your financial assistance in waging this fight, as the necessary financing has been contributed by a small group of bondholders, friendly to me, who have, in their own way, investigated the deplorable mismanagement of this company under Receivers Robinson and Jaffray and have urged me to take steps for their removal. Numerous other bondholders have also urged me to take this action. I requested an up-to-date list of the Minnesota & Ontario Paper Co. bondholders from the secretary of the so-called "Bondholders Protective Committee", but to no avail. I was, therefore, obliged to obtain a list from the United States Treasury Department, which list numbering approximately 15,000 bondholders was compiled during 1931, and, therefore, not entirely up-to-date. In failing to furnish this list I believe the so-called "Bondholders Protective Committee " desired to prevent my communicating with you. I feel certain that you will understand their failing to give me such a list after reading this letter. If you have disposed of your bonds, will you kindly pass this letter and pamphlet on to the purchaser or the broker to whom you sold with the request that it be submitted to the present owner.

While our common enemy includes in addition to Receivers Robinson and Jaffray, powerfully entrenched financial interests, the cold-blooded unscrupulousness of which is only matched by their available resources, they are nevertheless vulnerable because of previous public disclosures, the ignominy of which has been flung through the columns of the press to the four corners of the world.

The Minnesota & Ontario Paper Co. represents in part the consummation of a comprehensive plan by Backus-Brooks Co. of some 25 years ago intended to bring together under a single management the widely diversified operating properties acquired and developed through my efforts covering nearly half a century. The executive management during all this period was vested in myself. Hence, the statement already made that it represented my life's work. At the time of the Minnesota & Ontario Paper Co. receivership the Great Lakes Paper Co., Ltd., another major operating company owned by Backus-Brooks Co., was in the process of being taken over by the Minnesota & Ontario Paper Co., but the receivership prevented its consummation.

All idea of personal gain was wholly foreign to my underlying purpose during the upbuilding of these companies. The properties acquired, figuratively speaking, represented an empire. The organization had been developed and brought to the point of profitable operation. The localities of such operation had been strategically selected as a result of long years of experience. The requirements of future expansion had been thoughtfully anticipated. The foundations of a great and prosperous business had been carefully prepared. When the crash of 1929 swept the country, the newsprint industry was keenly feeling the effects of overproduction. However, there was neither hesitation nor fear on my part. The thought of any default on outstanding obligations never entered my mind, a fact perhaps best attested in that approximately $3,000,000 was expended during 1930 in expanding our properties in the United States, Canada, and Europe.

Looking back now, I can see where I made one mistake. I placed my reliance in banks and investment bankers. At that time I had no more conception of their inherent untrustworthiness than that possessed by the public generally.

In the summer of 1930. business judgment suggested the advisability of anticipating our requirements and making provision for our funded obligations maturing in 1931. The subject was accordingly taken up with the investment bankers, by whom I was assured these obligations would be cared for in due course, but that it was then too early to consider the matter. Relying on this promise, I returned to the duties of the active business management. Later in the fall several plans for refunding were considered. Arrangements were finally reached under which our commercial bankers and fiscal agents agreed to provide the amounts necessary to retire all of our funded maturities and other extraordinary requirements for 1931.

Late in February 1931 I made an appointment with the bankers for a conference in New York City, where the details of what had already been promised could be carried out. At that conference I was for the first time informed that the bankers would not keep their pledge, and that a receivership was the only solution. To lessen the force of this blow, it was then agreed that I should be made the sole receiver, thus preserving my managerial status and affording me the opportunity of working out the company's affairs.

At this conference the bankers demanded that substantially all of the cash working capital on hand, amounting to over $1,100,000, should be turned over to them and applied on their unsecured and unmatured obligations. This I was obliged to agree to, but only after receiving assurance that $3,000,000 would be provided by issuing receiver's certificates to enable us to conduct and operate the business. Only $500,000 of this sum, however, was furnished. Through this maneuver the banks were able to replace their unsecured notes with receiver's certificates, which are a preferred claim and a lien prior to your bonds. In the then conditions, with funded obligations maturing the following week, I had no alternative but to accede to their proposals. Then followed the original receivership with which you are already familiar.

In the following 9 months, during which I was the operating receiver, I accumulated a bank balance of over $2,000,000, including $500,000 borrowed on receiver's certificates, after defraying all operating and maintenance expenses. This $2,000,000 was turned over to Receivers Robinson and Jaffray upon their appointment as receivers on November 30, 1931. Immediately a campaign of extravagance, mismanagement, and waste began and continued until at one time the cash balance was reduced to slightly over $600,000. With proper management the cash bank balance at this time should be at least $5,000,000, or more than eight times the present balance.

