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About Google Book Search Google's mission is to organize the world's information and to make it universally accessible and useful. Google Book Search helps readers discover the world's books while helping authors and publishers reach new audiences. You can search through the full text of this book on the web at|http: //books .google .com/I assst- I • 50TH Congress, ) SEKATE. ( Ex. Doc. 51, IstSes&ion. J | Part 2. TESTIMONY TAKJSN BT THE piTED 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." BOBEBT E. PATTISON, or PurNSTLVAMiA, Okabmmt, £. ELLEBT Ain>EESON, of Nbw York, DAVID T. LITTLER, or Illinois, Commi$$ioner$. VOLUME I. t » t ( « *^n . ■ ' * » • ^ ■% r , REPORTED BT CHARLES p. YOUNG, of New York, Bborbtart and Stenographer to thb Commissioh. -4^^»-«- WASHINGTON: CWYBBNUENT PBINtiNO OFFIOB. 1887. '^42': 69 • • •• • • • • • • • • • • • • • • • • • • • • • ;• • ••, . • - •• • • • • • « d • • • . - . • . . TESTIMONY TAKEN BY THE UNITED STATES PACIFIC RAILWAY COMMISSION, AS TO THE WORKING AND FINANCIAL MANAGEMENT OF THE RAILROADS THAT HAVE RECEIVED AID FROM THE GOVERNMENT IN BONDS. New York, April 27, 1887. The Commissioa met at 10 a. m. Present: Gommissioner Pattison (chairman), and Oommissiouer An- derson. The secretary was directed, for convenience of reference, to prefix to the report of the testimony a copy of the act of Congress constituting the Commission, and defining its powers and daties. The act is as follows : AN ACT authorizing an investigation of the booJcSj accounts j and methods of railroads which have received aid from the United States^ and for otiier purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled j Tliat the President of the United States, be, and he is hereby, authorized to api>oint three commissioners, whose compensation shall be seven hundred and fifty dollars per month to each, and the necessary traveling expenses and board bills, for which proper vouchers shall be returned, to be approve<l by the Secretary of the Interior ; and said commission ma^' appoint a stenographer, if neces- sary, and fix his compensation ; and the persons appointed on the said commission shall have power to examine all books, papers, and methods of the companies hereinafter named, employ experts if necessary; and they shall at all times be under the immediate direction and control of the President of the United States, and may at any time be removed by him in his discretion. The term of office of said commissioners shall not extend bejoud the beginning of the next session of the Senate. If the Senate shall be conveneil after the fourth day of March, eigh- teen hundred and eighty-seven and before the first of December in said year and the duties of said commissioners shall not then be completed, the President shall by and with the advice and consent of the Senate appoint three commissioners who shall perform and complete the daties prescribed in this act within the time therein specified. s .U.;8.;I'AC^Fi6; BXlLWAY COMMISSION. . .- '.(^i^.'.^.Tliitt die duty of siiitloomruission sliaUbotooxaniiuointo the j»; • ■'•» ©Aili'g ami UnaDoml mauagoment of all of the railroads that have re- * * ceiveU aid from the Goveniinont iu boads; to ascert-aiti whether they havu observed all the obligations imposed upon thorn by the laws of tlio Uuited States nuder which they received such aid, or which have been Hiuce passed ia reference thereto, and coDiplied with all other obliga- tions to the Uoited States ; and whether their books and accoDitts are ur have been so kept as to show the net earnings of the aided roads, and what said books and accounts actnally show in regard thereto, and what have boen iu fjuit said net earnings ; or whether there has been a diversion of earninj^s of aided roadw to less proiUictivo branches, tbrongh eoustrnctive mileage allowances, or average mileage allowances between aidctl and non-aided roads or iiarts of roads, or oLIierwise, and also whether such system of constructive mileage allowances is fairand nsiial, and in practical operation has resulted adversely or otherwise to the aided roads and the interest of the United States; or whether there has boon a diversion of earnings of aided roads to wrongful or improper purposes, and, if so, to what extent ; whether there ia a discrimiuatiou of rates iu favor of unaided against aide<l roads; whether any, aud, if so, how much, money isdneaudowingto the United States ou account of mis- taken or erroneous accounts, reports, orsettlemeuts made by said roads: whether any traffic or business which could orshouldbe done on theaideu lines of said companies has lieen diverted to the Hoes of any other com- pauy or to non-aided lines, aud what amounts have been dedncted from the gi-osH earnings of any of said aided railroad oompaules, by their gen- oral IVoIgh t and imssenger agents or auditors, by way of rebate, peTcent- ago of business done, constructive mileage, monthly or other payments on any pooling or rate arrangement, contran.t.or agreement ; and also to inquire into, ascertain, and rei>ort as to the kind, character, and amount ' of the assets of said companies, aud what assets of each company are now subject to the lien of the Government, and the value thereof; and also whether any dividends have been unlawfully declared by the directors or paid to the stockholders of said companies, and, if so, to what ex- tent, and whether the amount thereof may not bo recovered trora the directors unlawfully declaring the same or persons who have unlawfully received the same ; whether the proceeds of any trust funds or lands loaned, advanced, or granted have beeu diverted from their lawful use , whether any new stock or bonds hiivo buen issued orany'guaranfceaor pledges mode contrary to or without authority of law ; whether any of the directors, olHoors, or employees of said companies respectively have beeu or are now directly or indirectly interested, aud to what amount or extent, in any other railroad, steamship, telegraph, express, mining, construction, or other business company or corporation, anil with which uuy agreements, undertakings, or leases have been made or enteroil into; what amounts of luouoy or credit have been or are now loaneil by any of said companies to any person or corporation ; what amounts of money or credit have been or are now borrowed by any of said oompa- iiies, giving names of lenders and the purposes for which s^iid sums have iKnen or are now required ; what amounts of money or other val- uable consideration, such as stocks, bond)*, passes, and so forth, have l>een expended or paid out by said companies, whether for lawful or un- lawful jmrpoBes, but for which sufficient aud detailed vouchers have not beeu given or tiled with the records of said companies; and, further, to enquire and report whether said companies, or either of them, or their olUcers or ageuts. have paid any money or other valuable consid- eration, or done any other act or thing, for the purpose of iuflneucing U. 8. PACIFIC RAILWAY COMMISSION. 5 legislation, and to investigate and report all the facts relating to an alleged consolidation of the Union Pacific Eailroad Company, the Kan- sas Pacific Railway Company, and the Denver Pacific Railway and Tele- graph Company into an alleged corporation known as the Union Pacific Railway Company. Said investigation shall include the alleged sale of the stock of the Kansas Pacific Railroad Company to the Union Pacific Railroad Company, and all the circnmstances and particulars pertain- ing to said alleged sale, and whether any of the Pacific railroad corpo- rations which obtained bonds from the United States to aid in the con- straction of their railroads have expended any of their moneys or other assets in the construction, or to aid in the construction, of other rail- roads, or invested of their moneys or other assets in the stocks or bonds of any manufacturing, mining, and commercial companies or corpora- tions, or of other railroad corporations; and if any such expenditures or investments have been made, the extent and character thereof made by each of said corporations shall be inquired into, and also the present interest of any of said corporations in the railroads auxiliary to their respective railroads. And said commission shall also ascertain and report the names of all the stockholders in each of said companies, from its organization to the date of the investigation herein provided for, as they appear on the books of said companies at the date of its annual meeting in each year ; the amount of stock held by each ; what consideration, if any, w<is paid by each stockholder to said company for his stock, and when and in what property such payment was made; the date when each stock- holder so appearing on the books became such; and whether stock is now held or has heretofore been held in the name of any person in trust or for the benefit of any other, and the names of all such persons ; the total amount of the stock in each company, and the dates and amount of any increase of such stock, and the reason for such increase; and the amount of the annual salaries or compensation that are now or at any prior time have been paid to any officer or employee of said company, when such salary or compensation amounts to five thousand dollars or more per annum, and the names of the persons now receiving or who have heretofore received such salaries or compensation, and all bonuses or donations which may have been given or paid to any such person ; and all payments made under the head of legal expenses, to whom made, and the amount paid to each, and for what specific services such payments were made. Said commission shall also inquire into and report upon the relations of said railroads to the interests of the communities through which they pass ; to all questions concerning the payment of taxes, especially upon lands granted by Congress, and the delay of said companies in taking oat patents for such lands; the I'ates of faro and freight charged, dis- criminations, differentials, pools, and other devices, and the focilities and accommodations furnished to the patrons of such roads ; and their report shall embrace a consideration of the interests and rights of said communities as affected by whatever plan of settlement or payment of the existing debt maybe proposed. Said commissioners shall also consider and report whether the inter- ests of the United States require any extension of the time for perform- ance of the obligations to the Unitc^d States of said companies, or any of them, and the facts and circumstances upon which said opinion is based, including the security held by the United States for the per- formance of such obligations, and the value thereof, and the value of the property of such companies, and either of them, not included in such seeorityy and what further security it is expedient that said companies )J. S. PACIFIC BAItWAY COMMISSION. shall bo reqnircd to give ; and if, in their opinion, such i?xtflDBiou shall bo rt?(|uireil by the interests of the United States, tliey shall submit u Hcbeino lor situli extension, wiiicb shall Hecuru to tlio United States full payment of all debtx dne thoin from said companies, with a reasonable rote of interest, in such time as the commissioners shall propose, hav- ing due regard to tlio fiuauciat ability of said companies and tlio proper conduct of their business iu such manner aa shall afford efHcient service to tbo public. Aud the said oumuiission shall report in full in regard to all suoli matters aforesaid, aud iu regard to any other matters which may bo ascertaiucd or come to their knowledge iu regard to said companies n;- apectively, on or before Deecmber first, cigliteep hundred aud eigbty- Eoveu, to the President of the United States, who shall forward said re- I>ort to Congress, with such reeomuiendatious or comments as he may see fit to malce in the premises. The commisMiouers »hall ahto ascertain tbo average cost per aunum of Government trausportatioii iu the region now traversed by the Pacific railroa^ls between the year 1850 and the- completion of said roivds, and also the average coat per annum since sueli (Himplelion, and what iidditioual fiieilitiea have been furnished to the Ooveniment and the people by said roads; also to enquire what discount Iho Paeillc Ititilroad and its sev- eral branches were forced to make, in dispoeing of the bonds guaran- tceil by the Uovonimeut, to obtain the gold coin which was the cur- rcucy of the country through which the greater part of said roadit pass; also to at<certaiu tbo comparative cost of construction of said mads an rompareil with what they would have cost with I he prices of labor iinii i(i[iiiu<iiliiii'f< prevailing five years preccdingor five years Kub- Boqiieiit. ill 111!' ciJiiii'li'lionof said roads: also to inquire wliether or not tlie Pacill'' JCaihoiMl was completed in less time thiiu wjis allowed by law, and, if so, how much less time, aud if the United Stales was beue- fltted tlicR'by i also to inquire if either of the raeiflc railroad companies have been embarrussed and their earning capacity impuiii-d by antug- onislic local or State legislation; also to inquire if tbo United States, since tbo Uniou and Central Pacitle liatlroad Companies accepted the terms proposed by Congress for the coustructiouof Ibo Pacitle Ilailroad, hEia gruntetl aid in lands for building computing paralbd railruwis to said I'acidc railroads, aud, if so, how mitny such roads, and to whiit ex- tfiOtBueh competing lines have impaired the earning capacity of the Pnciltc railroads; 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 servieo has been performed by them, and what money, if any, has been paid for sucb service, and what remains duo aud unpaid, and if the United States by failing to pay for such mail services lias ciiibarrassedsaid railroad companies, or either of tJiem, ill paying' llii-ir iiuli/bit'diiessto the United States; also to inquire if tiic Ki-v<.'iat I'acilic niilruad companies iiavo complied with tbo provis. ions ol'-Aii ;iit {•> aIUt aiid itineod the act entitled 'An act to aid in the cuuBlrtiflion i<( a railmad au<l telegraph line fi-om the Missouri Kiver to ttic Pacilic l.)i!eitn, aud Lo secure totboUoveriimeut theuseof tbosamo for postal, military, aud other purposes,' ujqiroved July Urst, eighteen buudrcd and sixty-two, aud al%) to alterand amend the act of Congress approved 'Inly second, eighteen bundrcti aud sixty-four, in amendment of siiid tirstiiamed act," commonly known as the Tburman act, and, if not, in what particulars tbey have failed lo comply ; also to euqairo what sums tbo I'aciflc railroads ami Iheir branches can severatiy pay annually on account of their indebtedness to the United States without ttaposingsQiih burdens upon the people, and particularly ujion tbe local- If. S. PACIFIC EAILWAt COMBflSSIOK. 7 ities through which the roads pass, as to retard the development of the country. That the commissioners hereby created, or either of them, shall have power to require the attendance and testimony of witnesses and the pro- duction of all books, papers, contracts, agreements, and documents re- lating to the matter under investigation, and to administer oaths^ and to that end may invoke the aid of any court of the United States in re- quiring the attendance and testimony of witnesses and the production of books, papers, and documents under the provisions of this section. Any of the circuit or district courts of the United States within the jurisdiction of which such inquiry is carried on may, in case of contumacy or refusal to obey a subpoena issued to any person, issue an order re- quiring any such i)erson to appear before said commissioners, or either of them, as the case may be, and produce books and papers if so or- dered, and give evidepce touching the matter in question ; and any failure to obey such order of the court may be punished by such court as a contempt thereof. The claim that any such testimony or evidence may tend to criminate the person giving such evidence, shall not excuse such witness from testifying ; but such evidence or testimony shall not be used against such person on the trial of any criminal proceeding. Sec. 3. That the sum of one hundred thousand dollars, or so much thereof as may be necessary, is hereby appropriated, out of any money in the Treasury of the United States not otherwise appropriated, for the purposes of this investigation. Sec. 4. That whenever, in the opinion of the President, it shall be deemed necessary to the protection of the interests and the preservation of the security of the United States in respect of its lien, mortgage, or other interest in any of the property of any or all of the several com- panies upon which a lien, mortgage, or other incumbrance paramount to the right, title, or interest of the United States for the same property, or any part of the same, may exist and be then lawfully liable to be en- forced, the Secretary of the Treasury shall, under the direction of the President, redeem or otherwise clear off such paramount lieu, mortgage, or other incumbrance by paying the suras lawfully due in respect thereof out of the Treasury; and the United States shall thereupon be- come and be subrogated to all rights and securities theretofore pertain- ing to the debt, mortgage, lien, or other incumbrance in respect of which such payment shall have been made. It shall be the duty of the Attor- ney-General, under the direction of the President, to take all such steps and proceedings, in the courts and otherwise, as shall be needful to re- deem such lien, mortgage, or other incumbrance, and to protect and defend the rights and interests of the Dnited States in respect of the matters in this section mentioned, and to take steps to foreclose any mortgages or liens of the United Stiites on any such railroad property. Seo.5. That the sinking-funds which are or may be held in the Treasury for the security of the indebtedness of either or all of said railroad companies may, in addition to the investments now authorized by law, be invested in any bonds of the United States heretofore issued for the benefit of either or all of said companies, or in any of the first- mortgage bonds of either of said companies which have been issued under the authority of any law of the United States and secured by mortgages of their roads and franchises, which by any law of the United States have been made prior and paramount to the mortgage, lien, or other security of the United States in respect of its advances to either of said companies as provided by law. Approved, March 3, 1887. U. 8. PACIFIC RAILWAY COMMISSION. The Oomiaissiou prooeadeil iritli ttio taking of teittiiaony. COLLIS P. HUNTINGTON, being duly sworu und examiued, tes- tified as follows : By CoiumiHuiuticr ANDUItsON : QiieBiiou, You are, 1 beliovt'.tliovieepresident of the Central Padflt^ Railroad f — ADSwer. 1 iiin. Q. How long has that bei?n your position 1 — A. Since the organiza- tion of the company in 1861; I think, possibly, it van 18C3 before wo fully organized. Q. What has been the sphere of year own connection with the com- pany T — A. [ have attended more particularly to the flnaueial mutt«m of the rnaipany hero, and the farni»hing of material for tbebnildiiig of the roail. Q. Where lit its maiu office! — A. Sau Francisco. Q. Where do the moetiiig!« of the directors take place 1— A. San Francisco. Q. WhatoDlcers restda in New Yorkt — A. No other than myself, I believe ; the viceprusidenu Q, What book-keepers liavo you here in New Yorkt — A. Wo never have kept a lull set of books here ; we have transferred onr accounts every mouth to California, and tliey have distributed the accounts there. For a number of years ray accouuts were quit« meager hero. 1 UHod to keep tlieui on memoranda and send them to Gnlifornia, and they nset) to distribiitH the matter there. Q. That is to say you kept memoranda of the diHbur3ement.s or finan- cial items made by you here, and referred them lo the acconutantR at Ban Fraiiciscol — A. Yes, sir. Q. Docs your company not send general reports of its linanciiil pro- CC(MlingH to New York for entry here I — A. No; unless I call for it; not a» a regular thing. Q. Is there nothing reported here except the printed annual rejiortsT —A. No. Q. Is [here no stock ledger kept here 1 — A. We have a transfer ledger here; transfer book. Q. What lire the names of the principal book-keepers or persons who keep your accounts in San Francisco t — A. K. H. Miller is secretary, and has supervision of the bonks. He has hud ever since the organisia- tion of the company. Q. Do you mean of all the books of (he company or of only those that refer to tho linanccs! — A. You can say all the books of the company. Q. Who keeps the retiord of the resolutions of the directors t — A. Mr. Miller, as seci-etary. Q. lie keeps the book of minutest — A. Yes, sir. Q. Who keeps tiie record of the action of the executive committee 1 — A. It is all done there. I think the secretary would^ be tho proper man; be is in all our meetings there; be is one of the fixtures; ho is always about the olllce. Q. ThatisMr. Miller!— A. Yes, sir; E. H. Miller, jr. Q. Tliero is a rewnl of tho minutes of the executive committ«eV twtioiit — A. Oh, yes, sir; I am there very few days in tho year, and sometimes for three or four years I am not there. Q. Who compose the executive committee at present 1 — A. I ooiild not say. We have not had an executive committee all the time fhim the ergantzation of the company. 1 think last yeiir Mr. Charles P. Crockor, Timothy Uopkius, and S. T, Oage. Q. All of Sail FraaciscQ f — A, All of San Francisco. COLLIS P. HUNTINGTON. 9 HISTOBY OF CENTRAL PACIFIC. Q. To give as some general information in regard to the history of this enterprise, not calling for exact figures at first, will yon start with year first connection with it and describe the road as it commenced and as it grew, as far as your memory serves you f We have all the reports here from 1872 down, if that will assist you ? — A. The company was organized, I think, in 1861. Q. Under a California charter? — A. Under a California charter. After its organization I came to Washington to get some aid from the Government, which was obtained. That is, what we supposed would be some aid. It has not turned out to be of any particular benefit to the company, I think. It was our intention to get some aid. Before we got any aid we commenced work, almost immediately after the pas- sage of the act of 1862. We commenced work and w^ built the road, I think, to Cisco without any aid, 92 miles. Q. Ninety-two miles from where f — A. Sacramento. I bought all the material here. We commenced under small contractors. I think we let the road to nine different contractors between Sacramento and New- castle, 31 miles ; but they got very much demoralized, labor was diffi- cult to obtain, and the first contractors picked up all the labor they could get, when the labor started to go up the line to the man that had employed them on the upper section. It was a little pleasanter working down the valley. The subcontractors thus interfered with each other. Afterwards we let a contract to Charles Crocker & Co., and we went on under that arrangement some time. They were doing the best they could, but I think I wrote to them they had better organize a company, and they organized the Contract and Finance Company, and the road was built by that organization. Tlie object was to get other parties here in. I will say that I had a talk before we did this with a great many, and they would not take the responsibility of going in as individuals — as an association of individuals or partners. They would not take the responsibility. I told them that I thought if they would organize a company I could get people here to take an interest with us, where their responsibility was limited beforehand. Q. Was the Crocker contract made before or after the passage of the act of 1862 f — A. It was made after. Q. Before the passage of the act of 1862 were the funds of the com- pany provided by subscriptions to the stock or the issue of bonds f — A. The first were subscriptions to the stock. Q. That is to say, a cash subscription ; or payment to the contractors with stock f — A. At first it was cash. Q. How long after the act of 1862 was the Crocker contract made! — A. My impression is it was a year or more. I was here all the time, and my impression is it was something about a year or a little more than a year after the act, 1864. Q. Have you a copy of the Crocker contract ? — A. I have not; I do not know that I ever saw it. Q. Do you know to what portion of the road it applied t — A. It was all in California. Whether or not it embraced all in California I do not remember ; but it did not come east of California. Q. Under the Crocker contract the construction continued ! — A. Yc5», sir. Q. Can you tell us, by date, about the rate of progress that was madef — ^A. I think the work was in the Sierra Kevada Mountains, in U. 8. PACIFIC RAILWAY COMMISSION. ' SUvlo of California — I iLiuk we iliil no work east of Califoriiia- iiiitil 1807. Q. I'li^iise describu the lino tliat was cuii8tructed witliiti tbe 3tute of CaliforuUi inior to 1807.— A. It wuh a very difficult line, to 8i>e«k of tlio |)li.v)tical obstructiuMB to bo ovi'rcomo. pTOliably it was tbe worst line tliat was over built. Wu rise 7,042 foot in 105 milee, anil all bnt 135 loot of tbat was ovt^roomu iti Hi tnilOH, with n oiasimuin gra<lu of 105 fVot. 1 bolievu tbero was ii little short [>t('ce wo do not count; tbat van 110. Q. Offtgmdef— A. Tes, sir. (j. I'leane describe between wliat points tbe construction occurred. — A. It was ill California. It was to itn imaginary boundary line; there is no town or anything. Q, It U tbe present line of tbe road from San Francisco to tho Cali- fornia bonndary-t — A. i-'rom Sacramento; yes, sir. Wo had to ovor- flome a great many dilHcnlties when wo started. Iron was $62, and bo- fore we got across tho mountains iron was sold for 9150 a ton. Loeo- iaotivi-8 went from $S,<)00 to as bigb as $32,500. We i)aid 2J per cent, insnranco in the time of peace, and in tbe time of rebojlion we paid 17 per oent., insuring the goods around Cape Horn. Many things went up nioru tbuii 200, and I gness many things 300, per cent, advance from the tirni' wf niriuinrived the road before we got it completed. Q. Weir llir |iiii'i-s, as fixed by tbe original Crocker contract^ ehaiigiil :ii nil !— A. I think not. Tbat was tor grading, and it was paid in gold all tlie tiuio, so that however prices lluctuated here, we sold our paper hero for gold, and there was where tho expense came in. Q. Please describe tho prosecution of this enterprise after 1807 1 — A. That was built, I think, all in tho State of Kcvadaand Territory of Utah, I was not over tho line whilst it was building. I went over in the winter of 1SG7 and 1808. (J. During what years was the constrnotion prosecuted in Xevada audUtjih? — A. The rails connected at Promontory Point on the 10th ofMav, 18(i0; and it was .Inriiii,' Ihe Years l.S(i7 and 1608. It Was all done, I think, iu 1807 ami ls08;ii]<l ii pint of 1800, ending with May 10. Q. Who cousti-uct ed that poMiKii «( I ho road!— A. That was under the Contract and FinaTict' Oompaii.v, THE CONTEACT ADD FINANCE COMPANy. , Please describo that orgaiiisatiou, and stivte how it originated. — A. I Wioto to onr people, afU'r wo found it very difficult to get mouey or to get people in with us. What I 8Ugge.itod to be done was to get Bomo of thcBo strong men in New York associated with us, as I said boforo. They did not like to como in under an unlimited partnership ; but Mr. WUliuin K. Garrison said if we would organiite a company, by which they wonld know tbe extent of their liability, ho tboughC ho would get bis father iu for one; tbut is, Commodora (larrison. I bail a talk with William K. Dodge, whom i knew very well, and Mosen Taylor; bnt more particularly Mr. Dodge. After tho organization I fipeut.a good deal of time with a dozen men, perhaps, in New York, endeavoring to got them to corue in with us, but I did not get any of them in. I). O. Mills I lalkeil with a great many times, but he said tbe risk be t]iout;lit wiis tin) cnsil. Mr. Garrison almost uaid lia would but notqaite. Itiit he liiiaily ^^lid I ho risk was too groat William tried to gi^t hiiri in, but lie said ho di<l not like it ; it was too Urge au nmierlakiiig, nrnl the times wore tiio iiricerlaiii. So by oudorsing paper C0LLI8 P. HUNTINGTON. 11 individuaUy, which we did- pretty largely here, we managed to get throagh. Q. My question is as to who constituted the Finance Company, and what the arrangement with them was f — A. The stock of tbat company was nearly all held by Governor Stanford, Mr. Hopkins, Mr. Crocker, ancT 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 was the name of that company ! — A. Contract and Finance Company. 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 cer- tain that I ever saw the contract. Mr. Hopkins, of the firm of Hunt- ington & Hopkins, hardware and metal merchants, attended to these things. Q. It was the road, substantially, after leaving the State of Califor- nia f — A. O, yes, sir. Camp 24, 1 think, is on the State line. It was a contractor's camp, you know; Jind it was from that to the point of junction. Q. About five miles west of Ogden, was it not? — A. We graded down to Ogden very near, and the Union Pacific people graded out to Humboldt, Wells — I should say 170 miles — in sight of each other. Mr. Durant was going to the Pacific Ocean, I believe — he started for there, at any rate — and I told him to tell our people I thought we should strain every nerve get into Salt Lake Valley to secure a portion of that business. It has not turned out as valuable as we thought it would be, but it then had nearly all the trade between the Wahsatch Valley and the 100th merid- ian, this side of Cheyenne a short distance. But, finally, I made ar- rangements with Sam Hooper and Ames, among them, that they might build the road to Promontory Point, 54 miles west of Ogden. I would agree that they should build the road to that point, and then we would buy that piece of road, and in that way come into the Salt Lake Valley, -or to divide that business a little, or we would come in alongside of them, and they could take their choice. They sold the road. Q. Have you a copy of the contract between the Central Pacific Com- pany and the Finance Company! — A. No, I have not. I think it is an even chance that I never saw it. Q. Can you state substantially what its terms were! — A. 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 ijot 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 tho^ bonds and stock at par f — A. No; I can 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 proportion of bonds and stock ? — A. The Government bonds and the company's bonds — about $64,000 was what the bonds were. Q. Sixty-four thousand dollars in bonds and the balance in stock? — A. That was just it. Q. And the balance in stock ! — A. Yes, sir. Q. About $36,000 in stock per mile f— A. Yes, sir. I have got it in my mind it was about $100,000 in all. Q. The junction was effected by 1869!— A. The 10th of May, 1869^ if ufj memory serves me right. U. 8. PACIFIC RAILWAY COSIMISSION. Q, Ami from tbat period the road bas been contiiiiioasly operated ! — A. Yes, eir. W« miglit have beeii detained some little time afteritwas first opeued. ll biul to be tdieddt^d over iibout 4U miles. We had to bdild eheda to operate it in the winter. Q. Wheu vTikti it that your eompauy tietjuired its tomiinal faciUtieR at SuH Fraiieiseo; wbatyoii call "Mission Biiy," 1 tliiiikt — A, I could rtot nay when that was. l sbould think that waa IS(!7 or 1.S6S, or alouft about tliftt timo, but I havo no data or anything; that I eaii •■ouiioot it with. I was not Ihcn; at the time. THE WESTERS TACIFIC. Q. Ill that connection please describe the ronto of what was known an the Western Pat^iflc. — A, When we were in Washington, and worn trying to get throngh the bill to give ns aid, a certain party said that we mu«t cut off onr part at Sacramento, and thoy must have the part iMitween San Kranciaco and Sacramento, or else we must begin work at San Francisco. Beginning work at Han Francisco would bo very much like bnihiing a roiul from here up to the Adirnudacks, instead of com- mencing at Albany, because they had a good river navigatiou up to Sac- ramento, and we wanted something to jiay Imtter than competing witli the river. Wo oouseuted. We commencedat Sacramento, and wo as- signed that part of the road, as we agreed to, t« tiharles McLuughlin and a wan by the name of Uouston, as 1 remember, and Judge Dane, and a number of them, and they located the road. We had nothing to do with them at that time. Q. The Western I'aciflf I — A. Yes, sir; they located that from San Fran- cisco, 5U miles south, to San Jose, and then 22 miles north, pretty nearly to Niles, und then up through the Alamada Canons to Livermore Val. ley, and over the Livermore Mountains around to Sacramento, 170 or 180 miles. They finally failed or got embarrassed — 1 will not say they failed, l)Ut they did not aeo their way clear to complete the roiul, and they came to us and said if we would take and finish the road to San Francisco we could have it, and they would keep the land grant. Q. You to finish the Western Pacific I— A. Yes, sir. Q. What is the total length of the Western Pacific f-A. They ex- pected t-o put in the wliole of that road via San Josfi, but they did not gut it in. They built fiTim San Jost^ to Sacramento, and it is 120 miloK, as I remember it. It maybe a fraction over or under, but I think that is it substantially. Q. What is the substantial direction to Sacramento firom San Fran- ciseol — A. I should say it was about a little north of east, Q. As operated since you took the Western Pacific, it is simply a continuation of thcOentral Pacific from Sacramcnto4o Sau Francisco! — A. Yes, sir. Q. When W!ia it that the consolidation ttK>k placet — A. I think the last consolidation was in 1870. It might havo been ISG9, There were two or three consolidatious ; I thiuk two — no, I do not know that there was but one. I was thinking of the iucreaae of the capit^U stock. We increased that two or three times as the work progressed. We did not. know exactly where wo wcro going when we started, but as the work progressed and wo found it of more importance wo incri>ascd the cap- ital stock. Q. Have you a copy of the articles of consolidation, showing the tfirmsf — A. 1 do not think 1 have here, but it is easily obtaine^l. 1 can COLLIS P HUNTINGTON. 13 8611(1 for it^ if I have Dot got it here. I could send to California aud get it Q. We would like to see the articles of consolidation, so as to under- stand them exactly. What other construction besides the construction that you have described has been undertaken by the Central Pacific! — A. The Central Pacific built from Lathrop to Goshen, 146 miles and a fraction, south. THE LATHROP BRANCH. Q. In what State is that? — A. That is in California. Q. Which is the point that is on the Central Pacific road? — A. Lathrop. Q. How far is that from San Francisco ? — A. By the direct line, the nearest line f Q. By railroad? — A. There are two lines of road that run from San Jos^ to Lathrop. It is about 80 miles by the shortest. Q. And this branch runs south from Lathrop to Goshen ? — A. Yes, sir. Q. About 110 miles? — A. One hundred and forty-six and a fraction, I think. Q. When was that road built? — A. That must have been built some- where between 1869 and 1870, 1 should think. Q. By»wh at contract was that road built? — A. I do not know. I think it was built by the Contract and Finance Company, though. Q. The same company that built the main line? — A. Yes, sir. Q. Have you ever seen the construction contract ? — A. No ; I do not believe I ever have. Q. Were you personally interested in it? — A. If the Contract and Finance Company were, 1 was. Q. As a stockholder ?-^A. Yes, sir. Q. Do you remember how that contract was made I By whoso vote? — A. No ; I do not. I do not think I have been there on the letting of any of the contracts. Q. Do you know whether that would appear in the books of minutes of the proceedings of the directors? — A. Very likely. Oh, yes, sir; it must have. It is regular business and it must appear. Q. Was it the practice of the company to make such contracts by res- olution of the board or by act of the president of the company ? — A. I should think that would be ratified by the board, at least. Q. Do you know what the contract price for the construction of the Lathrop branch was? — A. No ; I do not. Q. The gauge is the same as that of the main line? — A. Yes, sir; Q. Please tell us what sort of country it runs through, and what places this branch connects with. — A. It runs nearly south from Lathrop, and it did not connect with anything at the time. There was nothing up there : no town. Q. Does it follow the bed of the river? — A. It follows the valley. It goes up the San Joaquin Valley. There are a great many streams to cross. You can get the names off the map better than I can give them to you, but there are quite a number of streams. Every little distance, I noticed, there was a long bridge. Q. What was the object to be attained by the construction of that roadt — ^A. To develop the country. We thought it would be a good wheat country, but they could not draw the wheat very far by tCMims. There have been quite a number of towns built up since — Merced «qA U. 8. TACIFIC RAILWAY COMMISSION. ■■ Moilesto. Tliore are towna every few miles. I liavo not boon up tli( vallej' more tbaii throe or four timea myself, just inwsitiy tliruiigli miw i<ll.v. Q. TLia IS a brauuh owii«d by the Coutral Piiciflcl — A. Yva, Kir ; it is a part of the Ootitr.il Pacific. Q. It is 110 separate organization! — A. No. Q. Do you remember when that const ruction was ennipleteil T- No; Icouliltiot uay.jpist at the moment. That is one of the things tba^ 18 easily ascertaiueO. I can write to my people and get the date. OTIIEE BRANCOES. Q. What oltior roatU Iiua the Central PaciQc constrnctvil t — A. From Nik-H into the city of Oakland, 21 or 25 miles. Tliey biiiit that. (J. Ni1u» is the point on the Central Paeiflof — A. Yus, sir; in tlie jHiiiit where the Western PueiSu diverges. Une goes to Sim Job6 south, ami the other runs direct to San Francisco, Seventy-two miloS) as I remember, around by the way of 9au Jowi to Sail Friiiioiseo ; nn<| probalily L'S miles the oilier way. I think the road is 24 to Oakiiuit^ and rtii'iii it connects witli another road, and then Ihem is a I'erry of a 01-4 mill's. Q. When was this liranch construeledf— A. That is about the same. Minriewlii-re about 180S or ISGO. Q. And also constructed by the Contract and Finance Oompanyt — A* I am iiiit positive, but 1 should thinit ho. In all these matters we alwnys have toniid it more ct>nvenient to buiUl by a coiitruet oompany, \Va have built most of our roads in that way. They are the ooiniianies, of course. Q. What other branches or transportation companies does the Central Paeitle own I— A. They own from lioaeviUe to the Stut« line. STEAUEQS. Q. Is there not soinelliing about tlio ferries and waterways ami ferry-^ hoitt^ (hat you own, or that you ive'quired l>efore yon started to build the California road? — A. No. We Iwiight tliose steamers with tlid Ouiiroruia PiiciQe. 1 diil tbat trailing myself. I bought the CalifonilOi Pucitlc, and with it 1 honghc what was called the California Navigation: Company's steamers, I believe. Q. When was thati— A. That was early in the seventies. Q. Uow many steamers were purchased T — A. I do not remember noir bow many. There mtiHt have been ten or udozi'ii, probably Q. Itetweei! what points wore tlieyuscdl — A. itetwefii .San Frau- Cisco and Sacramento, and San Francisco and Stockton. Q. Whore is Stockton ? — A. That is on tbe San Joaiiuin. Von go uii through Due end of the Bay of San Francisco, and then through Sau Pablo; aud then yon turn, as you go up north or northeast, au(l go Id tlie right, up to the San Joai]uin. it isalittleslongh that runs thnmgh that country. Q. These were mainly river boatat — A. Yes, sir. Nothing thatiuuv outside. Q. You say there were about ten ! — A. I should tliink so. Q. Fi-om whom did the company pnrchitse the.sc boats! — A. Wft bought thom with the California Paciflc. We bought that road ani they owned those steamers. Tbey had bought them with the Callfonili Steam Navigation Company, I think it was called. COLUS P. HUNTINGTON. 15 Q. The California Pacific was a railroad orgamzation, was it not A. Yes, sir. • Q. Between what points ! — A. Between Sacramento and Vallejo. Q. Is that corporation still in existence! — ^A. Yes, sir; it is. Q. You purchased the interest in the corporation!— A. We purchased the stock Q. Along in 1870 !