The fourth was a slender, smooth-faced, cold-eyed, thin-lipped man of uncertain age, whose name was Basil Jerome. The latter had just appeared, and had been greeted by the others a.s.sembled.

It was several days after the landslide that had brought the stirring events in the Adirondack Mountains to a close--events that were directly traceable to the great business consolidation that these capitalists were now discussing.

"Mr. Jerome, gentlemen," said Watson Scott, "has expressed his willingness to come into our railroad project in case he is satisfied that it will be carried through in a manner that will insure success and profit to us all. You have expressed your willingness to take him in if he will enter on the same terms as the rest of us. Mr. Merriwell should be here now, and----"

"He is," said a voice, and Frank Merriwell, himself, entered the office. "I hope I have not kept you waiting, gentlemen. My cab got into a jam on Broadway, and I was delayed full fifteen minutes."

"You are in good season, Merriwell," said Old Gripper. "Let me introduce to you Mr. Basil Jerome, the gentleman I spoke to you about last evening. Jerome has been concerned in the organization of many a big project, and he stands ready to take a corner in the Central Sonora Railroad deal."

"Providing," said Jerome, "that I become satisfied that the deal is to be carried through properly and there are no serious obstructions in its way."

Frank did not like the man's look, nor the cold voice that corresponded so well with his frigid eyes and face.

"Just what do you mean, sir," he questioned, "when you state you are ready to come in if the deal is carried through properly?"

Jerome sat down, and Frank followed his example. They faced each other, and something told Merriwell there was to be a clash between them.

Jerome surveyed Merry from head to feet, taking him all in. Without at once answering the question, he observed:

"You are a very young man to be the promoter of a project of such magnitude."

Frank flushed, for there was something most annoying in the manner and words of the fellow.

"I fail to see what my age has to do with it."

"Youth lacks experience and judgment. It is liable to be flighty and build great projects on moonshine."

"I think you will admit, sir, that Watson Scott is not a man to be dazzled or deceived by moonshine. He is actively concerned in this business."

"Mr. Scott seldom makes mistakes," admitted Jerome.

"Besides," added the youth, "I object to the word 'promoter' as you applied it to me. I am not a promoter. I propose to put a good, round sum of hard cash into the combined fund of the syndicate."

"Oh, you do?"

"Yes, sir."

"Which goes to prove that what I have just said is correct--youth lacks experience and judgment."

Frank was surprised.

"I fail to see how you make that out. If the plan is a promising one, and I am satisfied that the railroad will be a paying venture, why should I not invest my money in it? If I were not confident that it would pay, I'd not be advocating it."

Jerome made a slight gesture.

"No such project can be absolutely a.s.sured of success at the outset," he a.s.serted. "It is a great venture, and the men who get in on the ground floor are certain to protect themselves from loss in any case."

Merriwell frowned, a puzzled expression on his face.

"How is that possible?" he asked. "If we are a.s.sembled here to organize and build that railroad, how is it possible for us to be protected against loss if the railroad does not prove a paying piece of property?"

A cold smile flitted across the face of Jerome.

"I knew you were inexperienced. Young man, there are several ways of doing it; but undoubtedly the simplest way is to organize a stock company and sell stock to the public. Let the public in general build the railroad, while we reap the profits, if there are any."

"But if the public owns the stock, I fail to see how we can reap the profits if the railroad is a financial success."

Jerome looked with something like pity at the questioning youth.

"It is a simple matter. I will explain it in a few words. To begin with, it is not necessary for us to invest one dollar of our own money in the scheme."

"What? And still we may hold an interest in it?"

"The controlling interest, Mr. Merriwell."

"Go on, sir."

"We will suppose at the start that we organize the Central Sonora Railroad Company and capitalize it for--well, just as an example, let's say ten millions of dollars. Before deciding on this we will have made surveys and estimates that have convinced us beyond question that the road may be built and placed in operation for four millions of dollars."

"Then why should it not be capitalized for four millions?"

"Because that is not business--safe, conservative business. Because that would make it impossible to raise the money needed without ourselves taking chances of great loss. Let me proceed. Having organized in a legal manner, and having issued certificates of stock to the extent of ten millions of dollars, we can next proceed to raise the money required to begin active building operations."

"By placing the stock on the market?"

"Not yet. Every man here, with the possible exception of yourself, Mr.

Merriwell, is known to every great banking inst.i.tution in the country, and his credit is unlimited. At the outset we will take four million dollars' worth of our stock to some inst.i.tution and secure from it on that stock the full sum required to build the railroad. Thus, you can see, we will not have to put up a dollar of our own money; but we will build the railroad with the money of the general public, which has been deposited at the bank from which we secure it."

"I see," nodded Frank, his eyes shining queerly. "It's a fine little scheme you have, Mr. Jerome!"

"I am letting you into the secret methods of capitalists who build railroads and organize great business projects without using a dollar of their own money," said Jerome. "Having secured our money, we will proceed to put our railroad through."

"We'll build it, and the general public will pay the bills?"

"Exactly. Having it constructed, by successful manipulation--the easiest thing in the world for those who know the trick--we'll unload four million dollars' worth of stock on the public and square ourselves with the bank. At this stage of the game the public will have paid for the railroad, which was built with the public's own money; but we shall still hold six million dollars' worth of stock in that road, or the controlling interest."

Frank felt his blood growing hot within his veins.

"In short," added Jerome, "we take no chances whatever, for at the start we know the road will cost a million less than half the amount for which it is capitalized, we have borrowed the public's money to build it, we are certain we can sell stock enough to pay back every dollar, and still hold control of the railroad, and we are in a position to come out ahead whether the railroad proves to be a paying piece of property or not."

"And this is the way railroads are built?" muttered Merriwell. "But what if we find, after the railroad is put in operation, that it is a losing venture--that it will not pay a dividend on the amount at which it is capitalized, and is running behind?"

"Then it becomes a simple matter for us to step out from under, and as we step out we can take with us in our own pockets a few millions in profits. If we become satisfied that the railroad is a loser, we'll again work the stock market, and, by certain manipulations, boost the price of Central Sonora to the highest possible point. When we are satisfied that we have it up to the top notch, we'll dump every dollar's worth of stock in our possession, pocket our profits, and smile as we see Central Sonora slump and go to the dogs."

"In short," said Frank, "after we have built the railroad with the money of the general public, overcapitalized it in a criminal manner, and discovered that it will not pay a dividend on its watered stock, you propose that we perpetrate another outrage on unsuspecting investors by selling back to the public our holdings of stock that actually belongs to the public anyhow!"

"Your inexperience is again shown by the manner in which you apply the term 'watered' to that stock. Watered stock is new stock issued by a railroad or other corporation that already has a certain amount of stock in existence, but claims that it does not fairly represent, through increase of the value of a property and franchises, the increase of actual capital. We capitalize at the start for more than double the actual cost of building and putting in operation, and therefore our stock may not justly be called watered. In case this railroad should thrive wonderfully, and should pay wonderful dividends on our ten million dollars' worth of stock, we might then water it by issuing more stock. I hope I have made the whole thing clear to you, Mr. Merriwell."