CANNON SPEECH BEFORE THE COMMITTEE ON PACIFIC RAILROADS University of California Berkeley SPEECH or HON. MARION CANNON, (I OF CALIFORNIA, BEFORE THE COMMITTEE ON PACIFIC RAILROADS. WASHINGTON: GOVERNMENT FEINTING OFFICE. 1894. Mr. CHAIRMAN: The bill now before the committee, extending the time for the payment of the Pacific railroads debts, is one of the most important that has been presented to this body for many years. It is important to the United States in attempting to secure the payment of about $178,000,000, principal and interest, from the Union and Central Pacific roads, or % froin the Central Pacific alone about $77,000,000. It seems to me that the main question to be considered by this com- mittee is, whether the conduct of the u Big four" Stanford, Huntington, Hopkins, and Crocker has been of such a character as to inspire in us a confidence sufficient to grant them an extension of time in which to pay this debt; whether they have so administered the great trust reposed in them by the act of 1802 as to warrant such confidence in their honesty in the future? It seems to me, that having violated every trust reposed in them by the people of the United States when we entered into a partnership with them in the construction of these great public highways^ that they are not now entitled to any consideration whatever at our hands. After violating every contract and law creating the Central Pacific Company, 1 believe the partnership should now be forever dissolved and these bandits retired to private life, or the State's prison, where bet- ter men are serving the State. If this great Government can not enforce its own laws against this corporation; if we must be continually harassed by the belittling suits that have so persistently occurred since the issue of these bonds; if we must abdicate our sovereignty, and through our officials be made to contend for petty successes or dis- astrous defeats in the forum of our own credits, then it is time for a complete divorce of the Government from this corrupt gang of bandits, who have preyed upon both the people and the Government for nearly thirty years. There is another reason why we should wind up the business of this corporation, and this reason is the most important to Stanford, Hunt- ington, Hopkins, and Crocker, and their estates. Under the laws of California, the stockholders of this corporation are individually liable for the debts of the company in an amount equal to the stock they hold. The law and the constitution of the State also declare that no corporation shall be granted a franchise for a longer period than fifty years. An extension of time would be making a new contract with these corporators, and would release them from all personal liabilities for the rascalities and frauds perpetrated by them in the building and management of these roads up to the time the new contract is made. The charter of the Central Pacific was granted by the California legis- lature June 27, 1861, and runs fifty years, and the State constitution forbids the renewal of any franchise after it has expired. Therefore, if the time of settlement is extended beyond the year 1911, the corpo- ration will be dead and no power on earth can resurrect it. You will therefore see by this brief statement the importance of this extension of time to the big four Stanford, Huntingtou, Hopkins, and Crocker, and their estates. First, it will release them from all personal 1 liabilities for their rascalities; second, by extending the time for settle- ment beyond the life of the corporation June 27, 1011 they will beat the Government out of the whole amount of the debt. Mr. Hunting- ton stated in his letters to Mr. Goulton that it had cost his company $1,700,000 to defeat Tom Scott and his " Texas Pacific" in Congress, and in view of this fact what should this Congress expect from his company ? To be relieved of all personal liabilities and an extension of time beyond the life of his company would be worth the whole amount of the debt, $77,000,000. Now, Mr. Chairman, it seems to me that these corporations are put upon trial before this Congress, when they come here and ask for an extension of time, for one hundred years, in which to pay their debts. I do not desire to do these corporations any injustice, and if their management of the great trust given into their charge have been con- ducted upon honest methods they should have -the time extended. But if it shall appear to this House that the methods employed have not been honest, but the most corrupt and vicious, so much so that it has become a national disgrace, then no extension of time should be given, and they should be wiped out with all possible speed. The partnership entered into between the Government and the Union and Central 1'acitie. Kansas Pacific. Sioux < 'it y and Pacific, and the Central Branch, as set forth in the several a<-ts of Congress, were a> follows: The Cnited States leaned them *ii iJi'J.'J.r.ll' in bonds bearing 6 percent interest and running thirty \ears. They also authorized the companies to issue first-mortuaue bonds to an equal amount of $64,623,512. We also gave them 26,029,534 acres of land, from which they have realized $30,479,213, and they have remaining unsold lands worth $26,504,270, making a total gift of land which amounts to $65,083,483. We granted them a right of way 400 feet wide, with all necessary room for depots, machine shops, and side tracks. We vested these corporations with control of these great public highways across the continent, and gave them power to establish rates of transporta- tion; that is, the power to levy toll upon all the tratlic which might pass over these roads. We also gave them the right of eminent domain. These two last great powers are vested alone in Congress, and they have been farmed oiit to these corporations. But in order to guard against all possible abuses of these great powers, and to insure good management and personal responsibility, Congress enacted that in return for the nation's liberality in granting these great powers and immense sums in bonds and lands, these companies should bind them- selves to have their stocks fully paid