— A. Yes, sir. Q. And in that way acquired title to the steamers ! — A. Yes, sir. Q. And subsequently the steamers were sold to the Central Pacific! — A. I think so. We used some of them ; running between San Francisco and Oakland. Q. How was that contract made between yourself and the Central Pacific Company for the transfer ! — A. I do not know. I did not have anything to do with that. That was done after I left California. Q. The Central Pacific acquired the title to your steamers ! — A. I know 'j but that was after I left. I bought the steamers with the Cali- fornia Pacific. Q. And then you sold them ! — A. Then I left. I was there only about thirty days, and when I left they wanted some boats, as I remember, for Oakland Ferry, and they made a transfer. Q. The terms to be paid must have been assented to by you before that went into effect! — ^A. No; not necessarily. I did the trading part of it. I did not buy it for myself. Q. You mean you bought the California Navigation Company for the Central Pacific ! — A. No ; Mr. Crocker was interested, and Mr. Stan- ford, and Mr. Hopkins, and several had a lesser interest ; but we four owned a large majority or it. By the Chairma n : Q. Was it a company purchase ! — A. No. Q. Individual purchase ! — ^A. Individual ; yes, sir. By Commissioner Anderson : Q. Then these individuals who owned the stock, and through the stock these steamers, must have assented to the terms of the transfer to the Central Pacific before it could go into eftect ! — A. We bought the stock of the California Pacific. I was not a director of the California Pacific, and it was not necessary that it should come before me. THE CALIFORNIA PACIFIC. Q. Who were the directors of the California Pacific! -A. M^jor Hammond, I think, was one. Q. Please give his full name. — ^A. H. P., I think, are his initials. We always called him " Major'^ Hammond. I could give you the names of the directors, but that is one of the things I could have to-morrow, I suppose, or the next day. Q. Do you remember the price paid for those steamers! — A. We paid Q. No; paid by the Central Pacific Company! — A. No; I do not. Q. Does it not figure in their reports at something like $800,000 ! — A. Well, it is possible. I do not remember, myself. By the Chairman : Q. Did you sell to the Central Pacific Company ! — A. No. Q • Who did sell ! — A. I purchased the stock of the Califoma PacifliQ for others and myself. They owned those steamers. Q. As individuals ! — ^A. The stock, as individual^. O. S. PACIFIC RAILWAT COMMISSION. ^ By Coiumissioner AlfDEBSOM : Q. Tim board of dlroctiou of tlio Culifornia Piwifiu tiDdoubte4ly con Irautol with tLo Ceiitral Pacific 1 — A. Yea, sir. Q. But I want to get how tbe contract WU8 made. — A. I could uot toll yon, but that is easily ascertained. ' Q. Were not the direotora iu the California I'aciflc alt intereatod nioiu or less in the Centra! Pacific! — A. No; 1 do not tbink they were! Major naminotiil, I know, was uot. That is, I know I do not think he wam. I never saw Ida name on the Ii«t. Q. liVhero ia tbe idaee of business of tbe California Pacifio to-day 1— A. San Francisco. Q. Are their books tburu I — A. Yes, sir. Q. As far as your recollection serves you, yuu do not know bow tbU transfer of the steamers came about, from tbe Cabforoia Pacific to thi' Central PacificT — A. No ; 1 do not. I probably did know at the tim but if I did it has passed from nic. y. You do not ramember tbe price imiil I — A. No ; I do nut. (j. Do you remember whether tbat tranaataioti bad any eflTcet on thi market value of the stock of the California Pacific which yon were tha owning! — A. No; I do not think it did, becanse it never bad mach ( any market valae. (j. Did it have any effect on tbe bonds 1 — A. No ; 1 do not tbink thv it woidd on the bonds. Tbe bonds rested ou the road, not on tbe steam era. ! do not see why it should, but I do not remember. We bough the stock of tbe California PactHc because tbey were ruuntng it to sel out to na. Tbey bothered us terribly, and they cnt rates, and they ba( the short line. It was nearly 82 miles to San Francisco that way, and the ucnrej^t way by nay of Niles waa 138 milfts over the Western Pacific, and we wera almost compelled to buy it. Wu did not buy it bucantift we wanted it, but simply to protect ourselves aud our interests. W< were large sbaro-hoider» iu the Central Pacific, and it waa as much foi that as anytbint;. <j. >So I uuderstivud; but I am only imiuirluK in regard to tbe tran«< fcr of the Iwats to tbe Central Pacific. — A. TItat was something doof after i left California ; at least, I was not there. It may have been I year or two later. I do not romemher. I was not there at the time f ' transfer was made. Q. Were you not consulted, as vice-president, as to tbo propriety of! acquirini;,' fhaf: property T — A, Very likely I was, but not necessarily, I used to do pretty important things here without consulting iny peo- ple and took I lie n-Mpoiisibility, and I used to tell them to do what th^ tbotiglit pm|HT wJHiout consulting me, and take the i-esponsibility. ^ li. How lii;i>; iifiiT acquiring those steamers did the Central I'tMiSt kfcii o|ieialiiig Ibom f — A. I tbink tbey arc operating them to day. Q. Tbey have operated thorn ever since T — A. Yee, sir. (j. Are you at all familiar with tbe details of tbo result of that 0l>er- ation and the earnings derived from them t— A. Somewhat. Tho pr^ its are very small. Ft is not iu a direct profit We never expected It to be. But it iaiu keeping things even, and not running everything afe! a loss. Wo bought off, at an early day, some sleamera that were po6' on. The Shin du Wan thfy put tin to sell to ns. Thoy asked $75,000, I know, and thev ran for almost nothing. It waa a boat worth about ilV'OO or jiliO.OdO. They finally got into trouble, and I tbinl we finally bought it for $18,000 or $20,000. They wanted toiaake f*" worth our while to buy them off. C0LLI8 P. HUNTINGTON. 17 Q. What is the next item of constmction that the Geutral Pacific un- dertook f — A. I do not remember any. The California and Oregon roail was built by the California and Oregon Company. Q. Started by them? — A. Yes, sir; was built to Tehama. I think, and then it was^consolidated with the Central Pacific, and they have been building it ever since. I think now they have got it to the State line. THE CALIFORNIA AND OBEGON. Q. What i.s the ultimate destination of that road T — A* From San Francisco to Portland, Oregon. It is built to the State line. But I un- derstood the question to be as to the Central Pacific's construction. An- other corporation in Oregon took up the constmction ; the Central Pa- dfie completed the road. It was started as the California and Oregon load Mid built, I think, to Tehama, and it has been built since to the State line by the Central Pacific. Since that time we have acquired eootrol of the Oregon and California. Q. The Central Pacific has acquired that! — A. No. A Who has acquired control of the Oregon T Do you mean some indindiuU! — A. Yes, sir; to run in that interest; to improve these (j. What was tlie Oregon and California corporation ! — A« That wsm SB Or;$oii eorpoTaitioo. Q. To coBScToc: a road from where T — A« From Oregon to the south liM <^tke Ssaie. to connect with the California and Oregon. Ours wm aSkd CiMafnia and Oregon, and theirs the Oregon and California^ and they hotk goi a land grant at the same time. Q. A Sa£t land grant T — A« Xo; from the Federal Government. Q. A Uniiail Slates land grant f — A^ Yes, sir. 4. Hire tb-:tse two roads united T — A. They have not. Q. Wjiai is ibe gap ! — A« It is about £cirty miles between the State hoe lad Aj^ilazkd. Q. I^ inDtccnMS^roeted pcvtion is in Oregon ! — A. Yc^, sir. Q. & thai i^ California and Or^^n is completed to the State iinet^- A Td I3ifr Scae liiMr. Q Wlieai ^jfcK tbis coostruction commenced by the California and Ortpm oootiiaBj ! — A. I tMnk in 1867 or ISSS ; I may be wrong, tmt I tim^ liie ae; ^lassed granting the land grant to them in I^$06, aufl I AmU lioiik wniihi two years afier they commenced and did some vodL and lifeL ri»*fj g<K into diAealties and could not g^t alofjg — Mr« ESXL ntc sinxft»- ifiiiexs — aod it fell into oar hands. <1l WbeL iiuz tiiey completed it to Tehama ? — A^ I i^houlfl think tliat WMIL i?wr ur 1^74; «r 1S74. Q. I^ieL -ntere wnf a consolidation, as I understand it^ fjetwe^n the Ceaiza I'^ciht and Uit California and Oregon f — A^ Yc^s. lor. Q. iTiieL x-ift& -LiiSu '.':»n«oIidatkn eSteted i—A^ I think abont 1^0. Q. 2»!^iE^ zik^ ri«r 10 Tehaau ? — A^ 1 am right aJxMit the tfjumAMb^ tioa. inc I mvy i»e wronr a^cNit kow far tlie rciad wa« Uailt umi^ XiMfi Cihfgaxi& uuL C^r»f^iL. I am lighi nh^Mui tlteccoHioiidatmL W/wi^er^ I IB gan^ sin*^^ S:* idte7 ma$t ksre lubd le6« rc^ad. or tl«e th^ con- ptectfhieltrv: liiniiTiiDprcssasiistliat tbeCaMorniaazkdOrtr^^ofidj^ mm mdiL xn k*^ is? a^ T^lhama. <j^ Hjt^ ^iii. ziiv*^ arckdes of cooi^^Iidatioii T — A^ Tberan; tiie b vai^ al acnt*: m liit^ fiame tise. I rhhik: tht Sa2i Jc^^aia road laGhn^' -ai Qom^ and 'die Galifamii ..Ad Oz^gon: Hie iz ± U. 8. PACIFIC RA[I.WAY COMMISSION. Q. Tb^fA were tlircti eorpnratioitH to it then T — A. Yen, air) I thflik more. (). Tli»t in lUe Siiiiio imiwr I called fori — A. Yoh, sir; I tlilnk tlift roiid IVoiTi Oakl.uid )o Niles iilso. Q, Allcr till- fiiriHoliilalLori w:is |n>rf'ciil(il ilid voiir company iiiimutli- Hti'ly (■"TitiiiiRi lliti ■;orislniii|iiin f— A. No; I tliiiik not. i}. 1 low limjj ii lu-.i iri.I cliLpHiil ?— A. I r il wji» to Teliivtiiii, we 8lO|t]HMl tUeio some tiiEio. Hit wii^iit T('li)tiiiHl)eforolliocoiiaoli<lattoii,it ri'itted tbrnotiio time; uiul it'it van before lliat, we piobitbly went alou^u!( i'nr iiM Toliitmii very hooii iifter llie eon sol illation. tj. Wbomliilyoii resume eoiiBtrueliont — A. We built tlin rtmd to Itwl- iliug, anil tlien it reHteil Home time. We weru t.'<>iii^' ri;.'lit idoiis, bnt. after wo haA [yMavd Iteilding tbero wasnu i>arlii.'iil,iMibj(-i'i i[i Ixiibling thin rouil uiiIi^M tiio Orcnoii ami California wiis buili. Wliiln it iH « very iin|)ortaut tlironyli line, it would not be an ininoiuniL line lo run to the State boundary ami havo no connection. Tlicn Ben. llolliday f;ot intoditlicHlties and Htopped construction on tlie Oregon end, and llieii we stopped. Q. lien, llollidity was eonstnietiug the Oregon! — A. Oregon and Oalifonim. He and bin friendn. They failed, I guess, pretty biwlly. Ai)d then Villard got the road and commenced worii, and wecoiiimenceil work nguin and bniltl^oEii Ueilding up to Deltii. We com me need work in the oai'ionH there. We worked along there very rapidly until there wax a lack of capital again on ViUard's part. Then wo ntupp'''! until tbiiiga took shape. About a year ago, in negotiating for the Orej;<n> ami Ualilornia, I thought wo hiwl got it where it was pretty Mafe, and the nej;(il!atiiMi wiml.l U,- ii.TJi-i'l.-d, and w.' i-oiriim.iic.'.l work ajimii. That is wliy tli.'s,. I,il,-I„'s Imm> br^'U in lii.' raliloniia ;i.id Oregon. Q, Ho tliiil llic lulal riirisLiiiclioiniflliL' Caliluniiaiiiid Oregon n'piu- senis a period of aliuiU sixteen or cightevu joars, all told 1 — A. I should think HO. (J. Alter the consolidation, by whom was this roail constructed j under what contniets 1 I mean tlie California and Oregon, after tlio i-oiiMolidaliori. — A. 1 do not kuow. The Paeillo Improvement Company linili, I (liink. from Ifi'iMlii'^ lo tlie Stale line. I am not positive. g, J low riKiiiy liid.-N is tliai!— A. 1 think it ia 140 miles. (J. Whni, iw the piiinl on llio Central Pacific at which the junction in made with the California and Oregon? — A. Rosevllle. Q. What is the lensth from Uosevdio lo the State lino!— .V. 1 think it is alwmt ^(00 miles, Q. WliffTtS'tlio length from Itosevillo to Tehama? — A, 1 have iiot got that distance, but It must bo about 13U; itdocs not vary more thaa 'Jot '.i miles from that. Q. Who constructed tlie road from Tehama to Ueddiiig!— -A. That I do not know. y. Who is the president of tho Pacific Construction Company ! — A. The Piicilic Improvement is the name. Mr. Doty, 1 believe, is now. Q. Do you know whether Mr, Crocker or yonraelf or the other gen- tlemen whom you havo named as being in tho l'"iii;iiii-i> ('iim|iany were stockholders iu tho Pacific Improvement? — A. 1 lliiiik tlii\ iur. Q. llave yon ever seen tho contract between thr (.'ihIimI I'lRiik: Com pany and the Pacilln Improvement Company for the inuHlnicTion of that road between Iteddiug ami the State line?— A. Yes, sir; I have seen that. Q. Have yon a copy of that ?— A. No ; I have not. I saw it In Sa|t Fraiioisco when I was there last fall. COLLIS P. nUNTINGTON. 19 Q. Do you retnember tho rate i>cr mile? — A. Ye8; I tliiuk I <1(». I thiuk they took it in securities at about $125,000 a mile face value. I know I had some dispute with my i)eople about it, and I thought it was not enough. They thought it was. I had been over the Hue and it was such a terrible road to build that I did not believe they would get as much money out of the securities as they would have to pay out to build the road. Q. Can you state what the securities were f — A. I think it was 80,000 shares of the Central PaciHc and $2,100,000 of the Central Psiciiic bonds — $2,100,000 Central Pacific first mortgage bonds — that is, the bonds on that piece of road they were building. Mr. Tweed. The bonds secured on the California and Oregon Com- pany. Q. What are they called! — A. I think the Central Pacific was the oonsolidatiou. The first was California and Oregon, but these were called Central Pacific after the consolidation. Q. Are all the bonds guaranteed by the Central Pacific ? — A. They were not guaranteed ; they were simply a bond of the Central Piicific. That is no special guarantee. Q. Has the work under the Pacific Improvement Company contract been oompleted? — ^A. I hardly think that it has beeu fully completed, bat the road is built to the State line. There is always a great deal of ballasting after the rails are on, and it generally takes a couple of thou- sand dollars a mile to clean up and ballast. . Q. Have all the sto<;ks and bonds that were payable under that con- tract been issued, do you know f — A. I presume they have. Q. Have yon oompleted the general statement of all construction wh ich bas been effected by the Central Pacific from the commencement of the enterprise to date ?— A. I do not think of anything else. By the Chaibman : Q. How does the Central Pacific get into San Francisco T — A. The way it is operated now it is over the California Pacific and the Northern. Q. The Central Pacific itself has no entrance into San Francisc/O a.sa ooqiontion ? — A. Ye5, sir. Q. Belonging to it ? — A. Yes. We run down on the old Western Pa- dftctoyik^ and then there is a short line from there to Oakland, and firm that to San Francisco. Q. Who is the short line oi)erated by f — A. The Central Pacific. It is«ODS(didated with it. It is a part of it, as much as any other part. AFTEK>'00>' SESSION. OOLUS P. HUXTlXGTOy, being further examined, testified as fol- lovs: By CoQimisfrioner AyDEESOX: QaesdoiL Uo yon recollect about how much of the stock of the Cen- tral Patifie h»i b^een issued for construction l>efore the pa.<sage of the aetof ISG^! — AnsfwtT. My impressiou is that there had not been any «tali&5ae*L I think there had l)een subscriptions: but the stock wa^ only isEB&L as I remember, after it was all paid for. It was calle^l (tpr in iacaCnects. aivl there was no stock issued until after the act of 1882; Tka: » hit recollection. Q. D» j<m rtaember about how much the subscriptlonif aniouiitod to before that act T— A. No; I do not tl. S. PACU'lC KAILWAT COMMISSION. Q. I moaa tbu cash p:iym»at(i mailc on ttio sabscripttonn. — A. Nu; tlio sum wiis not larguj 1 think, perliaji'j, leas ttmti (100,000. TLu Jaw required as to pay 10 per cent, dowu wlien wo subscriljcil, wliicU wiw done, and required there should be $1,000 a mile, 1 think, to bo sub- scribed in stock before we conhl orgauize. 1 think tUatwaa it; but that 18 in the statutes. And we built the rond 1 know by lending money; that i3, our first snbecriptioiia were not a great deal. I think only 150 shares we subseribed, if my recollection serves me right, which was necessary to perfect the organization to the State line, as I remem- ber. Q. Your recolloction is thiit the contractors for that work were paid from the result of tUo proceeiis of loans made by the company ! — A. Well, yes, sir; wade by the company; that is, they were paid by the company. The loans, of course, wore made by individuals. Q. They were not paid out of moneys that were paid by subscribers to the stock T — A. Not to the fiiU extent; I am quite sure that maat have been so. Q. Please describe the manner in which payments were made to the eontractorsafter the act of ISO^, when the Crocker contract was made.— A. I think the small contractors were paid in money; that is my reo- olleutioo, although I was not there all the time ; not more than thirty days in the year; perhaps not as much as that. Q. I mean the payments made under the Crocker contract. — A. I was not there, and I do not know how they were paid, bnt I am quite sure that they were paid in stock and bonds. THE GOVEBiraiBNT SUBSIDY PEE MILK. Q. That, if 1 remember right, was $C4,000, iu bonds— A. It wa» ' moro than that across the moantains. The act gives $10,000 a mile bo* tween tide-water and the base of the Sierra Nevada Alonntains, and $4S,0OU a milQ for 1J>0 miles across the mountains, and theu (32,000 a mile iu the great valley between the Rocky and the Sierras. I am quite correct in that ; I know I am correct. The same amount of first mort gage bonds were issued as the Government's. Q. 1)0 I understand you correctly that the Crocker contract called, for a similar advance in payments nhcu you reached the more difficult' porttona of the road T — A. Yes, sir; that must have been so, of necea- sity. now AND WHEBB DISPOSED OF. Q. Wore those bonds delivered by theoompany to the represeutativei, of the Crocker couti-act T — A. I am not so certain of that. I sold the Government bonds hero, I gness, perhaps all of them, myself, and bought gold largely for them, and I think, as far as they wore COU" cerncd, they most have been paid — the Crocker contract — in moneyti at least I sent over memoranda of what I bad done, and they distributed tbc accounts there. I never took inside of a ledger if 1 can helpit, and^ I most always cau. Mr. Uopkins was a most excellent manfortlioaa things; ho was a good bonk-keeiier and lawyer. Q. To whom wore the Government bonds first delivered by the Gov. ernmentf — A. They were all delivered to me, I think. Q. To von personally T — A. To mo porsoiially. Q. At Washington !— A. At Washington. Q. And brought by yon to Now York t — A. Brought by me to New York and sold. C0LLI8 P. HUNTINGTON. 21 Q. Sold to the pablic heref — A. Yes, sir. Q. Whose books contain the accounts of the sales f — A. I have not got them, bat I think that can be easily ascertained. Q. Probably they are at San Francisco! — ^A. Yes, sir; Fisk & Hatch might have them ; they sold a good many of them ; they were not known on the start, and when we first got them the people did not know what they were ; they would not take them for banking security. Q. The Government bonds f — A. The Treasury Department would not take the currency's ; there was a good deal of log rolling before holders could get the Oovernment's taken as collateral to bank issues ; we sold a lot at 89, 1 am quite sure, and bought gold at a very high premiam ; I paid as high as 2.20 for some gold, I remember. Q. Do you remember whether the Crocker contract called for the bonds or for money f — A. I do not ; my impression at first was that they took the securities ; but on that line, when I come to think of it, I sold all the bonds here ; I do not think any of them went to California. Q. May you not have sold them on account of the contractors f — A. I sent the account to Mr. Hopkins, and he distributed those matters in the way they were destined to go ; some here and some there. Q. Do you know what the history of the company's bonds were ! — ^A. Those bonds I sold here f Q. They were sent on from San Francisco to you here? — A. They were sent from San Francisco, and I guess I sold them all here. I am sorry to say we have not got any of them. Q. Were those sales for account of the Central Pacific Company or for account of the contractors f — A. My impression is that they were sold for the company. I sold the bonds and rendered an account every month of what I had done ; sent it to Mr. Hopkins. He settled with the company — with the contractors, as the case might be. Q. Is Mr. Hopkins in New York occasionally ^!r=rA. No ; Mr. Hopkins has been dead for some years. He died in 1879. -r - ^, Q. What ofSce did he hold ?— A. He was treasurer of the Central Pacific Bailroad Company. Q. Did Mr. Miller have charge of his books ? — A. I think Mr. Miller would know all about it. He and Mr. Miller were very intimate. They were old partners. The firm was Hopkins & Miller, grocery dealers, before he joined me. HOW THE STOCK WAS ISSUED. Q. Was that stock issued to the contractors under the contract, or was it issued to the subscribers and the money delivered to the con- tractors f — A. At first to subscribers who had paid money, but I think later it was delivered directly to the contractors. Q. Under the Crocker contract! — A. I think so. That will be all better known in San Francisco; but I think that was delivered to Mr. Crocker, and I think it was delivered later to the Contract and Finance Company. Q. Apart from the stock that was deliverable to the contractors un- der the various construction contracts, can you tell me whether any of the stock of the company has been subscribed for and taken by the pub- lic directly from the company I — A. On the first organization there was quite a good deal ; I do not know ; probably 100 subscribers ; I think not more. Hardly as many as that, 1 think. Q. Prior to the act of 1862 !— A. Yes, sir. 22 U. 8. PACIFIC R\n,WAY COMMrSStOS. Q. Representiug Iiow much stock T — A. I tliinlt it woulil ha all inside orn millioQ dollars. Q. Tlieii all tLo olber issues sinco tbe Orockei" contract Imvu bcon ii sued under coustnictioii contracts, I uiiUerstancl f— A. 1 think so, Th« foot of it ix, th^ro wiis no inarkot IVir 1h« stock for yeurs. Evtrybodj was nrmid (o touch it. Q. Whiit is tho yarliost printed i-eport of tbo Centml I'acifin I — A, I could not say, I do not think thoro was any priiitPrt report in the oart; ytars of tho construction. Q, Just look at the report for 1872 and see if rhat is iho earliost yoi rcincmbBp.— A. i liavo had very linletodn wilh tliese. Thoy a np in thB oIKce at San Francisco. This is ifi~'-i. Q. It is a reportof 187i', I Miink; isitnotT — A. Thero wasnonrinted reiwrt for iiniinihcr of years. This may be Ihc first one. •! should hav^ said it was a lilllo earlier thau that. ^^ (J. Von say thesi* aro made op at San Fi-anciMCo f — A. Yes, eir. Q. As to the imMliods of keeping the accounts and making tho staM meiits,was that done under yoar advice!— A. No; not ntall, I doniri think 1 was erer consalted about it nt nil. Q. Still, you became perfectly faruiliiir willi tbo methods of making the stntemenlBcoutftined in them, I suppose! —A. I peucrally look then over, buD I dc» mit i-xainine thusi'. rcpiiris vi'iv- iiiui:h. I li;ivo a man ex- amine thi-rn. ir llicrt^ is iiitv tiling' in- lliiiilis I w.iritd want lo liavo er- pUiirii-d (o nii', lir i>\[.l;iins 11. I ii-:ti| -ivi-r v.-iy liltio of th« n^portSi Mr. Miller mid .Mr. Stiiuronl and Mr. IIoiiIuiim, iiml many others then that havo bocii with mc since the urjfitni/,ulion of th<^ company, bav< ' each one his part to do. I have been tlie outside man always. I aiali all my inercantiUs busineHs. I m^ver go into the oflicH if I can help fl and 1 generally can. I do the ontside trading and attend tothogouenr out-side bnsiness. Q. Wore you cousultod, lor tnstBnoo, as to the mode of keepins a proQi niul Ions or income account, with reference to determtningqnestionstba might arise as to what was proper to credit to that actwint and wliaB was proper to charge to that account! — A. No: 1 do iml. liijid< tli«y would iisit mo anything about it. If tbey did, I should till {\\rm to keep their books iu their own way. I have always bei-u biie tin- Outx;lt- man Mint did not keep books, who eai<1 hokuewbowmueli Im owed and how much he had to pay it with. That is about all tho bookkeeping have ever done. KABNINGS OK OBNTKAL PAOIPIO. Q. Uo you know whether there is any priuted account of the earuingi of the (Jentrat Pauiflo Kaihyay prior to the Ktatcmeut^ iu tho report 0 18i3f — A. I think so, I think there is no trouble gutting itovery yea fVom tho coiumoneement of its operation. Yon can gE^t exactly wUai the road has earned and what it has cost to earn it. Q, I cat! attention to page 4a of tho report of 1873, which contains j statement of the net earnings, after deducting operatingexpenses, fnM llKIt to 1S71', amounting in all to $17,000,0(>l>.— A. 1 have no doub this is cornwt; but I do not know anything about it from any know edge of my own. Hut. 1 jim satiulleil it was correct. Q. My ipiesliou is, whetlier there is any printed statement coutaia ing an nccount tifthit iiiatlersto which those earnings were appliodi-- A. My ilnprc.HHiuii is tliat iu the early years there would bo no printer oecounl.'t: 1 think yon lau liud (liern nil in Ihe unice ol' the cumpaaj C0LLI8 P. HUNTINGTON. 23 bat I do not think there would beany printed accounts ; perhaps there are; I have no doubt but what those figures can all be verified in the ofBce. Q. The profit and loss account contained in the report for 1872 starts with a balance of $4,000,000^ and shows the result of transactions dur- ing that year, leaving you with a balance of profit of $7,433,000. — A. I have no doubt that is correct. Q. That 1 understand to be a statement that the actual profit made from the transactions stated in that income account indicates that the profits of the company for that year, confining yourself to these items, was the difference between the first ba>ance and the second balance — between the $4,000,000 and the $7,300,000 ?— A. Yes, sir 5 I presume that is so. Q. Have you any personal knowledge of the nature of the items charged against the earnings, and which appear in thisincomeaccountf — A. No ; I have never had anything to do with their book-keeping over there; the expenses here, what we paid for material and miscellaneous expenses, have gone into the memoranda for the different months, and then have all gone out and been distributed. MISCELLANEOUS AND LEGAL EXPENSES. Q. The account I refer to contains a charge for general and miscel- laneous expenses $233,272 ; in what book would the details of those ex* penses appear! — A. T do not know.. Q. That Mr. Miller could tell ust — A. Yes, sir; that would be in his department. And I have no doubt that he can explain it. Q. The same statement for this year, 1872, contains an item, ^' legal expenses, $63,678.10.'' Have you any knowledge of that item I — A. No; I have not Oovernor Stanford has attended to these matters in California, and I have attended to them here. They were always too mnch, I thought. Q. Do you know what the general character of the legal expenses daring the year 1872 wast — A. No; but then we have a multitude of legal counsel. We have to have, for the whole length of the road. If we kill a cow, tlie cow represents a certain sum and the legal expenses something more. Q. They do not charge $62,000 for cows in California, I suppose? — A. No ; but there are a great many of them. WHO THE COUNSEL WERE. Q. Will you please tell us the names of your principal counsel in 1872 1 — A. S. W. Sanderson, I think, was with us then. Q. Of San Francisco! — A. Yes, sir; and Mr. Kobinson. Q. Please give the full name! — A. I do not know that 1 can give Mr. Robinsons' name. Q. Of San Francisco f — A. Yes, sir ; S. W. Sanderson ; and llarvey Brown, I think, was with us then. And I guess S. M. Wilson anil Hall Macalister have been our general counsel for a long time. Mr. Storrs was counsel here, and then 1 had from time to time others. Q. Which Mr. Storrsf— A. James A. Storrs. Q. Was there counsel in Washington f — A. Yes, sir; we always had counsel there. Q. In 1862 who was counsel in Washington ? — A. Our principal man there was Kichard Franchot; and then we had others there, Hennr 24 U. 8. PACIFIC RAILWAY COMMISSION. Beard, I tliiuk. at Liiat time, anil Mr. Bliss, I tliiDk liis iiame was. We always liail quite a number io WasLingtoii. Q. Wlioftudilwl tholegaU'xpeiises! — A. I tbiuk Oovernor Stauford on tlio otbcr const, aud I iiaed to pay tbem here. Q. You paid tbein on whose audit — your own I — A, On my own. Q. Do yoiiknow where the vouchevs forthoseiteinsarctobefonndt — A. No; they would bein San f'rancisco, Isiipposc,if anywhere. There would not be Touchers for all, I do not suppose. Franchot always bad n great many expenses in Washington, and when he wanted some money I always used to give it to him. lie was a very lionorablo man, whom 1 bad always known bIuc«1 was a boy, and ho liadiiiy entire confidence, and there were a thousand things there to attend 1o. That is, there were many : I do uot say exactly a thousand. Q. Without vouchers, you mean I — A. Yea, sir. Well, I did not ask him for vouchers. By the (JnAlRMAN: Q. Whynotl — A. Wall, there are so many things that have to be paid; it is a dollar here and five dollars there, and it is almost impossi- ble to get vouchers. A little printing, aud advertising, aud messenger boys, and copying bills, back hire, hotel hills, and a great many things; ami I knew be would not pay out any money nnless it was proper. By Commissioner Anderson: Q. la there any one else to whom yon were in the habit of paying money without vouchers? — A. Ob, yea, sir; we have miscellaneous ac- counts. We alwaysdo have. I liclieve all oJflces have a miscellaneous account, as they call it. Q. 1 am referring now to legal expenses T— A. 1 suppose most all the offloes would have accounts of that kind ; I have always had. EICHAHD rEANflHOT AS COUNSEL IN WAsniNOTON. Q. I ask whether there was any other person than Mr. Franchot whom you remember as having been iu the habit of receiving money from you personally for legal expenses without voucliers T— A. I do not think tliere is ; not aa long as he lived; Mr. 81iorroIl succeeded Mr. Franchot. Q. now long did Mr. Franchot remain your counsel ! — A. Until he died. Q. In what year was that ! — A. I think it was in 1878, but I may be wrong; I should think it was in 1878, however. Q. Ilave yon any idea of the amonnt of anonal payments made to him which are not represented by vouchers t— A. No; I do not remem- ber at this time; it was very considerable. feahchot's fjaxaby. Q. And thatoccurred everyyear, or only occasionally! — A. TeB,8ir; about every year; General Franchot received $20,(>00 for his own services. ■ Q. Do you mean at one specific occasion ! — A. No ; we gave him for his own salary $20,000 a year. Q, Waa that payable monthly or payable whenever he wanted it I — A. Well, a« ho wanted italoug; generally there waa a little balance coming to him »t the end of the year, which was paid. COLLIS P. HUNTINGTON. 25 Q. In addition to this $20,000 a year, did lie also receive money from you for these items which you say are not susceptible of being verified by the vouchers! — A. Oh, yes, sir; when he said he wanted money for theae small expenses here, or he wanted a little money, I used to give it to him. LEGAL EXPENSES PAID WITHOUT VOUCHERS. (J. And he may have received from you $30,000 or $40,000 a year wiUiont voucher, then ? — A. I should think very likely ; in our large operations I should think so, in the important matters there in all the Departments and in Congress. We had to get men to explain a thou- sand things. A man who has not had the experience could hardly imagine the number of people that you have to explain the matters to. Q. Was he a practicing lawyer t — A. No, he was not ; I do not know whether he was educated as aiawyer or not ; I am inclined to think he was, though. I have known General Franchot ever since 1840. •Q. Do yon think the payments to him were included in that item of legal expenses or miscellaneous expenses ? — A. I think I generally had the item " Paid General Franchot for legal expenses ^ or " Miscellaneous exi>enses" ; something like that ] I think that was it in my memoranda that went out; I do not know just how they would distribute it, but they would have to follow that about as I had it, as they would not know any more than was on the memoranda. MB. SHEBBELL THE SUOOESSOJ& OF FBANOHOT. Q. What are the names of the gentlemen who succeeded him f — A. Mr. Sherrell. Q. Is he still your counsel t — A. He died here about two or three months ago. Q. Did he remain your counsel up to the time of his death ? — A. Yes, sir. Q. On substantially the same terms as General Franchot ! — A. Yes, sir ; he was living in Washington and was with General Franchot in the last years of his life. Mr. Frauchot's health failed and when Mr. Franchot died he took his place. Q. Has the same method been pursued, in regard to payments with- out vouchers, with Mr. Sherrell f — A. Yes, sir ; I very rarely go to Washington myself. Q. Is his salary the same, $20,000 a year!— A. No j he had $10,000. Q. Ten thousand a year f — A. Yes, sir, Q. Can you approximate the amounts paid to him annually without vouchers t — A. No, I can not; but it was considerable. Q. Probably as large as was paid to General Franchot f — A. I should think so. The last few years not so large, I should say. But along about the time Mr. Franchot left us and Mr. Sherrell took hold I think it was about the same. Our matters have been of less importance there for the last few years. Q. Beferring to the past five years, which is more within the scope of your positive recollection, is there any other person to whom you have been in the habit of paying moneys without vouchers for miscellaneous services t I mean of any amount. I do not refer to small transactions. — A. Wo always keep a little miscellaneous account in the office here, but tiiiey are not important. My matters here have been mostly for mate- rial and rails and locomotives, and a thousand and one things that coor^ into the building and operating of a railroad. . 8. PACIPIC RATLWAV COJDIISSION. Q. All paymeuts that ycra mabu for material niitl uatters nccdod for tbo Tiulroad you aniloubtedly piiy oh votiuLm-sf — A. Oli, yes, ttir. Q. Wlieu you pity you U'ceivu a vouelicrt — A. Vea, sir. Q. Aud yuu trutiKtuU tliat vuuulicr to LLo proper oCUcur in Sail Fran- cifico, nad tboru it is diMtribuled to tlic u(»;uunt to wliiuU it belongs t — A. YeB, sir. Q, Yon spKik of mtBuellauoous payniPiita. Cunfinirig your recoUec- tioii to tlH) last flri" yeara, is tliero any other pemon bi'sidiis Mr. Sherroll wlio Ims rucoiveil iiiotipy without voudiera ! — A. Nd; i do not think of any lit thii^ timn. lie lias attended to all these mii^c^dlivneouR matt^ro. I have generally handed hlin any money as lie has requested it. TUKOBy OF TUB OENERAI. DALANflE SHEET. Q. Will you please look at the general balance slioot in tlio report of IS72,uuduxplatti the theory on whicli it was luiwle up. — A. 1 do notknow roneli nbout the thoory of these aitconnts. I am not a Imokkeopcr. - liy the CnAiKSlAN : Q. (live us the practical si<l« of it.. The Witness. This is lUo 18T2 conatniotion account T Commissioner AifnEiisoN. No; the general balanw 8hect (if I gave you the right one). A. Yes. Vfv\], tliat is the construction iuic^unt, fioiii llio oonimeucu- meut of the building for a pprmancnt way. 1 suppose that is eorrect. I do not knownnythin;^ About the liKure^, exet^pt as 1 b<io them hero. There is tlio equipment Tliitt i» uudther account. The real estate and shops and mactiinery. Ily Commisssioner Anderson: Q. I wUI not trouble you to read it. Lot me put my que^tiou a lit- tle differeutly. Is it not tbo purpose of this iicconnt to state on the civdit aide all obligations of the company ami all of tbo sources from which i", dorivcd any money, the capital, the bonds, or the earnings, and to state ou the other aide, in a proper method of distribution, all the pur- poses to which the fuuds bo derived wore applied t Is not that the gen- eral ol^cctf— A. I should tbidk so. Q. Then when the sources of revenue are increased by an increase of bonds or by an increase of the profit and loss account, cannot the objtH:t int.o which sucb increase of proceeds is csponded be found by tracing the alterations in tbo balanci^is on the other side of the acctmnt I — A. I should say so ; hut as I say, I do not have anything to do, and never have, with the distributing these accounts, or being resjionsible for the book-keeping of the concern. Q. If you will look at the account of 1872 yon will lind that the profit nnil lo88 account is treated as beingacreditacconiitforabout $7,000,000, aud in the year 18-<5 the same account is treateil as being a cimlit auoouut for $24,(«)0,00(». Is not that tniut— A. Yes. Well, I am not familiar enough with these matters, I believe, to give you any light. Itouk- keepiug id a good deal like tireek to me, and 1 never leurn either. Q. Is it nut the logical conclusion from that statement that the ac- counts ropipseuted to be, or culled protit and loss, bad earned the dif- fBrence between $7,000,000 and |i;4,000,000 T— A. Well, I should say m. Q. In seeking to know what that money has gone into, or where it is, because we understivnd that it is not eisb ou hand, we muHt look to the other side of the oeeoniit and see which of those a^uriMiuls have lieen in- areaaeil: m not that correct 1 — A. 1 should think so. COLLIS P. HUNTINGTON^ 2? INCBEA6E IN CONSTRUCTION ACCOUNT. Q, I call your attention again on the other side of the accoant, to the iDcroase in the item, for instance, of construction account between 1872 and 1885 ; what <Io you find that increase to be t —A. 1885 construction account is »139,000,000 here, and it is $130,000,000 in the 1872. Q. To what construction does that refer f— A. I do not know. Q. Between 1872 and 1885 f — A. 1 could not say. Those are all very plain, and they must bo in tbe office in San Francisco. Q. As a matter of history in regard to the road, what actual con- stniction occurred between 1872 and 1885 which would represent an ex- penditure of $8,t)00,000t-— A.. Well, I should think we spent a great deal of money at Oakland Point. We spent millions of dollars there. Q. A million f — A. Millions of dollars there. And we spent consid- erable in San Francisco, in filling Mission Bay. That was in deep water when we got it Then on tbe Oregon road. Something must have been expended there. And large amounts for rolling stock. Q. Would rolling stock come into the construction account! — A. It would properly belong to construction account. Q. Would it not belong to equipment account? — ^A. Yes, sir; per- haps it would. Some roads, I guess, keep it one way and some the other; but it certainly would be right in equipment. Commissioner Anderson. There is an equipment item here; bud am now confining you to construction. The Witness. lioUing stock would go into the equipment, then. Q. The expenditure was. then, in the building at Oakland and Mis- sion Bay t — A. Yes, sir ; 1 think we put new steel rails on the whole road. It is all steel now. I think that would absorb more than half of it. Q. Probably new bridges f — A. Yes, sir; we have put in a good many iron bridges where the wooden ones have failed. I do not think that 18 an nnreasonable item. Commissioner Anderson. I want to get the theorv'. I am not criti- cizing yon at all. The Witness. Yes, sir; 1 want to state all I know about it. If the road is not all steel, it is nearly so. Q. How nearly? — A. My impression is there is not over 100 miles of iron rails on the road. At first I thought there was not any, but I think there is, out at Humboldt Plains. Tbe road is very straight there, and I think there is some. Q. Do you know the weight of the steel rails?— A. We call it 02 pounds. It is t)1.80. We are using some 64, but we are using no rail less than 60, and I have got an order now for 76 pound steel rails to send forward. I]MU>ROVEMENTS AT OAICLAND POINT. Q. What is this expenditure at Oakland Point that you refer to f — A. We filled out there. We have a pier there that is about 11,000 feet long. It Kins out to deep water. The piles were deca^ying away, antl \?e are fiUiyg it in. It is an immense filling tbere of a mile, running right out into the bay. Oakland lies across the bay to San Francisco. We run around the bay from San Jos6 to Niles, and Oakland is oppo- site San Francisco. Q. Is Oakland inchided in the aided i)iirt of the Central Pacific f — A. No, sir; there was no ai<l, except from San Jos6 to Niles and then to Sacramento, and from thence to Ogden. :28 U. 8. PACIFIC RAILWAY COMinSSIOS. Q. So tliat you woald nuderatand it that the GoverDment mortgage floea not apply to Oakland t — A- No, sir. Q. Or to fluy improvvmenta made there t — A. No, sir, Q. Or to the Missioii Bay property eitliert — A. No, sir. THE CALIFORHIA and OREGON EXTENSION. Q. The uext item of this account of 1835 is tlie construclion of the Cal- ifornla and Oregon extension. That, as I anderstand it, represents the entire cost up to that date of that extension, and that is not in- cluded in your ordinary construction account? — A. This is only a por tion of the cost of the Califoniia and Oregon. Q. Does it not represent all the cost u|> to that time ! — A, I dit not think it does ; I am quite sure it does not. Q. What is tbeitem as given there t— A. Say t3.00ft,0(M)~»2,l)72,O0l). Q. In what other item of that balance-sheet wouUl the balance of that cost of construction be fouud I — A. It would not he, unless it is in the large coustraction account. Q. The general construction account f — A. Yes; it would be in that; I know there is more than that ; very much more. Was that in 1883 — the California and Oregi>n Company t The Oqairhan. $2,105,820.77, as appears iu the account of 1882. The Witness. That is, I think, from Ahamii or Iteddiug up. Q. Your impression is that the entry of this item, as a separate item in the general ledger balanoesbeet, commcnees when you began the construction from Redding north I— A. Yes, sir ( that is my impression. Q. And that the cost of the construction south of Ueddiug is included in the general construction of the company T— A. Yes, sir } I am quite sure that is so. OommissioDcr Anderson. Please compare the equipment in 1872 with the equipment in 1883. The Witness. This is 1884. The equipment is, say, $8,250,000. Q. I think that is 1SS5 you have, is it not! — A. Tliis is 1884; here is 1885 ; the equipment here is $8,250,000. Q. And in 1872 f — A. Equipment, &ve million and a half, or a little over. Q. Can yon toll us iu general terms what that dltference represents t —A. I suppose it is right. I thought iciraH considerably more than that'. Our equipment has changed its character almost entirely since 1S72. I think our largest engines were 10 by 24 cylinders; a good many 15 by 22 ; 18 by 24 now is about the smallest engine we use, and we have tbem M by 36. I think one of these mjichiues will weigh four times as much as, and will give more than four times the power of, tbo 15 by 23. Our petiple ordoretl Jifty at one time of 15 by 22, I did not buy them because I thought they were too light. book-keepino treatment op deteriorated htouk. Q. Is it your practice to sell tlio old stock, or to keep it for what it may be worth T — A. I do not know that we have ever sold any. I do not recollect that we have. 1 think we have sold Kome of the smaller engines to the light branch roads — other roads. I think we have. Q. Do yon know whether the practice, in keeping these equipment Bcconnts. is to leave all these old maehiues in at cost, or is any allow- fcnco made for their deterioration f — A, Ihere ought to be an altowanoe for deterioration. COLLIS P. HUNTINGTON. 