^^1 BANCROFT LIBRARY <• THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA 6, SENATE. 1st Session. ' \ \ Part 6. )TH CONGRESS, ) SENATE. j Ex. Doc. 51, Session, j TESTIMONY TAKEN BY HE UNITED STATES PACIFIC RAILWAY COMMISSION, 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 Com- missioners being present. y EDWARD H. MILLER, JR., being duly sworn and examined, testi- fied 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 com- pany. Q. When was your first connection with the company f — 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 f — A. At Sacramento. Q. Had they any office in San Francisco at that time ? — A. No reg- ular 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, indicat- ing 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 consolida- tions, 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 Sac- ramento. The San Francisco, Oakland and Alameda Kailroad Com- pany, 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 consoli- dated 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 con- solidations 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 con- solidation 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 vice- president. 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 Fran- cisco. 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 reg- ularly 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 com- pany. 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 Wash- ington 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 Commis- sioner 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 now- shown 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 Sac- ramento 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 Com- pany 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 Sacra- mento 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 f — A. Yes, sir. COMMENCEMENT OF CONSTRUCTION OF CENTRAL PACIFIC FROM SAC- RAMENTO. Q. When was the construction of the Central Pacific from Sacra- mento 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, consid- ering 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-presi- deut ? — 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 f — 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 grad- ing and other work, masonry, bridges, &c. I cannot remember dis- tinctly 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 Sacra- mento. 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 f — 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 where- abouts?— A. No, sir. Q. Have you not talked with Mr. Huntington as to its where- abouts'?— A. No, sir. Q. Have you not talked with Mr. Charles Crocker as to its where- abouts'?— 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 paper0? — 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 pres- ent 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 with- out 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 confer- ring 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 under- took 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 pa- pers ? — 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 can- not 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 remem- ber that I did. I will say, doubtless I did but I do not remember hav- ing 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 f — 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 exam- ined 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 f — A. All small con- tracts ; 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 com- panions 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 con- tracts 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 Com- pany ? — 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 f— 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 posi- tively 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 posi- tively 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 de- tailing 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 infor- mation 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 in- direct 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 con- tract 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 mo- ment, 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 f — 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 Octo- ber 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. Hunt- ington, 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 f — 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 suspi- cions 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 it- self 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 hesi- tation. 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 construc- tion 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 be- fore. 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 remem- ber 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 con- tracts 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 ex- plain ? 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 pre- pared to swear that to the best of my knowledge and belief, after hav- ing 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 knowl- edge and belief—the 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 spe- cific 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 speci- fied 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 con- tract were payable in dollars or in bonds or in stocks ? — A. My recollec- tion 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 posi- tive. 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 f — 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 f — A. I do not quite compre- hend. Q. Did you debit in one case "cash77 and in the other case u bonds," or what is the distinction made in your books I — A. We opened an ac- count 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 ap- pear 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 cor- poration 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 Company1? — 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 presump- tion. 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 book- keeper. 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 por- tion of the road east of the contracts that have been mentioned pre- viously. 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 Lou- don? — A. I do not remember that. Q. Or if they had been purposely destroyed ? — A. I could not possi- bly know that. Q. I asked you if you remembered being asked that question1? — 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 Fran- cisco 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 ref- erence 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, sub- stantially, 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 con- tract ?— 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 por- tion may have been paid out directly on contracts for locomotives, en- gines, 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 Con- tract 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 ascertain- ing 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 posi- tive 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 Com- pany 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 en- trance. 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 con- nected 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 him0?— 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 Com- pany?— 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 Develop- ment 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. Prac- tically 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 f 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 f — 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 stockhold- ers in the Contract and Finance and the Western Development Com- panies ? — 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 f — 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 Rail- road 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 con- tract. (The witness produced the contract between the Central Pacific Rail- road 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, be- tween the Central Pacific Railroad Company, party of the first part, the Pacific Im- provement 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 rail- road 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 Rose- ville 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 Con- gress 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 re- lation 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 construc- tion 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 comple- tion 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 busi- ness 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 com- pletion 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 con- nection 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 busi- ness 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, excava- tions, embankments, ditches, drains, masonry, culverts, bridges, trestling, and nec- essary 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 pas- senger depots, water-tanks, turn-tables, engine-houses, section-houses, work and re- pair shops, with all the tools, furniture, and implements necessary and proper there- for; 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 maintain- ing 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 com- pleted 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 Com- pany, who may direct such changes to be made as they may deem proper, but the sal- ary 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, dam- ages, 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 reason- able 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 rea- sonable time complete or cause to be completed the said Oregon and California Rail- road 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 per- petual 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 inter- change of business than it gives to the Central Pacific Railroad Company, its succes- sors 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 com- pany has not fully paid all the costs and expenses incurred as aforesaid, the said im- provement 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 hun- dred 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 com- pleted, 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 in- cluded within its lease, and will increase the consideration of twelve hundred thous- and 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 provid- ed 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 Improve- ment 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 Com- pany 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 Im- provement 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, cer- tified, 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 construc- tion 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 Con- tract and Finance Company contract, the Western Development Com- pany 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 depart- ments?— 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 Commis- sion f — 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 re- ports 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 state- ment 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 f — A. I do not re- member 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 inter- ested 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. Hunting- ton and Governor Stanford — in the stock of the corporation which owned these steamers'? That was the California Pacific Eailroad Com- pany, 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 direct- ors f 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 misappre- hended 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 re- member 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 com- pany?— 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 pur- chases and has purchased from time to time large amounts of iron with- out 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 pre- sume 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 imme- diate 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 f — 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 de- partment 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 Cen- tral 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, be- cause 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 con- trol 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 distri- bution 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 " distri- bution book." Every item paid that goes into the account of the audi- tor is entered under name, with the total amount. Then, if it is an ex- pense, 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 com- pany?— A. Yes, sir 5 practically. Q. Are they all made up and approved by you, and under your di- rection ? — A. The blank books are. The voucher comes to me as audi- tor 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 ac- count 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 com- pany 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 f 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 sev- eral, 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 con- tract. 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 f— 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 mort- gages 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 ac- counting 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 Pa- cific 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 Inde- pendence, 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 trans- ferred 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 Commis- sion ? — 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 Pa- cific ? — A. The date of the lease was in February, 1885, to take effect April 19 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 ad- dressed to Governor Stanford ? Commissioner ANDERSON. Yes. The WITNESS. I have prepared answers to such as Governor Stan- ford 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 circu- lar. 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 Com- mission 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 ac- countants 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 commit- tee ?-^-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 re- port. 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 exec- utive committee, to be adopted. Q. How would the secretary of the board enter it upon the min- utes ? — 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 execu- tive 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 indi- vidual 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 in- dividual 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 execu- tive committee? — A. I think not; no, sir. Q. Was there ever any action on the part of the executive commit- tee ? — 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 com- mittee, 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 ex- ecutive 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 WJTNESS- 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 yester- day ?— 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 Com- mission 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 mort- gage 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 Rail- road 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 De- cember 15, 1869. (It was marked "Exhibit No. 2, July 26, 1887") Articles of consolidation between the Central Pacific Railroad Com- pany 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 Com- pany, dated June 28, 1870. (It was marked " Exhibit No. 4, July 26, 1887.") Articles of consolidation between the Central Pacific Railroad Com- pany, the California and Oregon Railroad Company, the San Francisco, Oakland and Alameda Railroad Company, and the Joaquin Valley Rail- road 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 Pa- cific 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 gen- eral 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 cer- tified 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 incorpo- ration 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 f 1,000 each, and to include the re- mainder 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 mort- gage ? — A. Yes, sir. Q, Are they all outstanding? — A. No, sir. The amount outstand- ing 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 de- pends 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 Bail- road 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 in- terest and other particulars ? — A. There was, by the mortgage, no spe- cial 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 dol- lars 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 com- pany under and in pursuance of said several acts of Congress hereto- fore mentioned, and such acts of Congress as might thereafter be en- acted. 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 Janu- ary 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 un- derstand it. Q. At what rate could that loan be renewed in 1898, when it ma- tures ? — 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 au- thorized, 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 Cal- ifornia 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 Eail- road 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 f — 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 judg- ment 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 Paci- fic 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 under- stand 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, 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 be- fore 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 Lthe settlement; the policy of mak- ing 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 imme- diately 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 sepa- rately. 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 Com- pany 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, deter- mined by multiplying the whole number of miles by 12,800 ac res, be- cause 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 uan- tity, 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 Govern- ment 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 dis- posal, 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 dis- posed of to that date? — A. I could not answer that question without examination ; that is, not anything like accurately. I might approxi- mately. Q. Will you approximate now, and then subsequently furnish the fig- ures 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 in- terest 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 deduc- tions, 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 in- vited 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 settle- ment. 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 cul- tivate 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 cul- tivation. 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 se- lected 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 destruc- tive to the pasture, and the cattlemen object very strongly to the lands being occupied by them. We have leased the lands as much as possi- ble 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 gen- eral 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 un- pateuted 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 decis- ion 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 ob- tained with facility no measure of that sort would ever have been re- sorted to. But the patented land of the company has been in the pos- session 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 f — 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 lib- eral 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 contig- uous 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 per- petual use of the land without purchase. This is just what the Gov- ernment 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 descrip- tive 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 coun- try, 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 ly- ing 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 up77 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 considera- ble 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 consider- able 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 real- ize anything from its grant, that was the only policy to be pursued. That 600,000 acre range is right there before Mr. Anderson, and com- prises 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 gentle- men 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 adminis- tered. 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 predeces- aor, 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 con- cerning the segregation of that land into agricultural, grazing, or tim- ber 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 f 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 de- scription 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 min- eral 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 Junc- tion, 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 tim- ber 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 com- pany 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 as- set of the Central Pacific Eailroad Company, of "lands unsold?" — A. According to the rules of arithmetic. ANNUAL REPORTS. Q. Do you make annual reports f — 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 dur- ing your term of office and your predecessors7 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 esti- mate, 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 Wy- oming ? — A. I have no knowledge upon the subject. By purchase, I presume. Q. To what sources can you refer us for information on that ques- tion ? — 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 com- pany. All the lands in green have been disposed of by the Govern- ment. 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 survey- ors-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 col- ored green were disposed of by the Government by homestead or pre- emption or by prior appropriation, before the rights of the company at- tached. 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 Cali- fornia 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 neces- sary. 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 min- erals 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 is- suing 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 dis- posing 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 ad- ministration 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 de- partment. 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 appli- cation 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 pro- vision 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 inter- dicted 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 pro- pounded 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 pre- sume 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 an- swered 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 PacitU- Eailroad Company, who is the treasurer of the trustees of the laud- mortgage fund, all money received that day. Q. Does that end your control over the fund after the day's settle- ment?—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 pres- ence, of knowledge. There may have been some grants of terminal facil- ities, 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 f — 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 depart- ment 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 superin- tendent 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 con- solidated 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 it- self 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 ex- tended a credit, though that is a matter outside of anything I am per- sonally 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 im- portance at all, but you will discover that this was not an action in eject- ment. 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 specula- tion 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 connec- tion 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 Com- pany, 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. Date. Selected by. Patented to. Acres. 55 259 09 Acres, January 1 1866 July 1 1866 . 45 5JQ 54 January 1 1867 . • i"]3 153 gg July 1 1867 156 204 95 190 7fiO I|A 161 755 67 144 386 63 July 1 1868 • July 1 1 869 278 532 56 261 525 33 January 1 1871 . 296 910 21 July 1 1871 271 005 85 January 1 1872 .................................... .... 492 ggg gi July 1 1879 * • 558 967 09 430 969 32 January 1 1873 -. J.il\ 1 '1874 ' 431 122 32 899 357 32 953 788 94 833 852 37 J'Hiuirv 1876 835 5S5 26 hil\ 1 IHTti 1 316 819 11 t.n'uirvl 1877 1 362 982 02 1 02° 913 35 • Inly 1 1877 . 1 376 548 38 1 234 0*9 27 •Jaiju.irv 1. 1878 July 1 1878 1 259 667 07 1 838 112 62 July 1 187'.J 1 950 955.35 January 1, 1880 , „ 2 048 788.57 1 657 557.77 Juh 1 1880 2 240 072 29 2 047 021.43 January 1 1881 » . July 1 1881 . . 2 059 593 94 January 1 1882 . . July 1 1882 . January 1 1883 2 366 031 57 July 1 1883 2 119 038 66 January 1 1884 2 397 234 85 2 143 553 15 July 1, 1884 2, 523, 602. 41 2, 176, 517. 83 January 1 1885 . 2 611 684 01 2 252 619 74 July 1 1885 2 651 533 52 2 272 514 83 January 1 1886 2 720 249 41 2 284 260 72 July 1/1886 3,350,739.61 2, 324, 955. 53 3, 480, 782. 16 2, 402, 384. 34 June 1, 1887 3, 581, 146. 22 Listed 3,581,146.22 Patented 2,402,384.34 Balance in the company's favor 1,178,761.88 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 Cen- tral 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 Com- pany ? — 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 de- partment, 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 al- ways 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 f — 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 in- structions 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 re- ferred 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 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 Treas- ury •,. 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 Com- mission'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 twenty- seven 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. WThen 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 com- pelled, 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 ele- vation 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 obli- gations 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 discharg- ing, as they accrued, each and every one of the obligations imposed upon it by Congress. If there had been such complaints I should cer- tainly 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 dis- charge, 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 affi- davit of Mr. E. H. Miller, jr., the secretary of the company, hereto at- tached, 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 Attorney- General 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 RAIL- ROADS. 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 business- like 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 end- ing 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 Octo- ber 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 Bu- reau 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 com- panies (Pacific railroads) having freely accorded all proper facilities for the inspec- tion 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 Bail- roads, 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 the«com- 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 care- fully 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 con- dition 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 cov- ered 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 un- exceptiouably good. (Auditor's Report, 1879, pp. 34-7.) The above extracts from reports made by the persons selected by Con- gress 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 re- ported 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 earn- ings." Answer 3. This interrogatory contains three independent proposi- tions : (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 earn- ings I To avoid confusion, I shall answer each proposition separately : CENTRAL PACIFIC RAILROAD BOOKS SO KEPT AS TO SHOW NET EARN- INGS 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 mat- ter of the settlement of the " net earnings," which, of course, had to be determined before the amount due the Government could be ascer- tained. 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 examina- tions 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 consid- erable 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 earn- ings," according to his requirements. NET EARNINGS SHOWN. (&) The books actually show the unet earnings " from the comple- tion of the road to the last settlement reported by the Eailroad Com- missioner 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 mil- lion 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 con- structive mileage. In the operation of the transcontinental line of roads there has always been constructive mileage allowed to the Central Pa- cific 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 Sacra- mento, 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 Pa- cific ? — 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 earn- ings 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 an- nual 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.] Period. Gross earn- ings. Expenses and taxes. Net earnings. Year ending November 5, 1870 : Coin $3 980 106 91 $2 575 239 99 $1 404 866 92 2 703 298 96 1 612 615 15 1 0°0 683 81 6, 683, 405. 87 4, 187, 855. 14 2, 495, 550. 73 Year ending November 5, 1871 : 3 995 350 72 2 673 242 93 1 32° 107 79 3 585 445 91 2 147 517 17 1 437 928 74 7, 580, 796. 63 4, 820, 760. 10 2, 760, 036. 53 Year ending November 5. 1872 : Coin . ... 5 235 711 03 3 168 870 55 2 066 831 48 4 142 783 45 2 322 266 96 1 8^0 517 19 9, 378, 494. 48 5, 491, 145. 81 3, 887, 348. 67 Year ending November 5, 1873 :, 5 230 251 25 3 305 999 35 1 834 051 90 Currency 4 908 428 05 2 579 462 38 2 328 9G5 67 10, 138, 679. 30 5, 974, 761. 73 4, 163, 917. 57 Year ending November 5, 1874 : 5 480 842 81 2 332 631 93 3 148 210 87 4* 98l' 012 23 2 182 809 06 2 798 203 18 10,461,855.04 4, 515, 440. 99 5, 946, 414. 05 Year ending November 5, 1875 : Coin 6 Oil 738 68 3 435 107 26 2 576 631 42 6 249 438 68 3 283 762 67 2 965 676 01 12, 261, 177. 36 6, 718, 869. 93 5, 542, 307. 43 Year ending November 5, 1876 : 6, 266, 377. 23 3, 633, 350. 02 2, 633, 027. 21 6 386 487.86 3 415 618.98 2 970 868 88 12, 652, 805. 09 7, 048, 9G9. 00 5, G03, 896. 09 Year ending November 5, 1877 : 4, 811, 515. 02 3, 315, 421. F6 1 49G 003. 16 6, 708, 736. 33 2, 955, 335. 40 2 753 400.93 10, 520, 251. 35 6, 270, 757. 26 4, 249, 494. 09 Period ending June 30, 1878 : Coin 2, 977, 445. 23 1, 744, 049. 94 1,233,395.29 3, 223, 544. 48 1, 677, 296. 00 1,546,248.48 6, 200, 989. 71 3, 421, 345. 94 2,779,643.77 85, 878, 514. 83 48, 449, 905. 90 37, 498 608. 93 9, 928, 152. 00 5, 601, 145. 19 4, 327, 000. 81 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 Treas- ury, the sums paid into the sinking fund of the company in the com- pany'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 earn- ings. 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 de- ducting 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 transcon- tinental 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 cal- culated to exceed this annual amount of $740,000, as the overland busi- ness 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 re- pairs charged in that year. Were these items of the usual amount the increase of earnings which was made at cut rates would have been ac- companied 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.] 1878. (July-Dec.) 1879. 1880. Gross earnings aided lino . ........... $5, 483. 930. 37 $10,058 332.35 $9 953 246 78 Opera tin 0" expenses and taxes • ..... ... 2, 503, 772. 66 4,788 536.67 4 135 955 66 Betterments and additions ... 138, 350. 18 143 352.66 209 216 70 Interest paid on first-mortgage bonds, having prior- ity of lien over United States bonds 834, 990. 00 1 671 540.00 1 668 390 00 3 477 112. 84 6 603 429 33 C 013 56f^ 36 2 006,817.53 3 454 903 02 3 939 684 42 Sinking funds payable from income for redemption of first-mortgage bonds, having priority of lien over United States bonds : Central Pacific Railroad, $100,000 per annnum) Western Pacific Railroad (83.31 per cent, of > $25,000), $20,827.50 per annum. > 60, 413. 75 120, 827. 50 120, 827. 50 1, 946, 403. 78 3, 334,075. 52 3. 818. 856. 92 P R VOL IV- -10 2476 U. S. PACIFIC RAILWAY COMMISSION. Earnings aud expenses of Central Pacific Railroad Company, <$-c. — Continued. 1881. 1882. 1883. $10 271 563 71 $9 580 615 94 $8 861 495 15 Operating expenses and taxes 4 444 127 74 4 734 994.99 4 538 392 39 Betterments and additions 150 856 28 273 164.50 299 396. 16 Interest paid on first-mortgage bonds, having prior- ity of lien over United States bonds 1 671 695.00 1, 673, 940, 00 1, 676, 910. 00 Total expenses ... .. ........ 6 266 679.02 6, 682, 099. 49 6, 514, 698. 55 4 004 884 69 2 898 516 45 2 346 726 60 Sinking funds payable from income for redemption of first-mortgage bonds, having priority of lien over United States bonds : Central Pacific Railroad, $100,000 per annum ) "Western Pacific Railroad (83.31 per cent, of > $25,000), $20,827.50 per annum. ) 120, 827. 50 120, 827. 50 120, 827. 50 3, 884, 057. 19 2, 777, 688. 95 2, 225, 899. 10 1884. 1885. 1886. Gross earnings aided line $7 300 780 67 $5 949 214.73 $6, 522, 909. 33 Operating expenses and taxes 4 416 624 22 3, 167, 081. 76 3 355,555.18 Betterments and additions 351 371 80 247, 404. 00 24, 631. 87 Interest paid on first-mortgage bonds, having prior- itv of lien over United States bonds 1 671 630 00 1, 671, 180. 00 1, 671, 180. 00 Total expenses 6 439 626.02 5, 085, 665. 76 5, 051, 367. 05 Net earnings so ascertained 861 154.65 863, 548. 