Only a relatively short time following my appointment was required to demon.strate that unseen and unknown forces were working against the interests of the bondholders and myself. The bankers, obviously, never intended that I should remain as receiver. Their first and underlying selfish motive was to get possession of the $1,100,000 of cash; and the second to remove me as receiver immediately the opportunity was afforded. These unseen and unknown forces have now been brought into the open and the maneuvering and manipulation resorted to is now apparent. The matters thus stated proved to be the initial steps of the conspiracy herein disclosed. The successive steps in its development will appear from what follows.

As the first move, our bankers designated and selected the so-called "Bondholders Protective Committee." The subservience of this committee to the interests to which its members owe their appointment has been and is apparent. Two members and the secretary are employees of Halsey-Stuart & Co., investment bankers of Chicago, and of recent "Insull fame." One member each is respectively an employee of the First National Bank of Chicago; Brown Bros. & Harriman, of New York; Bond & Goodwin, investment bankers, of Boston; Wood Gundy & Co., investment bankers, of Toronto. One member was formerly with Minnesota Loan & Trust Co., of Minneapolis, and one member is of affiliation unknown to me. These men are securities salesmen. They have had no experience or training as industrial operators; their advice in such matters is of no value in the administration of our vast properties.

It was these bankers and this committee, who so soon demanded my resignation, and insisted upon the appointment of Receiver Robinson. The latter's incompetency and inexperience in the management of our estate in which the so-called Protective Committee' has acquiesced, is nothing less than a stupendous tragedy.

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Receiver Robinson is reputed to be a man of large inherited wealth, yet, I am told, his entire business life has been spent as an employee of others. Receiver Jaffray is at the head of a banking organization the past transactions of which are now being investigated by the securities commission of the State of Minnesota.

I put to you the plain question: What protection can we expect for our interests through the office of a committee and receivership thus comprised? I have no personal animosity toward any of the individuals comprising this committee or Receivers Robinson and Jaffray, but I do know from my association with these receivers, that they and the committee are utterly incompetent to manage the Minnesota & Ontario Paper Co. and its numerous subsidiaries. How can we expect these receivers and this so-called "Protective Committee " to successfully manage and rehabilitate our vast properties? Well as a matter of fact, they are not managing * * they are destroying. Our estate will soon be of comparatively little value if we allow the present receivers to continue. If you have read the many disclosures of protective committees in general, I know you will have satisfied yourself that under their misguided directions the bondholders and stockholders always lose.

*

*

It is apparent that the real objective of the bankers from the outset was to eliminate and destroy me as quickly as possible, the plan being to discredit me in the eyes of the bondholders and creditors; and thereby clear the way to carry out their diabolical scheme at the proper time.

The first move was in the pretended interest of assumed harmony. They prevailed upon me to retire voluntarily as a receiver, and to consent to the appointment of Messrs. Robinson and Jaffray. I would never have consented to this radical and unbusinesslike change but for the assurance that I should be maintained and continued by the newly designated receivers in an advisory capacity to safeguard the estate against mismanagement and loss.

The disillusionment in this letter regard was not long postponed. Receiver Robinson immediately assumed dictatorial control; he ignorantly attempted a reorganization of all the departments of the business without any knowledge of the ability or capacity of the old department heads; disregarded all my advice and suggestions on important matters of business policy, and in general inaugurated the unprecedented policy of extravagance and waste which has characterized his operations throughout. While creating his personal organization, Receiver Robinson gave general instructions that none of his newly constituted department heads were to confer or advise with me on any matter of business. This was naturally taken by such employees to mean that if they did consult with me they would be discharged. I know you will agree with me when I say that any organization constructed on the above lines and without a real leader always results in heavy losses and inevitably spells ruin.

In the paper, lumber, and timber industry losses largely occur in the timber and logging departments where steady waste is usually prevalent when skillful management is lacking. Neither Receiver Robinson, or Jaffray, or any of their present advisors or staff, are capable of managing these departments and these steady losses are mounting day by day. To meet these operating losses and replenish the treasury, our quick assets are being sacrificed at whatever price they will bring.

I do not wish to unduly extend this letter. I feel, however, that certain outstanding facts may interest you.

