. Lind- say Company? A. Well, the entire establishment of the Nevius & Haviland branch was transferred to the J. J. Lindsay branch, and the help from the Lindsay branch was absorbed by our Phil- adelphia factories. Q. Philadelphia? A. Yes, sir. Q. Then the J. J. Lindsay branch that absorbed all of the Ne- vius & Haviland branch, did not represent more than either one of those two branches in the way of labor? A. Not in this State. Q. So you closed up a New York factory and compelled the workmen to go to Philadelphia? A. No; we didn’t compel them; they had the option of working in some of our factories here; they preferred to follow Mr. Lindsay, who became manager of one of the Philadelphia factories. Q. It was a matter of preference, you say, with them? A. En- tirely. Q. Are you now stating what you know to be a fact? A. An absolute fact. Q. Are your figures based up — oh, before I get to that: What Philadelphia branch did you reorganize in the manner indicated? A. Well, we didn't reorganize any branch there; simply consti- tuted Mr. Lindsay as manager and consolidated his branch with one of the factories there. Q. Which one? A. I should say that we not only made Mr. Lindsay manager of the branches there, but his son also, and be- tween the two factories the help was transferred to those fac- tories. Q. Did you have but two factories in Philadelphia? A. No, sir; we have four. Q. Now, you wish to be understood that this help that was dis- charged in the city of New York was spread over two factories in the city of Philadelphia; is that so? A. No, sir; I say with ref- erence to the employees of the J. J. Lindsay Company branch that they were mostly absorbed by these two Philadelphia fac- tories. 09(5 [Senate, Q. Now, we have got “mostly” not “wholly”; to what extent were they absorbed? A. Well, all their skilled labor was trans- ferred, as near as I can remember. Q. Are you guessing now, Mr. Burn? A. No, sir; there is no guessing about any of my answers, Mr. Chairman. Q. You say as near as you can remember? A. Yes, sir. Q. What do you remember about it? A. I remember that the manager coming to me and suggesting that he be allowed to transfer some of the men with him to the Philadelphia factory; naturally he choose the best men; there were one or two other factories competing for the same men, but in view of Mr. Lind- say’s former connection with them we gave him the preference. Q. To what extent did you add to the number of men employed in Philadelphia? A. I could not say; simply making up the complements required to run the factories. Q. So the Philadelphia concerns did not have the necessary number of men to run their factories? A. Not in every case; ex- perienced men — Q. You mean you weeded out men that you thought less ex- perienced, and sent your experienced men from the city of New York to take their places; is that so? A. I mean to say that men resigned from our factories and discharged themselves, seeking employment where perhaps they could get better wages, better opportunities as they thought, and we replaced them with these men; we can’t keep our men in bondage working there forever. Q. What do you mean by keeping your men “in bondage and working forever”? Do you consider that constant employment is the kind of bondage that workmen don’t like to have? A. I mean to say that a man wants — that as labor is constituted in these days he doesn’t remain continuously in one place of employment. Q. Isn't it because of the system introduced whereby consolida- tions are built from time to time to close up factories in various dis- tricts? A. Well, I have no knowledge regarding the operations of other lines of business aside from my own, and it is not true in respect to that. Q. Does your estimate of wage rate proceed upon the basis of No. 40.] 697 the wages paid in the Manhattan Wall Paper Company? A. No, sir. Q. Why not? A. Because that is one of the factories that was closed up, embraced in the number that I mentioned yesterday. Q. Or any figures from the Wilson & Fennemore Company? A. No, sir; it has no bearing on my figures. Q. Was that also a concern that was closed up as the result of the organization? A. That was one of the concerns we deemed it expedient to close up. Q. Did close up? A. And did close up; we have run it from time to time since. Q. You still own the property? A. We still own the plant; yes, sir. Q. What became of the men employed in that plant? A. They — most of them — were absorbed by other factories or found em- ployment. Q. By other factories of yours? A. Not necessarily, no sir. Q. They had to find other employment upon the closing of this particular plant? A. A few of them did; yes, sir. Q. Now many concerns competed against you at the time of the consolidation; I don't mean now, the time of the consolida- tion? A. The time of the consolidation? Q. How many did you leave as competitors in the field? A. About seven. Q. Against how many consolidated? A. I should have said — either; I think the factories consolidated amounted to 24 or 23, I am not sure. Q. Now, isn't it a fact that immediately after consolidation you closed up as many independent concerns as there were com- petitors in the field against you? A. No, sir. Q. You closed up eight concerns, didn’t you? A. We closed up four at that time. Q. When were the other four closed? A. At subsequent times; I can’t remember. Q. How long after? A. Oh, I think two years. Q. You mean within two years? A. I think at the end of 698 [Senate, the two years; at the end of the second year we closed up these others — not all of them even then, Mr. Chairman— some were not closed up until the third year. Q. What productive capacity did the eight concerns that were closed up by you represent? A. The eight — you speak of eight, now, Mr. Chairman? Q. Yes; four in the first year and four in the second two years? A. Well, we closed up six additional in the second two years, making ten in all; but they were combined. Q. Ten; what haven’t I mentioned in the names that I have given 3 r ou? A. Well, if you can call off those names again, I will supply the deficiency. Q. Baird Wall Paper Company? A. Yes, sir. Q. Bartholomew? A. Yes, sir. Q. Leisler, Middleton & Hughes? A. Yes, sir. Q. Lindsay? A. Yes. Q. Manhattan? A. Yes, sir. Q. Wilson, Fennemore & Company? A. Yes, sir. Q. Nevius & Haviland? A. Well, you want to add to that the A. Yerkes Manufacturing Company; and the Frankfort Wall Paper Mills; and the Boston Wall Paper Company; I would say that those were all small plants. Q. I will get at that in a moment; what was the productive capacity of all these ten concerns? A. About 15 per cent, of all our total output. Q. Fifteen per cent, of your total output? A. Yes, sir. Q. Or of the total output of the entire — A. Our total output. Q. Employing 15 per cent of the labor that was employed with the consolidated concerns? A. No, sir. Q. How much? A. Well I should judge not to exceed 10 per cent, for the reason that they made a cheaper line of goods which does not require as much help as the better class of goods. Q. Ten per cent of the labor would represent how many men? A. About 500 men— no, it would not represent that many — it would not represent more than 300 men. Q. All told? A. All told. No. 40.] 699 Q. Can you give us positive figures upon this question? A. Not w ithout considerable analysis. Q. Without what? A. A considerable analysis of our books. Q. Have you no figures showing the amount of the output of these closed concerns, and the amount of labor employed? A. We have never — we have not drawn up any memorandum show- ing the number. Q. Have you agreements with your employes; do you compel them in advance of employment to sign agreements according to which they bind themselves not to enter the employ of any com- petitive concern? A. No, sir; never heard of such a thing. Q. Is there nothing of that kind as a part of the system of your company or of any branch of it? A. I certainly have no knowl- edge of the fact, and I am inclined to think I ought to have if such a thing did prevail. Q. You say you have not reduced the price of labor; do you mean to make that statement on your positive knowledge? A. I will make that statement with a qualification; your question undoubtedly alludes to the charge made that we have reduced wages of block cutters; as a matter of fact we simply graded them. Q. A reduction by way of grading? A. No, sir; on the average they cost us just as much, but the good men were receiving less than some of the poorer men, and in order to adjust that all around we graded the men according to their abilities, paying the best men what was considered the highest wages. Q. And reducing the others instead of paying the uniform price? A. No, sir; we made the gradation like this; all men of a certain amount of ability we paid the highest wages to, and those who didn’t, come up — Q. What was the net result of the grading? A. The net result of the grading? Q. Yes? A. That so far as the company was concerned it prac- tically paid the same amount as it did before. Q. Practically? A. Yes, sir. 700 [Senate, Q. Did it absolutely? A. Did it absolutely? In my estimation it did absolutely. Q. Are you now stating a positive fact? A. I am stating now what my conviction is. Q. Can you not produce the figures for this? A. No, sir; I can- not. Q. Why not? A. I could not produce them to-day, Mr. Chair- man — 6 Q. I understand that; but you have got the statistics that will enable us to determine that question as a fact, have you not? A. Possibly, I may; I don’t know whether I could or not. Q. Did you reduce the wages of a man called Young, from $30 to $22? A. Mr. Young — • Q. Did you? A. I will have to state it my way, Mr. Chairman, in order to make it clear; the labor union brought that about. Q. Brought that about? A. Yes, sir; we were paying different wages to different men in his class, and the labor union insisted we should pay a uniform rate, and that brought about a reduction of Mr. Young’s pay. J Q. Do you mean to say that the labor union singled out Mr. Young and substantially constrained you to pay him $22 a week instead of $30? A. I say that the labor union — Q. Now, is that a fact? That is a fair question that you can answer? A. I didn’t single out Mr. Young; no, sir. Q. Then there were others? A. There were others. Q. How many? A. It brought up the wages of some and re- duced the wages of others. Q. The wages of how many were reduced? A. I can’t remem- ber — very few. Q. The wages of how many were increased? A. Well, I should say that as many were increased as were decreased. Q. And you say that this proceeded from the initiative of the labor union? A. From the demands of the labor union that we pay a certain rate of wages. Q. Coming to you in what way? A. In the way of committees. No. 40.] 701 Q. In writing or printed notice? A. No, sir; that has not been their method. Q. How did they officially notify you of this desire on their part? A. Well, they usually brought pressure to bear on the manager of the branch. Q. Does this apply to the State of New York as well as to the other States mentioned in which you had branches? A. Yes, sir. Q. Uniform throughout all your factories? A. Their union takes in the men connected with all of our factories. Q. Now, I would like to get the fact from you as far as you know it how you received official information of this desire on the part of the union? A. Well, I can’t remember the exact method by which they made them known to us; I simply state the fact. Q. Well, you must have received it in some official way; we want to get at the facts. A. Well, I presume I received it through the managers of the branches. Q. What branch manager received an official communication from the union to that effect? A. I could not tell you at this time. Q. What? A. I didn’t charge my mind with it. Q. Do you remember any manager of any branch that did? A. No, sir; I could not distinguish one manager from another as hav- ing made such suggestion. Q. Do you mean that they all did? A. I presume that those where the wages differed demand might be made upon us by the labor union, but where they w 7 ere all in accordance with the labor union I presume they did not. Q. Can you determine any one branch in which this situation existed? A. No, sir; I could not state. Q. Could not? A. No, sir; I would not presume to state — at this late date. By Mr. Warner: Q. Simply because you can’t state, isn’t it? A. I can’t state; my memory does not serve me well enough to remember every de- tail of a large business. 702 [Senate, By Mr. Lexow : Q. Have you in your establishment what is know as a commit- tee on economies? A. We have had in the past. Q. Was this reduction in wages made by order of the commit- tee on economies? A. Well, I would say I don’t remember; I have no recollection that that reduction was made by order of the committee on economies. Q. It seems, however, not to be entirely repugnant to the situ- ation in your mind? A. Well, I simply have no knowledge of the facts. Q. Well, don’t you remember anything about it? A. No, sir; I do not. Q. Were you a member of this committee on economy? A. I probably was, ex-officio. Q. Well, you must remember, then, whether the order for this reduction of wages came from that committee? A. If it came from that committee it was in view of the fact that this demand had been made upon us by the labor union. Q. Well, then, did it proceed from a committee which implies the introduction of economies in your establishment? A. It seems to me that was a very proper place for it to come from. Q. Then it was, was it, in the line of economy? A. (Con- tinuing) Enforced by the demands of the labor union. (Question repeated.) A. If it was in the line of economy it was also brought about by the demand of the labor union. Q. Do you wish to be understood to say that the labor union is very solicitous to have you economize in the price of labor? A. No; it stands to reason, Mr. Chairman, that if we are paying vary- ing rates of wages and the labor union makes a demand upon us, and wishes us to observe a certain rate of wages that we will give all of the men belonging to that union that rate of wages. Q. The committee on economics have had charge, dil it not, of the introduction of economies for the purposes of making a dividend? A. The committee on economies was appointed to do away with wasteful expenditures. No. 40.] 703 Q. For the purpose of being able to make a proper and suita- ble return to the stockholders of the company? A. In the in- terest of the stockholders and creditors of the company; if it didn’t, it couldn’t pay its debts. Q. Now, please tell me why this committee on economies should order a reduction of the wages of workmen unless for the purposes mentioned in your last answer? A. I don’t think — (Question repeated). A. I don’t think I quite understand your present question, Mr. Chairman. Q. Why was the committee on economies specially chosen to make this reduction unless it was for the purpose of introducing economies? A. Economies, as understood by that committee, were to do away with wasteful expenditures. Q. And you considered that the payment of $30 to a man whose services you could secure for $22 was a wasteful expenditure? A. No, sir; that doesn't follow; I do not see that that has any bearing on the case. Q. Why did this particular department of yours, the com- mittee on economies, make this cut in wages? A. It made no cut in wages, Mr. Chairman. Q. It reduced the wages of Mr. Young and a lot of other fel- lows, didn't it? A. It made a more uniform rate of wages than had theretofore prevailed. By Mr. Warner: Q. Why don’t you answer the question of the chairman? A. I will try to answer. (Question repeated). A. I could not answer that in the affirmative, because I have no knowledge that it did. By Mr. Lexow: Q. Why, you have testified that it did already? A. I have testified that it reduced a few and increased a few; the entire number will probably not exceed ten, up and down. 704 [Senate, Q. That were reduced? A. That were reduced; res, sir. Q. And how many increased? A. Probably the same num- ber. Q. Now, are you swearing to this? A. I am swearing to the best of my knowledge and belief. Q. Wasn’t there a general reduction all along the line made by order of the committee on economies in the fall of 1S94, and have the reduced wages then ordered by the committee on econ- omies, have they not been maintained until this time? A. When you speak of a general reduction — Q. Now, you will please answer that question; it is an intelli- gent question, susceptible of an intelligent answer. (Question repeated.) A. There was no general reduction of wages or compensa- tion. Q. Do you swear there was not. A. I do; there was no gen- eral reduction of wages or compensation. Q. Do you mean that there was something which was intended to equalize, by putting some men’s salaries up and other men’s salaries down? A. In the course of business — Q. Now, please answer that question. A. Well, in the course of business you have to advance certain men’s compensation from time to time, as their services become more valuable to you. Q. Now, I am not asking for a general system; I am asking as to what you did? A. Well, I presume that those who were enti- tled to advance in compensation outside of the labor unions were increased. Q. You presume that those who were outside of the labor unions were increased? A. W T here they deserved it, yes, sir. Q. And those that were inside the labor unions were reduced? A. No, sir; I have not stated that at all. Q. Well, what do you mean? A. I have stated that we don’t regulate the wages of the members of the union; we have abso- lutely acceded to every demand made by them. Q. I am asking now about the action of your committee on No. 40.] 705 economies: Did your committee on economies, in September or October, 1S94, bring about or order a general reduction of wages in your various establishments; and I ask you to give me a cate- gorical answer to that question? A. No — when you say a “gen- eral reduction” I say “No!” there may have been individual re- ductions and there may have been individual advances. Q. Did your committee on economies introduce economies in the way of a reduction in wages in September, 1894? A. I think I have tried to reply to that as intelligently as I can, Mr. Chair- man. Q. Then you can’t give any answer — A. The committee on economies was appointed not to cut down wages; it was to bring about improved conditions of manufacture; introduce methods, good methods that prevailed at some factories and that had not been introduced into others; in the course of that they brought about economies; there was no general reduction of wages. Q. But there was a sort of equalization, the final result of which was that on the question of labor the committee on econo- mies reported progress? A. As far as labor was concerned there was positively no reduction made. Q. What has become — A. In other words, we paid union rates of wages. Q. What has become of the salesmen, bookkeepers and other clerks connected with the various competing establishments em- ployed prior to the consolidation; were they all retained? A. Most of them. Q. How many were discharged? A. I could not state exactly, Mr. Chairman. Q. You can’t state? A. No, sir. Q. Were half of all that number employed in the independent establishments kept after consolidation? A. Well, I consider there were a great many more than half, a great many more. Q. Have you had half as many bookkeepers, clerks, and sales- men as the various independent concerns had before consolida- tion? A. We have a great deal more, Mr. Chairman. Q. Can you furnish the figures? A. No, sir; I cannot. 45 706 [Senate, Q. Why not? A. — but every branch that exists to-day em- ploys just as many as it did at the time the corporation was formed. Q. I am restricting the inquiry now to clerks, bookkeepers and salesmen? A. I am — I will — as far as salesmen are concerned we probably employ fully 25 per cent, more; as far as bookkeep- ers are concerned we employ probably more; in addition to the men that are employed in our various branches we have a large head office with a staff of nearly one hundred employes. Q. Here in the city? A. Yes, sir. Q. You can furnish reliable statistics on those subjects, can you not, Mr. Burn? A. I would certainly endeavor to do so, Mr. Chairman. Q. You have stated that the price of your product has de- creased to' the consumer; do you state that as a fact within your knowledge? A. As an absolute fact. Q. Has the price of the material diminished in grade or qual- ity? A. The price — Q. The value of the material used diminished in quality? A. In some cases it has slightly diminished; in other cases it has advanced. Q. Have you tables showing the prices obtained prior to the or- ganization of this consolidation and now r — do you keep statistical records in your company? A. No, sir; not in the sense that you ask the question; w ? e all know the prices of certain grades of goods prior to the formation of the company and w r e know their present price. Q. And the expense of their production; have you that? A. We have not the details of the cost of production prior to the formation of the company; no, sir. Q. You have now? A. We have some details as to our own — Q. I understood you to say that in the issue of stock you had issued it for earning capacity, in the proportion of 16; was that true? A. Yes, sir; in other words, we capitalized our profits on the basis of 6 per cent. Q. Now, in order to arrive at that result you must have made No. 40.] 707 a careful investigation into the price that the material cost in the various establishments? A. No, sir; made no investigation of that kind, at all ; that had no bearing on the case. Q. How could you show earning capacity without showing the cost of the material ? A. Well, the net profits of the concern can be ascertained without going into all that detail. Q. You didn't go into that detail? A. No, sir. Q. You said, did you not, that you bought out Mr. Smith’s establishment? A. Yes, sir; I was about to give you the history of the case when you interrupted me. Q. Have you kept it open? A. We didn’t buy it for any such purpose. Q. I am not asking the purpose; have you kept it open? A. I think you had better let me give the history of that transac- tion. Q. No, no — Q. (Interrupting) Have you kept it open — A. (Continuing) I think that will give the public the information you are after. Q. Have you kept it open? A. No, sir. Q. How many transactions similar to that of Mr. Smith’s did you make? A. I have no recollection of — perhaps one other. Q. Are you prepared to swear that there was only one other establishment like Mr. Smith’s bought and closed up by you? A. That is the only other one that I can remember. Q. In the city of New York? A. There was no other in the city of New York. Q. Where was the other? A. In St. Louis. Q. Where you did not buy out concerns, did you establish com- peting concerns next door? A. No, sir. Q. And drive them out? A. No, sir. Q. In no cases? A. No, sir; I should like — Q. In no cases? A. I should like to make a statement in regard to this Smith transaction — Q. In no cases? A. In no cases; we drove nobody out of busi- ness. Q. About the time that Mr. Smith sold, or was constrained to 708 [Senate,, sell his property to you, were there 75 per cent, of similar busi- nesses destroyed throughout the United States? A. I have no knowledge of such a state of facts. Q. Will you swear that such a state of facts did not exist? A. 1 have no knowledge of same. Q. Will you swear it didn’t exist, Mr. Burn? A. I can only swear to my knowledge of things. Q. You keep track of that department of the business, don’t you? A. Yes, sir. Q. Now will you swear from your knowledge of the wall paper business in the country that 75 per cent of merchants engaged in a similar business as Mr. Smith were not forced to the wall at about the time you acquired his business? A. I should — if any- body should make that statement as a statement; I should pro- nounce it absolutely false. Q. Well, what do you say under oath? A. I know of nobody who was forced out of business through the operation of this company. Q. Did they go out of business coincident with that time, ac- cidentally or on purpose? A. A few went out of business, as in the case of Mr. Smith, whose bad judgment caused him to leave the business; his large competitor in the city continued business on the same basis and is prosperous and flourishing to-day. Q. And do you mean to say that coincident with the exercise by Mr. Smith of such bad judgment, 75 per cent, of all the gentle- men engaged in similar business were accidentally compelled to give up business? A. I have already testified that I know of no such condition of affairs. Q. Will you swear that it did not occur? A. I have no such knowledge. Q. You know what did occur, do you not? A. I am not aware of everything that may have occurred. Q. You remember that there was a remarkable destruction of business similar to Mr. Smith’s at about the same time that you got Smith’s business? A. I remember nothing of the kind. Q. You stated you remembered a few — A. I don’t believe — No. 40.] 709 I should like to be furnished with the names of the concerns who claim to have been forced out of business; then I can make my answers specific; and I might add that Mr. Smith has stated he always felt sorry he went out of business at that time, that he was more scared than hurt. Mr. Lexow: That will do, Mr. Burn. We will now take up the rubber branch of the case where we left it off. The other witnesses in the matter of the Wall Paper Company may now leave, and attend again at 2 o'clock this afternoon. Charles K. Flint, recalled. Examined by Mr. Lexow: Q. Mr. Flint — A. Mr. Chairman, I would like to make a statement; it has occurred to me that there may have been some misunderstanding in regard to my testimony. Q. Yes? A. Although I have not had the opportunity of read- ing it — but I want to state that the United States Rubber Com- pany as a corporation had no knowledge as to the distribution of the stock by the bankers. On the other hand I want to state that personally I had — I knew that the stock was distributed by the bankers on the basis of preferred stock for tangible assets and common stock for trade marks, patents, organization busi- ness, franchises, etc., in my testimony it has occurred to me that there may have been some confusion as to the matter and I wanted to make that clear; after making that statement I will present the original Simmons report; I would like to have it back, if you can get it. in reasonable time. By Mr. Mazet Q. That is the one of which you gave us a copy yesterday? A. That is the one of which I gave the copy; I personally didn’t have an opportunity of making any comparison, but I now prefer that a comparison should be made with the original. 710 [Senate, Chairman Lexow: The Simmons report. Will the stenom’a- pher make a comparison between the copy which was presented yesterday and this original, and after such a comparison, return the original to the witness? Stenographer: Yes, sir. By Mr. Bedell: Q. You wish it mailed, do you? A. No, I prefer to have it delivered personally; it is a very valuable document. I will arrange to have a representative; I will have a represen- tative go with the stenographer for the purpose of comparison, and in order to receive the original paper. By Mr. Lexow: Q. Where was this kept, Mr. Flint? A. I don’t know; it was handed to me by the counsel of the company this morning; I don’t know where he obtained it, but I infer it was in the archives of the company. Q. You were requested yesterday by subpoena to produce the schedules that 1 were attached to this report, indicating the sub- division of values — I am referring to the respective properties acquired; have you those schedules? A. There were no sched- ules attached. Q. You have referred upon your examination to schedules, in- cluding about 3,000 pages, that formed part of the appraisement of the appraisal committee headed by Mr. Simmons? A. I have testified, Mr. Chairman, that those papers were never in the pos- session of the United States Rubber Company; they never have been in my possession ; that data was used by the Simmons Com- mittee as a basis for their recommendation I infer, but the United States Rubber Company have never had possession of it. Q. You have never seen it? A. I have never seen it; I have seen parts of it, but — * Q. We understood you to say the other day on your examina- tion that that was kept in the safe deposit vault of the company No. 40.] 711 in New Jersey? A. That is not the fact; that data, that detailed information has never been in the possession of the United States Rubber Company. Q. Do you know in whose possession it was? A. I know it was in the possession of the committee and the experts. Q. The Simmons Committee? A. The Simmons Committee and the experts referred to in the Simmons report. By Mr. Warner: Q. How much did the committee receive for their services in making this appraisement? A. I don't remember. Q. You testified the other day that they acted for the United States Rubber Company in making that appraisement? A. The Simmons Committee were appointed by the directors of the United States Rubber Committee. Q. Yes? A. And were requested to report to the United States Rubber Company on the value of these properties. Q. They were employed by the directors of the company that was subsequently formed? A. They w r ere employed by the direc- tors of the United States Rubber Company; the United States Rubber Company had already been incorporated and the directors appointed, and a special committee to examine and report on the offer of the bankers. Q. Do you know how much they were paid for their services? A. I don’t remember. Q. They were simply the employes of those directors? A. Well, the — Mr. Simmons — 1 Q. Is that the fact? A. They were a committee appointed by the United States Rubber Company; they represented the United States Rubber Company, and they were entirely in the service of the United States Rubber Company, but I could hardly call them employes. Q. Now, you mean to say that their report and all this data is now in the hands of the employes of this company? A. No; the report was — of the Simmons Committee is in the archives of the — or has been — of the United States Rubber Company, and I have 712 [Senate, now produced the original report; the data, the detailed informa- tion of all these experts, to which I have referred, that has never been in the possession of the United States Rubber Company. Q. Well, what else was there beside this report that was turned over to the company, which consisted of two or three thousand pages of matter? A. That was not turned over to the company; that data remained in the possession of the experts referred to in the Simmons report. Q. You testified the other day that the company had two or three thousand pages of matter made up by this appraisal com- mittee? A. I didn’t so testify; the fact is that the United States Rubber Company have never had that data; it has never been in their archives ; they never have had possession of it. Q. Do you mean to say that the United States Rubber Com- pany does not possess to-day data showing the amounts paid by the bankers, if you please, for those respective plants and prop- erties? A. I do; I mean to say that the company acted upon the Simmons report, issuing their stock in accordance with their rec- ommendation ; the members of that committee had access to all data. By Mr. Lexow: Q. Were you a member of the board at the time of the acquisi- tion of this property, that is to say, the turning over of this capi- tal stock? A. I was not. Q. How do you know that the United States Rubber Company did not have in its possession the inventory or schedule upon which this report is based? A. I don’t know it positively; I stated it on knowledge and belief; general knowledge and belief. Q. You mean to say simply that you haven’t got it — is that it? A. No; well, I am — I am satisfied, or I don’t believe that the United States Rubber Company has it. Q. Have you searched for it? A. No— I don’t know where to — I know it is not — I am satisfied it is not in the archives of the United States Rubber Company, that no one connected with the No. 40.] 713 United States Rubber Company has it, and there would be no way in which I could search for it. Q. Have you inquired among those who are custodians of the company’s property? A. I am — I am satisfied that they haven’t possession of it. Q. We don’t wish, Mr. Flint, to intrude improperly into the private concerns of your corporation, or any other, but we want to know for the purpose of this legislative investigation what water, if any, was injected into this stock, what the value was of the respective properties secured and the proportion of stock is- sued; now, why is it the policy of the United States Rubber Com- pany to withhold from us that very natural and important ques- tion? A. There was no water introduced in the stock. Q. That is what we want to determine? A. The stock was all issued for value; I produced the original of a report, signed by men of well known conservatism and ability, in which they recom- mend to directors of equally high standing the purchase of cer- tain property at certain prices, and that is — that seems to — that is evidence of the value, that the stock was issued for full value, and that there was no water, and I know that there was no water introduced into this capitalization. Q. How could you know that? A. From my general knowl- edge of the business; I know that the value of trade marks, pat- ents, good will, business organization, is equally valuable in fact as bricks and mortar; it is absolutely necessary to have the — Q. How did the United States Rubber Company know what it was acquiring if it didn’t have the inventory and the schedules of the properties that were turned over in exchange for its capital stock? A. Well, they had the — there was a special committee appointed, as I have before stated, consisting of directors of the company, that went into the matter, fully and in detail, and then made a report covering all these points and covering the facts, and they acted on that report as I have before stated, accepting the recommendation, and making the issue in accordance there- with. 714 [Senate, Q. They didn’t make the issue — the directors of the United States Company made the issue, didn’t they? A. Oh, yes. Q. On the recommendation of this committee? A. That is cor- rect — I meant to state that when I used the word “ they ” I re- ferred to the directors. Q. Now, how does the United States Rubber Company know to-day what it has purchased in the absence of the inventory and schedules covering those three thousand pages that you have mentioned? A. They have possession of all the plants; they have possession, or had possession of all the quick assets. Q. How do they know that? A. That is shown, and 1 — by the inventories of the company. Q. Simply the capital stock purchased? A. No; the company has detailed inventories of all the assets; those inventories are in the possession of the United States Rubber Company. Q. Have you been able, since the last meeting, to ascertain whether or not, the statement made by me as to the increase in prices of rubber after the organization of your combination was justified? A. There was a substantially large increase owing to the bicycle demand; I haven’t the exact figures. Q. An increase in rubber boots owing to the bicycle demand; do you mean to be so understood? A. I understood that you re- ferred to the price of crude rubber. Q. No, no; I am referring to the price of your manufactured articles to the consumer? A. I have obtained no information on that point. Q. Do you deny the statement that you have made a uniform increase of from 20 to 44 per cent.? A. As I have — Q. (Interrupting) Now, Mr. Flint — A. Well, I have not the information on that point; in general I will state that there can’t be uniformity owing to the differences in styles and qualities, and it is impossible in any — to have uniformity where there is such a variety of product, under such varying conditions. Q. You have substantially refused to answer every question ■with regard to the business of the company, on the ground that you are not connected with that part of the company’s transac- ]p. 40.] 715 tons. What were your duties, Mr. Flint, in your capacity as leasurer and director of the company? A. I attended the di- i ctors’ meetings in the main, and in a general way attended to lancial matters, but there has always been an assistant treas- :’er looking after the details of the business and I have given lecial attention to crude rubber, the one branch of the business here I have had a long experience; but I am not a shoemaker — Q. (Interrupting) We have had all that before. Isn’t part of our business attending to the stock of the company? A. It Dines under — that comes under the treasurer’s department, but ie details of the business are attended to by the assistant treas- rer and employes of the company. Q. Isn’t it a fact that you were the chief promoter of the com- any? A. I wouldn’t like to claim that distinction; I don’t know ust what a “promoter” is. Q. Were you not the leading spirit in the organization of the ombination? A. I took an active part in bringing it about. Q. Did you take an active part in the acquisition by the lanlcing firm of the various stocks and properties that were put nto the combination? A. I assisted in that work. Q. Were you not the principal organizer of the work? A. I lould not claim that; it might be disputed. Q. Was the combination not made for the purpose of the dis- tribution of the resulting stock to the public? A. No; that may tiave been an incidental result. Q. Was not that the main purpose? A. No. Q. (Continuing) So far as you are concerned? A. No. Q. Was that purpose not equally as strong a one as any sup- posed economies derivable from the consolidation itself? A. No. Q. Was it not your main, underlying purpose? A. No. Q. Without reference to your own interests in any of the con- cerns that were consolidated, was it not your purpose to produce this consolidation for the purpose of distributing the stock to the public? A. No. Q. You claim that it was an incidental, but not the main pu pose? A. No. Q. What do you claim? A. I make no claim. Q. You had no purpose? A. No what? Q. (Continuing) In making this consolidation outside of th establishment of economies? A. I didn’t make the consolide tion. «[' - f;!i i lu Q. You were a factor in it? A. I took part ; assisted. Q. Was not the whole consolidation, Mr. Flint, a speculation A. Positively not. Q. Will you explain to this committee why it is that the owner ships in these industries so'-called are distributed to the publii so liberally after the stock of the concerns have been so largely Mi increased ? A. The reason of the distribution is owing to the fact that the public recognize the advantages in the way of economies resulting from consolidation; they also recognize the value — Q. (Interrupting) Before leaving that, Mr. Flint, do you believe that the public that I am speaking of now, the non-speculative public, believe that any advantage is to be derived from the break- ing dowrn of individual enterprise and the concentration of every- thing into one great, over-shadowing monopoly? A. There is— Q. (Continuing) Do you believe that the public recognize that as an advantage? A. Read the question (to stenographer). Q. Do you not believe, if you fail to answer that question, that it is against the public judgment and sentiment that you and your associates are operating when you destroy individuality in business and concentrate everything into the hands of a few men — will you answer that question, please? A. If you will read all the question. (Question read). A. Mr. Chairman, if you will permit me to answ T er the first question; the public also recognize the advantage of having in- vestments in ready realizable securities, securities which in case of sickness or death can be readily realized; they also recognize the advantage of having securities which are listed and which can be readily used on short notice at any financial institutions for 1). 40.] 717 ie purpose of obtaining money by loan, occupying the position of {reserve investment available at times for the raising of cash inds. (To stenographer. Now, repeat the question.) (Question re-read.) A. (Continuing) There are other advantages, Mr. Chairman, it I will not enumerate — By Mr. Lexo w : Q. Now, turn to the disadvantages; just answer the last ques- on, please. (The whole question re-read.) A. I think that in all human organizations that disadvantages lay result dependent on management and administration, and or other reasons — as well as advantages; but in the main I am atisfied that it is in the best interests of all concerned that the resent evolution which is going on in economic manufacturing — am satisfied that there is noi other way in which this country :an hold its position in the production of goods at low prices, and hat there is no other way in which we can permanently sustain he present high wages of American workmen; otherwise I be- ieve that we would be ultimately forced to come down to the iasis of wages of the more densely populated countries. Q. Then you believe that in making these concentrations and changing industrial enterprises into speculative stock that you have the support of the public and are not running counter to public opinion in this country? A. I don’t believe that any gen- eral rule can be laid down as applying to all industries; I will speak for the United States Rubber Company; the parties origi- nally — the parties originally in interest, having large holdings, with one exception, still continue to be very large holders; I have stated that the men composing the executive committee — Q. (Interrupting) We have had all that; they hold f 10, 000,- 000 — A. (Continuing) And they hold $10,000,000, showing that they are in the business for legitimate development; now, Mr. Chairman, I can understand how these organizations can be mis- 718 [Senat used the same as abuses can occur under copartnerships, or undt smaller corporations; but if these concerns are managed on soun economic lines, I believe that they result to the best interests ( this country, and that, Mr. Chairman, if you will allow me t state, has been proved to be the experience abroad; during th past year the new capitalization, principally industrials, in Loi don, has amounted to $7S0,000,000. Q. In other words, the owners of the properties that have bee: stocked at $780,000,000 have successfully promoted their scheme upon the investing public to that extent— is that the effect of it A. I understand that the parties originally in interest in the mail continue in interest — Q. Do you think, Mr. Flint, from your knowledge of busines: situations that it is for the policy of the State, or the nation, t you state to the committee what proportion of the year labor is employed in the factories in New Brunswick? A. It de- pends entirely upon the demand for goods, which is fixed by the weather; our business is a business dependent largely upon the weather; w T e have had a great many open winters in the past eight or ten years; as I recollect it, the last good winter we had was in 1892; 1892-3; we had a good demand then for goods; and since then we have had many open winters; and our production has been lessened by the open winters. Q. Are the wages the same for the same class or kind of work in the different factories controlled by the United States Rubber Company? A. No; there is a difference; according to the lo- cality. Q. How is that; wages is different, according to locality? A. I say locality fixes wages according to the amount of labor there is in one place; for instance, a man in New York city would get more wages for doing a certain line of work than he would possi- bly if he was in Naugatuck, Connecticut. Q. Then there is no uniform scale of wages paid by you to em- ployees for doing the same work? A. Oh, no; you have to pay wages according to help — what you can get it for; what they will work for. 5s o. 40.] 769 Q. When did you commence running the United States Rubber Company’s plant in New Brunswick on third quality goods? A. I don’t know as to that; I had nothing particular to do as to the manufacturing part of it. Q. How many factories have been closed down in New Bruns- wick prior to your commencing to run that factory on third qual- ity goods? A. I do not know that any had. Q. Do you know that the New Brunswick Rubber Shoe Manu- facturing Company had been closed down? A. I know their busi- ness was transferred two blocks over to this New Jersey, the United States Rubber Company factory; I think that was last, a year ago last November. Q. Do you not know that the entire winter that plant was shut down and has not been in operation since? A. It has heen in operation making rubber tires, and is now making them. Q. When did it commence operation as a rubber tire manufac- turing plant? A. Well, I think almost a year ago. Q. How long then was it closed down? A. I should think a few months. Q. A few months? A. Yes. Q. Only a few months? A. Well, I can’t say just how many months as I don’t go down there very often to the factories. Q. Do you know how many months during the year 1896 your factories were running in New Brunswick? A. No — oh, in the year 1896; I think at Milltown we ran about eight months, last season; Milltown, the Meyer Company. Q. And the other concern? A. I don’t think they ran more than seven. Q. How many months have those concerns been running prior 49 770 [Senate, to consolidation, per year? A. Well, prior to 'Consolidation, we have had better winters; there was more demand. Q. I am not asking you that; I am asking you for the fact, as to the length of time operated? A. Well, I don’t know — no knowl- edge whatever of the New Brunswick factory; not being inter- ested in them, I couldn’t speak as to those; I should say at Mill- town we had run some; but we accumulated a good many goods which we could not sell. I Q. In 1895, how many months did your factories run during the year? A. I should say about the same as in 1896. Q. About seven months? A. Yes, sir. Q. In 1894, how many? A. I think we run more; longer. Q. Aibout eight months? A. Well, I think (longer than that; that is going back. Q. Nine? A. That is going back, and I don’t recall. Q. In 1893, how many months? A. Well, about the same. Q. Nine months? A. Yes, possibly. Q. Now, explain to the committee how it was that with factor- ies that you did not maintain in operation during 1895 and 1896, for more than seven months during the year, you continued the practice of purchasing competing factories? Al I don’t know as we did. Q. Didn’t you buy the Goodyear Eubber Glove Factory at Nau- gautuck? A. Well, we bought the stock of that company at dif- ferent times; just when, I don’t recall. Q. Did you buy no other concern during the year 1894? A. Not that I recall. Q. Or in 1895? A. I don’t recall. Q. Were you operative in the purchase of concerns? A. No. Q. Who was ? A. Only so far as being a director and voting No. 40.] , 771 upon any agreements to purchase, and that way; nJot in the nego- tiation of them. Q. Don't you remember the acquisition of the Woonsocket Rub- ber Company? A. Yes. Q. One of the largest of your competitors in the market? A. Yes. Q. When was that? A. That was in the spring of 1893; April or May, I think. Q. Was that not 1894? A. No, sir; 1893, I should say. Q. What led you to the acquisition of the Woonsocket plant? A. Well, it is a plant, the goods had a great reputation in the market; they are goods that we thought it was a desirable thing to get. Q. Was that part of the policy of the company to acquire plants that were competing against them in the open market? A. Well, there were no other plants to acquire but those; there were no other plants to buy except those that were in existence; conse- quently — Q. Consequently, you bought those that were in existence? A. We couldn't buy any others. Q. Have you at any time since the organization of the United States Rubber iCompany operated to the full capacity of the plants that you purchased under the first deal made by the company, in the way of combination? A. I do not think that (we have had any weather that would enable us to do it. Q. To what extent have you utilized the productive capacity of the factories originally purchased? A. We have made all the goods in them that we could sell, and more, too. Q. To what extent of the percentage of the total producing ca- 772 [Senate, parity of the plant? A. Well, that would be a very hard thing to answer. Q. Have you any data from which you can give us that informa- tion ? A. I have none. Q. Did you utilize more than 50 per cent, of the productive ca- pacity of those plants? A. Not having any data I cannot give you the figures. Q. Well, can’t you approximate, Mr. Ford? A. Well, I can guess. Q. Your knowledge of the company is such, is it not, that you can form a fair estimate? A. I have no great technical knowl- edge of it; I have been interested; all my time has generally been in other matters. Q. What is your special line? A. I have only in late years been brought into that through the death of other people. Q. What is your — A. I have always looked after the finan- cial part of the business, and, to a certain extent, the selling. Q. The treasury of the company? A. Yes, sir. Q. Do you assist Mr. Flint in the treasury of the company? A. Yes, sir. Q. But you do know, do you not, that at no time since the or- ganization of your company has the full capacity of the plants originally purchased been put in operation? A. Which do you mean by original? the New Jersey Rubber Shoe was the first one, and then there were some plants in — Q. I mean those included — A. (Interrupting) In the Simmons report? Q. Within the Simmons report, and upon which about 26 millions of capital were issued? A. I think the Goodyear Me- tallic Rubber Shoe Company has been run full for some years. No. 40.] 773 Q. I am now speaking of tlie total productive capacity of the properties acquired under the Simmons report. A. Well, as I said, we have not had weather which has made demand enough for goods to run those factories full. Q. I am asking for the fact as to whether or not you did run those properties full at any time since their acquisition? A. Not to my knowledge, unless we have the Goodyear Metallic Rubber Shoe Company, which I think has been. Q. Now, explain, if you had, as you say, a productive capacity exceeding that which you utilized, why you purchased the Woon- socket plant? A. Because they had a large boot trade and a capacity to make boots which had a great standing in the market, and it was to our interest to buy such plants of goods in order to supply the trade. Q. They were manufacturing the class and the same grade and description of boots that you were manufacturing in various of your factories, were they not? A. They were making rubber boots, and their boots had a call; their boots had a call which there did not exist of other makers as largely. Q. But that brand of theirs and that make of theirs was com- peting against your makes of a similar kind in the market? A. To a certain extent. Q. Well, was it not actively competing? A. Yes. Q. And it was your desire to acquire that brand and thus save your goods from competition in the open market by the Woon- socket Company, that induced you to acquire that property, was it not? A. It was not the competition; it w T as because we consid- ered it a desirable and business-like thing to acquire for business purposes, because we thought we could sell it. Q. Well, that business-like thing you speak of was the removal 774 [Senate, V of a very energetic competitor in the market, was it not? A. Not necessarily so. Q. Well, was it so? A. I do not consider it so. Q. What distinction is there in the brand they made of rubber shoes; what brands are made? A. They had a market for a very large number of pairs; our market for the Meyer Company was very small. ; Q. I am speaking now of the market of theUnited States Rub- ber Company for all its goods? A. Well, the Woonsocket Rub- ber Company boots w’ere boots that were sold all over the United States; the other company would have a trade in one State, and another company in another State; but these had a universal trade; it was a desirable thing to own them. Q. They had a trade extending all over the country? A. Yes, sir. Q. And entering into competition in every part of the country with your trade? A. To a certain extent; yes. Q. Well, wasn’t it the fact that it was to a very large extent an active competitor against your goods thaf induced you to buy the company? A. No; it is because they had a market which we did not have, and we could get part of that business. Q. Were they not operating through the same factors that you were? A. The same factors? ( Q. Factors ? A. That is a word I have heard here of late; I don’t exactly know what it means; do you mean a shoe merchant? Q. Y"es; through the same merchants? A. Oh, no; there are jobbing houses would sell theirs that wouldn’t sell — there were jobbing houses which sold theirs which did not sell others; we had jobbing houses sold ours and did not sell theirs; and they — Q. But without reference to individual cases or exceptional No. 40.] , 773 cases, wasn't the system that they distributed their goods through the medium of jobbing houses that distributed your goods? A. Only to a certain extent. Q. Wasn’t that the general situation, Mr. Ford? A. No, sir. Q. You mean to be understood as saying positively that it was not the — A. I say there were jobbing houses that sold our goods very largely and which sold no other goods; and then again, there were jobbing houses which sold their goods very largely and sold perhaps a small pro rata of others; -well, we used to have a cus- tomer in the Meyer goods up at Albany who never sold Woon- socket; they wouldn't sell them to him; a man up in Troy would handle them; they sold them through him; our man would need sometimes Woonsockets for his customers, and he would have to go out and buy them for him, in many cases; he would have cus- tomers who wouldn’t take any other kind; the retailers will only handle a certain kind of boot. ( Q. Did you see the document that was put in evidence yester- day, in connection with Mr. Flint’s testimony? Did you see the agreement that was put in evidence, Mr. Ford? A. You mean the agreement for the purchase and sale of goods? Q. Yes? A. Well, I think I saw you hand them up here; I think I know what you mean. Q. Has that been the system of your company since the date of its organization? A. Oh, that is the system that existed before the United States Rubber Company was thought of. Q. And has continued? A. Yes. Q. It was a system adopted by the independent companies when there was free competition between them? A. Yes, sir; only all of them didn’t have it; most of them — the standard— what we called standard companies used it. 776 [Senate, Q. Are you still operating under that system? A. Yes, sir. Q. When you purchased the Woonsocket Company, the fac- tors’ agreements that the Woonsocket Company held were turned over to the United States Rubber Company, were they not? A. I couldn’t say as to that; I think not. Q. Don’t you know? A. I do not say but they had — why that should be; not to my knowledge. Q. The business was turned over? A. Well, if you had a stock of a company, you would naturally get the business that goes with it; that goes without saying; there was no formal turning over. Q. The agencies that had been established by the Woonsocket Company as the result of the purchase of the stock by your com- pany became part of the agencies of your company, did they not? A. Oh, I see what you mean now. Well, no; some years after those things were done, and those agents who were then agents of the Woonsocket, became agents of the United States, I think. Q. What I mean is, that the United States, as the central body, controlled the system of agencies established by the Woonsocket, immediately after the acquisition of the Woonsocket Company’s stock? A. Not to my knowledge; no, sir. Q. Do you mean they still operated independently? A. Why, I say, I know they did; I am sure they did. Q. Notwithstanding you had secured the whole capital stock of the W T oonsocket Company? A. Yes. Q. That competed in the market against your product? A. Yes, those agents were controlled by the Woonsocket Rubber Company’s officers and directors. No. 40.] ( 777 Q. And you controlled the Woonsocket Rubber Company? A. We owned the stock in it. Q. Didn’t you change the board of directors? A. No, sir; I think not; I don’t think the board was changed until last July, if my memory serves me right. Q. Didn’t the policy of the parent company control the policy of the Woonsocket Company, after you had acquired the whole of its capital stock? A. I should say not. Q. Are you stating that as a fact within your own knowledge, that it did not? A. Well, the directors remained the same until, as I say, about last July. Q. Did the central body not fix the price at which the goods of the Woonsocket Company were delivered to the factors operat- ing under these factor's agreements? A. I couldn’t say as to that; I didn’t have any thing to do with fixing the price. Q. Who does that? A. I don’t know anything about selling the goods. Q. Who does that? A. Well, I presume the director of sales. Q. Mr. Johnson? A. Yes; he is now director of sales. Q. Mr. Johnson; and Mr. Johnson became, by reason of his be- ing director of sales of the United States Rubber Company, di- rector of sales of the product of the Woonsocket Company, even after it had acquired the capital stock? A. Well, to a certain ex- tent; no, they still had their agents to sell their goods — Q. Didn’t the parent organization, operating either through the general agent, Mr. Johnson, or through some other agent, control the fixing of price upon the product of the Woonsocket Company? A. I cannot say as to that. Q. You won’t deny that he did, will you? A. Well, I don’t know enough about it to so answer. 778 [Senate, Q. What amount of business did the Woonsocket Company do at the time of its control by the United States Rubber Company — at that time? A. Well, I have no special figures upon which to base a statement or knowledge. Q. Have you knowledge of the output and the sales of the company the stock of which you, as a director, authorized to be purchased? A. I have no remembrance of it. Q. Was a minute made upon the minute book of the directors with reference to the acquisition of the Woonsocket property? A. Most likely. Q. Do you know whether there was or not? A. I cannot say. Q. Was it made the subject of the action of the board of di- rectors of the company? A. I remember attending a meeting at which the proposal w T as made to buy it; the presumption is there was a minute made. Q. Do you remember whether there was or not? A. Well, I have not looked at the book to see; I have no knowledge except the presumption. Q. Did not the board take official action upon the proposition made for the purchase of the Woonsocket Company? A. Yes. Q. And was that official action entered upon the minutes of the company? A. The presumption is that it was. Q. Don’t you remember that it was? A. No, I do not. Q. Was an agreement entered into between the Woonsocket Company and the United States Rubber Company, indicating the terms upon which that purchase was made? A. I don’t think they ever had any agreement with the Woonsocket Rubber Com- pany; it was with certain stockholders. Q. Who controlled all the capital stock, or only a proportion of it? A. No, I think it was made with persons who controlled a large part of it; more than a majority. No. 40.] Q. What has become of that agreement? A. I think that agreement is in Providence now, in a suit that is there. Q. In a suit in Providence? A. Yes. Q. Arising out of that sale? A. Well, you see that sale was made under a certain agreement as regards values and so on, that came in, and certain uncollected open book accounts, and so on. Q. Yes? A. And that they were to be paid at a certain time, and not having been completed, there is a deficiency there, that the stockholders and these people who agreed to sell their stock, are liable for; and a suit has been brought to collect it. Q. And you say that that agreement is there in Providence? A. Yes, sir. Q. Where is the minute of the board of directors, showing the acquisition of this Woonsocket property? A. I don’t know, sir. Q. When did you last see it? A. I don’t know as there is any such minute — if you mean the minute book, I presume; I never read the minute book through. Q. You were served with a subpoenae duces tecum, were you not, Mr. Ford, to produce before this committee the schedules forming part of the report of the appraisers referred to in the testimony of Mr. Flint? A. Yes, sir. Q. Have you those schedules? A. No. Q. Or under your control? A. No. Q. Or in the archives of the company? A. I have never seen them. Q. You have access to the safe deposit vault, have you not? A. Yes. Q. Have you examined this vault to ascertain whether those schedules are there? A. I have not, because it is not necessary. 780 [Senate, Q. Why not? A. Because I have a memoranda of what is in them; if such a thing was there, I could keep it in my memory, being such a bulky thing as three thousand pages — safe deposit vaults are small. Q. “You have seen it, have you not? A. I have never seen it, sir. Q. Were you an original director of the United States Rubber Company? A. No. Q. Were you a director at the time of the presentation of the so-called Simmons report? A. I don’t think so; I should say not. Q. Don’t you remember? A. I should say not; I don’t recollect when I came in. Q. Don’t you know as a fact whether you were or not? A. No, I !do not; I came in in the fall of 1892, as a director; as I remember it, it was in April when I came in. By Mr. Mazet : Q. This report bears date September 6th? A. Yes, so I see, September 6th. By Mr. Lexow : Q. Eighteen hundred and ninety-two? A. Yes; September 6th, 1892. Q. Can’t you remember whether or not you were a director and party to the arrangement whereby 26,000,000 of the capial stock of the company w T ere authorized to be issued in pursuance of this so-called Simmons report? A. Well, I am sure if I had been a director I would have remembered it; my remembrance is I was not in the board at that time. No. 40.] 781 Q. Then you recollect now as a fact that you were not in the board, do you? A. Well, I say the fact of a report like that would naturally remain on my mind; when I became a director, I don't recollect exactly — I am very busy. Q. Do you wish to be understood then as saying that at no time while you occupied the office of director of your company, was a report of that kind or schedule of that kind submitted to the board? A. I do not recall any such report being submitted; and I never have seen the schedule spoken of. Q. Have you never taken action as a director upon that original report or upon any branch of that report? A. You mean the Simmons report? Q. Yes. A. 1 do not recall any. Q. Would you recall it if you had? A. Yes; I am sure I would. Q. Has it never occurred to you to investigate into the methods of distribution of so large a proportion of the stock of the com- pany? A. I never have had very much chance; I am a very busy man; I haven't had a vacation in eight years; always working — so much to do nowadays. Q. What was the capitalization of the Myers Company, of which you were president? A. You mean the capitalization or capital stock? Q. The capital stock? A. The capital stock was $200,000. Q. Organized when? A. I think the Meyer Rubber Company was organized in 1S61; it succeeded the Ford Rubber Company; succeeded a corporation, a firm, a copartnership. Q. With a capital stock of $200,000? A. Yes; the Ford Com- pany was $200,000, and it had a surplus. Q. What amount of capital stock of the United States Rubber Company was issued in payment of the company of which you were president? A. I was not president; I was the treasurer. 782 [Senate, Q. Or treasurer? A. Well, there wasn't any issued to the com- pany; to the stockholders. Q. I mean to the stockholders? A. I think each stockholder got about $600 of stock for $100 of Me3'er stock. Q. That is to say, in the proportion of one to sis? A. Oh, no, not at all, because that is our capital stock, I mean, there is a difference between that and capital. Q. I understand that; I am speaking of the nominal stock? A. Oh, the nominal; yes. Q. That is in the proportion of six to one of the nominal of both companies? A. Yes. Q. Was the Meyer concern then in full blast? A. Well, it was running, yes; not running full. Q. It was not running full? A. Oh, well; you mean the time of the stock — Q. Yes? A. Yes, I think we were then in the fall, we were very busy, and that proved to be a good winter, 1892. Q. During 1892? A. Yes. Q. What was the dividend that was paid in the year 1892 on the Myers company's stock? A. We didn’t pay any. Q. Did not pay any? A. No. Q. Eighteen hundred and ninety-one? A. Did not pay any. Q. Had you ever paid any dividend on the stock? A. Oh, yes. Q. In what year was the last dividend paid on the Myer stock? A. Well, I don't recollect that; that is veay back in ancient history. Q. Ancient history; -well, go way back? A. Yes; that is eight years; seven or eight. Q. So long ago that you don’t remember the particular year in which it was paid? A. I know until about four years before; No. 40.] 783 I don't tliink we paid dividends those lour years; previously they had always paid dividends. Q. And previous to that time what dividends had you paid; I mean the average? A. Oh, well, 25 40, 50. 60 per cent., differ- ent rates, according to the business of the year; what we thought we could spare. ' "i Q. All that you thought you could spare out of the working capital? A. Yes. Q. But for four years prior to the consolidation no dividends had been paid? A. Well, three or four. Q. Was to your knowledge any ratio established on the basis of earning capacity or profits in the distribution of the stock of the United States Rubber Company for the companies that were acquired or the stock of the companies that were acquired by it? A. Not that I know of. Q. Did you not in selling your own stock investigate as to whether or not, as compared with others, you were receiving a fair proportion of the increase in stock made? A. Well, it was understood that the property would be valued by responsible per- sons, and we should be treated alike, by those companies. Q. Did you know at the time that you deposited your stock for transfer to the United States Rubber Company what your com- pany was about to receive for it and what each of the other concerns coming into the combination was to receive for their respective stock? A. Well, my father made the original agree- ment; but so far as I know he did not know, and I think I would have known if he had. Q. You know from him that he did not know? A. No. Q. Now, do you wish to be understood here as saying that you put your concern into a consolidation involving some 14 or 15 784 [Senate, other plants and a capitalization of $26,000,000 at six to one for nominal of tlie shares, without knowing what anv of the other concerns were receiving for their stock? A. No; I knew the others were not to get any more than actual value and we were not to get any more than actual value, and those values were to be determined by honorable men, as appraisers, for instance. By Mr. Bedell: Q. How could you get actual value for yours on stock that had not paid any dividends for four years? A. Simply by having property there; assets; it is for that reason I want to state that $200,000 was not the capital, it was only the capital stock. By Mr. Lexow: Q. Was the nominal share capital? A. Yes, the nominal. Q. And each share had a nominal value of $100? A. Yes, had the nominal face value of it. Q. And it was exchanged at the rate of $600 of the United States Rubber Company nominal for nominal one hundred of the old company? A. Yes. Q. Were the other companies that were consolidated in the issue of that $26,000,000 of stock on a par with you as to the declaration of dividends for the previous three or four years? A. I couldn’t say as to that. Q. There had been competition in the open market as between these concerns that had prevented you from declaring dividends in those four years, had there not? A. No. Q. No? A. No; that was not the reason we did not declare dividends. Q. Why didn’t you declare dividends? A. Why, we were put- ting money in our goods in making — raising them up — and even- 785 iNo. 40.] ( tually so as to make them of better quality; in other words, in- stead of trying to make profit we put it in our goods, in the sense of advertisement, to make them better quality and getting a bet- ter price for them. Q. And it took four years to accomplish that and the loss of dividends in the meanwhile? A. Yes. Q. Do you mean to be understood as saying, Mr. Ford— A. Oh, no; excuse me — • Q. (Continuing) That a company that had been accustomed to pay from 25 to 50 per cent, divedends upon its stock voluntarily, for the purpose of raising the grades of its stock, relinquished the payment to its shareholders of any dividend at all? A. I have just stated that, and it is a fact! Q. Do you know whether competing concerns that were consol- idated with the United States Rubber Company at the same time as yours had also failed to pay dividends for three or four years prior to the consolidation? A. No. Q. Do you know anything about it? A. I think most of them paid dividends. Q. Most of them did? A. Yes. Q. Didn’t you keep yourself informed on that matter? A. It is very hard to do it in the rubber business; they are close cor- porations. Q. They were all close corporations? A. Well, yes; in other words, we do not know very much about them; it is very hard work to find out. Q. And was the organization of the United States Rubber Com- pany for the purpose of changing them from close to open and public corporations? A. No; the object of the United States Rubber Company was that we could get together all these differ- 50 ”86 [Senate, ent people who each — one man would be good in one thing and another in another — and we could get the benefit of this united experience and talent; at the same time we could — Q. Is it not the fact that the stock of the Meyer Rubber Com- pany was substantially held by one man? A. My father owned most of it. Q. Almost all of it? A. Well, the family owned it all; him. my brother, my sister and myself. Q. And notwithstanding the fact that you had voluntarily abandoned your dividends for four years as you say, for the pur- pose of raising — A. I think it was only three. Q. (Continuing) The value of your product, you went into this organization, and abandoned the fruits of your enterprise over this four years, to receive this stock? A. Well, we thought it would be a hopeless thing to raise it up — we thought it would be a good thing to get in with these other people; we thought it was more than equivalent for the benefit of their knowledge. Q. Those others had been and were then competing with you, were they not? A. Well, like any two stores, you can say — one is a competitor of the other, not necessarily so, though; they will sell to different people. By Mr. Bedell: Q. One thing, I would like to establish, Mr. Ford; for instance, here is a catalogue of the Wells, Goodyear Company. (Produc- ing catalogue.) A. Yes. Q. That is one of the companies of the — A. That is of the Naugatuck; it is of the Goodyear Metallic Rubber Shoe; that is a sort of trade mark. No. 40.] , 787 Q. You see certain prices quoted in here; for instance, ‘‘ lumber- men’s overshoes, $1.35, list price;” what does that mean? A. Why, all of our goods are sold by discount off from the list price; just let me see this please (takes catalogue). A. The retailer can sell for whatever he wants; he can give them away if he chooses to. Q. But he shan’t sell them for more than that? A. No; the ob- ject of this list price is this thing; I can’t show it here, as well as if I had another (indicating). By Mr. Mazet : Q. Is that the price to the retailer or the price at which you sell? _ By Mr. Bedell: Q. Here is the catalogue. A. Just let me explain; this list price is the price for Arctic shoes, 25 — or any shoes — now, we have changed the list price from it; the price generally was changed, which would make a great amount of work in correct- ing, and so on; and, therefore, it has been the custom in this trade, as it is in many others, to have a list price and sell by dis- count off of that. By Mr. Bedell: Q. Well, who does that list price apply to, and to whom do you sell at that price mentioned in the book? A. W T hy, we sell to the jobber for list price, so much discount, just as this contract tells you (indicating). Q. And how does he sell to the retailers? A. Well, he sells off again from the list price. 788 [Senate, Q. Then there is a list price for the retailer? A. Same list price. Q. The same one? A. Yes, sir; we have this printed on little sheets. Q. Then, that is the basis? A. That is the starting point. Q. Now, for instance, there is the “Emperor, Picadilly toe, rub- ber” — look at this now (showing witness list). A. These are all here, don't you see. Q. Well, it is the same thing, isn’t it? A. Well, that shows how many different kinds we have. Q. Well, I will take one sample of the — we can demonstrate this by just one illustration: That says “List Price, $2.25”; now — A. Yes. Q. The jobber gets that for $2.25, less a certain discount? A. Exactly. , Q. And the retailer gets it from the jobber for $2.25, less a cer- tain discount? A. Exactly. Q. And the retailer can then sell it for what price he feels — A. Certainly — give it away, if he chooses to. Q. Yes; that is the basis of the price for the jobber and for the retailer? A. Yes. Q. Well, -who fixes the discount that the jobber gives to the retailer? A. Why — you see that agreement. Q. That agreement fixes that? A. Yes, sir. Q. And that agreement also fixes the discount -which is given to the jobber? A. Yes. Q. So you control the jobber in his sale to the retailer? A. Well, yes, because we guarantee him the price through which — Q. I understand; but you control the price that the jobber No. 40.] 789 shall sell to the retailer; is that not the fact? A. Partially do; don’t always do it, though. Q. Well, you try to do it, do you not? A. Well, that has been the custom of this trade for ten or fifteen years. By Mr. Mazet : ( Q. You sell to the jobber or either to the retailer or the jobber? A. No, we sell to the jobber; not to the retailer; no, you see if we did, they wouldn’t buy from us. Q. But the retailer cannot buy from you, can he? A. No. By Mr. Bedell: Q. Suppose the jobber is handling your goods; is he permitted to handle anybody’s else? A. Anybody he can buy of; and they do it, too. Q. Is there any restriction as to the price at which he should sell expensive grades which are placed on sale? A. Well, there was in some of that Boston Rubber Shoe Company, and others I know; and there are a good many others that are not. Q. Well, you restrict what he shall sell? A. Only so far as we give them, and only so far as we have guaranteed the price on them; that is a very important thing, guaranteeing the price. Mr. Lexow: In the matter of the Wall Paper Company, are the statistics now obtainable with reference to labor? Mr. Burn: I did not leave here with the idea this morning of furnishing statistics. I was not requested to do so. By Mr. Lexow: Q. That is the main proposition that we want developed; I understood that I had asked you, after recess, to furnish us with those statistics? A. I did not so understand it; I told you this 790 [Senate, morning that it would require probably two weeks’ time to pre- pare them. Q. Ob, we can not give that time to it? A. It certainly would require that length of time. Henry Burn recalled: Examined by Mr. Lexow: Q. You produced a factor’s agreement this morning which is in use in your system of conducting business; did you have another kind of agreement that was in use in 1894? A. Our sales run from 1st of July to 1st of July; the same agreement was in force in — this agreement was in force in 1895 to ’6, and for the present year — the present season; the only other form that we had was the rebate system, to which I referred this morning; the rebate system prevailed the first, second and third years of our company. By Mr. Mazet: Q. Twenty per cent, rebate? A. It was 10 per cent, the first year and 20 per cent, the two succeeding years. By Mr. Lexow: Q. Have you got a copy of that particular rebate agreement which you then operated under? A. I have not, and I doubt very much whether I could get one readily; I presume there are some in existence. By Mr. Mazet: Q. Is there any on file in the office of the company? A. I say, there may possibly be one, but I don’t know. No. 40.] 791 By Mr. Lexow: Q. Did your rebate system, in operation during those years that you have mentioned include the proposition that if the factor sold the goods of any other concerns his agreement would come to an end and the rebate would not be allowed? A. It did not operate that way; they had no rebate. Q. Did it operate at all to that effect? A. No, sir; no, sir; under the rebate system we offered an option to every one; to those who availed themselves of that option to purchase their goods exclusively from the company during the season we al- lowed a rebate at the end of the season, the first year of 10 per cent., the two succeeding years 20 per cent. Q. I understood you to say that you had no rebate system in operation now? A. No, sir. Q. That you placed in the year 1S95 the jobber upon the same footing as the retailer, offering no discount to the jobber in ad- vantage over the retailer? A. In the seasons of 1893 to 1894, and 1894 to 1895, we offered no special discounts to jobbers. Q. Do you now? A. Yes, sir. Q. Offer a discount to the jobbers? A. Yes, sir. Q. Under the form of this agreement that you put in evidence this morning? A. Yes, sir. Q. Now, was not the result of your discontinuing the rebate system during the years mentioned the destruction of a large per- centage of the jobbers who were then doing business with you? A. No, sir; it was not. Q. Do you know how many were compelled to discontinue busi- ness? A. I know of no cases where they were compelled to dis- continue business. 792 [Senate Where they did discontinue business? A. I know, I think, two or three cases where they did discontinue business. Q. Was not that discontinuance due to the fact that you cut them off from the rebates that they had theretofore secured? A. In the two or three instances to which I make reference? Q. Yes? A. No, sir; it was poor judgment on their part in going out of business at the time; they were apprehensive; they had no occasion for that apprehension. By Mr. Bedell: Q. What were they apprehensive of? A. Why, they were ap- prehensive that — I don’t know what their apprehension was, ex- cepting that they — Q. How do you know that they were apprehensive? A. Well, I know in the c so of Mr. Smith; he was apprehensive. Q. Of what? A. Of not being able to realize a sufficient profit. Q. For what reason? A. Because we had given the benefit of their discount to the dealers as well. Q. To the retailer? A. To the retailer. Q. So that the retailer had the same benefit as the jobber? A. Yes, sir. Q. The jobber had no opportunity to make any profit at the time except he could sell to the retailer at a higher price than you would sell to the retailer; is that it? A. That is right; and from the time that we — By Mr. Lexow: Q. In other words, you having theretofore done business with the jobber and giving him a profit which enabled him to live, went directly — or your system changed so that you went directly to No. 40.] 793 the customer of the jobber, and gave the jobber no advantage over the retailer; is that the effect of it? A. The jobber had no monopoly of the customer. By Mr. Bedell: Q. He asks if that was the effect of it? A. Not entirely; the jobber was competing for the same customers that we were, to a certain extent. By Mr. Lexow : Q. Was it not the fact that at that time you had consolidated into one business so much of the productive capacity of the coun- try that the jobbers thus cut off from rebates were unable to se- cure the goods to fill the demand of their customers? A. That is not so, as is demonstrated by the fact that the jobbers did remain in business and are flourishing to-day; and in the case of Mr. Smith, Mr. Smith had already made contracts for a large amount of goods with a competitive concern at the time that he came to me and made the proposition to sell out his business. By Mr. Warner: Q. These prices that you say are ruling to-day; are they under consignment agreements with you? A. No, sir. Q. Do you have such agreements now? A. We never had a consignment agreement; absolute sale. By Mr. Mazet: Q. What were the conditions on which your customers were to have these rebates referred to under this option agreement ; under what conditions were they to have the rebates? A. Under the — if they availed themselves of the option. 