up in <-a*h; to build iirst-class roads; to carry freight for the Government at the same rates as for private individuals; to operate all the lines in the Pacific system as one connected, continuous line, and to give to each equal facilities in rates, time, and transportation, and to convey telegraphic messages upon equal terms to all persons. They also agreed to make annual reports to the Government, giving the names of their directors and stockholders, and the amount of their stock actually paid up in cash. and the amount of receipts, expenditures, and indebtedness, under oath. They also agreed to pay 5 per cent of their net earnings into a sinking fund and one-half the cost of Government transportation to pay the principal and interest upon the debt they owed the Govern- ment. With these binding obligations resting upon them what did these companies do ? They organized construction companies, through which they let contracts to themselves at immense prolits. The Union Pacific had her " Credit Mobilier," the Central Pacific had " C. Crocker & Co. Contract and Finance Company;" "Shoemaker & Co." built the Kan- sas Pacific, and John I. Blair built the Sioux City. The books of all these companies have been destroyed, so that the actual cost of build- ing these roads can not be given, but the records from other sources are sufficient to give a very close estimate of the cost. I will now give you the cost of constructing these roads and the amount of stocks and bonds issued by the boards of directors to themselves through these construc- tion companies, as reported by the "Pattison commission," known as "Senate Ex. Doc. No. 51, Fiftieth Congress, first session:" Union Pacific cost $38,824,000. The board of directors issued to themselves, through the Credit Mobilier, in stocks and bonds, $109,814,812, mak- ing a clear steal of $70,990,812. The Central Pacific, including the Western Pacific, was built for $40,000,000, and Stanford, Huntington, Hopkins, and Crocker issued to themselves stocks and bonds to the amount of $124,211,080, making a clear steal of $84,21 1 ,680. The Kan- sas Pacific was built for $11,800,000, and stocks and bonds were issued to the amount of $25,028,250, making a clear steal of $13,228,250. The Central Branch was built for $2,731,347 and stocks and bonds were issued to the amount of $4,200,000, making a clear steal of $1,468,052. The Sioux City branch was built for $2,600,000, and stocks and bonds were issued to the amount of $5,047,720, making a clear steal of $2,447,720. The Southern Pacific was built for $27,216,931, and Stanford, Huu- tiugton, Hopkins, and Crocker issued to themselves, in stocks and bonds, $82,756,486, a clear steal of $55,539,554. The California and Oregon was built for $3,505,609, and Stanford, Huntiugton, Hopkins, and Crocker issued to themselves, in stocks and bonds, $12,500,000, making a clear steal of $8,994,391. The Oregon Short Line was built for $14,000,000, and stocks and bonds were issued to the amount of $29,000,000, making a clear steal of $15,000,000. Now, Mr. Speaker, before we go any further with this history of these bandits let us group these stealings in such shape as to be handy for future reference, for they will have an important bearing upon the question whether these companies should be permitted to exist any longer. Stealings of- Union Pacific $70,990,812 Central Pacific 84, 211, 680 Kansas Pacific 13,228,250 Central Branch 1,408,650 Sioux City Branch 2, 447, 720 Southern Pacific 55, 539, 554 California and Oregon from Delta 8, 994, 391 Oregon Short Line , 15, 000, 000 Total stealings upon construction ^ 251, 881, 057 This is not all the stealings these companies perpetrated by any means, they are only the commencement. By the act of March 3, 1873, the Union Pacific was prohibited from the payment of dividends, except from actual net earnings, yet they declared dividends in violation of this act. By this act the Union Pacific was prohibited from issuing stock or mortgages or any pledges upon their company or its future earnings without permission from Congress. Yet in 1880 the company increased its stock from $30,762,000 to $50, 762,000 by the consolidation of the Union Pacific, Kansas Pacific, and Denver Pacific in violation of the act of March 'f, 1873, and a little later in the same year -the stock of the consolidated company was increased to $00,868,500 in violation of law, whereby Jay Gould pock- eted about 814,000,000. In 1879 they issued collateral trust bonds for $4,852,000, and pledged securities of the company in violation of the law. In 1883 they issued trust bonds for $4,500,000 in violation of the law. In 1882 and 1884 they guaranteed rhe payment of interest on the bonds of the Oregon Short Line for $14,000,000 in violation of law. This was done by the board of directors of the Union Pacific, many of whom held these bonds, thus voting money from the Union Pacific treasury into their own pockets. About the same time they guaranteed interest on t lie bonds of the St. Joseph and Grand Island Kailroad, amounting to $6,961,922, in viola- tion of the law. They also used the stock and bonds of the Union Pacific, in violation of the act of 1873,'in the construction of about 40 branch lines and in building np J5 or 20 private corporations, in which members of the board of directors were the principal stockholders, and so long as these private corporations paid dividends t lie old Union Pacific was not u in it." But when they ceased to pay the board of directors voted the stock over to the parent- company, and in some instances voted to guarantee the payment of the interest upon the bonds, as was done in the case of the Oregon Short Line. NYhile the majority of -the board of directors held the stock and bonds of these branch lines they leased them to the Union Pacific for large sums, amounting in the aggregate to about *:s,soo,OUO. At the risk of being tedious 1 will here give you the names of :>2 of these branch lines with a mileage of 4,015 miles: Nevada Central. Utah F.nstrrn. "L:i\vrriice and Kmporia. St. .Joseph and (Jrand Island. South Park and Lcadville. Denwr and Boulder Valley. Denver and South Park. Kansas Central. Greely and Salt Lake. Leavensworth and Topeka. Mauhatten and Alma. Denver and Middle Park. Georgetown and Leadville. Larmi and North Park. Oregon Short Line. Omaha and KYpnblican Valley. Utah Ontral. Sail Lake and \\Y-t.