8T95- 1 I "r ;^-,.-- wm mm i K 9 g^ m gmm sBira ^^^^K !%!(& mmM ^^^^^^mfV-3 n fflW Let Us HavG the Truth The Whole Truth And Nothing but the TPUTH » >■ i I n SPftCCH DCLiVCRCD BY THE HON. C A. BAPLOW m the riaguire Wigwam, oii OctoDer 26, i('^96 Kingsley-liamcs & NcunerCo. Print, 123 RroacJwHy, L. A. • • * c * • • •• •! . • I . • •• • . :• ..•:•. ' - • « •» M * • . • V vt •;. v: • • • c t R. J. WATERS' BUSINESS OPPORTUNITIES. R. J. WATERS' BUSINESS OPPORTUNITIES. The Republican papers and orators in the Sixth Congressional district are having much to say about Mr. C. A. Barlow's bus- iness opportunities, but thev cannot put their finger on a single act of his that has not been strictly honorable as between man and man. What is Mr. R. J. Waters' business rec- ord? Is it clean and will it stand investiga tion? A LITTLE HISTORY Mr. Waters came to Redlands in 1886, as a man of moderate means and soon there- after became interested in the Bear Valley irrigation enterprise. In 1891, that com- pany was re-incorporated with a capital stock of $4,000,000. Of this amount $1,000,- 000 was preferred stock, which was entitled to eight per cent dividends, and $3,000,000 was common stock, which was entitled to such dividends as the company might be able to pay, after the preferred stock div- idends had been provided for. From the reorganization of the companv up to a short time before its failure, in 1893, Mr. Waters was a member of the board of directors, and for a portion of that time, he was the business manager. DISCOUNTING THE FUTURE The company sold water rights to the Alessandro and Ferris irrigation districts to the extent of a continuous flow of 8375 inches during the irrigation season, taking in pav- ment therefor Alessandro district bonds to , the extent of $765,000. and Ferris district I bonds to the extent of $240,000. I These bonds wei-e delivered to the Bear j Valley Irrigation company on the distinct I imderstanding and agreement that the I money received from the sale of these bonds was to be used in constructing a new daiii for the reservoir and otherwise enlarging the water system of the cornpanv, so as to enable it to deliver to the districts the B^ir> inches of water for which the bonds were (riven, it being well known that the Bear Valley company at that time did not have as much as one thousand inches of water in excess of the amount called for by prev- iously existing contracts. HIRING A STOCK SHARF. The company employed one Charles W. K Greene of New York to sell its stocks and bonds, agreeing to pay him fifteen per cent, on all sales made. To assist in selling the stock the company declared a ten per cent, dividend. At first the common stock wa.i? sold at par, but under the stimulus of larare dividends, the price was gradually forced up to $160 per share. BIG SALES— BIG COMIVIISSIONS. The company thus sold about one-half of the district bonds at par and one-third of the common stock, receiving in all about $1,500,000 therefor, less about $22.5,000, which was paid in commissions. SILUI COLLATERAL CORFORATIONS. As a justification of these large di\idends, the company carried on its books and into its printed statements and prospectuses more than a million dollars of purely and absolutely fictitious assets, known to be such and of no value whatever by its mana- gers, the fraudulent scheme being resorted to of forming collateral corporations with purely fictitious capital and selling property to such corporations for many times its actual value, and taking payment in fabulous amounts of the stock of such corporafions and large amounts in the notes of such cor- porations, and then immediately releasing the stockholders of such sham concerns from all stockhold'crs' liability upon such notes. Yet this sham stock and these worthless notes were carried upon the books and into the statements of such company at their face value and offsetting positive and abso- lute liabilities to .such full value. WATERS A DIRECTOR ALL THE WHILE. Mr. Waters was present at the directors' meetings of the Bear Valley Irrigation Com- pany, as a member of its board of directors, when these sham sales to these sham cor- norations were made AND VOTED FOR THEM, and also voted for the resolution re- leasing the stockholders of one such sham corporations (the Alessandro Valley Land company) from all liability on account of $172,000 of the notes of the latter company given to the Bear Valley Irrigation com- i^anv. and also voted for a later resolution, which authorized the Bear Vallev Irrigation company to indorse and OIT.ARANTEE the pavment of such notes, in order that money might be raised upon them to continue the na-sTnent of the unearned "diviHends to the Bear Vallev company stockholders and further inflate the stock. BIG UNEARNED DIVIDENDS Tho sworn statement of the Secretary of the Bear Valley Irrigation company shnv.-s that such company declared and paid div- idends as follows: Januarv (?) 2, 1891, a cash divi- dend of $12S,.527.15 December 8, 1891, a cash dividend of 142.fi25..'?3 April 22. a cash dividend of 144,138.14 Mav, 1892, a cash dividend of . . . . 