97 1, 471, 542. 28 Sinking funds payable from income for redemption of first-mortgage bonds, having priority of lien over United States bonds : Central Pacific Railroad, $100,000 per annum) Western Pacific Railroad (83.31 per cent, of > $25,000), $20,827.50 per annum. > 120, 827. 50 120, 827. 50 120, 827. 50 740, 327. 15 742, 721. 47 1, 350, 714. 78 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 oth- erwise, 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 sur- rounding necessities controlling rates. Experience proved that the amounts involved were not large. To promote complete harmony, there- fore, 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 earn- ings 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 earn- ings from traffic interchanged between them and the main line. On less productive branches higher rates always prevail, other things be- ing 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 de- mand 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 al- lowances, 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. » Actual mileage. Constructive mileage. Gait-Tone, Amador Branch San Francisco-Tracy, leased . . . Tracy-Gait aided line Miles. 27 83 41 Percent. 17.9 55.0 27.1 Ainador Brunch Miles. 54 83 41 Percent. 30.3 46.6 23.1 Leased lines Aided lino Total Total ... 151 100 178 100 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 — Miles. Cents. Per cent. Atnador Branch . .. -• .......... 27 55 44.7 83 451 37 41 22i 18.3 . ' 151 123 100 On each dollar of this joint business the amount allowed by the con- structive 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 Janu- ary 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 Jan- uary 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 busi- ness. The total distance is 482 miles. The aided line proportion of the traffic is thus but 2^ per cent. The Southern Pacific and Texas Kail- road 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 Ange- les, 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 hav- ing 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 de- manded had the road been operated by a separate company. The ef- fect 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 mile- age was allowed, and fairly illustrates the result for the whole. Actual mileage. Constructive mileage. San Francisco-Tracy leased ... Miles. 83 147 11 241 Per cent. 17.2 30.5 2.3 50.0 Leased Miles. 83 147 11 361 Per cent. 13.8 24.4 1.8 60.0 Lathrop-Goshen non-aided . Non-aided Tracy-Lathrop aided Aided Goshen-Los Angeles, Southern Pacific Railroad Southern Pacific Railroad Total Total 482 100.0 602 100.0 For each dollar, then, received on joint business, the aided line would receive on an equal mileage basis 2.3 cents, and on the constructive- mileage 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 com- paring 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. Miles. Cents. Per cent 11 1.4 1 i San Francisco-Tracy leased 83 11 0 147 49.8 241 69 6 Total non-aided lines ...... - . ... ....................... ... 471 130 4 98 9 Total aided and non-aided ..... ........ ... .................. 482 131 8 100 0 STOCKTON AND COPPEROPOLIS RAILROAD. Constructive mileage of 50 per cent, was allowed on this branch for the year 1880, and 100 per cent, from January, 1881, to February, 1883, inclusive. The principal business interchanged is that between San Francisco and Milton. The operation in this case with the largest al- lowance is as follows : Actual mileage. Constructive mileage at 100 per cent. San Francisco-Tracy, leased Tracy-Stockton, aided Miles. S3 20 29 Per cent. 62.9 15.1 22.0 Miles. 83 20 58 161 Per cent. 51.0 12.4 3C. 0 Aided Stockton-Milton, Stockton and Copperopolia Railroad Stockton and Copperopolis Rail- road Total Total 132 100.0 100.0 2480 U. S. PACIFIC RAILWAY COMMISSION. By this allowance the Stockton and Copperopolis Railroad receives 36 per cent, of the through rate as against the 22 per cent, by the even- mileage division. It should receive more than this. The proper pro- portion to each line is shown by adding the local rates and ascertaining the percentage of each to the sum. The freight rates, classes one to five, inclusive, between San Francisco and Stockton average 12J cents per 100 pounds; between Stockton and Milton, 8^ cents. The division of these locals gives the following percentages : Miles. Cents. Per cent. Leased... 83 10 47. G Aided 20 2J 11.9 29 8k 40 5 Total 132 21 100.0 It will be seen by comparison with the statement showing construc- tive-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 EARN- INGS. The aided line received by the constructive-mileage allowance 12.4 per cent, on the division of such joint rates, while it should have re- ceived on the proper basis of combined local rates but 11.9 per cent. It will be seen from the foregoing that wherever constructive-mileage al- lowances 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 under- stand in this connection that the through rate might well be propor- tionately 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 USUAL1? " Question 5. And also whether such system of constructive mileage allowance is fair and usual, and, in practical operation, has resulted ad- versely 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 pro- ductive 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 busi- ness, 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, ac- cording 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 connect- ing 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. Miles. Kates through. Equal mile- age division would be — 142 $5 10 $5 93 28 2.00 1.17 Total 170 7.10 7.10 2482 U. S. PACIFIC RAILWAY COMMISSION. Constructive mileage allowances of 100 per cent, to the Northern Cal- ifornia Eailroad shows : Miles. Per cent. Bate. •Central Pacific Railroad ... 142 71 7 $5 10 Northern California Railroad ....... ............. 56 28 3 2 00 Total 198 100 0 7 10 In this case the California Northern Eailroad demanded and received 100 per cent, constructive mileage. Carson and Colorado Eailroad and Central Pacific Eailroad. Miles. Rate through. Equal mile- age division would be — San Francisco to Reno Central Pacific Railroad 244 $12 05 $15 10 Reno to Lone Pine Carson and Colorado Railroad . . . 322 23 00 19 95 Total 566 35 05 35 05 In this instance the division of the through rates amount to a construct- ive allowance of about 50 per cent, to the Carson and Colorado Kailroad, and this notwithstanding that road has the longer haul. Eureka and Palisade Eailroad and Central Pacific Railroad. • Miles. Miles through. Equal mile- age division would be — San Francisco-Palisade Central Pacific Railroad 625 $33. 05 $35 02 Palisade Eureka Eureka and Palisade Railroad ....... 90 8.00 6 03 Total , 615 41.05 41.05 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 strik- ing 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 Pa- cific 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. Class. Through rate. Divisions. C. B. transfer. C. P. U. P. C. B.-Chi. CM.-N. Y. $138. 30 105. 00 65. 00 100. 00 Cts. 50 50 50 50 Pro. $46. 00 34.50 20. 70 33. 26 Cents per mile. 5.22 3.91 2.35 3.77 Pro. $54. 00 40.50 24.30 38.94 Cents per mile. 5. 22 'A. 91 2.35 3.77 Pro. $14.55 12.50 6.81 10.50 Cents per mile. 2.97 2.55 1.39 1.95 Pro. $23. 25 17. 00 12.69 16.80 Cents per mile. 2. 55 1.86 1.39 1.95 Third ^ Coin...., RATES AND DIVISIONS HAD NO CONSTRUCTIVE MILEAGE BEEN ALLOWED. Unlimited 138. 30 50 36.69 *4. 15 42.92 4.15 20.34 4.15 37. 85 4.15 Second 105. 00 50 27.81 3.15 32.54 3.15 15.44 3.15 28. 71 3.15 Third 65.00 50 17.13 1.94 20.04 1.94 9.51 1.91 17. 82 1.94 Coin . .... 100. 00 50 26. 49' 3. OO1 31.00 3.00 14.70 3.00 27.31 3.00 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 al- lowance 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 re- ceive 'the constructive mileage allowance was of the greatest impor- tance, 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 PUR- POSES ? •* Question G. Or whether there has been a diversion of earnings of aided roads to wrongful or improper purposes, and if so, to what ex- tent." 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 exclu- sively to the benefit of the company. No portion of them, has been ap- plied 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 affect- ing 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 satis- factory 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 Gov- ernment 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 ben- efit 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 un- aided 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 un- aided 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 discrimi- nation 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 Cen- tral 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 ac- counts, 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 ac- count of mistaken or erroneous accounts, reports, or settlements made by our road. On the contrary, there is a balance due the Central Pa- cific 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 construc- tion and new equipment were not currently allowed by the Commis- sioner, 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, here- with submitted, and marked " Exhibit 2," also report of General Super- intendent 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 sup- port 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 justi- fied 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 sub- mit the following statement, prepared by Mr. E. H. Miller, jr., the sec- retary 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 prop- erty and appurtenances belonging on the foregoing railroad and tele- graph 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, consist- ing 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 rail- road 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 ac- count, 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 as- certaining 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. Dur- ing 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 appur- tenances 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 Com- mission has appointed experts to make appraisement of it, and there- fore 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 con- solidation 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 Gov- ernment. 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 direc- tors 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 or- ganized under the laws of this State, and is now carrying on its busi- ness in accordance with the provisions thereof. Section 309 of the Civil Code of California prohibits railroad corporations from making div- idends, 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 transporta- tion 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 de- clared 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 com- peting lines, and our business fell off very much, although the gen- eral 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 Pa- cific 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 divi- dends 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 recov- ered 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 noth- ing 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 sink- ing 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 compa- nies 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 de- cision 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 corpora- tion itself and then putting it back in the general assets ? — A. The gen- eral 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 be- yond 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 Pa- cific 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 guar- antees 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 Cen- tral 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 op- erating 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 indi- rectly 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, undertak- ings, 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 respect- ive 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 Southt- 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 com- pany. 8. Amador Branch Eailroad. I have 1,560 shares of stock in this com- pany. 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 MONEY LOANED BY CENTRAL PACIFIC RAILROAD COMPANY. Answer 18. The amount loaned any company, corporation, or indi- vidual 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 Cen- tral 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 con- veyed 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 Com- mission are examining the books of the company ; if any statement in detail of amounts which have been borrowed is desired, they will doubt- less make it up. PAYMENTS WITHOUT SUFFICIENT VOUCHERS. "Question 20. What amounts of money or other valuable considera- tion, 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 T7 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 fur- nish 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 com- panies, 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 be- half 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 Tele- graph Company, into an alleged corporation known as the Union Pa- cific 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 re- quires 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 in- vested 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 ques- tion. 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 corpora- tions shall be inquired into." 2496 U. S. PACIFIC KAILWAY COMMISSION. Answer 24. The extent and character of such expenditures and in- vestments are as follows : Description. Date of ownership. Value. Disposition. Remaining on hand December 31, 1886. Daily American Ha0", newspaper 1864 $5 000 00 Charged to expense ac- stock. 1866 48, 937. 50 ) count, Dec. 10, 1866. July 29 1868 sold for pany bonds i 1867 28, 738. 37 V $»5, 766. 37. f j ^ Georgetown Wa^on Road stock 1867 1 000.00 Charged to profit and Austin and Reise River Transpor- Feb. 8, 1872 1, 000. 00 loss account, Aug. 31, 1868. Nov. 18, 1873, sold for tation Company stock, 40 shares. C. P. R. R. first mortgage bonds, 21 . S J Valley R R. bonds 1 June 14, 1873 Mar. 10, 1874 21 735.001 775. 00 ! $600; dividends, 600; charged to profit and loss account, $200. . Transferred to sinking S J Valley R. R bonds, 1 Feb. 14, 1876 9'>0. 00 [ funds An"1 19 1879. W P R R. bonds 1 Feb. 11,1875 852. 50 J Green Point Dairy and Transporta- June 12, 1874 1, 500. 00 May 17, 1877, sold for tion Company stock, 30 shares. Nevada Company Narrow Gauge Mar. 1,1877 6, 300. 00 $765; construction ac- count, $735. Dec., 1878, sold for $6, 300. Railroad bonds, 7. Coos Bay Coal Company : 34 495 shares stock . Oct. 30, 1875 136 871 30 With assessments &c 400 acres land .... 1876 19 578 98 With expenses ....... $156 4^0 °8 Wells, Fargo & Co., stock, 8,250 shares. Sold for Sept. 30, 1879 825, 000. 00 216 015 67 Sold June 30 1880 Do 4 132 194 51 Sold Dec 31 1880 Do 85 554 50 Sold May 12 1881 . Do 507 101 90 Sold June 13 1881 Sacramento Transportation Com- ? June 30, 1882 940, 796. 58 C 75,000.00? 80, 000. 00 Notes of Fisk & Hatch (see note 830 665 46 below). Secured by Chesapeake and June 14, 1875 Ohio Railroad bonds. Changed to : Chesapeake and Ohio bonds, 7 percent., 1,344. Chesapeake and Ohio stock, first preferred, 255 June 26, 1884 June 26, 1884 > 830, 655. 40 shares. Chesapeake and Ohio stock, second preferred, 11,586 shares. Chesapeake and Ohio June 26, 1884 Sept. 3, 1884 J 3, 325. 60 stock, second preferred 405 shares. Scrip 1887 833, 891. 06 Sold Sept 3 1884 833 872 19 Forest Hill Commercial and Toll ( Nov. 20,1884 2, 000. 00 I 4 000 00 Road Company stock J June 20, 1885 Last received 2, 000. 00 3 l'-*0 00 120 00 remaining unsold. Central Pacific Railroad capital Jan. 18,1872 Dec 31 1886 724 500. 00 724 500 60 stock, held in trust for company by C. P. Huntington, agent. 1, 798, 942. 47 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 Chesa- peake 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 Chesa- peake 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 prin- cipal 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 princi- pal 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 extraor- dinary 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 inde- pendent 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 corpora- tions 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 ex- cept 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 prop- erty. The roads consolidated with the Central Pacific Eailroad Com- pany 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, Jan- uary 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, Stock- ton 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 Rail- road 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 Ala- meda 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 Com- pany— the present name of the company under the above consolidations. LEASES. Roads once leased by the Central Pacific Railroad Company now leased by the South- ern 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 organi- zation to the date of the investigation herein provided for, as they ap- pear upon the books of said companies at the date of its annual meet- ing in each year, and the amount of stock held by each." Answer 26. In reply to this interrogatory I would say the account- ants appointed by the Commission have in their possession the books of the company containing this information and are preparing the state- ment called for. WHAT STOCKHOLDERS PAID FOR STOCK. "Question 27. What consideration, if any, was paid by each stock- holder 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 pre- sume 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 enter- prise. 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 confi- dence and where, of course, there could be no returns until its comple- tion. 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 J9 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 hun- dred 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 pro- vided 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 state- ment of annual salaries amounting to $5,000 or more, paid by the Cen- tral 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 Pa- cific 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. Office. Name of officer. Annual salary. From — To— President Iceland Stanford .... $10, 000. 00 June 28, 1861 Mar. 31 1885 Vice-president . . C P Huntington sal- 12 500.00 June 28, 1861 July 1, 1863 Financial agent and attorney Treasurer ary and services. C... .do 1C. P. Huntington, sal- ary. Mark Hopkins 25, 000. 00 10, 000. 00 10, 000. 00 July 1,1863 July 1,1864 July 1,1863 July 1, 1864 Mar. 31,1885 Mar. 31,1878 Agent and attorney E B Crocker 10,000.00 Jan. 1,1864 Dec. 31,1869 Secretary and agent James Bailey ......... 10, 000. 00 Jan. 1, 1861 July 1, 1863 Superintendent and second vice-pres- Chief engineer Secretary ; Charles Crocker T.D.Judah E H. Miller, ir 10,000.00 10, 000. 00 10, 000. 00 Jan. 1,1866 June 28, 1861 Jan. 1, 1867 Mar. 31,1885 Nov. 2, 1863 July 1, 1878 Do...... 1 13, 000. 00 July 1,1878 Mar. 31,1885 Assistant secretary E S Miller 5, 000. 00 May 1, 1882 Mar. 31, 1885 Financial director . D D Colton 10, 000. 00 Oct. 1, 1874 Oct. 4, 1878 Treasurer E W Hopkins 5, 000. 00 Aug. 1, 1878 Dec. 31, 1882 Treasurer Timothy Hopkins 5, 000. 00 Jan. 1, 1883 Mar. 31,1865 S S Montague 5, 000. 00 Jan. 1, 1869 Dec. 31, 1869 Do 6, 000. 00 Jan. 1, 1870 Dec. 31,1871 Do... 8, 000. 00 Jan. 1,1872 Sept. 30, 1883 LELAND STANFORD. 2501 Statement of annual salaries amounting to $5,000 or more paid by, #c. — Continued. Office. Name of officer. Annual salary. From— To— General solicitor S W Sanderson* $12 000 00 Jan 10 1870 Dec 31 1870 Do .. 18, 000. 00 Jan 1 1871 Au" 30* 1875 Do 24, 000. 00 Sept 1 1875 Mar 31* 1885 Attorney 6 000 00 Jan 1 1869 Dec 31 1871 Do. 8, 000. 00 Jan. 1 1872 Dec 31 1874 Do 10, 000. 00 Jan 1 1875 Sept 30 1881 Attorney H S Brown 5 000 00 Jan 1 1873 Aug 3l' 1875 Do 8, 000. 00 Sept. 1 1875 Mar 31 188") Dot 4. 500. 00 Sept. 1 1875 Mar 31 1885 Assistant general solicitor 15 000 00 May 3 1881 Mar 31 188** L D Mclkisick 6 000 00 Sept l' 1882 Dec 3l' 1883 Do 8, 000. 00 Jan. 1 1884 Mar 31* 1885 Dot 1, 000. 00 Jan. 1 1884 Dec 31 1885 Agent and assistant to president S. T. Gage Do $6, 000. 00 8, 000. 00 Aug. 1,1871 Nov. 1 1882 Oct. 31, 1882 Mar 31 1885 B B Redding 6 000 00 Jan 1 1871 Apr 30 1873 Do 6, 000. 00 Feb. l' 1874 Au°" 31 1882 Attorney C H Tweed 13 333 33 Jan 12 1883 Mar 31 1885 C H Sherril 20 000 00 Mar 1 1876 Mar 31 1885 10 000 00 July 1 1867 Oct 30 1882 6 000 00 Apr 1 1882 Mar 31 1885 20 000 00 Jan 1* 1868 Mar' 4* 1875 Laud agent W.H. Mills Do 5, 000. 00 7, 000. 00 Jan. 1, 1883 July 1, 1883 June 30,1883 June 30 1887 10, 000. 00 Sept. 30 1871 Sept 30 1876 Consulting engineer . George E. Gray 10, 000. 00 Mar. 1, 1867 Nov 30 1870 General superintendent and general A. N. Towne 13, 000. 00 Sept. 1, 1869 July 31 1879 manager. Do .. 18, 000. 00 Au<*. 1 1879 Apr 30 1882 Do 25, 000. 00 May 1, 1882 Mar 31 1885 Assistant general superintendent . . - John Corningt 5, 000. 00 Aug. 1,1871 Au 1 670.69 Do Tehama Dec* 30* 1875 3 411.85 1876 Do... El Dorado Dec 26 1876 Year '76-77 1, 146. 52 Do Colusa Dec 26 1876 10 171.83 Do Yolo Dec 26 1876 71.77 Do Sierra Dec 26 1876 225. 04 Do Nevada. Dec 28 1876 2 425. 35 Do... Placer : District No. 1 Dec 28 1876 507. 37 Do District No. 2 Dec 28 1876 1, 259. 25 Do Do Butte Tehama Dec. 27, 1876 Dec 27 1876 2, 291. 98 5, 102. 35 Do. Sacramento Dec. 30 1876 49.10 1877 Do Placer Feb 26 1877 Miscs $0 67 Do Colusa Feb 27 1877 Miscs 21 67 Do . Yolo . . Feb 27 1877 Miscs 7 98 Do ... . Sutter . Feb 28 1877 Miscs 44 08 Do do Mar 1 1877 Miscs 858 40 Do . Tehama Mar 6 1877 Miscs 5 66 938. 46 Do Sierra . ' Dec 31 1877 Years 77 78 237. 47 Do Colusa ... Dec 31* 3877 1, 117. 76 Do ... do Dec 31 1877 $10 114.96 Do Less taxes paid under protest Sept 13 1875 8, 063. 61 Do Sutter. . Dec 31 1877 $2 051 35 287. 73 Do El Dorado Dec 31 1877 1,024.15 Do , Tehama . Dec 31 1877 4, 687. 34 Do Butte Dec 31 1877 1, 657. 84 Do Yuba Dec 31 1877 1, 911. 42 Do... Placer: District No. 1 Dec 31 1877 439. 27 Do District No 2 Dec 31 1877 857. 31 Do Yolo Dec 31 1877 66.40 Do... Nevada . Dec 31 1877 2,197.92 Do Dec 31 1877 37.92 Nevada Churchill Nov 6 1877 258. 85 Do Do Elko Lander Nov. 14, 1877 Nov. 14 1877 Years"'77-78 7, 200. 00 1,311.96 Do Nov 14 1877 9 633 28 Do Lyon Nov 14 1877 ' 129. 85 Do 'V\/"ashoe Nov 14 1877 1 438.33 1878 California Sutter Jan 15 1878 Miscs. $49. 50 Do Tehama Feb 21 1878 Miscs. 2. 30 Do Butte .. Feb 23 1878 Miscs. 340. 09 Do Yolo Feb 26 1878 Miscs. 6. 04 Do ' Sacramento Mar 5 1878 Miscs 3 65 Nevada Washoe Mar. 25 1878 Miscs. 29.19 430. 77 LELAND STANFORD. Taxes paid on lands— Continued. 2513 Location. Date of pay- State. County. ment. irenott. Amount. 1878 Nevada Lander Nov 12 1878 "V"par» '78— '7Q *1 O9O 00 Do Churchill Nov 13 1878 265 77 Do Elko Nov 14 1878 4 405 77 i Do Humboldt Nov 14 1878 2 777 43 Do Wash oe Nov 15 1878 1 315 64 Do Do do Nov. 19, 1878 Nov 12 1878 310. 80 004. oft California Sutler Dec 30 1878 .............. 345 60 Do Sierra Dec 30 1878 236 60 Do Butte Dec 31 1878 ............. 3 259 98 Do Colusa Dec 31 1878 2 716 61 Do El Dorado Dec 31* 1878 940 80 Do Dec 31 1878 7 632 42 Do Yuba Dec 31 1878 .............. 737 62 Do Dec' 3l' 1878 2 iGi 91 Do Placer : District No. 1 Dec 31 1878 358 27 Do District No. 2 Dec 31 1878 859 01 Do Yolo Dec 31 1878 35 27 Do Sacramento .. . .... ......... Dec 31 1878 45 07 1879 Nevada Churchill Nov 1 1879 Years '79-'80 279 63 Do Nov 10 1879 94 00 Do Eureka .. . ...... Nov 10 1879 336 67 Do Storey Nov 11 1879 157 34 Do Elko Nov 11 1870 3 969 00 Do Nov 12 1879 3 623 49 Do "Washoe Nov 12 1879 1*447 61 Do Nov 10 1879 2 025 00 California Butte Dec 29 1879 2 978 29 Do Sutter Dec 29 1879 377 69 Do Dec 29 1879 1 486 58 Do .. .. do Dec 29 1879 1 096 08 Do El Dorado Dec 29 1879 939 06 Do Yuba Dec* 30* 1879 53i 12 Do . Yolo Dec 30 3879 34 66 Do Dec 31 1879 2 099 88 Do Placer : District No 1 Dec 31 1879 400 40 Do District No 2 Dec 31 1879 Years '79-'80 804 CO Do Tehama ................ Dec 31 1879 10 346 54 Do Dec 31 1879 Miscs. $19. 20 Do Dec 31 J879 Miscs. 37.90 Do Sutter Feb 20 1879 Miscs. 16.25 Do Tehaina ........ Feb 24 1879 Miscs. 65.50 Do.... Feb 27 1879 Miscs 20. 66 159 51 Do... Dec 26 1879 Years '79-'80 357.24 1880 Do . . El Dorado Jan 28 1880 Miscs. $9.54 Do Sutter Feb 14 1880 Miscs 9 82 Do Butte Feb 14 1880 Miscs. 9. 35 Do Feb 14 1880 Miscs 8 50 Do Yuba Feb 16 1880 Miscs 119.38 Do Feb 17 1880 Miscs 8 21 Do Feb 18 1880 Miscs 66 55 Do Shista Feb 21 1880 Miscs 15 77 Do Yuba Feb 24 1880 Miscs 34 05 Do Nevada ..................... Feb. 25 1880 Miscs. 4. 55 Do Sutter Feb. 28, 1880 Miscs. 206. 83 Do Placer . June 4 1880 Miscs. 25.71 Less credit of ............... June 2 1880 Miscs. 518. 26 Miscs. 206. 80 311 46 Nevada Churchill Nov. 1 1880 Years '80-'81 295 84 Do Eureka Nov. 6 1880 385 07 Do Elko Nov. 9 1880 3 882 08 Do Humboldt . Nov. 9 1880 4 172 44 Do "Washoe Nov. 9 1880 1 350 90 Do Lyon . ............... Nov. 9 1880 102 70 Do... Storey .- Nov. 9 1880 67 30 Do Zumwalt School District Nov. 19 1880 8.65 California. . . Butte Dec. 15 1880 4 890.30 Do El Dorado Dec. 15 1880 975. 49 Do Nevada . ................. Dec. 15 1880 1 811.77 Do... Placer : DistrictNo.l Dec. 15 1880 587. 78 Do... District No. 2 .. Dec. 15. 1880 812. 56 2514 U. S. PACIFIC RAILWAY COMMISSION. Taxes paid on lands — Continued. Location. Date of pay- State. • County. ment. 1880 California Shasta Dec 15 1880 $6 773 71 Do Sierra Dec 15 1880 353 30 Do Yuba Dec 15 1880 1 5l>7 89 Do . Colusa Dec 16 1880 1 487 32 Do do Dec 16 1880 1 194 62 Do Sacramento . Dec 16 1880 82 96 Do Tehama Dec 16 1880 9 311 37 Do Yolo . .. Dec 16 1880 60 24 1881 Do Butte Feb 16 1881 Miscs. $59. 16 Do Colusa Feb 16 1881 Miscs. 32.30 Do do Oct 21 1881 Miscs. 285. 68 Do do Dec 23 1881 Miscs. 16.06 393. 20 Do.,. Nevada Feb 18 1881 Miscs. 63.17 Do .. Yuba Feb 19 1881 Miscs. 18.25 Do Tehama . .' Mar 4 1881 Miscs. 24.05 Do do Mar 10 1881 Miscs. 66. 80 Do .. do Mar 23 1881 Miscs. 13.32 Do .. Yolo Dec 8 1881 Miscs. 43.23 Do Zumwalt School District Dec 22 1881 Miscs. 19.32 248 14 . Do... Yolo Dec 8 1881 Yeara '81-'82 43.23 Do . Sacramento . . ......... Dec 10 1881 52 28 Do Colusa . ........... Dec 10 1881 3 748 11 Do El Dorado Dec. 10 1881 946 10 Do . Shasta . . Dec 12 1881 5 843 28 Do.... Sierra Dec. 14 1881 353 36 Do . gutter . . Deo 14 1881 230. 62 Do Tehama ...... Dec 15 1881 9 203. T9 Do Nevada - Dec. 15 1881 1 724 56 Do... Placer : District No 1 . Dec 19 1881 400. 16 Do .. District No 2 Dec 19 1881 S13. 64 Do . .. Plum as Dec 19 1881 96 58 Do Yuba . . • Dec 19 1881 2 452.80 Do Butte Dec. 19 1881 4 903.60 Nevada Churchill Nov 3 1881 301. 14 Do Eureka Nov 10 1881 481. 25 Do Do Lyon Storey Nov. 10, 1881 Nov 10 1881 132. 00 123. 04 , Do "Fumboldt ... Nov 11 1881 4, 123. 78 Do Do Elko "Washoe Nov. 11, 1881 Nov 11 1881 3, 935. 25 1, 557. 56 1882 California Tehama Feb. 3 1882 Miscs. $20. 79 Do ... Butte Feb. 11 1882 Miscs. 81. 70 Do Nevada Feb. 11 1882 Miscs. 60.45 Do El Dorado Feb. 11, 1882 Miscs. 25.84 Do gutter Feb. 11 1882 Miscs. 14. 84 Do Yuba Feb. 13, 1882 Miscs. 24.43 Do Colusa Feb. 14, 1882 Miscs. 387. 66 Do do .... Feb. 21, 1882 Miscs. 202. 29 Do • do Mar. 31, 1882 Miscs. 91.48 Do do Feb. 16, 1882 Miscs. 42.84 Do Placer .. Feb. 18, 1882 Miscs. 9. 99 Do do Feb. 27, 1882 Miscs. 5. 20 Do Tehama Feb. 27, 1882 Miscs. 20.63 Do do . Mar. 27, 1882 Miscs. 425. 30 Do do Mar. 27, 1882 Miscs. 56.93 Do Nevada Feb. 27, 1882 Miscs. 16.17 1, 486. 54 Do Dec. 13 18b2 Years '82-'S3 25 23 Do Placer (District No 1) Dec. 15 1882 346 40 Do do Dec. 15, 1882 Years '82-'83 806 40 Do Dec. 13 1882 1,550. 15 Do Sierra .... Nov: 27, 1882 339. i>2 Do Yuba Dec. 13, 1882 2, 424. 76 Do Sutter Dec. 19, 1882 226. 38 Do Butte Dec. 29, 1882 6, 773. 55 Do Tehama » Dec. 23, 1882 7, 861. 13 Do Shasta Dec. 26, 1882 5, 182. 79 Do El Dorado Nov. 29, 1882 920. 63 Do Colusa Dec. 13, 1882 3, 774. 18 Do Yolo Nov. 21, 1882 22.16 Nevada , \Vasho e Nov. 20, 1882 1. 485. 00 Do.... Do... Lyon Churchill .. Nov. 13, 1882 Nov. 6,1882 122. 00 301. 14 LELAND STANFORD. Taxes paid on lands — Continued. 2515 TTftar Location. Date of pay State. County. ment. Period. Amount. 1882 Nevada Storey Nov 15 1882 JK194 7R Do Humbo7dt Nov 15 1882 40 SO t\.t Do Lander Nov 16 1882 •••• 1784. 40 Do Eureka Nov 16 188'-* ..... . ....... Do Elko Nov 15 1882 *•••• 1883 California . . Placer Feb 2 1882 Miscs $10 00 Do.. Feb 10 1882 MJSCS 65 01 Do do Mar 4, 1882 Miscs 308 60 Do do Mar 20 1882 Miscs 97 08 Do Nevada Feb 16 1882 Miscs 65 34 Do Sacramento Feb 17 1882 Miscs 14 35 Do El Dorado Feb 27 1882 Miscs 5 00 Do Yuba . Mar 1 1882 Miscs 30 51 Do Placer Mar 2 1882 Miscs 29 23 Do, Bntte Mar 20 1882 Miscs 13 60 coo 70 Do Sacramento Dec 31 1882 Years '83 '84 14 08 Do Placer : District No 1 Dec 31 188** -|f!9 Q" Do District No. 2 Dec 31 1889 849 44 Do Nevada Dec 31 1882 1 601 46 Do Sierra Dec 81, 1882 ...... ..... 405 91 Do.... Plumas Dec 31 1882 196 07 . Do Ynba Dec. 31 1882 2 068 43 Do Sntter Dec. 31 1882 218 44 Do.... Butte Dec 31 1882 5 636 91 Do . Tehama Dec 31 1882 G 49° 56 Do Shasta Dec 31* 1882 4 G55 85 Do.. El Dorado Dec 31 1882 889 94 Do Colusa Dec.' 3l' 1882 3 928 15 Do Yolo Dec 31 ' 1882 22 03 Nevada... Washoe Dec 31 1882 1 300 00 Do Nov 20 1889 J°2 00 Do Churchill Nov* 2o' 188^ ............... 301 16 Do Storev Nov 20 1883 Years '83-'84 68 15 Do Humboldt Nov 20 1883 3 963 70 Do Lander Nov 20 1883 1 710 34 Do Eureka Nov 20 1883 496 61 Do Elko Nov. 20 1883 2 791.38 1884 California ElDorado Jan. 26 1884 Miscs. $12. 92 Do Placer Jan. 26 1884 Miscs. 52.41 Do Butte ..... Jan. 26, 1884 Miscs. 31.34 Do Shasta Jan. 26 1884 Miscs. 53.30 Do Colusa . Feb. 23 1884 Miscs. 70.23 Do El Dorado Feb. 28 1884 Miscs. 12.43 Do Zumwalt School District Feb. 29 1884 Miscs. 5. 21 Do Tehama Mar. 4 1884 Miscs. 208 01 Do do Mar. 27 1884 Miscs. 139. 76 Do Colusa Mar 10 1884 Miscs 168.82 Do do Mar. 18 1884 Miscs 37 04 Do.... Yolo Mar. 14 1884 Miscs 4 04 Do.... Shasta Mar 15 1884 Miscs 239 12 Do do Apr. 10, '1884 Miscs. 5H. 59 Do Yuba . Apr. 22, 1884 Misos. 19.91 Do Placer Aug. 8, 1884 Miscs. 20.78 Nevada Washoe Nov. 26, 1884 Miscs. 4. 00 1 132.91 Do... Eureka .. ............. Nov. 17, 1884 Years '84-'85 418 70 Do Elko . Nov. 14, 1884 2 169 96 Do Humboldt Nov. 15, 1884 3 548 97 Do Lander ......... Nov. 16, 1884 1 616 35 Do Lvon Nov. 15, 1884 122. 00 Do Storey . ..... . Nov. ]5, 1884 75 00 Do Washoe .... Nov. 15, 1884 1 218 50 California .. Butte Dec. 31, 1884 3 676 75 Do Dec. 31, 1884 CO 48 Do El Dorado . ... Dec. 31, 1884 1 401.44 Do Nevada Dec. 31, 1884 1 420.80 Do.. Placer Dec. 31, 1884 786. 50 Do Plnmas ......... Dec. 31, 1884 237. 79 Do Sacramento ....... ..... Dec. 31 1884 14. 18 Do Sierra . ........... Dec 31, 1884 362. 50 Do Sutler ........... Dec. 31, 1884 138. 59 Do Shasta Dec. 31, 1884 2, 323. 15 Do Tehama • .. . .......... Dec, 31, 1884 4, 014. 00 Do...... Yuba Dec. 31 1884 1, 127. 52 1885 Do Feb 26 1885 Miscs $9 60 Do ...do... Mar. 4.1885 Miscs. 1. 25 2516 U. S. PACIFIC KAILWAY COMMISSION. Taxes paid on lands — Continued. Location. Date of pay- State. County. ment. Period. Amount. 1885 California Colusa and Tehama May 11 1885 Miscs $61 36 Do Teliarua Mar 5 1885 Miscs 44 85 Do do Mar 24 1885 Miscs 74 51 •; Do do .. Apr. 1 1885 Miscs 23 36 Do do .. Apr 9 18Q5 Miscs. 2 50 Do do Apr 9 1885 Miscs 18 48 Do Placer Feb. 19 1885 Miscs 69 05 1885 Do Placer Mar 31 1885 304. 96 Miscs. 7 80 Do El Dorado Mar 9 1885 Miscs 5 22 Do Nevada Mar 11 1885 Miscs. 7 56 Do Shasta Mar 24 1885 Miscs. 54 26 Do do Apr 8 1885 Miscs 15 00 Do... do June 30 1885 Miscs 8 30 Do Bntte Mar 27 1885 Miscs 217 62 Do Tuba May 1 1885 Miscs 3 97 $624 69 Utah . . Cache Oct. 7 1885 Year '85-'86 156 30 Do Weber Oct 7* 1885 43 71 Nevada Churchill Nov lo' 18^5 295 79 Do "Washoe Nov 20 1885 767 23 Do Lyon Nov 20* 188*1 110 00 Do Storey > Nov 20 1885 69 60 Do Eureka Nov 20* 1885 427 07 Do Elko Nov 20 1885 1 844 93 Do Humboldt Nov. 20* 1885 2, 236. 91 Do Lander Nov 27 1885 1 520 82 California Placer Dec 21 1885 1 133 11 Do El Dorado Dec 21 1885 1 226 08 Do Yuba Dec 23 188*5 1 188 34 Do Tehama Dec 23 1885 3 322 22 Do .. Nevada Dec. 23 1885 1, 937. 37 Do Sierra Dec 28 1885 294 28 Do Butte Dec 28* 1885 3 751 54 Do Shasta Dec 28 1885 1 953 55 Do... Plumas , Dec. 30 1885 216.58 Do Colusa Dec 30 1885 58 91 Do .. Sutter Dec. 3l' 1885 111. 14 Do Sacramento Dec. 31 3885 13.37 1886 Do . El Dorado...... . Jan. 13 1886 Miscs. 27. 11 Do do Feb. 13 1886 Miscs. 60. 04 Do .. do Mar. 3 1886 Miscs. 21. 53 Do . Bntte Feb. 1 1886 Miscs. 37.29 Do do Feb. 11 1886 Miscs. 3. 75 Do .. do . Feb. 13 1886 Miscs. 19.62 Do ... do. . . ... June 1 1886 Miscs. 77.34 Do Colusa ... .. Feb. 13 1886 Miscs. 12.78 Do Tehama Feb. 13 1886 Miscs. 287. 56 Do Placer Feb. 17 1886 Miscs. 4. 58 Do - Shasta Feb. 23 1886 Miscs. 5. 23 Do Nevada Mar. 1 1886 Miscs. 8. 87 Nevada "Washoe June 22 1886 Miscs. $9.45 575 15 Utah . "Weber Oct. 11, 1886 Year '86-'87 33.54 Do Box Elder Oct. 12 1886 280. 82 Do Cache Oct. 14, 1886 29.70 Nevada Churchill . - Nov. 8, 1886 295. 73 Do... Lyon Nov. 15, 1886 110. 00 Do.... Storey ....... Nov. 15, 1886 60.48 Do ... "Washoe Nov. 15, 1886 741. 39 Do.... Humboldt Nov. 15, 1886 1, 198. 17 Do Elko Nov. 17, 1886 1, 539. 63 Do... Eureka .. ......... Nov. 18, 1886 441. 71 Do Lander Nov. 18, 1886 1,483.03 California .. Yuba Dec. 11, 1886 1, 451. 16 Do Sierra ........ Dec. 13, 1886 279. 72 Do Shasta Dec. 13, 1886 1,645.10 Do Tehama Dec. 15, 1886 2, 996. 06 Do. El Dorado Dec. 15 1886 1 083. 51 Do Nevada Dec. 15 1886 1 565.61 Do .. Placer: District No 3 Dec. 16 1886 82.90 Do District No 1 Dec. 18 1886 56. 14 Do District No 2 Dec. 16, 1886 804. 54 Do... Colusa Dec. 17, 1886 117. 54 Do... Butte ... Dec. 17, 1886 30.30 LELAND STANFORD. Taxes paid on lands — Continued, 2517 Location. Date of pay- Year. State. County. ment. Per. od. 1886 California IPluniRs Dec 17 1886 $309 53 Do Sutter Dec. 22 1886 46 49 Do Tehama Dec 30 1886 80 41 Do Butle Dec 31 1886 3 028 73 1887 Do Colusa Feb 21 1886 Miscs $67 40 Do Tuba Feb 28 1886 Miscs 22 33 Do Butte Mar 5 1886 Miscs 89 69 Do Shasta Mar 9 1886 Miscs 3 50 Do Placer Mar. 9 1886 Miscs 61.56 Do El Dorado Mar. 14 1886 Miscs. 