794 [Senate, Q. And that consisted of what? A. The option was the privi- lege to the customer to buy entirely from the company during the year, and at the end of the year to receive the rebate. By Mr. Bedell: Q. Not only the privilege, but the agreement to buy? A. No, sir; no, sir; there was no agreement at all. By Mr. Mazet: Q. Well, if he should buy from any competitor he forfeited his right to any rebate; is that true? A. Most assuredly; in other words, he bought his goods — Q. You expected him to be restricted to your goods in order to get the benefit of the — A. No ; we did not restrict him. Q. Is not that the result; the effect? A. That did not result. By Mr. Warner: Q. Wasn’t that the verbal agreement? A. There was no ver- bal agreement. Q. Or understanding? A. No, sir; there was an option ; he had the privilege of buying as he pleased; the option issued at the commencement of the season, and the customer knew perfectly well that if he availed himself of the option he would get the benefit of the rebate; in other w r ords, if he bought his goods at wholesale he would get any quantity — he would get them cheaper than if he only bought a small quantity. By Mr. Lexow: Q. If he bought them exclusively from you? A. Exactly; that would be buying in quantity. No. 40.] 795 By Mr. Bedell : Q. And if he bought them of some one else he lost the rebate? A. Assuredly. By Mr. McCarren : Q. Is your stock listed? A. No, sir; our stock is not listed; we have an express provision in our agreements whereby the stock cannot be sold by the original holders until after the ex- piration of ten years; that is done to assure the good will that we have purchased, and in order that the public may not be solicited to buy the stock until its actual value has been demonstrated by the experience of ten years. Q. Then, I understand you substantially to say that the public cannot purchase stock? A. No, sir; they cannot. By Mr. Mazet: Q. And also enabling the original stockholders to carry out the line of policy adopted by them at the time of the organization of the company; that would be the natural result, would it not — they are keeping control of the stock? A. Their keeping control of the stock would secure to us their services in the business that we required of them. Q. And the fulfilling of the line of policy under which and for Which the company was organized? A. Yes, sir. By Mr. McCarren : Q. Mr. Burn, did these individual concerns that were purchased or absorbed by your company have agreements with their custom- ers similar to the one now in use by you? A. Yes, sir; excepting in respect to the restriction in regard to purchasing from other manufactories ; the agreements that the original factors had with 796 [Senate, their customers was that in consideration of special discounts given to jobbers, those jobbers would maintain the prices of the respective concerns. By Mr. Mazet: Q. Those agreements did not restrict them from buying from other parties? A. No, sir; because they could not get the variety from any one manufactory. By Mr. McCarren : Q. Well, do you know anything about the question as to wheth- er the Supreme Court ha,s ever passed on the validity of the ven- dors’ agreements? A. The Supreme Court has passed upon the validity of the agreements, and it is declared to be strictly in ac- cordance with law; and I would say in this connection that in that suit these affidavits of Mr. Smith, upon the basis of which this inquiry rests, were introduced; and likewise an attempt was made to obtain the evidence of employes in regard to the sup- posed injurious effects on labor; and the only affidavit that they were able to obtain was that of Youngs, in regard to whom I was questioned this morning. By Mr. McCarren : Q. How did you acquire the property of Mr. Smith? A. We acquired the property of Mr. Smith by purchase; Mr. Smith de- cided to go out of business, and urged us to buy his stock off, and we finally concluded to do so, although very reluctantly we as- sured him that he had no cause for apprehension; that he would be able to do a prosperous business if he continued, but he was advanced in years and perhaps a little more apprehensive on that account; we filially agreed to buy his stock, and did buy his Yo. 40.] 797 stock at the price that he had paid us for the goods; we bought his fixtures at his inventory price; we assumed his lease and we took over his employes. By Mr. Lexow: Q. The Supreme Court did not hold anything more in that case, did it, than that it was perfectly valid for you in purchasing a business and good will, to attach to it a condition that the par- ties selling should not compete with you; that was all, wasn't it? A. Well, that was the main point of the entire agreement. Q. I understand the Supreme Court has never passed upon the factors' agreement that you have with the consignees? A. That was part of the evidence — certainly, it was passed upon. Q. It was not passed upon in that case judicially, was it, as to the validity or propriety of any of these factors’ agreements — that did not form an issue in that case, did it? A. Well, there were no factor agreements, but the rebate system. Q. Yes. Mr. Marshall — Mr..Marshall (counsel): Yes; the record in that case contained a copy of the rebate agreement, and also all the testimony of Mr. Smith; and also all of the facts concerning which questions have been put, with respect to the plan of organization of the company. Mr. Lexow: I understand; but the simple fact as to the fac- tors’ agreement in that case, was it not as to the validity of it — that clause of the agreement that prevented the competition against you after the sale of the property by you ? Mr. Marshall: Yes — if you will permit me, Mr. Chairman — Mr. Lexow: Was that true? Mr. Marshall: That was the main point. We brought an action for the purpose of enforcing a covenant in that agreement, 798 [Senate, which prohibited Mr. Hobbs from engaging in business in viola- tion of that covenant; and the claim was made on behalf of Mr. Hobbs that the entire organization was a conspiracy against trade. And for the purpose of establishing that these various agreements vcere put in evidence — the fact that some of the fac- tories were shut down, the fact of this rebate agreement, the fact that Mr. Smith testified that he went out of business at the time of the organization of this company — these were circumstances which have been here adduced — all these facts were passed upon and the court held after hearing all this evidence that the agree- ment and the organization were entirely valid. By Mr. McCarren (to the Witness Burn) : Q. Mr. Burn, I understood you to say this morning, either di- rectly or inferentially, that some of your stock was issued for the purchase of good will and patents, improvements, etc.; is that so? A. That was correct. Q. Did you ever have any opinion from the Attorney General of the State as to the validity of the issue of stock for good will? A. Yes, sir; the Attorney General of this State decided that good will was property, and that we issued that stock in accordance with law. By Mr. Mazet : Q. Nobody has ever disputed that proposition that you know of? A. Yes, sir. Q. That good will was not property? A. Yes, sir. By Mr. Warner: Q. Was that opinion of the Attorney General given at your instance? A. No, sir; it w r as in a suit brought against us to re- No. 40.] 799 quest permission of the Attorney General to bring suit for the dissolution of our company, and alleging this as one of the rea- sons; that we had issued stock for good will and that good will was not property. By Mr. McCarren : Q. That was the contention of the parties bringing the suit? A. That was the contention of the parties bringing the suit. Mr. Marshall: The United States Court has also said — The Witness (interrupting): I -would say, too, that the United States Court has affirmed the same fact. Mr. Lexow: The fact presented in the application before the Attorney General, was it not, that good will was not absolute property as against which stock might be issued, but that after good will had been severed from the property to which it attached, that then it ceased to be property for jvhieh stock might issue; was that not the contention before the Attorney General? Mr. Marshall : No; the contention before the Attorney General was that the issuance of common stock was for good will in the manner in which it was issued by this company; and under the vendors' agreements here in evidence — was not a valid issue of stock. That question was very thoroughly discussed and argued here, and he wrote a very elaborate opinion sustaining the valid- ity of this precise organization — our organization. And that, I may also say. was followed by the decision of the United States Supreme Court, in a suit which -was instituted by the same indi- vidual. -who sought intervention of the Attorney General. Mr. Lexow : The question before us is not so much whether the issue of stock was legal under the existing law, but whether a condition presents itself that requires additional legislation that 800 [Senate, will prevent the issue of stock upon the lines followed in this case. I do not say that it is not perfectly proper; that is a ques- tion for us to consider upon the whole testimony. By Mr. McCarren : Q. Mr. Burn, what was the object sought to be accomplished by the formation of the company that you represent? A. Well, the main object sought to be attained by the formation of the company was to avoid a curtailment of the business and the pos- sible death of the industry; inferior grades of goods were being introduced, and that had a tendency to make w'all paper unde- sirable as a decorative medium wdth the people at large, and in that event w 7 hy the business would have been curtailed and grad- ually extinguished; people wmuid have been thrown out of em- ployment, capital would have been wasted; in order to avoid that possible state of affairs this company w r as considered, because it was felt that w r ith the experience that it possessed it would bring about improvements in the class of goods that would be produced; and one of the first steps that the company took after its forma- tion was to improve the different grades of goods and establish a uniform quality for the respective grades and amongst all the factories; and as the result of that are— all goods that are bought in trade are now judged by our standard. By Mr. Lexow: Q. And the prices fixed by you followed? A. The prices as I have already stated were not advanced; on the contrary they were reduced; the prices were reduced, the quality was enhanced. By Mr. Warner: Q. That don’t answer the questions. No. 40.] 801 (Question read.) , A. I don’t understand that question. Q. Do you mean to say that your competitors followed your prices? A. All their quotations are based on our prices. By Mr. Mazet: Q. As a standard? A. Yes. By Mr. Lexow : Q. You set the standard and they fix theirs accordingly? A. Yes, sir. Q. Did I understand you to say that the form in which you capitalized was to take the percentage of profit and multiply by 16 to ascertain the capital ? A. I stated that. Q. Was that the fact? A. That we ascertained the net profits of the preceding year and multiplied that by 16 ; that formed the basis of the total issuance of stock. Q. So that if there were net profits of one hundred thousand dollars you would issue as against that a capital stock of 16 hun- dred thousand dollars? A. We would issue against that stock of 16 hundred thousand dollars; but we would in issuing that — Q. Tangible assets, being the debenture stock and the balance in common stock? A. In common stock. Q. And that was true with reference to every transaction which you made, except in the individual case that you specified where 4 there was not profit and where you simply issued for the tangible property? A. There were a number of such instances; it was not a single instance; there were a number of those instances; in other words, that when the company was formed some of those parties claimed profits and their books apparently indicated that 51 802 [Senate, they earned profits, but the profits there shown depended upon the collection of certain accounts; at the expiration of a certain time it was found that those accounts had not been paid, and con- sequently they were charged against profits, in many cases wip- ing them out altogether. Q. In that case you only issued debenture stock? A. That is all., Q. For the appraised tangible assets you issued debenture stock? I do not think we will need your testimony any further than for the purpose of getting statistics that we will — or need witnesses subpoenaed with reference to your company. Mr. Marshall : That relieves us from further attendance? Mr. Lexow: We would like evidence on this labor question. (Adjourned to 10:15 o’clock to-morrow morning.) The following form was marked “Feb. 19, H. C. L.” This memorandum of agreement, made and entered into the first day of February, 1892, between Messrs. H. B. Hollins & Com- pany, Mr. Charles R. Flint, Mr. Joseph P. Earle and Mr. Richard Sibley. Whereas, The parties hereto are interested in bringing about the consolidation into one parent or consolidated corporation in- terests in several companies now engaged in the manufacture of rubber boots and shoes throughout the United States; and Whereas, It has been agreed between the parties hereto that a condition of the participation in said consolidation by each of said companies is that a certain commission shall be paid by such consolidated company to Messrs. H. B. Hollins & Company; and Whereas, It has been agreed that each of the parties hereto shall participate in said commission to the extent and in the man- ner set forth in this agreement; No. 40.] 803 Now, In consideration of one dollar in Land paid by each party hereto to each of the others, the receipt whereof is hereby ac- knowledged, and in further consideration of the services in and about said consolidation heretofore contributed and hereafter to be contributed by each party hereto for the benefit of each of the other of said parties. It is hereby agreed as follows : First, Said commission, which is payable in the common stock of the consolidated company as shall be paid by said company to Messrs. H. B. Hollins & Company as above receipted, shall be divided as follows : A. M. Flint shall receive of such stock at par $200,000; Messrs. H. B. Hollins & Company, $100,000; Mr. Earle, $100,000. B. Such balance as shall remain shall be divided into four equal parts; one part shall belong to and be paid over to Mr. Flint; one part to Messrs. H. B. Hollins & Company, and part to Mr. Earle; and one part to Mr. Sibley. (Signed) H. B. H. & CO., C. R. F. Second, This agreement is in lieu of and is substituted for any other understanding as to the subject matter of this agreement whether written or oral, heretofore entered into between the par- ties hereto. In witness whereof, The parties hereto have hereunto and unto three other originals hereof set their hands and seals the day and year first above written. (Signed) H. B. HOLLINS & CO. (Signed) CHAS. R. FLINT. (Signed) RICH’D C. SIBLEY. (Signed) JOS. P. EARLE. 804 [Senate, (Endorsed on back as follows): We, Joseph P. Earle and Charles R. Flint, for value received, have assigned, transferred, set forth, and by these presents do assign, transfer and set forth unto the New York Commercial Company, Limited, a corporation of the State of New York, all our right, title and interest in and to the within agreement, and in and to all our rights, interests and privileges thereunder. New York, February 1, 1892. Witness to signatures of Joseph P. Earle and Chas R. Flint. (Signed) HENRY EARLE. (Signed) JOS. P. EARLE. (Signed) CHAS. R. FLINT. Following form was marked “Feb. 19, Exhibit B.” Memorandum of agreement between of (called the purchaser) and the National W r all Paper Company of New York, N. Y. (called the company). 1. The purchaser agrees to select and order from and out of jobbing lines of the machine made goods of the company on or before October 1, 1896, wall paper to the aggregate amount of $ , which .... hereby request the company to manu- facture for prior to April 1, 1897, goods to be delivered F. 0. B. at New York, or at the respective places of manufacture. 2. The terms of this sale are four (4) months from date of in- voice, with a discount at the rate of one per cent, per month for anticipated payments. Goods shipped between October 15th and March 1st to date from March 1st, and orders for goods not shipped before March 1, 1897, may be cancelled by either party to this agreement. 3. The purchaser expressly guarantee and agree that between September 1, 1896, and June 30, 1897, will not purchase or ac- No. 40.] 805 quire any wall paper or hangings the product of any person or corporation other than the company, and that will give additional and duplicate orders prior to July 1, 1897, to the amount of $ , and in consideration of such guarantee and upon the performance thereof company shall credit the purchaser with the discounts hereinafter named on the attached schedule on all purchases from the jobbing lines of the machine made goods of the company between said dates. Such discounts shall be figured and credited upon the basis of the shipments made hereunder and the discounts shall be calculated upon the gross prices published by the company in its price list for the patterns selected by the purchaser. The purchaser guarantee as a condition of the allow- ance of such discounts to refrain from making such use thereof among the trade as to interfere with the uniformity of the com- pany’s price and terms, and that (the purchaser) will at all times during this contract maintain the company’s road prices. 4. The company agrees to extend the same line of discounts referred to above to such goods as are contained in the exclusive lines of the machine made goods of the company, on the express guarantee that such goods will be used only for the retail depart- ment of the purchaser in the city of , and will not be offered at wholesale within his store or on the road. This contract shall at all times and for every purpose be deemed to have been made and executed at the principal office of the company, in the city of New York, and it shall for every pur- pose be construed under the laws of the State of New York. Dated, the city of New York, 1896. National Wall Paper Company, President. 806 [Senate, Schedule of discounts referred to in the foregoing agreement: On goods to 4c. inclusive per cent, discount D : tto above, 4c. to 5c per cent, discount Ditto, 5c. to 6c per cent, discount Ditto, 6c. to 8c per cent, discount Ditto, 8c. to 12ic per cent, discount Ditto, 12ic per cent, discount The discounts on borders follow the discounts on the hangings which they match. The purchase of the first grade is to be re- stricted to — per cent, of the entire order. ELEVENTH PUBLIC HEARING. COMMON COUNCIL CHAMBER, NEW YORK, FEBRUARY 23, 1897, 10 A. M. Mr. Lexow: A quorum being present the committee will now come to order. Mr. Lexow: Is Mr. Elverson in the room? (No answer.) G. Waldo Smith, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. What is your full name? A. G. Waldo Smith. Q. Residence? A. 313 West Forty-sixth street. Q. And age? A. Sixty-six years. Q. What is your occupation? A. Wholesale grocer. Q. Have you any official relation to what is known as the Wholesale Grocers’ Association? A. I have. Q. What is that? A. President. Q. Is that an incorporated body? A. It is not. Q. Membership association? A. Yes, sir. Q. Consisting of whom? A. Wholesale grocers. No. 40.] 807 Q. Limited to any particular territory? A. It covers New York, New Jersey as far as Paterson, Connecticut, part of Mas- sachusetts, New Hampshire, Vermont and up the Hudson as far as Poughkeepsie. Q. Has it any other name than just Wholesale Grocers’ Asso- ciation? A. The Wholesale Grocers’ Association of New York and Vicinity. Q. Meaning New York city and vicinity? A. Yes, sir. Q. Is there a State association ? A. There is. Q. A national association? A. No, sir; not now. Q. There was? A. There have been attempts to form one, but never fairly succeeded; it has been partially organized, but it never came into actual existence so far as I know. Q. What is necessary to membership in your association? A. To be distributers of food products at wholesale. Q. What is known as a jobber? A. Yes, sir ; some large retail- ers have applied for admission and, I think, have been admitted ; I thmk Park & Tilford and Acker, Merrill & Condit. Q. Have you by-laws? A. Yes, sir. Q. Have you a constitution? A. Yes, sir. Q. Which is signed by all the members composing the associa- tion? A. I think not; I have no recollection of ever signing it. Q. What are the membership fees? A. Ten dollars per annum for each partner. Q. For each partner? A. Yes; in each firm. Q. Have you any affiliation with the other Wholesale Grocers’ Associations of the various States of the Union? A. No, sir. Q. What is the jurisdiction of these Wholesale Grocers’ Associ- ations? A. The Southern Wholesale Grocers’ Association com- mences at Richmond and runs down to New Orleans, Nashville 808 [Senate, and Chattanooga; well, St. Louis has withdrawn; it used to in- clude that city. Q. It takes in the Southern planters’ territory — the sugar ter- ritory of the Southern Louisiana planters? A. Yes, sir. Q. And has jurisdiction over the sale of sugar within that ter- ritory? A. It has no jurisdiction over the sale of sugar any- where. Q. I mean in the sense that it represents jobbers? A. In a certain sense, possibly. Q. And through its control over the jobbers in that section controls to the extent of the membership in the association the sales made by those jobbers? A. In no manner, way or shape, so far as I know. Q. Well, that is true with reference to New York City Associ- ation, is it not? A. No, sir. Q. Do you mean to be understood as saying that you do not exercise any control over the sale by the jobbers composing your asociation of the food products that they handle? - A. I do, sir. Q. Do you say so without reservation? A. Yes, sir; so far as my knowledge goes. Q. Who does exercise that control? A. No one. Q. And you say that equally without reservation? A. I do, ttfir. Q. Then, you mean to say that neither as a result of direct action by the Wholesale Grocers’ Association, nor as the result of the producer of the material disposed of by the jobbers form- ing your association, is control exercised over the jobbers? A. I don’t know as I understand the question. (Question repeated.) A. There is no control as an association of any name or nature; ]S T o. 40.] 809 the only control possible might be that our secretaries send out notices of the change of price. Q. Change of price of food products? A. Of sugar only. Q. Then why do you make a distinction between sugar and the other food products? A. Simply because it is the most impor- tant article in our trade. Q. You so regard it? A. By all means. Q. And that sale of sugar is absolutely indispensable to- the prosperity of the jobber? A. Yes, sir; absolutely. Q. And that is why you make a distinction between sugar and the other products? A. We make no distinction; simply because our secretary, by some means, has commenced sending out no- tices of the change of price. Q. You are president of the association? A. Yes, sir. Q. Does the secretary assume to so act without knowledge or notice or authority from the president? A. Done with my con- currence. Q. What actuates you in concurring with such action by the secretary? A. The sugar refiners dictated certain terms of sale and we, in order to make those terms of sale effective or useful to us, simply send out notice of the change of price. Q. Then your action in sending out those notices was taken subsequent to the action of the sugar refineries in fixing the con- ditions? A. We could not of course do it until the conditions were fixed. Q. And the fixing of the conditions on the part of the sugar re- finers was an affirmative act by them without reference to you? A. Without reference to us; taken at our solicitation. Q. How did that occur? A. It originally occurred six years ago last June. 810 [Senate, Q. Between whom were the negotiations? A. Between Mr. Havemeyer and Mr. Searles and others; I think at that time Har- rison & Frazier of Philadelphia and others, and individuals who were wholesale grocers. Q. At a meeting between them and Mr. Havemeyer and Mr. Searles? A. At a conference granted to us by the sugar people; they had various interviews. Q. Who besides Mr. Searles and Mr. Havemeyer was present representing the sugar refiners? A. Different gentlemen whose names I cannot recall, at different times. Q. Was a representative of the Mollenhauer Company there? A. That was not in existence at the time. Q. Was a representative of the Howells present? A. Mollen- hauer and Howell are all one, are they not? Howell is agent for Mollenhauer, if I remember rightly. Q. Are these two sugar refining companies, one B. H. Howell, Son & Co., and the other, the Mollenhauer Company, in this State, in apparent competition with the American Sugar Refining Com- pany? A. My knowledge is — I have no definite knowledge; we buy largely of the Mollenhauer Sugar Refining Company, and Howell is their agent; I know neither; I have never seen them to my knowledge; I know they are agent for the Mollenhauer Com- pany. Q. Were they not in existence then? A. I think not. Q. Was there any competing concern in the State present at that interview? A. I think not, sir. Q. Was McCahan of Philadelphia? A. No, sir. Q. The Franklin? A. It did not extend to Philadelphia; we were only trying to take care of ourselves at that time. Q. Are you affiliated with the Wholesale Grocers’ Association No. 40.] 811 that has jurisdiction over Philadelphia? A. Simply know them, some of them; have no official relation with them whatever. Q. Are you now in communication with the Wholesale Gro- cers’ Association of the various States? A. We occasionally get a letter from some one relating to certain matters; some question of information; that is about all. Q. Are not the policies dictated by you the policies which are in vogue among the various Wholesale Grocers’ Associations of the United States; the policies or practices? A. We have no prac- tices as an association whatever of any name or nature except simply to send out these notices of the price; we have not passed resolutions of any kind nor appointed a committee in many years. Q. Where do you get the prices? A. Those prices come from the sugar refiners every morning. Q. From whom? A. Somebody hangs them up in the office. Q. Who gets the price? A. The secretary. Q. Of your association? A. Yes, sir. Q. Don’t he get the prices of any other food products? A. No, sir. Q. Limited entirely to sugar? A. Yes, sir. Q. Don’t you know that he gets the price from the American Sugar Refining Company? A. I have an impression that the price is hung up in the office of the American Sugar Refining Company and that he goes every day and looks at it. Q. Don’t you know whether he has instructions from you, or from a body that you represent, to go to the American Sugar Re- fining Company and get its price list to be sent around to the wholesale grocers? A. I don’t know where he goes after it; only I have an impression that he goes to the American Sugar Refining Company’s office and sees this paper hung up; I have never been 812 [Senate, there myself, and have never exchanged a word within several years with them. Q. Who draws up the rules and regulations that governs the action of this grocers’ association? A. The only rules and regu- lations ever drawn up were drawn up by a committee appointed at the first meeting we had; I can hardly tell you who were there; it was nearly nine years ago. Q. Have those rules and regulations never been amended since then ? A. Never, sir, to my knowledge. Q. Would you know if they had been? A. I ought to know; must have known,, Q. Does the American Sugar Refining Company itself issue the rules and regulations under which the wholesale grocers act? A. No, sir; not at all. Q. Be a little careful; so far as they have dictated what is known as the terms of sale, have they not? A. No, sir. Q. Will you swear that they do not? A. I swear that I do not kno w that they do. Q. Who prints them? A. I could not tell you, sir. Q. Have you ever had a fund in your association providing for the printing and distribution of the rules governing the action of the grocers? A. Originally we had. Q. I mean since nine years ago ? A. It is a long time — Mr. Lexow (interrupting): They certainly have had the origi- nal rules printed since that time? A. Not to my knowledge. Q. You never have known of the disbursement of a dollar for the printing of rules and regulations governing the sales of sugar by factors employed in your Wholesale Grocers’ Association for nine years back? A. I would not know, sir, if it was done. No. 40.] , 813 Q. Why? A. Because I have nothing to do with accounts and payments of the bills ; I have never seen any. Q. Who has? A. The treasurer. Q. Who is the treasurer? A. Mr. Cowing of the Cowing Sugar Company; his office is in Washington street. Q. Do you know his first name? A. No, sir. Q. You don’t know his first name? A. Cannot recall it just at this moment. Q. How frequently have you seen him? A. Not more than once or twice in three or four years, I think. Q. How frequently have you seen him during the nine years in which this Wholesale Grocers’ Association has been established? A. In the first four or five years frequently; but since then I have no recollection of seeing him at all. Q. Have you any recollection of the disbursement of a single dollar in the printing and distribution of the rules and regula- tions governing the wholesale grocers in the sale of sugar? A. No, sir; I have never had anything to do with the financial part of the enterprise. Q. Has it any financial part? A. Simply dues paid in or ex- pended by the secretary.. Q. Disbursed for what? A. Such as stenographer, typewriter and office rent. Q. If any other expenditures were made you, as president, would know of it? A. No, sir. Q. Would not? A. No, sir. Q. Don’t you audit the accounts of the treasurer? A. No, sir; have never seen accounts. Q. Never presented to you? A. It has been presented at the 814 [Senate, meeting and referred to the auditing committee; sometimes we have only a yearly meeting for the election of officers. Q. You have a meeting once a year? A. Yes, for the election of officers, and we have to send all over town to get a quorum then. Q. Isn’t it true that you send all over town to get a quorum be- cause those who form the association are simply instruments in the hands of the American Sugar Refining Company? A. They are not, sir, in any sense. Q. Have you ever seen that before? (Hands witness book.) A. I have no recollection of having seen it; I may have. Q. Are those the rules and regulations governing the Whole- sale Grocers’ Association? Just look at that carefully a minute. A. They seem to be, so far as my knowledge goes. Q. You have no knowledge as to the authenticity of that docu- ment? A. No, sir; but I have no recollection of ever seeing it. Q. Explain to this committee how it is that these rules and reg- ulations of the association could be amended, revised, printed and disbursed to the members of that association without you, as president, knowing about it? A. Because I have had but little to do with it for several years. Q. Can you name to this committee any person who has suffi- cient knowledge upon these rather important details of the busi- ness to be able to answer? A. I supposed that has been formu- lated by the sugar people, so far as I know; I don’t know; they are the terms of sale, I suppose. Q. Is that the only explanation that you can make? A. Yes. sir; they have dictated certain terms of sale at our demand or re- quest. Q. At your demand? A. And request; yes, sir. No. 40.] 815 Q. They have revised them, from time to time, at your demand or request? A. No, sir; we have — this New York association — has had nothing to do with this matter since six years ago; the last i hange was made at the solicitation of the West; New York had absolutely nothing to do with it, so far as I know. Q. Do you know whether the Louisiana planters solicited a revision of the Wholesale Grocers’ rules and regulations? A. Sugar planters? necessarily not, sir. Q. I mean the small sugar refiners of Louisiana? A. Probably not; I don’t know. Q. Who raised the raw r sugar on their plantations or make it on their plantations? A. 1 ha > 7 e no knowledge of it, sir. Q. Don t you know that they have protested against the rales and regulations of the Wholesale Grocers’ Association made by the American Refining Company? A. I don’t know. Q. For the purpose of excluding them absolutely from compe- tition in the United States? A. I don’t, sir; never heard a word of it in my life; if the chairman will allow me I will explain. Q. Yes; glad to have any explanation. A. Five or six years ago the wholesale grocers of the United States, so far as I know — I can speak for New York — were selling sugar at net cost and with a loss of the expense of doing business; it was producing ruin and disaster to the trade and would have resultel in bank- ruptcy. Q. To what trade? A. The wholesale grocers’ trade. Q. How about the sugar refiners? A. That we had nothing to do with. Q. How about the consumers? A. The consumers are willing to pay for the actual service performed for them; same as I paid five cents to ride down in the cable car to-day. 816 [Senate, Q. They were getting sugar for nothing? A. Same as I would have had I not paid to come down in the cable car this morning. Now they are getting it for two-thirds of the actual cost. Q. They are not getting it; the factors are getting 3-16 of a cent? A. That is about two-thirds of the actual cost of doing the business. Q. Have you read the testimony of Mr. Searles? A. Some of it. Q. That the profit to them on sugar was only one-quarter and that they were giving the factors 3-16? A. Yes, sir. Q. Do you believe that? A. I know nothing about their profits; I know our own; we are making — I had a paper in my pocket — I thought I had lost it — we are making as I estimated yesterday for three years in the way of an average of about 4.42 per cent. ; the wholesale grocers to-day — the average cost of doing business, so far as I can estimate, is 6^ per cent.; so we are losing now about one-third of the cost of doing business; whereas, for- merly we lost the entire cost of doing business in sugar. (Answer repeated.) Q. Then you mean to say that notwithstanding the concession of 3-16 per cent, you are still handling sugar at a loss? A. I de- sire to correct those figures; I find it is about 4.32 per cent, for three years ; our gross profit was 4.32 per cent. Q. When you speak of “our” whom do you mean? A. I mean my own firm individually. Q. You don’t handle sugar only? A. No, sir; we handle all kinds of groceries; but sugar is 30 per cent, of the trade, a very large item. Q. You mean to say that in your own individual business your system of distribution is such that, so far as you are concerned, ]S T o. 40.] 817 you don’t handle sugar at a profit even with 3-16 per cent.? A. As near as I can estimate. Q. You don’t assume to speak for anybody but yourself? A. Only that we are a type of the rest; as it is with us, it is with others in the same line of business. Q. How do you know? A. General observation. Q. What observation have you had? A. Forty years in busi- ness; I know the general cost of doing business. Q. What peculiar situation has presented itself whereby you have been able to judge of the profits made by others? A. Sim- ply know the general cost of doing business. Q. I call your attention to the third subdivision of this code of rules. “Changes in price of sugars shall take effect as follows: In that district, known as the Eastern Time District, the price shall take effect at the same moment that the American Sugar Refining Company makes the change in price. Factors in the Central Division of Time shall make change of price thirty min- utes later than that of points in the Eastern Division. Factors in the'Western Division shall make change one hour later than that of points in the Eastern Division. Example : If the market changes at refining point at 10 o’clock A. M., Eastern Standard Time, at points in the Central Division, change shall take place at 9:30 o’clock A. M. Central Standard Time, and at points in the Western Division prices shall change at 9 o’clock A. M., Western Standard time.” Q. That is a rule and regulation that is obligatory upon the promulgation of this uniform code of rules, so-called, upon every wholesale grocer belonging to your association and the other associations of the United States? A. Every one who expects to get a rebate. 52 818 [Senate, Q. Every one who expects to become a factor under the agree- ment of the American Sugar Refining Company, or any other sugar refining company in the country? A. Yes; those are the terms of sale. Q. As I understand you now, it is they, the sugar refiners, who have formulated and fixed this uniform code of rules which has been adopted by the various wholesale grocers’ associations? A. No, sir; never been adopted by any association, to my knowl- edge; certainly not by ours; never been any authority of any name on nature. By Mr. Mazet: Q. Acquiesced in? A. Yes, as individuals; but not by any act of the association. By Mr. Lexow: Q. Do I misunderstand you then ; you said it was the direct ac- tion of the Wholesale Grocers’ Association that secured in the first instance the promulgation of the rules? A. Secured in the first place six years ago ; the adoption by the refiners of what is called the “ limited price system; that was a voluntary system; this new system was adopted on the 16th of October last, when we became factors upon the solicitation of the west and south; all the knowledge I have of that is the fact that I heard from time to time that they were coming here from the West and South and asking the refiners to adopt a factors’ system; I have no definite knowledge; I never saw any of them. Q. Simply rumors that came to your ears? A. The New York Association, so far as I know, had nothing to do with it. Q. Have you never had any relation with the Western and Southern Wholesale Grocers’ Associations? A. No, sir. No. 40.] 81» Q. Never? A. I attended a convention at Cleveland two or three years ago; had an invitation to attend their banquet; this matter was not considered; no business was done in connection with sugar. Q. Then you wish to be understood, do you, that these rules and regulations are the rules and regulations established by the refiners? A. They are their terms of sale. Q. It is entitled “ Uniform Code of Kules; ” I now ask you to answer the question whether you wish to be understood as stat- ing that this uniform code of rules is the code of rules for which the refiners are responsible, and not the Wholesale Grocers’ As- sociation? A. I have no knowledge in relation to the formation of that code of rules and nothing whatever to do with it. Q. You have knowledge of the printing of the original code of rules, have you not? A. Of the original, six years ago? Q. Yes, sir. A. There was no code of rules so far as I know or remember; simply a notice from the refiner that if those who bought sugar maintained the price they would receive a rebate of 18f. Q. At the end of each month? A. Yes, sir. Q. Then the change was made to the end of three months? A. I think I am mistaken; I think it was taken off at the end of each bill; not at the end of the month. Q. Paid at once? A. Allowed on the bill — on each bill. Q. It is not so now? A. No, sir. Q. Now it is three months? A. Yes, sir. Q. Who made that change? A. Made by the refiners at the solicitation of the West and South, so far as I know. Q. The three months’ rule? A. Yes, sir. Q. When did the West and South form itself into a Wholesale 820 [Senate, Grocers’ Association? A. Not as an association; as individuals, as my knowledge goes; by the wholesale grocers from different States. Q. Individually? A. Yes, sir. Q. Not in the form of an association? A. It is possible they represented an association ; never met them when they were here; I heard of their being here. Q. I will read again : “Factors in the central division of time shall make change of price thirty minutes later than that of points in the eastern division.” You see, this is figured down to a mathematical nicety; do you know anything about this partic- ular regulation? A. Only as it relates to us as one of the factors. Q. Only as tj' the terms and conditions upon which the Ameri- can Sugar Refining Company would sell sugar on the rebate sys- tem as made known to you by them? A. To us as individuals; as an individual house. Q. As a factor? A. Yes, sir. Q. I read further : “Factors in the western division shall make change one hour later than that of points in the eastern division.” Do you mean to say that the Wholesale Gocers’ Association has had no knowledge or notice of this regulation or regulations or changes or revisions in them? A. Not to my knowledge. Q. I read: “Example: If the market changes at refining point at 10 o’clock A. M., eastern standard time, at points in the cen- tral division, change shall take place at 9:30 o’clock A. M., cen- tral standard time, and at points in the western division prices shall change a.t 9 o’clock A. M., western standard time.” Q. Do you know anything about that rule or regulation? A. Only as we received it as factor. No. 40.] 821 Q. You received it as factor only? A. Yes, sir; I suppose so: I have no definite knowledge of that; it would not come to me. Q. Did your association in soliciting the refiners solicit them to fix the price of the American Sugar Refining Company’s prod- uct as the standard for the price of refined sugar throughout the United States of America? A. Our association has had nothing to do since six years ago; then it only appertained to> New York. Q. But you say that you acquiesced in this revision of the rules, terms or conditions upon which the refiners do, business? A. As factors. Q. Do you mean to say that it was not your association, but you as individuals — you and your associates — that solicited the refiners of this country to fix in the rules and regulations estab- lished the price for your association or the members of it — the price of the American Sugar Refining Company as the standard whereby all refined sugars in the United States should be sold? A. I have had nothing to do with the matter of fixing the price or making any arrangement since six years ago last June, last May or June. Q. Then it is the refiners themselves -who have caused this reg- ulation to be made? A. At the solicitation of these grocers from the West and South. Q. Do you mean to say, Mr. Smith — I am asking you now to be deliberate in your answer — that the grocers of the West and South have solicited the refineries of this country to fix the price of the American Sugar Refining Company’s product as the stand- ard "whereby all sugar in the American market should be sold? A. I have no knowdedge "with regard to refiners, the American Sugar Refining Company as separate from other refineries. 822 [Senate, Q. They are all connected? A. I have not been in their office in six years. Q. They are all together in your judgment? A. So far as I know. Q. All work upon one uniform plan? A. We buy as much from one firm as from another. Q. But you as factor under a regulation established by some unknown power fix the price of all sugar you sell in the market according to the price given to yon by the American Sugar Be fining Company? A. Our brokers telephone it; we fix it as tele- phoned to us by brokers, as individuals. Q. Do you fix it in conformity with a uniform plan which you say you receive as factor, and which if you violate you lose your commission? A. We only lose our commission if we sell under the daily price; if we sell for less than we pay; we sell it for ex- actly what we pay for it; we sell it at 4| and get a rebate in three months and ten days. Q. You can’t get that rebate unless you make an affidavit that you have compiled with the rules and regulations established? A. We cannot — no; I beg your pardon — we cannot get it unless we testify that we have not sold within the daily price; that is the only difference in the rules or regulations that I know of; and the daily price is given to us by the broker over the telephone. Q. Do you mean to say, then, that these rules stand for nothing except upon the question of under-selling? A. Don’t stand for anything so far as I know. Q. That that third regulation don’t mean anything? A. I have no knowledge as to the rules whatever; I don’t know as I have ever seen them. Q. Have you not testified that you received a copy of this as No. 40.] 823 an individual factor? A. I have not; it would not come to me; it would go to the man who manages the sugar business; I have no definite knowledge as to the particular instance. Q. So far* as you are concerned in your business you make no distinction between the American Sugar Refining Company’s goods, McCahau goods, the Mollenhauer goods or the goods of any other sugar refining company in the Union, do you? A. Only markets open are the American Sugar Refining Company and the Mollenhauer in this city; we make no difference; we buy as much from one as from the other. Q. And you pay eactly the same price to one that you do to the other? A. I think so; although I do not buy; I know nothing about it. Q. You sell upon the same terms and conditions with reference to the one concern as you do with reference to the other? A. Yes, sir. Q. Same discounts? A. Yes, sir. Q. Same rebates? A. We got the same rebates. Q. .Same allowance? A. We get the same allowance. Q. Same credits? A. We get the same credits. Q. Same percentage in every respect? A. Yes, sir. Q. There is absolutely no difference between one or the other; it is uniform in the entire trade? A. Of thousands of different articles; we have no agreement or contract; if we get 1 per cent, on cash on butter, cheese and flour we are satisfied; there has never been any arrangement of any name or nature. Q. It was so before this agreement system was established? A. Yes, sir. Q. Didn’t you sav that it was so ruinous that you could not make ary money out of the business, and hence this uniform sys- 824 [Senate, tem and plan was adopted? It has not always been the case? A. It has always been the case that we can get 1 per cent, discount for cash in ten days; it has been so for a number of years; this has been done through fierce competition; 1 per cent, is the difference between success and failure. Q. The product of the Mollenhauer concern is fixed by the price of the product, by equality rates, of the American Sugar Refining Company? A. I have no knowledge on that question. Q. Isn’t it a fact, Mr. Smith? A. I suppose that the prices are the same; I never bought a cent’s worth in my life, personally. Q. Now that you have seen this code of rules that applies to what is called the eastern district and the fixing of the American price as the standard of price for all sugar have you any doubt that the factors operating under this agreement fix the Mollen- hauer product according to the price of the product of the Ameri- can Sugar Refining Company? A. I have no knowledge con- cerning it whatever. Q. You do it? A. Do what? Q. Fix the price? A. We fix the price as telephoned to us by our brokers, which comes about 9:30 or 10 o’clock; the price fixed for the day. Q. You fix the price in conformity with the system of rules adopted to guide you in your transaction of the business under the factors’ agreement? A. The only question by which we are guided is to maintain the price telephoned to us by our brokers; that is all the knowledge that I have. Q. Have you a copy of the agreement? A. No, sir. Q. I think I can show you one? A. I have seen them; I saw them when they were first promulgated. No. 40.] 825 Q. Now, Mr. Smith, I am sorry that we know more about your business than you do? A. That is not wonderful at all, sir. Q. Just look at this agreement and state whether or not that is the general plan under which you operate? (Hands witness copy of American Sugar Refining Company’s factors’ agreement.) A. That seems to be; I have not seen that paper. Q. How many conditions are mentioned on the face of that plan in addition to the simple question of cost? A. Well, first condition discount within thirty days; that has always been the condition of all sales of merchandise; less 1 per cent, if within seven days; that is the second condition; “sugars when sold billed in your name;” that we have always done; “that we are to pay all expense and assume all risk;” that we have always done. Here is the only one that affects us: “none of the sugar sold or disposed of by you, either directly or indirectly, for less than daily quota- tions, with freight added, as per quality rate book, nor on more liberal terms;” that is the only rule that we are guided by; that is all there is on that. Q. Then you mean to say that this third rule is the only rule that you are to be guided by? ‘A. If it is the third rule. Q. Say whether it is? A. It is the rule as to price, so far as I know. ! Q. The third rule? Was it the suggestion of the Wholesale Grocers’ Association thav you should net only adhere to the rules, but that in order to be certain you should make oath and file a.n affidavit showing that you had? A. We file an affidavit at the end of each month that we maintained the price. Q. You do? A. So far as I know I have never signed one. Q. Who in your establishment does? A. A Mr. ; I may have occasionally. 826 [Senate, Q. And that is the same recollection that you hare with refer- ence to the agreement; that all that you swear is that you have maintained the price? A. Yes, sir; that is all there is, so far as I know. Q. Look at that form of affidavit and state whether or not that is the form of affidavit that you make? (Witness examines pa- per.) A. That question relates to the price at which it is sold. Q. Is that the form of affidavit that you make? A. Yes, sir. Q. Doesn’t this affidavit compel you to swear that you have complied with the conditions upon which the sugar was consigned to you? A. Yes, sir; those conditions were then subsequently stated. Q. Do you mean to say that the only condition, notwithstand- ing that two additional conditions are mentioned, is the condi- tion as to sale? A. The usual conditions as to terms of payment; of course that is in every contract, and implied in all our pur- chases whether it is or not. Q. You have heard of the “equality rate book,” have you not? A. Yes, sir. Q. You referred to it in that affidavit; you refer to it in the affidavit you sign? A. My business does not use the equality rate book; I have never paid any attention to it. Q. Do you mean that your concern has signed this affidavit referred to in the equality rate book which contains the rules and regulations governing factors under their agreement without knowing its contents? A. It does not govern our house in the city; the equality book has no application in the city; it lias no reference to city trade. Q. Now, did the wholesale, grocers solicit the sugar refiners to compel them to make an affidavit such as this? A. The only so- No. 40.] 827 licitation that the wholesale .grocers made was six years ago, when they solicited them to dictate a limited price and rebate system; they did not require the affidavit; since then I have had nothing to do with it. Q. And these new tangled ideas that have since been intro- duced are not the result of your work, but are the result of the work of the sugar refiners? A. Result of the work of the grocers from the West and South, who importuned them to do it, Mr. Chairman; let me explain why; they would handle sugar for net cost; we found that ruin stared the jobbers and grocers in the face; we went to the American Sugar Refining Company and asked them for relief; we went there six times and spent three hours each time before they would consent; finally they said, “We will get you a list of the customers in New York and New England and the nearby towns tributary, and if you will get 95 per cent, of the people to ask for what you ask for, if they agree with you, we will accord you those terms;” we immediately went to work and got 99 per cent, of the grocers in New England and New York, Paterson, Newark, up the river as far as Poughkeepsie, to ask the refiners to dictate a rebate system ; and they finally, upon the presentation of that paper said they would; I will explain further why the change was made. Q. Then it was the American Sugar Refining Company who handed you the list of their customers and authorized you to get up an association for this purpose? A. It was not an association ; as individuals. Q. Individuals agreeing together on a certain plan? A. Half of these customers never belonged to any association that signed that paper. 828 [Senate, Q. Then there were those outside of the Wholesale Grocers’ Association? A. All of their customers. Q. Your people went to all of their customers upon the list handed you by the American Sugar Refining Company? A. Yes sir. i Q. You secured this meeting of minds upon a definite plain, fix- ing a definite price and definite profits on the sugar trade within your association district; is that true? A. We asked them to grant what we called a limited price and rebate in some form in which they would agree; there was nothing stated as to what that would be; we merely asked them for protection. Q. And they protected you by enabling you to form, or to bring together 99 per cent, of those dealing in sugars, to come in under a uniform plan formulated by them, the refiners, acqui- esced in by you; is that right? (Question repeated.) A. We asked them — Mr. Lexow, interrupting: Is that right? A. That ques- tion is very long and very difficult. Q. Question repeated. A. No, sir; we simply asked them to dictate some form of rebate and limit that would prevent cutting in this territory; I have no recollection of what that document was whatever. Q. You permitted them arbitrarily to fix the price of sugar for the district covered by your jurisdiction? A. Price under which we should sell. Q. Yes, sir; is that true? A. They fixed the price that we should sell no less than we paid; we paid 41 cents; we were sell- ing for less then. j Q. In plain English, you permitted them to fix what the price would be for sugar in your jurisdiction, you agreeing to sell at No. 40.] 829 that price and receive the profit in the form of rebate of 3-16? A. The sugar was sold to everybody alike; if we maintained the price we were entitled to a small rebate; sugar is sold to-day to everybody on earth under the same conditions which they give to those whom they employ to distribute their goods, which entitles them to a certain rebate. Q. Do you mean to have it remain on the record that through- out the world there is no competition? A. If there is no compe- tition? ( Q. If it is sold at the same price everywhere throughout the world how can there be competition? A. We don’t extend all over the world. Q. Then you don’t want to use the word “world.” A. (An- swer repeated.) Q. The earth is about as large as the world? A. That was a mistake; I mean in this territory. Q. You mean in the United States? A. All that I know of is the territory included within the original agreement. Q. What territory was that? A. New York, New England, Long Island, Hudson river as far as Poughkeepsie, Paterson, Elizabeth; that was six years ago. Q. And except as to those original rules have been revised by the sugar refiners they apply to that territory to-day? A. The new system applies to the factor system ; the factor system ap- * plies now; those rules are gone. Q. The system mentioned in this document? A. In the agree- ment which they established. Q. This book? A. I suppose so, although I am not familiar with that book; I have no recollection of that book; will you al- low me to explain why these men demanded, asked for a change? 830 [Senate, Q. We will have someone on the stand to explain that. A. Can I explain why the demand was made for this change? Q. Done so by the north and west? A. Right here in New Y ork ; I know why it was demanded, why it was needed. It was needed because one wholesale grocer’s broker telephoned that sugar had advanced; he immediately got the telephone, and be- fore notice was received by his competitors he had sold one thou- sand barrels of sugar at an advantage over the rest of us. Q. Before the telephone message came that sugar had de- clined? A. It was just the same then; of course, there was no system; that was the time of competition; there was no rule then. Q. There is no law of competition that has not been repealed by the factors’ agreement? A. The law of competition in one sense; it is not in another sense; we sell at a uniform price. Q. Therefore, the law of competition, so far as human ingenuity could devise a plan to destroy it, has been successfully destroyed under this factors’ plan; that is true, is it not? A. Under the same principle that a drowning man grasps a straw. Q. And on the same principle applying to every trade in the country, a factor’s system of this description, there would not be a single article sold in the open markets of the United States but that a syndicate would fix the price on everything from a plough- share to a twenty-five story building? A. If all the goods of uniform quantity, quality and price were left to competition they would be sold at absolutely net cost on the whole trade in the United States; trade would be absolutely ruined and worse pros- tration and disaster than now exists would soon occur all over this country. Q. Why has that not been the case for the last eighteen hun- dred years of the Christian era prior to the organization of these No. 40.] 831 syndicates and these non-competitive associations? A. Simply because twenty-five years ago there was not 5 per cent, of all the goods sold at retail that were of uniform quality, quantity and price; at that time there were goods upon which a margin could be made; a margin was always maintained on sugar, which was sold in hogsheads; now I should estimate that 75 per cent, of all goods that we sell are of uniform quality, price, quantity and cost ; and the price of the one-hundredth, the other ninety-nine, must immediately follow. Q. A splendid chance for the consumer? A. The consumer simply has to remunerate us for the service we perform ; same as I paid the five cents to ride in the cable car ; and the consumer does not find fault. Q. Don’t you know that when you paid five cents for the ride that that price was fixed by law, and the State assumed to con- trol and regulate the price? A. Yes, sir. Q. Now, do you not say that under a system of this kind the result would be as I indicated in my former question? A. I think- the more Congress and the Legislatures lets business alone the better for the entire country, the entire community, the mer- chants and laboring men, whose interests are the same; the mer- chant and the laboring man are one and inseparable; and any effort to restrict the channels of trade will result disastrously to all three classes. Q. Admitted; but is not this a restriction of the channels of trade when you create a cast iron anti-competitive or anti-opposi- tion agreement covering the whole United States of America on one of the necessaries of life? Is there or was there ever any greater restriction conceived of by man than this? A. I have no knowledge of what restrictions were conceived of. 832 [Senate, Q. How about coffee; have you any factors’ agreement? A. We don’t handle any coffee of that kind. Q. You don’t handle the Arbuckle brands? A. I am very thankful to say we don't; if that particular Arbuckle brand be- comes popular the last solvent wholesale grocer will soon be seen; it will not become popular, because it is inferior goods; peo- ple want the best goods. Q. Do you say that the Wholesale Grocers’ Association has taken no action on coffee? A. On anything. Q. On sugar? A. Not in the seven years that I have named of any name or nature; I have no recollection. Q. Nor on soda? A. No, sir; not to my knowledge. Q. It has been admitted on the stand that the Wholesale Gro- cers’ Association, operating through factors’ agreements for the benefit of Church & Dwight, control substantially the package soda business of the State; was that testimony true or false? A. I only know that our association had nothing to do with it. Q. It is with special reference to your association? A. You are mistaken. Q. It is with reference to the State of New Jersey and New Jersey is under your system; it is charged one cent more than any other State in the United States? A. I am very sure that our association have never taken any action ; never appointed any committee in relation to the subject; if there has I have no knowl- edge. Q. Isn’t the Wholesale Grocers’ Association simply the tail to the kite of the American Sugar Refining Company? A. No, sir; in no sense. Q. In its interest? A. So far as I know the Wholesale Grocers’ Association has nothing to do with the sugar refining business or with the price as sent out in the notices. No. 40.] 833 Q. How do you make that square with the statement on the back of this code of rules revised and approved by the sugar re- finers? A. I have no recollection of that pamphlet. Q. You have no doubt about its authenticity? A. Who wrote it and who prepared it, I have no knowledge whatever. Q. Can’t you, as President of the association so largely inter- ested in this question, make a guess? A. No, sir; I could not intelligently; I have no knowledge; I am not a good guesser. Q. Mr. Walker, Treasurer of the Church & Dwight Company, swore under oath on the stand here that the Wholesale Grocers’ Association coerced their company into the making of these fac- tors’ agreements; do you mean to state, as President of that asso- ciation, Mr. Smith, that Mr. Walker was mistaken when he made that statement? A. I think he was if it relates to our associa- tion. Q. It does? A. He is mistaken; some of the individuals may have; nothing has been done in that association, as I have never appointed a committee. Q. What have you appointed a committee to do? A. I have not appointed a committee in six years to do anything. Q. Was it then at your own instance that you were examined in Washington on the sugar schedules? A. Never was. Q. W T ere you not there? A. I have no recollection; I have been there so many times on so many questions. Q. Were you not examined with reference to sugar within the last year? A. No, sir; I am absolutely certain. Q. Somebody bearing the same name? A. I was there last month to attend the National Board of Trade meeting. Q. Was any committee appointed by your association? A. No, sir; we have not had the sugar question under consideration 53 834 [Senate, in our association in six years, in a meeting of any kind or de- scription that I am aware of. Q. You wish to be understood, do you, that you were operating as you understood under the original rules, except as they might be revised or amended by the sugar refiners? A. I understood that the sugar refiners simply dealt with us as individuals and not as an association ; the association has not amounted to much for a great while. Q. It has not? A. No, sir; cannot get an attendance together in the city. Q. Do you report to the American Sugar Refining Company, or any other refiners, violations of this so-called factors’ agree- ment ? A. I have no knowledge of any reports ; no knowledge of any violations. Q. Have you ever reported violations? A. Not under the factors’ agreement; no m Q. Has the Wholesale Grocers’ Association ever called the at- tention of the refiners to any violation of agreements, factors’ agreements? A. I have no knowledge of any. Q. Would you know if the Wholesale Grocers’ Association had called the attention of refiners to the violation of the factors’ agreement? A. I wouldn’t know if anybody had written a letter or called attention; I know there has been no action of the asso- ciation of that nature. Q. Then, if it has been testified to here that suspensions of fac- tor * 5 agreements have been had at the instance of the Wholesale Grocers’ Association that testimony is not true? A. I don’t know anything about it. Q. You would know if it ever occurred? A. If it occurred a a an official act. No. 40.] ( 835 Q. I am talking about that. A. There has been no action of the association in many years except to elect officers and have a din- ner; once in two years we have had a dinner; we have had no ex- ecutive committee meeting in more than a year; can’t get a quo- rum. Q. Isn’t it true that the American Sugar Refining Company has adopted for its plan a system of destroying direct sales to retailers? A. No, sir; not to my knowledge. Q. That it refuses to sell to the retailer? A. I am sure that it does not refuse to sell to the retailer. Q. Do you know that is a fact? A. I know a large number of retailers who are regular buyers. Q. They refuse to sell to those who deal in foreign sugars? A. No, sir; it does not. Q. Do you state that as a fact? A. To my knowledge. Q. What is your knowledge? A. There has never been a word said about it; we can buy all the foreign sugar we wish. Q. Do you ? A. It is unprofitable. Q. Do you? A. We have never wanted to. Q. Isn’t it a fact that you could undersell that company about a half a cent per pound if you did thereby vitiate your factors’ agreement; and if you did so you would receive no more sugar from that company? A. I have never heard a word from the re- fining company that would prevent us from buying all foreign sugars, either here or in Europe, that we desired to buy. Q. Isn’t there an understanding with the wholesale grocers that they shall not buy? A. I never heard of such an under- standing. Q. Do they as a fact? A. I don’t know. 836 [Senate, Q. Don’t you know as a fact that they do not deal in a ton of foreign sugar? A. I know that we don’t. Q. Does anybody who operates under this factor’s system as- sume to sell a single pound of sugar outside of those contained in the pool, the price of which is not fixed by the American Sugar Refining Company? A. I would have no means of knowing. Q. Do you know? A. I do not know. Q. Do you not know that the American Sugar Refining Com- pany has withdrawn its factors’ agreements from those operating under that agreement who have assumed to sell at retail at some time? A. No, sir; a large number of retailers have factors’ agree- ments or buy their sugar; I can name a large number. Q In lots of less than 100 barrels? A. They don’t sell lots less than that and never did. Q. You don’t know of any one who deals in lots of less than 100 barrels? A. I don’t think we could buy 99 barrels; that is my judgment. By Mr. McCarren: Q. You mean to get the rebate, the percentage? A. At any price, so far as my knowledge goes. Q. Could you buy 25 barrels? A. I am not certain; my im- pression is that we could not buy less than 100. By Mr. Lexow: Q. You say that you sell the Mollenhauer sugar? A. Yes, sir. Q. Do you do that under a factor’s agreement? A. Yes, sir. Q. In words and figures the same as that signed by you in your transactions with the American Sugar Refining Company? A. I have never compared them, but they seem to' be the same. No. 40.] 837 Q. Exactly the same? A. I don’t know ; they employ the same rules without doubt. Q. You make the same affidavit? A. Yes, sir. Q. Now, you say that the sale of sugar is absolutely indispens- able to the prosecution of a successful jobbing business? A. I believe so, sir. Q. Have you not stated that that was absolutely true? A. In my judgment; I never knew a wholesale grocers house that didn’t deal that way; I should think it would be business paralysis to give up sugar., Q. Hence, the making or unmaking of a jobber in the United States depends entirely upon whether or not that jobber secures a factor’s agreement from the American Sugar Refining Com- pany or its allies; is that true? A. The making and unmaking depends upon whether he can get a profit on sugar. Q. He cannot get it unless he can be received in good order by the American Sugar Refining Company and its allies in this coun- try? A. He cannot secure it except by the aid of the refiners. Q. I put the question to you directly; therefore the making or destruction of a grocer in the wholesale business in the United States depends upon the arbitrary decision of the American Su- gar Refining Company or its allies? A. The destruction of the wholesale grocer depends upon whether he is left to the laws of fierce competition for existence; it is the business of the Ameri- can Sugar Refining Company and all owners of 100 or more sta- ple articles to come to the rescue of the grocers by giving to us the aid of a rebate system; the destruction does not depend upon the refiners nor upon the owners of soap, milk nor starch; that is what prevents destruction ; they have come to our aid very gen- erously and said if you will help to handle our staple goods we 838 [Senate, will help you to obtain a reasonable margin of profit; and most of the margins we get are less than the actual cost of doing the business; for instance, on Royal Baking Powder we get a percent- age on the cost of doing business. Mr. Lexow: The stenographer will please repeat the question. (Question repeated.) Q. In the granting or withholding of a factor’s agreement? A. The law of competition — Mr. Lexow (interrupting) : Now, that is a fair question. (Ques- tion repeated.) That is a fair question, is it not — that is true, is it not? A. The only power that can rescue the wholesale grocers from destruction is that of the sugar refiners of America; there are two classes of grocers; the one whoi has a large importing business; I mean the dealer in staple goods who buys and sells staple goods; there are large institutions that are great import- ers; they handle mostly imported goods; but the dealer in staple goods, so far as my 40 years experience in the business enables me to judge, must have the profit on sugar in order to maintain his business at the ratio of 1 per cent, net profit; without that he cannot maintain himself. Q. I will put the question so simply that yon cannot avoid the conclusion; therefore, the making or unmaking of a wholesale grocer depends upon whether the sugar refiners operating under this factor’s system grant him or refuse to grant him this factor’s agreement? A. I cannot answer “yes” or “no;” is is impossible without making an explanation; the unmaking of a wholesale grocer is a question entirely without the control of the sugar re- finers; the making of him is largely within their control. Q. I will put the question this way: If a wholesale grocer, operating under a factor’s agreement for the sale of sugar, is No. 40.] 839 compelled to surrender that agreement; that factor's agreement does not destroy him as a business man? A. He would find it pretty hard sliding to get along. Q. As competing with those who are permitted to operate un- der factors’ agreements it means his financial destruction? A. It means certain financial loss; I could not say destruction; that depends upon his financial condition and the capacity of the man. Q. You have stated that a man must handle sugar in order to do a profitable business, and that business could not be conducted without this 3-16 rebate is paid; now, I ask you whether a man not operating as a factor in the wholesale grocery business can do a profitable business? A. He would be put to a great disad- vantage in competition with his competitors; that is the most I can say. By Mr. McCarren: Q. Suppose the wholesale grocers of the State, individually or collectively, requested the American Sugar Refining Company to cancel all the agreements now in existence between the wholesale grocers and the American Sugar Refining Company, doyou think the American Sugar Refining Comany would cancel them? A. I think they would be delighted to cancel them, as it involves an enormous amount of work; the only motive that led them to as- sume this enormous amount of work was this, they have a large amount of money in accounts receivable of wholesale grocers — very large — and they should maintain the wholesale grocers in a solvent condition ; if they didn’t they would have a very large amount of loss in accounts receivable; that is the only motive we ever presented to them. Q. In other words, did the wholesale grocers request the can- 840 [Senate, collation of agreements now existing between the refiners and the wholesale grocers, in any event, every grocer would be a factor provided he had sufficient financial standing; suppose that the agreements were all cancelled would not every grocer, wholesale or retail, in the United States be, so to speak, a factor, provided the American Sugar Refining Company thought he had sufficient financial responsibility? A. If the factor plan was withdrawn. Q. Yes, sir. A. If that was withdrawn there would not be any factor; we would be fighting each other for the business; and having — Mr. Mazet, interrupting: And each grocer could make the best terms possible with the company from which he was buying goods? A. That would make a uniform price and we would sell the goods for cost. Q. Was there a uniform price before this system was intro- duced? A. Always. Q. How do you apply this rule of uuiversal price of sugar; so far as I know there is no such regulation in clothing; yet, the clothiers seem to be getting along, and they are not all being ruined or driven out of the business; and if that is the case, why should not your rule apply to all industries of the kind I have in- dicated? A. For the simple reason nobody can tell within 5, 10 or 15 per cent, of the actual cost of a suit of clothes; nobody could tell except an expert; not being a retail clothier, I could not tell; therefore, there is always room for a margin; every re- tail grocer looks in the paper the first thing in the morning and he knows the price of sugar. Q. Isn’t that because it is fixed and published; it is fixed each day by the refiners? A. They read it in the paper. No. 40.] 841 Q. Don’t they fix it from the figures that are given out by the refiners? A. Same as every article on earth. Q. Precisely; you take the current quotations? A. They have the market quotations. Q. Well, people who handle other other classes of goods, the prices of which are published in the newspapers, seem to be pros- perous without any such agreement? A. Simply, because two cargoes of oats or wheat are not of the same value; they have a fluctuating value and varying quotations. Q. That is begging the question; they fluctuate because there is no fixed standard? A. Granulated sugar is granulated sugar in dollars and cents. Q. And an oat is an oat? A. No, sir; oats are worth from 80 to 40 cents. Q. Well, the same quality of oats, the same standard or brand ; or wheat or rye? A. There are certain brands that are well known; there are now two brands that have a regular standard value, the price of each one is fixed; on each one separate, you can make a little money; you can make a little money on flour, be- cause nobody knows exactly the value; but you take granulated sugar and it is dollars and cents; everybody know r s to a fraction what it is worth; when the duty was taken off of sugar it declined from 21 to 14 in one night; in order to obviate that sugar was manufactured in bond and sold in bond; it was kept in the cus- tom house until the morning of the first day of April; we bought sugar in bond and sold in bond, at 41 net to get 4| on the whole trade; finally, the one hundredth man offered sugar for 4i, and result was that thousands of tons of sugar were sold in New York city at 41 because the one hundredth man wanted to get the best of the rest of us that is the principle of competition; we 842 [Senatb, were compelled to store sugar and pay storage upon it and then sell it absolute net cost, 4A, under the laws of the one hundredth man. By Mr. McCarren: Q. Do you know what the practice of the refiners was prior to the Wholesale Grocers’ agreement with them; that is to say, with reference to the selling of sugar; was there any variation in the price between the grocers that purchased from the American Sugar Refining Company; did the refiners make any difference in price? A. Perhaps for very large quantities they made conces- sions that is done in nearly all businesses; but I think there was uniformity of price before the formation of the so-called associa- tion; you could go into Wall Street and they would all make their own price. By Mr. Lexow: Q. That was considered a terrible condition of trade? A. There was no time that he sold a barrel of sugar that he lost less than half a dollar; Mr. Harrison, of Harrison & Frazier, of Phila- delphia, told me that there was no time that he had manufac- tured a barrel of sugar that he had not lost half a dollar; that was told to me by either Mr. Harrison or Mr. Frazier eight years ago. Q. Don’t you know whether the American and other refiners have refused to sell sugar to wholesale grocers unless under a factors' agreement? A. No, sir; only as a matter of credit. Q. Was there any reason then other than the suspicion of credit, in your judgment, tlmt would prevent the making of an agreement between the refiner and the grocer applying for that agreement? A. No other. No. 40.] 843 By Mr. Mazet: Q. Was there not another reason that they would not sell under a certain number of barrels? A. They sell in 100 barrel lots, but maybe they sell 25 barrels at higher prices; we have never bought in small quantities; I have an impression that they never sell less than 100 barrels; they used to w r hen the competi- tion was fierce. S By Mr. McCarren: Q. In buying your soap or canned goods or butter what is your practice in dealing with the person from whom you buy? A. In what way? Q. With reference to the time in -which to pay, with reference to discount or rebate or elements of trade that enter into your negotiations? A. Almost every article, everything that is bought on Monday is paid for on the next Monday. Q. As to uniformity in the price, is there any difference in the price of the same grade of butter? A. I am not a butter buyer. Q; Is there any difference in the same grade; isn’t most of it sold on a limited price system? A. Uniform price — limited price. Q. What do you mean by limited? A. Rebate for maintaining the price. Q. Does that involve a uniformity of price? A. That is abso- lute; we have over 60 different articles of manufacture sold on limited price. By Mr. Barry: Q. As the result of combinations? A. If a man wants us to handle his goods we will do so at a slight profit. 844 [Senate, By Mr. McCarren: Q. So that practically in buying your soap or other articles a factor’s agreement is substantially in existence, although no agreement is entered into? A. No word or agreement; we send our theck and take out our profit; no word or agreement of any kind in existence; they simply say to us, you take our goods and we will allow you the profit if you make no reduction. Q. No written agreement? A. No, sir. By Mr. Mazet: Q. You said a moment ago that the grocers have been edu- cated to demand these terms? A. Yes, sir. Q. This limited price system; that would simply corroborate Mr. Walker, who said that his company was coerced into making this agreement? A. By individual grocers. Q. You make the distinction that it is not done by the Whole- sale Grocers’ Association? A. Simply as individuals. Q. So, that, to a considerable extent, manufacturers are under the domination of the association, not as an association, but as in- dividuals? A. They are not under domination in any sense; if they want to avail themselves of the use of our plan for the dis- tribution of their goods and we want to sell them there is no domination ; we have 60 different articles and there are no rules. Q. But you expect them to fix a price and you maintain it; you compel them to fix a price? A. No, sir; we don’t compel; we sim- ply say that we don’t want to handle the goods. Q. That is another way of doing the same thing? A. Well, possibly; they didn’t compel me to ride on the cable car, but I did and paid them five cents. No. 40.] 845 By Mr. McCarren : Q. Then, the action on the part of individuals, or wholesale grocers, in importuning the Sugar Refining Company to make this agreement by which you are not permitted to sell under the daily quotations, was, in other words, a request on your part to save you from yourselves? A. That is it exactly; to save us from the law that enables the one-hundredth man to fix a price at which the other 99 must sell ; nobody will pay more than the list price named by any man in the trade. By Mr. Barry: Q. Would yon consider those factors’ agreements necessary if there were 50 different refiners in the United States? A. I don’t think that would be possible if there was another refiner; if the Arbuckles build a refinery it will put an end to the whole busi- ness; I never supposed it would last three months when it com- menced; do not suppose now it will last three months. By Mr. Lexow: Q. Why then have Mollenhauer’s lasted? A. Simply because, as Mr. Harrison says, we follow the “trust.” Q. Because they have an agreement between themselves? A. No, sir; Mr. Harrison or Mr. Frazier, I don’t remember which, said, “before the Trust was formed we lost half a dollar; but while we are opposed to trusts, since then we make about 70 cents by following their price and we are making money”; that is what one of those gentlemen told me. By Mr. McCarren: Q. Why would the erection of a sugar refinery by Arbuckle prevent the operation of an agreement? A. Because Arbuckle would cut the price. 