defendants United States Steel Corporation and others.

Action brought under the Sherman antitrust law of 1890 online

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A. The Illinois Steel did manufacture cotton ties to some
extent, I think.

Q. Was it large or small?

A. It seems to me not large.

Q. You are not entirely clear on that, I suppose?

A. I am very sure it was not large.

Q. Cotton ties were made —

A. I do not think it was in constant use. It did have a
cotton tie mill, I am very certain.

Q. Cotton ties, I suppose, were made by this hoop com-
pany, were they not?

A. I think they were.

Q. I am only judging by the name.

A. Yes; they were.

Q. That is your understanding, is it?

A. Yes ; that is my understanding. And the National
Steel.

Q. And the National Steel?

A. Yes.

Q. What relation did that have to any of these other com-
panies ?

A. The National Steel was a large manufacturer of iron
and semi-finished steel, that is blooms and billets and so
forth ; and it utilized, I would say, about 75 per cent, anyhow
a very large per cent of its semi-finished steel in selling it to
these other three companies included in the Moore group.
The location of the National Steel and these other three com-
panies was such that the National Steel was a desirable
place for them to secure their steel, and a desirable place
for the National Steel to deliver its material.

Q. And were the stocks of those companies all in the same
ownership, as you underst^'Ti'^ "



ELBEET H. GARY. 4737

A. Well, practically. Those four companies at least were
in the general control of the Moore group.

Q. Yes, consisting of the persons you named a little while
ago, the two Moores and Eeid, and who else?

A. Leeds, Eeid and the Moore brothers; of course there
were other important men connected with them.

Q. I understand, but they were generally recognized as the
dominant factors ?

A. Yes ; undoubtedly they were.

Q. Now I will return to the question I started. You
reached some sort of a conclusion on the afternoon of that
Monday. State what it was.

A. I was going to say one other thing about that, if you
will allow me.

Q. Certainly, finish whatever you had in mind, Judge.

A. After the Federal Steel people, that is the few leading
men whose names I have mentioned, who were present at
the meeting referred to, had decided to favor the purchase
of the Carnegie properties, I sent a request to Mr. Morgan to
come in the same room, or in some way secured his presence
there, and he came in and I told him substantially what we
had decided to favor, and he then said it was a big under-
taking, but if these gentlemen who were practical and directly
eonneoted with the business, were satisfied this was a good
business proposition and could be made successful, he would
undertake to form a syndicate to furnish the necessary finan-
cial support. That is what he said in substance. Mr. Morgan
was not a practical manufacturer, as you understand; while
he was a strong personality and had his notions about things
and was careful to inquire more or less so far as the practical
conditions and the cost of manufacture were concerned, he
relied upon other men connected with him ; he based his opin-
ion on their reports and their recommendations.

Q. Up to that time had the owners of these other properties
been called in at all?

A. I think not, no.

Q. What next was done? I would be quite pleased. Judge,
to have you go on and tell these events in their natural
sequence without question, so far as you choose.

A. Well, I do not choose to do — I mean I have no choice.



4738 ELBEBT H. GARY.

Q. I mean to say, without waiting for a question, I want
to develop this matter chronologically, you know, and have
you tell what took place day after day until the Steel Cor-
poration was an actuality.

A. The first thing after that

Mr. Dickinson : Excuse me. In order that he may go on
without too much interruption from me, — and I do not want
to interrupt the continuity of it, — ^is it understood that my
exceptions may be regarded as continuous ones to any decla-
ration of motive or purpose or conversations that passed be-
tween them?

Mb, Lindabuet: Yes.

Mb. Dickinson : Then I will not interrupt the Judge any
more.

Me. Lindabuet: And further. Judge Dickinson, I will
stipulate that if, to save interrupting the witness, you wish
to put in any special objection after he has finished a topic,
you may put it in at any place you choose, the same as if
you had made it at the time.

Me. Dickinson : Then I will not interrupt him at all.

The "Witness: The next thing that occurs to me was the
calling in to consultation of distinguished lawyers. Messr,s.
Victor Morawetz and Francis Lynde Stetson were requested
to come to the bank, and from that time on until the organi-
zation was completed, I think I spent the forenoon of nearly
every business day at the banking house of J. P. Morgan &
Company, and sometimes a larger part of the day, but gener-
ally in the afternoon more or less at the offices of the lawyers.