22 32 Do do Mar 14 1886 Miscs 66 13 Do Nevada Mar. 14 1886 Miscs. 4 86 Do Shasta Mar. 21 1886 Miscs 7 50 Do do Mar. 30 1886 Miscs 436 39 Do Butte Mar. 25 1886 Miscs 120 92 Do Placer Mar. 28 1886 Miscs. 68 40 Do . Sierra ....................... Mar. 30 1886 Miscs. 10 92 Do Yuba . . . .... Apr. 6 1886 Miscs 14 48 Do Tehama Apr 15 1886 Miscs. 121 61 1 118 01 Total to June 30 1887 420 743.67 Respec&ully submitted. E. JB. RYAN, Tax Agent. 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 de- cision 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 inabil- ity of the company to obtain patents promptly upon application has caused us great loss, not merely in the sales of lauds, but more particu- larly 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 run- ning 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," at- tached hereto and made a part hereof. FACILITIES FURNISHED, AND EFFECT ON COMMUNITIES OF SETTLE- MENT FOR DEBT. • "Question 40. And the facilities and accommodations furnished to the patrons of such roac(& ; and their report shall embrace a considera- tion of the interests and "fights of said communities as affected by what- ever plan of settlement or payment of the existing debt may be pro- posed." 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. Sta- tions, station-houses, warehouse facilities, and sidings are provided at all necessary points. The character of the service generally will com- pare 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 inter- est. 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 re- quired by the interests of the United States, they shall submit a scheme for such extension which shall secure to the United States full pay- ment 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 com- pany had lost upon the one hand, and what the Government had gained upon the other, by the construction of the road, was a candid admis- sion 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 de- cision, 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 De- partments 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 mis- management 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 al- lowed by the Government. If they are allowed, then all questions rela- tive to the extension of time in which to pay the debt becomes immate- rial, 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 im- posed 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 busi- ness 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 Gov- ernment 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 Gov- ernment in transportation, that is, based upon the business before the completion of the railroad. Since the completion of the road the effi- ciency 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 coun- try and making it suitable for homes. That and other benefits to the United States were anticipated at the passage of the law, and I be- lieve in no single instance have the people or the Government been dis- appointed. If the Government does not allow the company the com- pensation 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 Govern- ment 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 Gov- ernment 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 in- formed that the engineers appointed by the Commission are making an estimate of all the property of the company, which will include ttiis in- formation. A statement of these assets is given in the foregoing reply to inter- rogatories 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 enumer- ated, 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 de- velopment 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 ne- cessitated 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 measure- ment by taking the falls of twenty-four hours and adding them to- gether, 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 thou- sand 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 mount- ains 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 go- ing 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 mount- ains 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 re- gard 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 pro- tect 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, Da- kota, 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 com- pletion." 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 TRANSPORTA- TION. 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 trans- portation was done either by water or by wagons. The average time between New York and San Francisco was about six mouths by sail- ing vessel and from 30 to 40 days by steamer. The cost of transporta- tion 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 ef- fected 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 Fed- eral Government — a loss that in two years would, according to the figures of Eepreseutative James A. McDougall, cover the cost of a com- pleted 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 quan- tity of stock on hand for his operations, while he waited for the long-com- ing ship to arrive, whose cargo also called for money to purchase. The other operated to the detriment of consumers, inasmuch as opportuni- ties 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 Mis- sissippi Eiver, the greater portion of which at the time of the commence- ment of this road was wilderness. It has been opened up into settle- ments, 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 guar- anteed by the Government to obtain the gold coin which was the cur- rency 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 com- pelled to pay gold coin during the progress of construction for all wages, supplies, fuel, materials, and contracts which were payable on the Pa- cific 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 inter- est 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 sink- ing 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 depre- ciated because of the existence of the civil war. For example, the com- pany was compelled to dispose of the bonds issued to it by the Govern- ment 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 under- stand 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 Govern- ment. 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 be- fore 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 sell- ing, 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 in- terest 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 ac- cepted 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 sup- plies 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 compa- nies 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. To what company Central Pacific Hail~o:id ('oiinmny ..] Western Pacific Railroad Company Date issued Interest commenced. Amount of bonds. Premium on gold, average rate. Value of bonds in United States gold. May l-\ 18G5 Jan. 16, 1865 $1, 258, 000 1.32 $953, 030. 30 An- U, 1865 Aug. 14. 1865 384, 000 1.42 270, 422. 53 Oct. If, 1865 Oct. 16,1865 256, 000 1.45 176, 551. 72 D.-c. il. 186-') Nov. 29, 1805 464, 000 1.45 320, 000. 00 M:ir. (i. l«i« Mar. 6, 1866 640, 000 1.33 481, 203. 00 Inlv 10. 18<>0 July 10,1866 640, 000 1.50 426, 666. 66 Oct. :<> Oct. 29, 1866 320, 000 1.46 219,178.10 •J.in. M. l,-'07 Jan. 14, 1867 640, 000 1.35 474, 074. 07 ' ><-t. 25, 1867 Oct. 25, 1867 320, 000 1.42 225, 352. 11 Dec. 12,1867 Dec. 11, 1867 1, 152, 000 1.34 859. 701. 49 .J::n. 10, I8C8 June 9,1868 946, 000 1.40 675, 714. 28 h.lv 11.1808 July 10,1808 320, 000 1.40 228,571.43 An-. 5.1868 An jr. 4, I'-GS 640, 000 1.48 432, 432. 43 An ST. 14, 18C8 Aug. 13, 1868 1,184,000 1.47 805. 442. 18 Sept.]?, 1808 Sept, 11, 1868 1,280,000 1.44 888, 888 88 S pt.'JO, 1808 Sept. 19, 1868 1, 120, 000 1.44 777, 777. 77 Oct. !.'{. 1808 Oct. 12,1868 1, 280, 000 1.38 927. 536. 23 Oct. '28. 1868 Oct. 26,1868 640, 000 1.34 477,611.94 Nor. f>. 1SH8 Nov. 3,1868 640, 000 1.32 484, 848. 48 Nov. 12, 18(58 Nov. 11, 1868 640,'000 1.34 477, 611. 94 Doc. 5. 1808 Dec. 5,1868 640, 000 1.36 470, 588. 24 Dec. 7.1808 Dec. 7,1868 640, 000 1.36 470, 588. 24 Doc. 30. 18K8 Dec. 29, 1868 640, 000 1.34 477, 611. 94 Jan. 13, 1809 Jan. 13, 1869 640, 000 1.36 470, 588. 24 Jan. 29, 1809 Jan. 28,1869 540, 000 1.37 467, 153. 29 Feb. 17,1800 Feb. 17, 1809 640, 000 1.35 474, 074. 07 Mar. 2,1809 Feb. 17,1809 1,066,000 1.32 807, 575. 76 Mar. 3, 1809 Mar. 2, 1809 1,333,000 1.32 1,009,848.48 May 28, 1809 May 27. 1869 1, 786, 000 1.40 1, 275, 714. 28 July 15,1809 May 27, 1869 1,314,000 1.37 959, 124. 09 July 15, 1869 July 15; 1869 268, 000 1.37 195, 620. 44 Dec. 31, 1869 July 16, 1869 1, 510, 000 1.20 1, 258, 333. 33 Jan. 2, 1872 Nov. 28, 1868 4, 120 1.09 3, 779. 81 Jan. 24, 1867 Jan. 26,1867 320, 000 1.34 238, 805. 97 Sept. 1,1869 Sept. 3,1869 320, 000 1.33 240, 601. 50 Oct. 29,1869 Oct. 28,1869 1, 008, 000 1.29 781, 395. 35 Jan. 27,1870 Jan. 22,1870 3"22, 000 1.22 263, 934. 42 Jan. 8, 1872 Jan. 22, 1872 560 1.09 513. 76 27, 855, 680 20, 448, 406. 75 The bonds were s^ld by the companies to some extent for a premium in currency, so that the above value of bonds in gold is not quite as much as the amount received by the companies, namely : Total value of currency bonds $27, 855, 630. 00 Value in United States gold $20,448,466.75 Premium added .- 287,139.70 20,735,606.45 Discount company was forced to make in disposing of the bonds, being loss to company on principal 7, 120, 073. 55 Interest thirty years at 6 per cent 12, 816, 132. 39 Total amount on bonds Central Pacific Eailroad Company is required to pay to the Government, for which it received nothing 19,936,205.94 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 (cur- rency 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 pro- visions of the acts of May 7, 1878, and March 3, 1887, has paid a pre- mium 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 Pa- cific 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 ex- piration 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, prin- cipal and interest, in round numbers, of about $40,000,000. The sacri- fice 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, be- cause 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 re- ceived 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 re- member 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 "com- pany"; was it the Central Pacific Railroad Company, or the Contract and Finance Companv ? — A. I have been speaking always of the Cen- tral 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 f The WITNESS. What prices ? Commissioner ANDERSON. The prices to be paid per mile for the con- struction 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 Con- tract 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 after- wards ? — 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 ex- penses 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 al- ready determined ?— A. We took the prices into consideration at the time these contracts were made. Q. In 1867 f— 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 al- lowed 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 com- pleting 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 COM- PLETION. 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 con- struction; 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 Gov- ernment 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 Govern- ment 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 Gov- ernment 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 trans- portation 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 ex- tract 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 Govern- ment 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 construc- tion, and in this view the saving to the Government has greatly exceeded the cur- rent 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 Gov- ernment. 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 when- ever they found that there was a limited supply of any given commod- ity 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 months7 stock is suf- ficient, 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 car- rying 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 Govern- ment will have saved 259,040,430.00 That was not such a very bad investment upon the part of the Gov- ernment after all. ANTAGONISTIC LEGISLATION. " Question 53. Also to inquire if either of the Pacific Railroad Com- panies has been embarrassed audits earning capacity impaired by an- tagonistic local or State legislation "P Answer 53. The Central Pacific Railroad Company has been embar- rassed 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 Cali- fornia 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 materi- ally 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 con- sequence was that we encountered the antagonism of the existing tele- graph companies. We were to build a railroad to San Francisco, con- sequently 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 conti- nent was also antagonized by the stage companies and express com- panies. The pony-express line and the toll roads, all of which had to give way before it, also opposed us. It also seriously affected contract- ors 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 Eu- rope, 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 peo- ple in this direction alone, $600,000 a year. The Overland Stage Com- pany, 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 legisla- ture 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 ma- lignity 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 intro- duced?— A. It was generally in the shape of bills "providing for the re- duction 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 origi- nating 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 at- tention 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 ex- treme 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 well- known 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 rail- roads, 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-rail- road 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 min- ing excitement of that State, and a vast amount of machinery and sup- plies 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 capac- ity of said Pacific railroads is hereinafter fully set out in the statement of J. C. Stubbs, general traffic manager, annexed hereto, marked u Ex- hibit 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 com- pany in cash. From and including the year 1882 to the present time there has been annually a balance due the non-aided lines for transpor- tation 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 Depart- ment, showing any agreement on that figure? — A. Yes, sir; Mr. Mil- ler'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 Pa- cific Kailroad Company of amounts equal to interest on the sums re- tained 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 un- paid. HAVE ROADS COMPLIED WITH THE LAWS f "Question 57. Also to inquire if the several Pacific railroad compa- nies 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 tel- egraph 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 par- ticulars 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 com- pletion 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 obliga- tions 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 re- tard 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 Gov- ernment lien extends, after paying the current charges which are prior in lien to -that of the United States, amount to about $740,000 per an- num. 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 dol- lar 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 im- pose a burden upon a comparatively few people along its line, for bene- fits 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 Cali- fornia. 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 inter- est on the United States bonds, without making any provision what- ever for the principal, would require an increase in local rates in Ne- vada and Utah of over 33 per cent. The foregoing statements, together with the exhibits herewith pre- sented 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 Rail- road 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 refer- ence 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 Pa- cific 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 Gov- ernment 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 for- tunately 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 con- nections with lines building westward from the Mississippi River, secured co-opera- tion and harmony in working the traffic which was common to both the Central Pa- cific and Southern Pacific lines that would have been impossible under separate con- trol, 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 pro- position, that had the railroads following the 32d and 35th parallel routes, respect- ively, 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., respect- ively, 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 traf- fic 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 Pa- cific 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 Commis- sion'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 Liv- ermore. 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 Sacra- mento, 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 expe- dites 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 Stock- ton 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 expen- sive route. The Government did not assume the responsibility of constructing the Central Pa- cific 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 prin- cipal 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 man- aged by practical business men upon established business principles, of itself a val- uable 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 At- lantic 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 in- dustry, 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 man- agers 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 man- agers 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 re- strained from adopting any method of conducting its traffic or any measure of econ- omy 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 re- quired 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 build- ing 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 protec- tion 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 " com- petitive 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 in- dependent 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 an- other 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 diver- sion 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 re- gion 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 en- tire 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 re- ceived 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 : ' 18 76. 181 % Pounds. Earnings. Pounds. Earnings. From Nevada.' points 121 712 030 $5i9 780.60 160 909 650 $649 237 60 381 211 690 2 789 9244 0 131 958 100 1 021 363 10 Total 3 339 710 00 1 670 600 70 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 Pa- cific 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 inex- haustible 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 circum- stances. The line from Sacramento to San Jose" is, in round n-umbers, 140 lineal miles ; be- tween 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 riv- ers, 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 horticult- ure, 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 ac- quisition 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 mount- ain 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 33f0^, 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, watch- men, 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 be- tween four and five hundred shovelers during the storms, and most of them were re- quired 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 en- gines 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 bet- terments. 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 Mount- ains. 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 state- ment ; 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 be- lieves 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. Number. Date. Kate, per cent. Amount. 1 Sept 13 1873 3 $1 6°8 265 2 Aii£ 4 1874 5 2 713 775 3 April 1 1875 6 3 256 530 4 Oct 1, 1875 4 2 171 0>;>0 5 April 3* 1876 4 2 171 0>;>0 6 Oct. 2,' 1876 4 2, 171 090 7 April 2, 1877 4 2 17' O'^O 8 Oct. , 1877 4 2 171 O'>0 9 Feb. , 1880 3 i 6°8 205 10 Aug. , 1880 3 ] 778 26."> 11 Feb". 1881 3 1 778 265 12 Aug. , 1881 3 1 778 265 13 Feb. , 1882 y 1 778 265 14 Aug. 1882 3 1 77« 2(55 15 Feb. 1883 3 1 778 205 16 Aug. 1, 1883 3 1 778 265 17 Jan. 15 1884 3 1,778 265 34. 308. 055 U. S. PACIFIC RAILWAY COMMISSION. Central Pacific Railroad Company. Statement showing surplus profits available for dividends from organization to December 31, 1884. 1864 to June 30, 1878. Income— receipts $124,283,017.46 Land receipts to redeem bonds 1, 136, 000. 00 Interest on sinking funds 790,207.43 $126, 209, 224. 89 Expenses, &c 98,582,084.43 Sinking funds of company 3,072,557.43 United States Government : One-half transportation charges retained prior to 1873 758,639.69 One-half transportation to June 30, 1878 1,021,289.85 Five per cent, of net earnings to June 30, 1878. . 1, 871, 430. 00 Land bonds redeemed 1,136,000.00 106,442,001.40 Surplus profits to date 19,767,223.49 Dividends Nos. 1 to 8, inclusive, September, 1873, to October, 1877. . 18, 453, 670. 00 Balance surplus profits 1,313,553.49 July 1 to December 31, 1878. Receipts: Earnings $9,798,477.33 Lands 1,151,000.00 Interest on sinking funds 118, 702. 29 11,068,179.62 Expenditures: Expenses, &c 7,916,723.13 Land bonds redeemed 1,151,000.00 Sinking funds of company 223,702.29 United States requirement, 25 per cent, of net earnings 536,291.93 9,827,717.35 '1,240,462.27 For the year 1879. Receipts : Earnings 17,250,971.02 Lands 433,000.00 Interest on sinking funds 233,903. 18 17,917,874.20 Expendi tures : Expenses, &c 14,860,262.54 Land bonds redeemed 433,000.00 Sinking funds of company 772, 403. 18 United States requirement, 25 per cent 899, 563. 92 16,965,229.64 952,644.56 Balance surplus profits to date 3,506,660.32 For the year 1880. Receipts : Earnings 20,911,108.58 Lands.. 200,000.00 Interest on sinking funds - 254, 617. 08 21,365,725.66 tELAND STANFORD. 2549 Expenditures : Expenses, &c $16,588,934.81 Laud bouds redeemed 200,000.00 Sinking funds of company 1,008,117.08 United States requirement 1, 037, 225. 28 18, 834, 277. 17 $2,531,448.49 Surplus profits to date 6,038,108.81 Dividends Nos. 9 and 10 3,406,530.00 Receipts : For the year 1881. 2, 631, 578. 81 Earnings $24,094,100.95 From investments 612,656.40 From lands 420,000.00 Interest on sinking funds 262, 500. 00 25,389,257.35 Disbursements : Expenses, &c 18,087,719.98 Laud bonds redeemed 420,000.00 Sinking funds of company 1,016,000.00 United States requirements 1, 038, 935. 24 20, 562, 655. 22 4, 826, 602. 13 Surplus profits to date 7,458,180.94 Dividends Nos. 11 and 12 3,556,530.00 Balance surplus profits 3, 901, 650. 94 Receipts : For the year 1882. Earnings „ $25,683,242.41 Lands 711,000.00 Interest on sinking funds 281, 260. 00 26,675,502,41 Expenditures : Expenses, &c 20,545,180.24 Land bonds redeemed 711,000.00 Sinking funds of company 1,034,760.00 United States requirement 792, 920, 24 23, 083, 860. 48 3,591,641.93 Surplus profits to date 7,493.292.87 Dividends Nos. 13 and 14 3,556,530.00 Balance surplus profits 3, 936, 762. 87 Receipts : For the year 1883. Earnings $24,751,657.75 Lands 574.000.00 Interest on sinking funds 335, 125. 00 25,660,782.75 Expenditures : Expenses, &c 20,196,863.42 Land bonds redeemed 574, 000. 00 Sinking funds of company 1, 088, 625. 00 United States requirement 661, 530. 69 22, 521, 019. 1 1 3, 139, 763. 64 Surplus profits to date 7,076,526.51 Dividends Nos. 15 and 16 3,556,530.00 Balance surplus profits 3, 519, 996. 51 2550 U. S. PACIFIC RAILWAY COMMISSION. For the year 1884. Receipts : Earnings $'22,162,030.86 Lands 472,000.00 Interest on sinking funds 373,000.00 Miscellaneous 234,211.83 23,261,242.79 Expenditures : Expenses, &c : 21,238,166.03 Lan d bonds redeemed 472, 000. 00 Sinking funds of company 1 , 126, 500. 00 United States requirement 538, 851. 52 Deficit. 23,375,517.55 $114,274.76 Surplus profits to date Dividend No. 17 Balance surplus profits to date 3,405,721.75 1,778,265.00 1,627,456.75 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 state- ment 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.] Names of stockholders. No. of .shares. Dates of pay- ment. Amount paid. In what property. Transferred, &c. Central Pacific Rail- road Company. 1 Oct 10 1864 $100 00 Cash 1 Oct 10 1864 100 00 Cash 2 Dec 1 1862 20 00 Cash To Chas Crocker. Mar 21 1870 180 00 Cash Adams C W 10 Mar 11 1864 1 000 00 Cash Brickell B 20 Apr 30* 1861 ' 200. 00 Cash .. To C. C. Crocker C Mar 21, 1870 1 800 00 Cash Brickell E J 40 Apr 30 1861 400 00 Cash To C. C. Crocker C Mar 21* 1870 3 600 00 Cash Booth L A 10 Jan 17 1867 1 000.00 Cash Bradley & Co E L ''5 Apr 30 1861 250. 00 Cash Forfeited. Beans T E 10 Apr 3o' 1861 100 00 Cash, Forfeited Bowstead & Co 10 Apr 30* 1861 100 00 Cash To D "W "Welfcv Welty, D. W To C. C. Crocker, C June 21 1870 900. 00 Cash Bailey, James Stanford, A. P 150 Apr. 30, 1861 Sept 28 1863 1, 500. 00 Cash To A. P. Stanford. To Leland Stanford. Stanford, Leland Apr 4 1870 13 500.00 Cash... Blanchard U" W 10 Apr 30 1861 100 00 Cash To C. C. Crocker C Dec 14 1866 900 00 Construction Burnham "W. C 10 Feb" 12* 1864 1 000 00 Cash Burt B 5 Feb 18 1864 500 00 Cash i Bell T 2 Nov 5' 1862 20 00 Cash To C. C. Crocker, C June 21* 1870 180 00 Cash Bruner. Joset)h . . 2 Ffib. 9' 1863 40.00 Cash... ToC.C. * See answer to questions 27, 28, and 30. LELAND STANFORD. 2551 EXHIBIT No. 5. — Statement of the consideration paid the company by each stockholder receiving stock, Chevalier, F .1.. Cash Cash Cash 1 Crocker C Cash Converse C. H 1 5 5 15 Cash Cook T.H Cash Coolot A Cash Cole Cornelius Cash Hnntin«ion C. P Cash Crocker, E. B Crocker H. S 10 5 20 Cash Services Cash dimming^, William... Bithell J Cash Crocker • C i, 266. 66 100. 00 900. 00 5, 000. 00 5, 000. 00 45, OUO. 00 25, 000. 00 500. 00 500. 00 500. 00 210.00 90.00 50.00 450. 00 100. 00 4, 000. 00 10.00 100.00 200. 00 2, 000. 00 100. 00 1, 000. 00 100. 00 200, 00 Construction . ..' Cash . . Clark D. W 10 Crocker C Cash Crocker, B. R C roc ker. C harles 50 500 250 5 5 5 3 Cash . . . Cash Construction ... Cash ... Chamberlain, O. L Drew N. L Cash .. . Dein (r li Cash Duffy Barnes A Casli Davis, E Cash Crocker C . Construction .. Cash Drehor W . . 5 Crocker, C Cash Drew,D. K 1 40 1 10 2 20 1 10 3 Cash Drew & Co., N. L Don "lasS. W. J Cash Cash English, W. G . Cash Evt'na, J. R Cash Ebner, C. & F Cash Esl, A. Earl.D. A.v .. Casli Cash Evertt, W. L Cash C rocker, C •- Construction . . 2552 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT No. 5. — Statement of the consideration paid the company by each stockholder receiving stock} 0 Cash Forfeited. Mahlenfels F H 2 Nov 5 1862 20.00 Cash ... Forfeited. Mosier Samuel 5 Nov 7 1862 50.00 Cash Forfeited. Meister John 2 Nov 8 1862 20. 00 Cash Forfeited. Marvin W W 10 May 10 1864 1 000. 00 Cash McNeil John 5 Sept 5 1868 500. 00 Cash McDonald K H 20 June 8 1868 2 ono.oo Cash Myers H 5 Dec 3 1864 500. 00 Cash ..... Mott jr. E B 10 Feb 5 1866 1 000.00 Cash...... ... Moore George R 10 Feb 25 1865 1 000. 00 Cash Mangan P F 1 Feb 15 1864 100 00 Cash Moore D Z 25 June 19 1865 2 250.00 Cash... To C C Crocker, C June 21, 1870 250. 00 Cash Mills & Co., D.O Mahou D "VV 50 5 Mar. 1,1864 July 1 1863 5, 000. 00 500. 00 Cash Services . Nichols N. S 10 Dec 16* 1863 1 000.00 Cash.... Newbaur &. Co A. 3 Nov 5 1862 30.00 Cash ...... To C C Crocker C June 21 1870 270. 00 Cash O'Neil, James 2 Oct 25 1862 20 00 Cash. .... To C C Crocker, C June 21 1870 180. 00 Cash Oatman, Ira. 10 Nov l' 1862 100. 00 Cash Forfeited Ochs, George . . . 2 Nov 7 1862 20.00 Cash To C C Crocker, C June 21 1870 180 00 Cash... Oettl, F 10 Dec 11 1862 100.00 Cash Forfeited Pond, J. S 2 Jan 30 1863 40. 00 Cash To C C Crocker, C June 21 1870 160. 00 Cash. ..... Pike, J.F 20 Mar 20 1865 2 000.00 Cash Kussell, P. H 5 June 19 1865 500. 00 Cash Rice.C... 10 Anril 6. 1863 300. 00 Cash... To C. C. 2554 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT No. 5. — Statement of the consideration paid the company by each stockholder receiving stock, $c. — Continued. Names of stockholders. No. of shares. Dates of pay- ment. Amount paid. In what property. Transferred, v. °!\ 1°f8 DI.-U 14, J8U8 Jan. 5, 1869 Feb. 18,1869 Oct. 1, 1869 $100 2,200 36, 000 200 20, 000 20, 200 4,000 300 337, 700 1,300 300 2,000 20, 000 1,000 3,000 6, 500 14, 100 504, 100 658, 400 271, 700 5,500 100, 500 221, 000 115, 800 210, 900 5, 000 190, 100 2,500 2,000 433, 400 57-4. »HO 4,500 678, 500 431,600 5,000 2,000 559, 500 13, 000 2,000 9,500 29, 500 1, 477, 700 142, 900 20, 000 60, 500 29, 500 199,600 161, 700 5,000 700 3,000 694, 000 1,097,600 2, 182, 200 912, 500 500 729, 900 176, 100 1,000 5,000 400 860, 000 5, 500 7, 396, 000 500 1,488,100 200 8, 600, 000 6, 880, 000 Stationery and printing. Car trucks Paid for materi- als. Services and cash. Rolling stock... Construction . . . Services ' Mason Mfg. Co Huntington, C. P., agt . Ross Samuel ....... Bran u an S ........ C rocker C .......... Moore George R...... Parker J. E Real estate Construction ... Real estate Services Crocker Charles ...... Ames Henry . Estee M M Haskell D. H Services Huntington, C. P., agt . Robinson Robert ..... Sold for cash . . . Services ........ Huntingtou, U. P Crocker E. B Salary Salary Crocker C Construction ... Construction ... Construction ... Salary Crocker C Crocker C ............ C rocker C ....... .. Construction ... Construction ... Construction ... Construction ... Paid to sundry persons and charged ex- pense. Construction ... Expense Crocker C... Crocker C Huntington, C. P., agt . Huntington, C. P., agt. Huntington, C. P., agt. Crocker C Expense Construction ... Construction ... Sold for cash . . . Construction . . . Construction ... Expense . Crocker C Huntington, C. P., agt. Crocker C.... ........ Crocker C.... ........ Huntington, C. P., agt. Huutington, C. P., agt. Expense Construction ... Expense. . . . Huntington, C. P., agt. Huntington, C. P., agt. Huntington, C. P., agt. Huntington, C. P., agt. Crocker C 130 20 95 295 14, 777 3,429 200 605 295 1,996 1,617 50 7 30 6,940 10, 976 21, 822 9,125 5 7,299 1,761 10 50 4 8,600 55 73, 900 14, 80 1 2 86, 000 68, 800 Sold for cash. . . . Sold for cash . . . Expense ..... Construction Construction Sold for cash Sold for cash... Expense .... Crocker C Huntington, C. P., agt. Huntingtou, C. P., agt . Huntingtou, C. P., agt . Construction Construction Sold for cash. . . Sold for cash. . . Expense Huntiugton, C. P., agt. Huntington, C. P., agt . Huntington, C. P., agt . Crocker C Construction. . . Construction Construction. . Construction.. Sold for cash. . Construction.. Construction.. Cash . Crocker C Crocker C Crocker C Huntington, C.P., agt. Crocker, C . ....... Crocker, C McClatchy, James Buntington, C. P., agt. Huntington, C. P., agt . Contract & Finance Co. Huntington, C. P., agt. Contract & Finance Co McDonald, R. H Crocker, C Paid sundry per- s o n s and charged to ex- pense. Expense as above Construction Expense Construction Real estate Construction.... Expense . Huntington, C. P., agt. Contract & Finance Co. Contract & Finance Co Construction Construction.... LELAND STANFORD. 2557 EXHIBIT No. 5. — Statement of the consideration paid the company by each stockholder receiving stock, 1867 .. .. 10 177 65 161 755 67 144 386 63 17 369 04 1869 13 354 31 278 532 56 144 386 63 134 145 93 1870 14 863 88 296 910 21 261 525 33 35 384 88 1874 15 443.24 304 196.38 271 165 85 33 030 53 1875 18 961.84 358, 628. 00 341 496 03 17 131 97 1876 42 668.34 721,658. 17 528 854 12 192 804 05 1877 43 543 is 735 2-;>4 53 694 158 99 41 065 54 1879 44 286 18 745 GG4 45 708* 869 17 36 802 "S 1882 51 546 35 871 623 73 7°1 434 68 150 189 05 1883 52 485 34 887 7'->8 12 780 879 40 If6 84^ 72 1884 63 440 01 1 077 727 50 889 945 99 187 781 51 1885 69 830 79 1 199, 262 87 Q->1 586 97 270 675 90 1886 90 484 17 1, 566 519. 07 1 039*710 59 59G 808 48 95 468 64 1, 162, 323. 13 1 039 710 59 6°2 619 54 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 ex- cess of the response of the Government to its petitions by way of patent. Your at- tention 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 pat- ents for but 528,854, leaving a balance of acres listed and unpateuted of 192,804. Fol- lowing 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 ap- plication 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 pre- ceding 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 dis- proportionately the figures in the column headed "Balance of acres listed and uu- patented." 