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United States Pacific Railway Commission,
1887 Report, Volume V, CPRR.
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APPOINTED UNDER THE ACT OF CONGRESS APPROVED MARCH 3, 1887, ENTITLED "AN ACT AUTHORIZING AN INVESTIGATION OF THE BOOKS, ACCOUNTS, AND METHODS OF RAILROADS WHICH HAVE RECEIVED AID FROM THE UNITED STATES, AND FOR OTHER PURPOSES,"
EGBERT E. PATTISON, OF PENNSYLVANIA, Chairman, E. ELLERY ANDERSON, OF NEW
YORK, DAVID T. LITTLER, OF ILLINOIS,
Commissioners.
VOLUME V.
REPORTED BY
CHARLES P. YOUNG, of New York, I SECRETARY AND STENOGRAPHER TO THE COMMISSION.
WASHIKGTOK:
GOVERNMENT PRINTING OFFICE.
1887. P R VOL V 1 2331
pt
TESTIMONY
TAKEN BY
THE UNITED STATES PACIFIC RAILWAY COMMISSION,
AS TO
THE WORKING AND FINANCIAL MANAGEMENT OF THE RAILROAD* THAT HAVE RECEIVED AID
FROM THE GOVERNMENT IN BONDS.
OFFICES OF THE CENTRAL PACIFIC RAILROAD COMPANY,
San Francisco, CaL, Monday, July 25, 1887.
The Commission reconvened upon the call of the chair, all the Commissioners
being present.
EDWARD H. MILLER, JR., being duly sworn and examined, testified as follows
:
By Commissioner ANDERSON :
Question. Where do you reside? Answer. In Alameda, Alaineda County.
Q. Do you do business in San Francisco ! A. Yes, sir. Q. How long have you
been in business in San Francisco? A. Since 1873.
THE CENTRAL PACIFIC OF CALIFORNIA.
Q. What has been your connection, if any, with the Central Pacific Railway?
A. I have been secretary and am a director of the company.
Q. When was your first connection with the company? A. In 1863.
Q. When was your original connection? A. My original connection was as book-keeper,
for about one year.
Q. And that was for the Central Pacific of California, as it was then known
? A. Yes, sir.
Q. Where were their headquarters? A. At Sacramento.
Q. Had they any office in San Francisco at that time? A. No regular office.
But President Stanford was in San Francisco a great deal of the time. He had
an office here.
Q. But the headquarters of the company were at Sacramento? A. At Sacramento.
Q. Please state what your connection has been with the company since 1803 to
date *? A. For one year, about, I was book-keeper for the company. Since then
I have been secretary continuously.
Q. How many years have you been a director? A. I think the whole time that
I was secretary. I think I was elected director at the same time I was elected
secretary.
3333
2334 U. S. PACIFIC RAILWAY COMMISSION.
Q. Please state for what companies you have been secretary, indicating at the
same time the changes in the corporate title of the railway? A. It has been
the Central Pacific Eailroad Company of California, and then a change of
title occurred.
Q. That was from 1863 until 1870, was it not ! A. Yes, sir.
THE CONSOLIDATION.
Q. What happened in 1870? A. In 1870 a consolidation with two or three other
companies took place.
Q. Will you name them, please 1 A. There were several consolidations, and I
cannot name them without reference to books.
Q. Will you name what you can? A. There was the Western Pacific Eailroad Company.
Q. Kunning between what points? A. Between San Jose" and Sacramento.
The San Francisco, Oakland and Alameda Kailroad Company, from Alameda, or including
the line between San Francisco and Niles. No, I am mistaken ; it was between
San Francisco and Oakland and Alameda. It was a branch. It had two lines, one
to Alameda and one to Oakland. I will explain them. There was a ferry from
San Francisco, both to the Alameda wharf and to the Oakland wharf, and then
local trains ran out from Oakland and also from Alameda, which were two different
points on the opposite side of the bay.
By the CHAIRMAN :
Q. Have you a map on which you can point those roads out? A. Yes, sir ; I
can furnish you one.
THE CENTRAL PACIFIC INCLUDED.
By Commissioner ANDERSON :
Q. What other company was included in this consolidation in 1870? A. I do
not remember.
Q. Was the Central Pacific itself included? A. The Central Pacific itself.
I am not sure whether the California and Oregon was consolidated at that time
or at a previous consolidation. There were three different times when the consolidations
were made, and we are getting it in consecutive form.
Q. I understand you remained secretary to the new company, as you had been
to the old? A. Yes, sir.
PREVIOUS CONSOLIDATIONS.
Q. How many consolidations were there? A. The consolidations as they appear
were several before these roads were consolidated with the Central Pacific
of California, Several of them had had previous consolidations with other roads.
I cannot give it to you in consecutive form without getting a statement I need
for that purpose.
Commissioner ANDERSON. As I understand the method pursued, the several roads,
consisting themselves of minor parts, had a species of integration among themselves,
and then the whole was integrated into the Central Pacific Railway, about 1870.
The WITNESS. Yes, sir.
Q. And you do not remember how many of these consolidations took place? A.
Yes, sir; I can remember how many, but I cannot give you the dates, I can name
all the companies that were cousolidateci.
EDWARD H. MILLER, JR. 2335
ARTICLES OF CONSOLIDATION.
Q. Was the process of consolidation always by entering into articles of consolidation?
A. I think so ; but as to some of the roads that had been consolidated previous
to their coming into the consolidation with the Central Pacific, I do not know
how they were consolidated with one another.
Q. Of the records of these consolidations, what have you on hand? A. I have
the minutes of the Central Pacific Railroad Company (and possibly of some of
the other companies that were consolidated), which show the dates and facts
of the consolidation.
Q. Have you the articles of consolidation? A. Yes, sir.
Q. Of the Central Pacific alone, or of some of these others also? A. I think
I have of some of the others, but I certainly have those of the consolidation
of the Central Pacific.
Q. Will you please produce for our information all the articles of consolidation
i A. Yes, sir.
OFFICERS OF THE CENTRAL PACIFIC.
Q. As to the present organization of the Central Pacific, who is the president
? A. Leland Stanford.
Q. He resides here in San Francisco? A. San Francisco.
Q. Please state the other officers by name, or at least the principal officers
? A. Leland Stanford is the president, and C. P. Huntington is first vice-president.
Q. Mr. Huntington residing in New York? A. Residing in New York. Charles Crocker
is second vice-president.
Q. Mr. Crocker also residing in New York? A. Residing in New York.
Q. And he is now in Europe? A. Yes, sir.
Q. Do you know when he will return? A. I do not.
Q. Can you ascertain for us? A. I do not know how I can.
Q. Can you tell us where we can have his deposition taken abroad, if desired?
A. I do not know where he is in Europe. I can ascertain, probably.
Q. Mr. Charles F. Crocker is his son, is he not? A. Yes, sir. I can ascertain
from him, probably.
Q. What other officers are there? A. Charles F. Crocker, third vicepresident.
Q. Is that Colonel Crocker? A. Yes, sir.
Q. Is he residing here? A. Residing in San Francisco.
Q. Who else? A. E. H. Miller, jr., is secretary. Timothy Hopkins is treasurer.
By the CHAIRMAN : Q. Where does he reside? A. In San Francisco.
By Commissioner ANDERSON : Q. Who is your land agent? A. William H. Mills.
Q. He is also residing here? A. Yes, sir ; also residing in San Francisco.
RAILROAD COUNSEL.
Q. Who are your present counsel? A. Col. Creed Haymond and Judge Harvey S.
Brown.
Q. Does Mr. Haymond reside here in San Francisco? A. Yes; in San Francisco.
2336 U. S. PACIFIC RAILWAY COMMISSION.
Q. Where does Judge Brown reside? A. He resides in Oakland. Judge L. D. McKisick
is another.
Q. Residing where?- A. In San Francisco. John Foulds, residing in tSan Francisco.
Q. What counsel have you in New York? A. Charles H. Tweed.
Q. Have you any other counsel elsewhere? A. No other counsel regularly employed.
ITS WASHINGTON COUNSEL.
Q. Have you permanent counsel in Washington now? A. I do not think there is
any one in Washington exclusively employed by the company. When I say permanently
employed I mean employed exclusively in the business of the company, to give
their exclusive attention to the business of the company.
Commissioner ANDERSON. You may give us the name of your Washington occasional
counsel, if there be one.
The WITNESS. Henry Beard, I think it is.
Q. Has he succeeded Mr. Sherrill and Judge Franchot? A. No, sir.
Q. In what respect does his employment differ from that of others? A. His
employment has been to look after the accounts of the company a great deal
and to attend to general business.
Q. That is, the adjustments between this company and the Commissioner of Railroads
? A. The Government ; yes, sir.
THE BOARD OF DIRECTORS.
Q. Of how many members does your board consist? A. Seven.
Q. Will you please give us their names as the board is constituted to-day?
A. Leland Stanford, C. P. Huntington, Chas. Crocker, Chas. F. Crocker, W. Y.
Huntington, Timothy JHopkins, and E. H. Miller, jr.
Q. W. V. Huutington is what relation to C. P. Huntington? A. Nephew.
Q. Where does he reside? A. San Francisco.
Q. Has your board always consisted of seven? A. I am not sure. I have an impression
that at one time it was five, but it was a long time ago. I do not recollect.
The report of 1872, I think, will show that it consisted of seven.
Q It has ever since 1872 consisted of seven? Do you remember whether there
was any change prior to that? A. I do not remember distinctly, but I am now
inclined to think that there was never any change ; that it was always seven.
COURSE OF CONSTRUCTION.
Q. Will you please state the course of construction of this road in point of
time?
The WITNESS. From the aided line?
Commissioner ANDERSON. In point of time ; yes, sir. A. I cannot do that without
referring to some papers documents.
Q. Will you state which portion was first constructed? A. The line from Sacramento
to Ogden was completed May 9, 1869.
Q. But was that from Sacramento to San Jose constructed before the railroad
east of Sacramento? A. No, sir.
Q. How far had the railroad east of Sacramento progressed when the line between
Sacramento and San Jose was completed? A. To Ogden* The line from Sacramento
to Ogden was completed first.
EDWARD H. MILLER, JR. 2337
Q. Before the road from Sacramento to San Jos6? A. Yes, sir.
Q. Was any part of that road which lies southwest of Sacramento completed before
the railroad east of Sacramento was completed? A. Yes, sir.
Q. Between what points! A. Between San Jos< and Mies.
Q. Was it after the act of 1862 had been passed I A. Yes, sir.
Q. How many miles is it from Sacramento to Mies?
The WITNESS. Allow me to refer to papers.
The CHAIRMAN. Certainly. Eefer to anything that will give you the information.
Commissioner ANDERSON. You will find it on page 5 of the report of 1872.
The WITNESS. This gives only the total from San Francisco.
By Commissioner ANDERSON :
Q. I will put this map in evidence. Please examine the map nowshown you, and
state whether the names of the roads and their lengths are correctly given
?
The CHAIRMAN. You will find here, on this map, the consolidations, with the
distances of the different roads given.
The WITNESS. Yes, sir ; it is correct at the time of its date, May, 1878, but
there may have been some little changes in the lengths of the lines since,
although I do not see how there could be. The Southern Pacific Bail way Company
has extended its line since the date of this map.
Q. Your answer merely shows that it is correct at the time? A. Yes, sir.
THE WESTERN PACIFIC.
Q. What is the corporate name of this railway constructed from Sacramento to
Mies?
The WITNESS. What is it now?
Commissioner ANDERSON. What was it at the time?
The WITNESS. The Western Pacific Eailroad Company.
Q. Which was built first that portion of the Western Eailroad Company from
Mies to San Jos6 or the portion from Niles to San Francisco? A. The portion
from Mies to San Jose, is my recollection. It was built before the portion
between Mies and Oakland.
Q. Was the portion between Mies and Oakland constructed before the consolidation
of 1870? A. Yes, sir.
Q. So that when the consolidation of 1870 took place the Western Pacific Eailway
Company was substantially completed from Sacramento to San Jos6 and to Oakland,
was it not? A. Yes, sir.
THE SAN FRANCISCO BAY RAILROAD.
Q. What was the name of the company from Oakland to Mies 1 A. The San Francisco
Bay Eailroad Company.
Q. That was consolidated into the Western Pacific then, was it not? A. No,
sir ; that was consolidated into the Central Pacific.
Q. Was that in 1870 u? Was there more than one consolidation to which the
Central Pacific was a party? A. Yes, sir.
COMMENCEMENT OF CONSTRUCTION OF CENTRAL PACIFIC FROM SACRAMENTO.
Q. When was the construction of the Central Pacific from Sacramento commenced!
I do not refer to the day of the month, but with reference to the acts of Congress.
2338 U. S. PACIFIC RAILWAY COMMISSION.
The WITNESS. Do you mean what year!
Commissioner ANDERSON. The first act of Congress was passed in 1862. How soon
after that was it that construction was commenced on the Central Pacific east
of Sacramento?
The WITNESS. The first actual work done on the construction was January 1,
1863, 1 think.
Q. That was east of Sacramento? A. At Sacramento.
Q. And going east? A. Starting east ; yes, sir.
METHOD OF CONSTRUCTION.
Q. Under whose direction were the first contracts? A. The board of directors.
Q. How was it done, I mean. Was it a large contract for the whole railroad,
or was it let out in small sections under specific contractors at first? A.
The first contracts I think were in small sections, considering 18 miles to
be a small section, and then in subsections or other sections of from 2 to
4 or 5 miles.
CONTRACT OF CHARLES CROCKER & COMPANY.
Q. Who took the first large contract for any portion of the work? A. Charles
Crocker & Co.
Q. Is that the same Charles Crocker who is now second vice-presideut? A. Yes,
sir.
Q. Was he at the time a director in the company? A. Not at the time he took
the contract.
Q. Who were the directors at the time he took the contract? A. I will have
to look.
Q. Will your book of minutes show? A. Yes, sir.
Q. Does your company keep a book of contracts? A. No, sir.
Q. What disposition do you make of contracts? A. We file them in the office.
Q. Between what parties was this contract, the Central Pacific and Charles
Crocker & Co? A. Yes, sir.
Q. Who were the members of the compauy besides Mr. Crocker? A. I do not know.
ITS TERMS.
Q. Do you remember for how many miles this contract extended? A. I think it
covered the first 18 miles from Sacramento.
Q. Do you remember the rate per mile? A. I do not.
Q. Do you remember how frequently that contract was modified? A. I do not remember
that it was ever modified ; it possibly was, but I do not remember it.
Q. You remember nothing about the terms of that co n tract, or what do you
remember about the terms? A. 1 do not think the contract was specific per
mile ; my recollection is that the contract was not specific, so much per mile,
but that it was so much in the aggregate for the 18 miles, or else there were
specifications which had prices fixed for grading and other work, masonry,
bridges, &c. I cannot remember distinctly which it was.
CUSTODY OF THE CONTRACT.
Q. In whose custody was that contract? A. In mine. Q. Has it always remained
in your custody? A. No, sir. Q. In whose custody did it pass? A. I do not
know.
EDWARD H. MILLER, JR. 2339
Commissioner ANDERSON. If it were in your custody you must have delivered it
to some one.
The WITNESS. I did not.
Q. Where did you keep it? A. In a vault, or in the safe, at Sacramento.
Q. When did you last see it? A. That I cannot tell you ; a great many years
ago.
Q. More than ten years ago? ^A. I cannot specifically say whether it was more
than that, but it was more than seven.
Q. How many copies were there? A. But one that I remember.
Q. Did not the contractors have one? A. Yes, sir ; doubtless they did, but
I do not remember.
Q. Were there two copies? A. I do not remember.
Q. Do you remember in whose handwriting it was? A. No, sir.
Q. Do you remember how many pages it covered? A. No, sir.
Q. You do not remember how many pages it covered? A. No, sir.
NOT ENTERED IN FULL ON MINUTES.
By Commissioner LITTLER :
Q. Was the contract entered on the minutes of the company? A. Not in full,
I think.
By Commissioner ANDERSON :
Q. Can you give us no further information as to its terms than you have heretofore
given? A. Not until I make an examination of the minutes ; there may be something
in the minutes.
Commissioner ANDERSON. We will ask you to do so.
CONTRACT MISSING.
By the CHAIRMAN :
Q. Where is the contract now? A. I do not know.
Q. You do not know because you have not examined the safe for a number of years
? A. No ; I do not know because I have examined the safe and I cannot find
it.
Q. When did you make the last examination? A. Within a few days.
Q. When did you make an examination prior to that time? A. I had made no special
examination for the contract prior to that time.
Q. Within a few days did you make a thorough examination? A. Yes, sir 5 it
was called for by the general accountant of the Commission.
NO MEANS OF ASCERTAINING ITS WHEREABOUTS.
By Commissioner ANDERSON :
Q. Has not this contract been called for in four or five litigations within
the last four or five years? A. I do not remember that it has, but I have
no doubt that it has.
Q. Was it not called for in the Colton suit? A. I do not remember that it
was.
Q. Was it called for in the Stewart suit? A. I do not remember.
Q. Was it not called for in the Hopkins's accounting? A. I do not remember.
Q. Do you not remember, as a matter of fact, making several searches for it
? A. I do not remember, as a matter of fact, although I doubtless did.
2340 U. S. PACIFIC EAILWAY COMMISSION.
Q Do you not remember talking with different persons as to this contract and
its whereabouts? A. No, sir.
Q. Have you not talked with Governor Stanford as to its whereabouts? A. No,
sir.
Q. Have you not talked with Mr. Huntington as to its whereabouts'? A. No, sir.
Q. Have you not talked with Mr. Charles Crocker as to its whereabouts'? A.
No, sir.
Q. Had you not, before Mr. Hopkins's death, talked to him as to its whereabouts'?
A. No, sir.
Q. And you declare positively and in good faith that you have no means of ascertaining
anything as to the disposition made of this paper? A. I do.
Q. Have you any suspicion as to what has been done with it? A. No, sir.
Q. Have you any idea as to what has been done with it I A. I have not.
By Commissioner LITTLER :
Q. Was anybody interested in its destruction? A. I do not know that there was.
PAPERS MISSING OWING TO FREQUENT USE IN SUITS.
By the CHAIRMAN :
Q. Were you in the habit of missing papers from your vault? A. Yes, sir.
Q. Did you miss other papers? A. Yes, sir.
Q. How many other papers? A. A great many.
Q. What kind of papers? A. Papers that were taken in any lawsuit and given
to the lawyers given to our lawyers or to the other lawyers. It became of very
frequent occurrence that they never caine back.
By Commissioner ANDERSON :
Q. Did you give up such papers as these without taking a receipt for them?
A. Yes, sir, I did ; but we do not do it any more.
Q. Who gave up the papers without taking a receipt for them? A. I do not say
anybody gave any specific papers up, but I mean those papers that went to court
in lawsuits. We became very much annoyed in one case, the Winchester case.
The same question was asked me if papers had been missing frequently, and I
said "yes." The result of the examination brought out just what I
am now saying, that probably they were in court or h,ad been taken to court.
A gentleman who was present went to court, and among its files found the very
document they were asking for.
Commissioner ANDERSON. Somebody, on behalf of your company, must be in the
habit of parting with these papers.
The WITNESS. I myself do that.
Q. You do not mean to say anybody could go in and get them, do you? A. I was
myself in the habit of giving them to our lawyers without taking receipts.
Q. Who was the lawyer you gave such papers to? A. Any one of our lawyers.
PERSONS HAVING ACCESS TO VAULTS CONTAINING PAPERS.
Q. Who had access to your vault and safe? A. No one but clerks in our office
and myself.
EDWARD H. MILLER, JR. 2341
Q. Had the clerks unlimited access, except under your supervision?
A. They had unlimited access, to go in and out when they chose.
Q. Had they any interest in taking these papers and losing them, or delivering
them to any one without your knowledge or without conferring with you?
The WITNESS. Do you mean these contracts?
Commissioner ANDERSON. Yes.
The WITNESS. No, sir ; not that I know of.
Q. Had Governor Stanford access to your vaults? A. I do not think he was ever
in them.
Q. Could he go there if he wanted to? A. Certainly ; if he undertook to go
there I should never attempt to prevent him.
Q. And the safe was open all day long? A. Yes, sir.
Q. Who were these attorneys to whom you parted with these papers? A. They
were the various attorneys of the company for all the time.
COUNSEL EMPLOYED AT TIMES PAPERS WERE MISSED.
Q. Give the names of those who were attorneys at the time you missed the papers
? A. Robert Kobinson. I cannot specify any particular time.
Q. Give the names of all the attorneys, and their residence? A. E.
B. Crocker.
Q. He is dead, is he not? A. Yes, sir. Kobert Eobinson, S. W. Sanderson.
Q. Is he dead? A. Yes, sir. Judge Eamage. His first name I do not remember.
By the CHAIRMAN :
Q. State if he is living, and where? A. I do not know. He was a resident of
Sacramento. I think he is dead, but I do not know. I cannot think of all of
them.
Commissioner ANDERSON. To limit this set of names, I think you stated you had
seen this contract within seven years?
The WITNESS. No, sir.
WHEN CONTRACT WAS LAST SEEN.
Q. When did you last see it? A. I do not remember.
Commissioner ANDERSON. You know you saw it twenty-five years ago?
The WITNESS. Yes, sir.
Q. Can you come down from that date and say when you last saw it? A. It is
very difficult to do that. I do not know that I have seen it within fifteen
years.
Q. Do you know that you did see it as far back as 1879, before the consolidation
? A. I saw it when it was made.
Q. That was in what year? A. That was in 1863 or 18G4.
Q. Did you not see it frequently after it was made? A. I probably did, during
the time of the construction of the 18 miles.
Q. How long did that last? A. A little over a year, I think.
Q. After it was completed do you not know that you frequently saw that contract,
with other contracts, in your safe? A. I cannot remember that I did. I will
say, doubtless I did but I do not remember having seen it.
2342 U. S. PACIFIC RAILWAY COMMISSION.
Q. Do you remember the fact that the first time you \vere asked to look for
it you found it had disappeared? A. I do not remember that fact.
Q. Do you not remember looking for that contract in the Colton case? A. No,
sir.
Q. Do you not remember being examined as to this contract and other papers
in the Colton case? A. I do not remember that I was examined as to this contract.
I was examined, of course, as to papers.
Q. Do you not remember the fact that you were examined at great length in the
Colton case? A. Yes, sir.
Q. Who else was examined on behalf of your company in regard to the custody
of these papers? A. I do not know that anybody was.
OTHER CONTRACTS.
Q. What was the next contract made after the 18 miles that you have referred
to? A. There were contracts made with Cyrus Collins & Bros. ; C. D. Bates & Co.,
I think ; S. T. Smith ; and, I think, there was another, but I do not remember
the name.
Q. These were all small contracts, were they not? A. All small contracts ;
yes, sir.
Q. Were these contracts in your custody? A. They were ; yes, sir.
Q. What has become of them $ A. There is one of them I found the other day.
[Producing it,]
Q. Where did you find it"? A. I found it in the vault.
Q. Just alone by itself, without companions? A. Without any companions of
that nature.
CONTENTS OF THE BOX OF CONTRACTS.
Q. Was it by itself or was it mingled with other papers that it did not pertain
to? A. No; it was in the box of contracts, or that which I call a box.
Q. In a box of contracts? A. In a file of contracts.
Q. What other contracts did you find with the Cyrus Collins I A. I do not remember
which one I found.
Q. What other contracts did you find with the contract you did find? A. I
cannot specify, because I was not looking for any but the contracts for building,
but there was quite a package.
Q. Were they construction contracts? A. No, sir.
Q. Were they contracts that belonged to the Central Pacific Company? A. Yes,
sir.
Q. Were they of the same date as the one you have found, or were they more
recent contracts? A. No ; they were of all dates.
Q. Were some of them as old as the one you discovered? A. I think not. Yes
; about the same date. Contracts for iron, &c.
Q. When did you make this discovery? A. Within the last week, or within the
last two weeks.
Q. Did you go over any of those papers yourself personally? A. Yes, sir.
Q. All the papers in that box? A. Yes, sir ; all the papers in that box.
Q. Did you find any other contracts relating to the construction of this road
? A. I did not.
Q. You say you do not remember the name of the contractor as to the contract
you found? A. No, sir ; I do not remember which one it was.
EDWARD H. MILLER, JR. 2343
Q. It was one of these small contracts? A. Yes, sir. Q. As to all the others
you have no information to give us I A. 1 have not.
TIME NEEDED TO THOROUGHLY EXAMINE THE VAULT.
By the CHAIRMAN :
Q. Have you made such examination of the vault as to swear now that the missing
contracts are not in the vault? A. I could not positively swear that, because
the vault contains so many papers; but I can swear to the best of my knowledge
and belief it is not there.
Q. Will you make such an examination as to be able to swear positively to this
Commission that the missing contracts are not in the vault? A. I will if you
will give me a year. It will take at least a year to do that.
By Commissioner ANDERSON :
Q. Why "? A. The vault contains an immense number of papers, and we would
have to go through every box and every paper to be able to swear it was not
there.
The CHAIRMAN. We will give you all the assistance needed by detailing men to
aid in going over the contracts, if you will give us access to the vault and
to the old contracts.
The WITNESS. I have no objections to that.
Commissioner ANDERSON. I suppose you refer us to the president in answer to
that ; but we want to be perfectly satisfied that those papers are thoroughly
examined.
The WITNESS. You ask me to swear to something that I cannot swear to. If you
ask me to swear that it was not in this room, I could not swear to it.
POSITIVE CROCKER CONTRACT IS NOT IN THE VAULT.
The CHAIRMAN. We want to know that when you swear that the missing contracts
are not in the vault you swear with positive information to that effect, having
made such an examination as to enable you to do so.
The WITNESS. I have made such an examination that I am willing to state positively
that it is not in that vault.
Commissioner ANDERSON. That conclusion may be reached in two ways: one, by
having searched the vault, and the other by having information as to where
the contracts may be.
The WITNESS. I tell you I have no information.
By Commissioner ANDERSON :
Q. Have you no direct or indirect information I A. No direct or indirect information.
THE NEXT LARGE CONTRACT WITH CROCKER.
Q. What was the next large contract made after these small contracts you have
referred to? A. The next contract, I think, was made with Charles Crocker & Co.
(calling the sections about a mile each, although they were not exactly a mile),
for sections from section 31 east. I do not remember how many miles.
Q. Was it to Camp 24 that it went? A. I am not sure of that. Camp 24 was named,
I think? but it is indistinct in my mind,
2344 U. S. PACIFIC RAILWAY COMMISSION.
Q. How many miles was it? A. I cannot remember specifically how many miles,
but my impression is to about section 58. That would be about 25 miles. I
am not positive about that, however.
Q. When was that contract made? A. I do not remember.
Q, Was the second Crocker contract made after the completion of these small
pieces 9 A. I think the second contract was made before they were entirely
completed. They went on with the work beyond section 31.
Q. Was this firm of Charles Crocker & Co. the same firm that had taken
the prior contract? A. So far as Charles Crocker was concerned it was. As
to the company, I do not know.
Q. You do not know anything about that? A. No, sir.
Q. Was there any company? A. Not that I know of. I do not know.
Q. Charles Crocker was the only person you dealt with? A. The only person
I know.
WHO COMPOSED THE BOARD OF DIRECTORS.
Q. Who negotiated that contract? A. The board of directors made it. Whether
the negotiation was referred previously to any committee or not I do not remember.
In some cases it was.
Q. Who composed the board of directors at the time the Crocker contract No.
2 was made? A. I will have to look to ascertain that.
Q. Perhaps you had better look. You can ascertain that in a moment, can you
not I A. I can, by going into the office. I can bring the list of directors
from the commencement.
Commissioner ANDERSON. We would like to have that. Also bring the contract
you found in the vault The Last Rose of Summer.
The WITNESS (after returning). I can state now that the directors were nine
instead of five for a certain time, if you care for that.
Q. Will you give their names in 1864, 1865, and 1866? A. In 1864, Leland Stanford,
C. P. Huntington, Mark Hopkins, A. P. Stanford, E. H. Miller, jr., Chas. Marsh,
arid E. B. Crocker. Those were elected October 8, 1864. If you want those in
office during 1864 I will have to go back.
Commissioner ANDERSON. Give us those in office during 1864.
The WITNESS. Elected July 14, 1863: Leland Stanford, C. P. Huntington, Mark
Hopkins, A. P. Stanford, James Bailey, T. D. Judah, Chas. Marsh, D. W. Strong,
L. A. Booth, and John F. Morse.
E. B. CROCKER.
Q. What relation is E. B. Crocker, who appears in the year 1864, to Chas. Crocker
1 A. Brother.
Q. What were their business relations? A. They had no business relations together.
One was a lawyer and one had been a merchant.
Q. Was E. B. Crocker the lawyer 9 A. Yes, sir.
Q. Did not Mr. Chas. Crocker become his assignee subsequently ! A. Yes, sir
; some time subsequently, though.
Q. Did you not know enough of their relations to say whether they had business
relations together or not? A I never knew that they had.
Q. You say this second contract was made before the completion of the first
con tract? A. I did not say that positively, but I think so.
SECOND CROCKER CONTRACT ALSO MISSING.
Q. Have you looked for that contract No. 2? A. Yes, sir. Q. When did you look
for that contract 1 A. The same time I looked for the other one, two weeks
ago.
EDWARD H. MILLER, JR. 2345
Q. Have you not also looked for that contract on other occasions? A I presume
I have ; I do not remember.
Q. When I asked you a few moments ago whether you had any suspicions as to
who had removed these contracts you hesitated. Please tell me, did the name
of any person occur to your mind at that time I A. No, sir ; I hesitated simply
Q. (Interposing.) Wait a moment. Did anybody's name present itself to you at
that time? A. No, sir.
Q. You thought of no one? A. I did not. I will explain that now.
Commissioner ANDERSON. You may do so now.
The WITNESS. I hesitated for the reason that I thought it was a proper question
for me to decline to answer. That was the only cause for hesitation.
By the "CHAIRMAN:
Q. Did you ever talk to anybody about the missing contract? A. A. No, sir
; except to Mr. Richard F. Stevens, your general accountant.
Q. Prior to that time did it occur to you that it was an unbusiness like method
to have contracts on so important a matter as the construction of the road
missing ! A. No, sir ; I do not think it was.
Q. Did it make any impression on you at all? A. You are getting by inference
a statement that I have not made.
STATEMENT AS TO MISSING CONTRACTS.
Q. What is the statement that you have made"? A. The statement I have
made is that I found the contracts missing within the last two weeks, and that
I do not remember ever having searched for them before.
Q. When you discovered within the last two weeks that the contracts were missing
did you discuss the question with anybody then? A. No, sir.
Q. Did you not think it important to report it to your superior officers at
that time? A. I did not.
Q. Do I understand you to swear that that was the first indication, two weeks
ago, that you had that those contracts were missing? A. I do not swear to
anything of the sort. I do swear that I do not remember ever having looked
for them before, or ever having known that they were missing.
Q. Why do you hesitate to swear that you had not information prior to two weeks
ago that the contracts were missing? A. Because I do not remembeir that I
had.
Q. Do you swear that the contracts were not called for in the Colton case?
A. I do not. I swear that I do not remember that they were.
DOES NOT BELIEVE THE PAPERS ARE IN THE VAULT.
Q. Then I understand, as you stated before, that you are not prepared to swear
now that the contracts are missing? A. I am prepared to swear that I have
made an examination and a search for these contracts in the place where they
ought to be, or the place where I supposed where they formerly had been, and
that I do not find them, and I do not believe that they are in the vault ;
that is, the vault in my office.
Q. Are you prepared to swear that the contracts are not in your vault $ A.
I believe I have answered that before.
Q. I do not think you have, yes or no. I would ask you to answer that question
yes or no. A. You know very well, Mr. Chairman, that
2346 U. S. PACIFIC RAILWAY COMMISSION.
I cannot possibly answer that question yes or no, after the explanation I have
previously made to the same question.
The CHAIRMAN. I will repeat my question, and call for an answer. Mr. Stenographer,
you will read it to Mr. Miller.
The STENOGRAPHER (reading) : " Then I understand, as you stated before,
that you are not prepared to swear now that the contracts are missing? A.
I am prepared to swear that I have made an examination and a search for these
contracts in the place where they ought to be, or the place where I supposed
where they formerly had been, and that I did not find them, and I do not believe
they are in my vault; that is, the vault in my office."
The WITNESS. Will you repeat the question?
By Commissioner ANDERSON :
Q. Are you prepared to swear that the contracts are not in your vault? Answer
yes or no. A. If I understand that question there is nothing to it except whether
I am prepared to swear whether the contracts are in my vault or not. Is that
the way it reads?
Q. Are you prepared to swear that the contracts are not in your vault? Answer
yes or no? A. No. I suppose I have a right to explain?
The CHAIRMAN. Certainly.
The WITNESS. I am not prepared to swear, because there is such a large mass
of papers in my vault that I had not recently gone through all those papers.
It would take a long time to do so. But I am prepared to swear that to the
best of my knowledge and belief, after having examined thoroughly the place
where those contracts should be, if they were in the vault, that I think that
I said to the best of my knowledge and beliefthe contract is not in my vault
TERMS OF SECOND CONTRACT.
Q. What do you recollect as to the terms of that second contract? A. The best
of my recollection is that that contract was made under certain specifications
which required payment to the contractor at a specific price for grading per
cubic yard, of all natures, rock work, &c., and for masonry and for iron, &c.,
furnished, to complete the road. ' I dp not mean the rails, but iron work necessary
for bridges, &c., at specified prices.
Q. Not including the rails? A. Not including the rails, I think, but it may
have included the rails.
HOW PAYABLE.
Q. Do you remember whether the amounts payable under that contract were payable
in dollars or in bonds or in stocks? A. My recollection is that it was payable,
a portion in cash, a portion in bonds, and another portion in stock.
Q. Can you give the percentages? A. I think it was five-eighths cash and three-eighths
in bonds and stock. Of that, however, I am not positive. I do not recollect.
Q. Do you remember whether the percentages were altered from time to time?
A. My recollection is that the percentages were not altered.
Q. Will your minutes show? A. I do not know whether the minutes will show
or not, but the books of the company will show. The accounts will show.
EDWARD H. MILLER, JR. 2347
Q. That is to say, the entries in the books of account of the company will
show? A. The entries in the books of account of the company will show.
METHOD OF KEEPING THE BOOKS.
Q. What distinction did you make in the entry of an issue of bonds on these
contracts, or a payment of cash? A. I do not quite comprehend.
Q. Did you debit in one case "cash 77 and in the other case u bonds," or
what is the distinction made in your books I A. We opened an account with the
contractors, crediting them with the work done and charging them with the bonds
and cash and stock when paid.
Q. In what account will the counter-charges be made, showing from whence the
bonds came and from whence the cash came and from whence the stock came? A.
The contractor being charged with cash, the cash would take credit ; and if
with bonds, the bonds would be credited ; and if with stock the stock would
be credited.
CHANGES MADE IN CONTRACT.
Q. So that by following the contract down from the inception of that contract
to the end, if there were any changes in its terms they will appear in your
books? A. Yes, sir 5 but I think I can explain it.
Commissioner ANDERSON. We will take any explanation you can give.
The WITNESS. This is the contract as I remember it. The stock was to be issued
at 50 cents on the dollar, and there was a change made in the percentage to
30 cents.
Q. In the percentage of cash or the percentage of stock? A. No, sir ; the
percentage of cash remained the same. The percentage of bonds, as I recollect
it, remained the same. But as to the percentage of stock, the stock was not
paid at par. First it was paid at 50 cents on the dollar and afterwards at
30 cents on the dollar.
Q. Do you remember the aggregate amount of stock, bonds, and cash which this
contract called for? A. Eo, sir.
Q. Can that be ascertained from your books? A. Yes, sir.
THE CONTRACT AND FINANCE COMPANY.
Q. What was the next construction contract which this company entered into
? A. As I remember it, the next contract was with a corporation called the
Contract and Finance Company.
Q. When was that company organized? A. My recollection of dates, especially
of those so long ago, is so poor that I cannot give it. I will explain that
I do not remember my own age, without counting back to the year I was born.
Q. Was it organized shortly before taking this contract? A. Yes, sir.
SPECIAL OBJECT OF ITS ORGANIZATION.
Commissioner ANDERSON. It was organized especially for the taking of these
contracts. I am quoting from Mr. Huntington.
The WITNESS. That was its business. Undoubtedly it was.
Q. Who were its officers? A. That I cannot say. I knew at the time, but now
I do not recollect.
Q. Who were the principal stockholders? A. I do not know.
Q. Who kept the books of the Contract and Finance Company? A, William E. Brown.
P R YOL iv 2
2348 U. S. PACIFIC RAILWAY COMMISSION.
Q. Where is lie? A. He is here.
Q. Is he president of the Southern Pacific Company 1? A. No, sir.
Q. What is his office? A. He is one of the directors of the Southern Pacific
Company at present.
Q. Does he reside in San Francisco? A. His office is here in the building.
Q. Is he present now? A. I presume he is.
Q. Can you obtain from him a list of the officers and stockholders of this
company at the time it took the contract I refer to? A. I think I can.
Commissioner ANDERSON. We will excuse you for that. We would like to have that
list now.
The WITNESS (after returning). Mr. Brown does not recollect. He was secretary
himself. He recollects that, and can give the names of two other directors,
but whether there were mo re than three he cannot say. He will ascertain, however.
ITS MEMBERS.
Q. Who were the directors he named? A. Wm. E. Brown, T. J. Millikin, and B.
K. Crocker.
Q. As a matter of fact, were not Mark Hopkins, Leland Stanford, C. P. Huntington,
and Chas. Crocker the holders of substantially all the stock of this Contract
and Finance Company? A. Not to my knowledge.
Q. Have you not heard them say so in litigations? A. No; I do not think I have.
I presume that to be the fact. But that is my presumption.
Q. Have you not heard them say so 1 A. No, sir ; I never did.
Q. Have you not heard them say that Mr. Millikin, Mr. B. F. Crocker, and Mr.
William E. Brown were holders of small portions of the stock for the purpose
of qualifying them to act as directors? A. I never heard them say that.
Q. You never heard any one say that? A. I never heard any of them say that.
Q. Have you ever heard anybody say that? A. I could only say for myself. That
is my presumption. Nobody knew.
Q. I will read for you from Mr. Huntington's testimony, taken before us, referring
to this Finance Company: "The stock of that company was nearly all held
by Governor Stanford, Mr. Hopkins, Mr. Crocker, and myself; there were some
few stockholders, but I could not say who." Are you satisfied that that
statement is correct? A. Yes, sir.
BOOKS OF THE CONTRACT AND FINANCE COMPANY.
Q. Have you ever seen any of the books kept by the Contract and Finance Company
? A. Yes ; I saw them.
Q. What books did you ever see? A. I saw the day-book and ledger, or journal,
I suppose; cash-book, day-book, and ledger, probably.
Q. When did you see these books? A. They had an office in the same building
with me in Sacramento, and I saw them when I went into their office.
Q. At Sacramento? A. Yes, sir ; I saw them in use by their bookkeeper.
Q. That was while this contract was under way? A. Yes, sir.
Q. Have you never seen them since? A. No, sir.
EDWAKD H. MILLER, JR. 2349
THAT CONTRACT ALSO MISSING.
Q. Where is that contract between the Central Pacific Company and the Contract
and Finance Company? A. That is missing.
Q. How many miles did that embrace? A. It embraced a large portion of the
road east of the contracts that have been mentioned previously.
Q. When did you last see that contract? A. I do not recollect.
Commissioner ANDERSON. That contract embraces, as you say, a large portion
of the construction of the Central Pacific?
The WITNESS. Yes, sir.
Commissioner ANDERSON. It is a contract of great magnitude and importance.
The WITNESS. Yes, sir.
Q. You say you never observed that it was missing until within the last few
weeks? A. I do not remember that I ever did.
THE COLTON CASE.
Q. Do you not remember being examined particularly with reference to all the
papers of the Contract and Finance Company in the Colton case? A. 1 do not
remember.
Q. Do you not remember being asked if those books were in Loudon? A. I do not
remember that.
Q. Or if they had been purposely destroyed? A. I could not possibly know that.
Q. I asked you if you remembered being asked that question 1? A. No ; I do
not remember being asked that.
Q. By Mr. Hayes? A. No, sir.
Q. You know Mr. Hayes? A. Yes, sir.
Q. You know he asked you a great many questions in the Colton suit three or
four years ago? A. Yes, sir.
Q. Do you not know that it was a question of public talk as to the disappearance
of the books of this company, at that time? A. I say I do not remember. I
do not remember anything about it.
Q. You do not remember that the subject was discussed in San Francisco at all
at the time of the trial of the Colton case? A. No, sir.
Q. Will you swear that you and Governor Stanford did not talk this matter over,
of the disappearance of these books, during the trial of the Colton case?
A. I will swear that I do not remember ever having spoken to him about it,
or his having spoken to me about it.
GOVERNOR STANFORD'S DEPOSITION.
Q. Do you not remember Governor Stanford's deposition was taken at great length
I A. Yes, sir.
Q. Where was he when his deposition was taken? A. In New York, I think.
Q. When he came back here, did you have no conversation with reference to that
subject? A. Not that I remember. Not only that I do not remember, but I do
riot think I ever did. I do not believe I ever did.
Q. Was no surprise expressed by any of the officers of the company as to the
disappearance of such important papers as this contract? A. Not that I remember.
Q. Was the subject never brought up in the board of directors when you were
present? A. No, sir.
2350 U. S. PACIFIC RAILWAY COMMISSION.
Q. Has no fault ever been found with you for having permitted these papers
to disappear? A. No, sir.
TERMS OF CONTRACT AND FINANCE COMPANY CONTRACT.
Q. What do you remember about the terms of the contract made with tbe Contract
and Finance Company? A. I do not remember the details of it at all.
Commissioner ANDERSON. From Camp 24 to Ogden? That is, substantially, from
the boundary of the State to Ogden, through Nevada and Utah.
The WITNESS. Does that say " Camp 24, the boundary of the State"?
Commissioner ANDERSON. It was substantially.
The WITNESS. Then I misstated the miles.
Q. I read to you from Mr. Huntington's testimony. He was asked :
Q. What was the subject of their contract? I want to know between what points
? A. It was Camp 24, if I remember right. I am not certain that I ever saw
the contract.
Q. It was the road substantially after leaving the State of California? A.
Yes, sir. Camp 24 I think is on the State line. It was a contractor's camp,
you know, and it was from that point to the point of junction.
In other words, the whole of this road in the State of Nevada and Territory
of Utah. You can tell us nothing as to the terms of that contract? A. No,
sir ; only what appears upon the books of the company now.
Q. Do you know whether it was an agreement at so much per mile? A. I believe
it was.
Q. Do you know whether the rate per mile was the same throughout the entire
length of the road from Camp 24 to Ogdeu, or to Promontory Point? A. I do
not recollect that.
Q. Do you know whether the rate per mile was payable in money or in bonds,
or whether it was mixed? A. I think it was mixed.
Q. Do you know whether the payment included the Government bonds? A. It did
not.
Q. Do you know, as a matter of fact, that none of the Government bonds went
to the Contract and Finance Company? A. Yes, sir.
Q. They did not? A. They did not.
GOVERNMENT BONDS SOLD FOR ACCOUNT CENTRAL PACIFIC.
Q. How were the Government bonds disposed of? A. They were sold in New York
by Mr. Huntiugton, almost wholly ; possibly a portion may have been paid out
directly on contracts for locomotives, engines, iron, &c.
Q. Do you know whether they were sold for account of the Central Pacific Company
or on account of tbe Contract and Finance Company? A. They were sold for account
of Central Pacific Railroad Company.
Q. Do you remember that the price per mile was about $100,000 in the Contract
and Finance Company's contract, payable in stocks and bonds? A. 1 not remember
that. I believe that was about the cost, as entered up on the books under that
contract.
COST PER MILE, IN SECURITIES AT PAR, $100,000.
Q. Do you mean, when you say "cost," the amount of stocks and bonds
issued at par? A. The stocks and bonds paid to them.
Q. Taken at par it would amount to $100,000? A. Yes, sir. The stocks, bonds,
and cash, at par, amounted to about that amount.
EDWARD H. MILLER, JR. 235 1
Q. Do you remember that the amount of bonds issued per mile was $64,000?
The WITNESS. I do not think I understand your question. The amount of what
bonds?
Commissioner ANDERSON. The amount of bonds issued to the Contract and Finance
Company.
The WITNESS. I do not remember that.
CHARACTER OF SECURITIES ISSUED TO CONTRACT COMPANY.
Q. What bonds were issued to the Contract and Finance Company? What character
of bonds'? A. The company's first-mortgage bonds, if any.
Q. Are you positive that any bonds were given to them? A. No, I am not positive.
Q. Will your books show? A. Yes, sir.
Q. And you have never examined them for the purpose of ascertaining whether
they received any bonds or not? A. I know, but I do not remember. I know perfectly
weil if 1 can look at the books.
Q. Do you not know perfectly well that the Contract and Finance Company did
get bonds'? A. No, sir; I do not. You are asking positive questions.
Commissioner ANDERSON. No, I do not ask positive questions.
The WITNESS. Possibly I am technical in my answer, but I do not remember it.
The books would show very plainly what they did get.
Q. How much of this contract with the Contract and Finance Company is entered
in your books of minutes? A. I do not know that any of it is.
THE WESTERN DEVELOPMENT COMPANY.
Q. What other large construction contracts has the Central Pacific made? A.
They made a contract for constructing the
Q. (Interposing.) Well, I will follow my own order. Did it make a contract
with the Western Development Company? A. I do not think it did.
Q. Was the Western Development Company subsequent in time to the Contract and
Finance Company? A. Yes, sir.
WHAT BECAME OF CONTRACT AND FINANCE COMPANY.
Q. What became of the Contract and Finance Company? A. It was disincorporated,
I think.
Q. Was it wound up by judicial proceedings? A. Not that I know of*
Q. Where was it last located? A. At San Francisco, I think.
Q. In what building? A. This building.
Q. In what room? A. Room No. 1, on the first floor, at the side entrance.
Q. When did you last see that room occupied by the Contract and Finance Company
? A. By the book-keeper.
Q. When? A. I think in 1874.
JOHN F. MILLER.
Q. Whom did you see there then? A. John F. Miller. Q. Is he a relation of yours
? A. No, sir.
Q. Where does he live? A. He lives somewhere on the Sacramento River, in Sacramento
County, I think.
2352 U. S. PACIFIC RAILWAY COMMISSION.
Q. Can you identify it a little better than that? A. No, sir ; I really do
not know.
Q. Who knows him here in this office? A. Almost everybody connected with the
office.
Q. So that we can find him? Does Mr. Brown know where he can be found? A.
I presume he does.
Q. You refer us to him? A. Yes, sir.
By the CHAIRMAN : Q. What is his business now? A. Farmer.
BOOKS AND PAPERS OF THE CONTRACT AND FINANCE COMPANY.
By Commissioner ANDERSON :
Q. Were the books and papers of the Contract and Finance Company in that room
when you saw.it in 1874? A. I never saw the books there.
Q. You only saw Mr. Miller there? A. Yes, sir ; I saw him.
Q. He had some books, I presume? A. Well, he was connected with some other
company Western Development Company I think ; and whether he had any books
of the Contract and Finance Company there, I do not know. I never saw them.
THE WESTERN DEVELOPMENT COMPANY.
By the CHAIRMAN :
Q. Who composed the Western Development Company? A. I do not know.
By Commissioner ANDERSON :
Q. Who was its president I A. That I do not know.
Q. Do you know the names of any of its officers 1 A. F. S. Douty was one of
its officers. He was either president or secretary ; I do not know which.
Q. Where is Mr. Douty? A. His office is in this building.
Q. What position does he now hold? A. He is president, I think, of the Pacific
Improvement Company, or secretary of it.
CONTRACT FOR ROAD FROM SACRAMENTO TO NILES.
Q. What was the contract with the Western Development Company? A. I do not
remember whether the contract for building the Western Pacific Railroad from
Sacramento to Niles was with the Pacific Improvement Company or the Western
Development Company.
Q. It was with one or the other? A. I think so.
Q. When was that contract made? Was it before the Contract and Finance Company
or after? A. I think it was made very soon after the completion of the Central
Pacific road to Ogden.
Q. That is, soon after May, 1869? A. Yes, sir.
THAT CONTRACT ALSO MISSING.
Q. Where is that contract? A. It is missing.
Q. Have you looked for that recently? A. I have looked for all of them.
Q. What can you tell us in regard to the terms of that contract? A. My recollection
of the terms is very indefinite.
Q. Can you refer us to any entries in your books, or the minutes, that will
furnish us with the terms of that contract? A. The entries on the
I
EDWARD H. MILLER, JR. 2353
regular books of the company will show the terms of that contract, but not
in detail. I do not think there is anything in the minutes of the company in
detail.
Q. How long did the Western Development Company continue to work this contract
?
The WITNESS. In building that road "?
Commissioner ANDERSON. Yes ; from 1869 until when?
The WITNESS. They finished it in about a year.
Q. What became of the company? A. I do not know.
OFFICES OF WESTERN DEVELOPMENT COMPANY IN SACRAMENTO.
Q. Where was their office? A. At that time I do not remember the date of the
organization of the Western Development Company, but if I am right, their office
must have been in Sacramento.
Q. Why do you say " must have been 9 " Is it because they were all
kept together? A. Because there were no offices here.
Q. Is it not also because the whole business of the Central Pacific was at
Sacramento at that time? A. Because the Western Development Company, as I
understand it, was successor to the Contract and Finance Company, and they
held their offices in the same place until we moved from Sacramento to San
Francisco, which was in 1873.
Q. Do you know who the stockholders of the Western Development Company were
? A. No, sir.
Q. Do you not know that they were substantially the same persons who were the
stockholders of the Contract and Finance Company? A. I do not know ; but I
presume they were. That is all I can say.
Q. You presume they were? A. I think they were.
CONSTRUCTION OF CALIFORNIA AND OREGON BRANCH.
Q. What subsequent contract did the Central Pacific make with the Pacific Improvement
Company? A. They made a contract I will not say it was the Pacific Improvement
Company, because I am not sure ; but they made a contract with one of the three
companies for building the California and Oregon Branch road.
Q. It was the Pacific Improvement Company, was it not? A. Practically the
successor.
Q. That is, the north part of that road? A. Yes, sir.
Q. From what point; from Bedding to the State line? A. No; Eoseville was the
beginning. I think they had a contract for building some portion of the road
between Eoseville and Bedding.
Q. Did they not have the contract for building the northerly 200 miles of that
road? A. Yes, sir.
THE PACIFIC IMPROVEMENT COMPANY.
Q. Who was the president of the Pacific Improvement Company? A. F. S. Douty,
I think.
Q. When was this contract made?
The WITNESS. The contract for building the northerly 200 miles, you are speaking
of?
Commissioner ANDERSON. Yes.
The WITNESS. Last year.
Q. Was it not longer ago than that? When was that finished? A. It was just
finished.
Q. Last year? A. No, sir.
2354 U. S. PACIFIC RAILWAY COMMISSION.
Q. Finished this year? A. Just finished within a month.
Q. Y/ho are the directors of the Pacific Improvement Company? A. I do not
know.
Q. Can you ascertain? A. I presume that I can from Mr. Douty.
Q. Who are the stockholders? A. I do not know that.
Q. Are they not substantially the same persons who were stockholders in the
Contract and Finance and the Western Development Companies? A. I think so.
Q. Who keeps their books? A. F. S. Douty.
Commissioner ANDERSON. I think you said he was president.
The WITNESS. He keeps the books also. They are in his charge, in one office.
Q. Where is the office of that company I A. That is in room No. 3, on the first
floor of this building.
Q. What other persons are in that room besides Mr. Douty? A. There is Judge
Underbill.
Q. What position does he hold? A. He is a lawyer.
Q. Is he the lawyer of the Pacific Improvement Company? A. He does and has
done considerable business for the Central Pacific Railroad Company, and now
does for the Southern Pacific Company.
ITS CONTRACT PRODUCED.
Q. Where is this contract with the Pacific Improvement Company? A. I think
I have it. At any rate it is entered in full on the minutes. Recently I have
adopted the plan of entering everything in full on the minutes.
Commissioner ANDERSON. Please see if you can produce the contract.
(The witness produced the contract between the Central Pacific Railroad Company
and the Pacific Improvement Company, dated October 11, 1886. It is marked Exhibit
No. 2, July 25, 1887," and is as follows :)
CONTRACT BETWEEN THE CENTRAL PACIFIC RAILROAD COMPANY AND THE PACIFIC IMPROVEMENT
COMPANY.
This agreement, made and entered into on the eleventh day of October, 1886,
between the Central Pacific Railroad Company, party of the first part, the
Pacific Improvement Company, party of the second part, and the Southern Pacific
Company, party of the third part, witnesseth :
That whereas the Central Pacific Railroad Company is the successor in interest
of the California and Oregon Railroad Company, mentioned in the act of Congress
of July 25th, 1886, entitled "An act granting lands to aid in the construction
of a railroad and telegraph line from the Central Pacific Railroad, in California,
to Portland, in Oregon ;" and
Whereas the said Central Pacific Railroad Company has constructed a portion
of the line contemplated by said act of Congress, to wit, that portion between
Roseville Junction, on the Central Pacific Railroad, and the town of Delta
; and
Whereas about one hundred and four miles of the line between Roseville Junction
and the southern boundary line of Oregon, as contemplated in said act of Corigress,
has not been constructed ; and
Whereas the Oregon and. California Railroad Company, charged by said act of
Congress with the construction of that portion of the said lino of railroad
between Portland, in Oregon, and the northern boundary line of California,
has been in an embarrassed condition and has been unable to complete its road
to said boundary line; and
Whereas until the whole of said line is completed, making a through connection
between Portland, in Oregon, and the city of San Francisco, in California,
no part of said line can be advantageously or profitably operated, nor the
act of Congress in relation thereto be carried into effect according to the
spirit and intent thereof, to wit, the construction and maintenance of a continuous
railroad between the said cities, which the Government of the United States
may use for the transportation of its
EDWA&D H. MILLE&, JK. 2355
property, troops, and munitions of war when necessary, and to aid in the construction
of which it has granted quantities of the public lands ; and
Whereas the completion by the said Central Pacific Railroad Company of its
own road to the southern boundary line of Oregon without assurance of the completion
of that portion of the road from Portland to said boundary line would be a
waste of money, the road having to be constructed through a rugged and mountainous
country at great expense and without sustaining local traffic ; and
Whereas it is of the greatest importance to the Central Pacific Eailroad Company
that it should have an opening into Oregon, both for local traffic and the
through business of the two cities, and also to furnish business for its entire
line from Ogden:
Now, therefore, for tho purpose of completing its said road, and of securing
the completion of the road between the California State line and Portland,
Oreg., thus making a through line between said cities of Portland and San Francisco
and a connection with the Union Pacific Railroad at Ogden, and in order to
secure the business of the northern portion of the State of California and
as much as possible of the business of the State of Oregon, and to bring such
business to its line from Ogden, and for the purpose and with the intent of
carrying into effect the provisions of said act of Congress, the said Central
Pacific Railroad Company hereby convenants and agrees with the said Pacific
Improvement Company
First. That the said Pacific Improvement Company shall, in a good workmanlike
manner, construct, finish, furnish, and complete the railroad and telegraph
lino of the said Central Pacific Railroad Company, commencing at a point near
the said town of Delta and running thence in a general northerly direction
by the most practicable route to a point on the southern boundary line of Oregon,
there to connect with the road of the said Oregon and California Company, a
distance of 104 miles, as near as may be, together with the rolling-stock,
buildings, instruments, and fixtures thereof; that is to say, to construct,
finish, and complete all the clearing, grading, excavations, embankments, ditches,
drains, masonry, culverts, bridges, trestling, and necessary fencing, and furnish
all the ties, timber, rails, all the chairs, fish-plates, spikes, frogs, and
switches, lay and complete all the main line of track and all the side-tracks,
spur-tracks, and turnouts necessary, usual, and proper for a single-track railroad;
also all necessary and proper buildirgs and erections for stations, freight
and passenger depots, water-tanks, turn-tables, engine-houses, section-houses,
work and repair shops, with all the tools, furniture, and implements necessary
and proper therefor; also to furnish and place on said railroad all necessary
and proper rolling stock, instruments, and equipments, including locomotives,
passenger, box, freight, baggage, platform, dump, and hand cars for the proper
and successful working and repairing of said railroad and telegraph line, said
rolling-stock to be furnished and delivered as the same may be required by
the said Central Pacific Railroad Company, not to. exceed the following quantity
and proportion, namely: One locomotive for every eight miles of road constracted
under the contract ; one passenger car for every five miles of road ; three
box and flat cars for every mile of road, the proportion of each to be determined
by the said Central Pacific Railroad Company ; one hand car for every six miles
of road ; such number of dump cars as may be required for maintaining the line;
said railroad to be constructed and completed to a point at or near the Klamath
River within twelve months from the date hereof, and to the southern boundary
line of Oregon as soon as the said Oregon and California Railroad is completed
to said line.
Second. That the said Pacific Improvement Company shall furnish and pay for
all the engineer service necessary or requisite for the location and construction
of said railroad and its appurtenances, &uch location and construction
to be subject to the approval of the president or chief engineer of said Central
Pacific Railroad Company, who may direct such changes to be made as they may
deem proper, but the salary of the chief engineer shall be paid by said Central
Pacific Railroad Company.
Third. That the said Pacific Improvement Company will pay all the costs, damages,
and other expenses incurred in obtaining right of way for the construction
of said road, and to that end the Central Pacific Railroad Company agrees that
it may use the name of the said company in any legal steps found necessary
to be taken in securing such right of way.
Fourth. That the said Pacific Improvement Company will, within a reasonable
time and as soon as it can be done to the best advantage, purchase, obtain
possession and control of the said Oregon and California Railroad, or that
it will, within a reasonable time, purchase the whole of or a majority of the
shares of the capital stock of said Oregon and California Railroad Company,
and in either event will within a reasonable time complete or cause to be completed
the said Oregon and California Railroad to a connection with the Central Pacific
Railroad at a point on the boundary line between California and Oregon, and,
as the case may be, will enter into, or will cause the said Oregon and California
Railroad Company to enter into, a contract perpetual with the said Central
Pacific Railroad Company, its successors or assigns, that the said Oregon and
California Railroad shall be operated in harmony with the said
2356 U. S. PACIFIC RAILWAY COMMISSION.
Central Pacific Railroad, prorating for services and covenanting therein never
to give to any other railroad company any better terms for through traffic
and for the interchange of business than it gives to the Central Pacific
Railroad Company, its successors or assigns.
Fifth. That the said Pacific Improvement Company shall and will repay to the
said Central Pacific Railroad Company, within one hundred and twenty days from
the date hereof, all sums of money, with interest thereon at the rate of 6
per cent, per annum, heretofore by the said railroad company expended upon
that portion of its aforesaid line of railroad and telegraph line lying north
of Delta, and that if said railroad company has not fully paid all the costs
and expenses incurred as aforesaid, the said improvement company will assume
the whole thereof, and will, upon demand, pay oif and discharge the same ;
or that if the said railroad company is compelled to pay the same or any part
thereof, then the said improvement company will, within one hundred and twenty
days after notice thereof, pay to the said railroad company the full amount
of any such payments, with interest at the rate aforesaid.
And the said Southern Pacific Company, lessee of the said Central Pacific Railroad
Company, hereby covenants and agrees with the other parties to this contract
that, in consideration of the advantages to be derived by it from the bringing
of business to the main lines of the Central Pacific Railroad, it will, when
said through line is completed, finished, and ready for operation, enter into
an agreement in writing with the said Central Pacific Railroad Company whereby
it shall lease from said company that portion of said line between Roseville
Junction and the State line not now included within its lease, and will increase
the consideration of twelve hundred thousand dollars, guaranteed rental mentioned
in the existing lease, as much in proportion as 80,000 shares of the capital
stock of said Central Pacific road shall bear to the whole amount of capital
stock of said company now issued, and will also increase the limit of the maximum
rental of thirty-six hundred thousand dollars therein provided for in like-proportion
; and that it will transport and convey, free of charge, over the lines operated
by it in California, north of San Francisco, all agents, laborers, and employe's,
and all provisions, tools, iron, and other materials, and all other property
employed or used, or to be employed or used, in and about the construction
of said railroad and telegraph line and their appurtenances by or for said
Pacific Improvement Company.
And the said Central Pacific Railroad Company hereby covenants and agrees to
and with the said Pacific Improvement Company that, in consideration of the
premises and of the faithful performance of the covenants herein contained
to be kept, observed, and performed by said Pacific Improvement Company, it
will, upon the execution of this agreement, issue and deliver to said company
eighty thousand shares of its capital stock, and in addition thereto it will
pay to said Pacific Improvement Company four million five hundred thousand
dollars in mortgage bonds, as follows : When one-half of the work on said road
between Delta and the Oregon line is completed, it will pay and deliver to
said Pacific Improvement Company all of its first-mortgage bonds now unissued,
part of an issue by it heretofore provided for, to be used toward the construction
of its railroad between Roseville Junction and said Oregon line, and that it
will pay to said Pacific Improvement Company the balance of said four million
five hundred thousand dollars of bonds, in its mortgage bonds, part of an issue
by it provided for in an indenture of mortgage by it made to William E. Brown
and Frank S. Douty, bearing date October 1, 1886, and that it will make said
last-mentioned payment as the work on said road progresses, and as sections
of not less than ten miles between Delta and the Oregon State line are completed,
and in the proportion which the completed section shall bear to the whole length
of the road between the points last aforesaid :
In testimony whereof the parties hereunto have caused these presents to be
signed by their respective presidents and secretaries and their corporate seals
to be hereunto affixed. Done in triplicate the day and year first herein written.
LELAND STANFORD, President of the Central Pacific Railroad Company.
[SEAL.] E. H. MILLER, JR.,
Secretary of the Central Pacific Eailroad Company.
LELAND STANFORD, President of the Southern Pacific Company.
[SEAL.] E. H. MILLER, JR.,
Secretary of the Southern Pacific Company.
J. H. STROBRIDGE, President of the Pacific Improvement Company.
[SEAL.] F. S. DOUTY,
Secretary of the Pacific Improvement Company.
(Indorsed on back :) Executed copy agreement between Central Pacific, Pacific
Improvement Company, and Southern Pacific Company. Pacific Improvement Company
to finish construction of California and Oregon Extension. October 11, 1886.
"
Exhibit No. 2, July 25, 1887."
EDWARD H. MILLER, JR. 2357
The WITNESS. I can furnish you with the printed copy of that, certified, if
you wish it.
By Commissioner ANDERSON :
Q. We were so rejoiced to get hold of a copy of any paper that we thought we
would have it copied. Haveyou enumerated all the construction contracts that
you recall? A. Yes, sir.
Q. They, then, represent substantially all the contracts under which the aided
portion of the Central Pacific was constructed? A. Yes, sir ; more than that.
Commissioner ANDERSON. That is, the Crocker contract, the Contract and Finance
Company contract, the Western Development Company contract, and the Pacific
Improvement Company contract.
The WITNESS. Yes, sir.
Commissioner LITTLER. As I understand, the contract you found was a subcontract
between Crocker and somebody else, who built a few miles of the road.
The WITNESS. No, sir ; you are referring now to one of the original contracts'?
Commissioner LITTLER. Yes.
The WITNESS. I found one of the original contracts for 2 miles.
By Commissioner LITTLER : Q. Where is that? A. I think Mr. Stevens has it.
I will send forit.
REPORTS MADE BY STANFORD, HUNTINGTON, HOPKINS, AND CROCKER.
By Commissioner ANDERSON :
Q. Were Mr. Huntington, Governor Stanford, Mr. Crocker, and Mr. Hopkins in
the ha,bit of making reports to the company, from time to time, of the transactions
effected by them in their respective departments? A. I do not think Mr. Hopkins
ever made a report. Yes, sir; he did, too, as treasurer ; yes, sir ; they all
did.
Q. Where are those reports? A. I have them, I think.
Q. How frequently were they made? A. Mr. Huntington's were made in the form
of a statement of accounts practically monthly.
Q. Have you all of these in your possession? A. Yes, sir.
Q. Will you please produce them at the convenience of the Commission? A. Yes,
sir ; I will do so. I beg to say that Mr. Stevens is using them right along,
however.
Q. Mr. Stevens has access to them? A. He has as he calls for them.
Q. Do you mean to say^that Mr. Huntington has made monthly reports always?
A. Practically, monthly, yes, sir, except for the very first year or two.
Q. In the shape of statements of accounts? A. Since 1865, as statement of
accounts, monthly.
Q. What subject did Governor Stanford report on? A. Governor Stanford did
not make any report or statement of account. Governor Stanford's habit was,
when he was in San Francisco, to draw his checks for anything and everything
from his private account at the bank. When at Sacramento he handed me his check
book, and from that I made up a statement of account, which I call his report.
Q. Explaining the application of these moneys? A. Yes, sir.
Q. What was the subject of Mr. Crocker's reports? A. I do not remember that
Mr. Crocker ever made a report.
Q. What was the subject of Mr. Hopkins's reports? A. The business of the treasurer.
2358 U. S. PACIFIC RAILWAY COMMISSION
PUECHASE OF SAN FRANCISCO AND SACRAMENTO STEAMERS.
Q. Do you recollect the fact that the Central Pacific made a purchase of the
steamers plying between San Francisco and Sacramento, I think it was?- A.
Yes, sir.
Q. Was that purchase made by a contract? A. No, sir ; I do not think it was.
Q. How was it effected? A. I think the negotiation was carried on by Governor
Stanford.
Q. And Mr. Huntington? A. I do not think Mr. Huntington was here at the time,
but I presume he knew all about it, and was a part of it, probably, but I do
not think there was any written contract.
Q. Do you know how the price was negotiated? A. No, sir ; I do not.
Q. Do you know whether Mr. Stanford and Mr. Huntington were interested in those
steamers before the Central Pacific acquired them? A. I have never understood
that they were.
OWNED BY THE CALIFORNIA PACIFIC.
Q. Do you know whether they w^ere interested I mean Mr. Huntington and Governor
Stanford in the stock of the corporation which owned these steamers'? That
was the California Pacific Eailroad Company, I think. A. Yes, sir ; I believe
so.
Q. The California Pacific, it was called? A. Yes, sir.
Q. They were stockholders? A. m Yes, sir.
THE MINUTES WILL SHOW THE PRICE PAID.
Q. Do the minutes of this company show how the price to be paid for these steamers
was determined?
The WITNESS. The minutes of the Central Pacific?
Commissioner ANDERSON. Yes.
The WITNESS. Is that Mr. Huntington's testimony.
Commissioner ANDERSON. Yes $ Mr. Huntington's testimony.
The WITNESS. The minutes may show that. The minutes possibly show the price
that was to be paid ; bat how that price was determined is more than I think
is in the minutes.
Q. Could it be determined in any way except by a vote of the directors?
The WITNESS. I beg pardon ; I had an idea that you meant how the actual amount
to be paid was determined the negotiations.
Commissioner ANDERSON. That is tf hat I mean. Whether they were to pay $1,000,000
or $2,000,000 or $100,000? A. Yes, sir. I misapprehended the question.
Q. What is your answer? A. Yes, sir. The minutes of the books will show it.
The books of the company show the amount they paid.
Q. Do you know who was present and voted as to whether the price should be
approved or not? A. !Nb, sir; I do not remember that.
Q. Do you know whether Mr. Huntingtou voted in favor of paying the price?
A. I do not remember.
Q. Or whether Governor Stanford did? A. I do not remember. It is easily ascertained.
Q. The minutes will show? A. Yes, sir. That is, if it appears, the minutes
would show it.
Q. Do you know the price that was paid? A. No, sir ; I do not remember exactly.
EDWARD H. MILLER, JR. 2359
PURCHASES OF OFFICERS SUBSEQUENTLY RATIFIED BY BOARD.
Q. Do you know whether the officers of the Central Pacific were in the habit
of making such purchases without any vote of the board of directors, and of
their own motion? A. I think they frequently made purchases to that extent,
which were ratified by the board of directors afterward, or assumed to be ratified.
Q. Of properties where they were stockholders in the selling company? A. No.
Commissioner ANDERSON. That is this case.
The WITNESS. Yes, sir ; that is this case ; but I did not gather that from
the form of your question. For instance, Mr. Huntington purchases and has purchased
from time to time large amounts of iron without any action of the board of
directors.
Q. And procured its ratification subsequently? A. No, sir; nevei procured any
ratification.
Q. Simply did -the business of his own accord? A. Yes, sir.
Q. To very large amounts? A. Very large amounts.
HUNTINGDON HAD FULL POWERS OF ATTORNEY.
Q. Who would then fix the price at which the iron was to be sold or paid for?
A. Mr. Huntiugton, I will add to that, however, that Mr. Huntington had full
power of attorney.
Q. From whom? A. From the company.
Q. Approved by the board? A. Yes, sir ; adopted by the board.
By the CHAIRMAN :
Q. Did the company keep a copy of the power of attorney? A. Yes, 'r.
Q. Have you a copy of it? A. It is entered in the minutes. I presume I have
a copy. I have the original, I presume. I have no doubt I have. Q. Will you
produce the original? A. Yes, sir.
BOOKS KEPT BY THE CENTRAL PACIFIC.
Commissioner ANDERSON. Please describe in general the set of books which are
now kept by the Central Pacific Company.
The WITNESS. You only mean the general books, of course ; not the operative
detail books.
Commissioner ANDERSON. Yes.
The WITNESS. They are the cash book, in the treasurer's office ; a journal
and ledger, in the secretary's office; and the minute book of the company.
The stock journal, the transfer book and ledger.
Q. Are they all kept under your supervision? A. Yes, sir.
Q. How many clerks do you employ under you? A. in that immediate department
there are seven. They are not employed now by the Central Pacific. There is
only one in employ of the Central Pacific.
Q. You have not named all the books, have you? A. I have named
sir.
the general books.
GENERAL AUDITOR'S BOOKS .
Commissioner ANDERSON. I^ow, in regard to the books relating to the operation of the road, the receipts for freight and passengers? The WITNESS. They are kept in the general auditor's office. Q. What is the general auditor's name ? A. E. C. Wright.
2360 U. S. PACIFIC RAILWAY COMMISSION.
Q. Where are his books? A. They are now in room No. 1 of this building.
Q. What books does he keep, describing them generally? A. He keeps a day-book
and ledger and distribution book. That is about all the regular books that
are kept.
FREIGHT AUDITOR'S BOOKS.
Q. Does he keep all the operating accounts, both the receipts from freight
and passengers, and of operating expenses'? A. No, sir.
Q. Who keeps those? A. Those books are kept for the freight department by C.
J. Wilder, the freight auditor, and for the passenger department they are kept
by A. G. W. McOullough.
Q. Where are these gentlemen? A. They are here in this building.
Q. Take the freight department first. Is C. J. Wilder your freight auditor
? A. Freight auditor.
Q. Does he keep all the accounts of the Central Pacific receipts for freight?
A. Yes, sir.
Q. The form of the business, as I now understand it, is that the Central Pacific
is leased to the Southern Pacific for the rent of its road, for the actual
receipts 1 A. Yes, sir.
Q. That is the amount they pay? A. Well, a guaranty.
Q. Therefore the auditor keeps an account of the business done on the Central
Pacific, just as he did before the lease? A. Yes, sir ; they are kept in just
the same way.
Q. Does Mr. Wright receive reports from all your freight agents at different
stations along your road? A. No, sir.
Q. How does he get his receipts? A. Mr. Wilder receives reports from all the
freight agents on the road.
REBATE AND REFUND BOOKS.
Q. Do you know whether Mr. Wilder keeps rebate books or refund books? A. No,
sir ; they are not in his charge.
Q. In whose charge is that subject? A. That is kept by the general freight
agent.
Q. What is his name? A. His name is Richard Gray.
Q, Is he also in this building? A. Yes, sir.
Q. And has he a book of the description I have mentioned, of refunds or rebates?
A. I do not know whether he has such a book or not, because those rebates are
paid and go into the general auditor's office, Mr. Wright's office. Mr. Wright
mav have that book instead of Mr. Gray.
Q. They are paid on regular vouchers or receipts? A. Yes, sir.
Q. Who has the custody of those vouchers? A. Mr. Wright, the general auditor.
Q. Has Mr. Wright the general control of the whole subject as to whether rebates
shall be allowed, and how much? A. He has no control whatever.
Q. Who has control of that subject? A. Mr. Stubbs, the general traffic manager,
and Mr. Gray^ the freight agent.
THE DISTRIBUTION BOOK.
Q. Is Mr. Stubbs also in this building? A. Yes, sir. Q. Do you keep a register
called the expense-voucher register? A. No -, no register called expense-voucher
register, but there may be such
EDWARD H. MILLER, JR. 2361
a book kept in the general freight office. It will appear on the distribution
book in the general auditor's office, under the head of " expense account," which
I can explain.
Commissioner ANDERSON. Explain it.
The WITNESS. We have a very large book which we call the " distribution
book." Every item paid that goes into the account of the auditor is entered
under name, with the total amount. Then, if it is an expense, a portion of
it, it is entered in the column of expense. If the voucher contains two or
three items they are distributed along through the book under the various headings
to which they belong. Instead of keeping several books we keep one of that
kind.
By Commissioner LITTLER :
Q. Were all those books prescribed by you as secretarv of the company? A. Yes,
sir 5 practically.
Q. Are they all made up and approved by you, and under your direction? A.
The blank books are. The voucher comes to me as auditor of accounts and I allow
it ; then it goes to the general auditor to be entered on his books. When it
is so entered it comes to the paymaster to be paid, and the paymaster returns
it to the general auditor, so that he can get credit for that amount of money.
REBATES ON VOUCHERS SEPARATE AND DISTINCT.
i
By Commissioner ANDERSON :
Q. Is the refund or rebate made out on a voucher separately by itself and without
any necessity for following it in the distribution book? Can we recognize
rebates simply from the voucher, or is the account mixed up with other payments
? A. No, sir ; the rebates will appear on a voucher separate and distinct from
anything else.
Q. Is there a separate book also? A. No, sir ; I think not. There may be a
separate book kept in the general freight office.
Commissioner ANDERSON. We have the names and we will find them. What we desire
to see is a statement of the course pursued by this company in allowing rebates
or refunds to any of the persons with whom the company has dealt, and we will
ask you to produce the book which will most readily give us that information.
The WITNESS. The distribution book will ; you can have it.
RECEIPTS AND PAYMENTS OF POOL CONTRACTS.
Q. In what books do the receipts of the Central Pacific Kail way Company and
the payment by it on pool contracts appear? A. They all appear on the auditor's
books.
Q. How many pool contracts had this company prior to the act of last April,
or, rather, of how many pools was it a member 1
The WITNESS. Just at that time, or altogether? There were various pools from
time to time.
Commissioner ANDERSON. Tell us of the various pools.
The WITNESS. I cannot do that. I do not know. There were several, but I cannot
give them all.
Q. Have you the pool contracts $ A. No, sir ; I do not think I have all of
them. I think some of them are in the general freight office.
Commissioner ANDERSON. Tell me what pool contracts you remem ber.
2362 u. s; PACIFIC RAILWAY COMMISSION.
THE TRANSCONTINENTAL POOL.
The WITNESS. There is one that we call the Gould-Huutington contract.
Commissioner ANDERSON. The Gould-Huntington pool?
The WITNESS. Yes, sir. There was a contract with the Pacific I do not know
the name of it the Pacific Coast Steamship Company, I think.
Commissioner ANDERSON. The transcontinental pool?
The WITNESS. Yes, sir ; there is one called the transcontinental pool. But
I am not familiar with those pools.
Q. Who is familiar wit-h them? A. The general freight agent and the general
traffic manager.
Q. Mr. Wilder? A. No; Mr. Stubbs and Mr. Gray.
Q. Are those pool contracts in your possession? A. I think I have one, or
perhaps all. I do not think I have, though.
LAND-ACCOUNT BOOKS.
Q. We will ask you to look for them. Who keeps your land accounts? A. William
H. Mills is the land agent.
By Commissioner LITTLER : Q. Does he keep the books? A. They are kept under
his charge.
By Commissioner ANDERSON:
Q. Where is his office? A. I forget the number of the room. Q. It is in this
building? A. Yes, sir.
Q. Do you know anything of the number of books kept by him, and what books
they are? A. Yes, sir.
Q. What books does he keep? A. I cannot give you the details of just what
he does keep.
Q. You refer us to him for all the books relating to land? A. Yes, sir.
LAND-GRANT MORTGAGES.
Q. Who is the trustee of your land-grant mortgage?
The WITNESS. At present?
Commissioner ANDERSON. Yes.
A. William E. Brown and J. O? B. Gunu.
Q. Where is Mr. Gunn? A. He is in San Francisco.
Q. How many land-grant mortgages has your company made? A. Two.
Q. Have you copies of those mortgages? A. Yes, sir, We liave printed copies,
I think.
Q. Can you furnish us with a complete printed copy of ail the mortgages made
by this company? A. Yes, sir. I can have them printed by type- writer. Possibly
I may have them all.
Commissioner LITTLER. We supposed.you had them already.
The WITNESS. I think I have, but if I have not I can furnish them.
By the CHAIRMAN :
Q. Have you named all the books kept by the company in the accounting department
? A. No, sir.
AUDITOR OF MOTIVE POWER AND MACHINERY.
By Commissioner ANDERSON :
Q. Please tell what you have omitted? A, There is an auditor of motive power
and machinery.
EDWARD H. MILLER, JR. 2363
Q. What is his name? A. His name is C. fl. Foster. Q. He keeps the statistics
relating to motive power and machinery $ A. Yes, sir.
By Commissioner LITTLER : Q. Does that department include fuel? A. Yes, sir.
THE TREASURER'S BOOKS.
By Commissioner ANDERSON :
Q. What other books are there, if any? A. I mentioned the treasurer's office.
Those books are a part of the general books. They keep simply a cash-book.
Commissioner ANDERSON. You mentioned that at the beginning.
The WITNESS. I think I mentioned that. I do not think of any others; that is,
any other general books. Of course the agents at each shop have a set of books
kept. They all come here for final collation.
LEASED LINES.
Q. Now in regard to leases : What companies have the Central Pacific Eailroad
Company operated under lease 9 A. The Stockton and Copperopolis, the California
Pacific, the Northern Railway, the San Pablo and Tulare, the Southern Pacific
of California, Southern Pacific of Arizona, Southern Pacific of New Mexico,
the Los Angeles and Independence, the Los Angeles and San Diego, and the Amador
branch.
Q. Up to what period were those roads leased to the Central Pacific? A. The
leases of all except the Stockton and Copperopolis were transferred to the
Southern Pacific Company in October, 1886. I may be mistaken as to the month,
but it was about that no, they were not transferred, but those leases were
canceled.
Q. When? A. In October, 1886.
Q. Have you those leases? A. Yes,sir.
Q. Will you plesse hunt them up and produce them to the Commission? A. Yes,
sir ; that is, the leases of the roads that were leased to the Central Pacific.
LEASE OF CENTRAL BY SOUTHERN PACIFIC.
Q. Yes. When was the Central Pacific leased to the Southern Pacific? A. The
date of the lease was in February, 1885, to take effect April 1 9 1885.
Q. Will you furnish a copy of that lease 1 A. Yes, sir.
(The lease will be found in the testimony of E. H. Miller, jr., given on August
16, 1887.)
CIRCULAR LETTER OF COMMISSION.
Q. Have you a copy of the circular letter issued by this Commission to this
company? A. Yes, sir.
Q. Have you prepared answers to the questions contained in that letter? A.
Yes, sir ; I have prepared some. You mean the letter addressed to Governor
Stanford?
Commissioner ANDERSON. Yes.
The WITNESS. I have prepared answers to such as Governor Stanford referred
to me, but the answers are not complete. They are now in the hands of the type-
writers, to be printed.
Q. Have you received another circular letter calling for answers to various
other matters? A. I have not got it here, but what you call p R VOL in 3
2364 U. S. PACIFIC RAILWAY COMMISSION.
the circular was a letter addressed by the Commission to President Stanford.
Commissioner LITTLER. I call that a letter directed to the company, and not
a circular letter.
The WITNESS. Yes, sir ; that is so.
Q. Was that the one you refer to? A. Yes, sir.
Q. You received another letter? A. Yes. sir.
Q. Have you prepared answers to that? A. I have not, assuming that the letter
to Governor Stanford would take the place of the circular. They covered the
same ground, as far as I understand it. This is the one I referred to [producing
the printed circular letter of the Commission for public circulation]. This
is practially a copy of the letter sent to Governor Stanford. The previous
one, I think, covered only ten or eleven questions.
CONSTRUCTIVE MILEAGE ACCOUNT.
By the CHAIRMAN :
Q. Have you a constructive mileage account? A. Yes, sir ; your accountants
are making it out. We had a constructive mileage account only from 1880 to
one or two months in 1883.
MINUTE-BOOKS OF BOARD OF DIRECTORS.
By Commissioner ANDERSON :
Q. Where are your books of minutes of the board of directors? A. They are
in my office.
Q. How many books are there? A. I think there are four.
Q. Will you inquire of the president of the company whether there is any objection
to our having them moved to the hotel for convenient ex. amination there this
afternoon? A. I will.
NO MINUTES KEPT BY EXECUTIVE COMMITTEE.
Q. Are there minutes of the meetings of the executive committee !
By Commissioner LITTLER :
Q. Are they kept in a regular book of minutes? A. No, sir. Q. Have you a different
book of minutes of the executive committee?-^-A. No, sir ; the executive committee
never kept any minutes.
By the CHAIRMAN :
Q. How did they report to the general board? A. They did not report.
Q. How often did they meet? A. Occasionally.
Q. How occasionally ; once in three or six months? A. I do not know.
PERSONNEL OF EXECUTIVE COMMITTEE.
By Commissioner ANDERSON :
Q. Who composed the executive committee? A. Charles F. Crocker, Timothy Hopkins,
and S. T. Gage.
Commissioner ANDERSON. I do not remember Mr. Ga^e as being a director.
The WITNESS. Yes, sir.
EDWARD H. MILLER, JR. 2365
INFORMAL VERBAL REPORTS TO BOARD OF DIRECTORS.
By the CHAIRMAN :
Q. How do the board of directors get information as to the work of the executive
committee? A. I am sure 1 do not know that they got any information from the
executive committee, except as the individuals of the executive committee at
the meeting of the board stated.
Q. Who was chairman of the executive committee? A. I do not think they ever
organized.
Q. Were you present at the meeting of the board of directors when any individual
of the executive committee reported? A. Only as I state, when they reported
verbally.
Q. Did you take down the report as secretary? A. No, sir.
Q. Were you present when any action was ever taken on a report of the executive
committee? A. There never was a report made by the executive committee as
an executive committee.
METHOD OF ACTING ON SUCH REPORTS.
Q. Ware you present when any action was taken on a report of any individual
member of the executive committee? A. Yes, sir.
Q. How did the board act? A. Sometimes they adopted the action proposed by
the executive committee, or by the members of the executive committee, to be
adopted.
Q. How would the secretary of the board enter it upon the minutes? A. He would
enter it as the action of the board of directors.
Q. Would any intimation be given as to the report of an individual member of
the executive committee? A. No, sir.
Q. Then if they approved of the course of an individual member of the executive
committee, it would take the shape of a resolution of the board of directors,
would it? A. No, sir.
Q. How would it appear on the directors' minutes? A. The executive committee
would not appear at all. As a member of the board of directors one of them
would perhaps offer a resolution that certain things should be done in the
board, and it was either adopted or not.
Q. Then where the individual members of the executive committee appear in the
meetings of the board of directors as offering a resolution, and the board
approved of it, that is the result of the action of an individual member of
the executive committee approved by the board? A. No, sir ; I do not understand
that they appeared before the board as an executive committee at all, but they
appeared before the board as individual members of the board. If they, as members
of the board, offered a resolution, and if the board approved it, it is adopted.
But as an executive committee they never made any proposition to the board
of directors, or offered a resolution to be adopted.
Q. Did the board of directors ever act upon any action of the executive committee?
A. I think not; no, sir.
Q. Was there ever any action on the part of the executive committee? A. Not
to my knowledge.
OBJECT OF THE EXECUTIVE COMMITTEE.
Q. What was the use of the executive committee? A. I do not know, really.
Q. Had it any purpose? A. Yes, sir 5 I think it had this purpose, that those
three were to talk matters up and consult together, and then, if they agreed
upon a certain proposition, it would be presented to the
2366 U. S. PACIFIC EAILWAY COMMISSION.
board, not by the committee as an executive committee, but it would be presented*
to the board for its action.
Q. Would not that be the result of the executive committee, if they agreed
upon it? A. No, sir. They took no action. It was submitted entirely and always
to the board of directors for their action.
Q. Was it after consultation by the executive committee? A. I do not know
about that.
Q. I understood you to say that after consultation the executive committee,
reaching a point of agreement, then had one of the individual members report,
and then, if approved by the board of directors, it went upon the minutes.
Is that true? A. No, sir ; I did not intend to be understood in that way.
Q. Will you explain? A. You asked me what was the use of the executive committee,
and I explained it as well as I could, that they would perhaps get together
and consult among themselves on what action, if any, in certain matters ought
to be adopted by the company. When they came before the board of directors
they did not come at all as an executive committee. They came just as individual
members of the board of directors would come, and offered such a resolution.
It was done in open board. If it was adopted, all right. It was the action
of the board of directors, the executive committee having taken no action whatever
on it ; only, as I take it, every resolution offered before the board of directors
of any company is always considered by somebody before it is offered.
Q. What I want to know is, after having ascertained the views of a member of
the executive committee, and there having appeared on the minutes a resolution
with the approval of the board of directors, whether that was the course of
the executive committee as approved by the board of directors? A. No, sir
; it was not, in any case.
E. H. MILLEE, JR.
The Commission then adjourned to meet on Tuesday, July 26, 1887, at 10 a. m.
OFFICES OF THE CENTRAL PACIFIC EAILROAD COMPANY,
San Francisco, Cal, Tuesday, July 26, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
EDWAKD H. MILLEE, JR., being further examined, testified as follows :
The W JTNESS - I did not give you yesterday, by oversight, the index to the
minute books.
The CHAIRMAN. We would like to have that.
The WITNESS. It is a separate book, and I ought to have handed it to you, but
I overlooked it.
FURNISHING INFORMATION PREVIOUSLY CALLED FOR.
By Commissioner ANDERSON :
Question. Will you inform us what you have that we called for yesterday? Answer.
Ail the articles of consolidation. I have not had time to arrange them, but
they are in this pile.
Charles Crocker's whereabouts I do not know anything about.
EDWARD H. MILLER, JR. 2367
I have the list of directors at the time of the Crocker contract. I now furnish
a complete list of the directors from the organization to the present time,
as you will see. As to the members of Crocker & Co., I answered that
yesterday.
Commissioner ANDERSON. You said you did not know.
The WITNESS. I did not know. As to Crocker's contracts, 1 and 2, 1 answered
yesterday that they were missing. As to the contract with Collins & Bro.,
I believe that is here, but I am not certain, I have been in such a hurry to
get them up.
As to the contracts with the Contract and Finance Company and the Western Development
Company, I answered yesterday that they were missing.
The copy of contract with the Pacific Improvement Company the Commission had
yesterday.
Eeports of Messrs. Stanford, Huntington, and Hopkins are not all here; but
the reports of Mr. Stanford, so far as I have found them, and of Mr. Huntington
up to 1878, are here. Your accountants are using the reports for 1879.
The reports of Mr. Hopkins, as treasurer, are all here, that I can find.
The powers of attorney to C. P. Huntington are here.
The refund book has not come in.
I have here the distribution book and books showing pool payments and receipts,
which will appear also upon the distribution book.
All pool agreements and leases are here that I have ever had in my charge.
I believe copies of all mortgages are here.
Q. Including the one of February, 1886 ! A. Including the mortgage of February,
1886.
Commissioner ANDERSON. The mortgage that was given to secure the last $10,000,000
issue. I think that is the date.
The WITNESS. That is the mortgage October, 1886, I think. That is $16,000,000.
They are all here, I think.
The minutes the Commission have.
PRODUCTION OF PAPERS.
The withess produced the following papers : Articles of association, of amalgamation,
and consolidation between the Western Pacific Railroad Company and the San
Francisco Bay Eailroad Company, dated October 28, 1869.
(It was marked Exhibit No. 1, July 26, 1887.")
The resolution agreeing to consolidate between the California and Oregon Eailroad
Company and the Yuba Railroad Company, dated December 15, 1869.
(It was marked "Exhibit No. 2, July 26, 1887")
Articles of consolidation between the Central Pacific Railroad Company and
the Western Pacific Railroad Company, dated June 22, 1870.
(It was marked "Exhibit No. 3, July 26, 1887.")
Articles of consolidation between the San Francisco and Oakland Railroad Company
and the San Francisco and Alaineda Railroad Company, dated June 28, 1870.
(It was marked " Exhibit No. 4, July 26, 1887.")
Articles of consolidation between the Central Pacific Railroad Company, the
California and Oregon Railroad Company, the San Francisco, Oakland and Alameda
Railroad Company, and the Joaquin Valley Railroad Company, dated August 20,
1870.
(It was marked "Exhibit No. 5, July 26, 1887.")
2368 U. S. PACIFIC RAILWAY COMMISSION.
ORGANIZATION OF CENTRAL PACIFIC.
Commissioner ANDERSON. It appears from the first article of Exhibit 5 of to-day
that the four companies mentioned in the last-named articles of consolidation
became known by the corporate title of the Central Pacific Railroad Company.
By Commissioner LITTLER :
Q. Was the first corporation, the Central Pacific Railroad Company, organized
under the statute of the State of California? A. Yes, sir.
Q. Under a special act? A. I think not.
Q. Was it under the general law? A. I think it was under the general law.
Q. Where is the certificate of incorporation of that company? A. I think I
have it.
By Commissioner ANDERSON:
Q. That is filed here in your county clerk's office, and you have a certified
eopy^ A. Yes, sir; filed in the office of the secretary of state, I think.
ARTICLES OF INCORPORATION RECORDED IN MINUTE-BOOK.
By Commissioner LITTLER :
Q. Have you not in your minutes the record of the proceedings by which you
became a corporation? A. I think the articles of incorporation are in there.
Q. In this first book of minutes? A. I think so. I think they are copied in
there, but I am not sure of that. But I have a copy of it if it is not here.
[After examination.] No, sir ; I am mistaken.
Commissioner LITTLER. I wish you would furnish the date of the certificate
of organization of the Central Pacific Company?
The WITNESS. I can get it now.
MORTGAGE OF JULY 5, 1865.
(The witness also produced a mortgage dated July 5, 1865, of the Central Pacific
Railroad Company, of California, to D. O. Mills and William E. Barron, trustees.
It was marked " Exhibit No. 6, Julv 26,
1887.")
By Commissioner ANDERSON :
Q. What was the amount of that mortgage of 1865? What was the authorized issue?
A. Series A, 3,000 bonds ; series B, 1,000 bonds.
By Commissioner LITTLER :
Q. What is the denomination? A. $1,000 each. Series C, 1,000 bonds. Series
D to be of bonds for? 1,000 each, and to include the remainder of said bonds
authorized to be issued on said portion of said railroad line.
Q. How long do these bonds run, respectively, and what are they payable in,
and how much interest do they pay per annum? A. They were 6 per cent, thirty-year
bonds.
Q. Each and all of them? A. Yes, sir.
Q. What are they payable in, principal as well as interest? A. In lawful money
of the United States.
EDWARD H. MILLER, JR. 2369
AMOUNT OF BONDS OUTSTANDING.
By Commissioner ANDERSON:
Q. What is the amount now outstanding? A. The report of 1885 will tell. The
amount of bonds to be issued was not definitely fixed by the mortgage.
Q. But it was to be equal to the amount of Government bonds? A. Yes, sir.
By Commissioner LITTLER :
Q. Were all the bonds issued that were authorized by that mortgage? A. Yes,
sir.
Q, Are they all outstanding? A. No, sir. The amount outstanding of Series A
is $2,995,000; of Series B, $1,000,000: of Series C, $1,000,000; of Series
D, $1,383,000.
By Commissioner ANDERSON :
Q. Making a total of how much? A. Six million three hundred and seventy-eight
thousand dollars.
ANTICIPATED TERMS OF RENEWAL AT MATURITY.
Q. Those mature in 1895? A. They mature at different dates ; they were issued
at different dates.
Q. Between what years do they mature? A. Series A matures July 1, 1895 ; Series
B, C, and D mature July 1, 1896.
Q. From your knowledge of the financial markets, at what rate of interest can
that mortgage be renewed when it matures? A. It depends entirely upon the
security.
Q. It is absolutely the first lien on your road, is it not? A. It is now.
Q. Assuming that it so remains, what is your answer? A. I think 3 J ; they
would sell at par ; possibly at 3 per cent.
HOW SECURED.
By Commissioner LITTLER:
Q. How many miles of road stand as security for that indebtedness? A. About
125, 1 think.
Commissioner LITTLER. I wish you would give the number of miles.
The WITNESS. It is estimated here at 125 miles ; I cannot give it to you exactly.
(The witness also produced a mortgage of the Central Pacific Bailroad Company
of California to D. O. Mills and William E. Barron, trustees, dated January
1, 1867. It was marked " Exhibit No. 7, July 26, lbS7.)
MORTGAGE OF JANUARY 1, 1867.
By Commissioner ANDERSON :
Q. Please tell us the amount of that mortgage, and the rate of interest and
other particulars? A. There was, by the mortgage, no special number authorized
; but they were to cover the railroad line lying eastwardly of the eastern
boundary line of the State of California, and to the extent and distance that
the company might construct the said railroad eastwardly of said eastern boundary
liae.
Q. Is the amount per mile specified? A. I do not think it is in dollars and
cents. It was to be to an amount equal to, but not exceeding,
2370 U. S. PACIFIC RAILWAY COMMISSION.
the amount of United States bonds which might be issued to said company under
and in pursuance of said several acts of Congress heretofore mentioned, and
such acts of Congress as might thereafter be enacted.
BONDS ISSUED UNDER IT.
Q. That is sufficient. Please state from the report the amount of bonds issued
under that mortgage and the amount outstanding. A. Series E, amount authorized,
$4,000,000 ; amount outstanding,$3,997,000 ; due January 1, 1897.
Series F, amount authorized, $4,000,000 ; amount outstanding, $3,999,000 ;
due January 1, 1898.
Series G, $4,000,000 authorized; $3,999,000 outstanding ; due January 1, 1898.
Series H, $4,000,000 authorized; amount outstanding, $3,999,000; due January
1, 1898.
Series I, amount authorized, $3,525,000 ; amount outstanding, $3,511,000; due
January 3, 1898.
Commissioner ANDERSON. I notice you are giving these figures from the report
of 1885?
The WITNESS. Yes, sir.
Q. Has the report of 1886 not yet been printed? A. No, sir; it is in the hands
of the printer.
Q. Can you have it very shortly? A. I think we will have it within a few days.
Q. What is the total amount outstanding of these mortgages? A. $19,505,000.
ANTICIPATED TERMS OF RENEWAL AT MATURITY.
Q. Is this mortgage also an absolute first lien on that part of the road east
of California and extending to Ogden? A. That is as I understand it.
Q. At what rate could that loan be renewed in 1898, when it matures? A. On
the same terms with the other one. Of course the time of the bonds would make
a difference.
Q. How do you mean? A. The time for which the bonds were issued. If they were
30-year bonds they would not sell for as much as they would if they were 50
-year bonds.
NO DEFAULT IN PAYMENT OF INTEREST.
By Commissioner LITTLER :
Q. Has there been any default in the payment of the interest on these series
of bonds? A. No, sir.
Q. Is the interest all paid to date? A. All that has been presented. There
are a few coupons always that do not come in at the time.
By Commissioner ANDERSON :
Q. They sell for about $113, do they not? A. I do not know.
(The witness also produced a trust mortgage, dated January 1, 1868, of the
California and Oregon Eailroad Company of California, to David S. Dodge and
Eugene Kelley, trustees. It was marked " Exhibit No. 8, July 26, 1887.")
MORTGAGE OF JANUARY 1, 1868.
Q. Please look at this mortgage and state the amount of bonds authorized, the
amount issued, the nature of the security, the period when
EDWARD H. MILLER, JR. 2371
due, and the rate of interest? A. This is a mortgage made by the California
and Oregon Eailroad Company. The amount authorized under it is $6,000,000.
The amount outstanding is $6,000,000. The maturity of the bonds is January
1, 1888. The rate of interest is 6 per cent. It is secured by a first mortgage
executed by the California and Oregon Eailroad Company upon the whole of its
railroad from the Central Pacific Eailroad in the Sacramento Valley in the
State of California to the southern boundary line of the State of Oregon.
O. That matures next January? A. Yes, sir.
Q. Has any provision been made for the renewal of that $6,000,000 1 A. No,
sir $ not that I know of.
ANTICIPATED TERMS OF RENEWAL AT MATURITY.
Q. At what rate, in your judgment, can that loan be renewed, or the amount
borrowed on the same security? A. I could not give an opinion on that.
Q. It is the first mortgage on the road, is it not? A. Yes, sir ; there are
subsequent mortgages, though.
Q. Assuming that the mortgages Can be extended, is it your judgment that they
can be extended at 4 per cent., the security remaining undisturbed and the
term being as long as 30 years? A. If they could be; yes, sir.
LAND-GRANT MORTGAGE OF OCTOBER 1, 1870.
(The witness also produced a copy of the mortgage, dated October 1, 1870, by
the Central Pacific Eailroad Company to Charles Crocker and Silas W. Sanderson,
trustees. It was marked " Exhibit No. 9, July 26, 1887.")
Q. Please look at this mortgage and state the amount of bonds authorized, the
amount outstanding, the nature of the security, the rate of interest, and the
period when due. A. The amount authorized was $10,000,000; the amount outstanding,
$4,630,000, as of December 31, 1885, and the date of maturity, October 1, 1890
; the rate of interest, 6 per cent. The security is upon the lands granted
to the Central Pacific Eailroad Company, and also on the lands granted to the
California and Oregon Eailroad Company by the United States Government.
Q. As to the first land-grant mortgage, on which you state there is still remaining
due $4,630,000, as of December 31, 1885, do I understand that the proceeds
of all lands sold are applicable to the payment of these bonds 1 A. Yes, sir.
Q. Is it your judgment that the amounts due on contracts for lands sold, and
the amounts to be collected for lands sold, will provide for the amount of
bonds outstanding between now and 1890, and the time of their maturity? A.
Not in the form you put the question, I think the lands already sold and the
amounts coming from contracts.
Q. I mean will all the resources of the trustees pay those bonds -by the time
of their maturity?
The WITNESS. The future sales of land, as well as those already sold?
Commissioner ANDERSON. Yes.
A. I will have to make an estimate of that. It depends altogether upon the
future sales. There is not enough now in the hands of the trustees, and amounts
due on unpaid contracts, to take up the bonds at maturity.
2372 U. S. PACIFIC RAILWAY COMMISSION.
By Commissioner LITTLER :
Q, Where do these trustees reside? A. Here in San Francisco. The trustees have
been changed by death. One of them, Mr. Sanderson, is dead. Charles Crocker
has resigned.
By Commissioner ANDERSON :
Q. Who are the present trustees? A. William E. Brown and J. O? B. Gunn.
MORTGAGE OF JANUARY 1, 1872.
(The witness also produced a mortgage, dated January 1, 1872, made by the Central
Pacific Railroad Company to Eugene Kelley and Philo C. Calhoun. It was marked " Exhibit
No. 10, July 26, 1887.")
Q. Please look at this instrument and state the amount of bonds authorized,
the amount outstanding, the rate of interest, the date of maturity, and the
security. A. The amount of bonds authorized is $7,200,000 ; the amount outstanding
December 31, 1885, was $3,680,<iOO ; it matures January 1, 1892 ; they bear
interest at 6 per cent. These bonds are secured or covered by the same security
as the bonds of January 1, 1868.
CONFIRMATION BY CENTRAL PACIFC OF MORTGAGE MADE BY CALIFORNIA AND OREGON.
By Commissioner LITTLER :
Q. It is a second mortgage on the same property? A. No, sir; it is not exactly
a second mortgage. The first mortgage provides, I think, for a larger issue.
This of January 1, 1872, is not exactly a mortgage. It is confirmatory by the
Central Pacific Eailroad Company of the mortgage made by the California and
Oregon Railroad. Company January 1, 1868. Between the dates of January 1, 1868,
and January 1, 1872, the California and Oregon Eailroad Company was consolidated
with the Central Pacific Railroad Company. The California and Oregon Railroad
having issued $6,000,000 under the mortgage of January 1, 1868, the Central
Pacific confirmed that mortgage by an indorsement dated January 1, 1872, and
issued under that mortgage of January 1, 1868, so confirmed, the bonds last
spoken of as having been issued under the mortgage of January 1, 1872.
BUT ONE ISSUE UNDER MORTGAGE OF 1868.
By Commissioner ANDERSON :
Q, There is but one issue, then, under the mortgage of 1868? A. Yes, sir. The
whole issue was under the mortgage of January 1, 1868. The amount heretofore
given by me as having been authorized under the mortgage of 1868, said amount
having been stated at $6,000,000, was not strictly accurate. By the provisions
of the mortgage an issue at $40,000 per mile was authorized. After the consolidation,
the Central Pacific having ratified the mortgage of 1868, and the event showing,
by the length of the line constructed, that the amount authorized, at the rate
of $40,000 per mile, would be about $13,000,000, the total authorized issue
under the mortgage of 1868, as ratified in 1872, was $13,200,000, and the amount
outstanding under that mortgage, bonds Series A and B, was December 31, 1885,
$9,680,000.
ANTICIPATED TERMS OF RENEWAL AT MATURITY.
Q. The security is the California and Oregon Railroad? A. Yes, sir. Q. Do
you make the same answer as before in regard to the rate of interest at which
that loan could be renewed? A. Yes, sir.
EDWARD H. MILLER, JR. 2373
Q. That you are unable to make an estimate? A. No.
Q. Why? A. I did make an answer, after putting it hypothetically , that there
is another mortgage, a greater mortgage, covering that same line ; and consequently,
if this was taken up a new mortgage could not be given as a first mortgage.
Q. It could be extended, with the consent of the junior incumbrance, could
it not? A. If it could become a first mortgage
Commissioner ANDERSON. It is a first mortgage.
The WITNESS. Yes, sir ; but if the extension should be a first mort gage, having
a prior lien to every other claim, it probably could be marketed at about 4
per cent.
BONDS PAID TO PACIFIC IMPROVEMENT COMPANY.
Q. Fas the amount varied since 1885, materially? A. Yes, sir.
Q. How so? A. By an additional issue of bonds, Series B.
Q. Amounting to how much? A. I cannot tell without examining.
Q. So much as to exhaust the amount authorized? A. No, sir 5 not quite.
Q. Are those the bonds that have been paid to the Pacific Improvement Company
under their contract? A. Yes, sir.
Q. Were there about $3,000,000? A. No, sir; I think not so much. But it may
be. I cannot carry those figures in my mind.
MORTGAGE OF OCTOBER 5, 1885.
(The witness also produced a mortgage, dated the th day of October, 1885, made
by the Central Pacific Railroad Company to E. C. Wool worth and S. M. Wilson.
It was marked Exhibit No. 11, July 26, 1887.)
Q. Please examine this instrument and state the number of bonds authorized,
the amount outstanding, the rate of interest, the period of maturity, and the
security. A. This is the second land-grant mortgage, dated October 1, 1885.
The amount of bonds authorized under it is $10,000,000; the amount of bonds
outstanding, as of December 31, 1883, is $5,000,000 ; it matures October 1,
1915 ; the rate of interest is 6 per cent. The security is of a second mortgage
on the land grant, subject to the first mortgage of October 1, 1870. There
are no bonds on this mortgage outstanding at the present time.
CANCELED OF RECORD.
Q. The $5,000,000 have been retired? A. They have been retired. There are some
other things. If you desire it, I can make a statement.
By Commissioner LITTLER :
Q. Has this mortgage been canceled of record? A. Yes, sir ; but whether the
cancellation has been recorded in all the counties in which the mortgage has
been recorded, I doubt.
Q. Has it been recorded in any county? A. Yes, sir. The satisfaction is out
now, to be recorded in every county where the mortgage had been recorded.
By Commissioner ANDERSON :
Q. The object is to cancel that mortgage, so that it will no longer form a
part of the obligations of this company, is it not? A. Yes, sir; it has been
done.
2374 U. 8. PACIFIC RAILWAY COMMISSION.
MORTGAGE OF OCTOBER 1, 1880.
(The witness also produced a mortgage made by the Central Pacific Eailroad
Company to William E. Brown and Frank S. Douty, trustees, dated October 1,
1880. It was marked Exhibit No. 12, July 26, 1887.)
Q. Please look at this mortgage and state the amount of bonds authorized, the
amount outstanding, the rate of interest, the date of maturity, and the security
? A. The amount authorized in the mortgage is $16,000,000; the rate of interest
is 6 per cent. ; the amount at present outstanding, I will have to look at
the books to ascertain.
Commissioner ANDERSON. We would like to know that.
The WITNESS. The amount outstanding is $7,063,000. The mortgage runs fifty
years.
Q. What is the security? A. I can hardly give this without read ing it in
full.
SECOND MORTGAGE ON LAND GRANTS.
Q. Will you state generally? A. It is a second mortgage on the lands granted
to the company.
Q. These are the branches west of Sacramento City, and the southern branches.
Is it a second mortgage on these? A. A second mortgage on the Central Pacific
Railroad between Lathrop and Goshen, on the California and Oregon Eailroad
line.
Q. A second mortgage on the California and Oregon Eailroad line? A. Yes, sir
; and on the telegraph line of the company.
By Commissioner LITTLER :
Q. Is it a first mortgage on the telegraph line of the company? A. No, sir
; I think not. That is an individual opinion, however, that I am giving. I
suppose the first mortage covers the telegraph line. This covers the telegraph
line between Oakland Point and the town of Niles, and between the towns of
Lathrop and Goshen, and on the line of the California and Oregon Eailroad Branch
$ also all the rolling stock.
STEAMERS EMBRACED IN MORTGAGE.
By Commissioner ANDERSON :
Q. A second mortgage? A. Yes, sir ; and the river steamers.
Q. Is it a second mortgage on the steamers, or do you not remember? A. I do
not know whether any other mortgage covers the steamers or not. It is upon
certain tracts of lands in the county of Alameda, about 500 acres, also.
By Commissioner LITTLER:
Q. How many steamers are embraced in that mortgage? A. There are four ferry
steamers and two river steamers.
By Commissioner ANDERSON :
Q. Does that include the big ferry boat? A. There are more than four ferry
boats. There are two freight ferry boats that I did not include. There are
six ferry boats and the transfer boat.
Q. It includes the big transfer boat? A. Yes, sir; the mortgage also contains
a list of miscellaneous land and property, the details of which can be obtained
from the mortgage.
PURPOSE TO WHICH BONDS WERE APPLIED.
Q. To what purpose were these $7,000,000 bonds applied, generally? A. $5,000,000
were for taking up $5,000,000 of the previous second
EDWARD H. MILLER, JR. 2375
mortgage bonds. Some of them were paid to the Pacific Improvement Company on
its contract. Some further amounts were for retiring some bonds of previous
issue.
Q. Is the balance of $8,000,000 or $9,000,000, which is authorized to be issued
by this mortgage, covered by the requirements of outstanding contracts, or
is it available for the general purposes of the company? A. 1 think there are
no contracts that cover it all.
Q. Have you given a complete list of the mortgages? A. I have given all the
mortgages of the Central Pacific.
Q. Audits branches?
The WITNESS. Is there a mortgage of the San Joaquin Valley .?
Commissioner ANDERSON. There is no mortgage of any railroad except the Central
Pacific and the California and Oregon.
The WITNESS. It is now the Central Pacific, between Lathrop and Goshen.
Commissioner ANDERSON. We want a complete list of the mortgages.
MORTGAGE OF OCTOBER 1, 1870.
(The witness also produced a mortgage made by the Central Pacific Eailroad
Company to D. O. Mills and W. C. Ealston, trustees, dated October 1, 1870.
The paper is marked " Exhibit No. 13, July 26, 1887.")
Q. Please look at this instrument and state the number of bonds authorized,
the number outstanding, the rate of interest, the date of maturity, and the
security? A. The amount authorized is $6,080,000 ; the amount outstanding
$6,080,000: due October 1,1900; interest, 6 per cent. The security is the railroad
line called the u San Joaquin Valley Branch."
Q. Is it a first mortgage on that property? A. Yes, sir.
MORTGAGE OF OCTOBER 26, 1864.
(The witness also produced a mortgage by the Central Pacific Eailroad Company
to Edgar Mills and James A. Donahue, trustees, dated the 26th day of October,
1864. It was marked " Exhibit No. 14, July 26, 1887.")
Q. Please look at this instrument and state the number of bonds authorized,
the number outstanding, the rate of interest, the date of maturity and the
security. A. The number of bonds authorized was $1,500,000 ; the amount outstanding
December 31 was $284,000. They matured July 1, 1884. The rate of interest was
7 per cent. It was secured on the railroad line of the company from Sacramento
to the eastern boundary line of the State, the fixtures, rolling stock, &c.
EXTENSION OF BONDS BY MR. HUNTINGTON.
Q. Can you explain why those bonds are outstanding at 7 per cent, after maturity
? A. Yes, sir. They were extended by Mr. Huntington, some three or four hundred
thousand dollars of them, with the consent of the holders, for three years,
I think."
Q. Do you know who the holders are, or the principal portion of them? A. No,
sir; I do not know the holders of a single one.
Q. Were they extended with the consent of the Central Pacific Eailroad Company
? A. No, sir ; not by any acts of the board of directors, except Mr. Huntington's
act as agent and attorney.
Q. Who would know the holders of those bonds? A. Mr. Huntington, probably,
2376 U. S. PACIFIC RAILWAY COMMISSION.
Q. Who pays the coupons? A. Mr. Huntington arranges for them to be paid by
some bank in New York.
Q. Do yoii know whether he himself is the holder of bonds? A. I do not know
positively, but I do not believe he is the owner of a single one. I do not
understand that he is.
MORTGAGE OF OCTOBER 23, 1865.
(The witness also produced a mortgage of the Western Pacific Railroad Company
to George T. M. Davis, dated October 23, 1865. It was marked "Exhibit
No. 15, July 26, 1887.")
Q. Please look at this instrument and state the amount of bonds authorized,
the amount outstanding, the rate of interest, the time of maturity, and the
security. A. There are $111,000 outstanding; there are $111,000 Western Pacific
bonds, Series A, reserved by the company to take up or exchange for these $111,000
bonds issued December 1, 1865.
MEANS PROVIDED TO TAKE UP THE $111,000 OUTSTANDING BONDS.
Q. Under the mortgage of what date? A. Under the mortgage of December 1, 1865.
It was an old issue, we call it. When the new bonds were issued under another
mortgage, they were all taken up from time to time, except this $11 1,000.
They become due December 1, 1895, and are drawing 6 percent, interest. The
bonds to be exchanged are also drawing 6 per cent, interest, and will be due
July 1, 1899.
Q. Do I understand that the bonds to be exchanged under the mortgage of December
1, 1865, are included in the bonds which you have described as outstanding
under the mortgage of that date? A. No, sir : under the mortgage of Decemb-.
r 1, 1865, the only outstanding bonds are $111,000. Under the mortgage of July
1, 1869, there are $111,000 retained by the company, to be exchanged at any
time that the holders of these $111,000 will exchange at par.
Q. My question is whether this amount of $111,000 is included among the bonds
issued under the mortgage of October 28, 1809, which you have described as
outstanding under that subsequent mortgage? A. No.
Q. As to the bonds which are retained for the purpose of being taken up in
exchange on the surrender of the $111,000 issued under the mortgage of 1865
1 ask you whether you describe those subsequent bonds as a part of the outstanding
issue of the subsequent mortgage or not. A. No, sir.
Q. Those $111,000 are secured, then, by a mortgage of the Western Pacific company
? A. Yes, sir.
MORTGAGE OF OCTOBER 28, 1869.
(The witness also produced a mortgage made by the Western Pacific Eailroad
Company toD. O. Mills and William E. Barrou, dated October 28, 1869. It was
marked " Exhibit No. 16, July 26, 1887.")
Q. Please look at this instrument and state the amount of bonds authorized,
the amount outstanding, the rate of interest, the date of maturity and the
security? A. The amount authorized under that mortgage was $2,735,000 ; the
amount outstanding is in two series ; the amount outstanding is $2,624,000
; it matures July 1, 1899 ; the mortgage covers the line of the Western Pacific
Kailroad.
Q. What is the rate of interest? A. The rate of interest is 6 per cent.
EDWAED H. MILLER, JR. 2377
THE SAN FRANCISCO, OAKLAND AND ALAMEDA MORTGAGE.
Q. Have you now completed the list of mortgages? A. These are all the mortgages
of the Central Pacific that I can find. There is one mortgage of the San Francisco,
Oakland and Alameda line which I do not find.
Q. Can you give the particulars of that mortgage? A. Yes, sir. The amount authorized
was $1,500,000; the amount issued was $587,000. It matures July 1, 1890. The
interest is at the rate of 8 per cent.
UNPAID TAXES.
Q. Are there any other liens of a nature different from mortgage on the property
of the company, such as judgments, mechanics' liens, or special contracts?
A. There are no judgments, no mechanics' liens. There is a question about some
unpaid taxes.
Q. Is there-a suit pending about them? A. I do not know the status of it.
Q. How much is involved? A. I do not know that.
Q. Does the company deny its liability for the taxes? A. Yes, sir.
By the CHAIRMAN :
Q. What taxes are they? The taxes of the State and counties. Q. For how many
years? A. There is a law now that I cannot explain that I do not comprehend.
By Commissioner ANDERSON :
Q. Who can give us the explanation? A. The law department. Q. What attorney
shall we call on? You have five or six attorneys.
A. Only one has had anything to do with it. Q. Who is that? A. Colonel Haymond.
Q. Is he now in the city? A. Yes, sir. He is sick. I think Mr. E.
B. Ryan, who has an office in this building, can give that information.
STOCK ISSUED AND UNISSUED.
Q. What is the total authorized issue of stock? A. $100,000,000.
Q. What is the total stock outstanding to date? A. $08,000,000.
Q. Where is the balance, $32,000,000? Is it unissued? A. Unissued.
Q. Is the entire $68,000,000 outstanding? A. No, sir ; there is about $704,000
of it held in trust for the company, not actually sold or issued. I do not
like to state it from memory.
Commissioner ANDERSON. The amount, as appears from your report of 1885, if
I remember right, is $54,000,000?
The WITNESS. No, sir; it was $59,275,500.
Q. In the 'report of 1884, then, it was $54,000,000. To what purpose was that
issue of $5,000,000 applied? A. That is something that I cannot answer.
By the CHAIRMAN :
Q. Who can answer it? A. No living man.
Commissioner ANDERSON. Oh, I can answer it by and by.
The WITNESS. It is impossible. You may find out, to satisfy yourself.
Q. Who was the last dead man that could have answered it? A. There never has
been a man living that could answer it ; not for this company or for any other.
In 1884 the amount was $59,000,000.
2378 U. S. PACIFIC EAILWAY COMMISSION.
Commissioner ANDERSON. There were $4,000,000 or $5,000,000 in the treasury.
The WITNESS. I think you are mistaken.
THE LAST ISSUE TO WHAT APPLIED.
Q. What was the last issue of your stock? A. The last issue was $8,000,000.
Q. What was the date of the issue? A. The latter part of 1886, or the first
of 1887.
By Commissioner ANDERSON :
Q. Do you not know to what purpose that was applied? A. Yes, sir.
Q. To what purpose was it applied? A. That was applied in pay-, ment of or
on account of the contract of the Pacific Improvement Company.
Q. Was it 80,000 shares of stock? A. Yes, sir.
By the CHAJRMAN :
Q. What was the date of the prior issue? A. I cannot tell you that without
getting the information.
Q. Did you ever make application to Congress for authority to issue stock 1
A. No, sir ; not that I am aware of.
GUARANTEE OF BONDS OF BRANCH ROADS.
By Commissioner ANDERSON:
Q. Has the Central Pacific guaranteed the payment of any bonds other than its
own bonds'? I mean any bonds issued on any of its branches? A. Yes, sir. Oh,
on any of its branches?
Q. What bonds has it guaranteed the interest of, or the principal? A. I think
there is a statement in that report, or some report.
Q. Will you find it, please? A. I doubt if it is in the annual reports. It
appears in the report made to the railroad commissioner, I think, or the railroad
auditor.
Q. In what year? A. In every year. I can ascertain that.
Q. Please make a memorandum, and ascertain the guarantees given by the Central
Pacific of the interest or principal of mortgages other than those executed
by itself? A. I will have to take time to ascertain that.
The CHAIRMAN. You can give it at any time.
AMOUNT DUE SOUTHERN PACIFIC.
Q. Among other liabilities of this com pany, apart from the capital stock and
the funded debt and the Government bonds, I find, in your balance-sheet of
1885, an amount due the Southern Pacific Company of $3,550,574.76. Where can
we find the account from which that balance was derived? A. From the books
of the company.
Q. I mean, what account? The account between the Central Pacific and the Southern
Pacific? A. The account headed the " Southern Pacific Company." The
ledger account.
Q. Can you state generally from what subject that indebtedness arises? A.
fo, sir ; not without stating the account in full.
Q. It is an account of the transactions and the tra flic between those two
companies? A. The transactions between those two companies.
EDWARD H. MILLER, JR. 2379
OUTSTANDING OBLIGATIONS.
By the CHAIRMAN :
Q. What obligations in the shape of notes has the company outstand: ing for
borrowed money 9 A. I think they have a note of $2,500 outstanding ; a note
to one of its former employe's.
Q. Are there any other obligations of that kind due-bills and notes for borrowed
money? A. Except for the Southern Pacific Company, I do not think there is
anything else. There are two or three small items, which do not amount in the
aggregate to $250,000 now. This is December 31, 1885, 1 understand the chairman
to ask now.
Q. I ask of this date. A. December 31, 1885, in the account of the old company,
the operations of the old company had not been settled up. They are in process
of settlement, month by month, until now of bills payable I think the only
note out is $2,500. There may be another one, possibly.
Commissioner ANDERSON. If you will furnish us a more recent balance-sheet than
this we will be guided by it.
The WITNESS. I hoped to have the report of 1886 to-day.
Commissioner ANDERSON. Please proceed with the identification of your papers.
LIST OF OFFICERS AND DIRECTORS HUNTINGTON POWERS OF ATTORNEY, ETC.
The WITNESS. The next that I find that was asked for is a list of the officers
and directors.
(The witness produced a list of the officers and directors, commencing with
those elected April 30, 1861, and ending with those elected April 14, 1887.
It was marked "Exhibit No. 17, July 26, 1887.")
Q. What is the next? A. The powers of attorney granted to Mr. Huntington.
I think there are some more scattered among these papers.
(The witness produced nineteen powers of attorney from the Central Pacific
Railroad Company to C. P. Huntington. They were marked, respectively, Exhibits
18 to 36, both inclusive, July 26, 1887.
The witness produced the original certificates of incorporation or articles
of association of the Central Pacific Railway Company, dated June 28, 1861.
It was marked " Exhibit No. 37, July 26, 1887.")
The WITNESS. I have here three overcharge and rebate books and one distribution
book, as samples.
CONSTRUCTION CONTRACT WITH CYRUS COLLINS & BROTHER.
(The witness also produced the construction contract for sections 19 and 20,
between the Central Pacific Railroad Company and Cyrus Collins & Brothers.
It was marked " Exhibit No. 38, July 26, 1887.")
By Commissioner ANDERSON :
Q. Is this the general form of contract that was adopted with reference to
the different small contracts made at the same time? A. Yes,
sir.
Q. What is the date of that ! A.' It is dated September 26, 1863, at Sacramento.
Q. Do you know whether the first contract with Crocker & Co. was of that
same form? A. Yes, sir. P B VOL iv 4:
2380 U. S. PACIFIC RAILWAY COMMISSION.
Q. Do you know whether the second contract with Crocker & Com pany was
of that general form I A. It was in this general form ; that is, with that
kind of specification attached ; but whether it was written out in detail,
as this one is, I do not remember. I think it was.
MODE OF PAYMENT OF CONTRACTS.
Q. Do you know whether the mode of payment, as to whether it was to be money
or in bonds or stock, was the same in the Crocker contract? A. This was a
part for stock, I think.
Q. What is your answer? A. I do not know, but I can easily ascertain from
the payments made, as they appear on the books.
Q. Do you know whether that general form of contract was also used in the dealings
between the Central Pacific and the Contract and Finance Company? A. I do
not remember whether it was or not.
Q. Did you ever read that Contract and Finance Company contract? A. I suppose
I did. I do not remember to have ever read it. I must have read it, so I can
say I did.
OTHER LEASES OF CENTRAL PACIFIC.
(The witness also produced twenty-two leases between various rail, road companies
and the Central Pacific Company. They were marked respectively, Exhibits 39
to 60, both inclusive, July 26, 1887.)
The WITNESS. All of these leases are now canceled, except one, possibly, the
Stockton and Copperopolis. I do not remember whether that was canceled or not.
POOL AGREEMENTS.
(The witness also produced a pooling agreement with the Atlantic and Pacific
Company, to take effect October 1, 1884, and to terminate on ninety days' notice,
indorsed, " Copy of notice, to terminate February 17, 1886." lib
was marked Exhibit No. 61, July 26, 1887."
(The witness also produced a pooling agreement between the Central Pacific,
Southern Pacific, and South Pacific Companies, dated December 31, 1879. It
was marked " Exhibit No. 62, July 26, 1887.")
By the CHAIRMAN:
Q. They are not all the pools; there are others that you cannot find? A. No,
sir; they are not all. There are other pooling agreements, but not in my possession.
I produce these as the only ones I found in my vault.
Commissioner ANDERSON. The Huntington pool is the one that I have referred
to, at page 527 of volume 1.
The WITNESS. Yes, sir; it is put in 'the minutes.
By Commissioner ANDERSON :
Q. Do you know whether the other pools that you have not found are also entered
at length on the minutes? A. No, sir; I do not think they are. 1 did not remember
that this one was.
By the CHAIRMAN :
Q. Who made your pool contracts? A. I think Mr. Stubbs, the general traffic
agent, usually does.
Q. Would he have a memorandum or knowledge of all the pools entered into by
the company? A. Yes, sir.
E. H. MILLER, JR.
The Commission then adjourned to Wednesday, July 27, 1887, at 10 o'clock a.
m.
ALFRED A. COHEN. 2381
OFFICES OF THE CENTRAL PACIFIC EAILROAD COMPANY,
San Francisco, Cal., Wednesday, July 27, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
ALFEED A. COHEN", being duly sworn and examined, testified as follows
:
By Commissioner ANDERSON :
Question. What is your occupation? Answer. I have practiced law for a great
many years.
Q. In San Francisco? A. In San Francisco ; yes, sir. Q. Since when? A. From
1857, 1 think, until I was prevented by sickness from continuing my practice.
Q. Where do you now reside? A. I now reside in the city of New York.
PROFESSIONAL EMPLOYMENT BY RAILROAD.
Q. Have you ever held office under the Central Pacific Railroad Company, or
any of its branches? A. I have not held any office that I remember ; but I
have been retained by them in my profession from time to time.
Q. Are you at present employed as counsel or attorney for the Central Pacific
Eailroad Company? A. Not for the Central Pacific Bailroad Company, but I have
had some business for the Southern Pacific Company.
Q. Are you the general counsel for the Southern Pacific Company? A. No, sir;
though my past relations with them are such as to prevent my accepting any
retainer against them.
LITIGATION AGAINST THE CENTRAL PACIFIC.
Q. With what litigation against the Central Pacific Eailroad Company have you
been connected in the past? A. 1 brought one or more suits against the Central
Pacific Eailroad Company some years ago on behalf of some of the original stockholders,
for an accounting.
Q. Will you please give the names of the stockholders?
The WITNESS. Do you wish me to give the names of the plaintiffs?
Commissioner ANDERSON. Yes, sir.
The WITNESS. One was named John E. Eobinsou.
Q. Of San Francisco? Does he live here? A. Yes, sir. Another was Anthony Coolot,
of Sacramento. Then there was another man in Sacramento whose name I have forgotten.
Q. Were there others? A. There were others, but I cannot remember their names.
Q. Were there any suits brought by some of the counties of this State? A.
Yes, sir ; there were several. I was attorney for the county of San Joaquin
in a suit which it brought against the Central Pacific Eailroad Company.
Q. Had you any connection with the suit of Stewart vs. Huntington? A. Yes,
sir. On behalf of Evarts, Southmayd & Choate I took the depositions that
were taken in California,
THE ROBINSON SUIT.
Q. How far did this Eobinson litigation go? Was it tried? A. It did not eonie
to a final trial. It resulted in a compromise.
2382 U. S. PACIFIC RAILWAY COMMISSION.
Q, Was any evidence taken before a master or a referee? A. Yes ; evidence
was taken under the provisions of the civil code of this State, which provides
for the examination of witnesses previous to trial.
Q. What was the name of that referee? A. 1 think that it was a notary public
named E. Y. Joice.
Q. Is that evidence on file with the records of the court, or is it in your
possession? A. That I could not tell you.
SAN JOAQUIN COUNTY SUIT.
Q. As to these other suits, how far did they progress?
The WITNESS. Do you have reference to the suit of the county of San Joaquin
?
Commissioner ANDERSON. Yes, sir.
The WITNESS. That resulted in a compromise also.
Q. Was any evidence taken in that suit? A. My impression is that there was
not. I did not bring that suit myself. It was brought by other counsel. A demurrer
had been filed to the complaint, and the demurrer had been overruled. The defendants
had answered. When I was employed, the first thing that I did was to examine
the complaint, and upon looking over it I concluded that it was not safe to
go to trial upon it. It would be a long and expensive trial ; and I found that
there were not the necessary parties to the suit, and I got leave to add the
necessary parties. Then the attorneys for the defendants demurred on the part
of the new parties, and I in substance confessed the demurrer, wishing to get
a chance to amend the complaint. I filed an amended complaint, bringing in
all such parties as I thought were necessary parties defendant. I think that
a new demurrer was filed, setting up the statute of limitations and other defenses.
The lower court sustained the demurrer. I declined to amend, and judgment was
rendered against the county. Then we argued it in the supreme court of this
State, and there appearing to'be some difference of opinion there, a reargument
was ordered. Before the reargument took place, I made a settlement of the case
with the defendants.
OBJECT OF SUIT.
Q. What was the general object of the suit brought by the county of San Joaquin
against the Central Pacific Railroad Company? A. The county of San Joaquin,
under an act of the legislature passed, I think, in 1863, had subscribed for
the stock of the Western Pacific Eailroad Company, and had issued its bonds
in payment of that stock. The act authorizing the subscription provided that
the stock should not be sold unless the sale was ratified by the vote of the
people, and it provided further that three fourths of the voters should consent
to it. The board of supervisors of San Joaquiu County, without any submission
to the people, sold the stock to one Charles McLaughlin. Mr. McLaughlin sold
it to the Western Pacific Eailroad Company, I think, or to some of the parties
connected with the Western Pacific Company. No payment, if I remember rightly,
had been received by the county. Some of its bonds, I think, had been deposited
in escrow with a banker of Stockton.
WITNESS'S MEMORY IMPAIRED BY PARALYSIS.
Q. Do you mean that no payment had been made by McLaughlin to the'county?
A. I think not. Right here I wish to say, in justice to myself, that I am giving
you the benefit of my memory as to things which
ALFRED A. COHEN. 2383
are matters of record, and the record certaiiily would be the best evidence;
and, in addition to that, I am unfortunately laboring under the disability
which has resulted from an attack of paralysis, which has somewhat impaired
my memory and recollection as to details. After that the Western Pacific
was consolidated with the Central Pacific. Then, again, the new corporation,
known as the Central Pacific Railroad Company, was consolidated with the
California and Oregon Railroad Company, the San Joaquin Yalley Railroad Company,
and the San Francisco, Oakland and Alameda Railroad Company. The county of
San Joaquin, after a change of government, concluded that it was entitled
to have its stock, or stock in the consolidated company, and brought a suit
to establish its right to this stock, and for an accounting for past earnings
; that was the suit that I took hold of, and which I settled by a compromise.
Q. Between what years did the litigation continue? A. I think that the county
of San Joaquin brought its suit in 1877 or 1878. I think that I was employed
about 1880. I think that it ran for about two years or more.
RECORD OF SAN JOAQUIN CITY SUIT.
Q. Is the record at the Supreme Court on appeal in print? A/ Yes, sir ; the
Supreme Court did not decide the case, and the record, so to speak, was withdrawn.
Q. The record contains the pleadings? A. Yes, sir.
Commissioner ANDERSON. The Commission would like a copy of it, if you have
one at your command.
The WITNESS. I do not know that I have it. If I have I will give it to you.
I have not paid much attention to these matters during the past few years.
PLEADINGS IN THE ROBINSON CASE.
Q. Was the Robinson case the suit of a stockholder asking; for an accounting
of the earnings of the company substantially? A. Yes, sir.
Q. Can you tell us where we can see the pleadings in that case? A. No, sir
; I cannot.
Q. The pleadings are substantially a copy of the same pleadings that were filed
in the Brannan case, are they not?- A. Perhaps they same with a few little
changes. I perhaps may have varied the complaint somewhat, as no two men ever
did draw complaints alike.
Q. Can you tell us who the notary was who took this evidence in the Robinson
case? A. I think that it was Mr. Joice. n Q. Residing here? A. Residing in
San Francisco.
Q. And you yourself do not know where that evidence now is? A. I could not
say" positively. It may have been filed or I may have it at my office.
I cannot tell which. It was settled a long time ago.
Q. Will not your register show where the evidence is? A. It may, and I think
perhaps it will. Inasmuch as the case did not come to trial, however, I doubt
whether the evidence was ever placed on file in the court ; such evidence as
was taken was simply in the form of depositions to be used if the parties were
not present at the trial.
Q. Was evidence taken in any of these other litigations calling for an accounting
? A. I cannot remember whether we took any evidence in the^San Joaquin case
or not; I should very much doubt whether I did, the litigation being s confined
to a demurrer, but still I might have done so.
Commissioner ANDERSON. You have mentioned one or two other suits brought by
stockholders whose names you do not recall.
2384 U. S. PACIFIC RAILWAY COMMISSION.
The WITNESS. No, sir ; they were all in one suit.
Q. All in one suit? A. Yes, sir.
Q. Were all of them included in what is known as the " Robinson suit"?
A. They were all brought in as stockholders ; the suit was brought by Robinson
and others on behalf of themselves, and all others who might choose to come
in.
Q. During what years did that litigation continue? A, It did not last very
long.
Q. Was it prior to the San Joaquin County suit? A. Oh, yes ; it was some years
before that ; I was going to say that it is my impression that the suit was
commenced in 1876 ; I do not think that it lasted very long ; I think that
it was settled in 1877.
CONTRACT WITH CONTRACT AND FINANCE COMPANY A SUBJECT OF
INQUIRY.
Q. Had you any connection at all with the Colton suit? A. Yes, sir.
Q. On whose behalf did you act in the Golton suit? A. For the defendants.
Q. In the course of any of these litigations was the contract known as the
contract of the Central Pacific Railroad Company with the Contract and Finance
Company a subject of examination? A. Yes, sir.
Q. Frequently? A. Yes, sir.
Q. Did you ever see that contract itself? A. I am pretty sure that I did not.
Q. Did you ever see a copy of it? A. I think that I never did see it. I never
saw the contract or the books.
Q. Were the terms of that contract substantially disclosed, according to your
recollection? A. My impression is that at some time or other I had an idea
what the terms were, but if I did it was shown on the record. I could not remember
now. I think that I tried to find out what they were, but never could find
anybody who could tell me. The only man that I perhaps might have got it from
is now dead. I do not remember that I ever examined him or that I could ever
get him just at the time that I wanted him. This was Mark Hopkins. I always
expected to get it from him at some time or other, but I do not remember that
I ever got him on the witness stand.
ITS TERMS NOT KNOWN.
Q. Do you know who drew that contract? A. I do not know anything about it.
Q. The conclusion you reached as to its terms, from such evidence as you took,
would hardly appear in the record, though it might in the briefs. Can you refer
us to any paper which would have or contain such conclusions? A. I will say
this from my recollection that I never did know what the terms were. I have
hunted for that contract, and have endeavored to gain some information as to
its terms as I have for many matters of history. I think that the terms of
that construction contract with the Contract and Finance Company, like the
name of the man with the iron mask, are fated to go down to posterity without
discovery. I tried for years to learn something about that contract, and never
could succeed. I had something more than a professional interest in it. I wanted
to get it, but never did.
NEVER COULD PRODUCE ANYBODY WHO HAD SEEN IT.
Q. What officers of the company did you examine with reference to it, or with
whom did you converse regarding it? A. I think that I ex
ALFRED A. COHEN. 2385
ainined Leland Stanford, C. P. Huntington, Charles Crocker, and E. H. Miller,
jr. I sat here yesterday and listened to your examination of Mr. Miller, and
it carried me back almost to my boyish days. I have been examining him myself
on those subjects ever since I was a young man. Q. Was substantially the statement
made then, that the paper was missing or mislaid or could not be found, the
same statement that you have heard so many times? A. I never could produce
anybody who ever had seen it. I would say that my impression was that I came
to the conclusion before I got through that there never was any such paper
; but that it was a verbal contract. I think that that was the conclusion which
I came to at that time.
MR. HUNTINGDON'S STATEMENT IN REGARD TO IT.
Commissioner ANDERSON. Mr. Huntingdon's statement on examination in New York
was that the terms of the contract called for substantially $64,000 in bonds
and about $36,000 in stock per mile.
The WITNESS. Was that in reply to the examination which I took?
Q. It was in reply to the examination which we took in New York. Does that
substantially agree with the approximation which you reached, according to
your recollection? A. I cannot tell you now. Will you please read those figures
again?
Q. Sixty-four thousand dollars in bonds and $36,000 in stock per mile? A.
I could not tell you about that.
CONTRACT WITH WESTERN DEVELOPMENT COMPANY A SUBJECT OF
INQUIRY.
Q. Did you have occasion, in the course of your litigations, to make any examination
with reference to the contract of the Western Development Company? A. I think
that the Western Development Company was formed after my examination in the
Robinson case ; and I think that at the time I examined them in that case the
Western Development Company could not have done much, if any, business, and
yet I might have asked them about it. It would have been better if you had
called my attention to the questions which you proposed to put to me, and I
would have prepared myself.
Q. The Western Development Company was formed in 1876, was it not? A. This
Robinson suit was brought in 1876.
Q. Then your examination did not come down to the time of! the Pacific Improvement
Company that was subsequent to the Western Development Company? A. I know nothing
about the Pacific Improvement Company except such information as I got in the
Col ton case as counsel for the defendants.
SUBJECTS OF INVESTIGATION IN THE ROBINSON SUIT.
Q. Did the subject of the first construction of the California and Oregon road
between Rose ville and Bedding enter into any of these suits was that a matter
of investigation in the Robinson suit? A. It is impossible for me to say.
It might, or it might not ; I think not, though.
Q. What other subjects which are disclosed in the complaint referring to the
Brannan complaint as the basis of the Robinson complaint were the subjects
of investigation in the Robinson suit as far as your evidence went? A. I started
in to try and increase the value of the stock of the plaintiffs in that case.
I tried to prove what the road had cost and what it should have cost, expecting
to show the profit that had been made in construction. The examination tended
to that end.
2386 U. S. PACIFIC RAILWAY COMMISSION.
Q. Was the subject of the ownership of stock in the Contract and Finance Company
a matter of investigation in your suit? A. I think that it was ; I am pretty
sure that it was.
STOCKHOLDERS OF CENTRAL PACIFIC AND CONTRACT COMPANIES.
Q. And also the votes by which the transactions between the Central Pacific
Kailroad Company and the Contract and Finance Company were determined? Those
votes must have been the subject of consideration, must they not?
The WITNESS. What votes?
Commissioner ANDERSON. The votes of the board of directors in order to determine
whether the persons who voted the contracts were the same persons who were
members of the Contract and Finance Company, and received all the benefit of
them.
The WITNESS. It seemed to be admitted, I think, that the principal stockholders
of the Central Pacific were the principal stockholders of the Contract and
Finance Company. I never heard any dispute on that point.
THE AGREEMENT BETWEEN THE COMPANIES.
Q. Did you ascertain by whom the agreement with the Contract and Finance Company
was signed on behalf of the Central Pacific Railroad Company?
The WITNESS. You mean for the construction of the road?
Commissioner ANDERSON. Yes.
The WITNESS. No ; I never did. My impression is that there was no such paper.
Q. You do not think that it was in writing at all? A. My impression is that
it was a matter of agreement shown on the minutes, or in some similar mariner;
but I know that I came to the conclusion from the examination which I made
from time to time and from what I personally knew of the way in which the business
was done that it was a matter of agreement. I say that is just the impression
which it leaves on my mind at this moment. As I have said before, Iwould not
rely in a matter in which I was not greatly interested on my memory. There
was a time, three years ago, when I had no memory and no speech. My memory
was all gone and my speech was all gone. That interferes a great deal with
me in my recollection of things that have taken place in a great many years.
Commissioner ANDERSON. You appear to have greatly recovered,
OFFICERS OF CONTRACT AND FINANCE COMPANY.
The WITNESS. I am a great deal better than I ever expected to be.
Q. Did you ever examine any of the officers of the Contract and Finance Company
with reference to their accounts I A. I examined Mr. William E. Brown.
Q. He was the president of that company, was he not ! A. He was the secretary,
I think, and I examined him.
Q. What other gentlemen were connected with their books? Was Mr. Douty? A.
So. Mr. Douty was not connected with the Contract and Finance Company, I think.
Q. Was he connected with the Western Development Company? A. I think that
he was with the Western Development Company.
Q. Was Mr. Gunn connected with these matters? A. Mr. Gunu was at that time,
I think, not connected with the Contract and Finance
ALFRED A. COHEN. 2387
Company. I think that be was cashier or secretary or something of that kind
with the California Pacific Railroad Company.
Q. Are there any other persons connected with the affairs of the Central Pacific
Railroad Company or of the Contract and Finance Company besides those whom
you have named who, in your judgment, would have any knowledge relating to
this paper the contract between the two companies or to the affairs of the
Contract and Finance Company in connection with the Central Pacific Railroad
Company? A. My recollection is that Mr. Brown had a staff of clerks, two or
three of them, and that they constituted pretty much the Contract and Finance
Company. I never was brought in contact with anybody else. Mr. Brown appeared
to be the manager of the concern the head and the board of directors.
PAPERS, CONTRACTS, AND BOOKS.
Q. Were any of the papers or contracts or books of that company produced on
this trial? A. No ; I think not. I do not think that I ever saw a paper connected
with the Contract and Finance Company.
Q. What answer was made in regard to the whereabouts of those books and papers?
A. I cannot say. Mr. Brown was the active custodian of those papers, and sometime,
I think in 1873 or 1874, Mr. Brown went to Europe and he turned over, I think,
all the papers and books to his successor, and it is my information and belief
that he never had anything to do with that company after that time. I never
was able to get his successor on the stand in order to examine him. I tried
to subpoena him in various ways, but I never could find him when I wanted him.
Q. What was that gentleman's name? A. John Miller.
Q. Do you know where he resides now? A. I do not.
NEVER COULD BE HAD.
Q. Have you any other information relating to these missing papers of the Contract
and Finance Company, and also to its contract with the Central Pacific Railroad
Company that you can give us for the purpose of enabling us to attempt to discover
the whereabouts of these papers? A. It would be impossible for anybody to
have got that information. I had interests to spur me on to get all this information
for myself, if anybody could have got it. I never was able to get it, and never
could get it. If these books and papers were in existence, I never could get
at them.
COUNSEL IN COLTON CASE.
Q. What other counsel in San Francisco have been interested in similar suits,
or in any suits that required the production of these papers 1 A. A great many
have been interested on the side of the defendants, on the side of the railroad
company, but I do not know of anybody particularly who has been interested
on the other side.
Q. How about Mr. Hayes? A. He was interested in the Colton case. In the Colton
case there were Judge Stanley, Mr. Hayes, and Judge Stoney, and also the late
Chief Justice Wallace, a very active man.
Q. Is there anyone who was with him in his office who could give us any information
? A. I am sure that I do not know. I was on the other side of the Colton case.
Q. Those are the only other counsel you think of, then I A. There were a great
many counsel in that case. Mr. Delmas was one.
2388 U. S. PACIFIC RAILWAY COMMISSION.
Q. All were gentlemen who would be more or less active in the pursuit of papers
? A. Yes, sir. I think that Mr. Hayes was the principal one. I remember that
they applied to us for leave to examine all these records, and they were
thrown open to them. They had experts down here for months, examining everything
pertaining to the company; nothing was kept back from them.
SUIT BY CHARLES MAIN AND OTHERS.
Q. Since the Colton case, has there been any litigation against the Central
Pacific Railroad Company involving any of these questions? A. There was a suit
brought by Charles Main and others, with respect to the transactions that took
place in the acquiring of the stock of the California Pacific Eailroad Company.
I believe that I brought that suit. There was a demurrer interposed to the
complaint and I argued the demurrer. I then removed from here to New York and
gave it up.
Q. Who took charge of the suit after you left? A. Mr. E. J. Pringle, and there
was a very eminent counsel who came from New York to argue it a Mr. L. E. Chittenden.
Q. Have you now stated all the counsel who, in your judgment, would have any
knowledge as to these papers? A. I do not know what knowledge they have as
to the papers.
Q. Or who have made any effort to find the papers? A. I think that I have.
There may be others.
Q. Are there any other persons who may not have been lawyers in these suits
who would have any interest in getting at these facts, and who made efforts
to find these papers? A. No, sir ; as I say, we had experts from time to time.
Those gentlemen all had experts ; and they had just the same chance to go through
the records and see what there was.
NO ACCOUNTING REACHED SHOWING PROFITS OF CONSTRUCTION.
. Q. In none of these suits, if I understand you correctly, was any accounting
gone through with from which a result could be reached showing whether the
large stockholders in the Contract and Finance Company had or had not made
large sums of money out of tjie Central Pacific Eailroad Company? A. No ;
I do not think that they ever got to that point. In the Epbiuson case, as far
as I was concerned, the plaintiffs were offered a price which they were willing
to take, and they took it. In the San Joaquin case, I made up my mind that
it was better for the county to get what it could. There were so many dubious
points of law involved there that I did not like to refuse a good offer. The
people up there wanted a new court house, and they thought that they could
get money enough out of this suit to build it, and were very glad to make a
settlement.
THE LAMBARD AND BRANNAN SUITS.
Commissioner ANDERSON. The Brannan case and the Lambard case were also settled,
I believe.
The WITNESS. I had nothing to do with those cases. I believe that I was defendant
in both of them ; but I do not think that any papers were ever served upon
me.
Q. By reason of your connection with what? A. With the San Francisco, Oakland
and Alameda Eailroad Company.
Q. But was not the fact of the adjustment and settlement made in the Lambard
and Brannan suits entirely developed and proved in the
ALFRED A. COHEN. 2389
Stewart case, with which you were connected afterwards? A. I was not connected
with the Stewart case, except to take the depositions to which I have heretofore
referred. When I went to New York, Messrs. Choate and Evarts and Southmayd
wished to employ me, but I declined. Mr. Huntingdon then offered to employ
me on the side of the defendants, but I declined to do anything in the matter,
as my health was such that I could not take up any new business at that time.
SETTLEMENT IN ROBINSON CASE.
Q. What was the nature of the settlement in the Eobinson case? A. They sold
the stock and the suit was dismissed.
Q. I mean what were the terms of settlement unless you have some reason for
not stating them? A. I have no reason at all. It would be difficult to say
what was paid for the stock and what was paid to counsel. There were three
counsel in the case on the side of plaintiffs.
Commissioner ANDERSON. I refer more especially to what defendants paid, without
any question as to the distribution.
The WITNESS. If I knew how many shares of stock there were I might be able
to tell.
Commissioner ANDERSON. I think that there were ten shares.
The WITNESS. There were more than that.
CommissionerANDERSON. There were thirty-two added afterwards.
The WITNESS. I was about to say that there were two very eminent counsel engaged
with me in that case. One had been governor of the State, Mr. Haight, and the
other was Delos Lake, a prominent judge here for a number of years. They were
associated with me in the case, and in the settlement of that case I thought
that the idea was to satisfy them so that they would not take up any litigation
against the Central Pacific Eailroad Company afterwards. I recollect exactly
what I got out of it.
Q. Do you remember what the defendant paid? A. I do not. I did not get anything
out of it. I gave the fee to the other counsel in the case. I allowed them
to take the fees.
RATE OF SETTLEMENT.
Q. Do you not remember, as matter of fact, that the rate of settlement exceeded
$500 per share for the stock? A. I should think so ; yes, sir. Mv impression
is that that question was asked .of me in the trial before, Judge Barrett in
New York, and I made a memorandum and gave it. Whatever it is you will find
it there.
Q. That is in the Stewart case? A. Yes, sir.
Commissioner ANDERSON. The records or books of the defendant will probably
show the amount paid?
The WITNESS. 1 do not know.
DATE AND TERMS OF COMPROMISE.
Q. Can you give us approximately the date of the compromise? A. It was in
1877.
Q. In regard to the settlement of the San Joaquin County suit : ' How many
shares of stock were involved in that suit ; is San Joaquin the name of a county
or the name of a place? A. It is a county. The county issued $250,000 in bonds
in payment for 2,500 shares of stock.
Q. What were the terms of that compromise? A. The county got $300,000 for
the 2,500 shares of stock, and a portion of the bonds returned, I think. That
is my impression.
2390 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. Please explain a little more definitely. It was alleged
that this stock had passed from the county to McLaughlin and had not been
paid for.
The WITNESS. Had you not better have the complaint?
Commissioner ANDERSON. I would rather have it; but as you are going away I
want to ask you this much. You might suggest something which would be of value
to us. I would prefer the record, of course.
The WITNESS. It is stated in the complaint more artificially and will give
you all the facts if you can 'get a copy of it. I would rather depend upon
the contents of that document than upon my memory at this time.
BASIS OF PAYMENT.
Q. Will you please state whether the amount paid as stated by you $300,000
and a portion of the bonds returned was upon the basis that no consideration
had been received by the county, or was it upon the basis that a consideration
had been received? A. It was upon the basis that no consideration had been
received by the county, no consideration having been received up to that time
by the county. The county of San Joaquin got $300,000, excepting that portion
which the counsel dextrously appropriated to themselves, and the return of
some of the bonds. Mr. Miller knows everything, perhaps, and he can tell you.
Q. Does Mr. Miller kno\? everything? A. Yes, sir; he is the general encyclopedia
of California, and I do not want to give any general statement unless indorsed
by Miller.
Q. Is Mr. Haight living? A. No, sir ; he is dead.
Q. Who was the other counsel that you mentioned? A. Judge Lake.
Q. Is he living? A. No, sir ; he is dead. I am the only one remaining, and
I shall probably be gone before this inquiry is finished.
Q. We will all be gone probably before the Government debt is paid. Can you
furnish us with any copies of briefs or papers which you can conveniently find
which will give us more accurate information as to these points? A. I shall
be delighted to furnish you anything that I have.
Q. Can I call at your office? A. I have no office here. I moved my office
to New York. My son has an office here, and may have some of those papers.
Q. Can you give me a note to him so that I can call on him ! A. I will tell
him about it.
SATISFACTORY TERMS MADE WITH COUNSEL.
Q. You mentioned a moment ago that the compromises in one or two of these cases
were made on such terms as to counsel that they would be satisfied and probably
would not undertake similar litigations thereafter. Was that made part of the
understanding? A. My impression is that Judge Lake told me that that was the
understanding with him in that settlement, that he would take no cases of a
similar nature, that he would not take any similar or any case* whatever I
do not know how that was. I remember that in that settlement he did not feel
himself at liberty to take any litigation against the officers of the Central
Pacific Eailroad Company after that time*
ALFRED A. COHEN. 2391
COUNSEL IN THE BRANNAN SUIT.
Q. Do you remember who was counsel in the Brannan suit? Was John B. Felton
? A. John B. Felton started it. Oh, yes ; I remember that. General Butler was
also counsel.
Q. Did John B. Felton subsequently enter the service of the company as counsel
? "A. Yes, sir.
Q. And did he remain in the service of the company until he died? A. Yes,
sir.
Q. How is it as to Governor Haight 1 A. I believe that he accepted a retainer
; not as a general retainer, but I think he was employed by the company afterwards.
Of this, however, I am not sure.
Q. As to yourself, did you feel at liberty to take any cases after the settlement
of the Eobinson case? A. Yes, sir; I received no fee in that case.
Q. Have you personally been connected with any such litigations since the San
Joaquin case u? A. No.
Q. Did I understand you to say that before you left practice you were engaged
in litigations for, and were retained as counsel by the Southern Pacific Company
? A. I had one or two cases for the Southern Pacific Company. No ; I think
I had only one case for the Southern Pacific, and that is still pending.
CONSOLIDATION OF SAN FRANCISCO AND OAKLAND WITH SAN FRANCISCO AND ALAMEDA.
Q. Do you recall the facts relating to the consolidation of the San Francisco
and Oakland Eailroad Company with the San Francisco and Alameda Eailroad Company!
A. Yes; I remember that, I think I signed that as president of one or the other
of the roads. Yes ; I owned the majority of the stock in the San Francisco
and Oakland road.
Q. What circumstances brought that consolidation about? A. They were roads
built to connect with the ferries crossing the bay, and I think that I had
sold the stock of both railroad companies; I owned a majority I think in both,
if I remember rightly at any rate I owned the majority in the Oakland Company
and a large portion in the Alameda Company ; I sold my stock in the Oakland
Company to E. B. Crocker and Leland Stanford, and I sold my stock in the Alameda
Company to Leland Stanford and Mark Hopkins ; I think I made the trade with
them ; they wanted them consolidated into one corporation, and we did it.
Q. Was your sale to these gentlemen made before the consolidation? A. Yes,
sir; necessarily so.
Q. The certificates for the stock appear to have remained in your name; how
was that? A. My impression is that I sold the Oakland road on a long credit,
and I think that I kept the stock as security until the money was paid.
SIGNING OF CONSOLIDATION PAPERS BY WITNESS.
Q. Were these consolidation papers signed by you at their request, you remaining
the equitable owner of the stock? A. I remained the legal owner; they had
the equitable interest; I think I had the stock, but I do not remember positively
whether I had it as collateral to their notes or not; I had their individual
paper for the stock, and kept it for a long time.
2392 U. S. PACIFIC RAILWAY COMMISSION.
Q. I call your attention to the fact that the consent to the amalgamation signed
by you as stockholder of the San Francisco and Oakland Eailroad Company shows
that you were a stockholder to the extent of 5,500 shares, while the consent
on behali of the Alameda Company was signed by Leland Stanford on behalf
of such amalgamation for 14,9^0 shares. Do I understand that you had actually
sold both of these amounts at that time? A. I spoke of selling the Oakland
road on credit. The Alameda road was sold for cash, and undoubtedly the stock
had been transferred.
Q. Can you explain to us the relative merits of these two corporations, so
far as their financial standing was concerned, so as to inform us as to whether
the terms of the consolidation were just as between the parties? A. I do not
remember what they were.
TERMS OF CONSOLIDATION.
Commissioner ANDERSON. The terms of con solidation were dollar for dollar,
and the aggregate capital was made equal to the capital of the two companies,
so that each shareholder of the old company held an equivalent amount of stock
in the new one.
The WITNESS. The Oakland Railroad had, I think, about two or three miles of
track running from Oakland Point to San Antonio, as it was then called the
portion that is now run as the local ferry track of the Central Pacific. The
Alameda Eailroad had about sixteen or eighteen miles of track, and both had
long piers extending out into the bay, and both had ferry-boats of great value.
The stock of the Alameda Company appears to be about fifteen thousand shares
and the stock of the Oakland Company about six thousand shares. I should think
that they had material property to cover about that value at that time, as
well as their franchises, which were valuable. I suppose that must have been
a fair division at that time.
NO BONDED DEBT AT TIME OF CONSOLIDATION.
Q. Do you remember what their bonded debt was at that time? A. The Alaineda
Company had no bonded debt, and the Oakland Company had none. If I remember
rightly I do not think that either of them had a bonded debt. After the consolidation
a bonded debt was put upon the Oakland Company for the purpose of making improvements
and other things. I do not exactly remember the purpose for which it was put
on, but I remember that after the consolidation into the San Francisco, Oakland
and Alameda Eailroad Company was formed they issued a bonded debt, and I think
that I signed the bonds and that I signed the mortgage as president of the
new corporation.
DIVIDENDS.
Q. Had either of these corporations paid dividends before the consolidation
? A. Oh, yes. The Oakland Eailroad Company paid dividends for some time. The
Alameda Eailroad Company would have paid dividends very shortly. She did not
pay dividends as such. The road was built on borrowed money, and she paid interest
on her debt, and her earnings were put into construction, extensions of the
road, &c. We never paid any dividends as such on the Alameda portion of
the road, but a great many dividends were paid on the Oakland portion.
Q. Do you know where the books of that particular branch are to be found?
Are they with the Central Pacific Company?- A. I suppose so.
ALFRED A. COHEN. 2393
Q. Were they passed over at the time of the consolidation? A. They should
have been.
STATEMENT OF CONSOLIDATIONS.
Q. This consolidated railroad was itself consolidated at a later date with
the Central Pacific, was it not? A. Yes, sir. I will give you that statement
of consolidation if it is of any service to you. There were several corporations
that now enter into the present Central Pacific. In the first place the Central
Pacific of California was the first corporation. Then there was the Western
Pacific. Then there was a corporation called the Bay Railroad Company. Then
there was the San Francisco and Oakland Railroad Company, the San Francisco
and Alameda Railroad Company, the California and Oregon Railroad Company, and
the San Joaquin Valley Railroad Company.
Q. The first consolidation that took place was with the Yuba Railroad Company,
was it not? A. I don't think that went in.
Q. Did it not go in with the California and Oregon? A. Oh, yes ; it did. The
first consolidation that took place was between the San Francisco Bay Railroad
Company and the Western Pacific Railroad Company, and the consolidated company
was called the Western Pacific Railroad Company. Then, in June, 1870, there
was a consolidation between the Western Pacific Railroad and the Central Pacific
Railroad Company of California, and that was called the Central Pacific Railroad
Company. Then there was a consolidation in August of the same year between
the California and Oregon Railroad Company and this Yuba Railroad Company.
THE CONSOLIDATION THAT FORMED THE CENTRAL PACIFIC.
Then, in the latter part of August, 1870, there was a consolidation between
the Central Pacific Railroad Company, the California and Oregon Railroad Company,
the San Joaquin Valley Railroad Company, and the San Francisco, Oakland and
Alameda Railroad Company, as then consolidated, and that formed the Central
Pacific Railroad Company, and that is the present corporation.
Q. How did it happen that these two latter consolidations occurred so closely
together the one being in June and the other in August? Was there a substantial
addition to the road, or were there any extensions of the property as it existed
in June? A. I do not remember, but I think that it was a question for some
time as to whether any consolidation had been legally made. I remember the
subject being discussed as a question of law between Judge Sanderson, other
counsel, and myself probably Mr. Wilson or Mr. McAllister, or probably both
of them as to the powers of the consolidation under our statute at that time.
They were a little crude and indefinite and the matter was kept in abeyance
some time, and, finally, I remember that it was resolved to make the latter
consolidation of August, 1870. I remember that I was starting for New York
at the time, and that I staid over to sign the papers. The question came up,
and I staid over until the papers were ready for my signature.
Q. Were you interested solely as a stockholder at the time of the latter consolidation?
A. I was interested simply as a stockholder in the San Francisco, Oakland and
Alameda Railroad "Company. I never have been a stockholder in any of the
other companies, except the California Pacific, and I am a stockholder of that
company now.
2394 U. S. PACIFIC RAILWAY COMMISSION.
FINANCIAL CONDITION OF CONSOLIDATED ROADS.
Q. As such stockholder, did you yourself make any examination of the financial
condition of the various roads which were being thus thrown together, in order
to determine whether the terms proposed were fair and just to all the parties
?
The WITNESS. In the latter consolidation?
Commissioner ANDERSON. Yes.
The WITNESS. I only thought at that time of the ability of the people who bought
my stock to pay for it. I was looking only at their financial ability. I think
I had the stock as security. I have no doubt that I had some opinion on the
subject at the time, but what it was I could not now tell you. I was not personally
interested.
THE LIENS.
Q. So you did not examine the status of the company, the amount of liens and
the financial condition generally, for that purpose? A. The liens were matters
of record. Everybody in California knew all about them of course.
ONLY SAN FRANCISCO AND OAKLAND STOCK VALUABLE AT CONSOLIDATION.
Q. Was there a market price for these various stocks at the time of the consolidation
1 A. I do not think that there was a market price for any of the stocks, except
that of the San Francisco and Oakland Railroad Company. It had a market price
and the stock was bought and sold here, but there never was a market price
for the others. They never were worth anything until the road was fully developed.
I would not have been willing at the time the Central Pacific road was finished
to take a block of the stock as a gift and be liable for the debts as they
then existed. It turned out better afterwards.
By Commissioner LITTLER :
Q. Do you mean that none of these stocks were listed on the exchange? A. I
mean at the time of the consolidation. At the time these roads were consolidated
there was no one who would touch a share of the Central Pacific Kailroad stock
if he had to pay anything for it.
NO MARKET VALUE TO CENTRAL PACIFIC STOCK TILL RESUMPTION OF
SPECIE PAYMENT.
By Commissioner ANDERSON :
Q. Still, you made no objection to the substitution of stock in the new Central
Pacific Kailroad Company for the stock which you had sold? A. No. My impression
was that at the time the stock was surrendered things were different. I sold
my stock two years before that time. I think that I surrendered the stock about
that time. I never took any new stock and never had any of it issued to me.
Q. Do you include the other stocks, except the Oakland stock, in what you say
about the stocks having no market value at that time? A. There never was any
market value to the Central Pacific stock, or to any of the other stocks, until
after the resumption of specie payments, until after the boom of 1880 and 1881.
Q. How about the Western Pacific Eailroad stock 1 A. That never has had any
market value as Western Pacific stock. Of course, when it got to be Central
Pacific it was included in that.
ALFRED A. COHEN. 2395
Q. How about the California and Oregon? A. That is Central Pacific also.
Q. Had it any value before the consolidation? A. Oh, no ; it had no market
value.
Q. Had the San Joaquin Yalley stock any value? A. No, sir.
THE YUBA ROAD.
Q. What was this Yuba Railroad? A. My impression is that it was a road built
by some intelligent gentleman up country to sell to the Central Pacific. It
has been a source of amusement for some parties for some years to get up railroad
companies and build little roads in order to force the Central Pacific or the
Southern Pacific to buy them.
Q. How many miles long is it? A. I do not know. It is a small road, if there
is any of it built at all.
Q. Do you know whether the books of these various corporations, showing their
financial operations and standing, have all been passed to the Central Pacific
Railroad as each consolidation was made? A. They should have been, but I do
not know it as a fact, however. The Central Pacific is entitled to all the
records of these various companies.
SAN FRANCISCO BAY COMPANY.
Q. What was this San Francisco Bay Company which was amalgamated with the Western
Pacific? A. The purpose of forming that was this: Under the act of Congress
the Central Pacific Railroad terminated at Sacramento. The Western Pacific
road ran from San Francisco to San Jose. Then there was a road from San Jose
to San Francisco, and it was supposed that the Central Pacific Railroad would
come into San Francisco in that way. It was found necessary to incorporate
some 'company to build a road from Niles to Oakland. It was found impracticable
to approach San Francisco by way of San Jose, and this road was chartered for
the purpose of affording a franchise or means of getting right of way, or condemning
right of way from JSTiles to Oakland.
ITS STOCK HAD NO MARKET VALUE.
Q. Was this San Francisco Bay stock commonly bought and sold? A. I do not
believe that they ever issued any stock. If they did, I never heard of it.
I do not believe that they ever built any road. I think that they merely incorporated.
However, I am not certain that they did not build any road, perhaps they did.
The stock had no market value. I have forgotten now, but it may be that they
built a piece of road between Eiles and Oakland. I think it probable that the
Bay Railroad Company may have built a portion, and that it was finished by
the Western Pacific, or it may have been the other way ; I am not sure which.
CENTRAL PACIFIC STOCK WORTH MORE AFTER CONSOLIDATION.
Q. Comparing the stock of the Central Pacific Railroad Company as it existed
before these consolidations in 1869 and 1870, and the stock of the Central
Pacific Railroad Company as it existed in August, 1870, the consolidations
being entirely completed, in your judgment was the absorption of these roads
a benefit to the Central Pacific, or the reverse? Of course we know your answer
will be only an estimate. A. I have always felt that the stock of the Central
Pacific Railroad Company, after p R VOL iv 5
2396 U. S. PACIFIC RAILWAY COMMISSION.
the consolidation of August, 1870, was worth a great deal more than it was
before.
THE EEASON.
Q. By reason of the completion of the through route and terminal facilities
? A. Not only that, but because of the absorption of these great highways through
the State, and their franchises, thus fastening to the Central Pacific so many
valuable feeders. And then, again, remember that the Central Pacific Eailroad
started with a capital of $8,500,000. As the road progressed, it got more property,
and increased its capital stock to $20,000,000. Then when they got into Nevada,
before the consolidation with the Western Pacific, they increased the capital
stock to $100,000,000. They have taken in all these properties the Bay Railroad,
the Western Pacific, the California and Oregon, San Joaquin Valley, the San
Francisco, Oakland and Alameda, and all their various rights and franchises,
which were of great value, and the stock of the Central Pacific has remained
just the same as it was before those properties went in.
AMOUNT OF STOCK ISSUED.
Q. They have issued enough of the $100,000,000 to equal the aggregate of the
stock of all the absorbed roads, in addition to their own, have they not?
A. The nominal stock of the company has remained the same through all these
consolidations.
Commissioner ANDEESON. As I understand it, less than half of it was originally
issued.
The WITNESS. It was issued, I believe, only as they wanted it.
Q. The other half,*if subscribed for at par, would have increased the assets
of the company to the amount of the issued st&ck. In other words, the real
stock of the Central Pacific was but $50,000,000 before the consolidation,
though the nominal stock was $100,000,000,
EFFECT OF THE THUEMAN ACT.
The WITNESS. The stock of the Central Pacific Eailroad Company of course would
have had a very much greater value to day if it hail been allowed to manage
its business as any other corporation has been allowed to manage its affairs.
Instead of taking its earnings and improving the value of the road, as it should
have done, they have been taken from it under the terms of the Thurman act
and by other legislation.
Q. Has not the Central Pacific Company substantially managed its affairs as
it thought best for the last fifteen or twenty years'? A. No; I do not think
so. Then, in addition to that the Government subsidized other roads that have
all the time been setting up opposition to the Central Pacific. The Government
has all the time been tying the hands of its debtor and giving aid and comfort
to the people fighting it.
By Commissioner LITTLEE :
Q. What roads do you now refer to I A. I refer to the Northern Pacific, to
the Atlantic and Pacific and its various branches, and to the advantages which
are being given to the Canadian Pacific in order to enable it to compete for
the business of this coast. It looks very much like the old system of imprisonment
for a debt. If a man owes you money and does not pay it, you put him in jail
where he cannot possibly pay it.
ALFRED A. COHEN. 2397
OPPOSITION LINES AIDED BY GOVERNMENT.
By Commissioner ANDERSON :
Q. You mentioned something about the subsidizing of other roads ; what roads
do you refer to? A. The Northern Pacific and the Atlantic and Pacific.
Commissioner ANDERSON. But you spoke about the Canadian Pacific.
The WITNESS. I spoke of the facilities given now to the Canadian Pacific to
do business and of privileges given to it to bond goods through our territory,
and setting them up in opposition to the road that owes the Government so much
money. It seems to me that no business man would treat his debtor in that way
if he wanted his debts paid.
Q. What are the facilities that you refer to as being given by the Government
to the Canadian Pacific? A. The right to run cars in bond to compete with
our ports here, the port of San Francisco, for the business which naturally
belongs to the Central Pacific Railroad. Heretofore large quantities of tea
and silk have been brought to this country by steamers connected with the Central
Pacific and Union Pacific companies, and this traffic has formed a very large
portion of the business of those companies, Under the new order of things,
the Canadian Pacific comes in with its steamers and its line of road and seriously
cuts into this business which has heretofore belonged to our own lines, and
the Government, by permitting that company to carry its goods in bond through
our territory and to points within our territory, assists it in its endeavor
to filch this business from the lines which are so largely in debt to the Government
of the United States. That is what I mean when I say that the Government gives
aid and comfort to the Canadian Pacific.
Q. Are there any other subsidized roads which compete with the Central Pacific
than those which you have mentioned? A. No ; I do not remember that there
are.
GOVERNMENT TRAFFIC ON OTHER ROADS.
Q. Do you know anything of the amount of the traffic given by the United States
Government to other roads in the matter of transporting troops and mails?
A. I do not. I know this, however : From my reading and studies on this subject
I am very well satisfied that the United States paid for carrying mails and
for the movement of troops between 1850 and 1860 a great deal more than it
ever allowed the Central Pacific and the Union Pacific from 1869 to the present
time.
TRANSPORTATION CHEAPER SINCE COMPLETION OF RAILROADS.
Q. Is it not true that it costs all the citizens of this country a great deal
less to move about from place to place at the present time than it did before
the railroads were completed? A. Of course ; that is one of the advantages
that the Government and people derived from the building of these two roads.
Prior to 1869 we had to go to New York by way of the Pacific Mail, which charged
us $300 for the passage, and pretty much everything was charged extra. The
time consumed in the journey was from twenty-four to twenty-eight days, and
the passengers had to take the risk of contracting the Panama fever and the
malaria of the tropics, and the numberless ills to which people are subject
in crossing such a place as the Isthmus of Panama. We are benefited, of course,
by the railroad in this respect ; the travel is not only more comfortable in
2398 U. S. PACIFIC RAILWAY COMMISSION.
every way, but it is cheaper. The rail rate is now less than $100, and the
time consumed less than seven days.
Q. Has that circumstance, in your judgment, anything whatever to do with the
payment of a debt for which a consideration was given and for which the obligation
remains? A. I think that it has a great deal to do with it.
Commissioner ANDERSON. We would be very glad to hear from you in what respect
it affects the question.
CONDITION OF COUNTRY PRIOR TO CONSTRUCTION OF ROAD.
The WITNESS. Before going into that question, of course it' becomes necessary
to consider the language of the law authorizing the building of these roads,
and the condition of the country before and during their construction. Before
these roads were built, the country was engaged in a great war for its existence.
The credit of the Government was at a low ebb ; materials and supplies of all
kinds could be procured only at abnormally high prices. Wages were high and
laborers scarce. It cost as much money to build a mile of road then as 3 miles
could have been built for five years before or five years afterwards. The credit
of the Government was very poor; very little was realized from the sale of
the bonds which the Government loaned to these roads. They had to be sold at
a big discount to provide money to build the road. In addition to this, the
Government was all the time pushing these people to greater exertion and greater
diligence, and* I think that all of these things should be considered in any
inquiry of this sort. When you estimate the present rate of interest, the amounts
realized by these people from the sale of their securities and the cost of
materials, you will find that the rate of interest upon this loan by the Government
will amount to more than 12 per cent, per annum on the money realized. It seems
to me that all these things should be taken into consideration in any report
which is made to Congress by you.
GOLD VALUE OF BONDS.
By Commissioner LITTLER :
Q. Can you state what these bonds netted the railroad company in gold? A.
I will say this : In gold they did not net on an average for all the bonds
given more than 60 per cent. This is according to my recollection and information.
I do not believe that the company got 60 per cent, in gold for these bonds.
I remember that when they were very hard pushed trying to get money to get
over these mountains, I tried to borrow money for them here in San Francisco,
putting two bonds in for one, but our capitalists would not lend the money.
Q. Were the contracts for construction payable in gold? A. That I do not know;
some of those made in the East were undoubtedly payable in currency ; but all
those made on this coast were payable in gold of the latest standard and fineness.
THE ROAD NOT WORTH ITS BONDED DEBT.
By Commissioner ANDERSON:
Q. Do not you know that many of these payments were made in bonds and stock
9 A. if so, they were at a corresponding value.
Q. Made to meet the real value of the articles sold to the company? A. It
was just this way, Mr. Anderson. When this Central Pacific Eailroad was finished
it was not worth its bonded debt. It is not worth its
ALFRED A. COHEN. 2399
bonded debt to-day. You cannot sell it for its bonded debt. Nobody in the world
would take this road mortgaged to the Government and make the money out of
it due to the bondholders and the Government. Q. You mean the two first mortgages
? A. I mean the road responsible for the bonds issued under the acts of 1862
and 1864 ; and the way that the Government is treating this company renders
the property of less value every day.
DIVIDENDS.
By the CHAIRMAN :
Q. What did the road do with the eighteen millions declared in the shape of
dividends to stockholders between 1877 and 1884? A. I do not suppose that
the road did anything. I suppose that the directors who owned the stock did
something.
Q. What effect would it have had on the Central Pacific Eailroad property if,
instead of dividing this $18,000,000 among its stockholders, it had applied
it to bettering the condition of its road and extending its earning capacity
? Do you not think that if this had been done the road would have been in better
shape to repay its debt to the Government than it is now? A. A great deal
of money went into this road besides that which the Government lent. Money
was procured from all available sources. The bonds of the company were issued
and sold for such sums as were possible. In many markets of the world at that
time you could not sell a bond. All this is now changed. The bonds of the Central
Pacific Railroad Company are now away above par. You gentlemen are men of the
world, of great financial as well as legal experience, and you know perfectly
well that you could not organize a railroad and go to any market in the world
and sell a bond unless you had some security for the money which you asked.
In addition to your bonds, you would have to give a portion of your title deeds
or your stock as a bonus ; and this was what the Central Pacific Railroad had
to do.
RESULT IF MONEY HAD BEEN APPLIED TO IMPROVEMENT OF ROAD.
Q. If this money declared in dividends to the stockholders had been applied
to the improvement of the railroad property, would not the security of the
Government have been better to-day than it is? A. Undoubtedly, if all the earnings
of the road had been used to redeem its liabilities instead of giving anything
to its stockholders, and if this could have been done without any bad effects
I might answer your question in the affirmative 5 but you must remember that
a great many people hold shares of this stock, people whose money went in to
discharge the obligations of the company incurred for tbe construction of its
road. At the time this road was finished I do not know but what perhaps I may
be telling you gentlemen something you do not wish to hear, but I presume that
you are acting in a judicial capacity, and that you would like to hear both
sides of the question.
Commissioner ANDERSON. Oh, yes ; we want to know everything.
FINANCIAL CONDITION OF DIRECTORS ON COMPLETION OF ROAD.
The WITNESS. When this road was finished every one of these directors was mortgaged
up to all that his credit would carry. Their notes were out everywhere. They
were scattered all over this State and in New York, Boston, and Philadelphia,
many of them bearing from 12 to 15 per cent, per annum interest. They had to
sell stock to redeem their personal obligations incurred for the benefit of
this road, stock which they had taken in payment for the building of t he road.
At
2400 U. S. PACIFIC RAILWAY COMMISSION.
the time this contract with the Contract and Finance Company was made, there
was not a capitalist on the face of the earth that was willing to take hold
of it. I have seen Mr. Huntington trudging about in New York trying to get
people to lend him money and take an interest in the construction of the
road upon the same terms that it was let to the Contract and Finance Company.
For months, almost for a year, if not for more, he was traveling at night
between Washington and Boston trying to raise money to send to California.
They were put to terrible straits to get money to get over these mountains.
I have sat here in bank parlors in San Francisco and heard the bankers and
capitalists say, "Don't you have anything to do with those men, Stanford,
Huntington, and Hopkins ; don't you put any money into their schemes. They
are bound to come to grief. Nobody in the world can get that road through." There
are two sides to this story, of course. You, Mr. Anderson, with your great
legal experience, know that it is very easy to frame an indictment, but I
know and you know that there never was a case to which there was not some
defense.
ABILITY OF COMPANY TO PAY ITS GOVERNMENT INDEBTEDNESS.
By Commissioner LITTLER :
Q. Have you considered the subject as to the ability of this company to pay
its indebtedness to the Government?
The WITNESS. I have no doubt that this company is composed of men who will
pay whatever they will undertake to pay, and do whatever they undertake to
do, no matter where it comes from. They are good for anything they nndertake.
There is no question about that.
Commissioner LITTLER. I am speaking of the corporation, independent of the
personal responsibility of these men.
The WITNESS. I will say this, you cannot sell the mortgaged property to-day
for the lien that is on it.
PLAN OF SETTLEMENT.
Q. What suggestions have you to give to this Commission, if any, as to the
terms upon which the settlement of the indebtedness between this company and
the Government can be made? A. The suggestion that I would make to this Commission
is the same that I would give to any business firm or corporation who would
consult me as to what it should do with a debtor under similar circumstances.
I would look at the property in its present condition. I would look at the
condition of the property when it came into existence. I would have regard
for the physical condition of the country through which it was built, which
made necessary its great cost. I would look at the condition of the nation
at the time the road was constructed, at the manner in which the people were
urging this company to complete the road. I would look at the great advantages
which the Government obtained from such completion, and the great convenience
which it has been to the people of the United States, and the enormous amount
of money which the Government has saved by its construction, and the failure
of the Government to keep its part of the contract as outlined in the debates
preceding the passage of the act of 1862. Then I would give full and fair consideration
to any application which might be made for an extension of the time of payment,
and I would give it upon fair and equitable terms. That is what any business
man would give to his debtor under like circumstances.
ALFRED A. COHEN. 2401
EARNING CAPACITY OF ROAD VERY MUCH REDUCED.
Q. Have you considered the subject sufficiently to indicate to this Commission
the terms of the settlement which ought to be proposed? A. I have not. I am
not prepared to make any positive suggestion on that subject. I am speaking
on general principles as to what ought to be done under the circumstances.
Q. Have you any intimate knowledge of the earning capacity of this property
as it stands to-day? A, No ; but I did have some years ago. I have been out
of business for some time, but I know that within the last few years its earning
capacity has been very much reduced. I am now speaking of the mortgaged property,
and not of the whole Southern Pacific property.
Q. You say that you know that its earning power has been very much reduced
; how do you know this? A. I know this from my knowledge of the affairs of
the company, and from my knowledge of the business which is being done by rival
lines. I also consider that the illconsidered legislation adopted by Congress
towards these two roads, the Central Pacific and the Union Pacific, has been
such that they have not had a fair chance to compete with other roads for the
business ol the country.
EARNING CAPACITY CONTROLS ITS MARKET VALUE.
Q. In determining the terms which the Government should adopt, would you take
into account only the value of the property as it stands to-day in the markets
of the world, or would you consider in addition thereto the earning capacity
of the property? A. The earning capacity of the property and its ability to
maintain those earnings necessarily control the market value.
Q. Is it not true that in railroad circles the value of a property is determined
more by its earning capacity than by the amount of money which it may owe f
A. Hardly so. The earning capacity of course has reference to the charges that
will come upon those earnings. If the earnings are to be absorbed in paying
interest on a large bonded indebtedness so as to leave nothing to the stockholders,
the road itself will have very little market value, except to its creditors.
ITS NET EARNINGS FOR 1886.
Commissioner LITTLER. The net earnings of this road for 1886, as I remember
them, were about nine million of dollars, and the gross earnings were between
seventeen and eighteen millions.
Commissioner ANDERSON. Including all the leased lines.
The WITNESS. 1 am speaking of the mortgaged property. I see very well where
the mortgaged property will be left if it is separated from the other property
which has been acquired and which is at present somewhat free from competition.
Q. Is it not true that at least some of these branch lines have been acquired
with moneys earned by the Central Pacific road? A. That is a mere question
of calculation which I have not been able to make. I notice that almost every
time a new property has been acquired, there has been some lien placed upon
it.
Q. Have you any interest in the stock or bonds of the Central Pacific Railroad
Company? A. No, sir ; not a cent, and I never did have.
Commissioner LITTLER. You seem to be a competent witness.
2402 U. S. PACIFIC EAILWAY COMMISSION.
The WITNESS. I ain merely giving you my opinion. 1 think that if you gentlemen
would come to my views on this subject the Government and the people of the
United States would make more out of this road than by any other course which
could possibly be adopted.
LOSS OF TRAFFIC CAUSED BY AIDED LINES.
Q. Have you any knowledge of the amount of the decrease of traffic of this
company arising from the construction and operation of the competing lines
to which you have referred? A. I made some kind of a calculation once, but
do not know how true it is. I have talked with some of the people whom I thought
to be familiar on the subject, and my impression is, from the best information
obtainable, that tlie loss to the Central Pacific and its leased lines caused
by the building of the other subsidized roads the Northern Pacific and the
Atlantic and Pacific and the loss caused by the construction of the Canadian
Pacific, together with the earnings which have been taken from it by the Atchison,
Topeka and Santa Fe Company, which, of course, works the subsidized line of
the Atlantic and Pacific, will amount to something over thirty millions of
dollars, probably nearer forty millions.
By Commissioner ANDERSON:
Q. From what period of time? A. That would be about five years, I think. The
business that has been taken away from your debtor by the roads which you have
subsidized and by the roads which you have aided in various ways has certainly
amounted to somewhere between thirty millions and forty millions of dollars,
and to this extent you have impaired the means of your debtor and reduced its
ability, so far, to pay its debt.
THE CANADIAN PACIFIC.
By Commissioner LITTLER :
Q. Does this Canadian Pacific Company, through the bonding system which you
mention, take a large part of the traffic which would otherwise go to the Central
Pacific 1 A. Yes, sir; the very idea of the Canadian Pacific seems to be to
take everything that is in sight, and the Government seems to be willing to
afford the foreign company every facility and means for doing it.
Q. Is that done under any statute of the United States? A. No ; I do not think
it is. I think this is done under a Treasury regulation.
THE NORTHERN PACIFIC.
Q. How does the Northern Pacific connect itself with the business of this region?
A. The Central Pacific, before the completion of the Northern Pacific, got
all the freight for Oregon and the territory north. Now the Northern Pacific
gets all of that business, and in addition to that it has a line of steamers
plying between San Francisco and Oregon and takes a large slice of the business
which naturally belongs to the Central Pacific line.
By Commissioner ANDERSON :
Q. Is not this carrying the doctrine of taking care of a debtor rather far
? It could hardly be expected that the builders of the Central Pacific Railroad
should have a monopoly of the carrying of traffic across the United States.
A. That is so. I am merely speaking of things as they exist, and how contrary
they are to the anticipations indulged in
ALFRED A. COHEN. 2403
by Senators and members of Congress and by the railroad companies before the
construction of the roads.
BENEFICIAL EFFECT OF COMPETITION OF SOUTHERN PACIFIC.
Q. How about the effect of the competition of the Southern Pacific on the Central
Pacific traffic I A. Instead of hurting, I think that it has greatly benefited
the business of the Central Pacific Kailroad. The Southern Pacific undoubtedly
has been the means of saving to California a great deal of its business. It
has built a line through Arizona, New Mexico, and Texas, and has opened up
these markets to the merchants of California. It has also built a line into
Mexico and has given our merchants a chance to compete for the business of
that country. But for this, all the business of these Territories and of Mexico
would be done by Eastern merchants, and California would get none of the benefits
from that traffic. As it is, California supplies the largest portion of the
goods consumed in these sections, and all of this business contributes directly
or indirectly to the prosperity of the Central Pacific road. The Southern Pacific
is the only line by which you can get freight rapidly from San Francisco to
New York and from New York to San Francisco. It is the only concern which can
make a through rate. You can go to a man in New York and he can tell you exactly
what he can do for you and the time within which he can do it,
Q. That is on freight? A. Yes, sir. If you want to ship any freight from New
York to San Francisco you have not got to await the convenience of the New
York Central, or of any other of those Eastern trunk roads, and you have not
got to be bothered and annoyed with the delay which always occurs at Chicago.
According to my experience, it used to take a week or ten days to get freight
through Chicago. I do not know how it is now.
SOUTHERN PACIFIC PROTECTS CENTRAL FROM COMPETITION WITH
GOULD'S LINES.
Q. What effect has the construction of the Southern Pacific and the establishment
of a through line had on the earnings of the Central Pacific? A. I do not
think that it has any but a good effect. If the Southern Pacific had not started
its road and protected the Central Pacific's through business, this business
would have been done by the Texas and Pacific and Mr. Gould's lines.
Q. What do you mean by " protected the Central Pacific "? A. If
the Southern Pacific had not been built, and if the Sunset route had not been
established, the Central Pacific, of course, would have had a competitor from
the south," which would have taken a large share of the business, reduced
the rates for traffic, and more or less demoralized the Central and Union Pacific
Companies, and business would have been done without profit. With the construction
of the Southern Pacific and the building of a road which worked in harmony
with the Central Pacific, rates were maintained and the earning capacity of
both roads increased. While the Central Pacifi c operated the Southern Pacific
under lease it, of course, received the tolls upon business done by the Southern
Pacific. The business of the Southern Pacific, under any circumstances, must
come over the lines of the Central Pacific, and must pay terminal charges and
ferriage to the Central Pacific. If the Southern Pacific road were owned by
the Pennsylvania Central, as originally intended by Tom Scott, or if it had
been built by the Texas and Pacific people under Mr. Gould, the earnings of
the Central Pacific would not have been as great as now.
2404 U. S. PACIFIC RAILWAY COMMISSION.
TERMS OF LEASE OF CENTRAL TO SOUTHERN PACIFIC.
Q. Have you examined the lease of the Central Pacific to the Southern Pacific
Company, and are you familiar with its terms'? A. I have not seen it.
Q. Do you know how the rental of $1,200,000 per annum, which the Southern Pacific
agreed to pay, was fixed I -A. I did know, but I have forgotten. I do not remember
now.
Commissioner ANDERSON. I presume that we can get that from the auditor's office.
The WITNESS. I think that you can get it from the record.
HOSTILE LEGISLATION.
By the CHAIRMAN :
Q. What legislation on the part of Congress interfered with the development
of the Central Pacific? A. I think the Thurman bill and all the various little
things that have been passed since then ; and not only that, but the general
hostility that has been shown by Congress to the Central Pacihc Railroad have
very seriously interfered with the development of the Central Pacific Railroad.
Although the company has complied with the terms of the various acts of Congress
and of the Thurman act, there has been money due by the different Departments
to the Central Pacific Railroad Company, and the Secretaries have reported
session after session that the amoiint was due, and it has been put into the
appropriation bills, but every time some patriot would rise up and have it
stricken out. Although these claims have been considered by the Court of Claims,
and have been passed upon by the Supreme Court of the United States, the company
has been unable to get its money, and there has been a very large amount of
hostility shown by somebody towards the management of this road.
PROSPERITY MEASURED BY EARNING POWER.
Q. Would you measure the prosperity of a road by its dividends! A. 1 measure
the prosperity of any material property by the amount of its earnings. Of course
this would apply as well to a railroad as to a brewery.
Q. Do the dividends of the Central Pacific Railroad Company represent the earnings
of the road? A. No well-regulated corporation ought to pay dividends except
from earnings.
Q. Do you know whether the dividends of the Central Pacific represent the earnings
of the Central Pacific? A. All that I know about it is that at the time they
were declaring those dividends, their annual reports, as published in Poor's
Manual, and in the " manual" containing the reports of its officers,
showed that they earned enough to pay those dividends.
Q. Is it not true that more dividends have been declared since the passage
of the Thurman act than at any time prior thereto? A. The Thurman act was
passed in 1878 ; I think that the road commenced to pay dividends in 1873 or
1874, and then they stopped fora while. After they resumed, I think they paid
up to 1882.
The CHAIRMAN. They paid up to 1884.
Commissioner ANDERSON. I think it was 1883.
The CHAIRMAN. A dividend was declared February 1, 1884.
The WITNESS. It is a mistake to say that they declared any dividend for 1884.
ALFRED A. COtiEN. 2405
The CHAIRMAN. February 1, 1884, a dividend of $1,778,265 was declared.
The WITNESS. That is a mistake. They did not declare any dividends in 1884.
The CHAIRMAN. 1 have it from the reports.
The WITNESS. It must be a mistake, for I think no dividends were declared in
1884.
Commissioner ANDERSON. Look at the report of 1884 and see what it says.
NO DIVIDENDS DECLARED FOR FOUR YEARS.
The WITNESS. It says that a dividend was paid February 1, 1884. That is, paid
from the earnings of 1883. I know that they were not earning dividends in 1884.
Q. If that be true, is it a just conclusion that the prosperity of the road,
so far as its financial standard is indicated by the payment of dividends,
has been interrupted by the passage of the Thurman act? A. This dividend to
which you refer me was paid from the earnings of four years ago. The company
has declared no dividends for four years, and then you must remember they had
income from the non-aided and leased lines.
Q. They declared dividends in 1883, 1882, 1881, and 1880, did they not? A.
Yes. But in 1884, 1885, 1886, and 1887 no dividends were declared.
EFFECT OF THURMAN ACT ON EARNING CAPACITY.
Q. I am taking the periods prior to the passage of the Thurman act and subsequent
thereto. If the declaration of dividends is an indication of the financial
prosperity of the road, can you conclude that the passage of the Thurman act
has interfered with the earning capacity of the road? A. I cannot say that
I have been sufficiently in the confidence of the directors to enable me to
say why the dividends were declared; but it may have been that at the time
the stock began to be put upon the market they commenced to pay dividends to
help its sales. I am very well satisfied that the property of the road and
its earning power, and everything else pertaining to its success, were very
much impaired by the legislation contained, in what is known as the u Thurman
act." It is a little too voluminous a subject to discuss in answer to
one question. But if you will take the traffic reports and the mode of distributing
the earnings, and what they paid the Government, and compare it with the distribution
of their earnings for years before, you will find my conclusion to be correct.
VALUE OF BONDS OF SOUTHERN PACIFIC.
Q Was not the " Thurman act" a mere preparation for the maturity
of the bonds? A. These men had started, as I understand, to make a sinking
fund of the bonds of the Southern Pacific Railroad Company of California at
ninety cents on the dollar. Those bonds to-day are worth one hundred and fifteen,
paying interest right along, and will, no doubt, be worth one hundred and twenty
in a little while, and will have to be redeemed at one hundred and twenty,
if redeemed before maturity. Instead of allowing them to handle a sinking fund
as any other solvent man would be allowed to handle it; instead of allowing
them to put in the liens of their own road at a low rate, as they proposed
to do, you force them to pay money in, which was taken out of their earnings
from time to time, and which was invested in some bonds of the Government which
2406 U. S. PACIFIC RAILWAY COMMISSION.
had to be purchased in the open market at a high premium, so that the money
put into the sinking fund is less to-day by three quarters of a million,
according to my recollection, than the amount of money paid in. You took
the earnings from them, and exhausted three quarters of a million of them
in buying your own bonds to create your own sinking fund. I want to call
your attention, as business men, and as intelligent men really as a matter
of business to the way in which these men have been treated; and to the unintelligent
way in which their business has been handled by those having Government control.
I know that I would not treat any debtor of mine in that way if I expected
him to pay me.
EFFECT OF CONSTRUCTION OF SOUTHERN PACIFIC ON UNION PACIFIC.
Q. What effect had the construction of the Southern Pacific road upon the Union
Pacific? A. Well, the Southern Pacific undoubtedly takes some business which
might otherwise go by the Union Pacific; or, if not by the Union Pacific, by
the Atlantic and Pacific, or by the Texas and Pacific. I wish to state to the
Commission, however, that when the Southern Pacific was started, recognizing
the fact that these roads were intended to be operated as one, and having due
regard to the interests of the Government as a creditor .of the Union Pacific,
an offer was made to the Union Pacific people Mr. Dillon and Mr. Gould to let
them in on the construction of the Southern Pacific upon equal terms, dollar
for dollar, without any bonus, and that they refused. They did not believe
that the Southern Pacific could hurt the Union Pacific. I think that you should
bear this in mind : If the owners of the Central Pacific had not the control
of the Southern Pacific, if the control of the latter road had been in adverse
hands, the condition of the Central Pacific would have been very much worse
to-day than it is, and the position of the Government would have been a great
deal worse. The same is true of the Union Pacific. It has had its share of
all the business which the Southern Pacific has thrown into the hands of the
Central Pacific.
EFFECT OF CONSOLIDATION OF CENTRAL AND SOUTHERN ON UNION
PACIFIC.
Q. Has not the effect of the union of the Central and Southern Pacific been
to divert a large portion of the traffic from the Union Pacific over to the
Southern Pacific? A. I have fully explained what I mean in this regard. Some
of it has been diverted, but not so much so as would have been the case had
the Southern Pacific been in any other hands than those of the managers of
the Central Pacific. I am about used up, gentlemen. I have given you all the
time I can very well afford this morning.
Commissioner ANDERSON. We will be here thirty days. Will you be back within
that time u?
The WITNESS. Oh, yes ; but if you want anything more I will give you any time
you want in New York. I shall be in New York the 1st of October. Or, if you
want me here to-morrow, I am willing to come. If not, I will read this over
and see what I want to correct.
Commissioner ANDERSON. We hope to ask our last question before the 1st of October.
The CHAIRMAN. Can we hear you to-morrow at some hour?
The WITNESS. I can be here to-morrow at 10.30. 1 want to go away Saturday.
ALFEED A. COHEN.
ARTICLES OF CONSOLIDATION. 2407
ABSTRACTS OF VARIOUS ARTICES OF CONSOLIDATION.
Commissioner ANDERSON. Mr. Miller has left with me the different articles of
consolidation produced yesterday, from which we will take extracts.
The following are extracts from the various articles of consolidation :
Articles of consolidatian between the Western Pacific Railroad Company and
the San Francisco Bay Railroad Company, dated October 28, 1869, containing
a recital of the organization and construction of these two railroads, of their
conclusion to consolidate.
They contain six articles.
The effect of these articles is to consolidate all the capital stock and all
of the property and franchises of the respective corporations into a new corporation,
which is declared to be the Western Pacific Railroad Company.
The terms of the consolidation are that the respective stockholders in each
of the constituent companies shall hold equivalent amounts of stock in the
new corporation.
The stock of the new corporation is fixed at $10,400,000, and the length of
the. consolidated road is stated to be about 223 miles.
The new corporation assumes all liabilities of the constituent companies.
The articles of consolidation are signed by Leland Stanford as president and
E. H. Miller, jr., as secretary of the Western Pacific Railroad Company, and
by Leland Stanford as president and by E. H. Miller, jr., as secretary of the
San Francisco Bay Rai Iroad Company.
The consent of iriore than three-fourths in value of the stockholders in the
respective companies is annexed and the signatures thereto are as follows :
nance Company, by C. Crocker, president ; C. H. Cuminings.
The stockholders of the San Francisco Bay Railroad Company are as follows :
Leland Stanford; C. Crocker; E. B. Crocker, by C. Crocker, attorney in fact
; Mark Hopkins ; C. P. Huntington, by Mark Hopkins, attorney in fact ; E.
H. Miller, jr.; Contract and Finance Company, by C. Crocker, president ;
Jerome Madden; B. B. Redding ; W. E. Brown, and D. A. Bender.
The articles of consolidation between the California and Oregon Railroad Company
and the Tuba Railroad Company bear date the loth day of December, 1869.
The terms of the consolidation are to the effect that the shareholders of each
of the constituent companies shall receive a number of shares in the consolidated
company equal to the number of shares held by them, respectively^ in the old
companies.
The stock of the new corporation is fixed at $15, 000,000, and its term of
existence at fifty years.
The new company succeeds to all the property and franchises of the old companies
and assumes all of their obligations.
The first board of directors of the new company is declared to consist of the
following persons: Lelaud Stanford, -C. P. Huntington, Mark Hopkins, E. B.
Crocker, Charles Crocker, E. H. Miller, jr., and A. P. Stanford.
The articles are signed by E. H. Miller, jr., as secretary of the California
and Oregon Railroad Company. A corresponding instrument is executed by the
Yuba Railroad Company.
Articles of association betiveen the Central Pacific Railroad Company of California
and tht Western Pacific Railroad Company bear date June 22, 1870.
The articles contain a recital of the organization, construction, and operation
of the constituent roads and of the preceding consolidation between the Western
Pacific and the San Francisco Bay Railroad Company, and the articles of consolidation
provide, substantially, that the new corporation shall succeed to all the property
and franchises of the constituent corporations and shall assume all of their
obligations ; that the stockholders in the new corporation shall hold an equivalent
amount of stock to that which they held in the constituent companies ; and
that the new corporation shall be known as the Central Pacific Railroad, which
shall exist for fifty years.
The first board of directors is declared to consist of Leland Stanford, C.
P. Huntington, Mark Hopkins, Charles Crocker, E. B. Crocker, E. H. Miller,
jr., and A. P. Stanford.
2408 U. S. PACIFIC RAILWAY COMMISSION.
The length of the road is stated to be about 1,000 miles, and its capital stock
is fixed at $100,000,000.
The articles are signed by Leland Stanford, president, and E. H. Miller, jr.,
secretary, for the Central Pacific Railroad Company of California, and by the
same parties as president and secretary, respectively, of the Western Pacific
Railroad Company.
Annexed to the articles are the consents of more than three-fourths of all
the stockholders of the respective companies.
The stockholders of the Central Pacific Railroad of California, whose names
are appended to the consent, are as follows : Leland Stanford, Charles Stanford,
by Leland Stanford, attorney in fact ; Mark Hopkins, C. P. Huntington, by Mark
Hopkins, attorney in fact; C. Crocker, E. B. Crocker, by C. Crocker, attorney
in fact ; E. H. Miller, jr., C. L. Scndder, A. P. Stanford, by Leland Stanford,
attorney in fact; B. R. Crocker, D. O. Mills & Co., Albert Gallatin, W.
R. S. Foye, C. H. Cummings, J. E. Hollister, Julius Wetzlar, J. S. Friend,
Friend & Terry, W. E. Terry.
The stockholders of the Western Pacific Railroad Company, whose names appear
subscribed to the consent, are as follows : Leland Stanford, Mark Hopkins,
C. P. Huntington, by Mark Hopkins, attorney in fact; C. Crocker, E. B. Crocker,
by C. Crocker, attorney in fact: E. H. Miller, jr., A. P. Stanford, by Leland
Staufordj attorney in fact, and C. H. Cummings.
Articles of association between the San Francisco and Oakland Railroad Company
and the San Francisco andAlameda Railroad Company bear date June 28, 1870.
They recite the organization, construction, and operation of the respective
roads. The articles are substantially that the new company shall succeed to
all the property and franchises, and shall assume all the obligations of the
old companies. The stock of the new company is fixed at $2,000,000.
The stockholders of the old companies are declared to be entitled to receive
amounts of stock in the new company equal to the amounts held by them in the
old companies. Tho name of the new company is declared to be the San Francisco,
Oakland and Alameda Railroad Company.
The length of the road of the new company is declared to be about 25 miles.
The articles of association are signed by the boards of directors of the respective
companies, and are: Alfred A. Cohen, president; D. O. Mills, W. C. Ralston,
F. D. Atherton, and D. P. Barstow, directors of tfce San Francisco and Oakland
Railroad Company ; and by F. D. Atherton, John Hewston, jr., E. B. Mastick,
and Alfred A. Cohen, as directors of the San Francisco and Ala.meda Railroad
Company.
The consents of more than three^fourths of the stockholders are annexed, being
for the San Francisco and Oakland Railroad Company: A. A. Cohen, D. O. Mills,
W. C. Ralston, F. D. Atherton, D. P. Barstow ; and by the following as stockholders
of the San Francisco and Alameda Railroad Company : F. D. Atherton, A. A. Cohen,
E. B. Mastick, John Hewstou, jr., and Leland Stanford.
The four parties first named signed for 5 shares 'each, and the last named
for 14,985 shares.
Articles of association betioeen the Central Pacific Railroad Company, the
California and Oregon Railroad Company, the San Francisco, Oakland and Alemeda
Railroad Company and the San Joaquin Valley Railroad Company bear date August
20, 1870.
These articles recite the organization, construction, and operation of the
constituent roads and contain articles of association as follows :
The new company is declared to be the Central Pacific Railroad Company.
It succeeds to all tiie property and franchises and assumes all the obligations
of the constituent companies.
The board of directors was declared to consist of the following-named persons
: Leland Stanford, William E. Brown, Mark Hopkins, C. P. Huntiugton, Charles
Crocker, Edward H. Miller, jr., and Charles H. Cummings.
The capital stock is declared to be $100,000,000, and the company is to exist
for fifty years. Each stockholder of each of the constituent companies shall
have the same number of shares of the capital stock of the new corporation
which he holds of the capital stock of the respective companies.
The articles are signed by Leland Stanford, as president, and E. H. Miller,
jr., as secretary, of the Central Pacific Railroad; by Leland Stanford, president,
and E. H. Miller, jr., secretary, of the California and Oregon Railroad Company
; by Alfred A. Cohen, president, and H. Lacy, secretary, of the San Francisco,
Oakland and Alameda Railroad Company ; by Leland Stanford, president, and E.
H. Miller, jr., secretary, of the San Joaquin Valley Railroad Company.
The consents of more that three-fourths of the stockholders of the respective
companies are attached.
WILLIAM H. MILLS. 2409
The stockholders of the Central Pacific Railroad Company are as follows : Leland
Stanford, Mark Hopkins, C. P. Huntington, by Mark Hopkins, attorney in fact
; C. Crocker, E. B. Crocker, by C. Crocker, attorney in fact ; W. E. Brown,
E. H. Miller, jr., and C. H. Cummings.
The stockholders of the California and Oregon Railroad Company, whose signatures
are attached to the consent, areas follows: Leland Stanford, Mark Hopkins,
C. P. Knntington, by Mark Hopkins, attorney in fact ; C. Crocker, E. B. Crocker,
by C. Crocker, attorney in factfE. H. Miller, jr., and B. B. Redding.
The stockholders of the San Francisco, Oakland and Alameda Railroad Company
whose names are attached to its consent are : Alfred A. Cohen, D. O. Mills,
F. D. Atherton, D.P. Barstow, and W. C. Ralston.
The stockholders of the San Joaquin Valley Railroad Company whose names are
attached to its consent are: Leland Stanford, Mark Hopkins, C. P. Huntingtou,
by Mark Hopkins, attorney in fact ; C. Crocker, E. B. Crocker, by C. Crocker,
attorney in fact; E. H. Miller, jr., B. B. Redding, and C. H. Cummings.
OFFICES OF THE CENTRAL PACIFIC RAILROAD COMPANY,
San Francisco, CaL, Wednesday, July 27, 3 887.
Afternoon session.
WILLIAM H. MILLS, being duly sworn and examined, testified as follows :
By the CHAIRMAN :
Question. What is your business? Answer. As connected with the road, I am
the land agent.
Q. How long have you been connected with the road? A. I was appointed land
agent on the 1st day of January, 1883.
Q. What relations did you hold with the road prior to 1883? A. Ko relation
with the road as an employe.
DUTIES OF LAND AGENT.
Q. How long were you connected with the road prior to 1883? A. I was not connected
with it as an employe' prior to that time, nor in any other way.
Q. Was the date of 1883 your first connection with the road in any capacity
? A. Yes, sir.
Q. What were your duties at that time, and what are they now?
The WITNESS. As laud agent 1?
The CHAIRMAN. As land agent?
The WITNESS. I have general charge and supervision of the lands granted by
the Government in aid of the construction of the road.
B. B. REDDING'S ADMINISTRATION.
Q. Who was your predecessor in office? A. Mr. B. B. Eedding.
Q. How long was he connected with the land department? -A. Mr. B. B. Bedding's
connection with the land department, I think, dated from the very beginning
of the grant. I think it was about 1866. That is only from recollection, of
course. I was not in a position to know or to answer that question really anyhow.
Q. Where is Mr. Bedding now? A. Mr. Bedding is dead.
Q. How long has he been dead? A. Mr. Bedding died in the summer of 1882, some
time, I think, in June or July of 1882. t
Q. Were you appointed or selected to fill the vacancy caused by his death?
A. Yes, sir; there was an interregnum in the office of land
2410 U. S. PACIFIC RAILWAY COMMISSION.
agent from that date until the date of my appointment from the date of his
death to the date of my appointment the office being conducted by clerks
and a deputy who had been in the office since the beginning of the administration
of the office.
Q. What are you paid by the company? A. I am paid a salary.
Q. What is the salary? A. The salary is $7,000 a year.
Q. How many clerks have you? A. Six clerks besides the field agents.
BOOKS OF LAND DEPARTMENT.
Q. What books do you keep?
The WITNESS. Personally, do you mean?
The CHAIRMAN. Yes, sir.
The WITNESS. None whatever.
Q. What books does your department keep impersonally I am speaking, altogether?
The WITNESS. Oh, you are speaking of the department?
The CHAIRMAN. Yes.
The WITNESS. We keep the tract books, which exhibit the lauds granted. We keep
all the maps and all the delineations of the land grant. We keep the plots
of townships, the accounts of sales and of leases, the accounts of sales of
timber lands, of lands where the timber is granted and the land is not granted,
which is the case within ten miles of the road if the land is mineral. We keep
accounts of all matters and things relating to the land department and to the
lands granted. I also keep all accounts between the Government and the railroad
company in the way of lists of selections.
Q. Have you named all the books which your department keeps? A. Yes 5 I guess
that would include all that is, in categories I have not named the specific
books in which the accounts are kept. But we keep all books which are necessary
to be kept relating to leases, and all books necessary to be kept relating
to sales, and to the balance of the principal due upon lands sold upon credit,
and all the tract books which exhibit the lands granted, showing the tracts
of lands.
AMOUNT OF LAND PATENTED AND DISPOSED OF. '
Q. How many acres of land has the company patented to date? A. My recollection
is that on the line of the Central Pacific Eailroad 1,039,710.59 ; and on the
line of the California and Oregon there are, 1 think, 1,340,000 to 1,350,000
acres patented to the company. There are some odd figures besides.
Q. How many acres of patented land has the company disposed of? A. On the Central
Pacific there are patented and for sale to-day I am speaking merely from recollection
now 345,000 acres ; on the California and Oregon there are about 275,000 acres.
My general recollection is that there are patented and for sale in the two
grants, in round numbers, 600,000 acres.
Q. And the difference between 600,000 acres and the number of acres patented
have been disposed of? A. Would represent the sales ; yes, sir.
AMOUNT APPLIED FOR AND UNPATENTED.
Q. Upon how many acres of land has the company applied for patents for survey
?
The WITNESS. Applied for altogether, do you mean I The CHAIRMAN. Yes, sir.
WILLIAM H, MILLS. 2411
The WITNESS. On the main line?
The CHAIRMAN. On the main line I speak of specially now.
The WITNESS. On the main line the excess of applications over the patents is
622,000 acres and some hundreds. I do not remember the hundreds, I only remember
the even thousands. On the California and Oregon line the ex cess of applications
over the patents amounts to 400,000 acres, perhaps a little more. I know that
the aggregate of applications by the company for patents in excess of the response
of the Government is a little over a million of acres.
HOW APPLICATIONS ARE MADE.
Q. How long have the applications been on file in the Department? A. That question
cannot be answered, Mr. Chairman, in the manner, perhaps, that you think it
can. I will give you the information and then you will see the difficulty of
answering the question. Applications are made for patents by listings, that
is, a list of selections is made. The company must first select the land, claiming
that it was granted. Those lists of selections are examined by the registers
and receivers in the land district in which the land is located. That examination
results in making what is called a clear list, or clearing the land to the
company. When the registers and receivers have decided that the land is clear
to the company the company pays the costs of the surveying, selecting, and
conveying, as required by law, and the list is forwarded by the register and
receiver, it having been properly certified by the surveyor-general of the
State that the fees have been paid to the General Land Office at Washington.
From these lists clear lists are made in the General Land Office at Washington,
and there has scarcely been a list sent from which there has not been some
suspensions from the very first, for further examination, which examination
has not in all cases been made.
SUSPENSIONS.
Now, when you ask the question, How long have these lists been before the Department
at Washington for examination? it is quite probable that from the very earliest
selections some suspensions were made for further examination, and that final
decision in those cases has not yet been rendered. For* illustration, a list
made early in 1882, prior to my administration of the department, comprised
126,000 acres. From that list 65,000 acres were suspended for further examination.
That examination has been made in part by special agents of the Land Office
at Washington, but patents have not been issued for it yet. Now, as to that
list of 65,000 acres the figures of the acreage are on the books, and I speak
generally, but that is about the proportion that land has not yet been patented.
Therefore, as to that list, we might say that about 65,000 acres had been before
the Department since May, 1882. And still behind that list there might be parts
of lists of selections upon which the costs of surveying, selecting, and conveying
had been paid and to which no response from the Government has been made in
the way of patents.
EFFECT OF FAILURE TO MAKE SURVEY.
Q. Does the failure to make the survey retard the company in making the selections
? A. Oh, yes, sir ; very greatly.
Q. Why? A. It is because the application for the land, which is notice from
settlers that they wish to settle upon the land and buy it? p B YOL iv 6
2412 U.'S. PACIFIC RAILWAY COMMISSION.
has been acted upon by us and we have directed our attention in all cases to
dealing with such tracts as the settlers wish themselves to buy. You will
understand that there is a very large quantity of un paten ted land in the
possession of settlers who are very anxious to obtain their titles. They
cannot borrow money on their holdings, and they cannot proceed with their
improvements until they have a title that will an swer for collateral security,
and they are very anxious to get titles. Now, to meet the requirements of
settlers, we "have always addressed our attention and 1 see from the
records of our department that that has been our custom from the first to
obtain title to such land as people wish at once to occupy and improve and
settle upon. The delay in making surveys, then, if people want to enter upon
a particular section of country, is a drawback. People begin to notify us
that they want to buy that land, and if that land is unsurveyed, of course
we cannot give them a title to it.
METHOD OF MAKING SELECTIONS.
Q. Do you wait until you get a notice from a settler before you attempt to
make any selection of the land? A. Oh, no, sir ; the selections have been
made generally with a view of meeting and encouraging settlements. The difficulty
in obtaining patents from the Government has been, from the first, such that
there was no encouragement to urge upon the attention of the Department at
Washington lists of selections, since those already before it had not been
patented ; and therefore the effort has generally been made in the direction
where settlement was proceeding, because to make lists of selections would
be to facilitate its improvement. If it was just generally to simply open the
country where there was no evidence of settlement, or no desire on the part
of anybody to take possession of the land, we would interpose those lists between
lists of land where we really desired to get patents ; that is, where the people
desired that we should get patents.
POLICY OF COMPANY IN REGARD TO APPLICATIONS.
Q. Is not the effect of such a policy and failure to patent lands, especially
in settled counties, to avoid on the part of the company the local taxation
in counties?
The WITNESS. You speak now of a motive on the part of the company?
The CHAIRMAN. Of a policy of administration.
The WITNESS. If there had been such a policy in the minds of the directors
I would have been notified of that policy. I have never been notified of the
policy of withholding the applications. On the contrary, it has been urged
upon me continually to get title to all the land we can ; that is, all the
land that we can get in before the Department.
Q. Is not the effect, however, to place the tax on the land upon the settler
at once, without subjecting the company to the local tax?
TO URGE THE ISSUANCE OF PATENTS.
The WITNESS. You mean, has that been the policy of the company?
The CHAIRMAN. Is not the effect of the policy which the company pursues with
reference to the land what I stated?
The WITNESS. The policy of the company has been to urge upon the Government
the issuing of patents. That has been its uniform policy. I cannot say what
the effect of the policy would be> The effect of tlie
WILLIAM H. MILLS. 2413
policy of the Government in delaying to issue the patents has been to keep
the people who occupy the land out of their titles and in a very unsettled
and uncertain condition.
Q. Is not the effect of waiting for the settler to make application before
the selection of land is made to place the local tax at once upon the settler
by giving him the immediate title instead of the company taking the title'?
COMPANY INTERESTED IN TRANSPORTATION SIDE OF ACCOUNT.
A. The effect of taking title where there is a probability of the early use
of the land is to accommodate L the settlement; the policy of making a general
application wherever applications might be made would be to fill the Department
at Washington with applications and lists of selections to the exclusion of
lists of selections where the land would be likely to be needed by applicants
for actual settlement. That would be the effect of that policy, and that effect
would be disastrous upon the settlement of the lands and the opening up of
the country immediately along the line of the roads. The company, of course,
is very anxious to settle the land in such a way that there would be a large
amount of money to the transportation side of the account. Here is an instance
where the owner of the land is interested in the progress of the settlement.
The land pays the company, perhaps, much better after it is settled than it
does by the price of it. The income from a settled piece of land is a continuing
source of revenue to the road and they are therefore very desirous of settling
the land along the line of the road.
WHEN TAXES ARE DUE ON PATENTED LANDS.
Q. When are the local taxes due upon the lands that are patented? A. The taxes
in California attach and become a lien on all property on the first Monday
of March of each year. If the patents were issued prior to the first Monday
of March in any year, it would be taxable. However, you will understand me
that we have also possessory rights that in the State of Nevada possessory
rights are taxable, and so they are in California. And it has been held that
a possessory right is a taxable entity, as I understand it. I know it is so
in Nevada.
LOCAL TAXATION THEREON.
Q. How much has the company paid upon patented lands in local taxation in the
several counties through which it passes? A. The taxes of this company are
managed and controlled by a tax auditor. I have no charge whatever of the taxation
on land. There is a department which has charge of that matter. I have no figures
on the subject, none whatever, nor have I any in my department.
Q. What is the name of the gentleman who has charge of that ! A. Mr. E. B.
Kyan.
Q. Is he subordinate to you or under your control? A. No, sir; he attends
to all tax matters relating to the company, and of course attends to the tax
upon lands. And those figures can very readily be obtained at his office.
By Commissioner ANDERSON :
Q. He attends to the tax on the lands? A. Yes, sir; that is the only matter
connected with the land over which I have no jurisdiction at all, I have no
jurisdiction in that case at all,
2414 U. S. PACIFIC RAILWAY COMMISSION.
By the CHAIRMAN :
Q. Have you any tax accounts whatever connected with the land granted by the
Governmet? A. The lists of lands patented to the company and subject to taxation
are made up in my department each year and sent to Mr. Ryan's office, and that
is the last I know of them.
Q. He can furnish that list to the Commission, with the amount of taxes paid
to date? A. Oh, yes, sir ; he keeps all those matters separately.
AMOUNT OF ORIGINAL GRANT TO THE CENTRAL PACIFC.
Q. How many acres of land of the original grant are yet due to the Central
Pacific Company? A. The grant to the Central Pacific Company at first, I find
in the reports before I administered the department, was theoretical in quantity.
It was made up by assuming that there was a grant of 12,800 acres to the mile.
There having been a grant of twenty sections to the mile of 640 acres each,
the amount would be 12,800 acres per mile. The theoretical acreage was, therefore,
determined by multiplying the whole number of miles by 12,800 ac res, because
that would be the quantity that would be granted ; but by reason of the sinuosities
of the road there are a great many miles which get no land. If we take, for
instance, in the vicinity of the mountains, where the road is very crooked,
there may be 2 miles of road constructed upon one tier of sections. You are
only making progress east and west in your land grant 1 mile to 2 miles of
your road. The theoreticalq uantity, according to my recollection, is 9,000,000
acres on the main line.
REDUCED BY GOVERNMENT DELINEATIONS.
Q. That is the total amount? A. Yes, sir; but when the Government delineated
the grant by fixing definite exterior limits, plats of which I can furnish
you, with the certificate of the General Land Office; that is, the governmental
delineation reduces the quantity to something like 7,500,000 acres, and from
that there is another deduction to obtain the actual result. Now, we have dealt
with the grant in California, and know pretty well just what we will get; that
is, we have the materials upon which to form a judgment. Theoretically we obtained
the result by multiplying the mileage by 12,800 acres, and it gives 1 ,992,000
acres for California. The Government delineation gives about 1,222,000 acres,
while the actual result is 774,000 acres. Now, out of a grant of 1,992,000
acres, theoretically, the company will receive about 774,000 acres of patented
land. That deduction arises from the fact that the delineation of the Government
does not take into account the crookedness of the road ; it makes the general
exterior limits almost straight ; that is, it follows the general course of
the road. Within that delineation made by the Government there are about 1,222,000
acres.
By Commissioner ANDERSON :
Q. What would make the second deduction to 774, 000 acres? A. The second deductions
are the subtractions from the grant, prior disposal, mineral lands, and the
lands generally excepted out of the grant. The land was granted in categories.
By Commissioner LITTLER :
Q. Would you be allowed to go beyond the limits for the purpose of making good
that grant? A. No? sir ; not upon the main line.
WILLIAM H. MILLS. 2415
THE CALIFORNIA AND OREGON GRANT.
If you are now referring to the California and Oregon grant, I will say that
that was a grant of quantity and not a grant in place. That was a grantof 12,800
acres, to be found within 20 miles each side of the line, and if there was
land lost in the odd-numbered sections of the lands granted, indemnifying lists
were provided 10 miles on each side of the land granted for the purpose of
indemnifying them for the loss in the granted limits. In that case below Redding,
from Redding to Roseville, the company never acquired the full amount granted
; that is to say, there was not enough land in the odd-numbered sections both
in the granted limits and in the indemnity limits to make the 12,800 acres
to the mile, which was the quantity granted in that case. It was an absolute
grant of quantity, amounting to 12.800 acres to the mile, but there was not
enough undisposed of to satisfy the grant for that distance.
AMOUNT OF LAND DISPOSED OF.
By the CHAIRMAN :
Q. Will you please repeat how many acres of land, estimating to date, on the
main line, the company has disposed of? A. The company has received on the
main line
The CHAIRMAN. No; I say disposed of sold?
The WITNESS. Well, I can only do that, Governor, by subtracting. The company
has received in patents on the main line 1,666,000 acres. There remains patented
and unsold on the main line about 345,000 acres. If you will subtract one figure
from the other you will see how much has been disposed of. The difference must
have been disposed of, of course.
AMOUNT RECEIVED THEREFOR.
Q. How much money has the company received from the land disposed of to that
date? A. I could not answer that question without examination ; that is, not
anything like accurately. I might approximately.
Q. Will you approximate now, and then subsequently furnish the figures to the
Commission? A. Well, there were bonds for $10,000,000, including the interest;
there are several elements entering into the question of reduction of the bonded
indebtedness. There was the interest account and the sale of stumpage, and
there are various things of that sort. What you wish to arrive at, I presume,
is what the land sold for.
The CHAIRMAN. I want to know how much money the Central Pacific has received
from land disposed of to date on the main line.
The WITNESS. Approximately I should think, altogether from all sources on the
main line?
The CHAIRMAN. Yes.
The WITNESS. Well, I would have to venture an opinion on that, because a segregation
would have to be made. The fund is all kept as one. I would say $2,000,000.
Q. Will you furnish the Commission with an accurate statement of the sum received
from lands disposed of? A. With pleasure. I will furnish the Commission any
statistical facts derivable from my books, if the Commission will give me a
list of the things which they wish.
VALUE OF LAND REMAINING UNDISPOSED OF.
Q. What do you estimate, as the land agent of the Central Pacific, is the value
of the land on the main line undisposed off
2416 U. S. PACIFIC RAILWAY COMMISSION.
The WITNESS. Patented and unpateuted?
The CHAIRMAN. Yes ; patented, or yet to be taken up. Allowing for the deductions
which you have made, what do you, as the lanji agent, estimate to be the value
of the land undisposed of along the main line of the Central Pacific?
The WITNESS. That is, the land that can be disposed of, excluding from that
computation the money already obtained for the sale of land?
The CHAIRMAN. Yes.
The WITNESS. Well, I should estimate it to be $4,000,000. That estimate is
very general. There will remain, after the present deductions, probably six
millions of acres, or five and one-half millions of acres, in that grant.
SETTLERS INVITED TO GO UPON UNPATENTED LANDS.
Q. When you make a selection of land at the suggestion of a settler, do you
allow him to go upon it at that time? A. Oh, the company invited settlers
upon its lands from the very outset. That is, upon the uupatented lands of
the company. You will understand that within the limits of the grant every
alternate section granted would remain uuoc: cupied if the grant itself would
constitute an obstruction to its settlement. To prevent the lands from being
a displacement of settlement, the company at once invited settlers upon the
unoccupied lands of the company. They invited them to take possession of the
lands and cultivate them and live upon them, and they have done so, and they
are doing so. There are scarcely any lands granted to the company that are
not in the use of somebody to-day, and that have not been free from first.
LEASES OF UNPATENTED LANDS.
Q. Have you made leases with the persons using the lands? A. Only in a very
few instances, and within the last eighteen months. Formerly leases were not
made at all, except upon patented lands suitable for cultivation. Lands patented
to the company and fit for cultivation were leased, but we did not charge the
settlers anything for occupying the land.
Q. How many acres of land unpatented and selected by you have you leased as
the land agent? A. Three or four hundred thousand acres, perhaps.
INCOME DERIVED THEREFROM.
Q. What income does the company derive from the leased lands selected and yet
unpatented? A. Up to two years ago the company had never derived any benefit
from leases of that kind. About two years ago I inaugurated a policy, owing
to the destruction of the ranges in Nevada ; this was chiefly a matter in Nevada
and Utah ; we have leased very little or no land in California. The sheep are
very destructive to the pasture, and the cattlemen object very strongly to
the lands being occupied by them. We have leased the lands as much as possible
to cattle men, preferring that class of stock upon the lands to sheen, because
sheep destroy the range. One lease was executed this year of 181,000 acres
for $1,200 per annum, and there is a lease executed for 320 sections. These
are the two largest leases, and comprise nearly all the land that is under
lease. There are 320 sections for $10 a section. That is, $10 for 640 acres.
The price is almost nominal ; $1,200 a year for 181,000 acres of land would
be a very small rate per acre. A general lease was executed, and the entire
territory of Utah embraced in
I
WILLIAM H. MILLS. 2417
it, to one individual, so as to distribute the leases among the people over
there. That was about three years ago. 1 think that was perhaps the first lease
of that kind that was made.
Q. What expense is the company put to either in taxation or the maintenance
of lands selected and unpatented? A. The company is not put to any expense,
unless it is necessary to protect the timber from depredations; in that case
it is very expensive, 'in California the lands left to the company now are
chiefly timber lands.
MAP OF LAND GRANT IN NEVADA.
Q. Did you issue a map concerning grazing land a year or so ago? A. We have
issued a map of the whole grant in the State of Nevada ; yes, sir.
Q. What was the character of the map? A. Well, I will exhibit a copy of it
here.
Q. Will you produce a copy of it to the Commission? A. Yes, sir.
Q. Did you issue an order in connection with the map? A. No, sir ; I do not
remember of any order. I have issued a notice several times, requesting people
to rent the lands, to lease the lands, so that they might have possession of
them.
Q. Could you produce a copy of the map here now I A. Yes, sir.
(The witness sent for the map.)
COMPANY'S TITLE TO UNPATENTED LANDS RIGHT OF POSSESSION.
Q. How do you get a sufficient title to the land to warrant you in making your
leases I
Commissioner LITTLER. That is, as to unpatented lands.
The CHAIRMAN. Unpatented lands.
The WITNESS. The court has decided recently in Utah that the right of possession
of unpatented lands is in the company. That question arose in a case between
the Promontory Stock Company as plaintiff against Adams and Schilling.
Q. What title does such possession give you? A. It gives us the right of possession
; that is to say, the ground.
The CHAIRMAN. I want to know the effect of such a title.
The WITNESS. Well, the effect of the decision iu that case was to give .judgment
tor the restitution of the land. There was a quantity of unpateuted land in
the possession of Adams and Schilling. The right to that land was sold to the
Promontory Stock Company, and they brought suit for the restitution of the
land for the right oi possession ; and the court decided that they had the
right of possession. I have the decision of the court up-stairs in that case,
and the charge of the judge to the jury, which sets forth the whole story.
Q. Will you produce that? A. Yes, sir 5 I have it printed in a little circular
form.
- CONFIRMATION OF SALE TO PROMONTORY STOCK COMPANY.
Q. Do I understand you to say that the court in that case confirmed the sale
to the parties? A. It confirmed the right of the company to the possession
of the land.
Q. What is the name of the company? A. The Promontory Stock Company, but they
were the grantees of the Central Pacific Railroad Company, so that it was a
confirmation of the right of possession iu the Central Pacific Railroad Company,
2418 U. S. PACIFIC RAILWAY COMMISSION.
By Commissioner ANDERSON :
Q. And of the right to transfer that possession to the grantee'? A. Yes, sir;
and I wish to say in that respect that if patents could be obtained with facility
no measure of that sort would ever have been resorted to. But the patented
land of the company has been in the possession of everybody without lease for
years. We have 214,000 acres patented in the State of Nevada that have been
in the free use of the people of that State for a great many years without
rent.
TERMS OF LEASES.
By the CHAIRMAN :
Q. How long dp you make your leases? A. The leases are made for one year,
with the privilege of sale. That is, they can be renewed from year to year,
if the lands are not sold in the mean time. The leases more frequently than
otherwise include patented lands. They include a large range of country. If
you saw that country as you came over it you will be prepared to understand
that it takes a large quantity of it to be useful to a herdsman. It is leased
in large ranges ; lands convenient to water.
Q. What is the length of the term of your large that leases you spoke of two
or three years? A. One year.
(The map already referred to was here produced.)
DIVISION OF NEVADA LANDS INTO GRAZING RANGES.
The WITNESS. Here is a map of the grant of lands in Nevada. There is a good
deal of green on the map.
The CHAIRMAN. I call your attention to the order signed by you dated July 31,
1885, and printed upon this map, of u Lands granted by the United States to
the Central Pacific Railroad Company in the State of Nevada." That order
states :
Hereafter land belonging to the Central Pacific Railroad Company in Nevada
be sold only in grazing ranges. The grant -Las been divided into ranges as
set forth below. The ranges will be sold or leased to stockmen on easy terms.
The attention of stockmen in Texas and Wyoming is respectfully called to these
ranges and the liberal terms upon which they may be secured.
Will- you please state to the Commission why a special description and division
of the land was made by the company and by your order into grazing ranges?
THE REASON OF SUCH DIVISION.
The WITNESS. It was because the sale of land immediately contiguous to water
destroys the use of the land lying behind that water. If you look upon this
map you will see that it is divided into ranges, that is, approximating somewhat
the water. There, for instance, is water through that range, and here is some
water in this range. The lands granted to the company, if they are ever to
find sale, must have the use of water. To begin with, this land will find its
highest use for hundreds of years to come in grazing. It is distinctively grazing
land. Nearly all the land left now to the company is grazing land or timber
land. There is some foot-hill fruit land left. The former practice was to sell
land in 160 or 640 acre tracts. Some lands of the company were sold along the
margin of streams by 40-acre tracts. The order that you see there, that is,
the notice that you see on the map, was that all the land used by a herdsman
must be purchased by him. They used these ranges. This whole territory is in
free use now except as to the two in
WILLIAM H. MILLS. ' 2419
stances of leases that I spoke of, one of them here in the eastern end of the
grant and the other about the middle of the grant, with some minor exceptions,
as for instance where a single section has been leased to a herdsman. So the
order was given that hereafter the lands would be sold only in ranges, because
in that way only can the lands be disposed of. If the water necessary to the
profitable use of the range is sold it is the equivalent of conferring upon
the purchaser of that water the perpetual use of the land without purchase.
This is just what the Government of the United States does all the time.
AREA OF RANGES, AND WHAT THEY ARE GOOD FOR.
Q. Are the numbers from 1 to 28 upon the map descriptive each of range I A.
Yes, sir. That is, they are intended to be generally descriptive of a range.
The whole grant was divided into ranges from 100,000 acres up, and some of
them containing 200,000 acres.
The CHAIRMAN. I observe that the ranges grade from 30,000 acres to 600,000
acres?
The WITNESS. Yes.
Q. Is not the effect of that to virtually or entirely exclude from this territory
granted to you by the Government and designated by you as grazing land, all
settlers except those who are engaged in the grazing business and able to purchase
a range of from 30,000 to 600,000 acres? A. The class you speak of have been
excluded since the settlement of the country. They are excluded by the character
of the country itself. They are excluded from the fact that the most of that
territory is at such an altitude that there is frost every month in the year.
The lowest place on that grant is 3,300 feet above the level of the sea, while
it rises in some instances to nearly 6,000 feet. The annual rain-fall of the
country, including the snow is 2J inches of water. It is therefore an arid
country, under a high altitude, with very cold winters. For the most part,
in the eastern portion of the grant, the thermometer goes down to 20 and 25
degrees below zero. It is not in any sense of the word an agricultural country.
THE WATER " BODIED UP" UNDER LAW OF NEVADA.
That policy was also forced upon the company for another and a very important
reason. The State of Nevada had a grant of the sixteenth and thirty-sixth sections
for school purposes. The Government of the United States took that grant back
and issued in lieu thereof scrip to the amount of 2,000,000 acres of laud,
authorizing the State to dispose of that land as it saw fit. The legislature
of the State allows the land to be taken in 40-acre tracts. The purchasers
of that land purchased the land lying contiguous to water. The State inaugurated
a system which, as they characterize it in that country, " bodied up " the
water in such a way as to give its exclusive use to the purchaser of lands
lying contiguous to water. That policy, being pursued by the State of Nevada,
produced a corresponding policy upon the company, because purchasers of lauds
in that State could buy this floating scrip of the State and could body up
the water in that way. They " bodied up 77 the even sections within the
limits of the railroad grant, and they " bodied it " solid outside
of the limits of the railroad grant. It was a plain recognition upon the part
of the land authorities of the State of Nevada that the country was distinctively
a grazing country. And while agriculture has been prosecuted there, under irrigation,
in the lower part of the grant, from the Humboldt House particularly down,
2420 U. S. PACIFIC RAILWAY COMMISSION.
and while there are large quantities of laud in Hurnboldt County which, if
capital could be induced to take the water out, might be raised to a very
considerable state of productiveness and induce a very considerable agricultural
interest, yet there are other portions of the Pacific coast so much more
productive that capital is not likely to be attracted that way.
BUT TWO LAEGE SALES MADE IK NEVADA.
Q. How many ranges designated on the map that you have produced have -been
disposed of by lease or otherwise? A. There have been but two large ranges
sold in the State of Nevada. That is, in any considerable quantity. There was
one of 30,000 acres and one of 31,000 acres. Those two are the only sales I
recall now there may be others. There htove been two large leases executed
in that State.
I wish to say to the Commission that these ranges are not arbitrary by any
means. An individual can buy all the land in the township. The announcement
there is simply the declaration that the old policy of selling water, that
is, selling 160 or 640 acres of land on the water, would not be any longer
pursued. It was a declaration that the man must buy a sufficient quantity of
land lying back of the water so that he would divide the water (water being
indispensable to the use of the laud) into something like fair proportions,
so that lands contiguous to water would not be purchased in such a way as that
the lands lying behind it would be wholly unsalable. If the compauy was to
ever realize anything from its grant, that was the only policy to be pursued.
That 600,000 acre range is right there before Mr. Anderson, and comprises very
largely the White Plains and Humboldt Desert, and 40 miles of desert, along
through that region. We put it in a large tract there because at least 550,000
acres of it has no grass on it.
SEEMING DISCREPANCY WITH REPORT FOR 1882.
Q. Will you please explain to the Commission the difference in your statement,
or the seeming difference in your explanation just made, and the report furnished
by you in the year 1882?
The WITNESS. 1883.
The CHAIRMAN. Memorandum relating to bond-aided roads. You place the agricultural
land in Nevada and Utah at 2,000,000 acres !
The WITNESS. Is that my report of 1883?
Mr. NORRIS. Report dated January 1, 1883, for 1882.
The WITNESS. I wish to state to you in regard to that report that I came into
the department, as I have already stated to you, on the 1st of January, 1883.
My predecessor had died during the year 1882. This report was derived chiefly
from statements made to me by the gentlemen in charge of the office as to quantities
of land and things of that kind. Immediately after taking possession of this
office I was sent to Washington and New York by the company on other business,
and I did not return so as to resume my duties in the land office until the
1st of April. This report was written in June. They notified me that I must
make a report for the year 1882 of the office I had administered. That is,
taking it up to July, I never had administered any part of the department for
that year. You will observe I came into office, I went to Washington, and I
resumed business here on the 1st of April, 1883. When I was notified that a
report of th at kind was to be made I took the reports of former years that
had been made by my predecesaor, called the gentlemen in who had been connected
with the depart
WILLIAM H. MILLS, 2421
ment from the first, and taking such general statements as might be derived
from their knowledge and recollection and having the general pattern of the
reports that theretofore had been made, I made the statements that appear there.
Now, following that, you will find that all reports of my department are entirely
devoid of any statement concerning the segregation of that land into agricultural,
grazing, or timber land.
NO DESCRIPTION OF LAND IN REPORTS.
Q. Did you attempt in your report of the subsequent year, or the year 1885,
to make any description of the land?
The WITNESS. My report is before you, is it not?
The CHAIRMAN. I am asking you the question. I ask you to look at the report
ibr the year 1885, and say whether you attempted any description of the land.
The WITNESS. It appears not, from this report.
Q. What other report can you produce, at any subsequent period, in which you
divide the number of acres of land into agricultural and mineral or otherwise
in the lands granted by the Government? A. I have made no other report to
the company than such as are published in its annual reports.
VALUE OF UNSOLD LANDS ON MAIN LINE.
Q. I call your attention to the annual report of the Central Pacific Eailroad
Company for the year ending December 31, 1885, under the heading of " Assets," and
ask you to please explain the item, "Lands unsold estimated value, $24,000,000," with
the estimate of value that you have given to the Commission, of $4,000,000.
A. That was on the main line, if you please. I made the estimate of $4,000,000
on the main line and did not include the California and Oregon ; that is not
in any respect my work.
THE CALIFORNIA AND OREGON GRANT.
By Commissioner ANDERSON :
Q. What is your valuation of the California and Oregon, so that we can gauge
the difference between the two estimates? A. The value of the California and
Oregon grant is much greater than that on the main line. There are about 1,400,000
acres in suspension, north of Eedding Junction, awaiting adjustment. That is
my general estimate. That land is worth perhaps an average of $2 to $2.50 an
acre. There are nearly 300,000 acres unsold in the California and Oregon grant.
Some of that land is quite valuable, as timber laud, and will become valuable
as timber lands come to be demanded. It is worth perhaps $3 an acre now, but
the valuation upon these lands I have noticed 1 am speaking now simply of what
I have seen of the valuation in these reports is based upon the price that
the Government asks for lands within the limits granted to the railroad companies.
It is the double minimum which the Government, fixes as the price of lands
that alternate with lands granted to a railroad. It is an estimate derived
from multiplying the whole number of acres by $2.50, I presume.
VALUE OF AGGREGATE GRANT.
Q. As tested by your judgment of what can ultimately be got for these lands,
do I understand that the estimate of $24,000.000 is entirely
2422 U. S. PACIFIC RAILWAY COMMISSION.
inaccurate? A. My judgment is that the estimate of $24,000,000 is too high,
having been ascertained by multiplying $2.50 for every acre of land within
the grant. The 4,000,000 of acres of land in the^State of Nevada are not
salable at $2.50 an acre, and never will be.
By the CHAIRMAN :
Q. How much is the asset of $24,000,000 upon the page before you, depreciated
in comparison with the actual value of the same asset " land unsold"?
A. Well, 1 presume that the lands remaining to the company might be placed
at ten or twelve millions of dollars, fairly $12,500,000, including the lands
in Nevada and Utah.