18,.?60.nn August 2, 1892. a cash dividend of. 147,020.00 December 13, 1892, a cash dividend of 19,244.00 ^^^S December 15, 1892, a cash di^^dend of 148,670.00 Making a total of $748,5S4.62 Of the di\'iderids so declared, there was actually paid $694,5?)2.62, leaving dividends declared and unpaid amounting to $54,252. Mr. Waters was an active dii'Pctor of thp Bear Valley Trris'a^'ion cnmmnv during all of the time covered hv thpsc dividends, ex- cf>T)t pnssihlv the last $157,000 thereof, and the records do not show that h-'' ever nro- tested or voted against any of such dhn- dends. Tlurinfr the period of time in whicTi these dividends ■were deelired and naid. the flnnt- ing indehtedness of the "Penr Vallev Trri^a- tion coTnnnnv iuerensed $420,000 nnd dur- ins? such period a mortn-afp indebtedness nf such companv of $300,000 became due. but was in no wav riaid or reduced, but an extension of navniertt was secured un+il TJecember. 1S05. "N^enrlv one-hnlf of the monev receiver! from flie sale of stor-h arid bonds wns T^nid out in dividends, and Avliile some monev was s^ent in the conotrnet'ori of finmes. ni'^e linos nnd otlior similTr im- provements, the -tvater sunnlv of thf" com- rianv was not increased to the extent of one inch. F?MALL LEaTTTTVTATE FNTrOME Durinpf the time that +lie eomoanv w^as paviuf these enonnoiic dividends mnl.-ins' a total of over SfifiOl.OOO to its Btorlcholf^prs. the Icffitirnate enrniuffS of +lie cnrnnanv frn"i the rental of the vtrater did not exceer! "640 - 000. Mobile the maintenancp cViarges of thoir Ti^ator svste'^i during sneb tir"f> e">^r'eede'1 SlOS.Onn. pnrl tbe eash income from the sale of lands did not ponal the expenditures in connection witli the land account. Yet. nevertheless. Tvhile such necessary' oiitmn so larerelv e-veee<^ed the ineome. "^\'hile the float- insr indelttedness of t^e eornoanv ittoc! en larrelv inereasinrr and the fi">^f'd indeVited- ness mnfurinVi handsome figures, running from par to RO ner cent above nar. the mnn- arrprs of tho eompanv not onlv boomed the stoek h-i' tlif> nnvment of these larTo un- earned dividends, but thev sent forth nub- lished statements in w^hif'h thev iustifi^d such dividends and such high nrices of thp stock bv sTiowing that all of the di'^'ir'ends ■were paid from surnhis earnings and that a larTe di^^^irlond fund, annroximatelv one million dollars, yet remained intact and un- touched. WTDOWR AND OEPTTANFJ PTTT^t^t^t? Reiving upon these glittering, false and fraudulent statements, which, however, seemed to be borne out by the actual pay- ment of dividends, eastern and foreign in- vestors were led to heavily invest in the .stock, one Swiss lawyer thus investing over $150,000 of trust funds in his keeping, be- longing to widows and orphans, which in- vestments proved a total loss. FIFTEEM FEK CENT. Dl\ IDEN'D. In the spring of 1893, a fifteen per cent, dividend was declared and most of it was paid, but a few months later the company failed with over $1,200,000 of indebtedness with no money to pay the debts, and $53,000 of unpaid dividends, although a published statement of the affairs of the company, is- sued a short time before the failure, showed over one million dollars to the credit of the dividend fund. FELONY AND MISDEMEANOR. Those who are acquainted with the Penal Code of California (see sections 560 and 565) can figure out wliere these transaetions place men who pay dividends out of monev received from the sale of stock, or who issue false statements as to corporate as- sets. GETTING BONDS TTNDETJ FALSE PRE- TENSES. The voter can also ascertain to what ex- tent Mr. Waters and his assoeiates kept fnitli vnth the lando^vners in the irrigation districts, when thev used the proeeerls of the sale of distriet bonds to pav rliviflends in order to inflate the price of th^ eompanv's stock, instead of using i*' to inr-rcase tVie water supplv for the henefit of the rancliers and landowners in those districts who had imposed a lien upon thoir innrts to tv.^ px- tp"t of 56^0 an acre in order to pav for that ■water supplv. A SHREWD BUSINESS MAN. Mr. Waters appears to have heen the shrewdest man in the Bear Vallev manage- ment, for. v'hen bv reason of the fraudulent fli-inrfpnrls the stock rcaehod a marl.-pt vabip of $160 a share or thereahouts. ho r.ror>epflprl to upload his stoek on his neirrhhors anrl friends. He sold for msli nnrl hp tradp^l for propertv. Soon he had a banV aecount and manv pieces of good real pst^+p. but no Boar Vallev stock. The Board of Directors, of which he was a member, having voteH these large dividends, he ■was enahlpd tospll his stock to good advantage and shortlv thereafter the affairs of the companv were placed in the hands of a receiver, and verv soon the stock which was sold at so great a premium could not be sold for one cent per share. As e-vidence that Mr. Water»s was the Ipading spirit in the management of Bear Vallev affairs, it should be borne in minrl that he was about the onlv memher of thp board who made monev bv the failure and most of the members lost very heavily. WHAT THE WTND-tTP SHOWED. ■ Shortlv aftenvards. the inevitable crash came. In Febriiary. 1894. judgment was ob- tained in the United States circuit court for the southern district of California, in the case of Jamea Gilbert Foster vs. Bear Val* ley irrigatiou company, for the sum of $405, 000, and a receiver was appointed. 