The Witness.- From dividends paid by the Interborough Rapid Transit Company, and, a very considerable time ago, in dividends paid by the Metropolitan Street Railway Company.

Q. Now how long has this lease between the subway linesrather, when did the Interborough Rapid Transit Company lease the subway lines, what years? That is what I want to know. A. The Interborough Rapid Transit Company acquired the lease of the subway lines under contracts 1 and 2 in May 1902.

Q. What rental does the Interborough Rapid Transit pay for the subway lines? A. It pays the interest and sinking funds upon all of the bonds issued by the City of New York.

Q. For construction? A. For construction. Under contracts 1 and 2, with the exception of a comparatively small amount of such bonds issued for easement purposes, because the City was obligated to give the contractor the right of way.

Q. And do you know what that amounts to in any one year? A. About two and a half million dollars a year.

Q. The Interborough Rapid Transit Company also secured or have a lease of the elevated lines? A. Yes, sir.

Q. And what rental does the Interborough Rapid Transit Company pay to the elevated lines per year? A. It pays, first, the interest upon the Manhattan Railway Company 1st and 2nd mortgage bonds.

Q. What does that amount-what is the interest per year? A. In dollars and cents that amounts to about $1,800,000.

Q. What is the rate? I meant the rates of interest? A. Four per cent mortgage bonds.

Q. Four per cent? A. Four per cent.

Q. On the $60,000,000 of common stock of the Interborough, what return is paid on that?

Mr. Quackenbush. - Manhattan, you mean? A. Manhattan. $60,000,000 of Manhattan stock.

Q. Yes, Manhattan. A. On $60,000,000 of Manhattan stock it pays 7 per cent per annum.

Q. Prior to this lease being taken by the Interborough Rapid Transit do you know what return was paid on the common stock, the $60,000,000 of common stock, what per cent? A. I think immediately prior to the lease it was about 7 per cent. It varied over a period of years.

Q. Was not there a time there that it was only four per cent? A. There was a time when there was four per cent paid.

Q. And isn't it a fact that up until shortly before this lease was made there was never paid more than four per cent on that common stock? A. There was more than four per cent paid. It was a long time ago. It ran four per cent for a while.

Q. I mean just before the Interborough Rapid Transit Company, or just prior to the Interborough Rapid Transit Company taking this lease, is it not a fact that no more than four per cent was paid on this common stock? A. My recollection is that just prior to the making of the lease, and for a year or two or so, four per cent was the dividend rate.

Q. And about the time the lease was being consummated there was, you say, seven per cent paid, though? A. Yes.

Mr. Riegelmann. - That was only one dividend, was it?

Q. Was that only one dividend? A. Of course I am speaking now from recollection and I would not confine it to one dividend. It might have been two. It might have been two dividends.

Q. The New York Railways Company is now in the hands of a Receiver, is it not? A. It is.

Q. In the early part of 1919, was there not a dividend paid on the $35,000,000 of Interborough Rapid Transit stock? A. Not in 1919.

Q. Are you sure about that? A. Well, now, it is possible at this moment it occurs to me it is possible that the first dividend was paid in 1919, although I would like to refresh my recollection on that point. The dividend stopped about a year ago.

Q. Yes, but you are not sure, then? A. Not sure.

Q. That there was a dividend paid on the Interborough Rapid Transit stock early in 1919? A. I am not sure of that. I would like to refer to records, before I commit myself on that.

Q. Is it not a fact that there was five per cent paid in 1919 on the Interborough Rapid Transit stock, in the early part of it? A. (Witness refers to records.)

1

Mr. Burr.- That is for the fiscal year of 1919?

The Chairman.-- Yes, fiscal year. That is what I mean, the fiscal year.

Q. The fiscal year ending June 30th, 1919? A. During 1919, during the first quarter of 1919 I think there was five per cent dividend declared, or two and a half per cent declared.

Q. Yes, now is it not a fact that the Interborough Rapid Transit Company had to borrow money to pay the interest and the dividend on the Manhattan Elevated here a few days ago? A. That is true.

Q. Isn't it a fact that the Interborough Consolidated is in the hands of a Receiver? It is, is it not? A. In the hands of a Trustee in Bankruptcy.