Q. Then the asset of $24,000,000 is just $12,000,000 too much as an asset of
the Central Pacific Eailroad Company, of "lands unsold?" A. According
to the rules of arithmetic.
ANNUAL REPORTS.
Q. Do you make annual reports? A. Yes, sir.
Q. To whom do you report $ A. To Governor Stanford, as president of the company.
Q. Will you furnish the Commission with a copy of your reports during your
term of office and your predecessors 7 term? A. Yes, sir ; if I can find them.
I can furnish you my own, I know. There are some other statistical matters
that have been referred to here that perhaps ought to be tested by the actual
facts. I have stated a great many things from memory.
The CHAIRMAN. In each case I have for the present taken your estimate, and
will ask you to produce the actual figures in the form of a statement. I only
wanted to get the approximate figures at present. I understand you to say that
you have not in your department any tax account I
The WITNESS. No, sir.
GOVERNMENT LAND GRANT THE ONLY ONE.
By Commissioner LITTLER :
Q. Did this company ever acquire additional lands from any other source than
the United States Government If A. No, sir.
Commissioner ANDERSON. You mean as a gift. They have purchased land for terminal
facilities.
Q. They have had no local land grants within the State? A. No, sir. The sovereignty
of the soil over which they pass belongs to the General Government.
Q. You mean their land has been derived from the Government? A. Of course.
And the sovereignty of the soil is in the Government in the States and Territories
through which the line passes.
Q. I understand ; but in some cases the States have lands, and I did not know
but that the State of California had fooled away its grant in that respect
to the company. A. No, sir ; the State of California has managed its land grant
excellently well, in my judgment.
NO PURCHASES OF MINERAL LAND BY THE COMPANY.
By the CHAIRMAN :
Q. Have you purchased any mineral lands for the company? A. No, sir.
Q. Have any purchases been made, or have any entries upon mineral lands in
the names of individuals been made for the use of the com
WILLIAM K. MILLS. 2423
pany? A. Not that I am aware of. Nothing of the kind has ever been done through
my department. Mineral lands are not a desirable kind of land to own in this
country.
TITLE TO WYOMING COAL LANDS. By Commissioner LITTLER :
Q. How did the Central Pacific acquire title to its coal lands in Wyoming?
A. I have no knowledge upon the subject. By purchase, I presume.
Q. To what sources can you refer us for information on that question? A. My
judgment would be that Secretary Miller would be good authority in that matter.
Will you permit me to exhibit this map to you before you ask me any further
questions?
Commissioner ANDERSON. Certainly.
DESCRIPTION OF THE LAND-GRANT MAP.
The WITNESS (referring to the map). There is the land grant in California.
All the lands in red have been disposed of by the company. All the lands in
green have been disposed of by the Government. These lands [indicating] were
Spanish grants. You will see that from Sacramento out, for a considerable distance,
there was a very small grant of land obtained. The lands marked yellow are
mineral ; that is, they are denominated " mineral" by the United
States surveyors-general. All these checks on them have been applied for; that
is the cost of selecting and surveying have been paid and the lands are before
the Department at Washington to be patented. Lands with a circle around them
are unsurveyed, and therefore unavailable in any way. The only part of the
grant in the State of California that we have not tried to get title to is
a little spot there [indicating], embracing about ten or twelve thousand acres.
All these red lands are patented and sold ; the blue lands are patented and
for sale. All the lands colored green were disposed of by the Government by
homestead or preemption or by prior appropriation, before the rights of the
company attached. Lands colored in yellow are mineral lands. All that remains
of this grant to be dealt with at all is a small space there [indicating] .
Q. A small place in the northeast? A. "Yes, sir. Now it is from this
map that I obtain materials for my statement that the grant in California will
yield the company but 774,000 acres, and you can see that we have here the
data from which such an estimate- might be safely made. I have made that estimate
since the Commission has been in session here the estimate of the number of
acres that we can get.
MINERAL LAND.
By the CHAIRMAN :
Q. What effect would a selection of land, leased by you before it was patented,
have upon the discovery that it was mineral land and that you were not entitled
to it under the law? A. Well, if we had leased a piece of land and we were
not entitled to it, I suppose that the party who had paid the lease money would
be entitled to recover or entitled to a rebate.
Q. Do you make any conditions upon selected lands, unpatented, for any discovery
in the future of minerals? A. No, sir; that is not necessary. We have never
leased, that I know of, any land in the mineral regions of California. We have
made but very few leases, and those
2424 U. S. PACIFIC BAIL-WAY COMMISSION.
very small, in the State of California. The leases that I spoke of have been
in Utah and Nevada. The discovery of minerals has been one of the sources
of loss to the company by reason of the tardiness of the Government to give
us patents. The company was interested in getting its title as early as possible
in consequence of that. Your questions have frequently gone to the general
subject of a supposition that the company has avoided taking title to its
land to avoid taxation. The one item alone of loss of lands in consequence
of the discovery of minerals would have paid all the taxes that ever could
have been assessed against the company if the whole grant had been taxable
from the start. The decisions of the courts, upon lands patented to the company
before valuable mineral deposits are known to exist, are that the mineral
passes with the patented land, but if the mineral is discovered prior to
the issuing of the patent the land is lost to the company, and that extension
of discovery has lost in value more to the company, a great deal more than
the taxes would have amounted to.
AVOIDANCE OF TAXATION ON LAND.
Q. As a business proposition, if you could have conveyed your title at once
upon the issuance of the patent, would you not, to that extent, have avoided
local taxation in the county in which the land was located? A. If I understand
the question it amounts to this, that if the land was unpatented and not taxed
we would have saved the tax.
The CHAIRMAN. Certainly.
The WITNESS. But if, by reason of failure to take the title, mineral discovery
should aifect the land we would lose the land.
The CHAIRMAN. I spoke of lands that you have patented, and not of lands that
are the subject of selection.
The WITNESS. Then I beg your pardon.
POLICY IN REGARD TO DISPOSAL OF LAND.
Q. I ask you, as a business proposition, whether it would not have been better
from a financial standpoint, in the handling of the lands of the company, to
pursue a policy of disposing of the land as quickly as possible after patenting,
in order to avoid the local taxation? A. It would as a business proposition.
It has been the policy of the company to dispose of its lands as soon as possible.
It undertook to repay this mortgage within a given time. It had to raise the
money out of the sales of land and it has pursued the policy continually of
urging the sale of its land. As a business proposition the land in the possession
of a settler is of the highest value to the road, on the transportation side
of the account, and there was, therefore, the strongest motive in the mind
of the company always in favor of disposing of the land, as against holding
it, if the land is not in the possession of any one disposing of it.
FAILURE TO PATENT LANDS DUE TO TARDINESS OF GOVERNMENT.
Q. Have you failed to patent land for the purpose of avoiding local taxation
at any point along your line? A. No, sir. Under my administration of the land
department I have urged upon the Department at Washington continually the subject
of survey. I have urged upon their attention selections. I have written frequently,
and personally made complaints to the Commissioner of the General Land Office
at Washington, of the tardiness of the Government in making response.
WILLIAM H. MILLS. 2425
The Commissioner of the General Land Office in that interview promised to give
it his personal attention. I represented to him the tardiness of the Government
in making these examinations. The reports of the Commissioners of the Land
Office from 1881 to the present time show conclusively that the Government
is many years in arrears with its work. Mr. Sparks reports 16,500,000 acres
of selections before his department. He reports that he was able to examine
and certify about 100,000 acres in one year. Mr. McFarlane, his predecessor
in office, made application to the Secretary of the Interior for one hundred
additional clerks and accommodations for them. Mr. Sparks renewed that application
when he came into office and approved of the recommendation, or request,
of his predecessor, and said that it was necessary. In 1862 Mr. Commissioner
McFarlane reported to the Secretary of the Interior that the railroad division
was many years in arrears. There is no provision of the law whereby one company
shall have a due proportion of the patents that they are able to examine
and certify to in a single year, and we do not know what the fate of other
companies in this respect is. We have given passes to United States surveyors
in order to induce them to take contracts for surveys that the land might
be patented.
LAND ENTEIES AND LOCATION OF LANDS.
Q. Can you furnish a statement showing the land entries paid for by the company
,- and the location of the land? A. Yes, sir; the location of the land applied
for will be shown on this map, so far as California is concerned. All the land
on this map with a blue check on it is applied for, and the fees for the surveying
is paid. The costs for the surveying are paid. You see it is taken clear up
to this point [indicating], I do not know why that [indicating] was left out.
My instructions were to commence at that end and "clean it up," as
we call it. That is, take everything right straight on through the grant. You
see that that course has been followed here up to this point ; and why that
has not been done here I do not Imow. I am disposed to think that it is interdicted
mineral, which shuts oif our application.
Q. I understood you to say that you have paid for those entries? A. Yes, sir
; we have paid for those surveys. All the fees for surveying have been paid
on those lands.
WITNESS REFERS TO HIS DEPOSITION SUBMITTED WITH GOVERNOR
STANFORD'S EVIDENCE.
Q. What other statistics have you bearing upon that question? A. Well, I will
state to the Commission that the questions which you propounded to Governor
Stanford, as president of the road, were furnished to me, and I answered to
him, and yesterday a notary public appeared at my office with iny answer. I
answered in writing, and answered as 'fully and completely as it was in my
power to do ; and a notary public appeared and I verified that statement to
Governor Stanford. I presume that Governor Stanford will hand it to you in
connection with the answers to the questions which you have propounded to him.
In that you will find a great many questions fully answered and accurately
answered from the books. The statistics concerning the amount for which the
lands were sold and the amount and quantity of lands sold, are being made up
in my office now.
THE LAND FUND.
Q. What control have you over the land fund I A. None whatever, I pay it to
the representative of the trustees of the land mortgage.
2426 U. S. PACIFIC RAILWAY COMMISSION.
Q. How often do you make settlements? A. Every day. At tbe close of business
each day I pay to the treasurer of the Central PacitUEailroad Company, who
is the treasurer of the trustees of the laudmortgage fund, all money received
that day.
Q. Does that end your control over the fund after the day's settlement? A.
Yes, sir. It is a trust fund, and it is paid to the trustees, and they have
control of it.
Q. Who are the trustees of the land-grant mortgage? A. Mr. W. E. Brown and
J. O'B. Gunn.
NO LAND GRANT FROM CALIFORNIA.
By Commissioner ANDERSON:
Q. Mr. Mills, are you positive in your answer that this company has not received
land aid from the State of California or from any of the counties'? A. It has
not. That is the extent of my knowledge, at least. I have been a citizen of
this State for twenty-four years, and I have taken part in the general discussion
of these questions. I was editor of a paper for a great many years, and I never
heard of it if they ever did. I am only speaking now from the absence, rather
than the presence, of knowledge. There may have been some grants of terminal
facilities, for instance. There may have been a grant of water front, and some
for depot purposes, but not as a subsidy. That is, there is no such thing in
my office received as a subsidy.
Q. Who can tell us in regard to that? A. Mr. Gage could assist me in answering
that question.
GRANT OF TERMINAL FACILITIES AT MISSION BAY.
Q. Was there no land grant in connection with Mission Bay? A. Yes, sir ; there
was land granted for terminal facilities here at Missiou Bay. But what I understood
your question to cover was the question of inducement to construct the line.
Of couFse this grant at Mission Bay was given after the line was constructed.
WATER FRONT AT SACRAMENTO.
Q. Were there other grants of that character? A. I believe there was some water
front granted at Sacramento on condition that they would construct wharves
and put lifting works upon them. That was after the road was completed, or
after the line was completed.
Q. Are those matters in your department? A. No, sir. My department is confined
strictly to the lands granted by the acts of 1862 and 1864, in aid of the construction
of the road. These other matters are generally in the hands of the various
departments ; for instance, if a shop were located upon the lands it would
be in charge of the master mechanic. If they were held for depot purposes they
would be in charge of the superintendent of the track department or the superintendent
of the right of way. Mr. Curtis would have charge of them. These lands here,
I suppose, are in charge of the company generally.
Q. That is the Mission Bay lands? A. Yes, sir. The Mission Bay lands must
be in the charge of the directors or their representatives.
NO STATE LAND GRANT BEFORE CONSOLIDATION.
Q. Was there no State land grant to any of the roads which were consolidated
together before the general consolidation of the Southern Pa
WILLIAM H. MILLS. 2427
citic? A. No, sir. There were no State lands to be granted. The State had
nothing but the sixteenth and thirty-sixth sections, and it lost all the sixteenth
and thirty-sixth sections in mineral belts, so that the State itself bad no
lai)ds to grant. The State was not possessed of any land, practically, at that
time. The swamp lands of the State were very largely disposed of prior to the
time that this road was constructed, and it could not have granted those. Congress
granted, under the act of 1850, the swamp and overflowed lands to the State
of California, but none of those were granted to the railroad by the State.
The State extended a credit, though that is a matter outside of anything I
am personally cognizant of. It extended a credit, but it was not in the form
of a land grant.
CENTRAL PACIFIC vs. L. B. ADAMS.
Judge McKissick calls my attention to an error in my testimony. You gentlemen
are lawyers, and I do not know that it is of any importance at all, but you
will discover that this was not an action in ejectment. It was the Central
Pacific Kailroad Company vs. L. B. Adams.
(The witness here handed to the Commission the- papers in the case referred
to, together with the charge of the judge to the jury.)
The WITNESS (continuing). The Promontory Stock Company I sup posed had been
a party to the action. There is the charge of the judge to the jury that I
referred to.
LESSEES OF LARGE RANGES.
By Commissioner LITTLER :
Q. Who was the lessee of the large ranges that you have spoken of? A. Sparks
and Tinnin are the lessees of it. 1). P. Tarpey is the largest lessee in Utah,
and George W. Crumm is the lessee of the 181,000 acres that I spoke of. George
W. Crumm's address is Battle Mountain and Sparks and Tinnin is Wells, Nev.,
and D. F. Tarpey's address is Corinne, Utah.
Q. Who is the lessee of the Promontory Stock Company? A. That is sold. That
is, the company's rights there are sold.
Q. To whom? A. To the Promontory Stock Company.
Q. Who compose the Promontory Stock Company? A. A gentleman by the name of
Buford and another by the name of Taylor and another by the name of Crocker
Taylor, Crocker, and Buford.
Q. What is Mr. Crocker's name? A. George Crocker.
Q. Is he the Mr. Crocker connected with the Central Pacific Railroad Company
? A. He is a brother of Col. Fred Crocker.
Q. What connection have the other members of that company with the Central
Pacific? A, Mr. Taylor is not connected with them in any way. He was formerly
superintendent of public instruction in this city and he is an enterprising
gentleman who has been engaged in speculation with them. Mr. Buford's relations
with the Central Pacific I have never known. He is a lieutenant in the Navy,
and he has no connection with this road that I know of.
WILLIAM H. MILLS.
P R VOL IV 7
2428
IT. S. PACIFIC RAILWAY COMMISSION.
The witness, William H. Mills, subsequently submitted the following statement
in connection with his testimony :
Table showing aggregate acres selected by and patented to the Central Pacific
Eailroad Company, and the Central Pacific Railroad Company as successor to
the California and Oregon Eailroad Company, at the end of each half year, from
the earliest date, to January 1, 1887, and during the Jive months thence ensuing,
ending June 1, 1887.
...OFFICES OF THE CENTRAL PACIFIC RAILROAD COMPANY,
San Francisco, Gal., Wednesday, July 27, 1887.
EDWAKD H. MILLEK, JR., being further examined, testified as follows :
By Commissioner ANDERSON :
Question. Will you produce the books and minutes which ygu. relating to branch
roads? Answer. Yes, sir.
EDWARD C. WRIGHT. 2429
By the CHAIRMAN :
Q. And also the minutes of the board of directors of the branch roads?
The WITNESS. That is, the roads that are consolidated with the Central Pacific
I
The CHAIRMAN. Yes.
The WITNESS. I can produce such as I can find. We never had them all. Do you
want them produced now?
Commissioner ANDERSON. Yes ; so that we can take them up to the hotel with
us as soon as we adjourn. . The WITNESS. I can get them all for you in an hour.
E. H. MILLER, JR.
OFFICES OF THE CENTRAL PACIFIC EAILROAD COMPANY,
San Francisco, Cal., Wednesday, July 27, 1887.
EDWARD C. WEIGHT, being duly sworn and examined, testified as follows :
By Commissioner ANDERSON :
Question. What is your position in the Central Pacific Kailroad Company? Answer.
General auditor.
DUTIES OF GENERAL AUDITOR.
Q. How long have you been general auditor? A. A year,
Q. One year? A. About a year.
Q. Were you connected with the company before that time? A. Yes, sir ; I was
with the company for seventeen years.
Q. State what positions you have held. A. I was assistant general auditor before
that, and before that I was a #lerk.
Q. Please state generally what are the duties of the general auditor. A. We
receive the daily reports from the ticket auditor and from the freight auditor,
in a condensed form, they receiving the reports from agents. We receive also
the daily statements of account from agents, which we check against these other
auditors' reports.
EARNINGS AND OPERATING EXPENSES.
Q. What you have stated then relates solely to the earnings? A. Earnings and
operating expenses. We make up reports of the operating expenses also.
Q. From what sources do you receive the operating expenses I A. From reports
received from the different departments, such as the motive power, and machinery
department, bridges and building department, and track department.
Q. The two statements you have made, then, will cover the receipts of the road,
the earnings of the road, and the expenses of operation? A. Yes, sir.
Q. Now, do any other of the accounts of the road pass through your offices
I A. Most all of the accounts representing the earnings and operating expenses
go through our office 5 we make up the monthly statements.
CONSTRUCTION ACCOUNTS.
Q. Do charges for construction account pass through your office? A. Yes, sir
; a great many of them.
2430 U. S. PACIFIC RAILWAY COMMISSION.
Q. Do you audit all bills for construction? A. Not all. Some of them go to
the secretary's office secretary and comptroller.
Q. Please state what makes the distinction as between items that go to your
office and those which go into the secretary's office? A. I know very little
about those that go to the secretary. The most of them go through our office.
Very seldom once in a while there might be a trifling item of what is known
as general expense, for which they send the bill to the secretary's office.
Q. Does it first come to you and you send it to the secretary? A. If it should
come to me I would send it to the secretary.
VOUCHERS FOR GENERAL EXPENSE.
Q. Why should you select such a bill for general expense and send it to the
secretary instead of auditing it as you would the general run of bills? A.
I know they have such an item as general expense. It is a matter of custom
more than anything else.
Q. Is it 'because the object for which the money has been expended dotes not
appear upon the face of the voucher? A. All the money always appears upon
the face of the voucher.
Q. But you have stated that vouchers for general expense sometimes go to the
secretary's office ; do you refer to a form of voucher which would disclose
exactly what the nature of expense was, and still say that you would send such
a voucher as that to the secretary I A. It might be something in the nature
of a purchase bill for the particular use of the secretary, that I would know
nothing about, and I would send it up there.
Q. Then the test would be that you would send vouchers which you did not feel
competent to pass upon yourself, from your own knowledge of the requirements
of the road, to the secretary for his judgment? A. Yes, sir.
Q. And after the secretary disposes of them, would they come back to your office?
A. A voucher might come back to our office with instructions from the secretary
to dispose of it there and charge it to a certain item of operating expenses.
DISTRIBUTION OF ACCOUNTS.
Q. After you have audited a bill for any purpose which you have referred to,
do you have anything to do with the distribution of it? A. Yes, sir ; as a
rule I direct the distribution.
Q. And you have been engaged in this business either as assistant or as principal
for seventeen or eighteen years? A. Oh, no; not so many years. I was in a subordinate
position for some of this time in other offices, and knew nothing about the
distribution of the accounts.
Q. How long have you been engaged in this business? A. About ten years.
Q. Would you be able to furnish the Commission a statement year by year for
the ten years, showing the distribution of the items which went to the construction
account, to the equipment account, and to operation? A. The way we dispose
of construction items at present is no I could furnish what is charged in bulk
to operating expenses ; it would take a long time to do it, though.
CONSTRUCTION BILLS AUDITED BY PACIFIC IMPROVEMENT COMPANY.
Q. To show you what I mean, can you take the construction account of that portion
of the California and Oregon that was done under the
EDWARD C. WRIGHT. 2431
contract with the Pacific Improvement Company anil explain the various vouchers
for payments made under that contract; as audited by you, so as to show us
from time to time how much road was constructed, and how much in the shape
of vouchers had been audited and approved by you <?
The WITNESS. You mean work north of Delta?
Commissioner ANDERSON. Yes.
A. I do not even audit those bills now. If a bill comes to me, I send it in
to the secretary of the Pacific Improvement Company.
Q. Why do you not audit those bills'? A. Because they are doing the work.
Q. Who are doing the work? A. The Pacific Improvement Company.
Q. But if your company is doing the paying, is it not proper that your department
should audit the bill before the payment should be made? A. The payments to
the Pacific Improvement Company are not made through our office.
Q. Through what office are the payments made? A. I could not say, unless it
is through the secretary's.
Q. Is that not unusual? A. I do not think so.
METHOD OF PAYMENTS AS TO OTHER CONTRACTS.
Q. What other large contracts have been paid through the secretary's office
without going through the auditor's office! A. You will understand that all
the vouchers that are audited in our office are allowed by the secretary and
comptroller.
Q. What is that? A. Most all of them are allowed by the secretary and comptroller.
Q. So I understand. But my question is, what other large contracts have been
paid for by the company without being audited from your office? A. The Western
Union Telegraph Company's payments are not made through our office, although
the showing is in there.
Q. How about the payments made to the Contract and Finance Company? Do you
know about those? A. That was before my time, and I do not know how that was
managed.
Q. Well, substantially, the bills of the Pacific Improvement Company were audited
directly by the secretary or by the board of directors? A. That I could not
say. They are not paid through our office.
Q. Do you know what evidence the company receives of the performance of the
work, and the justice or the propriety of the bilfin regard to work, done by
the Pacific Improvement Company? A. Merely by hearsay. I really do not know,
of my own personal knowledge, anything about it.
REPORTS OF EARNINGS OF LEASED LINES.
Q. Do you also receive in your office the reports of the earnings of the leased
lines as well as those of the Central Pacific Railroad directly? A. We make
up the earnings of those different lines composing the system in our office.
Q. On what basis or with what material do you make up the earnings of the leased
lines'? A. We receive detailed statements. Say w^e are distributing freight
earnings, we receive a detailed statement from the general freight office,
showing the amount in dollars. We distribute that over the line; it passes
well, it is distributed right straight over the line which it passes, on the
basis of mileage.
2432 U. S. PACIFIC RAILWAY COMMISSION.
Q. So that in making up the earnings then for a given year, you have to make
up the earnings of the main line proper to make up the earnings of all the
different lines which were leased to the Central Pacific I am speaking now
of the period prior to the lease from the Central Pacific to the Southern
Pacific and you then distribute the learnings of the interchanged traffic,
as you have said, in accordance with mileage so as to credit each road with
its proper proportion ! A. Yes.
Q. And in that way you make up a complete statement for the year of the earnings
of the main line and of its branches? A. Yes, sir.
CONSTRUCTIVE MILEAGE.
Q. Is it your custom in making distributions of the earnings interchanged between
branches and the main line, to determine at times the earnings of branches
by the use of the constructive mileage factor? A. No ; we are using the actual
mileage, but there should be a large constructive mileage, because these rates
on. which these earnings are based give different results. For instance, we
will say from a point on the Amador Branch to a point on the Central Pacific;
the rate on the Ama^or Branch is two or three times as heavy per mile as the
Central Pacific rate, but through some misunderstanding or mistake, we have
been using the actual mileage for the whole distance in the division. Of course
that gives the Central Pacific a much larger proportion than its local rate
would call for, or than it would be justly entitled to.
By the CHAIRMAN :
Q. What constructive mileage rates have you, and on what roads have you those
rates now? A. None at all, now.
Q. When did you have them? A. They did give some of these small lines constructive
mileage in 1882, I think.
RATES OF CONSTRUCTIVE MILEAGE.
Q. What were the rates? A. The California Pacific, I believe, had 50 per cent.
By Commissioner ANDERSON :
Q. That is 1 J? A. Yes, sir ; 1J ; and the Stockton and Copperopolis had 100
per cent.
Q. That is 2 to 1? A. Yes, sir; and some of these small lines, the Los Angeles
and Independence Eailroad, and the Los Angeles and San Diego, had, I think,
50 per cent. each. That is 1J to 1 for constructive mileage and even at those
rates they do not get anywheres near their proportion that they are entitled
to, as we have since discovered.
Q. Have you named them all? A. I think the Ainador Branch got constructive
mileage.
Q. At what rate? -A. I think 50 per cent.
Q. That is 1J to 1? A. I could verify those figures by the record.
Q. I would be obliged to you if you would verify it and give us a statement
of your constructive mileage ; on what roads it was allowed and the rates allowed
upon them. Why did you stop the allowance of constructive mileage? A. I believe
Auditor French objected to it when he was out here.
CONSTRUCTIVE MILEAGE OBJECTED TO BY AUDITOR FRENCH.
Q. What Auditor French? A. The Government auditor of railway accounts. I believe
that is his title.
EDWARD C. WRIGHT. 2433
Q. What objection did he make? A. I am speaking from hearsay now. Mr. Miller
could give that positively.
Q. Who directed you to stop? A. Mr. Miller.
Q. Since the lease of the Central Pacific to the Southern Pacific, do I understand
your work to have altered or changed its form? A. Yery little that I can think
of now. The details are improving all the time. Q. What is the difference in
the method of ascertaining the net earning of the railroad prior to the lease
to the Southern Pacific and subsequent to the lease? A. No difference in the
method.
TO WHOM RETURNS ARE MADE.
Q. To whom do the earnings belong since the lease? A. That is a matter that
the secretary keeps. We make our returns to him showing the earnings and the
operating expenses of each line in the system monthly, and we transfer from
our books to the secretary's books the accounts, so far as the earnings and
expenses go.
Q. Do you make your returns to him as secretary of the Central Pacific or as
secretary of the Southern Pacific? A. Secretary of the Southern Pacific Company.
Q. And before the lease the returns were made to him as secretary of the Central
Pacific? A. Yes, sir.
RENTALS.
Q. Does the rent reserved by the lease or to be paid to the Central Pacific
by the Southern Pacific pass through your office? A. No, sir ; not now.
Q. You understand that the net earnings of the Central Pacific are now determined
by the amount of rent payable to it by the Southern Pacific? A. I understand
so.
Q. All your accounts then are kept with the Southern Pacific at present? A.
We have a small open account with the Central Pacific ; some small unsettled
matters. Our account current with the secretary might not change for months
and months, and it might change by a slight charge or credit.
Q. Before the lease to the Southern Pacific, did the rentals that the Central
Pacific paid for the different leased lines pass through your office as part
of its operating expenses? A. Yes ; most of them did at one time.
REQUEST FOR STATEMENT OF NET EARNINGS.
Q. Can you prepare for the Commission a statement of the actual net earnings
of the Central Pacific from 1&80 to the date of the lease to the Southern
Pacific, and also a statement of the net earnings by way of rentals since that
lease to the present time, so that we can compare the results of one operation
with the results of the other? A. Yes, sir; I think that can be done with very
lifctle trouble. For how long a period?
Commissioner ANDERSON. From 1880 to the date of the lease and from the date
of the lease to the present time, five years before and two years since.
The WITNESS. I think that can be done in a very short time.
EFFECT OF CENTRAL PACIFIC LEASE.
Q. What, in your judgment, is the effect of that lease? Does the Central Pacific
receive as much at present under the leases as it did be
2434 U. S. PACIFIC RAILWAY COMMISSION.
fore? A. I have not given that much thought. I really do not know. That question
you asked me to make a statement about is a proper one for Mr. Miller to answer.
Commissioner ANDERSON. You can confer with Mr. Miller, but the figures are
in your department. He would have to get them from your department?
The WITNESS. Partially.
Q. Can you tell me whether, as to any of the leases which the Central Pacific
held prior to April 1, 1885, the rent paid by the Central Pacific exceeded
the net earnings derived from the leased roads? A. I could not say without
the records.
Commissioner LITTLER. The Central Pacific did not pay any rent. It was the
Southern Pacific which paid rent to the Central Pacific.
Commissioner ANDERSON. The Central Pacific held a number of roads under lease
prior to 1885.
The CHAIRMAN. What is your answer?
The WITNESS. I could not say without looking at the records.
Q. We would like that information also. In cases where the rent in those leases
is fixed on a basis of paying to the road its net earnings simply, then I suppose
that the net earnings would actually determine the rent, and that there would
be nothing else to pay. That is the arrangement in some of these cases, is
it not? A. That is a matter that is arranged entirely in Mr. Miller's office;
we have nothing to do with that.
Q. Under these leases where you pay something in addition to net earnings for
the use of the roads, would not the bills for the payments so to be made pass
through your office? A. I do not think that; they never have.
Q. Are you familiar with these leases? Have you seen them? A. Yes, sir; but
it is something that I do not handle.
Q. Can you furnish us with copies of the printed blanks in use in your department
? A. Yes, sir.
LIST OF BOOKS KEPT IN AUDITOR'S OFFICE.
Q. Please do so. .Please state now a list of the books which are under your
control and kept in your office. A. We keep a disbursement book, an auditor's
ledger and journal, and we have the accounts of two of the outside departments
in the office, such as the bridge and building department and track that is,
the bridge and building department and the track department. Of course they
have a number of detail books in each, in which they keep their records of
time and material, from which they compile a report, which is made in the form
of a voucher and entered in the auditor's journal and ledger.
Q. Are these all the books which you keep in your office? A. Of course there
are a great many small books in the shape of memoranda.
Q. They belong to one of these different classes of books and are the basis
from which you post into the general ledger? A. Yes, sir.
Q. Do you keep this book for the distribution of charges?- Yes, sir ; what
I call a disbursement book is the book from which we distribute these accounts
that I speak of to the different items of operating expenses and foreign roads,
and private parties, and to sundry accounts.
METHOD OF AUDITING REBATES.
Q. Are any of the refunds or rebates that are made on freight charges audited
in your office? A. Yes, sir; most of them.
EDWARD C. WRIGHT. 2435
Q. Do they simply appear in these same ledgers, or have you a separate book
for that? A. They appear in this disbursement book that I speak of.
Q. In what form are such charges audited? A. As a rule they take this course
5 the general freight agent will receive a claim inclosing a bill of lading,
an expense bill, and note demanding a refund, or asking it. He will make up
the voucher, knowing the details of the tariff and classification. He will
have it examined and compared with the waybill, to show that such a shipment
actually went over the road, and he will check the way-bill to prevent a future
claim being presented on duplicate papers. He will make up this voucher and
certify to its being correct. He will name the amount that should be refunded.
That voucher will go to a committee on allowance, and then usually it is brought
to our office. Sometimes it goes to our office first, and we send it there.
COMMITTEE ON ALLOWANCE.
Q. Who is the committee on allowance? A. Mr. E. H. Miller, Mr. G. L. Lansing,
and Mr. S. T. Gage, I believe; other officers sometimes allow vouchers, and
they are passed through also.
Commissioner ANDERSON. I am only speaking now of rebate or refund vouchers.
The WITNESS. As a rule, those are the only gentlemen who ever sign those vouchers.
Q. Who determines the rate that is to be allowed? A. The general traffic manager
or the general freight agent.
Q. Is that generally done before shipment, or is it sometimes done merely on
application after shipments? A. They are the only officers that should answer
that question, because the vouchers are certified to by them as being correct
when they come to me. *
REBATE VOUCHERS ALLOWED BY THIS COMMITTEE.
Q. Is your duty, then, purely ministerial? A. No, sir; not altogether. There
are many vouchers, for the correctness of which I am responsible, before they
are registered or audited.
Q. I am only speaking now of rebate vouchers. Have you anything to do with
the percentage of allowance, or with the person to whom it shall be made?
A. No, sir ; I have never considered that I was responsible for even a bad
payment on such vouchers, for I am not conversant with the tariff or classification.
Q. If it received the approval of the general traffic manager, or of this committee,
the voucher is thereupon audited by you? A. Yes, sir.
FORM OF PAYMENT TO SHIPPERS.
Q. What is the form of making the payment to the shipper? A. It is recorded
in our office, and sent by us to either the paymaster or the treasurer or to
an agent for payment.
Q. And there it is receipted for by the person to whom it is paid? A. Yes,
sir ; and then he sends it back to us with a report. We keep an account with
those officers. We keep an account, for instance, with the paymaster, charging
him with all moneys received and crediting him with all payments made.
Q. All these entries, I understand you, are made in your general books, and
are not made in a separate book by themselves? A. All
2436 tJ. S. PACIFIC RAILWAY COMMISSION.
overcharge, loss and damage, and rebate vouchers are entered in a separate
book, and at end of month transferred in bulk to the auditor's ledger.
EARNINGS DERIVED FROM POOLS.
Q. What reports do you receive of earnings derived from pools? A. The vouchers
for payments made to and receipts from pools are all approved in the same manner
that I have described as to these others.
Q. Do you have any means of determining the correctness of the report made
to you, either by consulting the pool contract or by consulting the report
of the traffic done and administered under the pool $ A. Yes, sir 5 I usually
read the pool contracts, and generally have had a copy of them. But I have
not considered myself responsible for the correctness of these vouchers.
RESPONSIBILITY FOR CORRECTNESS OF POOL VOUCHERS.
Q. Who is responsible for the correctness of the pool vouchers? A. Either
the general freight agent or the general traffic manager.
Q. Does the approval of the general freight agent appear on all the pool vouchers
which are audited in your office? A, I think every one of them or of the general
traffic manager.
Q. That is Mr. Stubbs ! A. Yes, sir.
Q. How many pools do you know of prior to last April? A. Well, the transcontinental
pool I presume you would call one.
Commissioner ANDERSON. Yes.
The WITNESS. There were a half dozen or so.
Q. Can you furnish us with the names of them by referring to yeur books? A.
I don't think I could.
Q. Do you refer us to Mr. Miller for that $ A. No ; I would refer you to the
general traffic manager.
By the CHAIRMAN :
Q. Who is the custodian of those contracts? A. He is familiar with the contracts.
Q. Who keeps the contracts? A. I think he does.
By Commissioner ANDERSON : Q. Mr. Stubbs ! A. Yes, sir.
OTHER SOURCES OF REVENUE.
Q. From what other sources do you derive revenue besides from passenger and
freight traffic and pool earnings? A. We receive rental earnings.
Q. Are there express companies? A. No ; also from property along the line
of the right of way, and from the sale of what they call " old horse."
Q. Old material? A. Yes, sir ; and from telegraph earnings, sleepingcar earnings,
and miscellaneous items.
EXPRESS BUSINESS.
Q. How has the express business been managed over your road? A. It comes to
us in a condensed form= The freight auditor renders to us reports, on which
we make credits to express earnings, and send to our treasurer for collection.
Q. Who does the express business? A. Wells, Fargo & Co., I believe, do
all of it.
EDWARD C. WRIGHT. 2437
Q. Have you the possession of the contract between Wells, Fargo & Co. and
the Central Pacific Company? A. No, sir ; I have not.
ORIENTAL AND OCCIDENTAL STEAMSHIP COMPANY.
Q. What do you know about the earnings of the Oriental and Occidental Steamship
Company? A. I have nothing to do with that company.
Q. Do not the earnings pass through your department? A. No, sir.
Q. Through what department do they pass? A. They have a secretary of their
own, I believe. He keeps all the accounts, I think Mr. D. D. Stubbs.
Q. Is that your Mr. Stubbs? A. No sir ; that is another Mr. Stubbs.
Q. I mean through what department of the Central Pacific or the Southern Pacific
do payments from that steamship company pass? A. They do not pass through
our office. Of course we may have a small bill against that company the same
as we do against private individuals, but we do not have anything to do with
their business. I do not know what contracts they have. I do not know how the
Central Pacific is connected with it.
Q. Is not the Central Pacific a large stockholder in that company? A. Not
that I know of. I don't know anything about it.
REQUEST FOR COMPARATIVE STATEMENT OF ORDINARY BUSINESS AND
POOL BALANCES.
Q. Could you furnish us with a statement for the year 1884, showing the passenger
earnings derived from pools and the passenger earnings derived from the ordinary
business, and a similar statement as to freight for the same year.
The WITNESS. Does this mean net?
Commissioner ANDERSON. No; not net, but just for the gross. So that we can
compare the volume of the two businesses.
The WITNESS. Yes, sir ; 1 can furnish that. *
Commissioner ANDERSON. Will you do so for the year 1884?
The WITNESS. When you say " net," I want to know whether you wish
all rebates deducted I
Commissioner ANDERSON. I think it would be a fairer test after th# rebates
are taken out.
The WITNESS. Sometimes we have six thousand vouchers a month right along, and
there are so many miscellaneous vouchers.
The CHAIRMAN. We want to know how much of your business in a year, taking the
year 1884 as an example, is ordinary railroad business incident to a railroad,
and how much you derive in the same year from pool balances or arrangements
or settlements with other roads, as distinguished from ordinary business.
The WITNESS. I understand it.
AMOUNT OF BUSINESS POOLED.
By the CHAIRMAN :
Q. What proportion of the business is pooled and what remains unpooled of freight
and passengers, taking the year 1884 as an example? ' A. When I come to think
that over, I cannot do it within a reasonable time.
Q. How long would it take you? A. Well, to make a statement covering a year
it would take me a month or more.
The CHAIRMAN. That will do, if you will furnish it and forward it to the Commission.
How much of your business is in a year's pool?
2438 U. S. PACIFIC RAILWAY COMMISSION.
The WITNESS. We have not segregated our earnings in past years in such a way
that it can be done without a vast amount of work.
HOW POOL ACCOUNTS ARE KEPT.
Q. How do you keep your pool account? A. We charge it right up. If it is a
payment we are making on account of pools, we deduct it from the total freight
earnings. If it is a receipt on account of the pool, we credit freight earnings.
Q. Taking the amount of pool credits or balances in favor of the company, and
contrasting that amount with the ordinary business of the company not forming
any part of the pool settlements, what would be then the traffic of the company
for 1884?
The WITNESS. That is the question?
The CHAIRMAN. Yes.
The WITNESS. That was before I was handling much of that detail. But my opinion
is it would take a vast amount of work to get that information.
By Commissioner ANDERSON :
Q. How many entries of pool balances, either of credit or debit, would you
make in the course of a year? You did not settle more than once a month, did
you? A. No, sir ; but a year's pooling business covers freight to all our
terminals. There is a great deal of other freight coming to the terminals,
which is not pool business. In order to answer that question I have got to
get down to all this detail at those terminal stations.
Q. Why? If you have the total of your freight business for a year, and you
can ascertain from perhaps twenty-five entries that you had received a certain
amount of money from the settlement of pool balances during that year, and
paid out other items, and then from that derived the exact amount of pool business
for the year, you will know that all the rest of the freight business is derived
from the other sources. All you have to do to effect that result is to ascertain
the amount of pool business so that we can compare it with the total amount
of the business.
* The WITNESS. I would like to hear that question asked once more by the stenographer.
(The question was repeated.)
The CHAIRMAN. This will make it easier. Can you give a statement showing the
amount of freight earnings derived from pools, and the amount of ordinary business,
for the year 1884? Can you give us also a statement showing the amount of
passenger earnings derived from pool balances, and the amount derived from
ordinary business, for the year 1884?
The WITNESS. I can let you know to-morrow what^we can dp.
Commissioner ANDERSON. You can let us know to-morrow. My explanation was only
intended to show you that in taking the pool part of it away the rest of it
would answer itself. It seems to me so, though I am not a railroad expert.
The WITNESS. It would be a very easy matter for me to deduct any amount we
may have credited to freight earnings on account of pools. That is a very simple
matter. But I do not get at the pith of the matter.
Commissioner ANDERSON. What we want to know is whether your pool earnings figure
in your business as a much greater quantity than your ordinary business. We
want to compare your pool earnings with
EDWARD C. WRIGHT. 2439
your entire earnings. All we need in order to make that comparison is to get
your entire earnings, which you have, and the pool earnings, which cannot
number many items.
The WITNESS. But for pool business there may be a great deal of business that
would be a loss.
COST OF CONSTRUCTION OF CALIFORNIA AND OREGON LINE.
Q. Very probably. We are not finding fault with the pooling, but we want to
know the result. Were any branch lines of this road constructed during your
administration of the auditor's office? A. A portion of the California and
Oregon was.
Q. The portion which you said did not pass through your office ; or did some
portion pass through your office? A. Well, the portion north of Delta, before
the Pacific Improvement Company took charge of the construction of that part
of the line. The details mostly passed through our office.
Q. Can you furnish a statement of the cost of that portion of the California
and Oregon which was audited in your office? A. Yes, sir. That is, I can give
you a statement of the entire amount which passed through our office, charged
to that account.
RESPONSIBILITY FOR ACCURACY OF VOUCHERS.
Q. As to those vouchers, do you consider your office responsible for their
accuracy? A. Yes, sir. That is, all that I can think of at this moment.
Q. On what report would you audit a voucher for work done on that portion of
the California and Oregon?
The WITNESS. On what report?
Commissioner ANDERSON. On what report, or what representation I A. Well, I
received some verbal authority at the time the work was was going on.
Q. Would you receive an engineer's certificate that certain work had been done,
or a surveyor's report? A. Oh, yes ; if the track department should do any
work in the nature of construction there, they would turn in " time-books," and
I would make up a statement and send it to the superintendent of track to certify
as to its correctness. Then it would pass through the committee on allowance
in the usual way. Then it would be registered and charged to that account.
EXTENT OF CONSTRUCTION DONE DIRECTLY BY CENTRAL PACIFIC.
Q. At what northerly point did the construction done directly by the Central
Pacific Company commence? A. 1 think they constructed it all the way from
Eoseville Junction ; bat I would not speak positively with regard to it. It
was before my time.
Q. Since your time between what points has the construction been completed?
A. What I am most familiar with is from Bedding to Delta.
Q. How many miles is that? A. It is about 40 miles.
Q. Have you been over that road? A. Yes, sir ; I have not been to the terminus.
Q. Have you been over the road from Delta to the north boundary of California?
A. No, sir; not all the way.
Q. What is the character of the country along the 40 or 60 miles of road that
you audited? A. I went over it in the night, and I did not see the country.
I could not say much about it.
2440 U. S. PACIFIC KAILWAY COMMISSION.
GROSS RECEIPTS AS DISTINGUISHED FROM GROSS EARNINGS.
Q. Would your office show the gross receipts of the Central Pacific Company,
as distinguished from its gross earnings?
The WITNESS. The gross receipts as distinguished from its gross earnings?
Commissioner ANDERSON. Yes ; by gross receipts I include all matters that make
up the receipts of the company by reason of the ownership of stock or of different
interests.
The WITNESS. No, sir ; my records would not show that.
Q. What records would show that? A. Mr. Miller's records would show that.
REBATES.
Q. Are these rebates that we have spoken of matters of individual arrangement
in each case, or have you in your office rebate contracts? A. We have not
all the rebate contracts. We get most of them copies of the contracts.
Q. How numerous are they I
The WITNESS. You are speaking of pools, are you, now?
Commissioner ANDERSON. No; I am speaking of rebate allowances to shippers.
The WITNESS. Oh, they are not all under contracts. There are all sorts of rebates.
Q. That was my question, whether they were matters of individual arrangements
with shippers or whether there were contracts extending over a fixed period
of time. A. Those contracts that you speak of are kept in the general freight
office.
Q. You have none in your office? A. No, sir.
Q. You refer us to Mr. Stubbs for that, do you ! A. Mr. Stubbs or Mr. Gray.
ANNUAL ALLOWANCES FOR REBATES, ETC.
Q. Have you a book which shows the total of the allowances for rebates, refunds,
returns, or overpayments made up annually? A. Yes, sir ; we have.
Q. Can you give us the gross total of such allowances by the year from the
time you commenced? A. Yes, sir.
Q. What year was it that you took charge 1881? A. I can show that many years
back.
Commissioner ANDERSON. Show us the full total of allowances for rebates.
Commissioner LITTLER. If he has such a book, he can let us see the book.
The WITNESS. By years, you mean?
By Commissioner LITTLER :
Q. Do I understand that you have a book for rebates containing the several
items of rebates during the several years the company has been in operation
? A. It is not kept altogether in one book. I can furnish the amount.
Commissioner ANDERSON. I simply ask for the amount made up by years.
GROSS RECEIPTS OVER GROSS EARNINGS.
By the CHAIRMAN :
Q. What does your department contribute to the gross receipts in making up
at the end of the year a statement for the company? A. We
EDWARD C. WRIGHT. 2441
close our showing of freight earnings, passenger earnings, and different items
of earnings, also the operating expenses, to the secretary's books monthly
; and then we are through with it, so far as that goes.
Q. But who ascertains the gross earnings as distinguished from the gross receipts
? A. We do.
Q. Then what figures do you use in order to ascertain your gross earnings?
A. We take, for instance, our station agent's returns of freight receipts and
ticket sales, baggage, &c., and then we may make a refund to a man for
an error in overcharging on a ticket, or an error for overcharging on freight
; and we would charge that amount to that item of earnings which should be
charged. Of course that reduces it to net freight earnings.
Q. Do you carry into the account your pool balances? A. If we should pay out
any money on a freight pool, we would charge that to the freight earnings;
and if we received any money on a freight pool, we would credit that to freight
earnings.
Q. What else do you carry into the gross sum before you ascertain your gross
earnings? A. We have express and telegraph, mail, rental, and sleeping cars
and extra baggage. I believe I named passenger and freight, of course ; I believe
that is all.
Q. Is the item of gross receipts taken off each year as a separate item? A.
We made a monthly showing of gross receipts and operating expenses, and then
we show the net.
Q. Is the item of gross receipts for the year taken off as a separate item
as distinguished from gross earnings? A. No, sir ; not that I know of. That
is made up by the secretary, anyhow. We transfer this to him monthly, you know.
HOW THE GROSS EARNINGS ARE ASCERTAINED.
Q. What do you deduct from the gross receipts to ascertain your gross earnings,
before you make your return to the secretary? A, We deduct all these rebates
that we have mentioned, from the gross receipts, and we still call that gross
earnings, after that ; and then we make up our operating expenses, and deduct
that from these gross earnings, and that leaves net earnings.
The CHAIRMAN. I understand that you have your gross receipts and gross earnings,
from which you deduct your operating expenses.
The WITNESS. I understand the gross receipts to be the gross earnings.
Commissioner ANDERSON. We differ as to that. We use the phrase " gross
earnings " as including everything that the railroad gets from every source,
in addition to the earnings from its road. If it happens to be the owner of
stock in a gas company in New York, or it gets rent from a house which has
nothing to do with the railroad, that we call gross earnings.
The CHAIRMAN. He deducts rebates and refunds and overcharges, and railroad
settlements come off.
The WITNESS. Yes. For instance, we sell a ticket from here to New York, and
our agent in San Francisco will report all that money as ticket sales, and
it goes into our passenger earnings. Now, we afterwards pay out from that to
the other roads interested, you see. That still leaves what we call our gross
earnings, after we have paid the other roads.
The CHAIRMAN. Yes, I understand you. Now, will you furnish a statement of the
gross receipts from 1869 to 1886, or from the date of
2442 U. S. PACIFIC RAILWAY COMMISSION.
opening of your road, as distinguished from gross earnings, year by year?
The WITNESS. It would make no showing at all, the gross receipts. My education
in railroad accounts has made the gross receipts the gross earnings, and
nothing else.
GROSS RECEIPTS AS DISTINGUISHED FROM GROSS EARNINGS. t
The CHAIRMAN. Yes, as ordftiarily understood. I now speak of gross receipts,
which include everything received by the company, out of which you make some
deduction, such as rebates, overcharges, terminal settlements, pool settlements,
and all other settlements, and then you would ascertain your gross earnings.
The WITNESS. I understand what you mean, but it would be a foolish showing,
because we sell a ticket here in San Francisco to New York for $120, say. I
don't know what the price is. We call that passenger earnings. I do not call
that gross receipts. It does not belong to us. We know it, and know we have
got to pay out to Eastern roads most of the money. But you call that gross
receipts.
Q. Do you take off the gross receipts every year, to ascertain and make your
deductions, in order to know just what you received before you determine your
gross earnings? A. We do this monthly.
Q. Will you furnish to the Commission a statement from 1869, or from the opening
of the road, to 1886, showing the gross receipts I A. I will do the best I
can.
The CHAIRMAN. Very well. That is all you can do. Let us judge of the foolishness
of it.
CUSTODY OF CONSTRUCTION ACCOUNTS.
By Commissioner LITTLER :
Q. Who has custody of the books containing an account of the cost of construction
of the Central Pacific road? A. I do not know. I never have seen them.
Q. In whose charge ought they properly to be found? A. That was before my
time, and I do not know anything about it.
Q. Are you sure they are not in the auditor's office? A. Yes, sir; I know they
are not in my office.
Q. Are there any vouchers in your office in respect to the construction of
the road? A. Not that I know of.
Q. To what date backward do your vouchers extend? A. They extend away back
to the beginning of the road.
THE AUDITOR'S OFFICE AN OPERATING OFFICE.
Q. Then they ought to embrace the cost of construction, ought they not 9 A.
Well, no ; that does not follow. Our office is an operating office, and as
a rule it might contain only charges to operating expenses.
Q. Then you think your office only includes the vouchers for operating expenses
from the time the road was opened ! A. No, sir ; I would not say that. Well,
as a rule, yes ; but we do occasionally, as an operating company, finish up
work that the construction company has left incomplete, and charge it to that
construction company.
Q. Who has charge of the canceled checks on which the money was paid out for
the construction of this road I A. I should say the treasurer had. I really
never saw them.
EDWARD C. WRIGHT. 2443
Q. The treasurer of the company really ought to have the custody of these books
containing the cost of the construction of the road, ought he not? A. That
I could not express an opinion about.
Q. Do you know whether any of the books of this company, from its organization
to the present time, have been destroyed, by accident or otherwise? A. No,
sir ; I do not know anything about it.
REFERRED TO CONSTRUCTION COMPANY FOR THE BOOKS.
Q. To whom can you refer us for the production of these books containing the
account of the construction? A. The Construction Company, I should say.
Commissioner LITTLER. Although a construction company may have constructed
the road, there must be books in charge of this company containing certain
accounts or vouchers upon which the money of the company was paid to the Construction
Company for its services under contract.
The WITNESS. I do not think that those accounts would necessarily go through
the auditor's office, which is, as a rule, an operating office.
Q. Through what office would they go, and where would these papers be found
? A. I should think the secretary's office would be the proper office. I should
think so.
EXISTENCE OF THE COMMITTEE ON ALLOWANCE.
Q. How long has this committee on allowance, I believe you call it, been in
existence? A. Ever since I have known anything about these vouchers.
Q. Does it date back. to the time of the construction of the road, and did
such a committee pass upon the vouchers for the payment of the cost of construction
?
The WITNESS. I think they did oh, the cost of construction 1
Commissioner LITTLER. Yes.
A. Well, that I could not say. That I do not know anything about.
Q. Recurring to the question of gross receipts as distinguished from gross
earnings, as I understand you, in the statement of your accounts, in order
to ascertain gross receipts you deduct all rebates, all overcharges, all moneys
paid on account of pool contracts, and credit all moneys received from other
railroads in the interchange of business, whether collected on freight or on
tickets? A. Yes, sir.
Q. What other deductions do you make from your gross receipts before you declare
your gross earnings? A. You have named them most all.
EDWAED C. WEIGHT.
REPLIES BY LETTER TO UNANSWERED QUESTIONS.
The following letter was subsequently received from the witness, E. C. Wright,
in response to requests for information :
[Southern Pacific Company (Pacific System), office general auditor.]
SAN FRANCISCO, August 9, 1887.
SIR : Please find below the questions propounded to me by your Commission July
27, 1887, with answers to same in regular order :
Question. Give the names of the roads which had constructive mileage when dividing
the earnings; the amount of such mileage, and the period during which it was
added to the actual mileage.
P R VOL IV 8
2444
U. S. PACIFIC RAILWAY COMMISSION.
Answer. This information has been furnished in full by the president of our
company in a statement presented to your Commission July 28, 1887.
Question. From 1880. inclusive to date of lease, and from date of lease to
the present time, prepare statements by years, of actual net earnings of Central
Paciiic Railroad ; also statement of net earnings by way of rental since date
of lease to the present time.
Answer. I would respectfully refer you to the secretary of our company for
statements requested above, as some of the records required to make the statements
are not kept in this office.
Question. State whether as to any of the leases held by the Central Pacific
Railroad, prior to April 1, 1885, tue rent paid by the Central Pacific Railroad
exceeded any earnings derived from leased roads.
Answer. Yes, in some instances, because such earnings were made up on a mileage
basis which did not give the leased lines their due propprtiou of earnings.
Question. Statement showing cost of that portion of the California and Oregon
Railroad which was audited in your office.
Answer. The records of my office show vouchers charged to the California and
Oregon construction, and these cover charges for construction north of Redding;
but as I transferred monthly the total amount of charges appearing on my books
to the books of the secretary, I cannot say that other charges were not made
direct on his books to the work, therefore it is impossible for me to give
the actual cost of the work between any given points. I would respectfully
rsfer you to the secretary for this information.
Question. Statement from 1869, or opening of the road, to 1886, showing gross
receipts by years.
Answer. Statement requested is given below :
Statement of gross receipts of Central Pacific Railroad and leased lines from
1864 to 1885,
inclusive.
...
Question. Statement showing amount of freight earnings derived from pools
and the amount derived from ordinary business for the year 1884.
Answer. The amount entered to credit of freight earnings in the year 1884,
account of pools, is $99,231.28 ; the amount charged to freight earnings in
the year 1884, account of pools, is $M),997.37 ; total, $110,766.09. Deduct
this latter amount from the gross freight earnings of 1884, or $13,043,034.
27 ; leaves amount derived from ordinary business, $12,932,268.18.
Question. Statement showing amount of passenger earnings derived from pools
and the amount derived from ordinary business in 1884.
Answer. The amount entered to credit of passenger earnings in year 1884, account
of pools, is $22,850.02; amount charged to passenger earnings in year 1884,
account of pools, is $623.47 ; total, $22,226.55. Deduct this latter amount
from the gross passenger earnings of 1884, or $7,226,570.94, leaves amount
derived from ordinary business $7,204,344.39.
I send you herewith a package containing samples of blanks in use in this office,
as per your request.
Very respectfully,
E. C. WRIGHT,
General Auditor. Hon. ROBT. E. PATTISON,
Chairman of United States' Pacific Raihvay Commission,
Palace Hotel, San Francisco, Col.
EMMONS B. RYAN. 2445
OFFICES OF THE CENTRAL PACIFIC EAILROAD COMPANY,
San Francisco, Cal, Wednesday , July 27, 1887.
EMMONS 13. RYAN, being duly sworn and examined, testified as follows :
By the CHAIRMAN :
Question. What position do you hold in the company 1 Answer. I suppose you
would call it the tax agent for the Central Pacific.
DUTIES OF TAX AGENT.
Q. What are your duties? A. To see that the taxes are paid on the property
; that it is not sold for taxes, and to protect it.
Q. How long have you been connected with that position? A. About fifteen years,
I think ; fourteen or fifteen years.
Q. Who did you succeed? A. No one 5 I commenced when it was very young, and
I have kept with it ever since, sir.
Q, What kind of books do you keep? A. Regular assessment rolls.
AMOUNT OF TAXES PAID UPON LANDS.
Q. Will you state to the Commission the amount of taxes paid by you upon the
lauds since the institution of your office, or since the grant by the Government
to the Central Pacific Company? A. It is between four hundred and four hundred
and fifty thousand dollars, or about four hundred and twenty thousand and some
odd dollars.
By Commissioner ANDERSON :
Q. For what period? A. That is since the first 18G9 ; somewhere along there.
By the CHAIRMAN :
Q. Do you give the amount accurately or approximately? A. I give it within
a few hundred dollars.
Q. Will you furnish to the Commission a statement showing the amount of taxes
paid upon the several land grants, by years and by counties? A. Yes, sir ;
to a cent. That is, so far as my books show, and they show correctly.
TAX RATES AND AMOUNT OF ACREAGE.
Q. Will you furnish a statement showing the tax rates of the several counties
? A. Yes, sir. They vary each year. That is, in nearly every case they vary
each year.
Q. Will you include in the statement also the acreage that the amount of taxes
has been paid upon? A.. That I can do also, because that I have in my office.
Q. And will you also include the names of the counties J? A. Yes, sir.
Q. How soon can you give that statement? A. I can give it to you in forty-eight
hours. And by the by, can I hazard one little bit of information?
The CHAIRMAN. Yes ; and do not make it a hazard.
The WITNESS. The Central Pacific has paid over six million dollars of taxes
on its lands and its other property since I have been connected with it.
Q. What i the other property I A. The roads, the plant, stations, frc.
2446
U. S. PACIFIC RAILWAY COMMISSION.
The CHAIRMAN. Well, we want the land grant. The WITNESS. You shall have it, sir.
E. B. EYAN.
The Commission then adjourned to Thursday, July 28, 1887, at 10 a. m.
The witness, E. B. Ryan, subsequently submitted the following statement in
connection with his testimony :
Statement of taxes paid on lands by the Central Pacific Eailroad Company from
1868 to
1886, inclusive.
...To the honorable COMMISSIONERS :
I respectfully state that my books do not tally with vouchers in the office
of the secretary of the company for reasons :
(1) Many payments of school, road, and other taxes were paid which do not appeal*
on my books.
(2) Many payments appear on my books which do not tally with actual payments,
from the fact of tax collectors correcting errors in amounts due ; rebates
on errors and from other sources by tax collectors : delinquents paid in the
interim between date of publication and sale, and taxes paid by parties purchasing
lands during the^iscal year of such payments.
NOTE. The company returns for assessment all lands owned by it on the first
Monday in March of each year.
(3) I did not assume the duties of tax agent until 1870^ hence my books show
from that year only.
The body of the foregoing is hereby submitted as substantially in its showing.
I have the honor to be, your obedient servant,
E. B. RYAN.
OFFICES OF THE CENTRAL PACIFIC EAILROAD COMPANY,
San Francisco, July 28, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
The sergeant-at-arms of the Commission having been sent for Mr. William E.
Brown, reported that Mr. B rown could not be found . Mr. S. T. Gage, having
been requested to learn the whereabouts of Mr. Brown, reported that Mr. Brown
had been in the office all day yesterday and at his hotel last evening, but
that he had not yet arrived at his office this morning. Mr. Gage further stated
that Mr. Brown had been sent for, and, if he could be found, would be on hand
as soon as possible.
The CHAIRMAN. We have sent our sergeaut-at-arms out for him. He has been out
some time.
Mr. GAGE. He has been sent for by messenger, and Colonel Crocker has also telegraphed
for him.
OFFICERS OF CENTRAL PACIFIC FAIL TO APPEAR.
The CHAIRMAN. The Commission has twice requested the presence of Mr. Stanford
before it.
Mr. GAGE. Governor Stanford has not known that.
The CHAIRMAN. He has not appeared. The Commission desires to know whether a
simple request for the attendance of the officers and employes of the company,
made upon some one in authority in the company, will be sufficient. If not,
then the Commission will issue subpoenas to the officers and employe's of the
company to secure their presence and the production of their books.
2452 U. S. PACIFIC RAILWAY COMMISSION.
EXPLANATION OF MISUNDERSTANDING.
Mr. GAGE. I can assure you, Mr. Chairman, that Governor Stanford has not received
any such information. Your bailiff, or whatever he may be, knocked at Governor
Stanford's door, a short time ago, an hour ago, probably, while I was in there
with Governor Stanford, and in quired for Mr. Brown. I went to Mr. Brown's
room, understanding that it was simply an inquiry for him, but he was not in.
I came here now for the purpose of saying to the Commission that Governor Stanford,
as president of the company, would like to appear before the Commission. He
has voluntered to do so, not having received any information that he was wanted.
Presuming that you would be in session, he voluntarily instructed me to say
to the Commission that he would like to appear before the Commission at 1 o'clock
to-day.
The CHAIRMAN. The Commission will hear Mr. Stanford to-day at 2 o'clock at
Parlor A, Palace Hotel.
Mr. GAGKE. I will so report to him.
OFFICES OF THE CENTRAL PACIFIC RAILROAD COMPANY,
San Francisco, July 28 7 1887.
JOHN H. WALSH, being duly sworn and examined, testified as follows :
By the CHAIRMAN :
Question. Have you served a subpoena on William E. Brown? Answer. I have not,
sir. <
FAILURE TO SUBPCENA W. E. BROWN.
Q. Where did you go to find him? A. I went to room 200, Palace Hntel. I inquired
also at the office of the hotel.
Q. What information did you get as to his whereabouts? A. The.y told me he
was not in the room, and they did not know where he was this morning.
Q. Where else did you go to find him? A. I went into a room adjoining, room
42, in this building.
Q. Is that his office? A. I was told that it was.
Q. Was any one there? A. Yes, sir.
Q. What answer did you receive *? A. They said Mr. Brown was not about to-day.
READINESS OF GOVERNOR STANFORD TO APPEAR.
Mr. GAGE. Mr. Chairman, Governor Stanford will take pleasure in meeting the
Commission at two o'clock to-day at the place designated parlor A, Palace Hotel.
The CHAIRMAN. We shall be glad to see him.
OFFICES OF THE CENTRAL PACIFIC RAILROAD COMPANY,
San Francisco, July 28, 1887. E. H. MILLER, JR., being further examined, testified
as follows:
The WITNESS. Before entering into any further answers, if agreeable, I would
like to make some explanation of uiy testimony given a few days since.
Commissioner ANDERSON t Certainly, you may do so.
E. H. MILLER, JR. 2453
ESTIMATES OF ENGINEER.
The WITNESS. I think that there was a call the other day relating to the examination
of a contract, but if not, I would like to offer it. I have found the estimates
of the engineers as to the quantities of the several contracts, with the prices
put in by myself, which I desire to offer.
By Commissioner ANDERSON :
Question. Please state to what contracts they relate? Is it indorsed here on
the back? Answer. I do not think it is. This bundle [indicating a package]
contains estimates for section 1 to section 54. This second bundle contains
engineer's estimates from section 55 to section 92, and this third bundle contains
engineer's estimates from section 93 to section 141.
Q. Please explain exactly what the papers are which you present? A. I can
only explain in general terms. They contain copies made by myself of the estimates
returned by the chief engineer of the company of the quantities of work performed
on the various sections from 1 to 141.
MEANING OF "SECTION."
Q. What is a section? Is it of any definite length? A. As I understand it,
it is not absolutely defined, but practically it is for 1 mile. Sometimes there
is a change made, as I understand, in the length of a section on account of
the character of the work to be done, and sometimes a particular section may
be a mile and a quarter and the next one perhaps may be three-quarters of a
mile, but on the average they represent 1 mile. There is a specimen copy of
one [handing document to Commissioner Anderson]. In addition to that there
is a statement made up by myself of the quantities as appears upon that statement
made by the engineer, the price as I ascertained it under the contract, carried
out for each subdivision of the work, making a total amount of the estimate
to the various dates, with the prices given.
Commissioner ANDERSON. After you have completed your explanation of one of
these estimates I will ask you some questions about it, in order to complete
the matter.
The WITNESS. That is a sample of the estimates and prices as tiled in my office.
Q. In whose handwriting are those estimates? A. In mine, those two, and, I
think, every one of them.
Q. When did you copy them? A. I copied them at the time of the dates, certainly
within ten days.
Q. Who was the engineer? A. S. S. Montague.
Q. Is he now-living $ A. He is not. In this connection, with reference to Mr.
Montague, as I have mentioned his name, I wish to say that no better man has
ever lived. He was competent, honest, and faithful.
EXPLANATION OF ESTIMATES.
Q. In the original paper prepared by him were the prices entered and the amounts
carried out, as well as the quantity of work? A. No, sir.
Q. Then the original contained simply the first column of quantities and you
entered the factors of price and the amount '? A. Excuse me.
2454 U. S. PACIFIC RAILWAY COMMISSION.
That is a copy a precise copy of an estimate furnished to ine by the engineers.
Q. Then the engineer did enter the price and carry out the amount? A. No,
sir ; I beg your pardon. I am mistaken in that. The engineer did not return
the prices, although it appears to be done on this copy that I have made.
Q. As I understand it you took his estimate of quantities and in the next column
entered the factors of price and in the third column carried out the amount
in dollars? A. Yes, sir.
HOW THE PRICES WERE ASCERTAINED.
Q. From what source did you ascertain the price! A. From the contracts or from
the orders of the board of directors, as they appeared on the minutes of the
company.
Q. In the marginal computations you took the total estimate which, as I understand
you, includes the total estimate of all the work done to date, deducted preceding
estimates, and then you obtain a sum which you divide into two parts, making
the " five-eighths cash " and the other " three-eighths stock." Please
state from what source you derive these fractions? A. Either from the contract
itself, if it was a contract, and, it it was not a contract, I took it from
the orders of the board of directors, making the price the same as appears
on the minutes of the board.
HOW THE CONTRACTORS WERE PAID.
Q. And these amounts due to the contractors, whoever they were, were paid in
this manner? A. They were not paid ; they were credited upon my ledger to
the contractor.
Q. And ultimately paid? A. And ultimately paid, certainly.
Q. Does your ledger contain two accounts, to one of which you credited the
cash payment and the other the stock payments? A. It shows plainly on the
face of the ledger exactly what is shown there, that he was entitled to receive
on this estimate a certain amount in cash and a certain other amount in stock.
Q. I ask you whether those amounts, the stock amount and the cash amount, were
entered in separate accounts, or whether they were all merged in one account?
A. There certainly would be one account for the cash and one for the stock
account, but not a separate account with the contractor.
Q. Then the contractor, on this statement which I hold in my hand, would be
credited with $204,439.79? A. Yes; but he would be credited $127,774.87, payable
to him in cash, and with $76,664.92 payable to him in stock.
Q. Those two entries would be made as separate credits? A. Yes, sir.
Q. They would not be merged into one figure"? A. No; the entry would appear
on the face of the ledger as separate items under the same heading.
Q. And when you came to balance that account you would figure up how much stock
was payable to that account and how much cash was payable to that account,
and you would balance the account by entering the required amounts in stock
and in cash? A. When it was received or paid to the contractors entries would
be made in the manner you suggest, or in the manner in which your question
indicates.
E. H. MILLER, JR. 2455
CONTRACT WITH CROCKER & CO.
Q. What I want to know positively is whether, when estimating what was paid
on this contract with Crocker & Co., we may take all your entries of cash
and all your entries of stock, as appearing in these estimates or as appearing
on the face of your ledger, and conclude that the consideration received by
Crocker & Co. was the sum total of the cash and the sum total of the stock
? A. Yes, sir.
Q. Will you please state to what contract these estimates refer, as far as
you can? A. Yes, sir ; they referred in general or in detail to all the contracts
between sections 1 and 141 ; the various contractors between those sections.
For all of these sections, of course, there were various contractors.
LOCATION OF SECTIONS.
Q. Give us the geographical location of those sections. Do they com mence at
the city of Sacramento? A. Section No. 1 commenced at the city of Sacramento
and section 141 ended approximately 141 miles east of Sacramento, varying perhaps
three quarters of a mile.
Q. How near the State line would that be? A. At the State line, practically.
CONTRACT AND FINANCE COMPANY.
Q. That carries us to a point where the transactions with the Contract and
Finance Company commence? A. Yes.
Q. And embraces all the minor contracts and the two contracts with Crocker & Co.
? A. Yes, sir ; I think there are three contracts, however, with Crocker & Co.
Q. In whose handwriting are the monthly estimates? A. The monthly estimates
of quantities are in the handwriting of some clerk in the engineer's department,
and the monthly estimates of prices and amounts are in my own handwriting.
From the estimates of quantities of work done and the estimates of amounts
payable, there is no difficulty in ascertaining all of the terms of the contracts
applicable to the sections between 1 and 141.
I wish to state to the Commission that these papers were not in the vault in
my office, but in an outside room, in some pigeon-hole, and 1 found them yesterday
while making a thorough overhauling of all my papers.
HOW CONTRACTS WERE MADE.
Q. What other papers do you desire to produce besides these estimates? A.
As I remember, 1 was asked under what arrangements contracts were let and the
circumstances in connection therewith. I find on looking over the reports of
Governor Stanford that reports were made by committees at various times upon
these matters. I have three reports of a committee of which, I believe, Governor
Stanford was one, and in another case I was another. One is a report of a committee
upon the question of making a contract for the construction and grading of
the railroad. It is dated May l), 1865. The report of another committee upon
letting a contract, dated June 6, 18G5, is also here. Also the report of the
president and the acting chief engineer, dated January 5, 1867, upon the progress
of construction, submitted to the board of directors January 14, 1867, and
ordered on file. With the permission of the Commission, I would like to read
these reports.
Commissioner ANDERSON. We will probably put them in our report and we will
read them this afternoon.
2456 U. S. PACIFIC RAILWAY COMMISSION.
The WITNESS. I would prefer to read them now if there is no objection. The
CHAIRMAN. It is not necessary to read them now.
REPORT FOR 1886.
The WITNESS. In my statement the other day as to the funded debt of the .company
I was very careful to state that my figures .wer.e given as of the date December
31, 1885. I have before me a proof of the report of the company up to December
31, 1886.
Commissioner LITTLER. Bead that.
The WITNESS. It is composed of tables. I will read it, and I would like afterwards
to submit our report containing them. This is our proof, and it has nut been
corrected; it will go back to the printer today for correction.
Q. When are you going to let us have the proof of your report for 1886? A.
There is the proof copy that came a few days ago and now goes back for correction.
There are a great many corrections in the proof.
Commissioner ANDERSON. We ought to get it in a day or two 'I
The WITNESS. Yes, sir.
Commissioner ANDERSON. We will get your report, then, in a day or two, and
it is not necessary, therefore, to read that statement at the present time.
STATEMENT AS TO GUARANTEES.
The WITNESS. My testimony should be corrected relative to those accounts, though
I was careful to state that the figures I gave were those of December 1, 1885.
With regard to the statement as to guarantees which I was asked to get out
as to the bonds guaranteed by the Central Pacific, I now submit it. It is a
statement showing the bonds of leased lines guaranteed by the Central Pacific.
It is made in tabular form, showing the name of the road, miles of road, character
of loan, amount of bonds guaranteed, date of maturity of bonds, interest payable, &c,
California Pacific, second mortgage, 6 per cent., $1,600,000, due January 1,
1891, interest payable in January and July.
By the CHAIRMAN :
Q. What is the date of the guarantee? A. It bears date at the time the lease
was made. Q. What was the date? A. I do not know.
By Commissioner ANDERSON :
Q. Cannot you tell us the year? A. Not from memory.
The CHAIRMAN. It is very important that we should have the date of the guarantee.
The WITNESS. There is no difficulty in ascertaining it from the papers in your
possession.
Commissioner ANDERSON. There is no doubt about that, but we have many things
to ascertain, and we would like to have you get the information for us.
The CHAIRMAN. Suppose you keep that paper and amend it by adding the date of
that guarantee.
The WITNESS. If you choose, I will pass that for the present.
Commissioner ANDERSON. The date of the guarantee is essential.
OBJECT OF INCREASED ISSUE OF STOCK.
The WITNESS. It is possible that there may be a correction necessary in my
testimony given the other day. 1 misapprehended one of the
E. H. MILLER, JR. 2457
questions, as reported by the reporters a question put by Mr. Anderson in relation
to the purpose for which the $5,000,000 were issued. Although that question
is in the report, I do not remember it at all. The question that I do recollect
was, what was done with the $68,000,000. My answer fits both cases, because
the $5,000,000 of bonds having been sold for cash, that cash was deposited
in various banks and disposed of in sundry ways. It was impossible to tell
exactly to what various purposes the proceeds of the sale of those $5,000,000
were applied. They went into the general fund, and were used for the general
expenses of the company.
Commissioner ANDERSON. The question was, what the $5,000,000 of stock which
was issued (raising the amount of stock from $54,000,000 to $59,000,000) was.
It was not bonds.
The WITNESS. I should have said stock; not bonds. It was impossible for any
man to tell to what particular purpose that money was applied, unless it was
kept entirely and distinctly by itself. The moneys came in and went into the
general fund, and they were applied to the general purposes of the company,
and it is impossible for me or for any man to say to what particular purpose
this particular money was applied.
DID PROCEEDS GO TO PAY DIVIDENDS?
By the CHAIRMAN :
Q. Would you have used it to pay dividends? A. If we paid any dividends after
that, unless this cash had been kept right sraight along separated from all
other cash, probably it would have gone towards the payment of dividends. 1
want to explain that. The actual and definite proceeds, the individual money
received from that $5,000,000 of stock, were not segregated from the other
moneys of the company, but went into the general fund, and if the company was
entitled to pay dividends if it had the right and authority to pay dividends
some of that actual money may have been used in paying them.
WHEN AND WHY THE STOCK WAS INCREASED.
Commissioner ANDERSON. The stock was increased in 1880, and is entered in the
reports of the company as held in trust for the company. It seems subsequently
to have been sold, and my question is, when was that stock sold, and what became
of the money"?
The WITNESS. The annual reports will show that. They will show the increase
in the stock issued. I do not remember the year.
Commissioner ANDERSON. You will find it $54,000,000 in 1881, 1882, and, I think,
1883. From your general report we cannot tell just when this issue was made
without tracing it up. This stock was sold from time to time as occasion offered,
and the cash entered in the miscellaneous cash assets of the company. You mean
to say that it is impossible to say that the dollars received from this stock
went to any special purpose, as I understand you.
The WITNESS. Precisely.
FLOATING DEBT.
Commissioner ANDERSON. But in taking the balance sheets of the company and
tracing from the year when the capital stock account was increased $5,000,000,
and tracing the increase on the other side of the account, the construction
account, or the equipment account, or any other of the accounts which appear
on that side, you may mean to say that
2458 U. S. PACIFIC RAILWAY COMMISSION.
the increase in the stock, together with the increase of the items the bonds
on that side have gone into the other moneys which appear to have increased
on the other side of the account.
The WITNESS. Yes, and I can add to that, generally, that the sale of that stock
was made for the purpose of getting money to pay off the floating debt ; but
whether that particular money received was used for that purpose or not, I
cannot say. I submit now a number of reports, which I have found in my office.
I have handed you all the papers, except Leland Stanford's reports. I have
here seven reports of Leland Stanford.
REPORTS OF OFFICERS.
(The witness here produced seven reports of Lelaud Stanford, president, as
follows : A report dated July 13, 1865, to the stockholders at their annual
meeting. A report dated December 28, 1865, reporting as to proceeds from sales
of California Central Eailroad rolling stock, &c. Three reports dated September
1, 1867. A report dated December 26, 1867. A report dated July 13, 1869, to
the stockholders of the Central Pacific Eailroad Company of California, at
their annual meeting.
The witness also produced fifteen reports of Treasurer Mark Hopkins.
The witness also produced reports of C. P. Huntington, as follows : Two reports
lor 1863. Two reports for 1864. Thirteen reports for 1866. Ten reports for
1867. Nine reports for 1868. Three reports, without the date being noted on
the back.)
Commissioner ANDERSON. That completes your papers, Mr. Miller, does it?
The WITNESS. Yes, sir ; I will say, however, that they are not all the reports
of Mr. Huntington. Your accountants are using the reports of 1869 and subsequent
to that time. They have been taken out of the files, and have been segregated
from those papers.
REQUEST FOR HISTORY OF CONSTRUCTION OF ROAD.
Commissioner ANDERSON. Could you place before the Commission in tabular form
(you may take a reasonable time to prepare it) a statement giving us, substantially,
the history of the construction of this road, starting with section 1 and coming
down to the completion in May, 1869, showing the cost of construction, the
amount of cash, of stock, and of bonds issued under the Crocker contract, the
amounts under the Contract and Finance Company's contracts and under the Western
Development Company's contracts, if that company had a contract during those
years? My information is that the entire construction up to May, 1869, covered
miscellaneous contracts the Crocker & Co. contracts with the Contract and
Finance Company and what we would like to know is how much it appears from
your books this construction cost in cash, bonds, and stock, to whom the same
were issued, and to what sections or miles of construction such payments were
respectively applicable, as they appear from the estimates of the engineers,
in connection with the issue of stock and bonds or payments in cash. In other
words, can you give us the story of the construction of this road from its
inception to its junction with the Union Pacific? I do not ask for the production
of all the books, showing each individual payment, but so that we can generalize.
You may take a number of sections together and take the contracts together,
and say that the Crocker contract commenced at such and such a section, at
such n date, and was completed so many months or years afterwards, at such
a section, and that the entire consideration issued under that contract was
so much in
E. II. MILLER, JR. 2450
money, so much ill stock, and so much in bonds, if bonds were used. Then we
would like to have the same thing, made out in the same way, applied to the
contracts of the Contract and Finance Company.
The WITNESS. Do you ask if I can give you these facts?
Commissioner ANDERSON. Yes.
TIME REQUIRED TO PREPARE THE STATEMENT.
The WITNESS. I can do so, but it will take some time.
Commissioner ANDERSON. How long will it take you to prepare that information
?
The WITNESS. Two or three days ; that is, I will not do it personally, but
I will have to have it done by my clerks.
Commissioner ANDERSON. You can have all the time necessary.
The WITNESS. It will take two or three days, but I will have it ready for you
within that time. I think, however, that your accountants are getting this
information in detail. So far as I have seen what they are doing, I think that
they will have full details of each contract with the date of each payment.
The CHAIRMAN. I should like to ascertain who can tell us the story of the construction
of this road. ,
The WITNESS. I can tell that story without any difficulty.
The CHAIRMAN. I want it regularly and consecutively, whether on the witness
stand or by memorandum. It is indifferent to me whether you write it out, or
take the stand and tell it orally.
The WITNESS. I will write it out, and, if you desire, make an affidavit to
it.
The CHAIRMAN. As far as I am concerned, I would like to get the facts. It is
immaterial in what shape they come so long as we get them.
Commissioner ANDERSON. I move that Mr. Miller be requested to prepare the statement
indicated to him, and, when it is ready, that he lay it before us.
The motion was agreed to.
VOUCHERS.
Commissioner LITTLER. Can you accompany that statement with the vouchers backing
it up?
The WITNESS. I can.
Commissioner ANDERSON. We want first to get a plain statement of when this
road was built and how much they paid for it, and then the detailed statement
of vouchers or anything explanatory that can follow. You have nothing to add
respecting the other contracts such as that with the Contract and Finance Company?
The WITNESS. No, sir ; only to say that I cannot possibly see any important
connection which those contracts have, whether lost or present. You have, I
think, every detail of those contracts among these that I have submitted this
morning.
Commissioner ANDERSON. In these estimates of sections Nos. 1 to 141?
The WITNESS. Yes, sir.
Commissioner ANDERSON. There are other things that we want to see. We want
to see the books of the Contract and Finance Company. We want to know how much
it cost that company to build this road, as well as what the Central Pacific
Company paid for it.
SUBPCENAS UNNECESSARY.
The CHAIRMAN. Is it necessary to serve you with a subpoena to be iere and testify
before this Commission? P R VOL IV 9
2460 U. S. PACIFIC RAILWAY COMMISSION.
The WITNESS. No, sir ; it is not necessary to subpoena ine, or any other person
connected with the company.
The CHAIRMAN. Will it be necessary to serve a subpoena for the production of
the books 9
The WITNESS. No, sir. Every book that I have you can have without a subpoena.
The CHAIRMAN. Then you will see that they are produced without subpoenas 1
The WITNESS. Yes, sir.
E. H. MILLER, JR.
Afternoon session.
PARLOR A, PALACE HOTEL, San Francisco, Cal, Thursday, July 28, 1887.
The Commission met as above, all the Commissioners being present, the chair
announcing that, until otherwise ordered, the sessions of the Commission would
be held at that place.
The CHAIRMAN. Mr. Leland Stanford is present, and I suppose we had better proceed
with his examination.
Mr. STANFORD. I received the Commission's printed circular containing some
fifty-eight interrogatories, and I have carefully prepared an answer to each
interrogatory. I had expected to be ready whenever the Commissioners should
arrive in San Francisco, but there was some of the information that I could
not obtain in time. If you will allow me I will read this.
The CHAIRMAN. Do you make this a portion of your testimony?
Mr. STANFORD. I have made an affidavit as to the truth of the facts stated
in it, to the best of my knowledge.
The CHAIRMAN. At the bottom of this paper?
Mr. STANFORD. The affidavit is at the bottom of another paper, but this is
a general statement preliminary to the answers that I have prepared to the
interrogatories. I presume you will remember that you sent me a printed communication
containing a number of interrogatories, requesting me to prepare answers, which
I have done.
The CHAIRMAN. Before going on with it I will swear you.
LELAND STANFORD, being duly sworn and examined, testified as follows :
The WITNESS. Your communication dated New York, May 12, 1887, requesting me
to answer the interrogatories contained therein, was duly received, has been
carefully considered by me, and I submit herewith my replies thereto :
I did not have personally the information necessary to answer some of the interrogatories,
and, agreeably to your request, referred them to those persons who possessed
such knowledge. Their reports, verified by their affidavits, are attached as
exhibits to, and are made part of, my answers to your communication.
CONGRESS TO CONSIDER THE EQUITIES.
The creation of this Commission charged by Congress with the duty of examining "into
the workings and financial management of all rail
LELAND STANFORD. 2461
roads that have received aid in bonds from the Government," was an honest
and candid admission by Congress that there were equities existing in favor
of the railroads in question, which should be inquired Into, and to the full
benefit of which they are entitled. I know that such equities do exist in favor
of the roads I represent, and I am pleased that an opportunity has at length
been offered us by Congress to present them in such form as to insure their
full and impartial consideration both by it and by the people at large.
EXAMINATION POSSIBLE ONLY BY CONSENT OF COMPANY.
It will be readily admitted that the examination contemplated by the act, and
with the making of which examination you have been charged, could not be held
without the consent of this company whose affairs it was thus desired to examine.
The Central Pacific Railroad Company was organized on the 27th day of June,
1861, under the laws of the State of California, and has ever since been, and
now is, carrying on and transacting its business under and in accordance with
the laws of this State. In this particular its relations and obligations to
the Government are entirely different from those of the companies which were
created by and under Federal statutes. Congress has a control over such corporations,
even to the extent, perhaps, of taking away their charters ; but as to the
Central Pacific, even though all the laws of Congress relating thereto, and
under which its relations to the National Government are defined, were repealed,
it would still exist as a legal corporation, and continue to do business as
such under and in accordance with the laws of the State relating to railroad
corporations. After diligent search I have been unable to find anything in
that contract which authorizes any investigation of this kind to be made.
Hence, as I have before said, it will be readily admitted that the examination
contemplated by the act of Congress cannot take place without the assent of
the company itself.
COMPANY CONSENTS TO EXAMINATION.
Notwithstanding all this, however, we meet you most cheerfully in this matter.
We shall furnish you a full and detailed answer to each and every one of the
fifty-eight propositions and interrogatories contained in the communications
hereinbefore mentioned.
AID FOR CONSTRUCTION OF ROAD URGED BY ALL.
The construction of the Pacific Eailroad to unite the Atlantic States with
the States and Territories of the Pacific was the leading topic of public discussion
from the termination of the Mexican war, until the road was finally completed
in May, 1869. This subject occupied the attention of political conventions
in neat- ly every State of the Union, and Congress was overwhelmed with petitions
and memorials urging the extension of Government aid to the enterprise. Public
sentiment compelled the national conventions of both political parties to declare
in favor of the construction of the road, as a military and commercial necessity.
EARLY SURVEYS AND ROUTES.
Prior to 1860, surveys and examinations were made by the War Department, of
various routes across the continent. The Southern route
2462 U. S. PACIFIC RAILWAY COMMISSION.
on the thirty-second parallel was regarded as the only one upon which it was
practicable to construct a trans-continental railroad. It was understood
that the Northern and Central routes were impassable in winter on account
of the deep snows in that region, and besides, the mountains themselves were
represented as imposing insurmountable barriers to the construction of a
railroad. Pending the discussion of the question, the civil war closed the
Southern route and rendered it impossible for the United States to avail
itself of the advantages supposed to exist on the thirty-second parallel.
The Government had no option; if a road was built, either the northern or
central route must be adopted. The war made it clear to every citizen that
a road connecting the Pacific with the Atlantic was a political necessity.
The discussions which had already taken place with respect to the several
routes across the continent had impressed the financial world with the impracticability
of constructing a railroad on the central line.
ACT OF 1862.
Congress, however, resolved that a road must be built, and to that end, in
1862, passed an act in aid of its construction. The act provided for the organization
of the Union Pacific Railroad Company to construct the road from the Missouri
River to the eastern line of California, and authorized the Central Pacific
Eailroad Company to construct the balance of the road through that State.
BUSINESS FROM COMSTOCK LODE.
At the time of the organization of the Central Pacific in 1861, the great Comstock
Lode in Nevada was being rapidly developed, and a vast amount of freight was
being carried over the mountains by teams. It was for the purpose of doing
this business for which there was no competition, except teams over the mountains,
that the projectors of the Central Pacific Eailroad 'organized that company.
They would not have attempted to scale the Sierra Nevada Mountains with a railroad
against other competition.
GOVERNMENT TRANSPORTATION PRIOR TO ROAD EIGHT MILLIONS A
YEAR.
On the line of the road across the continent for a term of years prior to the
passage of the act for the construction of the Pacific Eailroad, the annual
expenditures of the Government for the transportation of supplies for the military
and Indian service and carrying United States mail had exceeded $8,000,000.
This annual expenditure was assumed as a basis for the compensation which would
be paid to the railroad for the service it would be called upon to perform
for the Government. It was understood that the Government service would be
largely increased by the construction of the road, and it was assumed that
the compensation would never be less. The act provided for both bonds and lands
to aid in the construction of the road. The bonds were to draw 6 per cent.,
and to become due thirty years after the date of their issue. It was also provided
that the road should perform all Government service required, and that the
compensation therefor should be credited upon the principal and interest of
the bonds, and that the Company should also pay to the Government 5 per cent,
of its net earnings to apply on the bonds.
LELAND STANFORD. 2463
UNITED STATES TRANSPORTATION CHARGES AND FIVE PER CENT. OF NET EARNINGS TO
PAY THE DEBT.
It was estimated that the eight millions per annum which it had previously
cost the Government to transport supplies and carry the mail would-be paid
to the company for much better service, and that such payment, together with
the 5 per cent., would liquidate all the obligations of the company to the
Government before the maturity of the bonds. This would have been the case
if the Government had not reduced the compensation of the Pacific Railroad
for transportation ot supplies and mail service to a mere nominal amount. The
Government, in fact, required the Pacific Railroad to perform mail service
at a rate not exceeding the usual allowance made to railroads passing through
the populous States of the East, making no allowance for the fact that in the
region where the road was constructed there was no competition, very little
local business, and the fact that the Government had been relieved from the
slow and inadequate service formerly performed by teams and pack animals.
ACT OF 1862 NOT .ADEQUATE.
The Union Pacific Railroad was unable to enlist capital to. undertake the construction
of the road under the provisions of the act of 1862. The public mind was so
thoroughly impressed with the difficulties of the construction of a railroad
on the Central line that it could obtain no money for that purpose. In addition
to this, the war had destroyed public confidence and added largely to the difficulties
of the enterprise. The Central Pacific was also unable to avail itself of the
provisions of the act. It was, however, a State corporation, and. continued
to struggle to construct a road over the Sierra Nevada Mountains. Some aid
was extended by the State of California by the guarantee of interest on a million
and a half in bonds, and bonds of several of the counties of the State, all
of which have been fully reimbursed, except the city and county of San Francisco,
which compromised its subscription of $600,000 to the stock of the company
by paying $400,000 in the bonds of the city after a long litigation.
ACT OF 1864.
With the private means of the corporation and the aid above mentioned, it commenced
the work of construction in 1863, and continued it until the road was completed
in 1869. In 1864 Congress became satisfied that the road could not be built
on the terms and conditions provided in the act of 1862, and passed a supplementary
act containing important modifications, viz: It doubled the amount of the land
grant; it provided that the company might execute a first mortgage on the road
for an amount equal to the Government bonds ; and it confined the payments
required from the company to one-half the compensation due from the Government,
and the 5 per cent, of net earnings named in the original act. It reserved
a lien upon the road for the performance of these obligations.
REASONS FOR MODIFIED TERMS.
The argument in favor of these modifications was that the road was a political
necessity and must be built at whatever cost ; and it was contended that one-half
of the compensation due from the Government
2464 U. S. PACIFIC RAILWAY COMMISSION.
for services, together with 5 per cent, of the net earnings, would pay the
bonds before maturity. This would have been the case, if upon the construction
of the road the compensation had not been reduced below what was previously
paid. The time limited by Congress for the construction of the road extended
to July, 1876, but a universal desire was expressed by Congress and the country
for an earlier date.
RAILROAD OVER SIERRA NEVADAS DECLARED IMPOSSIBLE.
As before remarked, the Central Pacific was compelled to build over the Sierra
Nevada Mountains, which had been pronounced impassable for a railroad, not
only by the public at large, but by many engineers. This alone would have made
the negotiation of its securities difficult ; but added to this there was much
local opposition.
ANTAGONISM OF OTHER INTERESTS.
The construction of the railroad antagonized the Telegraph Company, the Sitka
Ice Company, the California Steam Navigation Company, the Pacific Mail Steamship
Company, the various toll road companies, the contractors for the Government,
the Sacramento Valley Railroad Company, Wells, Fargo & Co., and all the
various transportation interests, because its construction would interfere
with or practically destroy their respective business organizations. These
interests largely influenced the public press of the Pacific coast, and made
combinations to destroy the credit of the company and prove to the world that
its undertaking was a fraud and a farce which must necessarily culminate in
failure. Under these circumstances the road across the Sierra Nevada Mountains
was* constructed, and the will and energy manifested by the company attracted
the attention of Congress and induced a change in the law.
CENTRAL PACIFIC AUTHORIZED TO BUILD EASTWARD FROM CALIFORNIA.
It will be borne in mind that the original act conferred on the Central Pacific
the right to build to the east line of the State of California. In 1866 that
limitation was removed, and it was provided that both the Union and Central
Pacific Eailroad Companies might continue to build until a connection was made
by a continuous line of railroad. At that time the Central Pacific Company
was surmounting the difficulties on the Sierra Nevada Mountains which had hitherto
been regarded as obstacles which could not be overcome, while the Union Pacific
Company had scarcely made a commencement. The road of the latter company was
then constructed but a few miles west of the Missouri River, al though it had
a level plain for more than 500 miles west of Omaha.
ROAD COMPLETED MAY, 1869; SEVEN YEARS BEFORE TIME FIXED.
This act was passed to hasten the completion of the road, and it accomplished
the purpose desired. The last spike was driven in May, 1869, seven years before
the expiration of the time limited in the original act. The companies very
justly regarded this act as an indication by Congress that a speedy construction
of the road was demanded. To meet this demand both companies made great sacrifices.
LELAND STANFORD. 2465
EXTRA COST BY EARLY COMPLETION.
The loss sustained by the Central Pacific in thus complying with the manifest
design of Congress for the speedy completion of the road was very great. The
company did not wait for a completion of a continuous line to convey materials
and supplies for the construction of the road; on the contrary, by means of
teams and pack mules, transported supplies for hundreds of miles in advance
of completed construction. It even conveyed railroad iron, locomotives, and
other materials by teams in winter, over the deep snows on the Sierra Nevada
Mountains, where little but tunnel work could be done in that season of the
year, for the construction of the road beyond, and built many miles of road
before a connection was made therewith.
ADDITIONAL LOSS TO COMPANY BY EARLY COMPLETION.
I desire to call the attention of the Commission to some of the sacrifices
made by the company in hurrying the work to its early completion. The bonds
issued by the United States to the company were, on account of the war, disposed
of at a discount of over $7,000,000. This discount, with the interest on the
same until the maturity of the bonds, will amount in ronnd numbers to $20,000,000.
There was also a like discount suffered on the first mortgage bonds issued
by the company, whereas if the full time allowed by Congress had been occupied
in the construction of the road, these bonds could have been sold at par. At
the time the road was constructed the prices of labor and materials in California,
Nevada, and Utah were enormously inflated, not only on account of the war prices
which then prevailed and the war risks which were incurred in transporting
material from the East by sea, but also by reason of the great mining excitement
which prevailed in Nevada and California and absorbed nearly all the available
white labor. It will be shown by the testimony of engineers who had charge
of the construction of the road and other competent witnesses, that the cost
of construction exceeded 50 per cent, more than it would have been if the company
had delayed its final completion until July, 1876.
PUBLIC BENEFITS REALIZED THROUGH CONSTRUCTION OF PACIFIC
RAILROAD.
The Pacific Eailroad has accomplished all the good, both local and national,
that was predicted by its most enthusiastic supporters. It has demonstrated
the possibility of the construction of a transcontinental road ; it has proved
to the financial world that the great interior abounds in resources ; it has
made it possible for the construction of other transcontinental roads, with
numerous branches and feeders ; it has shown how the national domain can be
utilized; it has encouraged the development of the natural resources of California,
and shown that its products of fruits and wines can be transported to the Atlantic,
States by rail. It was the first enterprise anywhere in the world which made
possible the habitation of regions of country far remote from navigable waters,
and has added untold millions of wealth to the nation. It has performed the
public service so faithfully and expeditiously as almost to annihilate the
distance between the Pacific and the Atlantic, and bring the whole country
into close and intimate political, social, and commercial relations. It has
performed the Government service in transportation of mails, materials, and
supplies, to the complete satisfaction of all Government officers having charge
of such business.
2466 U. S. PACIFIC RAILWAY COMMISSION.
INJURY TO COMPANY BY UNJUST LAWS.
While the company has been spending all its energies in furnishing to the Government
and the people every possible facility at the lowest possible rate for transportation,
Congress has at times, through a misapprehension of the facts, appeared exacting
and unjust. The act of 1878, known as the u Thurman act," has been injurious
to the company. While it was admitted that there was nothing due from the company
except one-half of its compensation for Government service and 5 per cent,
of its net earnings, until the maturity of the bonds, Congress provided for
a sinking fund ; it placed the management of that fund in the hands of the
Secretary of the Treasury. The sums required under this act have been paid
into the fund since 1878 and have been invested in Government bonds issued
for the construction of the Pacific railroads, at a cost for premium of 34
per cent. These bonds, as we have already seen, were originally disposed of
by this company at a discount, causing a loss on the principal alone of $7,000,000.
INVESTMENT OF SINKING FUND BY UNITED STATES.
The company is charged interest on these bonds at the rate of 6 per cent, on
their par value. The Secretary has invested the money which the company has
paid under the Thurman act in these bonds, paying an average premium therefor
of 34 per cent. There has been paid in by the company to the sinking fund $3,168,600.50,
the loss on which in interest and premium up to the present time is $1 ; 612,966.72.
In fact, there is less money in the sinking fund to-day than the amount paid
in by the company by over half a million dollars.
BENEFITS TO BE CONSIDERED.
It was supposed when the company accepted the terms of the acts and entered
into the contracts with the Government that the United States would take into
consideration the circumstances under which the road was constructed, the difficulties
encountered in its construction, and the great benefits accruing to the Government'by
its increased facilities in mail service and transportation, and allow it a
like compensation to that formerly paid for the service when performed by teams
and pack animals. This company, instead of receiving four millions per annum,
which would have been its reasonable proportion according to the former rates
of compensation, has, in fact, received not more than one-eighth of that amount.
NO COMPETING LINES ANTICIPATED.
I also desire to call your attention to the fact that at the time of the construction
of the Pacific Eailroad no competing roads were anticipated. It was expected
that the Pacific road, for which the Government issued its bonds, would be
the only transcontinental road until its debt to the Government was fully liquidated.
But soon after the company entered into the contract with the United States
for the construction of the road, other parallel and competing roads were aided
by extensive land grants made to them by the United States. The land grant
to the Northern Pacific was many times in extent and value more than the land
grant of the Union and Central companies. The Atlantic and Pacific, Texas and
Pacific, and Atchison and Topeka are all compet
LELAND STANFORD. 2467
ing roads to the Union and Central, and have all been aided by extensive land
grants made by the Government since the commencement of the construction of
the Central Pacific.
LOSS CAUSED BY COMPETING AIDED LINES.
There was certainly no competition available to the Government with the Pacific
Railroad from the time of its completion until 1881, when the Atchison, Topeka
and Santa Fe united with the Southern Pacific at Deming, N. Mex. During all
that period the Government? was saved the full amount of the difference between
what was paid by the former mode of transportation and the actual amount paid
after the completion of the Pacific Railroad. This amounts to many millions
of dollars, as shown by the public reports. The local business for Utah and
Nevada is exceedingly small, as will appear from answers to your questions
which I shall hereafter make. The Central Pacific, outside of its local business
in California, mainly relies upon through business. This has been diminished
by the competing lines aided by the Government by at least $17,000,000, as
will be shown by the facts and figures hereafter presented in answer to the
proper interrogatories.
THE EQUITIES CONSIDERED BY CONGRESS.
The act of Congress, however, under which, your Commission is organized, recognizes
the equities of the company and provides for an examination of all the circumstances
attending the construction of the road, such as : what was the cost of Government
transportation and mail service on the line of the road prior to its construction
; how much more expensive was it to construct the road at the time than it
would have been five years earlier or fire years later; what discount was the
company forced to make in disposing of its bonds ; what loss has the company
sustained by competing lines subsidized by the Government. This is the first
opportunity the company has had to present in official form these equitable
considerations.
THE DEBT OF THE GOVERNMENT IN EXCESS OF THAT OF THE COMPANY.
I feel confident that when your Commission shall have concluded its labors
it will appear that upon an equitable adjustment between the United States
and the Central Pacific Company the company will owe nothing to the Government,
but, on the contrary, the Government will be largely in debt to the company.
PRINCIPAL CLAIMS AGAINST THE UNITED STATES.
I will recapitulate the principal claims of the company against the Government,
which are :
(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
Total . 19,936,205.94
(2) The amount which the Government saved in its transportation on the Central
and Union Pacific line between the completion of the road in May, 1869, and
time when it might have been completed under the contract, i. e., July 1, 1876,
$47,763,178. This coini>any's proportion, say 46 per cent - 21,971,062.00
2468 U. S. PACIFIC RAILWAY COMMISSION.
(3) The amount which the Government now owes the company upon transportation,
the legality of which claim has been sustained by the Court of Claims and
also the Supreme Court of the United States. This
amount is $1,853,323.15
(4) The amount of loss which the Company has directly sustained by reason of
the refusal of the Government to grant the company patents
for its lands as rapidly as called for, say 500, 000. 00
(5) The loss by the Sinking Fund investments in United States Treasury ,. 1,612,966.72
(6) Loss by diversion of business from Central and Union Pacific to other subsidized
roads, $37, 000, 000. Central Pacific's proportion of
which, 46 per cent is, say 17,000,000.00
Total 62,873,557.81
I will now proceed to answer the questions submitted by you in their order.
By the CHAIRMAN :
Question. Have you those answers in writing? Answer. Yes, sir.
Q. Do you desire to read them? A. Yes, sir ; but I suppose you may sometimes
desire to ask me questions as you go along. A little explanation may occasionally
be necessary, and it may save the Commission's time.
Commissioner ANDERSON. I think the witness had better get through all he desires
to state and then we can ask him such questions as we may desire.
The CHAIRMAN. We propose to take you up from the beginning, on the examination,
as to this road.
The WITNESS. I will be at your service as to anything you want.
The CHAIRMAN. And you can submit your papers.
The WITNESS. I do not believe there are any questions that you will ask me
but what will be cheerfully answered to the best of my ability. We have never
before had an opportunity to place the history of this road before the public.
This is the first time. There have been more misrepresentations and more falsehoods
told about this company than one would ever conceive, unless one was familiar
with its history.
THE BONDS WENT INTO THE CONSTRUCTION OF ROAD.
All of the $27,000,000 of bonds (none of which I ever saw) and every one of
our first-mortgage bonds went into the construction of the road. I signed all
of them and sent all of them East to be sold, and have never seen one of them
until this day. Yet they made us out as having made a profit of some hundreds
of millions of dollars or more. That story was circulated all over the country.
We only had twentyseven millions from the Government at the beginning, and
those sold at a discount of $7,000,000. And, by the way, those bonds are the
only ones that the Government ever parted with at par. All the rest, as you
know, were at a discount in gold, but these we are charged for at par. While
our credit was pretty good when the Government made the contract with us, and
we had great faith in the bonds, yet they came to us at a time when we sold
them, I think, at 40 cents in gold.
REASONS FOR RAPID CONSTRUCTION.
I do not know that I have explained to you all the reasons for this rapid construction
of our road, but there was more work performed on the first 150 miles of the
Central Pacific than would suffice to grade a line of road from that point
to Chicago, and that fact is very easily sue
LELAND STANFORD. 2469
ceptible of substantial demonstration. We worked a much larger force of men.
For three years we worked more than double the force of men on those mountains
that we worked afterwards when we went 500 miles in ten months (less 10 days).
That rate of speed on the other portion of the road would have carried us to
Chicago. We worked with more than double the force of men, and were aided on
an average by five hundred kegs of powder a day. I will tell you of a conversation
that occurred when we first went over the line, before there was a trail.
AT THE SUMMIT.
W T hen we were prospecting we got up about Donner Lake and had got to the
summit and looked down at the lake, 1,200 feet below us, and looked up at the
cliffs 2,000 feet above us, we meditated on the scene not only for its beauty,
but also for its practical relations to a railroad, and we came to the conclusion
that if a ship could start from San Francisco and sail around Cape Horn and
get in back there we could not afford to build a road and meet that competition
; or if a ship could sail from any Atlantic port around Cape Horn and get in
there, we could not afford to build the road and meet that competition. But
we knew that they could not, and the only competition, therefore, that we were
likely to have or could expect to meet,* was that of the ox-team and the mule-team,
and as the laws of the State of California allowed 15 cents a ton per mile,
we concluded we could build it.
COMPELLED TO HASTEN CONSTRUCTION TO MEET UNION PACIFIC.
When Congress passed the bill which provided for the Union Pacific Company
to build west towards us, to form a connection, and allowing us to build east
towards them, we were compelled then to meet that road out towards Salt Lake,
or else we would have nothing but this terrific mountain to operate and we
would be entirely at the mercy of the Union Pacific in bringing supplies from
the East to Nevada. We were compelled, therefore, to push our road through
with all the speed in our power to have anything of value. Although in passing
the summit we had done the greatest amount of our work, and had climbed up
an elevation of 7,000 feet in 103 miles (the most of which was done in about
80 miles), yet we made every sacrifice for speed. We economized our means as
far as possible, but we never hesitated at anything that would give speed.
Yoil must excuse me for branching off a little in this way, but it is a part
of the history of the construction of the road and of the influences which
led to its construction, which may not be generally known. Now the first question
you asked me is as follows :
DUTY OF COMMISSION.
"
Question 1. That the duty of said Commission shall be to examine into the working
and financial management of all the railroads that have received aid from the
Government in bonds."
Answer 1. This interrogatory, being simply a recital of the duties of the Commission,
does not seem to require any answer from me.
The CHAIRMAN. Are you going to give us this manuscript?
Governor STANFORD. Yes, sir. I might ask the privilege of editing it a little,
because we have been hurried very much, and there are some typographical and
other little errors that have crept in.
The CHAIRMAN. There is no objection to that.
2470 IT. S. PACIFIC RAILWAY COMMISSION.
HAVE COMPANIES COMPLIED WITH ALL OBLIGATIONS!
u Question 2. To ascertain whether they have observed all the obligations imposed
upon them by the laws of the United States under which they have received such
aid, or which have been since passed in reference thereto, and complied with
all other obligations to the United States."
THE CENTRAL PACIFIC HAS FULLY COMPLIED WITH THE LAWS.
Answer 2. The Central Pacific Railroad Company has always promptly observed
all the obligations imposed upon it by the laws of the United States under
which it received its aid in bonds, or which have since been passed in reference
thereto, and has also promptly complied with all other obligations to the United
States.
I have never heard, either from Congress or any other official source, that
the Central Pacific Railroad Company was not promptly discharging, as they
accrued, each and every one of the obligations imposed upon it by Congress.
If there had been such complaints I should certainly have heard of them.
I was chosen president of the Central Pacific Railroad Company at its organization,
and have' held the position ever since. It has always been the earnest desire
and purpose of the company to meet and discharge, and it has promptly met and
discharged, as they accrued, all the obligations imposed upon it by the laws
of the United States ; such has ever been and still is the policy of the company.
I deem it unnecessary to say more upon this point, but direct your attention
to, and ask your careful consideration of, the following extracts from the
reports of the Attorney-General and the Commissioners of Railroads; also to
the affidavit of Mr. E. H. Miller, jr., the secretary of the company, hereto
attached, marked " Exhibit 1," and made part hereof.
STATEMENT OF ATTORNEY-GENERAL AS TO FULL COMPLIANCE.
The Attorney -General, in his report to the Senate of the United States, at
the first session of the Forty-eighth Congress, said : " First. The Central
Pacific Railroad Company has fully and promptly complied with the requirements
of said act," meaning the act of Congress generally known as the Thurman
act. (Ex. Doc. No. 121, p. 2.)
Again, at the same session, in answer to further inquiry, the AttorneyGeneral
said:
In further reply to the inquiries of the Senate, I have the honor to state
that I ani informed by the Secretary of the Interior that the Central Pacific
Company has met and paid the demands of the Commissioner of Railroads, reserving
all rights. (Ex. Doc. No. 124, p. 3.)
STATEMENT IN 1882 OF UNITED STATES COMMISSIONER OF RAILROADS.
W. H. Armstrong, United States Commissioner of Railroads, in his report for
1882, says :
Able and expert accountants of this office have investigated and reported upon
the business, financial condition, and proportion of net earnings due the Government
for the past year. The results are shown in detail under the proper headings
hereafter. Free access has been accorded to the books and accounts of the several
subsidized roads whenever requested. Detailed statements of the earnings and
expenses, finan
JLELAND STANFORD. 2471
cial condition, and physical characteristics of the various laiid-graut railroads
have been compiled from examination and returns made, and are submitted herewith.
As a rule, the accounts of the road are kept in a thoroughly comprehensive
and businesslike manner. Reports to this office are not always made as promptly
as required, but the desire is expressed by the dilferent companies to fully
and promptly comply with the lawful demands of the Bureau. (Report 1882,
p. 5.)
Again he says :
Under the act of May 7, 1878, the book-keeper of this office checked the books
and accounts of the company (the Central Pacific Railroad Company) in San Francisco
with a view to the ascertainment of 25 per cent, of the net earnings for the
year ending December 31, 1881. Twenty-live per cent, of the net earnings of
the subsidized portion of the road was found to amount to $1,038,935.24. The
transportation for the Government during the year amounts to $959,785.33, leaving
a balance due the United States of $79,149.91. Statement was rendered and payment
demanded October 20, 1882. A check for the amount was sent to the Treasurer
of the United States by the vice-president of the company October 23, 1882.
The company has therefore paid to the Government all its accrued indebtedness
to date. (Ibid., p. 26.)
STATEMENT IN 1883 OF COMMISSIONER OF RAILROADS.
In his report for the following year, 1833, Railroad Commissioner Armstrong
says :
In accordance with the act of May 7, 1878, the books and accounts of this company
(Central Pacific Railroad Company) were checked by the book-keepers of this
Bureau in San Francisco, Cal., with a view to the ascertainment of 25 per centum
of the net earnings of that portion of the road (800.66 miles) subsidized with
the bonds of the United States for the year ending December 31, 1S82. The amount,
found due was $792,920.24, against which the company had performed transportation
services on aided and non-aided lines, all of which had been retained by the
Government, amounting to $1,051,862.46, leaving a balance due the company that
year of $258,942.22. The Central Pacific Railroad Company has paid promptly
all balances found to be due to the United States, after statements have been
rendered by this office. (U. S. Com. of R. R. Report 1883, p. 42.)
STATEMENT OF SAME OFFICIAL IN 1884.
In his report for 1884 Commissioner Armstrong says :
The property and accounts of the several railroads have been examined, the
companies (Pacific railroads) having freely accorded all proper facilities
for the inspection of their properties and the examination of their books.
(U. S. Com. of R., 1884, p. 3.)
STATEMENT IN 1885.
General Joseph E. Johnston, United States Commissioner of Bailroads, in his
report for 1885, says :
The lease (to the Southern Pacific company) has not affected the obligations
of the Central Pacific Railroad Company to the United States, of course. The
accounts of the company were examined in San Francisco. The property of thecom
pany was also examined and found to be in good condition ; its principal work-shops
at Sacramento are thoroughly equipped, and capable of making all the engines
and cars required by the whole system. The surface of the road is excellent,
the ditches ample, and the road-bod well raised and bridges sound.- (Rep. 1885,
p. 17.)
Again, in the same report, the Commissioner says :
The accounts of the companies under the supervision of this office have been
carefully examined, especially those of tho companies that were aided with
the bonds of the United States. Their officers readily furnished all necessary
facilities. The property inspected, including railroads, rolling-stock, and
work-shops, was in good working order. * * * The portion of this road (Central
Pacific) between West Oakland and Roseville Junction, 159 miles, was found
to be in the usual good condition so characteristic of this company's railroads.
(Rep. 1885, pp. 3 and 42.)
2472 U. S. PACIFIC RAILWAY COMMISSION.
STATEMENT OF THEOPHILUS FRENCH.
Theophilus French, United States Auditor of .Railroad Accounts, in bis report
for 1879, says :
This company (Central Pacific Railroad Company) lias rendered such reports
ae li.ive been required, and submitted its books and accounts to examination.
* * * The engineer's report shows in considerable detail the condition of the
property covered by the lien of the United States. * * The equipment on the
road is in good condition and ample. The ferry service between Oakland and
San
Francisco * * * is to be commended. The passenger service on this road is unexceptiouably
good. (Auditor's Report, 1879, pp. 34-7.)
The above extracts from reports made by the persons selected by Congress from
time to time and authorized to examine the books of the company show that it
has always faithfully and promptly complied with the laws passed by Congress,
and has, as I before said, promptly discharged all its obligations to the Government.
In this connection I direct your attention to the fact that the amount found
due the company for the year ending December 21, 1882, as reported by the Commissioner,
namely, $258,942.22, has not yet been paid.
DO BOOKS SHOW NET EARNINGS OF AIDED ROADS.
u Question 3. And whether their books are and have been so kept as to show
the net earnings of the aided roads, and what said books actually show in regard
thereto, arid what have been in fact said earnings."
Answer 3. This interrogatory contains three independent propositions :
(a) Have the books been so kept and are they now so kept as to show the net
earnings of the aided roads? (b) What do said books actually show in regard
thereto*? (c) What have been, in fact, said net earnings I To avoid confusion,
I shall answer each proposition separately :
CENTRAL PACIFIC RAILROAD BOOKS SO KEPT AS TO SHOW NET EARNINGS OF AIDED ROADS.
(a) The books of the Central Pacific Railroad Company have been and are so
kept as to show the net earnings of the aided roads.
The original acts of Congress passed in 18G2 and 1804, respectively, make no
provision for the examination by any officer of the books of the companies
therein referred to. After the roads were constructed and commenced business
difficulties and controversies arose between the companies and the representatives
of the United States in the matter of the settlement of the " net earnings," which,
of course, had to be determined before the amount due the Government could
be ascertained.
OFFICE OF AUDITOR OF RAILROAD ACCOUNTS CREATED IN 1878.
Congress, recognizing this defect in the acts of 1862, 1864, and 1878, by a
special act (June 19, 1878) created the office of Auditor of Railroad Accounts,
which act took effect on July 1, 1878. The designation of this office was by
the act of March 3, 1881, changed to United States Commissioner of Railroads,
being a change in title only, the duties and powers remaining the same. The
first auditor of Railroad Accounts appointed under the act of 1878 visited
the office of the Central Pacific Railway Company in San Francisco in 4879
and made a thorough ex
LELAND STANFORD. 2473
animation of tbe accounts and books and vouchers of the company from the date
of its organization down to the date of his examination. He was given every
facility for examination of the books, &c., and upon his report the amount
then claimed to be due from the company was promptly paid, and the amounts
found due in all subsequent examinations by the Auditor and Commissioner have
also been promptly paid.
SUGGESTIONS ADOPTED.
He also made some suggestions in his report that the books of the company had
not been so kept as to show readily the earnings of the aided and non-aided
roads. The company at the beginning of the next fiscal year Janury 1, 1880
changed its system of book-keeping at considerable expense of time and money,
to meet his suggestions. Ever since then the books have been and are now so
kept as to show the u net earnings," according to his requirements.
NET EARNINGS SHOWN.
(&) The books actually show the u net earnings " from the completion
of the road to the last settlement reported by the Eailroad Commissioner of
the United States, dated December 31, 1886.
(c) Such earnings amount to $59,276,387.54, from the completion of the road
to December 31, 1886.
Now, if you will observe, under the Thurman bill we paid in one million and
thirty-eight thousand dollars. That was in 1881, which was the first time that
we had a competing line of road, and you will see that we never were able to
pay as much in afterwards. At that time, in 1881, the Atchison, Topeka and
Santa Fe Eailroad Company made a connection with the Southern Pacific at Deming,
and of course opened a competing line of the road.
Question 4 relates to constructive mileage. I think I can give you a little
explanation here that will make you easily understand this constructive mileage.
In the operation of the transcontinental line of roads there has always been
constructive mileage allowed to the Central Pacific because of its difficulties
in operating. To illustrate (and you will see how fair that is), in going up
the Sierra Nevada Mountains a train of 45 cacs, say, which any engine can haul
over the level plain from Sacramento, has to be broken into five divisions
of 9 cars to each division, which, of course, requires five engines to get
to the summit, and, when there, one engine goes on and four engines return,
making an engine service of 9 miles for each 1 mile of actual engine service.
Each one of these engines burns more fuel, although coming back empty, than
one engine would burn hauling that whole load on a level plain. You will see,
therefore, that a road of that kind is fairly entitled to constructive mileage.
In our own case, as between our main road and most of the little roads, I do
not think there has been constructive mileage in more than a few cases, and
then the road has been very small.
By Commissioner LITTLER :
Q. Is this constructive mileage awarded your road by the Uuion Pacific? A.
I do not remember whether they have allowed it or not, but the eastern roads
allow it, and I think that they allow the Union Pacific constructive mileage
also. I believe they put us on an equal basis.
NET EARNINGS FROM BEGINNING TO JULY 1, 1878.
The following statement shows the earnings, expenses, and net earnings of the
aided road, as ascertaj-uecl by the United States Auditor of
2474
U. S. PACIFIC RAILWAY COMMISSION.
Eailroad Accounts, for each year from the completion of the road to the commencement
of the operation of the Thurrnaii act, July 1, 1878. It covers a period of
eight years and about 8 months. The average annual amount of net earnings for
this period was $4,327,000, 5 per cent, of which was paid into the United States
Treasury under the contract acts of 1862 and 1864.
Earnings and expenses of Central Pacific Eailroad Company, aided line (860.66
miles), from November 6, 1869, to June 30, 1878.
[As ascertained by the TJ. S. Commissioners of Railroads.]
...
NET EARNINGS JULY 1, 1878, TO DECEMBER 31, 1886.
The following statement shows the annual net earnings as ascertained by the
United States Commissioners of Railroads from July 1,1878,the commencement
of operation of the Thurmau act,, to December. 3.1,, 1886.
LELAND STANFORD.
2475
In order to show the requirements which are actually payable before payments
can be made into the sinking fund in the United States Treasury, the sums paid
into the sinking fund of the company in the company's treasury according to
the terms of the first mortgages, which are prior in lien to the United States
bonds, is deducted from the net earnings. The balance shown is the extreme
annual amount which can be paid by the company on its debt to the Government,
as it is the entire net earnings of all the road included in the Government's
lien after deducting the requirements of the prior lien.
NET EARNINGS REDUCED BY COMPETING LINES.
It will be noticed that the net earnings prior to 1882 amounted to about $4,000,000
per annum. In 1882 there was a decrease of $1,000,000. This is the year in
which competition commenced with other transcontinental lines which were aided
in their construction by United States land grants. This decrease continued
as new land-grant lines were completed till 1884 and 1885, for each of which
years the net earnings amounted to about $860,000, and the available balance
to about $740,000. The net earnings of the aided line hereafter cannot be prudently
calculated to exceed this annual amount of $740,000, as the overland business
will continue to be divided, and the aided road is chiefly in Nevada and Utah,
where there is very little local traffic.
The temporary slight improvement shown for the year 1886 is chiefly owing to
an unusually small amount of betterments, additions, and repairs charged in
that year. Were these items of the usual amount the increase of earnings which
was made at cut rates would have been accompanied by an equal or greater increase
of expenses.
The annual accruing interest on the United States bonds issued to the Central
Pacific is $1,671,340.80. The net earnings of $740,000 lacks $930,000 a year
of meeting the accruing interest, even if every available dollar should be
taken for that purpose.
Earnings and expenses of Central Pacific Railroad Company, aided line (860.66
miles), from July 1, 1878, to December 31, 1886.
[As ascertained under the requirements of the Thurman act.]
...CONSTRUCTIVE MILEAGE ALLOWANCES.
u Question 4. Or whether there has been a diversion of earnings of aided roads
to less productive branches, through constructive mileage allowances, or
average mileage allowances between aided and non-aided roads, or otherwise."
Answer 4. There has been no diversion of earnings of aided roads to less productive
branches through constructive mileage allowances, or average mileage allowances
between aided and non-aided roads, or otherwise, except in the instances noted
elsewhere and during the period between January, 1880^ and February, 1883,
inclusive.
ALLOWANCES MADE BY CENTRAL PACIFIC RAILROAD COMPANY HAVE BENEFITED AIDED ROAD.
Such allowance was in accordance with the usual custom throughout the United
States and was in every instance to the benefit of the aided road. Its continuance,
however, was a frequent source of criticism by those not familiar with the
details of railway operation and the surrounding necessities controlling rates.
Experience proved that the amounts involved were not large. To promote complete
harmony, therefore, with the Government and the officers appointed by it to
enforce the acts affecting the Pacific railroads, constructive mileage allowances
were discontinued and have not since been used.
AVERAGE MILEAGE ALLOWANCES FAVORED AIDED ROAD.
Average mileage allowances were made in ascertaining the net earnings of the
aided line by the United States auditor from November 6,
LELAND STANFORD.
2477
1869, to December 31, 1879, inclusive, but such allowances did not effect
a diversion of earnings from the aided line. The rules prescribed by the United
States auditor allowed only the mileage between Ogden and San Francisco in
prorating through earnings, over 95 per cent, of which was by this means given
to the aided line. The local earnings were then prorated to all lines oj>erated
on the average mileage basis. These rules, under which the net earnings of
the aided line were ascertained for the above period, favored the aided at
the expense of the non-aided road, the earnings from local business being greater
per mile of road in California, where the non-aided roads are located, than
in the sparsely settled territory in Nevada and Utah, thro ngh which the aided
line alone runs.
Equal mileage has always been made on mail earnings, the rate on mails being
fixed by the Post-Office Department on an equal mileage basis.
CONSTRUCTIVE MILEAGE AS ALLOWED FAVORED THE AIDED ROAD.
Constructive mileage was allowed in the division of earnings to the several
roads to certain less productive branches between January 1, 1880, and February
28, 1883. The constructive mileage allowed was not sufficient to give such
branches their proper proportion of the earnings from traffic interchanged
between them and the main line. On less productive branches higher rates always
prevail, other things being equal, than on more productive branches. This is
chiefly because the volume of traffic is much less, or because the expense
of operation is greater. In either case the cost of the service per ton per
mile or per passenger per mile is greater. In dividing the earnings from joint
traffic with the main line then the less productive line may fairly demand
more than its mileage proportion of the amount. The common practice throughout
the country in similar cases is for the unproductive line to demand its local
rate as its proportion of through earnings. Were the several roads operated
in connection with the Central Pacific managed by different companies, the
unproductive branch lines would demand and receive a division of earnings on
traffic interchanged greater than they did receive by the constructive mileage
allowance. There was, therefore, no diversion of earnings from the aided line
by such allowances, but, on the contrary, the aided line received in the division
a larger proportion of the earnings from joint traffic than it was justly entitled
to. This fact appears from the following statement in detail of the allowances
made.
ILLUSTRATIONS OF CONSTRUCTIVE MILEAGE ALLOWANCES.
AMADOR BRANCH RAILROAD.
Constructive mileage of 100 per cent, allowed from January, 1880, to February,
1883, inclusive. The principal joint traffic with this branch is between San
Francisco and lone.
...
2478 U. S. PACIFIC RAILWAY COMMISSION.
For each dollar then received on joint business between Sun Francisco and lone
the aided line would receive on an equal mileage basis 27.1 cents and on the
constructive mileage basis 23.1 cents. It should have received but 18.3 cents,
which is its percentage of the combined local rates, as follows :
The average freight rates on classes 1 to 5, inclusive, are
...On each dollar of this joint business the amount allowed by the constructive
mileage basis thus resulted in giving the aided line 4.8 per cent, more than
it was fairly entitled to.
LOS ANGELES AND INDEPENDENCE RAILROAD.
This road received constructive mileage of 100 per cent, from January 1, 1880,
to February 28, 1883. This is a branch road running from Los Angeles to Santa
Monica, and interchanged no business which affected the earnings of the aided
line.
LOS ANGELES AND SAN DIEGO RAILROAD.
This road received constructive mileage of 100 per cent, from January 1, 1880,
to February 28, 1883. This is also a branch running oat of Los Angeles, and
interchanged no traffic with the aided line.
SAN PABLO AND TULARE RAILROAD.
Line from Tracy to Martinez, 47 miles. Constructive mileage of 50 per cent,
was allowed for the year 1880. Practically the only portion of the aided line
affected by this allowance was that between Tracy and Lathrop, a distance of
11 miles, for the traffic between San Francisco and points on the Southern
Pacific Kailroad. The traffic between San Francisco and Los Angeles fairly
represents the average of this business. The total distance is 482 miles. The
aided line proportion of the traffic is thus but 2^ per cent. The Southern
Pacific and Texas Kailroad distance is 47 miles, being 9,96 per cent, of the
total mileage. The constructive mileage allowance is thus chargeable almost
wholly to the remaining 87.79 per cent, of the distance, which is a non-aided
ancl leased road. Though this road has a short haul, it has no terminal expenses,
as it formed part of the through Southern Pacific line shortly after its construction.
Constructive mileage was allowed only for one year.
SOUTHERN PACIFIC RAILROAD.
Constructive mileage of 50 per cent, was allowed on this line as it was built
southward from Goshen, from January 1, 1880, to February 28, 1883. The extension
of this line was at first in an undeveloped country with but little business.
From Goshen southward the road was difficult to construct and expensive to
operate. It crosses the mountains where there are short curves and heavy grades,
and to gain the summit at Tehachapi Pass the line doubles on itself, forming
the well known "Loop," since celebrated as an engineering feat. After
crossing the Mojave Desert, the road, to reach the valley of Los Angeles, passes
through the San Fernando tunnel of over a mile in length. Practically all the
joint traffic with this route affecting the aided line
LELAND STANFORD.
2479
was that from San Francisco. This traffic north of Goshen is carried over level grades easy of construction and operation and on lines having a larger traffic and lower average rates than the line south of Goshen. The cost per mile on the latter line being much greater, a higher charge per mile was just and reasonable, and would doubtless have been demanded had the road been operated by a separate company. The effect of the constructive mileage allowance on the line may be shown by the traffic between San Francisco and Los Angeles. This formed the greater portion of the joint business at the time the constructive mileage was allowed, and fairly illustrates the result for the whole.
...
For each dollar, then, received on joint business, the aided line would receive
on an equal mileage basis 2.3 cents, and on the constructivemileage basis 1.8
cents ; while on the basis of the combined local rates, which would be used
where the roads operated by different companies, the aided line would receive
.but 1.1 cents. By the constructive-mileage allowance, therefore, the aided
line has received more than its proper and just proportion of these through
earnings. This is shown by comparing the following proportions based on combined
local freight rates, with those given above based on the constructive-mileage
allowance:
Combined local freight charges between San Francisco and Los Angeles. ...
It will be seen by comparison with the statement showing constructive-mileage
percentages above, that the Stockton and Copperopolis Railroad was allowed
in the division of this traffic thirty-six per cent., while it should have
received on the basis of the local percentages 40.} per cent. Had this road
been operated independently, therefore, it would have received fully 4.J per
cent, more from earnings of joint traffic than it was given by the highest
constructive-mileage allowance.
AIDED ROAD HAS RECEIVED MORE THAN FAIR PROPORTION OF EARNINGS.
The aided line received by the constructive-mileage allowance 12.4 per cent,
on the division of such joint rates, while it should have received on the proper
basis of combined local rates but 11.9 per cent. It will be seen from the foregoing
that wherever constructive-mileage allowances have been made by this company,
such allowances have not constituted a diversion of earnings from the aided
line, but, on the other hand, the aided line has, notwithstanding such allowances,
received more than its fair proportion in the division of joint earnings.
A DOUBLE ALLOWANCE TO NEVADA ROADS.
I would say further that we allowed small connecting roads over in Nevada twice
as much for the same distance, or even more than that, in comparison with what
we charged ourselves. They were mere branch lines to feed us, and whatever
they brought us was so much gained. They could not afford to carry the short
distance, with their limited business, for the same rates that we could afford
to haul over the main trunk line for a long distance. I suppose that you will
understand in this connection that the through rate might well be proportionately
less per mile than the local, and if a small company demands its local it gets
a much larger division, and that is often done.
ALLOWANCE OF CONSTRUCTIVE MILEAGE OPTIONAL WITH EASTERN
ROADS.
I give elsewhere a detail of the different lines of road connected with the
main line which we control. You will notice, gentlemen, that in
LELAND STANFORD.
2481
the matter of the allowance to us of constructive mileage by the Eastern roads
it was entirely optional with those roads. As we could not send freight any
other way it was only their sense of justice that made them allow it to us.
IS CONSTRUCTIVE MILEAGE FAIR AND USUAL 1?
"
Question 5. And also whether such system of constructive mileage allowance
is fair and usual, and, in practical operation, has resulted adversely or otherwise
to the aided roads and the interest of the United States.' 7
ALLOWANCES HAVE RESULTED FAVORABLY TO UNITED STATES.
Answer 5. Such constructive mileage allowances are fair and usual and in practical
operation have resulted favorably to the aided roads and the interest of the
United States.
It is customary and fair to allow constructive mileage to less productive roads
which are not branches, but form part of through routes. Such roads are less
productive because they have but a small amount of traffic, or are expensive
to operate, or both. In either case the cost of the service per ton per mile
or per passenger per mile is greater on such roads, and this increase in cost
is the basis of the constructive mileage allowance. Constructive mileage should
always be allowed. It depends upon such circumstances as grades, curves, amount
of business, length of roads, &c. The character of the business is also
to be considered, for instance, as to whether it is a coarse grade of freight
or costly merchandise that is hauled. Climatic influence should also go to
determine a fair mileage rate. A rate that is sufficient on one road might
be entirely insufficient for another. The allowances made, according to rules
prescribed by the United States Auditor of Railroad Accounts, worked adversely
to the non-aided and leased roads. The aided road received thereby a greater
amount of net earnings than was properly its due, as more fully appears from
accompanying statements.
ILLUSTRATIONS OF USUAL CUSTOM AS TO CONSTRUCTIVE MILEAGE.
The following cases, taken at random, of rates in force with connecting lines
which are not operated or controlled by this company, will serve to illustrate
the usual custom :
Northern California Railroad and Central Pacific Kail-road.
...The less productive branch road in this case receives in the division of
the through rate an amount equal to about 50 per cent, constructive mileage.
AIDED LINES ALLOWED CONSTRUCTIVE MILEAGE BY OTHER ROADS.
NEW YORK TO SAN FRANCISCO.
A further illustration, which in the present connection is more striking and
suggestive than with the branch lines, is the allowance made to the Central
Pacific and Union Pacific by the roads east of the Missouri River on transcontinental
traffic. The Central and Union Pacific lines having less traffic per mile
of road, and in the case of the Central Pacific particularly, an expensive
road to maintain and operate across the Sierra Nevada Mountains, the average
cost of service per ton per mile is greater than with their connections east
of Omaha.
A higher rate per mile is therefore considered fair and has always been allowed
in the division of through rates. The through passenger rates from New York
to San Francisco which were in force during the
LELAND STANFORD.
2483
time constructive mileage allowances were made to branch lines by the Central
Pacific, the proportions allowed each line, and the proportions each would
have received had no constructive mileage allowance been made to the Central
and Union Pacific line are shown by the following table :
Through rates and divisions, 1880, between New York and San Francisco. KATES
AND DIVISIONS AS ALLOWED.
...
It will be noticed that in the unlimited rate the Pacific roads were allowed
5.22 cents per mile, while the roads between New York and Chicago received
but 2.55, the former in this case receiving over 100 per cent, per mile more
than the latter.
The mileage of the route is: East of Missouri River, 1,402 miles; west, 1,916
miles. Applying the constructive mileage system to the sum of the rates for
the several classes shows that the Central and Union Pacific received a constructive
mileage allowance of over 85 per cent.
PROFIT TO AIDED
ROADS BY SYSTEM OF CONSTRUCTIVE MILEAGE ALLOWANCES.
This through traffic was very large and comprised a considerable portion of
the income of the aided line. The constructive mileage allowance was also for
a long haul the whole length of the road. The difference therefore to the Central
Pacific whether it did or did not receive 'the constructive mileage allowance
was of the greatest importance, and the practice has added to the earnings
of the aided line amounts aggregating millions of dollars^
HAVE EARNINGS BEEN DIVERTED TO WRONGFUL OR IMPROPER PURPOSES?
* Question G. Or whether there has been a diversion of earnings of aided roads
to wrongful or improper purposes, and if so, to what extent."
2484 tr. s. PACIFIC RAILWAY COMMISSION.
EARNINGS USED EXCLUSIVELY FOR BENEFIT OF CENTRAL PACIFIC
RAILROAD COMPANY.
Answer 6. In answer to interrogatory No. 6, I have to say : That the earnings
of the company have been expended and applied exclusively to the benefit of
the company. No portion of them, has been applied in construction of any other
road. The company is willing and desirous of making a full and complete statement
to the Commission of all matters in which the Government can possibly have
any concern. I assume that it is unnecessary to go into statements of matters
affecting the interests of the company in which the Government has not and
cannot have any possible interest.
In determining the amount of the net earnings of the company, in which only
the Government is interested, the company do not propose to make any charge
or claim that would diminish or affect the amount of such net earnings, for
which it will not furnish entirely satisfactory documentary evidence. All items
of expenditure for which such satisfactory evidence shall not be furnished
shall be charged against the company exclusively. I will merely add, however,
that the disposition made of these earnings of the company, in which the Government
has no interest, has met with the approval of the board of directors of the
company and its stockholders, on repeated occasions.
The aided line does not run into San Francisco, but from Sacramento to San
Jose. In violation of the.principles of interstate law, the Government gives
the Canadian Pacific the right to bond goods here and take them from San Francisco
around up through Canada to Chicago, thereby carrying them for nearly 5,000
miles, for the same or a less rate than we carry them across the continent,
which is a violation of the interstate commerce principle. The Government does
that for the benefit of the Canadian Pacific road. I will hardly say it is
done for that purpose, but that is what is done, and that is the effect which
it has.
DISCRIMINATION IN RATES AGrAINST AIDED ROADS.
"
Question 7. Whether there is a discrimination of rates in favor of unaided
against aided roads."
NO DISCRIMINATION EXCEPT THAT MADE BY THE UNITED STATES.
Answer 7. There is no discrimination of rates in favor of unaided as against
aided roads, except that made by the Post-Office Department.
The rates for transportation of United States mails are fixed by the Post-Office
Department in accordance with the general laws upon the subject. The basis
of the rate is the average daily number of pounds carried over the whole route.
The overland Central Pacific route .is from Ogden to San Francisco via the
aided road to Sacramento, and thence to San Francisco via Benecia over unaided
roads. The aided line does not run into San Francisco ; the business must go
over unaided lines. The generalv business follows the line designated by the
Government between Sacramento and San Francisco, which is the shortest possible
line 87 miles by one route and 137 by the other. The weight of mails in either
case would be the same, and the rate per mile would be the same. The shorter
route, therefore, carries the mails for about one-third less than the longer
route. This is in effect a discrimination in, favor of the unaided against
the aided road. Not only has the Post-Office Department thus discriminated
against our line, but it and
LELAND STANFORD. 2485
the War Department and other Departments of the Government have given preference
to other transcontinental lines that have not been aided in bonds, thus diverting
traffic that the Central Pacific could have done. Upon this subject the United
States Auditor of Eailway Accounts says :
Government has taken away business across the State of Nevada, and has also
given transportation to the Northern Pacific, the Southern Pacific, the Atchison,
Topeka and Santa F6, the Atlantic and Pacific, and the Canadian Pacific, all
rival roads, and is paying them full rates, when they could get it done for
less rates by the aided Central Pacific.
This matter, with its embarrassing results to the company, will be found more
fully set forth in answer to interrogatory No. 54.
IS ANY MONEY DUE TO UNITED STATES FOB ERRONEOUS ACCOUNTS 1
u Question 8. Whether any, and if so, how much, money is due and owing to the
United States on account of mistaken or erroneous accounts, reports, or settlements
made by said roads."
MONEY IS DUE TO COMPANY FROM UNITED STATES.
Answer 8. No money is due and owing to the United States on account of mistaken
or erroneous accounts, reports, or settlements made by our road. On the contrary,
there is a balance due the Central Pacific for transportation services on non-aided
and leased lines of $1,853,323.15, which is withheld in the face of a unanimous
decision by the Court of Claims in our favor, confirmed by the Supreme Court
of the United States.
ANNUAL SETTLEMENTS BY UNITED STATES COMMISSIONER".
Settlements have been annually made by the Central Pacific Eailroad Company
with the authorized officers of the Government for the amounts due the Government
under the several acts of Congres. All amounts involved in such settlements
have been promptly paid by the company when due. Payments were in every case
made for the amounts as claimed by the United States Commissioner of Eailroads,
though they were not always believed to be justly due. The items of new construction
and new equipment were not currently allowed by the Commissioner, and payments
were made for the requirements as stated by him. The courts, however, in 1885,
decided these items to be proper deductions in ascertaining the net earnings.
(See Eep. U. S. Com. E. E. 1885, p. 7.) The erroneous accounts were restated
by the Commissioner in his report for 186G, page 35.
The Central Pacific Eailroad Company has overpaid the United States on account
of these mistaken and erroneous accounts the sum of $321,152.72. This sum is
still held by the Government, and is due the company in cash, though repeated
demands have been made for it by the company.
TRAFFIC DIVERTED TO NON- AIDED ROADS.
"
Question 9. Whether any traffic or business which could or should be done on
the aided lines of said companies has been diverted to the line of any other
company or to unaided lines."
Answer 9. This question will be fully answered under interrogatory No. 54.
Such discrimination and diversion is made only by the Gov
2486 U. S. PACIFIC RAILWAY COMMISSION.
eminent. I refer also to report of General Manager A. 1ST. Towne, herewith
submitted, and marked " Exhibit 2," also report of General Superintendent
J. A. Fillmore, marked " Exhibit 3."
DEDUCTIONS FROM GROSS EARNINGS BY REBATES, POOLS, ETC.
"
Question 10. And what amounts have been deducted from the gross earnings of
any of said railroad companies by their general freight and passenger agents
or auditors, by way of rebate, percentage of business done, constructive mileage,
monthly or other payments on any pooling or rate arrangement, contract, or
agreement."
SUCH ARRANGEMENTS HAVE ADDEp TO EARNINGS OF AIDED ROAD.
Answer 10. There have been rebates and pooling arrangements, there sometimes
being a balance against us and sometimes a balance in our favor. Rebates were
made for the purpose of securing business, and pooling arrangements for maintaining
rates, and these always favored the aided road.
The question of differentials, pools, &c., is more fully treated in support
of the answer to interrogatory !No. 39. See the report of J. C. Stubbs, general
traffic manager, verified by his oath, marked " Exhibit 7," and referred
to in the answer to that interrogatory, from which it will appear that whatever
has been done in this direction is fully justified by the results.
ASSETS OF COMPANIES.
"
Question 11. And also inquire into, ascertain, and report as to the kind, character,
and amount of the assets of said companies."
ASSETS OF CENTRAL PACIFIC RAILROAD COMPANY.
Answer 11. In reply to your interrogatory No. 11, 1 respectfully submit the
following statement, prepared by Mr. E. H. Miller, jr., the secretary of the
company :
Assets, July 1, 1887.
Railroad and telegraph lines as follows, between
Milea.
San Jose* and Niles 17. 54
Niles and Brighton 103. 83
Sacramento and near Ogden 737.50
Total aided road . . 858. 87
Sacramento and Ogden (non-aided) .95
Niles and Oakland Wharf 26.51
Oakland and Alameda, local lines (including 7.72 miles double track) . . 17.
31
Lathrop and Goshen 146. 08
Roseville and Coles . . 295. 30
Total non-aided road 486. 15
Total miles of road 1,345.02
Also right of way, sidings, turn-outs, switches, turn-tables, depots, stations
and other buildings, round-houses, shops, and machinery, tools, safes, furniture,
wharves, slips, engines, cars, and other equipment property and appurtenances
belonging on the foregoing railroad and telegraph lines.
LELAND STANFORD. 2487
Steamers and barges as follows :
Ferry steamers of the San Francisco Bay : Alameda, Amador, Capitol, El Capitau,
Julia, Oakland, Piedmont, Transit, and Thoroughfare.
Sacramento Eiver steamers : Apache and Modoc ; barges, Ace of Spades and Yolo.
Stocks and bonds of other companies owned, cost $1,074,360.07. Sinking fund
of the company in the treasury of the company, consisting of railroad bonds
of the par value of $10,356,000, cost $9,601,617.50.
Sinking fund of the company in the United States Treasury June 1, 1887, bonds
of the par value of $2,557,000, and cash, $39,137.32 ; cost of bonds and cash,
$3,168,600.50 ; cost for interest lost on investments, $1,040,503.54; total
cost in excess of par value of bonds, $1,612,966.72.
Land contracts, deferred payments on time sales, $1 ,142,084.86. Cash on hand,
$13,768.49.
Undivided half of sixty acres in Mission Bay, San Francisco ; 500 acres of
water front in Oakland, Cal. ; about 140 acres of water front Sacramento.
Land granted by the United States to the Central Pacific Eailroad Company,
of California, and to the California and Oregon Railroad Company, less amount
sold therefrom and lost from mineral lands, prior claims, &c.
APPRAISEMENT OF COMPANY'S PROPERTY. .
Any valuation which may be placed on the assets of the company must, at best,
be an estimate. I understand that the commission have delegated the duty of
making an appraisement of the value of the railroad and other property of the
company to a board of engineers, which makes it unnecessary for any such estimate
to be made in this place.
Much of the information I have given in answer to thi question is contained
in our annual report, but it is given a little more in detail here.
Commissioner ANDERSON. You understand that the report does not profess to give
the value of the property $
The WITNESS. It gives only estimated values.
Commissioner ANDERSON. For instance, take the construction account, which represents
$130,000,000 or $140,000,000. It does not even pretend to give the actual value
of the assets.
The WITNESS. No. That represents the cash and stock used. The stock, of course,
stands on the books as if at par, but in reality it was not worth much of anything.
Commissioner ANDERSON. The question here is with reference to ascertaining
the actual value of your assets, in order to determine the value of the United
States lien.
The WITNESS. Most of these things are given at what they cost. During the time
that we were constructing the road, I remember that we paid $65,000 for two
engines. That is the highest we ever paid. Of course, there is no such value
to them now. . We could put them on the road now for probably $13,500.
Commissioner ANDERSON. We have had a special officer, Colonel Morgan, making
an examination, and I presume his report will contain an answer to that question,
which we can rely on.
Commissioner LITTLER. His name is Eichard T. Morgan, jr.
The WITNESS. Our road is well equipped, and everything, I think, is in good
order.
2488 U. S. PACIFIC RAILWAY COMMISSION.
ASSETS SUBJECT TO UNITED STATES LIENS.
"
Question 12. And what assets of each company are now subject to the lien of
the Government and the value thereof! "
Answer 12. The assets of the company now subject to the lien of the Government,
are as follows :
ASSETS SUBJECT TO UNITED STATES LIEN. Aided line assets, July I, 1887.
Railroad and telegraph lines between
Miles.
San Jose" and Niles 17.54
Niles and Brighton 103.83
Sacramento and Ogden 737.50
Total operated road 858.87
Also the right of way, sidings, turn-outs, switches, turn-tables, depots, station
and other buildings, round-houses, shops, machinery, tools, safes, furniture,
engines, cars and other equipment, property and appurtenances belonging to
the foregoing railroad and telegraph lines.
As to the value of the different items of property referred to in this statement,
I am personally unable to give it. I understand the Commission has appointed
experts to make appraisement of it, and therefore this omission will be thus
supplied.
The CHAIRMAN. You do not refer there to the question of how far the lien of
the Government extends over the property and to what property it attaches.
The WITNESS. The assets of the company subject to the lien of the Government
are as I have read. Now, the lien, like the first mortgage bonds, is on the
road from Ogden to San Jos6 ; but by our laws of consolidation the entire property
of all the companies consolidated becomes liable for the debts of the institution,
just as a man's property is liable for his debts over and above the mortgaged
property. The mortgage, first, is a lien upon so much, but all his property
is liable. So all the unaided lines of our road, as well as the aided, are
liable for the general liabilities of the company, but there is no lien upon
them to the Government.
The CHAIRMAN. The whole property, however, is subject to execu tion?
The WITNESS. Oh, yes, sir.
DIVIDENDS PAID.
"
Question 13. And also whether any dividends have been unlawfully declared by
the directors or paid to the stockholders of said company ; and if so, to what
extent."
NO DIVIDENDS UNLAWFULLY DECLARED BY THE CENTRAL PACIFIC
RAILROAD COMPANY.
Answer 13. No dividends have been unlawfully declared by the directors or paid
to the stockholders of the Central Pacific Eailroad Company.
Section 6 of the act of Congress of May 7, 1878 (the Thurman act), provides
that no dividends shall be voted, made, or paid at any time when the company
shall be in default in the payment of either of the
LELAND STANFORD. 2489
sums required to be paid into tlie sinking fund, or in the payment of the 5
per centum of the net earnings, or interest on any debt the lien of which
or of the debt on which it may accrue is paramount to that of the United
States.
The Central Pacific Eailroad Company has not at any time been in default in
respect of the payment of any of the sums required under the provisions of
the act above quoted.
The Central Pacific Kailroad Company, as heretofore stated, was organized under
the laws of this State, and is now carrying on its business in accordance with
the provisions thereof. Section 309 of the Civil Code of California prohibits
railroad corporations from making dividends, except from the surplus profits
arising from the business thereof. As required by this section all dividends
have been made from the net earnings. The road has been in operation for over
twenty-three years for more or less of its extent.
AVERAGE DIVIDENDS 2.65 PER CENT.
The total sum of these dividends amounts to 61 percent. The amounts paid therefore
equal the annual rate of 2.65 per cent., and but for the completion of the
Government-aided competing lines, and but for the Government's failure to pay
to the company the money for transportation as determined by the Supreme Court
of the United States, the company would still be paying the dividends. For
the information of the Commission, and the evidence of the fact that the dividends
declared by the company were not illegal, we submit herewith, and ask your
consideration of a report by Mr. E. H. Miller, jr., secretary of the company,
marked Exhibit 4, and made a part hereof.
By Commissioner ANDERSON :
DIVIDENDS PAID OUT OF NET EARNINGS.
Q. Does your report contain a statement of the net earnings actually applicable
to the years in which dividends were declared? A. No, sir ; I think not. We
carried net earnings along for a good while, and when we commenced declaring
dividends it was with the supposition that we would be able to continue. For
a time the road earned a good deal more than a 6 per cent, dividend annually,
over and above the necessary expenses. But the opening of competing business
and the immense falling off of the business in Nevada, a great falling off
and the gradual interference with our business in Wyoming, Montana, and Idaho
have made a change. We used to have business in Wyoming, not very much, but
still some, and a good deal in Montana and Idaho, but the opening and pushing
out of other roads spoiled all that business for us. It was a very profitable
business, as we were able to fix our own rates, free of competition. Then came
the opening up of these competing lines, and our business fell off very much,
although the general business of the country was increasing. The prices paid
to us were very much reduced. As a result, from 1884 we have been not able
to earn any dividends. We have always earned something over expenses. We have
always kept up the Thurman fund and made something over expenses. Under the
lease of the Central Pacific to the Southern Pacific Company it is guaranteed
$1,200,000 a year, net, over and above all expenses and the interest account
and the sinking fund under the Thurman act,
2490 U. S. PACIFIC RAILWAY COMMISSION.
Q. I understand all that, but my question was whether the actual earnings of
the road between 1872, the time of your first dividend, and your last dividend,
declared in February, 1884/will show that the dividends paid were earned
$ A. Yes, sir ; the dividends were all earned ; not in that time, however.
We had quite an accumulation of net on hand when we commenced the dividends,
but all the dividends were paid out of net earnings.
By the CHAIRMAN :
Q. Did you ever borrow money with which to pay a dividend? A. We never borrowed
a dollar to pay a dividend.
DIVIDENDS.
"
Question 14. And whether the amount thereof may not be recovered from the directors
unlawfully declaring the same or persons who unlawfully receive the same."
Answer 14. I beg to state that as there have never been dividends wrongfully
or unlawfully declared by the company there remains nothing liable to recovery.
HAVE TRUST FUNDS BEEN DIVERTED*?
u Question 15. Whether the proceeds of any trust funds or lands loaned, advanced,
or granted have been diverted from their lawful uses."
NO FUNDS DIVERTED.
Answer 15. No proceeds of any trust funds or lands loaned, advanced, or granted
have been diverted from their lawful uses. The only trust fund that the company
has ever had in its treasury has been the sinking fund. This fund now amounts
to about $9,000*000. In addition to this we have paid $1,216,000 of what was
known as the State aid loan. The convertible loan also aggregated $1,500,000.
The trust funds have been invested in sinking funds at interest in the company's
treasury for the final redemption of bonds of the company. That fund, of course,
did reduce the general indebtedness of the Central Pacific Railroad Company.
It is not all for the aided line, but it is some for that line and some for
the others. There are sinking funds for all of the companies which are now
part of the Central Pacific, and they are growing very rapidly.
SINKING FUNDS.
By Commissioner ANDERSON :
Q. The sinking fund does not apply to the United States bonds at all I A. No,
sir ; it goes to the first-mortgage bonds the bonds that are a prior lien to
that of the Government.
Q. It goes to all your mortgages, as I understand it? A. Yes ; each mortgage
has its own sinking fund. They are all, of course, in the hands of the Central
Pacific Kailroad Company. These companies have been consolidated, and the Central
Pacific has assumed these liabilities.
THE LAW OF CALIFORNIA REGARDING SINKING FUNDS.
Q. Will you tell me what the requirement of the law of California is in regard
to permitted investments in sinking funds? A, That the money shall be loaned.
LELAND STANFORD. 2491
Q. Is there no limitation? A. I think there is none.
Mr. BERGIN. There is no limitation.
Commissioner ANDERSON. Can they loan it to anybody?
Mr. BERGIN. It is in the discretion of the board of directors of the corporation.
The law does require of railroad companies organized under its provisions,
that at the time of the creation of a liability by the company secured by a
bond and mortgage, it shall also provide a sinking fund for the ultimate liquidation
of the liability, but as to the manner of investing the fund, that is left
to the discretion of the board of directors.
DUTIES OF TRUSTEES AS TO INVESTMENT OF A SINKING- FUND.
Commissioner ANDERSON. May I ask whether there has been any decision upholding,
for instance, a loan of money in a sinking fund by a corporation to itself
?
Mr. BERGIN. No, sir ; the question of the manner of investment has never yet
been judicially passed upon by the courts.
Q. In your opinion, would the trustees of a sinking fund amounting to many
millions of dollars be justified in taking a note of the corporation itself
and then putting it back in the general assets? A. The general trustees ;
not the company. The company itself is not necessarily the trustee, or not
the trustee at all.
Q. I am asking you whether the trustees would be justified under the laws of
California in putting the money which they hold in the sinking fund into the
vaults of the corporation itself for its general purposes and taking as its
evidence of the sinking-fund moneys the note of the corporation? A. That might
be under some circumstances. I do not know now. My attention has not been called
lately to the duties of trustees, but I think under our laws that a trustee
may do with it as any good business man might do. I do not think there is any
restraint beyond that, is there, Mr. Bergin?
Mr. BERGIN. No, sir.
EXCHANGE OF BONDS.
Q. The point of my question is this : Have you not in fact surrendered over
three million dollars of first-mortgage bonds of the Southern Pacific belonging
to your sinking fund and accepted in lieu thereof the bonds of the Central
Pacific issued under its second or third mortgage made in October, 1886? A.
I do not know how much we have done. The trustees have often exchanged bonds
at a premium for bonds which, to our knowledge, were just as good as the bonds
in the fund, but which, not having an established market price, would have
commanded less, and so far would have been a benefit or profit to the sinking
fund.
Q. What are those bonds quoted at, the bonds under the mortgage of October,
1886? A. I do not think they are quoted on the market. They sell here. We
have been offered for them par in this market. I think that we could sell large
quantities of them here at par. They are 6 per cent, bonds and they are secured
by a second mortgage on the road. The mortgage is on the unaided portion of
the company's property and is not a lien upon the aided portions.
HAVE STOCKS OR BONDS BEEN UNLAWFULLY ISSUED?
"
Question 16. Whether any new stock or bonds have been issued, or any guarantees
or pledges made contrary to, or without authority of law."
P R VOL iv 11
2492 U. S. PACIFIC RAILWAY COMMISSION.
NO ISSUES OB PLEDGES BY CENTRAL PACIFIC CONTRARY TO LAW.
Answer 16. No new stocks or bonds have been issued, or any guarantees or pledges
made contrary to, or without authority of the law.
The WITNESS. Stock has been issued to aid in the construction and secure a
through line to Oregon. The valuable properties of the Central Pacific to-day
are the unaided lines.
By the CHAIRMAN :
Q. Have you not made guarantees of bonds of other roads since the passage of
the act of Congress of 1873? A. I cannot call to mind that the Central Pacific
has made any. I do not think it has. If Mr. Miller were here he could tell.
I do not think the Central Pacific has ever guaranteed any bonds.
GUARANTEE OF BONDS OF CALIFORNIA PACIFIC.
Q. How is it about the California Pacific bonds? A. The California Pacific
is a short line of road between here and Sacramento, and it was a competing
line to our 137 miles, and in the process of time it passed into and under
our control. We bought stock in the road. After operating it for a time we
saw that it could not pay the interest on the bonded indebtedness. The road
did not do well. It was washed out, and was unable to meet its requirements.
Upon the Central Pacific agreeing to guarantee the interest, the bonded indebtedness
was veiy much reduced, and a lower rate of interest was accepted. I cannot
give you the exact amount, but the interest on the remaining bonds was reduced
so as to make it much more easy to handle.
Q. What was the date of the guarantee ; what was the year? A. I cannot give
you the year, but it was some years ago.
DIRECTORS AND EMPLOYES' INTEREST IN OTHER COMPANIES.
"
Question 17. Whether any of the directors, officers, or employe's of said companies,
respectively, have been, or are now, directly or indirectly interested, and
to what amount or extent, in any other railroad, steamship, telegraph, express,
mining, construction, or other business, company, or corporation, and with
which any agreements, undertakings, or leases have been made or entered into."
INTEREST OWNED IN OTHER COMPANIES BY PRESIDENT STANFORD.
Answer 17. I may state that I have been and am interested in the following-named
companies, and to the extent set opposite the respective name of each company.
I know that some of the other directors of the company have been interested
in some of these companies 5 and I believe, but do not know, that they are
interested in all of them, the extent of their interest in which I am not prepared
to state, as there is no joint ownership of the stock. As to the absolute correctness
of the list that I am about to read, I am not prepared to say, because it was
only furnished just as I was coming away, and I have not been over it, but
I presume that it is correct, inasmuch as it has been furnished by the secretary.
1. California Pacific Eailroad. I have 24,755 shares of stock in this company.
LELAND STANFORD. 2493
2. Southern Pacific of California. I bad 70,936 shares of stock in this company
until December 8, 1884, when I transferred it to the Southern Pacific Company
in exchange for 42,561.6 shares of its stock.
3. Southern Pacific of Arizona. I had 49,987 shares of stock in this company
until December 8, 1884, when T transferred it to the Southern Pacific Company
in exchange for 29,992.2 shares of its stock.
4. Southern Pacific of New Mexico. I had 16,722 shares of stock in this company
until December 8, 1884, when I transferred it to the South t ern Pacific Company
in exchange for 10,033.2 shares of its stock.
5. Southern Pacific of Kentucky. I have 150,233.3 shares of stock in this company.
6^ Stockton and Copperopolis Eailroad Company. I have 586 shares of stock in
this company.
7. Berkeley Branch Eailroad. I have 231 shares of stock in this company.
8. Amador Branch Eailroad. I have 1,560 shares of stock in this company.
9. Los Angeles and San Diego Eailroad. I have 370 shares of stock in this company.
10. California and Oregon Eailroad. I had stock in this company, and took Central
Pacific stock for it when it was consolidated with that company. Do not remember
the number of shares.
11. San Joaquin Valley Eailroad. Same answer as No. 10.
12. San Francisco, Oakland and Alameda. Same answer as No. 10.
13. Western Pacific Eailroad. Same answer as No. 10,
14. Contract and Finance Company. I had 12,500 shares of stock in this<company
when it was disincorporated in 1874.
15. Wells, Fargo and Company. I have 86 shares of stock in this company. Have
had a larger number of shares, but do not remember how many.
16. Occidental and Oriental Steamship Company. I have 9,995 shares of stock
in this company.
17. Western Development Company. I have 10,000 shares of stock in this company.
18. Pacific Improvement Company. I have 12,500 shares of stock in this company.
19. lone Coal and Iron Company. I have 8,000 shares of stock in this company.
20. Eocky Mountain Coal and Iron Company. I have 1,817 shares of stock in this
company.
21. Carbon Hill Coal Company. I have no stock in this company, but have an
interest in it through my holding of Pacific Improvement stock, to which company
this mine belongs.
LOANS TO OTHER COMPANIES.
"
Question 18. What amounts of money or credit have been or are now loaned by
any of said companies to any person or corporation? >
MONEY LOANED BY CENTRAL PACIFIC RAILROAD COMPANY.
Answer 18. The amount loaned any company, corporation, or individual by the
Central Pacific Eailroad Company, being the amount owing to the company June
30, 1887, is as follows :
Stockton and Copperopolis Railroad Company $115, 653. 80
U. H. Giddings, New York , ,.. 93.13
2494 U. S. PACIFIC RAILWAY COMMISSION.
B. E. Smith : $100,000.00
T. J. Edmondson : 8,000.00
J. H. Flagg 2,000.00
J. W. Young 35,16f\34
Coos Bay Coal Company 4,048.30
Total : 264,960.62
This statement gives only the present amount. The amounts in detail from the
organization would be very voluminous. The accountants of the Commission are
uow examining the books of the company ; if any statement in detail of amounts
which have been loaned is desired, they will doubtless make it.
LOANS FROM OTHERS.
"
Question 19. What amounts of money or credit have been or now are borrowed
by any of said companies, giving names of lenders and the purposes for which
said sums have been and now are required."
MONEY BORROWED BY CENTRAL PACIFIC RAILROAD.
Answer 19. The amounts of money or credit borrowed by the Central Pacific Eailroad
Company, being amount owing by the company June 30, 1887, is as follows :
C. J.Torbert, note $2,500.00
Southern Pacific Company balance of account 793, 293. 88
Company's operating ledger balance of account 5, 630. 87
Trustees land grant mortgage 1, 508, 549. 26
Land suspense account being payments made on lands sold, not yet conveyed 6,754.80
Total 2,316,719.81
This gives only the present amount ; the amounts in detail from the organization
would be very voluminous. The accountants of the Commission are examining the
books of the company ; if any statement in detail of amounts which have been
borrowed is desired, they will doubtless make it up.
PAYMENTS WITHOUT SUFFICIENT VOUCHERS.
"
Question 20. What amounts of money or other valuable consideration, such as
stocks, bonds, passes, and so forth, have been expended or paid out by said
companies, whether for lawful or unlawful purposes, but for which sufficient
and detailed vouchers have not been given or filed with the records of said
companies T 7
PAYMENTS APPROVED BY DIRECTORS AND STOCKHOLDERS.
Answer 20. In answer to interrogatory No. 20 I have to say that the company
in its settlement with the Government proposes to claim nothing as expenses
in determining the amount of net earnings in which the Government has an interest
for which the company does not furnish full and satisfactory vouchers. It is
entirely immaterial to the Government and the Government can have no interest
in knowing what amount of money may have been expended for which the vouchers
on file are not sufficient in detail or otherwise. I wouldj however, remark
LELAND STANFORD. 2495
that all items of expenditure for which detailed vouchers are not on file have
from time to time been approved by the directors and stockholders of the
company.
INFLUENCING LEGISLATION.
"
Question 21. And further, to inquire and report whether said companies, or
either of them, or their officers or agents, have paid any money or other valuable
consideration, or done any other act or thing for the purpose of influencing
legislation."
Answer 21. In answer to interrogatory No. 21, I have to say in behalf of the
Central Pacific Eailroad Company that no deduction will be made from that portion
of the net earnings belonging to the United States on account of any expenditure
for which detailed and satisfactory vouchers are not furnished. We will account
to the Government as if no such expenditures had been made.
By the CHAIRMAN :
Q. Do you omit entirely the question of legislation ! A. I have given my answer
to that question.
CONSOLIDATION OF UNION PACIFIC RAILWAY.
"
Question 22. And to investigate and report all the facts relating to an alleged
consolidation of the Union Pacific Eailroad Company, the Kansas Pacific Eailroad
Company, and the Denver Pacific and Telegraph Company, into an alleged corporation
known as the Union Pacific Eailway Company. Said investigation shall include
the alleged sale of the stock of the Kansas Pacific Eailroad Company to the
Union Pacific Eailroad Company, and all the circumstances and particulars pertaining
to the said alleged sale."
Answer 22. This interrogatory relates to other corporations and requires no
answer from me.
ASSETS AND OTHER ENTERPRISES.
"
Question 23. And whether any of the Pacific railroad corporations which obtained
bonds from the United States to aid in the construction of their railroads
have expended any of their money or other assets in the construction, or to
aid in the construction of other railroads, or invested of their moneys or
other assets in the stocks or bonds of any manufacturing, mining, or commercial
companies or corporations, or of other railroad corporations."
Answer 23. The Central Pacific Eailroad Company has expended no money or assets
in the construction or to aid in the construction of other railroads. It never
had any interest in other roads except in the way of lease, or by consolidation.
The company has invested a very limited amount of money in bonds and stocks
of other corporations, the extent and character of which will be shown in my
answer to the next question.
EXTENT OF INVESTED ASSETS.
u Question 24, And if any such expenditures or investments have been made,
the extent and character thereof made by each of said corporations shall be
inquired into." ...
SETTLEMENTS WITH FISK & HATCH.
Fisk & Hatch, bankers of New York, acted as financial agents of the company,
and at the time of their failure in 1874 gave their notes, amounting to $830,665.46,
in settlement of account, with bonds of Chesapeake and Ohio Railroad, amounting
to $1,457,000, as security. Fisk & Hatch suspended payment again iu 1884,
and in settlement for amount
LELAND STANFORD. 2497
of notes and interest the Central Pacific Eailroad Company took Chesapeake
and Ohio securities, as above shown, June 26, 1884. The 1,344 bonds were
exchanged January 28, 1887, for 16,800 shares of stock of the Newport News
and Mississippi Valley Eailroad Company.
By Commissioner LITTLER:
Q. What is the total amount? A. One million seven hundred and eighty-eight
thousand nine hundred and forty-two dollars. The principal amount of that comes
through the failure of Fisk & Hatch. On their failure, some years ago,
they were indebted to our company. They were pur financial agents at New York,
and they gave us their note with the balance of securities. Then they failed
again, and again we settled with them, and took what they had. Among other
things we took these securities, and that Fisk & Hatch transaction makes
the larger portion of this amount.
Q. Do you mean to say that you acquired all the securities mentioned on that
paper in that way? A. No, sir ; but we so acquired the principal portion of
them.
COOS BAY COAL COMPANY.
We became interested in the Coos Bay Coal Companies because we were largely
at the mercy of the coal dealers, and had to pay extraordinary prices. For
instance, we paid as high as $8 per ton for local coal which can now be bought
for $4.50 per ton. In order to be independent we got this mine, and by so doing
have been able to bring down the prices of outside coal. In this way we have
secured a very large saving to the company.
We used to be very much at the mercy of the coal dealers at times. We buy coal
in England, Australia, and in the British possessions.
INTEREST IN AUXILIARY ROADS.
"
Question 25. And also the present interests of any of said corporations in
the railroads auxiliary to their respective railroads."
Answer 25. The Central Pacific Eailroad Company has no present interest in
the railroads auxiliary to its lines, and never has had except through consolidations
and leases, like the San Joaquin Valley, the California and Oregon, and the
Oakland and Alameda connections, &c., which constitute the most valuable
portions of the Company's property. The roads consolidated with the Central
Pacific Eailroad Company and those that have been leased by it are shown at
length in the following statement :
THE CENTRAL PACIFIC RAILROAD COMPANY.
CONSOLIDATIONS.
California and Oregon Railroad Company and Marysville Railroad Company, January
16, 1868. Name, California and Oregon Railroad Company.
California and Oregon Railroad Company and Yuba Railroad Company, December
18, 1869. Name, California and Oregon Railroad Company.
The San Francisco aiid Alameda Railroad Company, and the San Francisco, Stockton
and Alameda Railroad Company, October 15, 1868. Name, The San Francisco and
Alameda Railroad Company.
The Western Pacific Railroad Company and San Francisco Bay Railroad Company,
November 2, 1859. Name, The Western Pacific Railroad Company.
The Central Pacific Railroad Company of California and The Western Pacific
Railroad Company, June 23, 1870. Name, Central Pacific Railroad Company.
2498 U. S. PACIFIC RAILWAY COMMISSION.
The San Francisco and Oakland Railroad Company and The San Francisco ami Aiameda
Railroad Company, June 29, 1870. Name, San Francisco, Oakland and Alameda
Railroad Company.
Central Pacific Railroad Company, The California and Oregon Railroad Company,
The San Francisco, Oakland and Aiameda Railroad Company, and The San Joaquin
Valley Railroad Company, August 22, 1870. Name, Central Pacific Railroad Company
the present name of the company under the above consolidations.
LEASES.
Roads once leased by the Central Pacific Railroad Company now leased by the
Southern Pacific Company : Berkeley Branch Railroad. Northern Railway. Stockton
and Copperopolis Railroad. San Pablo and Tulare Railroad. Amador Branch Railroad.
California Pacific Railroad. Southern Pacific Railroad (of California). Southern
Pacific Railroad (of Arizona). Southern Pacific Railroad (of New Mexico). Los
Angeles and San Diego Railroad. Los Angeles and Independence Railroad.
NAMES OF STOCKHOLDERS.
"
Question 26. And said Commission shall also ascertain and report the names
of all the stockholders in each of said companies from its organization to
the date of the investigation herein provided for, as they appear upon the
books of said companies at the date of its annual meeting in each year, and
the amount of stock held by each."
Answer 26. In reply to this interrogatory I would say the accountants appointed
by the Commission have in their possession the books of the company containing
this information and are preparing the statement called for.
WHAT STOCKHOLDERS PAID FOR STOCK.
"
Question 27. What consideration, if any, was paid by each stockholder to said
company for his stock, and when and in what property such payment was made."
Answer 27. In answer to this question, the statement of Mr. E. H. Miller, jr.,
secretary of the company, marked " Exhibit 5," is submitted hereto,
and made a part hereof, showing the consideration paid the company by each
stockholder receiving stock, and when an I in what property such payment was
made. The dates of payment given in the subjoined list are the dates when the
amounts subscribed were fully paid up. When the stock was transferred or forfeited,
the date of the last payment of the person holding the stock is given.
DATE WHEN EACH STOCKHOLDER BECAME SUCH.
"
Question 28. The date when each stockholder so appearing on the books became
such."
Answer 28. This question has been fully answered in the answer to interrogatory
No. 27.
By Commissioner ANDERSON :
Q. Does Mr. Miller's report represent that the stock has all been paid for'
in full? A. I think that all the stock has been paid for in full. At the beginning
there was stock where the payments were not made in
LELAND STANFORD. 2499
full. We levied assessments and some of those assessments were never paid.
Q. I mean does Mr. Miller's report show stock issued to construction companies
directly and consider that as a payment in full? A. I presume so. I have never
looked over the report.
Q. Have you his report here? A. Yes, sir.
Q. And that is submitted with your paper? A. Yes ; and I presume that will
show all that. The greater part of the stock was issued for construction purposes.
We managed to obtain a subscription for ten shares here in San Francisco after
our books had been open for some weeks and that was all. Money at that time
was here worth from two to two and a half per cent, per month, and outside
of ourselves there was hardly anybody who had faith in the ultimate success
of the enterprise. They did not care to invest their money, which was worth
two to two and a half per cent, in an enterprise in which they had no confidence
and where, of course, there could be no returns until its completion.
STOCK HELD IN TRUST.
a Question 29. And whether stock is now held or has heretofore been held in
the name of any person in trust for the benefit of any other, and the names
of all such persons."
Answer 29. In answer to this interrogatory I will state that I am unable to
say what stock has been held in trust, but the books being in the possession
of, and under examination by, accountants appointed by the Commission, their
report will undoubtedly contain the desired information.
TOTAL AMOUNT OF STOCK.
"
Question 30. The* total amount of stock in each company J 9 Answer 30. The
total amount of stock in the Central Pacific Railroad Company is $100,000,000,
of which $68,000,000 has been issued. This includes the Western Pacific as
well as all other railroads consolidated with the Central Pacific. An analysis
and distribution byroads of the capital stock will be found under question
No. 27.
Q. You have skipped interrogatory 28. A. That has been answered in answer to
No. 27. You will remember what that answer is. I will state that we were organized
under the laws of this State to build our railroad to the State line. At that
time the estimate was $8,500,000, probable cost, and the stock was made out
accordingly. There is a law in our State, however, which provides that we cannot
issue bonds to a greater amount than the capital stock of the company. We found,
as we proceeded, that it would cost more than $8,500,000 to build over the
mountains, and that the Government aid and the first-mortgage bonds would amount
to a great deal more. We therefore increased the capital stock to twenty millions
which would be about the estimated cost. After that, when Congress passed a
law allowing us to build east until we should meet the Union Pacific, we again
increased the capital stock, not knowing where .we would meet that road. We
then made it a hundred millions. That accounts for the increase of capital
stock from time to time.
By Commissioner LITTLER :
Q. In that connection let me ask you where is the residue of that stock? A.
It has never been issued. When we got through, nobody wanted that stock 5 but
it was wonderful how the country developed,
2500
U. S. PACIFIC RAILWAY COMMISSION.
for a time, especially in Nevada. If the promises of those early years had
been continued we would have had a great property over there.
INCREASE OF STOCK.
"
Question 31. Ancl the dates and amount of any increase of such stock, and the
reason for such increase."
Answer 31. The organization of the Central Pacific of California provided for
$8,500,000 of stock. It was soon ascertained that the road would cost more
than that. Then upon the estimated cost the capital was increased to twenty
millions, the principal reason being that under the laws of California the
bonded indebtedness could not exceed the capital stock. Afterwards, by the
act of Congress of July 3, 1866, it was provided that the Central Pacific might
build eastward until it should meet the Union Pacific, and not knowing where
that might be, the capital stock was again increased to one hundred millions.
SALARIES OVER $5,000.
"
Question 32. And the amount of the annual salaries or compensa tion that are
now, or at any prior time have been paid to any officer or employe" of
said company, when such salary or compensation amounts to $5,000 or more per
annum."
Answer 32. In reply to this interrogatory, I submit a tabulated statement of
annual salaries amounting to $5,000 or more, paid by the Central Pacific Railroad
Company since its organization to any officer or employe, and all bonuses or
donations which have been given or paid to any such person.
The tabulated statement of annual salaries contains only the names of those
employed and giving all of their time to the company. Those persons who have
been employed by the comparft, giving their services only from time to time
as they may be called upon by the company, are not included. Upon the consummation
of the lease of the Central Pacific to the Southern Pacific Company, the services
of the most of the employe's were transferred to the Southern Pacific Company.
Statement of annual salaries amounting to $5,000 or more paid by Central Pacific
Eailroad Company since its organization, to any officer or employe, and all
bonuses or donations which have been given or paid to any such, person.
...
* $10,000 allowance for extra services Nov. 13, 1886. t Extra allowance.
+$2, 355. 52 donation to Mrs. Corning services, August 1. 1878, to November
16, 1878. $1, 000 allowance to Mrs. Corning for one and one-half months' salary
after decease.
As to this list I can say that the salaries of the principal directors and
officers were fixed at an early day at $10,000 apiece and continued until this
time or until the lease to the Southern Pacific. Since that time the principal
officers have had no salaries. There are others whose salaries in some cases
amount to a much larger sum. The principal counsel, Judge Silas W. Sanderson,
now deceased, received as high as $24,000. The next one to that is Mr. Towne,
the general manager, who received $25,000. I think those are all. In some cases
some of our employes who had bad luck may have received something, or, in case
of
2502 ti. S. PACIFIC RAILWAY COMMISSION.
their death, contributions may have been made to their widows and families.
"
Question 33. And the names of the persons now receiving or who have heretofore
received such salaries or compensation."
Answer 33. This interrogatory will be found fully answered in reply to the
preceding question.
BONUSES AND DONATIONS.
"
Question 34. And all the bonuses or donations which may have been given or
paid to any such person."
Answer 34. $o bonuses or donations have been given or paid to any person except
such as are stated in answer to question No. 32.
LEGAL EXPENSES.
"
Question 35. And all payments made under the head of legal expenses, to whom
made, and the amount paid to each, and for what specific services such payments
were made."
Answer 35. The expert of the Commission, Mr. Stevens, has been given the books
of the company, and he will prepare an answer to this interrogatory.
CONDITION OF COUNTRY AT COMMENCEMENT OF ROAD.
Now, as to question 36, it is a very broad question. When we commenced building
our road there was but one white man between the Truckee and Bear Eivers, and
he was a man that ventured to conduct a cattle ranch up there on the mountains.
There was scarcely any settlement from the Missouri Kiver to Utah except in
Salt Lake City. It was a wilderness. All that country has been developed since.
The railroad was not across Iowa until the Union Pacific commenced, and they
did not commence until two years after we did on this side.
By Commissioner LITTLER : Q. Do you undertake to answer that question? A. Yes.
I answer it, but its scope was so great that we could hardly embrace it. That
question is :
INTERESTS OF COMMUNITIES.
"
Question 36. Said Commission shall also inquire in to and report upon the relations
of said railroads to the interests of the communities through which they pass."
TESTIMONY OF PROMINENT CITIZENS.
Answer 36. The relations of the Central Pacific Eailroad to the communities
through which it passes is most intimate and important ; one is indispensable
to the other. As to these relations, I give the following testimony of prominent
citizens of this State upon this subject, which is instructive and valuable
:
VIEWS OF F. F. STROTHER.
City and County Auditor F. F. Strother, who came to San Francisco in 18G4,
and has been prominent in legal and political circles ever since, says:
I am generally considered an anti-railroad man, and so I am in the general
acceptance of the term. I mean by this that I give the railroad no praise or
credit to which
LELAND STANFORD. 2503
they care not plainly entitled. While this is true I can but agree with the
great majority of the leading business men of the city that the remarkable
era of prosperity which dawned on California and the Pacific Coast in 1869
was the direct result of the completion of the trans-continental railroad,
known as the Central and Union Pacific. My knowledge of the benefits and
advantages which have followed to the western country in general, and to
California in particular, has been obtained more from a close observation
of the growth and development going on everywhere around me than from actual
commercial experience. The fact is, that but for the indomitable energy of
the projectors of this great railroad enterprise, the condition of California
would be pretty much the same to-day as it was in the sixties, for the final
and successful consummation of this gigantic undertaking, operated as an
incentive to other railroad builders and the other trans-continental lines
are the result. I firmly believe that if the Union and Central Pacific people
had failed or given up this work they had in hand, this State, to-day, would
be without eastern railroad connection and our men of commerce and trade
would still be shipping hides, wool, tallow, and wheat (the only commodities
which was then possible for them to handle) to New York via Cape Horn with
clipper ships.
ADVANTAGE TO CALIFORNIA.
The development of the State which set in immediately after the connection
of the two roads was phenomenal. The people then saw for the first time that
there was something else to California besides wool, hides, and wheat. Here
was a market for their fruits and wines, and what was then an almost unknown
industry *began to expand until to-day it leads all others on the coast. Then
came prosperity, commercial and otherwise, and who can say where it will end.
Branch lines of road, "feeders" I think they are called, have been
built from end to end of the State, developing agricultural, viticultural and
mining interests in localities where before they could not be carried on profitably.
And all this, we may say, is the result of the enterprise of the pioneer railroad
builders ; it is the legitimate child of their courageous labors.
VIEWS OF JOHN H. WISE.
John H. Wise, one of San Francisco's principal business men, and who has been
identified with h^r leading commercial interests for over thirty years, has
this to say regarding the actual benefits which have resulted from the construction
of the Union Pacific and Central Pacific Railroads :
The building of these roads has benefited this city, the State, and the whole
coast to an almost incalculable extent. When the scheme of putting through
to this coast a line of railroad to connect us with the East was first broached,
it was regarded by the great majority of our leading commercial men, myself
included, to be next to impossible ; that is, it was an enterprise of such
gigantic proportions, with such seemingly insurmountable barriers in its way,
that we had little hope of its successful consummation. The primitive surveys
of the engineers clearly showed that success in carrying out the scheme demanded
not only an outlay of a sum so vast as to at once dampen the hopes of the projectors,
but a degree of skill, perseverance, and pluck as well, which had never been
applied to a similar enterprise in this or any other country. The lively desire
of the people of this coast, however, to bring about a more desirable condition
of things as regarded our commercial facilities led us to hope almost against
fate. Our commercial situation prior to the completion of these roads was unpromising
and altogether unsatisfactory. Our only facility for handling freights to and
from England, Germany, and eastern American ports was the clipper line of ships,
and about the only articles of merchandise we could export were whe^t, wool,
hides, aud tallow. Of course the shipping of any kind of fruit by a route which
it required, under the most favorable conditions, six months to traverse, was
altogether out of the question. The growing of fruits on the Pacific coast
for any other purpose than home consumption was, therefore, never thought of.
The vast area of excellent fruit and vineyard lands remained uncultivated,
and the country remained undeveloped, with no hope of improvement.
REVOLUTIONARY EFFECT OF RAILROAD CONNECTION.
The railroad connection, when it was finally made, brought about a revolution.
The clipper ships were abandoned, and the volume of business began increasing
at a )0<momenal rate; emigrants began to pour in, towns began to grow and
new ones to
2504 U. S. PACIFIC RAILWAY COMMISSION.
spring up, ranchers began cultivating the soil and planting vineyards, and
for the first time markets were established in Chicago and New York for California
fruits. A new era set in, and from that time dates the rapid development
of the Pacific coast. I consider that the best stroke of business done by
San Franciscans (and San Francisco was then pretty much all there was to
California) was when they gave their mite of encouragement and aid toward
the construction of this line of railroad. This mite was small indeed, almost
inappreciable in fact, because, as I have said, there was so little faith
in the ability of the builders to successfully surmount the many and great
impediments in their way, and complete the work. Had there been a greater
outlook for the enterprise, I do not doubt but that substantial aid would
have been given.
VIEWS OF MAYOR POND.
Mayor Pond gives the following impression of his views regarding the development
of the Pacific coast and the cause thereof:
I consider the connection of the Union and Central Pacific Railroads, which
first gave California a through line to the East, as having been the prime
factor in bringing about the rapid development of the country and the subsequent
prosperity this coast now enjoys. Prior to that time, you know, California,
while her reputation as a section of unlimited possibilities bad spread far
and wide, was regarded almost as a foreign country. Immigration into the State
had been limited, the whole volume of it being confined to the influx of the
adventurous mining horde attracted by the gold fever of '49, and the 50's.
These early pioneers were looked upon as explorers of a far-away and next to
inaccessible country, and it was in those days considered that a man had seen
a great deal of the world who had returned to his Eastern home in safety from
a trip to California.
REVOLUTIONARY EFFECT OF RAILROAD CONNECTION.
Our commercial facilities were equally as bad, our dealings being confined
to less than half a dozen articles of merchandise, because of the time required
to reach marketing points. The effect of the final railroad completion was
an instantaneous and complete revolution of everything. I cannot say that the
immediate effect on the city of San Francisco was beneficial, though some hold
that it was. Previously, you know, we had the handling of every article of
merchandise destined to coast points. San Francisco and California had been
synonymous terms with the railroad company. However, a new modus operandi was
instituted, and freight and passengers were delivered directly to their respective
destinations, leaving San Francisco to survive on her own merits. What little
we lost in the way of transient patronage, however, was made up a thousand
fold by the State and coast at large.
The truth is, the railroad builders made it possible for the outside points
throughout the coast to enjoy the benefits of their own. advantageous conditions
of soil and climate without dividing up the profit with San Francisco.
"
How much substantial encouragement did the railroad builders receive from the
people of the coast?" the mayor was asked.
None at all ; that is, none that I have heard of. You see we did not have much
faith in the enterprise, and while we hoped for its success, it was generally
a case of hands off, as far as contributions of money were concerned. My idea
is [said the mayor in conclusion] that but for the perseverance of those who
had this gigantic scheme in hand California and the Pacific coast would to-day
be just about where they were fifteen years ago.
VIEWS OF WILLIAM T. COLEMAN.
Willliam T, Coleman, the organized head and front of San Francisco commercial
business, one of the earliest pioneers who has been identified with the growth
and development of the commerce of the city, State, and coast since 1849, voices
the sentiments already expressed by the leading men of the city, that the construction
of tfce Union Pacific and Central Pacific Eailroads was the cause of which
the general prosperity of the coast is the direct effect.
When you ask me [said he to a gentleman in his office on July 9j to some of
the benefits wh,ich have flown from the final completion oi i.Ve hrst
LELAND STANFORD. 2505
railroad line between the East and the West, I can only point you to the evidence
of the unequaled prosperity of the Pacific coast, and tell you that all this
is comprised in the benefits brought about by the building of that railroad
line. Before, we had next to nothing ; now we have well-nigh everything that
can be desired.
The project was a mammoth one, requiring an outlay of hundreds of millions
of dollars. The capital controlled by the projectors was known to be comparatively
insignificant, and no one could see how the enterprise could possibly succeed.
We failed to calculate, however, on their capital of perseverance and pluck,
and this it was that built the road.
LITTLE AID RECEIVED FROM THE PEOPLE.
"
How much assistance did the road receive from the people? "
Next to none at all. That is, the contribution was so slight, and it was manipulated
in such a way that costly litigation ensued, and it proved more of a shackle
on the hands of the railroad builders than anything else. Some people call
me an antirailroad man, and perhaps I am partially deserving of the name, but
while I am ready to plead guilty to having scored the railroad in general at
ditfereut times when they seemed to merit it, I have generally been inclined
to make an exception of the Union and Central Pacific, which roads are, to
my mind, richly entitled to much more than they have ever received from the
Government or the public.
VIEWS OF SENATOR L. J. ROSE.
Senator L. J. Bose, of Los Angeles, was at the Palace Hotel on Sunday, July
17. In conversation with a reporter regarding the development of tbe southern
section of the State he said :
The railroads have made Southern California what it is to-day. Before the completion
of the through line formed by the joining of the Union and Central Pacific
roads the southern half of California, which is now famous the world over as
the most favored quarter in America in point of climate and soil conditions,
was no more nor less than a barren sheep pasture. In truth it hardly rose to
the dignity of a pasture at all, for the whole country was almost as destitute
of vegetation as a desert. There were no vineyards, no orchards, no agriculture
nothing. The only industries which any effort was made to prosecute were cattle
and sheep raising, with here and there a sort of experiment in the way of growing
cereals, mostly for home consumption. True, this last-nained industry grew
to some proportions after the institution of the clipper-ship line, by means
of which wheat was sent to foreign and Eastern ports via Cape Horn ; but the
leading industries of to-day were not dreamed of, inasmuch as San Francisco
was the only market known to us. Wine-making and fruitraising for other than
local consumption were out of the question entirely.
INDUSTRIAL REVOLUTION PRODUCED.
Our redemption came in 1869, when the railroad people completed that gigantic
and wonderful work the actual laying of a line of steel over, under, and through
the granite Rockies, giving California a direct rail connection with the East.
I say our redemption came then ; so it did. The effect was marvelous and immediate.
There was an industrial revolution. We beheld ourselves in a day, as it were,
surrounded by possibilities which made us a new and different people, in a
new and completely changed land. That day fortune smiled upon us, and the unequaled
prosperity which teems on every hand to-day is the result. The desert indeed " blossomed
as the rose ; " where there had been barren and neglected wastes there
sprang up orchards and vineyards as if by the hand of magic. Cattle and sheep
ranges were transformed into fertile and productive farms and ranches. Hamlets
sprang into villages, villages into towns, towns into cities. Life and activity
took the place of indolence and sloth. Our reputation began to spread, and
a different and better class of people began to settle among us. Our growth
and development have been phenomenal during our life of thirty years ; for
wo consider that we were born on the day the through railroad was completed.
And to-day there is no more prosperous section on the face of the globe. Who
can doubt that the railroads brought us all this prosperity which extends throughout
the Pacific coast? And who can say that the dauntless projectors of tbo great
enterprise which first gave HS communication with the world are not entitled
to all praise and all support?
INCREASE OF WEALTH CAUSED BY RAILROAD.
In connection with this subject there is one feature of the relation of the
community through which it passes that I feel should not be over
2506
U. S. PACIFIC RAILWAY COMMISSION.
looked. I refer to the wealth- creating power of railroads. The potency of
its influence has nowhere been better shown than in California.
INCREASE OF TAXABLE PROPERTY.
In 1870 the tax-roll of Los Angeles County showed the aggregate taxable property
to be less than seven millions of dollars. In 1883 the tax roll of that county
was twenty-seven millions and one-half, an increase in twelve years of nearly
300 per cent., and the figures show that the larger per cent, of this increase
should be credited to the past five years during which that county has had
railroad facilities.
The same gratifying result is obtained by a comparison of the taxrolls of other
counties in this State, as will be shown by the following tabulation from the
report of the State controller :
...
The increase from 1863 to 1870 was much less than the increase from 1870 to
1883. The taxable property of these eight counties in 1860 aggregated but thirteen
and one-half millions of dollars, or nearly fourteen millions less than the
taxable property in Los Angeles County to-day. The aggregate taxable property
of these counties in 1870 amounted to less than thirty-one and one-half millions,
while the present aggregate value of the taxable property in the same counties
foots up $114, (506,905, an increase of about 270 per cent. These counties
hav.e gained since 1870, $83,329,014, the increase being nearly three times
the amount of the taxable property in 1870. Taking the counties composing the
San Joaquin Valley, and I find that prior to the construction of the railroad
most of the land was used for sheep-grazing and was practically of no value,
whereas at the present time it is worth at least $125,000,000, so" that
there has been an increase of at least a hundred million dollars in the value
of the property in the San Joaquin Valley alone by the construction of the
road.
Now, I would like to show you the effect which transportation has had upon
this country. At that time the clipper ships were charging $17 per ton and
upward for freight from here to Liverpool. The year that the Southern Pacific
was completed it immediately dropped to $10 a ton, and I think it has never
been above that point since. On the contrary, it has generally been a little
below. That year we raised in this State about 1,000,000 tons of wheat for
export, and the saving to the farmers in freight alone was the difference between
$10 and $17 a ton. For first-class passage the Pacific Mail Steamship Company
was charging $300 by way of the Isthmus. When the road was completed it immediately
dropped and came down to a reasonable figure.
TAXES.
"
Question 37. To all questions concerning the payment of taxes, especially upon
lands granted by Congress."
LELAND STANFORD. 2507 NO TAXES DUE ON LANDS.
Answer 37. There are no taxes due to the United States or upon lands granted
by Congress.
Upon the subject of taxation I desire to submit the following statement from
Mr. E. B. Ryan, our tax agent :
CENTRAL PACIFIC RAILROAD TAXES.
STATEMENT OF E. B. RYAN. The Central Pacific Railroad Company of California
was incorporated June 28, 1861. The Western Pacific Railroad was incorporated
December 13, 1862. These two companies were consolidated June 23, 1870, under
the name of the Central Pacific Railroad Company. From the date of their respective
incorporations, and after their consolidation down to the year 1880, the Central
Pacific Railroad Company paid as taxes in the State of California the sum of
$1,936,666.49. The same Company paid in taxes in the same time in the State
of Nevada the sum of $1,316,587.26, and in the Territory of Utah the sum of
$130,984.88, making a total of $3,384,238.63. Prior to 1880 the county assessors
assessed railroad property the same as property of individuals in their respective
counties and boards of supervisors constituted boards of equalization for their
respective counties. During this time there had never been any litigation,
refusal, or delay in regard to tax matters, except in isolated cases where
prejudice or mistake had through the action of the assessor or the county board
of equalization raised the assessment in some county or counties out of all
proportion to the assessment for valuation in other counties through which
the railroad passed, and in one instance where several of the counties, instead
of assessing the railroad at its cash value, as required by law, took into
account its collections and the uses to which it was put thereby, fictitiously
increasing the valuation. In all cases, however, where the payment of taxes
was resisted both the Central and Western Pacific Railroad Companies, after
judgment was rendered in their favor, paid the usual and just amount of taxes
due from them.
HISTORY OF THE TAX LITIGATION.
The question of taxation is this State has been one of peculiar condition for
several years past, involving a controversy between the transportation companies
and the revenue department of the State government, and for the full understanding
of the question by the Commission it will be necessary to review the origin,
history, and present condition of this controversy at some length. The old
constitution under which this cornpany was organized provided, section 13 of
article 11, that all taxation shall be equal and ubiform throughout the State. "All
property in this State shall be taxed in proportion to its value, to be ascertained
as directed by law ; but assessors and collectors of town, county, and State
taxes shall be elected by the qualified electors of the district, county, or
town in which the property taxed for State, county, or town purposes is situated."
EQUALITY OF OLD CONSTITUTION.
Equality and uniformity are the controlling principles to this section of the
old constitution, and the laws passed by the legislature under the wise and
judicious limitations therein contained were equal and uniform in their operation
upon all persons and property in the State, including the property of railroads
operated in more than one county. The property of railroads operated in more
than one county of the State was assessed by the same assessor that assessed
all other property in his assessment district. The taxes thereon were equalized
by the same board and collected by the same collector that equalized and collected
the taxes on all other property situated within the jurisdiction of such board
and collector. Under this fair and uniform law there never was any difficulty
between the railroad company and the people upon the subject of taxation, except
in one or two isolated cases, due to purely local causes.
ASSESSMENTS TO RAILROADS PROMPTLY PAID WHEN ASSESSED AS
OTHER PROPERTY.
Prior to that time, as already said, the Central Pacific RailroaM Company and
the lines operated by it paid fully and promptly, without protest or contest,
all taxes as assessed ; assessments then being made upon railroads in the same
way as upon all other private property. I say private property, because if
railroad property is not private property it is not subject to taxation.
P R YOL IV- 12
2508 U. S. PACIFIC KAILWAY COMMISSION.
TAX PROVISION OF NEW CONSTITUTION.
In 1879 a new constitution was adopted in California, under which was created
a State board of equalization. In this new constitution the framers omitted
the principles of equality and uniformity which form the basis of all taxation
under the old instrument, and* inserted in lieu thereof the following :
''All property in the State shall be taxed in proportion to its value, to be
ascertained as provided by law." (Sec. 1, Art. XIII, Cons.)
Section 4 of the same article among other things provides :
"
A mortgage, deed of trust, contract, or other obligation by which a debt is
secured shall, for the purposes of assessment and taxation, be deemed and treated
as an interest in the property affected thereby ; except as to railroads and
other quasi-public corporations, in case of debts so secured, the value of
the property affected by such mortgage, deed of trust, contract or obligation,
less the value of such security, shall be assessed and taxed to the owner thereof
in the county, city, or district in which the property affected thereby is
situated."
INEQUALITY OF NEW CONSTITUTION.
In other words, the owners of all kinds of property in this State except railroads
and other quasi-public corporations have to pay only upon the value of their
interest therein after deducting .therefrom the value of the mortgages, &c.,
if any thereon, whereas the owners of railroad property have to pay taxes upon
the full value thereof and are not allowed to make any deductions for the value
of the mortgages, &.c., thereon. By the same instrument, sec. 9, county
boards of equalization were created with power to correct and equalize the
entire assessment roll, to increase or lower it, or any assessment contained
therein, so as to equalize the assessment of the property contained in said
assessment-roll and make it uniform to the true value in money of the property
so assessed ; this board being a tribunal to which an appeal could be taken
from the judgment and decision of the assessors. It was intended not only as
a check against incompetency and dishonesty on the part of the assessor, but
also, to give every property-owner his day in court, if ho suffered in any
way by the action or determination of the assessors. This beneficial and just
provision of the constitution applies only to the owners of property as assessed
by the county assessor, and does not apply to nor affect the owners of railroads
operated in more than one county of the State. The owners of such property,
if they have been ever assessed or wronged in any other manner in the assessment
of property, have no board or officer to whom they can appeal or before whom
they may appear to have their assessments equalized or their wrongs righted.
The remedy provided % for every other propertyowner in the State is denied
to them.
A SEPARATE SYSTEM OF ASSESSMENT FOR RAILROADS.
the new constitution, by section 10 of article 13, makes provision for an independent
and separate system of assessment for railroads operated in more than one county
in the State. They are assessed, not by the assessor, who assesses all other
property, including railroads operated in one county, but by the State board
of equalization. The operation of this law is discriminative against railroads
operated in more counties than one, being burdensome and unjust and unequal.
It is self-executing; it enables the board to assess the property at any place,
at any time at which it in its pleasure may elect to meet without any notice
given of any kind to any person to be affected by its action, and without an
opportunity to be heard after its action ; and its decision is declared to
be final. The board may assess those at $100,000 per mile, or it may assess
them at $1 per mile. Its action being final and conclusive, neither the railroad
companies on one hand, even if power is excercised to confiscation, nor the
people on the other hand, if the board should assess the property at $1 per
mile, could obtain relief.
ASSESSED MORE THAN ELSEWHERE IN UNITED STATES.
In the exercise of this power, the first State board of equalization made an
assessment of railroad property. The valuations placed by this board upon a
single-track railroad running chiefly through the thinly settled counties,
many of which roads had never earned or paid a dividend, was more than double
that placed upon any railroad of similar character within the United States.
The locomotives of these roads, some of which had been in service nearly a
quarter of a century, were assessed at 80 per
LELAND STANFORD. 2509
cent, more than new locomotives of the same pattern could be purchased for
and placed upon the road, and this, too, in face of the fact that the value
of the standard locomotive was certain and easy of ascertainment.
EFFORTS TO GET JUDGMENT ON THE MERITS OF THE CASE.
In the proceedings which have been had to determine the validity of this special
system of taxation, in no case has the company for a moment endeavored to delay
a final judgment. To determine this question as early as 1881 an action was
commenced in the circuit court of the United States, in which the whole matter
at issue between the companies and the State could be finally determined. The
State took a technical objection to the jurisdiction of the court, and the
case went off upon that ground and without reference to its merits. In 1882
the companies commenced proceedings in the superior court of San Francisco,
on the equity side, to determine the question at issue, and tendered into court,
without prejudice, CO per cent, of the tax claimed, and offered to litigate
the balance.
TECHNICAL .OBJECTIONS BY STATE.
Again the State interposed technical objections, refused to receive part payment
or let the question be heard upon the merits. The State then commenced suit
to recover taxes. Those cases were taken to the Federal courts, which courts
alone could finally determine the question at issue, and ari agreed case known
as the'*' San Mateo Case" was made up between the State and the company.
SAN MATEO TEST CASE.
This case was taken to the Supreme Court, advanced in the calendar, argued,
and submitted for decision. In the meantime an election had occurred and a
change in the State administration. It was asserted by the press and many able
lawyers that the case was not a fair one. This was pressed upon the Supreme
Court of the United States, and that tribunal directed that enough cases should
be tried upon their merits to present all the questions, and that when such
cases were brought up they would advance them in the calendar and hear them
at once. This fact was publicly announced by the court at the commencement
of the circuit court, last August, 18d6. In pursuance of that announcement
six cases were tried, but one of which has yet been appealed. The case was
taken up and a motion made to advance it. The court refused.
PENDING: LITIGATION CO PER CENT. TENDERED.
It will be borne in mind that the companies, although denying their legal liability,
tendered, on account, 60 per cent, of the amount claimed, which would make
the tax very much greater than that ever levied upon any such property in the
United States. The State board of equalization in 1882 reduced the assessments
upon railroad property, Cleaving it yet largely in excess of that levied upon
such property in any other State in the Union.
STATE BOARD ADMITS OVER- ASSESSMENT.
It was stated by the chairman of the board, at the time of this reduction,
that the assessment of 1880 had been made in advance of the assessment of other
property, and at a time when the board believed it had the full power to raise
individual assessments up to the standard of value which they fixed upon railroad
property, and they intended to do so, but owing to a decision of the supreme
court of the State that power was deniad them, and that the railroad property
was left standing at its full value, while other property in the State had
not been assessed at more than 44 per cent. This was a concession by the very
tribunal to which the framers of the constitution had encrusted the power of
valuation that the valuations of 1880 and 1881 were wrong.
FULL AMOUNT OF TAXES OFFERED TO STATE.
In view of the fact that the finances of the different counties had been disarranged
by the non-payment of those taxes in October, 1883, the railroad companies
proposed to the governor of the State to pay the taxes, although they still
believed them to be too high, for the three years upon the basis of the assesmont
of 1882. This proposal
2510 U. S. PACIFIC RAILWAY COMMISSION.
was refused by the governor in November, not upon the ground that it was not
just, but upon the ground that he had no power to accept it. In the meantime
the State authorities had the Spring Valley Water Company and the San Francisco
Gas Company settled upon the basis of the tax as assessed, 'without interest
or attorney's fees, although as against one or both companies the State had
prevailed in litigation. The Southern Pacific Eailroad Company made similar
propositions to settle, which were rejected. Against this adjustment with
the water and gas companies, which was a final one, and beyond which no power
can go, no cry of unfairness was raised by any one ; and from that hour to
this, so far as I am advised, no one has questioned the propriety or justice
of the settlement, although it is conceded that the property of the water
company will sell in open market for 100 per cent, more than the assessment,
while it is doubtful if the railroad company would bring in the market within
10 or 15 per cent, of the assessment.
STATEMENT ADVOCATED BY SAN FRANCISCO CHRONICLE.
After the refusal of the Governor to adjust matters with the railroad company,
and after the settlement was made with the water company and the gas company
on the 12th and 13th of November, the San Francisco Chronicle, in an article
commenting on the railroad's proposition, took the ground that the governor
had done right, but maintained -that a fair settlement of the whole matter
would be for the companies to pay the taxes "flat," as the water
and gas companies had done. That paper claimed, with a great deal of force,
that to satisfy the people that it was dealing fairly, and only wanted the
principle decided, the railroad company could afford to pay the difference,
which, taken in connection with the local tax levied upon ferry steamers, workshops,
stations, houses, &c., on the Central Pacific main trunk line, amounts
to $351 per mile, a tax beyond the power of any single track railroad to pay.
STATE CONTROLLER REFUSED TO RECEIVE MONEY ON ACCOUNT.
Notwithstanding this, long before that tax became delinquent, the companies
tendered to the State controller, who had been made the tax collector, 60 per
cent, of the amount, with a stipulation in writing that the receipt by the
controller of that sum should not affect any local rights of the State or counties
to proceed for the balance. The controller refused to receive the money, and
commenced suit against the company for the whole amount. The company has tendered
the 60 per cent, of the amount claimed in open court without prejudice to any
right to recover the balance, and by reason of the moral obligations resting
upon it, offered to pay into the State and county treasuries nearly two million
dollars in money.
TAXES PAID 1SS1-'S6 AFTER JUDGMENT DECLARING IT VOID.
The Central Pacific Railroad Company for the years 1880, 1881, 1882, 1883,
1884, 1885, and 1886, in the State of California, paid for State, county, and
municipal taxes $1,408,299.91. The greater part of this sum was in litigation
and was voluntarily paid by the company after judgment had been rendered declaring
the tax void. The Supreme Court of the United States, when these cases came
up before it, in each case affirmed the decision *of the circuit court in favor
of the company and against the legality of the tax.
TAXES PAID, OVER SIX MILLIONS.
The Central Pacific has paid in taxes in the
State of California $3,355,095.75
State of Nevada 2,411,227.60
Territory of Utah 264,316.38
Total 6,030,639.73
CENTRAL PACIFIC PAID MORE THAN ANY OTHER ROAD IN THE UNITED
STATES.
It is my firm belief, and I think the facts herewith submitted will substantiate
the statement, that since 1880 the Central Pacific Railroad Company has paid
more taxes tban any other company in the United States upon the same number
of miles of road.
In substantiation of this I submit the following table, which shows the facts
regarding taxes in those States from which I have been able to gather the necessary
data. The inequality of the railroad tax in California and Nevada, compared
with the re
LELAND STANFORD.
2511
maiuing States, is suggested by the ratio shown in tho last two columns between
the taxes per miles of railroad and the population :
Assessments of railroads in the following States.
...
VOLUNTARY PAYMENT OE TAXES.
By the CHAIRMAN :
The sum of $3,000,000 estimated there for payment of taxes was not paid upon
land granted by Congress? A. No ; that was but a small portion of the railroad
property. There is one thing to which I desire to call the particular attention
of the Commission with regard to these facts; and that is, that after judgment
had been rendered in our favor, and where there was no legal liability, we
paid over a million dollars in taxes. We have always paid our taxes. Even after
judgment in
our favor we paid a fair amount.
O By Commissioner LITTLER :
Q. Who determined that question of fairness? A. Where there was no legal liability
we paid as we had been accustomed to pay, and even then we paid a great deal
more than any other railroad in the United States.. I think that our assessment
was over three times as much per mile as the "New York Central assessment.
I do not believe there is another example like it to be found anywhere, of
a company, after a decision in its favor, paying over a million dollars voluntarily.
I only allude to it here particularly to show that we have been willing to
pay fair taxes.
DELAYS IN PATENTS FOE LANDS.
"
Question 38. And the delay of said companies in taking out patents for such
lands."
Answer 38. We have never been derelict in taking out patents for such lands.
We have not received our patents properly, and at the present time there are
applications for over one million acres of land pending before the United States
Land Department.
2518 U. S. PACIFIC RAILWAY COMMISSION.
INJURY TO COMPANY BY INABILITY TO GET PATENTS.
It has been charged that we do not take out patents because we do not want
to pay taxes thereon, but this is not so. We could never get out patents fast
enough and have suffered in consequence. The inability of the company to obtain
patents promptly upon application has caused us great loss, not merely in the
sales of lauds, but more particularly in the business that would have arisen
in their occupancy, as will be more fully shown in the report of Mr. W. H.
Mills, land agent of the company, hereto attached and made part hereof, marked " Exhibit
No. 6."
RATES AND CHARGES.
"
Question 39. The rates of fare and freight charged, discriminations, differentials,
pools, and other devices."
LOW RATES ON CENTRAL PACIFIC, CONSIDERING THE CIRCUMSTANCES.
Answer 39. Taking into account all the elements which have to be considered
in determining the rates at which passengers and freight can be moved, such
as amount of business done, the cost of doing it, c., the cheapest railroading
in the world is done on the Central Pacific. Taking the business between the
State lines of Nevada as an instance, the local business is almost nothing.
It would not maintain the running expenses. The maintenance of that portion
of the road is from the business that originates outside of those boundaries
and passes through - } and through freight is materially affected, both in
volume and rates, by competing lines of road subsidized by the Government.
For a more detailed answer I refer to the exhibit made by Mr. J. C. Stubbs,
the traffic manager of the road, marked " Exhibit No. 7," attached
hereto and made a part hereof.
FACILITIES FURNISHED, AND EFFECT ON COMMUNITIES OF SETTLEMENT FOR DEBT.
"Question 40. And the facilities and accommodations furnished to the
patrons of such roac(& ; and their report shall embrace a consideration
of the interests and "fights of said communities as affected by whatever
plan of settlement or payment of the existing debt may be proposed."
FACILITIES FIRST CLASS.
Answer 40. The facilities and accommodations furnished to 'patrons of these
roads are first class. There is a sufficiency of passenger and freight trains
for the accommodation and convenience of the traffic. The speed and frequency
of these trains are ample. The rolling stock is up to the standard and excellent
in its quality and condition. Stations, station-houses, warehouse facilities,
and sidings are provided at all necessary points. The character of the service
generally will compare favorable with the most thoroughly equipped and best
served in the country.
SETTLEMENT PROPOSED SHOULD NOT BURDEN COUNTRY ALONG LINE,
In any scheme of extension or adjustment that may be made between the Government and the company, the Government should not forget
LELAND STANFORD. 2519
the policy in which the measure had its origin, that is, the public interest.
Travel and transportation should not be so burdened as to cripple the road,
jeopardize its efficiency, and retard the development of the country.
The Commission then adjourned to Friday, July 29, 1887, at 10 a. m.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Friday, July 29, 1887.
LELAND STAKFOKD, being further examined, testified as follows: The WITNESS.
The next question in your circular was :
EXTENSION OF TIME FOR PAYMENT.
"
Question 41. Said Commissioners shall also consider and report whether the
interests of the United States require any extension of the time for performance
of the obligations to the United States of said companies, or any of them,
and the facts and circumstances upon which said opinion is based.' 7
SECURITY HELD BY UNITED STATES.
"
Question 42. Including the security held by the United States for the performance
of such obligations, and the value thereof."
SUCH A SCHEME FOR EXTENSION AS SHALL NOT AFFECT THE SERVICE.
a Question 45. And if, in their opinion, such extension shall be required by
the interests of the United States, they shall submit a scheme for such extension
which shall secure to the United States full payment of all debts due them
from said companies, with a reasonable rate of interest in such time as the
Commissioners shall propose, having due regard to the financial ability of
said companies and the proper conduct of their business in such manner as shall
afford efficient service to the public."
THE EQUITIES CONSIDERED.
Answer. Questions 41, 42, and 45 relate to the policy that shall be adopted
with reference to the payment by the company of the debt due the Government,
and therefore I shall consider them together. I have heretofore stated that
the appointment of this Commission by Congress, and the authority and instructions
given to it to ascertain what the company had lost upon the one hand, and what
the Government had gained upon the other, by the construction of the road,
was a candid admission on the part of Congress that this company had equities
which Congress desired to adjust and allow. We believe that Congress was not
actuated by any mere idle curiosity in creating this Commission to examine
into and report concerning the foregoing matters. We have therefore shown among
other things :
LOSS ON SALE OF GOVERNMENT BONDS.
(1) That the company had to sell the Government bonds at a discount, and thereby
sustained a loss of $7,120,073.55 ; and interest on this loss to maturity,
$12,816,132.59.
2520 U. S. PACIFIC RAILWAY COMMISSION.
AMOUNT SAVED TO GOVERNMENT ON TRANSPORTATION.
(2) That the Government saved $47,763,178 in transportation between the time
when the line was completed and the time when it might have been completed
according to the contract, this company's proportion of which was, say, 40
per cent, or $21,971,062.
AMOUNT DUE BY GOVERNMENT.
(3) That the Government now owes the company $1,853,323.15 for transportation
on unaided roads, the justness and legality of which claim has been decided
by the Supreme Court of the United States.
1 wish to say here that this matter was brought before Congress at various
times ; that the Departments both the Postal Department and the War Department
sent down word that they needed so much money to meet these expenses ; but
Congress did not make appropriations.
By Commissioner ANDERSON :
Q. Can you refer us to the case in which the figure you have given was declared
to be the figure that you were entitled to receive, $1,853,323,15? A. There
is no dispute as to the amount. It arose on these non-aided roads. The question
was whether it should belong to the sinking funds as the earnings of the aided
road.
Commissioner ANDERSON. I am speaking more especially as to the accuracy of
the figures to which you refer, because the difference as to the rate to be
charged for different kinds of transportation, which was the subject of litigation
for many years, and the difference as to the amounts ultimately awarded by
the court and the amounts claimed by the company is very important; so that
if you can refer us to the decision, we would like to see it.
The WITNESS. There is no dispute as to the amount between the Departments and
the companies. The whole question with the Departments was whether or not we
were entitled to take the earnings, and the Court of Claims decided unanimously
that we were entitled to take them, and on appeal to the Supreme Court of the
United States that court unanimously decided the same way.
Commissioner ANDERSON. That is the case to which we want you to refer.
The WITNESS. I will give you the reference.
By Commissioner LITTLER:
Q. Is there any dispute between this company and the Government as to other
sums of money? A. Not as to that particular sum now.
Q. Have you any controversy with the Government now? A. There are some sums
of a long time ago, concerning which I spoke yesterday, that have never been
settled. They have not been allowed. I think that they would amount to three
hundred thousand and odd dollars.
INTEREST LOST BY COMPANY.
(1) The amount of interest the company has lost upon the money which it would
have received from the sale of its lands, if the Land Office of the Government
had issued patents as fast as called for by the company. This amount can be
approximately determined.
LOSS ON ACCOUNT OF SINKING-FUND PROVISION.
(5) That the company has lost $1,612,966.72 in being forced to pay into a sinking
fund established by Congress large amounts of money for
LELAND STANFORD. 2521
which it not only has not received any interest, but the company has not so
much money now as it paid therein by. over $500,000. In other words, it has
not only lost the interest on this money by reason of mismanagement of the
fund, but has even lost a portion of the principal, and at the same time
has been compelled to pay 6 per cent, per annum on this very amount so lost
to it by reason of the purchase of the bonds placed in the sinking fund at
a premium.
DIVERSION OF BUSINESS.
(6) The diversion of business to other lines, of which this company's proportion
amounts to about $17,000,000.
AMOUNT OF EQUITIES EXCEED AMOUNT DUE GOVERNMENT.
There can be no question in the mind of any candid person but what this company
is entitled to have the foregoing specified equities allowed by the Government.
If they are allowed, then all questions relative to the extension of time in
which to pay the debt becomes immaterial, because the amount of these equities
exceed very largely the amount of debt now due from the company to the Government.
If, on the other hand, the Government is not willing to allow these claims,
it will be exceedingly difficult to determine the conditions which should be
imposed upon the company concerning the payment of the indebtedness. The ability
of the company to pay must always be determined by the amount of business it
does. This depends largely upon conditions changing from day to day, and over
which the company has no control. As we have hereinbefore stated, the net earnings
from local business of the State of Nevada amounts to nothing, and if the departments
of the Government having control of Government transportation divert from this
road and give to foreign and competing roads the business which this road is
fairly entitled to, ifc is impossible to tell when the company can meet its
obligations. About the only thing that can be done at this time will be to
fix the rate of interest which the Government should charge. This should not
be in any case more than the Government would have to pay for the use of the
money, to wit, any more than 2 per cent, per annum.
There should be taken into consideration the amounts saved the Government in
transportation, that is, based upon the business before the completion of the
railroad. Since the completion of the road the efficiency of the service has
been increased beyond comparison, of whicb we make no estimate. Probably thousands
of millions of values were created by the construction of the road in the development
of the country and making it suitable for homes. That and other benefits to
the United States were anticipated at the passage of the law, and I believe
in no single instance have the people or the Government been disappointed.
If the Government does not allow the company the compensation for services
contemplated by Congress at the time of the passage of the bill, and if they
are not to be allowed for the diversion of business consequent upon the Government
subsidizing competing roads, then the ability of the company to pay is manifestly
unequal to the burden imposed.
LIQUIDATION OF DEBT ANTICIPATED BY PAYMENTS WHICH HAVE BEEN MADE UNDER ORIGINAL
LAWS.
I deem it, however, proper to suggest to the Commission that it was originally
contemplated by Congress that the liabilities of the company
2522 U. S. PACIFIC RAILWAY COMMISSION.
were to be discharged by the compensation to be made by the Government to it
for the services it might be called upon to perform for the Government, and
the 5 per cent, of its net earnings reserved by law. The lien was only intended
to secure such performance. In other words, it was contemplated that the
services of the company, together with the
5 per cent., would liquidate its liabilities to the Government.
i
PROPERTY NOT SUBJECT TO UNITED STATES LIEN.
"
Question 43. And the value of the property of such companies, and either of
them, not included in such security V
Answer 43. The Government lien only covers the Central Pacific from Ogden to
Sacramento, and the Western Pacific from Sacramento to San Jose. No other property
of the company is covered by the Government lien. As to the value of the property
of the company not so covered by the Government lien, I am unable to estimate,
but am informed that the engineers appointed by the Commission are making an
estimate of all the property of the company, which will include ttiis information.
A statement of these assets is given in the foregoing reply to interrogatories
11 and 12.
FURTHER SECURITY FOR UNITED STATES.
"
Question 44. And what further security is it expedient that said companies
shall be required to give?"
UNITED STATES HAS NO RIGHT TO CHANGE ITS CONTRACT.
Answer 44. In answer to question 44, I respectfully submit that the Government
has no right to change its contract with the company and demand other security
than that fixed in the original acts of Congress of 1862 and 1864. Nor is it
expedient for the Government to ask further security. On the contrary, the
best security that the Government can have will be a fair consideration of
the equities we have already enumerated, and a fair and liberal settlement
with the company upon the basis originally contemplated by Congress, to the
end that the company may be able to discharge all its obligations and be able
to assist in the development of the country and promote the general interests
of the people. It should be borne in mind that the burden upon the company
other than its obligations to the Government were vastly increased by the rapid
completion of the road, both on account of the ruinous discount suffered in
selling its first mortgage bonds, and the high price of material and great
disadvantages under which the road was constructed in a country where a large
portion of the transportation was necessary by teams, it being impossible to
advance the constructed line of road on account of snow blockades in the Sierra
Nevada Mountains, and the unequal character of the country through which the
road passed necessitated transportation of supplies and of men frequently hundreds
of miles.
DIFFICULTIES IN CROSSING- THE MOUNTAINS.
The difficulties which we experienced in crossing those mountains can hardly
be appreciated. We worked along in the heavy snow, and our supplies and material
for the men and the horses had to be packed to them. We had to shovel snow,
and in some places to pick it with
LELAND STANFORD. 2523
a pick for 75 feet deep in order to get to a place on which to put our embankments.
Snow fell there one winter 63 feet in depth since we have been operating.
Not that you would find that in a measurement by taking the falls of twenty-four
hours and adding them together, but you would find drifts and places where
63 feet of snow was pressed down, perhaps, into not more than 18 feet, but
packed as hard as ice, and requiring the pick and powder to make a passage.
Then, in building the road out over that desert from Truckee to the Humboldt,
for 40 miles, we had to haul water for our men and horses to drink, and we
had to go some distance up to Humboldt before we struck water which was even
fit to be used. We sent over three thousand men and four hundred horses in
advance of our building lines to work up in the canons of the Humboldt those
three canons there and all their food and supplies had to be hauled there.
The springs were all a good ways from the road. Now we can get along very
well, because water is brought there from springs, but at that time we had
even to hunt for water. We laid the track of a little over 500 miles in five
days less than ten months, and we laid a little over 10 miles in one day.
There were a great many curves and a great many unforeseen difficulties which
had to be surmounted.
A RACE WITH THE UNION PACIFIC.
By Commissioner LITTLER :
Q. There was a race between you and the Union Pacific, was there not, governor
? A. Well, yes. When we were working on the mountains our work was so tremendous
that they thought we could not get over the mountains by two years as early
as we did, and they were going to meet us at the end of the eastern side of
the mountains. Of course our road would not be worth anything in that case.
It was a difficult road to operate, and they could bring goods from the east
and would be cutting off all our business over there. So we were forced to
make the most extraordinary efforts in order to get out to Salt Lake and have
something to say with regard to the future business and the supplies that might
go into Nevada. After we got over the mountains we swarmed men along that mountain
side, and we went over there faster than any one believed could be possible,
aiding the men with a liberal use of powder. AVe hauled the iron for 40 miles
over the mountains and built down on the Truckee in the winter season 40 miles
of road, and hauled iron and engines and everything over, besides all our supplies.
I paid 13 cents a pound for freight from the Summit out to Salt Lake City.
Then we had to haul it out on the line of the road and then we paid 2 cents
more. We accomplished 180 miles there with such help as we could get. Hay was
worth $100 a ton, and oats, I think, about fourteen or fifteen cents a pound.
Everything was up in price; 'and thos^ little teams over there would not haul
much more than a wheel-barrow full of dirt.
Commissioner LITTLER. The first time I was at Leadville hay was worth there
$180 a ton.
The WITNESS. I sold one potato for $2.50.
COMMISSIONERS TO REPORT BY DECEMBER 1, 1887?
"
Question 46. And the said Commission shall report in full in regard to all
such matters aforesaid, and in regard to any other matters which may be ascertained
or come to their knowledge in regard to said p R VOL iv 13
2524 U. S. PACIFIC RAILWAY COMMISSION.
companies respectively', on or before December 1, 1887, to the President of
the United States, who shall forward said report to Congress, with such recommendations
or comments as he may see fit to make in the premises."
Answer 4( This question, relating as it does entirely to the duties of the
Commission, does not require any answer from me.
COST OF UNITED STATES TRANSPORTATION PRIOR TO ROAD.
u Question 47. The Commission shall also ascertain the average cost per annum
of Government transportation in the region now traversed by the Pacific railroads
between the year 1850 and the completion of said roads."
UNITED STATES TRANSPORTATION $8,000,000 A YEAR.
Answer 47. The average cost to the Government per annum for transportation
in the region now traversed by the Pacific railroads, between the year 1850
and the completion of the road, was over $8,000,000. This does not include
the cost of maintenance of Government forts and military encampments and a
large number of troops necessary to protect the border against the hostile
Indians, which disappeared with the advent of the railroad. Nor does it include
the expense incident to the carrying of the mails, munitions of war, and other
matters required in the region beyond the line of the road, as in northern
Montana, Dakota, Washington Territory, and other points now reached by railroads.
The difference in the character of the service and other matters of interest
will be found more fully set forth in the reply to question 52, which has,
in a measure, to be treated in connection with this question.
SAVINO TO UNITED STATES TO 1886 $139,347,741.
The saving to the United States by the Central-Union line, in the item of transportation,
has amounted to January 1, 1886, to the sum of $139,347,741.
COST OF UNITED STATES TRANSPORTATION SINCE COMPLETION. ONE-TENTH OF FORMER
COST.
"
Question 48. And also the average cost per annum since such completion."
Answer 48. As shown by the books of this company and the records of the Government,
it appears that the average cost per annum for Government transportation over
said roads is about one-tenth of the amount formerly paid, with a very superior
service, all of which will be found set forth in detail in the answer to question
52.
ADDITIONAL FACILITIES FURNISHED BY ROADS.
"
Question 49. And what additional facilities have been furnished to the Government
and the people by said roads."
COST IN *TIME AND MONEY OF FORMER METHODS OF TRANSPORTATION.
Answer 49. It is difficult to definitely state or to specifically point out
oach additional facility which lias been furnished to the Gove rumen t and
LELAND STANFORD. 2525
the people 'by the railroads. It is a matter of history that before the construction
of the Central Pacific Bailroad, all transportation between San Francisco and
New York was done by water. The local transportation was done either by water
or by wagons. The average time between New York and San Francisco was about
six mouths by sailing vessel and from 30 to 40 days by steamer. The cost of
transportation by any method in use, before the completion of the road, was
very much more expensive in the direct charge than charges have ever been since
the completion of the road. The absence of a railroad to connect with the Atlantic
States of the American Union with the Pacific effected a loss to the people
of the whole country, in time, in property, and in money, which each year equaled
the annual expense of the Federal Government a loss that in two years would,
according to the figures of Eepreseutative James A. McDougall, cover the cost
of a completed railroad to the Pacific. This was a tax upon the industry and
enterprise of the people of every State of the Union. The old system of transportation
was marked by two great features of disadvantage; one of them was prejudicial
to the merchant, in that he was required to possess a larger command of capital,
in order to have a sufficient quantity of stock on hand for his operations,
while he waited for the long-coming ship to arrive, whose cargo also called
for money to purchase. The other operated to the detriment of consumers, inasmuch
as opportunities were afforded to persons having a ready command of money to
buy up the whole stock of a necessary commodity existing in the market, for
the purpose of creating a monopoly therein, and demanding a higher price therefor.
Before the establishment of railway facilities, this was repeatedly accomplished
with perfect safety to the speculator.
Two-thirds of the territory of the United States lies west of the Mississippi
Eiver, the greater portion of which at the time of the commencement of this
road was wilderness. It has been opened up into settlements, into homes and
general development. The values are not to be measured by hundreds of millions.
DISCOUNT ON UNITED STATES BONDS.
"
Question 50. Also to inquire what discount the Pacific Bailroad and its several
branches were forced to make in disposing of the bonds guaranteed by the Government
to obtain the gold coin which was the currency of the country through which
the greater part of said roads pass."
COST OF ROAD PAID IN GOLD.
Answer 50. The Central and Western Pacific Railroads were compelled to pay
gold coin during the progress of construction for all wages, supplies, fuel,
materials, and contracts which were payable on the Pacific Coast, the gold
always having been the currency of this region.
CURRENCY BONDS ISSUED BY UNITED STATES.
The bonds issued by the United States to aid the construction of the Pacific
railroads were made payable thirty years from date with interest at 6 per cent.,
payable semi-annual ly, the principal and interest made payable in lawful money.
This during the time of the construction of the road and for some years afterwards
was United States currency. From these facts the bonds have always been known
as " Currency Sixes," and they were the only bonds issued by the
Government which could not be redeemed by it, at its option, at any time before
maturity thereof. I have been informed, and 1 believe it to be true, that these
2526 U. S. PACIFIC RAILWAY COMMISSION.
are the only bonds which the Government issued during the civil war upon which
they did not sustain a discount. We direct your attention especially to the
irredeemable character of the bonds, because, as we will hereinafter show,
the company, on account of this character of bonds, has sustained a very
great loss in being compelled to pay into the sinking fund a large sum of
money from which it has received no interest whatever, and at the same time
is compelled to pay interest on these outstanding bonds.
CENTRAL PACIFIC CHARGED WITH TWENTY MILLIONS FOR WHICH
IT RECEIVED NOTHING.
During the time the company was constructing its road, and at a time when it
was experiencing the greatest difficulty in getting the money to meet its obligations,
the Government securities were very much depreciated because of the existence
of the civil war. For example, the company was compelled to dispose of the
bonds issued to it by the Government at a loss of $7,120,073.55. The company
is paying 6 per cent, on the bonds issued by the Government, so that at the
maturity of the bonds the company will have to pay in round numbers $20,000,000,
for which it never received one farthing. This is one item which must be taken
into consideration in estimating the cost of the road, and one which is rarely
recognized. Again, the company in selling its own first mortgage bonds was
compelled, by reason of the impaired value of the Government securities, to
sell its own bonds at about the same rate that it got for the Government bonds.
DEPRECIATED GOVERNMENT SECURITIES.
Commissioner ANDERSON. I do not understand your statement about the depreciation
due to the war, especially in connection with this loss of $7,000,000.
The WITNESS. There was a time when the Government securities were down to 40
; but at the completion of the road the Government credit had been restored
and its bonds were a little above par
Commissioner ANDERSON (interrupting). I do not understand your statement that
the bonds were depreciated by the war. I do not understand that any bonds were
issued to the Central Pacific and Western Pacific Companies until two years
after the close of the civil war.
The WITNESS. Yes ; there were some issued in 1863.
Commissioner ANDERSON. But you got no bonds from the Government.
The WITNESS. Oh, yes; we got the bonds; we got those bonds. I do not know what
time exactly, but it was during the war.
Commissioner ANDERSON. It was in 1866 when the first bonds were issued.
The WITNESS. In 1866 !
Commissioner ANDERSON. Yes, sir.
The WITNESS. I think that you are mistaken.
Commissioner ANDERSON. We have got the United States reports. The WITNESS.
There is no chance for a dispute as to what year these bonds were issued. We
got the bonds, I know ; and they were sold in the market at the time, and we
sold them for all that they were worth ill the market.
Commissioner ANDERSON. I was only referring to your statement that they were
depreciated by reason of the war.
The CHAIRMAN. The war was virtually over when you commenced, was it not?
LELAND STANFORD. 2527
SUPPLIES HAD TO BE ORDERED A YEAR IN ADVANCE.
The WITNESS. Not with us entirely. Our supplies had to be ordered fully a year
in advance of their use. Supplies and materials required in the construction
of the road had to be purchased at least a year before we needed them. We commenced
the grading of the work, and work was going on in 1863, and at that time our
orders were out in the East for everything that we required for a long time
ahead, so that we could continue our work with as little interruption as possible.
Commissioner ANDERSON. I am talking abo'it the depreciation in the bonds, and
not about the commencement of the road.
The WITNESS. We sold those bonds at that depreciation. We had until 1876, by
the contract, to complete the road. Had we waited for the expiration of the
contract time before finishing the road, instead of building it seven years
earlier than that time, we would not have had to suffer this loss. Had we waited,
we would have had the advantage of the bonds at par, together with the premium
at which they were selling, and as our own first mortgage bonds were depending
very largely upon the assistance which the Government gave, they would have
been above par also. By this rapid construction and completion of the road
before the time required by the act of Congress, the depreciation was not merely
on the Government bonds, but upon our own first mortgage bonds, so that what
we were forced to lose in the sale of the two classes of bonds made a depreciation
of $7,000,000 on each class, and the interest on them from that time until
maturity amounts to about $40,000,000, which we will have to pay at maturity
more than we would have had to pay otherwise had we realized par.
BONDS ISSUED.
The bonds issued to the Central and Western Pacific Eailroads were, at their
par value, as follows :
Central Pacific $25,885,120
Western Pacific 1,970,560
Total currency bonds 27, 855, 680
These bonds were issued as sections of the constructed road were accepted by
the President of the United States, and so bore different dates from the
years 1865 to 1869, inclusive, with the exception of a small number dated
in 1870. During all this period the currency was greatly depreciated, sometimes
selling as low as 42.66 cents on the dollar in January, 1865, to 83.68 cents
on the dollar in December, 1869.
AVERAGE AMOUNT RECEIVED FOR EACH B?)ND, $744.44.
In order to get the coin to pay for their construction, labor, and supplies
the Central and Western Pacific Companies were forced to dispose of the currency
bonds received from the Government at an average rate for gold of 1.34J. The
amount received by the company for each bond of $1,000 was therefore $744.44.
For the $27,855,680 in United States bonds these companies received $20,735,606.45.
The discount they were forced to make was thus $7,120,073.55. Interest is charged
the companies on the full amount to the maturity of the bonds. The interest
on the $7,120,073,55 discount which the companies were forced to make is for
thirty years, at 6 per cent., $12,816,132.39.
2528
U. S. PACIFIC RAILWAY COMMISSION.
LOSS FROM DISCOUNT, $19,936,205.
The total principal and interest for discount lost by the companies is therefore
$19,936,205.94.
The following table shows, the amounts and dates of the currency bonds issued
to these companies, and the market value of currency at the current average
premium on gold :
Statement showing dnie* and anwunls of United States bonds, issued to Central
and Western Pacific Railroad Ctnnfmnun (kti me tt nxcurrrncy sixes}, with value
of same in United States gold at current average w/es of premium for United
Stales currency.
...
LELAND STANFORD. 2529
BONDS BOUGHT FOB SINKING FUND.
Under the provisions of the act of May 7, 1878, the company has been forced
to pay for these same bonds for the sinking fund in the United States Treasury
a premium of about 35 per cent. It has thus suffered a loss in premium on the
redemption of the bonds of an equal rate to the loss in discount on their issue.
The sinking fund of the Central Pacific Railroad Company in the United States
Treasury on June 1, 1887, contained $2,548,000 United States Pacific Eailroad
bonds (currency sixes) and $9,000 Central Pacific Railroad first-mortgage bonds
; total, $2,557,000.
PREMIUM AVERAGED 34.21 PER CENT.
To secure these bonds the Secretary of the Treasury, under the provisions of
the acts of May 7, 1878, and March 3, 1887, has paid a premium averaging 34.21
per cent., or for each bond of $1,000 he has paid $1,342.10. As these bonds
must be held in the fund till the maturity of the debt, when they will be redeemed
by the Government at par, the premium paid is wholly lost.
LOSS RESULTING FROM PREMIUMS AND DISCOUNTS.
The resulting loss on account of premiums and discount for this $2,548,000
in the sinking fund is as follows :
Received by Central Pacific Railroad Company in coin for $2,548,000 United
States currency bonds, at $744.40 per $1,000 $1, 896, 731. 20
Paid by Secretary of Treasury in coin belonging to Central Pacific Railroad
Company for $2,548,000 United States currency bonds, at $1,342.10 , 3,419,670.80
Cost of $2,543,000 bonds in excess of amount received by Central Pacific Railroad
Company v 1,522,939.60
The foregoing facts may be summarized as follows : For each currency bond of
$1,000 issued the company received in coin $744.40
And is required to pay :
For principal for those in sinking fund $1, 342. 10
For interest on all for 30 years at 6 per cent., 180 per cent 1, 800. 00
3, 142. 10
Thus for $1,000 received in coin from the United States bonds the Central Pacific
Railroad Company is charged with 4,220.76
LOSS ON BONDS AND INTEREST BY EARLY COMPLETION OF ROAD,
FORTY MILLIONS.
As before stated the road was completed seven years before the expiration of
the term limited by Congress. If the company had taken advantage of the time
allowed by Congress for the completion of the road, they could not only have
sold the Government bonds at par, but could also have disposed of their own
first-mortgage bonds at their face value, which would have been a net gain,
over and above what was actually received, of 87,120,073.55, the interest on
which for thirty years would have been $12,816,132.39, which would make an
aggregate saving on the Government bonds and the bonds issued by the company,
principal and interest, in round numbers, of about $40,000,000. The sacrifice
was made to comply with the urgent demands of the United States
2530 U. S. PACIFIC RAILWAY COMMISSION.
and people generally, for the early completion of tlie road, with the general
understanding that the Government would make due allowance for the extra exertion
put forth by the company.
RELATIVE PURCHASING POWER OF GOLD AND BONDS.
By Commissioner ANDERSON :
Q. Allow me to ask : Do you claim the purchasing power of your gold was any
less than the purchasing power of your bonds?
The WITNESS. Dollar for dollar!
Commissioner ANDERSON. No, not dollar for dollar. Would the gold buy any more
or less labor than the bonds would have bought?
The WITNESS. The gold would buy more labor than the bonds, because the bonds
were not par in gold.
Q. Were not the twenty millions in gold worth just as much as the bonds were
to the same amount? A. No, sir; twenty millions in gold were worth as much
as twenty-five or twenty-seven millions in Government bonds. If the bonds had
been worth par when we received them we would have received $27,000,000 for
them ; whereas we received only twenty millions. It was with our company as
it was with the Government all through the war. The Government sold its bonds
at a low rate. At one time they ran as low as 40 cents, I think. I remember
that there was a time when it took $3 in greenbacks to buy $1 in gold.
Q. What is the first date of the issue of bonds in the table? A. May 12, 1865.
CONSTRUCTION DONE BY CONTRACT AND FINANCE COMPANY.
Q. What company was referred to where you used the word "company";
was it the Central Pacific Railroad Company, or the Contract and Finance Companv
? A. I have been speaking always of the Central Pacific Railroad Company.
Q. Do I not understand that all this construction was done by the Contract
and Finance Company? A. Yes, sir. But the Central Pacific Eailroad Company
had an interest. The expenses of that contract were a necessary part of the
burden of the Central Pacific.
Q. But were not those prices fixed when the contract was entered into in 1867
?
The WITNESS. What prices?
Commissioner ANDERSON. The prices to be paid per mile for the construction
of the road.
The WITNESS. Yes, sir.
Q. So that these alterations referred to in your statement and tables would
not affect these prices, would they? The contract with the Contract and Finance
Company was made in 1807, and I presume that the value of your securities was
considered when this contract was fixed at a specific sum per mile. If that
was so, the circumstance alluded to does not affect the Central Pacific. The
additional cost of labor and the cost of transportation by teams and the other
circumstances could only have affected the profits of the Contract and Finance
Company and could not have affected the Central Pacific Eailroad Company. A.
Oh, yes; because these circumstances were all well known, and were fully considered
at the time the contract was made.
Q. How could you have known all these things which happened afterwards? A.
Currency did not reach par, or at least these bonds did
LELAND STANFORD. 2531
not until about the time of (or after) the completion of the road. We received
some bonds after the completion of the road and sold them some time afterwards,
and those bonds, I think, were above par.
Q. I am speaking of the specialties of that work, the use of teams for sending
out supplies in order to have the work done, and the other expenses which you
have enumerated. What I want to know is, how they would affect the price to
the Central Pacific if that price had been already determined? A. We took
the prices into consideration at the time these contracts were made.
Q. In 1867? A. Yes, sir.
Commissioner ANDERSON. But these things occurred in 1868 and 1869.
The WITNESS. What time was that contract made?
Commissioner ANDERSON. October, 1867, according to the miuutes of the company.
SACRIFICE OF BONDS ISSUED ON MOUNTAIN PORTION.
The WITNESS. It was based on the condition of things then. The great sacrifice
was on the mountains. We received the largest amount from the Government for
the line over the mountains, and we were allowed under the law to issue our
own bonds a hundred miles in advance of completion. All those bonds were issued
at that time and disposed of at a sacrifice. The sacrifice on these bonds was
on the then existing prices.
Q. Was the mountain work done under the Crocker contract or under the Contract
and Finance Company's contract? A. A portion of the work was done under the
Crocker contract and a portion was done under the Contract and Finance contract.
COST OF CONSTRUCTION.
"
Question 51. Also to ascertain the comparative cost of construction of said
roads as compared to what they would have cost with the prices of labor and
commodities prevailing five years preceding or five years subsequent to the
completion of said roads. 77
Answer 51. Absolute accuracy of statement as to the cost of completing the
road as early as 1869, as compared with what would have been the cost if it
had been completed five years later, cannot perhaps be made ; but by comparing
prices of labor and material at the time the road was completed with the prevailing
prices seven years later (the time allowed for completion), and taking into
consideration the obstacles encountered and sacrifices made for rapid construction,
an approximation can be made.
THE CENTRAL PACIFIC COST MORE THAN DOUBLE BY EARLY COMPLETION.
It is safe to say that the road cost more than double what it would have cost
if the company had taken the time allowed by the acts of Congress for its completion,
by reason of the difference in price of labor and material, added to the sacrifices
made by the company to hurry the completion of the road. All supplies had to
be purchased in the East nearly a year in advance of the time when they would
be needed, in order to get them here when required. The company also, by reason
of the great demand that was made upon them by the Government and the people,
sent parties ahead 3f the construction train, in order that
2532 U. S. PACIFIC RAILWAY COMMISSION.
the road might be in course of construction in several different places at
the same period of time. Of course, in all these cases where parties were
organized and sent out in advance of the construction trains, everything
used by them in the construction of the road or in supply ing food and clothing
for the men and food for the teams had to be hauled in wagons, sometimes
as far as 350 miles or more, at a very great expense to the company. In many
instances the company even had to build the wagon-roads before their teams
could reach their destination, and in some cases they were compelled to haul
water for the men and teams over 40 miles.
