Authors: Elizabeth J. Hauser
My Story (26 page)
When stock of the Forest City Company to the amount of $400,000 was offered for sale, the Cleveland
Press
editorially recommended it as a safe investment for persons of small means and more profitable than savings bank deposits, describing the plan July 1, 1906, as follows:
“The Forest City Railway Company has sold $350,000 worth of stock at go. It has offered for sale and is now soliciting subscriptions for $400,000 more of the stock. All of this stock is to be put out at 90. The Municipal Traction Company under the
terms of its lease of the Forest City Railway Company has guaranteed 6 per cent. cumulative dividends on the par value of this stock. The entire amount received for the sale of this $750,000 worth of stock at 90 is to be invested in about 13½ miles of street railway construction and equipment. This means a capitalization of about $50,000 a mile; no bonds; no water. The Cleveland Electric Railway Company (the old monopoly company) is bonded and capitalized at about $150,000 a mile. The difference in these two propositions must be apparent to the merest tyro in finance.”
The stock sales as a result of this stand on the part of the
Press
and from advertisements in various magazines were very satisfactory. The Forest City railroad was fast nearing completion, twenty-four injunctions had expired one by one, there were fewer obstacles in the way of success than at any time before, and a three-cent-fare railroad in actual operation in a city where such a thing had for five years been declared impossible, and where no stone had been left unturned to render it impossible, was hourly becoming more and more certain of accomplishment. This was the status of affairs when the personal liability question was raised. For five days I was kept on the witness stand in a notary's court testifying to facts which were matters of common knowledge. The opposition newspapers of Cleveland referred to these as testimony “wormed” out of me, “dragged” from me, etc., and through the Associated Press the newspapers of the whole country were furnished with a great talking power against our movement. One of the mooted questions was whether I had guaranteed the Cleveland
Press
against loss when that newspaper had invited and guaranteed
stock subscriptions. The
Press's
own statement on the matter is so clear and comprehensive that I quote it in full. On October 24, 1906, it had the following:
“Here's a Nice Little Scoop on the Concon Lawyers.”
âââ
The Only Authentic Record of the Deep, Dark Mystery of That
“Press” Guarantee.
âââ
At the examination of Mayor Tom by the Concon attorneys Wednesday morning, the question was asked as to whether Mayor Tom had guaranteed
The Cleveland Press
against loss when
The Press
guaranteed the stock of the Threefer.
Mayor Tom said that whatever there was in the way of such a guarantee was in writing and that he would decide at the afternoon hearing whether or not he would produce the writing.
It makes little difference whether Mayor Tom decides to produce the writing or not, as
The Press
happens to have a copy and by publishing it herewith scores a scoop on the Concon lawyers:
Here's the writing:
Whereas, The Forest City Railway Company is inviting subscriptions to its six per cent. (6%) cumulative dividend stock, and the undersigned desire to aid in the establishment of a 3-cent-fare street railway in the city of Cleveland, with the ultimate municipal ownership thereof, and to that end desire to induce popular subscriptions in small sums from the people of Cleveland; and
Whereas,
The Cleveland Press
proposes to invite subscriptions to such stock and to recommend its readers to make such subscriptions, and to offer to them the guarantee hereinafter set out:
Now, therefore, the undersigned hereby agree, each with the other, and with the Scripps Publishing Company, publishers of
The Cleveland Press
, and with each subscriber to such stock through the columns of
The Press
as follows, to wit:
To each original subscriber or his personal representative whose
subscription has been made through
The Cleveland Press
, and who subscribes for an amount not exceeding two thousand dollars ($2,000) of the par value of said stock, we agree to purchase the stock so subscribed on sixty days' notice, given within ten (10) days after any dividend or interest period, and to pay therefor the amount paid by each subscriber with six per cent. (6%) interest thereon from the date of his payment, less any interest or dividend which he has received; this offer to purchase to be open for two (2) years from the date thereof.
They also severally agree with The Scripps Publishing Co., its successors and assigns, that they will each on demand repay to it any sums which it may pay out under the following guarantee:
[Here appears a copy of the guarantee which was attached to the stock of each subscriber, who subscribed for stock through this newspaper.]
In making the above agreement and guarantees, each of the undersigned agrees to bear and discharge one-half of the same, it not being intended that this shall constitute a joint obligation of each for the whole.
It is mutually understood and agreed that the amount of stock to be sold under the above guarantee shall not exceed the sum of four hundred thousand dollars ($400,000) of par value.
In testimony whereof we have hereunto set our hands and affixed our seals this 29th day of June, A. D., 1906.
E. W. S
CRIPPS
.
T
OM
L. J
OHNSON
.
The circumstances under which this contract was drawn up are interesting.
E. W. Scripps, the founder and controlling stockholder of
The Press
was in Cleveland last June and expressed a desire to see Mayor Tom.
Mayor Tom called on him and among other things discussed was the progress of the fight for lower street car fares.
Mayor Tom outlined what had been and what was proposed to be done, and Scripps said: “If you are so sure of the success of
your plans why don't you personally guarantee the stock of the low-fare company?”
“I am perfectly willing to do so to the extent of my fortune,” was the mayor's answer.
“Well, I'll go halves with you to the extent of $400,000 worth of stock which is now for sale WITH THE DISTINCT UNDERSTANDING THAT NEITHER OF US IS TO PROFIT TO THE EXTENT OF A DOLLAR,” said Scripps.
Up to this point the matter of guaranteeing the stock was a personal matter between Scripps and Johnson.
How to get this guarantee before the people in the best possible way was then taken up by Scripps with H. N. Rickey, editor-in-chief of
The Press
.