-rn. .Junction City and Fort Kearney Echo and Park ( it \ . Omaha and JJlark Hills. Salina and Southwestern. Soloman Kailroad. Saliiia, Lincoln and Western. Colorado Central. Utah and Nevada. Montana Railroad Company. Manhattan and Blue Valley. Denver, Marshall and Moulder. Golden and Cariboo. j Central Branch. i Utah and Northern. In addition to these branch lines, many other corporations were organized from the earnings of the Union Pacific, such as elevators, smelting works, street railways, etc. And farmers testified before the Pattisou committee that they were charged from 5 to 8 cents more for freight to Chicago than these elevator companies, thus forcing them to sell their grain to these elevators. We also learn from this report that the directors of the Union Pacific voted themselves a rebate to the Omaha Grant Smelting Works of $570,000, and upon the elevators to the amount of millions of dollars, thereby beating the miners and farmers out of their hard-earned profits. The names of these companies can be found in the report of the Pat- tisou commission. For the payments of these rebates the Pacific rail- roads voted to themselves and their pet companies, out of the funds which should have been applied to the payment of the Government debt, $25,866,235. They also refused to consider these rebates in their report of the net earnings of their roads, from which the 5 per cent payments to the United States were to be made. The law required them to pay up their capital stock in full, and make oath to that effect, and file it with the Interior Department. They complied with the law so far as to making the oath, but all hon- est men will hold them guilty of perjury as to the amount of stock they swore had been paid up. I herewith furnish a table, compiled by the Pattison commission from these affidavits on file in the Interior Department, and you will see by this table the amount actually paid up was $1,797,350, while these four men swore that it was $97,098,590 only a small lie of about $95,000,000. Had any of the common people made such an oath they very likely would have been serving the State in some penal institution. But here is the table, with the names of the parties: Stock table. Con.pany. , Kames of decent, paid in. ;1 Union Pacific $400,650 $36,762,300 j Oliver Ames i Sept. 27, 1870 Kansas Pacific i 250,000 5,072,500! K. E. Carr \ Sept. 28, 1872 Central Pacific 760, 000 ! 54, 283, Iflii Lelnml Stanford I Sept, 18, 1871 Central Branch Total . . 386, 700 j 980, 600 R. M. Pomeroy Sept. 21, 1,797,350 i 97,098.590 It is no answer to the Government that the managers of these com- panies did only that which the managers of railroads in other sections did. These lines were built upon public credit. They were public high- ways in the broadest sense of that term. The managers were acting as trustees of a national highway, and they can not plead any lawful jus- tification for making false affidavits, which state that $97,098,590 of stock was actually paid for, when in fact less than two millions had been so paid for. Now let us return to the big four in California, and if, when I get through with exposing their rascalities in the management of the Cen- tral Pacific and branch lines, this Congress determines to continue the management of these roads in their hands, the people of the Pacific coast will have to submit to their robberies for another hundred years. Much has been said about the ownership of the stock in the Central Pacific. Huntington denies that he owned a large block of this stock; but that the big four owned nearly all this stock is evident from the fact that they held possession of the board of directors, and voted contracts, made leases, and robbed both the people and the Govern- ment for nearly thirty years. It is no answer to say that this was done through private companies organized by these men for that purpose. Stanford, Huutington, Hop- kins, and Crocker can not shield themselves behind these private cor- porations which were organized for the purpose of plunder. Therefore, when the Contract and Finance Company voted the stock of the Cen- tral Pacific, it was the vote of the big four, as they, in fact, owned all the stock in these private corporations. When they contem- plated a steal they generally put sufficient stock in the hands of one of these private companies to carry it through the board, and but few instances occur where the big four voted more than a few thousand shares of stock, as shown by the books of the company now in exist- ence. When the capital stock was increased from $20,000,000 to $100,000,000, in 1868, the Contract and Finance Company voted 141,000 shares out of a total of 151,520 shares. Every one of these shares at that time belonged to the big four. We also find that Stanford, in his testimony before the Pattison com- mission (vol. 5, p. 2069), stated that the Contract and Finance Company distributed to them in stock $54,000,000, which was a net profit, subject only to an indebtedness of about $3,000,000. This $54,000,000 of stock was divided in equal shares among the big four. The original stock in the Central Pacific was *s,500,000. In 1864 it was increased to $20,000,000. In 1868 it was again increased to $100,000,000. This increase of stock from $8,500,000 to $100,000,000 was voted by the holdings of the big four, and voted to themselves. They then tried to force the original stockholders to exchange their stock, share I'm- share, lor t lie new stock. This the holders of the. original stock refu>ed to do. and all dividends were refused to these old stock holders unless they made the exchange. This led to suits being brought by Sam Brannon and others tor an accounting. These suits were com- promised by the big four paying from * ion to 1.000 per share for the original stock. (Sec evidence of Stanford, vol. 5. p. i'<;41: vol. (J, pp. 2775,2779.) The evidence on which the successful prosecution