The receiver's last official report, dated September 30, 1933, discloses the fact that current assets during the receivership period have shrunk $4,677,586.01. Receiver Robinson has liquidated the cream, so to speak, of our quick assets. In the remainder of the current assets will be found a very broken lumber assortment, slow accounts receivable, and other slow items.

A few of the items of waste, extravagance, and mismanagement are as follows: (1) Amounts paid for receivers' fees, attorney's fees, and expenses during the receivership period, $700,000; (2) unnecessary compromising of accounts receivable which could have been collected in full, $570,000; and (3) unjustifiable cash expenditure in National Pole & Treating Co. refinancing, $525,000.

The above items total $1,795,000, all of which was unnecessarily and unwisely expended. Taking these current items together with the other items set forth in detail in the pamphlet herewith enclosed brings the total loss up to over $12,000,000 during the administration of Receiver Robinson. I vigorously protested the confirmation of the principal items making up this loss. The items protested are as follows: (1) Concessions made to Great Lakes Paper Co., Ltd., now in receivership; (2) compromising of accounts receivable; (3) sale of Memphis Commercial Appeal property; and (4) sale of Minnesota Forest Products property.

In the two last-mentioned protests, appeals have been taken to the circuit court of appeals from the order of the district judge confirming sale, because I feel that if the court had any knowledge of the real value of the properties sold it would not have permitted them to be sacrificed as they were.

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Mr. Robinson has stated to the court several times in my presence that his recommendations have been referred to and approved by the so-called bondholders' protective committee." My watchfulness over the interests of our bondholders exasperated Receiver Robinson and those conspiring with him and finally climaxed in a suit brought by the receivers against myself to recover $7,000,000 claimed to have been abstracted by me from the business for my own personal ends. A baser and more groundless charge was never preferred against any man.

In the receiver's report of October 31, this $7,000,000 suit against me was conspicuously referred to. The so-called "protective committee " emphasized the incident in its letter dated November 17, 1933, to the bondholders, and as I

understand to all our creditors and the financial world in general. This was intended as the finishing touch to my absolute elimination and destruction. Their sole purpose was to make certain that I would be completely discredited and my continued opposition eliminated.

The pamphlet enclosed herewith contains my answer to that suit and diseloses the facts, viz, that the receivers have no claim against myself, but on the contrary that I have substantial claims against the company, which I had intended to satisfy by accepting additional stock. I have answered these false charges in a suit which I have instituted against the receivers individually for $2,000,000 damages for libel, and have challenged them to prove their untrue charges before an independent tribunal.

The final step in their conspiracy was my complete discharge from any connection with the affairs or business of either the Minnesota & Ontario Paper Co. or its subsidiaries, by reason of which they expected me to abandon all hope of realizing any recovery from my equity in this company, which has been my life work. I have publicly made all these charges in proceedings before the court to remove the present receivers for incompetency and waste of the assets of the receivership estate.

By the time you have reached this point you will doubtless be asking yourself the question, Why things are as they are? The answer may be expressed in three words, "too many bankers."

The Minnesota & Ontario Paper Co. attained its position as one of the largest organizations of its kind in the United States and Canada in the face of severe competition of powerful money interests behind competing industries. These competing organizations, owing to prevailing conditions, are heavily indebted; their obligations are held by certain of the banks to which we are to some extent indebted; these banks are looking exclusively to their own, not our interests. If they can destroy us, they are improving the condition of the heavier debtor; if they can destroy us, they will lessen competition; if they can force us to liquidate our affairs in such a way that the competitor may acquire our property at a small fraction of its fair and actual worth, they will have accomplished their end even though your interests and mine are ruthlessly sacrificed in the process.

This is precisely what is going on today. In the hands of your protective committee and the present receivers you are the victims for the sacrifice. Are you going to stand by and be led to the slaughter?

The final steps in the tragedy are near completion. Do not be surprised if shortly after the receipt of this letter there is presented for your consideration a plan of reorganization. However, their plan may not be presented after these disclosures.

This communication may be given relatively wide publicity. You will doubtless receive from your so-called " protective committee" extended communications showing their solicitude for your welfare. Incidentally, these communiçations may center their attacks on myself. You will be told that the present receivers are men of eminence and standing, with experience in large affairs. And, finally, that the whole administration of your interests has been under the jurisdiction of the court. As to the experience of the receivers, however broadly it may be postulated or exaggerated, there is one inescapable fact, viz: That neither of them is possessed of any experience calculated to qualify him for the handling and administration of the business and properties in which both you and I are interested. As to the court, it need only be said that the ordinary judge is lamentably inexperienced in practical business affairs.

