1903-10-08-New York Times-Dresser Tells Inside of Shipbuilding Deal
New York Times
8 October 1903, page 1
DRESSER TELLS INSIDE OF SHIPBUILDING DEAL.
Morgan's and Sehwab's Profits on Bethlehem Plant. THEIR STOCK SOLD FIRST. Ex-President of Steel Trust, He Says, Failed in Promise to Help Combination -- Witness Resents Insinuations.
That Charles M. Schwab and the banking firm of J.P. Morgan Co. cleared millions of dollars by selling the Bethlehem Steel Works to the now bankrupt United States Shipbuilding Company was one of the many statements made yesterday by Daniel Le Roy Dresser, witness at the hearing ordered by Judge Andrew Kirkpatrick of the United States District Court in the case of Roland R. Conklin and others, first mortgage bondholders, against the shipbuilding combination.
It was asserted that Mr. Schwab, Mr. Dresser, Lewis Nixon, and Harris, Gates & Co. entered into a copmact whereby the Gates brokerage firm was to sell the Morgan and Schwab shipbuilding holdings ahead of all others. These favored stocks represented $20,000,000. In order to effect the sale at the best possible prices Harris, Gates & Co. were to hold in a pool nearly all the remaining shares of shipyard stock, aggregating about 450,000 shares. Outside of the pool were left only 15,000 shares of preferred and 15,000 shares of common stock belonging to individuals who could not be drawn into the arrangement.
Besides giving the story of the Bethlehem deal, which involved transactions showing the dependence of Mr. Schwab on J. P. Morgan in the matter, Mr. Dresser told of Mr. Schwab's ultimate control of the shipbuilding combination and how it was secured through the agency of Max Pam. He described the organization from the start and the parts played by the Trust Company of the Republic, Mr. Nixon, Col. John J. McCook, Charles B. Alexaner, John W. Young, and Charles C. Deming. Concerning his own actions before he left the Presidency of the trust company he testified freely, declaring that he had done nothing criminal and nothing without due authority, and that the Trust Company of the Republic was in no sense one of the promoters of the scheme.
�He told how he had been President of the Trust Company of the Republic, organized on March 31, 1902. Mr. Untermyer asked what he had to do with the shipbuilding company. He replied that his connection with the combination began in the latter part of April, 1902, when Col. John J. McCook of the law firm of Alexander & Green, visited him. Col. McCook informed him that the Mercantile Trust Company, underwriter for the shipyard combination, had rasied abroad $6,000,000 out of the $9,000,000 required for the bond issue, and that he wished Mr. Dresser's company to raise the other $3,000,000. The Trust Company of the Republic was to act as transfer agent.
Col. McCook, according to the witness, came in behalf of John W. Young, promoter. The understanding was that $3,000,000 of the foreign $6,000,000 was to come from London, and $3,000,000 from Paris. Mr. Dresser had met Mr. Young previously, but had not discussed with him the shipbuilding plan. After seeing Col. McCook, he referred the scheme to the trust company's Executive Committee, which instructed him to go ahead and do what he thought necessary to secure the business for the company. It took him ten days to arrange for the $3,000,000.
Then he was informed by Col. McCook, he said, that the London subscriptions were belated, and therefore he was to raise another $1,750,000 here, while the balance of $1,250,000 would be obtained in Paris. So altogether the Trust Company of the Republic underwrote for the underwriters $4,750,000. Mr. Dresser said that the information he received came in the shape of statements from Col. McCook, who also showed him many cable dispatches from Charles B. Alexander, the representative of the promoters in Paris. Expert accountants' reports as to the condition of the various shipyards were shown to him, and he took them as reliable.
VALUE OF BETHLEHEM PLANT.
Mr. Dresser said that John W. Young was in Europe and had nothing to do with the deal. He explained that the contract was drawn up in the next few days, and he and Mr. Nixon went to Mr. Schwab's office. They saw an agreement entirely different, he said, from the one upon which they had settled at the previous meeting. This new contract, for which they were unprepared, was drawn up between Messrs. Nixon and Dresser on the one hand and J. P. Morgan & Co. on the other. Nixon and Dresser agreed to purchase on Aug. 11 for $7,200,000 the Bethlehem Steel Works from J. P. Morgan & Co. Mr. Dresser objected on the ground that he had agreed to no such form of arrangement, but Mr. Schwab explained that his personal affairs had made it necessary that the matter should be settled after the fashion indicated in the contract.
VALUE OF BETHLEHEM PLANT.
The questioning next turned to what sum the trust company was to receive as a reward for its part in the shipyard deal, and Mr. Dresser said he could not recall the exact figures, but he believed the profit would have been as much as $500,000. He suggested that the matter was one of record, and Mr. Guthrie, as counsel for the trust company, could procure the figures easily. He said that the securities held by the trust company were in the name and under the orders of John W. Young, and were not held by the company for itself.