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 percent- age 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 them- selves 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 re- lations 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 survey- ing, 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 Gov- ernment 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 illus- trating 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 adver- tised 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 en- tirety 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 com- pletion of the surveys of laud in this State, notifying the Commissioner of the Gen- eral 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 predeces- sors in offi e, and has attached to the requirements for disapproving the mineral char- acter 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 De- partment 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 pre- sented registers and receivers must first hear and determine upon all questions relat- ing 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 agri- cultural 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 reg- isters 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 dis- missed 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 prac- tice 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 dis- proof 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 require- • rnent relating to affidavits of non-mineral indication on each forty-acre tract of agri- cultural 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 Sacra- mento 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 un«ur- veyed, 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 aris- ing 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 com- pany 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 pat- ent 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 pat- ents, 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 com- pletion 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 com- pany to inconvenience and loss arising out of delay»in 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 de- posits in the lands prior to the issue of patents excepts the land in which such min- eral 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 ex- tended, 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 quan- tity of land thus listed to the company would be a very tedious task. Approxima- tions, 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-num- bered 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 even- numbered 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 con- cerning the disposition of the Government and railroad lands within the better set- tled 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 bound- aries. Your company has addressed itself assiduously to the task of inducing set- tlement 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 con- trary, the policy of the Government relating to the disposition of its lands, inter- spersed 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 particu- larly 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 ap- plicable to grazing lands. The general result of this has already been stated. Set- tlement 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 sur- veying, 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 Govern- ment and not to the company. (4) That the Government has at no time been in a position to grant patents con- veying 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 ap- plied 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 applica- tions 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 ex- amine 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 Commis- sioner 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 vari- ous 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 authoriz- ing additional clerical force in the department. The volume of business in tho rail- road division, and the relative capacity of the division to pass upon the lists of selec- tions 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 land- grant 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 ag- gregated in that year 11,861,608 acres. In 1885 the accumulation of business repre- sented 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 follow- ing 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 de- termination 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 exami- nation 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 sub- mitted. 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 at- tention, 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 set- tlement 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 ad- justment 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 in- volved. With 16,500,000 acres before the department at Washington for examina- tion, 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 ad- ministration 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 becom- ing more hopelessly and inextricably in arrears with its business. In view of these facts the land department of the company is confronted with hope- less 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, select- ing, &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 provis- ion 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 com- pleted, 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 taxa- tion 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 ex- ecution 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 abso- lutely, 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 state- ment consisting of pages next preceding, marked " Exhibit No. 6," and knows the con- tents 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 differen- tials, pools, #c. * The rates of charge for freights and fares are just and reasonable. When consid- ered in respect of circumstances and conditions affecting profit and loss, they af- ford 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 build- ing and also the cost of operating the road, and the volume of business which deter- mines 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, dur- ing 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 dis- tance 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 lo- cally 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 in- habitant 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 popu- lation of 9,744,385, or an average of 109 inhabitants to each two square miles — a pop- ulation 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 Chi- cago, 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 geog- raphies— I have collated the following information which bears directly on the ques- tion: 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 pop- ulation 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 pop- ulation 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 Ala- meda, 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 popula- tion of -0% Per square mile; -j1^ 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; be- tween 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 pas- sengers, 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 gov- erned 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-rail- road 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 citi- zens 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 sub- stantial 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 ex- tensive 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 gen- erally 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 com- pany 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 satis- factory 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 con- cerned in this pool was termed the Trans-continental Association. The object of this association was to make and maintain reasonable rates of transportation, afford mu- tual 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 Decem- ber^!, 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 Associa- tion 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 earn- ings 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 Rail- way, was concerned in a contract with the Pacific Mail Steamship Company, where- iimtor a certain amount of space in the vessels of said steamship company was pur- chased 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 be- tween 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 termi- nated 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 demon- strable 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 sta- bility and uniformity in rates, and were of mutual benefit to the public and the car- rier. 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 con- tinue. The pooling contracts referred to have not prevented nor interrupted the downward tendency of rates. They have simply regulated it by preventing a reckless compe- tition 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 car- riers, 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, connec- tions, 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 discrimina- tion 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 discrim- inations, 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- com- pels 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 per- son 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 ex- plainable 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 build- ing 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 con- tents 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 polit- ical and commercial necessities demanding the rapid completion of the railroad, de- termined 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 Eu- rope 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 bat- tle in financial circles, forcing them to show that they were not attempting an im- possibility, 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 Rail- road 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 includ- ing charges for transfer from ships at San Francisco to the lighter, nor for transpor- tation 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 rail- road 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 loco- motive. 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 neces- sary 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 up- wards 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, independ- ent, 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 aban- donment 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 set- tlements, 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 low- ered 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 ex- pensive ; 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 ma- terial 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 re- turned 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 concen- trated 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 construc- tion 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 sup- plies, the entire length of the Central Pacific Railroad, or 740 miles. Cars were transported on ship, in pieces, to San Francisco, and lightered for Sac- ramento, 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 emi- gration 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 ex- perience, 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 state- ment, 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 mat- ters 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 Rail- road: 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 con- struction 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 rain- fall 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 con- siderations 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 remem- bered 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 sum- rait 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 mate- rial 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 in- formation 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 con- struction 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 construc- tion 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 moun- tains 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 re- quired 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 Juljr, 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 neces- sity. 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 impos- sible 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 prepa- rations 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 la- borers about $2.50 to $3. We employed about '2,500 men, with six trains with loco- motives 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 foi4 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 gal- leries 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 destruc- tion 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 es- pecially the almost superhuman effort put forth by Mr. J. H. Strobridge. superin- tendent 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 advan- tage 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, -t^t>-r-oooooooc5ro i-lOr-iOOOOOOQOoOOOOtOOCOOOCOOO «o o to n O 00 CO •«• t^" t> r-T -^" |>T oT C5* S co ^ IM eo co IH ooocoooococcoocooot~t-t~t> S .'S JQ SJD &C fct feu fcJP, - . -rt-ca ; a ;a ; ^ -a ;H • Ssss s S : m" : a := ; g^Hji-3 .i-s .§ - ' _ . _ _ . . fcJD . tJC • ^.^.r-.^.-r_.^.^.F,- . H.rt.S .'.9 :^ :^r -9 '.S ; lfiP 1 1 1 1 S^s 1 1 1^1 1 |P ^°EP iP S0 l^'' i ' =2 5 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 com- plaints 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 numer- ous 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 command- ing 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 al- ternate 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 de- lay. 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 ir- regularities 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 ap- pear 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 Postmaster- General 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 fifty- two 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 con- nection 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 . United States trans- portation charges on Central Union Pa- cific. Cost at rates paid prior to railroads. Saving to United States. Freight $5 740 753.00 $61, 161, 307. 00 $55 420 554 00 TrooDS &c 4 616 053.00 49,178 967.00 44 562 914 00 Mail : : 10 606,507.22 49, 970 780. 47 H9 364 273 ^5 Total 20 963 313.22 160 311 054.47 139 347 741 25 A saving in the expense of the Government of nearly one hundred and forty mill- ions 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 items (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 rail- ways, 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 hither- to 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 Gen- eral'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 re- turn 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 : To January 1, 1886. Bonds issued by United States : Union Pacific Railroad $27,236,512.00 Central and Western Pacific Railroads 27, 855, 680. 00 Total bonds :... 55,092,192.00 Interest accrued to January 1, 1886 : Union Pacific $29,043,327.21 Central and Western Pacific Railroads 29, 299, 156. 21 — 58,342,483.42 113,434,675.42 Transportation charges and cash : Union Pacific — * Transportation to June 30, 1885 $10, 647, 579. 36 t Cash to June 30, 18c5, 5 per cent 283, 162. 99 t Interest payment, 1885 560,017.05 $ Sinking fund in United States Treasury 6, 006, 033. 73 Total Union Pacific payments on bonded line (not including Kansas Pacific) 17,496,793.13 || Central and Western Pacific transportation charges and cash . . 9, 251, 974. 43 Total transportation charges on aided line and cash paid 26, 748, 767. 56 Balance accrued on debt to date (due in 1898) 86, 685, 907. 86 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 mate- rials, 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 ad- vantages 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 bene- fits implied by the use of half the continent for seven years. The direct saving in money to the Government is easily abstracted from the forego- ing 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. "' Traffic. United States transporta- tion charges on Central- Union Pacific. Cost to United States at rates paid prior to railroad. Saving to United States to June 30, 1876. Freight - $1, 793, 556 2, 162, 296 3, 689, 343 $15, 509, 977 18, 698, 671 21, 199, 725 $13, 716, 421 16, 536, 375 17, 510, 382 Mails Total 7, 645, 165 55, 408, 373 47, 763, 178 The debt to the same date was as follows : Bonds : Union Pacific $27,236,512 Central and Western Pacific 27,855,680 Interest accrued less credits :* Union Pacific 9,438,810 Central Western Pacific 12,180,838 $55, 092, 19*2 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 inter- est 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), esti- mates the balance to become due on the debt of Central Union Pacific line ab matu- rity 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 transconti- nental 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 Govern- ment 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 1883- 1886, $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. Kind of service. amount saved by Govern- ment. Amount saved in 30 years to maturity debt. Freight . $3, 463, 785 $103, 913, 550 2, 785, 182 83, 555, 460 Mails 2, 385, 714 71,571,420 Total . ... 8, 634; 681 259 040 430 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 trans- portation 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 South- ern 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 con- struction 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 heav- ily 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 my- self), 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. Period. Direction. Via Central Pacific and Union Pacific. Via Central Pacific and Denver & Klo Grande. Via South'n Pac. and Atlantic & Pacific. Pounds. Charges, ds. Charges. Pounds. Charges. Jan. 1, 1874, to Mar. 31 1881 East. West 940, 363, 990 $12, 565, 250. 30 1, 647, 899, 888 29, 991, 892. 90 2, 588, 263, 878 100 42, 557, 143. 20 100 Per cent Apr. 1, to Dec. 31, 1881 East. West 143,303,150 272, 455, 990 1, 928, 977. 40 4, 234, 726. 90 415, 759, 140 94.54 6, 163, 704. 30 94.50 Jan. 1, 1882, to Jan. 31 1883 East. West 127, 141, 720 358, 452, 510 1, 650, 253. 30 5, 285, 101. 90 485, 594, 230 69.23 6, 935, 355. 20 72.37 Per cent Feb. 1, to May 31, 1883 East. West 21,447,710 107, 563, 550 281, 229. 20 1, 473, 145. 00 58, 730 $1, 298. 10 129, Oil, 260 57.77 1, 754, 374. 20 57.45 58, 730 .03 1, 298. 10 .04 Per cent June 1, to Sept. 30, 1883 East. West 56, 751, 140 79, 403, 880 808, 742. 50 1, 150, 336. 70 7, 842, 280 16, 396, 820 112,246.10 214, 107. 00 136, 155, 020 48. 76 1, 965, 079. 20 49. 71 24, 239, 100 8.68 326, 353. 10 8.26 Per cent Oct. 1, 1883, to Sept. 30 1884 East. West 118, 244, 380 204, 365, 320 1,478,543.10 2, 827, 834. 30 25, 158, 880 33,015,840 314, 268. 60 440, 416. 70 22, 695, 450 43, 151, 750 $258, 794. 10 577, 067. 90 322, 609, 700 42. 45 4, 306, 377. 40 43. 23 58, 174, 720 7.05 754, 685. 30 7.57 65, 847, 200 8.66 835, 862. CO 8.39 Per cent . . . Oct. 1, 1884, to Dec. 31 1885 East. West 160, 939, SCO 173,124,650 1,920,418.10 2, 353, 273. 00 34, 340, 150 22, 632, 530 436, 440. 70 284, 530. 70 62, 647, 870 129, 909, 200 699,411.80 1,559,200.40 334, 064, 510 35. 29 4, 273, 691. 10 35.65 56, 972, 680 6.02 720, 971. 40 6.01 192, 557 070 2,258,612.20 18.84 Per cent..... 20. 34 Jan. 1, to Dec. 31, 1886 East- West 175, 783, 490 193, 450, 600 1,492,955.00 1, 338, 468, 60 40, 745, 090 52, 001, 960 331,624.40 319, 472. 80 59, 254, 850 99, 8:20, 590 462, 541. 10 989, 241. 10 369, 234, 090 31.18 2, 831, 423. 60 32.36 92, 747, 050 7.83 651, 097. 20 7.44 159, 075, 440 13.43 1,451,782.20 16.59 Per cent Total 5 yrs. 9 mos 2, 192, 427, 950 48.35 28, 230, 005. 00 52.46 232, 192, 280 5.12 2, 454, 405. 10 4.56 417, 479, 710 9.20 4, 546, 256. 40 8.45 Per cent. Period. Direction. Via South'n Pacific and A. T. & S. F. Via South 'n Pac. and Texas & Pac. Via South'n Pac. and Gr. H. & S. A. Pounds. Charges. Pounds. Charges. Pounds. Charges. Apr. 1, to D%c. 31, 1881 East. West 21,362,350 2, 663, 060 $305, 546. 70 53, 068. 50 24, 025, 410 5.46 358,615.20 5.50 Per cent Jan.l, 1882, to Jan. 31, 1883 East. West 50, 393, 500 54, 278, 820 721,230.00 766, 021. 40 91, 534, 360 13, 223, 860 $921, 285. 60 234, 796. 40 420, 3GO $4, 501. 50 110, 672, 320 15.78 1,487,251.40 15.52 104, 758, 5:20 14. 93 1, 156, 082. 00 12.06 420, 360 .06 4, 501. 50 .05 Percent Feb. 1, to May 31, 1883 East. West 12, 847, 600 49, 494, 060 172, 954. 70 641, 752. 20 8,611,810 7, 055, 760 118, 4fiO. 80 122, 695. 60 5, 147, 610 11,093,7(50 64, 839. 40 177, 622. 20 62, 341, 660 27.92 814, 706. 90 26.67 15, 687, 570 7.01 241,156.40 16,241,370 7. 90 1 7. 27 242, 461. 60 7.94 2600 U. S. PACIFIC KAILWAY COMMISSION. EXHIBIT A. — Comparative statement showing freight tonnage, $*c.— Continued. Period. | 5 Via South'n Pacific and A.T.&S.E. Via Sonth'n Pac. and Tex. & Pac. Via South'n Pac. and G. H. & S. A. Pounds. Charges. Pounds. Charges. Pounds. Charges. June 1, to Sept. 30, 1883 East. West 13, 792, 950 30, 100, 000 $178, 392. 90 374,613.40 12. 704, 710 8, 113, 3oO $164, 939. 40 120, 022. 10 22, 477, 880 31, 663, 130 $261, 766. 40 561,700.70 43, 892, 950 15.71 553, 006. 30 13.99 20, 818, 090 7.46 284, 961. 50 7.21 54,141,010 19.39 823, 467. 10 20.83 Per cent Oct. 1,1883, to Sept. 30 1884 East. West 17, 916, 560 48, 184, 820 215,477.30 505, 712. 10 35, 29.}, 160 38, 104, 060 410,407.10 459, 110. 80 35, 460, 850 56, 874, 990 454, 253. 40 983, 714. 00 66, 101, 380 8.69 721, 189. 40 7.24 73, 397, 220 9.66 8G9, 577. 90 8.73 92, 335, 840 12.14 1, 437, 967. 40 14.43 Per cent ......... Oct. 1, 1884, to Dec. 31,1885 East. West 7, 396, flOO 254, 730 93, 884. 50 4, 406. 20 36, 437, 990 24, 649, 270 424, 778. 20 287, 921. 10 62, 363, 790 102, 173, 370 712,758.50 1, 610, 103. GO 7, 651, 630 .81 98, 290. 70 .82 61, 087, 260 6.46 712, 699. 30 5.95 164, 537, 160 2, 322, 862. 10 17. 39 19. 38 Jan. 1, to Dec. 31, 1886 East. West 769, 200 41, 310 8, 000. 70 586. 50 34, 625, 300 23, 132, 570 303, 160. 30 184. 238. 00 152, 680, 04o| 895, 459. 20 191,969,4401,288,154.20 810, 510 .07 8, 587. 20 .10 57, 757, 870 4.88 487, 398. 30 5.58 344, 649, 480 29.09 2,183,613.40 24.96 Per cent Total, 5 yrs. 9 mos.. 315, 495, 860 6.95 4, 041, 647. 10 7.51 333, 486, 230 7.36 3,751,875.40 6.97 672, 325, 220 14.83 7, 014, 873. 10 13.03 Per cent Period. Direction. Via North 'n Pacific and O. E. and N. Co. Via Oregon Short Line. Total via all routes. Pounds. Charges. Pounds. Charges. Pounds. Charges. Jan. 1, 1874, to Mar. 31 1881 2, 588, 263, 878 $42, 557, 143. 20 Apr. 1, to Dec. 31, 1881 439, 784, 550 6, 522, 319. 50 Jan. 1,1882, to Jan. 31 1883 = 701, 445, 130 9, 583, 190. 10 Feb. 1, to May 31, 1883 223, 320, 590 3, 053, 997. 20 June 1, to Sept 30, 1883 279, 246, 170 3, 952, 867. 20 Oct. 1, 1883, to Sept. 30 1884 81, 645, 044 10.75 $1, 036, 776. 08 10.41 760, 111, 104 9, 962, 435. 48 Per cent Oct. 1, 1884, to Dec. 31, 1885... . 91, 605, 847 9.62 1, 143, 128. 66 9.53 38, 513, 114 4.07 $458, 160. 71 3.82 946, 449, 271 11,988,416.17 Per cent .... Jan. 1. to Dec. 31. 1886 90, 666, 960 7.66 756, 457. 08 8.65 69,481,740 5.86 378, 222. 80 4.32 1, 184, 41.3, 140 8, 748, 581. 78 Per cent Total, 5 yrs., 9 mos. 263, 377, 851 5.81 2, 936, 361. 82 5.46 107, 994, 854 2.38 836, 383. 51 1.56 4,534,779,9551 53,811,807.43 Percent 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 Mis- souri 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 Dem- ing, 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 South- ern 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 An- tonio 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 earn- ings; in the third period, to 69.23 per cent, in tonnage and 72.37 per cent, in earn- ings; 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 indi- vidual 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 Mis- souri 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 traf- fic 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.] Periods. Direc- tion. Via Central Pacific and Union Pacific. Via Central Pacific and Denver & Rio Grande. Via Southern Pacific md Atlantic & Pacific Pounds. Charges. Pounds. Charges. Pounds. Charges. Jan. 1,1874, to Mar. 31, 1881. East.. West. 940, 363, 990 , 647, 899, 888 $12, 565, 250. 30 29, 991, 81.2. 90 2, 588, 263, 878 100 42, 557, 143. 20 100 Apr. 1,1881, to Dec. 81, 1881. East.. West. 143, 303, 150 272, 455, 990 $1,928,977.40 4, 234, 726. 90 415, 759, 140 94.54 6, 163, 704. 30 94.50 Jan. 1, 1882, to Jan. 31, 1883. East.. West. 127,141,720 358, 452, 511 M50.253.30 5, 285, 101. 90 485, 594, 230 69.23 6, 935, 355. 20 72.37 Feb. 1,1883, to May 31, 1883. East.. West. = 21,447,710 107, 622, 280 281,229.20 1, 473, 843. 60 $599. 50 129, 069, 990 57.80 1, 755, 072. 80 57.47 599. 50 0.02 June 1, 1883, to Sept. 30, 1883. East.. West. 64, 593, 420 95, 800, 700 866, 827. 30 1, 256, 404. 00 54,161.30 114, 039. 70 160, 394, 120 57.44 2, 123, 231. 30 53.71 168 201.00' 4.26 Oct. 1, 1883, to Sept. 30, 1884. Per cent ... East.. West. 143, 403, 260 237, 381, 160 1,637,052.10 3, 036, 139. 90 155, 759. 60 232, 111. 10 22, 695, 450 43,151,700 $J58,794.10 577, 067. 90 380, 784, 420 50.10 4, 673, 192. 00 46.91 387, 870. 70 3.89 65, 847, 200 8.66 835, 862. 00 8.39 Oct. 1,1884, to Dec. 31, 1885. Per cent East . . West. 195,280,010 195, 757, 180 2, 141,1 62. 6C 2, 487, 504. OC 215.C96.20 62,647,870 150, 299. 70 129, 909, 200 699, 411. FO 1, 559, 200. 40 '.... 391, 037, 190 41 31 4, 628, 660. 6C 38.61 365, 995. 90 3.05 192, 557, 070 20.34 2, 258, 612. 20 18.84 Jan. 1, 1886, to Dec. 31, 1886. Per cent East.. West . 216, 528, 580J 1, 659, 890. 1 C 245, 452, 5GO 1, 489, 614. 3C 164, 689. 30 168, 327. 10 59, 2o4, 850 99, 820, 590 462, 541. 10 989, 241. 10 461, 981, 140 39.01 3, 149, 504. 4C 36. OC 333, 016. 40 3.80 159, 075, 440 13.43 1,451,782.20 16.59 Total, 5 yrs. 9 mos . Percent 2, 424, 620, 230 53.47 29, 428, 726. 6C 54. 6£ 1, 255, 683. 50 2.34 417, 479, 71C 9.20 4, 546, 256. 40 8.45 . Period. Dire< tion Via Southern Pacific and A. T. & S. P. Via Southern Pacific Via Southern Pacific and Texas & Pacific. and G. H. & S. A. Pounds. Charges. Pounds. Charges. Pounds. Charges. Apr. 1, 1881, to Dec. 31, 1881. East.. 21,632,350 West . 2, 663, 060 $305 546. 70 . 53 OG8.5b . 24 O*>R 11 n 358 615 ''O 5.46 5.50 . LELAND STANFORD. 2603 EXHIBIT B. — Comparative statement showing freight tonnage, #c. — Continued. Period. Direc- tion. Via Southern Pacific and A. T. & S. P. Pounds. Charges. Via Southern Pacific and Texas & Pacific. Pounds. Charges. Via Southern Pacific and G. H. & S. A. Pounds. Charges. East. West 56, 393, 500 54, 278, 820 $721, 230. 00 766, 021. 04 91, 534, 360 13, 223, 860 $921, 285. 60 234, 796, 40 420, 360 $4, 501. 50 Jan. I, 1882, to Jan. 31, 1883. Percent 110, 672, 320 15. T8 1, 487, 251. 40 104, 758, 220 1 15.52 14.93 East. West Feb. 1, 1883, to May 31, 1883. Percent 12, 847, 600 49, 494, 060 62, 341, 660 27.92 172, 954. 70 641, 752. 20 8, 611, 810 7, 055, 760 814, 706. 90 26.67 15, 667, 570 7.01 ., 156, 082. 00 12.06 ~Il8, 460. 80 122, 695. 60 241, 156. 40 7.90 420, 360 0.06 4, 501. 50 0.05 5, 147, 610 11, 093, 760 16, 241, 370 7.27 64, 839. 40 177, 622. 20 East. West 13, 792, 950 30, 100, 000 178, 392. 901 12, 704, 710 374, 613. 40 8, 113, 380 164, 939. 40 120,022.10 22, 477, 880 31, 663, 130 June 1, 1883, to Sept. 30, 1883. Per cent 43, 892, 950 15.71 553, 006. 30 13.99 East . West 17, 916, 560 48, 184, 820 215, 477. 30 505, 712. 10 Oct. 1, 1883, to Sept. 30, 1884. Per cent 66, 101, 380 8.69 721, 189. 40 7.24 East. West 7, 396, 900 254, 730 93, 884. 50 4, 406. 20 Oct. 1, 1884, to Dec. 31, 1885. Per cent 7, 651, 630 0.81 98, 290. 70 0.82 East. West 769, 200 41, 310 8, 000. 70 586. 50 Jan. 1, 1886, to Dec. 31, 1886. Per cent . . 810, 510 0.07 8, 587. 20 0.10 Total, 5 yrs. 9 mos . Per cent .. 315, 495, 860 4, 041, 647 6.95 7.51 20, 818, 090 7.46 284, 961. 50 7.21 54, 141, 010 19.39 35, 293, 160 38, 104, 060 410, 467. 101 459, 110. 80 35, 460, 850 56, 874, 990 261, 766. 40 561, 700. 70 823, 467. 10 20.83 454, 253740 983, 714. 00 73,397,220 869,577.90 9.66 36, 437, 990 24, 649, 270 8.73 424, 778. 20 1 287, 921. 10 92, 335, 840 12.14 62, 363. 790 102, 173, 370 712, 758. 58 1, 610, 103. 60 61,087,260 712,699.30 6. 46 5. 95 34,625,300! 303,160.30 23, 132, 570 184, 238. 00 57, 757, 870 487, 398. 30 4. 88 5. 58 10 333, 486, 230 3, 751, 875. 40 7. 36, 6. 97 164, 537, 160 17.39 152, 680, 040 191, 969, 440 2, 322, 862. 10 19.38 895, 459. 20 1, 288, 154. 20 344, 649, 480 29.09 672, 325, 220J 14. 83 2, 183, 613. 40 24.96 7, 014, 873. 10 13.03 Period. Direc- tion. Via Northern Pacific and O. R. & N. Co. Pounds. Charges. Via Oregon Short Line. Pounds. Charges Total via all routes. Pounds. Charges. Jan. 1,1874, to Mar. 31, 1881. Apl. 1,1 881, to Dec. 31, 1881. Jan. 1, 1882, to Jan. 31, 1883. Feb. 1,1883, to May 31, 1883. June 1, 1883, to Sept. 30, 1883. Oct. 1, 1883, to Sept. 30, 1884. Per cent Oct. 1,1884, to Dec. 31,1885. Per cent Jan. 1, 1886, to Dec. 31, 1886. Per cent ... 81,645,044 10.75 91, 065, 847 9.62 90, 666, 960 7.6G $1, 036, 776. 08 10.41 1, 143, 128. 66 9.53 756, 457. 08 8.65 2, 588, 263, 878 $42, 557, 143. 20 439, 784, 550 6, 522, 319. 50 701, 445, 130 9, 533, 190. 10 223, 320, 590 3, 053, 997. 20 279, 246, 170 3, 952, 867. 20 760, 111, 104 9, 962, 435. 48 38, 513, 114 4.07 69, 481. 740 5.86 458,160.71 3.82 378, 222. 80 4.32 946, 449, 271 11,988,416.17 184, 423, 140 8, 748, 581. 78 Total, 5 yrs. 9raos. Percent ... 263, 377, 851 2, 936, 361. 82 107. 994, 854 5.81 5.46 2.38 836, 383. 51 4, 534, 779, 955 1.56 53, 811, 807. 43 P R VOL IV- -18 2604 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT C. — Statement allowing tonnage and charges lost to Central and Union Pacific lines (including Central Pacific tonnage and charges via Denver and Rio Grande) on through freight traffic for periods noted, on account of the opening of new lines. Period. Tons. Charges. Total tonnage and charges via all lines. January 1 1874 to March 31 1881 1 294 131 939 $49 557 143 20 April 1 to December 31 1881 219 892 275 6 522 319 50 January 1 1882 to January 31 1883 . . 350 722 565 9 583 190 10 February 1 to May 31 3883 111 660 295 3 053 997 90 June 1 to September 30 1883 139 693 085 3 95° 867 °0 October 1 1883 to September 30 1884 380 055 552 9Ofi9 40;: 40 October l' 1884 to December 31 1885 473 224 635 11 988 416 17 January 1 to December 31, 1 886 592 211 570 8 748 581 78 Total 5 years 9 months 2 267 389 977 53 811 807 43 Tonnage and charges via Central and Union Pacific. January 1 1874 to March 31 1881 1 294 131 939 42 557 143 20 April 1 to December 31 1881 ' 207* 879 570 6 163 704 '30 January 1 1882 to January 31 1883 242* 797 J15 6 935 355 20 February 1 to May 31 1883 . ... 64 534 995 1 755 072 80 June 1 to September 30 1883 . . . 80 197 060 2 193 231 30 October 1 1883 to September 30 1884 190 399 210 4 673 199 00 October 1 1884 to December 31 1885 .... 195 518 595 4 698 666 60 January 1 to December 31 1886 ........ 230* 990 570 3 149 504 40 Total 5 years 9 months ............... ... ....... 1 212 310 115 29 498 726 60 Loss of tonnage and charges to Central and Union Pacific. January 1, 1874, to March 31, 1881 April l*to December 31, 1881 12 012 705 35H 615 90 January 1 1882 to January 31 1883 . 107 995 450 2 647 834 90 February 1 to May 31 1883 47 125 300 1 298 994 40 June 1 to September 30, 1883 59 420 095 1 829 635 90 October 1, 1883, to September 30, 1884 189 663 342 5 289 243 48 October 1, 1884 to December 31, 1885 277 706 040 7 359 749 57 January 1 to December 31, 1886 .. 361 221 000 5 599 077 38 Total, 5 years 9 months 1 055 079 862 24 383 080 83 REDUCED TO ANNUAL RATES. Period. Annual tons. Annual av- erage rate. Annual charges. Total via all lines. January 1 1874 to March 31 1881 178 500 948 $3 288 50 $5 869 950 84 April 1'to December 31, 1881* 293 189.705 2 966 00 8 694 426 04 January 1, 1882, to January 31, 1883 323, 743. 908 2 732 40 8 846 021 64 February 1 to May 31, 1883 334, 980. 888 2 735 00 9 161 991 60 June 1 to September 30 1883 418 809 255 2 83] 10 11 858 601 60 October 1, 1883 to September 30 1884 380 055 552 2 691 30 9 96 > 435 48 October 1, 1884, to December 31 'l885 378 579 708 2 539 50 9 590 739 88 January 1 to December 31 1886 592 211 570 1 477 30 8 748 581 78 Total, 5 years 9 months ... 394 328 688 2 373 30 9 358 575 94 Via Central and Union Pacific. January 1, 1874, to March 31, 1881 178, 500. 948 3 2-88 50 5 869 950 84 April 1 to December 31, 1881 . 277, 172. 765 2 965 00 8 218 272 36 January 1, 1882, to January 31, 1883 224, 120. 402 2, 856. 40 6 401 866 32 February 1 to May 31, 1883 193, 604. 982 2,716 50 5 259 248 40 June 1 to September 30, 1883 240, 591. 180 2, 647. 50 6 369 693 84 October 1, 1883, to September 30 1884 190 392 210 2 454 50 4 673 199 00 October 1, 1884, to December 31 1885 156 414. 876 2 367 30 3 702 933 i;)4 January 1 to December 31, 1886 230 990. 570 1 363 £0 3 149 504 40 Total, 5 years 9 months 210 836.544 2 497 00 5 118 039 36 Loss annually to Central and Union Pacific. January 1, 1874, to March 31, 1881... April 1 to December 31, 1881 , 16, 016. 940 478 J 53. 68 LELAND STANFORD. 2605 EXHIBIT C. — Statement shoiving tonnage and charges, fc. — Continued. Period. Annual tons. Annual av- erage rate. Annual charges. Loss annually to Central and Union Pacific— Continued. January 1, 1882, to January 31, 1883 99 623 496 $2 444 155 32 February 1 to May 31, 1883 141 375 906 3 902 773 20 June 1 to September 30 1883 178 278 075 5 488 907 76 October 1, 1883, to September 30 1884 189 663 342 5 289 243 48 October 1, 1884, to December 31, 1885 222 164 832 5 887 799 64 January 1 to December 31, 1886 311 064 990 4 204 757 49 Total, 5 years 9 months 183 492 144 4 240 535 88 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 ton- nage 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 re- duced 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 De- cember 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 ton- would 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 in- fluence 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 Gal- veston, Harrisburg and San Antonio Railroads, respectively. Exhibit D and the other passenger statements shovr the earnings west of these re- spective 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.] Period. • ft Via Ogden and Union Pa- cific. Via Ogden and Denver and Rio Grande. No. Earnings. Per cent. No. Earnings. 2 January 1, 1874 to March 31 1881 East.. West. 207, 717 359, 116 $5,948,323.94 9, 688, 287. 38 566, 833 15, 636, 611. 32 100 April 1 to December 31 1881 East.. West. 20, 574 32, 854 53, 428 573, 384. 51 856, 946. 57 1, 430, 331. 08 77.25 January 1, 1882, to January 31,1883. February 1 to May 31, 1883 East.. West. == 24, 321 41,170 683, 809. 28 1, 059, 765. 89 65, 491 1, 743, 575. 17 63.32 East.. West. 6,781 16,445 190, 925. 36 384, 796. 17 436 352 $14, 837. 22 7, 318. 18 23, 226 575, 721. 53 53.78 . 788 22, 155. 40 2.07 June 1 to September 30, 1883 East.. West. 9,445 17, 183 228,731.93 419, 683. 73 3,464 2,676 9-2, 478. 71 61, 957. 72 26, 628 648, 415. 66 61.10 6,140 154, 436. 43 14.55 Octoberl, 1883, to September 30, 1884. East.. West. 19, 271 29, 033 484, 051. 