of such suits would depend was contained in the books of the < 'ontract and Finance Company, and rather than have these books produced in court, which \\ouhl show up their rascalities, t hey paid these large amounts for the outstanding stock. You will also find in the evidence of Stan- ford (vol. :. pp. LMi.V.. LMIIKI, that each of the big four. Stanford Hunt- ington, Hopkins, and Crocker, received s i;;.nhaie of the protit> of construc- tion. These suits alarmed the big four ami they removed the contract and finance books from their office in Sacramento and destroyed them. Section 10 of the act of the legislature of California, dated May L'o. 1861, under which the Central Pacific was incorporated, provided that "the directors shall cause to be kept a book to be called KYcord of Corporation Debts." and in this book the secretary was required to record all contracts, etc. This book, if produced, ought to throw some light upon the construction of the road by the ('ontract and Finance Company. Hut. strange to say, there were many things recorded in this book that wereof importance to the big four, and instead of destroy- ing it. as they did the books of the Contract and Finance Company, they cut the leaves out from pages 4s to 111. inclusive. If such methods of concealing their dishonesty is approved by this Congress, the people of the United States will place- the responsibility where it belongs upon the shoulders of a majority of this body. Another method they resorted to was to pass resolutions in the board of directors, by the votes of themselves, exonerating themselves from all rascalities and approving the actions of their president when he succeeded in making a steal of a few millions from the old company. When the Pattison commission ran across one of these resolutions spread upon their minutes they were astounded at the bold attempt of these four big rascals to shield themselves and their private fortunes from the penalties of the law. As these -releases have been studiously suppressed and kept from the public gaze, I will here produce oue of them as a memorial of the unadulterated gall of the big four in their dealings with their creditors. It is as follows : Whereas the president of this company, Leland Stanford; the first vice-president of this company, Collis P. Huntiugton; the second vice-president of this company, Charles F. Crocker, and the treasurer of this company, Timothy Hopkins, have done various acts and things in the interest of and for the benefit of this company, and have made various payments of money for which vouchers have not been received from the parties to whom payments were made ; and Whereas the nature of such acts and things, and the amount of such payments have been exhibited and fully made known and explained to us: Now, therefore, Resolved, That the stockholders of this company do hereby ratify and approve all uch acts and doings and payments made by said persons, and do hereby expressly waive the production or tiling of vouchers therefor; and the president or a vice- president and the secretary of this company be, and they are hereby, authorized and directed to execute full and complete releases, under the seal of the company, to said Stanford, Huntiugton, Crocker, and Hopkins, and deliver the same to the respective parties; which releases shall be in substantially the following form, to wit: Whereas Leland Stanford has been and is the president of this, the Central Pacific Railroad Company, and has, under and by virtue of the power and authority con- ferred upon him as such president, done certain acts and performed certain services for said company, both in the city and county of San Francisco, State of California, and in the city of New York and elsewhere, and has collected and received certain moneys of the company, and has paid out and expended certain moneys for the uses and purposes and for the benefit of said company, and in its name, place, and stead, and on its behalf has made and indorsed its checks, notes, drafts, and bills of exchange, and has executed and delivered contracts, agreements, and instruments of various kinds, has borrowed money for said company and has pledged and hypoth- ecated stock, bonds, and other securities of the company as collateral for money borrowed, has made purchases for said company, has paid, laid out, and expended moneys lor interest, freight, loans, insurance, commissions, purchases, and for other obligations and purchases of said con pany, and has employed clerks, agents, coun- sel, attorneys, and others in and about the business of the company, in its service and for its benefit, and has paid salaries, wages, expenses, and compensation to per- sons so employed, and has compromised, settled, and adjusted claims due and owing to and by said company, and lias done and performed various acts and things, and has attended to and managed generally the affairs and business of said company in the State of New York and in the State of California and elsewhere, and has, from time to time, rendered accounts and reported his acts and duties to said company, which said accounts and reports have been examined, audited, found correct, and approved by said company, about and of all which this company has full advice and knowledge ; "Now, therefore, the said Central Pacific Railroad Company, with a full knowl- edge of all of the facts and circumstances relating to said transactions, and each of them, in consideration of the premises and of the payments of moneys for the benefit of said company by the said Leland Stanford, and for and in consideration of the further sum of one dollar, lawful money of the United States of America, to it in hand paid by said Lelaiul Stanford, hath ratified, confirmed, and adopted, and doth hereby ratify, confirm, and adopt all the acts and deeds of said Leland Stanford in the premises as its own acts and deeds, and hath remised, released, and forever dis- charged, and by these presents for itself and its successors doth remise, release, and forever discharge the said Leland Stanford, his heirs, executors, and administrators of and from all manner of action and actions, cause of