846 [Senate, Q. And thefactorswouldceasetodeal with the American Sugar Refining Company? A. They would buy where they could get it the cheapest; he would be the one hundredth man and set the price for America; the business is entirely open and free to any- body that wants to put capital into it. Mr. Mazet: And willing to hazard it? Q. According to your theory the one hundredth man could fix the price of any kind of product, even drugs? A. No, sir; that is not of uniform quality; but take Royal Baking Powder, and the one hundredth man can fix the price for which it is sold in the territory around New York; he could not in drugs or in but- ter, or in flour, except some standard brands that have a large sale; take an article like Babbitt's soap, and he can absolutely fix the price. By Mr. Lexow: Q. Mr. Smith, is it not true that all future competition in the sugar business is practically removed by the system of factors’ agreements and the fear of factors that they will not be able to recover a lost agreement of the present sugar syndicate if they should buy from a new concern? A. I don’t see how the element of fear enters into it; there is no fear about it. Q. The larger the syndicate that controls the sugar system the greater the ability to buy up any competing concerns and retain that control; isn’t that true? A. Under this system every whole- sale dealer can sell sugar and buy it on equal terms with the very largest house in the trade; a great house that overshadows the rest of us has no superiority over us in the sugar line; it buys on an exact equal basis. Q. You must always provide that the smaller house refrains No. 40.] 847 from competition by adopting the price set through the factors by the larger house? A. The price is set by the refiners; we don’t make any price. Q. I am speaking of refiners; I am speaking of sales to you or through brokers? A. They all pay the same price. Q. And whether Tom, Dick or Harry sells to you, or whether you get it directly from the American Sugar Refining Company, or through the medium of an intermediary, you are bound under your factors’ agreement to sell that sugar at the price fixed from day to day by the American Sugar Refining Company? A. We do; it is all one price. Q. In this way you are able to and are building up an instru- ment for the perpetuation of a substantial monopoly in the hands of the present sugar refining company? A. No, sir; for the rea- son that it is open to all capitalists to enter into the business; they can be broken up in three months. Q. Is it not true that fear of the factors violating this factors’ agreement, which you say is the basis of successful business, is the thing which deters him from giving any recognition to a com- peting concern? A. I don’t know as I understand you. (Ques- tion repeated). A. There is no element of fear in it. Q. The fear that the factors’ agreement will be withdrawn from him by the syndicate which now controls 100 per cent, of the entire sugar output? A. That would be all; one syndicate con- trols — Mr. Lexow, interrupting: You have so testified? A. I have not testified to that. Q. You have testified that the American sets the price and that there is no competition between the price of refiners? A. I said the refiners of the Atlantic coast; when I speak of the re- 848 [Senate, flners I mean the refiners of the Atlantic coast; sometimes they are so large that they overshadow the rest — I mean four refiners. Q. They are so large that they overshadow all others; is it not true that you are lending yourself as an instrument by the estab- lishment of this factor system to perpetuate that monopoly? A. No, sir; not in any sense; the Mollenhauer institution has come since we have had the rebate system; they built their refinery and built another in Yonkers — I think it belongs to them; there are two more in operation in Philadelphia — independent refineries. Q. Since when? A. Since the first agreement. Q. How many have gone out of existence? A. None, except they have been bought out. Q. Bought out and closed A. I think none since then; there is the Revere in Boston. Q. Don’t you know that the Franklin Refinery is out of blast; that was since then; it is only six months; don’t you know that the Delaware is not running? A. But they do not run when there is no market; the Revere in Boston has always been an in- dependent refinery, entirely independent of the so-called Trust combinations. Q. But no competition? A. Yes; they used to two or three years ago; they would sell ten barrels to a retailer at net price. Q. I am speaking now as regards competition under your fac- tors’ agreement; there is no competition in the United States A. I think the Revere sells to retailers at cut price to day. Q. Have you not stated that you have produced a situation where sugar is worth dollars and cents? A. Always was. Q. Do you mean by that that there was no fixed price for sugar? A. No, sir; it varies every day. Q. Isn’t everything intrinsically worth something? You have No. 40.] , 849 fixed a definite ascertained price for sugar? A. No, sir; the law of nature has fixed the price; we have not fixed it; the law of sup- ply and demand has fixed the price; it has made sugar an article of'equal and exact value every day. Q. Do you call the American Sugar Refining Company the law of nature? A. No, sir; but I sav raw sugar was created by the law of nature., Q. You agree to sell at their price? A. Yes, sir. r Q. That company fixes the price? A. Four companies fix the price — I think there are four — two in New York. Q. You have stated on the stand, Mr. Smith, that the American Sugar Refining Company fixes the price and that the Mollenhauer follows? A. Whenever I have stated “the American” I meant the sugar refiners of the Atlantic coast, the whole of them; you say custom; that has application to the whole refiners; I used it in that sense. Q. Is it true or is it not? A. When I meant the American I meant the Mollenhauer as well. Q. How could you have meant that when you said that they followed? A. If I did make a mistake; I have no recollection of saying it. By Mr. McCarren : Q. Is it not true, so far as you know, that the independent or outside refiners are at perfect liberty to sell at lower than the rates established by the American Sugar Refining Company if they see fit to do it? A. I have no reason to believe that — Mr. Lexow (interrupting) : Through factors? A. In any way they choose. 54 850 [Senate, Q. I mean through the wholesale grocers’ factors? A. Cer- tainly. , Q. Then I call your attention- witness (interrupting) : So far as I know. Q. Then limit your answer to your own association; do you mean to so swear? A. Swear to what; I don’t know. Q. Do you mean to swear that the independent refiners could undersell, cut the price or deal in sugar at all through factors es- tablished under the Wholesale Grocers’ Association in view of the third rule of the uniform code of rules governing factors, which reads as follows: “Changes in price of sugars shall take effect as follows: In that district known as the eastern time dis- trict, the price shall take effect at the same moment that the American Sugar Refining Company makes the change in price”? A. It would seem to be there; that is with the American Sugar Refinery Company and not with the Mollenhauer Sugar Com- pany ; it has no application to that. Q. That is the plan; are you trying to evade the question by giving that answer? A. I am not, sir. Q. This is the Uniform Code of Rules for the sale of sugar under the factors’ agreement? A. Under the agreement of the American Sugar Refining Company. Q. Now, I ask you, Mr. Smith, after calling your attention to the rule, whether you still insist that any competing lefinery can compete, undersell, or put its product upon the market under factors’ agreement except as its price fixed by the American Sugar Refining Company? A. I know of nothing to prevent the Mollenhauer Company from selling sugar at any price it pleases. Q. Then, all your testimony before given upon this point in which you said that Mollenhauer followed the price fixed by the No. 40.] ( 851 American Sugar Refining Company, you now desire to correct? A. I don't think that I testified to any such statement. Q. Have you testified that the statement is true or false? A. I testified without knowledge if 1 did; I have no knowle_ge upon that question. By Mr. Mazet: Q. You have testified that the factors’ agreement and affidavit are substantially the same, and that you bought from Mollen- hauer and from the American Sugar Refining Company? A. That does not prevent us from buyiug to-day from the American at 4g and from tlm Mollenhauer at 4 5-16; in each case, we enter into an agreement; we could not sell the American for less than 4f, but if we bought the Mollenhauer for 4 5-16, we could sell it *o far as I know. By Mr. Lexow: Q. Will you swear that you can? A. I won’t swear that I know we can; I have no knowledge to the contrary. Q. Don’t you know that you have not given this committee a l direct answer to the question ; why do you seek to evade the question in that way? A. I have not been in the habit of stating for a fact something that I don’t know. Q. You say you don’t? A. I don’t know that there is any rule to prevent tw o different prices ; never, any more than I say now. Q. Is that book referred to in your affidavit that you file for three months’ sales of sugar? A. We don’t file any; we don’t use the equality book in our business. Q. Is that equality rate book mentioned in the affidavit? A. We don’t use it; I suppose that is the one referred to. Q. Do you know whether it is or not? A. I think so. 852 [Senate, Q. This testimony was put in evidence in the testimony of Mr. Post, a representative of the Mollenhauer and B. H. Howell, Son & Co.? A. He knows about it. Q. Will you swear that this is not the equality rate book? A. I stated that I have a general knowledge that there is a equality rate book; I suppose that is the book; I have never had occasion to examine it or use it. Q. You have never looked at the rules or regulations? A. No, sir; not to my knowledge; I suppose that it is the same as in the factors’ agreement. Q. Why do you suppose? A. If it is there; same thing would be there; I don’t know as to their rules and regulations; in our business we have no equality rate book because we trade in the city. Q. Will you name, so far as you can name, the sixty different kinds of staple articles that you handle as factor? A. I could not name a quarter, a tenth of them. Q. Name all you can? A. There is no factors’ agreement in any sense; they simply say sell our goods and send us a check and take out the pay for the work you have,done; there is no agreement of any name or nature. Q. You understand the characteristic difference between sale and consignment under a factors’ agreement, don’t you? A. Yes, sir. Q. Now, I ask you to state as many of the articles that you can which you sell under a consignment agreement, whereby the price of the article is fixed by the producer and you receive in compensation for a maintenance of that price a rebate on your sale? A. We have no rule or consignment agreement. Q. Now? A. No, sir. No. 40.] 853 Q. When you testified then that there was sixty articles that you sold under agreement, either written or verbal, on the con- signment plan on which rebates were given in consideration of maintaining the schedule of price of the manufacturer, were you mistaken or not? A. No*, sir; I was not mistaken; we get a re- bate, but it is not under an agreement or consignment; we buy the goods and pay for them. By Mr. McCarren: Q. On conditions imposed by the sale? A. Some on conditions imposed by ourselves, some on conditions offered by the manufac- turer; for instance, when we formed an association we went to them and tried to get some kind of concession, but they refused absolutely to aid us from year to year; and finally, a little over a year and a half ago, they came to us and said, “If you will in- crease our sales 10 per cent, during the current year we will give you a bonus at the end of the year of 5 per cent”; that is one of the styles in which it is done. Q. You say Royal Baking Powder? A. We handle their goods for net; we buy a thousand dollars worth and it does not make one cent difference. Q. Have you any written agreement to that effect? A. No; of any name or nature; they simply made that proposition to inter- est us in selling their goods so that we will push their goods and increase their business; they say if you will do this we will give you 5 per cent, on your purchases; that is all. By Mr. Lexow: Q. Why, Mr. Smith, in answer to my former question did you apparently seek to justify the American Sugar Refining Com- pany’s factors’ agreement by reference to the fact that you did 854 [Senate, practically the same kind of business in the sale of 60 other staple articles? A. The refiners were the first ones about that we asked, as that is a very important item in our business, and the others grew out of the various conversations and importunities on the part of the different wholesale grocers. Q. You seem very anxious to emphasize the fact that you have been coercing these manufacturers and importuning and solicit- ing them? A. I urged the manufacturers that if they wanted our services and our plan of distribution for their goods that they must see to it in some form which might be devised by them that we would be remunerated for the service that we performed in the distribution of their goods. Q. Now, you wish to be understood that with reference to 60 other staples you do not calculate to sell without the assurance of a profit to yourself and without any understanding or agree- ment of any kind except that you rely upon the philanthropy or generosity of the producer of that article to give you some kind of rebate? A. In most instances absolutely; we have sold some articles under this rebate system for 25 years. By Mr. McCarren: Q. Don’t grocers like Park & Tilford and Acker, Merrill & Con- dit and others do this? A. Oh, yes; so does Butler and Callahan in Vesey street; they all buy sugar same as we do; there has never been any effort to prevent it; I believe in the most open and free competition consistent with a reasonable margin of profit; when the merchant performs service for the manufacturer and the public he should have adequate remuneration; any system that would be opposed to this would be against public policy and the best interests of all the people. No. 40.] 855 Mr. Lexow: That is a self-evident proposition; I do not think anybody disputes that. A. Except by the aid of a limited price system all staple goods are necessarily sold at absolute net cost, and I know of no way to prevent it; I wish somebody would in- vent or discover some other way; what this country wants, above all things, is at least 1 per cent, profit on all commercial trans- actions; there are 83,475,640,203 of railroad stocks that cannot earn 1 per cent; it would go through the channels of trade and restore prosperity at once if they could, but they cannot do it be- cause competition has driven the business down until to-day they are carrying at one-fourth of the rate of 40 years ago. By Hr. McCarren: Q. I understand that you regard your association as a sort of vehicle through which goods are transmitted and distributed, and that that vehicle is charging a certain percentage for the ser- vices performed ? A. I have said repeatedly that our Wholesale Grocers’ Association amounts to very little; we cannot get them to attend a meeting; at the time when we have an annual meet- ing to elect officers we have to hunt around the streets to get enough to make thirteen. Q. Is that your position individually or collectively? A. The wholesale grocers individually are striving to catch on to every straw that will help them. Q. As distributers? A. Yes. j Q. Getting a percentage for services performed? A. Yes; get- ting remuneration for services performed; this we must have; we cannot afford to serve the public with food for nothing. Mr. Lexow: Your justification is that in order to secure that you are compelled to maintain the price fixed by the refiners? A. Of all manufacturers. 856 [Senate, UNIFORM CODE OF RULES FOR THE SALE OF SUGAR UNDER FACTOR AGREEMENT. APPROVED BY THE REFINERS. In Effect June 1, 1896. CODE OF RULES. For the guidance of factors in the sale of refined sugar in all territory east of the Rocky mountains. In view of the necessity for uniform rules governing the sale of refined sugar under the Factor plan, the following is ordered as effective on and after the first day of June, 1896, in all the territory above mentioned. A strict compliance with the fol- lowing rules and any others that may hereafter be adopted, is essential on the part of every Factor, in order to make the plan efficient. To the end that it may be perpetuated, violations will be subject to the rigid enforcement of the conditions of the plan without favor. FIRST. All sales of refined sugar must be made strictly according to the Equality plan, and in accordance with these rules. SECOND. I order to equalize cost to buyers in towns where local jobbers deliver free of cartage to customer’s store, outside jobbers may, if they choose, allow to their customers five cents a barrel to cover cartage from the railroad station to store. No. 40.] 857 THIRD. Changes in price of sugar will take effect as follows: In that district known as the Eastern Time District, the price shall take effect at the same moment the American Sugar Refining Com- pany makes the change in price. Factors in the Central Divis- ion of Time shall make change of price thirty minutes later than that of points in the Eastern Division. Factors in the Western Division shall make change one hour later than that of points in the Eastern Division. Example: If the market changes at re- fining point at 10 o’clock A. M., Eastern Standard time, at points in the Central Division, change shall take place at 9:30 o’clock A. M., Central Standard time, and at points in the Western Di- vision, prices shall change at 9 o’clock A. M., Western Standard time. , FOURTH. All orders for sugar, whether taken by salesman, or sent di- rect by customers by mail, telephone, telegraph or otherwise, shall and must be billed at the prices ruling at the hour and minute of time the order is so taken or sent; the time of taking or forwarding the order being stated on same, and no order shall be taken to be billed at a future date. FIFTH. I Sugars must not be sold on longer time than thirty days, nor witli a greater discount than 1 per cent, for cash within ten days sharp from date of invoice. When remittance is received later than the tenth day, the cash discount must not exceed 6 per cent, per annum for unexpired time. If invoice is not paid at matu- rity, interest must be charged to purchaser’s account for all time over thirty days. 858 [Senate, SIXTH. All sugars must be billed on separate invoices from other goods, and terms printed or stamped plainly on same. SEVENTH. A trade discount of 1 per cent, may be allowed on sales of '100- barrel lots or more, which must be sold, charged and billed at one time, and to one purchaser. EIGHTH. No shipment shall be made without a bona fide order. Any shipment made on account of an anticipated change in price shall be considered a direct violation of the Factor plan of sell- ing sugars. NINTH. In billing sugars, the actual date and time order was taken or sent must be plainly stamped or written on all invoices. TENTH. As the Equality plan enables competing markets to equalize the freight to all selling points, thus placing all upon an equal footing as to delivery, it is contrary to the plan for Factors to consign sugars to any point whatever, and this practice is ex- pressly prohibited. ELEVENTH. Factors selling through brokers can allow no more than the customary brokerage of ten cents per barrel, which cannot, and shall not be divided with the purchaser. No dealer acting as a broker, can be credited with brokerage on sugar bought for his own account. No. 40.] 859 TWELFTH. All refined sugars must be graded and sold ou the basis of re- finers’ New York card price for corresponding grade, except in that portion of the country tributary to and rated upon New Or- leans, which shall use the card price of the American Sugar Re- fining Company, New Orleans. THIRTEENTH. Factors may, if they choose, sell to one another at refiners’ prices and terms, provided purchasing Factors maintain full list prices. FOURTEENTH. In making sales of sugar to National, State, County or City institutions, when bids are requested and submitted the prices prevailing on the date bids are made, shall govern, regardless of advances or declines in the market date bids are accepted or orders received by factors. Factors are privileged to name net cash bids to such institutions, which are the Equality prices less 1 per cent, in less than 100-barrel lots, or less 1 per cent, and 1 per cent, in lots of 100 barrels or more. If delivery is made at jobbing points where the five cents per barrel drayage is allowed, this allowance can only be deducted from the face of the invoice, and not from prices when bids are made. FIFTEENTH. Factors must add the rate of freight as per Equality Rate book, to point of shipment, whether the purchaser is located on or off the point; whether he hauls the sugar or has it shipped; and the lowest local rate of freight allowed. 860 [Senate, SIXTEENTH. 1 Where sugars are shipped in carloads, shipment being made direct from the refiners, the Factor’s invoices must, in every case be dated the day the sugar is shipped by the refiners. AMENDMENT TO RULE 14. The cancellation of decimals extending beyond the third deci- mal, is permissible — as per example:: Equality prices 5.37 Less 1 per cent 0537 5.3163 Less 1 per cent 53163 Net cash 5.263137 COMMON COUNCIL CHAMBER, NEW YORK, FEBRUARY 23,1897. 10:30 A.M. Duke, James B., being duly sworn, testified as follows: Examined by Mr. Lexow: : Q. What is your full name? A. James B. Duke. Q. Your age? A. Forty years. Q. Your residence? A. Summerville, N. J. Q. Have you any official relation to the American Tobacco Company; if so, what? A. I am President of that company. Q. And have been how long? A. Ever since the company was formed in 1890. Q. In 1890? A. Yes, sir. Q. Where was it formed? A. In the State of New Jersey, where we were chartered. No. 40.] 861 Q. You organized under tlie laws of the State of New Jersey? A. Yes, sir. Q. What concerns were incorporated into the American To- bacco Company? A. Allen & Ginter, a corporation organized under the laws of Virginia; W. Duke’s Sons Co., organized un- der the laws of North Carolina, incorporated rather; McKinney Tobacco Company, of New York; Goodwin & Co., W. S. Kimball & Co., of Rochester, were all purchased by the American To- bacco Company. Q. That was upon the organization of the original company? A. Yes; purchased after the company was organized. Q. Did any one of those which was in one of those companies so purchased organize under the laws of the State of New Jer- sey? A. No', sir; the were not. Q. They were organized respectively, where? A. I stated in my answer that Duke & Sons was incorporated in the State of North Carolina; Allen & Ginter in Richmond, Virginia; McKinney To- bacco Company, New York State; W. S. Kimball and Goodwin were firms doing business in the State of New York, one in Roch- ester and one in New York city. Q. What caused you to organize in the State of New Jersey? A. Because it was more favorable to corporations. Q. Was there anything in your organization that you could do under the laws of the State of New J ersey that you could not do under the laws of the State of New York as then existing? A. I don’t think so. Q. Then I would repeat, what was there in the situation that justified the organization of the company, no department of which was situated in the State of New Jersey, w r here it had no interest, as distinguished from four States in each of which it 862 [Senate, bad interests? A. Well, the taxation policy for one thing, I think that had some thing to do with it, and the counsel advised us to organize in the State of New Jersey. Q. Do you mean the preliminary organization tax? A. Yes, sir; and probably the yearly tax. Q. And the yearly tax as well? A. Yes, sir. Q. Lower than those obtaining in the State of New York? A. That is my impression. Q. Was it not one of the clauses in the law of the State of New Jersey which permits the acquisition by a company organ- ized under those laws of the stocks and securities of compa- nies transacting substantially the same business; that was one of the moving causes for organizing in the State of New Jer- sey? A. That didn’t move me; we didn’t propose to take any stocks in any other corporations. Q. Or the acquisition of the businesses of companies opera- ting in the same line? A. I don’t think that there is any law in this country against that in any State. Q. Then that didn’t enter into consideration at all? A. Not so far as I was concerned. Q. So far as you were concerned; were you not the principal in the making up of that incorporation? A. I was not one of the incorporators. Q. Then, so far as you were concerned, the primary object was the question of taxation? A. Yes, sir. Q. Do you know in what respect the laws of the State of New Jersey are more favorable to corporations on their organization than are the laws of the State of New York? A. I think the laws of the State of New York have been changed somewhat since the formation of the company. No. 40.] 863 Q. Under the act of 1892? A. Yes; I don’t know wliat act; I have heard that the laws are more favorable. Q. But the act of 1892 substantially enacts of the law of New Jersey with reference to the organization of corporations by per- mitting them to acquire securities and stock in competing com- panies; the taxation laws have been, if anything, increased in ef- ficiency and the taxes themselves increased in size? A. I don’t know about that; because it was of no interest to me, for the reason that we were already organized; I paid no attention to it; I heard somebody say that the tax of corporations in the State of New York had been reduced. Q. That is not so? A. I am mistaken, then. Q. After the acquisition of these original concerns did you ac- quire others? A. Yes, sir. Q. Name them? A. We bought the business of the National Tobacco Works of Louisville, Kentucky, manufacturers of plug tobacco; we bought the business of P. Whitlock & Co., of Rich- mond, Virginia; Marbert Bros., and G. W. Gail & Ax & Co., of Baltimore, Md.; do you want all? Mr. Lexow: If you please. A. We bought the brands and machines and machine contract of Heinshein & Co., of New Orleans; we bought the business of T. H. Hall, the Consolidated Cigarette Company of New York; the H. Ellis Company of Baltimore; we bought some of the brands and business of A. H. Motley & Co., of North Carolina, Reedsville, N. C. Q. Is that all? A. That is all I remember at present. Q. Making a total all told? A. I have not figured them up. (The stenographer repeated the names of the nine companies). Q. Making fourteen, all told? A. If he has counted them right that is correct. 8G4 [Senate, Q. Is that your recollection? A. I don’t remember any fig- ures; I don’t think that I have ever counted them up; I have mentioned all that I remember at present. Q. Were all these companies transacting the same general line of business? A. They were all manufacturing tobacco in different forms and under different brands. Q. In the form of cigarettes? A. Some of them plug tobacco, some of them cheroots and some of them smoking tobacco, inclu- ding snuff; there was one of them manufacturing a brand of cig- arettes in New Orleans; some of them were manufacturing all tobaccoes under special brands. Q. Your general office is where? A. Main office in Newark, N. J.; general office in New York city at 507 W. 22nd street. Q. Have you, since the establishment of your incorporation in New Jersey done any manufacturing in that State? A. No, sir; we have not. Q. Have you anything more than the office record required un- der the laws of the State of New Jersey; that is to say, the office for the stock transfer books of the corporation? A. We carry some supplies there and ship leaf tobacco. Q. In Newark? A. No; in Jersey City. Q. You mean on storage? A. Yes, sir. Q. In warehouses belonging to you? A. No, sir; they do not belong to us. Q. You simply have some of vour goods in transit there on storage? A. Lots of them there in transit all the time. Q. In transit or storage as a matter of convenience? A. Yes, sir. I! Q. What proportion of the trade was represented when the consolidation of the original concerns was made? A. Well, that would be pretty hard for me to say. No. 40.] •865 Q. I am speaking for an approximation simply? A. I sup- pose those five concerns or brands had about SO or 90 per cent, of the business. Q. After the acquisition of these other nine establishments what proportion of the business did you represent? A. Most of the nine represented different lines of business; the first five were in the cigarette business and the largest part of the other business was smoking and plug tobacco. Q. Those subsequently acquired represented what proportion of the business that they transacted? A. I should not think that they represented the plug tobacco — well, about 5 per cent, of the total plug tobacco made in this country; smoking tobacco I suppose, may be 10 per cent., and all the tobacco grades, I sup- pose they made 50, 60 or 70 per cent, of the total business. Q. Of all the tobacco business? A. That is merely a guess, because I have no means of knowing how much the others made. Q. Are all those original factories included in the first consoli- dation and the subsequent acquisition now running? A. No, sir. ■ Q. What were closed? A. We closed the factory of Good- win & Co., and I think that the Hall factory was closed ; the con- solidated Cigarette Factory was closed and those brands were consolidated into tw r o or three other factories that we are opera- ting now. Q. That is to say, the manufacture of the brands made in the respective establishments that you closed was continued in the other establishments? A. Yes, sir; we don’t own the building of the factories; we bought out their brands and we are now manufacturing those brands on our own properties. 55 866 [Senate, Q. How many men were discharged as the result of the closing of the Goodwin & Co. concern? A. That was a very small con- cern, and the business, the brands that were formerly made by Goodwin & Co. were growing less in popularity; I cannot say how many people there were; I should think not more than 150, probably; but we employed more people in Rochester, where we moved it to. Q. I would ask for a specific answer; you can make explana- tions afterwards; I will give you an opportunity to show what the difference of labor was later. Q. Goodwin & Co. was located where? A. Grand, street. Q. In this city? A. Yes, sir. Q. Hall’s factory was located where? A. I have forgotten the street. Q. In the city of New York? A. Yes, sir. Q. How many men were discharged at the time of the closing of that factory? A. There were a great many of them that came to the 22d Street factory; I don’t know how many left our employment to go south. Q. Have you no figures whereby you can establish or approxi- mate the number of men discharged as the result of closing that factory? A. I would think probably there were 150 or 200. Q. Was it not 450? A. I don’t think that Hall had that many. Q. Were not the number of men employed there, on the aver- age, about 450, prior to the time of the closing of the factory? A. I don’t think that was the average; they have in busy sea- sons; when we bought the Hall brands they had a contract for a machine which we have taken up and are now using; and the changing of that factory over to the other place didn’t make any difference in the amount of people that would have been em- ployed if we hadn’t moved from the old Hall building. No. 40.] •867 Q. Can you fix within reasonable limits the number of men and girls; I understand you employ a large number of girls — that a large number were employed in the Hall factory prior to the time of its closing? A. I can only make a guess. Q. You ought to be able to guess fairly accurately? A. I should guess 350, maybe 450. Q. At times 450, and at other times 350? A. I should judge that; I don’t really know how many they employed. Q. How about the Consolidated Cigarette Factory; how many were employed there at the time of the closing down of the fac- tory? A. I don’t really know. Q. Where was that located? A. That was located in Avenue D and Tenth street, I believe; I am not certain. Q. In the city of New York? A. Yes, sir; they didn’t use as many hands, I think, in proportion to the business Hall did, for the reason that they used machines. Q. Would 300 cover the number of employees of that concern? A. I think it would more than cover the number for the amount of business they did. Q. Would you consider 300 a fair figure? A. I should think that they had that many ; they did not give them very steady em- ployment. ' Q. Where was the other factory in addition to those mentioned by you that was closed down? A. The last factory was in Bal- timore; it was moved over to our building; w r e put part of the consolidated business down in that factory. Q. The Ellis factory, of Baltimore? A. Yes, sir. Q. The Consolidated Cigarette factory has a branch there? A. We manufacture the brands of the Consolidated factory in Baltimore, and of course we had to employ a great many more hands than the Ellis Company had employed theretofore. 868 [Senate, Q. That is to say, you consolidated in Baltimore the Ellis fac- tory there with the Consolidated factory which has been closed in the city of New York? A. We manufacture all the brands; we didn’t buy the building. ; Q. Do you mean by transfer of the machinery? A. Yes, sir; machinery and all the employees that wanted to go to Baltimore had a chance to go there and work in the factory; we owned a large building down there which was conducted for manufac- turing purposes, and we opened a large factory there and ran three or four of the small ones from different points. Q. Did you close any factory in Baltimore? A. The Ellis fac- tory was closed; we closed one by opening another. Q. Do you mean to say that the Ellis factory in Baltimore was closed and that you opened another factory in Baltimore which was substantially the consolidation of the Consolidated Com- pany here and the Ellis factory? A. We took some of the brands of the Consolidated Company; wherever they were most adapted to go we sent them. Q. By that you mean that you took them to the most favorable location for the manufacture of particular brands? A. Yes, sir. Q. But without reference to the labor employed at the particu- lar place that you vacated? A. Of course w r e have — Mr. Lexow, interrupting: Did you take that into considera- tion? A. We have to go to the place of manufacture, where there is labor suitable for our purpose. Q. What proportion of the labor that was discharged in the city of New York, amounting, according to your testimony to about 900, was re-employed in any of these consolidations that you have mentioned? A. A great number of them went to the 22nd Street factory, and a great many of them went to other fac- No. 40.] 869 tories that were started or had been started some time prior to that. Q. Can you answer the former question any more specifically? A. I could; it would be only a guess. Q. Have you kept any record of it, Mr. Duke? A. No, sir; I have not. , Q. Does your company keep any labor statistics? A We know how many people we have employed; we don’t make any point of that. Q. Can you state how many people you employ as compared with the employment given to workers prior to the consolidation of the independent companies? A. I think we have given em- ployment to nearly double as many people as were employed by the factories that we bought; brands that we bought. Q. Have you increased the output? A. Yes; very largely. Q. Have you been guessing at the number, or do you state that as a fact? A. Well, we cannot figure exactly the number of people that were employed by the different factories that we bought. Q. Do you mean to say that you have increased the size and facilities of the other factories that you have incorporated into this company? A. Yes, sir; well, not factories; we cannot go by factories; we go by brands; some of the brands have increased, some have decreased. Q. What factory did you increase in size and capacity after the organization? A. Well, the factory at Tw r entv-second street is a great deal larger than it was before we bought it. Q. To what extent, Mr. Duke? A. I should judge that there is double the capacity of the old factory. 870 [Senate, What was the capacity of the old factory? A. I don’t know the dimensions; I am guessing now because I did not measure the buildings. Q. Are you able to give this committee the information re- quired? A. If there is anybody who knows what the size of the old building was I can have the present one measured; but the old one was burned and this was built in its place. Q. Upon the organization of the original company did they un- dertake the books of the five companies; did they receive the books of the five companies that were amalgamated? A. No, sir; they did not. Q. Did they receive any accounts or papers showing the amount of labor employed and the output of the factories that were consolidated? A. Not to my knowledge; theydid not because the company did not buy the book accounts of the different con- cerns; it only bought the property and trade marks, good will, machinery and fixtures; some of them the property; that is to say, the real estate. Q. Were the books preserved by the original companies? A. I don’t really know whether they have been or not; three of the companies have been burned since the company bought them; I don’t know but that the old books were burned with them; I am not sure about that. Q. What factories burned? A. The McKinney factory in Twenty-second street, Allen & Ginther, Richmond, and the Duke factory, Thirty-eighth street, New York city. Q. Have they been rebuilt? A. The Allen & Ginther factory was rebuilt and the McKinney factory, but the Duke factory was not rebuilt because we didn’t own the property; the building was under lease. No. 40.] 871 Q. Then that makes two more factories that were closed inten- tionally or accidentally? A. No, sir; it does not. Q. Do they make five altogether? A. No; we moved the Duke factory to the old Goodwin building, and after the larger building was constructed in Twenty-second street we moved from that factory there. Q. Do you wish to be understood that all the New York con- cerns were concentrated into the Twenty-second street factory? A. Yes, sir. Q. And that its capacity was about doubled? A. Yes; more than double, I should think. Q. Can you give us the increase — the figures showing the in- crease in capacity of the New York factory in Twenty-second street? A. I can from a guess. Q. But you have statistics? A. Yes; I suppose that can be found out. Q. We would like to have those showing the amount of in- crease as compared to the amount of decrease in the productive capacity owing either to fire or to the closing of factories? A. I think you will find that we make more goods in the present fac- tory than in all the others. Q. Is there anybody in your company who knows about this particular matter better than you do? A. I don’t suppose any- body could get them easier than I could. Q. Does Mr. Browne know about them? A. I don’t know whether he knows or not. Q. You operate, do you not, through what is called a factors’ agreement’ A. We don’t call ours a factors’ agreement; we call it a ‘‘consignment agreement.’’ Q. Have you got a copy of that here? A. No, sir; I have not, but maybe Mr. Fuller can furnish you with one; he is our counsel. 872 [Senate, (Witness hands paper to Mr. Lexow.) Q. Is that a copy of the agreement under which you are now operating? A. I suppose it is; I have not looked at it. (Witness examines paper). That is the agreement. Q. You have no doubt about its authenticity? A. I didn’t know but what he got it mixed up with some other papers. Q. You have established a system, have you not, for the sale of your goods through the agency of factors; I mean by that, by consignment instead of sale? A. Yes, sir; under the agree- ment, as you have it. Q. And you constitute those dealings in tobacco in different parts of the country consignees under this agreement? A. We don’t everybody. Q. I understand that; you reserve the right to discriminate? A. Yes, sir. (Marked Exhibit 2, February 23, 1897.) A. Such as we w 7 ant or require to distribute our goods. Q. How long has this form of agreement been in operation? A. Since the latter part of 1895. Q. You stated, I believe, in answer to a former question, that the concerns that were incorporated in this company represented an output of between 80 and 90 per cent, of the cigarette busi- ness? A. That is my guess; I would not be positive about that. Q. Have you any reason to believe that the figures are not ap- proximately correct? A. I think they are. Q. After the consolidation was effectuated by the purchase or acquisition of these nine other concerns, how many competing concerns were left? A. I don’t know exactly the number of all kinds of tobacco manufactured. Q. I am speaking now of competition in the line in which you produce from 80 to 90 per cent, of the product? A. I think that the revenue figures give somewhere around 100. No. 40.] 873 Q. That is, 100 producing from 20 to 10 per cent, of the pro- duct? A. Yes, sir. Q. How many in the State of New York? A. I think quite a number, Q. Do you consign on any other terms than those mentioned in this exhibit of this date? A. I don’t think that we do. Q. Is it not an established system of your business not to con- sign, excepting under the conditions mentioned in this rebate or percentage agreement? A. It is. Q. Do you sell direct to retailers? A. No, sir; we do not; but if anybody should come and ask for 1,000 cigarettes I suppose they would get them; we do not make any difference in the price; he could buy them from agents as cheaply as from us. Q. You consider those operating under this agreement your agents? A. Yes, for the distribution of goods. Q. Do you dispose of your goods in any other way than con- tained in this exhibit? A. So far as the cigarettes are con- cerned, the paper cigarettes, are disposed of under this agree- ment. Q. Have you other agreements with reference to plug tobacco and other brands? A. Quite a different lot of plans that we operate under. Q. Then this exhibit No. 2 refers exclusively to the cigarette department business? A. It does. Q. And you don’t sell cigarettes except under the terms of this agreement? A. No, sir. Q. Have you had any connection with the Wholesale Grocers’ Association? A. Not with reference to the wholesale grocers, because they distribute very few of the cigarettes; they have in- 874 [Senate, sisted at all times that we should fix a profit on the tobacco trade largely same as all over the country. Q. Do the jobbers through, whom you do your business or those whom you appoint as consignees under the terms of this docu- ment belong to the Wholesale Grocers’ Association? A. We don’t know how many, but we are of the opinion that a small per- centage of the tobacco jobbers have any connection with the Wholesale Grocers’ Association; I would say that the largest part of our consignees are not controlled by the Wholesale Gro- cers’ Association. Q. Have you ever had any formal communication, any official communication with the Wholesale Grocers’ Association? A. Well, every once in a while we get a demand of some kind from the association about fixing a profit on the different goods that they handle being sold at cost. Q. Have you received those yourself? Have you ever seen them? A. Yes, sir. Q. Coming officially from the Wholesale Grocers’ Association? A. Yes, sir. Q. Have the name of the association? A. It is generally by the secretary ; it may be sometimes by the president. Q. Have you drawn up these factors’ or consignees’ agreements with any reference to that association? A. Well, of course, any importunities on the part of customers we always listen to, but we didn’t fix that solely on account of coming from the wholesale grocers; it was different tobacco jobbers before the formation of the American Tobacco Company cigarettes were all consolidated in this section of the country, and of course everybody tried to get them; since the company was formed we decided we would No. 40.] 875 give them a portion of our profit if they would look after our in- terests. Q. Have you ever had occasion, Mr. Duke, to withdraw these consignment agreements from persons holding them? A. Yes, sir; quite a number of them. Q. Because of a violation, or assumed violation, of the terms and conditions of this agreement? A. Because they cut the price. Q. And with special reference to the seventh and eighth sub- divisions? A. I don’t know what they are; if you will read them I can tell you. Mr. Lexow reads the following: “If you do not discriminate against our cigarettes in favor of those of other manufacture, and if you do not sell, or dispose of, any of our cigarettes at less than the list price, and if, in all respects, you comply with the terms of this agreement we will pay you a commission of two and one- half (2J) per cent, on the amount realized by you from the sale of the cigarettes wdiich we may consign to you.” A. Yes; we have heard of some of them cutting the price; I don’t know whether it is those who get 24 or the 10 per cent., or the 74 per cent, dif- ference where they handle our goods exclusively. Q You consider yourself justified, under the terms of this agreement, to withdraw consignments if they violate that partic- ular clause of the contract? A. If they violate any section in the contract; we try just as hard as we can to live up to that agree- ment religiously and to have everybody else live up to it. Mr. Lexow: I call your attention to the eighth clause: “If, however, you handle cigarettes of our manufacture exclusively, and do not sell or distribute, or in any way aid in the sale, or dis- tribution of, cigarettes of other manufacture, and if you, in all 876 [Senate, respects, fully comply with the terms and conditions of this agree- ment, we will pay you an additional commission of seven and one- half (7i) per cent, on the amount realized by you from the sale of the cigarettes which we may consign to you.” Q. Do you consider in case of the violation of that eighth sub- division in this agreement that you are entitled to withdraw the agreement and to refuse to sell? A. We don’t do that; we gen- erally take away the 7-£ per cent, and let them have the per cent, provided they have not violated the agreement in any other part. Q. Provided they have violated the sixth clause of the agree- ment, that with reference to maintenance? A. If they have not cut the price or damaged the goods. Q. That is the single point of this factors’ agreement ; that is to say, that you compel the consignee to maintain the price of your goods as fixed? A. Yes, sir. Q. And you add to that this other qualification that if they will handle your goods exclusively you will pay them an addi- tional percentage of 7^ per cent.; isn’t it a fact, Mr. Duke, that no man engaged in the tobacco business can successfully compete unless he handles vour product, so great has been the demand created therefor? A. He can compete all right but he cannot make as much money; they have tried it several times. Q. Is not your business substantially on the same basis as the sugar business? A. Entirely different business. Q. That a man in that business cannot make a profitable business of it unless h j handles your goods, the same as the wholesale grocer cannot do a profitable business unless he handles sugar? A. There is a big difference; sugar is sold as sugar, and tobaccoes sold by brands; we manufacture cigarettes No. 40.] 877 and do not sell them as cigarettes, but as brands, and the con- sumer buys them as brands. Q. Your brands are so well known and have such a command of the market that the seller of tobacco cannot exist unless he can sell your brands? A. Yes; they do do it. Q. Do they not get their brands in some other way than through yon? A. Yes, sir. Q. In such a way that they cannot make a profit as large as they could under your agreement? A. Still they can make a profit; they can get 2| per cent; and this is more than they would make if we did not fix the price, for they used to sell them at cost and they lived then; I don’t see how they can live now. Q. I mean when you withdraw this consignment agreement the person from whom it is withdrawn must go to another jobber to get his goods, and the percentage or the rebate is given to that jobber, so that the retailer, the intermediary, will make no profit at all? A. We tried that condition of affairs before, but we could not do it because the jobbers would divide with each other; we have not been able to stop it so far. Q. That is your object, is it not? A. Yes, sir. Q. Don’t you consider, Mr. Duke, that the successful operation of ;i system of this kind must inr-vilubly 'ead to a monopoly? A. No, sir. Q. Why? A. That for the simple reason that we make and sell our brands, and anybody else can go into the manufacture of cigarettes and sell their brands, and if they can create a market and the public want their goods, they can always get plenty of people to distribute them. Q. Isn’t it a fact that you have created by the consolidation of these various brands into one, or under one head, so strong a mar- 878 [Senate, ket for jour own product that the smaller merchants must take your brands in order to successfully do business; and don’t you by the creation of this intermediary system of rebates and dis- counts, practically secure for your product a monopoly of the market? A. No, sir; you take one jobber in New York who will take the agency of some other brand of cigarettes, and if the pub- lic wants it he can stop the whole business; it is not necessary to have 100 jobbers in New York to handle our goods; we would rather have less; we don’t want to do any injustice to anybody that handles the goods under the agreement properly, and there- fore, we let them have them. Mr. Lexow: The Common Council wants this room; we have overstepped our bounds, and unfortunately have been unable to secure another room for this afternoon; therefore, we will take an adjournment until 10 o’clock to-morrow morning; it is rather unfortunate at this late day that we should have this interruption but it is impossible to avoid it; Mr. Duke, we would like to have those figures to-morrow morning. THE AMERICAN TOBACCO COMPANY, 507 to 529 West 22d street. P. O. Box 2591. New York, October 1, 1895. Dear Sir. — We will be glad to consign to you for sale, on com- mission, our various bi*ands of cigarettes, such cigarettes to be sent by us, and received, sold and accounted for by you, upon terms and conditions as follows, namely: First. All cigarettes which we may send to you, you are to sell to the retail trade only for retail purposes; you are to sell none to other than retail dealers except by our written permission. No. 40.] 879 Second. You shall, at all times, sell our cigarettes at such prices only as we may fix in selling lists sent to you. You shall not sell, or dispose of, any cigarettes at lower prices than those so fixed. Third. You are to guarantee all sales made by you. An extra compensation of 2 per cent, will be allowed, and can be deducted by you, on all advances made upon consignments which are re- mitted to us within ten days after the date of shipment to you. Fourth. All cigarettes consigned to you are to remain our prop- erty until sold by you, subject only to your lien thereon for all advances which you have made under the terms of this agree- ment. Fifth. The cost of freight from our factories is to be paid by us, or, if paid by you, to be allowed to you by us on account. Sixth. You are to guarantee us against loss by fire or other- wise of any cigarettes consigned to you, and you are to either re- turn to us the cigarettes in good condition or the price of the same as fixed on our selling lists as above mentioned. You are also to pay all charges and other expenses of every nature connected with the storing, keeping and selling of cigarettes which we may consign to you, or for your account, after the delivery thereof by us to the common carrier, including all State, county and munici- pal taxes and license fees. Seventh. If you do not discriminate against our cigarettes in favor of those of other manufacture, and if you do not sell, or dispose of, any of our cigarettes at less than the list price, and if, in all respects, you comply with the terms of this agreement, we will pay you a commission of two and one-half (2-|) per cent, on the amount realized by you from the sale of the cigarettes which we may consign to you. 880 [Senate, Eighth. If, however, you handle cigarettes of our manufacture exclusively, and do not sell or distribute, or in any way aid in the sale, or distribution of, cigarettes of other manufacture, and if you, in all respects, fully comply with the terms and conditions of this agreement, we will pay you an additional commission of seven and one-half (7-|) per cent, on the amount realized by you from the sale of the cigarettes which we may consign to you. Ninth. Settlements and payments of commissions are to be made as follows: On April 1, 1896, or as soon thereafter as practicable on all cigarettes consigned by us to you from the date of your signing this contract to January 1, 1896, which have been sold by you and settled for prior to April 1, 1896. On July 1, 1896, or as soon thereafter as practicable, on all cigarettes consigned by us to you during the three months ending April 1, 1896, which have been sold by you and settled for prior to July 1, 1896, and so on, from quarter to quarter thereafter, in the same manner, for the subsequent consignments, sales and payments. Tenth. All obligation upon our part to pay you any commission for the sale of the cigarettes which we may consign to you is, and shall be, dependent upon your strict compliance with the agree- ment hereinbefore contained that you will not sell any of our cigarettes for a less price than that fixed in our selling lists sent to you. If you should sell, or dispose of any of our cigarettes at less than such price, you shall forfeit all right to the payment of any commissions on cigarettes which you may have previously sold, and on which commissions have not been paid you, and you shall at once, on demand, pay to us the list price for all cigarettes which you have sold, and deliver to us all of our No. 40.] 881 cigarettes then in jour possession which may have been previous- ly consigned by us to you. Eleventh. Upon your acceptance in writing of the terms and conditions of this agreement, you understand and agree that you will handle our cigarettes exclusively, on the terms and condi- tions herein specified, and, in the event that you hereafter deter- mine to sell cigarettes of other manufacture, you are to notify us, in writing, of such determination; and thereafter, if you have fully complied with all other terms of this agreement, the com- missions to be paid to you for sale of our cigarettes shall be at the rate of two and one-half (2^) per cent. Twelfth. If you shall sell or distribute, or in any way, directly or indirectly, aid in the sale or distribution of any other cigarettes than those of our manufacture, without having first given us written notice of your intention so to do, as required by paragraph eleventh, you shall not be entitled to claim or receive any commis- sions not previously paid to you in excess of two and one-half (2|) per cent, on any past or future sales under this agreement; and the right and option is hereby distinctly reserved to us to de- termine and declare that you have surrendered all right to be paid any commission over said rate of two and one-half per cent., if we shall be satisfied that you have in any way aided in the sale or distribution of cigarettes other than those manufactured by us. Thirteenth. We reserve the right of determining, at all times, as to thA number of cigarettes and the brands which we will con- sign to you under this agreement, we to determine the matter be- fore or after receiving requests or reports from you ; and you ex- M 8&2 [Senate, pressly agree that you will promptly make reports, or account of all sales, to us, whenever, and as often as, we may call for the same. I Fourteenth. The right is reserved to us at any time, to decline to sell you any more cigarettes, and to withdraw the cigarettes al- ready consigned to you, upon repaying to you all your legitimate advances thereon, and the right is reserved to you, at any time, to decline to act further for us, after having delivered to us all cigarettes then in your hands, and paying over to us the proceeds of all sales of our cigarettes at list price. Fifteenth. Requests for consignments, as well as all advances and reports of sales with New York exchange, must be paid to our office in New York. Commissions will also be settled and paid from there. Sixteenth. No employe of this company has any authority what- ever to change or modify this agreement, or any circular, letter, or price list of this company. Your agreement in writing hereon to receive our cigarettes on consignment and to sell and account for the same, under the above conditions when executed by you, will constitute a binding contract between you and our company. Very truly, yours, THE AMERICAN TOBACCO COMPANY. ecame agents of the National Cigarette and Tobacco Company md instituted a very active campaign — put out advertisements n their own name ‘not made by a Trust.’ ” Brown, p. 1539. Craig, Stewart & Co., Los Angeles, Cal., September 1, 1894. ■They took the agency for the Admiral cigarettes in Los Angeles, were the headquarters for them and had a very lively campaign vith them there; and they amused themselves by cutting the trices on everything that we made, and we declined to deal with Lem in anything that we made.” Morris Hirsch & Co., Brooklyn, N. Y., about November 1, 1894. ilr. Brown does not refer to this case. Mr. Hirsch “guesses” that re was cut off for selling Admiral cigarettes. He had the win- low of his store full of them (p. 295). The National Company ’urnished him with the horse and paid for the keep of the horse pp. 307 and 308). Told Rosenbaum he was agent for N. C. & T. 3o. and thought he had a good thing. Rosenbaum, 1072-3. A. B. Haskin & Co., Holyoke, Mass., date not given. “Very ictive distributors of the Admiral cigarettes and in this adver- tsing.'’ We also considered them as imitating our goods (che- ’oots) and unfriendly. Brown, p. 1463. Rogers & Co., Salt Lake City, Utah, date not given. TVere the igents of the National Cigarette and Tobaccoi Company. “Had :heir men actively at work putting in their goods against ours, md there was a great deal of money spent there in advertising. 918 [Senate and they assisted in it.” They were the potent people for their concern all over the State. Total, 26. FOR HANDLING “ROYAL SWEETS,” A BRAND OF CIGAR- ETTES CLAIMED TO BE AN IMITATION OF “SWEET CAPORALS.” C. A. Whelan & Co., Syracuse, N. Y., May 2, 1892. George Whelan, the company of that concern, became an employee of the National Cigarette and Tobacco Company at a salary of four thou- sand dollars a year, and they immediately began pushing the “Royal Sweet Cigarettes,” which we considered an imitation of ours. Brown, p. 1542. Boston Cigar and Tobacco Co., Boston., Mass., May 4, 1895. “A. R. Mitchell & Co. had the agency for the Royal Sweet Cigar- ettes, and the Boston Cigar and Tobacco Co. were actively, as the sub-agents of these, pushing them.” Brown, p. 1313. See also report of R. R. Lawrence, p. 1540. Brewster, Crittenden & Co., Rochester, N. Y., May 9, 1895. Were cut off for handling “Royal Sweets Imitation Cigarettes.” S. S. Sleeper & Co., Boston, Mass., July 12, 1895. A member of this firm became president of the Executive Association of the Wholesale Grocers of New England, who were fighting the A. T. Co., and pushing the Royal Sweet cigarettes. The agency had entered into an agreement with the National Cigarette and To- bacco Company to give its goods the preference, for which it was to receive the sum of about $35,000. S. S. Sleeper & Co. had car- ried out the agreement of the association and had their windows full of the imitation cigarettes. Brown, pp. 1544, 1546. J. A. Andrews & Co., Boston, Mass., July 12, 1895. This con- cern was cut off for the same reason as S. S. Sleeper & Co. It had No. 40.] 919 joined the Wholesale Grocers’ Association, and was handling the “Royal Sweets.” Brown, p. 1430. Thomas L. Benham, Utica, N. Y., August 16, 1895. “Cut off for handling Royal Sweets Imitation Cigarettes.” Brown, p. 1446. Total 6. FOR HANDLING OTHER CIGARETTES THAN THOSE MADE BY THE NATIONAL CIGARETTE AND TOBACCO COMPANY. Boston Cigar and Tobacco Co.. Boston, Mass., June 15, 1893. West. Stone & Co., Springfield, Mass., July 15, 1893. The Boston Cigar and Tobacco Co. was an offshoot of A. R. Mitchell & Co., who had taken the agency for New England for the sale of the “Beauty Bright” cigarettes, and A. R. Mitchell & Co., and the Boston Cigar and Tobacco Co. were actively pushing and urging the sale of “Beauty Brights” in preference to the A. T. Co.’s goods. Brown, pp. 1321, 1322 and 1376. West. Stone & Co., A. R. Mitchell & Co. and the Boston Cigar and Tobacco Co. were just the same as one concern with branches. All of them were distributing “Beauty Brights” to the detriment of the A. T. Co.’s brands. Brown, p. 1376. Charles McArthur, buying agent for West, Stone & Co.. 1893, says that “West, Stone & Co. made an agreement with Mr. Rich- ards of A. R. Mitchell & Co., under which they, West, Stone & Co., were to have the sole and exclusive agency of the goods (Beauty Brights) for the city of Springfield, and in consideration they were to push the goods to the exclusion of all others and receive an extra bonus of 5 per cent.” He further says that he was one of the salesmen and knows that they did push Beauty 920 [Senate, Bright goods to the exclusion of all other paper cigarettes for a time. That he did it himself (pp. 1777-1779). Total, 2. Total revocations for handling other goods, 36. LIST OF CONSIGNEES OR DEALERS WHO TESTIFIED THAT THEY WERE NOT ALLOWED TO SELL OPPOSI- TION GOODS UNDER THE CONSIGNMENT AGREE- MENT, BUT WERE NOT CUT OFF. Hobart J. Park, of Park and Tilford, says that this firm at one time received upon consignment 25,000 cigarettes from the Na- tional Cigarette and Tobacco Company. That after they began to sell the same Mr. Butler, secretary of the A. T. Co-, called his attention to the sixth clause of the consignment agreement, and said that “if we continue to sell the National cigarettes it would allow them to give us the discount or not as they saw fit on the American Tobacco Company cigarettes; it was a violation of the contract, and we looked at the contract and we sent the goods back' 7 (p. 45). He further said that Mr. Butler did not say any- thing about refusing to sell or consign any other goods if Park & Tilford kept the National Company’s goods (p. 46). Joseph Park says that Mr. Butler gave him to understand that he was violating the contract and that the A. T. Go. could not continue their discount if he handled other than the A. T. Co.’s cigarettes or any in competition with them. That he violated their agreement (p. 196). Note. — It does not appear that Mr. Butler had any authority from the A. T. Co. to make these representations to the Messrs. Park. He was secretary and director, it is true ip. 1499), but it had been left entirely to the cigarette department to say whether No. 40.] 921 or not the company's consignees should be allowed to handle other cigarettes. (Arent’s, pp. 728, 736). Mr. Butler had nothing whatever to do with this department, his own department being principally machinery. James M. Kenny, Newark, N. J., was threatened with revoca- tion because he handled Admiral cigarettes. Upon explanation to the company, however, he was permitted to continue as a con- signee, and also to sell Admiral cigarettes, pp. 1241, 1243. J. Frank (Crawford, Newark, N. J., says that Dunstatter, an agent of the American Tobacco Co., once complained because he, witness, had a cartoon of Admiral cigarettes on the retail counter. Witness, however, did not take them off the counter and nothing came of the conversation, except that witness did not take in any new orders for Admirals, and may have been influenced not to do so by the conversation, p. 1249. Jacob L. Kahn, New York city, says that Mr. Rosenbaum said “that if I signed the contract I would get a rebate, 2 per cent., for cash, and every three months 35 cents on a thousand, provided I sell no other goods; provided I sell no other cigarettes but the A. T. Co.’s cigarettes." He said that I could sell the cigarettes which I had on hand and then I would have to stop selling other brands. Mr. Rosenbaum wouldn't leave the contract for me to read over and that is the last I ever saw of it. Case, pp. 229, 232-235. APPENDIX C. LIST OF THOSE CONSIGNEES WHOSE AGREEMENTS WERE REVOLTED FOR CUTTING PRICES, AS SHOWN BY THEIR TESTIMONY AND THAT OF MR. BROWN. Revoked before March 1, 1893. Gilderhouse. Wilting & Co., St. Louis, Mo., June 6, 1892. Brown, p. 1336. 922 [Senate, Sussmau Brothers, New York city, June 11, 1892. Brown, p. 1369. A. F. Cunningham & Go., Philadelphia, Pa., November 21, 1892. Brown, p. 1329; p. 882. Americus Grocery Co., Americus, Ga., December 3, 1892. Brown, p. 297. Total, 4. Revoked after March 1, 1893. Henry Berbert, Brooklyn, N. Y., May 26, 1893 and June 19, 1893. Brown, p. 1315; Burbert, pp. 358-359. S. Benjamin, Brooklyn, N. Y., June 16, 1893. Brown, p. 1316. A. & \V. Diamond, New York city, June 19, 1893 and June 18, 1894. Brown, p. 1334; Arnold Diamond, pp. 435, 436, 438, 439. M. H. Rieders, New York city, June 19, 1893 and June 18, 1894. Brown, p. 1364; Rieders, pp. 383-385, 387, 388. B. Berschatsky, Brooklyn, N. Y., June 19, 1893 and June 18, 1894. Brown, p. 1312; Berschatsky, pp. 444, 445, 448. I. Jackson, New York city, June 20, 1893 and July 20, 1893. Brown, p. 1339. A. Bernstein, New York city, June 29, 1893, December 9, 1893 and June 29, 1894. Brown, p. 1326. Charles Bernstein, Brooklyn, N. Y., July 14, 1893. Brown, p. 1305. John Hornandez, Portland, Me., July 14, 1893. Brown, p. 1337. Holtzman Brothers, New York city, July 14 1893. Brown, p. 1338. Joseph Resnick, New York city, July 17, 1893. Brown, p. 1364; Resnick, 413, 414. Samuel Samuelson, New York city, July 17, 1893. Brown, p. 1365. No. 40.] 923 J. F. L. Armfield & Co., Mt. Airy, N. C., July 19, 1893. Brown, p. 1301. L. Bernstein, New York city, July 25, 1893, October IS, 1893 and June 24, 1894. Brown, p. 1308. A. H. Mandelbaum, New York city, August 14, 1893. Brown, p. 1346. "The Fair,” Chicago, 111., August 15, 1S93. Brown, p. 1335. Philip Schuster, Rondout, N. Y., October, 19, 1893. Brown, p. 1365. Smeeringer & Co., Baltimore, Md., October 28, 1893. Brown, p. 1367. E. S. Goulston & Co., Boston, Mass., November 9, 1893. Brown, p. 1396. Joseph Cohen, Boston, Mass., March 6, 1894. Brown, 1468. M. L. Blitzstein, Philadelphia, Pa., March 16* 1894. Brown, p. 1320. Armstrong Brothers, New York city, May 9, 1894. Brown, p. 1437. Nathan Michaels. New York city, May 9, 1S94. Brown, p. 1491. Barking & Co., Wilson, N. C., July 6, 1894. Brown, p. 1459. Marum & Hoslich, New York city, July 14, 1894. Brown, p. 1490; Marum, pp. 75-78. Brooks & Co., Philadelphia, Pa., September 10, 1894. Brown, p. 1463. S. Mundy, Brooklyn, N. Y., October 17, 1894. Brown, p. 1492. E. R. Betterton & Co., Chattanooga, Tenn., March 7, 1895. Brown, p. 1447. Isaac- Boss, New York city, date not given; pp. 429-431. Joseph Rafalawitz, New York city, (sub-jobber), date not given; pp. 799-801. Total, 34. 924 [Senate, By Mr. Mazet: Q. As secretary, do you have charge of the transfer of stock? A. Yes, sir. Q. I understood you to say there were a little over two thousand stockholders, original stockholders? A. Yes, sir. Q. Do you know what number of stockholders hold preferred and what number common stock? A. I do* not, just now; it fluc- tuates with the transfers; of course, varies with the transfers. Q. In which stock is there the most variation and the largest number of transfers, in the common or preferred stock? A. In the common. Q. The common is much more largely dealt in than the pre- ferred. is it not? A. Yes, sir. Q. Do you know the number of stockholders, approximately, who own common stock? A. Not now; I do not; no. Q. Can’t you tell of the two thousand or more, what proportion hold common stock? A. I would not like to state, because they may have changed last week. Q. Can you tell us what it was last week? A. Well, I don’t know; I am only giving that as a presumption. Q. Have you informed yourself at all on that point? A. Not certainly; no*, sir. Q. You have not personal supervision of the transfer? A. I am supposed to be under the direction of the board, the custodian of the transfer books. Q. Don’t you sign these transfer certificates? A. No, sir; they are signed by the Treasurer and the President. Q. What explanation do you make of this wide fluctuation in the American stock, from 117 in May, 1895, to <53, in December of the same year? A. I do not make any. No. 40.] 925 Q. You have no explanation to make? A. None; except that the most marked fluctuations have been following the attacks upon us, of which, of course, the attackers have knowledge — by rival concerns — in the form of lawsuits established — initiated — instituted, rather, in New Jersey, Illinois; appeals to the Attor- ney-General in the State of New York, indictments in New York, legislative investigations, and things of that kind. Q. And wasn’t it also enforced by the action of the directors in passing the question of dividend? A. That was one; you refer to the instance of December, 1895? Q. Yes; well, that was when the stock was at the lowest point, wasn’t it? A. No. Q. In that year? A. Oh, I don’t know; I am not sure as *to that; I think it affected it several points, but should not have done so; the statement that was made in the newspapers, of the action of the Board of Directors was truthful, honest and genuine, and should have had an opposite effect. Q. Do you know w T hat proportion of the stock is held by per- sons other than those who w r ere in the tobacco business and w’ho went into this company as tobacco manufacturers? A. I do not know the proportion, but so far as I do know r — but I do know that the people you mention are large holders of the stock. Q. They have control of a majority of the stock? A. I couldn’t say as to that. Q. Haven’t you some knowledge, as secretary of the company, as to that point? A. No; it is not a matter that interests me at all; I — to look through the list of names and to ascertain the exact owmers from time to time — of the people connected with the company — w 7 ould be a labor that would be of no use to me; and I have more than I can attend to now. 926 - [Senate, Q. Wlio would know about that? A. No one would know un- less they made an examination, drew up a list. Q. The stock ledger would show, wouldn’t it? A. Oh, yes; show everything. Q. Is that in your custody? A. Under the direction of the board; yes. Francis B. Thurber, having been duly sworn, testified as fol- lows : Examined by Mr. Lexow : Q. I understand that you have desired an opportunity to make a statement before this committee. You understand, of course, that if you make a statement you are subject to cross-examina- tion upon it? A. Yes. Q. And with that understanding the committee wall give you an opportunity to make any statement you please? A. I have prepared a statement, Mr. Chairman, because I thought it would afford a basis for questioning; I thought it would show the facts that had come under my attention and would afford a basis for questions. Q. Mr. Thurber, before you read your statement will you in- form us what your occupation is? A. I am now president of the American Grocer Publishing Company, which publishes the American Grocer newspaper. Q. Especially representative of the interests of the wholesale grocers? A. No, sir; of the grocer trade in general, more espe- cially of the retail grocers. Q. How long have you been in that employment? A. Three years; previous to that I was in the wholesale grocery business. Testimony of F. B. Thurber, No. 143 Chambers street, New York city. No. 40.] 927. During many years I have carefully studied the effect of the larger aggregations of capital now generally called “trusts.” I am now engaged in the publishing business and am not interested in trusts except as a student of their politico-economic features. While there have always been aggregations of capital to a greater or less extent they have become more frequent and prom- inent since the age of steam, electricity and machinery, because these forces could not well be utilized without aggregations of capital, and these could only be obtained through the co-operation of a large number of persons, hence the great development of corporate life during the last half century. The first prominent development of the trust organization in this country and in the consolidation of numerous links of rail- road into trunk lines, and there was a fear in the public mind (in which I shared) that these combinations and consolidations would result in exhorbitant rates for transportation and to the detri- ment of the public interest. What the result has been is shown by the following extract from a report adopted by the National Board- of Trade at its annual convention in 1896: The average charge for sending a ton of freight one mile on thirteen of the most important railroads in the United States during 1865 was 3.08 cents; in 1870. 1.80 cents; in 1875, 1.36 cents; in 1880. 1.01 cents; in 1885, 0.83 cents; in 1890, 0.77 cents; in 1893. 0.75 cents; in 1894, 0.746 cents, and in 1895, 0.720 cents; these railroads performed one-third of the entire transportation of 1893, and, from the figures given, it appears that 0.72 cents would pay for as much transportation over their lines in 1895 as could have been obtained for 3.08 cents thirty years earlier; this reduction, amounting to three-quarters of the average rate of 1865, was ex- ceeded by that in price of but few even of these articles in the 928 [Senate, manufacture of which new inventions have worked the most radical changes. The entire transportation performed by the rail- roads of the United States during the twelve years ending June 30, 1894, was equivalent to moving 136,799,077,822 passengers, and 807,935,382,838 tons of freight one mile; had rates averaged as high as those of 1862 been collected on this traffic, the rail- roads would have earned $2, 829, 043, 459 more than they actually received.” The next most prominent aggregation of capital in the commer- cial world is known as the Standard Oil Co., and the effect upon the price of oil is illustrated by the following statistics compiled by the United States government, showing the wholesale export price for refined petroleum for the period extending from 1871 to 1896. It shows that the price in 1871 was 25 7-10 cents. I will not read them all, but it progressively declined until in 1896 the price was 6 8-10 cents. PRICES OF REFINED ILLUMINATING OILS, PER GALLON, EXPORTED FROM THE UNITED STATES, 1871 TO 1896. The prices represent the market value at the time of exporta- tion: Cents. 1871, 1872, 1873, 1874, 1875, 1876, 1877, 1878, 25.7 24.9 23.5 17.3 14.1 14 21.1 14.4 10.8 No. 40.] 929 1880. . 1881. 1882. 1883. 1884. 1885. 1886 . 1887. 1888. 1889. 1890. 1891. 1892. 1893. 1894. 1895. 1896. Cents. 8.6 10.3 9.1 8.8 9.2 8.7 8.7 7.8 7.9 7.8 7.4 7.0 5.9 * 4.9 4.2 4.9 6.8 This great decline in the price of oil is attributable partly to to the increase in production, but more largely to improvements in manufacture and transportation which were only attainable through the aggregations of capital in this industry. Among the more prominent cf the recent so-called trusts is that of the American Sugar Refining Co., which is a corporation formed under the laws of the state of New Jersey for the pur- pose of consolidating the sugar refining interests of the country and it row does about 75 per cent, of the sugar refining business in the United States. The effect of this is shown by the following table giving the prices of both raw and refined sugar, with the 59 930 [Senate, differing margins during the nine years prior to the consolidation and nine years since: The average for the nine years prior to the consolidation was 7 90-100 cents per pound. The average for the nine years suc- ceeding the consolidation was 5 27-100 cents per pound. Average. price. 1879 Centrifugals (raw). Cents per lb. 7.425 Granulated (refined). Cents per lb. 8.785 Difference. 1.362 1880 8.206 9.602 1.960 1881 8.251 ; 9.667 ■ i 1.416 1882 7.797 9.234 1.437 1883 7.423 ■ ' 8.506 1.083 1884 5.857 6.780 .923 1885 5.729 6.441 .712 1886 5.336 i : 6.117 .781 1887 ...... 5.245 6.013 1 . .768 Average 9 years. 6.807 7.905 1.098 The trust was formed in 1887. [ 1888 5.749 , 7.007 1.258 1889 6.433 7.640 1.207 1890 5.451 6.171 .720 1891 3.863 4.691 .828 1892 3.311 , ) 4.346 1.035 1893 ....... 3.689 1 ; 4.842 1.153 1894 3.235 1 4.119 .884 1895 3.258 4.140 .882 1896 3.631 f 4.539 .908 Average 9 years. 4.291 1 , 1 5.272 .981 No. 40.] ^3^ This reduction in price has been effected partly by increased production and largely through buying the raw material cheaper than when a large number of separate refineries were competing for the product. Large economies were also effected by closing inferior plants and enlarging and extending superior ones. The American Sugar Refining Co. has bought its raw material cheap, but it has given the public the benefit of such purchases, merely retaining as its profit about one-third of a cent per pound, which, considering the nature of the business, is a reasonable one. Q. What was that last statement? A. “It has given the publio the benefit of such purchases, merely retaining as its profit about one- third of a cent per pound, which, considering the nature of the business, is a reasonable one.” Please, Mr. Chairman, distin- guish between the margin between raw and refined, and profit; the margin between raw and refined during the first nine years the nine years! prior to the consolidation was 1 98-100 of a cent per pound; during the nine years succeeding the formation of the Trust it was 981-1000 of a cent per pound. By Mr. Mazet: Q. How do you reach the estimate of the profit, Mr. Thurber; do you take the figures of the company on that? A. No, sir; from the general knowledge that I have of the business; I have been a distributor of sugar for many years and was probably the lar- gest distributor of sugar for twenty years, and in the course of that business we acquire more or less information ; it is, of course, not as exact as it would be if taken from the books of the com- pany; but it is the general knowledge of the trade as to about the average cost and profit in refining. Q. In your judgment, is it true, that even with a smaller mar- [Sex ate, gin between the raw and the refined, that with increased facili- ties and more modern machinery and large capacity that they are yet enabled to make as much or more profit than they were be- fore? A. Yes; more, undoubtedly. (Continues reading.) These illustrations are but types of many in the evolution of industries, which is the result of the great forces before men- tioned and which have revolutionized the entire economic situa- tion. That there have been instances of hardship and injustice attending this revolution cannot be doubted, but it is equally cer- tain that the total results have been beneficial to* the public at large, and to the interests of the laboring classes especially, who constitute the majority. At some stages in this evolution, this remark was, perhaps, not true. The action of these forces was so rapid that men were thrown out of employment faster than wants were created and industries widened. Labor, however, soon followed the example which capital had set of organization, and during the last decade the organization of labor has progress- ed faster than that of capital, and has forced a division of a lar- ger share of the profits of industry for labor than at any previous period of history. In other words the profits of capital have been steadily decreasing, while those of labor, and especially organ- ized labor, have steadily increased. At no previous period would a dollar buy so much of the necessaries and comforts of life as at present. While this is admitted by intelligent laboring men, many of them contend that opportunities for earning a dollar have constantly diminished and they are now seeking by the ad- vocacy of shorter hours for labor to make employment for a lar- ger number of persons, and I believe that this is a worthy and beneficent aim. It is better to have a larger number of persons employed for eight hours than a smaller number of persons ten or No. 40.] 