The Knapp Failure, list of creditors

The Knapp Failure.

Interest in the affairs of the Knapp Electrical Works, recently closed by the sheriff and for which a receiver was afterward appointed, continues to increase rather than diminish. As has already been stated in the WESTERN ELECTRICIAN, the dissatisfied creditors associated themselves together to push their claims and appointed an executive committee to act for them. The creditors who thus agreed to co-operate are:

John A. Roebling's Sons company, Perkins Electric Switch Manufacturing company, American Electrical Works, R. S. Thomas & Sons company, Bryant Electric company, R. R. McCabe & Co., New York Insulated Wire company, Sunbeam Lamp Manufacturing company, New England Butt company, Western Electric company, Electrical Engineer, H. T. Paiste, C. H. Lever Manufacturing Company, Great Western Manufacturing company, Columbia Rubber Works company, Rice Machinery company, W. H. Sills, Electrical Industries, E. R. Crolius, Hart & Hegeman Manufacturing company, Turner Brass Works, Buckingham & Paulson, Chicago Edison company, Hadfield & Co., Chas. W. Tegtmeyer, George H. Benedict & Co., Sethness Chemical company, Fred P. Bagley & Co., Roth & Eck, Chicago Electric Protective company, Fuller & Fuller company, John M. Green Manufacturing company, Orient Manufacturing company, Holtzer-Cabot Electric company, Peckstow & Wilcox company, Manhattan Electric Supply company, Electric Power & Storage company, Electric Construction & Supply company, Alfred F. Moore, Steel & Johnson Manufacturing company, H. G. McFadden & Co., Electric Engineering & Supply company, Hammond Cleat & Insulator company, A. & J. M. Anderson, Albert Russell, Hapwell Manufacturing company, Bernstein Electric company, New York Carbon Works, Walworth & Neville Manufacturing company, Chas. H. Besley, H. M. Loud & Sons Lumber company, Edgerton Pottery company.

The executive committee consists of George S. Searing of the Hart & Hegeman company, James Wolff of the New York Insulated Wire company, Francis E. Donohoe of the American Electrical Works and Thomas G. Grier of the Bryant Electric company.

An expert auditor, E. F. Bard, was employed by the creditors' committee to examine the books of the Knapp Electrical Works and make a report on the condition of the business. That report, consisting of 186 pages, mostly typewritten, is now in. The tenor of it may be gathered from the following affidavit made by Mr. Bard and presented to Judge Tuttle last week:

Edmund F. Bard, being first duly sworn, on oath deposes and says that he is and has been for twenty-seven years last past a book-keeper, auditor, expert accountant and actuary; that for two years last past he has devoted his entire time and attention to auditing and making thorough examinations of the books, accounts and affairs of large corporations and firms engaged in various lines of business in the city of Chicago; that on the 24th day of September, A. D. 1894, he was retained by the executive committee of the Knapp Creditors' association to make a thorough examination and investigation, of the books, papers, records and affairs of the Knapp Electrical Works, a corporation under and by virtue of the laws of the state of Illinois, and report thereon; that as this affiant is informed and believes the above mentioned books, papers, records and assets of the said Knapp Electrical Works were at that time in the custody and possession of one Harry P. Lucas, as receiver, at the former place of business of said corporation, viz., 271 and 273 Franklin street, in said city of Chicago; that in accordance with his instructions from said committee he thereupon and on said last mentioned date proceeded to make a thorough and exhaustive examination of all of the books, records, documents arid other data obtainable by him from Lucas, receiver, M. A. Knapp, the president and general manager of said corporation, R. H. Watson, the cashier and general bookkeeper of said corporation, and M. B. Austin, one of the directors of said corporation.