action and causes of action, suits, debts, dues, reckonings, bonds, bills, specialties, covenants, contracts, contro- versies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands whatsoever, in law or in equity, which against him the said company ever had, now hath, or which it or its successors shall, can, or may have, for, upon, or by reason of any matter, acts, or things whatsoever done in and about the premises from the beginning of the world to the date of these presents, and particularly for all acts done by him as president of said company, or individu- ally, or otherwise. " In witness whereof the said Central Pacific Railroad Company hath caused these presents to lie signed in its name by its first vice-president, and its corporate seal attested by its secretary to be hereunto affixed this 8th day of October, 1887." These releases were passed periodically by the board of directors, after their president or other officers had been successful in one of their 8 schemes to beat the Central Pacific out of a few million dollars. Their minutes will show that they passed one of these releases to Stanford, as president, on October 7, 1887, after he had let the contract to build the California and Oregon, from Delta to the State line, to his private comDany. the Pacific Improvement Company, whereby he paid $8,000,000 in stock of the Central Pacific, and $4,500,000 in the bonds of the Central Pacific, making in all $12,500,000, for work that cost but $3,505,609. One would naturally suppose that, having built these branch lines with the earnings of the Central Pacific, they would be a part of that company's property. But it appears tliat the big four were not in the railroad business for their health, or for the accommodation of the people, or to increase the value of the Central Pacific debt to the Government, but for their own personal interests. They therefore, after using the earnings of the Central Pacific in constructing these branch lines in California, entered into leases with themselves, through their construction companies, whereby the Central Pacific paid to the big four, for rentals, si>!>.!li\:;7;U9. By such a system of fraud and rascality they turned over to them- selves all the earnings of the Central Pacific, and when this plan failed to absorb all the money in the treasury they usually appointed a com- mittee to invest the surplus. For instance, at the Central Pacific meeting, August 26, 1886, a committee was appointed to -loan or invest" the surplus, and at a meeting held September 30 following, th ommittee reported as follows : BAM 1 ' i : * N i > o, September 30, 1886. To the Board of Directors, Central Pucijic Hnilr.xtd Company: GENT i.i :MK\ : We, the undersigned committee. appointed for the purpose of invest- ing the money in the sinking funds of this eompany, respectfully report as follows: suitable investment presenting itself at present, we have, pursuant to the reso- ' lution of your board, dated Auu'iiM loaned the amount in t he Mnkinr fund, namely, $:{,n:i:_>. I Id.:;:;, to the 1'aeilie Improvement < ompany on thirty days' call at 3 per cent. Yours, respectfully. TlMolHY Hnl'KIN-. \-\ CROCK IK. \V. V. HUNTIM,l"N. You should always remember that the I *aei tie Improvement Com- pany" was organized and owned by Stanford. Uuntington, Hopkins and Crocker, as was also the "Contract and Finance Company" and others. These companies were organized for the purpose of receiving the earnings of the Central Pacific and distributing them to the big four. Usually the earnings are passed over to these private corpora- lions oil account of "leases," "constructions." --repairs." etc., and then distributed to the big four. This x.l.n.'L*. KM) was afterwards turned over to Stanford, Huntington \- Co., in exchange for tifty-year bonds. If you will read the evidence in the examination made by the Patti- son commission, you find that Stanford & Co., as directors of the Cen- tral Pacific, loaned to the " Con tract and Finance Company " $5,700,000, which was never returned to the Central Pacific. Now, 1 have shown the necessity of these thieving corporations, in the distribution of the earnings of the Central Pacific. To credit Stan- ford, Huntington, Hopkins and Crocker direct with the enormous profits they receive from the roads they operate would be stating the truth so the people could understand it, so they resort to these construction com- panies to cover up their rascalities. The Pattisou commission , after stating many of the facts in regard to the contracts, leases, etc., made by the big four to themselves, sums up their rascalities as follows, on page 84 of report : In general, it may be said to be established by the evidence that all the construc- tion contracts, and all the important con tracts for materials and supplies, were made between the Central Pacific Railroad Company and companies controlled by Stanford, Huntingtou, Hopkins, and Crocker. These four persons determined the terms of all these contracts, and the result has been that through the payments made by the Central Pacific Railroad Company they have received as profits a vast amount of stocks and bonds. Those resulting from the construction contracts above stated represent over $100,000,000 in stocks and over $5,000,000 in bonds. It appears from the books of the company that from the very inception of the enterprise down to the present time it has been the constant practice of the direct- ors of this company to permit the expenditures of very large sums of money with- out requiring any sufficient vouchers disclosing the purposes to which they were applied. A detailed list of these insufficient vouchers will be found in Exhibit W, attached to Stevens's report, volume 8. These insufficient vouchers aggregate $4,818,355.67. Soon after the Pattison commission was appointed by President Cleveland these rascals undertook to prepare their books as well as they could to meet this investigation. They knew that the books of "S., H., H. & 0.," that is, Stanford, Huntingdon, Hopkins, and Crocker, showed standing to their credit over $35,300,000, and this immense Bum would not look well standing to the credit