THE IRRIGATION AGE. 



charge was made in a vicious suit in the Superior Court, prosecuted 

 with all the venom which malice and self-interest could prompt, 

 and yet the Company was fully exonerated. An injunction was 

 sought at the same time to restrain the payment of the last 

 dividend which was declared, and, after a most exhaustive ex- 

 amination, the court decided there was no ground for such an 

 injunction. 



I assert unhesitatingly that no dividend was paid except from 

 realized earnings and net profits. The property was not over- 

 capitalized in any sense of the term. The offerings of the 

 capital stock were to provide for construction, and the purpose 

 was clearly and honestly stated. The business was conducted on 

 the lines laid down in the original proposition. It was the 

 departure from that representation and contract with me and 

 with the shareholders which has made all the trouble. 



Whatever difference of opinion there may be as to the policy of 

 paying dividends after the money raised for construction had 

 been diverted to other purposes than that for which it was speci- 

 fically obtained, and when the dividend fund was needed or could 

 be used for construction, it could not have been so used without 

 a violation of the contract with the purchasers of the stock a 

 contract as valid and binding as any other which the Company 

 ever did or ever can make. 



The ignoring of all profits as legitimate from the sale of land 

 net above all cost and expenses and to insist that the Com- 

 pany had no other source of profit except from annual water 

 rentals is in no sense fair or just, and is contradicted by the 

 present proposition and showing. The realization of profit 

 from such sales was just as much a part of the business for which 

 the Company was organized and empowered by its charter as the 

 delivery of water and its sale directly. 



In January you published in THE IRRIGATION AGE an open 

 letter from the former managing director, with comments in- 

 spired by him that were peculiarly unjust, and when I responded 

 to them you published my communication, but announced that 

 no more should be said through your columns, although you then 

 added to it comments calculated to discredit my statements and 

 distinctly accrediting Mr. Brown. While admitting he had sold 

 all of his stock, you proceed to say that he had evaded no respon- 

 sibility, " moral or financial." The one he never recognized, 

 and as to the other you will hardly claim now that under Cali- 

 fornia law he did not evade financial responsibility by disposing 

 of his stock. 



You said further, upon his authority, that I removed my profits 

 further east, while he had been engaged in a philanthropic effort 

 to protect the people of Redlands, wholly oblivious of the fact 

 that I had purchased the last 200 shares from Brown to help in 

 ridding the Company of him, and the further fact that I had ex- 

 pended more than $40,000 within the year in the cultivation of the 

 Alessandro lands, at my own risk, and that by reason of the 

 panic, although we harvested a good crop, I suffered a direct loss 

 of more than $80,000 by it, and the further fact that I had bought 

 400 shares of the Alessandro Land Company stock, and 820,000 

 of the Town Company stock, paying the same net price as paid 

 by all others. All of these stocks I have been compelled to 

 pledge as security, as well as most of my other property, on 

 account of losses incurred through this wrecking disaster one 

 as deliberately planned and mercilessly carried out as ever dis. 

 graced the annals of corporate management in California or any 

 other state. It has been frequently stated that I " unloaded," or 

 sold, my stocks in time to save myself. I take the opportunity 

 to say here that such was not the case. I made no sales after 

 the trouble begun for my own account and protection, but, on 

 the other hand, was a constant buyer, and shall be loser to the 

 full amount of my investments in common with other share- 

 holders. 



You have admitted in conversation that you are better advised 

 now than you were then. Why do you not admit it through your 

 columns as an act of justice due? Why do you permit yourself 



to be party to placing the odium for others' mismanagement, or 

 worse, on my shoulders, and for their protection? 



There have been many illegal acts done many of them. Why 

 do the perpetrators escape punishment? Your own statement 

 gives grounds enough for an investigation. 



Now, let us examine the proposed plan for reorganization. 

 You do not state it fully only generalize. You say the capital- 

 ization of the new Company is to be $4,000,000, and, by your own 

 showing, sustained by that of your very expert jury, it will not be 

 over capitalized. But will it not be pertinent for me to ask, 

 " Why if the future was capitalized before it will not be now?" 



You announce it will require 51,250,000 to pay the indebtedness. 

 Shareholders will probably ask: "How is the liability so much 

 increased above the amount said to be due when the Company 

 went to the receiver? " Who will have the benefit of this increase 

 when the payment is provided for, and what does it represent as 

 returned to the Company, if anything? It is quite likely that I 

 am not regarding my own interest in asking these questions 

 no more than I regarded it in giving a year of faithful and 

 onerous service in hopes of protecting the shareholders who had 

 trusted me. 



You say that from the beginning of the negotiations it was the 

 purpose and effort to formulate a plan which would enable those 

 who had made a genuine investment in the old Company to pro- 

 tect themselves and share in the benefits and profits of the new 

 enterprise. You do not state the terms on which they can share, 

 but from Mr. Cragin I learn that the $2,500,000 of bonds to be 

 issued one-half to pay the debts and the balance for construc- 

 tion are to be offered to the old shareholders at par, with a 

 bonus of an equivalent amount of shares in the new Company. 

 Evidently there is no protection in this for those who are unable 

 to double their investment. 



You say, "It is probable that nearly all the old stockholders, 

 American and foreign alike, will become stockholders in the new 

 company." As there is outstanding $3,500,000 of old stock, and 

 only $2,500,000 of bonds to be issued, the query suggests itself, 

 how can it be done? Then, again, it is proposed to issue $4,000,- 

 000 of the new stock. If only the equivalent amount of that is 

 given to the bond purchaser, what becomes of the excess ($1,500,- 

 000)? How is it to be divided? Who will get it, and on what 

 account? Is it possible that the parties who have criticised my 

 commission of 15 per cent, as excessive (which included all 

 expenses) share in this large profit of this reorganization deal 

 almost 40 per cent. ? 



These queries are propounded on the supposition that it is the 

 honest purpose to protect the old shareholders, as you announce. 

 If not so, if it is simply a consummation of the original wreck- 

 ing scheme with the syndicate parties to derive its advantages 

 and profit by the opportunities, then there may be nothing 

 said. They will have the legal right, undoubtedly, to buy it for 

 as little as they can at the auction block and divide it as they 

 choose. There ought to be no pretense of philanthropy under 

 such conditions. 



The announcement is a clear admission that when the Com- 

 pany went into the hands of the receivers it had a vast abund- 

 ance of assets. The statements bearing my signature as president 

 of the Company, and by authority of its directors, have not been 

 attacked or controverted. Except as to the increased indebted- 

 ness before referred to, there is no material difference in your 

 showing and mine. Of the $850,000 then due, nearly or quite one- 

 half would not mature in a year, and $300,000 not until Novem- 

 ber, 1895. Your estimate as to requirements for the completion 

 of the plant is pratically the same as mine. Your valuations 

 of the property are higher than mine, especially when we con- 

 sider the embarrassments to follow the discredit of the bank- 

 ruptcy proceedings. 



In a word, there was no misrepresentation on my part as to 

 the condition and the intrinsic value of the property from first 

 to last. 



