1 TtW Tt . wi-
The Commoner
JTOT, 1918
u
Federal Trade Commission Scores
Profiteers
(Continued from Pago 7.)
taking exhorbitant profits on their
leather business. Increases o 30 to
100 per cent m tanners' profits are
cited, one company boosting its
profits from $644,390 in 1914 to
$3,576,544 in 1916.
"During 1917 the prices of hides,
particularly packer hides, were ad
vanced very rapidly, notwithstanding
that during the period of advance
great supplies of hides were with
held from the public," the report
says.
Shoo Profits Very Large.
"Many shoe manufacturers in 1917
made larger profits than usual.
Wholesale shoe dealers secured wider
margins of profit in 1917 than they
had been accustomed to receive. The
margins of retail shoe dealers
widened greatly during 1917, es
pecially upon fancy shoes. This was
true to a less extent on staple shoes.
It appears that the retailer has
profited more in proportion than the
wholesaler.
"As an indication of earnings of
the big packers in the selling branch
of their leather business, the fol
lowing is quoted from a letter of
Jan. 17, 1917, by the Eastern Leath
er Company, an Armour selling sub
sidiary, to Mr. P. W. Croll of Ar
mour & Co.:
" 'We are Inclosing our check on
the National City bank, New York
city, payable to Mr. J. Ogden Ar
mour, for $915,787, same being a
dividend of 53 per cent on the 17,279
shares of common stock standing in
his name. In addition to this, and,
in accordance with our conversation
when in Chicago, we have set aside
as a surplus $250,000, which repre
sents 10 per cent on the common
stock.
Show Vast Earnings."
" 'We are also inclosing a check
on the National City bank for $202,
145.62, payable to Mr. Armour, this
being the balance due on 6,020
shares of common stock held for" employes.
"Here is a memorandum of May
15, 1917, from J. D. Murphy to Mr.
H. W. Boyd, president of the Ar
mour Leather Co.:
'"May 15, 19l7 Mr. H. W.
Boyd: Herewith comparative state
ment of results in the leather busi
ness for the three months ending
April 28, showing earnings of $1,
964,945.18. This does not include
Woodstock, as we have not finished
enough of our own leather up there
to make a loss and gain Tesult of
any value, as indicating the possi
bilities of the plant,
Charge Off Large Amounts.
" 'As per Mr. Armour's instruc
tions, given through Mr. Stull, we
are charging off In reductjon of the
above the following reserves:
" 'Earnings as above, $1,964,945.
18, " 'Reserve for income tax, three
months, ending April 29, '17, $36,
916.61. " 'Reserve 'for estimated excess
Profit tax six months ending April
28, '17. $423.620.84 total for both
$460,536.45.
" 'Net earnings, $1,504,408.73.
" 'J. D. Murphy.'
"Here's another letter in which
Mr. H. W. Boyd writes Mr. Armour
comparing the results for the Armour
Leather company with the Central
Leather company's, statement:
Oct. 31 1917. Dear Mr. Ar
dour: In reference to the Central
weather company's statement, would
say that it does not compare favor
ably with ours. You will notice that
after deducting interest with divi
dends they only have $40,000 to add
to the surplus. "We made $600,000,
and they are doing four times the
amount of business, and only made
$1,900,000, and, as stated above, af
ter deducting interest on the bonds
and paying dividends, they only had
$40,000 left to add to their surplus.
44 'I think, considering their lum
ber business, which is wonderful (the
manager of the Pennsylvania Lum
ber company told me that they never
expected to realize the profits they
were making on hemlock lumber and
that they were doing an enormous
business) that our statement is a
great deal better than theirs. Yours
truly, H. W. Boyd.'
Reappraise Swift Properties.
"The way in which Swift & Co.
proceeds when a government limita-
uuu oi pronts is expected is shown
by the following letter, in which
Louis P. Swift writes to his brother,
Ed. P. Swift, stating that he has
learned that the government expects
to establish profit control in the
leather industry and suggesting the
advisability of re-appraising their
properties in certain companies. Ed
ward P. replies.