of these paupers when Pattison cast his eye over the figures, so something had to be done before the commission arrived in California. I will here insert a letter from Huntington to E. II. Miller, jr., asking him to doctor up these books so that they would not show such an immense sum standing to the credit of the big four. Miller, who was so handy with the "Con- tract and Finance 77 books, shows Huntington how easy it can be done and proceeds to outline his plan in his reply to Huntington. Here are both letters, and after reading them you will again see the importance to these rascals of their private corporations. NEW YORK, January 10, 1887. FIJIKXD MILLKK : As you probably know, the account known as "S., H., H. &C." shows exceedingly large figures, which we propose now to cut down, since there are no assets to represent any such figures as these, which seem to show large amounts to be distributed. I don't understand this account myself, do not know much about it, in fact, and Mr. Crocker does not know any more. I know it is asking consid- erable, but I would like to have you look over these accounts, assets, and every- thing connected therewith, so as to verify them, and then send me a statement. I have great confidence, as you know, in Wm. E. Brown; but all men are liable to mistakes, and I would like to have you take this matter up and attend to it, as we propose to charge off to profit and Ions enough to bring the figures down to the actual assets on hand. It is possible Willard can help you in this matter, if you call on him to do so^ Mr. Brown will, of course, do all he can. Yours, very truly, C. P. HUNTINGTON. SAN FRANCISCO, CAL., January 25, 1887. C. P. HUNTINGTON, Esq., Vice-President, New York: DEAR SIR: Yours of the 10th instant duly received. I have looked into the matter of the very large balances to the credit of the individual accounts of Lelaud Stan- ford, C. P. Huntington, Charles Crocker, and estate of Mark Hopkins on the books of S., H., H. & C., amounting to over $35,300,000. These large balances arise from the following causes : As appears by the books, there has been distributed or divided at various times sundry properties, which have been currently charged to dividend account, amount- ing to $9,250,520.21 ; and various collections have been credited to same account, for dividends and interest received on stocks, etc., amounting to $655,533.53 the debt balance being $8,594,986.68. Among the items charged to dividend account the 10 larger cues are: In June, 1877, "S. P. bonds, divided," $2,880,000; in 1878, Oakland water-front stock, divided. $474,601.39; Central Pacific Railroad Company stock (E. B. C.), $5,192,550. Since 1875 interest accounts have been made up yearly in favor of and amounts cred- ited to the personal accounts of Leland Stanford, C. P. Himtington, Charles Crocker. Mark Hopkins, and estate of Mark Hopkins, and charged to "interest account," amounting in the aggregate, in round numbers, to $20,000,000. This was all right and proper, because the amount of capital contributed by each was unequal; and by making up interest on the full amount of credit balance of each from time to tim each got in effect a credit to which he was entitled for interest on the excess he had in the company. This matter of equalizing the interest, however, led to the very large amount of debit which now appears in " interest account." This debit repre- sents no assets, it being really a company loss, and might have been legitimately charged to profit and loss. Besides these large items of interest credited to the individuals. "S.. H., H., & C.," above, there were large items of interest, both received and paid, leaving the balance of debit in interest account . $-?<>. 82rt. 789. 49 There also appears on the books a debit balance to profit and lovs account of ' 1. 187. 215. 3J The main item to wedit of this account is balance transferred from Contract and Finance Company 2. ii(is. i'!>2. 29 A few of the larger items to debit of same account an- : Transfer Market Street, Railroad 212. sJM.Ol lone property stock issued and divided 22!. < *'>.">. Rolling stock furnished S. I'. K. K'. for account off. A F. Co 286,081.0] Estate of K. B. Crocker, amount of note given to K. P>. Crocker", March 24,1871, by Stanford, Huntington, and Hopkins 1.2!)S. 140.00 Amount due on contract of S. I'. K. K. Co. for rolling stock not fur- nished 135. 29 There are many other entries. The above are stated merely to give you some idea of tho account. Now, these items to debit of dividend account. >ay f' v ."'! 1 1 .! ( MiJs : iuteioi account, say, $20,826,78!*. W: profit and loss. say. 11,187,215.33, amounting in aggregate to $30,608,991.60, are properly and legitimately chargeable to the individual accounts of the parties " S., H., H., A C.," in equal amount*, one-fourth each. This would reduce the amounts now standing to their credits, as foil. Present credits, aggn-nate in round number-*, say $;{">. :!(>(), .<;(><>. 000.00 Leaves to their credit 4, 700, 000. 00 Something like, the amount of their actual assets. In the above are stated the amounts as they appear for Heceniber 31, 1885, tin- accounts , will, when made up and credited, of course vary the amounts of their accounts: but you will, I think, be able to get from the above suiucient general facts to enable you to understand how it comes that such large amounts appear to credit of L. S., C. p. 11., C. C., and estate of M. II., while the assets are so much less. Mr. Hopkins makes a suggestion to Mr. lirown, in which Mr. Brown concurs, and which I think would bo well to carry out that is, that since " S., H., H., & C." are now the only parties in interest in the Pacific Improvement Company, that the books of "S., II.. II., AC." be written up, the accounts of dividend, interest, profit and loss, etc.. be charged oil' as suggested, and the books balanced and turned over with the balances and assets to the P. I. Co.; the P. I. Co. to transfer the balances of "8.. II.. II.. A C.'' books to the P. I. Co. books, and thus have only one set of books for the accounts of the parties. >., H.. II.. A (V Trusting the above will be satisfactory. I