29 Q. Do you knowjosa matter of factt — A. I do not know. But I know we have sold some. We sold some to the Southern Pacific of those small machines ; that is, on that part of the Southern Pacific running out from San Francisco. Of course, we had credit in the equipment account for them. Q. When sold you credited the exact amount you received to the equipment account ? — A. Yes, sir. Q. What do you do in regard to the decreased amount that you have on hand t Do you charge the difference between the cost price of the machines and the realized price? — A. When we buy one it is charged to the equipment account 5 and then whatever we sold an old one for, that amount is credited to the account. I know Sam Wilson, the mas- ter mechanic of the Southern Pacific, said our people cheated him on seven or eight. That was talk amongst the operators and different superintendents. Mr. Wilson had nine small engines sold to him, and he said our folks charged him about twice what they ought to. Q. Would not the result of that method be this : That if you bought five millions of equipment, and, in the course of a year, sold it for two and a half millions, that account would apparently owe your road two and a half millions and have no property on hand at all f — A. That would be the result, of course. They would be credited with their serv- ices, and what they bring would have to balance the item. Q. In other words, to get a true statement of the value, you should make allowance for the deterioration of the property on handf — A. There is no doubt of that. Q. In regard to the construction of your road at $131,000,000; is not that the exact cost taken from the contracts, without ever making any allowance for deterioration or depreciation of value f — A, I ^ould think likely that was so, taking it from one year to another. INCEEASED VALUE OF "SHOPS." Q. The next item is shops. Please compare the statement of 1885 with the statement of 1872. — A. In 1872, the item for shops appears to be $813,000, and machinery in shops $466,000. There are odd cents and dollars there. The item of shops in 1885 is $1,229,000, and tools in shops $1,164,000. Q. So that 1885, as compared with 1872, increased how much in those two items f — A. A little more then double. It was $2,400,000 against, say, $1,300,000. About double. Q. Have you any knowledge of what that increase represents! — A, Our shops in 1872 were ordinary railroad repair shops. Now we have shops where we make locomotives. We are putting up this year 36 very large locomotives. We have rolling mills and roll our own iron. We cast 100 wheels every day except Sundays. We make fish- plates and track-fasteners and spikes. In fact, we have now a large machine shop and rolling mills. I had supposed the difference would be very much larger than it is. Then we had simply repair shops, and bought all our locomotives and cars here. We have put up 10 cars a day tJiere in our shops. They are a different thing now from our old shops. Q. Where are these shops situated f— A. At Sacramento. Q. Are they within the aided portion of the road f — A. Yes, sir. Q. So that the Government lien, as you understand it^ applies to ttiemt — ^A. Yes, sir; I suppose we have the most perfect railroad shops in the United States, That is, the most extensive shops of any in we United States. . H. PACn-IC RMLWAV COMMISSION. REAL ES'CATK. IJ. Tlni iK'xt lU'iii is real estate. Will you compiiro tluit itum in 1885 wllli Urn Slum it«iii in 1»T2T— A. Kuul oxtato in I8T:J was 49fi8,0()0. lluil cslnlti in 1885 w.in tl,51(i,0()n. Q. Wliiit iliKts tliiit iiiiireaHO i"P|ircsuiiLf — A. Wiwire alwiiys Iitijinjj, alwn.va aflor it^al CNtatn. 1 lianlly know whi>i-e it is, lUl of it. But wo am buying in Qaklanil, and wo iHniglit in Saomiueiito, 1 am qiiitfl siiro. Oli, yea, sipj we bonglit vory largely ia Sacramento since then. (j, For raili-oad imqioseiit — A. For railroad piirpoeos; macUiuo and n^)>ivir uliops sit otlior (dticeH till along. We aro cidargiug all the time, and tlitno is a ideceol'rwil oslat+t to bo houKlit Lore and tliero for rights lit' way and otlior n»cs. That i(i!iri i^ not as lar^e ad I eupposcd it was. Q, Att to tlnit item, bow inuiib ol* it is »iibici;ti><I to the lieu of the Uuit«d Stuti'B t — A. That 1 could not soy. DOES rnit GOTEBNMKNT LIBS OOVEB "EQUIPMI5NT"t Q. I omitted to iisk you that qmistiou in rogard to iho u'luiiimcut of $8,000,0011. la that all otiuipinent belonging to tho Ouiitral I'aclflu ItiiilroadT — A. Allbelongs to tbo ('antral Tacillo Builroad Company. Ykh, hit ; it ifi put in there as belonging to it. ({■ Do yoil make any distinction of title to the eqniiimuut as between tlio aided part of the road and the unaided part T — A. I am not learnetl ill thti Uw, but I slionhl suppn.st*, att a layman, that each mile would be entitled to it* proportion of the rolling ntock, ami so the aided part, whatever that was to the whole, would bo entitled to that percentage of the rolling mtock. "STEAJIER DlTlStON I'aopEHTY." Q. The next item i^t "sUsamor division property." Will you com- pare that in 1835 with 18721— A. aioamm- divimoh, |830,00l) tu 1872, and$fi,'JI,O00in 1885. Q. Does that refer to the steamers tUut you have before alluded to an having been sold to the company! — A. Vo.i, sir; I suppose that would be included. Q. What is the reason the amount iu L88j is les!i than the amount in 1872 1 — A. 1 suppose they are worn out. Unless we built some it would have been very ranch leas. Q, Worn out, or have you sold some)— A. We built some stuamunt, Or else that must have been very much leas. That is thirteen yeanr, and with those steamers, light steamers, thirteen years is about thfir life. Q. Do you umlorstand that to belong lo thu aided road or uotl — A. 1 do not know. (J. [ du not ask it us a r]UGStioii of law, but merely to got your un- derctandiug t — A. I do not think 1 ever thought of it. We always ex- IKMjted to pay thuUoverumunt what we owed, and wo never just flg- Brod Low wo were coming out. SINKING FUNDS. tQ. I know it} but wo are instructed to examine iut« tbo value of its aaaeta. The nest it'Cm in this general kilanoeshoet for 1885 reform to a nanibet- of elnk'tug fSimU. Will you v>leiw« oxt>\au\ viV-M Wxts'j B,x<i awl f COLLIS P. HUNTINGTON. 31 how they arose? — A. I could not explaia that. 1 think tlji^v aie rail- road bonds. Q. What are the sinking funds for ? No. 1 does not ap[>ear in the aoooaut at all. Do you know why t — ^A. No, I do not. There was a sink- ing fund on all the bonds. The laws of California, 1 thiuk, require a sinking fund. Q . Do you know whether there is a list of bonds that have been bought, redeemed, and paid for! — A. No, I do not think there is. Oh, yes, sir; I can answer that. The land grant bonds have been redeemed. I suppose some $6,000,000 of them have been retired, and the State aid bonds have been redeemed and paid for. Q. Through the operation of the sinking funds ? — A. Yes, sir ; I sup- pose so: and the convertible bonds — a million and a half of converti- ble bonds — also have been redeemed. Q. Sinking fund No. 1 was for the convertible bonds. These have all been paid offf — A. Yes, sir^ paid off and canceled. Q. Do you remember what the amount of the issue was ? — A. A mill- ion and a half. Q. Sinking fund No. 2 for the redemption of the California State bonds f — A. State aid, they call them; those are paid off. Q. Have you a list of themf The Chairman. There is a very small balance here in 1885. A. I do not think they were all paid. I think I extended, or the com- pany did, $400,000 of them. That is my recollection now. I think there was $1,100,000 of them paid. I arranged to extend them; that 18, 1 did the negotiating to extend $500,000, and there were not so many extended. The company paid off, I think, all but $400,000. Q. Sinking fund No. 3, for the redemption of the first mortgage bonds of the company, series A, B, C, and D. Do you know anything about the management of that sinking fund ? — A. The company has it It would net all the requirements. Q. Who has charge of it f— A. The company. Q. What officer of the company ! — A, The president, I suppose. We, the board of directors — I think it is a matter that is handled by the board of directors. Of course the president of it is at the head. HOW DISPOSED OF. Q. Do you know how the sinking fund matter is arranged ; whether it 18 simply a book entry, or whether any officer has charge of the mat- ter, so as to receive the actual moneys required for that sinking fund . provision from the earnings of the company f — A. My recollection is that W. V. Huntington and Timothy Hopkins have control of it. When 1 was in California, some two or three years ago — ^it comes to me now — they were appointed a committee to examine every certain time — every six month«, I think it was — those securities and see that they were in plaec Q. Do you know into what securities the funds belonging to these dif- ferent sinking funds are invested ! — A. No, I do not. 1 think some of them are in the Southern Pacific ; perhaps most of them. Q. Have you ever examined these securities, to see whether these funds are all actually on hand t — A. No, I have not. Q. Can you not state more definitely who would be responsible for the production of these securities to make the sinking fund goodt — A, I coald not state it any diflferently from what I have, that it \^ \SaA>Q«i«A otimctora, tbe president being at the head. TJ. 8. PACIFIC RAILWAY COMMISSIOIf. Q. Do yon kTiow wUere the bonds are that boloug to the siukiiig fiiiHll — A. I eappose tliey are in the vaults of the company, or at least ill Homu safe deposit. They are pnt away. There is no qnuHtiou about tbut. Q. They shonld be in some safe deposit company in Oiilifoniiat — A. Either that or in the vaults of the company. Oar vaults are very se- cure, where we keep oar own treasoi-es. Q. Do you know whether any actual veiiQcation of tbeso sinking funds has been made by the ofQcers of the company within the past two yearsT — A. I did not see it doue. As well as I could know it without seeing it done, 1 know they hiive, because they have reported to me when I have beeu over there tiiat they had oxamiQed them. That is, Mr. W. v. Uaiitingtoii. I iiiqnircd of him about them, and lie said tiey were examined. Q. Is he a relative of yours ! — A, A nephew. tj. Is ho in Han Franeiscol — A. Yea, sir. Q. Does he come to New York occasionally T — A. Not ofceu. Q. Do you kuow whether any portion of these sinking ftiuds \s rep- resented by loans, either to the company itself or to the Oonstruotion Gompauyt — A. No. I 8hoald think very likely that the Pacific Im- provement Company hiwl some of the money. TCE PACIFIC IMPEOTEMENT COMPANY. Q. That the PaciQc Improvement Company had whati — A. Had some of the sinking-fund money. I snggest^d to our people, when I was there, that they take some of it (and they had some funds), and let the Pacific Improveoient Company have it,and put np collaterals; that that would make it look better. 1 1 would not be any better than though the company bad their paper for it. I did not see it done, but I thtuk that Is the way a i)orlioii of the thinking fund is arranged. Q. Do you know wli:it amount of the sinking fund is invested that i way t — A. I do not. Q. Is it not riuitc a largcHum of money, several millions of dollars t— A. i do not know how much it is. My recollection is that at that time it was in the neighborhood of $3,000,000. Q. Do you know what security the Central Pacific holds for the money so advanced t — \. No, I do not. There was an esplanstion of it at the time which satisfied me, but it is out of my mind. Uy the Chairman: Q. Who composed the Pacific Improvement Com]>auy t — A. Thatifl' au old company. 1 could not tell you all the stockholders. Ity Gommiseioner Anderson : Q. Tell us some of the principal stockholders f — A. The four men, [ think, have a majority of thii stock. That is, Mr. Hopkins, Mr. Stan*'-, ford, Mr. Crocker, and myself. Q. Winch of these bomln fur which these sinking funds are held, are prior in lien lo the lieu of the United States f— A. There is the West- ern Pacific, from San .losti to Sacramento, and then the series ABO, and down to J, I gucwH, on the line between Hacrameuto and Ogden. Q. Aiul the moneys in all the other sinking fund^, nxct^pt those yon have enumerated, are for tlie payment of bonds junior to the LTiiited States lion f — A. There is no sinking fund on that, except what ia in file United States Treasury. The San .Tuat\\iin has a sinking fund, but that ia small, aod it i« outside of the toad ft\deA ^i's ^.\i'i Vjtyce'romsjav. COLLIS P. HUNTINGTON. 33 Q. Your answer is that most of these sinking funds, other than those whieh I have enumerated, apply to bonds which belong to portions of the road ontside of that portion which is aided by the Government! — A. I do not understand your question. All the bonds have a sinking fond, bnt those npon the Western PaciOo and those that are called the Central Pacific, but in series A, B, G, and so on to J, are on tbe main line ; those and the Western Pacific. Q. And they arc prior to the Government lien f — A. Prior to the Gov- ernment lien. Q. And I he other sinking funds! — A. Are on roads that are not aided by the Government and on which the Government has no lien. UNITED STATES TEANSPOBTATION AND SINKING FUND. Q. After these sinking funds the next item I find is United States transportation and sinking fund, amounting to $9,251,000 T — A. Nine million two hundred and fifty one thousand dollars. Q« Have you a copy of the account making that balance up t — A. No, 1 have not. The Government owes us about $2,600,000, 1 believe, out- side of that. Q. Have you ever seen that account, stating that the amount of the Government sinking fund is $9,000,000 ? — A. No, I do not think I have. It may have passed before me in the ofi^ce. Q. The meaning of that entry, as I understand it, is that the total amount of credits due you for transportation from the Government and credited to your sinking fund at the date of that account, amounts to the sum named, $9,251,000t~A. That is as I understand it. That is an offset against what we owe the Government. Q. Do you know whether that entr>' agrees with the Government ac- count up to the same date? — A. I do not. The Government owes us $2,500,000, which they have not paid us. I suppose they will some time. CASH DUE FROM UNITED STATES. Q. The next item in this account is as follows : ^^Due from the United States in cash above all requirements of law, $744,000." — A. I have no doubt that this was right at the time. Q. What is the meaning of that? — A. It is due for business done over non-aided roads, as I understand it, and perhaps something else. We went to the Secretary of the Treasury to get the money, and he said it was a large item, and we had better get a legal decision of the courts, and we went to the Court of Claims. We sued the Government, and the Court of Claims decided unanimously that they pay us the money. Q. That is on the non-aided portion of the roadf — A. Yes, sir ; and whatever the item was. There were some other items. They went up to the Supreme Court then, and they decided it ; but I believe some man somewhere stated he doubted the constitutionality of the court's decision, and we have not got the money yet. "STOCKS AND BONDS." Q. The next item I find here is "Stocks and bonds." Will you give the amount of that, and tell us what that means f I presume it is stock and bonds owned by your road. — A. I do not know. I suppose they hsre fio many bonds that they have bought, probably, and there are biBi iMelTftble to a certain amount, and accounts. 3 P B 54 V. R. I-AOIFIC liAILWAY COMM18SI0S. Q. Do you iintlerfltand that tli»t incaiis stockv und l>ou()» ol' tbcir owu road, or stocks and l>ond.<i of other roads T — A. i roully do not k any Alecks and boridH of other roads. Q, VoadonotkiiowthattheCentrall'ncificdocuiowu stocks and bonds ofauy other roads 1 — A. 1 do not think of thorn at this time, excepting as licUl in the sinking fundn. Do yon know what this in, Mr. Tweltd t Mr. Tweed. I du nnt know whnt it is. Tlio WiTHKH». I think it is probably on the California an<l Oregon brunch. They put in so many insued ; and if they had them on hand- .Mr. Tweed. Possibly that is it. Coinn)issioner Anrkhhon. How is it in lS84f ThoOHAiBMAN. Two liiindred and lifiy-threc thousand dollars ap. neara iu I88'J; a very much lover suia. Stocks and bonds in 1S8I J 100,000. Onmmissioucr Andebijox. It in Citlifuniia anil Oregon in somo way, bat 1 want (o understand ou what theory it is entered. Wo will imaa thu item and get the explanation of it at some other time. The Witness. I cannot exjilain that it^m at present, bat will dv so at some subsequent [leriod. By Conimissioner Anderho?i: Q. I notice in 1873 thosum of $G1, 000 again entered for legal ex]>PDfiei Are your explanations as to that the same as those given for 18721- A. I have DO other to give. The same. <J. And Mr. Franchot was the Washington attorue? during tlii year T— A. Yes, sir. I think he died in 1878 or 1379. FtBST dividend IM 18?^. tj. The report for the year 1873 contains yonr first dividend, I l>eliev< that WHH paid; or were any dividends paid at all before thatt — A. think not. Q. It is marked dividend No, 1 f — A, Yes, sir. JJy Uie Chairman: Q. Your earnings, however, commouccd with 1805! — A. Yes, sir; think HO. By Commissioner Anderson : Q. According to your best impression, that is the Arst dividend I- A. Yes, sir; iu 1873. That is, according to my recollection. Uo I the time of the completion of the road we paid everything we coulcf gi onr hands on to complete il. Q. Was there another division of profits matle in some other WAf f^ A. Ko, 1 think not; t never had any. Q. By increasing the appiireut value of the stock t — A. Nojweu _^^ dill that. We organized first to go to the l^tate line, 1<')0 miles or n liCtl mure, and the stock was 88,500,000, and t hoii wc condnded we would bnU on to the Big B"ud of the Truckee, and more if wo couhl, and we madi it9JO,000,lKH»; and when wo got there we made up our mind wowonU go to Salt Luke, or as muiili farther as we eouhl, and, with some roodi iu California wo made it ij UH),000,0OO. That was less per mile of road than the «8,500,ooo. ^ leoai, kxpknbks fur 1874. It JST4 I rind legal expenses ft*4,00«, I tUiuk it is. Will yoa » t C&e ttgtirea right T — A. lii;;\ity U»vee \\iovwa\iA OYvt^ V\v«.{iA^%!DJ ptfr» doiliu-H. COLLIS P. HUNTINGTON. 35 Q. Aud i>ortious of that, a8 far as you know, were always paid with- out vouchers ? — A. I should say so. I think that is true in every year. Q. And yoa can give us no other information as to the place where we can find the detailed payments except to refer us to the books in California f — A. No, we have nothing here. I have nothing here, I am satisfied that they will have nothing for those amounts that I paid. They will have nothing except my memorandum that I paid so much. Q. A letter of instruction from you to charge so much to that ac- ooantf — ^A. To charge it to profit and loss, or to charge it to legal and miscellaneous expenses, I think, is the general way I put it. Q. Was that instruction given by you more than once a year, or simply once a year for the purpose of making up the books ? — A. I think I used to send out a memorandum every month of what had been paid; I did not want to have as much as a year's business accumulate in my office, and my recollection is that I used to send out every month. Commissioner Andbbson. Certainly, as to material ; but I am speak- ing of this item. The Witness. As to any money that I paid. Q. Then we would probably be able to get twelve items showing the distribution of these expenses every year! — A. 1 should think so, and still you might find them more condensed ; Mr. Franchot and Mr. Sher- rell used to get the money, and at the end of the year I would settle up and pay them whatever was due ; but the people in San Francisco can explain it better than 1 can. They know more about the books. As I said, I do not pretend to know anything about book-keeping. By the Chairman : Q. If the<(invouched accounts do not appear anywhere, how are we to find themf — A. I do not know; I do not know the necessity of it, as the commission does ; but I kept the accounts just as I should my own accounts. I was satisfied that they were all right, and so wrote them down. Q. What would the unvonched accounts amount to every year f — ^A. They are considerable some years ; some years a great deal more than any you have got there yet. .Q. About what would they amount tot — A. I do not know; our business has been very large; I should not wonder if it would roll up to a couple of hundred thousand dollars a year, some years. You see there is a lot of commissions and things to be done. Q. Were all the items small items ? — ^A. I do not know. I used to give money to General Franchot, when he said, <^ I have got to have a certain sum." He had my confidence, and I would hand it to him. PAYING $5,000 WITHOUT A VOUCHER. Q. Would you pay a sum of $5,000 without taking a voucher or hav- ing an account for it f — ^A. Oh, yes. Q. Without knowing where it went f — A. That is, I would know it was right if I gave it to General Franchot; I would know it was the proper thing to do. Q. Would you know to whom or how it was expended ? — A. No. Q. Would you have no knowledge of it!— A. There were certain things to be done, and General Franchot, as I said, I had always known; he was of the strictest integrity, and as pure a man as ever lived ; and when he said to me^ << I want $10,000," I knew it was proper to let him have it, and I let bun have it. mM 36 U. S. PACIFIC KAILWAY COMMISSION. Q. Without ever knowing where it went or how it was paid t — A. Yes, sir ; that is the right way to do business, in my opinion ; I have been doing business over fifty years. My theory is the old theory to — Tmst all in all Or trust not at all, as the old poet says, and I have always acted on that. Mark Hopkins has handled hundreds of millions of dollars that he and I were inter- ested in together, and I never asked him to show a figure. Commissioner Anderson. That was not your custom with other items of expenditure, however ; for instance, in the purchase of rails t The Witness. No, certainly not. I always had them bring a bill in and very carefully looked it over, and I thought that was the way to do that. I was very careful to look it over and file it away. '< EVERYBODY WANTS EVERYTHING EXPLAINED." Q. How do you distinguish between your way in purchasing rails and in dealing with your solicitor t — A. I could not explain it, as I know of. But if a man will go to Washington and stay as I did for a gre&t many years he will find that everybody is afraid. I have been in Washing- ton for several years looking on, and everybody wants everything ex- plained. There are a great many men I could not get to, and General Franchot could not. By Commissioner Anderson : Q. What was he engaged to do ! — A. He was engaged to attend to our business, to the best of his ability. Q. To your business with whom t — A. With everybody; with all the Departments and with Congress. 1 know, and probably ypu do, and perhaps it would be no harm in stating it Commissioner Anderson. None at all. The Witness. No harm in stating that men go to Washington, and I will say it without any mental reservation, that I do not believe Gen- eral Franchot — I know 1 never did — gave a man money or tried to influence a man in his vote for money; but there are lots of men in Congress I cannot talk to at all. By the Chairman : Q. On what subject t — A. You cannot get near them, and they are afraid. explanation of pranchot's business. By Commissioner Anderson : Q. Why should they need money ? — A. They do not need money. Q, Why should Franchot need money! — A. Here is Eichard Eoe^ who represents a certain district, and you cannot get near him, and he is afraid if he votes for my Goat Island bill, which I wanted, that it will hurt him in his constituency. You can send to his constituents and get John Doe, and he will tell him that is just what is wanted by his constita- ency. Q. W'ho will get the money then, in the story you have told ust — A. John Doe would get it ; not Eichard Roe that had the vote. I do not know this. This is mere surmise. Q. Would not the man that gives the money to John Doe say to him, <'Tell me what kind of a talk you had with Eichard Boe^f — ^A. No; he will explain the matter to him and tell him wherein it is to tke pab* COLLIS P. HUNTINGTON. 37 lie interest, and convince him in tbo first place that it is right ; and then lie can sit down, as a man can with his chnm and acquaintance, and say, ** Here, you do not understand this. I understand all about it. Now, 1 want to have you do it.'^ Q. Were not Pranchot's requirements for moniey larger while Con- gress was in session than when it was not in session ? — A. I should think so, because we have all our printing to do, and much of our busi- ness was done while Oongress was in session. There are a thousand little things that had to be paid for while Congress was in session, which, to a certain extent, would die out when Congress left. I do not believe that General Franchot ever used a dollar in his life improperly, for 1 knew the man as a beautiful, clean man. He never used a dollar in his life that the law, in its most sensitive sense, would not bear him out in. Q. Can you give us an approximate statement of the whole amount of money used in this way from 1872 down to General Franchot's death ! — A. No ; I could not, now. By the Chaibman : Q. Let me inquire under this act (and it is a proposition that comes in here) whether any of this money that you have spoken of in the un- vouched items was used, or whether other valuablQ considerations were given, or any other act or thing done, for the purpose of infiuenciug leg- islation t— A. Will you repeat that question ! Q. I follow the words of the act only. There is a subject of inquiry given to us ; whether any of the sums named by you were used, or whether there was any other valuableHConsideration given, or any act or thing done by any agent of yours, in the direction that you have named under these nnvoucbed items, for the purpose of influencing legislation ? — A. No farther than to explain questions and show that it was a right thing to do, and more in the interest of the public than it was in the interest of the company. By Commissioner Anderson : Q. How could Mr. Franchot personally earn $30,000 or $40,000 a year in explaining things to members of Congress f — A. He had to get help. He had lots of attorneys to help him. Q. Whom did he have f —A. I never asked him. Q. How do you know he had ! — A. Because he told me so. He said "For these explanations I have to pay out a little here and a little there, and that aggregates a good deal." Q. Would that satisfy you without the names of the persons em- ployed by him t — A. Certainly. Q. Are you sure that was all he said in explanation of the use of his money f — A. Yes, sir. By the Chairman : Q. Whatdoyouknowastothecostof the explanation?— A. I did not care anything about it. There are certain things that you have to ex- plain, and you have to educate the people, and you frequently have to go to the newspapers to explain the thing. INFLUENCING LEGISLATION. Q. How did you educate the direction of legislation in Washington in that regard t — ^A. For instance, we wanted Goat Island, and they said tliat was- very valuable to the Government; and we wanted to explain toeveiybody that that was not of any value to the G^verum^ut — ^\9Vi\^Vi 38 ir. S. PACIP'IC RAILWAY COMMISSION. it wiiM not aud in uol— aud that it wjib oC viiluo to Uiu nvUroiid com|iuiiy, and tbat it wii« iM-tlcr for 8au Fmucifico to hiivo the wont end of the ratlroiid line upon a rock, wlipre theru was w»tur nevitrul futbonis deep, OD the BJda toward Han Fraucisco, than il was to bu built up and stand ou piles that were in 211 f«et of water, whidi would be oatL-n oiT in time by the teredo, and have to be removed every little while. We Iiavo had neveral hundred feet loHt nt like Hlips. We bud to explain that the island was no good to aiiybod.v but the Pacific Railroad. OoiumisHiunor ANDKltHON. A sort of common-Hdiool fund ! The WrrNKSS. Ve«, sir. Hy tbeCllAiUMAN: Q. How did you measure the cost of the explanation T What did it cost yon T — A. Tlie same as we would when we go into court. We have to hire an attnrne.v, and we give him about what he asks, liy Couiniissiouer Anderson ; Q. Do you!— A. We do. "MORAL INFLUKNCr." IN rnitllT AND CO?iaRESS. hy the Chairman: Q, Yon were not iu court at Wushin;;tun T— A. Yes, sir; just about the Kiime. Yon have to explain. Now, this committee can go and build three or four ihousand n)iles of railroad, and Ihcy will attack yoa from every direction, and you have got tt^'xplain, and you have to pay for the cxplanulion. Not lo buy voles, but to explain and briug inflii- euce — moral inHueiiee — to bear. There is no question about that. Q. In what direclion do .vou spend money to bring moral iutlncntte t — A. Vou have to send for parties that can explain it. One man can- not divide himself into four hundred parts and explain iL Hy Commissioner Anderson: Q. In addition to explainiog with words, do you not 8up]>08e they explain with champagne and expensive dinners t — A. Very likely. I never jjave a dinner in Washington. (J. I am talking aliout the use made ofycnrmonej'. Wao not a great deal of it spent in ciKiira and ilnim]in|,'iie dinners t — A, I think so. Kot' so mncli, but pcrliaiJH some i.f ii. wjim, |>i {;rl nduic able inau to sit down and really ex|)liiiii in tlie br<Milr'.-ii si-ns.- wliat we wanted done. (J. Was anybody til i>\|iliiHi llie pnr■l■lla^^^ by you of the stoeks and bonds of any olhei' road, or the pavnierit of nubscriptions by any one T — A. No. By the CoAlRMAN : Q. Will you give us one illustration of the thing practically carried out, t>y which an explanation was made to some one iu order to secure legislation f — A. I suppose half the members of Congress hod to be ex-. ])lained to. Q. Will viui (•" through anyone iimtaucet — A, 1 have sat down and exphiiiiiMl I.I ih<-iu myself. Q. Wliiit dill Villi pay t — A. I did not pay anytbing, iK'canse I did it directly. There was nothing for niu to pay. I did not get anythiug for uiy lime ; that is, nothing but what I ought to have. Q. Somebody bad to be paid. Now, how do they do f — A. I suppose tberBeiiH for ttomebody as 1 say. Mr. Krunchot says, "It costs a great (/ejutngt<r. tlio facts before raemberR oV Cttni;t*;m. "VVw^ ilo not under- COLLIS P. HUNTINGTON. 39 stand these questions, and it costn a great deal to get the facts before them." By Commissioner Anderson : Q. In what year was the largest expenditure of this kind t — A. I can- not tell you. Q. Bctftd all^ those items for legal expenses, year by year, and tell me. LEGAL EXPENSES. By the Ghaieman : Q. Have you an explanation, or is the explanation already given, one for the item of legal expenses for the year 1874, of $83,000, and also general and miscellaneous expenses, $245,000 1— A. I should think so. The Chairman. The items are as follows : 875. General and misceUaneous expenses |395,350 15 Legal expenses 106,184 44 876. General and miscellaneous expenses 469,327 74 Legal expenses 193,758 59 877. General and miscellaneons expenses 482,558 53 Legal expenses 146,112 04 The report for 1878 is missing. 879. General and misceUaneons expenses 394.752 79 Legal expenses 190,136 38 680. General and miscellaneons expenses. 378,696 82 Legal expenses 155, 5b6 57 881. General and miscellaneons expenses 239,606 98 Legal expenses ^ 167,894 69 882. General and misceUaneons (expenses 330,646 72 Legal expenses 216,750 41 883. GeneraJ and miscellaneous expenses 377,56126 Legal expenses 213, Idl 01 884. General and miscellaneons expenses 659,271 06 Lof^al expenses 246,686 28 885. General and misoeUaneons expenses, aecrned to April 1, paid dur- ing year 399,835 73 Legal expenses accrued to April 1, paid during the year 1 12, 640 20 By Commissioner Andebson : Q. The general explanation you have given applies to all these items? — A. Tes,sir; I do not think of anything else; no other explana- tion. Q. That is to say, as a part of all these items there are certain ex- penses which were paid by you without voucher and which were made, up to General Franchot's death, through him, and after that through Mr. Sherrellf — A. Tes, sir. INOBRASE OF CAPITAL STOCK. Q Do you remember an increase in the capital stock of the road be- tween 1880 and 1881, from t54,000,000 to 1 59,000,000?— A. No, 1 know there was about that time some increase. Q. Do you know what the object of that was or how it came about t — A. No, I do not; I can get that very easily, or we can get it from Mr. Miller, if you desire. Q. Was it connected with the California and Oregon construction t — A. I do not think it was. It may be, however. 1 do not remember aboat that. The Chairman. This is it: t54,000,000, and then in 1880 it is •59,000,000. I'. 8. t>ACIFlC RAIUVAV COMMISSION. ^^H The Witness. That is easy of explunutioii. I ciinuot uxpluiu it,l>Ht tbe records will dhow it. I can get it for you by day after to-innrniw, if you wish to have me. Commissioner Amdebson. Yes, sir. Hy tbe Cuaieman : Q. Will you also give an explanation of the item of nccounls paya- ble that aiijicar id the same year T — A. Tbe bonds T Q. Yes. — A. Yes, sir. I.EA8K OF OENTBAL PACIFIC TO SOUTHERN PACIFIC. liy Commissioner Andgbson: i).. N\'cre you a party to the a^eement for the lea«e of the Oeotral Pacittu to the Southern Pacific T — A. Yes; I was not in California. Q. llow did that umtter come upl — A. It haa been my view for a gootl mauy years that there ought not to bo more than three or four transport at iua companies in Ibe United States. There is a great econ- omy in working them. In fact, it would be better, I think, if there was but one tmusportation company in tbe United States. It would serve tbe people a great deal better and do business cbeajier. Ily tbeCHAIEMAN: CJ. It would do away with tbe old theory of competition beingtbe life of trade 1 — A. Thnt competition is killing, and it compels them to take alt they can get. In the long bau) you have to do it frequently with a little profit on train expenses, »nd you have to make it up where you can. ]ly Commissioner Ahdebson: Q. That is the way tbe subject came up I — A. Yes, sir. Therefore I thought if we should get all our companies together and get as many as possible to come in with us, wo could operate all under ouc company. That is tbe way we started with the Southern Pacific. As we built a road, we let that company take it. Q. What I want to get at particularly is why the Southern PociHc Oumpauy was selected as the lessee, and tbe change made from the prior order of things when the Central was a lessee of a portion. — A. The Souttierii Pacific got to be a greater company, and itlouked a little like the tail wagging the dog for tbe 8Ut) miles of road to run the 4,00U or 5,000 miles of road. Q. The Souliieru PaciQc is a Kentucky corporation ! — A. It is. Q. Mr, Stanford is tbe president of the Southern PaciHot — A. Yes, sir. Q. And he is also the president of the Central t — A. Yes, sir. ii. That wassoat the time the lease wasmade.wiut it not r — A. Itbink so ; I am not certain ; yes, sir, I am quite sure ; be has always beeu president of the Centnil, and 1 think he is of tlie Houthern. THE OPPICEES COMMON lO BOTH EOAD8. Q. What other officers iire common to both companies 1 — A. I thiuk they are mostly iibont tbe same. I could give yon the names of bolb boards without any trouble, that is in my ofiBce. Q. Who are the jiriucipal aud directing men In both companies 1 — A. Mr. Stanford and Mr. Orookor and Mr. Hopkins and I myself. I have aoBiething to «ay. COLLIS P, HUNTlNOTOK. 41 Q, You four together own a very large atnouut of the 8iock of the Soathem Pacific t — A. Yes, sir. There are a great many stockholders of the Southern Pacific ; it is uo more scattered than the Geutral, that I know of, but there are a great many stockholders iu the Southern Pacific. FBEiaHT BATES. Q. At the time when this lease was made who had charge of the di- rection of the arrangements that were made for the division of freight rates between the two roads f — A. The oi)eratiDg department, Mr. Town at the head of it i he is our general manager. Q. Under whose direction would he fix his rates ? — A. Naturally, un- der the president, I suppose. But Mr. Town has been with us a loug time, and he is a very able railroad man and knows more about oper- -ating roads than any of us, and we leave that almost entirely to him. Q. Has the division between the Southern Pacific and the Oentral Pacific, since the lease was made, been made on the basis of a ^^ pool- ing" arrangement, or has it been made with reference to the actual freight and traffic going over each road t — A. There is no pool, I think ; I think each road gets its earnings — I am quite sure of that; that is, they are kept separate, so that you can tell just what one road has earned and just what the other road has earned all through. Q. Describe how the Southern Pacific makes its connection with the eastern portion of the United States. — A. Over the Oentral Pacific. BOUTB OP THE SOUTHEBN PACIFIC. Q. No ; how does the Southern Pacific make its connection with the eastern jJortion of the country ! — A. They come to New Orleans with the rail and then they connect with the Southern Development Com- pany steamers to New York. Q. The Huntington line! — A. No; the Huntington line runs from Newport News to Liverpool. Q. What is the name of the line that was purchased so as to make that connection f Mr. Tweed. The Morgan line. A. Yes, sir ; that is a portion of the Southern Pacific system. Q. Can you tell us anything about the proportion of through trade that is carried over the Southern Pacific as compared with what goes over the Central f — A. No. That is easily ascertained. On the tide- water, as we say, we take nearly all of it. We are the shortest line, equating water against the rail. The line by New Orleans is some 400 miles the shortlist. When we get west of the Alleghanies we do not compete at all. That comes through the Atchison and Central Pacific. On the tide- water we carry most all of it by way of New Orleans. Q. Whom do you mean by " we ! " — A. The Southern Pacific. I am interested in the railroad from Newport News to New Orleans, but we do not do anything in that way. By the Chaibman : Q. Speaking of the gentlemen you have named, have they, with yourself, the controlling interest in the Southern Pacific ? — A. Yes, sir. The Pierce estate and we four have a majority. I think we four have ; 1 won't be positive about that. By Commissioner Anderson : Q. This fact that so much of the freight goes around by New Orleans has, of course, grown up daring the last three or four ^eata^ — ^. X«^^ Mr; since tbe parcbase oftbe Morgan Company. I. PACIFIC BAir.WAY COMMISSION, '.NCEUNINO TUR DIVKKMK'N OK PltOFtTS, (j. Hon not that liud the effect to decrease the enrutii^a of the Geii- trnl Puciflc in its through basineas 1 — A. Of course, to a certain extent when another road ik bnilt, it divides the iiicreaBe. As a matter of neccKsity the Northern Pacilic and the Atchison hare to divide. Q. I iiDderstand that ordinary competing lines will decrease the prolits, but 1 call your attcntfon to a diversion of profits made to a road ill which the oflicers are in both companies. — A. We do not have any- thing to do with Ihe eontrolliug of freight, (j. Nothing whatever T — A. Nothing whatever. The Union Pacific and Central Pacific have an office on the comer of Ueudc and Broad- way, und they work for freight. Mr. Ilawley is the agent for the South- em line. They work for freight. Nobo<iy comes to me. But if they ahouk), I (ihonld tell tbeni to ship which way they have a inind to. And the freight that comes from the companies here will go by way of New Orleans, nearly all of it. It is the cheaper line, and I think it is the belter line for freight. Passengers do not go that way to any consid- erable extent. Q. Your company doen nothing, then, to influence freight io favor of the Southern PacJflc system as against the Central Pacific 1 — A. Ob, no. By theCnAlHMAN: (J. Voii have a controlling interest in the Southern Pacific nlwo I — A. Yc», sir. THE BEOULATION or FREIODTS. Q. So that you regulate the freights for both t — A. 1 could not tell you to day what the rates of froight are. By Commissioner Andkrson : Q, Who controls the fixing of the rates t — A. It is done by tho gen- eral managers. Q. Does he not receive instructions from the president !