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the recklessness in the purchase of Connecticut and Massachusetts trolleys at prices exorbitantly in excess of their market value; the unwarranted expenditure of large amounts in “educating public opinion”; the disposition, without knowledge of the directors of hundreds of thousands of dollars for influencing public sentiment; the habitual payment of unitemized vouchers without any clear specification of details; the confusing inter-relation of the principal company and its subsidiaries and consequent complication of accounts; the practice of financial legerdemain in issuing large blocks of New Haven stocks for notes of the New England Navigation Company, and manipulating these securities back and forth; fictitious sales of New Haven stock to friendly parties with the design of boosting the stock and unloading on the public at the higher market price”; the unlawful diversion of corporate funds to political organizations; the scattering of retainers to attorneys of five states, who rendered no itemized bills for services and who conducted no litigation to which the railroad was a party.
Extensive use of a paid lobby in the matters as to which the directors claim to have no information, is another " significant incident," as are " the attempt to control utterances of the press by subsidizing reporters; payment of money and the profligate issue of free passes to legislators and their friends; the investment of $400,000 in securities of a New England newspaper; the regular employment of political bosses in Rhode Island and other states, not for them to perform any service, but to prevent them, as Mr. Mellen expresses it, from ‘becoming active on the other side ’; the re
tention of John L. Billard, of more than $2,700,000 in a transaction in which he represented the New Haven and into which he invested not a dollar; the inability of Oakleigh Thorne to accept for $1,032,000 of the funds of the New Haven entrusted to him in carrying out the Westchester proposition; the story of Mr. Mellen as to the distribution of $1,200,000 for corrupt purposes in bringing about amendments of the Westchester and Portchester franchises; the domination of all the affairs of this railroad by Mr. Morgan and Mr. Mellen and the absolute subordination of other members of the board of directors to the will of these two; the unwarranted increase of the New Haven liabilities from $93,000,000 in 1903 to $417,000,000 in 1913; the increase in floating notes from nothing in 1903 to approximately $40,000,000 in 1913; the indefensible standard of business ethics and the absence of financial acumen displayed by eminent financiers in directing the destinies of this railroad in an attempt to establish a monopoly of the transportation of New England. A combination of all these has resulted in the present deplorable situation in which the affairs of this railroad are involved.”
The report, says the press despatch describing it, told of millions used like stage money, of corporations as pawns in a monster game with all New England's transportation as a prize, which led the New Haven in the ten years just past from the height of prosperity to the point where a dividend has been passed, where
a dissolution suit is threatening and where criminal indictments of many of the directors who figured in its deals are at least a possibility.
It speaks of criminal maladministration and negligence, asserts with positiveness that the directors knew they were perfecting an illegal combination, and says that the dream of a transportation monopoly was unsound and mischievous.
The New Haven, the commission says, employed dummy directors, manipulated accounts, used questionable methods in increasing its own stock, paid the dividends of subsidiaries to make a showing and used many other devices to deceive the stockholders and the public. It dipped into politics,
a factor in “invisible government, made large campaign contributions to the two dominant political parties, bought officials and tried to distort public opinion. All this it did, the commis
to carry out a scheme of private transportation monopoly imperial in its scope.”
In its investigation the commission found the New Haven had 336 subsidiary corporations, many of which served no purpose except an
The report, pointing out that on the New Haven board were representatives of the Pennsylvania Railroad, the New York Central, the United States Steel Corporation, the Standard Oil Company, the Pullman company and many other interests, says that interlocking directorates of this sort cannot be too strongly condemned.”
So this is the way the highest financiers in the country and the most famous conducted the New Haven to its ruin.
Three facts are now to be considered very soberly by every citizen in the light of this revelation.
First, former President Mellen testified on the witness stand that for the purposes of “controlling public opinion” the New Haven spent less than other important railroads. So the true source of the newspaper support of the railroad cause is quite clearly revealed. We can see now why so many journals clamored for the 5 per cent. increase in freight rates. Also the real reason why the railroads needed that increase.
Second, there is no essential difference between the manner in which this railroad was scooped inside out and the manner in which the same process has been and is being carried on in other railroads. And for all of these amusements the public must assuredly pay, since the roads are left loaded with a huge capitalization and debt on which the public must dig up the dividends and interest.
Third, this process is very apparent in the case of the New Haven, where to meet the enormous charges caused by the looting rates have already been advanced, tickets that formerly sold for $4.65 being now $5, with other rates in proportion.
The substance of the proposition therefore is revealed. We pay increased rates that the gentlemen on the inside of these enterprises may have more yachts, more art galleries, more automobiles and more monkey dinners. This is the process we endorse when we vote for either of the old parties since both equally support it.
Of course, if we vote for what we get we ought not to complain when we get it.