For the actual cost of the road, as compared to what it would have been had
the road been constructed five years earlier or five years later, I would refer
you to the reports of L. M. Clement, assistant engineer j William Hood, chief
engineer ; J. H. Strobridge, superintendent of construction; and Arthur Brown,
superintendent of bridges and buildings, numbered, respectively, Exhibits 8,
9, 10, and 11.
BEFORE COMPLETION OF ROAD PACIFIC MAIL STOCK WORTH $330.
The WITNESS. Here I will say something that may be of interest. Before this
road was completed the Pacific Mail stock was selling for $330 a share. After
the completion of the road it went down rapidly, and reached as Iowa figure,
I think, as $30. They, therefore, had some reason to oppose us and throw in
our way all the obstacles that they could.
Commissioner ANDERSON. Perhaps that company will put in some claim against
the Government for compensation because of the loss in flicted by your competition.
The WITNESS. Perhaps so ; but I am inclined to think that the Government would
not feel disposed to recognize any such claim.
By the CHAIRMAN :
Q. Are these gentlemen you have just named in San Francisco I A. They are either
here or off attending to their business ; but any of them can be had at any
time.
BENEFIT TO UNITED STATES BY EARLY COMPLETION OF ROAD.
"
Question 52. Also to inquire whether or not the Pacific Railroad was completed
in less time than was allowed by law, and, if so, how much less time, and if
the United States was benefited thereby."
ROAD COMPLETED SEVEN YEARS BEFORE TIME FIXED.
Answer 52. The act required that the road should be completed July 1, 1876
; the road was in fact completed May 9, 1869, more than seven years in advance
of the time allowed by law. In thus hastening its completion its cost largely
exceeded what it would have been if it had not been constructed so rapidly,
and by this completion the Government has been largely benefited.
THE GOVERNMENT BENEFITED FORTY-SEVEN MILLION.
Before the expiration of the time allowed for the construction of the Central
and Union Pacific roads by contract the Government had been directly benefited
to the extent of more than $47,000,000 saved upon freights, mails, and transportation
of troops alone.
LELAND STANFORD. 2533
PAYMENTS TINDER ORIGINAL ACTS TO LIQUIDATE DEBT AND INTEREST.
At the time CoDgress made the loan to aid in the construction of the roads
every one expected that the transportation furnished by the Government to the
road would much more than pay the interest on the bonds and probably furnish
a sinking fund sufficient to extinguish the debt at maturity. This conclusion
was reached by taking the cost to the Government of transportation at the time
the loans were made as the basis of computation. Since the railroads were constructed
the amount of Government transportation has very largely exceeded the calculations
of the promoters of the enterprise, but the service has been performed at so
greatly reduced cost, that the receipts from this source have fallen far below
what it was expected they would be. This has been disappointing to us, but
a great gain to the Government. ,
TESTIMONY OF UNITED STATES COMMISSIONER OF RAILROADS.
Aside from what the Government saved directly in the cost of transportation
of mails, supplies, and troops, it has also saved an enormous amount indirectly
in various ways, as will be seen by reference to the report of the United States
Commissioner of Eailroads for 1883, an extract from which I herewith submit.
The Commissioner, at page 16 of said report, says :
The construction of these roads has been pronounced by the Supreme Court of
the United States to have been a national necessity so urgent as to admit of
no delay, and confessedly involving the integrity of the Union. The energy
with which they were built is well illustrated in the fact that they were completed
in seven years less time than the limit established by law, and at a time when
the currency bonds issued to the companies realized an average of only about
75 per cent, in gold. And they must be repaid at par. It was doubtless expected
that the compensation for Government transportation would equal the current
interest ; that it has not, has been a disappointmeiit as well to the companies
as to the Government, but had the charges for transportation continued at the
rate prior to their construction it would greatly have exceeded the interest.
The Government has the advantage, and is entitled to it, of the reduced expenses
of transportation which has resulted from their construction, and in this view
the saving to the Government has greatly exceeded the current interest it has
paid. It is also fairly to be considered that the national purposes have all
been more than realized in the increased sales of public lands, the extension
of civilization, the suppression of Indian wars and the consequent great diminution,
of expenses, the establishment of States, and the strengthening of the ties
which have bound the States of the Pacific coast indissolubly to the Union.
PUBLIC BENEFITS.
But the benefits to the public are even greater than those to the Government.
When we began to build the railroad the merchants of San Francisco had absolute
control over the other merchants of this coast, and they could, and frequently
did, combine to arbitrarily increase the price of provisions and all other
articles of commerce. Sometimes they would advance the price of a single article
100 per cent, in a single day. They kept a record of all in-bound vessels with
their cargoes, and whenever they found that there was a limited supply of any
given commodity in the market, they went out and bought up all in the market
and all in transitu, and no further supplies could be furnished until orders
from here could be filled in the Bast, which would take fully six months.
TRADE MONOPOLIES PRIOR TO ROAD.
In the mean time these men who had secured all there was of the article on
which they wished to create a monopoly fixed on it their own
2534 U. S. PACIFIC RAILWAY COMMISSION.
price. It was DO uncommon thing to have a necessary of life advance 100 per
cent, in a day. The construction of the railroad prevented all this, and
is so far a direct benefit to the consumer. Again, under the old system,
when all merchandise had to be brought in ships around Cape Horn, every merchant,
every importer, every business man, and every jobber, had to carry at least
six months' stock in his store and an equal amount afloat, involving in the
transaction of his business a very large capital, idle for the most of the
time, the interest on which became a burden on the people. Now, one or two
months 7 stock is sufficient, and a man can do as much business with $50,000
capital as he could under the old condition of things with half a million.
The carrying trade then was largely in the han'ds of foreigners, and a large
per centage of the moneys paid for freight was sent to Europe. S nee the
construction of these roads over 65 per cent, of the money received by us
has been paid out in California and adjacent regions in operating and other
expenses, and a large proportion of the balance not required to be sent abroad
to pay the interest upon the bonds has been invested here in developing the
resources of the State and in making it productive. The railroad company
ha } paid out along the line of its road in this State in wages alone more
than $100,000,000, most of which would have gone out of the country if the
road had not been constructed.
The benefit to the Government by the early completion of the line is more fully
shown by the report of E. H. Miller, jr., secretary of this company, upon the
subject, which report is attached hereto, marked Exhibit No. 11J. The report,
in reply to other questions, also shows the saving in transportation charges
by the construction of the road, as well as other information collateral to
this general subject, all of which is compiled from official documents.
SAVING TO UNITED STATES IN TRANSPORTATION IN SEVEN YEARS, FORTY-SEVEN MILLIONS.
By reference to this report it will be seen that the United States has saved
in transportation charges alone by the completion of the Central Union Pacific
line
To June 30, 1876 $47,763,178.00
To December 31, 1885 139,347,741.25
At the same rate, continued to the maturity of the bonds, the Government will
have saved 259,040,430.00
That was not such a very bad investment upon the part of the Government after
all.
ANTAGONISTIC LEGISLATION.
"
Question 53. Also to inquire if either of the Pacific Railroad Companies has
been embarrassed audits earning capacity impaired by antagonistic local or
State legislation "P
Answer 53. The Central Pacific Railroad Company has been embarrassed and its
earning capacity impaired by antagonistic local and State legislation. While
we were trying to make financial negotiations, one claim that we made was based
upon the fact that the State of California allowed us 15 cents a ton per mile.
Another was that the United States laws allowed us to charge any rate we pleased
up to 10 per cent, dividends, then only interfering in case our rates were
extortionate. When the agitation against rates commenced we had only 31 miles
of road built, and efforts were made in the legislature to pass bills materially
affecting our rates. This damaged us before the public. It not
LELAND STANFORD. 2535
only indicated that we might have to reduce our rates, but made the future
very uncertain.
CENTRAL PACIFIC ANTAGONIZED FROM THE FIRST.
From the very first we were strongly antagonized. Congress required that we
should build a telegraph line as well as a railroad. The consequence was that
we encountered the antagonism of the existing telegraph companies. We were
to build a railroad to San Francisco, consequently we encountered the antagonism
of the Steam Navigation Company and clipper-ship owners. We were to build a
railroad across the mountains, and so antagonized the Pacific Mail Steamship
Company and the Sacramento Valley Railway Company, which operated a railroad
from Sacramento eastward about 40 miles. Upon the construction of the road
their stock sustained a serious injury. A line across the continent was also
antagonized by the stage companies and express companies. The pony-express
line and the toll roads, all of which had to give way before it, also opposed
us. It also seriously affected contractors for the Government at the various
posts and Indian agencies, and antagonized many other interests of wealth,
power, and influence.
POLITICAL OPPOSITION BY CONFLICTING INTERESTS.
All these interests combined and influenced the press and politicians, and
antagonized us in the money centers of the East, Germany, France, and England,
with a view of injuring our credit and preventing the fruition of our hopes.
As there was a feeling extant not only in Europe, but in this country as well,
that the effort to cross the Sierra Nevada Mountains by a practical railroad
would prove a failure, these influences did injure us to a very great extent.
Even the Sitka Ice Company, which was charging the people of San Francisco
5 cents a pound for ice, antagonized us from a selfish motive, as we saved
the people in this direction alone, $600,000 a year. The Overland Stage Company,
which received from the Government .of the United States $1,800,000 per annum
for carrying the mail, brought their influence to bear against us. All these
interests combined to influence legislative bodies against us to injure our
credit, and, as the journals of all the legislatures would indicate, anuoyed
and hampered us in every possible manner.
CONTINUED HOSTILE LEGISLATION PROPOSED.
Hostile legislation has been proposed at every session of the legislature since
the commencement of the road. It has asSuined various forms and often of so
serious a character that if successful it would have been impossible to operate
the road under its restrictions.
CALIFORNIA RAILROAD COMMISSION UNDER NEW CONSTITUTION.
By the CHAIRMAN :
Q. Has any actual, local or general, hostile or antagonistic legislation been
enacted? A.. All those bills we were able to defeat. Every one of them helped
to defeat itself. They were generally gotten up in malignity and by men who
did not understand the subject, and wherever we could get such bills before
a committee composed of fair-minded men, to whom we could explain the true
nature and the necessary effect of such legislation, the bills helped to defeat
themselves. Finally, how
2536 U. S. PACIFIC RAILWAY COMMISSION.
ever, there was a new constitution adopted by the people of this State, which
created a board of railroad commissioners with absolute powers, executive,
judicial, and legislative, and without appeal. If they were so inclined they
could make rates that would practically confiscate the property of the company,
under this constitution, and we could not help ourselves. Our redress, of course,
would be to go to the Supreme Court of the United States for a final decision
of the question in the event of any such action by this board. My idea is that
the whole thing is unconstitutional, inasmuch as it vests those three powers
in one body, and it would not be sustained by the United States courts if the
subject ever goes before them. We have not cared, however, to raise the question,
but have got along the best that we could. At the same time this new constitution
has interfered a good deal with the company. It will not allow us to charge
less, for instance, to Los Angeles, which is a competitive point, than to intermediate
non-competitive points. The result is that we cannot make a rate from here
to Los Angeles which will compete successfully with the coast steamers and
along the rivers. This legislation, under the new constitution, interferes
with the companies in a good many ways, but the commissioneis have not done
all the damage that is in their power.
HOSTILE SENTIMENT DURING GRANGER EXCITEMENT.
Q. What was the general character of the hostile legislation introduced? A.
It was generally in the shape of bills "providing for the reduction of
freights and fares. I think that every one of the bills, if carried into effect,
would have rendered us unable to operate the roads.
Q. Was there a general sentiment in the State in favor of such bills? A. The
noisy and demagogic element was very strong at one tim^, and influenced others.
The feeling engendered by these men existed very largely in the State at one
time, and made the people think that we were actually overcharging them for
fares and freights, but gradually we haye been able to explain, until to-day
I think that the feeling iii the State is as good towards us as could be expected,
we doing business with so many people. The general public has a good deal of
confidence in this State, and I think that we have been able to satisfy them
that we are doing and have always done all in our power to develop its resources.
It was only for a little time that the interests adverse to us were able to
swing things their own way. At about that time you will remember that there
was a general howl all over the country against railroads. It was during the
time of the Granger excitement, which you will remember existed so generally
in your own country.
AVERAGE FREIGHT LOWER THAN IN 1878 AND 1879.
By Commissioner ANDERSON :
Q. How does your average rate per ton per mile compare to-day with the rate
in 1878 and 1879? A. It is very much less. We are now doing a class of business
which requires lower rates. While we were allowed 15 cents per ton per mile
by the law, I think that there was scarcely 1 per cent, of our business which
was done at that rate, and that rate was charged only upon very high-class
goods in very small quantities. For instance, we might charge that for short
haul from the end of Oakland wharf into Oakland, a distance, say, of 3 miles,
and 45 cents per ton, which is the highest we could charge, did not pay lor
the handling. We alsp charged high rates on some costly articles, and upon
certain classes
LELAND STANFORD. 2537
of machinery, for instance, which were carried to Nevada in the early days.
Some of this machinery was large and heavy, and one piece would frequently
occupy a whole car. In some instances we had to build cars especially for
such machine^, and perhaps they woald be required only occasionally. On such
shipments we charged 15 cents a ton per mile, and even this would not pay,
chiefly from the fact that we had such little use for such a car. It was
only at such times and under such circumstances that we charged the maximum
rate of 15 cents per ton per mile.
REDUCTION OF NEVADA AND UTAH THROUGH FREIGHTS.
Q. The rates, then, have been largely reduced? A. Yes, sir; I think that our
last report will show it. The serious thing to us was the reduction in the
through freights that passed through Nevada and Utah. As you came across that
country you saw that there was no local business there. There is not a station
business in that country which amounts to enough to sustain business. We depended
upon the business originating in California and east of Salt Lake, which passed
to and through Nevada and Utah, and when these other lines of railroads not
only cut down the rates, but divided the business with us, the rates went so
low and the business fell off so much that it has not paid. The value of that
road was from the through, business and the good rates which it could command.
There being no competition, such prices were fixed as were remunerative, and
which were fair as between the shipper and the carrier.
EXTREME LEGISLATION DEFEATING ITSELF.
By the CHAIRMAN:
Q. I understand you, then, to say that at no time has there been any hostile
local or State legislation? A. Excepting the State constitution. There have
been many efforts at hostile legislation made. For instance, the law taxing
our railroad. You saw yesterday a statement showing the extraordinary burden
placed upon us in that way. All other very obnoxious propositions, however,
were defeated.
Q. Were these bills largely supported in the legislature? A. Yes ; at one
time there was a legislature very largely elected because of its hostility
to the railroad, and on that account we paid no particular attention to it.
I made up my mind that in a legislature forty men would be fair, and out of
the forty there will be always twenty men who would be reasonable and just,
and these twenty men would be able to defeat extreme legislation. If the legislation
had not been so very extreme it is very likely that they would have passed
some of it ; but the extreme measures proposed defeated themselves.
THE ANTI-RAILROAD SENTIMENT.
Q. Did the members elected to the legislature largely represent the prevailing
sentiment of the people throughout the State at that time? A. I am not sure
of that. The anti-railroad sentiment was very noisy and very clamorous. I remember
that at the elections a wellknown railroad man and a friend of the railroad
ran away ahead of his ticket. I know a man who was a candidate for controller
who was known as the bosom friend of the railroad, and who believed in railroads,
and he ran ahead of his entire ticket. And in the senate, the railroad men,
as they used to be called, were, as a rule, a good class of
2538 U. S. PACIFIC RAILWAY COMMISSION.
men and they were the strongest. My impression is that the anti-railroad sentiment
of the State which appeared to have existed at one time syas more on the
surface than otherwise.
THE SO-CALLED u DUTCH FLAT SWINDLE."
Q. What year was that? A. I cannot tell the date. I am not very good at remembering
dates. It was a good while ago; I think about 1870 or 1872. During the early
days we had a great deal of antagonism from the various interests opposed to
this road. At one time we found it necessary, in order to carry on our work
with the greatest speed and economy, to build a wagon road over the mountains,
beginning at a place called Dutch Flat, and our opponents represented that
we were building this railroad for the benefit of the wagon road, and the whole
thing was called the " Dutch Flat Swindle," because the wagon road
commenced at Dutch Flat. The local business at that time was very good. It
was in the midst of the excitement in Nevada, the great mining excitement of
that State, and a vast amount of machinery and supplies was constantly going
forward, and the earnings from that source cut a very important figure in our
earnings.
INJURY BY COMPETING AIDED ALINES.
"
Question 54. Also to inquire if the United States, since the Union and Central
Pacific Railroad Companies accepted the terms proposed by Congress for the
construction of the Pacific railroads, has granted aid in lands for building
competing parallel railroads to said Pacific railroads, and, if so, how many
such roads, and to what extent such competing lines have impaired the earning
capacity of the Pacific railroads."
EARNINGS OF PACIFIC RAILROADS IMPAIRED BY UNITED STATES AID TO OTHER LINES
$37,000,000.
Answer 54. Congress has granted aid in lands for building competing parallel
roads to the Pacific railroads. The number of which and the extent to which
such competing lines have impaired the earning capacity of said Pacific railroads
is hereinafter fully set out in the statement of J. C. Stubbs, general traffic
manager, annexed hereto, marked u Exhibit 12," and made part hereof; the
actual business diverted being upwards of $37,000,000.
SERVICE OF NON-AIDED ROADS REMAINING UNPAID.
"
Question 55. Also to inquire if the United States have contracts with branch
roads controlled by either of said Pacific roads for carrying United States
mails, and, if so, what service has been performed by them, and what money,
if any, has been paid for such service, and what remains
due and unpaid."
i
PAYMENT ON LEASED LINES WITHHELD BY UNITED STATES.
Answer 55. The United States Government had contracts with branch roads controlled
by the Central Pacific railroads for carrying United States mail. The Central
Pacific Railroad Company controlled by lease a number of branch lines prior
to April 1, 1885, from which date the lines were leased to the Southern Pacific
Company. Mails were carried by these
LELAND STANFORD. 2539
lines for the United States under the rules and orders of the Post-Office Department.
No payments have been made for such service since 1883, at which time but
partial payments were made. The payments were withheld prior to April 1,
1885, because the Central Pacific Railroad Company leased the lines, and
they have been withheld since that date because the Central Pacific Railroad
Company had formerly leased the lines.
CASH DUE UNDER SUPREME COURT DECISION $1,853,323.15.
The United States Supreme Court has decided that compensation for transportation
on non-aided and leased lines was payable to the company in cash. From and
including the year 1882 to the present time there has been annually a balance
due the non-aided lines for transportation services performed. The amount thus
due from the Government in cash in excess of all requirements of law to December
31, 1886, is $1,853,323.15. The service that has been performed, the amount
of money which has been paid for such service, and what remains unpaid are
fully shown by the reports of Mr. E. H. Miller, jr., secretary of the company,
hereto attached, marked " Exhibit 13," and made part hereof.
By Commissioner ANDERSON :
Q. Does that report contain any statement from the office of the Commissioner
of Eailroads, or from the United States Treasury Department, showing any agreement
on that figure? A. Yes, sir; Mr. Miller's report gives such a reference. Each
of these statements you will find sustained by the reports of the United States
officers, and by the reports of the Kailroad Commissioners.
EMBARRASSMENT TO COMPANIES BY UNITED STATES NOT PAYING
AMOUNTS DUE.
"
Question 56. And if the United States, by failing to pay for such mail services,
has embarrassed said railroad companies, or either of them, in paying their
indebtedness to the United States."
PRESENT ANNUAL INJURY ON THIS ACCOUNT, $560,000.
Answer 56. The United States, by failing to pay for such mail service and other
transportation, has caused an expenditure to the Central Pacific Kailroad Company
of amounts equal to interest on the sums retained at the rate of 6 per cent,
per annum ; that being the rate of interest paid during the period on floating
debt of the company, which debt would have been decreased by the payment of
the sums clue from the United States. The annual interest on this balance due
the roads in question to December 31, 1886, of $1,853,323.15, at 6 percent,
is $111,199.39. This is the present annual injury to the roads by the Government
on account of the item of transportation charges unpaid. The current charges
also, in excess of the requirements, amount, as shown by the foregoing statement,
to about $450,000 a year. This amount with the interest on the balance makes
the accruing annual sum of $560 000 due for transportation on non-aided lines
and remaining unpaid.
HAVE ROADS COMPLIED WITH THE LAWS?
"
Question 57. Also to inquire if the several Pacific railroad companies have
complied with the provisions of 'An act to alter and amend p R VOL iv 14
2540 U. S. PACIFIC RAILWAY COMMISSION.
the act entitled "An act to aid in the construction of a railroad and
telegraph line from the Missouri Kiver to the Pacific Ocean, and to secure
to the Government the use of the same for postal, military, and other purposes," approved
July 1, 1862, and also to alter and amend the act of Congress, approved July
2, 1864, in amendment of said first-named act,' commonly known as the 4 Thurman
act,' and, if not, in what particulars they have failed to comply."
CENTRAL PACIFIC HAS FULLY COMPLIED WITH THE ACTS.
Answer 57. The Central Pacific Eailroad Company has complied with all the acts
enumerated in this interrogatory in letter and in spirit, to the satisfaction
of the officers heretofore appointed under the several acts of Congress to
examine into the affairs of this company. The first examination was made in
1879, and included everything from the completion of the road up to the date
of that examination. Since that time annual examinations have been made and
reported upon. In every case the report shows that the company has complied
with all the obligations imposed upon it by Congress. All this fully appears
in detail in my answer to interrogatory No. 2.
WHAT CAN BE PAID WITHOUT INJURY TO COUNTRY ALONGr THE
LINES.
"
Question 58. Also to inquire what sums the Pacific railroads and their branches
can severally pay annually on account their indebtedness to the United States
without imposing such burdens upon the people, and practically upon the localities
through which the roads pass, as to retard the development of the country."
INJURY TO NEVADA AND UTAH BY DEMANDING EARLY PAYMENT.
Answer 58. It has been shown in answer to interrogatory No. 3 (c), that the
present net earnings of the aided lines, over which the Government lien extends,
after paying the current charges which are prior in lien to -that of the United
States, amount to about $740,000 per annum. The annual accruing interest on
the United States bonds is $1,671,340.80. The whole amount of net earnings
therefore lacks $930,000 of meeting the accruing interest, even if every available
dollar were used for that purpose. The net earnings of the aided road are alone
available for the payment of the debt to the Government. Thus the available
funds can only be increased by increasing these earnings. This can only be
done by increasing the rates through Nevada and Utah, and so fixing the burden
of the debt upon the communities through which the road runs. To whatever extent
this means should be employed, it would retard the development of the country
and impose a burden upon a comparatively few people along its line, for benefits
which have been shared by the country at large and particularly by the several
Departments of the Government. The local rates would wholly have to stand such
a charge ; as, on account of competition of other 'trans-continental lines
which were also aided in their construction by United States land grants, through
rates cannot be raised. The earning from local traffic for the aided line during
the month of May, 1886,* was
Freight $161,310.08
Passenger - 87,366. 10
Total ,-...- -- . 248,676,18
LELAND STANFORD. 2541
This month is a fair average for the year, and would give an annual amount
of $2,984,000. A considerable amount of these earnings is from traffic, the
rates on which are controlled by competition, although it is local. This
is the case with most of that over the aided line in California. In case
the rates should be raised then to pay the Government bonds, the burden would
fall almost entirely on the communities in Nevada and Utah.
INCREASE OF LOCAL RATES REQUIRED.
To pay the balance of $930,000 necessary to meet the accruing interest on the
United States bonds, without making any provision whatever for the principal,
would require an increase in local rates in Nevada and Utah of over 33 per
cent.
The foregoing statements, together with the exhibits herewith presented in
connection therewith, substantiate the averment made on pages 20 and 21 hereof,
that an equitable adjustment of the accounts bet ween this company and the
United States would allow the company's claims against the Government to the
amount of $62,873,557.81. All of which is respectfully submitted.
LELAND STANFORD,
President. STATE OF CALIFORNIA,
City and County of San Francisco, ss :
Leland Stanford, being duly sworn, deposes and says, that the facts stated
in the foregoing answers to the 58 interrogatories propounded to him by the
United States Pacific Bail way Commissioners are true, to the best of his knowledge
and belief.
LELAND STANFOED.
Subscribed and sworn to before me this 28th day of Julj-, A. D. 1887.
E. B. RYAN, Notary Public in and for said City and County of
San Francisco, State of California.
EXHIBIT No. 1. Affidavit of E. H. Miller, jr., secretary, that the Central
Pacific Railroad Company has complied with all obligations of the laws.
E. H. Miller, jr., being duly sworn, deposes and says :
I am a citizen of the United States and of the State of California, over twenty-one
years of age, and am competent to testify in this matter.
On the '29th day of September, 1863, I was elected secretary of the Central
Pacific Railroad Company, and ever since then have been and now am the duly
appointed and .acting secretary of said company; that as snch secretary I have
had charge of and have kept, and now have charge of and keep, all the books,
of account, papers, and vouchers pertaining to its business; that as such secretary
I have had occasion to and have examined all the laws of the United States
heretofore passed with reference to aiding said company with bonds ; that as
such secretary I have had occasion to and familiarized myself with the obligations
of such laws, so far as they relate to the Central Pacific Railroad Company,
and the company has promptly observed all such obligations to the best of my
knowledge and belief.
E. H. MILLEE, JR.
Subscribed and sworn to before me this 26th day of July, A. D. 1887, [SEAL.]
E. B. RYAN,
Notary Public in and for the City and County of San Francisco, Cal,
2542 U. S. PACIFIC RAILWAY COMMISSION.
EXHIBIT No. 2. Statement of A. N. Towne, general manager, relative to diversion
ofbusi ness to non-aided lines.
SAN FRANCISCO, July 5, 1887. Hon. LELAND STANFORD,
President Central Pacific Railroad Co. :
DEAR SIR : In obedience to your instructions, I beg eave to report with respect
to the question (No. 9) asked by the Pacific Railroad Commission, created by
the act of Congress approved March 3, 1887 : " Whether any traffic or
business which could or should be done on the aided lines of said company has
been diverted to the lines of any other company or to non-aided lines," as
follows:
. DIVERSIONS TO THE LINES OF OTHER COMPANIES.
(1) Through traffic. It is a matter of public knowledge that there are now
several transcontinental lines. It is unnecessary to name them. All except
the original Central and Union Pacific line have been completed since 1880.
Each of those constructed since 18SO has diverted more or less traffic from
the original Union and Central Pacific line. The aggregate of these diversions
is equal to more than 50 per cent, of the total through freight and passenger
traffic for the five years and nine mouths ending with December 31, 1886, the
period which has elapsed since the opening of the first line competing with
the Central and Union Pacific line for through traffic.
The responsibility for the construction of these opposing lines rests, in my
judgment, with the Government of the United States. It follows that the United
States Government is the instrumentality through which said diversions of through
traffic from the Union and Central Pacific roads to the other later-built transcontinental
lines was accomplished.
A part of each of said other lines received large grants of land from the United
States Government, the grant being in each case, 1 believe, double the grant
of lands made to the Union and Central Pacific companies. It was the Government
grant of land which induced the building of these roads at least it, if not
the sole cause of their construction, was the inducement which facilitated
their construction and caused their early completion. In each case the building
of these roads has been in advance of the settlement of the country through
which they run. In nearly every case the country has been settled since the
completion of the road, in the main through the advertising agencies of the
railroad managers whose motives were not only to develop traffic but to sell
their lands. There has been no time when the original line made by the Union
and Central Pacific roads could not and would not have provided facilities
for and amply accommodated all the through traffic carried by the other lines;
hence, the conclusion is inevitable that the United States Government, by granting
large land subsidies in aid of roads which have been built, and which, since
their completion, have competed for and taken a larger share of the through
traffic from the Central and Union Pacific line, is directly responsible for
the diversion of said traffic and the consequent loss in earnings to the Central
Pacific Company and the Union Pacific Company. This loss would have been very
much greater, but fortunately the Southern Pacific Railroad Conipauy, organized
in 1865 under the laws of California to build a railroad from San Francisco
to San Diego, thence east to the boundary of the California State line, there
to connect with railroads to be built to the Mississippi River, passed in 1870
under the control of the men who controlled the Central Pacific. The control
of the Southern Pacific by the Central Pacific ownera delayed the extensions
of the former road, and after its extensions were made to connections with
lines building westward from the Mississippi River, secured co-operation and
harmony in working the traffic which was common to both the Central Pacific
and Southern Pacific lines that would have been impossible under separate control,
and which was of great advantage to the original or Central Pacific line.
There can be little questioning, in the minds of practical railroad men, of
the proposition, that had the railroads following the 32d and 35th parallel
routes, respectively, been wholly constructed and operated by men who wer.e
not interested in the Central Pacific line, the diversion of traffic to those
lines would not only have been more rapid and greater in degree, but that the
revenue of the Central Pacific and Union Pacific line would have been diminished
in much greater ratio.
The extent of the damage to the Central and Union Pacific line by diversion
of traffic to these other through trans-continental lines will be shown approximately
by the general traffic manager in answer to the Commission's inquiry No. 54.
(2j Local traffic. The traffic between San Francisco and other bay points,
on the one hand, and the cities of Stockton, Sacremerito, and Marysville, Cal.,
respectively, is shared by other carriers. This, however, scarcely comes under
the bead of a diversion from the Central Pacific aided lines. The other carriers
sharing this traffic are, (a) vessels navigating the bays, Sacramento River,
San Joaquin River, and Feather River, respectively routes which were open and
employed before the Gen'
LELAttD STANFORD. 2543
tral Pacific line was built; (&) the California Pacific road, which was
completed and in operation before the western division of the Central Pacific.
Therefore, whatever amount of this business has been done via the western division
of the Central Pacific is, in fact, a diversion from the other carriers named.
DIVERSIONS TO NON-AIDED LINES.
While the roads to which the diversions treated under this heading have been
mad j were built and are owned by other companies than the Central Pacific,
yet as they are controlled by those who have also controlled and managed the
Central Pacific, I presume they illustrate the diversions to non-aided lines
referred to in the Commission's interrogatory.
Traffic to and from points south of Lathrop interchanged with San Francisco
and Oakland has, since the completion of the San Pablo and Tulare road, Tracy
to Oakland via Martinez, been carried over that road instead of being carried
via Niles and Livermore. The road from Tracy to Oakland, via Martinez, is 11
miles longer than the road from Tracy to Oakland via Livermore, but the former
is a practically level road, its maximum grade being 10 feet to the mile, over
which an ordinary engine can draw 50 cars, loaded with from 10 to 12 tons each,
while the latter crosses the Contra Costa Range with a maximum grade of over
52 feet to the mile, which would require three engines to haul the same train.
The longer line does not lose appreciably, if at all, in the matter of time
when compared with the Livermore line, while it gains greatly in the matter
of cost of operating.
Traffic on the western division of the Central Pacific east of Lathrop, to
and from San Francisco and Oakland, has also been diverted from the "aided" line
between Tracy and Niles in like manner and for the same reason as the traffic
to and from points south of Lathrop.
Traffic interchanged by points east of Sacramento and north of Roseville Junction,
with San Francisco and Oakland, has been diverted at Sacramento from the " aided" line,
between Sacramento and Niles, to the California Pacific and Northern Railway,
a non-aided line. The reasons for this diversion are
(1) Public convenience. The passenger train time between San Francisco and
Sacramento, via the California Pacific line, is four hours against six hours
via the Central Pacific, Stockton, and Livermore route. The public demands
and is entitled to the best service we can give. We should be unable to justify
sending passengers or even freight over the long and heavy line via Stockton
against the shorter, easier, and much more attractive line via Beuicia. Especially
is this true of the through or trans-continental traffic, which is taken in
competition with other trans-continental lines. The weight of this consideration
with those whom the company serves is well illustrated by the fact that the
United States Government chooses the short line for the transportation of its
mails in consideration of (a) public convenience, (&) and the fact that
it pays for the transportation of mails by the mile. By so doing it expedites
the mails and saves money, secures the beat service at the least expense to
the Government.
(2) Economy in operating. The line from Sacramento to Oakland wharf, via Stockton
and Niles, is 136 miles, and crosses, as I have before explained, the Contra
Costa Range at a maximum grade of over 52 feet to the mile, while the California
Pacific line via Benicia makes but 86 miles between Sacramento and Oakland
wharf, and is practically a level line. If we were to equate the two lines
that is to say, reduce the grades and curves of both lines to their equivalent
in straight level lines, we would find the Stockton route to be more than double
the length of the Benicia line. There is fully that difference in the cost
of handling the traffic over the two routes, in view of which it would have
been inexcusable to use the longer and more expensive route.
The Government did not assume the responsibility of constructing the Central
Pacific road. It contributed thereto by a grant of land and a loan of credit,
but its motives were selfish. It was not moved by a desire to benefit or enrich
the promoters of these enterprises. The result, as will doubtless be shown
before the Commission, has amply justified the wisdom of Congress in granting
the aid. No government; or individual ever made a better investment, or, if
I may be allowed the expression, ever engaged in a more successful venture,
even if it transpires that neither the principal nor the interest of the loan
is ever repaid. Neither did the Government assume the responsibility of operating
the road when it was completed. It was left in the control and management of
its owners, and we must assume that this was the purpose of Congress. We may
also fairly assume that Congress expected the road to Ue managed by practical
business men upon established business principles, of itself a valuable promise,
affording the best guaranty that sooner or later the company would be able
to discharge its obligations to the Government. These shareholders found themselves
engaged with the problem of making a support for nearly a thousand miles of
road through a sparsely settled territory, which, for the most part at the
time,
2544 U. S. PACIFIC RAILWAY COMMISSION.
was regarded as incapable of producing anything in tlio way of traffic which
a carrier could move with profit. It was a link in a trans-continental line
connecting the Atlantic and Pacific coasts. California was the cbief State
on the Pacific coast, having a population in 1870, of but little over 560,000.
It was known only as a mining State. Its agricultural resources were not
only undeveloped but unknown, even undreamed of by the most sanguine. The
chief value of the road was its value to the Government as a military road,
as a strategic line, but the government assumed no responsibility for its
management, provided no guaranty of earnings, no means of support. The owners
of the road were left to their own resources and devices to develop traffic,
and to make a support for it. The occasion called for the greatest skill
and sagacity, untiring industry, and the utmost economy on the part of the
owners and the agents they employed to assist in conducting the affairs of
the company. The Government, which 1 here put in the place of the public,
certainly understood this. It cannot be that at the time there was any warrant
for interfering with the management of the road, or any thought of questioning
the propriety of anything which the managers of the road might or should
legally do in pursuit of the interest of the rail road company. Its interest
was to secure the maximum of traffic and to move it at the minimum of cost.
It is not to be supposed that the circumstances I have described ever (until
after the passage of the Thnrman act) suggested to the managers of the road,
to its patrons, to Government officials, or to Representatives in Congress,
that the question whether the company should or should not be restrained
from adopting any method of conducting its traffic or any measure of economy
in operating the road, or any device to conserve, increase, or promote its
traffic, should turn upon the point whether or not it affected the earnings
of a particu lar " aided" or "non-aided" portion of the
road, so long as the method, measure, or device was lawful, and had for its
object the welfare of the company. On the contrary, it is fair to assume
that these circumstances not only warranted but required the employment of
every measure of economy, every lawful device to defeat or meet competition,
every means to increase the traffic and enlarge the revenue of the company,
regardless of special considerations for a part of its road, whether "aided" or " non-aided," so
long as the communities on every portion of the road were afforded reasonable
service at a fair price.
Were we to examine into the ultimate cause which led to the acquirement or
building of the "non-aided" lines to which traffic may be said to
have been diverted, it will be found in every case to have had for its object
the strengthening and protection of the Central Pacific line. They are all
feeders of the main line. They occupy territory which sooner or later would
have been seized by other railroad companies. They have developed the resources
of that Territory and made it tributary to the main line of the Central Pacific.
I venture to say that in each case the gain to the Central Pacific Company
from contributions of traffic, the reduction of competition, the saving in
cost of handling traffic by the acquirement of these " non-aided " competitive
and tributary lines has more than equaled their cost. As a single example,
take the California Pacific road. Suppose it had continued under separate and
independent control from the Central Pacific, what its extensions might and
would have been to the damage of the Central Pacific iii its most productive
territory is scarcely a matter of conjecture. It certainly would have been
extended through the Sacramento Valley, and probably would have been constructed
east and formed another through line. The control of the California Pacific
was necessary to the Central Pacific. Having it, a reasonable regard for the
public interest, as well as economy in conducting the traffic, compelled the
Central Pacific managers to handle the traffic in the manner I have described.
I need only suggest these considerations. They have doubtless been thought
of and debated in your own mind to far greater length than in mine or than
I would be authorized to treat them in this communication. Very respectfully,
A. N. TOWNE.
SAN FRANCISCO, July 8, 1887. Hon. LELAND STANFORD,
President Central Pacific Railroad Co.:
DEAR SIR : In addition to what I said in my letter of the 5th relative to the
diversion of business and the difficulty in operating the aided line between
San Francisco and Sacramento as compared with the level and shorter line by
the non-aided roads, I desire to call your attention to another important factor
entering into the question, showing still further reasons why the company will
not be able to meet its obligations t& the Government at maturity, or even
for many years to come.
Of the H55 miles (in round numbers) of the aided line between San Jose" and
the point of junction with the Union Pacific, 5 miles west of Ogden, 586 miles,
or 67 per cent., is located in Nevada and Utah, through a section almost wholly
devoid of the first element of prosperity in a country, namely, agricultural.
All this vast region offers little inducement to the farmer in fa/st, the country
through which the
LELAND STANFORD.
2545
toad passes is a vast area of unoccupied land, and the settlements along the
road are small and unimportant, with few exceptions. I find in looking over
the earnings for that portion of the line within the State of Nevada for the
month of August, 1878 (which month showed the largest earnings of any month
th;tt year), it shows the entire receipts from both freighc and passengers
collected from our patrons for the pro rata proportion of the road operated
within that State to have been as follows :
Freight forwarded from points in Nevada $48, 620. 64
Freight received at points in Nevada 74, 715. 06
Passengers both ways 27,974.00
Total 151,309.70
On the other hand, for this same month the taxes and amounts actually paid
out to our own men, residents of that State, amounted to $63,347.97 ; and we
may add to this amount the cost of all such as rails, fastenings, timber, lumber
and material for shops, fuel, &c., used in that State, which are not included
in the above figure, together with proportion of interest, salaries, and other
expenses; and we would find out that the amount so paid out was greater than
the proportionate amount of earnings received from all traffic within the boundaries
of that State.
There being no timber and but little cultivation, this vast territory may be
classed as grazing and mineral lands, and the contributions to the road in
the way of traffic are small and of far less value now than in the past, as
will be seen by the following comparative statement of freight traffic to and
from points in Nevada during the years 1876 and 1886 : ...Which shows for the "out" freight
a gain in charges of 15 per cent, over 1876, and for " in " freight
it shows a loss in charges in 1886, as against 1876, of over 63 per cent. On
the total "in" and "out" it shows a loss in 1886, as compared
with 1876, of $1,669,109.30, or about 50 per cent.
The live-stock shipments are light, for the reason that the cattle-men drive
much of their stock north through a good grazing country to shipping points
for the East by the Union Pacific and Northern Pacific roads. And the great
mining industries of Nevada, which once contributed a large and remunerative
traffic to the road, now give us but a very limited amount.
From the Nevada State line westward, 138 miles, the road is constructed over
the Sierra Nevada range of mountains, reaching an elevation of nearly 7,000
feet, where the traffic is light and the expense of operating very heavy. And
since it is proper to judge all things by a standard of comparison, I may perhaps
be permitted to point out a few of the difficulties incident to constructing
and operating tho Central Pacific road over this mountainous and sparsely-settled
section as compared with the roads of the Eastern and Northwestern States ;
the latter were easily built, having straight lines, running through level
and populous sections, many of them over inexhaustible beds of coal, with grades
so favorable that eighty cars and upwards can be taken with safety in a train,
while on the other hand, on the mountain section of tho Central Pacific above
mentioned, six cars is the limit for a train with a ten-wheel engine, with
18 by 24-inch cylinders, more than six cars requiring a second engine, and
more than twelve or thirteen a third engine, or the train must be divided ;
this is on the portion of the road where we have to overcome an elevation of
nearly 7,000 feet.
In passing, and in this connection, I will add that the nature of the country
through which this road runs between San Francisco and Ogden is such that there
is nearly 15,000 feet of ascending and nearly 11,000 of descending grades ;
making a total of about 26,000 feet. The total curvature is 45,000 degrees,
equal to 125 complete circles, or to a 52-degree curve for the whole distance,
thus necessitating a material increase of locomotive power.
Again referring to that portion of the line between the Nevada State boundary
and Sacramento, I should not fail to remind you of the large and unavoidable
ex
2546 U. S. PACIFIC RAILWAY COMMISSION.
pense in the construction and maintenance of snow sheds and galleries, in extent
nearly forty miles, made necessary as a protection against the storms of the
winter months in that region ; then there is great cost in the maintenance
and operation of the enormous snow plows, with a large force of men to work
them, which force in the summer season has to be kept on water trains, fully
equipped, to extinguish fires in the sheds and galleries. This is an expense
that no other railroad in this country, or perhaps in the world, is subjected
to.
All this is necessary to keep the line open for the movement of the traffic
promptly and satisfactorily ; and further, it is all-important that the line
be ever kept open in order to meet the wants of the Government, as provided
in the act requiring us to be prepared at all times to transport the mails,
troops, munitions of war, supplies, and public stores whenever required to
do so by any department of the Government, as they are to have preference in
the use of the roa"d in all cases and under all circumstances.
The line from Sacramento to San Jose" is, in round n-umbers, 140 lineal
miles ; between Sacramento and San Joaquin River, 68 miles, the country is
good, and devoted to agriculture and horticulture, the soil is productive and
the traffic profitable to the road, although at Sacramento and Stockton we
have active competition from the rivers, which makes traffic to and from those
cities less desirable and profitable than we could wish.
From the San Joaquin River over the inner coast range of mountains to Livermore,
31 miles, is a section which pays little tribute to the road, but from Livermore
to San Jose" the line runs through a fine productive section of agriculture
and horticulture, although that portion of it between Niles and San Jose",
17 miles, is subject to active competition from the South Pacific Coast Railroad,
which not only divides up the traffic, but compels this company to take the
remainder at very low rates. Further competition from this source is, however,
happily now avoided by the acquisition of that company's property by the Southern
Pacific Company.
In conclusion, I will add that notwithstanding the light traffic, the facilities
and accommodations furnished our patrons are in all respects first class. Yours,
truly,
A. N. TOWNE.
EXHIBIT No. 3. Statement of J. A. Fillmore, general superintendent, relative
to cost of
operating mountain divisions.
SAN FRANCISCO, July 25, 1887. Hon. LELAND STANFORD,
President Central Pacific Railroad Company :
DEAR SIR: As requested in yours of even date, I submit the following relative
to the difficulties of and the difference in cost of operating the mountain
division of the Central Pacific Railroad as compared with a road of ordinary
grade :
(1) The engine service alone is nine times greater. For example, one engine
can take a train of forty -five cars in the valley from Sacramento to Rocklin,
from which point it requires fi,ve engines of the same class 1o take the same
train over the mountain division. On the return these engines, not being required
to pull the trains, are virtually "dead-headed," with the exception
of one.
(2) The total cost of engine service per mile was much greater. Using the same
fuel, wood, at the same price per cord, the cost per mile on the 'mountain
division is 33f ^, cents ; on a road of ordinary grade, 23$$, cents, an increase
of 42^ per cent.
(3) On account of the increased number of trains over the mountain division
(five trains being required to do the work of one in the valley) there is a
corresponding increase of expenses in the way of stations, telegraph operators,
track- walkers, watchmen, wood-pilers, &c.
(4) The cost of keeping the mountain division open in heavy weather, especially
during the winter months, is something beyond comparison with any other division
or with any other road. I had charge of that division, as division superintendent,
during the winter of 1873-4. The total fail of snow that winter was 63 feet.
At times it was necessary to run five snow-plows, and nine engines were required
to each plow, to insure against blockade. In addition to this we had to employ
between four and five hundred shovelers during the storms, and most of them
were required between tho storms to shovel back the snow preparatory to another
storm. During that winter, and indeed during every winter when we are troubled
with snow in the mountains, all freight trains are put on sidings outside the
snow-belt, their engines are placed on the snow-plows, and we only attempt
to run passenger trains. We have had as many as thirteen engines on one passenger
train of six cars. On that portion of the mountain division where the snow
sheds are located, we have expended for repairs of the sheds in the nine years
from 1878 to 1886, inclusive, $384,274.23, an
LELAND STANFORD.
2547
average of $42,697.23 per year. This is for ordinary repairs, and doesn't
include betterments. In addition to the above expenses on repairs of the snow
sheds, in order to guard against fire, we have three fire trains under steam
day and night, ready to move at a moment's notice when an alarm of fire in
the sheds is turned in. As a further precaution against fire, the sheds are
watered twice a week for a distance of about 36 miles,
(5) We have over the Central Pacific Railroad one through express train each
way per day, and during the summer months, for about six months of the year,
for about two-thirds of the time, these trains are run in two sections, being
too long and too heavy to be run as one solid train. Over the same road there
is an average of three through freight trains per day each way ; this is about
the same daily number that have been run during my entire connection with the
road, which began in 1871. It is only within the last few years, however, that
second sections during the summer months have become of almost daily occurrence.
(6) Relative to where the business comes from that would maintain a road from
the State of California through Nevada and Utah, will say : East-bound through
freight originates in California, nearly all of it, and mostly west of the
Sierra Nevada Mountains. Nearly all west-bound through freight originates east
and south of Ogden, Utah.
Yours, &c.,
J. A. FILLMORE, General Superintendent. STATE OF CALIFORNIA,
City and County of San Francisco, 88 :
J. A. Fillmore, being first duly sworn, saith : That he has read the foregoing
statement ; that the matter and things therein stated are true of his knowledge
and belief, except as to those matters stated on his information and belief,
and as to those he believes it to be true.
J. A. FILLMORE.
Subscribed and sworn to before me this 26th day of July, A. D. 1387. [SEAL.]
E. B. RYAN,
Notary Public in and for said City and County.
EXHIBIT No. 4. Statement of E. H. Miller, jr., secretary, relative to dividends
paid. ...
E. H. MILLER, JR.,
Secretary. STATE OF CALIFORNIA,
City and County of San Francisco, 88 :
E. H. Miller, jr., being first duly sworn, saith : That he has read the forgoing
statement consisting of the pages next preceding, marked " Exhibit No.
4," and knows the contents thereof; that the facts therein stated are
true except as to those matters stated on his information or belief, and as
to those he believes it to be truf.
E. H. MILLER, JR.
Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL.]
E. B. RYAN,
Notary Public in and for the City and County of San Francisco, State of California.
EXHIBIT No. 5. Statement of the consideration paid the company by each stockholder
receiving stock, and when and in ivhat property such payment was made.*
[The dates of payment herein given are the dates when amount subscribed was
fully paid up. "When stock was transferred or forfeited, the date of last
payment by party holding stock is given.]
...
E. H. MILLER, JR., Secretary. STATE OF CALIFORNIA,
City and County of San Francisco, ss : 4
E. H. Miller, jr., being first duly sworn, saith that lie has read the foregoing
statement, consisting of the pages next preceding, marked " Exhibit No.
5," and knows the contents thereof; that the facts therein stated arc
true except as to those matters stated on his information or belief, and as
to those ho believes it to be true.
E. H. MILLER, JR.
Subscribed and sworn to before ine this 26th day of July, A. D. 1887.
E. B. RYAN, [SEAL OF NOTARY.] Notary Public in and for said City and County.
EXHIBIT No. 6. Relative to lands of Central Pacific Railroad Company, l)ij
William H.
Mills, land agent.*
OFFICE LAND DEPARTMENT, CENTRAL PACIFIC RAILROAD COMPANY,
San Francisco, June 20, 1887. Hon. LELAND STANFORD,
President Central Pacific Railroad Company :
MY DEAR SIR: Answering the inquiries transmitted by you to this department
of the Board of Commissioners to examine into the affairs of the Central Pacific
Railroad Company, and touching the land grant to said railroad company, I have
to respectfully report to you as follows: That the act of 1862 granted to the
company for the purpose of aiding in the construction of a railroad and telegraph
line:
"
Every alternate section of public land designated by odd numbers to the amount
of five sections per mile on each side of the said road on the line thereof,
au.d within
* See answer to question No. 38.
LELAND STANFORD. 2559
the limits of ten miles on each side of said road, not already sold, reserved
or otherwise disposed of by the United States, and to which a homestead or
pre-emption claim may not have attached at the time the line of said road
is definitely fixed."
The act further excepted from the operation of the grant all mineral lands,
but where the same contained timber the timber thereon was granted. The provision
relating to this subject is found in section 3 of the act approved July 1,
1862. By the passage of the act of 1864, entitled "An act to amend an
act entitled: 'An act to aid in the construction of a railroad and telegraph
line from the Missouri River to the Pacific Ocean, &c.,'" the third
section of the act of 1862, above summarized and quoted, was amended by striking
out the word "five" where it occurs and inserting in lieu thereof
the word "ten," and by striking out the word " ten" where
it occurs in the original section and inserting in lieu thereof the word "twenty."
Thus amended, the granting acts gave land in odd-numbered sections to the amount
of twenty sections per mile on each side of the line of road.
The act approved July, 1864, amended and modified the mineral reservation by
declaring that the term ' mineral land," wherever the same occurs in the
act, should not be construed to include coal and iron land. These provisions
are found in section 4 of the act of 1864. The rights of the company under
the grants of 1862 and 1864 attached to the land granted coincident with the
time of the definite location of the road, and the filing of the map of definite
location with the Secretary of the Interior. It should be observed that the
date of the filing of the map of definite location of th.e road identifies
the land granted, and initiates the definite rights of the company, suspending
the operation of -the homestead and pre-emption Jaws of the United States;
but that.the right of the company to select lands by lists of selections for
the purpose of obtaining record title to the land by way of patents issued
by the Government of the United States, accrued only at the date of the acceptance
by the President of the United States of the road or section of the road when
completed, to wit, November, 1874.
The provision of law above referred to is found in section 4 of the act of
1862, which reads:
"
Whenever the said company shall have completed 40 consecutive miles of said
railroad and telegraph line, ready for the service contemplated by this act,
the President of the United States shall appoint three commissioners to examine
the same and report to him in relation thereto ; and if it shall appear to
him that 40 consecutive miles of said railroad and telegraph line have been
completed and equipped in all respects as required by this act, then upon the
certificate of said commissioners to that effect, patents shall issue conveying
the right and title to said lands to the company on each side of said road
as far as the same is completed."
The right, then, of the company to select the laud granted accrued on the date
when the commissioners referred to in the law filed their certificate of acceptance
by the President with fche Interior Department of the Government. The date
of the acceptance of the first 50 miles eastward from Sacramento is September
8, 1864, and the road between Promontory and Ogden was accepted by the President
July 15, 1869, and the whole finally accepted in November, 1874.
It will be observed that the right of the company to select lands for the purpose
of receiving record evidence of title by way of patents from the Government
did not accrue prior to the dates above referred to, that it was a right which
could not tte exercised until the lands were surveyed and the plottings of
surveys properly executed and filed in the local land offices of the United
States, after first having been approved by the surveyors-general of the respective
States and Territories through which the line runs. In addition to this, by
rule of the Department, no selections are permitted until ninety days have
expired after the date of filing and approval of the township plats by the
surveyor-general. At the time the right of the company to ask for patents accrued
by the acceptance of the various sections of the road by the President of the
United States, but a very small proportion of tho lauds within the granted
limits w r ero surveyed and a still smaller proportion properly platted and
the plats filed in the offices of the surveyors-general. An examination of
the official plats reveals the fact that between the dates of the surveys and
the dates of their final approval by the surveyors-general there is frequently
a period of two or more years.
The act of 1864 added five alternate odd-numb; red sections on each side of
the road, and attached a new and important condition precedent to acquirement
of record title. Section 12 of the act of 1864 provides :
"
That before any land granted by this act shall be conveyed to any company or
party entitled thereto under this act there shall first be paid into the Treasury
of the United States the cost of surveying, selecting, and conveying the same
by the said company or party in interest, as the title shall be required by
the said company."
By this provision a new condition was imposed not found in the act of 1862,
to wit, that requiring the company to pay the costs of surveying, selecting,
and conveying the land. This new condition entailed a large additional expenditure
of money by the cost of the items mentioned ; but it, at the same time, defined
the right of the company as to when sucli costs should be paid, In unequivocal
language it declared
2560 U. S. PACIFIC RAILWAY COMMISSION.
that the costs of surveying, selecting, and conveying the land should he paid
by the company as the title should be required by it, thus vesting in the
company the right of election as to when these fees should bo paid and the
record title obtained. The early occupancy and settlement of the region through
which the railroad passed was obviously consistent with the highest interests
of the company, that the Congress of the United States evidently depended
upon this most obvious interest alone for the early disposition of the land.
The subsequent action of the company proves that in entertaining this opinion
the Congress of the United States was not mistaken. From the very outset
the company inaugurated the policy of taking title to the lauds as rapidl3
r as such record evidence of title could be obtained from the Government,
and even before the completion of the first section of 50 miles eastward
from Sacramento, and in anticipation of its early completion, yourself as
president of the Central Pacific Railroad Company, addressed a letter to
Hon. John P. Usher, Secretary of the Interior, dated Sacramento, Cal., February
19, 1864, from which, as plainly showing forth the disposition of the company
under this head, the following quotation is made :
AN URGENT LETTER.
"
We expect to have 31 miles of railroad from Sacramento to Newcastle Gap completed
and in running order about the 1st of April next, and it would be a great aid
to the enterprise if the survey of 10 miles on each side of the road were completed
immediately thereafter, as contemplated by the act of Congress."
Herein you urge upon the attention of the honorable Secretary the importance
to the company of an early completion of the surveys of the lands granted to
it. The records of the Land Office will show that upon the date at which your
letter was written but six townships lying within the limits of the grant and
opposite the 31 miles of road subject of your letter were surveyed, and of
these six townships, embracing only about 70,000 acres of land prima facie
granted to the company, there was but ii small portion not accepted out of
the grant by the operation of the homestead and pre-emption rights,reservations
of mineral lands and land granted to the State as swamp and overflowed. Indeed,
at the date of the grant itself approximately but 104,000 acres of the grant
made to the road in California were surveyed, while the grant lying within
the boundaries of the State of California was approximately 1,500,000 acres.
It was presumably evident to your mind, as the chief executive officer of the
company, that your company would exercise its right to select the land at the
earliest possible moment, and your letter to the honorable Secretary of the
Interior, even before the completion of the first section, urging the completion
of the surveys is indisputable evidence of the very earliest disposition of
your company in the premises. Whatever may have been the motive, however, in
influencing the enactment of the provision above referred to, it is unequivocally
provided in the terms of the granting act that the time of payment of the costs
of surveying, selecting, and conveying the land should be a condition precedent
to the receipt of record title and that the time of such payment and the formation
of lists of selections should be left to tbjo election of the company, or,
to repeat the language of the act, should be paid, u as the company should
require the title.'' In seeking for an interpretation of these words there
is no ambiguity of language which leaves doubt as to their meaning. The cost
of surveying, selecting, and conveying the land, and the issue of patents to
follow the payment 6f such costs and selections were not made referable to
or dependent upon the exigencies of State, county, or municipal government,
but was relegated solely to the company itself. Notwithstanding, however, the
absence of all legal requirements as to the time when the company should apply
for and receive title to the lands granted, it from the first inaugurated the
policy of paying the costs required by law of acquiring at the earliest practicable
moment record evidence of title, and of promoting by every means in its power
the settlement of the country through which its roads passed. As already indicated,
the right of the company to" acquire title did not mature until the various
sections of the road had been examined and reported upon by the commissioners
appointed by the President of the United States, and the road accepted by the
President in pursuance of the recommendation contained in the report of such
commissioners. The date at which the road was finally accepted is indicated
by a letter from the Department of the Interior to the Commissioner of the
General LandOffice, dated Washington, November 3, 1869, in which the honorable
Secretary informs the commissioners that the road has been accepted. Early
in the year 1869 the Department of the Interior ordered an absolute suspension
of the issuance of patents, as the following letter will show :
DEPARTMENT OF THE INTERIOR, Washington, D. C.. March 22, 18G9.
SIR : You will withhold all action toward the issue of patents of lands to
the Central Pacific Railroad Company of California and the Western Pacific
Railroad Company until further advice from this Department.
Very respectfully, your obedient servant, J. D. COX,
IIo. JOSEPH S. WILSON,
Commissioner of the General Land Office,
LELAND STANFORD. 2561
This suspension of patents placed an absolute embargo upon transactions under
that head, an embargo which was not removed until March 26, 1870, a period
of one year and four days. However, on the 3d day of November, the honorable
Secretary of the Interior addressed the following letter to Hon. Joseph S.
Wilson, Commissioner of the General Land Office :
DEPARTMENT OF THE INTERIOR,
Washington, D. C., November 3, 1869.
SIR : The Commission to examine the Union Pacific and Central Pacific Railroads
having reported, and its report being accepted and made the basis of adjustment
of the accounts between the United States and said railroad companies, you
are herebyauthorized to commence the patenting of such lands to the said companies
under grants made by Congress, as follows : In addition to the bonds retained
by the United States as security for the completion of said roads in the matters
reported deficient or not up to the standard by the said Commission, one-half
of the lands ready for patenting to the Unjon Pacific will have patents suspended
until further direction from this Department. The other half may bo patented
to said company as fast as surveys and other preliminaries are completed that
is to say, beginning at Omaha and running westward Sections 1, 5, 9, &e.,
will be patented, there being no valid claim found, and sections 3, 7, &c.,
will be withheld until further directions as above stated. Patents to the Central
Pacific Railroad may, in like manner, issue, beginning at Sacramento and working
eastward. It is my desire that the work be so systematized that it may be pushed
forward as rapidly as possible. Very respectfully, your obedient servant,
J. D. COX,
Secretary. Hon. JOSEPH S. WILSON,
Commissioner of the General Land Office.
Under the instructions contained in the foregoing, lists of selections were
made. Some of these failed to observe the instructions of the Secretary of
the Interior to omit one-half of the land in any township from, the list of
selections made. These lists having reached the Department of the Interior,
the honorable Secretary, J. D. Cox, under date of March 8, 1870, in a letter
addressed to the honorable Commissioner of the General Land Office, says :
"
Under date of the 3d of November last you were directed to prepare for patenting
one-half of the lands inuring to said company, namely : Sections 1, 5, 9, &c.,
and sections 3, 7, &c., should be withheld. I find that the lands thus
to be withheld are in this list ; therefore return the list, that a new one
may be prepared, omitting those sections that are to be withheld from patenting."
Mr. Beard, attorney for the company at Washington, urged the issue of patents
for the list, which embraced 116,000 acres, and in a letter addressed to Hon.
Joseph S. Wilson, used the following language :
"
In view of the fact that there has been patented heretofore to the company
only 144,686 acres out of 1,700,000 acres, the surveys of odd-numbered sections
along the 130 miles of road in California, in five years, this course appears
to be but just."
Herein your attorney at Washington on the 26th day of March, 1870, was forced
to plead the small number of acres listed and patented in the Central Pacific
grant as an argument in favor of the issue of further patents.
It is plain from this plea of your attorney that there existed a strong desire
on the part of the Government to withhold patents from the company, and an
equally strong desire on the part of the company to urge the patenting of its
lands as rapidly as that process could be achieved.
Certified copies of all the letters above set forth from the Interior Department
at Washington are in possession of the land department of your company, to
be exhibited when called for.
The road was, however, not finally accepted until late in the year 1874. The
commissioners appointed to make the final examination were Eugene L. Sullivan,
Calvin Brown, and J. W. Dwyer, and the report of these commissioners is dated
Ogden, Utah, November 2, 1874. This report was certified by C. Delano, Secretary
of the Interior, to the President, under date of the 12th of November, 1874
; and at that date it may be said that the road was finally accepted. The time,
then, at which the right to receive patents for lauds granted may be placed
approximately at January 1, 1875, at which date the company had applied for
304,196.38 acres, and had received patents for 271,165.85 acres.
At the very outset the adjustment of the grant to the Central Pacific Railroad
was beset with difficulties and embarrassments unknown to the eastern division
of the line connecting the Missouri River with the Pacific Ocean. The lands
were not granted in specific sections. The sections could be identified only
after the map of definite location of the line had been filed with the Secretary
of the Interior. The limits of the grant could not then be delineated, Lauds
in tlie odd-uuwbereci sections
2562
U. S. PACIFIC RAILWAY COMMISSION.
within such limits were granted by categories only. Lands in certain other
categories or relation with respect of the title of the Government were excepted,
and among the latter mineral land was mentioned as an exception. The line of
road from Sacramento eastward intersects at right angles the great mineral
belt on the western flanks of the Sierra Nevada Mountains, and rules of practice
in the General Land Office had to be established whereby the mineral or non-mineral
character of the land could be ascertained. Decisions of questions of this
character necessarily involve delay. The granting act did not specifically
establish any court vested with power to hear and determine questions growing
out of the physical facts by which lands granted or lands excepted out of the
grant were to be identified. The act was turned over to the Executive Department
of the Government for executive and ministerial administration, and the rules
of practice by which determination was to be reached as to whether specific
lands were granted or excepted were established by the Interior Department
of the Government.
LISTS OF SELECTIONS FILED.
The first list of selections, completed May 19, 1865, and officially known
as list No. 1, Marysville, embracing the listing of 55,259 acres. The first
patent to the company granted in pursuance of this list of selections is dated
January 4, 1866, and covered but 45,510 acres of lands listed in the original
list, thus suspending for future examination 9,784 acres. This first list of
selections, in the amount of 55,259 acres was, therefore, before the General
Laud Office at Washington eight months before any patents were issued. At the
close of the year 1865 there was therefore due the company upon lists of selections
of unpatented land the amount of 55,259 acres. The second list of selections
is dated August 27, 1866, and embraced 41,804 acres. It is officially known
as list No. 2, Marysville; and the third list, embracing 36,059 acres, known
as list No. 3, Marysville, is dated November 0, 1866, and the receipt of patents
to lands selected by this list is dated June 22, 1867, a period of seven months
after the date of the listing. In each instance of lists of selections some
of the land claimed by the company was suspended for further examination, an
examination which, I regret to say, has not been made up to the present time.
Accompanying this letter to you will be found a tabulated statement.
This table shows the dates at which the listings were completed, and the date
at which the patents in pursuance of such lists were received, and from it
may be derived a full and complete exhibit of the status of the account between
the Government and the company at any particular date. The tabulated summary
of this statement is here introduced. This statement exhibits the total amount
of acres for which the company had made application, and which applications
were before the department at the end of each year the number of acres patented
in pursuance of such lists of selections and the balance of acres listed and
unpatented at the end of each year, from the end of the year 1865 to June 1,
1887. This table shows the smallest number of acres listed and unpatented before
the General Laud Office for examination to be at the end of the year 1^75,
and that they aggregated 17,131.97 acres, and also shows the largest balance
of land listed and unpatented to be on the 1st day of June., 1887, and that
they aggregate 622,612.54 acres. The tabular statement is subjoined, and its
careful analysis is respectfully urged upon your thoughtful attention: ...
LELAND STANFORD. ' 2563
DUE DILIGENCE TO SECURE PATENTS.
Your attention is respectfully called to the very significant fact that at
the end of the year 1869, the date at which the road was completed, the company
had made list application for 278,532 acres, all of which was made prior to
the completion of the road itself, and that the Government had responded by
issuing patents for but 144,386 acres, leaving a balance of acres listed and
unpatented of 134,145. Thus, at the date of the completion of the road, the
company was a petitioner for 134,145 acres of land in excess of the response
of the Government to its petitions by way of patent. Your attention is further
called to the fact that at the end of the year 1876, the approximate date at
which under the act the company was to have completed the road, it had made
application for 721,658 acres, to which the Government had responded by issuing
patents for but 528,854, leaving a balance of acres listed and unpateuted of
192,804. Following the table down to the close of the year 1883, a most significant
exhibit should not escape your attention. At the close of that year the company
had applied from the date of the first listing in 1865 to the last listing
completed in 1883, for 887,728 acres. From the acres so listed the Government
had patented to the company 780,879 acres, leaving a balance of acres listed
and unpatented of 106,848 acres. From the close of the year 1883 to the 1st
of June of the current year the company has made application for 774,595 acres,
an amount nearly equal in the three years and six months under observation
to the gross amount of lands applied for in the twelve years preceding that
period. The policy of increased activity in the application for patents was
inaugurated in the hope that a corresponding activity in the examination of
lists would be manifested by the Government. This, unfortunately, has not been
the case, as the table herein above clearly exhibits. The only effect has been
to increase disproportionately the figures in the column headed "Balance
of acres listed and uupatented." Of the 887,728 acres in the aggregate
listed at the close of the year 1883, but 106,808 acres remained nnpateuted
; that is to say, about 13 per cent, of the acres presented to the Land Department
at Washington in the lists of selections remained unpatented, while, on the
other hand, of the 1,662,323 in the aggregate listed on July 1, 1887, 622,612
acres remained unpateuted, the unpatented land bearing the percentage relation
to the whole number of acres selected of about 38 per cent. Thus the percentage
of the balance of acres listed and unpatented has increased since the close
of the year 1883 from 13 per cent, to 38 per cent. The significance of this
exhibit, as plainly tending to discourage the activity of the company in making
lists of selections, will not escape the attention of any candid mind. The
simple exhibit of facts themselves forces upon the company the conclusion that
increased activity in the way of making lists of selections of lands for which
patent is asked has not been met by a corresponding activity on the part of
the Government in responding to the petitions of the company, but, on the contrary,
has served only to increase disproportionately the balance of acres listed
and unpatented. Your attention is called to the fact that the aggregate fees
paid on account of lands selected by the company amount to $95,468. Of this
sum 38 per cent., or a sum in excess of $37,000, was paid upon the lands for
which patent is still withheld. The balance in favor of the company at the
close of the business of 1883, which had been paid upon the lands selected
and unpatented, was but slightly in excess of $6,000. Increased activity in
meeting the requirements of the granting act, by paying the costs of surveying,
selecting, and conveying the land, has therefore resulted in the payment into
the Treasury of the United States of a large sum of money, of the use of which
the company is deprived, and which, by reason of the failure" of the Government
to respond with patents, lies useless in its Treasury. These facts present
only discouraging features well calculated to deter the company from the policy
of increased activity in the way of making lists of selection of the land granted.
The exhibit also shows clearly that from the date of the inauguration of the
relations between the Government and the company under this head there has
been no time at which the company has not had on deposit with the Treasury
of the United States a considerable sura of money on account of the payment
of the cost of surveying, selecting, and conveying the lands ; that at all
times from the date of the first list of selections to June 1, 1887, the Government
itself has been the party delinquent, and that lists of selections upon which
the fees had been paid largely in excess of the response of the Government
by way of patents have been at all times and at all dates since the first list
of selections was completed before the Land Department of the Government for
examination.
THE GOVERNMENT FAILS TO SURVEY THE LAND.
Notwithstanding the requirement that the company shall pay the costs of surveys,
the right to determine when such surveys may be made is vested by law in the
Government of the United States. During the past two years the rates allowed
by the Commissioner of the General Land Office for surveying have been so low
as to almost
2564 U. S. PACIFIC RAILWAY COMMISSION.
wholly arrest the progress of surveys within the limits of the grant. As fully
illustrating the disposition of the existing administration in the premises,
it may be hero related that during the year 1886 the surveyor-general for
the State of Nevada advertised for bids for surveys relating to three hundred
and forty-five townships of land wholly within the limits of the grant to
your company in that State. These three hundred and forty-five townships,
embracing about one-half the area of the lauds granted to your company in
the State of Nevada, are still unsurveyed. Specifications for these surveys
and the amount which would be allowed as fees for the surveys were advertised,
and the bids were to have been opened, according to the advertisement, on
the 1st day of November in that year. Upon the date at which these bids were
to bo opened not one bid had been received. Ttie proposals had been rejected
in their entirety by the surveyors. A like result has attended the offers
of the Government for the completion of the surveys of land in California,
and on the 1st of July, 1886, the surveyor-general of California returned
to the Treasury of the United States the entire amount of the appropriation
which had been made by Congress for the completion of the surveys of laud
in this State, notifying the Commissioner of the General Land Office at the
same time that no responsible surveyor would enter into a contract for the
completion of the surveys ; that the rate of compensation ottered by the
honorable Commissioner of the General Land Office was entirely too low. In
the Territory of Utah the efforts of the Commissioner to secure the completion
of the surveys have been attended with a larger share of success, but there
still remains in that Territory within the limits of your grant a very large
area of unsurveyed land, while of the lands surveyed in that Territory within
the limits of the grant, more than half of the surveys have been completed
since the year 1880. According to the statements furnished by the honorable
commission appointed to investigate the affairs of your road under this head,
there was granted an aggregate of 8,000,000 of acres of land to your road.
A very small proportion of this area was surveyed prior to 1860. Between
the years 1870 and 1880 surveys were prosecuted very tardily. From 1880 to
1883 an increased activity in the surveys was observable, but even at the
present date about one-half of the lauds granted are still uusurveyed, but
owing to the policy inaugurated and persisted in by the present honorable
Commissioner of the General Land Office, surveying for the past two years
has been almost wholly suspended.
DISCOURAGING AND UNREASONABLE REQUIREMENTS.
In addition to all the discouragements herein set forth, within the past three
months, and in the exercise of his discretion, the honorable Commissioner of
the General Land Office has departed from all the precedents established by
his predecessors in offi e, and has attached to the requirements for disapproving
the mineral character of land onerous and, to my mind, unreasonable rules of
practice. These new rules are made applicable to the lists of selections which
have been before the Department for more than two years. Among these rules
may be mentioned that of requiring non-mineral affidavits as to land returned
and denominated by the United States surveyors as agricultural. Heretofore
such return by the surveyor was ac<cepted as prima facie evidence of the
agricultural character of the land. Under the existing regulations of the Land
Department, which regulations have been announced only within the past three
months, and made to relate to lists of selections which have been before the
Department for more than two years, it is now required that an affidavit shall
be made as relates to each 40 acres of laud embraced within such list of selections
by an individual "who has frequently passed over " each subdivision
of 40 acres, and is therefore competent to testify that there are no mineral
indications found upon the 40-acre tract subject of the affidavit ; that the
affidavit shall be made separately and specifically as relates to each particular
40 acres, and that a single affidavit embracing a number of these small Governmental
subdivisions will not be competent ; and that the individual who makes the
affidavit shall be specifically authorized in each particular case to make
such affidavit. This requirement is made to relate to large areas of grazing
land in the State of Nevada and the Territory of Utah, notoriously free from
all mineral indication. It is well known to you that large areas of lands,
fit only for grazing purposes, in the State of Nevada and the Territory of
Utah, are located in very sparsely settled regions, and that it will be most
difficult, if not wholly impossible, to find individuals who have frequently
passed over each particular and separate 40-acre tract embraced within the
limit of your grant, and who therefore possess the necessary knowledge to qualify
them to make the required affidavits in this behalf.
OBSTRUCTIVE MEASURES.
As to land interdicted as mineral by the field-notes of the United States surveyors,
new, onerous, and to my mind, unreasonable requirements, are made in the recently
adopted rules of pr&ctice, Under the rules of practice obtaining in 1865
and up to
LELAND STANFORD. 2565
the 1st of March, 1887, disproof as to the mineral character of land interdicted
as mineral could he initiated upon lands unselected. This was obviously a
reasonable rule. The lists of selections must first he submitted to the registers
and receivers of the local land offices of the district wherein the lands
are located. Upon lists so presented registers and receivers must first hear
and determine upon all questions relating to the mineral character of the
land before they can certify that it is agricultural in character, and therefore
clear of the company, and subject to the terms of the grant. The practice
has uniformly been to initiate proceedings prior to selections to disprove
the mineral character of the land, which proof has been submitted under the
rules established by the Interior Department itself for registers and receivers,
and under the direction of these officers with re*spect to advertising the
hearings of such testimony in disproof. Upon the testimony so presented,
registers and receivers have determined the mineral or agricultural character
of the land in question. The agricultural character of the land being established,
it became subject to selection by the company, and land so selected could
be certified as clear to the company by the registers and receivers of the
district land office to the Commissioner of the General Land Office. In pursuance
of this rule of practice, which was established by the Interior Department,
and which had been maintained by all the Secretaries of the Interior until
within the past few mouths, disproof as to the mineral character of the land
was taken as relates to a large area of acreage. The proceeding is in the
very nature of things costly, and after this cost had been borne by the company, &c.,
so much of the land as had been decided by the registers and receivers of
the district land offices to be agricultural had been selected, the Commissioner
of the General Land Office dismissed all the proceedings with reference to
the non-mineral character of the land, not because of any allegation of irregularity
of proceedings under the rules of practice which have obtained for the last
twenty years, but upon the technical plea" that the grant to the company
does not of itself establish such right in the company with respect of lauds
selected as would entitle it to inaugurate proceedings in disproof, but that
its rights to the laud must first be inaugurated by a, selection, and that
disproof as to the mineral must follow and not preclude such selection. The
order of the honorable Commissioner does not raise any question as to the
adequacy of the proofs submitted. It simply declares that the proof, however
adequate, was taken prior to the selection, and forces upon the company the
expensive duty of reopening the proceedings in disproof, which are objected
to not because of inadequacy, but solely on account of having been taken
prior to selection.
By this ruling lists of selections long since completed were relegated to a
condition of very indefinite delay as to the issue of patents. The extent to
which the requirernent relating to affidavits of non-mineral indication on
each forty-acre tract of agricultural land within the limit of your grant will
delay the future operations of the company in obtaining record title to its
lands will readily be perceived. It should he remembered that at the date of
the passage of the act the territory to be intersected by the line of road
between the Missouri River and tide-water at the city of Sacramento was, with
the exception of a small portion at the western terminus near the Missouri
River, almost entirely uninhabited. The presumption was most natural that the
construction of the road would be conducive to the settlement of this \ast
territory. At the date of the grant less than 5 per cent, of the lands granted
were surveyed. No applications for patents could be made with respect to lands
unurveyed, and while one-half of the costs of the survey within the limits
of the grant were chargeable to the company, the other half of the costs would
have to be borne by the Government itself. The grant to the entire line from
the Missouri River to the Pacific Ocean embraced approximately 20,000,000 acres
of laud, being at the date of the grant an unsurveyed and unappropriated portion
of the national domain. The administrative task of surveying the lands was
Avith the Government itself, a task which, after the lapse of a quarter of
a century from the date of the granting act, is now only partially accomplished.
The hearing and determination of evidence arising out of questions as to whether
lands applied for were granted or excepted out of the grant added materially
to. the embarrassment of producing record evidence of title as rapidly as would
meet the requirements of the company. As already noted, this embarrassment
was further complicated by the exception of mineral land from the operations
of the grant. There has never, therefore, been a time in the history of this
transaction when the Government was able to meet the requirements of the company
promptly by the issue of patents as rapidly as asked for.
GOVERNMENT UNABLE TO MEET THE DEMANDS OF THE COMPANY.
The Government has never been at any time, and it is not now, in a position
to patent more than a small proportion of the land granted. The payment of
the costs of surveying, selecting, and conveying, being a condition precedent
to the issue of patents, would involve a largo expenditure on the part of the
company upon each list of
2566 U. S. PACIFIC RAILWAY COMMISSION.
selections made. In the aggregate a very large sum of the company's money is
now tied up by these payments, and in view of the tardiness of the governmental
response to the demands of the company for patents, a delinquency which is
clearly set forth in the accompanying documents, there is nothing to encourage,
but rather everything to discourage, activity under this head. During every
period of the administration of the land department of the company it has
been apparent that the augmentation of lists of selections retarded rather
than promoted the issuing of patents, and the completion of these lists and
their presentation to the General Land Office at Washington involved a large
expenditure of the company's money, which, while the company was deprived
of its use, remained idle and usejess in the Government Treasury.
The task of completing the surveys of the vast area of uusurveyed land, and
the cost of making such surveys, which must be borne by the Government itself,
were all difficulties which confronted the Government, and to which is referable
the policy of vesting the company with the right to make demand for patent
only as prompted by its own requirements, or the progress of settlement and
consequent occupation and absorption of the lands granted. The provision of
the granting act herein referred to was clearly suggested to the Congressional
mind in the interest of the Government itself, and exactly supplemented the
rights, conveniences, and interests of both the grantor and the grantee. In
practice, however, it has conserved the interests of the Government more than
those of the company. In all cases the delay in the issue of patents to the
company has been a loss to the company's treasury. It has retarded the growth
and development of the country tributary to the line of transportation constructed,
and it has subjected the settler upon lands granted to the railroad company
to inconvenience and loss arising out of delayin receiving title to his land.
It has delayed the payment of money to the company for the purchase of such
lands, and, beyond all this, it has been the occasion of much loss by reason
of the extension of the discovery of mineral within the granted limits. This
latter feature deserves more than passing notice. Under the decisions of the
Supreme Court, lands patented to the company, and not known to be mineral at
the time of the issuance of patents,* pass the mineral with the title conveyed,
while the discovery of valuable mineral deposits in the lands prior to the
issue of patents excepts the land in which such mineral is discovered from
the operation of the grant. Within a large section of the granted limits search
for valuable mineral deposits has been arduous and constant. Mineral discoveries,
therefore, have been constantly extending, and as they are extended, they operate
to except out of the grant large quantities of valuable land which would have
been patented by reason of the absence of mineral indications and mineral discoveries
at the time application was made. Ascertainment of the quantity of land thus
listed to the company would be a very tedious task. Approximations, however,
have been made, and the result of such approximations justify the statement
that at least 200,000 acres of land have been lost to the company in this way.
GOVERNMENTAL POLICY.
The policy of the Government with respect of the disposition of the even-numbered
sections within the granted limits has been very injurious to the interests
of your company. As soon as the granting act was passed the price fixed upon
the evennumbered sections within the granted limits was raised to double minimum
valuation, thus discouraging the operation of the pre-emption laws within the
granted limits. The effect of the land policy of the Government as compared
with the land policy of the railroad company is clearly shown by the fact that
in townships of land where patents could be obtained, and where settlement
has been made, settlement was begun and prosecuted upon railroad land alone.
Recently prepared statistics concerning the disposition of the Government and
railroad lands within the better settled portions of the grant show that more
than twice the quantity of railroad land is being cultivated by actual settlers
than of Government land within the same boundaries. Your company has addressed
itself assiduously to the task of inducing settlement upon its lands, and by
a liberal policy, embracing in its features low prices, long extensions of
credit at low rates of interest, has largely accomplished its great mission
of extending settlement and civilization along its line of road. On tho contrary,
the policy of the Government relating to the disposition of its lands, interspersed
with the lands granted, has been rigid and many of its requirements not adapted
to the development of the country. The unwisdom of its policy is particularly
noticeable in the grazing areas of the great uplifted plateau lying between
the Rocky and Sierra Nevada ranges of mountains. The limitations of acquiring
only 160 acres to each actual settler, applicable only to such agricultural
land as by reason of fertility makes that quantity suited to the industry of
a single occupant, is not applicable to grazing lands. The general result of
this has already been stated. Settlement has been chiefly upon lands granted
to the railroad,
LELAND STANFORD. 25G7
A SUMMARY OF POINTS.
To summarize briefly the points herein presented, it has been clearly shown
:
(1) That by the terms of the granting act itself the cost of surveying, selecting,
and conveying the land was made a condition precedent to the issue of patents,
and that such cost was to be paid only as a title was required by the grantee.
(2) That the company has used due diligence in the payment of the costs of
surveying, selecting, and conveying the lands, and that its diligence in this
regard has resulted in a demand largely in excess of the response of the Government
at every period in the history of this transaction.
(3) That all the apparent delay in the issue of record title to the lands granted
to the Central Pacific Kailroad Company is chargeable to the tardiness of the
Government and not to the company.
(4) That the Government has at no time been in a position to grant patents
conveying the title to large granted areas by reason of the absence of surveys
and the unavoidable delays in determining questions of law and fact as to whether
lands applied for were granted or excepted out of the grant.
(5) That the company has been subjected to great pecuniary loss growing out
of the payment of costs of surveys and other attendant fees upon large lists
of lands for which no patents have been granted and the loss of the use of
moneys which would have been paid by the purchasers of lands had the response
of the Government been commensurate with the legitimate demands of the company.
(6) That arbitrary and obstructive rules of practice have recently been devised,
nullifying the efforts of the company to facilitate the completion of lists
of selections and unnecessarily complicating the perfecting of such lists,
whereby even greater tardiness in the response of the Government to the demands
of the company than has heretofore been exhibited- may be expected.
(7) That the delinquency of the Government and its tardiness in responding
to the requirements of the company have at all times acted as discouragements
to applications for patents ; and
Generally. The exhibits presented prove conclusively that the grantee has been
a party observant of all the duties made incumbent upon it by the terms of
the grant itself, and that there has been no delinquency in contravention of
the true intent and meaning of the granting act, except such as is chargeable
to the grantor.
GENERAL LAND OFFICE HOPELESSLY IN ARREARS WITH WORK.
This statement would be incomplete without some consideration being given to
the subject as to whether the Land Department of the Government is in position
to examine the claims presented, and pass upon them with greater promptness
than it has manifested in the past. The railroad division of the General Land
Office is charged with the adjustment of the grants for railroads, wagon roads,
and canals, and with the adjudication of claims of settlers and others within
the limits of the grant. Under date of October 11, 1882, Hon. N. S. McFarland,
Commissioner of the General Land Office, reported to Hon. Henry M. Teller,
Secretary of the Interior, for the fiscal year ending June 30, 1882, that t*he
work of the railroad division of his department was several years in arrears.
As illustrating the difficulties with which that division is beset, it may
be noted in the same report that Mr. McFarland declares that during the year
1882, 5,564 cases were presented for adjustment in the way of claims of settlers
and others within the limits of the grants to railroads, and of this large
number but 617 cases had received attention. Three thousand nine hundred and
forty-seven, therefore, constituted the accumulation of the year. In the same
report Commissioner McFarland submits a supplemental estimate in which he asks
for 100 additional clerks and sufficient additional room for their accommodation.
Each successive administration has called attention to the delinquency of the
various divisions of the Land Department. The present honorable Commissioner,
W. A. J. Sparks, repeats the suggestions of his predecessor, Commissioner McFarland,
and urges upon the attention of the Secretary of the Interior the importance
of authorizing additional clerical force in the department. The volume of business
in tho railroad division, and the relative capacity of the division to pass
upon the lists of selections presented, and the inadequacy of the force at
hand of the Commissioner of the General Land Office, are most clearly illustrated
in the following exhibit :
In 1882 lists of selections presented to the railroad division for patent by
the landgrant railroads to the United States aggregated 1,958,392 acres. In
1883 the amount had risen to 3,070,453 acres. In 1884 the lists of selections
had accumulated and aggregated in that year 11,861,608 acres. In 1885 the accumulation
of business represented 14,273,057 ;wres. In 1886 the acres before the department
awaiting its action worn 16,571,299. Thus, in five years, the number of acres
before the department awaiting its action had risen from 2,000,000 to over
16,000,000. The foregoing state
2568 IT. S. PACIFIC RAILWAY COMMISSION.
ments are derived from the official reports over the signatures of the Commissioners
themselves.
As more fully illustrating the extent of this incapacity of the department
to examine and certify for patents lands before it for examination, the significance
of the following statement will be apparent :
The railroad division of the General Land Office in 1881 examined 949,446 acres,
and certified that quantity for patents. In 1882 it examined and certified
for patents 176,406 acres ; in 1883, 477,740 acres; in 1884, 647, 162 acres;
in 1885, 1,153,950 ; in 1886, 100,823 acres. The business transacted from June
30, 1885, to June 30, 1886, was the only full year under the administration
of Commissioner Sparks ; with 16,570,299 acres before the railroad division
under his administration awaiting examination and determination by the division,
it was able to examine and certify for patents b,\t 100,000 acres. For the
six years reported, to wit, from June 30, 1881, to June 30, 1686, there were
examined and certified for patents 3,505,527 acres, being an average of 584.254
acres per annum, or, in round numbers, a half million acres per annum. If,
therefore, no further lists of selections are presented to the department,
and the average amount of business can be transacted in the railroad division
in the future as in the past, as shown by the above exhibit, it will require
thirty-two years to complete the examination of the land already selected by
lists of selections now before the department for examination.
ONE HUNDRED AND SIXTY YEARS.
If, however, the volume of business transacted by the railroad division in
the year 1886, the only full year under the existing administration, is to
betaken as a criterion of the capacity of that department for the examination
of the selections before it, one hundred and sixty years will be required to
examine the selections now made and submitted. The capacity of the department
under the existing administration having been tested by a full year of administrative
effort, and found to be equal to the task of examining and certifying 100,000
acres per annum, the lists of selections now before the department from the
Central Pacific Railroad alone will require six years in their examination
should the department devote itself entirely to the business submitted by your
company to the exclusion of all other lists. There is, of course, not the slight?
est reason to hope that the business of your company will receive this exclusive
attention, and receipt of patents for lands now applied "for is, therefore,
relegated to the indefinite future. In the mean time settlers and occupants
who have in good faith taken possession of the lands granted to your company
and established homes thereon are clamorous for title. This delay with titles
serves to obstruct and hinder the settlement and occupancy of the company's
lands, and the result consequent is a loss oa the transportation side of the
account" The granting of patents upon the selections now before the department
would place your company in a position to make lists of selections covering
1,000,000 acres within the next year and the sale of lands along the line of
your road would augment the business of the line in the most signal manner.
THE USELESSNESS OF FURTHER SELECTIONS.
In view of the condition of things as reported by the Commissioner of the General
Land Office, and of the further view of the manner in which lists of selections
have been treated by the Government, the uselessness of making further lists
of selections, and of devoting further sums of money to that purpose until
the lists now before the Interior Department are disposed of, is altogether
apparent. It is not the province of this report to you, nor within the purview
of answers to the questions propounded, to suggest remedies for this state
of things. It is, however, plain to the most casual glance that the Land Department
of the Government is most hopelessly in arrears with its business, and to such
an, extent as to make it entirely beyond its power to extricate itself from
existing complications. The department charged with the adjustment of these
land grants and the ultimate final adjudication is vastly inadequate. The remedy
is self-suggestive. Subsidiary departments in each State and Territory wherein
these land grants are located should be vested with the power of hearing and
of final determination of these cases. Their position on the ground would connect
their knowledge more immediately with the nature of the question in controversy,
and enable them to reach final determination with greater facility, and also
to reacli an adjudication of the various cases more nearly in accordance with
the equities involved. With 16,500,000 acres before the department at Washington
for examination, and the tested capacity to hear and determine as to but 100,000
acres per annum, it may be said with reason that the progress of the adjudication
is practically arrested. If it is ever to be proceeded with in a manner consistent
with the rights and interests of both the grantor and grantee, it is now plainly
apparent ttat at least one hundred times the force at the command of the Commissioner
of the General Laud Office will be necessary to meet the requirements under
this h ead. It is unreason*
LELAND STANFORD. 2569
able, if not wholly absurd, to suppose, in view of the existing tate of things,
that a single department of the Government, controlled and directed by a
single head, can hear and determine within a reasonable time the vast number
of cases submitted for its attention. In his report to the Secretary of the
Interior, Commissioner Sparks declares that the number of contested cases
awaiting final action at the close of the fiscal year was 6,331. Of these
1,227 had received some attention, but not final action, and 5,104 had received
no attention and no action whatever. Of the exparte cases before the department
there remained for final action at the close of business 4,540, and of these
923 had received some attention, leaving 3,617 exparte cases which had not
been reached for examination.
CASES BEFORE THE DEPARTMENT.
At the close of the year, therefore, there were 8,721 cases before the department
which had received no attention whatever. At the close of the business of
the administration preceding the present one, viz, June 30, 1882, the aggregate
of cases which had not been reached for examination was 3,947. In a period
of four years, therefore, there has been an increase of 4,477 cases which
had not been reached for examination, proving clearly that the arrears of
the department under this head are constantly augmenting instead of diminishing.
With the lapse of each fiscal year the reports of the Commissioner show that
under every head the department is becoming more hopelessly and inextricably
in arrears with its business.
In view of these facts the land department of the company is confronted with
hopeless and discouraging circumstances that call loudly for remedial legislation
at the hands of the national Congress.
RECENT AMENDMENTS TO THE LAW.
Frequent reference has been made in this report to section 21 of the act of
1864, which declared that before any land granted by the act should be conveyed,
there should first be paid into the Treasury of the United States the cost
of surveying, selecting, &c., as the title should be" required by
the company. In the foregoing, it has been clearly set forth that, notwithstanding
the right was vested in the company to pay the cost of surveys, and to make
lists of selections, as the title should be required by it, yet the company
has at all times importuned the Government for the issue of patents. Your attention
is now called to the fact that, by an act approved July 10, 1886, entitled "An" act
to provide for taxation of railroad land grants and for other purposes," section
21 of the act of 1864 was amended. The amendment is found in section 4 of-
the act of July 10, 1886, and reads as follows :
"
SEC. 4. That section 21, chapter 216, approved July 2, 1864, is hereby amended
so that the cost of surveying, selecting, and conveying therein required to
be paid, shall become due and payable on demand therefor made by the Secretary
of the Interior, as provided in section 2 of this act."
Notwithstanding the act last above quoted was approved July 10, 1886, no demand
has been made on the company by the Secretary of the Interior, and until such.demuml
is made the company cannot be delinquent or in default with respect of the
payment of costs of surveying, selecting, and conveying, or the making of lists
of selections.
CONCLUSION THE LAND-GRANT MORTGAGE.
In conclusion, permit me to call your attention to the strictures that have
been made upon the mortgage or trust deed, executed by the company on the 1st
day of October, 1870, upon the lands granted in aid of the construction of
the line. It has been contended that the mortgage was placed upon the land
in evasion of a provision found in section 3 of the act of 1862. That provision
reads as follows :
"
And all such lands so granted by this section, which shall not be sold or disposed
of by the said company within three years after the entire road shall have
been completed, shall be subject to settlement and pre-emption like other lands
at a price not exceeding $1.25 per acre, to bo paid to said company."
The trust deed, however, was decided by the Supreme Court of the United States
to be a disposition of the land within the meaning of the grant.
But even if the trust deed above alluded to had not been executed the proceeds
of the land grant would have passed to the company under the operation of this
clause of section 3, which, in effect, would have established in the company
a perpetual right to receive the proceeds of the sale of the laud. The lands
would thus have reverted to the public domain, and the proceeds of their sale
would have been payable to the company. As Government laud they would necessarily
have been exempt from taxation by States, counties, and municipalities, but
the proceeds of their sale would have been the property of the company. The
execution of the trust deed, therefore,
2570 IT. S. PACIFIC RAILWAY COMMISSION.
operated to create taxable property. Criticisms which have been made upon the
execution of the trust deed have generally proceeded upon the theory that
if such trust deed had not been executed, the lands "would have reverted
to the Government absolutely, and the rights of the company therein would
have ceased and determined. The erroneous nature of this view is clearly
shown by the words of the granting act.
WM. H. MILLS. STATE OF CALIFORNIA,
City and County of San Francisco, ss :
William H. Mills, being first-duly sworn, saith that he has read the foregoing
statement consisting of pages next preceding, marked " Exhibit No. 6," and
knows the contents thereof; that the facts therein stated are true, except
as to those matters stated on his information or belief, and as to those he
believes it to be true.
WM. H. MILLS.
Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL.]
E. B. EYAN,
Notary Public in and for the City and County of San Francisco, State of California.
EXHIBIT No. 7. Statement of J. C.Stubbs, general traffic manager, relative
to differentials, pools, #c. *
The rates of charge for freights and fares are just and reasonable. When considered
in respect of circumstances and conditions affecting profit and loss, they
afford the cheapest transportation service in the country. Among the circumstances
and conditions affecting profit and loss are the physical characteristics of
the road, such as the gradients and curvatures, which very largely determine
the cost of building and also the cost of operating the road, and the volume
of business which determines the earning power of the road. These, and other,
if not equally important, certainly very important, circumstances and conditions,
together with the rates of charge on the Central Pacific line when compared
with similar circumstances and conditions of rates of charge on other railroad
lines in the country, will inevitably lead to the conclusion that there is
no cheaper transportation service in the United States.
RATES CHARGED.
The fare between San Jose" and Sacramento (128 miles), where there is
practically no competition, is at the rate of 2.6 cents per mile, and between
intermediate stations for short distances at the rate of 4 cents per mile.
The freight charges for this line range from ! cents on the lowest class, to
3f cents per ton per mile on the highest class.
This line crosses the Contra Costa range of mountains, rising from 88 to 740
feet above th.e sea-level in 25 miles, and has for 38 miles an average grade
of 52.8 feet to the mile.
During the year 1885 the total number of passengers taken up and laid down,
either or both, on this line was at the rate of 2,410 per mile.
The freight taken up and laid down, either or both, on this line during the
year 1885, was at the rate of 3,197 tons per mile.
The rate of charge for fares between Sacramento and California State line (140
miles) is 5 cents per mile. The rates of charge for freights range from 1 cents
on lumber, to 14 cents per ton per mile on the highest class.
PHYSICAL LOCATION OF ROAD AND TRAFFIC DONE.
The number of passengers taken up and laid down, either or both, on this line,
during the year 1885, was at the rate of 534 per mile. The number of tons of
freight taken up and laid down, either or both, on this line during the year
1885, was at the rate of 1,070 per mile. On this section the road crosses the
Sierra Nevada Mountains, rising from 30 feet to over 7,000 feet above the sea-level.
In a distance of 87 miles (between Eoseville and Summit) the rise is over 6,800
feet, the average grade being over 80 feet to the mile, the maximum being 116
feet. Over 55 per cent, of the distance is curved line and about 40 miles of
it is protected by snow sheds.
Between California-Nevada State line and Ogden (603 miles) the rate of fare
locally for single trips is 7 cents per mile, and for round trips 5 cents per
mile. The freight charges range from less than seven-tenths of a cent per ton
per mile on lumber to 15 cents per ton per mile on the highest class of merchandise.
;
* See answer to question No. 10 and question No. 39.
LELAND STANFORD. 2571
For about 499 miles this line is through the comparatively desert and sparsely
pop* ulated State of Nevada, which contains 112,090 square miles of territory,
and had about 62,000 inhabitants in 1880, which declined to 58,000 in 1885,
being about one inhabitant to each two square miles. This area is nearly
equal to that of New York and the New England States (115,307 square miles),
which in 1885 contained a population of 9,744,385, or an average of 109 inhabitants
to each two square miles a population 169 times greater than that of the
State of Nevada.
The road through Eastern Nevada is heavy, having frequent grades, ranging from
52 to 79 feet to the mile.
In 1885, the number of passengers taken up and laid down, either or both, within
the State of Nevada, was at the rate of 77 to the mile ; and the number of
tons of freight was 237 to the mile j from which it will be seen that the local
travel on that line would not suffice to pay ordinary train expenses of one
train per day. Except on extraordinary occasions, one train per day each way
amply accommodates all the passenger travel, both through and local.
COMPARISON OF PASSENGER RATES WITH THOSE OF OTHER ROADS.
The fare bet ween San Francisco and Sacramento (140 miles, 110 miles of which
belongs to the bond-aided line) is $3. Compare this with the rate between New
York and Philadelphia (90 miles) which is $2.50 ; or with the rates between
Chicago and Union Grove, on the Chicago and Northwestern Railway, a distance
of 128 miles, which is $3.83, or at the rate of 3 cents a mile ; or the fare
between Chicago and Kewanee, on the Chicago, Burlington and Quincy Railroad,
131 miles, which is $3.93, or at the rate of 3 cents per mile ; or with the
fare between Chicago and Wyanet, on the Chicago, Rock Island and Pacific Railway,
129 miles, which is $3.74, or at the rate of 2.9 cents a mile ; or with the
fare between Chicago and Mount Carroll, on the Chicago, Milwaukee and Saint
Paul Railway, 128 miles, which is $3.83, or at the rate of 3 cents a mile ;
or with the fare between Chicago and Columbia, on the Pittsburg, Fort Wayne
and Chicago Railway, 120 miles; 'or between Chicago and Sturges, on the Lake
Shore and Michigan Southern road, 132 miles ; or between Chicago and Mattowa,
on the Michigan Central road, 1,9 miles, which was $3.90, $3.90, and $3.65,
respectively, or at the rate of 3 cents per mile.
As I have said, volume of traffic is one of the most important factors in the
earning power of a road, and necessarily is a determining factor in the rate
of charge. I have no means of determining the volume of traffic of the Eastern
roads nametl above in comparison with the Central Pacific line, but from various
statistical authority principally the United States census report of 1880,
cyclopedias, and standard geographies I have collated the following information
which bears directly on the question:
The line of the Chicago, Milwaukee and Saint Paul Railway, above referred to,
runs through the counties of Cook, Du Page, Kane, De Kalb, Ogle, and Carroll,
in Illinois.
The Chicago and Northwestern road runs through the counties of Cook, Du Page,
Kane, De Kalb, Lee, and Whiteside.
The Chicago, Burlington and Quincy road runs through the counties of Cook,
Du Page, Kendall, La Salle, and Bureau.
The Chicago, Rock Island and Pacific Railway runs through the counties of Cook,
Will, Grundy, La Sallo, and Bureau.
Of ilio counties through which the first-named (Chicago, Milwaukee and Saint
Paul Railway) runs, the population is 210 per square mile; 88.49 per cent,
of the total area is improved land ; the value of the products in 1879 was
$4,661.44 per square mile ; the value of manufactures in 1880 was $74,436.70
per square milo.
The tion ucts $66,779.37 per square mile.
Of the counties through which the Chicago, Burlington and Quincy runs, the
population is 210 per square mile; 87.82 per cent, of the land is improved;
the value of products in 1879 was $4,479.78 per square mile ; the value of
manufactures in 1880 was $73,928.49 per square mile.
Of the counties through which the Chicago, Rock Island and Pacific runs, the
population is 188 per square mile; 88.19 per cent. of the laud is improved;
the value of products in 1879 was $4,309.54 per square mile ; the value of
manufactures in 1880 was $66,053.96 per square mile.
The line between San Jose* and Sacramento, Cal., runs through the counties
of Alameda, San Joaquin, Santa Clara, and Sacramento. The population per square
mile is 34; percentage of improved lands, 50.19 percent.; value of products
in 1879, V2,473.33; value of manufactures in 1860, $3,376.35 per square mile.
P R YOL 16
2572 u. s. PACIFIC RAILWAY COMMISSION.
* The Central Pacific line, between Sacramento and State line, runs through
ibe counties of Nevada, Placer, and Sacramento. The population to the square
mile is 20; the percentage of improved lands, 20.25 per cent.; value of products,
$993.13 ; manufactures, $1,517.30.
The line of the Central Pacific road through Nevada runs through the counties
of Washoe, Storey, Churchill, Hnmboldt, Lander, Eureka, and Elko, having a
population of -0% P er square mile; -j 1 ^ of 1 per cent, of the land is improved
; the value of products in 1879 was $32.56 ; and the value of manufactures
in 1880 was $32.43.
The fare from San Josd to Reno (281 miles), or from San Francisco to Reno (294
miles), is $12.05. The fare between New York and Washington (236 miles) is
$6.50. The latter line is practically level, running between the metropolis
and the capital of the United States, through Philadelphia and Baltimore, the
tracks crowded with trains, and the trains crowded with passengers.
THROUGH RATES REGULATED BY COMPETITION.
The through rates of fare for business between California and points in the
Eastern States are regulated by competition.
For unlimited first-class travel the rate is 3 cents per mile ; for limited
first-class 2| cents per mile, and for third-class or emigrant If cents per
mile.
The rate for first-class travel over the great lines between Chicago and Council
Bluffs is 2| cents per mile; between Chicago and Pittsburg, 2f cents per mile;
between Chicago and Buffalo, 2.59 cents per mile; between Chicago and New York,
2 cents per mile. ,
.The rates between San Jos6 and Ogdeii, over the whole line, range from 1 cents
on the lowest class of freight (merchandise) to 5-fc cents per ton per mile
on first-class, while we have taken coke from Oakland to Ogden at one-half
cent per ton per mile.
The legal maximum rates for California and Nevada are 10 cents per mile for
passengers, and 15 cents per ton per mile for freight. Probably less than I
per cent, of the entire traffic has been carried at the maximum rate.
The through rates for freight between California and the Eastern States are
governed by competition, and at present vary from day to day.
RATES IN CALIFORNIA APPROVED BY STATE BOARD.
Our freight and passenger charges in the State of California have been approved
and published by the California State board of railroad commissioners. In the
State of Nevada they are published and posted according to law. For interstate
traffic they have been duly published and posted in accordance with the requirements
of the interstate commerce act. They are by these means given a wider publicity,
and are so reasonable that it is seldom that complaints are made. As an evidence
of this, I beg leave to call your attention to the fact that in 1876 the legislature
of California enacted a law under which a board of railroad comrnissiocers
was appointed by the Governor. This commission was popularly regarded as representing
the anti-railroad sentiment of the State. In their first report to the legislature,
dated December 1, 1877, the commissioners say :
"
In October, 1876, we issued a circular which was addressed to many hundred
citizens in various parts of the State whom we deemed likely to be able to
furnish us with information or suggestions of value in connection with the
subject of railroad transportation. A copy of it is as follows :
"
BOARD OF RAILROAD COMMISSIONERS APPROVE THE MANAGEMENT.
"
'SACRAMENTO, October, 1876.
"
'Among the principal objects proposed by the legislature in creating the board
of transportation commissioners is the compilation of facts and statistics
connected with the building and operation of railroads in this State, and also
the investigation of their management, especially as it affects the interest
of their patrons.
'It is believed that an impartial investigation of this subject will result
in substantial advantage to all concerned, and to this end this board desires
to receive information and suggestions and statements from all who are interested.
"
As your position has probably led you to give more than usual attention to
the subject, there may be matters to which, in your opinion, the attention
of the board should be called ; in which event it is requested that you will
communicate them to this board in writing.
"
' By order of the board.
(Signed) < WALTER M. PHILLIPS,
"
Secretary.'
LELAND STANFORD. 2573
"
This was transmitted to supervisors, county officers, members and ex-members
of the legislature, judges, prominent merchants, storekeepers, editors, hotel
keepers, patrons of husbandry, &c., and it led to some valuable communications,
although not to contributions of public opinion or information on the subject
as full or as extensive as we might have reasonably looked for.
"
We have deemed it our duty to visit and inspect, so far as such inspection
can be made in transitu, every part of every railroad in the State, in order
to acquaint ourselves so far as possible with the circumstances, local connections,
situation, and conditions of the various roads.
"
Without entering into unnecessary detail on this subject, we observed that
generally the railroads of the State are in good order and their management
wise and economical, and conducted with a view to the public convenience."
The communication addressed (as ab'ove stated bv the railroad commissioners)
to citizens of all classes and occupations, whose position was presumed to
have led them to give more than usual attention to the subject, was a bid for
complaints, and resulted in a report, by a certainly not friendly commission,
that, as quoted above, generally the railroads of California were in good order,
their management wise and economical, and conducted with a view to the public
convenience.
Since the date of said report the State of California has had several diiferent
boards of railroad commissioners to which complaints regarding the charges
of this company have been rare. In nearly every case they have proved to have
been without foundation or based on a misrepresentation of facts, and no case
has failed of a satisfactory adjustment.
CENTRAL PACIFIC INTEREST IN POOLS.
With respect to pools : The traffic over the line between San Jose" and
Ogden, or any part of it, is not, and has not been since April 5, 1887, subject
to any pooling contract. Previous to April 5th it was concerned with the Union
Pacific and Denver and Rio Grande Companies in a pool of Utah traffic, the
object of which was to secure uniform, reasonable, and stable rates of charge
for freight to and from the Territory of Utah ; conditions so necessary to
successful trade as to be of equal value to both the public and the carrier.
The balances received and paid under that pool were very small.
For several years previous to February, 1886, this line was also concerned
with others in a pooling contract which covered through rates between points
east of 97th meridian in the United States and the Pacific coast. The association
of roads concerned in this pool was termed the Trans-continental Association.
The object of this association was to make and maintain reasonable rates of
transportation, afford mutual protection to the interest of the associated
roads, and to fairly distribute the revenue from traffic which was naturally
the subject of competition between them. The pool was very beneficial to the
Central Pacific line. It was discontinued December^!, 1885, with the expectation
of renewing it, but the parties could not agree upon the terms, so that on
or about February 18, 1886, tho Trans-continental Association was dissolved.
The result was a " war in rates" that was very destructive to revenue.
Had the trans-continental pool be.en maintained during 1H86 and the same amount
of tonnage carried at the rate per ton per mile earned by the associated roads
in 1885, the earnings of the Central Pacific line from freight subject to that
pool during 188G would have been increased by over a million dollars. It is
only fair to say, however, in this connection, that doubtless the very low
rates that obtained in 1886 diverted traffic from the water lines which would
not have been carried by rail at the rates in force in 1885, and it also doubtless
moved other tonnage which would not have moved at the rates of 1885. Nevertheless
a continuation of tho trans-continental pool on both freight and passengers
would have benefited the Central Pacific line in a very large sum.
PACIFIC MAIL AGREEMENTS.
For many years the Central Pacific line, in connection with the Union Pacific
Railway, was concerned in a contract with the Pacific Mail Steamship Company,
whereiimtor a certain amount of space in the vessels of said steamship company
was purchased by tho railroad companies for a given sum, which varied from
time to time as the contract was amended. Under the last contract the amount
of space was 1,200 tons each way per month, and the sum paid was at tho rate
of $95,000 per month. This space was filled by such freight as could bo obtained
for California at rates made and controlled by the railroad companies. The
arrangement was of the nature of a joint purse arrangement, simply for the
purpose of regulating the competition between tho steamship company and the
railroad lines. It was beneficial to both by securing stability and uniformity
in rates, and was of great value to the public as
2574 U. S. PACIFIC EAILWAY COMMISSION.
well as to the carriers. Upou the organization of the Trans-continental Association
the roads joined in that organization assumed the obligations of the said
contract with the Pacific Mail Steamship Company. In March, 1886, this contract
was terminated by reason of the disorganization of the Trans-continental
Association, since which time there has been unrestrained competition between
the steamship company and the railroads, greatly to the detriment of both.
POOLS ARE PRODUCTIVE OF REASONABLE RATES AND BENEFICIAL.
The beneficial eifects of pooling contracts to the Central Pacific interest
is demonstrable by our experience and records.
No contracts to pool the earnings from traffic to which your companies have
been parties since my connection withtthem have permitted the charging of unreasonable
rates. On the other hand, they effected the minimum of discrimination, secured
stability and uniformity in rates, and were of mutual benefit to the public
and the carrier.
I take it that a reasonable rate is one which will, without diminution of the
profits to the carrier, permit and encourage the largest increase and development
of traffic ; that it would be unreasonable on the part of any carrier to impose
a charge for its service which would obstruct or dimmish remunerative traffic
; that it would be equally unreasonable to require a carrier to increase its
traffic at the expense or diminution of profits. In other words, the law of
supply and demand governs the carrying trade as it rules all other commerce,
and a reasonable rate is what a writer on ''"The Natural Laws of Business " terms
a " normal " rate, which he defines as "that point above which
demand falls off so rapidly that profits diminish, and below which even a great
increase of business would lessen them." The problem of railroad management
is to make the nearest approximation to this " normal" rate. In my
judgment this has been the constant aim and effort of the officers of your
companies. Rates have constantly tended downwards, and that tendency will inevitably
continue.
The pooling contracts referred to have not prevented nor interrupted the downward
tendency of rates. They have simply regulated it by preventing a reckless competition
which would have destroyed all profits. These pooling contracts have not destroyed
competition. When they were in force each carrier party thereto continued in
the field its soliciting and advertising agencies as active and earnest in
the pursuit of business as though it had no guarantee of revenue from the pool.
Each party had its own clientage, and was as jealous of the interests of that
clientage as the shippers themselves could be. All tariffs required unanimous
consent, and all rates and rules were uniform. The fact that these pools did
not hinder the operation of the law of supply and demand on the traffic; did
not destroy the competition between the carriers, and did not diminish the
traffic, is sufficient proof that they did not permit the charging of unreasonable
rates.
Again : It is seldom, if ever, that two or more carriers competing for the
same traffic are equal in respect to physical characteristics of the line,
terminal facilities, connections, or those features which determine preferences
upon the part of the traveling or shipping public upon all the traffic pooled,
and therefore their respective taking power differs. Those carriers having
few advantages to offer in these respects cannot compete with others possessing
numerous advantages upon equal terms ; hence their rates must be lower. The
better lines will not suffer the loss of business by permitting lower rates
to be made by others, except there is a mutual agreement fixing the relations
of the rates by the various routes. The result is the see-saw process, the
working of one line against the other by the shipper, which causes not only
constantly varying rates by the different lines but also different rates to
different individuals. The pooling contract produces uniformity in the rates
by all lines or fixes the degree of difference in the rates by the several
lines, and by so doing effectually prevents the discrimination between individuals
which invariably results from independent action. This uniformity and unanimity
of action in making tariffs prevents frequent changes and requires changes,
when made, to be duly considered and simultaneously published and applied by
all the carriers. It also requires a reasonable notice to the public, as each
carrier, jealous of the interests of its own patrons, insists upon time and
opportunity to acquaint its patrons with said changes, thus securing a stability
in rates which shippers as a rule regard as of the greatest value.
"
DISCRIMINATIONS " AND " DIFFERENTIALS."
"
Differential" rates as commonly used by practical railroad men, are not
and have not been in use on your line.
The general passenger agent and general freight agent, who are charged with
tho details of the passenger and freight business, respectively, report that
there are no unjust discriminations in the fares and freight charges of this
company. I presume
LELAND STANFORD. 2575
it is understood that in transportation business discriminations areas necessary
as in all other business; that is to say, different rates of charge are made
for different chisscs of passengers, and for different classes and different
quantities of freight. The rates of charge on the valley portions of the
road are lower than on the mountain portion. The charges upon lines through
comparatively thickly settled districts are lower than those made through
sparsely settled and desert territory. Such discriminations, I believe, are
recognized as necessary, legitimate, and judicious. Where competition is
encountered, rates necessary to meet that competition are made. Where this
competition is with water carriers, the charge is often lower for a longer
than for a shorter and immediate service, but in no case is a lower charge
made for a longer than for a shorter haul included in the longer except where
competition- compels it. There are not and have not been any discriminations
in fares or freight charges having for their object or effect the prosperity
of one locality or community against another locality or community, or the
promotion of the interests of one person or any number of persons against
the interests of any other person or persons.
In this connection I beg leave to quote further from the report dated December
1, 1877, of the railroad commissioners to the legislature of California, namely
:
"
Some few complaints of inequality or unfairness of charges and of lack of proper
attention to the public convenience in the classification of goods and the
charges for freight have reached us. These have, in all cases, been first referred
to the companies concerned for remedy or explanation, and, in every instance,
so far, the complaints have been responded to as promptly as if we possessed
legal authority to command their answer or enforce redress. Some of the complaints
made to us proved to be w ithout foundation or made on a misapprehension of
facts. In others, reasons for the course pursued have been adduced, not before
known to the parties complaining."
DISCRIMINATION BETWEEN INDIVIDUALS.
1 ' No instance of the occurrence of this abuse has been brought to our notice.
There are rumors of its existence, and it is even said that the sufferers by
it fear to complain lest they be punished by further and ruinous discrimination.
Whilst it is possible that there may be some foundation for these suggestions,
it is also probable that the instances, if they exist, are of rare occurrence,
and in most, if not in all, cases explainable by circumstances unknown to or
insufficiently considered by the parties who have felt aggrieved."
Upon the subject of inflexible railroad rates the railroad commissioner of
Michigan says (Report, 1883) :
It is certain that no rates can be made of universal application to all roads
alike without working the grossest hardship and injustice. The consideration
of cost of doing the business enters largely into the question of rates, while
the condition of the road bed, gradients, and character of lino generally have
so much influence in determining that cos't on each individual road, that it
is not at all certain that the interests of the public and the corporations
will not best be promoted by leaving the great principle of supply and demand
to regulate the price of railroad transportation the same as it does that*
of the commodities carried. If left to regulate itself as does the question
of rates on the high seas, only restricted by such reasonable limitations to
maximum charges as are incident to the fact that a railroad is a public use,
and the company that operates it in its corporate capacity derives its franchises
upon such conditions as the legislature may impose, I have no doubt that railroad
tariffs would soon become as uniform and rates as low throughout the country
as the cost of building and operating, coupled with the amount of tonnage to
bo carried would justify commensurate with a fair return upon the capital invested
ia the road.
So far as the productive industries in this State are concerned it can in truth
bo said that as between production and transportation there is little, if any,
friction, and that but for the fact of the question being a potent factor in
politics we should hear no complaint from the consumers who after all pay all
the freight charges on what is consumed.
STATE OF CALIFORNIA,
City and County of San Francisco, 88 :
J. C. Stubbs, being first duly sworn, saith that ho has read the foregoing
statement consisting of the pages next preceding, marked Exhibit No. 7, and
knows the contents thereof; that the facts therein stated are true, except
as to those matters stated on his information or belief, and as to those ho
believes it to be true.
J. C. STUBBS.
Subscribed and sworn to before me this 26th day of July, A. D. 1887. [SEAL.]
E. B. RYAN,
Notary Public in and for eaid City and County.
2576 U. S. PACIFIC RAILWAY COMMISSION.
EXHIBIT No. 8. Statement of L. M. Clement, civil engineer, relative to cost
of construction.*
SAN FRANCISCO, July 21, 1887. HOD.LELAND STANFORD,
President Central Pacific Railroad Company :
DEAR SIR : At the beginning of the construction, the company, knowing the political
and commercial necessities demanding the rapid completion of the railroad,
determined that nothing which was in their power to prevent should for a single
day arrest its progress.
With this determination in view all energies were bent, fully realizing the
physical obstacles and financial difficulties to be overcome.
The financial difficulties were not lessened by the opinions circulated to
the effect that the obstacles were insurmountable ; that the railroads then
constructed in Europe were as bagatelles compared with the difficulties to
be met in constructing the Central Pacific Railroad, and failure was clearly
written on the rocky sides of the canons and the\>old granite walls of the
Sierra Nevada Mountains.
Not only was it impossible to construct a railroad across the Sierras via Dormer
Pass, but owing to the great depth of snow, some years reaching an aggregate
fall of nearly 50 feet, would be impracticable to operate, and if built must
be closed to traffic in the winter months, which would have been the case had
not the road been protected at great cost by snow sheds.
Against these utterances from men of railroad experience the company had to
battle in financial circles, forcing them to show that they were not attempting
an impossibility, though always realizing the great difficulties.
As soon as the company went into the American market for rail, for they were
shut out from the other markets of the world by their charter, the prices raised
80 per cent., from $41.75 to $76.87 per ton, nearly three (3) times the price
of steel rails two years ago.
It must not be forgotten in discussing these questions that the Central Pacific
Railroad was begun a quarter of a century ago and has been completed over eighteen
(18) years. We should consider the state of affairs, circumstances, and conditions
then existing. The average price of American iron rail during the building
of the road (no steel rail was then made and think none till the last year
of its construction) was $91.70 per ton at the rolling mills.
This rail had to be transported to San Francisco via Cape Horn or the Isthmus
of Panama, and lightered for transportation to Sacramento, Cal., the initial
point of the Central Pacific Railroad.
Shipments via the Isthmus, as late as the year 18(58, cost for transportation
alone on rail, $51.97 per ton, the rail costing, delivered at Sacramento, $143.67,
not including charges for transfer from ships at San Francisco to the lighter,
nor for transportation up the Sacramento River. Delays and losses of ships
and IJieir cargo of railroad material via Cape Horn and unforeseen emergencies
made it necessary to frequently use the Isthmus route, that there should be
no detention in the progress of the railroad eastward.
During construction, by reason of high war risks, transportation rates advanced
275 per cent, per ton.
Via the Isthmus, for freight alone, there was paid as high as $8,100 for one
locomotive.
On a shipment by the latter route of eighteen locomotives the transportation
charges were $84,466.80, or $4.692.50 each.
For two engines, twenty-two years ago, there was paid $70,752 in the currency
of the United States. This was an extreme case, but the power was absolutely
necessary to supply materials needed for construction ; without these engines
there would be delay.
The first ten engines purchased by the Central Pacific Railroad Company cost
upwards of $191,000 ; the second ten upwards of $215,000.
The demand for power after the first 25 miles of road were constructed was
great was great, as then were met the high mountain gradients.
The freight via Cape Horn to San Francisco only, on the first locomotive purchased
by the company, was $2,282.25.
Not only was all the material for railroad construction commanding high prices,
labor also shared in the advance in prices. California's laborers were mainly
miners, accustomed to work in placer mines or not, as it suited them. Mining
was more to their liking than the discipline of railroad work. They were indifferent,
independent, and their labor high-priced, and to these difficulties the excitement
of the .great Comstock lode was upon us, where any able-bodied man commanded
$4 or more per diem.
* See answer to question No. 51.
LELAND STANFORD. 2577
Labor sufficient for the rapid construction of the Central Pacific Railroad
was not then on the coast, and the labor as it existed could not be depended
upon the first mining excitement meant a complete stampede of every man,
and a consequent abandonment of all work. This labor question as well as
others were serious ones. Each day brought up propositions which must be
solved without delay ; the construction must advance.
As the snow line was reached the snow increased in depth toward the summit,
from a few inches to over 15 eet on a level, from actual measurements. The
ground was kept bare forthe graders by shoveling, upwards of one-half of the
labor and, after storms, the entire grading force being expended in removing
snow. Not only was it necessary to remove the snow to permit excavation, but
the space to be occupied by the embankments was cleared and kept clear of snow,
otherwise the melting of the snow under the broad bases of the high embankments
would have caused serious settlements, which, on ascending gradients already
of 105 or 116 feet per mile, would in cases increase the gradient beyond the
tractive power of the engine. There was a limit to this snow shoveling as the
altitude increased, and this limit was reached when it required an army of
men to clear away and keep clear after each storm, for a small gang of laborers.
As we neared the summit of the Sierras winter was again upon us, granite tunnels
to bore, deep rock cuttings to make, and retaining walls to construct.
Rock cutting could not be carried on under snow drifts varying in depth from
20 to 100 feet. It was decided, no matter what the cost, that the remaining
tunnels should be bored during the winter. To reach the faces of the tunnels
the snow drifts were tunneled and through these snow tunnels all rock was removed.
Retaining walls in the canons were built in domes excavated in the snow the
wall stones raised or lowered to their places into the dome through a shaft
in the snow.
All the force, numbering thousands, could not be worked in the tunnels and
on the retaining walls. The surplus men with their tools, luggage, &c.,
were hauled beyond the summit, skipping the line now covered with deep snow,
and active work begun in the canons of the Truckee River.
That no delay, even here, should result from the unfinished gap, 20 miles of
rails with their fastenings, a locomotive, and cars sufficient for working,
were, by oxen and horses, hauled over the summit and down into the canon of
the Truckee River.
It was deemed important to reduce some of the work in the lower mountains crossed
by the railroad in Utah, so that when the track reached those points there
should be no delay. About one car-load of tools and material was wagoned from
Wadsworth to the Promontory Mountains, at a cost of $5,400. Everything was
expensive ; barley and oats ranged from, $200 to $280 per ton; hay $120. All
other supplies in Utah in the same ratio. Along the Humboldt River much of
the line was constructed during the winter. Earthy material that could ordinarily
be excavated by the pick and shovel was frozen to such a depth as to require
blasting. This frozen material made expensive embankments, requiring constant
attention when the frost was leaving it, to maintain the roadway in a condition
for the transportation of material to the front. As early as it was possible,
in the beginning of the following year, to again attack the work in the heavy
snow-belt region, the forces were returned to the granite cliffs and canons.
This army of men shoveled off the snow to gain time ; miles of the line were
thus made ready for the drill and powder $67,500 worth of powder in a single
month being used, a sum sufficient to construct and equip 8 miles of ordinary
railroad at the present day. During the winter months there was constant danger
from avalanches, and many laborers lost their lives. Where it was possible
to reach the threatening combs of great masses of compact snow leaning over,
the granite bluffs they were removed by powder. To reach the overhanging snow
required courage and determination, and the call for volunteers for this daring
undertaking was always answered. When the forces were concentrated the progress
in the solid granite ledges was slow but certain. The track was kept close
up to the grading forces and never lagged when it was possible to provide track
material, power, or rolling stock, either by steamships or sailing vessels.
For many days, owing to the hardness of the rock in the vicinity of Cisco,
it seemed impossible to drill into it a sufficient depth for blasting purposes;
shot after shot fired as if from a cannon. Perseverance alone conquered. That
was before the powerful explosives were invented and many other improvements
made for railroad construction purposes in the last twenty years. The company
at the summit of the Sierras, Doniier Pass, manufactured nitro-giycerino, but
it was too dangerous for general use. Transportation of material, tools, &c.,
was then an important factor in construction; there were then no such powerful
engines as of the present day, which could haul two of the then most powerful
ones and their loads ; no cars to carry 50,000 pounds of load.
All material for construction excepting timber, the greater portion of which
came from the Sierra Nevadas and some from the coast counties of California
and from Oregon, inus,t come from tfte Atlantic States, via. tlio Isthmus or
Cape Horn to
2578 U. S. PACIFIC RAILWAY COMMISSION.
Francisco, there lightered for ascending the Sacramento River to Sacramento,
and thence hauled over the Central Pacific so far as completed, and when
needed wagoned beyond the end of the track. The trains returned empty no
return loads ; there was not one inhabitant to 10 miles between the last
crossing of the Truckeo River and Bear River in Utah.
With the exception of a few cords of stunted pine and juniper trees, all the
fuel was 'hauled from the Sierra Nevada Mountains. Not a coal bed on the line
of the Central was then known, and the only one yet discovered is a poor quality
of brown lignite.
Water was scarce after leaving the Truckee and Humboldt Rivers, and during
the entire construction was hauled for steam and general use of the grading
forces.
Thousands of dollars without result were expended in well boring ; tunnels
were bored into the mountains east of Wadsworthto develop small springs, and
when water was found it was carefully protected and conveyed in some cases
over 8 miles in pipes to the line of the road.
There was not a tree that would make a board on over 500 miles of the route,
no satisfactory quality of building stone. The country afforded nothing entering
into the construction of the superstructure of a railroad which could be made
available. The maximum haul for ties was 600 miles, and of rails and other
material and supplies, the entire length of the Central Pacific Railroad, or
740 miles.
Cars were transported on ship, in pieces, to San Francisco, and lightered for
Sacramento, and there put together.
California had no means for manufacturing for railroads. Only fourteen years
prior to the beginning of the construction of this railroad was any considerable
emigration directed to this coast, either by wagon, requiring as many months
as now days from the Missouri River, by sailing vessels via Cape Horn, a long
and tedious voyage of months, or by steamship. Twenty-two days was a quick
trip. It was a country new, and only known as a mining region. A quarter of
a century has made great changes. Once the possibility of constructing a railroad
across the mountain ranges and deserts proven and emigration started west,
capital was less timid of the probable future of railroad enterprises, and
means were furnished for constructing other transcontinental roads. By the
aid of machinery, powerful explosives, and experience, railroads can now be
constructed at comparatively light cost.
It is probable that had the road been constructed during the five years preceding
it would not have cost more than 66 per cent, of what it actually did cost.
The principal elements material, transportation, and labor were very much cheaper.
Rails averaged 51 per cent, less; transportation 63 percent, less. Every element,
excepting labor, was a large percentage less.
If constructed five years subsequent, it would have cost about 75 per cent,
of the actual cost. Had the whole time allowed for construction of the Central
Pacific Railroad been used, it is not an easy problem to determine for how
much less the road could have been built.
Advantage of the markets could then have been taken; contractors would have
been willing to undertake the work if a reasonable time for completion were
allowed, so that they would not be required to perform any of the work during
the winter mo.nths where mercury freezes and in deep snows; in fact, all the
advantages of seven additional years.
Respectfully, yours,
LEWIS M. CLEMENT.
STATE OF CALIFORNIA,
City and County of San Francisco, 88 :
L. M. Clement, being first duly sworn, saith : That he has read the foregoing
statement, consisting of the pages next preceding, marked "Exhibit No.
8," and knows the contents thereof; that the facts therein stated are
true, except as to those matters stated on his information or belief, and as
to those he believes it to be true.
LEWIS M. CLEMENT.
Subscribed and sworn to before me, this 26th day of July, A. D. 1887. [SEAL.
E. B. RYAN,
Notary Public in and for the City and County of San Francisco, State of California.
LELAND STANFORD. 2579
EXHIBIT No. 9. Statement of Wm.Hood, chief engineer, relative to cost of construction.*
SAN FRANCISCO, CAL., July 23, 1887. lion. LELAND STANFORD,
President Central Pacific Hailroad Company :
SIR: Referring to yonr letter of recent date in regard to the Central Pacific
Railroad:
I was an assistant engineer on the road during the greater part of its construction,
and have been chief engineer since October 10, 1883, and ain familiar with
its construction and subsequent operation.
The entire road was completed in May, 1869, or about seven years sooner than
was required to comply with the act of Congress under which it was built.
This early completion of the railroad was accomplished only in the face of
obstacles of the most formidable nature and such as were perhaps unprecedented
in railroad construction. The Sierra Nevadas have a snowfall on the higher
portions aud a rainfall nearer their basis such as would seem incredible to
those not acquainted with the facts; and these climatic features were enough
to have caused the suspension of the work each winter had attention been paid
to cheapness of construction or to any considerations except the completion
of the road in the least possible time and in the most substantial manner practicable
with the available materials. Below the snow line in the winter of 1865 and
1866 the roads were practically impassible for wagons ; aud the large construction
force was supplied mostly by pack trains, employing large numbers of animals
to transport supplies of all kinds to the required points on the work.
The winter of L866 and 1867 and the winter of 1867 and 1S68 were long remembered
as having had a snowfall heavier than has since been known on the mountains,
and it was during these seasons that the railroad was built above the snow
belt and over the summit. The annual snowfall was about 40 feet, which gave
as much as 18 feet of snow on a level near the summit of the railroad pass,
and as late as March, 1867, the average level depth of snow in Summit Valley
was between 15 and 16 feet. These depths of snow, with the frequent storms,
made any work except in tunnels impracticable during the winters in the region
of the summit, and it was decided to send the force not engaged on tunnel work
to build railroad in advance in Truckee River Canon, where the less depth of
snow rendered grading work possible. The supplying of this force in the Truckee
Canon, by means of sleds over the summit through deep snows and blinding storms,
was exceedingly expensive, as was also the transportation by the same means
of track material for 40 miles of road so built in Truckee Canon aud 3 locomotives
and 40 cars. In this way, by working tunnel force in winter and moving back
the remainder to do the outside work in summer, the sumrait worfc was finished,
an incidental expense being the moving of from 10 to 12 feet of packed show
from the sites of the cuts and banks before grading could begin in the spring.
When the road over the summit to Truckee was done, the rapid progress across
the deserts began.
About 3,000 men were sent a distance of 300 miles in advance of the track to
Palisade Canon, and supplied by teams over the deserts, the haul without water
being as much as 40 miles in places, and the remaining force Drought up the
work in advance of the track. Ties were hauled from the Sierra Nevadas hundreds
of miles into the deserts. Rails for the rapid progress were brought by sail
around Cape Horn, and when any delay was possible through non-arrival of ships,
track material was sent at heavy expense by the quicker route via the Isthmus
of Panama and steamers. In the winter of 1868 and 1869 the weather was most
severe, and the earth was often frozen so deeply that it was blasted and handled
as if rock, at considerable expense.
During the entire construction of this railroad all supplies were very high-priced.
Rails were nearly three times as expensive as they were a few years afterwards,
and freights via Cape Horn were high ; and after reaching San Francisco all
track material had to be rehaudled and sent up the river to Sacramento before
it could be loaded on the cars for the front. Tne same was true of all the
rolling stock. With all these causes of extra expense to increase cost of buildiug
the road, it is my opinion that with more time spent in building, with entirely
legitimate reduction of force in winter and in general with ordinary speed
of construction, the entire road could have been built for fully 75 per cent,
less than its actual cost ; but in that case it would not have been open for
traffic for a long time after its actual date of completion.
The road was finished to Newcastle at less speed than afterward ruled. From
Newcastle to Wadsworth was built between February, 1865, and July, 1868, with
a
force averaging fully 11,000 men and more than three years' time was required for this 157 miles. From Wadsworth to Ogden was built between July, 1868, and May, 1869, with a force avera^ " only to build this 555 mi
1869, with aforce averaging 5,000 men, and between nine and ten months were required >5 miles. The work of buildiug from Wadsworth to Ogden is about
* See answer to question No. 51.
2580 U. S. PACIFIC RAILWAY COMMISSION.
comparable 011 an average to tliat from Ogden to Omaha ; and the work of building
the Central Pacific Railroad from Newcastle to Wads worth, only 157 miles,
would have easily built the entire road far east of Omaha, had this 157 miles
been of the same average cost as the road from Wadsworth to Omaha. Respectfully
submitted.
WILLIAM HOOD.
STATE OF CALIFORNIA,
City and County of San Francisco, 88 :
William Hood, being duly sworn, says he has read the foregoing statement ;
that the matters and things are true of his own knowledge except as to matters
on his information and belief, and as to those he believes them to be true.
WM. HOOD.
Subscribed and sworn to before me this 25th day of July, A. D. 1887. [SEAL.l
E. B. RYAN,
Notary Public in and for said City and County.
EXHIBIT No. 10. Statement of J. H. Strobridge, superintendent of construction,
relative
to the cost of construction.*
SAN FRANCISCO, CAL., July 23, 1887. Hon. LELAND STANFORD,
President Central Pacific Railroad Company :
SIR : Referring to your letter of recent date, in regard to the construction
of the Central Pacific Railroad, I was superintendent of construction during
the building of the road. The work was pushed with the utmost vigor ; all the
men were hired that could be found, and no eifort or expense was spared to
complete the road as quickly as possible. Inthiswayit was finished and in operation
from Sacramento, Cal., to Ogdeii, Utah, about seven years sooner than was required
by act of Congress. During construction very high prices were paid for powder
and all tools and supplies used on the work, and nothing was spared that would
hasten its completion, and the work was pushed regardless of the season. The
winter of 1865 and I860 was a very wet one, making the roads on the clay soils
of the foot-hills nearly impassable for vehicles. Large numbers of pack animals
had to be brought into use, and on them were carried nearly all supplies, even
hay and grain, over steep mountain trails, to the construction camps. As illustrating
the irnpassability of the roads, the stage running from end of track to Virginia
City was stuck in the mud and left standing in the street at Gold Run for six
weeks, the passengers being carried in the meantime by saddle train from the
railroad at Colfax to Dutch Flat. The building of the railroad during thin
time was prosecuted with energy but at much greater cost than would have been
the case in the dry season. During the winter of 1866 and 1867 and the following
winter of 1867 and 1868 there were unusually heavy snowfalls in the upper Sierra
Nevadas, where the road was then under construction. The tunnels were got under
way with as large a force as could be used on them, and the remainder of the
force was sent to the Truckee Canon on the east slope of the Sierras, where
the snowfall was not so great as to entirely prevent grading during the winter,
the total force being about 13,500 men at this time. The snows were so deep
that it was impossible to keep the tunnel approaches clear, and we were compelled
to make tunnels through the snow from the dump to the tunnel entrances. Snow
tunnels were also required to get into camp. In many instances our camps were
carried away by snowslides, and men were buried and many of them were not found
until the snow melted the next summer. In the spring of each year the men were
taken back from the Truckee into the mountains and an average depth of 10 or
12 feet of snow was cleared away before grading could be commenced.
The total snowfall of the season was about 40 feet, and the depth of hard,
settled snow in midwinter was 18 feet on a level in Summit Valley and Donner
Pass, over which we hauled on sleds track material for 40 miles of railroad,
3 locomotives, and 40 cars from Cisco to Donner Lake, where all was reloaded
on wagons and hauled over miry roads to Truckee, a total distance of 28 miles,
at enormous cost. In this way the road was forced to the east slope of the
Sierra Nevadas. In crossing the deserts eastward from the Truckee River, water
for men and animals was hauled at times 40 miles. It was necessary to have
the heavy work in Palisade Canon done in advance of the main force, and 3,000
men with 4oO horses and carts were sent to that point, a distance of 300 miles,
in advance of the track. Hay, grain, and all supplies for the
* See answer to question No, 51,
LELAND STANFORD. 2581
men and horses had to be hauled by teams over the deserts for that great distance,
there being no supplies to bo obtained on the entire route. The winter of
1808 and 1809 was one of severe cold. The construction was in progress in
the upper Humboldt Valley, where the ground was often frozen to a depth of
2 and 3 feet, and material required blasting and treatment like rock, which
could have been cheaply moved in a more favorable time. The entire cost of
the railroad, had it been built with less speed and as such railroads are
usually constructed, would have been fully 70 per cent. less than its actual
cost, as it was built with rapidity of construction, and without regard to
any outlay that could hasten its completion. The railroad from Newcastle
on the west slope of the Sierras to Wadsworth at the beginning of the Nevada
deserts, 157 miles, was built between February, 1865, and July, 1868, more
than three years, with a force averaging 11, COO men.
The railroad from Wadsworth to Ogden, about 555 miles, was built between Julj
r , 1868, and May, 1869, about ten months, with a force averaging 5,000 men.
If the country between Newcastle and Wadsworth had been of the same average
difficulty as that between Wadsworth and Ogden and between Ogden and Omaha,
the labor that was out upon the Central Pacific Railroad would have built it
to a point far to the eastward of Omaha in the same time, the work from the
east slope of the Sierra No'vadas to Ogden being more than an average of that
from Ogden to Omaha. Very respectfully,
J. H. STROBRIDGE.
STATE OF CALIFORNIA,
City and County of San Francisco, ss :
J. H. Strobridge, being duly sworn, says he has read the foregoing statement
; that the matters and things therein stated are true of his own knowledge,
except as to matters on his information and belief, and as to those he believes
them to be true.
J. H. STROBRIDGE.
Subscribed and sworn to before me this 25th day of July, A. D. 1887. [SEAL.]
E. B. RYAN,
Notary Public in and for said City and County.
EXHIBIT No. 11. Statement of Arthur Brown, superintendent of bridges and buildings,
relative to cost of construction.*
WEST OAKLAND, CAL., July 25, 1887. Hon. LELAND STANFORD,
President Central Pacific Railroad Company :
DEAR SIR : In reply to your letter of the 23d inst., I herewith submit a brief
outline of the construction of the snow sheds over the Sierra Nevada Mountains,
on the line of the Central Pacific Railroad, as well as the conditions which
made them a necessity.
As superintendent of bridges and buildings the work of constructing those sheds
was assigned to myself. The excessive snow belt where the road crosses the
Sierra Nevada Mountains, extends from a point near Blue Canon, on the western
slope, to Cold Stream Canon on the east, a distance of about 40 miles, having
its maximum depth near the summit. The snowfall for the season has been known
from actual measurement to be nearly 50 feet.
In the fall of 1866 the road was opened to Cisco. The experience in keeping
the road open through the following winter led to the construction of the snow
sheds. Although every known appliance was used to keep the road clear from
snow that winter, including the largest and best snow plows then known, it
was found impossible to keep it open over half the time, and that mostly by
the means of men and shovels, which required an army of men on hand all the
time at great expense.
It became evident from our experience then that the snow problem had become
serious, and it was decided, after various discussions on the subject by the
directors of the company, that the only positive means of protecting the road
was by snow sheds and galleries, although the expense of building a shed nearly
40 miles in length was almost appalling and unprecedented in railroad construction,
yet there seemed to be no alternative but build the sheds. I was therefore
instructed to make preparations and plans for such sheds as was deemed best,
from our limited experience at that time.
In the summer of 1867 we built some experimental sheds, which we had to modify
considerably. The snow-shed building in the spring of 1868 was commenced in
ear *See answer to question No. 51.
2582 U. S. PACIFIC RAILWAY COMMISSION.
nest. Owing to the short season in which the work had to bo done (less than
live months) it was decided to cover all the cuts and the points where the
roads crossed the great avalanches beyond the summit, with the idea that
the high embankments on the road could be kept clear of snow.
As the road was then rapidly progressing up the valley of the Humboldt it became
a matter of the most vital importance that the sheds should be so far finished
that the supplies and building materials for construction ahead should not
bo interrupted, as the -connection was to be made in the spring of 1869. We
therefore had to gather men from all quarters and pay high wages carpenters
$4 per day, and suitable laborers about $2.50 to $3. We employed about '2,500
men, with six trains with locomotives distributing material.
The expense was considerably increased by the fact that we had to keep the
road clear for the traffic, which was great, owing to the large amount of building
material forwarded to the front, and to avoid accident, which consumed about
30 per cent, of the time, consequently increasing the cost in that proportion,
besides, we had, by commencing early in the spring, to shovel from 6 to 8 feet
of snow before we could put in foundations foi 4 sheds.
In the fall we continued until the snow stopped us entirely, although we had
been shoveling snow for nearly two months. The expense from the amount of snow
that had to be shoveled, spring and fall, and the difficulty of getting men
at reasonable wages to remain on the work owing to snow, bad weather, &c.,
added very much to the cost. As there were not enough saw-mills to supply the
necessary material, we had to resort to round and hewn timber, which had to
be got from the woods and brought to the track at a great expense, as suitable
men for that purpose were very scarce.
The galleries are built along the side of the mountains, where the slope of
the roof conforms with that of the mountain, so' the snow can pass over easily.
Some of thoso galleries run back on the slope of the mountain several hundred
feet from the center line of the road. In other places massive masonry walls
were built across ravines to prevent the snow from striking the sheds at right
angles. The snow sheds and galleries were finished in the fall of 1869. In
them was used 65,000,000 feet, B. M., of timber, and 900 tons of bolts and
spikes, &c. The total length of sheds and galleries when finished was about
37 miles, at a cost of over $2,000,000.
For several years the loss from fires was considerable, as several miles were
burned down and had TO be rebuilt, and at the present time water trains are
constantly kept on hand for sprinkling down the sheds twice a week, thus preventing
their destruction by fire. A number of the tunnels through the same mountains
had to be timbered at a great expense, as most of it had to be got out in the
winter time, and, as it was impossible to keep the roads open, we had to employ
men and bring timber to the tunnels on hand sleds.
I am quite familiar with the extraordinary exertions put forth in all departments
of this work, as I was constantly on the ground during all this construction,
and especially the almost superhuman effort put forth by Mr. J. H. Strobridge.
superintendent of construction, in keeping the men at work on the rock work
and tunnels, and shoveling snow at great depth during the fall and winter,
and contending against mud and snow in getting supplies to the ground at great
expense.
I consider, from my experience, that if time could have been spared to take
advantage of the proper seasons, it could probably be duplicated now for less
than 40 per cent, of its original cost. Very respectfully,
ARTHUR BROWN, Supt. B. and B. Dcpt.
STATE OF CALIFORNIA,
City and County of San Francisco, ss :
Arthur Brown, being first duly sworn, deposes and saith : That he has read
the foregoing statement, and knows the contents thereof ; that the same is
true, except as to matters there in stated on his information or belief, and
as to those he believes it to be true.
ARTHUR BROWN.
Subscribed and sworn to before me this 26th day of July, A. D. 1887.
[SEAL OF NOTARY.] E. B. RYAN,
Notary Public in and for said City and County.
LELANB STANFORD. 2583
EXHIBIT No. 11. Statement showing from official records the saving to the United
Statesin transportation of mails, troops, munitions of war, supplies, <fc.,
by the construction of the Central Union Pacific Railroad.*
(By E. H. Miller, jr., secretary. )
The act of Congress authorizing an investigation of the books, accounts, and
methods of railroads which have received aid from the United States (in bonds),
and for other purposes, approved March 3, 1887, requires, among other information,
the following :
The average cost per annum of Government transportation in the region now traversed
by the Pacific railroads between the year 1850 and the completion of said roads,
and also the average cost per annum since such completion, and what additional
facilities have been furnished to the Government and the people by said roads.
Also, to inquire whether or not the Pacific Railroad was completed in less
time than was allowed by .the law, and, if so, how much less time, and if the
United States was benefited thereby.
It is for the purpose of furnishing this information that the figures and facts
stated in the following pages have been collated. All the statements made are
taken from official sources, and reference in each case is made to the authority.
Inquiry is made :
(1) As to the rates and cost of Government transportation prior to the construction
of the railroad, the rates and cost of service after its completion, and the
difference, being the saving in transportation charges resulting from the operation
of the road to the present time. This inquiry includes a comparison of the
facilities furnished the Government and the people before and after the construction
of the road, and furnishes the figures upon which the statements made in the
subsequent inquiries are based.
(2) As to the benefit to the Government resulting from the construction of
the road in less time than was allowed by the law.
(3) Inquiry is made as to the debt and interest at maturity of the bonds, less
the amounts applied as a credit thereon by transportation services and cash
payments under the existing laws, and the saving by the United States in transportation
services to the same time.
A comparison of the charges for transportation prior and subsequent to the
construction of the road can best be obtained by separating the subject of
inquiry into the headings of freight transportation, including supplies, munitions
of war, &c., passengers and troops, and transportation of United States
mails, summarizing these headings in conclusion.
UNITED STATES FREIGHT.
The greatest item of saving to the Government was in Army transportation. The
cost of this at former rates' was an item in the expense of the Army causing
frequent comment ; and one of the chief causes which led the Government to
grant the loan of subsidy bonds was that this expenditure might be reduced.
In arriving at a comparison between these charges before and after the completion
of the road, it has been lound that more accurate results can be attained by
considering separately the charges on freight from these on passengers and
troops. The following Trefers to freight traffic:
ARMY TRANSPORTATION PRIOR TO RAILROAD.
Prior to the construction of the road supplies for the posts on the plains
and in the mountains were regularly carried by wagons. Contracts for this service
were made by routes, and abstracts of these contracts have been stated from
time to time in the reports of the Quartermaster-General. Most of the data
for the following rates is taken from these reports. The Army first seems to
have availed itself of the road in 18o7. From that time the services rendered
by the road became greater year by year as the line was constructed from each
end ; and as the roads were extended the wagon routes were shortened and finally
abandoned. A general idea of the former condition of affairs, the routes and
rates, may be gained from the following references:
WAR DEPARTMENT REPORTS AS TO RATES.
The Quartermaster-General of the Army, in his report to the Secretary of War
for 1867, says:
"
The Department has, during the fiscal year, for the first time been able to
avail itself of the Union Pacific Railroad in forwarding its supplies to posts
on the plains west of the Missouri River. At the close of the fiscal year the
Omaha Branch of this
* This exhibit refers to questions Nos. 47, 48, 49, and 52.
2584 U. S. PACIFIC RAILWAY COMMISSION.
road transported the military store* as far as Fort Sedgwick, the branch from
Kansas City as far as Fort Harker, thus saving in the former case 398 miles,
in the latter 215 miles, of wagon transportation. After inviting, by public
advertisement, proposals for the transportation of military stores by wagon
transportation on the Western frontier, the usual annual contracts were awarded
as follows : April 4, on route No. 1, from the Omaha Branch of the Union
Pacific Railroad and certain other named points to posts and depots in Nebraska,
west of longitude 102; in Montana, south of latitude 46; in Dakota, west
of longitude 104 ; in Idaho, south of latitude 44 and east of longitude 114
; and in the Territories of Utah and Colorado, north of latitude 40, to Wells,
Fargo & Co., at the following rates: From April 1 to August 81, 1807,
inclusive, at $1.64 per 100 pounds per 100 miles; from September 1 to December
31,
1867. inclusive, at $1.99 per 100 pounds per 100 miles; and from January 1
to March 31, 1868, inclusive, at $2.50 per 100 pounds per 100 miles." (Report
Secretary of War, 18b7-'68, vol.1, p. 533.)
Again, Quartermaster- General Dana, in his report dated October 10, 1868, of
the rates paid for transportation on tho plains, says :
"
The field for the operation of wagon transportation lies almost exclusively
beyond the Mississippi River. Supplies are conveyed to various posts on the
plains by this means in connection with the Pacific railroads. The principal
routes are as follows, and contracts for the transportation of supplies, &c.,
on these routes, entered into for the year ending March 31, 1869, are now in
force:
11 Route No. 1. From Fort D. A. Russell, D. T., or such other posts as may
be determined upon during the year, on the Omaha Branch of the Union Pacific
Railroad west of Fort D. A. Russell, or at Fort Laramie, D. T., to posts in
the State of Nebraska, Territories of Montana and Idaho, that part of the Territory
of Dakota west of the Missouri River and the northern part of Colorado.
"
The contractors on this route are Samuel Black, Richard Kitchen and William
A. Martin, all of the city of Leavenworth, Kansas, composing the firm of Black,
Kitchen & Martin. The following are the rates per 100 pounds per 100 miles,
viz : For April,
1868, $1.90; May, 1868, $1.75 ; June, July, and August, 1868, $1.60; for September
and October, 1868, $1.75; for November, 1868, $1.90; for December, 1868, $2;
for January and February, 1869, $2.50; and for March, 1869, $3; and, on an
average, are for the. entire year the same as for the year previous." (Report
Secretary of War, 1868, part 1, p. 829.)
The next year the Quartermaster-General reports :
"
The completion of the Pacific railroads has diminished the quantity and cost
of wagon and stage transportation, some of the important posts and depots being
upon the line of railroad. The posts north and south are supplied by wagon
routes extending into the wilderness. Tho extension of the Pacific Railroad
has occupied the route No. 1, which has been supplied for many years by wagon
transports, aud 110 contract has been made on this route for the year ending
March 31, 1870." (Report Secretary of War, 1869-70, vol. 1, p. 213.)
HIGH FREIGHT RATES. PRIOR TO RAILROAD.
These statements show the rates in force from the commencement of the Pacific
Railroad to its completion on the wagon route which was replaced by the railroad.
The highest rate given is $3 per 100 pounds per 100 miles, equal to 60 cents
per ton per mile ; and the 'lowest rate is $1.60 per 100 pounds per 100 miles,
or 32 cents per ton per mile, the difference in the rate depending chieliy
on the difference in the seasons, the lowest rates being in the summer and
the highest in the winter or early spring. The rates stated are about those
in force for year after year just prior to the completion of the road on the
plains between the Missouri River and the Rocky Mountains. But west of the
Rocky Mountains, between the Great Salt Lake and the Pacific Ocean, a greater
cost was required for the service.
HIGHER RATES WEST OF SALT LAKE.
Of the rates on this Pacific coast teaming it is difficult to get any fair
estimate, as the transportation was chiefly performed by Government teams.
QuartermasterGeneral Meigs (Report Secretary of War, 1866-'67, p. 58), in October,
1866, says:
"
There are some very costly routes in the military Division of the Pacific west
of the Rocky Mountains and in Arizona, by which supplies are transported from
the Pacific coast. Most of this work is done by United States trains, and its
actual cost is not reported. The expenses of the troops on that coast, in consequence
of the difficulty and cost of transportation, are very heavy."
LOWEST RATE TAKEN FOR THESE CALCULATIONS.
If then, in making an estimate of the saving to the Government in transportation
by the construction of the Pacific railroads, we take as an average for the
rate for
LELAND STANFORD.
2585
inerly paid by the United States the lowest of those given, we shall certainly
err, if at all, on the side of the Government. The actual average must of course
be somewhat higher than the lowest rate; but, on the other hand, it is to be
remembered that the greater amount of transportation was performed at the summer
or low rates, and a comparatively small amount at the higher or winter and
spring rates. We will use then, as au average wagon rate, the lowest named
above, $1.60 per 100 pounds per ICO miles, or 32 cents per ton per mile.
The wagon rates on routes remaining in operation on either side of the Pacific
Railroad after its completion were reduced somewhat, compared to the wagon
rates in force formerly, but that reduction was the result doubtless of the
settlement and increased security of the country from Indian depredations consequent
upon the construction of the railroad. This reduction is an additional saving
in money to the Government by the construction of the road, which is not shown
in the following calculation, as it is not possible to make an estimate of
its amount which would be satisfactory.
The average rate of freight charged the Government by the Pacific railroads
has not been ascertained for each of the years under consideration, but the
average rate charged on all freight carried, including Government and commercial,
is shown in the following table:
FREIGHT RATES ON CENTRAL AND UNION PACIFIC RAILROADS.
Average rate per ton per mile charged on all freight transported the several
years shoivn.
...
RATES CHARGED UNITED STATES.
By the Pacific railroad act of 1862 it is provided (sec. 6) that the railroad
companies shall at all times, whenever required to do so, transport mails,
troops, munitions of war, supplies, and public stores for the Government " at
fair and reasonable rates of compensation, not to exceed the rates paid by
private parties for the same kind of service." (12 Stat., 489.) From
this it would seem that the average rate charged by the Pacific railroads
on all traffic would be a fair one to apply as an average on the traffic
for the United States. This view seems also to be corroborated by the QuartermasterGeneral
of the Army. In his report to the Secretary of War, dated September 30, 1884
(Rep. Sec'y of War, 1884-'85, p. 444), he states, in reply to charges, that
lower rates for army transportation on railroads might be secured by special
contracts, instead of accepting the regular rates ; that a thorough investigation
of the subjectmatter had been made, and the result shown was that, " as
a matter of fact, the Quartermaster's Department secures as low, if not lower,
rates of transportation than tiny other shipper, and as an evidence thereof
attention is invited to the comparatively small expenditure of money involved
in the large movements incident to the exchanges of stations of regiments
hereinafter referred to." An important consideration, however, prevents
our accepting the average rate on all traffic as an average rate on United
States traffic, namely, the different character of the freight. On wagon
transportation there is but one rate on all classes of freight, so that is
the average for all. But with railroads different classes take different
rates, and the average is reduced by the large shipments in car-loads of
commodities carried at the lowest rates, as, for instance, lumber, coal,
grain, &c. The Government freight has not as large a proportion of these
low classes as is the case with commercial freight. As a result, the average
rate on the Government freight is somewhat higher than the average for all.
For a portion of the period under review we have actual figures for Government
rates, which prove to be in accord with the above expectation. The Union
Pacific Railroad Company, for the three years from 1872 to 1874 inclusive,
has figured out the exact rates charged on the transportation of Government
freight. This shows the average rate per ton per mile to be : For 1872, 3.G8
cents ; for 1873, 3.20 cents; for 1874, 3.13 cents. (Annual Reports, Union
Pacific R. R., 1873-74.) These
2586
U. S. PACIFIC RAILWAY COMMISSION.
show the average for the Government freight to be .371 per cent, in excess
of the average on all traffic of the railroad. Applying this percentage throughout
the period shown, we have finally a very close approximation to the average
rate for Government freight for each year.
The application of the foregoing data gives the result shown in the following
tables:
Stalement showing charges to United States Government for transportation of
freight, and the cost of the same service at rates paid before the construction
of the railroads. ...It will be noticed that the tables include the years from
1870 to 1885, inclusive. The line was opened through May 10, 186y, and prior
to this date, as extensions were made
LELAND STANFORD. 2587
from the Missouri and Sacramento Rivers towards the center of the continent,
the Government availed itself of such extensions and profited by their use.
To bring the statement down to date, the year 1886 should also be added to
the table. The proper statistics, however, for the periods prior to 1870
and for 1886 are not now at band, so that for that time the statements fail
to express the benefit to the Government. There was a considerable amount
saved by the use of the roads as they were extended from point to point,
and a further amount for the use of the line after its completion thus omitted
from the table. This should be taken into consideration in any mental estimate
which may be made of the case. With the exception of these omissions, the
tables show the following result :
Saving to United States in freight charges.
Transportation charges on Central Union Pacific line for United States
supplies, munitions of war, &c. , to January 1, 1886 $5, 740, 753
Same service would have cost at rates prior to railroad 61, 161, 307
Saving to Government in transportation charges on freight for period 55, 420,
554
SAVING ESTIMATED BY UNITED STATES ENGINEER.
The result arrived at from the foregoing review of the items in detail receives
complete corroboration in sn estimate made by probably the most thoroughly
informed of official authorities, and by profession and experience perhaps
one of the best fitted to form an intelligent and impartial opinion on the
subject. By instructions from General Sherman, a history of the Pacific railroads,
in their relation to the Army, was prepared by Col. O. M. Poe, U. S. Engineers,
and printed in the last report made by General Sherman as General of the Army.
(Report 1883, p. 213 et seq.)
After a careful consideration of the question of a saving to the United States
in the Army transportation by the construction of the railroads, Colonel Poe
concludes as follows :
"
Taking the route from Fort Leavenworth to Fort Union for example, the average
cost by wagon per 100 pounds per 100 miles for the sixteen years from 1855
to 1870, both inclusive, was $1.77, whilst by rail it is now less than a tenth
of that amount. This represents the relative cost of wagon and railway transportation,
bearing in mind that any variation is always such as to show more strongly
the advantage of railway transportation. In some cases transportation by wagon
is twenty times more costly than by railway."
It will be noticed that the charges for freight transportation to the United
States by the railroads shown in the above table is about 9| per cent, of the
cost at the rates formerly paid. This is the result shown from the carefully
detailed figures. Colonel Poe's estimate, after a thorough review of the subject,
but without going into the same summary of details, is that the relative cost
of the railway and wagon transportation is as one to ten. The uniformity of
these results is additional evidence of the fairness of the foregoing conclusions,
if any further evidence than the facts already presented were needed.
UNITED STATES TROOPS AND PASSENGERS.
The cost to the United States for the transportation of troops before the completion
of the Pacific Railroad, compared with the cost after completion, is more difficult
to ascertain than in the case of freight. Before the road was built troops
were in a few cases carried by stages, but commonly were marched, a journey
which is now accomplished in a few days then requiring as many months. The
cost of marching troops in this way through a country with few inhabitants
save hostile Indians, and with no supplies obtainable save those brought from
long dis ances, must of necessity have been very great. Some idea of the differences
between the old order of affairs and the new may be gained from the following
facts :
COST OF MILITARY TRANSPORTATION PRIOR TO RAILROAD.
Quartermaster-General Meigs, in his report dated November 8, 1865 (Report Secretary
of War, 1865-'66, Vol. I, p. 113), commenting on the cost of transportation
over the plains, shows that a bushel of corn cost $2.79 at Fort Riley, $9.44
at Fort Union, $5.03 at Fort Kearney, $9.26 at Fort Laramie, $10.05 at Denver,
and $17 at Salt Lake City.
He then states that the cost of transportation for military stores westward
across the plains by contract during the fiscal year ending June 30. 1865,
amounted to $6,388,856.37.
P R VOL IV 17
2588 U. S. PACIFIC RAILWAY COMMISSION.
"
This expenditure [the Quartermaster-General continues] would be reduced by
the opening of railroads by a sum which would aid materially in paying interest
upon the cost of their construction."
At the same time the cost of transportation of a pound of corn, hay, clothing,
subsistence, lumber, or any other necessary of the troops from the base of
supply at Fort Leavenworth was as follows : To Fort Riley, per p'ound, 2AQ
cents; to Fort Union, per pound, 14.35 cents; to Fort Kearney, per pound, 6.44
cents ; to Fort Laramie, per pound, 14.10 cents; to Denver, Colo., per pound,
15.43 cents ; to Salt Lake City, per pound, 27.84 cents. (Ibid., p. 113.)
Supplies in those days had to be carried with the troops ; they could not be
obtained' on the line of march. The maintenance of marching bodies of men was
thus greatly increased as they continued westward. The settlement and development
of the West, consequent upon the completion of the railroad, gradually enabled
the Army to purchase its supplies near at hand at a cost in which transportation
bore
The troops maintained on the plains were mostly cavalry, as this arm of the
service was much better adapted for following bands of marauding Indians and
moving from place to place in the protection of immigrant trains and isolated
settlements. The cost of forage for the horses was thus a necessary part of
the expense of the transportation of the troops. The Quartermaster-General,
in his report for 1866 (p. 302), states on this subject that, " The supply
of the posts on the plains with forage has always imposed a heavy financial
burden upon this department. The Missouri River has for years marked the limit
of the cereal-producing region of the West, and grain transported from that
point when it reached the garrisons stationed near the Rocky Mountains had
reached an enormous price ; the cost of foraging one horse equaled the cost
of feeding a dozen animals in the States."
UNITED STATES WAGON TRAINS.
It has appeared above that the regular movement of supplies between posts was
affected by contractors. But all the transportation was not done by contract.
It was necessary for the Army to maintain a large number of trains, with their
accompanying wagons, mules and horses, teamsters, blacksmiths, and mechanics.
The Quartermaster-General tells us that tf trains must be kept up at the principal
posts to meet emergencies and to accompany marching bodies of troops." (Report
1866, p. 57. ) The expense of these wagon trains"forms a part of the cost
of transportation of troops as performed before they were transported by railroad.
The construction of the railroad canceled this item of expense for the territory
covered by it.
SAVING IN SUPPLIES FOR THE ARMY.
Another item of economy to the United States in the cost of supplies for troops,
caused by the building of the Pacific Railroad, is mentioned by the Commissary-
General of Subsistence in his report for 1867. ( Report Secretary of War, 1867-'68,
Vol. I, p. 576.) Before the era of railroad transportation the supplies for
military posts on the plains had to be carried in the summer months, when the
roads were to be depended on ; and a supply sufficient for all possible wants
for the coming year was laid in at that time. Many of the supplies were of
a nature that deteriorated or were destroyed altogether by storage for so long
a time, and much was stored in many cases in excess of what was found to be
the subsequent need, and was therefore wasted, as it could not be kept for
another season. In 1867 the Commissary-General says: tf The completed sections
of the Pacific railroads already afford such facilities for reaching several
of the occupied posts as to make it unnecessary to place and keep thereat such
large quantities of stores as were requisite when they could be supplied only
by train of wagons dispatched at special seasons."
GENERAL GRANT'S VIEWS.
The expense of maintaining troops on the plains and the great cost of their
transportation was a subject of constant comment by officers of the Army. Every
effort was made and every plan tried to reduce the expense within reasonable
limits. But until the advent of the locomotive all efforts were of little effect.
General Grant, Acting Secretary of War in 1867, says :
u During the last summer and summer before I caused inspections to be made
of the various routes of travel and supply through the territory between the
Missouri River and the Pacific coast, The cost of maintaining troops in that
section was so enor
LELAND STANFORD.
2589
nions that I desired if possible to reduce it. This I have been enabled to
do to some extent from the information obtained by these inspections; but for
the present the military establishment between the lines designated must be
maintained at a great cost per man. The completion of the railroads to the
Pacific will materially reduce this cost, as well as the number of men to be
kept there. The completion of these roads will also go far toward a permanent
settlement of our Indian difficulties. There is good reason to hope that negotiations
now going on with the hostile tribes of Indians will result, if not in permanent
peace, at least a suspension of hostilities until the railroads are pushed
through that portion of the Indian territory where they are giving the most
trouble." (Rep. Secy, of War, 1867-'68, Vol. I, p. 3.)
RELATIVE SAVING IN TRANSPORTING TROOPS GREATER THAN WITH FREIGHT.
From the foregoing facts it is clear that the cost to the United States in
the movement of troops by marching or by stages, before the construction of
the railroad, bore a greater proportion to the cost of their transportation
after its construction than the transportation of freight before the railroad
bore to its cost afterwards. Probably a greater part of the expense of marching
troops in former times was the cost of carrying forage and rations. But in
addition to the transportation of these supplies there was the original cost
of the supplies, or that part of them consumed during the excess of time taken
to march troops over the time taken to move them by rail; and there was also
1he whole pay and expense of maintaining them for the same excess of time.
The average movement by rail may be taken at about 20 miles an hour, or say
500 miles a day. Troops would not march for many consecutive days at a greater
average rate than 20 miles a day, or about 500 miles a month. But suppose they
doubled this rate and marched 40 miles a day, the ratio of time would be still
500 to 40, or over twelve to one. The saving to the Government in favor of
the railroad as compared to wagons has been shown above to be as about one
to ten.* 1
Thus the saving in passenger transportation by the construction of the railroad,
considered in any light, is in as great or greater ratio than in the case of
freight. Applying then, as an estimate, the same proportion of cost for the
movement of troops as we have shown existed in the transportation of freight,
the result is as appears in the following table.
Statement shoiving charges to United States Government for transportation of
troops and passengers, and the cost of same service at rates paid before the
construction of the railroads.
...
The result shown is that the United States has saved in the transportation
of passengers and troops by the construction of the Pacific Railroad, up
to the end of 1885, the sum of $44,562,914 forty-four and a half million
dollars.
*General Sherman says: ''These roads enable us to send soldiers to threatened
points at the rato of 500 miles a day, tlms overcoming the space in one day
which used to require a full month of painful marching." (Report 1883,
p. 46.)
2590 U. S. PACIFIC EAILWAY COMMISSION.
FREIGHT AND PASSENGERS.
The foregoing statements show the saving to the Government in transportation
charges by the construction of the Pacific Railroad, from the commencement
to January 1, 1886, to be in round sums :
On freight $55,500,000
On troops and passengers 44,500,000
Total freight and passengers 100,000,000
In these statements it has been assumed that an equal amount of traffic would
have been carried by wagons, or troops to an equal number would have been marched,
had not the railroad been built. The basis of the calculation is the service
which has been performed by the railroad since its completion, and the charge
for this service is compared with what the same service would have cost at
former rates. It is uot, however, a fair assumption that the same service has
since been rendered for the Army as would have been necessary had not the road
been built. The transportation formerly necessary was much greater since the
construction of the road.
ENDING OF INDIAN WARS.
The Indian wars have been practically ended, thus precluding the necessity
of the frequent movement of troops on the plains from place to place to protect
the scattered settlements and follow marauding bands of hostile Indians. As
the Indians have fled into the British possessions on the north and into Mexico
on the south, or have been placed on reservations, the military posts have
been abandoned and the troops have been concentrated at general points, from
which they can be rapidly sent to any place required. Their supplies, which
formerly were hauled long distances in teams, are now procured near at hand
at a price in which transportation forms, at most, an unimportant factor.
INDIAN WARS FORMER COST.
The movement of troops and the teaming of supplies and munitions of war have
thus been greatly lessened by the building of the road, and the actual saving
in this respect would be more closely shown by deducting from the amounts formerly
paid for services on the plains the amount subse'quently charged by the railroad.
The amounts formerly paid varied greatly, as Indians were hostile or friendly
at many or few points, and the actual cost for the country contiguous to the
Pacific Railroad is not now wholly obtainable, the cost covering not only teaming
done by contract, but by Government trains and tho movement of marching troops.
An idea of the former cost of this service is given in the report of the Pacific
Railroad Committee of the Senate, dated February 19, 1869, in which it is stated
that the Indian wars for the past thirty-seven years have cost the nation 20,000
lives and $750,000,000, or about $20,000,000 a year. In the years 1864 and
1865 the Quartermaster's Department spent $28, 574,228 for military services
against the Indians. (40 Congress, 3d session, Senate Rep. Com., 219.)
The cost of transportation of military stores westward across the plains, paid
to contractors alone, was over $6,000,000 annually. This amount stated for
tho year ending June 30, 1865, amounted to $3,388,856.37. (Report Secy. War,
1S85-'G6, Vol. I, p. 113.) Using this last amount as the annual cost for freight
transportation which the Government would have been reqislred to pay from 1869
to 1885, had not the railroad been built
The sum for the sixteen years would have been $102,221,702
The charges made for fre'ight transportation by the railroad for the same period
amounted to 5, 740, 753
Showing a saving of 96,480,949
Compared with saving shown by foregoing table of 55, 4^0, 554
$100,000,000 A YEAR SAVED ON FREIGHT AND TROOPS.
From these considerations it will be seen that the result of the foregoing
tables, showing a saving to the Government in freight and passenger transportation
charges by the Pacific Railroad to January 1. 1886, of $100,000,000, as great
as the amount may seem, fails to fully state the actual sum. It certainly represents
less than the amount saved in any point of view from which the subject may
be considered ; but it is preferably used in these pages to prevent any charge
of exaggeration, which the least of these sums would be likely to suggest to
one not familiar with the facts.
LELAND STANFORD. 2591
UNITED STATES MAILS.
All of the following facts as to the weights and ratQS of mails are taken from
the annual reports of the Postmaster-General for the several years :
The rates paid just before the completion of the railroad are shown in the
report for 1868 (pp. 7 and 8). The Department advertised March 9, 1868, inviting
proposals for conveying the mails from October, 1868, to June 30, 1870 : " On
Route No. 16635, from Cheyenne, Dak., or that point on the Union Pacific Railroad,
to which the mails might be conveyed when this service should go into operation,
to Virginia City, Nev., 1,095 miles and back, daily, the trip to be performed
in nine days each way in summer and twelve days in winter." Five bids
on this route were received in response to the advertisement. The lowest was
accepted, but soon failed. The others then successively failed or refused to
undertake the service. Finally, the PostmasterGeneral, with the Second Assistant
Postmaster-General, repaired to New York City, and consulted with Senators
Morgan and Cole, Horace Greeley, Isaac Sherman, Postmaster Kelly, and other
leading citizens, and under their advice accepted a proposition of Wells, Fargo & Co.
to carry the mail between the termini of the Union Pacific and the Central
Pacific Railroads daily for the term of one year, at the rate of $1,750,000
annually, subject to a reduction pro rata for every section of 50 miles of
railroad completed and reported to the Department ready to carry the mails.
In his report for 1869 (p. 9) the Postmaster-General makes the following statement
concerning the operation of this agreement :
"
The contract of agreement entered into on the 21st of October, 1868, between
the Post-Office Department and Messrs. Wells, Fargo & Co., for the transportation
of the United States mails between the western terminus of the Union Pacific
Railroad and the eastern terminus of the Central Pacific, for the term of one
year from October 1, 1868, or until the two railroads should meet, at the rate
of $1,750, 000 per annum, subject to reduction pro rata for every section of
50 miles of railroad completed and reported to the Department ready to carry
the mails, expired on the 9th of May, 1869, the railroad having eifected a
junction, and reported ready to carry mails through on the 10th. When the contract
was entered into, it was estimated that the junction would not be formed before
the 31st of July, it being supposed that the severity ot the weather would
compel a suspension of work on the railroads during the months of January,
February, and March; and it was further estimated that the cost of the mail
service under Wells, Fargo &. Co.'s contract would amount to $670,144.
The weather proving unusually mild, however, and the progress of the roads
being uninterrupted, their completion was accelerated nearly three months,
and hence the cost of the service under the contract with W'ells, Fargo & Co.
was reduced $214,339.36 below the estimate. 7 *
FORMER AVERAGE WEIGHT OF MAILS.
From this we get the contract rate formerly paid for mail transportation. This
rate was for the mails which were then carried. The weight of these is stated
by the Postmaster-General in a communication to the House of Representatives,
in answer to a resolution of inquiry of that body (quoted in Report Government
Directors U. P. R. R., 1875), who says:
"
The average amount of mail matter conveyed in the mails overland before the
completion of the railroads was less than 1,000 pounds daily."
From these facts we have the following : Annual amount paid for carrying mails
before the completion of the railroads, $1,750,000; distance carried, 1,095
miles; average daily weight, 1,000 pounds; rate, $1,598.17 per mile per annum.
After the completion of the railroads the mails were largely increased in weight,
and the service was equally improved in " certainty, celerity, and security." By
substituting a railway postal car with all conveniences for agents in charge,
and appliances for the distribution of mails en route, in place of the stage-coach
formerly used, the accommodations were increased in value in excess of the
increase of the weight of the mails.
WEIGHT INCREASED TWENTY TIMES.
Each of these items is allowed to be a fair consideration for the increase
of pay by the laws and the rules of the Post-Office Department. But as the
stage service cannot be compared with the railroad service as to certainty,
celerity, and security or accommodation, I will not attempt to place a moneyed
price on the difference of values. Weight is the principal basis of the law
fixing the compensation to railroads for carrying the mails, and the weights
carried by rail are more than twenty times greater than those which were carried
by stage. But as it may with truth be said that had no railroad been built,
an equal amount of mail matter would not have been sent, and, if sent, would
not have been carried by stage, as it would require several large stages daily
each way to haul the matter, we also omit from our estimate any allowance for
the difference in the weights.
The rates, weights, and amounts allowed by the Postmaster-General since the
construction of the railroad are shown in the following table :
...
LELAND STANFORD. 2593
SAVING IN MAIL TRANSPORTATION, $40,000,000.
The table shows that the amount allowed the railroad by the Postmaster- General
for carrying the mails from July 1, 1869, to December 31, 1885 a period of
sixteen and a half years was $10,606,507.22. This was for carrying the average
daily weight at the commencement of the period of about 5,000 pounds, which
at the close of the period had increased to about 30,000 pounds. The stage
rate, we have seen, was $1,598.17 per mile. This for the 1,895 miles of aided
road, and for the sixteen and a half years, would amount to the sum of $49,970,780.47.
The diiference representing the amount saved by the Government in the transportation
charges on United States mails is $39,364,273.25.
IMPROVEMENT IN THE SERVICE.
An idea of the improvement in the service and a suggestion as to its value
to the Government and to the people may be gained from the following remarks
relating to the subject, made by the Postmaster-General at the end of the old
regime and the beginning of the new. In his report for 1867 (p. 8) the Postmaster-General
says :
"
No changes have been made in the overland California mail since the last annual
report, at which time the Department was having daily service from the ends
of the railroad by both the Smoky Hill and Platte routes as far as Denver,
where the lines united and formed a single daily route via Salt Lake City and
Virginia City to the Central Pacific Railroad connection. During the spring
and summer months the complaints as to the manner in which the service was
being perfotmed, and the great delay in the arrival of mail from the East at
Denver and Salt Lake, were more numerous and pressing than at any time since
the present route has been in operation. It was charged that the Indian troubles
complained of by the contractor, and given by his agents as an excuse for non-performance
of service, were a pretense, and that there was no reason why the mails should
hot be conveyed regularly and within schedule time. The official reports, however,
of General Sherman and other officers of the Army, referred by the Secretary
of War to this Department, prove conclusively that the most serious troubles
did exist on the plains, and that there was no safety for either passengers
or mails except under ample military escort, which could not be furnished daily.
A special agent of the Department lately sent over the route for the express
purpose of reporting as to the manner in which the service had been performed
during the summer, and also as to its present condition, has, under date November
4, 1867, made his report, which is accompanied by the affidavits of the postmasters
at the principal offices on the route, and also by statements of several officers
commanding military stations on the line. The burden of this proof is summed
up as well, perhaps, in the affidavit of the postmaster at Denver as in other
papers submitted. He says : ' On that portion of the route from Denver to Omaha
City, or terminus of railroad, Indian troubles of a serious nature commenced
as early as February 16, and notwithstanding the contractor, supported by the
military, put forth every eifort in his power to clear the road and keep it
open, no mail was received at this office over that route from February 23
to March 2. During the month of March our registers show eighteen failures.
From June 8 to September 1 regular trips were made on alternate days, and from
that to the present we have had daily service. I am reliably informed that
the delay was in many instances caused by loss of stock driven off by hostile
Indians at points where it was impossible to replace it without prolonged delay.
This was more especially the case on the route from Denver to Salt Lake City.
Late in the winter the Union Pacific Railroad was blockaded by snow, followed
soon by high water, which caused another delay of three weeks and the diversion
of the mail from the Platte to the Smoky Hill line.
"
'From the best information I can obtain the cause of all the detentions and
irregularities complained of were unavoidable on the part of the contractor,
and of such a character as to have precluded the possibility of any man or
set of men making regular trips over the route unless securely guarded by an
armed force of considerable magnitude.'
"
From papers submitted by the contractor to the inspection division it would
appear that from April 1 to August 15, 1867, the Indians robbed him of three
hundred and fifty head of stage stock, burning twelve of his stage stations
with large amounts of grain and hay, destroyed three coaches and express wagons,
severely wounded several of his passengers, and killed outright thirteen of
his most reliable employe's.."
In contrast to this state of affairs, we find the condition of the service
the first "year after the Pacific Railroad was opened for through traffic,
stated by the PostmasterGeneral in his report for 1870, as follows (p. 12)
:
"
The through-mail tables herewith submitted make a favorable exhibit as to the
average speed and regularity with which the mails have been conveyed over the
line, 3,307 miles long, between New York and San Francisco, during the year
ending with the month of September, 1870. * * * The average time going west
was one hun
2594
U. S. PACIFIC RAILWAY COMMISSION.
dred and seventy-five hours fifty-two minutes, or seven days seven hours and
fiftytwo minutes; going east, one hundred and seventy-two hours forty-four
minutes, or seven days four hours and forty-four minutes. The records from
which these tables are compiled show that generally three mails a clay are
dispatched from New York for San Francisco, one in the morning and two in the
afternoon ; the average schedule time of the afternoon mails being nearly seven
days, and of the morning mails nearly seven and a half days, a single train
a day being run west of the Missouri River, the departure of which is arranged
to connect with the train making the latest afternoon departure from New York.
From San Francisco but a single mail a day is dispatched for New York, of which
the average schedule time, allowing for the intermission of Sunday service
east of the Missouri River, is about seven days three and a half hours, only
one hour and fourteen minutes less than the time actually attained."
Although the value of this improved condition of affairs is not stated in money
in the foregoing comparison of rates and amounts, it should be borne in mind
in connection therewith. And it strengthens the force of the argument made
by the figures that the construction of this line has saved the United States
in the transportation of mails during the sixteen and a half years ending December
31, 1885, over $39,000,000.
SUMMARY FREIGHT, TROOPS, AND MAILS.
A summary of the foregoing shows the following result to January, 1866 .
...A saving in the expense of the Government of nearly one hundred and forty
millions up to the end of 1885 in the item of transportation seems enormous
to one not accustomed to deal with accounts of Government expenditure. ret
it no doubt falls short of expressing the actual saving in this time; for
many it e ms (of which some have been noticed) cannot be satisfactory valued
in money, and have been entirely omitted from the calculations. A single
Indian war has cost more than the whole amount of bonds issued to the Pacific
railroads. The Pacific Railroad Committee of the Senate, in a report dated
February 19, 1869, make the following statement on this subject:
u What is the cost of our Indian wars as compared with the cost of the Pacific
railways, which will speedily end the Indian wars? A compilation from the official
records of the Government shows that these wars for the last 37 years have
cost the nation 20,000 lives and more than $750,000,000. In the years 1864
and 1865 the Quartermaster's Department spent $28, 374, 228 lor military service
against the Indians. * * .The chairman of the House Committee on Indian Affairs
estimated recently that the present current expenses of our warfare with the
Indians was $1,000,000 a week $144,000 a day." (40th Congress, 3d Session,
Senate Rep. Com., 219.)
VIEWS OF GENERAL SHERMAN.
The effect of the Pacific railroads in ending the Indian wars is thus commented
upon by General Sherman in his last report as General of the Army : (Report
1883, p. 5. et seq. )
"
I now regard the Indians as substantially eliminated from the problem of the
Army. There may be spasmodic and temporary alarms, but such Indian wars as
have hitherto disturbed the public peace and tranquillity are not probable.
The Army has been a large factor in producing this result, but it is not the
only one. Immigration and the occupation, by industrious farmers and miners,
of lands vacated by the aborigines have been largely instrumental to that end
; but the railroad (the italics are the General's), which used to follow in
the rear, now goes forward with the picket line in the great battle of civilization
with barbarism, and has become the greater cause. I have in former reports
for the past fifteen years treated of this matter, and now on the eve of withdrawing
from active participation in public affairs, I beg to emphasize much which
I have spoken and written heretofore. The recent completion of the last of
the four great transcontinental lines of railway has settled forever the Indian
question,
LELAND STANFORD. 2595
the army question, aud many others which have heretofore troubled the country.
* * * I regard the building of these roads as the most important event of
modern times, and believe that they account fully for the peace and good
order which now prevail throughout onr country. * * * A vast domain, equal
to two-thirds of the whole surface of the United States, has thus been made
accessible to the immigrant, and, in a military sense, our troops maybe assembled
at strategic points and sent promptly to the places of disturbance, checkin
bcdisorders in the bud."
The saving to the Government in mere money, which directly resulted from the
aid granted for the construction of the Central Union Pacific Railroad up to
January 1, 1886, may then be fairly stated as $139,347,741, nearly $140,000,000.
Such is the return received by the Government in the item of transportation.
As an offset to this are the bonds issued by the United States with interest
accrued thereon, less the amount of such interest which has been repaid by
transportation charges withheld in the Treasury Department and cash paid under
the law. Tho statement and balance of this account to December 31, 1885, is
shown as follows :
...
SAVING BY UNITED STATES THREE TIMES THE CASH VALUE OF THE DEBT AND
INTEREST.
This balance will not be payable till the maturity of the bonds at the average
date of, say, January 1, 1898. The present cash value of this sum, calculated
at 6 per cent, interest, payable semi-annually the same rate as borne by the
bonds is $42,647,795. The 'saving in money to the Government in transportation
charges to the same date amounts to $139,347,741. 25.
COMPLETION OF THE RAILROAD IN LESS TIME THAN ALLOWED BY THE LAW.
The last spike was driven in the Pacific Railroad at Promontory Point on May
10, 1869. From that date the Union and Central Pacific companies, forming a
through line between the Missouri River and the navigable waters of the Sacramento
River in California, have been in continuous use and operation for the transportation
of passengers, freight, and mails. By section 17 of the act of Congress of
July 1, 1862 (12 U. S. Stat., 489), the railroad companies were required to
complete the line, ready for use in a reasonable time, and it was provided
that if it were not so completed by the 1st day of July, 1876, their properties
should be forfeited to the United States, upon which Congress might pass any
act to insure their speedy completion.
The through line of railroad was thus actually opened for traffic over seven
years before the limit of time allowed by the law.
*U. S. Com. R. R. Rep., 1885, p. 1. \Ibid. \IUd., Rep., 1886, p. 6. Annual
Re. port U. P. Ry., 1885, p. 78. || Rep. C. P. R. R., 1885, p. 4.
2596
U. S. PACIFIC RAILWAY COMMISSION.
COST OF ROAD INCREASED BY EARLY COMPLETION.
Everything necessary to the construction of a railroad ; capital, labor, and
materials, cost the companies much more on account of this early completion
of the road, than they would have cost had the companies consumed the full
time allowed. But the Government and the people were benefited by all the
direct and incidental advantages connected with railroads as compared with
the slower and more expensive methods of transportation. To the public the
saving in transportation has been many times what it was to the Government
; and it has given to them all the material benefits implied by the use of
half the continent for seven years.
The direct saving in money to the Government is easily abstracted from the
foregoing statements. In addition to this there was a benefit probably to an
equal or greater amount by the ending of Indian wars and the abandonment of
many military posts which the former frequent hostilities made necessary.
The amount saved to the Government by the use of the road for these seven years
ending June 30, 1876, is, as shown by the following tables, as follows :
Seven years t) June 30, 1876.
...
21, 619, 648 Balance of debt, due at maturity of bonds in 1898 76, 781, 840
The cash value of this debt on June 30, 1876, discounted at the same rate of
interest borne by the bonds, was $21,522,^74.
The amount saved by the Government for that period was, as above, $47,763,178.
So that in transportation charges alone the Government benefited by the use
of the road for seven years for which time it was finished before the limit
allowed by the law, the amount of $26,240,904 in excess of the cash value of
the debt and interest to that date.
DEBT AND INTEREST AT MATURITY COMPARED WITH SAVING IN TRANSPORTATION
CHARGES TO SAME DATE.
The United States Commissioner of Eailroads, in his report for 1883 (p. 13),
estimates the balance to become due on the debt of Central Union Pacific line
ab maturity as $71,000,000. Subsequent experience has shown that the balance
will be greater than this sum, as since the commissioner's estimate several
competing transcontinental roads have been completed, thus reducing the net
earnings of the original line, and reducing also thereby the amounts of the
annual payments to the Government on account of the debt. In the following
estimate the annual payments from 1886 to 1897 are based upon the requirements
ascertained under the law since 1883.
* Public debt statement, June 30, 1876.
LELAND STANFORD.
2597
ESTIMATE OF DEBT AND INTEREST AT MATURITY.
Bonds, Central Union Pacific line $55,092,192
Interest, 30 years at 6 per cent 99, 165,945
Total, bonds and interest 154,258,137
PAYMENTS ON DEBT BY COMPANIES.
Central Western Pacific :
Transportation charges and cash to January 1, 1886* ... $9, 251, 974 Payments
1886 to 1897, estimated on average rate 18831886, $478,000 per annumt 5,736,000
Union Pacific Railroad :
Credits to January 1, 1886* 17,496,793
Pavments 1886 to 1897, estimated on average rate of 1883 1885, $1,448,000$
17,376,000
14,987,974
34,872,793
Total payments 49,860,767
Balance on debt at maturity 104,397,370
As an offset to this balance the saving in transportation charges may be cited,
as that is a direct pecuniary benefit to the Government. The foregoing statements
show this saving up to January, 1886, to have been $139,347,741. Assuming this
saving to continue to the maturity of the debt at the same annual rate as it
has been in the past, the result would be as follows :
SAVING TO GOVERNMENT IN TRANSPORTATION CHARGES TO MATURITY OF THE DEBT.
...
Balance on debt estimated to be due at maturity as above $104 , 397, 370
Saving to Government in transportation charges to same time 259, 040, 430
Surplus saved 154, 643, 060
The total debt stated above, with interest at maturity, without any deductions
for payments by the companies, amounts to
Principal of bonds $55,092,192
Interest at 6 per cent 99, 165, 945
Total 154,258,137
Deducting this amount from the sum saved above leaves $104,782,293 as the amount
of benefit which would have been realized by the Government in excess of the
whole amount of bonds and interest had they been a donation instead of a loan
at interest. At the time the granting acts were passed it was frequently stated
in Congress that in case the loan could never be directly repaid the saving
to the Government in transportation charges would more than equal the bonds
and interest, and thus directly offset the debt. The foregoing statements show
that those predictions have been more than realized.
* Annual Report of the Central Pacific Railroad, 1885, p. 4.
t Report of the United States Commissioner of Railroads, 1886, p. 35.
tSee preceding statement of January 1, 1886.
^Report of the United States Commissioner of Railroads, 1886, p. 35.
2598 U. S. PACIFIC RAILWAY COMMISSION.
STATE OF CALIFORNIA,
City and County of San Francisco, ss :
E. H. Miller, jr., being first duly sworn, saith : That he has read the foregoing
statement consisting of the pages next preceding, marked "Exhibit No.
1H," and knows the contents thereof; that the facts therein stated are
true, except as to those matters stated on his information or belief, and as
to those he believes it to be true.
E. H. MILLER, JR.
Subscribed and. sworn to before me this 26th day of July, A. D. 1887. [SEAL.]
E. B. RYAN,
Notary Public in and for tlie City and County of San Francisco,
State of California.
EXHIBIT No. 12. Relative to competing roads aided by Congress, by J. C. Stubbs,
general
traffic manager.*
There are now eight trans-continental railroad lines in addition to the original
Union and Central Pacific line that is to say, there are eight other lines,
each of which competes in whole or in part with the original Union and Central
Pacific line for the traffic interchanged between the Pacific coast and the
territory of the United States and Canadas east of the Rocky Mountains. They
are as follows :
(1) The original Union and Central Pacific line, opened for through traffic
in May, 1889.
(2) The thirty-second parallel route, or Atchison, Topeka and Santa F6 and
Southern Pacific line, via Deming, opened in March, 1881.
(3) The thirty-second parallel route, or Southern Pacific and Texas and Pacific
line, via El Paso, Tex., opened in January, 1882.
(4) The thirty-second parallel route, or Galveston, Harrisburg and San Antonio
Railway and Southern Pacific, via El Paso, Tex., opened in February, 1883.
(5) The Burlington and Missouri River Railroad and Denver and Rio Grande in
connection with Central Pacific, opened in May, 1883.
(6) The Northern Pacific Railroad, opened in September, 1883.
(7) The Atlantic and Pacific in connection with the Southern Pacific, opened
in October, 1883.
(H) The Oregon Short Line, the date of whose opening for business I am unable
to give.
(9) The Canadian Pacific, opened for business in July or August, 1886.
All of these roads, except the Canadian Pacific, are in United States territory.
In the report of the United States Commissioner of Railroads for 1884, pages
226 and 227, will be found a list of grants made by the United States in aid
of the construction of railroads, which gives the date of the act of Congress
making the grants, &c. By reference to the list it will be found that at
least a portion of each of the trans-continental lines above described, except
the Canadian Pacific (which was heavily subsidized in land and money by the
Dominion Government), was aided by the United States Government, and, I am
informed (not having searched the matter myself), that in each of said cases
there was a larger grant of land made than that to the Union and Central Pacific
line; that the grant to the latter line was for 12,800 acres per mile, less
mineral lands and lands for which there were prior claims, while the grants
to the other lines were usually at the rate of 12,800 acres per mile in the
States and 25,6CO acres per mile in the Territories. It is supposed that the
lands granted to the Texas and Pacific, Atlantic and Pacific, Atchison, Topeka
and Santa F<6, and Northern Pacific Companies caused their construction.
Certainly no one will deny that they hastened their completion. Without the
land grants the roads would not have been built, and without these roads the
traffic which has been carried by them in competition with the Central and
Union Pacific line would have gone over the Central and Union Pacific lines,
and contributed by so much to the earnings of the Central and Union Pacific
Companies.
To illustrate the extent to which the earning capacity of the Central and Union
Pacific Companies has been impaired by the completion of these roads, I have
caused to be prepared and beg to hand you herewith the following exhibits :
* See answer to question No. 54.
LELAND STANFOKD.
2599
EXHIBIT A. Comparative statement showing freight tonnage and charges on through traffic and percentage of same done by each route for periods as noted.
...LELAND STANFOED. 2601
Exhibit A is a showing of the freight tonnage and charges on through traffic
by each route from January 1, 1874, to December 31, 1886, divided into periods,
these being marked by the dates of the completion of the several opposing
lines.
For example :
From January 1, 1874, to March 31, 1881, there was but one line between the
Missouri Eiver and California, namely, the Union and Central Pacific. April
1, 1881, the Atchison, Topeka and Santa Fe road was connected with the Southern
Pacific at Deming, thus opening a new line the first new line to compete with
the original Central and Union Pacific line.
The date of the opening of this new line for business, namely, April 1, 1881,
begins a new period, which ends with the opening of the third line.
In January, 1882, the Texas and Pacific and Galveston, Harrisburg and San Antonio
roads were connected with the Southern Pacific at El Paso, making, for the
period from January 1, 1882, to January 31, 1883, four routes.
The Galveston, Harrisburg and San Antonio Railway, in connection with the Southern
Pacific at El Paso, did very little business previous to February 1, 1883,
when it opened for business for New York City. Hence, a new period is begun,
dating from February 1, 1883, and running to May 31, 1883, during which there
were still but four lines, though during the last period the Galveston, Harrisburg
and San Antonio line had been greatly strengthened as compared with the first
preceding period.
In May, 1883, the Denver and Rio Grande and Burlington and Missouri River line
was connected with the Central Pacific at Ogden, making five lines for the
period from June 1, 18&3, to September 30, 1883, at which time the Atlantic
and Pacific was connected with the Southern Pacific, making six lines.
You will notice by Exhibit A that for the period from January 1, 1874, to March
31, 1881, there being but the one line (the Union and Central Pacific), the
percentage of trafiic carried by this line is represented by 100 per cent.
; that this percentage is reduced in the second period to 94.54 per cent, in
tonnage and 94.50 per cent, in earnings; in the third period, to 69.23 per
cent, in tonnage and 72.37 per cent, in earnings; in the fourth period, to
57.77 per cent, in tonnage and 57.45 per cent, in earn
conclusively that with the opening of each new line there was an additional
loss in tonnage and in earnings from through traffic to the Union and Central
Pacific line. The conclusion is inevitable that this loss was occasioned by
the diversion of traffic to the new lines. The difference between 100 per cent,
and the percentages shown for the period succeeding March 31, 1881, represented
the loss to the Central and Union Pacific line, the sole cause of which was
the opening of new lines.
Exhibit B is the same as Exhibit A, with the exception that the entire tonnage
via the Central Pacific and Denver and Eio Grande and Burlington and Missouri
River line, and the Central Pacific proportion of charges west of Ogden for
the same line, are thrown in the first column under the head of Central and
Union Pacific line.
It was necessary in making these statements to show "line" earnings.
It would have been impossible from any records we have to show the earnings
of the individual roads in each line except by going back to the original billing,
which would have required so much time and labor, that a report to be based
upon information so obtained could not have been reached in time for the next
session of Congress.
The Denver and Rio Grande and Burlington and Missouri River roads made a line
by connection with the Central Pacific, just as the Union Pacific connected
with the Central Pacific ; hence the completion of the Denver and Rio Grande
and Burlington road only affected the Union Pacific road.
In Exhibit B the charges of the Denver and Rio Grande and Burlington and Missouri
River line east of Ogden are shown separate from the charges of the Central
Pacific, and will represent the loss to the Union Pacific by the diversion
of traffic caused by the opening of that line.
2602
U. S. PACIFIC KAILWAY COMMISSION.
EXHIBIT B. Comparative statement showing freight tonnage and charges on through
traffic by each route for periods as noted; also percentage of said traffic
done by each route(charges east of Ogden, via Denver and Rio Grande, shown
separately).
[The tonnage and charges for Central Pacific via Denver and Rio Grande are
included in Central and
Union Pacific lines.]
...The total loss (5 years 9 months) to Central and Union Pacific line = $24,383,080.83,
or an annual loss Of $4,240,535.88.
Of which the Central Pacific proportion is 46 per cent. = $11,216,217.18, or
an annual loss of $1,950,646.50.
Of which the Union Pacific proportion is 54 per cent. = $13,166,863.65, or
an annual loss of $2, 289,889.38.
Exhibit C shows the tonnage and charges of all the lines compared with the
tonnage and charges as given on Exhibit B for the Central and Union Pacific
line, and the difference in tons and dollars ; that is to say, according to
Exhibit C the loss in tonnage to the Central and Union Pacific line, by the
diversion to other lines, from April 1, 1881, to December 31, 1886, was 1,055,079
tons and $24, 383, 080.
Exhibit C also shows the charges and tonnage of each of the several periods
reduced to an annual basis ; that is, if for each of the several periods the
tons carried and charges made had been at the same rate for twelve months,
it shows what the annual tonnage, charges, and loss would have been.
For example : take the second period, from April 1, to December 31, 1881, being
nine months. The tons carried during that nine mouths via all lines were 219,892
tons, which at the same rate for twelve months would be 293,189 tons. The charges
or earnings for the nine months by all lines were $6, 522, 319, and for twelve
months at the same rate would have been $9,696,426. The tonnage and charges
of the Central and Union Pacific line for the nine months, at the same rate,
would have been 277,172 tons and $8,218,272. The actual loss for the period
to the Central and Union Pacific line is represented by 12,012 tons, on which
the charges were $358,615. For twelve months, at the same rate, the loss would
have been 16,016 and $478,153.
Exhibit C also totals the several periods beginning April 1, 1881, and ending
December 31, 1886 (five years nine months), with the following result :
Total tonnage and charges via all lines 2,267,389 tons and $53,811,807.
The tonnage and charges via the Central and Union Pacific for the same period
were 1,212,310 tons and $29,428,726.
The loss in tonnage and charges to the Central and Union Pacific line, being
the difference between the tonnage and charges via all lines and the tonnage
and charges via the Central and Union Pacific line, as shown above, were 1,055,079
tons and charges $24,383,060, which,rsduced to an annual basis, shows the loss
for this period at the annual rate of 183,492 tons and $4,240,535.
Exhibit C also shows the average annual rate per ton charged for freight. Dur
ing the first period, when there was but one line (Union and Central Pacific
line), from January 1, 1874, to March 31, 1881, you will note that the average
annual rate per ton was $32.88. By following down through, the several subsequent
periods you will notice a gradual reduction in the annual rate per ton until
in 1886 the rate was reduced to $14.77 per ton. Some of this difference in
rate was chargeable to the opening of competing lines ; in other words, take,
for example, the year 1886 ; while it is not reasonable to suppose that at
the annual average rate which obtained in 1885 ($25.32 per ton) the same tonnage
would have been moved as was moved in 1886 at a lower average rate ($14.77
per ton), yet it is true that the tonnage would have been moved at a higher
rate than the average earning during 1886. It is impossible to say what would
be the maximum rate at which the same tonnage would have moved.
It is a matter of public knowledge that during a portion of that year (1886)
rates were unnecessarily low. I should estimate that an average rate of $20
per ton, being a reduction of a little more than twenty per cent, from the
average rate prevailing from October 1, 1884, to December 31, 1885, would have
given all needed stimulus to the movement of traffic, and the difference between
$14.77 and $20 $5.23 per tonwould be a reasonable estimate oftUe effect of
unreasonable competition between
2606
U. S. PACIFIC RAILWAY COMMISSION.
the railroads, which would fall below rather than above the real measure of
the influence of that competition. Accordingly 311,064 tons extended at a rate
of $5.23 per ton would represent a further loss to the Central and Union Pacific
line by reason of the diversion of traffic to other lines and the competition
inaugurated by said other lines of $1,626,864.
For all the competitive periods shown on Exhibit C the charges are extended
at the annual average rate. The effect of the competition of the other lines
was something more in each period than the mere diversion of traffic. It reduced
rates ; that is to say, had the other lines not been built, not only the entire
traffic would have been carried by the Union and Central Pacific lines, but
it would have been carried at higher rates. Hence the earnings upon the total
traffic, if carried by the Union and Central Pacific line without the competition
of the other lines, would have been greater than the earnings made by all the
lines from the same traffic, so that the real loss in freight earnings resulting
from the building of other lines, if the exact facts could be ascertained,
would prove to be much more than $24, 383, 080, as shown on Exhibit C.
Exhibits A, B, and C relate only to freight traffic ; I also inclose herewith
Exhibits D and E.
Exhibit D shows the number of through passengers carried by each route, and
the earnings accruing therefrom west of Ogden, Mojave, Deming, and El Paso,
the termini of the Southern Pacific system.
Ogden is the terminus of the Central Pacific road.
Mojave is the point of junction of the Atlantic and Pacific with the Southern
Pacific.
Deming is the junction of the Atchison, Topeka and Santa F6 Railroad with the
Southern Pacific.
El Paso is the junction point of the Southern Pacific, Texas and Pacific, and
Galveston, Harrisburg and San Antonio Railroads, respectively.
Exhibit D and the other passenger statements shovr the earnings west of these
respective termini.
In the case of passengers, our records do not show the earnings of the connecting
lines as in the case of freight.
EXHIBIT D. Comparative statement allowing number of passengers carried by each
route on through traffic, and the earnings accruing west of Ogden, Mojave,
Deming, and El Paso , for periods as noted, also percentage of earnings by
each route.
[The earnings via Northern Pacific, 0. E. & N. Co. and Oregon Short Line
as shown are 46 per cent
of the through via those routes.]
...
NOTE. From April 1, 1881, to December 31, 1886 (five years nine months), during
which time other lines competed with the Central and Union Pacific line,
the Central Pacific road suffered a total loss of revenue amounting to $5,864,664.29,
or 39.33 per cent, of the total through passenger traffic. Assuming this
loss based on 46 per cent, of total through, the Union Pacific has sustained
a proportionate loss of $6,884,605.90, making total loss for Central Pacific
and Union Pacific line of $12,749,270.19. Reducing this to an annual basis,
the loss annually to the Central Pacific is $1,019,942.04, and to the Union
Pacific $1,197,323.26, or a total for the through line of $2,217,265.30.
Exhibit E is the same for passengers as Exhibit C for freight.
Both of the exhibits relating to the passenger traffic in the matter of division
into periods are the same as the exhibits for freight.
Exhibit D will show the number of through passengers forwarded by the original
Union and Central Pacific line from January 1, 1874, to March 31, 1881, amounting
to 556,833, from which the Central Pacific earned $15,630,611, which represented
100 per cent.
For the period (from April 1, 1881, to December 31, 1881) this percentage was
reduced to 77.25 per cent.
For the third period (January 1, 1882, to January 31, 1883) it was reduced
to 63.32 per cent.
For the fourth period (February 1, 1883, to May 31, 1883) it was reduced to
53.78 per cent.
For the fifth period (June 1, 1883, to September 30, 1883) the reduction was
only to 61,10 per cent, j that is to say, the opening of the Denver and Rio
Grande and Bur
2610
U. S. PACIFIC RAILWAY COMMISSION.
lington and Missouri River line contributed temporarily something to the earning
power of the Central Pacific, probably owing to the scenic attractions which
the new route would offer.
But in the sixth period (October 1, 1883, to September, 1884) the percentage
fell off to 42.43 per cent.
For the seventh period (October 1, 1884, to December 31, 1885) it was reduced
to 41.25 per cent.
For the last period (January 1, 1886, to December 31, 1886) it was reduced
to 38.51 per cent.
As in the case of freight, it will be observed with respect to passengers that
the opening of each new line, with the single exception of the short period
immediately succeeding the opening of the Denver and Rio Grande road, the Central
Pacific line suffered a loss ; and that loss resulted from no other cause than
the opening of these new lines.
Exhibit E shows the number of passengers carried by all routes and the Central
Pacific charges therein, with the loss in charges to the Central Pacific by
diversion to other routes for each period reduced to an annual basis..
The total loss to the Central Pacific by diversion for the period from April
1, 1881, to December 31, 1886 (five years nine months), is shown to be 277,629
passengers and $5,864,664, or an average annual rate of 48,276 passengers and
$1,019,942.
It will be observed also that the average rate on passengers for each period
shows a less percentage of reduction than in the case of freight, though in
the year 1886 the average rate fell to $12.75, against an average rate of $27.59
during the first period, from January 1. 1874, to March 31, 1881.
From October 1, 1884, to December 31, 1885, the average annual rate by all
routes was $21.60, and the number of passengers carried was at the rate of
121,644 per annum, as against a rate of $12.75 for the year 1886 and 180,210
passengers.
The large reduction in rate was incident to the war in rates which followed
the dissolution of the transcontinental pool. It was not compensated by increased
traffic, as all the rail lines earned less from the increased traffic than
they earned the year previous on a less amount of traffic. The conclusion necessarily
follows that while Exhibit E shows a loss for the year 1886 to the Central
Pacific by diversion of 77,268 passengers and $972,672, it does not show the
entire loss resulting to the Central Pacific by reason of the competition of
the other lines. The same number of passengers could have been moved by the
Central Pacific at a higher average rata than was earned by all lines.
As has been explained, the passenger exhibits show only the earnings west of
the eastern termini of the Southern Pacific and Central Pacific Railroads,
and show for the entire period from April 1, 1861, to December 31, 1886, a
total loss in revenue to the Central Pacific road of $5,864,664, or 39.33 per
cent, of the total through passenger traffic.
In my judgment, it is fair to assume that the loss of the Central Pacific represents
46 per cent, of the loss to the Central and Union Pacific line, that being
not only the Central Pacific road's proportion of mileage, but also its percentage
of the Central and Union Pacific " line " rates. This is a very close
approximation of what an inquiry for the purpose of ascertaining the exact
loss would show. It is rather under than over tjie loss. If we assume that
the loss to the Central Pacific road is 46 per cent, of the loss of the Central
and Union Pacific line, we have a loss in revenue to the Union Pacific and
Central Pacific line of $12,749,270.19. Reducing this list to an annual basis,
the loss of revenue annually for the line would be $2,217,265. This estimate
will govern Exhibit F, which combines the showings made by Exhibit C and Exhibit
E for freight and passengers respectively.
EXHIBIT F. Recapitulation of Exhibits E and C, showing combination of passenger and freight traffic lost to the Central and Onion Pacific line for the period April 1, 1881, to December 31, 18rf6 ; assuming that the results shown in Exhibit E (passenger) represent 46 per cent, of the through line earnings, the remaining 54 per cent, is added, showing total loss to Central and Union Pacific line, as below.
...
The total loss on passengers and freight (five years nine months) to Central
and Union Pacific line, $37,132,351.02, or an annual loss of $6,457,801.18.
Of which the Central Pacific's proportion is 46 per cent. = $17,080,881.47,
or an annual loss of $2,970,588.54.
Of which the Union Pacific's proportion is 54 per cent. = $20,051,469.55, or
an annual loss of $3,487,212.64.
Exhibit? is a recapitulation of Exhibit E and Exhibit C, and shows that the
total earnings for the entire period from April 1, 1831, to December 31, 1886
(five years, 9 months), of all routes from through freight and passengers were
$86,226,945.97 ; that the earnings of the Central and Union Pacific line, ascertained
as above explained, for the same period were $49,094,594.95. The loss resulting
to the Central and Union Pacific line by diversion of traffic to other lines
being the difference between the above amounts was 137,132,351.02, or 43 per
cent, of the total business. This reduced to an annual basis shows an annual
loss to the Central and Union Pacific line (since April 1, 1881, the date of
the opening of the first competing line), $6,457,801.18, 46 per cent, of which,
or $2,970,588.54, represents the loss of the Central Pacific Company.
There can be no question that the traffic carried by all routes during this
period could have been carried by the Union and Central Pacific lines. I do
not think there can be any doubt that had there been but one line, and that
line had offered the same rates (and these comparisons are based upon the rates
actually charged), the same amount of traffic would have been carried, and
the earnings from it would have been covered into the treasuries of the Central
and Union Pacific Companies. Not only is this true, but the same amount of
traffic could have been carried, and doubtless would have been carried, at
an average rate of charge something higher than was actually obtained, so that
while the average annual loss to the Central and Union Pacific line is shown
by these statements to have been less than $6,500,000, I believe that the actual
damage to the Union and Central Pacific line, caused by the building of the
other lines, is not less than $7,000,000 per annum, or a total loss of over
$40,000,000 for the period between April 1, 1881, and December 31, 1886, 46
per cent, of which represents the loss to the Central Pacific Railroad Company.
The facts and figures set forth in the inclosed exhibits are derived from our
own records ; first, being abstracts made from impression copies of the original
way bills covering the freight carried, and from the original tickets collected
from the passengers ; and, second, for the Oregon Short Line and Northern Pacific
roads, which are not connections of either the Central or Southern Pacific,
from the records of the Transcontinental Association for the period from October
1, 1883, to January 1, 1886, and for the year 1886, from the records of the
Northern Pacific and Uuion Pacific Companies respectively.
In giving the dates of the opening of the several lines, I have not been governed
by the historical dates, but by the dates of the first billing or ticketing
of through business done by those lines. Respectfully submitted.
J. C. STUBBS. STATE OF CALIFORNIA,
City and County of San Francisco, ss :
J. C. Stubbs, being first duly sworn, saith : That he has read the foregoing
state inent consisting of the pages next preceding marked " Exhibit No.
12," and knows the contents thereof; that the facts therein stated are
true except as to those matters stated on his information or belief, and as
to those he believes it to be true.
J. C. STUBBS.
Subscribed and sworn to before me this 26th day of July, A. D. 1887.
[SEAL.] E.B.RYAN,
Notary Public in and for said City and County.
2612 tr. S.PACIFIC RAILWAY COMMISSION.
EXHIBIT No. 13. Statement of E. H. Miller, jr., secretary, relative to amounts
due from the United States for transportation on non-aided roads.*
The Central Pacific Railroad Company controlled by lease a number of branch
lines prior to April 1, 1885, from which date the lines were leased to the
Southern Pacific Company. Mails were carried by these lines for the United
States under the rules and orders of the Post-Office Department. No payments
have been made for such service since 1883, at which time but partial payments
were made. The payments were withheld prior-to April I, 1885, because the Central
Pacific Railroad Company leased the lines, and they have been withheld since
that date because the Central Pacific Railroad Company had formerly leased
the lines.
The United States Supreme Court decidedjin U. S. vs. C. P. R. R. Co., October
term, 1885, that compensation for transportation on non-aided and leased lines
was due the company in cash. (See U. S. Com. R. Rs., 1886, p. 27. )
To show the amount of this service for which payments have been withheld, statements
are submitted herewith as follows :
(A.) Mail transportation from January 1, 1882, to March 31, 1885, showing amounts
as allowed by Post-Office Department, $1,814,384.96, of which non-aided and
leased lines' proportion is $806,923.27 ; cash paid is $300,623.46 ; balance
due and unpaid, $501,299.81.
AMOUNT DUE FOR MAIL SERVICE IN CASH.
(B.) Mail transportation from April 1, 1885, to December 31, 1886, showing
amounts as allowed by Post-Office Department, $989,037.54, of which non-aided
and leased lines' proportion is $459,244.97, all of which latter sum remains
due and unpaid.
The total amount thus remaining due and unpaid for transportation of mails
to December 31, 1886, on such non-aided and leased roads, is $960,544.78.
The transportation charges on non-aided lines were applied in settlement of
the annual requirements of the company under the provisions of the Thurman
act. After such applications there remained a balance due the Government on
December 31, 1881, of $79,149.91. This balance was paid by the company in cash
October 23, 1882, thus settling the accounts to the end of 1881. Of this the
U. S. Commissioner of Railroads, in his report for 1882 (p. 26), says:
"
Under the act of May 7, 1878, the book-keeper of this office checked the books
and accounts of the company in San Francisco, with a view to the ascertainment
of 25 per cmt. of the net earnings' for the year ending December 31, 1881.
Twenty-five per cent, of the net earnings of the subsidized portion of the
road was found to amount to 81,038,935.24. The transportation for the Government
during the year amounts to $359,785.33, leaving a balance due the United States
of $79,149.91. Statement was rendered and payment demanded October 20, 1882.
A check for the amount was sent to the Treasurer of the United States by the
vice-president of the company, October 23, 1882. The company has therefore
paid to the Government all of its accrued indebtedness to date.'"'
CASH DUE FOR ALL TRANSPORTATION SERVICE.
From and including the year 1882 to the present time there has been annually
a balance due the non-aided lines for transportation services performed. The
amount thus due from the Government in cash, in excess of all requirements
of the law, 1o December 31, 1886, is $1,853.323.15. This appears from statement
C herewith, the further details of which appear in the annual reports of U.
S. Commissioner of Railroads for the several years named.
The United States, by failing to pay for such mail service and other transportation,
has caused an expenditure to the Central Pacific Railroad Company of amounts
equal to interest on the sums retained at the rate of 6 per cent, per annum,
that being the rate of interest paid during the period on floating debt of
the company, which debt would have been decreased by the payment of the sums
due from the United States.
The annual interest on this balance due the roads in cash to December 31, -1886,
of $1,853.323.15, at 6 per cent., is $111,199.39. This is the present annual
injury to the roads by the Government on account of the item of transportation
charges unpaid. Tbe current charges also, in excess of the requirements, amount,
as shown by the foregoing statement, to about $450,000 a year. This amount
with the interest on the balance make the accruing annual sum of $560,000 due
for transportation on nonaided lines and remaining unpaid.
* See answer to question No. 55.
LELAND STANFORD.
...
STATE OP CALIFORNIA,
City and County of San Francisco, ss :
E. H. Miller, jr., being duly sworn, sayske has read the foregoing statement
; that the matters and things therein stated are true of his own knowledge,
except as to matters stated on his information and belief, and as to those
he believes it to be true.
E. H. MILLER, JR.
Subscribed and sworn to before me this 20th day of July, 1887.
[SEAL.] E. B. RYAN,
Notary Public in and for said City and County.
By the CHAIRMAN:
Q. Have you any further statements to submit to the Commission? A. No, sir.
Q. Do you desire to say anything further in connection with the statements
already submitted? A. No, except to explain them, if the Commission desires.
WILLINGNESS TO GIVE INFORMATION.
Q. Are you ready to have your oral examination proceeded with? A. Yes, sir
; now or at any time. I would suggest, however, that it might be better to
postpone it for a day or two. I suppose that there are a great many witnesses
whom you wisb to examine, and if I am left to the last there are some things
which may develop in the course of these examinations which I may be able
to explain.
Commissioner ANDERSON. We will call you again. We shall be here thirty days
yet, and I have no doubt that we will nearly bother the life out of you before
we get through.
The WITNESS. It may ; but this thing is not new to us by any means.
Commissioner ANDERSON. I believe that. The Union Pacific people say the same
thing.
The WITNESS. We have had investigating committees after us all the time since
we began crawling up the mountains. We used to have
2616 U. S. PACIFIC KAIL WAY -COMMISSION.
annual sessions of the legislature, and there was scarcely one of them but
what we had to appear and defend ourselves against attack. We used to appear
before these legislative investigating committees regularly and stand a general
investigation of our affairs.
By Commissioner ANDERSON :
Q. Shall we proceed with you this morning? A. Unless it is your order of business
I should like to be excused. I have some considerable work to do, and I am
not feeling very well to-day.
Commissioner ANDERSON. We have no other witnesses. We excused Mr. Brown because
we expected that your examination would require several days. If you can do
so just as well as not we would prefer to ask you a few questions now. When
you get fatigued, if you will let us know, we can stop.
EARLY BUSINESS CONNECTIONS.
Q. When did you first come to California? A. In 1852.
Q. At that time San Francisco was just beginning to be a city of any importance,
was it not? A. It was a pretty small place at that time. I think that when
we commenced to build this road it had a population not exceeding 60,000.
Q. What business did you follow here from 1852 to 1860? A. Merchandising.
Q. Were you alone, or did you have a partner? A. A portion of the time I had
a partner and a portion of the time I was alone.
Q. Who were your early partners? A. First, I had a partner by the name of Smith,
and my brothers had an interest with me. They had a certain interest with me
as a firm. I afterwards did business alone, and used that firm name. Then I
had a gentleman by the name of Meeker in partnership with me.
PUBLIC LIFE.
Q. When did you enter public life? A. I can hardly say. I took part in the
formation of the Eepublican party.
Q. Please state what public offices you have held. A. I held office once as
justice of the peace. I was elected to that office up in the mountains. The
only other office that I have held is that of governor of this State. From
all that I can learn, I believe that I made a pretty good justice of the peace.
Q. When were you elected governor of the State? A. In 1861.
Q. Did you serve more than one term? A. I served one term only.
Q. How many years is the term? A. It was then two years.
Q. What other public offices have you ever filled? A. None other.
Q. Are you not a Senator of the United States? A. Oh, yes; I did not think
of that.
Q. When were you elected Senator of the United States? A. Two years ago last
winter.
Q. When did you enter upon the discharge of your duties? A. I entered upon
the discharge of my duties at Washington at the time that Mr. Cleveland was
inaugurated President.
FIRST ACQUAINTANCE WITH CROCKER, HUNTINGDON, AND HOPKINS.
Q. When did you first form the acquaintance of Mr. Charles Crocker? A. I am
not certain, but I think that I formed liis acquaintance about 1854,
LELAND STANFORD. 2617
Q. Here in San Francisco? A. No, sir ; in Sacramento.
Q. What business was he in at that time? A. He was merchandising.
Q. Was he engaged in the same line of business that you were engaged in? A.
No, sir.
Q. Was he alone or had he a partner? I believe that the firm name was Charles
Crocker & Co. A. I think that he had a partner, but I am not certain.
Q. Do you know who his partners were at any time between 1854 and 18C2? A.
No, sir ; I do not know. If he had a partner I think that it was a gentleman
who lived in New York. I think that there was some one in New York who had
an interest with him in the firm.
Q. When did you become acquainted with Mr. Huntington? A. In 1852.
Q. What was his business? A. He was in the hardware business in Sacramento.
Q. When did you become acquainted with Mark Hopkins? A. About the same time.
Q. Also at Sacramento? A. Yes, sir.
Q. What was Mr. Hopkius's business? A. He had a general grocery and provision
store.
INCEPTION OF CENTRAL PACIFIC RAILROAD ENTERPRISE.
Q. Do you recall the circumstances under which the scheme of the Central Pacific
Railroad was first developed? I mean when the bill first passed the legislature
of California, and the time when the first idea of the road was developed.
A. I will tell you the whole history, if I can take time to refresh my memory,
because I was a part of it at the beginning. If you desire, however, I will
now give you a brief sketch.
ORIGINAL SURVEY MADE BY T. D. JUDAH.
Q. I wish that you would give us a brief sketch now, and at some future time
you can give us the complete history. A. In 1860 there was a gentleman by the
name of T. D. Judah, who was afterwards chief engineer of the company, who
had made surveys over the mountains with reference to the building of a line
of railroad connecting the Atlantic and the Pacific. At first I had no personal
acquaintance with him. The first time that my attention was called to the question
of the construction of a railroad was by a gentleman by the name of James Bailey,
who was afterwards the secretary of the company. Mr. Bailey came down to see
me, told me of his acquaintance with Mr. Judah, and informed me that Mr. Judah
had discovered in the mountains a pass over which a railroad could be built,
and gave me such further information on the subject as he possessed, and desired
that I should see Mr. Judah. I told him that I should be glad to see Mr. Judah,
but did not know that we would care to do anything in the matter. I told him,
however, that I would talk with Mr. Huntington and others about it. We fell
into conversation upon the subject, and the result was that we agreed to have
a meeting, and did have it the same evening at my house. We then fully considered
the subject, and discussed the matter one way and another. We afterwards met
again, when Mr. Hopkins joined us, and the result of that was that we concluded
that we would make the acquaintance of Mr. Judah. Neither of us was acquainted
with him, and we invited him to meet us and make our acquaintance,
2618 U. S. PACIFIC RAILWAY COMMISSION.
He then came down with Mr. Bailey and we had a conversation. We discussed the
question thoroughly in all its bearings, and the more we talked of it the
better we liked it. Mr. Crocker then came in, together with some other citizens,
and between Crocker, Huntington, Hopkins, Judah, Bailey, and myself we raised
some money towards making explorations which we thought necessary before
forming a company. We awaited the result of those explorations and the reports
made by Mr. Judah before we concluded to form a company, which we did in
1861.
COMPANY FORMED AND ROUTE SELECTED.
We had routes surveyed over the mountains according to my recollection there
were five of them and finally determined which was the best one as to the passes
and grades. We took the one which had the shortest snow line. At that point
the ascent is very irregular. We had 7,000 feet of ascent almost in 83 miles.
After reaching the summit the descent was at the rate of 90 feet to the mile.
Outside of this, down the Truckee, there were a number of short grades and
low summits, and a number of plateaus to cross. Altogether the route which
we selected was the most practicable, according to our ideas. Although the
snow falls as deep and even deeper on this line than it would have fallen on
other lines that could have been selected, yet this deep snow line extends
but a very short distance. We finished our explorations and then looked over
the country to see what business there would be for a railroad line. At that
time the business of Nevada was very promising, and we had an idea, like everybody
else on this side, that most of the mountains in Nevada were filled with mineral
wealth.
PROSPECTIVE BUSINESS FROM SILVER MINES.
Q. The Comstock lode was then being developed, was it not? A. Yes, sir ; they
were all making developments at that time and most of them were very rich.
The mines, however, did not have the depth which the Comstock lode had. I speak
now of the mines outside of those upon the Comstock lode proper. I remember
that while we were making our explorations, we came to the summit, and at Donner
Pass we looked down on Donner Lake, 1,200 feet below us, and then looked up
at the drifts above us 2,000 feet, and I must confess that it looked very formidable.
We there and then discussed the question of the paying qualities of the enterprise,
and we came to this conclusion : That if there was a way by which a vessel
could start from San Francisco or from New York, and sail around Cape Horn,
in behind those mountains, we could not afford to compete ; or if a vessel
could start from any of the Atlantic ports and come there around Cape Horn,
we could not compete. If this could not be done, however, and if we had only
the ox and mule teams to compete with, we saw that we could obtain such a rate
for carrying freight and passengers that we could afford to build the road
with the prospect of further developments in Nevada.
GOVERNMENT AID.
Q. Was not your attention almost immediately turned to the subject of obtaining
aid from the Government? A. I do not think it was at that time, but it was
very soon afterwards. We drafted the bill in our office which, I think, became
the foundation of the act of Congress. Mr. Judah and Mr. Bailey went to Washington
to look after it. Mr. Judah went before the railroad commission and the committees
of Congress,
LELAND STANFORD. 2619
and bad his maps with him to explain everything. He did a great deal towards
the passage of that bill, because he understood the subject better than any
other man at that time. He understood the country and the routes, and what
was needed generally.
METHODS EMPLOYED IN OBTAINING IT.
Q. It appears from your minutes with reference to this visit of Mr. Judah to
Washington, that a resolution was passed authorizing the issue of not to exceed
$100,000 in full paid stock to be used by Mr. Judah as agent for the company,
in such manner as he might deem advisable, in compensating agents and assistants
who might perform service in promoting the interests of the company, and. in
furtherance of the objects of his mission. Do you remember that circumstance
? A. Yes, sir ; I know that we gave him stock to be used to pay his expenses
there, and to secure such aids as he might need. He used but little of that
stock, however not very much of it. I do not remember how much he did use,
but it may be that the reports will show. I think, however, that he brought
back most of it.
Q. He was by profession an engineer, was he not? A. Yes, sir.
Q. Who else accompanied him to Washington on behalf of the company? A. Mr.
James Bailey. He was the first secretary of the company.
Q. Had you at this time any acquaintance with J. 0. Stone, of Leavenworth,
who was then present in Washington? A. No, sir $ I did not go on to Washington
myself.
PASSAGE OF BILL BY CONGRESS.
Q. Proceed with your narrative. You were stating the inception of the enterprise,
and the ideas that you had about getting over the mountains, and the object
of Mr. Judah's trip to Washington? A. Mr. Judah remained in Washington some
little time, and I do not know but what Mr. Huntington was there with him,
but I think not, however, at that session. The bill was finally passed. After
the passage of the bill Mr. Judah came back here and went to San Francisco
in the hope that stock might be placed with the capitalists here in order to
get money to build the road. Except a subscription for one lot of ten shares,
we were not able to interest anybody in this city. The only thing we were able
to obtain was that one ten-share subscription. There was some local feeling
at Sacramento and some little stock was taken up there. This failure compelled
us to ask aid from the counties, particularly the county of Placer, through
which the road was to be constructed, and it gave a subscription of $200,000
towards the stock, giving the company its bonds for the same.
STOCK SUBSCRIPTIONS.
By the CHAIRMAN :
Q. Did you open books for the subscription of stock here? A. Yes, sir.
Q. And also at Sacramento? A. Yes, sir. And we went around soliciting subscriptions
but found it impossible to get them. At that times everything here was high,
and money was readily worth from 2 to 2 per cent, per mouth. All the objections
to taking stock might be crystallized into this one, that money was bringing
from 2 to 2 J per cent, P R VOL iv 19
2620 U. S. PACIFIC RAILWAY COMMISSION.
I
per month, arid capitalists could not afford to put it into an enterprise which
they considered at best as of doubtful character, where the return would be
only after the completion of the road. We were therefore compelled to rely
upon our own resources. We obtained $200,000 subscriptions to stock from Placer
County; $300,000, I think, from Sacramento County, and $000,000 were to have
been subscribed by San Fran cisco, but the influential men and other influences
here were such that we could not obtain this last subscription, and after considerable
litigation the city gave us $400,000 of their bonds and did not take any oi
our stock. It was the best that we could do, but it hurt the enterprise very
much. One of the principal things which operated against our securing stock
subscriptions was the fact of the existence of a personal liability which attached
to stock under the laws of this State. We were forced to use our own individual
credit to its fullest extent for the purchase of supplies, at one time to the
extent of $600,000. We went on, however, and built the first 31 miles of road
entirely from our own means. We had not then obtained any county or State,
aid. The State paid the interest on a million and a half of our own bonds,
we paying the principal. We built 31 miles of the road, but we were not able
until we got this county aid to go further.
LOCAL CONTRACTORS.
By Commissioner ANDERSON :
Q. What 31 miles was this? A. The first 31 miles east of Sacramento.
Q. The first 31 sections'? A. Yes, sir.
Q. By what company was that built? A. By the Central .Pacific liailroad Company,
without any outside aid.
Q. Was it built by 4ocal contractors who took certain small subdi visions?
A. Yes, sir. We thought that was the most practicable way of building the road
at that time.
OBSTACLES TO BE OVERCOME.
By the CHAIRMAN :
Q. During what year was this? A. I think that it was in 1863. We kept on building
and doing what we were able to do until our means were substantially exhausted.
The principal drain at that time was in the purchase of iron. We wanted to
have on hand sufficient iron to build fifty miles of road. We had considerable
litigation to procure right of way. In fact, we obtained hardly any without
litigation. Parties opposed to the construction of the road interfered with
us, and we had a great deal of trouble and considerable litigation. Finally
the courts decided in our favor, the counties gave us their bonds, and the
State paid the interest on a million and a half of our own bonds. That was
all that we had until we got aid from the Government.
CONTRACT WITH CHARLES CROCKER AND COMPANY.
By Commissioner ANDERSON : Q. Please go back to the construction of the road.
After several contractors had proceeded with portions of the work, and you
concluded t hat it was best to make a change, what change did you make in the
form of construction? A. We then made a contract with Charles Crocker, in
the name of Charles Crocker & Company, He had no part
LELAND STANFORD. 2621
ner, but the contract was made out in the name of Crocker & Company for
the reason that we had hopes that he would be able to get capitalists interested
with him. This was found to be impossible, however, as every one regarded the
enterprise as of too doubtful a character to risk money in it. It was the general
impression that it would be a doubtful struggle at best, with the chances all
against us.
Q. For how long was this matter discussed between all of you as to the advisability
of changing the method which you had pursued, and instead of letting the work
to smaller contractors giving it out in large contracts? A. It came up almost
immediately.
OBJECTIONS TO SMALL CONTRACTS.
By Commissioner LITTLER :
Q. Immediately after the small contractors began 1 A. Yes, sir. Labor was very
scarce, and we pushed them very hard. We wanted the work done as nearly as
possible in consecutive order. We wanted it done first at the point nearest
the starting point, so that as each section was completed we could utilize
our capital to the greatest extent possible. We often found, however, that
the contractor the farthest off would finish his work first. The others would
be slow, and there was constant trouble from this source. Considerable trouble
also resulted from the fact that labor, especially white labor, was very scarce.
Most of the men working on the road were merely working for a stake, and when
they got that they would go off to the mines, and we could not hold them, except
in rare instances, more than a very little while. We could not get the necessary
white men, and then we had to take Chinaman.
By Commissioner ANDERSON :
Q. Had Mr. Crocker done any work of this character before that time? A. I think
not.
ADVANTAGES OF CONTRACT WITH CROCKER.
Q. What were the advantages known to you of selecting him as contractor to
do that work? A. He joined us in the enterprise. He was a man of a great deal
of energy and force of character, and nobody else hardly would touch the enterprise
at all. We were left substantially alone. Six or seven men who started with
us left us to get through the best that we could. After that it became practically
an individual enterprise. Then we made this contract, in the hope that we would
be able to get others in with us. I think that we made the contract for a certain
number of miles, which Mr. Crocker finished, and that
he then continued on working without any regular contract.
CROCKER'S RESIGNATION AS DIRECTOR.
Q. I would like to know something about the contract first. Do you remember
the fact that Charles Crocker resigned his office as director of your company
on the 24th day of December, 1862? A. I remember the fact that he resigned,
but I do not remember the date.
Q. Do you not connect that resignation with the fact that this contract was
about to be awarded to him? A. I do not remember that fact, but very likely
that was so. This contract, as I say, was awarded to Mr. Crocker in order that
he might get capital interested with him in the matter. It had got to be a
sort of individual enterprise, because
2622 U. S. PACIFIC RAILWAY COMMISSION.
nobody else would take hold, and it became a question with us how to get on.
We saw that we must control things, control the men and control the work,
if we were to succeed at all. I made great efforts, and so did all of us,
to get capitalists to take an interest in this contract with Mr. Crocker,
but we were unable to do so. This personal liability clause in our law had
a great deal to do with it. We not only tried to get capitalists interested
with iis, but we were very anxious that they should come in, even if we had
to give them all the assets of the company. Our failure in this matter led
us to form the Contract and Finance Company.
Q. That was formed some time later, some three years later, was it not? A.
Yes, sir.
REASON FOR HIS RESIGNATION.
Q. Mr. Crocker's proposal for construction under his contract appears from
your minutes to have been considered and awarded by your board on the 26th
of December, 1862, two days after his resignation. Without intending to criticise
that resignation, is it not perfectly apparent and well known to all of you
that he resigned because the voting for that contract or the awarding of that
contract while he was a director might raise questions as to its legality?
A. That may have been so.
Q. Was it not so, according to your best judgment? A. I do not know but that
it was.
Q. Mr. Crocker resigned on the 24th and his proposal was acted on on the 26th.
Would that not seem to indicate that the reason that I have suggested for his
resignation is the correct one I A. That may have been the case. I have stated
the objections to the making of small contracts, and in making a contract with
Mr. Crocker it was done with the idea that we knew that he would work with
us, that he was deeply interested with us, and that he would be at all times
under our control. We wanted his whole time devoted to the construction of
the road. We thought that he could do better service as a contractor than as
a director, and there may have been some question as to his occupying both
positions. How far those influences went at that time, however, I do not now
remember, but it was a part of our general scheme to build the road, and we
knew that we had to rely upon ourselves. Mr. Crocker went on with the contract,
and kept on struggling with the rest of us until our means were pretty well
exhausted.
TERMS OF HIS CONTRACT.
Q. Now pass to his contract : Can you tell us what the terms of his contract
were? A. No, sir : not without examination. I know, however, that we gave
him so much a yard for material I think in cash, and so much in stock. The
stock at this time was not considered as of much, if any, value. We did not
attach much importance tt it. Long before we got over the mountains it was
not a financial problem. It was a question of whether it was possible to construct
the road.
Q. What I want to get at is, what is your recollection as to the terms of the
Crocker contract ; was payment to be made on the engineer's statements of the
quantity of work to be done, and not at so much per mile? A. That is my recollection.
We made estimates of prices for the different classes of work, but those prices
I do not remember. I think that our books, if you have them, will show just
what those contracts were,
LELAND STANFORD. 2623
THE STOCK OF LITTLE VALUE.
Q. The minutes do not show the terms of the contract. Your books show only
large payments to Mr. Crocker during the years 1863> 1864, and 1865, and
the estimates produced yesterday by Mr. Miller show, as preliminary to making
the payments to Mr. Crocker, that schedules of estimates of quantity and estimates
of amounts were made out, stating so many yards of excavation, so many feet
of grading, so many ties delivered, so much wrought iron, so much cast iron,
the whole being computed by the month, and then payments were made to Charles
Crocker & Co. at the rate of five-eights of the amount due in money and
threeeighths of the amount due in stock. Does that statement refresh your recollection
as to the nature of the (Crocker contract? A. Iknow that the contract was
for specific prices, to be paid by the yard, and so much was to be paid in
cash, and so much was to be paid in stock. The stock was not considered as
amounting to very much value, but still we had an idea that the stock of the
company might be an inducement to capitalists to come in with Mr. Crocker,
and if the enterprise was successful they would have the benefit of it. None
came iri, however ; but we still continued on in the hope that at some time
or another either this stock or some other inducements could be given by which
we could obtain the necessary financial assistance to complete the road. As
I have said before, this became substantially an individual enterprise. The
whole weight rested upon us. We could not get anybody with us, and it seemed,
long before we got over the mountains, that something had to be done or we
would not be able to make it a success. The best thing that we could do was,
first, the making of this contract with Crocker & Co., hoping for the best,
and then the contract with the Contract and Finance Company.
CHRONOLOGICAL HISTORY OF CONSTRUCTION.
Q. When did you make the contract with the Contract and Finance Company? A.
That was made after the contracts with Crocker & Co.
Q. Before I ask any further questions in that respect I would like to get an
intelligent and chronological history of the construction of the road from
year to year. I would like the history of the building of of the road, section
by section. How many miles did the Crocker contracts embrace before the contract
was made with the Contract and Finance Company? A. I think that this contract
took us up to a place called Dutch Flat, 60 miles from Sacramento, about 30
miles from New Castle. Mr. Crocker then continued on building the road. I do
not know now whether there was any regular contract for this additional construction
or not, but I do not think that there was. I do not think that we ever gave
him a contract beyond Dutch Flat, because, as I say, we were all oping to get
some Eastern contractors and capitalists to come out and take an interest in
the work. We did not succeed in this, so Mr. Crocker kept on doing the work.
I do not know about the prices, whether they were changed or not. I do not
think that we cared, so long as we got the work done. We kept building all
the time, so far as we could obtain money to go on with the work. We pushed
it as fast as our means would permit, and in order to do this it was necessary
that we should keep substantially the control of the whole thing in our hands.
I do not know whether there was ever any new contract, either verbal or written.
I do not think that there was. I think that it was merely a general understanding.
2624 D. S. PACIFIC RAILWAY COMMISSION.
EXTENT OF WORK DONE BY CROCKER.
Q. Assuming that there was not, or that they were mere modifications of this
original contract, up to what point did the Crocker work extend, and where
did the Contract and Finance Company begin? A. The Crocker work continued
merely to the State line, I think, before the work of the Contract and Finance
Company began. By this time, I will say further, our means were very limited.
Under the act of Congress we had mortgaged the road and issued bonds 100 miles
in advance of construction, and they were all consumed, together with the county
aid and all the aid that we received, and it was doubtful if we could possibly
go on. Then I thought, and talked it over with the rest of my associates, that
if we made a contract and put in a sufficient amount of the stock so that the
con tractors could have substantially what there was in it, we might induce
Eastern men to come in, and possibly some of our own people. I tried to get
some of the largest capitalists in this State to come in with us at that time,
but it was the same old story.
THE CONTRACT AND FINANCE COMPANY A FINANCIAL NECESSITY.
They were afraid to take any chances in what they considered a doubtful enterprise,
when they could lend their money out on good security at high rates of interest.
All the way through it was a question of capital whether we would succeed or
not. And we determined to let contracts in the way in which they were let,
thinking that in that way we might get rid of this scare of the individual
liability of stockholders under the California law. We thought that by forming
the Contract and Finance Company, and agreeing to give it the stock of the
company, that company might be able to interest capital. Of course this was
practically giving the contractors all the assets of the company, but it was
better for us to do that than to fail.
FAILURE TO INTEREST CAPITALISTS.
Mr. Huntington in Kew York tried to get capital interested, and I tried here.
At one time I had a good deal of hope that I might succeed here by forming
a syndicate of our wealthiest men and offering them these inducements. We failed
in all these endeavors, as we had failed in all the previous ones. We finally
managed to get through, but when we did finish the work to Ogden our entire
means were exhausted. The Government bonds were all gone. I never saw one of
these Government bonds. Our first-mortgage bonds were exhausted. The aid received
from the counties had been used up. The money raised from the bonds on which
the State had guaranteed the interest had gone into the road, and, to cap all,
the company was considerably in debt.
ROAD COMPLETED TO STATE LINE.
Q. To come back to Mr. Crocker's work, I understand you to say, then, that
the construction actually effected, paid under those contracts, extended from
Sacramento City to the State line. Is that correct? A. Not by virtue of the
contract, but because we continued the work for the reason that there was no
one else to do it.
Q. flow many miles was this east of Sacramento 141? A. About that ; I think,
though, that it was about 137.
LELAND STANFORD. 2625
Q. Can you give ine the exact location where your State line is, with reference
to Donner Lake Pass or the town of Truckee? A. It is some ways down from
Truckee.
Q. After you pass the village? A. Yes, sir.
Q. Was it not known as " Camp No. 24 " at that time? A. I cannot
say as to that.
Q. At what period was it that you reached this point on the State line? A.
I do not remember exactly.
Q. Take it this way. How long was it before the contract was made with the
Contract and Finance Company *? A. I think that it was in the winter of 1866
and 1867. I know that in 1868 we were at the Summit. We built over the desert
during the season of 1868 the winter of 18C8->69.
COST OF CONSTRUCTION.