933 twelve hours. Unrest of labor in a free country is not a danger- ous phenomenon, but rather a safety-valve, and one which capital can afford to encourage. At the same time it must not be forgot- ten that education of the masses has created new wants and that these wants have grown faster than the means of gratifying them. The problem should be view T ed from both sides, and only what is reasonable should obtain. Wherever unlimited power exists, it is usually accompanied by tyranny, whether of labor or capital. There are labor trusts as w^ell as capital trusts, and in all the annals of combination, there are no' greater illustrations of tyr- anny than the attitude of some of the labor organizations toward laborers. This, however, was the inevitable outcome of organiza- tion and of the great evolution which is now going on throughout the world, under the operation of the great forces that now con- trol the world, steam, electricity and machinery. Under the op- eration of these forces, the world has been growing richer. All the resources of nature are being developed. Capital has increased faster than the opportunities for its profitable employment, as is evidenced by the steadily de- creasing returns of capital, or, in ether words, rate of interest. I used to think that combinations of capital would abrogate com- petition, but experience has shown that instead of abrogating competition it has elevated that force to a higher plane. If the combination of capital in any line temporarily exacts a liberal profit, immediately capital flows into that channel, another com- bination is formed and competition ensues on a scale and oper- ates with an intensity far beyond anything that is possible on a smaller scale, resulting in breaking down the combination and the decline of profits to a minimum. The only trusts which have succeeded for any length of time have been these which have been 934 [Senate, conducted on a far-sighted basis of moderate margins of profit, re- lying upon a large turn over, and the economies resulting from the command of large capital intelligently administered. The truth of this is illustrated by innumerable failures in trust orgaoia- tions, recent illustrations of which are the Strawboard Trust, the Starch Trust, the Wire Nail Trust and the Steel Trust. There are trusts so-called in nearly every branch of business, and there is good and bad in all, but the good so far predominates that such aggregations of capital should be encouraged, accom- panied by safeguards against abuses. The only additional safe- guards needed are for stockholders and investors, whose interests are often sacrificed through the lack of publicity. So far as the interest of consumers is concerned it is amply protected now; first, by competition, as I have shown, and, second, by the com- mon law, which, if invoked, will nullify any contract in restraint of trade and under existing statutes any unreasonable combina- tion is subject to indictment for conspiracy. The popular hostility to trusts is due principally to lack of knowledge of their economic effects, and these are gradually be- coming better known. There were just enough abuses attending them to give an excuse for sensational journalistic denunciation, and this has caused undue predjudice. A great politico-economic question like this should be considered dispassionately and all sides of it carefully investigated before conclusions are reached. The result of my many years’ study of it has been to materially modify the views I entertained in the beginning. While within the limits of a hearing like this it is impossible to discuss exhaustively all the varying phases of so large a sub- ject I have endeavored to present to your committee the thought® which have come to me in a somewhat extended observation and No. 40.] 935 study of the phenomena attending the great economic revolution now in process of development, with the hope that they may have suggested some points which are worthy of further consideration and which may aid your committee in arriving at wise conclu- sions. By Mr. Warner: Q. What is your object in wanting to have this communication spread upon the minutes? A. My object was this, sir; there has been during the last few years a denunciation of capital in its larger organizations, which it seems to me is detrimental to the best interests of the people of the State of New York, indeed of the whole United States — that there ought to be a better under- standing of the relations of capital and labor and of the effect of these great organizations upon the public welfare; I do not think that at the present time they are well understood ; and I believe that the study of the question by everybody will result in arriving at similar conclusions to those which I have arrived at during many years of study. By Mr. Lexow: Q. What is your definition of a trust, Mr. Thurber? A. A trust is any combination of capital in the popular sense of the word. Q. Is that all? When you make this statement before the com- mittee do you mean simply to be understood as applying your theories to combinations of capital as a whole, without reference to these distinctive features attached to combinations here? A. I think it has a general as well as specific power, Mr. Chairman ; I have endeavored — 936 [Senate, Q. Do you mean that this argument made by you and permitted by the committee to be placed on our record as representing the views of a journal which we suppose championed the Wholesale Grocers’ Association, which stood more or less indicted upon this record — and for that reason we admitted it — applies to combina- tions of capital as a whole, or refers to those distinctive charac- teristics that are supposed to inhere in what is popularly called a Trust? A. Well, in the paper I have made certain specific — given certain specific figures, referring to certain specific, so- called trusts; you — Q. You have referred to railroad companies? A. To the com- binations of railroad companies. Q. Is there not that characteristic difference between combina- tions in the nature of trusts and railroad companies that the State by reason of the public character of the railroad transporta- tion business and the right of eminent domain that is conceded to a railroad company, exercises the right of control over the prices charged? A. They are all included — Q. Isn’t that true? A. I think that so far as the railroads are concerned they are at the present time under better supervision and regulation perhaps than other forms of trust organization; I labored for many years and I spent a great deal of money to get just that regulation; I presume — Q. For railroad companies? A. For railroad companies; yes, sir; and had perhaps as much to do with the establishment of the Railroad Commission in this State as any one citizen. Q. Then do you mean by that illustration of yours and the ap- proval of that method to suggest that what are known as trusts, and by trusts we mean either monopolies or quasi-monopolies, should be placed under governmental control and regulation as No. 40.] .937 to price? A. I think that there may be varying conditions in different parts and different branches of commerce, but on gen- eral principles I believe it would be better for the capital invested in these great organizations of all kinds to have a supervision and regulation in the interest alike of the capital invested and of the public; I believe it would lead to a better understanding of the relative rights, and to prevent perhaps unwise and ill-con- sidered legislation, which was unjust in many cases. Q. You seem to overlook the essential element, Mr. Thurber, that one of the questions here is whether the State should permit the combinations of capital to go on in the direction of trust or- ganizations; that is to say, the organization of such a combina- tion of competing concerns as practically to create a monopoly? A. I think it is the natural evolution of capital and production under the great forces that now control the world. Q. How about capital itself, Mr. Thurber ; do you consider that the interest of capital is fostered or advanced by permitting ag- gregations of capital to assume such large proportions that small- er capital that desires to compete has no chance of entering? A. I think that there may be abuses which ought to be abated, but it must be borne — < Q. That is not the point, Mr. Thurber — are there not abuses, and does your own experience with regard to the very organiza- tions with reference to which you have spoken in this argument of yours, not demonstrate to you that there are abuses which should be checked and quelled if possible? A. I think that those things remedy themselves, as illustrated in the result in prices to the consumer. Q. Take the example of the Sugar Trust, Mr. Thurber; here is an organization that under permission of the laws of the State 938 [Senate, of New Jersey has been permitted to increase its capital, whereby 80 per cent, of all the sugar producing capacity of the country has been centralized under one general management. Do you mean to say that even regard for capital is served by permitting an organization of that kind to go on increasing — preventing capital that would otherwise be disposed to enter upon the field of competition, to enter upon it? A. Mr. Chairman, there is nothing to prevent any person who desires to go into sugar re- fining business from doing so, and the result is shown — Q. There is no law, Mr. Thurber, but doesn’t the fact that one organization has a control to such an extent that it controls the price of the raw material, that it fixes and controls the price of the manufactured product, that it regulates and adopts and re- vises a system of uniform rules and regulations, wherby the dis- tribution of that product over the entire United States is had, so that competition even among companies ostensibly competing, is absolutely destroyed, according to the phraseology used by the President of theWholesale Grocers’ Association and intentionally BO 1 — do you imagine that capital smaller in amount, weaker in strength, can compete against a corporation once organized, of that kind? A. It can, Mr. Chairman; ftnd it is now being done; and it is increasing every day; the competition with the Ameri- can Sugar Refining Company is inevitable, going to increase; and I believe that the best answer to your question as to its bearing on the public interest is that the price of refined sugar has de- clined about 50 per cent., while the refining max*gin has declined materially. Q. Well, now, I see that you use certain figures here — while not leaving the main question; let us come down to that; you say for the years prior to the organization of the Trust, the marginal dif- No. 40.] 939 ference between the raw sugar and manufactured product was 1.98? A. Yes, sir. Q. Where do you get those figures? A. 1.09; it is one and ninety-eight one thousandths. Q. Yes; that makes a great deal of difference? A. 1 98-1,000. Q. And not one and ninety-eight one hundredths? A. No, sir; it is one and ninety-eight one-thousandths, while the margin in the nine years succeeding was nine hundred and eighty-one-thou- sandths. Q. Now, have you taken the trouble, instead of taking the fig- ures made apparently for the purpose of securing that result, by the firm of Willett & Gray — have you taken the result of the five years preceding the formation of the Trust and the five years subsequent? A. I have them here in detail each year (referring to typewritten paper); I would state that these are Willett & Gray’s figures, verified by the records of the American Grocer. Q. Now, is it not a fact that for the five years preceding the Trust, the marginal difference between the refined and the manu- factured product was 853-1,000 of a cent; while for the five years subsequent to the organization of the Trust the marginal difference was 981-1,000 of a cent? A. I think it is, sir, and — Q. That is right? A. I think it is; those figures bear that out; but it should be taken by the nine years rather than the five years. Q. Why? A. Because the last five years since the formation of the Trust are materially less than the first four years — since the first four years — and the contract has been in existence about nine years. Q. Why do you take the figures that are most favorable to the Trust and exclude those which seem to be the figures most natu- 940 [Senate, ral to be taken in reaching a result upon this question? A. Mr. Chairman, I think I must answer that question by asking you the same question — because I take the entire nine years that the Trust has been in existence and compare it with nine years previ- ously. Q. Why do you take those nine years? A. Because it has been in existence nine years. Q. Why do you take the nine years that Willett & Gray use upon their printed pamphlet, which w r as circulated for the pur- pose of showing that the intention of the Sugar Trust with ref- erence to the association should be considered and have weight with Congress? A. If the Trust had been in existence ten years I should have taken ten years difference, but as it has only been in existence nine years I take the nine years it has been in exis- tence and compare it with the nine years previously. Q. Don’t you think that five years previously to the organiza- tion of the Trust is a fairly reasonable standard for the computa- tion of results? A. I don’t think it is, as compared with the suc- ceeding five years, for the reason that the full effect of the com- bination did not take place until, you might say, the last five years; I think it is not a correct way of judging, unless you take the whole nine years, because for the first five years the economies effected by the Trust had not had their full effect; whereas, in taking nine years together, it has; it makes a fairer average to take the whole nine years than it does to take the previous — at least, the five. Q. Isn’t it a fact that the very first year of the trust, the mar- ginal difference between refined and manufactured, that is be- tween raw and refined rose from about 70-100 of one cent to about 1 21-100 of one cent. A. Yes, sir. No. 40.] 941 Q. Then the effect of the trust was practically, in one year, to double the marginal difference between refined and raw? A. And then the question would come — Q. Isn’t that true? A. It was, sir. Q. Notwithstanding the economies resulting from centraliza- tion which are said to be the main object of aggregation and con- solidation, notwithstanding the centralization of industries and the economies derivable therefrom, in one year 50 per cent, was added to the marginal difference between the refined product and the raw material; isn’t that true? A. It is; and the question is, was that reasonable? Q. Now, do you consider that so far as consumers are concerned that that effect of a trust is a beneficial one to be fostered and permitted? A. I say that the total results show that it is; that it has reduced the price of sugar 50 per cent. Q. And is it not true that labor, on the one side has absolutely no advantage from consolidation, and that the consumer on the other side has not had even the advantage of the fall in the raw material; while the producer of the raw T material has been com- pelled to bear the entire burden — only a fractional part of which has gone to the consumer and the major part of which has been held by the refiner? A. That is not correct, Mr. Chairman. 'Q. Explain where the error lies? A. The figures show for themselves that with the price of 7.90 for granulated sugar for the nine years preceding the Trust it has declined to 5.27 hun- dredths for the nine years succeeding the Trust; on that average. Q. I am speaking now of the five years preceding the Trust, compared with either the five years succeeding the Trust, or the whole nine years succeeding the Trust? A. Well, sir; if you will take the five years succeeding the Trust on the price of granu- 942 [Senate, lated sugar it is lower than the five years preceding the formation of the Trust; I can give you the exact figures of it in a moment; (makes a calculation on paper) ; this is the result, Mr. Chairman, for the five years preceding the formation of the Trust the aver- age price of granulated sugar was 6.77. Q. You mean the refined product? A. Yes, sir; and for the five years succeeding the formation of the Trust it was 5.97 cents — granulated sugar. By Mr. Mazet : pw Q. Does not the very fact that as is shown the large dividends earned on this immense capitalization by the American Sugar Refining Company demonstrate conclusively that there is a larger profit in the business notwithstanding the fact that the price has been reduced to the consumer — and that the consumer has not got the entire benefit of the improved machinery and centraliza- tion, etc.? A. Unquestionably. By Mr. Lexow: Q. Will yon read those figures again? A. Yes; for the five years preceding the formation of the Trust the average price of granulated sugar was 6.77 ; for the five years since the formation of the Trust — the first five years — it was 5.97. Q. What conclusions do you draw from that? A. I say that notwithstanding that the margins between raw and refined dur- ing the first five years were larger than they were during the five years preceding the formation of the Trust, that the result — which is the important thing to the consumer — was a saving of one and three-quarters cents a pound. Q. No question— nobody disputes that! The proposition is this: Whether the consumer during that period of time, not- No. 40.] 943^ withstanding the fact of increased economies from concentration and aggregation, has received even the benefit of the whole amount of the reduction in the price of the raw material; and jour answer to that is no? A. I don’t think so. Q. Raw material has diminished more than has the price to the consumer of the refined product? A. Unquestionably; the profits of refining were larger after the formation of the Trust than they were prior to the formation of the Trust; but there is one fact which, perhaps, ought to be stated — in the few years precedingthe formation of the Trust, the sugar refining business was a most disastrous business, and numbers — I think probably a dozen sugar refineries were forced out of business; and I believe that there were more men thrown out of employment by those failures than there were by the consolidation. By Mr. Mazet: Q. Don’t you think that would have righted itself that the de- mand for sugar would necessarily create a supply — that is, the supply regulate the demand? A. I do not think so, sir; while, of course, demand has a great influence on prices, etc., the cheaper goods are the more there are used; at the same time, the condi- tion of the sugar refining industry was such that there was ab- solutely a necessity that something must be done — refinery after refinery failed, and new methods came in, and it was a natural result that the sugar refining industry should have taken just the course that it did take. Q. Do you consider it good policy for any combination of capi- tal to make an agreement compelling purchasers to sign an agree- ment that they shall not purchase from any competitor; do you think that is good policy, and don’t you think that would retard competition? A. Well, it would depend on how it was done; 944 [Senate, now, in point of fact, all of these aggregations of capital known as trusts, that make this limited price agreement, offer an induce- ment to the distributor to handle only their goods; they will sell their goods to anybody; but to a man who will promise to push their goods, to handle their goods exclusively, they offer better terms than they do to a person who won’t promise to do that. Q. Isn’t that in the nature of a monopoly in the business? A. No, sir; I don’t think so; any other concern — Q. It seems to operate in that way? A. Any other concern can do the same thing. By Mr. Warner: Q. Doesn’t that give the company making these agreements an immense advantage over similar concerns that come in to> com- pete? A. The smaller concerns can adopt the same principle, you know. Q. Isn’t it a fact that the sugar refining company have prac- tically taken into partnership the wholesale grocers of this coun- try in order to shut off the smaller refiners? A. Not at all. Q. From doing business? A. Not at all; that arrangement was made at the request of jobbers. Q. Well, at whosoever’s request it was made, doesn’t it have the effect to give them an unfair advantage over smaller concerns? A. This limited price system, as it is called, is a necessity, I be- lieve in modern trade; and it all comes down to the question of whether anything unreasonable is done or not; if an unreasona- ble thing is done, it ought to be stopped. Q. Do you think that there is such a competition between the jobbers and wholesalers that the consumer gets all the benefit that he should receive? A. I do, sir; at the present time; take No. 40.] 945 the item of sugar, for instance; I sold more sugar for twenty years — that is, my concern did — than any other in the United States; and we did it, I think, constantly at a loss of 3 to 4 per cent, below the average cost to us of doing business; that is, in other words, saying that our average cost of selling goods and handling goods, the collecting and all that, was between 5 and 6 per cent. ; we did not make more than perhaps 2 per cent. — and our actual cost of doing the business exceeded the gross profit that there was in it. By Mr. Mazet: Q. You make some reference in your statement to investiga- tions, and the public, the stockholders — they ought to be pro- tected? A. It seems to me that there is a lack of publicity in the affairs of these great corporations. Q. Doesn’t the fact of their capitalization at these immense sums and the putting of this stock in the market enable them to control a monopoly of stock, considerably at their pleasure? A. I think so, to a great extent; and the interest of thousands of partners in these great industrial concerns have certainly not been consulted to the extent that they are entitled to be con- sulted. Q. That you consider one of the evils growing out of these combinations? A. Yes, sir; there ought to be greater publicity and regulation. Q. What is your idea as to how that should be accomplished? A. Well, I had not thought it out on that line. Q. You made the suggestion that some supervision ought to be exercised over these organizations, in your paper? A. Yes; I said that I believed that there ought to be greater publicity; 60 946 [Senate,, and how that can best be obtained is something that has to be carefully considered, of course. Q. You, I presume, have taken into consideration the fact that the different States of this country offer inducements, one per- haps inferior to that of the other, or considered so by these cor- porations? A. Yes, sir. Q. Your organization, I believe, is incorporated under the laws of New Jersey? A. Yes, sir. Q. Were they more liberal there? A. Yes, at that time they were; there is one thing about the New Jersey laws; they are not inquisitorial, in so far as the ordinary business of a corpora- tion is concerned; it does not reveal their methods of business to competitors, and there is a great deal in that; a man wants to conduct his business in his own way; he has his — that is, when I say a man, I mean a corporation ; it has ways of doing business that it don’t want to give competitors the benefit of; there ought not to be anything which is inquisitorial — unnecessarily so. By Mi’. Warner: Q. What is there, Mr. Thurber, in the laws of the State of New York that is inquisitorial, in regard to these trusts, at the present time? A. Well, I think that the laws of the State of New York now are not so bad; the — some of the reports are perhaps un- necessarily in detail, that do give competitors information which they should not have. By Mr. Lexow: Q. Reports for taxation purposes? A. Yes, sir; the annual reports. Q. But that is not open to the public; the report made to the No. 40.] 947 Comptroller is a secret document; that is not open to the public, so that cannot possibly give a competitor any knowledge of the business? A. Well, I can only speak from my own impressions that I had; I am not aware of what you stated — the correctness of that. Q. What is there in the provision requiring an annual report — and the looseness with which that report can be drawn — that is inquisitorial, that would prevent any honest corporation from operating in this State? A. Well, I don’t know that I am famil- iar enough with that to judge. Q. Have you investigated that subject of taxation at all, Mr. Thurber? A. I have somewhat, sir; I found this — Q. Do you consider that the laws of the State of New York are any more oppressive than those of the State of New Jersey, or that the methods for the collection of an honest tax are in better shape in this State than they are in the State of New Jersey? A. I think the laws of New York are more liberal now than they were; but I will say this as regards the difference be- tween taxation of corporations and taxation of private persons — • that when our firm was formed into a corporation, we had to pay about nine thousand dollars taxes more than what we had paid previously; and we were in competition with houses in our same line of business that did not pay a cent on their personal prop- erty, their stocks, goods, and all that sort of thing, which we as a corporation had to pay. Q. You mean that a corporation has to pay a larger percent- age of the tax proportionately than the individual? A. Yes, sir. Q. And that upon certain lines of business a corporation only pays a tax where the individual escapes entirely? A. Yes, sir. Q. Do you hot consider that the limitation of liability that a 948 [Senate corporation possesses is an adequate consideration for the pay ment of a tax such as is levied? A. Well, in some kinds of busi ness it may be; but I should say that in my line of business, that I never in the world would incorporate a business again, as long as it could be continued under individual management. Q. Now, have you in making this defense of the combination of capital, in a general sense, taken into consideration the apparent accessory of each one of these combinations, namely, that im- mediately upon centralization the stock is increased to a prodig- ious quantity, the stock certificates are listed upon the New York Stock Exchange, and what were before non-speculative industrial pursuits are changed into speculative securities? A. Yes, sir; I have thought of that. Q. Have you thought of that with reference to the conduct of the business of industrials of that character, where the induce- ment to raise or depress the stock in the market is a prominent feature? A. The question of what a business should be capi- talized at is a very difficult and intricate one to solve; the ques- tion of the earning power of that business is, of course, the prominent feature of it; and the earning power may depend on a great many different things. Q. Has the earning power not become a more prominent and necessary feature because of the fact of change from an ordinary industrial pursuit to a matter of speculation? A. It is not neces- sarily changed by incorporation, but where a business is — where the stock of a corporation is listed on the stock exchange and it is made the subject of speculation, as you say, undoubtedly, there is a great opportunity for elevating and depressing those stocks by the men who know the inside of that business. Q. By restricting and increasing production in the industrial Jo. 40.] 949 tself, or ridding themselves of competition on the one side, or ■aising an ostensible competition on the other; are not all those nducements severally injected into what otherwise would be an ordinary industrial pursuit? A. All those things are possible mder the system. Q. Aren’t they the natural consequences, Mr. Thurber, of in- creased capitalization and of a change of the holding from a few 0 many for speculative purposes? A. Well, you know there are speculative stocks and there are non-speculative stocks; it is not lecessary that a corporation should list its stock and become a speculative stock; there are thousands of corporations that do lot list their stocks and do not make them speculative stocks. Q. Do you know of any so-called trust, and by that I mean a combination which controls a percentage greater than one-half if the entire business of the country in that specific line, the stock of which after capitalization has not become a speculative commodity? A. Yes; the Standard Oil Company is a conspicuous example of that. Q. Do' you mean to say that the Standard Oil Company is not 1 security which is dealt in speculatively in the city of New Fork? A. I do not think it can be called a speculative stock. Q. Are its quotations not to be had readily? A. Yes, sir; but pou do not say — that is, in the popular mind, I do not think it s considered speculative stock; that is, a number which — By Mr. Mazet : Q. Not speculated in as much as some? A. No. By Mr. McCarren : Q. The holder don’t sell it? A. Yes; it is steady; it is an invest- nent stock. 950 [ Senate, By Mr. Lexow: Q. Now, isn’t it the fact, that when you come to consider a combination like the Sugar Refining Company, that it is only in the case of a rupture such as is produced between the Arbuckles controlling about as many millions as the Sugar Refining Com- pany on the one side, and the Sugar Refining Company on the other, that there is any hope or expectancy of any competition in sugar? A. Not at all; we see it in the Mollenhauer; we see it in the McGahan; we have seen it in the Revere Refinery, in Bos- ton — Yes, there is competition in the refining of sugar to-day. Q. Do you consider it competition, Mr. Thurber, when the wit- nesses on the stand here have testified that these various refiner- ies follow the prices made by the American Sugar Refining Com- pany? A. Well, they are at perfect liberty to make different prices if they choose; you can’t — Q. Don’t you know that the American Sugar Refining Company has it in its power to buy up every one of these concerns if it desires, to-morrow? A. No, sir; I don’t know that. Q. Don’t you know that their output is so small, while the force of capital controlled on the other side is so great that they could get rid of competition and buy absolutely all competitors of this kind ultimately, if they desire? A. No, sir; I don’t think that is correct. Q. Why, then, do not the Mollenhauers, instead of working their factories only to the extent of 50 or 60 per cent, of their productive capacity — why don’t they work them to the full ex- tent of their power of production and compete openly in the market? A. Because they do not have the demand for their sugar; they sell all they can. Q. If the American Sugar Refining Company can sell at prices No. 40.] 951 fixed by that company, one thousand two hundred millions of tons of sugar a year, do you mean to say that the small pro- ductive capacity of the Mollenhauer Company could not be sold, in competition with the American Sugar Refining Company? A. It is a question for them whether they wmuld make more money with two thousand barrels of sugar a day, selling at one price, or whether they would make more — on three — selling at another price. Q. Selling at prices fixed by the American Sugar Refining Company? A. Well, they don’t — Q. Isn’t that true? A. I don’t think that they sell at the prices fixed by the American Sugar Refining Company; but they fix their own prices as close to theirs as they can. Q. Fixed under the factors’ agreement, according to the price of the American Sugar Refining Company? A. That has nothing to do with their fixing their price; they can fix their price at any amount they choose; and they pursue with the distributors the same factor’s system that the American Sugar Refining Company does. Q. Mr. Thurber, the testimony is upon the record here, given by the representative of the Mollenhauers, that the expense of producing refined sugar lessens in proportion as the capacity of the factory is worked; and that the smallest expense is reached when the factory is worked to its full limit; now be kind enough to explain to us how a concern manufacturing only two thou- sand barrels of sugar a day cannot sell its entire output, where the American Sugar Refining Company, acting through the same factors, is able to dispose of its output, amounting to 80 per cent, of the total manufactured product of the United States? A. Each concern — 952 [Senate, Q. If there was competition? A. Each concern has its cus- tomers, and they are constantly trying to get the trade of this house and that house and the other house; and I think that the Mollenhauer people sell all that they can sell. Q. All that they are permitted to sell by the American Sugar Refining Company; is that not true? A. No, sir; I don’t think so. Q. How do you account for it, then, that just in proportion as the American Sugar Refining Company limits its percentage of product, the Mollenhauer and the other so-called competing con- cerns limit the percentage of their product? A. I am not aware that that is so. Q. Mr. Post conceded on the stand here that they followed the American Sugar Refining Company in limitation of product? A. By limiting the product — well, that is news to me! — Q. (Continuing) And explained on the ground that the same causes that operated to make the American Sugar Refining Com- pany limit its product at a given time, would necessarily operate with the Mollenhauer, by — A. Well, not bind them — Q. Now, if there was free competition, and one concern sold nearly twelve hundred thousand tons annually, and the other concern only manufactured two thousand barrels a day, explain to me how, if there was true competition, that small concern could not sell the entire capacity of its plant? A. I think it was the trade conditions that Mr. Post alluded to and that the same trade conditions that affected the American Sugar Refining Com- pany affected them ; and that when the demand fell off for sugar in the one case it fell off in the other. Q. Operating through the same factors? A. No, sir; operating through different factors; they each have their classes of custom- No. 40.] 953 ers, you know — they have their houses that deal with them; some houses deal with both. Q. Do you mean to say that it is not in the power of the Ameri- can Sugar Refining Company to stamp out the competition of any concern controlling substantially less capital than it does, by reducing price? A. I do; unless a concern had insufficient capital, when they might run them out; but you take any — Q. Isn't the hope of competition now, with reference to the American Sugar Refining Company based entirely upon the prop- osition that the Arbuckles — controlling almost as many millions as the Sugar Refining Company — proposes to enter into compe- tition with them; and isn’t that the only hope 1 of competition in this country to-day? A. No, sir; you take a small concern; you take a two-thousand-barrel refinery with sufficient capital to operate that refinery on a cash basis — if it was doing business to ruin instead of to make money — they could ruin the whole sugar refining industry — it is the most vulnerable thing that you can find — a big concern is at the mercy of any little solvent con- cern, that wants to go to work to ruin them. Q. Well, how long can that little concern remain solvent? A. Ah! As long as they can pay cash. Q. As long as it could pay cash; therefore, is it not an irresist- able conclusion from that, that in order to make any effective competition against a combination controlling 80 per cent, of the market of this country, with a capital of $75,000,000, almost an equivalent capital must be competing against it? A. Not at all, sir; that is an entire fallacy; and I think that these large aggregations of capital are the most vulnerable things — if any- body wants to attack them and wants to do business and not make money; they can break down any combination of capital — 954 [Senati, Q. Will you then account, Mr. Thurber, for the purchase by the American Sugar Refining Company of the Camden factory, not- withstanding the fact that it had not been operating a number of its own factories for years previously and notwithstanding the fact that it had not been utilizing the productive capacity of its factories in operation to the extent of from 60 to 70 per cent since the organization of the trust? A. Well, I have no doubt — Q. Does that mean that small capital can compete against the American Sugar Refining Company, or will be swallowed by it? A. I have no doubt that any refinery which may be built to sell out, as the saying goes, could be bought, at any time; but there are businesses that are not built to sell out. Q. The Franklin factory was not built to sell out, but it had been operating for 20 or 30 years, had it not, in Philadelphia? A. It had. Q. The Delaware factory was in the same situation, was it not? A. Yes, sir; I think so. Q. The Spreckels factory was organized with a capital of $10,000,000, in Philadelphia, also, was it not? A. Yes, sir— J think it was built to sell. Q. Now, explain to me, if small capital can compete — and, cer- tainly $10,000,000 is not small capital, how it was that although the American Sugar Refining Company was not then operating four or five of the plants that it had acquired and was not then utilizing more than 60 per cent, of its productive capacity, never- theless bought these competing plants? A. There is no doubt that a person — Q. Can you account for it? A. Yes; I can account for it in thif « way — that there may be inducements enough offered to make a person sell out, if it — No. 40.] 955 Q. One moment — just stay there one minute — and is not that concern which controls 75 to 80 per cent, of the total market and has a capital of $75,000,000 the ability to offer any inducement that will prevent competition? A. No, sir; that is shown by Nash, Spalding Refinery of Boston; it is shown by the Mollen- hauer Company of New York; and it is shown by the McGahan of Philadelphia. Q. But, Mr. Thurber, is it not known to you as a student of this question, that some concerns might more properly be kept in operation, in order to avoid the question of the creation of monopoly, and that if those concerns follow prices, the monopoly is as nearly established as though they had been swallowed? A. No, sir; not necessarily; there are people who go into business to make a manufacturing profit and not to sell out; and there are others who go into business to sell out; the Spreckels refin- ery was undoubtedly built with that view and with that result. Q. Is that the only answer you care to make to that proposi- tion? A. I don’t think of any other, sir. By Mr. Mazet: Q. You made a statement a moment ago; that unless a man wanted to go into business to make money, he could make these combinations — A. (Interrupting) Yes; if he wanted to do busi- ness without profit; because he could reduce — Q. (Interrupting) — That practically prevents competition — a man wouldn’t go into business unless he could make some money by doing so? A. That is it. Q. Well, isn’t the natural result, then, to prevent competition? A. It all comes down to the question of what is reasonable; if you make the margin so large that it tempts additional capital \ 956 [Senate, to an undue extent into any business, it will naturally tend to reduce the profits to nothing in that business; now, if I were going into the sugar refining business to-day, I should endeavor to do so to make money; I would endeavor to keep my prices as high as I could keep them, and if, on the other hand, I wanted to go into the sugar refining business to ruin the American Sugar Refining Company, I would sell my goods just as low as I could sell them. . \ By Mr. Bedell: Q. If you were going into the business to-day of refining sugar, you would put your sugar out on the market at the same price the American Sugar Refining Company did, would you not. A. As nearly as I could. Q. If you w 7 anted to make money? A. If I wanted to make money. Q. You would not attempt to charge a higher price? A. Why, of course; I couldn’t sell my sugar. Q. You would not attempt to charge a lower price, because they would meet you on it? A. Yes; that is so. Q. Then, by reason of their being in a position to control so large a portion of the trade, you, if you expected to make money out of your enterprise, would find it necessary to follow the prices established by the American Sugar Refining Company, would you not, as a matter of fact? A. Well, I would, after I got the trade; but you know you have got to get your trade, and in order to get the trade you might at first have to cut under their prices. Q. Don’t you think they would meet you on the cut? A. They would if No. 40.] 957 Q. Then, how would you get the trade? A. They would if you were of sufficient importance, but you could go in and for a while you wouldn’t be of sufficient importance. Q. After you got the trade, then you would follow the prices established by the American Sugar Refining Company? A. I would, unquestionably. By Mr. Lexow: Q. That is it. In other words, in order that a person or com- bination of persons shall be of sufficient importance to compete against the Sugar Refining Company, they must be of sufficient importance to put before the public an output somewhat similar in size to that produced by the American Sugar Refining Com- pany? A. Oh, no ; not at all. Q. They must be able to supply the market, must they not? A. No; they must be able to supply the market up to their ca- pacity, whatever that may be. And a 2, 000-barrel capacity — after it has got the customers to take that amount, why they, of course, don’t want to sell their product any cheaper than the trust would sell it; they want to sell it at a profit; at first they may sell it for less in order to get the trade. Q. But if the Trust then followed, they could not get the trade, could they? A. Well, it would be a question of how fast they followed. Q. You do not dispute, do you, that there is nothing short of a combination of capital involving many millions that would make any competition against the American Sugar Refining Company, and capital that desired to invest in that field would know that it faced the risk of absolute ruin by the American Sugar Refining Company underselling it in the market? A. Not 958 [Senate, at all, sir; you take a 2,000-barrel refinery that is a solvent refinery, with sufficient capital to do its business with, and it could ruin the American Sugar Refinery Company to-day. Q. How much capital would you say would be necessary? A. Enough to pay cash for what it bought. Q. And how long A. Not a large capital by any means. Q. How large? A. Well, I should say that a capital of two millions of dollars would be ample to be proof against any as- saults which the American Sugar Refining Company could make, because it w r ould be practically independent; they could buy and sell for cash; and the American Sugar Refining Company could not ruin them if they tried. By Mr. Bedell: Q. But you say they could ruin the American Sugar Refining Company? A. I do — because, don’t you see — there is the large capital, and that large plant that has got to work on the same margin that the small capital and the small plant does. Q. Let me ask you — is this American Sugar Refining Com- pany producing, as it does, and controlling 50 per cent, of the total here in the United States, of refined sugar, to simply remain passive while you were putting out on the market the entire product of your two million dollar concern — now, after you had disposed of all the product of that concern, in what position would the American Sugar Refining Company be placed; would they not then charge any price that they saw fit for their sugar? A. Oh, no; because it is a continuous thing; and it would be a question simply of the volume of the business; it might be to their interest to Q. But you could only control a certain — only 2,000 barrels, No. 40.] 95$ because you only have an output of 2,000 barrels — A. I under- stand — it might not be large enough to make it an object for them to reduce their price on their entire output. Q. But you are asserting that you can ruin the American Sugar Refining Company — I fail to see just how? A. Well, you have got to have a sufficient amount, perhaps, to bring down the price. What I mean to say is — ■ Q. Then you would have to have an output equal to the Ameri- can Sugar Refining Company? A. No — quite a long while — you might have to increase your output. Q. Then you would have to increase your capital? A. Yes. Q. Then, the two million dollars would not be sufficient, would it? A. Yes; I think it would have that effect; I think it would have the demoralizing effect. What I mean to say is, if a com- pany was formed, to go into business for the purpose of seeing how cheap they could sell goods, instead of making profit, then it would have the effect to stimulate the American Sugar Refin- ing Company into reducing their prices until prices would go down until where there was absolutely no profit perhaps on the sale. Q. How long would it take to wipe out that entire two million dollars, if you could reduce the price of sugar one-half or three- quarters of a cent a pound? A. If you did not do business below the cost of doing it, it would not be wiped out; it would remain there as a factor; and you could stop, shut down your factory, if you chose, when you got to the point where there was no money in it. i By Mr. Lexow: Q. Why, you have stated that the American Sugar Refining Company, with all its concentration, is compelled to pay one-third 960 [Senate, of a cent per pound for refining? A. No; I said that was their profit. ( Q. Now, if the refinery undercuts the American by one-half cent, he must lose just the difference between one-third and one- half cent in the manufacture of his output? A. Yes. Q. How long would his two millions last? A. He is not obliged to cut it below the third; when he gets to the point where there is no profit he can stop. Q. Then, where would the competition come in? A. The American Refinery would be doing business without profit; and there is their immense capital and plant — and that has been brought down to that point by a little one. Q. How much would it cost, Mr. Thurber, to put up a factory that would produce enough sugar to compete with the American Sugar Refining Company, in the city of New York? A. Well, I don’t know just what the — , Q. Don't you know it would cost over two millions of dollars? A. Well, I say that two millions of dollars would operate a fac- tory of moderate capacity, and which, if the American Sugar Refining Company tried to run them out, could not be run out. Q. Supposing the American Sugar Refining Company, this be- ing the district in which your two million dollar adventure was started, put down the price of sugar to one cent below the cost of manufacture, and compelled through its factor agreements which -we have in evidence here, every factor to sell at that price; how long would that investment of two million dollars last A. You are not compelled to operate your factory at a loss; you can shut it down when it gets at a point where it is nonremunera- tive. No. 40.] 961 Q. And that would be the situation exactly with this invest- ment of two millions of dollars, after a very few days, wouldn’t it? A. But where would be the situation of the seventy-five millions of dollars? Q. They would then be able to continue without competition? A. Ah! But you can start your refinery up again the moment they get to a profitable basis. By Mr. Mazet: Q. You do not mean to say that you could compete with a con- cern that has plants all over this country and could sell sugar so much cheaper, and at the same time realize the same profit — for instance, this concern could sell in Cincinnati and in Philadel- phia at a much lower figure, considering the freight rates, than you manufacturing here, and yet make more profit than when you were profiting on sugar — A. They might in Philadelphia because they have their local refineries there; but they could not in Cincinnati. Q. You do not wish to be understood as saying, do you, that a man, under these circumstances, could be a successful practi- cal competitor against a concern of that kind? A. I say — Q. Might be temporary, in a certain locality? A. I say that any refinery that goes into business to make money can compete with the American Sugar Refining Company and make money, at the present margin of profit; if it should go down a third of a cent; that is, if the margin of profit should be reduced a third of a cent, they could not do it, because that is about the average net profit that the refiners make. 61 963 [Senate, By Mr. Bedell: Q. You are coming right to our proposition, if that is where you stand? By Mr. Mazet: Q. That is, adopt their prices? A. Naturally a man goes into business to make money, he sells his product as high as he can in the market. By Mr. Barry: Q. Isn’t it a fact that the refined sugar in this country is regu- lated by the price of foreign sugar, foreign refined sugar? A. Well, it is more regulated by the price of the raw sugar; and to some extent is, to a certain extent, by the — Q. If the duty was taken off refined sugar, would not that have more effect on the sugar combination than any other combination of capital in this country would have? A. Yes; I have no doubt it would break down the refining industry in this country; it would simply transfer the refining industry from this country to the other side. By Mr. Lexow : Q. You mean that that would break down the refining indus- try? A. Yes, sir. Q. Would it have any effect on competition with the American Refining Company? A. Well, no, sir; I think they would all be in the same boat. By Mr. McCarren: Q. In your statement, if my memory serves me right, you stated — or read — that at one time you were under the impression No. 40.] 963. that combinations of capital tended to abrogate competition? A. Yes, sir. Q. And I infer that you have changed your mind? A. I have, sir; I believe that it enhances competition ultimately; it may tem- porarily prevent competition; but in the long run it lifts compe- tition to a higher plane; and these large organizations, when they do compete, compete much more strongly and virulently than the small ones do; we see that in railroad wars. Q. I do not wish to be personal, but at one time you were very prominently identified with the organization known as the Anti- Monopoly League? A. Yes, sir; I had the honor of forming that organization. Q. Well, at that time, as I understand, the principles of the organization were inimical to the concentration or consolidation of capital? A. The real object of the Anti-Monopoly League was to get a Railroad Commission in this State; and that was opposed by the railroads; and it took a seven years’ fight to get it, and we finally succeeded in getting it— and afterward had the satis- faction of having the railroads say that it was a good thing for them as well as for the public. Q. During this investigation, a great deal of stress has been laid on the fact that many of these industrials, so-called, have been over-capitalized and as a result the stock has been placed upon the market and unloaded on an unsuspecting public; there- by causing loss on the one side and gain on the other; do you view that in any other light than a transaction in which one gambler wins and the other loses? A. Well, no man is obliged to buy stock unless he believes it is a good investment; and I think that the widening of the ownership of these great organ- izations is a good thing; but I think that oftentimes the interests 964 [Senate, of stockholders are sacrificed through lack of knowledge, that they ought to have; as I have stated in this statement that I have submitted to you, 1 do believe that there is a necessity for publicity and supervision in the interest of the owners. Q. Taking that view of it, regarding the operation in stock as merely a gambling transaction, would you for that reason advo- cate the abolition of the stock exchange? A. No, sir; I would not; I think the stock exchange is as legitimate an institution and as necessary an institution to the modern development of commerce as any institution we have. By Mr. Mazet: Q. You don’t necessarily regard a man who buys stock as being a gambler — don’t many people buy stock when they have a small amount on which they seek to have a fair return for investment? A. Certainly. Q. And you think these people are entitled to some consid- eration? A. I do; they are the real partners in these enterprises. By Mr. McCarren: Q. I am speaking now, Mr. Thurber, not of where a man buys the stock outright, but where it is speculated in on a margin, •where there is no delivery of stock at all? A. Well, the stock exchange is operated on the basis of actual delivery of stocks; and if you wall investigate that I think you will find that they are; the bucket shops don’t have any actual delivery. Q. Well, they are exchanges; now, Mr. Thurber, another ques- tion; there has been a good deal of testimony brought out to show that the large aggregation of capital prevents competition; in other words, that the large aggregation of capital, the con- No. 40.] 965, solidation of manufacturing interests, prevents the existence of small organizations or corporations; do you see any other way to prevent that than by limiting the capitalization of a company by the State; in other words, providing that no manu- facturing industry shall employ more than a certain amount of capital in this concern? A. Well, it is a question w T hether that would remove that evil; concerns can be bought up by profit — by the profits which have been earned they can buy up the earn- ings, whether the capital is large or small; now 7 , there are indus- trial corporations that are entirely private, that their profits are far greater than, in proportion, than any corporation; you take the Royal Baking Powder Company, it is said in the trade, that it makes a million dollars a year on a million dollars capital; and there are plenty of private businesses and corporations that are not speculative corporations, that are business corporations, where the profits are far beyond anything that w r e see in such concerns as the Standard Oil Company, the American Sugar Re- fining Company, or the Rubber Trust, or any of those, in pro- portion to their capital. By Mr. Mazet: Q. What conclusion do you draw from that, as to the placing of the capital stock of some of these companies on the market of the public; if the stock continues to remain remunerative to the holders there would not be any inducement to place it on the market, would there, as in this case- you speak of? A. Well, in some cases, no; and in some cases, yes; in some cases the ques- tion of duration of life and state of health of the proprietor, you know, or something of that kind — and if he sells out— if he is going to sell out that business, he wants to get w T hat he thinks 966 [Senate,. it is worth — now, in England they have a system of estimating the value of a business — the profits of a certain number of years — and they say, the profits have been, for instance, a hundred thousand pounds a year for 17 years — they will say that business is worth seventeen hundred thousand pounds; and they will capitalize it, somewhat speculatively, perhaps, but nevertheless with a certain basis of value; now, the question of good will which has been here, and the value of trade marks, are all elements which enter into the capitalization of business. By Mr. McCarren: Q. Now, Mr. Thurber, independent sugar refineries have been cited here very often during the investigation, to show that the American Sugar Refining Company absolutely controls the price of refined sugar, inasmuch as the independent refineries refuse to sell their sugar at a lower price than that fixed by the Ameri- can Sugar Refining Company. Do you believe that the act on the part of these independent refineries is voluntary or not, in refus- ing to sell their wares at a lower price than that fixed by the American Sugar Refining Company? A. I think that their action is a perfectly natural and reasonable one and they would not do that if the margin of the American Sugar Refining Company was too large; if it was so large that it was very tempting, they would cut under it and endeavor to increase their output, don’t you know, to get a larger profit on the increased output; but in point of fact the margin of profit has only been a fair refining margin, and it was not to their interest to reduce that margin; if it had been beneath that they would, perhaps, have tried to grab a larger share of the trade, but they say, “ Here is a margin of manufacturing profit, and we are satisfied with that, and we No. 40.] 967 will keep as close to it as we can, and get as fair a share of the trade as we can.” By Mr. Lexow: Q. Are you arguing now on general propositions or from knowledge of your own of the basis upon which these so-called competing companies act? A. Well, it from a long acquaintance with the trade and observation. By Mr. McCarren: Q. If the proposition is true that the American Sugar Refining Company has it within its power, inasmuch as it controls 80 per cent, of the trade, to lower the price of sugar, then the converse of the proposition is true, that they have it within their pwer to raise the price of sugar? A. Undoubtedly, they could get a larger margin than what they have been getting on the average; but it would not be to their interest, in the long run, because it would tempt too much additional capital into the business; there would be a larger number of competing concerns; it all comes down to the question of what is reasonable. By Mr. Lexow: Q. I would like, Mr. Thurber, if you can describe, or more nearly, so that we can understand it, where the temptation for an outsider with small capital going intoi the sugar business exists, when they know that 80 per cent, of the product is con- trolled by one concern operating through factors, which factor system creates a practical monopoly, because they would have to appeal, in order to undersell the American Sugar Refining Company they would have to appeal directly to the retailer of the goods and pay that increased expenditure that the American 968 [Senate, Sugar Refining Company avoid. Now, where is the temptation for small capital to embark in the enterprise when they know that the control of the product and price exists in the hands of a company that by putting down the prbe can destroy any smaller capital that may go in, in this way? A. Why, Mr. Chair- man, these factors are not bound to the Anierican Sugar Refining Company; they can change in a moment, if they choose, to any other refinery. By Mr. Warner: Q. Well, they don’t choose, do they? A. They do. By Mr. Lexow: Q. Does the factor not know, Mr. Thurber, that a change from the American Sugar Refining Company to a smaller concern that may come in competitively may mean the destruction of the factor’s arrangement with the American Sugar Refining Com- pany, after the destruction of that competing concern, and, under the testimony, the destruction and ruin of their business. Do you still mean to say that there is any possibility for competition by small capital or small concerns, under this system that is in operation? A. That system has no bearing whatever on it; and it was not sought by the refiners; it was sought by the grocers, when they, sick of doing business at a loss they tried to get some system where they could reduce that loss; and they are not doing business now at a profit on sugar; they are doing business at a loss less than what they did. By Mr. McCarren: Q. Well, Mr. Thurber, is it a fact, as a general proposition, that before people in the manufacturing business would refuse to get No. 40.] 969 as high a price as they can for their goods, that it will be neces- sary to eliminate the selfishness that is residing in the ordinary human species? A. I think, sir, that that is about right. By Mr. Lexow: ( Q. I would like to ask you the additional question, Mr. Thurber, that if a two million dollar plant would wreck the American Sugar Refining Company, why do not the McGahans’, in Philadel- phia, do it — why do not Mollenhauer's of New York do it? A. I said, Mr. Chairman, that a small plant of a two million dollar plant, conducted without desire to make profit could do it; and these men are all doing business to make money. Q. Wouldn't there be an enormous profit after the wreckage of the American Sugar Refining Company to the concern that had been able to wreck them? A. No, sir; because there is the plant, and it is all ready to start at any time. Q. And you really mean, and desire to be placed on the record here as stating, that a two million dollar plant would be allowed, by a concern that controls seventy-five million and any number of plants, that they have bought simply for the purpose of closing up — to remain an active competitor in the market and to wreck them — without buying them out? A. I say that any large con- cern is at a great disadvantage as compared with a small concern that is actuated by the desire to injure the large concern and not make money in doing business. By Mr. McCarren: Q. Well, do you regard this refusal on the part of Mollenhauer and McGahan and the rest of these independent refiners, to lower their prices on sugar from the standard set by the American 970 [Senate, Sugar Refining Company as a positive refusal on their part to become public philanthropists? A. Well, it is very much in that line; in point of fact, however, they do — these outside refineries make some variation from the prices of the American Sugar Refining Company, at times, when they get a little surplus, when trade is dull and they want to move their product, they still make concessions which enable them to do that; they don’t follow absolutely the prices of the American Sugar Refining Company, but they keep as near them as they can, because they are in business to make money the margin is not an excessive one in the sugar refining industry. Q. And they take the American Sugar Refining Company as a guide for them to make money? A. Yes. By Mr. Lexow: Q. The profits of the American Sugar Refining Company is the standard whereby they gauge their profits? A. Naturally, the largest — Q. Is that true? A. I think it is, sir; the largest concern, nat- urally, you know, leads in setting the pace. By Mr. McCarren: Q. The same as the strongest will lead in almost any race? A. Well, I don’t know that — whether that is an exact parallel. By Mr. Lexow: Q. Do you know, or have you investigated the question as to whether the organization of a trust or quasi-monopoly in indus- tries has invariably been followed by a deterioration of the product? A. I think it has been precisely the reverse, as a rule. Q. Well, now, do you know anything about that? A. Well, I No. 40.] 971 only know from general reputation that the larger a concern’s output and facilities are, the more careful, as a rule, they are concerning the quality of it; it is the natural tendency to, as you— Q. Do you know anything about that, Mr. Thurber, or are you simply arguing from general premises? A. Arguing from gen- eral premises — and my experience in business. Q. Have you any specific knowledge of whether or not the ar- ticles made by combinations after the forming of the combina- tions have deteriorated in quality, as compared with the articles made by the independent concerns previously operated? A. I don't think you can find a case on record where that is the case. Q. Do you mean to say, as contained in your statement, that it is an absolute rule that combination has led to a reduction in price? A. I think that the tendency of these' large combinations in the long run is toward reduction in price and improvement in quality. Q. Have you read the testimony with reference to the rubber combination? A. I think I have read some of it; yes, sir. Q. That the price of all the important articles, with the excep- tion of one, had been increased immediately after the formation of the combination and had not been diminished since? A. I saw that statement, but I am not familiar with the rubber trade, and so I know nothing about it personally. Q. That is a statement admitted on the stand by the treasurer of the company? A. I haven’t any doubt that in many cases — now, you will see that immediately after the formation of the American Sugar Refining Company prices advanced, the margin advanced; but as it begun to get all its facilities working, it has steadily declined, until the total result is a great benefit. 972 [Senate, Q. Now, let us see whether that is a fact, Mr. Thurber; take the last three years of the marginal difference between the raw material and the manufactured product, and state whether or not, instead of a steady decline, there has not been a steady in- crease each year? A. Well, sir, in 1894 it was 884 thousandths; in 1895 8S2 thousandths; in 1896 908 thousandths. Q. Therefore, a steady increase, instead of a steady decrease? A. No, sir; in the year 1895 it was 28 less than in 1S94; and in 1896 it was 908, against 882 — it is an increase of 16 points. Q. Now, after seeing that with reference to the American Su- gar Refining Company, do you think your statement is justified, that after a reasonable period of time, the economies develop themselves and a reduction ensues? A. I do, sir. Q. Isn’t it borne out by that statement there, that instead of economies developing a reduction gradually, an increase is de- veloped gradually? - A. Well, let me show you — Q. (Interrupting) Now, isn’t that true? A. No, sir; it is not; you take the point of beginning, with one and 258 thousandths, it gets down to 884, 882, and 908. Q. Now, isn’t it true, as a general proposition, that all articles not controlled by a combination in the nature of a trust, have, during the years of depression, declined, while all articles con- trolled by a combination or trust, notwithstanding the depres- sion, have increased in price? A. No, sir; I don’t think it is true, as a rule; you may find exceptions, but they only prove the rule. Q. Is it not a rule with regard to combinations, that the prices have either been maintained or have increased, while with refer- ence to articles not controlled by a combination, during times of depression, they have invariably, or as a rule, been depressed? A. I think you will find instances where a large organization — No. 40.] 973 Q. I am asking for the rule, to which there may be exceptions - I am asking for the rule on both sides? A. Well, I think — I meant to have answered that, Mr. Chairman, that I think that it is not the rule; it may be an exception; it may be correct in in- stances — but as a rule that the tendency of combinations has been to reduce prices and to maintain quality. Q. Isn’t it true that combinations in the nature of Trusts are able to maintain prices under conditions of trade when articles not controlled by combinations felt the drift of the time? A. There may be instances of that character. Q. Isn’t that the rule? A. No, sir; I don't think it is. Q. Can you specify a single instance where that rule does not apply? If so, please specify it? A. Well, sugar (indicating paper with statement). Q. Do you base your statement that it is not the rule upon that illustration? A. That is my opinion, sir. Q. I mean, is that the illustration upon which you have your — that statement? A. Well, you asked for one; I presume I can find many t Q. I am asking you, now, upon what you base your statement? A. Well, there is oil. Q. Is your statement that a Trust is not able to control and maintain prices under abnormal conditions, based upon the re- turn you have there before you of the American Sugar Refining Company? A. I say, that as a rule, no. Q. You know the question; you can answer that question. (Question read twice). A. It is, and of the Standard Oil Com- pany, and of the Transportation figures that I have given. Q. Then it is based upon the American Sugar Refining Com- pany’s returns that you have before you, the Standard Oil and the Transportation Company? A. Yes. 974 [Senate, Q. And is it based on anything else? A. On my general ex- perience and observation. Q. That would cover a multitude of situations; can you give anything else, definitely; the prices made or maintained by what other combination in the nature of a Trust have guided you in making that answer? A. Well, take the Starch Trust; that is an example; they have not been able to keep up the prices, prices were never so low as they are at the present time and I have mentioned one or two others here. (Reading paper) Straw Board Trust, Wire Nail Trust — there was an extraordinary example of where an unreasonable demand resulted iu breaking it up very speedily; they, instead of working on a fair margin of profit, put the prices up to a point where it was unfair and un reasonable, and as the result, they went to pieces; prices were never so low as they are now. Q. They were unable to gain sufficient control over the produc- tive capacity of the country to form what we understand by a Trust? A. No, sir; they — - Q. Is that not true? A. They had the whole of it at one time; but they put their prices up to an unreasonable margin of profit, and tempted in so much additional capital into the business that they were soon obliged to go to pieces. Q. Now, Mr. Thurber, you say that they had the whole of it; are you considering your answers carefully? A. Well. I may be wrong in saying that they had the whole of it, but they had a very targe proportion of it. Q. Do you know how much? A. I do not exactly. Q. W^hat productive capacity of the country they controlled? A. I know they controlled the business absolutely for a while. Q. Is it not true that they controlled simply a fair percentage No. 40.] 975, of the business of the country, and then sought to obtain control by purchasing the productions of the other factories in the coun- try, without controlling the production of those factories? A. I only kuow they absolutely controlled prices for a while, and they put their tariff up, as I say — - Q. Did they not do in the way I have given in my question? A. It is possible; because I am not familiar with the details of it; I only know they made their prices — Q. Are you familiar w'ith the details of the so-called Starch Trust? A. Well, I am pretty familiar with it. Q. Do you know what prices have been ruling -within the last five years? A. I know it has steadily declined, until it is now lower than it has ever been. Q. Do you know that to be a fact; have you seen those prices? A. Yes, sir. Q. Can you give them to the committee? A. I can send them to you; I will be very glad to furnish you with a tabular state- ment on that. By Mr. Warner : Q. The inference seems to be, from your statement, that because there has been a reduction in price of some of those com- modities that that has been due to the formation of these trusts? A. Not entirely; but I mean to say this, that I believe the general tendency is in every case towards an improvement and uniformity in quality and the lowering of price. Q. Hasn’t that been the general tendency in all lines of pro- ducts — farming products, for instance? A. Well, there has been a general decline, I think in all products; that has been the ten- dency; but what I mean to say is, that these large aggregations 976 [Senate, of capital, in the long run have not had the effect to unduly main- tain the advanced prices. Q. Well, they have not had the effect on the other hand of un- duly decreasing the price? A. They have whenever they cause competition — because whenever competition between large ag- gregations of capital results it proceeds to an extreme far greater than that between small capitals. By Mr. Mazet: Q. But there have not been any such competitions; there has not been such competition by the large aggregations of capital? A. Oh, yes; there has; take starch — Q. Not in these matters that we were talking about? A. Take the Starch Trust; take Straw Board Trust; and the Wire Nail Trust; and the Steel Rail Trust. By Mr. Warner: Q. You say you think there should be further supervision on the part of the State over these Trusts? A. I have stated that I thought that in the limited publicity, for the protection of share- holders that there ought to be a regulation and publicity in some way more than we have had. Q. Don’t you think there should be something further in re- gard to these factor agreements? A. I don’t see why. Q. Do you know that there are trust and factor agreements the intent and spirit of winch is that the factors and jobbers shall deal exclusively in the goods of the trust that—. A. No, they offer a premium for their doing so; I don’t see how you can well stop that. No. 40.] 977 By Mr. Lexow: Q. You don’t consider that as being in restraint of trade? A. No, sir; I do not see how you can prevent a manufacturer saying on what terms he will sell his goods. Q. Although those terms imply the restraint — or imply re- straint upon the factor in the selling or disposing of competing goods? A. If you are a manufacturer, and I a dealer — Q. Just answer that? (Question read). A. I don’t think that that is an unreasonable thing; and I don’t think that you can prohibit the manufacturer from offering inducements to a dis- tributor to handle only his goods. Q. Well, that will involve a question of law. Do you have any doubt but that legislative restraint should be placed upon an agreement of that kind? A. Well, you are a much better judge of that, Mr. Chairman, than I am. Q. I assumed that you had looked into this? A. No, sir; I have not; but if you are a manufacturer and I am a distributor, and your desire is of having my service in introducing your goods, and you say, “ Now, if you will handle only my goods I will give you so much lower price,'” why, it seems to me that that is not an unreasonable thing for you to say. Q. Although that at the time is known to you to involve the cost and of the sale or offering of the goods of the competing concern, by the person with whom that contract is made? A, Yes; I am not obliged to accept your offer, if it is more to my interest to handle a competing brand. Q. But assume that the fixing of price means that unless the factor accepts the terms and conditions, a system has been cre- ated which involves his ruin as a business man. Do you mean to say than with that additional factor, it is not an agreement in G2 978 [Senate, restraint of trade and does not effectually restrain the trade? A. I think if you were right in your premises, that you would be right in your conclusions; and if you are wrong in your premises it will not be. Q. You admit, however, that if these premises are correct that the conclusion would be correct? A. Yes, sir; I do. By Mr. Warner: Q. Do you own any stock in the American Sugar Refining Company? A. No, sir; none whatever; never have. Recess to 2.45 COMMON COUNCIL CHAMBER, NEW YORK, FEBRUARY 23, 1897, 3 P. M. Thurber, F. B., recalled. By Mr. Lexow: Q. Where do you get the statement that you make in this docu- ment, that the American Sugar Refining Company makes a profit of 1-3 of a cent on the product? A. That is the best accepted opinion of the grocery trade and is based on hearsay through a long period of years. Q. Do you mean, therefore, to be understood as saying that this 1-3 of one cent covers a long period of years and is the aver- age? A. Yes, sir. Q. What data have you to indicate any such result? A. Only that which has grown out of long experience in the grocery trade in handling sugars. Q. Assuming that the output of the American Sugar Refining Company is 2,800,000,000 pounds, and that on a capital of $75,- 000,000 they have paid an average dividend of 9 1-2 per cent., in No. 40.] 979 1894 an extra dividend of 10 per cent., and have accumulated a surplus of about $2,000,000 per year besides, how can you make the figure of 1-3 of a cent per pound agree with the facts? A. That is over $9,000,000 per year, a third of a cent on 2,800,000,000; 10 per cent, on $75,000,000 — Mr. Lexow (interrupting). Does any such conclusion as the amount per pound earned agree with the figures that I have given you? A. Yes, sir. Q. An average dividend of 9^ per cent, on $75,000,000 of stock and an extra dividend of 10 per cent.? A. Yes, sir. Q. And a surplus of $2,000,000 per year? A. You take a divi- dend of 10 per cent, on $75,000,000, it is only $7,50i',000. Q. And 9| would be how much? A. Somewhat less; a little less. . Q. About $7,000,000? A. Yes, sir. Q. A surplus of $2,000,000 would be $9,000,000? A. $3,000,000 per year, Q. Would be $9,000,000 and an extra dividend of 10 per cent, would make it how much? A. That would be $7,500,000 still, less the average of $2,000,000 per year for nine years, or $18,000,- 000, out of which you could pay your 10 per cent, extra dividend of $7,500,000 and have over $10,000,000 left. Q. I don’t see how you make that? (Answer repeated). Q. A percentage of 9| added to a surplus of $2,000,000 a year makes the whole derivable as income at the ratio of one-third of one cent per pound without an extra dividend? A. I figured the one-third of a cent on 2,800,000,000 pounds to be over $9,000,000 per year. Q. And 9i per cent, on the stock together with the $2,000,000 of surplus makes more than that, does it not, without any extra 980 [Senate, dividends? A. No, sir; you take 9^ per cent, from $7,000,000 a year, that is, deduct $7,000,000 from $9,000,000 and you have $2,000,000, and on nine years’ operation that would leave $18,- 000,000 margin, from which you deduct one dividend of 10 per cent, on $75,000,000, $7,500,000, it leaves $10,500,000. (Question repeated). Q. That admits of a fair answer? A. I should say no. Q. How do you make 9^ on $75,000,000? A. Conclude it in round numbers to be $7,000,000 and some thing over that, $7,500,- 000; I will figure it exactly. (Witness makes computations). It makes $7,125,000 per year. Q. Add to $2,000,000 of surplus to that makes $9,000,000 plus, does it not? A. Yes; and that is what a one-third of a cent figures $9,000,000 plus. Q. So I say that without any extra dividend of 10 per cent, the whole amount derived by the company at the ratio of one-third of a cent per pound profit will be equaled by its per cent, divi- dend on the stock together with the $2,000,000 of surplus each year? A. It figures pretty nearly, according to my estimate. Q. That is right. (No answer). Q. Now, I would like to have you give us, at the conclusion of your testimony, the definition that you gave us of a Trust at the beginning? A. A Trust, in the popular acceptation of that term, seems to be any large aggregation of capital. I do not think it is a correct one; I do not think that the American Sugar Refining Company is a Trust, in the strict sense of the word; it is a corpo- ration organized under the laws of a State in which a number of original companies were merged; and the Tobacco Trust, as I un- derstand it, is of similar formation. Q. I am speaking now — and when you use the word “Trust” in No. 40.] 981 this pamphlet of yours — you mean that entity which is popularly called "Trust”? A. Yes, sir. Q. I am asking you now what you mean by the use of that ex- pression “Trust” as applied by you in this instance? A. I mean any large aggregation of capital, because it is spoken of as a so- called "Trust.” Q. Then you don’t mean that that large aggregation of capital shall have any characteristics beyond the mere aggregation? A. Well, that is the sense in which I used it. Q. And your whole argument is based upon the proposition that it is lawful and proper, and in some respects of economical advantage for the capital to combine; that is your argument? A. Yes, sir, Q. But, Mr. Thurber, when that combination of capital com- bines for the specific purpose of controlling the market, controll- ing the price and controlling the methods of distribution, and operates from the beginning along those lines, do you still insist that is a good policy to foster combinations having that object in view? A. Yes; if it shows good results. Q. Then you believe that the ends justify the means, no matter what those means may be? A. No; I do not. Q. You do not? A. I distinctly state in the document which I have handed you that where abuses exist, where unreasonable things exist, that they should be remedied; but my general prop- osition is that those evils, such as the temporary raising of prices which they sometimes do, will remedy themselves in the regular course of trade; and the figures on the experience that w T e have had shows it. Q. And upon the general proposition that after years there may come a time when that will regulate itself by the competi- 982 ' [Senate, tion arising, you believe that it is proper for the legislature to refuse to intervene; is that your proposition? A. I believe it is. Q. That no matter if i { is deleterious to the public good the legislature should not intervene, but allow the evil to correct itself after a lapse of time? A. I believe that the legislature should interfere wherever there is a palpable wrong growing out of the operations of trade; but I believe that the legislature may act unwisely and do more damage than it attempts to do good by not relying sufficiently upon the natural laws of trade, and seeking to adopt arbitrarily unnatural methods to an industrial situation. Q. Do you not concede that free and fair competition should be the normal condition and not an unnatural condition in trade? A. Free and fair competition is all right. Q. Should that be the normal condition? A. I think it should; but there is such a thing as unfair and unreasonable competition; I believe that if the law of competition is allowed to work itself out will remedy most of the evils, perhaps not all, which exist in our industrial system. Q. Can there be unfair competition where there is free competition? A. Yes, sir. Q. Is it not true that competition is unfair only when it is restricted? A. I do not think it is. Q. Do you take the position, then, that Mr. Smith occupied here on the stand yesterday, that competition is to be deprecated, that it is ruinous; that situations should be created whereby competition could be effectively removed by the fixing of prices for that purpose? A. You cannot absolutely remove competi- tion; it is impossible. Q. You don’t believe that the proposition urged by Mr. Smith is a good economic proposition? A. 1 think so far as his advo- No. 40.] 