58 708, 192. 05 5,886 4,839 165, 289. 34 128, 064. 45 48, 304 1, 192, 243. 63 42.43 10, 725 293, 353. 79 10.44 LELAND STANFORD. 2607 EXHIBIT D. — Comparative statement showing the number of passengers, $-c. — Continued. Period. Direction. Via Ogden and Union Pa- cific. Via Ogden and Denver and Bio Grande. tfo. Earnings. • Per cent "Ho. Earnings. Per cent October 1, 1884,|to December 31, 1885. January 1 to December 31, 1886 East.. West. 21, 013 33, 304 $519, 642. 79 745, 564. 18 9,574 5,546 $251, 742. 18 143, 394. 40 41.25 54,318 1, 265, 206. 97 15, 120 395, 136. 58 12.88 East.. "West. 30, 157 38, 768 375, 253. 90 510, 028. 26 18, 804 15, 213 250, 893. 45 189, 547. 59 68, 925 885, 282. 16 38.51 34, 017 440, 441. 04 19.16 Total, 5 years 9 months 340, 320 7, 740, 776. 20 51.91 66, 790 1, 305, 533. 24 8.75 Period. | fi Via Mojave and Atlantic Pacific. Via Deming and A. T. and S.F. Ko. Earnings. 1 No. Earnings. Per cent. April 1 to December 31, 1881 East.. 5,354 8,652 $169, 114. 89 252, 201. 40 West. 14, 006 421, 316. 29 22. 75 January 1, 1882, to January 31, 1883 February 1 to May 31, 1883 East.. 9,640 17, 967 296, 874. 80 518, 021. 11 West . 27, 607 814, 895. 91 29.60 East .. 3,105 8,918 94, 837. 93 238, 434. 46 West. 12, 023 333, 272. 39 31.14 June 1 to September 30, 1883 East 2,088 4,187 61, 171. 33 108, 174. 12 West. 6,275 169, 345. 45 15.96 Octoberl, 1883, to30, September 1884. October 1, 1884, to December 31, 1885. January 1 to December 31, 1886 East.. West. 2,463 4,789 $42, 580. 18 «2, 246. 20 4,126 11,989 120, 244. 54 314, 364. 28 15.49 7,252 124, 826. 38 4.44 16, 115 434, 608. 82 East . . West. 6,796 16, 849 60, 945. 85 130, 807. 15 3, 763 9,900 107, 969. 87 254, 417. 34 23,645 191, 753. 00 6.25 13, 663 362, 387. 21 11.81 East.. West . 8,262 22, 210 42, 462. 35 123, 839. 29 1,136 3,160 21,214.25 57, 134. 49 ...... 30, 472 166, 301. 64 7.23 4,296 78, 348. 74 3.41 Total, 5 years 9 months 61, 369 482, 881. 02 3.31 93, 985 2, 614, 174. 81 17.46 2608 U. S. PACIFIC RAILWAY COMMISSION. EXHIBIT D. — Comparative statement showing number of passengers, $c. — Continued. Period. • Direction. Via El Paso and Texas and Pacific. Via El Paso and Ox. H. and S.A. No. Earnings. Per cent. No. Earnings. Per cent. January 1, 1882, to January 31, 1883 February 1 to May 31 1883 East.. West. 2,495 2,348 $80, 462. 02 114, 440. 48 6,843 194, 902. 50 7.08 East.. West. 1,318 2,266 32, 438. 10 55, 581. 23 455 952 $18, 610. 46 32, 652. 78 3,584 88, 019. 33 8.22 1,407 51, 263, 24 4.79 June 1 to September 30 1883 East . . West. 813 1, 427 22, 765. 33 34. 428. 58 287 761 10, 503. 58 21, 382. 76 2,240 57, 193. 91 5.39 1,048 31, 886. 34 3.00 October 1, 1883, to September 30, 1884 October 1, 1884, to December 31, 1885 January 1 to December 31 1886 East.. West. 3,161 4,630 87, 853. 67 139,139.45 1,270 3,773 46, 677. 52 113, 703. 96 7,791 226,993.12 8.08 5,043 160, 381. 48 5.71 East.. West. 4,433 6,093 152, 573. 07 145, 072. 83 2,434 4,473 84, 329. 71 134, 399. 42 10, 526 267,645.90 8.72 6,907 218, 729. 13 7.13 East.. West. 7,011 7,342 93, 668. 30 132, 617. 72 1,675 5,781 30, 179. 49 106, 565. 27 14, 353 226, 286. 02 9-85 7,456 136, 744. 76 5.94 Total 5 years 9 months 45, 337 1, 061, 040. 78 7.13 21, 861 599, 004 95 4.02 Period. Direction, Via Northern Pacific and O. R. and N. Co. Via Union Pacific and Northern Pacific. No. Earnings. Per cent. No. Earnings. Per cent. October 1, 1883, to September 30, 1884 October 1, 1884, to December 31, 1885 January 1 to December 31 1886 12, 955 10,871 13, 896 $294, 796. 23 221, 150. 98 257, 474. 42 10.49 7.26 11.23 3,692 1,155 $82, 054. 90 24, 696. 82 2.92 0.80 Total 5 years 9 months 37, 722 773, 421. 63 5.18 4,847 106, 751. 72 1.52 Period. Direction. Via Oregon Short Line. Total via all routes. No. Earnings. Per cent. No. Earnings. January 1, 1874, to March. 31, 1881 566, 833 67, 434 99, 941 41,028 42, 331 111, 877 141, 918 180, 210 $15, 636, 611. 32 1, 851, 647. 37 2, 753, 373. 58 1, 070, 431. 89 1, 061, 277. 79 2, 809, 258. 35 3, 066, 579. 02 2, 298, 395. 73 April 1 to December 31, 1881 Jannarv 1, 1882, to January 31, 1883 February 1 to May 31, 1883 June 1 to September 30 1883 October 1 1883, to September 30 1884 October 1 1884, to December 31 1885 5,713 6,795 $119, 872. 43 107, 516. 95 3.90 4.67 0.71 January 1 to December 31 1886 Total, 5 years 9 months 12, 508 227, 389. 38 684, 739 14, 910, 963. 73 LELAND STANFORD. 2609 EXHIBIT E. — Statement showing number of passengers (through) and revenue lost to Cen- tral Pacific road on account of opening of new lines ; also showing average rate per passenger earned and loss annually for the periods as noted. Period. Total via all routes west of C. P. and S. P. terminals. Total C. P. via Ogden, including via JD.fl.Gr. Loss to Central Pacific via Ogden. No. Earnings. No. Earnings. No. Earnings. Per cent. Jan. 1, '74, to March 31, '81.. . Average rate per passenger. April 1, '81, to Dec. 31, '81 Average rate per passenger. Jan. 1, '82, to Jan. 31, '83 .... Average rate per passenger. Feb. 1, '83, to May 31, '83 .... Average rate per passenser. June 1, '83, to Sept. 30, '83 ... Average rate per passenger. Oct. 1, '83, to Sept. 30, '84. ... Average rate per passenger. Oct. 1, '84, to Dec. 31, '85 Average rate per passenger. Jan. 1, '86, to Dec. 31, '86 .... Average rate per passenger. Total five years nine months. 566, 833 $15,636,611.32 27.59 566, 833 $15,636,611.33 27.59 67, 434 1, 851, 647. 37 27.46 2, 753, 373. 58 27.55 1, 070, 431. 89 26.09 1, 061, 277. 79 25. 07 2, 809, 258. 35 25.11 3, 066, 579. 02 21.60 2, 298, 395. 73 12.75 53, 428 1, 430, 331. 08 26.77 1, 743, 575. 17 26. 62 597, 876. 93 24. 89 802, 852. 09 24.50 1, 485, 597. 42 25.17 1, 660, 343. 55 23. 77 1,325,723.20 12. 88 14, 006 $421, 316. 29 30.08 1, 009, 798. 41 29.02 472, 554. 96 27. 77 258, 425. 70 27.02 1, 323, 660. 93 25.05 1, 406, 235. 47 19.40 972, 672. 53 12.60 22.75 99, 941 65, 491 "24," Oli" 34, 450 36.65 41, 028 17, 014 44 14 42, 331 32, 768 9,563 '52,"848' "72," 480 " "77," 268' 24.35 111, 877 59, 029 47.12 iii, 9is 69, 438 45.85 180, 210 102, 942 42.32 684, 739 14, 910, 963. 73 407, 110 9, 146, 299. 44 277, 629 5, 864, 664. 29 39.33 Period. Reduced to an annual basis. Total via all routes. Total via Ogden. Annual loss to Central Pacific. No. Earnings. No. Earnings. No. Earnings. Per cent. Jan. 1, '74, to March 31, '81 .. April 1, '81, to Dec. 31, '81 Jan. 1, '82, to Jan. 31, '83.. Feb. 1, '83, to May 31, '83 . June 1, '83, to Sept. 30, '83 Oct. 1, '83, to Sept, 30, '84. Oct.l, ?84, to Dec. 31, '85|.. Jan. 1, '86, to Dec. 31, '86. . Total five years nine months. 78, 180 89, 912 92, 256 i23, 084 126, 993 111, 877 121, 644 180, 210 $2, 156, 773. 92 78, 180 71, 237 60, 456 72, 048 98, 304 59, 029 59. 508 102, 942 $2, 156, 773. 92 2,468,863.36 2, 541, 575. 52 3,211,295.64 3, 183, 833. 37 2, 809, 258. 35 2, 628, 496. 32 2, 298, 395. 73 1, 907, 108. 11 1, 609, 453. 92 1, 793, 630. 76 2, 408, 556. 27 1, 485, 597. 42 1, 423, 151. 64 '1, 325, 723. 20 18, 675 31, 800 51, 036 28, 689 52, 848 62, 13fi 77, 268 $561,755.05 932, 121. 60 1, 417, 664. 88 775, 277. 10 1, 323, 660, 93 1, 205, 314. 68 972, 672. 53 22.75 36.68 44.14 24.35 47.12 45.S5 42.32 119, 076 2,593,211.40 70, 800 1, 573, 269. 36 48, 276 1, 019, 942. 04 39.33 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. Assum- ing 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. Re- ducing 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 re- duced 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 an- num, 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 traf- fic, 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 Cen- tral 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 passen- ger 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 in- quiry 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 es- timate 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) repre- sent 46 per cent, of the through line earnings, the remaining 54 per cent, is added, show- ing total loss to Central and Union Pacific line, as below. Total earnings via all routes. Earnings via Central and Union Pacific. Loss to Central and Union Pacific. Per cent, earnings lost. Passenger ...... ................. .. $32 415 138.54 $19, 665. 868. 35 $12, 749, 270. 19 39 53 811 807.43 29, 428, 726. 60 24,383,080.83 45 86, 226, 945. 97 49,094,594.95 37, 132, 351. 02 43 LELAND STANFORD. 2611 EXHIBIT F.— Recapitulation of Exhibits E and C— Continued. Reduced to an annual basis. Annual earnings all routes. Annual earn- ings Cent'l and Union Pac. Annual loss of earnings to C. P. & U. P. Percent, lost annually. $5, 637, 416. 10 9, 358, 575. 24 $3, 420, 150. 80 5, 118, 039. 36 $2, 217, 265. 30 4, 240, 535. 88 39 45 14, 995, 991. 34 8, 538, 190. 16 6, 457, 801. 18 43 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 F 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 passen- gers ; 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 serv- ice 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, state- ments 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 an- nual 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 in- debtedness 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 Rail- roads 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 non- aided lines and remaining unpaid. * See answer to question No. 55. LELAND STANFORD. 2613 t~t-c}i«O"*oc5coaocot^ocooin:"3i-i>- O OO «O ^ r-t t- lO *H Ci CO t-t CO CO i-l S8SSSSS8SS3Sg§gSSSgSSSS§ ilJlJJ; *i 2614 U. S. PACIFIC RAILWAY COMMISSION. 2,1 ! 1*1 0 ,8 § ?3 1» fit » 85 5 S> !» 9 II a « •s s*3s IMS- * a-s-3 s^slea * SF SSffl^lgliiiSi.l^a^J, LELAND STANFORD. 2615 STATEMENT C. — Statement showing amounts due from United Slates Government in cash to December 31, 1886, for transportation on non-aided and leased lines. Year. Requirement under Thur- man act. United States transportation. Balance due and unpaid. Aided lines. Non-aided lines. Cash paid. Total trans- portation less cash. 1882 $792, 920. 24 661,530.69 538, 851. 52 386, 118. 83 418,271.56 $403f| 754. 26 403,241.26 478, 225. 20 342, 941. 39 344, 694. 45 $648, 108. 20 515, 237. 00 481, 395. 51 514, 242. 16 504, 343. 41 $122, 754. 64 183, 564. 93 $929, 107. 82 734, 913. 33 959, 620. 71 857, 183. 55 849, 037. 86 $136, 187. 58 73, 382. 64 420, 769. 19 471,064.72 430, 766. 30 1883 1004 1883 -ICCfj 2, 797, 692. 84 1, 972, 856. 56 2, 663, 326. 28 306, 319. 57 4, 329, 863. 27 1, 532, 170. 43 The requirements from July 1, 1878, to December 31, 1884, were originally stated and settled as above, but they have since been restated in conformity with the decision of the Court of Claims (see U. S. Com. of R. R., 1885. p. 7), that new construction and equipment on the aided line are proper deductions in ascertaining the net earnings. These deductions, since made, make the annual requirements less than the amounts on which settlements were currently effected, by the sum of $321, 152.72. This amount is therefore due the compauy in addition to the sum stated above Making balance of cash due and unpaid for transportation on non-aided roads to De- cember 31, 1886 321, 152. 72 1, 853, 323. 15 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 mat- ters 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 state- ments already submitted ? — A. No, except to explain them, if the Com- mission 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 regu- larly 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 consider- able 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. Mer- chandising. 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 en- tered 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 merchandis- ing. Q. Was he engaged in the same line of business that you were en- gaged 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 infor- mation 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 ex- plorations 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 recol- lection 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 sum- mit 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 sum- mits, 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 pay- ing 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 com- pete. 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 f — 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 is- sue 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 ob- jects 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 com- pany ?— A. Mr. James Bailey. He was the first secretary of the com- pany. Q. Had you at this time any acquaintance with J. 0. Stone, of Leaven- worth, 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, particu- larly the county of Placer, through which the road was to be construc- ted, 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 f — 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 sub- scriptions to stock from Placer County; $300,000, I think, from Sacra- mento 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 litiga- tion 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 un- til we got this county aid to go further. LOCAL CONTRACTORS. By Commissioner ANDERSON : Q. What 31 miles was this f — A. The first 31 miles east of Sacra- mento. 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. Par- ties 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 capital- ists 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 sec- tion 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 re- sulted 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 con- tractor 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 substan- tially 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 con- tract 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 con- tract was about to be awarded to him f — 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 con- tract with Mr. Crocker, but we were unable to do so. This personal lia- bility 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. With- out 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 oc- cupying 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 our- selves. 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 con- tract were f — 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 con- tracts 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 com- puted 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 three- eighths 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 cap- italists to come in with Mr. Crocker, and if the enterprise was success- ful 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 ob- tain 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 con- tracts embrace before the contract was made with the Contract and Fi- nance 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 con- struction 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 modifica- tions of this original contract, up to what point did the Crocker work extend, and where did the Contract and Finance Company begin f — 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 pos- sibly some of our own people. I tried to get some of the largest capi- talists 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 ques- tion 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 stock- holders 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 f — 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 Sum- mit. 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 f — 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 pro- ceeds 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 every- thing 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 Sacra- mento 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 look- ing 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 sub- sequently 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 success- ful 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 exercis- ing 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 hun- dred 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, sec- tion 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 de- tails; 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 Col- fax, 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 neces- sary 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 sur- plus 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 Bail- road 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 por- tion of the work on either road so difficult as that which we had in climb- ing 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 is- sues 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 in- formation 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 ex- pression, "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. Hunt- ington, 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 con- tracts?—-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 f — 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 forty- first 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 ordi- narily 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 re- quired 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, be- fore 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 Com- pany, 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 in- dividuals have procured to be issued to themselves enormous quanti- ties 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 no- where 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 as- sertion 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 sub- stantially 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 capi- talists, 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 Gov- ernment for these G3 miles, which made a considerable inroad in the amount received from the Government by the Central Pacific. Every- thing 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 prop- erty 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 com- pany 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 my- self, 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 gen- tlemen 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 manage- ment 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 f — 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 Com- pany 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 in- dividuals 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 stock- holders 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 judg- ment 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 f — 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 time1? 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 con- sidered, 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 irf- terests 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 con- tractor 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 or- dinarily 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 rolling- stock 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, un- der the Crocker contract, your gross earnings amounted to quite a con- siderable 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 in- come, 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 in- come 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 my- self, 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 substan- tially 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 real- izing 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 tak- ing 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 account- ing. 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 remem- ber 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 modifica- tions 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 origi- nated 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 inter- ested. 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 or- ganized 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 subscrip- tions. 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 sepa- rate 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 inter- ested 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 organ- izers, 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 com- pleted 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 Com- pany ? — 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 presi- dent 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 opera- tions 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 prop- osition 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 Oc- tober, 1867. At that time who was employed in the office of that com- pany 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 Com- pany 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 ex- amine 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 Fi- nance 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 Eail- road 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 Sacra- mento took small amounts. It was not taken by many individuals. There was no money in California at that time for permanent invest- ments 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, ex- cept 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 Com- pany'?— 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 in- terest, 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 Mil- ler. 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 oppo- site, 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 Fi- nance Company, and these issues have been at such a rate as to abso- lutely cripple the power of the Central Pacific Kailroad Company to pay the debt due to the Government; and that assertion, taken in connec- tion with the fact that the contract and books of the Contract and Fi- nance 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. Com- plaints 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 Gov- ernment. 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 hav- ing bought any of the original stock outside of ourselves, are not in- terested in that question at all. Besides ourselves, I do not know any- body 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 unlim- ited 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 per- centage 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 num- ber of shares. Q. Have you given us all the information that you can as to the where- abouts 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 Con- tract and Finance Company and the Central Pacific Railroad Com- pany ? — A. None whatever. WITNESS'S TRANSACTIONS WITH CONTRACT COMPANY. Q. Have you any books that will shed any light on your own trans- actions 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 com- pany, 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 Bail- road 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 pro- ceeded. Whatever is of value, so far as the Central Pacific is concerned, we created by the construction of the road. The development of busi- ness along the line of the road was rapid. I do not think that the through business increased so rapidly as the local business. After busi- ness has become settled upon certain routes it is difficult to divert it, and it takes some time to do so. Gradually, however, we kept divert- ing 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 prom- ising 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 com- pany 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 what- ever 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 aggre- gate 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 is- sued to the Contract and Finance Company, of which you were to re- ceive 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 Com- pany, 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 Com- pany. 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 out- siders 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 for- gotten 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 connec- tion 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 Gov- ernment 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 con- tract 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 substan- tially 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 Og- den. 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 any- thing. 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 man- aged a little differently from ours, and the people controlling it had dif- ferent 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 bet- ter 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 fol- lows : 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 direc- tors 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 com- mittee 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 re- gard 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 or- dered that — Charles Crocker & Co. be allowed and paid for all work done and material fur- nished, 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 three- eighths 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 dili- gence 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 re- ceipt 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 con- struction of the road? — A. I put a portion of that stock into the Con- tract 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 con- tract, 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 Con- tract 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 do- nation 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 mort- gage 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 f — 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 Califor- nia, and presented a draft of such contract. The same having been read and consid- ered, the following resolution and order was unanimously adopted, to wit : Resolved and ordered, That this company hereby consents and agrees with the Con- tract 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 hun- dred 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 arrange- ments 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 infor- mation 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-mort- gage 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. Hunt- ington, 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 re- alized— 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 calcula- tion 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 num- ber 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 eco- nomical. 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 pe- riod 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 begin- ning, we were very much troubled. On one or more occasions the Gov- ernment, 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 prob- ably 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 cor- rect, 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 esti- mates 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 appor- tioned it according to the number of miles and the comparative diffi- culty 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 recol- lection. 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 trans- ferred 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 mat- ter 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 proceed- ings ? 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 consol- idation, 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 Com- pany ? — 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 con- tinued 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 some- thing 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 set- tlement 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 under- take 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 f — 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 after- ward. 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 gen- tleman, 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 or- ganization I do not remember. Q. It was organized after the other company was dissolved, do I un- derstand you to say, or about that time1? — 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 Fi- nance Company, by loaning the credit of your name, without cash pay- merit, also applies to Mr. Hopkins, to Mr. Huntiugton, and to Mr. Crock- er ? — 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 de- sire to correct your testimony about it at any time hereafter the oppor- tunity 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 Com- pany ? — 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 sub- stantially 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 after- ward 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 Improve- ment 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 com- pany 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 Con- tract 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 Com- pany for the construction and equipment of the railroad and telegraph line and fix- tures 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 con- tract 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 pro- ceeded ? — A. Not very rapidly. We pushed it along up toward Marys- ville, 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 min- utes 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 com- pleted 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 pro- vided. 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 cog- nizant 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 pur- chased 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 Sacra- mento 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 Cen- tral 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 remem- ber. There are papers though that would show exactly. The consoli- dation 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 De- velopment Company. Q. Under an extension of this contract f — 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 bound- ary, 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, my- self, Mr. Huntington, and Mrs. Hopkins, and there were other stock- holders. 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 rail- roads. 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 any- body 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 in- struments. 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. WThere 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 junc- tion 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-0 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 Improve- ment 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 con- tract 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 Ore- gon 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 pay- ment of this construction. Is it not correct, then, to say that the con- tract 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 ob- tained. Q. In what shape has that been obtained? — A. By obtaining control of the stock of that road and the construction of the uncompleted por- tion 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 sus- tain 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 nego- tiation 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 negotia- tion 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 Cen- tral 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 ap- ply when the party receiving the consideration is the same person who votes the consideration1? — A. No; not exactly. We hold (I do not know how you do on the other side) that two corporations are compe- tent 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 indi- viduals 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 Paci- fic Improvement Company in payment for this construction ? The ques- tion 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 remem- ber the particulars with sufficient definiteness to state them. That oc- curred 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 re- ceive 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 mort- gage 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 consoli- dation 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 rail- road 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 Gov- ernment 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 TER- MINAL 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 Govern- ment, 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 secur- ing 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 float- ing 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 Cali- fornia 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 cor- rect?— 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 CONSOLIDA- TION. 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 Improve- ment 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 con- struction company ? — A. I think whatever there are are mentioned there. There were some companies that never had any more than a paper exist- ence. 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 mis- taken, 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 Com- pany until the amount exceeded $3,000,000, and that as security for that your sinking fund held bonds of the Southern Pacific Railroad Com- pany, 'and that finally the account was settled by the sinking fund tak- ing 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. Mil- ler. There are some questions I want to ask you in regard to your pre- liminary statement, but if there is anything further to be asked about the details of construction, or the story of the road, perhaps it had bet- ter 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 Con- tract and Finance Company received for their services in constructing the Central Pacific road from Sacramento to Ogden all the first-mort- gage 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 SETTLE- MENT. 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-mort- gage 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 mag- nitude, 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 sur- plus 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 exist- ence 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 fin- ished the work of construction ?— A. Well, no. We only received about $50,000,000, a very inadequate compensation for the risks that were in- curred. 