Q. What is your recollection as to the cost of the first portion of the road
? What is your recollection as to the total amount paid under the Crocker contracts
for the work done by him from the thirty-first section to the one hundred and
forty first section? A. I cannot remember now. I cannot tell you in dollars
and cents 5 but I know that he had all the money that we could put our hands
on at that time, as well as the proceeds realized from the sale of our own
bonds for one hundred miles in advance of our construction, part of it at the
rate of $40,000 a mile, and the rest at the rate of $32,000 a mile. The Government,
I think, gave us bonds on the basis of two-thirds of the completed amount of
work, at the rate of $48,000 a mile. All that was gone, and everything that
we had from the county and State had gone in at that time. The bonds given
us by the city and county of San Francisco bore interest at the rate of 7 per
cent, per annum. Money here at that time was very high, and I think that all
we realized from the sale of those bonds was at the rate of 73 cents on the
dollar. The million and a half of our own bonds, upon which the State had guaranteed
the interest, produced us but about $1,000,000 in cash. From the Sacramento
County bonds we realized but 65 cents on the dollar, and from the Placer County
bonds but 70 cents.
Q. Your statement is that all that the company had received, all of its assets,
except what had been paid to the small contractors for the construction of
the first thirty-one sections of the road, were used up in paying for work
done under the Crocker contract and the extension of the Crocker contract?
A. I think so. I may be in error a little, but that is substantially the case.
At that time I know that I was looking after the finances here, and what I
have given you is my recollection.
NECESSITY FOR COMPANY TO CONTROL CONTRACTORS.
Q. Do you remember the fact that Mr. Crocker first proposed, among a number
of other contractors, for a comparatively small section of work between Sacramento
and the California Central, and that it was subsequently to that date that
he made his larger contract? A. Yes, sir; subsequent to that. When we first
commenced, we thought of letting contracts to bidders before much work was
done, but it soon became apparent to us that we could not handle them and be
successful in building the road in that way. We saw that we must have them
under our own control, or practically so. We saw that we must have contractors
whom we could control, who could do the work when we had the money to pay,
and who would push it and be willing to make any
2626 U. S. PACIFIC EAILWAY COMMISSION.
kind of sacrifice that we might call upon them to make. We looked at the work
ourselves, and whenever there was a chance to push it by any sacrifice, we
did not hesitate. We used our money with the greatest economy in every respect,
except in the matter of speed, and theft we never hesitated to make a sacrifice.
The road could not have been built under any other circumstances, and we
could not have done anything in the matter, except by pushing it as rapidly
as possible, still exercising in everything the closest economy.
Q. Our object is to ascertain approximately, without disputing your proposition,
the terms upon which it was constructed. A. There is no reason for concealing
anything about this, or about anything else in connection with the company.
1 take it that this committee is here to see what is fair and right between
the Government and the company, and what is right all around. I am glad to
give you all the information in my power. We had great difficulties to overcome,
and the only wonder is that we ever did overcome them.
AMOUNT PAID TO CROCKER & CO.
Q. We find from the books of the company that the payments to Crocker & Co.
in 1865 amounted to $3,236,710.35; in 1866, $8,290,790.11; and in 1867, $9,930,282.19.
The payments that I have enumerated all appear to have been made for the construction
of the road from section 31 to section 141, both inclusive, one hundred and
ten sections in all. It would therefore appear that between $21,000,000 and
$22,000,000 were paid in the form in which the payments were made, five-eighths
in cash and three-eighths in stock, to Mr. Crocker for his work to the State
line. If this is correct It would seem that for the construction of the road
between sections 31 and 141 Mr. Crocker received at the rate of over $200,000
a mile. Is that the way you understand the work to have been done and the payments
to have been made, assuming these figures to be correct? A. I do not know
about the figures. We did not give him money any faster than he needed it,
because we had great difficulty in obtaining money at that time.
Q. Who can give an idea about this I A. I am coming to it.
MAGNITUDE OF THE WORK.
Q. Please describe the start at section 31 and extending to section 141, each
of the sections being substantially equivalent to 1 mile, and give us the character
of the country over which this line passes. Give the names of the towns, the
names of the rivers, and tell us all you can about the general character of
the country. Give us a description of the plain first, and then you can tell
us about the mountains. A. I was going to give you an idea about that work.
We worked on that mountain from ten to fifteen thousand men most of the time,
and then were oftentimes aided by five hundred kegs of powder a day. After
we passed the mountains we worked about half that number of men. We were four
years crawling up the mountains, and three of those years we drew upon all
the forces that we could get. After we passed the mountains we built 500 miles
of road in five days less than ten months.
Q. That is not under the Crocker contract. What I want to know is all about
the Crocker contract and the work done under it. We can take up this other
work afterwards. A. What I wanted to give yon was an idea of the magnitude
of the work.
LELAND STANFORD. 2627
Q. What I want to know first of all is the history of these first one hundred
and forty-one sections. A. If you will let me go on I will give you something
by which you can judge of the magnitude of that work.
GEOGRAPHY OF THE COUNTRY.
Commissioner ANDERSON. If you will describe the geography of the country, and
give the names of the towns, rivers, &c., as you go on, it would be much
more intelligent to me. If you say, for instance, section 31 commenced east
of such and such a place and passed over such and such a river, going such
and such a way, I could follow you more intelligently.
The WITNESS. The maps of our engineers will show all of these details; although
they will give you the names of a great many places well known at the time
the road was constructed, but which have since disappeared.
Q. The rivers are there, are they not? A. The rivers are there ; yes, sir.
The contract with Crocker, I think, commenced at New Castle, 31 miles east
of Sacramento. It was for a limited number of miles. My impression was that
it was for 20 miles. It may have been only to Colfax, 51 or 52 miles. I am
not positive about that. After terminating this contract, however, Mr. Crocker
continued on with the work. I do not think that we put the terms in writing,
but still we may have done so. At any rate I am not certain about it, and I
do not see that it is of any great importance. We were doing whatever we thought
necessary to complete that road, and we" went on and did the work, and
pushed it on as fast as possible with the means at our command. We never had
any surplus money.
Commissioner ANDERSON. Mr. Crocker seems to have had some surplus money at
some time or other in the course of his life.
DIFFICULTIES IN CROSSING THE SIERRA NEVADAS.
The WITNESS. I will give you something which will give you an idea of the extent
of the work and of its magnitude if you will let me. We worked from ten to
fifteen thousand men on that mountain, and after we passed the mountain, with
less than half the force, we built 500 miles in five days less than ten months
and met the Union Pacific Bailroad line at Promontory. The work on the Sierra
Nevada Mountains was exceedingly difficult, and was far more than the average
of the work from there to Chicago. The same rate of speed which we were able
to exhibit after we left the mountains with only half the men would, if we
had been able to have carried it out during all the time that we were building,
have carried us to Chicago. There never was any portion of the work on either
road so difficult as that which we had in climbing the Sierra Nevada Mountains.
Q. Which side of Truckee? A. Partly beyond Truckee, say, for the first 150
miles beyond the summit, carrying us beyond the State line. It took more work
upon our part to get us across these mountains than would have sufficed to
build a single track road from the other side of the Sierra Nevadas to Chicago.
PREVIOUS INVESTIGATIONS.
By Commissioner LITTLER :
Q. Is not this work well described and well stated on your side of the case
in the report of >our superintendent of construction, which is
2628 TJ, S. PACIFIC RAILWAY* COMMISSION.
made an exhibit to your affidavit? A. Yes, sir. This is twenty-six years ago,
during which time I have led a very busy life. From time to time the papers
have discussed all these questions, and they have been all through these
things. Legislative committees and the courts have fully investigated all
these matters, and numerous reports have been made from time to time. I suppose
that in one place and another an immense quantity of matter can be found
that would throw light on this subject, but I cannot place my hand on it.
BASIS OF RAISING MONEY TO PAY CONTRACTOR.
By Commissioner ANDERSON:
Q. It appears from these figures, which I have read, that there was paid to
Mr. Crocker for the work done by him, part of which was in money and part in
stock, at the rate of $210,000 for each mile of road constructed, and our inquiry
is directed to the question whether the issues of stock and the sales of bonds
made for the purpose of raising that money were not upon such a basis as to
have contributed, in the ultimate result, very largely to the present crippled
condition of the Central Pacific Eailroad Company? A. No, sir; it has not.
Commissioner ANDERSON. And on that point we would like any information that
you can give us.
The WITNESS. The stock was not considered as valuable at the time, and it did
not turn out to be of any valuable assistance in the building of tiie road.
If it had any value at all it was wholly prospective. We could not sell it
and we could not hypothecate it. All the money that we could get from any and
every source went into the road.
Q. You mean it went into the Crocker contract? A. It went into the construction
of the road. Mr. Crocker did not have any profits from it.
WHO CONTROLLED THE ENTERPRISE.
Commissioner ANDERSON. Excuse me ; but you are passing over the whole question
that we are so anxious to get light upon. If that expression, "Crocker
did not get any profit out of it," is based upon fact we will pass to
the next section.
The WITNESS. We substantially controlled the whole of that work. We knew all
the work that we could do and all the money that we had to push it through.
Q. Whom do you mean by "we," yourself and Crocker? A. I mean the
five men who devoted themselves to it from the beginning to the end. We all
worked on the best that we could, and did all we could to accomplish the result.
Q. There were yourself, Mr. Crocker, Mr. Mark Hopkins, Mr. Huntington, and
who else? A. E. B. Crocker.
Q. A brother of Charles Crocker? A. Yes, sir. Mr. Judah died early and Mr.
Bailey retired.
Q. And E. B. Crocker is dead now? A. Yes, sir.
Q. Was his interest substantially the same as that of Charles Crocker ; did
they work together? A. No, sir. Charles Crocker was contractor; but we all
felt that we should fill our parts the best that we knew how towards securing
the construction of that road, and we did so.
Q. You say that you were all working together. Do I understand you that you
all contributed your time, attention, and credit, and gave your best energies
to the successful completion of these Crocker contracts? -A, Yes, sir j that
is substantially it.
LELAND STANFORD. 2629
WHO WOULD HAVE GOT THE PROFITS.
Q. Do I also understand that you were equally interested in any of the profits,
or were to share any of the losses that might arise under that contract 1 A.
No, sir ; not at that time.
Q. If there had been profits would they have gone to Mr. Crocker? A. If there
had been profits we would have let them go to him, as is ordinarily the case
in contracts, and Mr. Crocker would have enjoyed them. We had to make great
sacrifices, however, in order to make time, and this cut off whatever profits
he might otherwise have made. Sometimes it was a question how far we could
get money to keep things going, and how to regulate expenses so as to be able
to pay them.
RELATIONS OF CONTRACTORS WITH RAILROAD COMPANY.
Q. State on what you based your belief or conviction that you appear to have
that when Mr. Crocker had finished the one hundred and fortyfirst section there
was nothing left of the $22,000,000 in money and stock which he had received
? A. Because the money passed through our own hands, and the relations of Mr.
Crocker and the Contract and Finance Company with the railroad company was
such that we knew all the time about their expenses and their wants. We met
their wants, but did not go any further. The contract, at the time it was let
to Mr. Crocker, would not have been taken by anybody else. If there had been
a regular contract let to a regular contractor whom we could not have absolutely
controlled, we would have had more or less trouble. We could not have afforded
to have let him go on as contractors ordinarily go on with work, because of
the difficulty which we experienced in getting money. If we could have let
him go on in this way, as other contractors do work, he would have had a right
to enjoy all the profits that he could make; but we had to have control over
him in order to be able to do anything at all; and as he was interested with
us in the construction of the road, and as we were all working together for
the common end, we could of course do as we pleased with him.
INDIVIDUAL KNOWLEDGE OF EXPENSES.
Q. Did that control which you exercised over Mr. Crocker give you such a knowledge
of his doings as to enable you to tell when he ought to have money, or did
you take his word for it every time *? A. We knew what he wanted and what he
needed. We had reports of the work that was being done, and we knew the work
that was to be done. We knew what it was costing, and we knew every dollar
that was required to carry it on.
Q. Those reports made to you must have, been entered somewhere upon your books,
and ought to show the amounts paid to the different contractors who did the
work, ought they not? A. I suppose so.
Q. You would not be liable to take his word for it whenever he needed money,
would you? He would not come to you and say, " I want more money to do
more work," or " I want $5,000,000 to go on, as I have spent all
I had "? A. Each one of us on the spot had his individual knowledge as
to the other's department, and we kept trace of it all the time. We hardly
slept, but did the best we could to get along, and I may say now that I sometimes
wonder that we ever did get through at all.
2630 U. S. PACIFIC RAILWAY COMMISSION.
DISAPPEARANCE OF CONTRACTOR'S BOOKS.
Q. Who kept Charles Crocker's books? A. I think William E Brown. Perhaps not
at the beginning, but very soon afterwards, before the enterprise became of
very great magnitude, William E. Brown was in charge.
Q. Have you ever seen those books since this contract was finished in 1867
? A. 1 dp not know. I never have been over his books, but I have seen books
in his office lying open on his desk.
Q. Do you know whether they have been exhibited in any of the various litigations
in which these matters have been discussed! A. Not to my knowledge.
Q. Do you know whether they are available to this Commission now? A. I do not
think that they are. I do not know where they are, nor what became of them,
but they have disappeared.
Q. They have disappeared? A. Yes, sir.
Q. Do you know whether this has been the subject of litigation and investigation,
as have been the books of the Contract and Finance Company, which have been
described as missing? A. Yes, sir.
Q. And they have not been produced? A. No, sir.
INTEREST OF COMMUNITY AS TO CAUSE OF CENTRAL PACIFIC'S
WEAKNESS.
Commissioner ANDERSON. I may as well say here that the subject, as we understand
it, assumes about this shape : The community is largely interested in this
matter, and it seems to be the general belief that the present weak condition
of the Central Pacific Railroad Company is due to the fact that the contract
with Crocker & Co., and the contract with the Contract and Finance Company,
and the contracts with the Western Development Company, and the contracts with
the Pacific Improvement Company have drained the company of its resources ;
that certain individuals have procured to be issued to themselves enormous
quantities of stock and bonds of this company, and have paid dividends on the
stock, and have made the interest charge on the bonds exceedingly heavy, and
that the origin of its difficulties lies there entirely, and nowhere else.
The Commission desires to afford a full opportunity to have answers made in
reference to that matter. To those subjects to which you have been so fully
devoting your time (and in the report you handled them with great dexterity
and ability), the community has had its attention called so often that it is
familiar with them 5 but the subject of this issue of stock and bonds has always
remained concealed, and all proceedings brought to throw light upon it have
been met with the assertion that the books and the contracts have disappeared.
THE STOCK VALUELESS WHEN ISSUED.
The WITNESS. I thank you for your frankness. This opportunity is what we want,
and what we have desired for some time. We have nothing in our transactions
to conceal, and we are ready and willing that the whole history shall be fully
understood. The stock was substantially valueless. It had no value at the time
it was issued, and it had no value when the road was completed. Of course it
afterwards became valuable. Of the very few people who subscribed for stock
at the beginning, most all got out, and this included most of those who had
taken a little stock to help us along. Afterwards it went down, and 1 myself
bought, as an accommodation to a stockholder, 2,300
LELAND STANFORD. 263!
shares of it at 10 cents on the dollar, full paid stock. Finally, it was not
sold at all, as nobody would have it. In making these contracts we did not
count the stock even among ourselves as of any special value, but we put
it in in the hope that somebody or other, some capitalists, would be willing
to take an interest with us, and there would be the property as security.
MEANS EXHAUSTED UPON COMPLETION OF ROAD.
When the road was completed to Ogden, all of our money and all of our means
were exhausted. You will understand that our road was mortgaged for 100 miles
in advance of construction, and we had used up all of this money crossing the
mountains. We had graded the road to Promontory, some 63 miles, I think, and
there met the Union Pacific. In the settlement, the Union Pacific took the
entire aid from the Government for these G3 miles, which made a considerable
inroad in the amount received from the Government by the Central Pacific. Everything
was used up. The Contract and Finance Company itself was somewhat in debt,
and I think our books will show by this I mean the Western Development Company
books that when the Contract and Finance Company went out of existence there
was a great deal of property which it was supposed by the general public to
have, which really had no existence. About that time there was a great deal
of talk about the Credit Mobilier matter of the Union Paific.
DISSOLUTION OF CONTRACT AND FINANCE COMPANY.
The people began to talk about the Contract and Finance Company; and when we,
after a while, got through, we concluded to let that company go. Its affairs
were wound up, and under our laws here it was dissolved. The indebtedness of
the Contract and Finance Company was assumed by Mr. Huntington, Mr. Crocker,
Mr. Hopkins, and myself, according to my recollection, and its affairs were
wound up.
DIVIDENDS.
Commissioner ANDERSON. I will say here that the assertion is made that the
Contract and Finance Company was in the condition which you mentioned because,
before presenting its petition to the court, it had divided up enormous dividends
of stock and bonds to the four gentlemen you named.
The WITNESS. My impression is that the only dividends made were of stock ;
but Mr. Brown, when you come to him, will be able to tell you specifically
about that.
MONEY PAID TO CROCKER.
By the CHAIRMAN :
Q. Of what department did you have charge during the Crocker con tract? A.
I was president of the company, and had the general management of its affairs
on this side. I looked particularly after the financial department until we
were able to obtain aid from the Government. I had to look after a great deal
of the financial business of the company, especially that which was transacted
here.
Q. Was the sum of $22,000,000, or the different amounts named to you as having
been paid to him from 1864 to 1867, paid to Mr. Crocker on his individual contract
? A, As to the amount I cannot say, but
2632 U. S. PACIFIC KAILWAY COMMISSION.
of course Mr. Crocker received the money, whatever was paid for that work from
the end of the 31 miles until the Contract and Finance Company took hold
of the construction. But as to the amounts I cannot say anything. I only
know this, that I was helping to raise money all the time, and it was hard
work to get it.
STOCK SUBSCRIPTIONS.
I will say further about this stock: The stock subscriptions by individuals
were very small. At last we had some trouble about this Contract and Finance
Company, and got into the courts. We finally bought up the stock, so that there
was none of the stock owned by the original shareholders in the market that
we know of, and they have not any interest in the railroad because of that
stock. The present stockholders in the concern have no interest or concern
at all in any business or contracts prior to that date.
ACCOUNT BOOKS OF CHARLES CROCKER & CO.
By Commissioner ANDERSON :
Q. Before leaving the Crocker contracts can you refer us to any one else besides
William E. Brown and Charles Crocker who would "have knowledge of the
contents of the books of account of that firm, and who can lay before us the
figures showing what profits, if any, were made out of that construction, so
that we can reach an intelligent judgment on that subject? A. No ; I do not
think that I can. I think that Mr. Brown had a clerk or two with him ; but
he kept the books, and he would know. Mr. Crocker did not pay much more attention
to the books and to the accounts than the rest of us. He was supervising construction,
and spent most of the time at the front. He was a very active man, and personally
supervised the work of construction.
Q. Did he have any assistant? A. Yes, sir ; his first assistant was Mr. Strobridge.
Q. Is he living? A. Yes, sir.
Q. Please give us his name in full. A. J. H. Strobridge.
Q. Please give us his address. Is he living in San Francisco? A. He lives
across the bay, in Oakland.
Q. How can he be reached? A. He may be reached at almost any time upon a .day's
notice.
Q. Did he make the subcontracts that Mr. Crocker made? A. No, sir.
Q. Was he employed by Mr. Crocker? A. Yes, sir.
Q. Did he have the employment of any men? A. Yes, sir ; under Mr. Crocker
he had the entire supervision of the work of construction.
Q. Did the Crocker contract include rails? Did he furnish the rails? A. 1
think that the contract included everything.
MATERIALS PURCHASED IN NAME OF CENTRAL PACIFIC.
Q. Where goods, materials, rails, &c., were purchased in the East to be
used in" these Crocker contracts, were they purchased in his name or in
the name of the Central Pacific? A. I think they were purchased in the name
of the Central Pacific and charged by the Central Pacific to Crocker & Co,
LELAND STANFORD. 2633
Q. The Central Pacific bought the rails aud charged them to the Crocker contract?
A. Yes, sir; I think that was the way.
PRICE OF BAILS AND ENGINES.
Q. Do you remember the price of rails at that time? A. They varied, I think,
from $70 to $80 a ton, and I believe at one time we paid as high as $136 per
ton.
Q. Does that mean iron or steel rails'? A. Iron; that was before the days of
steel. Everything was high. I think that we paid $65,000 or $67,000 for two
engines.
Commissioner LITTLER. Your engineer says that you paid $143.67 at one time
per ton for rails delivered at Sacramento.
The WITNESS. Yes, sir; that was for a portion.
Q. Was it at that time very difficult to get rails? A. Yes, sir. Does that
statement give the amount of rails that we bought at that time 1?
COST OF TRANSPORTATION VIA PANAMA.
Commissioner LITTLER. Eb, sir ; he says that shipments by way of the Isthmus
of Panama were made as late as 1868, and that the rails alone cost $51.98 per
ton ; and that with freight added the rails cost, delivered at Sacramento,
$143.67, not including the charges for transfer from the ships at San Francisco
to the schooners, or for transportation up the Sacramento Eiver to the city
of Sacramento.
The WITNESS. I remember that we had 10,000 tons of rails come by way of the
Isthmus, and I think that my impression is that they charged us about $60 a
ton for the freight. I know that we had quite a number of engines come by way
of the Isthmus, and it cost us something like $3,000 an engine for freight
by way of the Pacific Mail.
By Commissioner ANDERSON. I show you one of your estimates to make up the amount
coining due under this contract. Please explain it. [Hands witness the document
referred to.]
EXPLANATION OF ESTIMATES.
Q. Does the first column show the quality of work done for which payment was
to be made, the second column the price, and the third column the figures?
A. I only know by what I see here ; but 1 presume that it is correct. I have
no reason to think otherwise.
Commissioner ANDERSON. I call your attention to the fact that the items for
work do not seem to include the rails.
The WITNESS. This seems not to include them.
Q. Does your memory serve you as to whether they were included in the contract
or not? A. I think that they were included in the contract, but that would
be a different charge. These are estimates made by the engineers at the beginning
of that contract. It was very carefully considered, and received as much attention
as any other matter which came before the company, because when Mr. Crocker
made the contract he, of course, hoped that he would make some money out of
it ; and if we had been able to push matters, he would have gone on in that
way, and would have made some money; but circumstances required us to make
all kinds of sacrifices for speed. At one time we had to pick out and dig out
snow to the depth of 75 feet to make an embankment. At times the snow was very
deep all along the mountains, and it was difficult to get provisions aud materials
to the front. At times the stage could not run, owing to the depth of the mud.
The horses would mire in the mud, and
2634 U. S. PACIFIC RAILWAY COMMISSION.
then we had to pack the goods to the front at great expense and with a great
deal of trouble. The snow fell during the winters that we were on the mountain
to an average depth of from 37 to 38 feet. Heavier falls have taken place
since, but we have been better prepared to meet them. In the spring that
snow would pack down to about from 14 to 16 feet, and would be very hard.
We worked through this snow at enormous expense and trouble, and no contractor
would have been able to stand on his contract.
WHY THE COMPANY CONTROLLED SUPERVISION OF WORK.
9
Q. Are you speaking of the Crocker contract? A. Yes, sir. We therefore practically
took control of the supervision of affairs, and did all that we could to take
care of the interests of the company ; but we forced the road along at any
sacrifice, without any reference to the irfterests of the contractor.
By Commissioner LITTLER:
Q. And without any reference to the obligations of the contract? A. Yes, sir.
We wanted the work done, and as Mr. Crocker was jointly interested with us
in the success of the enterprise, his interests as a contractor were considered
by us as secondary to the completion of the road.
Q. Do you mean to say that by your conduct you practically annulled the Crocker
contract and ran the work yourselves? A. Pretty largely, though not entirely;
perhaps legally not. But we had to have that work done, and we insisted upon
it that every sacrifice should be made. For instance, we wasted a great deal
of dirt, which the contractor ordinarily would put in the fills ; but to do
this would have delayed the progress of the work.
By Commissioner ANDERSON :
Q. Did you have any trouble with Mr. Crocker about this? A. No, sir.
Q. Did he make any objections? A. No, sir.
Q. Did Mr. Crocker furnish any part of the equipment or the rollingstock under
his contract? A. I think that everything went in under that contract.
Q. You notice that by your reports you did business as fast as your road was
completed, do you not 1 A. Yes, sir.
GROSS EARNINGS FROM COMPLETED PORTION.
Commissioner ANDERSON. So that your gross earning reported for the years 1864,
1865, 1866, 1867, and 1868 reached up to quite large figures, the gross earnings
of 1868 being over $2,000,000, those for 18(59 being over $5,000,000, those
of 1870 being $7,000,000, and those of 1871 being $9,000,000. I merely refer
to the fact that from 1862 to 1867, under the Crocker contract, your gross
earnings amounted to quite a considerable sum. The rate at which the road was
operated appears to have been under 35 per cent., and the credit to the income
account, that is, the actual surplus after deducting all expenses chargeable
to the income, appears to have amounted to over $1,000,000.
The WITNESS. About the book-keeping part I do not know. I do not know that
I ever looked over a page of the books since the history of the road commenced.
LELAND STAlfFORD. 2635
FINANCIAL RESULTS FROM CROCKER'S CONTRACT.
Q. Have you ever been over any statement showing the result of this contract
with Mr. Crocker, so as to see whether he did or did not make any money out
of it? A. No, sir ; I never did. All the money that he received on that contract
went into construction. Of course the stock was net. I never went over the
matter myself, but still I had sufficient knowledge of things, and I knew that
at that time every dollar of income from every source went into the construction
of the road. In the first place, I had largely to do with negotiating the money
for him, and our relations were such that I knew what his wants were. He talked
it over with Mr. Hopkins, who was treasurer of the company, and myself, and
we furnished what was needed, but we did not furnish any more. It was hard
enough to get that.
THE STOCK A NET PROFIT.
Q. You used the expression a few moments ago that the stock was net ; was it
your understanding that the money which he received was sufficient to pay the
expense to which he was put, and that when he finished the Crocker contract
and completed the road up to that one hundred and forty-first section he had
all the stock remaining substantially net? A. I think so.
Q. Was there ever anything done whatsoever between Mr. Crocker, Mr. Huntington,
Mr. Hopkins, and yourself as to the money received by Mr. Crocker under the
Crocker contracts $ A. No further than what our books show.
Q. I mean, was there anything done looking to an accounting among yourselves
as partners'? A. Not at that time; no, sir.
Q. You say that you were not partners at all as to those sections? A. No,
sir ; we were not partners in those contracts.
Q. You had no interest in his profits? A. No interest at all at that time.
Q. You were not to be held for any portion of his losses, if he made any? A.
No, sir.
Q. At any time have you had any right to inquire from Mr. Crocker whether he
made any money or not out of his contract, or to ask him to account for the
moneys received by him for the construction of sections 31 to 141? A.. We
had no right to do it, other than that we were all engaged in the enterprise,
and if money was taken out and wasted, or anything of that kind done, we would
have stopped it. This work was in such shape that we could have stepped in
at any time, if we were not satisfied, and could have taken it out of Mr. Crocker's
hands.
NO EXPECTATION OF PROFITS.
At that time, in our own minds, we had given up all hope of realizing anything
from the stock of the company. The profit to us as investors in the railroad
had passed away. We had given up all hopes of that. It was then simply a question
whether we could overcome the difficulties which beset us, and succeed in building
the railroad. How to build it was the thing that engaged our attention, and
we were willing to give our best efforts towards building the road with the
greatest expedition possible ; and if we had found that Mr. Crocker was making
a great deal of money out of it we would have said to him, ^ No ; it cannot
be 5 we cannot afford to give you a large profit in money,? R VOL IY 20
2636 U. S. PACIFIC RAILWAY COMMISSION.
because we cannot spare it;'? and whatever bis contract might have been, we
would have stopped it. I had enough knowledge of his affairs to know just
how much money he needed and what he was doing with it. I was perfectly familiar
with the whole thing, as also were the others. We were all in the enterprise
together. We all started in at the same time, and at the beginning we started
with the idea of taking what stock we could afford to take, and if others
desired to come in and subscribe for the balance they could do so, even to
the taking of the control of the road.
Q. As far as Mr. Crocker's individual profits out of the construction of that
portion of the road to which I have referred, from section 31 to section 141,
are concerned, neither you nor Mr. Huntington, nor Mr. Hopkins, ever received
from Mr. Crocker an accounting or a division of the profits 9 A. No, sir.
Q. Is that your positive statement? A. Yes, sir 5 I do not think that we left
him with any money over.
Q. I am asking about an accounting. A. We never had any accounting.
NOT ENTITLED TO SHARE IN PROFITS OF CROCKER CONTRACT.
Q. I will ask you if you were entitled to receive any of the profits from the
Crocker contracts or liable to pay any proportion of the losses? A. No, sir;
if he had made a large profit, there was nothing to prevent his legally appropriating
it to his own use, and if he had made large losses, there was no obligation
upon our part to assist him, except the general fellowship which comes from
association in large enterprises like that. If he had made losses he might
have appealed to us to assist him, and he might have done so with good grace,
as we had practically assumed control of the work. We demanded that the work
be crowded, without any reference whatever to whether it was advantageous to
the contractor or not.
Q*. To confine myself to your connection with the Crocker contract, I understand
you to state positively that you have riot participated in any of the profits,
if any were made out of the Crocker contracts, for the work that was done between
sections 31 and 141 of this road? A. Yes, sir ; that is my positive statement.
PRICE AT WHICH STOCK SHOULD BE TAKEN.
Q. Do you remember that the stock originally was to be taken at 50 cents on
the dollar in the settlement with Mr. Crocker? A. I remember that we made an
estimate of this stock at that time, but whether that is the exact figure or
not I do not remember now.
Q. Do you not remember that from time to time there were modifications made
which reduced this figure to 30 cents on the dollar 9 It would be counted as
30 cents on the dollar in your settlement. It is on your minutes, if you have
forgotten it. A. I know that there was an estimate made on the stock under
the C. Crocker & Co. contracts when they were made ; but I do not think
there was afterwards.
INCEPTION OF CONTRACT AND FINANCE COMPANY.
Q. We will now come down to the Contract and Finance Company. By whom was that
invented or engineered? A. I think that that originated with me.
Commissioner ANDERSON. Mr, Huntington claims it,
LELAND STANFORD. 2637
The WITNESS. He was not here when it originated. When it was made I think that
he was at the East; but of this fact I have not a positive recollection.
At any rate I have no doubt that we must have talked it over some time when
we were together, and I know that when we made it we did it with the approval
of all the principal men interested.
ORIGINAL STOCKHOLDERS.
<
^. Who were the stockholders in that company at its inception?
A. At first we made that contract in the hope of inducing capitalists to eome
in and take a part. Our finances were very low, and we organized this company,
putting in some men who took a small amount of the capital stock. I'do not
know whether Charles Crocker did or not, but I know that I often tried here
to get others to come in and take that stock, but could not succeed. We did
not succeed in any quarter, and finally gave it up. Then I think that each
of us subscribed for a fifth, or about a fifth Mr. Hopkins, Mr. Huntington,
Mr. Crocker, Mr. E.
B. Crocker, and myself. I think that Mr. Hopkins subscribed for Mr. Huntington,
but I may be mistaken about that. I do not think that Mr. Huntington was here
to subscribe for the stock, and I think that the business was done for him
by Mr. Hopkins. In that way each of us became interested to the extent of about
a fifth. There may have been a few shares left, I presume, in the names of
the original organizers of the company.
CAPITAL STOCK.
Q. How much was the total capital stock? A. Five million dollars.
Q. Was it divided into 50,000 shares? A. Yes, sir.
Q. And did you not have 12,500 shares, the same number that you had in the
Western Development Company and in the Pacific Improvement Company? A. I believe
not. No ; I could not have had more than a fifth. I am sure I took a fifth.
The two Crockers each had a fifth, and Mr. Huntington and Mr. Hopkins each
had a fifth, and I had a fifth.
AMOUNT HELD BY THE CROCKERS.
Q. Do you think that the two Crockers each took a fifth; was it not a fourth
between them? A. I think that I ought to know; but still I am not sure. It
is rather an impression that my previous answer is correct. I cannot say that
I ever saw the stock-book or the subscriptions.
Commissioner ANDERSON. I will read you Mr. Huntington's answer to this question.
He says :
The stock of that company was nearly all held by Governor Stanford, Mr. Hopkins,
Mr. Crocker (meaning Charles Crocker), and myself. There were some few small
stockholders, but I could not say who. Mr. Hopkins asked me what we would do,
and I wrote back that he could "take as little as he could, and as much
as he must," and not any more/
Q. What is the name of that company? A. The Contract and Finance Company.
Q. Is not that substantially your recollection also ! It is a mere question
whether the two Crockers were one interest or were separate interests. A. I
think that they held their interests separately in all of their undertakings.
I think that Mr. Huntiugton is mistaken. As to taking some stock, I think that
this was because our idea was, when we took the stock ourselves, that we might
get capitalists interested with us, and get them to come in and take a portion
of it.
2638 U. S. PACIFIC RAILWAY COMMISSION.
OTHER STOCKHOLDERS.
Q. Who were these small stockholders? A. I think B. R. Crocker (no relative
of these Crockers), Mr. Milliken, a merchant in Sacramento at that time. There
may have been one or two more.
Q. Did William E. Brown have any of it? A. I do not think he did. Yes ; I
think he must have had. I think that he was one of the organizers, and must,
of course,' have had some stock.
Commissioner LITTLER. In your testimony yesterday, in an exhibit giving the
interest you had in divers companies, you stated that in the Contract and Finance
Company you had 12,500 shares of stock when it was disincorporated in 1874.
The WITNESS. Yes, sit; that is so, probably, because Judge Crocker sold out
his interest in everything, and we bought it.
Q. That is E. B. Crocker ! A. Yes, sir.
Q. How soon after the formation of the company? A. We had completed the road.
Q. You five gentlemen, as I understand it, owned all the stock? A. Yes, sir;
substantially. And before the company was disincorporated I think we owned
every share.
HOW THEY OBTAINED THE STOCK.
Q. With regard to these small stockholders, were their small holdings given
to them in order to qualify them to act as directors and officers of the company?
A. They all subscribed for their stock.
Q. Was that stock given to them in order to qualify them to act as directors
and officers of the company? A. 1 have no recollection about that. I think
that they subscribed for the stock themselves, but about the payments I have
no knowledge or recollection at all.
Q. Have they not been examined in various litigations in which the Central
Pacific Railroad Company, the Contract and Finance Company, and yourselves
have been interested, and have they not testified that they held their stock
to qualify them to act as directors under the law? A. I think that they have
been examined, but I cannot say what they testified to.
Q. Did not these questions come up in the Colton suit and in the Branuan suit?
A. I think not. However, I was not here when the Colton suit was tried and
am not familiar with what was done.
CROCKER PRESIDENT OF CONTRACT AND FINANCE COMPANY.
Q. Who was the first president of the Contract and Finance Company? A. I do
not know whether I was the president before Mr. Crocker became president or
not.
Q. Did Charles Crocker become the president? A. Yes, sir - } he was the permanent
president.
Q. When did he become president? A. He became -president very soon after the
organization of the company; but whether he was president at the time of the
organization or not I do not know.
Q. Was he president at the time that the contract was made between the Central
Pacific Railroad Company and the Contract and Finance Company, which was in
October, 1867? A. I do not know but that the contract was made with the organizers
of the company; but still, it may have been otherwise. Mr. Crocker became president
very soon, and the work done under the contract was done while he was president
of the company.
LELAND STANFORD. 2639
Q. The arrangement was, substantially, that he should direct operations in
the matter of construction, and on behalf of your construction company, was
it not? A. I do not know what the others thought, but I thought so myself.
I did not anticipate that any one would come in and take stock unless we
could find large capitalists who would take the property as it was, and build
the road, and, if successful, have all the benefits to be derived from it.
SCOPE AND OBJECT OF THE COMPANY.
Q. What was the general scope and object intended by getting up this Contract
and Finance Company? A. To aid in the construction of the road. It had ceased
to be on our part a financial problem, and had become an individual question
with each of us how we would get through. The absorbing question was how to
build the road. It was a great struggle. It was a great enterprise, if I do
say so myself. We were the features of it. We commenced work on this side two
years earlier than the Union Pacific commenced work on the other side. We had
this great mountain to overcome at the outset, and it was a great struggle,
to which we gave the best energies and endeavors of our lives. The building
of the road was the great question, and its construction was far above all
pecuniary considerations.
Q. How soon after the formation of that company did it make a proposition to
the Central Pacific Railroad Company for the construction of the remainder
of its railroad? A. AS to the date I cannot tell you, but it was substantially
right along about that time.
Q. It appears from your minutes that the proposal was made in October, 1867.
At that time who was employed in the office of that company in addition to
William E. Brown? A. I do not remember the names of the clerks. I think that
he had one or two clerks.
THE HEADQUARTERS OF THE COMPANY.
Q. And where was the office of the Contract and Finance Company? A. At Sacramento,
in the same building then occupied by the railroad company.
Q. Did you yourself see the books of the Contract and Finance Company from
time to time? A. Only as they may have been lying on the desks. I did not have
occasion to go into that room, and I did not examine the books at all.
Q. Had you no personal connection with that company at all, except as a stockholder?
A. That was all, except as I came in contact with Mr. Crocker or Mr. Brown.
They would sometimes come to me and tell me they wanted some money.
Q. What efforts were made to sell the stock of the Contract and Finance Company?
The WITNESS. Do you mean down here?
Commissioner ANDERSON. Anywhere?
The WITNESS. At the beginning?
Commissioner ANDERSON. Yes, sir.
PLAN FOR DISPOSING OF STOCK.
The WITNESS. We opened an office here, and kept it open some time, and advertised
for subscriptions to the stock of the Central Pacific Eailroad Company. We
thought that if we brought those books to San Francisco the wealthy men here
would gobble up all the stock, so we
2640 U. S. PACIFIC RAILWAY COMMISSION.
opened them a week in advance in Sacramento in order to give our people at
Sacramento the people of means at that place a chance to take stock in what
we supposed would have been a good thi ng, and what would have been a good
thing if we had not been delay ed. It would have been advantageous for the
people here if they had taken stock and enabled us to push the road along
to a speedy completion. A few people in Sacramento took small amounts. It
was not taken by many individuals. There was no money in California at that
time for permanent investments in enterprises of this nature, as it was worth
too much for current business. We came down here, opened our office, and
laid out our books. We sat there patiently waiting all day, but nobody came,
except one man, a Frenchman I think it was, who came in and subscribed for
ten shares. That is all that was taken here.
Q. Has this reference to the stock of the Contract and Finance Company'? A.
No, sir; I thought that your former question referred to the stock of the Central
Pacific Kailroad Company. We kept our books down here for some time I do not
know how long but no one ever came in to take stock. That threw somewhat of
a damper upon us. We were then thrown upon our own resources, and did the best
we could. We did not open the books of the Contract and Finance Company in
order to get subscriptions to the stock, because it would have been of no use.
I went around, however, to such men as D. O. Mills, W. C. Ralston, Haggin & Tevis,
Edward Barron, Michael Keese, Mr. Mayne, and to everybody who I thought might
possibly be induced to take an interest, but could not succeed at all.
By Commissioner LITTLER:
Q. You mean that you were soliciting these gentlemen to take stock in the Contract
and Finance Company? A. Yes, sir ; I wanted them to take stock in that company
in order that we might get funds to push construction.
By Commissioner ANDERSON :
Q. Was this before the contract was made in October, 1867, or was it both before
and after that date? A. It was both before and after. , I did everything that
I could to try and get capitalists in with us.
CUSTODY OF BOOKS.
Q. In regard to the books of the Contract and Finance Company, when did you
last see them? A. I have no distinct recollection as to the time when I last
saw them. I suppose that the time when I last saw them was the time that I
was last in the office of that company.
Q. In whose custody were they then? A. I think that Mr. Brown was still there.
Q. Mr. .Brown has stated that he passed them over to Mr. John Miller. Do you
know Mr. John Miller $ A. Yes, sir $ he succeeded Mr. Brown. I have no recollection
at all of the books, but as I frequently passed the door of his office going
to my own, which was directly opposite, I have no doubt that I have seen the
books hundreds of times lying on his desk, but I never examined them, and any
recollection that I have as to the last time that I saw them would simply be
as having seen them lying on the desk.
A CALL FOR THE BOOKS.
Commissioner ANDERSON. I will say again, as I said in regard to the Crocker
contract, that a great deal of interest has bee n manifested by
LELAND STANFORD. 2641
the community in this matter. The assertion has been made that large amounts
of stock and bonds have been issued to the Contract and Finance Company,
and these issues have been at such a rate as to absolutely cripple the power
of the Central Pacific Kailroad Company to pay the debt due to the Government;
and that assertion, taken in connection with the fact that the contract and
books of the Contract and Finance Company have never been accessible, and
that no satisfactory explanation of their disappearance has ever been given,
has led this Commission to take a great deal of interest in the matter, and
to move it to do what it can to solve the mystery. Therefore, on behalf of
the Commission, I would invite you to give any explanation that you can as
to the whereabouts of the books, and also to produce John Miller, who appears
to be the last person in whose custody the books were.
SUITS AGAINST THE COMPANY.
The WITNESS. As to the books, I can give no information. After the construction
of the road several suits were brought against us, which I thought were pure
blackmail. At that time all sorts of stories and statements were being circulated
about us. Exaggerated stories as to the great wealth we had acquired were floating
everywhere. Complaints were made, principally by envious and malicious persons,
that we had robbed the company. We were represented as having made $100,000,000
alone out of the $27,000,000 loaned to us by the Government. I think that one
complaint was made that we had made $300,000,000 out of this road, and it went
all over the country. All this helped to make the history of the road. The
supposition was that we were all millionaires, when in fact we were all poor,
with nothing but this stock, which at that time was without value, but which,
of course, afterwards became very valuable. The money that we made out of this
stock came to us simply because nobody would have the stock at the time that
we were so anxious to sell it. However, there is nobody interested in that
but ourselves, except out of mere curiosity, because we became the owners by
purchase of all of this little trifling stock which was in the hands of the
original subscribers. The present owners of the stock in this Central Pacific
Eailroad Company, not having bought any of the original stock outside of ourselves,
are not interested in that question at all. Besides ourselves, I do not know
anybody who has the least interest in this matter. The Government itself is
not interested.
WHY THE CAPITAL STOCK WAS INCREASED.
Q. Why not? It is alleged that the corporation issued an unlimited number
of bonds, secured by a first mortgage upon its road, and burdened itself with
heavy interest obligations, the Government having a second lien upon the same
property, which can be satisfied only after the first mortgage has been paid
though I do not allege this to be the fact. Would it not be clear that the
Government would be interested in knowing that you did not misapply -the proceeds
of the first bonds which you obtained from it? A. Yes, sir; I was not speaking
about the bonds, or the assets of the company aside from the stock. The only
reason that we had for increasing the capital stock was because the law required
that we should not issue bonds in excess of the capital stock. A large issue
of bonds would exceed the then capital stock, and this compelled us to increase
the latter from the small amount with
2642 U. S. PACIFIC RAILWAY COMMISSION.
which we started. The original capital stock of our road was $8,500,000. The
present capital stock is $100,000,000. So far as our ownership was concerned,
or so far as the value of the road was concerned, the eight and a half millions
of stock was as good for all purposes as though the stock had been a hundred
million.
DIVIDENDS.
Commissioner ANDERSON. Except when you paid dividends, and the dividends on
fifty-four millions would be a trifle more exhaustive than the dividends on
the smaller amount.
The WITNESS. Not necessarily so. The dividend would be the same in either case.
The difference would only be upon the percentage on the shares. If there had
been but a hundred shares of course the percentage upon each share would be
very much greater, but in any event it could not absorb any more than the amount
of money upon hand. The amount of money to be divided would not depend upon
the number of shares.
Q. Have you given us all the information that you can as to the whereabouts
of those books? A. Yes, sir.
MR. JOHN MILLER.
Q. You have not answered whether you can produce Mr. John Miller. Can you do
so? A. I do not know much about Mr. Miller. He is a man with whom we had some
considerable trouble. The last that I heard of him was several years ago, and
at that time he was living at some point on the Sacramento Eiver. Whether he
is living there now or not I do not know. I suppose, however, that you can
ascertain that without much difficulty.
Q. Have you yourself any books which will contain any records or entries which
will shed any light on the transaction between the Contract and Finance Company
and the Central Pacific Railroad Company? A. None whatever.
WITNESS'S TRANSACTIONS WITH CONTRACT COMPANY.
Q. Have you any books that will shed any light on your own transactions with
the Contract and Finance Company as a stockholder? A. I do not think that
any of the books which I have will give any such information. I think that
all the business of the Contract and Finance Company was kept in the books
of that company.
Q. Eegarding the dividends of stock that were made by that company, were any
certificates passed over to you, or any certificates given to you, and, if
so, was the record kept only in those books?
The WITNESS. Certificates of what?
STOCKS AND BONDS.
Q. Of stock. Were certificates of stock in the Central Pacific Bailroad Company
delivered by the Contract and Finance Company to the stockholders in that company
? A. Yes, sir.
Q. You are positive that no bonds were delivered or divided I A. Yes, sir ;
I do not think that there was any such division.
Q. Are you positive that no money was divided? A. I am positive that no money
was divided.
LELAND STANFORD. 2643
Q. Was a statement of the division of the stock prepared and issued to the
stockholders at the time that it was made? A. I do not know that it was.
Q. It must have been, must it not. in order to show how much stock you were
each entitled to? A. We had an evening up some time after the work was done,
and at that time the individual stock which we all owned was put in. I bad
bought some stock, Mr. Huntington had bought some stock, and I presume that
Mr. Crocker had bought some. We dumped it all into the Contract and Finance
Company, and afterwards. I think, divided it by five.
Q. Are you sure that it was not divided by four? A. Yes, sir; I am sure.
VALUE OF STOCKS.
Q. When that was done was a statement of the different transactions which made
up the ultimate result prepared and delivered to you, to Mr. Hopkins, to Mr.
Crocker, and to Mr. Huntington? Would you not naturally have been curious
to know how many shares of stock you were going to get? A. Not very.
Q. When was this? A. After the road was completed. We did not know at that
time whether this stock would ever be worth anything or not.
Q. The company paid dividends in 1872, did it not? A. I do not think that
it was as early as 1872.
Commissioner ANDERSON. Your reports show that dividends were paid in 1873,
so that the stock at that time must have had some value.
DEVELOPMENT OF THE COUNTRY.
The WITNESS. We developed the business of the country as we proceeded. Whatever
is of value, so far as the Central Pacific is concerned, we created by the
construction of the road. The development of business along the line of the
road was rapid. I do not think that the through business increased so rapidly
as the local business. After business has become settled upon certain routes
it is difficult to divert it, and it takes some time to do so. Gradually, however,
we kept diverting it from the Pacific Mail and the Isthmus of Panama, and from
the clippers which came around Cape Horn, and it grew to be a very promising
business and kept constantly improving. Everything looked bright until the
competing lines of road were built in 1881, and then they began to interfere
with us. Besides this, there was a great falling off of business in Nevada.
This falling off was very great during the last two years, but at that time
the business of Nevada was lively.
CENTRAL PACIFIC STOCK OWNED BY CONTRACT COMPANY.
Q. In 1870 your gross earnings were $7,000,000 and the net earnings were over
three million. In 1871 the gross earnings were over nine million and the net
earnings over five million. I ask you whether it is possible, if this Contract
and Finance Company had on hand a large number of shares of the Central Pacific
Railroad Company, which company was making such earnings as that, you were
not interested in looking over the books and papers to see how many shares
of stock you were going to receive in the railroad company? A. I knew very
soon about that.
2644 U. S. PACIFIC RAILWAY COMMISSION
Q. How did you know how many shares of stock you were entitled to receive?
A. I knew that I was entitled to receive one-fifth of whatever that company
had, and I knew how many shares of stock had been issued to it.
Q. Were not these shares of stock issued from time to time as the work progressed
? A, That may be; but 1 knew about what the aggregate of the shares was.
Q. Did you keep that in your head? A. Yes, sir.
Q. Do you know what the aggregate of the shares was that were issued to the
Contract and Finance Company, of which you were to receive a fifth? A. No
; I do not remember now. We consolidated a good many lines of railroad from
time to time, and we never increased the capital stock. In consolidating these
lines of railroad the stock of those roads was added to that issued to the
Contract and Finance Company, but I cannot give you the exact details. The
books, however, will show that.
Q. What books? A. The books of the Central Pacific Eailroad Company.
Q. Will the books show the gross amount issued? A. Yes, sir.
WAS THE CONTRACT VERBAL OR WRITTEN?
Q. Did you ever see the contract between the Contract and Finance Company and
the Central Pacific Eailroad Company? A. I think that I signed it.
Q. Are you quite positive that it was in writing and not a verbal contract
? Mr. Cohen in his testimony advised us that his conclusion was that there
had never existed any such contract in writing. That is your recollection?
A. I cannot remember the actual fact of having signed it, but I have no doubt
upon the subject.
Q. Do you think that you did sign it? A. Yes, I think so.
Q. Do you remember having seen it, or to have read it, so as to have a present
recollection about it so as to enable you to say whether it was in writing
or not? A. I cannot say that I ever saw it, positively, but I have no doubt
on the subject.
Q. And you have no doubt that you read it? A. Yes 5 I have no doubt whatever.
I know that I helped them to discuss it all the way through.
TERMS OF CONTRACT.
Q. It was a very important contract, was it not? A. It was a very important
contract. And we put in all this stock in order to get outsiders to take an
interest in it.
Q. And it embraced what property? It embraced what portion of the road? A.
From the State line as far as we could go ; I think some 500 or 600 miles.
Q. Do you remember its terms at all? Did it embrace grading? A. If you will
look at our books, you will see what it did cover, and it will tell you a good
deal better than 1 can.
THE CONTRACT MISSINO.
Q. Do you know your secretary says that the contract is missing? A. So he told
me yesterday, or the day before, 1 believje.
Q. How long before had he told you 1 A. I did not know before that it had been
missing.
LELAND STANFORD. 2645
Q. Did lie not tell you that it was missing before this matter came up? A.
No, sir 5 I supposed that the contract would be found on the files of the
office. I had no reason to think otherwise. I do not think that I ever heard
the subject mooted before.
Q. Do you know that it was missing as long ago as 1876? A. No ; I have no
recollection of that. If I did know it at the time I have forgotten it.
Q. Were you not examined as a witness by Mr. Cohen in the suit of John K. .Robinson
against the Central Pacific Railroad Company for an accounting? A. Yes, sir.
Q. And did you not state in your deposition in that suit that that contract
was missing? A. It is possible that I did ; but if so I have forgotten it
I
BOOKS AND PAPERS OF CENTRAL PACIFIC.
Q. Is it not a matter of common notoriety in San Francisco and throughout this
State, and I might say throughout the United States, that this contract and
all the books and papers of the Contract and Finance Company, and the papers
of the railroad company in connection with the Contract and Finance Company,
have been missing and cannot be found? A. I know that the books were missing,
but I never was informed that any of, the contracts were missing. I do not
see, however, that it makes very much difference, so far as the contracts are
concerned, because the books will show their terms. I mean the books of the
Central Pacific Company. You might pick out the terms from the books, and I
think that from them you can get all the information upon this point that you
desire.
EXTRACT FROM HUNTINGDON'S TESTIMONY.
Q. From your memory, can you give us any information as to its terms, as to
the price per mile to be paid? I will call your attention to what Mr. Huntiugton
says about it. In answer to the question, " Can you state substantially
what the terms were? " he says :
It was a contract to take the bonds and stock, I should say, of the company
and build the road a certain amount of stock, but not the whole stock. The
capital stock was $100,000,000. It was to take a certain amount of stock and
bonds to build the road.
Q. Do you remember the rate per mile, computing the bonds and stock at par?
A. No ; I could tell you pretty nearly ; I do not think it was over $100,000
per mile. I think something about that.
Q. Do you remember the relative proportions of bonds and stock? A. The Government
bonds and the company's bonds about $64,000 was what the bonds were.
Q. Sixty-four thousand dollars in bonds and the balance in stock? A. That
is just it.
CONTRACTOR TO HAVE ALL THE ASSETS.
What is your recollection? A. My impressions are I thought that we would meet
the Union Pacific at Salt Lake City. In makingthe contract the contractor was
to have all the assets of the company, that is, in the way of bonds, &c.,
and in estimating the amount of stock to be put in we put in an amount that
would be sufficiently large to warrant us to mortgage the road and issue our
own first mortgage bonds, and the contractor was to receive those bonds. That
was the basis of the amount of stock that was put into the contract.
Q. When you say all the assets of the company you mean substantially all the
proceeds of the bonds and the proceeds of any other loan,
2646 U. S. PACIFIC RAILWAY COMMISSION.
or tiie proceeds of county aid, or any and every other asset of that character
that you could control? A. Yes, sir ; but there was no county aid left ;
that was all exhausted.
Q. Did you intend any portion of the net earnings of the road to go into the
construction account?
The WITNESS. Do you mean earnings made prior to that time?
Commissioner ANDERSON. Yes 5 and those that were being made.
A. I do not know what the understanding was about that.
AN "EXHAUSTIVE CONTRACT."
Q. Then it was substantially that the builders of the road under the contract
should take all the bonds of whatever character there were, as you have stated,
and the amount of stock to authorize you to issue those bonds, under your own
first mortgage? A. Yes, sir.
Q. The idea was to give the men who built the road all the property of the
company? A. Yes, sir; and if there was anything in it the builders of the road
would get the benefit.
Q. It was what has been called on some of the branches of the Union Pacific,
for instance, an exhaustive contract, which took all the paper assets of the
road for building it? A. Yes. We did not count the stock as of any particular
value, except as giving us control at that time. Even after we got through,
we would have gladly sold it at 10 cents on the dollar.
Q. What stock? A. Central Pacific stock.
Q. When you got through where? A. When we got through to Ogden.
VALUE OF RAILROAD STOCK AT COMPLETION.
Q. In May, 1869? A. Yes, sir. When we got there we would have been glad to
have sold for 10 cents on the dollar. At the same time we could have bought
the Union Pacific stock at the same rate. At any rate, we could have bought
a block large enough to have gained control of that road.
Q. How soon afterwards did you change your mind? A. About as soon as I made
up my mind that we could not sell it. We had to stay in and work it out. When
the road was completed we were all tired and exhausted, and would have been
glad to sell out for almost anything.
Q. You had very different ideas in 1870, did you not? A. We had hopes in 1870.
EXCESSIVE PRICES PAID FOR STOCK TO SETTLE SUITS.
Q. Did you not pay as high as $400 per share for the old stock early in 1870
? A. No, sir ; not for the stock, but to settle suits.
Q. At any rate, your idea as to the value of the property must have undergone
a very rapid and material change after the completion of the road, must it
not? A. Yes. After the completion of the road for a time we did not get any
through freight business. I do not like to say much about the other lines,
but the road connecting with us was managed a little differently from ours,
and the people controlling it had different ideas from those which we entertained.
It was some time before we got prices fixed at a figure where we could induce
people to avail themselves of the advantages offered by the railroad.
LELAND STANFORD. 2647
Q. Do you mean that your prices were higher than theirs, or that theirs were
higher than yours? A. Theirs were higher than ours. We have never been in
harmony with the Eastern lines in the matter of passenger rates. I have always
thought that lower rates would be better for us. We had the idea that every
passenger we could induce to come here would be a patron of the road.
PALACE HOTEL, San Francisco, July 29, 1887. Afternoon session.
LELAND STANFORD, being further examined, testified as follows :
REPORT ON LINE EAST OF NEW CASTLE.
By Commissioner ANDERSON :
Question. In connection with your statement in regard to the Crocker contract,
I will read from the minutes of the proceedings of the directors of the Central
Pacific the following abstracts, subject to correction, of course: On the 1st
day of May, 1805,. it appears from your minutes that a committee, consisting
of Lelaud Stanford, Mark Hopkins, and E. H. Miller, jr., was appointed to examine
into and report upon the question of letting a contract for the construction
of a railroad and telegraph line east of New Castle. On the 9th of May, 1865,
the committee appointed at the last meeting relative to the construction of
the line east of New Castle submitted a report, which was filed, and the committee
was directed to ascertain and report as soon as practicable on what terms and
to whom a contract might be let in accordance with the report of the committee
just filed.
That report we have not been furnished with. Do you recollect the fact that
such a report was made? Answer. I do not.
Commissioner ANDERSON. If it can be found we would be pleased to see it.
DIFFICULTY OF THE WORK.
The WITNESS. If Mr. Miller were here he could tell you, I think, about those
papers, or almost any papers you desire. I have a general recollection of the
matter ; that is, it was a matter of discussion and consideration with us for
some considerable time how we were going to be able to really avail ourselves
of all that we had, or should have, to pay for the construction of the road,
and we came to the conclusion that we had to do it by having one contract.
We were not nearly as much impressed then with the importance of having the
contract in one hand as we were as the work proceeded. We learned better later
on the magnitude of the thing, and we learned also, when we came to regard
the construction, of the immense sacrifice that we had to make for the sake
of speed. Then it became, very early, a question of whether or not we could
get over the mountains. We had to work during the winters on mountain work,
three of which winters were the heaviest known in the history of the State.
There was one winter only that I know of when more snow fell on the mountain
than fell there for the three winters, in succession, while we were conducting
our work,
2648 U. S. PACIFIC KAILWAY COMMISSION.
TERMS OP THE CROCKER CONTRACT.
Q. On the 6th of June, 1865, a committee, appointed to ascertain and report
on what terms and to whom a contract could be let, submitted a report, which
was adopted and ordered on file. That makes two reports we would like to have.
At the same meeting it was resolved and ordered that
Charles Crocker & Co. be allowed and paid for all work done and material
furnished, or which may hereafter be done or furnished, until the further order
of the board of directors, in the construction of the railroad of the company
from section 48 eastward, and in accordance with the terms, conditions, and
stipulations set forth in the contract of said Charles Crocker & Co., dated
September 19, 1863, except so far as the same may be modified or changed by
this order, at the following rates and prices, and in accordance with the following
classifications, payments to be made according to monthly estimates, five-eighths
in gold coin and the remaining threeeighths in the stock of the company, at
the rate of $2 of capital stock for each $1 of said three-eighths of said estimate,
with the privilege of paying said three-eighths in gold coin in lien of said
stock, at the election of said company, to be made at the time of such payment.
THREE-EIGHTHS IN CASH OR STOCK AT THIRTY CENTS.
Now I read from your minutes of May 2, 1866, a communication from Charles Crocker & C.,
reading as follows:
We find it impossible to sell the stock which we have received upon our contract
with the company for the construction of its railroad for more than 30 cents
on the dollar, and cannot realize 50 cents therefor, the price at which the
same Tyas received under the contract ; and we find ourselves unable to prosecute
the work with the diligence and rapidity required by the company under the
present management. We therefore request that your company pay us cash instead
of stock, or, otherwise, that the stock be paid us at the rate of 30 cents
instead of 50 cents on the dollar, as at present.
On motion,
Jtesolved, That the three-eighths now payable in cash or stock, at the election
of said company, be paid in cash, provided there bo cash in the treasury to
pay the same; otherwise that the same be paid in the capital stock of the company
at the rate of 30 cents on the dollar.
PUTTING STOCK INTO THE CONTRACT AND FINANCE COMPANY.
Those are all the minutes that I find relating to the Crocker contract. Now,
in addition to the questions I have asked you in regard to the receipt of any
profits or dividends by you from the firm of Crocker & Co., I would ask
you whether you ever received any stock from Crocker & Co. on account of
the stock issued to Crocker under any contract for the construction of the
road? A. I put a portion of that stock into the Contract and Finance Company.
After the road was completed whatever any of us had we put into the Contract
and Finance Company, because our interests in that regard were about the same,
and we divided it up then, I think, so that each of us had about one-fifth.
That is, we put everything in there, and then we had each of us one-fifth of
the Contract and Finance Company's stock. When this contract was let to Mr.
Crocker we did not know very well what this work was going to cost. We made
a price, because it seemed necessary to make a price, and we thought that maybe
others would come in and take a part of that contract, but we did not expect
Mr. Crocker to make or to lose money. It was an instrument by which the work
was to be accomplished. We knew that if we wanted at any time to reform that
contract, or do anything that seemed to be to the interest of the company,
Mr. Crocker would, not object. We went on in that manner all the way through
to
LELAND STANFORD. 2649
the completion of the road, working hard for its completion and using such
instrumentalities as seemed to be necessary.
CROCKER DID THE SAME.
Q. Do I understand that Charles Crocker passed over to the Contract and Finance
Company any stock which he had on hand and which resulted from his own contract
prior to the contract with the Contract and Finance Company I A. I think that
was the way it was done. I know I had full-paid stock, on some of which I had
paid par, and some I had bought at lower rates, and I know Mr. Huntington had,
and I think Mr. Crocker and Mr. Hopkins had. I know we put it all into that
institution. We had all worked for a common purpose, and although we never
were partners, every man from the beginning owned his own interest in his own
right, whatever it was ; yet we had worked together for a common purpose and
as one body of men. It was our harmony in that respect, I think, that enabled
us to get through our work at all. I know this, we had no money left over;
all the Government bonds and the first mortgage bonds were gone and the money
had gone into the road.
THE PLACER COUNTY BONDS.
Q. While on that point please state what other aid you received. I understand
that from Placer County you received a certain amount. A. I will give you substantially
within a few thousand dollars of the exact amounts realized. We sold the Placer
bonds for 70 cents, I think, and realized $140,000.
Q. There were $200,000 of them at par?- A. Yes; and we sold the Sacramento
County bonds for about 65 cents. There were 300 of those. And we sold 400 'bonds
of San Francisco. The highest, I think, we ever sold them for was 73 cents,
but many of them we sold at 70 cents.
INTEREST ON CERTAIN BONDS PAID BY STATE.
Q. Was there not an act passed by the legislature making you a donation of
$10,000 per milel A. No, sir; the only aid we received was in the first original
act, by which they agreed to give us something, but that was changed. And we
were authorized to issue a special mortgage for $1,500,000, on which the State
paid the interest. Those bonds were sold and we realized about $1,000,000;
a little more than that, but less than $1,100,000. We received a little over
$1,000,000 for those bonds, and those have been paid off since.
Q. They were paid by whom? A. Paid by the company.
Q. So that what the State has done has been to pay the interest on them until
you paid the principal? A. Yes ; the State was to pay the interest on those
bonds and the company realized a little over $1,000,000 for their bonds.
Q. Did the company repay the State any of the interest? A. No; that was a
donation. Then we used our own individual credit so far as it would go, and
I know particularly over in the East that we used our own individual credit
to the extent of $600,000, and I know we made it work along so that we could
payjup to New Castle. And we worked to Colfax, 50 miles. We finished the road
to New Castle, 31 miles, and had iron enough on hand for 50 miles, to Colfax,
2650 U. S. PACIFIC RAILWAY COMMISSION.
AMOUNT OF STOCK PASSED OVER BY CROCKER TO CONTRACT AND
FINANCE COMPANY.
Q. Have you any idea of the amount of stock which was passed over by Charles
Crocker to the Contract and Finance Company, resulting from his contracts prior
to the contract with the Contract and Finance Company? A. No ; I cannot tell.
If Mr. Miller were here, I think he could tell you how much stock there was
when the road was finished, and he can tell you 'from the various consolidations
how much stock came into the company from that direction.
Q. Do you understand that Crocker & Co. substantially passed over all of
the stock which they received? A. I think all of it went into the Contract
and Finance Company.
Q. If your books show that the gross payments to him were $22,000,000 of which
twice three-eighths was in stock before the reduction to 30 cents, that would
give him about $14,000,000 in stock? A. As to the amount I cannot say. I think
the stock all stood in his name until after the completion of the road, but
I may be mistaken about that.
THE CONTRACT WITH THAT COMPANY.
Q. Now, passing to the Contract and Finance Company, I read from the minutes
of December 3, 1867 :
President Stanford reported that he had made arrangements for a contract with
the Contract and Finance Company for the construction and equipment of the
railroad and, telegraph line of this company, lying on the eastern boundary
line of California, and presented a draft of such contract. The same having
been read and considered, the following resolution and order was unanimously
adopted, to wit :
Resolved and ordered, That this company hereby consents and agrees with the
Contract and Finance Company to the terms, stipulations, and conditions of
articles of agreement submitted by the president of this board, and the president
and secretary are hereby authorized and directed to execute the said contract.
The directors present and voting on that proposition being Leland Stanford,
E. B. Crocker, Mark Hopkins, and E. H. Miller, jr.
Do you recollect the fact of reporting such a contract? A. Well, I know I
must have done it. I have no doubt about it, but I cannot call to mind the
actual fact.
DIFFICULTIES OF CONSTRUCTION EASTWARD.
Q. Will you describe the construction as it proceeded eastward from the State
line under the Contract and Finance Company's contract?
The WITNESS. Well, you mean how we worked it?
Q. I mean the character of the country you went through. A. The general character
of the country, so far as grading was concerned, was not difficult. You came
through the Truckee Canon and you could see what it was there. I think that
is about as heavy as the work done on the Ogden and Weber Canons on the Union
Pacific. The greatest difficulty was in the desert country, the long stretch
of desert over which we had but limited transportation for water and supplies.
We sent out men ahead, I think it was three thousand men and four hundred horses,
with their wagons and such things as that, into the canon of the Humboldt.
There were three canons there, and that was very heavy work. We had to send
those horses and those men, with all their equipments, 300 miles in advance
of the completed line to work there. I went over to Salt Lake that season and
had made arrangements there, and graded substantially 160 miles from Ogden
this way with what labor I could pick up aud with the supplies over there.
Our
LELAND STANFORD. 2651
supplies either came from California east, or to the end of the Union Pacific,
starting in the spring nearly 500 miles away, and the supplies were hauled
all that long distance. From Salt Lake I think that we used to pay $12 to
$15 a day for teams that did very little work. Oats were 12 to 14 cents a
pound, and I do not know but what more than that. And hay then was $100 a
ton, and then it had all to be hauled.
EXORBITANT PRICES FOR SUPPLIES.
Q. Was that 12 or 14 cents a bushel? A. No ; a pound. They did not deal in
bushels over there. We dealt in pounds. And everything then had to be freighted
to the front. I paid 13 cents a pound for freight hauled from the Sierra Nevadas
over to Salt Lake, and then had to haul it from there up on to the line of
the road, and it cost me 2 or 3 cents a pound, I think. Corn was hauled all
the way from Iowa and other States there up to the end of the Union Pacific
Kailroad, and then was teamed through several hundred miles into Salt Lake
Valley.
TIME COVERED BY CONTRACT OF CONTRACT AND FINANCE COMPANY.
Q. How long were you in effecting this construction ; when did you begin?
A. We commenced our real active work in 1863.
Q. I mean the Contract and Finance Company. You commenced in 1867 with that
company, did you not, according to the resolution I have read to you? A. I
can tell you how we went on with the work better than I can about those dates.
We passed the summit in 1868, and we had worked down on the Truckee in the
canons, and by the next spring, in May, we were out to Promontory and had the
work all done, ready for the track, from there to Ogden. At Promontory there
was very heavy work, and it held us for some time.
Q. Eighteen months, then, would cover the whole construction under what was
done by the Contract and Finance Company? A. I should think it would.
POLICY OF COMPANY IN REGARD TO STOCK.
Q. Now, as to the terms of that contract, can you give us any information at
all? A. I can tell you rather the policy of the company. In the first place
about the stock. We did not value that ; that is, in our estimation of values
it cut no figure. But we meant to get enough stock out so that we could have
our own first mortgage bonds and the Government bonds, and we could not do
that unless the stock was made equal in amount. So we estimated about what
the stock would be and what the incumbrances upon the road would be, and made
the stock in the contract accordingly.
Q. Do you remember at what figure the stock was to be taken in payment? A.
No; I do not think we figured that. I think we said : "We will take the
bonds; we will put into this thing the bonds." Everything else, I believe,
had been used up. That is, the first-mortgage bonds, or what was left of them.
REAL OBJECT IN THE INSSUANCE OF STOCK.
Q. You had enough stock to make the bonds legal? A. Yes. And that was the real
object of the issuance of the stock at that time. We did ot count the stock
for much when the road was -through, except as a P R VOL iv 21
2652 U. S. PACIFIC RAILWAY COMMISSION.
means to control it. We had devoted ourselves to this work with an intensity
which few people understood. It was to us everything. Our fame and reputation
were connected with its success, and we wanted to make it a success. That
was the chief value to us in the stock, for the purpose of control at that
time ; but in a short time thereafter the road began to develop business
all along its line, and in 1871 it began to show a good future ; but even
then we had doiie much work over here in California. I mean the Contract
and Finance Company had done it. We had built the road and had, I think,
negotiated for the Alameda and Oakland Railroad, and had done a great deal
of worn that had proved valuable, but Judge Crocker's health failed him and
Mr. Charles Crocker was apprehensive ; so they both sold their stock to Mr.
Huntington, Mr. Hopkins, and myself, and that sale carried all their interest
in other enterprises. The 'sale was made for 13 cents on the dollar. That
was the estimate of the value then in 1871, or 1872, though the sale carried
greater values with it than were in those companies, because all these local
enterprises have been profitable ones. If you go over and notice some of
the business done on the local roads you will see that every one of them
has been a success.
METHOD OF PAYMENT.
Q. Now to go back to this contract. Have you any recollection of a payment
per mile, of which a certain proportion was to be in gold?
The WITNESS. To the Contract and Finance Company?
Commissioner ANDERSON. Yes.
A. I do not remember. It may be that we made it in gold, thinking of about
what we were to receive from the bonds what would be realized but I have the
impression that we made it for bonds and stock.
Q. Our accountant reports that the entries in your books indicate that the
terms of the contract were to construct and equip the road for $80,000 per
mile east of tbe State boundary, payable half in gold and halt in the capital
stock of the railroad company. Do those figures refresh your memory at all
? A. 1 think that must have been upon the calculation of what we were going
to be able to get out of the bonds and the stock so as to make an amount such
as to justify the mortgages.
WEIGHT OF RAILS.
Q. Do you remember whether the weight of the rails was specified in the contract
? A. No. I do not. I know the rails were 56 pounds. That was our standard.
Q. How much would that make it per ton per mile, 56 pounds 1 A. With side tracks
it takes about a hundred tons.
Q. Is it not the customary rule to divide the number of pounds per yard by
7, and multiply the result by 11, in order to obtain the number of tons per
mile ! A. I do not know as to that. That was not our rule. Practice satisfied
us that about a hundred tons to the mile was about what is required, to include
good side tracks, switches, &c.
Q. The entries in your books indicate that the weight of the rail was about
68 tons per mile, which, by the application of this rule, would agree with
your statement of 56 pounds per yard. The entries also indicate that the contract
required 5,200 pounds of spikes per mile. Do you recollect any provision relating
to that? A. No 5 I do not. I supposed those specifications were gotten up
by the chief engineer. I know that we estimated the number of engines and the
number of cars that would be needed.
LELAND STANFORD. 2653
NUMBER OF LOCOMOTIVES.
Q. Do you remember how the number of locomotives to be provided was fixed,
whether it related to number of miles? A. Yes, sir ; I think it did.
Commissioner ANDERSON. The entries in your book indicate that there was to
be one locomotive for each 5 miles.
The WITNESS. I presume that is correct. Of course it is correct if it is from
the books. My recollection is that there was one engine to so many miles.
Q. The entries indicate one engine for each 5 miles, one passenger car for
each 20 miles, one box car for each mile, two flat cars for each mile, and
one hand car for each G miles, Are you satisfied that those figures are substantially
correct? A. I presume they are. I have no doubt that those were made upon the
estimate of what the road would need.
THEIR COST.
Q. Do you remember whether the contract provided how much the locomotives should
cost, or what grade of locomotives they were to be? A. I think very likely
we specified the size of the locomotives. I know, at any rate, that was taken
into consideration at different times as we were building the road, as to what
locomotive was most economical.
Q. Do you remember whether all the equipment called for in this contract was,
in fact, furnished to the Central Pacific? A. I think so. I think we needed
it all, and I think we had to provide more.
Q. Do you remember what the locomotives purchased at this period cost? A.
No. I remember those two that I mentioned, because of their very great cost.
They cost us more than any others on the road. Those were either $63,000 or
$65,000 for the two. They could probably be put on the road to-day for $6,500
apiece. Sometimes, at the beginning, we were very much troubled. On one or
more occasions the Government, desiring engines, took from us the engines that
we had ordered.
Q. That must have occurred before the end of the war? A. Yes ; it was in the
early part of the w ar. Of course they were not many, but we did not have many,
and it was to us quite an annoyance, because we needed them very much.
Q. Were the engines that you referred to as costing $63,000 for the two bought
under the Contract and Finance Company's contract? A. I am not sure about that
; I think the highest prices were before that.
LENGTH OF LINE FROM EASTERN BOUNDARYOF STATE.
Q. What was the total length from the eastern boundary of the State to the
termination of the work done under this contract I A. I ought to know exactly
to a mile, and did know for many years, but I prefer to refer you to the books.
Q. It was about 600 miles 1 A. Yes.
By Commissioner LITTLER :
Q. It was to Ogden, was it not? A. Yes. Now, along the line of that road (as
I think I stated to you before), when we started in, there was only one white
man between there and Bear River, Utah. There were some off in the mining districts
to .the south.
2654 U. S. PACIFIC RAILWAY COMMISSION.
AOGrREOATE NUMBER OF LOCOMOTIVES AT COMPLETION OF ROAD.
Q. Can you tell us how many locomotives had been provided for this company
when the work was all completed? A. No ; I could not tell you how many.
Q. I hand you a list of the locomotives which appear to have been bought during
that year. Please look at the figures and see whether they accord with your
recollection. A. (After examining.) These are for the Contract and Finance
Company.
Q. During the period they were constructing, the locomotives must have been
bought by them. Those are the prices which your accounts show were paid for
engines during the years 1867, 1868, and 1869. Are the figures about right
? A. I notice here that two were bought at $36,000 ; they must be the two that
I referred to, but that item has probably the freight added.
Q. That list contains substantially the prices, as you remember them, for locomotives
at that period? A. Yes, sir ; they seem to me to be correct, about as my mind
would indicate.
MANNER OF PAYMENTS UNDER THE CONTRACTS.
Q. Do you remember anything about the manner in which payments were made under
this contract? A. Yes; we paid the money when they had to have it. We did the
best we could.
Q. But what proof did you require from them that they were entitled to receive
the money, and as to the amount which they were entitled to receive? A. Well,
I suppose those payments were made upon the estimates of the engineers.
Q. The reports of the engineers stating the actual construction of the road?
A. Stating the actual progress of the work ; yes. We apportioned it according
to the number of miles and the comparative difficulty we thought they had to
encounter in accomplishing their work.
AMOUNTS PAID CONTRACT AND FINANCE COMPANY FOR THE 600
MILES.
Q. Have you any recollection of the figures and the amounts paid to the Contract
and Finance Company for all the work done by it on the 600 miles? A. No ;
I have not ; that is, I mean I have no present recollection. I have not thought
of the subject for a long time. I have no doubt that at the time it was fresh
I knew about it.
Q. Have you any recollection of the amount of stock that was transferred or
issued to the Contract and Finance Company in payment for this work? A. It
seems to me that it was about twenty millions, but I would not be sure of that.
It is rather an impression than anything else.
Q. That would be in addition to the stock that was transferred by Crocker & Co.
to the Contract and Finance Company? A. Yes ; that does not account for all
the stock.
CONSOLIDATED LINES.
Commissioner ANDERSON. There were consolidations, I know, to a large amount.
The WITNESS. Yes ; and the lines consolidated are the best portion of the Central
Pacific Eailroad to day. Those lines are really its strength. I refer to the
line of the road running up the San Joaquin Valley 150
LELAND STANFORD. 2655
miles and the California and Oregon road, running up the Sacramento Valley,
and this Oakland and Alameda property over here, say up as far as Mies. By
that I mean the Oakland lines, moles, and wharves, and all the surroundings
there.
DISSOLUTION OF CONTRACT AND FINANCE COMPANY.
i
Q. I understood you to say that the Contract and Finance Company was subsequently
dissolved? A. Yes.
Q. What lawyer conducted those proceedings for you? A. I do not know which
one of the lawyers had it most particularly in charge. We have several in our
office and it was done by our office lawyers.
Q. Before what court were the proceedings? A. Before the county court at Sacramento.
Q. Do you know where the papers are on file? A. I suppose they are on file
at the county clerk's office in Sacramento County.
Q. Did you verify them? A. I do not know. I may have done so.
Q. Did you see them before they were presented to the court? A. I do not remember.
I see so many papers and I sign so many as a matter of course, that I have
hardly any recollection of any particular one unless my attention is called
especially to it.
Commissioner ANDERSON. Cannot some one of the counsel of the company, or some
one present, inform us who conducted those proceedings?
Mr. BERGIN. I think it is not at all improbable that Mr. Eobinson attended
to the matter. He at that time was the active counsel of the company.
Q. What Mr. Eobinson? A. Mr. Eobert Eobiuson.
Q. Is he living? A. He is living, I believe, or was living when last I heard
of him, but he has not been in active business for several years. He has not
been in condition to do business.
Q. Where does he reside? A. Here in San Francisco.
DIVISION OF ITS STOCK.
Q. Do you remember whether these proceedings in court contained an account
of the company's operations for the purpose of showing how it stood at that
time, so as to enable the court to make a proper order of distribution? A.
No ; I have no positive knowledge. It was all in the hands of our attorneys,
but I have no doubt I signed whatever 'papers were necessary, if I was called
upon to sign any, although I have no distinct recollection of signing them.
My recollection is that the stockholders had to assume certain liabilities
before the company could be dissolved.
Q. Do you remember that before the institution of the proceedings to dissolve
the Contract and Finance Company the larger portion of its assets were divided
up among the stockholders? A. There have been divisions of stock. I do not
know that the stockholders ever divided any money, but there have been divisions
of stock of these roads that we built. We built these roads and issued a certain
amount of stock, and out of those assets we managed to complete them. The profits,
however, were always in the stock.
WITNESS' SHARE OF CENTRAL PACIEIC STOCK OVER THIRTEEN
MILLIONS.
Q. What is your recollection of the amount of stock of the Central Pacific
Company which you received from the Contract and Finance
2656 tr. s. PACIFIC RAILWAY COMMISSION.
Company by way of dividend? A. I do not remember how much stock. I do not
think that there was ever a dividend of stock of the Contract and Finance
Company for some considerable time after that road was completed and other
stock added to it; but I think that my share of stock eventually of the Central
Pacific Railroad Company, after the consolidation, was something over thirteen
millions, and I believe that each of the other gentlemen had substantially
the same. Q. In stock? A. In stock.
HOW STOCK WAS ACQUIRED.
Q. Was all of that received through the Contract and Finance Company? A. I
think there was stock subscribed and paid in at different times to the amount
of $65,000 each. Then we each bought stock at different times. Whether the
650 shares were thrown into the Contract and Finance Company in the end I do
not remember, but everything else that we had bought we put in there. Then
at some time afterward I do not remember when there was a division of the Central
Pacific Eailroad Company's stock, which included, I think, stock that had been
issued for the various consolidations, and I know there was something over
thirteen million apiece.
Q. That would be 130,000 shares to each? A. Yes.
Q. That would be substantially all the stock that there was at that time? A.
I think at that time we had bought substantially all except a few shares of
stock, and almost all of it has since been acquired.
BUYING UP OUTSIDE STOCK.
Q. Four times thirteen million would be fifty- two million. I think your reports
show that up to the year 1879, the total stock outstanding was not over fifty-four
million. A. Then I had something over thirteen million ; I do not remember
the exact amount. I bought up, and continued to buy up, other stock, and paid
for it. Most of the outside stockholders had taken stock originally to help
the enterprise along, and if afterward any of them wanted to part with their
stock, when we were able to spare the money we, as individuals, gave them par
for their stock voluntarily, because there was not much chance for them to
dispose of it otherwise, and they had helped the road along to the extent to
which they had paid in their money.
WHEN IT WAS PUT ON THE MARKET.
Q. After the division made by the Contract and Finance Company, and the issue
of this stock to yourself and your associates, how long was it before the stock
was put on the market and became an object of customary purchase and sale?
A. I cannot tell the year, but perhaps you will remember better than I, at
the time when there was a good deal of a boom in stocks.
Commissioner ANDERSON. I am not familiar with stock booms. I regret to say
that I never got into them. Perhaps I can learn something by staying here a
little while.
The WITNESS. I think it must have been about 1880 or 1881.
FIYE MILLIONS SOLD TO A NEW YORK SYNDICATE.
Q. You began paying dividends in 1873. How long after that was it before the
stock began to be bought and sold*? A. We could not get it
LELAND STANFORD. 2657
on the market until, I think, about 1880 or 1881. I think it was 1880. Then
we sold, I think, five millions to a syndicate in New York and they put it
on the market. They were better manipulators than we were. They put that
stock on the market and after that time it had a regular quotable value.
I do not think it ever got below 60 cents on that market for several years,
though we could not sell much of it. After that I believe it went down as
low as 26. 1 think that was the lowest.
WITNESS PRESENT INTEREST $3,200,000.
Q. What is your present interest in the Central Pacific Company? A. I do not
know how it stands on the books, because my stock was sent east and was pufc
in shape there to be transferred. I do not care much generally about telling
my private business, but in this case I have no particular objection. I think
I have about equal in value to thirty-two thousand, which would make $3,200,000.
Q. Thirty-two thousand shares of stock? A. I think that would be about thirty-two
thousand. I remember it rather according to its par value than otherwise.
Q. And that is your present interest which you own in your own right? A. Yes.
DATE OF DISSOLUTION OF CONTRACT AND FINANCE COMPANY.
Q. In what year was this dissolution of the Contract and Finance
' Company If If you do not remember the date yourself I will take it from
any one else present. I wish to get the date so that we may know where
to look for the record. A. Almost any of our people around the office
could tell you, but my impression is that that occurred about 1874.
Q. You gave us the name of the court in Sacramento, did you not, in which the
proceedings took place? A. Yes. I think the court was known at one time as
the county court. I believe now it is called the superior court.
Q. And the records are with the clerk of that court? A. Yes.
NOTES GIVEN IN PAYMENT OF ITS STOCK.
Q. In relation to this matter I find the following memorandum in your minutes
under date of September 2, 1873 :
Resolved, That the secretary be directed to receive from the Contract and Finance
Company the notes of Lelaud Stanford, Mark Hopkins, and C. P. Huutingtou, amounting
to $5,700,000, and indorsed by said Contract and Finance Company, in settlement
of its indebtedness to this company, and credit the amount of the same to the
account of said Contract and Finance Company.
Can you explain that transaction or to what it refers? ' A. I could rot tell
you now. I have forgotten. I think when we subscribed to that stock of the
Contract and Finance Company we gave our notes as a basis of credit for the
Contract and Finance Company. The Contract and Finance Company used its credit
a great deal at that time. But I cannot tell you exactly now to what that quotation
refers. I do not know when this thing has come to me before and I do not like
to undertake to tell you unless I can be exact. I think Mr. Miller probably
would be able to recall it.
Q. Then 1 wilt put the question to you in this form : Did the four gentlemen
who subscribed for the stock of the Contract and Finance Company ever pay for
that stock in any other way except by loaning to it the credit of their notes
? A. That was the way according to my
2658 IT. S. PACIFIC EAILWAY COMMISSION
recollection now. I do not fairly remember, but it is my impression that each
of us gave our notes for that stock to the Contract and Finance Company.
NO CASH PAYMENTS.
Q. And is it your impression that these notes were returned to the Central
Pacific Railroad Company, and through that company to you, in this way? A.
Well, I am notable to call that to mind.
Q. Are you able to say whether you ever paid auy money for your stock in the
Contract and Finance Company? A. Not in cash ; 1 think not.
THE WESTERN DEVELOPMENT COMPANY.
Q. What was the Western Development Company? A. That was a company similar
to the Contract and Finance Company, formed afterward.
Q. Who were the stockholders of that company? A. 1 presume about the same.
We took in with us about that time, I believe, another gentleman, and he may
have had an interest in that, but whether we took him in after it was formed
I am not certain.
Q. Mr. Colton, you mean? A. Yes. Whether he was in at the organization I do
not remember.
Q. It was organized after the other company was dissolved, do I understand
you to say, or about that time 1? A. About that time.
Q. Do you know whether the same explanation which you have made as to the manner
in which you acquired stock in the Contract and Finance Company, by loaning
the credit of your name, without cash paymerit, also applies to Mr. Hopkins,
to Mr. Huntiugton, and to Mr. Crocker? A. I presume what was done in the one
case was done in the other, but I have been trying to recall about those notes
and the circumstances connected with them, and I do not wish to say positively
anything about them on my present dull recollection of how it was.
Commissioner ANDERSON. That can be as you desire ; and if you desire to correct
your testimony about it at any time hereafter the opportunity will be given
you.
The WITNESS. I think if I could see Mr. W. E. Brown and confer with him, he
probably could tell me the circumstances under which many of these things were
done and that would bring them to my recollection.
WITNESS'S SHARE OF THE STOCK.
Q. What was the capital stock of the Western Development Company? A. I do
not know. It may have been five and it may have been ten millions.
Q. Do you remember what your interest was ; what proportion substantially you
held, whether one-fourth or one-fifth of the whole? A. My impressions are that
at that time it was one-fourth, and that afterward we gave Coltou an interest
in it. I think we agreed to sell him one-ninth, letting each of the others
keep two-ninths.
WHAT WORK THE WESTERN DEVELOPMENT COMPANT DID
Q. What construction or extension did the Western Development Company do for
the Central Pacific? A. I do not think the Wesjtern Development Company ever
did anything for the Central Pacific other than repairs and various things
of that kind ; I do not think that it ever had any contracts.
LELAND STANFORD. 2659
Q. Their relations were with what company? A. With the Southern Pacific Company
principally, and I think with some of these local roads also.
WHO CONSTRUCTED THE CALIFORNIA AND OREGON, AND WHEN.
Q. By whom was the California and Oregon road constructed from Boseville to
Redding! A. I think that a portion of that line from Koseville to Bedding must
have been constructed by the Contract and Finance Company, and the latter portion
of it by the Pacific Improvement Company. There may have been a little piece
of it constructed by the Western Development Company, but I think not.
Q. Do you remember when the construction of that road commenced from Eoseville
north? A. The road from Koseville to a place called Lincoln was constructed,
I believe, by the Central road a little company which we bought out afterwards.
Then we built up and gradually extended our line. We bought out, then, the
California and Oregon line, and proceeded to build it from time to time until
at last we got up to Bed Bluff. That is substantially the head of navigation
on the Sacramento.
CALIFORNIA AND OREGON CONTRACT WITH CONTRACT AND FINANCE
COMPANY.
Q. To refresh your recollection, I will read from the minutes of the California
and Oregon Company of April 2, 1868 :
Mr. Crocker offered the following resolution relative to the contract with
the Contract and Finance Company for the construction and equipment of the
railroad and telegraph line of this company, which was unanimously adopted
:
Resolved and ordered, That a contract be, and is hereby, entered into between
this company [the California and Oregon Company] and the Contract and Finance
Company for the construction and equipment of the railroad and telegraph line
and fixtures of this company from the Central Pacific Railroad to a point at
or near the town of Red Bluff", in Tehama County, to be paid therefor
as follows : $20,000 in gold coin and $30,000 in the capital stock of the company
for each mile of the said railroad and telegraph line, and the draft of such
contract here now presented by the corporation is hereby agreed to, and the
president and secretary are hereby ordered and directed to execute the same
on behalf of this company and attach the coroporate seal thereto.
Does that refresh your recollection as to the commencement of that construction
?
The WITNESS. In what year was that?
Commissioner ANDERSON. Eighteen hundred and sixty-eight.
The WITNESS. Well, I do not remember the year positively, but I should think
it was about that time. Are you sure it is 1868?
Commissioner ANDERSON. Yes. Then follows in the minutes the contract at length
with the Contract and Finance Company, signed by Alpheus Bull, president of
the California and Oregon Railroad; John P. Brodie, secretary of the California
and Oregon Bailroad; Charles Crocker, president of the Contract and Finance
Company; and William E. Brown, secretary. Those gentlemen held those offices
in 1868, did they not?
The WITNESS. Yes; I think they were the officers. They were the gentlemen who
were in office at the time we purchased the control of that road.
HOW THE CONSTRUCTION PROCEEDED.
Q. Do you remember how the construction of that road then proceeded? A. Not
very rapidly. We pushed it along up toward Marysville, and into Marysville.
There we stopped some time, and then went
2660 US. PACIFIC EAILWAY COMMISSION.
on by pieces. The real trouble and stoppage at Bed Bluff was because the California
and Oregon road was in difficulties and there was no local business beyond
that point to sustain our road, and it was of no use to go on any further
with the financial proposition until there was a prospect of the California
and Oregon road coming to meet us. By a provision of the act of Congress
governing them, it was understood that the roads were to meet at the Oregon
line. Whepever they were ready to start we always went on. The Oregon Company
was first controlled by a gentleman named Holliday. He was unfortunate and
the control of the road passed into other hands. At different times from
one cause or another the road has been unfortunate, and failed to complete
its portion. Anticipating that that company would build its road, we built
ours away up into the Sierra Nevada Mountains, at a great deal of cost. It
was very heavy work, and was of no use to us at all, unless we could make
a connection with the Oregon line.
PURCHASE OF OREGON AND CALIFORNIA.
When we found that the road had stopped again, when Mr. Villard failed, after
a time we commenced negotiations for the purchase of the Oregon and California
road, in Oregon. The long negotiations were finally concluded, and the road
is now likely to be brought to completion. We are operating all but, I think,
1C miles that is being staged between the two terminal points, and, when completed,
that line will probably be a very important feeder to the Central Pacific.
But as a local road, up there in the mountains, there is no value to it ; that
is, there is not, and perhaps never will be, business enough in the way of
local traffic to support that road alone. But the through business, added to
the local business, I think, is going to make it a very fine piece of property.
RATE OF PROGRESS.
Q. In connection with the rate of progress, I will read from the minutes of
July 22, 1870, as follows :
The Contract and Finance Company presented a bill for the construction of 77.6
miles of railroad from Marys-ville on the line of the Central Pacific to Chico,
amounting to $3,860,000, under contract of April 2, 1868. It appearing that
the road has been completed under said contract in all respects satisfactorily
to this board, it is ordered that the said amount be allowed, and paid in cash
and stock as in said contract provided.
That was in July, 1870. Do you remember the fact? A. Well, no; I do not remember
the particular fact, although I was here and cognizant of everything going
on at that time.
LOCATION OF MARYSVILLE.
Q. Is Marysville about the same point as Eoseville? A. It is 34 miles, I think,
from Eoseville. Eoseville is 18 miles from Sacramento. There was a short line
of road built from a place called Folsom, across and going by Eoseville, out
to a place called Lincoln. That we purchased and consolidated in, and it makes
a part of the California and Oregon line.
Q. Then is Marysville on the line of the Central Pacific? A. On the line of
the California and Oregon. The California and Oregon leaves the Central Pacific
18 miles east of Sacramento and runs up the Sacramento Valley.
LELAND STANFORD. 2661
Q. Why is Marysville described in your minutes as being on the line of the
Central Pacific? A. I do not know. There is a mistake there somewhere; maybe
it is in your type-writer. I find, frequently, that they make mistakes. Marysville
is on the line of the Central Pacific now, because that road has been consolidated
with the Central Pacific and is a part of the Central Pacific, but in talking
with you of the Central Pacific, generally, I understand we mean the aided
line.
Q. Yes. Had the Central Pacific acquired this line from Koseville to Marysville
before this contract was made with the Contract and Finance Company? That
would explain it if that was so. A. I do not remember. There are papers though
that would show exactly. The consolidation papers would show.
CONSTRUCTION FROM TEHAMA TO DELTA.
Q. As to the construction after the termination of this contract by the Contract
and Finance Company north to Delta, how was that done? A. That was done by
the Pacific Improvement Company.
Commissioner ANDERSON. The Pacific Improvement Company did not commence until
you reached Delta. There must have been some construction -between Tehama and
Delta.
The WITNESS. Well, I think that must have been the Western Development Company.
Q. Under an extension of this contract? A. I do not remember as to that.
Q. How far is it from Tehama to Delta? A. I think it is a little over 50 miles.
FROM DELTA TO STATE BOUNDARY.
Q. Now, passing to the construction from Delta to the State boundary, that
was done under your contract with the Pacific Improvement Company? A. Yes.
Q. Do you remember the distance? From Delta up it appears by the contract
to be 104 miles. Is that your memory? A. It is about that.
Q. Have you been over the road? A. Yes.
Q. And you are familiar with its character? A. Yes ; that is, fairly so.
DATE OF PACIFIC IMPROVEMENT COMPANY CONTRACT.
Q. Do you remember when that contract was made with the Pacific Improvement
Company ; it is quite a recent matter, is it not? A. Yes; but I do not remember.
I would prefer that you should look at the books. I am troubled somewhat about
remembering dates lately. My memory seems, some way or other, lately to fail
me in that regard, and 1 seem to be more troubled by colds and sickness than
formerly.
Q. Was it not in 1886, just about a year ago? A. Well, it occurred whenever
we were certain that we were going to control the Oregon and California road,
so that it would justify our building. I know those facts, but the dates I
cannot call to mind.
Q. Who are the stockholders interested in the Pacific Improvement Company?
A. I think the chief stockholders were Mr. Crocker, myself, Mr. Huntington,
and Mrs. Hopkins, and there were other stockholders.
STOCK OF PACIFIC IMPROVEMENT COMPANY.
Q. What is the total capital stock? A. I do not remember whether it is five
millions or ten millions ; it is probably one or the other.
2662 U. S. PACIFIC E AIL WAY COMMISSION.
Q. What is your own personal interest "? A. I think it is shown there
in that paper.
Q. It is stated to be 12,500 shares. A. Well, that is given from the books.
Q. What is the par value of the stock, $100? A. Yes.
Q. What cash payments for your subscription to that stock have you made? A.
I do not know. We have been in the habit of furnishing it with money from time
to time as it was required, often by direct loans, but as to payment on the
stock itself, I do not remember anything.
Q. The stock was issued to stockholders and the stockholders loaned their credit
to the company for the purpose of enabling it to work? A. Yes. These were
all instruments in the work of building these railroads.
TERMS OF THE CONTRACT.
Q. Do you remember the terms of the Pacific Improvement Company for the building
of the road between Delta and the northern boundary of the State? A. No.
Q. Do you not remember that they were to receive four and a half millions in
bonds, and 80,000 shares of stock? A. Yes ; upon certain conditions.
Q. Do you remember what those conditions were? A. One was, I believe, that
we were to get control of the Oregon and California road and run it in connection
with the Central Pacific, and never give anybody else any preference over the
Central Pacific.
Q. Who is president of the Pacific Improvement Company? A. Mr. Strobridge.
Q. Is it not Mr. Douty? A. No. He is secretary.
Q. Then Mr. Huntington does not seem to be correctly informed? A. Well, I
do not think he or any of us paid much attention to the instruments. It was
the end that we were after, whether we made use of a shovel or a barrow or
a plow to obtain that proper end.
Q. Is this Mr. Strobridge the same gentleman that you referred to as having
been connected with Mr. Crocker's construction a good many years ago? A. Yes.
Q. Who are the other officers of this company? A. I think those are the only
officers of the company.
Q. W T here are the offices located 1 A. In San Francisco.
Q. And in the same building with the Central Pacific? A. Yes.
COMPLETION OF WORK FROM DELTA TO STATE LINE.
Q. How far has that work progressed? I mean the construction from Delta to
the State line. A. It is all completed to the State line.
Q. When was it completed? A. During this past season.
Q. Has all the equipment called for by the contract been furnished I A. I presume
so.
ACCOUNT OF PACIFIC IMPROVEMENT COMPANY WITH CENTRAL
PACIFIC.
i
Q. In connection with your statement in regard to this construction I will
read to you from your minutes of January 6, 1887, as follows :
E. H. Miller, jr., offered the following resolution, which was unanimously
adopted : That the following voucher, drawn by the secretary of the company
in favor
LELAND STANFORD. 2663
of the Pacific Improvement Company, be, and the same is hereby, ratified, approved,
and allowed, to wit :
DECEMBER 31, 1886. The Central Pacific Railroad Company to the Pacific Improvement
Company, Dr.
For amount of bonds of Central Pacific Railroad, California and Oregon Division,
payable to the Pacific Improvement Company on account of construction of road
from a point near Delta station, 191.87 miles north from Roseville Junction,
towards the Oregon State line, as per contract dated October 11, 1886, to wit
:
The contract requires the delivery of all the first-mortgage bonds of said
road now unissued when one-half of the work of the said road from Delta to
the State line is completed.
Said first mortgage bonds cover the road from Roseville Junction to the Oregon
State line, and may be issued to the amount of $40,000 per mile and for 50
miles in advance of completed line.
The road from Roseville Junction to point near Delta completed in 1885, 191.
87 miles.
Bonds issued on 192 miles of completed road and 50 miles in advance equals
242 miles, at $40,000 $9,680,000
Road completed, as per contract, from point near Delta to the point near Edgewood
station, 60 miles, being more than half the distance from first main point
to the State line, 104 miles, December 31, 1686. Road junction near Delta,
191.97. Near Delta to the State line, as per survey, 104 miles. Line of road
under mortgage 295.87 miles, reserving fj- of a mile for possible change- in
the road as constructed, leaves 295 miles, at $40,000 in bonds per mile, is
11,800,000
Balance of bonds unissued, now payable to the Pacific Improvement Company 2,120,000
Then, after that statement, showing the amount due, is a receipt, as follows
:
Received bonds as above, with coupons, payable July 1, 1887, and all subsequent
dates attached, said bonds being numbered as follows :
Then follow the numbers of the bonds.
The statement that I have read seems to show that under that contract at that
time $2,120,000 had been earned in bonds, which were actually delivered to
the company. Then follows a receipt, signed by Mr. William E. Brown, showing
the receipt of this amount of bonds.
ACCOUNT SHOWING BONDS DUE JUNE 1, 1887.
I now read from the minutes of June 1C, 1887, a report of Mr. Miller's relating
to the amount of bonds still remaining due under this contract, and a resolution
approving the following voucher :
JUNE 1, 1887.
TJie Central Pacific Company to the Pacific Improvement Company, Dr.
For bonds dated October 1, 1886, due on contract for construction of Oregon
Division from point near Delta station to Oregon boundary line, as per contract
dated October 11, 1886, to wit : Bonds payable under contract $4, 500, 000
Against that credit are the following charges :
First mortgage bonds California and Oregon Division, paid by voucher
No. 455, December, 1886... $2,120,000
Bonds October 1, 1886, paid by voucher No. 456, December, 1886 1, 373, 000
Bonds October 1, 1886, due on completion of contract 1,007,000
Making a total of 4,500,000
Estimated amount of cost to finish the line, reserved from balance due as
above 317,000
Leaving bonds now payable as follows 690, 000
2664 U. S. PACIFIC RAILWAY COMMISSION.
CONSIDERATION FOR CONSTRUCTION TO DELTA, THE CONTROL OF OREGON AND CALIFORNIA.
Then follows the receipt for this $690,000 in bonds. It also appears from a
statement made by you to Governor Stanford that 80,000 shares of the stock
were issued to the Pacific Improvement Company in payment of this construction.
Is it not correct, then, to say that the contract with the Pacific Improvement
Company for the construction of the road from Delta to the northern boundary
of California was for the consideration of four and a half millions, payable
in bonds, and 80,000 shares of stock? A.' Well, that is a part of the consideration,
but a very important part of the consideration was that they were to obtain
control of the Oregon and California line of road, so that it might be used
or run in connection with the main line, to make available really all of this,
substantially from Redding up.
HOW OBTAINED.
Q. And has that control been obtained '? A. Yes ; that has been obtained.
Q. In what shape has that been obtained? A. By obtaining control of the stock
of that road and the construction of the uncompleted portion of it, and assuming
all the responsibility and management of that property. It was not a thing
that we wanted to do, but it was a thing that we could not very well help,
because we built the road up there and unless that connection was made all
the road constructed from Redding up was substantially lost. There was not
local business enough to sustain it.
Q. You say you did not want to do it. It was done by your own votes? A. Yes;
but that was better than not to do it. We would a great deal rather the Oregon
people should have completed their road down to the State line.
COMPENSATION ALLOWED PACIFIC IMPROVEMENT COMPANY: HOW
DETERMINED.
Q. Who determined how much compensation should be paid to the Pacific Improvement
Company by what votes was it determined? A. The Central Pacific.
Q. It was determined then by vote of yourself and Mr. Charles Crocker, and
Mr. Huntingtou and the other directors? A. Practically. Whether we were all
present or not I do not know.
Q. When did that occur? A. It occurred last fall. The final negotiation with
the Oregon and California people (who are German and English) was consummated
by Mr. Huntington. Of the general terms and intention, of course, I was cognizant
; but the most of the negotiation was completed this winter when I was not
present. As to going into details, I cannot give you anything near as complete
as you would derive from the papers. The general terms of the negotiation had
been discussed for two or three years and sometimes were almost completed,
and then difficulties arose and changes occurred in the terms.
TERMS OF CONTRACT DETERMINED BY DIRECTORS.
Q. Is it not true that the terms of the contract between the Pacific Improvement
Company and the Central Pacific Eailroad Company were
LELAND STANFORD. 2665
determined by the vote of the directors of the Central Pacific Company whom
you have named? A. Of course.
Q. And the prominent directors whom you have named of tie Central Pacific Company
were also the largest stockholders of the Pacific Improvement Company? A.
The largest stockholders.
Q. So that the question as to whether the price agreed to be paid was a proper
price or not must be tested by those considerations which apply when the party
receiving the consideration is the same person who votes the consideration
1? A. No; not exactly. We hold (I do not know how you do on the other side)
that two corporations are competent to deal with one another, even though they
should be composed of the same stockholders and directors or a part in one
company and a part in the other. They are always accountable to the stockholders
for the integrity of their actions.
MANNER 'OF PAYMENT BY CENTRAL PACIFIC.
Commissioner ANDERSON. My question relates now to the manner in which it was
determined that it was a proper price to pay for this 104 miles of construction
as named in the contract four and a half millions in money and 80,000 shares
in stock about $120,000 a mile.
The WITNESS. Well, I think on the whole it was a very good trade for the Central
Pacific.
Q. Who passed on it 1 A. I helped to pass on it, I suppose, in part. All the
negotiations and proceedings were determined in the interest really of the
Central Pacific. We would never have thought as individuals to have individual
interests independent of our interests in the Central Pacific, in touching
that Oregon and California road.
ACTUAL COST OF CONSTRUCTION.
Q. Do you know whether the actual construction cost as much as the four million
and a half of bonds and the 80,000 shares of stock were worth? A. I have not
seen it, but I suppose it did. The work was very heavy work, indeed. 'I do
not know whether the work on the Central Pacific over the mountains is heavier
or not, but I do not think there is any other work in the United States as
heavy as the work over these mountains through Oregon.
Q. Where are the books of the Pacific Improvement Company? A. At their office.
Q. They will show, will they not, the actual cost of this construe tion 1 A.
I presume so.
BONDS ISSUED TO PACIFIC IMPROVEMENT COMPANY.
Q. Do you remember what issue of bonds was delivered to the Pacific Improvement
Company in payment for this construction? The question is whether you remember
what bonds were issued? A. No ; I do not. Many of these particulars you can
have exactly from the books, and it is a great deal better to get the exact
figures in that way than to take them from my recollection, especially since,
during the last few years, I have been frequently absent, and have not been
very familiar with the details of the business.
LOAN FROM SINKING FUND TO THAT COMPANY.
(^. Do you remember the fact that during the last year over $3,000,000 were
loaned from your sinking fund to the Pacific Improvement Com
2666 U. S. PACIFIC RAILWAY COMMISSION.
pany and that you held their note for this amount? A. I do not remember the
particulars with sufficient definiteness to state them. That occurred in my
absence. It has been arranged since my return, I think; but as to the terms,
and all about that, I should rather you should call on some of the others who
were entirely familiar with them, or refer to the books themselves.
Q. I am not testing the accuracy of the figures, but the transaction is one
which I think we ought to ask' you to explain, as it concerns so large an amount
of the sinking fund. I will read now from the minutes of May 2, 1887:
OFFER TO PAY BACK THE LOAN.
A communication was received from the Pacific Improvement Company offering
to pay loan of $3,03*2,410.33, with $45,486.15 accrued interest in Central
Pacific Railroad Company fifty-year 6 per cent, gold bonds of October 1. 1886.
The proposition was accepted.
Do you remember that transaction ! A. Yes ; I know those accounts were all
settled.
Q. And that your company agreed that the sinking fund should receive these
6 per cent, bonds? A. Yes.
Q. In payment of tlie money? A. I do not know about u payment of the money," but
I remember about the arrangement of putting the bonds in the sinking fund.
Before that was done I think that the thing was submitted and approved of,
without going very particularly into details. I cannot call to mind the details
at all.
MORTGAGE OF OCTOBER, 1886.
Q. Assuming that the minutes, as read, are correct, what is this mortgage that
is referred to here of October, 1886? A. That is a mortgage made to take care
of the floating debt, and to pay oft' another mortgage and to provide for $6,000,000
coming due this winter ; and we had another small mortgage over here and we
thought to wipe out all those things with this $16,000,000 mortgage.
Q. What property does it cover? A. It covers the unaided portions of the Central
Pacific. It would not cover any of the aided portions.
Q. It covers all of the terminal facilities? A. I think everything excepting
the aided portion.
PROBABLE EFFECT OF ITS FORECLOSURE.
Q. What would the effect of the foreclosure of that mortgage be on the interest
of the United States ! A. Under our laws, by the consolidation the joint property
becomes liable for the debts of each institution in the consolidation. Here,
of course, the Government has its lien on what we call the aided portion. As
to the remainder, the Government stands as a creditor would to a debtor who
had large property beyond that which was under the mortgage.
Q. Then the effect of a foreclosure of this mortgage, which, as you say, applies
to all except the aided portion, would be to strip the railroad of all property
covered by the Government mortgage and leave it absolutely without terminal
facilities or branches. A. It does not change the relations of the Government
at all, because all this $16,000,000 mortgage would go to redeem the individual
mortgages and debts of the various consolidated roads. A large portion of it
con gists of first-mortgage bonds on the road, which this mortgage is ex
LELAND STANFORD. 2667
pec ted to take up, and then some exchanges have been made. There was also
another mortgage that preceded it. It removed that, and really gets the roads
free from floating debt and the smaller mortgages, and takes care of them at
maturity, so that the relation of the General Government with the roads is
not affected at all, except favorably, inas much as we pay off the smaller
mortgages and floating debts. It is a good thing for the company.
WOULD LEAVE KOAD FROM SACRAMENTO TO OGDEN WITHOUT TERMINAL FACILITIES.
Q. It is favorable as long as it holds the corporate responsibility of the
whole Pacific system, I admit, and I do not mean to suggest that you intend
to do anything which would unfavorably affect the Government, but as a matter
of information I ask you whether the effect of a foreclosure would not be to
leave the line from Sacramento to Ogdeu absolutely without terminal facilities,
without an end, and without any connecting branch? A. That, of course, would
be. So would the debts that this proposes to take up do the same thing, if
the mortgages securing them were foreclosed and the roads sold out to meet
those debts. The present indebtedness of the company is not increased at all
by this mortgage. It is only one mortgage of $16,000,000 executed to take the
place of and satisfy about an equal amount of first mortgages and floating
debt.
Q. Can you tell us what other construction, if any, has been had by the Central
Pacific Eailroad, referring to any of the other branches connected with it?
We have gone through the main line and the California and Oregon. A. I believe
that is all, except by consolidation.
LINES CONSOLIDATED WITH THE CENTRAL PACIFIC.
Q. I will read you the names of the branches and ask you to please state whether
they came in by consolidation. First, there is the branch from Lathrop to Goshen.
A. That is a part of the San Joaquin Valley road.
Q. That came in by consolidation of what road with what road? A. It was known
as the San Joaquin Valley Eailroad.
Q. And it came in through the consolidation of August, 1870? A. Yes.
Q. How is it as to the branch from Mies to San Jose? A. That is a mistake.
Commissioner ANDERSON. I am reading from your report of 1872.
The WITNESS. That is a portion of the Western Pacific. It is called the San
Jose Division.
Q. How is it as to the branch from Alameda to Hay wards, 17 miles? A. That
is one of these ferry roads that run from Alameda. Alameda is the place where
the narrow gauge runs its ferry now.
Q. Then as to the Oakland and Brooklyn branch, 6 miles 1 A. That is one of
the short ferry roads.
Q. All these short roads to which you refer now, comprising the roads, as you
may say, which extend from the Western Pacific to the bay here and then down
to Goshen, I understand, were all brought together by consolidation into the
Central Pacific, and subsequently gathered into the Southern Pacific by the
consolidation of August, 1870. Is that correct? A. There were some other consolidations;
for instance, these two short lines of ferry road. P R VOL iv 22
2668 U. S. PACIFIC KAILWAY COMMISSION.
Q. But there was no construction by any of these companies for the Central
Pacific, as applicable to any of these short lines? A. I think not.
INTEREST OF OFFICERS IN THE SHORT LINES BEFORE CONSOLIDATION.
By the CHAIRMAN :
Q. Were any of the officers interested in any of the short lines'? A. In every
case we had become interested before consolidation. Most of them we purchased.
Q. Had any of the officers been engaged in the construction of the short lines
? A. Only through the improvement company.
Q. What improvement company constructed them I A. The Pacific Improvement Company.
The CHAIRMAN. It seems to be turning out that the Pacific Improvement Company
constructed some of these short lines.
Mr. BERGEN. That is a misapprehension.
The CHAIRMAN. Let us understand it. I wish to know whether any of these short
lines were built by any of the construction companies.
THE ROAD FOR MILES.
The WITNESS. A portion of the road from Niles, to meet and connect with the
Alameda road, was built by, I think, the Contract and Finance Company. The
Pacific Improvement Company was not organized until, I think, a later date.
It was organized more particularly with reference to building a" road
through Arizona and New Mexico.
Q. Have you named all of the short roads that were built by a construction
company? A. I think whatever there are are mentioned there. There were some
companies that never had any more than a paper existence. They were planned
for roads around the bay here. I think they were all put in, to get them out
of the way. It may be that 1 am mistaken, now, about the road from Niles this
way. I am inclined to think that it was built by the Central Pacific itself,
upon a contract. It was a little piece ot road, and it is rather my impression
that it was not built by any of our construction companies, but by individual
contract. Upon reflection I am quite sure it is so.
LOAN OF PORTION OF SINKING FUND TO WESTERN DEVELOPMENT
COMPANY.
By Commissioner ANDERSON :
Q. In regard to the sinking fund, do you remember that from time to time portions
of it were also loaned to the Western Development Company until the amount
exceeded $3,000,000, and that as security for that your sinking fund held bonds
of the Southern Pacific Railroad Company, 'and that finally the account was
settled by the sinking fund taking the bonds of the Southern Pacific Railroad
Company at 90 cents on the dollar? A. I have a general recollection of the
transaction.
Q. And that after that the bonds of the Southern Pacific were sold by order
of the board, and the proceeds of the sale, with some other moneys in the sinking
fund, were loaned to the Pacific company, and that loan was adjusted, as explained
before, by taking bonds of the mortgage of October, 1886? A. I think you have
stated it about as I remember it, but there is a great deal of it that occurred
in my absence, and 1 do not want to state exactly with regard to it, especially
as there is documentary evidence for it.
LELAND STANFORD. 2669
Q. Who are the present trustees of the sinking fund or funds I A. There are
different trustees. I do not like to be inaccurate about that. I would prefer
that you should ask Mr. Miller about it.
Commissioner ANDERSON. Very well; we will ascertain from Mr. Miller. There
are some questions I want to ask you in regard to your preliminary statement,
but if there is anything further to be asked about the details of construction,
or the story of the road, perhaps it had better be asked now.
WHAT WAS PAID FOR CONSTRUCTION FROM SACRAMENTO TO OGDEN.
By Commissioner LITTLER :
Q. To recapitulate in respect to the construction of the Central Pacific road
$ as I understand you, the firm of Crocker & Co. and the Contract and Finance
Company received for their services in constructing the Central Pacific road
from Sacramento to Ogden all the first-mortgage bonds of the company, and all
the subsidy bonds issued by the Government of the United States, and all the
stock which has, in fact, been issued. Am I correct in that statement? A.
Not exactly. I doubt whether the Contract and Finance Company ever handled
one of those bonds. They were all sold at the East, and the proceeds used for
the company.
Q. At all events they received the proceeds arising from the sale of the bonds?
A. Of the bonds.
CONDITION OF CONTRACT AND FINANCE COMPANY AT FINAL SETTLEMENT.
Q. So that when you settled up the affairs of the Contract and Finance Company
there remained nothing as clear profit to the company except the common stock
of the Central Pacific road? A. Yes ; I think that that is all they had. And
I do not know but what they were somewhat in debt ; but their profit, if any,
was in this stock. All those first-mortgage bonds were converted into money
in New York and sent out here, and they all went into the road.
Q. Is it not somewhat remarkable that, in a transaction of such magnitude,
the cost should come out even with the amount of money arising from these securities
and leave the stock as a clear profit? A. It would have been so if the Contract
and Finance Company had come out exactly even ; but, as I understand it, they
did not. On the contrary, they owed a good deal of money.
Commissioner LITTLER. You had not stated that before.
The WITNESS. Well, that is the fact ; they owed a great deal of money.
AMOUNT IT OWED AT THE COMPLETION OF THE ROAD.
Q. Give us an estimate of the amount they owed at the time of the completion
of the road. A. Several millions of dollars. I think Mr. Brown, when you get
him on the stand, will be able to tell you exactly.
Q. Then, do you desire to be understood as saying that this Contract and Finance
Company received this company stock, and yet it was not clear profit, .but
that they had to pay several millions of dollars in order to clear the stock?
A. That is my recollection. They were several million dollars in debt when
they got through. If there had been a surplus of money over, we would have
cried a halt with the Contract and Finance Company, and have said : " You
are making money out of this,
2670 IT. S. PACIFIC EAILWAY COMMISSION.
and we cannot afford to have you do it." The Contract and Finance Company
was really a means to an end, although it had its legal existence and was responsible
for its liabilities.
CREATED FOR PURPOSE OF BETTER CONSTRUCTING THE ROAD.
Q. The Contract and Finance Company, when properly understood, was merely an
instrument in the hands of the Central Pacific Railroad for constructing this
road, as I understand you? A. It was created for the better purpose of constructing
the Pacific road.
Q. And yet, it is true that yourself and associates in that company received,
as profits, all this stock amounting to between $50,000,000 and $60,000,000,
less the amount the company had to pay after it had finished the work of construction
? A. Well, no. We only received about $50,000,000, a very inadequate compensation
for the risks that were incurred. It was not possible to find anybody else
of responsibility in the United States that could be induced to take a part
in it.
PERSONAL LIABILITY OF STOCKHOLDERS.
Q. Yet it is true that by reason of your being a corporation, the members of
the corporation were not personally liable for any of the debts of the company
? A. They were liable for any debts that that company might be unable to pay.
The corporation itself was a stockholder, and, as a stockholder, was liable
for the debts of the company. The Contract and Finance Company proved a most
valuable instrument in the construction of the road, but it never was compensated
for the risks that it had to take, and there was no man to be found and no
party of men that could be found that would take an interest and participate
in the risks.
Q. This being a corporation under the laws of the State of California, I suppose
its stockholders were not liable beyond the amount of stock subscribed, were
they?
Mr. BERGIN. That is a mistake. Stockholders here are individually liable under
the laws of this State to the extent of the debts and liabilities contracted
or incurred while they are stockholders, regardless of the mere amount paid
on the capital stock. The stockholder is liable, in the first place, for his
subscription. In addition to that he is individually liable to every creditor
for his proportion of the debts and liabilities of the company contracted or
incurred while he continued to be a stockholder.
Commissioner LITTLER. Is that the law of the State of California.
Mr. BERGIN. Yes.
Commissioner LITTLER. I do not see any object in forming incorporations under
your laws, if that is so.
EFFECT OF THE LAW ON INVESTORS.
Mr. BERGIN. That is what Governor Stanford has referred to here as a frightening
of foreign capital from investment in California, and it has been a source
of a great deal of financial embarrassment in this State.
Commissioner LITTLER. I now understand the personal liability that you have
been talking about. I could not understand, under the laws of my own State
or most of the other States, how a stockholder of a corpor ation became liable
for debts beyond the amount of the stock subscribed.
FRANK S. DOUTY. 2671
The WITNESS. I tbink it is a very unfortunate provision of our laws. It has
often hindered investments of capital, and we found that to be the greatest
difficulty in obtaining capital in aid of our road. I see that your Commission
is inclined to be thorough, and I hope you will be so thorough in your examination
that there will be nothing left that anybody else will think worth prying
into.
The Commission then adjourned to Saturday, July 30, 1887, at 10 a. m.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Saturday, July 30, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
FEANK S. DOUTY, being duly sworn and examined, testified as follows :
SECRETARY AND TREASURER OF VARIOUS CORPORATIONS.
By Commissioner ANDERSON :
Question. What is your occupation, sir? Answer^ I am connected with various
corporations as an officer.
Q. Will you please enumerate them 1 A. I am secretary and ex-officio treasurer
of the Pacific Improvement Company; president and ex- officio treasurer of
the Western Development Company ; secretary and treasurer of the Southern Development
Company ; secretary and treasurer of the Los Angeles and Independence Railroad
Company; secretary and treasurer of the Carbon Hill Coal Company ; secretary
of the Eocky Mountain Coal and Iron Company ; secretary and treasurer of the
Colorado Steam Navigation Company; secretary and treasurer of the Southern
Pacific Eailroad Company of Arizona ; secretary and treasurer of the Southern
Pacific Eailroad Company of New Mexico.
Q. Which of these corporations have had any dealings with the Central Pacific
Eailroad Company? A. The Western Development Company has had some dealings
and so also has the Pacific Improvement Company.
THE WESTERN DEVELOPMENT COMPANY.
Q. Which of these two corporations was first formed, the Western Development
Company or the Pacific Improvement Company? A. The Western Development Company.
Q. Do you remember who were the iucorporators of the Western Development Company
? A. John Miller, F. S. Douty, Frank C. Eoss, H. K. White, and D. T. Philips,
I think.'
Q. Who were the first officers of the company? A. F. S. Douty was president,
and John Miller was secretary and ex officio treasurer.
Q. What was the capital stock? A. Five million dollars.
Q. Divided into 50,000 shares? A. Fifty thousand shares of $100 each.
Q. Do you remember who were the principal stockholders not named 1? A. Governor
Stanford, Mr. Huntington, Mr. Hopkins, Mr. Crocker, and General Coltou.
2672 U. S. PACIFIC RAILWAY COMMISSION.
REPRESENTATIVES OF OTHERS, AND NOT OWNERS.
Q. What stock had you standing in your name? A. Ten thousand shares, I think.
Q. Did you ever pay for it all '? A. I did not.
Q. Did you understand whose stock it was? A. I do not know, but my impression
at the time was that I represented General Colton.
Q. Did you state the year when this company was organized and commenced business
? A. It was organized in December, 1874.
Q. How many members of the board were there? A. Five.
Q. Please state their names ; are they the same gentlemen who were the incorporators
1 A. The same incorporators were the directors.
Q. Do you know whether the other directors held stock beside yourself, beside
this 10,000 shares? A. Each held 10,000 shares.
Q. In his own name? A. Yes, sir.
Q. Frank C. Ross and White and Philips and Miller? A. Yes, sir.
Q. Did you understand whether or not they owned this stock absolutely for themselves,
or as representatives of the other gentlemen? A. My understanding was that
they were representatives and not owners.
Q. And that the real owners were the five gentlemen you have named, Governor
Stanford, Mr. Hopkins, Mr. Huntington, Mr. Crocker, and Mr. Colton? A. Yes,
sir.
Q. And in all the dealings of the corporation, I assume that you would expect,
unless you were asked to do something absolutely wrong, to be entirely guided
'by the ideas of these gentlemen? A. I intended to represent them.
Q. And so did the other directors, as far as you could judge by their actions,
intend to represent their principals? A. That was my understanding of it.
THE PACIFIC IMPROVEMENT COMPANY.
Q. In regard to the organization of the Pacific* Improvement Company, was it
similarly done? A. Yes, sir; it was similarly done, with the exception that
General Colton was not there, and originally Mrs ; Hopkins had no part in it.
Q. When was that company organized? A. In November, 1878.
Q. The Pacific Improvement Company? A. Yes, sir.
Q. Who were its first officers? A. J. H. Strobridge was the president and
F. S. Douty was secretary and treasurer.
Q. And the board of directors? A. J. H. Strobridge, F. S. Douty, W. E. Brown,
Arthur Brown, and B. E. Crocker. Of course, I am giving these from memory,
and I would not swear positively that such was the case, but that is my recollection.
There were five in all.
Q. How much was the capital stock? Also $5,000,000? A. Five millions.
Q. And who were the real owners of the stock in the company? A. In the beginning
Messrs. Stanford, Crocker, and Huntington.
Q. And then Mrs. Hopkins afterwards? A. Yes, sir ; Mrs. Hopkins afterwards.
ITS DEALINGS WITH THE CONTRACT AND FINANCE COMPANY.
Q. Did any of these companies have dealings with the Contract and Finance Company
? A. The Western Development Company bought
FRANK S. DOUTY. 2673
from the Contract and Finance Company a considerable amount of construction
material. It had no other dealings.
Q. Did it not also take an assignment of a contract h"ld by the Contract
and Finance Company? A. Yes, sir; with the Southern Pacific Railroad Company.
Q. For the construction of the Southern Pacific road? A. Yes, sir ; but this
was subsequently made a contract direct between the two companies.
Q. Did you hold any office in the Contract and Finance Company? A. No, sir.
EMPLOYES OF CONTRACT AND FINANCE COMPANY.
Q. Do you know who the clerks were in the office of the Contractand Finance
Company, who were employed there? A. By hearsay only. When I entered the service
of the Western Development Company I did not take charge of its affairs until
some time after its organization, and at that time the Contract and Finance
Company existed in name only. John Miller, I know, however, was the secretary
of that company.
Q. Were there not other employes of that company that you know of except John
Miller? A. There were employe's connected with the Contract and Finance Company
and the Western Development Company in the office of the Western Development
Company. The employe's of the Western Development Company at that time were-F.
C. Eoss, John Miller, and C. H. Beddington, besides an office boy.
Q. Have you any knowledge of the books of the Contract and Finance Company?
A. I have not.
Q. You never saw them? A. I never saw them.
TRANSACTIONS BETWEEN THE WESTERN DEVELOPMENT AND CENTRAL
PACIFIC.
Q. What was the nature of the transactions between the Western Development
Company and the Central Pacific Railroad Company? A. The principal relation
was that of attending to certain repairs 01 bridges and buildings under the
superintendence of Mr. Arthur Brown.
Q. For how long a period did these transactions continue? A. Until January
1, 1879, I think.
Q. Where are the books of the Western Development Coinpany? A. In the office
of the company?
Q. That is in the same building as the Central Pacific Kailroad Company's offices?
A. Yes, sir; at the corner of Fourth and Townsend streets, in this city.
DEALINGS BASED ON COST WITH 10 PER CENT. ADDED.
Q. Can you tell us approximately what the amount of these transactions was
per annum these repairs? A. I cannot from recollection.
Q. Can you inform us how these transactions were made, how the prices came
to be fixed? A. All the dealings between the Western Development Company and
the Central Pacific Railroad Company were based on cost with 10 per cent, added.
This 10 per cent, included superintendence and the use of tools, the depreciation
of which could not be distributed to any particular piece of work.
NATURE OF REPAIRS.
Q. Please describe the kind of repairs that your company did for the Central
Pacific. A. Repairs to bridges and buildings.
2674 U. S. PACIFIC RAILWAY COMMISSION.
Q. And the reconstruction of roadway or the laying of rails If A. No, sir.
Q. Along the whole line of that road and all of its branches! A. Yes, sir.
I think the Western Development Company did make a heavy fill at a place called
Secret Town and at Long Eavine. I do not recollect that it included any track-laying
simply replacing the trestle with earth embankments.
Q. Was the same rule observed in all of these companies of charging the cost
with 10 per cent, added? A. Yes, sir; 1 think that was the case in this instance.
PREPARATION OF STATEMENT OF COST.
Q. By whom was the statement of cost prepared? A. That was prepared in my
office.
Q. Taken from the books? A. Yes, sir.
Q. Your books would show the cost? A. Yes, sir.
Q. And were the vouchers rendered or the bills rendered to the Central Pacific
Railroad Company made out in that way, a statement of the cost and an addition
of 10 per cent, on the face of the vouchers? A. Yes, sir, as I recollect it,
but it is some time since I thought of it.
CENTRAL PACIFIC BOOKS CONTAIN ANNUAL AMOUNT 'OF COST.
Q. Can you furnish us with a statement showing the annual amount of money received
for this work by the Western Development Company from the Central Pacific Railroad
Company from 1872 to 1879 A. I think that it could be furnished. It would take
some little time, however. The Central Pacific books undoubtedly contain it
all.
Q. Then I suppose we will get it. The items would naturally appear gathered
together in a ledger account of those two companies, would they not? A. Yes,
sir.
Q. And the footing of the balances would give the answer to the question that
I have asked? A. We kept two or three different sets of books. For instance,
the total of the work performed by Arthur Brown would appear in what we call
the timber books books devoted to thip class of work entirely; and then another
set, as distinguished from the other, we call the general books. The two gathered
together would show the result.
Q. Are not all these accounts gathered together in the cash ledger? A. In the
general ledger. It would appear there simply as a balance, probably, representing
the gross amount, without any details.
Commissioner ANDERSON. All that we want is some verified statement showing
the magnitude of the transactions between the two companies, and what they
amounted to during that period.
The WITNESS. The books will show that.
WORK OF WESTERN DEVELOPMENT FOR SOUTHERN PACIFIC.
Q. What construction did the Western Development Company do for the Southern
Pacific Railroad Company? A. It built the road from Sumner to San Fernando,
and from Spadra to Yuma.
Q. How many miles does that embrace? A. I think it is about 405 miles ; 404.91
1 think is the exact mileage.
Q. Was that the inception of the Southern Pacific Railroad the first construction
done for the Southern Pacific Railroad Company? A. There had been other construction
there which we found, between
FRANK S. ElOUTY. 2675
San Fernando and Los Angeles, and between Los Angeles ana Spadra. That portion
of the road had already been constructed.
ROUTE OF THE SOUTHERN PACIFIC.
Q. Please tell us where the Southern Pacific road commences, describing its
route, so that we can have it before us. As I understand it, it does not communicate
directly with San Francisco? A. No, sir. The Northern Division of the Southern
Pacific Eailroad enters San Francisco and runs between the Coast Kange and
the ocean, at that time ending at Soledad. It had two termini, one at Soledad
and the other at Tres Pinos. The latter was a branch, which left the main line
at Gilroy and went to Tres Pinos. The main line went to Soledad.
Q. And how far is Soledad south of San Francisco? A. One hundred forty-two
and 9.10 miles.
PARALLELLED GEOGRAPHICALLY, BUT NOT AS TO BUSINESS.
Q. Please describe the rest of the Southern Pacific Eaiiroad? A. The other
line, the Southern Division, begins, at Goshen, goes to Los Angeles, and from
Los Angeles runs to the Colorado Kiver.
Q. And which was the part of that road which you found already constructed?
A. That part between San Fernando and Los Angeles and between Los Angeles and
Spadra.
Q. There is a gap, as I understand it, between the Northern Division and the
Southern? A. Yes, sir.
Q. I understand that the two lines virtually parallel each other? A. There
is a range of mountains between them. But for that matter they parallel each
other, so far as they go, in a geographical, but not in a business sense.
Q. Is the line to fill that gap now in course of construction? A. No, sir
5 there is also another piece of road from Goshen to Huron, which was built
by the Western Development Company.
Q. Belonging to the Southern Pacific? A. Yes, sir.
ENTRANCE TO SAN FRANCISCO FORMERLY CONTROLLED BY CENTRAL
PACIFIC.
Q. Over what route does the Southern Pacific now communicate with San Francisco
? A. It is now controlled by the Southern Pacific Company, but was formerly
controlled by the Central Pacific.
Q. What was the name of it? A. I cU> not know that I ever knew the corporate
name. It has always been regarded as part of the Central Pacific.
Q. Does it run between San Francisco and Goshen? A. Yes, sir.
Q. Is that the contract which was originally made with the Contract and Finance
Company and purchased by the Western Development Company? A. It is a portion
of that contract.
Q. Is that contract in existence? A. I suppose so. I do not know, however,
that the Western Development Company purchased it.
ASSIGNMENT OF CONTRACT BY CONTRACT AND FINANCE COMPANY TO WESTERN DEVELOPMENT
COMPANY.
Q. Did it take an assignment of it I A. Yes, sir j it took an assignment of
it.
2676 U. S. PACIFIC RAILWAY COMMISSION.
Q. Is the original contract with the Contract and Finance Company in existence
? A. I do not know. It is not in my possession.
Q. Did you ever have it? A. Ko, sir.
Q. Was it never among the papers of the Western Development Company that you
know of? A. 1 do not know that I ever saw it. I do not know that I ever had
it. My only knowledge of it was derived from reading the minutes of the Southern
Pacific Eailroad Company.
By the CHAIRMAN :
Q. Who kept posession of it? A. It would be among the papers of the Contract
and Finance Company, and it may possibly be among my papers. I never saw it,
however.
By Commissioner ANDERSON : Q. You never examined it. A. I do not recollect
anything about it.
NEW CONTRACT BETWEEN WESTERN DEVELOPMENT AND SOUTHERN
PACIFIC.
Q. You say that there was a new contract made directly -between the Western
Development Company and the Southern Pacific Railroad Company 1 A. Yes, sir
$ that was what I referred to.
Q. Have you that contract? A. Yes, sir; it is in my office.
Q. Was that for the whole of the 400 miles? A. Yes, sir ; and something more.
It provided for all the uncompleted portions. As I understand it, the original
design was to connect the lines between Tres Pinos and Huron; also to build
the line between Mojave and the Needles, which was on the Colorado River. Those,
however, were not built by the Western Development Company.
PACIFIC IMPROVEMENT BUILDS LINE BETWEEN MOJAVE AND
NEEDLES.
Q. By whom were they built? A. That line between Tres Pinos and Huron has
not been built, and I do not know that it ever will be. The line between Mojave
and the Needles was built by the Pacific Improvement Company.
Q. At a subsequent date? A. Yes, sir; in 1882.
Q. At the time that this contract was made, who were the stockholders in the
Southern Pacific Railroad Company? A. I could not name them.
Q. Who were the directors? A. That I could not say positively.
Q. Who was the president "1* A. Charles Crocker.
CONSTRUCTION CONTINUED FOUR YEARS.
Q. How long did the construction continue, from the commencement to the end?
A. There was more or less work done on it during the active existence of the
Western Development Company as a corporation between the latter part of 1874
and the latter part of 1878 four years.
SETTLEMENTS MADE WITH SECRETARY OF SOUTHERN PACIFIC.
Q. With ^hom were the- settlements made when money came due to the Western
Development Company with what officers? A. Under the contracts no money was
due. Payments were made to the Western Development Company in the form of stock
and bonds. The settle
FRANK S. DOUTY. 2677
ments are usually made with the secretary of the Southern Pacific Bailroad
Company, Mr. J. L. Willcutt.
Q. Do you remember how many bonds in all were received on this contract with
the Southern Pacific Railroad Company? A. I cannot say that from memory. I
would prefer to give it from the books.
Q. Were the bonds the first-mortgage bonds of the Southern Pacific! A. Yes,
sir.
Q. In what respect, if at all, were these transactions with the Southern Pacific
Railroad Company intermingled with your transactions with the Central Pacific
Eailroad Company? A. They were not intermingled at all, that I know of.
LOANS ON COLLATERALS.
Q. Were there not large loans of money made by the Central Pacific Eailroad
Company to the Western Development Company, for which you gave the Southern
Pacific Eailroad bonds as collateral? A. Yes, sir ; there was a loan of that
character.
Q. Do you remember its amount? Was it over $3,000,000? A. Yes; I thin'k it
was in that vicinity, but I do not remember the exact figures.
Q. Were other loans of money made to the Western Development Company, from
time to time, as it required money, or was it all in one lump? A. I think that
it was in one loan.
Q. Do you remember the rate at which the Central Pacific took these bonds as
collateral? A. I do not.
LOAN ACTED Otf BY DIRECTORS OF WESTERN DEVELOPMENT COMPANY.
By the CHAIRMAN:
Q. Did the board of directors of the Western Development Company act upon that
loan? A. Yes, sir; I think so. I think that it is all a matter of record.
Q. Does it appear upon your minutes? A. I think it does. If there was any action
by the board of directors it would appear upon the minutes.
By Commissioner ANDERSON :
Q. Do you remember how the loan was paid? A. I think that it was paid in bonds
of the Southern Pacific Eailroad Company.
CENTRAL PACIFIC NOTE PAID BY SOUTHERN PACIFIC BONDS.
Q. We find in the minutes of the Central Pacific Eailroad Company, under date
of September 1, 1879, a proposition from the Western Development Company to
pay .a note, due the Central Pacific Eailroad Company, for $3,086,259.72, with
bonds of the Southern Pacific Eailroad Company at 90 cents on the dollar. Is
that the transaction as you recollect it? A. Yes, sir; there was a transaction
of that kind.
Q. Was that proposition acccepted and carried through? A. Yes, sir.
CONTROLLING INFLUENCES SUBSTANTIALLY THE SAME IN BOTH
BOARDS.
Q. And at that time were the directors of both boards substantially the same
persons that you have named the board of the Western
2678 U. S. PACIFIC RAILWAY COMMISSION.
Development Company and the board of the Central Pacific Eailroad Company such
as we find on the books of the company? A. The leaders of the board of directors
of the Central Pacific Eailroad Company and the owners of the Western Development
Company were substantially the same.
Q. But the controlling influences were the same? A. The controlling influences
were the same, except for the deaths of General Colton and of Mr. Hopkins,
which occurred during the meantime.
NO MARKET VALUE TO THE BONDS.
Q. Do you know what the market value of those bonds was at that period, or
had they any market value? A I do not know that they had any market value.
I think that it was about the time that they began to be placed upon the market.
Q. Has the interest on those Southern Pacific bonds always been regularly paid?
A. Yes, sir.
PRODUCTION OF WESTERN DEVELOPMENT BOOKS DESIRED.
Q. Could you not answer these matters more readily if you had present the ledger
of the Western Development Company? A. I certainly could, with the books of
the Western Development Company.
Q. What books would you require? A. The ledger, journal, and cash book, and
possibly some vouchers. Frequently the detail will appear on the voucher and
would not be written out in full on the books.
Commissioner ANDERSON. I should prefer to conduct the examination with the
books present. Would it be convenient for you to have them brought here?
The WITNESS. If so ordered. I do not know that I have sufficient control over
them to take them out of the office.
Commissioner ANDERSON. We have sufficient control, if we wish to exercise it,
to order the books brought here, and we will give you authority or an order
to bring them in order that we may examine them. 1 think that the examination
would be more satisfactory with the books.
TRANSFER OF CENTRAL PACIFIC BONDS TO WESTERN DEVELOPMENT.
Q. Do you recall the fact of a number of bonds of the Central Pacific sinking
fund coming into the possession of the Western Development Company? A. I do
not recollect the figures with sufficient accuracy to state. I think that it
was something like four millions or thereabouts.
Q. Out of what transaction did the transfer of those bonds to the Western Development
Company arise? A. In pursuance of some policy which the directors had. I suppose
that they were desirous of marketing bonds of the Southern Pacific Railroad
Company.
Commissioner ANDERSON. These are Central Pacific Eailroad sinking fund bonds
that I am speaking of.
The WITNESS. They were Southern Pacific bonds.
Q. Had they been held in the sinking fund of the Central Pacific Eailroad Company
? A. Yes, sir.
FOR DEBT DUE BY CENTRAL PACIFIC.
Commissioner ANDERSON. I will recall to you your statement, made in the Colton
case, where this same subject was brought to your attention, and you were asked
:
From whom did the Western Development Company acquire these bonds?
FRANK S. DOUTYo 2679
You answered:
From the Central Pacific Railroad Company. Q. How? A. In the payment of a
debt, I think.
Q. They took them for the payment of a debt due by the Central Pacific Railroai
Company to the Western Development Company? A. Yes, sir.
The WITNESS. That is another class of bonds. They relate to the so-called income
bonds. These are a different kind of bonds. I had the Southern Pacific of California
bonds in my mind as belonging to the sinking fund. These were what were called " income" bonds,
and I referred to them in that way. They were properly sinking fund bonds,
I suppose.
CENTRAL PACIFIC USED AS A BANK.
Q. Out of what transaction did the indebtedness of the Central Pacific Eailroad
Company to the Western Development Company arise? A. The Western Development
Company used the Central Pacific Kailroad Company as a bank to deposit money
with and to draw money out of, and I think that this amount of money represented
the balance due on account current from the Central Pacific to the Western
Development Company.
Q. You mean an overdraft or loan made by the Western Development Company to
the Central Pacific Eailroad Company? A. It was an aggregate of deposits made
by the Western Development Company in the treasury of the Central Pacific Eailroad
Company, in excess of what it (Western Development Company) had drawn out of
the Central Pacific Eailroad. The Western Development Company used the Central
Pacific Eailroad Company as a bank, and deposited more than it drew out. Naturally,
there would be a balance due to the Western Development Company.
WESTERN DEVELOPMENT DRAFTS HONORED BY CENTRAL PACIFIC.
By the CHAIRMAN:
Q. Did the Western Development Company draw out more than it sometimes had
in? A. It is possible that that may have occurred. We usually, however, had
a great deal more in the treasury of that company on deposit than we drew out
of it.
Q. W^as that with the consent of the Central Pacific as a banker? A. There
was never any objection to it that I was aware of. The drafts were always honored.
Q. Had the Western Development Company unlimited draft upon the Central Pacific
Eailroad Company for funds as a banker? A. No.
Q. What was the limit of the draft? A. I do not know that that question ever
came up. I do not know that I ever drew a cent to which any objection was made.
LARGE BALANCE ON DEPOSIT.
Q. I understand you to say that it is possible that you drew out more than
you had on deposit? A. It may have been so. I stated that it might have been
done, but I do not recollect whether it was or not. As a rule, the Western
Development Company had a large balance on deposit with the Central Pacific
Eailroad Company.
Q. Would the Central Pacific Eailroad Company honor the drafts of the Western
Development Company if it had not sufficient funds on hand? A. I do not know
whether it would or not j unless some ar
2680 U. S. PACIFIC RAILWAY COMMISSION.
rangement was made to take care of it. I do not think it would. If we wanted
money we would be likely to make some arrangement for it, as we would with
any other bank with which we were doing business.
Q. Was not the controlling influence in the Western Development Company and
in the Central Pacific Railroad Company the same? A. Yes, sir 5 the controlling
influences were the same in both companies.
NO DIFFICULTY IN ARRANGING AN OVERDRAFT.
Q. So that there would be no difficulty or trouble in arranging or adjusting
any banking account in case of an overdraft? A. They could do whatever they
pleased with regard to that.
Q. Would it be likely that the man making an overdraft would find any trouble,
if he were the same person upon whom the draft was drawn? A. I do not imagine
that in case of myself there would be any trouble.
CENTRAL PACIFIC A DEBTOR TO AMOUNT OF $3,000,000.
By Commissioner ANDERSON :
Q. The fact was that at this period the Central Pacific Eailroad Company was
the debtor of the Western Development Company in an amount exceeding $3,000,000,
as I judge from your testimony in the Colton case? A. Yes, sir; whatever was
stated there is correct.
Q. And the Wester u Development Company received these bonds in payment of
the debt or as security? A. In payment of that debt.
Q. What became of those bonds? A. The Western Development Company parted with
them by paying some of its own debts.
BONDS SOLD TO THOSE IN INTEREST.
Q. Do you know to whom those bonds were sold? A. I think that Mr. Crocker
had some of them and Mr. Huntington some.
Q. And were there not some sold to all of these gentlemen in interest ! A.
Yes, sir ; to all four.
Q. To the four? A. Yes, sir.
Q. How did you designate the four? A. S., H., H., and C.
Q. How did that transaction come about? Who directed you to sell those bonds
? Was it by direction of Mr. William E. Brown? A. I think that it was either
by his direction or upon information which I received through him.
Q. Do you remember the price at which they were sold? A. Par and accrued interest,
I think.
"
s., H.? H., AND c."
Q. Were books kept of the transactions of "S., H., H., and G."? A.
Yes, sir ; I think there are such books.
Q. Will you explain whom you mean by S,, H., H., and C.? A. Stanford, Huntington,
Hopkins, and Crocker.
Q. By whom were these books kept? A. By William E. Brown.
Q. Has he possession of those books now, so far as you know? A. So far as I
know ; yes, sir.
Q. Have you ever had any connection with those books? A. No, sir.
Q. You do not know what class of transactions they contain? A. I do not.
FRANK S. DOUTY. 2681
NO OTHER TRANSACTIONS BETWEEN WESTERN DEVELOPMENT AND
CENTRAL PACIFIC.
Q. What other dealings besides the construction of railroad and the interchange
of loans occurred between the Western Development Company and the Central Pacific
Railroad Company, as you remember? A. 1 do not recollect of any aside from
those that I have already mentioned.
Q. Were there any other occasions when loans of any magnitude existed between
them, other than' the two which you have given? A. I do not recollect any
other.
Q. What .other railroad construction did you make besides the building of the
Southern Pacific Railroad?
The WITNESS. You mean the Western Development Company?
Commissioner ANDERSON. Yes, sir.
THE NORTHERN RAILWAY.
The WITNESS. The Western Development Company built a considerable portion of
the Northern Railway.
Q. Where is the Northern Railway? A. It begins at Oakland Point and goes to
a point near Martinez. Then it begins at Benicia and goes to Suisun, or to
a place just beyond Suisun. Then it begins at Woodland and goes to Teh am a.
THE CALIFORNIA PACIFIC RAILWAY.
Q. What is this line between the fends of the Northern Railway? A. The California
Pacific Railroad.
Q. Between Woodland and Suisun? A. Yes, sir.
Q. What is this little road between Sacramento and the California Pacific?
A. That is a portion of the California Pacific extending to Vallejo. The California
Pacific runs from South Vallejo to Sacramento, and also has a line from Napa
Junction up the Napa Valley to Calistoga, called the Napa branch.
Q. There is a break near Suisun? A. Yes, sir.
THE ROAD BUILT IN SECTIONS.
Q. When was that construction contract made with the Northern Railway? A.
The road was built in pieces, and had separate contracts for each piece.
Q. The first was when? A. The first part of the Northern Railway the Western
Development Company had nothing to do with in the beginning. It began at Woodland
and extended to Williams. This, I think, was in 1875. Then the next work was
done between Oakland and Martinez. That was in 1877; it may have been a little
before that. Then it was built from Benicia to Suisun ; then from Williams
to Willows. That included the new work done by the Western Development Company.
Q. The Western Development Company did not build from Willows to Tehama? A.
It did not build that.
CHIEF STOCKHOLDERS OF NORTHERN RAILWAY.
Q. At the time of this construction who were the chief stockholders in the
Northern Railway? A. There was very little stock issued at that time, and I
do not kn/>w who the stockholders were.
2682 U. S. PACIFIC RAILWAY COMMISSION.
Q. Who was president? A. I do not know. The secretary , was, first, E. H. Miller,
jr., and then J. O. B. Gunn.
Q. Whom do you refer to as the men really interested in the enterprise? A.
Governor Stanford and the other gentlemen.
Q. Stanford, Huntington, Hopkins, and Crocker? A. Yes, sir. My instructions
at that time, in my dealings, were principally taken from General Colton. He
seemed to be more actively engaged in the management of the Western Development
affairs than the others.
CONSTRUCTION CONTRACTS. ,
Q. Between what parties was the construction contract made? The Western Development
Company on your side, and who else? A. The first contract between Woodland
and Williams was under an assignment of a contract originally made between
the Northern Eailway and Charles Crocker. The assignment was made by Charles
Crocker to the Western Development Company. The other contracts were between
the Northern Eailway Company and* the Western Development Company direct.
Q. In "conducting this construction did you have any financial transactions
with the Central Pacific Railroad Company? A. We used the Central Pacific as
a banker during this time.
USED THE CENTRAL PACIFIC AS A BANKER.
By the CHAIRMAN :
Q. How did you keep your accounts with the Central Pacific as a banker? A.
We deposited money with it and took credit therefor, and drew money out as
we needed it.
Q. You would make an interchange of receipts from time to time? A. I deposited
for the Western Development Company cash, or its equivalent, with the Central
Pacific Railroad Company and took its receipts therefor. In drawing money out
drafts were given generally, sometimes vouchers were receipted.
Q. With whom would you deposit your money? A. With the treasurer of the Central
Pacific Railroad Company.
Q. Would the money go into the general fund of the Central Pacific Railroad
Company? A. I cannot say what that company did with it ; but I presume that
it used it the same as any other money.
LEDGER ACCOUNT WILL SHOW TRANSACTION.
By Commissioner ANDERSON :
Q. You have a ledger account showing the whole transaction? A. Yes, sir; I
have a ledger account.
Q. This will show all the money that was deposited and how much money you drew
out? A. Yes, sir. The Central Pacific had a similar account. .
DEPOSITS FURNISHED BY STOCKHOLDERS.
By the CHAIRMAN :
Q. Where did you first get your funds to make deposits in the Western Development
Company? A. From the stockholders of the Western Development Company.
By Commissioner ANDERSON :
Q. Did you deposit with the Central Pacific Railroad Company the funds of the
Western Development Company which you received from
FRANK S. DOUTY. 2683
the stockholders of the latter company? A. I think that they were largely
made up of deposits by Messrs. Stanford, Huntington, Crocker, Colton, and
Hopkins.
FORM OF DEPOSITS.
By the CHAIRMAN :
Q. Deposits made with the Western Development Company? A. Yes, sir; in the
form of cash, coupons, or other evidences of indebtedness on the part of the
Central Pacific Railroad Company cash or its equivalent.
Q. On what account were the deposits made? A. They were made each on his individual
account with the Western Development Company.
Q. Was there any action on the part of the board of directors of the Western
Development Company, or of the stockholders, permitting these gentlemen to
make such deposits? A. I do not recollect any such action.
Q. Did they volunteer these deposits from time to time? A. They deposited money,
or its equivalent, at their pleasure, or as it might be needed. In the regular
course of business, if we had more money than we wanted to use, we would give
ifc to the Central Pacific.
WHERE THE WESTERN DEVELOPMENT GOT ITS MONEY.
The CHAIRMAN. I want to know where the Western Development Company got its
money?
The WITNESS. I have already told you. It came from deposits made from time
to time by these five gentlemen whom I have named.
Q. Were deposits made on call? A. I should think so, yes. If they wanted a
part of it back they could have it.
Q. Were deposits made on call with the Western Development Company?
The WITNESS. Do you mean made by the Western Development Company with the Central
Pacific*?
The CHAIRMAN. No ; by the stockholders of the Western Development Company.
Did they deposit money with that Company?
The WITNESS. Yes; I should say so. They paid the money in, and if they wanted
it again they could have it.
HOW DEPOSITS WERE REGULATED.
Q. Would it be by an order of the board of directors, or by entries in the
minutes of the board of the Western Development Company, or by any action on
the part of the Western Development Company? A. I do not recollect any such
action.
Q. How did you regulate your deposits upon call with the Western Development
Company? A. The matter regulated itself. When we had to have money these gentlemen
knew it very well and would supply us with what we required.
Q. How did you limit the amount of the call? A. We did not limit it. They would
simply put in what they had to spare and would be credited with that amount
on our books.
THOSE INTERESTED FURNISH CASH OR ITS EQUIVALENT.
By Commissioner ANDERSON :
Q. As I understand you, these four gentlemen were all interested in the enterprise,
they advanced money from time to time to the Western p R VOL iv 23
2684 U. S. PACIFIC RAILWAY COMMISSION.
Development Company, and that company used the Central Pacific Eailroad Company
as a banker I A. Yes, sir. There were five interested at that time, however.
Q. You say that a large portion of the funds advanced by them consisted of
coupons and obligations of the Central Pacific held by these five gentlemen
? A. Yes, sir ; more or less of their deposits were of that nature ; but how
much I could not say at this time. However, it was cash or its equivalent.
That is what it amounted to.
RELATIONS BETWEEN NORTHERN RAILWAY AND CENTRAL PACIFIC*
Q. What relations, by lease or otherwise, existed between the Northern Railway
and the Central Pacific? Was it leased to the Central Pacific? I so understand
it. A. Yes, sir; that is the fact.
Q. At what time? A. When it was ready to be operated.
Q. About 1878? A. Yes, sir; in that vicinity.
Q. Do you remember the terms of the lease? A. I do not. I do not know that
I ever saw the lease.
Q. Did it remaiu in operation until the lease of the Central Pacific to the
Southern Pacific Company? A. Yes, sir. I have an impression that it was for
some time after that.
ALLOWED INTEREST ON ACCOUNTS AT VARYING RATES.
By the CHAIRMAN:
Q. Were you allowed interest on the accounts by the Central Pacific Eailroad
Company? A. Yes, sir.
Q. At what rate of interest? A. Varying rates, depending upon the current
rates at that time.
By Commissioner ANDERSON :
Q. What are they here 1? We are not familiar with your rates. A. When I first
came here, iu 1874, 12 per cent, per annum was the current rate. It subsequently
fell to 10 per cent., which was the highest rate paid to the Central Pacific
Railroad by the Western Development Company, and then to 8 per cent.; then
for a short space of time 7 per cent.; then, finally, 6 per cent.
Q. Do you remember the aggregate amount of the loans? A. No, sir.
Q. Did you pay interest to the stockholders of the Western Development Company,
to the gentlemen who made deposits with you? A. Yes, sir.
NEVER PAID A DOLLAR ON ACCOUNT OF STOCK.
By Commissioner LITTLER :
Q. Did they ever pay a dollar on account of their stock? A. No; not if the
money they paid to the Western Development Company is regarded as a loan to
that company.
Q. At the time they were receiving interest on deposits they still owed the
Western Development Company the entire amount of their stock subscriptions,
did they not? A. I think that would be a matter of opinion. They owned the
company.
Q. As I understand you they never paid any money on account of their stock,
did they? A. No, sir ; I never treated their payments as payments on stock.
FRANK S. DOUTY. 2685
OWNED THE COMPANY.
Q. They owed for tbeir stock all the time after they had subscribed for it,
did they not? A. Whether they owed anything for it or not 1 cannot say, as
they already owned the company, and of course, I suppose, owned all the stock.
Q. How did they own it, unless they paid for it? A. They created everything
that the company had, and it would have been a mere matter of form if they
had paid in money on account of the stock.
INTEREST CREDITED ON DEPOSITS.
Q. As a matter of fact, they never paid a cent on account of stock subscriptions,
and yet when they paid in money, this same company credited them with the interest
right along, did it not? A. Yes, sir. The deposits were unequal. They did not
deposit the same sums, or at the same time. They did not make deposits in proportion
to the interest which each owned in the company, and this interest was allowed
to equalize this difference.
By Commissioner ANDERSON :
Q. The deposits were in effect simply personal loans, then? A. I so treated
them.
Q. It would not affect the capital stock in any way? A. No, sir.
Q. Was the stock on the market? A. No, sir.
Q. Have the loans been repaid to the persons who advanced the money *? A. No,
sir ; they are still owing, except in the case of General Col ton. They still
remain a liability on the books of the Western Development Company. The Colton
interest has been extinguished, but the other accounts are still drawing interest.
Q. Those other loans are still drawing interest? A. They are.
NO ACCOUNT NOW BETWEEN THE CENTRAL PACIFIC AND WESTERN
DENELOPMENT.
Q. Is there still a balance due from the Central Pacific Eailroad Company to
the Western Development Company? A. No, sir. There is QO account between the
Central Pacific and the Western Development Company at this time.
Q. There is no interest running against the Central Pacific? A. No, sir.
Q. Do you remember the balance due these four gentlemen remaining out of the
original five? A. I do not know.
Q. Will your books show? A. They will. They are in unequal amounts, but whatever
the balance was that was due to each has been undisturbed since the Western
Development Company ceased active operations.
Q. Is the interest regularly paid? A. The interest is regularly placed to
the credit of each account, at the end of each year.
Q. So that they run as personal loans? A. They do.
LAW OF CALIFORNIA IN RELATION TO STOCK ISSUES.
Q. Do you know whether, under the law of California, it is permitted to issue
stock in such corporations to the subscribers without any payment whatever
being made, and still vest a good title in the stockholder ! A. I think that
it is perfectly legal to do so. I think that it is
2686 U. S. PACIFIC EAILWAY COMMISSION.
a matter which can be decided by the stockholder ; that is, except ill the
case of railroad corporations ; stockholders in railroad companies are unable
to do so. Some amount has to be paid in on subscription.
Q. Do you remember the amount? A. I think it is 10 per cent.
Q. After that, may stock be issued without further payment so as to vest a
good title in the subscriber to the stock? A. After that, stock may be issued
subject to assessments.
NORTHERN RAILWAY STOCK REGARDED AS FULLY PAID.
Q. In regard to the stock issued in the Northern Eailway Company, do you know
whether anything more was paid for that than the 10 per cent, of the subscription?
A. I think not. The Western Development Company took a contract to construct
the road, and a part of that contract between the Western Development Company
and the Northern Eailway Company provided that a certain portion of stock be
paid in that way. It would be regarded as fully paid stock.
Q. To whom was that stock paid? Was it to the Western Development Company?
A. Yes; to the Western Development Company.
ITS STOCK POSSESSED BY WESTERN DEVELOPMENT COMPANY.
Q. Has the Western Development Company possession of that stock, or has it
distributed it in dividends? A. It has possession of that stock.
Q. Do you know how much it amounts to? A. I would not like to state from recollection.
Q. That stock substantially belongs to the stockholders in the Western Development
Company? A. It does.
Q. They get all the benefit, whatever it may be, derived from this stock?
A. The Western Development Company gets it, and through it, the owners of the
Western Development Company get it.
RENT OF NORTHERN RAILWAY CREDITED TO WESTERN DEVELOPMENT COMPANY.
Q. To whom is the rent paid by the Central Pacific Kailroad Company for the
use of the Northern Eailway Company? A. It was paid through the secretary
of the Northern Eailway. I collected the money and placed the proceeds to the
credit of the Northern Eailway Company.
Q. To the credit of the company, or to the credit of the Western Development
Company? A. I gave a receipted voucher to the Central Pacific Eailroad Company
to be placed to the credit of the Western Development Company in the books
of the Central Pacific Eailroad Company.
Q. And the only credit to the Northern Eailway would be entered on your books?
A. The only credit, arising from such a transaction, to the Northern Eailway
would be entered in the books of the Western Development Company.
Q. You would obtain control of the money and deposit it, crediting the Northern
Eailway with the amount? A. It was paid out only on orders of the secretary
of the Northern Eailway.
Q. Have you an account showing to whom that rent was paid? A. We, the Western
Development Company, kept a running account with the Northern Eailway and credited
it with the amounts received, and
FRANK S. DOUTY. 2687
charged the Northern Bail way with all amounts paid on its account. When I
made collections from the Central Pacific it would be simply entered in the
account between the Western Development Company and the Central Pacific Railroad.
It was treated as a commercial account.
BONDED DEBT OF NORTHERN RAILWAY.
Q. Did the Northern Bail way have a bonded debt? A. It had.
Q. Do you remember the amount? A. It had an authorized issue, I think, of
about $6,000,000, and something over $4,000,000 have been issued. I cannot
give the precise figures, however.
Q. Were those bonds issued by the Northern Bailway Company to the Western Development
Company in payment of construction? A. Yes, sir ; that portion which the Western
Development Company now holds.
Q. And what became of those bonds ; did you sell them, or did you hold them
? A. We sold them.
Q. Do you remember the price, or the limits of the price? A. I do not 5 I
think it was ninety or ninety-five. We held them for a great many years.
Q. When were they sold? A. I think in 1882.
Q. Was interest collected from time to time? A. It was.
Q. Did that interest come from the operation of the railroad, or can you tell
us where the interest came from? A. The coupons from the bonds were presented
to the secretary of the Northern Bailway, in return for which he gave a voucher
authorizing the Western Development Company to charge to the Northern Bailway
Company's account in its books the amount of the voucher.
EARNINGS OF NORTHERN RAILWAY RECEIPTED FOR ON VOUCHER.
Q. What accounting was had of the earnings of the Northern Bailway Company
? Did they not naturally go to pay the interest coupons on these bonds? A.
I do not know.
Q. Who received the earnings of the Northern Bailway Company? A. They were
virtually received and receipted for on the voucher which would be prepared.
Q. It was all in the rental? A. Yes, sir; it was all in the rental.
DIVIDEND OF BONDS AND STOCK.
Q. What dividends did the Western Development Company pay? A. It paid one.
Q. At what time? A It was in September, 1877.
Q. That was before the Northern Bailway was completed? A. Yes, sir.
Q. In what form was it paid? A. I would not say that this dividend was declared
before the Northern Bailway was completed or not, but it was before we had
any of the securities of that company.
Q. What was that dividend ; do you remember? A. It was a dividend of bonds
and stock.
Q. W as it. a division of all the bonds and stock which it had received in
this construction? A. It was a dividend of only a certain portion.
Q. Do you remember what it amounted to? If not, I suppose we can ascertain
from your books. A. Yes, sir ; the books will show.
2688 U. S. PACIFIC RAILWAY COMMISSION.
Q. What has been done with the rental and the other things received since that
time by the Western Development Company? A. It simply accumulated, and after
deducting the charges against it the balance was on hand.
Q. Have there been dividends declared upon the Northern Kail way stock? A.
Yes, sir.
Q. They were paid to whom? A. To the stockholders.
WESTERN DEVELOPMENT COMPANY A STOCKHOLDER OF NORTHERN
RAILWAY.
Q. To the stockholders of the Western Development Company? Was the Western
Development Company a stockholder? A. They were paid, while the Western Development
Company was a stockholder, to the Western Development Company.
Q. The stock having been issued "to it as you before explained? A. Yes,
sir ; and it still holds that stock, or the most of it.
Q. Is the Western Development Company still in operation to-day? A. It is still
in existence, but not in operation, except passively.
LIABILITIES OF WESTERN DEVELOPMENT COMPANY EXCEED ASSETS.
Q. Do I understand that from 1877 to the present time there has been no distribution
made, or any dividends declared, or payments of money made, to the stockholders
of the Western Development Company? A. You are correct in that understanding.
The liabilities of the Western Development Company, I think, would exceed the
assets, if there is any difference.
Q. Do I understand you to say that the liabilities of the Western Development
Company are in excess of its assets? A. I think so, as the assets are principally
in the form of securities, upon which it would be difficult to place a value.
PRINCIPAL CREDITORS OF WESTERN DEVELOPMENT COMPANY.
By the CHAIRMAN :
Q. Liabilities to whom? A. Liabilities to whomsoever the Western Development
Company owes money.
Q. To whom was that company indebted? A. To Governor Stanford, Mr. Huutingtou,
Mr. Crocker, and Mrs. Hopkins, representing the estate of Mark Hopkins. They
are the principal creditors of the company.
By Commissioner ANDERSON :
Q. They are substantially all of the creditors of that company? A. All to
any great amount. There are one or two smaller accounts that we owe, probably
amounting to $20,000 or $30,000.
Q. What is the gross amount of the liabilities approximately J? A. I think
about $10,000,000 or $12,000,000.
Q. And how near will the assets come to paying them in full? A. At this time,
I think, it may be about a stand-off.
Q. So that substantially, when you say that there is no surplus, you mean that
all the assets of the company are owned by these four gentlemen? A. Substantially
; yes, sir.
By the CHAIRMAN :
Q. Owing to themselves? A. Yes, sir.
Q. The banker, the liabilities, and the assets consisted of the same individuals.
Is not that true, as a fact? A. Substantially ; yes, sir.
FRANK S. DOUTY. 2689
By Commissioner ANDERSON :
Q. In other words, these four gentlemen have gone into an enterprise ; they
made a dividend in 1877 of a portion of the assets ; the transactions have
continued to this day; they have advanced the money needed to carry on the
enterprise, and have the whole of the proceeds of that enterprise received
from the construction of railroads, repairs of buildings and bridges, the amounts
received from rental, &c., and these amounts will be about sufficient to
pay for these advances made by the four projectors and promoters? A. That
would be a fair statement, depending upon the value at which the securities,
forming a part of the assets, are rated.
BOOKS SHOW EXACT STATUS OF ACCOUNTS.
Q. Your books will show the proportions existing between the exact advances
made by these gentlemen and the ledger balances due them to-day? A. The books
will show everything. There are quite a number of them.
Q. I mean to say that the accretions by way of interest, or any other form
of benefit that may be given to the persons who loaned you the money, would
all appear on the books, so that we can ascertain the proportion between the
original advances and the balances as now appearing due to them. Is that correct
? A. Yes, sir ; you can see the exact status of every one's account in the
books.
Q. And the balance due each individual at this time? A. Practically, at this
time.
SAN PABLO AND TULARE RAILROAD.
Q. Now, in regard to other constructions ; what other roads did the Western
Development Company build? A. The San Pablo and Tulare Eailroad.
Q. Where is that road? A. That begins where the Northern Kailway leaves off,
at a point near Martinez, thence to Tracy, along the south side of Suisun Bay.
Q. Along the south side of Suisun Bay, and thence in a southwesterly direction
to Tracy? A. Yes, sir ; and there joins the Western Pacific.
THE WESTERN PACIFIC RAILROAD.
Q. Please trace the Western Pacific? A. It begins at San Jose" and runs
to Niles, and thence goes through the Livermore Canon, via Tracy and Lathrop,
to Stockton. There is a connecting road between Niles and Oakland.
Q. In that way the road approaches San Francisco? A. Yes, sir.
Q. When was this construction effected? A. The San Pablo and Tulare road was
completed about the same time that the Northern Railway between Oakland and
Martinez was completed. The construction was carried on simultaneously, or
practically so.
WESTERN DEVELOPMENT BUILD SAN PABLO AND TULARE RAILROAD.
Q. Who were the controlling parties who advanced the money to build the San
Pablo and Tulare Eailroad? A. The stockholders of the Western Development Company.
Q*. These same gentlemen whom you have already named? A. Yes, sir.
2690 U. S. PACIFIC RAILWAY COMMISSION.
Q. Between what parties was the contract made? A. Between San Pablo and Tulare
Eailroad Company and the Western Development Company.
Q. Who was the president of the San Pablo and Tulare Eailroad Company 1 A.
I do not recollect who was the president. The secretary was Mr. J. O. B. Gunn.
Q. How many miles of construction were there? A. It was something like 46
miles. .
Q. Have you that contract in your possession I A. I have.
Q. The distance was 46 miles? A. About 46 miles.
Q. By whom were the funds furnished for that building? A. By the stockholders.
Q. By the stockholders of what company? A. The Western Development Company.
We had only one source.
SAME COURSE PURSUED AS IN CASE OF NORTHERN RAILWAY.
Q. In this matter, was the same course pursued as you have described in regard
to the Northern Bail way! A. Yes, sir; the same line of policy and the same
method of doing business was carried out.
Q. Were the sums received by you from the stockholders of the Western Development
Company for the purpose of constructing the San Pablo and Tulare Eailroad also
deposited with the Central Pacific Eailroad Company? A. Mainly.
Q. Had you an account with the Southern Pacific Eailroad Company at that time
? A. We banked with that company also.
Q. In respect of all deposits made by you with the Central Pacific Eailroad
Company, was the same allowance made by them of interest as before described
I A. Yes, sir.
METHOD OF PAYMENT FOR SAN PABLO AND TULARE.
Q. How did your contract with the San Pablo and Tulare Eailroad Company provide
for reimbursement 1 A. In bonds and stocks.
Q. Do you remember the amount of bonds and the amount of stock which were issued
to the Western Development Company? A. The stock was 18,610 shares, and the
bonds 1,023, and there was an item of cash or credit in account of $116.
Q. What became of those bonds; were they sold"? Ar Yes, sir.
Q. About when? A. I have nothing by which I can fix that date.
Q. Were they sold before or after the sale of the bonds of the Northern Eailway
$ A. I think that they were sold afterwards.
Q. What became of the stock? A. The Western Development Company still has
it.
Q. It is one of your assets I A. It is one of the assets of the Western Development
Company.
Q. Was the interest on the bonds paid in the same way as described for the
Northern Eailway Company? A. It was.
Q. By direction to you to charge the amount to that company in your accounts
? A. Yes, sir.
Q. Was that road rented to the Central Pacific also? A. Yes ; indirectly.
RECEIPT OF RENTAL OF SAN PABLO AND TULARE RAILROAD.
Q. Did you receive the rental in the same way as described 'for the Northern
Eailway? A. No; not in precisely the same way. The
FRANK S. DOUTY. 2691
Northern Railway, I think, leased the San Pablo and Tulare Railroad, and the
Central Pacific leased them both. For a time a separate rent voucher by the
San Pablo and Tulare was collected and a credit was made in the books of
the Western Development Company in favor of the San Pablo and Tulare Eailroad
Company at the end of each six months for the preceding six months' rent.
COMPARISON OF NET EARNINGS WITH RENTAL.
Q. Have you any knowledge of how the actual net earnings of either of these
companies, the Northern Railway or the San Pablo and Tulare Railroad Company,
compared with the rental paid by the Central Pacific Railroad Company? A.
No, sir ; I have not.
Q. You do not know which was in excess of the other 1 A. No ; I do not. I presume
that the rental was in excess by reason of the fact that certain dividends
were paid by the Northern Railway Company. I say that I presume that the rental
was in excess of the amount required to pay the interest coupons. 1 cannot
say anything as to what the net earnings of those roads amounted to.
Q. My question was whether the rental was in excess of the actual net earnings
from that .portion of the road, and I understand you to say that you do not
know anything about that 1 A. I do not know anything about that.
Q. You do not remember the amount of these rentals, do you 1 A. They were varying
figures. I do not remember them.
TWO OR THREE DIVIDENDS DECLARED.
Q. What dividends can you recall? How many of them arising from these rentals
? A. Whether they arose from rentals or not I cannot say ; but I think that
there have been two or three dividends declared by those companies; maybe more.
I will not state that precisely.
Q. When dividends were declared how were the dividends paid, and to whom?
A. To the Western Development Company. The Western Development Company would
simply charge the Northern Railway, or the San Pablo and Tulare Railroad Company,
as the case might be, with the amount of the dividend, and credit its interest
account.
VOUCHERS GIVEN COVERING DIVIDENDS DECLARED.
Commissioner ANDERSON. You receiving the rent, and having control of all the
moneys, ought to be able to say whether the rental exceeded the amount required
to pay the fixed charges, and ought to be able therefore to say whether there
was anything to meet the credits.
The WITNESS. I am not familiar with the Northern Railway Company's books. The
Northern Railway would declare a dividend in regular form and give me, through
its secretary, a voucher covering the amount which was so declared, which voucher
I would charge to the Northern Railway Company and credit the Western Development
Company's interest account in the Western Development Company's books.
Q. The account between the Western Development Company and the San Pablo and
Tulare Railroad Company stands in the same position as that with the Northern
Railway, as I understand it T A. The same principle was observed, varying in
amount only.
ROAD FROM GALT TO IONE.
Q. What other construction, if any, did the Western Development Company do
? A. It built the road from Gait to lone.
2692 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. I am referring only to roads in which the Central Pacific
got some interest or had some financial interest.
Q. You built the line from Gait, which is a point on the Western Pacific, to
lone? A. Yes, sir.
Q. How many miles? A. About 27 miles.
Q. And when was that constructed? A. In 1876, I think.
Q. What was the object of that road? A. It was to develop some coal mines
and to do other business 5 we wanted to get some coal from mines in which we
had an interest at lone. Fuel at that time was scarce.
IONE COAL AND IRON COMPANY.
Q. Do you know by whom the coal mines were owned? A. By the five gentlemen,
including General Coltou.
Q. What was the name of the coal mine? A. The lone. The name of the company
owning the coal mine was the lone Coal and Iron Company.
Q. Were the funds for this construction also provided by the stockholders in
the Western Development Company? A. Yes, sir.
Q. And between what parties was the contract made? A. The railroad company
and the Western Development Company.
Q. Was there a written contract? A. I do not recollect whether ! there was
a written contract between this company and the Western Development Company
or not.
PAYMENT FOR CONSTRUCTION MADE IN STOCK AND BONDS.
Q. How was payment made? A. Payment was made in stock and bonds.
Q. You remember the amount of stock and bonds? A. No, sir.
Q. Have you sold the bonds? A. I think that we have a few of them. I think
that they were principally divided in that September, 1877, dividend.
Q. Has interest on the bonds always been paid? A. So far as I know.
Q. You still hold some of them? A. We got some back from the Colton estate:
Interest on these bonds has always been paid.
Q. Was that road leased to the Central Pacific, or to one of the other roads
and then to the Central Pacific? A. Whether it was leased or not I cannot
say. It was operated by the Central Pacific at a certain fixed rental.
Q. Did the Western Development Company receive their rental in the same way
? A. In the same way.
Q. The bonds that you hold are a lien simply on this branch? A. The Amador
Branch bonds are a lien on the property of the Aznador Branch Railway.
Q. And have any dividends been declared on the stock? A. Not to my knowledge.
DISPOSITION OF RENTALS.
Q. The rental, as you received it, was credited to the company which pays it,
and stands among your assets to-day? A. It would stand with the Western Development
Company as a liability. Whatever credit there was arising from these rentals
would be due to the Amador Branch Kail way Company. The Western Development
Company owed the Amador Branch Eailroad Company for whatever the Amador Branch
deposited with it, less what it drew out.
FRANK S. DOUTY. 2693
' Q. Has the Amador Branch a deposit account? A. It had.
Q. Is this road from Gait to lone called the Amador Branch? A.
Yes, sir.
THE AMADOR BRANCH.
By the CHAIRMAN :
. Q. Has the Central Pacific Railroad Company guaranteed the bonds of the Amador
Railroad Company? A. I do not think so. I cannot say, however.
By Commissioner ANDERSON :
Q. When you say it would owe money to the Amador Branch you mean to say that
receiving the rental from the Central Pacific the Western Development Company
would be accountable to tlie Amador Branch Company for the money? A. I do.
Q. And you would apply it under the direction of the Amador Branch to the payment
of interest on the bonds of that company, or the payment of dividends, when
dividends would occur? A. Yes, sir. The balances, however, would not justify
dividends. There was a very close or a very little margin one way or the other.
Q. In all these companies to which you refer, was the same course of proceedings
in relation to construction and management followed as you have already described
? A. The same general proceedings ; yes, sir.
THE BERKELEY BRANCH.
Q. Was there any other construction? A. There was a short piece of road from
a point on the Northern Railway near Shell Mound to Berkeley. It is a little
branch 3 miles long.
Q. Is that what is called the Berkeley Branch? A. Yes, sir.
Q. Was that constructed in the same way? A. In the same way practically.
Q. Is it operated by the Central Pacific Railroad Company? A. It was.
Q. Before the lease to the Southern Pacific Company? A. Yes, sir.
Q. And the rental paid for it? A. Yes, sir.
Q. And entered and credited in the same way? A. Yes, sir.
By the CHAIRMAN :
Q. Did the Central Pacific pay the interest on the bonds? A. The Western Development
Company paid the interest on the bonds. The account has been overdrawn for
some time.
LOS ANGELES AND SAN DIEGO ROAD.
By Commissioner ANDERSON:
Q. Who built the Los Angeles and San Diego road? A. As I understand it, it
was built in part by the Contract and Finance Company, and by the Western Development
Company to Santa Ana. The Western Development Company built about 27 miles
of it. I think that the Contract and Finance Company built to Florence, about
miles. When construction was continued it was continued and built by the Western
Development Company until it reached Santa Ana. Of the Southern Pacific Railroad,
the road from Ooshen to Sumner was built when the Western Development Company
took hold of it, also the portion between San Bernardino and Los Angeles, and
between Los Angeles and Spadra. The Western Development Company built from
Sumner to San Fernando, and from Spadra to the Colorado River.
2694 U. S. PACIFIC RAILWAY COMMISSION.
LEASED TO CENTRAL PACIFIC THROUGH SOUTHERN PACIFIC. '
Q. Was there any portion of this construction to which you refer, this 27 miles,
operated by the Central Pacific Company, except through the lease by the Southern
Pacific to the Central Pacific 1 A. That I do not know. I think it was leased
to the Central Pacific through the Southern Pacific, but I am not prepared
to say.
Q. Did the rental by the Central Pacific to the Southern Pacific pass through
your accounts at all? A. No, sir ; I don't think it ever came through my books.
Q. That would be in the books of the Central Pacific or the Southern Pacific
? A. Yes, sir ; or in the books of the Los Angeles and San Diego Eailroad Company.
RELATIONS OF CENTRAL PACIFIC AND SOUTHERN PACIFIC.
Q. Can you give us any information as to the relations existing between the
Central Pacific and the Southern Pacific, arising out of the rental paid by
the Central Pacific for the Southern Pacific, and in any connected with the
construction of the Southern Pacific road as constructed by the Western Development
Company? A. No. I only know that the Central Pacific leased the Southern Pacific
and. some of its branch lines, but I do not know anything further than that.
Q. You do not know how the rental was determined or what relation it had to
the cost of the road? A. No, sir.
RELATIONS OF WESTERN DEVELOPMENT TO SOUTHERN PACIFIC.
Q. What were your financial matters as between your company and the Southern
Pacific? Were they similar to those which you have described for the other
branches? Did the parties interested in the construction of the Southern Pacific
road advance some money to the Western Development Company? Did the Western
Development Company bank with the Southern Pacific, and receive from the Southern
Pacific the same rates by way of interest on the moneys so deposited? A. Yes,
sir.
Q. But whether that affected the Central Pacific in any way, you do not know
? A. No, sir ; I see no connection.
Commissioner ANDERSON. There might be, but of course you would not know it.
Therefore, I will not ask you any questions about it.
DEPOSITS WITH BOTH CENTRAL AND SOUTHERN PACIFIC.
By the CHAIRMAN :
Q. How many bank accounts did you keep? A. Two 5 we had two places of deposit.
Q. Where were they? A. The Central Pacific and the Southern Pacific.
Q. Was the deposit with the Central Pacific subsequent to the Southern Pacific
? A. No ; they ran together.
Q. Did you make your first deposit with the Central Pacific or with the Southern
Pacific? A. I think they were both opened at the same time. We had business
transactions with both companies.
RELATIONS OF CENTRAL PACIFIC TO WESTERN DEVELOPMENT COMPANY.
By Commissioner LITTLER :
Q. Is it not true that the Western Development Company is an instrument by
which Messrs. Stanford, Huntington, Crocker, and Hopkins
FRANK S. DOUTY. 2695
performed work and furnished materials to tbe CentralPacific Railroad Company,
and that they, as officers of the Central Pacific Railroad Company, furnished
the Western Development Company with funds belonging to the Central Pacific
Company, and charged a profit of 10 per cent, on all work done and materials
furnished, which profit they appropriated to their own use '? A. I do not
call that a true statement. I never should regard it as that way. No funds
belonging to the Central Pacific Railroad Company were ever advanced the
Western Development Company by the gentlemen you have named.
Q. Please explain in what respect their operations differed from what I have
described? A. I do not understand that they used the Western Development Company
as officers of the Central Pacific, but in their individual capacity. Each
of these companies stood on its own bottom. The Western Development Company
derived its capital from its stock owners, Stanford, Huntingtou, Crocker, Hopkins,
and Colton, and from no other source. It never used a dollar of Central Pacific
money, except such as may have been borrowed, and then repaid with interest.
THE 10 PER CENT. ADDED TO EVERY BILL.
Q. Can it be otherwise if they are one and the same thing? A. It is just as
I have stated it. While the Western Development Company was doing work for
the Central Pacific Railroad Company it added 10 per cent, to each and every
bill to cover certain contingent expenses which could not be included in the
bill, such as superintendence, the use of tools, &c. There may have been
some element of profit in the 10 per cent., but to the best of my judgment
and belief it was slight.
Q. Can you explain in what respect their relations to these two companies differed
from the manner in which I have stated it? A. These individuals virtually
owned the Western Development Company.
Q. And they were the chief officers of the Central Pacific? A. They were the
chief officers of the Central Pacific.
Q. And as chief officers of the Central Pacific, they furnished the Western
Development Company with the funds of the Central Pacific to operate with?
A. No ; as chief officers of the Central Pacific they never furnished a cent
of the Central Pacific money.
Q. You stated that they never paid a dollar to the capital stock of this Western
Development Company which they subscribed for. If they never paid a dollar
as capital stock A. (Interrupting.) Unless you should treat the deposit they
made with the Western Development Company as deposit on account of stock.
Commissioner LITTLER. You cannot do that for the reason that they were treated
as personal advances, and they charged and received interest for them.
The WITNESS. That would be a matter for you to construe, not for me.
ONLY INDIVIDUAL FUNDS ADVANCED.
Commissioner ANDERSON. The witness means to state that the money advanced by
Messrs. Stanford, Huntington, Hopkins, and Crocker was their own funds, not
derived from the Central Pacific Railroad Company.
The WITNESS. That is as I understand it.
Commissioner ANDERSON. Of course it is very difficult to state whether that
is so or not.
The WITNESS. Of course it would be impossible for me to say from what source
their money was derived, having no knowledge of their affairs outside of their
connection with the companies I represent, but
2696 U. S. PACIFIC RAILWAY COMMISSION.
if any ever came from tlie Central Pacific, the books of that company will
certainly show.
The CHAIRMAN. To the best of his knowledge and belief, the money advanced by
these gentlemen was from their own individual funds, and not from the funds
of the Central Pacific Railroad Company.
The WITNESS. If any one or all of them had matured coupons from securities
which they owned themselves, and those coupons came to me to collect, I would
not collect for them as officers of the Central Pacific Company, but in their
capacity as individuals, and when I gave the necessary credit, it would be
to their individual deposit accounts with the Western Development Company.
THE 10 PER CENT. NOT CONSIDERED AS PROFT.
Q. Is it not true that the Central Pacific was compelled to pay this company
a profit of 10 per cent, on the work and materials which it furnished the Central
Pacific? A. That 10 per cent. I never considered as profit. It was 10 per
cent, over and above the cost, so near as the cost could be ascertained, of
any work for which we would render a bill, but there are certain elements of
cost entering into work of that character which cannot be distributed to any
particular piece of work, such as the depreciation of tools, machinery, and
superintendence.
WAS INTERVENING CORPORATION NECESSARY?
Q. Is it not true that this Western Development Company used tho tools, the
shop, and the materials of the Central Pacific Railroad Company <j A. It
never had anything from the Central Pacific that it did not pay for, with 10
per cent, added to it.
Q. Do you not think that good railway management would require the officers
of this company to perform this labor and conduct repairs, and do any new construction
on behalf of the company, without any intervening corporation, which would
naturally require a profit for its labor ! A. That is a question which I do
not regard myself as qualified to answer.
Q. You are a railway man, are you not? You are secretary and treasurer of
all the companies in this part of the State, and I ask you for your opinion
as an expert in railroad matters. A. I am not an expert in railroads. Kone
of those companies are r.ailroad companies in active operation.
ADVANTAGES IN ( USING WESTERN DEVELOPMENT COMPANY.
By Commissioner ANDERSON :
Q. Would you not think it more advisable to do these repairs through master
mechanics and shops than through the Western Development Company with 10 percent,
added? A. That is a question which I cannot answer. There was no contract
between the respective companies. I recollect at the time this method was adopted
it was considered as good management, because the Western Development company
had an organization to do this work, which was large and expensive, by use
of which the Central Pacific was saved the investment of a large capital.
By Commissioner LITTLER :
Q. Do you know of any other great railway corporation of America that has its
construction and repairs done through the intervention of another corporation
? A. I do not know anything about the matter.
FRANK S. DOUTY. 26B7
I do not know that to be the case, but that is not saying that it is not the
case, as I do not know anything about any other railroad.
Q. Is it not true, as far as your knowledge extends, that all this kind of
work is carried on by the railway corporation requiring the work to be done,
through its chief officers, its master mechanics and superintendents of construction
and repairs, &c.? Is not that true 1
The WITNESS. It is true that the Western Development Company.
Commissioner LITTLER (interrupting). That is not an answer to the question.
The WITNESS. So far as I know, that may be the case 5 but the reverse may also
be the case for all I know. My experience is confined to this particular railroad.
By Commissioner ANDERSON :
Q. Is there any other construction which was carried on by the Western Development
Company by any railroad which was subsequently leased or operated by the Central
Pacific Railroad Company? A. I think I have enumerated all the roads built
by the Western Development Company.
Q. Have you enumerated all of the Southern Pacific and its branch line which
were constructed by the Western Development Company 1 A. I have.
THE SOUTHERN PACIFIC OF ARIZONA.
Q. -Who built the Southern Pacific of Arizona? A. Pacific Improvement Company.
Q. Did the Western Development Company build any part of it? A. Yes, sir ;
there was a little piece built by the Western Development Company. The termination
of that road is at Yuma. The Western Development Company built a bridge spanning
the Colorado at that point, and it built a little of the road extending from
the end of that bridge to the town of Yuma. All that the Southern Pacific of
California paid for was to the Colorado River.
Q. Is the Southern Pacific of California a separate corporation? A. Yes, sir.
It is a corporation organized under the laws of Arizona.
Q. It dealt with the Pacific Improvement Company I A. Yes, sir ; entirely.
Q, What was the Speyer & Co. contract? A. I do not know anything about
that. I presume you mean the New York bankers.
Commissioner ANDERSON. Yes, sir.
The WITNESS. I do not know anything about that.
By the CHAIRMAN :
Q. Have you named all the contracts and all the construction performed by the
Western Development Company? A. Yes, sir; I think so.
By Commissioner ANDERSON :
Q. You mean all of those different parts of road which were operated by the
Central Pacific afterward? A. I have named everything so far as the Western
Development Company's work is concerned; everything of any consequence.
COLORADO STEAM NAVIGATION COMPANY.
Q. You had a contract with the Colorado Steam Navigation Company, did you not
? A. No ; the stock of the Colorado Steam Navigation Company was bought on
behalf of certain individuals.
2698 U. S. PACIFIC RAILWAY COMMISSION.
Q. These same gentlemen? A. Yes, sir; we simply advanced the money and charged
the individuals with the amount in the end.
Q. Were those steamers subsequently transferred to the Central Pacific? A.
No ; they were operated by the Central Pacific, and if they earned anything
over and above expenses it would be turned over to the Western Development
Company.
Q. Was that line between San Francisco and Sacramento 1 A. No ; you have in
mind now the California Steam Navigation Company. This other corporation is
the Colorado Steam Navigation Company, and has a line of steamers on the Colorado
Eiver between Yuma and points up the river.
Q. How many steamers were there? A. I think there were four.
Q. When did you buy them? A. In 1878, I think.
Q. When did the Central Pacific undertake their operation? A. As soon as we
bought them. It desired to use them to connect with the Southern Pacific road
at that point.
EOUTE OF STEAMERS.
Commissioner ANDERSON. Please indicate on the map the points over which the
steamers passed.
The WITNESS. It is difficult to do that. They start at Yuma and run up' the
Colorado Eiver to various points on the river, depending on the stage of the
water. Sometimes the water is low and the steamer cannot be operated very far
; at other times there is a full supply of water, when the river runs bank
full, and then the steamers go up further.
Q. Do they run below Yuma? A. They do not go below Yuma.
Q. What was the object, then, of navigating the river I A. There were Government
supplies to be transported to the Government forts and reservations on the
river, and mining supplies for the mines which were being developed.
Q. The steamers, then, were used in connection with the operations of the Central
Pacific? A. Yes, sir; they were used to take freight, and also as an inducement
to ship freight over the railroad with which they connected, the line connecting
with different points on the Colorado Eiver.
RELATIONS OF WESTERN DEVELOPMENT COMPANY AND STEAMSHIP
COMPANY.
Q. Did the Central Pacific pay rental to the Western Development Company for
these boats I A. No, sir.
Q. In what form was compensation made? A. They operated the boats and paid
all expense of running them, and if there was anything Itft they would pay
it to the Western Development Company.
Q. Did the Western Development Company receive money from this source? A.
Yes, sir.
Q. How long did this operation continue? A. I think to January 1, 1879.
Q. What became of the boats? A. They have been sold out since to the former
superintendent of the line.
Q. For whose account, the Western Development Company I A. No, sir 5 for account
of the stockholders of the Colorado Steam Navigation Company.
BANK S. DOUTY. 2699
STOCKHOLDERS OF STEAMSHIP COMPANY.
The CHAIRMAN, Who were the stockholders of the Colorado Steam Navigation Company
I
Commissioner ANDERSON. The same five gentlemen.
The CHAIRMAN. Put it on record. We might as well have it there.
The WITNESS. Messrs. Stanford, Huntington, Crocker, Hopkins, and Colton were
the original owners.
STEAMSHIPS FIRST BOUGHT BY WESTERN DEVELOPMENT COMPANY.
By Commissioner ANDERSON :
Q. Did you not first purchase these boats for the Western Development Company,
and did not these gentlemen buy them from that company? A. The Western Development
Company bought the boats and carried the account on its books as a charge against
the Colorado Steam Navigation Company for some time. And in 1879, 1 think,
I made up the account and charged each individual with his proportion.
Q. And when you sold the boats you credited each individual with his proportion
of the proceeds, did you not? A. I have not done so yet, because the account
is overdrawn some $30,000, and whatever proceeds come in I shall apply to that.
Q. The operation and sale then did not result in a profit? A. At times the
line was profitable. And two or three dividends were declared. But after 1878,
business fell off very much and there was no more profit. It did not earn enough
to pay for the operation of the boats; there was a deficiency every month.
When the Central Pacific was operating it, it paid all expenses, and in case
of any surplus would pay it to the Western Development Company, and the Western
Development Company would credit it to the Colorado Steam Navigation Company.
In case of a deficiency, that would be charged against the Colorado Steam Navigation
Company.
Q. In other words, you would get the net proceeds, if any, and stand the loss,
if any? A. Yes, sir.
Q. Do these entries all appear on the books of the Colorado Steam Navigation
Company? A. They do.
FROM WHOM PURCHASED.
By the CHAIRMAN :
Q. From whom were the boats purchased? A. From no particular one. It was simply
a transfer of the stock of the Colorado Steam Navigation Company.
Q. From whom were the boats purchased ; they must have been bought from somebody
? A. The Colorado Steam Navigation Company was an organization before we bought
it. We simply bought the stock of the different stockholders in that organization.
I think that a man by the* name of Birmingham, was the principal stockholder.
He is an old resident here.
Q. Were the four gentlemen that appeared in the several companies interested
in the steamship company with Mr. Birmingham I A. No, sir; we bought the stock
from Mr. Birmingham and his associates.
The CHAIRMAN. I thought they were selling to themselves.
The WITNESS. No, sir.
The CHAIRMAN. That appears so often to be the case that it is difficult to
distinguish.
P R VOL IV 24
2700 U. S. PACIFIC KAILWAY COMMISSION.
THE CALIFORNIA PACIFIC.
Commissioner ANDERSON. Was there any other construction or was there any other
property purchased by the Western Development Company which, after its purchase,
was operated by the Central Pacific Bailroad Company?
The WITNESS. I do not recollect anything else.
Q. Was any -portion of the California Pacific Eailroad? A. There is a little
link that was built for the California Pacific Eailroad Company near Suisun.
Q. Which was built by the Western Development Company? A. Yes, sir ; and which
the California Pacific subsequently paid for.
Q. Did the Western Development Company receive any rentals paid by the Central
Pacific Bailroad Company for the use of the California Pacific Bailroad? A.
No, sir.
Q. When was the road built between Sacramento and Brighton? A. I do not know
; that was before my time.
Q. The Western Development Company did not have anything to do with it? A.
No, sir ; it was not in existence then.
THE LOS ANGELES AND INDEPENDENT ROAD.
Q. Was the Los Angeles and independent Bailroad before your time I A. No, sir
; the Western Development Company bought that in 1877, I think.
Q. Was that road operated by the Central Pacific? A. Yes, sir.
Q. And when was the lease made, shortly after you bought it or before? A.
About the same time.
Q. From whom was it bought? A . From John P. Jones and others, who owned the
stock in it. The corporation was not changed. We simply bought the stock in
that concern and its control passed to the Western Development Company. The
road extends from Los Angeles to Santa Monica, and was built principally by
Senator Jones.
Q. Do you know how the rental was paid or fixed? What relation had it to the
price you paid for the stock? A. I cannot say as to that. I was not a party
to the settlement of the rate.
Q. Did you buy the stock only, or the bonds also? A. There were no bonds.
Q. Did you buy all the stock? A. Yes, sir.
Q. Do you remember the price? A. I do not now. It was something like $300,000.
Q. Do you still own that stock? A. Yes, sir.
Q. Who receives the rental of that road now? A. The road itself, of course,
receives the rental. The Western Development Company opened an account with
the Los Angeles and Independent Bailroad Company and it credits the proceeds
to that account.
Q. And rent was received from the Central Pacific up to 1885, and since then
from the Southern Pacific Company? A. I think so.
HOW RENTED BY THE SOUTHERN PACIFIC.
Q. Or is it still rented to the Central Pacific and through the Central Pacific
rented to the Southern Pacific Company? A. I do not remember when the change
occurred, but I know that at this time we are collecting the rent from the
Southern Pacific Company.
Q. Do you not remember what that rent is? Do you receive it now I A. Sixteen
hundred and eighty-three dollars a month.
FRANK S. DOUTY. 2701
Q. Did the Western Development Company have anything to do with the Stockton
and Oopperopolis Eailroad Company? A. No, sir.
Q. Either by purchase or construction? A. No, sir.
Q. The Western Development Company has had nothing to do with that road? A.
No, sir.
SOUTHERN PACIFIC OF NEW MEXICO AND OTHER ROADS.
Q. Regarding the Southern Pacific of New Mexico, has the Western Development
Company had anything to do with that? A. No, sir.
Q. And the Galveston, Harrisburg and San Antonio Eailway Company? A. The Western
Development Company has had nothing to do with that.
Q. The Sacramento and Placerville Eailway Company ! A. Nothing to do with that.
WORK OF PACIFIC IMPROVEMENT COMPANY.
Q. When was the Pacific Improvement Company formed? A. In November, 1878.
Commissioner ANDERSON. I think that you have stated that the same gentlemen
were the principal stockholders?
The WITNESS. I stated that in the beginning there were only three of them.
Q. And then Mrs. Hopkins came in afterwards? A. Mrs. Hopkins went in afterwards.
General Colton did not.
Q. What construction was undertaken by the Pacific Improvement Company? A.
It built the Southern Pacific of Arizona, the Southern Pacific of New Mexico,
the branch from Mojave to the Needles, and the extension from Soledad to San
Miguel. It is now engaged in building the California and Oregon Eailroad, or
completing it, and the Oregon and California Eailroad to Ashland, Oreg. It
is completing the " C. and O." and building the " O. and C." to
Ashland.
CALIFORNIA AND OREGON AND OREGON AND CALIFORNIA.
By Commissioner LITTLER :
Q. What I want to know is what the initials u C. and O." and " O.
and C." mean I
The WITNESS. California and Oregon and Oregon and California, It has built
the California and Oregon to the State line. At that point it began construction
at the Oregon and California.
By Commissioner ANDERSON :
Q. Your answer was that it was building the one and completing the other? A.
Yes, sir.
Q. Have you enumerated all the construction undertaken by the Pacific Improvement
Company? A. It built the continuation of the ' Northern Eailway from Willows
to Tehama.
THE OAKLAND WHARVES AND FERRY SLIP.
Q. Did it not build the Oakland wharves and also the ferry slip? A. The Western
Development Company built what is known as the Oakland Ferry slip ; that is,
where the freight ferry boats now land.
Q. By contract with whom? A, With the Central Pacific Eailroad Company,
2702 U. S. PACIFIC RAILWAY COMMISSION.
Q. Have you that contract? A. Yes, sir ; I think so.
Q. Do you remember what it amounted to ; how much was it? A. We did not complete
the work as per contract, but completed all that the Central Pacific required,
and made a settlement on that based on the engineer's estimate; it amounted
to about two-thirds or threefourths, I think.
Q. How much did the contract amount to? A. One hundred and eighty-seven San
Francisco, Oakland and Alameda bonds.
Q. This was after the Alameda Kailroad Company was in operation by the Central
Pacific ! A. Yes, sir.
Q. This was after the Northern Railway was completed? A. Yes, sir.
IMPROVEMENTS AT MISSION BAY.
Q. While on that point, did you effect any of the improvements at Mission Bay,
or erect any of the buildings of the Central Pacific Railroad Company? A.
Yes, sir ; there was some work done on what is known as the Illinois street
cut, filling in Mission Bay.
Q. How much of a transaction was it? A. it was an account jointly between
the Southern Pacific and the Central Pacific ; I think that the aggregate may
have amounted to $100,000 ; I am not positive of that, however ; but my impression
is that it was about that amount.
Commissioner ANDERSON. I will ask you generally to examine your books with
reference to any other construction, if there should be any, which the Western
Development Company effected for the Central Pacific. Any other construction
or repairing or building done by the Western Development Company for the account
of the Central Pacific, or for any of the branch roads operated by the Central
Pacific. You know what has been done, and if you find on examination that there
has been anything omitted, we would like to have our attention called to it.
Anything in addition to what you have been over with us today.
CONSTRUCTION OF CALIFORNIA AND OREGON ROAD.
Q. Let us now go back to the Pacific Improvement Company ; when was your contract
made for the construction of the California and Oregon road ; it extended,
I believe, from Delta to the State line I A. It did.
Q. Do you know who had built the 60 miles south of Delta? A. The Central Pacific
Railroad itself, I think.
Q. How far is Tehama from Delta? A. I cannot say from memory.
Commissioner ANDERSON. I understand that the Contract and Finance Company built
to Tehama, but we never have been able to learn who built from Tehama to Delta.
The WITNESS. The Western Development Company did not.
Q. Neither did the Pacific Improvement Company? A. No, sir; the road from Tehama
to Redding has been in operation for many years.
PRICE TO BE RECEIVED WHEN COMPLETED.
Q. What price were you to receive for building from Delta to the State line?
A. It was a lump sum, I think.
Q. Was it not four and one-half millions in bonds and eighty thousand shares
of stock? A. That is it.
Q. Will your book show what the actual cost of that construction was? A. So
far as construction has pro$eeded? they do not show what the cost will be,
FRANK S. DOUTY. 2703
Q. How far has construction proceeded? A. The track is laid across the State
line. There is a good deal of rolling stock yet to be furnished; a good many
buildings to be erected and fences to be built.
Q. Has the entire price been paid? A. No, sir.
Q. Have all the bonds been issued to you the four and a half millions? A.
They have not.
Q. How much has been reserved? A. Three hundred and seventeen.
Q. Has the stock all been delivered? A. Yes, sir.
Q. Does this reserve amount represent approximately the amount which will be
required to complete the work? A. Yes, sir.
Q. It can be done for that? A. It is estimated that it can be done for that.
Q. It can be done for $500,000, certainly? A. I think so.
Q. Are your sure of that 1? A. It ought to be.
Q. Who prepared the estimate? A. I think that Mr. G. L. Lansing looked up
the matter.
Q. What is he? A. Assistant controller of the Southern Pacific Company.
Q. Is he an engineer? A. No, sir ; but he would probably go to the engineers
for information. It came to me from him.
COST OF CONSTRUCTION AND WORK STILL TO BE DONE.
Q. What do your books show to have been the cost of that 104 miles? A. I do
not know. I could easily ascertain for you, however.
Q. Under your contract, what additional work and obligations are you required
to perform? A. To furnish rolling stock and complete fences and buildings,
and complete the road in all respects.
Q. Has all the rolling stock called for by the contract been furnished? A.
No, sir.
Q. How much of it has been furnished? A. That I do not know. I do not know
that any has, but orders are out here and in the East for all the rolling stock
called for in the contract.
Q. How does it happen that you received all the bonds and stock payable, to
you and yet your work is not completed ; and none of the rolling stock has
been delivered? A. The railroad company is enjoying the earnings derived from
the operation of that road, a part of the Central Pacific system. At present
they have passenger cars enough to take care of the traffic and freight cars
sufficient to handle the business together with what will come in a little
later, when the orders are completed.
AGREEMENT TO CONTROL OF OREGON AND CALIFORNIA ROAD.
Q. What other obligations did you undertake, besides the construction you have
enumerated, in relation to this contract? Did you undertake to get control
of the other road? A. Yes, sir j we agreed to get control of the Oregon and
California road.
Q. What has been done in that respect? A. I think that we have got control
of it.
Q. What has been done?
The WITNESS. Do you mean now in regard to the construction? What construction
forces are doing there?
Commissioner ANDERSON. No; I mean what has been done with regard to getting
control of the Oregon and California Eailroad.
The WITNESS. 1 think thft we have got control of it.
2704 U. S. PACIFIC RAILWAY COMMISSION.
Q. By the ownership of stock? A. By the ownership of stock. We have been a
couple of years negotiating for it and acquiring it.
ENOUGH BONDS RETAINED TO INSURE PERFORMANCE OF CONTRACT.
Commissioner ANDERSON. The point of nay inquiry is whether the Central Pacific
should pay the entire consideration which it has agreed to pay in advance of
performance.
The WITNESS. It was part of the contract that it would pay the eighty thousand
shares of stock upon the signing of the contract. And in regard to the bonds,
enough bonds have been retained to insure what is estimated will be required
to complete the contract.
Q. To complete the California and Oregon road? A. Yes, sir.
THE 16 MILES YET TO BE CONSTRUCTED.
Commissioner ANDERSON. But there is no reservation to secure the construction
of the 16 miles of road that remain to be built, as I understand it.
The WITNESS. No ; but there is no question that it will be done.
Q. Was that not a part of the consideration, that that 16-mile gap should be
filled up and built "I A. 1 think that the consideration was that we should
acquire control of the Oregon and California roads.
Q. And to build that 16 miles 1 A. Yes, sir; which we are doing. The important
part was to obtain control.
Q. But you have not built the 16 miles? A. No ; but we are building it.
COST OF REMAINING CONSTRUCTION.
Q. What was the estimated cost of that 16 miles? A. I do not know; I have not
seen the estimate, but I understand that it is very heavy and expensive work.
Q. Will it amount to as much as $50,000 a mile? A. Yes, sir; probably more.
I have never seen, the profiles and have never seen the estimates of the engineers.
Q. Is there any part of that construction in that country that has cost as
much as $100,000 per mile? A. That I am unable to say, but from descriptions
of the country which 1 have seen 1 should say, yes.
Q. Is there a large amount of tunnel work? A. Yes, sir; a good deal of tunnel
work.
DISPOSITION MADE OF BONDS.
Q. What disposition have you made of these bonds? A. We havemost of them on
hand.
Q. What bonds were they; whatissue? A. There were 2,120 of them which were
an issue of the California and Oregon Eailroad Company. I do not know what
its proper corporate name is. They have always been called California and Oregon
bonds. Then enough more of the Central Pacific fifty-year 6 per cent, bonds
to make up the total amount under the contract.
Q. Of October, 1886? A. The difference is made up by bonds of that issue.
Q. Have you turned over three millions of these bonds to the Central Pacific
? A. Yes, sir ; we took up a note with them.
Q. A note for funds which you had borrowed from the Central Pacific sinking
fund? A. Yes, sir.
FRANK S. DOUTY. 2705
Q. What bonds did you deliver in payment of that note? A. Central Pacific
fifty-year 6 per cents.
Q. Any of the others ; any of the California and Oregon? A. No, sir.
Q. Where are they? A. Those are all in New York, if I recollect rightly. I
sent them on there to get signatures.
Q. But they are all owned by the Pacific Improvement Company? A. Yes, sir.
Commissioner ANDERSON. We would like the statement showing the actual cost
of the Pacific Improvement Company of the construction from Delta to the State
line. Can you prepare it from your books?
The WITNESS. Yes, sir.
HOW PACIFIC IMPROVEMENT COMPANY OPERATED.
Q. How was this construction carried on? Was it from the Pacific Company direct,
or bycontracts made by the Pacific Improvement Company with particular contractors
? A. Do you mean how we did the work?
Commissioner ANDERSON. Did the Pacific Improvement Company actually do the
construction?
The WITNESS. Yes, sir. It has an organization in the field under the charge
of J. H. Strowbridge, the president of the company and superintendent of construction.
The masonry work, however, was sublet.
Q. So that your statement of costs would include the amount of work done by
you and the amount of masonry work, including your pay-rolls and other expenses
for the employment of your engineers and assistants and workmen? A. It will
include everything in connection with expenses up to this time.
Q. And material? A. Material and labor.
Q. What is the rail which you have laid? A'. Principally a 60-pound steel.
Q. In regard to the construction of the north end of the Northern Kailway.
When was that built? A. In 1882, 1 think.
Q. By a contract between the Pacific Improvement Company and the Northern Kailway
? A. Yes, sir.
Q. How many miles of construction? A. About 37.
METHOD OF CONSTRUCTING CALIFORNIA AND OREGON.
Q. In regard to the California and Oregon road, how much of that road was in
your possession during construction? Only the part north of Delta? A. I have
no recollection, but we began at Bedding and did some little work, but no contract
was ever made for that piece. The Central Pacific paid us for what we had expended
in that direction. It repaid us and carried on the work itself.
Q. Until you began at Delta? A. The Central Pacific began again at Delta and
carried on considerable work. What they had expended, however, north of Delta
the Pacific Improvement Company repakl with interest.
Q. By crediting them in account I A. Yes, sir j by crediting them in account.
CENTRAL PACIFIC RECEIVED ALL RETURNS DURING CONSTRUCTION.
Q. What I want to know is^whether the Central Pacific Railroad Company received
all the returns from that road while you were construct
2706 U. S. PACIFIC KAIL WAY COMMISSION.
ing it. I mean all the returns from the operation of the road? . A. Yes, sir.
Q. The contractors did not operate any portion of the road themselves? A.
There is always an interval between what is called the operating terminus (that
is, the point to which the road that has been turned over to the operating
department is operated) and the end of the track. I think quite likely in fact
I know it to be the case that we have collected fares of people who desired
to go farther than the operating terminus, but it is not intended to make a
business of it. It was intended almost exclusively for the transportation of
our own men and material. Of course there would be occasionally people traveling
over there who wanted to take advantage of our line, and the conductors of
the construction trains would collect fares. This did not amount to much, however.
It might amount to $25 a month or something like that, but after the road passed
into the hands of the operating department our jurisdiction ceased.
THE NOETHERN RAILWAY.
Q. In regard to the Northern Bail way ; that contract was made, you say, in
1882? A. That is my recollection.
Q. How many miles of construction were there? A. About 37 miles of that road.
Q. Do you remember whether the rental paid by the Central Pacific for its operation
was increased by reason of such construction? I presume it was increased.
A. It must have been. I do not recollect, however, anything about that. There
must have been some change.
Q. You continued to receive the rental after the change 1? A. Yes, sir. We
continued to receive it, and are receiving more now than when the first arrangement
was made. There have been several changes in the rate of rental.
Commissioner ANDERSON. Whenever you built additional miles of road, I presume
that the annual rental paid for it by the line operating that railroad would
be increased so as to cover the extension?
The WITNESS. That would be naturally the case.
ROAD FROM WILLOWS TO TEHAMA.
Q. How long did this construction take from Willows to Tehama? A. About six
or seven months.
Q. When was it completed? A. I think some time in September, 1882.
Q. Does that road from Davis to Tehama intefere v, ith the operation of the
California and Oregon road? It seems to substantially parallel it. A. I never
heard that there was ever any material interference. As I understand it, there
is room enough for two roads.
Q. Are you familiar with this country through which the California and Oregon
road passes? A. I am not ; only by hearsay.
Q. You do not know the nature of the traffic that it gets or the amount of
it? A. No, sir ; anything of that kind is not in my line.
Q. Will your books show the cost of the road from Willows to Tehama? A. Yes,
sir.
Q. How was your company paid in stock and bonds also? A. In bonds and stock.
Q, Do you remember* the amount? A. I do not.
^. Do you remember whether an addition to the rental was made, or a sum sufficient
to pay interest on the bonds and dividends on the
FRANK S. DOUTY. 2707
stock? A. I do not know what object they had in view in making it. I had nothing
to do with making the contract; but the interest on the bonds was paid so
long as we held them, and there have been dividends on the stock.
Q. That is, since this construction from Willows to Tehama? A. Yes, sir.
Q. So that it would include the stock issued on that portion of the road? A.
Yes, sir.
THE RAILROADS BANKERS FOR PACIFIC IMPROVEMENT COMPANY.
Q. Has the course of procedure under the Pacific Improvement Company been the
same as -with the Western Development Company ; that is to say, have the chief
stockholders put you in funds, and 'have you used the Central Pacific and Southern
Pacific as your bankers? A. Yes, sir.
Q. What interest allowance have you received on the money so deposited; what
rates? A. The ruling rates. I think the Pacific Improvement Company received
6 per cent.
RATE OF INTEREST ON DEPOSITS.
By the CHAIRMAN :
Q. Who fixed the rate of interest? A. I do not know who did.
Q. Was there any negotiation as to the rate of interest? A. No; there was no
negotiation.
Q. Who notified you, as secretary, that the rate was 6 per cent.? A. 1 charged
that rate.
Q. Why? A. Because in my judgment we were entitled to it.
Q. Why did you fix 6 per cent. ; why did you not fix 10 per cent.? A. That
was the rate for which we could obtain money elsewhere.
Q. Was there any order by the board of directors or by any officer directing
you to carry the rate of the Western Development Company into the Pacific Improvement
Company? A. No, sir.
By Commissioner ANDERSON :
Q. What other construction has the Pacific Improvement Company conducted? A.
I think that covers substantially all of it. Of course we are engaged in construction
all the time. The Pacific Improvement Company is an active company and constantly
has projects under way.
CONSTRUCTION OF SOUTHERN PACIFIC OF ARIZONA.
Q. I have not asked you as to the details of construction of the Southern Pacific
of Arizona arid the Southern Pacific of New Mexico. When were those roads built
? A. We began in November, 1878, building the Southern Pacific of Arizona,
and construction proceeded continuously until the Eio Grande Eiver was reached.
It was in 1880 or 1881, I do not remember which.
Q. How many miles of construction did that embrace? A. About 550 miles.
Q. Have you that contract? A. It is in the office of the company.
PRINCIPAL STOCKHOLDERS.
Q. Who are the principal stockholders of the Southern Pacific of Arizona? A.
The original subscribers were David D. Colton, Charles
2708 U. S. PACIFIC RAILWAY COMMISSION.
F. Crocker, and some local people of Arizona. I have forgotten their names.
Q. Did Messrs. Stanford and Huntington subsequently become interested in the
other projects'? A. They became interested there through their interests in
the Pacific Improvement Company, Their names do not appear upon the books of
the Southern Pacific of Arizona, or did not appear at that time on the books
of that company.
Q. Was the same course pursued in regard to this road j that is to say, the
stockholders of the Pacific Improvement Company advanced you the money as you
required it from time to time, and you kept that money on deposit with the
Central Pacific or Southern Pacific, as the case might be, at interest, just
as with the others'? A. Yes, sir.
CAPITAL STOCK OF THE COMPANY.
Q. Do you recollect what is the capital stock of the Southern Pacific of Arizona
? A. Twenty millions.
Q. Do you know whether any money was paid for that stock, except the 10 per
cent, required by law? A. I do not.
Q. Is 10 per cent, required in Arizona? A. I do not think so.
Q. Do you know whether any money was paid? A. I do not think so.
Q. What is the bonded debt of that road? A. Ten millions.
Q. What did your contract call for? A. It called for stock and bonds.
Q. Do you remember the rate per mile? A. The rate, I think, was $25,000 in
bonds.
Q. And how much of the stock I A. And all the stock, except these fifty shares.
Q. Have you ever been over that road? A. No, sir.
Q. Do you know the nature of the country through which it passes? A. No ;
only by hearsay.
Q. Do you know whether it is mountainous or level? A. I do not ; but I suppose,
from what I learned, that there are mountains and plains mixed in.
RENTAL PAID BY CENTRAL TO SOUTHERN PACIFIC OF ARIZONIA.
Q. Was that road also leased to the Central Pacific? A. Yes, sir.
Q. And how is the rental fixed 1 A. It is fixed on the basis of what the interest
would be on the outstanding bonds.
Q. Was that all that the Central Pacific paid? A. They paid $10 more. We began
on just what the interest was, but that was intended to be temporary, and was
to last until we could get some rolling stock. It was afterwards increased
$10 per mile per month, or to $13*5.
Q. Do you mean that the interest charged was $ 125 per mile per month in the
start, and that this was afterwards increased? A. Yes. sir 5 at the stare
it was $125, and then there was an additional amount of bonds issued, owing
to certain extra work which was done there, which increased the amount of interest
accruing monthly to something like $133 per mile.
Q. Do you remember what year this was made? A. Some time in 1880, I think.
Q. And is that rental entered in your books in the same way as the rental from
other sources? A. No; I collect that direct.
ACTUAL NET EARNINGS OF SOUTHERN PACIFIC OF ARIZONIA.
Q. Do you know anything about the actual net earnings of the road, whether
they were more or less than the rental? A. They were considerably more.
FfcANK S. DOUTY. 2709
Q. So that tlie operation of that road was an advantage to the Central Pacific
1 A. It was very profitable to the Central Pacific.
Q. It operated it at a considerable profit? A. It was to the Central Pacific,
but not to the Southern Pacific of Arizona.
Q. They have not paid anything for their stock, but they have paid interest
on their bonds ; is that not so? A. The Southern Pacific of Arizona did not
make enough to pay interest on certain extensions which they were compelled
to make. There was a deficiency, and this addition to the rental of the road
was made towards meeting it.
Q. Will your books show the actual cost of the construction of that road 1
A. They will.
Q. Do you know whether it equaled the par value of the bonds, $10,000,000 1
A. It came very near it.
THE SOUTHERN PACIFIC OP NEW MEXICO.
Q. In regard to the Southern Pacific of New Mexico ; when did you construct
that? A. In 1881, I think ; it may have run into 1882.
Q. Was that constructed in the same way, by moneys advanced by your stockholders,
and the same banking method practiced between your company and the Central
Pacific and Southern Pacific? A. The methods were substantially the same.
Q. How many miles of road did you build? A. 167.22 miles. In regard to the
distance ; you asked me the distance a few moments ago, as I understood it,
of the two roads the Southern Pacific of Arizona and the Southern Pacific of
New Mexico. I gave you the two together. I think now that you are asking me
separately. The Southern Pacific of Arizona is 384.17 miles, and the Southern
Pacific of New Mexico is 167.22, as I recollect the figures.
RENTED TO CENTRAL PACIFIC.
Q. Was that road leased to the Central Pacific? A. It was.
Q. How was its rental fixed? A. It was based upon what money was required
to pay interest on the bonds.
Q. What was its bonded debt? A. Five millions.
Q. What was its stock issued? A. The authorized stock was ten millions. The
stock issued was less than that.
STOCK HELD BY PACIFIC IMPROVEMENT.
Q. Does the Pacific Improvement Company hold the stock of these two last-mentioned
roads? A. It holds none of the stock of the Southern Pacific of Arizona. It
holds about two thousand shares of the stock of the Southern Pacific of Mexico.
Q. How has it disposed of the stock which it got and which it no longer holds
? Was it by dividends? A. It was afterwards sold to the Southern Pacific Company
in exchange for stock of that company.
Q. Then the Pacific Improvement Company holds the stock of the Southern Pacific
Company? A. Yes, sir.
By Commissioner LITTLER :
Q. Was it exchanged dollar for dollar? A. No, sir.
Q. What were the terms of the exchange? A. It was about either a half of Southern
Pacific Company or six- tenths for one, or something like that.
2710 U. S. PACIFIC RAILWAY COMMISSION.
By Commissioner ANDERSON :
Q. Is it the Southern Pacific Railroad Company, or the Southern Pa cific Kentucky
Company? A, The Southern Pacific Company of Kentucky.
By the CHAIRMAN:
Q. Does not the controlling influence that prevails in the companies that you
have named prevail in all the companies that you are secretary of? A. Yes,
sir.
The CHAIRMAN. Therefore, I want to examine you on the books of those companies.
Q. Has your banking been done for these companies through the Southern Pacific
or Central Pacific? A. No, sir ; these companies have bank accounts with the
Pacific Improvement Company.
REQUEST FOR BOOKS OF THE WESTERN DEVELOPMENT AND PACIFIC IMPROVEMENT COMPANIES.
By Commissioner ANDERSON:
Q. Can you let us have the minute books of the Western Development Company
and the Pacific Improvement Company? A. I do not know that I have any right
to take them out of the office. I will let you have them if you will procure
for me the necessary authority.
Q. You are president of one of these companies, are you not? A. Yes, sir 5
of the Western Development Company.
Q. If we issue a subpoena duces tecum, will that quiet your conscience? A.
It might have that effect.
Commissioner ANDERSON. I move that Mr. Douty be requested to produce the minute
books of the Pacific Improvement Company and the Western Development Company,
and I will ask him now to state whether he will produce those books without
subpoena, or would prefer to have a subpoena served?
The WITNESS. I would prefer to have a subpoena served, as I doubt my authority
to take those books away from the office, of my own motion.
F. S. DOUTY.
Commissioner ANDERSON. I move that a subpoena duces tecum issue. It was so
ordered, and a subpoena was issued.
The Commission adjourned to Monday, August 1, 1887, at 10 a. m.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Monday, August I, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
FRANK S. DOUTY, being further examined, testified as follows : By Commissioner
ANDERSON :
Question. Mr. Douty, do you prefer to wait for your counsel, Mr. Bergin, before
you testify in reference to the whole matter, or in reference to the books
chiefly? Answer. In reference to the books chiefly.
Q. How soon will Mr. Bergin be here? A. He expected to be here at 10 o'clock
when I saw him.
(Pending the arrival of Mr. Bergin the witness was excused from testifying
further.)
F. S. DOUTY.
DANIEL Z. YOST. 2711
PALACE HOTEL, SAN FRANCISCO, CAL.,
Monday, August 1, 1887.
DANIEL Z. YOST, being duly sworn and examined, testified as follows:
By the CHAIRMAN:
Question. What is your full name? Answer. Daniel Z. Yost. Q. What is your
business? A. United States appraiser. Q. How long have you been connected
with the Department? A. I was appointed two years ago in June.
Q. What were you engaged in prior to that time? A. I was a member of the San
Francisco Stock Exchange, sir, for several years.
FORMERLY PRIVATE SECRETARY OF MR. STANFORD.
Q. Were you employed by Mr. Stanford, the president of the Central Pacific,
at any time * A. Yes, sir ; I was his private secretary.
Q. What was the date of your employment? A. It was 1869 or 1870, I think;
I forget which it was; I think it was from about 1870 up to 1878.
Q. How long did you act in the capacity of private secretary? A. Well, during
my term there ; I think from about 1870 to 1876, or December, 1877. I have
forgotten the exact time.
Q. What were your duties as private secretary ! A. Mostly to attend to his
correspondence and answer letters.
Q. Did you have charge of all his business correspondence?-A. Yes, sir ; except
perhaps those letters that he wrote himself. His general business correspondent
attended to most of it.
BOOKS KEPT BY WITNESS.
Q. Did you keep any of his account books? A. Yes, sir.
Q. What books did you keep? A. I kept a ledger and a book containing daily
transactions.
Q. Have you named all his books? A. I don't know but what there are some other
books ; I do not recall now. I do not remember what they were. These were not
a full set of books ; I did not keep a full set of books.
Q. Had you an assistant 1 A. No, sir.
Q. What character of entries did you make in the books?
The WITNESS. What character of entries?
The CHAIRMAN. Yes ; what accounts. In this book of daily transactions, for
instance?
The WITNESS. Well, that book, if I remember rightly, was more of a memorandum
book, as regards whatever transactions he had in his private business.
Q. How long had you possession of the books? A. Until the day I severed my
connection with him by resignation.
Q. To whom did you deliver the books at that time? A. To himself.
THE CONTRACT AND FINANCE COMPANY.
Q, Had you any business transactions, on account of Mr. Stanford, with the
Contract and Finance Company? A. I don't remember any transaction of that
nature ; I do not remember any transaction that I had of the Governor's with
the Contract and Finance Company.
2712 U. S, PACIFIC RAILWAY COMMISSION.
Q. Had you any communication with any of the officers of the company?
The WITNESS. Of the Contract and Finance Company?
The CHAIRMAN. Yes, sir.
The WITNESS. I do not remember any communications that I had with them. No
official communications. Of course I knew them very well, but transactions
of that character generally the Governor attended to himself.
Q. Did you keep an account of Governor Stanford's with the Contract and Finance
Company? Yes, sir.
Q. Did you keep an account with the Central Pacific Eailroad Company of Governor
Stanford's? A. No, sir; his individual accounts were kept on the books of
those companies ; we thought that one account was enough ; that is, he did
not keep his individual account separate from the account, as it was connected
with the company's.
Q. Have you any knowledge of the business conducted by the Contract and Finance
Company? A. No, sir ; I have not, except in a general way.
BOOKS OF THAT COMPANY.
Q. Did you ever see the books of the company?
The WITNESS. To make an inspection of them?
The CHAIRMAN. No ; to see them.
The WITNESS. Yes, sir.
Q. When did you see them? A. I saw them last in Sacramento, in 1873, in charge
of Mr. Mark Hopkins. I think that was in the year that the company moved from
Sacramento to San Francisco ; I do not remember positively about that year.
It may have been 1874, but I think it was 1873 that I saw the books with Mr.
Mark Hopkins.
THEIR LOSS.
Q. Did you hear subsequently that the books were lost? A. I heard so ; yes,
sir.
Q. How long after? A. That I could not tell you; I have forgotten now ; it
was some time ago, however, that I heard that they were lost.
Q. Was it while you were in the employ of Mr. Stanford? A. Yes, sir.
Q. Was there any discussion at the time as to the disappearance of the books,
with Mr. Stanford or in the office? A. No, sir,- my hearing of it was incidental,
but it was not in any connection or conversation with them concerning the books.
It was with some of the employes, or something of that kind.
Q. What employes? A. That I could not say now. I do not remember the particulars
of how I heard about their being lost. I think it was in connection with some
suit, perhaps, that I heard that the books could not be found.
WHEN LAST SEEN BY WITNESS.
Q. What was the condition of the books when you last saw them in 1873? A.
They were being packed in large cases.
Q. Who was packing them I A. Mr. Mark Hopkins.
Q. Was he connected with the Contract and Finance Company at that time? A.
I don't know whether he was or not. He was treasurer of the Central Pacific
Eailroad Company at that time, and I think Mr. John Miller was secretary of
the Contract and Finance Company at that time, but the two offices adjoined
each other, the Contract and Finance Company and Mr. Hopkins' office.
DANIEL Z. YOST. 2713
Q. Were they being packed for the purpose of shipment? A. That I don't know,
but I suppose so from the fact that we were moving.
Q. Where were you moving? A. The offices of the railroad company were being
moved from Sacramento here to San Francisco.
Q. Who also was present at the time? A. That I don't remember. There may have
been some one present, but I have forgotten if there was.
Q. What was the occasion of your presence there? A. Well, I was with the Governor
there, as his secretary, at that time, and I was out, and all the time attending
to business matters.
Q. Had you any conversation with the Governor concerning the books? A. No,
sir.
Q. Did you ever make any inspection for the Governor of the Contract and Finance
Company's books? A. No, sir; not that I remember of.
Q. Did you ever take off an account from the Contract and Finance Company's
books for the governor? A. No, sir; I think not.
Q. Did you ever receive at any time an account taken off from the Contract
and Finance Company's books for Governor Stanford? A. No, sir; I don't remember
that I ever received an account for Governor Stanford.
Q. Do you know of a settlement with the Contract and Finance Company on account
of Governor Stanford's interest at any time? A. No, sir; I do not remember
of any.
Q. Did you visit the office of the Contract and Finance Company at any time
while in the employ of Governor Stanford for the purpose of securing a settlement
with the company on account of Governor Stanford? A. No, sir, I do not think
I did.
Q. Did you collect from the Contract and Finance Company a dividend for Governor
Stanford at any time? A. I may have, but if so, I have forgotten it now.
EELAT1ON OF WITNESS TO GOVERNOR STANFORD.
Q. What did you do for Governor Stanford with the Contract and Finance Compan^
? A. Well, I cannot say that my capacity with him was of a fiduciary character.
I do not know whether it is proper for me to answer as regards those companies.
I was with him more in an individual capacity, and not as connected with the
road. If I have to tell of his private matters I do not know if that is what
you are more desirous of finding out, or as regards railroad matters.
The CHAIRMAN. That is just what I am asking you about, railroad matters.
The WITNESS. And I do not know to what extent you recognize, of course, the
fiduciary capacity that I held.
By Commissioner ANDERSON:
Q. You are not an attorney, are you? A. No, sir; I am asking you more for information
as regards that.
By the CHAIRMAN :
Q. Do I understand you that in all your answers you have qualified them with
reference to your private capacity? A. No, sir; I simply ask that now, as
regards that question wlridi you asked me, whether I had received dividends
from the Contract and Finance Company for Governor Stanford. I may have done
so, but if so I have forgotten it. I do noc remember of receiving any. It is
some time ago now, since 1878, to remember any particular thing.
2714 U. S. PACIFIC RAILWAY COMMISSION.
Q. Did you make an entry of the dividends in the books which you kept for Governor
Stanford 1 A. I would have, if I had received them ; yes, sir; in Governor
Stanford's private ledger.
NO TEANSACTIONS WITH CONTKACT AND FINANCE COMPANY.
Q. What business transactions had you with the Contract and Finance Company
on account of Governor Stanford? A. Whatever I did have I have forgotten any
individual transactions that I may have had for the Governor and Finance Company
on account of Governor Stanford. Well, whatever I did have, I have forgotten
any individual transactions that I have had.
Q. What business transactions have you had while you were employed in the capacity
of private secretary with the Contract and Finance Company? A. Well, as I
said, if I had any transactions, they have passed from my mind now; what they
were and what nature they were.
Q. Did you have many 1 A. Well, that I could not state; 1 think very few. As
I tell you, I think that his private account was kept on the books of these
companies and not in my account.
Q. Did you at any time receive from the Contract and Finance Company Central
Pacific Railroad stock on account of Governor Stanford? A. No, sir ; I don't
remember that I did.
WITNESS'S LACK OF MEMORY.
Q. Did you receive from the Contract and Finance Company any checks or bonds
or sums of money on account of Governor Stanford ! A. I don't remember that
I did; no, sir.
Q. Did you receive at any time any stock or bonds or checks or sums of money
from the Contract and Finance Company on account of anybody?
The WITNESS. I beg your pardon, I did not understand you.
The CHAIRMAN. Did you receive at any time any stocks or bonds, or checks or
sums of money, from the Contract and Finance Company during your capacity as
private secretary for Governor Stanford.
The WITNESS. Well, I may have, but I have forgotten what they were.
Q. Have you any papers, correspondence, or accounts, showing any transactions
with the Contract and Finance Company? A. No, sir ; I don't remember that
I had.
Q. Had you at any time any papers or accounts showing business transactions
with the Contract and Finance Company? A. As I say, it is so long ago now that
I have forgotten. I may have had, but I do not remember now.
BUSINESS TRANSACTIONS WITH OTHER COMPANIES.
Q. What other companies had you business transactions with on account of Governor
Stanford? A. Well, I had business transactions on his account with all of
them, more or less, in different ways.
Q. What do you mean by all of them? A. All the companies, naturally, that
he was connected with.
Q. Will you name them? A. I cannot remember them all.
Q. Name as many as you can remember. A. I had business transactions for him
with the Southern Pacific and the Central Pacific and the California and Oregon
and the Sacramento and Placerville.
DANIEL Z. YOST. 2715
Q. And the Western Development Company? A. I do not remember any transactions
that I had with them.
Q. The Southern Development Company? A. No, sir; I don't remember any transactions
that I had with them.
Q. Have you named all the companies that you can recall? -A. The California
and Pacific.
Q. The Carbon Hill Coal Company*? A. No, sir ; I do not recall any transactions
that I had with them. His books, however, will show any transactions that I
may have had with them. It is so long ago that I have forgotten.
THE "S. H. H. & C." SET OF BOOKS.
By Commissioner ANDERSON :
Q. Mr. Yost, do you know of a set of books kept under the title of " S.
H. H. & C."? A. S. H. H. & C.? Yes, sir.
Q. Do you know that Mr. Douty kept them 7 A. I was not aware that Mr. Douty
kept them.
Q. Who did keep them? A. I was under the impression that Mr. William E. Brown
kept them.
Commissioner ANDERSON. Perhaps I am mistaken.
The WITNESS. I speak of the time when I was there ; I don't know.
Q. Did you occasionally see Mr. Brown in regard to matters contained in those
books'? A. No, sir; I don't remember that I did.
WHAT THEY CONTAINED.
Q. Do you know what those books did contain? A. Those gentlemen's private accounts,
I think.
Q. With the Contract and Finance Company, Western Development Company, the
Pacific Improvement Company, and Central Pacific Company? A. I think so ;
yes, sir. That is my remembrance, that they were their private accounts.
Q. Well, do you know as to the dividends had from time to time and the interests
of these four gentlemen (of whom Governor Stanford was one), how they were
adjusted and collected? A. No, sir; I don't think I do.
Q. Do you know who received the stocks and bonds and money belonging to each
of them? A. No, sir ; that did not come to my attention.
Q. Did you receive Governor Stanford's share from any source? A. No, sir. I
think the Governor attended to that business himself. I may have some time
received moneys for him in that connection, a dividend or something of the
kind ; if so, I have forgotten, but his books will show what the amount was,
or if I did receive it. I don't remember now.
Q. Did he himself make any entries in his private books, or did you make them
all? A. I think in the private account he never made any entries.
Q. Did you make the entries? A. Yes, sir.
THE THIRTEEN MILLIONS OF CENTRAL PACIFIC STOCK.
Q. Now, without asking you the exact figure, do you not remember entering,
on the occasion of the division of the assets of the Contract and Finance Company,
the receipt of a quantity of Central Pacific stock amounting to something like
thirteen millions of stock? A. No, sir ; I don't remember, p R YOL IY 25
2716 U. 8. PACIFIC BAILWAY COMMISSION.
Q. No such entry occurs in the books which you kept, do you mean? A. I don't
think it does, sir.
Q. Did you keep a journal? A. No, sir ; I don't think I did.
Q. Or a day-book? A. Well, that is what I referred to when I said a book of
daily accounts or daily occurrences, or whatever it was. That is what I meant
as a day-book.
Q. If you had received for him in his private capacity thirteen millions of
Central Pacific stock on a given day, would that have been an entry that you
would have made in this book such as you kept? A. I don't think so ; no, sir.
Q. Why not? A. Well, because, as I told the chairman, his private account of
those amounts and nature generally were kept in the Central Pacific books,
as I understand it, and it was credited up to him on those books, and on other
books, but not on mine.
Q. Did you keep a book of accounts receivable of the various stocks and bonds
held by the governor? A. No, sir; I do not think I did.
Q. Do you know that such a. book was kept? A. Well, outside of the regular
company's books, I do not think there was ; no, sir.
HOW BONDS WOULD STAND ON THE COMPANY'S BOOKS.
Q. How would the company's own books inform Governor Stanford of the amount
of dividends or the amount of coupons that he was entitled to on bonds? A.
That I do not know, because I did not see those books. I have not seen those
books. I should judge, however, they were credited to his individual account.
Q: How would you know what bonds he held? A. Because those would be credited
to him when they would be paid to him, I should judge.
Commissioner ANDERSON. The coupon bonds stand in the name of no person.
The WITNESS. They would be probably placed to his credit, I suppose, on the
books of the company.
Q. Do you assert that, or do you just think that there was not kept amongst
the books to which you had access a book of bills receivable which would inform
the governor when his coupons became due and when his dividends became due
? A. Yes, sir. I did not keep those accounts. I may have made some particular
entry of some kind or amount, but I do not recall it now. But that account,
as a rule, was not kept in my books; that is, in his private books.
Q. Did you have any relations with the Pacific Improvement Company on account
of Governor Stanford? A. No, sir ; not that I remember of.
BOOKS OF CONTRACT AND FINANCE COMPANY.
Q. Did you ever see these boxes in which the books of the Contract and Finance
Company were placed, in the city of San Francisco? A. I may have ; if so,
1 have forgotten it,
Q. If you saw them, where is your best impression that you saw them? A. In
the office at Fourth and Townsend streets, at the railroad offices.
Q. How long after you had seen them at Sacramento? A. That I could not say
5 I am not sure that I ever saw them there.
PLACED IN BOXES BY MARK HOPKINS.
Q. How many boxes were there here? A. That I could not tell you . Q. How long
did you remain in that room when Mr. Hopkins was packing these boxes up? A.
I do not remember.
DANIEL Z. YOST. 2717
Q. Do you mean to say that he himself was engaged in placing the books in the
box or boxes? A. Yes, sir.
Q. Did you see him nail up the boxes? A. In the process of nailing them up,
or rather screwing them with screws
Q. He was doing that work himself I A. Yes, sir.
Q. Was John Miller there I A. If there was some one else there at the time,
I have forgotten who it was. There may have been some one in the room at the
time.'
Q. Have you seen John Miller since that time? A. Yes, sir.
Q. Has he ever alluded to this occurrence in your presence since? A. No, sir.
Q. He said nothing about these books at all? A. No, sir.
Q. Have you said anything to him about them? A. Not that I remember of.
Q. Well, think it out and see if you do not recall that you heard that they
had disappeared, and of saying something to John Miller about them? A. No,
sir ; I don't remember.
Q. Did you speak to any of the officers of the company or any person about
it after it was ascertained that the books had disappeared? A. I may have
; if so, I have forgotten it now, though. It has passed from my mind and I
did not fix it at all in my memory.
Q. In connection with what suit was it that you think that you learned of this
disappearance? A. That I do not remember. I think it was a suit that called
the subject up. What suit it was I do not remember.
Q. Do you remember any lawyer in connection with it? A. No, sir ; I do not.
Q. Do you remember Mr. Cohen in connection with any such transaction? *A.
No, sir ; I don't remember him in connection with it.
Q. Did you ever have an interview with him about these books? A. Not that
I remember of.
WITNESS'S CONNECTION WITH CHARLES CROCKER.
Q. Did you ever have any connection with Charles Crocker, as employ 6, clerk,
or book-keeper? A. Yes, sir; I was with him for a few months, I think.
Q. When was that? A. I cannot give the exact date.
Q. Was it about the time they were building this road? A. It was when I first
went there, about 1869 or 1870. I was with him there, I think, two or three
months, and then I went with Governor Stanford. No, sir; I had no connection
with him while he was building the road. It may have been at that time
Commissioner ANDERSON. This contract was between 1864 and the end of 1867,
or the beginning of 1868.
The WITNESS. No, I was not connected in any way with him during that time;
no, sir.
Q. Did you ever see the books of Crocker & Company relating to the construction
of this road? A. I may have in a casual way, but never to inspect them.
Q. Do you know who kept them? A. I think Mr. W. E. Brown did; I am not sure,
however, but I think Mr. W. E. Brown was the secretary of the company at that
time.
RESIGNS HIS POSITION WITH GOVERNOR STANFORD.