am. > our* very truly, M. 11. MII.I.KI:. .lis. Mr. Chairman, you should not forget that this immense sum paid out for interest was paid to the big four, and not to the Government or the stockholders. When the Thurman Act was passed, st'ttin.u aside a certain per cent of the earnings of the Central Pacific to be applied on the debt they owed the Government, they tried to beat it in the courts, but failing in that suit, they deliberately set about to defeat the object of that act by fraud. To this end they incorporated the " Southern 11 Pacific Railroad of Kentucky." They claimed, by incorporating under the laws of Kentucky, they could prevent the Government from inquir- ing into the management of the Central Pacific and branch lines, by leasing them to this Kentucky pirate, and to fully carry out this infa- mous scheme, they appointed two dummies president and secretary of this Kentucky abortion (W. E. Brown as president, and E. H. Nash, secretary), who entered into a lease of the Central Pacific for ninety- nine years, with Stanford and E. H. Miller, the president and secretary of the Central Pacific Company. / After securing the lease, these two dummies resigned, and Stanford and Miller were elected to fill their places. Then the wrecking of the Central Pacific commenced. They claimed that the Central Pacific had a floating debt of $12,873,945.61, which they assumed, and the remarking of the rolling stock, and the sale of the immense supplies of the Central Pacific were turned over to this Kentucky bandit to pay this assumed debt, and as this was the transfer of property upon which the Government held a lien, it was to that extent no better than high- way robbery. The big four fixed the price at which this Government property was turned over to themselves, and from the character of their other transactions it is safe to say that they made millions by this transfer. Thus the parent company which had furnished all the capital to build up this bastard offspring was finally swallowed up. Stanford in his report of these transactions touches the subject very gingerly, this is what he says : On January 1, 1885, just prior to the lease to the Southern Pacific Company, there was a net floating debt of $12,873,945.61. This has been reduced each year, till, on December 31, 1887, the floating debt was wiped out and there remained a surplus of $1,970,194.65 The result has been chiefly accomplished by the sale of supplies and materials 011 hand to the Southern Pacific Company at the commencement of the lease, by the nonpayment of dividends for the period, and by the issue of bonds. I may as well give the people some light upon this Kentucky pirate which assumes the prerogative of robbing the people of California, as well as the Government, of their just rights. It was incorporated by the legislature of Kentucky March 12, 1884. The incorporators were Henry D. McHenry, William G. Duncan, Samuel E. Hill, Samuel M. Cox, and Henry McHenry, jr., who were dummies of Stanford, Himt- ington, Hopkins, and Crocker, and who assigned the franchise of the big four. The act forbids the company doing business in the State of Kentucky, but gives it a license to prey upon all the rest of the world. Its capital stock is $1,000,000, with the privilege of increasing it to any amount deemed necessary for the transaction of its business; but in no event are the stockholders responsible for more than $1,000,000. After the big four possessed themselves of this franchise they increased the capital stock to $100,000,000, and later on they increased it again to the amount of $150,000,000. Thus the great State of Kentucky has sent out this pirate corporation with a commission to rob all the world whenever it pleases, using a capital of $149,000,000 free from any lia- bility to stockholders, making only owe exception they must not enter the sacred territory of blue grass, fine horses, and whisky. Kentucky must be exempt from their operations. Now, Mr. Speaker, I wish to insert here a few tables compiled by the Pattison commission, showing the total amount of aid received by these bond-aided railroads, the earnings which have found their way into the pockets of the managers, and the principal and interest paid and to be paid by the Government at the maturity of the bonds, and the methods pursued by these companies. 12 Aid from all' sources. Principal and intcrestadvauces paid and to be paid l)v United States. Value of land u rant sold and unsold. Aid from . other sonr< e.4 j $92,844,290.94 4, 426, 608. 26 4, 509, 255. 89 \ 77,104,604.41 $44, 911, 637. 77 1, 000, 000. 00 j:t'.i, 364. 60 19, 832, 581. 24 $-250, 000. 00 Sioux City and Pacific :.... J55, G8ti. 00 -'. 191. 24 Central Pacific "Western Pacific Total 178, 884, 759. 50 65, 983, 583. 61 3, 070, 877. 24 Total aid. Aid exclusive of use by com- panies until ma- turity of annual interest pay- ment by Gov- ernment. 1 sf until matu- rity in l#)5-'99 of annual inter- est payment^ on lia.sis of lie paid bv United itOS. Kansas Pacific W, 114 6 303 0005 $59, 304, 778. 94 $92, 844, 290. 94 100 00 1 600 000 2 826 608 26 4 426 608 26 Sioux City and Pacific 101.77 1 628,320 2 880 935 89 i 4 509 255.89 Central Pacific 737.50 25.885,120? Western Pacific 123 16 1 MO 560$ 49,248,9*24.41 77, 104, 604. 41 Total 2 495 05 64,623 512 114 261 247.50 178 884 759.50 PROFITS OF $278,023,357.63 IX OPERATING THE ROADS The reports of these companies show the following figures relating to operation, disclosing a profit or net earnings of ^L'Ts.tL 1 ;;,:;:.?.!;:;, r.|ii;iling $15,000,000 a year. Road. /: rniinj 8 table. Gross earnings. Operating ex- penses. Net earnings. Union and Kansas Pacific $315,303,504.66 274.139.U6.27 $169,916,078.90 149.199.102.40 $145.387,425.76 124, 940, 013. 87 Central Pacific Railroad, from 1863 to December 31, 1886... ...... Sioux City and Pacific Railroad, from July 30, I860, to June 30, 1887 9,187,359.50 6,423,596.82 2,763,762.6* Central Branch Union Pacific 12. 849, 403. 47 7, 917. 308. 15 4, 932, 155. 32 Total 611,479,443.90 333,456,086.27 27*. 023, 357. 