(See the ten charges presented at the April 6 shareholder meeting, two weeks prior to the below list)

SIXTEEN CHARGES SENT TO SHAREHOLDERS BY KARL EILERS APRIL 18, 1921:

A few weeks after the 1921 American Smelting shareholder meeting, Karl Eilers published these sixteen charges as part of a shareholder letter. The italic comments were added by Karl.

1. The charge that the affairs of the Company are dominated by the Guggenheims, who are but slightly interested in the Company and have large conflicting interests.

This is of the utmost importance and its effects extend throughout the large and small affairs of the company. Its disastrous results are not only in what it causes actually to be done, but in preventing Smelters from having a management of its own with power, vision and initiative. The facts of such dominance and of such adverse interests by the Guggenheims are almost matters of common knowledge. In the litigation known as Ross v. Burrage, Mr. Daniel Guggenheim swore that the Guggenheim firm dominated the A. S. & R. Co., and also swore substantially to the effect that sometimes when they would enter upon negotiations for a mine, it would be some considerable time before they (the Guggenheims) would decide whether to buy it themselves or to have Smelters buy it.

2. The purchase, while the Company was under the control of the Guggenheims, of various mining properties from the Guggenheims and their associates for approximately $22,000,000 and of other mining properties including unsuccessful ones and ones in localities as distant as Chile.

In the statement sent to the stockholders on January 20th, 1921, it was stated that the company should not buy mines, and it was also given as a reason for not purchasing interests which had been acquired by the Guggenheims personally that they were distant and hazardous. Regardless of the merits of the question as to whether or not the company should buy mines, the stockholders should know what the company has bought, what the Guggenheims sold to it, and whether the statement officially sent to the stockholders was true, or as we claim, not only misleading but contrary to the fact.

3. The charge that the Guggenheims, although and at the time when in receipt of large salaries from the American Smelting & Refining Company and although they sold to the Company mining properties in which they, themselves, were interested and caused it to invest in other distant and hazardous properties, nevertheless took for themselves the good opportunities which were presented to the A. S. & R. Co.

The point is not so much concerning the policy of the company as to whether it should or should not buy mines. It is rather that under the Guggenheims they caused it to buy mines on its own account and they bought mines on their own account and they sold mines to the company. The best propositions offered became the property of the Guggenheims. Less desirable ones became the property of the company.

4. The charge that at one time there were as many as five members of the Guggenheim family receiving very large salaries and perquisites fixed by themselves and kept secret even from the Board of Directors.

It is not only the amount paid concerning which information is sought although it may be remarked that even yet no light on that subject has been given. Were the Guggenheims in effect fixing the payments to themselves and keeping their amounts secret? What were their especial qualifications? What did they all actually do for the company?

5. The transfer to the firm of Guggenheim Bros. without consideration, while the A. S. & R. Co. was dominated by them, of contracts between the A. S. & R. Co. and various mining companies for the sale of copper on commission, which contracts are claimed to have profited the A. S. & R. Co. more than one million dollars per year.

The explanations so far offered contradict each other and are obviously evasive. Their insufficiency is apparent. The facts should be known. If Guggenheim Bros. took these contracts away from Smelters because they were philanthropists, as seems to be the essence of some of the explanations, that fact should be known and credit should be given where credit is due. If they took the contracts because the contracts were profitable that also should be known. The figures as to the amount of profits are based upon those of Mr. F. W. Hills, Comptroller of the company, as of October 31, 1920, when he showed the net proceeds from the selling agency from January 1, 1912, to October 31, 1920, to be $10,046,409.

6. The methods and reasons for the methods which were adopted in the sale of the copper of the A. S. & R. Co. which methods are claimed unnecessarily to have cost the company many millions of dollars.

This matter was handled personally by the Guggenheims and the losses are matters of record. The reason frequently given for the method employed, namely, that it was required by the copper selling contracts, is not the fact. See pages 28 and 29 of the Handbook. It is important to know what the real reason was.

7. The claim that the Guggenheims were interested in the subordination of the stocks of the A. S. & R. Co. so that now the preferred stock, instead of being the first security and the common the second security, follow both bonds of the Company and the stocks of a subsidiary.

No adequate explanation has ever been given for the issue of the bonds of the A. S. & R. Co. Why should they have to be issued? It has been claimed that the American Smelters Securities was wonderfully and magnificently financed by the stock guarantee. If financing could be done by the stock guarantee, why could it not have been done by a simple issue of Smelter stock, which; while not affording the same opportunities for the Guggenheims, might have been much more advantageous for the stockholders. How did these transactions affect the Guggenheims? How much did they profit?

8. The question of whether or not the dividends paid during 1920 were earned, as was officially claimed by the management.

A careful study of the annual report would indicate that notwithstanding official assurance to the contrary these dividends were not earned. The stockholders are entitled to know the facts and also to know whether or not the official assurance was true.

9. The reason why the net quick assets per hundred dollars of capital and indebtedness are approximately the same as fourteen years ago.

The Guggenheims have made frequent mention of the increase of net quick assets, without at the same time pointing out the increases in capitalization and in indebtedness. It is difficult to see what advantage the stockholders (as distinguished from the Guggenheims, who have the handling of the property) gained from increased net assets and increased turnover which did not increase either the book value or the market price of the respective shares of stock. As the dividends have declined, the failure to increase the value of the stock is not due to increased distributions.

10. The use of the company’s funds and facilities and the time of its highly paid officers and of its employees for investigations of properties for the benefit of the Guggenheims, for the solicitation of proxies and efforts to perpetuate the control of the Guggenheims and to extend their strangle/hold on the company and its property.

11. The lack of confidence in the company’s securities as evidenced by their excessive market declines.
The stocks of the company have declined far below the average, and their courses have been averaging steadily downward since the Guggenheims, while selling out, yet retained their domination.

12. The question of whether contracts between Smelters and mining companies in which the Guggenheims are much more largely interested than they are in Smelters are profitable to Smelters and if so whether they are as profitable as other smelting contracts in which the Guggenheims are not interested on the mining side.

13. The dislike and ill will which the Guggenheims have built up for the A. S. & R. Co. through-out the mining world. The good will and the efficiency and morale of the organization should be the two greatest assets of a company such as the A. S. & R. Co. It has been claimed that both have been undermined and largely destroyed by the Guggenheim control.

14. The actual condition of the company and the meaning of its inventories.

How much metal is carried and at what prices? What shrinkage would the company’s assets show if metals should be valued at present market values except as to the quantities which for years have been carried at certain fixed values? It is feared that instead of inventorying their excess metals at “cost or market value, whichever may be lower” they have been inventoried at cost and that such cost is very much above the market.

15. The use of nominal officers and employees of the Smelting Company, while on the payroll of the Smelting Company, to attend to other and entirely distinct and disassociated enterprises in which the Guggenheims were interested.

16. Trading in the Company’s stock by the Guggenheims.

The now in and now out, now short and now long ownership of stock by those in control often does not contribute to the permanent welfare of a company.