98a cacy of the limited price system, the factor’s system, is concerned, that he is right; but your proposition is one which does not exist; there can be no abrogation of competition; it is impossible; it is contrary to those industral laws which are superior to all human laws. WEDNESDAY, FEBRUARY 24, 1897, 3.30 P. M. Harris, Wm. R., being duly sworn, testified as follows: Examined by Mr. Lexow: Q. What is your office in the American Tobacco Company? A. Auditor. Q. How long have you been such? A. Since about the early part of 1891. Q. What books does the company keep in the State of New Jersey? A. It keeps what is generally recognized, what is gen- erally called, general books; main books, head books. Q. Head books; what are the head books? A. The books that we keep are about the same as all corporations keep, all con- cerns that have a number of scattered factories. These books are the main books; all other books are subsidiary to these books. For instance, our New York office books are subsidiary to the New Jersey books; the Rochester books in the same sense; the Louisville and St. Louis books are all subsidiary to the Jersey books. Q. Do you mean to say that the general accounts of the com- pany are not kept in the Twenty-second street factory? A. Yes; Ido. Q. And have been? A. They have been possibly in years gone by. 984 [Senate, Q. Have they not been until recently? A. No, sir. Q. How long ago has the system changed. A. Our main books, or general books, have been in New Jersey some years; the exact date at this time I am not able to state; it is some years; it is true that we may have made an addition to the lit- tle force that we have had in New Jersey about a month ago; I sent some five or six girls and a few young men there to work out some details; that was brought about by the absolute necessity for making room in my accounting department by special details that we have had; and instead of placing nine more desks in my counting room and thereby making somebody get out — -there was no more room in that building; and that is how it was brought about. Q. What had you in New Jersey previous to that time? A. The general books of the company. Q. State what they consisted of? A. The general ledger, the general journal, the general cash book and the check book. Q. And do you mean to say that that sj’stem has been con- ducted by your company from its organization until now? A. No, sir; not exactly that way. Q. I would like to have a fair answer? It is simply a question of system; I am not inquiring as to particular books, except for the purpose of establishing why a corporation with its property in the State of New York organized in the State of New Jersey without having its interests there. You can answer that can- didly? A. My understanding has been that it is necessary for us to keep a set of books over there; that is; the general books of the company; just as soon as we were able to get statements of our accounts they were placed there. Q. How long ago were they placed there? A. I should judge between two and three years. No. 40.] 985 Q. Doesn't your New York office contain general books of ac- count referring to the different concerns consolidated into one? \ A. No, sir. Q. No general books at all? A. No, sir; not in the sense that the Jersey books do. Q. What is the “ sense ” that you restrict your answer to? A. Not in the sense that you speak of. Q. You don’t know what sense I speak of; I am asking you now whether or not the books in your New York office do not con- tain the general accounts of the corporation? A. They do not; that is my — Mr. Lexow (interrupting). Do they not contain all those items that go to make up the general ledger of the company in New Jersey? A. No, sir. Q. Are not the New Jersey books compiled from the New York books? A. The New York books are compiled from the New Jer- sey books; they have to balance with the Jersey books, and Rochester balances with Jersey. Q. You say the New York books are compiled from the New, Jersey books? A. Yes, sir. Q. Then do you mean to say that the Jersey books contain the items of original entry and the New York books are compiled from those? A. I do. Q. The items of original entry are not in New Jersey? A. Well, it depends upon what you mean by original entry. Q. You know, as an auditor, what an original entry means? A. Yes, sir; I do. Q. I ask you whether items of original entry are contained in the New Jersey books and the New York books are compiled from them? A. Yes, sir. 986 [Senate, Q. Yes, sir? A. Yes, sir. Q. Then the transactions even of your New York branch are first entered in the New Jersey books and then returned from New Jersey to the New York branch? A. They are practically simultaneous; for the reason that the New York books have got to agree with the New Jersey books; in other words, an entry that is made a debit in the New Jersey books will possibly be made simultaneously in the New York books, a credit in the New York books. Q. But transactions occuring here must be first noticed in the New York books? A. Well, possibly certain transactions. Q. Then the New Jersey books are compiled from the New York books so far as the New 7 York branch of your corporation is concerned? A. No, sir. Q. You send reports from New York State to New Jersey? A. Yes, sir. Q. In what form? A. In condensed form. Q. In the form of day-book or journal entries? A. Yes; some- times. Q. Haven’t you got a system that you follow always, not only sometimes? A. Usually there is an abstract at the end. (Question repeated). A. Yes, sir. Q. Isn’t 3 7 our system such that original entries are made with reference to transactions in the State of New York in your New York books? A. A great number of them are made in New York; others are made in New Jersey. Q. Of transactions in the State of New York? A. Yes, sir; that is right. Q. What kind? A. Well, for instance, the passing of vouchers No. 40.] 987 and the payment of vouchers here in New York, the payment of bills; it is often the case that our New York office, on account of the financial facilities afforded here, will pay a great number of bills that would otherwise be paid in New Jersey; in that case our New York office may make the entry here and charge .Jersey; and Jersey in like manner will make an entry crediting New York. Q. Have you fiscal arrangements or your financial treasury in * the State of New Jersey? A. Yes, sir. Q. And pay accounts of the company in the State of New Jei> sey? A. Yes, -we issue checks in New Jersey. Q. In Newark? A. Yes, sir. Q. For general business? A. Yes, sir. Q. Or only for the payment of New Jersey expenses? A. Oh, no; for whatever happens to suit us. Q. For whatever happens to suit what? A. To suit us. By Mr. Mazet: Q. How many employes in Newark? A. About a dozen. Q. How many in your New York office? A. In the bookkeep- ing department, say, 95, about. Q. Do you want us to understand that the Newark office has charge of the entire business of the American Tobacco Company with a force of 12 clerks, and that the New York office, with 95, has only New York? A. Yes, sir; if you will allow me to explain I will set you right; our Newark office has an account, we will say, with the New York office; it has another account with “ Durham; ” another account with the Rochester factory; every- thing which is chargeable to “ Durham ” or “ Rochester ” or “New York,” or any other factory, is charged up in the Jersey 9S8 [Senate, books; now, on account of the fact that the New York office has to deal with thousands of customers that we come in contact with, that we sell goods to, we have a larger force here in New York. Q. Then the New Jersey office has nothing to do with the pur- chase or sale of goods except through the other office? A. No, sir. Q. In other words, the purchases and sales made by the of- fices in the various cities are compiled and returned, sent to Newark? A. To a large extent. Whelan, George G., being duly sworn, testified as follows: Examined by Mr. Lexow- Q. What is your business? A. Wholesale dealers in cigars. Q. Where do- you live? A. Syracuse, N. Y. Q. Where is your business? A. Syracuse. Q. You are in litigation with the American Tobacco 1 Company, are you not? A. We have a suit before Attorney-General Han- cock, to dissolve the corporation or stop it from doing business. Q. You have prosecuted that company during the last two years? A. Yes, sir. Q. And you have been a very energetic prosecutor of that com- pany? A. So far as I could. Q. And you are strongly biased against the company, are you not, in view of the fact that you have these suits? A. To a cer- tain extent, yes. t Q. You feel you have been injured A. We know that we have been injured. Q. That is your feeling? A. Yes, sir. Q. I would like to have you state in what respect under the fac- tors’ arrangements which are in vogue, you feel that you have No. 40.] 989 been injured A. From the fact that they have refused to sell us goods except that we do business entirely and exclusively with them; that was the reason why they cut us off. Q. The factors’ agreement that is in evidence here is an agree- ment which substantially provides that 2^- per cent, shall be al- lowed those who maintain the price and 7^ per cent, additional bonus for those who deal exclusively in the goods of the Ameri- can Tobacco Company; now, explain in what way you were cut off, if you were cut off? A. We were cut off previous to the new contract; at the time we were cut off they had an old contract, and under that we brought our suit. Q. How long ago was that? A. About a year ago; a trifle over that^ Q. What occurred to produce that revocation of the factors’ agreement? A. The fact that we bought goods of the National Cigarette Company. Q. From a competing firm? A. From a competing firm. Q. In what way did that revocation take place? A. They re- fused to sell us goods for any price. Q. In what way, verbal or written notice? A. By a letter signed by Mr. Josiah Browne. Q. Where is that letter? A. I have it in Syracuse. Q. Can you give us the contents of it? A. It says — I cannot remember now. Q. Not word for word? A. The effect was that they declined to consign us any goods after that date. Q. Assigning any ground for it? A. No, sir; simply said that they did not care to do it. Q. Why, then, did you state that it was done because you were dealing in the goods of the National Cigarette Company? A. Because we know that that is the way they do their business. 990 [Senate, Q. How do you know? A. I know from a number of other job- bers they cut off in the State of New York; -several were cut off directly after the time they commenced to handle competing com- panies’ goods, or National Cigarette Company’s goods. Q. Are you now stating matters within your personal knowl- edge or simply — ? A. I absolutely know what I am talking about; I have seen letters which they sent. Q. To whom? A. Different jobbers they had cut off. Q. Are those persons mentioned in the schedule of jobbers con- tained in the papers presented by the American Tobacco Com- pany in New Jersey in the form of a brief? A. I hardly know about that; the jobbers I have referred to are Thomas L. Benham, of Utica, N. Y. Q. Have you not seen the brief or statement of facts submitted by the different attorneys in the case pending before the Vice- Chancellor in New Jersey? A. I believe this case was com- menced since that; some of them. Q. Is that a case in which you have any interest or which you brought? A. New Jersey case; I have no interest in it what- ever. Q. Do you know the names of those mentioned in that schedule to whom this factors’ agreement was given and then revoked? A. No, sir; 1 don't remember about them. Q. Confining yourself to what you know; do you know of any case outside of your own where a discrimination of this kind has been made? A. T. L. Benham, R. Whalen & Co., of Rochester, N. Y. ; Brewster, Crittenden & Co., of Rochester, N. Y., is another. Q. How do you know that those concerns have been refused factors’ agreements? A. I have seen the letters, except in the case of Brewster, Crittenden & Co.; I don’t believe that I have No. 40.] 991 seen that letter; I understood that such a letter was received, because I was told of it. Q. Signed by Mr. Browne? A. Josiah Browne as secretary of the company. Q. Any others? A. I think there are others but I cannot re- call them just now. Q. How does the revocation of this factors’ agreement such as made by the American Tobacco Company operate upon the job- bing trade in the sale of tobacco? A. You mean the present contract? Q. Yes, sir? A. Why, if a jobber does not buy their goods ex- clusively they will not sell to him except upon the 2J per cent, basis, and as it costs 10 per cent, to sell goods he naturally can not make any money in cigarettes. Q. He loses money? A. He loses money, certainly. Q. How does that operate? A. If you don't sign their con- tract they will not allow any jobber that they sell to direct to sell to another jobber that don’t purchase, claiming that they re- serve the right to do business with that man direct; as an in- stance, J. P. Hyer, of Syracuse — we asked him to sell us some cigarettes; he refused to sell them, claiming that he must have authority from the company; we then went to my brother, Louis Whelan and asked him and he declined to do it, simply claiming that he could not afford to be cut off by the American Tobacco Company, and they would naturally watch him. Q. Do you mean to say that under the practice of this factor or consignment agreement that even jobbers, as between them- selves, cannot sell one to another? A. They can sell to a re- tailer; but they must get consent, to a certain extent, if he is a large retailer, where he is not charged with being a jobber; we 992' [Senate, then sent to Cleveland, Ohio, and bought 25,000 cigarettes of Feeder Bros, and had them shipped to Syracuse; we tried to buy 25,000 more after that and a representative of the Feeder Bros, told us that the American Tobacco Company had notified them, had sent a man there, to inform them not to sell us cigarettes under any circumstances. Q. Who? A. This agent. Q. Do you know anything beyond the statement of the agent? A. Well, the fact that they would not sell us again. Q. Agent for whom? A. Feeder Bros. Q. What business relations have the Feeder Bros, with the American Tobacco Company? A. They are consignees. Q. What did he say? A. That he could not sell us any more; that the American Tobbaco Company had sent a man out there to see that they did not sell goods for less than the regular price and that they would thereafter decline to sell us goods. Q. You were asking them to sell you at less price? A. We were willing to pay $3.80; we were willing to pay the regular price. Q. Then how would their books show a sale at less price? A. It didn’t show it; the reason was that they supposed that we sent out there for cigarettes and that we must be buying for less than list prices; it was not the fact, if I understand right, as we paid $3.80. Q. Which is the price? A. To any retailer. Q. What effect had it upon your business as jobber to be closed out of the market for the cigarettes manufactured by the American Tobacco Company? A. A jobber cannot do business without some of the American Tobacco Company’s goods; he must have them for ordinary trade. No. 40.] 993 Q. Why is it that he cannot? A. From the fact that they bought everything that had any kind of a demand when they organized. No company could do that alone; they bought all the companies that were in existence by buying out every man who had goods for which there was a demand; and after the intro- duction of the factors’ agreement no other concern was allowed to get strong enough to compete with them. By Mr. Mazet: Q. How is it possible for the American Tobacco Company to trace the purchase of cigarettes, to Cleveland for instance? A. Every cigarette is marked with the jobber’s number; each job- ber has a certain number, and by that they can trace any pack- age of cigarettes to any jobber or consignee. Mr. Fuller: I desire the committee to ask this witness a ques- tion or two. Mr. Lexow: You may; but the questions will be repeated by the stenographer as coming from the committee. The following questions were asked by Mr. Fuller: Q. Mr. Whalen, are you not now and have you not been for several years the agent of the National Cigarette and Tobacco Company, under salary? A. I am not under salary of the Na- tional Cigarette Company. Q. How long since you ceased to be? A. About a year ago. Q. Were you not so when you made this application to the Attorney-General? A. I was and I considered that I had a per- fect right to be. Q. Were you not handling goods made by that company that were fraudulent imitations of the “ Sweet Caporal ” brand and known as “Royal Sweets?” A. We were selling a cigarette 63 994 [Senate, which was not an imitation of the “ Sweet Caporal.” If it was, it was the place of the American Tobacco Company to stop their manufacture. That was their business and not ours. And the fact that they did not is evidence that it was not an imitation. Q. Was the consignment plan of which you complain not adopted earlier than March, 1892, two years after the formation of the American Tobacco Company? A. I don’t understand ex- actly what you mean. Do you mean to say in regard to the con- tract first being — Q. I mean this; did the American Tobacco Company have any plan or assignment or consignment called factors’ plan earlier than March, 1892? A. I don’t know anything about that. Mr. Lexow: How is that material? Mr. Fuller: It seems to me that he is leaving a wrong impres- sion on the committee. It has not been understood by me that the consignment plan was originated in March, 1892, which was more than two years after the American Tobacco Company was formed. I wish to follow that with another question. Q. Whether the National Cigarette and Tobacco Company was organized in July, 1892, several months after the adoption of the consignment system of the American Tobacco Company and two years and a half after the formation of that company? Mr. Lexow: How is that material here? I assumed that this witness was antagonistic to the American Tobacco Company, and in order to have it fairly upon the record, in commencing his ex- amination, I showed by him his apparent and absolute bias and his personal antagonism to your company; and it was only fair that that should be' done. Now, it seems to me that these ques- tions that you are putting are entirely outside of the subject mat- ter of this investigation. No. 40.] 995 Mr. Fuller: Then, of course, we must defer to the wishes of your committee. Mr. Lexow: How is it material upon the question as to whether or not this suit that you have conducted may be considered inju- rious to the public interests or in restraint of trade. It is not a question :as to whether the public has raised any particular clamor against the company represented by you. The question is whether the company represented by you is doing business un- der a system wdiieh is either not recognized by the law of the State or which, if in vogue, shall be recognized by the Legisla- ture. We assume that the witness is biased. Mr. Whelan : I wish to> say now that the suit against the Ameri- can Tobacco Company brought by Attorney-General Hancock, was not brought by the National Cigarette Company. It was at my suggestion and entirely by me and I handled every part of it. Mr. Fuller: If this is material, I desire to ask one question. Mr. Lexow: It does not seem to me that it is. We assume in all prosecutions of that kind that they proceed from interested motives. Mr. Whelan: The fact that I worked for the National Cigar- ette Company has nothing whatever to do with it. They are cer- tainly injured, if anybody is injured. Schulte, Anthony, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. Where do you reside? A. In New York city. Q. What is your occupation? A. Dealer in cigars and tobacco. Q. Where? A. 39 Park Eow and several places. Q. In the city of New York? A. All in the city of New York. Q. Are you what they term a retailer? A. Yes, sir. 996 [Senate, Q. Have goods of the American Tobacco Company been with- held from you as a retailer? A. No, sir. Q. Never? A. No, sir. Q. Have you had any coercion or oppression or experienced any in your business as a retailer? A. None at all, sir. Q. Do you deal in the goods of the American Tobacco Com- pany? A. Yes, sir; I do. Q. Largely? A. Quite largely; yes, sir. V Q. Interested in the company? A. Not at all. By Mr. Mazet: Q. Do you handle any other cigarettes than those of that com- pany? A. I do. Q. You have signed this agreement of the company? A. No, sir. By Mr. Lexow : Q. Did you sign or have you been requested to sign any factors^ agreement or consignment agreement? A. I never have. Q. Never seen them? A. Never saw one. Q. Are the same term® and conditions imposed upon you in handling the product of that company that are imposed upon fac- tors operating under the consignment system? A. No special terms imposed upon me in handling their goods at all. Q. No limits upon the price? A. No, sir. Q. Never have been? A. No, sir. Q. Do you purchase through jobbers? A. I do; yes, sir. Q. In your transactions with the jobbers from whom you pur- chase, is the price fixed? A. Well, I don’t know what price is fixed; we buy at certain prices, at the regular prices from the No. 40.] 997 jobber, and we receive a commission from the company as a re- tailer. Q. You receive a commission from that company? A. From the American Tobacco Company on the amount of cigarettes that we purchase. Q. What is the consideration of that commission? A. Six per cent, of the amount purchased. Q. And what are the terms and conditions upon which that consideration moves to you? A. Not any that I know of. Q. You get it without the performance of any terms or con- ditions imposed upon you? A. Yes, sir. Q. As to price? A. Yes, sir. Q. Are you certain about that? A. I am; yes, sir. By Mr. Mazet: Q. Get the same rebates from other companies as well. A. No; there are no rebates from any other companies that we deal with. Q. Then you get cigarettes cheaper from the American Tobacco Company than from other companies? A. No, sir; I didn’t say that, because the price direct that we buy from other companies is somewhat lower; instead of giving a rebate the other compa- nies make a reduction in the price from the outset. Q. What proportion of the cigarettes that you purchased are those of the American Tobacco Company? A. Well, probably nine-tenths. Q. What advantage is there, then, in purchasing the cigarettes of that company in preference to those of other manufacture? A. Because the demand regulates that. Q. What other cigarettes do you sell than those of the Ameri- can Tobacco Company? A. We sell quite a large number of the National Tobacco Company’s cigarettes. 998 [Senate, Q. What brand? A. The “ Admiral ” and the “Yellow Kid.” Q. You get no rebate on these? A. No, sir. Mr. Lexow: The sergeant-at-arms will call the name of Joseph Rafalovitz. (No answer.) The stenographer will make a minute of the fact that his name was called by the sergeant-at-arms and that he failed to respond. Is Mr. E. B. Smith in court? (No answer.) The committee desires to state upon the record that it has been promised the attendance of Mr. Johnson, of the United States Rubber Company, and that his attendance is requested to-mor- row. His attendance has been repeatedly requested and he has not yet been present. You may also state upon the record that every effort has been made to subpoena the manager of the Liberty Rubber Company, of Setauket, and that every effort has proved unavailing. We now stand adjourned until 10 o’clock to-morrow morning. THIRTEENTH PUBLIC HEARING, MORNING SESSION, THURSDAY, FEBRUARY 25, 1897. Samuel Sloan, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. Your residence, Mr. Sloan? A. New York. Q. City? A. City. Q. And occupation? A. President of the Delaware, Lacka- wanna and Western Railroad Company. Q. And you have been president of that road how long? A. About thirty years. Q. And are president still? A. Yes, sir. No. 40.] 999 Q. The Delaware, Lackawanna and Western road is known as a coal carrier, is it not? A. Yes, sir. Q. And carries a large percentage of the anthracite coal con- sumed in the city of New York? A. Yes, sir. Q. How many coal carriers — so-called — are there that convey coal from the coal fields to the city of New York in addition to the Delaware, Lackawanna and Western road? A. I could not answer that question; I do not know. Q. Did the presidents of the various roads known as the coal carrying roads have a meeting sometime in the year 1896 for the purpose of discussing and deciding upon the methods of con- ducting or handling the coal business? Did they, Mr. Sloan? A. I beg pardon. (Question repeated.) A. Yes, sir. , Q. Can you give the date? A. I could not. Q. About the date? A. Well, I think it was — I think it was about a year ago. Q. It was sometime prior to the first day of February, 1896? A. I think it was sometime about that time. Q. You were present at that meeting? A. I was. Q. Can you state to this committee who were present there besides yourself? A. I could not; I don’t recollect. Q. Were there present at that meeting — in addition to your- self — either the president or some executive representative of the following named roads: Philadelphia and Reading, Lehigh Val- ley, New Jersey Central, Delaware and Hudson, Pennsylvania, Pennsylvania Coal Company, New York, Lake Erie and Western, New York, Ontario and Western, Delaware, Susquehanna and Western — New York, Susquehanna and Western? A. Yes, sir. 1000 [Senate, Q. And that meeting was called at whose instance, Mr. Sloan? A. Well, I don’t recollect who personally is responsible; the condition of the trade was such at that time a conference was asked for to see if we could do anything to improve it. Q. To improve the trade with reference to the coal business? A. Coal transportation. Q. Coal transportation? A. Yes, sir. Q. Now let us understand; does your road own coal mines? A. Yes, sir. Q. In addition to transporting coal to the market? A. Yes, sir. Q. So that you are both a coal owning corporation and a coal transporting corporation? A. Yes, sir. Q. All in one, or by means of sub-companies? A. The charter of the Delaware and Lackawanna permits them to own lands and mine the coal. Q. Well, then at that conference, you attended both in the in- terest of the coal mining and the coal transporting companies? A. Yes, sir. Q. So far as they were controlled by the Delaware, Lacka- wanna and Western. A. Yes, sir; but the point was more of the transportation, but that makes no difference to me personally, or the D., L. & W. for them. Q. Now you represented, as you stated, your company, in con- junction with representatives of other companies, called as the result of a prior conference, or as the result of a call, issued by one of the presidents? A. Well, I couldn’t tell you that; whether it was really a conference; I signed a paper I think asking the conference to meet. Q. Were you alone in making that request? A. I am not sure, I don’t recollect, but I think I signed it, sir. No. 40.] 1001 Q. I understand you to say, however, that the calling of the conference proceeded from a general desire among these com- panies to make some adjustment or readjustment of the coal, situation, is that true? A. To consider the coal situation as it then existed. Q. Where was that conference held, Mr. Sloan? A. At the Trunk line rooms of the Trunk Line Association in Liberty street. Q. Is that association composed of these companies which I have mentioned? A. They are members of the Trunk — most of them, if not all, I think, of the Trunk Line Association. Q. The Trunk Line Association has nothing to do with the coal business, has it? A. No, sir. Q. It is an association of all the Trunk lines entering this city? A. ,Yes, sir. Q. How long did the conference last? A. Well, I couldn’t recollect that; I didn’t remain to the close, but I think it lasted some hours. Q. Some hours? A. Yes, sir, I think so. Q. Can’t you state whether three, four, or five hours? A. Well, I would state two hours, certainly; don’t recollect more than that — I don’t recollect it now. Q. Your best recollection is that it is more likely to be more than two hours than less? A. Very likely, yes. Q. Were statistics produced at that meeting showing the amount of coal transported or mined by the various companies? A. I am not sure about that, sir; I couldn't say; I don't recollect it. Q. Was there any agreement made as to the amount of coal, or percentage of the whole that should be carried by each com- pany? A. 1 think there was, sir. 1002 [Senate, Q. Let me call jour attention to certain figures, and please then state whether these were the percentages agreed upon at that conference: To the Philadelphia and Reading 20^ per cent? A. I could not answer that — only the D., L. & W.; if you will name that I will tell you about it. Q. Thirteen and 25-100? A. I think that is it, sir, the allotment that was talked about. Q. Now by what process, Mr. Sloan, was this figure, that allot- ment reached? A. Well, it must have been from the business of the roads the previous year, I think, or two or three years — I am not sure which it was. Q. You took as a basis for computing then, each individual allotment the business done by the road, the particular road, for the one, two, three Tears previously? A. Yes, sir. Q. There was a disagreenu nt there, was there not, as to partic- ular allotments? A. Oh, always is. and i don’t think it amounts to anything, now practically. Q. The disagreements were harmonized before the conference concluded? A. Well, if you call it harmony; it was not carried out; they did not live up to it. Q. No; but I am speaking now of the purpose of that confer- ence; so far as that conference was concerned, the several allot- ments that were agreed upon then were supposed to be binding on the various companies represented there? A. Well, they did agree to it among themselves, but it is one of those uncertain things that — so far as the D., L. & W. was concerned, and that is all I have to do with, we did not accept it directly; we acquiesced in the principle agreed upon there. Q. You acquiesced in the principle established there, and the result of the figures showing the allotment? A. We acquiesced; we didn’t want to. No. 40.] 1003 Q. And did the other companies there represented acquiesce in the several allotments apportioned to them? A. Well, unwil- lingly, pretty generally. ( Q. They all wanted more, you mean? A. That is the case with the coal men. Q. And they finally compromised rather unwillingly on these figures? A. Yes, sir; I suppose that is the best way to put it. Q. When you left that conference on that occasion, Mr. Sloan, you understood, did you not, that the honor of the various gentle- men representing that conference, representing rather the roads at that conference, were pledged to maintain the allotments ap- portioned to them at the conference? A. I don’t think I can say yes to that, sir; I don’t think they pledged themselves at all, be- cause the subsequent events show that they did not. Q. Shows that if they did pledge themselves, they violated that pledge? A. Well, you can put it that way if you choose. Q. Yes, but your understanding? A. Acquiesced in the gen- eral^ Q. And among honorable men that you had acquiesced in that arrangement and would live up to it? A. Yes, I suppose it would be fair to say yes. Q. Now, from the time that allotment was made, Mr. Sloan, whether the companies have lived up to it or not, effort was made to live up to it, was there not? A. Oh, I think there was; I think there was, but circumstances and the different interests seemed to govern., Q. Do you mean that circumstances that transpired after the conference? A. Yes, I mean that. Q. And by those circumstances you mean the individual desire of the different companies to get the best of this conference? A. 1004 [Senate, No, I don’t say that, sir ; I think that the market was such that while generally, the allotment was acceded to, the market — no one was refused coal — no one — no coal was withheld from them that wanted it; we supplied our customers — I think that all the other companies did that — they had in their mind, of course, the allotment, but the allotment allowed them from month to month if it could be got together, will show that they didn’t strictly keep the allotment, because we felt that we could not bind our- selves to such an obligation. Q. In what w T ay did you feel that you could not, Mr Sloan? A. Because we thought that it was not to our interests, and then again, we thought that it was not consistent with the interests of those we were serving, the public — and all concerned — that each had their own customers and they were supplied. Q. Now, in making these supplies, however, in view of the con- ference held and the acquiescence given to the output or to the percentage there established, you held in mind from month to month, the allotment that had been made to your particular road, did you not? A. Yes, I think we did. Q. And honestly sought to live up to it? A. I think we did; yes, sir; some months we couldn’t and some months we didn’t. Q. What was the price of coal, and by price of coal I mean taking as a standard, lump coal? A. I couldn’t tell you. Q. At that time? A. I couldn’t tell you; I am not sufficiently posted in regard to that. Q. Do you recollect whether after the conference the price of coal was increased in the market? A. I think it was, just at that time, but it didn’t stay to — Q. It was increased on the first of February, was it not? A. I don’t recollect, sir; our coal salesmen would be able to answer that question. No. 40.] 1005 Q. Who is your coal salesman? A. Mr. Holden. Q. Is his presence obtainable here to-day? A. Oh, yes, I think so. Q. Where is his address? A. No. 26 Exchange place; he is in his office now. Q. There will be no necessity for a subpoena — I suppose Mr. Holden will attend on request? A. Oh, I think he would, but it would be as well for you to give him a subpoena; I hardly think that I should have come here without one. Q. Your case differed from Mr. Holden’s case; I regarded that this, in a sense, would be a request from his superior officer to attend here? A. Oh, I beg your pardon; undoubtedly he will come, sir. Q. The apportionment made was to last from the first of Febru- ary, 1896, to the 31st of March, 1897, was it not? A. I think it expired the first of this February; but if it does not, it has not been regarded, I am sorry to say; I don’t hesitate to say that everything has become more or less unsettled, prices are unset- tled as well as production and transportation unsettled. Q. And the results of that conference, as a result, have been unsettled also? A. Well, very much so. J Q. Do you remember, Mr. Sloan, how many increases in the price of coal were made after that conference was held? A. I don’t, sir. Q. Do you remember whether four were made of 25 cents each? A. I don’t; I can’t answer that question; Mr. Holden can tell you all about that. Q. Was the question of increasing the price of coal discussed at the conference that you were present at? A. Not — only in a general wav, I think the object was to get a better price, for we were all going wrong, losing money largely. 1006 [Senate, Q. Then the allotment of coal made at that conference included the general purpose by allotment of raising the price? A. No, sir; it did not; they very distinctly objected to that; Mr. Roberts of the Pennsylvania road objected to that; he would not con- sent to it. Q. He objected to what? A. Raising the price of coal with this allotment. Q. I see what you mean; that the allotment itself at that time did not carry with it the announcement of a raise in prices, but as 1 understand your former answer the fact of making the allot- ment implies the purpose to get a better price for the coal? A. Undoubtedly, that is the object. Q. Do the sales agents themselves, without participation by the presidents of the various companies, fix the price of coal from time to time? A. I think they do; sometimes pretty generally, our sales agent does. Q. So far as your company is concerned? A. Yes, sir. Q. You have — A. Of course he — Q. (Continuing) — as president, delegated that authority to him without special conference with him? A. Oh, I think he always consults me; but that is his department that initiates It and adopts it. Q. Can you state whether or not the sales agent of the com- panies represented in the conference that was held just prior to February 1, 1896, themselves held a conference or conferences after the allotment was made? A. I cannot answer that ques- tion; I do not know. Q. Incidental to the power of fixing the price of coal does the sales agent of your company have the right to confer with others and establish uniform prices with those companies which shared No. 40.] 1007 in this general plan of allotment? A. Oh, I should think he would, necessarily. Q. Has it come to your knowledge as president of the road that he did? A. That he conferred with others? Q. Yes? A. Oh, yes, I think that he did; I think he told me he did. Q. You have a distinct recollection, have you not, that he did make that statement to you? A. No, I have not. * Q. You have not? A. No. Q. Have you no official recollection of an official conference be- tween the sales agents of these various roads held subsequent to the time that this allotment was made? A. I have not. Q. The fact that you do not know, Mr. Sloan, that there was or was not on official conference, if there was an official confer- ence between the sales agents of the roads, would not abate from the authority of your sales agent to have attended that conference and joined in its decisions, would it? A. I don’t — (Question repeated.) A. Oh, I think not. Q. You think not? A. No. Q. Well, you must know the official power of your sales agent — A. I think not, sir. Q. He had general authority? A. He has had for years. Q. And any prices fixed by him — A. It is proper to say that his actions — he would inform me of these conferences afterwards. Q. Did he keep you informed? A. Well, I suppose he does. Q. Now, do you know of an official conference that was held between the sales agents just after this allotment of percentages was made? A. I don’t know anything about it. 1008 [Senate, Q. He never informed you of one. A. Well, he must have in- formed me; but I don’t know — Q. You don’t remember? A. I don’t remember; he must have informed me. Q. Is it not a fact that monthly after the apportionment of these percentages the sales agents of these interested roads met and fixed the price of coal for the ensuing month? A. Our sales agent did not meet and do so. Q. On no occasion? A. That I am aware of. Q. When you stated in your former answer that there may have been conferences and you believe he informed you of the fact that he had had some conferences, do you mean in your last answer to exclude any such conferences from such answer? A. Oh, I could not answer that question; I don’t want to exclude or include anything; I merely answer the questions as you give them to me; he has general authority in the management of that department; of course he consults and reports, but we have so much — he pretty much manages the business. Q. And you have had no occasion to disavow or disapprove of any action taken by him from the first day of February, 1896, until now, with reference to the price of coal? A. No, sir. Q. Do you know yourself anything about the prices that were established, or the ruling prices that ranged between the first of February and now? A. I do not; I do not. Q. Can you state how many tons of coal are mined by the com- panies that were represented at the conference? A. I can not answer that question; I do not know. Q. Leaving then the allotment, determined at that conference, how was the output for the Delaware, Lackawanna and Western fixed as to months in the year? A. My impression is they fixed No. 40.] 1009 it from time to time; they didn't fix it for the year, but from time to time; they were governed by the conditions of the market. Q. Always, however, with reference to the whole of the allot- ment permitted? A. For the year? Q. Yes? A. Yes. Q. And your own and the other companies lived approximately within that allowance, mining and transporting the coal to mar- ket according to the exigencies of the trade? A. Yes, sir. Q. Within the allotment? A. Yes, sir. Q. So that at no time should the supply of coal, within reason- able limits, exceed the demand? Was that the general rule? A. Well, that was the general thing, but the transportation did ex- ceed, did exceed, in some instances largely; sometimes one, some- times the others; in other words, the whole thing, excepting keep- ing in our mind, was a failure; that is what I mean. Q. Do you mean that the entire allotment made, I mean the sum of the allotment made, exceeded the demand A. I don’t get your question. Q. Now the allotment, the sum of the allotment made, was on the basis of an output of 40,000,000 of tons, was it not? A. I don’t recollect what that was; I couldn’t answer that question. Q. Well, was it about that? A. I should think it would be. Q. Now my question was, that the sum of the allotment made, to wit, about 40,000,000 of tons, exceeded— did it— the demand? A. At different — from month to month; some months it did and some months it didn’t; those — Q. But taking the whole, Mr. Sloan? A. Well the figures are not- can be reached showing the whole, all that are on record — there is no trouble about it. 64 '10X0 [Senate, Q. I am not talking so muck of the figures as the principle that underlies the arrangement; you fixed upon a gross amount of coal to be transported? A. That we think the market will take. Q. That is it? A. That is it. Q. Basing your estimates upon former years — A. Yes — Q. And you allotted that in percentages to the various com- panies? A. Yes, sir. Q. Based upon experience tables? A. Yes, sir. Q. Now I ask you whether the experience of the year show that the gross sum allotted as the intended output exceeded the demand? A. No, I think that they all exceeded the quantity of allotment, the allotment that they talked of at the time; that the output exceeded what we estimated it would be. Q. Then the demand exceeded the output estimated by you upon which these percentages were based? A. I think it did* I think it did; but Mr. Holden is very familiar with all this, he can give you, he can give you all the information you desire. Q. I believe you stated, did you not, that the output for each of the roads within the limits of the apportionment was fixed from month to month? A. Yes, I think so. Q. And by the sales agent, not by you? A. Yes, the sales agent, so far as we are concerned; he reported to me what was proper, and I either — Q. Can you explain to this committee what the necessity was, I mean on following the rules of supply and demand — what the necessity was for increasing the price of coal about the first of February, 1896? A. Coal was very low at that time, I think, and it was increased in consequence of the great loss to the com- panies; I think it was that. Q. The increase was made by the companies? A. Yes. No. 40.] 1011 Q. Because they considered that coal ruled too low in the market? A. Yes, sir. Q. And not because there was a demand larger than the supply? A. No, because the coal, as we regarded it, was too low in price. Q. You considered that a commodity upon which you had the right as owners to fix the price? A. We think we have. Q. I am asking for your principle? A. Well, we think we have, we think we should. Q. Can you or the general salesman, Mr. Holden, give the cost of production and transportation of coal to market? A. He can. Mr. Lexow: That will be all, Mr. Sloan. Mr. Sloan: I am much obliged to you. Mr. E. B. Thomas, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. Where do you live, Mr. Thomas? A. In New York. Q. New York city? A. Yes, sir. Q. What is your occupation? A. President of the Erie Rail- road. Q. Officially known as the New York, Lake Erie and Western? A. No, sir. Q. It has changed its name? A. We have annual reorganiza- tions of that property, and we have changed our name. Q. What is it now? A. The Erie Railroad. Q. Was it on the first day of February, 1896, known as the New York, Lake Erie and Western? A. It was not. Q. What was its then name? A. The Erie Railroad. Q. The reorganization was finished before that time? A. Yes, sir; the old corporation of the New York, Lake Erie and Western is still in existence; I am also the president of that; but the prop- 1012 [Senate, erty itself is known as the Erie Railroad since its reorganization December 1, 1S95. Q. You have heard the testimony of Mr. Sloan? A. Yes. Q. Were you present at a conference held by the presidents of the various coal carriers about, or just prior to the first day of February, 1896? A. Yes, sir. Q. And participated in the deliberations? A. To some extent. Q. And the conclusions reached by that conference; the New York, Lake Erie and Western road received an apportionment of percentage of 4 per cent., did it not? A. No, sir. Q. What was the per cent? A. The Erie Railroad received an allotment of 4 per cent. Q. I mean the Erie received an allotment of 4 per cent? A. Y"es, sir. Q. Do you remember the allotments made to other companies? A. I do not; I haven’t them in my mind at the moment. Q. If I call your attention to the figures, you would remember them? A. Approximately, undoubtedly. Q. The Philadelphia and Reading 20 J per cent? A. I think that is correct. Q. The Lehigh Valley 15 and 65-100? I cannot answer ac- curately; I assume that was approximately correct; about that. Q. I would like the approximate figures to have them on the record? A. Yes, sir. Q. The New Jersey Central 11 and 70-100? A. I think that is substantially correct. Q. Mr. Sloan has answered for the Delaware, Lackawanna and Western; the Delaware and Hudson, 9 and 60-100; is that your recollections? A. That is my recollection. Q. The Pennsylvania, 11 and 40-100? A. I think that is about it. No. 40.] 4013 Q. The Pennsylvania Coal Company, 4 per cent? A. Yes. Q. Your company 4 per cent? A. Yes. Q. The Ontario and Western, 3 and 10-100? A. Yes. Q. The Delaware, Susquehanna and Schuylkill 3 and 50-100? A. They declined to accept any such allotment. Q. That was the allotment made to them that they declined to accept? A. Yes, sir. Q. The New York, Susquehanna and Western 3 and 20-100? A. I think that is about the amount. Q. Now was the Delaware, Susquehanna and Schuylkill road the only road that refused to accept the percentage allotted? A. I think they were. Q. Did they ultimately refuse and finally refuse to accept it? A. I think the figures show that they never complied with it. Q. Well, I am speaking now of an official refusal; did they ever serve the conference or its chairman, either then or thereafter, with an official declination of that percentage or allotment? A. Well, Mr. Warner, who represented that company at the con- ference, declined to vote; that is all the proceeding that ever took place in respect to it. Q. The statement of Mr. Sloan made here was correct, accord- ing to your recollection, was it not, that the other companies acquiesced in the allotment made? A. Substantially. Q. Although some of them unwillingly? A. All of them. Q. All of them? Did you live up to the allotment, Mr. Thomas? A. Not entirely. Q. Within reasonable limits? A. So far as the demand on us for coal permitted of our doing so. Q. Did that exceed the allotment? A. It did, at various times. Q. Substantially? A. Well, that is rather a difficult question 1014 [Senate, to answer ; I haven’t the figures as to exactly how the amount of coal produced after that discussion, at that time, finally worked up. Q. Are the figures of output not accessible to the presidents of these conferring roads from month to month not only so far as their own roads are concerned, but as to all of the roads that went in the conference. A. The statistics of the anthracite output are kept, and copies of them were sent over; I occasionally see them; at other times I do not; I don’t keep very close track of them. Q. Do you keep track of the prices made? A. I do not. Q. Have you any knowledge of the figures set upon coal by your own company from month to month? A. No, those prices are made, dependent upon the demand for coal. Q. And fixed by whom, Mr. Thomas? A. They are fixed by no one individual — by the law of supply and demand. Q. Who fixes — A. There are frequent, I have no doubt there are consultations occasionally among the sales agents as to what prices they are going to charge, as there are in other avocations of life. Q. You have no personal recollection, have you, of the fact that there were conferences between the sales agents of these conferring roads. A. I have not. Q. Have you any knowledge or information as to any definite conferences or consultations that were held between the sales agents of these various roads? A. I have not. Q. Do you wish to be understood as stating in your official ca- pacity as president that your sales 'agent did not under the au- thority of his employment, attend a conference of that character? A. I have no knowledge of his attending any conference of that kind. No. 40.] 1015- Q. Never reported to you? A. He has never reported to me; I know he undoubtedly consults with others as to the market, de- mand for coal; what the market will probably take. Q. With you? A. No, sir. Q. With other sales agents? A. Not to my knowledge. Q. Who is the sales agent of your road? A. Williams & Peters. Q. Their address? A. No. 1 Broadway. Q. Will you kindly state the name of that man in the firm who more particularly represents the road in fixing the price of coal? A. I don’t think there is any difference between them. Q. Do you know T the first name of Mr. Williams? A. R. H. Q. And Mr. Peters? A. S. T. Q. No. 1 Broadway is a place where a number of offices of sales agents of these conferring roads is to be found, isn’t it? A. I think there are several coal companies that have their offices there. Q. Has it not come to your notice that these sales agents meet together at No. 1 Broadway and have conferences and consulta- tions looking to a uniform rate for coal? A. It has not. Q. That rate is uniform, is it not, Mr. Thomas? A. I am sorry to say it is not. Q. There is a uniform rate fixed whether by the sales agents or by the laws of supply and demand, monthly, according to which the various roads sell their coal? A. If there is, it is hardly ever maintained. Q. Is that— is that subject to the same variations as did this conference agreement, fixing the percentage? A. I don’t get your question. Q. (Question repeated). A. I must confess, I would like to an- swer that question, but I don’t quite understand it. 1016 [Senate, Q. Is the price subject to the same variation as was this per- centage that was fixed at the conference of the presidents? A. I think the price is more subject to the ability of the sales agents to sell. Q. Now, that is regulated, is it not, by the amount of coal pro- duced, mined and exported? A. I hardly think so, because we are at all times prepared to supply any demand for coal. Q. Provided that demand comes with the price fixed by your roads, isn’t that true? A. Provided that it comes at a price which is satisfactory to our agents. Q. You do not dispute then, the proposition that with lower prices for coal a larger demand is to be found in the market? A. We didn’t find, in 1895, when we produced more coal than 1896, that we got any larger market — the coal was simply piled up. Q. Restriction of output increases demand, or apparent de- mand, does it not? A. The restriction of output? Q. Yes? A. I don’t think so. Q. If, instead of mining 50,000,000 tons, you mine 40,000,000 of tons, the demand becomes more pronounced, does it not, and the price raises? A. That would seem to be the natural consequence but as they never have produced 50,000,000 tons — Q. That was the object, though, for the holding of that con- ference among the presidents of these roads, to fix: the output so that the price of coal would reach what in your judgment, was its fair value? A. The question of the amount of coal to be pro- duced was never discussed at any meeting that I have ever at- tended. Q. You heard Mr. Sloan say, did you not, here on the stand, that it was the effort of the companies and one of the objects of that conference to obtain a fair price for coal? A. In eighteen ninety — No. 40.] 1017 Q. Do you agree with him in that? A. To some extent; in 1895 the companies produced, transported, more coal than there was a market for; there were a large accumulation of coal on hand, and prices were low; it was in the hope that we might secure some little remuneration for the industry that the agree- ment, or the understanding of which you speak, was held. Q. And that goes hand in hand, does it not, with the restricting or fixing the output at such a figure that the demand would in- crease the price or value of your coal to what you considered to he a fair price? A. No, there has never been any agreement whatever to my knowledge of any restrictions in quantity. Q. I am not speaking of agreement, I am asking for the princi- ples underlying your form of doing business; that is the principle, is it not, and was the principle that was understood by you, in entering into that conference? A. We undertook to not produce ourselves more coal than we can sell; we didn’t care to pile up our coal as we did the year before. Q. And when you say any more coal than you could sell do you not imply, wish to imply, more than you could sell at what you considered to be a fair price for your coal? A. Yes. Q. Are you miners as well as transporters of coal? A. The Erie Railroad does not mine any coal. Q. Have you affiliated companies that mine coal? A. We have a company called the Hillside Coal and Iron Company which mines coal. Q. So that your company either directly or indirectly is inter- ested in the production of the coal and in its transportation to the shore, to the city of New York? A. Slightly in its produc- tion; more largely in its transportation. Q. You produce then, but you transport more than you pro- duce? A. We do. 1018 [Senate, Q. Can you give the committee the figures that ruled during the year 1896, from the time of the conference until now, approx- imately? A. You mean the prices of coal? Q. Yes? A. I could not. Q. The sales agent, can he? A. The sales agent can. Q. Do you remember, Mr. Thomas, that immediately after the holding of this conference, the price of coal went up 25 cents a ton? A. I have no recollection of that. Q. That a month after that it went up another 25 cents a ton? A. I don’t keep track of the prices. Q. Do you remember generally that since the holding of that conference the price of coal has gone up $1 a ton? A. I do not. Q. Which upon the allotment of 40,000,000 of tons means $40,000,000 additional? A. I never knew of any allotment being made of 40,000,000 tons; any advance in prices applies only to broken sizes. Q. Do you remember whether at that conference the figures shown by the respective companies indicated an output of over 45,000,000 of tons? A. For what? Q. For the previous year? A. There were about 46,000,000 of tons of coal produced in 1895, anthracite coal. Q. Forty-six? A. Forty-six, in round numbers. Q. That is what I want; now is it not true that at your con- ference upon the basis of the percentages fixed, there was a gen- eral understanding to the effect that the allotment of the whole should amount to 40,000,000 of tons for the year? A. I never have had any discussion as to that nor any understanding at any time. Q. Whether by agreement or by coincidence was it the fact that the output for the year exceeded only by a trifle 40,000,000 No. 40.] 1019 of tons? A. There were about, between 43,000,000 and 44,000,000 of tons of anthracite coal produced in this country last year. Q. Your recollection is that it was about 3,000,000 less than the year before? A. Somewhere between 2,000,000 and 3,000,000, but more than was produced in 1894. Q. More than in 1894? A. Yes; I can give you the figures for a few years, if you desire them. Q. If you please? A. They are approximately, and in round numbers : In 1891 40,000,000 In 1892 In 1893 In 1894 In 1895 In 1896 42.000. 000 43.000. 000 41.000. 000 46.000. 000 43.000. 000 These are approximate figures only and in round numbers; the truth is that this country has an ability to produce about 60,000,- 000 of tons of anthracite coal per annum; it has an ability to mar- ket somewhere in the neighborhood of 40,000,000. Q. These companies? A. Yes. Q. Will you explain how it was that between 1894 and 1895 the output of coal increased 5,000,000 of tons, while between 1895 and 1896 the output decreased 3,000,000 of tons? A. Well, I think in 1895 the people endeavored to conduct the business more on the lines of commercial sense than in 1895. Q. You mean in 1896? A. In 1896. Q. You mean in 1896 those companies operated on a standard of greater commercial reason. A. I do. Q. Than they did the year before? A. I think they had some 1020 [Senate, glimmerings of commercial sense and endeavored not to give away their product, and one which is impossible of replacement. Q. Do you mean to be understood in making that statement that the companies were actuated by the desire to market coal at only what they considered to be a fair price? A. I can’t speak for the others; I only speak for ourselves; we endeavored not to produce a quantity of coal in excess of that that we could mar- ket; we had less of coal on hand at the upper lakes; we had less of coal in store at Buffalo, less at tidewater, than in 1895; and made no money out of the business in 1895. Q. Mr. Thomas, doesn’t the ability to market — is not rather the ability to market, largely dependent on the price you fix? A. No, sir; not entirely. Q. Do you not find that upon putting an additional price upon your coal you at once contract your market? A. The anthracite coal has a great deal of difficulty now in sustaining its market by reason of the competition of oil, or gas, and of the low prices of bituminous coal; they are a constant menace to the price. Q. That is because you hold the price of anthracite coal so considerably beyond that of bituminous coal that notwithstand- ing its advantages, the advantages of anthracite, you have hard work in competing; is that it? A. The only advantage that I know of in anthracite is its cleanliness; a ton of bituminous coal will produce more steam than a ton of anthracite, and the low price at which it can be mined and placed upon the cars in com- petition with the anthracite must always prevent any exorbitant price being secured for anthracite coal. Q. When you speak of this output of 43, 46 and 41,000,000, you mean of anthracite coal, do you not? A. I mean all sizes, pea, buckwheat — No. 40.] 1021 Q. Of anthracite? A. Of anthracite, all sizes; no bituminous coal; I am speaking of anthracite coal only. Q. Were you never informed by the sales agent of your com- pany of any uniform price schedules as between these conferring roads? A. I have never been informed of their ability to main- tain any uniform price. Q. Not of the ability to maintain, Mr. Thomas, but of the fact that they have agreed to maintain? A. I have never known of any conference. Q. Never been informed of it by your sales agent? A. Not to my recollection. Q. Would he have had, does he possess under your authority, full power and authority to attend a conference and establish prices. A. Never been any official authority delegated to him in that respect; he is expected to meet the markets and to market the amount of coal that we purchase, or rather we produce the amount that he can market. Q. Do the sales agents post notices of the monthly prices? A. I do not know how the detail in which the business is conducted — I am not advised as to that. Q. Don’t you know the detail of the method of the conduct of your own sales agent? A. I do not know any of its details. Q. Mr. Sloan has stated that at least two hours, and probably more, were occupied in this conference, that is, prior to February 1, 1896; do you remember the time? A. I do not. Q. Was it a longer time? A. Why, I think there was several hours in conference, including lunch and all; I didn’t charge my mind with any special reference to the time; it may be well to state at this point that the understanding that was arrived at at that time expired on the first of February, 1897. 1022 [Senate, Q. Did it not extend to the 31st of March. A. Not to my rec- ollection, sir; I know of no understanding that exists at this mo- ment. Q. Under and by its terms was it operative for a limited period of time then well understood and fixed? A. My recollection of the discussion and the understanding of the gentlemen was that it expired on the first of February, 1897, and there has never been any meeting since. Q. Was there any meeting since the first of February, 1896? A. No, sir; not that I have attended. Q. Either by the conference as a whole or by any committee appointed by the conference? A. There was no committee ap- pointed by them and there has been no meeting — Q. Who was chairman of the conference? A. Well, I can’t rec- ollect; I wish I could. Q. You probably remember whether Mr. Oliphant was chair- man? A. No, he was not; my recollection is that it was Mr. Rob- erts of the Pennsylvania, but I am not certain as to that. Q. What is the price of coal now, Mr. Thomas? A. I don’t know what the price of coal is. Q. Are you not aware as to whether or not as the result of that conference, or subsequent to that conference, by degrees, the price of coal was raised one dollar? A. I am not; I think we secured better prices in ’94, or 1896, than we did in 1895. Q. By about one dollar? A. I don’t think by anywhere ap- proaching that sum; there was no advance whatever on steam sizes, pea, buckwheat, and those smaller sizes were lower than in 1895. Q. The advances were made on grate, egg, stove and chestnut? A. If there were any advances they were on what are called prepared sizes. No. 40.] 1023 S7 E Frederick H. Gibbons, being duly sworn, testified as follows: Examined by Mr. Lexow. : Q. Wliere do you reside? A. New York city. Q. What is your occupation? A. Treasurer of the Delaware, Lackaw’anna and Western Company. Q. Treasurer? A. Treasurer. Q. Have you anything to do with the sales of coal? A. No, sir; I have not. Q. Any official relation to the coal department of the company? A. None at all, except to take the money which is turned in for sales of coal. Q. Do you know what the output of the Delaware, Lackawanna and Western Company was for 1896? A. I don’t know the out- put; I think that the output — the coal mined by ourselves and transported for others was in the neighborhood of 8,000,000 of tons, but I don’t know exactly the figures. Q. Did that come within the percentage fixed at the conference of presidents about February 1, 1896? A. I don’t know. By Mr. Mazet: Q. What was your answer, the number of tons? A. Between 8,000,000 and 9,000,000 mined and transported. Q. By your road? A. Yes. By Mr. Lexow : Q. How did that compare in relation to the percentage fixed at this president's conference? A. I do not know, sir, whether it was — what the relation was. Q. You mined and transported then about one-fifth of the total product of the year? A. I have made no examination of the ton- nage, sir, I can’t say. 1024 [Senate, Q. Have you any special authority over the sales agent of your company? A. None at all. Q. Any communication with him? A. Communication in the course of business — Q. As to the fixing of prices? A. Not at all. Q. Or establishment of the amount of output? A. No, sir; none whatever. Q. Have you any special knowledge of the practice pursued by him in his business? A. I have not. Q. Do you not know that the prices of coal are fixed monthly by conference between the sales agents of these conferring compan- ies? A. I do not know that, sir. Q. Have you any information on that subject? A. I have not. By Mr. Mazet: Q. What prices did you get per ton during 1896? A. I could not answer that. Q. Haven’t you a knowledge of that as treasurer of the com- pany ; don’t you know as to the comparative price between 1896 and 1895? A. I think it was slightly higher in 1896. Q. How much? A. I do not know; but I should suppose 30 to 40 cents; somewhere in that neighborhood. Q. Per ton? A. I should think so. Q. What was the comparative tonnage of 1895 and 1896 trans- ported by your road? A. I am not able to say that, sir. Q. Was it more in 1896 or less than in 1895? A. My impres- sion is more, but I have not examined those figures. Q. Did you hear Mr. Thomas’s testimony that a great deal of coal was mined in 1895 and was piled up hete and unsold? A. I did not hear that, but I think that was the case; I believe that that was true. No. 40.] 1025 Q. Tliat would seem, would it not, that there was more mined and transported by your company in ’95 than ’96? A. I am un- able to say anything definite about the tonnage; I have not closely followed that. I Q. But your impression is that between ’95 and ’96 the price was increased about 30 or 40 cents per ton? A. That is my im- pression. Q. That is all the knowledge you have on the subject? A. That is all I have definitely that I could state. Q. What is the price at the present time as compared with ’95 and ’96? A. I could not state that. .Q. You don’t know the price at the present time? A. No, I do not. By Mr. Lexow: That is all. Mr. Charles A. Walker, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. What is your name? A. Charles A. Walker. Q. Occupation? A. Treasurer of the Delaware and Hudson Canal Company. Q. Of which Mr. Oliphant is president? A. Yes, sir. Q. Who is the sales agent of the Delaware and Hudson Canal? A. Thomas F. Torrey, 21 Cortlandt street. Q. Did you attend the conference of presidents about February 1, 1896? A. I did not. Q. You were not present? A. I was not. Q. Have you any official authority over the sales agent of your road? A. No, sir. Q. Do you know anything about his transactions, the system upon -which he carries on that department of the company? A. 65 1026 [Senate, Well, to a partial extent; of course, I must know all that is going on, but the methods — v Q. Who fixes the prices of coal from month to month for your company? A. The general sales agent. Q. How does he fix it? A. I don’t know. Q. How is the notice given of the price fixed? A. Well, all I know is he issues circulars to> our customers establishing the price. / Q. For the ensuing month? A. Well, until changed; I don’t know how often they change it. Q. Is it not a fact that the prices are established as a matter of fact monthly? A. No, they are not. Q. In your company, I mean? A. In my company. Q. A notice stands good at the price indicated therein until countermanded? A. Until changed by a subsequent circular. Q. By a subsequent circular; that is with reference to your general customers, or permanent customers — have you any tran- sient trade, do you sell except to customers who 1 are permanent? A. Well — i Q. I mean permanent, more or less permanent? A. We con- sider all our customers are permanent. Q. You have no transient trade? A. I don’t understand what you mean by transient trade; we sell only to dealers — Q. You sell only in large lots to customers' supposed to be per- manent? A. We consider every one who goes upon our books that he is a permanent customer. Q. Do you sell to dealers as well? A. Yes. Q. In small lots? A. Well, we sell in boat loads. Q. Anything less than boat loads? A. Well, that is a — I don’t think I can answer that question; my end is the financial part of No. 40.] 1027 the company; those are questions that the sales agent will answer. Q. Do you know whether he is in the city to-day? A. I be- lieve he is. Richard H. Williams, being duly sworn, testified as follows: Examined by Mr. Lexow: Q. Where do you live, Mr. Williams? A. New York city. Q. Occupation? A. Coal merchant. Q. Do you bear any relation to the Erie Railroad Company? A. We are their general sales agents. Q. Your firm? A. Williams & Peters. Q. Is the sales agent for the Erie and has been so during the year of 1896? A. Yes, sir. Q. Is yet? A. Is yet. Q. Do you remember a conference of sales agents that took place in the year 1896? A. No, I do not; it may be proper for me to state that I was abroad from the 29th of February to the 29th of May. Q. At no time that you were in the city of New York, do you know of any conference occurring between the sales agents of the roads that came in conference just prior to the first of Febru- ary, 1896? A. I think it most probable, and it is possible that I was there; it was formal; it was customary to have informal talks over the situation. Q. When? A. Well, generally. Q. W T here? A. At various offices, wherever a man happened to be; one man would visit one man one month, and another man visit another man another month; people coming over from Phil- adelphia would come to various offices. Q. I am speaking now of the conference that is more formal in its character than that, in which either all, or a majority of the 1028 [Senate, roads that conferred about the first of February through their presidents, on the coal situation, met and discussed the situa- tion and reached some conclusion; do you remember any such conference? A. Yo, I do not; I do not. Q. At any of these informal conferences that you have spoken of, how many were together, the most? A. Three or four, I should think. Q. Representing what roads? A. Well, at various times the Lackawanna, the Reading, the Lehigh Valley, the Erie, and the other coal roads. Q. Were you informed of the allotment or percentage that had been given your road by the conference of presidents? A. I was informed that the Erie road would have 4 per cent, of the total tonnage brought to market, to haul, transport. Q. You bore that in mind during that year, did you not; you held that in mind in making your arrangements for the disposi- tion of coal? A. Yes. ( Q. And were guided by the allotment that had been made in disposal of coal? A. You mean to say that tonnage allotment of 4 per cent.? Q. Yes? A. Yes. By Mr. Mazet: Q. What do you mean by 4 per cent, of the tonnage; as the de- mand should indicate, or was the total output fixed? A. Oh, no; the total output was not fixed. Q. How could you ascertain what 4 per cent, would be if you didn’t know what the total would be? A. It was customary to discuss what the probable requirement for the following month would be. Q. And on that you would base the output for the month? A. Yes, sir. No. 40.] 1029 Q. You fixed the output for each month, didn’t you, approxi- mately? A. Approximately, yes. Q. And figured the percentage on that? A. Yes. Q. You determined particularly, or generally, once a month, and fixed the output for the succeeding month? A. We didn't fix the output; we discussed as to what would be the probable require- ments for that month, and were guided in our mining operations by that decision. Q. That was the basis on which you conducted your work? A. Yes. By Mr. Lexow: Q. When you refer to “ we,” Mr. Williams, whom do you mean? A. I mean sales agents or officers of the several coal companies, what we call the initial railroad companies or transporters of anthracite coal. Q. By those you mean the conferring companies, those compa- nies that conferred? A. The representatives of those companies did confer, yes, sir. Q. The companies that conferred about the 1st of February? A. Those are the companies of which I speak. Q. And it was your practice, was it, to meet from time to time in informal conference and fix your estimate of the amounts to be mined respectively by those conferring companies in view of the allotment that had been made? A. Well, we would discuss as to the probable requirements of the succeeding month. Q. Yes, and in respect to the allotment, that is to say, after fixing the requirements as you judged the market? A. Yes. Q. You would then divide that according to the allotment at the president’s conference. A. Yes. 1030 [Senate, Q. And that would furnish the amount which your company on its allotment of four per cent, would bring to the seaboard? A. Yes; but not necessarily all to the seaboard. Q. I understand; you mean transport? A. That is right. Q. Would offer to the consumer, that is it, is it not? A. Well, yes. Q. Do< you deal with retailers? A. Yes, we sell retail dealers. Q. In making those sales do you officially represent your com- pany, or are you acting in an arbitrary capacity as a firm? A. We handle the entire output of the Erie road and guarantee sales, responsible for results and all — Q. You are, in a sense, factors? A. Well — yes, if you please. Q. Why was it that the price of coal was increased 25 cents a ton immediately after the holding of this conference of the respective presidents of these roads? A. Well, because the price had been so low in 1895 that there was absolutely no money in doing the mining business. Q. You considered that you were getting too little for your coal? A. Altogether. Q. You considered that you were losing money on your coal? A. Yes. Q. And you considered that you had a right to fix the price upon the coal which in your judgment was its fair value? A. Certainly. Q. And you believed that you had a right to confer together and by mutual understanding reach both an allotment and a figure which would give you what in your judgment was a fair price for your product? A. Absolutely. Q. And it was upon that principle that you worked together^ but the result of it was, was it not, a restriction in production? A. Well, I am sorry to say it was not. No. 40.] 1031 Q. I mean — A. We might. Q. The object? A. No; the object was not, the object was not to mine more coal than we could market, because it costs a great deal of money, and the coal deteriorates when above ground; it costs less inside, to carry it in the ground. Q. When you say market, Mr. Williams, you mean market it at such price as you in your judgment fixed as a fair value of your product? A. We didn’t fix it; there are other considerations that enter into it. Q. You try to fix it as near as you can? A. Yes. Q. And you don’t succeed always because of the law of supply and demand? A. Well, and competition of other coals; 25 to 33 per cent, of our output is steam coal, buckwheat and pea, sizes under domestic sizes, and those prices are regulated very largely by the price of bituminous coal. Q. Do you mean that the price of bituminous coal regulates the price of anthracite in the New York market? A. To a very great extent; oh, yes, always has — I mean in the steam sizes. Q. The price of steam sizes? A. Yes. Q. The price of anthracite coal is subject to still greater con- trol and regulation by restriction of production, is it not? A. Why, if absolute restriction could be carried out; it never has been; it would have some bearing on it. Q. Anything that would retard the independent action of these companies in mining, such as they deemed proper, and limiting them to a specific amount supposed to represent the demand of the market, would have the effect of adding to the price, would it not? A. If it w'ere carried on to a greater degree than it has even been done. Q. And if the companies lived up to any agreement that they 1032 [Senate, might enter upon? A. If the companies would do that it would be far more arbitrary; it never has been. Q. I understand the claim has been made by Mr. Sloan that the companies, or some of them, did not live up to their allot- ments; that was true, was it not? A. Why — Q. (Continuing) But the establishment of that allotment was for the purpose of only securing enough coal to be brought to the seaboard to meet the demand, as considered established by the figures of the preceding years; is that true? A. Well, not exactly. Q. What is true? A. It is true that more coal has always been brought under this agreement to tide water than could be marketed at reasonable figures. Q. Was the advance of coal of 25 cents a ton made after the conference of these presidents, the result of that conference? A. I should say so. Q. When was the next increase? A. I am not positive, but I think in about May or June. Q. About the first of May, was it not? A. I think so; yes. Q. You then increased the price 25 cents more? A. I think that was it. Q. Was that the result of the conference? A. It was. Q. Do you remember the next increase — was it about the first of July? A. I think it was. Q. That was also an increase of 25 cents? A. I think so. Q. And the next, the first of September? A. Well, there was a September — Q. And that was also an increase of 25 cents? A. I think it was. Q. So that between the first of February and the first of Sep- No. 40.] 1033 tember, as the result of that conference held immediately prior to the first of February there was an increase in price of about a dollar a ton — or just a dollar a ton? A. There was an actual increase of one dollar a ton in the circular price; the September circular was never realized, and that size was stove coal, which is about 20 to 22 per cent, of the total output; that was the only size that was affected to such an extent; that was actually af- fected about 75 cents instead of one dollar, as the circulars will show. By Mr. Mazet: Q. What percentage of the coal consumed here is steam coal, Mr. Williams? A. Well, that is a little difficult to answer; but I would say 25 to 30 per cent., I should think. Q. And that is the one in which there is the most competi- tion? A. That is, the soft coal regulates the price more of that by its low prices. Q. And the other 70 per cent, there is not so much competi- tion? A. Not so much competition. By Mr. Lexow : Q. Is it not true that between the dates named in the question just asked, the price of grate, egg. stove and chestnut was raised, including February 1, 189G, and September, 1896, one dollar per ton? A. Oh, no; the price of stove coal in September — oh, in September, 1896, you say? Q. Yes? A. My recollection is that, that the price of stove coal for January and February was about $3.25 a ton. Q. And $1.00 fixed in September? A. Well— yes. 1034 [Senate, Q. That is right, so that with the addition of 25 cents in Feb- ruary, $4.00 in September showed an increase of $1.00 per ton? A. About $1.00 per ton was shown in the stove size; grate did not participate, nor did egg nor chestnut. Q. Was the egg $3.50 as fixed by the increase in February? A. It was not selling, it was not. realizing that price. Q. And did you not fix $4.25 by your circular issued in Sep- tember? A. None was sold in 1896 at that price. Q. Well, whether you sold it or not, is it not a fact that you issued a circular fixing that as the price? A. Yes; I think it was. Q. And isn’t the same true with reference to the other two sizes that without reference to the question as to whether you got the money, you did issue a circular which made a raise of one dollar during the period mentioned in my question? A. About that; yes. Q. What was there in the situation, Mr. Williams, to warrant or justify a raise of one dollar per ton? A. Why, the fact that for the 18 months prior to 1 October, 1895, that we had been mining coal, coal had been steadily declining about a dollar and a half, and the companies had all that time been losing a great deal of money, they were trying to get their properties back on a paying basis. Q. You considered that the value of your product had not been reached in those years? A. Oh, no; decidedly not. Q. And that you were justified in fixing this higher price upon it as a reasonable value for your product? A. Yes. Q. Do you consider yourselves justified to make an agreement among competing companies fixing a uniform price which was higher than that ruling or prevailing upon what is considered a necessary of life? A. We made no actual agreement. No. 40.] 