Postal Riders and Raiders

by W. H. Gantz

Moreover, there is another large fund slowly but surely accumulating in connection with the 1907 bond distribution. This 1907 gift to the shareholders was in the form of a bond issue secured by the deposit of stocks and bonds of other corporations formerly owned by the company itself. The deed of trust provides that if the income from these stocks and bonds is more than enough to pay interest of 4% a year on the $24,000,000 of Adams Express bonds, the surplus shall accrue and be distributed in 1947 among the holders of the Adams Express bonds. As a matter of fact there is a computed excess income derived in this way of $151,517.50 a year and by 1947 this will have mounted up to more than $6,000,000, not allowing for compound interest. Here is a 50% extra dividend being nourished along toward maturity. If there is any better example of being able to eat one’s cake and have it too, I have yet to hear of it.

At the outbreak of the civil war the Adams Express Company turned its routes in the Southern States, in which it had enjoyed a complete monopoly, over to the Adams-Southern Express Company, created by the Georgia courts for the purpose of assuming this business. The property of the association was to be represented by 5,000 shares, of which 558 were then issued. The Adams Express Company has held to the present day a dominant interest in this association, which it created to facilitate business during the war. After hostilities ceased, it resumed some of its Southern routes by agreement with the Adams-Southern Express Company, whose name had meanwhile been changed to the Southern Express Co. The two companies still work in common and use the same wagons and offices in many places.

But close as the Southern Express is to its parent company, it has a separate enough existence to justify a separate account of its money-making capabilities. Referring to the original 558 shares of stock, the secretary and treasurer of the Southern Express says: “None of the original twenty-four stockholders are living and there is no existing record to show how much was realized from the distribution.” This does not help us much, but in another report to the Interstate Commerce Commission the company appears to know what these records showed, for it says “none of its stock was ever issued for real property, equipment, acquisition of securities, or for any other purpose in the sense in which the issuance of stock is understood in connection with corporations.” But we do find that in 1866 the number of shares was increased to 30,000 and distributed to the owners as a stock dividend. Plainly, the civil war did not impoverish the express carriers. Then in 1886 enough more new stock was created to give the owners five shares in place of every three which they already held, so that there are now 50,000 shares.

Five hundred and fifty-eight shares of stock, the circumstances of whose issue are known to no one living, have sprouted into 50,000 shares by the mere process of paying stock dividends. Dividends of 8%, or $400,000 a year, are now paid upon the 50,000 shares, although the entire value of the company’s property, real estate, buildings, equipment, furniture, etc., was only $944,179 on June 30, 1909. Here are dividends of 8% on $5,000,000 stock, or more than 40% on the value of the property employed in the business. And this is not all. The Southern Express Company owns high-grade stocks and bonds valued at almost $4,000,000, which may some fine day form the basis of another melon.

If the Adams Express Company and its Southern associate were the only ones to shower their members with unheard-of profits we might be inclined to think they had been visited with peculiar and exceptional good fortune. Such is far from being the case. Let us proceed alphabetically and see how the members of the American Express Company have fared.

The Adams and American are easily the two most important of the express companies, and control, or have controlled at various times, all the other important companies with the exception of the Pacific. Since 1868 the capital of the American has stood at $18,000,000, this stock having been issued in exchange for the shares of the original American Express Company and the Merchants’ Union Express Company, under articles of merger and association dated November 25, 1868. The company’s books show that $5,300,000 was the value of the assets taken over at that time. There was $183,819 in cash; $1,261,023 in securities; $2,200,300 in real estate, less a mortgage of $505,143; and $1,260,000 in equipment; making a total of $4,400,000. New stock was sold which realized $900,000 in cash, making a total of $5,300,000 in assets for the $18,000,000 of stock. No new stock has been issued since 1868 and no further cash has been paid into the treasury except from earnings.

From its own balance sheet we find the company now has less than $10,000,000 in real property and equipment, all of which does not represent property employed in the service, because the item “real property” includes real estate investments.

With an original investment in cash and property of but one-third the par value of its capital stock, the American Express Company now pays dividends on this stock of 12% a year and for many years paid 6, 8 and 10%. Moreover, it has accumulated from its earnings a fund of more than $20,000,000 which is invested in readily negotiable stocks and bonds, the yearly income on which amounted to $1,178,000 in 1909. Among these securities are such high-grade railroad stocks as Chicago and Northwestern, Northern Pacific, New Haven, New York Central and Union Pacific.

Six years ago (1904-5), the substantial assets of the American Express Company had grown from $5,300,000, the amount fixed in the articles of association, to six times that amount. These assets, let me repeat, did not represent new capital put into the business, for none whatever was put in, but were accumulations of earnings over and above funds required to carry on the business and pay dividends of 8% upon $18,000,000 of stock. Even the association’s own shareholders failed to see the need of such a treasure and in 1906 a committee representing them addressed the officers of the company thus: “It is evident the management has faith in its ability to conserve the vast fund so accumulated beyond the needs of the business, without wasting the same or embarking it in new and dangerous ventures, and while we personally neither criticise them nor express any want of confidence in them, still it is our opinion, and that of many representative holders of long standing, experience and means, that this immense fund should not be further rapidly increased to become a source of temptation to the possible weakness or a snare to the possible inexperience of their successors.”

I would like to quote further from both Mr. Benson and Mr. Atwood. The former writes two articles which appeared in Pearson’s Magazine in February and March, 1911, clearly showing not only why we have no parcels post, but, to some extent, the raid which the express companies have made and are making on postal service revenues that rightfully and legally should accrue to the government. The latter, Mr. Atwood, speaks in three splendid articles in the American Magazine (February, March and April), under the caption, “The Great Express Monopoly.” Each of the gentlemen handles his subject masterfully. Each of them set forth facts which every American citizen should know and, knowing, should go after every public official who has ignorantly permitted or knowingly condoned, aided or cloaked the criminal raiding into the legitimate field of the postal service and revenues. Every one who can should get hold of and read the five articles referred to. I shall probably quote further from them in the closing division of this volume, but to appreciate them fully one should read them entire and connectedly.