By the CHAIRMAN :
Q. When did you resign from the employment of Governor Stanford? A. I think
it was December, 1877, 1 am not sure, or the begin
2718 U. S. PACIFIC RAILWAY COMMISSION.
ing of 1878 ; I could tell by referring to certain memoranda, and give the
exact date.
Q. What memoranda have you? A. There is the time that I went to the stock
exchange.
Q. What memoranda did you keep while in the employ of Governor Stanford tor
yourself "S A. I may have kept some memoranda as regards his transactions.
Q. As regards your own transactions, I mean. You spoke of some memoranda. What
memoranda do you refer to 9 A. Oh, when I became a member of the board, I can
give the exact date when J resigned my position with the governor, because
I resigned from there and went into business the next day.
Q. In answer to Mr. Anderson's question, you spoke in reference to Mr. Crocker's
contract, and said that you could tell by some memoranda that you had ; what
memoranda did you refer to? A. Mr. Crocker's contract. I did not understand
that question, I think. Would you be kind enough to repeat that?
REQUEST FOR MEMORANDA MADE WHILE PRIVATE SECRETARY.
Q. Did you keep any memorandum during your connection with Mr. Stanford to
enable you to recall the business transactions that you had in his employ 9
A. Oh, yes, sir 5 I did.
Q. What kind of memoranda did you keep? A. Just ordinary memoranda, like one
would job down to jog the memory, or something of that kind. Nothing especial
at all.
Q. Have you got them in your possession now? A. !N"o, sir.
Q. What did you do with them? A. I guess they are in the archives with my
old books and memoranda, but I don't remember where they are.
Q. Have you got them in yo'ur possession? A. They are stored at my brother's
store, on Bush street.
Q. Can you secure possession of the memoranda? A. I do not know that I can.
I will see, however.
Q. Will you produce them to the Commission 9 A. I will endeavor to find them
; yes, sir.
DISBURSEMENTS OF MONEY WHILE SECRETARY.
Q. Did you pay any money out under the direction of Mr. Stanford while in his
employ? A. Yes, sir.
Q. For what general purpose did you make payments under his direction? A.
I don't know. Any transactions that he might want me to attend to.
Q. Did you ever attend to any legislation on account of Governor Stanford?
A. In a general way ; yes, sir.
Q. What did you do in a general way, concerning legislation? A. I would get
up statistics and facts, anything that he requested me to do in that direction.
Q. What did you do with the statistics and facts? A. Turn them over, to him,
generally.
NO EFFORTS TO INFLUENCE LEGISLATION.
Q. Did you make any payments under the direction of Governor Stanford for the
direct purpose of influencing legislation, or any that you know of that were
indirectly used for the purpose of influencing legis
DANIEL Z. YOST. 2719
lation? A. Not that. I remember of now. I think not. No, sir ; not that I
remember of.
Q. Would you not remember such a circumstance? A. Well, no ; I don't think
it is likely that I would recall any such circumstance.
Q. Was that such an ordinary occurrence that you would not regard it as of
any importance? A. Perhaps, extraordinary.
Q. What is the difficulty about recalling such a transaction? A. Well, as
I say, I do not recall any that I had.
VISITS TO THE LEGISLATURE.
Q. Did you visit the legislature under the direction of Governor Stanford?
A. Yes, sir.
Q. How often did you visit the legislature?
The WITNESS. How often during the entire term, do you mean!
The CHAIRMAN. During your connection here in his employ from 1863 to 1868?
WITNESS. At almost every legislature there was, I was there, I think.
Q. Did you go alone 9 A. No, sir.
Q. Who accompanied you? A. I generally went with the governor. I acted in
the same capacity there as I acted here ; to attend to his correspondence and
hunt up any figures for him, or any facts that he wanted to find.
LEGISLATIVE INVESTIGATING COMMITTEES.
Q. He was not governor during that time, was he? A. No, sir; at the expiration
of his term of office as governor he became president of the Central Pacific
Railroad.
Q. What was he doing there then? A. Very frequently he was sent for to reply
to questions of committees appointed to regulate freights and fares, and he
was generally there to explain to them about fares and freights and the condition
of the road, or answer any questions that were asked of him.
Q. What did you do? A. I generally kept all his letters and replied to all
inquiries, and if there was anything in the way of getting up statements for
him or anything of that kind, I generally would ob^s" his instructions
about it.
OTHER OFFICERS OF CENTRAL PACIFIC.
Q. Who else was there besides Governor Stanford? what other officers of the
Central Pacific Company? A. Generally, Mr. Stubbs; he was there frequently
; I remember he was our general freight agent ; at that time he was there to
explain in reference to freight matters. Mr. Goodman was also there.
Q. Who is Mr. Goodman? A. He was general passenger agent.
Q. Who else was there to represent the company t-r-A. Well, Col. W. B. Hyde,
I think, used to be there also. He was a civil engineer, and a very good statistician.
Q. Who else was there? A. Generally, there were a good many.
The CHAIRMAN. I want to know who representing the Central Pacific Company.
The WITNESS. Oh, representing the Central Pacific! Well, I don't remember.
Generally, that was all, I think, that was there to represent the company.
2720 U. S. PACIFIC RAILWAY COMMISSION.
WHO ATTENDED TO LEGISLATIVE MATTERS.
Q. Who looked after the legislation for the company? A. I think Governor Stanford
did, generally ; in answer to these bills that were generally called before
the legislature.
Q. Who was regularly employed and on duty there to watch the legislation and
see that it was not hostile or injurious in any way to the railroad interests
? A. That I do not remember.
Q. Did the company have anyone there? A. Well, I think, generally, most of
the time the governor himself was there. He had his home there in Sacramento.
Q. Did he do all the explaining to members of the legislature during the whole
session? A. Generally, when he was called on, he was always willing to explain.
Q. Who were stationed there during the session of the legislature and known
to be Central Pacific Kailroad men, looking after the interests of the Central
Pacific Railroad Company in the legislature? A. I do not remember any particular
one now. As I say, 1 think the governor was, generally, the one that was looked
to.
LEGAL REPRESENTATIVES.
Q. Who explained the law matters? A. Perhaps some of the law firm would be
called on.
Q. Who were they? A. Judge Silas W. Sanderson was one, and Harvey S. Brown
and Kobert S. lloberson were others.
Q. Were there any others? A. That is all that 1 recall just now who took part
at that time; there may have been some outside lawyers, but those were lawyers
directly connected with the office there of the company.
Q. Were there any individuals known and designated as railroad lobbvists in
attendance upon the legislature? A. Not that I remember of.
Q. Did you ever hear of the term before? A. Yes, sir.
Q. Did you hear of it while in the employ of Governor Stanford? A. Yes, sir.
Q. Whom did you hear were there? A. Oh, I do not remember.
Q. Did you ever hear any names mentioned in connection with that company?
A. ,Not that I remember any particular name ; no, sir.
NO MONEY FOR INFLUENCING LEGISLATION.
Q. Do you know of any payment of money for the purpose of influencing any legislation
or elections? A. No, sir ; I do not remember of any.
Q. Would there be any difficulty in remembering such a circumstance as that
? A. I think it would impress itself.
INTEREST IN ELECTIONS.
Q. Do you know of the participation of any of the officers, or employe's, or
agents, or directors of the Central Pacific Company in general or primary elections?
A. I do not remember of any now; they have taken a general interest.
Q. What do you mean by general interest? A. Governor Stanford has always been
a very prominent Eepublican, and has always taken a general interest in his
party matters.
DANIEL Z. YOST. 2721
Q. Who else was connected with the road? A. Come to think of it, I think they
were all Eepublicans.
Q. Did they all take a hand at the general and primary elections? A. Well,
hardly, I think ; that is, not that exact expression. They generally took an
interest in the success of their party. Oh, there was one Democrat, by the
way General Col ton, I remember.
Q. Did they take an interest in the general elections or local elections as
railroad men? A. No, sir; I do not think they did as railroad men.
TO WHOM PASSES WERE ISSUED.
Q. Did you issue any passes while in the employ of Governor Stanford? A. Yes,
sir.
Q. Had you authority from him to issue passes? A. I think on some few occasions
only. Generally he signed all the passes that I made out.
Q. To whom did you issue them generally? A. I do not remember. Generally to
a good many of the employe's in the law department, and their families and
friends.
Q. Did you issue passes to the members of legislature 1? A. Yes. sir.
Q. And to members of Congress? A. Yes, sir.
Q. And judges of courts? A. Yes, sir.
Q. Did you issue passes to the friends of members of the legislature on the
application of the member? A. That I cannot remember; but, I think, possibly
we did.
Q. What other inducement, or what other preference or privilege, rather, was
given by way of bonus that you recall by the railroad company? A. I do not
remember, now, of any.
Q. Do you recall any advantages that were offered to members of the legislature
by way of bonus, other than a pass? A. No, sir ; I do not remember.
PERSONAL ACQUAINTANCE WITH MEMBERS.
By Commissioner ANDERSON :
Q. Were you generally personally familiar with members of the legislature?
A. Yes, sir; I have resided here so long that I generally know them.
Q. You know a large number of them personally? A. Yes, sir.
Q. Where did the legislature meet, in Sacramento? A. Yes, sir.
Q. Did you remain there generally throughout most of the sessions? A. Well,
I think so ; yes, sir.
Q. How long were the sessions? A. I think about three months, perhaps, or a
little longer.
DISCUSSION OF BILLS WITH MEMBERS.
Q. Where did you stay while there? A. Most of the time, I think, at the governor's
house. Sometimes at the hotel.
Q. At the governor's house? A. Yes, sir; he had a home there in Sacramento.
During the daytime I was there, most of the time.
Q. And when at the hotel? A. When at the hotel? I had rooms at the hotel.
Q. When at the hotel you had a parlor besides a bedroom? A. Yes, sir.
Q. Was it a common occurrence for members of the legislature to be in your
parlor? A. Not a common occurrence ; no, sir; I don't think it was.
2722 U. 8. PACIFIC RAILWAY COMMISSION.
Q. It did happen occasionally, though? A. Yes, sir.
Q. When there, would the subject of railroad legislation be discussed between
you and the members? A. Without remembering exactly now, I think very probably
it was ; yes, sir. We would discuss the bills, whatever was before the legislature.
Q. How did you come to have charge of discussing these matters, was it at Governor
Stanford's request? A. No ; I do not think he ever made a particular request.
Q. What kind of discussion would you use with these gentlemen ; what would
you say to them? A. I do not remember now ; it is so long ago. And it depended
on the bills entirely.
ORJECT OF DISCUSSION.
Q. What was your object ; to try to get them to vote reasonably and in the
interest of the company? A. Yes. sir. And try and take our view of the bills,
and to see the injustice that it would work to the company by high charges.
Q. Did you ever suggest to any of those members of the legislature that it
would be of advantage to them to so vote? A. No, sir ; I do not remember that
I ever made that suggestion.
Q. Cannot you remember a little more exactly what the nature of your persuasive
power was? A. Well, I do not know about the persuasive powers, except the
explaining to them.
PINING MEMBERS AT PERSONAL EXPENSE.
Q. Did you dine them at the hotel? A. I think yes, sir I have dined them there
and elsewhere. They were acquaintances of mine and friends of mine, and I have
known some of them for many years.
Q. At whose expense did you dine them? A. At my own expense.
Q. Was the account so expended ever charged up to the company? A. I do not
think it was.
Q. Was this a frequent occurrence; did you give them many dinners? A. Oh,
no, sir.
Q. Were they generally given to single members of the legislature, or were
they dinner parties? A. Oh, that I don't remember; it is too long ago now.
MEMBERS WERE NOT STOCKHOLDERS.
Q. Did you know whether any of these members were holders of stock of the Central
Pacific at the time that you talked to them? A. No, sir ; I don't know that
they were. I don't remember now that any of them were holders of stock.
Q. Do you know whether any of them became holders of stock afterwards? A. No,
sir; I do not remember that they did.
Q. Can you name some of these gentlemen who dined with you and were familiar
with you during those sessions? A. It is so longago now that it really has
passed out of my mind as to any particular persons.
APPEARANCES AT WASHINGTON.
Q. Did you ever attend any sessions of Congress in Washington with Governor
Stanford? A. No, sir; not in the capacity of secretary; I was there a year
ago.
Q. When? A. A year ago.
DANIEL Z. YOST. 2723
Commissioner ANDERSON. 1 refer to those periods we have been speaking of.
The WITNESS. No, sir ; I did not.
Q. You did not attend at all until a year ago at Washington? A. Well, that
was a mere accident of my being in Washington. When Congress was in session
a year ago last April I was there, and the governor was there as Senator.
Q. And before that time you never attended the sessions of Congress? A. No.
sir.
ATTENDANCE AT OTHER STATE LEGISLATURES.
By the CHAIRMAN :
Q. What other State legislatures did you attend with Governor Stanford? A.
I think California was all.
Q. Do you recall going to any other legislature?-^A. No, sir; I do not think
that I attended any other legislature except that of California.
Q. Were any of the members of the present legislature, or were any members
of the last legislature, members of the legislature when you were in attendance?
A. Well, really, I do not recall the members ot the last legislature ; I would
if I saw a list of them. I could then tell you, and answer that question more
correctly; but I was here at the time, and busy, and I paid no attention to
the last legislature.
ATTENDANCE OF STEVEN T. GAGE.
Q. Have you named all of the officers, employes, or agents of the Central Pacific
Railroad Company that were in attendance at any time upon the legislature for
the purpose of watching legislation? A. Well, now, it just comes to me about
another gentleman, Steven T. Gage? who was there.
Q. Who is Steven T. Gage? A. He occupies some official capacity, I think,
with the company. I think he is a director.
Q. What was he doing there? A. He was very well posted on our freight and
fares matters, and very familiar with the subject.
HIS FRIENDLY ACQUAINTANCE WITH MEMBERS.
Q. How were members of the legislature approached? A. I think he knew quite
a number of them as friends and as acquaintances. He has an acquaintance with
them.
Q. Did he talk with them individually, or as members of committees? A. Well,
I suppose both.
Q. To whom were reports made of the effect of such explanations during the
session of the legislature? A. I guess Governor Stanford kept pretty well
posted as to the individual views of members.
Q. Did the officers and agents report to Governor Stanford from time to time?
A. Incidentally, if there was anything to talk over,
Q. Did the officers which you have named gather information as to how the members
were going to vote on the different bills pending? A. I don't remember that
they did. They may have done so where they expressed their opinion to them.
Q. Did they report to Governor Stanford? A. I think they did. Yes, sir ; they
would post him as to their opinions.
Q. That is all, Mr. Yost, unless you can produce the memoranda. Is theie anything
else that you desire to say to the Commission? A. No ; I don't know that there
is.
2724 U. S. PACIFIC RAILWAY COMMISSION.
Q. Have you any information that you can give the Commission other than what
you have said? A. No, I don't know of anything at this time. I may have in
a few days if I can think of anything.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Monday, August 1, 1887. FRANK S. DOUTY, being further examined, testified as
follows :
By Commissioner ANDERSON :
Question. Have you with you the books of minutes which were called for at the
last session I Answer. I have not.
REFUSAL TO PRODUCE BOOKS.
Q. Why have you not produced the same? A. Under the advice ot counsel.
Q. Do we understand that you decline to produce them? A. Yes, sir.
Q. Either here or at your office? A. Either here or at my office.
Q. Have you at your office the books of account of the Pacific Improvement
Company and the Western Development Company? A. Yes, sir.
Q. Are those books open to our inspection? A. Subject to the advice of counsel.
I have not been instructed in that particular.
Commissioner ANDERSON. Perhaps you had better inform yourself in regard to
that matter before we proceed further.
(The witness retired for a few moments, and, after consultation with his counsel,
returned to the witness chair.)
Q. What is your answer, Mr. Douty? A. They are not. I cannot produce them.
THE BOOKS ARE SUBJECT TO INSPECTION.
Q. The question is whether they are open to our inspection at 4he office of
the respective companies? A. Yes, sir ; that is my understanding.
Q. They are open to our inspection? A. So far as the accounts relate to the
Central Pacific.
Q. Well, to avoid any possible mistake, do you make a distinction between the
minutes of these corporations and their books of account? A. No, sir ; I make
no distinction.
Q. The minutes are also open to our inspection? A. Well, I say that any books
relating to the Central Pacific directly I understand to be subject to your
inspection.
Q. Including the books of minutes? A. Yes, sir ; if there is anything in there
relating to the Central Pacific, that I understand would be open to your inspection.
I will say for your information this : There is nothing between the Central
Pacific and the Western Development Company that the Central Pacific books
do not fu-lly contain, as 1 understand it.
REFUSAL TO PRODUCE BOOKS OF WESTERN DEVELOPMENT COMPANY.
Q. In order to present the question clearly to you, and referring first to
the Western Development Company, we desire to see the accounts which will inform
us of the exact cost of construction of all roads or
PRANK S.. BOUTY. 2725
parts of roads which were either built for account of the Central Pacific,
or subsequently leased to the Central Pacific, by the Western Development
Company, and which accounts will show the cost of such construction to the
Western Development Company. Now, my question is whether that account is
open to our inspection. A. Well, sir, I have a variety of accounts. I shall
make the same answer in regard to that. Under the advice of counsel I decline
to disclose the accounts.
ALSO THOSE OF PACIFIC IMPROVEMENT COMPANY.
Q. I now ask you the same question in regard to the accounts of the Pacific
Improvement Company as to disclosing the cost of construction to the Pacific
Improvement Company of the California and Oregon Kailroad from Delta to the
northern boundary of the State, and also all other accounts which disclose
the actual cost of construction of all railroads or parts of railroads constructed
by the Pacific Improvement Company for the account of the Central Pacific Company,
or which were subsequently leased to the Central Pacific Railroad, which accounts
will disclose the actual cost of the construction of such railroads or parts
of railroads to the Pacific Improvement Company. I ask you whether those accounts
are open to our inspection and examination? A. Under advice of counsel I am
compelled to say they are not.
AND OF SOUTHERN DEVELOPMENT COMPANY.
Q. Now, I ask you the same question in regard to the Southern Development Company
as to all books and accounts which show the cost of construction of any road
or part of road, either for the account of the Central Pacific or subsequently
leased to the Central Pacific. What is your answer in regard to those accounts
? A. The same answer.
OR THOSE OF OTHER COMPANIES.
Q. I ask you the same question in regard to the accounts showing the cost of
the Los Angeles and Independence Eailroad Company? A. The sajne answer.
Q. The same question with regard to the accounts of the Carbon Hill Coal Company
? A. The same answer..
Q. The same question with regard to the Eocky Mountain Coal and Iron Company
of Wyoming? A. The same answer.
Q. The same question with regard to the Colorado Steam Navigation Company?
A. Same answer.
Q. The same question with regard to the Southern Pacific of Arizona? A. The
same answer.
Q. The same with regard to the Southern Pacific of New Mexico? A. Same answer.
COST OF CONSTRUCTION BY PACIFIC IMPROVEMENT COMPANY.
Q. Have you an account amongst the books and accounts of the Pacific Improvement
Company which would show the exact cost of the construction done by that company
under its contract with the Central Pacific road from Delta to the northern
line of the State? A. I have an account of that construction, which will show
the cost up to the date when the last entries have been made.
Q. That is, the cost to the Pacific Improvement Company? A. That is, the cost
to the Pacific Improvement Company.
2726 U. S. PACIFIC EAILWAY COMMISSION.
Q. Are you able to state from memory how much that amount is? A. I am not.
Q. Well, will the accounts of the Western Development Company show the cost
to the Western Development Company of the various roads or parts of roads constructed
by that company which have been referred to in the call hereinbefore specified.
A. Yes, sir ; the books of the company will show everything that it has ever
done.
COST OF CONSTRUCTION TO OTHER COMPANIES.
Q. And will the books of the other companies hereinbefore specified also show
the actual cost of construction to the respective construction companies of
the various lines specified in the call? A. Yes, sir.
Q. Will these books also show, in each case where the line has been leased
to the Central Pacific, the amount of rental charged to the Central Pacific
Company, as explained in your evidence Saturday? A. I don't know that it will
in all cases.
Q. Will it in some of the cases where such rentals were credited by you? A.
Wherever those companies you have named had anything to do with the rentals,
the books will show the rentals.
Q. Will the books which you have referred to show the amounts charged to the
Central Pacific Company or received by you from th Central Pacific Company
for the interest on the amounts which the respective companies had on deposit
with the Central Pacific Company? A. I cannot answer that; that is, if I understand
the question aright. Will you read it again?
INTEREST PAID ON DEPOSITS WITH CENTRAL PACIFIC.
Q. You stated on Saturday, as to a number of these companies, that they kept
their funds with the Central Pacific, and that company allowed them interest
at 10, 12, 8, and G per cent., and the question is, whether the amounts of
interest so allowed will appear in those books. A. Well, the Western Development
Company books will show all the transactions it ever had with the Central Pacific
Eailroad Company, and also the interest which was allowed by that company,
but if I stated on Saturday that the interest paid by the Central Pacific was
12 per cent., that is an error. I was asked, as I understood it, the ruling
rates of interest at the time, and I think the highest rate of interest we
ever received was 10 per cent., and it got down to 6.
BOOKS OF "S. H. H. & C."
Q. The answer was 12, 10, 8, and now 6. It is not material. Have you the books
which you referred to on Saturday as the S. H. H. and C. books? A. I have
not.
Q. In whose custody are those books? A. Well, I cannot state that positively.
Q. Is it Mr. W. E. Brown? A. Mr. William E. Brown is supposed to have them.
He keeps the books.
Q. Will the books above referred to, relating to the Pacific Improvement Company,
the Western Development Company, and the other construction companies, show
the profit, if any, which was made under the construction contract by the stockholders
of those respective companies? A. I think it would be a difficult thing to
figure out profits on any contract.
Q. That is hardly an answer. Will those accounts show whether any profits were
made or any losses sustained? A. You are asking me
FRANK S. DOUTY. 2727
whether a profit or loss was made or sustained, and I will answer it in this
way: The pay that the company received was in stocks and in bonds. Now, it
depends entirely at what you value the stock and the bonds, as to whether
the Pacific Improvement Company made or did not make a profit.
Q. I will now put the question to you in this form : Will those accounts show
just what was expended for the account of the stockholders of the various companies,
and, on the other side, what form of consideration was received for their benefit
from the Central Pacific Company? A. The Central Pacific or any other company.
SUFFICIENCY OF NOTICE TO PRODUCE BOOKS.
Q. Are you willing to place on record an admission that the notice to produce
the books, papers, contracts, agreements, documents, and accounts which have
been called for is sufficient, as matter of form, to give you notice of the
demand of this Commission and of the nature of the books and papers called
for?
Mr. BERGIN. There is no objection to the mere form.
A. That is my answer.
By the CHAIRMAN :
Q. Do I understand you that you decline to produce any books, papers, contracts,
or agreements, of any kind whatever, of the several companies you have named
1 A. Yes, sir.
T. I. BERGIN.
Q. Who is your counsel? A. Mr. Bergin.
Q. What is his full name? A. T. I. Bergin.
Q. Is he the attorney for the Central Pacific Company? A. Well, I cannot say
as to that. He is probably one of the retained attorneys of the Southern Pacific
Company.
Q. Does he appear here as the attorney for the Central Pacific Company? A.
I can only state that he does appear here as my attorney in this case.
F. S. DOUTY.
DECLINES TO STATE IN WHAT CAPACITY HE APPEARS.
The CHAIRMAN (to Mr. Bergin). Do you appear before the Commission, as the attorney
of the Central Pacific Eailroad Company?
Mr. BERGIN. I do not exactly know that it is very material to know whether
I do or not.
The CHAIRMAN. I desire to know whether you appear before the Commission, and
have appeared from time to time, as the attorney of the Central Pacific Kailroad
Company.
Mr. BERGIN. Well, I do not see that it is very material whether I do or not.
The CHAIRMAN. Do I understand you to decline to answer?
Mr. BERGIN. Yes ; I decline to answer in that way.
The CHAIRMAN. Well, gentlemen, I do not see, unless we hold a secret session
and make our application to the court, that we can proceed further at this
time. We will excuse all other gentlemen.
The Commission here went into secret session.
2728 U. S. PACIFIC RAILWAY COMMISSION.
PALACE HOTEL, SAN FRANCISCO,
Monday j August 1, 1887.
Afternoon session.
Mr. Alfred A. Cohen, at 2 p. m.? appeared on behalf of the Central Pacific
Railroad Company in relation to the refusal of the witness Frank S. Douty to
produce the books of the Western Development Company, the books of the Pacific
Improvement Company, and the books of sundry other corporations of which that
witness is an officer, which have been called for by this Commission? and
said :
PROPOSAL TO PRODUCE BOOKS AND PAPERS RELEVANT TO INVESTIGATION.
I wish to say that this witness and these corporations are willing to produce
all books and papers which will in any way instruct this Cornmission, or explain
the testimony of any of the witnesses before it, or which will in any way enable
this Commission to pursue its inquiry within the scope of the act of Congress
under which it derives its appointment ; and I ask that the witness be recalled
for examination, and that he be questioned on the particular subject-matter
concerning which the Commission desires to derive information from the books
or papers under his control.
It is the intention of all the companies allied, or in any way connected, with
the Central Pacific Railroad Company, and the officers of all those companies,
to afford this Commission every aid in their power to enable it properly to
perform its duties.
ACCOUNTS DESIRED BY THE COMMISSION SPECIFIED.
Commissioner ANDERSON. The exact accounts which we desire to see are the accounts
kept by the Western Development Company, showing the cost of construction to
the Western Development Company of any roads, or parts of roads, either constructed
for the account of the Central Pacific Railroad Company, or which were leased
to the Central Pacific Railroad Company, in order to ascertain whether the
stockholders of the Western Development Company have received from the Central
Pacific Railroad Company portions of its assets, or portions of its earnings,
which have been realized by them as a proQt on said contracts, the proof being
that they were the controlling influence both in the Central Pacific and the
Western Development Companies.
We therefore ask you whether your proposition includes the production of the
accounts of the Western Development Company showing the cast of construction
of the railroads and parts of railroads above specified.
I make the same explanation in regard to the Pacific Improvement Company, without
repeating it at length, and also in regard to the sundry other corporations
of which Mr. Douty is an officer.
COUNSEL OF CENTRAL PACIFIC.
Mr. COHEN. I think that my offer is broad enough to include every subject-matter
and thing which this Commission, by the terms of the act of Congress, is authorized
to inquire into. Therefore I have suggested that specific questions be put
to see whether we have any record
LELAND STANFORD. 2729
or written evidence that bears upon the specific matter to be inquired into.
OBJECT SOUGHT BY COMMISSION IN EXAMINATION OF BOOKS.
Commissioner LITTLER. This Commission desires not only the examination of the
books for the purposes stated, but for the purpose of ascertaining whether
the chief officers of the Central Pacific Railway Company have not used these
several corporations as mere instruments to benefit themselves personally,
and whether their conduct is not really an abuse of these trusts as such officers.
Commissioner ANDERSON. I want to say that the specific questions that you allude
to were put to the witness Douty, and he made answer thereto that the accounts
in his possession would show the cost of v construction of these various roads
to the Western Development Company and to the Pacific Improvement Company,
and I call your attention to the fact that the mere statement of a willingness
to show us anything which we are entitled to see under the act of Congress
will not lead to a solution of the difficulty, on account of a difference between
ourselves and the representatives of the company as to the permitted scope
of inquiry ; and that unless a representative of the company is prepared to
say that the accounts which we have specified can be inspected by us it would
be a mere loss of time to recall the witness, as it would be necessary to obtain
the judgment of the court as to whether we are entitled to see those accounts.
The Commission then adjourned to Tuesday, August 2, 1887, at 10 a. m.
PALACE HOTEL, SAN FRANCISCO,
Tuesday, August 2, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
LELAND STANFORD, being further examined, testified as follows: RELATION OF
THE CENTRAL PACIFIC TO THE GOVERNMENT.
If the Commission please, perhaps it would tend to a better understanding of
the case if I should read a short paper which I have just had prepared. It
would, at least, give our views a little better. I wish to read it partly because
of a remark which you. Governor Pattison, made to me. I infer from remarks
made by some of the Commissioners about the time of adjournment last Friday,
that it was supposed that the Central Pacific Railroad Company did not occupy
towards the Government the position of an independent contracting party, but
was in some way an agent acting in a fiduciary capacity. The Federal courts
have in several cases construed the Pacific railroad acts, and have determined
what are the property rights of the company under the acts of Congress. It
has been repeatedly held by those courts that the grants of lauds and bonds
made in aid of the construction of the road became the property of the company
upon compliance with the conditions named in the acts. Several actions have
been prosecuted by the United States upon the theory that the Government could
compel an accounting with
2730 U. S. PACIFIC RAILWAY COMMISSION.
the directors of the corporation constructing the Pacific railroad for the
disposition they made of the bonds issued by the United States.
UNITED STATES VS. UNION PACIFIC.
The case of the United States vs. The Union Pacific Railroad Company, in the
circuit court of Connecticut, was the first of this character of suit. (See
2 Blatchford, 404.) The case was appealed to the Supreme Court and affirmed.
Mr. Justice Hunt, in delivering the opinion of the circuit court, said:
The grants of land and the issuing of bonds are to be considered gratuitous,
voluntary contributions to aid in the construction of works which it was supposed
would develop the resources of the country, advance civilization and improvement,
aud upon which the mails and munitions of war could bo transported. When given
and accepted the power of the donor is at an end, and the absolute ownership
is in the corporation.
It was upon the theory that the bonds issued by the Government were the private
property of the company, that the court refused to order an accounting of what
disposition was made of them by the di. rectors.
COURT OF CLAIMS CASE.
A case involving similar questions and of the same title was commenced in the
Court of Claims and appealed to the Supreme Court. (See 1 Otto, 72.) Mr. Justice
Davis in delivering the opinion of the court, said :
The act itself (Pacific railroad act) was an experiment. It must be considered
in the nature of a proposal to enterprising men to engage in the work, for
wit h 1 he extraordinary obstacles in the way there was no security that capital
could be enlisted ; if enlisted at all it would only be on condition which
would insure in a case of success remuneration in proportion to the risk incurred.
The proffered aid was in lands and interest-bearing bonds of the United States.
The court in this case affirmed the same doctrine that was maintained in the
case previously cited. No contrary view has been expressed by the Supreme Court.
In construing the^Tlmrman act it was assumed throughout by the Supreme Court
that the aid granted by the Government to the roads was private property. (See
9 Otto, 700 to 709.) ISor was it decided that Congress had power to change
the contract, but it was argued by the court that the provision for a sinking
fund did not interfere with the rights of the company or require payment from
it before maturity of the bonds.
I believe that it has been reaffirmed in our case before the Court of Claims,
aud again by the Supreme Court of the United States, on the question of compensation
to the aided roads. I put this in to give you an idea of our side of this matter,
as I do not seem to have been able to have made it sufficiently clear in my
former statement.
It is unnecessary to examine in detail the expenditure of the company in the
construction of the road. The aggregating expenditures for all purposes can
be readily ascertained.
LELAND STANFORD.
2731
The following is a list of all the available resources, with the exception
of those originally contributed by the promoters to inaugurate the enterprise
:
Central and Western Pacific Railroads. Memorandum regarding receipts from all
sources,
to December 31, 1869.
...
Under the act of Congress we were permitted to issue bonds secured by a first
mortgage on our road to an amount equal to the Government loan. The State aid
bonds referred to in the table were our own bonds, to the amount of a million
and a half, on which the State paid the interest for twenty years, the company
paying the bonds at maturity.
These bonds issued to the Western Pacific Eailroad Company were given before
the Central Pacific gained control of that road, and we never handled them.
The bonds given by these various counties were for subscriptions to the stock
of the railroad company.
COUNTIES AUTHORIZED TO SUBSCRIBE AID.
Commissioner LITTLER. Before passing from this schedule of securities I wish
to call your attention to a list of counties which, under the laws of California,
Vere authorized to subscribe aid to railways, and ask you to state, as I name
them, whether the Central Pacific Eailroad Company received aid from any of
them. First, Yuba County was authorized to subscribe $200,000.
The WITNESS. Not to the Central Pacific.
Commissioner LITTLER. Sutter County, $50,000.
The WITNESS. Not to the Central Pacific.
By Commissioner LITTLER:
Q. Or to any of its branches? A. N"o, sir ; I know that that county issued
some bonds, or was authorized to issue some for a road that was intended to
have been built to Marysville, but we had nothing to do with it, and never
have had.
Commissioner LITTLER. Solano County, $200,000.
The WITNESS. That has nothing to do with the Central Pacific.
Commissioner LITTLER. Yolo County, $50,000?
The WITNESS. Not to the Central Pacific, p R VOL iv 26
2732 U. S. PACIFIC RAILWAY COMMISSION.
AID GIVEN TO ROADS PRIOR TO CONSOLIDATION.
Commissioner LITTLER,. As T call this list over, if any of the railways are
named which have subsequently been consolidated with the Central Pacific and
now form a part of that road, please mention that fact.
The WITNESS. The county of Yuba subscribed to some railroad, but not one that
we were connected with ; and whether stock in some of these roads was taken
by the county, or not, I do not know, but the Central Pacific had nothing to
do with it, directly or indirectly. The only counties that have ever contributed
to the Central Pacific are the ones that I have mentioned. The aid given by
San Francisco, Santa Clara, and San Joaquin Counties to the Western Pacific
Railroad was given before the Central Pacific took hold, and never came into
our hands.
Commissioner LITTLER. In order to get through with my list, I will read them
to you and you can answer. San Mateo County ,"$ 100,000.
The WITNESS. That was given to the road then called the San Francisco and San
Jose* Railroad. The Central Pacific had nothing to do with it.
THE |600,000 SUBSCRIPTION OF SAN FRANCISCO COUNTY.
Commissioner LITTLER. San Francisco County, $600,000.
The WITNESS. That county was authorized by law to subscribe for $600,000 of
our stock. We had trouble with the county. The people here had lost faith in
our road, did not believe that we could ever construct it, and were very much
afraid of the liability to which they might be subjected, and instead of subscribing
for the stock and issuing $600,000 in bonds, the matter was compromised by
the county giving us $400,000 of its bonds and taking no stock.
Commissioner LITTLER. Santa Clara County, $200,000.
The WITNESS. That went to the Western Pacific before we had any connection
with it.
Commissioner LITTLER. Placer County, $200,000.
The WITNESS. Yes ; that went to the Central Pacific.
Commissioner LITTLER. I see some of these counties repeated here. Santa Clara
County $200,000, and San Mateo County $100,000.
The WITNESS. That was to this San Francisco and San Jose Railroad.
Commissioner LITTLER. San Francisco County again, $300,000. These were authorized
by different statutes of the State of California.
The WITNESS. The Central Pacific had nothing to do with that. I have no doubt
that San Francisco gave ifc, but I have no positive knowledge of it. I do not
remember the circumstance.
Commissioner LITTLER. Los Angeles City, $50,000.
The WITNESS. That has nothing to do with the Central Pacific.
Commissioner LITTLER. Los Angeles County, $100,000.
The WITNESS. That has nothing to do with the Central Pacific.
Commissioner LITTLER. Placerville City, $100,000.
The WITNESS. That was to another railroad.
THE COUNTY AID TO CENTRAL PACIFIC.
Commissioner LITTLER. These are under statutes authorizicg subscriptions to
the stock of railroad companies. These various statutes, I mean, referred to
in this list. I do not know whether they are to your road or not. I am calling
them off for the purpose of getting your answer.
LELAND STANFORD. 2733
The WITNESS. There was nothing of this in favor of the Central Pacific except
from those counties along the line of that road. Sacramento County, and Placer
County, and San Francisco gave $400,000 in bonds. That is all that the Central
Pacific had.
Commissioner LITTLER. If you are quite sure that you have enumerated all the
subscriptions paid to this company and its branches, as now constituted, I
will not trouble you with this list.
The WITNESS. I cannot be mistaken about that.
The CHAIRMAN. I would jmt it all on the record. I would not stop it now, inasmuch
as you have commenced it.
AID FOR ROADS THAT NEVER WERE BUILT.
The WITNESS. There was a time when aid was voted for roads that never were
built. Some of them I do not remember, for we had nothing to do with them.
Commissioner LITTLER. San Joaquin County, $250,000 ; El Dorado County, $200,000;
Placer County, $250,000 ;' Santa Clara County, $150,000 ; Stanislaus County,
$25,000.
The WITNESS. I do not remember anything about that. There were never any roads
built in this last county under such statutes, and whether any bonds were issued
or not, I can not say. I think it doubtful, however.
Commissioner LITTLER. Alameda County, $220,000 ; San Francisco County, $l,000,OoO,
authorized by the statute of 1863.
The WITNESS. Are you reading the complaint filed in some of these cases that
have been brought against us?
Commissioner LITTLER. No, sir; I am reading from a list of the statutes passed
by the State of California, authorizing subscriptions to railroad companies.
The WITNESS. It sounds a little similar to some of the complaints that I have
heard. That is why I ask the question.
SUBSCRIPTIONS OF OTHER COUNTIES TO RAILROADS.
Commissioner LITTLER. Sacramento County, $300,000, under the statute of 1863;
Calaveras County, $50,000; Tuolumne County, $50,000; El Dorado County, again,
$100,000; Calaveras County, again, $50,000; Napa County, $70,000; Stanislaus
County, $25,000; Yuba County, $65,000; Yolo County, $100,000; Los Angeles County,
$150,000; Los Angeles City, $75,000; Plumas County, $230,000; Sutter County,
$50,000; San Joaquin County, $200,000 ; Stockton City, $300,000 ; San Francisco,
$1,000,000, authorized by the statute of 1869.
In this list it is stated that Yuba County actually issued $265,000; Solano
County, $200,000; San Mateo County, $100,000; San Francisco, $950,000; Santa
Clara County, $350,000; Auburn Town, $50,000; Los Angeles County, $150,000;
San Joaquin County, $250.000 ; Placerville City, $100,000; El Dorado County,
$300,000; Placer County, $250,000 ; Sacramento County. $300,000, making a total
of $3,265,000,
The WITNESS. I do not know anything about how correct that statement is, but
I think that the person who prepared it is mistaken. There were a great many
statutes passed authorizing different counties and places to vote on propositions
to aid railroads, but they never availed themselves of the opportunity. I presume
that this statement is prepared from the law books, and the person preparing
it did not go farther.
2734 U. S. PACIFIC RAILWAY COMMISSION.
B^ Commissioner LITTLER :
Q. Do you still stick to your list as read here? A. Yes, sir.
Q. Do you state that it contains all that the Central Pacific or its branches
secured? A. Yes, sir ; it contains all that I remember, and I am sure that
I have forgotten nothing.
The CHAIRMAN. Go ahead with your statement.
CONSTRUCTION OF ROAD FROM SAN JOS TO OGDEN.
The WITNESS (continuing}. With the foregoing funds and credits tlm company
constructed 8G0.66 miles of road, which extended from San Jos6 to Ogdcu. The
entire resources of the company, as above stated, were $47,889.000, which would
allow the company to expend on each mile, in round numbers, $55,600.
I would say here that it was estimated that the road would cost $90.000 a mile,
and there were good engineers who estimated that portion's of that road would
cost from $250,000 to $3t,0,000 a mile, if it ever could be built at all. I
will state, however, that that statement came from those who were hostile to
the road and did not wish to see it constructed ; but we built the road in
spite of them, and at a cost very much less than the estimates.
They could not have exceeded that expenditure, having no more money. I submit
that no board of competent engineers, taking into consideration all the facts
and circumstances couuected with the construction of the road, including the
price of labor and material at the time of construction and the difficulties
encountered, will say that $55,600 per mile was unreasonable.
GOVERNMENT ONLY INTERESTED TO EXTENT OF ITS GRANTS.
The Government, however, had no interest in the money contributed for the construction
of the road in addition to the grants of Congress. The bonds granted by the
United States, together with first mortgage bonds of the company authorized
by the acts of Congress, produced in the aggregate the net amount of $41,485.000.
If no other money but the bonds issued and authorized by the Government had
been used in the construction of the road, it could not have cost more than
$48,200 per mile, for that was the full amount realized from the Government
aid and the first-mortgage bonds.
COMPANY AUTHORIZED TO USE THE ENTIRE GRANT IF NECESSARY.
It will not be denied that the company was authorized to use the entire grant
of the Government in the construction of the road, and it it <iould be completed
with the bonds issued and authorized to be issued by the Government without
other funds, the company was not called upon to appropriate additional money.
In other words, the Government offered to the company the grants named in the
act upon condition that the company should build the road and perform for the
Government the service required. If the road could have been built for one-half,
or any other traction of the amount granted by the United States, the amount
saved would have been the property of the com pauy and not of the United States.
The Government named its conditions, the company accepted them, and is entitled
to whatever benefits may result from the contract. This position is in accordance
with the decisions of the Supreme Court of the United States. Does any one
suppose that the road would have been built if it had been understood
LELAND STANFORD. 2735
that if the company was successful the Government would take the profits, and
if unsuccessful the stockholders would have to make up the loss? But, strange
as at may seem, that is the position assumed by those who, at the completion
of the work, demand an accounting from the company for the moneys received
from the Government, without regard to the terms and conditions of the contract.
POSITION ASSUMED FOR SAKE OF ARGUMENT.
But suppose that we assume, for the sake of argument, that the company occupies
toward the Government the position of an agent or employe, and that it must
account to the Government for the moneys received, and must pay over to the
United States every dollar over and above reasonable compensation for the construction
of the road, we submit with the utmost confidence that the $48,200 per mile
which the company obtained from, the bonds issued by the United States, and
its own first mortgage bonds authorized by the act of Congress, was less than
the reasonable cost of the road, and that without other aid the road could
not have been constructed at that time and under those circumstances, so that,
so far as the original amount paid for construction of the road is concerned,
we say :
POSITION TAKEN BY COMPANY.
First. No money or aid from the United States was used which was not granted
to the company on condition that it construct the road, and when the road was
constructed arid the conditions complied with that the United States had no
right to inquire what disposition was made of the bonds granted for its construction.
Second. That if the company is bound to account to the Government as a faithful
agent in the construction of the road, the aid granted by the United States
was insufficient for its construction, and that upon this basis the Government
ought to make good the deficiency.
I shall be pleased, at the proper time, to offer further evidence as to what
was a reasonable compensation for the construction of the road.
I thought proper to offer this paper this morning, that the Commission might
better understand our views in regard to the relations between the Government
and the company, as it might facilitate somewhat the investigation.
By the CHAIRMAN :
Q. Have you anything to add to that statement? A. No, sir; not now. I am at
the service of the Commission. I take it for granted that at some time or other
we will have an opportunity to present our views as to the matters concerning
which the Commission desires to examine us.
The CHAIRMAN. Oh, yes ; any information you desire to present we will be glad
to have.
RELATIONS OF THE COMPANY AND THE GOVERNMENT.
Commissioner ANDERSON. The Commission has listened to your explanation in regard
to the distinction which arises between an agent acting in a fiduciary capacity
and accounting for trust funds in his hands, and an account rendered by a beneficiary
under a law of Congress, with a right to dispose of property. I will, however,
call your attention to this point : That while, of course, we do not differ
with the rule as laid down in the Connecticut case by the Supreme Court of
the United
2736 U. S. PACIFIC RAILWAY COMMISSION.
States, and could not differ from it, the relations which the parties hold
to each other are somewhat different.
We understand that we are appointed in order to give Congress in telligent
information with reference to a question of proposed futui legislation ; and
the question presented to Congress is whether it is desirable and proper that
the debt of this company, which matures between 1895 and 1897, shall be extended
for a long period of years at reduced rare of interest.
GOVERNMENT'S INTEREST IN ABILITY OF ROAD TO MEET OBLIGATIONS.
The United States, in addition to its interest as an ordinary creditor having
a lien, is vitally interested in the corporate power of the Central Pacific
llailroad Company to meet its obligations; and therefore, when the Central
Pacific asks for an extension, it seems but just and reasonable that information
should be given to Congress as to whether its management and the administration
of its affairs have been fair and honest, or whether the officers of that company
aud'its stockholders have impaired its corporate power to pay its obligations
by the manner in which they have carried on the affairs of the company.
It* the company says it has no legislation to propose, and d esires no extension
whatever for the payment of the debt that it holds itself ready to pay the
United States the amount of its obligation when the same becomes due then I
think that the statement which you have read in connection with the decision
of the Supreme Court of the United States would have great weight. But if we
are to report with reference to proposed future legislation on the part of
Congress, it seems to me that it does not bear on the question upon whicirCougress
desires to be informed.
COMPENSATION FOR SERVICE ESTIMATED TO BE SUFFICIENT TO PAY
DEBT.
The WITNESS. As I understand, this Commission was appointed to impartially
investigate the affairs of the company, in order that the Government itself
may have a proper understanding and that it may devise some way in which to
secure itself against loss. I have endeavored to show you that the only reas >n
why the company is not able to pay, or may not be able to pay, these obligations
at maturity arises through the act of the Government itself. If you will read
the debates which took place in Congress at the time of th i passage of the
Pacific Railroad bills you will see that Congress did not, and that we did
not, anticipate any trouble over this matter. You will see that at that time
everybody recognized the fact and it was taken for granted that the Government
would pay for services rendered by the company. They assumed that the large
amount expended theretofore for services rendered the Government west of the
Missouri Kiver would be ample to meet all these obligations. But, while we
have performed a hundred fold the services expected of us, our compensation
has only been about one eighth tbat which was paid to mule teams and ox teams
and pack animals. The debates in Congress show tbat it was anticipated on the
part of the United States that we should receive at least as much as had been
paid for the other service. We have never had a fair opportunity, and we claim
now that we are entitled to that compensation, and if this point is admitted,
there will be no difficulty about the debt.
LELAND STANSORD. 2737
CONDITION OF ROAD AT PASSAGE OF THURMAN ACT AND SUBSEQUENTLY.
Still we were doing well up to 1881, and we thought that we would be able to
meet our obligations at maturity. We passed resolutions for the establishment
of a sinking fund to meet the obligations due the Government. But when the
Thurman bill was passed, it took the matter out of our hands, and the Government
took it upon itself to look after the sinking fund. We had nothing to say about
it. We were not satisfied, though we had no objection to the Government being
the custodian of the sinking fund. At that time we did not have any doubts
as to our ultimate ability to pay the debt at maturity; but important competing
lines of railroad were built. Up to the time of the completion of the Atchison,
Topeka and Santa Fe Railroad to a junction with the Southern Pacific at Deiuiug,
our only competitors were mule teams, ox teams, and pack animals. The rates
were large, and we had no difficulty in getting whatever we thought was fair.
We could charge whatever we thought best. When the other road was built, however,
business was divided, and the rates cut down. Whenever any new road was built,
the business fell off very perceptibly and the percentages fell off all the
way through. On the Central Pacific, the falling off in the through business
has been so great that now it commands but about 27 per cent.
ADVANTAGE OF CONTROL OF SOUTHERN PACIFIC.
Some people have thought that we helped to divert this business by constructing
the Southern Pacific road. This is not so, however. The construction of the
Southern Pacific road was provided for by act of Congress, and its management
went into the hands of people other than those who controlled the Central Pacific.
It soon became apparent that the best interests of the Central^ Pacific required
that the control of the Southern Pacific should be in the same hands, and that
that road should work in perfect harmony with the Central Pacific. It became
a necessity, therefore, that we should control the Southern Pacific, and when
opportunity offered we availed ourselves of it, and purchased the controlling
interest in that road. Since then the roads have worked in entire harmony,
with all the advantages of a pooling arrangement and the advantages resulting
from our system of leases.
TERMS OF LEASE OF CENTRAL TO SOUTHERN PACIFIC.
In the lease from the Central Pacific to the Southern Pacific we provide for
a certain amount to be paid to the Central Pacific, equal to about G per cent,
per annum on the present value of the stock, and declare further that the object
of this lease is not that one rond shall ever advantage itself at the expense
of the other, but that the lease shall be revised from time to time with the
change of circumstances ; and more than that, that the minimum that shall be
paid to the Central Pacific shall be 2 per cent, upon the par value of the
stock which has been issued, equal at present to $1,200,000 per annum. It is
further provided that when the road earns more money it shall have all that
it earns up to 6 per cent., and that after that the Southern Pacific may have
the remainder for its compensation. It is provided that the lease may be revised
at any time, whenever the Central Pacific calls upon the Southern Pacific for
such revision. The object of the whole arrangement was that the roads should
be a mutual benefit, each to the
2738 U. S. PACIFIC RAILWAY COMMISSION.
other, and that each should have what it was fairly able to take, and not have
any competition which would be injurious.
CONSTRUCTION OF OREGON AND CALIFORNIA.
In constructing the Oregon and California road we provided by that contract
that 80,000 shares of Central Pacific stock should be issued to the company,
and the lease provides that additional rent shall be paid for that road, so
as to make the amount equal to 6 per cent, upon the present value of the stock,
or a minimum rental that is equal to 2 per cent, on the par value of the stock.
The stock is now quoted in the market at about 35 cents on the dollar.
ADVANTAGE OF SMALL ROADS TO MAIN LINE.
I will say further although perhaps you may want to examine ine on that point
that in every instance th^se little roads the feeders which have been leased
to the Central Pacific have been a great advantage to that road. The Central
Pacific is a trunk line of road, and without feeders it would not be very valuable.
These feeders, however, we have constructed through a good country, but they
were built while the population was scarce. It gradually increased, however,
until I believe that all of them, with one exception, are doing a very good
business.
SOUTHERN PACIFIC TO PAY INDEBTEDNESS OF CENTRAL.
In this connection I think that it is important to say that the Southern Pacific
Company, under its lease of the Central Pacific, guarantees to provide for
the payment of the indebtedness of the Central Pacific, and also to take care
of the funds under the Thurrnan act.
Commissioner ANDERSON. The Thurman act requirements are complied with under
that lease, I suppose.
The WITNESS. Yes; it agrees to comply witball the requirements of the Thurmau
act, and to protect the Central Pacific in every direction. Colonel Haymoud
is one of our regular counsel, arid is familiar with these things. He has just
informed me that this lease for ninety-nine years also covers the interest
to the Government.
By Commissioner ANDERSON :
Q. Do you mean that the lease by the Central Pacific to the Southern Pacific
covers the interest to the Government on its loan? A. Yes, sir ; it covers
all the debts except the principal.
Q. You mean such interest as comes due to the United States? A. Yes, sir.;
and whatever comes under the Thurmau act.
Colonel HAYMOND. The Southern Pacific Company pays $1,200,000 per annum in
cash, whether the road earns it or not.
The WITNESS. I hope that the Commission will look at the statement in regard
to the business that has been diverted, in order that it may see exactly that
the falling off corresponds with the completion of each additional road which
parallels it.
REAL CAUSE OF INABILITY TO MEET OBLIGATION.
Commissioner ANDERSON. In regard to your explanation, I think that the Commission
will agree that the issue as stated by you in your last statement is the issue
which we wish to examine. That is, the reason, or the real cause, of the inability
of the Central' Pacific Railroad Company to meet its debt at maturity. You
have given the explanation j ust
LELAND STANFORD. 2739
stated, and we are here to see if the prevailing feeling in the community is
correct, that the inability of the Central Pacific to meet its obligation
is due to the fact that under the Crocker contract a great deal more in bonds
and value were given than the actual cost of construction, and that under
the Contract and Finance Company's contract avast amount, far larger than
the actual cost of construction, was given ; that under the Pacific Improvement
Company the same thing occurred in regard to the extension of the California
and Oregon road, and that under the Western Development Company a large number
of roads were constructed upon terms which provided that the rentals of those
roads under the leases should be such as to compel the payment of a inucli
larger sum than the interest on the actual cost of those roads ; and that
all of the transactions which I have alluded to were controlled and influenced
by the same gentlemen acting as grantors and grantees.
NECESSITY FOE COMMISSION TO EXAMINE THE BOOKS.
Now, without intending to say that any of these propositions are true, the
Commission feels that if it is to discharge its duty efficiently, the books
showing these transactions should be laid before it in order that Congress
may receive intelligent information as to the various points that I have specified.
In the absence of that information we cannot, even if you be right in your
position, undertake the task of giving that information to Congress in such
form as to command the attention either of Congress or of the people of the
United States.
MONEY ALL EXPENDED IN CONSTRUCTION.
The WITNESS. I wish to say that I want to give the fullest information, because
I know that there is a great deal of misapprehension in regard to these matters.
The fact is, that I know enough about the construction of the road I was part
and parcel of it in the beginning, watching its interests as carefully as any
man could watch his private business to say that the money troin all those
sources was all expended in the construction of the Central Pacific Railroad.
AMOUNT OF STOCK NOTHING TO DO WITH COST OF CONSTRUCTION.
I know further that there never has been a dollar diverted from the Central
Pacific treasury to the aid of these other roads. I do not want to say anything
about my private business, but all these roads were built largely from the
money derived from bonds issued by the company, and the values, as in the case
of the Central Pacific, arose to the stockholders from what they created. When
the Central Pacific Kail road was completed I do not suppose that its stock
could have been sold for five cents on the dollar or that it would have brought
anything worth mentioning. That company, however, gradually developed the country
and developed the business which gave value to that stock. The amount of that
stock had nothing to do with the cost of construction. It would have made no
difference to the Government if there had been but a thousand shares issued.
The ownership would have been in those persons who owned the road, and whether
a hundred shares or ten thousand shares or a hundred thousand shares it could
make no difference to anybody. It was a mere question of convenience to the
owners or the stockholders themselves.
2740 u: s. PACIFIC KAIL WAY COMMISSION.
COMPANY'S BOOKS OPEN FOR EXAMINATION BY COMMISSION.
The books of the Central Pacific Railroad Company are open, and with the aid
of the secretary, who is familiar with everything contained in them, they may
be fully explained. In my own judgment, I think that the books of that company,
so far as they throw light directly upon the affairs of the company, should
be examined. This, I should imagine, could be done without spreading the books
open to the whole world and publishing the matters not pertaining to the objects
of this inquisition. I suppose that the Commission does not care to take any
step of this nature. So far as I am concerned there is nothing that 1 want
to conceal, although perhaps we might have been more wise in our construction
one time or another, and I have thought that sometimes we may have blundered
in not taking the time given by the act of Congress in which to construct the
road and living up to our contract and enforcing it in the courts, as we probably
would have been able to do. If this had been done, I think it very probable
that we could have built the road with the proceeds of the Government bonds.
If we had taken the time required we would not have had to make all the sacrifices
which we did make.
NOT DESIRED TO THROW THEM OPEN TO THE PUBLIC.
By Commissioner LITTLER :
Q. Is it not true that if you had taken the time required, or the time permitted
under the act, the Union Pacific Railroad Company would have built clear through
to the California line? A. Yes ; that may be true. We could not afford to
rest. After that act of Congress was passed, allowing both companies to build
until they met, we could not do less than force the construction. At the same
time the country would not have been satisfied if we had taken the time. If
the Commission please, I am ready to use my influence to gain permission for
the Commission to examine any books that we have as to the matters pertaining
to the Central Pacific Railroad Company ; but we have very active rivals and
competitors, and we have relations with many individuals. We do not want those
things laid before the public ; not that there is any harm in them, but we
do not want to throw our books open to the examination of everybody. So far
as the Commission is couerned, we have no objection to its seeing anything
and everything contained in our records. I know that the Commission is composed
of honorable men, and I know that they would not wish to publish anything which
does not concern the public or affect the interests of the Government. If the
Commission please, I would like to put this offer in written tbrm, and submit
it to you for your consideration. So far as the affairs of the Central Pacific
are concerned, I want all the light thrown upon them that it is possible to
obtain, and the Commission cannot be more desirous in that respect than 1 am.
BOOKS OF THE CONSTRUCTION COMPANIES.
By Commissioner ANDERSON:
Q. Do we understand you to extend that suggestion to the books called for yesterday
from Mr. Douty, and which, under the advice of counsel, he declined to produce?
I refer to the books of the Western Development Company, showing the actual
cost of construction of the roads, or parts of roads, constructed either for
account of the Central Pacific, or leased to and operated by that ro*<td;
similar books of the
LELAND STANFORD. 2741
Pacific Improvement Company, showing the actual cost of construction to the
Pacific Improvement Cojipany ; and also the books of the other corporations
which were enumerated, and which corporations appear to have had dealings
with the Central Pacific, either in the sale of materials, or by leases,
or by loans of money, or by other methods by which it might be possible that
the property and assets of the Central Pacific were affected or were passed
to the stockholders of those corporations by the votes of gentlemen who occupied
a dual position in both corporations. A. I do not state positively how far
these companies will go, but so far as you can possibly obtain light upon
this subject which you are investigating, I want you to see the books, and
shall use my influence towards that end. Technically, I do not control them
; but I presume that I have influence and that my advice may be listened
to. Commissioner ANDERSON. I think so.
OBJECTIONS RAISED TO LEASES TO CENTRAL PACIFIC.
The WITNESS. I want you to do this, because you wil 1 find that the relations
of these companies have been kept very clear. All of the dealings of the company
will show just what one company has clone for the other. If one company has
ever aided the other, it has had credit for it. I do not think that there was
ever, directly or indirectly, any money diverted from the Central Pacific to
construct any of these roads. Of course they have had very close business relations,
but each company, so far as we possibly could bring it about, has had its fair
share and whatever was just at the time. As far as those leases are concerned,
I wish to say that when we made the leases to the Central Pacific of these
small roads or feeders there was an outcry from the people who were not particularly
interested in the receipts of the road and who did not own a share of the stock
in any of them. They claimed that we were doing great injustice to the Central
Pacific, and I learned that some Government officials thought so too. Finally,
when the Southern Pacific got to be some three or four times larger than the
Central Pacific, and we concluded to change the system of leasing, these same
people again entered their objections and said that we had taken away a good
thing from the Central Pacific. There was nothing in these objections one way
or the other, because there was always an understanding that the rents from
time to time should be adjusted as equity might require. All the while the
roads would have the advantage of working harmoniously and co-operating in
every way and neither company would lose anything by the arrangement.
PROTEST AGAINST PRIVATE EXAMINATION OF BOOKS.
By Commissioner LITTLER :
Q. What objection is there to throwing open these books?
Commissioner ANDERSON. We will all go down to the office and see them lor ourselves.
The CHAIRMAN. I want to say that so far as any private examination is concerned
I shall protest against it. As Commissioner, I would not engage in any investigation
that would be considered as at all private; and I do not want any testimony
submitted to me that will be considered as private testimony. I think that
it should all be subject to public criticism.
NOT NECESSARY TO EXPOSE COMPANY'S AFFAIRS TO RIVALS.
The WITNESS. Anything that you care to obtain, I do not object to. It does
not follow, however, that because you examine our books all
2742 U. S. PACIFIC RAILWAY COMMISSION.
the public shall also have the privilege of examining them. I know you to be
gentlemen of reputation, but I presume that there are private matters of
business which you have attended to for your clients which are perfectly
honest and proper, and yet I do not believe that you would care to throw
your cases open to the public, even after the matter is settled and the business
has passed, and tell the public all the motives that influenced you and the
views that controlled you in your actions. It is so with us. I think that
there is as little objection to opening our books as there would be to opening
the affairs of any man's private business ; but at the same time we have
had business that we do not consider the public interested in, and do not
think it necessary that we should expose it, and tell our rivals and competitors
all about our affairs.
COMMISSION BOUND TO MAKE PUBLIC ALL EVIDENCE BEARING ON THE
ISSUE.
Commissioner ANDERSON. So far as I am concerned I am satisfied to make an examination
of the necessary books at the offices, where they will not be disturbed. Of
course we cannot stipulate that any one page or any one entry shall or shall
not be published. I do not suppose that the chairman or Mr. Littler or myself
wish to amuse ourselves by publishing accounts and vouchers, or any other material
that we might find in the books, just for the amusement of publishing them,
but, as commissioners, we would be bound to make public, through our report
to the President, all that we concluded to be evidence bearing on the issue.
EQUITIES DUE THE COMPANY.
The WITNESS. I appreciate that. I have always thought that the time would come
when we co'uld go to the Government and demand the equities due to this road,
especially since it became apparent that by the diversion of business we would
not be able to meet the Government claim at maturity, I know that we cannot
go before Congress and the people of the United States and ask that ail the
equities be allowed, except we show our hands completely.
Commissioner ANDERSON. That is it. You have stated the whole case in that last
sentence.
The WITNESS. Of course I have no objection to those necessary clerks that you
must take. 1 do not care about that.
Commissioner ANDERSON. You want to submit this proposition tons in writing,
I suppose?
The WITNESS. I thought that I would like to put it in writing, so that there
would be no misapprehension about it.
PUBLICITY OF EXAMINATION DEMANDED.
The CHAIRMAN. Let us understand it. There is to be no examination but what
is in the nature of a public examination.
The WITNESS. I will consult with counsel, but so far as that is concerned I
believe that the commissioners will not tell the public that in which it has
no interest, and that the Commission will not go further than is necessary
to throw light upon this subject. All things which will tend to this end, however,
I want the Commission to have.
The CHAIRMAN. But the meetings must be public and the examination must be public.
Commissioner ANDERSON. If Governor Stanford is going to make us a communication
in writing, perhaps we had better receive it, and answer it.
LELAND STANFORD 2743
*
The CHAIRMAN. I want Governor Stanford to understand now, so Unit there may
be no misunderstanding hereafter, or any further discussion as to the paper
submitted, that I want everything public, I want it so that there may be no
mistake as to my position with reference to the fullest publicity.
- The WITNESS. I understand that you do not want any star-chamber proceedings.
I must say, however, that it seems that this whole matter is iu the nature
of an inquisition. Still, it does not follow that because an examination is
public every person shall have the liberty of examining these books and turning
over the leaves. It is pretty much the same as any judicial proceeding in a
court of justice.
EXTENT OF EXAMINATION PERMITTED BY COMPANY.
Q. Do I understand you to state that this Commission shall have the privilege
of examining all these books to which reference has been made, and of taking
such extracts of their contents as we think bear upon the subject of inquiry
under the statute, and making that public? A. To that we could have no objection.
Commissioner LITTLER. If there are any entries in these books which are strictly
of a personal and private nature, and have no connection whatever with the
Central Pacific Eailroad Company, I suppose that that is the sort of entry
that you want excluded frouTthe public gaze?
The WITNESS. Yes, sir. If there is anything there that shows how we meet competition
in the struggle with our competitors I do not suppose you want to make it public.
Commissioner LITTLER. I do not suppose that that is in issue.
The WITNESS. I do not believe that when you come to make your examination there
will be any difference between you gentlemen and ourselves.
WITNESS TO CONSULT COUNSEL.
By Commissioner ANDERSON :
Q. When will you submit your suggestion? A. As soon as I consult with my counsel
about this thing. I. want to act with their approval in whatever I do.
Commissioner ANDERSON. Certainly ; you can submit it this afternoon here, or
to-morrow morning.
Mr. BERGriN. I think that we should prefer to morrow morning. I think perhaps
it would be as well to reach a conclusion of this question before going on,
as it may be decided one way or another. It would doubtless facilitate business
and assist the dispatch of the investigation.
Commissioner ANDERSON. I was going to examine Governor Stanford somewhat in
regard to some matters. In his general statement which preceded his general
report there were some matters of explanation which may as well be taken up
now.
Mr. COHEN. I would suggest that we arrive at some conclusion as to the scope
of the inquiry, and what information the Commission desires it will probably
shorten your labors before proceeding with the examination of Governor Stanford.
COMMISSION TO DECIDE ON PERTINENCY OF EVIDENCE.
I would like also to suggest, with the permission of the chairman, in regard
to something that he has just said about receiving evidence that is regarded
as private. I do not think that that was the intention of
2744 U. S. PACIFIC RAILWAY COMMISSION.
Governor Stanford. We make that offer just as we would offer it to a judge
upon the bench, and just as we would submit books or papers for the examination
of a judge, for him to decide whether it is pertinent to the inquiry or to
the issue being tried before him. If it should not be pertinent he would not
allow it to be published, nor would he allow the reporter reporting in his
court to take it down. It was in that view that Governor Stanford mentioned
the fact that such evidence as you might call for, not pertinent, should not
be published, precisely as in the case of any circuit judge or any judge of
any nm prhis court. If the judge found it not to be pertinent he would not
allow it to be used. Correspondence is frequently called for, but if the judge
finds' that it would not tend to illustrate the issues before him, or its publication
would be unjust to some parties, or to parties not connected with the case,
he would return it to the parties offering it, and \vould not permit the contents
to be divulged. It is in that view that we spoke of the private matters and
things contained in these books, and entered our objection to their publication.
It is for you to say, exercising your judicial functions, whether or not the
evidence is pertinent to the subject of the inquiry with which you are charged.
Commissioner ANDERSON. I accept tbat suggestion so far as I myself am concerned,
but I call your attention to the fact that your illustration supposes the judge
to be the absolute judge of the relevancy or irrelevancy of the paper. The
question of its publication or non-publication or its use as evidence is left
absolutely and implicitly to the judge when the document, instrument, or account
is once placed before him. If this is what you mean, I have no objection.
Mr. COHEN. That is precisely what I mean.
NO PRIVATE PAPER PREVIOUSLY RECEIVED.
The CHAIRMAN. I do not see that any such question has arisen at any time in
this examination. The call was for the Western Development Company's books.
Any examination with reference to any money arising from the Central Pacific
that could possibly be traced to any of these companies through their accounts
would have to be oral, as the secretary or book-keeper would have to be examined
as to the condition of the books. At no time in any period of this examination
by this Commission has it received any paper of any kind of a private nature
; but everything that has been received by the Commission has been given to
the public, and I think that this should be no exception, especially as it
is a case bearing upon the accounts of the railroad com ' pany. We claim the
right to publish our examination of the books, and every item bearing upon
this investigation wherever found, whether in the books of the railroad company
or in any books bearing upon the affairs of the railroad company.
Mr. COHEN. That is assuming a great deal.
Mr. BERGEN. I think that we had better not discuss the question any further,
as mere discussion cannot determine anything. I think it better to consult
and submit to you gentlemen to-morrow morning the conclusion that may be reached.
BOOKS WILL SHOW NO DIVERSION OF FUNDS.
The WITNESS. I should be very sorry if I found it necessary in any manner to
prevent the Commission from obtaining anything and everything that we have
as to the diversion of any funds from the Central Pacific to any of these companies.
1 am confident that there never has
LELAND STANFORD. 2745
been a dollar diverted that way, and that the books of the company not only
will not show it, but that," on the contrary, they will show that the
dealings between the two companies, or between the several companies, have
always been tair.
Mr. RAYMOND. Suppose that these books were submitted to you gentlemen, and
you should select certain things which we might think ought not to be published.
That question could be left to the circuit court by a friendly proceeding,
and could be speedily passed upon. I do not think that any difficulty will
arise.
The WITNESS. I do not think so, either.
NO SECRETS IN THEM.
Mr. HAYMOND. From what I know of these books, which have been pulled over and
hauled over for twenty-odd years, I do not think that there are any secrets
in them. If there are any secrets in them, I do not know it. 1 do not know
of any secrets connected with the company.
Commissioner ANDERSON. I can only put my own position as Mr. Cohen has put
it.
Mr. HAYMOND. I think that you put it fairly.
Commissioner ANDERSON. If I ruled, or if the Commission ruled, that a certain
account was relevant, it would be considered as belonging to the world from
that moment.
Mr. HAYMOND. Yes; provided your ruling could be sustained by the court.
Commissioner ANDERSON. The court would not have time to interfere, because
as soon as it would be decided relevant it would be in evidence.
Mr. HAYMOND. I do not think that there will be the slightest difficulty between
the Commission and the company on these matters. I do not see where difficulty
can arise. I do not see anything that has not been town talk, and discussed
in conventions, on the stump, and in the churches, and everywhere else, during
the last twenty four years.
POSITION OF COMPANY THAT OF PLAINTIFFS. .
The WITNESS, In one respect I think that we shall be in the position of plaintiffs
in this matter, and in making out our case, if you should be left in doubt
on the subject of the diversion of funds of the Central Pacific, we want the
privilege of putting in all the testimony that we can produce.
Commissioner LITTLER. Suppose you gentlemen confer and present in condensed
form your proposition, and then we will understand it exactly.
The WITNESS. Yes, sir ; we will do so. I am obliged to the Commission for its
action. It may seem singular, yet it is a fact, that we have never been able
to present our side to the public, and this really is the first time that the
opportunity has been given to us. There was a time when we might as well have
whispered in a hurricane with the expectation of being heard at a long distance
as to have talked at all.
Commissioner LITTLER. We hope that you will bring in your whole case, including
these books.
The WITNESS. I propose giving you our case.
COMMISSION NOT GOVERNED BY RULES OF EVIDENCE.
Mr. COHEN. I would suggest, although I think it is hardly necessary to make
such a suggestion to a lawyer of your great experience, Mr. Chair
2746 U. S. PACIFIC RAILWAY COMMISSION.
man, that you are asking more here than a court would ask, or thai the court
to which you would apply would ask. That is, the production of books and papers
by wholesale.
Commissioner LITTLER. We have found it utterly impossible to be governed by
the rules of evidence in conducting this examination. We take all sorts of
statements hearsay and everything else.
The WITNESS. I think that the hearsay evidence has reached you first.
Commissioner LITTLER. We have to take that in order to get the facts.
Commissioner ANDERSON. Do you prefer to make your proposition first, or shall
we proceed now?
Mr. COHEN. We prefer to have time.
Commissioner LITTLER. Could you not bring that proposition in this afternoon
? We are pressed for time. Among so many lawyers you ought to be able to write
it out in an hour.
Commissioner ANDERSON. We have traveled several thousand miles, and while your
fruit is charming and much of your scenery is good, we want to get home.
The WITNESS. I would like to take you over the railroads that we have built
in our system, of which there are about 6,000 miles. The information that you
would gain on a trip of that kind would be very valuable in the future.
Mr. RAYMOND. In regard to this matter, I am prepared to make a proposition
now, so far as I am concerned.
Commissioner LITTLER. If you will let me write it, I can do it in twenty minutes.
Commissioner ANDERSON. You could write it so as to satisfy yourself.
Mr. HAYMOND. Suppose you write it. I have no doubt that it would be satisfactory
to me.
Commissioner ANDERSON. Suppose you take until 2 o'clock, then.
Mr. BERLIN. I think that we had better take until to morrow morning.
The CHAIRMAN. We must take up other matters and begin on another line. If you
cannot be here this afternoon we will give you gentlemen all the time that
you need, but we will go on with other witnesses.
Commissioner ANDERSON. W r e will postpone the general examination, although
it would have had nothing to do with this question which is now under discussion.
The examination which I proposed to make was in relation to the expenditures
mentioned by Governor Stanford with reference to the transporting of troops, &c.
Mr. HAYMOND. Why not go on with that?
The WITNESS. Why can we not go on, then? I desire to answer everything that
I can. I ought to have our general traffic manager here, I presume, to assist
me in reference to these questions.
Mr. HAYMOND. I understand that Mr. Bergin does not desire to delay the Commission,
but only to postpone this question until to-morrow morning. We have a great
deal of evidence to offer and of course our time is limited.
QUESTION OF PERMITTING EXAMINATION OF BOOKS POSTPONED.
The CHAIRMAN. What disposition do you propose to make of this question?
Mr. HAYMOND. Let this matter go until to-morrow morning, and proceed with the
other portions of the evidence.
PROPOSITION TO PRODUCE BOOKS. 2747
The CHAIRMAN. Very well ; if you ask for time until to-morrow morning at 10
o'clock we will be ready then to hear you.
The WITNESS. The counsel ask for that time. I am now ready to go on with anything
that I know.
Commissioner LITTLER. I understand that Governor Stanford is ready to go on
with such matters as Mr. Anderson is ready to question him about.
The CHAIRMAN. My understanding is that his counsel have asked time until to-morrow
morning at 10 o'clock.
Mr. BERGIN. Yes, sir.
The WITNESS. Do you ask that delay with reference to my examination?
Mr. BERGIN. I think that you had better wait until to-morrow morning.
The WITNESS. I suppose that I must submit myself to counsel. [After consultation
with counsel.] After inquiring of these gentlemen, I find that they are not
willing to go on with my testimony ; I, myself, am ready to go on now.
Mr. HAYMOND. I think that Commissioner Anderson states the question in a nutshell
with reference to the investigation here, so far as an appeal to courts of
equity is concerned.
Mr. BERGIN. Commissioner Anderson h as jnst made a suggestion to me which makes
ifc desirable that this matter should be decided at once, and asks if we need
Governor Stanford in order to enable us to decide promptly.
WITNESS EXCUSED FOR PURPOSES OF CONSULTATION WITH COUNSEL.
Commissioner ANDERSON. Do you want Governor Stanford in order to decide this
matter by half-past two o'clock?
Mr. BERGIN. Yes ; I think that it would be entirely proper.
Commissioner ANDERSON. I understand that these gentlemen ask to have Governor
Stanford excused until half-past two o'clock, and that they agree if this is
done to make a proposition to us at that hour. 1 move, therefore, that Governor
Stanford be excused from further examination on this subject until half-past
two o'clock this afternoon.
The CHAIRMAN. If there is no objection it will be so ordered.
The WITNESS. I am sorry that you have excused me.
Commissioner ANDERSON. If your lawyers do not want you we will proceed with
the examinationon^this general subject; but they say that they want you.
Mr. BERGIN. Doctors cannot operate without patients to operate upon.
Commissioner ANDERSON. The Commissioners think that they require a great deal
of patience, too.
PALACE HOTEL, SAN FRANCISCO,
Tuesday, August 2, 1887.
Afternoon session. PROPOSITION IN REGARD TO PRODUCTION OF BOOKS.
Mr. BERGIN. The proposition that is submitted to the Commission is on behalf
of Mr. Douty. We will submit to the Commission the books P R VOL iv 27
2748 U. S. PACIFIC EAILWAY COMMISSION.
of the companies asked for from Mr. Douty, as well as any other evidence at
our command, reserving the right to assert our legal rights to I withhold
the same or any portion of the same whenever, in our judgment, the Commission
seek to examine any matters appearing therein not pertinent to or proper
for a full and complete examination by the Commission of all the matters
with the investigation of which they are properly charged under the act of
Congress.
The CHAIRMAN. Suppose you leave that proposition with us for ten or fifteen
minutes.
Commissioner LITTLER. We desire to have an opportunity to confer together for
ten minutes to discuss this matter.
A SECRET SESSION AND DECISION.
The Commission here retired and held a secret session in the adjoining room.
Upon their return the secretary was directed to read their decision, as follows
:
The Commission report that they have decided to accept the proposition set
out in Mr. Bergin's communication, with the understanding that the motion in
which papers were filed this morning in the circuit court of the United States
should stand over without prejudice, with the right to either side to call
the same on for argument before any judge of the circuit or district court
on one day's notice, and that the Commission shall be at liberty to depute
any of their accountants to examine the books in question, and to take such
extracts from them as the Commission shall desire, and with the understanding
that the said companies shall produce the books before the Commission when
required, for the inspection of the Commission.
TWO DAYS' NOTICE ASKED.
Mr. BERGIN. It seems to me that one day's notice is hardly enough. You have
all your papers prepared, and you are ready to act on the moment. We, of course,
would have to prepare papers to respond to your application ; and, as you can
readily see, one day's notice would hardly give time to do that.
Mr. COHEN. We think that to make it two days would be much better.
The CHAIRMAN. Time with us is a very important factor. That is why we fixed
it at one day.
Mr. COHEN. We will not delay you in any way, and two days would be sufficient.
The CHAIRMAN. I would rather have it one day, if you can possibly get ready.
It means one day more with us for our other business.
Commissioner LITTLER. And that will not prejudice your right to be heard before
the c.ourt for an extension of time, of course, but we will have the right
to call this matter up on a day's notice, and if you can show cause to the
court why you are not ready, that is another matter. It is like setting a case
for trial.
Commissioner ANDERSON, I never knew a California lawyer, nor any lawyer of
any other State, that could not manage to get one extra day.
Mr. BERGTN. In this matter we desire to act in perfect good faith, and do not
wish to have an assurance or understanding which seems to be merely illusory.
PLACE OF EXAMINATION OF BOOKS.
The CHAIRMAN. Have you any further propositions, gentlemen? Mr. COHEN. I would
suggest to the Commission that I think it would answer every purpose, and be
very much more convenient to Mr.' Douty
PROPOSITION TO PRODUCE BOOKS. 2749
and to the companies that he represents, if the examination of these books
could take place at the railroad offices instead of their being brought up
here. They are very voluminous. There is no place to keep them here, and
they would have to be moved backwards and forwards.
The CHAIRMAN. What will the Commission do with reference to the examination
of the books I
Commissioner ANDERSON. My suggestion is to send Mr. Stevens there with instructions
that that which we want him to obtain is the actual cost of the different roads
specified, as it appears on these books ; and unless the gentlemen of the Commission
desire to take some other course, I should suggest that Mr. Stevens, our chief
accountant, be sent to the office of the company with instructions to take
such extracts as will furnish to this Commission that information. We would
also like the minute books of the Western Development Company and the Pacific
Improvement Company, which cannot be very voluminous, placed at our disposal
for our examination here.
ALLEGED DIVERSION TO SOUTHERN PACIFIC.
Governor STANFORD. I would suggest, with reference to the remark made by a
Commissioner this morning, with regard to the diversion of means to the Southern
Pacific road, would it not be well to possess yourselves particularly of that,
in the first place? Having determined that, it may determine a good deal what
other information you want.
COMMISSION'S ACCOUNTANT TO REPORT ACTUAL COST OF ROADS.
Commissioner ANDERSON. Well, so far as my views are concerned, I would send
the accountant there with instructions to report to us the actual cost of these
roads. That is the essential fact in my mind to de termine the other questions.
Commissioner LITTLER. We will determine the question about bringing the books,
or going to the books, when that question arises.
Commissioner ANDERSON. At present we will send Mr. Stevens down there and only
ask for the minute books to be brought here.
Commissioner LITTLER. We will undertake to take good care of the minute books
and have them put in the vault here at night. We have no time to examine these
minutes except out of the session, and we would like to examine those books
to night. Is that satisfactory?
Mr. BERGIN. That, I believe, is satisfactory.
Commissioner ANDERSON. Our minutes are as precious as yours. We understand,
then, that the matter is disposed of on the terms which appear in your proposition
and our acceptance?
Mr. COHEN. Yes, sir.
Commissioner ANDERSON. We would like to have, for use this evening, the minute
books of the Western Development Company and the Pacific Improvement Company.
2750 U. S. PACIFIC RAILWAY COMMISSION.
PALACE HOTEL, SAN FRANCISCO,
Tuesday, August 2, 1887.
LBLAND STANFORD, being farther examined, testified as follows :
ANNUAL EXPENDITURES FOR GOVERNMENT TRANSPORTATION.
By Commissioner ANDERSON :
Question. In your preliminary statement you made the remark that tbe annual
expenditures of the Government for transportation of supplies for Indian and
military service and the carrying the United States mail had exceeded $8,000,000
annually. From what sources did you take those figures? Answer. That is from
the Government reports.
Q. Do you know what particular year that figure applies to? A. It appears
in the Senate committee report, where the expenditures were given from 1840
to 18G9. Reports of other committees vary from that amount. I think in one
of the exhibits that I filed they are all referred to particularly.
Q. Do you know what the total proportion for transportation in % auy one year,
between 1840 and 18G9, was? A. No ; I cannot give that, I think in the original
tables it was all footed up, and the times when the money was paid out by the
Government ; but my recollection is now of the gross sum.
Q. Do you know what the total appropriation for all the services of the Army
for any one year was between 1840 and 1801? A. No, sir ; I did not examine
into that. I did not deem it important except only to state the general facts.
There are witnesses who can state all those particulars.
TRANSPORTATION RATES PRIOR TO CONSTRUCTION OF ROAD.
Q. Can you give us any of the details of rates that were paid during these
years, or before the completion of this railroad, for any services of this
class relating to the transportation of mails or troops or munitions of war?
A. Yes, sir; it is in those various reports, giving the price paid per pound
for transportation at the different posts and the price paid for the carrying
of the mails. I know that at the time the roads were less than 1,300 miles
apart there was a contract with Wells, Fargo & Co. for carrying the mails,
not above a thousand pounds at any one time, that being the maximum, of a little
less than $1,800,000.
REASONS FOR SUPPOSING SAME RATES WERE TO BE PAID COMPANY.
Q. On what do you base your assertion that it was contemplated that the same
rates of transportation which the United States had paid before the construction
of the road would be paid after its completion? A. On two things. One is the
debates that occurred in Congress at the time when members of Congress took
the position, from the reports showing what the Government had paid out for
transporta tion over the country substantially to be administered by these
railroads, that one-half of that would be sufficient to meet the interest on
the Government bonds, and, with the 5 per cent, net, would be sufficient to
provide for their payment at maturity. The other was that as the competition
was nothing, we supposed that we would be able to charge, and the Government
would allow, as much for the service as they had been paying to the ox-teams
and mule-teams, as there was no competition by which they could get a better
rate 5 but when they
LELAND STANFORD. 2751
came to fix the rate they gave us no voice in the matter, and did not pay anything
like in proportion. For instance, as to carrying the mail, whereas they were
to pay $1,800,000 for less than 1,300 miles of mail transportation, we had
to carry it from the Missouri River to San Francisco, furnishing a car capable
of carrying 18 tons, and a couple of messengers, carrying it through in four" days'
time, and with no limit as to the amount of mail, for sometimes an extra
car would have to be sent along to carry it, and they have never paid the
two companies, I think, quite $1,000,000 a year for one year's service. It
has been less.
HOW RATES WERE FIXED TO BE REASONABLE.
Q. With reference to the rates that you referred to, is it your judgment that
the debates of Congress and the casual expressions of members when speaking
to a bill are entitled to as much weight as the actual expressions contained
in the act itself? A. No ; in so far as the law is explicit ; but you will
notice that there is no provision in the law for our payment except in that
manner. The question was solemnly considered in Congress at the time the law
was remodeled, in 1864. The first law, of course, was not of that character
which permitted the roads to be constructed
Q. Do 1 understand you to say that this act does not contain a provision relating
to the rates to be charged by the companies to the Government? A. Oh, no ;
they were to be reasonable rates.
Q. And not in excess of what 9 A. Of the rates charged to other parties for
similar services. Now, with other parties we were in a condition to make contracts
based upon such competition as there might exist. With the Government they
did not leave us the option. The Government fixed arbitrarily the transportation
prices for the mail.
DECISION IN CASE OF UNION PACIFIC.
Q. Has not the question of the rates charged by you been presented in several
cases in the Court of Claims? A. I think not.
Q. Neither in the case of the Central Pacific nor in the case of the Union
Pacific? A. Mr. Miller can answer that question. Mr. Miller, have we ever
made out an account to the Court of Claims, asking for additional compensation
?
Mr. MILLER. No. The Union Pacific had a case, and it was decided that the United
States Post-Office Department had a right to fix the rates. That is as I understand
it.
Commissioner ANDERSON. Was not this the decision : that the rates which had
been fixed by the Post-Office Department, and which were the subject of review
in that case, were decided to be reasonable rates?
Mr. MILLER. I am not sure about that.
Commissioner ANDERSON. The case will show. That was the decision. Of course
the Post- Office could not fix rates.
The WITNESS. Whenever we get the chance to prove the matter in court wo will
prove that the Government rates were not reasonable rates.
GRANT TO NORTHERN PACIFIC UNJUST TO CENTRAL PACIFIC.
Q. You have alluded several times to the extension of other transcon tinental
roads as having interfered with the amount of earnings real ized by your company
through the rates it was enabled to charge, and also to the fact that some
of these rouds had been aided by the United
2752 U. S. PACIFIC RAILWAY COMMISSION.
States Government, alluding particularly to the grant to the Northern Pacific.
Do we understand that you regard the grant to the Northern Pacific as being
a violation of the spirit contained in the grant of assistance to the Central
Pacific and Union Pacific? A. Yes, sir.
GREATER AID EXTENDED TO OTHER ROADS.
Q. Do you know in what year the grant to the Northern Pacific was awarded by
Congress? A. No % ; I have forgotten now. But I want to say this : At the
time of the passage of these bills to aid the road the debates in Congress
show that they did not anticipate that this road itself could be completed
in 1876. But they said that if the companies needed more time they would give
time. It was an experiment. It was a road passing through a country that was
supposed to be almost impassable for railroads. There was not known to be any
fuel (coal) on the line of the road at that time and the geologists of the
country had declared that they never would find any ; and it was problematical
about the operation of the roads over the mountains in the winter seasou at
all. It was the pioneer road. As I said, it was the first time that any great
railroad had ever penetrated far into a country in advance of business, and
it was supposed that if this road was ever completed it would be a long time
before anything would ever come of it. The debates before Congress will show
that Congress gave more than twice the aid in land grants to these other roads.
And the part of the country through which the Northern Pacific passes is a
much better character of country than that through which the Central Pacific
passes. You gentlemen have been over it.
GRANT TO NORTHERN PACIFIC IN 18G4.
Commissioner ANDERSON. You say this was a violation of the spirit of the grant
to the Central Pacific, which was in 1862 and -1864. I think that you will
find that the proposition is unquestionable that the grant to the Northern
Pacific was made in the same year, in 1864, on the same day, and must have
been contemplated.
The WITNESS. What year is that u?
Commissioner ANDERSON. 1864.
The WITNESS. Yes, sir; but ours was made in 1862.
Commissioner ANDERSON. But you did not commence to construct your road till
1864.
The WITNESS. No. They gave us a more beneficial act then. But I was going to
say this, that whether they did it on the same day or not, they have taken
from us the means which wo had to pay the debt. It is in consequence of those
very acts of our creditor that there is now any question of ability to pay
to-day.
CENTRAL PACIFIC SHOULD BE COMPENSATED FOR INJURY DONE BY ASSISTING OTHER ROADS.
Q. In regard to other roads that were constructed through the United States,
the southern route, (which you had a large hand in constructing yourself),
the Sunset route, and the Topeka, Atchison and Santa Fe, and the other routes
which you have referred to, do we understand you that your idea of these acts
of Congress is that it was the duty of the United States to leave the rest
of that entire country undeveloped until you should have earned enough money
to have paid your debts? A. No, sir But, then, if they find it in the interest
of the country that
LELAND STANFORD. . 2753
they should do something that deprived us of the means of paying the debt,
they ought to compensate us for it. That is our view of it.
Q. Is it not possible that the rest of the community may not agree with you
in the idea that you were to be left, alone, and that, if you were interfered
with at all in any of this vast territory, you ought to be compensated? A.
If we are harmed by the Government, directly, by its acts, I think it ought
to regard it as an equity. Whatever question there is of our ability to pay
the debt arises out of the acts of the Government.
Q. Is it not a fact that in almost every industry which is exercised through
corporate powers, subsequent industries are developed which are more or less
competing with the first chartered industry I A. Yes, sir.
A CASE OF BENEFITS TO THE GOVERNMENT.
Q. And have you ever heard of a case before where the holder of the first charter
claimed that the grant of power that interfered with it in any way entitled
it to compensation from the State? A. I cannot say that I have, but I know
of no case similar to this. This is one of benefits to the Government. The
Government has received benefits in every direction. It has never been disappointed
in a single expectation as to the accommodation that the road would give to
its business, nor in the development of the country, nor in the time in which
it was completed not a single one. There has been never, so far as our company
is concerned, at any rate, a complaint on the part of a Government official.
And we are fulfilling every obligation. Now, the Government has had that advantage;
and yet it is assisting to build rival roads and is destroying our capacity
to earn, while it is enjoying all the benefits of the contract it has with
us. I submit it is a question of equitable consideration.
VALUES CREATED BY CONSTRUCTION OF ROAD.
Q. In regard to the question of benefits, is it not true that the successful
accomplishment of any great enterprise benefits not only the successful promoters
of it but also, indirectly, the whole community through which it passes? A.
Yes, sir, I think so. I do not suppose that this company, if it were able to
pay the 10 per cent, which the Government contemplated it should pay before
being interfered within any manner, or if it were paying 10 per cent., it would
get the one hundredth part of the values which it created.
Q. Is it your judgment, if a man, for instance, erects costly buildings adjoining
vacant property, and thereby enhances the value of the vacant property, that
he has any claim, either legally or equitably, against the owner of the vacant
property for compensation? A. No, sir ; none at all. There is no compact between
them.
SHOULD BE DEALT WITH IN A SPIRIT OF JUSTICE AND LIBERALITY.
Q. Do you understand that there is any agreement, or anything in the act, in
which you can predicate the assertion that the United States intended or meant
to be held accountable for the benefits that the country would receive from
the construction of your road? A. I think so 5 I think the whole act indicates
at that time that the companies were to be dealt with in a spirit of justice
and liberality. Now, then, we say that the Government has never been disappointed
; that it has all the advantages contemplated, and a great deal more. Then
they, by their
2754 U. S. PACIFIC RAILWAY COMMISSION.
own act, go to work and deprive us of the reasonable expectations we formed.
COMPLETION OF ROAD IN ADVANCE OF LIMIT.
Q. You have alluded several times to the fact that the road was completed seven
years in advance of the limit. Is there any action o the Government that you
can refer to as indicating a desire on theii part or a wish on their part that
you should complete that road at the time that you did? A. I cannot call to
mind any express declaration 01 the part of the Government to that effect ;
but I know this, that whei they provided that the two companies who built should
build east am west until a junction was made, they did expect that the roads
wouki be compelled, in self-defense, to hasten their completion ; and they
se cured what they were after, the early completion of the road. That legislation
was for the very purpose of securing an earlier completion of the road.
CAUSE SELF-PROTECTION.
Q. Had you not, or had not your company, special interests to subserve by effecting
that completion as rapidly as possible? A. Yes, sir ; self-protection. We
had done the greater portion of the work, so far as the grading was concerned,
between the Sacramento Kiver and the Missouri River. If we were open to competition
by a road operating from the east, our Nevada business would be substantially
destroyed to the Central Pacific, and that road would have been worthless.
Q. Was that one of the chief objects which you sought to ob'aiu by the rapidity
of your movements? A. Yes, sir ; that was one of the chief objects.
ANOTHER OBJECT IN VIEW.
Q. Was there not another object in completing that road at as early a date
as possible? I call your attention to your table of figures as to the net
earnings for the years 1869 to 1876. I call your attention to the fact that
the net earnings of your road, as appears from your own report of 1876, between
1870 and 1876 exceeded fifty millions of dollars. Now, if you had postponed
that construction and saved some of the expenses and discounts that you have
referred to, would it not have resulted in a corresponding loss in net earnings
?
The WITNESS. Fifty millions, from what time?
Commissioner ANDERSON. 1870 to 1876, six years, an average of over $8,000,000.
A. You say that was against operating expenses, but there was new work and
new track, and so on.
Mr. COHEN. I think you are under a mistake, Mr. Anderson, in the question you
are putting. These are net earnings after deducting operating expenses. From
that has not been taken out the interest and other expenses.
Commissioner ANDERSON. I so understand.
The WITNESS. Your question would be entirely a fair one, I think, if that was
net profits ; but as they are not, it is misleading.
Commissioner ANDERSON. I call your attention, then, to the fact that between
the years 1870 and 1876 your company divided over $18,000,000 of dividends.
The WITNESS. That was out of the net earnings.
LELAND STANFORD. 2765
COMPANY'S FIRST MORTGAGE COULD HAVE BUILT THE ROAD.
Q. Would it have been possible to have reaped that advantage if you had postponed
the construction of your road five, six, or seven years? A. Yes, sir ; I have
not the least doubt our own first-mortgage bonds would have built the road
; and now the Government is piling up the interest account against us, and
has got this enormous claim, all of which we could have avoided.
Q. Is it not clear that you could not have earned the money you did during
those years if your road had not been completed? A. It could not, of course.
Mr. COHEN. This is not all Central Pacific. There are leased roads included.
SELF-PRESERVATION FORCED EARLY COMPLETION.
Q. Was it not for your personal advantage to hasten the completion of that
road I mean, balancing all the advantages and disadvantages, one against the
other; and was not that the main motive that induced you to finish it in 1869
? A. It was self-preservation which forced us to do it. After this act of Congress
the Union Pacific came over and commenced work on the Humboldt. They were transporting
materials and corn and supplies for their animals 750 miles from their own
base, with the anticipation of coming in and heading us off. And I call your
attention to the fact that these dividends,. whatever they were, are not merely
confined to that portion of the Central Pacific to which Government aid was
given. The best part of the Central Pacific property is not that which the
Government so aided.
Q. The whole road was in operation when completed, and contributed to the earning
of dividends 9 A. Yes, sir.
THE COMSTOCK LODE.
Q. And is it not also true that you could only secure your laud grant to the
extent which you have secured it by building the road as far as you did? A.
Well, you have seen the land grant; let it speak for itself how much railroad
any one could afford to build to secure it. I do not think the laud grant would
have had a great deal of influence in pushing this road. Then there is one
fact I want to call the attention of the Commissioner to. At the time when
we organized the company the Comstock lode was developing immensely, and the
whole of that country went on and improved and the business was enormous, ami
at such rates almost as we chose to charge, not exceeding 15 cents a ton to
the mile. In the last six or seven years all Nevada has depreciated very much.
Its population has dwindled, and its business proportionately, or more than
proportionately. The greater portion of the net proceeds arising from that
business in Nevada arose out of that Comstock lode.
VALUE OF GOVERNMENT LAND GRANTS.
Q. I would call your attention to the fact that the estimate you put upon these
Government lauds, in your own report of 1872 (and I do not think the fact is
materially diminished in subsequent reports), is $20,000,000? A. They are not
for Government lands only.
Q. Farming lands, they are called, and they do not include the Mission Bay
or private property in cities? A. That was our land agent's
U. S. PACIFIC RAILWAY COMMISSION.
report. The population at that time was increasing over in Nevada, and there
was a prospect that they would want some of those lauds.
LARGELY DEPRECIATED.
Q. But the figures I have quoted from your report are signed by yourself? A.
It is in mine. It is embraced in it, and I took his judgment. But the failure
of the Comstock lode and the depreciation of population, and the diminishing
of business over there, has substantially, or very largely, changed our opportunity
of disposing of the land, and prevented our disposing of them. Besides that,
the Government has not given us even the title to those lands, although we
have demanded it from time to time. We have always had a surplus in the Treasury
of the United States to pay for the surveying and other ex- t penses. We demanded
these lands time and time again, without ob-' taiuing them, and in consequence
of the Government's derelictions we have been charged with not taking out land
patents in order that wo might avoid taxation.
BENEFITS CONFERRED IN DEVELOPMENT OF COUNTRY.
Q. The object of my explanation to you is to show you how the matter presents
itself to us on the subject of what you call an equity against the Government
by reason of the benefit arising from the completion of that road seven years
before the time. If that completion was due to your own judgment as to your
own interests, for the purpose of securing the Salt Lake City business, and
for the purpose of securing the land grant, and for the purpose of putting
the entire road in operation and enabling you to increase your earnings, then
I ask you on what basis you claim that there is any equitable right to compensation
from the Government? A. I do it for this reason : That we had a business,
and there was a prospect of a business that would compensate us for all these
sacrifices. That business has been diverted from us by the act of the Government,
Now, it is a misfortune of course that the population of Nevada has decreased
so much 5 but perhaps that we cannot claim anything for, excepting on this
consideration, that we have developed the whole country from the Missouri River
to the Sacramento, and the Government has had all that benefit. If, therefore,
in dealing with its debtor, which is not in fault if it is not able to pay
(it is its misfortune), the Government should take into consideration the magnificent
benefits which it has received, and allow to that debtor what would be proper.
The whole country was developed between the Missouri River and the city of
Sacramento. From the big bend of the Truckee to the Bear River, in Utah, there
was but one white man along the line of our road when we commenced. We all
know there was not even a railroad across Iowa when the Union Pacific commenced.
The first iron had to go down one river and then up another river to be laid
down there.
THE COMPANY WILLING TO SURRENDER THE LANDS.
But, so far as the lands are concerned, we will let the Government have them.
We have always been willing to let the Government have those lands on account
of their debt, at their own valuation. We will do it to-day. To-day, when they
are apprehensive that they may not be paid, we will give them all the lauds
that we have, from the commencement of the road at Sacramento, at the price
that they have put
LEI, AND STANFORD. 2757
upon their own lands adjoining. They can have them at their own price to-day.
By Commissioner LITTLER :
Q. You mean at such a valuation as the Government, through its agents, fixes
? A. Yes, sir ; we would gladly turn all that over to the Government, if it
is apprehensive.
Q. To be credited on your debt? A. Yes, sir ; and as we have not had a great
many of them, they are there, pretty nearly all we were entitled to. [To Mr.
Miller]. How man y acres of land have we sold?
Mr. MILLER. I do not know.
THE CENTRAL PACIFIC A PIONEER ROAD.
The WITNESS. I want to say this about the Central Pacific Eaiiroad. It was
a pioneer road, and the other roads that were aided by Congress did not move
until we had demonstrated the practicability of operating the through road.
They were failures. It was the success of the Central Pacific that finally
enabled these other roads to go on to completion. You must remember, and I
think it is but due and right that I should call your attention to the peculiar
condition of all that country at that time, that it was a wilderness ; that
never before in any country had anybody attempted to penetrate an unoccupied
country with a railroad, trusting to the development that was to follow to
make it successful. Now, the developments to sustain the road were all consequent
upon the construction of the road, and the Government has had the benefit of
it for hundreds of miles upon either side. This road created confidence and
led to the completion of other roads. Those are facts which I think ought to
be considered by the Commission in making up their statement of the relation
of these roads to the Government.
WILLING TO LET GOVERNMENT HAVE ROAD ON CERTAIN CONDITIONS.
By Commissioner ANDERSON :
Q. True, but the question is whether the circumstances that you refer to are
matters which should be commended in words, or matters that should be commended,
as you seem to claim, in dollars? A. Well, it is a matter that we ask your
careful consideration of. We shall prefer these claims to the consideration
of the Government. We think that the road is entitled to them, There is one
thing about it. I do not know the present prospects of the country, or its
intentions, but if the Government wants that road, if they will make an allowance
for the benefits they have received from the beginning to the present time,
and will take the roads and lands and release the aided portion of the road
I do not know but that the company will agree to it to-day.
GOVERNMENT HAS NO CLAIM ON DIRECTORS.
By the CHAIRMAN :
Q. How much of the benefits which the directors have received will they concede
to the Government? A. The Government has not any claim upon the directors
for benefits. They built the road, they used the means that they had, all of
them, and then they owned the road. The ownership of it at that time was of
little consequence. There were no capitalists who would invest a dollar in
the stock, upon the completion of the road ; and the values that the road created,
a small portion
2758 TJ. S. PACIFIC RAILWAY COMMISSION.
of those values, made this property sufficiently valuable to make iti worth
holding by the directors. And that was the reason they owned the road. The
values were created by the construction of the road, ami they had them at
the last because nobody else would touch them! This road was open to capitalists,
but there was not to be found a com-l panyin the East nor in the West that
was willing to take it. We were thrown upon our own individual resources
to get together the means to build the road over the mountains ; and unless
the very men that er gaged in it had taken upon themselves all the responsibility,
the roa would not have been througn to-day. I do not know that you woul have
found anybody but the Government itself to do it. Individual would not do
it. With all the magnificent grants to the Northern Pa cific, and after the
example of our road in developing business, look ho> long it was before
they would go on with the work, and then see th subsequent failures that
occurred.
Commissioner ANDERSON. There was no aid in bonds extended to il The WITNESS.
No, sir ; but from the bonds extended to us we realize* seventy per cent on
the dollar, and are paying now six per cent on th par value; and the lands
which they have had were of great value. I would have been better for them
to have built the road that way thai to have had aid from the Government, the
way we had it.
DISPOSITION OF GOVERNMENT BONDS.
Q. From what source do you take the statements of discounts whic were 'paid
upon the Government bonds? A. From our own books.
Q. And where were they sold? A. Mr. Miller tells me that they were not all
converted, because some of them were paid out in the way of supplies; but taking
the average discount at the time we received the bonds, this is the price in
gold.
Q. Well, how long did you keep some of these bonds, after you received them,
before they were actually sold? A. They were sold generally in advance, before
we got them.
ROAD MORTGAGED AHEAD OF CONSTRUCTION.
Mr. COHEN. The road was mortgaged two hundred miles ahead before it was built,
was it not?
The WITNESS. One hundred miles ; and then on the road from the Promontory to
Ogden we went to the Union Pacific, and had to pay them for it ; and then it
was some .time later before the Government bonds on that portion were received.
But the Government allowed us two-thirds of the amount upon the uncompleted
road ; and estimates were made, and we anticipated the receipt of the bonds,
so that they were all used up when we got to Promontory.
WHAT THE BONDS SOLD FOR IN GOLD.
Q. What I want to ascertain is, the exact amount which the bonds sold for the
account of this company produced in gold, which gold was remitted to you here
for the uses of your company? A. One of the statements here gives it. I supposed
that I gave it exactly to a dollar, but a little of it had to be estimated,
because the currency was used at par over there in purchasing.
By Commissioner LITTLER :
Q. Did you not give that statement in your paper submitted this morning?
LELAND STANFORD. 2759
Commissioner LITTLER. No ; the statement was given a few days
I -ave there what I supposed to be the actual dollars received, but 'from
Mr. Miller I learn that a part of that was estimated upon the bonds at the
time according to their value in the market.
By Mr. COHEN :
Q Did you ever see any of those bonds, or receive the bonds to handle them?
A. No, sir; I never saw one of those Government bonds.
HOW THEIR VALUE IS ESTIMATED.
By Commissioner ANDERSON Q. The bonds were sold in New York when they were
sold 1 A.
sir
' Is it not a fact that the value of the bonds which you have submitted to
us is merely an estimated value of the bonds, taking the premium on old at
the 'time you received them from the Government?
Mr. MILLER. No, sir ; not exactly ; but it is made up mainly from the average
premium on gold for each year.
Commissioner ANDERSON. For each year during which the bonds werel'eceived?
Mr. MILLER. Yes, sir.
BONDS ALL SOLD AFTER COMPLETION OF ROAD.
Mr COHEN. And for each year during which they were sold 1 The WITNESS. They
were all sold. We did not keep a bond after the completion of the road, and
1 think that all our own first-mortgage bonds were sold before the completion
of the road. We had a right under the law to issue bonds for a hundred miles
in advauceof the completed line ; and then we were also to have the Government
aid on the portions beyond, at an estimate of two thirds of what we might receive
from the Government for the work beyond, all of which, when we got over the
mountains, had been issued and used so that we started out over the plains
with an incumbered road in advanceseveral million dollars debt in advance probably
some six or seven million dollars in debt.
BORROWING ON BONDS.
Q. The sales of these bonds was a matter entirely within your cou Q And you
'could have borrowed substantially the face of the bonds at the time/? A. We
did, over there, when we could get it. We borrowed money, and we never could
have gotten through excepting that we hypothecated our own bonds and pledged
the Government bonds to such people or capitalists as had confidence that we
would give the bonds to them as we earned them. In that way we were able to
get through. We really passed the mountains in a pretty nearly crippled condition.
BONDS NOT KEPT A WEEK PRESSURE FOR MONEY.
By Mr. COHEN :
Q. When you got the Government bonds, how long did you keep t |j em? A. I
do not know that positively, but Mr. Huntiugtou was the agent over there and
disposed of them. I do not believe that he ever
2760 U. S. PACIFIC RAILWAY COMMISSION.
had on hand any of them unless he had some fragments of a lot ; I do ' not
believe that he ever kept them a week.
By Commissioner ANDERSON :
Q. The question of whether he should sell them or carry the loan by hypothecating
the Government bonds was a matter in which he used his own discretion? A. Yes,
sir.
By Mr. BERGIN :
Q. Subject to the exigencies of the business? A. Yes, sir. Oh, we were pressed
for money and used it all up.
MILLIONS OF BONDS PLEDGED IN ADVANCE.
By Commissioner ANDERSON :
Q. Was the money any better to you, whether it was the result of the sale of
bonds or the result of a loan by hypothecating the bonds? A. Well, yes, sir.
From a long experience in being in debt 1 have come to the conclusion that
it is a much more comfortable condition not to owe money. The Government bonds
were, many of them, I think, millions of dollars pledged in advance of our
receiving them.
Q. You issued certificates, I suppose, and then when you got the bonds you
substituted the bonds for the certificates. Is not that the course which you
pursued?
Mr. MILLER. We gave a man an order to receive them.
INDIVIDUAL NOTES GIVEN, SECURED BY COLLATERAL.
A. Yes, sir. And there is another thing. Most of the time here and I do not
know but Mr. Huntington did the same thing over there when he borrowed money
wo did not give the company's notes ; but we gave our own individual obligations,
secured by these collaterals. People would not take the company's obligations
here.
Q. Where the collateral was the Government did it make any difference who the
borrower was? A. I do not suppose it made any difference there. In the case
of the Government I suppose they relied upon the collaterals entirely.
HIGH PRICES FOR LABOR AND MATERIAL.
Q. Can you give us some of the prices that you have alluded to as being very
high between the years 1867 and 1869 for labor and material, iron, and other
matters connected with your building? A. Yes, sir ; I think I furnished a list
of some things ; but I know in Salt Lake City we did considerable work from
there this way ; and, by the way, we lost all we did from Ogden to Promontory
in the final settlement. Oats were from 12 to 15 cents a pound, and hay was
$100 a ton ; and I think some hay was hauled out that cost $180 a ton. Teams
we paid $12 to $14 for did not haul and could not haul anything but very small
loads. The horses were very weak.
PRICE OF TIES.
Q. What were the ties? A. I think we paid $2 for some ties, but they were
all oak.
Q. Give us the limits.^- A. We did not take a great many at that price. They
were bought for the purpose of facilitating the construe
LELAND STANFORD. 2761
tion of the road. It was for that purpose that we bought ties over there, and
laid them down and had them ready when the track should come along. I think
the Union Pacific j>aid $2 for a great many ties over there.
Q. Was the average price of ties in that region and during those years in excess
of $1? A. All those ties cost a good deal. I do not think either company was
able to get ties from people over there for less than $1 ; but we carried our
ties, most of them, from the Sierra Nevadas, and some of the redwood ties went
away out on the desert. They were cut in Huinboldt County and were brought
down to San Francisco and then were shipped out to the front.
Q. Did you not get Sierra Nevada ties at as low a rate as fifty to sixty cents
? -A. About forty, I think ; forty to fifty cents.
Mr. COHEN. But they were very perishable and had to be renewed very soon.
The WITNESS. Yes, sir ; they did not last long. When we can get those ties
here we use the redwood. When the lumber mills were started on the Sierra Nevadas
we could get plenty of ties, but we had to carry them away out to the front.
BAILS.
Q. I understand that that cost has to be added. Now, in regard to the rails
on that road during 1867 and 1869, where were they purchased? A. They were
all American rails. Some were purchased in New York. The most of them were
manufactured in Pennsylvania.
Q. Do you remember the price paid? A. I do not think any rails went on the
road for less than $70 a ton. That was the cost over there in the East. I do
not think smy were purchased that did not cost more than $70 a ton.
HOW TRANSPORTED.
<
J. How were they transported to you? A. The most of them came around Cape
Horn. I remember 10,000 tons at one time came across the Isthmus ; and I am
not positive, but I believe the charge was 3 cents a pound freight ; that is,
$60 a ton freight. And we had quite a number of engines and other materials
that came across the Isthmus at very high rates. The general rate for freight
on the steamers at that time was from 3 to 5 cents a pound.
LARGE SHIPMENTS.
Q. Do you not know that in a case of large shipments of this character special
arrangements were always made? A. We made the best arrangements we could,
and that is why I think possibly we did not pay 3 cents. That was the rate
; but I believe, and I know, we tried to get something off. Whether we succeeded
or not I do not remember now.
Q. That will appear in the books? A. Yes, sir ; whatever we did pay will appear.
Perhaps Mr. Miller can tell me.
Mr. MILLER. I cannot tell now. It is all on the books, though.
FILLING AND GRADING DONE BY CONTRACT AND FINANCE COMPANY.
Q. Was most of the labor of filling and grading generally done by con tracts,
let out at so much a yard, or was it done mostly by the people whom you employed
? A. No, sir ; most of the work was done by the Contract and Finance Company.
They sometimes Jet minor contracts.
2762 U. S. PACIFIC RAILWAY COMMISSION.
The earthwork that we started on in going over the mountain was pushed along,
and in fact the whole road was pushed with all the rapidity possible ; and
it was a question of distributing men to the best advantage as to how fast
we could go. I think when the road was on the Humboldt we had men at work
over by Salt Lake ; and at one time I know we transported over 3,000 men
and 400 horses, with all their supplies, 300 miles in advance of the completed
line 5 that is, to do the work on the canons on the Upper Humboldt. Perhaps
you may have noticed the work in the canons upon the Humboldt. There were
three canons there, and the work was very heavy. In order that we might not
be delayed on reaching here it was necessary to transport men and supplies
in advance out to that place.
OX-TEAMS HAULING TIES OVER MOUNTAINS.
Mr. COHEN. I would like you to mention to the Commissioners the circumstances
under which rails and ties were hauled across the Sierra Nevada Mountains by
ox- teams.
The WITNESS. If they would like to hear it.
Commissioner ANDERSON. Yes, I would like to hear it.
The WITNESS. Well, it is well known that the winters during which we were working
on the mountains were three of the heaviest winters that we had ever encountered.
We have had since then one winter when the snow fell to the depth of 60 to
70 feet in one place. But during those three winters the snow was somewhere
from 30 to 40 feet deep, as near as we could measure. That is the actual fall
on the level during the winter, and then the snow was settled down towards
the spring, packed down to about 13 or 14 feet of hard snow. Then the snow
would fall sometimes 5 to 6 feet in the night ; I believe in one case that
9 feet fell in a single night. It obstructed all the roads, and made it almost
impossible to get over the mountains.
HOW THE ROADS WERE KEPT CLEAR.
During the time. of these storms we had ox teams and other teams moving along
constantly trying to keep the road clear and the snow packed so that when the
storm was over we could pass along with our niti terial and could transport
our iron. I think that is all told in my report. We moved the iron there over
the mountains, over this snow, and down on to theTruckee Canon, where we could
work our men during the winter, and then we continued and laid the iron until
we had 40 miles of track laid. That is the way we hauled our material through
the Sierra Nevada Mountains from a point about 15 miles this side of the summit.
It was hauled there under all those difficulties, the snow falling and we laboring
to keep the road clear. We worked in tunnels many times.
TUNNELING DURING THE WINTER.
We pressed the tunnels forward during those winters as fast as we were able
to, and we oftentimes had long tunnels under the snow to reach the mouth of
the tunnel in the rock where we were doing our work. The season was very short
for working on those mountains in the open air, and when the proper time came
we swarmed the mountains with men, and placed the men along wherever we could
find a place for them to work or even could find the men, and even then we
used to send them to do this work under a very great disadvantage. We almost
wasted
LELAND STANFORD. 2763
powder. We bad to rely very largely ou powder, and we used it freely, and it
cost us, I think, from $12 to $13 a keg at that time. I think it cost about
three times what powder could be bought for before or since.
OTHER DIFFICULTIES IN GOING OVER THE MOUNTAINS.
And while we were doing these things it is almost impossible to portray the
difficulties which we had to encounter in pushing that road over the mountains.
Before reaching the snow line, down below the snow line for some distance,
the soil is of a peculiar character. It is a red, spongy, thick soil, and takes
up and holds water. There were weeks there when the teams could not haul stuff
on the wagons supplies for the men and materials that were furnished and they
were hauled by pack animals. I know the stage was abandoned on this side of
that mud or soft soil, and for, I think, nearly two months the passengers were
carried across on horseback until they could get up on the snow. We pushed
the work up there as fast as possible. It so happened that every winter we
were on the mountains was that kind of a winter. We pushed the work along as
well as we could at that time, but of course it was at an enormous cost.
LARGE FILLS ORIGINALLY COVERED WITH WOODEN TRESTLES.
Q. Can you tell me whether the large fills that occurred, that are found in
the ascent of the mountains, were originally covered with wooden trestles or
were they filled at the time? A. There were two or three of them that were
wooden trestles.
Q. Which is the largest of those fills ; was there not one fill that was estimated
to contain about 90,000 yards, in a distance of 600 feet? A. As much as that.
Q. And was that fill made at the time of constructing the road, or was there
a wooden trestle there, and it was subsequently filled? A. I ought to be able
to tell you the exact number of trestles that we have taken out, but I think
there are only three or four. I think there have been three or four trestles
taken out.
BOND AID INCREASED FROM $16,000 TO $40,000 WHERE.
Q. How far east of Sacramento City was the rate of the Government bond aid
changed from $16,000 to $48,000 a mile? A. About 7 miles east of Sacramento.
Q. Seven miles east of Sacramento City? A. Yes, sir.
CHARACTER OF COUNTRY BETWEEN SEVENTH AND TWENTY-FIRST
MILES.
Q. What is the character of the country between the seventh and the twenty-first
mile east of Sacramento City? A. It was very light work ; almost level. Out
to 23 miles up from Sacramento the rise is a little over 300 feet. I will tell
you, Mr. Commissioner, it would seem as though it was a very simple thing to
determine the base of a mountain. Dana in his geology gives the base of the
Rocky Mountains at the Mis* sissippi. In the case of the base of the Sierra
Nevadas there was a report made by the State geologist, the United States surveyor-general,
and the State surveyor-general, upon where the base commenced. There is a rise
there of 7^000 feet, more than 116 feet to the mile, but that p R VOL iv- 28
2764 U. S. PACIFIC RAILWAY COMMISSION.
was only for 4 miles, and they could not determine that by any abrupt ascent
of the railroad, and so they took the geological formation and found that
the mountains came down to this point, lieally they came down 4 miles this
side, but very plainly the mountain formation was down at this point, and
from that point up there was never a place where they went below the starting
point. That was fixed as the base. It was submitted to the President, and
he established the base at that point.
Q. In what form was it submitted to the President? Was it in the form of a
certificate or verified statement? A. I forget about the verification of the
statement, but I know that three reports were submitted, and I presume they
probably went to the Secretary of the Interior first. But as to that I cannot
say. I was not over there at the time.
COMPARATIVE COST OF FIRST SEVEN AND SECOND SEVEN MILES.
Q. As a matter of fact, is the cost of construction for the first seven miles
from Sacramento City any more than the cost of the second seven miles? Is
there any difference in the cost of construction of the first seven miles as
compared with that of the second seven miles? A. Yes, sir ; a little more.
There are some cuts, but it is light work.
Q. Is not the character of the country precisely the same ! Which would be
the more expensive to construct, the first seven or the second seven? A. lean
only estimate it. The American River bridge is a costly structure, and that
is in the first seven miles. Taking that in, I do not know.
THE BASE OF THE MOUNTAIN.
Q. As a matter of fact, you got $48,000 on the second seven miles and $10,000
on the first? A. I will say further about that. I presume it was not only geologically
the base, but, if you remember, this extra aid was to be given on that portion
commencing at the base of the mountains ; u the most mountainous and difficult
of construction," a hundred and fifty miles there, took us out to the
east line beyond the Sierra Nevada, and that extra aid really came where it
was most needed, and where the greatest difficulties were encountered. Yes,
I have heard it said that we moved the mountains down to the valley.
Q. Is it not a fact that one of the engineers of the road declined to verify
the certificate fixing the point at which the $48,000 rate would commence?
A. I never heard of such a thing.
Q. Did Mr. Judah sign the certificate? A. Mr. Judah I do not think was alive
when that was fixed.
Q. It was fixed in 1868?
Mr. COHEN. He was dead before 1865.
The WITNESS. Mr. Judah went home from here when, I think, the road was out
about six or seven miles, and he died. He must have died as early as 1863 or
1864.
Q. Do you remember that there was a difficulty between the company and Mr.
Judah as to the location of that particular point? A. No difficulty at all.
DISCUSSING AS TO WHERE IT COMMENCED.
Q. No discussion at all? A. Oh, yes ; we discussed this thing a good while
as to where the base of the mountain commences. We could not find any place
to fix it. The idea was that it was somewhere in the foot-hills, as you call
them, but when we came to start out we
LELAND STANFORD. 2765
got well up to twenty-three miles out ou the line before we struck the foot-hills,
and then there was never a time that the grade along up there was less than
100 feet, and then we commenced an examination to find out what was the base
of the mountain. Dana gave us the first idea when we went there. And so did
the State geologist, when we went to him. We also went to the United States
surveyor- general and to the State surveyor-general.
ALB THE OFFICEES WHO MADE THE EXAMINATION AGREED.
By Commissioner LITTLER :
Q. Did all those officers agree as to the point? A. Yes, sir ; they agreed.
They all agreed geologically that it was correct, except that the probabilities
are that, strictly speaking, it ought to commence about four miles earlier
than it did.
Q. What evidence was submitted to the President of the United States upon which
he fixed this point? A. Particularly the reports of those three gentlemen.
Q. Were their reports in writing? A. Yes, sir.
Q. Were they verified? A. I do not know.
^
THE BASE PROPERLY FIXED GEOGRAPHICALLY.
By Commissioner ANDERSON :
Q. I will call your attention to the fact that the language of the act under
which you were to have the $48,000 is, that for the 300 miles of said road
most mountainous and difficult of construction, to wit, 150 miles westwardly
from the eastern base of the Rocky Mountains and 150 miles eastwardly from
the western base of the Sierra Nevada Mountains, said points to be fixed by
the President of the United States, the bonds should be treble the amount on
the rest of the road. Does it not appear that that point should have been located
with reference to the difficulty of construction and the mountainous nature
of the territory rather than to the theoretical base as fixed by geologists?
A. Well, both. It first said from the western base of the Sierra Nevada Mountains.
Now we fix that base geologically. The object of the act was to aid that portion
most mountainous and difficult of construction. The whole of the difficult
portion of the Sierra Nevada Mountains lies within that 150 miles. The 150
miles commencing at that point takes us out over the Truckee Valley to the
east of the Sierra Nevada Mountains.
Mr. COHEN. As the distance was only 150 miles it does not seem to be very material
where it commenced, does it? They were to have three times the allowance.
The WITNESS. Well, the object of Congress was attained. It established the
point by taking the base afc which the 150 miles were commenced, which took
it on to the plains beyond the Sierra Nevada Mountains on to the Truckee meadows.
COST OF CONSTRUCTION FROM SACRAMENTO TO OGDEN.
Q. In relation to the construction of this road from Sacramento to Ogden, are
you able to state, from your own knowledge of the books in which those accounts
were kept, whether the figures which you have given us to-day of the entire
material aid that you had, amounting, as you have stated, to forty-eight millions
of dollars, are more or leSsthau
2766 U. S. PACIFIC RAILWAY COMMISSION.
the actual cost of the construction of that road 1 A. I know it in two ways.
Those figures were furnished to me from our books. I had such
intimate relations with the Contract and Finance Company
Q. What figures were furnished you from the books! A. I gave them to-day.
ALL THE MONEY USED UP IN CONSTRUCTION.
Q. I am speaking of the comparison of those figures with the figures that would
appear in the books of the Contract and Finance Company and the books of Charles
Crocker & Co. ; and I ask you, are you able to state from your memory of
the figures in the books of the Contract and Finance Company and the books
of Charles Crocker & Co. whether those figures show the cost of the construction
of that road to be more or less than the $48,000,000 you have mentioned? A.
I am not able to say anything about what those books would show, because I
never looked at them. But this I do know, from my intimate relations with the
work of Mr. Crocker, and from having much to do with the financial affairs,
especially while we were raising money over here, that I know it as well as
if you sat down to carry out a great enterprise and were working to a purpose,
you would know whether there was a surplus of money or not. I am as confident
as I am of niy present existence that all the money was used up in that construction,
and that there was no surplus over. I know that we were so close up and so
crippled for money all the time that we would not furnish and would not attempt
to sell a bond excepting as we needed the money.
ACTUAL COST TO OGDEN MORE THAN $48,000,000.
Q. Then your statement is that the actual cost of the road from Sacramento
to Ogden was at least forty-eight millions of dollars? A. It was more than
that. It was more than the Government and first- mortgage bonds, because into
it, I think, went largely the earnings of the road. We were doing business.
Mr. COHEN. And then you borrowed money on your individual credit I A. Oh, yes
; we borrowed a great deal of money. I hope you will not think I am boasting,
but during that time I was permitted to overdraw, without security, over $1,300,000
at one time. We borrowed money, and I think that what I borrowed here was borrowed
on our individual credit. I do not think we signed the notes by the company
at any time. We possibly might have done so ; but I know for a long time, at
any rate, they would take our individual notes when they would not take the
notes of the company. However, excepting the overdrafts at the bank, we had
to put up collaterals.
PROCEEDS OF INDIVIDUAL NOTES USED.
By Mr. COHEN :
Q. Did the proceeds of those notes go into the construction of the read*? A.
Yes, sir.
Commissioner ANDJERSON. The proceeds arising from those notes were used by
the company in the construction of the railroad, I presume?
The WITNESS. The proceeds of the notes, all I got, I suppose 1 paid over to
the treasurer of our company ; and then it was paid to the Contract and Finance
Company for construction,
LELAND STANFORD. 2767
Commissioner ANDERSON : Those were personal loans that were paid and upon which
you received interest, I suppose?
The WITNESS. Whatever interest I have paid for the company the company has
in some manner or other paid back. I do not know just how that interest was
paid, because I used to pay the interest on the notes running for some considerable
time. I used to pay interest monthly and I used to pay this money out.
INTEREST ON INDIVIDUAL NOTES REPAID BY COMPANIES.
By Commissioner ANDERSON :
Q. The question is, whether you received interest on the moneys which you advanced
to the Central Pacific or to the Contract and Finance Company u?
Mr. MILLER. Not always.
Commissioner ANDERSON. Let Governor Stanford answer according to his recollection.
The WITNESS. What money I borrowed, either the Contract and Finance Company
or the Central Pacific Company, according as they were benefited, made up to
me with the interest. I did not lose the interest.
Mr. MILLER. You mean you received no interest. The books of the Central Pacific
will show.
Mr. COHEN. I do not think you quite understood Governor Stanford about that
interest question.
The WITNESS. You were asking me about interest, Mr. Anderson, when we were
broken in upon, and a gentleman here suggests that either you did not understand
it or I did nor make myself clear. Whatever of interest was paid by us in our
individual capacities, the same interest was paid or intended to be paid by
the companies for which the money was borrowed, we charging no more and no
less than what the money was borrowed at.
METHOD OF CONDUCTING WESTERN DEVELOPMENT COMPANY.
Commissioner ANDERSON. The statement of Mr. Douty in regard to the Western
Development Company showed how things were conducted with it, and I presume
that the same course was pursued in regard to the Contract and Finance Company.
If I am wrong in that you may correct me. His statement showed that all that
construction work, and all the capital which the company used for the purpose
of doing its work, was advanced by the individual loans of yourself, Mr. Huntington,
Mr. Crocker, and in his lifetime, Mr. Colton, Mr. Mark Hopkins, and Mr. Colton
in the Western Development Company ; and the moneys so received were deposited
with the Central Pacific ; that the Central Pacific paid interest to the Construction
Company ; that the Construction Company either paid or credited interest to
the stockholders, and that the funds so advanced were used for the purpose
of doing the business of the company.
The WITNESS. Are you speaking of the Western Development Company 1
Commissioner ANDERSON. I am speaking of Mr. Douty's explanation, with regard
to the Western Development Company, but I have assumed that the same course
was pursued with regard to the Contract and Finance Company. Jf it is not so
you may correct me.
2768 U. S. PACIFIC RAILWAY COMMISSION.
SEPARATE ACCOUNTS WITH CENTRAL PACIFIC AND CONTRACT AND
FINANCE COMPANIES.
The WITNESS. I do not think it was so with regard so that company. I made my
return, I think invariably, to the secretary of the Central Pacific Eailroad,
of my financial operations of borrowing any money. It is possible that I may
have borrowed money for the Contract and Finance Company, but if I did it went
to them. I never mixed the two companies together, and I do not know that it
ever was done at any time.
NO MORE INTEREST CHARGED THAN PAID.
Mr. MILLER. You may have had such relation with the Contract and Finance Company,
but if you did I did not know it.
Q. Do I understand that you never charged the company which received that money,
whether it was the Contract and Finance or the Central Pacific, any more than
the rate that you had to pay yourself when borrowing the money? A. Yes, sir;
neither more nor less, but always the same. I do not want to answer for Mr.
Douty about it, because I never looked at his books, but Mr. Miller says the
interest account was made up on both sides. Sometimes there was a credit and
sometimes an indebtedness.
FURTHER TESTIMONY TO BE SUBMITTED BY COMPANY.
By the CHAIRMAN :
Q. Have you anything else to submit? A. I said to the Commission yesterday
that after the Commission got through we might wish to submit some testimony
upon our side. There are quite a number of things, very likely, which we may
wish to submit, but it will depend greatly upon what is drawn out by the examination
which the Commission is making. I think very likely we may want to put in some
testimony in regard to the equities that we think exist between the Government
and ourselves.
The Commission then adjourned to Wednesday, August 3, 1887, at 10 a. m.
PALACE HOTEL, SAN FRANCISCO,
Wednesday, August 3, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
THE DOUTY PETITION IN COURT.
Mr. BERGIN. Before Governor Stanford begins his testimony, if the Commission
please, I think that it would be proper for me to appear in circuit court with
Mr. Douty, as the document prepared by the Commission has been served, and
there explain the condition of affairs. I did write a note to United States
District Attorney Carey explanatory of the whole matter, but I think that perhaps
it would be better for me to appear and explain to Judge Sawyer how the matter
now stands.
Commissioner ANDERSON. I think that the stipulation which has been made out
between us is sufficient. Under that stipulation I do not think the district
attorney will put the case down for any specific day. I do not think that there
would be anything gained by your appearing
LELAND STANFORD. 2769
in court this morning. The understanding is that the matter will be brought
up upon notice by either side.
Mr. BERGIN. Of course that is the understanding between us.
Commissioner ANDERSON. Of course, if the district attorney sets it down for
any specific day, we shall have to move specially to have it go over.
LELAND STANFORD, being further examined, testified as follows:
METHOD OF ASCERTAINING PROCEEDS OF GOVERNMENT BONDS AND
OTHER AID.
By Commissioner ANDERSON:
Question. Referring to the tables submitted to you of the approximate realizations
from the bonds and other assets of the company up to January 1, 1870, you have
stated that the amount given as the proceeds of the Government bonds was obtained
by taking the average market value for the years when the bonds w r ere received,
and, in a measure, disposed of. 1 desire to know whether the same system has
been adopted in regard to the other items contained in your statement.
The WITNESS. The county and State aid.
Commissioner ANDERSON. Yes, sir; and the company bonds also.
The WITNESS. I do not know whether these figures are taken from the books of
the company, so far as the amounts are concerned, or not. They are substantially
correct, and can differ but very little from the figures which are absolutely
correct. I have it in my mind, so that I know the rate generally at which these
bonds were sold. This statement, however was furnished to me by Mr. Miller,
the secretary of the company, but whether he took it from the books of the
company or not it is, of course, impossible for me to say. I observe that the
figures here are in round numbers. For instance, the San Francisco bonds most
of them were sold at 70 cents. I think that we sold only a small lot at 73
cents. These bonds were sold at different times. We peddled them out from time
to time as best we could. You can hardly understand the difficulty that we
had in obtaining money here, even when the securities were good.
Q. My only question now is, whether this is made out from your books and is
a correct abstract from those books, or whether it is an estimate based upon
the market value, or the supposed market value, at the times referred to in
the statement? A. When this was handed tome I supposed that it showed the exact
amount to a dollar, but I see many round numbers here which makes me have a'little
doubt upon that subject. Mr. Miller would know all about it.
Q. And you refer us to Mr. Miller for an exact answer, do you? A. Yes, sir.
The facts contained in that statement are according to my recollection. I know
that the bonds were disposed of in that way.
SIGNING OF TESTIMONY BY WITNESSES.
Mr. COHEN. If the Commission will permit me to interrupt for a moment I would
like to ask whether you intend to have the testimony of each witness read over
by him and signed before finally concluding the examination.
Commissioner ANDERSON. That has been our practice.
Mr. COHEN. Will it be so in this case? I think that there is a little misapprehension
as to the answer of Governor Stanford yesterday with respect to the net earnings
of the road.
2770 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. It will be so in this case. That has been our practice
heretofore, and I see no reason why it should be changed.
Commissioner LITTLER. The witness will have abundant opportunity to correct
his testimony.
Commissioner ANDERSON. It is better to have all the witnesses sign, because
that will obviate mistakes , and then the witnesses are foreclosed.
Mr. COHEN. We would like to have an opportunity to correct the testimony of
the witnesses of the Central Pacific Railroad Company.
Commissioner ANDERSON. You shall have that opportunity.
BALANCE SHEETS FOR 1868 TO 1871.
Q. Have you in shape to exhibit to us the balance sheets of your company for
the years 1868, 1869, 1870, and 1871?
Mr. COHEN. Which company.
Commissioner ANDERSON. The Central Pacific Company.
The WITNESS. Do you mean to ask if I will have such an exhibit prepared and
exhibited to you?
Q. Have you in course of preparation the balance sheets of those years? The
reason that I ask for this is that your first printed report is for the year
1872. A. I cannot say. When I received your letter I wrote to Mr. Miller inclosing
to him your interrogatories and directing him to make complete answers to all
your questions.
Commissioner ANDERSON. I refer to your usual balance sheets in those statements.
The WITNESS. I asked Mr. Miller to furnish all the statements necessary, and
he furnished something which I put in here as an exhibit. I never went over
it very carefully, and I cannot now call to mind what was in it, but whatever
it was, I am satisfied it was correct.
Q. I ask you whether you had the balance-sheets at the time 1869, 1870, and
1871? A. I presume so, but I have no distinct recollection about it.
Mr. COHEN. If we have them we will take pleasure in furnishing them to you.
IMPROVEMENT AFTER COMPLETION.
Q. Do you know whether the items of the construction account varied materially
after the road was completed in May, 1869, during the years 1869 and 1870 1
The WITNESS. We continued to improve the road after that. Of course, while
we were rushing along at the rate of 500 miles in less than a year that road
cou-ld not be expected to be so complete as to be entirely satisfactory. We
ran over it while the ground was soft, and it was thrown somewhat out of line.
During the winter, when there was a great deal of frost, we dumped great masses
of frozen dirt, especially at the Humboldt, and when warm weather came around
this new road got out of line, and we were constantly at work on it. Afterwards
we had to straighten out the line in places, and we did a good deal of work
improving the road-bed. We put millions of dollars upon the road in the way
of betterments and improvements after the road was completed. That is only,
however, just such a history as all new roads have. After they are built the
company must go on for some time afterwards improving them.
THE WAY THE WORK WAS DONE.
Q. Through what intermediary was that work done after the completion of the
road in 1869? Was it through the Contract and Finance
LELAND STANFORD. 2771
Company? A. I think that most ot'it was done that way. I think that we allowed
them to do it ; bat as to that perhaps I had. better not say, 1br I have
an indistinct recollection upon the subject. It seems to me that nearly all
of this work was done in this manner upon the basis of the cost, with 10
per cent, added, because the construction company could do it much better
than the railroad companies could, for it was well equipped with everything
that was needed, and we considered that mode of procedure to be most economical
at that time.
COST OF CONSTRUCTION AT COMPLETION.
Q. I understand the statement of values which you have furnished, estimated
by you at $47,880,000, to cover all values which the company parted with up
to the date of the completion of the road in May, 1869? A. That statement was
furnished to me by Mr. Miller, and I presume that it is correct. Do you mean
all the values, including county aid, State aid, and subscriptions, and all
that?
Commissioner ANDERSON. Yes, sir. I understand you to say that that is the measure
of what you parted with and paid tor the construction of the road up to the
time of its completion, and that you also paid out more money. Is that correct
?
The WITNESS. Yes, sir ; I do not remember exactly how that is stated, but if
I understand it, it includes all that we received from the firstmortgage bonds
of the company and from the Government bonds, and in addition to that, all
that we received from other sources.
Q. And your statement is that you paid out and disposed of all these available
resources by the time the road was completed?
Mr. COHEN. And money received from other sources?
The WITNESS. According to my recollection, we had paid out everything by the
time we had the road built.
STATEMENT OF PROFIT AND LOSS JANUARY 1, 1870.
Q. Can you tell me from what source you got the statement of the amount of
profits and loss under date of January 1, 1870, amounting to $1,810,000? A.
I must refer you to the books for that. I am not a book-keeper, and do not
attempt to carry those things in my mind. The books will show, and Mr. Miller,
the secretary of the company, can probably explain it. I cannot do it.
Q. The amount included in that sum, which purports to be profit and loss, seems
to have been accumulated from the actual profits made by the company up to
that date, January 1, 1870 ; can you tell us anything about it? A. I only know
from that statement. I have no positive knowledge from a personal investigation
or examination of the books.
Q. I do not ask you whether it is correct, but whether you know that this amount,
which is set down here as profit and loss, was actually realized as the profits
from that portion of the road up to that date? A. I believe that it is correct,
as it was furnished to me by the secretary.
Q. Do you know how much the interest account was in the years 1870 and 1871?
A. I do not,
INTEREST ACCOUNT OF 1870 AND 1871 COMPARED.
Q. Was there any alteration in the interest account in 1870, as compared with
that of 1871? A. I think that the tendency was downward. When we first commenced
building the road, I borrowed money for the company and paid 2 per cent, a
mouth for it. We never borrowed any
2772 IT. S PACIFIC RAILWAY COMMISSION.
money as low as 1 per cent, a month, until after the Bank of California was
established, and that bank practically fixed the banking rates at 1 per cent,
per month.
Q. I am speaking now of the interest account on your mortgage bonds; was there
any change in that?
The WITNESS. Any change in our interest account 1 Commissioner ANDERSON. Yes;
the amount of annual interest which you were required to pay on your bonds.
Was that altered in 1870 and 1871? A. They were G per cent, bonds, and we
paid whatever interest was due upon them. I don't know that there was a possibility
of there being any other rate.
ISSUANCE OF LAND GRANT BONDS.
Q. It appears from the account of your funded debt in December, 1872, that
your land-grant bonds were issued, or are dated, in October, 1870, and that
the amount of bonds authorized was $10,000,000, and that the amount issued
was $9,153,000. The issue of those bonds in 1870 would naturally increase your
interest account, would it not? A. I presume so.
Q. Do you know how those bonds come to be issued? A. I am not able to call
to mind now the conversations and things that occurred prior to it ; but I
have no doubt that it was considered. I think that they were issued for the
purpose of paying the then debts, debts already contracted, and to provide
money ibr expenditures that we would have to make. I say this, although I am
not able to call to mind any of the conferences that preceded the issue of
those bonds.
HOW DISPOSED OF.
Q. Do you know whether they were sold in the market and the proceeds credited
to the company, or whether they were issued to individuals or corporations
in payment of claims'?
Mr. COHEN. I think that the books will be the best evidence upon that point.
Commissioner ANDERSON. Very likely, but we are not at the office, and this
is a large amount. We would like the witness's recollection upon it, if he
can give it to us.
The WITNESS. I cannot remember all about the occurrences of twenty years ago.
I have done an immense amount of business in those twenty years, and have been
engaged in a large number of important enterprises. It would seem natural that
I ought to be impressed with them, but sometimes I am not clear about them,
even in my own mind, and a good many things relating to those matters have
escaped my memory. Sometimes I wonder that I do not remember them. If you want
to get accurate information, you can use the books of the company, and I would
very much prefer that you should do so.
THE BOOKS WILL SHOW.
Q. Will the books show what disposition was made of those landgrant bonds,
to whom issued, and what consideration was received for them? A. I think so.
I believe that our books are kept as well and as accurately as the books of
any mercantile concern, and 1 presume they will show everything. I have never
examined tbese books, and I do not think that I have ever looked over half
a dozen pages of the ledger in all these years.
LELAND STANFORD. 2773
Q. Did you receive any of those bonds yourself? A. Not at that time.
Q. How long afterwards? A. I do not know.
Q. How many did you receive? A. I do not remember.
Q. Do you know whether you bought them, or whether they were distributed to
you as a dividend from some of those construction companies? A. As to how
those bonds were issued and disposed of eventually I do not now remember with
certainty. Before answering that question I would like to refresh my memory
by conversing with some one who does know more about it.
Q. Have you any of those bonds at present? A. No, sir.
Q. Where were you during the year 1869? I mean generally up to May, 1869, when
the road was completed ; during the latter part of the year, after its completion
? A. I think 1 was in this State. I may have made a trip East, but I think
that I was here all the time. I do not think that I went East in 1869.
"
DRIVING THE LAST SPIKE."
Q. Were you not present at the celebration?
The WITNESS. Of driving the last spike !
Commissioner ANDERSON. Yes, sir.
The WITNESS. Yes, sir ; I was there.
Q. That was a period of considerable rejoicing, was it not, among all the parties
connected with the enterprise? A. Yes, sir; the rejoicing was very great.
Q. I would not say that the land flowed with milk and honey, but I suppose
it flowed with other things, did it not? I mean all of you gentlemen had a
good time and a great jollification at the completion of the enterprise. A.
Well, I do not know. We had a good time, and there was^ a good deal of jollification
among those present. We were exceedingly relieved when we got through and we " jollified
;? a little. W^e thought we had succeeded in accomplishing a great work, and
had done a great thing for the country, as well as a great thing for our own
reputations.
THROUGH BUSINESS AT COMPLETION OF ROAD.
Q. Did not the effect of the enterprise manifest itself immediately in the
through traffic that went over the road? A. No, sir; it was some time before
we got prices down so that they could command the freight. It was some months
before we had much of any through business.
Q. Do you remember what the business was for the year 1869? A. 1 do not think
that we got much business in that year. We had expected to do a big business,
but we were disappointed in our expectations as to the amount of through business
for the first year. It came gradually, however.
BONDS ON WHICH INTEREST WAS PAID FOR 1869.
Q. Is it not true that all the bonded debt on which you paid interest for this
year 1869 was the interest on the underlying mortgages which preceded the United
States loan, and which amounted to about $25,000.000, exclusive of the Western
Pacific, which was not then consolidated? I believe that you had no interest
in that last-named road at that time.
2774 U. S. PACIFIC RAILWAY COMMISSION.
Mr. COHEN. There was the floating debt on which interest was paid.
Commissioner ANDERSON. I mean the bonded debt.
The WITNESS. We paid the interest on our bonds, whatever it amounted to. I
believe that we have never yet been in default.
Q. Were there any other bonds at that time except this $25,000,000? A. In
addition to the first-mortgage bonds there were a million and a half of State
bonds, a million and a half of convertible bonds
Q. Is it not true that the State of California paid the interest on the State-aid
bonds? A. Yes, sir ; the State paid the interest.
Q. What other bonds did you pay interest upon, except the firstmortgage underlying
bonds in 1869? A. A million and a half of convertible bonds, at 7 per cent.,
I think. I do not now remember any other bonds upon the road.
Mr. COHEN. There were the company's bonds I
The WITNESS. Yes, the company's bonds.
Mr. COHEN. And the floating debt?
The WITNESS. He is speaking of bonds.
NET EARNINGS FOR 18G9.
Q. It appears from your reports that the net earnings of the Central Pacific
for 1869, that is to say, the earnings less the operating expenses, amounted
to $2,677,290.06. I am quoting from your report, from the detailed statement
by years showing all the years up to 1884 as per report of that year. Were
you not then aware in 1869 that, judged by the traffic of that year alone,
the Central Pacific was earning an absolute net which largely exceeded the
interest on its permanent loans on its bonds? A. And the operating expenses
for the year! I think not. I think that we ran behind. That is my impression.
Q. Will you please consult your report? A. I will stand by the report whatever
it is. 1 have no doubt that it is correct, and it is much better than my memory.
Q. The report says that your earnings, after deducting operating expenses from
the gross earnings, were $2,677,290.06 for the year 1869. I will also say that
it appears from your reports that for the years 1863 and 1867 there had been
a net, after deducting operating expenses from the gross e.irnings, exceeding
$1,000,000 in each year, and a small net before that. I will ask you now whether
you were not aware that in 1869 the Central Pacific Eailroad Company was earning
considerably more than the amount required to meet its fixed charges? A. L
do not think that it was.
DEDUCTIONS TO BE MADE FROM GROSS EARNINGS.
Mr. COHEN. I think that your question, Commissioner Anderson, confuses the
witness. Those are not the profits of the company. The difference between the
amount received arid the amount remaining after deducting operating expenses
does not show net earnings. In addition to that you must deduct from this apparent
profit, interest, taxes, executive expenses, &c., which have to be paid.
Commissioner ANDERSON. I have simply asked the question whether Governor Stanford
was not aware, at the time that these figures were prepared, that after deducting
the operating expenses and these other expenses from the gross earnings there
was more than enough money left to meet the fixed charges of the road in 1868
and 1869?
The. WITNESS. Those figures may show it, but I do not think that they express
or show all of the expenditures. There must have been
LELAND STANFORD. 2775
a great deal going on in the way of payments for improvements to the road,
repairs, tax expenses, and other things. That statement, I presume, represents
any profit simply over and above operating expenses. What else was to be
included there I cannot say, but I presume that if you were to ask the secretary
he could tell you. I cannot explain all these details which appear in the
reports, but I know that we did not have the money, and 1 know that our expenses
were a great deal more at that time than the money that the company received,
but the amount I cannot say.
VALUE OF THE STOCK IN 1869.
Q. We want your judgment of this enterprise in 1869.- Do you say that the stock
had no value at that time? A. In 1869 we would have sold out for anything that
we could have got, if anybody wanted it. To give, you a 'general idea of how
this stock was estimated by us, I will say that the health of Charles Crocker
and of his brother E. B. Crocker became very much impaired. Judge Crocker's
health became permanently impaired, and Charles Crocker became apprehensive
and concluded to quit business. That was the doctor's advice to him. The result
was that Mr. Huntington, Mr. Hopkins, and myself bought them out for 13 cents
on the dollar for that stock, and that included whatever interests they had
in other enterprises.
Mr. COHEN. That was in 1871.
The WITNESS. I have forgotten the year, but it was some time after the construction
of the road. I think 1871 is correct. It shows what we estimated the value
of it to be as amongst ourselves.
Q. Was not this purchase afterwards set aside, and was not Mr. Crocker reinstated,
and did he not take his stock back? A. After Charles Crocker returned from
Europe, his health was very much improved, and he then bought back his interest
at the same rate at which he sold it. At the time of the sale, however, the
trade was absolute, and it was not known that he would ever want to come in
again.
BUYING UP THE OLD STOCK.
Q. At this very period that you are speaking of as having made this trade,
did you and your associates buy up all of the old stock of the company outstandingunder
theeightand one-half million issue, wherever you could find it u? Did you
not buy up the stock held by Mr. Lombard; did you not buy up Stewart's stock
; did you not buy up every share of stock that you could control, and did you
not go into the market so as to get all of it that you could? A. We bought
pretty much all of it.
Q. Did you not pay for that stock all the way from 90 cents on the dollar to
par? A. I bought full-paid stock at as low a price as 10 cents on the dollar.
Q. From whom I A. I bought this lot of shares which I have now in my mind of
a Mr. Watson.
Q. When was this purchase? A. Pretty early in the history of the road.
Q. In 1864 or 1865? At any rate, was it not long before the road was constructed
! A. Yes, sir ; it was before the road was completed.
BLACKMAIL SUITS.
Q. I am not, inquiring in regard to purchases made at that period, but as to
purchases that have some bearing on your statement that
2776 U. S. PACIFIC RAILWAY COMMISSION.
your judgment in 1869 was that this stock had no value. Beferring to that period,
I ask you particularly in regard to purchases made from Mr. Aspinwall and
from Mr. Stewart, purchases made here in San Francisco, whether you or your
associates did not get all that stock in and pay par for it? A. There was
a time when several blackmail suits were commenced against us.
Commissioner ANDERSON. I am not asking as to them- I am referring to purchases
made from friendly parties.
The WITNESS. I am telling you about those blackmail suits. We did not buy the
stock because it was worth any such money as that, but we did so simply to
make settlements of this litigation.
Couimissiomer ANDERSON. I am not talking of blackmail suits, I am speaking
of the other matter.
The WITNESS. You are asking me about those suits and I am telling you the character
of them. "
PURCHASE OF STEWART'S STOCK.
Q. I am not referring to the blackmail suits at all. I am talking of friendly
purchases made by you. For instance, the Stewart purchase, and such other purchases
as were made in a private way. Was not Stewart's stock purchased, and did you
not pay par for it? A. 1 think that the Stewart suit was one of the results
following the bringing of the Brannan suit, and that it was blackmail pretty
much the same as the Brannaii case. I think that he sold his stock as a result
of the Brannan suit.
Q. Was not Stewart's stock purchased long before you had any suit witti Brannan,
or anybody else? A. I think you must be mistaken about Stewart's stock. I
think that the Brannan suit was brought before that.
THE STEWART SUIT.
Q. One of the allegations in the Stewart suit was that he was not aware of
the Brannan case at the time that he was advised here in California to sell
his stock at par ; that after he sold it to you and your associates, who paid
for it at that price, he subsequently brought a suit, now pending, in which
he seeks to recover money, and in which he claims that there was an agreement
that, although he sold at par, if au} r more was given to anybody else for
similar stock he should receive an additipnal sum which would equal the money
paid for this other stock. Your answer says that the money paid for the stock
was not for stock #loiie, but was paid to settle claims. I ask youaf you did
not agree to purchase the stock at par at that time? A. My recollection is
that that stock was bought at par.
Q. Was it not part of that issue of eight and a half million of doll^rs, and
not of an issue of fifty millions?
Mr. COHEN. Your question is not correct.
Commissioner ANDERSON. It was part of an issue of eight and a half millions,
or of the subsequent issue of twenty millions.
Mr. COHEN. And some of the issue of one hundred millions.
The WITNESS. I cannot tell as to that, for I do not remember it.
OTHER PURCHASES.
Q. Did you make several purchases of this same character from different parties
? I do not refer to the blackmail suits. A. 1 cannot say how much was purchased.
Mr. Huutlugton purchased this Stewart
LELAND STANFORD. 2777
s'ock. I think that be also purchased stock from Mr. Aspinwall, and from other
parties at the East, and it was done for various reasons. What those reasons
were I do not know that it is now necessary to state, but it was not because
of the intrinsic value of the stock to us. I know that.
Q. I merely want to know whether those purchases were made at this time, and
whether par was paid? A. I suppose you want to get at the value of the stock
that you are inquiring about. If you want to get at that value I think that
you should take what it was worth in the market at that time. Asking about
these other arrangements I do not think is the best way to learn that value.
PROFITS ARISING FROM CONSTRUCTION OF ROAD.
Commissioner ANDERSON. I want to get at your real judgment as to what you believed
you made out of the construction of the road.
The WITNESS. So far as I can remember, whatever we made was stock.
Commissioner ANDERSON. Yes, thirteen millions of stock for each of you.
The WITNESS. No, I think not.
Commissioner ANDERSON. Thirteen millions of stock when construction was completed.
The WITNESS. We made various consolidations of other railroads with the Central
Pacific, and stock was increased in that way. Of course we had our proportion
of that. The exact amount received from the Central Pacific under the contract
with the Contract and Finance Company, I am not sure about, but I think it
was about twenty millions that the Contract and Finance Company received. I
cannot remember the exact amount, but I think that it was something like that.
METHOD OF DIVIDING- STOCK.
Q. Divisible into as many shares as there were stockholders? A. Yes, sir.
Commissioner ANDERSON. You have stated to us that under the Crocker contract
something likft $14,000,000 of stock was passed over, and that under the Contract
and Finance Company's contract about $20,000,000 of stock was paid to it exclusive
of the consolidating.
The WITNESS. Whatever there was in the Contract and Finance Company was divided
between the stockholders. . Relative to the purchases that were macte by ourselves
from time to time, they were made upon our individual judgment and account;
but these things had ceased to be valuable, and were not worth as much as we
had paid for them. The result was that each man4,ook credit for what he had
paid for this stock, and put the stock into the Contract and Finance Company,
and then it was divided among the stockholders in proportion to their holdings.
That is as near as I can remember about it. The exact amount 1 cannot tell.
OF SLIGHT VALUE AT TIME OF DIVISION.
The value of the stock at that time was not much. We did not consider it so,
and w would have sold it at a very small price. We could not, however, have
sold it at all. I would have been glad to have sold for a trifle, and I know
that the others felt as I did.
2778 U. S. PACIFIC RAILWAY COMMISSION.
Q. And yet your accounts show that the earnings of the road from 1869 to 1872
very largely exceeded the amount required for fixed charges, and that in
1873 you declared a dividend.
The WITNESS. In 1873 !
Commissioner ANDERSON. Yes.
The WITNESS. If we did, we declared them out of the net earnings.
Commissioner ANDERSON. And in addition to this, you state that there were purchases
effected by you for some purpose which you cannot at present exactly remember,
at prices approximating par, and yet, in the face of all those assertions,
you say that you believed that this stock had no intrinsic value whatever?
How is this 1
The WITNESS. At the time that we bought this stock it had no value, except
for the mere purpose of control. I do not believe that we could have sold it
in the market for any price. In fact, it had no market value. It was the same
with the Union Pacific. I know that we could have bought a controlling interest
in the Union Pacific at 10 cents on the dollar. At least, I was told so, and
it was selling in the market at 13 cents on the dollar.
FAITH IN THE SUCCESS OF THE ROAD.
Q. I am not inquiring as to the market price of this stock, but I am asking
for the judgment of Governor Stanford as to its value in 1869, as reflected
by his acts, and as to his then belief in the value of this stock. Had you
not great faith in it?
The WITNESS. Did I have great faith, do you mean 1
Commissioner ANDERSON. Did you have faith in the ultimate outcome of this enterprise
?
The WITNESS. I had a great deal of faith that we would get a very large proportion
of the through business. In this, however, we were somewhat disappointed, as
business did not come along during the first year as we had anticipated. We
looked for a great passenger travel, and thought that people in the east would
like to come to this coast. They did not come, however, and during the first
year I do not think that any more people traveled by rail than by steamer.
Q. Did you make any serious efforts to sell your own stock at that time?
The WITNESS. After the road was built?
Commissioner ANDERSON. Yes, sir.
The WITNESS. I do not think that I did. It would have been of no use.
Q. Did you really think that you got yourself into trouble and had made no
money out of the operation of the road, and the construction of it between
the years 1867 and 1870? A. I thought we had got ourselves into trouble. In
fact, I knew it. * We worked and toiled as few men were capable of working,
but had great hopes that we would succeed. Several times we would have willingly
gone out of it with the clethes on our backs if we could have been guaranteed
the completion of the road.
UNABLE TO SELL STOCK FOR TWENTY CENTS.
Q. When? A. At almost any time during the last* two years of construction.
Mr. Huntington and Mr. Hopkins offered to sell 80 per cent, of that stock at
20 cents.
Q. When I A. Mr. Cohen tells me that it was in 1873.
LELAND STANFORD. 2779
Q. The transaction did not go through, did it? A. No, sir; the transaction
did not go through, but it was not from any fault of Huntington and Hopkins.
The purchasers had their own reasons why they did not care to complete the
purchase, and I am informed that it was because of the demands being made
by the Government that they concluded not to make the trade.
SUITS AGAINST THE COMPANY.
Q. Let me ask you a few questions in regard to these suits to which you have
referred. As a matter of fact there were quite a number of suits brought against
the company by various persons. I refer to the Brannan, Kobinson, Lambard,
San Joaquin County, and other suits of like character, were there not? A. Yes,
sir; several. Lambard and other gentlemen of the Credit Mobilier thought they
had a chance to make some money out of us, and came out there. After a time
we settled with them. Brannan had some stock, $25,000 par value, which he had
taken in trade. It was reckoned at 25 cents on the dollar. Afterwards he brought
this suit.
Q. Did he get the stock in exchange for equipment and rollingstock? A. Yes,
sir.
Q. Which you afterward sold to another railroad at some loss?
The WITNESS. Sold to another railroad?
Commissioner ANDERSON. Yes; at least your books say so.
The WITNESS. I do not think that we ever sold that stock after we bought it.
Q. You mean that you never sold the equipment? A. Yes, sir ; I do not think
that we sold the equipment. I think that it went to the benefit of the Central
Pacific.
Commissioner ANDERSON. But the Central Pacific subsequently disposed of it
to one of the minor lines or sold it to another line; still, Brennan got his
stock, and that is far as we care to go. I will either ask you about the suit
or take any suggestion that you have to make.
COMPLAINT IN THE BRANNAN SUIT.
The WITNESS. I wish you would read the complaint filed in that suit.
Commissioner ANDERSON. I have read it.
The WITNESS. If you have you will understand the magnitude of it. I think that
he puts down the assets of the Central Pacific somewhere between $300,000,000
and $400,000,000, and that it was all appropriated by one or two men.
By the CHAIRMAN : Q. Is that one of the blackmail suits? A. I counted it as
such.
REASON FOR COMPROMISING- SO-CALLED BLACKMAIL SUITS.
By Commissioner ANDERSON :
Q. Quite likely. I want to ask you when suits of this character were brought,
what inducing motive was it that caused you gentlemen to pay the large sums
of money at the rate of $400 or $500 a share which were paid for the adjustment
of these suits instead of compelling the party to go to his proof and show
the exact state of facts to the whole world? A. I would like to gratify your
curiosity and that of
p -R YOL IY 29
2780 U. S. PACIFIC RAILWAY COMMISSION.
everybody else, and will do so as far as I can. At that time we were building
other railroads, and we concluded that it was merely a business matter to
settle those suits and not have them go on, and perhaps interfere with our
credit. That is one reason. Whether we were wise in doing it or not I do
not know; but in my own judgment we were very unwise, and I have always thought
so.
Q. That is my judgment also. The nature of the allegations were a direct attack
on the integrity and the honesty of the men engaged in the enterprise, was
it not? A. Very largely.
SUITS SCATTERED THROUGH A SERIES OF YEARS.
Q. Were those suits all brought in one year, or were they scattered through
a series of years, from 1871 to 1878? A. They were scattered. Some were brought
as late as 1880. The other suits were long afterwards, except the suits of
Lambard and Brannan.
Q. And how about the Robinson suit? A. Mr. Cohen tells me that the Robinson
suit was brought in 1876.
Q. And how about the San Joaquin suit? A. Mr. Cohen says that it was brought
in 1877. 1 do not remember the dates myself.
CHARACTER NOT DAMAGED BY SCURRILOUS ALLEGATIONS.
Q. During all these years, you gentlemen have had an opportunity to put yourselves
in a position to defend yourselves from scurrilous allegations, such as these
contained in these complaints, and yet you seem to have taken no steps towards
doing so. Was there any particular reason for remaining silent? A. I do not
know that our general character was damaged by any such allegations as those
contained in those documents. We have lived in this community for thirty-odd
years, and we are pretty well known.
Q. But did you pay money for the settlement of all these suits?
SAN JOAQUIN BONDS ISSUED TO WESTERN PACIFIC.
Colonel HAYMOND. Not for the settlement of the San Joaquin suit. That was decided
in our favor. Whatever was paid in that matter was purely voluntary on the
part of the company.
The WITNESS. We never touched one of those San Joaquin bonds. They were issued
to the Western Pacific Railroad Company before we purchased the control of
that road. The only question about that was that Mr. McLaughliu paid more for
that stock than it was worth at the time. There was a clause in the law that
the county should not part with that stock until it had first submitted the
matter to the people. Afterwards, through the trade, we became owners of that
stock.
Q. In its complaint, did not the county allege that it had been sold without
its consent or without the consent of the people and ask to have the stock
back again, or that the company account for what it was worth? A. I do not
know ; we received the stock from McLaughlin when we purchased the Western
Pacific.
ATTORNEYS IN THE SUITS.
Q. I understand that the county claimed that it was entitled to have the stock
returned, or its value. Who was the attorney in the Brannan suit ! Was it not
John B. Felton?
LELAND STANFORD. 2781
Mr. COHEN. In the Braiinan suit? No, I think not.
Q. Who was the attorney in the Lombard suit? A.. John B. Felton.
Q. And is it not true that he subsequently entered the employ of the Central
Pacific, and remained in its employ until his death? A. Yes, sir.
Q. Who was the attorney in the Robinson suit? A. A. A. Cohen and Delos Lake.
Q. As far as Mr. Cohen is concerned, is it not true that he is now one of the
advising counsel of your company? A. Yes, sir.
Q. And did Judge Lake" enter the service of your company afterwards?
A. Yes, sir.
OTHER SUITS AGAINST THE CENTRAL PACIFIC.
Q. What other suits of this nature were brought against this company? A. The
Main and Winchester case and the Colton case.
Q. Were those suits of a similar character? A. I consider them so.
Q. Who was the attorney in those .suits?
The WITNESS. On our side?
Q. No; on the side of the plaintiff? A. The attorney in the Hain and Winchester
suit was a gentleman from New York.
MR. CHITTENDEN'S CHARGE.
. Q. Mr. Chittenden? A. Yes ; ttiat is the man, and he made a good deal of
trouble for us. He once appeared before a committee of Congress, at request
of Mr. Huntington, and he wanted for his services to charge $25,000. Mr. Huntington,
however, gave him only $10,000, so I suppose he was trying to get even on this
case. You are perfectly acquainted with the gentleman, probably.
Commissioner ANDERSON. Very well.
The WITNESS. I will not ask you to state what his reputation is in your community,
or with you gentlemen of the bar, but I think that it is pretty well known.
Q. Who were the San Francisco lawyers associated with Chittenden?
Mr. COHEN. I brought the suit as an agent of Mr. Chittenden.
%
NO ILL FEELING TOWARDS LAWYERS ON THE OTHER SIDE.
Q. Do you remember the consolidation of the Central Pacific with' the Southern
Pacific? A. Yes, sir. But before I go on with that question I will say this,
Commissioner Anderson, that I do not believe that because lawyers are engaged
on the other side it follows that I do not appreciate their merits, or have
any ill-feeling against them for discharging their duty ; and I do not know
that in all of these cases, except it might be where a man had done some mean
thing, the^fact of his being employed upon the other side has ever interfered
with our personal relations.
Commissioner ANDERSON. I will say exactly why I have asked the questions :
It bears on the question of fact whether, in very truth, you and your associates
believed that the proceeds of your enterprise, in stock or otherwise, had value
or not. It appears so to us, that it had value, and that you must have thought
so at the time that it had a great value.
2782 U. S. PACIFIC RAILWAY COMMISSION.
NEGOTIATIONS TO SELL HUNTINGDON AND HOPKINS WILLING TO
SELL AT 20.
The WITNESS. No ; we did not think that it had great value. The strongest evidence
is the fact that when the Crockers sold they were willing to take 13 cents
on the dollar for this stock, and it carried with it whatever interest they
had in the other enterprises. Some of these enterprises were very hopeful ones
indeed, on which we had spent a good deal of time. Afterwards Mr. Huntington
and Mr. Hopkins got pretty tired also, and they wanted to sell to a syndicate
to be formed here/and the negotiations proceeded so far that at one time I
thought that it would be successful. I was going to retain my interest. I was
not selling at that time. Mr. Cohen tells me that Huntington and Hopkins agreed
to sell at 20 cents on the dollar, and that this was in 1873. That was their
estimates of value. Hopkins wanted to sell at 20 cents on the dollar, and this
was to carry with it all of his interest in the other enterprises on*the Pacific
coast, and Mr. Huntington was willing to do the same. At that time we had done
a good deal in the way of building other railroads and projecting them. I think
that we had control of the Southern Pacific at that time, did we not, Mr. Cohen
?
ACQUISITION OF SAN FRANCISCO AND SAN JOSE.
Mr. COHEN. You acquired the Southern Pacific in 1870 or 1871. I think that
it was in 1870.
The WITNESS. We had a great many very valuable interests at that time, besides
the Central Pacific. This road between San Francisco and San Jose, known then
as the San Francisco and San Jose Railroad, has been a very fine piece of property
running out of this town. It is now operated by the Southern Pacific Company.
DISAPPOINTED WITH REGARD TO ASIATIC BUSINESS.
We were very much disappointed with regard to the business with Asia. We were
very busy building bur road, and we had not taken much account of what was
going on in the matter of the construction of the Suez Canal. I think that
the whole country anticipated that when this road was built there would be
a greflt business with Asia, but the opening up of the Suez Canal during the
very season that we completed our road disappointed us in that anticipated
business.
EFFECT OF PROTECTION TARIFF.
I do not know how much more we had to pay for iron because of the tariff which
protected American iron ; but I know there was a time when we had estimates
made which showed that we paid out for rails, and other iron, over $11,000,000
more than we would have had to pay if we could lave bought it in England.
Mr. COHEN. That was because of the protection given to Pennsylvania at that
time.
The WITNESS. Some people seem to think that they need protection. Through the
aid which we offer iron and coal in the shape of a protective tariff in order
to assist and protect the poor coal mine owners of Pennsylvania, we are paying
75 cents a ton more duty on coal than we otherwise would, and part of this
is used on this Central Pacific Railroad, which Mr. Anderson thinks the Government
has an interest in.
LELAND STANFORD. 2783
MANNER OF CONSOLIDATION.
Q. Please to relate to us the manner in which the consolidation of August,
1870, was brought about between the Central Pacific and the other lines involved
*? A. According to the laws of California. That is the best answer that I can
make.
Q. Describe the relations of the roads to each other and why it was considered
desirable to throw them into one? A. So that they could be operated in harmony
under one system and at less expense.
Q. The roads consolidated with the Central Pacific form substantially a net-
work of communication between Sacramento and the Bay of Jban Francisco, do
they not? A. Yes, sir.
WITNESS PRESIDENT OF VARIOUS ROADS.
Q. What roads were you president of at the time besides the Central Pacific?
I mean of the four corporations in the consolidation. A. While I am not certain
about it I think that I was president of all of them.
Mr. COHEN. I think that you were president of the Western Pacific, the San
Joaquin Valley, and the California and Oregon all except the San Francisco
and Oakland road.
Q. Mr. Cohen, now present, was president of the San Francisco and Oakland road,
was he not? A. Yes, sir.
GENERAL TERMS REGARDING INTERCHANGE OF STOCK.
Q. Do you remember what were the general terms with respect to the interchange
of stock?
Mr. COHEN. You have the articles here, and they are the best evidence.
Q. The stock was exchanged dollar for dollar, was it not? A. I think so ;
I cannot say.
Q. Was the aggregate capital of the new corporation equal to the sum of the
capitals of all the constituent companies? A. I do not think so. I think that
instead of that it was equal to the issued stock of the various companies.
Mr. COHEN. I will ask you to show to the witness the articles of consolidation,
which are on the table, and let him testify from them in answer to your question.
Commissioner ANDERSON. I will take the answer from any of the attorneys present.
Commissioner LITTLER. We have returned the articles.
CONSOLIDATION STOCK EQUALED STOCK OF CONSTITUENT COMPANIES.
The WITNESS. I think that the aggregate stock must have equaled the issued
stock of the other companies. The stock of the Qentral Pacific was $100,000,000.
I think that the capital issued- every time depended upon the amount of stock
in the two companies which had been issued, and not upon their authorized capital
stock.
Q. You mean upon the outstanding stock, do you not 1 A. Yes, sir ; on the outstanding
stock. I think that that was the way in which it was done.
Mr. COHEN. That is in the complaint in the Brannan case, if you have it.
2784 U. S. PACIFIC EAILWAY COMMISSION.
Commissioner ANDERSON. I have that complaint, but I have from the witness all
the answer that I desire. I understand that the stock was exchanged dollar
for dollar.
Mr. COHEN. I do not remember exactly myself, but the articles will show.
ARTICLE FIVE OF CONSOLIDATION AGREEMENT.
The WITNESS. Article five of the consolidation of August, 1870, provides that
each stockholder of each of said parties shall have the same number of shares
of the capital stock in the new corporation which he now owns and holds of
the capital stock of his respective companies, and shall be entitled to receive
from said new corporation certificates therefor for the certificates now held
by him or sucli other evidence of his ownership as he may now have for the
certificates which have been issued to him by the company of which he is now
a stockholder.
Q. Had the Western Pacific been consolidated with the Central Pacific in June,
1870, on substantially the same terms?
Mr. COHEN. The terms are stated in article six of the articles of said consolidation.
The WITNESS. The terms are the same.
A LARGE STOCKHOLDER OF CONSTITUENT COMPANIES.
Q. Referring to these constituent companies, were you a large stockholder in
all of them? A. In all. One moment, however ; I do not know that the answer
is absolutely correct. Those companies were constructed, I think, by the Contract
and Finance Company. Now, whether the stock had been distributed by that company
at that time or not, I would not be sure.
Q. It either had been distributed, or else it would be held by the Contract
and Finance Company for account of the stockholders, would it not? A. Yes,
sir.
Q. In either case it answers my purpose.
Mr. COHEN. Excepting that which is outstanding.
The WITNESS. It was either distributed or else it was owned by the Contract
and Finance Company, except such small portion as may have been outstanding.
Commissioner ANDERSON. I refer to stock in which Governor Stanford was in any
way interested.
CONSIDERATION FOR STOCK.
Q. Can you tell us what consideration had been paid to those individual constituent
companies for that stock? I mean Whether it was paid for in money or whether
it was issued to the construction company in substantially the same way as
was the stock of the Central Pacific for the construction between California
and Ogden.
The WITNESS. Of course, I must have had stock in my own name to have organized
a company and to have been president of it ; but as to what amount of stock
stood in my name, I do not remember. We bought the stock of the Western Pacific,
or, rather, a majority of it, from Mr. Charles McLaughlin. I have forgotten
now what we paid him for it.
Mr. COHEN. It is not important what you paid him. You got it.
Q. Without pressing you as to what you paid McLaughlin, do you know what the
corporation itself received from McLaughlin for that stock? A. I do not know.
LELAND STANFORD. 2785
Q. He was the contractor who built the road originally, or who began to build
it and had to give it up, was he not? A. He was the principal projector
of the Western Pacific.
STOCK AND BONDS ISSUED TO CONTRACTOR.
Q. Is it not true that this stock was issued to him together with the bonds
of the company in consideration of his construction contract, which amounted
to about $5,400,000, and that he gave it up and you made some bargain with
him and bought him out? A. There was another partner in there with McLaughlin.
I cannot say anything about any of those contracts from memory. I suppose I
must have known or heard something about them at that time. I do not think
that the work was done by McLaughlin directly. There was another gentleman
who had the contract with him or with his company for the construction of the
road, and he did the work that was done. Then their means were exhausted and
they could not go on, the result being that finally we bought the road.
Q. Was not that stock of Mr. McLaughlin all passed to the Contract and Finance
Company? A. I made the negotiations with McLaughlin and they were finally
completed by the Contract and Finance Company after I got through. Whether
the terms upon which I agreed were carried out or not I cannot say, but if
I were to give a guess I should say yes.
CONTRACT OF WESTERN PACIFIC COMPANY SUBLET.
By Mr. COHEN :
Q. Who has got the land grant of the Western Pacific Company? A. This Mr.
McLaughlin got the land grant.
Q. Did it not pass to the Contract and Finance Company $ A. No, sir ; it did
not pass.
Mr. HAYMOND. I would suggest that perhaps you are under a misapprehension in
regard to the construction of the Western Pacific. The first contract for the
construction of the Western Pacific was let to Houston and others, but they
were unable to carry it out. They abandoned it, and then the work was let to
McLaughlin, who contracted to construct the road. He sublet the contract to
Cox and others, and then your company, Governor Stanford, took charge of it,
as you have mentioned.
EXTRACT FROM WESTERN PACIFIC COMPANY'S MINUTES.
Commissioner ANDERSON. It may refresh your memory if I will read to you an
extract from the minutes of the Western Pacific Railroad Company. It is a communication
from Charles McLaughlin, dated June 3, 1867, and it is as follows :
The undersigned, Charles McLaughlin, reports that he has become involved in
litigation respecting his contracts with said company (the Western Pacific)
for the construction of its railroad, and that he is surrounded by difficulties
which prevent him from prosecuting the work of construction as speedily as
desirable, and he is confident that arrangements can bo made with other parties
that can do the work faster than he can. He thereupon requests that all contracts
between himself and said company be rescinded, annulled, and canceled, and
that he is willing to execute the proper instruments for that purpose.
Do you recollect any transaction of that nature between the Western Pacific
Company and "Mr. Charles McLaughlin? The WITNESS. No, sir \ I do not
remember it.
2786 U. S. PACIFIC RAILWAY COMMISSION.
METHOD OF PAYMENT FOR CONSTRUCTION.
Q. What I want to know is this : Is it not generally true of the Western Pacific,
and of all these roads, that contracts made for their construction were liquidated
in bonds and stock of the comparfy in such a manner that the bonds substantially
paid for the actual cost of construction, and that the stock was left as the
property of the parties interested? A. I would not like to speak for what
was done between McLaughlin and the Western Pacific, because I was not in their
confidence at the time of these contracts, and do not remember that I had any
relations with them. As I told you the other day, for the Central Pacific we
deemed it to be the only way in which the road could be constructed, and from
all the experience I have since had I am satisfied that it never could have
been constructed under any other system, except upon the basis that the parties
interested could control all the workings of the construction, and it is the
best way now to do the same work. At that time the parties in interest could
make sacrifices, which contractors having no interest except their contracts
would not make, and the road would not oftentimes be expedited regardless of
cost.
Q. I would like to ask the witness if the bonds and stock which the construction
companies received for the construction of these roads would have paid the
cost of construction if they had been sold at the time that the roads were
finished? A. No, sir; I do not think that it would.
NEGOTIATIONS IN REGARD TO WESTERN PACIFIC CONTRACT.
Commissioner ANDERSON. I am trying to get at the exact facts in order to refresh
the recollection of the witness. If you will be kind enough to run your eye
over this contract, which is a contract made between the Western Pacific and
yourself, you will see that it is a construction contract under which you took
McLaughlin's place; he handed you a bill for what he had done, and you gentlemen
then assumed the contract and carried it out, subsequently passing it over
to the account of the Contract and Finance Company.
The WITNESS. I made all the negotiations, except in so far as I was assisted
by Judge E. B. Crocker. I cannot remember tbe terms now, except that the result
of it was that we gained control of the road. The particular manner in which
we did it, I cannot tell you. I know, however, that McLaughlin in some way
or other had the land grant.
Q. Did you surrender the land grant to him? A. I do not know how it was done,
but I know that he had the land.
Q. He got it some way and gave up the contract. Is that it? A. I think it was
done before we had the contract. It was a part of the understanding that he
was going to have the land. Those lands were not considered as of very much
value, and he would have been very glad to have sold them to us or to anybody
else for one hundred thousand dollars.
Q. Please examine the contract to which I have called your attention and see
if you can state that construction undertaken upon the Western Pacific road
was completely paid for in the bonds of the company, and that the stock was
subsequently passed over and was part of the stock held by the Contract and
Finance Company, and distributed in 1874 in the distribution of thirteen millions
to each of 3'ou, heretofore referred to? A. I do not remember anything about
the particulars of this contract, but I have the contract here. This contract,
I presume, was car
LELAND STANFORD. 2787
ried out. It was stock that was issued by the Central Pacific and all these
roads that were consolidated, according to the terms, whatever they were. I
do not remember the terms.
ALL STOCK PUT INTO CONTRACT AND FINANCE COMPANY.
Q. All of that stock was subsequently found in the treasury of the Contract
and Finance Company, and distributed to you four gentlemen, as I understand
it. Is that correct*? A. I cannot say as to that. I presume that it is so ;
however, I do not remember now whether we took that stock directly to ourselves
in the purchase from McLaughlin, or whether we made a contract and then had
all those matters carried out by the Contract and Finance Company. I am not
certain.
Q. Did you acquire stock in any other way, except through these different contracts?
I mean stock which went into the Contract and Finance treasury. Did you acquire
it by purchase in the market at that time to any amount? A. Whatever stock
we had bought as individuals, at last went into the Contract and Finance Company,
and was distributed through that company.
Commissioner ANDERSON. I want to know wfiether all that stock did not all come
from construction contracts, except some immaterial amounts, which were bought
from individuals desiring to sell.
The WITNESS. I do not like to say that positively, because I may not remember
correctly, although I have not the least doubt that it was put into the Contract
and Finance Company. Yet I cannot call to mind any fact in relation to it that
fixes it in my memory.
STOCKHOLDERS PAY THE DEBTS.
Q. At the time of the distribution of the assets of the Contract and Finance
Company, who paid the debts of that company? A. I think that the stockholders
did.
Q. The persons among whom those assets were divided? A. Yes, sir.
By Commissioner ANDERSON :
Q. After the consolidation, what subsequent construction occurred for the account
of the Central Pacific? Were contracts made with the Western Development Company
for bridges and repairs between 1872 and 1880.
CENTRAL PACIFIC CONSTRUCTION SUBSEQUENT TO CONSOLIDATION.
Mr. COHEN. The Western Development Company was not formed in 1872.
Commissioner ANDERSON. Whenever it was formed, then; 1874, I think.
The WITNESS. For the Central Pacific?
Commissioner ANDERSON. Yes.
A. I do not remember. Of course, the Central Pacific has been building more
or less every year since its completion. Whatever work it may have had done
by the Western Development Company I do not remember.
Q, Do you not know that there were very large and important contracts between
the Central Pacific and the Western Development Company?
The WITNESS. For what purpose?
Commissioner ANDERSON. Eepairs, building bridges, making fills, &c.
2788 U. S. PACIFIC RAILWAY COMMISSION.
A. Very likely. I do not think that there were any of very great importance
or of any great magnitude. If you will specify any particular portions of
the road that were repaired, or name any particular work that was done by
the Western Development Company, I could give you better answers.
Q. From 1874 to 1875 your mileage increased 95 miles. In 1876 it increased
116 miles. In 1877 it increased 358 miles. This was after the consolidation.
What construction was that? A. I cannot remember. We built the San Joaquin
Valley road, and that was consolidated 150 miles. We built about 150 miles
up the Sacramento Valley, and we built roads over here.
Q. How was that construction effected? Was it not through the Western Development
Company? A. I am trying to think whether it was the Western Development Company
or the Contract and Finance Company. My impression is that it was the Contract
and Finance Company.
Q. It was constructed, was it not, by either one or the other of those companies'?
A. I would not say whether it was constructed by the Contract and Finance Company
or by the Western Development Company.
Q. But it was one of them, was it not? A. The books will show those dates.
I cannot remember the dates.
Q. Was this construction under substantially the same form of arrangement as
in the case of the Central Pacific itself? A. I presume that the contracts
will show.
CONTRACTS MADE WfTH CONSTRUCTION COMPANIES.
Q. Was the contract made with one or the other of those construction companies?
A. It must have been the Contract and Finance Company by which the San Joaquin
Valley and the Sacramento Valley roads were constructed.
Commissioner ANDERSON. The contracts with the Contract and Finance Company
are missing and cannot be found.
Mr. COHEN. For which road?
Commissioner ANDERSON. All contracts between the Central Pacific and the Contract
and Finance Company.
Mr. COHEN. I think not. You only asked for one, and that was the contract for
building the road through Nevada. I do not think that you asked for any other.
PRODUCTION OP ALL CONTRACTS REQUIRED BY COMMISSION.
Commissioner ANDERSON. We now ask for the production of all contracts between
the Central Pacific Railroad Company and the Contract and Finance Company.
Mr. COHEN. My impression is that those contracts are in existence, but I am
not sure. I will inquire, and if we have them they will be produced.
The WITNESS. If they are not in existence I do not know why they should not
be ; but our papers have been hauled around so much to satisfy the curiosity
of others than these stockholders and those directly interested in -the company
that it is no wonder if they should be lost. There is nothing in any of those
contracts which would make us wish to withhold them from a commission like
this. Nobody was ever harmed by them. Nobody had a right to complain but the
Central Pacific it
LELAND STANFORD. 2789
self, and its very existence has been saved and its property has been saved
through these various extensions built from time to time.
Commissioner ANDERSON. It is very likely that the feeders are all valuable.
What we are inquiring is whether the officers of this company made a personal
profit, which they might have done, even assuming them to have been largely
to the advantage of the main line.
The WITNESS. I presume that we are entitled to make a profit out of our business,
especially when in so doing we harmed no one.
NO CONTRACT WHICH WAS NOT LEGAL AND PROPER.
Q. In regard to all these contracts, and without referring to the question
whether they were of benefit to the company or not, is it not true that they
were voted for by the same persons and the same influence, representing the
corporation entering into the contract and the construction company agreeing
to do the construction? A. I want to draw a distinction between persons and
individual stockholders in these companies and as officers. Under the laws
of this State anybody may be an officer of a company whom the stockholders
choose to elect. If he discharges his duties faithfully the stockholders will
be satisfied. If he does not do so he will be responsible alone to the stockholders.
There is no law in this State that I know of that prevents one corporation
from dealing with another, and if one corporation should fail to deal with
another when it would be to its advantage, I think that its officers might
very well be held responsible by its stockholders. We have had no contract
which, in our judgment, has not been legal and proper, and which has not been
for the best interests of the companies which we represent. From the experience
that I have had in these matters I know this to be the fact.
PECUNIARY INTEREST OF DIRECTORS.
Q. Without referring to the question whether, under the laws of California,
it is competent for two corporations having the same boards of directors to
contract together, what I want to know is whether, in the votes cast for these
construction contracts, the directors who voted in favor of granting the contracts
had not a direct and personal and pecuniary interest in the result of those
contracts? A. I think thiit in all. or most all, of those companies I was
a stockholder and director and an officer. I mean in the companies that made
this consolidation.
Q. Was not your relation to the company such that if the contracts turned out
to be advantageous and yielded a profit you shared in that profit? A. Yes,
sir.
Q. And did you vote for those contracts? A. Yes, sir.
ACTED IN INTEREST OF EACH OF THE COMPANIES.
Q. And is the same true of Mr. Huntington? A. Yes, sir. But if the contract
was for the benefit of the Central Pacific, I shared in that as against the
other company. Both companies were undoubtedly benefited by the contract, and
my obligations to one company were no greater than to the other. My obligations
to the Central Pacific vrere as great as to the others, and to the others as
great as to the Central Pacific. We acted for the interest of each of the companies
that I represented, faithfully and honestly, and I never have heard a stockholder
but what thought so too.
2790 U. S. PACIFIC BAIL WAY COMMISSION.
Q. The same financial position is true in regard to Mr. Huntington, in regard
to Mark Hopkins, and in regard to Charles Crocker, is it not? A. Yes, sir.
Mr. HAYMOND. As a matter of fact, so far as Mr. Huntington was concerned, I
believe that he was not here at that time.
Commissioner ANDERSON. Was he not a stockholder in all of these companies,
and interested in the result?
Mr. HAYMOND. You were just speaking of casting votes and exercising personal
judgment.
Commissioner ANDERSON. We will put this limitation to the answer of the witness.
When Mr. Huntington was here and voted, his financial relations to the corporations
were similar, were they not?
The WITNESS. About the same. At the time of those consolidations I do not think
that Mr. Huntiugton was here. He has business most of the time on the other
side, and is in this State very little.
CONTRACT ON BASTS OF COST AND TEN PER CENT. ADDED.
Q. Was it not the general rule, in dealing with the Western Development Company,
that contracts for materials furnished the Central Pacific, or work done by
the Western Development Company, were upon the basis of cost and 10 per cent,
added? A. I think so. I doubt whether there was any work done otherwise than
that.
Q. Have you any idea what the contracts for repairs and supplies with the Western
Development Company amounted to from year to year? Did it amount to a million
dollars a year? A. I would rather look at the books before I answer that.
Q. Was there any discussion as to fixing this 10 per cent? Was anything said
as to whether it should be 5 per cent., or 15 per cent., or some other figure?
A. I think that there was some talk as to what would be a fair thing. Ten per
cent, was a very small compensation. Oftentimes no interest was charged and
the Western Development Company had supplies on hand so as to be ready when
needed to furnish them, and when work was done there was a settlement. It was
greatly to the advantage of the railroad companies to have it done by that
company. That company has done considerable private business. It has done a
great deal of work for Mr. Hopkins, Mr. Crocker, and myself, and we wore charged
the same rate as was charged the railroad company. They charged us individually
in our private matters cost, with 10 per cent, added, and we thought that that
was right.
DIRECTIONS TO PURCHASING AGENT.
Q. What other firms furnished materials and had dealings with the Central Pacific
on this basis of cost and 10 percent, added? A. I think that all those construction
companies that we formed must have had more or less business. I am not able
to state the amount.
Q. Was not that arrangement with Mr. Hopkins's firm? A. No, sir.
Q. Was there not such an arrangement with the firm of Huntington & Hopkins "H. & H.
?" A. There were some things furnished by them I believe at that rate
; but almost everything was brought from them as from other merchants, and
my instructions on different occasions to our purchasing agent was that he
should never do more than make a preference at the same price 5 that after
they quoted us a price he must not tell it to the other merchants ; but that
if the other merchants gave a better price, he must accept the latter. His
instructions
LELAND STANFORD. 2791
were so to deal that the company could have the benefit of open competition
in the market, and to take advantage of whatever rivalry existed between
merchants. I remember that on two occasions particularly I told him that
if I ever heard of his giving them a preference at higher prices I would
discharge him.
Q. To whom did you say that? A. Our purchasing agent.
Q. What is his name? A. J. E. Watson.
Q. Is he with you now? A. No, sir.
CONSTRUCTION AND RENTAL OF LEASED LINES.
Q. Do you remember the construction of the different leased lines by the Western
Development Company the Northern Railway, the San Pablo and Tulare .Railroad,
and the other branches? Do you remember the fact of their construction from
time to time? A. Yes, sir.
Q. Do you remember how the rental which the Central Pacific was to pay for
those leased lines came to be fixed? We will take the Northern Eailway first.
A. I cannot tell you now. I think that at first it was based upon the estimated
cost, and then afterwards was changed according to our experience; but the
price made I cannot tell you.
Q. Did you personally examine into the estimated cost with reference to fixing
these rates? A. I know that I was familiar with it along with the others.
We fixed the rate which seemed to us to be right, but I cannot remember now
any special conversation in regard to it.
Q. The Northern Eailway was built by the Western Development Company, or at
least a large portion of it was so built, was it not? A. Yes, sir ; a part
of it.
PROPORTIONATE INTERESTS IN WESTERN DEVELOPMENE COMPANY.
Q. And you and the other four gentlemen who have been named owned all of the
stock of the Western Development Company, did you not? A. Yes, sir ; the same
parties I think. No, Colton did not own the same interest in the railroad company
itself.
Q. I a in talking of those .interested in the Western "Development Company
you, Huntington, Crocker, Hopkins, and Colton each held 10,000 shares of stock.
Is not that correct? A. No, sir.
Q. Not in the Western Development Company? A. No, sir.
Q. How do you understand it? A. Colton had one-half as much stock as either
of the others. Under the arrangement with Colton he had a one-ninth interest,
and each of the others had two-ninths.
Q. Under th'e construction, contract between the Western Development Company
and the Northern Eailway the bonds and stock of the Northern Eailway were issued
to the Western Development Company in payment for that construction. Was not
that the way it was done? A. That is my impression.
Q. So that you and the other gentlemen named as the holders of all the stock
in the Western Development Company were substantially the owners of the Northern
Eailway, were you not 1 A. We were substantially the same parties, excepting
the Colton interests.
DUAL RELATIONS IN REGARD TO RENTALS.
Q. In fixing and determining what the rental of the Northern Eailway should
be to the Central Pacific you occupied the same dual relations which I have
referred to as existing in the case of other companies, so that you were interested
on both sides of the question. Is
2792 U. S. PACIFIC RAILWAY COMMISSION.
not this true? A. Yes, sir ; it would not make any difference to us particularly,
or to anybody else that I know of, whether the contract was favorable to
one party or the other ; but we tried to make those contracts just as fair
between them as though we were holding the scales for somebody else. It was
part of our policy of doing business to so keep and handle everything that
we might know how the different portions of the system were doing.
BONDED INDEBTEDNESS OF NORTHERN RAILWAYS.
Q. Do you know whether the construction of the ^Northern Railway cost as much
as the bonded debt of that company? A. I do not know it. I do not remember
now what either the bonded indebtedness is, or how much the road cost ; but
I guess that it is well used up. These bonds which we received at different
times we did not sell after the contracts were completed, but held on to them
as long as we could, so that we might have a good basis of constructed road
as security. When w*3 organized one of those enterprises and made bonds, the
bonds of course had no substantial basis of line of road as security, and therefore
we did not try to sell them, and in tact could not have sold them. For that
reason we wanted to keep them and build all the road that we could before placing
them on the market. Take the case of the Southern Pacific, for instance. We
built the road through, and borrowed money to do it. We put it off as long
as possible before selling the bonds, in the hope of being able to prove that
the line of road would be ample security for the bonds.
Q. What I want to get at is this : Do you know that the rental which was fixed
for the Central Pacific to pay to this road amounted to something like 25 or
26 per cent, of the cost of construction, as it appears on the books of the
Western Development Company? A. No ; I do not know it. But I know that it
turned out that the road commenced earning money from the first, and earned
it right along.
LEASES MADE TO BENEFIT CENTRAL PACIFIC.
Q. And it was an advantage to the Central Pacific? A. Yes, sir. About the time
that we made those leases to the Central Pacific, outsiders and I do not know
whether the Government found fault or not found fault with us for building
those roads and leasing them to the Central Pacific. They said that all this
was at the expense of the Central Pacific and for eur individual benefit. Afterwards,
when the Southern Pacific system got to be several thousand miles long and
there was but little business that could be entirely controlled by the Central
Pacific, we changed the lease so that the Southern Pacific protected the Central
Pacific. Then there was another outcry. There is one underlying principle in
this contract, and that is that one road shall not be advantaged at the expense
of the other, and the present contract provides that the lease shall be reformed
at any time that it may turn out that such reformation shall be to the benefit
of the Central Pacific Railroad Company. The design was to afford the fullest
protection to the Central Pacific and to enable it always to get the fullest
value for its road.
LEASES PROVIDE FOR FIVE YEAR PERIODS.
Q. Does not the contract provide that this reformation may take place every
five years?-.& Q r oftener J thinly
LELAND STANFORD. 2793
Q. The most of your leases provide for five year periods ; is not this lease
made the same way? A. I think that is the case with most of them. In all
those matters, however, we all the time have control of those things and
we nlake these leases as fair as possible. In the present lease to the Central
Pacific there is very much to its advantage.
Q. Do you remember the terms of the present lease of the Northern Kail way?
A. No, sir.
Q. Is it not $40,000 per month and a guarantee of $4,000,000 of bonds and repairs
? A. I do not know.
SAN PABLO AND TULARE ROAD ALSO CONTROLLED.
Q. As to the construction of the San Pablo and Tulare Eailroad, was that road
also constructed by the Western Development Company? A. I think so.
Q. Do the same propositions in regard to the ownership of stock and the relations
existing between the Central Pacific and the San Pablo and Tulare and the Western
Development Companies, which have been explained in regard to the Northern
Railway, prevail? That is to say, you are stockholders of the Western Development
Company, and the Western Development Company owned all the stock and bonds
of the San Pablo and Tulare Eailroad Company. A. I think that the contracting
company and the officers of the company owned between them all of the stock.
That is, I mean the officers of the railroad company.
Q. The officers of the Central Pacific and the stockholders of the Western
Development Company owned substantially all of the stock, did they? A. I think
that they owned every share of it.
RENTAL ABOUT 20 PER CENT. OF COST.
Q. Do you remember the relations between the rental as arranged for that road,
and its cost of construction, as it appears on the books of the Western Development
Company? A. I do not remember the specific sum.
Q. Do you know whether it exceeded 20 per cent, of the cost? A. I do not.
Do you say that the rental was 20 per cent., Mr. Anderson?
Commissioner ANDERSON. I do not.
The WITNESS. You asked me about 20 per cent., and I supposed, of course, that
you had some knowledge about it, and had some authority on which to base your
question.
Commissioner ANDERSON. I have been too busy to look up the matter myself, but
that has been suggested to me as the correct figure.
The WITNESS. I think that you asked me about 26 per cent, on the Northern Bail
way. I did not believe that to be the figure, but I could not state 80 positively
as I had not the books, and even though you stated that figure, I had my doubt
about it.
AN INQUISITION RATHER THAN AN INVESTIGATION.
Commissioner ANDERSON. I am making no assertions.
The WITNESS. If you will allow me to say it, it seems to me that your commission,
instead of being disinterested and trying to investigate between the railroad
company and the Government, is all on the side of the Government. It seems
to me more like a prosecution against this company than an investigation, and
perhaps I might add, inquisition.
Commissioner ANDERSON. We will not stop to discuss that. I shall have to pursue
my own method,
2794 U. S. PACIFIC KAILWAY COMMISSION.
OBJECT OF THE AMADOR BRANCH.
Q. In regard to the Amador Branch Bailroad, do you know about the construction
of that branch ! A. Yes, sir.
Q. What was the object of that construction? A. It was to reach a coal mine.
Q. Was it the lone coal mine? A. Yes, sir.
Q. How long is that branch? A. I do not remember, but I think it was about
27 miles.
Q. Was that road also built by the Western Development Company 1 A. Yes, sir.
Q. Who were the owners of the lone mines? A. The same parties that built the
road.
10NE COAL MINE REGULATES THE MARKET.
Q. Was the road built for the purpose of reaching those mines? A. Yes, sir.
Let me add something in explanation. The market for coal here is very limited,
and a great deal of the coal consumed here is foreign coal. Sometimes it is
a little scarce, and they used to put up the price on us very much. The coal
at lone was what we call lignite. It is very poor, but we have been able to
use more or less of it ; but its principal value is that it helps to regulate
the market, and in this respect it has been of great advantage to us. So, also,
has another coal mine that we have. We can always take care of ourselves, and
cannot be forced to buy coals in the market at high prices. We used to pay
$8 a ton for coal from the Black Diamond coal mine here in the Coast Range
Mountains. We buy it now for about $4. At other times we paid as high as $12
a ton for foreign coal ; but with these mines of ours, while the coal is not
as good as we would like it, we are enabled to protect ourselves against high
prices.
COST OF THE AMADOR BRANCH.
Q. Do you know what was the cost of construction of the Amador Branch road
? A. No, sir.
Q. Do you remember that a contract was made with one Bailey for all of the
grading at $20,000, or a price not to exceed $20,000?
The WITNESS. With whom?
Commissioner ANDERSON. W. S. Bailey & Co. They were to do the grading for
the entire road of the Amador Branch Eailroad from Gait to lone at a price
not to exceed $20,000.
A. I did not have anything to do with it. I do not remember it at all. It is
a little road, and I think that it was provided for in my absence. I do not
know anything about this man Bailey.
BASIS OF RENTAL.
Q. Do you know how the rental to be paid for that road came to be fixed? A.
I cannot call to my mind any of the circumstances connected with it.
Q. Was it fixed by parties holding the same relations to each other company
as in the case of the Northern Kailway and the San Pablo and Tulare Kailroad
? A. Yes, sir.
EXTRACT FROM WESTERN DEVELOPMENT COMPANY'S MINUTES.
Commissioner ANDERSON. I may as well put in an extract from the minutes, and
you may desire to give an explanation about it, I read
LELAND STANFORD. 2795
from the minutes of the Western Development Company, March, 18, 1875:
Text of articles of agreement entered into on the llth of March, 1875, between
the Western Development Company and W. S. Bailey # Co.
The Western Development Company agree to construct and operate, or cause to
be operated, within twelve months, a railroad from a point on the Central Pacific
Railroad at or near Gait Station, in Sacramento County,, to a point at or near
lone City, county of Amador; Bailey to pay for the right of way, and expense
of obtaining the same, and to grade the road-bed under the direction of the
engineer of the party of the first part, or to pay the Western Development
Company for the grading at the cost thereof, not to exced $20,000 ; the railroad
when completed to be entirely owned and operated by the Western Development
Company or its assigns.
The WITNESS. I do not know anything about that.
THE CALIFORNIA PACIFIC.
Q, Do you remember the California Pacific? A. Yes, sir.
Q. Were portions of that road also built by the Western Development Company
? A. The road was built when we took hold of it ; it was very largely destroyed,
however, by the floods, and rebuilt.
Q. The same four or five gentlemen obtained control of the California Pacific
and controlled or owned its stock, did they not? A. Yes, sir ; we bought a
controlling interest in the stock of that road ; I think that the stock amounted
to about twelve millions, and that we bought something over seven millions.
ITS LEASE TO CENTRAL PACIFIC.
Q. Then it was leased to the Central Pacific, and the rental was fixed by the
same course of proceeding as obtained in the other railroads; is that correct
? That is to say, the two boards came together, and a price was named, but
the fact is that the parties who controlled the decision were interested on
both sides. Is that a fair statement? A. I am not clear in my recollection,
but I know that we were negotiating for that road for some time, and arrangements
were made before it came into our hands to a certain extent, which regulated
the amount of money that it required to pay its fixed charges.
Q. As I understand it, you made a lease in 1876 of 138 miles for twenty-nine
years at a rental of $550,000 per annum, with a provision
The WITNESS. At what time did that road come into our hands?
Mr. COHEN. In 1871.
COMPETITION BETWEEN THE TWO LINES.
The WITNESS. I did not think that it was as early as that. There is a good
deal of history that might be recited in connection with that 'affair. I am
not able to recall all of it, however, but I know that it was a very serious
competitor to our line of road between here and Sacramento. Our line was 137
miles long, while the California Pacific line was but 87 miles that is, by
water and by rail and it inj ured us to a very great extent. The competition
was hard to meet, and the result of it was that it was not only expensive for
us, but they also suffered a good deal. For that reason they were anxious to
sell the road, and even approached me on the subject. The same parties had
also projected a line of road up the west side of the Sacramento Valley towards
Marysville, with the intention of building a road over the mountains. In that
P R VOL iv 30
2796
U. S. PACIFIC RAILWAY COMMISSION.
enterprise were some of the wealthiest men in California, and with such backing
it became a very serious matter to us,and we entertained their propositions
to purchase the road.
NOT A PAYING INVESTMENT.
The result was that we traded, but at no better figures than we coul< have
traded at any time prior to that ; and I think that there were times prior
to that when we could have done better. It was 'represented to us, however,
that the road had a certain earning capacity, which it turned out it did not
have. We paid the interest on the bonds for some years, but finding that the
road could not earn this interest we stopped. Then proceedings in bankruptcy
were instituted, and these proceedings resulted in a compromise by which the
creditors of the road agreed to reduce the amount of their bonds and to reduce
the rate of interest. Upon this basis we made a settlement. After that this
lease was made, and all of that was for the benefit of the Central Pacific
Kailroad.
ADVANTAGES OF THE CALIFORNIA PACIFIC.
The California Pacific road itself was a good road and ran through a fine country.
The parties connected with it were very wealthy, and necessarily were very
dangerous rivals, especially if they carried out their proposition to build
over the mountains, as that would have injured the Central Pacific to a very
great extent. They proposed to go through a pass known as " Beckwith
Pass," over the Sierra Nevada Mountains, and build another competing
line of road.
THE LEASE ASSURED BY THE SOUTHERN PACIFIC.
Q. Do you know how long that lease has to run now? A. That lease was changed
at the time when the Central Pacific was leased to the Southern Pacific. The
lease was originally the Central Pacific. When the Southern Pacific took control
under its general lease all these contracts of lease were assumed by the Southern
Pacific Company.
Q. Does the Southern Pacific operate that road to-day? A. Yes , sir ; it operates
all this railroad system with which I am connected.
Q. How long has the Southern Pacific Company control of the California Pacific
Railroad under the present existing arrangement?
Mr. HAYMOND. Ninety-nine years from the 1st of April, 1885.
SOUTHERN PACIFIC CONTROLS WHOLE RAILROAD SYSTEM.
Q. Do I understand that as the Central Pacific proper stands to-day it has
no right of access beyond Sacramento to tidewater, except at the volition of
the Southern Pacific Company? A. No, it is not that. It is now under lease
to the Southern Pacific Company, and that company controls all of these railroads.
The road from Sacramento to San Jos6 was leased by the Central Pacific Eailroad,
and runs as a part of the entire system, having all the connections of that
road. The Southern Pacific Com any controls everything, and all the parts are
run as one property.
BENEFITS TO THE CENTRAL PACIFIC OF THE LEASE.
Q. You do not understand what I want. What I mean- is, assuming that the relations
between the Southern Pacific Company and the Cen,
LELAND STANFORD. 2797
tral Pacific should be severed, do I understand that the Central Pacific, as
constituted to-day, has no access to tidewater between Sacramento and the
Bay of San Francisco? A. No ; I do not think that it has any line excepting
its own. It never did have a line; that is, the aided portion of the line
into San Francisco. If you want to know whether that lease of the Central
Pacific to the Southern Pacific was benefited or not to the Central Pacific
I will ask you to look at it. In my judgment it was of immense benefit to
the Central Pacific and a very great protection to it, because the Southern
Pacific Company controls the system of railroads all the way through to the
Gulf of Mexico. It guarantees to pay the Central Pacific $1,200,000 a year,
which is 2 per cent, per annum upon the par value of the stock. In addition
to that it protects it in all of its relations its interest account, its
liabilities to the Government under the Thurman act* so far as meeting the
requirements of that sinking fund are concerned, and also, if the Central
Pacific can earn more money than that, it has the entire benefit of it up
to 6 per cent, before the Southern Pacific Company can have any advantage
other than that of having it work in entire harmony with the general system.
This latter is the general advantage which the SouthPacific Company has under
this lease. If the Central Pacific should develop an earning capacity equal
to 6 per cent, upon its stock, then it would be a question whether or not
the Southern Pacific Company should enjoy the excess beyond that amount.
EXTENT OF CENTRAL PACIFIC.
Q. The object of my question is to ascertain exactly where the Government stands.
What I mean is this, if the relations between the Central Pacific Company or
the Southern Pacific Company and the Government should be such as to lead to
a separation of the aided portion of the road from the other portions, does
the aided road hold or control by ownership or by lease, or in any way whatsoever,
any means of communication between Sacramento and tidewater? A. It owns nothing
but its own road.
Q. Does that road end absolutely at Sacramento? A. Yes, sir. But there has
always been a river connection which is a pretty good one. It is never frozen
over and is always navigable. It has always been able to fix the rates between
here and Sacramento which the railroad company can charge.
WHAT THE BONDS COVER.
Q. Exactly at what point did the issue of bonds commence ; was it in the city
of Sacramento? A. Yes, sir ; in the city of Sacramento, to the Central Pacific.
Q. Does that include the property of the company in the city of Sacramento
? A. Yes, sir ; it includes depots, shops, and all of the station grounds there.
TITLE TO TERMINAL FACILITIES IN CENTRAL PACIFIC.
Q. Is all the land on which the shops stand ana on which the company does business
now in the name of the Central Pacific $ Does the title stand in the name of
the Central Pacific! A. Yes, sir; it all stands in the name of the Central
Pacific Company. I would like to call your attention to the features contained
in that lease to the Southera Pacific. The Southern Pacific fcas taken all
the risk* The Centra]
2798 U. S. PACIFIC RAILWAY COMMISSION.
Pacific has taken no risk, but it has the advantage of a provision that it
shall have all of the earnings up to 6 per cent. Then the only risk that
it takes is that if the earnings exceed 6 per cent, it may lose that amount
of money to the Southern Pacific Company, but that is a contingency which
I am afraid is very remote. My recollection is that the first year the earnings
of the Central Pacific Railroad Company, for the aided portion of the line,
netted above operating expenses something like $700,000, and the similar
net earnings of the entire Central Pacific system I believe was about $1,400,000.
Commissioner ANDERSON. I think it was about $200,000 more than that.
The WITNESS. Yes ; but that includes the unaided lines as well as the aided
lines.
Q. Does it include the earnings from all the road that was built, everything
north of Goshen ! A. Yes, sir.
SINKING FUNDS.
Q. And it was from the earnings of that portion that you were making provision
for sinking funds? A. Yes, sir ; the sinking funds are getting quite large,
and we have to pay a good deal of money to the Government under the Thurman
act. In fact, the Southern Pacific Company had to protect the Central Pacific
in all its contracts of every kind.
PALACE HOTEL, SAN FRANCISCO, CAL., J August 3, 1887.
Afternoon session.
LELAND STANFORD, being further examined, testified as follows : By Commissioner
ANDERSON :
Question. The next company, I believe, after the Western Developi, ent Company,
through which a good deal of the construction of the Central Pacific and its
auxiliaries was effected, was called the Pacific Improvement Company, was it
not? Answer. That was the successor company. I think that was after General
Cotton's death we formed this this new company, and its first business I think
was to construct the road east of the Colorado through Arizona and New Mexico.
Q. That is, the Southern Pacific? A. On the line of the Southern Pacific 5
yes.
HISTORY OP CONSTRUCTION FROM ROSEVILLE NORTH.
Q. And they also completed the construction of the California and Oregon road
? A. Yes.
Q. North of Delta 1 A. That is hardly completed yet, but they have don that
work, all the latter portion of it.
Q. Now please to give us an outline of the construction of that road from Koseville
northward? A. Eoseville is about 18 miles from Sacramento.
Q. "What is the junction point of the California and Oregon and the Central
Pacific? A. Eoseville. There was a road from Folsom (that is
LELAND STANFORD. 2799
on the south side of the American river) across up to Lincoln, called the California
Central, I think. That was sold out, and we purchased it ; and then there
was the California and Oregon road, having a land subsidy from the United
States Government. The road was bought out and finally consolidated into
what we call the California and Oregon, commencing its line at Roseville.
I do not suppose you care to hear about (and at any rate I do not know that
I could tell you) all the proceedings of the foreclosure and purchase of
this little road, but it was finally consummated and it was consolidated
into the company that I have named.
CALIFORNIA AND OREGON BUILT BY CONTRACT AND FINANCE COMPANY.
Then the Contract and Finance Company took the contract to build that California
and Oregon road, and we pushed it along gradually from time to time. Business
was very light and the company was not making much. The country was undeveloped,
and the passenger and mail car carrying the baggage and mail and express used
to do the business up to Marysville. After awhile we pushed on further and
we kept building. We would build whenever the Oregon and California road showed
life, as the two roads were to meet at the State line between Oregon and California.
The different persons who controlled that Oregon and California road were unfortunate,
and when they stopped operations, as there was no local business for our road
we always stopped, and whenever they showed a capacity to go on we commenced.
Finally, when Yillard had the road it seemed as though it was going through
to completion, and we pushed on with all the ability that we had, to be there
at the State line at the time they would arrive there. We pushed on up a hundred
miles into the upper canon of the Sacramento Eiver and into those mountains,
beyond the point where there was any local business to sustain the road. Finally
Mr. Villard, who was controlling those roads, failed, and we stood still for
a spell. Then the Oregon and California road went into the control of the bondholders.
They were all Europeans, I think. I believe they were mostly Germans and English.
CONTROL OF OREGON AND CALIFORNIA BY SOUTHERN PACIFIC.
About two years ago or more we opened negotiations for the control of that
road. The negotiations were carried on until finally we had the control of
that road. Then we pushed on again so that as early as possible we might avail
ourselves of the through business, because the local business was not sufficient
to sustain the road at all, and yet it is very heavy work up there. I do not
know but that it is fully as heavy as a great deal of the work over the Sierra
Nevada Mountains.
Q. You say that you have obtained control of the Oregon and California? A.
Yes, sir.
PROVISIONS OF THE CONTRACT.
Q. By that you mean, I suppose, the ownership of a majority of fche stock?
A. We substantially have the whole control of the stock ; when I say " we," I
mean the Southern Pacific. We have the lease. For the better understanding
of all that, it would be well to introduce the whole contract, because the
interests all interlace so cosely that you can hardly appreciate it or understand
it without taking the whole into consideration. The Central Pacific makes a
contract with the Pacific Improve
2800 U. S, PACIFIC RAILWAY COMMISSION.
inent Company for a completion of the road, and the contract provides that
the Pacific Improvement Company shall obtain control of the California and
Oregon road, and that it shall be completed to connect with the Central Pacific,
and be run in conjunction and connection with it, and that no other road shall
ever have any better advantages. The Southern Pacific increased the rental
in consequence of that additional stock so as to make it the same per share
that it is now, in other words, about equal to 2 per cent, upon the par value
of the stock.
BENEFITS TO THE CENTRAL PACIFIC.
Q. That is, it increases it in the proportion that the 80,000 shares paid to
the Pacific Improvement Company bears to the whole amount? A. To the whole
; yes. The interests are very much interlaced. On the whole, I think it a good
contract, that is, unless we should be disappointed about the business. The
only one that is really taking much risk is the Southern Pacific Company. The
Central Pacific E am sure will be benefited. Oregon is a growing State ; its
population now, I think, is about 400,000. I know it was so stated by the Senators
from that State last winter. There is much good country there ; it is improving
all the time, and we think it is going to be a very valuable connection of
the Central Pacific.
Q. Have you personally been over that road I A. Pretty nearly to the State
line, not quite to the State line.
Q. And how recently was that? A. That was last fall ; I have not been over
it this summer yet.
COST OF CONSTRUCTION.
Q. Do you remember the amount in bonds that was paid to the Pacific Improvement
Company for the construction from Delta to the north line of the State? A.
Not exactly. I think that of the bonds that were placed upon the road, undisposed
of, it takes all of them under the mortgage.
Q. The amount of bonds specified in the contract is four and a half millions,
and the quantity of stock is 80,000 shares. How did that figure come to be
the specified figure 5 what examination of the probable cost and what negotiations
were had? A. It depends a great deal on what had to be paid to get control
of the Oregon and California road. There is a good deal to it, and if I had
all the contracts here about it with the owners of the California and Oregon
road I could tell you better. The negotiations were pending about two years
before it was finally completed, but under all the circumstances I think it
was a good contract for the benefit of the Central Pacific. In fact the whole
thing was done for the benefit of the Central Pacific on our part.
FAIR CONSIDERATION RECEIVED BY CENTRAL PACIFIC.
Q. You will perceive that if the consideration paid by the Central Pacific
for the work done is an excessive one it would necessarily decrease the paying
power of the Central Pacific, and for that reason I ask you to specify a little
more clearly whether the consideration received by the Central Pacific is a
fair consideration for the price to be paid? A. I think so. The best test
of that is this, that the Southern Pacific considered the benefits to be'derived
by the connection were such that they could justly consent to increase the
rental equal to 2 per cent, upon the additional stock, which amounts at the
present price of stock in ttie market to something like 5 and C per cent.
LELAND STANFORD. 2801
Q. Do I understand that the Southern Pacific pays the interest on the issue
of four and a half millions of bonds? A. They have to take care of that
interest ; yes.
Q, How much do you figure the increased rental to be derived from this source,
over and above the $1,200,000? A. The minimum would be equal to 2 per cent,
upon the 80,000 shares.
Q. Do you understand the provision which directs that if the earnings of the
Central Pacific exceed the rental (which is the general provision of the lease),
the Central Pacific should have the benefit of such excess up to 6 per cent.
; do you understand that that provision applies to the increase of the rental
to be paid, by reason of the completion of the California and Oregon? A. Yes.
THE CONSIDERATION PAID BEFORE COMPLETION OF ROAD.
Q. Your minutes show that all of that consideration has been paid except $300,000
in bonds. Can you explain to us why that has been done before the completion
of the undertaking by the Pacific Improvement Company, to complete the gap
of 1G miles between the Cali-' fornia and Oregon and the Oregon and California
! A. I think that $300,000 was kept back because the California and Oregon
is not entirely finished up according to the contract. That is supposed to
be sufficient to put it in good condition.
Commissioner ANDERSON. It would not be sufficient to complete the gap of 1C
miles.
The WITNESS. The gap is entirely in the State of Oregon.
Q. But does not the Pacific Improvement Company undertake itself to construct
that gap of road or to cause it to be constructed? A. Yes ; but its compensation
is entirely derived from the Oregon and California contract. The Central Pacific
pays for nothing beyond the boundary line of the two States.
SECURITY FOR COMPLETION OF OREGON AND CALIFORNIA CONTRACT.
Q. You hold no other security for the completion of that contract than the
obligation of the Pacific Improvement Company? A. No. The Central Pacific holds
back 300 bonds.
By Commissioner LITTLER :
Q. $300,000 you mean? A. Yes, sir ; $300,000 of bonds, to be paid to the Pacific
Improvement Company when they complete their contract.
By Commissioner ANDERSON :
Q. But that, you say, is sufficient only to cover the deficiencies south of
the State boundary s l A. Yes.
OWNERSHIP OF OREGON AND CALIFORNIA.
Q. So that, I say, for the completion north of the State boundary you have
nothing but the obligation of the Pacific Improvement Company, their agreement
? A. The contract between the Central Pacific and the Pacific Improvement Company
required the Pacific Improvement Company to buy or to acquire control of the
Oregon and California line. They have obtained that control and are in possession,
so that they have complied, substantially. The Central Pacific have nothing
to pay upon that road beyond the State line. They are only interested that
the road shall be completed in order that they may have the benefit of the
through business. Both parties are equally interested in that.
2802 U. S. PACIFIC RAILWAY COMMISSION.
Q. When, in your judgment, will that gap be completed? A. I think about October.
That is the opinion of our people.
THE EQUIPMENT.
Q. Do you know whether all the equipment provided for by the contract has been
furnished? A. This $300^000 that is kept back is sup posed to be an ample
security for the entire completion of the contract. As to the details of what
there is yet to be finished in the way of embankments, &c., I am not able
to say.
Commissioner ANDERSON. As to equipments the contract provides that a locomotive
shall be furnished for every 5 miles and a car for every mile, and it contains
other provisions of that nature.
The WITNESS. I am not sure, but I think that the equipment is complete.
RELATIONS BETWEEN THE CENTRAL PACIFIC AND SOUTHERN PACIFIC.
Q. Will you please explain to the Commission the relations existing between
the Central Pacific and the Southern Pacific Companies, starting with the state
of things existing when the Southern Pacific Company was leased to the Central,
and explain why the change was made, and also how the terms of the present
lease were arranged? A. I have all the leases here if you wish to see them.
If you understand the geography and topography of the country you could understand
that easily. In the San Joaquin Valley the Central Pacific had 153 miles of
road, built originally as the San Joaquin Valley Eailroad. At Goshen it strikes
the line of the Southern Pacific Eailroad Company. The Southern Pacific Eailroad
Company built the road from there southerly.
THE TRUE SOUTHERN PACIFIC.
This line running down here by the line of San Jose [indicating by inference
to a map] is the true Southern Pacific Eailroad ; it passes through this San
Joaquin Valley and up the Salinas Valley. There is a break that has never yet
been completed, and the Southern Pacific there makes its connection for all
through business and all business south of the Central Pacific at this point,
Goshen.
Q. The road that you refer to as the true Southern Pacific is the road that
is nearest to the' seanearer the sea than the Goshen road? A. Yes, sir ; the
line of the Central Pacific strikes the Southern Pacific line at Goshen. There
is only, I think, 20 miles of line westwardly of the Southern Pacific built
from Goshen.
DESCRIPTION OF LINE OF TRUE SOUTHERN PACIFIC.
Q. Please indicate on the map what line you refer to as being the true Southern
Pacific? A. This is the true Southern Pacific [indicating the line nearest
to the coast].
Q. What point is this I A. That is Tres Pinos. Kow the line crosses the hill
and follows up this Tres Pinos canon. It is a narrow canon ; there is nothing
there, nothing to justify the building of the road. When we came to build the
road, we built along on that line to that point. Then our labor would be all
wasted if we went up that canon, so we determined to take this line that runs
through a very fine country.
Q. Eunning westerly to the sea? A. Yes ; and carrying it up to the Salinas
Valley, which is a long valley, probably about 175 miles long ;
LELAND STANFORD, 2803
and thence up here into the San Joaquin Valley. Then, after reaching about
the neighborhood of San Miguel, we crossed over southeastwardly to a junction
with the road south of Goshen. Now when we got toTresPinos a question arose.
Under the act- of Congress we had to build 20 miles of road up that caiion
and 20 miles could be constructed, but it would be thrown away. There was
no business there then, and there is not now 5 and there is no prospect of
it, but we went on. We knew about this great San Joaquin Valley, which is
from sixty to a hundred miles wide. There was hardly anybody up there excepting
sheep herders. We went up and examined it. I went up along with the others
and examined the country to see whether or not we would be justified in building
this line of road up here to Goshen and then building 20 miles from that
on, to fulfill the requirements of the act of Congress. We went there and
looked over the country and we commenced and built that 158 miles really
in order that we might continue to build the Southern Pacific. There was
not the business there at that time which would justify the building of the
road. Then we built 20 miles up there; and this is the true Southern Pacific
line.
CONTROL OF THE SOUTHERN PACIFIC.
Q. Now, at this period that you are speaking of the general project of the
construction of the Southern Pacific had been discussed, and was a subject
of interest to you all? A. Yes ; we had got control of it at that time. The
Southern Pacific, as perhaps you may have noticed, was organized under an act
of Congress, and authority was given to people not connected with the Central
Pacific to build the road. We early saw that if that line of railroad was completed
if it crossed the Sierra Nevada Mountains all the valleys of the State would
be open to it and it would be a very serious competitor of the Central Pacific.
So we tried to control it, and we have succeeded in controlling it ; and the
consequence is, that it has never been operated to the prejudice of the Central
Pacific. Then at this point, Mojave, the act of Congress gaye to us the right
to build on this line to meet the Atlantic and Pacific, and on that line to
meet the Texas and Pacific, on the Colorado Eiver.
THE ATLANTIC AND PACIFIC.
Q. That is, on the line running southwest from Mojave, to meet the Texas and
Pacific, and on the line running southwest by way of Los Angeles? A. To Fort
Yuma, on the Colorado Eiver, as the act of Congress required. We built this
first line, and operated it to the Colorado Eiver. The Atlantic and Pacific
came along, and since that time, by arrangements, they have leased or bought
that line of road, and operated it to Mojave.
LOCAL BUSINESS PROSPECTS OF " SUNSET ROUTE."
Q. To Mojave? A. Yes, sir; to Mojave. This is the Sunset route, going off to
New Orleans. We built alon g from time to time, and we built across this stretch
and we crossed that desert to meet the Colorado, but there was nobody there.
The Texas and Pacific had not yet come up, and its misfortunes had not come
on, and all this long stretch of road from up here to here, for 250-odd miles,
from the Gorgouio Pass across this desert, was of no value except as a through
line j and there was no business that could be gotten for it. If you go down
there you will see what a country it is. It is as much of a desert as there
could possibly
2804 U. S. PACIFIC RAILWAY COMMISSION.
be. When we got there there was no road to meet us, and we tried to utilize
our line and save ourselves by building on farther, as we did, into Nevada
and Arizona.
CONTINUATION OF ROAD TO NE W ORLEANS.
Q. How many miles of line did you build in Arizona? A. I have forgotten now.
Commissioner ANDERSON. About 287 miles, I think it is.
The WITNESS. I ought to remember these things, but I cannot do it now. Then,
when we got across there, the other road had not come up, so we built across
New Mexico, and then we went down through New Mexico and down on the Kio Grande
100 miles more, and then met the Texas Pacific. That made a through line that
way. We continued on down the Rio Grande and connected with the road to Texas,
that was organized to be built from San Antonio to the western boundary of
the State, and it forms a part of the through line now to the Gulf of Mexico.
And thence we went on to New Orleans. So the Southern Pacific Kailroad now
is a line entirely under one management, from San Francisco to New Orleans.
THE CONTRACTORS.
Q. By what company was this construction carried on? A. From the other side
of the Colorado River, commencing at Fort Yuma, by the Pacific Improvement
Company. On this side down to away beyond El Paso, there was a line under another
company, and they worked from San Antonio westward to a junction ; and they
met on the Kio Grande.
DATE OF COMMENCING CONSTRUCTION.
By Commissioner LITTLER :
Q, Did not those roads meet at the Pecos River? A. Yes, about there; but we
followed the Rio Grande all the way down. If I had known what sort of country
Western Texas was, I would never have built there.
Q. About when was this Southern Pacific south of Goshen commenced, or how soon
after the completion of the Central Pacific was it commenced? A. The Central
Pacific was entirely completed, I think, before we touched the Southern Pacific
at all.
Q. Was it within a year or two after the completion of the Central Pacific
that you commenced the construction of the Southern Pacific? A. I think it
was.
BONDED OBLIGATION.
Q. What is the bonded obligation, per mile, on the Southern Pacific and its
branches? Do you remember? A. I forget now. 1 1 was made to cover all the
lines and was issued from time to time. A portion of it was -paid off, and
without reference to the books I would hot like to say anything about it, because
there you can see exactly what it is.
Q. All the contracts for the construction of this road we will find amongst
the papers of the Western Development and the Pacific Improvement Companies
? A. Yes ; E presumo so. This San Joaquin Valley is the largest valley in the
State, and by some supposed to be the most valuable, by reason of its extent.
But the Sacramento Valley is a very large valley and wonderfully fertile. Here
is the Oregon line. [Indicating.] It makes, as you see, a great north and south
trunk line,
LELAND STANFORD. 2805
leading down this way to a coimection with Mexico, that goes away down to the
city of Mexico or to New Orleans.
THE COAST LINE AS A MILITARY ROAD.
Q. So that when completed it will be a coast line from Portland to Mexico"?
A. Yes, and to iNew Orleans. It crosses all the continental lines of road that
we have now, or probably ever will have, and it runs, you see, away inside
of the coast. We can take this line from Sacramento, by way of Stockton, and
keep away inside. And perhaps it is one of the grandest military roads in the
world, being entirely protected from approach by the sea, except at San Francisco
here, which is a hundred miles off from this line. We have one line in here
(San Francisco), and this coast line is nearly completed, making another line
down to Los Angeles.
OPERATION OF SOUTHERN PACIFIC DURING CONSTRUCTION.
Q. By whom was the Southern Pacific operated as its construction progressed?
A. This portion here, from here to Gilroy, 80 miles, is maintained by itself
and has been operated largely almost like an independent road. It did not have
any real proper connection with the Central Pacific system. Then as we built
up here, after we commenced at Goshen, it was always operated by the Central
Pacific.
TERMS OF LEASES TO CENTRAL PACIFIC.
Q. And how was the rental or how were the terms of the leases fixed ; were
they altered from year to year as the construction proceeded? A. I cannot
say whether they were always formally altered or not. But, of course, as new
lines were turned over we met them and they paid the interest and the taxes
to keep it out of debt. We did that at one time when the lease was not quite
ample for that. But substantially the Central took care of it.
PROFITS DERIVED FROM LEASED ROADS.
Q. Is it your judgment that during the years between 1874 and 188 the Central
Pacific made or lost money by the operation of the leases of the Southern
Pacific? A. I would say in regard to that, that all these lines of road
facilitated the business of the Central Pacific. And if we built a branch
line of road like the Amador road, a road for instance that did not pay and
has not paid, and probably never wi?l pay, it turned its business on to the
Central Pacific for 100 or 150 miles and in that way it became profitable,
and so with the other roads. Take the San Joaquin Valley road for example.
I think that the development of the country near these lines of roads will
be such that they will all pay a profit to the Central Pacific. With the
exception of the Stockton and Copperopolis road (which we did not build,
but have the control of), and this little Amador road, which two are, I think,
the only ones that have not been profitable, I believe that in the whole
system of leased lines of road there was a profit, of some extent, to the
Central Pacific. However, it was not expected that we should make any very
large profit, so that the lease would be corrected from time to time.
* THE BOOKS SHOW AS TO EACH ROAD.
Q. My question is addressed particularly to the operation of the Central Pacific
road from 1874 to 1880. Is it your judgment that the amount
2806 U. S. PACIFIC RAILWAY COMMISSION.
received from the operation of that road was more, or was less, than the railroad
paid? A. That is something that I have known about, and I cannot remember
now. But I think that there was a profit to the Central Pacific, taken as
a whole. This line of road across from Mojave to the Atlantic road that the
Atlantic now takes from us never was a profitable road ; but on the whole,
I think there was a profit to the Central Pacific. Mr. Miller, the secretary,
can perhaps tell you. The accounts have been so kept that by an inspection
of the books you can tell what each of these roads has paid or lost. I will
j ust ask Mr. Miller this question, whether, on the whole, the leased lines
were profitable or not to the Central Pacific, taking them altogether?
Mr. MILLER. Taking them all together, they were.
The WITNESS. The accounts have been so kept with each of the branch roads that
they show whether there was a profit or a loss.
Mr. MILLER, No ; I do not think we made it up so for the first few years. We
did not segregate them because it made no difference to the company, as every
dollar of the earnings went into the treasury of the Central Pacific. We only
charged it for our own satisfaction to ascertain how much or how little each
particular line earned.
The WITNESS. After the United States Eailroad Commissioner suggested a different
way of keeping the books, did we not then keep the books sol
Mr. MILLER. Yes; from that time on they were kept that way.
LOSS SHOWN BY REPORT OF 1884.
Q. I will call your attention to the report of 1884, in which the operation
of the leased lines is stated in the last two columns. The last column but
one shows the net profit to the Central Pacific arising from its own management
and the management of some of the lines ; and the last column contains the
net loss to the Central Pacific arising from other lines. I will ask you to
look at the figures showing that the Southern Pacific of California (excluding
the Mojave Branch) resulted in a loss to the Central Pacific for that year
of $476,608.44. And that the operation of the Southern Pacific Eailroad of
California (the Mojave Branch) resulted in a loss of $202,935.99. That would
appear at that time to have been operated at a loss? A. Yes ; 1 know there
was a time there when there was a loss. Of course, that line of road from Mojave
to the Colorado runs through what is mostly a desert and was practically of
no value until the Atlantic and Pacific connected with it, which was at the
Colorado Eiver. As to the other road I do not know why it did not pay as well
that year, but it came up the business developed and as a whole that was a
profitable thing to the Central Pacific.
THE LOSSES APPARENT RATHER THAN REAL.
Q. Now, in examining the operation under those leases and the relations of
the rental to the returns, are we to assume that the rentals were determined
in the same manner as the other leases (as to which you have already testified),
that is to say, by the votes of gentlemen who were interested in the Southern
Pacific and in its stock, and who would be benefited if the rental was more
than the earnings? A. As to that, there were different officers in the Southern
Pacific from the Central Pacific. The Central Pacific stock gradually began
to pass into the hands of the public and we were more careful about those contracts.
I think my recollection and impressions are rather that the Central Pacific
took the Southern Pacific, intending to keep it out of debt and work it
LELAND STAFFORD. 2807
as a feeder to its own road. Now the loss that you speak of was apparent rather
than real, because all the way from Goshen to San Francisco, from the southern
part of the State, there was an entirely new business developed by the construction
and operation of that road, and it was not running anything like its full
capacity. The additional business cost the Central scarcely any more to do
it than its expenses would have been if that business had not been put upon
the road. So that while nominally if there was not a gain to the Central
Pacific, in reality there was a profit made by the construction of the Southern
Pacific.
BENEFIT OF BRANCH LINES TO THE TRUNK LINES.
To illustrate : A railroad, say 100 miles long, considers the question of extending
itself 25 miles farther. Now, with one-fifth of the business necessary to sustain
the 25 miles, when you turn it on to a hundred miles already constructed you
have the four-fifths to justify your building that 25 miles. An independent
company, of course, could not afford to build those 25 miles of road, but the
company having the 100 miles completed and in operation, could afford to do
it. It is in that way that the compensation is made to the trunk lines of roads,
in the extension of branches that do not seem to pay of themselves. That was
the case with the Central Pacific. I have no doubt that we made a great deal
more money out of the Southern Pacific than was sufficient to pay that rent.
In a little while the business of the Southern Pacific developed so that it
has been a good thing of itself, and thus it went on.
DEVELOPMENT OF THE COUNTRY.
Q. While on that subject, will you mention some of the articles produced in
this valley, the San Joaquin, or along any other portion ot this road, which
tend to make the business that passes over the Central Pacific or some part
of it? And also the Central Pacific business which finds a vent through the
San Joaquin Valley, which it would not have found if the railroad had not been
there? A. Before the road was built, Mr. Hopkins, with some engineers and
myself, and some others, went up this valley to examine it. We had to carry
our supplies for both horses and ourselves, and we prepared to camp out. You
could ride miles and miles through that valley and see nothing better than
a sheep herder's little cabin. It was almost entirely unoccupied ; but upon
the construction of that road this country has gradually filled up until today,
up near Fresno, there is one ranch of a thousand acres that sold, the other
day to an English gentleman, for 200,000, a million of dollars, which, seven
years ago, could be bought, for sheep-herding purposes, for a dollar and a
quarter an acre. And so we developed that country. It would be interesting
to take the assessment return of those days and compare it with what it is
now. Now it is a prosperous country.
Q. What are the products of this country that pass over these roads? A. Wheat,
mainly ; but then there are 12,000 acres now at this place in vines and fruit
trees, near Fresno.
FRUIT ROUTE TO EASTERN MARKETS.
Q. Does that fruit come to San Francisco to find its eastern market, or does
.it go over the Southern Pacific? A. I think it conies entirely to San Francisco.
We bring fruit from Los Angeles County all around there now, and the greater
portion of it, I think, to-day, goes by way of the Central Pacific, in going
east.
2808 U. S. PACIFIC RAILWAY COMMISSION.
'
Q. Why does it select that route instead of the Sunset route? A. It is an
established route and it reaches the market more easily, I think, than by the
other route.
CHICAGO THE CENTER.
Q. Do you refer to fruit that seeks a market on the Atlantic coast or fruit
that is distributed at local points in and around San Francisco? A. Some of
it comes here, and some goes east. Chicago is really the great center.
Q. So that much of this produce from Los Angeles and the valley of the San
Joaquin is carried as far as Chicago? A. Yes. The oranges and all fruit that
comes up this way go north over the Central Pacific.
GROWTH OF LOS ANGELES.
Q. It comes up north and goes east over the Central Pacific? A. Yes, sir. And
when we built this road before we built this road to Los Angeles most of the
vegetables of that country came up here to San Francisco; and one of the charges
made against our company was the high price we charged on potatoes and beans
that went from San Francisco to Los Angeles. The beans were raised up here
on the coast, and most of the potatoes were raised in Mendocino County and
came from there to San Francisco, and then went down to Los A^ngeles. If you
go down there now and see that beautiful country and its development of orange
groves and fruit trees everywhere, one can hardly realize what it was. The
other day I was going down to Los Angeles and we met on our way, at one place,
two different trains of cars. I think there were thirty cars in one train,
loaded with potatoes to go on to Kansas, I believe, and some, I guess, to Chicago
going east, at any rate. Sometimes a train-load of the asparagus raised up
here at Sacramento goes east ; but I think it is stopped generally on this
side of New York.
REASONS FOR CHANGE OF RELATIONS BETWEEN THE TWO ROADS.
Q. Please explain what considerations led to the change of these relations
which you have spoken of, so that the Central Pacific became leased to the
Southern Pacific. A. The road became finally completed to New Orleans. We purchased
what was known as the Morgan line, which was about 1,200 miles of additional
road, and a line of steamers, twenty-eight steamers, I think, running from
Galveston to New Orleans and some to New York. We were building branch roads
down into Los Angeles and extending this line of road here, and it became altogether
too big and cumbersome, and, besides, the things in which the Central Pacific
was in no manner interested had to be taken care of down there. So we thought
it all over, and as it was too big for the Central Pacific to lease and control
all those interests, we concluded to turn it the other way, and let the Southern
Pacific Company, which was formed for the very purpose of building and leasing
railroads, have the control of it, and that it should lease all the railroads
of the system and secure their entire harmonious action. So we made that lease.
Of its wisdom I have not the least doubt, particularly for the Central Pacific,
because unless it should get to be a very profitable railroad, it enjoys all
its own earnings and has the advantage of the connections with every one of
these roads as, though it was all one line, The relations of the Ceu
LELAND STANFORD. 2809
tral Pacific to the other interests are protected, particularly so far as the
interests of the Government are concerned.
SOUTHERN PACIFIC OF KENTUCKY.
By Commissioner LITTLER :
Q. Is this Southern Pacific of Kentucky a Kentucky corporation? A. Yes.
Q. Why did you go to Kentucky for a charter? A. To get a charter that was favorable
that would allow us to lease all the roads in the country. That was why we
went there.
ITS OBLIGATIONS.
By Commissioner ANDERSON :
Q. What security have you for the performance of such obligations as the Southern
Pacific of Kentucky may enter into to guarantee bonds or the payments of rentals,
if it should cease to be advantageous to it how could you enforce any such
obligation against the Southern Pacific of Kentucky? A. I will tell you. I
think when we formed that company there were twelve different companies forming
a through line to New Orleans, and we had to keep up those different organizations.
THE CONSOLIDATION.
They all had different interests, and it was very inconvenient and somewhat
expensive; so we formed this company in Kentucky for the purpose, practically,
of making one company controlling all these roads. The roads are all under
the same ownership in reality. We formed this Kentucky company and owned it,
so we took the lines of these roads and we valued them. Then we took the stock,
for instance, of the Southern Pacific Company and appraised that at so much,
and exchanged that for so much stock of the Southern Pacific of Kentucky. So
that the Southern Pacific of Kentucky practically owns the Southern Pacific.
So through Arizona, and so through New Mexico and all the lines through to
New Orleans and those branch lines in Texas I think some eight or ten hundred
miles altogether there they are owned really by the Southern Pacific. The Southern
Pacific really owns all these roads, excepting just enough stock to keep up
the organization of these different companies, so that it is the value of those
roads and whatever they have got as assets that makes the Southern Pacific
Company.
OFFICE IN KENTUCKY.
By Commissioner LITTLER :
Q. Do you keep an office in Kentucky ! A. We have to keep one there.
Q. Whereabouts 1 A. I don't know where the clerk lives just now; but I believe
in Lexington.
Mr. HAYMOND. It is in Lexington, Ky.
DECISION OF THE COMPTROLLER OF THE TREASURY.
By the CHAIRMAN :
Q. Has there not been a decision delivered by Judge Maynard, the Comptroller
of the Treasury, concerning tbe powers, of Kentucky corpo
2810 u - s - PACIFIC EAILWAY COMMISSION.
rations? Has he not lately decided that powers given by the State of Kentucky
outside the State, and prohibited within -the State, are virtually void and
of no effect?
Mr. BERGIN. I do not recall any such decision.
The WITNESS. I do not see why that should be.
STATE LAWS REGARDING FOREIGN CORPORATIONS.
Mr. HAYMOND. The powers given to Kentucky corporations in relation to all roads
are also given by the statute of this State to foreign corporations.
The WITNESS. There are eastern corporations doing business in this State all
the time.
Mr. HAYMOND. That might exist elsewhere, but it could not here, because the
powers of this company are derived from this State as well.
Commissioner ANDERSON. You say there is an act of the State of California vesting
this power iii the Kentucky corporation?
Mr. HAYMOND. It vests in any foreign corporation the right to lease railroads.
Commissioner ANDERSON. The power to hold railroads in this State?
The WITNESS. Yes; full power. That probably exists always by comity ; at least,
I believe it has always been so held.
Commissioner ANDERSON. Not to operate a railroad?
Mr. HAYMOND. Well, at any rate it is a question which cannot arise here.
ORGANIZATIONS OF THE COMPANIES MAINTAINED.
The WITNESS. These companies are all maintaining their organizations. We have
to keep a board elected for each of the companies ; but I rather think that
at the next session of Congress I shall ask Congress for permission to consolidate
all these companies into one. There is no reason why we should not do it, as
nobody? cau be harmed, and it will simplify and economize the conduct of our
business, and the consolidations have all been made.
FOREIGN AND DOMESTIC. CORPORATIONS HAVE SAME RIGHTS.
Mr. COHEN. In relation to the former question I would say that the statute
of this State gives to any foreign railroad corporation the same rights to
operate railroads in this State as it does to a domestic corporation.
Mr. HAYMOND. That statute was passed at the instance of the Atlantic and Pacific
Company.
TERMS OP PRESENT LEASE.
