1903-10-22-New York Times-Nixon Warned Schwab of Shipyards' Ruin
New York Times
22 October 1903, page 1
Contents |
NIXON WARNED SCHWAB OF SHIPYARDS' RUIN
Says He Vainly Protested Against Methods Used. BETHLEHEM BURDEN HEAVY Canda Plant, Which Made Quadricycles and Launch Engines, Was Bought in for $1,100,000 in Cash and Securities.
Lewis Nixon, President of the United States Shipbuilding Company, was on the witness stand three hours yesterday at the hearing in Samuel Untermyer's office before Special Examiner Henry D. Oliphant, appointed by Judge Kirkpatrick of New Jersey to take testimony in the case of the first mortgage bondholders against the shipyard trust. In the essential matters relative to the rise and fall of the trust, Mr. Nixon corroborated D. Le Roy Dresser, who told his story two weeks ago.
That Mr. Nixon, like Mr. Dresser, relied largely upon the assurances of John W. Young and the other original promoters in the initial proceedings was acknowledged by Mr. Nixon, who admitted that he made but scant detailed investigations into the finances of the consitituent shipyard concerns before the amalgamation.
The story of the Bethlehem steel deal with Charles M. Schwab and J. P. Morgan & Co. was told substantially as Mr. Dresser told it, with some new features added. The evolution of the Schwab Directorate, too, was described by Mr. Nixon, who declared that he formerly warned Max Pam and the other Schwab Directors that he believed their resolution to appropriate shipyard funds to Bethlehem purposes would wreck the shipbuilding companies.
BUILT LAUNCH ENGINES.
From 1896 to the time of the option experimenting with these automobiles, said the witness, was the principal business of his company. In the seven years probably eighty quadricycles were built. Between fifteen and twenty were sold. Mr. Canda was asked to produce the option and did so. Mr. Untermyer asked if his company ever had done any work appertaining to shipbuilding, and the reply was that it had built some engines for launches.
- Q.--How many? A.--Six or seven--there are three on hand still.
- Q.--Three that you made in those seven years? A.--Yes.
- Q.--Did you make at any time anything that was used in the construction of ships? A.--No.
- Q.--What connection had your business with the shipbuilding industry? A.--The location, the buildings, and the plant were considered available for use--just as available as for making automobiles and engines for launches.
- Q.--Has the plant ever been operated since it was acquired by the United States Shipbuilding Company? A.--No.
- Q.--When you transferred the property to the shipbuilding company did you get $200,000 in cash? A.--Yes.
- Q.--Did you get $300,000 in preferred stock? A.--Yes.
- Q.--Did you get $300,000 in common stock? A.--Yes.
- Q.--And you paid no part of it out in commissions? A.--No.
- Q.--Who suggested that your plant go into the shipyard combination? A.--I think it was Mr. Young.
- Q.--Do you know at what price it was put into the shipbuilding company? A.--No, Sir.
- Q--You had no curiosity on that subject. A.--No, Sir.
When asked about the first plan for a shipyard combination, Mr. Nixon said he never heard of such a scheme until 1900 or 1901, in the office of Andrew Freedman. There he met John W. Young. The plan they framed included the amalgamation of the Newport News Shipbuilding Company and the Crescent, Canda, Bath, Moore, Hyde, and Union Iron Works plants. He said he thought Roach's was also mentioned. In the final formation, planned after the failure of the first, the Newport concern and Roach's were omitted, and the Harlan & Hollingsworth Company was added.
In connection with the first scheme there was a subscription paper in lieu of underwriting, and Mr. Nixon recalled that the Mercantile Trust Company was in charge. Alexander & Green were counsel. Poor & Co. undertook to collect the subscriptions, but failed to do so. The name of the combination was to have been the United States Co-operative Shipbuilding Company.
VALUE OF STEEL PLANT.
Mr. Nixon said he had known Charles M. Schwab four years and had heard from him in a casual way about the acquisition of the Bethlehem plant, but neither he nor Mr. Schwab knew about the second shipyard scheme until Mr. Young returned from Europe, where he had been searching for underwriters. Mr. Schwab then agreed to underwrite $500,000 of bonds, as he previously had subscribed for that amount in the unsuccessful scheme under the management of Poor & Co.
PROFITS FOR PROMOTION.
At the afternoon session Mr. Nixon recalled that he talked with Mr. Schwab about promotion profits, and upon the latter's demand he gave him a signed memorandum to the effect that he (Schwab) was to receive from John W. Young for such profits, $100,000 in bonds and either $100,000 or $200,000 in each kind of stock. Mr. Schwab had told him, he explained, that some of these promotion profits would have have to be given to Mr. Gates.
This was the first time it had developed at the hearing that Mr. gates was in any of the preliminary deals. Mr. Untermyer asked for details, but the witness could recall only that Mr. Schwab said he (Schwab) ought to get some promotion profits if any of the underwriters did. Later, after the memorandum was signed, Mr. Young wrote to Mr. Nixon a letter, saying that none of the responsibility of making good the memorandum bargain was to be upon Mr. Nixon's shoulders.
The witness described the payents of their money to the shipyard owners who sold out to the combination. The checks from the Trust Company of the Republic were drawn in Nixon's name.The latter had promised John W. Young not to divulge the prices, and so the checks were transferred in this manner. The total amount represented by more than a dozen checks was $6,000,000. He had not carried on the negotiations, and was simply carrying out a schedule arranged beforehand.
Asked what he had done with his memorandum of the prices, he said:
"Mr. Young had asked me to keep them secret, and I thought destroying the memorandum was about as good a way as any to do it. I can give you the figures from memory, however. But I want to say that I promised not to give them, and anything I tell here is forced from me."
Instead of having him give the figures Mr. Untermyer called for the checks, which were produced by an official of the Trust Company of the Republc. There were twenty of them altogether. Thirteen were payable to Mr. Nixon. One, for $2,250,000, was in the name of J. & W. Seligman, bankers. Seven were payable to E. W. Hyde, as Trustee for the Hyde Windlass Company.