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 mem- bers 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 con- struction 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 liabili- ties 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 indi- vidually liable to every creditor for his proportion of the debts and lia- bilities 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 incorpor- ations 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-of- ficio 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 Cen- tral Pacific Eailroad Company ? — A. The Western Development Com- pany 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 De- velopment 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 named1? — 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 your- self, 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 abso- lutely for themselves, or as representatives of the other gentlemen ? — A. My understanding was that they were representatives and not own- ers. 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 under- standing of it. THE PACIFIC IMPROVEMENT COMPANY. Q. In regard to the organization of the Pacific* Improvement Com- pany, 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 presi- dent 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 con- struction material. It had no other dealings. Q. Did it not also take an assignment of a contract h"ld by the Con- tract 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 com- panies. 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 Con- tract 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 Com- pany'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 transac- tions 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 su- perintendence 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 recol- lect 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 pre- pared 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 Cen- tral 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, how- ever. 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 state- ment showing the magnitude of the transactions between the two com- panies, 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, describ- ing 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 end- ing 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 Com- pany, 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 assign- ment 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 Com- pany 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 some- thing more. It provided for all the uncompleted portions. As I un- derstand it, the original design was to connect the lines between Tres Pinos and Huron; also to build the line between Mojave and the Nee- dles, 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 Improve- ment Company. Q. At a subsequent date? — A. Yes, sir; in 1882. Q. At the time that this contract was made, who were the stockhold- ers 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 corpora- tion 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 Bail- road 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 South- ern Pacific Railroad Company intermingled with your transactions with the Central Pacific Eailroad Company f — A. They were not intermin- gled 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 COM- PANY. 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 De- velopment 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 Com- pany 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 cer- tainly 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 examina- tion 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 au- thority 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 Pa- cific sinking fund coming into the possession of the Western Develop- ment Company ? — A. I do not recollect the figures with sufficient ac- curacy 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 at- tention, 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 Pa- cific Eailroad Company to the Western Development Company arise? — A. The Western Development Company used the Central Pacific Kail- road 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 Develop- ment 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 Pa- cific 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 Develop- ment 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 ad- justing 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 Com- pany 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 inter- est ! — 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. Stan- ford, 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 Com- pany and the Central Pacific Railroad Company, as you remember ? — A. 1 do not recollect of any aside from those that I have already men- tioned. Q. Were there any other occasions when loans of any magnitude ex- isted 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 build- ing 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 consider- able 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 Wood- land 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 f — A. The first part of the Northern Railway the Western Development Company had nothing to do with in the be- ginning. 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 Wil- lows. 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 enter- prise?— 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 man- agement 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 assign- ment 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 be- tween the Northern Eailway Company and* the Western Development Company direct. Q. In "conducting this construction did you have any financial trans- actions 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 equiv- alent, with the Central Pacific Railroad Company and took its receipts therefor. In drawing money out drafts were given generally, some- times vouchers were receipted. Q. With whom would you deposit your money ? — A. With the treas- urer 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 West- ern Development Company ? — A. From the stockholders of the West- ern 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 indebted- ness 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 Com- pany. 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 Com- pany ? The WITNESS. Do you mean made by the Western Development Company with the Central Pacific*? The CHAIRMAN. No ; by the stockholders of the Western Develop- ment 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 con- sisted 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 North- ern Railway and the Central Pacific ? Was it leased to the Central Pa- cific ? 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 here1? We are not familiar with your rates. — A. When I first came here, iu 1874, 12 per cent, per annum was the cur- rent 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 Develop- ment 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 re- garded 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 sup- pose, 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 mat- ter 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 in- terest 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 f — 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 De- velopment 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 Com- pany 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 remain- ing 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 pay- ment whatever being made, and still vest a good title in the stock- holder ! — 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 con- tract 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 Develop- ment 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 West- ern 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 DEVELOP- MENT COMPANY. Q. To whom is the rent paid by the Central Pacific Kailroad Com- pany 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 Com- pany. Q. To the credit of the company, or to the credit of the Western De- velopment 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 re- turn for which he gave a voucher authorizing the Western Develop- ment 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 Bail- way 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 divi- dend of bonds and stock. Q. Was it. a division of all the bonds and stock which it had re- ceived 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 De- velopment 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 es- tate of Mark Hopkins. They are the principal creditors of the com- pany. 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 gen- tlemen ?— 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 enter- prise ; they made a dividend in 1877 of a portion of the assets ; the trans- actions 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 num- ber 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 pro- portion between the original advances and the balances as now appear- ing 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 Kail- way 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 Pa- cific. 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 Rail- way 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 secre- tary 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 Develop- ment 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 North- ern Eailway $ — A. I think that they were sold afterwards. Q. What became of the stock ? — A. The Western Development Com- pany still has it. Q. It is one of your assets I— A. It is one of the assets of the West- ern 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 ; in- directly. 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 Pa- cific 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 con- trol of all the moneys, ought to be able to say whether the rental ex- ceeded 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 Com- pany's books. The Northern Railway would declare a dividend in regu- lar 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 Pa- cific, 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 Com- pany. Q. Were the funds for this construction also provided by the stock- holders in the Western Development Company? — A. Yes, sir. Q. And between what parties was the contract made ? — A. The rail- road 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 West- ern 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 pay- ment 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 under- stand 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 Con- tract and Finance Company built to Florence, about 0 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 be- tween 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 be- tween 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 con- structed 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 South- ern Pacific the same rates by way of interest on the moneys so de- posited?— 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 instru- ment 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 Cen- tral Pacific Railroad Company were ever advanced the Western De- velopment 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 com- panies 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 in- terest 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 fur- nished 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 Com- pany 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 ren- dered 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 oppor- tunity, 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 mat- ter 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 cus- todian 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 comple- tion 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 percent- ages 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 be- came a necessity, therefore, that we should control the Southern Pa- cific, and when opportunity offered we availed ourselves of it, and pur- chased 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 pro- vide 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 de- clare 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 ar- rangement 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 ad- vantage 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 be- lieve 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 com- plied 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 f — 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 Com- pany 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 con- structed 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 in- fluenced 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 informa- tion, 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 ex- pended 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 com- pany, 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 construc- tion. 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 imag- ine, could be done without spreading the books open to the whole world and publishing the matters not pertaining to the objects of this inquisi- tion. 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 con- struction one time or another, and I have thought that sometimes we may have blundered in not taking the time given by the act of Con- gress 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 f — 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 Com- mission 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 individ- uals. 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 cou- €erned, we have no objection to its seeing anything and everything con- tained in our records. I know that the Commission is composed of hon- orable men, and I know that they would not wish to publish anything which does not concern the public or affect the interests of the Govern- ment. If the Commission please, I would like to put this offer in writ- ten 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* 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 re- ceived them, before they were actually sold ? — A. They were sold gen- erally in advance, before we got them. ROAD MORTGAGED AHEAD OF CONSTRUCTION. Mr. COHEN. The road was mortgaged two hundred miles ahead be- fore 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 han- dle 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 sub- mitted to us is merely an estimated value of the bonds, taking the pre- mium 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 Govern- ment for the work beyond, all of which, when we got over the mount- ains, had been issued and used so that we started out over the plains with an incumbered road in advance—several 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 bor- rowed 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|jem ?— 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 differ- ence who the borrower was ? — A. I do not suppose it made any differ- ence 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 ma- terial, 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 pur- chased ? — 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. y other com- pany *? — 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 in- fluence 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 made1? — 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 re- ceipts 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 ex- pected 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 re- ceipts, 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 pro- same, 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. Lam- bard?—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 cer- tain 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 re- gard 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 f — 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 com- mencement 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 gen- tlemen 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 Commis- sion 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 f — 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 COM- MENCED. 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 recol- lect. 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 Hunt- ington 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 conversa- tions 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 com- pany, or any officer of the Government, to whom you testified your dis- sent 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 let- ter 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 Col- fax. 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 f — A. I do not recollect the names of those gentle- men ; 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 ex- amine 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 rec- ollect. 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 dif- ferent 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 I—A. 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 con- tractors 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 go- ing 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 re- gard to certain business. Hiram Hubbard and Mr. Baker had a con- 1 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 cer- tain 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 pres- ent. 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 pos- itive 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 testi- mony 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 chair- man 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 ex- amination, 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 state- ment that you have made to this Commission ? — A. I do not know any- thing 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 con- struction 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 news- paper 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 im- proper?— 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 under- stand it. Q. Do you mean that it was to construct the road from the Sacra- mento 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 ap- pear 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 neces- rary 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. Sar- gent 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 re- ceipts 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 con- tained 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 com- pleted until the railroad was finished to Truckfce, when there was no fur- ther 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 posi- tive 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. Accord- ing 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 toll- houses. 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 in- formation ? — A. I was trying to think who gave me the first informa- tion, 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 informa- tion, 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 Coin- mission'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 f — 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 inter- ested in the whole project from the beginning and knew the country so thoroughly that Judah always had me with him, and it was under- stood 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 im- pecunious. 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 excite- ment 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 Washing- ton and see what could be done. Sargent and Jim McDougall were mem- bers 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 McDou- gall, 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 sec- retary 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 orig- inal 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 Pa- cific, 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 after- wards. 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 obliga- tions 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 recollec- tion 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 some- what 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-exami- nation, 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 cross- examined 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 per- fectly proper for us to criticise these statements and examine this wit- ness 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 condi- tion 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, except- ing 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 an- swer 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 presi- dent of this company, and that ought to be better evidence than any- thing 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 in- telligent judgment of this Commission, except to say this : That if noth- ing 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 cross- examination. The CHAIRMAN. We want to give you the fullest liberty in this mat- ter 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, how- ever, 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 Ander- son 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 Commis- sioner 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 Kail- road 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 f — 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 re- ceived 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 in- terest. DIFFERENCES AS TO AMOUNT DUE TO WITNESS. Q. I find this entry in the general balance sheet of the Central Pa- cific 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 following- named 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 : uLeland 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 f — 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 con- dition 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 f — 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 WITNESS7 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 re- ferred to in those accounts f — 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 under- standing that he was to collect and divide with me everything above par. Q. Did you know that he brought a suit f — 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 mat- ter 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 assign- ment 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 fol- lows: 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 applica- tion, 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 Sac- ramento 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 f— 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 f — A. No, sir. Q. How long did you remain in the position to which you were first appointed f — 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 trans- ferred 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. WTere 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 Fi- nance 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 un- der 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, f — 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 secre- tary ? — 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 en- tries ? — 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 direc- tions ? — 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 f — 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 be- sides 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 call- ing on him as he was about to start for Europe. DISAPPEARANCE OF OLD BOOKS OF CONTRACT AND FINANCE COM- PANY. 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 disap- peared 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 memoranda1? — A. I turned a lot of papers that I had over to him to keep for me. I afterwards in- structed 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 ab- stract of the principal accounts on Mr. Brown's books. Q. What is Mr. Curtis's full name1? — 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. WTere 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 dis- appear, 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 pay- ments were made. Q. I am not asking you that, but they Showed generally what com- pensation 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 Com- pany ? — 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 f — 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 f — 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 Com- pany ?— 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 Fi- nance 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 Com- pany ? — 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 which- ever company it had done for. Then the cost of the grading and every- thing 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 Devel- opment 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 re- ceived, was entered in the Contract and Finance Companyrs books that were removed. Q. How did you obtain the balances to enter in the Western Devel- opment Company's books when the contract was assigned to that com- pany ? — A. I have forgotten how long it was after the Western Devel- opment 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 received1? — A. There was a contract between the Contract and Finance Company and the Southern Pacific for con- structing 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 Fi- nance Company was assigned by that company to the Western Devel- opment Company. Q. After some work had been done? — A. Yes, sir. I had been keep- ing 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 INFOR- MATION. 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 f — 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 Fi- nance 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 em- ploy 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 ac- counts 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 f — 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 f — 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 neu- tral 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 rail- roads. THE COMMISSION MIGHT WANT CONTRACT, BUT IT WAS DESTROYED. Q. Will you describe the conversation between yourself and Mr. Cur- tis ? — A. That was about all. Q. There must have been something else. — A. He said that he sup- posed they might like to see that abstract, but that it had been de- stroyed. 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 hear- say. 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 sup- pose 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 em- ployed f — 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 .Robin- son. 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 Com- pany ?— 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 adjust- ment 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 ad- justed. 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 com- pany ? — 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 com- pany ? — 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 evi- dence. 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 making- entries in the books? — A. I do not remember now; those were my regu- lar duties; I do not remember to have performed any extra services. Q. Did you not purchase property for them f — A. "iN"o, sir. Q. What was the nature of the difficulty between you and the com- pany ; was it not in reference to property of the company f — 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 Pa- cific 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 remem- ber 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 Com- pany. We were old acquaintances and friends, and just spoke in a gen- eral 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 f — 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 tes- timony. 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 prop- erty for the company f — A. No, sir; I never was in the employ of the Central Pacific. Q. During your employment by the other company did you buy prop- erty 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 some- thing 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 f — 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 consider- ation of the property delivered up? — A. Nothing; only to call the ac- count 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 noth- ing 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 posses- sion 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 em- bezzles property is encouraged, and if that settlement is made and res- titution is made before any offense is charged, the judge is bound to take that into consideration in fixing punishment; so that it is en- couraged instead of being discouraged by the law of this State. Commissioner ANDERSON. Personally, I attach no importance what- ever to it so far as Mr. Miller is concerned. I only think that it is un- fortunate 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 Govern- ment 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 trust- ing his subordinates. The CHAIRMAN. Our inquiries are with regard to the business meth- ods. 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 Com- mission 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 Oc- tober, 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 fol- lows : 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 Com- pany ?— 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 Gov- ernor Stanford when he was governor. Q. In 1861?— A. In 1861. Q. Did you do any other business for any of these gentlemen be- tween 1861 and 1868?— A. No, sir. Q. Or any for the Central Pacific Railroad Company f— 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 Con- tract 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 Con- tract 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 con- struction company for the purpose of building the Central Pacific Rail- road from the State line eastward ; that the work would be very ex- tensive and it would be very necessary to do it more rapidly than it had ever been done before. He desired to organize a construction com- pany, in order to get other capital interested with him and his associ- ates to take stock in this construction company and assist them in carry- ing 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 f — 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 princi- pals ? — 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 f — A. I pre- pared 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 incor- poration ; yes, sir. Q. How soon after you had the books prepared was the contract en- tered 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 disap- peared ? — 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 com- plete a telegraph line, furnish telegraph offices and instruments, fur- nish buildings necessary for the section hands, furnish necessary round houses, turn-tables and so many (I have forgotten the number of) en- gines, cars, and running material per mile ; but whatever was neces- sary 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 Fi- nance 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 t00. 00 500. 00 1, 000. 00 1873. Mar. 6 Mar. 12 Mar. 27 1874. Jan. 13 Jan. 16 Mar. 10 May 14 June 22 Juno 15 June 27 Juiy 9 July 10 July 11 Sept. 11 Oct. 16 Oct. 23 Nov. — Dec. 2 Dec. 29 1875. Jan. 6 Jan. 11 Al,ir. :5 Mar. 5 Mar. 25 Mar. 25 Apr. 27 Apr. 30 Dec. 31 Dec. 31 1876. Jan. 4 Feb. 7 Jan. 24 Mar. 31 Apr. 1 Apr. 6 Apr. 17 Apr. 19 May 12 May 15 May 19 Apr. 20 May 4 June 2 June 3 June 19 July 19 July 20 July 12 Aug. 30 Sept. 7 Aug. 18 Aug. 21 Sept. 12 Sept. 22 Oct. 4 R Franchot $5, 148. 40 1, 700. 00 500.00 7, 348. 46 I E Gates Total C P Huntington Total Chas. Crocker, contingent R Franchot 7, 000. 00 500. 00 2, 000. 00 1, 000. 00 3, 298. 55 500. 00 300. 00 1, 000. 00 100. 00 348. 11 1, 250. 00 2, 048. 82 10, 625. 00 250. 00 1,450.00 4, 012. 13 2, 000. 00 3, 000. 00 4, 000. 00 1, 000. 00 500. 00 500. 00 2, 000. 00 1, 500. 00 10, ?98. 42 2, 700. 00 500. 00 200.00 12, 139. 94 500. 00 20, 000. 00 J, 910. 52 3, 700. 00 150. 00 200. 00 200. 00 5, 000. 00 281. 00 200.00 1, 000. 00 4, 863. 48 2, 000. 00 52, 844. 94 C P Huntington I E Gates Fiak & Hatch R Franchot "expenses C P Huntington C P Huntington Fisk & Hatch Geo.C.Gorham R Francbot C P Huntington I E Gates R Francbot I E Gates I E Gates C P Huutington E.B.Ryan C P Huntington I E Gates I E Gates C. P. Huntington General Dwyer, United States commissioner ., . " W. A. W." Paid by C. P. Hunting-ton ........... C. P. Huntington ........... R Francbot " J. F. Wilson W.H.Stewart C P Huntington Lcland Stanford ............ Total Hiram Walb ridge ...... .. C P Huntington 0. P. Huntington 2, 500. 00 5, 000. 00 1, 592. 50 C. P. Huntington ... R. Francbot I E Gates James H. Storrs, expenses . Dent & Paige . . C. P. Huntington 1, 530. 00 1, 530. 00 3, 000. 00 1, 000. 00 500. 00 171,781.89 8, 877. 15 Total R Franchot . 63, 581. 03 C P Huntington R. Franchot I E Gates 1, OOr. 00 1,731.75 500. 00 2, 242. 47 324. 50 2, 500. 00 2, 500. 00 1, 000. 00 500. 00 1, 200. 00 K. Franchot R. Franchot . •. . R Frauchot Total 197, 311. 54 L. E. Chittendeu N.T.Smitb, for amount paid H S Brown C. P. Huntington 5, 000. 00 20, 000. 00 2 500 00 C P. Huntington C P Huntington C P Huutington L Stanford 1875 R Franchot Total 1 E.Gates 5, 000. 00 5, 000. 00 5,000.00 1, 621. 00 5, 000. 00 5, 000. 00 5, QUO. 00 1, 000. 00 1, 000. 00 25, 000. 00 1,000.00 5 000 00 13, 498. 72 C P Huntington R. Franchot C P Huntinftou 33.00 13, 200. 00 1, 000. 00 1, 000. 00 500. 00 500. 00 500.00 1, 000. 00 5, 000. 00 5, 000. 00 :>00. 00 MO. 00 500. 00 19, 295. 50 5, 000. 00 500. 00 1, 000. 00 500.00 4, eoo. oo 200, 00 13, 233. 33 Jas. II. Storrs "Attorneys' " fees R. Franchot 'C. P. Huntington I E. Gates I E. Gates . . R.Franchot I E. Gates C. P. Huntington . .... Edward Lamed C. P. Huntington Anna Franchot C. P. Huntington S C Pomeroy C. P. Huntington .......... R. Franchot I E Gates 10, 000. 00 3, 381. 45 3, 000. 00 10, 000. 00 2,500.00 1, 000. 00 50, 000. 00 1, 500. 00 600.00 10, 000. 00 15, 698. 92 50, 000. 00 500.00 R Franchot New York papers (Tribune, Times, World, and Bul- letin C. P. Huntington J. C.Kennedy C. P. Huntington ....... C H Sherrill Richard Franchot I E Gates . E. Gates S L H Barlow . E. Gates D. D Colton C. P. Huntington Leland Stanford .E.Gates R B Mitchell .E. Gates S. W. Kellogg Lyman Trumuull .E.Gates Services in 1872 . . . R. Franchot (no date) Disbursements, Western Development Company . . C. P. Huntincton . . Total 73, 361. 