I only ask you, if such communications are received, to bear a few salient facts in mind. I built the Backus-Brooks Co. organization, which owns over 90 percent of Minnesota & Ontario Co.'s stock, from the point where its capital investment was $3,000 to one where that investment was over $100,000,000. In this fight to protect my interests I am protecting yours. I believe I know far better the needs and necessities of the situation than any syndicate of eastern bankers or Receiver Robinson, their emissary. I will welcome and extend my full cooperation to any management which is conscientiously working to salvage and reorganize our vast interests and which is not subject to banking domination.

If you agree with me in the policy thus outlined, your first step should be to withdraw your securities from the hands of the present committee; revoke its authority to act in your behalf, and stand firm in the independent exercise of your own rights. I myself will assume the burden of the fight to protect your interests as well as my own, and without cost to you.

One further feature exists from which you may draw your own conclusions. There is every reason to believe that the banking interests, parties to the conspiracy above outlined, have been systematically buying up our bonds at sacrifice prices during the pendency of the receivership. Recently, one of ⚫ these investment banking concerns, and one, whose employee is a member of your protective committee, has bought several hundred thousand dollars of the bonds of the same issue which you hold, for approximately 10 cents on the dollar.

What can be expected when those in whom you are reposing your confidence, on whom you are relying for the protection and conservation of your interests are carrying on a campaign of sniping, preying upon the misfortunes of those of your number who may be financially distressed? What reliance may be placed in a so-called "protective committee" designated by those who are working in their own interests, in total disregard of yours and mine?

In conclusion, I know you will forgive my briefly displaying a sentimental view in connection with this enterprise. In the 1890's when conducting my logging operations in northern Minnesota, I was 200 miles from the Canadian boundary at the point on Rainy River where International Falls, Minn., and Fort Frances, Ontario, are now situated. There were no roads. It was midwinter and a blanket of snow 3 feet deep made travel difficult. Accompanied by my head timber cruiser we covered the distance on foot and finally arrived at the Hudson Bay trading post one beautiful moonlight night after midnight with the thermometer at 40 below zero. I viewed the wonderful waterfalls there and decided to do some constructive pioneering. The outcome was the building of 200 miles of railroad, now the Minnesota & International Railway Co.; the development of the water power and paper mills on both sides of the river; the building of saw mills, planing mills, Insulite mills; 200 miles of additional railways; the purchase of timber holdings in large amounts; and finally a total investment of $50,000,000. Why should I not be sentimental and strive to rehabilitate this organization which has been my life work and my pride?

And so, fellow bondholders, I ask you, in the same spirit created during this past year, by our worthy leader, President Roosevelt, let us work together and put to an end the destructive practices of the "money changers."

I invite your personal response to this letter and shall welcome all constructive suggestions you may care to make.

Very respectfully yours,

E. W. BACKUS,

President Backus-Brooks Co., and Minnesota & Ontario Paper Co.

BACKUS-BROOKS COMPANY-OFFICE OF THE PRESIDENT

To the Bondholders of Minnesota and Ontario Paper Company:

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The properties of the Minnesota and Ontario Paper Company, whose bonds you hold, is the prey of a so-called Bondholders' Protective Committee," under circumstances comparable to the plan so vividly portrayed in the article, "Other People's Money," which appears on the opposite page.

Every bondholder of the Minnesota and Ontario Paper Company should be informed that the Court, in its order appointing the original receivers, specifically found the company to be in a solvent condition.

The purpose of the receivership, therefore, must have been rehabilitation and not the liquidation of its affairs. But what does the record show? When you have read my personal statement and this pamphlet disclosing the colossal wastages committed, you will be convinced that the policies of the present receivers are destined to destroy and not to rebuild.

I understand that Eastern Bankers and the Receivers, in the case of the Minnesota and Ontario Paper Company, are evolving a scheme to seize the properties of our company for a mere fraction of their value. If this happens, both you and I will be the victims. Heartless Financial Giants in the form of Eastern Bankers and their allied Newsprint competitive company have marked us as they prey in this colossal tragedy. To accomplish their purpose, more easily and surely, they have determined that my business life and reputation be sacrificed on the altar of the "Money-Changers."

I accept their challenge and will fight to the finish, but I need your help. Herein is set forth the history of legal proceedings that have been instituted by me to block this ruthless plan. I most earnestly urge that you read it carefully throughout to get the facts. When you know the truth of the impending