Commissioner ANDERSON. You have explained how the Kentucky corporation acquired
the stock of these various corporations. Please explain now how the other terms
of this lease were arrived at; that is, the lease of the Central Pacific to
the Southern Pacific.
Mr. COHEN. Of what date?
Commissioner ANDERSON. The lease under which it is operating.
Commissioner LITTLER. Had you not better call attention to the different paragraphs
of the lease?
LELAND STANFORD. 2811
LIABILITIES AND OBLIGATIONS ASSUMED BY SOUTHERN PACIFIC.
Q. I will call your attention first to the paragraph by which the said Southern
Pacific Company agrees to discharge all the liabilities and obligations, including
obligations on leases, now held by the Central Pacific Company, with certain
exceptions named in this article, the exceptions being the Central Pacific's
floating debt, the obligation to pay the principal of the indebtedness known
as its bonded debt, the principal of all indebtedness the payment of which
has been guaranteed by the Central Pacific Railroad Company, and also excepting
the principal of the indebtedness of the Central Pacific Railroad Company to
the United States. What discussion was there as to the measure of assumption
and as to what the exceptions should be? A. I think it was the principal of
the debts that we were to pay to the Central Pacific whatever they had to pay
out. For instance, we pay the interest on all their bonds; we discharge the
obligations of the company to the Government; we take care of their sinking
fund according to the requirements of the mortgage. We pay to the Government
the amount due to it under the Thurman bill. We also take care of it and relieve
it of any liability to the small roads that it had leased. I thiuk that is
about all.
Q. Paragraph 1 then, is framed on the theory that the Southern Pacific Company
should discharge all matters that were chargeable to its income, to be paid
at various periods during the year, but that they should not undertake to pay
the principal or the indebtedness in any form? A. No, sir; that would be left
to the company itself. Whatever may be the legal views in respect to it, there
is nothing in that Southern Pacific Company and its control of these lines
that can prejudice a single individual interest in the whole country, but,
on the contrary, it enables all these lines of road of nearly five thousand
miles, with its lines of steamers, to be operated as a whole at the lowest
possible expense. Many benefits arise. from it, and no injuries, so far as
I know, to a living soul.
OPINION OF COMPTROLLER MAYNARD.
The CHAIRMAN. The opinion I have reference to was delivered by Judge Maynard,
the Comptroller, on October 26, 1886, in which he sets out as follows :
The point is also made, that, inasmuch as the Southern Pacific Company of Kentucky
is prohibited by the act incorporating it from leasing, owning, or operating
any railroad within the State of Kentucky, it has no power to enter into such
a contract for the operation of railroads in other States or Territories.
CONSOLIDATION AN ADVANTAGE TO THE PUBLIC.
The WITNESS. I do not know about that % I do not suppose we were heard at all
in that matter. I have no knowledge or recollection of it. But that does not
trouble me any. I should thiuk it very singular, with the general recognition
of the advantages of consolidated lines all ovei the country, if Congress does
not allow these various companies to con solidate into one line for their common
advantage. I shall be very much surprised, for it is a matter by which not
only does nobody suffer any injury, but it is a manifest advantage to the public
as well as well as to the company. I do not see why anybody should be tenacious
about mere technicalities.
P R VOL iv 31
2812 u. s. PACIFIC RAILWAY COMMISSION.
BASIS UPON WHICH RENTAL WAS COMPUTED.
Q. I now call your attention to the following extract from the lease by which
the Southern Pacific Company agrees that during the continuance of this lease
it will, annually, on the 1st day of May, pay to the Central Pacific Eailroad
Company, as guaranteed rental for the said Central Pacific Eailroad and other
leased property, for the year ending on the 31st day of May next preceding
that date, the sum of $1,200,000. What estimates or computations did you have
before you when this figure of $1,200,000 was reached? A. A variety of circumstances
entered into the consideration at that time. We took iuto consideration the
business of previous years ; also the fact of competition. Of course the Northern
Pacific was established, but the Union Pacific was building what was known
as the Oregon Short Line. Before that construction, the Union Pacific was interested
in common with ourselves in having all the business of Oregon go by way of
California. And it all did prior to the construction of the Northern Pacific.
DIVERSION OF TRAFFIC.
As soon as they built through and had opened up for business what they called
their Oregon Short Line, they became interested in diverting all the Oregon
business from the Central Pacific. That was a very important business, the
population of Oregon being then, I suppose, between three and four hundred
thousand. It is estimated now at 400,000 people. Not only that, but the Washington
Territory business, and the British Columbia business, that used to come here,
has been diverted from us, we having the only land line. By the construction
of those two lines all that business was diverted. We took all that into consideration.
EARNINGS OF THE CENTRAL PACIFIC.
Those were the facts that enable us to determine what might be the earnings
of the Central Pacific. We figured it accordingly. We made it at the rate of
2 per cent., which, at the way the stock was selling then, was about equal
to 5 per cent, on its actual value. We thought we could earn it. The result
showed that we were right. We earned, I believe, nearly fourteen hundred thousand
dollars, so that we did not lose any money by that Southern Pacific contract.
Then we provided, trusting to the general development of the country, that
if there was more than what would be 2 per cent, on the stock, it might be
made up to 6 per cent, on the stock, which, according to its then value, would
be about 16 per cent. That is, if it should ever go up to 6 per cent, on the
par value it would be about 16 per cent, upon the price at which the stock
was then selling, or upon what it is selling at to-day.
PROFIT TO STOCKHOLDERS.
Q. What connection had the market value of the stock with the question of the
obligations of the Southern Pacific as lessee to its lessor? A. That did not
have any, excepting that it was something that the stockholders would be very
likely to approve. I am only showing you what kind of compensation it would
have to earn before the Southern Pacific could enjoy any profit; but the idea
was that from the intimate connection and harmonious operation of the roads
it would be paying to the stockholders this large profit.
LELAND STANFORD. 2813
THE AMOUNT OF RENTAL.
Q. These considerations, then, were argued and debated, and the conclusion
you reached was to fix the figure at $1,200,000? A. Yes. I will say further
that that was largely done with the bankers in ]S"ew York who had helped
to place the stock and bonds of the Central Pacific on the market. Speyer & Co.
thought well of this lease. We had it under consideration, I think, more than
a year before it was done. If I may say so, we were particularly zealous in
looking after the interests of the Central Pacific, and of course we had a
large interest in the Southern Pacific. By " we," I mean the managers.
I was not the president of the Southern Pacific, but I was the president of
the Central Pacific. I had a large interest in the stock of the Southern Pacific.
We considered the whole matter with great care, and finally we came to the
conclusion that this was a most advantageous proposition for the Central Pacific.
We hoped that it would not be injurious to the Southern Pacific. But the Southern
Pacific's direct profit from it was problematical, because there would be none
until there was a G per cent, dividend declared.
DIVIDENDS.
Q. Six per cent, on what? A. Six per cent, on the capital stock issued.
Q. Do you mean, then, $6,000,000 I A. On the stock that is issued.
Q. And that is 6 per cent, on 60,000 shares?- A. About that; yes, sir.
Q. Are you not mistaken about that 1 Is it not 4 per cent. I -A. I am quite
sure that my memory cannot fail me on that.
INCREASE OF EARNINGS LIMITED.
Q. Please look at the section which provides for an increase of the earnings.
See if the increase is not limited to $2,400,000? A. I know that it was supposed
that it would be a long time before we would make that 6 per cent. It was intended
entirely as I stated, and that was my impression during all the discussions
on the subject; but it may be that this clause controlled that :
And it is further agreed between the said Southern Pacific Company and the
said Central Pacific Railroad Company that if at any time it appears that by
the operation of this agreement either party is being benefited at the expense
of the other, then this agreement shall be revised and changed so that such
will not be the operation thereof; and if the parties hereto cannot agree upon
the changes necessary to that end, then each party shall appoint one arbitrator,
disinterested, but skilled in relation to the subject-matter, and the award
and decision of such arbitrators in writing shall be binding upon the parties
hereto, and this agreement shall be revised and changed in accordance with
such award and decision, and as revised and changed shall be duly executed
in writing by the parties hereto.
It may be that that caused the change, but it had entirely passed from my mind
that it was less than 6 per cent., and I know that that was what we had fixed
at one time.
Q. The provision, as you find in the lease, is that the limit of the increase
is $2,400,000. Is that not correct? A. Yes.
Mr. MILLER. Twenty-four hundred thousand in addition to twelve hundred thousand?
The WITNESS Yes ; that is correct. I have learned to distrust my memory a great
deal, but I did not think I could be so much mistaken.
Mr. COHEN. The witness finds on reading the clause referred to that the limit
is $2,400,000 in addition to the $1,200,000, making in all $3,600,000, or about
6 per cent, on the outstanding stock.
2814 U. S. PACIFIC KAIL WAY COMMISSION.
SINKING FUNDS IN CHARGE OF EXECUTIVE COMMITTEE.
Q. Does the lease require you to keep up the sinking fund required by the mortgages,
other than the United States mortgages? A. Yes, sir ; that is as I remember
it.
Q. Who has charge of these sinking funds'? A. The trustees. I believe we have
an executive committee, whose business it is to go in and examine those things
and see that they are all right. They are kept in the vaults of the company..
Q. Will you refer us to the present committee, so that we may examine as to
the amounts and as to the present investments of the sinking fund 1 A. Mr.
Timothy Hopkins is the treasurer. Mr. Charles P. Crocker is another trustee
[addressing counsel] is not Mr. Gage on that committee?
, Mr. HAYMOND. That executive committee is not now in existence. Mr. Hopkins
is on the committee.
The WITNESS. A committee was appointed from time to time to examine.
Commissioner ANDERSON. One name is sufficient for our purpose. We only want
know how the money is and where it is invested.
The WITNESS. I know they were appointed to investigate and report. We did have
an executive committee, but that was abolished.
THE COMMITTEE AND THE THURMAN ACT FUND.
Mr. HAYMOND. That committee had nothing to do with the sinking fund under the
Thurman act.
The WITNESS. Did you understand that they had anything to do under the Thurman
act?
Commissioner ANDERSON. Not at all, but they hold a certain portion of the sinking
fund as security for a certain portion of the bonds which are prior to the
lien or claim held by the United States ; and therefore the amount and investment
of that sinking fund is a matter of interest.
The WITNESS. Those sinking funds are for all the roads that were consolidated
into the Central Pacific, each one having, however, its specific portion of
that sinking fund.
Q. As stated in your report? A. Yes, sir.
NET EARNINGS OF CENTRAL PACIFIC FOR 1886.
Q. And your report gives it all? A. Yes ; I expect so. And really we have
been traveling over a good deal of ground that is covered by my report.
Q. 1 mean the annual printed report. A. Yes.
Q. In regard to the operation of this lease of 1886, have the net earnings
of the Central Pacific (I mean of that portion leased to the Southern Pacific)
been more or less than twelve hundred thousand dollars, after deducting and
paying all matters required by the lease? A. I think it is between thirteen
and fourteen hundred thousand dollars, according to my recollection.
Commissioner ANDERSON. That is for the year 1886 7
The WITNESS. That is the only one we had, was it not?
Commissioner ANDERSON. We had a broken portion of 1885. That report was made
out for 1885, and showed about thirteen or fourteen hundred thousand dollars.
The WITNESS. Let me ask Mr. Miller about that. Was that the year from the time
the road took it, or for the financial year?
LELAND STANFORD. 2815
Mr. MILLER. I think they were put together.
Commissioner ANDERSON. In 1885 it was for the whole year?
Mr. MILLER. Yes, as I remember; but the report will show.
COMPARATIVE EARNINGS OF 1885 AND 1886.
Q.- My question is, whether the lease of 1886 is better or worse than that
of 1885? If you do not know, you may refer us to Mr. Miller. A. I do not know.
I was interested in the general result, and I understood that the earnings
of the Central Pacific were something over what the Southern Pacific were called
upon to pay.
Commissioner LITTLER. What is your answer, Mr. Miller?
Mr. MILLER. I do not recollect. It is about the same, but the financial tables
will all be here to-morrow morning. I think if you will examine them they will
show the whole thing.
FIERCENESS OF COMPETITION.
The WITNESS. If you will allow me, I will say that the Central Pacific is about
as low now as it has ever been, or is likely ever to be again. There can never
be any fiercer competition waged against it than there has been for the last
two years. The State of Nevada, which at one time gave to it a very profitable
mining traffic, has gradually run down in population and business. I would
not say how much, but to probably less than one-half the business that there
was formerly, and I think from this time on that the population is likely to
be increased, and the mines are likely to be developed. The future is better
and brighter, and so far as its lines in this State are concerned, they are
growing better every day, so that I think the condition of the Central Pacific
now is at its lowest ; and I think that we may reasonably expect a constant
improvement hereafter. Competition can never be fiercer than it has been within
the last two years.
HOW THE SINKING FUND IS INVESTED.
Q. Do you remember whether the portion of the sinking fund you have referred
to is invested in the bonds of the Central Pacific 1? A. I do not know. The
bonds in that fund have practically been used from time to time, according
to our judgment as to what was best for the fund.
Mr. COHEN. To what fund do you refer?
Commissioner ANDERSON. The funds with the Central Pacific for the local roads.
INTRINSIC VALUE AND PRESENT MARKET VALUE OF BONDS.
The WITNESS. From our position we have had a good opportunity to judge of the
intrinsic value of the bonds outside of the market value, and we found that
after the road had all been operated some time, ami fairly established, the
bonds appreciated in the market and they were better to make exchanges with
and take some of the bonds of other roads that we thought just as good to hold,
at a less price; we have done that, and, to the advantage of the fund, a good
deal in that way.
Q. What is the present quotation of the first-mortgage bonds of the Southern
Pacific? A. About 15 or 16 per cent, premium.
Q. How long have they been on the market ! A. I do not remember what time.
2816 U. S. PACIFIC RAILWAY COMMISSION.
WHEN THEY WERE PUT ON THE MARKET.
Mr. COHEN. I think they were first put oil the market about 1880 or 1881.
The WITNESS. We had them here arid we used them as collateral for a long-time
before any of them were put on the market. Circumstances were such, for one
reason or another, that we could not market them at a reasonable price, and
so we were compelled to carry them, and borrow money on them.
VALUE FOR CONSTRUCTION PURPOSES.
Q. They were issued to the various construction companies and used, as collateral
until there was a market to sell them? A. Yes. Now I will say this : That
when you project a new road and you provide for its construction and for the
issuance of bonds, those bonds have no market value ; and, until there are
lines of road constructed, the holders have really no obvious security. The
construction company takes those bonds and holds on to them, and borrows money
on them, until there is a sufficient amount of the road constructed to show
that there is security, and then they begin to try to market them.
THE DIFFERENT SERIES.
Mr. COHEN. The market price I gave you was for the Southern Pacific of California.
There are three series of Southern Pacific bonds.
Q. Do they vary materially?
Mr. COHEN. No. About 2 or 3 per cent., I think.
The WITNESS. These Southern Pacific bonds never reached par, I think (unless
it was by a kind of force), until the line of the road was all the way through
to New Orleans. That is my recollection, and I do not think that we have sold
any of them above par ourselves. We have sold them away down : I think as low
as 85 cents.
DISCUSSION OF POWER VESTED IN CENTRAL PACIFIC.
Q. Was the subject of the power of the Central Pacific to make this lease of
itself to the Southern Pacific, discussed in your board, or have you any opinion
on the subject from your lawyers? A. I do not know whether we have any written
opinions or not. It was discussed orer in New York, and Mr. Charles H. Tweed
passed upon it, and Mr. Creed Haymond here. I think Mr. Southtnayd, also, who
was counsel for Speyer & Co. Speyer & Co. are very largely interested.
I do not mean in direct ownership, but they negotiated and sold the greater
portiou or a very large portion of the stock of the Central Pacific, and also
the bonds of the Southern Pacific, and the bonds of the Central Pacific. They
have been very largely the financial instrument through whom we have operated
in New York. In all these cases I think they have always had Mr. Southmayd
to pass upon them.
BASIS OF ACCOUNTS.
Q. In preparing the account of the actual earnings of the Central Pacific for
the purpose of making your adjustments with the Commissioner of Railroads,
please state whether they were made upon the basis of the lease between yourselves
and the Southern Pacific, or whether they are made directly from the actual
Darnings? A. The United States Com
LELAND STANFORD. 2817
missiouer has lately been over here and his experts have been at work. What
their report will be I do not know, but probably Mr. Miller can tell us what
their views were.
Q. The only question is whether that account is settled on the basis of the
actual earnings, or whether it is settled upon the basis of the rent agreed
to be paid by the lease? A. I should think upon the basis of the actual earnings.
Mr. MILLER. Upbn the actual earnings.
The WITNESS. Whenever it would exceed the $1,200,000, I should think they would
rely on the earnings, but whenever it was less, then it would be upon the basis
of the $1,200,000.
RELATIONS WITH THE GOVERNMENT REGARDING THE LEASE.
Q. In other words, the Government pays no attention to your lease to the Southern
Pacific? A. I presume that if the Central Pacific should earn less than $1,200,000
they would, unless I am mistaken.
Commissioner ANDERSON. You do them great credit.
The WITNESS. I am glad to give them credit whenever I can.
Q. The Government reserves the option to take advantage of the lease, or to
collect on the earnings of the road? A. If it is an option with them I have
no question at all as to what they will do.
CONSENT OF CONGRESS NOT ASKED AS TO LEASE.
By the CHAIRMAN :
Q. Was the question of the lease of the Central Pacific ever presented to Congress
in any way? A. I do not know that it ever has been. I do not think it ever
has been.
Q. Was any application made to Congress to secure its consent to the lease
of the Central Pacific to the Southern Pacific? A. None at all.
Mr. BERGIN. Your views of the law, Mr. Chairman, are somewhat different from
the views of Mr. Maynard. I do not understand that a California corporation
has got to get the consent of Congress.
The WITNESS. I do not understand that in the management of the affairs of the
Central Pacific we have any more to do with Congress than we have with an outsider,
except in those things prescribed in the contract with the Government.
EXTENT OF JURISDICTION OF CALIFORNIA CORPORATION.
Q. Do you extend the jurisdiction of a corporation of California beyond the
State line? A. Yes, sir. That is, by the statutes (the State of California
and the State of Nevada consenting), the Central Pacific is entitled to avail
itself of all the advantages and privileges conferred by the act of Congress.
Of course we could not go beyond the State limit by our own original corporation
articles, but the legislature of the State of California authorized us to accept
the conditions of the act of Congress, and they have reserved the powers of
the State over the corporation. That lease was drawn with the greatest care
by the parties in order to do justice all around, and 1 have my judgment upon
it to-day, the same as it. was the day it was made, that it is a just and good
one for all parties. I shall be very glad if the Commission will examine it
most critically, especially because it is a large transaction of two great
railroads, and I would like the public to be as well informed as possible in
regard to it,
2818 U. S. PACIFIC RAILWAY COMMISSION.
DATE OF ISSUING BONDS.
Q. How soon after the date of commencement of the construction of the Southern
Pacific were the bonds of the Southern Pacific issued? A. Not for a number
of years. It was quite a number of years before we did anything with them other
than to use them as collateral. There was a time once when we could have sold
those bonds at a rate that we could have afforded to accept, but there came
on the hard times, and from that time until about the time that we did sell
them, we could never get a price that would justify the sale ; and the consequence
was that we did not go on with that road as we would like to have done. We
built it in pieces, from time to time, as we were able to build it, and we
got down finally to the Colorado River, I think, before we sold any of those
bonds. The Southern Pacific runs to the Colorado River at Fort Yuma, and I
do not think we were ever able to sell a bond until after the road had reached
there, and we had made arrangements to go on into Arizona and New Mexico. That
was an extreme case, but, really, in most all the roads we built, we have had
to wait until the roads demonstrated very fully their value before we could
sell the bonds.
EFFECT OF SOUTHERN PACIFIC UPON CENTRAL PACIFIC.
Q. In regard to the relations existing between the Southern Pacific and the
Central Pacific, and as bearing particularly upon the earning power of the
Central Pacific, will you please state what alterations have occurred in the
trans-continental movement of freight since the Southern Pacific has been opened
as a through route? A. The first competition that arose to the Central was
by the connection of the Atchison, Topeka and Santa Fe with the Southern Pacific.
That was made practically before the Southern Pacific line was completed. In
Mr. Stubb's report to me, which I have filed with the Commission, the amount
of the diversion from the Central Pacific by the construction of each road
is set forth very clearly, and if you want to see how much effect and what
effect each of these competing lines had upon the business of the Central Pacific
that report will show. If I had that to refer to now, I could answer more clearly.
DIVERSION OF TRAFFIC.
Q. Does that report show whether or not the Southern Pacific has diverted through
business from the Central Pacific? A. Yes ; the Southern Pacific has had some
very great advantages over the interior lines, it being one line through from
San Francisco to New York. Once on their steamers, freight would come through
with hardly any delay. On the other lines (through freights from California
not being very heavy) things get mixed up with the freight of other roads and
cars are shunted off on side-tracks. And particularly is that the case at Chicago.
Chicago is a very difficult place for them to get through, and there is great
delay usually on Eastern lines. When freight leaves Chicago it meets considerable
delay until it reaches Omaha, and then it comes through without any delay at
all. But still on these railroads, with the immense costs they have and the
small amount of business, not having enough for full trains, delays occur.
The certainty with which freight comes through is a great advantage to the " Sunset" route. "When
it reaches New Orleans, of course, there is no change of car or of control
until it reaches the point of destination. We run a line of ships from New
York to New Orleans and that makes it a through line. And
LELAND STANFORD. 2819
in that way the certainty of that delivery has diverted a great deal of business
from other eastern ports.
Q. It has diverted a great deal of business that otherwise would have gone
over the Central Pacific, do you mean? A. That diversion became serious only
when the Southern Pacific had to compete with these other lines which the Central
did not control. The Central, when it controlled the Southern Pacific, dictated
the rates both ways.
COMPARISON OF RATES.
Q. How do the rates on the Southern Pacific between San Francisco and Now York
compare with those over the Central Pacific? A. They are about the sarne?
I believe, but in times of competition no relation of Central and Southern
could control competing lines. Then we met the competition and got the best
we could.
Q. Has the Southern Pacific taken adverse proceedings for the purpose of securing
traffic as against the Central Pacific in bidding or soliciting through freight?
A. It never interfered with prices at all. There has been complete harmony.
The Union Pacific and all of the lines, of course, were interested in sending
it by the Central, because in doing that they sent it over their own line and
they had their own agents.
EFFORTS TO SECURE THROUGH FREIGHT.
Q. What efforts do you make to secure through freight, either here or in IsTew
York? A. We have our agents in New York and our agents here. And all these
other lines have their agents at all Eastern points, and they all have their
agents here in San Francisco, Los Angeles, and sometimes above here. Every
railroad in the United States that wants to send business to California is
interested to get it over its own road, and with the most favorable connection.
NO CHANGE IN MARKING OF ROLLING STOCK.
Q. After the lease of the Central Pacific to the Southern Pacific was the title
of the property and rolling stock changed to the Southern Pacific? A. Yes
$ that passed into the control of the Southern Pacific with the condition that
they should return it in its present condition.
Q. I mean, was the title of the cars and of the general property the marks
on them changed to the Southern Pacific after the lease from the Central Pacific
to the Southern Pacific?
Mr. BERGIN. I do not think the title would change.
By Commissioner ANDERSON : Q. Were the car marks changed?
Mr. COHEN. The name of the company was changed, but the title would not pass.
The WITNESS. I do not think any car marks were ever changed.
By Commissioner LITTLER :
Q. They were not changed, but bear the Central Pacific marks? A. Of course,
yes $ all the property of the Central Pacific the Southern Pacific must keep
in good order and repair.
MILEAGE RATES ALLOWED.
Mr. HAYMOND. They allow mileage rates.
Commissioner ANDERSON. That is for the cars, stock, and engines, and other
rolling property? A. Now, if the cars of the Central Pacific Com
2820 U. S. PACIFIC RAILWAY COMMISSION.
pany are used on the Southern Pacific they get credit for it. The account is
kept between the two roads just as it is between Eastern roads. Every car is
counted and every company has its credit for the cars that it runs. Q. That
is, a mileage account is kept? A. Yes, sir.
By Commissioner ANDERSON:
Q. Does the Southern Pacific keep a separate agent in San Francisco separate
and independent of the Central Pacific? A, No, sir.
Mr. COHEN. If you will read the lease that will explain it to you better than
the witness can.
The WITNESS. A complete inventory of the property of the Central Pacific has
been taken.
Q. Is it printed? A. No, I do not think so.
Mr. MILLER. It is not printed.
AGREEMENT TO KEEP ROLLING STOCK IN GOOD ORDER.
By the CHAIRMAN :
Q. So that after the lease, the property of the Central Pacific, the engines
and the rolling stock, remained still designated as that of the Central Pacific,
and so appeared on the outside I A. Yes ; and they must be restored in as good
condition, or, if they use a car up, they must return one in its place. That
is, they must return the same property or substitute some other for it. Of
course they are liable to have engines smashed up and worn out, but they must
keep the rolling stock in good order and condition.
Q. What I wanted to know is, whether there was an outward change in the designation
of the cars and other property of the Central Pacific upon leasing that road
to the Southern Pacific? A. No, sir ; but there is an account with all those
departments and their earnings are noted. The accounts, I think, are in every
respect as distinct as though the roads were entirely different.
Mr. COHEN. The property remains in the Central Pacific as though the transfer
had not been made *?
Mr. BERGIN. The names of the cars, as I understand the drift of the question,
have not been changed. They retain the same name since the lease as they had
before.
SEPARATE AGENTS FOR EACH ROAD.
By Commissioner ANDERSON :
Q. In regard to these agencies, has the Southern Pacific a separate agency
from the Central Pacific in New York, San Francisco, and at other points where
through freight may be solicited? A. Yes ; there is an agent of the Central
Pacific who has been the agent of the Union and Central together. The Southern
Pacific has its own agent there.
Q. Under what officer is that agent? A. The general manager of what we call
the Atlantic Division is a Mr. Hutchiuson. He is in New Orleans. On this side
the general manager is Mr. Towne.
Q. From whom do these gentlemen receive their instructions as to what they
shall do to get freight? A. On that side from our general traffic manager.
Q. That is Mr. Stubbs? A. Mr. Stubbs ; yes, sir.
Q. Do you know anything in relation to the instructions Mr. Stubbs has given
to these gentlemen? A. I do not know of any special in
LELAND STANFORD. 2821
structions. I can understand that the general instructions would be to do the
very best that they can for the company, but there is no competition allowed,
or cutting of rates, to divert the business from one road to the other.
METHODS OF OBTAINING BUSINESS.
Q. Do you know whether they have not. as a matter of fact, bid for business
by offering rebates and issuing passes J? A. Not for the purpose of diverting
business from one to the other. They have met competition. There never was
any competition between those two lines to induce them to cut rates, one against
the other, but when they have given rebates I suppose it has been to obtain
business. I justify obtaining business by any fair means and meeting competition
wherever it exists, either by accepting the business at the low rate or by
giving a rebate. Where competition exists it practically fixes the rates that
the railroad company may obtain. I do not know but what the Union Pacific may
have cut rates against them, but we never allowed it ; they could not do it
over our line of road ; they had to do it entirely over their own line of road.
BUSINESS DIFFERENCES WITH UNION PACIFIC.
Q. Without saying anything hostile to the Union Pacific, have there not been
many differences between the Central Pacific and the Union Pacific in regard
to the working of the through business? A. There have been business differences.
There is not as much, perhaps, as might naturally be expected. There is a great
deal of competition, of course, from the East to the West at Salt Lake and
for the business of Montana, Wyoming, Idaho, and Utah, and sometimes there
has been friction, but it is very seldom such that the freight agents were
not able to fix it up among themselves.
METHODS OF MEETING COMPETITION.
Q. Have there not been occasions when they asked you to prorate or divide a
decrease in the rates with them in order to meet the competition of other roads
and where you have declined to dp so? A. I do not know but that that may be
so, but we did not feel it necessary. Our lines over here for a time entirely
protected this end. Then we had the road from Mojave eastward, the line from
Sa.n Francisco to the Colorado Eiver was about the same in distance as the
line by the Central Pacific to Ogden, and the same was true of the Southern
Pacific to Fort Yuma, and we did not want them to compete. They were all under
one management, that of the Southern Pacific, and we would not consent to cut
the rates for the Union Pacific to compete with other lines of road, because
to the Central Pacific it would not make any difference whether the freight,
came by the Union Pacific or any other road, because the proportion going to
the credit of the Central Pacific was about the same on all these lines.
CHARACTER OF FREIGHT UNDER DISPUTE.
Q. What articles of freight did that matter refer to; what was involved? A.
I do not remember anything in particular.
Q. From what points was it u? I mean was it freight that would come necessarily
over the Southern Pacific, so that you would get the bene*
2822 U. S, PACIFIC RAILWAY COMMISSION.
fit on that side? A. I think uot that way. It was more particularly that which
would take the Atchison, Topeka arid Santa Fe or the Union Pacific line.
It was about the same in either case. It was in that kind of freight that
this competition occurred. The greater portion of the freight, you know,
arises west of the Atlantic seaboard ; of course it is a very large amount
of the freight. It is the freight along the Atlantic seaboard which seeks,
most conveniently, the Southern Pacific route. The three lines being so nearly
equal, when they were all under the management of the Central Pacific there
was 110 reason why they should consent to share a cut rate with any Eastern
company competing with i
INTEREST OF CENTRAL PACIFIC IN THE FREIGHT.
Q. Well, the question we wanted light on was whether, even if this traffic
came over the Atlantic and Pacific or the Atchisou, Topeka and Santa F6 you
were not bound to get substantially your share of the rate before the freight
in question could reach San Francisco. It could not get there without going
over a large portion of your line? A. In any event it practically did not
make any difference to the Central Pacific whether it took one line or another.
Q. If it came over the Southern Pacific what interest would the Central Pacific
have in it? A. Because the Central Pacific at that time had a lease of the
Southern Pacific.
Q. That was before the present lease! A. Yes.
IMPORTANT ARTICLES OF TRANSCONTINENTAL FREIGHT.
Q. Eeferring more especially to the present state of affairs, will you please
state what are the more important articles that are carried over and form part
of your transcontinental freight. I presume fruit is an important class of
freight with you? A. That is a very important factor. So is wine. Sometimes
we have carried grain, wheat, and barley east, and we have carried cabbages
to Saint Louis.
Q. And wool? A. Yes ; a very large quantity.
Q. Is there much tea carried? A. Yes ; I think that the greater portion of
the tea now used in the United States passes over these roads.
Q. Do you carry much sugar? A. And sugar too; yes; a good deal of sugar I think
has been made here and gone to Saint Louis.
Q. Over what road does most of the sugar go now? A. Most of it goes by the
Central Pacific, I think.
Q. Since last April *? A. I cannot say as to the period since last Ipril. I
cannot say what are the proportions going by the Atchison and Santa Fe, or
the Atlantic and Pacific.
Q. Mr. Stubbs can give us those figures, can he? A. I think he can give them
to you.
COMPETITION FOR BUSINESS OF OREGON AND WASHINGTON TERRITORY.
Q. Your lease contains a recital that the Union Pacific Eailroad Company has
obtained the control of the line known as the Oregon Short Line, wnd thereby
secured an outlet to the Pacific, independently of that over the Central, and,
in that respect, had placed itself in opposition to the interests of the Central
Pacific. How far did that consideration enter into the making of that lease
? A. It had this effect, that so far as the influence of the Union Pacific,
over on the other side, can be exerted
LELAND STANFORD. 2823
in regard to freight for Oregon and Washington Territory, it is used to send
it by their own line and not over the line of the Central Pacific.
Q. How often has that occurred? A. I do not know the proportions, but I think
Mr. Stubbs in his report to me grouped all the business that went to Oregon
and Washington Territories together. I do not know whether he was able to divide
the freight on the Oregon Short Line from that on the Northern Pacific, but
may be he was. There is one thing that T want to say in regard to this Union
Pacific. I understand that the impression has gone out that we treated them
unfairly. We never have treated them unfairly or intruded on their territory.
They established lines, and would not allow us to prorate at all for the business
of Utah, Wyoming, and Montana, and we had to pay them the local rates for any
business that went from here. They intruded upon the territory which otherwise
would be divided, but we did not complain. They complained of our carrying
a road over on their line of territory. We had no line of road to cut into
their territory.
OREGON SHORT LINE AN INJURY TO CENTRAL PACIFIC.
Q. W T e are only asking for information as to how much the Southern Pacific
has diverted from the Central, or how much the Oregon Short Line had diverted
from the Central. As a matter of fact, do you, or does your general passenger
agent, regard the completion of the Oregon Short Line as iniurious to the Central
Pacific? A. Yes; because they had an interest in diverting from our line all
the Oregon business, and sending it to their own line ; also the Idaho and
Montana business. They have the control of that from Ogden north, and they
would never allow us to send anything over except at their local rate, which
was very high.
REDUCED EARNINGS.
By Commissioner LITTLER :
Q. How does the volume of business over the Central Pacific for the last year
compare with that of former years, can you tell us? A. I cannot say, but of
course the earnings have been much less.
Q. Are those reduced earnings to be attributed directly or remotely to the
leasing of the Central Pacific to the Southern Pacific? A. Not at all. Those
reduced earnings are entirely due to the competition which has grown up since
the road was completed.
SOLICITING AGENTS.
Q. I do not know whether I understood you or not in relation to soliciting
agents. Do you say that the Central Pacific has no soliciting agents here or
at New York? A. Oh, no 5 we have an office here and an office in New York,
but the soliciting over there is donfe by a common agent of the Central Pacific
and Union Pacific.
Commissioner LITTLER. I can well see how this lease of the Central Pacific
would become injurious to that road and to the Government if there were a combined
effort on the part of the officers of the leasing line to send freight and
passengers over the Southern Pacific.
CENTRAL PACIFIC AND "SUNSET" ROUTES NOT COMPETITORS.
The WITNESS. Yes; if that was the policy then the Central Pacific would complain.
But the competition of the Central Pacific is not with the u Sunset" route.
It is through those routes that start from the
2824 tr. s. PACIFIC RAILWAY COMMISSION.
doors of the shipper every branch Hue of railroad connecting with the trunk
lines through the entire Eastern States. Those lines of roads compete with
the Southern Pacific and Central Paciiic.
Q. It is true, however, that freight can be transported over the Southern Pacific
to all eastern ports and points? A. Yes; but if freight is to reach New York,
and then be sent into the interior, as to, say, Chicago, it has got a thousand
miles of railroad to be sent over, and it will have to pay the local rates.
It does not go back that way. I think it rarely, if ever, reaches as far back
as Chicago.
FINANCIAL INTERESTS OF THE MANAGERS.
Q. How do the interests of the managers of the Southern Pacific and the Central
Pacific compare I I mean their financial interests in the respective corporations
A. We have a larger financial interest now in the Southern Pacific than we
have in the Central Pacific.
Q. If you should consult your own financial interests you would probably be
willing that the Southern Pacific should have its full share of the traffic,
to say the least of it? A. Financially, yes ; but it does not compete except
for that comparatively small business that runs along the coast. Just think
of it. The Southern Pacific Eailroad runs to the Gulf of Mexico on the south
and through to Louisiana.
ACTIVITY OF AGENTS OF COMPETING LINES.
Q. I understand ; but do you mean to say that there is no traffic going from
California to New York which does not find its way over the Southern Pacific
road, and roads connecting, east? A. We have one agency for the roads. Here
is the Atchison, Topeka and Santa Fe ; it has an agency, and there is an agent
for the narrow-gauge road that comes into Salt Lake. There is an agent for
the Southern Pacific, and there are agents in here for the Northern Pacific,
and for the Union Pacific, all of them looking out vigilantly for their interests
as against competing lines. It is not very easy for the Southern Pacific if
it wanted to divert business to do so as against five or six agents who are
as active in securing business as any agent of ours could be.
Q. The question still recurs whether the agent of your company, representing
both the Central Pacific and the Southern Pacific, after securing through traffic
to New York, is not capable of sending that through traffic over the Southern
Pacific to New York by way of lines connecting eastward from El Paso or from
New Orleans, or from Houston, Tex., if you please 1 A. No ; you seethe cutting
of rates to divert business away from the Central Pacific would mean an interference
with all the rates ; not only the rates to New York, Baltimore, Philadelphia,
and Boston, but it would interfere with the rates which the Central Pacific
would obtain for that interior business which comes over, because if they cut
the rates to New York City the rates to Buffalo would follow and necessarily
be cut.
ROUTE GENERALLY DESIGNATED BY SHIPPER.
Q. You would not have to cut the rates under my proposition. The agent of the
Southern Pacific, having secured the freight and having the option whether
to send it over the Southern Pacific or the Central Pacific, the freight being
destined, say, to New York, the question is whether he could not send it over
the Southern Pacific to New York by routes connecting with your road, say at
El Paso, Tex., or at Houston,
LELAND STANFORD. 2825
Tex.? A. The shipper generally directs which way his freight shall
goCommissioner LITTLER. Very often he does not.
The WITNESS. Yes ; soinethnes he might be influenced, but our agent is always
watched by competitors, and we cannot afford to interfere with the rates of
all the vast business that lies west of the Atlantic coast.
Commissioner LITTLER. It would not be interfering with anybody else's rates
at all, as I put the question.
The WITNESS. It would interfere with rates the moment you cut the rates or
make them less to New York by the Southern Pacific than it is by the Atlantic
and Pacific.
Commissioner LITTLER. I do not ask you about the cut rates.
The WITNESS. Then how are you going to divert the business?
THE TWO ROADS WORK HARMONIOUSLY.
Commissioner LITTLER. The question I put is, could your agent, representing
the great financial interests of yourself, and the other gentlemen interested
in the Southern Pacific, after securing the freight for transport to New York,
exercise his own judgment and send it over the Southern Pacific instead of
the Central Pacific, without disturbing the rates at all?
The WITNESS. Well, practically that does not occur.
Commissioner LITTLER. That is what I wanted to know.
The WITNESS. The two roads work entirely in harmony. Their interests are identical,
and they never cut rates. I think they do the best they can. They have to meet
the competition of other roads, but as between themselves they never had to
cut rates, and an agent would not be allowed to do so. The agents have never
had such permission.
Commissioner LITTLER. I understand that, and I know that prior to the adoption
of the interstate commerce law there were pools and contracts to sustain rates,
but all these questions I am putting to you do not contemplate the cutting
of rates at all.
The WITNESS. Those things were hardly able to fix rates.
Commissioner LITTLER. Well, there were fixed rates?
The WITNESS. So called.
Commissioner LITTLER (jocularly). I have no idea that any of you ever lived
up to them.
The WITNESS. All our agents say that they lived up to them, and that the others
always cut first.
THEIR INTERESTS IDENTICAL.
Commissioner LITTLER. The question I put to you does not involve the cutting
of rates at all. The question is this : The consolidated company (which embraces
the leased lines and the Southern Pacific), having secured the business on
a fixed rate to New York, and your agent being more interested in the earnings
of the Southern Pacific than he is in the Central Pacific, the question is
whether to secure business and increase the earnings of the Southern Pacific,
rather than of the Central Pacific, it is not possible for him to transport
that property at that fixed rate from San Francisco to New York over the Southern
Pacific and the Texas Pacific, if you please, and the Wabash system? A. I suppose
it is possible, but in practice it is not done. We forbid that. If the two
companies were separate, if their interests were not so dove
2826 U. S. PACIFIC RAILWAY COMMISSION.
tailed and so intermingled in the local as well as the through business, it
would no doubt occur. And that is the real reason why we kept them so close
together, that they should work in entire harmony and work out to a common
interest.
COMPARATIVE COST OF TRANSPORTATION OVER BOTH LINES.
Q. Do you not think it probable that you could transport freight from San Francisco
to New York, in the winter time, more particularly, over the route I have indicated,
as cheaply as you could over the Sierra Nevada and the Eocky Mountain ranges?
A. We could really do it a great deal cheaper. The trains from Yuina to New
Orleans I think do not have to climb as heavy grades. I think we have grades
that do not exceed in any place 52 feet to the mile.
Q. Then the distance of a thousand miles added cuts but very little figure
in the transportation of freight from here to New York? A. Yes, it does ;
you cannot transport freight for a thousand miles without costing something,
and over the Sierra Nevadas, where a hundred miles of that road requires nine
times the engine power to lift the freight over that 100 miles for many purposes
that counts for a thousand miles in many places on easy grades.
SOUTHERN PACIFIC THE CHEAPEST.
Commissioner LITTLER. For that very reason I am inquiring into the operation
of these roads. A. The Southern Pacific works to get what business it can,
and so far as the cost of movement is concerned it is less there. The actual
cost of movement sometimes becomes very small, and the question is whether
you shall take the freight or not. It does not depend on the freight paying
the average cost, but if it will pay the additional cost consequent upon that
movement. Then you take it rather than reject it. If all the business was done
at that low rate the railroad could not live. We do not take into consideration
the interest account, or the semi-fixed expenses, such as station men, brakemen,
trackmen, and the minutiae of expenses of the roads ; but will it pay the additional
cost consequent upon its movement, and if it will do that we take it rather
than refuse it.
Q. Recurring again to the question I have put, I ask you whether it is not
in the interest of the Central Pacific, and consequently in the interest of
the Government, that that road should be represented by its personal independent
representative as a solicitor of freight ! A. If the stockholders do not like
our management, let them say so.
Commissioner LITTLER. That is not a fair answer to my question.
RESPONSIBLE TO STOCKHOLDERS FOR MANAGEMENT.
The WITNESS. I think it is. I want to say to you this : The first consideration
to me in the management of this road is that I shall so conduct its business
as to satisfy my stockholders. Now, the management of the Central Pacific has
been approved time and time again at the annual meetings of the stockholders
as weH as at the meetings of the board of directors. That is a fact. That is
the relation we occupy, and as long as I have their approval I do not think
I should give myself much trouble. We have done the best we could for the road.
There are large numbers of stockholders in the road now larger numbers than
ever and I don't know that there is a stockholder in the Central Pacific that
is dissatisfied with our management.
LELAND STANFORD. 2827
Commissioner LITTLER. You should understand that we are not representing a
stockholder, but a large bondholder, and we have a right, and it is our duty
under this act of Congress, to inquire in a respectful manner as to the causes
of the falling off of the traffic of the Central Pacific road. We have that
right as a creditor of that road.
The WITNESS. I might dispute that right.
SEPARATE MANAGEMENT NOT ADVISABLE.
Q. While I desire to be entirely respectful to you, of course, I will repeat
my question whether it would not be to the interest, the very best and highest
interests of the Central Pacific Eailroad, to have its independent representative
to solicit freight, and, if possible, increase the traffic over that road?
A. No, sir; the Southern Pacific in a short time will have its own completed
line from here to the coast [showing on the map]. It is over the Sierra Nevada
Mountains and into the valley of the San Joaquin, and all the sources of traffic
of the Central Pacific are open to competition, and if the two lines are managed,
I do not care how amicably, but still with entirely independent interests,
they would be in conflict, whicli is now avoided, and the safety to the Central
Pacific is in its harmonious connection and relations with the Southern Pacific.
Of course it was largely for the benefit of the Southern Pacific at first,
but finally we found it necessary to go on and protect it until at last it
has become a great system of roads.
Commissioner LITTLER. That is all I care to ask you just now.
GOVERNMENT NOT ENTITLED TO MAKE INQUIRIES BECAUSE OF ANY
DEFAULT.
The WITNESS. I like to have you ask these questions. I do not think myself
that the Government is in the position of a creditor to inquire into this,
because the Central Pacific has never been in default to the Government, and
the company has a right to pay off its indebtedness by services. Now, there
are thirteen years during which this contract runs before the maturity of those
bonds, and it may be that the Government will yet have business enough for
this road to pay off the entire debt. Suppose a foreign war were to occur,
a war with Great Britain, and suppose England were to send twenty-five or more
thousand troops and some of her fleets over on this side, it is impossible
to say how much service we might render to our Government before the maturity
of those bonds. I have never heard before, and I do not think, in all your
experience, you have heard, that a man is to be controlled in the payment of
his debt and his capacity to earn, the money with which to pay it before the
maturity of the debt.
CAUSE OF CREATION OF THE COMMISSION.
Commissioner LITTLER. The existence of this Commission results from efforts
of the Central Pacific Company and the Union Pacific Company to secure more
favorable terms for the payment of the debt, and are sent here to inquire diligently
into all the facts and the circumstances which surround this company and its
property. And you, as its president, expressed a very great satisfaction to
see us when we first came here. We hope we have not become irksome or tiresome
to you. We are here for the purpose of getting at the bottom facts of this
property and its earning capacity with a view of recommending to Congress such
legislation as may seem proper under all the circumstances, and we hope p R
YOL IY 32
2828 U. S. PACIFIC RAILWAY COMMISSION.
you will not become impatient under our examination. We desire to get all the
facts so that no Commission hereafter shall have even straw to thresh over.
CONTRACT BETWEEN THE GOVERNMENT AND THE COMPANY.
The WITNESS. Well, it was a query in my mind whether you came here like a judicial
body to investigate the matters between two parties, or whether you came here
as a representative of the Government alone; because the courts have decided
that there is no question that, whatever control the Government has, their
control arises from the contract itself, and that we are two parties to the
contract, the company and the Government. I hope you have come here holding
the scales evenly and to do us justice and right as well as the Government.
Commissioner LITTLER. Speaking for myself alone, I am here to ascertain the
exact truth in relation to all these matters and to be governed in my recommendation
to Congress by those facts, but I am going to be tolerably inquistive, in order
to get at the facts. That is a part of my duty.
HOPING FOR GOOD RESULTS FROM THE INVESTIGATION.
The WITNESS. I should be very much disappointed not to have this Commission
go on, because we hope largely through this Commission to establish our case
by the proofs that we shall submit and are submitting. We feel that we have
been wrongly treated by the Government. We know that we have great equities
and we hope that this Commission will be able to present those equities as
they may appear to them, and it will make a very great difference to our case,
I think, in public estimation. But as far as concerns the legal status of the
Commission and its right to investigate our books, we have, I may say, an opinion
of our own. We do not want, however, to throw any obstacles in the way of the
Commission.
Commissioner LITTLER. It is due to the Commission and every member of it to
say that not a line of their report has been written or considered nor will
be until the investigation is entirely completed. When we have time to review
all this evidence, we expect to sit down as a judicial body and write a report
that will be sustained by the facts, and make such recommendation, following
that report, as seems to be justified.
A FRIENDLY INTERVIEW BETWEEN DEBTOR AND CREDITOR.
Mr. HAYMOND. In other words, it is a friendly interview between a creditor
and a debtor.
Commissioner LITTLER. Yes, sir ; and we do not want any ill feeling about it,
but we do want all the facts, and you can facilitate very greatly the ascertainment
of those facts, if you will.
The WITNESS. I think so far we have evinced a disposition to do so.
Commissioner LITTLER. We have no complaint to make except in one little matter
which we settled by diplomacy.
Mr. RAYMOND. In all examinations a period arrives when somebody objects to
producing books.
Commissioner LITTLER. We want to see all your books and see what they show.
I have no doubt from what Governor Stanford states that they will not convict
anybody of high crimes. They might show, however, that some of you gentlemen
have made a great deal of money
LELAND STANFORD. 282$
THE GOVERNMENT AND THE PEOPLE BENEFITED.
The WITNESS. We have made a great deal ; I think that is so. I can tell better
after the. debts are all paid. But we owe a great many millions of dollars.
At the same time I have this to say about it, that the values that 'we have
created where none existed before, we have created without prejudice to a single
individual in the United States, and where we have created one dollar of value
for ourselves, we have created hundreds for the Government and the people in
developing the country and its resources. The amount saved in the cost of transportation
has been several hundred millions to the people of California.
AN INTERESTING FACT.
To show the effect of these railroads I will state an interesting fact : Prior
to the construction of the Southern Pacific Kailroad, which was constructed
largely for the moving of agricultural products, they were charging upward
of $17 a ton on vessels for wheat from here to the East. Immediately upon our
moving the first train load of wheat from here to Few Orleans freights dropped
down to $10 a ton and then came down from $10 to $5, and they have never been
up to $10 since. That year we had millions of tons of wheat to move, and we
saved several millions of dollars to the farmers of this coast alone.
Commissioner LITTLER. That is a part of your case.
The WITNESS. Well, we feel like telling, once in a while, what we have done
for others as well as for ourselves ; of course what we have done for ourselves
is a little problematical while those large debts remain unpaid.
EFFECT OF SOUTHERN PACIFIC UPON UNION PACIFIC.
By the CHAIRMAN :
Q. What effect had the construction of the Southern Pacific upon the Union
Pacific 1 A. So far as it diverted business of course it was injurious, but
we got on pretty well without cutting rates. There was no chance for the Southern
Pacific to touch the Union Pacific at all, until the Atchison and Santa F6
reached it, and that immediately formed a new line ; but before that the Southern
Pacific went off by way of Fort Yuma and down into Texas, and it did not affect
the Union Pacific business by as much as a penny or a pound of freight. There
was no place where they could come into competition, but the moment that the
Atchison and Santa F6 touched the Southern Pacific and formed a through line
for all the business of the interior as well as the Atlantic coast, then both
the Union and the Central became affected.
PERCENTAGE OF TRAFFIC DIVERTED.
Q. What percentage of a year's business after the connection of these roads
was affected or diverted? A. I think you have it here. I think that year it
had the immediate effect of diverting 23 per cent, of the whole through business.
Q. So that the income of the business of the Union Pacific, by reason of the
construction of the Southern Pacific, was affected to the extent of 23 per
cent.? A. Yes, sir. I may be mistaken as to it being immediately iu that year,
but I think the accounts show that. I was going to say this : Neither we ourselves,
individually, nor any of the Central Pacific people, are in any manner responsible
for the building of the
2830 IT. S. PACIFIC RAILWAY COMMISSION.
Southern Pacific line. I mean to say they had nothing to do with procuring
the Government aid for the Southern Pacific. They had no interest in the
Southern Pacific until long afterwards. Mr. Anderson spoke yesterday about
the Northern Pacific being provided for the same year that we were. That
is a mistake. We organized and commenced work under the act of 1862, and
our company accepted its terms. So that the provision for the building of
the Northern Pacific was made two years after the commencement of the construction
of the Central Pacific.
NO DIVERSION OF CENTRAL PACIFIC FUNDS TO CONSTRUCT SOUTHERN PACIFIC.
Q. Were the funds of the Central Pacific used in the construction of the Southern
Pacific? A. There has never been a dollar in any shape or manner of Central
Pacific money diverted to the construction of these other roads. There have
been accounts between them, but they have been as carefully kept as though
one railroad were in Eussia and the other in America.
Q. Were the funds of the Central Pacific borrowed by the Southern Pacific for
the purposes of construction? A. No, sir ; but while these roads were in process
of construction the Pacific Improvement Company or the Western Development
Company had running accounts with the Central Pacific, sometimes performing
services for it and having a balance sometimes in its favor, and sometimes
against it; but in that case the accounts have always been kept carefully and
the interest accounted for, whichever way it might fall. It was a great convenience
to have harmonious relations existing between the entire Pacific system of
roads in this State, and it has been of immense advantage to all.
THE SHORT LINES NOT SELF-SUSTAINING.
If one were to divide up all the little companies which were consolidated,
and which are running to-day, many of them could not have lived. The Central
Pacific was running these roads successfully, while if they were divided up
into sections of 100 miles each, there are not two of them that would be self-sustaining.
Take for instance all of the roads on the other side of the Sierra Nevada through
Utah and Nevada; unsustaiued by business originating outside, they could not
maintain themselves or pay their running expenses. There is not a station over
there that is worth anything. The business has been mostly in carrying supplies
to the miners and bringing out the product of their labor, which is of course
very valuable (being the precious metals), but it did not make so much business.
In Nevada the commercial business is very slight. Outside of their mines the
chief transportation business is in cattle, and some of the cattle come over
here and some go east.
NO MONEY BORROWED OF CENTRAL PACIFIC TO CONSTRUCT SOUTHERN PACIFIC.
Q. Did you, as an individual, borrow the money of the Central Pacific for the
purpose of using it in the construction of the Southern Pacific? A. I never
borrowed a dollar in that way. I do not think there has been any real borrowing
between the companies, but in the way of deposits and services rendered the
account in balancing has sometimes been in favor of one and sometimes in favor
of the other. I have never borrowed
LELAND STANFORD. 2831
any money from the Central Pacific for these other companies. I have borrowed
a great deal of money individually for the Central Pacific and continued to
do so up to the completion of the road. Whatever was done in the way of financial
management on this side I did it. Money never went down to less than L per
cent, during the construction of that road. I think the Bank of California
first brought the rates down to 1 per cent, in this State, but I do not think
it has ever got below 1 per cent, per month during the time of that construction.
INDIVIDUAL OBLIGATIONS.
Q. Did you, with your associates, borrow money from the Central Pacific? A.
No, sir.
Q. For any purpose? A. No, sir. I borrowed with my associates plenty of money
for the Central Pacific.
EXTRACT FROM MINUTES AS TO INDIVIDUAL LOANS.
Q. I call your attention to the minutes of the Western Development Company
of September 15, 1875, from which I read :
Whereas Leland Stanford, C. P. Huutington, Charles Crocker, and Mark Hopkins
are owing the Central Pacific Railroad Company the sum of $273,347, and were
owing said company said sum of money on the first day of January, 1875 ; and
Whereas the said Leland Stanford, C. P. Huntington, Charles Crocker, and Mark
Hopkins ask to make their promissory note for said amount to said Central Pacific
Company, bearing date of January 1, 1875, and payable two years thereafter
with interest at the rate of 10 per cent, in gold coin ; and
Whereas said Stanford, Huntington, Crocker, and Hopkins
Will you please explain that transaction? A. I do not remember it, but we never
borrowed any money ourselves from the company, and so if we ever borrowed or
became responsible for money it was in connection with these roads. We had
no object in doing it individually, and it was not done individually ; but
we may have assumed obligations.
MILLIONS BORROWED ON INDIVIDUAL PAPER FOR CENTRAL PACIFIC.
That we very likely did. I have borrowed millions of dollars on the paper of
Mr. Huntington, Mr. Crocker, Mr. Hopkins, and myself, and sometimes on my individual
paper, for the Central Pacific Company. Yery likely 1 put up the collaterals
of that company, but our people here did not care to take the trouble lest
there might be a default. They preferred that they should look to us individually
rather than to look to the railroad for their monej 7 , and so for a long time
I guess, up to the completion of the road we had an individual credit here
that we used for the benefit of the company. Why, I have been overdrawn to
the Bank of California, without a collateral, at one time over $1,300,000,
just on my individual checks. That was all for the benefit of the company,
and it went in there, and at the proper time they settled the thing to my -credit,
but it shows you how our credit was. I only tell you this to show you how our
credit was here at the time, and the extent to which we could use it. We never
hesitated to use our individual credit for the benefit of the company from
beginning to end. But as to that particular transaction I have no recollection
of it either one way or the other, but I have this general knowledge of our
business, that that could not have been associated with our personal use in
any way, but must have been in connection with the companies in some way.
2832 U. S. PACIFIC KAIL WAY COMMISSION.
NO RECOLLECTION OF TRANSACTION MENTIONED IN MINUTES.
Q. That is in the direction of my question whether this money was at any time
borrowed from the Central Pacific upon collateral by you or your associates
for the purpose of the construction of the Southern Pacific. A. I have no recollection
of this transaction ; it may be that Mr. Miller can explain it.
Q. Did you at any time borrow the money of the Central Pacific after placing
collateral, with your notes or with any other security, for the purpose of
using it in the construction of the Southern Pacific? A. I have no recollection
of any such transaction.
Q. Were you at the time of the construction of the Southern Pacific banking
with the Central Pacific?
The WITNESS. Do you mean me individually I
The CHAIRMAN. No ; I am speaking of the company.
The WITNESS. Of the Southern Pacific?
The CHAIRMAN. Yes.
The WITNESS. Well, I am not able to say, really ; but we had such business
relations that no doubt the balances were sometimes one way and sometimes the
other.
+
MONEY LOANED TEMPORARILY TO PACIFIC IMPROVEMENT COMPANY.
Q. Was that while you were drawing on the Central Pacific during the construction
of the Southern Pacific? A. I never drew from the Central Pacific except sometimes
when we may have had a surplus, and the Central Pacific would loan its money
where they knew all about it for a time. For instance, in the sinking fund
there was a time here when it had two or three millions of dollars in it, and
there was no good chance to invest it because the only way we could do it well
was to invest it in some security, and then I think they loaned it temporarily
to the Pacific Improvement Company until they could make an in vestment of
it ; I cannot recall to mind the circumstances, but this I do know, that when
you come to investigate it the books will show that it was not as an individual
thing for the benefit of us four gentlemen.
SOUTHERN PACIFIC DEPENDED ON ITS OWN RESOURCES.
Q. You misunderstand me. I want to ascertain whether, in the construction of
the Southern Pacific road, not individually, but for the purpose of building
the Southern Pacific, you at any time, with your associates, representing the
corporation, the Southern Pacific, borrowed money from the Central Pacific
for the purpose of constructing the Southern Pacific? A. I have no recollection
of any such circumstance. The Southern Pacific Railroad, like these other roads,
depended upon its own resources. When we started in it did not cost much to
buy that road; two or three hundred thousand dollars, I believe ; and we made
bonds and hypothecated those bonds, and so we went on for a long time, and
I think we went on hypothecating bonds and using our individual credit one
way and another until the road' was completed through to Yuma, about 720 miles
from here.
BONDS HYPOTHECATED.
Q. With whom, did you hypothecate your bonds? A. Oh, a good many people. We
borrowed a good deal of money.
Q. Did you hypothecate your bonds at any time to the Central Pacific? A, Oh,
yes 5 during the early time of the construction we of
LELAND STANFORD. 2833
course parted with the Central Pacific bonds very reluctantly at the low rates.
We had faith in the Government triumphing in the civil war, and we knew that
whenever the end was apparent bonds of all kinds would go up, and we hypothecated
our bonds and hypothecated the Government bonds when we could, Generally
they went just as soon as we had them, but still we borrowed money on them
on the prospect of receiving them.
Mr. BERGKEN. The witness seems not to catch the meaning of the question. I
understand the point of your question to be, Mr. Chairman, whether or not the
bonds had been pledged to or hypothecated with the Central Pacific.
The CHAIRMAN. Yes, whether the bonds of the Southern Pacific were pledged with
the Central Pacific.
The WITNESS. I beg your pardon ; I did not understand it ; I thought the question
was whether we had used the Central Pacific bonds in borrowing money for the
Southern Pacific.
NOTE AND COLLATERAL OF WESTERN DEVELOPMENT COMPANY.
Q. I will call your attention to the minutes of September 18, 1876, the minutes
of the Western Development Company :
We, the Western Development Company, hereby transfer and deposit -with the
Central Pacific Railroad Company as collateral for the payment of the above
promissory note and the interest which may accrue thereon, the following personal
property of which we are the sole owners, the same being at our expense and
risk, to wit : 2,567 first-mortgage bonds of the Central Pacific Railroad Company
for $1,000 each.
Will you please explain that transaction if you can recall it? I will read
to you further :
The president and secretary were ordered to issue the following note of the
company:
FEBRUARY 7, 1876.
One year after date, for value received, we promise to pay to the order of
the Central Pacific Railroad Company the sum of $1,796,714.41 with interest
from date until paid at the rate of 10 per cent, per annum, both interest and
principal payable in United States gold coin, at par, dollar for dollar.
Does that aid your memory in recalling the transaction? A. No ; I do not remember
anything about that. It may have been in connection with the sinking fund.
I think at one time we borrowed a great deal of money of the sinking fund,
that is of the different companies, until the sinking fund could invest it
in good bonds. lu doing that it was a benefit to the sinking fund and gave
them some interest. And until they could do better it was very well.
NO RECOLLECTION OF THE CIRCUMSTANCE.
Q. Was the money so borrowed by you used at any time in the construction of
the Southern Pacific road? A. I cannot say as to that. As to this particular
sum I have no recollection of that transaction. I think that the Pacific Improvement
Company, and very likely the Western Development Company, has had money from
the sinking fund when they had it to lend. I think so, but I presume never
without having security, or else it was of such temporary kind that it did
not need any security.
Q. Were such sums used in the construction of the Southern Pacific Kailroad
?--A. I cannot say. It probably went into the general fund of the Pacific Improvement
Company and was spent in their various businesses, whatever they may have been,
2834 U. S. PACIFIC RAILWAY COMMISSION.
Q. So that if such sums went in to the Pacific Improvement Company at the time
of the construction of the Southern Pacific road, then the probabilities
are, I understand you, that such sum went into payment for the construction
of the Southern Pacific Railroad? A. No; I do not say that.
Q. Then * will you please explain? A. I say if they borrowed the money they
did with it as they pleased in their business. Now, where they expended it,
I cannot say. If they borrowed the money they used it as they would if they
had borrowed it from the Bank of California, or from any private individual,
and used it accordingly, and paid for it.
SOUTHERN PACIFIC NOT AIDED BY CENTRAL PACIFIC.
Q. Do I understand you, upon your oath, to say that no funds of the Central
Pacific Railroad ever went into the construction of the Southern Pacific Railroad
? A. Yes ; I do not say that the money of the Central Pacific Railroad may
not have been borrowed and used that way, but I say this, that the Central
Pacific was never under any obligation to furnish, nor did it furnish, money
for that unless they might have done so in a business way, for which they'had
their full compensation. The Central Pacific never has been in such a condition
as to loan money except some small sum that they might have had on hand. I
do not remember any ; but if I am to understand your question to mean whether
the Southern" Pacific, by reason of our being managers of the road, ever
had an undue advantage or an undue facility in obtaining aid from the Central
Pacific, then I tell you no, and I say that the accounts had been kept as honestly
and faithfully between the two companies as though they had no connection,
and as though their managers were entirely different persons.
NO ADVANTAGE TAKEN OF FRIENDLY RELATIONS.
Q. I am not questioning the integrity of the accounts or the honesty of the
transactions, or the security that was put up at the time. I am only endeavoring
to ascertain this: Whenever the Central Pacific Company had a surplus of funds,
and you and your associates in the Southern Pacific Company gave sufficient
security and borrowed sums of money for the Improvement Company, did that money
go into the construction of the Southern Pacific Railroad 1 A. I do not remember
any transaction of that kind, but I have no doubt at all that if the Central
Pacific had money that was idle we would have loaned it as soon to the Southern
Railroad as to anybody else, if we thought that was the best place to loan
the money of the Central Pacific; but, if your question is whether because
of our relationship we gave in any way an advantage at the expense of the Central
Pacific, then I say no. We never did that. Of course there were many transactions
that I cannot call to mind now, but I do not think the Central Pacific ever
had much money to loan. My recollection is that it had not. It generally borrowed.
Certainly all through its construction it had no money to loan, and I do not
think it ever had any money to loan except out of its sinking fund.. There,
of course, it has had money to loan, and we have endeavored, as far as possible,
to invest that money in good bonds, but when they could not make that investment
then of course we would loan the money. But you had better see the books. I
think they would explain this matter.
Mr. COHEN. I would like to have the books. I remember this transaction that
Governor Stanford speaks of. I had in my mind at one time what the explanation
was, though I do not recall it now.
LELAND STANFORD. 2835
WHEN SOUTHERN PACIFIC BONDS WERE ISSUED.
Q. Were the bonds of the Southern Pacific Railroad Company hypothecated with
the Central Pacific Company through the Western Development Company before
the construction of the Southern Pacific Railroad <? A. The bonds of the
Southern Pacific Eailroad were issued from time to time, as the work progressed.
I think there was a clause in there that the bonds should not be issued for
more than so many miles in advance of the completion. So much a mile and not
more than so many miles in advance of completion.
(Question repeated :)
A. I cannot say that they ever hypothecated any of them with the Central Pacific,
but they were used in borrowing money by hypothecating.
Mr. BERGIN. But not with the Central Pacific.
The WITNESS. I have no recollection, and I can not call to mind anything in
regard to this one that you have read to me, or anything to remind me of it.
Q. How much in advance of construction did you issue the bonds of the Southern
Pacific 'I A. Not very much. I think there was a clause in there that we were
not to issue them at the rate of more than a certain number of miles in advance.
Q. I want to know whether upon the deposit of collateral these gentlemen used
the money of the Central Pacific (the same gentlemen having given the Central
Pacific authority to so use it) in the construction of the Southern Pacific
Bailroad?
NO DIVERSION OF CENTRAL PACIFIC FUNDS.
Mr. HAYMOND. The chairman has been addressing himself to the proposition whether
the money of the Central Pacific has been taken and used to build the other
roads.
The CHAIRMAN. That is it.
A. The funds of the Central Pacific were never in any manner appropriated to
the building of these roads unless it was in a matter like borrowing from the
sinking fund. That may have been done. As to the issue of the Southern Pacific
bonds, I know that some of our mortgages provide that we shall not issue more
than twenty miles in advance of the completed line. And I am of the impression
that that clause related to the Southern Pacific, so that we issued the bonds
substantially only about as the road was completed. I want in some manner to
make it plain^on this point, that there have been no improper diversions of
money or money ever used to the inconvenience in any respect whatever of the
Central Pacific to build the Southern Pacific road.
FINANCIAL RELATIONS CONDUCTED ON BUSINESS PRINCIPLES.
By Commissioner LITTLER :
Q. Do I understand you to state, that if funds were borrowed of the Central
Pacific at any time, or any number of times, they were borrowed upon business
principles, and were paid back in due course of business, with interest? A.
Entirely so. All the relations of the two companies have been carried on on
true business principles, and never to the disadvantage of one or the other,
and I do not think either of them ever suffered any disadvantage. The company,
however, that has reaped the great advantage from all these lilies is the Central
Pacific itself. While it controlled these lines as the main trunk they developed
the
2836 U. S. PACIFIC RAILWAY COMMISSION.
country and developed business, and the developed' business passed on to the
Central Pacific. That gave it, of course, a volume of traffic.
Mr. COHEN. You will find that all these construction companies were always
short of money, and borrowed money wherever they could find it.
THE BOOKS WILL SHOW THE RELATIONS OF THE COMPANIES.
Commissioner LITTLER. These inquiries are made for the purpose of dispelling
the accusations that are sifted throughout the country ; and it is due to you,
as well as to this Commission and the Government, that we should get at the
hard-pan facts. That is what we want, and that is why we ask you for your books.
The WITNESS. 1 do not know what our books may develop in our relations with
private individuals. But I have no idea that there is anything there that would
hurt them or us much. It may be a little unpleasant, but the books themselves
in our relations to these companies would show, I think, a thorough explanation
of these transactions, and will show the relations of the Central Pacific to
any other railroad corporation. The more thorough the examination is the better
we shall like it.
Commissioner LITTLER. We will try to make it thorough.
TWO LEADING QUESTIONS.
Mr. HAYMOND. I understand that there are two propositions about which you particularly
wish to be satisfied : First, whether the Central Pacific actually cost as
much money to build as the money loaned by the Government in the shape of bonds
and that received from other sources ; and, second, were the funds of the Central
Pacific used to build up and construct these other roads, or were these other
roads constructed from the funds belonging to these private individuals? As
I understand it, those are the two leading questions that you want information
upon.
Commissioner LITTLER. Yes 5 at this time those are the controlling questions.
Mr. HAYMOND. It seems to me that in the spirit in which Congress has directed
this investigation to be made those are the questions.
CAUSE OF HEAVY INDEBTEDNESS.
The WITNESS. The great reaso n of the heavy indebtedness was that we had to
build these roads largely with bonds, and the bonds would not sell at anything
near par. That was the trouble. If I had time I think I could tell you exactly
what the company realized on the Southern Pacific bonds from time to time.
We held on to the bonds, and I think never sold any bonds until that road was
through to Yuma.
By the CHAIRMAN :
Q. I will call your attention to the minutes of June 7, 1884, of the Pacific
Improvement Company, from which I read.
LETTER OF SECRETARY OF SOUTHERN PACIFIC.
The secretary presented and read the following letter from the secretary of
the Southern' Pacific Railroad Company :
SAN FRANCISCO, June 6, 1884. F. S. DOUTY, Esq.,
Secretary Pacific Improvement Company :
DEAR SIR : On August 3, 1882, the S. P. R. R. Co. made its first payment to
your company of $1,000,000 on account of its contract for constructing the
road from Mojave to the Needles, and in like manner had paid your company $750.,
000 more "before
LELAND STANFORD. 2837
the opening of the road for business on November 13, of that year. Throughout
the construction of this line not only have our payments been far in advance
of the opening of the several sections, but we have invariably paid beyond
the points to Avhich the road has been operated, thus bearing quite a loss
in interest in the absence of receiving rental.
Further, the Central Pacific Railroad Company, our lessee, in leasing this
line, had reason to believe that eastern connecting roads would be completed
within a few months, but owing to the delayin such connections it incurred
a heavy loss in operating the road during the year 1883, and requests this
company, as lessor, to reimburse it for the amount of such loss.
As the amount received by this company for rent is but equal to the interest
it pays on its bonds, it would seem that the claim of the Central Pacific should
be referred to your company, and I would respectfully suggest, in view of the
foregoing facts, the propriety of your allowing from the amount which has been
received on the contract for construction the sum of $234,211.83, a demand
for which is hereby made.
I would respectfully request you to inform me of the action of your company
in this matter.
Yours, respectfully,
J. L. WILLCUT.
On motion of W. E. Brown, duly seconded, it was resolved that the claim of
the Southern Pacific Railroad for $234,211.83 be and hereby is acknowledged
as just, and that the secretary of this company be and is hereby authorized
and directed to pay the same to the Southern Pacific Railroad Company.
CAUSE OF LOSS ON LEASE.
Does the letter recall to your mind the transaction of this particular case?
A. I remember generally that the Central Pacific lost money on that lease,
and it was mainly because that connection was not made at the Needles with
the Atlantic and Pacific.
Mr. COHEN. The Central Pacific lost money.
The WITNESS. Yes, sir ; the Central Pacific leased that portion of the road
from Mojave to the Needles, and they expected at the time that the Atlantic
and Pacific would come and meet the Central Pacific at the Needles. There were
obstacles, and they did not ; and consequently the Central Pacific local business
was not sufficient to pay, and they were properly asked for relief. Well, the
Southern Pacific itself charged to the Central Pacific just enough to cover
the interest on the mortgage. They had nothing, and therefore it fell properly,
I think, upon the Pacific Improvement Company to make the reimbursement.
Q. Does not this letter indicate that rentals were being paid in advance of
construction? A. Not in advance of construction. The road was completed through,
or a portion of it. They paid for the interest, the interest accruing every
six months, and I have no doubt they made the interest, whatever it was, and
the object of the lease was to make enough to protect the interest on the bonds.
With regard to that minute book, this is the first time, to my knowledge, that
I ever saw it. I would prefer that you -should ask somebody about it who is
familiar with it.
The Commission then adjourned to Thursday, August 4, 1887, at 10 a. in.
2838 U. S. PACIFIC RAILWAY COMMISSION.
PALACE HOTEL, SAN FRANCISCO,
Thursday, August 4, 1887. The Commission met pursuant to adjournment, all the
Commissioners being present.
DANIEL W. STRONG, being duly sworn and examined, testified as follows :
By the CHAIRMAN :
Question. Where do you live $ Answer. At San Diego, Cal. Q. What is your business
there? A. I am not doing anything. Q. Ho^ long have you lived there $ A/ Since
1869. Q. Have you ever had any connection or association with the Central Pacific
Eailroad Company? A. Not since that date. Q. Since what date? A. Since 1869,
when I left.
CNE OF ORIGINAL TRUSTEES OF CENTRAL PACIFIC.
Q. What was your first connection with the Central Pacific Eailroad Company
? A. I was one of the original trustees and directors.
Q. How were you connected with the company at the beginning? A. Before the
road was commenced, I was living up at Dutch Flat, and knew the country very
well. I thought there ought to be some way of getting over the Sierra Nevada
Mountains and diverting a portion of the travel of the emigrant travel across
the plains, so that it would come our way and to Sacramento.
Q. What year was that? A. It was in 1859. Being interested in Placer County
at the time I was very anxious to do all that I could to get a portion of this
emigrant travel to come through that county.
Q. Where did you live then? A. At Dutch Flat.
EFFORT TO DIVERT EMIGRANT TRAVEL ACROSS THE PLAINS.
Q. What county? A. Placer County, State of California. I was in business at
Dutch Flat, mining and keeping store. It was thought that we could divert the
emigrant travel across the plains for the general benefit of the community,
and I started out with a party of volunteers to make a reconnaissance for a
road across the mountains, to see whether we could not build a road and get
a portion of that travel for the benefit of that part of the county.
*
ORIGINAL SURVEY.
Q. Who was with you! A. Nobody at that time. The others had no particular interest
in the matter. They were- men that I picked up who were willing to pick up
a living in that way, and to go along and assist me to make a survey. I have
a list of the names, but they were parties who had no interest other than simply
to pass over the mountains and render such assistance as they could. That was
the origin of it. In making the reconnaissance for that route I discovered
a place where a railroad could go through. There was a continuous divide upon
the summit of the Sierra Nevada Mountains to the Sacramento Valley, and all
along to the foundation, between two rivers, probably between three rivers
the norfch fork of the American Eiver upon the south side, Bear Eiver for a
part of the distance, and Yuba Eiver on the north side. There is a continuous
divide all along there, and I saw that a road could be easily constructed,
DANIEL W. STRONG. 2839
INTERESTS MR. JUDAH.
Mr. Judah was a gentleman with whom I was not personally acquainted, but I
had heard of him, and knew that he was investigating the country trying to
find a pass over the mountains a little further north than the thirty-second
parallel. Shortly before this he had been at Tehachipi Pass and other points
below here. He was then in Sacramento canvassing the subject, and hearing of
his being there I wrote to him and told him what I had discovered and that
I would show it to him. He came up the next day by stage to Dutch Flat from
Sacramento and was introduced to me by the stage-driver who brought him to
my place. The next morning I went with him to the livery stable, got some horses,
and we started up over the trail. There was no wagon road, nothing except the
marks left by the Donner party, but there was a regular trail by which we went
up to 'the summit. I took him up to the summit where we could take in a general
panorama of the country east, looking down on Donner Lake, and so on down to
Truckee.
Being familiar with the country beyond, I gave him a description of it as well
as I could, but the main point that he was after was to find a way to get through
the Sierra Nevadas. I asked him no questions, but gave him all the information
that I could. We camped thereover night in an abandoned herder's or stockman's
house, and carne back the next day. It rained all the way down, and we were
pretty wet and did not feel very much like doing anything. We then changed
our clothes.
ARTICLES OF ASSOCIATION.
The next morning Judah came into my place and he said to me, " Give me
some writing material." I had a little room back of the store that I occupied
myself. I produced writing material and he sat down and drew up what he called
u articles of association," and he shoved them across the table to me
and said, " Sign for what you want."
Q. Articles of association of what? A. A railroad.
THE CALIFORNIA CENTRAL.
By Commissioner LITTLER :
Q. What railroad? A. That was in the iucipiency of the whole thing, and we
had not adopted a name, but before we left Donner we concluded to call it the
California Central. I told him that he could sign first, but he said, "Fo
; you are the party, and you sign for just the shares you want."
He explained to me that the law required that there should be $1,000 a mile
subscribed for the approximate distance that the road was to be built, and
we estimated that the distance to the State line was 115 miles. He said to
me that there would have to be $1,000 a mile subscribed and 10 per cent, paid
in before we could organize as a company.
CANVASSINO FOR SUBSCRIPTIONS TO STOCK.
I signed for fifty shares of stock. He looked at it and said, u Well, that
is about right." He then said, " Go around town and see what other
subscriptions you can get in the town from merchants, from the Ditch and Water
Companies, and so forth." Knowing everybody, I went around with him and
called on different parties. The highest
2840 U. S. PACIFIC RAILWAY COMMISSION.
number of shares taken there was twenty-five. D. L. Bradley and one other man
took twenty-five shares, and other parties all the way from five to twenty-five
shares. Then we went to Auburn, and when we stated the case to some of the
leading citizens there they proposed to call a meeting of citizens and see
what the town would take. Some of the leading men there made a proposition
that they did not wish to take hold of it unless they had the control of
it. I told them that nobody would have control, except ourselves, and that
they could only have the amount of stock which they might be willing to subscribe
for ; that if they did not want to take any stock in the concern to say so
and I would move on. When the stage came I took it and went to Grass Valley,
as I had told them that we could not wait any longer. I rode to Grass Valley,
in Nevada, canvassed those points and got considerable stock taken. Then
I went to Sacramento and canvassed the city pretty thoroughly. The merchants,
saloon men, draymen, and everybody in fact, took an interest in the matter,
and took from five to ten and fifteen shares of stock simply to encourage
it. They said that if anything came of it it was bound to make business for
Sacramento, and they simply took hold of it to show their interest in the
matter.
NO SUCCESS IN SAN FRANCISCO.
Not getting it all taken there I went to San Francisco, and the people there
laughed at the idea ; and there were only two men in this city and they belonged
to Grass Valley (Colonel .Raymond and Judge Walsh), stopping then at what was
called the Tehama House who said that they would take twenty-five shares apiece.
That was all I got subscribed here ; and they were men belonging in the mountains
anyway. I went back to Sacramento and got some more stock taken there, but
it was a very few shares only.
In the mean time, whenever I was in Sacramento, being well acquainted with
Governor Stanford and Charles Crocker and Huntington and Hopkins, I used to
frequently go ; nto Huntington & Hopkins's place of business.
INTERESTS HUNTINGTON, HOPKINS, STANFORD, AND CROCKER.
Q. What business were they engaged in? A. Huntington & Hopkins had a hardware
business on K street; Charles Crocker had a dry goods business on the Plaza.
Governor Stanford was interested in camphene and burning fluid and lamps, and
so forth. I used to buy goods from those men, and being somewhat acquainted
with them it was natural for me to go and see them. They took a great deal
of interest in the matter, as far as stock went, and always told me that they
would like to see the thing progress, and so forth; but Mr. Huntington told
me that they had been burned out but a few years before and had not got well
started in business again ; though doing a good business, yet it was not proper
for them to go into any wild speculation of that kind on account of their creditors.
They had good credit in New York, and were doing a good business, and hoped
to be in good shape again presently, and did not feel that they could take
hold of anything of the kind. I went on with the work, and was out a great
deal evenings, and one evening after I got the stock pretty much all subscribed
for I went to their store, as usual, and found Governor Stanford and Huntington,
Hopkins, and Crocker all there.
DANIEL W. STRONG. 2841
TAKING BALANCE OF STOCK.
The CHAIRMAN. He was not governor then.
The WITNESS. He was governor-elect. I think that he was elected, but had not
qualified. He had not taken his seat, but we called him governor all the same.
After asking me how I was getting along, and so forth, and what success I was
having, Mr. Huntiugton turned around and said, " Governor, what do you
think ; suppose we take the balance of this stock and close it out, and let
Strong go home? " I was then living at Dutch Flat.
The governor said, " I do not know. What do you think, Charlie 9 " (referring
to Mr. Crocker). Crocker said, " Do whatever you think best about going
in." Hopkins was sitting at his desk, and he laughed and said, " What
do we want of anything of that kind? We do not want to meddle with anything
of that kind, Huntiugton." After discussing the matter, they finally took
the stock and closed the thing out, and I went back.
MEETING OF STOCKHOLDERS.
Q. How many shares did they take at that time? A. I do not recollect what
it was,'but they closed it out. It was a small amount, I think.
Q. Was there much left? A. No, sir; that was simply to put the thing in shape.
Afterwards, of course, the next thing was to call a stockholders 7 meeting.
We got all these stockholders together and organized a company.
Q. Where did you call the meeting 9 A. The arrangement was made at the rooms
of Huntingtoii and Hopkins ; at their store. I think that Governor Stanford
owned the building, and there was considerable room overhead. We held our first
meeting there. Those rooms were put into shape and occupied afterwards as the
railroad company's rooms for two or three years ; I do not know how long. We
always met there, and had our meetings there. The office of the company was
there, &c.
Q. After you called your meeting, what then did you do? A. We discussed everything
pertaining to the business.
Q. Who were present at the meeting 9 A. I do not recollect ; that is a matter
with. which I never had occasion to charge my mind; there were quite a number,
but I do not recollect all of their names.
WHO WERE PRESENT.
Q. About how many were there? A. There were a good many; I presume that there
were at least thirty; probably more. I remember L. A. Booth, Charles Marsh,
T. D. Judah, James Bailey, and also Governor Stanford, C. P. Huntington, Mark
Hopkins, Charles Crocker, and myself, and* numerous others whose names I do
not now recollect.
Q. What did you do at the meeting 1? A. After discussing these things, Governor
Stanford was called to the chair, and he presided during the meeting. There
was a motion made to appoint a committee to retire and nominate officers for
the ensuing year directors or trustees. The chair nominated Huntington, Judah,
and Strong to nominate a board of directors, and they retired to a room.
PROPOSING NAMES FOR DIRECTORS.
Q. After they retired, whom did they nominate? A. After getting together,
Huntington said, after shoving over a piece of paper to me,
2842 U. S. PACIFIC RAILWAY COMMISSION.
"
Here, make such nominations as you think proper. As you have taken so much
interest in this matter, we want you to be satisfied with whom the directors
shall be, and if Judah and I approve of it it will be all right." So I
wrote down names of those whom I thought proper parties, and whom I had known
to take the most interest in the project. We had agreed upon nine directors
as the number to constitute the board, and I put down nine different names
and shoved the paper over to Huntington. He looked at it and said : " It
is all right but one thing. You are a little too modest in this matter. We
propose to cross out one of these names and substitute your own." My name
was not on the list that I made.
FIRST BOARD OF DIRECTORS.
Q. Whom did you nominate as directors? A. I do not know that I can recollect
all of them. I put down Huntington, Hopkins, Crocker, Stanford, Judah, James
Bailey, Charles Marsh, and myself. L. A. Booth was afterwards a director of
the company, but whether his name was on that list or not I cannot say. I think
not, however. I think he afterwards came in, but I would not be positive about
that.
Q. After you formed your board, what then did you do? A. That was all there
was to it so far as the stockholders were concerned. We then adjourned.
Q. Did you report to the meeting? A. Yes, sir. The nominations that we made
were unanimously elected. We then adjourned, and it was stated by Governor
Stanford, I think, that the law required us to meet within three days as a
board of directors, and elect officers from among ourselves, and that, being
all then present, it would be better to call a meeting of those persons who
had been elected directors, have a directors 7 meeting, and proceed to business,
which we did.
NOMINATION OF OFFICERS.
Q. What was done at that meeting? A. The same programme was gone through with.
The governor was in the chair as usual, and nominated the same committee to
select officers. The committee retired to the same room, and Huntington handed
me a paper, saying, " I want you to state whom you would like for officers,
according to your notions." I wrote down the names and made comments as
I nominated them. I think the officers were whom I thought proper to fill those
particular positions, Stanford as president of the company, Huntington as vicepresident,
Judah as chief engineer, Hopkins as treasurer, and Bailey as secretary. Those
were all the officers that were to be voted for at that time.
MR. HUNTINGTON OBJECTS.
Q. Did the committee approve your selections after you had written the names?
A. When I first commenced this list Huntington did not seem to be satisfied
with the first nomination, and rather intimated that he was the proper man
to fill that position 5 but Judah and I had our minds fixed on this matter,
and there was no use in his further objection, and he simply threw out that
hint.
Q. What objection did he express to Stanford as president of the company? A.
Nothing of that kind. He rather intimated that I had not put the right man
in the right place. As Judah and I understood it, he would rather have been
there himself at that time.
DANIEL W. STRONG. 2843
Q. What did they do with the list? A. We returned to the meeting, handed in
the list, and reported. We then took a vote and elected those gentlemen as
officers.
Q. After you had effected your organization, what did you do next? A. Simply
adjourned, and that ended that part of the programme.
A PRELIMINARY SURVEY.
Q. When was your next movement in the organization? A. Very soon afterwards.
Judah went to work and organized a surveying party a surveying corps to go
out and lay out the line, that is, to make a preliminary survey across the
Sierra Nevada Mountains so as to make some kind of an estimate of what should
be done. Judah being chief engineer, and I knowing the country so well, I was
always with him as his chief assistant, as he called me.
Q. He called you what? A. His chief assistant. In his pamphlet of the reports
of the meetings he called me his chief assistant. I was always along, as knowing
the country, and always went with him when he was out in the field. We would
generally go ahead of the surveying party, and I spied out the route, of course,
ail the way from Illinois Town, which is now called Colfax, to the State line.
The surveying party, the two parties with the level and transit, were following
us, and as we had set out flags, of course they knew where to go. The line
did not afterwards vary very much from the one which we set out. Of course
they made some changes in it after they came to make a close survey, but these
changes were very small and unimportant, and the road as finally built was
practically upon the survey which we made.
REPORT OF ENGINEER.
Q. You are getting ahead of your story. Did Judah report to the directors?
A. He prepared to go out on the line.
Q. After he had been out on the line and made the survey as the engineer of
the road, did he then report to the board of directors *? A. Yes, sir.
Q. Was that report discussed by the board? A. Yes, sir.
Q. What was the discussion, if you can recollect it? A. There were so many
meetings, and it is matter with which I have never had occasion to charge my
mind, that I could not give it. I could not say exactly.
Q. Was the report to the directors adopted? A. Yes, sir.
THE WORKING SURVEY.
Q. What did you do afterwards? A. We organized a regular party and went into
the field. When we got into the vicinity of Dutch Flat the weather became so
rough and boisterous that the engineers could make no progress on account of
the glasses being covered with rain and mist and snow, and they quit work.
Judah went back to Sacramento, but the majority of the party staid at Dutch
Flat until such time as the weather cleared up. That was the intention.
Q. In what year was that? A. That was in 1860, 1 believe. I think it was March,
I860. It was in October, 1859, when Judah and I went there first, and this
was in the following spring ; I think it was in March, 1860. As soon as the
weather cleared up again, and things got so that we could put regular parties
in the field with teams, tents, and p R VOL iv 33
2844 U. S. PACIFIC RAILWAY COMMISSION.
every thing to take along the whole party, we started out. Mr. Judah and myself
had a tent and a team to ourselves, and we went ahead of the rest of the
party. Sometimes we were with them, and sometimes five, ten, or fifteen miles
ahead of them. Sometimes we would be back of that party, as occasion required.
We were going back and forth constantly. We kept our tent as near to the
scene of operations as was advisable. Q. Did you commence construction at
that time? A. No, sir.
PREPARATIONS TOWARD RAISING FUNDS.
Q. After you had been over the line with Mr. Judah, what was the next step
in the organization and in the work of the road?
The WITNESS. After making the survey?
The CHAIRMAN. Yes.
The WITNESS. It took us pretty much all summer to make that survey to the State
line, and then there was a good deal of other preparation to be made. Elections
were coming on, and there was a great deal of work necessary to be done to
make preparations for them in order that we might get. funds for carrying out
the work, and so forth. We went to work at Placer, Nevada, and Sacramento Counties,
and at San Francisco County to get them to subscribe for stock. Elections were
called for the purpose of seeing whether the people would vote to take stock
or not. They required a good deal of attention from the parties interested.
GENERAL MANAGEMENT OF FINANCES.
Q. Who had charge of the looking after the finances of the counties' subscriptions
? Who had charge of that part of the business on account of the road? A. This
board of directors had general management, had these elections called to vote
upon the question of stock. Placer County, I think, took $150,000. I think
that Nevada County took $200,000. I think that Sacramento County took $250,000.
I would not be positive about the amounts. San Francisco took $600,000, and
afterwards compromised by paying $400,000 and throwing up its stock. Some little
misunderstanding arose between Placer County and the company. That county had
bought a certain amount of stock which they got, and paid their money for.
They got some of the old stock.
PLACER COUNTY STOCK.
Q. What was the misunderstanding with Placer County? A. Tdo not recollect what
it was now. It was a long time ago, and I know that it did not retain the stock.
How much money it cost the county, I do not recollect.
Q. How long did Placer County keep the stock? A. I think a compromise was
made and a settlement effected some time in 1864. It probably had the stock
three years. I would not be positive about that.
Q. Do you remember any discussion as to the difference between Placer County
and the railroad company with reference to that subscription? A. No, sir ;
I was out on the line at that time, and the other members of the board Huntiugton,
Hopkins, Stanford, and Crocker, who lived in Sacramento attended to this matter,
and I did not know much of what was going on at that time with regard to that
board.
DANIEL W. STRONG. 2845
CHANGE OF ORGANIZATION.
Q. What was the next step after the counties had voted subscriptions to this
stock? A. They changed their first organization and organized under the general
railroad law of the State. In order to do this, they had to get deeds of trust
from all of these original subscribers. Having solicited these subscriptions,
and knowing the parties better than anybody else, Mr. Hopkins requested roe
to go around and make these changes and get these deeds of trust, which I did,
and the stock went into the hands of the company ; that is, these deeds of
trust, so that the company really had the whole thing in their hands all this
stock.
DIRECTORS VISIT THE LINE OF ROAD.
Q. What was the next step? A. I do not know as I can follow up the routine
just as things came along one after the other 5 but I know that it was necessary
to look out the country beyond, and Governor Stanford, Mr. Huntington, and
Mr. Crocker came up to Dutch Flat and made a start to team it over the Henness
Pass road. It was the only way to get out in order to reach the east side of
the Sierra Nevada Mountains and reach the road at Donner Lake. We took horses
at Dutch Flat and teamed it over there, and camped there for twenty-four hours.
We did not get through until the next day. We then turned the horses over to
the man who brought the team around, and he went to Dutch Flat with it. We
took the team and went down the Truckee Eiver, following the old American road,
and came out at what was then called the lower crossing of the Truckee, now
known as Wadsworth, where the road crosses the Truckee Eiver the first time.
We came there that night. It was about 9 o'clock when we got there. We camped
there in a stack of hay. In the morning we moved out on the desert. That was
as far as we intended to go east on that line. We calculated to swing around
to a place known as Honey Lake Smith's at that time. That was the name of a
man, and the station was generally known as that. I do not suppose that you
want the particulars of that trip across there.
Q. Give us the information that you have with reference to it. What was the
next thing? A. We unfortunately broke down on the desert about 10 miles after
crossing the river. It was one of the hind axles which broke in two, caused
by rolling over the cobble-stone road. Governor Stanford being the heaviest
man in the crowd, we concluded to let him take the team to Honey Lake Smith's
and we would foot it in, which was done. He managed to get into Smith's that
night.
RIGHT OF WAY ACROSS NEVADA.
The next day we went to Carson City. Nevada was not then a State. The council,
called the Territorial council, was in session, and we spent about two weeks
there, as near as I can recollect. We tried to get a bill through, giving us
the right of way across Nevada as far as the Territorial council could give
it to us, together with certain privileges for the company. After that we went
to Sacramento.
Q. After you had returned to the board of directors, after you had been over
the route, what took place in the business organization of the company as to
raising funds'? A. There had been some means raised, you know, from these counties.
Mr. Huntington, I think, had been East in the mean time and had raised a couple
hundred thousand dollars for stock. Things looked pretty blue for the company
during those times.
2846 U. S. PACIFIC RAILWAY COMMISSION.
Q. Of what year are you now speaking? A. I think it must have been 1862.
CHANGE IN BOARD OF DIRECTORS.
Q. Had you made any change in the board of directors? A. I cannot be positive,
but I think that in the mean time Mr. Bailey had retired from the company and
Mr. Miller had been elected in his place. I think so, but I would not be positive;
that is, I do not know whether it happened as soon as that, or at that date.
I would not be positive.
Q. Was there any difficulty in the board of directors at any time along there,
as to the organization? A. Yes, sir; they did not agree very well.
DISAGREEMENT IN THE BOARD.
Q. When did the disagreement take place? A. Very soon ; not a great while
after the organization. There was a regular meeting of the board once a month,
but there was a portion of the board that used to meet oftener than that at
Sacramento, but what was done at those meetings I do not know.
Q. What portion of the board was that? A. A majority of them. I think five
of them at least four.
Q. What were their names? A. I do not like to say ; but J can give the names
of those who were not there better than those that were. Judah and myself,
Charles Marsh, and L. A. Booth.
Q. Were they four of the regular directors, and did they meet at the regular
meetings of the board? A. Yes, sir.
Q. When did the other five meet? A. They might have met twice a day, as far
as I was concerned.
Q. Who were they? A. Not having been present, I could not tell you.
Q. Were Stanford, Huntington, Crocker, Hopkins, and Bailey the other men?
A. Mr. Bailey did not very often meet with them. But after his retirement,
Miller did.
DISAGREEMENT AMONG MEMBERS.
Q. Did the four directors, with whom you were associated, complain of these
quiet meetings of the other five directors? A. There was a good deal of dissatisfaction.
Q. About what was your disagreement or dissatisfaction with the other five
? A. As to the modus operandi of conducting the whole thing.
Q. W T hat did they do ; what was the modus operandi I- A. You have seen the
result of it, or at least the world has. Things came to such a pass that there
was a disagreement to a certain extent, so much so, that there was a proposition
made to buy or sell the stock. One side was to remain and the other to go out,
and vice versa.
CAUSES OF DISSATISFACTION.
Q. What was the difference between tbe four and the five as to the conduct
of the business of the company? A. The minority was not satisfied in not having
much to say in regard to the management and the running of the company. In
the general meeting of the board we would oftentimes pass certain resolutions,
but they would be acted on differently and reversed as to the results.
Q. Would the five who would meet afterwards, those who would have a quiet meeting
after the regular meeting would adjourn, reverse
DANIEL W. STRONG. 2847
whatever was done first in the regular meeting? A. They were really the board.
Mr. COHEN. He did not say that, Mr. Chairman.
Q. What do you say? A. I say that we thought they were running the thing according
to their notions, regardless of the opinion of the whole board, and things
came to such a pass that one side or the other had to retire from the management.
Q. What did this difficulty arise over? What did the difficulty come out of?
A. No particular one thing ; but there was a long list of grievances.
COUNTY SUBSCRIPTIONS.
Q. Was the subject of the subscriptions of the counties discussed? A. Yes,
sir ; that was one thing.
Q. Was there a difference of opinion on that point? A. Yes, sir ; there was
a difference with regard to that, and also with regard to this stock that these
counties had taken.
Q. What was the difference? What did you maintain with the gentlemen associated
with you and what did the other five do after the regular meetings of the board
were held? A. The remark that Judah made was this : u We have got a very good
thing. It is good enough for anybody. Let us live up to our agreements and
relations with the counties and all parties interested in this matter." There
seemed to be a little disposition to take some little advantage of subscribers
to the stock.
Q. Did they take advantage of the subscribers? A. I do not know how it was
accomplished, but I know that the counties did not retain their stock.
Q. What did they do? A. I do not know; but a good many members also did not
retain their stock. They were original subscribers and had full-paid stock,
and they said, " Here, take it off our hands, and we will have no more
to do with it."
Q. What did the five do differently from what you wanted them to do? A. They
were the controlling influence in the board. They were the majority.
Q. How did they take advantage of the subscription to the stock? A. I do not
know, sir, how the thing was worked or managed.
DEATH OF CHIEF ENGINEER JUDAH.
Q. How long afterwards did you remain in the board? A. After this agreement
about buying and selling Judah went East to perfec.t an arrangement to take
the stock. He was taken sick while crossing the isthmus, and died at the Astor
House, in New York City, two or three days after he arrived there; and that
ended the matter, so far as that transaction went. When he left here he left
Montague he being chief engineer and Montague beiug his assistant he left Montague
as acting chief engineer in his absence. As I have said, Judah died, and as
soon as I got an account of his death I tendered my resignation as director.
Governor Stanford wrote back to me that it had better not be accepted, unless
I insisted upon it, as they did not propose to make any changes in the board.
1 said nothing more about it and it rested there. At the next annual meeting
of stockholders there were seven directors elected instead of nine, and from
that time on, I believe, there have been only seven directors of the company.
APPLICATION FOR STOCK.
Q. Did you get your stock? A. No, sir.
Q. Did you make application for it? A, Yes, sir.
2848 U. S. PACIFIC RAILWAY COMMISSION.
Q. To whom did you make your application? A. The last application that I made
was to Miller, the secretary of the company. Q. What Miller? A. Ed. Miller
we used to call him. Q. What position did he occupy with the company? A.
Secretary.
NOT ALLOWED TO INSPECT THE STOCK BOOK.
Q. Did you get your stock? A. No, sir. I went in and asked him for the privilege
of looking at the stock book, as a stockholder, and claimed the right to see
it, the same as any other stockholder. There is a long counter across his office,
and behind that there is a vault, where the books are kept. He objected to
handing the book to me, and finally laid it on the table between the vault
and the counter, with the back of the book towards me, and said, " There
is the book ; look at it." I said, " Mr. Miller, that is not what
I came for." He said, "You cannot look at that book, and nobody else
can ; I will not allow it." I said, " If that is the case, all right.
You acknowledge, I suppose, that I am a stockholder?" He said, " Yes." I
said, " I would like my Central Pacific stock." He said, " Very
well." My stock was the original stock ; but, as you have seen before,
the stock at this time had been watered up to one hundred millions. The proposition
was to give me my fifty shares of this watered stock, and I objected to take
it. I said I would not take that stock, and he said, " All right ; you
may take it if you want it, otherwise not, as you please." 1 have never
had anything to do with him since that time.
Q. Did you ever get your stock? A. No, sir.
DO MONEY CONSIDERATION RECEIVED.
Q. Did you ever get any money consideration for your interest in the company
? A. They never paid me a cent.
Q. Were you ever offered any money consideration? A. Mr. D. O. Mills went on
the street in Sacramento and bought up quite a number of shares. I was told
so, though I did not see it. It was the same style of stock as mine, and I
was told that he paid at the rate of a thousand dollars a share for it. I was
told so, and I believe it to have been true. I think it was worth that value,
provided it was par value original stock. I tried to have him take my stock,
but he would not even make me an offer for it at all.
ADVISED TO INSTITUTE LEGAL PROCEEDINGS.
Q. Have you made any efforts through the courts to recover your interests in
the company? A. I have not. There was a Jo. Hamilton, with whom I was well
acquainted for a good many years, and who was attorney for a good many years,
and as a prosecutor, and he frequently informed me in Auburn, his place of
residence, that I ought to get something. He frequently said to me, " How
are you getting along with the company? " And I said, " Everything
stands as usual." He would say, " Why don't you bring suit against
them and bring them to some kind of terms? " and I would say, " There
is no use in doing that - 7 I could not afford it. I think the gentlemen will
do the fair thing when it suits their convenience." The thing went on
in that way for several years ; finally, as I was going away from there and
had made up my mind to go to San Diego, a party came to me and said, " I
understand that you have some misunderstanding with the railroad company, some
claim or other against them? " I said, " Yes." He said you
had better put it in some kind of shape and try to collect something."
DANIEL W. STRONG. 2849
I saw two or three parties in Sail Francisco, leading attorneys, and they said
that .they were not in shape to take the case against the company. They listened
to my statement and said that it was all right, but that they were not in
shape to take it, and recommended me to go to others, and I finally fell
in with Mr. Stratton, whom I have been acquainted with for a number of years.
He used to be State librarian. Stratton said to me, " 1 have all the
things necessary here, and would like to take your business, as you are going
away."
HAYMOND AND STRATTON EMPLOYED AS ATTORNEYS.
Q. What was the result of it? A. The result was that Haymond and Stratton took
the case and went on with it. They said that I need not be present, that they
would keep me posted ; that it was a matter of but sixty days or ninety days
at the furthest before it would be straightened up. They said that I would
not be wanted in the mean time, so I went to San Diego.
RESULTS IN DEFEAT.
Q. What was the result 1 A. The result was that I was defeated, and I want
to give you alittle of the particulars. They kept me posted for a time two
or three letters a week. Finally this communication stopped this correspondence
and I heard no more from them. I suppose it went by default or some other way.
From that time to this Mr. Haymond has been the leading attorney of the Southern
Pacific Company. That is all I know about it.
WITNESS'S LETTER TO THE COMMISSION.
The CHAIRMAN. Mr. Strong, I want to read your letter to this Commission. It
is as follows :
SAN DIEGO, CAL., JulyZG, 1887. To the honorable RAILROAD COMMISSIONERS,
San Francisco :
GENTS : Ask Mr. Crocker why he, Stanford, and Huntington swore to an affidavit
that the foot-hills commenced at Arcade Creek instead of Dry Creek, as laid
down by T. D. Judah and myself, who was the chief assistant. The subsidy was
$16,000 per mile for the foot-hill section, a distance of 22$ miles. Mr. Huntington & Co.'s
affidavit which Mr. Judah refused to sign, as well as myself, gave them $32,000
per mile where there was not a cut or fill of 3 feet in the whole distance.
And why they broke up every one of the first contractors, then formed the Finance
and Contiuction Company composed of Stanford, Huntiugton, and Hopkins, Charles
Crocker and Ed. Miller, and let the whole job to Crocker & Co., although
directors of the road. As directors they let the contract, as the construction
committee they took the contract, and as the railroad company they paid themselves.
Why did they collect $3,000,000 tolls on the Dutch Flat wagon-road, and then
charged up the cost of its construction to the railroad company as necessary
work for the construction of the railroad, besides freezing ine out of my tenth
interest in the same, which Mr. A. A. Sargent can verify.
To introduce myself I signed for the first share of stock of the C. P. R. R.,
of Cal., and solicited the subscriptions of the Messrs. Stanford, Huntington & Co.
They declined, as they said, on account of poverty, but gave me encouragement
until the stock was mostly taken, when they finally closed it out ; the last
of the charter stock at $1,000 a mile had to be subscribed and 10 per cent,
paid in to organize.
It was estimated 115 miles to the State line ; they took 15 miles. Respectfully.
D. W. STRONG.
P. S. I was director for the first four years of the company.
Q. Are the facts set out in your letter true? A. I think so j yes.
2850 U. S. PACIFIC KAILWAY COMMISSION.
Q. Have you any other information to impart? A. As to the length of time I
was one of the board I would not be certain, but it was about that time.
Q. Have you anything to add to what you have already testified to? A. No,
sir ; not that I know of.
Q. Have you any other information to give this Commission? A. I do not recollect
of anything that comes to my mind now.
CORRESPONDENCE PRODUCED.
Q. Have you any other papers in your possession? A, I have some correspondence
between Governor Stanford and Huntington, Crocker, Bailey, and Hopkins.
Q. Have you that correspondence with you? A. I have also some from Mr. Creed
Haymond, &c. Yes ; I have it all with me.
Q. Has it any connection with the construction of the Central Pacific Railroad
? A. It is simply a verification of what I have been stating here.
Q. Suppose you produce the letters and let us look at them.
The WITNESS. You do not want to look over all that list of letters, do you
?
The CHAIRMAN. We want any statement, or any proof, or any evidence that you
have to sustain wliat you have stated to this Commission.
The WITNESS. Mr. JSTorris can go up to my room and bring down what letters
he thinks necessary.
Q. Where are those letters? A. They are in my room on the third floor of this
house.
Q. Suppose you produce them before this Commission. A. All right, sir.
MR. HAYMOND'S EXPLANATION.
By Mr. HAYMOND :
Q. My name is Haymond, Mr. Strong, and I am the party to whom you have referred
in your statement. The application that Stratton and myself made was an application
to the attorney-general for leave to bring suit against the Central Pacific
Eailroad Company, and was made upon your verified affidavit, was it not? A.
Yes, sir.
Q. In what year? A. It must have been in 1868 or 1869.
Q. Do you not know that upon the hearing of that application before the attorney
-general, Judge Robinson, the counsel for the Central Pacific, and I came almost
to blows and came very near having a fight about it? A. I know that I had a
letter from you to that effect.
HIS CONNECTION WITH THE CENTRAL PACIFIC.
Mr. HAYMOND. I had never been in the employment of the Central Pacific Railroad
in any shape, manner, or form previous to the year 1881. The application to
which Mr. Strong refers was an application which required no testimony, was
made on affidavit, and was based upon the fact that the Central Pacific had
not completed the road within two years, as required by the State of California.
Our claim, therefore, was that it had forfeited its charter, and we asked the
attorney-general, whom Mr. Strong supposed to be his friend, to allow us to^bring
a suit to annul the charter of the company, unless it would pay him for his
stock. Was not that the cause of action, Mr. Strong?
The WITNESS. It was something of that kind $ yes, sir.
DANIEL W. STRONG. 2851
FINAL RESULT, DEFEAT.
Q. And you were advised about its progress from time to time, were you not
? A. Yes, sir ; but the final culmination of the whole thing was that I was
defeated, and no explanation came to me one way or the other.
Q. Mr. Stratton was the one particularly engaged, and he would have written
to you. You engaged him particularly. You did not know me at all, did you?
A. No, sir ; but you and Stratton were copartners.
Q. Yes 5* but Stratton was the one with whom you communicated, and was the
one who drew up your affidavit for you, was he not? A. Yes, sir.
NO SUIT WITH ATTORNEY-GENERAL'S CONSENT.
Q, And he depended upon the .man whom you supposed to be your friend, the attorney-general
of the State, to get a solution of the question. We knew that we could bring
no suit without his consent, and you knew it also, did you not? A. 1 know
that that was the statement which you made to me, that I had to get his consent.
At that time he was not attorney-general of the State. That was when the nomination
was made, but there was no question about his being elected ; but there was
no proviso after he was elected.
Q. He was attorney-general of the State at the time, and we appeared before
him. I distinctly remember that the counsel for the company, Eobert Robinson,
and I came very near having a fight on that occasion. Very bitter words passed
between us. I thought that the only remedy that you had, because you had not
bought your stock, and were not entitled to it as such under the laws of this
State. I advised you that if we could get leave to bring such a suit, I thought
the company, rather than have such a suit instituted, would be willing to pay
the par value of that stock. Was not that the advice that 1 gave you? A. Yes,
sir.
REFUSAL OF ATTORNEY- GENERAL TO BRING SUIT.
Q. We had no difference of opinion in relation to this matter. We could bring
a suit of this kind if we got permission, and we could have forced the company
to do something. Under such a suit we could have caused these people some trouble
unless they did what we claimed, and I think that we advised you that you had
a right to recover. Did you ever hear anybody say that in that proceeding we
did not cany out our instructions to the full length and do everything for
you in our power? We failed simply because the attorney- general absolutely
refused to allow us to bring a suit? A. I never heard anything about it. There
was nobody interested. I had no correspondence with anybody but yourself and
Stratton.
A PERSOTfllL VINDICATION.
Mr. HAYMOND. The attorney- general having denied the application, that, of
course, was the end of it. I only want, so far as I am personally concerned,
to have it understood that I never took a suit for a man and did not do the
best I could. I had nothing whatever to do with the Central Pacific until the
year 1881, and this other matter came up in 1868 or 1869. I never had any employment
of any kind, shape, manner or form before I entered the employment of the company
six years ago.
Q. Was it not true, Mr. Strong, in point of fact, that you had only paid
2852 U. S. PACIFIC RAILWAY COMMISSION.
10 per cent, on your stock? A. I have the documents to show the contrary.
AMOUNT PAID FOR STOCK.
Q. How much did you pay? A. The books of the company ought to show.
Q. How much do you remember? A. Four thousand dollars.
Q. On what? A. Five thousand dollars. I had credits with the company which
would more than balance it.
Q. Did you not know that under the laws of this State no stock in a railroad
company could be issued until fully paid up in cash? A. The other members
of the board never had paid for their stock in cash.
Mr. HAYMOND. Of that I know nothing.
The WITNESS. I do. I had credits, and Judah went before the general board and
tried to have them allow me something, which they declined to do.
LAW REGARDING ISSUE OF STOCK.
Commissioner ANDERSON. I want to know if what has been stated is really the
law of this State. I have been given to understand that it simply required
a payment of 10 per cent., and that then the parties could take their stock.
Mr. COHEN. Under this incorporation law, as it then stood, you could only be
called upon for 10 per cent, per month, until the whole amount was paid in.
Commissioner ANDERSON. Does your law forbid the issuing of railroad stock unless
it be paid for in full?
Mr. RAYMOND. Yes ; money, or what is equivalent to money. The courts here have
held that promissory notes are equivalent to cash.
The CHAIRMAN. How long has that been the law I
Mr. HAYMOND. I will not state how long, because I have not been very familiar
with corporation law until late years.
THE TEN PER CENT. PROVISION.
Mr. COHEN. The original railroad law of this State was passed in 1861. You
will find it in the session laws of that year. They were amended in 1863, and
the law as then amended continued until the adoption of the code in 1871.
The CHAIRMAN. Was that 10 per cent, provision in the act of 1861?
Mr. HAYMOND. " es, sir ; it had to be paid in advance before the articles
of incorporation could be filed. The supreme court of this State has held that
payments could be made in money, or anything equivalent to money ; even a solvent
promissory note was a payment.
Commissioner ANDERSON, ^t the time of the organization of this company, was
it the law that the stock must be fully paid for before it could be issued
?
Mr. HAYMOND. Yes, sir ; I am only stating it now from memory, as it has been
a long time since I looked it up. In this Strong matter of course we would
not have brought suit to compel them to issue the tifty shares of stock, because
he had forfeited them. I do not care to examine Mr. Strong any further, because
I have brought out all that I wish. I knew that he was mistaken in his statements,
and simply wanted to bring out the facts.
DANIEL W. STRONG. 2853
INCORPORATION OF CENTRAL PACIFIC.
By Mr. COHEN :
Q. What is your recollection of the year in which the Central Pacific was incorporated
? A. 1861.
Q. You said 1860, did you not? A. I think the opening occasion was the 8th
day of January, 1861. We broke ground on that occasion and had a grand demonstration
in Sacramento. Organization was perfected the year before.
Q. Did you sign more than one article of association? A. Yes $ I think so.
I would not be positive.
Q, The articles of association signed by you bear date the 27th day of July,
1861. Did you sign any other than that? A. None after that.
SUBSCRIPTION FOR STOCK.
Q. You subscribed there for fifty shares, did you not I A. That was previous
to that, a year previous to that date.
Q. Did you pay any money previous to the date of the signing of the articles
of association in 1861? A. No, sir.
Q. Previous to signing the articles of association in 1861, did you pay any
money to the Central Pacific? A. Money or its equivalent. I had a receipt from
the company, which was the same thing.
Q. Have you that receipt? A. No, sir.
Q. What value did the company get for that receipt? A. It was a receipt for
10 per cent. ; a monthly receipt.
Q. You had a receipt for 10 per cent., did you ! A. Yes, sir.
Q. When did you first pay 10 per cent, to the company? A. I would not be positive,
but I received my credits by vote of the board of directors. 1 had done as
much work and probably more than anybody else at the time.
Q. How many payments of 10 per cent, did you make on the fifty shares that
you subscribed? A. I had receipts for four.
Q. How much ; that would be $2,000, would it not? A. No ; I am mistaken ;
there are eight receipts. I had receipts for 10 per cent, on $5,000, and I
had eight receipts.
PAID FOR IN MONEY OR ITS EQUIVALENT.
Q. You paid 80 per cent, on your subscription, did you? A. Yes, sir; and I
have receipts to that effect.
Q. Did you pay that in money I A. Money or its equivalent.
Q. What was the equivalent? A. I had receipts for it.
Q. What was the equivalent of the money? A. A part, in fact all, was for services.
I used a great deal of money on behalf of the company, and I was credited for
the money when I made my statements.
Q. What was the character of the service rendered? A. In connection with the
surveying party. I never received any salary or payment, or anything, for my
services as director. It cost me a good deal of money. I had to travel from
Dutch Flat to Sacramento by stage, and spent a good deal of time going there
and back again, and I never got my expenses. I paid out other money for the
company during the time that I was an active member of the board.
Q. Did you pay any portion of the 80 per cent, in money? A. I did not go into
the office and pay it as an assessment, but I did pay it out for the benefit
of the company, and it was credited to me in my settlement as cash and services
in connection with my other services.
2854 U. S. PACIFIC RAILWAY COMMISSION.
Q. Your payments were for your own personal expenses in traveling, were they
not? A. For the benefit of the company.
Q. Were they expenses that you yourself had incurred? A. Yes, sir; while with
Mr. Judah I paid bills for the company tor diiferent men out on the line of
the road. The bills were brought to me and I paid them, and charged them up
to the company.
NO MONEY PAID TO SECRETARY ON STOCK.
Q. You paid nothing to the secretary in the shape of money on your subscription
to stock, did you? A. No, sir; I did not, not a 10-cent piece, nor did any
of the rest.
Q. How much of that 80 per cent, was for money disbursed by you, and how much
for your services? A. I am sure that I never charged my memory with it. I
could not tell you.
Q. Can you approximate it? A. I cannot tell you anything about it. I never
troubled myself with it. Everything was going along smoothly, and I did not
pay much attention to it. When I got my receipts I supposed that was enough.
OFFER TO PAY BALANCE DUE ON STOCK.
Q. Did you offer to pay the balance due on your stock, the balance between
the $4,000 and the full amount? A. I did, after I gave in my charter stock.
Q. When did you make that offer? A. I do not know whether it was in 1868 or
1869. I have got the documents to show the date.
Q. You say it was 1868 or 1869? A. It might have been 1867.
NUMBER OF SHARES DEMANDED.
Q. How many shares did you ask the secretary to give you at the time that you
made this demand? A. I claimed that that watered stock was only worth 10 per
cent, of my original stock.
Q. How many shares did you want him to issue to you? A. I had fifty shares
of original stock.
Q. How many shares did you want issued to you for your original subscription
of fifty shares? A. Five hundred shares of this watered stock.
Q. Would he not give it to you? A. No, sir.
Q. How much did he want to give you? A. The same amount as my original stock.
WATERED STOCK.
Q. You say the stock was " watered ;" what do you mean by that?
A. When I subscribed for the stock the capital stock of the company was only
$15,000,000. It was afterwards increased to one hundred million, and when I
asked for my stock one hundred million was the capital stock of the company.
The books of the company will show that the stock was one hundred million.
I considered my stock was equal to 500 shares.
Q. I would like you to inform the Commission a little further, if you will
be so kind, as to when the service that constituted your payment of 80 per
cent, on your subscription was rendered ; was it before organization of the
company or afterwards? A. Afterwards. I was also in the service of the company
before that time.
DANIEL W. STRONG. 2855
NO CHARGE FOR ORIGINAL SURVEYS.
Q. You have spoken*of surveys made in 1859 and 1860, before the organization
of the Central Pacific. That company was not organized until 1861, was it?
A. They had nothing to do with that. I never made any charge for those services.
I took charge of that party and went over the country to the crossing of
the Truckee. Judah and I went only to the State line ; afterwards the men
went on a separate survey 5 and a man by the name of Kingsbury, on the Placerville
road, undertook to head us off. I took charge of the party, and went over
to the upper crossing of the Truckee, at the lower end of the Truckee cafion,
and commenced a line of surveys upon the upper river.
DATE OF SERVICES RENDERED TO COMPANY.
Q. Between what dates were your services rendered to the company <? A. You
may say between January, 1860, and 1864.
Q. What time in 1864? A. 1 do not know. I do not recollect the date.
Q, Can you not remember at what time these services ceased? A. No, sir. I
had no occasion to charge my memory with it. I do not know anything about it.
It made no difference to me whether I recollected it or not.
Q. Did you render any other services to the company, or do any other thing
than on the survey, or in connection with your services as director, during
the time you mentioned? A. I did, sir.
COUNTY ELECTIONS CONCERNING SUBSCRIPTIONS.
Q. What were they? A. Hopkins, I think, it was
Q. Which one? A. Mark Hopkins. He was the only Hopkins that we knew in those
days. He requested me to take charge of the canvass in Placer County, and try
to get as many votes as we could on this question pending to take stock in
the Central Pacific Eailroad Company on the part of Placer County.
Q. In what year was that? A. I do not know whether it was in 1860 or 1861.
It was at the election, or previous to the election, in Placer County, on the
question of taking* that stock. I do not remember the date.
Q. Was it in 1860 or 1861? It is important to discover that fact. A. 1 do
not remember the dates of those elections held in Sacramento, San Francisco,
and Placer Counties at that time. Each county had an election of its own.
Q. Do you say that your services to the company ended in 1864? A. Yes, sir.
Q. But you cannot remember at what time in 1864 it was? A. No, sir ; I cannot.
ORIGINAL CAPITAL STOCK OF CENTRAL PACIFIC.
Q. Do you remember what the original capital stock of this company was? A.
I think it was fifteen millions.
Q. Do you mean the original capital stock I A. Yes, sir.
Q. The articles of association show it to have been eight and a half millions.
Which do you think most reliable, your memory or this document? A. The probability
is the document is correct. I do not want to say anything about the fact. I
do not recollect anything about it.
2856 U. S. PACIFIC RAILWAY COMMISSION.
Q. Were you a director of the Central Pacific, m the year 1864? A. I think
that my letter from Governor Stanford vf'as dated in 1864, some time.
INCREASE IN 1864.
Q. When? A. Some time in 1864.
Q. Do you remember the capital stock of the Central Pacific Railroad Company
being increased in the year 1864 from eight and a half millions to twenty millions
? A. I recollect something about it. I do not recollect the particulars.
Q. Was that done with your consent? A. 1 do not recollect. I do not think
I was present at the meeting of the board.
Q. You did not testify your dissent to that increase in any way, did you?
A.* No, sir 5 I did not.
Q. Can you remember when it was that you demanded five hundred shares of stock
from Mr. Miller? A. Some time in 1869.
Q. Did you know that previous to that date, on July 23, 1868, the capital stock
of the Central Pacific had been increased to $100.000,000? A. I did.
DOES NOT OBJECT TO INCREASE TO $100,000,000.
Q. Did you, as a stockholder, object any, or make any dissent before the board
of directors? A. I was nofra member of the board.
Q. You were a stockholder, were you not? Do you not say so ! A. I supposed
that I was a stockholder. Mr. Miller would not allow me to look at the book.
Q. You stated that it was afterwards that Mr. Miller would not allow you to
look at the books. Do you know that in July, 1808, before you made your demand
on Mr. Miller for 500 shares of stock, the capital stock was increased to $100,000,000
? A. Yes, sir.
Q. Did you, after July, 1868, between the time of that increase and the time
you made your demand on Mr. Miller for this 500 shares of stock, testify your
disapprobation in any way to that increase of capital? A. I do not think I
ever did. I had lost a good deal of interest in the whole project at that time.
Q. You started out originally with the statement that the stock had been watered,
did you not? A. I put* it in that way. You can modify it if you want to. 1
call it watering stock.
Q. I cannot modify your testimony. Why do you call it watering stock? A. I
call it watering stock, because it was an increase of the capital stock.
WERE ASSETS INCREASED CORRESPONDINGLY 1
Q. Was there an increase of the capital stock without corresponding assets?
A. That I do not know. I never investigated this matter.
Q. Do you not think that it is rather necessary to investigate that fact before
you charged the directors with watering their stock?
The WITNESS. Where do these assets come from?
Mr. COHEN. I am asking you if you do not know that there were assets corresponding
to that increase of capital?
The WITNESS. The Government made two different subsidies to this company. Of
course that was afterwards.
ARTICLES OF ASSOCIATION.
Q. That does not answer my question at all. Did you know the purpose of the
articles of association which you signed $ How much
DANIEL W. STRONG. 2857
road was to be built under those articles? A. We were organized under tbe State
law to build to the State line. That is, as far as California went. We afterwards
formed a different organization to extend east, after the Government had made
arrangements with the Union Pacific and Central Pacific that each should extend
its line until it met the other, or any other line going east or west.
Q. Was it not required by the act of Congress that the company should construct
portions of road not contemplated by the original articles of association,
and was it not for this reason that the stock of the Central Pacific was increased
? A. I do not know. It was all one organization and one company. What the excuse
was I do not know It was under the same organization that it was made.
OPINIONS VS. FACTS.
Q. Are you not guessing at a great many of the things that you have informed
this Commission about as being positively aware of them ; are you not adopting
some popular traditions, and coming here and putting them in the form of evidence
without knowing them to be facts of your own knowledge? A. No, sir ; I have
vouchers for anything I state.
Q. It seems to me that you have not upon the question of watering stock. Do
you know any of these facts personally, from being present before the board
of directors? A. I do not know things that have been done at meetings when
I was not there.
Q. You have testified here as to disagreements among the board of directors
; you have said that there were quiet meetings of a portion of the board of
directors, at which the minority were not represented ; do you know of any
instance in which the directors met officially as a board of directors, and
passed any act, adopted any resolution, or did anything to bind or affect the
interests of the company, at which meetings you were not invited to be present,
at the time that you were a director? A. I was notified to be present at all
the regular monthly meetings of the board. At none of these other meetings,
except one or two or three different occasions, was I present, except when
I was notified by the secretary to be present on some special business.
SECRET MEETINGS OF BOARD.
Q. There were no secret meetings held then without your knowledge, were there
? A. I could not say as to that. As I said before, they might hold a meeting
twice a day, and I would not know of it,
Q. But that would not be an official meeting, would it; and anything done at
such a meeting would not bind the company, would it? A. No, sir. But where
there are two factions in- a board the majority can nullify the acts of the
whole board.
Q. You mean that the board was divided into a majority and a minority, do you
not 9 A. About the time that I left it ; yes, sir.
Q. And the vote of the majority controlled the action of the company, was not
that it? A. Yes, sir.
Q. Is that different from the mode of government of ai>y other company *?
A. I do not know that it is.
PROPOSITIONS TO BUY OR SELL STOCK.
Q. You have stated that when that condition of things prevailed the majority
vote was controlling the affairs of the company, so that tbe influence of the
minority was not felt, and there was a proposition made
2858 U. S. PACIFIC RAILWAY COMMISSION.
p
to buy or sell the stock held by the different members of the direction. At
what time was that proposition made? A. It was either in 1863 or 1864 ; I
cannot say which.
Q. How much had you paid on your stock when this proposition was made 1? A.
I have got receipts for the amount, I told you.
Q. You had then paid 80 per cent., had you? A. Yes, sir.
NO ASSESSMENTS MADE ON WITNESS'S STOCK.
Q. Was not the balance due on your stock called for between that time and the
time that you applied to Mr. Miller for the five hundred shares? A. I never
was asked for an assessment on this stock.
Q. Did you not see the notice of the secretary published in the papers of Sacramento
calling upon stockholders to pay their assessments? A. Yes, sir ; but I had
receipts ahead of the advertisements.
Q. Did you follow those advertisements right along? A. I had receipts ahead
of them up to the time I left.
Q. Did you see the advertisement calling for the ninth assessment upon the
stock that had been subscribed, or the tenth? A. No, sir ; I do not think
I did.
Q. You paid no assessment on your stock to the officers of the company, did
you? A. The company was owing me more than they amounted to, and I supposed
it would be credited up to me.
Q. For what did they owe you more than the 80 per cent, with which they had
credited you? A. I have not the minutes of all the little transactions that
I had with the company.
Q. You have said in your exatnination-in-chief that the prospects of the company
at the time you were a director were looking very blue ; what was the reason
that you did not, when the offer was made to buy or sell, sell your stock?
A. 'Because we thought we could do better.
Q. Do you say that you never have received anything at all for that stock?
A. No, sir; nothing.
NO LEGAL MEASURES TAKEN TO SECURE STOCK.
Q. Did you ever make any attempt whatever, by legal or other means, to force
the Central Pacific Kailroad Company to issue to you those fifty shares of
stock on payment of the balance due? A. No, sir. 1 found that I had no strength
to litigate against leading attorneys who were .apparently subsidized, or otherwise
engaged, so that they could not act. I could do nothing because of the expense,
and there was no use throwing good money after bad. I went away entirely, and
never expected to realize any money from it.
Q. The evidence brought out in this 'case is that some people who owned stock
received over $500' a share for it; could you not have put in your stock?
A. I had no stock.
Q. Did you not have receipts for 80 per cent.? A. I did not meet this party.
I think it was Mr. Mills. I was in San Diego at the time, and I saw the report
in the Sacramento Union.
Q. Had you receipts showing your payments of 80 per cent.? A. Yes, sir.
RECEIPTS TURNED OVER TO O. D. LAMBARD.
Q. But you never attempted to enforce your rights under those receipts, did
you? A. I turned the receipts over to a man by the name of O. D. Lambard. He
told me that he thought I could realize something
DANIEL W. STRONG. 2859
from my stock, as the company was not disposed to give me anything for it.
He said that the company would not do so, but that if ho could collect it
he would do so upon the basis that he would take all up to the par value
and divide everything above that figure. I was to get half of the advance.
I turned the receipts over to Lambard, and from that day to this I have never
seen him. I went to San Diego, and I do not know what he has done with the
stock or with the receipts. I prosame, from what I have seen in the newspapers,
that the same stock has been litigated in New York in connection with some
suit in which Mr, Huntingtou is involved.
Q. Is the Lambard you mentioned the same party who instituted a suit against
the Central Pacific for an accounting upon the stock issued by that company
?
The WITNESS. Did I see such a statement, do you mean?
Mr. COHEN. Was the Lambard you speak of the gentleman who was plaintiff in
the suit I have mentioned?
The WITNESS. I do not recollect the suit. The name of that party was O. D.
Lambard.
Q. In what year was it that you turned that stock over to Mr. Lambard? A. I
think it was in 1808.
Q. Then you were not in possession of the stock when you asked Mr. Miller to
issue stock to you in 1869? You did not hold the certificates at that time,
did you'? A. I would not be positive in regard to these dates, because I had
no occasion to charge my mind with them. It has been some time since these
things took place ; but by reference to certain documents I can give you the
exact dates.
ALLEGED PURCHASE OF STOCK BY D. O. MILLS.
Q. You spoke of D. O. Mills going on the street in Sacramento and offering
$1,000 a share for stock of a similar character to that which you claim you
were entitled. Do you know that of your own knowledge? A. No, sir ; I know
it by reading it in the local papers of Sacramento at the time.
Q. Did you ever have any conversation at all with D. O. Mills on this subject-?
A. Itfo, sir.
Q. You said you asked Mr. Mills to buy your stock, and he refused to make you
an offer for it; is that true? A. I did not make that statement.
Q. I refer to the evidence. I think it will show that you did so state. What
is your present recollection on the subject? A. I never asked Mr. Mills to
buy the stock.
Q. You said that Mr. Mills was buying this stock on the street, and that you
could not get him to make an offer for it. Did you ever ask him to buy your
stock? A. I did not see Mr. Mills. I was acquainted with him, but did not
meet him after I found out that he was buying that stock.
BELIEF BASED ON NEWSPAPER REPORTS.
Q. You have no knowledge on the subject, then, but you give this iniormation
from hearsay ; is that so? A. I only know from reading the newspapers.
Q. Most of the information that you have given here, except with regard to
your personal connection with the company, you have derived from newspapers,
have you not? A. Most of it. p R VOL IV 34
2860 U. S. PACIFIC RAILWAY COMMISSION,
Q. They are very reliable in some cases, I know, bat not always so. Is this
letter, which you addressed to tho Corn uissiun, d ,ted th^ 2u'lh of July,
1887, in your handwriting"? A. If they ha. ve one to that effect it
is in my handwriting.
Q. Is the body of the letter in your handwriting? A. It is in iny handwriting.
Q. At whose request did you write this letter? A. Nobody's but my own, sir.
I heard that the Commission was here, and did not knew but that my testimony
might be wanted for some reason. I wrote it more particularly to call their
attention to the questions embodied in the letter. I did not know whether they
would want to get witnesses who would give them the data and ask the questions
given in the commencement of my letter.
EXPENSES OF WITNESS.
Q. Were you subpoenaed to come here? A. Yes, sir.
Q. Who paid your expenses here? A. I paid my own expenses so far.
Q. Are you stopping here at your own expense? A. So far.
Q. Without any assistance from anybody?
The CHAIRMAN. It is understood that we pay the expenses.
Mr. COHEN. I am not asking about the Commission. We are getting a little outside
information.
A. I certainly should not have come up if they had not dispatched to me, requesting
me to appear, and saying that all my expenses would be paid. I am not interested
enough in the matter to pay my expenses coming to San Francisco.
CONVERSATION REGARDING GIVING TESTIMONY.
Q. With whom have you conversed as to the testimony that you would give before
this Commission? A. I do not know anybody but the gentlemen present. Mr. Norris
here is the one that I have said the most to.
Q. Previous to your writing this letter did you converse with any one as to
the testimony you could give, and the testimony you desired to give, to this
board? A. I am sure that I do not know that I conversed with anybody in particular
that I recollect anything about now, unless it was Mr. Mixer. I may have said
something to him about it.
Q. Who is Mr. Mixer? A. He is the agent of the Southern Pacific Company at
San Diego.
Q. Did you show him this letter? A. No, sir ; that was after that letter was
sent and after I had received the dispatch from the Commission to appear here.
Q. Did you tell him what your testimony would be? A. I do not know. I do not
think I did. I simply told him that I was going up on business pertaining to
this matter, and asked him to pass me over the line of the road. He said he
could not do it, and that was all there was of it.
Q. You did not tell him whether your testimony would be favorable or unfavorable
to the interests of the Central Pacific, did you? A. No, sir ; I do not think
I did. I was not aware whether it would be or not.
Q. You did not know whether the information that you could give was prejudicial
to them or not? A. It is given in a nutshell there in th at letter.
Q. You request the Commission to ask Mr. Crocker whether he and Stanford and
Huntington swore to an affidavit that the foot-hills com
DANIEL W. STRONG. 2861
menced at Arcade Creek instead of at Dry Creek. Were you aware of the contents
of that affidavit at the time that it was made? A. I did not see the affidavit.
Q. Where did you get this information? A. From T. D. Judah.
DECLINED TO SIGN AFFIDAVIT AS TO WHERE FOOT HILLS COMMENCED.
Q. You were a member of the board of directors of the company at that time,
were you not? A. Yes, sir.
/Q. Did you set yourself on record anywhere against that affidavit as being
improper, or as taking any advantage of the Government? A. I simply declined
to sign it.
Q. Were you asked to sign it? A. Yes, sir.
Q. By whom 1 A. By some member of the company ; I do not recollect.
Q. Which one? Did Governor Stanford ask you to sign it? A. No ; T do not
think it was the Governor.
Q. Did Mr. Huntington ask you to sign it? A. 1 think it was Huntington or
Crocker. I would not be positive about it. Judah and I discussed the matter
several times. It was laid down on the maps of the company as valley land as
a valley section and says he to me, " We cannot sign it, because the foot-hills
do not begin here according to our surveys."
CONTENTS OF AFFIDAVIT.
Q. How did you know the contents of that affidavit? Did you read it? A. I
did not see the affidavit.
Q. Who told you the contents of the affidavit? A. I got it from various reports
; I do not know how. There was no question, I guess, about the matter. I was
told by a man who had seen it in Washington, or claimed to me that he had seen
the affidavit there. That was the first I knew that an affidavit had been sent
to that effect.
Q. Who told you that? A. That I do not recollect. It was some friend.
Q. Did you read that in the newspapers'? A. No, sir; I got that from some one.
I would not be positive, but I think it was Mr. Judab himself.
Q. When was it that Mr. Huntington or Mr. Crocker asked you to sign that affidavit
? A. -It was shortly previous to the commencement of construction. I do not
recollect the time.
Q. When was the construction commenced? A. I do not think that any work was
done to any amount until 1801.
DATE OF CONSULTATION WITH JUDAH ABOUT AFFIDAVIT.
Q. Was that the time that you had the consultation with Mr. Judah about the
contents of this affidavit I A. We had frequent conversations together all
the time. We often talked about matters pertaining to the company and its business.
I could not fix any dates.
Q. Can you not say what year it was 1 A. No.
Q. Was it while you were a director? A. Yes, sir.
Q. How long before you ceased to be a director was your attention called to
this matter? A. I do not recollect. It was a matter I did not charge my mind
with.
Q. Did you think the matter stated in the affidavit was wrong and that it ought
not to have been prepared? A, I did not think the foot
2862 U. S. PACIFIC RAILWAY COMMISSION.
hills commenced at that point. Otherwise I would not have hesitated to have
signed the affidavit myself. It was laid down on the maps of the survey as
valley section between those two points.
Q. Is there anybody alive or anybody now connected with this company, or any
officer of the Government, to whom you testified your dissent or disapprobation
of the contents of that affidavit? A. I do not recollect. There are very few
now living who were in that department at that time.
Q. You were a stockholder, were you not? A. Yes ; I supposed that I was.
Q. And were perfectly willing to take your share of any benefits to be derived
from getting this aid from the Government, were you not? A. Of course, like
all other men, I was willing to take anything that came to me fairly 5 but
when I was asked to testify, when I had already testified to the contrary,
I did not feel like giving an affidavit to that effect. I could not sign a
paper describing it as foot-hill land when I knew it to be a valley section
of road. I objected to giving my assent and to making any such statement as
that it was foot-hill.
CHANGE IN NAME OF STATION.
Q. There is a great deal of valuable testimony contained in your letter and
also in your evidence, about which I would like to ask you a few questions.
There is one very important fact that I find on my list, and I will ask you
regarding it before I go farther. You speak of the change of the name of one
of the stations from Illinois Town to Colfax. What was your prejudice against
Illinois that you made that change? What was the reason for that change? A.
I do not know that there was any prejudice against the town as a town, but
it suited the company to have a village of its own, and so the change was made.
Q. You agreed to the change, did you not? A. I never was asked for my opinion
upon the subject.
ORIGINAL CONTRACTORS.
Q. You ask the Commission to inquire of the officers of the railroad company
why they broke up the first contractors. Will you explain who those contractors
were, and what the action of the company was that broke them up? A. I do not
recollect the names of those gentlemen ; they were strangers to me. I knew
their names at the time, but I have forgotten them. At that time the road was
let out in mile or half-mile sections, more or less ; as the contractors bid.
they would examine the work and agree to take so many miles, or so many thousand
yards, or so many hundred yards, at so much a yard, according to the material
or the estimates of the engineer.
Q. Can you give us the name of a contractor whose fate invoked your sympathy
u? A. I had no particular sympathy for them; I cannot recollect. One of them,
I think, is a boarder at the Stockton Asylum now. He was formerly a resident
of Stockton and lost all he had and then went crazy. All the contractors quit
their work, and the work was broken up, and they could not carry out their
programmes.
Q. Was there a written contract between the company and these different contractors
? A. I presume there was.
OBSTACLES IN THEIR WAY.
Q. Did the company ask any more of those contractors than they had undertaken
and agreed to perform IA. I do not know that it did.
DANIEL W. STRONG. 2863
But it is a very easy matter for an employe to throw obstacles in the way of
the contractor. When they came to measure up, there might be quite a discrepancy
in his judgment as to whether it was hard or soft rock, and so forth.
Q. Will you state from your own knowledge any fact or circumstance, or the
name of any employe" who threw any obstacles or obstruction in the way
of any contractor performing his contract? A. I do not know that I can give
you any particulars.
SOURCE OF INFORMATIOM.
Q. Did you get that from the newspapers? A. No, sir; I got that from Judah.
Q. In what year was it that these contractors were broken up? A. It was the
first season of the commencement of the construction of the Central Pacific
Railroad. I cannot tell in what year that was.
Q. Can you not tell pretty closely? A. I think it was in 1861.
Q. You were a director ail that time, were you not? A. Yes, sir.
Q. Did you ever lift up your voice in the board, or anywhere else, in favor
of these contractors? A. I was out on the line a great deal, and was not in
the town, and did not know anything about it. The looking after national affairs
and the management of the company were left to the board of directors of the
company, or to that portion of the board living in Sacramento.
Q. In that time, in 1861, if that was the year, was it when these contractors
threw up their contracts 1 A. I do not recollect.
RELATIONS OF COMPANY WITH CONTRACTORS.
Q. Did you ever know of the company refusing to perform its part of the contract
or to pay any contractor any money that was earned? A. No, sir; how would
I know it?
Q. You were a director, and must have been aware of what was going on, were
you not? A. I knew that there were several contractors who never received money
unless they would agree to certain things.
Q. What things? A. Unless they" would settle disagreements in regard to
certain business. Hiram Hubbard and Mr. Baker had a con1 tract to build a bridge
across the American River, the first bridge of the Central Pacific. There was
a disagreement between them and Mr. Crocker with regard to a gravel deposit.
I think that it was good for making concrete. Baker and Hubbard did not want
to give it up, and $30,000 was held back on the bridge contract until they
agreed to certain things with regard to the concrete matter. The company would
have had to pay them eventually, no doubt, but the fact is that they were out
of funds and could not go on with the work, and therefore they had to agree.
Q. Were they contractors with the Central Pacific, or contractors under Charles
Crocker & Co.? A. They were under the Central Pacific Railroad Company.
Q. Was the contract on account of the railroad company? A. Yes, sir.
Q. Did this matter come before the board of directors at the time that you
were a member of it? A. Not at the meetings when I was present.
Q. Did you take any positive action to do what you thought right towards the
contractors? A. I did not have any thing to do with those matters. They did
not pertain to my branch of the business. I was
2864 U. S. PACIFIC KAILWAY COMMISSION.
out on the road most of the time, and those matters were left to the board
at Sacramento.
CROCKER & CO. AS CONTRACTORS.
Q. You further stated to this Commission in your letter that they formed a
finance and construction committee, composed of Stanford, Hun tin gton, Hopkins,
Charles Crocker, and Ed. Miller, and let the whole job to Crocker & Co.,
although directors of the road. Where did you get that information? A. With
regard to the committee, I have no positive knowledge. Mr. Crocker was a member
of the board of dirictors.
Q. When? A. About that date. He was one of the first directors.
Q. Can you state the real date? Give us the year. A. He was a member of the
first board of directors.
MR. CROCKER AS DIRECTOR.
Q. How long did he remain a director after he was first elected? A. If I could
remember positively I could give the date of this matter.
Q. Was he a director of the Central Pacific after the early part of 1862?
A. I think not. If you allow me to make a statement, I want to say that Judge
Crocker, or Ed. Crocker, as he was called, was not a stockholder. When this
arrangement came to develop itself in a way that there seemed to be money in
the construction of the road, Charles Crocker gave a portion of his stock to
his brother Ed.
Q. How do you know that? Did he tell you so? A. I am not sure whether he
told me that he gave it in that way, or whether he sold it to him. I know this
: that at the time Charles Crocker retired from the board Ed. Crocker was substituted
in his place.
Q. Did you ever have any conversation or communication with Charles Crocker
upon that subject? A. No, sir; I think not. It was something that Crocker
would not give me any information on, even if I asked him.
Q. Do you say that Crocker would not give'you any information ! A. We talked
about matters generally, but with regard to this matter Crocker never told
me anything. He said he was going to retire from the board, and that Ed., as
he called him, was going to take his place.
SOURCE OF INFORMATION.
Q. I want to remind you that a great deal is predicated on your testimony and
the testimony of other intelligent witnesses like yourself, and I wish that
you would be particular in your statements as to how you know these matters.
The CHAIRMAN. Perhaps he has read some of Mr. Cohen's speeches.
Mr. COHEN. He has not said so. I am like my friend Anderson. I have watched
his career in New York for a great many years. He always does the best he can
for the side that employs him. I was about to say, as the chairman has referred
to some of my speeches
The CHAIRMAN. I do not wish to interrupt you.
Mr. COHEN. I was glad to have that question raised 5 but if the chairman was
about to predicate anything on any of my early ebullitions of temper, when
I was young and green, I would like to have a chance to explain and tell what
I thought I then knew, and what I have since found to be the facts.
THE COMMUNITY AND THE COMPANY.
Senator STANFORD. If you will allow me, I will say to the chairman that there
was a time in this State when it seemed that everybody was
DANIEL W. STRONG. 2865
against the railroad, but I have lived long enough to see almost every one
of these people in this State a friend of the railroad. I have very friendly
relations with a good many men who have been referred to as having once been
most hostile to the railroad company. I have seen the time when the people
of this town thought that we were their enemies.
Mr. COHEN. I was about to say that there was a time in this State, and of course
the Commission will find that out in the course of the examination, when the
Central Pacific Kailroad Company was as much under a cloud as the Democratic
party was until Cleveland raised it from the slough of despond and gave it
a new lease of power.
MR. CROCKER'S STOCK.
Q. You say that you do not know whether Mr. Charles Crocker gave that stock
to his brother or sold it to him? What do you mean by such a statement as
that? What information have you to support the statement that you have made
to this Commission? A. I do not know anything about it positively. I only
know that Ed. Crocker got some stock from his brother.
Q. What information have you to support the statement that you made to the
Commission as to the formation of the finance and construction committee, as
you call it? I suppose you mean the Contract and Finance Company, do you not?
A. 1 presume that is the name of the company. It was called "Crocker & Co." at
that time.
THE FIRM OF CROCKER AND CO.
Q. You mean, then, Crocker & Co., and not the Contract and Finance Company
? A. Yes, sir.
Q. Do you mean to say that the firm of Crocker & Co. was composed of Stanford,
Huntingdon, Hopkins, Charles Crocker, and Ed. Miller? A. Yes, sir ; I think
it was.
Q. Did Governor Stanford ever state to you that he was a member of that firm
? A. No, sir.
Q. Did Mr. Huntington or Mr. Hopkins? A. No, sir ; none of them. I got it
from general information at the time, and from what happened afterwards.
Q. And from the newspapers? A. I presume I got some of it from the newspapers.
I do not know how much credence to give to the newspaper reports, but they
sometimes state facts.
Q. You say that they let the whole job to Crocker & Co. You were a member
of the board of directors when that contract was let to Crocker & Co.,
were you not? A. I believe so. I would not be positive, but I think so.
DATE OF CROCKER CONTRACT.
Mr. COHEN. What was the date of that contract?
Commissioner ANDERSON. I think it was December, 1862.
Q. You were a member of the board in December, 1802, were you not? A. Yes,
sir.
Q. Did you lift up your voice to denounce that contract as being improper?
A. No, sir; I do not think it would have done any good if I had. I said nothing.
Q. You thought it improper then, did you? A. I did not like that way of contracting.
I believed that the better way would be the old plan of contracting by the
mile.
2866 U. S. PACIFIC RAILWAY COMMISSION.
WHAT THE CONTRACT COVERED.
Q. Do you say that that contract was not by the mile 1 A. It was a general
contract to complete the road the whole road.
Q. From where to where? A. As far as they might build, as I understand it.
Q. Do you mean that it was to construct the road from the Sacramento Eiver
until it met the Union Pacific? A. I think that was the contract with Crocker & Co.
Q. That is your best recollection, is it? A. Yes, sir.
Q, Are you just as sure of any other fact that you have testified to as you
are about the contents of that contract? A. As I said before, it was a matter
that I had but little interest in, and a number of years have passed since
that time. I have not charged my mind with it, and it is difficult for me to
answer positively questions of that kind.
QUALITY OF WITNESS'S CHARGES.
Q. You are nearly as old as I am, Mr. Strong, and you have a very kindly look.
Do you think that it was right or fair to send a letter to a Commission of
this kind and make charges of this character against your fellow-citizens who
have been members of the board of directors of this company with you, upon
such imperfect information as you appear to possess on this occasion? A. I
do not think that you have in this examination been inclined to show any sympathy
for me, and they have not shown much sympathy for me.
Q. I am speaking now, not of sympathy, but of truthfulness. Do you think it
is fair? A. I am stating facts as I know them, or as I believe them. I did
not expect to appear before the Commission. What 1 know I am willing to state,
and what I do not know I am willing to qualify.
BASIS OF INFORMATION.
Q. You asked this Commission to inquire, why did these gentlemen collect $3,000,000
of tolls on the Dutch Flat wagon road, and then charge up the cost of its construction
to the railroad company as necesrary work of the construction of the railroad,
besides freezing you out of your one-tenth interest in the same, which you
say Mr. A. A. Sargent can verify. What information have you that they collected
$3,000,000 in tolls on the Dutch Flat wagon road? A. I cannot tell as to the
exact figures, but I was living on the line of the road all this time, and
knew the business that was being done, and knew the rates of toll.
Q. Did you ever see any weekly, monthly, or daily report of the receipts of
that road that enabled you to fix these figures? A. I think there was a published
statement at the winding up of the affairs of the company, showing the cost
of construction, receipts, &c.
Q. I suppose that is so. Is not the whole of the information contained in your
letter to this Commission the result of general reports which you have heard
from time to time from irresponsible sources? A. I do not think it is all from
irresponsible sources.
Q. How long was it from the time that this wagon road was completed until the
railroad was finished to Truckfce, when there was no further use for this wagon
road? A. I think that the wagon road was used for a toll road for about three
years. I think it was for that time.
Q. Between what years? A. I do not recollect the date. lam positive about
it, though.
DANIEL W. STRONG. 2867
AMOUNT OF TOLLS ON WAGON ROADS.
Q. Your 'judgment is without any positive knowledge on the subject. Did the
wagon road collect $1,000,000 in tolls each year? A. According to my understanding
of the matter, they did.
Q. Where did you get that understanding? A. I got it partly from parties interested,
and a part of it from general information, and my own knowledge of what was
going on over the road. There were teams reaching for 3 miles, one leading
right on to the other, and from my own knowledge of what tolls were charged
I could figure that amount.
Q. From your own observation you thought that they were collecting over $3,000
a day in tolls, did you? A. Yes, sir.
Q. Did you have a list of the tolls charged on that road? A. No, sir.
Q. Did you ever see one? A. Not a list of the charges. You mean the toll per
mile or per head?
Mr. COHEN. Yes, sir ; that is what I mean.
The WITNESS. Certainly I have seen that list, but I do not recollect what it
was. It was put up at each of the gates at each of the tollhouses.
Q. Do you know what were the tolls charged on a wagon team? A. No, sir ; it
was divided into sections. They did not make one charge all the way through
on the whole length of the road. I do not recollect what the through toll was.
INFORMATION AS TO CONSTRUCTION OF WAGON ROAD.
Q. From whom did you get the information that the cost of this wagon road was
charged up to the cost of construction of the railroad $ was it done while
you were a member of the board of directors $ A. No, sir; if it had been, I
would not have agreed to it.
Q. From whom did you get this information, which you have given to this Commission
as true, that the cost of the wagon road was charged up to the cost of the
construction of the railroad as necessary work in the construction of the railroad
; did Governor Stanford tell you so?
By Commissioner ANDERSON :
Q. Let the witness answer. Mr. Strong, where did you get that information?
A. I was trying to think who gave me the first information, but I cannot fix
it in my mind. It was from a source that I got it which I know fixed itself
in my mind. I do not recollect what the source was or who told me.
Q. Did you get it from anybody likely to know the fact? A. Yes, sir ; from
some person pertaining to the company. I cannot tell you whether it was Judah
or who it was, but it was somebody that I had faith in.
Q. Was Mr. Judah living when the road was completed to Truckee? A. I cannot
give the date of Judah's death. I cannot recollect about that.
Q. Do you know as a fact whether Mr. Judah was living at the time that the
railroad was completed to Truckee? A. I think he was not. I think he died before
they got to Truckee.
Q. Do you know it as a fact that the cost of this wagon-road was charged to
the construction of the railroad? A. Not from my personal knowledge j no,
sir.
2868 U. S. PACIFIC RAILWAY COMMISSION
OBJECT IN WRITING LETTER.
By Mr. HAYMOND :
Q. I would like to ask you one question, because I think I understand your
letter a little differently from the other counsel: This letter was not written
by you with the view that you were coming here to testify, was it? A. That
is it.
Q. You embodied in this letter things, some of which you thought you knew,
some of which you had heard on what you thought good information, and some
of which yon learned through the newspapers, and you simply expected this Commission
to call witnesses to prove whether these things were true or not ; is not that
the case? A. Yes, sir. I did not expect to be called as a witness in this
matter, bat I sent them these questions which I thought they would like to
have explained. I felt an interest in this thing, and I wanted them to ask
the proper parties and get the desired information.
Q. Indeed, many of these inquiries were directed to the directors, were they
not? A. Yes, sir; that was only what I intended.
Q Some of these things you had heard, some you thought of, and some you heard
through newspapers, and these facts you sent to this Commission in a general
way for its investigation? A. I drew the Coinmission's attention to it, and
thought that would be the end of it.
Q. And as a citizen of the United States, you thought that it would be the
proper thing to do? A. Yes, sir.
Q. At that time, did you intend to come before the Commissson? A. No, sir.
I did not suppose there was any secret about it, or anything else.
FINANCIAL CONDITION OF STANFORD, HUNTINGTON & CO.
By Mr. COHEN :
Q. You said that Messrs. Stanford, Huntington & Co. declined to subscribe
for the stock of the Central Pacific on account of poverty, but gave you encouragement
until the stock was mostly taken. What do you mean by that? A. The word poverty
was simply an expression from Huntington to me. He used it and supposed I would
understand what he meant. He was not so far ahead but that he had regard to
the opinion of his creditors in New York. He told me that his firm had good
credit then and that his creditors would not permit him to take hold of anything
like that.
NO FIXED SALARY PAID TO WITNESS.
Q. When was it that the Central Pacific formed any arrangement with you to
assist in the work of making a survey or in any other work which you did?
A. The Central Pacific had nothing to do with that. T. D. Judah, as chief engineer
of the road, was in authority and could employ whomsoever he pleased on his
staff. I had been interested in the whole project from the beginning and knew
the country so thoroughly that Judah always had me with him, and it was understood
by the company as to the position I was occupying and that I should be well
remunerated.
Q. Was there any salary fixed for you? A. No ; nor for Judah or any other
member of the association.
Q. No salary was fixed? A. Not at that time.
Q. Did they fix a salary for you at any time during your connection with the
company? A. Only by days.
DANIEL W. STRONG. 2869
Q. Did they pay you by day's work? A. My salary was fixed at so much per day,
not by annual or monthly salary.
Q. Were you paid for every day, whether actually engaged in the business of
the company or not? Or how was it? A. There was no time when I was engaged
in the office. I was out on the line most of the time.
Q. What was the condition of the company at that time as to its finances?
A. At that time they were what you might call rather impecunious. When we were
making surveys we did not know exactly where the money was coming from.
GOVERNMENT AID.
Q. Did the financial condition change during your connection with the company
? A. Yes, sir.
Q. When I A. I think it was in 1862. It was during the excitement of the rebellion.
We talked the matter over in meeting and concluded that we could without any
difficulty probably get assistance from the Government. We decided that Judah
should go on to Washington and see what could be done. Sargent and Jim McDougall
were members of Congress ; one in the Senate and the other in the House. They
were going on to attend the sessions, and it was decided that Judah should
go on with them. I drew one or two maps of the route across the country and
made marginal notes, one for Sargent and one for McDougall, for them to take
along and study up on the route. Mr. Judah also went along and discussed matters
on the route, and so forth. They were pretty well posted and understood the
subject so that they could work intelligently and together. Mr. Judah was appointed
secretary of the Eailroad Committee at Washington. Sargent had charge in the
House and McDougall in the Senate, and between them there was a bill passed
granting a subsidy to the company to that date, and from that time on they
have managed to live.
Q. It was in July, 1862, that that bill was passed, was it not I A. I think
it was in 1862 ; yes, sir.
FIRST MORTGAGE BONDS.
Q. Was it the prospective aid to come to that line that changed the financial
condition of the company? A. Yes, sir ; it was that that fixed them. They
were to get so much in bonds per mile and so much land on each side of the
road. Afterwards it was increased, and then they went on in very good shape
until they found a chance to make a little more money in another way. The Government
took a first mortgage on the road, but some time after this assistance was
given it agreed to release that first mortgage and take a second and allow
the company to issue first mortgage bonds in place of it. After that was done
they were in good shape to do business.
Q. When was that done? A. I do not know whether it was in 1863 or 1864 when
the aid was granted.
COMPETITION BETWEEN UNION AND CENTRAL PACIFIC.
By Mr. HAYMOND :
' Q. At that time had not the Union Pacific refused to accept the original
proposition and done no work at all? A. Yes, sir; and finally a bill was passed
by which the two roads were to run east and west until they should meet, and
each one should have credit for the number of
2870 U. S. PACIFIC RAILWAY COMMISSION.
miles it would build. Mr. C. T. Durant, vice-president of the Union Pacific,
telegraphed me through Mr. Lam bard in the first place to furnish him three
thousand Chinamen, to be delivered at Humboldt Wells, way this side of Ogden.
They were preparing to commence there so as to cover the territory back and
head off the Central Pacific at that point. Q. Was that after the passage
of the act of 1864? A. Away afterwards.
FINANCIAL EFFECT OF ACT OF CONGRESS.
By Mr. COHEN :
Q. You say that the financial condition of the company changed after the passage
of the different acts of Congress that you have named, do you? A. Very naturally.
Q. During the time that you were a director of the company was there any money
realized from the aid granted by the Government beyond that which was absolutely
necessary to do the work of the road so as to improve the financial condition
of the company or retire the obligations which they had previously entered
into? A. They got aid from the Government, and as the road progressed they
drew on this subsidy from the Government.
Mr. HAYMOND. Mr. Anderson, do you remember the date that the Union Pacific
Railroad Company actually began work I My recollection is that it was after
the passage of the act of 1864. They did not accept the first one.
Commissioner ANDERSON. I do not recollect with sufficient accuracy to speak.
Q. What information did you have as to the financial condition of the company
during the time that you were connected with it? A. Up to the latter part
of it, the last year, matters were in pretty good shape.
Q. Up to what time? A. I have not had myself informed, but up to the last
year of my connection, during 1863 and a part of 1864, 1 think.
AMOUNT OF MONEY RAISED IN 1861.
Q. How much money did they raise after the formation and signing of the articles
of association in 1861, during that year, and from whom? A. I do not know the
amount. It was sufficient to keep things moving quietly and working on. In
the next place, we found it somewhat difficult to keep up our expenses in regard
to the survey, but after that the company got funds and began to contract.
They contracted a bridge and contracted the work of a section or two.
Q. From what source, within your recollection, was this money raised?
Commissioner LITTLER. That is not cross-examination. We have not asked the
witness anything in relation to this subject.
VALUE OF EVIDENCE OF WITNESS.
Mr. COHEN. No, sir; but I remember a statement made -by your houor two days
ago as to the course of this inquiry, in which, I believe, you stated that
you were not confined by the ordinary rules of evidence; that you had not consulted
either Greenleaf or Wharton as to the course that you would pursue, but that
you picked up evidence where.ever you could. Is not that the statement that
you made?
Commissioner LITTLER. Yes, sir.
Mr. COHEN, I ask the question, not for the purpose of cross-examination, but
really to call him in rebuttal and test his recollection and
DANIEL W. STRONG. 2871
show the value of the evidence which he has given to the Commission. I call
your attention to the fact that this witness has stated many things which
he is unable to verify.
Commissioner LITTLER. And I call your attention to the fact that this witness
has not pretended in this letter, on which you have crossexamined him at great
length, to know any of the facts contained in that letter. He simply asks us
to ascertain these facts from somebody else. This cross-examination is making
this record unnecessarily long. That is the objection I have to it.
Commissioner ANDERSON. I think so, too, after the statement that he has made
that he simply wrote the letter as an indicator to us.
Mr. COHEN. Under the very skillful questions asked by the chairman, upon the
supposition that the information contained in the letter of this witness is
reliable, and that he was speaking of his own knowledge, a great many statements
have gone on the record; and in order that we may appear as we wish and as
we should in the report that you must make, and in which the companies may
be criticised, it makes it perfectly proper for us to criticise these statements
and examine this witness and ask him all of these questions. One of the ends
that I have had in view was simply to show that he had given information about
things concerning which he had no knowledge, and that he had jumped at conclusions.
He has spoken in his letter about the financial condition of the company, and
I propose to show by him. that during the time that he was connected with the
company it had no means, excepting such as it could derive for the construction
of its road under these acts of Congress, and that its credit was^at a very
low ebb.
SUGGESTED LIMIT TO CRO&S-EXAMINATION.
Commissioner LITTLER. You have stated that over and over.
Mr. COHEN. I do not think so.
Commissioner LITTLER. Governor Stanford has taken up much time to show to this
Commission the financial status of this company, and the reports of the company
will show the status much better than this witness can. This witness does riot
pretend to know anything about these matters, and it is simply a consumption
of time uselessly lor him to be cross-examined, or to be asked any of those
questions.
Mr. COHEN. I want to put this witness before the country and the people, to
whom this testimony is going, in exactly the position that belongs to him.
I want the facts to go to the country as a whole, and I want our side of it
to appear as well as the other side.
Commissioner ANDERSON. Colonel Raymond's question and the answer of the witness
to that question would seem to dispose of the whole matter, and I do not think
that you can make it any clearer if you spend your life at it.
Mr. COHEN. I want to explain that it is very necessary for us to show exactly
the status of each witness who testifies here when he gives any evidence that
we have got to rebut. The value of the report which you gentlemen will make
consists in the power given to it to take testimony, and we say that it is
very necessary that we should stand properly.
Commissioner ANDERSON. I do not object to your showing the animus of the witness,
but I do object to your asking him about the financial condition of the company
from 186) , because I think it is a waste of time to ask that question.
Mr. COHEN. When you look at the assumptions in his letter as to the prosperous
condition of the company, it becomes necessary to show that lie had knowledge
that a contrary state of affairs existed at that time,
2872 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner LITTLER. Here is the official statement of the president of this
company, and that ought to be better evidence than anything this witness
can tell about the financial condition of the company.
Mr. COHEN. That cannot go in now.
Commissioner LITTLER. The president of the company will be able to state the
financial condition of the company much better than this witness can, and I
do not think that we ought to waste any more time in this cross-examination.
Mr. COHEN. I do not put my judgment in this matter against the intelligent
judgment of this Commission, except to say this : That if nothing is to be
predicated upon the credibility of this witness as to the standing of the company
at that time, I do not wish to ask him anything further.
The CHAIRMAN. Does the Commission accept the testimony of the witness under
those condi tions !
COMMISSIONERS REMONSTRATE.
Commissioner ANDERSON. No, sir ; but I think that unless we can get to some
conclusion, we will never get to the end of this matter. I think that the question
is immaterial.
Commissioner LITTLER. You can reserve this witness and make him a part of your
case, if you want to. What you want now is not crossexamination.
The CHAIRMAN. We want to give you the fullest liberty in this matter to do
as you please.
Mr. COHEN. These gentlemen say not.
Commissioner ANDERSON. We have been remonstrating with you in a gentle way.
We say that there is no need to ask this question. It merely lengthens the
time.
Commissioner LITTLER. And it makes the record long.
Mr. COHEN. This man has come a long way to testify, and while he is here I
think that we should get out of him all that we can.
Commissioner ANDERSON. If you insist upon examining him, I will make no further
objection. It is about time for adjournment now, however, and if -the examination
is to be continued, perhaps it had better be after recess.
Commissioner LITTLER. No adjournment must take place with my permission until
this witness is disposed of. ,
The CHAIRMAN. Have you any further questions to ask I
Mr. COHEN. Under the circumstances, I am through.
THE COMPANY'S LIBERTY TO EXAMINE WITNESS.
The CHAIRMAN. I want the Commission to understand that so far as I am concerned
I want Mr. Cohen and this company to have the fullest liberty to ask this witness
any question concerning the testimony he has given, or anything else that he
knows, or thinks he knows. If you ask the question, Mr. Cohen, we will get
through in five minutes.
Mr. COHEN. I wanted to go to the assistance of Commissioner Anderson yesterday
when he was examining Governor Stanford, to put in one pertinent question.
I was told that I could do so when our side came to make the cross-examination,
but that he then wanted him for an hour or more. The Commissioner from Illinois,
whose bump of order is so well developed, very properly objected to my interrupting
Commissioner Anderson by asking any questions, and I was then told that I
DANIEL W. STRONG. 2873
should examine all the witnesses who came before this committee as much as
I pleased. I have not interrupted Mr. Strong during the time that he has
been testifying, supposing that I would have this right of cross-examination.
It is always very ungracious on the part of counsel to proceed with an examination
when the judge is frowning upon him, and does not want him to do it, and
thinks it is not necessary. We will excuse Mr. Strong, so far as we are concerned.
CENTRAL PACIFIC ACCOUNT WITH WITNESS.
By the CHAIRMAN :
Q. I wish to call your attention to some items which I will read to you, taken
from the general balance sheet of the Central Pacific Kailroad Company of California
for the year ending December 31, 1863 : "Voucher No. 477. Amount paid
D. W. Strong, $5,000." Do you recall receiving such a sum?
The WITNESS. I never did.
Q. This is from the general balance sheet, December 31, 1863 : u Amount paid
D. W. Strong for expenses incurred in promoting the interests of the company,
$5,000." From the same balance sheet, July 4, 1863, is the item, " D.
W. Strong, amount of stock issued to him by order of the board of directors,
July 1, 1863, for services rendered and expenses, $2,000." Do you recall
receiving such stock or such a sum of money? A. Never. This $5,000 was to
pay my assessment in full on the stock, and the stock was to be issued. I never
got the stock and never received any such amount.
Mr. COHEN. Does the Commission propose to give a decree for the delivery of
this stock?
The CHAIRMAN. The Government may take an assignment of the interest.
DIFFERENCES AS TO AMOUNT DUE TO WITNESS.
Q. I find this entry in the general balance sheet of the Central Pacific Railroad
Company of California for the year ending December 31, 1864: ."D. W. Strong,
services for the year ending July 1, 1864, $1.400." Do you recall receiving
any such sum "? A. I did not receive a cent. Speaking of that particular
amount, it is what they claimed I owed as a balance on my stock. It was that
amount when I asked for my stock. I claimed that it was all paid up and credited
to me, and they claimed that I owed that amount, but I never received anything.
ISSUE OF STOCK.
Q. In the same balance sheet, ending December 31, 1864, 1 find a list of stockholders.
In September, 1864, stock was issued to the followingnamed parties, and was
charged to the construction account and to the legal- expense account for amounts
allowed by the board of directors September 5, 1864, for salaries and services
to July 1, 1864 : u Leland Stanford, 115 shares ; Mark Hopkins, 100 ; C. P.
Huntiugton, 250 shares 5 A. P. Stanford, 50 shares 5 Charles Crocker, 100 shares
; Charles Marsh, 25 shares ; Lauren Upsou, 16 shares ; D. W. Strong, 14 shares
; Charles Crocker, assignee of E. B. Crocker, 230 shares. Total, 900 shares."
There is a note made by the accountant who made an examination of the balance
sheet and vouchers to the effect that the vouchers for these items have not
been found. Do you recall any such number of shares as I have read to you as
having been issued by the company? A. No, sir.
2874 U. S. PACIFIC EAILWAY COMMISSION.
Q. Does it suggest to you any information which you had at the time of the
number of shares which you were entitled to? A. I subscribed for 50 shares,
and that was the only amount that I sub,>ciibed to L.DC! it was all that
I expected to have. I supposed that it was paid in full by the action of
the board and that it would be subject to my order, but I never got it.
ASSIGNMENT OF INTEREST TO LAMBARD.
Q. Did you ever assign your interest, or the interest that you claim you have,
in the Central Pacific Eailroad Company of California to any individual or
individuals or to any company? A. As I explained to you before in my testimony,
I transferred my receipts to Mr. Lambard, with the understanding that he was
to collect from the company. He got my stock, and was to collect what he could
from the company, and whatever he realized from the stock he was to divide
everything above $100 a share, par value, whenever he should realize. It w#s
the condition that he was to have one-half of what would be realized above
the par value of the stock.
By Commissioner ANDERSON : Q. To whom was it transferred? A. To O. D. Lambard.
By the CHAIRMAN :
Q. Have you received any consideration from Lambard? A. Not since I transferred
them.
A CALL FOR BALANCE OF WITNESS 7 PAPERS.
Q. Will you furnish to Mr. Morris the papers and documents and letters in your
possession? A. As far as I have them.
Mr. COHEN. The witness offered to furnish Mr. Norris a short time ago only
such letters and telegrams as he desired. We would like to have him furnish
all the letters and telegrams that he has bearing on the claim.
The CHAIRMAN. Mr. Strong, you will furnish to the Commission all letters, papers,
contracts, agreements, and telegrams that you have in your possession relating
to the subject before the Commission.
By Mr. BERGIN :
Q. Did you give vouchers to the compan y for the several sums referred to in
those accounts? A. No, sir ; not that J recollect of. I do not recollect of
having had any occasion to give vouchers.
DID LAMBARD BRINGr SUIT ON WITNESS'S CLAIMS?
By Mr. COHEN:
Q. Governor Stanford suggests that I should ask you whether you were not advised
that Lambard had brought suit against the Central Pacific for an accounting
upon certain shares of stock which he held, or which were in his possession,
and that part of his claim was upon the stock which he had received from you.
Do you know anything about it? A. That is news to me.
By Mr. HAYMOND :
Q. Do you remember the date of the assignment of your stock to Lambard? A.
I do not? but I thinl? I have the evidence,
JOHN MILLER. 2875
By Mr. COHEN :
Q. Do you know whether Mr. Lambard founded his claim against the Central Pacific
upon the stock which you had assigned to him? A. I do not. I did not have
any claim against the railroad company any further than my stock. I transferred
it to him with the understanding that he was to collect and divide with me
everything above par.
Q. Did you know that he brought a suit? A. No, sir. I have not seen him since
I assigned the stock to him.
SALE OF STOCK AT $400 A SHARE.
By Mr. STANFORD :
Q. You parted with your stock to Lambard and be brought suit against the company.
Do you know that he did not put that stock in as, a part of the stock upon
which he based his claim? A. A. No, sir ; I do not know anything about it.
I saw a suit not long ago in New York, wherein Choate was one of the attorneys,
in reference to the same amount of stock a suit against Huntington which was
sold for a matter of $400 a share. From the testimony in that suit I supposed
that it was that same fifty shares of stock, as the amount was fifty shares,
and the amount it sold for was $400 a share. What the result of that suit was
I do not know, but I recollect that I had my attention drawn to it.
The CHAIRMAN. Is there anything further that you wish to ask this witness?
Commissioner ANDERSON. If he has assigned his stock the assignment will show
all the facts.
Governor STANFORD. The reason why I asked the witness about this Lambard suit
was that Lambard was one of the parties who brought a suit, and I think that
the stock described by Mr. Strong was a part of the stock upon which that suit
was brought.
PALACE HOTEL, SAN FRANCISCO,
Thursday, August 4, 1887.
Afternoon session.
JOHN MILLEE, being duly sworn and examined, testified as follows:
By Commissioner ANDERSON :
Question. Where do you reside? Answer. I reside at Walnut Grove, Sacramento
County, in this State.
Q. What is your occupatiau now? A. Farmer.
Q. What was your occupation in 1867? A. In 1867? I was not in the State then.
Q. Where were you then? A. I was in Virginia.
AN OFFICER OF CALIFORNIA PACIFIC.
Q. When did you come to this State? A. In 1870.
Q. What did you do after you came here? A. When I first came to California
I lived at Yallejo and I worked for the California Pacific Bailroad. I worked
at South Vallejo. P R VOL iv 35
28 7 G U. S. PACIFIC RAILWAY COMMISSION.
Q. Into what occupation did you enter? A. I was clerk and ticket agent.
Q. For what road? A. For the California Pacific road.
Q. How long did you remain in that capacity? A. About a year.
Q. What did you do after that? A. I went to Sacramento as a clerk for the Contract
and Finance Company.
Q. How did you come to receive that employment? A. By application, I think,
sir.
APPLIED TO AUDITOR FOR EMPLOYMENT.
Q. To whom did you make application? A. I made application to Mr. J. O'B.
Gunn, who, I think, was auditor of the Central Pacific at that time.
Q. Had you had a prior acquaintance with him? A. Yes, sir.
Q. Had you any acquaintance with any other officer of the Central Pacific or
with the Contract and Finance Company at that time ! A. None of the principal
officers.
Q. What was the result of that application? A. He forwarded my application
to Sacramento, and then Mr. Gunn wrote me to go to Sacramento and see Mr. E.
H. Miller.
By Mr. COHEN: Q. What date was this? A. The latter part of 1870 or 18T1.
EMPLOYED BY THE SECRETARY.
By Commissioner ANDERSON :
Q. What happened then? A. Mr. Miller sent for Mr. W. E. Brown, who was the
secretary of the Contract and Finance Company. He came in and we had a talk,
and he gave me employment.
Q. Who was the president of the Contract and Finance Company at that time?
A. I think Mark Hopkins.
Q. Where was their office? A. I think it was in a building known as the Railroad
Building, in Sacramento.
Q. When did you go -there $ A. It was 'about the latter part of 1870 or the
first of 1871. 1 think.
MADE ENTRIES IN "CONSTRUCTION AND REPAIRS" BOOKS.
Q. What precise position did you fill I A. I helped the young man who was paymaster,
and I wrote in some of the books ; not the regular account books, but the auxiliary
books.
Q. Please describe more particularly the books that you first made your entries
in. A. They were the books that related to construction and repairs ; I think
it was described by Mr. Brown, in his books, as "Construction and Eepairs."
Q. Who were the persons who occupied that office when you first went there
? A. Mr. Brown and Mr. Moore.
Q. What was Mr. Moore? A. Mr. Moore was paymaster.
Q. Is Mr. Moore living? A. No, sir.
Q. How long did you remain in the position to which you were first appointed
? A. About a year and a half.
Q. What change then occurred"? A. I was made secretary of the Contract
and Finance Company.
Q. That occurred about 1872 1 A. I think that was 1873.
JOHN MILLER. 2877
DUTIES AS SECRETARY.
Q. What were your duties as secretary? A. They were to keep the account of
constructing roads and repairing roads already built, to keep the accounts
as they came out until they got pay for them from the Central Pacific.
Q. Of what nature were the accounts at that time? A. They were for repairs
to the road in operation, and for the cost of grading, ties, rails, H buying
engines, &c.
Q. Was it all for the Central Pacific? A. Xo, sir; some for the Southern Pacific
I forgot about the Southern Pacific at that time.
DESCRIPTION OF COMPANY'S BOOKS.
Q. When you first came to that office, in 1870 or 1871, what were the books
that were being kept by the company? A. I think it was in 1871 I went there.
The principal books were the cash-book, journal, and ledger. Then this book
that I kept was pretty much of the same kind, but the accounts were accounts
that were transferred from Mr. Brown's books to my books, and related especially
to the minutiae of construction and repairs. All the little items in my book
were transferred in bulk to Mr. Brown's books.
Q. Mr. Brown's books you refer to as being the principal books? A. Yes, sir.
Q. Do you remember how many volumes of journals there were in the office when
you went there? A. Of the journals, I think there were four or perhaps six.
Q. W T ere you familiar with those books? A. Ko, sir.
Q. You were familiar with the outsides of them? A. Yes, sir j I have seen
them inside, of course ; but I am not familiar with them.
Q. Do you know generally what dates they cover? I mean what periods of time.
A. No ; I do not. I think that there was one set of books for Charles Crocker & Co.,
and then there were the Contract and Finance Company's books. I think there
were two sets of Contract and Finance Company's books and one set of Charles
Crocker & Co.'s books.
Q. When you speak of from four to six journals, do you include the journal
of Charles Crocker & Co., as well as the journal of the Contract and Finance
Company? A. As well as I remember ; yes, sir. I think there were four journals
of the Contract and Finance Company and two of Charles Crocker & Co. When
I speak of journals, I mean a regular journal, on one hand, and cash-book on
the other.
Q. When you speak of this number of volumes you do not mean that they were
all being used at the same time, but they were old books which had been filled
up? A. Yes, sir; Charles Crocker & Co.'s books had been set aside and one
set of the Contract and Finance Company's books had been filled up and another
set had been opened, and was being carried on.
Q. And there were the natural amount of ledger accounts which would be required
to post the entries from the journal? A. Yes, sir.
CHARLES CROCKER & CO.'S BOOKS KEPT SEPARATE.
Q. Were the books of Charles Crocker & Co. kept separate from the books
of the Contract and Finance Company? A. Yes, sir.
Q. Please describe the location of these books. A. I never looked into the
books of Charles Crocker & Co.
2878 . U S. PACIFIC RAILWAY COMMISSION.
Q. You merely saw them there? A. Yes, sir.
Q. Were they on the shelf or in the drawers? A. They were in a locker.
Q. After you became secretary of the company were these books under your supervision
and charge. I mean those that were in use? A. Those that Mr. Brown had in
use? No, sir.
Q. In whose charge did they remain,? A. I do not know.
Q. I mean immediately after you were appointed secretary, in 1872?A. When
I took possession of the books, Mr. Brown's books were not in the office.
Q. Can you state exactly the time when you were appointed secretary? A. l$b
5 I think it was in August or September, 1873.
USED BOOKS WITH BALANCES BROUGHT FORWARD.
Q. After you became secretary, what books did you use for your entries? A.
I used a set of books that Mr. Brown had opened up for me, and on which he
had brought forward these entriep from his books.
Q. Were they simply balances posted in there, or were they entirely new books
? A. Entirely new books with the balances brought forward.
Q. At that time who was in the office besides yourself and Mr. Brown? A. Mr.
Moore.
Q. Any one else? A. jtfo, sir.
Q. Was any one else in the habit of coming there and giving directions? A.
Yes, Sir; Mark Hopkins.
Q. Any one else? A. Probably Governor Stanford, but I do not think he did.
Mr. Crocker was not present. He was not there at the time.
THE ENTRIES MADE BY WITNESS.
Q. In the books kept by you what entries were made by you? Only those that
you have referred to as to repairs, and the building ot bridges? A. Yes, sir
; and building roads. They were building roads at the time.
Q. What were the principal accounts opened by you in the books which you kept
? A. The principal accounts were those of the Central Pacific^Kailroad Company
and the Southern Pacific Eailroad Company.
Q. You say that the balances appearing on the old books were posted or carried
forward into your new books? A. Yes, sir.
100 BALANCES CARRIED FORWARD.
Q. How many of those balances did you remember as having been carried forward
? A. I suppose a hundred.
Q. Did you have an index to them? A. Yes, sir.
Q. Do you remember how many accounts appeared in that index I A. Eb, sir; it
has been some time ago, and I do not remember.
Q. What did Mr. Brown say to you what directions did he give yon, in regard
to these books?
The WITNESS. The books that I was keeping.
Commissioner ANDERSON. Yes ; that you were to keep.
The WITNESS. He came in and said that at a meeting of the board of directors
of the Contract and Finance Company I had been elected secretary, and he turned
over the books to me these books that he had brought balances forward in.
JOHN MILLER. 2879
BOOKS TURNED OVER WERE BRAND NEW BOOKS.
Q. You mean to say that the books that were so turned over were brand new books
? A. Yes.
Q. Were they purchased to be started as new books? A. Yes, sir.
Q. Was that all the conversation which you had at any time with Mr. Brown in
regard to the books of the company? A. Yes, sir ; all that I remember.
Q. How long before that had you seen Mr. Brown's books? A. I had seen them
every day or two for six months or more.
Q. Were you absent from your duties at this time for any period at all at the
time that you were elected or prior to the time that you were elected secretary
? A. No, sir.
Q. You had been in attendance regularly day by day? A. Yes, sir.
Q. How long before the day when you had this conversation with Mr. Brown, had
you seen Mr. Brown's books? A. That same day.
Q. You had seen them on the morning of that day when you arrived at the office
? A. Yes, sir.
Q. Did you remain at the office all of that day? A. I left for lunch.
Q. With that exception did you remain there all of that day? A. As well as
I remember.
Q. Whom do you remember to have seen in that office on that day besides Mr.
Brown? A. I do not remember any person particularly. Mr. Brown was getting
ready to go away and a good many persons were in and out. I know that he had
a good many friends, and they were calling on him as he was about to start
for Europe.
DISAPPEARANCE OF OLD BOOKS OF CONTRACT AND FINANCE COMPANY.
Q. You say that from the very moment that Mr. Brown delivered to you that new
set of books, you have never seen those old books? A. I do not say from the
very moment, but about that time during that day. I did not see the books that
afternoon, and I have never seen them since.
Q. Did you mention this fact to Mr. Brown? A. No, sir.
Q. You never said a word to him as to the disappearance of these books? A.
No, sir.
Q. Is that your answer? A. Yes, sir; I said nothing to him about the disappearance
of the books.
Q. At that time or ever? A. Never to this day.
Q. Did you help pack those books up? A. No, sir.
Q. Did any one whom you know help pack them up? A. I do not know who did.
Q. But you say you were in that office the whole of that day except at lunch
?- A. Yes, sir.
DISAPPEARED DURING LUNCH TIME.
Q. Did they disappear before lunch or after lunch? A. They disappeared while
I was gone to lunch.
Q. How long were you at lunch? A. I may have been about an hour.
Q. When you say these books disappeared, please state in as great detail as
you can all the books that were carried away? A. All the general books were
carried away. Of course when I speak of the gen
2880 U. S PACIFIC RAILWAY COMMISSION.
eral book, I mean the books that Mr. Brown kept, but not any of the books that
I kept myself. I considered mine as auxiliary books.
Q. Your books did not disappear? A. No, sir.
Q. Were the Crocker books in the locker? A. Yes.
Q. And all the books of the Contract and. Finance Company, except those that
you had kept? A. Yes, sir ; and Mr. Moore's, the paymaster.
Q. Have you ever seen any of those books from that day to this? A. No, sir.
Q. Have you any memoranda or extracts made by you from those books? A. I may
have ; I do not know.
Q, If you have them, where are they? A. I do not know whether they are in
Sacramento or at my home.
MEMORANDA LEFT WITH JUDGE CURTIS.
Q. If in Sacramento, where are they? A. If they are in Sacramento, Judge Curtis
has them.
Q. Who is Judge Curtis? A. He is a lawyer of Sacramento City.
Q. For what purpose has he those memoranda 1? A. I turned a lot of papers
that I had over to him to keep for me. I afterwards instructed him to destroy
them. I do not know whether he has done it or not.
Q. What was the nature of these memoranda? A. It was an abstract of the principal
accounts on Mr. Brown's books.
Q. What is Mr. Curtis's full name 1? A. M. Greene Curtis.
Q. When did you instruct him to destroy these> memoranda? A. Several years
ago.
Q. Who requested you to have them destroyed? A. No one.
Q. Why did you wish them destroyed? A. I had no use for them.
DESTROYED BECAUSE OF NO VALUE.
Q. Why did you wish them destroyed? A. They were of no value.
Q. But they were no injury, were they? A. Well, I thought there was no use
keeping those old papers.
Q. You did not have charge of them ; you were not bothered with them ; why
should you want them destroyed? A. He did not wish to be bothered with them,
I think. As well as I remember, he said that he would rather not keep tlieni
any longer, and I told him to destroy them, and he told me afterwards that
he had.
Q. You say these memoranda contained statements of the principal accounts in
the Brown books? A. Yes, sir.
Q. What accounts? A. All the principal accounts in the tiooks.
Q. The construction accounts? A. Yes, sir.
Q. Did they, show the actual cost of the construction of the Central Pacific
done by the Contract and Finance Company? A. As well as I remember.
Q. Did they show the dividends declared by the Contract and Finance Company
? A. I do not remember how that was. I will tell you how the abstract was taken.
I had not been with the company very long and the business was, to me, intricate,
and I took this abstract with a view of making myself more efficient in the
service of the company.
Q. Did your memorandum extend to the Crocker books also? A. No, sir.
Q. Was Mr. Brown at this office when you returned from lunch? A. I do not
know whether he was or not.
JOHN MILLER. 2881
Q. Was anyone in the office when you returned there? A. Probably Mr. Moore
may have been there.
Q. Was it locked? A. No, sir ; the office was never locked during the day.
Q. Some one was in charge when you were away, then? A. Mr. Moore may have
gotten there before I did, or he may have been sick at the time. I do not remember.
Anyhow, the office was never locked during the day.
Q. Whom did you leave in charge when you went to lunch on that day? A. I left
Mr. Brown.
Q. But you do not remember whether he was there when you came back? A. I do
not remember.
Q. Was it not a matter of some surprise to you to see these new books prepared
for you? A. They had been already prepared. I had seen him preparing them some
time previous to that.
Q. How long had you seen him preparing them? A. Probably a month.
OFFICE REMOVED TO SAN FRANCISCO.
Q. Howlong after this did you move your offices from Sacramento? A. I think
in about a month.
Q. You do not remember in what year it was? A. We moved the office in 1873,
I think.
Q. Where did you go to? A. To Fourth and Townsend streets, San Francisco.
Q. Where you remained until the dissolution of the company? A. Yes, sir.
NO REAPPEARANCE OF THE OLD BOOKS.
Q. Did you ever see any box said to contain books when you were here in San
Francisco? A. 'I do not remember that I did.
Q. W T ere you ever sent to find any of these old books, for the purpose of
reference, by Mr. Brown or any other officer of the company? A. No, sir.
Q. Did you ever hear of any one being sent to get any of those old books? A.
No, sir.
Q. Do you know why those books were made to disappear? A. No, sir.
Q. You have no idea? A. It is simply a private idea.
Commissioner ANDERSON. We do not object to private ideas.
The WITNESS. Well, it is simply a conjecture, such as you would have about
anything that did not concern you. It did not concern me very much.
Q. Can you not suggest what possible object there was in making these books
disappear? Who had any interest in making them disappear, that you know of?
A. I do not know of any one that had any particular interest.
GENERAL NATURE OF THE ENTRIES.
Q. Do you know what the nature of the entries in those books was? A. Yes, sir
; the general nature.
Q. They contained the transactions of the Contract and Finance Company'? A.
Yes, sir.
Q. And they showed how much the construction had cost them, did they not? A.
As well as I remember.
2882 U. S. PACIFIC EAILWAY COMMISSION.
Q. And the books also showed what payments the Contract aud Finance Company
had received from the corporations for which it had done work? A. I think
that the accounts were balanced up, but how they were balanced particularly
I do not remember now how the payments were made.
Q. I am not asking you that, but they Showed generally what compensation had
been received for what work had been done 9 A. Yes, sir.
Q. Was any one interested in those books except those persons who were interested
in the profits or losses of the Contract and Finance Company? A. Not that
I know of, except that a short time before Mr. Brown went away, I think that
Mr. Samuel A. Hopkins, a nephew of Mr. Mark Hopkins, was made president, and
he may have been made president with a small amount of stock. I do not. know
anything about that.
Q. Who were the stockholders of the Contract and Finance Company? A. I do
not know.
Q. You never heard I A. Yes ; I have heard, but I do not know.
Q. How much stock did you hold? A. None that I know of.
Q. What stock was standing in your name? A. No Contract and Finance Company's
stock.
WITNESS'S CONNECTION WITH WESTERN DEVELOPMENT COMPANY.
Q. What company succeeded the Contract and Finance Company in its work? A.
The Western Development Company.
Q. Did you have any connection with that company? A. Yes, sir.
Q. What was your connection with that company? A. I was the secretary of it.
Q. How long did you remain secretary of the Western Development Company? A.
I do not think it was a year.
Q. Was it while you were also secretary of the Contract and Finance Company
? A. Yes, sir.
Q. You filled both offices at once ! A. Yes, sir.
Q. Where was the office of the Western Development Company? A. in the same
room with the Contract and Finance Company at Fourth and Town send.
Q. Who was the president of the Western Development Company? A. Frank S. Douty.
Q. Who at this time was the president of the Contract and Finance Company?
A. Samuel A. Hopkins.
TRANSFER OF BUSINESS.
Q. Do you know whether any of the business of the Contract and Finance Company
was passed over to the Western Development Company? A. Yes, sir; I think a
transfer was made of all their lumber, tools, teams, and things of that kind
operating material.
Q. Were there any contracts transferred that the Contract and Finance Company
commenced? A. Yes, sir, there were some contracts with the Southern Pacific.
Q. On which the Contract had done some work? A. Yes.
Q, You say you were the secretary of the Western Development Company? A. Yes,
sir.
JOHN MILLER. 2883
DUTIES AS SECRETARY OF WESTERN DEVELOPMENT COMPANY.
Q. As secretary of the Western Development Company, what were your duties'?
A. I was secretary and treasurer. I had the books to keep, partly by myself
and partly by clerks ; and I presented to the company bills that were sent
in. All the carpenters' work and bridge work was kept by Mr. Arthur Brown over
at Oakland, and every month he would send in those bills for construction and
repairs against whichever company it had done for. Then the cost of the grading
and everything of that kind was charged up. Those bills were entered up every
month.
Q. You were responsible for the correctness of those entries on the books'?
A. Yes, sir.
Q. How long had the Contract and Finance Company been engaged on the contracts
which had been assigned over to the Western Development Company before the
assignment? A. I do not remember.
Q. Some considerable time? A. I think one of them had, probably,
PRINCIPAL CONTRACT RELATES TO SOUTHERN PACIFIC EXTENSION.
Q. Which contract do you refer to? A. I think that the principal contract that
was assigned over was for extending the Southern Pacific road.
Q. And the Contract and' Finance Company had been engaged on. that contract
for how long a period? A.. About a year, I believe.
Q. How long before you moved to Sacramento was it before you were appointed
secretary of the Western Development Company? A. I think it was about a year
or a year and a half.
Q. Do you remember whether the first work under the contract of the Southern
Pacific in the books of the Contract and Finance Company had been entered in
the books which were removed? A. I think ail the work for constructing the
Southern Pacific, so far as it had been received, was entered in the Contract
and Finance Company r s books that were removed.
Q. How did you obtain the balances to enter in the Western Development Company's
books when the contract was assigned to that company? A. I have forgotten
how long it was after the Western Development Company was organized before
the assignment of the contract was made, but it was not long.
ACCOUNTS OF CONTRACT AND FINANCE COMPANY ADJUSTED BY
WITNESS.
Q. When it was made, the standing accounts of the Contract and Finance Company
had to be passed over to you to be adjusted? A. Yes, sir.
Q. From what source did you get those figures? A. I think that all the Southern
Pacific road that had been constructed and received had been paid for to Mr.
Brown, and settled with Mr. Brown before he went away, and then the unfinished
sections were carried on, and when they were completed they were paid for some
to the Contract and Finance Company and some to the Western Development Company,
I think.
Q. In order to keep the accounts straight between the Contract and Finance
Company and the Western Development Company were you not compelled to know,
when you made your first entries, just how much had been earned by the Contract
and Finance Company, and how much had been received by the Contract and Finance
Company? A. Yes* sir.
"2884 U. S. PACIFIC RAILWAY COMMISSION.
FIRST ENTRIES IN WESTERN DEVELOPMENT'S BOOKS.
Q. From what source did you ascertain how much they had earned and how much
they had received 1? A. There was a contract between the Contract and Finance
Company and the Southern Pacific for constructing the road, equipping it, and
so forth, and as to the unfinished work the balances were brought forward from
the Contract and Finance Company to the Western Development Company.
Q. I understand that; but you have just stated that the part that was done
by the Contract and Finance Company had been kept in the books which have disappeared.
I now ask you how you got the initial figures to enter in the Western Development
Company's books, which showed how much work had been already done and how much
had been earned by the Contract and Finance Company, and how much in bonds
or stocks had been already paid them on account of their work. From what source
did you get those figures ; did Mr. Brown tell you? A. No ; there was a contract
between the Contract and Finance Company and the Southern Pacific, and that
contract with the Contract and Finance Company was assigned by that company
to the Western Development Company.
Q. After some work had been done? A. Yes, sir. I had been keeping the accounts
right along for the grading so far as the work had progressed, and when any
'section was finished it was settled for by the Southern Pacific Company according
to their contract.
CONTRACT AND FINANCE COMPANY'S BOOKS THE SOURCE OF INFORMATION.
Q. You have not yet answered from what source you ascertained how many sections
had been finished, and how much money had been paid. A. 1 felt, as secretary
of the Contract and Finance Company, that I had nothing to do with any completed
sections previous to the time that I took charge of the books.
Q. But as secretary of the Western Development Company you had to be informed
at what section your accounts would commence? A. Yes, sir.
Q. From what source did you learn at what section your account should commence'?
A. From the books of the Contract and Finance Company.
Commissioner ANDERSON. You have just stated that those accounts had been kept
in the books which had disappeared.
The WITNESS. All the completed sections, but the unfinished sections were on
my books. When a section was completed Mr. Brown would take it on to his books.
Q. You say that the unfinished sections, which were the only ones that you
were interested in when the contract was assigned, were kept in your books
? A. Yes, sir.
Q. That is, in the new books, delivered to you by Mr. Brown? A. Yes, sir.
Q. How long did you keep those books I
The WITNESS. The Western Development Company's books 1
Commissioner ANDERSON. No ; the Contract and Finance Company's books.
A. They were kept for about two years.
Q. You kept them in San Francisco, here? A. Yes, sir.
Q. For about how long? A. For about two years.
JOHN MILLER. 2885
WITNESS'S ASSOCIATES IN THE OFFICE.
Q. Who was in that office with you I A. Mr. Charles H. Eeddington and Frank
C. Eoss, and a boy named Goury, I believe.
Q. Which of these persons are living? A. I think Goury probably is dead, but
I think Koss and Keddington are probably alive.
Q. Where does Mr. Koss live! A. I do not know. I have not seen him for a good
many years.
Q. Where does Mr. Eeddington live? A. I do not know. I have not seen either
of them for several years.
Q. Are you aware that Mr. William E. Brown says that the last time he saw the
books which disappeared from Sacramento, he saw them in the possession of yourself?
A. No, sir; I am not aware of that.
Q. Is that true, if it has been so stated? A. They are not in my possession.
Q. You say when you went to lunch that day you left Mr. Brown there. A. Yes,
sir; and the books were there.
Q. When you went to lunch, Mr. Brown and the books were there? A. Yes ; and
when I came back Mr. Brown was there, but I did not see the books. They may
have been in his safe.
Q. When did Mr.* Brown leave the employ of the Contract and Finance Company?
A. I think it was in September, 1873.
Q. While you were in Sacramento? A. Yes, sir.
Q. How long after the disappearance of these books? A. I think it was probably
the next day ; I think he left for Europe the next day after the books disappeared.
STATEMENT MADE BY MR. BROWN.
Commissioner ANDERSON. I will read you this statement made by Mr. Brown, or
which appears to have been made by him.
Mr. COHEN. Might you not as well prove that that was made by Mr. Brown before
you examine the witness concerning it?
Commissioner ANDERSON. If it was not made by him, he can so state. [Eeading
:]
Q. Do you know what became of these books and papers? A. I do not.
Q. Have you made any search for these books and papers? A. No, sir.
Q. Into whose possession did they pass when the corporation ceased to do business?
A. They passed into the possession of my successor, John Miller, when I left
the employ of the company in 1873.
The WITNESS. I presume that he referred to the books that he had opened with
the balances carried forward ; the new set of books.
Q. That does not then refer to the books which you refer to as being Mr. Brown's
books containing the transactions of the Contract and Finance Company for the
years prior to your entries there, nor to the books of Crocker & Co., which
were in the locker? A. Xo. sir.
WITNESS EXPLAINS HIS ENTRIES.
Q. I wish you would explain a little more definitely how you made your first
entries in the books of the Western Development Company, which related to this
unfinished contract with the Southern Pacific, the earlier portion of the construction
accounts having been kept in the books of the Contract and Finance Company.
A. General Colton had come into the railroad employ about that time and I was
directed to have an inventory of all the property belonging to the Contract
and
2886 U. S. PACIFIC RAILWAY COMMISSION.
Finance Company taken, and all open accounts, and those open accounts such
as grading, bridge building, and things of that kind, and every other open
account that it was right and proper to turn over to the Western Development
Company, was turned over to them and was put on the* Western Development
Company's books.
Q. From what books did you take these open accounts? A. I took them from the
books which Mr. Brown had opened for me.
TRANSFER OF BALANCES.
Q. Were there not some open accounts in Mr. Brown's books the books which disappeared
? A. He transferred them, I presume. A certain contract or certain work, such
as grading, &c., would be charged up so much, and that would be brought
forward in bulk, and after that I would go on and add the additional charges
to it. Then, when the Western Development Company was formed I transferred
the balances in the same way to the Western Development Company.
Q. Then you transferred the balances from the books which had been kept by
you personally? A. Yes, sir.
Q. In whose handwriting were these initial entries in those books which Mr.
Brown had prepared for you? A. W. E. Brown's.
Q. In his own handwriting? A. Yes.
Q. All of them? A. As well as I remember.
Q. When did you last see Mr. Curtis? A. I have seen him about ten days ago.
Q. Did you have any conversation in relation to these memoranda? A. Yes, sir.
Q. What was said? A. He said that he had destroyed them.
Q. This happened about ten days ago? A. Yes, sir ; he destroyed them.
RELATIONS BETWEEN WITNESS AND MR. CURTIS.
Q. How did you happen to go to see Mr. Curtis? A. I met him on the street.
He is my lawyer.
Q. Do you know whether he is in the employ of the Central Pacific ! A. I have
no idea that he is.
Q. Do you know whether he has been? A. He never had been, to my best knowledge.
Q. Without going into details, at the time that you left the Central Pacific,
there was some bitter litigation in which you were concerned, was there not
? A. Yes, sir.
Q. Did Mr. Curtis defend you in that litigation? A. Yes, sir.
Q. Do you know at whose instance he did this? A. At my own.
Q. Do you know whether anybody paid him for it besides yourself? A. I think
not. I have no idea that anybody else paid him.
Q. Who selected him? A. I did.
Q. After consultation with any of the officers of the Central Pacific? A.
No, sir.
MEETING BETWEEN WITNESS AND MR. CURTIS.
Q. You say that you met Mr. Curtis on the street? A. Yes, sir.
Q. How long before that had you been in Sacramento? A. lam there every two
or three weeks, and frequently do not see him.
Q. It was an entirely accidental meeting? A. Yes, sir.
Q. Did you go anywhere together or meet on the street? A. Just met on the
street.
JOHN MILLER. 2887
Q. Did you go into any room? A. ISTo, sir.
Q. Did you see him more than once? A. No, sir.
Q. Who opened the conversation? A. I think he did, by asking me if I had been
subpoenaed down here.
Q. He asked you if you had i been subpcenaed to attend before this Commission?
A. Yes, sir.
Q. What else did he say? A. I told him that I had not, and he said that he
would not be surprised if I was.
Commissioner ANDERSON. Please tell us all that was said.
The WITNESS. I told him that I hoped I would not ; that I was neutral as between
the company and the Government ; that I knew very little and it had been some
time since, and I knew so little that I thought that I might be misunderstood
for knowing so little as I did. I am farming now, and 1 have been farming for
ten or twelve years, and my thoughts have run in a different channel from railroading
or the railroads.
THE COMMISSION MIGHT WANT CONTRACT, BUT IT WAS DESTROYED.
Q. Will you describe the conversation between yourself and Mr. Curtis? A.
That was about all.
Q. There must have been something else. A. He said that he supposed they might
like to see that abstract, but that it had been destroyed.
Q. Have you not just told us that you told- him or that you suggested to him
that he had better destroy the memoranda, and that you did not know whether
he had or not? A. I said that he said they might like to see that abstract,
but that he had destroyed it.
Q. Have you not, in the former part of this examination, stated to us in regard
to those memoranda that you had suggested to your lawyer that he had better
destroy the memoranda, and that you did not know whether he had done so or
not? A. I did. I only know now from hearsay. He told me he had. I instructed
him two or three years ago to do so, and the question has never come up again
until within this last ten clays.
A GOOD THING IT WAS DESTROYED.
Q. He said it was a good thing they were destroyed, did he? A. Yes.
Q. Was it a good thing that they were destroyed? A. I do not know. I suppose
he thought it was no use my meddling with this thing which did not concern
me at all.
Q. For whom did he mean it was good ; for you? A. No. I suppose it was good
for the company.
Q. Good lor the company? A. Yes, sir.
Q. That they were destroyed? A. I suppose he meant that. I do not know what
he meant.
NO KNOWLEDGE OF THE OTHER BOOKS.
Q. What became of these other books that you kept for the Contract and Finance
Company? A. I left them in the railroad office.
Q. Left them with whom? A. With Mr. J. O'JB. Gunn.
Q. Have you ever seen them since? A. ]STo, sir.
Q. Have you ever been called upon to make some explanations about the entries
in these books? A. No, sir.
Q. Do you know where they are now? A. JSTo, sir.
Q. Where is Mr. Gunn? A. I do not know.
2888 U. S. PACIFIC RAILWAY COMMISSION.
EMPLOYMENT OF ME. CURTIS.
Q. In regard to this employment of Mr. Curtis to defend you in the proceedings
that occurred when you left the company, how long had there been trouble between
you and the company before he was employed? A. Very recently ; not a month.
Q. The general nature of the difficulty was a charge that you had misapplied
funds of the company, was it not? A. Yes, sir.
Q. Was that difficulty adjusted '? A. Yes, sir.
Q. Between you and what officer of the company, chiefly? A. I was owing them
and I turned over property to them. I do not know how much it did amount to.
I was tried for embezzlement.
Q. My question was, what officer of the company did you deal with in making
this adjustment 1 A. Mr. Harvey Brown and Judge .Robinson.
Q. Had you known Mr. Curtis before that time? A. No, sir; only by sight.
Q. Who introduced him to you with reference to defending you in this matter
? A. I think he introduced himself to me. My wife went to see him.
Q. Do you not know that he was either sent to you or introduced to you through
the intervention of some officers of the^Central Pacific Company? A. No, sir.
Q. You did not meet him until after the matter between you and the Central
Pacific had been 'adjusted ; is that how I am to understand you? A. It was
not fully adjusted at that time. I think he had helped to adjust the matter.
CRIMINALLY PROSECUTED AND DECLARED INNOCENT.
Q. What part did he take in the adjustment? A. I think by taking the property
and calling the account square.
Q. flow did he come to interest himself in the matter? A. By my solicitation.
Q. How had you heard of him? A. I had heard of Judge Curtis ever since I had
been in the State.
Q. It was on his personal merits? A. Yes, sir ; as a fine lawyer. I wanted
to get a good one, and I considered him the best in the State.
Q. Was the matter that was pressed against you, after the adjustment with the
company, tried? A. Yes.
Q. Was it tried on its merits? A. It was tried on its merits.
Q. Was it litigated? A. No. The criminal charge was tried on its merits, and
through the testimony of the witnesses from the railroad company I was declared
innocent of all crime;.
Q. And the personal suit against you was adjusted? A. There was no personal
suit.
Q. The personal claim against you ! A. The personal claim was adjusted.
Q. Which occurred first, your acquittal or the settlement? A. The settlement.
Q. Who appeared in this criminal prosecution against you? A. The district
attorney, Mr. Darwin.
Q. Any one else? A. That is all, I think.
Q. And what officers of the company were examined as witnesses? A. Judge Kobert
Kobiuson, Mr. J. O'B. Gunn, Frank S. Douty, and E. C. Wright. I do not remember
any others.
JOHN MILLEK. 2889
10,000 SHARES IN WITNESS'S NAME.
Q. As to this Western Development Company, what stock stood in your name?
A. The company was formed by five of us, taking 10,000 of the shares each of
the stock. I had 10,000 in my name.
Q. Who was the real owner; who did you represent? A. Mr. Mark Hopkins.
Q. What became of that stock when you left the employ of the company? A. Mr.
Hopkins had it.
Q. You transferred it over to him I A. Yes, sir.
Q. What understanding was there ; what did you understand as to your relations
to Mr. Hopkins as a holder of this stock? A. I was only a nominal owner.
Q. You were to represent his wishes and carry out his views? A. Yes, that
is it.
Q. Do you say that Mr. Curtis was never in the employ of the company? A. To
the best of my knowledge.
Q. Do you know his handwriting? A. Yes.
Q. Please look at the paper which I show you and state in whose handwriting
the signature is. A. I think that is his signature.
RECEIPT OF "N. GREENE CURTIS" TO CENTRAL PACIFIC COMPANY.
Commissioner ANDERSON. In that connection I will read this in evidence.
Central Pacific Railroad Company to N. G. Curtis, Dr. Jan. 17, 1872. For legal
services in The People vs. Burke et al, in Nevada... $500. CO
There is a receipt at foot for the amount, dated January 17, 1872, signed "N.
Greene Curtis."
The WITNESS. That was a special case which I knew nothing about..
Commissioner ANDERSON. Your statement was that to your knowl edge he had never
been in the employ of the company.
The WITNESS. Yes, sir 5 I knew nothing about it.
INDORSEMENT ON THE VOUCHER.
Mr. COHEN. The indorsement qn that voucher is :
C. P. R. R.
No. 101, $500.00.
Name, N. G. Curtis.
Place, "Sac." (meaning Sacramento).
For legal services.
When paid, January 17, 1872.
Chargeable to legal expenses.
I certify that the within account, amounting to $500.00, is correct.
ROBERT ROBINSON..
NO EXTRA SERVICES PERFORMED.
By Commissioner ANDERSON:
Q. What other business did you do for this company besides makingentries in
the books? A. I do not remember now; those were my regular duties; I do not
remember to have performed any extra services.
Q. Did you not purchase property for them? A. "iN"o, sir.
Q. What was the nature of the difficulty between you and the company ; was
it not in reference to property of the company? A. No,, sir.
2890 U. S. PACIFIC RAILWAY COMMISSION.
NAMES CENTRAL PACIFIC OFFICERS HE HAS TALKED WITH.
By the CHAIRMAN:
Q. Have you talked with any of the officers of the Central Pacific since you
have been in San Francisco concerning this case? A. No, sir ; I spoke to Colonel
Raymond.
Q. Colonel Haymond is the attorney for the company? A. Yes, sir.
Q. Who else have you talked with connected with the Central Pacific Company
? A. I only spoke in a casual way to Mr. Cohen, in the hall.
Q. Whom else did you talk with? A. No one else that I remember of.
Q. Did you talk with Mr. Yost? A. I did not know that he was with the railroad
company now. Yes, I talked with Mr. Yost.
Q. Did you talk about the testimony that you were about to give? A. I may
have remarked that I knew very little; that it would not take me long to give
it, or something of that kind.
CONVERSED WITH MR. YOST.
Q. What conversation had you with Mr. Yost? A. We were only speaking about
this case in a general way. He was Governor Stanford's private secretary at
the time I was with the Contract and Finance Company. We were old acquaintances
and friends, and just spoke in a general way. There was no comparing of notes
or anything of that kind to see what I should testify to.
Q. Did he tell you what he had testified to? A. No, sir.
Q. Did he tell you that he had been called as a witness 1 A. Yes.
Q. Did he converse with you about the subject of his examination? A. In our
friendly talk it came up, and I said that the examination was pretty thorough.
He said yes, more thorough than the papers had represented it. I told him that
I had seen the papers ; he did not state anything, though. He made no remarks
as to any portion of his testimony.
Q. Did you talk with him about the affairs of the company at the time that
you were employed by it? A. No.
SPOKE TO THE DEPUTY MARSHAL.
i
Q. Who else did you talk with outside of the company since you have been here
concerning this investigation? A. I may have spoken to the deputy marshal,
MacFarland, I told him I had very little to say and it would not take me very
long to get through. I told him that I had very little to say, and I knew very
little. It had been a long time, and I had not thought about these things,
and had not cared about them.
Q. During your employment by the Central Pacific did you buy property for the
company? A. No, sir; I never was in the employ of the Central Pacific.
Q. During your employment by the other company did you buy property for yourself
or for the company? A. I bought property for myself.
Q. Did you buy property for the purpose of selling it to the Central Pacific
Company or to the Western Development Company? A. No, sir.
Q. Do you know Mr. Kennedy? A. Yes.
Q. Was he associated with Mr. Curtis in the trial of your cause? A. No.
JOHN MILLER 2891
Q. Did he represent you? A. No, sir.
Q. Were you associated with him iii the purchase of coal lands 9 A. No, sir.
A " GO-BETWEEN" IN PURCHASING COA! LANDS.
Q. Had you ever had any interest with him in the purchase of coal lands? A.
I think I purchased some coal lands from some person through Mr. Kennedy. He
was a go-between, or probably had some slight stock in some coal mine,
Q. Was the purchase for your individual account or for the account of the company
? A. My individual account.
Q. Where were you pending the negotiations between the company and your attorney
? A. I was at the railroad office.
Q. At what railroad office U A. The Central Pacific Eailroad office, corner
Fourth andf Townsend streets, San Francisco.
Q. Whom did you meet there? A. I met quite a number of persons.
The CHAIRMAN. I mean pending the negotiations for the settlement of your case.
The WITNESS. I mean that, too. * Q. How often were you there? A. I was there
every day for a mouth.
Q. Who met you there at first I A. I think I was met by all the principal officers
of the Central Pacific Eailroad Company.
NEGOTIATIONS BETWEEN WITNESS AND CENTRAL PACIFIC.
Q. What was the character of the negotiations? A. I was turning over property
to them and settling up my accounts.
Q. What offer did the officers make to you? A. They told me to make restitution
and square up my account so far as I could, and they would call it square.
Q. Did it take a mouth to do that? A. Very nearly.
Q. Was that the final negotiation? A. With the company, yes, sir*
IMPORTUNED BY KENNEDY TO BUY PROPERTY.
Q. Did you talk to Mr. Kennedy about your case? A. I may have done so. Mr.
Kennedy is a man that I had very little business to do with. I met him frequently.
I know that he was importuning me time and again for one thing and another
to buy some coal mines, or something of that kind after I had left the railroad
company, and I told him I had no money with which to buy, and of course he
let me alone then. He was soliciting me to buy other property afterwards, but
I did not buy.
Q. Was there any paper executed by the company to you? A. No, sir.
Q. Was there any release given to you? A. No, sir.
CALLING THE ACCOUNT SQUARE.
Q. What were the officers of the company to do for you in consideration of
the property delivered up? A. Nothing; only to call the account square.
Q. How did they square the account '? A. I do not know.
Q. What did you understand by that? A. That it was equal to a receipt in full
; they were to cancel my indebtedness and take what I had.
p R VOL iv 36
2892 U. S. PACIFIC RAILWAY COMMISSION.
Q. Were all charges to be withdrawn? A. No, sir ; there was nothing said about
charges ; they made no charge.
Q. Was anything said about the case in the criminal court? A. No, sir.
Q. Was the case discussed at all? A. No.
Q. Who made the complaint in the criminal proceedings? A. I think Fitch, or
some of these newspaper meo.
Q. Have you any other statement to make to the Commission? A. No, sir.
Q. Have you any other information to give to the Commission? A. No, sir.
The CHAIRMAN (to Mr. Cohen). Do you wish to ask this witness any questions
?
Mr. COHEN. No.
PALACE HOTEL, SAN FRANCISCO,
Thursday, August 4, 1887. D. Z. YOST, being further examined, testified as
follows :
By the CHAIRMAN :
Question. Have you produced the papers that you were to bring to the Commission
? Answer. No. Q. When will you do so? A. This week.
The CHAIRMAN. We would like to have them at as early a date as possible.
The WITNESS. I will bring them as soon as I find them. Mr. COHEN. What papers
is he to produce?
The CHAIRMAN. All the papers or memoranda he has in his possession concerning
the business of the Central Pacific.
LAW OF THE STATE OF CALIFORNIA ON EMBEZZLEMENTS.
Mr. HAYMOND. I would like to call your attention to a provision of a statute
of this State, as you seem to attach some importance to what took place down
there. A settlement here between a party who embezzles property is encouraged,
and if that settlement is made and restitution is made before any offense is
charged, the judge is bound to take that into consideration in fixing punishment;
so that it is encouraged instead of being discouraged by the law of this State.
Commissioner ANDERSON. Personally, I attach no importance whatever to it so
far as Mr. Miller is concerned. I only think that it is unfortunate that these
books, which appear to have so vital a bearing on the real question of the
cq$t of construction of the Central Pacific, should be missing, and that no
one should be able to give us information that we could rely on as to that
point.
Mr. HAYMOND. I agree with you that it is unfortunate. I think the company would
give a million for them now.
The CHAIRMAN. I only want to say with reference to the .testimony of this gentleman,
that I regard it as important from the fact that the business of the corporation
was so loosely conducted, as to allow at that time such irregularities to exist
in an organization in which the Government has many millions involved.
NECESSARY TO TRUST SUBORDINATES.
Mr. HAYMOND. If you had been there for a month you would see that it was impossible
to carry on that business without trusting subordi
W. E. BROWN. 2893
nates. There is not a man living on the face of this earth that could live
twenty years and run any one of those departments without trusting his subordinates.
The CHAIRMAN. Our inquiries are with regard to the business methods.
Mr. HAYMOND. There is no other way in whi"h that business can be run.
These principals must trust some men and they do trust the heads of their departments.
If you would stay there a week you would see that it was impossible to do anything
else. My judgment is that they have saved money by that sort of confidence,
although sometimes they have lost.
COMMISSION WILL SUBMIT REPORTS OF EXPERTS.
Mr. COHEN. I would like to know from the Commission whether they intend to
submit to us the reports of their experts, or whether the Commission intends
merely to annex them to its report. I mean the reports of the experts on the
books and accounts of the Central Pacific.
The CHAIRMAN. We have no objection to submitting to you any papers or documents
that we may have from the accountants, but they will not be ready, probably,
until the first of October, whe.n the balance sheets are taken off.
Mr. COHEN. There may be some things which we could explain to you.
Commissioner ANDERSON. Of course any paper or copy of a paper taken from your
books that requires explanation will be submitted to you, if you desire it.
Mr. COHEN. We want to have an opportunity of explaining it to you.
Commissioner ANDERSON. We shall hardly receive them until October, but we shall
be very glad to see you, gentlemen, in New York, in September.
Mr. COHEN. I shall be there, sir.
PALACE HOTEL, SAN FRANCISCO,
Thursday, August 4, 1887.
W. E. BROWN, being duly sworn and examined, testified as follows :
By Commissioner ANDERSON :
Question. Where do you reside? Answer. In San Francisco.
Q. What is your occupation? A. I am an accountant.
Q. Are you in any special employ, or are you a general accountant? A. I keep
the private accounts of Messrs. Stanford. Huntington, Crocker, and Hopkins,
as they relate to each other.
Q. How long have you kept them? A. Ten years.
Q. Have you been in the employ of the Contract and Finance Company? A. Yes,
sir.
Q. When was that? A. From 1868 to 1873.
Q. Where was your office? In Sacramento? A. Yes.
Q. During the whole period of your employment? A. Yes.
Q. Were you never in their employ in San Francisco? A. No, sir.
WITNESS'S CONNECTION WITH CONTRACT AND FINANCE COMPANY.
Q. What was your position? A. I was secretary and treasurer of the Contract
and Finance Company.
2894 U. S. PACIFIC RAILWAY COMMISSION.
Q. How long did you hoid tbat position? A. From 1868 to 1873.
Q. Were you always at the same place in Sacramento? A. Yes, sir.
Q. Did you occupy more than one room? A. Yes; we had two rooms.
Q. Where were those rooms'? A. They were over Huntington & Hopkins' hardware
store.
Q. Were they both rooms in which work was done? A. No ; one room was a store
room and the other an office.
Q. Then you worked in the office room? A. Yes.
Q. Who was in the office room besides yourself? A. The clerks that I had at
different times.
WITNESS'S ASSOCIATES IN THE OFFICE.
Q. Please give the names of those you had after 1871? A. Ralph Smith was a
clerk at one time, and a Mr. Moore was a clerk, and John Miller.
Q. Is Mr. Balph Smith living? A. I think he is dead.
Q. Mr. Moore is dead I A. Mr. Moore is dead.
Q. And Mr. Miller is the last witness? A. Yes, sir.
Q. What had you been doing before you entered the employment of the Contract
and Finance Company? A. I was private secretary to the governor of the State
; Governor Low.
Q. Had you done any business for either Mr. Stanford, Mr. Crocker, Mr. Huntington,
or Mr. Hopkins? A. I was private secretary for Governor Stanford when he was
governor.
Q. In 1861? A. In 1861.
Q. Did you do any other business for any of these gentlemen between 1861 and
1868? A. No, sir.
Q. Or any for the Central Pacific Railroad Company? A. No.
Q. Or for any associate company? A. No.
DATE OF EMPLOYMENT.
Q. In what part of 1868 did you enter into the employ of the Contract and Finance
Company? A. I think in the spring.
Q. Had you anything to do with the firm of Crocker & Co. before that time
? A. No.
Q. Had you examined any of their books? A. No.
Q. Were you acquainted with Mr. Charles Crocker? A. Yes.
Q. How well? A. Meeting him every few days.
Q. Were you intimate with him? A. Not at that time.
Q. How did you come to obtain the position of secretary in the Contract and
Finance Company? A. I think through Governor Stanford.
Q. Did he come to see you about it? A. Yes, sir.
APPOINTMENT THROUGH GOVERNOR STANFORD.
Q. Will you, in brief, tell us how the appointment was made? A. Governor Stanford
told me that he had determined to organize a construction company for the purpose
of building the Central Pacific Railroad from the State line eastward ; that
the work would be very extensive and it would be very necessary to do it more
rapidly than it had ever been done before. He desired to organize a construction
company, in order to get other capital interested with him and his associates
to take stock in this construction company and assist them in carrying on the
work.
W. E. BROWN. 2895
Q. Please state how that led to your employment as secretary? A. He asked
me then to have a company organized, leaving the details oi its organization
to me, and I with Theodore J. Milliken and B. R Crocker had the company incorporated.
Q. In connection with the subject of doing this through a construction company,
was any allusion made to the difficulty of getting capital to embark directly
in the enterprise by reason of the personal liability of the stockholders?
A. Yes.
Q. That subject was alluded to? A. Yes, sir; that was alluded to, and it was
more particularly alluded to from the fact that he desired to get prominent
capitalists in San Francisco and Sacramento to take stock in this construction
company.
Q. Did he suggest the names of the incorporators? A. Yes, sir.
WHO SUBSCRIBED FOR THE STOCK.
Q. Did the incorporators themselves take the stock of tfie Contract and Finance
Company in equal shares? A. Yes.
Q, How many were there? A. Three.
Q. Was that not subsequently increased to four? A. No.
Q. Did they each take one-third? A. Yes ; I think they did.
Q. Please repeat their names? A. B. E. Crocker, Theo. Milliken, and W. E.
Brown.
Q. Was the stock taken in your name, the third? A. Yes, sir.
Q. Did you pay anything for it? A. No.
Q. Whose stock was it understood to be? A. The whole stock was understood ;
to be for Governor Stanford, Mr. Hopkins, the two Mr. Crockers, and Mr. Huntington.
Q. And you three gentlemen acted for them and represented them? * A. Yes,
sir.
NO REASON ASCRIBED FOR SUBSCRIBING THROUGH OTHERS.
Q. What reason was assigned for not taking this stock directly in the names
of the parties really interested? A. I do not think any reason was assigned.
Q. Is that your best recollection? A. Yes.
Q. Your best recollection is that the subject was not discussed ! A. My recollection
is that there was nothing said on the subject.
Q. Were you at that period a man of substance or wealth? A. I had some property.
Q. How was it as to these other gentlemen ; was Mr. Milliken a man of means
? A. Yes, sir ; he was a merchant in Sacramento.
Q. How was it as to the second, Mr. Crocker? A. He had means.
Q. Is it your judgment that the object of doing the business in that way was
to avoid personal responsibility on the part of the principals? A. I do not
know what their object was.
Q. Did you immediately enter on your new duties? A. Yes, sir.
Q. Then it must have been at the very inception of this work that you went
in and that you organized? A. Immediately.
WITNESS PREPARED THE BOOKS OF THE CORPORATION.
Q. Who prepared the set of books that were to be kept? A. I prepared them.
Q. What books did you select? A. A cash-book, a ledger, journals, day-books,
and time-books.
2896 U. S. PACIFIC RAILWAY COMMISSION.
Q. The usual books appropriate to that business? A. To au incorporation ;
yes, sir.
Q. How soon after you had the books prepared was the contract entered into
between the Finance Company and the Central Pacific"? A. I think within
a week.
Q. Were you present at the meeting when it was voted? A. I was at the meeting
of the Contract and Finance Company.
Q. Were copies sent in to your company from the other company? A. Yes, sir.
Q. Where was the Central Pacific Company's office? A. In the same building,
across the hall from the Contract and Hinance Company's office.
Q. And you kept a copy in your own office? A. Yes, sir.
DISAPPEARANCE OF CONTRACT BETWEEN CONTRACT COMPANY AND
CENTRAL PACIFIC.
Q. Do you know where that contract is? A. I do not.
Q. Was it with the other papers of this company? A. Yes, sir.
Q. And disappeared with them at the same time that they disappeared? A. I
do not know as to that.
Q. How long did you see it afterwards. Had you not had occasion to make frequent
reference to it? A. Yes, sir ; very often.
Q. During the whole of this work? A. Yes, sir.
Q. Where did you keep it? A. I kept it in my safe.
Q. What sort of a safe had you? A. I do not remember the name, but it was
a very large safe.
Q. Was it large enough to keep all the books which you had in that office?
A. Yes, sir ; all the general books. I did not keep the minor books there.
Q. Did you customarily keep the general books in the safe? A. Yes.
Q. When did you last see that safe? A. I saw it in the fall of 1873.
Q. The safe? A. Yes, sir.
TERMS OF THE CONTRACT. i
Q. Do you recall or remember the terms of this contract between the Contract
and Finance Company and the Central Pacific? A. Yes, sir.
Commissioner ANDERSON. Please state them as nearly as you can.
The WITNESS. The Contract and Finance Company were to build the road from the
State line eastward to do all the work, the engineering, grading, bridging, &c.
They were to lay the track, build and complete a telegraph line, furnish telegraph
offices and instruments, furnish buildings necessary for the section hands,
furnish necessary round houses, turn-tables and so many (I have forgotten the
number of) engines, cars, and running material per mile ; but whatever was
necessary for the road and machine-shops.
Q. Furnishing and laying rails? A. Yes, sir.
Q. Do you remember what the weight of the rails was? A. It was, I think, 60
pounds to the yard ; at least 60 on heavy grades and 56 on the level.
Q. Iron or steel? A. Iron.
Q. Were they to furnish ties? A. Yes, sir.
Q. Were they to pay all the transportation on the line of the road? A. Yes,
sir ; beyond the State line.
Commissioner ANDERSON. Continue your statement of the terms of this contract.
W. E. fcROWtf.
The WITNESS. I think that was ab'out all that the Contract and Finance Company
agreed to do.
AGREEMENT OF THE CENTRAL PACIFIC.
Q. What did the Central Pacific agree to do? A. They agreed to pay.
Q. On what? A. .They agreed to pay for this work $86,000 a mile.
Q. In what way? On what certificates? A. $43,000 in cash and $43,000 in the
stock of the Central Pacific Eailroad Company.
By Commissioner LITTLER :
Q. Did that contract extend from the State line through to Ogden? You said
eastward. A. Eastward until the connection was formed with the Union Pacific.
By Commissioner ANDERSON :
Q. On what certificates, or how were t<hey to pay? A. They were to pay
when the sections were accepted by the Government.
Q. Did you keep an account of that construction from the commencement to the
end? A. Yes, sir.
PARTIES IN CHARGE OF CONSTRUCTION.
Q. Who had charge of the construction? A. J. H. Strowbridge had charge of
the grading and the track laying, and Arthur Brown of the bridge construction
and of the buildings.
Q. Are both these gentlemen living? A. Yes, sir. .
Q. And did they have charge during the whole period, from the beginning to
the end? A. Yes ; they did.
Q. Did they report to you? A. Yes.
Q. How frequently? A. Every month.
Q. In the form of detailed statements of the work done by them? A. Yes ; and
in the form of pay-rolls.
Q. Where were those pay-rolls kept? A. They were kept in ray office.
Q. In what part of your office ; I mean, were they kept in the safe or on the
shelves? A. They were kept on the shelves in the second office or storeroom.
Q. We will take Mr. Strowbridge first. What other reports did he make besides
the pay-rolls? A. His reports were confined to grading and track laying.
Q. Was any portion of the work sublet to other parties? I mean of Mr. Strowbridge's
work? A. No, sir.
MR. STROWBRIDGE'S DEPARTMENT.
Q. State a little more definitely the distinction between these departments.
What was Mr. Strowbridge's department? A. Mr. Strowbridge's department was
grading and track-laying; Authur Brown's was bridge-building, and the building
of structures for shops, and turntables, and other structures where timber
was required.
Q. Who had charge of the masonry? A. Men that Mr. Strowbridge employed.
Q. Under Mr. Strowbridge? A. Yes, under Mr. Strowbridge.
Q. In addition to the pay rolls, they must have reported the purchases of materials
to you. A. Yes ; all the materials that they purchased on the road were reported
to me.
2898 U. S. PACIFIC RAILWAY COMMISSION.
WITNESS PURCHASED SUPPLIES.
Q. Who purchased the materials I A. I purchased all the supplies.
Q. Do you mean the supplies for feeding the men? A. Yes, the supplies for
feeding the mfen and the teams.
Q. Who purchased the stone for the masonry? A. I do not think that was purchased.
I think they found it in the mountains, on or near the line of the road.
Q. Who purchased the cement? A. I purchased it.
Q. Who purchased the iron rails? A. They were bought by the Contract and Finance
Company, through the purchasing agent, in New York, of the Central Pacific.
Q. Through Mr. Huntington? A. Through Mr. Huntingtou.
Q. Who purchased the ties? A. I bought those made contracts for them.
Q. As to those matters which you purchased directly, there was no report made
to you except the vouchers for the payments? A. That is all, sir.
MR. BROWN'S DEPARTMENT.
Q. Now, as to Mr. Brown's contract, did he also have the pay-rolls to report
? A. Yes, sir ; the pay-rolls of his carpenters and mechanics.
Q. Who purchased the material used by him? A. He contracted for that through
the mills.
Q. He purchased it, then, for the account of the Contract and Finance Company?
A. Yes, sir.
Q. And he reported such purchases in the form of vouchers? A. Yes, sir; he
would make contracts for large amounts of lumber and timber to be delivered
from time to time, and when it was delivered he would turn in the vouchers
to me.
Q. Who paid for all this material? A. I paid for it.
Q. With what checks? A. With my own checks.
Q. You mean your own individual checks? A. Checks as secretary and treasurer
of the Contract and Finance Company.
Q. Where did they keep their accounts? A. They kept account at the bank of
D. O. Mills & Co., in Sacramento, and at the Bank of California in this
city.
Q. Are the books of those banks still in existence? A. I suppose they are.
DISPOSITION OF THE BOOKS.
Q. What other books did you have in this office beside those books that you
were keeping? A. We had no books there except the minutebooks of the proceedings
of the board of directors, and the time-books.
Q. Did you have no other books, kept in boxes or in a locker there? A. Alter
every two or three months, whenever the time-books were used up, they were
packed away into a store-room in the office.
Q. Have you heard the testimony of Mr. John Miller, who has just left the stand?
A. Yes, sir; I have heard the latter part of it.
Q. Did you hear him state that in that room in a locker there, were the books
which had been used by the firm of Crocker & Co.? A. I did not hear him
state that.
Q. Is that statement true? A. I think there were books there. I never opened
any of them.
Q. Where were these books? A. They were in a store-room where we kept books
and papers that we considered oPho use; just across the hall from the main
office.
W. E. BROWN. 2899
Q. He used tlie expression u iu*a locker"; what locker was that? A. I
do not know what he meant by that. There was a small room with shelves where
papers and books could be stored.
MR. MILLER EMPLOYED AS BOOK-KEEPER AND SECRETARY.
Q. When did you first become acquainted with Mr. Miller? A. I think it was
in 1871.
Q. How did you -become acquainted with him? A. I was short of hands in keeping
time-books and keeping accounts, and inquired of some of our men for a good
clerk to look after that branch of our busUness, and he was recommended to
me. I liked his appearance very much and employed him.
Q. What books did you first put him on? A. The time-books.
Q. How long did he remain on the time-books? A. I think about a year and a
half.
Q. What then happened? A. Then he kept the regular books.
Q. Was he appointed secretary then? A. He was appointed secretary when I left.
Q. And he was put on the regular books before he was appointed secretary? A.
Yes.
Q. How many journals or day-books had been filled in between the time you started
and the time Mr. Miller commenced? A. 1 think that there were two sets before
Mr. Miller took possession of the books. Books filled very rapidly while we
were doing a large amount of business.
Q. How large were these books? A. The ordinary size of mercantile ledgers and
journals.
Q. Containing about how many pages each; five or six hundred? A. No ; not as
much as that ; I did not have books so cumbersome ; there were probably three
hundred pages.
Q. Enumerate the books that you kept. A. A ledger, a journal, and a cash-book
were the principal books ; I think in all there were three sets of those books.
Q. Your recollection is that they would all fit in this safe? A. They were
not all in the safe, except during the time they were being kept.
Q. After they had been filled, where were they placed? A. They were placed
in the store-room, right across the hall.
Q. And the books that were in actual use were kept where? Were they kept in
the safe? A. Yes, sir.
NEW SET OF BOOKS PREPARED BY WITNESS.
Q. Do you remember preparing a new set of books for Mr. Miller? A. I remember
preparing a new set of books about the time he took possession of them. "Not
especially for him.
Q. Were they a new set? A. Yes, sir ; a new set entirely.
Q. Were all the'balances from the preceding set transferred to this new set
? A. All except such as had been closed.
Q. In whose handwriting were the first entries of this new set of books? A.
In mine.
Q. How long were you engaged in that work? A. I think about a month.
Q. Did you do it all yourself? A. Yes, sir.
Q. Do you remember the occasion when the work of transferring these balances
was completed? A. It was some few weeks before I left the employment of the
company.
2900 U. S. PACIFIC EAILWAY COMMISSION.
Q. Do you remember the occasion of telling Mr. Miller that the books were ready
for him, and putting him in charge? A. I think it was about a month before
I left the employment of the company that I gave him charge of the books.
Q. That did occur? A. Yes, sir.
BOOKS PUT IN THE STORE-ROOM BY WITNESS.
Q. Just at the time that you were engaged making these transfers, and at the
time that you completed the transfers, what disposition did you make of the
books in which the entries were taken? A. I put them in the store-room.
Q. Did you put them in with your own hands? -A. Yes, sir.
Q. What part of the store-room? A. I put them on the shelves of the store
room where I had put the books nearly a year before another set that I had
filled.
Q. Do you recall an occasion when (those books being in the office) Mr. Miller
went out to lunch, leaving you in the office, and his returning shortly afterwards
and finding the books missing? A. No, sir.
Q. Have you heard his testimony? A. I heard it; yes, sir.
Q. Did nothing of the kind happen 1 A. I do not remember anything of the kind.
EXAMINED IN STEWART CASE AS TO BOOKS DISAPPEARING.
Q. Were you examined in the Stewart case, Mr. Brown? A. Yes, sir.
Mr. COHEN. Do you want to read that deposition?
The WITNESS. If he asks me any questions from it.
Q. Were you asked this question in that case : " Do you know what became
of these books and papers? " (referring to the books and papers of the
Contract and Finance Company). A. I think I was asked that question.
Q. What answer did you make? A. I cannot tell exactly the answer I made.
Q. Well, what answer would you make if I put the question to you now'?
The WITNESS. What is the question?
NO KNOWLEDGE OF CONTRACT AND FINANCE BOOKS.
Commissioner ANDERSON. The question is, Do you know what became of the books
and papers of the Contract and Finance Company I
A. I have stated that I put the books on the shelf of the store-room of the
company.
Q. Now, I ask you, do you know what became of them? A. I do not.
Q. Have you made any search for these books? A. Yes, sir.
Q. When did you make the search for them? A. I think I made the search when
I was called upon to testify in that case. I was asked to make a search for
them, and 1 went to Sacramento and spent a day searching the store-houses of
the company.
Q. Into whose possession did these books pass when you gave them up or ceased
to have them?
Mr. COHEN. What are you reading from?
Commissioner ANDERSON. I am reading from Mr. Brown's examination in the Stewart
case.
W. E. BROWN. 2901
The WITNESS. I should like to look at that. That was a good many years ago.
Mr. COHEN. Where does that book come from?
Commissioner ANDERSON. It came from my room.
Mr. COHEN. Where did you obtain that from ; from whose possession I
Commissioner ANDERSON. You did not give it to me.
Mr. COHEN. From whose possession did that deposition come 1
Commissioner ANDERSON. If you want to know whether the book is a genuine book,
I assure you that it is.
Mr. COHEN. How do you know that it is?
Commissioner ANDERSON. I know it from the character of the gentleman from whom
I received it.
Mr. COHEN. Who was that gentleman?
Commissioner ANDERSON. I am not prepared to say at present.
Mr. COHEN. I think we ought to know where evidence of that kind comes from,
if it is to be used in this examination.
The WITNESS. I should like to look at that evidence to see if it will refresh
my memory at all.
Commissioner ANDERSON. You shall see it.
CONSIDERED BOOKS IN POSSESSION OF JOHN MILLER.
Q. In whose possession did those books pass when you gave them up? A. I considered
that they passed into the possession of Mr. Miller ; that everything in the
two offices went into his possession.
Mr. COHEN. I would say to the gentlemen of the Commission that when a paper
of that kind is to be produced, and the witness is to be charged with a statement
therein contained, we have a right to know where it came from.
Commissioner ANDERSON. I am not charging the witness with anything.
Mr. COHEN. We are entitled to see the paper.
Commissioner ANDERSON. I am not using it now. What is the answer?
The WITNESS. My answer was that I considered them in the possession of John
Miller ; all the books and papers in the two rooms.
Q. Why do you say that you considered them in his possession? Were they in
his possession, to your knowledge? A. He was appointed secretary of the company.
Q. Had you seen these books in his possession and control? A. I had not seen
them in his hands ; I have not seen anything in his hands.
Q. Had you indicated to him in any way where the books were? A. I indicated
to him that he was appointed secretary of the company, and that he had charge
of the two rooms and everything in them.
REASON FOR PREPARING NEW SET OF BOOKS.
Q. Why did you prepare this new set of books for him? A. Because the old set
was full and the contracts were complete.
Q. What contracts'? A. The contracts with the Central Pacific Railroad Company.
Q. Were there no other contracts in those old books? A. Kb ; there was an
uncompleted contract with the Southern Pacific which was transferred ; all
the accounts which were not completed were transferred.
Q. How many did they number? A. I should think they numbered one hundred and
fifty, perhaps.
2902 U. S. PACIFIC RAILWAY COMMISSION.
Q. Uncompleted accounts? A. Uncompleted accounts ; yes, sir.
Q. Why could not Mr. Miller have continued the old books as they stood? A.
They were full. As I told you, that was the second set that I had filled and
transferred to new books and put away.
Q. Do you mean to say that all these one hundred and fifty accounts were all
full? A. Not entirely, but the pages were filled ; what would be called by
a book-keeper full. New books were necessary.
Q. When did you first hear that these books were missing? A. I think it was
at the time of the Stewart trial.
Q. You never heard it mentioned before? A. No, sir.
Q. Have you heard Mr. Douty's testimony the other day, that on an occasion
in 'Sacramento City, when he was there, Mr. Mark Hopkins was engaged in packing
these books into boxes'? A. No, sir ; I did not hear that testimony.
Q. Have you never been spoken to in any litigation the Col ton litigation or
other litigations in reference to the disappearance of these books? A. Very
frequently since the Stewart trial. All those litigations have been since the
Stewart trial.
EXAMINED IN ROBINSON'S CASE AS TO BOOKS DISAPPEARING.
Q. You were examined in the Eobinsou case, were you not? A. I think so.
Q. You 'were examined in the Eobinson case as to these books? A. I was examined
in the Kobinson case. I have been examined in pretty much all of these cases.
Q. Were you examined in the Eobinson case as to the disappearance of these
books? A. Yes, sir.
Q. When was the Eobinson case tried? A. I do not remember the year.
Q. When were you examined? A. I do not remember the year.
Q. Well, was it not eight or ten years ago? A. Yes, sir. There have been several
trials in connection with the Central Pacific Railroad affairs where I have
been examined and on the subject of those books.
Q. You have just stated, apparently from an inadvertence, that you had never
heard that these books had disappeared until the Stewart trial? A. I think
the Stewart trial was the first time the first Stewart trial.
Q. Were you not examined in the Eobinson case many years before the first Stewart
trial? A. That might be ; I do not remember. I have not a distinct recollection
of the sequence of those trials. 1 know I have been examined four or five times
on different occasions with regard to the disappearance of those books.