1035 Q. Do you call the deliberate results of a conference other than an agreement? A. We worked on the same lines and ob- tained similar results. Q. And you wish to be understood that it was simply a coin- cidence that that result was obtained? A. No; we were operat- ing to get more money for our coal. Q. And you were trying to do it in that way? A. We were trying to do it in that way. By Mr. Mazet: Q. What is the cost of mining coal per ton? A. Well, that varies a great deal. Q. Approximately — the average? A. I should say from $1.60 to $1.80 a ton at the breaker; the first cost of these breakers is, of course, very great, and the cost of developing the property is very great. Q. How are the miners paid, by the day or by the ton? A. Some per day and some per ton. Q. How much are they paid per ton? A. Well, I am not inter- ested in that end of it; at least, I could not give you the accu- rate figures. Q. But your impression is that the cost of mining is about ?1.50? A. It would average more than that. Q. What does it cost to bring it from the mine to the sea- board? A. That is a part of the railroad branch of the business; I am not in the railroad business. Q. That you are not familiar with? A. No. Edwin R. Holden, being duly sworn, testified as follows; Examined by Mr. Lexow: Q. What is vour full name? A. Edwin R. Holden. Q. Your residence, Mr. Holden? A. New York city. 1016 [Senate, Q. TV hat is your occupation? A. Vice-president of the Dela- ware, Lackawanna and Western railroad. Q. Are you sales agent of that road? A. That is not my official title. Q. Are you? A. Well, the business of the sale of coal is under my direction. Q. You have the same control over the sales of coal of your road that Mr. Williams and his firm have over the Erie? A. Well, I don’t know what control they have over the Erie. Q. General sales agents? A. I don’t know the nature of their control over the business. Q. Isn’t the relation of a general sales agent to a coal-carrying railroad fairly well understood? A. It is not necessarily identi- cal. Q. Is not? A. No, sir. Q. Have you got exclusive charge of the sales of coal made by your road? A. I have under authority of the president and the board of directors. Q. And fix the price? A. Ido. Q. And hold whatever conferences there are to be held with reference to the establishment of prices, or the fixing of the amount to be mined and transported? A. I have known of no such conferences for some time past. Q. There have been in the past? A. Oh, some years ago, prior to 1895; there was some of the men known as sales agents used to meet for conference occasionally, but I have known of none since. Q. Do you know Mr. Williams? A. I do. Q. He has testified here that there were what he designated as informal conferences between the sales agents of the various No. 40.] 1037 roads that conferred about February 1, 189G, subsequent to that time; .were you not present at any of them? A. I have/not been. Q. Any held in your office? A. No; if 1 might be permitted to say, that unless you are to call a casual meeting of their men who come into my office, as for example the gentlemen whom I have just left there, but no conference in the sense which I should term a conference. Q. How many? A. No meeting by appointment, nor anything of that sort. Q. But there was an interchange of ideas that occurred every month during the year 1S96? A. Not to my knowledge. Q. (Continuing) And which resulted from the conference held about the first of February, 1896? A. I know of none, heard of none, attended none. Q. Didn't these companies that formed part of the president’s conference — you know what I refer to — of about the first of February, 1896? A. I do. Q. At which an apportionment was established as between the various roads, and in which your road received the apportionment of 13 and 35-100 per cent, of the whole. To stenographer: Just read the question, please. (Question read). Q. (Continuing) Through their sales agents confer together about monthly after that presidents’ conference? A. To my knowledge there has been no such conference. Q. Informal, I mean? A. Either formal or informal, unless you would so call, as I said before, the casual meetings of indi- vidual gentlemen together, and exchanging views in regard to the situation, and I know I don’t recall any such conferences as that even that would extend to more than two or three indivi- duals. 1038 [Senatb, Q. About four individuals control tliree-fourths of the entire output of the anthracite coal carrying companies, do they not? A. Well, I could not answer that at the moment. Q. Does not the Reading, the Lehigh Valley, the Delaware, Lackawanna and Western, and the New Jersey Central, together with the Pennsylvania, control three-fourths of the entire coal carrying anthracite coal carrying trade? A. I can’t say as to that. Q. Is that your best impression as an expert? A. Let me see if I understand the Chairman ; you asked first whether or not four persons did not control — Q. (Interrupting) I now include five? A. Well, if you were to include a large enough number it would. Q. Five? A. That I can’t say; I should say — if you would allow me one moment; it would be about 60 or 70 per cent., I should say, if I understand the term “ control ” in the sense the Chairman does. Q. I mean that according to experience tables used at the presidents’ conference of about the first of February, 1896, their percentage was fixed so that that would indicate a control in the hands of those five roads. A. The experience tables — I don’t know any such. Q. Your experience in the way of production? A. Well, I should say it would be between, somewhere, those interests named wrnuld have to do with 60 to 70 per cent. Q. Did you in 1896 exceed the amount of percentage appor- tioned to you of 13 and 35-100 of the whole? A. I can’t say; I can’t say as to that. Q. Have you never investigated into that? A. Yes, if the Chairman will permit me, I would say that the percentages to No. 40.] 1039 which he refers had to do were addressed entirely to the trans- portation of coal, and it is within my knowledge that the aggre- gate amount of coal transpored over our road between the 31st of January, 1896, and the 1st of February, 1897, did exceed that quantity, that percentage. Q. To a substantial extent, or only to a slight extent? A. Probably not very much. Q. It was your purpose, was it not, in the production of coal, or transportation of coal to keep within the limits, reasonably wdthin the limits fixed at that presidents’ conference? A. That had no bearing upon it. Q. Did you not consider it at all? A. Well, it was a fact not absent in my mind — it was constantly within my knowledge. Q. Within your knowledge and in your mind, and do you mean to say that that did not guide at all in the policy of the company? A. Most assuredly. Q. You do? A. I do. Q. Then you differ from Mr. Sloan? A. Well, however much I may dislike to differ from my superior officer, I think if Mr. Sloan had qualified what he might have said about that — if he said it was matters with which he was not very familiar. Q. Did you have personal knowledge of this question of ap- portionment as to transportation, or was your duty more confined to the sales of coal? My duties include both. Q. Both; did you meet Mr. Williams at any time during the year 1896 upon the question of output and price? A. I don’t think I ever did; never recollect having done so; I have met Mr. Williams frequently in the ordinary intercourse of business; doubtless that was during the year; I can’t recall any specific instance, however. 1040 [Senate, Q. And no instance at which the question of fixing the price of output was discussed? A. Not any. Q. In its relation to the price or the output to be fixed by the Erie Railroad Company? A. Not at all. Q. Or your company? A. Not at all; if the Chairman will per- mit me, perhaps I may simplify the examination somewhat; if he will permit me to state the facts as they exist. Q. Certainly; we would like to know them? A. In the begin- ning of the year 1896 there was a conference held by the represen- tatives of the several principal coal carrying railroads, the avow r ed purpose of which was to see if by some means, some law- ful means, a betterment of the deplorable condition of the busi- ness might be arrived at. After considerable discussion, it was proposed by Mr. Roberts, president of the Pennsylvania railroad, that the transportation of anthracite coal should be divided among the several roads upon an agreed basis or percentage; that was assented to; difficulties were found in satisfying the different parties, and finally a committee was appointed who would take the matter in hand and recommend a schedule of percentages for the division of the transportation of anthracite coal, of which committee I was a member. That committee met and prepared a schedule which was submitted at a subsequent meeting of the same gentlemen, and was not assented to unanimously. Q. There was one road which dissented? A. There was one road which dissented. Q. That is the Delaware and Schuylkill? A. The Delaware and Schuylkill declined to accept; then a committee was ap- pointed to formulate a plan for carrying this into effect, and it was supposed, certainly by myself, that one of the matters to which that committee would address itself would be the attitude No. 40.] 1041 of this dissentment; that committee never made any report, and so far as I know, so far as I have known at any time, the reason of their making none, that they could formulate no plan that could be efficacious, that would not be obnoxious to the law; and the matter was dropped; since that time the different interests have struggled along, trying to do the best they could without un- necessary collisions, and so far as the question of fixing an allot- ment as it is termed, for the production of coal, the company I represent has strenuously and repeatedly insisted that it would produce all of the coal that it could sell; it has pursued that line and has never departed from it. Q. When you speak of the policy of the company as to the pro- duction of all the coal that it could sell, do you mean to be under- stood a% intending to produce all the coal that it could sell at any price, or all of the coal that it could sell at such price as the com- pany considered to be a fair value of the article furnished? A. That is the condition precedent, the price should be satisfactory, which, I regret to say, it has not been. Q. Will you explain, Mr. Holden, to this committee, how it was that immediately after this presidents’ conference of February, 1S96, the price of four of the principal grades of coal advanced 25 cents a ton? A. How was it advanced? Q. Yes? A. The price of coal for a long time prior to that had been abnormally low, ruinously low, and the cessation, in a meas- ure of depressing influences upon the market, made an advance of 25 cents — if that be the amount, I don’t recollect, exactly — made it practicable. Q. Is there anybody immediately under you in authority with reference to the sales of coal in your company, who has special 66 1042 [Senate, knowledge of the prices that were fixed during the year 1890? A. Xo person that has knowledge that I do not possess myself. Q. Was there anybody who, under you, had authority, or who did confer with the sales agents of other roads for the purpose of establishing uniform prices and an output commensurate with the percentages established at the presidents’ meeting? A. Xo one; no one under me has authority. Q. Nor did, as far as you know, anybody arrogate to himself any authority so to act? A. Not to my knowledge. Q. Can you explain? A. If the Chairman will pardon me, per- haps I may be able to explain a seeming discrepancy between what I have just testified in that respect, and what seems to be in the mind of the committee. These several allotments, however they may have been determined, if they were determined, and if they were determined, it was by sidewalk talk, or something of that nature, so far as my knowledge goes, they were merely tentative estimates of the possibility of the market for am ensuing period, and it was in practice as well as in expectation, it was the re- quirements of the market as they were found to be that would determine the value of production rather than the tentative estimate made before hand. Q. The tentative estimate made beforehand was on a basis of a production of 40,000,000 tons per year, was it not? A. No, sir, it was — Q. Was it on the basis of any production? A. I never heard that it was, and the division or volume of transportation was not a division of any given quantity, but of the total, or total poten- tial quantity. Q. Do you mean to be understood then as insisting that this conference of February, or abomt February, 1896, had not in mind No. 40.] 1043 the establishment of any production based upon a supply of the demand of the market consistent with the maintenance of fair values for the coal? A. The principal, sir; the principal gen- tlemen present at that conference distinctly disclaimed any wil- lingness to consider the question of production of coal ; I have in mind more especially Mr. Roberts, president of the Pennslyvania company; he repeatedly enforced that view upon the other gen- tlemen; he was there as the representative of a common, carrier, having nothing to do with the production of coal. Q. But the object of the conference was, was it not, to put an end to what was considered to be a disastrous and ruinous busi- ness, due to the sale of coal at a figure below what was considered by the company its real value? A. The main object of the con- ference had that in view; the methods whereby that result might be brought about, or what was considered at conference — and as I have said, Mr. Roberts and others distinctly refused to have anything to do with the production of coal; he was a common carrier and he only spoke as a common carrier. Q. This percentage, however, that you say was fixed tenta- tively? A. I beg pardon? Q. What object had it unless it affected the amount of the probable output? A. I beg pardon if I said that the percentages were fixed tentatively; I made a mistake; I had reference to the so-called monthly volume of production; I said that those were mere tentative estimates of the requirements of the near future; the percentages referred to were not tentative. Q. They were permanent? A. They were intended to be if they had been adopted. Q. They were adopted, were they not, except as to the one road, the Schuylkill road? A. They were not adopted by any, that one road being — 1044 [Senate, Q. Or to use the words of the president of the road “ they were acquiesced in”? A. Well, I should not say so; I certainly did not acquiesce for our company. Q. Were you present at the meeting? A. I was present, and the only — during part of the time, was the only representative of the company present. Q. Mr. Sloan was there part of the time? A. He was there several times, but he was not there continuously. By Mr. Mazet: Q. How then were those percentages fixed, Mr. Holden, if the representatives of the respective companies did not acquiesce in them, approve of them. A. The percentages fixed, which have been talked about, were experimentally submitted by the com- mittee appointed for that purpose. Q. By a special committee who made a report? A. A special committee which I have previously referred to, of which I was a member, made a report, and that report, failing to be unanimous, was not adopted by anybody; that is my own version of it. By Mr. Lexow: Q. I understood you to say in answer to the former question that you drew a distinction between output and between per- centages; in that output was tentative, and percentages were permanent or fixed, and that the only question with reference to percentages was as to whether or not the Schuylkill Valley Road could be prevailed upon to take the percentage allowed to it by that conference; is that true? A. I don’t quite understand the question? (Question read.) No. 40.] 1015 A. I only know as to'iny own attitude toward the question, and I held, as I have stated, that failing to be assented to by all concerned this schedule of percentages applied to none. Q. Why then Mr. Holden did you bear that percentage in mind during the year 1S96, as stated by you, “ had that in view in the product of the company ”? A. I say, did not have that in view in the product of the company; I intended to be so understood. Q. You undoubtedly stated otherwise in answer to the ques- tion; Mr. Stenographer, will you turn back to that part of the witnesses’ testimony: (The stenographer read the following questions and answers previously given). " Q. It was your purpose, was it not, in the production of coal, or the transportation of coal, to keep within the limits, reason- ably within the limits — fixed at that presidential conference? A. That had no bearing upon it. Q. Did you not consider that at all? A. Well, it was a fact not absent in my mind; it was con- stantly within my knowledge. Q. Within your knowldege and in your mind, and do you mean to say that that did not guide at all in the policy that the company pursued? A. Most assuredly. Q. You do? A. I do.” Q. You said in other words, it was in your mind? A. In my mind, as I may use the term, as a historic fact, but that such a schedule of percentages had been prepared, presented, and not adopted. Q. Your road increased the price of coal, did it not, immediately after that presidents’ conference? A. I think so. Q. Twenty-five cents a ton? A. I think so. Q. And in May another 25 cents a ton? A. Well I would not like to speak with accuracy in regard to that — I don’t think that there was such an increase as that in the results of the business. 1046 [Senate, Q. Well, whether you actually increased it to the consumer, the fact was that the schedule price announced, contained an in- crease of that amount, did it not? A. Well, so far as circular prices are concerned, we issue no circulars; adopt none. Q. What? A. We issue no circular price. Q. What is your method? A. Our method is that a man ap- plies to purchase coal; it is a matter of bargain and sale on the moment. Q. Don't you fix a price that rules until countermanded? A. Not in any general sense; an individual buyer may come to me, and I will give him a price that will be good until withdrawn. Q. Did you not quote prices in the month of February follow- ing that presidents’ conference, of twenty-five cents per ton higher on the grades of grate, stove, chestnut and egg than the preceding months? A. It may be; I can’t say. Q. Don't you remember? A. I remember this fact, that the aggregate quantity of coal that we floated at Hoboken, our ship- ping point, for the month of February, realized less per ton than it did in the month of January; we tried to get more money for coal in February than we did in January, and I presume that 25 cents was the extent of that offered. Q. That the prices quoted were 25 cents higher, whether real- ized or not — I am speaking now of quoted prices — w r ere 25 cents higher than during January? A. I presume they were. Q. And in May w r as another addition of 25 cents per ton for the grades mentioned made? A. It was not made, that was, it was not realized. Q. It was quoted? A. May have been, yes, sir. Q. Is not that your recollection? A. Well, in that respect, my No. 40.] 1047 recollection -would have to be based upon information and be- lief; I was out of the country at the time. Q. Do you remember a similar advance of 25 cents for those grades in July? A. Well, I can't say as to that, whether there was another advance at that time or not. Q. And in September another advance of twenty-five cents? A. September there was an attempt made to advance prices; it was a failure. Q. Is it not a fact that during that year the price of the four grades of coal mentioned in my former question was advanced, or attempted to be advanced, by circular or advice, one dollar per ton? A. I don’t understand what the Chairman means by “advice”; I would say that in respect of the coal of our own company that as I have stated we issue no formal circular of prices, and in respect to advice that I take it only from the superior officers of the company. Q. You send out advices to your sales agents, do you not? A. We have no sales agents in this part of the country, outside of our own office and Exchange place. Q. You send out advices to your customers? A. Yes, on ap- plication; sometimes prior to application. Q. Now, was the result of the operations of the year 1896 that you sent out advices to your customers in this part of the country, and agents in other parts of the country, stat- ing an advance in the aggregate of the prices of the four grades of coal mentioned in my former question, of one dollar? A. Well, I can’t say as to that, sir; whenever it appears to me that we can safely advance the price of coal we do it, and when we find that we are obliged to reduce it, we reduce it, and advices, acts in either direction would be disseminated. 1048 [Senate, Q. Mr. Sloan stated that you mined between 8,000,000 and 9,000,- 000 of tons of coal during the year 1S96. An advance of one dol- lar per ton would be, as I figure it, between $8,000,000 and $9,000,- 000, if realized. Do you mean to be understood as stating that you do not know with reference to so substantial an amount as to whether or not in your department that had been done? A. At the risk of being reprimanded by the Chairman for differing from the president, I would wish to correct his statement very mate- rially; the quantity of coal mined by the company was less than half the amount stated; the company mines about 70 per cent, of the tonnage which it markets; the remainder is purchased from so-called individual operators; the company's mining from its own property is, as I said, less than half the quantity stated; the aggregate quantity of coal sold by the company was about 5,000,- 000 tons, between 5,000,000 and five million and a half of the whole country’s at large; but in respect to the arithmetical calculation of the Chairman I have no reason to impugn one dollar a ton on 8,000,000 tons would be .$8,000,000; but the fact is, that taking what is more accurately in my mind the basis of the calculation, what is called the tidewater market, we actually realized on all the coal floated in New Jersey not over 25 cents a ton more than during the year 1895. Q. In the aggregate? A. In the aggregate. Q. So that the fact is that according to that, that while its advances were made they were not realized? A. They were not realized, and they were the advances that were made, were tried to be made, were not realized; I don’t think there has been a month of the year when they have been. Q. Can you explain how it is that those advances were not realized — whac was the reason for the failure to realize their full No. 40.] 1049 value? A. Well, unregulated competition arising from different degrees of interest on the part of the sellers of coal partly, mainly in fact. Q. What do you mean, Mr. Holden, by “ unregulated compe- tition?” A. Competition not regulated by rules of business prudence and good sense. Q. Those rules would be made by the competitors themselves? A. The fact — ■ Q. But opearting together? A. Operating coincidentally, not together, in the sense of interchangeable authority. Q. Was the failure of this attempted advance in price due to a violation — a not observance, more properly speaking — of those percentages that you say were not adopted finally at the presi- dent's meeting in February? A. I can only venture an opinion on that subject. Q. I am asking that? A. My opinion is that they were not; that is to say, that the failure to realize the desired prices was not the result of non-observance of any schedule whatever. Q. Was not the result? A. Was not the result, no, sir. Q. It was the result of free competition? A. Yes, together with other elements, as for example, the reduced purchasing of the consuming community was an element of the case which inten- sified the competition on the part of the seller; and the substi- tution of other fuels in different parts of the country because of that reduced purchasing power, still further intensified the com- petition among the sellers. By Mr. Bedell: Q. Where your company takes the output of individual pockets, what kind of an arrangement do you have with them for paying 1050 [Senate, for the coal which you take? A. Different arrangements; differ- ent arrangements. Q. Well, will you specify one arrangement? A. We have from the time the company was organized until the present, we have had contracts with individual producers of coal; under one sys- tem we paid for the coal laid in cars at the breaker a price based upon the average cost of labor at certain collieries of our own known as the “ mine” labor; that is to say, we pay a miner so much a car for mining coal and loading it in that car in the mine, that car having a certain standard cubical contents; then the sum total of that divided by the number of tons of market coal loaded into the car is the price at the breaker which forms the basis of price upon which we pay the miner; another system of purchase we have is based upon the price which we receive for the coal at tidewater; and another — Q. What percentage, then, do you pay the owner of the mine? A. We pay the — in that case there are different arrangements, and in — some of this coal we buy without any — we do not have any fixed understanding — Q. Well, where you do have an agreement with the mine owner to pay a certain percentage of the price that the coal brings at tidewater, about what percentage is that? A. That percentage in our case is modified by certain arbitrary conditions; for ex- ample we have contracts for the purchase of the entire product of collieries based upon a percentage of what we receive our- selves for certain sizes of coal, the average, adding thereto cer tain arbitrary margins per ton for different sizes of coal, the basis of ours on that being 50 per cent.; then I think in one such contract I have in mind there is a stipulation — perhaps it may only be implied, but it is a fact followed, however, that if in case No. 40.] •1051 that we are shown within, between the first and fifteenth of the following month, that the price we are, have paid for the months of coal producing, is less or more than other operators receive from other purchasers, large companies for example, that a read- justment will be made on the subsequent months. Q. These readjustments almost always take place, do they? A. Every month; that is, they are very slight, however. Q. Then the total apportionment that the mine owner receives from the selling price of the coal is from fifty to sixty per cent., is it not? A. It is substantially 60 per cent.; that is to say — Q. That would be a fair estimate to base most of the trans- action on, would it not, about 60 per cent.? A. I think so; that is to say, it is a well-known fact that in the trade, perhaps at the time, that on the Lehigh Valley road, the Lehigh Valley Coal Company produces about 60 per cent, of the entire tonnage pass- ing over the Lehigh Valley railroad; the contracts with pur- chasers of that coal provide that the seller and producer shall receive 60 per cent, of the price realized by the Lehigh Valley Coal Company on board vessels at tidewater for each separate size of coal above the size known in the market; the refuse sizes, pea and buckwheat being arranged on a smaller percentage, so that that comes practically to be the standard of purchase. Q. And so the railroad company, that is the transporter, re- ceives 40 per cent, as its compensation for the carrying of the coal from the mine to tidewater? A. That I don’t know any- thing about. ^ Q. Well, where does this 40 per cent, go? A. I don’t know anything about it; I know) on our road, in fixing the rates of trans- portation we don’t take that into account. Q. But here is 40 per cent, left; some one must receive it; now 1052 [Senate, wliat I am trying to arrive at is who does receive it? A. That is not within my knowledge. Q. You have no knowledge on the subject? A. I have no knowl- edge on the subject., Q. Isn’t it a fair inference that the railroad company receives it? A. That is an inference that anybody can draw. Q. Well, is it not a fair inference? A. I should prefer to testify to facts than inferences. Q. Well, now, Mr. Holden, you are engaged in the business; you represent the railroad company, do you pot? A. I do. Q. And you have no knowledge whatever as to the disposition of the 40 per cent.? A. The gentlemen’s previous interroga- tory, if he will pardon me, were addressed to conditions which I had spoken of as existing on the Lehigh Valley Railroad. O. Does it exist upon your road? A. I said it did not; that we do not on our road; in fixing the rate of transportation is fixed according to tin? tariff, and the tariff is published and is the rate for transportation. Q. Have you no contracts with individual mine owners by which your road pays to them 60 per cent, of the price that is realized upon the coal at tidewater? A. Not in terms, but in effect. Q. In effect? A. In effect we readjust those prices when we — when they are found to be below what — the rates of freight re- ceived from others. Q. Now, do you find that in effect the mine owner receives 60 per cent.; now with reference to your own individual road, won't you please explain what becomes of the other 40 per cent.? A. In our own individual road the practice is that the 40 per cent, is not taken into account as fixing the rate of transporta- tion, that is. on that coal ; it is merged with the mass of the coal No. 40.] 1053 of the company's own production and an arbitrary rate of trans- portation charged upon the whole. Q. Who receives the 40 per cent.; where does it go to? A. Well, the gross receipts of all of the business goes into the com- pany’s treasury. Q. Yes, and they pay out 60 per cent, of it to the mine owners? A. Not entirely. Q. Well, I mean practically? A. I beg to say in that respect, that the difference between the coal produced by the company, the coal mined by the company, any the coal purchased by the company, the difference in cost is very material; they are all merged together, no distinction made. Q. I am speaking now where the company makes a purchase from individual mine owners, and if there is any profit, element of profit, between the cost that the company, that you have to pay to the individual mine owner and the amount that you receive for the coal at tidewater, your company gets the benefit of it? A. That coal is — immediately that coal is purchased — Q. Well, is that the fact? A. It is not a fact — immediately that coal is purchased it loses its identity, and does not neces- sarily — the tidewater, its tidewater price is a mere arbitrary basis, and the coal may go to Jericho or Jerusalem; it does not follow that it goes to tidewater. Q. But the tidewater price gives the price which you pay the individual miner? A. In that respect, yes. Q. Well, where does the difference go — into the treasury — A. The whole proceeds — Q. Into the treasury of your company? A. The whole pro- ceeds of the coal, whether tidewater or elsewhere, goes into the company’s treasury. 1054 [Senate, Q. Well, then, the only payment that the company has to make out of the total 100 per cent, is the approximately 60 per cent, that it pays to the individual mine owner, isn’t that true? A. It would be true if this particular business retained its identity, which it does not. Q. Well, we will assume it does not, but the fact remains that the transaction could be traced out? A. It could not. Q. Could not? A. No, sir. , Q. But the fact still remains that the company receives 100 per cent., which is the selling price, and it has to pay over to the mine owner a certain percentage for the coal; now, the balance remains in the treasury of the company even if you do not disconnect it from the other transaction, is that not true? A. It remains there as an undivided element. Q. Now, are there any other payments that the company makes outside of the payment to the individual mine owner? A. Well, with every desire to give the gentleman all the information that the committee call for, I respectfully suggest that he rather transcends the limits of the inquiry. Q. In what direction, sir? A. In making an inquiry into the company’s affairs with regards to details of its business which are not within the purview of this inquiry. Q. Well, it is not the desire of this committee to in any way transcend its authority, or to ask questions that the committee does not have the right to ask, and it seems to me that that is a question that is pertinent to the issue here, and I would repeat the question, and I would ask an answer. (Question read.) A. Do you mean to limit that question to that particular coal? Q. I do; I mean in reference to the coal that is received from the individual mine owner? A. The companvpays out only whatit No. 40.] 1055 pays for the coal, and it pays for its carriage, the cost of carriage, that is to say, the cost of wages, employes, etc. Q. All that would go into the regular channel of the expenses of the operation of the company? A. Precisely the same as the coal does. Q. What I mean to ask is whether there are any other per- centages that are p(aid out, that would reduce the profit that goes to the carrying company below the 40 per cent., is is evident which remains in their hands after settling with the individual mine owner? A. If I understand the gist of the gentleman’s question I should say no. Q. That is what I wish to arrive at exactly. A. I would like to correct the gentleman in regard to that statement in respect to 60 per cent.; the assumption of the inquiry implies that the amount of coal purchased of any given individual operator is in the aggregate transported to a given point, and that the price received for it forms the basis for this, for its purchase, which is not true; moreover the constant reference to 60 per cent, being paid for that class of coal is also fallacious inasmuch as that 60 per cent, does not apply to more than 70 to 75 per cent, of the tonnage purchased; in other words the sizes of coal taking a lower percentage at the colliery forms, perhaps, on the average 25 per cent, of the total. Q. Well, I only wanted to bring out the fact as to individual transactions; that is to say, where you had a transaction with an individual mine owner, where you paid to him, 60 per cent., we wanted to trace what became of the other 40 per cent. A. Briefly stated, I would say that when we buy coal of an indi- vidual owner we buy it as cheaply as we can and get as much out of it as we can. 1056 [Senate, By Mr. Mazet: Q. Do you know how tlie the price of ruining coal is regulated, the wages paid to the miners by the company, — have you any knowledge on that subject? . A. Not in detail. Q. Do you know whether there is an organization of the miners, and whether they fix the price, or does the company determine what it pays per ton for mining coal? A. Well, the prices of labor at the mines have not been disturbed for some years but just the method whereby it has been adjusted, if it has been, I am really not informed. Q. Do you know this fact, — do you know whether or not the miners, when the price of coal is raised, get any additional price per ton for the mining of coal? A. Not immediately. Q. Do not? A. Nor have their wages been reduced when the price of coal has been lowered. Q. The price of coal does not affect the question of the amount paid to the miner. A. In some of the mining regions they have what is known as the basis system existing, where they have some sort of a scheme whereby the price of coal is supposed to have an effect upon the wages; it is not in vogue in our region. Q. There is no arrangement, then, between the miners and the company to regulate the cost of mining? A. None whatever, except such arrangements as have existed between any employer and employe. Q. I mean, there is no scale of prices determined by the selling price of coal? A. No, sir; not in our business, and I do not know of any prevailing in our region. Recess until 2 o'clock. No. 40.] 1057 THURSDAY AFTERNOON, FEBRUARY 25, 1897, ROOM 20, CITY HALL, NEW YORK. Krenning, Francis H., being duly sworn, testified as follows: Examined by Mr. Lexow: Q. Where do you reside? A. St. Louis. Q. Are you in business in the city of St. Louis? A. Yes, sir. Q. And have been for how long? A. About 10 years. Q. What is the nature of the business you transact? A. Whole- sale grocer. j Q. And during the time mentioned you have been such whole- sale grocer? A. Yes, sir. Q. Jobber? A. Yes, sir. Q. In sugar, coffee and the like? A. Yes, sir. Q. Have you in the course of your business as jobber had trans- actions with the American Sugar Refining Company? A. Yes, sir. Q. State to the committee when those transactions commenced. A. Practically as long as we have been in business, 10 years ago. Q. Directly with the American Sugar Refining Company? A. Yes, sir. Q. Did you accept what was known as the factors’ plan or sys- tem of doing business? A. No, sir. Q. You refused so to do? A. Yes, sir. Q. State whether or not this paper that I hand you is the sys- tem in use in that part of the United States covered by your operations? A. Yes, sir. (Marked Exhibit No. 1, Feb. 25th, p. m.) Q. That is the system of rules and regulations? A. Yes, sir. Q. I call your attention particularly to the 10th clause; it is 67 1058 [Senate, headed “ Instructions to Salesmen; ” I read: “ We are permitted to sell factors of the American Sugar Refining Company at re- finers’ prices and terms; but we are obliged to see that purchas- . ing factors maintain full list price.” A. Yes, sir. Q. That is one of the conditions governing the business in your section of the country? A. Yes, sir. Q. And without the observance of which factors’ agreement sugar is not consigned to you or anybody else? A. No, sir. Q. Now, was it suggested to you to accept this system? A. Yes, sir. Q. What did you do? A. Refuse to accept it. Q. Then what did the American Sugar Refining Company do? A. Shortly after the factors’ system went into operation, about November 5th, they notified their brokers that we should pay nine points more for sugar than factors; they made a deliberate price on all their sugar and the factor is to pay the carload rate on the sugar, we to pay the regular rate, which made a difference of nine points; we would also lose 3-16 rebate which the factor gets, making a total difference of 36 points or about $1.30 per barrel, practically prohibiting us from buying sugar, as this was more than the retailer paid for sugar and more than the factor made; the American Sugar Refining Company also always car- ries a “ spot-stock ” of sugar in St. Louis; on this sugar we made them an offer, and a few days later — Mr. Lexow, interrupting: W T hen was this? A. About Novem- ber 1st. Q. Of last year? A. Eighteen hundred and ninety-five. Q. Of 1895? A. Yes, sir; their price on “ spot-sugar ” was 4.65, less a rebate of 3-16 and 1 per cent., or 4.43 net; they telegraphed their broker — - No. 40.] 1059 Mr. Lexow, interrupting: Look at that document and state what it is? A. It is a telegram from the American Sugar Refin- iug Company to their broker. Q. To the broker representing them where? A. St. Louis. Q. Received by that broker? A. Yes, sir. Q. And how did it come into your possession? A. He pre- sented me a telegram and I made a copy. Q. Of the original telegram? A. Yes, sir. Q. Please read that telegram. A. It is dated November 22, 1895. “ Have no consigned sugar to offer Krenning. Can sell 4 3-4 direct shipment. “ THE AMERICAN SUGAR REFINING COMPANY.” Q. You swear that is a true copy of the telegram that wan handed to you by the representative of the American Sugar Re- fining Company at St. Louis? A. Yes, sir. (Exhibit 2, February 25, 1897, p. m.) Q. As having been received by them? A. Yes, sir. Q. What then occurred? A. Their price at that time was 4.65, less a rebate of 3-16 and 1 per cent., or 4.43 net; they then sent us the telegram which I just read offering to sell sugar at 4.75 direct shipment; add to this 20 cents rate of freight the sugar would have cost us 4.95, or 52 cents per hundred over the factors’ price; they also stated that all “ spot-sugars ” must be sold to factors only; about November 20th, we made another offer on sugar, and in place of accepting or declining it, they wired. Mr. Lexow: Look at this document and state whether that is a copy of the telegram that you received. A. Yes, sir. Q. Where did you see that telegram? A. In St. Louis. Q. In whose possession? A. In the possession of the broker of the American Sugar Refining Company. 1060 [Senate, Q. And you made a copy of that telegram? A. Personally; yes, sir. Q. And swear that the telegram contained what is stated in this copy? A. Yes, sir. Q. Please read the telegram. “ All sugars are for other deliveries and all orders for Kren- ning & Sons must be sent to Searles direct. “ Dated November 21, 1895. “ THE AMERICAN SUGAR REFINING COMPANY.” Q. What occurred then, Mr. Krenning? A. The broker was then instructed not to consign us any more sugar as they would not fill any orders until we signed a factors’ agreement. Q. From whom did you learn that? A. Their broker told me, Mr. Hutchinson. Q. Mr. Hutchinson? A. Yes, sir. Q. Did he act for them? A. Yes, sir. Q. What occurred thereafter? A. They tried in every possible way through the Association of Wholesale Grocers to hinder us from getting sugar; they even placed spies around our store to find out where we got our sugar and if possible to cut off the supply. Q. Did you make any effort to obtain supplies of sugar from any ostensibly competing concern? A. Yes, sir. Q. From what concern? A. The Mollenhauer and the Na- tional. ' Q. Dm you receive any communication from them? A. Yes, sir. Q. Will you look at this paper and state what it is? A. Yes, sir; it is a telegram respecting an offer we made to Howell, who represents the National and Mollenhauer Companies. No. 40.] IO6I1 Q. Please read it. “ Market unchanged. Howell declines to sell Krenning, any terms. “ TURNER BROS.” They are agents for B. H. Howell & Co. in this city. Q. Did the Mollenhauer and National concern refuse to sell you continuously from that time on? A. Yes; they have never sold since. Q. And always refuse to sell after you got into difficulties with the American Sugar Refining Company? A. Yes, sir. Q. Was there any reason, Mr. Krenning, why they should have tefused to sell you sugar? A. None whatever, as we were al- w ays on friendly terms. Q. How is your standing as to credit in the community? A. * A. No. 1 ” Q. Illustrate. A. We discount all our bills. Q. You mean by that that you pay vour bills before they be- come due? A. No, sir; we discount seven-day sugar bills. Q. That is to say, you pay cash in seven days? A. Yes; on all goods. Q. Was any objection ever made on account of your credit by the American Sugar Refining Company or the Mollenhauer or the National concern? A. No, sir. Q. Was there anything in the situation that caused the Mollen- hauer concern or the National to refuse to sell you on any terms, except that you had refused to sign a factors’ agreement for the American Sugar Refining Company? A. None whatever. Q. Now, describe how the factors’ agreement results to the benefit of the refiner or to the benefit of the American Sugar Refining Company? A. They practically prohibit the jobber from buying foreign granulated. 1062 [Senate, Q. When you say practically prohibit, just explain what you mean by that. A. Some of the jobbers in St. Louis shortly after the factors’ agreement was formed bought foreign sugars, and the American Sugar Refining Company was notified, and a few days later the president of the Wholesale Grocers’ Association read a letter informing the jobbers that in case they continued to buy foreign sugars they would lose their factorship and also^ forfeit their rebate. Q. So that they had the choice between giving up the sale of foreign sugar entirely or losing their factorship agreement with the American Sugar Refining Company? A. Yes, sir. Q. And when you speak of the American Sugar Refining Com- pany do you include also the companies known as the Mollen- hauer and the National Company? A. Yes, sir. Q. So that the agreement as to one, when a factors’ agreement is made, applies to all? A. Yes, sir. Q. And results in excluding foreign sugars from the American market? A. Yes, sir. Q. Is that true even if foreign refined sugars are offered at prices largely below those which form the product of the Ameri- can Sugar Refining Company’s product? A. Yes, sir; it makes no difference. Q. Can you illustrate by any instance in your experience? A. Well, the factor plan of the American Sugar Refining Company makes only one price on granulated sugar; that is the Eastern price; and as a general thing it is impossible to sell “ German Granulated ” at the same price, as 99 per cent, of the sugar is not as good as that of the American, and it will, therefore, have to be sold for less or not at all; and as they have only one price,, alone would prohibit the sale of the “ German Granulated.” No. 40.] 106a Q. Have you known of cases when the imported sugar ruled, so far as offering prices w r as concerned, as low as one-half a cent per pound less than the price of the American Sugar Refining Company’s? A. Yes, sir. Q. Yet it was still entirely excluded from the American mar- ket under the operation of this agreement? A. Yes, sir; quite often. Q. Do you mean by that that it is a general situation? A. Yes, sir. ! Q. After you had positively declined to execute any factors’ agreement did you have trouble in securing sugars? A. Yes, sir. Q. What is the difficulty in the way of securing sugar? A. We had to resort mostly to foreign sugars, because the principal refiners of the United States would not sell us at any price. Q. Is your territory, St. Louis, included within the territory of the Southern Wholesale Grocers’ Association? A. No, sir; I think not; the grocers of St. Louis worked under an association of the State of Missouri. Q. Are jobbers operating under factors’ agreement permitted to sell sugar to you? A. No, sir. Q. Because you have no agreement? A. Yes, sir. Q. Not having an agreement? A. No, sir. Q. Is there a difference in the price between sugar sold in the St. Louis market, or in that vicinity, and the price of the Eastern sugar? A. Do you mean sugar made in Louisiana by the Ameri- can Sugar Refining Company? Q. Yes, sir. A. Yes, sir. Q. That is to say, the product manufactured by the American Sugar Refining Company in Louisana has a different price from the product manufactured in the Eastern district by the same company? A. Yes, sir. 1061 [Senate, Q. What is the difference? A. The difference varies; during the grinding season of the Louisiana crop — probably the months of November, December and January — the price is very often a quarter of a cent lower than the same sugar made in the East. Q. How does that come about? A. The American Sugar Re- fining Company tries to market that crop just as quickly as pos- sible and makes a lower price, practically shutting out the Eastern granulated sugar from St. Louis and similar markets. Q. That is to say, during the grinding season, in the territory in which the Southern crop of this country is produced, the price is cheaper? A. Yes, sir. Q. At the time when the crop comes into the market? A. Yes, sir. Q. And after the crop has come into the market and has been bought up, what, then, is the effect or result? A. The price is generally advanced very promptly, making only a slight difference between the Eastern and the Southern price. Q. Do you know of any attempt having been made by the American Sugar Refining Company to exclude the Louisiana planters’ sugar from sale by factors? A. Yes, sir; they did; they excluded planters’ sugars just the same as imported sugars; that is the granulated. Q. The sugar that competes with their sugar as granulated sugar? A. Yes, sir. Q. In what way? A. By simply only having one price on sugar; and as the “ Plantation Granulated ” is much inferior, it cannot be sold at the same price. Q. Are factors permitted to deal in the granulated sugars of the Louisiana planters? A. In 1896 they were brought together, all together; but in 1897 they were allowed to handle them under certain restrictions. No. 40.] 1065 Q. A year ago? A. This year. Q. The last two years? A. During the grinding season. Q. What is the grinding season? A. During the grinding months. Q. That is from the middle of November? A. The months of November, December and January. Q. In 1896 the planters’ sugars were excluded? A. Yes, sir. Q. That is to say, the factors were not permitted to sell plant- ers’ sugars? A. Except at the same price as the best granulated, which it was impossible to do. Q. And this year, what is the system? A. They are allowed to sell them at six points less than the standard granulated. Q. Could they sell them on that basis? A. Only to a small extent. Q. Has the price of Louisiana product been increased within the last year? A. Do you mean the price? I don’t know. Q. The price of sugar, of the Louisiana product? A. No, sir; the price is lower than it was last year; all sugars are lower. Q. Was the price increased year before? A. Yes, sir. Q. How many points? A. I don't remember. Q. Was the price increased nineteen points? A. There was an advance of nineteen points on Louisiana sugar about two weeks ago without any corresponding increase in the “ raws.” Q. Without any corresponding advance on the raw material? A. No, sir. By Hr. McCarren : Q. Why did you refuse to become a factor? A. I did not think it was a right way of doing business; it stifled competition. Q. In what way would it stifle competition? A. Well, the 1066 [Senate, jobbers were compelled to make tbe same price on sugars; and it practically puts the control in a gigantic monopoly, a trust, a combination; after they do that they can do as they wish and they generally do. Q. How long have you been in business? A. Ten years. Q. You testified that the factors were not permitted to buy foreign sugars and sell them at a lower price than the sugars of the American Sugar Refining Company? A. Yes, sir. Q. And also that the factors had to choose between selling American Sugar Refining Company’s product and the foreign product? A. Yes, sir. Q. Do you know of an instance where the factor chose to sell the foreign product instead of the product of the American Sugar Refining Company? A. No, sir. Q. No instance? A. No, sir. Q. You so state? A. Yes, sir. ; By Mr. Lexow: Q. You mean that the American seller would rather handle the American product than the foreign product? A. Yes; it is easier for him to handle the American product. By Mr. McCarren: Q. You also stated that the foreign sugar was sold at a lower price than the American sugar because of the inferiority of the foreign product. A. No; not altogether that; it is somewhat in- /+ ferior; some brands. Q. I am speaking of granulated. A. Yes; granulated is some- what inferior. Q. The foreign product is inferior. A. To the German. No. 40.] 1067 Q. You say foreign. A. There is a “ Dutch granulated ” which is as good as the American. Q. Do you know of any instance where an offer was made to sell the Dutch granulated at a lower price than the American product? A. Yes, sir. < Q. Is the Dutch granulated as good as the American granm lated? A. Yes, sir. Q. Is the Dutch the standard? A. It is the best foreign sugar made. I By Mr. Lexow: Q. Is it the standard for judging of sugars? A. I don’t exactly understand you. Q. Do you judge of the purity of sugar according to the Dutch standard? (No answer.) By Mr. McCarren : Q. That is the crude sugar? A. Crude sugar; yes, sir. Q. Can you explain to the committee why it is that the foreign sugar refiner is enabled to sell a product equally as good as the American sugar at a lower price? A. Because he is satisfied with a smaller margin than the American Sugar Refining Com- pany. Q. Does the question of labor that enters into the product have anything at all to do with it? A. I have made inquiry and I find that the European laborer is paid just as well as the ordinary laborer in America; I am speaking about ordinary labor, not presidents and secretaries. Q. Where did you get your information? A. I was in New Orleans, and also made some inquiries around here last year. 1068 [Senate, Q. From whom did you get that information? A. The people connected with the sugar business. Q. They told you that foreign labor in sugar refineries was paid as high a rate of wages as labor in the American Sugar Refining Company’s factories? A. The common labor. Q. Do you know the wages of foreign labor in the foreign sugar refineries? A. They get in the neighborhood of a dollar a day. Q. Do you know what wages unskilled workmen receive from the American Sugar Refining Company? A. I was told in New Orleans that it was 13 cents an hour, or a dollar and four cents a day. Q. Do you know what it is in the east? A. No,, sir. By Mr. Lexow: Q. Do you know whether it is 12J cents per hour? A. No, sir; I couldn’t tell. By Mr. McCarren: Q. Do you sell sugar now? A. Yes, sir. Q. Where did you get it? A. Mostly foreign sugars; also a few sugars from a certain small refinery in the South. Q. A certain small refinery in the South? A. Yes, sir. Q. What brand do you buy from that? A. Generally called “ plantation granulated.” Q. How does that compare in grade with the product of the American Sugar Refining Company? A. Always compares very favorably, as a general thing, but the goods are not as good; this brand compares favorably with any brand made in Louisi- ana by that company. Q. It is inferior? A. As a general thing plantation granulated: is inferior. No. 40.] 1069 By Mr. Lexow: Q. But in this particular case it is about the same? A. Yes, sir. By Mr. McCarren. Q. What do you pay for your sugars now? A. Do you mean foreign sugar? Q. Any sugar that you buy. A. That is different. Q. Answer it differently. A. For instance, for a sugar equal in quality to that manufactured by the American Sugar Refining Company we pay nearly the same price as the price of the Ameri- can product, probably a trifle less. Q. What do you mean by saying nearly as much and probably a trifle less? A. It is not a material difference. Q. It is practically the same? A. Yes, sir. Q. Then, so far as competition between the American Sugar Refining Company and the company or companies from which you buy your sugar now is concerned, so far as you are finan- cially concerned, there is no benefit to you at all; so far as the price that you now pay to outside refiners is concerned and that which you would pay to the American Sugar Refining Company, you practically derive no benefit? A. By buying outside? Q. Yes, sir. A. No, sir. Q. No benefit? A. No, sir. Q. Then do you consider that you are at a disadvantage in not being able to deal with the American Sugar Refining Company? A. Yes, sir. Q. In what way? A. The other sugars can only be had during a few months in the year. Q. How long did you say that you were in the grocery business? A. Ten years. 1070 [Senatb. Q. I understood you to say that it was in October or November, 1895, that the American Sugar Refining Company refused to consign you sugar? A. Yes, sir. Q. That was about 18 months ago? A. Yes, sir; just about. Q. Prior to that time you had been eight years and a half in the grocery business? A. Yes, sir. Q. Can you give an approximate idea of the amount that you sold yearly during those eight years and a half? A. I don’t know exactly how many barrels we sold each year. Q. Where did you get your sugar from prior to that? A» From the American, the Mollenhauer, the National, the Spreck- els and the Franklin. Q. In how many barrel lots? A. Oh, 1,000 or 2,000 barrels, 100 barrels, 200 barrels — just as the market warranted. Q. Did you sell several thousand barrels every year? A. Yes, sir. Q. Can you give an approximate — 9,000 to 10,000? A. We have sold as high as 50,000 barrels. Q. In one of the years prior to October, 1895? A. Yes, sir; prior and since. Q. Have you sold just as large an amount since October, 1895, as you did prior to that time? A. Yes, sir. Q. Your trade has not fallen off in any respect? A. Our trade has increased somewhat; we make greater efforts than ever be- fore. Q. And that increase is due to greater efforts? A. Yes, sir. Q. Have you extended your stores or increased them? A. Yes, sir. Q. And the price to you as a wholesale buyer has been compara- tively the same? A. How do you mean? No. 40.] 1071', Q. I mean that you hare paid about the same for your sugars that you did prior to October, 1895; you just stated a moment ago that the difference between the price of the American Sugar Refining Company and the price of the sugar of the companies from which you now buy was comparatively the same; that there was no difference? A. Just at present during the grinding sea- son of the Southern sugars. Q. What would be the difference in price during the non-grind- ing season? A. We just take our luck; we get American sugars unless we can get the imported. Q. In taking your luck how do you fare in getting American sugar? A. Well, during the winter months we fare fairly well. Q. That is the grinding season; I am trying to fix in your mind that I want to get some notion of your trade outside of that? A. We then handle mostly imported sugars. Q. I understood you to say that it was because you couldn’t get American sugar? A. Yes, sir. Q. Do you get any American sugar outside of the grinding season at all outside this certain refiner that you spoke of? A. No, sir. Q. None outside of that? A. Very little; very little* Q. Have you at any time since October, 1895, ever found it difficult to supply your trade? A. At times; yes, sir. Q. You have received orders that you could not fill? A. No, sir; we have always been able to fill them. Q. And you have been making a greater profit in some in- stances than you would have made if you had been dealing with the American Sugar Refining Company? A. Well, I don’t think the profit has been any larger. Q. Been about the same? A. About the same, probably; I 1072 [Senate, cannot state exactly the difference; it depends greatly on how the market goes, because in buying European sugars at four months we take the risk of the market during that time. Q. Profits have been the same? A. Last year at the com- mencement of the season there was a large profit in the imported, but at the end of the season there was no profit because the mar- ket went down, and at the commencement the market went up. Q. Then, so far as you are personally concerned, you have no grievance against the American Sugar Refining Company be- cause of a financial loss, have you? A. No; so far as we are concerned personally I don’t think that we have suffered much. Q. What was your purpose in coming here to testify? A. Just to show the way they are trying to prohibit foreign sugars being handled in this country, and by that operation to get a tremendous profit on their sugar; in order to show how they try to prevent the sale of foreign sugar. Q. In order to show how they try to prevent the sale of foreign sugar and how unsuccessful they are in the attempt? A. They are not unsuccessful. Q. Are you not an illustration of the unsuccess of the attempt of the American Sugar Refining Company to interfere with the trade of a grocer outside of those who accept the factors’ agree- ment? A. They have 1,800 factors and we are about the only ones outside, so they have been pretty successful. Q. You are a living illustration of the unsuccessful attempt of the American Sugar Refining Company to injure your trade? A. Yes, sir. Q. And there are 1,800 factors operating this system whereby the American Sugar Refining Company, the Mollenhauer and the National distribute their product as against you, the sole exam- No. 40.] 1073 pie of one who distributes without a factors’ agreement? A. I think that is about the number, 1,000 or 1,800. By Mr. Lexow: Q. You said something in regard to preserving your independ- ence as a business man; does that operate in refusing to under- take the terms and conditions of the factors’ agreement? A. Yes, sir. .. Q. You refused, with other words, to be made one of the ma- chinery whereby the sugar interests of the whole United States are controlled by a company or a syndicate of companies? A. Yes, sir. Q. Have you had similar experiences because of a refusal to undertake factors’ agreements in the coffee business and in the tobacco business? A. Yes, sir. Q. Have you invariably refused to accept factors’ agreements, both as to the sale of coffee and the sale of tobacco? A. We have refused to comply with the conditions which they ask and they have taken the agreement away from us. By Mr. McCarren: Q. Was that a coffee concern?- Mr. Lexow. — And tobacco? A. Yes, sir. Q. So that you stand substantially on a par with reference to this class or system of factors’ agreement. A. Yes, sir. By Mr. McCarren: Q. Isn’t vour chief object in coming here and giving your testimony for the purpose of showing that you want to maintain 68 . 1074 [Senate, jour independence as an individual wholesale dealer? A. We want to maintain that at all hazards. Q. You have been successful in doing it? A. Yes, sir; so far. By Mr. Lexow: Q. Is there anything in the situation developed under this system that indicates that you will not be able to maintain your independence permanently? A. If there should be any change in the tariff, such as putting a larger duty on foreign sugars, we would be obliged to get out of business or sign a factors’ agree- ment. \ \ By Mr. McCarren: Q. Explain that, please. A. If a higher duty is put on refined sugars it will practically shut out the European article. By Mr. Lexow: Q. And then you would have to submit to the terms of the factors’ agreement and abandon your independence as a business man or go out of the wholesale grocery business? A. Yes, sir. By Mr. McCarren : Q. Have you known any such condition as you have outlined to exist in this country at any time? A. What do you mean? Q. Such a condition as that pictured by you — a condition that would compel you to go out of business in the event of the happening of certain things with reference to the tariff; has any such condition ever existed up to the present time? A. Not that I know of. Q. Then, why do you anticipate that? A. I don’t anticipate it; I simply said if. No. 40.] 107 ^ Mr. McCarren (interrupting). — If the clouds should fall they wouldn’t be above us. By Mr. Lexow: Q. With other words, if I understand you, unless it were for the fact that you are able to buy imported sugars you would not be able to undertake the business of sugar broker? A. Yes, sir. Q. And anything that would exclude you now from the pur- chase of foreign sugar would make it necessary for you to either bind yourself under a factors’ agreement or quit the business? A. Yes, sir. By Mr. McCarren : Q. Are you generally in favor of selling foreign-made articles in preference to American-made articles? A. No, sir. Q. Would you sacrifice, to the extent of paying a fractionally higher price for the American article, in order to sell that in preference to a foreign article? A. Certainly. Q. Then why don’t you do it in this instance? A. Can’t get it. Q. Can’t you get it if you comply with certain conditions and requirements? A. If we sign a factors’ agreement we can. Q. If it were made apparent to you that it would be necessary to maintain and employ American labor that you should sign the factors’ agreement, would you sign it? A. If necessary. Q. You would sign it if it were made apparent to you that it would promote the employment of American labor? A. If you put it to me that way; if it would help the American laborer. Q. Don’t you think it would tend to employ foreign labor if all the refined sugar made in other countries had the preference in this port in competition with the American article? A. Sugar can be made just as cheap in America as elsewhere. 1076 [Senate, Q. Have you ever been in the sugar refining business? A. No, sir. Q. How do you know about that? A. I have heard it said by refiners. Q. Do you believe everything that you hear? A. No, sir. By Mr. Lexow: Q. You consider the signing of a factors’ agreement substan- tially the surrender of your independence as a business man? A. Yes, sir. < Q. And you would sacrifice rather than surrender that inde- pendence? A. Yes, sir. By Mr. McCarren: Q. He testified the other way. A. Not at all. Q. On certain conditions you said that you would be willing to sign a factors’ agreement. A. If it were necessary to keep American labor employed. Q. In that case you would be willing? A. If that could be proven. By Mr. Lexow: Q. But you refuse to sign for the purpose of maintaining con- trol in the hands of a few of the whole sugar product of the United States? A. Yes, sir. ^ . ■ " EXHIBIT No. 1, FEBRUARY 25, 189'T, P. M. INSTRUCTIONS TO SALESMExt. Dear Sir. — On and after June 1st each and every sale of refined sugar must be made strictly according to the equality plan and in accordance with the refiners’ rules. No. 40.] 107T 1st. All orders for sugar, whether taken by a salesman or sent direct by customers by mail, telephone, telegraph or other- wise, shall and must be billed at the price ruling at the hour and minute of time the order is so taken or sent. You will notice that under this rule you cannot name a price for sugar, but that it will be at the market, whatever it may be, at the minute the order is taken by you or sent direct to the house by the customer. You will state on each order the exact hour and minute at which it is taken and it will be priced accord- ingly. There is no objection to your putting the equality price on the order, but in all cases it is subject to revision should a change in the market have taken place between the time of your last advice and the time the order itself was taken. We shall continue to advise you of changes in the market as heretofore, giving you the exact hour and minute of time at which any change may take place; but in taking orders you must in all cases remember the fact that the market may have changed without your having received an advice, and that in all cases your price is subject to revision. The refiners’ rules are absolute in this respect and cannot be varied under any circumstances whatever. In case your customers send orders direct to the house, either by mail, telegraph, telephone or otherwise, they should in all cases date their order with the hour and minute of time. Please explain this to them thoroughly; it is a matter in which we have not the slightest discretion, and must be exactly followed out to the letter. 2d. The cartage allowance of five cents per barrel may be allowed in jobbing towns, as heretofore. For a list of such towns in your territory, if you are not thoroughly informed, write us at once. 1078 [Senate, 3d. Under no circumstances are you allowed to take an order for sugars to be billed at a future date. All orders taken to be filled at a future date must be billed on the day order is received, and at the price ruling the hour and minute the order is taken. 4th. Sugars must not be sold on longer time than thirty days, nor with a greater discount than 1 per cent, for cash within ten days sharp from date of invoice. 5th. All sugars must be billed by us on invoices separate from other goods, on which invoices the terms will be plainly printed or stamped, and the hour at which the sale was effected will be noted on the invoice. 6th. On sales of 100-barrel lots or more, which are sold, charged and billed to one purchaser, at one time, a trade discount of 1 per cent, will be allowed. 7th. No shipment will be made without a bona fide order. Any shipment made or order taken on account of any anticipated change in price will be considered by the refiners and by us as a direct violation of the factor plan of selling sugars. 8th. We are not permitted to consign sugars to any point what- ever, and cannot do so under any circumstances. This practice is expressly prohibited. 9th. All refined sugars must be graded and sold on the basis of refiners’ New York card price for corresponding grade, except- ing in that portion of the country tributary to and rates upon New Orleans, where the card price of the American Sugar Refin- ing Company, of New Orleans, shall govern. 10th. We are permitted to sell factors of the American Sugar Refining Company at refiners’ prices and terms, but we are obliged to see that purchasing factors maintain full list prices. 11th. In making bids for the supply of either national, State, No. 40.] 1079 county or city institutions, we are permitted to name a net cash price, which is the equality price, less 1 per cent, in less than 100- barrel lots, or less 1 per cent., and 1 per cent, in lots of 100 barrels or more. Bear in mind that this is a net cash price, and that the public institutions in remitting for the invoice shall not be allowed to deduct a cash discount. If the institution referred to above is located at a jobbing point outside the limits of the city where the jobber making the bid is located, a further allowance of five cents per barrel drayage may be allowed ; but this allow- ance shall only be deducted from the face of the invoice, and not from the price at which the bid is made. 12th. In selling sugars you will, as heretofore, add the rate of freight, as per equality rate book, to the New York price card, whether the purchaser is located on or off the railroad. If he is situated off the railroad he must be sold at the rate given for the nearest regular shipping point, and from his invoice we will deduct the lowest local rate of freight allowed. 13th. Where sugars are shipped in carloads, shipment being made direct from the refiners, our invoices will, in every case, be dated the date the sugar is shipped from the refinery. It is essential that every point in these rules that we have given you above be carefully noted and studied by you and thoroughly understood, as ignorance of the rules will not excuse errors. These rules have been made by the refiners, and as far as our house is concerned they must be implicitly obeyed. Respectfully yours, 1080 [ Senate,. ROOM 20, CITY HALL, NEW YORK, FEBRUARY 25, 1897 r 2.30 P. M. Wisner, Clinton W., being duly sworn, testified as follows: Examined by Mr. Bedell: Q. Where do you reside? A. In Warwick, N. Y. Q. Are you connected with the Stevens Coal Company of West Pittson, Pa.? A. Yes, sir; I am its vice-president and treasurer.. Q. Your company is known as an individual operator? A. Yes, sir. , j ; j ■ Q. By that term, what do you mean? A. The coal roads, many of them, are also operators; and those companies not connected with the road are known as individual operators. Q. That is the character of you company? A. Yes, sir. Q. What proportion of the entire output of anthracite coal does your company produce? A. I could not say what propor- tion our company produces; the proportion that individual oper- ators produce is about 20 per cent, of the entire output of anthra- cite. Q. And the mines that are controlled by the railroad compa- nies produce the other 80 per cent.? A. Yes, sir. Q. Do these individual operators own the lands or do they operate under a lease? A. I think, as a rule, they are leased and operate under a “ Royalty.” Q. About how many men do you employ in your coal company? A. I think about 400. Q. What is the basis of payment to these men? A. Do you mean the miners? Q. Yes, sir. A. They are paid in different ways; some by “ yardage ” and others by “ cars.” No. 40.] 1081 Q. By cars? A. So much a car. Q. Containing a specific amount of coal? A. So many cubia feet; yes, sir. Q. To whom do you sell your coal? A. We sell our coal to the Lehigh Valley Coal Company. Q. Under contract? A. Yes, sir. Q. Generally, what are the terms of that contract? A. Our contract is similar to that of most individual operators; that is, the operator gets 60 per cent, of what the coal brings at tide- water and the railroads, or the company, that we sell it to, gets the balance, 40 per cent. Q. That 40 per cent, represents to the railroad company its profit upon the hauling of the coal? A. Yes, sir; their freight. Q. Their freight? A. Yes, sir. Q. Aside from that they have to pay the salaries of their sales agents? A. Yes, sir. Q. And they pay a percentage to the sales agents on each ton of coal sold? A. So I understand. Q. How do they arrive at what you call tidewater price? A. I don’t know that I can answer that; but I have a general un- derstanding of how they arrive at it. Q. Give your best knowledge on the subject? A. The larger coal-carrying roads compare their price, as I understand, in Feb- ruary, for instance, for the month of January; the prices then are averaged and the settlement to the operator is made on the basis of the average price received by the coal-carrying roads at tide- water. Q. Is a provision for the averaging of prices contained in your agreement? A. I don’t remember just how that is; we take the Lehigh Valley prices, as that is our contract. 1082 [Senate, Q. The prices that they sell the entire output not only of the individual operator but of their mines? A. Yes, sir. Q. By tidewater you don’t mean necessarily sold at tidewater? A. No, sir. Q. But the price at which coal is sold at tidewater fixes the price as to all the coal that you sell to the company? A. Yes, sir. Q. Supposing the railroad company should ship that coal west as far as the city of Buffalo, how would that effect you as an individual operator? A. It has an ill effect. Q. In what way? A. In this way; the “ rail ” prices at Buffalo, or what are known as “ line ” prices, are considerably better than tidewater prices; and while our coal may be sold at Buffalo for 20 cents a ton more than it would bring at New York, we have to take a tidewater basis of settlement. Q. Then the carrying company makes an additional profit? A. In that way, yes. By Mr. Mazet: Q. Does it cost any more to send it to Buffalo than to tide- water? A. I cannot answer that. By Mr. Bedell: Q. Now, Mr. Wisner, in 1895 the price of coal was very low? A. Yes, sir. Q. Are you acquainted with any of the facts that led up to the increase in price? A. Since 1895? Q. Yes, sir. A. I know that the market was in a very demoral- ized state in 1895 and operators were all losing heavily; the prices have been a little better and were getting better up te December; since then they have fallen some. No. 40.] 1083 Q. Do you know what the difference in the price of coal is now as compared with 1895? A. I think that our advances during the year 1896 were about 75 cents per ton. Q. That advance was fixed by whom; by you as an operator or by the railroad companies? A. We have to take the railroad companies’ prices. Q. Supposing you should refuse as an individual operator to sell your output to the railroad, in what position would you be placed? A. We have a right to do it and can market our own coal. I Q. Can you do that at an advantage, considering the freight fates? A. Not always; there is some difference of opinion in regard to that; the object in selling to a coal road is that the payments are sure and prompt and guaranteed; while in market- ing your own coal in small lots over a scattered territory you have to take your own chances of collection; so there is some advantage in having your coal go to a coal-carrying road. Q. Now, Mr. Wisner, about what does it cost to produce a ton of coal at the mine ready to be delivered over to the carrying company? A. It would be impossible to answer that closely, because the cost of operating varies from month to month, and there are different factors and conditions in working mines. Q. Could you give it approximately? A. I should say that ?1 .80 is below the average, if anything, for producing anthracite coal in the cars. Q. At what does that coal sell for at tidewater at present? A„ It sells at different prices, according to size. Q. Stove coal — does it cost as much to produce one class as it does another? A. It costs more to produce some; if you take stove coal as a standard — it is the highest priced coal that come* to our market. 1084 [Senate, Q. What would that cost per ton at the mine? A. As I say, probably $1.80 per ton. Q. What does that sell for according to tidewater price? A. I think we realize for stove coal $3.87. Q. You realize; do you mean at tidewater? A. If sold at tide- water, $3.87. Q. Then you would receive $3.32 per ton for the coal and the carrying company would receive $1.55 per ton for the coal, is that correct? A. I have not figured. Q. Will you figure and see if that is correct; we are now speak- ing of one size of coal? A. It would figure that as a basis from the fact that it is charged us by other lines of coal on which they sell very close and which costs different prices to mine and pre- pare. Q. I want to follow out on the line of one particular kind of coal to see what the cost of production is; that is the most ex- pensive kind that you have? A. No, sir; it brings the largest price in the market; it has to be very pure. Q. Assuming that it cost $1.80, you receive $3.87 for it at tide- water; you would then have $2.32, would you not — $1.55? A. That is on the basis of 60 per cent, and 40 per cent., and $3.87 for that kind. Q. You as the miner of the coal make a profit of about 50 cents per ton? A. No, sir; we do not. Q. On this particular kind? A. On that figuring. Q. The carrying company receives $1.55 per ton for whatever portion of the work it attends to in carrying and distributing to the consumer. A. Yes, sir; you have not figured on the royalty. Q. But you have the 50 cents per ton yourself with which to No. 40.] 1085 pay the royalties. A. Not on the present, because there is 40 cents per ton to be added. Q. That leaves only a profit of about 12 cents per ton? A. Yes, sir. Q. The railroad company pays no portion of that royalty? A. No, sir. Q. They receive the full 40 per cent, of tidewater price? A. Yes, sir. ) Q. And as the price of coal is increased or decreased by the railroad company they receive the largest per cent, of the benefit or meet with the largest loss? A. Its tariff is governed entirely by the price that it gets for coal at tidewater. Q. Was there a large tonnage of coal in 1895? A. Yes, sir; I think the largest tonnage ever produced in anthracite was in the year 1895. Q. Can you explain that? A. I think I can give the causes that led to that ; in 1S95, the Philadelphia and Reading, the larg- est producer of anthracite was in the hands of a receiver; they were making strenuous efforts to show that they could produce 22 per cent, of the entire output of coal; it naturally caused the other roads to look after their laurels, I presume, and it resulted in a very large output, the market was largely overstocked and the price consequently very low; so that a great deal of money was lost. By Mr. Lexow: Q. That was the year 46,000.000 tons were marketed? A. Forty-six million seven hundred thousand tons; that year a great deal of money was lost by operators and consequently the rail- roads in proportion owing to the low price of coal. 1086 [Senate, By Mr. Bedell: Q. Does your company, as an individual operator, in any way fix the price of coal to the consumer or the price at tidewater? A. No, sir. Q. That is solely within the control of the carrying companies? A. Yes, sir; the company that we sell it to. Q. You have to abide by the price as arbitrarily fixed by them? A. After once having signed a contract with them; yes, sir. - By Mr. Lexow: Q. You are not under obligation with them, are you? A. No, sir. Q. What other choice is left? A. You market your own coal. Q. Directly to the consumer, do you mean? A. Yes, I pre- sume. Q. Is that a practically feasible plan? A. In some instances; in our case it would not be, from the fact that part of our coal is leased from the Lehigh Valley Coal Company who operate and are practically the same as the Lehigh Valley Railroad; and under our contract the Lehigh Valley Railroad Company is to have a proportion of our coal; so it would necessitate our selling coal only along the lines reached by the Lehigh Valley Com- pany. Q. With other words, you could not reach tidewater? A. Yes, sir; we could reach tidewater by the Lehigh Valley; it goes there. By Mr. Bedell: Q. But only by the medium of that railroad? A. Yes; over any other line that has our contract, or rather our lease. No. 40.] 1087; By Mr. Mazet: r, Q. Under the terms of your lease you are obliged to ship your coal over the lines of that company? A. Yes; they retain the transportation. Q. You know approximately what the cost is per ton to ship coal from your mines to tidewater? A. No, sir; I do not, because I am not in the railroad business. Q. Have you shipped coal independently? A. No, sir. Q. Have you no idea of what it costs other independent miners to ship coal per ton; you said a little while ago you might with advantage, or perhaps, with advantage, ship direct; on what figures do you base that estimate? A. That probably would be in case we were not bound as we are to transport our coal over some one given line. Q. Are there independent miners who are not so bound by agreement? A. Yes, sir. Q. Are you in a position to state what it costs, approximately, for them to ship coal to tidewater? A. No, sir; I am not. Q. Have you any idea as to the price? A. No, sir; I have not. Q. What is the rate of wages paid to miners now as compared to that paid in 1895? A. I don’t think that there is any difference at all that I know of. 1 Q. So that any increase in the selling price of coal inures en- tirely to the benefit of the railroad companies and not to the miners; is that true? A. I don’t know how that is; I don’t know that any change has been made since 1895. Q. No material change either one way or the other? A. No, sir. Q. Is the price paid to the miners for mining coal dependent at all on the selling price of the coal? A. Necessarily. 