That he continued such examination for a period of about seventeen days, and thereafter and on the 11th day of October he rendered a report to the said executive committee of the Knapp Creditors' association, consisting of 186 pages of written and typewritten matter, comprising a general report of the financial affairs of said Knapp Electrical Works from the date of its incorporation to September 1, 1894; also a general report of the financial affairs of the predecessor of said corporation, the Knapp Electrical Works unincorporated, and a detailed report of the receipts and disbursements of the present receiver from September 1, 1894, to October 4, 1894, inclusive. That all of the statements and exhibits therein contained are correct abstracts from the books, papers, records and other original data belonging to the Knapp electrical Works examined by this affiant as aforesaid, except the calculations, estimates and percentages which therein appear to have been made by this affiant, and as to those he verily believes them to be correct. That the following facts and figures are some of the more important and noticeable items contained in and report, viz.:

The property turned over to the Knapp Electrical Works, incorporated, by F. M. Knapp, in payment for the $100,000 capital stock issued, was, as is shown by the minutes of the meeting of directors on February 4, 1890, represented by M. A. Knapp to be worth $108,750, whereas its actual value as shown by the books was $64,492.22, showing an apparent deficiency of $35,507.78.

The books show that the business has been constantly on the decrease since September 1, 1891; that for 18 months ending March 1, 1893, the net profits were only $4,112.50 on gross sales of merchandise amounting to $872,595.91; that the ratio of gross profits was 9 per cent. and expenses 8 per cent.; that for the following 18 months ending September 1, 1894, the percentage of gross profits decreased to 8 per cent., whereas the expenses increased to 16 per cent., and the net loss in conducting the business was $53,345.92; that the average monthly expenses during the 18 months ending March 1, 1893, on sales aggregating $872,595.91 was $3,737.20, whereas for the following 18 months on sales aggregating $515,724.91, or a little more than one-half, the monthly expenses averaged $4,134.22, or an increase of $400 per month.

According to the minutes of the board of directors, F. M. Knapp resigned the presidency of. the company on September 12, 1893, and at the, following meeting, September 18, 1893, a judgment note was given to him for $27,989.50.

Under the date from August 20 to 27, 1894, inclusive, the books show $24,359.64 in accounts receivable and $16,387.21 in bills receivable were transferred to sundry creditors, of which $7,263.85 in bills receivable signed by J. B. Whalen & Co. were transferred to F. M. Knapp. There was also transferred to him $3,283.43 in stock of the Hercules Iron Works, and credit was given him on the books for $1,000 for "expenses incurred by him up to August 25, 1894, in the way of legal advice, railroad fares, traveling expenses, etc." The ledger showed him indebted to the company on open account on September 1, 1894, the sum of $325.08.

Stock of the Commercial Electric company of St. Louis, Mo., amounting to $2,500 was transferred to M. A. Knapp. His account was credited with $6,000 on salary account, of which $1,333.36 represents an increase in rate dated back to March 1, 1893. His account was also credited with $962.50 for traveling expenses and $1,200 for entertainment expenses.

During the same period the books show the purchase of $8,400 in second mortgage bonds of the Cicero Light, Heat & Power company from H. P. Lucas, the present receiver; the sale to him of one 2,500 light dynamo for $2,800 and $2,584.97 in merchandise on account, and the ledger shows a balance due from him September 1, 1894, of $448.34.

That among, the bills receivable shown upon the books of said corporation are the following, notes given by H. P. Lucas to said Knapp Electrical Works:

All of which were outstanding and unpaid on September 1, 1894.

The books show an indebtedness of J. B. Whalen & Co. of $12,304.14 closed out by the alleged return of $3,500 in tools and machinery and $2,864.43 in merchandise, and the giving of $5,939.71 in notes which were transferred to F. M. Knapp.

That the following is a true and correct abstract of the receipts and disbursements of. the said receiver as appears by his books from September 1, 1894, to October 4, 1894, inclusive:

This affidavit forms apart of the proceedings in Judge Tuttle's court on October 26th, when the creditors' commitee, through its attorney's, endeavored to have the appointment of the receiver set a side, on the ground that it was unsatisfactory to many of the creditors and also because Mr. Lucas was a debtor to the company. The judge denied the application, but stated that if three-fourths of the creditors would sign a petition to that effect he would remove the present receiver. The dissatisfied creditors are now endeavoring to obtain the necessary signatures.