total of but $947,000, or an average of $315,666 per year; while to pay the interest on the trust certificate and income bonds at the agreed rates and 5 per cent. on the stock of the Delaware Company would require about three times this amount, or $890,000 per year.

No statute forbade the raising of the price of gas to the public, or the distributing of more than 10 per cent. dividends regularly on the stocks of the Boston gas companies. But those who formed the combination did so with the full knowledge that a tradition stronger than any statute fixed 10 per cent. as a general maximum dividend, and that, having gained admission to Boston solely on the strength of the promise to give the public cheaper gas, it would be impossible to raise materially the price of gas in Boston at a time when gas prices everywhere else were rapidly declining. It was perfectly plain to everybody concerned that any attempt to raise the price would cause appeals to the legislature and the Gas Commission for investigation, regulation, and lowering of the price of gas.

Therefore, if those who brought about the "harmonious relations" of these companies were to reap anything more than large personal salaries* and counsel fees as a result of their years of effort, two things were necessary: first, a great increase of net earnings from the use of water gas and economy of administration; and, second, a turning of all the surplus earnings of all the companies into the treasury of the Bay State Company of Massachusetts, to go to the treasury of the Bay State of Delaware in the guise of interest on the $4,500,000 obligation, and then to be transformed once more into the form of interest and dividends on the foreign capitalization. It now becomes

The annual salaries and directors' allowances of the four combined companies were in 1887 but $18,300. After the consolidation they rose to $60,930. I have not the data at hand to apportion this among the different officers; but the salary of the president, who was of course the chief owner, was $25,000. It was said by opposing counsel, and not denied, that the brother of the president received also $25,000 as treasurer of all the companies; but this seems improbable.

plain, if we take into view the statutes and also the traditions of Massachusetts, why this multiplicity of companies had been necessary, and also what the exact function to be performed by the obligation for $4,500,000 was. If the net profits of all the companies did not exceed 10 per cent. on the share capital, allowing for the dividends on the minority shares, there would be but $398,700 to pay interest on the Boston United Gas Bonds, leaving an annual deficit on this account alone of $101,300, with nothing whatever for the stock and bonds of the Delaware Company. The problem was, therefore, virtually to triple the earnings from this gas field, and to turn all the surplus into the Bay State treasury.

Even before the technical completion of the trust, the diversion of surplus began. The Boston Gas Syndicate declared an extra cash dividend of $150,000, or 25 per cent., on the stock of the Roxbury Company on February 19, 1889, and thus got rid of the accumulated cash of that company.

When the companies had been brought into harmony, they elected substantially identical boards of directors, and moved the business all into one set of offices, as soon as practicable, in view of unexpired leases and contracts. The next step was to sell water gas patents to the subject companies. On this account the Bay State interests took from the treasury of the Boston Company $150,000, from that of the Roxbury Company $50,000, and from that of the South Boston Company $25,000. The whole history of the Bay State Company shows that when its directors sold to themselves, as directors of the other companies, these licenses, or patent rights, they had no intention of allowing these companies to make any use of the rights, but fully intended to manufacture gas in the Bay State works, and sell it to the other companies as soon as the Bay State plant was capable of supplying the demands of the field. It will be recalled in this connection that the

Bay State Company sold no gas to consumers until about July 1, 1891, and that, having in all less than sixteen miles of street mains, its sales to consumers since have necessarily been insignificant. As a matter of fact, the Roxbury company ceased to manufacture any gas whatever before it bought the rights, and its plant remains. shut down to this day. For the vote of the directors authorizing the purchase of the rights was passed on April 24, 1890; while a committee of the directors was appointed June 20, 1889, to consider the advisability of closing the works and buying gas of "some other company." Upon the recommendation of this committee, such purchase of gas was authorized July 12, 1889, or nearly a year before the purchase of the patents. The closing down of the works was a gradual process; and it was not until about July 1, 1892, that the works of this and the Dorchester Company were completely and permanently closed down.* The Boston Company made no attempt to manufacture any water gas until April, 1893, when the increasing demands of the field had outrun the capacity of the existing plants. The attempted justification of this sale of patents by the Bay State party to those under its control appears in large measure untenable. The claim put forth was, first, that the corporations had to be kept legally separate, and that each one had at all times to be prepared, in case of necessity, to act independently; and, in the next place, that the companies could not distribute water gas made by the Bay State Company without these patents. This last point has never been adjudicated; but, so far as the present writer has been able to ascertain, the patents are all for some manufacturing process, and it is difficult to see why any license should be necessary to distribute gas legally made by these patent processes and once sold.