83 2954 U. S. PACIFIC RAILWAY COMMISSION. Specific vouchers— Continued. Date. Name. Amount. Date. Name. Amount. 1876. Oct 5 $2 500.00 1878. Aug. 3 Jas. A . George $300 00 Opt 14. 6 300 00 Aug 19 T M Norwood 287 95 ~N"nv 3 D D Colton 5 000 00 Aug 29 ?00 00 ~N"nv 8 D D Colton 8 000 00 Sept 23 D D Colton 1 °00 00 Oct 17 £ E Gates 5 000 00 Oct 1 D D Colton 3 460 00 Oct 21 [ E Gates 5 000 00 Oct 4 D D Colton 3 290 00 Oct 23 [ E Gates 1 000 00 Sept. 3 A J. Howell ''OO 00 Oct 26 I E Gates '700 oo Sept. 3 J A George . 150 00 Oct 30 I E Gates 1 000 00 Sept. 4 T. M. Norwood 1 000 00 Nov 10 2 500.00 Sept. 14 I. E. Gates 1 500 00 Nov 13 I E Gates . • ... 1 000 00 Sept. 19 O.M. Bradford 75 00 Nov 14 I E Gates 1 000.00 Sept. 23 J. A. George 150 00 Nov 15 I E Gates 1 000.00 Sept. 27 I. E. Gates 5 000.00 Nov 16 C P Huntin^ton ...... 5 000.00 Sept. 27 J. G. Printim 60.00 Dec 1 I E Gates 3 000.00 Sept 28 I. E. Gates 2, 000. 00 Dec 7 I E Gates 1 000.00 Oct. 1 200. 00 Oct 1 204 00 Total 299 301.37 Oct. 1 J. A. Howell 200. 00 Oct 1 J A George 250 00 1877 Oct 3 I E Gates 5 000 00 ~PVV» fi 26 000 00 Oct 5 I E Gates 2 000 00 Tin 3 10 000 00 Oct 7 I S Gates 1 000 00 T-m 15 5 000 00 Oct 7 J E Forney .. .... 300 00 Jin 8 I E Gates 5 000 00 Oct 10 I E Gates 2 000 00 Fob 19 I E Gates 10 000.00 Oct. 19 I. E. Gates 6, 000. 00 Feb 26 C P Huntington 5 000 00 Oct 22 •Mar 9 I E Gates 2 000 00 Oct 24 C P Huntington ......... 3 000 00 Mar 1° Jas H Storrs 1 125 35 Oct 26 I E Gates 10 000 00 Mar 24 I E Gates 500 00 Oct 28 I E Gates 10 000 00 Mar 29 I E Gates 5 000 00 Oct. 29 I E Gates 5 000 00 Apr 23 C H Sherrill 15 000 00 Nov 2 John Boyd 224. 48 May 9 C H Sherrill 300 00 Nov 2 T M Norwood 1 083.98 Mav 24 I E Gates 5 000 00 Nov 11 I E Gates • 500. 00 Julie 2 C H Sherrill 2 000 00 Nov 13 I E Gates 1 500.00 C H Sherrill 1 000 00 Nov 21 C H Sherrill 1, 000. 00 5 000 00 Nov 21 O M. Bradford 75 00 July 2 I E Gates 200 00 Nov 22 100. 00 Stvnt ^ 1 000 00 Nov 27 I E Gates 500 00 Sept 7 10* 440 00 Nov 27 T M Norwood 500. 00 Sept 15 1 000 CO Cpr j- 9f) 3 000 00 Dec 2 200 00 Oct 26 5 000 00 Dec 5 I E Gates 10, 000. 00 Nov 1 83 418 US Dec 9 I E Gates 2,800 00 Oct 5 C P Huntington l' 500 00 Dec 17 10, 500. 00 Oct 15 2 000 00 Dec 23 John H Fla g4 — 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 trans- portation 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 UO. 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 fol- lows: 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 be- iug 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 re- gard 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 ex- plain it, the general relation of Mr. Strong to the officers of the com- pany. 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 engi- neer to survey the wagon road over the mountains, before Mr. Hunt- ington 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, be- cause 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 Commis- sion 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 Kail- road 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 in- quiry withintthe scope of this Commission? Mr. COHEN. Not any more than the letters which have been intro- duced by the chairman, but I think it is just about as relevant. Commissioner ANDERSON. The chairman has not introduced any let- ters. 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 RE- PORT. 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 argu- ments which I, as counsel for the company, address to this Commission, taken down so that those arguments may be considered by the Presi- dent, 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 argu- ments 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 re- port we shall make to the President of the United States. Those let- ters 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 prac- tice in your courts in the preparation of a case on appeal f Does a case on appeal generally contain arguments of counsel ? CLAIMED AS A RIGHT. Mr. COHEN. It frequently does. This company has applied to Con- gress 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 di- rected the President to appoint this Commission : and this Commission is here to receive the statement of the Central Pacific Railroad Com- pany ; and such statement as it makes through its counsel is a proper subject to be considered and reported upon to the President and to Con- gress. 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 argu- ments. 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 con- cerning 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 evi- dence ? 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 f — 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 com- pany. Q. Is not that letter dated after the incorporation of the Central Pa- cific 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 in- corporation 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 fol- lows : 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 ad- dressed?—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 2S7 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 re- ported 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 suf- fer 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 our- selves 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 tele- graphed to Durant. WILL NOT bUY ANY MORE STOCK. By Mr. HAYMOND : Q. Who was Durant, Mr. Strong?— A. He was the man who was vice- president 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 deci- sive. 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 ex- penses 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 ex- plains 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 unani- mously " 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 di- rected 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 di- rected 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 f — 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 dis- solution 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 Com- pany 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, Hunting- ton, 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 pass- books 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 Con- tract 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 liabili- ties 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 Con- tract 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 Ceu- tral 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 re- ceived 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 con- struction of the Central Pacific Eailroad paid from that $43,000 per mile in cash, or was it paid from other sources or assets f — 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* Prom- ontory 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 Com- pany 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 f — 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 f — 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 knowl- edge?— 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 com- pany. 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 pru- dence 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 Con- tract 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 Com- pany 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 rapid- ity of it. I said that the cash paid by the company would not be suf- ficient 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 Kail- road, 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 pre- vious witness, I will ask you whether, on your oath, you will state that the stockholders of the Con tract and Finance Company received any bene- fit 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 af- fairs 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 Con- tract 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 Cen- tral PacificRailroad Company or their directors or any one in the inter- est of that company should not have seen. I have, very sincerely, re- gretted the loss of them. Q. In your judgment was there any thing upon the books of the Con- tract 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 construc- tion of the road1? — A. I think they do. WHAT THE BOOKS OF THE CENTRAL PACIFIC SHOW. Mr. COHEN. Gentlemen, we will tender you those books of the Cen- tral 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 Pa- cific Railroad Company. Q. That was not the question put to you. It is the cost of construc- tion that makes the whole point. Would not those books show abso- lutely 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 de- rived from the contract made between the Central Pacific and the Con- tract and Finance Company ? — A. Yes, sir ; but the Contract and Fi- nance 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 Gov- ernment 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 con- struction account with the Central Pacific beginning at the east bound- ary of the State and ending at Promontory Point? — A. No other accounts except accounts of parties from whom materials and supplies were fur- nished. 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 disap- peared ? 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 Pa- cific 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 pre- sume 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 indebted- ness 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 bal- ance 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 accumu- lating 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 Fi- nance 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 por- tion 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 Com- pany 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 Con- tract 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 indebt- edness 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 ac- counts ? — 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 ad- visable 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 construc- tion ? — 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 f — 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 com- menced 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 pur- pose, 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. Remit- tances were made to him in New York for various purposes and for ma- terials 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 be- tween 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 Com- pany?— 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 bal- ances. 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 ac- count there, I think, during its entire existence. Q. Did they borrow large sums of money from the Bank of Califor- nia ? — A. No7 sir ; not very large sums ; they were occasionally over- drawn there, but only by overdrafts. Q. Who were the officers of the Bank of California during this ac- count1?—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 remem- ber 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 Commis- sioner 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 Commission- ers being present. CHAELES F. CROCKER, being duly sworn and examined, testified as follows : By the CHAIRMAN : Question. What is your business f — Answer. I am one of the di- rectors and executive officers of the Central Pacific and Southern Pa- cific 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 f — 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 after- wards 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 Fran- cisco 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 f — 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 f — 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 stockholders7 meeting in 1878 f — 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 gen- eral freight agent. Q. Whose place did you take in the board ? — A. I have no recollec- tion 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 Com- pany, 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 reso- lution any attention ? — A. Yes ; I think I had. Q. What investigation did you make of the subject-matter of the reso- lution1?— A. By looking it over, and reading it carefully, and consider- ing 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 at- tending to its affairs. Q. What did he do ? — A. I do not know. I acted as one of the stock- holders in showing a confidence in everything that he had done. Q. What was it ? You certainly did not go it blind on the whole busi- ness ? 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 reso- lutions ? — 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 par- ticularly. Q. Do you recall any acts of his in the Territories of Utah and Ari- zona?—A. No, sir. Q. Was the subject of his conduct discussed at all by the stockhold- ers or directors ? — A. I do not remember that it was, particularly. Q. Was anything said at the time about the acts of I/eland Stan- ford ? — 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 particu- larly said. CONFIDENCE IN STANFORD AS AN EXECUTIVE OFFICER. Q. What were they talking about? — A. There was no particular dis- cussion about those matters, that I recollect, but it was proposed to pass the resolution, and there was a general consent to ratify and con- firm 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 cus- tomary 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 en- tered 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 f — 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 f 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 gen- eral 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 f — 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 offer- ing 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 reso- lution, 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 Co- lumbia, 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 reso- lution 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 f The CHAIRMAN. This is an extract. I call upon Mr. Cohen to pro- duce 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 origi- nate 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 direct- ors, 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 Com- pany 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 jurisdic- tion of. The WITNESS. The directors have always been in the habit of con- sulting 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 be- tween 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 f — 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 organ- ization, 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 out- side 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 bal- ance 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 Pa- cific 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 inter- est ? — A. No, sir. Q. Did you have charge of the sinking-fund money1? — A. I repre- sented 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 f — 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 with- out 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 cur- rent 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 or- ganizations 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 Fi- nance 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 con- nected 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 inter- est 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 gentle- men 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 ex- penses 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 com- pany, 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 stockholders7 meeting1? The CHAIRMAN. Yes, sir. Commissioner LITTLER. It was not a meeting of the board of direct- ors, 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 suffi- cient. 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 di- rectly. 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 ren- dered by the counsel employed by the company that made these pay- ments 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 f — 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 stockholders7 meeting? — A. I did not de- cline to give any at the stockholders7 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 informa- tion as it desired it, we would be glad to give it. quickly. As we are about a mile from the company7s 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 ac- count of the Central Pacific Railroad Company for the purpose of in- fluencing 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 satisfac- tory 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 pur- pose 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 ques- tion. 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 deduc- tion 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 cer- tain 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 expend- itures. 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 proceed- ings of this Commission. I notice that when I am speaking the secre- tary 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 mo- tions 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 fur- ther. 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 ren- dered. 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 con- sultation 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 insuffi- cient 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 ut- terly 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 ac- cording to the real and proper construction of the powers of the Com- mission ; but that explanation is absolutely insufficient. NECESSITY OF RESISTING ADVERSE LEGISLATION. Mr. COHEN. It seems to me it ought to be apparent to the Commis- sion, 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 con- cerned, 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 law- yers, 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 f 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 Mon- day 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 ex- amination. 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 f — 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 con- struction 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 Pa- cific 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 f 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 consoli- dated 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. TheSouth- ern 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 con- sidered during your attendance upon the meetings of the board of di- rectors 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 discus- sion in the Central Pacific board ? — A. Nothing special. The construc- tion 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 Cen- tral 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 Devel- opment 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 Cen- tral Pacific for the loan of the Central Pacific money ? — A. I do not re- member 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 Cen- tral 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 Com- pany ? 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 Company1? — A. No, sir. WHAT THE WESTERN DEVELOPMENT COMPANY PROPOSED. The CHAIRMAN. I read from the minutes of the Central Pacific Eail- road Company, page 385, September 1, 1879, that the Western Develop- ment Company proposes to pay a note given to the Central Pacific Eailroad Company for $3,086,259.72, with bonds of the Southern Paci- fic 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 informa- tion. 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 can- not 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 Develop- ment Company for the purpose of the construction of the Southern Pa- cific ? — 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 Cen- tral 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 col- lateral security ; how far had the construction proceeded ? Mr. COHEN. You mean of the Southern Pacific .Railroad f 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 construc- tion?— 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 per- manent 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 f — 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 in- vestment ? — 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 ex- tends, 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 remem- ber ? — 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 Com- pany, 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 West- ern 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 recol- lection 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 recol- lect?— 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 f — A. I do not be- ? lieve that they have been ; I have no recollection of it. There has al- ways 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 proceed- ings 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 re- ports 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 show- ing 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 diffi- culties 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 stock- holder. 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 thou- sand 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 Cen- tral 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 Rail- road 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 Improve- ment 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 con- tract?— 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 in- formed 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 con- tracts 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 par- ticular portion made. The engines are being made at Sacramento as rapidly as they can be made, and the quota under this contract is sup- plied 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 South- ern 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 Improve- ment 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 Pa- cific ?—- 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 Pa- cific 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 f — 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 determined1? — A. An ac- count 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 f — 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 deliv- eries0/— 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 Pa- cific 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 Im- provement Company and some are orders of the Southern Pacific Com- pauy3 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 Com- pany will make under the contract in question, the consideration it re- ceives being four and a half millions in bonds of the Oregon and Cali- fornia 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 f — 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 f — 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 Com- pany I—A. 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 rent- als, 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 earn- ings 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 af- fected 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 be- fore 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 f — A. Yes, sir. Q. Why do you think that it was a good thing ? — A. It continues hai- mouious 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 Pa- cific 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 in- crease 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 f — 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 mount- ains, 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 in- crease, if it does so, the earnings of the Central Pacific between Sacra- mento 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 Ore- gon 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 possi- ble, 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 Com- pany, 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 mort- gage 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 Pa- cific line from Sacramento to Promontory Point, with its shops, appur- tenances, 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 f 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 finan- cial 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 refer- ence 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 suffi- ciently 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 consider- ation, 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 f — 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 South- ern 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 Pa- cific 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 Pa- cific was put under the title or lettering of the Southern Pacific Com- pany ? — 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 com- pany. 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 SURPL¥S EARNINGS. Q. At that time were there sufficient earnings out of the actual sur- plus 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 bor- rowed 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 com- pany 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 sec- retary 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 com- pany, 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 sur- plus 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 sur- plus 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 equiva- lent ? — 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 receiv- able, 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 divi- dends. 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 mak- ing all proper deductions and crediting all balances, you look no fur- ther 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 ma- terials, 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 com- pany 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 fol- lows: Suppose you had money enough to pay a dividend invested in coal, and that coal were all paid for, would you then declared a divi- dend ? — 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 ques- tion. 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 re- call 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 earn- ings 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 vol- ume of the traffic, and the change in the general affairs of the com- pany. 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 en- tirely 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 traf- fic ! 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 informa- tion 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 mana- ger. 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 sub- ject?— 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 feat- ures 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 traf- fic ; 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 sea- son, 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 transconti- nental 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 gen- erally. 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 com- pany. 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 Com- pany of October 5, 1885, page 64, to the resignation of C. P. Hunting- ton, 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 resig- nation 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 ac- cepted 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, reso- lution reciting the issuing of ten millions of bonds to pay off the float- ing debt. Perhaps it may suggest some information to you : "Also, re- solved, 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 dis- cussion 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 ac- cepted holders of a large amount of the floating debt that was intended to be paid by this mortgage1? — 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. There- fore, 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 requi- site 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 inter- ested 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 Pa- cific f — 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 Moun- tain 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 f — 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 f — A. If you tell me, I will tell you. Q. I am trying to find out from you ; can you name any others f — 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, un- dertakings, 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 ques- tion. 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 f — 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 Rail- road 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 Rail- road 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 com- panies that you can recall f — 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 Commis- sion f — 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 that- such 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 dif- ference 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 Thur- man 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 prop- erty 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 tak- ing 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 con- solidated, 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 in- terest 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 ques- tion, 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 ad- verse 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 por- tion 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. How- ever, 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 earn- ings of the company since 1884. I would like to get a little further in- formation 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. . 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 com- pany 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 Pa- cine ? — A. I do not recollect the date. Q. Or with the Atchison, Topeka and Santa Fe and Atlantic and Pa- cific 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 Com- mission. Q. Is that information included in the answers of Governor Stan- ford?—A. I believe it is. By the CHAIRMAN : Q. Who made the calculations ? — A. They were prepared in the of- fice 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 four- teen 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 Com- mission 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 sec- ond 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 divi- dend 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 esti- mates. 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 Gov- ernment 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 ad- vised 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 secreta- ry'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 con- nection 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 Cen- tral 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 f — 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 Com- pany ? — 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 thirty- seven 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 in- troduced 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 de- fend 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. II 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 mat- ters 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 serv- ices 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 Di- vision. Mr. Burke pursued the accused parties into the State of Ne- vada, 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 de- fend him, but it was a question personal to himself; that if he was con- victed 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 de- fend 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 in- dicted 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 re- ceipt, 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.em- ployed 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 em- ployed 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 busi- ness. I do not know that the railroad company's business was to de- fend 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. Hop- kins ? — 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, uAnd 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 pro- ceedings 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 sub- poenaed, 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, UI 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 threat- ening 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 Rob- ert 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 f — 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 capt- ured. 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 Gover- nor 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 f 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 com- pany 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 Con- tract 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 cus- tody of them, that the books had been lost, and that they were impor- tant 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 cer- tain 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 pre- paring 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 examina- tion 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. WThen did Mr. Miller give you those papers ? — A. I think in Octo- ber, 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 argu- ment. There were two trials, and I saved them and kept them all un- til 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 prob- ability 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 Commis- sion." 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 mat- ters. 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 investi- gating, 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 informa- tion 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 sim- ply 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 commit- tees. 