mission reports that the Chicago Bearing Metal Company which manufactures certain supplies for railroad use is controlled by the Swifts and affiliated interests. Among the stockholders of record were L. V. Robinson and H. B. Natches, care of C. F. Stephenson, of Swift & Company and L. R. Poor, address, Union Stock Yards, Chicago. Replies to questionnaires sent out by the Commission to these names were made by C. F. Stephenson, an employee of Edward F. Swift, who in each case attached a memorandum that there were no such persons, and stated that "Mr. Edward F. Swift is now and at all times has been the owner of this stock." 7 It is now clear that there may appear in a single control organization a great variety of ways in which control may be established. The four modes of control with their several variations may of course be multiplied by the several distinct instrumentalities employed to institute the control. The closer the control organization comes to a direct violation of federal and state laws against monopoly and restraint of trade, the greater will be the care exercised to conceal the true condition of control. It remains but to describe a few representative types of control companies, in order to show the great flexibility of this form of participation organization. 7 Ibid, p. 269. CHAPTER XVII CONTROL COMPANIES A. TRUSTS AS CONTROL COMPANIES PRIOR to the year 1888, when the state of New Jersey first adopted a general law giving to its corporations the power to hold the securities of other corporations, control through participation could be brought about only through the joint stock company and the trust form of organization. The holding, or combination trust, was the favorite form employed and proved itself admirably adapted to this work. Under it the parties to the Standard Oil Trust Agreement, of 1882, brought together under a single unified control the varied interests of individual proprietorships, partnerships, joint stock companies and corporations. Nowhere in the organization was the holding corporation used. This famous trust was, however, merely a reorganization of an earlier one created by the members of the Standard Oil Group, in 1879. The conception of the idea of using the trust form for control and combination purposes has quite generally been attributed to S. C. T. Dodd, the attorney for the Standard Oil Company of Ohio. Between the years 1880 and 1890 a number of large trusts were formed, most of them patterned after the Standard Oil Trust. In 1884, the American Cotton Oil Trust, embracing some eighty-five concerns doing business throughout the South was formed in the state of Arkansas. In 1887, the Distillers' and Cattle Feeders' Trust, the National Lead Trust and the Sugar Refineries Company were formed. These were popularly known as the "Whiskey," "Lead" and "Sugar" Trusts. The legal principles governing trusteeship have already been explained. These apply with equal force to a simple as well as to a complex trust. However, since the trusts here under consideration involve participation in other organizations that retain their distinct entity, a few words of explanation concerning them will not be amiss. The Standard Oil Trust of 1882.1- This trust because of the complexity of its organization brings out more clearly than any of the others the nature of the organization and the transactions involved in constituting it. The accompanying chart is a diagrammatic sketch of this trust. DIAGRAM ILLUSTRATING THE TRANSACTIONS INVOLVED Stocks of Standard Oil Cos.and Group Assns. to Board of Trustees. The heavy margins indicate the units that remain after formation of the Trust and the dotted lines leading to them show control by the Board of Trustees. The assets, etc. of individuals, partners and Group I corporations and associations have been transferred to the Standard Oil Companies and the units dissolved. The figures indicate the order of transactions begining with formation of Std. Oil Cos. A.H.STOCKDER. 1 A copy of this trust agreement will be found in Part VI of the text, pp. 560-571. The parties to the agreement, who were the settlors of the properties upon the board of trustees, were divided into three classes, namely: (1) All stockholders and members of 14 named corporations and limited partnerships; (2) some 46 named individuals; and (3) a portion of the stockholders and members of 27 named corporations and limited partnerships. It was then further provided that a Standard Oil Company should be formed in each of the four states of Ohio, New York, New Jersey and Pennsylvania; but the Ohio company already existed. The settlors of Classes 1 and 2 were thereupon to convey all of the property, real and personal, assets, and business mentioned and embraced in certain schedules to the Standard Oil Companies in exchange for the stocks of these companies whose par value equaled a fair valuation of the properties. The former stockholders, partners and individuals thus became stockholders of the Standard Oil Companies. They were then to turn this stock over to the board of trustees and receive in return Standard Oil Trust Certificates of equal value. These transactions necessitated the dissolution of some of the original organizations. This was easily accomplished in the case of settlors of classes 1 and 2. However, with class 3, where the signers of the agreement comprised but part of the stockholders and partners, the entity of the organizations had to be preserved. Hence, it was provided that the stockholders and partners of this class should deposit their securities directly with the trustees. But this arrangement was changed by a supplementary agreement entered into a few days later by virtue of which the trustees were given authority to decide which companies should be dissolved and their assets absorbed by the Standard Oil Companies and which should remain under the direct control of the trustees. This latter classification 2 The organizations called limited partnerships were largely special joint stock companies. has been employed in the diagram where Group I corporations and associations represent those that were dissolved and Group II those taken over directly. After all transactions had been completed there remained under control of the board of trustees the four Standard Oil Companies, Group II Corporations and Group II Associations, all other organizations having been dissolved. The Whiskey Trust. In the Distillers' and Cattle Feeders' Trust the procedure was somewhat different. Among the settlors were corporations and ordinary partnerships. In order to simplify the control it was provided that "the parties hereto who are not corporations shall become such before this deed takes effect." It is also provided that "the several corporations, parties to this agreement, shall maintain their separate organization, and each shall carry on and conduct its own business. . . . The capital stock of each corporation shall be transferred to the board (of trustees) and in lieu of the same, certificates not exceeding fifty millions of dollars, divided into five hundred thousand shares, each of one hundred dollars, shall be issued by the board and distributed as hereinafter provided." Legal Status. The further spread of this form of trust organization was checked through action taken by several of the states and the United States. It was at first attacked as an agreement illegal under the common law; the general contention being, that corporations committed an act ultra vires by giving the power of management and control. over to a board of trustees. In 1887, the state of Louisiana attacked the American Cotton Oil Trust on this point. Shortly thereafter the state of New York brought suit against the North River Sugar Refining Company to force it out of the Sugar Trust, and in 1890, the state of Ohio began an action against the Standard Oil Company of |