After some discussion the whole matter was turned over to Rickey, to handle in any way he saw fit, or not to handle at all so far as
The Press
was concerned.
Rickey consented to guarantee the stock through
The Press
, provided neither Johnson nor Scripps would consider any step taken or any contract drawn up as confidential and that Rickey would be under no obligation, either stated or implied, to keep any of the facts here set forth from the readers of
The Press
, whenever in his judgment they would make a good news article.
This seems to be the psychological â not to say dramatic â moment.
In passing it might not be out of place to suggest that there probably will not be any doubt, if there ever has been any, that
The Press
guarantee is worth 100 cents on the dollar.
The next day the
Press
said editorially:
THAT HELPS SOME.
The horrible accusation is made by the Concon and its newspapers against E. W. Scripps,
The Cleveland Press
and Mayor Tom, that to the extent of guaranteeing investors against loss,
they have lent their credit to a three-cent street railway company in Cleveland.
For E. W. Scripps and itself,
The Cleveland Press
pleads guilty to this accusation.
As Mayor Tom has admitted the accusation at least fifty times during the past year, no further proof seems to be necessary.
The net result to the people of this city of the efforts which Mayor Tom and
The Cleveland Press
have made for lower street car fares in Cleveland is this:
A three-cent line has been built and equipped and will be ready to carry passengers over its fourteen miles of track just the minute that the Concon injunction department will permit. This three-cent line is prepared to take over every Concon franchise as fast as it expires.
As for the Concon, that company is, figuratively speaking, on its knees, begging the people to extend its franchises for twenty years at seven tickets for a quarter.
Not a bad situation FOR THE PEOPLE OF THIS CITY to be in, is it?
Were it not for the well-known innate modesty of
The Press
, we might be inclined to crow a little over the part we have played in bringing about this most delightful situation.
If either the Concon or its newspapers will show us how it is possible for the people to lose when two street railway companies are fighting like the very devil for the privilege of carrying passengers at a rate of fare which will mean the saving of millions to street car riders in the next decade, we shall never again say one word in favor of lower street car fares in this city.
No matter how hard
The Press
tries to please the other newspapers of this city, it doesn't seem able to do it.
After twenty-seven years of effort in this direction, it doesn't appear to be any nearer to it than when it started.
Our only consolation is that THE PEOPLE generally seem to approve of us and our methods; and after all THAT HELPS SOME.
My own position in the matter had been publicly set forth in a formal statement made at the time of the “
Press
guarantee,” in which I said:
“Inasmuch as I am associated, in the public mind, with the enterprises herein set forth, I deem it fitting that I make a full statement of my position. I am not now and never have been financially interested in the Forest City Railway Company. I have, however, in the discharge of my pledges to the people of Cleveland, aided in every way in my power the efforts to construct and operate a system of low-fare railroads in this city. I have in the past a number of times when requested become liable as surety in bonds and guaranteed the payment of obligations of the Forest City Railway Company, but the net result is that while I have in the past stood to lose if the enterprise failed, I never have and never will reap any financial benefit from its success. I believe that it will succeed and that the people who ride on street cars will benefit from reduced fares and that those who invest money in the low-fare road will reap fair dividends and profits from the venture. To my mind this is not a philanthropic enterprise, but rather a plain and sound business proposition. I believe that publicity and the high personal integrity of the directors of the Municipal Traction Company will guarantee the carrying out of the plans set forth in absolute fairness to the public and to the stockholders of the Forest City Railway Company. Secrecy and over-capitalization are two cardinal vices of the modern public service corporation. Neither of these can have any place in this plan. With the utmost regard for all the rights of existing companies, I shall do all in my power to further the success of the Forest City Railway Company and the Municipal Traction Company, but my interest shall not be of a pecuniary nature. In lending such aid and encouragement I feel that I shall be doing no more than I have promised the people of Cleveland. For five years a struggle has been waged in Cleveland to
secure reasonable fares. In all that time I have, as mayor, and as a citizen, waged no unfair war on any private interest. This enterprise shall have my hearty support and I confidently invite the support of the public, both as citizens and as investors. The grants to the Forest City Railway Company will establish street railroad facilities where they are very much needed, and will, on a capitalization of fifty thousand dollars a mile, in my judgment, produce a net revenue of more than fourteen per cent. on the actual capital invested. The Cleveland Electric is earning eight per cent. net on a capitalization of about one hundred and fifty thousand a mile. This would mean, if capitalized at actual cost, between twenty and twenty-four per cent., so that the estimate of fourteen per cent. net earnings is conservative. The city of Cleveland has made the greatest growth in its history in the last six or eight years, and during all that time the building of street railroad tracks has been almost at a standstill. Extensions equaling one-third of the present system are now greatly needed. The lowering of the fare will greatly stimulate traffic, and make more tracks and equipment necessary. When asking for grants for extensions, both in new territory, and for grants on streets where franchises have or will expire, the Forest City Railway Company is likely to receive at the hands of the city favorable consideration not only because the fare is lower, but because all earnings above the fixed payment to the investors are to accrue indirectly to the benefit of the city. The city shall provide in all grants to that company proper safeguards, but can afford to be much more liberal in making grants under these circumstances than where there is no limitation of future profits. This plan really secures to the people of Cleveland better service and lower fare and the benefit of all future growth in franchise values and economies in the operation of street railways.”
The evidence showed plainly that if the low-fare project failed, I should lose about four hundred thousand
dollars, but that in no event could I profit a penny by the enterprise. When the court asked me why I had made guarantees to creditors and stockholders, I answered:
“I'll tell you why. Some men like to leave monuments behind them; some build hospitals, some libraries. Others build universities. I want to see that there is a street railroad built that will be run in the interests of the people.”