The South Boston Company continued to manufacture coal gas longer than any other of the captive companies. It has made no gas of any kind since the middle of 1895.

The inter-company sales of gas furnish one of the chief means of accomplishing the main object of the Bay State Company, and, therefore, demand our careful attention. It should be borne in mind that, although the Bay State works were tested as early as December, 1887, and, although the contract for constructing them was accepted as completed in March, 1889, the company had no right to distribute the only gas it could manufacture until after the act of 1888. In fact, the act of 1888 merely authorized the Gas Commission, under certain conditions, to license the distribution of gas containing more than 10 per cent. of carbonic oxide, and the Bay State Company took out no license under the act. When in the spring of 1890 the legislature formally repealed the 10 per cent. limit, and thus for the first time opened the way for the unrestricted sale of water gas, the Bay State Company was still a financial, and not a manufacturing company. At this time, moreover, it had no distributing system whatever. could not, therefore, before this time have done any gas business, even in the absence of legal prohibitions, until it had command of the distributing systems of the other companies. The manufacturing operations of the company may be said, practically, to have begun after the act of 1890.* This is about a year after the completion of the trust, and more than a year after the work of the contractor was accepted as complete. For, although the specifications called for a manufacturing capacity of 4,000,000 cubic feet of gas per day, or about 1,250 to 1,460 million feet per year, the company, with full control of the other

It

*It is true that before the act of 1890 the Bay State Company had sold in all about 161,000,000 feet of gas to the other companies, which mixed coal gas with this water gas and distributed it to their customers. It is understood that this mixture contained regularly more than 10 per cent. of carbonic oxide. But the companies became liable to a penalty under this prohibition only, if their gas contained more than the legal limit of carbonic oxide "on three successive examinations." By some toleration on the part of the State administration it was easy for the companies to find out when inspections would be made, and thus continue these sales and still avoid the penalty by being within the limit at one examination out of three.

companies, had sold in all, before July 1, 1890, as stated above, but about 161,000,000 feet. Until that date the energy of the Bay State Company had been expended in perfecting arrangements with the other companies and in trying to get favorable legislation.

After the unacceptable act of 1888, authorizing the company to increase its capital stock, it turned its chief activity to an attempt to get from the legislature the right to consolidate legally, by lease or ownership, all the companies in and about Boston. In the session of 1890 it finally forced through the legislature a bill authorizing all the companies doing business in any town or city in the State to consolidate at the will of the stockholders. This bill virtually left the terms of consolidation and the amount of capitalization at the discretion of the stockholders. Fortunately for the good name of the State, Governor Brackett vetoed this bill; and the company was unable to overcome the veto in the legislature.

After more than six years of remarkable and fruitless appeals to the legislature for special legislation favorable to the company, and of legal and financial manipulation, about July 1, 1890, the Bay State Company found itself in possession of a magnificent water gas plant of large capacity, and in complete control of four other companies, with perhaps, on the whole, the most valuable field for the sale of gas in the world. The company determined, without for a moment ceasing its appeals to the legislature, to make the most of such legal rights as it already possessed. It is easy to see that, if the Bay State Company were allowed to sell gas to the companies controlled by it, at its own prices, there could be no limit to its ability to turn all the profits of all the companies into the desired channel; namely, into the treasury of the Bay State Company. The directors of the company assumed that they had such right; and, when it became known that they were acting on this