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Show 1 STARTLING EXPOSURE 1 SI McRae Report on Steel Trust Is Quite Sen-S Sen-S : sational W Washington. Feb. 27. The House Q U stcol trust Investigating commlttco to. S day ina'ie public the result of the 5JJ ' .' Inquiry Into tho books and minutes of the United States Steel corporation I conducted by Farquhar J. McRao, nn , cxneii accountant Tho McRae report reaches the conclusion con-clusion that tho Steel Corporation op-orates op-orates In restraint of trado and prevents pre-vents competition through a manipulation manipu-lation of prices, through tho Influence of tho so-called "Gnry dinners," by control of raw materials and through a flvstem of Interlocking directors- In various companies. It also tends to cjntradlct somo of the testimony given giv-en by Stcol trust officials. Somo of the figures dealt with In the report are startling, Jt 1b shown ! that J. P Morgan & Co. received ap-nroximatcly ap-nroximatcly f7O.000.OO In cash profits for organizing the big steel comhlno, and that tho net profits of tho concern con-cern for tho flmt nine years of its existence were more than a billion dollars Stool CororaUon officials objected to producing their books before tho committee In this city, but consent-rd consent-rd to place them freely at tho disposal dis-posal of an expert to be named by H tho committee. Mr. McRae made a '' thorough study of the books and minutes, min-utes, and, In his report to tho committee, com-mittee, bo pointed out these salient ' features ; That J P (Morgan & Co.. heading jt the syndicate which organized the 'l -stool corporation, received a caeh ll :, profit of 69.300.000. of which $C2.- 500,000 was for promotion, with ad-J, ad-J, dlllonal commission of ?r.300,000 for j : ! a bond conversion scheme, j ! That tho net earnings of the cor- ' ' poratlon for a period or nlno years a-j! were $1,029,G8G,389, or an equivalent of approximately $13 a ton on fln-e fln-e Jshcd product, Instead of $980,000,311 as claimed by the corporation In Its i report, ggi Controln BO Per Cent 2 k That tbo stcol corporation, con- ? trary to the statement made by 9 Judge Gary and K O. Frlck to JBros-it JBros-it ldent Roosevelt In 1907, that It lld BJ not control more than CO per cent of I steel properties In tho country, coa-I. coa-I. ' trols about SO per cent of the steel : holdings. Tho section of the report dealing S; with the "Gary dinners," whero inde-Mi inde-Mi pendent as well as corporation steel P men assembled ot discuss conditions i : In tho trade, contains an analysis of W I tho legal effect of tho "golden rule" im I n0,,Cr prepared by Anthony .T. Ernest, fl a New York lawyer. In which It Is im' i1 dcc'ared that the "conventions agreed jtij to If enforced would be objectionable I "Tho Gary dinner Krrangemcnt," says th report, whereat the so-called Independents aro Inflnenccd to reduce re-duce their production conformably to their estimate of tho reduction In the demand existing, and to maintain prices, Ib objectionable as far rs it operates to exclude free competition. The arrangement is designed and In- j tended to so operate, and has operated oper-ated admittedly, as to standard steel rails although It Is claimed that the so-called independent participants can cut prices without fear of penalty, except the dishonor of declaring In I favor of a named prlco and then selling sell-ing at Bomo other prlco. "It can be no justification of the co-operation of tbo participants In the Gary dinners that no penalty attaches at-taches to a violation ot tho declarations declara-tions mutually oxchanged, because perforce the antl -trust act would pro-Aont pro-Aont tho enforcement of any penalty for reducing prices or exceeding one's share of the huslnoss. Previous pool agreements mav have been broken' and penalties Inflicted by the members mem-bers themselves, although this was SHU Kon discontinued. Tt will bo as-sa as-sa sumcd thnt the word of tho par-2fl par-2fl ' tlclpanta In tho Gary pinners Is I ample security for tho professions of a ( co-operation In the policy almost 3 l unanimously subscribed to at the din-& din-& ncra. "On tho other hand, any contract ! may bo broken; any conspiracy may , bo upset by recalcitrants. It Is sure"-ly sure"-ly no excuse for the illegality of nny 1 j arrangement In restraint of trade that I It can bo doparted from by the par- tlclpants." B j Stross 1b laid In tho financial sec-1 sec-1 lion of the report upon the demon- I j atratlon by figures that the atcel cor-1 cor-1 poratlon restrains competition by 1 making tho groator portion ot Its pro- fits In raw materials aud Un plantu i producing Bcml-finlshed materials, -.j while tho finished product plants tnake very low profits, This operates, n ' it Is declared, to keep the prlco of W raw materials, ore coko rfnd pig Iron, f on a high plane, to the advantage ot I tho corporation and disadvantage of f tho Independent. ' sj ; "During the nine vears, from Jnnu- ary l, 1902, to December 31, 1910," ? the report says, "tho productions ot i : the corporation In rolled and other fln-f fln-f ', .8hed steel amounted to .7,967,303 tons v and the adjusted net earnings for thrj : same period amounted to $1,029,GS53S ; or an equivalent of noproxlmately tl', 1 i per tpn. In order that an Idea ma J i he had of the net earnings In dollars ? ; r,. n of tbc 8vel operating groua 4 t ?i '-corporation. T haVe calculated . these figures and find tho approximate. i $ lCrn?Kot $13 per of InJaho i ! K"c boon earncd as ro1' II r, nI manutacturlng companies 18 01 ( Tib ' ,by CKaI cokc companies, 1 Ilea Arin: ?' lr mllllnE compa- .' ies. ?212 per ton: bv transportation ior?irpanlcs,perion-To- j;, Thin, the report sjays. is equivalent vT I'm ' ''Mi mKaWmmmWSmmmWf''mW 1 1 to an earning capacity or 40 per cent on cost. Discrepancy Explained. In accounting tor thc discrepancy betweon th earnings claimed by tho steel corporation, $9?0,000,SJ1 and his estimate of $1.1 09.14 C,09, Mr. McRae restored to net earnings what had been eliminated by the Steel corporation corpora-tion In Its accouutlng, Including such things as "Interest on bonds of sub-Lldlury sub-Lldlury companies, the loeked-up Inter-company profits In lnventorlea, special depreciation admittedly charged charg-ed to construction, employe bonus funds and special compensations, account ac-count preferred stock subscriptions, which have been treated as dividends from earnings and not In the nature of additional wage3 to employes, and, lastly, Interest on bonds, mortgage and purchase money obligations of subsidiary companies." As showing the result of tho policy of the Steel corpopratfon to make the bulk of Its profits In the raw aud semifinished semi-finished matoria.1, Mr. McRae submitted submit-ted a condensed' statement of the dlv-Idcnts dlv-Idcnts paid by tho subsidiary companies compa-nies to the Steel corporation and the Interest paid by the Carnegie' com panv on Its collateral trust bonds, from April 1, 1901. to April 1. 1910, Showing a total of 5753.124,380 53. "The Income from the Carnegie (Continued on Page Six.) STARTLIHBJiSCLOSUitE (Continued from Pago One.') company in dividends and bond interest," inter-est," ho says, "amounted to $305,239.-537.49, $305,239.-537.49, or "about 40 per cent of tho" total. The American Bridge company paid the holding company dividends on Ub preferred stock during this period peri-od to the amount of $19,715,677.50, or 2 C-10 per cent of the total." Tabic of Divldendn. Tho table of dividends for the nine-year nine-year period follows: ' The Carnegie componv .5227,280,000.00 Federal Steel Co., com. 114,816,182.00 Federal Steel Co., pfd.. 31,157,128.50 National Tube Co. com 29,783,905.50 National Tube Co., pfd. 27,299,737.60 American Steel & Wiro Co of N. J., com.... 51,110,400.25 American Steel & Wlro Co of N. J., pfd 27.299.15S.25 National Steel Co., com 6,400,000.00 National Steel Co.. pfd. 3,779,153.00 American Tin Plate Co,, , common 7,119,690,00 Amorican Tin Plato Co., ; preferred 3.634,372.00 American Sheet Steel , Co., common .... 3,154,948.00 Amorican Sheet Slcol , Co , preferred . . . . 