63 OVER $25,000,000 FOR POOLS, REBATES, AND OVERCHARGES. In addition to the gross earnings given as above, the bond-aided companies received the following sums, which they subsequently paid out on account of pools, subsidies, rebates, overcharges, etc. : 13 Road. Pools, rebates, and overcharges. Pools. Rebates and overcharges. Total. Kansas Pacific 5 $4, 004, 512. 48 $11, 577, 091. 62 $15,581,604.10 Sioux City and Pacific 401 832 01 Central Pacific 9 882 799 61 Total 25,866 235 72 Had the Pacific railroads been built and managed upon honest methods, had the Government loan been properly applied, these companies, regarded as a whole, ould have declared dividends at the rate of 6 per cent per annum for eighteen years, from the date of actual completion to the present time, upon all the moneys that they would have been required to pay in to complete and equip the roads. They would have owned 2,495 miles of road free from all debt and worth $124,600,000, upon an original outlay of less than $35,490,381.44. Three of them, the Union Pacific, Central Pacific, and Central Branch, could have repaid every cent of the principal and interest advanced by the Government to date, and could have reduced their charges to shippers to the extent of over $140,000,000, or nearly $8,000,000 per year. For $1 the stockholders would have realized $1.07 in dividends in eighteen years and $1 11 in land sales. The property would have been free from debt, and for every dollar that they had invested the stockholders would have had in property over $4; so that in eighteen years each dollar would have yielded $6.18. But they chose dishonest "methods. At the outset theV divided $172,347,115 of fictitious capital, they dissipated over $107,000,000 which should have been applied to the payment of the principal and interest of the Government debt, and they taxed shippers to the extent of over $140,000,000, or nearly $8,000,000 a year, to pay for the inflation of the capital of these companies and for the vicious practices that rept into their management. Method actually pursued. Union and Kansas Pa- cific. Central Branch. Sioux City and Pacific. Central Pa- cific. Total. Cost of construction Capitalization $50, 624, 000. 00 134, 843, 06. 00 $2. 731, 347. 23 4,200 000.00 $2, 600, 000. 00 5,047 720.00 $40, 000, 000. 00 124 211 680 00 $95, 955, 347. 23 268 032 462 00 Fictitious capital put on 84 21Q 062 00 1 468 6^)3 00 2 447 720 00 84 211 680 00 172 347 115 00 Actual net earnings 145 387 425 76 4 932 155 00 2 763 762 68 124 940 013 87 278* 023* 357 63 Land sales 30 907 367.77 1 000 000 00 239 364 60 7 332 581 34 39* 479 313 71 Amount credited by Gov- ernment to November 1 1887 21 597 575 76 316 124 12 131 023 62 8 913 416 11 30 959 039 61 Net earnings and land sales in excess of the amounts credited by Government 154, 697, 217. 77 5 616,030 88 2 871 203 66 123,359 179 10 286 543 631 41 Dividend of 6 per cent per annum for 18 years on outlay to have been re- quired of stockholders . . Amounts dissipated 18, 383, 207. 04 136, 314, 010. 73 1, 245, 991. 33 4, 370, 039. 55 762, 473. 52 2, 108, 730. 14 17, 937, 940. 06 105, 421, 239. 04 38, 329, 611. 95 248, 214, 019. 46 I have treated these bond-aided roads as a whole, because, if the policy of extending the time for the payment of their debts is adopted by Congress, they will all claim the same rights, and Congress can not, with justice, apply one plan for settlement with the Union Pacific and another plan for the Central Pacific. We must either extend all their debts or call them all to a settlement. The Central Pacific, fearing justice will be done them for their many rascalities, and that they will be called upon to settle with creditors in the near future, have filed a lot of claims against the Government, which they dub "equities." I propose to briefly look into these "equi- 14 ties" ami sec what merit they have. Here is the first one (p. 91, Pat- tison report) : (1) The loss and interest thereon which the company sustained by being forced to sell the bonds received by it from the Government at a discount : Loss $7,120,073.55 Interest to maturity. 12, 816, 132. 39 19, 936, 205. 94 llere they claim $19,936,205.94 for loss on the sale of the bonds which the Government loaned them. If they sold these bonds at a discount nobody is responsible for that act but themselves; the Government has paid interest upon them since they were issued, and at maturity will have to pay their full face value, and it makes no difference to the Government whether they were discounted $7,000,000 or $40,000,000. These men might as well put in a claim for $40,000,000 as any other sum, because they used them for the payment to themselves for con- structing the road, and the " contract and finance committee" divided the surplus between the big four. But the cheek of these bandits in claiming ^li'.sK;.!;',!'.:;'.! for interest upon this discount is equal to that of a Government mule. The second "equity" is worse still. (2) The amount \vhich the Government >aved in its transportation on the (Vntral and Union Pacific line between the completion of the road in May. 1SW. ami Time when it might have been completed under the contract, i. 6., .Inly 1, 1876, $47,768, 17& This company's proportion, say 46 per cent, ^LM.itT: Here they claim -^ 17, 7(1.1, ITS for completing their roads seven years too soon. They had the use of the roads for seven years without any competing line, and charged what they pleased for transportation of freights and passengers, and on many parts 1* railroads, and is managing them through its courts without corrupting the administration. Now, Mr. Chairman, in conclusion. I will group the incomes from all sources of these bandits, so as to show their rascalities at a glance. Profits upon construction - 1 . 057 Net earnings 338, 023, 357 Aid from all sources "2 17. !:; Kebates 25, SN Leases : Union I'arilie 38,800,000 Central Pacific 29,912,373 Grand total 932, 422, 244 And yet these paupers come before Congress and ask an extension of time for fifty years to continue their rascalities, and expect us to leave the management of these great public highways of commerce in their hands for another half a century. Will you do it? This ques- tion must be answered by your action. 10 08 5