1088 [Senate, Q. It is? A. If coal has to go very low yon would necessarily have to cut your miners in time. Q. If I understand you correctly the wages were not affected by the increase from 1895 to the present time? A. No; because during the year 1895 wages were fully maintained; however, I can not speak intelligently on that as it does not come under our department. Q. But your general knowledge on the subject is that prices are substantially the same? A. Yes, sir; I think. Dixon, Joseph B., being duly sworn, testified as follows: Examined by Mr. Lexow: Q. What is your full name? A. Joseph B. Dixon. Q. Your residence? A. Morristown, N. J. Q. Your business? A. Wholesale coal business. Q. Do you represent any coal carrying company in an official capacity? A. The New York, Ontario and Western Railroad Company. Q. And have represented that road how long? A. Since 1890. Q. As its general sales agent? . A. Yes, sir. Q. You represent that road in such capacity from the 1st of February on, don't you? A. Yes, sir. Q. Have you any knowledge of a conference of the presidents of the various coal carrying companies centering in New York city or vicinity that took place about the 1st of February, 1896? A. I think that such a conference was held. Q. Do you know the aliquot proportions of the business appor tinned to each company in the conference? A. About. Q. Your own road, the New York, Ontario and Western, was credited with a percentage of 3.10? A. Three and ten hun- dredths. No. 40.] 1089 Q. That is to say, of the business to be done during the current year, your conference agreement expiring within one year from its date, your company was supposed to contribute a business amounting to 3.10 per cent, of the whole? A. Apportioned upon that basis; yes, sir. Q. Simply as transportation or as coal from the mine? A. Transportation company solely. Q. Who represented your company at that presidents’ confer- ence? A. I think the president was there part of the time and the general manager part of the time. Q. Did you receive official information from him of the per- centage allowed by that conference to your road? A. I was told simply that the percentage allowed was 3.10. Q. By him? A. Yes, sir. Q. In any official way? A. I cannot tell you whether it is official or conversation. Q. He communicated in his official capacity as president of the company? A. Yes, sir. Q. Did you live up to that percentage? A. Not wholly; no, sir. Q. Did you live up to it within reasonable limits? A. The per- centage was about the usual percentage which we always pro- duced. Q. About the same as was produced by you a year or so pre- vious to the conference? A. Just about. Q. It was fixed on that basis? A. Yes, sir. Q. It came to you officially, didn’t it, that the other roads had their percentage fixed on the same general equality plan? A. With one exception, the Schuylkill company. Q. Which is a producing road? A. I think all producing — I think they all protested, Mr. Chairman. 69 1090 [Senate, Q. Others protested? A. Yes, sir. Q. That led the rest of the roads; the Schuylkill company abso- lutely refused? A. Yes, sir. Q. And adhered to that refusal? A. Yes, sir. Q. You figure, don’t you, the output of your road, or did figure the output of your road monthly during the year 1896; was it upon that figure that the output that was apportioned to your road during the year 1896 was based? A. No, sir. Q. Upon whose figures? A. Upon the figures of the general manager of the road. Q. What is his name? A. Mr. Childs. Q. He made the figuring and handed it over to you? A. He figured about what our percentage would entitle us to. Q. And communicated that fact to you? A. Yes, sir. Q. When you received the figures from him it was upon the principle that the figures given represented the percentage to which you were entitled under the terms of that conference of February, 1896? A. Yes, sir. Q. To sell? A. Yes, sir. Q. Had you had anything beyond selling the coal product ap- portioned? A. Yes, sir; we handled some coal over the Penn- sylvania railroad. Q. Then you don’t sell entirely the New York, Ontario and Western? A. No, sir. Q. Did you have a conference with the sales agents employed by other companies from month to month during the year 1896? A. No, sir. Q. When I speak of conferences, I mean informal as well as formal. A. No, sir; I don’t think that I discussed the question twice in 1896, the question of price. No. 40.] 1091 Q. With anybody? A. With any of the companies. Q. But you fixed the price? A. We are a very small factor and we try to get as large a price as possible. Q. Do you send out circulars to your customers stating the price for a certain period of time? A. No, sir; we do not send any circulars; we don’t issue anything. Q. Do you issue anything in the way of notice to your custom- ers? A. No, sir. Q. Stating the price of coal? A. No, sir. Q. Do you hang anything in your office, any statement of the price? A. No-, sir. Q. What is your system upon which the price is carried to your customers? A. The system is generally through salesmen who cover a different territory; the coal is sold very largely through salesmen who cover different territories and who' come in contact with customers, unless a customer should come to the office. Q. What system do you follow in notifying your salesmen of the price at which your coal shall be marketed? A. Merely on the supply and demand. Q. But how do you convey to your customers that figure which the law of supply and demand fixes for a particular time? A. We never make changes, except for extended delivery; it is from day to day; 1 think it is generally understood that way. Q. Is it not true that in the month of February, 1896, you added twenty-five cents per ton to the four grades known as grate, stove, egg and chestnut? A. We may have tried to, but we did not realize the advance. Q. Did you, as a matter of fact, whether you succeeded in real- izing the figure — did you add twenty-five cents per ton to those grades of coal during that year? A. If we could obtain it; yes. 1092 [Senate,. Q. Didn't you, as a matter of fact? A. Xo, sir. Q. Didn’t you add twenty-five cents, whether you obtained it or not; didn’t you add that figure to the price of coal during that month? A. There was no fixed price during 1895. Q. I am asking about 1896? A. During 1S95 everybody in- sisted upon getting the best results he could; in 1896 it was recog- nized that the operators and the companies had they continued for twelve months they would have to go into bankruptcy, which led to this Presidents’ Agreement or Presidents’ Conference, and from that time the price gradually advanced; in some ways, as you are able to understand, we can get more money in certain sections than we can in others on account of the locality and the means of getting there, although the distance may be greater; in the Boston market, for instance, with a low water transporta- tion, we can realize, as a general thing, a better price than in Buffalo, where there is long railroad transportation of 300 miles, as compared with 150 miles from the mines to tidewater. Q. The experience of 1895 was that free competition among the companies resulted in reducing the price of coal below the figure which, in your judgment, was a fair price for coal or as remun- eration to the companies? A. It was below absolute cost. Q. That is true, is it not? A. Yes, sir; to the best of my knowledge. Q. And the effort was then made, in February, 1896, to secure some harmonious action between the coal-carrying roads whereby the price of coal could be raised again to such prices as would, in the judgment of the companies represented, be a fair value for the coal they handle? A. Yes, sir. Q. And acting upon that, in the months of February, May, July and September, of that year, they did advance, whether they" No. 40.] 10931 realized it or not, the price of coal 25 cents per ton for the four standard sizes of coal that I have mentioned? A. They tried to; yes, sir. Q. You did so far as you could? A. Yes, sir. By Mr. McCarren: Q. You say they asked it? A. The actual result showed that the advance was not an actual advance over 1895 of over 25 or 35 cents per ton to be divided between the transportation com- pany and the miner. By Mr. Lexow: Q. You figure, therefore, that owing to the cuts among those companies, notwithstanding the conference, instead of an ad- vance of one dollar all along the line with reference to these four grades of coal, there was an advance which only netted 35 cents per ton for these four standard grades? A. I don't think it was as much as that; from 25 to 35 cents. By Mr. Bedell: Q. If the price of coal in New York in 1896 was raised one dollar per ton the average small dealer raised his price one dol- lar per ton to the consumer, did he not? A. No, sir; during the year 1S95 there was a very low price; in fact, the retailer did not reduce his price in proportion to the reduction in the whole- sale price. Q. If there was an advance the retailer advanced the price of coal to the consumer in the same proportion that the wholesaler advanced it? A. No, sir; a 25 cent raise by the wholesaler is not wery apt to cause an increase by the retailer. 1094 [Senate, Q. What about an advance of a dollar? A. It was a paper advance of a dollar. Q. A quoted price over your coal of a dollar; didn't that affect the price almost to the extent of a dollar to the consumer? A. I don’t think so. Q. How do you arrive at that conclusion? A. You take any large dealer in this town and he can buy coal to-day on the aver- age of fully 50 or 60 less than what you call circular price; I don't remember that there has been any advance in the retailer’s price; I think about the advance 25 — Mr. Bedell (interrupting) : Was there an advance in 1896? A. I think there was; perhaps one or two. Q. Was not an advance made according to the advances made by the coal companies? A. They undoubtedly have to get more money than in 1895. Q. Then the consumer was charged practically a dollar more per ton? A. No, sir. Q. Would you say that he was charged only 35 cents? A. Thirty-five or 50 cents. Q. Limited to that? A. Yes, sir; I say the actual cost to the consumer was not over 35 or 50 cents more than in 1S95. Q. Is there any bulletin here in New York city upon which the price of the retailer is fixed or quoted? A. No, sir. Q. Each man has his individual bulletin? A. Yes, sir. By Mr. Lexow: Q. Will you explain to the committee how it was after you had made the first advance of 25 cents per ton, then made the second advance of 25 cents, making 50 cents altogether, and you found from experience that you were only getting an advantage No. 40.] 1095 of 35 cents per ton, you still went further and advanced the price 25 cents in June, same in July, and then again in September? A. We did not make those advances; I don’t know as I can ex- plain why those -were made. Q. What I mean is this; why were these advances continued after it had been demonstrated as the result of the second ad- vance that you were not even getting the price charged on the second? A. I think with the idea that the advance in the price would strengthen the active price. Q. Did it have that effect? A. No, sir. Q. The fact was that you only got 10 cents more per ton after making the first advance; if you got 35 cents per ton more you only got 10 cents of the second advance added to the 25 cent* of the first advance, so that the whole of the second two advances were thrown away and 15 cents of the second advance? A. The average advance in the price as made through all the year I think was 25 or 35 cents; I cannot say in what proportion they were, whether 10, 15 or 20, in February, March, July or Septem- ber; the average price received for anthracite coal in the year 1896 does not show that we have obtained more than 25 or 35 cents per ton over 1895. Q. Do you know Mr. Williams, the selling agent of the New York, Lake Erie and Western? A. Yes, sir. Q. Did you meet him during the year 1896 with reference to the sale of coal? A. No, sir. Q. Or price of coal? A. No, sir. Q. Were you not in any of the so-called informal conference* that he has testified to with reference to the price of coal? A. I was not; no, sir. ’ Q. He has stated that as the result of conferences between sales 1098 [Senate, agents acting under the authority of this president’s conference of February, four advances were made during the year for the months of February, May, July and September of 25 cents each; and that the advances were made by general consent of these coal-carrying companies; do you dispute the accuracy of that statement? A. I do not, sir; I know nothing whatever about it; I was not present at the meetings; if Mr. Williams says so, it is so; I was not present and cannot testify as to the correctness of it. Q. Do you know whether or not the gentleman who handed you the figures constituting the prospective output of your road, or the transportation of your road, was in the conferences upon this question? A. He was not; to the best of my knowledge. Q. In making your sales, however, did you keep in line with the general understanding that was had at the February con- ference of the presidents of the roads? A. I don’t think that the presidents took action on the price at all. Q. No, not price, but amount of output? A. The amount of output was fairly Avell conformed to during the year 1896, al- though it was accidental. By Mr. Mazet : Q. Is there any association of coal dealers in the city? A. I think there is. Q. What are the general terms of the association, the objects? A. That I cannot tell; I don't think that association to-day amounts to anything; in fact, it is a dead letter; there has been no uniformity of action between them for over a year. Q. Was the object of the association to regulate the price of coal at retail, the selling price? A. I think partly so when it was formed. No. 40.] 1097 Q. And has it been successful in maintaining it? A. No, sir; it was a failure. Q. So that to-day, so far as you know, each retailer sells for the best price he can get? A. Best profit he can get above cost; the best he can obtain. Q. There is no concerted action as to the price at which coal shall be sold by the dealer to the consumer? A. No, sir. By Mr. Lexow: Q. The Retailers’ Association that you have mentioned as being a dead letter was in life to the extent that it voted formally to increase to the consumer the price of coal in exact proportion as it had been increased by the coal-carrying companies during the year 1896? A. If that is so, I have never been advised of it. Q. You don’t know about it? A. No, sir. By Mr. Mazet: Q. In selling coal you have no transactions except with the in- dividual to whom you sell; I mean no transaction with any asso- ciation or dealers? A. No, sir; we sell to whoever comes into the office — whoever we consider a desirable person. Heilner, P. B., being duly sworn, testified as follows: Examined by Mr. Lexow: Q. Where do you reside? A. Elizabeth, N. J. Q. What is your occupation? A. I am sales agent for the Lehigh & Wilkesbarre Coal Company. Q. How long have you been such sales agent? A. Four years. Q. Do you know of the conference of presidents of the coal transportation companies centering in the city of New York and 1098 [Senate, vicinity, held about the 1st day of February, 1896? A. Not to my knowledge. Q. Had no notice come to you in an official way of the holding of that conference? A. No, sir. Q. Or of the percentage to which you would be entitled in pursuance of the conclusions of that conference? A. Well, no, eir. Q. You seem a little doubtful about that? (Question repeated.) A. What do you mean? Q. I mean about February, 1896? A. I was told by my su- perior officers what our percentage would be. Q. You were told about the first of February, 1896, what the percentage would be by your superior officers? A. Yes, sir. Q. Do you remember the percentage now? A. The percentage of the company would be 6 per cent. Q. Are you part of the Lehigh system? A. No, sir; I am the sales agent for the Lehigh & Wilkesbarre. Q. Is that a transportation company as well as a producing company? A. Only a producing company. Mr. Lexow: This will conclude the testimony taken by this committee unless it shall appear to the committee hereafter that further testimony may be necessary. As a matter of form I will again call the names of Mr. John- son, of the United States Rubber Company, and Mr. Elverson, of the Liberty, of Setaubet. The committee is surprised that, not- withstanding the promises made that those gentlemen would be produced, they have not been produced, and the inference to be drawn from their absence must necessarily not be very favor- able to the company. The stenographer will note upon the minutes that by unani- No. 40.] 1099 mous vote the committee extends its thanks to the common coun- cil for the use of its rooms, and to the city court for the use of this room and the other court room which we used the other day. The committee also desires to express its thanks to the press for the cooperation which they have manifested in this investi- gation. The following form, contained in printed case of National Wall Paper Company against Robert F. Hobbs, 1895, papers on ap- peal from order of Justice Lawrence, continuing injunction was marked “ EXHIBIT 6, FEBRUARY 18, 1897. E. S.” “ A.” Referred to in the foregoing complaint and forming part there- of. — Robert S. Hobbs & Co., Robert S. Hobbs, Robert F. Hobbs. National Wall Paper Company and Charles R. Flint and Oliver S. Carter, trustees. AGREEMENT OF SALE AND CONVEYANCE. (Guggenheimer & L'ntermever. attorneys, 46 Wall street, N. Y.) An agreement made this seventeenth day of June, in the year one thousand eight hundred and ninety-two, between Robert S. Hobbs and Robert F. Hobbs, individually and together compos- ing the firm of Robert S. Hobbs & Co., of the city of Brooklyn, and State of New York ('hereinafter called the vendors), parties of the first part. National Wall Paper company, a corporation or- ganized under the Laws of the State of New York (hereinafter called the company), party of the second part, and Charles R. Flint and Oliver S. Carter, as trustees (hereinafter called the trustees), of the city of New York, parties of the third part. noa [Senate, Whereas, The vendors are engaged in the conduct of the busi- ness of manufacturing, buying, selling and dealing in wall paper, decorations, furnishings and merchandise of a like character, having their factory and salesrooms at Nos. 131-135 Columbia street, extending through to 14-18 Tiffany place; their color fac- tory at No. 20 Tiffany place, and storage and shipping rooms at 24-26 Tiffany place, in the city of Brooklyn, and State of New York, and other places of business elsewhere; and Whereas, The business so conducted by the vendors has, by reason of the superior and distinctive character of their goods and through their business skill, acquired a reputation through- out the United States which gives the good-will of such business a substantial value; and Whereas, The vendors are the owners of a lease of their color factory and storage and shipping rooms, which lease will expire May 1, 1893, and also own all the machinery, chattels and fixtures and every other manner of property and assets now in or upon the premises at which their business is conducted or elsewhere l used in or connected with their business, including labels, trade- marks and other devices, and stock of merchandise manufac- tured, unmanufactured and in process of manufacture, and of the book accounts and bills receivable as the same appear on their books; and Whereas, The company is desirous of purchasing from the vendors the leases owned by them upon the aforementioned color factory and storage and shipping rooms, together with the fixed plant and machinery contained therein, or in and upon the fac- tory property, and the fixed plant and machinery elsewhere located and owned by the vendors in connection with their busi- No. 40.] 1101 ness, together with all the chattels, merchandise, book accounts and all other property and assets used in or connected with the said business, and the gaod-will of the business, with the ex- clusive right to the use of the firm name of “ Eobert S. Hobbs & Co.” or any part thereof, or any similar name in connection with the business of manufacturing, selling and dealing in wall paper, decorations or business of a like character, or of any other name by which the said firm or its product has been known; and Whereas, The vendors are willing to sell their said property, business and effects as a going concern, and to assure unto tne company the good will thereof upon the terms hereinafter pre- scribed; and Whereas, The vendor is the owner of the land upon which the factory building above described is located, and is also the owner of said factory building, and the company is desirous of acquiring the right to purchase said real property with the buildings and improvements thereon, if the same can be had upon terms satis- factory to the company; and Whereas, The company has an authorized share capital of $14,000,000. divided in 140.000 shares of common stock of the par value of $100 per share, and has authority under its charter to issue a form of security in the nature of certificates of indebted- ness, known as debeuture stock, to the extent of $6,000,000; Now, therefore, in consideration of the foregoing recitals and for other good and valuable consideration, it is hereby covenanted and agreed by and between the parties hereto, and each of them, and by and between each of the vendors with the other, and with the company and their respective successors, legal representa- tives and assigns, as follows: I. The vendors hereby sell, assign, transfer and set over unto 1102 [Senate, the company, and the latter hereby purchases all the leasehold rights, fixed plant and machinery contained in or connected with the premises Nos. 20, 24 and 2G Tiffany place, and all of the fixed plant and machinery contained in or connected with premises Nos. 131-135 Columbia street, in the city of Brooklyn, and State of New York, and all the leasehold rights, fixed plant and ma- chinery used in or connected with the business of the vendors, and all fixtures, chattels, merchandise, book accounts, patented process and apparatus, trade-marks, copyrights, signs, labels and every other manner of right, property, assets and effects owned by the vendors as a part of or used in connection with their said business of manufacturing, selling and dealing in wall paper, decorations, furnishings and goods of a like character, together with all materials on hand, whether manufactured, unmanufac- tured or in process of manufacture, and the good will of the said business, and the exclusive right to the use of the name of Robert S. Hobbs & Co., or any part thereof, or any other name or device which has heretofore been employed by the vendors or their predecessors in said business, or in connection therewith, the in- tent hereof being to include every manner of property, assets and effects, proper or necessary in the judgment of the company to assure unto it the said property and business as a going concern and to preserve the continued value of the good will thereof in the hands of the company, except the real property, which is to be dealt with as hereinafter described. II. The vendors being the owners of the real property upon which the factory building occupied by the vendors in their business is located, do hereby jointly and severally grant unto the company an option to purchase said real property. If the com- pany conclude to make such purchase, it shall so notify the No. 40.] 1103 vendor on or before the 1st day of September, 1892, and in that event the real property shall be valued in the manner hereinafter prescribed with respect to the valuation of the property and assets acquired from the vendors hereunder, except that the valuation of such property shall be taken for the purpose of a factory for the manufacture and sale of wall paper, decorations, furnishings and articles of a like character and not solely in accordance with its intrinsic value as real estate, independent of that business. If the company shall conclude not to exericse the option hereby granted with respect to any part of the above- described real property, it shall lease such property for a term not longer than ten years, with the option of renewing such i -ase for an extended term of an additional ten years, at a yearly cental for the first of said terms to be fixed by the persons and in the manner hereinafter provided with respect to the valuations of the property herewith transferred to the vendors, except that the leasehold value of such property shall also be fixed upon the basis of its use for purposes of the wall paper business, and not solely in accordance with its intrinsic value as real estate, inde- pendent of that business; and if the vendors or the company shall be dissatisfied with the rental value fixed for the purpose of leasing there shall be no obligation upon any of them to enter into such lease, but the failure of the parties to reach an agreement with respect to said real property shall in nowise affect or impair the binding force of this instrument, with respect to any of the other property or business herewith transferred. The lease, if made, shall provide for the fixing of the rental for any renewal term by arbitration and appraisal upon the basis of a return to the owners of the property of 6 per cent, per annum upon the then appraised value thereof. t 1104 [Senate, III. The leasehold interests hereby conveyed are agreed to be of no greater value than the obligations assumed by the company, with respect to the payment of the rent reserved by such leases, and such leases shall be transferred upon the company assuming the obligations thereof. The value of the fixed plant, machinery, fixtures, chattels, merchandise, book accounts and other assets hereby transferred shall be fixed by Messrs. Theodore C. Carey, William H. Mairs, John J. Lindsay, Henry Burn and George D. Mcllvaine, who are hereby designated as the appraisers for that purpose, and who shall be paid by the vendors for the services rendered by them at the rate of $10 for each and every day, be- sides their necessary traveling, hotel and other expenses certified by them as having been actually occupied and incurred in the work of appraisal ; provided, however, that if, and when the pos- session of the property shall have been transferred to the com- pany hereunder, the latter will repay to the vendors the outlay for such appraisal; and provided, further, that if the parties hereto shall eventually elect to abandon or rescind this agree- ment by mutual consent, the total charge against the vendors for such appraisal shall not exceed the sum of $250. The decision of the majority of the persons hereby selected to value the property and assets of the vendors shall be final and conclusive upon each and all of the parties, provided that the valuation so fixed shall be reduced to writing in duplicate and signed by such majority of the persons herein named as valuers, one of such duplicates being delivered to the vendors and the other to the company. The persons so selected shall have the right to make such in- dependent investigation and to take such advice as they may deem proper, and shall have access to the books of account and vouchers of the vendors to assist them in their determination. 1105 No. 10.] IV. The company hereby agrees to pay, and the vendors agree to accept, for the business, property, assets and good will here- with transferred, debenture stock and common stock of the com- pany. to be issued as soon hereafter as may be practicable, as follows: (a) There shall be issued to the vendors in payment for the property and assets acquired hereunder the obligation of the company in the nature of one or more certificates of indebtedness to be known as “ debenture stock,” in an amount equal to the ap- praised value of the property and assets hereby transferred, to be fixed in the manner hereinbefore provided. The debenture stock so to be issued shall be part of an authorized issue of $6, 000, 000 of such stock and shall be and remain an obligation of the company, repayable at the expiration of the corporate existence and entitled meantime to interest at the rate of 8 per cent, per annum, payable quarter yearly, as an expense of the business from and out of the profits of the company before any dividend can be declared or paid on the common stock or share capital. The debenture stock shall be issued pursuant to proper resolutions providing that no payment of interest shall be made on such debenture stock which will impair the capital of the company, nor unless the amount paid shall have been actually earned by the company, and that the holders of debenture stock shall not be entitled to demand or sue for the interest payable upon the obligations held by them unless such interest was actu- ally earned by the company, in which event the amount earned shall be distributed amongst and paid to the different holders of debenture stock in the proportion of their holdings, but such unpaid interest shall, notwithstanding, become and remain an obligation of the company, payable out of any future profi s to the 1106 [Senate, full extent of such unpaid interest before any dividend can be declared or paid on the stock or share capital. The holders of debenture stock shall furthermore be entitled, in the event of the dissolution or winding up of the company, to rank pari passu with other unsecured creditors of the corporation and shall be entitled to receive in full out of the assets of the company the amounts represented by the outstanding certificates of indebted- ness before any payment is made on account of the share capital of the company. (b) There shall be further issued and paid to the vendors for the good will of the business hereby transferred and in consider- ation of the execution by them of this agreement, and of further contracts assuring the continued good will of such business to the company in such form as may be approved by the counsel for the company, an amount of common stock equal at par to sixteen times the net earnings of the vendors in their business for the eleven months commencing July 1, 1891, and ending May 31, 1892, less the appraised value of the property hereinbefore agreed to be transferred to the company, but the issue of such common stock shall be subject to the conditions and restrictions hereinafter contained. For the purpose of fixing the amount of the common stock of the company to which the vendors shall be entitled (subject to the conditions and restrictions hereinafter contained) as pay- ment for the good will of the business so to be transferred and for the assurance of such good will to the company by several and separate contracts by each of the parties of the first part, Messrs. Deloitte, Dever, Griffiths & Co.. English chartered accountants. No. 69 Wall street, in the city of New York, shall investigate the books of account of the vendors on behalf of all of the parties 2> T o. 40.] 1107 hereto and shall certify to the net profits earned in said business for the period from July 1,1891, to May 31, 1892. The vendors shall permit the said accountants to have full access to their books of account and to all vouchers and other papers relating to their business and the report of or certificates of said accountants shall, except as hereinafter provided, be conclusive upon the par- ties as to the net profits of the vendors during the term embraced in said investigation. The certificate of the accountants fixing the profits of the vendors shall be delivered to Mr. Henry Burn, as chairman of the appraisers, and each certificate shall there- upon be and become the conclusive finding as to the profits for the above-stated period unless the appraisers or the vendors shall discover some error in such certificate. In any such event the appraisers shall notify the vendors and shall hear such testimony as the vendors may desire to submit with respect to a change in the certificate. After hearing all the testimony produced before them the appraiser shall have the power which is hereby dele- gated to them by the vendors, by a majority vote, to modify the certificate of the accountants as they may deem proper and the cer- tificate, as thus modified, shall be deemed and taken as the con- clusive statement of profits for the term covered by the investi- gation and as the sole basis for the issuance of common stock to the vendors in payment for good will hereby transferred. As soon after the delivery of the report of the accountants as modified by the appraisers as may be practicable, the company shall issue to and in the name of the vendors, subject to the conditions and restrictions hereinafter contained, and the vend- ors shall accept an amount of common stock, part of an author- ized issue of $14,000,000 of stock to be held and transferred as hereinafter provided, equal to sixteen times the net profits of the 1108 [Senate, vendors in tlieir said business during the period covered by such investigation less the par value of the debenture stock herein- before provided to be issued. In determining the net profits earned in the business of the vendors the accountants shall allow for and credit all interest charged on the capital actually invested in the business at the beginning of the term for which the profits are to be calculated, but only the interest on the capital so in- vested. In valuing the assets for which the debenture stock shall be issued, tangible assets only shall be considered, and all other rights and assets, such as patents, or application therefor, copy- rights and trade-marks, shall be regarded as part of the good will. The common stock so to be issued shall be full paid and unas- sessable. V. The book accounts and bills receivable shall be valued at the face value thereof, and the vendors hereby guarantee the collection of such book accounts and bills receivable herewith transferred to the company at the face value thereof, on or before the 1st day of July, 1893. If at that time any such accounts or bills receivable shall remain uncollected, the same shall be re- turned by the corporation to the vendors and shall be the prop- erty of the latter, and the vendors shall thereupon surrender and pay back to the company an amount of debenture stock equal at par to the face value of the accounts and bills receivable so un- collected, the trustees shall surrender to the company an amount of common stock, part of the shares of such stock hereby agreed to be conditionally paid for the good will of the business of the vendors, equal at par to 1 sixteen times the face value of such uncollected book accounts and bills receivable, less the amount of debenture stock returned; that is to say, the debenture stock and common stock to be returned in that event shall, together No. 40.] 1109 be equal to sixteen times the amount of such uncollected book accounts and bills receivable. The vendors hereby agree with the company that in the taking of their inventory as of May 31, 1S92,' and in the balancing of their books for the purpose of determining the profits earned in the business for the eleven months ending May 31, 1S92, the assets shall be taken upon precisely the same basis as was adopted in the taking of the inventory and closing of the books for the preceding business year, to the end that there shall be no undue enhancement of the profits of the current year caused by increases in valuation of assets. The above-named appraisers are hereby empowered by a ma- jority vote to investigate the manner in which the vendors took their inventory for the eleven months ending May 31, 1892, and to determine the valuation at which the assets should have been taken for the purpose of fairly determining the profits for the eleven months, and such determination shall be without prejudice to the decision of the appraisers as to the value of the assets for the purpose of the issuance of debenture stock. If it shall be determined by the appraisers that the profits certified by the accountants have been enhanced by the valuation of assets by the vendors on a basis different from that adopted at the close of the preceding business year, the amount of such enhanced profits shall be deducted and the amount of common stock to be issued to the vendors shall be based only on the profits determined after making such deduction and such other changes as the ap- praisers may have made in the exercise of the powers hereby vested in them. VI. For the purpose of more effectually assuring unto the com- pany the good-will of the business hereby transferred and the 1110 [Senate, continued value of its trade name, copyrights, trade marks and other assets, the vendors hereby severally covenant and agree that they will, whenever thereunto requested by the company, institute and prosecute such proceedings as may be necessary to secure unto the company the continued use of the firm name of “ Robert S. Hobbs Co.” as a part of the good-will hereby sold, and that neither they nor any of them will directly or indirectly engage in or become associated with any business of manufactur- ing, buying or selling wall paper, decorations or furnishings, or merchandise of a similar character, as principals, agents, em- ployes, or in any other relation or capacity, or as stockholders, directors, trustees, agents, officers or employes of any corpora- tion, other than the company, engaged in the business of manu- facturing, buying or selling wall paper, decorations, furnishings or merchandise of a similar character, or in any like business in any State or Territory of the United States, east, northeast, south or southeast of the State of Washingon, it being expressly agreed that the business of the vendors extends throughout the United States and that the prohibition herein contained is neces- sary to assure unto the company good-will of the business pur- chased by it, and that such prohibition is co-extensive only with the interest transferred and does not exceed in territory the limi- tations of the business of which the good-will is hereby pur- chased. VII. The said Robert S. Hobbs and' Robert F. Hobbs hereby severally agree that they or either of them will act as director of Ihe company if and so long as they or either of them may be elected to that office and shall be eligible thereunto. And that they will so long as they or either of them may be employed by the company devote their or his exclusive time and attention to So. 40.] 1111 its business, at and for a compensation to be fixed by the board of directors of the company. VIII. The property and business hereby purchased are here- with taken over and the exclusive possession thereof surren dered to the company as and from the said 1st day of June, 1892 and from and after that date the business shall be deemed to have been conducted for the benefit of and at the risk of the com- pany, the latter hereby agreeing that the interest upon the de- benture stock shall be payable from the first day of June, 1892, and that the company assumes the burdens and receives the benefit of all outstanding contracts from and after that date. IX. The vendors hereby warrant the title to all the property and assets herewith transferred, free from debts, claims, de- mands and encumbrances, except such as are expressly assumed by the company in writing, and they jointly and severally cove- nant and agree with the company, its successors and assigns, that they or any of them will at any time, upon the request of the company, its successors, nominees or assigns, make, exe- cute and deliver to it, or them such further acts, deeds, trans- fers, assignments and assurances in law as may be reasonable or which may be advised by the counsel of the company to be necessary or proper for effecting the true intent and purpose of this agreement and for the better assuring and confirming unto the company, its successors and assigns, the business, property and good-will hereby sold. X. The vendors hereby assign, release, surrender, transfer and set over unto the trustees and the survivors or them for the term of ten years from the 1st day of June, 1892 (but in no event be yond the lives of the trustees or the survivor of them), all shares of common stock of the company receivable by them hereunder in 1112 [Senate, payment for the good-will of the business herewith transferred unto the company, and of the covenants and agreements entered into by the vendors with the company, and all certificates that may hereafter be issued representing such stock, to be held, owned and used by the trustees and the survivor of them upon the following trusts and for the following purposes: (a) If the said Robert S. Hobbs and Robert F. Hobbs, or either one of them, shall at any time hereafter directly or indirectly engage in or become associated with any business of manufac- turing, buying, selling or dealing in wall paper, decorations, fur- nishings or merchandise of a like character other than that of the Company, as principals, agents, employes, or in any other relation or capacity, or as stockholders, directors, trustees, agents, officers or employes of any corporation other than the company engaged in the business of manufacturing, buying, selling or dealing in wall paper, decorations, furnishings, or in any busi- ness similar to that herewith sold by the vendors, in any State or Territory of the United States, east, northeast, south or south- east of the State of Washington, or if the said Robert S. Hobbs and Robert F. Hobbs, or either of them, shall fail, omit, neglect or refuse to act as directors of the company, if and so long as they, or either of them, may be elected to that office and shall be eligible thereto, or if they or either of them shall fail, omit, neglect or refuse to devote their or his exclusive time and atten- tion to the business of the company, if and so long as such vendor shall be employed by the company at a salary fixed by its di- rectors, or if either of the vendors shall sell, hypothecate or otherwise dispose of any of the shares of common stock, payable hereunder, or any certificate representing the same, or attempt so to do, or if either of the vendors shall violate or fail, omit, Xo. 40.] 1113 neglect or refuse to promptly perform any agreement made by him Tsitli the company, upon the purchase by the company of the property, business and good will of the vendors, then and upon the happening of any such event all the shares of the stock of the party in default shall belong to and be the absolute prop- erty of the company, and the trustees shall accordingly, and they are hereby directed by the vendors, in any such event to deliver and surrender the certificates representing such shares of com- mon stock into the treasury of the company, and the same shall thereupon be canceled. It is expressly agreed that the debenture stock, payable here- under as the purchase price of the property of the vendors and of each of them, and of which the vendors have the unrestricted right of disposal, is a full and substantial consideration for the tangible property acquired by the company, and that the pro- visions contained in this agreement are not in the nature of a penalty, and are essential to secure and assure unto the com- pany the good-will of the business for which the common stock was agreed to be issued, subject to the restrictions herein con- tained. The transfer of stock hereby made to the trustees for the benefit and security of the company is, however, not inclusive of, and is without prejudice to, the right of the company to apply for, and secure relief from, a court of equity, by injunction, to restrain either of the vendors from entering into or upon any busi- ness of a character similar to that sold by the vendors unto the company, and the title hereby reserved to the company in the shares of common stock transferred to the trustees hereunder, is in addition to the right hereby expresly retained by the com- pany to restrain the violation of any covenant made by either of the vendors with the company against engaging in any busi- 1114 [Senate, ness of a character similar to that sold by the vendors to the company. (b) If it shall hereafter appear that the obligations of the ven- dors on the 1st day of June, 1892, were in excess of the amount appearing on their books, and the company be compelled to pay or shall elect to pay such excess, or if the vendors shall for any reason fail to refund to the company the amount of debenture stock hereinbefore provided to be repaid for uncollected book accounts or bills receivable, then and in any such event upon the failure of the vendors to refund and make good to the com- pany the amount expended in payment of such obligations for the shares of debenture stock repayable with respect to such un- collected book accounts or bills receivable (as the case may be) within thirty days after the service by mail by the company on the vendors, or either of them, of a notice specifying the amount payable to the company, and upon proof by the company to the satisfaction of the trustees or the survivor of them of such pay- ment of obligations, or of the amount of debenture stock repay- able with respect to the uncollected book acounts or bills re- ceivable (as the case may be), the trustees shall sell at private sale, to any then registered owner of the common stock, at such prices and upon such terms as the trustees may deem proper, all or such part of the shares of the stock, to be transferred to the trustees under this agreement, as may, in the judgment of the trustees, or the survivor of them, be proper or necessary to satisfy the claims of the company. In the event of one or more sales by the trustees of parts of the stock for the satisfaction of the claims of the company, under this subdivision of the agree- ment, the vendors shall be liable to contribute from their respec- tive holdings toward the shares so sold, in the proportion of their holdings as defined between themselves, and the balance No. 40.] 1115 of said shares of stock shall, in such event, remain in the hands of the trustees until the termination of the trust hereunder, sub- ject to the same conditions as if no part thereof had been sold. The company shall be under no duty to defend any suit that may be instituted against it by reason of having assumed the obligation of the vendors, and it may suffer judgment to be en- tered against it by default and resort to the security of this agreement, unless fully indemnified by the vendors to its entire satisfaction against all the costs, charges and expenses of such suit, and against any judgment that may be rendered therein. The foregoing provisions, with respect to the proportionate contribution by the vendors tow T ard any sale of the shares of stock by the trustees, are without prejudice to such rights and remedies as may exist in favor of any of the vendors against any of the others by reason of such enforced contribution. (c) Upon the continued performance by the vendors of all the covenants contained in this instrument for the period ending June 1, 1902, or upon the death of the trustees prior to that time, the shares of stock herewith transferred, or such part thereof as may remain in the hands of the trustees unapplied under the trusts hereof, shall be returned and retransferred to the vendors, provided they shall execute and deliver to the company such fur- ther agreements and undertakings, with such security as may be reasonably required to assure unto the company the continued performance of the covenants entered into by the vendors with the company for the assuring unto the latter of the good will of the business herewith transferred to the satisfaction of the company. XI. The shares of stock to be transferred to the trustees here- under shall be conveyed bythe usual form of assignments of certif- 1116 [Senate, icates of stock with accompanying power of attorney in accord- ance with the regulations of the New York Stock Exchange, and the vendors do hereby grant unto the trustees power of attorney for that purpose, except that said transfers, besides being made to the trustees as “ Trustees,” shall contain the following words: “ The transfer of the shares of stock represented by the within certificate is made pursuant to the terms and conditions of a certain agreement between the holders of the common stock allotted to vendors of property to the company of the first part, ‘ National Wall Paper Company ’ of the second part, and Charles R. Flint and Oliver S. Carter, as trustees, of the third part (a copy of which agreement is on file and may be inspected at the offices of the company) and is to be held and disposed of by the trustees in accordance with the terms of that agreement.” XII. In the event of the death or insanity of either of the vendors, his interest in the shares of stock hereby transferred shall be and remain subject to all the terms and conditions of this agreement until the termination of the trust hereby created. XIII. The shares of stock herewith transferred to the trustees above specified, or any part thereof, may be wholly or partially relieved from the conditions of such trusts or any of them prior to the time above designated for the termination of such trusts on the written consent, duly acknowledged, of the registered own- ers of common stock of the company owning not less than 75 per cent, of such common stock upon the books of the company, but no such waiver or release shall be deemed valid, unless the same be in writing subscribed by the then registered owners of at least 75 per cent, of the then outstanding common stock of the com- pany; and it is expressly agreed that the vendors will not, nor will either of them, urge or claim any such waiver or release, No. 40.] 1117 unless the same be evidenced by such writing duly acknowledged. Either of the vendors may sell or dispose of his reversionary in- terest in the shares of stock hereby transferred to the trustees, provided such sale be in express terms subject to the conditions of this agreement, and be made to a person who is at the date of this instrument a registered owner of common stock of the company, but not otherwise. No such transfer shall be of any force, effect or validity unless the purchaser shall, at the time of such purchase, notify the company and the trustees of the transaction, and shall join in the execution of this agreement. XIV. The vendors shall continue, notwithstanding the trust hereof and the transfer hereby made, to receive all dividends that may be paid with respect to the shares hereby transferred, so long as the conditions hereof shall be kept and performed. The trustees shall grant, and they do hereby grant, unto the vendors such proxies as may be required to enable the vendors to vote on the shares of stock transferred to them respectively until default in the condition of this agreement, whereupon all proxies so issued and granted shall be and become revoked. XV. Either of the trustees may resign the trust hereby dele- gated to him by a previous notice of three months in writing, addressed to the company, and thereupon he shall be relieved from all further duties with respect to the trust. Either trustee hereof may be removed, and a new trustee appointed in his place, upon the consent in writing of a majority of the then.registered owners of the common stock of the company. In the event of the death, resignation or removal of any trustee, the majority of the then registered owners of the common stock of the company may designate a new trustee in the place of the person so displaced. 1118 [Senate, and thereupon such new trustee shall be vested with the same powers as though he had been named in this agreement. In the event of the failure of the stockholders to designate a new trustee within sixty days after the death, resignation or removal of trus- tee, the maining trustee shall designate such new trustee, and thereupon the person so designated shall be vested with all the trusts and powers hereby reposed in the trustees named in this instrument as though he had been one of the original trustees hereof. The word “ trustee ” shall be deemed to apply to any substituted trustee, except that the duration of the trust hereby created shall be limited to the lives of the persons named herein as parties of the third part. XYI. This agreement and all the covenants and conditions hereof shall bind the executors, administrators, legal representa- tives and assigns of the vendors and the successors and assigns of the company, but no personal liability shall in any event be claimed against the trustees or their successors, except that each trustee shall be liable for his personal fraud or misconduct with respect to the trust hereby delegated to him, but not for the fraud or misconduct of a co-trustee, and every trustee hereof shall be indemnified out of the trust estate in priority to all other claims against all loss, costs, charges, expenses, or liability which he may incur in or about the premises, or by reason of any act done, omitted, conferred, or otherwise, and every discretion expressed to be given to a trustee shall be exercisable by him free from any fetter or liability whatever. In witness whereof, the vendors and each of them have here- unto set their hands and seals and the company has caused this instrument to be executed, and its official seal to be hereunto No. 4U.] 1119 attached by, and pursuant to resolution of its board of directors, the day and year first above written. (Signed) ROBERT S. HOBBS & CO. By Robt. S. Hobbs. [l. s.] ROBERT S. HOBBS. ROBERT F. HOBBS. (Corporate Seal) NATIONAL WALL PAPER CO. By James Y. Corey, President. Attest : Jno. W. D. Dobler, Secretary. (Signed) CHARLES R. FLINT. [l. s.] OLIVER S. CARTER. City and County of New York. STATE OF NEW YORK, SS " On this 1st day of August, in the year 1892, before me person- ally appeared Robert S. Hobbs and Robert F. Hobbs, to me known and known to me to be the individuals described in and who executed the foregoing instrument as parties of the first part, and they severally acknowledged to me that they executed the 6ame. (Signed) W. H. HORSMAN, [l. s.] Notary Public, No. 304, New York County. CERTIFICATE OF ORGANIZATION OF THE UNITED STATES RUBBER COMPANY. We, the undersigned, William Barbour, of Paterson, N. J., and William L. Trenholm, J. Edward Simmons, John P. Town- send and John I. Waterbury, of the city of New York, N. Y., do hereby associate ourselves into a company under and by virtue of the provisions of an act of the Legislature of the State of 1120 [Senate, New Jersey, entitled “ An act concerning corporations,” approved April 7, 1875, and the several supplements thereto, and acta amendatory thereof, for the purposes hereinafter mentioned, and we do hereby assume to and for said company, all the rights, powers and privileges granted to and conferred upon corpora- tions by the laws of said State of New Jersey, and do hereby cer- tify and set forth, as follows: 1. The name assumed to designate such company and be used in its business and dealings, is United States Rubber Company. 2. The places in the State of New Jersey where the business of said company is to be conducted, are the city of New Bruns- wick, in the county of Middlesex, and also those other cities, towns and villages in said State in which said company may hereafter deem it expedient to conduct its business, and the city and county in which the principal part of the business of said company within said State is to be transacted and conducted, is the said city of New Brunswick, in the county of Middlesex. The part of the business of the said company to be carried on without the said State of New Jersey, is as hereinafter stated. The city, county and State in which the principal office or place of business of said company out of the State of New Jersey is to be situated is the city, county and State of New York, and the said company also proposes to have a business office in the city of Boston, Mass., and one in the city of Chicago, 111., and carry on operations in all of the States and Territories of the United States and in foreign countries. t The objects for which the said company is formed are the making, purchasing and selling rubber boots and shoes and all goods of which rubber is a component part, and the various ma- terials entering into the manufacture of any and all such goods, No. 40.] 1121 and also the acquiring and disposing of rights to make and use any and all such goods and materials, and the doing and trans- acting all acts, business' and things incident to or relating to or convenient in carrying out its business as aforesaid, which are authorized by law, including the purchasing of the stock of any company or companies owning, mining, manufacturing or pro- ducing materials or other property necessary for its business, or of any other company whose shares it may lawfully purchase and exercising wdth relation thereto all rights, powers and privi- leges of individual owmers of the shares of such stock. The portion of said company’s business which is to be carried on out of the State of New Jersey is its financial business gen- erally, and as well such portion of its manufacturing business and the business of buying and selling as it may from time to time find convenient. 3. The total amount of capital stock of said company is $50,- 000,000. The number of shares into which the same is divided is 500,000, and the par value of each share is $100. The stock of the said company is to be of two kinds, to wit: general stock and preferred stock. The amount of the preferred stock shall at no time exceed one-half of the total outstanding capital stock of the company. The holders of the preferred stock shall be enti- tled to receive semi-annually all net earnings of the company determined and declared as dividends in each fiscal year up to but not exceeding 8 per cent, per annum upon all outstanding preferred stock before any dividend shall be set apart or paid on the general stock, but such dividend upon the preferred stock shall not be cumulative, and the preferred stock shall not be entitled to participate in any other or additional earnings or 1122 [Senate, profits. In case of liquidation or dissolution of the company, the holders of preferred stock shall be entitled to receive cash to the amount of their preferred stock at par, before any payment in liquidation is made upon the general stock, and shall not there- after participate in any of the property of the company or pro- ceeds of liquidation. The amount of capital stock with which the said company is to commence business is the sum of $100,000, divided into 1,000 shares of the par value of $100, of which 500 shares are to be preferred and the remaining 500 shares general stock. Additional issues on account of the total authorized capital r stock may be made from time to time either in preferred or gen- eral stock, or both, in such sums and in such manner as the board of directors of the company may determine, and in accord- ance with law and this certificate. 4. The names and residences of the stockholders and the num- ber of shares held by each are as follows: Number of shares. P |*A m Names and Residences. General. f er red William Barbour, Paterson, N. J 100 100 William L. Trenholm, New York city, N. Y 100 100 J. Edward Simmons, New York city, N. Y 100 100 John P. Townsend, New York city, N. Y 100 100 John I. Waterbury, New York city, N. Y 100 100 Total shares 500 500 5. The period at which the said company shall commence shall be the 30th day of March, 1892, and the said company shall terminate on the 30th day of March, 1942. N o. 40.] 1123 In witness whereof, we have hereunto affixed our hands and seals, respectively, this 29th day of March, in the year 1892. (Signed) WM. BARBOUR, W. L. TRENHOLM, [l. s.] J. EDWARD SIMMONS, JOHN P. TOWNSEND, JOHN I. WATERBURY. 4 STATE OF NEW JERSEY, ss.: Be it remembered that, on the 29th day of March, 1892, before me, the subscriber, a master in chancery of the State of New Jersey, personally appeared William Barbour, William L. Tren- holm, J. Edward Simmons, John P. Townsend, and John I. Water- bury, who, I am satisfied, are the incorporators in the foregoing instrument named, and I having first made known to them the contents thereof, they did each acknowledge that they signed, sealed and delivered the same on their voluntary act and deed for the uses and purposes therein expressed. In witness whereof, I have hereunto set my hand. (Signed) RANDOLPH PARMLY, (Seal) Master in Chancery of New Jersey. Indorsed: Received in the clerk’s office, Middlesex county, March 30, A. D. 1892, at 8.40 o’clock in the forenoon and re- corded in Book “ C ” of Incorporated Societies, page 175, etc. P. CONOVER, Clerk Indorsed: Filed March 30, 1892. Henry C. Kelsey, Secretary of State. r 1124 [Senate, STATE OF NEW JERSEY, Department op State. I, Henry C. Kelsey, Secretary of State of the State of New Jersey, do hereby certify that the foregoing is a true copy of the certificate of organization of the United States Rubber Com- pany and the indorsements thereon as the same is taken from and compared with the original filed in my office on the 30th day of March, A. D. 1892, and now remaining on file therein. In testimony whereof, I have hereunto affixed my official seal at Trenton, this 30th day of March, A. D. 1892. (Seal) HENRY C. KELSEY, Secretary of State. EXHIBIT “A,” FEBRUARY 15, 1897. NEW YORK EQUALITY FREIGHT RATES. Effective^, August 17, 1896. Supersedes all previous issues. Sugar Factors’ Code of Rules for the guidance of factors in the sale of refined sugar in all the territory east of the Rocky Mountains. In view of the necessity for uniform rules governing the sale of refined sugar under the factor plan, the following is ordered as effective on and after the 1st day of June, 1896, in all the territory above mentioned. A strict compliance with the follow- ing rules, and any others that may hereafter be adopted, is essential on the part of every factor in order to make the plan efficient. To the end that it may be perpetuated, violations will No. 40.] 1125 be subject to tbe rigid enforcement of the conditions of the plan without favor. First. All sales of refined sugars must be made strictly accord- ing to the equality plan and in accordance with these rules. Second. In order to equalize cost to buyers in towns where local jobbers deliver free of cartage to customer’s store, outside jobbers may, if they choose, allow to their customers 5 cents a barrel to cover cartage from the railroad station to store. Third. Changes in the price of sugars shall take effect as follows: In that district known as the Eastern Time District, the price shall take effect at the same moment that the American Sugar Refining Company makes the change in price. Factors in the Central Division of Time shall make change of price thirty minutes later than that of points in the Eastern Division. Fact- ors in the Western Division shall make change one hour later than that of price in the Eastern Division. (Example: If the market changes at refining points at 10 o’clock a. m., eastern standard time, at points in the Central Division change shall take place at 9.30 o’clock a. m., central standard time, and at points in the Western Division prices shall change at 9 o’clock a. m., western standard time.) Fourth. All orders for sugar, whether taken by salesmen or sent direct by customers by mail, telephone, telegraph or other- wise, shall and must be billed at the price ruling at the hour and minute of time the order is so taken or sent, the time of taking or forwarding the order being stated on same, and no order shall be taken to be billed at a future date. Fifth. Sugars must not be sold on longer time than thirty days, nor with a greater discount than 1 per cent, for cash within ten days sharp from date of invoice. When remittance is re- 1126 [Senate,, ceived later than the tenth day, the cash discount must not exceed 6 per cent, per annum for unexpired time. If invoice is not paid at maturity, interest must be charged to purchaser’s account for all time over thirty days. Sixth. All sugars must be billed on separate invoices from other goods, and terms printed or stamped plainly on same. Seventh. A trade discount of 1 per cent, may be allowed on sales of 100-barrel lots or more, which must be sold, charged or billed at one time and to one purchaser. Eighth. No shipment shall be made without a bona fide order. Any shipment made on account of an anticipated change in price shall be considered a direct violation of the factor plan of selling: sugars. Ninth. In billing sugars, the actual date and time order was taken or sent must be plainly stamped or written on all invoices. Tenth. As the equality plan enables competing markets to equalize the freight to all selling points, thus placing all upon an equal footing as to delivery, it is contrary to the plan for factors to consign sugars to any point whatever, and this prac- tice is expressly prohibited. Eleventh. Factors selling through brokers can allow no more than the customary brokerage of 10 cents per barrel, which can not and shall not be divided with the purchaser. No dealer acting as a broker can be credited with brokerage on sugar bought for his own account. Twelfth. All refined sugars must be graded and sold on the basis of refiners’ New York card price for corresponding grade, except in that portion of the country tributary to and rated upon New Orleans, which shall use the card price of the American Sugar Refining Company, New Orleans: No. 40.] 1127 Thirteenth. Factors may, if they choose, sell to one another at refiners’ prices and terms, provided purchasing factors main- tain full list prices. Fourteenth. In making sales of sugar to national, State, county or city institutions, when bids are requested and submitted, the prices prevailing on the date bids are made shall govern regard- less of advances or declines in the market date bids are accepted or orders received by factors. Factors are privileged to name net cash bids to such institutions, which are the equality prices, less 1 per cent, in less than 100-barrel lots, or less 1 per cent, and 1 per cent, in lots of 100 barrels or more. If delivery is made at a jobbing point where the five cents per barrel drayage is allowed, this allowance can only be deducted from the face of the invoice, and not from prices when bids are made. Fifteenth. Factors must add the rate of freight as per equality rate book to point of shipment. Whether the purchaser is located on or off the point, whether he hauls the sugar or has it shipped, and the lowest local rate of freight allowed. Sixteenth. Where sugars are shipped in carloads, shipments being made direct from refiners, the factors’ invoices must, in every case, be dated the day the sugar is shipped by the refiners. AMENDMENT TO RULE 14. The cancellation of decimals extending beyond the third deci- mal is permissible, as per example: Equality prices 5.37 Less 1 per cent • 0537 5.3163 Less 1 per cent .53163 I Net cash 5.263 i = 1128 [Senate, Here follows a tabulated list of all distributing points in the State of New York, alphabetically arranged, about 1,700 in num- ber. • Bureau of Labor Statistics, Albany, N. Y., February 24, 1897. Hon. Clarence Lexow, Chairman, etc., Albany, N. Y.: Dear Sir. — I beg leave to acknowledge the receipt of your favor of February 22d, requesting a detailed statement, from 1887 down to the present time, of the number of workmen employed by the sugar companies in this State, the average annual wages paid to such employes, designating in the report, if possible, the names of the companies to which such figures apply. In reply permit me to say that the only information that I can find in the Bureau bearing upon this subject is contained in the Sixth Annual Report for the year 1888, a transcript of which I have caused to be made, and which I send herewith. Last year I sent out blanks to> every firm and corporation en- gaged in manufacturing, to any great extent, in this State. I sent out 5,111 blanks, calling for the number of employes, the wages paid each year for five years, and also for the cost of stock and materials used during that period, and the total market value of the manufactured materials. I also send herewith a copy of this blank. Three thousand seven hundred and forty-three establishments sent returns to the blank; but many neglected or refused to answer; some of them alleging that the information sought would compel them, in answering, to reveal their private affairs. Section 3 of chapter 205 of the Laws of 1886, relating to this Bureau, provides that no witness shall be compelled to answmr No. 40.] 1129 any question respecting his private affairs, and in view of this provision of law, and it not being the policy of the Bureau to pry into private affairs, where a return was not made and the excuse was given that to* make such a return would be a revelation of private affairs, the Bureau thought it wiser not to take the matter into the courts with a view of compelling answers to the questions. One of the establishments that objected to answering the ques- tions was the American Sugar Refining Company, and hence the Bureau is unable to give the statement requested. Yours very respectfully, john t. McDonough. A TRANSCRIPT FROM THE SIXTH ANNUAL REPORT OF BUREAU OF STATISTICS OF LABOR. Sugar Refineries. Eleven firms reported 2,728 employes. Wages per day: Boys, 50 cents to 91 2-3 cents; miscellaneous workers, $1.45 to $5, the latter engineers and skilled labor. Wages per month: $50 to $125; superintendent, $250. Rates per hour: 14£ cents to 21 cents. Hours per day, 9 to 12; on Saturday, 6 to 12. “ There are at present in Brooklyn eight refineries closed, that used to employ 1,300 men; 1,200 men are at present employed in Brooklyn. The New York refineries are small with one exception; the smaller ones pay 15 cents per hour, but are only in operation from three to four months in the year. The largest one in New York pays only 13| cents per hour. There is no evidence of organization among the sugar-house employes at present either in Brooklyn or New York.” 1130 [Senate, SUGAR REFINERIES. CLASSIFICATION. Number of blanks. Number of employes. Rates per Day. Hours for first five days. Hours on Saturday. Lowest. Highest. Blacksmiths 5,843 1 $2 50 $1 75 10 10 Blacksmiths, carpen- ters, etc 5,851 7 2 50 3 50 10 10 Blacksmiths and 5,700 13 2 00 2 50 10 5 '843 5 2 35 Boys 5^851 5 50 913$ 10 10 Carpenters 248 1 2 20 10 10 Engineers . 4,129 ] 2 00 9-10 6-8 Engineers 5; 849 24 1 95 3 3314 10 9-10 5,843 3 al25 00 10 10 Engineers and machin- ists 5,848 27 1 95 3 334 10 9-10 Firemen „ . 5,843 4 1 75 10 10 Firemen . . 5 '851 8 1 80 12 12 Firemen 5' 849 42 2 20 2 474 10 10 Firemen 5,848 20 1 70 3 00 10 10 Firemen’s helpers 5,848 19 1 50 10 10 Firemen’s helper* ...... 5^849 19 1 65 10 10 Firemen 5^843 21 2 05 10 10 Firemen, watchmen, etc 5,851 8 50 a75 00 10 10 Helpers 5,848 23 1 50 1 90 10-12 10-12 Laborers 5,706 16 ...... 144 10 9-10 Laborers 5,700 160-260 bl5 bl6 10 13 Laborers 5,706 75-95 bl7 bl9 10 12 Laborers 5,851 285 1 45 1 60 10-12 10-12 Laborers 4,129 3-4 1 50 1 664 9-10 6-8 Laborers 2 firms 1370 1 50 2 00 10 10 Laborers 5,848 35 1 70 2 50 10 10 Laborers 5,849 45 2 00 5 00 10 10 Machinists 5,843 6 ...... 1 90 10 10 Machinists aud carpen- 5,706 6 2 75 3 00 10 Machinists and copper- smith ...... .... .... ...... .... .... ...... Pipe fitters, etc 5,851 31 2 25 3 00 10-12 10-12 Machinists’ helpers 5,849 14 1 50 1 70 10 9-10 Mechanics 5,849 55 2 00 5 00 10 8-10 Mechanics 5,848 14 2 00 5 00 10 8-10 Mechanics’ helpers 5,849 23 1 60 2 50 10 8-10 Shipper 4,129 1 ...... 2 164 9-10 6-8 Superintendent _ _ _ 5,843 1 250 00 10 10 Watchman '248 2 1 85 10 10 a Per month. 6 Per hour. Kates for 1886. Kates for 1887. No. 40.] 1131 WAGES AND NUMBER OF WORKING HOURS OF THE SUGARHOUSE EMPLOYES OF BROOKLYN FOR FIYE YEARS, 1883-1887. Sugar Boilers. TEARS. "Wages Pee Month. Houbs. Highest. Lowest. Eor first fire days of week. On Saturday. 1883 $90 00 $75 00 12 12 1884 90 00 75 00 12 12 1885 90 00 75 00 12 12 1886 90 00 75 00 8 8 1887 90 00 75 00 8 8 Inside Men Laborers. 1883 1884 1885 1886 1887 .13* 10 to 12 .13* 10 to 12 .12* 10 to 12 -14* 10 to 12 .14* 10 to 12 10 to 12 10 to 12 10 to 12 10 to 12 10 to 12 Truckmen. 1883 14 00 12 00 12 1884 14 00 12 00 12 1885 14 00 12 00 12 1886 14 00 12 00 12 1887 14 00 12 00 12 THE FOLLOWING ARE COPIES OF SO-CALLED Anti-Trust Laws and Laws to Prevent Combina- tions in Restraint of Trade ENACTED BY CONGRESS AND THE DIFFERENT STATES (EXCEPT NEW YORK). AS FAR AS THE SAME COULD BE ASCERTAINED BY YOUR COMMITTEE. UNITED STATES ACTS. UNITED STATES STATUTES AT LARGE. CHAPTER 647. AN ACT TO PROTECT TRADE AND COMMERCE AGAINST UNLAWFUL RESTRAINTS AND MONOPO- LIES. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled : Section 1. Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby de- clared to be illegal. Every person who shall make any such contract, or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by a fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said pun- ishments, in the discretion of the court. § 2. Every person who shall monopolize, or attempt to monopo- lize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the sev- eral states, or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discre- tion of the court. § 3. Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any territory 1136 [Senate, of the United States or of the District of Columbia, or in restraint of trade or commerce in any such territory and another or be- tween any such territory or territories and any state or states or the District of Columbia and any state or states or foreign nations, is hereby declared illegal. Every person who shall make any such contract or engage in any such combination or con- spiracy shall be deemed guilty of a misdemeanor, and, on con- viction thereof, shall be punished by fine not exceeding five thou- sand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. § 4. The several circuit courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this act; and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direc- tion of the attorney-general, to institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition, setting forth the case, and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition, the court shall proceed, as soon as may be, to the hear- ing and determination of the case; and pending such petition, and before final decree, the court may, at any time, make such temporary restraining order or prohibition as shall be deemed just in the premises. § 5. Whenever it shall appear to the court before which any proceedings under section four of this act may be pending, that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned, whether they reside in the district in which the court is held or not ; and subpoenas to that end may be served in any district by the marshal there^ Ao. 40.] 1137 § 0. Any property owned under any contract, or by any com- bination, or pursuant to any conspiracy (and being the subject thereof), mentioned in section one of this act, and being in the course of transportation from one state to another, or to a foreign country, shall be forfeited to the United States, and may be seized and condemned by like proceedings as those provided by law for the forfeiture, seizure and condemnation of property imported ♦ into the United States contrary to law. § 7. Any person who shall be injured in his business or prop- erty by any person or corporation by reason of anything forbid- den or declared to be unlawful by this act, may sue therefor in the circuit court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover three-fold the damages by him sustained, and the costs of the suit, including a reasonable attor- ney’s fee. § 8. That the word “ person ” or “ persons ” wherever used in this act shall be deemed to include corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the territories, the laws of any state or the laws of any foreign country. Approved, July 2, 1896. Chapter 349 of the Laws of 1894, entitled “An act to reduce taxation and provide revenue for the government and for other purposes.” Section 73. That every combination, conspiracy, trust, agree- ment or contract is hereby declared to be contrary to public pol- icy, illegal and void, and the same is made by or between two or more persons or corporations thereof who is engaged in importing any article from any foreign country into the United States, and 72 1138 [Senate, when such combination, conspiracy, trust, agreement or contract is intended to operate in restraint of lawful trade, or from com- petition in lawful trade or commerce or to increase the market price for any part of the United States of any article or articles imported or intended to be imported into the United States, or of any manufacture into which such imported article is intended to enter. Every person who is, or shall be hereafter, engaged in the importation of goods or any commodity from any foreign country in violation of this section of this act, or who' shall combine or conspire with another to violate the same, is guilty of a misdemeanor, and on conviction thereof in any court of the United States such person shall be fined in a sum not less than one hundred dollars and not exceeding five thousand dollars, and shall be further punished by imprisonment, in the discretion of the court, for a term not less than three months nor exceeding twelve months. § 74. That the several circuit courts of the United States are hereby invested with jurisdiction to prevent and restrain viola- tions of section seventy-three of this act, and it shall be the duty of the several district attorneys of the United States, in their respective districts, under the direction of the attorney-general, to institute proceedings in equity to prevent and restrain such violations, et cetera. § 76. That any property owned under any contract or by any combination or pursuant to any conspiracy (and being the subject thereof) mentioned in section seventy-three of this act, and being in the course of transportation from one state to another, or to or through a territory or the District of Columbia, shall be for- feited to the United States and may be seized and condemned by like proceedings as those provided by law for the forfeiture, No. 40.] 1139 seizure and condemnation of property imported into the United States contrary to law. § 77. That any person who shall be injured in his business or property by any other person or corporation by reason of any- thing forbidden or declared to be unlawful by this act may sue therein in any circuit court of the United States, in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover three-fold damages by him sustained and the costs of suit, including a reasonable attorney’s fee. ALABAMA. No. 634. H. 521. AN ACT To more effectively protect tho people against combinations, conspiracies and agreements between insurers whereby rates of insurance are raised or fixed. Whereas, existing laws have proved inadequate to protect the people against combinations, conspiracies and agreements between insurers whereby rates of insurance are raised or fixed by such practices, therefore, in order to suppress such combinations, conspiracies and agree- ments to the end that competition in business shall alone make such rates, i Section 1. Be it enacted by the general assembly of Alabama, that every contract or policy of insurance made or issued after the passage of this act shall be construed to mean that in the event of loss or damage thereunder, the assured or beneficiary thereunder may, in addition to the actual loss or damage suffered, 1140, [Senate, recover twenty-five per centum of the amount of such actual loss, any provision or stipulation in such contract or policy to the contrary notwithstanding; provided, at the time of the mak- ing of such contract or policy of insurance, or subsequently before the time of trial the insurer belonged to, or was a member of, or in any way connected with, afiy tariff association or such like thing by whatever name called, or who had any agreement or had any understanding with any other person, corporation or association engaged in the business of insurance as agent or otherwise about any particular rate of premium which should be charged or fixed for any kind or class of insurance risk; and provided further, no stipulation or agreement in such contract or policy of insurance to arbitrate loss or damage nor to give notice to make proofs of loss or damage shall in any such case be binding on the assured or beneficiary, but right of action accrues immediately upon loss or damage. § 2. Be it further enacted, that if it is shown to the reasonable satisfaction of the jury by a preponderance of the weight of the testimony that such assurer at the time of the making of such agreement or policy of insurance or subsequently before the time of trial belonged to, or was a member of, in any way connected with, any tariff association or such like thing by whatever name called, either in or out of this state, or had made any agreement or had any understanding either in or out of this state, with any person, corporation or association engaged in the busi- ness of insurance as agent or otherwise about any par- ticular rate of premium which should be charged or fixed for any risk of insurance on any person or property, or on any kind or class of insurance risk, they must, if they find for the assured or beneficiary, in addition to his actual damages, assess and add No. 40.] 