1903-10-15-New York Times-Dresser Says Schwab Wrecked Ship Trust
New York Times
15 October 1903, page 16
DRESSER SAYS SCHWAB WRECKED SHIP TRUST
Effect of Holding Back Bethlehem Plant Earnings. HAD NO PERSONAL PROFIT. Recently Sought Interview with Ex-President of Steel Trust to Induce Him to Re-establish Yard Combination--"Dummy" Directors Testify.
In his second day of testimony regarding the affairs of the United States Shipbuilding Company, Daniel Le Roy Dresser made the direct charge that Charles M. Schwab had wrecked the trust. This accusation was the feature of the session, which was held in the office of Samuel Untermyer, at 30 Broad Street, yesterday morning and afternoon.
VOTED AWAY MILLIONS.
Incidentally it was brought out that they and a third associate voted away $70,000,000 of securities without knowing even where the shipyards were located and hardly knowing the names of the trust's officials.
Special Commissioner Henry D. Oliphant, appointed by Judge Kirkpatrick of the United States District Court of New Jersey, presided at the hearing. Henry Wollman appeared with Mr. Untermyer for the plaintiffs in the action seeking to make the shipyard receivership permanent. With Mr. Guthrie for the company was Charles C. Deming of Alexander & Green. William J. Curtis of counsel for the reorganization committee also was present. Lewis Nixon, who, it is expected, will take the stand this morning, and Oliver Wren, Mr. Schwab's confidential secretary, were attentive listeners, and among other future witnesses, most of whom were sworn during the day, were John W. Young, promoter of the trust; Winthrop E. Scarritt, the successor of Mr. Dresser as President of the Trust Company of the Republic; Charles. I. Canda, and Joseph E. Schwab.
Questioned as to what he had got for himself out of the ship yard deal, Mr. Dresser said there had been no agreement on the subject. There had been no paper or memorandum naming an amount of stocks or bonds or both in that connection. There was a big surplus of cash for promotion expenses.
"Is it true," he was asked, "that you collected and used for yourself any of the cash?"
"Absolutely, no."
"Any bonds?"
"No."
"Did you get any stocks for your own use?"
"Yes, from John W. Young, in Paris," said Mr. Dresser.
He explained that when he met the promoter in Europe the latter gave him stock which he sold for $100,000, though the par value was about $1,200,000. He told the promoter that his affairs in New York were in a bad way. The value of his 1,450 shares in the Trust Company of the Republic had come to be of no value, he informed Mr. Young. In answer to further questioning he did not deny that he had drawn as much as $135,000 for promotion expenses from the trust company, and what he did with the money was a matter of record. he had no objection to any one's knowing all about it.
BORROWED SHIPYARD BONDS
Mr. Guthrie recalled that in Mr. Dresser's schedule of bankruptcy there was a mention of his owning some shipbuilding first mortgage bonds. Mr. Dresser responded that he did not believe he owned them. He explained that W. S. Andrews had loaned him some of the bonds when he was hard pressed, but that since then there had arisen in the courts the question of who the bonds belonged to. Mr. Guthrie then asked if it was not true that Mr. Dresser had given John W. Young in Paris a draft on himself. Mr. Dresser, after admitting that he had, said:
"Do you want me to give the reason why I did not honor the draft?"
"No, only facts," responded the lawyer.
"But I want to give the reasons," persisted the witness.
There was a dispute between the lawyers, and Mr. Dresser had to postpone his explanation until the redirect examination by Mr. Untermyer. An hour later, however, he got the chance to tell how he had cabled from Paris, before giving the draft, to discover if certain shipbuilding securities were still on deposit with the Trust Company of the Republic. He received an affirmative answer, and the draft was given to Mr. young against those securities. On returning home Mr. Dresser found that the Sheldon Reorganization Committee had taken the securities, and the cable answer sent to him by the trust company had been worded wrong. The trust company had left out the word "not" in describing the status of the bonds and stocks.
When the dispute over this matter had ended, Mr. Untermyer obtained from the Trust Company of the Republic's officials and introduced in evidence a memorandum that Mr. Dresser described as having been given to him by Col. John J. McCook in the early stages of the shipyard organization. The memorandum was as follows:
Nine-million-dollar bonds to be underwritten at 90 equals $8,100,000. Underwriting in France, $6,000,000. Underwriting in United States, $3,000,000.
| Cash. | Bonds. | Common Stock. | Preferred Stock. | |
| Vendors receive | $6,400,000 | $4,050,000 | $4,000,000 | $4,000,000 |
| Working capital | 1,500,000 | 1,500,000 | ||
| Expenses, &c. | 200,000 | 300,000 | 500,000 | 500,000 |
| $8,100,000 | ||||
| To obtain which underwriting bonds at 90 per cent. | 9,000,000 | |||
| 25 per cent. stock bonus of each | 2,250,000 | 2,250,000 | ||
| Commissions of underwriting | 150,000 | 750,000 | 750,000 | |
| Promotion | 1,000,000 | 2,500,000 | 2,500,000 | |
| $16,000,000 | $10,000,000 | $10,000,000 | ||
| To secure the underwriting and issue in France and England requires the following: | ||||
| Expenses | $133,000 | $200,000 | $300,000 | $300,000 |
| Commissions on underwriting | 100,000 | 500,000 | 500,000 | |
| Promotion | 400,000 | 1,000,000 | 1,000,000 | |
| $700,000 | $1,800,000 | $1,800,000 | ||
| Leaving the following remaining for expenses | 67,000 | 100,000 | 200,000 | 200,000 |
| Commissions on underwriting | 50,000 | 250,000 | 250,000 | |
| Promotion | 600,000 | 1,500,000 | 1,500,000 | |
| $67,000 | $750,000 | $1,950,000 | $1,950,000 |
As to what each separate shipyard owner got for his property, Mr. Dresser said he had never been informed, but John W. Young probably would know. The figures in the memorandum were all he ever received along that line, but he know that Charles C. Deming, Col. McCook's law partner in the firm of Alexander & Green, did the actual business of making the payments. The Trust Company of the Republic disbursed the money by checks drawn "in the name of one person," because it was explained that such was the best method. The titles to the properties came back in due time through Mr. Deming.