— A. No, eir. By theCnAiKMAN: Q. Or from other oflleers of the eoinpiuiy ! — A. I do not think he docs. I never gave any instrmilions. il. Or the board T — A. The traffic men, as they say, agree upon the rates. I presume they do. Wo do not have anything to do with it. By Commissioner Anderson : Q. Have you no personal advantage in having a large ijnantity of freight going over the Southern Ptwific rather than over the Central Pacific f — A. I should think we hud. And I have got more interest in having it go over the Chesapeake and Ohio; but we do not »tend any thing that way. I do not tell lliem to send anything Hint way, and I do not think they do. By the Chaieman: Q. l>id you submit the questioD of lease of the Central Pacific to the Soutllfni Pacific fo your stoekhoIdersT — A, I do not know. Do you knovf, Mr. Tweodt Mr. Tweed. No, CHARLES FRANCIS ADAMS 43 CONGRESS NOT CONSULTED AS TO LEASE. Q. Did yoQ sabinit a proposition to Congress or to the United States Go^mment that you were going to make sach a lease f — A. I do not think we did. Q. Yon onght to know. — A. I am quite snre we did not There is nothing in the statute that requires it. I do not think there is; Mr. Tweed is the man for that Q. So that, without consultation with your other stockholders or without notice to the United States, you leased the Central Pacific to the Soathern Pacific f — A. Yes, sir. Q. The same interest that controls the Central Pacific controls the Soathern Pacific? — ^A. Yes, sir. The Commission then adjourned to Thursday, April 28^ 1887, at 10 a. m. No. 10 Wall Street, New York, Tkvrsday, April 28, 1887. The Commission met pursuant to adjournment. Present: Commissioner Patterson (chairman) and Commissioner An- derson. GHAELES FEANCIS ADAMS, being duly sworn and examined, testified as follows: By Commissioner Anderson : Question. You are at present the president of the Union Pacific sys- tem of railroads t — Answer. I am. Q. How long have you held that oflSce ? — A. I have held that ofiBce since the 17th of June, 1884; three years in June. Q. What connection with the railway department had you prior to that timet — A. My recollection is that I had been director fourteen or sixteen months before that. Previously, I was for one year a Goveru- ment director of the road. A member of the board of Government directors. HISTORY OF CONNECTION WITH UNION PACIFIC. ' Q. So that your first connection with the road began when ?— A. If I recollect right, it began at the annual election in March, 1883. Pos- sibly 1882. Q. As Government director f — A. No; I was Government director in 1878 and 1879 ] one year. Q. Between 1879 and when you were elected general director had you any connection with the road f — A. None whatever. Q. Were you a stockholder ! — A. A part of the time. Q. From what period can you say that you are familiar with the gen- eral affairs and internal business of this corporation ! — A. Really not qntil a short time before 1 became president, exactly three years ago at this time. I was called on, as a director, by the other directors to take an active part in the management. Complications then arose which caused me to be chosen president about six weeks afterwards. But prior to the let of May, 1884, 1 had very slight lamiliarity with the af- fBin of the company. U. 8. PACIFIC RAILWAY COMMISSION. y. Wei-u you 11 uicmbiT ol' tbo vuiiiiiiitU'CK i>f tlio buuiil ui direc- tion T — A. 1 was u mcralitr of oiio «1 llie n-Rular cotuuiillcoH ol' tlin board of diroctiou, but tb« work tliut cniiie bot'oro tbat coiniiiittvi- was nominal. « Q. Then your inllmivte acqniiintance with its affairs d*t« from lUo tiiiio you became presidentT — A. May, 1884; tlir«o yeurs ago nt tliis time. Q. Since that period have yon examined very cIokcI^- into the Rffairs of tbp whole system t — A. Very closely, indeed, <J. Have you been over the road frequently yourself, in your ofHcial capacity T — A. Very frequently. Q. Are you familiar with the eaining capacity and the qnnlilien of both tliu main line and of all the dilTorent branches T — A. I ought to be, and profess to be. Q. You hare made it a subject of )irufcssionnl mudy ! — A. I have made it a subject of close study. Q. nave yon also siucc yoa hare been president examined tbe oilt> cial affairs of th's corporation relating to its hiBtory anterior to the [wriod when you were elected president! — A. Never, except incident- ally. Q, In what particulars have you examined the subject yourselft — A. Its various lines, its connection with the Government, and its indebted- nesH to the Government, and the hest ways of dealing with these ques- tions. KANSAS PACIFIC CONSOLIDATION. Q. Ilaveyou examined peisoually theniatterof theconsolidaliouof the Kamnas Pacific with the Union Paciflc I — A. Never; I only have looked into it incidentally. I have accepted it as a thing which binl t^keu place three years or four years before I becamopresident, audit was my business t(p manage tbe consolidated road and not to examine into the history of tbe consolidation. I had to look into it to a certain extent in connection with some questions which arose in tbe State of Kansan, but 1 never had occasion to investigate it thoroughly. Q. Uavo you cxumiiicd it with reference to tbe question whether the corporation had a cause of mition agiiinat any persons by reason of matters connected with that consolidation 1— A. I have. Q. You have examined it in that point of view f — A. I have exandned it in that point of view, Q. lu relation to claims against persons individually, or in relation to claims generally! — A. There were stories that reached my ear, and charges were made against certain persons, especially Mr. Gould, who was then on the direction. <J. Before yon leave the names, please state what other persons it was reported had so conducted themselves that they were responsible to thft roi-pnralion. — A. Well, they generally took the form of saying that Gould, Dillon, and Ames, &c., referring to the leading directors Q. Dillon t — A. Sidney Dillon and F.L.Ames. They were simply leading directors, old dii^'ctors of tbe company. It led tn my looking into that matter. I will state tlint I came distinctly to tbe concla- Mon Q. We will come to the figures Inter on. I wanted to know what ex- amination you hud maduT — A. I bad made that examination. Q. Am there any other snbiecls connected with the prior history of tbe road, before yon were president, tba.t.i'on\iftiVvTiavQ\\\M\^ I w.fer particuUirly to (ho oiigiii of lliebianeb Viiws. — \. ftomvot \Vi«m\>aii.'S'a CHARLES FRANCIS ADAMS. 45 looked iuto, especially their financial quest ions and questious connected with their construction, to a greater or less extent. Enough to satisfy me. . BRANCH LINES. Q. You say some of them. Will you please name which of these branch lines you have examined into particularly f — A. The iirst one I looked into was t4ie Nevada Central. I then looked somewhat into the Denver and Sonth Park and Oregon Short Line and the Omaha and Be- pablican Valley. I may say, generally, that I looked into all of them. Q. Did you make this examination mainly with reference to ascer- taining whether these branches were a source of revenue or assistance to the parent line, or did you make it for the purpose of ascertaining whether the Union Pacific had claims against individuals by reason of circamstances connected with the origin of the branch lines t — A. 1 may say, generally, covering all those grounds, to a greater or less extent. Q. Which of these branch lines which form a part of your system' have a separate organization f — A. They all have separate organiza- tions. Q. Those that are connected with your company, as well as those in which you merely have an interest in the stock f — A. Yes. It arises out of the peculiarity of the charter of the Union Pacific. Nothing can be consolidatetl with the original Union Pacific except the through lines of which the present Union Pacific is formed. That is, the Kan sas Pacific, the Denver Pacific, and the old Union Pacific. That con- solidation was provided for in the original acts. Everything else is outside, and under a separate organization. Q. Is there anything to prevent the Union Pacific building a branch road, just as it would build sidings or side tracks! — A. I do not under- stand that the Union Pacific can build a foot of road under its charter, strictly. It is a remarkably narrow charter, and never ought to have been passed in so narrow a form. Q. You think, then^ that it would bo restricted from, for instance, connecting a gravel pit half a mile from the main road? — A. No ; that is too nan'ow. I am speaking of the construction of branch lines. We have some forty organizations of which I am president, I think. I never counted them. SYSTEM OF OKGANIZATION. Q. What is the system of organization — a president and board of directors f — A. President and board of directors, the regular organiza- tion. Q. Bonds and stocks f — A. Some of them have bonds and stocks, and some have stocks. They are of all sorts. I could not undertake to enumerate them at this time. Of course we will be ready to submit to yoQ at any moment a schedule. Q. Do I understand you to say you are president of all those f— A. If I am not, I ought to be. The intention is I should be president of them all. Q. Of a]] the organizations? — A. Of all the organizations. Q. Are the directors selected from directors of the Union Pacific! — A. As a rule, bat we, of course, comply with the laws in the dififereut States, &c., which prescribe sometimes that directors should bo citi- zens of the Htntcs. pacific: kailway commission, accounts op bbakoh links. Q. Wlieie are tlie accounts and Iiow aro the iiccuuiits uf those oepar- ato bmnulies kept f — A. Thoy aro kept at Omatiu, aiul they are kept in Q. Have you a complete tranHcript of the bookn in Boston T — A. I do uol know ; you will bavo to ask the comptroller. Q. Pk'iwo give the eoinptroller'a name. — A. Oliver W. Mink. (j. How long has he been with your cumpaoy 1 — A. lie haa been with it mauy years, long before J ha<l auytbiiig to do with it ; he was assist- ant treasurer when I became president, and afterward, being much im- presEud by his integrity of character and skill as an accountant, when I reorganized Iht^ syHteni I made him comptroller. Q. is he (he man who has the fullest knowledge of your book-keep- ing t — A. Undoubtedly; I refer to him for everything in his depart ment. Q. Are the Iwoks of the branch lines and the businesa of the branch linos kept nnder the same Buperrision au the business of the parent line, Uif Inr as the book'ke<fpiug is uouuerued t — A. The same. ^j, You [lersoually have no knowledge of the details of the books t — A. I do not think I ever jwrsonally looked into one of the books in my life; 1 rely wholly upon the head of the department. X}.. Yon Hiiy yon did make some examination in regard to the origin or manner of construction of «ome of these branch roads f —A. Yes. Q. Please select one that is most prominent in yonr mind; Denver and Honih Park? — A. Yes; I have looked into that, to a degree. r KSTROCTION OF DENVER AN13 SOUTH PARK. Q, Wlieu was the road iuitiate<l ! — A. The Deuver aud Sonlh Park wa8 built by Governor Kvans, of the Stale of Colorado, somewhere about lt80, 18.S1, or lasa, and along there. Ho sold it to the Union Pacific. (J. Had he any connection k ith the Union Pacific at the time t — A. Not the sligLest. Never had any that 1 know of, Q, How much of it wjis built by him ! — A. Uehuiit 150 miles, Etliinb. if. Wbo luis the books relating to tbat original construction by Mr. Kvans! Have tbey been passt^'d over to your company I — A. Ifthey have 1 have never seen them or heard of them. I suppose they were. Mr. Mink probably can tell. Ue is here. It gpes back before my time. Q, 1 am speaking of this examination you made to And out how this branch road came to be conslTuctedT — A. I did not go back to tbo original records. I made my inquiries from individuals who were aC' qnainted with the facts. Q. Will yon please tell ns who some of these individuals were T — A. They were in Colorado ; peopl« I have met in my visits in Colorado la going over the road. The engineer who constructed the road was one. 1 have seen (lovernor Evans himself, aud I have talked with General Palmer and Mr. Dillon and Mr. Gonid, and all the parties who were en- gaged in those traiisaclions. y. Do you remember, at the time of the transfer fram Governor h) vans to tliB Union Pmnfic Company, what the stock and bonds of the road amounted toU — A. No: I do not. Tbat is, I could not tell you at this, minute. Our liooks tell. tj. tour books Mi f — A. The books HiU. CHARLES FRANCIS ADAMS. 47 Q. The books of the orgaoizatiou itself f — A. Yes ; the books of the organization at the time we received it. Q. That is why I ask you where they were. — A. I cannot now tell where they are. TRANSFER OF DBNYER AND SOUTH PARK TO UNION PACIFIC. Q. Do you know who made the bargain for tbe transfer of that branch line to the Union Pacific t — A. I have heard. •! do not know otherwise. Q. A bargain was made t — A. Yes, a bargain was made. Q. Do yon know how it was carried into effect ; I mean, was the stock all transferred or surrendered to the company T — A. Entirely. Q. The stock of this branch road ? — A. We bought the stock. It was all in the hands of Governor Evans. There was a sharp competi- tion going on for the possession of that road between rival lines, as I have been informed. It was before I was a director. Governor Evans wanted to sell it ; and General Palmer, of the Denver and Bio Grande, and Mr. Gould, on the part of the Union Pacific, were bidders for it; and Governor Evans played between the two, and he succeeded. At tiiat time everything in Ck)lorado was in that very inflated condition which ususJly precedes a great collapse. There was a state of artificial prosperity very marked. Finally, Mr. Gould, I think it was, on the part of the Union Pacific, closed the transaction with Governor Evans, and he (Gould) gave it to the Union Pacific, or the Union Pacific took the bar- gain of him. Q. Have you ever seen the papers ! — ^A. N'ever. Q. Do you know whether the agreement between Mr. Evans and Mr. Gould was in writing?— A. I do not; I do not know whether it was a mere verbal agreement or whether it was in writing. Q. Do you know whether anything but stock was transferred? — A. That was all that was transferred ; the stock and property. We took all the stock Governor Evans had and which he represented, and it amounted to nearly the whole of the entire stock, at a fixed piice. Q. Do you remember the rate iier share that was paid by the Union Pacific?— A. I do not. Q. Do you remember it, about? — A. No; I do not. I cannot say. As things turned out afterward, it was a most extravagant price, but at the time it was not so considered. There never was such a collapse as that which took place in Colorado shortly afterwards that I ever heard of. Q. Will you please describe that collapse with reference to the busi- ness done by this road? — A. It fell off more than half. SOURCE OF REVENUB OF DENYER AND SOUTH PARK. Q. What was the chief source of revenue of the road at the time the bargain was made ? — ^A. The chief source of revenue of the road was in carrying men and material into Colorado to dig holes in the ground called mines, and until it was discovered that there was nothing in those mines the business was immense. That was the famous mining boom of Colorado — for it was famous at the time — when every one was crazy. While the craze lasted, the railroad did a magnificent busi- ness. When it broke down, and these mines and villages were de- serted— and they stand there deserted today — of course the business left the road. It was the same with all the Denver and Bi\o QrraxA<^ ^a well as tbe 8oatb Park. . VAfiriC UAILWAV COMMKHSUIN. Q. From wlial point on the Uuiou Pacitlu iloes it tliverge t — A^. Denver. Q. To wbat place 1 — A. Ilconnects with uh at Dciiver,niiil it runs tu Leadviile and GuoDtsou. NOT BABIflKG OPBBATING EXPENSES AT PIIBKENT. Q. Ae a matter of fact, does thib road at present pay ojieratjng ex- penses!— A, No; it hasuot paid operating expenGOn for two or tbree years, but at the time we bought it anil after it paid dividends on ita Btuck. Q. For how long! — A. On© year. The year that preceded the col- lapee. I onght to state, in jasticeto the gentlemen whopnrohased thin property, tlnit after the contract was made for its purchase from Gov- urnoi' IJvHDs they were oflered a bonns of C5(lO,UUO for the bargain. Q. You state lliat positively ; you mean yoii ain so lufonncd t — A. I am so inrorniod, and I have uo question about it whatever. Q. Uy whom ! — A. My informant was Mr. F. L. Ame», who Uaid tbon beeti a director, and whose statemeut I slionid aucept instantly. It wu a curious caseof the illusory values of that time; but the bargain conid have btscu sold by the Union Pacitio for a largo actual profit. Oonimitisiouer ANDEB80N. tiomeliines wfien wu have bought a piece of property at pretty high figures we say wo are oG'ered a jirice for it when somebody sayH he thinks it is worth so much moru. Tlio Witness. 1 havu nodoubtGeueral I'almerdrdmake thatofFer; from what I know of him and from the statements I havo received, I have never bad thn slightest reasoa to IjcUcvb that there was auytlung that woidd not sustain a perfect examination iu that trausaction. It was an error of juilgment, as things afterwards turned out; to that we are all liable. Q. What is the chief bnsiness done by that road uowT — A. Theaanra BB before. The Leadviile l)U8Jr)cs.>< and the business to the^o mioiag camps up on the mountains. (j. Are there any settlements of any magnitude ou the line of the road 1 — A. Oh, yes ; the road doi's a bnslnt^'ss. Tlie report will t«ll. It IB increasing rapidly now. A million tiud a half, I think it was, laat year. Q. A mdlion nod a half gross earnings 1 — A. I think so. Q. What is the annual deficit or excess of operating expenses over the groHs earnings, approximately t— A. About lOOjOOO last year. FUTURE OF DENTEB AND SOUTH PARK. Q. That is operating expenses alone T — A. Thiit is what it was. It failed to pay its operating expenses and taxes by about $00,(100. Q. Is there anything iu the business that that road is doing that you can tell ns of which causes you to expect that it will improve in the future in any way, so as to be an advantage to the Union I'aciflcl — A. In the ups and downs of railroad property, and especially in a region like Colorado, I should not consider the future of that road in auy way hopeless. (j. Js there anything connected with the special region that the rood goes through that can give you reason to believe that itH opfration will be more imditable iu the future T — A, Yt-s; mining cumpaiiitui, cBpe- tmJ/j; arc subject lo iipn and downs. If tht-y strike u good mine any- trhere ou tlw road, or dcv'olop a inineTivV regvo\\,\t-«w\\4 u.^'osk, NJam ^atJi Park at once to pick up. CHABLES FRANCIS ADAM8. 49 Q. Is there auy thing else that can be looked forward to as develop- ment for agricaltaral purposes f — A. Oh, no ; nothing whatever. It is purely a mineral road. Q. It IS based solely on the expectation ot future mineral discover- ies T — A. Yes ; sach in the fatare as there have been in the past. Q. In regard to this traffic that yon actually do over that road in car- rying men and material, are the persons that travel on that road mainly persons who use it for local purposes or only a short portion of the Un- ion Pacific, or do they go over the whole length of the Union Pacific in going to and fro T — A. It gives us a very large control of what is called Colorado business, from Omaha to Leadville and beyond. Q. Will your books show, so that we can discriminate as to the busi- ness of that road, how much of it is of benefit to the Union Pacific proper? — ^A. Oh, yes. Q. So that we can divide! — A. Yes; I have had those tables made cot repeatedly, in order to enable me to judge. Q. And Mr. Mink can give those figures? — A. Our accounting de- partment will give them. We have gone into the question frequently, in order to ascertain whether our branch system was a burden to us or DOf. Q. What is your personal judgment in regard to this particular branch ? — A. For two years it has been a burden to us. CON8IDSBATION GIVEN FOB DENTEB AND SOUTH PABK. Q. Have you told us all that yon know or were able to find out in re- gard to the circumstances under which the Union Pacific became the owner of this branch ? — A. Substantially. Q. Have you any personal knowledge whatever as to the price paid by Mr. Gould to Mr. Evans before the transfer to the Union Pacific^ or what was agreed to be p»id ? — A. I knew it, but it has escaped my memory, like many things connected with the road. I knew it exant^r at one time, but whether it was tlOO a share or tl50 or t200 a shasvl could now say. I should have to look the figures up and asoertaiik. Q. Do you know whether the transaction between Mr. Gknild aa»^ Governor Evans embraced any other subjects than the translcr rtf xLif branch road, at the same time? — A. I think not. Q. Do you know whether Governor Evans received thecntiie mmsK- eration which was paid by the Union Pacific ? — A. I have bp dmi'^c iv^ did. Q. You know nothing i>ersonally of it ? — A. I know BODal whatever about it. Q. Do yon know whether the consideration was paid ■ stock of the Union Pacific, or other securities ? — A. It not paid in stock of the Union Pacific. I have everv it was paid in money. Q. Do you know to what account that payi the Union Pacific books ? Would it be to ^( A. Oh, no ; to investment account. We have oonnt of $33,000,000, have we not, Mr. Mr. MiiVK. Yes, sir. Q. What year was that purchase ?— A. I it not, Mr. Mink? ^Ir. MnvK. In 1881. iP9 I V. 8. PACIFIC RAILWAY COMMISSION. stilted ill the reports; yuu will lliid it Itiore. OWNEBSHIP OF STOCK AND BONDS. (j. 1 iioticuiD the statement in the report of 1884, tbattlie Union I'a- citlc has aoquired titlu to only half of the bon<t.t. J)o yon know any- thing in relation to that! — A. 1 did not think it had acquired title to any of^them. I do not kuow what that tueans. (j. 1 read from the report that the Uuiou Facillc owned 86,0^,500 of stock out of a lotai of «6,142,800 and $2,080,000 of tb« consoUdatea bonds out of a total bonded debt of (4,01^,000. — A. 1 can explain that at once ; when we bought the road there was a first mortgage upon it of $1,800,000, which was in the bands of the outside public; it is now; afterwardB wo built extensions to Leadville and to Uunnison, itnd IbMi we placed a consolidated mortgage upon the entire property, the old jtroperty and the new, but wo reserved in our treasury a sufHeicnt inim- ber of consolidated mortgage bonds to take up the Hrst luortgapc bond«i when we could get them or when they matured, anti therefore Ihose bonds are in our treasury still; tiicy were set aside, one-halfof tbeinto cover the first- mortgage bonds and the other half or more were open lO' sale or pledge, or what not. Q. In regard to these charges, in your report of 1881 the stock of . this road is stated at (4,10(),000 and the bonded indebtedness at $!l01,OtlO; are you quite sure about the figures you have given usf — A. I am sure abont them as they stand to-day ; I cannot say about 1881 ; I Khould have to look into the record. Q. Tben when the Union Pacific purchased you canuot say exactly subject towbat outstanding amount of l>ond8 the purchase was madeT— A. X cannot now ; I should have to look. Q. What is the present status in regard to these Imnds, the state- ment being that then; are $4,GO0,O00 in all, aii/1 that the Union Fanifla owns$:2,Ghg,000T— A. Tbat would make itexactly; there are $1,800,000 Iwnds, a first mortgage on the line belonging to the original jiroperty which Govenior Evans built; that is, the 150 miles; loofi'set these tberv are $1,800,01J0 of the stibscquent consolidated mortgage bonds which are in our treasury ; tho other $:3,6O0,OO0, making $4,400,000 in all, ar« * subject to issue at any time. Q. Then I understand that there is no outstanding lien against this branch, except $1,800,000 T— A. That is all. lint there are $70,000 or. $80,000 of the consolidated bonds which we subsequently paid oat tw< Westinghonse on a contract for air-brakes. He agreed to take his pay ill these bonds, lie took them to tho extent of $70,000 or $80,000.. Those are outstanding and in Westinghouse's hands. Tbe re»t of thft consolidated bonds are all in our treasury. Mr. John F. Dillon. 1 understand this, and can make a suggestion about it. Tbe Witness. Judge Dillon knows more about it than I do. Mr. John F. Dlllon. I think the first mortgage was $1,800,000 at 7 per cent., covering about 150 miles of road, and that the extensions were built with tbe consolidated mortgage. Q. Ami the bonds are ontstandingl — A. No; tbe bonds are not out> standing of the consolidated mortgage. Tbey are in our treasury. Mr. .John F. Dillon. Tbey have been issued. The Witness. They have been issnod, iiud we have taken them. Q. I'oii otru (Item 1 — A. The distinction 1 drew in tliis ease was ba vea bauds ia the bauds of the outside v«bV\c, vi\i\tV \ ca\\^»m&&^^« ' laarLetvd ami nre afloat, and bonds w\\\c\\\>avo\>c;fctt\*sn,ci«a\« r ttvtusary. CHARLES FRANCIS ADAMS. 51 BRANCHES OF DENVER AND SOUTH PARK. Q. Yoa say that there have been two branches of this branch con- stracted since you acqaired it I — A. Yes. Q. Name them. — A. One is over the Breckenridge Pass to Leadvilie, and the other from Baena Yista, soathwesterly to Gannison, with a branch to Baldwin ; to the coal mines at Baldwin. Q. What is the length of these branches, respectively I — A. About 100 miles. Q. Your total mileage is 320! — ^A. 170 miles. Q. Which was built first ? — A. If I recollect right, the branch over Breckinridge Pass. Q. When I — A. I could not tell you. Both were finished before I took charge. There has not been any road built since I took charge. Q. Is the object of this branch a mineral object ! — A. Entirely. They were the branches that gave us our main business. They were neces- sary to give OS any business. Q- Please state what was done in regard to the consolidated bonds issued on this new construction. — A. They were issued and sold to the Union Pacific, as I understand it. They are in the treasury of the Union Pacific. All the bonds and stock were issued to the Union Pacific in payment for construction. • MEDHOD OF CONSTRUCTION OF BRANCH LINES. Q. That is to say, this Denver and South Park branch procured the CTnion Pacific to do the construction, and paid for the construction by issuing its bonds to the Union Pacific ? — ^A. Practically that was the way. Q. And the Union Pacific now holds those bonds I — A. Now holds those bonds. Q. As a part of its investments ?-rA. Yes. Q. Do you know, in fact, who controls the construction of these branches? — A. They were done under contract, under the supervision of the engineers the Union Pacific employed ; there was no construc- tion company whatever ; there was an engineer in charge, and the lines were paid for in the regular way. Q. How were the prices to be paid to the contractors for the work de- termined ? — A. It was all done by the construction department of the Union Pacific Bailroad ; it was in the regular way ; it was done by con- tract. Q. Was it done by lump contract for so much a mile, or was it done directly by the Construction Company employing engineers to do the work! — A. We had no construction company. Q. The Construction Committee, I mean. — A. There never was any construction committee; there is a construction department of the Union Pacific Bailroad Company. UNION PACIFIC CONSTRUCTION DEPARTMENT. • Q. Did the construction department let out the contract for the build- iog of the whole road to some persons, or did it employ engineers and workmen and direct the construction itself? — A. In every case that I have known of it has made a contract which has been approved by the direetora for ibe constractiou of the ro^d for so much with responsib^'* U. S. PACIFIC 11AII.WAY COMMISSION. Q. WoiiUI that be doiio on sealed bida or proposalH beforehand? — A. Ah a riiU>, tbiit is the way we bavo always done. Q. Ab a matter of fact, do you know with whom thocoutraet for build- ing this Denver and South Tftrlc branch was made ! — A. No ; 1 do not, I will state, as it may enlighten the Coinmissioii, that all this worit, ever since I liave had Anything to do with the Union Pacific and long be- fore, wa^ done by whiit is called the "engineer department" of the company at Ouiaha, of which the chief was a Mr. BlickensderfiT, u Peuusylvania Oeruian, a man of high reputation and of great experi- ence. He had been connected with the earlyconstruction of the Union Paeiflc, and has recently been retired because of his years. Ho is now living at Omaha. He knows all about these itiings and can tell every- thing. Q. In regard lo this briinob, what is your personal knowledge, after the study yon hiive maile of it, in regard to the general question as a|i- plicd to tbc future of the road, whether Ihc retention and openuion of this particular branch will be of advantage to the whole syatcnt nod to the parent companyT — A. It has been a subject of great perplexity to me, great doubt and perplexity, during the two or three years sinoe I have bad charge. i}. So that you arc not prepared to make a positive answer! — A. If I were I would *have made it to the direct^irs and reached a decision lung ago. THE NEVADA CENTRAL. Q. Please give us the name of one of those liritncheH that yuu have made a subject of examination. — A. The Nevada Central, a property that wo once owned. Q. is it li stemuf the roadf — A. No. Q. Not connected with itf — A. No; it wiui a road (hat 1 fonml wo had all (he stuck of. It is in Nevada, and is some 200 or 300 miles from a». (J. Betweoii what points does it comnmuiiiate! — A. Between Auiitin and Battle' Moiuitain. It is on the Central Pacific. It was supposed it would, in some future period, bo valuable to us in connection with the develiipments in Nevaila. li. What is the length of the roail t — A, Ninety miles, I think, Q, Is it complete I — A. It is, <j. Equipped f — A. After a fashion. I may as well say that about thfi first thing 1 did when I became president was to throw it overboard, and 1 have never regretted so doing since. I looked into that suHiciently to satisfy me that it had no fdture. WHEN ACQCIREQ, Q. When was that stock acquired by the Union Pacific! — A. That (•lock was acquired by the Union Pacific abont the same time as th9 South Park; a little later; X cannot say exactly. g. About 1881 T— A. J881!, i should say. (j. Was there an organization of the Nevada Central before the tttil to its Ntock was acquired by the Union Pacific t — A. Oh, yc6; it w* owned here in New York. (J, Who was its president 1 — A. I do not know. y. Do you know any of the directors that were then in the organixft- *»>« f — A. Yes; the directors or l)oud\ioU\eTs aT« v*t^ -seUfeciown neopT ^rp/n jwmf Yolk. CHARLES FRANCIS ADAM»^. 53 Mr. John F. Dillon. Messrs. Pbelps, Stokes & Co. ? The. Witness. Yes ; they supplied the capital to build it. Q. Where does the transaction appear in the books of the Union Pa- cific Company — ^in the investment account! — A. In the investment account, undoubtedly. Q. In what year I — A. I should say it would probably be about 1882. The reports will show. Q. What was bought at the time the purchase was made ! — A. The stock. Q. No bonds I — A. The income bonds were boup;ht. The report will show. Q. Did you make your investigation in regard to the circumstances under which this interest was acquired, or did you simply make a stud^^ of the road t — A. I never made what you would call a thorough investi- gation. I found the road in our possession, and I asked why in the world we had it; and afterwards, in California, I met the parties who had been engaged in the transaction and inquired into the history of the thing. Q. Please tell us whom you mett — A. I met the man who sold the road to us, a Mr. Brydges. Q. What is his first name! — A. Lyman Brydges. I met him and many others. He always insisted we had made a very good purchase. Oommissioner Anderson. They always do ! The Witness. Yes, I have been there. Q. Who QiCted for the Union Pacific in the negotiations with Mr. Brydges? — A. 8. H. H. Clark, its general manager. Q. He is living now! — A. Yes ; he is first vice president aud^general manager of the Missouri Pacific Railroad. Mr. Dillon was presiilent of the Union Pacific. Mr. Clark and Mr. Brydges met and made this bar- gain, and Mr. Dillon confirmed it. Whether it was in writing or not I do not know. Q. Was it ever reported to your board, or does it appear on your minutes in any place ! — A. I have never looked to see. It was all done befoi'e I became president of the company. Q. Do you know the terms of the contract ! — A. I do not. THE COST OF THE UNION PAOU'IC. Q. You do not know what the Union Pacific gave for this property ! — A. Yes ; our books show that. I did know it. When I closed the thing out^ the Nevada Central owed the Union Pacific about $565,000, if I Recollect right. Q. Does that include the purchase price! — A. It includes the whole investment account. Q. That account included all payments on bonds ! — A. All payments on everything. Q. Does the account show any return from the Nevada Central at all f — ^A. I think the Nevada Central — certainly when I had it — never did much more than pay its operating expenses. Tbat is, the Ne- vada Central was one of those roads which, in mining countries, are so dangerous. Any one who has had anything to do with them knows all about it. As tlie espression goes, '' The mines peter out." We have had several such cases, where roads for the time earned enormously. The most brUliaiit and noted case in the history of mining and railroads is the ease of tiie Oomstook lode. The Virginia and Truokee Railroad was for many years one of the most valuable roads in the United States, and then 54 U. S. PACIFIC RAILWAY COMMISSION. suddenly the Comstock lode ceased to pay. We have had iiutuerous simi- lar cases in our history. The mining railroads are a species of railroad gambling. That is, if you strike a mining camp which holds out it is the most profitable form of railroad there is ; and then, again, if the mines are worked out you are left with your railroad on your hands. Q. You say Mr. Dillon confirmed this contract I — ^A. He did. Q. The arrangement then was made before Mr. Gould became presi- dent of the road ! — A. Mr. Gould never was president of the Union Pacific. Q. Or director! — A. He was director at that time. Q. Do you know whether he had any connection with the action taken in confirming the contract I — A. Their oflfices were adjoining and I do not doubt that Mr. Dillon spoke of it to Mr. Gould when the ac- tion was taken ; but I do not think he had anything to do with it. Mr. Gould had great confidence in Mr. Clark. TO WHOM THE PURCHASE MONEY WENT. Q. Do you know who the stockholders were of the branches at that time f — A. I know all the money went to California. Commissioner Andebson. That is a big place. The Witness. Mr. Brydges had it. Q. He did not own all the stock and bonds? — A. No; he represented those who did, and' he got a very large portion of the money paid. It was a good bargain that he made. I made as thorough ^an investiga- tion as I couhl of that matter, and I became satisfied that the whole amount of money had been honestly paid over. Q. What I want to ask you is whether you have any information as to who was benelitfed by it ! — A. Yes, I have this information : that they were i)arties not in any way connected with the Union Pacific. I conld not find that a dollar of it ever went to any one connected with the Union Pacific. I made very careful inquiry as to that. Q. 1^0 director, or trustee, or large stockholder of the Union Pa- cific ? — A. Not one dollar ; I am satisfied of that. Q. When did you report to the directors that the Nevada Central had better be gi^veu up ! — A. At the first meeting after I became president. In September, 1884, 1 made a report and recommended that we stop paying the coupons. Q. Since that time you have had no financial connection with the investment ? — A. No financial connection ; I am still president of the Nevada Central Company, I believe ; we have never paid a dollar on account of it since. Q. Will you take up any other of these branches with which yon have made yourself familiar f — A. There are a good many of them, and you might read the list ; I will tell you all I know about any of them, as you name them. Commissioner Anderson. Perhaps that is just as good a way. The Witness. You will find the list a long one. Commissioner Anderson. I know ; but I believe you yourself con- sidered this one of the most important subjects of our investigation, and I do myself. The Witness. Oh, yes. I have given a good deal of attention to our branch system. Commissioner Andebson. Take the first one : The Central Branch of the Union Pacific Bailroad Company — Atchison, Colorado and Pa- cific Railroad Company. CHABLES FRANCIS ADAMS. 55 The Witness. That is one of them; I can inform you as to the Cen- tral Branch. Q. By whom is that road operated I — A. That road is operated by the Missonri Pacific^ under a lease from the Union Pacific to the Mis- souri Pacific. ME. GOULD'S PLAN OF DEVELOPMENT. Q. Where does it connect with the Union Pacific!— A. It does not connect with the Union Pacific. Tbis will require a little explanation, for our branch system is a large subject. I can explain it better with the aid of a map. At the time Mr. Gould was the principal stockholder, and, in fact, the directing mind in the affairs of the Union Pacific, the com- pany was not nearly as much developed as it is now ; and Mr. Gould had a large scheme for the railroad development of that country. His theory, which I think was entirely a correct theory for that time, was for the Union Pacific to be developed into a complete system, starting from Missouri Biver points between Kansas City and Omaha, and serving the country west of the river, bringing the business of all that region to Omaha, Saint Joseph, Atchison, Leavenworth, and Kansas City, and there delivering it to the roads running east, just as the roads west of Chicago deliver to the roads that run east from Chicago. It was a large scheme. You can easily see the whole plan of it, and how he intended to work it out, but he afterwards got interested in other things and gave it up. In carrying out this plan he proposed to have the Union Pacific acquire by purchase, or development, or otherwise, various roads west of the Missouri ; among these was a road called the Central Branch of the Union Pacific; it was a part of the original Pa- cific Bailroad scheme provided for by Congress in the charters of 1862 ; the first 100 miles oYit were subsidized by the Government, and in so far is a part of the matter which is referred to you under the act of Congress. The road ran from the town of Atchison in a westerly (lirec- tioQ through the northern part of the State of Kansas. It had been taken up as an enterprise by certain interests, and they had built ex- tensions, which were not subsidized by the Government. These exten- Bions threatened to interfere with Mr. Gould's plan of development. They had been bonded and stocked at a very low rate, and in 1880 they were feeding the Central Branch. THE CENTRAL BRANCH, UNION PACIFIC. Q. These extensions were feeding the Central Branch? — A. They -were, and are to this day feeding the Central Branch. The Jewell Ck>unty road and others are extensions of the Central Branch. Mr. Gould entered into negotiations with the parties controlling them. Finally he bought the Central Branch stock on account of the Union Pacific. The stock of the 100 miles of the Central Branch Bailroad rep- resented also the investment in the additional lines which had been extended farther west. His intention was ultimately to connect that line down, making it a part of the Union Pacific system. The stock was bought with that view. 1 do not know in what year. Q. Do I understand" that this Central Branch is between what used to be the Kansas Pacific and the old Union Pacific? — A. It runs be tween the two, in the interim in g territory. Q, Where does it connect with the Missouri Pacific! — A. It now con- iieots with the Missouri Pacific at Atchison. Q. When was the purchase effected by the Union Pacific ? — A. 1 can- D. S. PACIFrc RAILWAY CilSrMISSlON. ekX give yoii tliu csact ilato. ll han osciipci) tiiv memory, ll Ik stnt^il ill the i-eport of 1884, 1 think. Q. nave you a copy of tbe lease to the Misaouri Paoillot — A. \\\- have it iu oar office in Boston. Q. That 18, made by tbe Central BraniiU leasiii^r itself to the Missmiri Pacificf— A. I should have to look at tlio lease to see exactly Iiow ll. WHS made. I made that lease. Q. Is your interestasserted through the stock ! — A, Stock I We own the stock. We are the owners of the road. Q. Do you remember the amount of tlio bonded indebtedness f — A. It is stated in the reports. I could not tell you from memory. OHAEACTEE OF BUBINEBS DONE. Q. In reg.ird to tbe general business done on that road, what is tbe character of it t — A. A(fricnltnral business ; it is an agricultural road Q. lias that road pai<i 1 — A. Very profitably. Q. Please give ns your best judgment as to its present prospects and fnture. — A. 1 think it is a valuable proi>erty — mora valuable to a road rnnniug east from Atchison than lo the Uuion Pacific, but It is a very valuable railroad property. LKAKB OP CENTEAI. BEANOH TO BUS30UBI PAOIFIO. Q. IIow long is the lease to the Missouri Pacillcf — A. The present lease has a little over twenty-three years to run, Q, What are in general Iho terms t — A. The ternitu are that the Mia- souri Pacific is to operate the road, and that ail the note'iruings arclo be paid over to the Union Pacitle; the inducem^t for the Missouri Pacific, of course, being the control of the tntflic ; that is, it can oarry the traffic from Atchison east. Q. Is the Central Branch exposed to any immediate competrtiou of a peculiar nature f — A. Yes; the competitioD in that region is continually increasing. Whether it exceeds the development of the coantry I can- not say. Q. In regard to the transaction or the purchase itself, have yon made that a subject of personal in^'estigation I — A. To a certain extent, It happened long before I took charge. I took it as an accomplished (iwt, but I have examined into it. Q. Have you examined to find out who the parties were who were in- terested in the sale to the Union Pacific t — A. Ves, Q, Who were tbey! — A. Certain parties in Boston and elsewhere who owned the Central Branch. Q. Please give us their names as far as you remember. — A. Mr. Pom- eroy was one. He was suffering from paralysis and has since died. He citme to see me about it. Q. Were any of the parties who were interested in that sale in any manner connected with the Union Pacific or its affairs T — A. Xone whatever. Q. No director or officer ! — A. Not the slightest. Q. May they have been stockholders 1 — A. They may hnve been stockholders, but I know, in that case, tbey were not stockholders to any large extent. Mr. Pomeroy represented the Central Branch, and was president of it. Q. The whole of that transaction appears in your investment no- coitiit f~A. It does. CHARLES FEANCIS ADAMS. 