1903-12-19-New York Times-Effort To Underwrite Shipyards in France

New York Times

19 December 1903, page 16

EFFORT TO UNDERWRITE SHIPYARDS IN FRANCE

Mr. Alexander Testifies to His Experiences Abroad.

Effect of Morgan & Co.'s Dispatch to Morgan, Harjes & Co. -- Some Bethlehem Deal Cables.

Notwithstanding the efforts of counsel for the United States Shipbuilding Company to prevent the introduction of papers showing transactions of the law firm of Alexander Green, the lawyer for the complainants, in the shipyard case, managed to disclose at yesterday's hearing the contents of some of the cable dispatches and letters sent from Paris in 1902 by Charles B. Alexander, then having the mission of making the French underwriters pay their obligations.

The correspondence which William D. Guthrie and his associates of the shipbuilding company's counsel have prevented from being made public contains various personal references by Mr. Alexander to well-known financiers here and in Europe. The comments are not complimentary. Young Mr. Harjes, for instance, comes in for some picturesque characterization because of his actions previous to the time his banking house received a message from its New York correspondent, J. P. Morgan & Co. Then the Seligmans of this city and Paris are favored with remarks from the pen of Mr. Alexander, who at that time believed they were trying to injure the underwriting plan.

More than once Mr. Untermyer has referred to Alexander & Green as having promoted the shipyard combination. Whether the correspondenc will be published in full rests with Judge Kirkpatrick.

While questioning Mr. Alexander, Mr. Untermyer held before him a copy of all the disputed correspondence. The question of how the complaints came into possession of this transcript has puzzled some of those familiar with the case. It is known now that the law firm gave to D. Le Roy Dresser copies of all the cable messages and letters, in order to let himknow how things were going in Paris. Mr. Dresser had the copies Incorporated in the records of the Trust Company of the Republic, and from there they were taken by subpoenas on the company's counsel, James B. Dill.

CHANGED THEIR ATTITUDE.

The questioner brought out yesterday that the Paris firm of Morgan, Harjes & Co., after having spoken unpleasantly of the shipbuilding enterprise, suddenly changed front on receiving from J. P. Morgan & Co. the cablegram informing them that "C. M. Schwab and his friends" were interested in the flotation of the combination. It also came to light that Mr. Alexander on one occasion wrote something about John W. Young being an "ass." He also wrote that he threatened young Harjes with reporting him to J. P. Morgan if he didn't take a more cordial view of the shipyard enterprise.

The hearing was held again in the rooms of the Board of Trade and Transportation at 203 Broadway; before Special Examiner Henry D. Oliphant, Messrs. Pam and Schwab, Col. John J. McCook of Alexander & Green, and President McIlvaine of the Bethlehem Steel Company were among those present.

The session began with a wordy controversy between counsel as to Mr. Untermyer's questioning about a certain cable in which Mr. Alexander had directed the sale of certain securities owned by him. It developed that part of the message was in cipher. The witness translated the words "tomb" and "piously" as referring to Union Pacific preferred and not to shipbuilding securities. The message closed, "Sell new rights on my tomb piously."

Q.--You did not know the exact values of the plants in the new concern? A.--No; I would not presume to form a judgment.

Q.--You did not form a judgment? A.--Not in dollars and cents.

Q.--Did you know anything of the earnings of any of these companies? A.--No.

Q.--Did you know what the working capital of the new company was to be? A.--No, I don't think I did.

Q.--While attending to the matter of the French underwriting, were you in the possession of such knowledge as entitled you to recomment the securities to the investors? A.--I did no recommend these securitiees. And the question calls for my judgment rather than for facts, and so I don't feel like answering it.

Q.--Did you in the course of your investigations discuss the values of the properties and their merits with the investors? A.--I had interviews from time to time wiht a number of the underwriters. I confined myself strictly to saying I was not an expert in judging the values, but I personally considered the properties of great value and the personnel of the men in the company to be very high. The burden of my conv ersations was that the men had agreed to make underwriting payments before my arrival, and that they were bound to do so.

Asked if he had told the Oppenheims and Judge Mayer that $1,000,000 could be raised in England without difficulty, Mr. Alexander said he had remarked that a London banker expressed that opinion, but later the banker said he did not want to be in it. The Oppen heims, he admitted after much questioning, had the relation of assisting in securing the underwriting. Again the question of privilege of lawyer on matters appertaining to his client was raised.

UNDERWRITER WAS ANGERED.

The disjointed story of the negotiations in Paris began with a visit to the Oppenheims. Then Mr. Alexander was introduced by Robert Oppenheim to Baron Calvet-Rogniat, who took about $1,000,000 of the underwriting. Mr. Untermyer, reading from the copy of cablegrams and letters, asked if during a subsequent visit to the Baron that gentleman had complained of having been treated very badly, and if his complaint did not amount to a "tremendous denunciation."

"That is a fair description of what happened," replied Mr. Alexander.

Rogniat, it was admitted, complained that he had been deceived as to the success of the shipbuilding enterprise. As he complained, he said he had taken John W. Young's statements as coming from Col. John J. McCook and the Mercantile Trust Company. But Mr. Alexander responded that he was not responsible for Young's statements.