44 4I approve, if done quietly and
promptly. E. P. S.' "
Charge Salmon Profiteering.
Still more charges of profiteering
are leveled at the packers in the fol
lowing report on salmon canneries:
44In 1917 the average net profit on
investment of ninety companies,
packing 7,426,678 full cases (87 per
cent, of the total year's pack), was
$2.28 per case, or 52.8 per cent on
the net investment in the salmon
canning business proper. This aver
age of 52.8 per cent does not reveal
the fact that some of the low cost
companies, included in the average,
made over 200 per cent. It is sig
nificant that some of these low cost
companies are those allied with the
big meat packers."
Accuse Flour Millers.
Some of the most conscienceless
profiteering so far exposed is attrib
uted by the commission-to the flour
millers, whose greed has enhanced
the cost of our daily bread.
'In the case of flour milling, it is
apparent that while the government
fixed price for wheat and an allow
ance of maximum margin of profit
over cost on flour have had the vir
tue of stabilization, nevertheless the
profits resulting are heavy," the re
port says. "Before the government
interfered flour sold in 1917 with an
average profit as high as 52 cents a
barrel. After the fixation of the
price of wheat and the determination
of a maximum profit of 25 cents per
barrel of flour the very high aver
age profit per barrel dropped toward
the maximum. Where this decline
in price did not bring the price down
to the maximum that is, where the
millers -continued to exceed the gov
ernment maximum, as they did in
,,r iafnnppR many of the millers
were actuated by the hope that they
would be allowed to include Income
and excess profit taxes in their costs
and pass these taxes on to the con
sumer. "However, if there had been a
fairly general compliance with tne
maximum of 25 cents the profits of
Se S efficient mills would I have
been considerable and those of the
most efficient mills proportionately
heavier. To the extent that the max
imum price was exceeded the profits
were larger and in general woro in
fact very great.
"The flour millers havo had un
usual profits for considerably more
than a year. Information collected
and verified by the commission shows
for the four years ending Juno 30,
1916, a profit of 13 cents on each
barrel of flour and 12 per cent on the
capital investment.
"In the year ending Juno 30, 1917,
these same mills made an average
of 52 cents on each barrel of flour
sold, and nearly 38 per cent on their
investment profits that arc Inde
fensible considering that an average
of the profit of one mfll for six
months of the year shows as high as
$2 per barrel.
"The commission has tabulated re
turns covering the sale of something
over 4,000,000 barrels of flour made
and sold under the food administra
tion's regulations from September,
1917, to March, 1918, inclusive. In
face of the regulation of 25 cents
per barrel maximum, the average
profit per barrel on this flour was
about 45 cents, or over three times
the normal profit per barrel referred
to above. The return on investment
was apparently between 25 and 30
per cent.
Jobbers Profits Jump.
"However, with prices maintained
at xthe same level, cost would prob
ably have increased and profit would
have been somewhat reduced in April,
May, and June, 1918, because of the
smaller output in Ihose months. The
average net profit of jobbers report
ing iti-the commission was about 15
cents per barrel for 1913 and 1914,
but increased to nearly 50 cents in
the first half of 1917. These profits
include all the pay received by the
proprietors of the business for their
services.
"It is clear that if the profit above
such pay was reasonably high in 1913
and 1914, it was exorbitant in the
first half of 1917. The food admin
istration has succeeded in reducing
the profit of these concerns, but for
the year 1917 it was still over twice
as high as In the earlier years.
44In cases where the government
fixes a definite margin of profit above
costs, as in the case of flour, there Is
a considerable incentive to a fictitious
enhancement of costs through account
juggling. This has added to the vol
ume of unusual profits.
"Increase of cost showing on the
producers' books can be accomplished
in various wayfl, The item of depre
ciation can be padded. Officers' sal
aries can be increased. Interest on
investment can be included in cost.
New construction can be recorded as
repairs. Fictitious valuations on raw
material can be added. And inven
tories can be manipulated."