By Me. Lindabuet :

Q. I am not so much concerned with the legal side of this
now as with the business side, and I would like you to tell
of the negotiations which resulted in the acquisition of the
other properties, and beginning first, as to the acceptance of
the Carnegie offer, if it was accepted at any definite time.
Anyhow, it is the business side of the thing just now.

A. Soon after the Monday meeting I have referred to,
if not on that day, it was decided to purchase the Carnegie
properties; and following that, at some day, which I pre-
sume is shown in the papers — I am not certain of that, how-



ELBERT H. GARY. 4739

ever — a formal agreement was drawn np for the acquisition
of the Carnegie properties, and

Q. Do you remember the form that took, whether an ex-
change of letters or otherwise ?

A. No, I do not, Mr. Lindabury.

Q. Do you remember what gentlemen had charge of that
as lawyers or otherwise?

A. My recollection is that Mr. Stetson and Judge Eeed
of Pittsburgh.

Q. Mr. Stetson representing whom?

A. Eepresenting

Q. Your side?

A. The Federal Steel Company; he was connected with
us, at least we so considered him ; and Judge Eeed represented
Mr. Carnegie.

Q. That will do, because that will enable us to get it.

A. After that, we began negotiating for the acquisition
of the different properties. We were in active negotiations
for some time.

Mr. Converse represented the National Tube,.! remember.
The American Bridge Company was not taken in at first, but
was acquired subsequently.

Q. Judge, by whom were these negotiations carried on on
behalf of your company, and what, if anything did you per-
sonally have to do with them?

A. I had considerable to do with them. Mr. Bacon had
something to do with them.

Q. Did you have to do with any part more than another?
That is, did you particularly attend to the negotiations as
to either of the companies ?

A. I did particularly with the Wire Company, I remem-
her. Some of the others at the bank had attempted to negoti-
ate with the wire companies, and had got to the point where
they seemed to think they could not succeed. I took it up and
finally made a bargain with them.

Q. Where was this?

A. This was at the bank ; in one of the rooms of the bank.

Q. Of Mr. Morgan's bank?

A. Of Mr. Morgan 's bank.

Q. J. P. Morgan & Company's bank?



4740 ELBEBT H. GABY.

A. Yes.

Q. Was that negotiation rather prolonged?

A. It was.

Q. But you finally reached an agreement?

A. "We finally reached a conclusion.

Q. One evening, or late in the afternoon, I believe you
said?

A. Yes, late in the afternoon.

Q. Mr. Morgan was there, I suppose? I mean at the bank-
ing house ?

A. He was at the banking house. I remember the circum-
stances very well.

Q. Was there any arrangement at the beginning, after
you concluded to go on with the thing, as to who should con-
duct the negotiations — of course with such help as you could
give ; but was anybody fixed upon or appointed or nominated
to conduct the negotiations for the acquisition of the various
properties ?

A. Well, I should say J. P. Morgan & Company.

Q. And company? Or a particular member of the firm?
I do not know how it was.

A. Of course Mr. Morgan was the dominant man always.

Q. And he often was J. P. Morgan & Company, in your
talk?

A. Yes. Mr. Morgan did not give much time or attention
to the details of any proposition, as is well known. He would
designate, with respect to a particular transaction, some mem-
ber of his firm. I think Mr. Charles Steele was absent from
the city, but came back to the city before negotiations with
the Moore brothers were closed, for instance, and had some-
thing to do with that, I think Mr. Bacon had had considerable
to do with it. Mr. Morgan had personally seen them a good
many times.

Q. Then all of you gentlemen took part more or less in
the different negotiations as the matter opened itself to you?

A. That is true. I personally knew, day by day, the steps
that were being taken, what interviews had been had, and
what the result of the interviews was, and so on. I was in
very close contact from beginning to end, with the whole situ-
ation.



ELBERT H. GARY. 4741

Q. I show you a circular letter dated March 2, 1901, signed
by J. P. Morgan & Company and addressed to the stockholders
of the Federal Steel Conapany, the National Steel Company,
the National Tube Company, the American Steel & Wire Com-
pany, the American Tin Plate Company, the American Steel
Hoop Company and the American Sheet Steel Company, and
ask you whether you are familiar with that.

A. I am generally familiar with it. Of course I was very
familiar with it at the time.

Mr. Dickinson: Your agreement that I can enter excep-
tions afterwards applies to all of these documents, too, Mr.
Lindabury? I just want that understood, so that I may not
interrupt you.