57 Q. The date of the transfer of the securities and the amoaiit i)aid ? — A. I do not doubt it all appears. Q. As far as that payment is concerned, that I presume was also made in money by the Union Pacific? — A. I do not doubt it was. mCBEASE OP STOCK OF UNION PACIFIC. Q. Please state on what occasions the capital stock of the Union Pa- cific was increased. — A. The capital stock of the Union Pacific was in- creased twice. — It was increased at the time of the consolidation Q. The Kansas Pacific? — ^A. When the stock of the three companies were consolidated ; in 1880 ; that was when the consolidated company was formed. Q. After that consolidation, as I understand it, all the stock took the form and name of the Union Pacific Railway Company ? — A. The Union Pacific BskWway Company , the old company was the Union Pacific BailreMtd Company; it was consolidated into the Union Pacific Bailu^a^ Company. Q. The increase, if I remember right, was from about $36,000,000 to $50,000,000?— A. It was. Q. What was the subsequent action ? — A. Under some provision of the charter — I forget what ; it was before my time — they issued $10,000,- 000 stock. Q. At par? — A. At par; paid for, dollar for dollar. Q. That was subsequent to the consolidation ? — A. Yes. Q. Those were the only increases that you recall ? — ^A. Those are the only increases that have ever taken place ; So far as I can at this mo- ment recall, all the acquisitions of the Union Pacific were made with money ; I do not think we ever paid for anything in securities. NEW BOND ISSUES OF CENTRAL BRANCH. Q. Has there been any new issue on this Central Branch since the Union Pacific acquired its title ? — A. There have been some bonds of the Atchison and Colorado, I think ; the extensions, which have been is- sued at so much a mile ; for instance, when 50 miles of road were built it was mortgaged ; under the mortgage you would have the right to issue 80 many bonds ; it was increasing the general lien of that particular mortgage. Q. So that if the construction was unprofitable it might affect your interest as a stockholder? — A. Yes; like any other. Siiice I have been president I think I sold some $300,000 or $400,000 of these bonds, if I recollect right. Q. The Union Pacific itself would have no interest in those bonds? — A. They were in the treasury of the Union Pacific Company. This road bad paid them over to the Union Pacific for the construction of these ex- tensions, and they were a part of the assets in our treasury. The Union Pacific constructed the extensions, and received for so doing the stock and bonds. Q. Was that contract made in the same way as by your construction department ? — A. All of them. Q. Do yon know who the contractors were 1f — A. No ; but so far as I know or have been able to trace there has never been a suspicion of a oonstmction company in the Union Pacific. All has been done as fairly and in ^s strajgbtforward a manner as it could be. 58 I'. S, PACIFIC RAILWAY I COMMISSI OS. <j. Tliese 1>i)ii<lM Llial liitt Union I'ii<:ili<' liol.l \vi<tv mailed b.v tlie Vet tral Briiii<;)i It) piif uieoL for this coiiHtr nation I — A. They wuru. Q. Are these still owned by the Uuiou FaciBcf — A. No; I barL 8olU ihem. I sold them iu order to pay the debts of the Uuiou Pacilia, Tiiey wereussets; quick usaets in our treasury; and I sold them to ]iay off our debts. Q. All that wdlappeariu your iiivestaientaccountT — A. Yes; it baf beiMi reported from year lo yesr in groat detail. COUNCIL BLUFFS STREET HAILWAY. Q. The next braoeh that I find mentioned is the Council BlaQs Street Railway Coinpauy. What is that t — A. That is a littlo road r from our union passenger station iu Council Bluffs up to the town dS Ooiiiioit Bias's. I do not know under what circumstances thiit camtt into our hands. I found it there, like mauy other things which found their way or which bad beeu taken iuto tbe Union Pacific for varioiul rooeona and considerations during the preTiou.i r(!giuie. 1 have I encaged since in seeing how it coald be utilized. ij. It is a street railway f — A. It in. Q, Howlougt — A. Only a mile or «o. Q, It is a small matter! — A. A very small matter, indeed ; it is i small a matter that I have repeatedly turned it over to my subordia alcH lo advise me as to what course should be pursued about it. (j. Have you examined at all as to when that interest was acquired f— A. Ponfonally, I have not. I have, through my assistantfi. 1 Iiavfl made a careful examination through them. I think Mr. liSue was sent oat on that matter. Q, Then you refer us to Mr, Lane as to more definite iuformatiou ia regard to tbatt — A. Yes; Mr. G. M. Lane, who is one of the nssistnuU fu my office. I have giveu some attention to it, but it is all mlhof vflgne in my mind and I turned it over to others. Q. Have yon any definilecouclusion yourself as to whether the fa tun operation of that road will pay or not t — A. That is a matter that J^ have beeu giving some attention to lately, 1 think it will pay. I^ hope and plan ia, in connection with the new bridge that we built ^ Umaha, to have that become a part of the consolidated stn-ot railway system of Council Bluffs and Omaha, and we will get rid of our tnte^ est iu that way. We would sell iter dispose of it to a consolidate outride comimny, "A GOOD TnmO TO SELL." ti. It is a good thing to sellt — A. A good thing to sell; very, TherQ are mauy things in a corporation as large as the Union I'ucifle that it is desirable to dispose of when you can to advantage. Things change^ and what seem to be at one time important to the general Kcheme be< conm alU'rwanls unimportant. (i. Can you imagine exactly what importance this particular streel railway company ever appeared to have to the Union I'aciflct — A. 1 think wo wanted to get that frauchiae. There was some purpose — U get up iuto town. ^ Mr. Lank It was to connect the Uuiou Dejwt with the town. The Witness. Yes, the Union Depot is quite a distance from I cowo. CHARLES FRANCIS ADAMS. 59 , DENVER, MARSHALL AND BOULDER RAILWAY. Q. What is the Denver, Marshall and Bonlder Eailway Company ? — A. That is a road which rans from Denver to some coal mines at Mar- shall. If I recollect right, that was bronght into the system, or we owned some of the mortgage bonds and I found it there. It wa^ consid- ered desirable at that time to have the Union Pacific have a controll- ing interest in the property. That was before I took charge. Since I took charge I have had the concern reorganized and straightened out, and the r^ikd now connects the Union Pacific with Boulder and with the Marshall mines. We do a large coal business there. Q. What is the length froni Denver to Boulder t — A. I think it is 30 miles. Q. Is it a narrow-gauge road ! — A. !N"o, standard gauge. Q. What does the company own besides its track ; any equipment t — A. Yes, the company owns whatever the report in your hand says. I do not remember what it is. Q, I think the report of 1885 does not give any details. — ^A. The re- port of 1886 will probably give you the information. It is only within this year that the line has been operated. Q. Do you know anything about the circumstances under which the stock of that company and what bonds you had were acquired ? — A. I did know all about them^ but I could not recall them at this minute ; I sfaonld have to reft^esh my memory. Q. Do you know who the parties were that were interested in the sale of it ? — A. Yes, I did a large portion of the negotiation in this case my- self. Q. X)f what ! — A. The negotiations. Q. For the purchase of the stock and bonds f — A. Yes. Q. Who was the owner! — A. The road was one in which we had an interest, and in order to straighten the thing out and consolidate it and get it into shai>e we bought np the bonds. I think we paid for them about 35 cents on the dollar of the original investment. That is my recollection. Q. Thirty-five cents on the par value of the bonds f — A. Yes. Q. You say 35 cents on the cost of the original investment ? — A. On the par value of the bonds. Then we extinguished them and consoli- dated and reorganized the road. The person with whom I dealt was a Mr. Wolcott, a lawyer in Denver, and he told me that he represented various holders, some living in Boston and some in New York. None of them had anything to do with the Union Pacific. It was a perfectly fair trade, and I thought we did tolerably well on it. THE LEAVENWORTH, TOPEKA AND SOUTHWESTERN. Q. The next company I find among those which are not directly con- nected with the system is the Leavenworth, Topeka and Southwestern Railway Company. — A. That was a company winch was formed to build a road from Leavenworth to Topeka. For various reasons it was deemed desirable by the Atchison company and ourselves, Mr. Dillon then rep- resenting the Union Pacific, to control the property. It ran between our lines. The two companies entered into an agreement and bought it, and it has been operated under joint management ever since. Q. When was the purchase made ? — A. That purchase, I think, was made in the year 1882 or 1883, 1882 probably. Q, Who owned the stock of the company before tbe X5mo\i "P^kfcV&fc . PACIFIC RAILWAY COMMISSION. fmrcliagcd ii! — A. I'liey wei-e locul iiarlies in Katisms. I turitvi Ihn uuuieor till! purty rcpresoDting tUtiotLorcoinpiiny. I knew it, buttbu aiTUugement wa8 one which Mr. Dillon mtide iu couneottou witll tbu Atchison people. They had Dothin^ to do with the I'liion Pocillc in aiiy form. That I can say at oneo. (}. Ifyoudoiiutlcnow who tliey were,how eauyou tdl I — A. Iteuause I did know. I cannot recall the names. It was a good while ago. I was not then connected with tlie Union Paciflc, and it made no iinprea- BioQ on mv mind. Q. There were $550,000 stock 1—A. Yes. Q. Wliat does that road <InT — A. It gives access to Topelca (rota l^eavcn worth. Q. Ilnw many miles! — A. It raii&t be about 50 milea — not far fVom 60 miles. Q. What in th» character of the business done ou the rooil I — A. It is a local road. It runs through au agricultural country. It has not been a profitable road, but Topeka in the e^pital of the Stale, and Leaven- worth ia onoof theprincipiU towns, !t isaroad we did not want there, and we tbougbt it desirable to control it in the interest of the two prop- erties. Q. Has it paid operating expeust^s! — A. I think it has. Q. Anything more! — A. No, very little, if anytliinginore. Thatisa rond Ihe ])urchase of which was somewhat forced up<m us. "FORCED" UPON THE UNION PACIFIC. Q. What do you mean by "forced" upon you 1 — A. In this wa)' — you will nnderntand it perfectly ■ It was a road lying in this tt*rritory which we supplied or operated in, and it was poamble that some of the lines ruuntiig west from Chicago might pick it np to our injury. Any one familiar with railroads knows how it is. Hero was this bit of a rail- road, bankrupt and irresponsible, and the flrst tiling we and rhe Atclii- eon felt was that it might fall into the bands of some interest hostile to us and be used to our injury ; and therefore it was bought as a meas- ure of protection. Q. Vou do not remember the price [>aid for the stock ! — A. No, I do not. I do not think Huything wna paid for the stock. Aly impression is we bought the bonds of the road, and we took tfau stock as an inci- dent. That is my impression, but it would appear in the books. Q. Yon do not remember the cost of the road at first T — A. No; that was before my time, like many other things tJiat were purchased before my time. Q. I find iu your supplemental income account for 1881, "Advances' for account of the I^ai'euworth, Topeka and Bouthweslem Kailroa*]. Company coupons iu 188^, written off, J27,tiOI)." What is thatt — A. 1 suppose Mr. Mink can esplnin it. I supiioso it means written off to profit and loss. We regarded it as a bud debt, and then-fore passed it to our income account, like any other bad delit. Q. Do yon still pay the coupons T — A. We do. Q. Do you remember whether your company owns them all! — A. It is ajoint guurantee of ours and the Atchison. We each pay half. Q. What projiortion does the company holdt — A. I do not think wo own any. We owu none of the bonds. Q. I understood your j)rior statement to be that you ucqiiirccl the tJDe by hnyiug the bonds, and the stock was thrown in f — A. No, no. Letmeaiie, bow was Ihatf We g\iarivi\teei\ t\\6 \>oim\?. w »*>nwtbUMg of CHARLES PKANCIS ADAMS. 61 that sort. Wo pat oar gaarantee oa tho bonds ; some arrangement of that kind. The stock has no value. Q. Yoa bought the property, whatever it was, subject to the bonds? — A. Yes; and pnt our guarantee upon them. Mr. Lane. The amount of the bonds on tho road is $1,380,000. Q. And of that the Union Pacific guaranteed half, and the Atchison, Topeka and Santa F6 the other half! — A. That is my recollection. My recollection is somewhat vague about all of these things, for they were done before I took charge. I afterward looked them up, and then they passed out of my mind after I had made my examination, which, of coarse, had to be done through others. Q. What is your judgment in regard to the future of this company f Is it ever likely to earn over operating expenses enough to pay interest on the bonds?— A. My impression would be to-day that the situation is 60 changed in that region that the possession of that road is of no im- portance to the Union Pacific. Q. And as far as paying for itself is concerned, what is your judg- ment ? — A. I am not clear about that. Ever since I have been in there has been a sort of languid negotiation going on between the Atchison Company and the Union Pacific — we have several joint properties — as to working them. How it would be if we owned it entirely, or Atchi- son owned it, I cannot say. But I should think it would be important to one or the other. MANHATTAN, ALMA AND BURLINGAME RAILWAY. Q. The next item is the Manhattan, Alma and Burlingame Bailway Company. What is that f— A That is a road running from Manhattan on the Kansas Pacific, and that again is a connection that we own jointly with the Atchison road. Q. What road is it ; how many miles f — A. A. little road running from Manhattan to Burlingame. I think it is some 40 to 50 miles. Mr. Lane. Fifty-six miles. The Witness. Burlingame is a point on the Atchison road and Man- hattan is a point on our road; and this road was considered a necessity, or what not, and it was built between the two ; and in order to prevent onr quarreling over it, it was agreed that it should be built on joint ac- count and jointly owned and jointly operated; and it has been so from that day to this. Q. Your company owns half of the stock? — A. Our company owns half and th€^ Atchison company owns half. Q. Nearly half; $418,650 out of a total of $1,000,000. There must be some small holding outside of the two companies! — A. There was some township stock, unless the towns sold them; it has no value. Q. What is the character of that road ! — A. It was an agricultural rosid, running through a poor country, if I recollect rightly; I have been over it. That is one of the roads that there has always been this feeble negotiation going on about between the Atchison and ourselves as to \yhether we should take that, and we take the Leavenworth, Topeka and Sonthwestern, and they take this. Q. Does it pay the interest on its bonds! — A. I think not. Q. Does it pay operating expenses ! — A. I think so. You are now getting into a class of roads where, when you say ^^ Do they pay interest CD tbeir bonds?" the answer is twotbld. It may be that they do not do it directlj, and yet they may pay a very large interest indirectiy \>^ ^^Xmi^- fim they bring to our Uoe. This forms quite an imijK>Ttai^t ^V9^ S. TAririC liAll.WAY fUMMlH^lN.N, ^H with our tbroiigli line, Tor it runs away ap to tlie Uniou rit(;ill(-- proper division. It cunnevtrt witli our line nt Alaiihattan. All tlieee ronds, ex- cept the central braneli, coiiitect wilh our iniiiD liues. Q. YoH say it fonneota with the Uiiiou PaciBc 1 — A. Wilh tlj« Kan- sas division of the Union PaciQc ; Mauhattan is quite a station on the Kansas Pauiflc division ; when you go over the road you will seii the intercouueciion in these things more clearly ; that road is operatird by the Atchison. Q. When was this purchase made f — A. That was before my tiiw. Q. Uavoyou examined into the eircumstances of the purchiise at all 1 — A. Somewhat. Q. It was a coDStructiOD, rathpr; eoustructed Jointly by the [Intun radlio and Atchison companies T — A. Yes. Q. Hare yoa ever seen the construction conlractsT — A. ^'o; 1 know nothing abont them. Q. Do you know who wasintoreMt^-diu thuissueoftlie stock or bondn iir the uiaiinor in which it was paidi — A. No ; I do not believe anyone a Q, Somebody must have constructed the road aud wceived the stock ami bonds T — A. No ; it was done in this way, aa I understand it : The road wiiH constructed by the conlj-actor ; it had its own organization, the Manliattan, Alma and Burlingame organization; the contract orre- ceived the stock and bonds of the company, and then he turned them over in a Inmp to the other two companies, who divided them between Ihem and paid for the road ; they paid for the road aud tiiey received the slot^kand bonds, which went into their treasuries; that has been the uniform practice, so far as I know, with the Union Pacillc. Q. But who tho persons wore who were interested in the construc- tion you caunot recuilectf— A. Probably no one but the contractor, and his contract is on file in our olHct>, Q, And Mr. Mink can tell us about this I— A. I have no doubt of it. They are probably in the hands of the Atchison company or in thuso of our company at Omaha. Q. In reganl to the paymont of the interest on the bonds I presume the Onion Pacific pays lialfand the Aliishison pays the other U;ilf I — A. Uow is that! Mr. liANE. We never disposed of our Imnds. The WiTNKss. They are in our treasury. Q. You have them in your treasury I — A. Yes. Q. Ito you not kwp the account, or is it the same as if ynu paid out the interest and it comes back on the bonds t — A. Exactly the same They are in our treasury, Q. As I nntlerstand it the charge for interest ap|iear<< a.t a charge for interest and then it appears in your investment returns t — A. Then it' appears in our receipts — our general income. Q. You do not lose anything byitt — A. We do not lose anything. It is out of one pocket and into the other; it is a book-keeping accoURt, that is all; It simply makes it a branch of our road. MANBATJ'AN AND BLUB VALLEY BA.U,WAT. (J. The next I liiid is the Manhattan and Blue Valley Koad i— A. Tho Manhattan and iSlue Yaliey is a very important link in our system. It iitart« fVum Manhattan, on the Kansas I'aclflc, and runs up the Blue Jtirer lo a Jaavtioa with theOuiaba and ItepaWinan Valley, and so con- aeete the Kansas J*acifiG division wUb U\c Cmon Y-Awftv. ft:\v\w.w\', (wiiv CHARLES FRANCIS ADAMS. 63 sequently it is a throagb line between the two divisions. Two years ago I found, on inquiry, that for the purpose of carrying the company's material between the Kansas division and the Union Pacific or Ne- braska division, we paid aboat $40,000 a year freight money to the Mis- souri Pacific, at the regnlar charges; -and I was impressed with the necessity of having a connection of our own \ this is the connecting link. Q. How many miles long is it! — A. It is 40 miles long. Q. Between what points does it operate? — ^A. It runs from Manhat- tan to Garrison. Q. When was this purchase made f — A. It was not purchased ; wo boiit it. It was built since I came in; it was built under my orders. Q. The language of your report is "the Union Pacific purchased its interest in the stock." — ^A. Oh, yes; when I became president there was a bit of a road built which had been abandoned. That was done when Mr. Dillon was president, and it had not been operated. It ran from Manhattan 10 or 12 miles up the Blue, and we have since continued it 28 miles farther to the point of connection. Q. Does it pay interest on its bonds! — A. It does a very large busi- ness. Q. How large a business ! — A. It has only been running three or four months, but it has carried an enormous tonnage during that time. I cannot tell you how large. Q. This report of 1885 is before it was complete f — A. Yes ; and it is only mentioned for three months, I think, in the 1886 report. NATURE OF ITS BUSINESS. Q. What is the nature of the business ! — A. Through business and local business, both. A freight business between our Union Pacific di- vision and Kansas division. There is also a large business between the towns. It has brought a profit to us in a way which you gentlemen will come across very frequently. It is reported in the returns for these 40 miles only, but all of that business we haul for three or four hun- dred miles beyond, and we would not have it at all, except for these 40 miles. Q. Is it of more benefit east or west f — A. This road runs north and south. Q. Is it of benefit to the points on the Union Pacific that lie farther to the west or farther to the east f — ^A. It is farther to the east mainly that it is of benefit-. It is between Kansas City and Omaha that it con nects. Q. What is your idea of the desirability of the branch f — A. It is in- dispensable. To part with it would be almost like cutting oS a vital member. Q. A connecting link ? — A. That is it exactly. It was the missing link until we built it. THE NEVADA CENTRAL. Q. The next road is the Nevada Central, and that you have already explained I — A. Yes. In order to complete the line of inquiry I wiil now say that the Manhattan and Blue Valley was built in the regular way that we built roads. A contract was made, the stock and bonds were put in our treasury, and we paid cash. Q. Aod bant ander your supervision 1 — ^A. Entirely. T\i«A.\%,l^x- soDsUy do not know any thing about it ; but I have impVicvt co\iM«iV»> U. H. rACIlMC ItAll.WAV COMMIMaiOM. ill Mr. Bliciiensderfer, our tiliief rngiaeer. I lielieve biin to bo one of the most Iioncst men on the fnco of the earth, ancl my only regret is that tils ngc inenpARJ tales him for more uctive work. OMAHA BELT RAILWAY. Q. The im\t is the Ooinha Belt Kailway Coiuimtiyr— A. That tlot^'x not now belong to us. There is n history attached to that enterprise. We have Uot paid for it. CbiiiniisHionci' Andbbson. The statement of the report of 1885 is that all the aecuritics of the company, when issued, will be owned by the Cnion Pacific. Mr. Lane. Th»t is th» 1884 report. The 18S5 report gives the expla- nation. Tho Witness. It is explained in the 1885 report. I think the-Uaioa Paeific was rather dispossessed of that property. Q. Will yon please give tlie exphiuatiuu of this, so that it will appear on our miiiutesf — A. Certainly. Q. Uow was it that you eoased to huve iiiiy furtlu-r interest in this road i — A. It huppenud in this way : When I took charge of the Union Pacific IheUmahu Belt was upet oehemeufMr. S. II. 11. Clark, general mnnager uf the tJuiou Facifleut that time. Shortly after J took charge, Mr. Clark, who had been many years with the Union Paciflc, severed his couueutiou with it, and in doing so, he did uot like to lose control of the Omaha Belt Itailway, which was bis pet scheme. He thcrefom made an arrangement with Mr. Gould, of the Minsonrl Pacific, under which Mr. Oonid advnnced money to complete the Bolt line; and lean only say that by Moine arrangement, which it in unnecessary to go into, we found that the control of the Belt line had i>a8sed out of our hands into the hands of the Missouri Pacihe. Liligation followed ; it was not a friendly litigation; the roHuIt was that after a time we concluded it waa better to let the thing go ; so we made up our bill or account, bad a reference, and were repaid all the money which we paid in. The prop- erty iheu passed into the hands of the Missouri Pacific. Q. Then the Uuiou Pacific has received back all that it cost T — 4. Yes; it has been Netlletl within a fortnight. The award has been made by a referee and the niouey paid to ns. SAINT JOSEPH iHD WE8TKRN. Q. State HI regard to the Saint Joseph and Western liailroiul Com- pany.— A. That is now a pitrt uf the Saint Jo and Graud Island. That WHS one of the concerns like the Central Branch. It was a part of Mr. Gould's groat scheme of a niilroad system went of the Missoari. In order to carry it out, they obtuiue<l possession of the Hocurities of this Saint Joseph and Western Company, They were i)icked np at very low prices in tlie market, as they could buy Iheui. Q, When were the bonds and stocks bought T — A. They were picked up from time to time. i}. Bought before yoiiciime in? — A. Bought before I came in. When I came in, I found that wo had in our Ireasury a large number uf thoee tboods, which were tlien at a nominal price, and there was a quarrel or litigation in jirogress. The road hail been in the hands of a receiver, aod there wa«« great ti-ouble. One of my elTorta at once was to avaii oanelvoB of tJiat security, which seemed to be one that could be worked ap to tutvaittage. I I'orgut what the \wqAs wctc wWwi?, Vttv, but they WW ahoat Ot) or 70, or along there, CHA£LKS FRANCIS ADAMS. G5 Q. Where is this road located t— A. From Saint Joseph west. Q. How many milesf— A. Two hundred and fifty-two. It runs from Saint Joseph to Hastings and from Hastings to Grand Island, where it connects with the Union Pacific. NATURE OF BUSINESS. Q. What is the chief characteristic of its business! — A. Agricultural road. Q. Have you investigated to any degree the circumstances connected with the purchase of the stock and bonds ? — A. Oh^ yes ; I have been through thatvery thoroughly. I reorganized the concern. It was done since I became president. Q. I mean in the first instance! — ^A. Yes; I went through it as far as finr as I could. It was necessary for my purpose. Q. Do you know who the parties were who were in negotiation with the Union Pacific !— A. Mainly Mr. Dillon and Mr. Gould. They picked the stock up on account of the Union Pacific, and the bonds also, in open market. The prices are all stated. Q. The prices are all in your investment account! — A. Yes; I have been through them two or three times in the process of working up the reorganization, to find out what it costs us. Q. Those are the prices at which the Union Pacific (Company ))aid for themt — A. Yes. Q. Have you made any investigation to ascertain whether the prices charged in the books are the prices actually paid for those stocks and bonds t — A. No, I have not ; but I think there can be no question about it. The securities were bought in op^n market, and were quoted all the time ; the prices were low. Q. So that you could compare the prices charged in the books with the market prices at the same date f — ^A. Yes ; and I may as well now say, in jnstice to these gentlemen, that, so far as my observation in the com- pany's afiairs is concerned, I never saw anything of that sort in their deal- ings with it. They always dealt with the company fairly. In regard to any transaction in the open market, I cannot conceive it possible, from what I have seen, that it could be done otherwise. These things were all done in the board of direction, with full understanding of all the members of the board. I wish to say at once, and am glad of the opportunity of saying it, that I think Mr. Dillon, who mainly dealt with these things, had an individual feeling about the Union Pacific which always caused him to deal as closely for the Union Pacific as he would for himself. I never found anything that would lead me to be- lieve that he would have been concerned in making any small personal profit out of it. On the contrary, it was all the other way. Q. Does this road pay I — A. Yes ; we have reorganized the company and made a good deal of money out of it. We have sold all our bonds, and they are now quoted at something like 109 or 110. It is a good property. Q. It pays more than the interest on its bonds?— A. Yes. Q. Yon still hold the stock I — A. Y^es ; because that represents the control. I no longer consider the control so important as it was, bo- eaase the changes in that territory, through other companies coming in, have quite brought to an end Mr. Gould's plan of one railroad sys- tem. Q. What is its particular advantage to the Union Pacific t—-x\. len- der the recent chang:e8 in the last two years, they are verj tn1iVu\v^» V\» /iregiAe Unioa Paci6c a direct connection with the Bamt 3oiMH\ii\\. S P M tJ. 8. J'ACIFIC BAILWAY COMMISSION. I'lTIUBE VAiUB OF THE ROAD, Q, lu regard to its future vuliio lo the company, what is your judg- ment T— A. X think it ia probable that as a connecting link witli tbe Union Pacific, giviiigit entrance into tUat terrifory, it ia problematicaJ. We may have na east and west busiDess in coal, lumber, fuel, and prod- ucts coming down, which may make tbe counecLiou raloable, but that is Ji matter of the future. Q. nan it paid any dividend on tlie etockt — A. Itfaasnot; bntithaa paid all ita interest, and a surplus. Q. i)oeH it give you business applied to that portion of tbe road with which it conuecta so as to let you derivu a benefit from it t — A. That was the theory of the thing; butnp to this time there has been no such development as would make it of much value In rhiit way to us. (J. Your fut&ro interest in it would be solely in the hope of gutting a dividend on the stock 1 — A. Yes ; that and the iucidentAl benefit wbioh might accrue from ajoiut busineBS. It is an independent and self-sns- taiuing oompauy. That is what it now is, Q. The account of 1885 shows a deficit of $5,828 on the iDterest ac- count. Mr. Holmes. That was before the reorganization. The Witness. That was before tbe reorganisation. 1 know aiuce the reorganization there has been no deficit. It was llie first cigbt mouths alter the reorganization. SALINA, LINCOLN AND WESTERN RAILWAY. Q. The nest road is the Saliua, Liacoln and Western Railroad Com- pany t — A. That is a little road, built sime I have been president, run- ning fVom Saliua, on the Kansas Pacific, in a northwesterly dirtwtioD, The construction of it was forced upon lis. It is a rich country, along the Salina Biver— a very fertile country— from which the Kansas Va- cific drew a great deal of its business. We delayed building as long aa we could ; but one day a competing company threw construction par- ties in there and we found we were going to have this competing line running into our territory, from which we drew business, and we hwl^ therefore to make an arrangement, which we did, and took the road and rebuilt it. It is a road 50 miles long, and we are going to extend it into the country beyond. Q. That road was built in the same way you h.ave described before— by the construction department t— A. Exactly; we built it and took all the bonds and stock, which arc now in our treasury. Xo, I am mis- taken ; they are not in our treasury ; they have been turned into a troat for the greater security of the mortgage holders of tbe Kansas Pacifla road, Including the Government. ^^M Q. Uowlong hasthat road been in operation f— A, About six inonl It was put in operation laat October. tJ. riow many miles long is it t— A. Fifty, I think, or 38. Q. IIow much was the price per milo f— A. About $12,000 to $14 00* a mile. Wo can tell very nearly from the cost per mile whether a road is bnilt properly in that country. Q. That includes the land, grading, sleeperH, and track t — A. EveiT' thing — station, buildings, an<l everything. Q. Any c(iuipmeutT— A. No; it has no equipment itself. The Kan- «as PaeiBc supplies the eiiuipmenl. Q. Fourteen thodsiiml dollars pur in\\e*. — A.. X«a, \i\ w\ o^\\"?v'wq *«» coaatry foil can Imilfl a sufficiency good toaA ai %V\,viW\ ijme «a CHABLES FBANCIS ADAMS. 67 Q. Yoa have no rock excavation f — ^A. No ; and not mach bridging, nor very heavy fills or cats. It is an average road; sufficiently good to bring the business oat. SOUTH PARK AND LEADVILLE SHORT LINE. Q. Explain aboat the South Park and Leadville Short Line Bailroad Company. — A. That is an unfortunate road. It was a spur road, a branch of the Denver and South Park to the London mines — Mr. George R. Blanchard's mines — which gave us a good deal of business ; but, like many ether mines, these came to grief. It was a little branch, lying around loose, and I think when I was out there I bought it for $8,000, including a locomotive and some cars. Mr. liii^. Four thousand four hundred and ninety dollars. The Witness. It was an $8,000 note, which I bought for $4,490, and I got the rolling stock. -We substantially got the consideration in the equipment. It was a small affair. If I recollect right, we bought a judgment against the property. • Q. Ton say you substantially got the consideration in the equip- ment f«— A. I think so. If you are going on with me in this line you will be a good while at it. If it is convenient for you to adjourn I can come back. The inquiry will occupy a good deal of time, and I am afraid it wiU not be very intelligible. I am very glad to give you the informa- tion. afternoon session. CHABLES FBANCIS ADAMS, being further examined, testified as follows: The Witness. I want to say that my memory is refreshed in relation to that London, South Park and Leaidville Road. The way we came into possession was by foreclosure. When the road was building, we ad- vanced the company some secondhand rails and took a mortgage on the whole property, which afterwards we foreclosed. The transaction I have referred to was simply perfecting our title by buying up a judg- ment. It was a trifling thing, and I merely mention it now because it escaped my recollection this morning until after I had left the room. UTAH AND NEVADA RAILWAY. By Commissioner Anderson : Q. The next road is the Utah and iN'eva da Bailway Company. — A. That is a road from Salt Lake City that runs around the southern point of Salt Lake to a place called Garfield, and thence down to a point near Stockton. The main business of the road is to carry people from Salt Lake City down to the bathing places and points of amusement at Garfield. Stockton is a mining camp below. It was a road in which we acquired our interest, if I recollect right, before I had anything to do with the property. It is quite a remunerative road, so far as it goes. It is small, but it is a good piece of property. Q. Do you know anything of the circumstances attending the ac- qaisition of the title to the stock and bonds? — A. Absolutely nothing. Q. Do you know when it was acquired! — A. Only as it was printed in the reports before you. If I recollect right the road has been in our possession ten years — the stock and bonds or the ownership interest. U. 8. PACIFIC- RAILWAY COMMISSION. Oommissiouer Andkb^o?!. Tlie report of ISSi states tUat the properl was purchased in 1S81. Tlic Witness. Was it as recently as that ! I went over it, I remei ber, ju 1878. Q. Your flrstintcrestwasiu bonds, which wuieafterwanis exchanged for $438,000 stock out of a total issue of dSSSiSfiO. Dojou know any- thing of the circumstances of ttome of the slock being lidd by othM parties f — A. No, I do not know anything about it. That is a matter 1 never looked into. ' Q. Does the road pay dividends f — A. Yes. It is a good proiHtrtfJ (J. In your judgment, would it be for the tidvantuge of the Unir'" Pacific til retain the road ( — A. Yes. I do not know Uuw it would b in the point of view froju wliinh thi? ro;id w<t«i originally acquire) When that road was acquired there was a great speculative leelia) about mining properties and every thing else all down throagh thi country, way to Nevada — 1 mean to the western bouiidaiy of Nevadi It was supposed the road would be onniinued, and it wnsin uonnectU witlrthatroad anil with the id^a of its existence that the Nevada (Jo tral was acquired. The whole scheme wa^ one of tbost- schemes whii rise in speculative times. Commissioner A»dbrso.\. The net inoonio as returned for the yea from I88L to 1834 ran np to aliont $14,000, and I find no income I turned in 188o. The WriNBSS. I know we made a dividend the other day. i}. Of what per cent T— A. 1 forget, Mr. Lanb. l-'ifteen or 20 |>er cent. An accumulation. The WiTi^EBS. It was quite large. Uur books will sliow it. la sorry that I have not got the last report here for yon. Q. Thereportof 18301— A. Ve«. Commissioner AndbcsoN. We have it hen*. The Witness. That is merely the preliminary one. The fall ilod ment is not yet set up. It will be in the course of next week. Q. They are the returns lor 1885 which appear in the report t — i Yes ; we paid a dividend on Utah and Nevada the other day. I fopg the amonnt.of it. UTAH OEKTEAL RAILWAY. (J. The next mad is the Utah Central Railway Company. Will yi describe that!— A. The Utah Central is a property that was started I the Mormons, and long before I hart anything to do with the Union P cifle. It ran down from Salt Lake City from Ogden. It was then a tended to — I forget what point. Tlie Utah Soutborn was to KriM Our interest is simply a controlling interest, not a minority interest,!! the stock. We h.ive none of the bonds. Until the Denver and Rli Grande road came to Salt Lake the properly was very valuable snA made large returns. It had been extended some 100 or 150 odd milM, or something of that sort, to Frisco, in order to reach the Horn »i)T«l! mine. lu the way those things are apt to happen, the Denver and Btl Cmnde came in, and at the same time the Ilorn silver mines " pot«nd out" or caved in, and ceased to be productive. That wa« about tU time I took charge, and then the Utah Central oeased to be profltablft H. The total length at present is all given under the Utah Ccatrilli) from Ogden to Frisco, as :i80 miles T — A. Yes. ij. I notice in your return for 1885 that the not earnings fall ofl'froH $l.lUO,OiH} in ISS-J to $483,000 in 18*4.— i. T\\at >«&& owiug to the vHuaea I weutioiietl. One was tho commg'm oi CMnv^^S&oTi, " 'hetirij CHARLES FRANCIS ADAMS. 69 that line very seriously, and the other, the Horn silver mine, worth to the Union Pacific Railroad at least $1,000,000 a year in traffic, suddenly stopped producing. There was no reason to suppose that such a thing was going to occur. It is an illustration of the ups and downs of min- ing. Q. I notice that the bonded indebtedness is $4,000,000. — A. Yes ; that is not large for a road of the length. Q. In your judgment, is that .road able to earn operating expenses and interest on this bonded indebteduess ! — A. Oh, yes; it does now, even in these bad times. Q. The account of the operation for 1885 shows a deficit of $53,000. — A. There may have been a small deficit that year, but it about pays its interest charges now. NATUBE OF BUSINESS AND FUTURE PROSPECTS. Q. What is the character of the country through which that road goes f — A. The upper portion of it is agricultural, and then you get . into a region with some grazing interests, and then into a desert and mineral country. The portion down in Southern Utah is about as bad as Arizona ; but the country will fill up with population by degrees, and they will irrigate more and more, and that road will take care of itself. Q. You'are quite positive that 4ts future prospects will keep it free from being a burden ! — A. I think so. And if the Horn Silver Mine were to get into shape again and go on producing — and I believe there is still silver in it — it will become once more, in connection with the Union Pacific, an enormously valuable feeder, because we have a thou- sand miles haul from Ogden to Omaha. It was formerly an immensely valuable feeder to the Union Pacific. Q. Does the traffic that is derived from that road pass over any con- siderable portion of the parent road f — A. The whole of it, from one end to the other, from Ogden to Omaha. It was that road and one or two others which made the palmy days of the Union Pacific. Q. What is the distinction you draw between holding a majority inter- est and holding the control! — A. I should consider that a minority inter- est may be a controlling interest, if it is sufficiently large. For instance, two-fifths is generally a controlling interest. The other three-fifths will not combine against you. Q. You then act as president of that road f — A. I am president of that road ; but then it is managed by John Sharp. Q. Do you know anything of the circumstances under which the Union Pacific acquired its interest ? — A. No, I do not ; it was acquired long ago. Q. Back in 1872 ? — A. There are other members of the board of direc-^ tion that can tell you all about these things. Q. We would like to have their names. — A. Any of the old mem- bers, Mr. Atkins or Mr. Dillon or Mr. Fred. Ames. They can tell you all about these things. I know nothing about them. Q. State in regard to the present working of the road and its opera- tion.