Some Comfortable Salaries.
The commission says it has detect
ed the payment of extraordinary sal
aries and in some instances bonuses
to executives of corporations, and
adds:
44An illuminating example of high
remuneration, charged to the ex
pense account, is that given by the
American Metal company, limited, of
New York, the chief dealings of which
are in zinc. Appended are the sal
aries and tantieme (French an in
terest, commission or proportional
amount) of some of the chief offl-
cials
"B Hochschild, chairman of
board of directors, W'Z'-p.
"C. M. Loeb, president, $364,-
326.73.- f - ...
"Otto Sussman, vice-president,
"Sol Rtfos, manager St. Loul of
flee, $148,530.69,
"M. Schott, manager Denver of
fice, $136,563.12."
Coal Margins Increase.
On the subject of coal operator'
profits, the commission says'
"Generally speaking, the bitumin
ous coal operators In 1917 had very
much larger margins than !n previous
years, while in 1916 the margins
(what operators actually received for
coal sold over f. o. b. mine coat) may
bo regarded in some cases as lower
than normal, yet the margins of 1917
were often two or three tlmeo the
normal return. In the figures for
1916 and 1917 mentioned below re
turn on investment must bo covered
in margins shown.
"The increaso of margins Is illus
trated by an examination of the re
turns for 1916 and 1917 of twenty
three typical bituminous coal com
panies in the central Pennsylvania
field. The average margin of these
companies in 1916 was 20 cents per
ton, and In 1917 was 90 cents. The
highest margin for any company of
the twenty-three companies in 3917
was $1.85. The corresponding mar
gin for this company in 1916 was 41
cents.
"Similarly the lowest margin for
any of these companies In 1917 was
27 cents, the corresponding margin
for the same company in 1916 being
13 cents.
"April realizations contain relative
ly little coal sold on contracts made
prior to August 21, since most such
Contracts expired April 1 ,1918. Sam
ple reports for April operations, cov
ering 12,619,274 tons actually mined
in West Virginia, Pennsylvania, Ohio,
Indiana, Illinois, and Kentucky, show
an average margin between claimed
f. o. b. mine cost and actual realiza
tion from sales of about 54 cents, as
against a prwe-war margin of an aver
age of 10 to 15 cents.
Fraud on Gasoline Reports.
'4In anthracite the average receipts
per ton, including all sizes, during the
year 1914 (thirteen companies pro
ducing 79 per cent of the total ton
nage in 1916) were $2.86 per ton.
The average receipts per ton of an
thracite, including all sizes, allowing
for later obligatory summer discounts
on prepared sizes, during the period
January-March, 1918 (six companies,
produc'ng 50 per cent of the tonnage
in 1916), were $4.26 per ton.
"The average labor cost increase
per ton since 1914 was 76 cents, and
if this is deducted from the 1918 av
erage receipts per ton on increase of
60 cents per ton (or 22 per cent) in
average receipts is indicated, without
allowance for increased cost of sup
plies and general expense."
The commission charges that false
reports of gasoline famine have been
spread "for the purpose of maintain
ing the high price of that product and
the heavy profits from it."
Enormous Profits in Fuel Oil.
"A survey of the petroleum field,"
the report says, "shows that the mar
ket, when under the control or domi
nating factors, such as Standard Oil,
can be one of huge profits without the
device of the high fixed price.
"Enormous profits are now being
made In fuel oil, with the advantage
to the refiner that the high price of
that product meets no popular chal
lenge. "The average profit in the oil in
dustry Is about 21 per cent on th
Investment. This is a considerable
increase over the rate of profits in
dicated for pre-war yeaTs, as the com
mission's gasoline report indicates an
average profit for the years 1913,
1914 and 1915 of 15 per cent on ih
lIlVUDLUlUllt.
U. S. Steel Profits.
$221 596 04 u ot51 rronw.
"j! Loeb, vice-president, $147,- - in 1917 the steel companies, tkm
commission says, maue auuormw
930.69
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