Mr. Lindabury: You probably would not want to object
to this, Judge, anyway.

Mb. Dickinson : I do not know that I would.

Mr. Lindabury: You are familiar with this circular.

Mr. Dickinson: I simply wanted to know if your state-
ment did cover anything you are asking Judge Gary now.

Mr. Lindabury: Yes, Judge.

By Mr. Lindabury :

Q. Judge, do you happen to know what publication at-
tended the issue of that circular?

A. It was very generally published, published in many
newspapers in this city and all over the country, for that mat-
ter; it was formally published in a great many different
newspapers, and other newspapers throughout the country
published the substance of it ; but many of them published the
circular in toto.

Q. Do you remember whether it was sent out to the stock-
holders in the companies named or not?

A. It was.

Q. You recall that that circular states the terms upon
which the stocks of the various companies named were to be
taken over if the holders of the stock consented?

A. Yes.

Mb. Dickinson : Are you going to introduce the circular?
Mr. Lindabury: Yes, when it comes; I am trying not to
lose the time, that is all.



4742 ELBEKT H. GAKT.

By Me. Lindabuey :

Q. Had the negotiations been concluded then with the
principal owners of the various companies?

A. Negotiations had been concluded, and after they were
concluded the amount of capital stock to be issued was fixed,
and the stock of the new company which was to be offered
to the various stockholders of the various companies in ex-
change for their securities was determined, and I think stated
in the circular.

Q. When was it determined what form the proposed or-
ganization should take? Some where in the course of this
negotiation, of course?

A. Yes ; it was during the negotiation.

Q. Was there any question as to how the organization
should be effected, whether by having the existing companies
take over the stocks of the others, or by organizing an entirely
new one?

A. It was determined.

Q. And was it a subject of debate or consideration?

A. It was.

Q. What then existing company was spoken of as perhaps
a good one to take over the others ?

A. My first suggestion was to increase the capital stock
of the Federal Steel. My next suggestion was, when it was
determined under the advice of counsel to organize the new
corporation, to call the new corporation the Federal Steel,
but it was finally decided to call it the United States Steel
Corporation.

Q. You rather wanted to keep the "Federal Steel"?

A. I did.

Q. But it was finally concluded to take another name?

A. It was.

Q. And that of the United States Steel Corporation was
agreed upon?

A. Was adopted, yes.

Q. Now, how was the capital arrived at?

A. I cannot give definite figures, but the capital of the
new corporation was arrived at by adding together the cost
of the different companies agreed upon, and leaving, as I
remember, a margin for securing other properties which we
then contemplated getting at a later date, if we could.



ELBERT H. GAKY. 4743

Q. Anyhow it was made enough to purchase the properties
which had then been agreed upon with the principal stock-
holders ?

A. That is correct.

Q. Did you, before sending out the circular, have an agree-
ment in writing or otherwise with a majority of the stock-
holders of each of the companies, as you recall?

A. I think not. I am not sure, but I think not.

Q. I am under the impression the circular said so ; perhaps
I am wrong. But anyhow you did have an understanding
with the leading stockholders'?

A. Yes ; we had.

Q. Of each of the companies?

A. We had, and I think you will find that because we had
to secure the voluntary offer of other stockholders to ex-
change their securities for the new securities to be issued by
the New Company, it was provided in some of the circulars
at least that the general plan might be abandoned at any time.
It may be, and I think it is a fact, that with respect to most,
if not all the companies, we had ascertained that we could get
a majority of the stocks of those various companies, if we
did not already have an agreement to that effect.

Q. I will now show you the circular letter referred to and
ask you if you identify it (handing paper) .

A. I recognize the form of circular letter.

Mr. Lindabury : Judge, I propose to offer this in evidence
at this point, and to offer other documents on direct ex-
amination, unless you object; and I make the latter remark
because in the practice under which I have grown up it is
not regarded as proper to offer in evidence a document until
after cross examination. We have not been doing that, and
unless you prefer that that practice should be observed, I
will offer it now.

Mr. Dickinson : I make no objection as to the point of
time. Defendants' Exhibit N'o. 54, being a circular dated
March 2, 1901, is excepted to as incompetent, irrelevant, and
containing self-serving statements.

Mr. Lindabury : Then I will ask to have it marked in evi-
dence.

