The Pink Rag from Topeka, Kansas • 2

000. THE PINK RAG- -By CHAS. H. TRAPP The Pink Rag Published every Friday afternoon at 113.E. 8th Topeka, by Chas.

H. Trapp, Editor and Owner. Entered at the postoffice at Topeka, Kansas, as second class mail matter. Subscription Per Year, in advance. $0.25 Per month, by .10 Advertising.

Display, per .50 Locals, per line .10 (Continued from Page One in Nebraska, and then issue and sell stock in other states far in excess of the amount which had been allowed by the order. While the applicant company's method of bookkeeping appears on the surface to be fair and regular, yet in fact there are included under the heading of real estate and buildings, many items which mislead and deceive investors of the company, and cause them to think that the company has assets greatly in excess of its actual holdings; such method is fraudulent and for that reason the company cannot be permitted to issue further stock. As an example of the improper method of bookkeeping, the Grand Island hotel property may be cited. The applicant company made a showing as of December 31st, 1917, in which the Grand Island property was carried among the assets of the company at $406,059.81. The ground cost 628.95 and the building though less than half completed, was carried on the books of the company at 400.86.

The contract price of the building was $322,550.00, but as soon as the contract was let, architects' fees to the amount of $16,125.00 were credited to the account of the building as well as commissions on stock sales amounting to $27,805.86. It may bed contended that this is simply a matter of bookkeeping, that the entire contract price is credited to the hotel and a charge equal in amproperty, is made on the other side of the ount ledger. The architect's fees are put in at far more than the services are actually worth. The commissions amounting to $27,805.86 on sales of stock enter into the value of the do not It doubtless is a physical property. item in making up the assets proper the generally, but the of corporation paid on the sales of stock commissions corporation cannot be credited to in a building because the any issued the entire assets of particular stock is on the company.

The inclusion of such item is highly misleading and fraudulent to prospective purchasers of stock and cannot be sanctioned by the commission. All of the stock of the applicant company, except $200,000 of common stock, which holds all the voting power, is six per cent cumulative preferred stock. If the plan of the organization of the company and methods of doing business render it impossible to pay six per cent upon its stock, then the sale of stock providing for such dividend rate is fraudulent upon the investing public. The certificate of stock provides: "Before dividends shall be declared or paid on the common stock of this company, the holder of record of this certificate is entitled to receive and this company is bound to pay from its net earnings, a fixed yearly dividend of six per cent per annum, payable semi-annually on the first days of January and July of each year. Such dividend shall be cumulative.

After the six per cent dividends on preferred and common stock have been paid, this certificate shall participate pro ratio in fifty per cent of the net earnings of the company." It is the plan of the applicant company, as outlined in its testimony, to build hotels in a number of towns in Nebraska, and adjacent states, some fourteen properties have already been planned for and it is also intended, by the officers of the company, to lease and operate a number of other hotels. Only two of the hotels are in actual operation at present. These are the Hartington Hotel at Hartington, and the Blackstone Hotel at Omaha, Neb. The Hartington hotel has been in operation something over a year, and the Blackstone hotel with its furniture and fixtures is carried on the books of the company at over Although the officers of the company insist that their management is higly efficient, that they employ only the most capable managers, and that by their superior methods the cost of hotel operation is far less than ordinarilly incurred, yet the net result of the operation of the Hartington hotel up to this time has been a loss of $1,283.30. This is simply the excess of expenditures over the receipts, as shown by the books of the company, and does not take into account repairs, replacements and depreciation.

There was no income with which to pay dividends on the outstanding stock at the last dividend pay day, which was January 1st, 1918. At that time the Bankers Realty Investment company, being a corporation, could not give away any of its assets, SO that while this amount was distributed to the stockholders of the North American Hotel company, it was simply a subterfuge, and the latter company will undoubtedly be called upon to return the money to the treasury of the Bankers Realty Investment company. It was not only a fraud upon the Bankers Realty Investment company, but it was also a fraud upon the stockholders of the North American Hotel company, because under the statute of Nebraska, dividends could not be paid except from the earnings of the company, and was also a violation of the provisions of the certificate of stock itself. It is impossible to keep separate the three companies, the Bankers Realty Investment company, the Blackstone Holding company and the North American Hotel company. They appear in the records as thoroughly interlocked.

In July, 1917, the Bankers Realty Investment company, then the owner and holder of certain mortgages upon the Blackstone Hotel in Omaha, issued a circular in which it placed the value of the property at $845,826.18. On December 19th, 1917, the North American Hotel company purchased from the Black stone Holding company the Blackstone Hotel at the agreed price of 65. This was done without having any investigation made, or without consulting experts or engineers. As far as it appears from the evidence, it was at least $150,000 more than the property was worth. It had been run at a loss ever since the date of its opening, which was in November, 1916, and it has since continued to run at a loss.

From the time the North American hotel company took it over until June; 1918, a period of six months, the receipts exceeded the expenditures by only $2,926.62, according to the books of the company, and for the month. of May, the expenditures exceeded the receipts by more than $4,000. This was without considering repairs, depreciation or retirements. With these items subtracted, it is seen that there is a net loss in the actual operation of the (Continued on Page Three) BUSINESS BUILDERS HALFTONES DEEPLY ETCHED, BRIGHT SNAPPY ZINC ETCHINGS NE OR MORE COLORS DESIGNS ILLUSTRATIONS FOR CATALOGS, BOOK COVERS, ADUERTISEMENTS FASHIONS MACHINERY CAPPER ENGRAUING CO. CAPPER BLOG.

TOPEKA. KANS..