'J iie re- port of the receiver shows such a wreck as was hardly ever before known. The follow ing extracts from the receiver's reports and irom the decree of the court wdl give some idea of the true condition of the attaii-s ol this company that had a short time before paid to its stockholders $694,000 in divi- dends and yet claimed to have on hand a dividend tund of $l,0oi,325 as surplus earn- ings, over and above all liabilities and leav- ing its capital intact and untouched, lleceiver's report oi July 20, isyi, says: "To complete the plan oi tue jjtar V al- ley irrigation company and put it in a po- sition to hil Its exibtmg water contructs will require an expenditure ol at least $i,UU0,00U lu excess ol tne amount required to pay its indebtedness." (,'ihe indebtedness, as iound by the receiver, then exceeded $1,200,000.) Ihe annual earnings ol tlie company are $80,574.87 ; the annual liabilities ol the com- pany are $132,000, showing an annual deli- cit of $41,425.13." iDliICKEE Ui'^ THE CiKC LIT COURT UT Alj(JUyT27, 16^4. The decree of the circuit court, dated Au- gust 27, 1894, 111 such case, among other things, hnde: "inat the annual expense of maintain- ing the plant of said deiendant corporation, the interest on its indebtedness and taxes upon Its property, exclusive of the compen- sation of its receiver herein, exceeded the annual revenue of the cori>oration by the sum of at least $41,000, and that said cor- poration IS insolvent and unable to pay its indebtedness." Receiver's report of February 5, 1895, says: ■'Defendant was then, when receivers were appointed, March, 1894, without funds and without credit; its works were out of re- pair, and its employes disgruntled by rea- son of the long continued non-payment of their wages, and all its i)roperty advertised for sale for delinquent state, county, city aui^ irrigation district taxes. The corpora- tion generally was in bad repute in every locality in which it was delivering water." "That petitioners Jound themselves hampered by contracts unlav- orable to defendant, made by pretended agents of the corporation, wlio assumed des potic authority in bartering away rights, privileges and emolu.meats ol defendant." RECEIVER'S CERTIFICATES ISSCED AMOUNTING TO $153,000. In order to pay the operating expenses of this property during the year that such suit was pending, and to relieve the property from pressing laborers and mechanics' liens, it be- came necessary not only to apply all the in- come received from the property during such time, but in addition to issue receiver's certificates amounting to $153,200.48, which were made a hrst lien upon all of the com- pany's property. CREDITOR BUYS IN THE ENTIRE PROPERTY FOR $380,000. This litigation resulted in all of the prop- erty of the Bear Valley Irrigation company (WHICH THE YEAR BEFORE WAS CARRIED ON THE BOOKS AND INTO THE STATEMENTS AND PROSPEC- TUSES OF THE COMPANY AS BEING WORTH OVER $5,000,000) being sold to a judgment creditor of the company for $380,- 000, subject to about $450,000 the mortgage indebtedness, and $153,000 the receiver's certificates. PRESENT VALUE OF THE PLANT. Within the last month a plan of re-organ- ization of the Bear Valley property has been in active negotiation between the users oi water under the Bear Valley system and the present owners of the property with the re- Eult that the owners of the property and those having liens upon it, includdng the owners of the mortgage and the holders of the receivers' certihcates, have all proposed to sell and surrender all interest in the prop- erty lor the sum of $525,000, and to take their pay in long-time bonds, bearing a low rate of interest to be made a lien upon the prop- erty. The foregoing are irrefutable facts, estab- lished by the records of the Bear Valley ir- rigation company, and by the court records. MR. WATERS TRIES TO EXCUSE HIS CONDUCT Air. Waters and his mouthpiece, the Los Angeles Daily Times, are now trying to make it appear that he disapproved ot all this looting of the Bear Valley Irrigation company, and of the payment of these un- lawiul dividends, and that he retired from the company before these things were done. Such attempted defense is contrary to the facts and the records and is absolutely false. The books of the Bear Valley Irrigation com- pany show that Mr. Waters was still a di- rector of that company until nearly $000,- 000 of these unlawful dividends were paid, and that he never voted or protested against any of them. 'That he did unload and get down and out of the company before the last dividend was declared and before the stock depreciated and its real actual worthlessness became generally known, is conceded, and Mr. Wa- ters is welcome to all the credit to which this wise act of caution entitles him. For a large portion of the time during which such dividends were being declared and paid, Mr. Waters was its general manager and it was largely his scheming brain and his guiding hand that was engineering and pronioting the company's affairs during that period of time, when this scheme of allur- ing, but unlawful dividends was decided upon. He was at the helm when the pay- ment of these dividends began and he did not retire from the management imtil the delusion was fully launched and the stock sales were booming. NOT A CREATURE OF THE GREAT SOUTHERN CALIFORNIA BOOM This reckless financiering cannot be ex- cused by attributing it to the prevailing in- fatuation that seemed to possess so many people* in Southern California during the great real estate boom of 1887-88, for it had its origin two years later, after values had receded to