1141 twenty-five per centum of the amount of such actual loss, and judgment shall be rendered accordingly. § 3. Be it further enacted, that this act shall be liberally con- strued to accomplish its object. Approved, February 18, 1897. CONNECTICUT. The constitution of the state contains a provision against monopolies. DELAWARE. There is no law upon the statute boohs of this state, nor any pro- vision in its constitution against combinations, but a proposed amendment to the constitution, which h!as not yet been adopted, makes it the duty of the legislature to enact laws prohibiting com- binations designed to produce fictitious prices for commodities. GEORGIA. A BILL To be entitled. An act to declare unlawful and void all arrange- ments, contracts, agreements, trusts, or combinations made with a 1142 [Senate, view 'to lessen, or which tend to lessen, free competition in the im- portation or sale of articles imported into this state; or in the manu- facture or sale of articles of domestic growth or of domestic raw material; to declare unlawful and void, all arrangements, contracts, agreements, trusts or combine tin ns, between persons or corpora- tions designed, or which tend to advance, reduce or control the pried of isuch product or article to producer or consumer of any such product or article; to provide for forfeiture of the charter and fran- chise of any corporation organized under the laws of this state, vio- lating any of the provisions of this act; to prohibit every foreign corporation, violating any of the provisions of this act from doing business in this state; to require the attorney-general of this state to institute legal proceedings against any such corporation violating the provisions of this act, and to enforce the penalties prescribed; to prescribe penalties for any violations of this act; to authorize any person or corporation, damaged by any such trust, agreement or combination, to isue for the recovery of such damage, and for other purposes. Section 1. Be it enacted by the general assembly of G-eorgia, and it is hereby enacted by the authority of the same, that, from and after the passage of this act, all arrangements, contracts, agree- ments, trusts or combinations between persons or corporations made with a view to lessen, or which tend to lessen, full and free competition in the importation or sale of articles imported into this state, or in the manufacture or sale of articles of domestic growth, or of domestic raw material, and all arrangements, con- tracts, agreements, trusts or combinations, between persons or corporations designed, or which tend to advance, reduce or con- trol the price or the cost to the producer, or to the customer of any such product or article, are hereby declared to be against public policy, unlawful and void. No. 40.] 1143 § 2. Be it further enacted by 'the authority aforesaid, that any corporation, chartered under the laws of this state, which shall violate any of the provision® of this act, shall thereby forfeit its charter and its franchise, and its corporate existence shall thereupon cease and determine. Every foreign corporation which ishiall vio- late any of the provisions of this act, is hereby denied the right to do, and isi prohibited from doing, business in this state. It is hereby made the duty of the attorney-general of this state to enforce this provision by due process .of law. / § 3. Be it further enacted by the authority aforesaid, that any violation of the provisions of this act shall be deemed and is hereby declared to be destructive of full and free competition, and a con- spiracy against 'trade, and any person or persons who may engage in any such conspiracy, or who shall, as principal, manager, director or agent, or in any other capacity, 'knowingly carry out any of the stipulations, purposes, prices, rates or orders made in furtherance of such conspiracy, shall, on conviction, be punished by a fine of not less than one hundred dollars, or more than five thousand dollars, and by imprisonment in the penitentiary not less than one year or not more than ten years; or, in the judgment of the court, by either guch fine or such imprisonment. § 4. Be it further enacted by the authority aforesaid, that the pro- visions of this act shall njot apply to agricultural products, or live stock, while in the possession of the producer or raiser. § 5. Be it further enacted bv the authority aforesaid, that any person or persons or corporation that may be injured or damaged by any such arrangements, contract, agreement, trust or combination, described in section one of this act, may sue for and recover, in any court of competent jurisdiction in this state, of any person, persons or corporations, operating such trust or combination, the full con- 1144 [Senate, sideration or sum paid by him or them for any goods, wares, mer- chandise, or articles, the sale of which is controlled by such com- bination or trust. , § 6. Be it further enacted by the authority aforesaid, that it shall be the duty of the judges of the superior courts of this state specially to instruct the grand juries as to the provisions of thiis act. § 7. Be it further enacted by the authority aforesaid, that all laws and parts of laws )in conflict with the provisions of this act be, and the same are hereby repealed. Approved, December 23, 1896. , ILLINOIS. TRUSTS AND COMBINES. Pools, trusts and 1 combines prohibited. An Act to provide for the punishment of persons, co-partnerships, or corporations forming pools, trusts and combines, and mode of procedure and rules of evidence in such cases. -Section 1. Be it enacted by the people of the -state of Illinois, re- presented in the General Assembly: If any corporation organized underthe lawso-f this or any other state or country, for transacting or conducting any kind 1 of business in this -state, or any partnership or individual or other association of persons whosoever, shall create, enter into-, become a member of or a party to any pool, trust, agree- ment, combination, confederatipn or understanding with any other corporation, partnership, individual, or any other person or associa- tion of persons to regulate or fix the price of any article of merchan- No. 40. J 1145 dise or commodity, or shall enter into, become a. member of or a party to any pool, agreement, contract, combination or confedera- tion to fix or limit the amount or quantity of any article, commodity or merchandise to be manufactured* mined, produced or sold 1 in this state, such corporation, partnership, or individual or other associa- tion of persons, shall be deemed and adjudged guilty of a conspiracy to defraud, and be subject to indictment, and' punished as provided in this act. § 2. It shall not be lawful for any corporation to issue or to own trust certificates, or for any corporation, agent, officer or employes, or the directors or stockholders of any corporation, to enter into any combination, contract or agreement with any person or persons, corporation or corporations, or with any stock- holder or director thereof, the purpose and effect of which combi- nation, contract, or agreement shall be to place the management or control of such combination or combinations, or the manufac- tured product thereof, in the hands of any trustee or trustees, with the intent to limit or fix the price, or lessen the production and sale of an article of commerce, use or consumption, or to prevent, restrict, or diminish the manufacture or output of any such article. § 3. If a corporation or a company, firm or association shall be found guilty of a violation of this act, it shall be punished by a fine in any sum not less than five hundred dollars ($500) nor more than two thousand dollars ($2,000) for the first offense; and for the second offense, not less than two thousand dollars ($2,000) nor more than five thousand dollars ($5,000), and for the third offense, not less than five thousand dollars ($5,000) nor more than ten thousand dollars ($10,000), and for every subsequent offense and conviction thereof, shall be liable to a fine of fifteen thousand 1146 [Senate, dollars ($15,000); provided, that in all cases under this act either party shall have the right of trial by jury. § 4. Any president, manager, director or other officer or agent or receiver of any corporation, company, firm or association or any member of any company, firm or association, or any indi- vidual found guilty of a violation of the first section of this act may be punished by a fine of not less than two hundred dollars ($200) nor to exceed one thousand dollars ($1,000), or to be pun- ished by confinement in the county jail not to exceed one year or both, in the discretion of the court before which such convic- tion may be had. § 5. Any contract or agreement in violation of any provision of the preceding sections of this act shall be absolutely void. § 6. Any purchaser of any article or commodity from any indi- vidual company or corporation transacting business contrary to any provision of the preceding section of this act, shall not be liable for the price or payment of such article or commodity, and may plead this act as a defense in any suit for such price or payment. § 7. The fines hereinbefore provided for may be recovered in an action for debt, in the name of the People of the State of Illinois. If, upon the trial of any cause instituted under this act to recover the penalties as provided for in section three, the jury shall find for the people, and that the defendant has been before convicted of a violation of the provisions of this act, they shall return such finding with their verdict, stating the number of times they find defendant so convicted, and shall assess and return with their verdict the amount of the fine to be imposed upon the defendant in accordance with said section three. Pro- vided, that in all cases under the provisions of this act a prepon- No. 40.] 1147 derance of evidence in favor of the people shall be sufficient to authorize a verdict and judgment for the people. § 8. It shall be the duty of the prosecuting attorneys in their respective jurisdictions, and the attorney-general, to enforce the foregoing provisions of this act, and any prosecuting attorney of any county securing a conviction under the provisions of this act, shall be entitled to such fee or salary as by law he is allowed for such prosecution. When there is a conviction under this act, the informer shall be entitled to one-fifth of the fine recovered, which shall be paid him when the same is collected. All fines recovered under the provisions of this act shall be paid into the county treasury of the couuty in which the suit is tried, by the person collecting the same, in the manner now provided by law, to be used for county purposes. Approved, June 11, 1891. ENFORCING TRUST LAWS. An Act to amend an act, entitled “An act to provide for the. punishment of persons, copartnerships or corporations forming pools, trusts and combines, and mode of procedure and rules of evidence in such cases, approved June 11, 1891, and in force July 1, 1891, be and the same is hereby amended by adding two new sections — 7a and 7b, respectively — and making an ap- propriation for the purpose of carrying into effect this act.” Section 1. Be it enacted by the People of the State of Illinois, represented in the General Assembly: That an act, entitled “An act to provide for the punishment of persons, copartnerships or corporations forming pools, trusts and combines, and mode of procedure and rules of evidence in such cases,” approved June eleventh, eighteen hundred and ninety-one, and in force July 1 148 [ Senate, first, eighteen hundred and ninety-one, be and the same is hereby amended by two new sections, as follows: § 7a. It shall be the duty of the secretary of state, on or about the first day of September of each year, to address to the presi- dent, secretary, or treasurer of each incorporated company doing business in this state, whose post-office is known or may be ascertained, a letter of inquiry as to whether the said corporation has all or any part of its business or interest in or with any trust, combination or association of persons, or stockholders, as named in the preceding provisions of this act, and to require answer, under oath, of the president, secretary or treasurer, or any director of said company. A form of affidavit shall be in- closed in said letter of inquiry as follows: AFFIDAVIT. V- ' STATE OF ILLINOIS, ) oo . V oo. « County op ’ I, , do solemnly swear that I am the (president, secretary, treasurer or director) of the corporation known and styled duly incorporated under the laws of on the of , 18. . . ., and now transacting or conducting business in the State of Illinois, and that I am duly authorized to represent said cor- poration in the making of this affidavit, and I do further sol- emnly swear that the said known and styled as aforesaid, has not, since the day of (naming the day upon which this act takes effect), created, en- tered into or become a member of, or a party to, and was not, on the day of nor at any day since that time and is not now, a member of, or a party to, any pool, trust, agree- No. 40.] 1149 ment, combination, confederation or understanding with any other corporation, partnership, individual or any other person or association of persons, to regulate or fix the price of any arti- cle of merchandise or commodity; and that it has not entered into or become a member of, or a party to, any pool, trust, agreement, contract, combination or confederation to fix or limit the amount or quantity of any article, commodity or merchandise to be manu- factured, mined, produced or sold in this State; and that it has not issued and does not own any trust certificates, and for any corporation, officer or employe, or for the directors or stock- holders of any corporation, has not entered into and is not now in any combination, contract or agreement with any person or persons, corporation or corporations, or with any stockholder or director thereof, the purpose and effect of which said combina- tion, contract or agreement would be to place the management e or control of such combination or combinations, or the manufac- tured product thereof in the hands of any trustee or trustees, with the intent to limit or fix the price or lessen the pro- duction and sales of any article of commerce, use or consumption, or to prevent, restrict or diminish the manufacture or output of any such article. •••••••• * J (President, Secretary, Treasurer or Director.) Subscribed and sworn to before me, a within and for the county of , this day of , 18 (Seal) And on refusal to make oath in answer to said inquiry, or on failure to do so within thirty days from the mailing thereof, the Secretary of State shall certify that fact to the Attorney-Gen- 1150 [Senate, eral, whose duty it shall be to direct the State’s attorney of the county wherein such corporation or corporations are located, and it is hereby made the duty of the State’s attorney, under the di- rection of the Attorney-General, at the earliest practicable mo- ment, in the name of the people of the State of Illinois, and at the relation of the Attorney-General, to proceed against such cor- poration for the recovery of a penalty of fifty dollars for each day after such refusal to make oath, or failure to make said oath, within thirty days from the mailing of said notice. Or the Attor- ney-General may, by any proper proceedings in a court of law or chancery, proceed, upon such failure or refusal, to forfeit such charter of such incorporated company or association incorpo- rated under the general laws, or by any special law of this State, and to revoke the rights of any foreign corporation located here- in to do business in this State. § 7b. It shall be the duty of the Secretary of State, at any time, upon satisfactory evidence that any company or association of persons, duly incorporated under the laws of this or any other State, doing business in this State, has entered into any trust, combination or association in violation of the preceding section of this act, to demand that it shall make the affidavit, as above set forth in this act, as to the conduct of its business. In case of failure of compliance on the part of the corporation, then the same procedure shall ensue as provided in section 7a of this act. Provided, that no corporation, firm, association or individ- ual shall be subject to any criminal prosecution by reason of any- thing truthfully disclosed by the affidavit required by this act, or truthfully disclosed in any testimony elicited in the execution thereof. No. 40.] 1151 The Secretary of State is hereby authorized and required to charge and collect of each corporation a fee of one dollar for receiving and filing the affidavit herein provided for, to be ac- counted for as other fees received by him. Provided, that cor- porations organized under the building, loan and homestead association laws of the State are excluded from the provisions of this act. Approved, June 20, 1893. INDIANA. A BILL. An Act to prevent trusts or combinations intended to restrain trade or to control the market value or cost of importation or , transportation of merchandise, produce or commodities, and to promote free competition in the state of Indiana, declaring all arrangements, contracts, agreements, trusts or combina- tions made with a view to lessen or which tend to lessen free competition in the importation, transportation, making, manu- facture or sale of any article or commodity into or within this state unlawful and void, declaring certain acts in connection therewith criminal, fixing penalties and punishment therefor and matters connected therewith, and providing mode of pro- cedure in such cases. Section 1. Be it enacted by the general assembly of the state of Indiana, that from and after the passage of this act all agree- ments, contracts, arrangements, trusts or combinations between persons, corporations, firms or associations made with a view 1152 [Senate, to lessen, or which tend to lessen, full and free competition in the importation, transportation, making, manufacture or sale of any article or commodity, or which tend to advance, reduce or control the price or the cost to the producer, user or consumer of any such article or product, or which create or carry out, or tend to create or carry out, restrictions in trade, or which limit or reduce or tend to limit or reduce the production or increase or reduce, or tend to increase or reduce, the price of merchandise or commodities, or which fix any standard figure whereby its price to the public shall be in any manner controlled or estab- lished upon any article or commodity of merchandise, produce or manufacture intended for sale, use or consumption in this case, or which establishes or tends to establish an agency, pre- tended or real, w T hereby the sale of any such article or commod- ity shall be cornered up and made to appear to be for the original vendor or manufacturer, to control the wholesale or retail price of any such article or commodity, after the title to such article or commodity shall have passed from such vendor or manufac- turer, or which binds or tends to bind the parties to any such arrangements, contracts, agreements, trust or combination not to sell, dispose of or transport any article or commodity or ar- ticle of trade, use, merchandise or commerce or consumption below 7 a common standard figure or card or list price, or by which they shall agree in any manner to keep the price of such article or transportation at a fixed or graduated figure, or by which in any manner establish or settle the price of any article or commodity or transportation between them or themselves and others, to preclude a free and unrestricted competition among themselves or others in the sale or transportation of any such article or commodity, or by which they shall agree to pool, com- No. 40.] 1153 bine or unite any interest they may have in connection with the sale or transportation of any such article or commodity that its price might in any manner be affected, are hereby declared to be unlawful, against public policy and void. VIOLATIONS OF THE ACT. Section 2. Any violations of either or all of the provisions of this act shall be deemed, and is hereby, declared to be destructive of full and free competition, a conspiracy against trade and a crime, and any person or persons who may engage in any such conspiracy or take part therein, or aid or advise in its commis- sion, or who shall, as principal, manager, director, agent, ser- vant or employe, or in any other capacity, aid or advise or carry out or attempt to carry out any of the stipulations, purposes, prices, rates or orders made under or in furtherance of such conspiracy, shall, on conviction thereof, be punished by a fine of not less than one hundred dollars nor more than five thousand dollars, and by imprisonment in the penitentiary not less than one year nor more than ten years, or, in the discretion of the court, by either such fine or such imprisonment. § 3. That any corporation chartered under the laws of this state which shall violate any of the provisions of this act shall thereby forfeit its charter and franchise, and its corporate existence shall thereupon cease and determine. Every foreign corporation which shall violate any of the provisions of this act is hereby denied the right to do, and is prohibited from doing business in this state. It is hereby made the duty of the attorney-general or prosecuting attorney, in their respective capacities and juris- dictions, upon his own motion, to enforce the provisions of this 73 , 1154 [Senate, act by due process of law, and there shall be taxed as a part of the costs in any suit or proceeding brought for such purpose a fee of not less than fifty dollars nor more than five hundred dollars, which shall be a fee to such attorney-general or prose- cuting attorney for his services in such suit or proceeding, and the same shall be collected as a part of the costs therein. § 4. In any indictment or information for any offense named in this act it is sufficient to state the purposes and effect of the arrangement, contract, agreement, trust or combination, and that 4 the accused was a member of or acted with or in pursuance of it, without giving its name or description or how or where it was created.. § 5. In prosecutions under this act it shall be sufficient to prove that an arrangement, contract, agreement, trust or combination, expressed or implied, exists or existed between defendant or de- fendants and some other person, persons, firm, corporation or association, for one or more of the purposes set out and enumer- ated in section one of this act, and it shall not be necessary to make any proof as to the corporate existence, partnership or asso- ciation of any party to or participant in said arrangement, con- tract, agreement, trust or combination, or that said corporate existence, partnership or association is evidenced by any written instrument or came into existence by any agreement of any kind or character whatsoever. § 6. That any arrangement, contract, agreement, trust or com- bination in violation of any of the provisions of this act shall be absolutely void. § 7. The provision of this act shall not apply to agricultural products or live stock while in the hands of the original producer or raiser. No. 40.] 1155 § 8. Any purchaser of any article or commodity from any per- son, firm, corporation or association of persons, or of two or more of them violating any of the provisions of this act, shall not be liable for the price or payment of such article or commodity, and may plead this act as a complete defense to any suit for such price or payment. § 9. Any person who shall suffer any damage by reason of any other person, firm, association or corporation violating any of the provisions of this act, shall have his right of action there- for, and may enforce the same in any court of competent jurisdic- tion, and he shall recover all damages sustained by him and the cost of suit, including a reasonable attorney’s fees. § 10. It shall be the duty of all judges and courts of this state required by law to instruct grand juries to instruct said juries as to the provisions of this act. IOWA. ANTI-POOL AND TRUST LAW. An act for the punishment of pools, trusts, combinations and conspiracies, and as to evidence in such cases. Be it enacted by the general assembly of the state of Iowa: Section 1. If any corporation organized under the laws of this or any other state or country, for transacting or conducting any kind of business in this state, or any partnership or individual or other association of persons whosoever, shall create, enter into, or become a member of, or a party to, any trust, agreement, com- 115G [Senate, bination, confederation or understanding with any other corpora- tion, partnership, individual, or any person, or association of per- sons, to regulate or fix the price of any article of merchandise or commodity, or shall enter into, become a member of or party to any pool, agreement, contract, combination or confederation to fix or limit the amount or quantity of any article, commodity or merchandise to be manufactured, mined, produced or sold in this state, shall be deemed and adjudged guilty of a conspiracy to defraud, and be subject to indictment and punishment as pro- vided in this act. , § 2. It shall not be lawful for any corporation to issue or to own trust certificates, or for any corporation, agent, officer or em- ployes, or the directors or stockholders of any corporation, to enter into any combination, contract or agreement with any person or persons, corporation or corporations, or with any stock- holder or director thereof, the purpose and effect of which com- bination, contract or agreement shall be to place the manage- ment or control of such combination or combinations, or the manufactured product thereof, in the hands of any trustee or trustees, with the intent to limit or fix the price or lessen the production and sale of any article of commerce, use or consump- tion, or to prevent, restrict or diminish the manufacture or out- put of any such article. § 3. If a corporation or a company, firm or association, shall be found guilty of a violation of this act, it shall be punished by a fine of not less than one per cent, of the capital stock of such corporation or amount invested in such company, firm or association, and not to exceed twenty per cent, of such capital stock or amount invested. Any president, manager, director or other officer or agent or receiver of any corporation, company, Xo. 40.] 1157 firm or association, or any member of any company, firm or asso- ciation, or any individual, found guilty of a violation [Senate, of such products, or whereby the products or profits of such man- ufacture or sale shall be made a common fund to be divided among the respective persons, partnerships, companies, associa- tion, or corporation so entering into such contract, agreement, or combination. Section 29, ch. 701 (46 N. W., 155). § 4443. Pooling between persons, partnerships, companies, as- sociations or corporations, engaged in the same or like business for any purpose whatever, and the formation of combinations or common understanding between two or more persons, companies, partnerships, associations, or corporations in the nature of what are commonly called trusts, for any purpose whatever, or the continuance of the same after the taking effect of this act, are hereby prohibited and declared to be unlawful, and each day of the continuance of any such pool or trusts shall constitute a separate offense. § 4444. That in any case any person, persons, company, partner- ship, association, or corporation shall do, cause to be done, or permit to be done, any act, matter or thing in this act prohibited or declared to be unlawful, such person, persons, partnerships, company, or corporation shall be liable to the person, persons, partnership, company, association, or corporation injured there- by. for the full amount of damages sustained in consequence of any such violations of the provisions of this act, together with a reasonable counsel or attorney fee to be fixed by the court in every case of recovery, which attorney's fee shall be taxed and collected as part of the costs in the case, and the property of any person who may be a member or interested in any partnership, association, company or corporation violating the provisions of this act shall be liable for the full amount of such judgment and may be levied upon and sold to satisfy the same. So. 40.] 1193 § 4443. Any association of persons doing business in this state in a firm, partnership, or corporate name, and not incorporated under the laws of the state who shall violate the provisions of this act, in addition to the other penalties and liabilities herein provided, shall forfeit its right to do business in such firm, part- nership, or corporate name; and if any such person shall there- after continue to do business in such firm, partnership, or corpor- ate name, they shall incur the penalties provided in section three of the act, entitled ‘‘An act providing for the recording of the names of all members of associations doing business under a firm, partnership,- or corporate name.” See § 3230, ch. 40. § 4446. Any corporation violating any of the provisions of this act, in addition to the other penalties and liabilities herein pro- vided, shall surrender and forfeit its right and privileges as a corporation, and it shall be the duty of the prosecuting attorney of the proper county to institute proceedings against said cor- poration or the person constituting the same for the purpose of having the same dissolved, and the same proceedings shall be and the same judgment may be rendered as is provided in title 23, entitled “ Information,” of the Code of Civil Procedure. § 4447. Any person, partnership, company, association, or cor- poration subject to the provisions of this act, or any director, officer, receiver, trustee, clerk, lessee, agent, or person acting for or employed by them or either of them who shall violate any of the provisions of section one or two of this act shall be declared guilty of a misdemeanor, and shall upon conviction thereof be fined in any sum not exceeding one thousand dollars, or im- prisoned in the jail of the county for a period not exceeding six months, or both, in the discretion of the court. 1194 [Senate. § 4448. In any action brought under any of the provisions of this act the court before who, the same shall be pending may compel any person, or persons, partnership, company, associa- tion, or corporation so proceeded against, or any of the members of any such partnership or corporation, or any director, officer, receiver, trustee, agent, employe, or clerk of them, or either of them, to attend, appear, and testify in such suit or proceeding, and may compel the production of the books and papers of any such person, persons, partnership, company, association, or cor- poration party to any such proceeding. § 4449. Nothing herein contained shall prevent any assemblies or associations of laboring men from passing and adopting such regulations as they may think proper, in reference to wages and the compensation of labor, and such assemblies and associations shall retain — and there is hereby reserved to them— all the rights and privileges now accorded to them by law, anything herein con- tained to the contrary notwithstanding. NEW HAMPSHIRE. Your committee is informed that a bill is now pending in the New Hampshire Legislature against combinations in restraint of trade. No. 40.] 1195 NORTH CAROLINA. (LAWS OF 1889, CHAPTER 374). AN ACT To prohibit trusts in the State of North Carolina, and to provide for the punishment of persons connected with them. The General Assembly of North Carolina do enact: Section 1. That all combinations and trusts, as defined by this act, are unlawful and dangerous to the liberty of the people, and are hereby forbidden to be formed or carried on in this State. § 2. That a trust, arrangement, understanding or agreement, either private or public, entered into by two or more persons or corporations, for the purposes of increasing or reducing the price of the shares of stock of ary company or corporation, or of any class of products, materials or manufactured articles beyond the price that would be fixed by the natural demand for or the sup- ply of such shares, products, materials or manufactured articles, and any attempt to carry out such purpose shall be evidence that such arrangement, understanding or agreement exists. § 3. That any persons, company or corporation who shall form or attempt to form a trust in this State, or the agent or the repre- sentative of any trust in any State or county who shall attempt to carry on operations in this State, shall be guilty of a misde- meanor, and upon conviction may be fined not more than $10,000 and may be imprisoned not more than ten years for each offense. § 4. That any person, company or corporation who enter into an arrangement, understanding or agreement, not to mine, manu- facture, buy, sell or transport more than a certain specific amount 1196 [Senate. of any goods, products or commodities tlmn specified, it will have violated section three of this act, and will be liable to indictment thereunder ; and any person, company or corporation that gives a bond or makes a forfeit of any kind not to break such arrange- ment, understanding oir agreement, shall be guilty of a misde- meanor, and on conviction thereof shall be fined or imprisoned, or both, in the discretion of the court. § 5. That any merchant, broker, manufacturer or dealers in raw materials of any kind, or the agent of such officers, who shall sell any particular class of goods, raw materials or manufactured ar- ticles for less than actual cost, for the purpose of breaking down competitors, shall be guilty of a misdemeanor and upon con- viction, may be fined or imprisoned, or both, in the discretion of the court; provided, that nothing contained in this act shall op- erate or be construed so as to 1 forbid or prevent any person or persons who desire and intend to purchase any article or com- modity for his or their own use or consumption from combining or otherwise lawfully acting, so as to protect or keep themselves from imposition in the cost or purchase price of such articles or commodities as they or either of them may design or intend to use the same. § 6. That this act shall be in full force and effect from and after the first day of May, of the year one thousand eight hundred and eighty-nine. No. 40.] 1197 OHIO. (NO STATUTE.) The Secretary of State of Ohio 1 writes that combinations in re- straint of trade under the common law have been held by courts of that State to be contrary to public policy. SOUTH CAROLINA. In this State the law has been proposed, but not yet enacted, prohibiting any combination which lessens or tends to lessen com- petition or which affects or tends to affect prices. All corpora- tions, domestic or foreign, the law forfeits their charter privileges. Violations are to be punished by a fine of not less than five thou- sand dollars, and imprisonment in the penitentiary of not less than six months and not more than ten years. Persons who may be damaged by such combinations may recover at law the entire amount paid the combination. Agricultural produce or live- stock while in the hands of the produced: are exempt from the “operation of the proposed law. 1198 [Senate, SOUTH DAKOTA. (1890, chap. 154. 1893, chap. 171.) PROPOSED AMENDMENT TO THE CONSTITUTION OF THE STATE OF SOUTH DAKOTA. To the people of the State of South Dakota: The Fourth Legislature of the said State of South Dakota, at the session thereof begun and held at Pierre, the capital, on Jan- uary 8, 1895, and concluded March 8, 1895. proposed the following amendment to the constitution of the State, viz: A Joint Resolution proposing an amendment to the constitution relating to monopolies and trusts. Be it resolved by the Senate of the Legislature of the State of South Dakota, the House of Representatives concurring therein : Section 1. (Amendment.) That the following proposition is made an amendment to the constitution of the State of South Da- kota, which is hereby submitted to a vote of the electors at the next general election, viz: Article 17 of the constitution to be amended by adding at the end thereof the following: § 20. Monopolies and trusts shall never be allowed in this State and no incorporated company, co-partnership or association of persons in this State shall directly or indirectly combine or make any contract with any incorporated company, foreign or domestic; through their stockholders or the trustees or assigns of such stockholders, or with any co-partnership or association of persons, or in any manner whatever to fix the prices, limit the production or regulate the transportation of any product or commodity so as No. 40.] 1199 to prevent competition in such prices, production or transporta- tion or to establish excessive prices therefor. The Legislature shall pass laws for the enforcement of this section by adequate penalties and in the case of incorporated companies, if necessary for that purpose may, as a penalty, de- clare a forfeiture of their franchises. § 2. (Submission.) The foregoing proposed amendment shall if agreed to by a majority of the members of each house of the Legislature, be submitted to a vote of the people at the. next gen- eral election. The above proposed amendment will be voted upon by the people at the general election to be held in the State on the 3rd day of November, A. D. 1S96. The proposed amendment will be printed upon each ballot, fol- lowed by the words.: “Shall the above amendment to the con- stitution be approved and ratified?” Immediately to the left of which shall be printed the words “Yes” and “No,” each preceded by a square in which the elector can place a. cross to indicate his vote. Electors desiring to vote “Yes” will place a cross before the word “Yes,” and those desiring to vote “No” will place a cross before the word “No.” Dated at Pierre, the capital of South Dakota, this 3rd day of August, 1896. THOMAS THORSON, Secretary of State. Adopted November 3rd, 1896. . Section 1. Defining Which Trusts Are Unlawful. — That any combination, agreement or trust, made, entered into or formed between persons, co-partnerships or corporations in this state, or by or between any persons, co-partnerships or corporations, 1200 - [Senate, within this state, with any person, co-partnership or corporation without this state with the intent and which shall in any manner tend to prevent a free and fair and full competition and produc- tion and manufacture, or sale of any article or commodity of domestic growth, use or manufacture, or that tends to advance the price to the user or consumer of any article or commodity of domestic growth, use, production or manufacture beyond the rea- sonable cost of the production or manufacture thereof or that tends to advance the price to the user, purchaser or consumer of farm machinery, implements, tools, supplies and lumber, wood and coal imported into this state from any other state, territory or county beyond the reasonable cost of production and sale or manufacture and sale of the same, or which tends to and does induce and accomplish a sale of wheat, corn, oats, barley, flax, or cattle, sheep, horses, or other farm or agricultural products for less than such farm or agricultural products are really worth at the time of sale or for a less price than such farm or agricultural products would sell for in open market if such combination, agreement or trust did not exist, or tends to, or shall increase, and enhance or maintain, rates of interest on loans of money for forbearance of payment any sum of money or debt, or prevents fair competition for a low rate of interest on loans, or for forbearance of payment of any debt or obligation, is hereby declared to be against pub- lic policy and unlawful and Void; any person or persons who shall be a party to any such unlawful combination, agreement or trust, or who shall in any way assist, aid or abet any such combi- nation, agreement or trust, either as principal, agent, attorney, employee or otherwise, shall be deemed guilty of a felony, and upon conviction thereof shall be punished by a fine not exceeding Xo. 40.] 1201 one thousand dollars or imprisonment in the state’s prison not exceeding three years, or both such fine and imprisonment, at the discretion of the court. § 2. Unlawful sale of articles or goods. — Any person or persons who shall agree and undertake, as agent, to sell, and shall sell in this state any of the articles, commodities, products or ma- chinery, implements, tools, supplies or goods, wares and merchan- dise mentioned in section 1 of this act for a non-resident manufacturer of or wholesale dealer in such articles, commodi- ties, products, machinery, implements, tools, supplies or goods, wares and merchandise, while at the same time such non-resident, manufacturer or wholesale dealer, refuse to sell at wholesale or manufacturer’s prices such farm implements, tools or supplies, as are furnished to such agent for sale in this state to responsible and reputable wholesale or retail dealers in this state, shall be deemed to have unlawfully combined within the meaning of section one of this act, with such non-resident manufacturer, or wholesale dealer, with intent to prevent, full, free and fair com- petition in the sale in this state of any such farm machinery, implements, tools or supplies, furnished to such agent as afore- said, and refuse to be sold to wholesale or retail dealers in this state as aforesaid, and with intent to advance the price to the user and purchaser and consumer beyond the reasonable cost of manufacture and sale, whose production and sale of such farm machinery, farm tools, farm implements and supplies, refuse to be sold as aforesaid to dealers in this state as aforesaid, such agent or agents upon conviction thereof shall be punished by a fine of not more than one thousand dollars or imprisonment in state’s prison for not more than five years or both such fines and imprisonments at the discretion of the court. 76 1202 [Senate. § 3. Non-resident corporations; liability of. — Any non-resi- dent corporation, co-partnership or company, or person, who shall ship or bring into this state for sale any of the commodities, pro- ducts or goods, wares or merchandise, machinery, tools or imple- ments mentioned in section one of this act to be sold only and exclusively by an agent or agents or person or persons selected appointed and controlled in the sale of such goods by such non- resident corporations, co-partnership, company or person, in violation of the spirit, intent and purpose of this act may be re- strained by an order of injunction from any court of competent jurisdiction in this state from selling or disposing of any such commodities, goods, wares or merchandise, machinery, tools or implements, or having the same sold in this state until the de- fendant in such order offers the same for sale or to be sold, on like and regular terms, and without restriction, except as to price and terms of payment, to reputable and responsible whole- sale or retail dealers of this state, without regard to location, that may desire to purchase the same or any portion thereof. The order of injunction mentioned in this section may be, upon evidence which shall show to the satisfaction of the court or judge thereof, to whom application is made, that person or per- sons, or co-partnership or corporation named as defendant in the application and affidavit for an order of injunction has violated some provision of this act, the order of injunction issued upon such affidavits may be served in the manner now provided by law for the service of such orders, and in the absence of the defendant therein, or his agent or attorney, such order of in- junction may be served on any and all persons in this state having in possession and for sale, or in his possession for the use, or subject to the order or direction of the defendant or No. 40.] 1203 defendants in such proceeding, any of the several articles or commodities or goods, wares and merchandise mentioned in sec- tion one O'f this act, the sale of which is restrained by this order. On the final hearing by the court, if such application for injunc- tion be sustained by the court, the court shall render judgment against the defendant in such proceedings, and in favor of the plaintiff therein, for all the costs incurred by the plaintiff therein, including such attorney’s fee allowed by the court therein. Any judge of a circuit court or of a supreme court may, in like manner, enjoin and restrain any manufacturing or whole- sale or retail business, being conducted or carried on in violation of any provision or the spirit and intent of this act, from con- tinuing such manufacture or wholesale or retail business in this state, and all official restraining orders may be perpetual or for such period and upon such terms and conditions as the court or judge thereof shall determine. All laws, rules and regula- tions now in force relating to applications for and granting or- ders of injunction in this state shall apply to proceedings under the provision of this act so far as the same are not different from or in conflict with the provisions of this act. § 4. Duty of state’s attorney. — It shall be made the special duty of each and every state’s attorney of each and every county in this state, who shall have good reason to believe that any of the provisions of section one of this act are being violated by any person or persons in his' county, or upon affidavit of two or more reputable persons made and delivered to him, showing or stating affirmatively that any person or persons in his county have violated any of the provisions of section one of this act, to make complaint and cause the arrest of such person or per- sons and to prosecute him or them diligently to conviction if 1204 [Senate, proved to be guilty, and also, at the request of any citizen of his county, and for good cause shown, apply for an injunction or restraining order as provided in this act: Provided, that the provisions of this section shall not be construed to prevent any person from making complaint to any court of competent juris- diction of any violation of the provisions of this act, and in such case the court shall issue a warrant and proceed with same as though the state’s attorneys had made the complaint; and the court may also permit any attorney whom the plaintiff may em- ploy to appear and prosecute such action at any stage of the proceedings therein, and such attorney’s fee, in any such case, shall be deemed part of the costs or prosecution as mentioned in section one of this act. § 5. The duty of secretary of state. — It shall be the duty of the secretary of this state, on the application for a charter to es- tablish any corporation, to require two applicants thereof to make oath or affirmation that such corporation is not being formed for the purpose of enabling several corporations to avoid the provisions of this act, and if such oath or affirmation is not sat- isfactory, the secretary is authorized to withhold such charter. The above act was amended by chapter 171 of the Laws of 1893 by adding to section 4 of said chapter the following: And provided further, that any person or persons, who may suffer damage by reason of the operation of any such pool, trust or combination defined in section one of this act, or any pool, trust or combination formed without, but holding property within the state may maintain an action therefor and may recover the amount of damage sustained; and any person or persons who in good faith may have contributed any funds or property, as a donation or otherwise for location, building or carrying on of any milling or manufacturing or other industry in this state, or any No. 40.] 1205 stockholder in any corporation or company formed for the pur- pose of carrying on and operating in such industry, which milling,, manufacturing or other industry may thereafter become the prop- erty of, or controlled by any such pool, trust or combination, without the consent of such person or stockholder, may maintain an action and recover from such pool, trust or combination or individual composing the same, a judgment for tne amount so contributed or invested in stock as the case may be, and the prop- erty, including the plant and all buildings, machinery and other property so owned or controlled by such trusts or combinations, shall be liable to 1 attachment and execution in such action and may be sold to satisfy any judgment therein, and the court in which such case is pending may appoint a receiver to take charge of such property and receive all rents, issued and profits there- from, in addition to such other powers as are now conferred by law upon receivers, and immediately after the sale of such prop- erty and confirmation thereof by the court, the purchaser shall be let into possession of such property; and in case of a surplus, after satisfying such judgment or judgments, the same shall be paid over to the clerk of the court in which such action is pend- ing, and shall be liable thereafter to the same extent as property sold is liable, and if such surplus shall remain in the hands of such clerk, and no proceedings instituted to recover the same, or any portion thereof, for three years thereafter, the same, or such portion thereof then remaining in the hands of said clerk, shall be paid over to the county treasurer of the county where such property shall be held or located and be credited to the school fund of the district or township in which such property is held or located and shall be paid out by such county treasurer in like manner as other funds belonging to such district or township. Approved March 6, 1893. 1206 [Senate, TENNESSEE Chapter 3 of title 13 of the Code of Tennessee reads as follows: " OF COMBINATIONS IN RESTRAINT OF TRADE.” Pools, combinations, etc-., unlawful. — All trusts, pools, con- tracts, arrangements or combinations made with a view or which tend to prevent full and free competition in the pro- duction, manufacture or sale of any article of domestic growth, production or manufacture; or in the importa- tion or sale of any article of domestic growth, production or manufacture; or in the importation or sale of any article grown, produced or manufactured in any other state or country; or which are designated (designed) or tend to fix, regulate, limit or reduce the price of any article of growth, production or manu- facture; or which are designed or. tend in a (any) way to create a monopoly are hereby declared to be unlawful, against public policy and void. (Laws of 1891, chap. 218, § 1.) Section 3186. Felony, entering or continuing any such pool, et cetera. — All persons entering into or continuing in any trust, pool, contract, arrangement, agreement or combination, either in his own account or as agent or attorney for another, or as an officer, agent or stockholder of any corporation or in any capacity whatever, shall be deemed guilty of a felony, and on conviction thereof shall be punished by a fine of not less than five hundred dollars nor more (than) five thousand dollars and imprisoned in the penitentiary not less than one year nor more than five years. (Code of Tennessee, 1896, p. 739.) § 3187. Debts, joint and several, liability for. — 2. All persons and corporations and the officers and stockholders of all cor- No. 40.] 1207 porations that shall become or continue to be members of, or in any way connected with or concerned in, such trust, contract, agreement or combination, shall be jointly and severally liable to pay all the debts, obligations and liabilities of each and every person and corporation that may become or continue a member thereof, or concerned therein as fully as if all were partners in the collection of such debts, obligations and liabilities. § 31SS. Charter forfeited; duty of attorney-general.— If any corporation organized under the laws of this state, or any officer or stockholder thereof, as such, shall become or continue to be a member of any such trust, pool, contract, agreement, arrange- ment or combination, its charter shall become and be thereby forfeited; and it shall be the duty of the attorney-general of the county where the same is located, or having its principal office, to bring suit against such corporation in the circuit court of such county, to have its said charter declared forfeited for that reason and to wind up the same under the order of such courts. § 3189. May be pleaded in abatement or bar of suits. — When any action at law r or suit in equity shall be commenced in any court of this state, it shall be lawful, in the defense thereof, to plead in bar or abatement of the action that the plaintiff, or any other person or corporation interested in the prosecution of the action, is a member or connected with, and the cause of action grows out of some business or transaction with such trust, pool, contract, agreement, arrangement or combination, as described in section thirty-one hundred and eighty-five. § 3190. Injured party may recover double damages. — Any per- son or corporation injured or damaged by any such trust, pool, contract, agreement, arrangement or combination, may sue and 120S [Senate, recover fines in any court of competent jurisdiction, double the, amount of damages suffered by said person or corporation. § 3191. Witnesses, who may be; matters criminating. — Upon the trial of any civil action against any corporation, person or copartnership for a violation of any section in this chapter, by officers, stockholders and other agents of such corporation, per- son or copartnership shall be competent witnesses against the defendant as such on trial; and such officers, stockholders and agents may be compelled to testify against such defendant, and produce the book and papers in their custody or control pertinent to the issues in such cases at or before the time of trial, and shall not be excused from producing any books or papers because the same might tend to criminate such witnesses; but nothing which such witness shall testify to, and any books or papers pro- duced by him, shall in no manner be used against him in any criminal action to which he is a party. TEXAS. TRUSTS. (H. B. No. 404, chap. 83.) An Act to define trusts, provide for penalties and punishment of corporations, persons, firms and associations of persons con- nected with them, and to promote free competition in the state of Texas, and to repeal all laws and parts of laws in conflict with this act. Section 1. Be it enacted by the legislature of the state of Texas, That an act entitled “ An act to define trusts and to pro- So. 40.] 1209 vide for penalties and punishment of corporations, persons, firms and associations of persons connected with them, and to promote free competition in the state of Texas,” approved March thirty, eighteen hundred and eighty-nine, be so amended as to here- after read as follows: § 1. That a trust is a combination of capital, skill or acts by two or more persons, firms, corporations or associations of per- sons, or either two or more of them, for either, any or all of the following purposes : 1. To create or carry out restrictions in trade or commerce or aids to commerce, or to create or carry out restrictions in the full and free pursuit of any business authorized or permitted by the laws of this state. 2. To increase or reduce the price of merchandise, produce or commodities. 3. To prevent competition in manufacture, making, transpor- tation, sale or purchase of merchandise, produce or commodities, or to prevent competition in aids to commerce. 4. To fix at any standard or figure, whereby its price to the public shall be in any manner controlled or established, any article or commodity of merchandise, produce or commerce in- tended for sale, use or consumption in this state. 5. To make or enter into or execute or carry out any contract, obligation or agreement of any kind or description by which they shall bind or have bound themselves not to sell, dispose of or transport any article or commodity, or article of trade, use, merchandise, commerce or consumption below 7 a common stand- ard figure, or by which they shall agree in any manner to keep the price of such article, commodity or transportation at a fixed or graded figure, or by which they shall in any manner establish 1210 [Senate,. oi* settle the price of any article or commodity or transportation between them or themselves and others to preclude a free and unrestricted competition among themselves or others in the sale or transportation of any such article or commodity, or by which they shall agree to pool, combine or unite any interest they may have in connection with the sale or transportation of any such article or commodity that its price might in any manner be affected. § 2. That any corporation holding a charter under the laws of the state of Texas which shall violate any of the provisions of this act shall thereby forfeit its charter and franchise, and its corporate existence shall cease and determine. § 3. For a violation of any of the provisions of this act by any corporation mentioned herein, it shall be the duty of the attorney- general or district or county attorney, or either of them, upon his own motion, and without leave or order of any court or judge, to institute suit or quo warranto proceedings in Travis county, at Austin, or at the county seat of any county in the state where such corporation exists, does business or may have a domicile, for the forfeiture of its charter rights and franchise and the dissolution of its corporate existence. § 4. Every foreign corporation violating any of the provisions of this act is hereby denied the right and prohibited from doing any business within this state, and it shall be the duty of the attorney-general to enforce this provision, by injunction or other proper proceedings, in the district court of Travis county in the name of the state of Texas. § 5. That the provisions of chapter forty-eight, general laws of this state, approved July nine, eighteen hundred and seventy- nine, to prescribe the remedy and regulate the proceedings by Xo. 40.] 1211 quo warranto, et cetera, shall, except in so far as they may con- flict herewith, govern and control the proceedings when insti- tuted to forfeit any charter under this act. § 6. If any person shall be or may become engaged in any com- bination of capital, skill or acts by which two or more persons, firms, corporations or associations of persons, or of either of them, combine for either, any or all of the following purposes: 1. To create or carry out restrictions in trade or commerce or aids to commerce, or to create or carry out restrictions in the full and free pursuit of any business authorized or permitted by the laws of this state. 2. To increase or reduce the price of merchandise, produce or commodities. 3. To prevent competition in manufacture, making, transporta- tion, sale or purchase of merchandise, produce or commodities, or to prevent competition in aids to commerce. 4. To fix at any standard or figure whereby its price to the public shall be in any manner controlled or established, any article or commodity of merchandise, produce or commerce in- tended for sale, use or consumption in this state. 5. To make or enter into or execute or carry out any contract, obligation or agreement of any kind or description by which they shall bind or have bound themselves not to sell, dispose of or transport any article or commodity, or article of trade, use, mer- chandise, commerce or consumption below a common standard figure, or by which they shall agree in any manner to keep the price of such article, commodity or transportation at a fixed or graduated figure, or by which they shall in any manner estab- lish or settle the price of any article or commodity or transporta- tion between them or themselves and others, to preclude a free 1212 [Senate, and unrestricted competition among themselves and others in the sale or transportation of any such article or commodity, or by which thej^ shall agree to pool, combine or unite any interest they may have in connection with the sale or transportation of any such article or commodity that its prices may in any manner be affected, or aid or advise in the creation or carrying out of any such combination, or who shall, as principal, manager, di- rector. agent, servant or employe, or in any other capacity, know- ingly carry out any of the stipulations, purposes, prices, rates, directions, conditions or orders of such combinations shall be punished by fine of not less than fifty nor more than five thou- sand dollars, and by imprisonment in the penitentiary not less than one nor more than ten years, or by either such fine or im- prisonment. Each day during a violation of this provision shall constitute a separate offense. § 7. In any indictment for an offense named in this act it is sufficient to state the effects or purposes of the trust or combi- nation, and that the accused was a member of, acted with or in pursuance of it, without giving its name or description, or how, when or where it was created. '•■V § 8. In prosecutions under this act it shall be sufficient to prove that a trust or combination, as defined herein, exists, and that the defendant belonged to it or acted for or in connection with it, without proving all the members belonging to it or proving or producing any article of agreement or any written instrument on which it may have been based, or that it was evidenced by any written instrument at all. The character of the trust or combi- nation alleged may be established by proof of its general repu- tation as such. § 9. Persons out of the state may commit and be liable to in- dictment and conviction for committing any of the offenses enu- No. 40.] 1213 merated in this act, which do not, in their commission, necessa- rily require a personal presence in this state, the object being to reach and punish all persons offending against its provisions, whether within or without the state. § 10. Each and every firm, person, corporation or association of persons who shall in any manner violate any of the provisions of this act shall, for each and every day that such violations shall be committed or continued, forfeit and pay the sum of fifty dol- lars, which may be recovered in the name of the state of Texas in any county where the offense was committed, or where either of the offenders reside, or in Travis county'; and it shall be the duty of the attorney-general or the district or county attorney to prosecute for and recover the same. § 11. That any contract or agreement in violation of the pro- visions of this act shall be absolutely void and not enforceable either in law or equity. § 12. That the provisions hereof shall be held cumulative of each other and of all other law's in any way affecting them now in force in this state: Provided, this act shall not be held to apply to live-stock and agricultural products in the hands of the producer or raiser, nor shall it be understood or construed to prevent the organization of laborers for the purpose of maintain- ing any standard of wages. § 13. That nothing in this act shall be held or construed to affect or destroy any rights which may have accrued, or to affect the right of the state to recover penalties, or to affect the right of the state to forfeit charters of domestic corporations and pro- hibit foreign corporations from doing business in this state, or affect the right of the state to maintain prosecutions for viola- tions thereof under any law of this state relating to trusts for acts heretofore done. 1214 [Senate, § 14. Any court, officer or tribunal having jurisdiction of the offense defined in this act, or any district or county attorney or grand jury may subpoena persons and compel their attendance as witnesses to testify as to the violation of any of the provis- ions of the foregoing sections. Any person so summoned and examined shall not be liable to prosecution for any violation of said sections about which he may testify fully and without res- ervation. § 15. All laws or parts of laws in conflict with this act are hereby repealed. § 16. Whereas, the people of this state are without an adequate remedy against trusts, therefore an emergency and imperative public necessity exists requiring that the constitutional rule which requires that all bills shall be read on three several days be suspended, and it is so> enacted. Approved, April thirty, eighteen hundred and ninety-five. UTAH. CHAPTER XXXIX. TO PREVENT POOLS AND TRUSTS. An act prohibiting and providing for the punishment of per- sons, copartnerships, associations and corporations forming pools, trusts, combinations or conspiracies, to affect or control the price of professional services or to affect or control the price, or limit or lessen the production, manufacture, con- sumption, use or sale of any article of commerce, manufacture or product of the soil, means for the suppression of such evils, and remedies for persons injured thereby. *”0. 40.] 1215 Be it enacted by the legislature of the state of Utah: Section 1. Any combination by persons having for its object or effect the controlling of the prices of any professional services, any products of the soil, or of any article of manufacture or com- merce or the cost of exchange or transportation, is prohibited and hereby declared unlawful. Any person who shall violate the foregoing provisions shall be subject to prosecution and punish- ment as hereinafter provided. § 2. If any person or association of persons shall create, enter into, become a member of. or a party to, any pool, trust, agree- ment, combination, confederation or understanding with any other person or persons, to regulate or fix the price of any article of merchandise of, or a party to, any pool, trust, agreement, con- tract, combination or confederation to fix or limit the amount or quantity of any article, commodity or merchandise to be manu- fectured, mined, produced or sold in this state, such person or persons, shall be deemed and adjudged guilty of a conspiracy to defraud, and be subject to punishment as hereinafter provided. § 3. It shall not be lawful for any corporation to issue or to own trust certificates, or for any corporation, agent, officer or employe, or the directors or stockholders of any corporation, to enter into any combination, contract or agreement with any per- son or persons, the purpose and effect of which combination, contract or agreement shall be to place the management or con- trol of such combination or combinations, or the manufactured product thereof, in the hand of any trustee or trustees, with the intent to limit or fix the price, or lessen the production and sale of any article of commerce, use or consumption, or to prevent, restrict or diminish the manufacture or output of any such arti- cle, or to monopolize any part of the trade or commerce within this state. 1216 [Senate, §4. If a corporation, a company, a firm or association, shall be found guilty of a violation of this act, it shall be punished by a fine in any sum not less than one hundred dollars nor more than two thousand dollars for the first offense; and for the second offense not less than five hundred dollars nor more than five thousand dollars; and for the third offense, not less than five thousand dollars nor more than ten thousand dollars; and for every subsequent offense shall be liable to a fine of fifteen thou- sand dollars. ( § 5. Any president, manager, director or other officer, agent or receiver of any corporation, company, firm or association, or any member of any company, firm or association, or any individual found guilty of a violation of this act, may be punished by a fine of not less than one hundred dollars, nor to exceed one thousand dollars, or by confinement in the county jail not to exceed one year, or both, in the discretion of the court before which such conviction may be had. § 6. Any contract or agreement in violation of any provision of the preceding sections of this act shall be absolutely void. § 7. Any corporation created or organized by or under the laws of this state which shall violate any of the provisions of the preceding sections of this act, shall thereby forfeit its corporate right and franchise, and its corporate existence shall thereupon cease and determine. § 8. It shall be the duty of the secretary of state, upon satis- factory evidence that any corporation or association of persons, incorporated or operating under the laws of this state, have en- tered into any trust, combination or association, as provided in the preceding provisions of this act, to give notice to such cor- porations that unless they withdraw from and sever all business Xo. 40.] 1217 connections with said trust, combination or association, their corporate right and franchise will be revoked at the expiration of thirty days from the date of such notice. § 9. At the expiration of the thirty days mentioned in the last preceding section, the secretary of state, shall cause a certified statement of the facts to be filed in the office of the attorney- general of the state, who shall proceed, or direct such proceedings by any county attorney in the state, to commence an action in the district court of any county in the state of competent juris- diction, to forfeit and revoke the corporate right and franchise of such corporation. When said proceedings are instituted, they shall be conducted as ordinary law actions, triable by court or jury. On the final decision of the same, should the defendant be found guilty of a violation of any of the provisions of this act, said court shall render a judgment and order a revocation of the charter, corporate rights and franchises of said corporation as a penalty for the violation or violations of which the said corpora- tion shall be found guilty, and the secretary of state shall there- upon make publication of such revocation in four (4) newspapers in general circulation in four of the largest cities of the state. § 10. In case any person or persons shall do, cause to be done, or permit to be done, any act, matter or thing in this act, pro- hibited or declared to be unlawful, such person or persons shall be liable to the person or persons injured thereby for treble the amount of damages sustained in consequence of any such viola- tion of the provisions of this act. § 11. The words “ person ” or “ persons,” wherever used in this act shall be deemed to include corporations, companies and asso- 77 1218 [Senate, ciations existing under or authorized by the laws of either the United States or any of the territories, any state or any foreign « country. Approved March 9, 1896. VIRGINIA. NO STATUTE. The secretary of the commonwealth, in reply to a letter ad- dressed to him on this subject, stated that no laws had been passed by the legislature of Virginia in respect of combinations of capital popularly known as trusts. That a. bill for that pur- pose was introduced at the last session of the general assembly of that state and failed of passage. WASHINGTON. Section twenty-two of the constitution of the state of Washing- ton provides as follows: “Monopolies and trusts shall never be allowed in this state, and no incorporated company, copartner- ship or association of persons in this state shall directly or indi- rectly combine or make any contract with any other incorporated company, foreign or domestic, through their stockholders or the trustees or associates of said stockholders, or with any copart- nership or association of persons or in any manner whatever, for the purpose of fixing the price or limiting the production or Ho. 40.] 1219 regulating the production of any product or commodity. The legislature shall pass laws for the enforcement of these acts by adequate penalties, and in case of incorporated companies’ of- fenses for that purpose may declare the forfeit of their charters. The state law prohibits any combination for artificially raising or depressing the market price of any foreign dairy produce or growing products or for excluding from the market the produce of any particular locality, grown or manufactured by any person. WISCONSIN. CHAPTER 219. An Act to protect trade and commerce against unlawful trusts and monopolies. The People of the State of Wisconsin, represented in Senate and Assembly, do enact as follows: Section 1. Every contract or combination, in the nature of a trust or conspiracy in restraint of trade or commerce, is hereby declared illegal. § 2. Every person w r ho shall monopolize, or attempt to monopo- lize, or combine or conspire with any other person or persons to monopolize any part of the trade or commerce in this state, shall be deemed guilty of violating the provisions of this act, and upon conviction thereof shall forfeit for each such violation not less than fifty dollars, nor more than three thousand dollars, together with the cost of prosecuting such forfeiture; -such forfeiture and costs to be collected as is now provided by statute for the collec- tion of forfeitures. 1220 [Senate,. § 3. Jurisdiction is hereby conferred on the several circuit courts of this state to prevent and restrain, by injunction or otherwise, any violations of the provisions of this act; and it shall be the duty of the several district attorneys of the several coun- ties in this state, upon the advice of the attorney-general, who may appear as counsel in such case, to institute such actions or proceedings as the attorney-general may or shall deem necessary to prevent or restrain any violation of this act. Such proceed- ings shall be by way of information or complaint, as in ordinary actions, setting forth the case and grounds for the interference of the court, and praying that such violations, whether continuing or intended, shall be enjoined or otherwise prohibited. When the parties complained of or informed against shall have been duly notified of and cited to answer such information or complaint, the court shall proceed as soon as may be, in accordance with its rules and practice, to the hearing and determination of the casls; and pending such information or complaint, and before final judgment, the court may at any time, upon proper notice, make such temporary restraining order, injunction or prohibition as shall be just in the premises. § 4. Whenever it shall appear to the court before which any examination under section three of this act may be pending, that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned in such manner as the court shall direct. § 5. Any person transacting or doing business within this state who shall be injured in his business or property, by any other person or corporation, by reason of anything forbidden or declared to be unlawful by this act, may recover the damages by him sustained and costs of suit. ( ; : No. 40.] 1221 § G. The examination of any party, or in case a corporation be the party, the examination of the president, secretary or other proper officer or general managing agent of such corporation, or any person acting for another or acting for such corporation or partnership, otherwise than as a witness on a trial, may be taken by deposition at the instance of the state of Wisconsin, in any action or proceeding under this act, at any time after the com- mencement thereof, and before final judgment. Such deposition shall be taken before a judge, at chambers, on a previous notice to such party and any other adverse party, or their respective attorneys, of at least five days, or it may be taken without the • state, upon commission, in the manner provided for taking other depositions. The attendance of the party to be examined may be compelled, upon subpoena, without payment of witness fees, and such examination shall be subject to the same rules as that of any other witness; but he shall not be compelled to disclose anything not relevant to the controversy. If such examination shall be taken before issue joined, the notice of taking the same shall be accompanied by the affidavit of the district attorney, the attorn ey-gen oral or some other party, stating the general nature and object of the action, that discovery is sought to enable the party to plead the points upon which such discovery is de- sired, and such examination shall be limited to discovery of the facts relevant to the points so stated unless the court, or the presiding judge thereof, on motion and one day’s notice, shall, before the examination is begun, by order, further limit the sub- jects to which such examination shall extend; but such examina- tion shall not preclude the right to another examination after issue joined upon all the issues in the case, and the party ex- amining shall, in all cases, be allowed to examine upon inter- / 1222 [Senate, rogatories. Suela examination shall not be compelled in any other county than that in which the party to be examined re- sides: Provided, that whenever plaintiff or defendant is a non- resident of the state, his deposition may be taken, under the provisions of this section, in the county in which the action is pending, if he can be personally served with notice and sub- poena in such county. In any examination under the provisions of this section, the judge or commissioner before whom the same is had, shall have power and authority to compel the party ex- amined to answer all questions relevant to the issues involved, and shall, upon the application of the attorney-general, compel the production by the party examined of all books, papers and records relevant and pertinent to the issues, and may enforce such orders and the production of such books, papers and records by contempt proceedings. § 7. If any defendant or his agent lawfully required to appear and testify, as provided in this act, either within or without the state, shall neglect or refuse to do so, he may be punished as for contempt, and the pleading of such defendant may, in the dis- cretion of the court, be stricken out, and judgment given against him, according to the prayer of the complaint of the state. § 8. The word “ person ” or “ persons,” wherever used in this act, shall be deemed to include corporations, partnerships, indi- viduals and associations existing under or authorized by the laws of the United States, the laws of any of the territories, the laws of this or any other state or the laws of any foreign country. § 9. This act shall not be construed to affect or in any manner refer to or interfere with labor unions or any other associations of laborers organized for the purpose of promoting the welfare of labor, nor shall it interfere with or suppress associations or No. 40.] 1223 organizations intended to legitimately promote the interests of trade, commerce or manufacture in this state. § 10. All acts and parts of acts inconsistent with this act are hereby repealed. § 11. This act shall take effect and be in force from and after its passage and publication. Approved, April seventeen, eighteen hundred and ninety-three. List of States in which no law against trusts, or combinations of capital, individuals or corporations, in restraint of trade, have been enacted: Arkansas, California, Colorado, Florida, Nevada, New Jersey, North Dakota, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia. West Virginia, Wyoming. I ’ I INDEX TO WITNESSES Havemeyer, Theodore A, Havemeyer, Henry O.. . Arbuckle, John Jar vie, James M Parsons, John E Randall, Samuel H M oiler, George R Callahan, Michael Connele, James S Beardsley, E. S Post, James H Searles, John E Fuller, Lawson N Bergin, John Duggan, Edward J Flint, Charles R Walker, William I Dwight, John E Pope, Charles F Burn, Henry Ford, James B Smith, G. Waldo Duke, James B Browne, Josiah Thurber, F. B PAGE. 65 98 , 162 , 652 127 , 131 , 139 , 145 , 193 134 , 148 143 , 264 , 431 , 589 , 664 266 267 289 293 302 309 . . . . 196 , 346 , 372 , 420 270 , 443 189 279 451 , 475 , 590 , 709 , 736 537 578 581 677 , 689 765 806 860 , 884 909 626 , 978 PAGE. Harris, William R 983 Whelan, George G 988 Schulte, Anthony 995 Sloan, Samuel 998 Thomas, E. B 1011 Gibbons, Frederick H 1023 Walker, Charles A 1025 Holden, Edwin R 1035 Williams, Richard H 1027 Krenning, Francis H 1057 Wisner, Clinton W 1080 Dixon, Joseph B 1088 Heilner, P. B 1097 INDEX TO EXHIBITS. PAGE. American Sugar Refining Company : Factors' agreement 128 Factors’ affidavit 129 Application for permission to act as factor 130 Deed incorporating American Sugar Kefining Co 168 Contract for purchase of Franklin Refinery 179 Contract for purchase of Knight & Co. Refinery 184 Contract for purchase of Delaware Refinery 185 Option for purchase of Franklin Refinery 672 Resolution authorizing issue of stock for purchase of Philadelphia refineries 671 Statement of amount of taxes paid State of New York. 672 Uniform code of rules for sale of sugar 856, 1124 Instructions to salesmen 1076 Howell, Sons & Co.: Equality rate book 410 Factors’ agreement 412 Dwight & Co.: } Factors’ agreement 542, 543 Church & Co.: Factors' agreement 545 United States Rubber Company: Simmons report 638 1228 Index. PAGE United States Rubber Company — Continued. Factors’ agreement G46 Supplementary factors’ agreement G51 Agreement, C. R. Flint and H. B. Hollins & Co S02 Certificate of organization 1119 National Wall Paper Company: Factors’ agreement 804 Agreement with Hobbs & Co 1099 American Tobacco' Company: Factors’ agreement 878 List of consignees whose agreements were revoked. . . . 913 List of consignees not allowed to sell competing goods, 918 Statistics from Bureau of Labor Statistics in re sugar 1128 INDEX TO LAWS Anti-trust Laws and Laws to Prevent Combinations, in respect to trade, enacted by: PAGE. United States Congress 1135 Alabama 1139 Connecticut 1141 Delaware 1141 Georgia 1141 Illinois 1144 Indiana 1151 Iowa 1155 Kansas 1159 Kentucky 1103 Louisiana 1166 Maine 1171 Maryland 1173 Massachusetts 1174 Michigan 1175 Minnesota 1178 Missouri 1182 Montana 1189 Nebraska 1191 New Hampshire 1194 North Carolina 1195 Ohio 1197 South Carolina 1197 1230 Index. PAGE. South Dakota 1198 Tennessee 1206 Texas 1208 Utah 1214 Virginia 1218 Washington 1218 Wisconsin 1219