(The paper referred to was thereupon marked "Defend-



4744 ELBERT H. GABY.

ants' Exhibit (Gary) No. 54, May 28, 1913," and will be
found in the volume of exhibits.)

By Mb,. LiiirDABUBY :

Q. Had or not the basis upon which the stocks of the
named companies were to be taken over, as stated in this
circular letter, been agreed upon with these principal stock-
holders to whom you have alluded at this time?

A. It had.

Q. And the same terms, then, were offered to all the stock-
holders as had been agreed upon with the representatives to
whom you have alluded?

A. That is true.

Q. This is not addressed to the stockholders of the Car-
negie Company, you will observe

A. No.

Q. Why not? That is, had you already agreed with them?

A. "We had agreed with them.

Q. Your offer was from Mr. Carnegie individually, I
take it?

A. Yes.

Q. Do you know when his associate stockholders came in?

A. Almost immediately.

Q. They were not very many in number, were they?

A. Not very many. The stockholders were made up of
the old partners.

Q. Did they come in on the same basis as Mr. Carnegie
had offered, as you recall?

A. Well—

Q. I think there was some difference in the method of
payment, was there not?

A. Yes; so far as the cost price of the whole property
was concerned, yes.

Q. Mr. Carnegie took bonds?

A. He took bonds.

Q. And they took some bonds and some stock?

A. Yes.

Q. That was the only difference, was it not?

A. The only difference ; I think that is so. Of course they
could tell better than I, how they distributed the payments
for their respective interests.



ELBERT H. GARY. 4745

Mr. Dickinson: I except on the gr'oimd that the witness
has not been shown to have been present at the negotiations
between the Carnegie interests and the Morgan interests, nor
to have had knowledge of the original agreement or other
agreements between the Carnegie interests and the Morgan in-
terests in respect to the exchange of the Carnegie properties.

Q. I show you another circular letter dated March 21, 1901,
sent by J. P. Morgan & Company as syndicate managers to
the stockholders of the Federal Steel Company and the other
companies to whom the circular letter of March 2nd was ad-
dressed. Do you identify this? (Handing paper.)

A. I do.

Q. Do you remember whether that was sent out or not 1

A. It was sent out and widely advertised.

Q. You will observe that that contains a statement as to
the amount of stock that had come in under the March 2nd
plan up to that time.

A. I do.

Q. Over 90 per cent of each class of stock of all the cor-
porations, was it not?

A. Yes.

Q. Besides making that announcement, I think the cir-
cular extends the time, does it not, for the others to come in?

A. It does.

Me.. Lindabuby : I offer that in evidence.

(The paper referred to was thereupon marked "Defend-
ants' Exhibit (Gary) No. 55, May 28, 1913," and will be found
in the volume of exhibits.)

Q. Judge, to return to these negotiations again for a
moment: Do you know whether the negotiation for the ac-
quisition of what we are calling the Moore properties was
prolonged or not?

A. It was.

Q. With whom were those negotiations had?

A. With Mr. Moore largely.

Q. Participated in by any of the other gentlemen you
have named? Or do you not recall?

A. To some extent. But I think Mr. Moore represented
them generally in the negotiations.



4746



ELBERT H. GARY.



Q. To which Mr. Moore do you allude?

A. Mr. W. H. Moore.

Q. Were those negotiations particularly strenuous and
closely held or pursued!

A. They were.

Q. Do you know over what period of time they ran ?

A. I do not; but it was some time.

Q. Weeks?

A. I should think so. That is my recollection.

Q. And do you know which of the companies was the last
to conclude negotiations?

A. The American Steel & Wire Company, I think.

Q. You mentioned having a particular part in that. I do
not know whether you mentioned the gentleman who led in
the negotiations on behalf of the stockholders or not.

A. Of the Wire Company?

Q. Yes.

A. John W. Gates.

Q. Do you think that was concluded after all the others ?

A. I think so,

Q. Being the last?

A. Yes.

Q. Mr. Converse you said, I believe, represented the Tube
Company?

A. He did.

Q. Did you have a part in those negotiations?

A. I did, to some extent ; not very much. My recollection
is that Mr. Converse was very reasonable in his attitude and
that it did not take very long to agree with him. Of course
he had to consult with his associates more or less, and some
time was occupied, but it was a little different from the
negotiations with some of the other companies, I think. Each
company, of course, was trying to get as much as it could,
and others were trying to keep them down as much as possible.