normal conditions and while the serious lessons of the boom were still fresh in the minds of all. So this Bear valley South Sea bubble cannot be excused as a creature of the great Southern California real estate boom. THE TIMES' DEFENSE OF WATERS. In its attempted editorial defense of Mr. Waters in the Times of October 25, 1898, it is conceded that the "characteristic pro- moter," F. E. Rowan, the founder of the Bear valley enterprise,, secured the assist- ance of Mr. R. J. Waters as his CONFI- DENTIAL ADVISER in connection with floating the Bear valley proposition. The iictitious capitalization of the enterprise is admitted by the Times in the following language: "The campaign of inflation was on; the stock of the company, represent- ing a paid-up value of §42 iier share, was called in, and a double quantity issued; this was in time called in and $3 of face value in stock was issued for $1 of the sec- ond issue, leaving the stock with a paid- up value of $7 per share. But notwith- standing this outward appearance of pros- perity, the managers of the company were driven to desperate straits by the fact that the floating indebtedness of the company had mounted up to half a million dollars. THEN IT WAS THAT THEY CAME TO MR. WATERS AND BESOUGHT HIM TO RESCUE THE COMFxVNY FROM ITS DESPERATE POSITiOlS. While he had but a trifling interest in the company, and while the company had plunged into recklessness in opposition to his advice, still his property was under the Bear valley sys- tem and he had LONG HELD CONFIDEN- TTAL RELATIONS WITH THE PRIN- CIPAL PROMOTERS of the company. THESE CONSIDERATIONS WERE SUF- FICIENT TO INDUCE HIM TO LAY HOLD OF THE COMPANY'S AFl'AIRS TO RESCUE THEM. So confused were the aftairs of the company that it took ninety days to ascertain the amount of the indebtedness, and yet, despite all the ob- staples, within less than a year the Bear valley company had paid off ever dollar of its floating indebtedness." There are some grains of truth in these statements. What is said as to the inilation of the stock is true; what is said as to Mr. Waters' relation with the promoters of the company is true; that his interest in the company and his relations to its promoters induced him to lay hold of the company's affairs is true, but it is not true that with- in a year thereafter the company had paid ofl every dollar of its floating indebtedness. Ou the contrary, its indebtedness was large- ly increased during such period. The truth is that Mr. Waters took hold of the afiairs of the company just prior to the beginning of the campaign of the inflation of stock by the payment of unearned and unlawtul div- idends, and he remained general manager thereof for a largo portion of the time cov- ered by such unlawiul payments. He act- ively connived at the various schemes re- sorted to to bring about tlie result ot stock inflation; printed prospectuses, signed by iiim as general manager, justihed investors in believing the stock was worth all that Mr. Charles W. Greene, as its financial agent, was claiming it to be worth. Mr. Waters may have had some disagree- ments with Mr. Greene, during the latter portion ot the campaign of inflation that caused the company to hold on to Mr. Greene and to permit Mr. Waters to step out of the directory, but these misunderstandings, it any, were long after the mischief had been done, and was when the company was on the brink of ruin, and nothing but such dazzling and audacious achievements as those of Charles W. Greene in continuing to sell stock at ^IbU a share seemed to otter any tiope of staying a certain collapse of the entire concern. In the opening of its defense of Mr. Waters, in the editorial above referred to, the Times says: "Before that gentleman's (Mr. Waters) nomination, the work of the backbiters, which were slandering Mr. Waters prompted the Times to investigate the matter, not through suspicion of Mr. W^aters' character, but to ascertain if the facts were such that they could even be considered to cast odium upon that gentleman. "As a result of that investigation, this paper found that the whole connection of Mr. Waters with the Bear Valley company was such as to cast honor upon him." In connection with this, its defense of Mr. Waters, the Times says: "At this time (the year that Mr. Waters came to the rescue of the Bear Valley com- pany) came the amazing announcement that Charles W. Greene was selling the company's stock in Europe for $160 on a guarantee of 15 per cent, annual dividends. "The idea of paying $15 dividends per year on an investment of $7 seemed to Mr. VVaters to be the height of absurdity, and he gave to his associates the alternative of choosing between sustaining Mr. Greene or allowing him to drop from the company. The stockholders were dazzled with the achievements of Mr. Greene, and R. J. Waters stepped out of the Bear Valley com- pany with a record for honesty and busi- ness sagacity which have been often illus- trated by the calamities which have beset the company as a result of its gross mis- management, against which Mr. Waters per- sistently raised his voice, though in vain, and that is the whole story." We have no evidence as to the thorough- ness of the Times' investigation as to Mr. Waters' connection with the Bear VaJley company, but that it was probably conhned to asking Mr. Waters if he wasn't aJi right IS evidenced