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 Fi- nance 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 ren- dered 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 be- longed to her, and which she had before she married Mr. Miller. That was subsequently lifted and paid by Mr. Clark, a capitalist at Sacra- mento. She secured iny fee by a mortgage on land that she owned be- fore 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 con- sider 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 com- iug 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 wit- nesses to find out all they knew. Alexander Campbell, an able crim- inal lawyer here, at my suggestion — in fact I think I employed him my- self, 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 em- ployed. 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 con- tracts. 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 state- ment 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 f — 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. Sections. Contractor. Date of comple- tion. Amounts paid. Total. Stock. Bonds. Cash or its equivalent. 1 to 18 C. Crocker C Collins & Bro Jan., 1864 $50, 000. 00 300. 00 "Tsoo.'oo' 5, 500. 00 7, 600. 00 11,600.00 522, 381. 53 4, 414, 899. 00 23, 736, 000. 00 $100, 000 $250, 000. 00 2, 044. 84 15, 226. 25 25, 776. 02 31, 238. 88 43,3:51.64 65,537.42 870, 752. 47 7, 357, 228. 06 23, 736, 000. 00 $400. 000. 00 2, 344. 84 15, 226. 25 30, 276. 02 36, 738. 88 50, 931. 64 77,137.42 1, 393, 134. 00 11,772,127.06 47, 472, 000. 00 19 to 20 Do C.Crocker Turton, Knox & R. . C. D. Bates S. D. Smith C. Crocker & Co ... ....do do Apr., 186 1 ..do Mar., 1864 Apr., 1864 July, 1864 Mar., 1866 Dec., 1868 21 to 24 25 to 27 28 to 29 30 to 31 32 to 54 f>5 to 138 From 138th to 690th mile. Cont. and Finance Go. Total July, 1869 28, 752, 780. 53 100, 000 32, 397, 135. 58 61, 249, 916. 11 3038 IT. S. PACIFIC EAILWAY COMMISSION. Central Pacific Railroad Company — Continued, [otfoto to statement showing amounts paid in stock or in cash on different contracts.] Section. Amount as per statement rendered. Capital stock. 32 to 54. 55 to 138. The stock issued on the contract was f of the estimate and was issued at the rate of 50 cents on the dollar: Amount charged as per estimate At the rate of 50 cents on the dollar, the stock issued on above was The proportion (|) of stock issued on this contract was at the rate of 50 and HO cents on the dollar: Amount charged as per estimate Stock issued on above: At the rate of 50 cents At the rate of 30 cents Capital stock issued in addition to amount shown as per statement -•--•- $522, 281. 53 4, 414, 399. 00 4, 936, 780. 53 $1, 044, 766. 68 1, 652, 600. 00 11, 960, 330. 00 14, 657, 696. 68 9,720,916.].", The WITNESS. I have here an analysis or statement which I have made up, showing the settlement with the Union Pacific for the addi- tional 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 state- ment. 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. Section. Items. Total cash. Amount per mile. 1 to 8 Paid in cash (100 C. M. bonds at $85) 18 miles $335 000 00 $18 611 11 19 to 20 17 271 09 8 635 54 21 to 24 2")' 776 02 6 444 00 23 to 27 31 238 88 JO 4J2 96 28 to 29 Paid in cash, 2 miles 43 331 64 21 G65 82 30 to 138 8 293 517 95 76 087 T? 139th to 690th mile Paid in cash, 552 miles .... 23,736 000 00 43 000 00 "j Expended by company 751, 903, 78 690th mile to 737. 5 miles 1 Compromised with Union Pacific R. E. Co., 2, 840, 000 00 from Sac'to, 47. 5 miles, f 1, 502 C. P. bonds, first mortgage; 1,338 U. S. bonds, 6 per cent. Total 36 074 099 36 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 grad- ing, 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 Cen- tral 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 consid- ering 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 coun- try from section 1 to section 18. Mr. COHEN. Had you not better take that from the engineer's re- ports ? 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 Amer- ican 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 Ameri- can 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. Col- lins & 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 pay- ment 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 con- tractors— 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 possi- ble 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 con- tract 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 after- wards 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 three- eighths 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. Ste- vens's. The WITNESS. They do up to 138. Q. In making up the statement of total payments made to these con- tractors 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 ques- tion, 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. Ste- vens 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 con- tractors' 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 is- sued to the Contract and Finance Company taken; at what rate was it taken f — A. At par; that is, $43,000 of stock at par value. Q. Do you mean $43,000 per mile f — 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 vary- ing 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 is- sued in payment of original construction. The WITNESS. The questions that Mr. Anderson asked^and the state- ments 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 under- stand 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 be- fore. 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 track- laying, 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 f — 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: No. .] subdivision of C. P. K. E. OF CAL. division. Final estimate, July 26, 1867. tractor. -, con- Quantities. Price. Amount. Grubbing and clearing Excavation : miles.. . . . . cubic yards 13 580 956 $2, 000. 00 45 $26, 000. 00 261 430 20 do . . . 100 470 65 69 205 50 do... 594 943 1 47A 877 540 94> do.... 156 290 '> 50" 388 225 00 do 20 071 5 00 130 355 00 do.... 12 574 1 50 18 861 00 Masonry : do... 3 294 25 00 8 235 00 3d class - - • - • - • • do .. 5J7 25 00 13 425 00 4th class --- ....... ...• do.... 5 198 °0 00 103 960 00 5th class do.... 4, 037 10.00 40, 370. 00 854 5 00 4 270 00 27 3 00 81 00 7 754 30.00 932 62 Timber: feet, B. M.. 221, 425 90.00 19 9'>8 °5 do 474 804 75.00 35 610 30 do.... 135, 602 90. 00 J2 204 18 Of truss - -• -- do.... 105, 900 90.00 9 531 00 do 40, 886 75.00 3 066 45 do.... 34, 432 83.00 28 578 56 133 800. 00 11 000 00 16, 190 70. 00 1 133 30 960. 00 71, 400 15. 00 10 710 00 do 48, 617 11.00 5 347.87 do.... 9,550 8.00 764. 00 do 1, 325 1. 15 212.00 gallons 180 270 00 Total 2, 081, 507. 15 Sections tfos. 55 to 67. EDWARD H. MILLER, JR. 3045 Abstract of monthly estimate for -. 186—. Total estimate of section. Total final estimate to date $2,081,507.15 Deduct former estimate 1,989,651. 19 Final estimate I certify the above estimate to be correct. 91,856.36 ESTIMATE FOR SECTIONS 68 TO 92, CROCKER & CO. CONTRACT. No. .] C. P. E. E. OF CAL. subdivision of division. Final estimate, July 26, 1867. C. Crocker, con- tractor. j^eacripuon. Quantities. Price. Amount. Grubbing and clearing ................ .. 25 $2 000. 00 $50 000 00 Excavation : 280, 629 .45 126 283 05 168, 691 .65 109 649 15 Third class 833, 693 1 47£ 1 229 697 18 Fourth, class - 786, 551 2 50 1 %6 377 50 Fifth class 89, 167 5 00 445 835 00 28, 912 8 00 231 ''96 00 11, 540 20 00 230 800 00 31, 302 1 50 46 958 00 10, 823 .45 4 870 35 Masonry : Second class 2,890 25.00 72 250 00 Third class .. 450 25.00 11 250 00 10,239 20.00 204.780 00 Fifth class f 3,966 10.00 39, 660. 00 Cement mortar ...... ..... 1,844 5.00 9 220. 00 Lime mortar ...... ... 1,719 3.00 5 157 00 Hip-rap wall . » 2,673 3.00 8 019 00 lietaining .... 5,082 10.00 50 920 00 Timber in trestle bridges 154, 536 75.00 11 590 20 Timber in tunnels 137, 788 90.00 12 400 92 Timber lagging 42, 466 90.00 3 821 05 Timber in tlumes 172, 600 70.00 12 089 00 Plank in flumes 82, 712 70.00 5 789 84 Wrought iron 8 491 15.00 1 273 65 Cast iron 5,633 11 00 619 63 Spikes and nails 2 000 8 00 160 00 Ties in track 05 000 83 00 53 950 00 Miles track laid 26 800 00 20 800 00 Total 4 055 504 51 Section No. 68 to 92. Abstract of monthly estimate for -, 186—. Total estimate of section. Total estimate to date $4,965,504.51 Deduct former estimate 4, 173, 545. 78 Final estimate for the month 1 certify the above estimate to be correct. 791,958.73 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 contract- ors 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 fol- lows : 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 en- gaged. 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 con- vinced 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 abil- ity 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 re- poits 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 prog- ress. 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 infa- inons 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 con- fidence in the practicability of the work, and at the same time give increased corin- dence 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 capi- talists 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 sub- ject, 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 sub- mitted. 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 en- gineer 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 Cali- fornia : 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 care- ful consideration ; that they have endeavored to make arrangements to procure a com- bination 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 com- bine such an amount of capital and business tact and energy as would secure the con- fidence 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 carry- ing 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 suc- cess 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 pos- sible. 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 obliga- tions. 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 be- lieve 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 accom- plish 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 com- pleted 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 sac- rifice, 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 di- rectors, 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 arrange- ments, 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 be- lieve 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 miscel- laneous 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 rec- ommend 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 dol- lar f — A. I cecollect that it was continuing the rates that had been paid under the contract. It is my impression that the rate appears some- where upon the minute books of the company. Q. Are they the same rates stated in these estimates which you pro- duced 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 state- ment, 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, how- 3ver, 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 em- bankments, 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 mount- ains. 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 in- creased expenditure -upon the company. Heavy rock excavations that, to work econ- omically, 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 cur- rency, 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 disap- pear, 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 com- mencement. 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 confi- dently calculated on a full supply of powder, and at least 15,000 men, but were dis- appointed 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 press- ing 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 com- pany 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 com- pletion 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 doubt- ful whether the means of the company will justify us in pursuing a policy so expen- sive 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 gran- ite, 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 prob- ably, if successful, enable us to obtain that number. To have this large body prop- erly 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 sum- mit, 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 un- til 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 consid- erations above referred to. We believe that by forcing the work regardless of expense, your road can be com- pleted 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 Ex- hibits 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 prepara- tory 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 consulta- tion 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 ex- cavation. 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 en- gineer'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 rea- sonable 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 f — 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 tim- ber 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 reason- ble 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 Commis- sion 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 Ne- vada 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 go- ing 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 Sum- mit 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 some- thing 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 char- acter 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 constructing1 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, Aug- ust 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.] Quantity. Price. Total. Hock excavation cubic yards 61 , 657 $3 00 $184 371 00 Embankment (to burrow) .... . do .. 12'* 6UO 0 90 110 340 00 Do .do 16 960 0.30 5 088 00 Retaining wall do ... ' 39 860 3.00 119 580 00 Tunneling .. . lineal feet 1,400 120 00 168 000 00 Do ..do . 200 85. 00 17 000 0 l Do . do... i 255 90. 00 22 950 00 Do , 100.00 57 5QO 00 Truss bridging do 1 410 40. 00 50 400 00 Bridge masonry 20. 00 134 6'JO 00 Arch culvert, masonry • ... do ... 2,770 16.00 44 3'>0 00 Do .. do 390 10 00 3 900 fO Snow protection iinealfeet.. 3,500 12.50 4('< 750 00 Total 9C7 799 CO EDWARD H. MILLER, JR. 305? Approximate estimate of the cost of constructing road on south line (I4,000/ee£) from Sum- mit (ros£), including cost of Summit tunnel. Tunnel at lower end of Donner Lake, and 2£ miles of increased -distance. [Grade, 90 feet per mile.] Quantity. Price. Total. Earth excavation ... cubic yards 1,660 35, 000 15, 600 7,970 1, 660 185 1,300 1 1 1, 520 626 500 4,300 600 $0.30 3.00 2.00 3.00 120. 00 85.00 80.00 15.00 40.00 20. 00 16.00 10.00 12. 50 $493. 00 105, 000. 00 31,200.00 23, 910. 00 199, 200. 00 15, 725. 00 104, 000. 00 525. 00 8, 000. 00 30, 400. 00 10, 016. 00 5, 000. 00 66, 250. 00 30, 000. 00 629, 724. 00 62, 500. 00 Hock excavation do Cement excavation do Retaining wall do Tuniiclin"' wall lineal feet Do ... do Tunneling (cement) do Brid^inc span 35 feet Do ..span 200 feet.. .Arch cnlvert masonry do Jinx culvert masonry do Snow protection lineal feet Extra protection for snow slides do .. Add for increased length of line, about 2£ miles, North lino including Summit tunnel $25 000 692, 224. 00 967, 799. 00 South line including Summit tunnel Donner Lake tunnel and 2£ miles increased dist Difference in cost in favor of south line ance . 692, 224 00 275, 575. 00 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 con- struction 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 con- struction, 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 construc- tion ? — 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 Com- pany. 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, super- intendence and clerk hire, and all that sort of thing. The usual prac- tice 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 Con- act 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. 3059 The estimate as to sections ninety-three to one hundred and thirty- eight was then marked " Exhibit 9, August 8, 1887, " and is as follows : No. . 0. P. E. E. OF GAL. subdivision of division, final estimate returned December 14, 1868, , contractor. Description. Sections No. 93 to 119. Section s No. 120 to 138. Total sections No. 93 to 138. Quantities. Quantities. Quantities. Price. Amount. Grubbing and clearing miles . . Excavation : 1st class cubic yards 27 299, 201 190, 733 188,909 170, 237 83,319 22, 825 19 170, 336. 38 123, 132. 18 90, 731. 80 146, 784. 70 1 1, 080. 38 46 469, 537. 38 313, 865. 18 279, 640. 80 317, 021. 70 9 i, 399. 38 22, 825 $2, 000. 00 .45 .65 1.47^ 2. 50£ 5.00 8.00 20.00 1.50 1.50 35. 00 25. 00 20. 00 10.00 5.00 3.00 10.00 $92, 000. 00 211,291.82 204, 012. 37 412, 470. 18 792, 554. 25 471, 996. 90 182, 600. 00 1, 265, 484. 00 42, 759. 10 5, 575. 73 59, 083. 85 127, 197. 75 381, 806. 20 83, 640. 30 6, 373. 90 2,840.10 57, 638. 70 2d class do 5th class do 6th class do CO, 278. 5 13,904 2,666 538. 52 2, 106. 18 14, 580. 29 5, 658. 33 1, 274. 78 91 4, 522. 86 2, 995. 7 14, 602. 07 1, 051. 15 1,149.59 2, 981. 73 4, 510. 02 2, 705. 70 ""855." 7" 1,170.47 70.60 63, 274. 2 28. 506. 07 3, 717. 15 1, 688. 11 5, 087. 91 19,090.31 8, 364. 03 1, 274. 78 946. 70 5, 763. 87 In foundations : 1st class do.... 4th class do Masonry : 1st class do 4th class do ... Cement mortar do Retaining wall do lietainin & wall 2d class do .... Surface ditches do Excavation in foundations : 2d class do.... 4,114 4, 114 .45 1, 851. 30 2, 942. 63 2, 286. 45 142 345, 531 3d class . do .... 5, 371. 08 1.50 8, 056. 62 5th class ..... ..... .... do .... * Timber : In truss bridges feet B. M.. Tuunels ... do.... 608, 881 430, 709 35, 105 9,327 954,412 430, 709 35, 105 32, 043 93, 080 90.00 . 90. 00 90.00 50.00 50.00 85, 897. 08 38.763.81 3, 159. 45 1,602.15 4, 654. 00 Jjacroing. .......---.---- -do .. Culverts ... - do.... 22, 716 Delivered for In foundations 93, 080 64, 072 52, 902 42, 940 19 .50 Wrought iron pounds . . 143, 761 106,016 71,457 27 1.25 207, 833 158, 918 114,397 47.75 .15 .11 .83 800. 00 31, 174. 95 17,480.98 94, 949. 51 38, 200. 00 Cast iron do.... Spikes and nails, ties in track, do . . . Track laid miles. . Side track laid .do.... Total 4, 725, 115. 00 Abstract of monthly estimate for -, 186—. Total estimate of section. Total estimate to date $4,725,115.00 Deduct former estimate 3,534,587.31 Estimate for tlie month 1,190,527.69 Five-eighths cash 744, 079. 81+17788 Less per cent, three-eighths stock 446, 447. 88—17. 88 Amount due 1,190,527.69 I certify the above estimate to be correct. 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 engineers7 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 sub- ject?— 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 esti- mates 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 es- tima.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 con- tained 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 un- less 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 any- thing; 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 meet- ing, 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 pre- sented a draft of such contract. The same having been read and con- sidered, the following resolution and order was unanimously adopted, to wit : Besolved and ordered, That this company hereby consents and agrees with the Con- tract 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 secre- tary 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, round- houses, and furnish all the equipment, such as cars, locomotives, ma- chine-shops, freight-shops, machinery in the shops, and everything nec- essary 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 rec- ollection, was that the Central Pacific Eailroad Company, as a com- pany, 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 sub- ject 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 min- ute-book, that a resolution was passed directing that none of the regu- lar 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 Com- pany?— 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 en- gineer. 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 in- clude 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 pay- ment 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 cir- cumstances that existed with the Contract and Finance Company, the in- creased 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 indebted- ness 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 min- ute book), it is shown that the increase of the capital stock was sub- mitted 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 circum- stance 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 dis- cussed 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 di- rectors was submitted f 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 Com- pany 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 expendi- tures 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 Hop- kins, the following resolution, offered by E. B. Crocker, was adopted, to wit : Resolved and ordered. That the bill presented by the Contract and Finance Com- pany for $1,021,712.05 for expenditures in building snow sheds, artesian wells, pros- pecting 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 con- tracts 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 re- member 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 Com- pany 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 Cen- tral 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 hap- pen 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 busi- ness ? — A. 1 think there were two contracts. I think there was one pre- vious 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 stockholders7 meeting a resolution was introduced reading as follows : That all disbursements and expenditures of moneys of the company by its. vice- president, 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 ex- pended. 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 remem- ber 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 expendi- tures ?-^-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 ap- pear 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 f — 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 ex- plaining 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 disburse- ments 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 state- ments as they were sent out to me for disbursements that he made, be- cause 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 com- ment?— A. Yes. Q. Did Mr. Huntiugton ever tell you that portions of this money re- ferred to in these resolutions had been used for the purpose of further- ing 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 in- fluencing 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 Cal- ifornia 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 Pa- cific 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 f — 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 con- vinced 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 Pa- cific 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 pur- chase ? — 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 trans- actions 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 re- ferred 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 guar- anteeing 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 meet- ing 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 gen- tlemen, 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 be- cause 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 resi- dent 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 con- stitutionality 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 mat- ters which satisfied him that they were entirely right f — 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 stockholders7 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 Ar- izona 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 confi- dence 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 re- mise, 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 com- pany 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, ad- ministrators 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 aris- ing or growing out of any such acts or doings. Resolved further, That the board of directors of said company are hereby author- ized, empowered, and directed to execute by its vice-president and secretary on be- half 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 suc- cessors 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 liabil- ity 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 Pa- cific 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 stock- holders 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 Names. Charles Crocker, in person E. B. Crocker, by Charles Crocker, trustee E. H. Miller, jr., in person Leland Stanford, in person Moses Hopkins, in person S. T. Gage, in person C. H. Cummyns, by Leland Stanford, proxy E. W. Hopkins, in person A. R. Preece, by E. W. Hopkins, proxy H. H. Seaton, same proxy William C., same proxy Charles Zeitler, same proxy William Ingraham, jr., same proxy... F. L. Anderson, same proxy Robert H. Hall, same proxy Albert Gallatin, same proxy W. R. S. Foey, same proxy Charlea A. Bailey, same proxy G. W. Sather, same proxy L. D. Folsom, same proxy J. R. Watson, same proxy Benjamin Welsh, same proxy Ansel B. Cheney, same proxy J. A. Seaman, same proxy Thomas Dunworth, same proxy C. J. Torbert, same proxy Mark Hopkins, Mrs. M.F. S. Hopkins, administrator, by E. W. Hopkins, proxy George Crocker, by Charles Crocker, proxy E. D. W. McCullough, in person D. T. Phillips, in person Charles F. Crocker, in person Number of shares. 94, 093 103, 851 10, 063 44, 083 2,500 4,500 10, 829 2,500 5,000 3,000 3,000 1,000 1,500 2,000 2,500 4,500 4,500 1,500 1,500 2,000 1, 500 1,000 1,500 1,000 2, 000 1,500 52, 804 100 5,000 3,486 100 Names. C. P. Huntington, in person k W. A. Tompkins, by C. P. Hunting- ton, proxy ......................... S. B. Dodd, by C. P. Huntington, proxy I. E. Gates, by C. P. Huntington, proxy R J. Phillips, by C. P. Huntington, proxy E. E. Adams, by C. P. Huntington, proxy , E. H. Pardee, by C. P. Huntington, proxy C. A. Van Deeren, by C. P. Hunting- ton, proxy E. St. John, by C. P. Huntington, Number of shares. proxy W. R. Curtis, by C. P. Huntington, proxy W. C. McKean, by C. P. Huntington, p roxy William Porter, by C. P. Huntington, proxy D. D. Colton, in person. E. M. Dunbar, by C. P. Huntington, proxy Jerome Madden, by L. Stanford, proxy A. N. Towne, in person John Corning, by L, Stanford, proxy . William E. Brown, by L. Stanford, proxy E. S. Miller, in person Robert Robinson, in person Total votes 10, 510 1,200 480 800 1,200 920 .1,255 1,920 210 2,000 1,000 20, 024 2,645 6,000 6,197 7,000 1,721 7,000 10, 010 457, 490 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 f — 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 offi- cers 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 per- son. 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 Cali- fornia and the Territories of Utah, Arizona, and the District of Colum- bia^— 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 in- tended transaction ? — A. Yes, sir; I think I had. I think I had notifi- cation 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 be- fore that it applied to the District of Columbia ; at least, I had forgot- ten that it did. Q. Do you know of any acts of Mr. Stanford, in the District of Co- lumbia, 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 oper- ated 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 com- pany 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 Cen- tral Pacific Railroad Company in Southern Pacific Eailroad bonds. Do you remember that action f — A. Yes, sir. Q. What was done under it f 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 ex- actly, 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 re- lates 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 invest- ment 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 mort- gage; 2 of the San Joaquin Valley. This is simply a report of a com- mittee, 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 Pal- ace 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 con- tract an agreement by the Central Pacific to buy any further sleeping- cars 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 Cen- tral 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 con- nected 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 any- thing, 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 COM- PANY. 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. Im- provement Company, and B. E. Crocker, acting on behalf of this com- pany, 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 stockholders7 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 ex- plained to us"; and, continuing: "Therefore, resolved, That the stock- holders waive the filing of vouchers and authorize the delivery of re- leases." 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, Hunting- ton, 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 in- sert the name of the party) of and from any and all liability and all manner of ac- tion 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 com- pany, 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. Pre- cisely 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 pay- ments 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 ex- penses. 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 dis- closed 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 infor- mation 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 con- sidered 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 com- mittee 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, un- issued, 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 con- structed ? — 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 Kail- road, 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 profita- ble 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 de- partments 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 Cen- tral Pacific before the lease of April, 1885, as compared with the opera- tion 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 earn- ings 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 de- termined. SOUTHERN PACIFIC OF ARIZONA AND NEW MEXICO LEASE. Commissioner ANDERSON, The lease of the Southern Pacific of Ari- zona 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 South- ern 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 con- nect ? — A. Because some circumstances did not turn out as they sup- posed they would at the time the lease was made. Q. In 1885, how long had those leases to run which the Central Paci- fic 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 South- ern Pacific guarantees that those earnings shall not be less than a mill- ion 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 agree- ment on the part of the Southern Pacific. They are liable to have some- thing to pay on the $1,200,000 and they are not very likely ever to re- ceive 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 show- ing 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 every- body for months before this lease was made. LEASING OF BRIDGE OVER COLORADO RIVER. Q. Do you remember the arrangement made with the Southern Pa- cific 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 re- membrance 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 rec- ollection 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 Com- pany, 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 be- tween merchandise going from San Francisco or any other point upon the Southern Pacific, delivered on the river by steamers, and merchan- dise 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 high- est 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. Gener- ally 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 Og- den. 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 Mount- ain 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 sell- ing 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 Mount- ain 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 Pa- cific ? — 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 direc- tors 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. Stan- ford 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 be- fore 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 considera- tion, 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 ques- tion 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 can- not. Our accounts with the Government are in such an unsettled con- dition that it is impossible for anybody to tell how it does stand ; we cer- tainly 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 trans- portation 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 as- certain 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 Govern- ment account. I understand our account, and that is all I do under- stand. 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 sub- ject, 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 bene- fit 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 prin- cipal, 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 earn- ings," 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 require- ments?— 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 Pa- cific ?— A. No, sir, and never had— not a dollar. I desire for myself to come before the Commission some day, and fur- nish 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 ac- count 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 explana- tion 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 differ- ence 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 ex- planation— 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 Depart- ments, 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 Fi- nance Company and the Central Pacific. I think if we have an oppor- tunity 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 in- formation and statements that have not yet been supplied. For ex- ample, 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 or- dinary business. ,We want that information as to both freight and pas- sengers 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.