Q. Trustee in Bankruptcy? A. Yes.

Q. Isn't it a fact that there was $2,000,000 borrowed by the Interborough Rapid Transit from the Interborough Consolidated to pay this interest? A. The Interborough Company did borrow that amount from the Interborough Consolidated Corporation.

Q. But is not the Interborough Consolidated in the hands of a Trustee or Receiver? A. Trustee in Bankruptcy.

Q. Trustee in Bankruptcy? A. Yes.

Q. And didn't you say that the Interborough Consolidated at some time derived its income from the Interborough Rapid Transit? A. Part of its income.

Q. Notwithstanding that fact it had money to lend back to the Interborough Rapid Transit to help pay their shortage in interest, is that right? A. Because for one main reason, among others, the Interborough Rapid Transit Company had advanced a very considerable amount of money for the purpose of completing the third tracking and the elevated extensions of the Manhattan system.

Q. Let me ask you: Are you in any way connected with the Interborough Consolidated? A. No, Interborough Rapid Transit Company.

Q. No. You are not connected officially or otherwise? A. Oh, yes; I am also the Auditor of the Interborough Consolidated.

Q. Do you know why the Interborough Consolidated went

into the hands of the Receiver or in bankruptcy? Have you any idea? A. Briefly, because the dividends of the Interborough Rapid Transit Company stock ceasing, the Interborough Consolidated Corporation was without the necessary funds to meet the interest upon its four and a half per cent collateral trust bonds.

Q. Is it not true that since the time of the leasing of the Manhattan elevated and the leasing of the subway by the Interborough Rapid Transit Company, that the Interborough Rapid Transit Company has paid 18711⁄2 per cent dividends? A. The Interborough Rapid Transit Company has paid about that amount in dividends.

Q. Is it not true that the Interborough Rapid Transit has paid in dividends in one year as high as twenty per cent? A. That

is true.

By Mr. LaGuardia:

Q. In the years that they paid twenty per cent., was any amount put aside for surplus? A. Yes.

Q. What percentage of the profits? A. When the twenty per cent. was being paid in dividends the surplus was approximately $20,000,000.

By the Chairman :

Q. What? A. $20,000,000.

Q. What was done with that $20,000,000? A. First it was availed of for the purposes which I described a moment ago. About $10,000,000 or $11,000,000 of it was devoted to the work of constructing the third-tracking and completing the elevated extension work.

Q. What was done with the balance of the $20,000,000? A. Later a very large part of it was advanced to the New York and Queens County Railway Company lines in order to keep that line in operation. We advanced to the New York and Queens County Company approximately $5,000,000. The line would not have been able to continue if we had not done it.

By Mr. LaGuardia:

Q. They were insolvent at the time? This Queens railway was insolvent at the time? A. It was solvent, because the Interborough Rapid Transit advanced the money necessary to keep it solvent.

Q. Without that advance it would have been insolvent? A. Without that advance it would have been insolvent.

Q. So it advanced this insolvent company part of its surplus and the other part it paid out in dividends, at the end of the year leaving no surplus at all? A. The surplus is invested in the New York and Queens County lines very largely. What the future has with regard to that, of course I cannot know.

Q. No, no; not the future. At the time this advance was made, this Queens County Company was insolvent, you say? A. I do not say that. I say that at the time this advance was made, if it had not been made the New York and Queens County Company would have been insolvent.

Q. Exactly. A. Yes.

By the Chairman:

Q. So then you loaned this surplus fund practically to an insolvent company. Is that correct? A. The company which we are now referring to is owned, substantially all of it, by the Interborough Rapid Transit Company.

Mr. LaGuardia. - Good. Now, Mr. Burr, will you please get for me the list of holders of this Queens Railway Company at the time that this loan was made?

Mr. Burr.- Yes.

Mr. Quackenbush. - You can give that now, Mr. Gaynor.

Mr. LaGuardia. - Well, we will get it in its order.

Mr. Burr.- Queens County and suburban, Mr. Quackenbush?

Mr. Quackenbush. - New York and Queens County Suburban. By the Chairman:

Q. Let me ask you another question: During the fiscal year ending June 30, 1919, was there any profit made on the subway line? A. No, sir.