by the following facts and records, taken either from the minute book of the Bear V'alley Irrigation company, or Irum the court records: The minute book o. the Bear Valley Irri- gation company shows the first meeting of such company was hatl for the purpose of organization, upon December 19th, 1890, at winch meeting such company purchased the entire water plant of the Bear Valley Land and Water company, giving therefor two million dollars ($2,000,000) of its common stock and purchased the property of the Alessandro Land and Development com- ))any, giving therefor four hundred thousand dollars ($400,000) of its common stock, leav- ing in the treasury undisposed of one million dollars ($1,000,000) of its preferred stock and SIX hundred thousand dollars ($600,000) of its common stock. The same minute book, page 7, at the fourth meeting of the board of directors of the Bear Valley Irrigation company, held December 31st, 1890, twelve days after its organization, shows that R. J. Waters was regularly elected as a director of such com- pany and took his place on the board At the same meeting, the minutes show that R. J . Waters was elected a member of the ex- ecutive committee of such company. At the next meeting of the company, Jan- uary 3d, 1891, four days later, R. J. Waters was appointed assistant general manager of the company (see page 11, minute book). On March 3d, 1891, (see page 85 minute book) R. J. Waters was re-elected director and assistant general manager, and on such date a financial department of such com- pany was established (see page 89, minute book) and R. J. Waters was elected the head of the financial department and direc- tor for the coming year. 1K9^^^ '^""'^ ^^^' ^^^^' ^^^^ minute book, page 154) the corporation declared a dividend ot tour per cent, on its preferred stock and hve per cent, on its common stock. Mr. Waters was present as a director and voted lor this dividend. ^^" August 22, 1891, (see minute book. i^f^^Tir^ '^ resolution was introduced bv Mr Waters, and passed, binding the Bear ^ ill icy lrn«>atu)n company to guarantee the payment of the principal and interest of the Herns and Alesandro district bonds, owned by the company, aggregating in amount over one million dollars ($1,000,000). This reso- lution was reiterated in more formal lan- guage at subsequent meetings held Septem- ber 17th, 1891, and October 13th, 1891, (see page 197 and 213, minute book. On October 22, 1891, ]\Ir. Waters was elected genera] manager of the company, , uistead of merely assistant manager, so thai at such dates he was a director, general man- ager, and the head of the financial depart- ment. The court records show that in a subse- quent attempt to defend the policy of the Bear \ alley Irrigation company in its course in paying these large dividends", that its man- agers were relying upon the fact that in order to keep faith with the stockholders to whoin stock had been sold, it was nece8.sary to live up to the representations made to theni 111 printed ciicu'ars sent them prior to their purchase of stock. The first circular referred to as justifying such continuance ot dividends was signed by Charles W. tireene financial a^ent of the Bear Valley Irrigation' company, from which we take the following extracts: A FAVORABLE BHOWmO. New York, Nov. 12th, 1891. At a conference held here, at which the Cahtornia directors were represented bv t. L. Brown, chief engineer, and R. J. Waters, genei-al manager of the Bear Val- ley Irrigation company, and the leading East- ern stockholders, a very careful examination as to the finanacial condition of the company was made, with the following results: Fifth— The amount of the securi- ties, irrigation district bonds and land notes in the said fund (dividend funds) amounts now to almost one million, five liundred thousand dollars ($1,500,000). There have been other sales of water rights, agreed to, but not consummated, which will increase this fund to more than two million dollars ($2,000,000). This can be realized on read- ily as needed, for dividends. Sixth— It is therefore deemed justifiable to announce that the company will, in addition to the regular dividends of five per cent on each date, January 1st and July 1st, respectively, pay an extra dividend on com- mon stock on the 1st of April, or a total of 15 per cent, a year. This rate can be main- tained beyond question, continuously. Eighth— It is also considered that the present capital will e be sufficient to meet the requirements of the company for the development of its entire plant, and the completion of its works as planned. . Under these circumstances 1 am justi- fied in advancing the price of common stock, or as much of it as remains beyond the pres- ent selling price. Not to do injustice to the agents AVho rnay have transactions pending, I may adopt the following plans: Fifty thousand dollars ($50,000) of the common stock will be offered to sell at one hundred and fifteen dollars $115) per share; agents Avill be notified by telegraph Avheii the amount has been taken. The second fifty tliousand dollars of the comiiaiiy stock will be sold for one hundred and twenty dollars ($120) per share. The tiiird fifty thousand dollars of the company stock will be sold at one hundred and tweitty-five dollars ($125) per share. The fourth and last fifty thousand dollars of the company stock vnll be sold