—A. It is worked by "Bishop" Sharf). I know nothing about it. Q. He could give us all the information we desire. — A. Oh, yes. He lives at Salt Ijake. Commissioner Andekson. Probably we shall live at Salt Lake for a while. The Witness. You will be there, and you can get it from Mm* U. 8. PACIFIC RAILWAY COMMISSION. WASATCH AND JOKDAN VALLEY EAILKOAD. Q, Tbe next IB the Wasatch aud Jordan Yiillo.v Kailroail CompaDy. — A. That was dosed out and wouud up; probably it baa been consoli- dated. Q. The statement is, the Union Pacific owns $10,000 of its bonds ; you do not know when it was acquired or antbing about itt — A. Xo; I should say probably it was an old branch; it has gone along on onr books ; there is no road of that name ; oh, Mr. Mink now t^lls me that since the report of last December we wrot« the account off ; it has dis- appeared from onr books. COLORADO CENTRAL BAILItOAD. Q. We pass to what you call the operated lines ; tbe first of these is the Colorado Central Railroad Company. — A. The Colorado Centra! is a road north of Denver, which Mr. Uotild, in the early days of the company, coustrncted through to Cheyenne in opposition to the Denver Pacific, which we did not control ; I know nothing about the early his- tory of that roa<l ; now it is a local road in Colorado and u very good property, indeed ; it is partly narrow gauge and partly standard gauge, and it furnishes a great deal of business on which we get a long haul ; that portion of Colorado has been developed very rapidly, indeed ; it is agricultural, and it is mineral, and it is grazing, and there are quarries there where we get large quantities of stone which we carry down into the prairie country below. Q. I notice that there are $4,701,000 of first-morlgage bonds, 7 per cent. — A. Yes. Q. What proportion of those bonds are owned by the company t — A. It is stated in the report ; I forget. My impression was they were nearly all owned by the company; $-1,097,000, Mr. Mink tella me. Nearly all of them. Q. la it your judgment that that road earns enough to pay operating expenses and interest on the bonded debt T — A. Decidedly. That rond, if I recollect right, pays very well indeed. Q. The repo'rt for 1885 shows a deficit of $30,000.— A. 1 think in 1886 it turned the other way decidedly ; did it not, Mr. Mink T Mr. Mi»K. I haven't the statement here. The WiTHESS. The rejwrt of 1880 will show. It is a matter of rec- ord. NATDKE OF DCSINE8S. Q- What is the peculiar development in traffic that has improved it I — A. The road is in a very fine country, and population is guing rap- idly iu there. Then, too, there are very valuable granite quarries, and wo carry stone down to Omaha and Kansas City. It furnishes a great deal of business to our main hue. Q. Have you any knowledge of the circumstances attending the ac- qnisition of that interest by the Union Pacific ! — A. It would be more completely stated hy other parties. It must date back nearly fifteen years. Mr. Dillon and Mr. Ames can tell you about that. Mr. Holmes. It was completed in 1874 or 1875 by W. H. I^oveland. Q. What is Mr. LoveJand's address t — A. You will hear a gieat deal of Mr. Loi'elaiid when you get out to Colorado; he is a well-known "horacter. % Haa this road been extended, or Xiaa o.t\^ gp-'n ttQiisXratWott X«ftia. CHARLES FRANCIS ADAMS. 71 put on it within the last five years f — A. Yes ; we have been bailding a branch or two this year. Q. From what points ! — A. We built one to the Buck Horn quarries ; that is under another charter, but it is an extension of this road ; I should have to think for a few minutes as to the other ; my impression is we built two branches at least, to points where we could get granite. Q. What construction has been done through the construction de- partment of the Union Pacific? — ^A. In ^he regular way ; we are build- ing there to-day through the construction department ; whatever has been done there has been done since I came in ; that I know all about. Q. You construct and the bonds are transferred to your investment account. — A. That is it exactly. GOLORADO CENTRAL OP WYOMING. Q. Tell us about the Colorado Central of Wyoming. — A. A part of that road was built under a Wyoming charter ; it is a bit of road that goes over the border. Q. The report states that it is virtually a part, of the Colorado Cen- tral Bailroad Company. — A. Yes ; my impression is that that bit of road has been abandoned, and we now run our traffic by the Denver Pacific. Q. When was that road built f — A. It must have been built at the time when Mr. Could built the other ; 1874 or 1875, or along there. Q. Not Mr. Gould, was it ? — A. Well^ it was built when Mr. Gould was the guiding spirit in the Union Pacific ; he built this road in order to force a consolidation with the Denver Pacific. Q. In what year do you locate Mr. Gould's first connection with the Union Pacific t — ^A. I cannot say. Mr. Gould went into the Union Pa- cific, I think, about 1874 or 1873. The only way I can locate it is this : The first Union Pacific stock Mr. Gould bought was bought of Mr. Ames. The way he got interested in it was that when the Cakes Ames stock was thrown overboard as the result of Mr. Ames's troubles Mr. Ckmld bought it. That was the foundation of his large ownership. PBESENT DIBECTOBS WHO WERE SUCH IN TOE BEGINNINO. By the Chaibman : Q. How many of the directors who are now in the present organiza- tion were in at the beginning ? — A. Very few, as I take it ; Sidney Dillon and G. M. Dodge. I am not sure when Mr. F. L. Ames came io. Elisha Atkins came in later. F. -Gordon Dexter certainly came in ^arly. Mr. Baker's father was an original director ; he succeeded his Dftdier. If Mr. Holmes will r^ad the list I can tell you in a general way. Mr. Holmes. The list is, Charles Francis Adams, Elisha Atkins. The Witness. Mr. Atkins came in later. Mr. Holmes. Sidney Dillon. The Witness. Sidney Dillon was an original director. Mr. Holmes. Frederick L. Ames. The Witness. Possibly; I am not sure whether he was in at the be- ginning or not. Mr. Holmes. Gordon Dexter. The Witness. He came in early. lir. Holmes. Mr. Baker. The Witness. He succeeded his father in 1B74 or 1876. Mn HoLMfS, 8. R. Callaway. Hbe Witness. New. . R. TACIFIC 1IAII.WAV COMMISSrON. Ml". Holmes, llwiry II. Cook. Tlifl WiTKBsa. New, Mr. U01.MBS. I>a\i(i Dowb. Tlie WiTNKSs. Mr. David i)ows has been in many yearn. Mr. HoLMKM. Hn ba« been in and Imou oiitt Tlie WiTTSKsa. He has been many ypars a diractor. Mr. HoLMKS. Granville M. Dodge. Tiie WiTHKss. He has been many yeiirs a (lire<'.lor, Ily CommiHi^ioner Anderson: Q. He WH8 the enginper ! — A. lip was 1 In' uii-fiiial (^iigini road. Mr. HoLMEB. Udlgate lloyt. TlieWiTNKss, Ue is now. Mr. BoLSiKS, John 1'. S|)iuilding. The Wu'NKss. U« is a now director. Mr. HoLMKt). Andrew II. Qrei-u. The WrrNKsa. Uu oiime in rccKptly. Mr. Hoi,Mt;«. John Sharp. The Witness. John Sharp liasboen in ni,iiiy years. Mr. HoLUK». .lames HamsetJ. Tlip W1TNK88. He came in recently. By the Chairman; Q. The uiajority of the present directors or interest have I>een in since the beginning t — A. No; I slionid say not. I Hlionld say the other way. Q. How much the olher way ! — A. I sliouhl say not more than f'onr have Iteen in since the beginning, possibly five, ont of lll'teeii. ECHO AND TABK CITY RAILWAY. CoMiMiiscdoner jVndebson. The next I find is the Echo and I'ark City Railway Company. The Witness. The Echo and Park City isalittle bitof a road, which connects witli the Union Paeillc — not far from Ogden — and runs up through the Echo Cailon to Park City. It is practically our siding to the Ontario Silver Mine. That hua been and still is tlie richest silver mine in the world. I take it there is nn other like it. It paid itfi one hundred and seventy -fifth dividend, I think it was, the otber day, By Commissioner Andeeson : (J. The first mortgage bonds are gi ven at (4r^0,00() and the capital stock ix |t'iSO,000 also, 1 believe. In your Judgment, is that road able to earn theintereatonitsbonds, inatldition totlieoperatini^exiienseat — A. 1 suppose that road has earned its cost twenty times over — I might say fifty times over. Commissioner Anderson. The earnings from 1881 to 18S4 are given as high as $:1C,000 and $35,000. The Witness. That is merely for itself. Itisa very short haul. It brings the trafiiouf the mine down to our main line. The main line has the whole advantage of it. Commissioner Anderson. In 138r> we find it reported as » deficit for Its own business t The WiTNBBB, I dai-e say. Q. How iln ytm explain tliat I — \. SiraYiVj VUat \l\aw\ftU a very short till timf it then not pay. CHARLES FRANCIS ADAMS. 73 Q. How would yon explain the difference between the net earnings of $a5,000 in 1884 and the deficit of $15,000 in 1885!— A. I should have to look it up. I have never paid much attention to the Echo and Park City Company. 1 have always regarded it as a species of siding. ITS VALUE AS A F££D£R. Q. The peculiar advantage you state in regard to that road is that it famishes to the parent road a complete haul over its whole length T — A. Yes; of the Ontario mine. There is a coal mine there also — Grass Creek. Q. Do you know anything about the manner in which the Union Pa- dfic Railway Company obtained possession of this roadf — ^A. iN'othing whatever. That dates back to 1871 — sixteen years ago. Mr. Holmes. It was started in 1871, but was reorganized in 1881. Q. In 1877, the report of 1884 sa\8. That is prior to your dy- nasty f — A. Tes ; and I never looked into it either. Q. Who could inform us in regard to that ?— A. I have no doubt Mr. Dillon coald tell you all about it. Q. Yoar judgment is that the retention of that branch would be a desirable feature for the Union Pacific !— A. There is no question what- ever about it Q. Other things being equal, the branches at the west end of the Union Pacific are, I judge from the way you testify, more important than those at the east endf — A. That depends entirely on circum- stances; but as a rule yes, unquestionably. You may have a very un- profitable branch at the west end, and then it is no good anyhow ; but other things being equal, a branch at the west end is the most valuable of the two. Q. The most through traffic that comes from the branches is done in connection with the eastern part of the country I — A. Yes ; and it comes over our whole line ; we have wheelage on it from one end to the other. GEOBGETOWN, BBECKENRIDGE AND LEADVILLE K. R. Q. Explain as to the next road, the Georgetown, Breckeuridge and Leadville Railroad Company. — A. That is a connection or extension of the Colorado Central ; it is not consolidated with the Colorado Cen- tral ; it is a line known as '^ the loop line," and is one of the engineer- ing curiosities of the country. Q. What was the object of acquiring it ? — A. It was intended to make a short line from Denver to Leadville through the Loveland ' Pai^s. It ran up to Central City and other mining camps, which are of themselves valuable, and then it wound up through the mountains to this point, and was intended to cross over; there are now 14 miles of missing link, and whether we will put that through, making the road the ^^ Leadville Short Line," is a question to be decided. It is a short road, and an extension of the Colorado Central — only 8J miles long; a very difficult piece of engineering. Q. Its business is mineral !— A. Its present business is mineral ; and somewhat of pleasure travel. Many people go uo there in oider to get . to Oray's Peak. It is an engineering curiosity also. It winds about over itself, and every one who goes to Colorado goes over it in order to see this mountain road. . 8. PACIFIC RAILWAY COMMISSION. Q. Tlie operating expenses are reported to exceed the gross eam- ingal — A. I Bbould think ou that 8 miles the; probablf most. ITS VALUE AS A FEEDER. Q. Doee tliat road give any bosineos to your parent road I — A. Oh, yps ; everything it bag comes down over the Oolora*lo Central. Q. now con a road nhoae whole trntfle is less than its operating ex- penses, and the annual businesR only amounts to $7,000, be au advan- tage to the Union I'aciflc ! — A. Becanse that 87,000 may represent over a longer haul on the other road tKXi.OOO. It would depend ou Lho length it was carried over the mother road. Bneh a case as 1 suggest is !i thing perfectly easily to be conceived, and it exists in the case of the Echo and Park City. Q. It can be computed, but has the compntation been made! — A. Ob, J es ; I have had those made every year in order to ascertain what the branch lino business of the Union Pacific road is worth to it. Q. Have you made it for this jiarticnlar branch T — A, For that par- tieular branch. It is merged with the rest. I have not made it for that. Q. Who has charge of tbatcomputationT — A. They always go to the comptroller. Q. Mr. Mink f — A. Mr. Mink bus theuj jircpared for me. Q. And he eau furnish you with all those statements T — A. Yes. Q. bo yon know nnytbitig about the circumstances under which your interest in that company was acquired t — A. In the regular way. It was built by us. Our chief engineer laid it out, and it was built by our coDstmction department. Q. It has been con^itructed since your administration I — A. TSo; it was before my time. In 1882 when 1 was out Iliere they were at work on it. GOLDEN, BOULDEB AND CARIBOtt ItAILEOAD. Q. I now tind the Gohku, lioulder and Caribou Railroad Company : will you tell iia about that I — A. Has that road not bren discontinued ! I think that has been merged in the Uenvei, Boulder and Marshall; practically it was a sort of switch to the Marshsill mine. Mr. Holmes. Yes, from Boulder to tlie Marshall coal mines. The Witness. Since we construcied theDeuver.Boulder and Marshall we have a better line, and so we have discouiinued that, working our business over the other line. Q, When was that road constructed t — A. We own the Marshall mine, and it was constTUcled to that mine. No ; 1 am mistaken ; we did not own the Marshall ; the Louisville mine we owned. There was a rjaarrel there. When I came in it was one of the vexatious question!) I had to deal witb, and I dealt with it through the Denver and Marshall road, which made a short line, and we carried the coal out by that. Q. It appearN from .vonr report that it cost the company 8ill.'0,000t A. I should think it likely. Q. Do you know anything abcnt the circumstances attending the ex- penditure of that money ! — A. Nothing whatever. Q. Who can give us those facts T — A. I have m doubt Mr. Dillou can ttill you all about it. GREELEY, SALT LAKE AND PACIFIC RAILROAD. Q. I now find the Greeley, Salt Lake ami Pacific Railroad Company; tvill yon tell lis about tliatt — A. That is a VrsvwcXuac ■, \X, t9.\\ \\v ix'O'Ww CHABLES FRANCIS ADAMS. 75 Greeley of the Colorado Central to oar quarries at a point called Stoat, and has never been carried any further. It is practically a road with which we bring stone down from these quarries and Bhip it east. Q. How long have you owned your interest in that road f — A. Long before I had anything to do with the Union Pacific. Q. The report of 1884 says that this road was incorpora'ted in 1881. It must have been acquired after that, was it notf— A. I only know that when I went over the road in 1883 we went up to Stout ; that was my first acquaintance with it. Q. What is the length of the road t — A. Fifty-four miles. Q. What is the character of the road ! — ^A. It is a road that runs through an agricultural and grazing country until it gets into the hills, and then it goes to these granite quarries. It was always supposed it would go up the pass beyond — that was the original idea — into tHe l^orth Park. Q. The reports show a constant deficit. Is that the present case f — A. I dare say ; I do not remember. Q. What is your judgment as to its future! — A. It is a very valuable feeder, indeed; it brings enormous quantities of stone to us, which are carried down to Kansas City and Omaha. When you get up there you will see an enormous movement going on ; but the haul is short, and the road itself gets little from it ; the profit goes to the main line. "STONE DEPAETMENT" OF UNION PACIFIC. * Q. What quarries does this road connect with ? — A. Those at Stout. Q. By whom are these quarries owned f — A. They are owned and operated by us. We have a Stone Department there. Q. Do those appear in your report as one of the investments outside of railways! — A. Yes; the Stone Department makes its own reports, just as the Coal Department does. Q. Is the quany used by you in connection with the masonry work on your own roadf-i-Yes ; for instance, we are now building depots out of the stone we quarry there. We buy our own stone, just as we buy our own coal. Q. Is it a distinct company t I mean is the ownership of this quarry effected through an organization or company f — A. !N^o, I think not; we work it exactly as we work the coal mines at Bock Springs; it is a part of our organization. This department is credited with the prices it gets. They keep their own accounts — they have to — to see what the stone costs, and we get it at cost. Q. When did j^our company acquire title to the quarry ? — A. I do not know. Q. It was before your time ? — A. It was long before my time, and we must have taken up the sections in the regular way. It is not on the land grant. Q. Was the main object of acquiring title to this Salt Lake road for the purpose of making that connection ? — A. I cannot tell you that ; that was before my time. Q. Do you know anything of the circumstances of the acquisition of the title to the stock and securities of the Salt- Lake Company f — A. No. Q. Can Mr. Dillon give us that information ! — A. I have no doubt he can. Q. What is your judgment in regard to the advisability of retaining that roadf — A. It is very valuable indeed. It is a source o( %t^^\> ^^4l gwwiDg buaineaa. I am building another just exacUj \\Vl^ \Xi X^Xk" Bkcuii: , H. PACIFIC BAILWAY COMMISSION. Butik Horn qii-.irrioa now, TIil< whole MinHiftsippi ValUi,y in Onx'oUl of titoue thnt is worth anything, and we Rliall have a hirge buHiaeSH, all down hill. Q. The groat advantage t)eing that the etone will be required at the eaut cud of your eiitin^ line! — A. Of the entire line, 700 miles oif. .UlNC^TION CITY AND POIIT KEAHNEY. Q. Explain about the-Tniiction City and Fort Kearney Builway Com- pany I — A. That iH a road i'rom .lunotion City on the Kansas Pacilie to Fort Kearney and beyond. It is an agricultural roiid, and waa bufore my time entirely, and it is an agricnitnral feeder of the K;in sas Paoitle. Q. Do you know when the oonipany arqnired its interest in that road I— A. I should have to look and see wlien it was. Commissioner Anderhon. It came thr(>u;^h the Kansivs I'aoiAo, I aee in your report. The Witness. Yes; it came Ihmngh the Kansas Pacilic. It was be- fore the couHOlidatiou, Q. Does it pay interestand operating expenses T — A. It pays its whole operating expenses, bnt does not quite meet its fixed charges ; but tho bonds are in our possession. Q. What is the point of connection I — A. Junction City. Q. How far from Kansas Cityf — A. One huadre<l and thirty-eigbt miles. Q. What is your judgment a» to the oflect of that road as a feeder 1 — A. You see we have on that road 138 miles hanl on its entire busi- ness. I should say that there was no qnefition that it was a valuable property. I should be very sorry to lose it, Itmay nutappearasource of profit in its own accounts, but there remains that grand fact of 138 miles hiial on everything that goes to it or comes from it. Q. You know nothing of tho circnmstanees under which the nt^fCk was acquired I — A. No ; that noes back to the original Kansas Paciflo road, before it came into the Union Pacific system.* KANSAa CENTBAL RAILWAY. Q. Will you explain about the Kansas Central Railway Company T — A, The Kairsas Central was another of those ronds which came in under the same heading as the Central Branch. It is a uarrow-gange road. That is the trouble with it. ITntil the gange is widened it ia a very poor piece of property. It will probably have a wide gange. There are two points where it conuecta. at Manhattan City and Juuo- tion City, That road runs from Leavenworth due west. Commissioner Anderson. I notice that the balance of the income account down to December 31, 1885, shows an aggregate loss of over 8700,000. Tho Witness, Tea i that road has for the last few years worked very badly, and I think it will until we change the gange and widen it Q. What is your practice in stating tho accounts with these subsidi- ary roads, where you hold the bonds, in charging interest T Do you al- ways charge the full interest at the rate of the bonds !— A. That is my understanding. Q, The [iractice has not been to charge at an nrhilniry rate of inter- est. :i or 4 per cent, t — A. Oh, no, sir. <?. If the bondaran at 6 or 7 percent.! — A.. So-, I know in HomecaseH tng hare not presonCed coiipous. Wo \\a.vft\e'Ev. \,\\c,m aV^asAv^fli \.« \i(«i "da so that t/ioj accumulate and go o\\ w\lVio«l\i«\o£ v^'*'-^ «*• CHARLES FBANCI8 ADAMS. 77 Q. In that case the income account would show a more favorable re- sult than the actual fact would be f — ^A. The real question to be looked at in this case is the question of operating expenses. The Kansas Cen- tral is a difficult problem. Commissioner Anderson. I notice under' the statement in regard to this company that your company holds $1,162,000 of the bonds out of a total of $1,348,000, and substantially owns all the stock. The Witness. There is only about $170,000 that is outstanding. Q. On these bonds that are outstaudiug, has the interest been paid f — A. It has been paid uptil this year ; I stopped it the other day. Q. At 7 -per cent. T — A. Yes ; it is about $10,000 a year that we paid. Q. What was the object in paying that interest in prior years, when the road was running behind so heavily ! — A. It was considered, as they express it here always, that we were ^^ protecting our investment." We went on from year to year in the belief that the thing would work better, and we were not prepared to deal with the question of reorgan- ization. This year the directors coucluded that it would be better to deal at once with the question of reorganization, aud therefore they stopped paying the coupons. I understand there will be legal proceed- ings. Q. Do you know who are the owners of the $170,000 of outstanding bonds f— A. Yes; it is Mr. Smith, of Kansas, commonly called Len. Smith. He built and owned the road, and when he sold it to us he re- tained that amount of bonds. Q. When was that road sold to your company! — A. I really do not know. Mr. Mink. January, 1880, was the first interest obtained in it. The Witness. It was obtained, I know, from negotiations with Mr. Smith. Mr. Holmes could tell you a great deal more than 1 about that, for he was of counsel. The counsel of the Kansas Pacific is familiar with these things ; I only know of them from hearsay. LAWEENCE AND EMPOEIA EAILROAD. Q. The next road is the Lawrence aud Emporia Railroad Company. Will you explain about that? — A. That was a road about 25 miles long, from Lawrence running southwest to Carbondaie, as it is called, a place where there were some coal mines. It was a small affair, acquired some years ago, and we o\?n all the stock and all the bonds. The coal fields there proved worthless, and we have abandoned them, and we have practically abandoned the operation of the road. Mr. Dillon could tell you all about that. It has given me a good deal of trouble, first aud last. Q. What coal mines were they that it connected with ? — A. There were some coal mines, wh^re you strip the soil off, and there are under- lying layers of coal two or three feet thick ; soft coal. We owned the mines; the Carbondaie Coal (Jompauy and we worked them until we worked them out^ Mr. Holmes again can tell you all about that. I merely know that it was a small affair; that the mines worked out, and it has been a burden to us since I have had charge. Q. I notice your deficit runs up to $14,000 and $16,000 a year.— A. Yes; there is no business at all there since we stopped the mines. Q. The enterprise is now abandoned f — A. No, we cannot abandon it We have to keep it nominally running, but there is no business tiiere. It is one of tbose cases which a railroad sometimoA m^^\A "vXi^x^ SoasrpprereatedbjTfipar franchise from taking the iron up, ox ^oaix^ U. S. PACIFIC RAILWAY COMMISSION. ^^| unwilltDg to offend the local intercstH; bat if tbe interest of the flom- pany only was <-oiieuUeil we ought to take the iron up. But the altor- tiey-generul ainX the legisliitiire hiive threatened us. Q, Thrcateiieil whom ! — A. The Union Pacific road. Q. I Dnderstand it is run by unother road ; is that bo f — A. That is true ; but they say "you are resiionsible for that, and you own it." We have to deal with it. It has bcou a cause of grave charge against us in the legislature, the fact that wo did not do anything with a wholly worthless road. Tliey wanted us to extend out, and we did not see oor way to do it. It lias been a very dipiigreeable cxjieneDce. Q. Do I understand Ihat it is still causing you a loss of $14,000 s year as now operated ! — A. I do not remember the exact amount ; it is in the report, copies of which will be handed you to-morrow. Q. What is the total deficit in the income report t— A. 1 think we cut it down to a nominal figure this last year, Q. It is $l.'t7.fl(K> to l>t'cemb(.>r, lS8fl, acconling to your income acooaot, if. it not T — A, That stretches over a great number of years, Q. Vou know nothing of the circumstances relating to tbe acquisition of tbe interest T — A, I know more or less, for I inquired iuto that, bat Mr. Holmes can tell you better than I, and my information is based wholly on bearsay. MONTANA RAILWAY. Q. Will you esidain about the Montana Ilailway OompauyT — A. We have a Montana Railway and the Montana Union. This is a branch from our Utah Northern to the Anaconda Smelting Works. The Anaconda Smelting Works are some enormous works owned by James B. Haggin, of California, and this is practically a branch line to them, over which we do an enormous business ; it has been very pro&Lable, indeed. Q, How long has that road been operated ! — A. Only about three years, I ihink. It was finished after I took chari^e. Q. What is the ownership of Ihe Union Pacific in thati — A. Itowna the whole of it, I believe. It owns all the stock. We never had any bonds on it. Q. By whom was that road constructed t — A. It was constructed in the usual way by Mr, Itrinkendorfer, the engineer — by our constnto- tion department. It was constructed under contract. Commissioner Andekson. I see this is a narrow-gauge roadf The Witness, Yes. "TlIK NARBOW GAPOB A FIRST-OLABS NtHSANCB." (j. In regard to the construction of a narrow-gauge road, what 19 your judgment as to the eflrct on the nsef^ilness of the road so cott atrncted ! — A. I consider the mirmw gauge a first class nuisance. Q. In all cases f — A. Yes ; 1 never saw a narrow gauge that I wonld give a cent more for because of its being narrow gauge. Q. This road has been constructed on a narrow gauge! — A. It hasj and we are going to make it a standard gauge next summer. Q. Was not this done since your administration! — A. Yes; it was poi't of the Utah and Northern narrow gauge system, but we are going to widen the Utah Northern nest summer. Q. !n your judgment, then, in almost every case tbe narrow gauge is. imdesirable ! — A. We haven't got a case of a narrow gauge connected' wff/i tbe Union Paeiflc where 1 do not think \t wo\i,\0k^'o«ttftTtoUaT8' theataatlanl gaiigo. CHARLES FBANCIS ADAMS. 79 COMPARISON BETWEEN NARROW AND STANDARD GAUGE. Q. What is the differeace, under ordinary constraction, in the cost of coustractionf — A. I cannot tell yon, but I do not think it very great; the whole theory of the narrow gauge is broken down ; the theory under ▼hicb it started was that it could have very much lighter rails, be- caase it had very much lighter equipment, and it would require very much lighter structure ; but since that, under the pressure of business, they have found it necessary to increase the weight of rails, and of lo- comotives, until they have got it up as high as the standard gauge was at the time the narrow-gauge roads were built ; and the only ground it can possibly stand on now is that it can climb to i>oints which the standard gauge cannot reach ; for instance, on the narrow gauge you go over 4 per cent, grades — that is, 216 feet to the mile of ascent. Q. Is it your present policy, wherever it is convenient, to alter the narrow gauge to the standard gauge? — A. Yes ; so far as we can. Q. How much narrow gauge have youf — A. Fifteen hundred miles, more or less, I should think — the Utah Northern, the South Park, and the Kansas Central. OMAHA AND REPUBLICAN VALLEY RAILWAY. Commissioner Anderson. I pass now to the Omaha and. Republican Valley Railroad Company. The Witness. The Omaha and Republican Valley Railway Company IB a system of branch lines which we have built in Nebraska, and which feed the main line of the Union Pacific. It is a Union Pacific diyision. It is changed since the report you have before you. In our present re- port it has about 750 miles, I think. Commissioner Anderson. I notice the earnings take a great jump in 1883 or 1884. The Witness. The country is filling up very fast. Q. What is the character of that country ! — A. Agricultural. Q. Please describe the other portions that have been consolidated with it to make up the 700 miles f — A. We have put all our branch lines ID Nebraska and as many as we could of those in Kansas into one con- solidation, which includes properties both north and south of the main division of the Union Pacific. Mr. Holmes. It is more easy to treat that un^er the name of the Omaha and Republican Valley Railway Company, in which the railroad, with others, was consolidated. Q. This system is now known as the Omaha and Republican Valley Railway Company ?— A. Railway Companj^, yes. Q. Please describe the character of the business done by that road. — A. Agricultural. Q. Does it do any mineral business at all ! — A. iN'one whatever. Q. What is your judgment as to its future ! — A. I think it good. I should be very happy to buy that road of the Union Pacific at any time. I think very favoralJly ofit. Q. Do you know anything in regard to the circumstances under which the Union Pacific acquired its interest ! — A. It was in the regular way. The various roads were built under contracts made by our construction department, and paid for by the Union Pacific, and all the stock and all the bonds were pnt into the treasury of the Union Pacific. Commissioner Andebson. I notice your report ^tai\/^ \\i<^ TJiamk PaeiScowna all the bonds except 12^000! U. 8. PACIFIC RAILWAY COMMISSION. 'I'lio Witness. I do not know bow they got out. Q. Is tlu^ road valuable as ft feeder, ulso J— A. Verj". The only difll- rull.v with it i» tlmt on traffic to au<I fVom it we have cotDparatively, what, yon remarked before, a short hanl from Omaha. MABYSVILLE AND BLUl! VALLEY HAILBOAD. Oommissioner Anderson. The next road is the MaryHville and Blue Valley Itailroad Company, which is stated to be a part of the one that we have been speaking oft The Witness. It is the couuectiut; link between the Union diviaion and the Kansas division. Cominissiouor Andehhon. I should like to go away for a short while if you will go on with this. The OUAIBMAN. I will leave that branch aud take up another branch of the examination. I conclude that you are familiar with it fh>iu the Jact that you have examined in detail from time to time the accounts of the road. ORIGINAL COST OF OONSTKUCTION OF UNION PACIFIO, By the CnAiBMAN; Q. What was the original cost of the constmction of the Uuion Pacific! — A. I cannot tellyou. Q. Abont whatT — A. Tliat goes fkr back into the early hiatot?, twenty years ago. Without long examinations of accounts aud records I should he unable even to form a Judgment. Q. Whoro can we get that iuformalion T — A. Yon would have to go In the original records. It was a very confused stateof affairs in those (lays. You know it was the period which immediately followed the war, and the roail was built in the most costly way in which a railroad conia be built. There has never K'en anything like it. It was built under great i>opular pressure; with nspeedthatwasnever known Itefore; with gold at abont 15(1; withoutanyrailroad reaching the Missouri River, ami with everything to be carted across the prairie. You would have to get Mr. Dillon and others connected with the company in these days to tell you about that. (J. Mr. Dillon and who elset — A. Mr. Blinkendorfer, our engineer, could t«II yon a groat deal, and General Dodge, of course, could tell yon a great deal. (J. Aud the other directors who were diruclors at the timet — A. Yes. I Q. Wlrere are the original records t — A. The original records of the L Union Pocitic are in BoHton. L Q.' Aru the minutes of the meetings of the board of directors there I sleot — A. Yes; 1 presume so. I Q. Ilave you ever examined the minutes of the records of the early I meetings 1 — A. I never have. I will state to you that I do not pretend I to know anything about the Union Pacific Jtnilroad prior to 1880 — prior I to the consolidation. I draw the line there. I have always in8lHt«d that I there must be a period at which you draw the line, and I drew it at the I conaolidatiou. Before that it n^as matter of ancient history to me. I H must take all that occurred prior to some specified date a» occom- ^ plitthed fiLcts, aud, »» that date, I took the year 1880— the time of tiitt; ^M cousolidatiou. Beyond that 1 regarded the statutes of limitations bar-; ^B inff^nin, so fur as 1 was concerned. H <?. Tiien yon am niiablo to give xiaany \n^)nv\vAw\\Vj x^i^sau qI -^vfoa CHARLES FRANCIS ADAMS. 81 own knowledge prior to 1880 ? — ^A. I have made it a rule not to go bejond that period. I have always had sufficient to do in attending to the busiuei^s of the present time. Q. Have yon examined the establishment of the auxiliary system of roads with reference to the time prior to 1880, as to its effect upon the general road in the future t — A. No ; I took the property as I found it. INVESTMENTS IN BRANCH LINES FROM NET EARNINGS. Q. From what fund has the Union Pacific made investments in die auxiliary roads from time to timet — A. It has made the investments largely from its net earnings. There was a very long period when the Uniou Pacific was immensely profitable, and it earned, I think, at times as high as 12 to 14 per cent, a year on its stock. The directors pursued a tolerably conservative policy, and they used to divide 6 or 7 per cent., and the balance was put into the property. That represented every year a large sum of money ; several millions of dollars. And as that accumulated it made the basis of the Jbranch system. The branch system of the Union Pacific represents money which the stockholders might perfectly well have divided, paying it out to themselves in divi- dends, but which they did not so use, putting it, on the contrary, into - the property. They have, moreover, from time to time sold a portion of the securities, which, in the case of any other company, would have been represented by their own securities issued against their branch system. For instance, the G. B. and Q. has pursued the same course as we have. TheChicago, Burlington and Quincy last week put out a loan of $12,000,000, secured on its branch system. That is a sound railroad policy to pursue, but we cannot pursue it. If we could, we would take our branch system and issue against it the bonds of the Union Pacific ; we should then sell them exactly as the C. B. and Q.are selling similar bonds to-day. We are unable to do so on account of the peculiarity of our charter and our connection with the Government. Every other company does that, and, financially, it is the correct thing to do. We woald do it if we could. LOSSES ON BRANCH LINES FALL ON UNION PACIFIC. Q. Then the loss account of the several branch roads which you have citoi falls upon the Union Pacific! — A. That falls on the Uniou Pacific. Q. Then as to most of the roads that have been named to you, 1 think iu a majority of them there has been a deficit, according to your re- ports!—A. I do not know whether there has or not, but that would be immaterial. Q. Where does the road derive the benefit ; in the future! — A. No, it derived it in the immediate present. Q. In what direction ! — A. In the direction of business which the branch lines give to the main line, which it would not have but for the branch lines. We will take such a road as the Echo and Park City, or any road of a similar character. Such a road will give to the Union Pacific a large amount of business which it otherwise would not have, which the Union Pacific hauls 800 miles over its track. The wheels are going all the time ; and if the main line did not have the branch it would not have its business. Therefore the Union Pacific makes im- mensely out of the branch, although the branjch itself may show a de- ficit Q, IsU Dot trae that in the fature^ as population grows, t\i<^)5t^\M9tiM dps '. 8. PACIFIC RAILWAY COSUflSSION. wilt ba of mora beueilt than in tLe past ! — A. That doiK-nds. As to the ' agriculuiral braticbes tliey will be, btit a» to mineral ami miniDg branches it will depi-ud eutiiely upon the luines to which tbey ruti. SINKING PDNDS. Q. Tor the Itonln tliat were iacued originally by tlio Union Pacillo you have a siukiiig <\iiid acL-oiint t — A. The original bouiU ! <J. Yee, Hir. — A. No. tbero is iio sinking fiinil for the original buuda. <j. liow do you make your iRvestmeiits forthe siuking fuiidt — A. Kvery uiortgaga deed pruvitlus fur itself. As a gpneral rule, they pro- vide for buying in their own bonds up to a certain price. When the boDdtt exceed that price they take something else. Each mortgage Bl>eakH for itself. Q. Then the inveatmout for each sinking fund is made in the bondi of the company T — A. In tite bonds of tbo particular company ; yes. The very object of tbo Kinking fund is to absorb the bonds. Q. Are the aiuking-fund accounts over need for other investments.