Q. Who examined you in the Eobinson case? A. I do not remember that. I think
Mr. Cohen.
Q. Before whom was it ; before what court or notary? A. I do not remember
that.
Q. Have you no copy of what you swore to? A. No, sir.
Q. Do you know where the deposition is? A. No, sir.
Q. Do you know what you swore to then? A. No, sir.
DISAPPEARANCE OF BOOKS.
Q. Well, was that occasion of your examination in the Eobinson case the first
time that your attention had been called to the disappearance of these books
? A. If that was the first case that came up when I was
W. E. BROWN. 2903
examined that was the first time that I ever knew anything of the disappearance
of the books. As I have stated, I do not remember the sequence of those trials
which was first and which was last.
Q. Now, you have stated that you have made some search for these books and
papers. What search have you made? A. I searched through the rooms that I
speak of the storeroom at Sacramento and through the warehouse of the railroad
company, where a large amount of books and papers were stored in Sacramento,
and through the storehouse down at Fourth and Townsend, where a large number
of books and papers were stored.
Q. Describe the storehouse at Fourth and Townsend more particularly. A. It
is a storeroom in the third story of the building where books and papers are
stored.
Q. Are there no other storerooms in that building which contain books and papers
in which the Central Pacific is interested *? A. I do not know of any room
where disused papers are stored except that room.
Q. Who told you where to look? A. I think I asked Mr. Miller, the secretary,
where he kept his disused papers.
Q. Mr. John Miller? A. Mr. E. H. Miller, jr.
Q. Have you looked through any places where Mr. Miller keeps his papers? A.
No, sir.
Q. When did you make this search? A. I made it about the time of the first
trial 1 spoke of, where I was a witness.
HCW THE COMMISSION CAME INTO POSSESSION OF CERTAIN EVIDENCE.
Commissioner ANDERSON. Now, Mr. Cohen, if you want to look at that, here is
the volume.
Mr. COHEN. I would like to know if this book came from the possession of Mr.
Joseph H. Choate. I submit to the chairman and gentlemen of the Commission
that we are entitled to know where this evidence came from, for the purposes,
among other things, of determining its genuineness, and also for the purpose
of determining (I say it with all due respect) how close this Commission is
with gentlemen who have litigations against this company.
Commissioner ANDERSON. We have nothing to do with litigation. It was furnished
to me out of courtesy entirely. I knew all about it from seeing the books and
papers. Mr. Choate is a very old friend of mine and I asked him to lend it
to me.
Q. I call your attention now to the fact that when asked in the Stewart case
whether you had made any search for the books and papers you answered no. Which
answer is correct, according to your present recollections? A. Well, I think
I made search
Mr. COHEN (interposing). Wait one minute. We make this? point, and desire to
have it noted and ruled upon by the Commission, that under the laws of this
State, when a witness is to be examined upon any deposition which he has previously
given or his evidence is to be contradicted by statements contained in the
deposition, that he is entitled to be shown*the original paper in which his
evidence is contained and which is signed or has been approved or sworn to
by him. The act of Congress recognizes these State laws as preferable to testimony
taken in tribunals within this jurisdiction or within this State.
2904 U. S. PACIFIC RAILWAY COMMISSION.
COMMISSION NOT SEEKING TO IMPEACH WITNESS.
Commissioner LITTLER. We are not seeking to contradict this witness. He is
our witness and we do not want to impeach him.
Mr. COHEN. The witness says he had made a search and now you seek to show to
the contrary.
Mr. RAYMOND. He has stated according to that that he did not make search. He
may never have sworn to that in the Stewart case. He is entitled to know before
you cross-examine him that he has so sworn, and no court, either Federal or
State, except sitting in equity, can admit testimony until the original document
has been produced and shown the witness. "
Commissioner ANDERSON. We do not use it to contradict him.
Mr. HAYMOND. Well, it goes into the record and the original deposition should
be produced. It is not fair to the witness. So many mistakes creep into printing
these records. That,occurs here so frequently that we are cautious. If you
could yourself assert that it is correct it would be different.
Commissioner ANDERSON. I cannot do that.
ANY TESTIMONY ADMISSIBLE WHICH THROWS LIGHT ON THE SUBJECT.
The CHAIRMAN. The chair would say, without delivering an opinion as to the
admissibility of this testimony, that any testimony throwing any light upon
the subject under investigation is admissible and proper. If you disagree with
that, we will give you an exception, if you desire to take it.
Mr. HAYMOND. But that is not the point. You cannot admit hearsay evidence here.
Jf you say this book is correct we will take your word for it ; but until you
do that we ask for the record itself to be produced, which the witness is entitled
to see, because there might be something in the original record which explains
his testimony. I think the law of New York is the same as that of California.
Commissioner ANDERSON. The law of New York would not allow the use of a book
without the production of the original, but it does not require you to show
it to the witness. I will proceed. I am not disposed to make any serious question
on that.
INQUIRIES ABOUT MISSING BOOKS.
Q. Now, whenever it was that you discovered these books to be missing, what
conversation did you have with any of the officers of the company about them
? A. I do not think I had any with any of the officers of the company.
Mr. COHEN. Which company are you inquiring about?
Commissioner ANDERSON. Either the Central Pacific Company or the Contract and
Finance Company.
Q. You had no talk with any of them? A. No, sir.
Q. Have you ever had any talk with any of them? A. I think I told Governor
Stanford at the time, or soon after, that I had made search for those books
and could not find them.
Q. What did he say? A. He said he thought it was very strange that they should
disappear in that way.
Q. When was that conversation with Governor Stanford I A. After I had made
a search for them.
Q. Some years ago? A. Yes, sir.
W. E. BROWN. 2905
Q. Has he spoken to you about it within the last few weeks $ A.. No, sir.
Q. Has he ever spoken to you again about it? A. No, sir.
Q. Have any other officers of these companies spoken to you about it? A. No,
sir.
Q. Do you know whether any search has been made by the officers of the company
to find these books? A. No, sir.
A MILLION DOLLARS FOR A SET OF BOOKS.
Q. Have any clerks been to see you to find these books? A. No, sir.
Q. Nobody has offered you $1,000,000 for them until you heard the offer made
in this room awhile ago? A. No, sir.
Commissioner ANDERSON. Some gentleman made that offer.
Mr. HAYMOND. I say the company now will give $1,000,000 for them.
Commissioner ANDERSON. The offer is repeated. Mr. Brown, now is your chance.
The WITNESS. I would like to be able to produce them. I should like for my
own satisfaction to see them.
Q. Have you ever given any instructions about the removal of these books to
anybody? A. No, sir ; never.
Q. Have you ever taken those books to Europe with you? A. No, sir.
Q. Do you deny that you took those books to London with you? A. I do.
Q. Or to Paris? A. I do.
Q. Or that you took boxes away without knowing what -their contents were?
A. I do. I took nothing to London or Paris or out of this State but wearing
apparel.
Q. And your statement is that you have absolutely no knowledge whatsoever about
the whereabouts of those books? A. That is my positive statement.
CLASS OF ACCOUNTS KEPT IN THE BOOKS.
Q. What was the general class of accounts contained in those books? A. There
were accounts kept called the Tie account, the Bail account, the Fence account,
the Grading account, the Masonry account, the Telegraph-wire account, the Telegraph-poles
account, and the accounts for the construction of section houses, of round
houses, and the construction of all those houses and structures that were necessary.
There was an account of rails purchased and laid and of spikes. They were all
kept separate, in order to get at the cost of each.
THE TRUCKEE LUMBER MILLS.
Q. Will you enumerate the names of persons with whom you or Mr. Strobridge "or
Mr. Arthur Brown had dealings in relation to this construction. A. We had dealings
with the Truckee Lumber Company.
Q. What is the full name? A. The Truckee Lumber Company is one.
Q. Located at Truckee? A. Yes, sir ; on the Truckee River.
Q. Is that company still in existence? A. I think it is..
Q. Who was its manager at the time? A. E. J. Brickell.
Q. Is he living? A. I think so ; and we had dealings with all the lumber mills
on the Truckee. I cannot remember their names. We
2906 U. S. PACIFIC RAILWAY COMMISSION.
were obliged to build two or three saw-mills ourselves in order to get ties
rapidly enough.
Q. That was for ties? A. Ties and timber.
Q. State the names of some of the foremen of the gangs of men employed by Mr.
Strobridge. A. I could not remember those.
Q. You remember no names? A. No, sir ; no names of foremen.
Q. Do you remember the names of anybody in charge of the payrolls? A. I cannot
remember them. They were all certified to by the chief of the department, either
by Arthur Brown or else by J. H. Strobridge. With their signatures, I was satisfied
that they were correct.
PROMINENT PEOPLE DEALT WITH AS TO MATERIALS.
Q. Just state any other names of prominent people that you dealt with for materials.
Did you deal with Huntington & Hopkins. A. Huntington, Hopkins & Co.
we bought of.
Q. What materials did you buy of them? -A. Hardware and shovels, and we bought
groceries of Lindley & Co. and Booth & Co.
Q. Located where? A. At Sacramento.
Q. From whom were the rails purchased by Mr. Huntingdon? A. I do not know
who they were purchased from.
Q. Did those purchases include all the other iron required spikes and washers, &c.
? A. Yes, sir.
Q. And fish-plates? A. Yes, sir.
PRICES OF RALS, ETC.
Q. Do you remember the run of prices of these things at all? A. No, sir; I
do not. I think that our rails cost us laid down at the end of the track all
the way from $115 to $150 a ton.
Q. Do you give those prices as extending all the way from Sacramento to Ogden
? A. No, sir ; from the State line eastward.
Q. From the State line to Ogden? A. No, sir; eastward. It did not go to Ogden.
Mr. COHEN. What price did you say? A. I think from $115 to $150 a ton.
By Commissioner ANDERSON :
Q. Does that include the spikes, fish-plates, and washers, or merely the rails
? A. So much a ton for rails. The fish-plates, nuts, washers, and spikes would
cost more.
Q. What was the average price paid for ties? A. I think that the ties were
from 40 to 55 cents delivered at Truckee, and then the transportation eastward
to the end of the track, the cost of that added.
COST OF TRANSPORTATION ADDED.
Q. You say the cost of the transportation from the Truckee eastward was added
? A. Yes.
Q. Who fixed their rate? A. It was transported by the trains of the Construction
Company.
Q. Was the payment made to the Central Pacific or to the Finance Company itself?
A. No, sir; just the cost of running the train, which was very heavy, on acqount
of the difficulty of getting fuel and water.
Q. In whose operation was the road as it progressed from 1868 to May, 1869
? A. When it was completed by the Government it was put into the hands of the
Central Pacific Company,
W. E. BROWN. 2907
Q. And then as you built beyond the Central Pacific you would charge transportation
up to the point at which it had been delivered to the Central Pacific? A.
No, sir ; they did not charge transportation.
Q. Who charged transportation? A. There was no transportation charged. I spoke
of the cost of the transportation as the actual cost of fuel and water that
the Construction Company was obliged to go to in order to get this material
forward.
NO TRANSPORTATION CHARGED AFTER ROAD WAS DELIVERED TO
CENTRAL, PACIFIC.
Q. Do you mean to say that the Construction Company took charge of transportation
over that part of the road which had been delivered to the Central Pacific
? A. No, sir ; beyond that part which had been delivered.
Q. After you had got east of the Humboldt and had delivered to the Huinboldt,
who charged for transportation between the Truckee and Humboldt?
The WITNESS. After the road was delivered to the Central Pacific I
Commissioner ANDERSON. Yes.
The WITNESS. There was no charge.
Q. Are you positive about that? A. I think the agreement in the contract was
that the transportation should be free after the road was completed.
Q. Is it your statement that the cost of transportation from the point where
the road had been delivered to the point where the material was to be used
brought the price of rails up to beyond $115 1 A. No.
Q. You meaur the cost from New York? A. Yes, sir 5 I did not say the transportation
brought it up to that price; but you asked the cost of rails, and I told you
I thought it varied from about $115 to about $150 a ton.
Q. And you included the price of transportation in the same way? A. Yes, sir.
Q. And what was the cost of the rails in New York? A. That I do not remember.
CONTRACT AND FINANCE COMPANY DOING BUSINESS ON BORROWED
CAPITAL.
Q. Had the stockholders put in any money I
The WITNESS. In what?
Commissioner ANDERSON. In the Contract and Finance Company?
A. No, sir; tLey did not at the commencement of it. Afterwards they put in
money.
Q. In what form? A. They borrowed it.
Q. In what form was it put in? Was it a subscription to the stock, or was
it a loan to your company? A. They put it in as a loan to the company.
Q. How many persons made these advances? A. Five.
Q. Did they advance equal amounts? A. No.
Q. Did the amounts vary? A. Yes.
Q. They drew out and put in again? A. Yes.
Q. Which made the largest advances? A. I do not remember.
Q. Do you remember the aggregate amount of the advances of the five? A. I do
not.
Q. Can you give no estimate? A. It varied at different times. P R VOL iv 37
2908 U. S. PACIFIC RAILWAY COMMISSION.
INDEBTEDNESS OF THE CONTRACT AND FINANCE COMPANY.
Q. Between what limits? A. The Contract and Finance Company, within a month
or two after its organization to the time of its disincorporation, was indebted
to various parties from $1,000,000 to $5,000,000 at different times.
Q. When you say to different parties, do you mean these five gentlemen? A.
No ; I mean to them and to the banks and to lenders of money.
Q. Name your creditors. A. The Capital Savings Bank of Sacramento was one,
and the French Bank at San Francisco was another. There was also Michael Keese,
a prominent money lender here.
Q. In San Francisco? A. In San Francisco. Those are a few that I
remember. About everybody that had any money to lend we owed.
LOANS MADE ON NOTES INDORSED BY STOCKHOLDERS.
Q. How did you make those loans? In what form I On notes? A. By giving notes
of the company, indorsed by the stockholders.
Q. Indorsed by these five gentlemen, or some of them? A. Yes, sir.
Q. On what collateral? A. No collateral. We tried Central Pacific stock, but
they did not want that at any price.
Q. Did you borrow money in New York? A. No.
Q. What use was made of the Government bonds? A. I do not know.
Q. You merely received cash from the Central Pacific? A. Yes.
Q. And you say that the amounts would run from one to five millions? A. During
the time of its organization.
Q. What rate of interest did you allow on these loans to the stockholders or
to the gentlemen who made the loans? A. The customary rates that we had to
pay the banks and money-lenders was about 12 per cent, per annum at that time.
Q. And that was the rate that you paid to Mr. Huntington and Mr. Stanford,
and the others? A. Yes.
FAILURE TO BORROW ON CENTRAL PACIFIC STOCK.
Q. You say you tried to borrow money on the Central Pacific bonds? A. No,
sir ; on the stock. The Contract and Finance Company never had any of the Central
Pacific bonds.
Q. Did you never borrow on the Central Pacific stock? A. No, sir.
Q. At any. time before the completion of the road? A. Never.
Q. How much stock did yon receive in all? A. I do not remember the exact amount.
We received $43,000 a mile.
Q. And how many miles did you build I A. We built about 550 miles, I think.
Q. Between the east boundary of the State and the termination of the road?
A. Yes, sir.
Q. That makes over $23,000,000 of stock? A. Whatever it would be at $43,000
a mile.
Q. You received all the stock that you were entitled to under your contract
? A. Yes, sir.
Q. When was the last delivery, with reference to the completion of the road
? A. I think the last delivery was along in the fall of 1869 or the spring
of 1870 ; somewhere during that winter.
W. E. BROWN. 2909
Q. To whom were the certificates delivered? A. They were delivered to me.
Q. They were issued by whom? A. By the officers of the Central Pacific Eailroad
Company.
CASH PAYMENTS MADE BY CENTRAL PACIFIC.
Q. To whom were the cash payments made by Central Pacific Eailroad Company
? A. To me.
Q. And by whom? A. By the treasurer of the Central Pacific Company.
Q. Who was the treasurer then? A. Mark ELopkins was the treasurer.
Q. On what bank were those checks drawn? A. Generally on the bank of D. O.
Mills & Co.
Q. Of San Francisco? A. No ; of Sacramento.
Q. Were substantially all the checks received by the Contract and Finance Company
from the Central Pacific Eailroad Company checks drawn on D. O. Mills & Co.
! A. Substantially 5 yes.
Q. Have you ever looked to see whether D. O. Mills & Co. have that account
? A. No, sir.
Q. Were the checks paid to you as the sections were so completed? A. No.
Q. How were they paid? A. They were paid to me as we required money.
Q. Without any reference to the completion of the section? A. Yes, sir ; it
was always within the amount that would be due on a section.
Q. Were they not generally paid in figures which would approximate the amounts
called for by completed sections? A. Yes, sir.
Q. And the exact figure of the checks delivered to you by the Central Pacific
can be traced through the account of D.O. Mills by the size of the checks'?
A. No; I think not; we would get checks every day on D. O. Mills, and at the
end of the month we would get very much larger checks, when large bills were
becoming due.
Q. Do you remember the Crocker accounts ; the fact that Crocker had a construction
account for the road between Sacramento City and the east boundary of the State
? A. I knew that he had such books and such accounts, but I never saw them.
CROCKER & CO. TRANSFER CENTRAL PACIFIC STOCK.
Q. Did the firm of Crocker & Co. turn over to the Contract and Finance
Company any stock of the Central Pacific Company? A. Yes.
Q. Do your remember the amount? A. I do not.
Q. Do you know what that stock had resulted from? A. 1 understood it had resulted
from their contracts for building the road across the mountains.
Q. Did they turn over anything else? A. No, sir.
Q. No bonds 1 A. No.
Q. No money? A. No.
Q. No book entry? A. No.
Q. What is your best recollection as to the amount of stock they delivered
to you? A. I do not remember ; I have no recollection as to the amount.
Q. In what account of the Contract and Finance Company did you enter that transfer
? A. The Central Pacific stock account. "
2910 U. S. PACIFIC RAILWAY COMMISSION.
Q. What did that indicate its being entered in that account? A. It indicated
the amount of the Central Pacific stock which the company owned.
Q. Then it was transferred to the Contract and Finance Company as its stock
? A. Yes.
Q. By Crocker & Co.? A. Yes, sir.
Q. And that in effect vested it in the stockholders? A. In the stockholders
of the Contract and Finance Company.
EXPLANATION OP THE TRANSFER.
Q. What explanations were made to you of this transfer? A. I think it was handed
over to me as being stock belonging to the stockholders of the Contract and
Finance Company.
Q. Who handed it over? A. Mr. Crocker.
Q. Without any representation that it was his personal or individual stock?
A. Yes, sir.
Q, And substantially instructing you to treat it as the property of the Contract
and Finance Company? A. Yes, sir. It was substantially divided pro rata among
the other stockholders.
Q. When was that division effected? A. It was effected, I think, early in
1870.
Q. Had your company received other stock besides the $23,650,000 resulting
from your own construction and the amount (whatever it was) that you received
from Crocker & Co.?
Mr. COHEN. The witness has not fixed that amount as having been received by
him.
Commissioner ANDERSON. We have the mileage, and he says it is $43,000 a mile.
Mr. COHEN. The Contract and Finance Company only constructed to Promontory
and not to Ogden.
Commissioner ANDERSON. We asked him how many miles he constructed and he said
550, and Mr. Norris multiplied 43,000 by 550.
Mr. COHEN. Is that to Promontory?
The WITNESS. No ; there was a subcontract ; I think that was done by the Mormons.
Commissioner ANDERSON. Well, we will begin again.
Q. How many miles did the Contract and Finance Company construct and get paid
for? A. I do not remember the number of miles.
OTHER CENTRAL PACIFIC STOCK RECEIVED.
Q. Outside of the stock which you received from the Central Pacific for construction,
and from the firm of Crocker & Co.^ did the Contract and Finance Company
receive other Central Pacific stock? A. Whatever miles are represented by
the distance between Promontory and the State line, between Nevada and California.
I do not remember the number of miles.
Q. 1 do not think you understood my question.
Question repeated.
The WITNESS. Do you mean, did it receive such stock from any other source?
Commissioner ANDERSON. Yes.
A. They bought some stock ; a very small quantity.
Q. How much was it they bought in all? A. I do not remember now a few thousand
shares, perhaps.
W. E. BROWN. 2911
Q. Under 5,000 shares, or under 10,000 shares? A. I think it was under 5,000
shares.
DIVIDENDS OF CENTRAL PACIFIC STOCK.
Q. Do you remember the dividends of 1870?
The WITNESS. The dividends of the stock?
Commissioner ANDERSON. Yes. About how many shares were divided up I
The WITNESS. I think somewhere between 500,000 and 600,000 shares.
Q. What were the proportions of the divisions? A. It was in five equal portions.
Q. Was there any other dividend made? A. No.
Q. No other division of property by the Contract and Finance Company? A. No,
sir.
Q. What withdrawals of money were made by the gentlemen who had deposited money
with you? A. The withdrawals did not equal the amount deposited ; they deposited
more than they withdrew.
Q. But they withdrew to some extent 1? A. Yes; they kept a running account.
Q. Who had withdrawn the most? A. I do not remember who had withdrawn the
most.
Q. How was the interest credited ; every month or every six mouths? A. Every
year.
REDUCTION OF RATES OF INTEREST.
Q. How long did the 10 per cent, rate keep up? A. Interest was figured between
the five associates on the basis of the market value of money here. For a long
time it was 12 per cent, per annum, then it was reduced to 10 per cent., and
afterwards to 7 or 8.
Q. When was this reduction to 7 made? A. I think about 1879.
Q. Had you these accounts in your possession in 1879? A. Yes, sir ; the accounts
between the five individuals ; I kept them, as I told you, for about ten years.
Q. Did these accounts that you had in 1879 contain the entries of the advances
to the Contract and Finance Company by these five gentlemen? A. Yes, sir.
Q. How were the payments made to them 5 by the checks of the Contract and Finance
Company? A. Up to the time of the dissolution of the company they were made
in that way.
Q. And after that; what became of these accounts after that? A. They were kept
by a nephew of Mr. Hopkins, by the name of Samuel Hopkins.
THE " S. H. H. & C." ACCOUNTS.
Q. What was the title of the accounts after the dissolution of that company
I A. They were called " S. H. H. & O. w accounts.
Q. Then I understand you to refer to individual accounts of these gentlemen
with " S. H. H. & C." as a supposed association or partnership?
A. No, sir; they were associated together and these individuals assumed the
indebtedness of the Contract and Finance Company. It could not be disincorporated
while it had any indebtedness, These gentlemen assumed its indebtedness when
it was disincorporated.
Q. When was it disincorporated? A, In 1875.
Q. From whom did you ascertain the indebtedness at the time of the dissolution
? A. From Samuel Hopkins.
2912 U. S. PACIFIC RAILWAY COMMISSION.
Q. What books did he get those figures from? A. I do not know where he got
them from. He kept them during my absence for three years.
Q. Were they the books which you had given to Mr. Miller to continue? A. No,
sir. The accounts that he kept were simply the accounts of Stanford, Huntington,
Hopkins, and Crocker with the Contract and Finance Company, and the amounts
that they assumed of indebtedness of the Contract and Finance Company in order
to bring about its disincorporation.
WHO KEPT THE ACCOUNTS OF CONTRACT AND FINANCE COMPANY.
Q. I am speaking about a period anterior to the disincorporation. Who kept
the accounts of the Contract and Finance Company showing the advances made
by these five gentlemen to that company 1 A. From 1873 to 1875 John Miller
kept them.
Q. In these books which you had furnished him? A. Yes.
Q. And you say that this interest continued until 1879? A. Yes, sir.
Q. And that from 1875 to 1879, they having been assumed by this association
or partnership, were kept in books between those individuals and S. H. H. & C." I
A. Yes, sir.
Q. Who kept those books? A. I kept them.
Q. From 1875 to 1879? A. Yes.
Q. And where are those books now? A. I have them.
Q. What is the present balance due to those five gentlemen? A. I do not know
5 I do not remember.
PRIVATE BOOKS OF "S. H. H. & C."
Q. Will you please examine and let us know on some other occasion? A. They
are the private books of these gentlemen.
Commissioner ANDERSON. I do not understand that the gentlemen themselves make
any objection.
The WITNESS. If they do not object, I will do so with pleasure.
Mr. STANFORD. They are entirely private books, and I should like to think about
that. I do not suppose it is any concern of yours, or of this investigation,
so far as the Central Pacific Railroad is concerned.
Commissioner ANDERSON. It has been alleged by this witness that when this stock
was delivered, which represented the profits, it was claimed that it was not
all clear profit, because there was a balance of indebtedness due, which had
been advanced by these gentlemen. It is therefore proper that the amount of
that advance, so far as it is to be used in reduction of the profit alleged
to have been made, should be placed before us.
HOW MUCH PROFITS, HOW MUCH INDEBTEDNESS.
Mr. COHEN. Now, you want to find out the balance twelve years afterwards, do
you?
Commissioner ANDERSON. The point of my desire is to ascertain how far this
$52,000,000 of stock was clear stock at the time it was delivered, and what
assumption of indebtedness there was that diminished the value of that dividend.
The Commission has no idle curiosity as to the contents of your books.
Q. Now, have you stated all the dividends that have been declared by the Contract
and Finance Company? A. Yes, sir.
W. E. BROWN. 2913
Q. And that included all that you received from Crocker & Co.? A. Yes,
sir.
NOT CONNECTED WITH CENTRAL PACIFIC AFTER 1873.
Q. What business were you concerned with connected with the Central Pacific
after 1873? A. I never was connected with the Central Pacific, except as director
for a short time.
Q. Or with either of the construction companies? A. There were three years
nearly that I was out of the country.
Q. Have you any connection now with any of the construction companies'? A.
No. I will say that I am a director of the Pacific Improvement Company.
Q. Do you take any prominent part in its work? A. Only at meetings of the
directors. I always attend them, and I always look over the accounts in the
interest of the individuals that I represent.
Q. Did you keep any memoranda or make any extracts from these books of the
Contract and Finance Company?- A. No.
Q. Did any one keep any on your behalf? A. No.
NO INFORMATION AS TO ABSENCE OF BOOKS AND PAPERS.
Q. Can you give us any information as to the absence of any of the papers or
books whatever, either pay-rolls, receipts, vouchers, books of account, or
any other instruments, that would shed any light on the affairs of the Contract
and Finance Company? A. No, sir; I cannot.
Q. Did you know that "Mr. Miller had taken abstracts from those books?
A. I did not until I heard him say so to-day.
By Commissioner LITTLER:
Q. Would the proceedings in court, by which this company was disincorporated,
show the amount of its indebtedness at that time? A. No, I think not. I think
that if it had any indebtedness it could not be disincorporated. I think it
had to be shown that there was no indebtedness.
INDEBTEDNESS OF CONTRACT AND FINANCE COMPANY UPON DISSOLUTION.
Q. Would those proceedings show the amount of the indebtedness which the stockholders
assumed in order to balance the books? A. I think not.
Q. Do I understand you to say that this Contract and Finance Company never
declared any dividends, except the stock of the Central Pacifiic? A. Never
any other dividends.
Q. Was there never any money or property divided? A. No.
Q. Can you approximate the amount of the indebtedness the time they ceased
to do business and determined to wind up their affairs?
The WITNESS. At the time of the disincorporation?
Commissioner LITTLER. I refer to the time when they ceased to do business and
determined to wind up their affairs. A. I think it was somewhere about $3,000,000
indebtedness.
Q. At that time? A. That is the amount that was assumed by the five stockholders.
NET PROFIT OF CONSTRUCTION OF CENTRAL PACIFIC.
Q. In determining the amount of net profit which the company made in the construction
of the Central Pacific, assuming that it consisted
2914 U. S. PACIFIC RAILWAY COMMISSION.
solely of stock in the Central Pacific, would it not be necessary to deduct
the three millions of indebtedness, if that was the figure which they had
assumed? A. Yes, sir ; from the entire amount which they had received from
the Central Pacific in cash.
Q. In other words, the stock of these gentlemen cost them $3,000,000, in round
numbers s in money? A. The indebtedness was not all to these gentlemen.
Q. But they assumed it all? A. Yes; they assumed it all.
Q. And in paying it to others this stock in that way cost them $3,000,000 1
A. Yes, sir.
VERIFICATION OF PETITION IN PROCEEDINGS FOR DISSOLUTION.
By Commissioner ANDERSON :
Q. Who verified the petition in these proceedings for dissolution? A. I think
Kobert Robinson represented the Contract and Finance in the county court.
Q. Who verified the petition? A. I do not know who did that.
Q. It was after you had left? A. Yes.
Mr. COHEN. You will find a copy of it on record.
Commissioner ANDERSON. Have you seen it?
Mr. COHEN. I have seen it in the" county court at Sacramento, but I do
not remember exactly as to its contents.
Commissioner ANDERSON. Do you know what documents are attached to it?
Mr. COHEN. No.
Mr. BERG-IN. The papers would scarcely show that. They do not usually contain
exhibits of that kind.
INDEBTEDNESS ASSUMED BY <'S, H. H. & C."
Q. Do I understand you to say that all the outside indebtedness of the Contract
and Finance Company was actually paid by S. H. H. & C. before the order
of dissolution or the proceedings for dissolution? A. No; it was not paid.
It was assumed by them and afterwards paid. The notes of the Contract and Finance
Company that were due these money lenders and bankers were assumed by IS. II.
H. & C. and the notes of the Contract and Finance Company canceled.
By Commissioner LITTLER :
Q. Was their assumption of the debt in the manner you have stated treated by
the court as payment within the meaning of the law? A. Yes.
By Commissioner ANDERSON :
Q. And did the creditors accept this assumption? A. Yes. Q. And they gave
up their old claims against the company? A. Yes.
AMOUNT OF ASSUMPTION, ETC.
Commissioner ANDERSON. We desire a correct statement as an extract from these
books showing the amount of this assumption and the amount due to these gentlemen,
each one of them, at the time of the declaration of this dividend or the division
of the stock ; and we also desire a statement showing the amount due by the
Contract and Finance Company at the time of its dissolution. Have you any source
from which you can give that?
W. E, BROWN. 2915
The WITNESS. I do not think I could give the amount due at the time of the
dividend, because the only evidence that I would have would be the books
of the Contract and Finance Company, which I have not got.
DATE OF OPENING THE "S. H. H. & C." BOOKS.
Q. Perhaps the S. H. H. & C. books would have those entries carried back.
When did they start? A. They started in 1874, I think. When I returned from
Europe I took the memoranda that had been kept by Samuel Hopkins and opened
these books from his statements.
Q. What did you do with the memoranda furnished you by Mr. Hopkins? A. They
were small pass-books, and the entries were made in a very loose way. I considered
that it would be proper to open a regular set of books, and I did so and destroyed
the memoranda.
Q. They are all absolutely destroyed? A. Yes. I made out an abstract, so far
as I could make them out, from those memoranda, and submitted my report to
the gentlemen interested in it, and I ascertained that they were correct. Then
I opened a set of books..
By the CHAIRMAN :
Q. What light would the books of S. H. H. & C. throw upon the Contract
and Finance Company's business? A. I do not think they would throw a particle
of light on it.
Q. Were any of the accounts of the Contract and Finance Company carried into
these books of S. H. H. & C.? A. No ; not one.
OPENED FROM CONTRACT AND FINANCE COMPANY MEMORANDA.
Q. Were the memoranda from which you opened the books of S. H. H. & C.
taken from the accounts of the Contract and Finance Company's books? A. They
were taken from memoranda that, I presume, were taken from the Contract and
Finance Company's books by Samuel Hopkins.
Q. Would not, then, the entries that you made from those memoranda and entered
in the S. H. H. & C.'s books throw light on the Contract and Finance Company's
business? A. There was nothing but the amount of the indebtedness assumed by
these five gentlemen, and the amounts that had been paid on that indebtedness
during the years that I was absent that had been kept by Samuel Hopkins.
Q. Will you please furnish the entries so far as they were taken from the pass
books that you refer to that were delivered to you, Mr. Hopkins, from which
you made entries in the S. H. H. & C.'s books? A. Yes ; I can furnish
those.
Mr. COHEN. I understand you to say that you have not the passbooks?
The WITNESS. He asked me if I would furnish the entries which I made in my
books from the pass-books.
By Mr. COHEN :
Q. Do I understand you to say that the entries which you made would be the
amounts remaining due to these five gentlemen at the time that you returned
to the State after three years' absence? A. Yes.
Mr. COHEN. That would not show how much they assumed to pay for the Contract
and Finance Company.
Commissioner ANDERSON. The witness had said that he would give us these entries.
2916 U. S. PACIFIC RAILWAY COMMISSION.
CALL FOR ENTRIES IN " S. H. H. & C." BOOKS.
The CHAIRMAN. The witness has said that these pass-books were made up by Mr.
Samuel Hopkins from the Contract and Finance Company's books; and that from
the pass-books he (the witness) opened the books of S. H. H. & C. Now,
I simply call for the entries in the S. H. H. & C. books that have any
bearing upon the business of the Contract and Finance Company's work 5 that
is, the entries that were on the passbooks.
Mr. COHEN. That would not show anything.
Mr. HAYMOND. You want the amount that was due to these people, if it can be
ascertained, at the time of the dissolution of the Contract and Finance Company.
Commissioner ANDERSON. Yes; it is evidenced by an entry in that bcok, and we
want that entry. The matter is too clear for discussion.
Mr. COHEN. Those entries will not show the amounts assumed by those gentlemen
at the time of the dissolution of the Contract and Finance Company, but will
simply show the amount that remained due at the time that the witness opened
the books.
The CHAIRMAN. Will you produce the books and let us look at them?
Mr. COHEN. We will not say as to that now.
The CHAIRMAN. Well, I call for them, and I desire the call entered on our record.
*
Commissioner LITTLER. I understand you that you have not refused to produce
them?
Mr. COHEN. We do not refuse. We want to look at the entries first.
The CHAIRMAN. I desire my call noted.
Commissioner ANDERSON. I unite in the call.
Commissioner LITTLER. So do I.
The Commission then adjourned to Friday, August 5, 1887, at 10 a.m.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Friday, August 5, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
DANIEL W. STRONG, being further examined, testified as follows: By the CHAIRMAN
:
Question. Have you those letters which you brought here I Answer. No, sir.
Q. I mean those which I handed back to you. Where are they? A. I put them
in that book.
Q. Where is your book 1? A. In my room.
The CHAIRMAN. You had better go and get them. Mr. Cohen, have you any objection
to these letters?
Mr. COHEN. I have no objection to them, but I do not see their relevancy.
IDENTIFICATION OF LETTERS.
The CHAIRMAN. Do you wish the witness to identify these letters? Mr. COHEN.
Yes; I think they had better be identified. Commissioner ANDERSON. Have you
looked through those letters I
LELAND STANFORD. 2917
Mr. COHEN. No, sir. We wanted to look at them last night, but you were using
them. (The witness here returned with the letters.)
By the CHAIRMAN :
Q. Mr. Strong, are these all the letters that you have with you? A. Yes, sir;
I may have some more at home.
Mr. COHEN. I would suggest that the examination of these papers be left until
after adjournment, so as not to keep the witnesses waiting.
The CHAIRMAN. There is no objection to that. We will give you time.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Friday, August 5, 1887.
LELAND STANFORD, being further examined, testified as foL lows :
By Commissioner ANDERSON :
Question. In your enumeration which you have furnished of companies in which
you are personally interested, the enumeration, I presume, refers to the present
time to the present interest that you have in them? Answer. I think not.
COMPANIES IN WHICH WITNESS IS INTERESTED.
Q. The enumeration, I presume, does not include the interest in other companies
which have had relations with the Central Pacific, with the stock in which
you have parted, so that you are no longer interested in them. Is that so If
A. Without looking at that list which was furnished to me I find myself unable
to answer, because the question that you asked was, how much interest I now
had and had formerly owned, and that list was made up and handed to me just
before I came here. I presume that it is correct, but whether it is as to the
stock owned now only or in the past, I do not know which way it reads. I presume
it is correct.
Q. I will recall one or two corporations which are not mentioned here, and
see whether you are interested in them or not. Did you have any interest in
the Colorado Steam Navigation Company or in the steamers on the Colorado River
? A. Yes, sir.
NO INTEREST IN WATER-FRONT PROPERTY AND FERRIES.
Q. Have you had an interest in any of the water-front property, or ferries,
through which connection is made with the city of San Francisco If. Have you
had an interest there in a company, or a personal interest independent of the
railroad company? A. I think not. I think I never have had any interest, except
as derived from the railroad companies.
Q. Was that interest which you refer to as derived from the railroad companies
derived directly from the Central Pacific Railroad Company, or was it derived
from a subsidiary road? A. We purchased the ferries and the connecting lines
of railroads, and then afterwards they were consolidated into the Central Pacific.
Q. That was the San Francisco Bay Railroad, was it not I A. I forget the name.
I think one was the San Francisco and Alameda Railroad and the other the Oakland
and San Francisco Railroad.
2918 U. S. PACIFIC RAILWAY COMMISSION.
Mr. COHEN. One was the San Francisco and Alameda and the other was the San
Francisco and Oakland. Both were consolidated, and the consolidated company
went into the Central Pacific.
The WITNESS. 1 remember that they were consolidated first, and then the consolidated
line was consolidated into the Central Pacific.
Q. The point of my question was to ascertain whether any portion of the line,
either relating to ferry privileges or to ferry-boats or to property that is
used by the Central Pacific, is held by a subsidiary company, which makes arrangements
with the Central Pacific, either by lease or by prorating, in order to reach
the city of San Francisco. Can you give us any information on this point? A.
That is all the property of the Central Pacific.
OAKLAND WATER FRONT COMPANY.
Q. What is the Oakland Water Front Company? A. That is a company which was
formed about the time that we agreed to bring a branch road from the Western
Pacific from Niles into Oakland. It was property mostly owned by two gentlemen,
I think, at that time, and they formed the so-called Water Front Company. They
gave to the Central Pacific 500 acres to be located by the Central Pacific.
The rest of it was retained, and put into a company known as the Oakland Water
Front Company. I think that the city of Oakland made some claim or other to
this same property, and several questions about title arose, but they were
all finally settled, and the various titles were consolidated. I think that
the title to the 500 acres rests securely in the Central Pacific, and the rest
of it belongs to the Oakland Water Front Company.
Q. Does that Oakland Water Front Company control the transit facilities, wharves,
or boats which are used, or have been used, by the Central Pacific Eailroad
Company, or the leased lines which reach the water-front? A. I think not.
Q. For what is the Oakland water front used? A. It was thought that it would
become very valuable in time to Oakland, and so far as business was concerned,
a large share of the business of Oakland is done over it.
NO CONNECTION WITH CENTRAL PACIFIC.
Q. It is used, then, only for private business, and has no connection with
the administration of the Central Pacific? A. JSbne whatever.
Q. Do any cars pass over it I A. There is another railroad there which we thought
trespassed on some of the ground of the Central Pacific, but that is pretty
much settled. It did not pass over it with the consent of the Central Pacific
or of any of its officers.
Q. In what other corporations have you any interest, which corporations have
had dealings with the Central Pacific? A. I believe that that list enumerates
all with which the Central Pacific has had any thing to do.
Q. The list commences with the words, " I am now interested in the following-named
companies," and therefore does not seem to include the past. Are there
any other companies which you no longer have any interest in, but in which
you have had an interest in the past, and which have had dealings with the
Central Pacific, either ia selling materials to that company or property, or
in the receiving of rates for the , transportation of freight? A. I do not
remember any.
DELANO STANFORD. 2919
COLORADO STEAM NAVIGATION COMPANY.
Q. In regard to this Colorado Steam Navigation Company, thafc company, as I
understand it, owned a number of steamers, and navigated the Colorado River
from Yum a, and communicated north of that point to various points on the river
where they might find business ; is this understanding correct? A. Yes, sir;
the business of the company was to deliver and receive freight at those points.
Q. What was the nature of your interest in that company ; was it a quarter
interest? A. I do not know whether we owned it individually or whether it was
owned or purchased by some one of the construction companies.
Commissioner ANDERSON. The proof is that the Western Development Company purchased
it.
The WITNESS. Then whatever I had was through that company.
Q. Do you know who made the arrangements in regard to the prorating of freight
moving, for instance, from San Francisco to points on the Colorado River?
A. No ; I do not.
PROPORTIONS OF FREIGHT PAID TO NAVIGATION COMPANY AND TO
SOUTHERN PACIFIC.
Q. Do you not know, then, what proportion of that freight would be paid to
the Colorado Steam Navigation Company, and what proportion would be taken by
the Southern Pacific Railroad Company? A. No ; I do not.
Q. Which of your officers would give us this information? A. I think that
Mr. Towne would be more likely to remember about that than anybody else. I
remember being consulted and talking over matters about the purchase, and what
wo wanted. There was some business, not of any great magnitude to a railroad,
but it was the one way of getting up above Fore Yuma when the railroad reached
there. It was not always that satisfactory arrangements could be made with
the steamboat company, and in order to have the matter in our own hands they
sold out to us. The craft was of an inferior character and did not cost much.
Q. What is the distance by rail from San Francisco to Yuma? A. A little over
700 miles.
Q. What is the average distance of the transit from Yuma to the point where
the steamers would deliver freight or receive freight?
The WITNESS. Do you mean up the river?
Commissioner ANDERSON. Yes.
A. I think about 250 miles, or somewhere in that neighborhood.
WHAT WOULD BE AN EQUITABLE DIVISION?
Q. According to your usual rates prevailing, what would beau equitable division
between the railroad company transporting freight 700 miles and the steamers
carrying it, say, from 200 to 250 miles? A. I do not know. It is a little
business, and sometimes the water is very low, so that there is a good deal
of difficulty about getting up the river. What would be fair at one time would
not be fair at another ; but I could not undertake to say what would be a fair
rate at all times, be cause I never was up there, and I never thought much
about it. I do not know much really about the difficulties they had to encounter.
Q. As a matter of fact, that company declared in a few years quite a considerable
number of dividends, did it not? A. I do not know ; I
2920 U. S. PACIFIC RAILWAY COMMISSION.
do not remember 5 that is something that the books, I suppose, will show.
BRIDGE ACROSS COLORADO RIVER.
Q. There was a bridge across the Colorado Eiver, was there not? A. Yes, sir.
Q. What sort of a structure was it? A. A good one; a wooden structure.
Q. Was the title to that bridge held by the railroad company, or was it held
by one of the construction companies or by a private corporation? A. I do not
remember now how it was. There was some trouble because of the State line.
The State line was in the center of the river.
Q. Have you any idea what it cost to build that bridge 1 A. No, sir. There
was great difficulty in getting the bridge properly located. There was some
trouble about getting in piers there. The bridge was burned down, and since
that time the new bridge has been constructed and is the one now in use.
Q. Do you not remember that the bridge was leased to the Southern Pacific Railroad
Company separate from the railroad? That it was not delivered as the rest
of the road was by the Construction Company, but that the Southern Pacific
Railroad Company paid $15,000 a year as the rent of the bridge? A. 1 think
that was so. About the rent I have forgotten.
Q. When the Southern Pacific Railroad was leased to the Central Pacific, the
rental, of course, had to be paid by the Central Pacific, did it not? A. Of
course.
Q. That would necessarily follow, would it not? A. Yes, sir.
COST OF THE BRIDGE.
Q. Do you recall the cost of the bridge? A. No, sir.
Q. Was it over $50,000? A. I think so.
Mr. COHEN. The books will show.
The WITNESS. If you want to ask me about details, you will find me a \ery poor
witness.
Commissioner ANDERSON. I do not want the accurate details ; but the suggestion
is made that the bridge cost $50,000, and I asked you if you could tell us
what the actual cost was.
The WITNESS. I cannot. We had some trouble there at the time the bridge was
built. A one-armed soldier endeavored to stop the trains, and I believe that
he did it until we could get the consent of Congress. It runs across a military
reservation.
Q. The assertion is made that this bridge, instead of being put into the general
construction of the Southern Pacific Llailroad, was kept out that its title
was vested in a separate company, or retained by the Western Development Company.
It is also asserted that it cost but $50,000 to build this bridge ; that you
and the other three gentlemen were the owners of it, and that it was leased
to the Southern Pacific at $15,000 a year, which would be about 30 per cent,
per annum upon the cost of construction. Can you tell us about this? A. I do
not know as to the cost of the bridge, or as to the rent that is paid for it.
I believe that in consequence of the fire it was a losing operation. The Southern
Pacific Company, of course, could not go beyond the center of the river, and
that company was not in condition, therefore, to build the bridge,
LELAND STANFORD 2921
and that is about the principal reason for its having been built by the Western
Development Company.
BRIDGE LEASED THROUGH SOUTHERN PACIFIC TO CENTRAL PACIFIC.
Mr. COHEN. Do you say that it was leased to the Central Pacific?
Commissioner ANDERSON. No ; it was leased to the Southern Pacific, and through
the Southern Pacific it was leased to the Central Pacific.
The WITNESS. When the Central Pacific ran the Southern Pacific, of course it
took everything with it. Without that bridge I do not suppose that they could
have very well sent anything beyond that point.
Commissioner ANDERSON. The point of my inquiry is whether the bridge could
not have been put in the general structure of the railroad as other bridges
were, aud if there was some advantage in keeping it out why the rent was fixed
at $15,000 a year, if that be true, when it cost only $50,000.
The WITNESS. It seems that it was not enough to compensate the owners of the
bridge as it afterwards turned out. Besides, the Southern Pacific had no right
to cross the river it could only go to the center of the stream.
Q. Do you remember a letter from Mr. Huntington in regard to the structure,
in which he said that by reason of probable difficulties in prorating with
the Texas and Pacific Eailway Company, it would be desirable to keep this bridge
title out from the general title of the railroad company and thereby be enabled
to fix the rate and put a tax on transcontinental commerce? A. I do not remember.
EXPRESS BUSINESS OF WELLS, FARGO & CO.
Q. Do you remember such a letter? A. No, sir.
Q. In regard to your interest in the express business of Wells, Fargo & Co.,
how was the express business done? A. In this State mostly by Wells, Fargo & Co.
Q. Were they not given the exclusive control of the express business over the
Central Pacific Kailroad? -A. I think not.
Q. What other express companies have done business over the Central Pacific
Kailroad to any amount? A. I do not know that there are any. There is no other
company here of any consequence.
Q. Who negotiates the rates and makes the arrangements between the express
company and the railroad company? A. I took a part in the discussion.
Q. When did you acquire your interest in the stock that you hold in Wells,
Fargo & Co.? Was it at the time that these original negotiations were going
on? A. There was another company formed in which we had an interest, and that
was taken in by Wells, Fargo & Co., and some stock was issued. I think
that if you will go to the books, it will be a great deal better than my recollection.
WELLS, FARGO & CO.'S CAPITAL INCREASED.
Q. The assertion that is made is that Wells, Fargo &Co., being capitalized
at a given sum during the time that these negotiations were pending in regard
to the business of the Central Pacific Kailroad, increased its capital stock
from ten million to fifteen million dollars, and that a certain amount of stock
was, at that same period, issued to your
2922 U. S. PACIFIC RAILWAY COMMISSION.
self, Mr. Huntington,Mr. Crocker, and to Mr. Hopkins; what is there of truth
in that statement? A. I cannot now recall the details of that. I know that
there was another party, and in the arrangements the stock was issued, and
a certain amount of stock in Wells, Fargo & Co., I think, went to the Central
Pacific a pretty large amount. The contract, 1 think, did not give Wells, Fargo & Co.
a preference over other companies, but provided that no other company was to
have a preference over them. I think that that was one of the conditions, but
I never have seen the contract since it was made, and I am not able to give
the details of it.
Q. Was your stock purchased from the Central Pacific, or was it issued to you
by Wells, Fargo & Co.? A. I think that we had it direct from Wells, Fargo & Co.
The Central Pacific had a certain amount of its own.
ISSUED TO WITNESS AND OTHERS FOR A CONSIDERATION.
Q. Was the stock issued to you by Wells, Fargo & Co. issued to you for
a consideration, or was it issued without consideration I A. There was a consideration.
We did not go on with the opposition express company, and it gave Wells, Fargo & Co.
great conveniences over such roads as were controlled by us. The Central Pacific
had kept its own interest represented, and received a certain amount of stock
for the benefit that it would confer on Wells, Fargo & Co. by entering
into this contract.
Q. How much stock was issued to you? A. If you look at that contract it will
be a great deal better than to depend upon my recollection.
Commissioner ANDERSON. We call for that contract, and would like to see it.
Still, I would like to know how much stock was issued to you.
The WITNESS. I do not remember how much stock I had.
Q. Do you remember how much stock was issued to the five gentlemen who were
associated with you? A. I do not.
Q. Was it a million and half dollars \ A. I do not remember.
Q. Have you stated all of the consideration that was paid for this stock? A.
No ; I do not say that. I do not remember.
INTEREST ACQUIRED THROUGH ANOTHER COMPANY.
Q. Do you remember whether you personally paid money for the stock, or whether
it was covered by this general arrangement made with the Central Pacific?
A. No ; it was not covered by the arrangement with the Central Pacific. D.
O. Mills and some others had formed another company, and it was out of that
that our personal interest came. If you will look at the books or contracts,
you will know all about it. You cannot get it from me, for I do not remember.
Q. Will the contract disclose your personal connection with the ownership of
your own stock?
The WITNESS. In the contract with Wells, Fargo & Co.?
Commissioner ANDERSON. Yes.
The WITNESS. I cannot say as to that. I do not know why it should. Perhaps
it does, however. It may be that the whole arrangement is in the contract.
There was considerable negotiation leading up to it, one way or the other.
Commissioner ANDERSON. Perhaps it will bring the matter more clearly to your
recollection if I were to read to you an extract from the complaint
The WITNESS. From what document are you reading?
LELAND STANFORD. 2923
COMPLAINT IN THE ROBINSON SUIT.
Commissioner ANDERSON. This is the complaint filed in the Eobinson suit.
The WITNESS. If I .am to be interrogated upon all the statements contained
in the complaints filed in these various blackmail suits, and in newspaper
charges, I shall never be able to give you aoy definite information, because
I cannot remember ; but if you will take our books and examine them, and question
the men in charge of them, and the men in charge of the various portions of
the work, you will get the truth quickly. I will try to give you all I can,
and will give you all the time that you want ; but I shall begrudge it if it
lasts more than six months. I dp not suppose that I can give you a minute history
of all these little private . affairs that have occurred in the last twenty-six
years, even if I should take six months or a year.
Commissioner ANDERSON. I do not intend to interrogate you as to the private
affairs which have no concern with this, but as to private affairs directly
connected with the Central Pacific Eailroad Company which require explanation.
I had supposed that it was an advantage to you to call your attention to what
is said about these things, and give you an opportunity to explain them.
CONTRACT BETWEEN CENTRAL PACIFIC AND WELLS, FARGO & CO.
This allegation is that the gentlemen connected with you that is, yourself,
Mr. Hopkins, Mr. Charles Crocker, E. B. Crocker, and C. P. Huntington, composing
a majority of the board of directors of the Central Pacific Eailroad Company,
between the 1st day of May, 1869, and the 1st day of April, 1870, granted to
and contracted with the defendants, Wells, Fargo & Co., in substance and
to the effect that the said Wells, Fargo & Co. shall have the exclusive
right of running express freight trains, and carrying and trausporting]express
freight packages, bullion, and so forth, over the Central Pacific Eailroad
Company's line of railroad, and in consideration therefor said Wells, Fargo & Co.
increased its capital stock from ten millions to fifteen millions of dollars,
and delivered and made over to the said Stanford, Huntington, Hopkins, Charles
Crocker, and E. B. Crocker, without any consideration, except the making of
said contract in the name of said Central Pacific Eailroad Company, one and
one- half millions of said stock of Wells, Fargo & Co.
OBJECTS TO QUESTIONS BASED ON COMPLAINTS IN BLACKMAIL SUITS.
The WITNESS. I am willing to tell you what I know ; but this thing ought to
have a limit. You are interrogating me upon complaints in blackmail suits,
such complaints as the one you are reading from, and asking me to make answer
to them right here as a witness on the stand. Just think for a moment what
you ai*e asking me to do.
Commissioner ANDERSON. I am only asking if it is true that you got a million
and a half dollars of this stock without paying anything at all for it.
The WITNESS. I do not think that it is true.
Q. Will you refer me to ihe source from which correct information as
to this allegation can be had? A. I think that if you go to Wells,
Fargo & Co., or to D. O. Mills, and probably some of our secretaries of
the different companies, then carrying on the business, you will get it
p R VOL iv 38
2924 U. S. PACIFIC EAILWAY COMMISSION.
better than you can from me, because they are more likely to remember details
than I am.
Q. Then I will ask you to produce the contract between the Central Pacific
Bailroad Company and Wells, Fargo & Co. Did you state that the contract
between yourself and Wells, Fargo & Co. was in writing? A. I do not know
that it was. I do not now remember the details. There were several persons
interested with us, and we had only a portion of the stock of the opposition
company. I think that came from taking put of competition with Wells, Fargo & Co.
the other express companies.
ATLANTIC AND PACIFIC EXPRESS COMPANY.
By Commissioner LITTLER :
Q. What was the name of the express company in which you gentlemen were interested
? A. I have forgotten ; but I believe it was the Atlantic and Pacific.
Q. Do I understand that by this arrangement your company was consolidated with
or transferred to Wells, Fargo & Co., and you went out of business 1 A.
Yes, sir ; we went out.
OCCIDENTAL AND ORIENTAL STEAMSHIP COMPANY.
By Commissioner ANDERSON :
Q. What is the Occidental and Oriental Steamship Company? A. There was a time
when it was supposed that the Pacific Mail Steamship Company was going to do
a very large China and Japan business by way of the Isthmus of Panama. The
Union Pacific and Central Pacific Eailroad Companies were not satisfied with
that, and we organized that steamship company. It not only furnished a great
deal of business to the railroad companies, but it practically compelled the
Pacific Mail Steamship Company to run its ships to San Francisco. It has forced
that company to bring its freight to San Francisco and send it overland by
rail, because with rail and steamer competition business would not go by way
of the isthmus. That was the object of the organization of the Occidental and
Oriental Steamship Company.
Q. Was the company gotten up entirely for that purpose? A. It was gotten up
entirely for that purpose, and we expected to lose probably $100,000 a year.
WQ thought that if we did not lose more than that we could afford to do it.
Business, however, has been very fair and has paid nicely for the time that
the company has been organized.
Q. What is the total capital stock I A. Ten million dollars.
THE CHIEF STOCKHOLDERS.
Q. Who are the chief stockholders? A. The representatives of the Union Pacific
and Central Pacific Companies Mr. Huntington, the estate of Hopkins, Mr. Crocker,
and myself.
Q. The Union Pacific ownership, 50,000 shares, is in the corporation itself,
I believe, is it not? A. I think that it is now, but I am not sure.
Q. And the ownership of the other half is represented by 10,000 shares to each
of the five gentlemen referred to, is it not? A. Yes, sir.
Q. What are the relations between this company and the Central Pacific in regard
to business, delivered or interchanged, between the Occidental and Oriental
Steamship Company and from the Central Pa
LELAND STANFORD. 2925
cific? A. They do a general business, whatever they can get, between China
and Japan and San Francisco.
RATES FOR PRORATING 'STEAMSHIP AND RAILROAD COMPANIES.
Q. Who determines the rates for prorating as to through freight interchanged
by the two companies? A. The railroad company.
Q. Which officer of your road has charge of that business? A. I will correct
my former answer and say that the rates out this way are substantially made
by the agents in China and Japan. Their general instruction is to meet the
competition of the Suez route, and the railroad companies all the way through
from here to 'New York, Boston, Philadelphia, and all the Eastern cities have
allowed that arrangement for fixing the rates, whatever they may be, and the
railroad takes a certain proportion and the steamship company the other.
Q. Which officer of your road has charge of that business I A. The regular
officers of the steamship company, of course, have charge of that. I am president
of that steamship company 5 that is, the Occidental and Oriental Steamship
Company, and Charles F. Crocker is the vicepresident. Besides that we have
a superintendent and freight agents.
Q. Do I, then, understand that the schedule of interchanged rates which fixes
what percentage shall go to the steamship company and what percentage shall
go to the Central Pacific Railroad Company is determined by yourself and Charles
F. Crocker? A. Oh, no; the agents, I think, of the Union Pacific have something
to say. It has been more particularly arranged after consultation with the
Union Pacific people and with the representatives of the railroads east of
Omaha for the through business. I suppose that their traffic agents are all
more or less consulted at different times in making rates. In the first place,
when the company was organized, we undertook to make an arbitrary rate from
Yokohama to New York, but after a time we found that it was necessary to leave
the matter of fixing rates to the agents on the other side of the ocean to
meet competition, whatever it was. Sometimes there are what we call " ocean
tramps " that put in to these foreign ports seeking freight, and we must
make our rates to compete with them as well as with the Suez route. In other
words, we have to make our rates to meet the prevailing, competition, and this
must be left to the agents on the ground.
Q. I am not inquiring so much about the fixing of the through rate as I am
about ascertainment, of the relative percentages divided between the Occidental
and Oriental Steamship Company and the Central Pacific and Union Pacific Eailroad
Companies. Who determines that? A. The books of the company will show it.
PERCENTAGES DETERMINED BY THE OFFICERS OF THE TWO COMPANIES.
Q. Who determines what the factors will be? A. The officers of the companies,
both railroad and steamship. I am president of the Central Pacific and I am
president of the Occidental and Oriental Steamship Company. I thought that
I told you that.
Commissioner ANDERSON. You did ; but I supposed that you had a traffic agent
who had charge of that business.
The WITNESS. I do not know particularly how much I did, but I knew about the
rates at the time. We conferred about it and fixed the amount of the rate which
we thought fair, but afterwards we changed
2926 U. S. PACIFIC RAILWAY COMMISSION.
it some. We had to change it to meet competition, and that rate is satisfactory
to our Eastern connections as well as to ourselves.
Q. Do you not see that the rate which is satisfactory to your Eastern connections
has nothing to do with the relative percentages between the Central Pacific
and the Occidental and Oriental Companies? A. Yes; it has everything to do
with it. Without their consent we could not do business. We must have a through
rate, and a certain proportion goes to the rail road companies and the other
goes to the steamship company.
Q. What percentage goes to the steamship company? A. I refer you to the books.
I do not remember.
Q. Can you not refer me to the traffic agents? A. We have no traffic agents.
Q. Is it Mr. Stubbs, or who is it? A. Mr. Stubbs knows all about it.
Q. That is what I have been trying to get at. Does Mr. Stubbs know these figures
? A. Yes, sir.
Q. Did not a large portion of the material used in the construction of the
Southern Pacific Railroad pass over the Central Pacific $ A. Yes, sir.
Q. Do you know what rates of freight were charged by the Central Pacific on
the material which it transported? I do not mean the detail, I mean whether
it was the usual rate. A. I would not undertake to say what were the rates.
There was no other such kind of business done for anybody else. We moved these
ties and this iron over the Central Pacific on to the line of the Southern
Pacific at Goshen, but I do not recollect what were the arrangements. I do
not remember, although I once knew.
VERY LARGE BUSINESS DONE.
Q. There was a very large business done and a very large quantity of material
transported, was there not? A. Yes, sir; the business was very large. It was
a question sometimes whether it should come here or whether it should go down
to the port at Los Angeles.
Q. Do you know whether very large quantities of freight of this character were
transported over the Central Pacific without any charge to the Southern Pacific
? A. I do not know that there ever was any. The books will show you what was
paid. If you wish to know how the rails came here, I will say that they came
mostly around Cape Horn. I think that this was the rule in all cases up to
the time that we finished our road to New Orleans, since which time we have
shipped considerably by that route. A very large quantity of rails for the
Southern Pacific came by sea, and before they came, as I have stated, it was
a question whether we should bring them here or send them to Los Angeles. After
the road got down to Los Angeles it was a question whether we should ship material
there or in this way. After the line was completed to New Orleans we sometimes
had the rails come that way, and sometimes the other way.
Commissioner ANDERSON. The object of my question was to ascertain whether the
stockholders or the parties interested in the Southern Pacific obtained any
advantage from the Central Pacific in the rates of transportation; and, if
they did, what the amount of the advantage was.
FAIR DEALINGS OF CENTRAL PACIFIC WITH OTHER COMPANIES.
The WITNESS. I understand that. I want to say here in regard to it that I would
like to direct your attention to this fact, that the rela
LELAND STANFORD. 2927
tions between the Central Pacific aiid all these brancli roads have been as
one man, or one party, with another. No money of the Central Pacific has ever
been diverted from its treasury into the treasury or the bands of the others,
excepting in the way of accounts, and then every cent of it has been accounted
for. The Central Pacific has never lost a dollar or contributed a dollar towards
them, excepting as one creditor or one party dealing with another may do. I
will say that as a general proposition and direct your attention to it, and
you may see if there is anything that contradicts it. I do not think thatthere
ever has been an instance where we have made less rates for branch roads that
the Southern Pacific or the officers of the Southern Pacific has an interest
in, or that the officers of the Central Pacific had an interest in, unless
it might have been in the case of some of these small roads in the construction
of which the Central Pacific was directly interested. It may have occurred
also in a case or two where the Central Pacific has aided little wagon roads
which brought more or less business to the Central Pacific. For instance, there
are three little railroads constructed over in Nevada, and I think that we
carried their material for a less rate than we were carrying freight for other
people, and we have a prorating arrangement with them by which we give them
a greater mileage rate, by a great deal, than the Central Pacific receives.
This was because they were branch roads, and could not afford to do business
as cheaply as the Southern Pacific could do it. I also know that we have helped
stage lines in which no officer of this company had any interest. I mention
these things to you to show that the dealings of the Central Pacific have been
fair, and that that company has been as well protected in all its relations
with all these companies as good business judgment would permit.
DUTCH FLAT WAGON ROAD.
Q. What was this Dutch Flat wagon road about which we have heard several times
? A. It was a wagon road built from a place called Dutch Flat, which is, I
think, 60 miles from Sacramento, and was built over the Sierra Navada Mountains
for the purpose of accommodating teams carrying freight to and doing business
in the State of Nevada.
Q. By whom was it built? A. The greater portion of it was built when we took
hold. The Dutch Flat wagon road, as it was called, did not go all the way to
Virginia City. On the eastern end it connected with other wagon roads. Most
of the work on the Dutch Flat end was done by Mr. Huntington, Mr. Crocker,
Mr. Hopkins, and myself, and I think that Mr. Strong had some interest in it,
and one or two others. A Mr. Bradley, I think, had some interest. I may be
mistaken, however, about Mr. Strong having an interest in it. I do not think
that there was anybody else.
Q. Is it or is it not true that any portion of the expenses for the construction
of that road, so far as your memory goes, was charged to the Central Pacific
Railroad Company? A. No, sir ; it was not. When we went into the enterprise
we thought that it would be a good property, and at that time it was a necessity
to the Central Pacific, because as the road went up the mountain there was
no wagon road from the railroad to Virginia City to take freight from the end
of the railroad. Without the wagon road the railroad could not have done this
Nevada business, which at that time was very important, but practically there
was not much more than two seasons of wagoning on that road, because the railroad
was constructed so rapidly over the mountain.
2928 U. S. PACIFIC RAILWAY COMMISSION.
COST NOT CHARGED TO CENTRAL PACIFIC.
Q. My question is, whether the cost of construction was charged to the Central
Pacific Railroad Company? A. I was going to tell you about that. The road
was built by us as individuals. We never got back the money that it cost to
build it, and when we got through with the construction of the railroad we
gave the wagon road to the counties in which it was built.
Q. You presented it to the counties through which it passed? A. Yes, sir.
Q. You still do not say whether the cost of construction was charged to the
Central Pacific Kailroad Company? A. I say that it was not charged to the Central
Pacific Eailroad Company. I know that we lost money on it. The Central Pacific,
however, got the benefit of the road, and the entire cost of it ought to have
been charged to the Central Pacific.
Q. I ask because if it was built by the Central Pacific, or if the cost had
been charged to the Central Pacific, then the Central Pacific would have been
entitled to the tolls, whatever they were ; is that not so? A. Yes, sir. But
it was not charged to the railroad company. The wagon road business was a losing
one. The road was a good one. The stage horses used to take the grade on one
end of it and trot all the way over the mountains.
CENTRAL PACIFIC DID NOT GET THE TOLLS.
Q. As matter of fact, the construction was not charged to the Central Pacific,
the Central Pacific did not get the tolls and did not get the profits or suffer
the loss that resulted? A. No, sir. The wagon road made a profit, because
it had the road to carry stuff from the end of the railroad over the mountains,
and the railroad company got the profit, because this wagon road was thereover
which the stuff could be carried. We could not have carried the freight at
all if it had not been for this wagon road. But for the speedy construction
of the railroad the wagon road would have been a fine property ; but, as it
was, it was in use but so short a time that we did not get our money back out
of it.
Q. Did not the railroad company pay tolls, as well as anybody else, when its
freight passed over it? A. It did not pay tolls for freight. The merchandise
was not going to the railroad for its account, but to other parties.
Q. These tolls, you assert, amounted to no such sum as represented, either
three million, two million, or one million dollars? A. No, sir 5 they did not
amount to enough to pay for the construction of the road. If I might make a
suggestion here I would like to do it. You want to know whether we robbed the
Central Pacific Eailroad Company. I say that we did not. Now, if you will find
people to show that we robbed it, or that we did anything that looks like it,
or find people who will say that we robbed it, we will answer them ; but to
ask me these questions, when 1 deny the fact, and try to prove from me that
we have been guilty of wrong-doing, does not seem to me to be the way that
this thing should be done. As this Commission is composed of lawyers, 1 have
an idea that the ordinary rules of evidence ought to have some application.
Commissioner ANDERSON. You call yourself a good deal worse name than I do;
but when these names are called, do not you think it proper that we should
give you an opportunity to deny the fact?
LELAND STANFORD. 2929
CALLED ALL SORTS OF NAMES BY DEMAGOGUES AND NEWSPAPERS.
The WITNESS. I do not care a cent for that. It does not affect my character
among people who know me. I have been called all sorts of names by demagogues
on the stump and by hostile newspapers, and by enemies of the road, and they
have never injured me. At one time I was charged with having a connection with
bunko sharps and threecard monte men and gamblers, who were robbing passengers
on the railroad. I do not suppose that anybody believed that, but still the
charge was made. While I wish to treat the Commission with all courtesy, I
do not feel like answering questions suggested by that class of complaints
and that class of individuals.
PACIFIC MAIL STEAMSHIP COMPANY.
Q. Have you also been personally interested in the Pacific Mail Steamship Company
I A. I think I was I am not sure whether I was ever the owner of any of the
stock in the Pacific Mail, or not.
Q. Did the relation of the Pacific Mail Steamship Company to the transcontinental
business have a large influence in determining the transcontinental rates during
the last ten or fifteen years? A. Very much. It was one of the competitors
for the business between the Atlantic and the Pacific.
Q. Will you please give this Commission your views as to the advantage or disadvantage
that has resulted to the Central Pacific from th payment of the annual subsidy
to the Pacific Mail Steamship Company $ A. Of late years I think that it has
been a very great advantage to the Central Pacific. That competition between
that line and the railroad company was very great at a time when that company
was very weak. I do not think if an arrangement had not been made that it could
have lasted a great while.
BUT FOR SUBSIDY PACIFIC MAIL COULD NOT HAVE LASTED LONG.
Q. Do you mean that the Pacific Mail could not have lasted a great while? A.
Yes, sir. At that time the coast business was very much less in consequence
than it is now, and the main business was the through business between New
York and San Francisco. The latter business was very greatly reduced upon the
construction of the railroad, and if the Pacific Mail had been compelled to
depend upon that business at that time it could not have lived. Since then
its business, particularly its South American coast business and its business
all along this coast, has largely increased, and its business across the Isthmus
of Panama is very good.
Q. Do you mean to say that this business gives them a strength derived from
another source which would enable them to stand the competition of your company
for a longer period than otherwise would be the case? A. I think that is possible.
As to the exact amount of business done by that company, I have no positive
knowledge.
Q. What is your information as to the chief articles of freight entering into
this question I What would go around by the Pacific Mail route in case you
had an open fight with that company for the transcontinental business? What
kind of business would go around by those steamers? A. That depends altogether
how low the railroad rates may be. At the same rates, the railroad will always
have the preference.
2930 U. S. PACIFIC RAILWAY COMMISSION.
FREIGHTS WHICH GO BY RAIL IN PREFERENCE TO STEAMER.
Q. This would only be for certain articles, would it not, and not for everything
?- A. It would be for everything.
Q. Would it include fresh fruits ! A. The steamers cannot carry fresh fruits.
Q. Are there not a great many articles that cannot go by steamer because the
time is more essential 1 A. Yes, sir ; for instance, fresh fruits would never
go by steamer.
Q. Would canned fruits go by steamer in preference to going by rail? A. They
might if they wanted to; they now go more or less in that way, and a large
quantity goes by way of Cape Horn. A great deal of it goes to Europe by sailing
vessel around the Horn, and the same is true with regard to canned salmon.
Great quantities of salmon used to go from the Sacramento River, and a great
deal goes from up North Oregon and Washington Territory ; it used to come down
here and go over our road, but now of course it seeks transportation to foreign
ports by way of the Northern Pacific and the Canadian Pacific, and I do not
know but what some of it goes around Cape Horn.
NO ARRANGEMENT BETWEEN PACIFIC MAIL AND CENTRAL AND UNION
PACIFIC.
Q. What is the present arrangement between the Central Pacific and the Union
Pacific, and the Pacific Mail since the passage of the interstate commerce
law? A. I think that there is no arrangement now ; at least no binding arrangement.
Q Is there not an understanding to furnish the Pacific Mail with a certain
amount of freight or pay them its equivalent? A. Not now ; there used to be
such an arrangement; we had an arrangement by which we had a certain amount
of space in their ships, which we could fill or not as we pleased ; we had
to pay the freight whether we occupied the space or not, and we used to send
a great deal of freight that way, up to the filling of that space. Of course
if we paid them for it we wanted to use it, and this was better than to let
it remain empty ; the arrangement was a good one, as it prevented them from
cutting our rates ; in this way it was greatly to the advantage of the railroad
companies.
Q. Do you say that there is no arrangement now? A. There is none now.
PACIFIC MAIL CUT RATES SINCE CESSATION OF SUBSIDY.
Q. IJas any cutting been done by the Pacific Mail since, the cessation of the
subsidy? A. They cut the rates ; but I cannot say how much. They are an active
competitor for the business.
Q. Has it produced a serious decrease in the transcontinental business? A.
think not. The competition by the railroads has been so great that the competition
by the steamers has become of little consequence. The worst competition is
that inaugurated by the railroad companies.
Q. How long has that state of affairs existed as you have described in your
last answer, that the competition by the railroads has been so great that the
competition of the steamship company is of little consequence 1? A. It did
not commence immediately upon the connection at Iteming ; but the greatest
competition is by way of the Northern Pacific and has existed since that road
was completed.
LELAND STAtftfom 2931
Q. Has it been since 1883? A. I cannot say ; I do not remember* Q. Or 1884
or 1885? A. I have forgotten the dates of the complex tion of those roads,
but as those roads were completed, of course com^ petition became fiercer between
the railroad companies.
DURING EXISTENCE OF RAILROAD POOL COMPETITION OF STEAMSHIP COMPANY UNDESIRABLE.
Q. Is it your judgment that from the date that competition was established,
the continued payment of the subsidy to the Pacific Mail Steamship Company
was a mistake and a loss 1? A. I am not prepared to say. The competing lines
of road did pool for a time, and lived up to this pooling contract perhaps
moderately well. While that pool was in existence, it was very desirable that
the competition with the Pacific Mail Steamship Company should not be allowed.
The railroads at the East agreed with us in this view, and contributed their
part of the subsidy. When I say railroads at the East, I mean those east of
Omaha. They contributed their part towards subsidizing the Pacific Mail. It
was not really subsidizing that company. We paid it so much for so much space,
and they permitted us to control the rates. Had it not been subsidized in this
manner, it might have controlled the rates by setting them at figures which
the railroads would have had to adopt. There was a time when it is possible
that if fierce competition had existed that company might have been broken
up. After that time had passed there is no doubt that this arrangement with
the Pacific Mail was good for railroads: If it had not been, it would not have
been observed, and the railroads east of Omaha would not have contributed their
proportions.
DURING FIERCE RAILROAD COMPETITION STEAMSHIP COMPETITION OF LITTLE IMPORTANCE.
Q. You have stated in answer to a previous question that since the competition
of the railroads had got to be as fierce as it was, the competition of the
steamship company was of very little importance. When did this begin? A. That
is about a year and a half or two years ago. At that time that pooling arrangement
became substantially broken, and then this arrangement with the steamship company
became less important. As a consequence, some of the railroads at the East
did not think it worth while to continue the payment of the subsidy, and so
it was broken off. Some of our people can give you the exact facts of these
occurrences, but that is the general condition of affairs.
Q. The payments by the different railroad companies to ttye Pacific Mail continued
after the disruption of the pool up to the passage of the interstate commerce
law, or nearly to that time, did they not? A. Mr. Cohen suggests to me that
the pooling arrangement was broken up nearly a year before the passage of the
interstate commerce act.
Q. Did the arrangement with the Pacific Mail terminate at that time? A. The
contract was not renewed. I do not know but that it was temporarily continued
while negotiations were going on with a view to its continuance.
NO ARRANGEMENT NOW BETWEEN PACIFIC MAIL AND RAILROADS.
Q. Do you say that there is no arrangement existing at present? A. None that
I know of. If any arrangement has been made, it has been done on the other
side.
2932 tr. s. PACIFIC RAILWAY COMMISSION.
Q. Do you mean at the New York end? A. Yes, sii ; our agents would know exactly
whether it was done or not.
Q. Do you mean Mr. Stubbs? A. Mr. Stubbs would know.
Q. In your judgment, would it advantage the railroads or not to restore, if
the law permitted it, any such arrangement with the Pacific Mail at present?
A. That would depend entirely upon the competition that might exist among the
railroads themselves. If they had a pooling arrangement by which they would
not cut rates as against one another, it would be better to continue the arrangement
with the Pacific Mail, in my judgment.
THE FUTURE OF TRANSCONTINENTAL BUSINESS.
Q. What is your view as to the future of the transcontinental business itself;
I mean as to whether it is a growing or decreasing quantity in its relation
to the local business 1? A. Our business, of course, fell off' very much,
owing to the competing lines of road ; but I think that the general business,
owing to the general development of the country, is growing all the time.
Q. When you say " our business fell off,*' do you mean business of the
Central Pacific and Union Pacific? A. Yes, sir. On that subject I desire to
say, and I think it is very interesting, that I have filed with the Commission
a statement compiled for me directly from the books, showing the falling off
upon the completion of each competing line of road, and I think it is very
important. As Congress has asked that very question, it is something to which
I beg to call the attention of the Commission. You will find it well set forth
in my answer. It is in one of the exhibits prepared by Mr. Stubbs.
Commissioner ANDERSON. We have been so busy that we have not been able to make
a critical examination of the exhibits.
The WITNESS. The exhibits are the foundation of my statement that I have submitted.
LOCAL BUSINESS INCREASES FASTER THAN THROUGH BUSINESS.
Q. I asked you the question as to whether the through business, as compared
with the local business, was increasing on your road. What is your answer?
A. The local business increases much faster than the through business. I do
not mean to say this as regards the entire through business by all routes,
but as compared to our business the local business is increasing much more
rapidly than the through business. Of course, our through business having been
diverted to those other lines of road that shows a very large falling off,
but the general population is constantly increasing, and there is such a general
improvement in the development of the industries of the State that our local
business is constantly increasing. In this exhibit to which I referred, I do
not at this moment find the illustration that I wish, but the whole article
itself gives a complete history of our freight business. It shows that the
very low rates fixed by the competition of the railroads themselves by which
one coinpany strives to take business away from the other has affected us more
than the competition with the steamships; while at the same time this competition
among the railroads has had a very serious effect upon the steamship line itself.
The amount of fixed expenses constantly going on with the steamers requires
that they earn a certain amount of money, and every pound of freight that goes
that way has to bear its fair share, or else there is a loss. On the railroads
LELAND STANFORD. 2933
it is different. The railroads have a certain plant and they obtain the best
prices that they can for their ordinary business. Then it becomes a question
of getting additional business, which they can get only by giving a low rate.
The question that the railroad has then to ask itself is, Will the additional
cost consequent on the movement of this freight be met by the low rate. If
it will be, they take it rather than not, as the additional rate is so much
as is represented by the additional cost of fuel and the wear and tear of
the equipment going over the road. That is all, and if the low rate will
meet this cost the railroads will always take the goods.
CENTRAL PACIFIC'S EARNING POWER DEPENDENT ON LOCAL BUSINESS.
Q. Your judgment of the Central Pacific is that its earning power in the future
is dependent' on quasi local business more than on its transcontinental business
? A. Yes ; I think so. This transcontinental business is a very uncertain thing.
Take, for instance, the competition in the carrying of teas from China and
Japan. We have had to compete with the Suez route, but we have gradually been
diverting it this way until the larger portion of it has been coming overland.
Now, however, the Canadian Pacific Eailroad enters as a factor. It puts on
a line of steamers to compete for this business. The result will, of course,
be that the business will be divided and the rates decreased. Even now they
are carrying it at a less rate than we are.
PERMISSION TO CANADIAN PACIFIC TO CARRY TEAS THROUGH IN
BOND.
Q. What is there as to the permission accorded to the Canadian Pacific to carry
teas through in bond without the payment of duties? A. I cannot say as to
that, exactly; but I know that our Government has allowed them to take freight
in violation of the interstate commerce law, carrying it by water from here
around to points East, and to Chicago particularly, a distance of 5,000 miles
as against our 2,500, and at a less rate for the longer distance than for the
shorter distance through our own country. Why the Government has done this
is not very plain, but I suppose that it is a sort of comity between Canada
and this country that the Canadian Pacific Eailroad shall have this privilege,
even if it is disastrous to the Central Pacific.
MOST IMPORTANT FEEDERS OF CENTRAL PACIFIC. '
Q. Which portion of the road do you regard as the most important factors in
regard to its local business which branches?
The WITNESS. Of the Central Pacific?
Commissioner ANDERSON. Yes.
The WITNESS. The two trunk lines, the one up the San Joaquin and the one up
the Sacramento Valley, are the most important.
Q. Are they the most important ; feeders? A. Yes; and in addition to that
this portion of the system in and around the Bay of San Francisco is important,
as this bay business is growing very rapidly.
LOCAL BUSINESS BETWEEN SACRAMENTO AND EASTERN STATE LINE.
Q. How is the local business between Sacramento and the eastern boundary of
the State? A. That holds itself good. It never was very
2934 ti. S. PACIFIC RAILWAY COMMISSION.
heavy. The population is small. I do not think that we are growing as much
in Placer and Nevada Counties as we did formerly ; but there is more or less
development, especially of the timber interest, all through the mountain
section. The stoppage of hydraulic mining has temporarily decreased the business
somewhat, because it has decreased the population. This will remedy itself,
however, in time.
MOST VALUABLE PORTION OF LAND GRANT.
Q. Which portion of the land grant do you consider the most valuable? A. That
in California.
Q. Do you refer to the land which has been obtained along the main line and
also on the California and Oregon line? A. Yes, sir.
Q. And on the Western Pacific? A. The Western Pacific lauds are all down near
here. All the lands that were supposed to be good for anything were taken up
prior to the location of the Western Pacific Eailroad. They were largely covered
by Mexican grants. The Western Pacific did not get much laud which was considered
valuable, but it is turning out now so that it sells for something. We have
nothing to do with that, however.
Q. Was that the land to which you referred yesterday as having been in some
way or other retained by Mr. McLaughlin? A. Yes, sir ; I think McLaughlin would
have been glad to sell his interest in that land at the time that we bought
the railroad, for $100,000.
POLICY OF COMPANY IN DISPOSING OF ITS LANDS.
Q. What has been the policy and method pursued by the company in disposing
of its lands? A. It has sold its lands at very cheap rates. It has been our
policy to allow people to go onto these lands before we obtained title, and
when we did obtain title from the Government we always gave such parties the
preference at the graded price, not taking into consideration their improvements.
We have not sold our lands in advance of obtaining the patents from the Government,
as we did not think it wise. We have not been able to obtain patents for the
land as we applied for them, and that has been a very serious disadvantage
to us, because if we had had the patents we might have sold the lauds and obtained
the money for them. The lands also would very likely be settled up and furnish
business to the road.
Q. What I want to know particularly is -as to whether on the laud which you
had sold, or which you. had for sale, the opportunities you have afforded the
public have been open, fair, and equal to all applicants? A. I think that
they have been fair, and that the business has been managed with a great deal
of good judgment by our land agents, for the reason that we have scarcely ever
had any complaints, and the people buy lands from us in preference to buying
from the Government because they can get them more easily. The evidence of
this is that we have sold a great deal more land than the Government, even
where the Government land has been alongside.
NO SALES OF LANDS FOR ACCOUNT OF STOCKHOLDERS.
Q. Have there been no cases in which the title to certain tracts of land have
been placed in the names of certain parties in order to have the subsequent
sales made for account of stockholders or directors in the company? A. Never
in a single instance that I know of.
LELAND STANFORD. 2935
Q. Was there not a large tract of kind placed in the name of Mr. Redding?
A. 1 never heard of it.
Q. Who was Mr. Redding 9 A. Mr. Redding was our land agent for a number of
years. I have no knowledge of the circumstance to which you allude.
Q. Have you any knowledge of any tract of land being placed in his name and
subsequently sold for account of some of the stockholders of the Central Pacific
? A. I never heard of it.
Q. Is Mr. Redding in San Francisco? A. He did live here. .He is dead now.
Q. During what years was he land agent? A. I think he became land agent as
soon as we had any land to sell, or about that time.
Q, Were there any large tracts of land acquired from Mr. Redding by some of
the directors and officers of the company? A. I do not think so. I cannot call
to mind any such transaction.
WITNESS BOUGHT SOME RAILROAD LAND.
Q. Has none of that land been conveyed to you I A. I have bought some railroad
land myself.
Q. Through Mr. Redding, the land agent? A. I presume so; either through him
or Mr. Mills. I bought a large tract of land, the title of which was founded
in a Spanish grant, and then commenced buying up land of an inferior quality
what we call sheep laud. There was not much railroad land left, but I bought
some from the railroad company and I bought titles that had passed from the
Government altogether. [ gathered in that way large tracts of laud, worth perhaps
from 50 cents to $2 or $3 an acre. How many acres of that came from the railroad
company I do not know.
Q. Will Mr. Redding's accounts show just how much came to you? A. It may be
since Mr. Redd ing's death. It may have been since Mr. Mills took charge.
Q. Then it was either Mr. Redding or Mr. Mills? A. Our books will show the
whole transaction.
Q. In what counties were these lands 1 A. In Butte and Tehama. I gave all of
those lands to an institution which I am endeavoring to build up. These lands
were principally bought to finish up the tract.
Q. How many years ago? A. Some were bought before that, and I think that I
had this conveyance two years ago.
LAND SOLD TO CHARLES CROCKER OR HIS SON.
Q. Do you know whether any other of the directors of this company have also
bought lands through the laud office from one motive or another? A. VVe sold
a large tract of land I do not know whether it was sold to Charles Crocker
or to his sou. His son is managing it, however. It was a large tract of land
out on the Promontory. I do not know how many acres are embraced in that tract,
but it is quite extensive, and is used for cattle purposes.
Q. That is a ranch, is it not? A. Yes, sir 5 that is a ranch. A party of three
or four have bought it, and Charles Crocker advanced money to his son for his
proportion. Colonel Ilaymond tells me that Charles Crocker advanced all the
money to buy the place, and took the title as security for the advances made
to those parties.
Q. Was the title taken by Charles Crocker?
Colonel HAYMOND. Mr. Crocker advanced the money to purchase it for his son,
for Mr. Buford, and for Mr. Taylor.
2936 ' U. S. PACIFIC RAILWAY COMMISSION.
Q. How large a tract is it I
Colonel HAYMOND. It is a very large tract, and at the time it was bought was
in litigation. It has cost a great deal of money since that time to perfect
the title. The purchasers had a great deal of litigation over it, but they
anticipated that.
The WITNESS. This land that I bought and gave to the university did not amount
to very much, the whole of it. I do not know how much was bought from the railroad
company, but that class of land was worth about a dollar or a dollar and a
half an acre. We sold land in the same neighborhood, about the sale of which
I was consulted, for about 50 cents an acre for a whole township. It lies along
the hills, and is ehiefly lava formation. The lava has come down from the mountains
in former times and overrun all that country, so that it is not worth much
for any purpose. Its only value to me was that it enabled me to straighten
out my tract. Still, however, it counts up, and it is very likely that some
places may be found of 10, 15, or more acres that may be cultivated, not now,
but in the future when land becomes more valuable.
IONE COAL AND IRON COMPANY.
Q. There are one or two companies about which I have not asked questions which
you have included in your report, and in which you represent yourself as being
interested. One is the lone Coal and Iron Company, in which you state that
you own 8,000 shares. What are its relations to the Central Pacific? A. It
sells that company coal, or rather it did sell it.
Q. What does the Central Pacific do for the lone Coal Company $ A. It does
not do anything for it now.
Q. Does it transport its coal? A. Yes, sir ; on its branch. There is no market
at present for that coal. I do not think that there is any purchaser at all
outside of the Central Pacific, and the Central Pacific does not use much of
it, if any, at present.
By Commissioner LITTLER :
Q. Where are the mines located"? A. In Amador County. By Commissioner
ANDERSON :
Q. Are they located at the end of the Amador Branch Eailroad? A. Yes, sir
; on occasions coal becomes very scarce in the market here, and at such times
if the local dealers can advance prices they do so. At such times we have used
the lone coal as far as we well could. It is a very poor quality of coal. It
is not a lignite, but it seems more like clay saturated with oil. It burns
pretty well in the grate, however, and makes a pretty fair fire, but the engineers
do not like to use it in their locomotives, as they say that there is not power
enough in it.
NOT MUCH BUSINESS BETWEEN IONE AND CENTRAL PACIFIC.
Q. At the time that you constructed that branch railroad and for some years
afterwards, was there much business between the lone Coal Company and the Central
Pacific Railroad Company? A. Not much. We used it as far as we very. well could,
because to that extent the coal men here and these foreign coals found a competitor.
When we had no controlling interest in that mine, we oftentimes had to submit
to very high rates for our coal, but since that time we have been able to regulate
prices. The coal companies in British Columbia also now
LELAND STANFORD. 2937
send us a very good article of coal, and the Rocky Mountain Coal Company, as
it is called, in Utah, provides us with an additional supply. It is now used
upon the mountains, and is a very good coal.
Q. When you say that you had to submit to very high rates, do you mean that
the coal company charged exorbitant rates for its coal? A. Not the coal company,
but the coal dealers. The Black Diamond Coal Company used to charge us $8 a
ton for what they now charge us $4.
Q. What price did the lone Coal Company get for its coal? A. I do not know
; probably not much. I guess it was $3 or $4 a ton.
KOOKY MOUNTAIN COAL AND IRON COMPANY.
Q. There is another company called the Eocky Mountain Coal and Iron Company
; where are its mines located? A. They are located over in the Wahsatch range
of mountains, about one hundred miles from Ogden.
By Commissioner LITTLER :
Q. Are they near Evans ton? A. Yes, sir. By Commissioner ANDERSON :
Q. Did 'that company sell coal to the Central Pacific? A. Yes, sir.
Q. To what extent? A. Until it met the wood of the Sierra Nevada Mountains
; that is, when the wood would be as cheap as the coal, it stopped.
Q. Were the transactions extensive? A. All of the eastern end of the line of
the road was operated on that coal. Now we bring it to the Sierra Nevadas to
such point as it can be economically used when taken in comparison with the
cost of wood. Chinamen used to get out a good deal of wood on the mountain
at moderate rates, but the price has now gone up considerably, and we have
found it cheaper to use coal in most instances than to use wood.
ITS CAPITAL STOCK.
Q. How much was the capital stock of the Eoeky Mountain Coal and Iron Company?
A. I do not remember.
Q. Who were the chief stockholders? A. That stock has changed somewhat.
Commissioner ANDERSON. I mean at the time that General Col ton was alive.
The WITNESS. I do not think that it has changed much, if any, since that time.
It belonged to other parties, and we gradually bought it up and got the control
of it. Since that time it has been very largely controlled by our people.
RATES PAID FOR COAL. **"
Q. How were the rates that the Central Pacific paid for coal determined ; through
whose intervention? A. I have had a great deal to say about it. In the fixing
of this rate I was more particularly representing the Central Pacific, and
I have insisted at one time and another upon a little lower rate as I thought
the coal company could afford it. I have never given any especial attention
myself to the coal company.
Q. As matter of fact, were not the rates paid to the Eocky Mountain Coal Company
for coal very high for several years? A. I think not.
Q. Has the Central Pacific not paid as high as $7 and $8 a ton? A. It might
have paid as high a$ that for coal delivered on the line of
2938 -U. S. PACIFIC RAILWAY COMMISSION.
the road, but I do not recollect. I know that the Union Pacific used to charge
very high for bringing it over its road.
By Mr. COHEN :
Q. That company charged $2 per ton, did it not, for freight ! A. Yes, sir j
and I think that that is the charge now.
Commissioner ANDERSON. The Union Pacific charges $6.50 a ton from Eock Springs
east and west.
The WITNESS. We have always thought that they charged us a very high rate for
bringing coal over that line of road to Ogden. I think that they once used
to charge us $2.50 a ton.
By Commissioner ANDERSON :
Q. Did the Kocky Mountain Coal Company do any other business than this coal
business with the Central Pacific? A. Yes, sir ; we have sold coal at Ogdeu
when we could, but not very much, I think.
Q. The main feature of the business was the business with the Cen tral Pacific,
was it not? A. Yes, sir.
ROCKY MOUNTAIN COAL COMPANY PAID FAIR DIVIDENDS.
Q. Has not the Eocky Mountain Coal Company paid very large and frequent dividends
? A. Very fair dividends have been paid ; but I would not undertake to say
how many or how large. All I can say is that I know that the business has been
very satisfactory. We bring considerable coal for the mines in Nevada, principally
at Virginia City. It is not a very heavy trade, however. We also furnish coal
to anybody along the line of the road in Nevada and Utah.
CARBON HILL COAL COMPANY.
Q. I find another company here called the Carbon Hill Coal Company ; . what
company is that? A. A company up north.
By Mr. COHEN :
Q. It is in Oregon, is it not? A. Yes, sir. By Commissioner ANDERSON :
Q. What dealings has that company with the Central Pacific 1 Does it sell coal
to the Central Pacific? A. Yes, sir.
Q. How extensive is that business $ what does it amount to? A. It has never
paid anything. I do not know how much of it comes here by water, but it is
mined to meet this market, and furnishes always a sufficient supply to make
the railroad company more or less independent of foreign coals. When foreign
coal, sells at low rates, there comes less of the Carbon Hill coal 5 and when
the prospect is that the coal is going to be dear, there is a greater force
put on at the mine, and a larger quantity of coal brought down here.
Q. That mine, then, is used as a regulator of prices, is it? A. Yes, sir ;
it is used as a regulator. There is plenty of carbon in the coal, but it is
very fine and disagreeable to run engines with.
Q. Is it dusty? A. Yes, sir ; it is dusty.
BERKELEY BRANCH RAILROAD.
Q. What is this Berkeley Branch Railroad that is mentioned in your list in
the stock of which you are interested? ^A. That is a. little, road
I
LELAND STANFORD. 2939
which runs out to the university near Oakland, and which is operated in connection
with these ferries.
Q. Is it leased separately from any other branch to the Central Pa eific?
A. The Central Pacific runs it.
Q. Under what arrangement does the Central Pacific run it? A. I do not know.
It is a little piece of road 3 or 4 miles long, and I guess the Central Pacific
pays for it.
Q. Does the Central Pacific pay certain rates for the use of it I A. It pays
a rental for the use of it.
Q. Then it is among the leases, is it not? A. Yes, sir; it is among the leases.
It is now leased to the Southern Pacific Company.
Q. It is leased at $200 per mile per month. What was the arrangement before
that lease was made ; how was the use of that road compensated for? A. I do
not remember. What date is that lease?
Commissioner ANDERSON. November, 1880. I suppose that that was about the time
the road was constructed.
Q. How was the use of that branch compensated for $ A. I do not remember.
Commissioner ANDERSON. That is all that I have to ask this witness.
Commissioner LITTLER. As I understand it, Mr. Chairman, you wish to ask some
questions in chief, and you do not wish Mr. Cohen's crossexamination to begin
until you have finished.
The CHAIRMAN. I have some questions that I wish to ask the witness.
LOCAL TRANSFER BUSINESS AT SAN FRANCISCO.
By the CHAIRMAN :
Q. How was the local transfer business of the Central Pacific in San Francisco
organized?
The WITNESS. Do you mean the baggage transfer?
The CHAIRMAN. Yes.
A. I think that it was organized by a man by the name of Kennedy. I think that
he was the organizer of that transfer company.
Q. Who was associated with Mr. Kennedy? A. I do not know.
KENNEDY, LONGr & CO.
Q. Do you recall the firm of Kennedy, Long & Co.? A. I think so. I do
not remember now who the company was.
Q. Did the firm take charge of the business for some time? A. Yes, sir.
Q. Were they organized into a corporation? A. They did have a sort of a corporation.
Q. What was the name of the company? A. I do not remember.
THE SAN FRANCISCO COMPANY.
Q. Was it the San Francisco Company? A. It may harve been. I do not think
that they ever issued much, if any, stock. Mr. Kennedy got into some trouble,
and it became necessary for him to give up the business. Then it was purchased
by other parties. I took a good deal of interest in the company,, for I saw
that it could be made a very great convenience to the public. We never gave
that company any contract as to the length of time that it could have the privileges
which it wished. I would not give it to Kennedy, because I did not know how
well he would do it, and it was very important that the baggage should be r
R YOL IY 39
2940 U. S. PACIFIC RAILWAY COMMISSION.
handled to the satisfaction of travelers. Mr. Kennedy got into debt, or his
company did, and he had to sell out. His successors bought him out and paid
him a certain amount of money enough to cover that indebtedness. Since that
time that company has been doing business without any permanent lease from
the Central Pacific, but only during our will. So long as it does the business
satisfactorily it shall have it. Q. Who were the successors of Mr. Kennedy
? A. Mr. Coleman and Mr. Smith.
TROUBLE BETWEEN CENTRAL PACIFIC AND KENNEDY.
Q. Had the Central Pacific any trouble with Mr. Kennedy? A. I do not know that
we really had trouble, but he wanted to hold on to the business, I believe.
He was not doing it to our satisfaction, however, and he became financially
embarrassed. That is all the trouble that we had, so far as I know.
Q. Did you make any complaint to Kennedy that he was not doing the business
properly? A. I do not remember of any formal complaint, but I know that I
was not satisfied with the manner in which he was
doing the business.
SENATOR GrWIN'S SON-IN-LAW.
Q. Who was Mr. Coleman? A. The only office that I remember his having held
here was that of bank commissioner.
Q. Is he not the son-in-law of Senator Gwin? A. Yes, sir.
Q. Is it not true that Kennedy and his company were dispossessed, to give the
transfer business in San Francisco to Mr. Coleman, at the solicitation of Senator
Gwin? A. I do not remember that. .There would have been no transfer if Kennedy
had kept out of debt and attended to the business in a satisfactory manner.
I do not remember all the particulars, but I know that he did not do the business
to our satisfaction. He got into debt, and constant complaints were made about
it at the time.
Q. Did you have any conversation with Senator Gwin, concerning the transfer
business? A. Yes, sir.
Q. What was the conversation? A. I do not remember definitely ; but I know
that he wanted to get the transfer business. I do not know whether he had an
interest in it or not, but he wanted to get the business for his son-in-law,
Mr. Coleman, and for Mr. Smith.
By Mr. COHEN :
Q. Can you mention the date of this conversation with Senator Gwin I A. No,
sir; we had several conversations. They wanted to getin without paying Kennedy
anything, or buying him out ; but I would not listen to any such proposition.
Q. That was after he had ceased to be Senator, was it not? A. Yes, sir.
Q. Was it not some years after? A. Yes, sir.
STIPULATION OF SENATOR GWIN AS TO TRANSFER BUSINESS.
By the CHAIRMAN :
Q. What was the stipulation on the part of Mr. Gwin as to what he was to do
for the company in consideration of having the transfer business? A. He was
to do the business to the satisfaction of the company. I know this, that I
demanded that in any arrangements that he made
LELAND STANFORD. 2941
with Kennedy, it should be upon the basis that Kennedy's creditors should be
paid, and I believe that they were paid. They wanted a contract allowing
them to do this business as a transfer company for a specified time, but
I declined to do that, and stated to them that I would not bind the company
at all. I told them that if they did the business to the satisfaction of
the company, there was no doubt that they could retain it as long as they
pleased, but otherwise they could* not keep it at all. That is all the contract
that they have CVPT had with the company.
Q. Was there any stipulation with Senator Gwin as to using his influence in
Congress? A. None at all.
Q. Or that he should use his influence in the matter of Congressional legislation
? A. None at all.
SENATOR GWIN IN WASHINGTON.
Q. Did Senator Gwin subsequently represent the company at Washington? A. He
was over there subsequently, I think, and he staid in Washington for some considerable
time. I do not think that I had anything to do with that. I think that he went
there at the request of Mr. Huntington.
Q. Was his business there for the Central Pacific Railroad Company? A. I cannot
say that he went there because of the company alone, but he received compensation
while he was there, or for a portion of the time at any rate, from the company.
NATURE OF HIS BUSINESS.
Q. What was the nature of his business there? A. I do not remember now what
particular interest we had there that we thought his influence would be valuable.
It may have been on account of the Central Pacific, and still I may be mistaken
in that. When I come to think of it, I think that what he was doing there was
in connection with the Southern Pacific. I think so, but I am not certain.
Q. How long did he remain in the service of either the Central Pacific or the
Southern Pacific at that time in Washington? A. I cannot say ; but it certainly
was not over a year. It may have been a year.
Q. Was that service of Senator Gwin rendered to the Central Pacific or to the
Southern Pacific subsequent to the transfer of the local transfer business
in San Francisco to his son-in-law, Mr. Coleman? A. I do not remember that.
NO STIPULATION AS TO SERVICES IN WASHINGTON.
Q. In the conversation with reference to the conveyance of the transfer business
to Mr. Coleman, was there any stipulation as to the servvices that Mr. Gwin
should render in Washington? A. None at all. It was purely a business transaction,
and no favors were shown or expected because of it. I was very careful to make
them understand that there must be an arrangement made with Kennedy & Co.,
and that then, if it was satisfactory to us, they could have the business,
but only at our will. Whether they could retain it or not depended entirely
on whether they could give us satisfaction.
Q. Did he intimate to you in any conversation anything regarding his influence
with Southern Congressional delegations? A. There was not anything of the
kind talked about. It was not necessary between en
2942 U. S. PACIFIC RAILWAY COMMISSION.
ator Gwin and myself. Our personal relations had always been friendly for years,
ever since the time when we traveled on the ocean together. I know that he
was always a very earnest friend of the Pacific Bailroad. He was our friend
when it was supposed that the Southern line was the best line for a road ;
as a member of Congress he was a very efficient friend of the railroad, but
he had nothing to do, of course, with the matter. I do not know where he was,
but he had nothing to do with the passage of the present Pacific Kailroad bills.
Q. How long after his retirement did he enter the service of the Central Pacific
Railroad Company? A. I am not sure as to his being in the service of the Central
Pacific. I cannot recall to mind the particular service that he was expected
to render at Washington, except that whatever it was he was to use his influence
and knowledge of matters with the members and before the committees. It seems
to me that he went before some committee for us.
CONTROL OF PRESIDENT OF ROAD OVER VOUCHERS.
Q. What control have you had as president of the company over the vouchers
to be charged to the general legal expense account? A. Of course as president
of the company I have the right to go and look at everything, but I scarcely
ever have looked into a book or turned over a leaf in one of the books in the
secretary's office. The vouchers, of course, were kept by the secretary.
Q. Did you approve the vouchers as president? A. I have allowed accounts.
Q. Did you approve any of the vouchers charged to the legal-expense account
that you now recall? A. I cannot recall any one, but I have no doubt that
I have approved them.
Q. Are you familiar with the expenses that have been charged to the legal expense
account? A. I used to be, but I have not been very familiar with them the last
two, three, or four years.
Q. Would the vouchers recall to you the purposes for which the expenses were
made? A. I do not think that they would, unless there were items in the vouchers
themselves.
Q. Who else has approved vouchers to be charged to the legal-expense account
? A. Generally they have been approved by whomsoever was cognizant of the services
performed. Probably some of that expense that was incurred by order of anybody
in the law department would be approved by some one of the counsel who may
have found it necessary to employ additional service, or procure service of
any kind. I do not know whether these vouchers will specify what they were
for or not. I do not remember looking at that kind of a voucher, unless some
one brought it to me to be approved or allowed.
MR. RAYMOND'S CONTROL OF LEGAL EXPENSE ACCOUNT. 'I
Q. Who is the present head of the legal department? A. Creed Haymond.
Q. What control has Mr. Haymond over expenditures charged to the legal-expense
account? A. I think that anything that he would do in the way of his business
which he might consider necessary would be approved. In our business we find
it necessary to have an attorney in every county through which our line of
road runs. Then we have several other attorneys and counselors in our office;
and in addition to that, we employ several of the more important firms in this
city, as occasion
LELAND STANFORD. 2943
may require. Colonel Haymond distributes our business to the different attorneys
in such manner as his judgment deems the best.
Q. Do all the counsel and other attorneys report from time to time to Colonel
Haymond as head of the legal department? A. Yes, sir.
Q. How long has Colonel Haymond been at the head of that department? A. Since
the death of Judge Sanderson. There was a gentleman by the name of Sanderson
at the head of the department for a number of years ; but he died a little
over a year ago, and Colonel Haymond succeeded him.
FORMER HEAD OF LEGAL DEPARTMENT, JUDGE SANDERSON.
Q. How long did Judge Sanderson remain at the head of the legal department
?
Mr. COHEN. Seventeen years. From 1869 to 1886.
The WITNESS. I presume that is correct ; I do not remember the exact time.
Q. Had Judge Sanderson the same powers of control that Colonel Haymond has
over the legal department expenses? A. Yes, sir,
Q. Would Judge Sanderson approve vouchers? A. In that department ; yes, sir.
I think that they were usually approved by him, and in come cases, perhaps,
some would be approved by others. They would be approved by who ever rendered
the service or procured it to be rendered. Judge Sanderson was at the head
of the department, and the vouchers would generally have his approval. We had
another attorney who was with us a good many years. He had charge of what you
might call the executive part of the business, and during the time that he
was there he would frequently approve vouchers. He attended to a great many
things, and Judge Sanderson did only that which it was necessary for him to
do. All the minor work was done by some one else.
Q. What was the name of the gentleman who aided Judge Sanderson? A. Robert
Eobinson.
JUDGE ROBINSON THE PREDECESSOR OF JUDGE SANDERSON.
Q. Who had charge of the department prior to Judge Sanderson? A. Judge Eobinson.
I think that Judge Eobinson was the early attorney of the company. Judge Crocker
was an early attorney, but I think that Judge Eobinson was the active one,
doing most of the business prior to Judge Sanderson's time.
Q. So that all the vouchers as to their being correct, I understand from you,
were passed upon during these years by either Colonel Haymond, Judge Sanderson,
or Judge Eobinsou? A. No, sir 5 I do not say that.
Q. Who else would do it? A. I am not sure. Others might do so. If any of these
gentlemen in our employ, perhaps forty or fifty of them, should sign a voucher
and state that they had had occasion to make certain expenditure, it would
be allowed. I am not sure what ones have ever done this, but we have in our
employ here in San Francisco some of the most eminent attorneys of the State.
I do not know that there has ever been any special discretion conferred upon
them, but any bills that they would certify to as having been incurred on behalf "of
the company, I have no doubt would be allowed.
LEGAL EXPENSE VOUCHERS PAID ON APPROVAL OF PRESIDENT.
Q. During these years, were legal expense vouchers paid upon your approval
as president? A, I do not think that a great many were paid
2944 tt. S. PACIFIC RAILWAY COMMISSION.
upon my approval. I am away a great deal, but when I am here I have no doubt
that I do approve such vouchers.
Mr. HAYMOND. I have been accustomed when I have had any large vouchers to take
them to you for your approval. Many times these vouchers would not show the
items going to make up the total, and I wanted some one to approve them. Those
vouchers 1 am prepared to explain.
The CHAIRMAN. I understand from Colonel Raymond's statement to you that all
the vouchers in the legal expense account are so stated or itemized that the
expenditures can be explained.
CHARGES MADE REGARDING LEGAL EXPENSE VOUCHERS.
Mr. HAYMOND. No, sir; that is not so. The vouchers do not always show all these
items. Shortly after I went into the law department there was a complete change
in the method of doing business. We used to litigate with everybody, and had
a suit with everybody who had any claim against the company. We used to take
the representations of our own men in all cases, until the Central Pacific
Railroad Company had over three hundred suits pending against it when I went
into its employ. I frequently found that when we came to trial the reports
furnished us by our own men were not correct. I frequently tried cases myself,
and often spent four or five thousand dollars in a case in order to ascertain
what the truth was. When I had gained all the facts in that class of cases,
I would go to Governor Stanford and tell him that these reports were not correct,
and that I believed that this person or the other person was entitled to so
much money. Frequently when I knew that I was right, I would pay these claims^froni
my own funds, and let the amount run on until it amounted to probably ten or
fifteen thousand dollars. I seldom asked for reimbursement until the amount
was quite considerable, and then I would take the vouchers to Governor Stanford
or to Mr. Hopkins and explain them, and a voucher would be drawn in my favor
for the total. In that way the vouchers would be really payable to me. Previous
to the inauguration of this system we had a great deal of litigation, because
Judge Sanderson looked at everything from the standpoint of the lawyer. The
new method of doing things saved a great many expenditures which had become
necessary under the old system, and it reduced the legal expenses of the Central
Pacific nearly $200,000 in three years. At the present time we have not more
than fifteen or twenty cases pending against the Central Pacific. We have made
peace for the Central Pacific, and this has had a great deal to do with the
change in public sentiment toward that company. We now practically try all
of these cases in our own office. If we find that there is the least liability
on the part of the company, we make a settlement.
POOR HEALTH OF JUDGE SANDERSON.
The CHAIRMAN. I understand that your explanation applies, however, only to
the years 1886 and 1887.
Mr. HAYMOND. No, sir ; for a long time before I became chief counsel 1 did
the principal part of the business, because Judge Sanderson was not very well.
In fact, at the time that I was employed, Governor Stanford explained to me
that I should go into the legal department for the purpose of relieving Judge
Sanderson, who was regarded as the most valuable man in this State, and they
wanted to do everything that
LELAND STANFORD. 2945
they could to preserve his health. They wanted all the work possible to be
kept away from him. Although all the improvements that I made were made in
his, lifetime, and were made by me in his name, they were practically made
without much consultation with him, for he did not want to be bothered with
it. He had never done that kind of business in his life. He was a thorough
lawyer, and would accept the reports of our engineers and conductors as final.
If these reports showed no liability on the part of the company, the claims
would be contested. He would take the word of who ever did the injury that
was complained of, and would care to go no further. After I went there I
managed to have all of this changed, so that now we have comparatively little
litigation and no ill-feeling against us.
WHO CAN EXPLAIN THE VOUCHERS?
The CHAIRMAN. I want to know who is the real party who can explain these vouchers.
Can you tell me that?
Mr. HAYMOND. I can explain many of them, although some of them may have occurred
before my time.
The CHAIRMAN. What period did you cover? .
Mr. HAYMOND. That is difficult for me to say. The other day I thought that
I had been with the company but five years, but when I came to look at the
books I found that I had been there six years.
The CHAIRMAN. Would that cover your entire knowledge of the v oncher.s?
Mr. HAYMOND. Yes, sir. There might be many vouchers that did come to me for
my approval, and while they would be perfectly proper they would not show the
items of the expenditures. There might be many .of them on which it would not
be proper to state the items or to give any statement showing just where the
money went.
The CHAIRMAN. Prior to this six years, who can explain to the Commission these
expense vouchers?
Mr. HAYMOND. I do not think anybody living.
The WITNESS. Judge Eobinson is not in condition to explain anything. I think
that he overtaxed himself, and he has not been able to be around or to do any
business for some years.
Q. Where is Robert Eobinson now? A. He is living in this city.
GENERAL EXPENSE AS DISTINGUISHED FROM LEGAL EXPENSE
VOUCHERS. *
Q, Who approved the general expense account vouchers as distinguished from
the legal expense vouchers? A. I do not know.
Q. Did you at any time approve any vouchers charged to the general expense
account, as president? A. Yes. I cannot remember any particular ones, but I
know that I frequently approve accounts. There are regular officers who approve
accounts, but sometimes they come to me and ask me to approve them.
Q. Were all the items of expense in a voucher, approved by you and charged
to the general expense account, explained before your approval "? A. They
were explained to my satisfaction.
Q. Can you explain to the Commission, in detail, the items of expenditures
in the several vouchers approved by you and charged to the general expense
account? A. I do not suppose that I could explain one, or tell the year, except
by the date of the vouchers themselves.
2946 U. S. PACIFIC RAILWAY COMMISSION.
THEOPHILUS FRENCH.
Q. Do you know Mr. Theopkilus French? A. Slightly.
Q. When did you first become acquainted with Mr. Theophilus French? A. He
was out here as a Government commissioner to examine our business, books, accounts,
and so forth. He was appointed United States Auditor of Eailroad Accounts.
By the CHAIRMAN. He was the first auditor in 1878 of railroad accounts.
Q. What was the date of his visit to San Francisco? A. I do not remember.
Q. Do you know whether it was in 1880 or 1882, or in 1879? A. I cannot tell
you the year. It was somewhere about that time. It was some years ago.
Q. Did you have any conversation with him while he was here? A. Very little.
Q. Did he examine the accounts of the company? A. I think that lie was around
the office with his accountants for several weeks.
Q. Have you had any knowledge at any time of the report that he made on the
condition of the legal expense and the general expense accounts? A. I presume
that I have seen the report, but I cannot now remember anything about it.
Q. Were you asked for any explanations?
The WITNESS. By whom?
The CHAIRMAN. By Mr. French.
The WITNESS. I do not think that I had any conversation with him about the
accounts. I have not the least recollection that he ever asked me to explain
anything.
EMPLOYED FOR ONE OF THE COMPANIES.
Q. Was he ever employed by the company? A. It seems to me that after he ceased
to be railroad auditor he was employed by Mr. Huutington for some one of the
companies. I think that I heard Mr. Huutington say that he had employed Mr.
French to do something or other, but I do not remember.
Q. Do you remember the compensation that was paid Mr. French for his services
? A. No, I do not.
Q. Do you know whether it was five thousand or six thousand dollars a year
? A: I do not know anything about it. I have no idea that I ever heard it mentioned,
or that 1 ever asked any question with regard to it.
Q. Was his employment considered by the board of directors? A. I do not think
so. I call to mind the fact that for some reason and I presume that Mr. Huntington
told me why he employed him Mr. French was employed by the company. Mr. Huutington
wanted him for something or other. I am sure that he told me that he had either
employed French or was going to employ him. That is probably the only conversation
that I ever had with anybody about it.
Q. How long after he was railroad commissioner was he employed by your company
? A. That I cannot say.
CHARACTER OF HIS EMPLOYMENT.
Q. I call attention to the exhibit submitted to the Commission in answer to
interrogatory Ko. 32, wherein Agent Theophilus French appears with an annual
salary of $G,000 from April 1, 1882, to March 31, 1885.
LELAND STANFORD. 2947
I will ask you to examine it, and see whether it recalls anything to your mind
of the character of the employment of French by the company? A. April, 1882,
to March, 1885, would be three years. I have handed him this statement as
it was furnished to me by Mr. Miller, and that is really all that I know
about it. In regard to this French matter, my recollection is, as I have
already told you, that Mr. Huntingdon told me that he either had employed
him or was going to employ him in and about our business.
Q. What kind of business was French to do for you? A. We have always had more
or less business before the Departments in Washington, and I presume that he
was to be employed to attend to that. I cannot say as to that, however.
Q. If he was employed by the company in 1882 it must have been soon after he
severed his connection with the Government at Washington as Eailroad Auditor,
must it not? A. I do not know what time he severed his connection with the
Government. Was it by expiration of his term, or did he resign?
The CHAIRMAN. I do not remember.
The WITNESS. I do not know anything about that.
The CHAIRMAN. Has he been employed by the Southern Pacific Company since 1885
J?
A. Not to my knowledge.
Q. Did Mr. Huntiugton give him a recommendation to you at the time of your
conversation with Mr. Huntington regarding the employment of Mr. French? A.
I did not employ French.
HUNTINGTON REGARDED FRENCH AS A VALUABLE MAN.
Q. At the time of the employment of French or before that time when you had
a conversation with Mr. Huntington, did Mr. Huntington explain to you the character
of the ability that Mr. French would bring to the road! A. I remember that
he thought that French, with his knowledge of our matters and of the Departments,
would be a valuable man. That is about the general idea. As to his peculiar
qualifications for the place I do not remember that they were discussed.
Q. Did French write any letters to you? A. Not to my recollection.
Q. Have you read any of the letters that French has written to Mr. Huntington?
A. I do not think that 1 ever did. Still, I might have done so. Such a thing
as that may have occurred without my recollecting it.
Q. How long has Mr. French been out of the employ of the Central Pacific?
A. I do not know.
Q. Has he been employed by the Southern Pacific Company? A. I do not know
anything about his employment of any kind, except what I have told you, two
or three times over.
Q. Did Mr. French make any suggestion to you or to Mr. Huntington as to his
knowledge of the affairs of the Central Pacific road, and what he was going
to do with that knowledge? A. I do not remember it.
PUBLICATION BY FRENCH CONCERNING CENTRAL PACIFIC.
Q. Are you aware of a publication made by Mr. French concerning the affairs
of the Central Pacific which appeared in the New York World t A. I saw it at
the time. m
Q. Do you know of any conversation or any meeting between Mr. Huntington and
Mr. French as to the Dublication of that article prior
2948 tT. S. PACIFIC RAILWAY COMMISSION.
to its being published? A. I am riot sure whether Huntington told me that
French had been to him or not regarding that publication. I have an impression,
and yet I do not recollect it, or where it came from, that he had been to
Huntington before that publication.
Q. Did Mr. French complain to Mr. Huntington that you had a knowledge of his
dismissal? A. I do not know anything about French's complaint. I say that
I have an impression, which I received either from Mr. Huntington or some one
else, that French had been after Mr. Huntington about railroad matters before
that article appeared in the World.
PURPOSE OF FRENCH'S VISIT TO HUNTINGTON.
Q. What impression have you now or had you then, that you can recall, of the
purpose of the visit of Mr. French to Mr. Huntington I A. I shall have to refer
you to Mr. Huntington about that. I was in Washington at the time, and I do
not think that I saw Mr. Huntington for some time afterwards.
By Mr. BERGIN :
Q. You do not know anything of your own knowledge about this matter, do you
1 A. I do not remember whether I got it from Mr. Huntington or whether I had
it from someone else that French was a blackmailer.
By the CHAIRMAN :
Q. Did Mr. French make any threat against the company and as to the account
of his dismissal from his employment! A. I never heard of it. I do not know
when he was dismissed and could not state, prior to this conversation, that
I had ever heard that he was in the employ of the company for any considerable
length of time. I suppose that it was about the time that I went to Europe
to be gone some considerable time that Huntington told me about French. 1 think
that occurred just prior to my leaving for Europe, and I do not believe that
I ever heard any mention again of the name of French until since this publication
in the World.
Q. What did you hear then? A. 1 do not think that I have heard Mr. Huntington
speak of French except contemptuously.
Q. What did you say to Mr. Huntington concerning French's course? A. I do
not remember what I said. I remember what I thought, if you want that.
THOUGHT FRENCH TRIED TO BLACKMAIL HUNTINGTON.
Q. What impression had you of the conduct of Mr. French? A. I thought that
he had tried to blackmail Huntington for some purpose or other. That is what
I thought.
Q. Did you talk to Mr. Huntington about French? A. I do not remember.
Q. Did you drop the subject there? A. I do not know whether I dropped the
subject or not. I only had the impression. That is all.
Q. Are you unable to recall the fact. It has only occurred within the last
few months, has it not 9 A. I do not recall the fact.
Q. You remember the publication, do you not? A. I remember the publication
in the World. That was some time last winter.
Q. Then your thought in relation to his conduct was subsequent to the publication,
as I understand you? A. Yes, sir j I do not know that
LELAND STANFORD. 2949
I ever bad any occasion to think ill of Mr. French until I saw this. The first
notice that I had of it was what I saw in the World.
Q. With whom did you talk about the publication after that! A. I do not know
that I talked much with anybody about it.
R. FRANCHOT.
Q. Were you acquainted with Mr. B. Frauchot? A. Yes, sir.
Q. When did your acquaintance begin? A. A long time ago. I do not remember.
Q. Was it subsequent to the organization of the railroad company?A. Yes, sir
; it was subsequent to that.
Q. Was he employed by the company 9 A. Yes, sir.
Q. How was he employed? A. He was employed as an agent, repre sen ting our
affairs at Washington more particularly.
Q. How was he employed? A. Sometimes I guess he would do al most anything
that he was called upon to do in the general interest of the company, but more
particularly as an agent at Washington.
CHARACTER OF FRANCHOT 7 S DUTIES AT WASHINGTON.
Q. What was the character of his duties at Washington? A. Representing generally
the interests of the company with the Departments and with such people as might
become of consequence members of Congress, very likely. He had standing there,
and had many friends among them.
Q. Had he any power as to the expenditure of money? A. I cannot say. He never
had any such power from me. I do not remember that I ever gave him any positive
directions with regard to the business.
Q. With whom did he deal as to his expenses account in Washington, with which
officer of your company? A. He was immediately under Mr. Huntington, and anything
of that kind would go through that source.
Q. Was he a member of Congress prior or subsequent to his employment by the
company I A. I do not know when he was a member of Congress. I was not acquainted
with him at that time. I think that it must have been prior to any employment
by the company.
VOUCHER IN FAVOR OF FRANCHOT.
The CHAIRMAN. I call for the production from the general expense account of
1869, December 10, of voucher in favor of E. Franchot, expenses, $500.
Mr. COHEN. Have you not got it already? You have most of our vouchers.
The CHAIRMAN. If we have got it, you need not produce it.
The WITNESS. Is Franchot on that list you have?
Mr. COHEN. It is on the list. It is on the list attached to your answer to
question 32.
By Commissioner ANDERSON :
Q. Who made that list? A. It was furnished to me by Mr. Miller.
Q. I notice one or two omissions which I do not understand. You have several
distinguished gentlemen to whom money has been paid whose names do not appear.
April 24, 18G9, Roscoe Conkling appears to have received $10,000. I do not
know why that was omitted.
2950 U. S. PACIFIC RAILWAY COMMISSION
Mr. HAYMOND. He was not in the regular employment of the company, but he has
been paid fees from time to time for arguing cases in the Supreme Court of
the United States. I suppose that the railroad company has as much right
to employ him as it has to employ anybody else.
MOST PROMINENT LAWYERS OF THE COUNTRY EMPLOYED.
Mr. COHEN. You will also find that the company has employed at various times
Mr. Edmunds and Mr. Evarts, and a number of the most prominent lawyers of the
-country.
The CHAIRMAN. Nobody questions the right of the company to employ these men,
or the right of these men to accept that employment. We simply ask these questions
for our information.
The WITNESS. Everything that we have done might probably be considered as objectionable
by a certain class of people. I will say that Mr. Conkling was employed on
a number of occasions to argue cases in the Supreme Court of the United States,
and I believe, although I am not certain, that I once* engaged his services
myself. At any rate,I talked with him about it, but whatever has been paid
I think has always been settled by Mr. Huntington.
OFFICERS RECEIVING $5,000.
Mr. COHEN. Is not your inquiry confined to those on the pay-roll who receive
an annual salary?
Commissioner LITTLER. An annual salary of $5,000.
Commissioner ANDERSON. Or compensation. It is in the act.
Mr. HAYMOND. Will you please look and see?
Mr. COHEN. Congress empowers this Commission to inquire into the amount of
the annual salaries or compensation that are now, or at any prior time have
been, paid to any officer or employe" of said company, when such salary
or compensation amounts to $5,000 or more per annum, and the names of the persons
now receiving or who have heretofore received such salaries or compensation.
This certainly does not apply to special employment.
The WITNESS. Mr. Conkling has never had any salary from us. He has had several
fees for his services. If that is the construction it is all right, but at
any rate it is immaterial.
Mr. HAYMOND. It is necessary to protect the name of Mr. Conkling. He never
received a cent that he was not entitled to, and I do not see why anybody in
any manner should impugn his official conduct as a Congressman.
NO -ONE'S CONDUCT IMPUGNED.
Commissioner ANDERSON. His conduct is not impugned by showing that he received
a fee of $10,000.
The CHAIRMAN. We are not impugning the conduct of anybody.
Mr. HAYMOND. I do not care, so far as I am concerned, what facts are brought
out on this investigation ; but only the proper construction should be placed
upon them. I see no objection to stating all the facts, because I do not believe
that any of you gentlemen regard that there is anything wrong in it. Mr. Conkling
was publicly employed, and appeared in the Supreme Court of the United States
in some of the greatest cases ever argued there, and in one of the greatest
questions ever decided by that court.
LELAND STANFORD. 2951
Commissioner ANDERSON. Not in 1869. Did he argue the Thurman act case?
Mr. HAYMOND. That was one ; and the question argued in that case was whether
Congress had power to. impair the obligations of a contract, which the Supreme
Court of the United States decided that it could do. Since then, I believe,
it has decided to the contrary.
AN ILLOGICAL DECISION OF THE SUPREME COURT.
The WITNESS. One of the most illogical of the decisions of the Supreme Court
was this one which decided that the clause in the Constitution prohibiting
a State from passing any act impairing the obligations of contracts did not
apply to the United States, because it did not say in the Federal Constitution
that Congress should not pass any act impairing the obligation of a contract.
Some of them satisfied their judgments with that kind of reasoning.
Bp the CHAIRMAN :
Q. Do you recall any expense made by yourself in 1875 and charged to the general-expense
account in the month of December? I refer to the voucher, December 31, 1875,
Leland Stanford, $171,781.89, charged to the. general-expense account.
Mr. COHEN. We would like time to consider whether we should make objection
as to that.
The WITNESS. What objection is there to it?
Mr. HAYMOND. It may possibly never have been charged to the expense account.
Mr. COHEN. The question is, whether he recollects it.
The WITNESS. Are there vouchers for it?
Q. Would the voucher aid you in recalling the expenditure? A. If there is
anything on it it might do so.
The CHAIRMAN. I call for the production of the voucher of December 31, 1875.
The WITNESS. Of the fact itself I do not remember anything.
CALL FOR VOUCHERS.
The CHAIRMAN. I also call for the voucher of December 1, 1875, L. Stanford,
$8,777.15^ charged to the same account ; also, same year, 1875, the voucher
of February 7, L. Stanford, $20,000 5 September 3, 1878, L. Stanford, $12,000
; legal-expense account, December, 1875, L. Stanford, $15,117.33; November
12, 1878, L. Stanford, $46,816.94; also, September 27, 1879, L. Stanford, $38,156.03.
Kecurriug to the general-expense account, September 7, 1875, L. Stanford, $50,000,
we would also like that voucher. Without calling for any more at present, I
ask for the production of those vouchers this afternoon.
Mr. COHEN. I think that you have all the vouchers here.
Commissioner ANDERSON. We have all prior to 1872, and these are subsequent
to that time.
Mr. COHEN. I do not think that we can get them here by 2 o'clock, but we will
try.
2952 U. S. PACIFIC KAILWAY COMMISSION.
PALACE HOTEL, SAN FRANCISCO, GAL.,
Friday, August 5, 1887
. Afternoon session.
The CHAIRMAN. Are you ready to produce the voucher with reference to the payment
to Mr. Theophilus French for the sum of $6,000, named in the exhibit produced
by Mr. Stanford $
Mr. COHEN. We will produce every voucher that you call for that is pertinent
to this inquiry ; but you called for them just before the adjournment, and
we had no time except to get our lunch and no time for consultation, and I
have not been to the railroad office; but every voucher that you called for,
that ought to be produced, we certainly will produce, but we cannot produce
them now, at this moment.
NO QUESTION AS TO PRODUCTION OF VOUCHERS.
The CHAIRMAN. Is there any question about the production of the vouchers?
Mr. COHEN. I know of none now ; but I thought that we would take Saturday afternoon
if you were not sitting at that time, or Sunday, if necessary, to hunt up all
these papers, and whatever we can produce we will have here Monday morning.
We cannot have them this afternoon very well, unless you adjourn so that we
can go for them. There is a very large hole now in the place where vouchers
are kept, for many vouchers have been delivered to your secretary.
The CHAIRMAN. In order to examine Senator Stanford it is necessary to have
the five vouchers that I called for, and I understood at the adjournment that
there would be no trouble as to the production of those vouchers.
Mr. COHEN. No, sir ; but there is a misunderstanding. I did not so understand
it.
The CHAIRMAN. I desire the following vouchers :
December 31, 1875, Leland Stanford.. . $171, 781. 89
On December 31, 1875 8,877.15
February 17 20,000.00
September 7, Leland Stanford 50,000.00
November 1,1877 83.418.00
On February 14, 1878 10,000.00
1875, charge* for legal expenses, L. Stanford 15, 137. 00
November, 12, 1878, L. Stanford 18,168.71
September 27 38,156,03
Mr. COHEN. There has been a misunderstanding. I did not know that you wanted
them this afternoon or I would have gone to the railroad office and hunted
them up.
Commissioner ANDERSON. I think the best way would be to make a list now of
all the vouchers you want, and give them plenty of time to get them together
and have them here Saturday.
CALL FOR VOUCHERS. 2953
CALL FOR SPECIFIC VOUCHERS.
The CHAIRMAN. Very well ; I will make a call for the following :
...Mr. COHEN. What is this from I
STATEMENT FROM THE NEW YORK WORLD.
The CHAIRMAN. This is a statement of the date January 15, 1887, published in
the New York World, with reference to these vouchers of the expense account.
Now, Mr. Cohen, we ask for the production of the vouchers that have been read,
? R voi, iv 40
2956 U. S. PACIFIC KAILWAY COMMISSION.
Mr. COHEN. Very well. Will you tell me for the vouchers of which company you
are asking?
The CHAIRMAN. For those of the Central Pacific.
Mr. COHEN. Will you oblige me with your copy of the New York World from which
you have been reading, so that I will not have to have the stenographer write
it out again.
The CHAIRMAN. I can't let you have my copy as it is the only one I have.
Mr. COHEN. Can we copy it? I suppose a copy of an indictment is all a prisoner
can ask for. He is not entitled to the original.
Mr. HAYMOND. Does that purport to be a copy of Mr. French's reports?
AFFIDAVIT OF THEOPHILUS FRENCH.
The CHAIRMAN. This is an affidavit made by Theophilus French. For the purposes
of your examination, and the other officers of the Central Pacific Company
with reference to these vouchers, it is absolutely necessary that we have all
the vouchers before us, and therefore they are called for.
Mr. COHEN. When do you wish the vouchers?
The CHAIRMAN. Just as soon as they can be produced. We wanted to go on to-day
so we could close up this legal expense account and general expense account.
Mr. COHEN. You are asking a little more than can be accomplished in an hour,
but I would suggest for the convenience of all parties thatr we will hunt up
all the papers that you have called for so as to produce all that we have on
Monday morning all that we have that will give us plenty of time.
Mr. HAYMOND. Mr. Miller says that it will take three days to get these out,
Mr. COHEN. Well, we will produce them.
The CHAIRMAN. Well, we will fix three days ; say Wednesday morning at 10 o'clock.
The paper from which I read the list is a published copy, and of course public
to the world, but it is the only copy that I have. So far as Senator Stanford
is concerned,! will not need him any further until Wednesday morning.
MR. STRONG PRODUCES LETTERS TO SUPPORT HIS STATEMENT.
Mr. BERGTN. Is it worth while encumbering the record with those letters produced
by Mr. Strong?
The CHAIRMAN. We do not encumber the record. Mr. Strong produces these letters
in support of his statement.
Mr. BERGriN. Yes ; still you would not offer them unless they were designed
to have some effect, or some pertinency to the case, and these letters are
most of them the merest statements of parties, and do not constitute any element
of evidence whatever.
The CHAIRMAN. Without reference to what Mr. Strong desires, they constitute
a very important matter of information, so far as his general statement is
concerned. The facts were brought out on cross-examination by Mr. Cohen concerning
his relations with the company, and it was apparently developed by the examination
that Mr. Strong was without interest. It was shown afterwards by the production
of the balance sheet that he had an interest in the company in its early organization.
In confirmation of the statement made by him to that effect he has produced
these letters.
EXPENSE OF CONSTRUCTION. 2957
ENDEAVORING TO ASCERTAIN ACTUAL EXPENSE OF CONSTRUCTION.
Mr. BERGIN. Grant that it is so, still is it not as well to keep to the substantial
point of the investigation, which, as I understand, is that you are endeavoring
to ascertain what is the actual expense of construction. These personal matters,
it seems to me, are entirely outside of that investigation.
The CHAIRMAN. Well, I call your attention to the fact that Mr. Judah, the first
engineer, made an estimate with reference to the construction of a road across
the Sierras, and that estimate is here, and we offer that as a matter of history,
and that estimate is produced by Mr. Strong.
Mr. BERGIN. That, of course, is a mere unsworn estimate and a matter purely
conjectural.
Commissioner LITTLER. I think they can go in for what they are worth.
Commissioner ANDERSON. The report is not going to hurt you ; you do not have
to pay for printing it.
Mr. BERGIN. That is undoubtedly true, but at the same time where it can subserve
no useful purpose, and is simply airing old resentments and old feeling in
regard to matters that are past and gone and can reflect no light upon the
object of the investigation of the Commission, it hardly seems proper.
ARE THE LETTERS GENUINE!
Commissioner ANDERSON. Well, suppose you gentlemen agree as to whether the
letters are genuine or not.
Mr. RAYMOND. Suppose Mr. Strong were to look at the books of the Central Pacific,
and also at the record of the Lombard case and refreshed his mind as to when
his stock in law passed from him ; of course how far it passed in equity is
another question, and we could give that to you in a nutshell.
The CHAIRMAN. Mr. Strong was a director of this company for four years, and
was associated with Messrs. Hopkins, Crocker, Huntington, and Bailey when they
were directors. All the records he produced are connected with the early organization
of the Central Pacific, and that is all that he has produced with reference
to the future construction of a road across the mountains.
GENTLEMEN TO BE EXAMINED ON THE SUBJECT.
Mr. COHEN. If these letters should go in we would like an opportunity of examining
Mr. Huntington and Mr. Crocker in reference to their connection with Mr. Strong
; he has said that these were the members of the direction with whom he had
more conversations and had more direct communication than with Governor Stanford.
Before the Commission close their labors we would like to examine the gentlemen
on the subject of these letters.
Commissioner ANDERSON. We expect to examine Mr. Huntington in New York, and
Mr. Crocker we shall only be too glad to examine if we have an opportunity,
but I understand that his health is very poor.
The CHAIRMAN. Do you desire these papers read?
Mr. LITTLER. No, I do not desire to read them, but I am in favor of printing
them for what they are worth.
2958 U. S. PACIFIC RAILWAY COMMISSION.
Mr. BERGIN. As tax-payers we protest against this wasteful extravagance with
our money.
Commissioner LITTLER. If you will figure out your share of the taxes the Commission
will pay it.
PALACE HOTEL, SAN FRANCISCO, CAL., Friday, August 5, 1887. LELAND STANFORD,
being further examined, testified as follows :
WHERE WAS THE BASE OF THE MOUNTAINS.
By the CHAIRMAN :
Question. Will you look at that paper and state what it is? Answer. Mr. Judah,in
some of his early reports, fixes the base of the mountains at somewhere about
Eoseville, and we assume that that was about it until we came to examine to
find out where to fix the base, and when we did that we discovered that there
was nothing definite in regard to the base unless we took the geological base,
and the geologists we found, and particularly Dana, had described what was
the base of the mountains. Then when we came to take the line of the road,
there was no one point where you could put your finger and say, "There
the base commences, taking the gradients of the road." I explained that
to you yesterday. Finally we took the opinion of the State geologist, a very
eminent man by the way, Mr. Whitney, and the surveyor-general of this State,
and the United States survey or- gen era! in this State. They gave this their
opinions. I don't remember how those came to be procured, whether they were
appointed to be a commission or not ; but they gave their opinion. Some gave
it to one and some to the other; but 1 think that Whitney fixed the base at
what he called the geological base ; that is, where the mountain soil and rock
came close down to the valley of the American Eiver. Then there was a constant
ascent of the mountains. That was Whitney's idea, according to my recollection.
Another important point was that, having found the base, it was to be for 150
miles most mountainous and difficult of construction, and the first 150 miles,
commencing at the point that was established, took us out over the mountains
onto the Truckee meadows, where there was a corresponding grade. These were
what substantially determine the final location, and I do not think that there
was any substantial difficulty, only there was a variety of opinion at first
about the base. Finally they determined that.
AGREEMENT ON WHAT SHOULD BE THE BASE.
I think that we all agreed on what ought to be the base, and I have never had
any doubt but that it was the only base that could be found, unless it could
be determined without reference to the grade it came down. The base came down
nearer to the river, really four miles nearer to the American Eiver. If Dana
had been called upon to fix the base he would have fixed it four miles nearer,
because the mountain soil and rock came down four miles closer to the American
Eiver. I speak of that because Mr. Strong alludes to some difference, and I
thought I would explain what the difference was. I do not think there was any
ill-feeling connected with it, and I do not remember in what year the President
fixed the base. It was finally established by the President,
DANIEL W. STRONG.
2959
PALACE HOTEL, SAN FRANCISCO, GAL.,
Friday r , August 5, 1887. DANIEL W. STKONG, being further examined, testifies
as follows:
PRELIMINARY SURVEY ACROSS THE SIERRA NEVADA MOUNTAINS.
By the CHAIRMAN :
Question. Will you please examine this paper and state what it is? Answer.
This was a document that was drawn up for the purpose of getting subscriptions
towards the preliminary survey across the Sierra Nevada Mountains and to ascertain
the feasibility and practicability of building a wagon road across them.
Q. When was it drawn up? A. I think it was in 1859.
Q. What is the date of it? A. I do not see any date on it.
Q. By whom was it drawn? A. There is a date on it $ it is 18GO.
Q. In whose handwriting is it? A.. The body of the instrument was drawn up
by a man by the name of Frank Moore, who was Wells, Fargo & Co.'s agent
at the time in Sacramento.
Q. Did you secure the names attached to it? A. I didj sir.
SUBSCRIPTIONS TO CARRY ON SURVEY.
The paper was marked " Exhibit No. 1, August 5, 1887," and is as
follows :
Whereas from information derived from reliable sources it is believed that
there is a pass through the mountains a little north of the present emigrant
road from Dutch Flat to the Truckee River which offers greater facilities for
the construction of Pacific railroads than any route hitherto discovered or
brought to the notice of the public, for the purpose of establishing the fact
and at the same time examine the route for a wagon road over the mountains,
it is proposed to make a preliminary survey of the route, and for that purpose
to secure the services of a competent engineer, with instruments necessary
to ascertain altitudes and determine the practicability of the route for a
railroad. To do so will require some money to defray expenses, estimated at
$500.
We, the undersigned, therefore agree severally to pay the sums set opposite
our names, to be expended for the objects above stated.
Dutch Flat, June 26, 1860.
B. F. Moore (paid) $10.00
S. L. Bradley (paid) 10.00
D. W. Strong (paid) 10.00
H. C. O'Neill (paid) 10.00
V. W. Blanchard (paid) 5.00
Thomas G. Sloan (paid) 2.50
C. E. Nannon (paid) 2.50
H. W. Nelson (paid) 2.50
Miss Cohen (paid) 2.50
H. Sicraan (paid) 1.50
John V. Thomas (paid) 5.00
T. H. Willita & Co. (paid) 10.00
Samuel B. Miller (paid) 5.00
B. H. Barton (paid) 5.00
Moses Heath (paid) 5.00
G. P. Beal (paid) 5.00
W. C. .Richmond (paid) 10 00
John Boho (paid) 5.00
L. C. Blairs (paid) 5.00
S. Herman (paid) 5.00
G. Seflfers (paid) 7.50
G. Freeman (paid) 5.00
J. T.Mathewson (paid) 5.00
C. M. Koop (paid) 5.00
JohnZerr&Co (paid) 15.00
James Scuff (paid) 5.00
JohnS. Colgood (paid) 5.00
J. H. Stone 2.50
C. Z. Thon (paid) 3.00
R. Spenk (paid) 1.00
W. Parsone 2.50
C. W. Miller (paid) 10.00
A. J. Jackson 2.50
E. Mattoon (paid) 1.00
John McNally (paid) 1.00
E. L. Bradley (paid) 1000
S. T. Mathewson (paid) 5. 00
Cash(paid) 2.50
A. Friedman (paid) 5.00
J. J. Johnson x paid) 2. 50
L. Arnstein (paid) 5.00
I. H. Rimekel (paid) 2.50
J. H. Laphams (paid) 2.50
L. Sliowl (paid) 2.00
Burkharter, Sevnol & Co 2.50
H. Davis (paid) 2.00
T. Doore (paid) 2.50
Q. When did you receive the paper which you have in your hand? A. About the 20th of November ; it came to me by mail.
2960 U. S. PACIFIC KAILWAY COMMISSION.
Q. Just read the date. Do you know the year that you received it? A. I think
it was in the year 1861. 1 would not be certain whether it was 1861 or 1862.
I do not recollect about date.
Q. From whom did you receive it? A. I received it from Mr. Judah.
The CHAIRMAN. I offer that paper in evidence. It is merely an engineer's report
that was circulated at the time.
Commissioner ANDEESON. It seems to be dated November, 1860.
LETTER FROM T. D. JUDAH.
The paper was marked "Exhibit No. 2, August 5, 1887," and is as follows
:
SACRAMENTO, November 10, I860.
DEAR SIR: The object of this communication is to direct attention to some newly
discovered facts with reference to the route of the Pacific railroad through
the State of California.
Confident of the existence of a practicable line across the Sierra Nevada Mountains
nearer and more direct than the proposed line via Madelin Pass and headwaters
of the Sacramento, I have devoted the past few months to an exploration of
several routes and passes through Central California, resulting in the discovery
of a practicable route from the city of Sacramento upon the divide between
Bear River and North Fork of the American, via Illinois Town and Dutch Flat,
through Lake Pass on the Truckee River, which gives nearly a direct line to
Washoe, with maximum grades of 100 feet per mile.
The distance from Sacramento to Summit is 102 miles ; to State line about 115
miles ; to Virginia City about 162 miles. The elevation of pass is 6,690 feet.
The importance of this information is apparent, when we consider this line
effects a saving in distance over the northern line of 150 miles, and avoids
the passage of two canons on the Sacramento River 21 miles long, estimated
by Lieutenant Beckwith to cost $4,200,000, while it affords a direct line to
Washoe across the narrowest portion of the State and a local road for the business
of Sacramento, Placer, and Nevada Counties.
The Pacific railroad bill, as matured by last Congress, and which is made the
special order for the third Tuesday in December next, provides the following
appropriation for the construction of the road through California, viz : $13,000
per mile from navigable waters of the Sacramento River to the base of the Sierra
Nevadas ; thence $24,000 per mile to the summit ; thence an additional $3,000
per mile for each degree of longitude crossed until 109th degree is reached.
Inasmuch as the road through the State of California must be constructed by
an organization effected under the laws of the State, it is proposed to immediately
organize a company for the purpose of constructing the road through the State
upon this route in anticipation of the passage of this bill ; to procure the
recognition of this as the line of the Pacific railroad through California
; to procure the appropriation appertaining to this end of the route, and to
construct the road under this organization.
This will be effected either by inserting the name of this company directly
in the bill as the company to whom these appropriations shall come, or by an
arrangement with the corporations or trustees named in the bill.
In organizing a railroad company in this State, the law requires that $1,000
per mile shall be subscribed and 10 per cent, paid in. The estimated length
of the road to the State line is 115 miles, requiring a subscription of $115,000,
on which 10 per cent., or $11,500, is required to be paid in. It is proposed
to make with this 10 per cent, a thorough, practical railroad survey, establishing
the grades, cuttings, fillings, and to make the necessary maps, profiles, estimates,
reports, &c.
To the accomplishment of this end, the instrument required bylaw has been drawn
up, and has, in the towns of Dutch Flat, Illinoistown, Grass Valley, and Nevada,
received a bona-fide subscription (requiring a payment of $7,000), to be made
up in the cities of San Francisco and Sacramento. It is not considered necessary
to make an urgent appeal for subscriptions, but to simply present a plain statement
of the facts to a few persons of responsibility and influence in those cities
who feel an interest in the matter, who will subscribe in good faith, and who
are able to pay in the 10 per cent, without embarrassment. To this end your
co-operation is respectfully solicited and a subscription from yourself asked.
The plan will receive the support of our delegation in Congress, and Col. Baker
carries on with him a profile of the route. It has also received the approval
of Gov. Downey and many other influential and prominent gentlemen. Messrs.
Burch and
DANIEL W. STRONG 2961
Scott, and Mr. Curtis, chairman of the Pacific Railroad Committee in Congress,
have been fully posted up in regard to this movement.
It is intended that no further call than the 10 per cent, required by law shall
be made ; and no further assurance of this statement seems necessary when it
is known that the law compels the subscription of the whole capital stock,
with 10 per cent, paid in, before any additional assessment can be called.
I estimate that the entire road can be graded for the amount of appropriation
supposed to be given by Government, leaving only the iron, rolling stock, &c.,
to be provided for by other means. An issue of first-mortgage bonds of $12,000
per mile will furnish this material.
A bill is also before Congress providing for an appropriation of 4,480 acres
per mile of Government lands. Mr. Burch will press this bill in the next Congress.
The road may connect either with the Sacramento Valley road at Folsom, or with
the California Central road at Lincoln.
The counties of Placer and Nevada will probably vote to subscribe $500,000
toward the construction of the lower portion of the road.
It is important that this organization be effected before the sitting of the
next Congress that they may deal with a company already in existence. Verv
respectfully,
THEODORE D. JUDAH.
The following appears upon the back of the letter :
SAN FRANCISCO, November 14, 1860.
DEAR DOCTOR : I drop a hasty line to say that I have struck a lucky streak,
and shall fill up the list without further trouble. I have got one of the richest
concerns in California into it, and will post you fully in a day or two. Yours,
truly,
JUDAH. NOTICE OF A MEETING OF SUBSCRIBERS.
Q. Please state what that paper which I now hand you is? A. It is a notice
from Mr. Hopkins to the subscribers to be present at a meeting at which also
I was requested to appear.
Q. Was the circular sent to you? A. Yes, sir ; this was a notice sent to me
by Mr. Hopkins.
Q. What is the date of it! A. The 8th of April, 1861.
Q. Is that Mr. Hopkins's signature? A. That is Mr. Hopkins's signature.
Q. And it was received by you at that time? A. Yes, sir.
The paper was marked " Exhibit No. 3, August 5, 1887," and is as
follows :
OFFICE OF CENTRAL PACIFIC RAILROAD COMPANY,
Sacramento, April 8, 1861.
DEAR SIR : You are hereby notified that a meeting of the subscribers to the
stock of the Central Pacific Railroad Company will be held at the office of
the Company, in the City of Sacramento, on Tuesday the 30th day of April, A.
D, 1861, for the organization of the company.
MARK HOPKINS,
Treasurer Southern Pacific Eailroad Company. To D. W. STRONG,
Dutch Flat.
Please attend or send proxy.
NOTICE TO APPEAR IN SACRAMENTO.
Q. Please examine that paper and state to the Commission what it is? A. That
is another notice from the same party Mr. Hopkins to appear in Sacramento.
Q. Is that in Mr. Hopkins? s handwriting? A. That is Mr. Hopkins's handwriting.
Q. What is the date of it? A. September 4, 1862.
Q. Was it received by you? A. Yes, sir 5 it was, sir.
2962 U. S. PACIFIC RAILWAY COMMISSION.
The paper was marked " Exhibit No. 4, August 5, 1887/ 7 and is as follows
:
SACRAMENTO, September 4, 1862. Dr, D. W. STRONG, Dutch Flat :
DEAR SIR : After consultation with Mr. Judah it is thought advisable to avail
ourselves of the provision of the general railroad law, which was passed after
the formation of our company. In order to do this the law requires from us
a formal acceptance to be filed in the office of the secretary of state.
We have drawn up an instrument for that purpose, which has been signed by all
the directors except yourself. And we forward it to you herewith for your signature,
which please return to us as early as convenient, and oblige. Yours, truly,
MARK HOPKINS, Secretary C. P. B. E. Co.
NOTICE TO COMMENCE THE SURVEY.
Q. What is the paper that you now hold in your hand? A. That is a notice from
Mr. Huntingdon with reference ,to starting the survey of the road.
Q. What is the date of it ! A. It is dated May 19, 1862.
Q. In whose handwriting is it? A. Mr. C. P. Huntington's.
Q. Is it signed by him? A. Yes, sir ; it is signed by him I know his signature.
Q. And was it received by you at that time? A. Yes, sir; it was received by
me on that date or the next day.
Mr. COHEN. With reference to this letter, I think it had better be submitted
to Mr. Huntington. Governor Stanford thinks that it is not his handwriting.
By Mr. COHEN :
Q. Did you see Mr. Huntington sign that letter, or did you receive it by mail
? A. I received it by mail.
The paper was marked " Exhibit No. 5, August 5, 1887," and is as
follows :
SACRAMENTO, May 19, 1862. Mr. D. W. STRONG :
DEAR SIR : Yours of tlie 16th is before me. I was glad to learn that the snow
was off as far up as the Upper Crossing of the Yuba, and I think it will be
well to organize as soon as we can get the balance of the stock taken, which
I have no doubt can be done this week, as there are responsible parties that
say that they will take the balance ; and if so, I see no reason why we cannot
be ready to commence the survey next week. I think that we shall all agree
in this, viz, That the surveys should be made on the entire line before we
commence grading. We have not seen Mr. Wilcoxson yet. You did not mention in
your letter whether you had got any more stock subscribed or not, but I suppose
not, or you would have mentioned it. I think that some of us will be up next
week. Yours, &c.,
C. P. HUNTINGTON.
LETTER OF C. CROCKER.
By the CHAIRMAN:
Q. Just state to the Commission what that paper is. A. This is an answer to
a communication that I sent to Mr. Crocker in regard to the survey.
Q. What is the date of it? A. The date of it is the 18th of April, 1862. This
is a letter from Mr, Crocker.
Q. And whose handwriting is it in? A. Mr. Crocker's handwriting as I understood.
I received a communication from him every day or two. There is no question
but what it is Mr. Crocker's handwriting.
DANIEL \V. STRONG. 2963
The paper was marked " Exhibit No. 6, August 5, 1887," and is as
follows :
SACRAMENTO, April 18, 1862. D. W. STRONG :
DEAR SIR: Yours of 16th is at hand. I have talked with Mr. Huntington about
the matter and he has written to Stanford in relation to it, and we are awaiting
an answer. In the mean time, we think it will be impossible, owing to the lateness
of the spring, to finish the road for any travel this fall, and all we shall
aim to do is to get the road done in time so it will get settled this winter
and be ready for travel early in the spring. In the mean time, what do you
think of measuring the distance between Folsom and Virginia City, via Placerville,
and back via Dutch Flat with a roadometer and thus get the exact difference
in favor of our route, if there is any? Please give me your views on that
point. Yours, truly,
C. CROCKER.
CELEBRATION OF THE " FIRST THROWING OF DIRT."
Q. What is the paper I now hand you? A. This is a notice from Mr. James Bailey,
who was then the secretary of the company, for me to be present in Sacramento
at the celebration of the opening of the Central Pacific Eailroad Company,
the first throwing of dirt.
Q. Was the paper received by you? A. Yes, sir ; it was received by me.
By Mr. COHEN :
Q. What is the date of it? A. It is January 5, 1863. By Mr. HAYMOND :
Q. What was the date of the opening? A. On the 8th of January, 1863.
Mr. HAYMOND. That is the date of the battle of New Orleans.
The WITNESS. Yes, sir ; the date of the battle of Kew Orleans ; that was the
occasion ; and this was written on the 5th.
By the CHAIRMAN :
Q. In whose handwriting is it? A. That is Mr. Bailey's. He was the first secretary
of the company.
The paper was marked " Exhibit No. 7, August 5, 1887," and is as
follows :
OFFICE OF THE CENTRAL PACIFIC RAILROAD COMPANY OF CALIFORNIA,
Sacramento, January 5, 1863. D. W. STRONG, Esq.,
Director C. P. E. E. Co. :
At a meeting of the board of directors hold January 3, 1863, it was "Resolved.
That the commencement of the work on the railroad of this company be inaugurated
with proper ceremonies on the 8th day of January, at 11 o'clock a. m., at the
foot of K street, and the public societies and citizens generally are hereby
invited to participate therein.
JAMES BAILEY,
Secretary.
CIRCULARS FOR DISTRIBUTION ON THE RAILROAD QUESTION.
Q. Please examine that paper and state to the Commission what it is. A. This
is a letter from Mr. Crocker, with reference to a bundle or packages of circulars,
before the election of Placer County for the taking of bonds or subscribing
to the bonds of the company.
Q. What date was that? A. May 2, 1863.
Q. In whose handwriting is that? A. Mr. Crocker's.
Q. Was it received by you? A. That was received by me.
2964 U. S. PACIFIC EAILWAY COMMISSION.
The paper was marked "Exhibit No. 8, August 5, 1887," and is as follows
:
SACRAMENTO, May 2, 1863. D. W. STRONG, Dutch Flat :
DEAR SIR : We send you a bundle of circulars on the railroad question ; also
a bundle tollarriman, both of which, are tied up in a bundle to E. L. Bradley.
We hope you will interest yourself in having them circulated to all parts of
the county about Dutch Flat. The Company will pay all expenses of their circulation.
Please act in concert with Harriman and Bradley. We send to all for fear some
might be away.
The company earnestly hope that every vote about Dutch Flat will be cast in
favor of the railroad. We need every vote, as the Auburn clique are moving
all they know to beat us.
Yours, truly.
C. CROCKER.
CONCERNING ELECTION OF STANFORD AS GOVERNOR, ETC.
Q. What is the paper that you now hold in your hand? A. This is a letter received
from Mr. Judah, dated September 2, 1861.
Q. In whose handwriting is it? A. It is in Mr. Judah's.
Q. Was it received by you? A. That was received by me.
Mr. COHEN. I would like to have a copy of this letter, Exhibit 9.
The paper is marked "Exhibit No. 9, August 5, 1887," and is as follows:
SAC., Septembers, 1861.
MY DEAR DR. : Your letter duly received, and I had the Union notice the discoveries.
If I only had time should like very much to take a trip out there with you,
but cannot now.
Our office work is getting along rather slowly. I hope to get everything finished
so as to be able to go on by 1st October, if they still desire me to go.
Election and politics so monopolize everything here now that our people have
very little time to talk railroad matters, but promise as soon as election
is over to get together.
While I think of it, there was a pair of bullet-molds, belonging to that Sharp's
rifle, which were brought down as far as Dutch Flat, but I think were left
there. They brought in a bill of $8 this morning for them, and if they are
up there please send them down to Huutington and Hopkins by express.
I think the next Congress will be a favorable one to procure lands from the
Government, and perhaps it may be money ; but of the latter I do not feel by
any means so certain; but the lands do not create any debt, and the feeling
towards California ought to be a good one.
A good deal depends upon the election of Stanford, for the prestige of electing
a Republican ticket will go a great way toward getting us what we want. I am
satisfied that the Conness votes will be thrown away, and that he does not
stand the ghost of a show.
Col. Wilson is getting along very well with his road, and will be running to
Lincoln by the 1st of October.
I am trying to put my little road upon its legs, and it looks rather favorable,
but like everything else can do nothing with it until after election. With
regards to inquiring friends, I remain, yours, truly,
T. D. JUDAH.
A "HARD ROAD TO HOE" DISAGREEMENTS.
Q. What is that paper? A. This is a letter from Mr. Judah in reference to
matters in general, pertaining to the interests of parties in Sacramento. I
was there at Dutch Flat at the time.
Q. Is that in Mr. Judah's handwriting? A. Yes, sir; that is in Mr. Judah's
handwriting, and is signed by him.
Q. Was it received by you? A. Yes, sir.
Q. What is the date 1 A. May 13, 1887.
DANIEL W. STRONG. 2965
The paper was marked " Exhibit No. 10, August 5, 1S87," and is as
follows :
ENGINEER'S OFFICE, CENTRAL PACIFIC RAILROAD OF CALIFORNIA,
Sacramento, May 13, 1883.
MY DEAR DOCTOR : I trust to your amiable disposition and an appreciation of
the many business cares which environ me for an excuse in neglecting to answer
you before.
Your letter was received and its suggestions heeded. I fully understand how
necessary it was to have the right sort of canvassers for Placer County, but
have as little to do with those matters as though I was not a member. I can
not tell you in the brief space of a letter of all that is going on, or of
all that has taken place j suffice it to say that I have had a pretty hard
row to hoe.
I hope to see you before long and to have a good long talk with you, when I
will tell you of much that is amusing, to say the least.
I had a blow-out about two weeks ago and freed my mind, so much so that I looked
for instant decapitation. I called things by their right name and invited war
; but counsels of peace prevailed and my head is still on ; my hands are tied,
however. We have no meetings of the board nowadays, except the regular monthly
meeting, which, however, was not had this month ; but there have been any quantity
of private conferences to which I have not been invited.
I try to think it is all for the best, and devote myself with additional energy
to my legitimate portion of the enterprise.
On the 1st of April I presented my accounts to the board and insisted upon
a settlement, but after backing and filling the board adjourned, and to this
day I do not know if they are considered as allowed, and there has been no
regular meeting of the board since. I read to Mr. Hopkins and Mr. Crocker that
portion of your letter with regard to your subscription. They said that there
had been no action taken such as you apprehended, and no notice or advertisement
other than the regular monthly call for installments, which the law requires
to be made in the terms set forth, so do not give yourself any uneasiness.
I will do my best to have your stock, or a portion of it, allowed you, or notify
you of any contemplated action.
Much to my surprise Mr. Hopkins has got me charged with 10 per cent, on my
150 original shares as cash advanced by him, and he says he knows of no agreement
or understanding that it was to be allowed me as compensation for services
rendered previous to the final organization.
All are elated at the vote in Placer County. Governor Stanford is in San Francisco,
and if the vote carries in our favor there, the office of treasurer will be
an important one.
I hope to put parties on the location of the second 50 miles this summer, so
look out to see me up there before long. Yours, truly,
JUDAH.
$2,500 FOR WITNESS'S SERVICES THE WAGON ROAD.
Q. What is the paper that you now hold in your hand? A. This is also another
letter from Mr. Judah with reference to the doings of the members of the board
in Sacramento while I was not present.
Q. Is that in Mr. Judah's handwriting? A. Yes, sir; it is in Mr. Judah's handwriting.
Q. Have you stated the date of it? A. The date is July 10, 1863.
Q. Is it signed by Mr. Judah? A. No, sir ; it is not signed by Mr. Judah ;
but that is his handwriting.
Q. And it was received by you? A. Yes, sir ; it was received by me as coming
from Mr. Judah, with information that could come from no other source.
Q. He was then in the engineer's office of the Central Pacific? A. Yes, sir.
By Mr. COHEN :
Q. Who is it addressed to? A. He addresses me as "'My dear doctor." That
is the way he always addressed me.
2966 U. S. PACIFIC RAILWAY COMMISSION.
The paper was marked " Exhibit No. 11, August 5, 1887," and is as
follows :
ENGINEER'S OFFICE, CENTRAL PACIFIC RAILROAD OF CALIFORNIA,
Sacramento, July 10, 1863.
MY DEAR DOCTOR : You will excuse the long delay in answering your letter, but
I have been waiting from day to day to have something definite to write about.
Huntgniton has returned, and seems to possess more than usual influence.
Stanford, who I told you was all right, is as much under their influence as
ever.
The wagon road seems to be a tie which unites them, and its influence seems
to be paramount to everything else. I have had a big row and fight on the contract
question, and although I had to fight alone, carried my point and prevented
a certain gentleman from becoming a further contractor on the Central Pacific
Railroad at present.
You are to be retained as director. There will be no opposition influence in
the meeting ; all will go one way, and both you and I will go with the stream.
I got through the board yesterday a resolution allowing you $2,500 for previous
services, to be credited you as five assessments on your [interest.]
I offered the resolution at $5,000, and tried hard to get it, but from the
indications of old sores in a debate, was afraid of upsetting the whole thing,
and compromised on the half.
I believe I told you that the governor told me he would sell to Rohn his wagonroad
interest. There is a good deal of negotiation going on, and from all the indications
all their differences are reconciled, all is smooth. They are a band of brothers
again, and are going to let Rohn and Parish in with them. Rohn is with them
a good deal, and told me to-day that he and Parish were going up Thursday next
over the road, and that they offered him 30,000 interest, but he wants a controlling
interest. Crocker and Huntington are going up Thursday, and going over the
new route across to Nashoo City. They have been consulting and looking over
the way every day, and do not hesitate to talk boldly, openly before me, but
not to me, about it. They talk as though there was nobody in the world but
themselves who could build a wagon road. They are going to take up this route.
Crocker wrote up to a Mr. Brown to meet them. He is going to take Rohn and
Parish over it. He wants Huntington's judgment on it, and before they return
they intend to take it up.
If this election was over I would feel like going up there and taking this
route, but I cannot stir from here now. I think that Rohn and Parish will draw
out of any wagon road arrangement with this present set of managers after going
over the road and seeing how it is,managed unless they can get the control.
About coming down, do as you think best; it is not absolutely necessary; everything
will go one way, and you are on the list; Marsh also. I would be very glad
to see you and have you come down; but if you should not, write me, and send
me yours and such other proxies as you have got. What do you think of going
up immediately and taking up that route? Cannot a new company be organized
for that purpose of persons whom you can control.? But of course if they should
know of it before the election they would decapitate you. Perhaps it is best
to rest easy and come down at any rate, when we will consult together.
[No signature.]
LAST LETTER RECEIVED FROM T. D. JUDAH.
By the CHAIRMAN :
Q. What is that paper you now hold in your hand? A. This is a letter that
I received upon the return of the steamer St. Louis, which was the steamer
that Mr. Judah went East on, or went to Panama on. He wrote on board the steamer
; the letter came back on the return of the steamer. It is the last letter
I ever received from him and probably one of the last he wrote to anybody.
It is in relation to the general business that he was going East on, and pertaining
to this company.
Q. What is the date of it? A. September 9, 1863.
Q. Is it in his handwriting? A. It is in his handwriting.
Q. Is it signed by him? A. Yes, sir ; Theodore A. Judah.
Q. And it was received by you? A. Yes, sir ; it was received by me. I think
you have got the envelope that it came in there.
The envelope was marked " Exhibit No. 12, August 5, 1887," and the
letter was marked "Exhibit No. 13, August 5, 1887," and is as follows
:
STEAMER ST. Louis, September 9, 1863.
MY DEAR DOCTOR: I was so much hurried and distracted with events and the hurry
of getting off that I did not write you before leaving. There is not much that
DANIEL W. STRONG. 2967
I can say now that is very interesting. I have a feeling of relief in being
away from the scenes of contention and strife which it has been my lot to
experience for the past year, and to know that the responsibilities of events,
so far as regards Pacific Railroad, do not rest on my shoulders. If the parties
who now manage to hold to the same opinion three months hence that they do
now, there will be a radical change in the management of the Pacific Railroad,
and it will pass into the hands of men of experience and capital. If they
do not, they may hold the reius for awhile, but they will rue the day they
ever embarked in the'Pacinc Railroad.
In your last letter you say that you hear I have sold my interest in the ranch
to Baker. Until after Baker came down I never had the slightest conversation
with either him or Hubbard with regard to the ranch, and any statements made
by any one to the contrary were unfounded.
After he came down, and before I received your letter, he and Hubbard spoke
of the ranch to me, and said they wanted an interest in it. I said to them
that I had no objections to it if you were willing, and am of the same opinion
now ; but I wish it distinctly understood that unless you are willing I am
not. I desire to do nothing with regard to it that does not meet your approbation,
and leave its management entirely with you.
If after the wagon-road and bridge and mill, &c., are built, the town site
and wood land secured, you choose to admit them to an interest in the ranch,
well and good ; there are some reasons why it might be well, and help to improve
it, and render it valuable sooner than otherwise.
About the wagon-road I hardly know what to advise ; as near as I could ascertain
they gave out that they intended to build over to the Henness road, whether
on account of your having recorded your route or because you were not ready
to go to the expense of the new road at present I do not know ; it may be that
they are willing that you should go on and build it, they intending to get
it of you in some shape hereafter. I think Hubbard and Baker are afraid of
the other wagon-road parties. I may be mistaken, but such I think is the case.
My opinion is that before next summer that party will have all they want to
attend to on their hands. If they treat me well they may expect similar treatment
at my hands. If not, I am able to play my hand.
If I succeed in inducing the parties I expect to see to return with me to California,
I shall likely return the latter part of December ; if not, I shall stay later.
Trusting that everything in which you are interested will prosper, and that
I shall soon see you again,
I remain, as ever, truly yours,
THO. D. JUDAH.
LETTER CONCERNING WITNESS'S RESIGNATION AS DIRECTOR.
Q. What is the last letter which I handed to you? A. This is a letter from
Governor Stanford, in answer to a letter written after receiving information
from Mr. Judah in New York City. I tendered my resignation as a member of the
board of directors, and this is an answer to that letter from Governor Stanford.
By Mr. COHEN : Q. Will you give the date? A. October 3, 1864.
By the CHAIRMAN:
Q. Is it in Governor Stanford's handwriting I A. I think it is. Q. And was
it received by you? A. It was received by me in answer to a letter that I
wrote to him.
The letter was marked " Exhibit No. 14, August 5, 1887," and is as
follows :
OFFICE OF THE CENTRAL PACIFIC RAILROAD OF CALIFORNIA,
Sacramento, October 3, 1864. Dr. D. W. STRONG, Dutch Flat :
Your letter of the 30th ultimo came to hand this morning, in relation to the
stock that will he due as soon as the board act upon the subscriptions of the
original stockholders. Whenever it is determined to appoint an agent to look
after the timber I will urge your appointment. Indeed, doctor, I shall always,
be glad to serve you whenever it may be in my power.
2968 U. S. PACIFIC RAILWAY COMMISSION.
I hope you will be down to the election ; if not, I shall be glad to have your
proxy I inclose herewith a blank power of attorney. Yours, truly,
LELAND STANFORD.
p > g 4 i ^0 not think there will be any desire to change the board of directors.
Am I to understand that you will not accept of re-election?
L. S.
TELEGRAM FROM DURANT AS TO CHINESE LABOR.
Q. What is the paper which you now hold in your hand ! A. That document was
a telegraph dispatch from Salt Lake, from C. P. Durant, who was at the time
the vice-president, I believe, of the Union Pacific Eailroad.
Q. Was the telegram received by you in the shape that you now have it? A.
Yes, sir ; it came to me from the telegraph office that way.
Q. Have you given the date of it? A. October 10, 1868.
The telegram was marked " Exhibit No. 15, August 5, 1887," and is
as follows :
UNION PACIFIC RAILROAD COMPANY,
Salt Lake, October 10, 1868.
I authorize D. W. Strong, of Dutch Flat, to contract with Ah Him or Ah Coon,
or any responsible party, on the part of the Union Pacific Railroad Company,
for any number of Chinamen, not exceeding two thousand, to be delivered to
our agent at the terminus of the Central Pacific Railroad Company's track on
the following terms of agreement, viz :
The Union Pacific Railroad Company to furnish, free of expense, necessary transportation
for tents, cooking utensils, and camp fixings ; to furnish them with work on
this road east of Humboldt Wells, and to pay them in United States gold coin
$40 per month for twenty-six working days, and allow their pay to commence
from the time they report themselves to our agent.
The railroad company to protect them from Indians with soldiers if necessary.
To be used on receipt of telegram from me.
THOS. C. DURANT,
Vice- President.
LETTER FROM " O. D. L." ON SAME SUBJECT.
Q. What is the paper which you now hold in your hand ! A. This is pertaining
to the -same subject, but is from a different party, also at Salt Lake, September
26.
Q. Whose handwriting is it in? A. In Mr. Lambard's.
Q. How is it signed? A. It is signed U O. D. L."
Q. How do you spell his name I A. L-a-m-b-a -r-d.
Q. What is the date of that? A. September 26, the same year. The first is
dated in 1868. This was received about the same time, and the other a few days
afterwards.
The paper is marked " Exhibit No. 16 ; August 5, 1887," and is as
follows:
Poor pen.] SALT LAKE, Saty., Sept. 26.
D. W. STRONG, Esq. :
DEAR SIR : I telegraphed you yesterday that my friends were detained east and
\\ould not be here till next week. This is h 1 for me, for I shall nearly die
in this stupid town. Durant, the big Indian of the U. P., telegraphed me yesterday
from Chicago that he would leave there to-day.
Hostility is springing up, and I think we will have some fun before long. I
think immediately after the next pay-day, October 15, will be the time we will
fix on, as that will give time to provide supplies.
Will telegraph as soon as I see our friends.
O. D. L.
DANIEL W. STRONG. 2969
ANOTHER LETTER FROM " O. D. L." ON SAME SUBJECT.
Q. What is the paper which you now hold in your hand? A. This is dated October
25, 1868. It is also signed " O. D. L. ; " by Lambard, and it has
reference to the same matter, and alludes to Mr. Stanford beiug in Salt Lake
to consult with Durant.
Q. This is in Mr. Lambard's handwriting and was received by you? A. Yes, sir.
The paper was marked " Exhibit No. 17, August 5, 1887," and is as
follows :
SACRAMENTO, October 25, 1868. D. W. STRONG, Esq. :
Stanford has gone to Salt Lake. I conclude Durant can't decide till he sees
him. I telegraphed Durant to telegraph me his dicision as soon as possible.
I hate to be kept this way in suspense. It is disgusting to everybody.
I will telegraph again in a day or two, telling him we want to know mighty
quick.
In the mean time don't let it damage your private business. Hastily.
O. D. L.
ANOTHER ON THE SAME SUBJECT.
Q. What is the paper which you now hold in your hand? A. This is also a letter
from Mr. Lambard with regard to the same matter.
Q. Is it in Mr. Lambard's handwriting 9 A. Yes, sir.
Q. Is it signed by him? A. Yes, sir.
Q. And was it received by you at the time? A. Yes, sir.
Q. What is the date? A. Thursday evening. There is no date.
The paper was marked " Exhibit No. 18, August 5, 1887," and is as
follows :
THURSDAY EVE. D. W. STRONG, Esq. :
DEIR SIR: I returned from S. F. this a. m. I duly received your letter, with
check for $300. I telegraphed D. to tell me immediately what he intended to
do, and on Tuesday I telegraphed the operator to hunt D. up and get an answer
; he replied that D. would telegraph to-day from Echo. There are a good many
things pending. Stanford is there by this time and they may come to some agreement.
This is very unpleasant for us both. I am out and injured one way and another
several thousand dollars, and from my experience with railroad companies I
am afraid I will lose it.
I think to-morrow I will send a dispatch to Burham inquiring how matters are.
Don't be at any expense, for it looks very dubious whether or not they hire
anj Chinamen of anybody.
Judging from the way D. acts I am as much surprised and indignant as you are
We won't fool with them any more than a few days longer.
O. D. LAMBARD.
COMPLAINT THAT COMMUNICATIONS ARE NOT ANSWERED.
Q. What is the paper which you now hold in your hand? A. This is an answer
to a letter. This is a communication from Mr. Lambard in regard to a dispatch
that we sent to Durant to find out why he did not answer our communications.
There seemed to be some dilatoriness on his part.
Q. Is that Mr. Lambard's handwriting? A. Yes, sir.
Q. And was it received by you? A. Yes, sir; it was received by me.
The paper was marked " Exhibit No. 19, August 5, 1887," and is as
follows :
SAC'TO, TUESDAY. D. W. S. :
Yours received. I don't know what to make of Durant's silence. There must
egraph him to-morrow again. I
I will telegraph him again.
O. D. L.
2970 U. S. PACIFIC RAILWAY COMMISSION.
LETTERS* ON EXTRANEOUS SUBJECTS.
Mr. COHEN. Mr. Strong produces further letters in his possession, which I will
now show to him. I will ask him to explain what they are. What is the letter
which I now show to you, Mr. Strong I
The CHAIRMAN. Those letters only which bore upon the railroad question have
been taken out. These other letters have reference to gold mines and silver
mines. They were excluded on that account. To offer those in evidence will
be simply to fill our record.
Mr. COHEN. I want to show, so far as this correspondence will explain it, the
general relation of Mr. Strong to the officers of the company. The letter I
show to him is addressed from Mr. Strong to the chief engineer of the company,
Mr. Montague.
The WITNESS. Well, allow me to explain it. Was Mr. Montague always chief engineer
?
Mr, COHEN. He was, after the death of Mr. Judah.
The WITNESS. Mr. Judah authorized him to act in his place after he left here.
You will notice that this was a long time previous to that date, and Mr. Montague
was not at that time connected in any way with the railroad. Mr. Montague was
employed by myself, as an engineer to survey the wagon road over the mountains,
before Mr. Huntington or Mr. Stanford, or Mr. Crocker, or any of these people
had anything to do with it ; and this is in answer to one of my letters, because
Mr. Montague did not come up as he agreed.
OBJECTION TO THEIR RECEPTION.
The CHAIRMAN. I want to say to you that if you want to offer these letters,
Mr. Cohen, you can write out a statement, or you can write a history of Mr.
Strong's relations to the road, and put any letters that you see fit into that
statement, and submit it to this Commission, but as to their going in our record
I shall certainly object.
Mr. COHEN. I will make the offer and take the ruling of the Commission upon
it. I now offer a letter witten by Mr. S. S. Montague, who was for a number
of years the chief engineer of the Central Pacific Kailroad Company, dated
December 10, 1801, written to the witness, D. W. Strong.
Commissioner LITTLER. For what purpose does the gentleman offer the letter
?
Mr. COHEN. Because it comes from the possession of the witness, and shows his
relations to the employes of the company.
Commissioner LITTLER. In what respect does it bear upon the inquiry within
t the scope of this Commission?
Mr. COHEN. Not any more than the letters which have been introduced by the
chairman, but I think it is just about as relevant.
Commissioner ANDERSON. The chairman has not introduced any letters.
Mr. COHEN. I think he has.; I offer it, as Mr. Littler says, for what it is
worth.
The CHAIRMAN. I protest against our stenographer taking all this stuff down.
Commissioner ANDERSON. I told the stenographer that the arguments were not
to be reported.
A REQUEST THAT THE STENOGRAPHER SHALL MAKE A FULL REPORT.
Mr. COHEN. In that connection I would ask that this be taken down. I appear
here as counsel for the Central Pacific Railroad Company,
DANIEL W. STRONG. 2971
whose interests and the interests of whose stockholders are very much affected
by this examination ; and I claim the right to have the arguments which I,
as counsel for the company, address to this Commission, taken down so that
those arguments may be considered by the President, to whom your report is
to be made, and by such committees of both houses of Congress as may be appointed
when your report comes up for investigation. I claim that it is the right
of the Central Pacific to present its side of the case to this Commission,
and that the arguments of its counsel on every matter of evidence here introduced
should be carefully reported, and should accompany the evidence and report
which may be made by this Commission.
The CHAIRMAN. In answer I want to say that the Commission will hear any statement,
will accept any paper, and will attach it to the report we shall make to the
President of the United States. Those letters which you now hold of Mr. Strong's,
if you will furnish them in the shape of an exhibit, we will accept ; but we
do not wish to entail the expense of multiplying the record through the stenographer.
Commissioner ANDERSON. I would ask you whether this is the practice in your
courts in the preparation of a case on appeal? Does a case on appeal generally
contain arguments of counsel?
CLAIMED AS A RIGHT.
Mr. COHEN. It frequently does. This company has applied to Congress for some
relief. Whether it is entitled to that relief is a matter of doubt. The Congress
of the United States, in its wisdom, has directed the President to appoint
this Commission : and this Commission is here to receive the statement of the
Central Pacific Railroad Company ; and such statement as it makes through its
counsel is a proper subject to be considered and reported upon to the President
and to Congress. I claim it as the right of the Central Pacific Railroad Company,
that the remarks of its counsel upon the admissibility of evidence, and also
the arguments that it introduces here to influence the action of this Commission,
should appear as they are made, and in connection with the subject-matter on
which they are made.
Commissioner ANDERSON. I am totally opposed to reporting arguments.
Mr. COHEN. The next letter I propose to offer is the following.
Commissioner ANDERSON. Had you not better have a ruling on the offer of the
other one?
Mr. COHEN. To show the relevancy of it, the next letter I propose to offer
is a letter from Mr. Lambard to Mr. Strong about the stock concerning which
he has made a complaint to this Commission, saying that the Central Pacific
deprived him of it. I certainly have a right to put that in.
The WITNESS. Is your interpretation of that correct?
Mr. COHEN. That is the interpretation I give to it. After I offer it you can
be heard to explain it.
The WITNESS. I would like to explain it.
The CHAIRMAN. I think the quickest way out of this difficulty is to let you
spread your letters right on the- record.
Mr. COHEN. Had you better not rule on the admissibility of the evidence?
Commissioner ANDERSON. We will rule on the admissibility of the letters as
soon as Mr. Cohen gets through offering them, and he can offer them all in
a bunch.
P R VOL iv 41
2972 U. S. PACIFIC RAILWAY COMMISSION.
Mr. COHEN. Just as the Commission pleases. I will offer them all now, or one
at a time.
Comrnissioner^ANDERSON. Let them ail go in.
SURVEY OVER SIERRA NEVADAS FOR A WAGON ROAD.
By Mr. COHEN :
Q. Mr. Strong, will you now look at the letter which I now show you and state
what it is? A. Mr. Montague was a stranger to me, and was engaged in business
Q. I will put the question in another form ; by whom was that letter signed
? A. By Mr. Montague.
Q. To whom was it addressed? A. D. W. Strong.
Q. What is the date? A. December 10, 1861. Mr. Montague had no connection
with the railroad. There was no railroad to be connected with at that time.
This letter was in reference to a survey that I asked him to assist in making
over the Sierra Nevadas with reference to a wagon road, but it had no connection
with the road or any railroad company.
Q. Is not that letter dated after the incorporation of the Central Pacific
Railroad Company? A. Mr. Montague had nothing at all to do with it at that
time.
Q. I ask you the question whether that letter is not dated after the incorporation
of the Central Pacific Railroad Company and after you were a director of that
company? A. Yes 5 but this letter was in reference to a wagon road and not
to a railroad.
LETTERS OFFERED IN EVIDENCE BY CENTRAL PACIFIC.
Mr. COHEN. Well, I offer it for what it is worth.
The WITNESS. Mr. Montague was not an engineer of the company at that time,
but he was employed by me.
Mr. COHEN. I ask to have the letter marked Exhibit 20.
The CHAIRMAN. Do not number it among our exhibits.
Mr. HAYMOND. It is offered on the cross-examination.
The paper is marked "Exhibit No. 20, August 5, 1887," and is as follows
:
LETTER FROM S. S. MONTAGUE.
FOLSOM, December 10, 1861. Dr. D. W. STRONG :
DEAR SIR : I expected, as I wrote you last week, to have been able to have
started for your place to-day, but in consequence of the flood I have been
unable to arrange my business here so that I can leave.
As soon as communication with Sacramento is open, I hope to close my matters
there, and will then be at liberty to attend to your work.
I will start for your place at the earliest possible moment, unless I hear
further from you.
We were cut off from both city and country yesterday, but hope to get the mails
and
Respectfully yours,
SAM. S. MONTAGUE.
PURCHASE OF SHARES FOR LAMBARD.
Q. Will you look at the paper now shown you and state what it is? A. This
is a letter from Mr. Lambard with regard to some shares that he requested me
to buy.
DANIEL W. STRONG. 2973
Q. To whom is it addressed? A. D.'W. Strong.
Q. What is the date? A. August 7, 1868.
Q. Is there any explanation that you want to make concerning it? A. Mr. Lambard
wanted me to buy some shares from certain parties that were subscribers to
the original stock of the road.
Q. What road? A. The Central Pacific road; and he wanted me to see what I could
get those shares for, and to get them if I could. This was in reference to
that matter. There were two or three parties who wanted to sell their stock,
or offered to sell it to me.
The paper was marked " Exhibit No. 21, August 5, 1887," and is as
follows :
SACTO, Aug. 7, 1868. " D. W. STRONG, Esq. :
DR. SIR : Yr. fav. of th reed, yesterday. Will advise you at once of any word
from our friends East.
What is the cost of the 25 shares? I will make out the papers here and send
them zip to you.
Yrs. very truly,
O. D. L.
"
WISE IN NOT TAKING THE STOCK."
Q. Will you look at the paper now shown to you and state by whom it was written
? A. It is dated August 24, 1868, and was written by Mr. Lambard.
Q. To you? A. To D. W. Strong.
Q. Is this about the stock of the Central Pacific Railroad Company? A. That
is about the stock that was in the hands of a man by the name of Brickett,
with whom I was negotiating to get the stock from him, as agent for Mr. Lambard.
By Mr. BERGIN :
Q. On the same terms that you have just stated? A. On whatever terms I could
make with parties. That was unsettled. We were in correspondence all the time.
The paper was marked " Exhibit Ko. 22, August 5, 1887," and is as
follows :
SACTO, Aug. 24, 1868. Dr. STRONG :
DR. SIR : Yrs. reed. You were wise in not taking that stock of Brickell without
the asst. receipts. That is, I think so at present. I don't know but I have
already enough for our purposes. So you need not absolutely buy any more till
I tell you. I expect to-morrow to sell them our institution, and I wish to
be very quiet for a week or so.
No answer yot from the East. Expecting word that they were coming to Salt Lake
lirst of Sept. and wish me to meet them. This was written before they reed,
that letter.
Saw Mr. Judah yesterday. Hasty. Yrs. truly,
O. D. LAMBARD.
LETTER FROM LAMBARD'S PARTNER.
By Mr. COHEN :
Q. Will you look at the paper now shown you and state what it is? A. It is
a letter I wrote to Mr. Lambard.
Q. Will you state who it is signed by, the date, and to whom it is addressed?
A. Dated November 10, 1868, signed by Mr. L. Goss.
Q. Of what firm was Mr. Goss? A. Of the firm of Goss & Lambard, mill- men
in Sacramento.
2974 U. S. PACIFIC RAILWAY COMMISSION.
Q. And it is addressed to you? A. Yes, sir ; this was a letter written to
me explaining where Mr. Lambard was. I could not communicate with him.
The letter was marked " Exhibit No. 23, August 5, 1887," and is as
follows :
Goss & Lambard, Sacramento Iron Works, I street, between Front and Second.
SACRAMENTO, November 10, 1868. D. W. STRONG, Esq. :
DEAR SIR : Our Mr. Lambard left town the other day for a few days, and requested
me if a telegram came from a certain party to him to inform you or request
you to come down and see me. I have received a dispatch which reads thus : "To
O. D. Lambard:
"
Mr. Bent will take fifteen hundred (1,500).
"
You can come down, or act yourself as your judgment may dictate." Truly
yours,
L. GOSS, Of Cross $ Lambard.
MATTERS GETTINGr INTERESTING AT SALT LAKE.
Q. Will you look at this paper and state what it is, and by whom it is written?
A. It is written by Mr. Lambard, and is dated August 31, 1868.
Q. And is it addressed to .you I A. Addressed to me, yes, sir ; in reference
to a transaction with Mr. Durant.
The paper was marked " Exhibit No. 24, August 5, 1887," and is as
follows :
[Private.]
SACTO, Aug. 31, 1868. D. W. STRONG, Esq.:
DEAR SIR : Just rec'd a telegram from the East telling me to be ready to come
to Salt Lake at short notice. The matter begins to be interesting. I think
there is a storm coming. Keep posted in everything and if business calls you
from Dutch Flat let me know it, as I am liable to want to confer with you at
short notice.
Don't buy any more stock till I see you. I think we have enough for our purposes
already.
Hasty,
L. We must be very discreet and keep our own counsel.
"
THIS FIGHT WAXES WARM."
Q. Please look at that and state by whom it was written, to whom it was addressed,
and the date. A. Salt Lake, September 2S 7 no year 5 from O. D. Lambard, signed
u O. D. L."
Q. Do you want to make any explanation about that? A. Well, it it is simply
notifying me or giving me some reason why the business we had on hand was delayed.
That is as far as I can explain it.
The paper was marked "Exhibit No. 25, August 5, 1887," and is as
follows :
SALT LAKE, Monday, Sept. 28. D. W. S. :
DR. SIR: I wrote you by yesterday's mail, simply saying that my friends have
been detained in Chicago by sickness. They left Chicago Sat'y night and will
get here this week some time. They are obliged to stop and examine the road,
so they are longer on the road than the regular mail passengers.
The fight is increasing and waxes warm. Keep quiet for a few days and await
my return or telegram. So much time has been lost by the parties' delay that
I think the 15th of October will be as soon as we can move. Yrs. trul v,
O. D. L.
DANIEL W. STRONG. 2975
RELATING TO MATTERS BETWEEN UNION AND CENTRAL PACIFIC.
Q. And what is this? A. This letter is dated November 6, 1868, is signed " O.
D. Lambard," and related to this same matter with regard to the Union
Pacific and Central Pacific.
Q. You mean Central Pacific stock? A. No, sir ; no stock about it.
Q. That speaks of stock, does it not I A. No, sir 5 nothing about stock.
Q. Does it not say, "I shall want to see you when I return about the stock
I bought of you"? A. He simply makes an allusion to it; it is pertaining
to matters the same as in the other except in regard to that stock ; that.
was a matter we had between us.
Q. That was the stock of the Central Pacific, was it not? A. Yes, sir.
The letter was marked Exhibit No. 20, August 15, 1887," and is as follows
:
. SAC'O, Nov. 6, 1868. D. W. STRONG, Esq. :
D'R SIR: My business takes me to-morrow up in El Dorado Co., Grizzly Flat,
twenty miles off the telegraph. I have instructed Mr. Goss, my partner (who
knows about our plan), to send you any telegram that may come from D. I hear
to-day reported that the C. P. Co. have got an injunction against the U. P.
Co. to restrain them coming east of Salt Lake. Something or other has occurred
to disturb their plans, and it is of no use for us to wait any longer in my
opinion. I shall go East I think within sixty days and will get satisfaction
I believe for any damages we have sustained. $5,000 won't begin to make me
whole for the damage my interests suffered here \vhile I was gone.
I shall want to see you when. I return here about the stock I bo't of you.
Will write you when I return. If a dispatch comes from D. I have left my cypher
with Mr. Goss, and if it is not intelligible Mr. Goss will consult with you
and if necessary he will dispatch a messenger for me.
The telegraphed man at Salt Lake telegraphed me yesterday that D.w'd answer
my dispatch yesterday, but he has not done it. 1 can't afford to let my interests
suffer any longer, so to-morrow I shall start for a mine we are working. Shall
be back next week. Mr. Goss will be here all the time and will open any telegrams
that may come and communicate with you.
If the U. P. Co. come this way, or go to Oregon, I will have opportunities
to get ourselves all right. He is a first-rate man, but there is a hitch somewhere
unexpected. Very truly y'rs,
O. D. LAMBARD.
Q. Please look at this 5 who was that written by? A. Mr. Lambard. " O.
D, L." it is signed.
Q. To* you? A. Tome.
Q. It is dated how? A. Dated October 30, no year. He had telegraphed to Durant.
WILL NOT bUY ANY MORE STOCK.
By Mr. HAYMOND :
Q. Who was Durant, Mr. Strong? A. He was the man who was vicepresident of the
road.
Q. Of the Union Pacific at that time? A. The Union Pacific at that time.
Q. There is a statement in that letter, " I won't buy any more of tbis
company's stock until I know more." Was that the Central Pacific stock
? A. Yes, sir ; that was the stock I was telling of certain parties were offering
to sell it. Different parties were offering to sell from five to twenty shares
apiece, and I was authorized by Mr. Lambard to buy.
Q. Did not you fix a price? A. No, sir; I was not authorized to close a trade
without consulting him as to figures.
2976 IT. S. PACIFIC RAILWAY COMMISSION.
The paper was marked *< Exhibit No. 27, August 5, 1887," and is as
follows :
SACT., Friday, Oct. 30. D. W. S.:
D'uSiR: Y'rsrec'd. I have telegraphed Durant to telegraph me something decisive.
I can't telegraph Burnham, as I don't know exactly where to address him. I
don't like the way these R. R. men do their business. Am afraid they are all
alike.
I won't buy any more of this co.'s stock until I know more, and as I have some
money to pay out Tuesday you may return me that $600. You can deduct your expenses
down here, &c. Better send a check by express.
Whatever* funds are needed if we handle Chinamen I can provide for. I am going
to get satisfaction from the U. P. Co. for you and myself too in case they
don't do anything with us. Will telegraph you what I get from D.
O. D. L.
NOTICE OF MEETINO OF DIRECTORS AND STOCKHOLDERS.
Mr. COHEN. Will you look at the paper now shown you and state what it is?
The WITNESS. It is a letter written by Mr. Mark Hopkins. Q. To you? A. Yes,
sir ; it is dated November 17, 1862. Q. Is there any explanation you wish to
make of that? A. It explains itself.
The paper was marked " Exhibit No. 28, August 5, 1887," and is as
follows :
ENGINEER'S OFFICE, CENTRAL PACIFIC R. R. OF CAL.,
Sacramento, November 17, 1862. Doct. D. W. STRONG,
Dutch Flat :
DEAR SIR : At a meeting of the hoard of directors of the Central Pacific Railroad
Co. of Cal., called by the president and held this 17th day of Nov'r, it was
unanimously " resolved that a meeting of the board of directors be called
to meet at the office of the company on the 22nd day of Nov'r inst., and that
the secretary be directed to give notice of the same to the directors not now
present and request a full attendance."
There is a meeting of the stockholders of the company called to meet on that
day, and as there are matters of importance to be acted upon by the directors,
I am directed by the prest. to specially request your attendance. Resp'ly,
yours, &c.,
MARK HOPKINS,
SecVy.
WILL BUY MARSH'S CENTRAL PACIFIC SHARES.
Q. Will you look at that paper and say by whom it was written, and to whom,
and how it is dated? A. It is dated January 26, 1870, and Mr. Lambard wrote
it to me.
Q. The stock there mentioned was held by Mr. Marsh? A. Yes, sir.
Q. Is that the stock of the Central Pacific? A. Yes, sir; he was a director
at the time.
Q. Is there anything in this copy-book you have produced that bears upon this
inquiry? A. No, sir ; that is an old memorandum book that I carried in my
pocket in those days.
The paper was marked " Exhibit No. 29, August 5, 1887," and is as
follows :
SAN FRANCISCO, Jan'y 26, 1870. D. W. STRONG, Esq. :
D'R SIR : I wrote you myself from Sac'to relative to buying Marsh fifty shares
of C. P. stock, but have rec'd no answer. If you answered it has miscarried.
He offered it to you a year ago for the first assessment, $500, and if you
can secure it now for that I will take it and allow you a commission of $100
for getting it. I don't know as it is worth a cent, but I have determined to
give those people a try, and will go $600 blind on Marsh's 50 shares. I shall
need your services as a witness by and by. Keep this secret till I tell you,
for I shall not be ready to strike for a few weeks.
WILLIAM E. BROWN. 2977
the pay
the papers for him to sign. If I make anything out of this I will do better
than the $100 by you. Answer soon as you can.
O. D. LAMBARD,
Cosmopolitan Hotel, S. F.
If you get the stock, telegraph, and T will send the documents for his signature
at onee and the money.
O. D. L.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Friday, August 5, 1887.
WILLIAM E. BROWN, being further examined, testified as follows:
STATEMENT OF LIABILITIES OF CONTRACT AND FINANCE COMPANY.
By Commissioner ANDERSON :
Question. What do you now produce? Answer. A statement of the liabilities of
the Contract and Finance Company at the time of its dissolution which were
assumed by Messrs. Stanford, Huntington, Hopkins, and Crocker 5 that is, as
near as I could get it.
Q. Is it a statement of all the liabilities of the Contract and Finance Company
at the time of its dissolution? A. Yes, sir.
Q. Will you please give the date? It does not appear on your paper.
A. It was in October, 1875.
Q. Is this amount which was assumed by S., H., H., and C.? A. Yes, sir.
Q. And which they arranged with the various creditors whose names appear on
this paper? A. Yes, sir; and finally paid them.
Q. From what source did you take the figures that appear on the paper? A. I
got them, as I remarked yesterday, from the memoranda that were given to me
by Samuel Hopkins.
Q. Did you have those memoranda before you when you made this copy? A. No,
sir; I made up my books from those memoranda and I got this from my books.
Q. Are these the first entries on your books? A. Yes, sir.
Q. And they were made from that document furnished you by Mr. Hopkins? A.
Yes, sir.
Q. You understand this to cover all the liabilities of the Contract and Finance
Company at the time of its dissolution? A. So far as I know; yes, sir.
Commissioner LITTLER. Give the amounts so that they can be taken down.
The CHAIRMAN. The liabilities of the Contract and Finance Company when that
company was disincorporated, which the witness states as October, 1875, were
:
The French Savings and Loan Society $600, 000
Capital Savings Bank 280, 000
Savings and Loan Society 200,000
B. R. Crocker 56,000
D. O. Mills & Co 200,000
Michael Reese , 300, 000
Total . 1,636,000
2978 tr. s. PACIFIC RAILWAY COMMISSION.
The WITNESS. These liabilities were assumed by Stanford, Huntington, Hopkins,
and Crocker and have since been paid.
Q. Who is the Mr. Hopkins that furnished you this? A. Samuel.
Q. Is he living? A. No, sir.
Q. Did you ever hear him state where the second set of books were that he made
these extracts from? A. No, sir.
Q. And you do not know anything about those books? A. He was dead when I returned.
Q. Then you know no more about those books than you do about your own books?
A. No, sir; I took them from his memoranda.
Mr. BERGEN. Mr. Brown, however, knows about the payments of these moneys, so
far as that is concerned.
Commissioner ANDERSON. The payment is not very material.
Mr. BERCHN. Except as vouching for the accuracy of the amounts.
DISAGREEMENT AS TO EXTENT OF CALL.
The CHAIRMAN. Have you produced all the entries made from the pass-books which
were in the possession of Mr. Hopkins I
The WITNESS. Produced them here?
The CHAIRMAN. Yes.
The WITNESS. No, sir ; I produced what were asked for.
Commissioner ANDERSON. The Commission called for all the entries made by you
in the new set of books that were opened from the passbooks of Mr. Hopkins.
Mr. COHEN. I do not think that was the demand. I think that you merely asked
for the amount which was due at the time that the Contract and Finance Company
was disincorporated.
The WITNESS. That is what I understood.
Q. Is this a mere approximation? A. No, sir ; so far as it goes, it is correct
; but there were other entries connected with the books that were started that
are not included in that, but it does not refer to the liabilities of the Contract
and Finance Company.
Q. They were entries made from the books furnished you by Mr. Hopkins, which
had been taken from the books of the Contract and Finance Company, were they
not? A. Yes, sir.
Commissioner ANDERSON. Anything coming from the Contract and Finance Company
we want.
The CHAIRMAN. Is there any misunderstanding about the call, Mr. Cohen 1
Mr. COHEN. I thought the witness produced everything for which you had asked
him.
The CHAIRMAN. We desire all the entries made by you at the opening of the new
set of books for S., H., H., and C., taken from the pass-books furnished to
you by Samuel Hopkins containing entries from the Contract and Finance Company's
books.
AMOUNT DUE BY CONTRACT AND FINANCE COMPANY.
By Mr. COHEN :
Q. The paper which you produced to the Commission will show that $1,036,000
was due at the time of the disincorporation of the Contract and Finance Company,
from that company to various persons, and that those liabilities were assumed
by Stanford, Huntington, Hopkins, and Crocker. It appears that these gentlemen
have since paid that sum. Can you give us the further information of what amount
was due by the Con
WILLIAM E. BROWN. 2979
tract and Finance Company at the time that the construction of the Ceutral
Pacific Eailroad was finished 1 A. I should think the indebtedness at that
time was from three to four million dollars.
Q. Was the difference between sixteen hundred thousand and the amount that
you have spoken of between three and four million dollars paid by the Contract
and Finance Company after the construction of the Central Pacific road? A.
Yes.
Q. You have mentioned that the Contract and Finance Company received from the
Central Pacific, for each mile of road constructed from the State line to Promontory,
$43,000 in cash and $43,000 in stock. Was this floating debt that you had remaining
at the time of the construction of the Central Pacific Eailroad paid from that
$43,000 per mile in cash, or was it paid from other sources or assets? A.
It was paid from other sources ; that had all been received at the time the
road was completed.
DEBT BETWEEN THREE AND FOUR MILLIONS.
Q. Then do I understand that when the road was completed to* Promontory you
had expended $43,000 per mile and you were still in debt between three and
four millions of dollars? A. That is my idea.
Q. Was any portion of that $43,000 per mile used in any other way than for
the construction of the road and the purchase of supplies, rails, equipments,
and matters that properly belonged to such construction? A. No, sir.
Q. Was any portion of that $43,000 per mile paid in dividends or as compensation
to any one of your stockholders? A. !Nb, sir.
Q. Therefore, at the completion of the road to Promontory you had the stock
that you had received from the Central Pacific Eailroad Company and you had
the debt that you have mentioned, of between three and four millions of dollars
? A. Yes, sir.
MARKET VALUE OF THE STOCK.
Q. From what you know of the market value of the stock at that time could the
stock have been sold or any considerable amount of money raised upon it? A.
I think not.
Q, Did you ever try to sell any of the stock? A. No, sir.
Q. Why did you not try to sell it? A. I tried to borrow money on it and failed
; I never tried to sell it.
Q. You offered it as collateral for your loans, I think you said, on your previous
examination? A. Yes, sir.
Q. And it was not accepted? A. It was not accepted.
Q. Did you offer to pledge this stock for the money that you were indebted
to Michael Eeese? A. Yes, sir; Michael Eeese was one of the parties.
Q. What was Michael Eeese's position as a capitalist and banker in San Francisco
? A. He was not a banker, but he was a large capitalist and a lender of money.
Q. Was he in the habit of lending large or small sums to your knowledge? A.
Very large sums ; he was a very wealthy man.
Q. He was one of the leading capitalists of California, was he not? % A. Yes,
sir.
Q. Were there any other of the people to whom you owed money, to whom you offered
this stock? A. I think Michael Eeese was the only one that I ever offered
this stock to.
2980 U. S. PACIFIC RAILWAY COMMISSION.
FINANCIAL CONDITION OF CONTRACT AND FINANCE COMPANY.
Q. If you had been called upon to pay the money that you owed at the time of
the completion of the Central Pacific Kailroad, if payment had been insisted
upon, what would have been the financial condition of the Contract and Finance
Company?
Commissioner ANDERSON. In what year I
Mr. COHEN. Upon the completion of the road in 18G9.
The WITNESS. Unless the company could have realized something on its Central
Pacific stock it could not have paid the debt of the company.
Q. Would it have been insolvent? A. Yes, sir.
Q. In the construction of the Central Pacific Eailroad by the Contract and
Finance Company, did you use ordinary business care and prudence in the purchase
of materials and in the employment of laborers and other subordinates? A.
Yes, sir ; I think the greatest care was used except in the one idea of haste
in construction. Everything was subordinated to the rapid construction of the
road.
Q. You were at that time running a race with the Union Pacific, were you not?
A. Yes, sir.
PRUDENCE USED IN CONDUCTING BUSINESS.
Q. And excepting that you were trying to build all the road that you possibly
could in the shortest possible space of time, you used ordinary business care
and prudence in the conduct of the business of the Contract and Finance Company
? A. I think so.
Q. Did you ever ask the Central Pacific Railroad Company or any of its officers
to increase the allowance to the Contract and Finance Company for the construction
of the road beyond the amount agreed in the contract that you made with it?
A. I talked several times with the treasurer of the company, Mr. Hopkins, upon
that subject, when we found that the expense of construction was being increased
by the rapidity of it. I said that the cash paid by the company would not be
sufficient to build the road. His reply always was that it was all that he
could give us ; that $43,000 a mile was all that the company had to give and
all that it could give.
Q. Had you any personal interest in the affairs of the Contract and Finance
Company beyond your salary or remuneration I A. No, sir.
Q. I believe that you have already stated that the object of forming the Contract
and finance Company was to get the leading capitalists of the State or elsewhere
to assist in building the Central Pacific Kailroad, have you not? A. Yes, sir.
CONTRACT AND FINANCE COMPANY RECEIVED NOTHING BUT STOCK.
Q. Using the language of the chairman in a question he put to a previous witness,
I will ask you whether, on your oath, you will state that the stockholders
of the Con tract and Finance Company received any benefit or profit from the
building of the Central Pacific Eailroad, from the State line to Promontory,
beyond the stock remaining on hand at the time of the construction of the road,
subject to the debts of the road? A. They never received any other benefit.
Q. A good deal has been said about the books of the Contract and Finance Company.
I ask you to state from your knowledge of its affairs and from your experience
as an accountant whether there was any
WILLIAM E. BROWN. 2981
thing upon those books that could in any way have militated against the interests
of the Central Pacific Railroad Company or of the Contract and Finance Company
or of the directors of the Central Pacific Railroad Company or of the stockholders
of the Contract and Finance Company? A. I think there was nothing on those
books that the Central PacificRailroad Company or their directors or any one
in the interest of that company should not have seen. I have, very sincerely,
regretted the loss of them.
Q. In your judgment was there any thing upon the books of the Contract and
Finance Company that would have prejudiced the interests of the directors of
the Central Pacific Railroad Company or the officers of the Central Pacific
Railroad Company if these books were produced to-day before this Commission
? A. Nothing whatever.
Q. I will ask you this question I happen to know it myself and I would like
you to testify to it: Do not the books of the Central Pacific Railroad Company
show everything that was paid to the Contract and Finance Company the amount
of work which the Contract and Finance Company did for the Central Pacific
Railroad Company as fully and completely as the books of the Contract and Finance
Company would show if they were here produced, less the actual details of the
construction of the road 1? A. I think they do.
WHAT THE BOOKS OF THE CENTRAL PACIFIC SHOW.
Mr. COHEN. Gentlemen, we will tender you those books of the Central Pacific
Railroad Company. Would you like to see them !
By Commissioner ANDERSON:
Q. Do the books of the Central Pacific Railroad Company show the cost of this
road to the Contract and Finance Company? A. [No. sir.
Q. Then why do you say that they contain substantially everything that the
other books would, except the details'? A. They contain all that the Contract
and Finance Company received from the Central Pacific Railroad Company.
Q. That was not the question put to you. It is the cost of construction that
makes the whole point. Would not those books show absolutely and without the
possibility of such mistakes as may occur even to an accountant who has not
seen them for twelve or fourteen years, just how much profit these directors
had made out of this construction I A. The books of the Contract and Finance
Company would show the details of every department of construction more accurately,
of course, than the Central Pacific Railroad Company's books would show them.
Q. Would they not show by subtracting the cost of construction from the consideration
received exactly what benefit the directors had derived from the contract made
between the Central Pacific and the Contract and Finance Company? A. Yes,
sir ; but the Contract and Finance Company used all the resources that were
supplied to it by the Central Pacific Railroad Company. The books of the Central
Pacific Railroad Company show what other resources there were and what were
turned over to the Contract and Finance Company, all of which were used by
the Contract and Finance Company.
ADVANTAGES OF SEEING THE WRITTEN ENTRIES.
Q. But the last statement is merely the statement of your memory and not the
statement of a written book. In that respect, do you not
2982 XT. S. PACIFIC RAILWAY COMMISSION.
see that it would be of advantage both to the directors and to the Government
to be informed by written entries in the books that as a matter of fact all
the cash resources received had been expended, so that they could measure
the exact profit made by the directors? A. Undoubtedly it would be a great
advantage, and I expressed myself that I would like very well to see those
books.
Q. What other accounts did these books contain besides this construction account
with the Central Pacific beginning at the east boundary of the State and ending
at Promontory Point? A. No other accounts except accounts of parties from whom
materials and supplies were furnished.
Q. Did they contain no accounts of construction for the Southern Pacific?
A. No, sir ; not at that time.
Commissioner ANDERSON. I mean up to the time that they disappeared?
The WITNESS. No, sir. Up to the time that they disappeared I Yes ; there was
some construction of the Southern Pacific, I think, up to that . time.
CONTRACT AND FINANCE ACCOUNTS KEPT WITH VARIOUS PARTIES.
Q. Did they contain no account of repairs and work done for the Central Pacific
after May, 18G9 and 1870? A. Yes, sir; whatever was done after that up to 1873.
Q. Have you not stated that they contained an aggregate of as many as 150 unfinished
accounts at the time the books were posted? A. I think there were as many
as that, including all the various parties by whom supplies were furnished.
We kept running accounts with all the parties from whom we bought.
Q. And on some accounts was the balance against the company and on some accounts
was the balance in favor of the company? A. The balance was not in favor of
the company with any one from whom we bought materials.
Q. You had accounts on your books with the parties for whom you had done work,
or to whom you had furnished materials, out of which there arose a balance
in favor of the Contract and Finance Company, had you not? A. Yes, sir.
Q. Did you have other accounts the balances of which were against the Contract
and Finance Company? A. Yes? sir. The balances were both ways in the different
accounts.
Q. How often did you make up your balance sheet? A. Every month.
BALANCE DUE FROM CENTRAL PACIFIC.
Q. Do you undertake to say that you can recollect to-day that at the time that
this road was completed in May, 1869, there were no accounts whatever showing
a credit or balances due the company from which the obligations assumed by
S., H., H., and C., may have been paid? A. I did not say so. I think there
was a balance due from the Central Pacific Eailroad Company at that time.
Q. Arising out of what? A. Out of the construction of the road. At the exact
date of finishing the road I think there was a balance due from the Central
Pacific Eailroad Company.
Q. A cash balance? A. Yes, sir.
Mr. COHEN. But I understood you to say that it had been expended.
WILLIAM E. BROWN. 2983
9
HOW LARGE AND WHEN PAID.
Q. One moment. Do you know how large that balance was? A. I do not know how
large the balance was.
Q. Do you recollect whether it was one hundred thousand or five million? A.
No ; I think it was something between one million and a half and two millions.
Q. Do you know when that balance was paid? A. No, sir; I presume it was paid
a very short time after.
Q. At what period is it that you said that the result of the work was that
all the cash receipts had been expended, and the company had the stock on hand,
with a liability against it of between three and four millions of dollars?
A. At the completion of the contract in 1869.
Q. Can you state positively from your present recollection that that result
was after crediting this balance due from the Central Pacific, which was not
paid until afterwards, or before crediting it? A. I said I thought, approximately,
that the indebtedness of the company would amount to between three and four
millions.
Q. Did you afterwards collect from the Central Pacific the balance which you
say amounted to about a million and a half? A. Yes, sir.
INDEBTEDNESS OF CONTRACT AND FINANCE COMPANY.
Q. Did that then go to reduce the indebtedness of the Contract and Finance
Company, which you have stated to be between three and four millions? A. Yes,
sir.
Q. So that after that collection had been completed, the indebtedness of the
Contract and Finance Company, as against the stock, would not have been over
$2,000,000? A. I think the company was in debt at least from three to four
millions of dollars. That was its absolute indebtedness, including what was
due it from the Central Pacific.
Q. You mean that that would have been the net balance against the company on
stating the balance sheet? A. I think so, approximately.
Q. Can you call to your mind the balance sheet containing that balance from
the Central Pacific as one of the assets and all the other credit balances
as assets and on the other side all the debtor balances? A. No, sir 5 I presume
that is the amount from the general impression that I have, that we were always
very largely in debt for material. While we were building fifty miles of road
a month, the materials were accumulating and the indebtedness was accumulating.
The result was that at no period were we not owing a large amount for materials
furnished, which were generally bought on a credit of from 30 to 60 days.
OFFSET OF AMOUNT DUE FROM CENTRAL PACIFIC.
Commissioner ANDERSON. That I perfectly understand, but at the same time the
very fact of incurring an obligation of that kind would necessarily develop
corresponding credit for moneys to come to you?
The WITNESS. We had the million and a half or two millions from the Central
Pacific coming to us, which, so far as it went, went towards paying that indebtedness.
Q. And was there nothing to increase your indebtedness after May, 1869, arising
out of the Contract and Finance Company's operations I Was there no purchase
of material after that date? A. Yes, sir; we did considerable work after that
date.
Q. Did you not state that the road was completed by May, 1869? A. The road
was accepted by the Government commissioners, but there
2984
U. S. PACIFIC RAILWAY COMMISSION.
was a good deal of work required to put it in first-class condition after
that, which the Contract and Finance Company did ballasting and surfacing.
CONTRACT AND FINANCE COMPANY INDEBTED TO CENTRAL PACIFIC.
Q. After 1869 did the balances as between the Contract and Finance Company
and the Central Pacific Railroad Company change so that the Contract and Finance
Company became indebted to the Central Pacific Railroad Company?- A. Yes, sir.
Q. Out of what did that arise? A. For moneys advanced.
Q. Moneys advanced by the Central Pacific to the Contract and Finance Company
? A. Yes, sir.
Q. What did that indebtedness amount to? A. I think that at one time it amounted
to several million dollars.
Q. For what purpose was that money borrowed by the Contract and Finance Company
I A. For carrying on its business.
Q. In what work was it then engaged? A. It was engaged in the construction
of a portion of the railroad down the San Joaquin Valley, and the California
and Oregon Railroad.
Q. And also a portion of the Southern Pacific? A. And also a portion of the
Southern Pacific.
TERMS UPON WHICH MONEY WAS BORROWED.
Q. Do you remember on what terms that money was borrowed? A. It was borrowed
at the usual rate of interest. The interest was paid and the principal was
paid.
Q. I know that. But do you know what the rates of interest were? A. I think
at that time it was 10 per cent, per annum.
Q. It was how much? A. I think 10 per cent, per annum.
Q. Do you know whether some portions of this money was borrowed without any
interest at all? A. No, sir.
Q. Do you remember a practice of the Contract and Finance Company to leave
memoranda with the officers of the Central Pacific and to receive cash advances
for limited periods without paying interest on such advances? A. No, sir ;
not for any length of time ; perhaps for a day or for two days, but for no
length of time.
INDIVIDUAL NOTES TO SETTLE CONTRACT AND FINANCE DEBTS.
Q. Now, I read you this memorandum from the minutes of the board of directors
of the* Central Pacific, of September 9, 1873 :
"
Resolved, That the secretary be directed to receive from the Contract and Finance
Company the notes of Leland Stanford, Mark Hopkins, and C. P. Huntington, amounting
to $5,700,000, indorsed by said Contract and Finance Company, in settlement
of its indebtedness to this company, and credit the amount of same to the account
of said Contract and Finance Company."
Do you remember that transaction? A. Yes, sir.
By Mr. COHEN :
Q. You say you do? A. Yes, sir ; it was in payment of the indebtedness that
I told you of. The advances that had been made and the interest on those advances
were finally settled by the delivery of those notes.
WILLIAM E. BROWN. 2985
By Commissioner ANDERSON :
Q. Did your company retain the money? A. They had the money.
Q. They did not pay it back at all? A. No, sir ; they did not pay it back
to the Central Pacific ; they paid it back in notes.
Q. The ultimate result of the transaction was that the Central Pacific held
the notes of these gentlemen? A. Yes, sir.
Q. And you had the money without any obligation whatever of the Central Pacific?
A. Yes, sir.
STATEMENT OF ACCOUNTS OF CONSTRUCTION.
By Commissioner LITTLER :
Q. Do I understand you to say that after the Central Pacific road was completed
according to your contract and after you had received all the money which you
were entitled to receive by the terms of the contract, there was a statement
of the accounts of the construction by the Contract and Finance Company, and
it was then ascertained that the road had cost between three and four millions
more than the total amount of money received from the Central Pacific Company
? A. I do not know that any statement of accounts was made to that effect.
That was a fact.
Q. How could you arrive at the facts without a statement of the accounts?
A. We had used up all the resources that had been received, the $43,000 a mile
in cash, and we were in debt.
Q. Had any portion of the State or county subsidies gone into that construction?
A. I do not know ; no portion of those county subsidies or State subsidies
ever came to the Contract and Finance Company.
By Mr. BERGIN :
Q. You mean directly, do you not? : A. Directly. All the Contract and Finance
Company received was the $43,000 per mile in cash. It never received any subsidy
or any bonds of any kind.
INDEBTEDNESS ASCERTAINED AT COMPLETION OF CENTRAL PACIFIC.
By Commissioner LITTLER :
Q. Do I further understand you that the sixteen hundred and some odd thousand
dollars of debt contained in your statement furnished this afternoon formed
a part of this three million and a half of indebtedness ascertained at the
completion of the Central Pacific Railroad? A. That formed a part of the indebtedness,
but it might not have been exactly with those people. It was carried on from
bank to bank and from money lender to money lender, just as it was most convenient
and advisable to borrow the money.
Q. You do not mean to state to the Commission that the Contract and Finance
Company was indebted the $3,500,000 at the completion of the road, and was
also indebted this $1,000,000, do you? A. No, sir.
Q. Did the $3,500,000 cover every item, of indebtedness arising out of the
construction of the Central Pacific road? A. Yes, sir.
Q. Do you state these facts from your recollection? You do not pretend to state
that they are accurate, do you? A. I state them as my idea of the approximate
amount of tjie indebtedness.
, MARKET VALUE OF CONTRACT AND FINANCE STOCK.
Q. How many millions of dollars in stock did this Contract and Finance Company
get in addition to cash payment for that construction? A. I have forgotten
now the mileage. It is from the State line
2986 U. S. PACIFIC RAILWAY COMMISSION.
to Promontory. Whatever number of miles it is between those points, multiplied
by $43,000, would give the amount of stock.
Q. Do you desire the Commission to understand that the total amount of that
stock, $23,600,000, was not equivalent in value, and more than equivalent in
value, to the amount of its indebtedness at that time? A. I think it would
be very difficult to fix any value upon it. There was no market value.
Q. Do you not know that there are a great many valuable things that have no
market value? A. The Contract and Finance Company and the stockholders of the
Contract and Finance Company considered that it had value.
Q. As I understand, you never made any effort to sell any of this stock except
to this capitalist Reese? You did not hawk the stock on the market? You made
no effort to sell it? A. No, sir.
STOCK NOT ON THE MARKET.
Q. Was the stock at that t ime listed on the stock exchange in New York? A.
No, sir.
Q. Or in San Francisco? A. No, sir.
Q. It had never been offered in the market for sale? A. No, sir.
Q. What is your idea of when this stock began to have a market value? A. 1
think it was about 1876.
Q. What is your recollection as to the time when it was first listed on the
stock exchange in New York?
Commissioner ANDERSON. It was 1879.
The WITNESS. I think it was about that time. It had some little value when
the first dividend was paid, about 1874. Regular dividends commenced in 1879
or 1880, and then it was listed on the New York board.
Q. What were its first quotations, as you now remember? A. I think it was
listed on the board at about 50 or 60.
Commissioner LITTLER. That is pretty good for a new stock.
The WITNESS. All those kinds of things are managed by the brokers.
NO RESOURCES ON HAND.
By Commissioner ANDERSON :
Q. When you say that this road cost $43,000 a mile for construction, Jo you
base that on the fact that you had no resources on hand; had they all been
spent? A. Yes, sir.
Q. Was that the only basis? A. Yes, sir.
Q. So that if there should have been expenditures made which have escaped your
recollection, either by way of checks given to stockholders or checks given
for any other purpose or moneys applied to any other purpose, there would be
no foundation for your conclusion, would there? A. I am quite sure checks
were not given for any other purpose.
Q. That is merely the result of your memory after the lapse of all these years,
is it not? A. Yes, sir. No dividend was ever declared by the Contract and
Finance Company, except in stock.
SALARIES.
Q. Did the stockholders have any salaries? A. No, sir.
Q. Did you have any salary? A. I did.
Q. What other officers had salaries? A. The clerks and secretaries, the clerks
and book-keeper.
Q. Had you not bought for the account of these gentlemen several thousand shares
of Central Pacific stock, outside of the business? A. Not up to that time.
WILLIAM E. BROWN. 2987
Q. Not up to what time? A. Not up to 1869. We bought stock after that.
Q, When did you make your earliest purchase? A. I think we made some small
purchases of stock in 1870. I do not remember the date.
Q. May you not be mistaken about the date? A. Mr. Huntington may have bought
some stock earlier than 1870, but I amuot aware of it.
HUNTINGTON REIMBURSED FOR PURCHASES OF STOCK.
Q. When he purchased stock was he not reimbursed by the Contract and Finance
Company, and was not the stock turned in? A. Remittances were made to him
in New York for various purposes and for materials that he bought.
Commissioner ANDERSON. I am talking of the stock that he bought Central Pacific
stock.
The WITNESS. I do not know when he did commence buying it, but I do not think
he bought any before 1869.
Q. If he did buy and turn the stock into your company, would not you have had
to pay him for it? A. He did not turn any in before that.
Q. I asked you if your practice was not to pay him for stock when he turned
it in? A. Yes, sir ; we paid him by crediting his account.
Q. Would that appear in your balance sheet? A. Yes, sir.
Q. And with the same effect as though it was paid in cash? A. Yes, sir.
Q. Was any payment made by the Contract and Finance Company to the firm of
Crocker & Co. for the stock which it turned over? A. No, sir.
Q. Are you positive of that? A. Yes, sir.
CROCKER & CO. STOCK TURNED IN AND DIVIDED UP.
Q. How can you remember that when you cannot recall the account? A. I know
that the stock that Vas held by Crocker & Co. was turned in as belonging
to the five associates, and it was divided up pro rata among them all.
Q. Can you remember whether there were any other transactions between the Contract
and Finance Company and Crocker & Co. than this one? A. No, sir.
Q. Was there no other entry in any other books? A. There was no entry at all
of any kind.
Q. Was there no transactions relating to any other building, or sale of material
between Crocker & Co. and the Contract and Finance Company? A. No, sir.
*
Q. Did not Crocker & Co. pass over considerable material that they had
on hand at the end of their work? A. Yes, sir ; I think they did turn over
the horses and carts that they had, and they were paid for by the Contract
and Finance Company.
Q. Did the Contract and Finance Company pay for them? A. Yes? sir ; I think
they did.
By Mr. COHEN : Q. To be used in the work? A. Yes, sir 5 they used them in the
work.
By the CHAIRMAN :
Q. Can you recall any entries in the Contract and Finance Company's books any
balances? A. No, sir ; I cannot recall any absolute balances.
P R VOL iv 42
2988 U. S. PACIFIC RAILWAY COMMISSION.
Q. Can you recall any accounts as stated? The WITNESS. What accounts, siH
The CHAIRMAN. The accounts in the Contract and Finance Company's books. The
WITNESS. No, sir ; I cannot recall them absolutely.
NOTHING IN BOOKS COMMISSION SHOULD NOT SEE.
Q. Why do you say, then, to the Commission, that there is nothing in the books
but what the Commission could see? A. Because I believe there is nothing in
the books that the Commission should not see.
Q. Do you say that from what you recall of the books as a matter of fact?
A. From what I know of the books and from what I know was in the books.
Q. Do you say as a matter of fact that you recall that from the books of the
Contract and Finance Company? A. I make that statement from the manner in which
the books which were under my supervision were kept.
Q. Do you make that statement from what was in the books? A. Yes, sir; I make
it from what was in the books. I do not think there was anything in the books
that any living man might not see.
ACCOUNT WITH THE BANK OF CALIFORNIA.
Q. Did the Contract and Finance Company keep an account with the Bank of California
? A. Yes, sir.
Q. How long did they keep an account there? A. They kept an account there,
I think, during its entire existence.
Q. Did they borrow large sums of money from the Bank of California? A. No
7 sir ; not very large sums ; they were occasionally overdrawn there, but only
by overdrafts.
Q. Who were the officers of the Bank of California during this account 1?
A. I think D. O. Mills was president and William C. Ralston cashier.
Q. Who were the directors, if you recall them? A. I do not remember the directors.
Q. Can you recall any of them? A. No, sir.
Q. Were any of the members of the Contract and Finance Company directors in
the Bank of California? A. Ko, sir.
Q. Had any of the members of the Contract and Finance Company interests in
the Bank of California? A. Not to my knowledge.
STILL IN DEBT AT END OF CONSTRUCTION.
By Mr. COHEN :
Q. I understand, then, that the fact still remains as testified by you in answer
to my question and in answer to the questions of Commissioner Littler, that
you expended the full amount of $43,000 per mile in the construction of the
road and were still in debt at the end of the construction to the extent of
about three and a half million. Is that correct? A. That is my belief; yes,
sir.
The CHAIRMAN. That is all; now, if you will produce those additional entries
which we have called for, we will excuse you.
The WITNESS. 1 will do so.
The Commission then adjourned to Saturday, August . at 1Q a. m.
CHARLES F. CROCKER 2989
PALACE HOTEL, SAN FRANCISCO, CAL.,
Saturday, August G, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
CHAELES F. CROCKER, being duly sworn and examined, testified as follows :
By the CHAIRMAN :
Question. What is your business? Answer. I am one of the directors and executive
officers of the Central Pacific and Southern Pacific companies.
CONNECTED WITH CENTRAL AND SOUTHERN PACIFIC COMPANIES.
Q. How long have you been connected with the company? A. A little over ten
years. I commenced with the company in January, 1877.
Q. What relation did you hold to the company in 1877? A. I was clerk in the
office of one of the division superintendents.
Q. What was the next position that you held I A. I was clerk afterwards in
the office of the general freight agent, and after that I was occupied some
time in the office of the local freight agent at San Francisco station. Following
that I went into the executive office.
Q. Is that the position which you hold now? A. No, sir ; I was then a director
only. It was some time before I became an executive officer.
Q. In what year did you first go into the board of directors? A. In 1878,
I think.
Q. How are you connected with Charles Crocker, one of the original directors
? A. I am his son.
Q. Did you acquire your interest in the road through your father? A. Yes,
sir.
Q. Do you attend all the meetings of the board of directors? A. Yes, sir.
I have been absent very little. I have attended nearly all the meetings.
WORK OF EXECUTIVE COMMITTEE.
Q. What committees did you serve upon? A. I have been on the executive committee.
There are no other subcommittees.
Q..What were the duties of the executive committee'? A. They were general in
their character.
Q. What especial work did that committee do? A. I think that I should correct
my former answer. My recollection is, at least while I have been a director
of the Central Pacific, that there has not been an executive committee of that
company, and no subcommitees that I know of.
Q. That is since 1877 or 1878? A. Yes, sir.
Q. Was that when your connection as a director commenced? A. Yes, sir.
Q. There has been, as I understand it, no subcommittee of the board of directors
? A. I do not remember any.
Q. Why do you refer to the executive committee as an organization separate
from the board of directors? A. Because at one time we had what was called
an executive committee.
Q. What time was that t A. It has been since the organization of the Southern
Pacific Company, not of the Central Pacific.
Q. What was the date of that; was it since April 1, 1S85? A, Yes, sir.
2990 U. S. PACIFIC EAILWAY COMMISSION.
Q. Do you recall the stockholders' meeting in July, 1878 1 A. Not particularly.
STOCKHOLDERS' MEETING IN 1878.
Q. Do you recall being present at the stockholders 7 meeting in 1878? A. I
may have been.
Q. Was that the time that you were elected a director? A. I could not say
whether I was elected a director at a stockholders' meeting, or between the
meetings of the stockholders upon the resignation of some one of the other
directors. I do not recollect that.
Q. Were you elected director prior to July, 1878? A. No ; I do not think that
I was, because in July, 1878, 1 was in the office of the general freight agent.
Q. Whose place did you take in the board? A. I have no recollection of that.
I believe that I was elected a director when absent from the office. That is,
I was in the general freight office, but my father had given me some stock
some time before that, and at some meeting, when I was not present, I was elected
a director, and was notified.
Q. Will you give to the Commission the date of your election from any memorandum
that you have? A. I have no memorandum.
RESOLUTION OF CENTRAL PACIFIC STOCKHOLDERS.
Q. The books of the company may suggest something. Do you recall a resolution
of the stockholders of the Central Pacific Kailroad Company, July 30, 1878,
approving the acts of Leland Stanford, as president, done and performed in
the States of Nevada and California, and in the Territories of Utah and Arizona,
and in the District of Columbia, and releasing him from all liability? A.
I remember that such action was taken at that meeting, but the date, of course,
I do not recollect.
Q. Were you present at that time I A. Yes, sir.
Q. Do you recall whether you offered the resolution or not I A. I think that
I did, but it is not clear.
Q. Do you recall writing the resolution? A. No, sir ; I do not.
Q. Do you recall the circumstances under which the resolution was presented
to you! A. Not in detail.
Q. Prior to its being offered for consideration, had you given the resolution
any attention? A. Yes ; I think I had.
Q. What investigation did you make of the subject-matter of the resolution
1? A. By looking it over, and reading it carefully, and considering whether
it was the proper thing to do or not.
STANFORD'S ACTION IN NEVADA AND CALIFORNIA IN COMPANY'S
INTEREST.
Q. Will you state to the Commission what were the acts that were done and performed
by Leland Stanford in the States of Nevada and California? Take, in the first
place, the State of Nevada ; what was done there? A. I do not think that I
was present with him when he performed acts in Nevada for the company.
Q. But the stockholders must have had some idea as to the character of the
work before they voted such an absolute indorsement, must they not? A. Yes,
sir.
Q. How did they inform themselves? A. I do not know how they may have informed
themselves. I had only a general knowledge of what had been done.
CHARLES F. CROCKER. 2991
Q. What was the general knowledge that you had? A. A general knowledge that
he had acted in the interest of the company, and had done a great many things
for the benefit of the company.
Q. What did he do in the State of Nevada? A. I have no particular recollection.
Q. What have you of a general recollection? A. None ; only in a general way,
anything that he may have done.
Q. What knowledge have you as to what Governor Stanford was doing in California
at that time? A. The same knowledge.
Q. What knowledge is that? A. Only a general knowledge that he had been doing
whatever he saw fit as president of the company in attending to its affairs.
Q. What did he do? A. I do not know. I acted as one of the stockholders in
showing a confidence in everything that he had done.
Q. What was it? You certainly did not go it blind on the whole business?
COMPLIMENTARY RESOLUTIONS.
By Commissioner LITTLER :
Q. What gave rise to the passage of the resolution? A. A discus sion of all
those matters.
Q. Had Governor Stanford's character or reputation been attacked in any way
or by anybody? A. No, sir.
Q. What was the occasion of your passing these complimentary resolutions?
A. The resolutions that were passed, as 1 recollect, were passed for the purpose
of having the stockholders show their confidence in Governor Stanford, and
to ratify all of his acts which had not been formally ratified by the board
of directors.
By the CHAIRMAN :
Q. What had he been doing! A. I do not recollect anything particularly.
Q. Do you recall any acts of his in the Territories of Utah and Arizona? A.
No, sir.
Q. Was the subject of his conduct discussed at all by the stockholders or directors
? A. I do not remember that it was, particularly.
Q. Was anything said at the time about the acts of I/eland Stanford? A. Some
things may have been said.
Q. What was said? A. I do not recollect in detail.
Q. What was said generally? A. There was not anything particularly said.
CONFIDENCE IN STANFORD AS AN EXECUTIVE OFFICER.
Q. What were they talking about? A. There was no particular discussion about
those matters, that I recollect, but it was proposed to pass the resolution,
and there was a general consent to ratify and confirm the acts and deeds of
Governor Stanford as an executive officer, and in that way to show the confidence
that we had in him.
Q. Did Governor Stanford suggest the passage of the resolution? A. No ; I
do not recollect that he did.
Q. Who suggested it? A. I do not recollect that. It had been customary to
pass resolutions of that kind.
Q. Can you recall the passage of any resolution resembling this at any other
time in the history of the company prior to 1878? A. .1 entered the directory
of the company about that time.
2992 U. S. PACIFIC EAILWAY COMMISSION.
Q. Why do you state to the Commission that it was a matter of form, and that
it was customary to pass such resolutions? A. I understood it to be so.
It seemed to me to be a very proper thing to do.
Q. Will you produce any resolution like this which was adopted prior to 1878
?
Mr. COHEN. Yes ; we will. There are some that were adopted prior to that time.
The WITNESS. They will be found in the minutes.
Q. What did Leland Stanford do in the District of Columbia that required an
indorsement by the stockholders of the company and his release from all liability
? A. I do not know.
SERVICES RENDERED IN WASHINGTON.
Q. What service had Leland Stanford rendered to the company, or done or performed
for the company, in the District of Columbia that required such a resolution
? A. I believe that he had performed general services in pursuance of his duties
as president.
Q. What were the general services? A. I do not know what they might have been
; anything that might come up that would be to the interest or benefit of the
company.
Q. What would come up? A. I cannot specify.
Q. What would suggest itself to you as coming up in the District of Columbia
that the president of a great railroad corporation would be interested in so
as to be required to do certain things, and then require the subsequent indorsement
by the stockholders and a release by them of all liabilities? A. I do not
know. I cannot give a more definite answer to the question than I have, for
at that time I was new in the office, and I have no knowledge of any special
transactions.
Q. Were the services which Governor Stanford rendered as president of the company
in the District of Columbia discussed before the offering of the resolution
? A. I do not recollect that they were.
Q. Do you recall having heard of any service having been rendered by Governor
Stanford in the District of Columbia? A. No, sir.
Q. Do you recollect any part that he took in the District of Columbia in any
legislation before the Congress of the United States? A. No, sir.
Q. Was this indorsement with reference to any expenditure of money in the District
of Columbia? A. If it was, it would show on the resolution, I think. It might
cover that.
Q. Do you recall any discussion with reference to any act whatever of Leland
Stanford as president of the company, in the District of Columbia, at the time
of the passage of the resolution? A. No, sir.
PURPOSE OF RESOLUTION RELEASING HIM FROM LIABILITY.
Q. What was the purpose of the latter part of the clause in the resolution
with reference to a release of all liabilities? A. I should say that it meant
what it said.
Q. What does it mean with reference to the District of Columbia ; what liability
had he incurred 1 A. There may have been none, and there may have been some.
I do not know.
Mr. COHEN. Do you know what is in the resolution, Mr. Chairman? Do you want
it read?
The CHAIRMAN. I have read the resolution.
Mr. COHEN. The whole of it?
CHARLES F. CROCKER. 2993
Commissioner LITTLER. Have you a copy of the resolution? The CHAIRMAN. This
is an extract. I call upon Mr. Cohen to produce this resolution in full.
It is dated July 30, 1878; the approval of the acts of Leland Standford,
page 293, minutes of the Central Pacific Eailroad Company. Mr. COHEN. I shall
be glad to do it.
BUSINESS IN CHARGE OF EXECUTIVE OFFICERS.
Q. Did all the business of the Central Pacific Eailroad Company originate in
the board of directors or in committee? I want to distinguish between the
work of the committee and the work of the board of directors, if you had any
committees.
Mr. COHEN. That is rather a confusing question. I would say that it might confuse
the witness.
Q. Had the board of directors of the Central Pacific Eailroad Company any organized
committees? A. No, sir.
Q. Was all the work of the company done in the board meetings?
Mr. COHEN. What kind of work?
The CHAIRMAN. Such as the board of directors would have jurisdiction of.
The WITNESS. The directors have always been in the habit of consulting about
matters almost constantly ; at any rate, every day. The custom of the directors
has been to meet formally once a week, and whenever it became necessary to
pass formal resolutions.
Q. Who had charge of the work between the meetings of the board in case any
question should arise? A. The executive officers of the company.
Q. Then instead of referring to an executive committee, or to any other committee
of the board, the work arising during the interval between the adjournment
of one meeting and the calling of another was referred to the executive officers,
was it? A. Yes, sir; it was.
Q. Are you connected with the Pacific Improvement Company? A. No, sir; not
directly.
Q. How are you connected? A. Through my father.
Q. Are you a member of the board or do you hold any office in the Pacific Improvement
Company? A. No, sir.
RELATIONS BETWEEN WESTERN DEVELOPMENT AND CENTRAL PACIFIC
COMPANIES.
Q. At the meetings of the board of directors of the Central Pacific Eailroad
Company during your membership, were questions of finance between the Development
Company and the Central Pacific discussed? A. No, sir; I think not.
Q. Were any loans of money made by the Central Pacific Eailroad Company to
the Western Development Company, or to any other organization, upon the deposit
of collateral security? A. Yes, sir; I think so. But as I entered the directory
of the company in 1878, and as it was in that year that the Western Development
Company discontinued its business, I cannot state positively.
Q. During your association as a member of the board, what relation had the
treasury of the Central Pacific Eailroad Company with any outside organization
? A. Outside organizations used the Central Pacific Eailroad Company as a depository
for its moneys and had accounts with it.
2994 U. S. PACIFIC RAILWAY COMMISSION
QUESTIONS OF ACCOUNTS BROUGHT BEFORE BOARD OF DIRECTORS
Q. Were the questions of the accounts brought before the board of directors
at their regular meetings 1 A. Yes ; I think so ; there have been instances
of it many instances.
Q. Did the board of directors pass on applications for the use of the money
of the Central Pacific? A. Yes ; I think they did : the record books will
show, however.
Q. What outside organizations made such applications and received the use of
any money that you can recall? A. I do not know of any except the Pacific Improvement
Company. There may have been others. I think at times when the Central Pacific
has had a large balance on hand, the money has been loaned out, and it may
have been loaned to various parties.
Q. Do you recall any organization or any parties other than the Pacific Improvement
Company? A. No, sir.
CENTRAL PACIFIC'S RATE OF INTEREST.
Q. What rate of interest was charged by the Central Pacific for the use of
the money? A. The rate prevailing in the market at the time, according to what
money was worth.
Q. Was any money of the Central Pacific loaned at any time without any charge
for interest? A. Not that I know of.
Q. Do you recall the use of the money of the Central Pacific by any other outside
organization or individual without the payment of interest? A. No, sir.
Q. Did you have charge of the sinking-fund money 1? A. I represented the directors
of the company in taking charge of the sinking fund or having charge of the
securities.
WHO CONTROLLED THE SINKING FUND.
Q. Had you direction or control of the sinking funds? A. No, sir.
Q. Who had? A. The board of directors.
Q. Was any money belonging to the sinking fund, to your knowledge, put out
on loan at any time? A. I do not recollect anything of the kind.
Q. What was the size of the balance that the sinking fund usually carried ;
what was the cash amount? A. It varied. The books, of course, will show it.
Q. Did you have a clerk in charge of the cash on hand? A. No, sir.
Q. Who had, charge of the cash belonging to the sinking fund? A. The treasurer.
TIMOTHY HOPKINS TREASURER.
Q. Who was the treasurer? A. Timothy Hopkins; and before him E. W. Hopkins.
Q. Did he take direct charge or was it done through a clerk? A. I could not
tell you that. I do not know.
Q. Do you know whether that money was put out at any time without charge for
interest? A. I do not know.
Q. Do you know whether the money, the cash on hand, upon receipt of a tag or
memorandum, was loaned out at any time to any individual or company? A. I
do not recollect.