5,573,508.0,0 American Sheet & Tin Plato Co, common. . 25,540,S33.00 American Sheet & Tin Plate Co., preferred.. 12,004,804.00 American Steel Hoop Co., common 1,330,000.00 American Steel Hoop Co., preferred 2,041,197.51 American Bridge Co., preferred 19,715,577.50 Oliver Iron Mining Co. 2,400,000.00 Lake Superior Cons. Iron Mining Co 60,039,909.03 Shelby Steel Hube Co., preforrcd 2,224,995.00 Pittsburg Steamship Co. 243.S70.0O Claitton Steel Co 4,235,000.00 3675,104,849.04 Interest on the Carnegie Carne-gie C coll. - trust-bonds trust-bonds 77,959,537.10 Total ?753,12 1,380.53 (Continued on Page Eight.) ulilLliGJXPfl.uUREjl (Continued from Page Six.) ?fi Rooaevelt Is Quoted. lW Relating to restraint ot trado there m are fourteen conclusions In tho roport, S one of which deals with percentages cit f! jtf business dono by tho corporation and P in which the ore and other holdfnga f are discussed. M "Percentages of the business done 2 m by the United States Steel corpora- h, tfon,'the roport says, "are deceiving H .- and misleading unless sogregated with ; j; reference to particular products. For , jj example, Mr. Roosevelt refers to an j estimate that the United States Steel i g corporation did not havo above CO per j cent 'of steel properties' or 'steel hold- 1 lngs,' and whon he was asked if Gary ': ji and Frick (at tho time of the pur- f J chase of the Tennessee Coal & Iron ' L company) said any thing about the y J ore pro'pertles that they were buying IT at that time, he answered, 'They did fi- not go into details at all,' and ho also j'jff stated that ho understood they wero IT? going to buy tho Tennessee company's J? 'plant.' p "If this estimate of 60 per cent re- jfr fers to property and investment In 115 the steel business, it may be noted, vt in' that year (1907) that the total If? property of the Bethlchom, Cambria, Jj Colorado, Lackawanna, Ponnsylvanin. '? and Tenneaseo companies, added to rl the capital stock of Jones & Laugh- yl lln (because statement of property Is rW not avallaole) amounted to $305,768.- 1 8S9, these companies being the only , ! Important concerns in the steel bus- J InesB In the "Ujilted States outside of I J the United States Steel corporation j ! This amount added to that of tho Uni- f' ted States Steol corporation equals n grand total of $1,881,(106.339, of which ! tho property account of the United ; ' States StocI corporation amounts tn j $1,445,837,450. or about 80 per cent" I. Conclusions in the roport boating p on restraint of trade are embodied In fourteen sections, somo containing h voluminous quotations from the min- i utes of meetings of the corporation t and of the subsidiary companies. Summarized, the report concludes. J No Competition Remains. "Competition between , previously V competing concerns was terminated y by tho concentration of the control of V. upwards of 180 corporations Into one iff security-holding company known as YM the United States Steel corporation. I The United States Steel corpora- 1, 5 tion is merely a holding company en- ' gaging in no business except the con- Jf. ! trol through stock ownership of the h sibsidiary companies. i S There were acquired and brought J ' under single control, upwards of ISO t concerns In lines of business allied 1 - with tho steel making business, in- : ! eluding ore owning and mining com- j I panics "which aro now restrained i; j from competing in the sale ot ore"; I; 5 'transportation companies, through LJ consolidation of which "every pos- f siblllty of competition between these i? roads Is prevented," pig Iron plants, ftS coal and coke companies, and many IS others. f There were acquired a large number t f of "major concerns at much inflat- i cd valuations, succeeding several in- V creases in the capitalization of pre- 1 H ceding Incorporations, due, in some ! ) cases, to the ,greatcr combination f f value or merger of the consolidation. r in which of courso the units combined r wore restrained ot any compotitic 1 I activity. 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