at one hundred and thirty dollars ($130) per share. You will readily see that this stock, even at $150 per share, is a better investment to a purchaser than when it was offered at par, and when only ten per cent, dividends were provided for. Ahnost eight hundred thousand dollars ($800,000) has been expended in improve- ments since that time. I need only add in conclusion that the pur- chasers of this stock are getting an excep- tional investment, combining the two ele- ments of absolute safety and high rate of regular dividends. , i , j Full information will be furnished by ad- dressing, CHARLES W. GREENE, Financial agent, Murray Hill Hotel, New York City. Cable address "See Greene, New York." WATERS BOOMING THE STOCK. This circular was largely distributed throughout the Eastern States, England, Scotland, Switzerland, and elsewhere, under the express sanction and aproval of Mr. R. J. Waters, the head of the financial de- partment and general manager and a direc- tor of the Bear Valley Irrigation company, at the time such circular was issued. But in a printed report, issued by Mr. Waters, as the general manager of the Bear Valley Irrigation company to the stockhold- ers of such company, dated Redlands, Cal- ifornia, March 1, 1892, he goes way beyond Mr. Greene in emphasizing the value of the stock of the Bear Valley Irrigation com- pany, as the following extracts fronJ such report demonstrate: (Extracts from report of R. J. VVaters, general manager, to the stockholders of the Bear Valley Irrigation company.) In the financiering of the company, at the date of the organization, that a capital 9! four million dollars, $(4,000,000), would fully provide for the completion of the works, as then projected, and that all of the income of the company, from whatever source, should thereafter be available for distribution to the stockholders. . . . The income of the company has been so exceptionally large that while ample pro- vision can be made for the pay- ment of the dividends upon the preferred stock of eight per cent and on the com- mon stock of fifteen per cent, annually, it is believed there will still be an ample sur- plus for the completion of the plant from the income of the company, and to provide for all the extensions, without making fur- ther increase of the capital account by sales of additional stock. This surplus, due pro- vision being made for the preferred stock, belongs to the common stockholders, and it is proposed that as the expenditures reach round amounts, new stock shall be issued for corresponding amounts to this class of shareholders, thereby increasing their holdings, and indirectly, their dividend ac- count. ^ , . , This also has the merit of keeping down rate of dividend, which, if fixed at a high percentage, might prejudice the company in the estimation of its patrons. . . . The water supply, which this company has at present acquired is sufi'icient for the ultimate irrigation of 250,000 acres, allow- ing for a succession of dry years and for all the industrial enterprises and for a popula- tion of one hundred thousand people. Such development is not the work of a single de- cade; in fact, it can never be completely ac- complished. The income of the past year, although very large, is quite likely to be exceeded in the present year — 1892. As community or- ganizations are being made in every direc- tion and the organization of subsidiary com- panies to this parent company has already begun. The directors will easily accord the accu- mulation of the surplus fund, so as to abso- lutely insure the regular payment of divi- dends, and thereby enhance the market val- ue of its stock and extend its repuation and financial standing, so that its indorsers and its securities it may have to sell will demand respect. As to the preferred stock, it will be noted that the present account upon the securities held in the dividend fund is quite ample to make the payments at the rate of 8 per cent leaving to the common shareholders all the direct profits resulting from the operations of the company. Respectfully submitted, R. J. WATERS, General Manager Bear Valley Irrigation Company. This circular, while addressed to the ex- isting stockholders, was used by Mr. Charles VV. Greene, the financial agent of the company, with prospective purchasers of stock, as an inducement to justify them to purchase stock at the exorbitant figures named by him in hid previous circular. In view of the positive statements con- tained in this circular that the income of the company was sufficient to continue the payment of the regular! 