The witness admitted having told the Baron that success did not mean the selling of all the bonds, but only of enough of them to persuade the Trust Company of the Republic of New York that the French negotiations were successful. He was asked if he told the Baron that it was the custom in New York to declare all issues of bonds a success and peddle all the bonds afterward.

"I am afraid that is so," he said.

"You think that is true among reputable financiers in New York?"

"Yes, I fear so. It was my general impression that it was so in New York."

After Mr. Alexander's argument Rogniat said he was "perfectly delighted," and thought the underwriting was a "good thing." These expressions Mr. Untermyer read from the letters, and the witness acquiesced. Mr. Alexander did not explain the final refusal of Rogniat to pay his underwriting.

Q.--Did you tell Baron Rogniat that you, too, thought he and M. Sourdis had been treated very badly? A.--I don't remember exactly that expression, but I was sympathetic. Yes, I was sympathetic.

When asked if he told Mr. Oppenheim to go to the Baron and say that the underwriting would be forthcoming from New York if Paris did no pay up, and that it was too good a thing for Paris to miss, the witness replied that if he told Oppenheim anything like that it must have been in the presence of Mr. Young, and therefore privileged.

He recalled the 25 per cent. call upon the French underwriters, but could not recall whether he had cabled to the Trust Company of the Republic to make that call. The Oppenheims deplored the unexpectedness of the call.

Q.--Did you tell the Oppenheims, in substance, that J. P. Morgan had taken some of the Shipyard bonds? A.--I told them I had heard that rumor.

Q.--How did that excite the Oppenheims? A.--I don't know how, but it did excite them.

Q.--You objected to the selection of Morgan, Harjes & co. to receive this money? A.--They were not my first choice, but I may say that I was not left to choose?

Q.--Who designated Morgan, Harjes & Co. to receive the money? A.--I don't remember, and I decline to answer, on the ground that it is privileged.

Q.--Did the request come from New York? A.--Yes.

Q.--From one of your clients? A.--Either from one of them or from my firm.

Mr. Untermyer inquired if the witness ever told a Mr. Monroe who recommended or designated Morgan, Harjes & Co. The witness did not remember. Mr. Untermyer said:

"Let me refresh your memory. Did you not say it was on account of J. P. Morgan's request?"

COULD NOT RECALL REMARK

Mr. Alexander did not recall the remark. Later he said that in July, 1902, he tried in vain to persuade some of the underwriters to assign their underwriting. They did not wish to do so, thinking the underwriting a good thing. Mr. Untermyer asked what happened between that time and the time when they refused to pay up. Mr. Alexander said he did not know.

Q.--Is it not a fact that what happened in the interval was that the French underwriters made an investigation as to the merits of this enterprise? A.--I don't remember such an investigation, except that the underwriters constantly were asking questions about the matter.

Q.--Don't you know that they started an investigation through a New York banking house? A.--I don't recall it.

Q.--Don't you recall that such an inquiry was set on foot through the Seligmans? A.--I do not.

Q.--Also inquiries through Ladenburg, Thalmann & Co.? A.--I have the faintest recollection about some inquiry being made through Ladenburg, Thalmann, & Co.

Mr. Untermyer read from a letter in which it was recorded that C. B. Alexander, when he called on young Harjes, was told by Mr. Harjes that Young caused him (Harjes) to have a bad idea of the enterprise. Young Harjes remarked that he knew Young and did not trust a plan in which he was engaged. Alexander answered that he had not introduced Young, but that Young was just such a promoter as J. P. Morgan "often made use of" in New York.

The witness said he could not recall terming Young "a mere promoter" or saying that Young was the sort of man used by Mr. Morgan. At this point Mr. Guthrie made strenuous objection to having the correspondence disclosed in the indirect manner adopted by Mr. Untermyer.

According to another communication, from which Mr. Untermyer read, Mr. Alexander told young Harjes, with whom he was indignant because the latter could not tell the difference between himself and Young, that he would cable to J. P. Morgan at once and cause the money to be transferred to another bank. This wasprevious to the cable episode that brought a smile to Morgan, Harjes & Co. in place of their former unpleasant expression. The witness asked about all this, admitted that he "did express regret" that young Harges's view of Young warped the entire situation. He acknowledged that he might have said Young made an ass of himself by calling on Harjes.

"You didn't say that in the presence of Mr. Young did you?" was inquired.

"No, I don't think I did," was the smiling response.

Mr. Alexander said he believed that J. P. Morgan & Co. had bought some of the Shipbuilding bonds, and he himself sent some of them to his friends by express. Mr. Untermyer then asked:

"What securities did you understand had been promised to the French press for the floating of the underwriting in France?"

"I did not know," was the reply.

"Did you not know that the French papers were to get $200,000 in bonds?" said the lawyer.

"I did not know the amount," answered Mr. Alexander.

"Do you know for what services the French press was to get these bonds?"

"I did hear that commitments were made for the press, but for what purpose I did not know."

The hearing will be resumed next Tuesday morning..