-^ A. No. Q. You are only speaking now of the period since 18S0t — A. They never were, I think. I am speaking of tbe whole time, lint Mr. MIdk can tell yon a great deal inoie tbnn I can about thnt. Going back to that matter of tbe branches, I would say tliat the last computation I bad made, in order to ascertain what our branch system was worth to the Union Pacific indirectly, in the amount of bu'^iuesa which the maio line had which it would not have without the brunches, led mo to the conclnsion that at jtrcsent our branch system was worth to the Union proper about $j,00(),000 a year, entirely apart from anything that ap- pears in the accounts of the branches themselves. CONCERNINd IKTESTHENTS IN OTHER BMTEBPBIBE8. Q. What other interests have yon outside of the Union Pacific 'm uianufaoturing or mining coTnpanies along the line T — A. Wf have coat' mines at Uock Springs, Alma, and Grass Oreek. That, you know, was the salvation of the Union Paciflc; those mines saved it. Otherwtao the Union Pacific would not have been worth picking up. It Hlmck coal. Of eonrse, in the wholly nndevoloped condition of tlic country we had to become coal miners, and at first we mined coal solely forourowu nse. The road ran through a wilderness at that time. We did so, and gradually there grow up a regular coal dejiarlment attached to the road. Then we began to mine for private consumption, asaregular miner, and it has since been a source of large profit. In additiou to that, we are intirested or were interested — I have got rid of several of them — in other mines, and ft'om time to time, iu order to help things along in that country, we have been interested in el»> vators, exposition buildings, &c.; helping them along in those things. (J. Then yon have soda deposits and soda workst — A. Vcs. That was a case where we tried to develop the country witli very jioor hud- cess. There was a lake with large deposits of soda; anil Mr. Sickles came back fmm abroad with the idea tliat there was in lliat deposit a fund of wealth for tlie country and l)usini!as for the road, and he in- duced us to put up works. Since that time we have been running them, because we did not feel like taking the risk of abandoning thenv TJietv is DO proflt in them. CHARLES FKASCIS ADAMSL 83 OOGIDSNTAL AKD ORIENTAL. STKAlfSllIP COMPAXV. Q. I notice the Ooddental and Oriental Steamship Coiii))aiiy ; will joa tell OS about that t — A. It is a profiuble thin^, Mr. Miuk oau tell more about it than I can. The Central PaoiAo people orpinixotl it to ran a line of steamships to Japan, and we took a half intervsu 1 think. That has been a source of profit. Q. Have the investments in manufiietonug and miuiug com|>auie$ t^ A. We never had any iu manofacturing. Q. Have any of those outside miscellaneous investments^ as a rulo^ been successful in producing profits t — A. I think not I am opposetl to them, and the policy of the company is opposed to them ; but t4K\v were rather forced upon us by the unsettled condition of the region through which the road ran. There are two pressures brought to bear very heavily on us the whole time out in that country. One is, as the people say, " To help things along, to develop the country, to lend us a hand." As a rule, when we do so — and we do so with great reluctant^ —immediately the counter feeling comes up, " Why do you put your finger into every pie in the country !" We are denoanceti if we do not do it for lack of enterprise; and if we do it we are denounced for meil dling with things that do not belong to us. I am myself strongly in- cline to confine the company strictly to its legitimate business us a common carrier. Q. Then these investments have been a source of loss t — ^A. Not per ceptibly. As a rule I should say we had made money on them. GONGEBNING THE 5 PER CENT. RULE. Q. What have been your payments to the United States Government under the 5 per cent, rulef — A. Wo have made them every year. Q. In cash t — A. Yes j practically, though there is no money paid ; bat, it is paid in transportation, for which the Government owes\i8, and t^ea, instead of giving us the money, they deposit it to our account iu the Treasury. Q. Then, under the act of 1862, you have at no time made any cash payments more than twice, I think, according to the reiK)rts of the Sec- retary of the Treasury, other than in the credits that have been allowed by the Government for transportation! — A. I think that is all. Q^ How was the amount adjudjred by the Court of Claims paid t— A. That was paid in legal-tender notes. Q. Was it paid in full t — A . It was. THE $900,000 ITEM. Q. Will yon explain to me this item that appears in the report of Mr. Mannmg, Secretary of the Treasury, for the year 1885 1 The item is 1641,000 credit and $200,000 is reported to be in cash. I see no cash payment in your returns. — A. Undoubtedly the rest of that particular item was paid in services rendered. I i-emember, if I recollect right, that I sent up legal-tender notes for $716,000. Hr. Lane. Nine hundred thousaud dollars. The Chaibman. It does not appear there. The Witness. I know very little of the way those accounts are kept. I merely remember that I had to get the money, and I got it, and it was paid into the Treasury) and a receipt for it in full given u%. U. 8. l-ACIFIC HAILWAV COMMI88IOS. Q, Wbo can explain tbat item T — A. Mr. Mink can tell you all about t. Q. There does not, as a inutttT of fact, appear auj wliern in Ibe Unitud Slates Treasnry account tlio pnynieut of any such sum as $!KK),000, the avrurd mode by rlie Court of Claims. — A, It roust appear aomowlierc ; I know «o nmdo tlie payment. Tliure was no cheek given, but the money WI18 deposited in hills at the KUb treasury, for I remember tlie hilts had to he counted ; the auli-lreamiry in Boston. Mr. Lane (to the eliairinan). The part going to the sinking Oind yon did not see; it is stated elsewhere. The VViTNKKM. The total was #917,0(10. The Chaieman. These are the total p.iymeuts showing the amount withheld by tbo Uniled Htates and the credits given, as report«d Janu- ary, 1S87, showing the ciiHh {myinenta and the credits, in which this anm docs not appear. The WiTNESM. I should hnve to refer you to Mr. Mink to explain tbat. Mr. Lank. Wc held on to that moimy, awaiting their division ofthe aaiount between the two acconiits, for a few days. CONCKHNINO INTKBEST OF (H'PIRERS IS Ol'HEB BNTEBPBI8US. (j. I will a^k you a genend question under tbo act of Congreea, whether any of tlie ilirectors, otlieers, or employes are intercstol in any way in contracts with the road f — A. 1 never beard of a caao. (j. You would bear of it if tiueh was the case t — A. t should hoi>e to hear of it. I never lieard of anything of tlie sort. The only way in which an oinpluyi^' has ever been inteiest^d— but no one ever has. I was going tu say, as to those construction contracts, tbat once or twice tsama one iu our employ has been a nominal contractor, lie made a nominal contract with us, for our construction department must bavu some one thn>ugh whom these o|)erattotia aru conducted ; but in such cttsusthey have never beeu paid uuythlug. We simply use their names iu order to transfer the stock and bonds to our treasury. It is a nominal service. Q. There is no profit T — A. No profit whatever ; not a dollar. Q. Speaking since 1880, has the road loaned or invested its sinking fund money in any way ! — A. No. What sinking fund money! Q. Sinking funds for bonds! — A. You mean the Thurnian act sink- ing fund ! Un that the (jovorninent gave us 2 per cent, a year. The Chairman. You buve established a sinking fond to which yon carry different sums from time to time, and out of which you make iu- Testmeuts in order to accnmulatu to meet them at matnrity. The WriMEss. The trust companies do tbat. Tlie company hasuotli- iog to do with it. I think it is always a trust company now. I do not think we have a single casu of trustees. Oh, Mr. F. L. Ames is the trustee under the landgraut mortgage. Tbat is an exception. But lie cannot make any investments whatever. He is prohibited from doin^ 80. Be can only deposit the land money with a trust company in New I York. H Q. Where do you carrj- the proceeds from the sale of land ! — A. Itgoea I to tbo trustees. All of it. The oompany has nothing to do with it. H <J, For what purposes! — A. Iu the Union I'neiiie liind grant it Is a H trust to take up the lan<l.graiiC bonds and the sinking fund bonds at H matarity. In the cn»e of the KanaaH I'&citic, It is it trust to Ijtke oaro H oftbe cousolidiitvd Kansas I'aeibu motVgag© \iouv\a. CHARLES FRANCIS JLDAM^ 85 Q. The trustees make iovestineuts for the bonds !— A. Ther^ are no iQTestments to be made. Q. What is done with this cash payment that yon ^et from the salo of the land Y — A. It is put into a tmst company and accumulates there* Q. What does the tmst company do with itf — A. We do not know. They pay us 3 per cent, interest. Q. Who can inform us as to what they do ! — ^A. The tm^^tees and the trust company. Q. So that we would have to look to the trustees for that iuforma* tion f -A. Undoubtedly. The tmst company would say *« it $^)es into our general funds." We have an agreement with the company by which they i>ay us 3 per cent, interest, or whatever it is, but the money itself goes into the general investment account of the trust company. DIVIDENDS. Q. When was the last dividend of the road declareil t — A. It was de* dared at the meeting held in March. I8S4. It was paid the 1st day of April, 1884. Q. How do the earnings of 18S5, for the purposes of di\idends, com* pare with 18841 — A. They fell off. In 1883 everything came on the Union Pacific at once. Before that it was earning enormously ; but at that time the ]^orthern Pacific was completed through, which affected us very severely on Piicific coast business and on Montana business, very severely, indeed. The Denver and Bio Grande was completed through to Ogden, which affected us on business to Salt Lake. At the same time the Southern Pacific was completed through, which affected us on the business to San Francisco and the Pacific. And almost at the same time the Horn silver mines ceased to be productive. The re- sult was that our business fell off, if I recollect right, $4,000,000 in one year. At the same time our rates were reduced and our expenses were necessarily increased. rSB OP NET EABNINGS FOE CONSTRUCTION OE TO PAY FLOATING DEBT. Q. What disxK>sition did the company make of the proceeds of the profits or net earnings of that year ? — A. What was left of the net earn- ings of that year, alter the Oovernmeut was paid (which would have been applicable to dividends), was devoted to paying off the floating debt of the company and restoring its financial situation. Q. Was that the case with the year 1886, the year just passed f — A. Tea. We were forced last year into a certain amount of construction and development, and that was the only fund we had to apply to it. It is 60 stated in the report of the year. Since I have been in charge of the Union Pacific we have put $16,000,000 into the property; and we have raised that money, or about lialf of it, from net revenue, which would have been .applicable to dividends which the stockholders went without; and the other half of it came from the sale of securities, the quick securities in our treasury. We turned them into cash, and put the proceeds into the business. Q. Then the net earnings or profits of 1885 and 1886, which are nearly ftboutthe same, have all gone into the improvement of the road t— A All gone into the general improvement of our property and tlie pttflK of ^ ^aatiog debt I n. 8. PACIFIC RAII,WAV COMMISSION. Q. Where would that appear in your balanco-shcet T — A. Yoa mil fltid it in detail in the annual report of this yi>ar. Q. la thatstatemontsctout in thebntanc^-8bc«t,8howiDg theinoFAase of investmentsfroratimetotiroo! — A. Yes; in our inTestmentacoonnt. You will And it there orery year. DBCEEASE OF ASSETS. Q. Tbe investments as tlipy appear in 18S4 are *4G,000,000 in total, and in 18SS aro only $40,00(1,000, us reported in the total investuicut account. What is the nmseof that d»!ereasel — A. There weri? $4,000,- fiOOor J "1,000,000 in Saint Joseph and Grand Island Itonds that wuru solcl. The aiiconnt has been iiicreaseil from some Honrees and diininlMheil by the sale of quick assets; ho the amount you name is the net di.>€rciu«>. Q. [low much of thin went Inio Iho construction account of tbid $1(1,000,000?— A. I should have to look to llio report of this year to tell you; but it is slatoii Ihcre. (J, VVjis there a largo amount T — A. A very large amount. Tbe Ou AIRMAN, i call your attention to the fact that in 1883 or 18S4 the constrnctiou account tolRl was $108,918,(107.04, and in 188(t$ltll,- 2S3,fl88.m ; so that of the «1«,000,000 net earningH of the three ycara, or two ycara. only 8.'i,(KiO,0(MI went into tbe construction account. Tho Witness. That was the construction accxinnt of the Union Pa- oiflo proper. The Chairman. This is for the Union Pacific system, the railway company. The Witness. Ts it tlio railway company proper, or tho system t Tho (jnAiKMAN. Vl's, sir. Tbe WiT.NBSS. Tho company proper is one thing; the sytttuin ia another. Tbe Chaibman. U is the railway company. The Witness. Then %'«ry likely $3,000,000 wont into constrnctioii. That was repicHeiUed in all kinds of thiuEs— equipment, and improved appliances, and bridges, and evorylhing. We had (o rebuild the Omaha bridge, among other things. Q. Uf that $H],000,()00, you have put into this Union Paelflc Railway Company about $.i,(HH>,0(io in the coustrnetiou account, iu iuiprove- ineots 1 — A, Yes. PAOIBNT op FLOATING IiEIlT. Q. Where did tho other go I — \. Then there was a debt we had to pay off. We paid off a debt of $1 1,000,000, I think it was, a floating debt that tho company had when 1 took charge. 1 mean bills payable. Our bills payable amounted, If I n'collect riglil. lo ahotit that. Then a large portion of that money we paid over to thi' (inMininenl, tj. I call your attention to the fact iu tho 8;ii]ii' iipm I ..I' the liabil!> tiea, tho general balancusheet of the Union PaiMlii: (Jnrnp^uiy. that the net floating debt was $308,000. — A. lam now .'^peaking of oilla pay-' able. That is a different thing entirely. The bills payable outatttDU- fng really represent tbe floating debt of tho company. FLOATING DEBT OP 1884. TiisCnAinytAN. It appears in the rcflort of Vfta4tUa.tt.U« floating debt tFas $J0S,513. CHARLES FRANCIS ADAMS. 87 The Witness. That is a mistake, somehow or other. You are wrong there. The Chatkman. Very well, we will get the reports. The Witness. We never had any such diminutive floating debt as that in 1S84. The Chairman. The report of the floating debt is $1,861,000. The Witness. I do not know where you get those figures. The Chairman. It is from your reports. Mr. Mink. You might look at page 81 of the report of 1885. The Chairman. I call your attention to the liabilities in the Union Pacific Railway Company's balance sheet, page 79 ; floating debt, •12861,445.44. The Witness. When is that! The Chairman. The year 1884. The Witness. Is that the floating debt t The Chairman. Yes, sir. Mr. Lane. Tou will find on the next page the details of that. The Chairman. I call your attention to the other difference of the floating debt of 1884. The Witness. There it is, yes, sir; $1,801,000, which had been re- duced then from $7,000,000. The Chairman. It was reduced from $3,237,696.53. The Witness. The floating debt touched its highest point the 1st of Jaly, 1884. Q. That was $3,237,696.53 1— A. It was a great deal more than that. The Chairman. I call your attention to the balance sheet. The Witness. That is December 31; I say June; it ran right up there to June. The net floating debt on June 30, when it attained its highest point, was $7^800,000. The Chairman. What have you to say in reference to the $308,000 of floating debt t The Witness. Is it not $3,000,000 ? The Chairman. No, sir ; $308,000. The Witness. When was that t The Chairman. This is the year 1883, where you deduct. The Witness. They deducted material on hand in that account. We have never done it since. Q. It appears in your account as a floating debt, $308,000, for that year, does it not? — A. Yes, sir; I see it. We never deduct material on hand. Q. I want to call your attention to this fact, that in the accounts of 1881 to 1886 fuel and material appear in all the years except 1883 and 1882. Why were they omitted then ! — A. I am surprised that they did 80 appear. I did not know that they were omitted. What is more, I see in the table they have here it does not appear. It is contrary to my orders. Q. 80 that they ought to appear in every year t — A. ]^o ; they never shoQid appear in any year. The Chaibman. 1 call your attention to the amounts where they ap- pear in 1880 to 1886. The Witness. 1 directed them to be left out in 1884 and never put back again. I thought they had been left our, and they are left out kre, 1 have not had a chance to examine those papers, so that I can- not tell what they are. Mr. Mink would have to account for them. The Oh AIRMAN. 1 want to call your attention to this lepottlieis^ \ iA!^ MtfjBoteiiaL 88 U. S. PACIFIC RAILWAY COMMISSION. The Witness. That is not floatiDg debt. That is a different thing. That is not included in our floating debt. Q. I want to know why these items are omitted in these reports in the years 1883 and 1882, and they appear in every other yearf — A. I cannot tell you. Mr. Mink will have to explain that. They ought to appear in the general balance-sheet. Q. Have you any items, miscellaneous accounts or legal expenses, that appear in any of the books since 1880, where there are no vouchers for each item of payments t — A. 1 think not. Q. All your items, then, since 1880 are vouched for, with vouchers on file t — A. I cannot speak tor 1880, but since I have been in charge they are— that is, since 1884. I supposed they were before that. Mr. Mink knows; 1 do not. I think our vouchers will stand a great deal of in- vestigation. HOSTILE LEGISLATION. Q. On the question of hostile local legislation, I ask you, generally, up- on that question, to what extent has hostile legal legislation affectea the working of the Union Pacific along the linef — A. They have affected it quite seriously. That is, in nearly every State — at any rate in Ne- braska and Kansas — there have been laws passed which have arbitrarily cut down our rates. And then, in a new country like that, and espe- cially with a railroad like the Union Pacific, it has to bear a most inordi- nate share of taxes. Our taxes amount to $ 1 ,100,000 a year ; much more than they would be in a thickly settled country. Q. Has there been any legislation known as hostile legislation that affected the Union Pacific? — A. I do not think there has been any. The legislature of Kansas commenced quo warranto proceedings against us on account of the consolidation ; but those were settled long ago and the proceedings withdrawn. They are always threatening legisla- tion and making us uneasy ; injurious bills are constantly being intro- duced ; but I do not think it has taken the form of actual legislation. At least, if it has, I should have to consult as to particulars with our officers on the spot and inform myself more accurately. Q. Then you do not know of any hostile legislation that affect^i (he general interests of the road? — A. No, except in the particulars men- tioned. LAND GRANTS. Q. Has the United States anywhere aided any of the com))eting lines of the Union Pacific ? — A. They have given them very large hind grants. Q. What lines? — A. The Atchison, Topeka and Santa Fe had a laud grant from the State of Kansa^s; the Northern Pacific had a land grant, which we all know about ; the Chicago, Burlington and Quincy, or the Burlington and Missouri, in Nebraska, had a very valuable land grant from the State of Nebraska, and the Northwestern and Elk Horn. There have been land grants to nearly all the roads, as well as to our own. Q. I am speaking of the United States land grants to roads that* com- pete with you ; you can speak as to the effect of the competing lines upon your roads, can you not? - A. Yes, very decidedly ; I have reason to; 1 have a realizing sense of that; everything in relation to land grants is a matter of record, and my evidence will be of little value. The Chairman. 1 do not know that I want to go any farther to-day. CHARLES FRANCIS ADAMS. 89 Tl:c Witness. I will be here at 11 o'clock to-morrow, and I shoalil like to have my examiDation finished tomorrow, as I mnst go to Omaha as soon as I can get away. The Chairman. Very well ; we will adjourn until tomorrow at 11 (/clock. The Commission then adjourned to Friday, April 29, 1887, at 11 a. m. No. 10 Wall Street, New York, FHday, April 29, 1887. The Commission met pursuant to adjournment. Present: Commissioner Pattison (chairman), and Commissioner An- derson. CHARLES FRANCIS ADAMS, being further examined, testified as follows: The Witness. Before I proceed further I should like to say that I notice in looking at the papers that there apparently is some disposi- tion to comment upon my statement made yesterday that I never per- sonaUy looked into one of the books of the accounts of the Union Pa- ckc I desire to explain. I am not a book-keeper or an expert in book- keeping; I do not pretend to any knowledge of book-keeping proper; and as, Governor Pattison, when you were governor of Pennsylvania, yott never, I presume, looked into any of the books of accounts kept in the treasurers office yourself, so it has been with me. 1 have called, and do call continually, for summaries direct from the books, and hardly a day passes that I do not call for them; but when it comes to going to the books themselves and examining them in detail, I could not under- stand them if I did, for I do not know enough of book-keeping to ena- ble me to go into them intelligently. It is a foreign language to me. Every day in the practical work of my office the comptroller comes to me with his report. He takes my Instructions in regard to how charges shall be made; and 1 call on him for summarized statements, drawn from the books, of whatever I want, whether bearing on the operation of the road, financial conditions, or anything else. 1 take these sum- maries as he brings them to me, and I must necessarily do so, for the books are too complicated for a person who does not make a regular business of book-keeping to look into them intelligently. I am not enough of a book-keeper to pretend to go into the books of the Union Pacific myself; I must take them from others in whom I have confi- dence, those who have the control of them. OMAHA, NEOBBABA AND BLACK HILLS RAILROAD. By Commissioner Anderson: Question. The last one among the operated branches that we have examined about was the Omaha and Eepublican Valley. The next branch as to which I will ask for an explanation is the Omaha, Nio- brara and Black Hills Railroad Company. — Answer. That is a branch extending from the main line of the Union Pacific in a northerly direc- tion in Eastern Nebraska. It is an agricultural road. It has since been consolidated and is now a part of the Omahai and B^\>\>b!&iA!SL y^efBailway Cowpany, which I explained yesterday • U. 8. PACIFIC RAILWAY COMMISSION. ^^H Q. What, is tbe cliaractprof its opcratiou! — A, An agricultnral rood. Q. What has beeu its history in regard to payiiiftt — A. It has beea in connection with the Union Pacitic a profitable! road. Q. That is, taking its own operation in connection with the operation afforded to the main line? — A. Yes; we have a very large constrnctive mileage Item the roads east of us, which in the cAse of this road roakeH it a proiitable road to the Union Pacific, C0N8TEU0TIVE UILSAQE. By the Chairman: Q. In constructive mileage does the branch road receive the benefit! — A. No; tlie Union Pacific n>c(?ives it from the roads east of Omaha. Commissioner Anderson. Wc had better takeeach subject by itself. The Witness, It is a complicated subject, and 1 think you will have to take that up by itself. By Commissioner Anderson; Q. In regard to this road, you say it has become part of the Omalis and Republican Valley R^steni t — A. Yes. Q. And that system, if I remember right, you stated now embrace* about five hundred miles of road! — A. Justabout; 408 miles. Q. And yoar explanation given yesterday includes the explanation that you desired to give in regard to the Niobrara branch T — A. Yes. THE ORKHON BIIOHT LINE. Q, I Und the next company or branch is the Oregon Short Line Rail- way Company. Please state where that leaves the parent road. — A. It leaves it at Granger, about 180 miles, if 1 recollect right, east of Og- deu, Q. Can you indicateon this nmpf — A. I can ; it is marked there very distinctly. Q. That is Granger [indicattngon the large map] T — A. That is Granger. It rons up to the border of Oregon and ends at Huntington, where it connects with the Railway and Navigation Company. Q. At this point it uonuects with what [indicating] t — A. At Hnot- ington with the track of the Oregon Railway and Navigation Com- pany. Q. And that makes connection with Portland, OregonT^A. With Portland, Oregon — Washington business. Q. Is this a proposed extension t — A. No; that belongs to the Ball- way Navigation Company. It is already built. We connect now and run to Portland, Oregon. Q. That is the line between Huntington and Portland t — A. No, not Portland ; Umatilla. Q, Is this [indicating] the Oregon Navigation Company t — A. No; the lower part, running south, belongs to the Central Pacific. (J. This is the Oregon and California 1— A. Yes. The Railway and Navigation Company ends at Portland. Q. And the yellow line is the Northern Pacific system t — A. That Is the Northern Pacific. Q. When was this Oregon Short. Line first thought off — A. About tbe^ear 1881, 1 think. It was incorporated in 18S1. CE[ARLES FRANCIS ADAMS. 91 ITS ORGANIZATION AND CONSTRUCTION. Q. When did tbe coDstruction commence t — A. It must have com- menced, I think, in the fall of that year. It was completed in 1882— two years before I took charge as president. Q. When did yon say it was finished t — A. Oar road was finished in 1883, I think, bnt the Eailway and Navigation Company did not connect with OS nntil after I became president ; that is, some time in Decem- ber, 1884. When I went over the road in the sammer of 1884, immedi- ately after I became president, I went to Hantington. Q. What information can yon give ns as to the origin of this scheme of making this connection ?— A. That is a matter that others are far more familiar with than I. It naturally suggested itself. The theory of the construction is obvious. It was then supposed that the Northern Pacific was in such a condition that it could hardly be extricated from its troubles. The Washington and Oregon business was a very valua- ble business, and the directors of the Union Pacific conceived the idea of securing it by means of the Short Line. Q. With the Washington system t — A. With the Washington system of roads; not expecting that the Northern Pacific would be completed for many years. Then Mr. Villard suddenly appeared upon the stage, and the Northern Pacific was in fact completed first, which quite de- ranged their plans ; and then the Oregon Short Line was completed afterwards, making an equally short line with the Northern Pacific. The two lines are of the 8ame length. Q. Please tell us who the parties were who were originally interested, and most prominently, in this scheme ? — A. There was no one most prominently interested in the scheme. The plan for building the road was the one ordinarily adopted, and adopted by all the lines, so far as I know; moreparticularlj', recently, the Atchison, Topeka and Santa F^. It was proposed to build this line in connection with the Union Pacific. Tbe charter was obtained from Congress as a sort of a child of the Union Pacific, and the right to subscribe to the securities was publicly oficred to all the stockholders of the Union Pacific in proportion to the stock \rbicb they helcl. There were no reserved rights. The rights stood at a premiam. The whole of them were subscrit^d for by the Union Pacific stockbolders, and the money was called in on the subscriptions. Q. Hy question addressed itself to the period prior to that. I want to know who the men were who were the advocates of this scheme of constructing the Oregon Short Line. — A. I think all the directors were convinced of its desirability. Q. Wti8 it the unanimous opinion of the whole board that it should be bailt? — A. I think so. I do not think there was any dissenting opinion about it. I did not belong to the board then. Q, Was that before you were a director t — A. It was before I had any- thing to do with the company in any way. Q. Not before you were a stockholder f — A. I think it was before I was even a stockholder. Mr. Holmes, who is better informed historic- ally than I, tells me that it was started as early as 1876 or 1876. If so, it was long before I had ever been near the Union Pacific. Q. When were these rights to subscribe to the securities of the Ore- gon Short Line offered to* the stockholders of the Union Pacific f — ^A. That is matter of record, but I think it was in 1881. 0* That is about the time you began to be interested in the company t —A. I had some stock then. I forget how much. 1 boug\iti ^ \v^dM6 stock. U. S. PACIFIC RAILWAY COMMISSION. Q. How was tliat road nctimlly bniU. ; by Ibo construction depart- ment of llie Union PaciHc T— A. Yen. Q. HnvL' you cupicH of tde contracts for uoiik true tion 1 — A. Tlicyare on lilu. <J. How many miles is it for tbe whole length of the roa^l from Gran- ger to nuatington T — A. Six hundred and ten miles. CIIARAOTER OF COUKTBY TRAVEH8ED. Q. What is the charucter of the country thi-CDgb which the road passeBf — A. As fur asFucalelloit iBamouiitninoueconDtry. The road rnns iilotig the valley of the river. Q, Whiitriverl — A. The Bear Kiver, and then the Pont Neuf. It is a glazing country, with good farming possibilities in these valleys lying anioug the mouutaius. Then it runs into a lava bed, aud that lava bed extends for several hundred miles. Theu there is the Wood Kivcr Branch, which runs fnmi Shoshone to Uailey, about 40 miles up in the Salmon Kiver mininc country, a mineral region. Then, when they get near the Snake, ou the western bordtT, not far from Bois6 ^ity, the line again runs into an agricultural and grazing country' and out of the lava. Q. What is the character of the country that you describe as a lava bed I — A. It IS a country which is covered with sagebrush, and evi- dently at some time in the history of the world, geologically, it has been in a highly eruptive state, so that the lava lies everywhere. Q. It cannot l)c nued for agiicultural purposes ! — A. On the contrary whorever sage l>rush is found the soil is rich. Tiicre are now great schemes on foot for irrigating that region. I regard Idaho as thu ino»t promising region the Union Pacific uow has open to it. It has the most promising future. The Territory is full of schemes for irrigating, and wherever you have siige brush like that, water will turn the coun- try into a garden. Q. Is it UHturally a ))rodnctlve country without artificial assistance T — A. Oh, no ; no more so than Colorado. Q. Then there are no earnings derived from the productions of that particular section at present! — A. There are a few catlle that graze there. That is all at present. Q. When was this construction actually commenced 1 — A. I think the constructioi) must have been begun in 1880 or 1881. Q. When was the road opened for actual operation t — A. Th« road was opened early in 1882. That is stated in our report, Un page 48of that report you have in your hand you will find it. COST OF OONSTEDCTIQN. Q. Do you remember the rate of construction per mile t — A. On that road I Q. Yea— A. My impression is it cost between ?20,000 and #25,000 per mile. <;. That includes the land t — A. Everything, Q. The grading! — A. Everything. Q. Not the equipment t — A. Yes. The road could be built for less money today, liccause everything has since then gone down very ma- CHARLES FRANCIS ADAMS. 93 BOND AND STOCK ISSUES. Q. How mQcli is that road bonded fort — A. Twenty-five thousand dollars a mile. Q. How mach is the stock per mile t — A. I think it is the same. Q. Did I understand you to state that the stock and bonds were both satecribed for, the first option being given to the holders of Union Pa- cific stock f — ^A. They were all subscribed for by the holders of Union Pacific stock. Kot all the stock and all the bonds. One-half the stock and all the bonds were subscribed for, in blocks. By the Chairman : Q. Did the Union Pacific guarantee the bonds? — A. No; the Union Pacific guaranteed the payment of interest on the bonds, under a traf- fic guarantee. By Commissioner Anderson : Q« You say one-half of the bonds f — A. All the bonds. Q. All the bonds were taken at par f — A. I do not know. These blocks were subscribed for by the stockholders. A block would con- tain the bonds and stock, and they were all subscribed for. Q. The point I want explanation about is that the par value of the stock and bonds is $50,000 a mile, and you state that the construction was $25,000 a mile. — A. Twenty-five thousand dollars: yes. One-half the stock' was retained in the treasury of the Union l?acific, in order to represent the control of the property. Q. And that is there still? — A. It is there still. Q. What were the terms of subscription to the other half of the stock f — A. They will speak for themselves. I have not got them. Q. The cost of your road as entered in thi« balance-sheet is $2G,000,- 000, and your statement that $25,000 a mile covered the entire cost would only give us $15,000,000 for 010 miles ; so that there must have beeu other things besides. — A. There were 40 miles more on the Wood River branch. Mr. Lane. That is included in the 610. The Witness. We have not got $25,000,000 of bonds out on that Une. We have only $15,000,000 of bonds out. Q. Twenty -five thousand dollars a mile for 600 miles would give you $15,000,000. — A. That is the exact amount of bonds we have out. Q. The cost of your road, as stated in the balance-sheet, to balance both half the stock and bonds, is $26,000,000.— A.. That is right. That includes the stock that went out with the bonds. The way it was sub- scribed is this, if I recollect right : A thousand dollars in bonds and five shares of stock Q. Five hundred dollars in stock ? — A. Yes ; was given for every thousand dollars subscription. That is my recollection. Q. Then the stock went with the bonds, without any additional [)ay- ment in money! — A. Yes. Q. And the statement in your balance-sheet of the cost of the road is made so as to balance that issue, and without reference to the actual figures of its cost! — A. The actual figures of cost were different ; but that is what appeared on the books. YALUB OP OREGON SHORT LINE TO UNION PACIFIC. Q. What has been the operation of that road since 1882 as tc geoeralgaestioD of paying its expenses f — A. The road Uaa a\wttS1 U. 8. PACIFIC lUILWAY COMMISSION. its expeimea and uurtied u very uoiishlerablu Eurplus, bat not saSicieDt uj) to the preseut lime tfl pay tbe entiro interest on the bouds as it accrued. We can give yon the tiRurea of that, Q. Has the operation of the road iiuprovcd from year to year f — A. Steadily. Q. Of what degree of utility is thia road to the Union Paciflo as u feeder f — A. Very great, in my opinion. The Union Pacific lias 800 miles haul on every thiug that goes to or comes from that road ; 850 intles, or 860, r think it is. • Q. What proportion of the traffic that goes over that road and pftsses Granger lias come all the way from Omaha t — A. Nearly the whole of it, except coal, &c., which conie» froui our mines at Bock BpriugB, aiid Bome which comes from Salt Lake. CUAHACTER OP UUSINESS DONE. ' Q. What ia tlio character of the freight that is carried all the way from Omaha to points on tbe Oregon Short Linof — A. It wouhl beini- , possible for mo to say. It is miscellaneons fVeight, going to Portlaod* and Washington Territory IVeighl. Q. Can yon not give me thepromiuent items f — A. No; Ishouldha\'e to call for them. There is everything on earth. It would not be |kw- sible for me to specify. Everything that passes across the coutiiieut — trauscoutineulal busines-t. Q. Can you tell me anything in relation to the proportion of freight or ti-alliu that terminates on the line of the Oregon Short Line as com- pared with (hat which goes beyond, to Portland and points beyond Huntington t — A. There is a large business which goes over the Oregon Short Lino up into the Wood Utver country, and comes back from the Wowl River country ; this is mineral. Stuff of every description goes iu. The iieople there raise nothing; they depend upou us to carry them everything. They send out the prmlncls of their miues, and that goefl over the lino IVont ShoHhone. Then the lioist^ City business is of a luJs- cellaneous character. You could get that Information much better by examining our freight agent than by examiiiing me. Q. Please give us Ihe name of the freight agent. — A. Mr. P.P. Shelby would be the proper person to examine on that point — of Salt Labe City. lie is thoroughly informed. Q. Wliat is tbe population that may be said to be tributary to this, Oregon Short Ltnet — A. I could not tell you. Q. Ingeuerul terms, it is very sparse t — A. It ia very sparse indeed along the line of the Short Line. Q. Are there any sjieeial settlements of any magnitude along tbe line of the road T— A. >'o, except BoisiJ City. That is at the western cud of Iho roiid ; and there is a series of towus springing up along SnitkA liiviT. There is a surprising degree of activity yon will see a** yoQ go over I lie line, ii. TIk- population is, in your judgment, increaeiugt — A. Very repidlyj. very nipiilly bnleet). As I say, I regard Idaho as the most promhsing- ■ field of development — undeveloped Held — that the Union PaciBc now bas. I nm very sanguine ni regard to the future of Idaho. Have you over been over the soctiou of the Central Pacific whiol r tbttir Oregon connt-otiou, wWcU iVtj's ca\\ tt\e daX\\oTiA». vu \ CHABLES FRANCIS ADAMS. 95 Oregon f — ^A* I have never been over that line. It was never completed ao that I ooold go over it. I shoald have had to stage it « Q. Do you know anything of the character of that country with refer- ence to the difficulty of construction as compared with the character of the country through which the Oregon Short Line goes! — A. I am under the impression that it is much more difficult of construction. Q. Does that apply to the whole section from Bedding to the north line of Oalifomiat— A. I cannot tell that. The region that I speak of is where the line crosses the Cascade Mountains. I have heard of that; I have never been there. I want to say, in regard to the remark that I just made that the Ore- gon Short Line could now be built for much less than it was constructed foTj that that is true of every railroad in the West that was constructed in the year 1881. Since that year the prices of material have gone down, so that it is safe to say the road could now be built for 30 per eent. less than it was built for then. Q. Thirty per cent, f — A. I think so ; it is safe to say that. GUABANIEE OP H^TEBEST BY UNION PACIFIC. Q. I think yon stated that the TTQion Pacific had guaranteed the pay- ment of the interest on the Oregon Short Line bonds f — A. Yes. Q. When was that action taken t — A. That action was taken at the time. It is a matter of record. Q. At the time the bonds were issued f — A. At the time the bonds were issued. I am informed that January 12, 1882, is the date of the agreement. Q. Was it reported by the Government directors to the Washington antiioritiesf — A. I presume so. Q. You don't know f — ^A. I don't know. Mr. John F. Dillon. I know it was. The Witness. Judge Dillon can tell you about it better than I. Mr. John F. Diixon. There is a record of the correspondence with tbeOommissioner of Bail ways on the subject. WITHOUT THE CONSENT OP CONGBESS. By the Ghaibman : Q. Did you obtain the consent of Congress to make the guarantee? — A. Oh, DO. It was not covered by the act of 1873, our counsel advised us. It was made under advice of counsel. By Commissioner Andebson : Q. Who was the counsel who so advised t — A. It is on record. Sid- ney Bartlett, I think, Judge Dillon, and Shellabarger & Wilson. I don't know whether Mr. Holmes advised that or not. Q. All the counsel whom you have named advised you that the guar- antee was within the limits of your powers and did not require the con- sent of Congress! — A. Yes. Q. Was tibat the precise question that was submitted to counsel, as yon remember f — A. I had nothing to do with it. It was before my time. 1 am merely speaking now of things that I have heard. The Ohaibman. The act of Congress provides — I call your attention to it in connection with that question — that no new stock shall be issued or mortgages or pledges made on the property or future earnings of t tompany without leave ofCongrea8. U. 8. PACIFIC RAILWAY COMMISSION. The Witness. My nttentiou hua been called to tbat inHuy, maay tinius.. It has beeu uuder loni; aud careful c(iiisi<leration. I have par- Hiied uiit^ uourse in regard to all those tliinRS and I thiuk it is the 011)7 couri<o 1 cuiiid iiursui}. I liitve nubmitCcd the guestious as they urotio, affwetiiig acts of OoiiKress or what not, to our eoun»el ; and when Mr. Burtlett or Jud<;e Dillon tohl nie t« go ahead on a certain line, and that it wiiH I[-{;h1, I did not undertake to revise their jndgiueut, any mora than I Hhould the auconiits of the coiniitroller. I Riinply went ahead. 1 have their opinions in writing. Q. The (Jommissioneni would like to have their opinions. Will yoa produce thorn t — A. You will have tlieni. I have never yet met any oonniiel who hail a different opinion on that point, and I have bad the advice of almost iniinuierahle counsel. The Ohaiuman. On the advice of counsel you yourself take the risk of the penalty in the act f Tlie W1TNK8S. Of course I must; I cannot help that; 1 cannot go behind the opinion of counsel ; 1 am au official of a corporation, if the Uovernnient were to obtain a different deci.sion, I of conrso must bear the penalty. I could merely fall back on our lawyers and say, " Tber* is the written opinion, and 1 could not undertake to revise it." For everythin^r l have ever done as president 1 have had the written opiii* ion of bouusut ; but all that was an aceouipliuhed fart before I beccunft president. I had no part in it. The Chairman. Of course the Commission naturally run into this act in this examination. The Witness. Oh,yes^ I shall refer you there to Jndgo Dillon. Ue is the keeper of my conscience on all legal issuer. THE DEFICIT ON THE INTEREST. Q. I will read you the ttgures of the deficit on the interest payable on these bonds. For the year 1833, $100,000; in 1884,444(1,000; in IS-^A, $330,000; in 188ff, $395,000. On what do you bn«e your cxpeu^ tation, in view of the figures shown by your i-eporl, that this company will be able to pay the entire interest on its bonds, waiving for the pres- ent the qnestion of any dividend on its stock t — A. T base it simply oa the inoreiise of business. Q. On the expectation of the increase of business! — A. Yes. ii. And the entire deficiency which I have stated in the interest faaq to be made up by the Union Pacitic from its earnings from othai sources ! — A. Yes, from its earnings. Q. Under its guarantee T — A. Not its earnings from other soorceti; Itl carninga from this lino. Q. Thu dolicicncy has to be made up from the earnings of the differ- ent lines 1 — A. No, not at all ; the earnings from this line are f&t more tlian sufficient to make up the deficiency. (j. 1 am 8|>eaKing of the last four years. — A. 1 also am speaking the last four years. The Union Pacific during the last four years ll_ made money out of the Oregon Short Line — most distinctly and emphaK ioally made money out of it. Q. Htill the earnings that are required to make np the amount quired for the interest have to be taken from the earnings of thn llnfod I'iiciflo, which are not the local earnings of the Oregon Short Lino. — A, Not the locnl earnings of that line, but still the earnings of the Unir^^ Puoitli; from basiuess derived from the Oregon Sljort Line, whicb Nover Mould Imve bad if the Oregon 8\iOTV \An<i\\ai\ 'i\«V\acftVi,\»\VA, > CUABLES FBANCIS ADAMS. 