8 per cent, dividends on the $1,000,000 of preferred stock and the 15 per cent annual dividends on all of the common stock, it is difficult to see how the Times reaches the conclusoin either that Mr. Waters' connection with the Bear Val- ley company "cast honor upon him," or that he considered as the "height of absurdity" Mr. Greene's scheme to pay 15 per cent an- nual dividends. MORE DIVIDENDS. Resuming again Mr. Waters' record, as shown by the minute book of the Bear V al- ley Irrigation company, it is found that on December 8, 1891, (see minute book, page 233), a dividend was declared of 4 per cent, on the preferred stock and 5 per cent on the common stock, payable January 1, 1892. The record^ shows Mr. Waters to have been present at this meeting and to have offered no opposition to the dividends. The minute book, under date of March 1, 1892, shows the annual meeting of the stock- holders of the Bear Valley Irrigation com- pany, and that Mr. Waters' printed report, extracts from which have been set forth above, was "read, received, ordered filed and adopted," and that Mr. Waters was re- elected a director for the corporation for the next ensuing year. WATERS RE-ELECTED. A meeting of the newly elected board of directors of the company, held tipon the same day, (see minute book, page 25.3), shows Mr. Waters was re-elected general manager for the next year. On April 22, 1892. (see minute book, page 274), the minutes show that a dividend of 5 per cent on the common stock of the com- pany was declared. Director Morrison alone voting against this di^ndend. This was an extra dividend of 5 ner cent, in addition to the regular annual 10 per cent dividend, so as to make the total divi- dend on the common stock ^5 per cent pp'^ annum in accordance with the promise set forth in the Greene and Waters circulars. .Tune 7, .1802, Tsee page 288 of minute book), a dividend of 4 per cent on the pro ferred R<^ock was declared, payable Julv 1. 1892. Mr. Waters was present at this mect- inff and offered no oppo.sition to the resolu- tion. On June n. 1892. ("sec paf'P ''SR of minuf f^ book), Mr. Waters tendered his resifnafi'^" as (TPneral mnnarffr of +1-ip comnnriv. as dirl nearlv all the other officers of fhc /^om- panv. The same was laid upon +Vip fpWo On -Tune 14. 189''. fspp paf^po 288 and ''R91 thp rPsifnations of all flip nfftVors f rxnflprrifl v.^ere accented, but Mr "R. .T. Watcro ti'ps nr nnnt^ rp-plpp*-pd general manager, with sa'iip qplnrT ns l-ipfnrp On .Tune 15. 1892. fsee pagp 291 minute V>ook). a np'w pvprntivp cornmiftee was an- nointed. of which Mr. Waters, general managpr. w^as marlp chairman. On August '' 180'> fsee pa^p .31.'). minutes'!, on motion of Mr. Waters. di\-idpnd of .'i po>- cpnt. on the common stock was declared v-'^^lTonf opposition. On XTrivpTnTipr 1 1892 (=pf^ mirufp book nanrp 32.'iV Mr. Waters was plectpd seconrl vi^'o riT-ociflprit. On "Wovprnber 2. 1892 fminute book, page .3.30).^ Mr. Waters resigned as second vice- prpsidput and general manager. On Dpcpmber 2. 1892 fsee minute book, page .3.32). a resolution Tvas passed author- irip"' fl->e snip of the Wiite W^a^pr ranch. SIno-w Creek' rarieli nnd all Tvater rights eon- nop+pfl +lipvp-\vi<-b nnrl 3030 sharps of tVip t-'slm '\^pnpT- \'\^nter ponrnnrtTT sfnek fo-r one hnndre*! thonsand dollar's proposi- tion remaining good for sixty days and a commission of five tTiousand dollars f^.'iOOO) to l-'C allowed. 'N'o+''vithstnndinrr this the coninanv con- tinued to thereafter cnrrv such pronertv upon its books and into its nrinted state- nien^^s and prosrieetuses. as brwiprr a value of $600.00n. so that t>>ev micrlif elaim that the capital was not being diminished or en- ( croached upon in their subsequent claims I that their dividend fund amounted to nearly one million five hundred thousand dollars ($1,500,000). WATERS RESIGNS On December 2, 1892 (miniute book, page 3.32), Mr. Waters resigned as director of the company. From the foregoing it will be seen that Mr. Waters was director, general manager and head of the financial department ot the Bear Valley Irrigation company during the whole period covered by the dividends which had been paid up to this date, amounting to $580,670.62. In the face of these facts, all of M'hich are matters of record, to claim that IMr. Waters is not responsible for the declaring and payment of these unlawful and un- earned dividends and for the promulgation of the false and fraudulent reports which resulted in the sale of the company's stock and bonds and fictitious prices, is so utterly false as should put to shame any one who utters such a statement. The facts doubtless are that ]\Tr. Waters' "'ithdrawal from the Bear Vallev Irriga- tion company and its management was oc- ^■;easioned bv Mr. Greene's nolie^' of naviTiT fontiuued dividends. but rather b^' tl-ip realization of the fact that tl'P companv could no longer scrape I'l'fether anv fimds from nnv soiiree ivitli which to pay further dividppds. As evidence of this fact, on December 14. 1892. twelve davs after ]\Tr. Waters resignerl fsee • -■:.info V)ook. vol. TT. nafTo ^1. a rlividend of 4 ner cent on the nrpferrcrl cfneV ■was rlppla^'ed and on Dpeember 1". 1900 friafrps ^ iTifl ^ minute book, vol JTI. a .5 nor cent rli'M'dend was declai-ed on the coTirnon stock. Seeing no possibib'tv of rnpeting the pav- "T--nt of these di'vidends tlipv ivprp re<^on. siflered at a rneeting of the comnnnv helrl .January 16. 189.3 (m^^c 1.'5. vol. IT. minnt'^ booV). and botb dividends were rescinded Ml- Charles W. Greene, rpalizinrr that 't would be ruinous to announee to the -^vorl'' that tbe regular expected dividenrl -vt-ouI'I not h'-< forti^r-oming returned to T'edlan'^s fr-nrn "NToiv Vork and insisted that lie eonM finanee the pnvment of such caneplpd divi- d^ufls. and *^bereafter. on the 31st dav of .Tpniim-v. 18Q.3. the aetfon of thp ^^oai-d in P,nn/^olin4.2-'i2 was neA^er paid, but notwithstnndinrr tbis fact, on April 21. 