CHARLES F. CROCKER. 2995
"
TAGS" REPRESENTING MONEY.
Q. Have you ever heard of tags in connection with the cash account of the Central
Pacific Kailroad, either in the sinking fund or in the current account? A.
No, sir. Do you mean tags in the treasurer's office I
The CHAIRMAN. I mean tags as applied in connection with other organizations
or companies. This is a new term to me.
Commissioner LITTLER. He means tickets representing money in the cash account
in the treasurer's account. He means the carrying the ticket as so much cash.
Q. Was there such a practice? A. The treasurer may have done it.
Q. Did you ever hear of it? A. I have heard of tags.
Q. In connection with what business? A. In connection with the ordinary business
in the treasurer's office.
Q. Who got the money on the deposit of tags, that you heard of? A. I do not
know ; various individuals.
WHO RECEIVED THE "TAGS."
Q. Did the Western Development Company, or the Contract and Finance Company,
or the Pacific Improvement Company, receive money on the deposit of tags?
A. Not that I know of.
Q. Did you ever hear of tags in connection with any of the companies that I
have named? A. No, sir.
Q. Was any interest charged on the tag account? A. I do not know of any financial
transactions with the companies with which I am connected on which there was
no interest charged.
Q. How would the interest charge be made upon the deposit of a memorandum,
or what you call a tag 1 How would you keep the interest account with reference
to such deposit? A. If I were treasurer I could do it by noting the date.
Q. Is it not a fact that tags were carried as cash, and not as tags or due
bills? A. It does not follow that they were.
Q. I am asking you if it is not a fact that they were in this case ! A. I do
not know that it is a fact ; no, sir.
MONEYS PAID WITHOUT VOUCHERS.
Q. I will call your attention to the stockholders' meeting in the year 1885,
April 14, to a resolution reciting that Lei and Stanford, C. P. Huntington,
and Charles F. Crocker have made various payments of money in the interest
of the company, for which they have given their individual receipts, but no
vouchers have been received from the grantees to whom the sums were paid; also
reciting that the nature and amount thereof have been exhibited and fully made
known and explained to stockholders, wherefore it was resolved that the stockholders
waive the filing of vouchers and authorize the delivery of releases. Do you
recall the meeting at which this resolution was offered? A. Yes, sir.
NATURE OF THE EXPENDITURES.
Q. What was the nature of the expenditures made by these gentlemen from which
they were thus released from the filing of vouchers or detailed statements
I A. They were general in their character.
Q. What do you mean by general in their character? A. I mean expenses for
various purposes.
2996 U. S. PACIFIC RAILWAY COMMISSION.
Q. What various purposes? Please* enumerate or state in detail, as far as you
can. A. Anything and everything that they might consider advantageous to
the company, and which required the expenditure of money.
Q. Is it not a singular fact that in the management of the finances of a great
corporation anyone should be released from the filing of vouchers, and from
explaining the cause of the expenditure 1 Would not that suggest something
irregular in the proceedings? A. No.
THE EXPLANATIONS MADE.
Q. What explanation was made at the time? A. The explanation was made that
the expenses were incurred for the benefit of the company, and that it was
impossible to file full explanatory statements or documents.
Q. I call your attention to the fact " that the nature and amount thereof
have been exhibited and fully made known and explained to us " ; that
is, the stockholders. Now, what explanation was made?
Commissioner LITTLER. Was that a stockholders 7 meeting 1?
The CHAIRMAN. Yes, sir.
Commissioner LITTLER. It was not a meeting of the board of directors, then
?
The CHAIRMAN. No, sir; it was a stockholders' meeting.
Mr. COHEN. Mr. Chairman, is the amount stated there?
THE STOCKHOLDERS SATISFIED.
The CHAIRMAN. No. Colonel Crocker, I call your attention to the fact that the
nature and amount of such expenditures, according to the resolution, " were
fully exhibited and made known and explained to the stockholders." Now,
what explanation was made !
The WITNESS. An explanation was made which was considered sufficient. It was
explained that these expenses were incurred, and that they were necessary for
the company. The stockholders thought that was sufficient ; or, so far as I
was concerned, I thought so.
Q. Who made the explanation? A. The parties mentioned in the paper.
Q. Were all of the gentlemen named Messrs. Stanford, Huntington, and Crocker
present at the time that the explanation was made I A. The books will show
that. I believe that they were.
Mr. COHEN. This was a stockholders' meeting in 1885?
The WITNESS. The books will show who was present.
WITNESS THE MAN REFERRED TO IN THE RESOLUTION.
Q. Are you not the Charles F. Crocker referred to in this resolution? A. Yes,
sir.
Q. What explanation did you make? A. I explained in that way, just as the
others, that these expenditures were necessary.
Q. Did- you make the expenditures yourself? A. No, sir; not directly.
Q. How did you make them? A. Through attorneys and officers of the company.
Q. What attorneys and officers? A. The attorneys that were in the service
of the company.
Q. Did you make the payments of the money to the officers of the company?
A. In some cases.
CHARLES F. CROCKER, 2997
THE PAYMENTS WEBE FOR GENERAL SERVICES.
Q. For what did you make the payments of money? A. For services rendered.
Q. What kind of services'? A. General services anything and everything.
Q. What kind of a voucher did you take that you did not give to the company
? A. I do not recollect that I took any.
Q. What explanation was given to you?
Mr. COHEN. I beg to say, Mr. Chairman
The CHAIRMAN. Let him answer this question.
Mr. COHEN. I will ask the witness whether these services were rendered by the
counsel employed by the company that made these payments 9
The WITNESS. Yes, sir ; they were.
DECLINES TO ANSWER, UNDER ADVICE OF COUNSEL.
Mr. COHEN. As at present advised, without further consultation with my associates,
I advise you not to make any further answer to that question.
Q. What is your answer to my question, Colonel Crocker 9 I repeat it. What
explanation was given to you? A. Under advice of counsel, I decline to answer
that question.
Q. Were any of the payments made for the purpose of influencing legislation
? A. I do not know of any.
Q. Would you not know if you had made such payments J? A. I did not make any.
Q. What was the character of the expenditures that you declined to give in
full or in detail at the stockholders 7 meeting? A. I did not decline to give
any at the stockholders 7 meeting*.
The CHAIRMAN. Mr. Cohen, we ask that this resolution, or the book containing
it, be laid before this Commission.
Mr. COHEN. I would suggest that if the Commission would hold its meeting at
the proper place, where it could be furnished with information as it desired
it, we would be glad to give it. quickly. As we are about a mile from the company
7 s offices I cannot give information the moment you call for it.
Commissioner ANDERSON. We do not want you to give it the moment we ask for
it. We simply want you to give it to us.
The WITNESS. Previous to the last question I think that I was asked the question
whether these moneys referred to had been used for the purpose of influencing
legislation.
THE GOVERNMENT^ PER CENTAGE NOT TO BE AFFECTED.
Q. Have you any knowledge of the expenditure of any money on account of the
Central Pacific Railroad Company for the purpose of influencing legislation
? A. I have none ; and I wish to submit generally in answer to that question
the same answer which Governor Stanford has already made to the same question
; that is, that no .reduction will be made from that portion of the net earnings
belonging to the United States for account of any expenditure for which detailed
and satisfactory vouchers are not furnished. We will account to the Government
as if no sucli expenditures had been made.
2998 U. S. PACIFIC RAILWAY COMMISSION.
Q. Do you know, directly or indirectly, of the expenditure of money on account
of the Central Pacific Railroad Company for the purpose of influencing legislation
?
ADVISED NOT TO ANSWER CONCERNING INFLUENCING LEGISLATION.
Mr. COHEN. I advise you not to answer that question.
The WITNESS. By advice of counsel, I decline to answer that question.
Commissioner ANDERSON. On behalf of the Commission, I desire to put in an explanation.
The witness in answer to this question stands upon the answer of Governor Stanford,
which is to the effect that no deduction is made in the account of the Government
in relation to the amounts actually due under the Thurman act. That has absolutely
nothing to do with the merits of this inquiry. The expenditure of large sums
of money for the purpose of influencing legislation necessarily has the effect
of decreasing the assets of the company and diminishing the power of the company
to pay its debts. In the next place, it is referred to by the act as a proper
thing to be inquired into. It certainly needs no argument to show that if Congress
is to be asked to take any action in this matter, it is perfectly right to
ask if any of its members have been approached or improperly influenced. In
my judgment we are compelled to insist upon answers to these questions $ and
I suggest to counsel that before committing themselves to the position of refusing
to answer they take the matter under serious consideration.
AN ASSUMPTION NOT PROVED.
Mr. COHEN. So far as I am concerned, I can advise now, but I would prefer to
take time to consult. In the first place, the Commission assumes a fact to
exist which is not yet proved. The witness has said that certain payments were
made to the counsel of the company, and has said that in the absence of vouchers
the stockholders and directors of the company, with full knowledge of the facts,
have approved these expenditures. I do not know whether, after I have had consultation
with the other counsel in this case, we shall advise the witness not to answer
the question. As to what the rights of the Commission may be, that can easily
be determined.
COUNSEL DESIRE TO BE FULLY REPORTED.
I would like to have some understanding as to the orderly proceedings of this
Commission. I notice that when I am speaking the secretary stops reporting.
If that is to be the rule, I might as well retire, as I can do no good by appearing
here unless the arguments and the motions I make to this Commission are to
go upon record. If they are not to go upon the record, I do not desire to waste
my time here any further.
THE SECRETARY DIRECTED TO REPORT EVERYTHING.
The CHAIRMAN. We will hear you, sir. You may go ahead, and the secretary \v
ill report everything that you say.
Mr. COHEN. So far as I am concerned, I have said in the first place that the
Commission assumes a fact to exist which has not yet been proven. The witness
has said that certain payments were made for the
CHARLES P. CROCKER. 2999
benefit of the company, for which detailed vouchers have not been rendered.
I have said that in the absence of associate counsel, who are not here this
morning I do not know why I prefer, until I have had consultation with them,
to advise the witness not to answer the question. I have not considered the
powers or the rights of this Commission in the premises, or what the effect
of the non-explanation of the payments might have upon the interests of the
Government. Until I shall have had the consultation with my associates that
I have spoken of, I would prefer that these questions be not insisted upon
by the Commission.
Commissioner ANDERSON. I am perfectly satisfied with that.
The CHAIRMAN. There is no objection to that.
AN ABSOLUTELY INSUFFICIENT EXPLANATION.
P
Commissioner ANDERSON. I want to point out the absolutely insufficient nature
of the explanation given in the answer before us. The mere fact that no reduction
will be made from that portion of the net earnings belonging to the United
States on account of any expenditure for which detailed and satisfactory vouchers
are not furnished is utterly insufficient by itself. If we should have no power
over the matter, or if for any other reason the question is improper, we should
consider it, with a desire to decide it according to the justice of the case
and according to the real and proper construction of the powers of the Commission
; but that explanation is absolutely insufficient.
NECESSITY OF RESISTING ADVERSE LEGISLATION.
Mr. COHEN. It seems to me it ought to be apparent to the Commission, not only
with respect to this corporation, but with respect to all other large corporations,
that they are engaged not only before Congress, but before the State legislatures
in resisting adverse legislation. They seldom ask for any affirmative legislation,
but they are compelled, in the interest of their stockholders, and in this
case in the interest of the Government, to see that their earnings are not
curtailed and their power to pay their debts impaired by such legislation as
is proposed in all the States through which the roads run ; and for that purpose
they have undoubtedly been compelled to employ counsel and agents and have
had ,to give them certain powers. If such payments have been made, it certainly
answers no useful purpose to drag those agents into the public gaze, or to
examine them. So far as the Government's interest is concerned, we do not seek
to charge it with any payments that may have been proved to have been made.
Whatever we think is right, as lawyers, to advise our clients to do, that will
be done.
The CHAIRMAN. Mr. Littler, is that agreeable to you?
REQUEST FOR TIME TO CONSULT.
Commissioner LITTLER. As 1 understand it, you ask time to consult with your
associates?
Mr. COHEN. Yes, sir 5 I do not know why they are not here, but I suppose that
they thought that you had adjourned until Monday.
Commissioner LITTLER. I think that that is a reasonable request and I think
that it should be granted.
Mr. COHEN. I think it is. Will the Commission adjourn until Monday at 10 o'clock
I
Commissioner LITTLER. We can skip that question, and go on with other matters.
Let it stand that way.
3000 U. S. PACIFIC RAILWAY COMMISSION.
The CHAIRMAN. We will skip that point, and proceed with the examination.
IGNORANT OF COST OF CONSTRUCTION.
Q. How familiar are you with the cost of the construction of the roads which
have been consolidated into the Central Pacific? A. I am not familiar with
it.
Q. Have you any knowledge at all as to the actual cost of any of the roads
connected with or consolidated into the Central Pacific? A. No, sir.
Q. Have you ever considered the question of the actual cost of construction
of the several roads I
The WITNESS. Do you mean that now form a part of the Central Pacific I *
The CHAIRMAN. That now form the Central Pacific road. They were consolidated
into it, I think, in the month of June, 1870.
The WITNESS. I know of those companies or railroads, but I know nothing of
their cost.
Q. Have you ever as a director or one interested in the Central Pacific considered
the actual cost of the several roads with reference to the bonded and stocked
cost?
Mr. COHEN. These roads were all consolidated before you became a director of
the company, were they not?
The WITNESS. Long before that.
"
HE WAS A SMALL BOY, THEN."
Q. I asked the question, have you considered these matters as one having an
interest in the Central Pacific?
Mr. COHEN. He was a small boy then.
The CHAIRMAN. What was your answer?
The WITNESS. I could not have considered it. I did not. That is the answer
; I did not consider it.
Q. I understand you to say that, speaking relatively, you have no knowledge
of the actual cost of the several roads that were consolidated into the Central
Pacific with reference to the bonded and stocked cost? A. I have no knowledge.
CONSTRUCTION OF THE SOUTHERN PACIFIC.
Q. That is what I wanted to know. Was the Southern Pacific in process of construction
while you were connected with the board? A. No, sir.
Commissioner ANDERSON. Some branches of it must have been.
The WITNESS. Not any portion of the Central Pacific.
Mr. COHEN. The question is as regards the Southern Pacific.
The WITNESS. I thought that you said the CentralPacific. TheSouthern Pacific
was in course of construction.
Q. How far had the construction of the Southern Pacific proceeded when you
went into the board? A. To Fort Yuma, Arizona.
Q. Was the subject of the construction of the Southern Pacific considered during
your attendance upon the meetings of the board of directors I A. Its construction
was no doubt considered.
NOTHING TO DO WITH THE CENTRAL PACIFIC.
Q. With reference to what part of the construction was the discussion in the
Central Pacific board? A. Nothing special. The construction of those roads
had nothing to do with the Central Pacific.
CHARLES F. CROCKER. 3001
Q. What generally was the discussion about in the board of the Central Pacific
with reference to the construction of the Southern Pacific? A. There was
no consideration of those matters in the board of the Central Pacific.
Q. Were there any applications to the board of the Central Pacific for the
loan of money to the Southern Pacific or to the Western Development Company
on account of the Southern Pacific construction? A. No, sir ; none that I
know of.
Q. Were there any offers on the part of the Western Development Company for
the deposit of bonds of the Southern Pacific with the Central Pacific for the
loan of the Central Pacific money? A. I do not remember any.
PROPOSAL TO PAY DEBT DUE TO CENTRAL PACIFIC.
Q. I call your attention to the minutes of August 28, 1878, page 306, of the
Central Pacific Railroad Company ; communication of F. S. Douty, president
of the Western Development Company, proposing to pay off indebtedness due by
the Western Development Company to the Central Pacific Eailroad Company, or
to continue the present loans at 6 per cent, per annum. Do you recall the discussion
that took place in the board of directors during that year concerning the loans
made by the Central Pacific Eailroad Company to the Western Development Company
?
Mr. COHEN. Was Colonel Crocker present at that meeting?
The CHAIRMAN. It does not appear.
The WITNESS. I doubt that I was a director at that time.
Q. Do you recall at any subsequent meetings any discussion as to the loans
of the Central Pacific funds to the Western Development Company 1? A. No,
sir.
WHAT THE WESTERN DEVELOPMENT COMPANY PROPOSED.
The CHAIRMAN. I read from the minutes of the Central Pacific Eailroad Company,
page 385, September 1, 1879, that the Western Development Company proposes
to pay a note given to the Central Pacific Eailroad Company for $3,086,259.72,
with bonds of the Southern Pacific Eailroad Company at 90 cents on the dollar.
Mr. COHEN. That was in the interest of the Government, was it not?
The CHAIRMAN. I am not discussing that. I am asking for information.
Mr. COHEN. The bonds are now worth 115.
The WITNESS. I have no recollection of that at all. I recollect that about
that time the Western Development Company began to close out its affairs, but
I have no recollection that it had any such transaction as that.
Q. Did you not consider the question of the security that was bfeing ' placed
with the Central Pacific for the use of its money? A. I did think of it ;
yes, sir.
Q. Would not such a sum as $3,000,000 make an impression upon you? A. Yes,
sir.
Q. What impression have you now of the transaction that took place in 1879
9 A. It was a very lair one to make for the company.
Q. Do you recall what discussion took place at the time? A. I cannot remember
any details.
Q. Were not the funds of the company loaned from time to time to the Western
Development Company, to be used in the construction of the Southern Pacific
Bailroad? A. Ho, sir; not that I am aware of.
3002 U. S. PACIFIC RAILWAY COMMISSION.
CENTRAL PACIFIC MAY HAVE LOANED TO WESTERN DEVELOPMENT.
Q. Do I understand you to say that you have no knowledge of the use of any
of the money of the Central Pacific by the Western Development Company for
the purpose of the construction of the Southern Pacific? A. If there were
any loans made the books will show them ; but I have no recollection of any
moneys that were turned over by the Central Pacific for that purpose.
Q. Were not the moneys of the Central Pacific loaned upon deposit of proper
security for that purpose? A. They may have been.
Q. Was not interest received by the Central Pacific for the loans made for
the purpose of the construction of the Southern Pacific I A. If there were
any loans made there was interest.
Q. Then is it not a fact that upon such loans the funds of the Central Pacific
went into the Western Development Company for the purpose of constructing the
Southern Pacific? A. I do not know that they were.
SOUTHERN PACIFIC BONDS AS COLLATERAL SECURITY.
Q. Were bonds of the Southern Pacific taken by the Central Pacific as collateral
security for loans on account orf the construction of the Southern Pacific
Bailroad? A. Those bonds were taken as collateral security for loans; but I
have no knowledge of the use that was made of that money.
Q. How far in advance of construction were the bonds issued as collateral security
; how far had the construction proceeded?
Mr. COHEN. You mean of the Southern Pacific .Railroad?
The CHAIRMAN. I mean the Southern Pacific Eailroad.
The WITNESS. I do not think it had proceeded in advance at all. I do not recollect
that bonds were issued before the road was built.
Q. As you proceeded , were bonds issued in advance of the construction? A^.
I have no recollection that they were. I do not believe that they were.
COMMITTEE TO INVESTIGATE SINKING FUNDS.
By Commissioner ANDERSON :
Q. Were you not a member of the committee appointed to invest the sinking funds
of the company? A. Yes, sir.
Q. For how many years did you serve on that committee? A. I think that that
committee was appointed from time to time. It was not a permanent committee.
Q. How soon after you became a director did you first serve on such committee
? A. Three years at least, I should say.
Mr. COHEN. What committee was this?
Commissioner ANDERSON. A committee to invest the sinking funds.
Q. That would be about 1881, would it not? A. As near as I can ^ recollect.
Q. Before that time, had you any knowledge of the various sinking funds of
the company? A. Yes, sir ; I had knowledge from what I had heard in conversation
and read in the reports of the company. I studied the reports of the company.
METHOD OF DISPOSING OF SINKING FUNDS.
Q. What was the mode of operation iu regard to disposing of the sinking fund
5 was it done through trustees of the sinking fund, as in
CHARLES F. CROCKER. 3003
other States, or was it done by the board of directors? A. It has been done
by the board of directors.
Q. So that the sinking fund has been entirely under the control of the board
of directors, has it? A. Yes, sir.
Q. Was there any one person especially charged with the custody of the securities?
A. They were more particularly in charge of those trustees. There was a separate
safe provided for all the securities.
Q. By trustees, do you mean the committee appointed with power to invest?
A. Yes, sir.
Q. You say that there was a separate safe! A. Yes, sir.
PLACE OF DEPOSIT OF SINKING FUNDS.
Q. Is there a separate safe to-day for the sinking funds 1 A. Yes, sir.
Q. Are the securities kept in that safe? A. Yes, sir.
Q. Are there any other securities belonging to the company kept in that safe,
or only the sinking funds? A. Only the sinking funds.
Q. Where is that safe? A. It is in one of the rooms in the railroad company's
offices.
Q. Who has the key or the combination of that safe to-day? A. I have the combination
; and I think that Mr. Timothy Hopkins also has it.
Q. And are you two gentlemen responsible for the sinking funds to day for the
presence of all the securities and for the nature of the investment? A. I
do not know whether there are any others who know the combination of that safe
or not.
WHO ARE RESPONSIBLE FOR THE SECURITIES.
Q. Do you hold yourselves responsible for the sinking funds so far as. the
care that you, as a member of the committee, are called upon to bestow upon
them? A. As to the care of the securities; yes, sir.
Mr., COHEN. With the ordinary restriction of a bailment.
Q. I want to know of whom to ask these questions. In regard to these investments
of the sinking fund, going back as far as your memory extends, what has been
the policy of the company? A. The policy of the company has been to invest
the accumulating sinking funds as soon as convenient after they had accumulated.
Commissioner ANDERSON. I call more particularly for the general nature of the
investments made.
GENERAL NATURE OF THE INVESTMENTS.
The WITNESS. The investments were made in available securities in the securities
that were considered advantageous as an investment.
Q. Can you not be more specific as to the nature of the securities and the
nature of the corporations or persons to whom this fund has been loaned from
time to time? A. These reports of the trustees, so-called, have been made
to the directors, and these reports have been spread upon the minutes of the
company, and are now in the record book.
Q. Were the reports made to the board in writing or verbally? A. In writing.
Q. Has that always been the custom as far back as you can remember? A. Yes,
sir.
P R VOL iv 43
3004 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. I ask you to furnish us with copies of these reports
of the investment:
REQUEST FOR STATEMENT OF SECURITIES
By Commissioner LITTLER:
Q. Can you not furnish us with a statement of the several securities which
go to make up your sinking funds? A. Yes, sir 5 I can have a statement of that
kind prepared, and will do so.
Mr. UAYMOND. Let your statement show what those securities cost and what their
par value is.
Commissioner LITTLER. Also state the total amount of the sinking fund.
FUNDS LOANED TO CONSTRUCTION COMPANIES.
By Commissioner ANDERSON :
Q. Is it not a fact that these funds have occasionally been loaned to the different
construction companies to the Pacific Improvement Company, for instance, at
times 1 A. Yes ; I believe that they have been.
Mr. COHEN. On interest, you mean. *
The WITNESS. Tiiero was interest, of course.
Q. Is it not also a fact that the funds have been loaned to the Western Development
Company in the same way 1 A. Yes, sir ; I think so, from what has been read
from the minutes. I have no personal recollection of it.
Q. You have no present recollection? A. No, sir. Q. Is it not also a fact
that these moneys have been occasionally loaned .individually to Mr. Huntiugton
and to Mr. Stanford and to Mr. Crocker * A. No, sir.
Q. Do you state that positively, or is it merely that you do not recollect?
A. I certainly do not recollect of any such loans.
Q. Do you know whether the funds of the Central Pacific Eailroad Company, other
than those belonging to the sinking funds, have also, ! at times, been loaned
to the construction companies? A. I do not be-? lieve that they have been
; I have no recollection of it. There has always been a running account between
the two companies, and it may have been overdrawn.
Q. If such running account were overdrawn to the extent of a million dollars,
would that not in effect be a loan of the funds of the Central Pacific to the
construction companies'? A. YeSj sir 5 it would.
NO RECOLLECTION OF $5,000,000 LOAN.
Q. Do you not know, or have you not heard at any time, of a loan amounting
to as much as $5,000,000 having been made of the funds of the Central Pacific
to the Contract and Finance Company? A. No, sir.
Q. You never heard of it? A. No, sir.
Q. And that that loan was paid by notes of Charles Crocker, Mark Hopkins, and
Leland Stanford? A. I may have been eight or nine years old at that time.
Commissioner ANDERSON. I am glad that you are so young now. Twelve years ago,
Mr. Crocker, if you were then nine years old, would make you now rather a young
man.
The WITNESS. I have learned a great many things about the early history of
the road from reading the newspaper reports of the proceedings of this Commission.
.
CHARLES F. CKOCKER. 3005
PAST REPORTS SHOW SINKING FUND OPERATIONS.
Q. Will your past reports show not only the condition of the sinking funds,
but also the collaterals held for the loans'? A. Yes, sir.
Q. These reports that we want are all the reports as far back as reports were
made. Will you produce them 1
The WITNESS. Do you mean the annual reports of the company?
Commissioner ANDERSON. I mean the reports of this committee showing the investment
of the sinking funds, not only the current report for this year, but as far
back as reports go. I suppose that they were filed with the secretary of the
company.
The WITNESS. I think that they were so filed.
Q. Do you know whether the chief engineer of your road makes an annual report?
A. He does.
Q. Does he make any report other than the report which appears in your printed
annual report? A. No, sir.
Q. Is that the only one that he makes? A. Yes, sir.
MANUSCRIPT REPORTS PREVIOUS TO 1872.
Q. The first annual report that we have in print is dated 1872. Do you know
whether there are on file copies of the reports of the chief engineer from
the organization of the road up to 1872? A. I do not know whether those reports
are on file or not. The reports are made in manuscript and then printed, together
with the reports of the other officers of the company.
Q. If you have the manuscript reports from 1862 to 1872 we would like to see
them. Will you produce them? A. Yes, sir; if we have them.
THE CALIFORNIA AND OREGON.
Q. What knowledge have you of the construction of the California and Oregon
Eailroad between Delta and the State line? A. I have been along the line frequently
and have watched the work.
Q. What is the nature of that country with reference to the difficulties of
construction? A. It is mountainous and rocky, and there are steep grades.
For 75 miles the road winds along a narrow canon, and there are a great many
curves with a high degree of curvature and steep grades.
Q. What is your precise relation to that construction ; are you merely interested
as a director, or have you any connection or official relation with it? A.
I am, of course, interested as a director and as a stockholder.
Q. Stockholder of what company? A. Of the Central Pacific.
Q. Are you a stockholder of the Pacific Improvement Company? A. No, sir.
Q. Did you represent your father in examining the road or watching its progress?
A. I do not represent him in my official relations with the railroad company.
Q. Has your investigation of the construction been sufficiently close to give
you any- knowledge of the actual cost of the construction? A. No; it has not.
WHY CENTRAL PACIFIC DID NOT BUILD IT DIRECTLY.
Q. Can you tell this Commission why the Central Pacific Railroad Company did
not construct this road through its own engineers and officers, at cost, instead
of constructing it through the device of the Pa
3006 U. S. PACIFIC KAIL WAY COMMISSION.
cific Improvement Company, for the construction of which road the Central Pacific
pays four and a half millions in bonds and eighty thousand shares of stock
? A. There were legal difficulties in the way.
Q. Of what nature? A. The difficulty in the way of making the proper connections
with the Oregon and California Company.
Q. How would that difficulty affect the question of determining the cost of
construction by means of the engineers and officers of this road, who should
do the work directly up to the State line? A. The value of the railroad depended
largely upon its being under our management through to Portland, Oreg., and
that could not be accomplished by the Central Pacific.
Q. Why was that circumstance controlling so as to compel the Central Pacific
to make this construction by a contract with the Pacific Improvement Company
instead of constructing that road itself? A. It was necessary to obtain the
control of the Oregon and California Railroad Company.
Q. Could not that portion of the arrangement have been made by separate negotiation,
leaving the Central Pacific to build this road in the usual way? A. It could
not have been done.
Q. Why not? A. I do not believe that it could have been done.
Q. Can you give no other reason? A. I do not think it could have been accomplished
in that way.
CONTROL OF OREGON AND CALIFORNIA STIPULATED.
Q. Is a large portion of the consideration agreed to be paid to the Pacific
Improvement Company based upon the promise of the Pacific Improvement Company
to obtain control of the Oregon and California road, and to complete that road
to a junction? A. That was one of the considerations.
Q. How much of the value to be p'aid by the Pacific Improvement Company is
based upon that consideration that is, the completion of the Oregon and California
road? A. In my judgment it was the greater part of the consideration.
Q. And all of the consideration has been paid to the Pacific Improvement Company,
except $317,000 in bonds, has it not? A. Yes; I think so.
Q. But the junction has not yet been made, has it? A. The Pacific Improvement
Company has fulfilled its part of the contract.
Q. It has not fulfilled that part of completing the gap, has it, which you
say was a very material part of the contract? A. It is not actually completed
to-day.
THE FURNISHING OF EQUIPMENT.
Q. Is it not also true that the Pacific Improvement Company has not furnished
any of the equipment agreed to be furnished under the contract? A. I think
that it has furnished the equipment, or else it is in process of delivery.
Commissioner ANDERSON. The president of that company has informed us that none
of it has been delivered as yet, though the orders for it are out in the East.
A. I think that the greater portion of it is delivered, but am not daily apprised
of the arrival of rolling stock.
Q. Have you been apprised of the arrival of new rolling stock? A. I know that
a great deal of rolling stock has been delivered.
Q. Under that contract? A. Yes, sir.
CHARLES F. CROCKER. 3007
Q. Where is it delivered? A. To this system of railroads at one of its eastern
termini from some of the other railroads.
Q. Where is it manufactured? A. In various places. There are contracts in
different places.
Q. Is it manufactured most generally in the East? A. Yes, sir. The passenger
cars are made at Dayton, Ohio ; the freight cars are made at two or three different
places; the engines are being made at Sacramento, in the shops of the company.
Q. How many engines have been built at Sacramento? I mean for this Pacific
Improvement Company contract. A. There is not any particular portion made.
The engines are being made at Sacramento as rapidly as they can be made, and
the quota under this contract is supplied whenever they are needed.
SOUTHERN PACIFIC BUILDING THE ROLLING STOCK.
Q. By what arrangement between the Pacific Improvement Company and the Central
Pacific Eailroad Company is it that these engines are being constructed? A.
I do not believe there is any arrangement with them. The shops and employes
are all under the control of the Southern Pacific. It is a part of the lease
to the Southern Company, and fbe Southern Pacific Company is doing that work
at Sacramento.
Q. For whose account does the Southern Pacific Company do it? A. If the rolling
Stock is made for the Pacific Improvement Company under any of its contracts,
it is made for account of that company. If the rolling stock is needed by any
one of the different railroads leased by the Southern Pacific Company it is
apportioned off to it where needed.
Q. How is the price to be paid by the Pacific Improvement Company for these
engines determined? A. An account is made up of the cost; to this 10 per cent,
is added and charged against the Pacific Improvement Company.
TERMS OF CONTRACT AS TO EQUIPMENT.
Q. The Pacific Improvement Company under its contract agrees for the four and
one-half millions of bonds and the eighty thousand shares of stock to deliver
one locomotive for every 5 miles, and a number of passenger cars and freight
cars, to be determined by the mileage of the road. As the Pacific Improvement
Company appears to have received all the consideration, I want to know how
it is that the cost of these locomotives arid cars is regulated so as to reimburse
the Central Pacific?- A. I do not believe that the cost of that rolling stock
affects the Central Pacific at all.
PACIFIC IMPROVEMENT PAYS SOUTHERN PACIFIC.
Q. If the locomotives are manufactured- in its shops, the Central Pacific must
pay the wages of the men who make the locomotives, must it not? A. Those shops
are leased to the Southern Pacific Company.
Q. Then the Southern Pacific Company must pay* these wages, must it not? A.
It pays the wages of the men in the shops.
Q. How does it get the money back from the Pacific Improvement Company? A.
The Pacific Improvement Company pays for it.
Q. How is the amount which it is to. pay determined 1? A. An account is made
up of the cost ; to this 10 per cent, is added and charged against the Pacific
Improvement Company.
3008 U. S. PACIFIC RAILWAY COMMISSION.
Q. In regard to the rolling stock that is bought in the East by whom is that
purchase made, by the Pacific Improvement Company, or by the Southern Pacific
Company? A. It is made by the Pacific 1m provement Company.
Q. Where was that rolling stock to be delivered, at Ogden? A. Generally at
Ogden ; yes, sir.
MR. DOUTY HAS FULL INFORMATION.
Q. Do you say that Mr. Douty has no information of these deliveries / A. He
has full information of them.
Commissioner ANDERSON. Mr. Douty has told us that they have been made. .1 refer
to these deliveries of rolling stock called for by the Pacific Improvement
Company's contract. He said that they were simply under order at the East.
The WITNESS. There are a great many orders at the East, and one may be confounded
with another. Some are orders of the Pacific Improvement Company and some are
orders of the Southern Pacific Compauy 3 and deliveries are being made almost
constantly.
IGNORANT OF PROFITS OF PACIFIC IMPROVEMENT COMPANY.
Q. Are you sufficiently familiar with the construction between Delta and the
State line and the amount of equipment to be delivered under the contract to
tell us how much profit the Pacific Improvement Company will make under the
contract in question, the consideration it receives being four and a half millions
in bonds of the Oregon and California and of the Central Pacific, issue of
October, 1886, and eighty thousand shares of stock of the Central Pacific Railroad
Company, and the work to be performed by the Pacific Improvement Company, being
the aforesaid construction of 104 miles, and the delivery of the rolling stock
? A. I do not know anything about its profits.
Q. Do you-know what the bonds of October, 1880 fifty-years bonds are worth
? A. They are not on the market.
Q. Do you own any of them? A. -N"o, sir.
Q. Have you ever owned any of them? A. No, sir.
INTEREST ON BONDS OF 1886.
Q. Do you know whether the interest is paid on those bonds? A. Yes, sir ;
it is paid. It is a very new bond.
Q. I know that one coupon has passed ; was it paid? A. Yes, sir ; on such
bonds as had been issued when the coupon was due.
Q. Do you know at what rate those bonds were received as collateral for your
sinking funds? A. No, sir ; I do not recollect.
Q. Do you know that within a year a large number of these bonds were accepted
in payment of bonds of the Southern Pacific Eailroad Company held in the sinking
funds? A. Yes ; I do recollect that.
Q. Is it your judgment, then, that the bonds of October, 1886, are as good
as the first-mortgage bonds of the Southern Pacific Eailroad Company IA. Yes
; I* think they are as good.
ALSO ON CALIFORNIA AND OREGON BONDS.
Q. How about the California and Oregon bonds; is the interest paid regularly
on those? A. Yes, sir ; it is.
CHARLES F. CROCKER. 3009
Q. In your judgment, are those bonds as good as the Southern Pacific Railroad
bonds'? A. Yes, sir; they are.
Q So that, so far as your judgment goes, we may assume that the four and a
half millions paid to the Pacific Improvement Company in those bonds as being
the equivalent of four and a half millions in money? A. I do not know whether
they would sell in the open market for that amount or not.
Q. With what other construction of the Central Pacific, or any of its branches,
are you familiar? A. There is no other construction that has been undertaken
by the Central Pacific since I have been connected with it.
RECEIPTS OF CENTRAL PACIFIC BEFORE AND AFTER LEASE.
Q. How familiar are you with the results of the management of the Central Pacific
prior to the lease of 1885, as compared with those results subsequent to the
lease of 1885? A. I am somewhat familiar with it. I have been at the office
nearly all that time.
Q. Have you studied the figures showing the gross receipts of the management
before the lease of 1885 with the deductions made for rentals, interest, sinking-fund
requirements of the United States, and. the State sinking funds, so as to familiarize
yourself with the absolute net resulting prior to the lease of 1885, and as
compared with that, the net actually received since the lease of 1885, which
has amounted, as you know, to $1,300,000 or $1,400,000? A. The statements showing
those facts are prepared by the secretary or his assistants, and I have seen
those statements. 1 have also obtained other information upon those points
from the annual reports of the company. Regular statements of earnings and
expenses are also made out.
CENTRAL PACIFIC'S INTERESTS NOT AFFECTED.
Q. What is your conclusion as to which is most advantageous to the Central
Pacific Railroad Company ; which form will yield the largest amount of earnings'?
A. As nearly as I can judge the interests of the Central Pacific remain the
same as they did before this lease.
Q. Do you mean to say that the amount of net earnings is about the same? A.
No, sir ; they do not necessarily remain the same, but the net earnings of
the Central Pacific depend upon its actual business to the same extent exactly
now as they did before.
Q. Before that lease were not the net earnings of the Central Pacific largely
affected by the operation of the Southern Pacific of California, the Southern
Pacific of Arizona, the Southern Pacific of New Mexico, and all the lines south
of Goshen? A. The lease had nothing to do with that.
Q. Before the lease of 1885, were not the annual net earnings affected by the
operation of the lines of the Southern Pacific south of Goshen? If those lines
south of Goshen made more money than the rentals, would not that increase the
net earnings of the Central Pacific? A. Yes, sir.
Q. And if they made a loss, it would decrease those earnings? A. Yes, sir.
Q. Since that lease, the lines south of Goshen do not enter into the computation
at all, do they? A. They do not. The Central Pacific is independent, as it
was before.
3010 U. S. PACIFIC RAILWAY COMMISSION.
ABE THE NET EARNINGS MORE OR LESS?
Q. I ask you whether the absolute net earnings after the payment of all charges,
the net earnings that would be available for dividends, are more or less under
the operation of the lease of 1885 than they were before the lease of 1885?
A. These reports would show that; but as to the business of the Central Pacific,
it cannot be affected.
Q. Do you mean when you say Central Pacific, the aided portion of the Central
Pacific? A. No; I mean all of the Central Pacific lines.
Q. I cannot understand your answer. Before the lease of 1885, the Central Pacific
Railroad Company was a system, the net earnings of which were determined by
its own actual net earnings, and also by the net earnings resulting from a
number of lines leased to it, including those south of Goshen. Since the lease
of 1885, it is a corporation whose net earnings are determined by the operation
of its own line, and of certain leased lines embracing only those north of
Goshen. I ask under which system the net earnings have given the largest return
? A. I must refer you to the reports of the secretary for such a statement.
They will show the fact. The only knowledge which I have of them is what the
secretary would furnish to me, and what I have obtained from the annual reports.
WAS THE LEASE A GOOD THING?
Q. I will put the question in a very much shorter form : Do you think that
the lease of 1885 was a good thing? A. Yes, sir.
Q. Why do you think that it was a good thing? A. It continues haimouious relations
between these companies, which is very desirable.
Q. When you say a good thing, you mean a good thing for whom? A, All the parties
concerned.
Q. Do you think that it has brought more money to the Central Pacific than'the
Central Pacific would have had if this lease had not been made? A. I do not
think that the Central Pacific has been affec ted much either way.
FUTURE OF THE THROUGH BUSINESS.
Q. Have you made the subject of the through business, as compared with the
local business, a study? A. Yes ; I have observed it as closely as possible.
Q. What is your judgment as to the probable future of the through business
; by this, I mean the transcontinental business? A. The value of the through
business to these railroads has been greatly impaired. It is not worth as much
to these companies as it once was.
Q. Has it been impaired chiefly in tonnage, or in money value? A. The rates
have been so affected by competition that it is not worth to the companies
what it once was.
Q. How far is the decrease of earnings from this cause offset by the increase
of local earnings? A. In my judgment, it has been very nearly offset ; for
the increase of local trade or traffic has been considerable.
THE MOST VALUABLE FEEDERS.
Q. Which do you regard as the most valuable feeders tending to increase the
local earnings? A. The local lines in the valleys about San Francisco ; and
within the last two or three years the local lines about Los Angeles, m Southern
California.
Q. Does the class of business which goes to these local lines to any extent
pass over the main line of the Central Pacific? A. Yes, sir.
CHARLES F. CROCKER. 3011
Q. What are the features of this business? A. The local business on the main
line of the Central Pacific, as far east asTruckee over the mountains, or
to Keno, is large, and the local business on the Central Pacific, Oregon
Division, as far north as Bedding, is growing rapidly, and it is now quite
heavy. The local business in the San Joaquin Valley is also increasing rapidly.
Those localities are rapidly settling up with a new population. In addition
to these, those feeders of the line which do not actually form a part of
the Central Pacific, but which are valuable, are the California Pacific,
in Napa Valley, and the Northern Railway.
Q. How far does the business to which you are now alluding tend to increase,
if it does so, the earnings of the Central Pacific between Sacramento and Promontory
Point $ A. That business is affected by the local trade first referred to by
me, and is between Sacramento and Truckee.
Q. Because it goes farther east than Truckee, is that the reason? A. Because
it is the same line.
Q. Is it not affected beyond Truckee! A. Any business beyond Truckee would
be affected. I was speaking of the very valuable feeders to the main line,
and referred to its best local business.
THE EXPECTED BUSINESS FROM OREGON.
Q. In regard to this expected business from Oregon, what direction would that
take after the completion of the road? I mean, whether it would benefit the
road east or west of the point of junction with the Central Pacific? A. It
would benefit the Central Pacific from the Oregon State line to Sacramento.
Q. And is the only aided part of the Central Pacific that it would benefit
the portion of the road between Eoseville and Sacramento? A. Yes, sir.
Q. Which is about 18 miles, is it not 9 A. Yes, sir.
Q. Would you expect to do any through business from the East to Portland over
that line? A. Yes ; we hope to.
By Commissioner LITTLER :
Q. Then the road east of the junction would be favorably affected, would it
not? A. Yes, sir ; on all of that business. I supposed that Commissioner Anderson
was referring to the San Francisco business ; that is, the business between
San Francisco and Portland.
EFFECT OE FEEDERS ON AIDED LINES.
By Commissioner ANDERSON :
Q. What I want to get is some information from you as to the effect of some
of these feeders, including the California and Oregon, on the aided portion
of the line between Sacramento and Promontory Point ; can you give us any such
information? A. The construction of this line to Portland and the control
of it by the California company forms another line to Portland from the Eastern
States. That line is directly through Ogden and Roseville Junction, thence
up to Oregon. For the entire distance to Eoseville it passes over the aided
line. It will be the policy of the company to get as large a share of that
business as possible, and work it as a through line.
Q. So far as the East is concerned, it would have to compete directly with
the Union Pacific and the Oregon Short Line, would it not? A. Yes, sir ; and
with the Northern Pacific also.
3012 U. S. PACIFIC RAILWAY COMMISSION.
NORTHERN PACIFIC'S TRAFFIC RIGHTS.
Q. The Northern Pacific does not connect with Portland, except by the interchange
of traffic with the Oregon Railway and Navigation Company, does it? A. It has
a traffic right to run its cars over their track.
Q. Has it a traffic right over the line of the Oregon Railway and Navigation
Company I A. Yes, sir.
Q. Is the lease of the Oregon Railway and Navigation road to the Oregon Short
Line subject to that trackage right I A. I have not seen the papers, but I
should think that it is.
FORECLOSURE WOULD DAMAGE THE AIDED ROAD.
Q. What, in your judgment, would be the effect on the value of the aided portion
of the Central Pacific in case of a foreclosure of the mortgage of October,
1886? A. Its value would be impaired through the loss of benefit from the local
traffic.
Q. The effect would be to sever from the aided portion all of the branches
and all communications with tide water, would it not? At least, that is the
apparent effect to us. A. It would sever from the aided portion all property
railroad and real estate included within the mortgage of October, 1886.
Q. Then, so far as the old Central Pacific is concerned, it would leave nothing
but the route from Sacramento to Promontory Point, and, so far as the old Western
Pacific is concerned, it would leave nothing but the route from Sacramento
to San Jose via Niles, 1 believe ; is that your understanding? A. Yes, sir
; the papers show that whatever the aided portion is.
Mr. COHEN. That would be so if the property sold for less than the mortgage;
but if it sold for more than the mortgage, of course it would be different.
Of course it would be liable to the Government for the debt.
PRESENT VALUE OF CENTRAL PACIFIC.
Q. What, in your judgment, is the present value of the Central Pacific line
from Sacramento to Promontory Point, with its shops, appurtenances, and rolling
stock belonging to it? I do not ask for a critical answer as to its value,
but for an answer in relation to its general value, considering its mortgage
and the Government lien, amounting in all, principal without interest, to about
$54,000,000. A. I do not believe it is worth that; at least it would not sell
for that.
Q. What would it cost to-day to reconstruct or produce it? A. I have no definite
knowledge on that point.
Q. Are you satisfied that it would cost less than $54,000,000? A. I believe
it would.
Q. Can you approximate more closely? Would it cost $40,000,000? A. I should
not want to take a contract to reproduce it for much less than $40,000,000.
Q. Do you include in that all the property at Sacramento and all the rolling
stock belonging to that portion of the line? A. Yes, sir.
WOULD THE STOCKHOLDERS LET IT GO?
By the CHAIRMAN : Q. In your judgment would the stockholders let it go at $54,000,000
? A. I have no knowledge as to what the stockholders would do.
CHARLES F. CROCKER. 301o
Q. I am asking you as to your judgment whether it would bring $54,000,000.
A. I believe that I said I thought that it would not bring it.
Q. Would the stockholders let it go for fifty-four millions? A. I do not know.
Q. What is your judgment of the matter, when you consider the financial history
of railroad companies? A. Speaking for myself, which is as far as I can go,
I should say yes.
By Commissioner LITTLER :
Q. From whom can we get the most reliable information with reference to the
traffic management of this property? A. From Mr. J. 0. Stubbs.
Q. You do not know much about that branch of the subject, do you? A. I talk
with him a great deal, but he is the traffic manager of the company, and is
thoroughly posted upon all of this business.
PLAN OF SETTLEMENT.
Q. Have you any suggestions to give the Commission in relation to the adjustment
of the Government lien against this property? A. No; I have no suggestions
to make.
By the CHAIRMAN :
Q. Have you considered the question of the adjustment of the debt, as a director
of the Central Pacific? A. I have thought of it a great deal.
Q. Have you thought of it sufficiently to give the Commission the benefit of
any opinion that you have reached? A. No, sir ; not sufficiently for that
purpose.
Q. Have you considered the question of the extension of the debt? A. Yes, sir.
TIME FOR PAYMENT SHOULD BE EXTENDED.
Q. What conclusion have you reached as to such an adjustment? A. I believe
that it would be a fair thing to the company and to the interests of the Government
to extend the time for it's payment.
Q. Upon what conditions and in what manner? A. I have no advice to give the
Commission on that point.
The CHAIRMAN. I am only asking for your thought and for the result of your
consideration as a director. If you have given it any consideration, we want
the benefit of it. We want all the information that we can get upon that question.
The WITNESS. I have nothing to say upon that point.
WAS NAME ON ROLLING STOCK CHANGED?
Q. Were you familiar with the rolling stock of the Central Pacific and its
condition at the time of the lease of the Central Pacific to the Southern Pacific
? A. I was generally familiar with it.
Q. Have you any knowledge as to any order issued with reference to the change
of the name of the company painted on the outside of the cars and rolling stock
generally, from the Central Pacific to the Southern Pacific Company? A. I believe
that there was some discussion with the operating department as to that.
3014 U. S. PACIFIC RAILWAY COMMISSION.
Q. What discussion did you have with reference to the change? A. We discussed
what course should be pursued and what form should be adopted in lettering
the cars. I believe that was settled between Mr. Towne and Mr. Miller.
Q. Did you settle it by changing the lettering from the Central Pacific to
the Southern Pacific Company? A. I do not recollect that.
WHO WOULD KNOW IF IT WAS SO ORDERED?
Q. Was there an order issued? A. I do not know of any order.
Q. Who would have knowledge of such a change, if it was true? A. Mr. Towne,
the general manager.
Q. Do you know whether any of the rolling stock of the Central Pacific was
put under the title or lettering of the Southern Pacific Company? A. I do
not know positively whether it was or not.
Q. Could Mr. Towne give that information? A. Yes, sir.
Q. Who is Mr. Towne? A. He is the general manager of the company.
Q. At the time of the declaration of the last dividend by the Central Pacific
Kailroad Company in February, 1884, or prior to that time, at a meeting of
the board of directors, was there any discussion in the board as to the ability
of the company to pay a dividend at that period? A. I do not recollect any
particular discussion. There was a statement submitted showing the earnings
and expenses, and the balance sheet was also before us.
DIVIDEND PAID IN 1884 FROM SURPLS EARNINGS.
Q. At that time were there sufficient earnings out of the actual surplus on
hand in cash to warrant the payment of a dividend in February, 1884? A. Yes,
sir.
Q. Have you any knowledge of the borrowing of money at any time for the purpose
of paying dividends? A. I have no knowledge of any such proceedings.
Q. Was any part of the dividend of February 1, 1884, paid out of borrowed money
I A. No, sir.
Q. Have you any knowledge of any money having been borrowed at that time from
James G.' Fair for the purpose of paying the dividend of February 1, 1884?
A. No, sir.
Q. Would you have knowledge of the fact if such a loan had been made by Mr.
Fair to the company at that time? A. Yes j I might have knowledge of that
fact:
Q. Then, to your knowledge, were all dividends of the company paid out of the
earnings represented in cash in the possession of the company at the time of
the declaration of a dividend? A. Yes, sir.
By Commissioner ANDERSON :
Q. Do you mean represented in cash? A. It was stated by the secretary that
there was available for a dividend a sufficient amount to pay it.
Q. I am asking you whether the statement was that there was this amount available
in cash on deposit in bank to the credit of the company, or whether the statement
was that it was surplus earnings?
Commissioner LITTLER. Would not the surplus earnings necessarily be in bank
?
Commissioner ANDERSON. No ; they never are.
Commissioner LITTLER. Where do they keep them?
CHARLES F. CROCKER. 3015
Commissioner ANDERSON. They keep them in the property itself. The WITNESS.
It is possible that some of it was in the form of surplus earnings that had
not beeu previously divided.
NO MONEY BORROWED TO PAY DIVIDENDS.
. , By the CHAIRMAN :
Q. Did you call in the loan of surplus earnings and reduce it to cash, or,
in case these loans were not called in, did you borrow money to pay the dividend
and afterwards repay those loans of borrowed money? A. The railroad company
never borrowed any money for the purpose of paying dividends.
Q. What answer do you make to Mr. Anderson's question? A. I answered him.
By Commissioner ANDERSON :
Q. My question is whether you mean when you say there were surplus earnings
enough to warrant a dividend, those surplus earnings at the time of the declaration
of the dividend were in fact in the form of cash I A. I answered that by stating
that a portion of that dividend may have been in the form of surplus earnings.
By Commissioner LITTLER :
Q. In what form would the surplus earnings be, cash or its equivalent? A.
It would be considered as cash. Q. Cash or its equivalent? A. Yes, sir.
WHAT CONSTITUES SURPLUS EARNINGS.
By Commissioner ANDERSON :
Q. Might it not be in the form of houses, ties, material, bills receivable,
fuel, and other accounts?
Commissioner LITTLER. They would not declare a dividend on that.
Commissioner ANDERSON. They do it, however. Every company ever organized does.
So long as the account shows surplus earnings and that account is fairly kept,
it is quite justifiable. So long as the amount is sufficient it is called surplus
earnings available for dividends. Is that not so, Mr. Crocker?
The WITNESS. I think that part of the dividend might have been of surplus earnings,
and from the earnings of the company for a period prior to the payment of the
dividend. The dividend might not have been altogether earned during the year
preceding its payment.
Q. And that is the form in which that surplus might appear. Is it not true
that in making up the income account for the year, after making all proper
deductions and crediting all balances, you look no further in determining the
question whether you are entitled to declare a dividend? A. If the earnings
during any previous period, together with any previous earnings not divided,
amount to enough to pay a dividend, it might be paid.
Q. Without reference to the question whether those earnings have been invested
in branch lines, or in building bridges, or in paying for supplies and labor,
or loaned to other railroads, or paid out for materials, you concern yourselves
with none of these things, but only take the surplus as shown upon your balance
sheet. Is that not the case? A. We look to see whether we have the money on
hand or not.
Q. Do you look to see whether you have the money on hand before you declare
a dividend? A. Yes, sir; we look to see whether we have a surplus to warrant
its payment.
3016 U. S. PACIFIC RAILWAY COMMISSION.
EXPENSES WHICH FORM PART OF FLOATING DEBT.
By Commissioner LITTLER :
Q. You never declared dividends on money earned and invested in betterments
on the road, building new stations and side tracks, and all expenses charged
to construction account, did you? A. Such expenses form a part of the floating
debt.
Q. They form* a part of the floating debt unless charged up. When you pay expenses
out of the earnings you do not have any money on hand to pay dividends, do
you I A. No, sir.
Q. And you do not declare a dividend where you have expended the surplus earnings
in that way, do you? A. No, sir ; we would not do so.
Commissioner LITTLER. Of course not.
By Commissioner ANDERSON :
Q. On the other hand, if you have invested surplus earnings that belong to
income and represent funds properly available for dividends, you would declare
a dividend even though those surplus earnings had been loaned out, or been
completely changed as to their form, whether charged to equipment, construction,
or any other particular account. So long as you have surplus earnings out of
which a dividend can be declared, you would not hesitate to declare a dividend,
would you I A. We would not.
Commissioner ANDERSON. In one instance the floating debt would increase, and
on the other hand you would have a surplus.
WOULD NOT BORROW MONEY TO PAY DIVIDENDS.
By the CHAIRMAN :
Q. If you could not reduce the surplus to cash, would you borrow money to declare
a dividend I A. We would not borrow money for that purpose.
Q. If you had no money on hand from surplus earnings out of which to pay a
dividend, and did not wish to turn these surplus earnings into cash, would
you borrow the money to pay that dividend ! A. If we did not nave the cash
on hand we would have to borrow it.
Q. Did you borrow it? A. I do not remember. Whenever the company has paid dividends
it has. done so from its surplus earnings. If some of these earnings have been
invested in station-houses and side tracks, and possibly in equipment, such
expenditures form its floating debt.
WHAT IS EQUIVALENT TO CASH FOR DIVIDEND PURPOSES.
By Mr. COHEN :
Q. I understand Commissioner Anderson's proposition to be as follows: Suppose
you had money enough to pay a dividend invested in coal, and that coal were
all paid for, would you then declared a dividend? A. Certainly we would.
By the CHAIRMAN :
Q. My question is purely where you got your cash out of which you paid your
dividend on February 1, 1884"? Whether you borrowed it or reduced sufficient
of your surplus earnings to cash to pay it, without regard to the merits of
the question? A. I could not answer that question. I am not competent to answer
it.
CHARLES F. CROCKER. 3017
NOT FAIR TO EXCLUDE DIVIDENDS ON ACCOUNT OF BETTERMENTS,
By Commissioner LITTLER :
Q. Suppose that it appeared from the books that during any given year you earned
$5,000,000 more than the cost of operating expenses, and it appeared on examination
of the construction account that the company had determined as the earnings
came in that it was necessary to invest them in new buildings and side tracks
and in ballasting the road, and for other permanent improvements on the road,
and that at the end of the year all of the five millions were so invested ;
you would not be in condition under such circumstances to declare a dividend
to your stockholders, would you? A. Yes, sir ; I think we might be.
Q. Where would you get the money to pay a dividend in such a case as that?
A. We would pay the dividend out of the surplus earnings, or from the cash
on hand.
Q. There would not be any cash on hand under my proposition, would there !
A. Oh, no. We could borrow it for one purpose or the other.
Q. You would not pay any dividend, would you? A. It would be unfair to the
present stockholders, or the day-to-day stockholders, for the company to put
betterments on the road and new buildings and ballasting and steel rails instead
of iron rails and side tracks out of the surplus earnings and never pay any
dividends.
By the CHAIRMAN :
Q. Were the dividends of the Central Pacific which were declared and paid from
the year I do not know the month, perhaps you can recall it 1873 to February
1, 1884, inclusive, paid in the manner that you have stated with reference
to the payments of the dividends, to wit, out of the surplus earnings? A. Yes,
sir. There was a portion of the period when I was not in the office.
Q. What portion do you recall when you were not in the office? A. I was not
in the office previous to 1878.
FALLINGr OFF IN SURPLUS EARNINGS.
Q. I call your attention to the fact that the dividends during that period
amount, in round figures, without giving the smaller amounts, to $33,000,000.
How do you account for the falling off in surplus earnings from the date of
the last dividend down to the present time? A. It results from the change
in rates for freight and fare and in the volume of the traffic, and the change
in the general affairs of the company.
Q. What have been your surplus earnings, if you can recall the amount, since
the declaration of your last dividend! A. Just as stated in the reports. I
think that they are here.
Q. Do I understand you to say that the falling off has been due entirely to
the reduction in the rates of freight? A. And to change in the volume of traffic.
Q. What do you mean by change in the volume of traffic? A. Prom a very heavy
business it has fallen to a very much reduced business.
WHAT HAS BECOME OF THE TRAFFIC?
Q. How do you account for such a large change in the volume of traffic ! Where
has it gone? What has become of it? A. It may have gone tack and forth by
other roads, or it may result from a general change
3018 U. S. PACIFIC RAILWAY COMMISSION.
in commercial affairs the difference in the volume of business that is transacted.
Q. Will you please state to the Commission, or give it any information as to
the change in the volume of traffic, so as to affect so seriously the business
of the Central Pacific Eailroad Company since 1884? A. J think that that could
better be explained by the general traffic manager.
Q. Have you not considered it? A. I have thought of it from the statements
that have been presented to me.
Q. What has been presented to you to give you light upon the subject? A. Statements
of earnings and in particular instances tonnage* statements.
SOME SALIENT POINTS ON THE SUBJECT.
By Commissioner ANDERSON :
Q. Can you not give us some information as to some of the salient features
bearing upon this subject"? A. Some years there is a great deal more freight
received here by the Cape Horn route than in others, and in some years a crop
fails, and there is a great change in the local traffic ; and then there may
be a change in the rates in the through rates so as to affect the volume of
traffic thereafter by enabling merchants and shippers to run up a very heavy
stock to last them clear into another season, or over another season. A great
many things occur in that way, and I think that they occurred during that period.
During the same time, also, there was a great deal of trouble between the different
transcontinental lines about freight rates, which finally resulted in a freight
war. The hydraulic mining interests also were discontinued, and there was an
enormous reduction in the product of the mines of Nevada, and also in the mines
of Arizona and California.
THERE HAVE BEEN UPS AND DOWNS.
By the CHAIRMAN:
Q. Do you recall any other facts that have contributed to the decrease in your
gross earnings'? A. No. I think that covers the subject generally.
Q. Then is it a fact that these changes have all taken place since the declaration
of your last dividend in 1884? A. No. Those changes have been going on during
the entire period of the operations of the company. There have been ups and
downs.
Q. But they were not sufficient to affect your earnings as to dividends prior
to 1884, were they? A. I think that there was a long period when the company
paid no dividends.
Q. What period was that? A. I do not recollect it, but the books will show.
I think there were two or three years when no dividends were paid.
WHY DID CERTAIN DIRECTORS RESIGN?
Q. There were two years, I think. Those were 1878 and 1879. I now call your
attention to the minutes of the Central Pacific Eailroad Company of October
5, 1885, page 64, to the resignation of C. P. Huntington, Moses Hopkins elected
in his place, to the resignation of Charles Crocker and the election of D.
T. Phillips in his place, and to the resignation of W. V. Huntington and the
election of George Crocker in his 'place. Can you explain the cause of the
retirement of these gentlemen
CHARLES F. CROCKER. 3019
from the board of directors of the Central Pacific Eailroad Company? A. I
think that upon the advice of counsel we sought to have a full meeting of
the board so that all the directors authorized by the by-laws should be present.
Q. How long did these gentlemen that I have named remain out of the board?
A. Perhaps for various periods. I do not recollect how long, but it was not
for a very long time.
Q. As I understand you, in order to secure a full attendance from time to time
of the members of the board of directors of the Central Pacific Railroad Company,
the resignations of members would be accepted and others elected in their places,
is that so? A. It was so in that instance.
AUTHORIZING A MORTGAGE.
Q. What was the important business transaction, if you recall it, that required
a fall board meeting? A. I think that it was voting on the resolution authorizing
a mortgage.
RESOLUTION AUTHORIZING TEN MILLION BOND ISSUE.
Q. I read to you from the minutes of October 5, 1885, page 64, resolution
reciting the issuing of ten millions of bonds to pay off the floating debt.
Perhaps it may suggest some information to you : "Also, resolved, that
to secure the payment of said bonds a mortgage, subject to the first mortgage
of the company, be made upon all the lands granted by the United States to
the Central Pacific Eailroad Company, also upon all lands granted to the California
and Oregon Eailroad Company, excepting the lands included in the right of way." Was
there any discussion at the meeting that this resolution recalls to your mind
? A. Yes ; I think there was a general discussion.
Q. Were the members whose resignations had been tendered and accepted holders
of a large amount of the floating debt that was intended to be paid by this
mortgage 1? A. I do not know that they were.
Q. Did they hold any part of the floating debt that was intended to be paid
with this loan or mortgage? A. I never heard that they did.
Q. Do you not recall the fact that they retired from the board rather for the
purpose of avoiding a vote upon their own interest which would be involved
by the adoption of this resolution? A. No, sir 5 I recall no such fact. They
were all absent from the State.
Q. Had they any interest in the floating debt of the company? A. I do not
believe that they had.
THE LEGAL REQUISITES FOR A MORTGAGE.
Mr. COHEN. I will state to the Commission that the railroad law ot this State
requires that a mortgage shall not be made by a railroad company, except with
the unanimous consent of all its directors. Therefore, if they were about to
vote upon the issue of a mortgage to secure bonds or promissory notes, or for
any such purpose, it would be requisite that all the directors should be present.
The CHAIRMAN. I just asked for an explanation. It appears upon the minutes,
and I did not understand it. That is aii.
RAILROAD OFFICIALS AS CONTRACTORS.
Q. Are any of the officers and employes of the Central Pacific interested in
contracts with that company? A. No, sir ; not that I know of. P R VOL iv 44
3020 U. S. PACIFIC RAILWAY COMMISSION
Q. Have they had any interest. in contracts with the Central Pacific? A. No
; I do not think they have. I do not know of any.
Q. Have any of the directors, officers, or employe's at any time had any interest
in contracts with the Central Pacific? A. Some of them have been stockholders
in corporations that have had contracts.
Q. Will you name them? A. Wells, Fargo & Co., the Eocky Mountain Coal
Company, the Pacific Improvement Company that has been brought out, has it
not 1
The CHAIRMAN. I want you to say it.
The WITNESS. The Pacific Improvement Company.
Q. The Western Development Company also? A. Yes, sir.
Q. And the Contract and Finance Company? A. Yes, sir ; that was before my time,
however.
"
IF YOU TELL ME, I WILL TELL YOU."
Q. Is that all that you know off What else? A. If you tell me, I will tell
you.
Q. I am trying to find out from you ; can you name any others? A. I do not
recollect definitely any more.
Q. Do you recall any others? A. No, sir.
INTERESTS OF CENTRAL PACIFIC PEOPLE IN ENTERPRISES CONNECTED
WITH THE ROAD.
G. I ask you as an executive officer the general question which has been asked
and I desire information and your views upon the subject. Whether any of the
directors, officers, or employe's of said companies (the Central Pacific being
one of them), have been or are now directly or indirectly, interested, and
to what amount or extent, in any other railroad, steamship, telegraph, express,
mining, construction, or other business company or corporation, and with which
any agreements, undertakings, or leases have been made or entered into.
Mr. COHEN. I believe that has been answered by Governor Stanford. I would like
to look at his answer before the witness answers this question.
Commissioner ANDERSON. Can he not answer it?
Mr. COHEN. He has no knowledge of the subject.
The WITNESS. I believe they have been.
By Commissioner ANDERSON :
Q. What interest have they? A. I do not know the extent of it.
Mr. COHEN. I think that Governor Stanford puts it properly, and his answer
should go as a general answer to this question.
The CHAIRMAN. I understand this gentleman to be the third officer of the Central
Pacific Railroad Company one of the leading officers and we are asking him
as an intelligent gentleman, sufficient to be at the head of his department,
for information such as has been asked of the other officers,
Mr. HAYMOND. You must remember that he has only been there a little while.
The WITNESS. I have answered the question. I think that it is just as well
to say that they have been.
WHO ARE SO INTERESTED.
By the CHAIRMAN :
Q. What officers, directors, or employes of the Central Pacific Railroad Company
do you recall who have such an interest? A. My father
CHARLES F. CROCKER. 3021
is interested, as Governor Stanford is, as stated in bis answer generally to
question 17.
Q. Do you recall any other director? A. Mr. Huntingdon.
Q. Do you know of any companies that your father is interested in other than
those named by Senator Stanford? A. No, sir.
Q. What other directors? A. No others.
Q. What other officers? A. 1 have stock in some of these companies.
Q. What companies? A. I have stock in the California Pacific Railroad Company,
in the Southern Pacific Railroad Company of California, in the Southern Pacific
Company of Kentucky, in the Stockton and Copperopolis Railroad Company, in
Wells, Fargo & Co., and in the Rocky Mountain Coal and Iron Company.
Q. What other officers of the Central Pacific are interested in these companies?
A. I think they have ail been stated.
Q. Have you any knowledge of any employe's of the Central Pacific Railroad
Company, other than those you have named, being interested in any of the companies
or contracts? A. The books of these companies would show that positively.
At one time Mr. Towne had some of the stock of the Rocky Mountain Coal and
Iron Company. I think that is all.
1 Q. Have you named all of the officers or employe's and all of the companies
that you can recall? A. I have used this list, and answered completely so
far as the list will guide me.
Q. Have you any other information to give the Commission upon the subject of
this investigation? A. I have not, unless Mr. Cohen wishes to ask me some
questions.
ON WHAT BASIS LOANS WERE MADE.
By Mr. COHEN :
Q. If you have no objection, will you state your age to this Commission? A.
I am thirty-two years of age.
Q. Since you have had any knowledge of the affairs of the Central Pacific Railroad
Company, have you ever known of the funds of the company being loaned to the
construction companies mentioned, or to anybody else, except upon sufficient
security, and at the current rate of interest? A. I do not know of any loans
of a different nature than that.
Q. Have you ever known of any loans made by the Central Pacific Railroad Company
to either of these construction companies, so thatsuch loans interfered with
its own business or advantage? A. No, sir; none.
ADVANTAGEOUS TO THE FUNDS.
Q. Since the time that you have had the supervision of the sinking funds of
the Central Pacific Railroad Company, have the loans that have been made tended
to the advantage of those funds, or otherwise? A. They have tended to the
advantage of those funds.
Q. Could you at any time when you made such loans have obtained any higher
rate of interest, or any more satisfactory security from any other borrower
? A. No, sir ; we could not.
Q. Have you any knowledge of the money that has been paid by the company under
the Thurman bill to the sinking fund provided for by that act? A. Yes, sir.
3022 U. S. PACIFIC RAILWAY COMMISSION.
EFFECT OF THE THURMAN BILL ON INVESTMENTS OF SINKING FUNDS.
Q. Can you state to this Commission what would have been the difference between
the amount of that fund as it now exists and the amount that would have been
to its credit, if the money paid under the Thurman bill had been invested by
the company in the mode in which it had previously been investing the moneys
belonging to its mortgage sinking funds"? A. The amount to the credit
of the company, in the Government sinking funds, would have been something
more than $1,600,000 in excess of what they are now. This is about 50 per cent.
In other words, if the Government sinking fund had been treated as the company
has treated those under its control, the former would have been 50 per cent,
greater than it is.
FURTHER EXPLANATION ABOUT " CASH TAGS."
Q. I will ask ^ou to explain for the information of the chairman a little further
about cash tags. As I understand it, cash tags are kept by the treasurer of
a corporation, or by any other person having the custody of money, when there
is constant demand on the fund for a particular purpose until the demand is
satisfied, and then one voucher or receipt is given. In the meantime, the amount
advanced from time to time is kept on tags. Is not that the use and purpose
of cash tags? A. That is the manner in which the treasurer has done that business
and has used tags as a sort of suspense account.
Q. And explain further, if any officer or person authorized to receive money
from the treasurer, say to the amount of $10,000, and did not want it all hi
one day, but took $1,000 to-day and $2,000 to-morrow, and so on each day as
he required it, he would give tags until he had drawn the whole amount and
then give one receipt; would he not? A. The treasurer has done that.
FAVORABLE RESULT OF CONSOLIDATION ON AIDED ROADS.
Q. You have been asked as to your opinion of the value of the property forming
what is known as the aided roads. I want to see if I can test your judgment
on that subject a little further. What would have been the value of the aided
roads on which the Government has a lieu at the present day and by that I mean
the road starting westward at Promontory Point and ending at San Jose* if it
had stood or been operated alone, or was owned by one company without any other
line or connection, as compared with its value to-day, being included in the
consolidated property of the Central Pacific Railroad Company? A. If the Central
Pacific had been compelled to continue its operations only as between San Jose" and
Promontory and had been prohibited or prevented from making any consolidations
with other lines, or taking leases of those lines, its value would have been
very much less than it is at the present day.
Q. Standing alone to-day, without its connection with the roads with which
it was consolidated, could it in your judgment earn sufficient to pay its interest
over and above the cost of operating?
Commissioner ANDERSON. Can you not make that question so that we can understand
what you mean by interest, whether interest on one class of bonds, or interest
on the Government debt, or not?
The WITNESS. As I understand it, you speak of the property as it is to-day.
CHARLES F. CROCKER. 3023
WITHOUT CONSOLIDATION IT COULD ONLY PAY INTEREST ON FIRST
MORTGAGE.
Mr. COHEN. Yes, sir. I will repeat my question. Standing alone to-day, without
its connection with the roads with which it was consolidated, could it in your
judgment earn sufficient to pay its interest over and above the cost of operating
I By the interest I mean the interest on the first-mortgage bonds issued by
the company, amounting to something over $27,000,000, the bonds issued by the
Western Pacific IJailroad Company, and such floating debt as it might have
incurred in the construction of the road and for its equipment.
The WITNESS. It might be able to pay the interest on its mortgage bonds; but
considered as a separate property, it could not do more than that. If it had
been obliged to remain a separate property there is hardly any doubt that there
would have been parallel lines constructed by this time.
Q. Under the condition of things that I supposed in my former question, could
it in any way have contributed to a sinking fund to redeem, its indebtedness
to the Government, in your judgment? A. No, sir. In my judgment it could not.
Under such circumstances the road could not take care of itself.
PRO RATA EARNINGS OF AIDED AND NON-AIDED ROADS.
Q. What, in your judgment, would have been the difference between the pro rata
earnings upon the aided roads as compared with the entire earnings of the consolidated
roads as they existed after 1870, with the condition of the aided roads, if
the consolidated lines had been in adverse possession that is, in the possession
of parties whose interests were not identical with those of the Central Pacific
! A. An answer to that question involves ascertaining the proportions of the
aided portion as compared with that portion of the Central Pacific which was
not aided ; but such statements involving that information can be prepared
so that you could have accurate information upon the subject. However, my judgment
is that the earnings due to the earning portion as compared with the non-aided
portion are about as forty is to sixty, and the aided portion is less than
the non-aided portion.
Q. How much less would they have been if the nou aided portion had been owned
by any company having adverse interests to that portion of the Central Pacific
which received aid in bonds from the Government? A. It would have been very
much less than it is at the present time ; less than it actually is to-day.
TRANSCONTINENTAL POOL.
Q. You were asked by the chairman about the decrease of the earnings of the
company since 1884. I would like to get a little further information from you
about that point. Do you remember the forming of the transcontinental pool
previous to 1884? A. Yes, sir.
Q. Under that pooling arrangement each road had a defined share of the business,
and by that means rates were kept up, were they not I A. The share was not
definitely defined, but the pool was upon that basis, and for the pupose of
maintaining rates. While it lasted it served t liat purpose.
(,>. Under that arrangement there was no war between the companies competing
for the overland traffic, was there? A. None.
<
v >. That agreement came to an end some time in 1885, did it not? A. Vex,
sir; in 1885.
3024 U. S. PACIFIC RAILWAY COMMISSION.
Q. And then it was a go-as-you please arrangement, and each company went for
all the traffic that it could get, did it not? A. Yes, sir ; regardless of
rates. The trouble began very late in the year 1885, but the war was during
the year 1886.
Q. Can jou mention the time at which the earnings of the Central Pacific were
interfered with by the competition of the Northern Pacine? A. I do not recollect
the date.
Q. Or with the Atchison, Topeka and Santa Fe and Atlantic and Pacific companies?
A. That is all shown on this record here, but 1 do not recollect those dates.
VERY LARGE DIVERSION OF TRAFFIC.
Q. Have you formed any estimate as to the amount of gross earnings which the
Central Pacific has lost by the competition of those two roads, and including
also the Canadian Pacific to the commencement of this year? A. There has been
a very large diversion of traffic which the Central Pacific might have enjoyed,
and some statements have been prepared which show it ; they have already been
submitted to the Commission.
Q. Is that information included in the answers of Governor Stanford? A. I believe
it is.
By the CHAIRMAN :
Q. Who made the calculations? A. They were prepared in the office from the
records tonnage, traffic, way bills, and the written books containing passenger
mileage and freight tonnage.
Q. By whom were the calculations made? A. They were made by subordinates in
the general freight office and in the auditor's office and in the secretary's
office.
STOCK IN OTHER CORPORATIONS.
By Mr. COHEN :
Q. You stated that you owned some stock in various corporations mentioned in
the exhibit to the answer to question seventeen submitted by Governor Stanford;
how long have you owned those stocks? A. From different periods ; but I obtained
most of them at about the time that I became connected with the company.
By Commissioner LITTLER :
Q. Do you mean at the time that you became connected with the company as a
director? A. No, sir ; previous to that time. I have also acquired some of
those stocks long since that time.
GRADES ON THE CENTRAL PACIFIC.
By Mr. HAYMOND :
Q. The grades over the Central Pacific from Auburn to, say, Yerdi are very
heavy, are they not? A. Yes, sir; they are.
Q. It requires two locomotives and 14 cords of wood to take fourteen freight
cars over there, does it not? A. Yes, sir.
Q. Do you know about the price of wood? A. Yes, sir.
Q. In addition to that there are snow sheds in a continuous line for 40 miles,
are there not? A. Yes, sir.
Q. Those snow-sheds are not built like the Union Pacific snow- sheds are they?
A. No, sir.
CHARLES F. CROCKER. 3025
HEAVY EXPENSE OF CONSTRUCTION.
Q. Do you know that some of them have cost over $200,000 per mile? $280,000
per mile, I think, is the cost,
Commissioner ANDERSON. Did you say $200,000 a mile?
Mr. HAYMOND. Yes, sir 5 some of the sheds cost $280,000 a mile; that is my
information.
Commissioner ANDERSON. Are they built of marble '?
Mr. HAYMOND. No, sir; they were built not to protect the road against the fall
of snow, but against the mountain avalanches. They have to be built at the
same grade precisely as the mountain, and they must be made secure. I think
that $280,000 a mile is the actual cost of some of them. I have a suggestion
to make which I think the Commission ought to consider.
(To witness.) If that road could be thrown down, say to Soda Springs, and a
tunnel run through to Truckee, it would take away all of the heavy expense,
would it not? A. Yes, sir ; all of it.
Q. And enable that road to be run as cheaply as the Union Pacific has been
run, would it not? A. Yes, sir.
HOW THE GOVERNMENT COULD GET ITS MONEY BACK.
Q. I want to ask you this question : Suppose that these leases which are now
made between the Central Pacific and the Southern Pacific were forfeited and
all of the subordinate lines were consolidated by an act of Congress and Congress
advance the money to make this change in this line of road, on a liberal credit,
and the Government took a second lieu upon the whole line of road from the
city of New York to Ogden, giving the Central Pacific an independent line through
and the right to take up the outstanding bonds at the Government prices, which
would be 1 or 2 per cent., do you believe that this line would pay a dividend
besides paying what would be required to create and maintain sinking funds
? Take the whole line, and, besides that, take 1,000 miles of local line which
must be built in California within the next year, I would ask you whether,
if such an arrangement could be made with the Government upon a liberal credit,
and putting the Government Commissioners in charge of its operation, you do
not think that the Goveinment could be repaid all of its money, that the bondholders
would be paid all of their money, and that these roads would be in time freed
from debt? A. I believe they could. I believe that such a policy on the part
of the Government, and a change of the line over the Sierra Nevada Mountains
in some such manner as you suggest, would place the Central Pacific almost
beyond the reach of competition.
Q. It would place it nearly where it was. before the Government, whether rightfully
or wrongfully, aided the construction of opposition and competing lines, would
it not? A. Yes, sir.
A TEN-MILLION DOLLAR TUNNEL SUGGESTED.
By Commissioner LITTLER :
Q. Will you state in that connection the length of that tunnel and the probable
cost of it?
Mr. HAYMOND. It would cost about ten millions.
The WITNESS. That subject has been examined carefully by some of the engineers
of the company, and I have heard it discussed. I think that there is some definite
information on the subject, and some estimates.
3026 U. S. PACIFIC RAILWAY COMMISSION.
Mr. HAYMOND. Not only that. Commissioner Littler, but that tunnel would supply
water to all the cities on the road, because it taps Lake Tahoe.
BRINGING WATER FROM LAKE TAHOE.
The WITNESS. One of the projects discussed in connection with that tunnel was
to bring water to all the cities of the coast from Lake Tahoe.
Mr. HAYMOND. It seems to me that if such an arrangement as that could be made,
and all these roads could be brought under it, the Government with plenty of
money on its hands could be made absolutely secure, which it ought to be, of
course.
The CHAIRMAN. We want you gentlemen to decide what you will do with reference
to the question put to Colonel Crocker, which you advised him to answer. You
will please be ready to give the Commission your decision on next Tuesday morning
at 10 o'clock?
Examined, corrected, and signed this 5th day of September, 1887.
CHAS. F. CROCKER.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Saturday, August 6, 1887.
ELISHA S. MILLER, being duly sworn and examined, testified as follows :
By the CHAIRMAN :
Question. What is your business? Answer. I am a book-keeper in the secretary's
office, Southern Pacific Company.
Q. How long have you been connected with the company? A . About twenty-two
years.
BOOKKEEPER OF THE SOUTHERN PACIFIC COMPANY.
Q. Of what department of the company have you charge? I mean in what department
are you a clerk? A. I am simply in the secretary's office keeping books for
the secretary's department. I am also a sort of assistant to him, not legally
an assistant, but only a general assistant, in so far as I can render him service.
Q. During your association with the company, have you had any connection with
the cash account? A. No, sir.
Q. Do you keep any of the cash account? A. No, sir.
Q. Do you assist in the keeping of the cash account, or have you assisted in
keeping it? A. No, sir.
Q. Did you keep at any time memoranda of the amount of cash paid out 9 A. Only
on the books of the company from memoranda furnished by the treasurer's department.
DAILY CASH STATEMENTS FURNISHED.
Q. Did the treasurer furnish you with memoranda to be entered on your books
? A. I think that he furnishes daily statements from the treasurer's department
to be entered on the secretary's books of the Central Pacific Railroad.
Q. What kind of memoranda or papers did he furnish to you? A. He furnished
a regular statement of the daily business.
Q. Was it a printed statement? A. It was a written statement with a printed
heading, I think.
ELISHA S. MILLER. 3027
Q. Did be at any time furnish to you any original papers, memoranda, tags,
or due bills as evidence of the payment of money during the day? A. Not to
my knowledge.
Q. Have you any knowledge of the payment out of the money of the Central Pacific
on the deposit of tags in the drawer in the place of cash? A. No, sir.
Q. Did you ever hear of the use of the term tags in connection with the management
of the finances of the Central Pacific Eailroad Company? A. No, sir.
Q. Is this the first time that you ever heard the use of the term? A. I have
never heard it in connection with the Central Pacific, but I have heard of
tags before.
EXPLAINS THE MEANING OF "TAGS."
Q. Where did you hear of them before? A. In mercantile business.
Q. It is a new term to me ; can you explain it? A. In mercantile business
sometimes they lend a man a little amount of money and take what is called
a tag for it. It would be used as a tag against that man, and would either
be charged to his account in time or be taken up by him in cash.
Commissioner LITTLER. It would be an ordinary I O U, and not be entered up
as a due bill.
Q. Would that occur in the instances you relate and be carried as cash? A.
It would be in mercantile business. I have never known anything about it in
the Central Pacific.
Q. During your connection with the railroad company have you had any knowledge
at any time of the use of due bills, or tags, or memoranda as evidence of the
payment of cash? A. No, sir.
Q. Have you any knowledge of the loan of any of the money of the Central Pacific
on the deposit of a tag or due bilH A. No, sir.
Q. Have you any knowledge of the loan of any money of the Central Pacific without
the charge of interest? A. No, sir.
E. S. M1LLEE.
The Commission then adjourned to Monday, August 8, 1887, at 10 a. m.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Monday, August 8, 1887.
The Commission met pursuant to adjournment, all the Commissioners being present.
N. GEEEN CUETIS, being duly sworn and examined, testified as follows :
By Commissioner ANDERSON :
Question. Where do you reside? Answer. I reside in Sacramento City, this State.
Q. What is your occupation? A. I am an attorney-at-law.
Q. How long have you been in practice? A. Thirty or forty years ; almost all
my lifetime.
Q. And always in California? A. For about thirty-six or thirtyseven years
in California. I came here in 1850.
3028 U. S. PACIFIC RAILWAY COMMISSION.
ACQUAINTED WITH JOHN MILLER.
Q. Are you acquainted with John Miller, formerly employed by the Contract and
Finance Company? A. Yes, sir.
Q. How long have you known him? A. I became acquainted with him in the fall
of 1876. I met him at the bar of the court, and was introduced to him there.
That was the first time that I ever saw him.
Q. Had you prior to that time acted as counsel for the Central Pacific Eailroad
Company? A. Never, sir.
Q. In no business whatever? A. Never. I was never employed by them in any capacity
whatever in ray life.
Q. How did you come to meet Mr. Miller? A. I was sick at the timp with typhoid
fever. I was taken sick in July.
ATTORNEY FOR JOHN MILLER.^
Q. What year? A. In 1875. While I was sick in bed, Mrs. Miller came to me
and said that she wanted me to defend her husband. I was taken from my room
in September. During the month of August I scarcely knew anything. My partner,
General Clunie, appeared for me in the criminal court, and stated to Judge
Blake that I was too sick to defend Mr. Miller, and the case was continued.
I went down to the bar of the court in a carriage, stated my condition to the
district attorney, Mr. Eyan, and Judge Blake then continued the case. That
was in the fall or the winter of 1875. Mr. Miller was brought to trial in October,
1876.
I appeared in court and defended him upon charges of embezzlement.
I I never had acted as attorney for him before, and never had met him. Q. Through
what intermediary did your introduction to Mr. Miller's
family occur? A. I knew Mrs. Miller when she was Mrs. Friend. She came to my
bedside and acquainted me with the object of her visit. She employed me to
defend Mr. Miller.
Q. Had you attended to any business for Mr. Miller upon other matters at the
request of any officials of the Southern Pacific? A. No, sir ; I did not.
I did not attend to anything at all for him.
ACCOUNTING FOR A CERTAIN VOUCHER.
Q. W^hile on this point, there is a voucher among the Central Pacific papers
a receipt for $500 alleged to have been paid to you for services rendered in
relation to some matter in the State of Nevada. Can you tell us anything about
that? A. I saw an account of that in your examinations, and I wish to e'xplaiu
it. An old friend of mine by the name of Burke had got into some trouble in
the State of Nevada and was indicted there in 1872, I think. It was alleged
that some parties had destroyed property belonging to the Central Pacific on
the Truckee Division. Mr. Burke pursued the accused parties into the State
of Nevada, and brought them to California without any legal process. He had
no extradition papers. The grand jury of Washoe County, in the State of Nevada,
indicted Mr. Burke for kidnapping. Mr. Burke was a well known and prominent
man in Sacramento City. He was a very prominent citizen and an old friend of
mine. He employed me to defend him. He said that the railroad company would
furnish attorneys to defend him, but it was a question personal to himself;
that if he was convicted the railroad company could not go to the penitentiary
for him. He therefore wanted his own attorney. 1 said to Burke. "I will
go and defend you." He said that the railroad company objected to employing
outside, counsel.
N. GREEN CURTIS. 3029
I went there and defended Mr. Burke, and he was acquitted. When we came back,
I had a conversation with him about my fee. He was amply able to pay it,
but he said that the railroad company ought to pay it, as it was their business.
He had brought those parties from the State of Nevada and did not stop to
get proper papers. He was indicted for that, and wanted that I should defend
him, and I agreed to do so. The railroad company had their own attorneys,
but he preferred to employ me, and I therefore went over and defended him
in this matter. When we came back, we were talking about the fee. He said, "I
have seen Uncle Mark (that is Mr. Hopkins) and explained the situation to
him, and he is willing to pay that fee. He has told Kobinson to allow you
the fee." Five hundred dollars was paid to me, and I signed a receipt,
but whether it was paid by Eobinson or by Burke, I do not kmow. I know that
I got the money and signed the receipt. I was never.employed by the Cesitial
Pacific Railroad Company in my life. They never tendered it, and I never
solicited it. I suppose that I would have been glad to have had their business,
but I never was tendered it, and I never solicited it.
THE CENTRAL PACIFIC PAID THE MONEY.
Q. So far as this business was concerned, the railroad company paid the $500,
did it not the fee of $500 which you received? A. Yes, sir; I was employed
by Mr. Burke ; I signed the receipt, but they never employed me.
Q. They paid the fee, did they not? A. Yes, sir.
By the CHAIRMAN :
Q. The statement that you make is that from your understanding of the relations
of the parties it was a matter which it was the business of the Central Pacific
to defend and to pay counsel for, was it not? A. 1 do not know whether it
was or not. That is a question.
Q. Did not Mr. Burke so state to you? A. It was Mr. Burke's business. I do
not know that the railroad company's business was to defend him against any
improper act.
SERVICE RENDERED FOR BURKE : BILL PAID BY CENTRAL PACIFIC.
By Commissioner ANDERSON :
Q. You said that Mr. Burke told you that in his judgment it was a matter for
which the railroad company ought to pay, did you not? A. Yes, sir.
Q.. And you so far acquiesced in that representation as to accept the money
of the Central Pacific? A. I did not care who paid me my fee. I did the service
for Mr. Burke and the railroad company agreed to pay for it, and I accepted
the money and signed the receipt. "
Q. Is that the only acquaintance that you have had with the officers of the
Central Pacific? A. Kb, sir; I was intimately acquainted with all of them.
They are all my warm personal friends. Long before the road was projected,
we were warm friends living in the same town. Governor Stanford was a particular
friend of mine, and so were they all. Mr. Crocker was a warm friend. I served
in the legislature with Mr. Crocker in Sacramento in 1861. We lived in the
same town, and were all personal warm friends.
THE INDICTMENT AGAINST JOHN MILLER,
Q. While the negotiations were going on between Mr. Miller and the railroad
company before the indictment was moved for trial, did you
3030 U. S. PACIFIC EAILWAY COMMISSION.
see any of the officers of the Central Pacific about the business? A. I did
not. T was sick in my bed, and did not have any conversation with them .
Q. You were not sick in your bed when you went into court and tried the indictment,
were you? A. No, sir ; that was the year after.
Q. Up to that time had you seen the officers of the Central Pacific and conversed
with them about this matter? A. Yes, sir 5 I saw Mr. Hopkins.
Q. How long before the indictment was tried did you see Mr. Hopkins? A. I
do not remember. It was some time before the trial, but some time after the
indictments were found I went to Mr. Hopkins. I had been led to believe
Commissioner ANDERSON. I do not care to know at length anything that occurred
between you, I merely want to know generally if Mr. Hopkins explained to you
the situation and what tke company had claimed Mr. Miller ought to do. A. I
can tell you exactly.
HAD NO PART IN THE MILLER SETTLEMENT.
Q. What allusion, if any, was made by Mr. Hopkins in regard to the indictment
? A. Please understand distinctly that I had nothing to do with the settlement
between the railroad company and Mr. Miller, and never had any conversation
with the railroad about it, or with Mr. Miller, for I did not know Mr. Miller.
It was some time after Mr. Miller had made all these settlements that he was
indicted, and I defended him. I had nothing to do with the settlement. I notice
that in his testimony Mr. Miller said that Harvey Brown and Judge Eobinson
acted for the railroad company, and you asked the question, or some one of
you did, u And Mr. Curtis acted for you? " and he said " Yes." He
was mistaken in that. I only acted for Mr. Miller in the criminal court, and
not in their settlement. That was all made before I saw Mr. Miller.
Q. What did Mr. Hopkins say to you in regard to the criminal proceedings 9
The WITNESS. Will you let me, in the way of explanation, give what I said to
Mr. Hopkins?
Commissioner ANDERSON. If you will not be too long about it.
"
DO IT; THE MORE THE MERRIER."
A. I was led to believe by Mr. Brown, the attorney for the railroad company,
that probably the railroad company would pay my fee. I was interested in that.
I went to Mr. Hopkins, as I had understood from Mr. Brown that Hopkins was
the man. I knew Mr. Hopkins well. I asked him if the company was to pay my
fee for defending John Miller, and he said, u No, sir ; we pay no money $ not
one cent. We neither prosecute nor defend. The State prosecutes. If we are
subpoenaed, we will go before the court and testify as other citizens." I
went into Governor Stanford's office, where I met Governor Stanford, and soon
after General Colton came in. Colton was denouncing Miller in bitter terms.
I said, U I have nothing to do with that, sir." I said to Governor Stanford, " Do
you intend to prosecute John Miller? " He made me no answer for some
time. I intimated to him that if he did prosecute, Mr. Miller perhaps would
be a damage to him. Governor Stanford took that as an offense and seemed to
think that I was threatening him. I was not. In a very bitter manner he said, " Do
it, sir, and I will employ the best counsel in the State to prosecute him." I
N. GREEN CURTIS. 3031
said, " Do it ; the more the merrier," aiid I walked out. That was
the only conversation I had with him in relation to the matter.
WITNESSES IN THE CASE.
Q. What witnesses appeared at the trial? A. I do not know their clerks. I
think that Mr. Dotity was there, and also Mr. Gunn and Robert Eobinsou.
Q. Did you not know that they were coming? A. No, sir; I did not. I supposed
that Crocker would be there. I did not know but what he probably would come.
I had no intimation as to whom their witnesses would be. I was prepared for
the defense.
Q. The result was that Miller was acquitted, was it not? A. Yes, sir; he was
acquitted on two indictments. He was tried by two juries and acquitted.
WAS IT A DESPERATE FIGHT?
By the CHAIRMAN :
Q. It was not a very desperate fight, however, was it? A. It would not be
well for me to criticise those lawyers. I defended him and he was acquitted;
but whether they made a prosecution or not it would not be fair for me to say.
Q. Who was the prosecuting attorney? A. Mr. C. B. Darwin, a very able lawyer.
Q. How long did he speak? A. I do not know ; he spoke and I spoke at some
length. I would not attempt to criticise Mr. Darwin or his management of the
case.
THE MISSING BOOKS OF THE CENTRAL PACIFIC.
By Commissioner ANDERSON :
Q. When did you first hear that Mr. Miller had had the custody of some books,
which had disappeared, relating to the construction of the Central Pacific
Railroad? A. I do not remember whether about that time or before then. I heard
that he had, as secretary of the company, got into trouble and absconded, and
then I heard that he had been captured.
Q. I ask you when you first heard that the books of account, which he had kept,
had disappeared?
The WITNESS. The books who had kept?
Commissioner ANDERSON. The books of the Contract and Finance Company that Mr.
Miller had kept.
The WITNESS. I do not remember; perhaps in some suit with the railroad company
perhaps in some suit that Mr. Cohen had against them. I do not remember.
Q. Can you give us the time with relation to the happening of these events
concerning Mr. Miller, whether before or after this indictment was tried?
A. It was before the indictment was tried that I heard the books were missing;
some time before that.
GOVERNOR STANFORD BROUGHT BEFORE THE CRIMINAL COURT?
Q. Do you remember the occasion when Governor Stanford and one or two officers
were brought up on some complaint, I believe in the criminal court, for failure
to produce those books? A. I had nothing to do with that case.
3032 . U. S PACIFIC RAILWAY COMMISSION.
Q. Do you remember such a suit? A. I do not remember it.
Mr. COHEN. Do you say that there was such a case?
Commisskmer ANDERSON. No, sir.
The WITNESS. My memory is a very good one, and I do not very often forget anything.
I do not remember any such thing as that.
Mr. COHEN. If counsel wishes to examine the witness as to any prose cutiou
against Governor Stanford in such a matter, I think that he should fix the
time and place. It ought not to be assumed that Governor Stanford appeared
in the police court under any such circumstances.
Commissioner ANDERSON. I was informed that it was so, but I do not know anything
about it.
SUIT BY ROBINSON TO DISCOVER THE BOOKS.
The WITNESS. I never appeared for Governor Stanford in my life.
Q. Do you remember a suit which was brought by a Mr. Robinson, in which proceedings
to discover these books were instituted? A. I do not remember that I ever
heard anything about it. I thought when I read these things in the paper that
I never knew directly anything about it.
Q. Do you remember that it was before the indictment that you heard that the
books had disappeared? A. Yes, sir.
THEY WERE OF GREAT IMPORTANCE.
Q. What did you hear about these books? Did you bear that they were important
books that had been lost books of great consequence? A. Yes ; I understood
that. It was understood in the community that they were of great importance.
Q. At that time did you know that Mr. Miller had kept these books and had made
entries in them? A. I did not know anything about it^ I thought that Mr. Brown
had kept the books.
Q. Did you not know that Mr. Miller had been secretary of the company I A.
I did not know it until he was arrested.
Q. Did you hear it then? A. Yes ; I heard he had been secretary. Mr. Miller
told me that the books were passed over to him to transcribe into a new set.
JOHN MILLER'S CONNECTION WITH THE BOOKS.
Q. So that for the past ten years you have been aware that books 01 great consequence
in matters in which the Central Pacific Railroad Company was interested had
been lost, and that Mr. Miller had, when secretary of the Contract and Finance
Company, made entries in those books'? A. No ; I did not know that he had made
entries in those books.
Q. He had been secretary, and had been in charge of them, had he not? A. I
never heard that Mr. Miller was secretary of the old Contract and Finance Company.
I heard that he had succeeded Mr. Brown as the clerk of that company.
Q. What I want to know is whether at this time you knew that he had some position
in connection with those books which gave him custody of them, that the books
had been lost, and that they were important books? A. I heard that at the
time. I heard it from Me. Miller, as I stated to you. Let me explain it. It
is but justice to me that I should explain it. I heard from Mr. Miller himself
and from other parties that Mr. Miller had been secretary of the Contract and
Finance Company after Mr. Brown had given up the place.
N. GREEN CURTIS. 3033
Q. After you knew these facts, did you receive from Mr. Miller certain papers
purporting to contain figures or entries which had been taken from his books?
A. Never.
Q. Did you receive any papers from Mr. Miller? A. Yes, sir; I did.
Q. Did you examine those papers? A. I did. Of course I examined them.
PAPERS DELIVERED BY JOHN MILLER TO WITNESS.
Q. When did he deliver those papers to you? A. When I was preparing Mr. Miller's
defense in 187G ; I think it was in September that I was preparing his defense.
Mr. Miller, in the mean time, had given bonds and was at large. He brought
me at different times sheets of paper, saying, "Ask Crocker this; ask
Crocker that." They did not purport to be transcripts of any papers, but
they were memoranda that Mr. Miller had made, and he gave them to me to conduct
the examination in court. For instance, they were questions like this : u How
much did the Central Pacific cost per mile T? " How much did the Contract
and Finance Company charge for a mile, and how much did they pay*P He had many
questions of that sort which I and you as a lawyer would ' know could not be
used in his defense. No matter what the railroad had done, that would not be
a defense for Mr. Miller. I examined them particularly. They did not purport
to be transcripts from books, but were interrogatories prepared by Mr. Miller
to be propounded to these gentlemen in the criminal trial. .
USED IN DEFENSE OF JOHN MILLER.
Q. W T hen did Mr. Miller give you those papers? A. I think in October, 1876.
Q. Where was your office then? A. At Sacramento City. He gave them to me in
this city at the old Cosmopolitan Hotel, where I stopped.
Q. By this city you mean San Francisco? A. Yes, sir. My office was in Sacramento
and I came here to defend him, and he brought me those papers to my room in
the hotel.
Q. Did you have possession of those papers at the time of the trial? A. Yes,
sir; I did. I had them on the desk' before me.
Q. How many were there? A. I cannot tell. There were several sheets and parts
of sheets containing notes, &c. I had them together with notes of the testimony
that I made myself and notes for argument. There were two trials, and I saved
them and kept them all until after the trials. There were two jury trials.
Q. Where did you take the papers after the trial? A. From the court-liouse
to my room at the old Cosmopolitan Hotel. I went over them and examined them
carefully to see if I had covered all the points in the argument. I never referred
to them in the argument, although I had them jotted down. I was then going
home. The memoranda that Mr. Miller gave me were simply questions to ask these
gentlemen. That memoranda and the memoranda that I had taken, the memoranda
of testimony and the notes for the argument, I put into the grate in my room
at the Cosmopolitan Hotel in October, 1876, and went home to my office at Sacramento
the next day. As Mr. Miller was acquitted I had 110 further use for them. If
he had been convicted, I should in all probability have kept them for future
reference, a new trial, &c.
"
PUT THEM ALL IN THE GRATE."
Q. Did you destroy all of them I A. Everything that there was I put there.
I put them all in the grate.
3034 U. S. PACIFIC EAILWAY COMMISSION.
Q. Have you on any other occasion received any other papers from
Mr. Miller? A. Nothing of this sort. I received a mortgage from his
wife, but that has nothing to do with this matter. I received no papers from
him referring to that.
Q. Did you meet Mr. Miller on the street in Sacramento ten or twelve days ago?
A. I did, sir.
Q. Did you say to him in that interview that it was a good thing for this company
that those papers had been destroyed? A. I did not. I see that Mr. Miller
is credited as so testifying. I met Mr. Miller and 1 said, " In all probability
you will be subpoenaed before this Commission." He said, " If I am
what shall I do? " I said, " Obey it." That was all that was
said about this matter. We talked about fruit matters.
Q. Do you say that there was no allusion whatever to these papers? A. Not
a word.
Q. Was there no allusion made to the subject concerning which he was subpoenaed?
A. None whatever. I knew the subject, and so did he.
Q. How did you know the subject? I knew what you were investigating, and I
thought that Mr. Miller would be subpoenaed.
Q. How did you know what relation his testimony might bear to the subject-matter
of this investigation? A. Simply from the lact that you were trying to find
out everything in relation to the Central Pacific' Eailroad Company's connection
with the Contract and Finance Company, and knowing that Mr. Miller had been
there, I supposed thafyou would subpoena him. I did not know it; I supposed
it.
Q. Did you know that he was charged with the fact that he was the last custodian
of the books, after Mr. Brown? A. I supposed that you were coming here to get
everything you could, to get all the information you could, and that you came
here to get facts, and I supposed that you would call upon Mr. Miller.
"
ALLUDED TO IT OFTEN."
Q. And you say that the conversation concerning the disappearance of the books
never happened; that there never was any allusion made to it in any conversation
between yourself and Miller? A. I did not say so. We have alluded to it often.
Q. You say you have alluded to it often? A. Yes sir; often.
Q. What has Miller said to you as to these books, and as to his last information
concerning them? -A. Miller told me at different times that he had memoranda
from those books. He said that he had never kept the books, but that Brown
had kept them. He tokl me that he had taken abstracts from the books. He told
me that repeatedly, but I do not know anything about it myself. That is what
he told me, but he never gave me what purported to be abstracts from the books,
but simply memoranda of questions to ask those gentlemen if they appeared on
his prosecution.
Q. Did he tell you where those abstracts were kept? A. No, sir.
Q. Did you ever hear of anybody who has seen them, or professed to have seen
them?
The WITNESS. Do you mean the abstracts that Miller made?
Commissioner ANDERSON. Yes, sir.
ATTENDED TO HIS OWN BUSINESS.
The WITNESS. No, sir. 1 make it a very strict rule to attend to my own business;
and do not look after other people's business.
N. GREEN CURTIS. 3035
Commissioner ANDERSON. You have never been a member of an in-, vestigating
committee.
The WITNESS. Oh, yes, Ihave. I have occupied positions not as high perhaps
as those you occupy now under the Government of the United States, but under
other capacities I have been on investigating committees.
By the CHAIRMAN :
Q. Are you aware that Mr. Miller swore in his testimony before the Commission
that the papers which he delivered to you were abstracts taken from the books
of the Contract and Finance Company? A. No, sir. I understand that he said
that he gave me memoranda and not abstracts; but if he said that he gave me
abstracts, I wish to say that he never did. I never had any abstracts.
DENIES THAT THE PAPERS WERE ABSTRACTS FROM BOOKS.
Q. He said that he had made abstracts taken from the Contract and Finance Company's
books which he had kept, and delivered them to you. Did he ever do that? A.
No sir. I never saw them. If he stated that he gave them to me, he stated that
which is not so. He never did give me any such abstracts.
The CHAIRMAN. He swore to it.
The WITNESS. He* gave me what purported to be memoranda made by him to guide
me in his defense, and to ask these gentlemen certain questions. Where he got
his data for these memoranda I never knew. He never showed me what purported
to be abstracts. At different times he said, " Here is another thing ask
this ; here is another, ask this also." I never asked these questions,
because these gentlemen did not appear.
NOT PAID BY CENTRAL PACIFIC FOR SERVICES TO JOHN MILLER,
Q. Did you receive any money or compensation of any character whatever from
the Central Pacific Eailroad Company for services rendered to Mr. Miller?
A. Never one dollar. I would like to explain : Mrs. Friend, who is now Mrs.
Miller, employed me. She came to me as Miller's wife, and she secured my fee
by a mortgage on land which belonged to her, and which she had before she married
Mr. Miller. That was subsequently lifted and paid by Mr. Clark, a capitalist
at Sacramento. She secured iny fee by a mortgage on land that she owned before
she married Miller, when she was Mrs. Friend, lhat was paid out of her separate
property. She gave a mortgage to secure my fee and other indebtedness, which
mortgage was paid off by Mr. Clark. I never got a dollar from the Central Pacific
in any shape or form. I never received a dollar from them under any conditions
whatever, except the $00 in the Burke case, and then I was not employed by
the Eailroad Company, but by Burke himself he preferred me to any man in the
State to defend him, and said thatif he had been convicted and had to go to
the penitentiary the railroad company could not go for him, and he therefore
wanted his own lawyer. He afterward went to Mr. Hopkins, arid Mr. Hopkins told
Judge Robinson to allow my fee. I did not consider that the fee was really
a fee from the Central Pacific Eailroad, but from Burke. Burke was my friend,
and I would have gone for him and defended him even if he had not been able
to pay for it. He has been an old and long time friend of mine, and he could
have paid the fee. Outside of this, I never received a dollar from the railroad
company P R VOL iv 45
3036 U. S. PACIFIC RAILWAY COMMISSION.
in any shape, manner or form, and even in this case I was not employed by it.
About the Miller fee, I wanted to know where my fee was comiug from.
Q. Was a man named Kennedy employed in that Miller case? A. No, sir. Alexander
Campbell, a very able lawyer in this town, was employed by Mrs. Miller at my
solicitation.
DOES NOT KNOW KENNEDY.
Q. Had Mr. Kennedy anything to do with the case I A. I do not know any such
man.
Q. His name is M. G. Kennedy ; do you know him? A. I do not know him.
The CHAIRMAN. He was formerly connected with Kennedy, Long & Co. in the
transfer business in this city; from 1869 to 1873.
The WITNESS. Do you mean employed as attorney in the case?
Q. Was he employed in any capacity in the case, so far as you can recall it
? A. No, sir.
Q. Had you any conversation with M; G. Kennedy? A. I do not know. If he was
a witness perhaps I did. I talked with all the witnesses to find out all they
knew. Alexander Campbell, an able criminal lawyer here, at my suggestion in
fact I think I employed him myself, but Mrs. Miller was to pay him was associated
with me in the case.
Q. Was any attempt at that time made to secure any information concerning the
jury list ; did you make any such attempt?
The WITNESS. On my part, do you mean?
The CHAIRMAN. Or on the part of anybody else that you know of.
The WITNESS. Yes, sir; I did. I always tried to get a copy of the venire and
look at every man there. I want to learn all I can about him, what business
he was in, how he lived, where he lived, what his proclivities were, and whether
he would be likely to favor the other side or hot.
Q. Had you any conversation with M. G. Kennedy concerning the list? A. I do
not know. I talked with everybody that I could.
The CHAIRMAN. I refer to Kennedy as having been specially employed.
The WITNESS. No, sir; I never employed him. 1 may have talked to Kennedy as
I talked with a good many people about that time. I may have talked about the
jurors in order to find out all about them, and then I questioned them very
closely when they come on the stand. I always do. It is a habit that I have
got in trying to hunt up all I can about a juror.
PALACE HOTEL, SAN FRANCISCO, CAL.,
Monday , August 8, 1887.
EDWAED H. MILLEE, JR., being further examined, testified as follows :
By Commissioner ANDERSON :
Question. Have you prepared the statement exhibiting the cost of the construction
of the road under the various contracts, as it appears from the books of the
Central Pacific Eailroad Company, which was referred to in your prior testimony
? Answer. Yes, sir.
Q. In what form have you prepared it; what does it show? A. It is a statement
in tabular form showing the amounts paid in cash, stock,
EDWARD H. MILLER, JR.
3037
and bonds for the different portions of the road from Sacramento to the 690th
mile, which is Promontory Point.
Q. Is it prepared by miles or by sections? A. It is prepared by contracts.
Would you like to look at it [producing the statement]?
COMPLETE STATEMENT OF CONTRACTS.
Q. What is the statement which you now produce? A. It is a statement of the
cost of construction of the Central Pacific under its contracts between section
1, commencing at Sacramento, and the 690th mile near or at Promontory Point,
by different contractors.
Q. Does it give the amount of stock, bonds, and cash issued or paid under each
contract separately 1 A. Yes, sir.
Q. Who prepared this statement! A. A clerk in my office.
Q. What verification have you made of its accuracy? A. I did not examine all
the details, but I am positive that it is accurate.
UNION PACIFIC BUILT FROM OGDEN TO PROMONTORY POINT.
By Commissioner LITTLER:
Q. I. will ask you how far is it from Promontory Point to Ogden? A. Fifty-two
miles.
Q. Why is it that in all these matters there is nothing said as to the cost
of the road between Promontory Point and Ogden? A. Because the Union Pacific
built to Promontory Point, and an arrangement was made with them to get the
road from Promontory to a point 5 miles west of Ogden.
Q. Did you buy the road as constructed? A. Yes, sir. The Union Pacific now
owns to a point 5 miles west of Ogden.
The paper referred to was marked " Exhibit 1, August 8, 1887," and
is as follows :
Central Pacific Railroad Company. Statement showing amounts paid in cash, stock,
and bonds for differen t portions of th e road.
...
The WITNESS. I have here an analysis or statement which I have made up, showing
the settlement with the Union Pacific for the additional miles that were
received. [Producing another paper.]
AN ANALYTICAL STATEMENT.
By Commissioner ANDERSON:
Q. Do I understand that this supplemental paper is made for the purpose of
showing the cost per mile of that portion of the road which is expressed as
being a cash payment? A. Yes, sir.
Q. It appears to omit all the stock ; is that correct? A. Yes, sir $ it omits
the stock. It shows only the cash and bonds; and in addition to the previous
statement it shows the compromise or settlement with the Union Pacific for
the 47^ miles from Promontory Point to a point 5 miles west of Ogden. This,
I think, does not appear on the first statement. It was made up by me especially
in explanation of the previous statement.
The paper was marked " Exhibit No. 2, August 8, 1887," and is as
follows :
Statement allowing amounts paid in cash or its equivalent for different portions
of the road;
also amount per mile.
...MONEY EXPENDED BEFORE THE PURCHASE.
Q. I see an item on this Exhibit No. 2, expended by the company, $751,963.78.
Do I understand it was expended by the company on the section of the road
purchased from the Union Pacific? A. Yes, sir.
EDWARD H. MILLER, JR. 3039
Q. For the purchase? A. No, sir; it was made before the purchase. It was made
oil our line; but the Union Pacific built a road parallel to our line, and
that was so much lost.
Q. To whom was that payment made I A. The payment was made by Governor Stanford,
acting under a power of attorney, when he was in Salt Lake City, in advance
of the completion of the road. It was made to many different parties.
Q. Was the construction carried on by the Contract and Finance Company? A.
No, sir.
Q. By whom was the construction carried on? A. By the company itself, through
Governor Stanford, its agent and attorney.
By Commissioner LITTLER :
Q. Do you say that the payments made by Governor Stanford were made to many
different parties? A. Yes, sir ; they were made to many different parties.
EACH ROAD PARALLELED THE OTHER.
Q. Do I understand you to say that the Union Pacific paralleled a portion of
this line between Promontory Point and Ogden? A. Yes, sir; each road paralleled
the other for a long distance.
Q. Which track was taken up; the track built by you, or the track built by
the Union Pacific? A. No track was built by either. The Union Pacific came
200 or 30Q miles west of Promontory with their grading, and the Central Pacific
graded from Ogden for nearly 100 miles this way, and when the tracks met, of
course, the grading done by either alongside the track of the other was so
much lost.
Q. That was so much dead loss? A. Yes, sir; so much dead loss.
By Commissioner ANDERSON :
Q. Was this figure of $2,840,000 full payment to the Union Pacific for the
road which it had built, and for its interest under the acts as applicable
to that portion? A. Yes, sir ; that payment was in bonds. It was a payment
of $2,840,000 in the first-mortgage bonds of the Central Pacific Eailroad Company,
and the 6 per cent. United States bonds that were issued on that mileage.
By Mr. COHEN :
Q. In addition to what? A. In addition to the Central Pacific bonds.
CONDITIONS OF THE PURCHASE.
By Commissioner ANDERSON :
Q. What I mean to ask you is whether this was the full measure of the value
of the Union Pacific portion, this 47J miles, without considering the $751,000?
A. No, sir; I do not think so. I think there was an additional payment made
to the Union Pacific on that 47 J miles. There was no equipment furnished,
or anything of that sort. This 47 miles was simply bare track, while the mileage
this way from the one hundred and thirty-eighth mile to the six hundred and
ninetieth mile was fully furnished with equipment locomotives, cars, buildings,
and everything of that sort, including water stations and turn-tables.
Q. What I mean to ask you is whether the $751,000 was expended on the same
track or whether it was expended on a parallel track, and therefore not to
be counted as a part of the consideration paid to the Union Pacific for its
track? A. It was expended on the parallel track, and we derived no benefit
from it whatever.
3040 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. Please describe the character of the country from section
1 to section 18.
Mr. COHEN. Had you not better take that from the engineer's reports?
Commissioner ANDERSON. I would like this witness to state his knowledge.
CHARACTER OF THE COUNTRY.
The WITNESS. It commences at Sacramento and runs out to the American River
bridge, a distance of 3 miles, partly over the old Sacramento City levee, which
was very much widened and strengthened, and the elevation heightened by the
Central Pacific in building. The American River bridge trestle-work extends
for a quarter of a mile on each side of the bridge, the bridge itself being,
I should say about 1,01)0 feet in length. From there on the grading is not
very heavy, and the road runs through practically an undulating country, rather
than a hilly country. We have, however, another bridge crossing Arcade Creek
at a point about 16 miles from Sacramento.
AT WHAT FIGURE CROCKER & CO. TOOK STOCK.
Q. All that work was completed before January, 1864, by Crocker & Co.,
was it not? A. I do not remember.
Q. Do you remember whether the stock issued under the contracts for section
1 to section 18 was taken at par? A. I think so. I am not positive, but I
have no doubt of it. It was taken, I think, practically at par.
Q. Sections 19 and 20 you have entered Collins & Company? A. Yes, sir.
Q. From what did you take that entry? A. From my books.
CROCKER & CO. SUCCEEDED COLLINS & CO.
Q. I find the report made to the Commission by Mr. Stevens, the accountant,
states that sections 19 and 20 are entered to Crocker & Co., as the contractors.
Will you please explain that? A. Yes, sir. Collins & Bro., failed to complete
their contract, gave it up, and Crocker & Co. completed it.
Q. The amount entered in the statement, $15,226.75, was a cash payment made
to Crocker & Co., and the other amount entered to Collins & Co., of
$2,344.84, had been paid to Collins & Co., before they failed. Is this
your understanding? A. Yes, sir. They failed to complete the contract, and
Crocker & Co. completed it upon the same terms that Collins & Bro had
taken it.
DIFFERENT CONTRACTORS FOR SECTIONS 21 TO 29.
Q. Sections 21 to 24, for which Turton, Knox & Eyan were the contractors
do you know on what terms the $4,500 of stock were taken?
The WITNESS. At par. Is that what you mean, whether at par or not?
Commissioner ANDERSON. Yes, sir.
The WITNESS. It was taken at par.
Q. As to sections 25 to 27, C. D. Bates was the contractor. Do you know on
what terms the $5.500 of stock were taken? A. At par. 1 make this answer with
the same qualification, however, that it is possible that I may be mistaken
; but I think not.
Q. Sections 28 and 29, S. D. Smith, contractor. On what terms were the $7,600
of stock taken? A. On the same terms.
H. MILLER, JR. 3041
SECTIONS 30 TO 54 BUILT BY CROCKER & CO.
Q. Sections 30 and 31, Crocker & Co., contractors ; do you know on what
teruivS the $11,600 of stock were taken? A. My recollection is that it was
at par.
Q. Sections 32 to 54, C. Crocker & Co., contractors. From what source do
you obtain the date of the completion of the work as being March, 1860? Is
that because that is the date of the last payment? A. That is the date of
the last estimate which came in, which is credited to the contractors on my
books.
Q. Do you know the date of the contract? A. No, sir ; I have not that. I know
from recollection only.
TIME OF PAYMENT AND TERMS OF CONTRACT.
Q. Do you know when the payments began under the contract for the construction
of sections 32 to 54? A. I can state only this fact, that they began immediately
before the first estimate was returned by the engineers for the first work
done.
Q. Do you know what were the terms of that contract?
The WITNESS. Which, 32 to 54?
Commissioner ANDERSON. Yes, sir.
A. Only generally. It was fixed for the prices for the grading, masonry, bridging,
trestling, &c., and did not include track-laying, iron, ties, or equipment
or buildings.
Q. What do you mean by buildin'gs? A. Depot buildings.
Q. When you say iron, do you include rails? A. I do not include the rails,
but do include the superstructure.
Q. Does it include, then, the materials which we find in the estimates which
were furnished 1 A. Yes, sir.
Q. How were the rates fixed that were to be paid? A. They were fixed in the
contract.
Q. Who fixed them before they were entered in the contract? A. I do not remember
that. Do you mean how were the terms of the contract settled as to rates?
Q. The rates to be paid for the different classes of work done by Crocker & Co.
; how were they fixed? A. I do not remember that. It is possible that there
was a committee appointed, or something of that kind, by the board of directors,
to see what rates could be got.
Q. Do your minutes show anything on the subject? A. I do not know that.
Q. Do you remember any discussion as to whether those rates were reasonable
or extravagant? A. I do not remember.
THREE-EIGHTHS IN STOCK, FIVE-EIGHTHS IN CASH.
Q. Do you remember how the payment was to be made, as to each dollar of payment?
A. That statement will show. My recollection is that it was three-eighths in
stock and five-eighths in cash.
Q. And did that rate persist throughout the contract, or was there a modification
? 1 think it persisted. A. Whether under this contract or not, stock was to
be paid at the rate of 50 cents on the dollar, and afterwards it was modified
to 30 cents on the dollar, I cannot say. I do not know whether that was under
the contract, or under the continuance of the terms of that contract, doing
work that had not been contracted for.
Q. But you do remember, do you not, that at the inception the threeeighths
which was payable in stock was taken at 50 cents on the dollar; from section
32 to section 54? A. I am not sure about this.
3042 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. It so appears in Mr. Steven s's report.
The WITNESS. That is my recollectiou. I think so.
Q. Fifty cents on the dollar? A. Yes, sir; that is my recollection.
Q. For sections 32 to 54? A. Yes, sir.
Commissioner ANDERSON. Your figures seem to agree with Mr. Stevens's.
The WITNESS. They do up to 138.
Q. In making up the statement of total payments made to these contractors for
sections 32 to 54 has your clerk not taken the entries directly from the account
books showing the payments actually made? A. Yes, sir.
THE STOCK ENTERED AT PAR.
Q. And have not the payments in stock on your books been reduced to their cash
value by dividing the actual issue of stock into halves, so as to state it
at 50 cents on the dollar? A. If I comprehend your question, I think t*hat
the stock has been entered in the statement at par value.
Q. I think that there is no doubt that under the Crocker contract twice as
much stock was issued to him as appears on the account as cash? A. If that
is so, it is an error of my clerk. I will analyze it.
Q. I think your clerk is right, because he agrees with Mr. Stevens. He is stating
the exact cost of the stock instead of the cash cost. Stevens calls it "stock," and
you can see that it is half the actual issue. Will you please ascertain whether
in the column of " Stock," contained in Exhibit 1, of August 8, you
have stated the stock payments after their reduction to their cash value, the
contract providing that the stock shall be issued at 50 cents on the dollar;
and whether, as matter of fact, the number of shares issued to Crocker & Co.
on sections 32 to
54 were not double the amount entered on your statement 1? Perhaps you can
tell it from your balance sheet. A. Yes ; I think that is so.
Q. What is your next division of sections? A. The next division is
55 to 138.
Commissioner ANDERSON. Mr. Stevens's division seems to be 55 to 92.
The WITNESS. That probably is because it is in that one year. The next year
is probably to 138.
STOCK FOR SECTIONS 55 TO 138 TAKEN AT FIFTY.
Q. 1 see that I have it here; 55 to 92, and 92 to 138, but the details are
separate. In regard to your statement of the cost of sections 55 to 138, as
to which sections you state that $4,414,899 of stock were paid, is that entered
in the same way the value of the stock reduced to cash on the basis of 50 cents
on the dollar for each share up to May, 1866, and after that date upon the
basis of 30 per cent, for the stock 1 A. It is the equivalent of that. That
statement is made up from the contractors' account, charging them with simply
the three-eighths of stock that was three-eighths at par. That -stock was issued
to them, and additional stock not charged to them under the contract at 50
per cent, when it was 50 cents on the dollar, and 70 per cent, when it was
30 cents on the dollar.
Q. Can you furnish us with a true statement of the total amount of stock issued
to the contractors? A. Yes, sir. I supposed that it was in there. If I had
done it myself I would have put it in.
By Commissioner LITTLER : Q. Can you do it now? A. Not without the books ;
not now.
EDWARD H. MILLER, JR. 3043
STOCK ISSUED TO CONTRACT AND FINANCE COMPANY.
By Commissioner ANDERSON :
Q. How about tin's six millions more of stock; lio\v was the stock issued to
the Contract and Finance Company taken; at what rate was it taken? A. At par;
that is, $43,000 of stock at par value.
Q. Do you mean $43,000 per mile? A. Yes, sir.
Q. That would make about eight millions or nine millions additional. We find
in Mr. Steveus's report sections 53 to 92 stated by themselves, and that the
cost in cash or its equivalent for these 37 miles was $7,047,012.06. Will you
please verify that statement from your books? A. Yes, sir.
Q. We find that the payment credited in stock, reduced at the varying rate
of fifty and thirty, was $2,642,569, the total payment carried out in the cash
column, and we understand that the contractors must have received an amount
exceeding the amount stated in stock, being an equivalent amount while the
rate was fifty, and an amount at the rate of seventy when the rate was changed.
Will you please furnish us as to these sections the exact amount of additional
stock issued? A. 1 will give you an exact account of the whole stock issued.
Commissioner ANDERSON. We want it from 55 to 92.
The WITNESS. I will furnish it from 55 to 92, showing the total amount of stock.
TOTAL CENTRAL PACIFIC STOCK PAID FOR CONSTRUCTION.
Commissioner LITTLER. If .you have not already done so, I wish you would furnish
the Commission with a statement showing the total amount of stock issued by
this Central Pacific Railroad Company ; 1 mean issued in payment of original
construction.
The WITNESS. The questions that Mr. Anderson asked^and the statements that
I will furnish in reply, will bring that out. I supposed that it was in this
statement; but he now asks for totals. I will make a statement of the whole
thing.
Q. Do you know the character of the country between section 55 and section
9Uf A. That is in the Sierra Nevada Mountains.
Q. Do you know the initial point and the terminal point? A. The initial point
is at or near Colfax, but as for the terminal point, I cannot tell from recollection
whether it is on this side or on the other side of the summit. 1 think, however,
that it is not far from the summit of the Sierras.
CONSTRUCTION COSTS $195,000 A MILE.
Q. The cash or its equivalent paid, omitting additional stock, runs up to about
$195,000 a mile, does it not? A. That must include, then, the Summit tunnel,
and probably does.
Q. Do I understand that this only includes the work that appears on the engineers'
estimates as to these sections of the road? A. I understand it so.
Q. Does it include the rails or the equipment or the buildings'? A. I have
not examined into that since the Commission has been here ; but I have learned
more about it in the last few days than I ever knew before. Perhaps you had
better examine the estimates upon this point.
Commissioner ANDERSON. We have the estimates here, but we would also like your
recollection.
The WITNESS. I will not say positively that they do not cover tracklaying,
iron, and equipment. I am not positive, but I will ascertain. By the CHAIRMAN:
Q. They may relate to the entire track, may they not? A. That
3044
tl. S. PACIFIC RAILWAY COMMISSION.
seems to be my recollection, but i will not state positively. There is n pencil
memorandum on this estimate that I did not suppose I had left there, and from
your question just now it is possible that it may not be correct. With reference
to the question you have just asked, I will state that that is my recollection,
and so I state it.
By Commissioner ANDERSON :
Q. We will ask you to get definite information. Will you do so 1 A. Yes, sir
5 I will. I have no doubt that is correct.
WORK UNDER THE CROCKER CONTRACT.
Q. Will you look at the two final estimates now shown you for the work under
the Crocker contract, the first being from section fifty-five to section sixty-seven,
and the second being from section sixty-eight to section ninety-two, and state
the total cost of work appearing to have been done upon these two estimates
? A. $7,047.011.06.
Q. Then we understand that the work actually paid for under these contracts
was the work specified on these two estimates? A. Yes, sir; that amount was
specified on these two estimates.
Q. And we understand that that amount of work was paid for at the rates stated
on these papers? A. Yes, sir.
ESTIMATE FOR SECTIONS 55 TO 67, CROCKER & CO. CONTRACT.
The papers referred to were marked respectively " Exhibits 3 and 4, August
8, 1887," and are as follows:
...The WITNESS. I should judge from these estimates that the iron and so forth were not furnished, and that the track laying simply was done by the contractors. 1 would like to explain this a little further. In answer to some questions I think that I said that Crocker & Co., the contractors for sections 55 to 92, did not furnish iron, &c. It appears by this
3046 U. S. PACIFIC RAILWAY COMMISSION.
estimate that they did furnish ties and did lay the track, included iu this
amount which is stated, but iron was not furnished.
Mr. COHEN. Mr. Chairman, when did you say that you wanted Charles Crocker?
The CHAIRMAN. In September, in New York.
Mr. COHEN. I will try and have him there. I would like to have him explain
all of these contracts himself.
Commissioner ANDERSON. In connection with this contract, I will read the following
report, signed by Leland Stanford, Mark Hopkins, and E. H. Miller, jr., and
dated May 9, 1865.
REPORT OF COMMITTEE APPOINTED TO EXAMINE INTO THE QUESTION OF CONTRACTING FOR
THE GRADING.
The paper was marked " Exhibit No. 5, August 8, 1887," and is as
follows :
To the Board of Directors of the Central Pacific Railroad Company of California
:
Your committee, appointed on the 1st day of May, 1835, to examine into and
report upon the question of contracting for the grading of the railroad of
the company, beg leave to report that they have given the subject a good deal
of consideration, in view of its importance and its effect upon the great enterprise
iu which the company is engaged.
It is the universal experience of railroad companies that the work of construction
can be conducted more economically and expeditiously by competent contractors
than by the officers of the company. The result has been that nearly all the
railroads of the United States have been built by contract, by the terms of
which a considerable portion of the contract price is paid in the stock of
the company, thus identifying the contractors with the successful progress
of the enterprise, and at the same time relieving the finance of the company
to the extent of such stock payments.
By adopting that plan the board of directors will be relieved of a large amount
of labor in carrying out the details of such a work and thus leave them more
time to perform the other arduous labors of providing the money necessary to
complete the road expeditiously, the purchase of the necessary rolling stock
and other railroad material, and the operating of the road, which are sufficient,
if properly attended to, to fully occupy the time and abilities of .'ill the
members of the board of directors.
The experience gained in the prosecution of the work to the present point has
convinced us that the contract system is decidedly preferable.
We are also satisfied that it will be necessary to let the contract for the
grading of the road as far as the surveys of the company have been extended,
that is, the Big Bend of the Truckee River in Nevada, to some competent firm
of contractors whosj known knowledge of the work to be done and experience
in the business will secury the confidence of the public and capitalists on
their ability to perform it. The price should be a remunerative one, reasonable,
fair, and just, in view of the large amount of labor to be performed and the
rugged, mountainous character of the country over which the line to that point
is located. It should also be within the means and ability of the company to
pay.
We recommend this course for the following reasons : It is well known that
the enemies of our enterprise have been and still are actively engaged in circulating
repoits that it is virtually impracticable to build a railroad across the Sierra
Nevada Mountains. A railroad operator who has heretofore occupied a somewhat
prominent position in this State has published a letter which has been extensively
circulated, in which he asserts that your railroad over the mountains cannot
be constructed for less than $'250,000 to $300,000 per mile, that the physical
obstacles are so great as to render its construction impracticable, and that
the only purpose of the company is to secure public aid to build the Pacific
Railroad far enough into the mountains to turn Nevada freight and travel over
the Dutch Flat and Downer Lake wagon road.
The falsity of these statements is well known to you, but those unacquainted
with the route are liable to be misled by it, and their industrious and persistent
circulation have no doubt had a tendency to injure the company in its financial
negotiations. Although his bitter enmity to' the Pacific Railroad is well'
known here and therefore his statements carry but little weight, yet as he
claims to be a civil engineer of large experience, capitalists who are not
well acquainted with the route and the country are liable to be misled, and
thus the negotiable secureties of the company, upon which it relies to raise
the money necessary to carry on the work, are liable to be depreciated, and
the company will thereby suffer loss, and the work will be delayed in its progress.
EDWARD H. MILLER, JR. 3047
In the Eastern States and in Europe, where the true character of the enemies
of your work and their interest in hostile local roads are unknown, but where
their infainons publications have been circulated by thousands, through the
mails and by the agents of Wells, Fargo, & Go's, express, it is not strange
that some doubt should have been created in the minds of capitalists as to
the practicability of constructing your railroad in consequence of its supposed
great cost.
Our agent and friends there, who are negotiating our bonds and other securities,
have to meet and overcome these objections, and they advise us that if a contract
was let to responsible contractors of known character, experience, and good
judgment, well acquainted with the character and extent of the work to be done,
at a price within the means of the company to pay, it would immediately secure
the public confidence in the practicability of the work, and at the same time
give increased corindence and establish a higher market value for your securities.
Your committee are confident that such would be its immediate effect, and we
know of no other means so effectual to counteract the effects of the enemies
of your enterprise and place its success beyond all contingencies.
It will not only increase the value of your, securities, but it will remove
all doubts of the speedy completion of the railroad, not only to Dutch Flat,
but beyond that point to the valleys over the mountains. It will be a fall
and complete answer to the oft-repeated slander that the railroad is only interested
as a feeder to the wagon road.
A fair and reasonable contract of the kind proposed will also induce railroad
capitalists whose business it is to build railroads to take an interest in
the work, and thus add to your strength and give increased confidence in its
speedy completion.
So, too, placing so large a portion of the work in the hands of one firm of
contractors, the work on the more difficult and expensive points can be pushed
more rapidly, as they can procure labor cheaper, there being no competing contractors
to run up the price, and they can more readily concentrate a large force upon
any particular section when necessary.
It is well known that after reaching the vicinity of Bear Valley the line passes
through many miles of rough country, chiefly of a hard granite and serpentine
rock formation, which will be expensive and slow, and the more so, being about
5,000 feet above the level of the sea, and where for several months in the
year the work, except in the tunnels, will be necessarily suspended by snow
and inclement winter weather. In view of this interruption of the work in that
region its actual cost will be largely increased, and must be commenced two
years or more in advance of the time when by the acts of Congress the 25-mile
sections are required to be annually completed.
The work, therefore, of this portion of the line should be commenced soon,
and, in the opinion of your committee, after a full and careful examination
of the whole subject, that it would be the best policy to let a contract for
the whole work to the Big Bend of the Truckee River, if reliable parties can
be found with whom a contract can be made upon terms satisfactory to the company.
All of which is respectfully submitted.
Sacramento, May 9, 1865.
LELAND STANFORD, MARK HOPKINS, E. H. MILLER, JR.
The WITNESS. In connection with these reports, I would like to state that I
produced them on the 28th of July and offered to read them to the Commission,
but was not permitted to do so. On the 29th of July they were asked for from
Governor Stanford, with some sharp remarks to the effect that they had been
demanded and had not been produced.
Commissioner ANDERSON. We have a great many things to do, and cannot read every
paper presented to us.
The WITNESS. Your memories did not seem to be much better than mine, which
you have criticised so freely.
Commissioner ANDERSON. Memory as to what?
The WITNESS. Memory as to their not being produced.
Commissioner ANDERSON. I have said nothing about it.
The WITNESS. Somebody did, and only one day had intervened.
By Commissioner ANDERSON:
Q. Do you remember who composed this report ; was it composed by yourself or
by Governor Stanford? A. I do not think that it was I who composed it. It
is in the handwriting of S. S. Montague, chief engineer of the company at that
time.
3048 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. I think that I will read this other report also to the
Commission. It is dated Jane 6, 1865, and is signed by Mark Hopkins and E.
H. Miller, jr.
REPORT OF COMMITTEE UPON THE QUESTION OF CONTRACTING FOR
CONSTRUCTION.
The paper was marked " Exhibit No. 6, August 8, 1887," and is as
follows :
SACRAMENTO, June 6, 1865.
To the President and Board of Directors of the Central Pacific Railroad Company
of California :
Your committee, to whom was referred the matter of contracting for the construction
of the railroad of the company, would respectfully report :
The subject is one of great importance to the company, and requires a full
and careful consideration ; that they have endeavored to make arrangements
to procure a combination or association of capitalists and businessmen, who
would take a contract on fair, reasonable terms to construct the railroad of
the company, and who would combine such an amount of capital and business tact
and energy as would secure the confidence of the public in the speedy completion
of the work ; but we have, thus far, failed in our efforts. We feel confident,
however, that in the course of time such an arrangement can be made.
It is absolutely necessary to construct the road as rapidly as practicable,
for the purpose of concentrating without delay upon the line of the railroad
route the carrying and passenger trade between Sacramento and Virginia, and
also to comply with the acts of Congress and the State legislature, which require
the rapid completion of the road. In view of this necessity, and to come up
to the wishes and wants of the public, your committee cannot recommend the
letting of any contract to any parties unless they are men of known ability
and where friendship and sympathy for the success of our enterprise would be
a sure guaranty that the work would be pressed with vi^or, and that every effort
would be made to complete the work as speedily as possible.
Persons of large capital seem unwilling to bind themselves to construct the
road as rapidly as the acts of Congress and the interests of the company require,
fearing that the scarcity of labor, and the uncertain character of the rock
excavations in the upper mountainous portions of the line, will prevent a compliance
with such obligations. The high rates which capitalists are able to realize
for the use of their money in this State is also another serious obstacle to
effecting such arrangements. We believe that it will not belong, now that the
rebellion is crushed, before arrangements can be made by which business men
here, possessing the proper skill and energy, can co-operate with J&Lstern
capitalists in taking a contract for the construction of the road, which will
insure its completion as speedily as labor and capital can accomplish it.
C. Crocker & Co. have been, and are now, pushing on the work with extraordinary
vigor and success. They have in all cases complied with the orders and directions
of the officers of the company. They are entitled to great credit for the system
with which they have conducted their affairs and the rapidity with which they
have graded and constructed the road. Their organized force of superintendents,
foremen, and laborers carry on the work in the most effective and expeditious
manner. Their known enterprises and large pecuniary interest in the company
afford assurance of their continued and hearty co-operation with the board
in carrying out their plans in the future.
Until, therefore, parties can be found with whom other arrangements shall be
made your committee recommend that they continue the work, and that they be
allowed, therefor, the prices named in the annexed resolution, which is herewith
reported by your committee, and the adoption of which they hereby recommend,
and which they are willing to abide by.
Some of the work could probably be done at a lower price, if sufficient time
could be allowed them to do it in the most economical manner, but the necessity
for the speedy completion of the work is so great, that we believe it is true
economy for the company to pay the prices named, rather than to have the work
delayed, or even run the risk of delay, by the hands of unskillful, incompetent,
or unfriendly contractors. Delays work serious and incalculable injury to the
business of the road.
For instance, we are confident that the gross earnings of the railroad, which
for The month of May have been about $665 per day, will be increased to $1,500
per day when it reaches Illinois Town, and probably greatly exceed that amount
if it can be completed to that point early in September. To do that will require
the combined energy
EDWARD H. MILLER, JR. 3049
of the contractors and the board. It is therefore true economy for the company
to keep and to maintain at this time such immediate control of the work as
will enable them to complete the road to that point at the earliest day possible,
even at some sacrifice, if need be, in crowding the work at a rate which
contractors studying the mere economy of working would not be likely to do.
Messrs. Crocker &. Co. fully understand the plans and wishes of the board
of directors, and know better than any others the character of the work, the
obstacles to be overcome, and what is requisite to carry out those plans successfully.
They are also fully provided with the necessary tools, horses, and carts, with
a well-organized force to do the work expeditiously. It would require a large
outlay of money, as well as mouths of time, for others to secure the same advantages.
They are willing to carry on the work as desired at the price named in the
resolution, and at any time give way to others whenever the board shall require
it or can make better arrangements, but they are unwilling to go on at leas
prices, in view of the difficulties and the great extra expense of hurrying
on the work as required. Your committee believe that it would be ruinous to
the best interests of the company to make any change in. the present management,
and break up the admirably organized 83'stem of these contracts now in such
successful operation, and which is hurrying on the road so rapidly. Your committee
are satisfied that, under the oircuinstances, the prices named in the resolution
are just and reasonable, and they therefore recommend that the resolution be
adopted and maintained until some better arrangement can be made. All which
is respectfully submitted.
MARK HOPKINS.
E. H. MILLER, JR.
By Commissioner ANDERSON :
Q. Have you the resolution referred to in the report which I have just read
I A. I suppose that it appears on the books; it must appear on the minutes.
RESOLUTION CONTAINING RATES.
Commissioner ANDERSON. The resolution referred to is a resolution containing
the rates.
Mr. COHEN. You have it here.
The CHAIRMAN. It is in the minutes of the Central Pacific Railroad Company
at page 12, under date of June 6, 1865.
(The resolution referred to will be found printed among the miscellaneous documents
in the latter part of volume 7. See Index.)
By Commissioner ANDERSON :
Q. This report states that " until, therefore, other parties can be found
with whom other arrangements can be made, your committee recommend that they
continue the work, and that they be allowed therefor the prices named in the
annexed resolution." Do you know whether that referred to the different
classes of work which they were to do at so much a yard, or does it refer to
the resolution which appears on the minutes providing that they be paid at
the rate of three-eighths in stock and five-eighths in cash, the stock to be
taken at 50 cents on the dollar? A. I cecollect that it was continuing the
rates that had been paid under the contract. It is my impression that the rate
appears somewhere upon the minute books of the company.
Q. Are they the same rates stated in these estimates which you produced to
day? A. I think so, but I am not sure.
Q. Will you produce or furnish us to-day with the proof of the rates agreed
upon as they appear upon the books of the company? A. I will, if possible.
I will hunt for them.
RATES SUBSTANTIALLY THE SAME AS THOSE STATED IN THE ESTIMATES.
Q. Is it your judgment that they are substantially the same as stated in the
estimates? A. Yes, sir ; substantially the same. I would not
3050 U. S. PACIFIC RAILWAY COMMISSION.
like to have it appear that I say this positively, because I am not clear about
it. I will endeavor to ascertain, however.
Q. In whose handwriting is this report of June 6, 1865? A. In that of E. B.
Crocker.
Q. Was he a brother of Charles Crocker? A. Yes, sir.
Q. Do you know why it was not signed by Governor- Stanford, who was on this
committee who signed this other report? A. I know of no reason, unless he
was absent.
RELATIONS OF CROCKER & CO. AND CONTRACT AND FINANCE COMPANY.
Q. At the time this report was made, did you or did -you* not know that, so
far as there were any profits under the Crocker contract and stock, they were
to be divided equally between Charles Crocker, Mark Hopkins, Lelaud Stanford,
and C. P. untington 1 A. At the time of that contract I did not know; in fact,
at no future time.
Q. Did you know at the time of this report? A. At the time of this report I
did not know; and, in fact, 1 supposed that the profits were to belong to Charles
Crocker or to Charles Crocker & Co. whoever the Company may have been.
Q. You do know now, do you not, from Governor Stanford's statement, that the
surplus Crocker stock was carried into the books of the Contract an, I Finance
Company? A. Yes, sir; I understand so. I understand that whatever loss or profit
Crocker & Co. made was turned over and formed a part of the assets and
liabilities of the Contract and Finance Company.
Commissioner ANDERSON. I will now read the report of January ,5, 1867.
REPORT UPON THE PROGRESS OF WORK OF CONSTRUCTION.
The paper was marked " Exhibit No. 7, August 8, 1887," and is as
follows :
OFFICE OF THE CENTRAL PACIFIC RAILROAD COMPANY,
Sacramento, Cal. } January 5, 1867.
To the Board of Directors of the Central Pacific Railroad Company of California
:
The commencement of a new year renders it proper that we should make you an
official report of the progress of the work of construction of your road during
the past year and the prospects for the year on which we have just entered.
During the year 1866 39 miles of additional track have been laid up the western
slope of the Sierra Nevadas, making in all 93 miles of completed line. Cisco,
the present terminus, is within 12 miles of the summit of the Sierras, and
has an altitude of 5,811 feet above tide water. The portion of the line constructed
during the past year is conceded by all to be the most difficult ever yet surmounted
by any railroad in the United States, if not in Europe. It has been a herculean
task, and has fully taxed the means and energies of the company and its officers.
The result has, how3ver, demonstrated the fact that a railroad with practicable
curves and grades can be constructed and operated over the mountains a matter
which has been doubted jy many.
The obstacles with which, we have had to contend have been great. The country
over which the track has been laid is rugged and rocky, upon a steep mountain
side, and up by deep ravines, requiring a continued succession of deep cuts
and high embankments, many of which had to be protected by heavy stone walls,
and requiring large and long culverts of stone to pass the torrents of water
which fall-in the mountains. The material has been almost entirely rock, much
of it being the hardest kind.
The work has been carried on with the greatest vigor during the past season,
and the necessity of completing it within a short space of time has entailed
a largely increased expenditure -upon the company. Heavy rock excavations that,
to work economically, should have taken eighteen months to complete, have,
been pushed through m from four to live months, of course requiring a greatly
increased outlay of money to accomplish it. Besides this, we have be.m compelled,
from the commencement of
EDWARD H. MILLER, JR. 3051
the work, to pay gold for all labor and materials procured in this State. As
all our money has to bo obtained in the Atlantic States, where paper money
is the sole currency, the loss in exchanging this currency for gold has been
very great. This loss has been a serious item in the expense of carrying
on the work, an item which does not appear on the books of Eastern railroads.
We have confidently expected from year to year that this item would be reduced
to a small figure, if not entirely disappear, but it still exists as a large
item of the expenses of the company. The result is that the road and equipments
from Sacramento to Cisco, including the work done east of the latter point,
has cost over $14,500,000.
We have not made as much progress during the last year as we hoped at its commencement.
This was caused by the scarcity of powder on the Pacific coast, and our inability
to procure as many laborers as we wished and expected. We confidently calculated
on a full supply of powder, and at least 15,000 men, but were disappointed
in both. We were only able to procure about 10,000 men, who were kept constantly
t work during the spring, summer, and fall months. This force has been reduced
to about 6,000 since the winter storms s,et in. A great portion of this body
1 of men is now lodged in comfortable camps at and near the summit of the Sierra
Nevadas, and employed in excavating the numerous tunnels in that part of the
line, ifc being impossible to work them in open cuts. The remainder are at
work in the Upper Canon of the Truckee, just below the snow line, and about
30 miles east of the summit of the mountains.
The employment of so large a force during the inclemencies of the winter season
adds largely to the cost of the work, and this increased expenditure caused
by pressing the work forward so rapidly has aad will increase the total cost
of the work fully 50 per cent. And it is an important matter for your consideration
whether the company is able or ought in justice to bear this increase of cost.
The national as well as State Governments and the people demand the speedy
construction of this great national highway, and the public impatience, for
its completion at the earliest day practicable seems to grow the more rapidly
the work is done, and the nearer it approaches a union across the continent.
This public demand we have endeavored to meet, though it has been a costly
effort to the company, and it is for you to determine whether the same policy
of rushing on regardless of expense is to be pursued in our future operations.
While the speedy completion of the road across the continent is important to
the public, or to the company, it is very doubtful whether the means of the
company will justify us in pursuing a policy so expensive in its results, or
whether the benefits derived compensate for the loss
We still have a large amount of heavy and expensive work to do before the road
is completed over the mountains, the greater part of which is in the hardest
of granite, ironstone, and trap. The season for laboring on open-air work is
so very short at the summit that it necessitates the employment of a large
force, probably twenty thousand, during the coining seasou, to insure its completion
before the fall of next winter's snow. To meet this necessity we have made
arrangements which will probably, if successful, enable us to obtain that number.
To have this large body properly organized under competent foremen by early
spring, orders have been issued to rapidly increase the force now at work in
the canon, and as fast as the work there is iinis'hed, and the snow will permit,
keep them moving on the line towards the summit, finishing the grading as they
go, while a similar force is working from Cisco to the same point, then all
to unite in the heavy rock work, and press it vigorously until completed. In
order to expedite the completion of the road by working a larger force in winter,
as well as to insure safety and ease of operation, numerous tunnels, fourteen
in all, have been laid out between Alta and the State line. These are of the
aggregate length of 6,170 feet, the longest being at the summit, 1,650 feet
long. The excavation of so many tunnels adds largely to the cost, but is justified
by the considerations above referred to.
We believe that by forcing the work regardless of expense, your road can be
completed to Great Salt Lake by the 1st of January, 1870, but by taking one
or two years more time a great saving of cost can be effected, and the reasonable
expectations of the public fully met.
LELAND STANFORD,
President. E. H. MILLER, JR.,
Secretary. SAM. S. MONTAGUE,
Acting Chief Engineer.
Commissioner ANDERSON. State whether the prices named in Exhibits 3 and 4 are
stated in dollars and cents, or how. The WITNESS. They are stated in dollars
and cents.
P R VOL IY 46
3052 U. S. PACIFIC RAILWAY COMMISSION.
By Commissioner LITTLER :
Q. In what column? A. In the price column ; the left-side division is dollars
and the right side cents.
Commissioner ANDERSON. Grubbing and clearing ; that was preparatory work, as
I understand it.
The WITNESS. Yes, sir.
GRUBBING AND CLEARING.
By Commissioner ANDERSON :
Q. What do you know about the ordinary price for grubbing and clearing? What
did you know at that time? A. I only knew what I learned generally from the
engineers. As regards the grubbing and clearing, however, on the mountains,
I was over the line several times in advance of grading, and I saw that a large
portion of it was very heavily timbered. First, they had to cut down the timber
and get it out of the way, and then they had to dig up the stumps, the reason
for which was explained to me by the chief engineer. I said to him, " It
seems to me to be going to an enormous expense for nothing," He said that
it would not do to leave any stumps in the road-bed at all, that they would
decay finally and upset the line very materially. They were therefore all dug
up very much below the bed of the road, even where they were to be filled over.
They were dug up and grubbed out and got out of the way.
Q. For what distance or quantity is this price of $2,000? A. One mile, I think.
$2,000 A MJLE.
Q. Do you mean $2,000 per mile? A. Yes, sir.
Q. Have yon stated substantially all the knowledge that you had on which you
base your report that $2,000 per mile was a reasonable charge for grubbing
and clearing, under the Crocker contract? A. I had known of the grubbing and
clearing previously up to those sections. I knew something of the cost of grubbing
and clearing up to section 34 or 35 under other contractors. The cost was very
light in the valleys, but as soon as they got into the mountains it was very
heavy. Up to Kockland, 22 miles from Sacramento, there was very little grubbing
and clearing, but from there on it was very heavy.
Q. Had any efforts been made to procure other bids so far as this grubbing
and clearing were concerned? A. i$"o, sir ; not that I know of.
Q. Had any reports of your engineers as to what would be a fair price for grubbing
and clearing been made to you? A. I do not know that they had given us any
written reports, but we were in consultation with them.
FIRST-CLASS EXCAVATION.
Q. What is meant by first-class excavation? A. I hardly know. That is the engineer's
classification of the work to be done.
Q. Forty-five cents per yard appears to be the price for first class excavation.
What can you tell us about that? A. I do not suppose that I ever knew anything
about this arrangement until I saw Mr. Judah's specification for the first
contract, and the first work to be done. Then 1 absorbed information from that
time on, from the first contracts. I am not an engineer, and I have no practical
knowledge of that matter.
EDWARD H. MILLER, JR. 3053
DIFFERENT CLASSES OF EXCAVATION
Q. Then you do not know the difference between the several classes of excavation
? A; Yes, I do know practically something about it. Excavations of the first
and second class are mostly earth. The third class would be powder work and
probably cement gravel. The fourth class and the fifth class, and the sixth
class, were undoubtedly alike, but I suppose that the engineers have different
methods of classifying.
Q. Do you mean the fourth and fifth classes? A. Yes, sir; and the sixth class,
which appears here for $8 a yard.
Q. Is there a sixth class on your report? A. Yes, sir.
Q. Who was the engineer who checked these estimates? A. I think S. 8. Montague.
It was either T. D. Judah or S. S. Montague.
Mr. BERGIN. This was after the death of Mr. Judah?
The WITNESS. That is so ; these were Montague's.
Q. What is the difference between the several classes of masonry I
THE SEVERAL CLASSES OF MASONRY.
A. I really do not understand much about that. One, I suppose, is rough rock
masonry, and the other is, perhaps, better rock, requiring more labor.
Q. From what sources did you derive knowledge that $25 per yard for masonry
was a reasonable charge? A. From the same source that I derived knowledge
in relation to any other of the prices from the engineer's estimates.
Q. First-class masonry is $35 a yard. Have you any knowledge now on which you
can assert that that would be a reasonable price? A. No, sir ; I have not.
I wish to say what would be a reasonable price now is a very different affair
from what it was then.
Q. I am talking of what was then a reasonable price in 1866 and 1867. Have
you any such knowledge"? A. No, sir; I have not. '
RIPRAP WALL.
Q. How about riprap wall? Did you know anything then, or do you know anything
now, as to what would have been a reasonable price for anything of that kind?
A. No, sir; if I had riprap walls now to construct, I would endeavor to get
from experts what would be a reasonable price.
Q. Brick is charged at the rate of $30. For how much brick is that? A. Thirty
dollars a thousand, I presume ; it does not specify.
Q. Thirty dollars a thousand? A. Yes, sir.
Q. Was that rough brick that was used, or what kind of brick was it? A. I
suppose that it was the ordinary commercial brick.
Q. Have you any means of knowing whether that was a reasonable price then?
A. Only from my remembrance of work that I did in building for myself.
TIMBER AND TRUSS BRIDGES.
Q. Timber and truss bridges, $90; for how much was that? A. Ninety dollars
a thousand, I presume.
Q. Will you look at the entry? A. Timber and truss bridges I take to be board
measure.
Q. Ninety dollars for how much? A. For a thousand feet. Trestle was $75 a
thousand. That timber is measured in the bridges after they are constructed.
3054 U. S. PACIFIC RAILWAY COMMISSION.
By Mr. COHEN :
Q. Is that with the labor added? A. Yes, sir; it is like measuring timber in
the house when the house is finished. You measure the timber and that takes
everything.
By Commissioner ANDERSON :
Q. What was your answer to iny other question? A. The price was $90 a thousand
in the bridge.
Commissioner ANDERSON. Please explain how this total is carried out. It seems
to foot up 221,000.
The WITNESS. That means 221,000 feet.
Q. And you multiply that by 90? A. Yes, sir; and that gives the price.
Q. Have you any knowledge whether that price, or any of the other prices stated
on this estimate, were reasonable prices at the time that you made your report?
A. I believe that those were all reasonable prices at that time.
Q. The question is, if you had any knowledge of that class of work, or otherwise,
so as to know whether they were reasonable or not? A. No, sir ; I have not
now.
TRACK-LAYING.
Q. For laying the track, the price charged is $800 per mile. Had you any experience
as to that price, or have you any knowledge derived since which will enable
you to state whether $800 per mile is a reasonble price to charge? A. I have
no experience. If the Commission will look through the report it will gain
all the knowledge that I have. I would like to furnish a list of prices and
materials about those times.
Commissioner ANDERSON. We shall certainly be very glad to get any light upon
the subject.
The WITNESS, t will get this information from books and bills.
Q. Have you given all the information that you can as to the nature of the
country between sections 55 and 92, so as to inform the Commission of the reason
for the great excess in the cost of that part of the route?
The WITNESS. 55 to 92.
Commissioner ANDERSON. Yes ; 12 miles from the summit.
WORK ENTIRELY IN ROCK ON A STEEP SIDE HILL.
The WITNESS. Twelve miles this side of the summit I know that for several miles
on this side of the mountain, near Bear River, the work was entirely in rock,
and on a very steep side hill. It cost an immense deal of work to grade it
out. There were many ravines to cross with high trestling, &c. ; but that
is immaterial.
Q. Will you please look at the final estimates of amounts now shown you and
state what it is? A. This is an estimate for building sections 93 to 138, combining
the whole. They are in two separate columns. They are gotten up the same as
the other estimates that I have spoken of. This is practically to the State
line, section 138 being practically or absolutely the State line between California
and Nevada.
By Commissioner LITTLER : '
Q. How many miles of construction does that estimate embrace? A. Forty-six
miles.
EDWARD H. MILLER, JR. 3055
CHARACTER OF THE COUNTRY.
By Commissioner ANDERSON :
Q. Please describe the character of the country embraced in that 46 miles.
A. It is from 12 miles this side of the summit of the Sierra Nevada Mountains
to the State line down the Truckee River. It includes several tunnels, some
of which were through what was called iron-stone rock, into which it was almost
impossible to drill a hole. After passing the summit of the Sierra Nevada Mountains
through the tunnel, the road skirts Donner Lake at a great elevation. Personally,
I went around from Summit tunnel down to near Truckee on foot. It was impossible
for a horse to be taken along, and we were all completely used up in making
about 15 miles that day, starting out early in the morning. It is a very steep
side hill, most of the way. The tunnel is on a curve going from Donner Lake
side around into Strong's Canon. It then seemed to me to be absolutely impossible
to build a road on that line; but we had with us Colonel Gray and S. S. Montague,
both engineers, and they seemed to have no question about it, except the cost.
From Summit tunnel, in going from 93 to Summit tunnel, it "is on an up-grade.
After going out of the Summit tunnel, it is on the down grade, I believe, or
116 fefet to the mile most of the way.
CLEARING AWAY THE SNOW TO GET AT THE EARTH.
At this point, I would like to say, and I will say in this connection, that
from about the 105th mile to the 138th mile, the grading was done in the winter
when the snow banks were any number of feet in depth and the snow had to be
cleared away and was cleared away in order to get at the earth to grade. There
were snow banks from 30 to 100 feet deep. The object in doing that was to connect
the road with 40 miles of road which had been built down the Truckee, and to
do so as early in the spring as possible, so as to enable the company to go
beyond the 138th mile as fast as possible. In that same connection, IJwish
to say that the iron, engines, rails, and everything of that kind were carried
over the summit by teams from Cisco to Truckee to build that 40 miles beyond
Truckee, and at an enormously high price for freight.
Q. Is that included in the estimate, where you carried engines or iron? A.
That class of work was done by the. company, and is something in addition to
the cost under this contract.
MOST DIFFICULT WORK ON EAST SIDE OF THE SUMMIT.
Q. I am inquiring only as to the cost contained in* the estimate. Is the work
from the Summit down, on the other side, the same in character as the work
on this side of the Summit? A. It is more difficult for the first 10 miles,
I think, than it is on this side of the Summit.
Q. So that the character of this work was as difficult as any work that you
had to do, from your description? A. For 10 miles of it, from the Summit over.
Q. After you got beyond that 10 miles, that would be about section 115, how
was the work to section 138? A. From 115 down it became lighter.
ESTIMATES ON NORTH AND SOUTH SIDES OF DONNER LAKE.
Commissioner ANDERSON. I have here a document which I have not read (estimates
for lines on the north and south sides of Donner Lake), which at this stage
it might be proper to put in.
3056
U. S. PACIFIC RAILWAY COMMISSION.
By Commissioner LITTLER :
Q. By whom was this estimate made, Mr. Miller? A. I think it was made by S.
S. Montague.
By Commissioner ANDERSON :
Q. Whose handwriting is this? A. S. S. Montague's.
(Witness produces approximate estimate of the cost of constructing 1 a road
on the south line, 14,000 feet from the Summit east, and also an approximate
estimate of the cost of constructing a road on the north line, 14,000 feet
on the north, from the Summit east.)
Q. That is about G miles in all, is it not? A. No, sir; 14,000 feet would be
less than 3 miles.
Q. It is 14,000 feet on each side, east and west, is it not? A. This estimate
was made to show what would be the cost of .building either one line or the
other. The estimate on the south line was $092,224, and on the north line $967,799.
This was simply for excavation.
By Commissioner LITTLER :
Q. Which line WAS adopted by the company? A. The south line. By Commissioner
ANDERSON :
Q. This estimate shows the cost to have been estimated at about $200,000 per
mile in the smaller estimate? A. Yes, sir; more than that. The smaller estimate
is over $300,000 a mile.
Q. Is it not about 3 miles in all? A. It is 14,000 feet, considerably less
than 3 miles.
Commissioner ANDERSON. Say 2f miles, then, for $600,000.
The WITNESS. It is $G92,000,'or nearly $700,000.
The estimate was received in evidence, was marked "Exhibit 8, August 8,
1887," and is as follows :
Approximate estimate of the cost of constructing road OH north line (14,000
feet) from Summit (east), including cost of Summit tunnel.
[Grade, 105.6 per mile.]
...By Commissioner LITTLER :
Q. Does that estimate only include the cost of excavation and the preparation
of the road-bed ready for the ties and not the ties and rails? Is that all
? A. It explains itself.
By Commissioner ANDERSON :
Q. Does it give the figures per yard? A. Yes ; I think it does. I did not
read it, however.
"
SNOW PROTECTION."
Q. What is meant by this expression, " Twelve and one-half dollars per
lineal foot for snow protection"? A. I suppose that it was the snow sheds.
Mr. Montague knew that neither side of that line beyond the summit could be
operated without snow sheds. Without snow sheds, it could not be operated more
than six months in the year.
By Commissioner LITTLER :
Q. The construction of snow sheds was no part of the cost of construction under
these contracts, was it? A. No, sir. They were built by the company afterwards.
Q. Built by the company itself afterwards? A. Yes, sir.
Q. I want to know whether this company, as a part of original construction,
constructed any snow sheds?
The WITNESS. Do you mean the Contract and Finance Company?
Commissioner LITTLER. Yes ; or any other company.
CENTRAL PACIFIC CONSTRUCTED ITS OWN SHEDS.
The WITNESS. The Central Pacific Railroad Company constructed its own snow
sheds, except that it constructed them, or a portion of them, through the Contract
and Finance Company.
3058 U. S. PACIFIC RAILWAY COMMISSION.
By the CHAIRMAN :
Q. To that extent, did they go into the cost of original construction? A.
No, sir.
Q. I mean as regards the Contract and Finance Company? A. The Contract and
Finance Company made this contract, and afterwards it constructed some snow
sheds and charged us at the rate of cost and 1.0 per cent, added, just the
same as if anybody else had done it.
CONTRACT WITH WESTERN DEVELOPMENT AND CONTRACT AND FINANCE
COMPANY.
By Commission LITTLER :
Q. Was it under the contract by which the Central Pacific contracted with the
Contract and Finance Company to repair the road after it was constructed and
to add betterments? A. No, sir ; we never had a contract with it for that
purpose.
Commissioner ANDERSON. That was the Western Development Company.
The WITNESS. The-Contract and Finance Company had contracts with the Central
Pacific, as also did the Western Development Company. Whatever work they did
for the company, they charged the actual cost of materials and labor and 10
per cent, to cover the use of tools, superintendence and clerk hire, and all
that sort of thing. The usual practice in order to arrive at the cost of anything
of this nature is to add 10 per cent, for the use of tools, &c., to the
labor and cost of materials.
By Commissioner ANDERSON :
Q. We have not reached any portion of the work done by the Conact and Finance
Company as yet, have we? A. No, sir.
PENCIL MARKS ON THE EXHIBITS.
Q. In whose writing are the pencil marks on these exhibits, stating prices
? A. They are mine.
Q. When did you make them? A. I made them at the time.
Q. At the time that the estimate was placed before you J? A. They were made
at the time that the amount of the estimate was credited up.
Q. You made them from what prior estimates? A. I made them the same as I made
previous estimates.
Q. Was the price always entered by you '? A. Yes, sir.
Q. Was it in every case, individually? A. I think so, in every case of these
estimates.
Commissioner ANDERSON. Please run your eye over these prices and see if they
are the same contained in the estimates for the other sections.
The WITNESS. As far as I can see now, they are the same. [After comparison.]
Yes, sir 5 they are the same prices.
EDWARD H. MILLER, JR. ESTIMATE FOR SECTIONS 93 TO 138.
...
3060 IT. S. PACIFIC RAILWAY COMMISSION.
ENGINEERS' REPORTS SHOW WORK DONE BEYOND SECTION 138.
By Commissioner ANDERSON:
Q. Have you anything that will show the quantity of work which was done from
section 138 on? A. No, sir. Do you mean the amount of work done?
Commissioner ANDERSON. Yes, sir.
The WITNESS. No, sir. Some of the engineers' reports will show it.
Q. Have you the engineers 7 reports? A. Yes, sir; I brought them this morning.
Q. I want to get something to test the work done by the Contract and Finance
Company as to its value, and as to the amount between section 138 and the end.
You have given us something quite direct as to what Crocker & Co. did.
Can you furnish it to us? A. My information comes almost entirely now from
the books of the Central Pacific. Their books contain nothing from that time
on as to the amount of work done by the Contract and Finance Company, except
as to the number of miles.
CHARACTER OF THE COUNTRY.
Q. You know the character of the country, do you not? At any rate, you know
whether there are fewer mountains, do you not? A. Not so well as the engineers
who have traveled over it. I think that you want to examine Mr. Strobridge
on this subject.
Q. Can Mr. Strobridge give us any useful information upon this subject? A.
Yes, sir.
Q. Is he in the employ of your company? A. No, sir. He is in the employ of
the Pacific Improvement Company.
Mr. COHEN. Mr. Clement can give you better information than any map living.
He was the assistant to Mr. Montague.
Q. Can your company secure the attendance of Mr. Strobridge? A. I do not know.
He is here as often as once or twice a month, in this city. I have no doubt
that we can get him or that you can get him, if you ask somebody. I do not
know that I have any authority over him. In fact, I know that I have not.
E. H. MILLEE, JR.
PALACE HOTEL, San Francisco, CaL, August 8, 1887.
Afternoon session.
EDWAED H. MILLEE, JR., being further examined, testified as follows :
By Commissioner ANDERSON :
Question. Please look at the estimates I now show you, being estimates running
from section 32 to section 68, and say by whom they were made. Answer. They
are in the handwriting of S. S. Montague, chief engineer of the company.
WAS COST OF GRUBBING AND CLEARING $2,000 OR $200 A MILE?
Q. I call your attention to the fact that they run quite a distance into the
division applicable to sections 54 to 92, and that the suggested estima.te
for grubbing and clearing nowhere exceeds $200 a mile. Have
H. MILLER, JR. 3061
you any explanation to make as to the price of $2,000 a mile in the awards
for 54 to 92? A. No ; unless the engineer classified the work differently;
I do not understand it.
By Commissioner LITTLER :
Q. Does that embrace any portion of the prairie region? A. This estimate reads
to section 68 only.
By Commissioner ANDERSON :
Q. What do you understand by grubbing and clearing; simply clearing away the
trunks or roots of trees, and loose stones or other obstructions? A. That
would not cover loose stones, unless there were bowlders which came above the
surface of the place where the track should be.
Q. You cannot explain, then, the difference between the figures contained in
Mr. Montague's estimate and the price actually awarded? A. This is an estimate
of what it would cost. It is an approximate estimate, made before the work
was done, and I cannot explain that. However, this only runs to section 68,
which reaches the heavy timbered country, but does not penetrate it. As it
appears now, that country is very lightly timbered compared to what it was
when the railroad first went through it. The timber has all been cut off.
Q. Have you Mr. Montague's estimates from 68 to 92? A. Not unless they are
here. It is possible that I may have them, but I hunted these papers out of
a great lot of old papers that were laid away, which were supposed to be valueless.
This is all I can find, so far.
WORK EAST OF STATE LINE DONE BY CONTRACT AND FINANCE COMPANY.
Q. In regard to the work east of the State line, that was done by the Contract
and Finance Company, I believe? A. Yes, sir,
Q. Have you any knowledge of the cost of that work to the Contract and Finance
Company? A. No, sir.
Q. Did you make no investigation whatsoever while they were doing this work
as to what it was costing them? A. No, sir.
Q. Was no examination made by any member of the board? A. During the construction,
not that I remember.
Q. Either before the construction or during the construction? A. What was
done before the construction in letting that contract I do not remember.
A. Well, what do you know about it? Some steps must have been taken to ascertain
what contract would be desirable, I suppose. A. I do not remember anything.
My recollection does not tell me anything; though, of course, I suppose there
was something.
Q. Do you recollect any proposition coming before the board from the Contract
and Finance Company? A. At present I do not. I have an impression, however,
that there was one made.
WHO OWNED THE STOCK OF THE CONTRACT AND FINANCE COMPANY?
Q. At the time that the contract was acted on, did you understand who owned
all the stock of the Contract and Finance Company? A. No, sir ; I did not.
Q. It was not stated at the board, then, by any of the stockholders in that
company who were also directors in the Central Pacific, that they held the
two relations? A. No, sir.
Q. Who were the members of the board when that contract was voted on? A. That
is fixing dates, which I cannot fix from memory.
3062 U. S. PACIFIC RAILWAY COMMISSION.
Q. It was in December^ 1867? A. I could tell ouly by looking at the list of
directors ; in that way alone could I remember.
Q. Who were on the board of directors at that time? A. That is shown by the
list of directors that I furnished you.
Commissioner ANDERSON. It was December 3, 1867. I should like to know who were
present at that meeting.
Mr. COHEN. On December 3, 1867, there were present at that meeting, Leland
Stanford, E. B. Crocker, Mark Hopkins, E. H. Miller, jr. Do you want any more
?
Commissioner ANDERSON. If there were any others present.
PROCEEDINGS OF BOARD OF DIRECTORS OF CENTRAL PACIFIC.
Mr. COHEN. There were no others present. I will give you the entire proceedings.
They are very short. President Leland Stanford in the chair called the meeting
to order. The president reported that he had made an arrangement with the Contract
and Finance Company for the construction and equipment of the railroad and
telegraph lines of this company lying east of the eastern boundary line of
California, and presented a draft of such contract. The same having been read
and considered, the following resolution and order was unanimously adopted,
to wit :
Besolved and ordered, That this company hereby consents and agrees with the
Contract and Finance Company to the terms, stipulations, and conditions of
the articles of agreement submitted by the president to this board, and the
president and secretary are hereby authorized and directed to execute the said
contract on behalf of this company, arid to attach the corporate seal thereto.
That is all there is on that subject.
Q. Now, Mr. Miller, after having heard the record of the proceedings read to
you, I ask you again was any explanation made at that meeting that the other
three directors who were present were stockholders in the Contract and Finance
Company? A. I do not remember that any such explanation was made.
Q. Had such explanation been made to you at any time before that time? A. No,
sir.
TERMS OF CONTRACT WITH CONTRACT AND FINANCE COMPANY.
Q. What is your recollection of the terms of this contract? A. My recollection,
as I get it from the books now, is that the contract was to build and equip
a line of railroad and telegraph from the State line eastwardly for $86,000
per mile ; one-half payable in cash and the other half payable in stock ; that
the Contract and Finance Company was to complete the road ; build all depots,
station-houses, turn-tables, roundhouses, and furnish all the equipment, such
as cars, locomotives, machine-shops, freight-shops, machinery in the shops,
and everything necessary to the running of the road.
Q. Did the contract include the purchasing and laying of the rails? A. It
did ; only the contract evidently, from the books and from my recollection,
was that the Central Pacific Eailroad Company, as a company, agreed to provide
the equipment, certainly, and the iron itself, certainly, charging the Contract
and Finance Company with the cost thereof.
Q. Do you you derive these terms solely from an inspection of your books, or
from your memory somewhat? A. Well, my memory has been refreshed somewhat
by the books, but almost solely from the books.
EDWARD H. MILLER, JR. 3063
Q. Are you positive that the stock was to be delivered at par? A. Yes, sir
; it was so delivered. Q. It was so delivered as appears from the books?
A. Yes, sir.
CHARACTER OF THE COUNTRY.
Q. Please describe, as well as you can, the general character of the country
to which this contract applied. A. I know very little of it; I never traveled
it at all until the road was completed.
Q. Had it any engineering difficulties compared to the mountainous portion'?
A. Compared to the mountainous portion the difficulties were very slight. Of
course there were grades and curves and some difficult work, but the character
of it I cannot tell.
Q. To whom can you refer us as the best witnesses relating to the subject of
the actual cost of this construction to the Contract and Finance Company?
A. J. H. Strobridge for one, Arthur Brown for another. I do not know any one
else, unless Charles Crocker himself, and William E. Brown.
Q. Mr. Clement was referred* to. A. Mr. Clement was referred to more as an
engineer, and probably would not know as much about the cost to the Contract
and Finance Company.
Q. Would he not know as to the quantity of work that was to be done, and what
a fair charge would be for it? A. Well, generally, yes.
Mr. COHEN. Mr. Clement does not know the prices, perhaps.
The WITNESS. No.
PERSONNEL AND PRACTICE OF THE AUDITING COMMITTEE.
Q. It appears from the minutes of July 5, 1865, at page 18 of the minute-book,
that a resolution was passed directing that none of the regular warrants drawn
upon the treasurer should be allowed, except through an auditing committee
appointed by the board ; who was the auditing committee? A. I think the auditing
committee must have been formed just about that time.
Q. Who served as an auditing committee through the period of the Crocker contract
and the contract of the Contract and Finance Company? A. I was one of the members
all the time, and Mark Hopkins was one part of the time. I do not remember
who the other one was ; there were various persons at various times.
Q. Please describe what the practice of the auditing committee was ; what you
did. A. When any vouchers came in as claims against the company the auditing
committee examined them and if they found no objections to them they were allowed
and paid.
Q. What, ii anything, was done to verify the report! For instance, if an engineer's
estimate came in, did you take any further steps? A. No, sir ; not in those
cases.
Q. You accepted the report? A. We accepted the report of the engineer. We had
an engineer whose report could be accepted if that of any living man could
be accepted.
Q. Did you all sign the report? A. I do not think so, in all cases; only in
very important cases.
Q. Who signed the report generally? A. I did during all the time. I was the
active member of the auditing committee.
MR. CROCKER'S BILL FOR EXTRA WORK.
Q. From the minutes of January 3, 1868, page 65, 1 find that a bill of Mr.
Crocker's for extra work was rendered, amounting to $173,785.27,
3064 U. S. PACIFIC RAILWAY COMMISSION.
and was allowed. Do you remember that there was a bill for extra work connected
with the Crocker contract? A. I remember that there were several bills paid
to Crocker & Co. and the Contract and Finance Company for work done outside
of their contract.
Q. Were those bills in addition to the statement that you furnished here this
morning? A. Certainly. They were work entirely outside of the contract.
Q. Then the statement that you furnished this morning does not include all
the payments made to Crocker & Co. for work done by them? A. All the payments
for work done under this contract. They built some wagon roads, and some one
of them built the snow-sheds. That was outside of the contract.
Q. But work forming an integral part of the railroad itself? A. Not necessarily,
but some things that were necessary for the railroad. For instance, they built
wagon roads to some stations so that travel could come to the station.
Q. Can you furnish an approximate statement of the amount of this extra work
? A. I cannot from memory ; I can by looking at the books.
Q. Do you know, from memory, whether it exceeded $1,000,000, for instance?
A. I am inclined to think that the total extra work, or payment for extra work
done, was in excess of $1,000,000.
Q. On each contract or on the two? A. On the total contract from the State
line to Promontory Point.
RESOLUTION TO INCREASE CENTRAL PACIFIC STOCK.
Q. 1 find in the minutes of July 13, 1868, at page 60, a report made by Mr.
E. B. Crocker that the stock of the company as it stood at that date, $20,0^0,000,
was less than was necessary for the construction, completion, and equipment
of the road when it should be extended to a connection with the Union Pacific.
The entry continues :
Ariel whereas an increase of said capital stock of not less than $80,000,000,
making the whole amount $100,000,000, is necessary for such completion, resolved
that the capital stock be increased to S100,000,OCO.
The resolution further provides for the submission of said increase to the
stockholders. Will you explain in what respect, under the circumstances that
existed with the Contract and Finance Company, the increased stock gave them
any additional capacity for'the completion of the road $ A. None at all, as
I understand it. The increase was occasioned, as I supposed, because the laws
of the State required that no indebtedness should be incurred by any company
over and above the amount of its capital stock ; and as they wanted to issue
more bonds they must necessarily issue more than $20,000,000 worth, so they
had to increase the capital stock on paper in order to get themselves into
a position to incur the additional indebtedness.
QUESTION OF INCREASE SUBMITTED TO STOCKHOLDERS AND APPROVED.
Mr. COHEN. There is another resolution at page 62 which ought to be inserted
in this connection.
Commissioner ANDERSON. You may put it in if it sheds any light on the subject.
Mr. COHEN. By the proceedings of July 18, 1868 (page 62 of the minute book),
it is shown that the increase of the capital stock was submitted to a vote
of the stockholders of the company at the annual meet
EDWARD H. MILLER, JR. 3065
ing held on the 14th day of July, 1868. I merely wished to show that the stockholders
voted on it and approved it.
RESOLUTION RATIFYING ACTS OF THE BOARD.
Q. From the minutes of July 10, 1869, at page 73 of the minute book, it appears
that a resolution was passed that the question of ratifying and approving the
acts and proceedings of the board of directors during the past four years be
submitted to a vote of the stockholders at the next annual meeting in the following
form : " Eatifying the dcts of the board of directors ; yes or no." Do
you remember that circumstance in July, 1869? A. No ; I do not remember that
specifically. It was a common thing, at meetings of stockholders, to submit
resolutions ratifying the acts of various officers, but I did not recollect
specially that they ratified the acts of the board of directors.
Q. Do you remember what particular acts were thought to require ratification?
A. No, sir; I do not remember that there were any. I suppose it was a mere
general ratification.
Q. Was there any question made at that time in regard to contracts made with
Crocker & Co. or with the Contract and Finance Company? A. I do not remember
that there was at that time or at any other by the stockholders.
Q. In July, 1869? A. No.
Q. You certainly remember that such questions were, raised and discussed in
1870? A. Not at the meeting of the stockholders. Outside I remember having
heard it.
Q. I am not confining my inquiry to the meeting of stockholders. I ask what
circumstances had occurred which made the directors think this proceeding necessary
? A. I understood that, and I said I did not consider that there were any.
Then I understood you to go on further and ask what discussion was had at that
meeting.
Commissioner ANDERSON. Mr. Cohen, you have the minutes of this meeting of stockholders.
Will you kindly examine those minutes as to whether this question of ratifying
the proceedings of the board of directors was submitted?
Mr. COHEN. Yes, sir.
CONTRACT AND FINANCE BILL FOR BUILDING SNOW SHEDS.
Q. On the 7tn of August, 1869, it appears from the minutes, at page 75 of the
minute book, that a bill of the Contract and Finance Company for expenditure
by them in building snow sheds, purchasing wood, &c. 7 and other matters,
amounting to $1,021,712.05, was allowed. Do you remember that bill? A. I do
not .remember it now.
Q. Do you remember that there was a large extra bill I A. Yes; I remember that
they built the snow sheds and were paid for building them.
Q. But that item is not embraced in estimates of the cost of the road, as submitted
by you this morning? A. I did not intend to represent that as the cost of
the road entirely.
Commissioner ANDERSON. I understand that.
Mr. COHEN. And that bill was for other purposes than purchases of wood and
building snow sheds. It included artesian wells, prospecting for coal, &c.
If you will admit the proceedings of that meeting as they we're, that will
save us the trouble of referring to them again.
Commissioner ANDERSON. You may put them in.
3066 U. S. PACIFIC RAILWAY COMMISSION.
PROCEEDINGS OF BOARD OF DIRECTORS APPROVING SAME.
Mr. COHEN. On page 75 of the minutes, August 7, 1869, the folio wing appears
:
SACRAMENTO, August 7, 1869.
Meeting of the board of directors held at the office of the company in Sacramento,
pursuant to a call of the president.
Present, Leland Stanford, E. B. Crocker, Mark Hopkins, and E. H. Miller, jr.
President Stanford called the meeting to order.
The bill of the Contract and Finance Company heretofore presented, for expenditures
by them in building snow sheds and in purchases of wood, &c., amounting
to $1,021, 712.05, was taken up, and on motion of E. B. Crocker, seconded by
Mark Hopkins, the following resolution, offered by E. B. Crocker, was adopted,
to wit :
Resolved and ordered. That the bill presented by the Contract and Finance Company
for $1,021,712.05 for expenditures in building snow sheds, artesian wells,
prospecting for coal, and in purchases of wood, &c., be, and the same is
hereby, allowed.
A statement of account was now presented by the Contract and Finance Company,
showing $11,038,630.13 to be due them on final settlement of contract of December
3, 1867, for building the railway and telegraph line of the company east of
the boundary line of the State of California. E. B. Crocker offered the following
resolution, which was adopted, to wit :
Resolved and ordered, That the account of the Contract and Finance Company
as represented, showing $11,038,630.13 due the said Contract and Finance Company
on final settlement under their contract of December 3, 1867, be, and the same
is bereby, allowed and ordered paid in accordance with the terms of the said
contract.
RESOLUTION ADOPTED RATIFYING TWO CONTRACTS WITH TELEGRAPH
COMPANY.
Q. From the minutes of April 30, 1870, at page 89 of the minute book, it appears
that a resolution was adopted ratifying the two contracts entered into by Leland
Stanford on the 22d of April, 1870, with the Atlantic and Pacific Telegraph
Company. Do you remember what those contracts were? A. No, sir; I do not remember
them at all.
Q. Have you them on file? A. I do not think so, though they may be on file,
Do you want me to look for them I
Commissioner ANDERSON. Not unless we tell you. Do you know whether they relate
to telegraph business?
The WITNESS. I do not remember a thing about them, except what appears in what
you have just read.
ARRANGEMENTS AS TO TELEGRAPH BUSINESS.
Q. Do you remember whether the telegraph business of the road or part of the
road was carried on by the Atlantic and Pacific Telegraph Company, instead
of being done by your own line? A. I do not remember now. I had forgotten
entirely that there was such a company.
Q. What is the present arrangement of the company in regard to the transmission
of telegraphic messages? A. The Western Union Company has a contract with
the Central Pacific Company.
Q. The Western Union does the whole business? A. Yes, sir.
Q. Under a contract with the Central Pacific? A. Yes.
By the CHAIRMAN : Q. What is the date of the contract? A. I do not remember
; it was made several years since. Commissioner ANDERSON. We will call fora
copy of that contract.
TELEGRAPHING PRIOR TO CONTRACT DONE BY CENTRAL PACIFIC.
Q. What was the arrangement prior to that contract ! A. The Central Pacific
did its own telegraphing prior to that time, on its own lines j
EDWARD H. MILLER, JR. 3067
but the Central Pacific had bat very little connections, and, so, could get
but very little commercial business to do.
Q. You say they did their own business "prior to that? A. Yes, sir; they
did their own business as to running trains, &c., and attempted to do a
commercial business, but could not get much, because our lines only extended
along the line of our road and large towns did not happen to be on our line.
We got the commercial business of little towns only.
By Commissioner ANDERSON :
Q. Then this contract with the Western Union is the first contract that you
remember by which that company did this particular business? A. 1 think there
were two contracts. I think there was one previous to the one in existence
at the present time.
Q. And as to the contracts with the Atlantic and Pacific, you do not recall
those? A. I do not remember anything at all about them.
RESOLUTIONS APPROVING EXPENDITURES AS JUDICIOUS.
Q. The minutes of July 9, 1872, page 82 of the minute book, show that at a
stockholders 7 meeting a resolution was introduced reading as follows :
That all disbursements and expenditures of moneys of the company by its. vicepresident,
C. P. Huutmgton, heretofore made at the East, have been judiciously made in
the interests of the company and are hereby approved.
Also, .
Resolved, that the directors of the company be and they are here oy autnorized
to allow the account of said Huntington for moneys so as aforesaid disbursed
and expended.
Also,
Resolved, that all disbursements and expenditures of the moneys of the company
by its president, Leland Stanford, heretofore made, have been judiciously made
in the interests of the company.
And such disbursements and expenditures are by said resolution approved.
Also,
Resolved, That the directors of the company be authorized to allow the account
of said Stanford so as aforesaid disbursed and expended.
Do you remember those resolutions of the stockholders' meeting in 1872? A.
I remember the first one, but since that I do not remember any one distinctly.
But there were several of them, from time to time.
Q. Did you introduce some of them? A. Very likely I did, if it is so put down
on the minutes. They were handed to me to take into the room.
DISBURSEMENTS AND EXPENDITURES AS APPEARING UPON BOOKS. *
Q. What did you know in regard to the disbursements and expenditures?-^-A.
I knew all about the disbursements and expenditures as they appeared on the
books.
Q. These particular ones that were ratified by the stockholders?- A. All the
disbursements and expenditures made by either of them.
Q. Well, did these particular disbursements and expenditures appear in detail
on the books? A. If there is any mention there of them they did. Whatever
are mentioned did.
Commissioner ANDERSON. They are not mentioned in detail. The entry states that
u all disbursements and expenditures of the money of
P R VOL
3068 U. S. PACIFIC RAILWAY COMMISSION.
this company by its vice-president, C. P. Huntington, heretofore made at the
East have been judiciously made."
The WITNESS. " All disbursements and expenditures heretofore made at the
East " had been entered upon the books, and I knew all about them if the
other directors did not.
RESOLUTION RATIFYING ALL ACTS OF HUNTINGTON AS AGENT.
Q. In what respect did these disbursements differ from any others that they
should require a vote of this character? A. The resolution ratified all the
acts of Mr. Huntington as agent and attorney of the company.
Q. Why did Mr. Huutington want any more ratification than you did? A. I do
not know. He wanted it ; that is a 11 1 know. I suppose, if I acted as an agent,
I should be very glad to have my acts ratified by my principal. I intend, when
Mr. Huntington comes here again, to get his ratification of all my acts done
as his agent.
Q. Did you say that your books show the detailed purposes to which all the
expenditures and disbursements made by Mr. Huntington at the East were applied
? A. In detail, no.
Q. Do they show the names of the persons to whom they were paid, or the purposes
for which they were incurred? A. The purposes for which they were incurred,
yes, but not always the names of the persons to whom they were paid.
Q. When you say they show the purposes to which they were applied, how definitely
do you mean to say that? A. I mean to say that they show those purposes from
Mr. Huntington's statements.
Q. Do you mean to say that they purport to show whether they were used for
buying rails or other material, or for moneys expended in explaining matters
at Washington or for educational purposes? Is it not true that in a great many
cases they do not define the purpose? A. Very likely.
Mr. COHEN. I think the vouchers themselves will probably be the best evidence.
Commissioner ANDERSON. The trouble with this resolution is tlj#t it does not
tell exactly what it refers to.
The WITNESS. As I understand that resolution it referred to all his expenditures
of every nature and kind.
Q. Now, I ask you whether you understood what all his disbursements had been
? I mean their character? A. I did not. He spent the money, and charged " Expenses
by C. P. Huntington," not always giving a detail of what the expenses
were for.
"
THIS IS FOR THE BENEFIT OF THE COMPANY."
Q. Referring to those in general, and not to any disbursements in particular,
did you accept Mr. Huntington's statement when he said to you, " I tell
you this is for the benefit of the company," and make no further inquiry
? A. I never made any inquiry in regard to his statements as they were sent
out to me for disbursements that he made, because I understood that he was
acting with as full power as the board of directors would have if they were
in his place. So his statements of account were accepted without question by
me.
Q. Assuming, for the sake of illustration, that some portion of that money
had been used in influencing members of the legislature, would you know anything
about it from the form or face of the explanation that Mr. Huntington might
make to you? A. Nothing at all.
EDWARD H. MILLER, JR. 3069
Q. And you would accept his explanation without any further comment? A. Yes.
Q. Did Mr. Huntiugton ever tell you that portions of this money referred to
in these resolutions had been used for the purpose of furthering or defeating
legislation at Washington or elsewhere? A. He never did.
Q. Did he ever refer to moneys expended at Washington at all? A. No, sir.
Q. Or at Sacramento? A. No.
Q. Were you aware, from any source (if it be true), that moneys of this company
were used for such purposes'? A. For the purpose of influencing legislation
$ No, sir.
Q. Or for explaining to members of the legislature, or to friends of the members
of the legislature, what the company desired to have done or not to have done
? A. I never knew anything of the kind.
Q. Did you ever read Mr. Huntington's letters in the Colton case? A. No, sir
; I did not. I had too much to do. Life is too short. I was as busy in the
Colton case as I am in this. I had my own business to attend to.
AUTHORIZATION TO PURCHASE INTEREST OF CALIFORNIA PACIFIC IN
CERTAIN STEAMERS.
Q. On December 14, 1872, at page 92 of the minutes, it appears that Mr. Leland
Stanford was authorized to purchase the interest of the California Pacific
Eailroad Company in certain steamers for $786,000. Do you remember that purchase
? A. Yes, sir.
Q. Did you vote for that resolution? A. I presume I did; I do not remember
the fact.
Q. Were either of the four directors, Mr. Stanford, Mr. Hopkins, Mr. Huntington,
or Mr. Crocker personally interested in the California Pacific at the time
? A. Yes, sir ; they were all owners of stock.
Q. At that time did they not practically own all of the stock? A. I think
they did. , Mr. COHEN. No.
Commissioner A NDERSON. Well, if you do not know you may answer that you are
not sure.
THE CONTROLLING STOCKHOLDERS.
The WITNESS. Well, I am not sure, but I think that they did. They had the control.
I do not think they ever owned anything like all t)f it, now that I come to
refresh my memory.
Q. Did you know that they had that interest in that company at the time that
this resolution was passed? A. Yes, sir.
Q. What did you know about the value of the property bought for this sum of
money ! A. I remember I thought it was a good purchase for the Central Pacific
to make.
Q. Had you ever seen these steamboats? A. Yes, sir ; I traveled upon them
frequently.
Q. How many of them were there? A. I do not remember exactly, but I think
four or five good boats and a lot of barges, besides some poor boats.
Q. Did you know what they were worth? A. No, sir ; I did not know.
Q. Did you vote for this because in your judgment you were convinced that it
was a good vote, or because you were requested to do
3070 U. S. PACIFIC RAILWAY COMMISSION.
so? A. Neither; but because I heard that President Stanford had made negotiations,
and he reported his negotiations, and I voted for it because I supposed he
had investigated it and understood it to be good.
SUBSEQUENT HISTORY OF THE STEAMERS.
Q. What was the subsequent history of those steamers? A. They were used on
the Sacramento River. They kept off opposition and kept up prices, which was
for the benefit of the Central Pacific and its leased road, the California
Pacific. They are diminishing and growing less and less, some of them going
out of service. Some of them have been sold, and some of them have been condemned.
Q. Have they paid operating expenses? A. I do not think they have altogether
; no, sir. They have indirectly, though, paid the Central Pacific very large
operating expenses.
Q. By keeping off competition? A. Yes, sir ; and having practical control
of all the business between Sacramento and San Francisco.
Q. All the water business? A. They had control of the rail routes, too.
Q. You mean the Central Pacific controlled the roads? A. Yes, sir ; the Central
Pacific controlled both roads and the steamers, and that of course avoided
any cutting of rates between those points.
Q. Have there been any opposition steamers put on since that purchase? A.
There has been no active opposition. There may have been steamers put on for
a short time, but the opposition soon wound itself up.
EXTRACT FROM MINUTES CONCERNING CHARGES MADE IN BRANNAN
SUIT.
Q. I refer you now to the proceedings of the stockholders of July 8, 1873,
at page 99 of the minute book. Reference is there made to the charges that
had been made against the company in the Brannan suit and other similar suits,
and the recital is made that
In view of the matters aforesaid wo Lave considered it incumbent upon us for
our own security and the security of all others having any claims upon or against
the company to inquire into these alleged abuses.
And whereas we have investigated and now know and understand all the transactions
of the president and directors of the company in and about the construction
of said road and the general management of the affairs of the company, and
are fully satisfied therewith ;
And whereas it is just to them that our opinion of their administration of
the affairs o:r*the company should be formally and publicly expressed ; Now,
therefore,
Resolved, That we do hereby, with full knowledge of the matters hereinbefore
referred to, approve and indorse the plaus, measures, and contracts adopted
and made by our president and directors iu relation to the construction of
said road as affording in our judgment the only practicable and available mode
under the embarrassing and trying circumstances in which they were placed and
as being more expeditious and equally as economical as any other course that
could be adopted.
Resolved further, That we approve the action of the president and directors
in guaranteeing the payment of 600 of the 20-years 6 per cent, mortgage bonds
for $1,000 each of the California Pacilic Railroad Company as being highly
advantageous to the financial interests oft/he company.
Resolved farther, That we wholly condemn and disapprove the course pursued
by Samuel Brannan in the county of Placer in instituting the suits hereinbefore
referred to.
Do you remember the proceedings at that meeting of stockholders? A. I do not
think there were any special proceedings except to vote upon those resolutions.
Q. Well, do you remember that? A. I cannot say that I remember It, except
as my attention is called to it now.
EDWARD H. MILLER, JR. 3071
Q. Were you present on the occasion? A. I think I was ; that is, I have not
any doubt that I was.
PROCEEDINGS OF ANTI-BRANNAN MEETING OF STOCKHOLDERS.
Commissioner ANDERSON. Does that book show the proceedings of the meeting at
which the anti-Brannan resolutions were passed?
Mr. COHEN. Yes 5 at page 99.
Commissioner ANDERSON. Does it contain the Ust of the persons present?
The WITNESS. I was present at that annual meeting.
Q. Do you know who else was present at that particular meeting 1 A, I do not
rernember.
Q. Do you know what stockholders voted for the resolution? A. I do not remember.
Mr. COHEN. There were 625,640 shares present.
Commissioner ANDERSON. Who were the holders of the shares? Does the book show
I
Mr. COHEN. It does not say, but merely states that there were that number of
shares present, and that number of votes cast.
Q. Who were the principal stockholders of the Central Pacific in 1873?- A.
Leland Stanford, C. P. Huutington, Mark Hopkins, and Charles Crocker. E. B.
Crocker had drawn out then, I think.
Q. That represents substantially all the stockholders? A. A very large majority.
WHO WERE PRESENT.
Q. Do you remember whether anybody else was present at this meeting when these
resolutions were passed If A. Yes, sir ; there have been always some others
present besides them.
Q. Can you give us the name of anybody else who was present at that meeting
I A. I cannot remember now. Governor Stanford was present, but he was, of course,
in the. chair.
Q. What examination had you made, which was referred to in this resolution
? A. It did not require any special examination from me 5 I knew all about
it beforehand without any examination.
Q. Who was present at that meeting to whom these remarks could possibly apply
! A. I suppose any outside stockholders that happened to be present ; outside,
I mean, of those few that you have mentioned. There were always some.
Q. But you cannot refer to the name of any person who was present, and of whom
it can be said that he had examined into the matter, and now fully understood
the whole circumstances? A. I do not remember now who else was present except
those I have named.
Q. Do you know whether this meeting was held before or after the division between
those gentlemen of the stock held by the Contract and Finance Company 1 A.
I do not know.
RESOLUTION NOT THE ACT OF THE CONTRACT AND FINANCE COMPANY.
Q. Was this resolution anything more than the act of these four gentlemen,
and of the Contract and Finance Company, ratifying their own acts, and saying
that they were good boys? A. Yes, sir 5 it was, so far as my vote was concerned.
Mr. COHEN. Mr. Albert Gallatin was also present. I presume so because he was
a judge of election at that time.
3072 U. S. PACIFIC RAILWAY COMMISSION.
Q. What Albert Gallatin is that; do you know ! A. He was a resident of Sacramento.
Q. Do you know how many shares of stock he had? A. No, sir; I do not remember.
Q. Has he ever been a stockholder of any note in your company? A. Yes ; he
has held considerable stock.
Mr. COHEN. I think he was the plaintiff in that suit, to test the constitutionality
of the u Thurman act."
Q. You cannot tell us how much stock he had at that time? A. No, sir ; but
my impression is that he had 5,000 shares.
Q. In 1873 ! A. Yes, sir.
Q. The stock-transfer books will show ! A. Yes, sir. You have a copy of the
stock-list here ; that will show.
Commissioner LITTLER. It is not finished yet.
Q. Is Mr. Gallatin living? A. Yes, sir.
Q. Do you think that he had made any examination into these matters which satisfied
him that they were entirely right? A. I do not know whether he had or not.
RESOLUTIONS RATIFYING ACTS OF PRESIDENT STANFORD.
Q. According to the minutes of July 30, 1878, at page 293 of the minutes of
stockholders 7 meetings, a resolution was passed ratifying the acts of Leland
Stanford as president, done and performed within the States of Nevada and California
and in the Territories of Utah and Arizona and the District of Columbia with
a direction that a release be executed, releasing him from all liability. Do
you know what matters were referred to in that resolution? A. I do not know
that any specific matter was referred to.
The CHAIRMAN. That resolution was called for, and it had better be entered
now in full on our minutes.
Mr. COHEN. Yes, you called on Mr. Crocker for that. I will read the resolution
now. It is as follows :
Resolved, That we, the stockholders of the Central Pacific Railroad Company
now assembled in a stockholders' meeting, having been fully informed and advised
of all the acts and doings of Leland Stanford as president of said company,
heretofore done and performed within the States of Nevada and California and
in the Territories of Utah and Arizona and the District of Columbia, and having
full and perfect confidence in said Leland Stanford and believing that all
said acts and doings have been for the best interests of said company and of
the stockholders thereof, do hereby remise, release, and forever discharge
said Leland Stanford of and from any and all liability and all, and all manner
of, action and actions, cause and causes of action, suits, debts, dues, sums
of money, claims and demands whatsoever which said company or we as stockholders
thereof have had, or now have, or which said company, its successors or assigns,
or we as such stockholders thereof, our heirs, executors, administrators or
assigns can, shall, or may have by reason of any of said acts or doings of
said Leland Stanford as president of said company or of any matter or thing
arising or growing out of any such acts or doings.
Resolved further, That the board of directors of said company are hereby authorized,
empowered, and directed to execute by its vice-president and secretary on behalf
of said company to said Leland Stanford, and to cause the corporate seal of
said company to be thereunto affixed, as its act and deed, a release in the
following form, to wit :
Know all men by these presents, that the Central Pacific Railroad Company has
remised, released, and forever discharged and by these presents does for itself,
its successors and assigns, remise, release, and forever discharge Leland Stanford
of the city and county of San Francisco and State of California of and from
any and all liability and all, and all manner of action and actions, cause
and causes of action, suits, debts, dues, sums of money, claims, and demands
whatsoever which said Central Pacific Railroad Company ever had or has, or
which it or its successor can, shall,or may have by reason of any of said acts
or doings of said Leland Stanford as president of said company, or of any matter
or thing arising or growing out of any of such acts
EDWARD II. MILLER, JR.
3073
or doings ; or by reason of any matter, cause, or thing whatsoever prior to
the date of these presents.
In testimony whereof, the said Central Pacific Railroad Company has caused
these present to be signed by its vice-president and secretary and its corporate
seal to be hereunto affixed, and its acts and deed, this day of A. D. 1878.
Q. Was such a release given and executed subsequently? A. Yes,
sir.
Mr. COHEN (to Commissioner Anderson). You asked for the stockholders who voted
at the previous meeting. They are set out here, all of them who voted on this
proposition ; perhaps you had better get them down.
Commissioner LITTLER. Bead the names and number of shares.
Mr. COHEN read as follows :
LIST OF STOCKHOLDERS AND NUMBER OF
PROPOSITION.
SHARES VOTING ON THE
...
VOTING ON PROXIES AT THE MEETING.
Q. Mr. Miller, you voted on something over ten thousand shares? A. Yes, sir.
Q. Did they belong to you? A. No, sir.
Q. Whose stock was that? A. Mark Hopkins'.
Q. You voted as he requested, I suppose? A. No, sir ; I voted some of my own
with them.
Q. Did you vote on his stock without his request? A. Yes, sir.
Q. He was present, was he? A. Well, he was present, and I voted the same way
that he did. If I had not voted the same way as he did probably I would not
have voted as I did
3074 U. S PACIFIC RAILWAY COMMISSION.
Q. Did you see any of the proxies that were used at that meeting 1 A. I saw
them all.
Q. Were they the same form? A. Yes, sir.
Q. Did they contain anything relating to this particular matter? A. No, sir.
By Commissioner LITTLER :
Q. How much stock was not represented at that meeting I Mr. COHEN. There were
four hundred and fifty-seven thousand shares. That would be about forty-five
and three-quarter million dollars, and there was probably outstanding at that
time $54,000,000 of stock. The WITNESS. The annual reports will show, if you
care to see.
LARGE STOCKHOLDERS PRESENT.
Q. What large stockholder was present and voted on his own stock? A. Mr. McCullough
was one. He had five thousand shares. I have no means of knowing who were actual
stockholders except myself.
Q. The book before you will show who voted without proxies, will it not? A.
Mr. McCullough voted five thousand shares, D. T. Phillips three thousand four
hundred and eight-six; Charles F. Crocker and C. P. Huntington
By Commissioner ANDERSON:
Q. Were not all of the other votes cast by proxy or else by the officers of
the company personally? A. As I understand, those three were in person and
all the rest were by an officer of the company. No ; there is one other. Moses
Hopkins, two thousand five hundred, in person. He was not an officer of the
company.
Q. Are there any other exceptions? A. No, sir ; that is all.
Q. Was the person exercising a proxy in all cases an officer of the company "?
A. Yes.
THE TRANSACTIONS AS TO WHICH RELEASE WAS GIVEN.
Q. What were these transactions as to which this release was to be given, and
which referred to acts in the States of Nevada and California and the Territories
of Utah, Arizona, and the District of Columbia^ A. I do not remember now any
particular transaction that it related to, but all his transactions.
Q. Had you had any conversation with Mr. Stanford about this intended transaction
? A. Yes, sir; I think I had. I think I had notification of it rather, that
he intended to have such a resolution presented, and perhaps I drew it up.
Q. Did he converse with you about what the subject-matters were from which
he desired release, as for instance such as were applicable to the District
of Columbia? A. No, sir; in fact, I did not know before that it applied to
the District of Columbia ; at least, I had forgotten that it did.
Q. Do you know of any acts of Mr. Stanford, in the District of Columbia, as
to which he had reported vouchers which did not state the persons to whom the
money had been paid, and as to which this operated as a release 1 A. I do not
know of any, and I do not believe there ever were any.
Q. You do not believe that he ever spent any money for the company in the District
of Columbia, at all? A. Not that I know of.
EDWARD H. MILLER, JR. 3075
INVESTMENT OF SINKING FUND OF CENTRAL PACIFIC IN SOUTHERN
PACIFIC BONDS.
Q. On January 21, 1880 (page 413 of the minute book), a resolution was passed
authorizing the investment of the sinking fund of the Central Pacific Railroad
Company in Southern Pacific Eailroad bonds. Do you remember that action? A.
Yes, sir.
Q. What was done under it?
Mr. COHEN. It says, " Southern Pacific Eailroad bonds or other good securities."
Q. What was done under it? A. I do not remember the action exactly, but the
minutes within a few days of that time will show. I have no doubt the president
reported.
Commissioner ANDERSON. You will find the report at page 574.
The WITNESS. This does not relate to the same thing, though it relates to a
similar transaction. This was in 1882, while the other was in 1880.
Q. You will find at page 542 further authority given for the investment of
the sinking-fund moneys of the Central Pacific Eailroad in Southern Pacific
Eailroad bonds, and then at page 574 the report upon the bonds and sinking
funds.
Mr. COHEN. That report at page 574 simply says what was in the sinking fund.
NUMBER OF SOUTHERN PACIFIC BONDS IN CENTRAL PACIFIC SINKING
FUND.
Q. Does the report disclose how many bonds of the Southern Pacific were held
in the sinking fund at that time? A. Yes, sir. Q. How many were there? A.
4,271 ; the date is September 20, 1882.
By Commissioner LITTLER :
Q. What was their denomination? A. $1,000 each. By Commissioner ANDERSON :
Q. As security for what loan? A. As security for a loan from the sinking fund.
Q. For what amount? A. It does not show that.
Q. Do you know at what rate they were taken*? A. I think they were taken at
90 ; that is my recollection ; all that were invested in the sinking fund of
the Southern Pacific of California were taken, 1 think, at 90. There were 4,271
Southern Pacific bonds.
Commissioner LITTLER. Colonel Crocker has agreed to furnish a full list of
those.
The WITNESS. Ninety-eight were of the Southern Pacific of Arizona ; 80 of the
California and Oregon ; 22 of the Central Pacific first mortgage; 2 of the
San Joaquin Valley. This is simply a report of a committee, after having examined
them, showing that they find these bonds in the sinking fund.
By Mr. COHEN: Q. There is nothing said about their cost? -A. No.
CONTRACT WITH PULLMAN PALACE CAR COMPANY.
By Commissioner ANDERSON :
Q. On May 23, 1883 (page 612 of the minute book), there appears to be a contract
with the Pullman Palace Car Company! A. Yes, sir.
3076 U. S. PACIFIC RAILWAY COMMISSION.
Q. What was that contract, substantially? A. In substance, the contract was
that the Central Pacific sold to the Pullman Palace Car Company one-fourth
interest of the cars that it had on its lines. The Central Pacific then leased
the other three-fourths to the Pullman Palace Car Company, they to operate
tbe line and to pay to the Central Pacific three-fourths of the net earnings.
There was also in that contract an agreement by the Central Pacific to buy
any further sleepingcars that may be wanted from the Pullman Company, paying
to them the cost of building them, with 10 per cent, additional.
Q. Do you know whether at this time any of the officers of the Central Pacific
were either officers or stockholders in the Pullman Palace Car Company? A.
I think there was one of the officers that held a little stock in the Pullman
Palace Car Company.
Q. Which officer? A. Well, since I do not know anything further than my belief,
I will have to decline to answer. It was no one connected with the board of
directors.
By Commissioner ANDERSON :
Q. It was not either of the " S. H. H. and C." people? A. No, sir.
I would like to strike that out, if you have no objection.
Commissioner LITTLER. Very well. But you have not told us anything, and it
would not do any harm.
By Commissioner LITTLER :
Q. What was the result of that contract, as to whether it was a good or a bad
contract? A. It was an unfavorable contract to the railroad company, in my
judgment.
PURCHASE OF CONSTRUCTION OUTFIT OF PACIFIC IMPROVEMENT COMPANY.
Q. On August 1, 1883, at page 643 of the minute book, it appears that on motion
of E. H. Miller, jr., a resolution was passed to purchase the construction
outfit of the Pacific Improvement Company. What was the object of that purchase
? A. I cannot remember now what it was.
Q. How much did it amount to? A. It amounted to $164,000. I see by tbe purchase
that J. H. Strobridge, the superintendent of the. Improvement Company, and
B. E. Crocker, acting on behalf of this company, fixed the prices, but what
the object was in buying it I do not at present remember.
Q. Please look at the minutes of the stockholders 7 meeting of April 14, 1885,
pages 43, 44, and 45 of the minute book. Do you find a very voluminous and
complete set of resolutions there? A. Yes, sir.
Q. By whom were those resolutions prepared ; do you know? A. I think they
were prepared in our own law department.
Q. Did^you know anything of them before they were offered at the meeting?
A. Yes, sir ; they were in my possession before they were offered at the meeting.
Q. Who directed their preparation? A. Personally, I do not know, but some
one of the directors undoubtedly, possibly C. Crocker.
RESOLUTION RELEASING STANFORD, HUNTNGTON, AND CROCKER FOR EXPENDITURES FOR
WHICH THERE WERE NO VOUCHERS.
Q. Please look at the third resolution, reciting that Leland Stanford, C. P.
Huntington, and Charles F. Crocker had "made various payments of money
in the interests of the company for which they have given
EDWARD H. MILLER, JR. 3077
their individual receipts, but no vouchers have been received from the parties
to whom the sums were paid "5 also reciting that "the nature and
amount thereof have been exhibited and fully made known and explained to
us"; and, continuing: "Therefore, resolved, That the stockholders
waive the filing of vouchers and authorize the delivery of releases." Do
you find that resolution? A. The resolution does not seem to follow in the
form that you have there exactly, but I have it. It reads as follows :
[Central Pacific Railroad Company. Resolution adopted at stockholders meeting
of April 14, 1885.
Whereas the president of this company, Leland Stanford, the first vice-president
of this company, Collis P. Huntington, Charles Crocker, the second vice-president
of this company, and Charles F. Crocker, a director of this company, have made
various payments of money in the interest of and for the benefit of this company,
for which they have their individual receipts, but no vouchers nave been received
from the parties to whom the same were paid ; and
Whereas the nature and amount thereof have been exhibited and fully made known
and explained to us : Now, therefore,
Resolved, That the stockholders of said company do hereby ratify and approve
all such payments made by said officers, and do hereby expressly waive the
production or filing of vouchers therefor, and the secretary of this company
is empowered and directed to execute releases under the seal of the company
to said Stanford, Huntington, and Crocker, and C. F. Crocker, and deliver the
earne to the respective parties. Said releases to be substantially as follows
:
Know all men by these presents, that the Central Pacific Railroad Company,
for value received, remises, releases, and forever discharges, and by these
presents does, for itself, its successors, and assigns remise, release, and
forever discharge (here insert the name of the party) of and from any and all
liability and all manner of action and actions, cause and causes of action,
suits, debts, dues, sums of money, claims and demands whatsoever which said
Central Pacific Railroad Company ever had or now has, or which it or its successors
or assigns can, shall, or may have by reason of any acts or doings of said
as (here insert the office) or director of said company, or of any matter or
thing arising or growing out of any such acts or doings.
In witness whereof the said Central Pacific Railroad Company, by an order of
its board of directors and by an order of its stockholders, has caused these
presents to be signed by its secretary and its corporate, seal to be hereunto
affixed as its act and deed this day of , 1885.
RELEASES IN PRIOR CASES.
Q. Now, my question is : Was not this action taken with reference substantially
to the same class of matters as have been referred to in the other resolutions
to which you had your attention called? A. Precisely the same.
Q. You notice that in this case a reason for the release is given, and the
reason, as given, is that the parties had given their receipts, but do not
themselves hold sufficient vouchers? A. Yes.
Q. 1 want to know if that was substantially the reason for giving the releases
in the prior cases? A. I do not know that it was. I do not think it was. I
was going to explain that the prior resolution related to all disbursements
made, while these resolutions refer and are confined to such as they had not
furnished a detailed voucher for.
Q. The resolution states that " the nature and amount of these payments
have been exhibited and fully made known and explained " to the stockholders.
Was the nature and amount of the payments which had been made by these gentlemen
explained to you? A. They did not need any explanation to me, because I knew
more about them than anybody else.
CLASS OF EXPENDITURES COVERED BY RELEASE.
Q. Well, what amounts are referred to and what payments? A. Such amounts as
I have already referred to. Amounts that Mr. Huiitington
3078 U. S. PACIFIC EAILWAY COMMISSION.
had returned as expenses without giving any names, or the nature thereof, and
the same with the others.
Q. The same as to Mr. Stanford 1 A. Yes, sir.
Q. And the same as to Mr. Charles Crocker? A. Yes, sir.
Q. And the same as to Mr. Charles F. Crocker? A. Yes, sir.
Q. They had all made returns of amounts expended by them without filing any
voucher therefor? A. Without filing any voucher except their own receipts.
Q. When you state that you knew all about it, do you mean to be understood
as saying that you knew exactly what these gentlemen had done with the money
? JL Not at all. I did not know anything at all about what they did with the
money.
Q. Did you know the amount of each of the several payments made by them? A.
I had the means of knowing, if I did not know exactly, because it was entered'on
the books of the company.
NATURE OF PAYMENTS.
Q. Do you mean to say that each entry on the books of the company represents
a separate payment made by Mr. Stanford or by Mr. Crocker or Mr. Huntington,
or that it represents an aggregate amount I A. It represents a separate payment.
I will explain that. Possibly Governor Stanford may make a voucher for $10,000,
chargeable to expenses, which is paid by the treasurer and comes to iny books
and is charged to expenses. That is the nature of those payments.
Q. How would you know from that (unless the name of the person were disclosed)
that Governor Stanford did not gather together four or five payments that he
had made, aggregating them all at $10,000, and so report to you! A. I think
he did.
Q. Then you do not know what each specific payment made by either of these
parties might be u? A. No, sir.
Q. Why, then, do you state in the resolution here that the nature and amounts
of these payments made by them to other persons had been disclosed to you?
A. The amount had been fully made known, but the nature of them I could know
nothing of further than what appeared on the face that they were chargeable
to expenses. That is all the information about the nature of them that I had.
Q. That is all the explanation that you can give as to these unvouehed items
? A. Yes, sir.
Q. Do you know what their gross aggregate is in the last twenty years? A. I
should think a million and a half of dollars at a guess.
STATEMENTS AND VOUCHEES NOT QUESTIONED BY WITNESS.
Q. And as secretary or director of this company you have not considered it
your duty to make any further inquiry than simply to accept the statement of
these gentlemen that they were acting for the interests of the company? A.
-As secretary of the company I had no occasion to inquire as to the statements
given to me, but as a member of the committee on accounts I did not question
a voucher of that kind that came to me from any of those gentlemen. As I explained
before, if Governor Stanford should make a voucher or certify to a voucher
that called for $10,000 I would not question it, neither did I those of any
of the others who were members of the executive committee.
EXPLANATION OF HUNTINGTON'S EEPORT OF STOCK SALES.
Q. I now refer you to the minutes of May 5, 1887, at page 204 of the minute
book. A report of C. P. Huntington is there set forth as to the
EDWARD H. MILLER, JR. 3079
disposition made of 83,331 shares of Central Pacific stock, of which he reports
sales as follows :
January 29, 1880. 35,000 shares sold at 72 $2,520,000
January 30, 1880. 15,000 shares at 72 1,080,000
Total 50,000 shares 3,600,000
He also reports the issue of different certificates, and the balance of the
shares returned by him to the company (26,088 shares), and that he, as trustee
of the company, still holds 7,245 shares. How was it that that transaction
was not reported for six or seven years? What is the explanation of that f
A. The explanation of it is that Mr. Huntington still retained 83,330 shares
in his hands, as trustee of the company, unissued, except that certificates
had been issued for that purpose. At my suggestion (I think in answer to a
letter from me) he made this statement. I suggested that he had better send
back that which was not going to be issued and have it canceled and retain
just sufficient to leave $68,000,000 outstanding. He returned the balance and
had it canceled the unsold balance and instead of retaining 33,333 shares in
New York unissued he retained 7,245 shares.
Q. Which makes up just the 680,000 shares? A. Yes, sir ; that leaves sixty-eight
millions outstanding.
LEASES OF THE NORTHERN RAILWAY.
Q. Have you been familiar with the various leases that have been made from
time to time with the auxiliary lines as they were constructed? A. Yes, sir.
Q. Who had charge of that subject-matter generally? A. I think that there
was no special charge of it. The various members of the board of. directors.
Mr. Charles F. Crocker and Timothy Hopkins, I think, lately ; but formerly
Governor Stanford and Mr. Hopkins and Mr. Crocker and Mr. Colton from time
to time.
Q. Take the different leases of the Northern Eailway for instance. Who determined
the rates that should be charged and what leases should be made? A. I think
that was done mainly, if not always, by what I call " our people." I
mean Governor Stanford, Mr. Crocker, or. Mr. Hopkins.
Q. Take the lease of the Northern Eailway, dated September 4, 1879 the operative
lease the lease that was made at so much a mile for different classes of cars.
Please state the terms of that lease in brief. How many miles of road are operated
and how many miles of road are conveyed ; the lease of the Oakland Branch,
and the Benicia Branch, and the San Pablo and Tulare? A. Commencing in Oakland,
in the county of Alameda, and ending at Martinez, in the county of Contra Costa,
thence commencing with the Tulare and San Pablo Kailroad, a length of 21 miles.
Q. That is one part. Then there is another ; in all about 93 miles, is it not
! A. Yes, sir.
RENT PAID AND ALLOWANCE FOR REPAIRS.
Q. What was the rent provided for? A. Twenty-five cents per mile for locomotives
passing over the line.
Q. And 20 cents for passenger cars and 8 cents for freight cars? < A. Yes,
sir.
3080 U. S. PACIFIC RAILWAY COMMISSION.
Q. And then an allowance of $100 a month to the Central Pacific for repair?
A. Yes, sir; $100 a month per mile.
By Mr. COHEN :
Q. For what repairs? A. For repairing the track. Q. For what length? A. The
whole 93 miles, or whatever it was.
LEASE PEOFITABLE TO THE NORTHERN ROAD.
By Commissioner ANDERSON :
Q. Do you know what the result of that operation was for the first year after
it went into effect? A. I do not know exactly what it was, but it was very
profitable to the Central Pacific.
Q. Do you know how much it produced for the lessee, in the first year? A. I
beg your pardon ; I meant to say that it was very profitable to the Northern
road.
Q. Who negotiated that lease, as to its terms? A. I think Mr. Towne suggested
it and advocated that that was a good way to lease that piece of road. It was
difficult to fix the terms.
Commissioner ANDERSON. Perhaps it will shorten this if I make you out a statement
of the terms of the leases and you can look over them and state if they are
correct.
The WITNESS. Very well, sir.
Q. In regard to the lease of the Southern Pacific and its various departments
to the Central Pacific, do you remember who conducted that negotiation? A.
Those were all by Governor Stanford or our people " S. H. H. & Co."
OPERATION OF CENTRAL PACIFIC BEFORE AND AFTER ITS LEASE.
Q. Have you prepared a statement showing the operation of the Central Pacific
before the lease of April, 1885, as compared with the operation under the lease
of 1885, so as to determine under which operation the earnings would be largest?
A. I cannot see that it would possibly make any difference, because the Central
Pacific now receives all its earnings.
Q. North of Goshen? A. All the earnings of its line.
Q. North of Goshen, you mean? A. Yes ; but before the lease of 1885 it included
the earnings south of Goshen. It included the earnings of the roads leased
to it.
Q. I want to know whether it made more money when it operated the Southern
Pacific of Arizona and of New Mexico, and the other lines south of Goshen,
than it does now?
Mr. COHEN. You can get that from the books.
A. I think the annual reports will show very clearly.
Commissioner ANDERSON. I asked Mr. Wright to make up such a statement from
the books, and he said he would, and I did not know but that he had turned
it over to you.
The WITNESS. It is very difficult to make up such a statement as you want from
the books. In making up those statements a man does not clearly comprehend
what you want. If you want to know whether those leases were profitable or
not to the Central Pacific, it is easily determined.
SOUTHERN PACIFIC OF ARIZONA AND NEW MEXICO LEASE.
Commissioner ANDERSON, The lease of the Southern Pacific of Arizona and of
New Mexico?
EDWARD H. MILLER, JR. 3081
The WITNESS. That is shown in our annual reports. The Southern Pacific of California
at first was a loss, and afterwards became a profit. There is one item I
think you have not got, and that is that .the Southern Pacific Eailroad Company
returned to the Central Pacific the loss it made on the Colorado division
of some $300,000 under the lease.
Commissioner ANDERSON. I have a memorandum of it. It was $304,000.
The WITNESS. Something like that.
Q. Was that because of the failure of the Atlantic and Pacific to connect?
A. Because some circumstances did not turn out as they supposed they would
at the time the lease was made.
Q. In 1885, how long had those leases to run which the Central Pacific held
? How long had they to run when the alteration was made? A. I think various
times. The leases show for themselves. Some were for five years from their
dates, and some for ten, and a certain time had run on each. It would require
an examination of the lease to show.
HOW THE CENTRAL PACIFIC RENTAL WAS FIXED.
Q. Was there any general statement made in writing showing the estimated figures
of these operations, from which the conclusion was reached that the actual
net rent as charged of $1,200,000 was a fair and just figure? A. I do not understand
that there is any such clause in the lease. I understand this to be the fact,
in relation to that lease, that the Central Pacific was to have for itself
and for its own treasury all the net earnings that it makes up to 6 per cent.
Then the Southern Pacific guarantees that those earnings shall not be less
than a million two hundred thousand dollars, and for the sake of that guarantee
it also gets a counter-agreement that if it makes in excess of $3,600,000 it
shall have the excess for itself. I think that was a very fair agreement on
the part of the Southern Pacific. They are liable to have something to pay
on the $1,200,000 and they are not very likely ever to receive any income in
excess of $3,600,000.
By Mr. COHEN :
Q. You say it was an advantageous lease for the Central Pacific? A. Yes, sir.
By Commissioner ANDERSON :
Q. My question was whether there was prepared a statement showing just how
these various lines operated which would facilitate the Commission in reaching
the conclusion whether this was a fair lease for both sides or not. A. I cannot
remember any statement being made, but the matter was under discussion by Governor
Stanford with everybody for months before this lease was made.
LEASING OF BRIDGE OVER COLORADO RIVER.
Q. Do you remember the arrangement made with the Southern Pacific in regard
to the bridge over the Colorado Eiver?
The WITNESS. There are two Southern Pacific companies.
Commissioner ANDERSON. I refer to the Southern Pacific Eailroad Company, and
not to the Kentucky corporation.
The WITNESS. The Southern Pacific made no arrangement with the Central Pacific,
I think.
Q. What I want to know is whether you remember the leasing of that bridge to
the Southern Pacific at $15,000 a year. A. That lease was directed to the Central
Pacific, as I remember it.
3082 U. S. PACIFIC RAILWAY COMMISSION.
Commissioner ANDERSON. Well, state it as you remember it. I have been informed
it was to the Southern Pacific.
The WITNESS. It may have been to the Southern Pacific, but my remembrance is
now that it was $12,000 a year to the Central Pacific.
Q. Have you the lease? A. No, sir; I do not believe I have. I think, however,
that the books will show the rate paid.
Q. Your recollection of the rate is 812,000 a year? A. That is my recollection
now; yes.
Q. Do you know what it cost to build the bridge? A. No, sir.
Q. Does that appear on the books of the Pacific Improvement Company, or whatever
company built it? A. I think so.
Q. Who are the owners of the bridge? A. I do not know. I think the Pacific
Improvement Company. That is my impression.
Q. They are still the owners of the bridge? A. I think they are.
Q. Who negotiated that lease and determined what the rate should be? A. The
same people.
Q. Are you still paying that rent for the bridge? A. I think we are. The details
of the operating I have very little to do with now, and I do not know anything
about it.
Q. Do you remember the operation of the steamships on the Colorado Biver above
Yuma? A. Yes, sir ; something.
DIVISION OF RATES BETWEEN STEAMERS AND SOUTHERN PACIFIC.
Q. Who would know about the division of the freight rates as between merchandise
going from San Francisco or any other point upon the Southern Pacific, delivered
on the river by steamers, and merchandise coming the other way? A. Mr. Stubbs.
Q. Do you know what the prorates have been? A. No, sir.
Q. You refer us to Mr. Stubbs for that information? A. Yes, sir.
Q. Do you know who fixed the rates at which the Rocky Mountain coal was sold
to the Central Pacific? A. I think that the owners of the coal practically
fixed the rate.
Q. Who were the owners of the coal, these same gentlemen? A. No ; there were
a great many other gentlemen. Mr. Towne had something to say about the rates.
RATES 'ON ROCmrMOUNTAIN COAL.
Q. What was the rate generally, between what limits '? A. The highest rate
paid was $2.25 at the mine, and the lowest rate I think is $1.85 now.
Q. Did you buy it at the mine? A. Yes, sir.
Q. The Central Pacific generally bought it at the mine? A. Generally at the
mine, and paid the Union Pacific $2 a ton freight. Now I think it is $1.50.
Q. The Union Pacific freight is $1.50? A. Yes, sir; to get it to Ogden. The
Union Pacific rather had us in a corner.
Q. Did you say Mr. Colton had anything to do with fixing the rate at which
the coal was sold? A. Mr. Colton was an owner in the mine and I do not know
but that he controlled it before he became connected with the company. .
RATE FIXED BY GENERAL MANAGER.
Q. What I want to know is : Who fixed, or who agreed to, the rate on behalf
of the Central Pacific? A. Mr, Towne, general manager, agreed
EDWARD H. MILLER, JR. 3083
to the rate, but our people generally, of course, nad something to say about
it.
Q. Your chief directors' had to sanction Mr. Towne's acceptance of the rate
i A. Yes, sir.
Q. Is it not true that the directors of the Central Pacific Eailroad were also
large stockholders in the Eocky Mountain Coal Company? A. Yes, sir.
ROCKY MOUNTAIN COAL COMPANY HAD JL MONOPOLY.
Q. And about the Carbon Hill Coal Company. How was that? A. As to that Eocky
Mountain Coal Company I may as well state that the Union Pacific had a coal
mine nearer to Ogden than the Eocky Mountain coal, and one not very much further,
and they sold their^coal in Ogden at a considerably higher price than the price
we paid for it at any time. They sold their coal at about $5 and $5.50 I think.
Q. At the mine! A. No; at Ogden. Ours cost at the highest $4.85 in Ogden when
we were paying $2.85 and $2 freight, and they were selling at the same time
their coal at over $5. As the price went down I think they reduced their rates
a little. Their sales are the only means I have of ascertaining the market
price in Ogden. The Eocky Mountain Coal Company had a monopoly of all the trade.
Q. As to the Carbon Hill coal, what jvere the arrangements about that? A.
The same, generally, as relates to the Eocky Mountain ; in fixing prices I
mean.
Q. And is it also true in regard to this company that the directors of the
Central Pacific were also large stockholders in the Coal Company A. So I understand.
EXPRESS BUSINESS CONTROLLED BY WELLS, FARGO & CO.
Q. Do you know how the Express Company of Wells, Fargo & Co. came to obtain
the control of the express business over the Central Pacific? A. No ; excepting
that they gave to the Central Pacific, I think, $825,000 of stock at the par
value at the time of making that contract.
Q. What is their total capital? A. I do not know.
Q. Do you know whether it was increased at the time they made this arrangement
with the Central Pacific? A. Ko sir; 1 do not know.
Q. Do you know whether they gave any of their stock to the directors of the
Central Pacific? A. Never that I knew of. I did not get any.
Q. Do you not know that a million and a half were issued to Mr. Stanford and
Mr. Hopkins and others? A. I do not kuow. They had some of Wells, Fargo & Co.'s
stock, but I never knew how they obtained it.
SAN FRANCISCO AND BAY RAILROAD STOCK.
Q. Do you know anything about the San Francisco Bay Eailroad before its consolidation
with the Western Pacific? A. I know pretty nearly all there is to know about
it, I think.
Q. Well, do you know that the stock was issued without consideration, or is
that the tact? A. I do not know that; no, sir.
Q. Do you know anything about how the stock came to be issued? A. That I do
not know.
Q. Do you know whether it was issued under one of these exhaustive contracts
or not I A. I do not recollect how it was. p R VOL rv 48
3084 U. S. PACIFIC RAILWAY COMMISSION
RELATIONS BETWEEN CENTRAL PACIFIC AND GOVERNMENT.
Q. Have you given much consideration to the subject of the relations between
the United States Government and the Central Pacific? A. Yes, sir; to the details
of the relation I have given a great deal of thought and attention, and about
them I have had a great deal of trouble.
Q. Who has conducted the negotiations with the Commissioner of Railroads?
A. I have.
Q. For the purpose of settling the amounts due? A. I have entirely.
Q. Do you and the Commissioner of Railroads agree as to the amount standing
in tbe United States sinking fund to which you are entitled? A. .Yes, sir ;
I think we do, practically ; I do not think there is any question abput that.
SINKING FUND.
Q. Can you state the amount in that sinking fund from your report of 1880?
A. No, sir ; not from any report we have we can only state it from the reports
received from the Government ; I have received one within a month. The report
from the Treasury Department will give some information.
Q. Does it show here [handing a paper to witness] J? A. I have had a copy
of that ; I cannot make anything out of that.
Q. The statement presented to you is the result, as I understand it, of the
half transportation, and of tbe payments which have been made by you? A. Under
the Thurman bill ; yes, sir.
Q. My question to you is whether the company's accounts agree with the statements
of the United States Treasury as to that particular fund? A. As to this particular
fund, it would if we put the account upon our books, but we do not; we pay
no attention to this, and cannot. Our accounts with the Government are in such
an unsettled condition that it is impossible for anybody to tell how it does
stand ; we certainly have not anything in this fund like the amount we ought
to have.
WITNESS DISAGREES WITH GOVERNMENT OFFICIALS.
Q. Will you please present to us the amount that you claim should be in the
sinking fund belonging to you? A. I think that will appear clearly in our
last annual report ; the Government officials put into that fund an amount
that should not be there.
Q. Do you not know how much you have paid in cash? A. Yes, sir ; we know that,
but the Government treats the account very differently from what we do ; they
put things into the sinking fund which we claim they have no right to do, such
for example as earnings for transportation on leased lines and on non-aided
lines.
Commissioner LITTLER. We shall want a statement of the condition of your account
with the Government.
The WITNESS. There is no possibility of your getting that except through your
accountant. I will give him all the facilities and. all the help that I can.
Q. Please indicate from your balance sheet of 1886 how you can ascertain the
amount which you claim ought to be in the sinking fund? A. It cannot be done
from that.
CANNOT EXPLAIN GOVERNMENT ACCOUNT.
Q. That contains all of the claimed funds together, and the balance due you
and all the payments? A. Yes ; and amounts bearing on con
EDWARD H. MILLER, JR. 3085
solidated roads. The fact of it is, it is impossible for me to explain a thing
I do not understand myself, and I do not understand the Government account.
I understand our account, and that is all I do understand. We cannot get anything
from the Government department that will explain it.
Commissioner ANDERSON. I suggest, as to that, that if you give me a couple
of hours some morning I will go over that with you. I went over it with the
Union Pacific secretary and we agreed.
THE GOVERNMENT OVERPAID $500,000.
The WITNESS. If you will come to the office some time and sit down at the books
I will be very glad to do so. While we are on this subject, I might as well
say that, while I have settled with the Railroad Commissioner and the auditor
of railroad accounts, I have settled on the basis that they have claimed, and
not on any basis that I claim is just and right. I believe that, on a just
basis, such as I have no doubt you gentlemen would fix, after proper examination,
the Government has been overpaid lately $500,000, and I believe over a million
of dollars altogether, under the Thurman bill.
By Commissioner LITTLER :
Q. Have you made these payments Bunder protest, reserving all rights? A. tTes;
one or two 5 but there is no use protesting against the United States Government
; we cannot get anything out of them, under any circumstances.
Commissioner LITTLER. It makes no difference, except so far as the use of the
money is concerned.
SETTLEMENT WITH RAILROAD COMMISSIONER UNSATISFACTORY TO
WITNESS.
The WITNESS. Yes, it does ; the reason that I at first went on, and why I was
so affable in settling on any basis that they determined, was that we supposed
the money was going into the Treasury for our benefit and for our interest.
If I had supposed, at the time of settling with him, that it was a final settlement
of so much money, dollars and cents, I never would have settled with him on
the basis that he insisted on at all; I thought it was simply putting so much
money into the Treasury of the United States for our benefit.
Commissioner LITTLER. We understood from Governor Stanford that you claim the
amount now due you from the United States Government to be $1,800,000.
The WITNESS. In cash ; yes.
Commissioner LITTLER. In this report you have it entered u Amount due from
the United States, in cash, above all requirements, $756,000." Please
explain that difference.
The WITNESS. It would take some figuring and examination of the accounts to
make that explanation. My assistant who made this up is very much more familiar
with it than I am. I quit about four years ago having anything to do with Government
accounts at all, and I hope I may live long enough to see it settled some time.
If I do, I will be a very old man.
PLAN OF SETTLEMENT.
Q. In regard to the plan of adjustment between the company and the Government,
what have you to suggest! A. I would suggest that the Government ought in justice
to the company, and in justice to the
3086 U. S. PACIFIC RAILWAY COMMISSION.
people, to wipe out the debt clean, from to-day, or if they do not do that,
they should require nothing more than the payment \)f the principal, without
any interest, extending over a period of certainly fifty years. I believe
it is a thing I would do, as a business man. if I were in the Government's
place.
COMPANY CANNOT PAY OVER $600,000 OR $700,000 YEARLY.
Q. Speaking with reference to the earning capacity of your company, how much,
in your belief, can your company pay per annum without being .crippled in its
operations? A. It is very difficult to tell what they can pay in future years,
but I do not think they can pay over $600,000 or $700,000 a year; and that,
you see, carries out my idea that they ought to wipe out the debt, because
almost any rate of interest that the Government would be asked to fix would
amount to that, and the debt would never be paid. The interest would amount
to six or seven hundred thousand dollars a year.
EARNING POWER OF AIDED BRANCH.
Q. What, in your judgment, is the earning power of the aided branch 1 A. It
will earn not more in my judgment than a million and a half in any future years,
net, and probably a great deal Jess.
Q. What do you refer to when you say "it"? A. The aided branch of
the Central Pacific Railroad.
Q. A million and a half, you think, will be as much as it will earn? A. Yes,
sir ; a million and a half will be its maximum, net, in any future year, in
my judgment, and it is liable to fall to less than a million at any time. I
judge that because the through business was formerly profitable. There is no
profit in it now at all. When I said " net earnings," I meant net
profits, not net earnings. Net profits are one thing; net earnings are entirely
another.
Q. You mean by " net profits " what is left after paying all requirements?
A. Yes.
Q. Including fixed charges? A. Yes, and interest, taxes, &c. JSTet earnings
are simply gross earnings after deducting operating expenses the cost to keep
the road up to its standard.
By Commissioner ANDERSON :
Q. Have you individually any personal interest in any companies or corporations
which have any financial relations with the Central Pacific? A. No, sir, and
never had not a dollar.
I desire for myself to come before the Commission some day, and furnish some
information which we have not been asked for.
Commissioner LITTLER. We will assign next week as the time in which you gentlemen
will have your hearing.
Mr. COHEN. There are a good many questions I would like to ask Mr. Miller about
this company and its relations to the Government.
DIFFICULTY WITH THE GOVERNMENT.
The WITNESS. You will understand something of our difficulty with the Government
when I tell you that after we presented our first account for $100,000, we
received payments of it from the Treasury $1,000 at a time, or $2,000 at a
time, without a word of statement or explanation as to what the money should
be applied to. and until we sent men to Washington we never could ascertain
their account of that $100,000,
EDWARD H. MILLER, JR. 3087
and we do not know until this day ; and that account rendered over twenty years
ago is not yet fully settled.
By Commissioner LITTLER :
Q. Your books show the amount of services you performed for the United States
Government, to start on, do they not? A. Yes, sir.
if. And your books, I presume, show the amount of money you have paid the United
States Government? A. Yes, sir.
Commissioner LITTLER. I should think that by taking those sums and comparing
them with the statement of the Government, the difference between you would
at least be developed.
WITNESS ILLUSTRATES TROUBLE WITH THE GOVERNMENT.
The WITNESS. Yes, the difference ; but I will give you an illustration of the
trouble we had with the Government. We rendered a bill for $105,000, for transportation
services that went into the Government archives, and from time to time we received
warrants without any explanation at- one time a warrant of $10,000, and at
another of $5,000, and at another of $1,000, and we could not fit them. We
presented bills from that time on, but we could not fit the warrant to any
bill which we had rendered, and now we do not know what they have cut out of
our bill or what they have not. We have got some very long statements.
GOVERNMENT ACCOUNTS NOT KEPT ON ANY CORRECT PRINCIPLE.
Commissioner LITTLER. By the terms of this act of Congress, we are required
to state the accounts between the Government and the company, and we want to
hear your side of it.
The WITNESS. Well, the very best thing you can do is to come over to the office
and take our side of the account ; you will find that the Government's accounts
have not. been kept on any correct principle. That statement before you is
about the clearest statement I ever saw from the Government, and that is not
worth the paper it is written on, as a statement of account between us and
the Government. It is not the fault of any particular one, but it is hung up
in various Departments, and if a clerk finds a mistake he shoves the whole
thing into a pigeon hole. What we get from the Treasury is always right, and
has always been correct. There is no difficulty in keeping an account with
the Treasury, but our accounts do not go to the Treasury Department.
E. H. MILLER, JR.
Mr. COHEN. I desire an apportunity to examine Mr. Miller on various subjects,
and among others the relations between the Contract and Finance Company and
the Central Pacific. I think if we have an opportunity to present the books
of the Central Pacific to you, you will find information that will supply the
loss of the contracts, and the missing books of the Contract and Finance Company
so far as concerns the cost of construction of that portion of the road which
was constructed by the Contract and Finance Company from the State line to
Promontory, and there are various other matters in those books.
Commissioner LITTLER. We will set apart next week for you.
CALLS MADE UPON AUDITQR FOR INFORMATION.
The CHAIRMAN. We have made several calls upon the auditor for information and
statements that have not yet been supplied. For example, we asked for rebate
contracts.
3088 U. S. PACIFIC RAILWAY COMMISSION.
Mr. COHEN. He has none.
The CHAIRMAN. We asked for copies of the printed blanks in use in his department,
also a list of the books under the control of the auditor.
Mr. COHEN. I think he gave that in his testimony.
The CHAIRMAN. We called for a statement of the gross receipts of the Central
Pacific from 1869 to 1886. I make another call now for a statement showing
the amount of passenger earnings derived from pools, and a statement showing
the balances and the amount of the ordinary business. ,We want that information
as to both freight and passengers if we can get it ; how much has been received
from pooling arrangements and how much from the ordinary business that does
not enter into the pool.
Mr. COHEN. That would be the difference between the local and through traffic.
The CHAIRMAN. We want the aggregate amount of business for each year, in freight
and passenger traffic, which the Central Pacific has done under pooling arrangements,
and also a statement of how much it has done without pooling.
The Commission then adjourned to Tuesday, August 9, 1887, at 10 a. m.