Q. The negotiation was a strenuous one?

A. It was.

Q. You have stated the need that the Federal Steel di-
rectors felt of having such finishing mills as the Moore prop-
erties possessed?

A. Yes.



ELBEET H. GABY. 4747

Q. How came you to take the National Steel?

A. I should say the principal reason was that the National
Steel Company's properties were needed to supply steel to
the other three companies connected with that in what was
called the Moore group. Another reason was that the Na-
tional Steel had some very good ore properties that were de-
sirable and necessary; and also I am very certain that Mr.
Carnegie insisted that the National Steel should be purchased
so that he would have security on the property of the Na-
tional Steel.

Q. Do you remember what the attitude of Judge Moore
and his associates was as to selling!

A. They would not sell one without all, as I remember.
We could not have gotten the other three companies unless
we took the National Steel; but it was a very good purchase
in connection with them, Mr. Lindabury, for the reasons I
have given.

Q. There was not included in this scheme as you have so
far testified to it, the acquisition of the Lake Superior Con-
solidated Iron mines?

A. No.

Q. Or the American Bridge Company?

A. That is true.

Q. Those were acquired later?

A. They were.

Q. How did that come about?

A. With reference to the iron ore properties, known as the
Eockef eller properties, I remember suggesting to Mr. Morgan
prettly early in these negotiations that if we succeeded in
acquiring the other properties, we should have the Eocke-
feller ores. Not very much consideration was given to the
subject matter at that time, apparently, but when I men-
tioned it to Mr. Morgan the second time he asked me what I
thought he ought to do, and I suggested that he go to see Mr.
Eockef eller; and he did so. The next morning, as he came
in the bank, I remember his saying that he had seen Mr.
Eockef eller and had some conversation ; that he had not made
any headway in negotiating but still he did not think Mr.
Eockefeller was averse to selling on some basis. The next
thing I knew about it, Mr. Frick was negotiating with some



4748 ELBERT H. GAKT.

of the Eockefeller people in regard to the Eockefeiier ores.
So far as I know, that was the first connection Mr. Frick
had with the matter, except in joining in selling the Carnegie
properties.

Q. Do you recall whether this was after March 21, after
it was known that the first proposition could go through?

A. It was after, I should say.

Q. And Mr. Frick had been a considerable owner in the
Carnegie Company had he not!

A. Yes, a large owner.

Q. And he had agreed to sell?

A. Yes.

Q. With aU the others?

A. Yes.

Q. And to take securities in the new company?

A. Yes.

Q. So that he was interested in it?

A. Yes.

Q. You discussed the matter of acquiring these different
ores with Mr. Frick?

A. I had had a little conversation, not very much.

Q. He was a practical steel man, was he not?

A. He was a practical steel man.

Q. And well informed on the subject?

A. Yes. During these negotiations I remember ^Ir.
Morgan asked me to make an estimate on the value of the
Rockefeller ores, and in a somewhat crude way I attempted
to do that, having before me then some figures showing quan-
tities and knowing something about the ore properties in the
Lake Superior region, and at a period later than that he
showed me a memorandum which Mr. Frick had brought him,
coming direct from the Rockefellers, and which contained an
amount which the Rockefellers had finally said they woiild
take.

Q. Were those various negotiations that you have already
told us about, running into and including those with respect
to the Rockefeller properties and the Bridge Company, taken
in consultation with the other gentlemen of the Federal Steel
that you began with?

A. They were; of course I kept them fully informed all



ELBEBT H. GARY. 4749

the time, and was acting for them, being spokesman and repre-
sentative of the Federal Steel interests.

Q. They continued in touch with the whole matter?

A. They did. I had not quite finished the closing up of
the Rockefeller project. I did not know whether you wanted
me to.

Q. I was speaking to Mr. Severance, and did not notice it.
Proceed.

A, I was simply going to say that Mr. Frick brought in
a proposition that he had secured from the Eockefellers, and
while the figures were a little larger than those I had given
Mr. Morgan previously, we decided to take them over.

Q. I think I will ask you, even at the expense of a little
repetition, to state again as succinctly as you can the reasons
for purchasing the Eockefeller ore properties, as they ap-
peared to you and your associates in the enterprise.

A. I should say there was only one reason, and that was
that the manufacturing properties very much needed that ore,
and as we finally secured it at what then seemed to be a



Online Librarydefendants United States Steel Corporation and othersAction brought under the Sherman antitrust law of 1890 → online text (page 15 of 30)