1893 Tscc minute book, page 73), a dividend of ."i p^r cent was dp- elared on the common stoek. payable ATa^' 1, 1893, no portion of which was ever paid. From this it is evident that Mr. Watera 410895 stayed with the dividend policy as long as suckers would continue to bite. As a further evidence that Mr. Waters, even after his resignation from the com- pany, was not willing to condemn the policy of the payment of these enormous divi- dends, he* is on record as upholding the company in their course of so doing, relying upon the enormous value of the lands owned by the company in the Alessandro Irrigation district. VALUABLE LANDS As late as April, 1893, a sworn statement was made by Mr. Waters that he was "ac- quainted with the lands owned by the Bear Valley Irrigation company, situated in the Alessandro Irrigation district, and know.s the value thereof, and that the same, in the opinion of the affiant, is worth two hundred dollars ($200) per acre." Had this statement as to the value of the lands been correct, the Bear Valley company owning in such irrigation district over 12,000 acres, it of course would result in giving^ these lands a value of two million four hundred thousand dollars ($2,400,000). Upon this theory alone could even Mr. Waters justify the payment of the dividends. THE ENGLISHMEN'S DISGUST. The English stockholders thought at one time to reorganize the company and try to save the largei sums they had invested therein, but finally concluded, after careful investigation, that it would be better to lose the money they had in the enterprise Ihan to put in largei* sums to save that which was lost. A VALUABLE PROPERTY. The Bear Valley reservoir system was or- iginally a very valuable property, an'd it would be a valuable property yet if it could be taken out from under the stock-jobbing load that has been placed upon it by Mr. Waters and his associates. A move is now being made by the users of water from that system to accomplish this end. SAD CONDITION OF THE VICTIMS. In the meantime about 500 inches of water is being supplied to the residents of Alessan- dro, Moreno and Perris from the Bear Val- ley system. Thds is all the reservoir can furnish them, although their lands are en- cumbered with over a million dollars in bonds to pay for 8375 inches. The best sea- son they have only received about 160 inches. A large tract of land has been brought under cultivation and these lands are getting the water. Other lands subject to the bonded debt get no water, and many of the owners consider the case so hopeless that they allow theirMands to be sold for state and county taxes, be- cause they consider them worthless, under existing conditions. These are the lands tvhich Mr. Waters and his associates listed at $250 to $500 an acre in their prospectuses to boom the stock to $160 a share and sus- tain the idea of 15 per cent dividends. PROSPEROUS BANKER WATERS. After the wreck of the Bear Valley com- pany, Mr. Waters moved to Los Angeles, built a fine residence on x\dams street, en- gaged in banking, purchased the gas works at Pasadena, and now is a candidate for Congress, and the English stockholders and the Alessandro and Perris settlers and landowners are paying the freight. COLOSSAL DEBTS. When the affairs of the Bear Valley Irri- gation Company finally went into the hands of a receiver, shortly after the last of these fraudulent dividends had been de- clared, the debts of the corporation were found to be over $1,200,000. MATTERS OF RECORD. All of these facts, with many interesting details, are matters of record in the litiga- tion occurring at the time of winding up the affairs of the Bear Valley company. It is a well known fact that the Bear Valley Irrigation Company has not now and never had water enough to irrigate twenty thousand acres of land, despite Mr. Waters' circular that it had water sufficient to irrigate 250,000 acres. Few men have had such a business oppor- tunity as this and have taken such advan- tage of it. TEN REASONS Why the Honorable C. A. Barlow Should be Returned to Congress from the Sixth Congres= sional District : 1. Secured Four Hundred Thousand Dollars appropriation in the Lower House for San Pedro Harbor. 2. He secured the Pine Mountain and Zaca Lake forest reservation, 3. He secured passage of bill granting the city of Santa Barbara Three Thousand Five Hundred acres of land, to develop Municipal water supply. 4. He secured over Twenty-eight thousand dollars of back pension money for the Old Soldiers, and did more work for them than all of his predecessors from the Sixth District put together, 5. He voted for the free and unlimited coinage of silver at the ratio sixteen to one, and also introduced into the House of Representatives an Income Tax Amendment to the Constitution. 6. He supported all measures indorsed by organized labor. 7. He voted against the Refunding Bill. 8. He is in favor of the immediate con.struction of the Nicaragua Canal by the government, to be owned by the government and operalad by the government in the interest of the people. 9. He believes in the policy of protection of labor, and agrees with Speaker Reed " That the Dingley Bill is a failure." 10. He stands for equal rights for all, and special privileges for none. ^155, , University of Calitornia SOUTHERN REGIONAL LIBRARY FACILITY 305 De Neve Drive - Parking Lot 17 • Box 951388 LOS ANGELES, CALIFORNIA 90095-1388 Rofm this material to the library from which it was borrowed. tiMVEKSlTY OF CALIFORNIA AT LOS ANGELES LIBRARY ;)C(::": ^Uf:.j:2r.-^-:..^V"-' ■*;cr" 1' I ■.i-.fi.M* ,.*^.; JK 8795 B24 1 'A.