97 Q. Does not the deteriniiiatiou of that statement requii*e the exami- nation, and the close examination, of the derived business which the Ort*gon Short Line furnishes to the parent line in order to ascertain tuat the net advantage from that business is equivalent to the defi- ciency f— A. Undoubtedly it does. Q. And your statement is that after such examination you dechire that it was more than sufiicient to make up that difference ? — A. That is my statement. Q. Have you those statements in writing! — A. No; I have called for them from time to time, and they are made up for me. I stated 3'ester- tlay that the Union Pacific, as far as I can now ascertain, derives about $5,000,000 a year of profit from the branch line business which it does; not, yoa must observe, from business done over the branch lines, but ^m branch line business done over its own lines between Omaha and its branches, and this Oregon Short Line business would be included in it The Union Pacific has a haul of 800 miles on the Oregon Short Line business, and business of that description is the most profitable business a railroad can do, without any exception. I should like to enlarge on this a little, because there is a very great misconception on the subject. THE LONG HAUL. The business a trunk line does for its branches is its most profitable boriness. All it does is to hitch a locomotive to a train of cars and haul that train 860 miles in the case of the Short Line ; it then turns it over at Omaha, if it runs East, to the Chicago lines ; or at Granger, if it goes West, to the Oregon Short Line itself; and then another locomotive is hitched on b}^ the connecting line and the train is pulled off. It is a basiness upon which it is safe to say the profit is larger than on any other possible form of business which a railroad company can have ; and it can be done at a lower rate, and therefore when you take an ex- tension like the Oregon Short Line, which receives whole trains of loaded can every day which are simply hauled and turned over to it, the busi- ness can be done by the parent line at a wonderfully low figure. Q. You have to pay the same wages to the brakemen and the fire- men on the trains f — A. And that is all. Q. Yoa have to pay for the wear and tear of the wheels f — A. Yes ; bat that is trifling. Q. Do you have to i*epair the track t— A. You have to repair your own track; you would have to do all that, you know, even if these trains did not ran. BAILBOAD OPEBATION DESCRIBED. Q. Is it not absolutely true that the wear and tear is directly propor- tioned to the number of trains that pass over a road ! — A. Not by any means; decay goes on just the same whether you are using a track or not. Decay is what affects our ties, which are such a large element of expense, and our bridges, and it goes on just the same whether you are using your road or not. So of care of the road. The thing that makes the expense in handling a railroad is the delay of your cars at local sta- tions on your road. For instance, a car is hauled 20 miles out of Omaha on the Union Pacific proper ; it has to remain there three days to be loaded and unloaded, and the wheels are idle. Tou take the cars that are going to the Oregon Short Line and the wheels are turuiugui^Vit wid. df^ eanuDff money the whole time. No one has to \)e al 11^^ \Q^aSL ita^ 7p s U. 8. PACIFIC RAILWAY C0MMIB8ION. tioii to hmidlu ttie fm^tit ; tliuro is aothiiig to l>e iluiiu bnl Httuply bit^ih ii lo(»>m»tivu oil iiiid iitilt a full triiiii SUO niilcn. Q. Is it nut trne tliut at curtiiiii rates of fmi^lit tliu mi)UuH of a hviglit train U a loss to the road instead of beiug »ii advantage T — A. niiiloulitedlf. That, bowever, euuuot bo flxod ; it dqicDds npon tba rlana of bneinosa. Q. Are the ratos whicb are paid fur Oregon Short Liao fVoigUt, an ap- plirablti to the Uoiou Pacific portion of tbo line, remunerative rates 1 — A. I cAunot tell y.ou. Uecently my attention was ealUnl to the fart tliat tlic business during one month was being done at a remarkably low rate. My attention had not been called to the fact previously, and I sent ont to inquire why it was. 1 take it that it waj4 some local disturbauus which could be remedied, lint we have a regular through transcoutb nental rate; the same rate that the Northern Pacific has. Q. Compaiing together branch mads which have been constructed by n nystem like tbo Union Pacific and branch roads which are conatrauteu by the enterprise of the people themselves who deairo to develop a given region and to make a connection, why is it better to have (be parent ruilrowl do all this workT — A. We would be Ter>' gla«l, in most ciwea, if such an arrangement could be made. There, as a rule — what hoH been so strongly criticised — the construction company comes in. It has been suggested to me repi>atedly that the only way for the Union Pacific to overt'onio the difliculty was for the directors to build all these roada and lease them to the main line. 1 have stutwl that tliat did not eeem to me to be sound policy. That is what you suggest I • Commissioner Andeuson. No, sir. The Witness. That is what it all comes to. The money comes from- the East. It is put into tbo branch, and the branch has to be oonnectM with the main line ou some terms, Commissioner Andeuson. I presumed there weresomeciti^enauf the United States who were not directors i>f the Union Pacific who might lie Interested in such enterprises. The Witness. Undoubtedly; but I do not think such a case probablu. Wo have hud some lines built in that way, but the profit on the busi- ness always does and always must go to the main Unes. Q. Are there not many branches of Kastern roads that have lieeu built by local enterprise, in which the main road has had no oonueo- tion whatever!— A. 1 think wherever it has been done you will find that the road has ultimately been leased to the main lino, because it can be operated much more economically as a leased line or as a part of the main system than as an independent road. VALUE OP BUANCn LINES AS PBBDEB8. Q. What I refer to particularly is this, that where a great systfim like the Union Pacific is anxious to develop itself by the constructloa of branch lines, is there not danger that in the desire to hasten the de- velopment of the road they will run ahead of the development of the country and eoustruct lines before the period comes when tliey will bo remunerative!— A. That is the history of all railroads in the United States; lines are constructed before they are remunerative; but they an constructed much more quickly in connection with amain hne, and macU more economically and profitably than they can be when they are *Mjn. Btructed independently. Q. The result of the history of tlie couaUvicUou wt souv branch linea ja that in a /arg-oanmbcr of instances l\\e5\ia.v« uQtVwftiitoraA\«'ASM CHARLES FRANCIS ADAMS. 99 ble ; is not that so t — ^A. I think that generally, with very few excep- tions, they have been fonnd profitable in connection tcith the main line. It 18 there the econoniical question comes in. The business tbey briuj? is to the main line new business. For instance, if we build a Hue 50 miles long from Granger, the business comes from or goes tq the Eiist, and we have a haul on it not of 50 miles, but of 850 or 900 miles. The haol of 50 miles has no profit in it, but if you can do that same business and haul it 850 miles there is a very great profit in it. It is the length of haul that makes the profit Q. As f^ as the Government interest is concerned, I understand yoor proposition to be that the amount of 25 per cent, of the net earn- ings'of the Union Pacific, or of that portion of the Union Pacific which has been aided by the Gk>vernment, reaches a larger figure under the actaal operation of the Oregon Short Line than those net earnings would reach if the Oregon Short line did not exist? — ^A. Unquestionably. It does not admit of doubt. Q. We would like a table of that specific information. — A. You shall have it. In my opinion, speaking without the card, I do not believe that the 25 per cent, of the Government to-day would aggregate more than half what it now aggregates if the branch line system of the Union Pacific had not been built. LEASE OP OREGON NAVIGATION COMPANY TO OREGON SnORT LINE. Q. To return to the Oregon Short Line : I notice that within a few days a lease has been made by which the Oregon Navigation Company has become lessee to the Oregon Short Line. Will you please state what that transaction was! Mr. Dillon. Lessor to the Oregon Short Lino. Commissioner Anderson. Lessor to the Short Line. It has leased itself. A. It was a negotiation which has been going on for two years and which was brought to a close last week. We were delayed in coming to a dose earlier owing to the difficulties which the lawyers found. The heads of an agreement had been reached long ago, but the lawyers threw so many difficulties of one sort and another in our way that we codd not consummate the thing. Finally we got a law passed by the legislature of Oregon (both the Short Line and the Navigation Com- pany's tracks being corporations of Oregon) authorizing the lease, and that removed the difficulty. The lease was then made. Q. Will you please furnish the Commission with a copy of the lease f — A. Certainly. Q. What are its general terms ? — A. The usual terpis of a lease. The property of the Navigation Company is turned over to the Short Line, and the Short Line guarantees the payment of certain sums of money. We have complete possession, just as if wo owned it. AMOUNT OF rental. Q. The Short line guarantees the payment of the interest on the bonds of the Oregon Navigation Company! — A. Yes. Q. And what per cent, on its stock t — A. Six. Q. Do you know the amount of the stock t — A. Twenty-four million dollars. Q. And the amount of the bonds f — A. The amount of the bonds I cannot now give you. The whole amount of the reiital 'wWV \j^ ^iMaib 02^,mayear. U. 8, PACIFIC RAILWAY COMHI8HION. Q. WliHt iisiiitiiaatioa have you made of tbo uut unriiiiiffH of tlio Oro' f^uu yiivigution Ooinpaiiy for tlio past tbreo or four yoarsT — A. I bave \ beoii prelty uoDHtautly viigaj;fi(l on it. Q. Will youfiiruisb us with reports of that company T — A.. Oertaiuty. I would rather give you the exact figures iu these matters thau Ktate my memory of them. I eannot pretend to carry all theae items in my miitd. I e»n only giro them generally. Cj. We only want your Judj^ment as to how goo<l a bargain you think the Oregon Short Liuu tias made. — A. How good a barKaiu bbo Navi- gation Uompauy made 1 Q. No ; bow good a bargain the Short Line madel — A. I tUiuk it ia a goo<l bargain for both sides. My impression is that it is a very good bargain for both Bides. FUTURE op THE CONSOLIDATION. Q. rnyourjudgment,isitpos8ii>le,from whittyouknowof tliebOMtuvM done by the Oregon Navigation Company, that the burden on the Ore- gon Short Line at any time during the next tow years will be Inuroiuied instead of diminisbedt — A. My impression is now that the two com- jianiescan act together; that there will bo a very great development of that conutrj'. Uustness will liow into it and How through it m larger volume than ever before. Then, a part of the agreement is that there ia to lie active construction to complete our itystem. Emigration is pouring into that region very rapidly, and I look to »ee new liues of iuiHinosa develop under a joint management, a common management, and I confidently look forward to very beneficial results both to the public (it breaks down artiticial barriers) and to the local eommunitie« of Oregon and Idaho, as well as to the companies themselves. (j. I[i the eveut of disappointment in any of these auticipatioDS could the disappointment go beyond the fact that the Oregon Short Line would bo compelled to foreclose its mortgage, so as to get rid of the lease T — A. The Union Pacific comes into it as a tUird party. The Union I'aciflc cA>mes in with ii form of gaarautee much like the Oregon Short Line, and I should say tliat the lease was tolerably safe. Q. Then the foreclosure of the Oregon Short Line mortgage never c^nld take place so long as tke Union Pacific pays the interest^ — A. So long as the Union Pacific stands in the way, no. Q. If the result of the lease should impair the earnings of tbe Oregon Short Line T — A. It would be the nsual case of a collapse. P08SIBLB BB8ULT8 TO THE UNION PAOIFIC. Q. And the burdenon the Union Pacific wonld thereby be increased (— A. It would be increased; yes. Q. But that is not at alilikely,acconUng to your view of the elements of this contract t — A. I don't think it likely. Q. Then, iu regard to the stock of the Oregon Short Line, huw muob did you say remained in tlie treasury of Uie Union Pacific T — A. I should bave to look at the bookR ; it is a m^orily of the whole Htock. IQ. If this Oregon Na%-igation contraotshould be profitable, that would benefit the stock held by the Union Pacific 1 — A. Very largely. i Q. The stock so held is 98,000,000 1— A. It is so stated in our return. J Mr. LANS. J'age 50. M CHASLES FRANCfIS ADAltS. 101 SALUTA and SOUTHWE8TBBN RAILROAD. - • * • Q. I find a branch called the Salina and Southwestern Bailroad Goih- pany. Will yon tell ns about that f — A. That is another of those agri- CQltural roads in Kansas. It branches off from SallDa^ on the Kansas Padflo, and runs to the town of McPherson, about 25 miles. It is like the other roads that I spoke of in Kansas ; it is an agricultural feeder. Q. How many miles is it from Kansas City f — A. One hundred and eighty-five miles. That makes the line practically 220 miles long. It is stated in the report for 1884. Q. What has been the result of the operation of that road f — A. It has always paid its operating expenses and more, but I should have to look to ascertain whether it had paid the full interest on its securities, all of which we own. There are none of them in the hands of the public. Q. When was this road built f — A. It was before my time. Mr. Holmes. 1878 or 1879. The Witness. It runs through a remarkably beautiful country, rich aod fertile. A few years ago it was the greatest wheat-growing county in Kansas: the champion county. Q. You know nothing yourself personally of the circumstances at- tending the construction of the road f — A. Nothing whatever. Q. And the acquisition of its securities f — A. It was entirely before my time. It was before the consolidation, even, that it was done. Mr. Holmes can tell you all about it. Q. Who holds the secnrities f — A. They are held by our trustee or tke tmstees of the Kansas Pacific consolidated mortgage. There are none of them in the hands of the public. The branch belongs to the Kansas Pacific, in other words. Q. What is your judgment as to the advisability of retaining the operation of this branch in connection with the Union Paciflc t — A. There is no question of it whatever. I should as soon think of the Missoori Pacific or the Atchison, Topeka and Santa F6 or the 0., B. and Q. parting with their branches. They guard them jealously. Q. You would as soon think of cutting off one of your own fingers 1 — A. I would just as soon think of cutting off one of my own fingers with . the idea of strengthening my body. Q. The next line I find is the Salina, Lincoln and Western Railway Oompany. Please tell us about that. — ^A. That I explained yesterday. That rans from Salina in a northwesterly direction. SALT LAKE AND WESTERN RAILWAY. Q. I should have said the Salt Lake and Western. — A. That is a part of the road I was speaking of yesterday, the Utah and Nevada. It is merely an extension of that. Mr. Lane. From Lehi Junction to Silver City. It is a separate organization. The Witness. I forget about that. Is that the road to 'Frisco I Q. It goes from Ironton to Silver Qity, 57 miles. — A. It is a part of a larger ro^ ; it is a road that runs down from Lehi Junction. It is a [Mrt of the Utah Oentral system ] it is a road that branches off from Uhi Janction, on the Utah Central, to the mines at Tintec, down in Central Utah. It is a mineral road, and it comes under <^ Bishop" Sharp's management, which explains why I know so little about it. Q. What is the character of its operations t — A. There is some graz- iBg ooantiy there^ hut it is mainly a mineral region. li\exet ^«g&>i!tot^ Aatiace, 102 •. .•iir.-i.'jefccrflc RxawAY commission. , ■ij.VTfliabliaa boeu its Qiutncial liistorjl — A. I should have to look it 'ml.' *ft is aroHd I know little about, Q. The ioconio account appears to lie debited about $50,000, ducH it not T — A. !t haa more than paid its operating expon«es every year, bat thpro haa been Bome deficit. Ynii had better ask Sidney Dillon, and "Hishop" Sharp about that road. Tlioy conid tell you mtieh rlearly than 1. TllH SOLOMON KAILROAI). Q. We next find the Solomon Railroad Compiuiy. — A. Tbut is a road in Kansas. I say the aiiiue of that as I have snid of all tiie other Kan- sas roads. It riiua along the Solomon Uiver, in a verj' rich country. It is an agricultural road. Q. How far f^'oni Kansas City is it f — A. Two hundred and twenty two miles. Q. Has its operation paid the interest on Its bonds T — A. It haa paid its operating expensei^. I should have to ask about the interest on its bonds. All the bonds belong to us. Q. The ineouie account appears to he debited some ♦•^0,870 T — A. It paid Ita interest year before laat, but whether it did last year or not I cannot say. You will have the fuct^ before jou In the tables. All the bonds belong to the Kansas I'aeilleroad. It ittn branch of the Kaiisai I'acifle. Q. What have you to say as to the nae of that rond as a feeder of the Union I'aeiflcT — A. I say the same that I did in regard to the Halina and Southwesteni and the others. Q. Then^ is no doultt about its being desirable f — A. 1 think not the slightest. I think the Kansas I'aeific would be in a very bad way If it did not have (hose branr.lies. UTAH AND NOItTURllN KAILWAY. Q. The next branch is the Utiih and Northern Kailway OonipatiT Please expliiiu about that. — A. That is a larger atl'air. The Utabana Northern Kailroad Company is a road whieti runs fromOgden, the went' era terminus of tljo Union Pacific, up through the Territories of IJtahi and Idaho and Montana to (iarrisun, where it makes aconiiection with; the Northern Pacific. There are about 450 niiles of it. It ends at Sil- ver Bow now. There are, in exact numbers, 406 miles. It ia a road, which was originally constructed by the Mormons. Q. It is west of the commencement of the Oregon Short Line, then 1 .—A. Uh, no; it eroaaes the Oregon Short Line at Poentelln, about 100 niilea west of Granger. Q. I say west. — A. Vou are right. It crosses the Oregon Short Liufl at Pocate'llo, right at that green spot that you see on the map, Q. Here [indicating ou the largo map] J — A. Yes. That green spot is the Indian re.servation. It crosses the Utah and Northern about tbs middle of the Shoshone Reservation. Q. And makes connecliou with the Northern Pacific at what point t— A. At Silver Itow to Garrison. Silver Bow is the point where itut ]ireseut Utah and Northern strikea the Montana Union, and then itgooK over the Montana Union to (iarrisou, about 50 miles further north. Q. When was that road eonstrueted I — A. That road was cunstTDctM] by llw Mormotm; Itrigham Young was the cughieerofil — long lieforq my till w. II nins baek into aneient \iiRUiT>-. CHARLES FRAKCIS ADAM8. 103 Q. When did the Union Pacific obtain itsintereatf — A. Long before I knew anything of the Union Pacific ; in 1875. It bought the stock of the company. Then it extended the road. At first the road, I think, only went to Pocatello. That road has been very profitable in the past. ITS HISTORY. Q. What has been the financial history of the operation of that road f — ^A. It has been very profitable indeed. It has paid dividends on its stock as well as the interest on its bonds in years past. Q. How was it in 1883 1— A. In 1883 the Northern Pacific had been bailt through, which cut the Utah and Northern business right in two, taking from us half of the business of Butte and the great camps at the north. The Utah and Northern suffered greatly from that cause and from various other causes, such as the price of copper. In 1883 or 1884 it began to improve. Mr. Lane. 1885. The Witness. 1885, 1 am told. Q. These remarks apply to 1885 1— A. 1886. Q. What is its present business; how is the business running at present t — ^A. This year the road will pay its oi>erating expenses and all its interest, and in all probability have a surplus over, judging by the way it starts out. Q. What is the junction point with the Union Pacific? — A. Ogden. CHARACTER OP COUNTRY TRAVERSED. Q. Please describe the country between Ogden and the junction point with the Northern Pacific. — A. From Ogden the Utah and Northern rous Dorth through a very beautiful agricultural and grazing country filled with Mormon settlements, although here it is a very badly located line. It was located by the Mormons, and they located it, as I have been told, on religions principles; that is, they did not want it to go through the towns, so they put it up on the hillsides when they might perfectly well have put it down in the valley ; that holds good until you get north of Logan ; then the road begins to run in a more hilly coun> try until it gets to the top of the water-shed, when it ])a8ses into the lava country of the Shoshone Ileservation and goes along the Pont Nenf until it strikes the Snake at Eagle Bock, north of Pocatello. That is all a lava region. They are, however, now bringing in some large irrigating schemes, and that country, there is every reason to soppose, has a good future before it. From there the road follows up by tbe gate of the Yellowstone Park, with a mining region on its west, from which it derives a very considerable business, until it passes the divide of the Rockies and comes down on the headwaters of the Mis- souri in a very beautiful region, agricultural and grazing — a beautiful region. It terminates practically at Batte, which is now the largest and the most active mining camp in the world. The road does an im- mense business there. Q. What is the principal character of the business which passes over the road f — A. We carry coal, coke, and salt to Butte, to the mining camps, and everything that they eat, drink, and wear. We bring away the results of the mining camps— smelted ores and matte and whatever comes out of the mining camp. Matte is the product of copper ore. Q. Substantially all that business, going both ways, pa&a^ov^T \h!b entire length of the Uuion Pa<jificf— A. No; for thft mot« eei()\iO\B3k«sA n. 8. PACIFIC RAILWAY COMMISSION. liaiidliiig, wo turn tLat biieiiiOHB otf at Tocatello and carry it dowu ovkt the Oregon t^bort Liue to Granger, and it pat)seH ou to the Union Piicifio at Grange/, Tliat is, we go ovit tlie liyiiotheuuae of tbo triangle. If iro cany it to Ogden we bave got to drop down into tbo valley of Salt Lake and I lion lilt it up again on tbeothor sideoftbe triangle; whereas by taking the other liuo we go east by the hypotlieniiae. t;. Is the aide of this triangle between Ogden and the point where, yoii cross the Oregon Short Line reinuncnitivcf — A. It is. (J. That has none of the through bnsinosB, 1 understand 1 — A. That baa a very considerable husineBS, local business, from Salt Iiflke. Tbey earry salt up and a certain amount <»f coal. Of conrseit would be more remunerative if we forced all the buainesa round two sides of the tri^ angle. Q. Then the Utah and Norlberit is subHtaiitially a onntinuous liDO with the Utah Central, which riinH south from Ogden f — A. Yes; but the two have nothing to do wiib each oilier ; they are wholly distinct corporations. liy tbo way, ytai asked why we could not lea^-e thd building of branch linos to local enterpiise. Those two roads were, started by local enterprise, both of them, ami the Union Pacific come in afterwards. The local support was not able to carry the enterprise on unaided, Commisaioaer Akderson. I am a hoiuerule man. The Witness. We wonid be delighted to see liomv-rulo if it conld only be made efl'ectnal and do tbe work. (Jommissioncr Andebson. That, I believe, completer the reference by yon to all the branchee operated by your road. The Witness. I should say it did. rONSTEFCTITB MILEAGE. Q. The subject of consiructive mileage has been referred to nereral times. Please tell us what is uuderstooil by constructive mileage A. It is a system which is in use throughout tbe United Htates, ro far as I know ; certainly it is in use in New Knglaud. A parent mad, we will 8&y a main line leading to a terminus like Bostou, New York, or Pbila- d^phia, somewhere on its line meetB a branch, say 50 miles long. That branch picks uji business in little lots, a car-load here and a car-load, there, and bringing it down, delivers it to the main line. The inafB line then carries it to its terminus ; from that terminus again It cArriei the train back and delivers it over to the branch line, which n^in peddles it out, as it were, distributing at local points. Therefore, It has been universally the custom to recognize it as an economical thct, fotmded on sound principles, that the main line, doing the business on: much more advantageous terras and coneequenlly much more cheaply than tbe branch line, should allow the branch line constructive milengci: that is to say, 2 miles, more or less, to 1. For instance, it the branoli: is 50 miles long and the main line 100, and the branch line is allowetl i to ], each line would be counted as 100 luiles and tliey would divide the results of the business equally. In the case ol* the Union Pacific, from the beginning — tbo earliest days — this principle baa been recog- id, and every liue with which it has ever connected at Uuiaha (Enst- orn lines) has allowed it an arbitrary constructive mileage. TbeChi-^ cflgii, linrliugl'tii anil Quincy, the Eock Island, tbe Northwestern, the. Saint Paul, ilic Wabasb, all allow us this constructive mileage, which rangon liitwit /nmr .'i niibM to 1 to a \m\^ aw\ a \\v\\f \o \ CHABLES FRANCIS ADAMS. 105 Q» They all allow that constructive mileage to the Union Pacific t — A. Yesj they all allow it to the Union Pacific; it has been so fh>m Uie beginning and is now a part of every contract. The Union Pacific, then, does exactly the same thing to its branches which its connections do to itb When it comes to a branch it allows it a constructive mileage ; one and a half or two to one, or whatever it may be. Attention was called to this matter years ago ; I think in 1882. APPROVED BY GOVERNMENT DIRECTORS. Bnmors were afloat that we were bleeding the main line for the bene- fit of the branches, and the Government directors took the matter up. They looked into the matter. They were not a board particularly friendly to the Union Pacific. Mr. George G. Haven, who was mainly interested in the Chicago, Burlington and Qnincy road, was the chair- man of that board and wrote its report. They went into it very fully; tliey stated all the facts and approved of the arrangement, declaring that the divisions made were fair and just, such as prevailed among other roads ; they have remained the same from that day to this. Q. Have you their report t — A. Certainly ; it is in their regular an- Bual report. I can call your attention to it in a moment. Q. Is it in the Government report of that year t — ^A. It is in the Gov- ernment directors' report of that year. I can give it to you j we have it. Q. While conceding the propriety of that division, as between a parent road and branches who all work in the same interest, would it DOtbe a dangerons method if the parties who had the control of fixing Ae rates, as owners of stocks or bonds of a branch road, had an adverse iDterest to the parent road f — A. Undoubtedly it would; it would admit of abase. Those things always admit of abuse; there are few things that do not, so far as my observation goes. But I have looked into that subject pretty carefully, and I think the Union Pacific has tried to do to its connections exactly what was done to it by its connections. EFFECT ON GOVERNMENT'S 25 PER CENT. Q. Please State the exact effect of this, without reference to the just- ice of the thing at all ; the exact effect of it in relation to the net earn- ings which would remain as applicable to the Goverrment's 25 -per cent— A. The Government makes very largely by the application of wjiat is called the constructive mileage rule; that is, through what is allowed to us by our Eastern connections under the rule. If a rule is to be applied it should, of course, be applied universally. If the Gov- ernment only allows it to be applied where it works in its favur and then lefuses to have it applied where it works against it, the Govern- ment naturally would make. It would be so with a man also. But the Government still makes, unquestionably — I have no doubt of that — by the constructive-mileage rule universally applied ; that is, the main line ma&es more under the rule at Omaha than it loses under it farther West Q. Taking the allowances to the Uuiou Pacific as an advantage to ihi* Govttmnent, and the allowances A. (Interposing.) By the Union Pacific to its branch lines f Q. (Continaed.) And the allowances to the branch Mwt mm m iliimA' vantage to the Government A, (iBterraptiDg.) The Qovernment makes. L lOf! u. s. PAcrnc railway commission. Q. (Continued.) The balance is in favor the Goreriiment f — A. Ua- ilonbtecliy. Q. Can yon furnisb us with tables allowing that result f — A. The mat* ler is one vhich I have bei^n looking into for my own informatioti for a long time ; it bos given mo much trouble. I nm now having accounts l<ept to Bbow the actual result. Q. Who has chnrgo of timt business! — A. Tlio accounting depart- ment. Q. Is there not some one especially charged with it whom wc can see at IJoHtonf — A. Not at Boston ; that has to be done at Omaba. ii. AVho do you refer us to f — A. Our auditor, Mr. Young. CHIEF BENEFITS KECKIVED BY BBANOn LINES. By the Oqaibman : Q. Is it not true that t)ie beneflls under the constrnctive-inileago nystcm are all in favor of the branch lines or unaided roadsT^A. Un- doublodiy. Q. Then ;s it not also true that if that be so the income or groHS re- rcJiits are that much less to the Union Pacific 1 — A. Undoubtedly, just as the Union I'aeiflc receipts are so niueb greater by tlio application of the rule lit Omaha. Q. Would not the calculation of benefits to the Government be jusfc that much decreased by reason of that! — A. Yes; if we abolinb the rule at both ends, the Oovcrnment would lose at Omaha and gaiu al; the West ; but if the Uo%'ernment takes the ground that they like the rule very well when it works in their favor, but will have nothing to da with it when it works against them, undoubtedly the Uovemnient will l>e tbo gainer. But, I take it, when the Government directors approve of it Ihe Government will not upset the rule. We bavo the Govern^ ment directors ilat on record on that point after careful examination. Q. It is not the custom to go behind the returns, I believe T — A. Th»2 have done it in one or two cases. Q. The table then that you will give us will show the benetlts to thi branch roads t — A. Yes, undoubtedly; when it is printed. Q. And the income to the Union I'acilict — A. Yes; there lias b«en so much unintelligent talk on this subject that 1 was anxious to iibov what the working of the rule was throughout. FBEIQIIT AGENTS. By Commissioner Anderson: Q. How many freight siti>erintendenls are there between Omaha and Ogden who have control of the rates of freight between thoue jtointM, and oti the iuterveniug liucsT — A. Thera is only one. Q. Who is tbati — A. Our general freight agent, Mr. Monroe, Omaha. Q. Does he determine all questions relating to freight rates T- The Union Pacitie, like all large roads, is divided into live department^ one of which is known as the commercial department. The commerdw department is under the charge of General TrafHc Manager, Mr. T. h, Kimball. Mr. Kimball has under him a general freight agent and gen- eral passenger agent. So the thing is subdivided. There is also att intaiBtaiit g'cneml tnifiic niunapev. The rates for the western iKirtlOQ ofllie line !nv made by M''. P. V. H\io\\i>',ftVV3!jfe\\,v\wC\,'V\v.Waws»fe' CHABLES FBANCIS ADAMS. 107 the general freight agent at Omaha. They are in constant telegraphic commanication. CONCEENINO SPECIAL BATES. Q. What freight agents of your road have authority to make special contracts for freight with individual merchants in different localities f — A. Since the 5th of April no one has ; we have no special contracts. Q. Since the passage of the interstate law t — A, Since the interstate- commerce law took effect. Q. Prior to that timet — A. Prior to that time it was all done in Omaha. Wherever a special rate was made they telegraphed to and fro and obtained authority to make it. The traffic has to be concen- trated at one point. Q. Were those special rates reported to you f — ^A. No, they cannot be : I have to depend in this matter upon the general traffic manager. Q. Did you make it a part of your business to look into them when visiting Omaha t — A. No j I talked about them with the general traffic manager. As respects the more important, where they involved some- times two or three million dollars of business a year, as in the case of the Anaconda Mine or the Grant Smelter, the general manager would come to me at last and say, " What shall we doT' After talking with him I would decide the question of general policy ; but when it eame to details, the general in charge of an army might just as well himself try to overlook the details of his quartermaster's department. OONCERNINa DISCRIMINATIONS IN BATES. Q. To bring the subject up in a different way, I will ask it in this shape: Have many complaints been made to you from merchants or persons engaged in business along these different branch lines, or on points on the main line, of discriminations ma<le in favor of their rivals . in business, which they themselves were unable to getf— A. I think they have been very rare indeed — very rare. Q. There has been no great complaint then in regard to discriminat- ing in favor of or against particular persons I — A. Sometimes, yes. There have been cases that have come to me. I remember, for instance, that ex-Senator Hill, of Colorado, came to me once or twice alleging that he could not carry on business. Other smelters have been to me, and 1 have talked the matter over with them and endeavored to reach some conclusion ; but the cases are rare. Q. What was the business that he was doing f — A. He is a large smelter of ores at Denver. He complained that he could not get the ores on equally favorable terms with his competitors. Q. Where was his mine? — A. He bought ores. The works were at Denver. Q. That related to the transit of the ores from what points ! — A. He got his ores from Idaho, as I understood him, and other ores would come from Leadville over our South Park road. We have a large mineral Rystem; it is very complicated. I will say, and I say it perfectly frankly, that I have always avoided those discussions, because 1 could not understand the ramifications and details of the business unless 1 devoted my whole time and attention to it, and I was sufficiently busy with the proper duties of my office. The general traffic manager un- derstood them ; it was his province, not mine, and lie camv^ to va^ %\\sl- p)yoa qaeatiou9 of general policy. I 108 D. S. PACIFIC RAILWAY COMMISBION. CONOEE5IKG DISCRIMINATIONS BBTWEBN LO0AUTIB8. Q, To poas from wliat may be called diacrimiuatioDs an between iD4J viduulH, has tbere been any complaiut made to you of discrimination ill Ikvor of localities t — A. I have seen them coutinually ; the looaljtia in Mie West, like all rising localities, are prone to be jealous of eaoj otber, and to think tbat one bas tnore advantage (ban auotber ; and fl Ibfi case of a road like tbo Cuiou Pacific, which teruiinateB at coiupotiuj lowiis on the Missonri River, thisjealonsy is incessant. Q. What particalar localities have been loudestiu theircotnpluiutT- A. I have had groat diUicalty at Ooancil BliitTs and at Omaha. Thi said at Council Bluffs that wo favored Omaha, and at Omaha they aal we favored Kansas Oity. Those are examplos. Q. Are there any other localitiea that occnr to you j wc expect to , there, and wish to be referred ta theml — A. ! thinli you will hard! flml a town ou the road that does not think the next town istbefiivor town ; they generally intimate that the directors own real estate in next town, which causes them to favor it. They are very prone (o tin feeling. OONCEKNING DISCRIMINATION IN FAVOR OF BRASCn LtSES. By theOnAlHMAN: Q. Have you as a matter of fact, iu the general managemont of tL roaU, in giving to the unaided linos the beneilt of rates, diseriniinatHi u favor of the branch lines as against the main line I — A. No. . Q. Under no circumstances 1 — A. None whatever, that I know ofi The rale which was laid down by me (and 1 8top|ied there) haa IwObJ that, BO far as possible, all localities should be treated evenly — an Dear! evenly as might be : and, laying down that general principle, I had depend upon the subordinate officers in charge to carry it oot; I oon not possibly attend to all the details myself. Q. That is to say, that starting fVom Omaha and passing over tl main lino to the Oregon Short Line, you have in no case discriminate in favor of a resident upon the Oregon Short Line as against any poii between where tbo Oregon Short Line joins and Kansas City, orOmaba — A. No; nothtngof the sort. With reference to the Union Paciflc, I winh to say once for all, in tl bpginniug of this investigation, that there has been much idle, foolii talk about preparation being made to abandon the main line of th Union Pacific and turn it over to the Uovernment, after stripping it i its branches, and all that sort of thing. I have never heani any sac thing suggested, except on the street and in the newspapers. Bo far l 1 know, the directors of the Union Pacific, in everj' discussion ever bai have regarded the system as bound up together by the course we hai adopted from the beginning, and tbat it could not be severed. It hn got to stand or fall by itself, as a whole — a unit. Q. There is one other question ; I want to know whether there ha been a diversion of earnings in favor of branch lines as against tlie mall linot — A. Never, that I know of. CONHTBL'OTrTE MtLBAGB UMIVERSAI.. Q, Then yon do not regard, under the constriu'-tive milcjige sysh the beiH'Sts that arc derjvedby IbcbrAncUUncftadivorsionof theea ingH of the main line T— A. No"; I s\inv\>- en.\\ \\. \\\« a.wW'M^^Awn «^ ». ■> CHA&LES FRANCIS ADAMS. 109 which 18 uuiversal. For instance. I \^ill give yon a case in point. You Uike the Chicago, Burlington and Quincy Bailroad, which is our com- petitor in the South. They are not trammeled as we are by charters, &c.| yet they apply to their branch lines exactly the same rules we do. So far as I know the rule is of universal application. With the Korth- em Pacific ii. is the same. So also with the Northwestern. I do not know a railroad company in the country that does not apply it; if the rale 18 wrong in our case it must be because we are for some inscrutable reason entirely exceptional. Q. In this ten million of stock issued iu 1881, was the consent of Con- gress obtained t — A. I think Judge Dillon can tell you more about it than I can. !&Iy impression is that the stock you refer to was issued under our charter— our original charter. Mr. John F. Dillon. The opinion of Mr. Bartlett and myself is in writing as to the authority to issue that stock. Commissioner Akdebson. Yon will let us have that opinion f The Witness. It was long before my day ; I know nothing about it. Mr. John F. Dillon. I will. It is in writing. That will tell the whole story. GUARANTEES MADE WITHOUT CONSENT OF OONOBESS. Q. Ton guaranteed the Saint Joseph and Qrand Island bonds of seven millions, I think f— A. Yes. Q. Was the consent of Congress obtained ! — A. No ; we did it under the advice of counsel. It did not come within the section of the act of Congress which you have referred to. Q. Was there an opinion delivered by counsel t — A. Yes. Q. You will let us have that I— A. Certainly. Q. Also with reference to the collateral trust bonds of 1879 ? — A. Thwe also were issued* under advice of counsel. We have elaborate opiDiODs; everj'thing of that sort has been fortified so far as we could forUfy it; that matter also has been before the courts. Q. (By Commissioner Anderson.) What, the guarantee I— A. The collateral trust pools. Q. Of what large pools, outside of the operation of its own system, is the Union Pacific a member f — A. Before the fifth of April we had xk)o1s evwywhere. Since that we are in no pools. Wherever we met a com- petitor we had some kind of a pool arrangement, except in Kansas, where it was forbidden by law. Q* Which are the more important pools of which you were a member prior to the 6th of April f— A. There is the Utah pool, the Colorado pod, the Nebraska pool, the Omaha pool, the Transcontinental pool, the Montana pool, the Oregon pool. It was the regular way of doing bosiness wherever we met other lines. TEANSCONTINENTAL POOL. Q. Now in regard to the Transcontinental pool, who were theother mem- ben of that pool t — A. The original Transcontinental pool consisted — loQght to say that was long before my time; Judge Dillon can tell JOQ better than I can— but it consisted simply of the Pacific Mail Steam- diipOompaDy and the Pacific railroads— the Union Paci&c an^^uXs^ 110 U. 8. PACIFIC RAILWAY COMMISSION. Q. When you became presideut of tlie road what was tliu iiieiiiber* blii]) of that pool 1 — A. WIicD 1 became prosideiit of llie road tboNortU- cm Paciflo bail gone tbrougli. Q, Aiid it bm] be«oiuo a member 1 — A. Itliad b(;comea member; Ui« i)titivcr and Ititi Cirande and tbo 01iicni;ii, BurbnKtoD and Quiiiuy had guno through to Halt Lake id coiiuectiou with tbo Central Pacitiu, if I n^membcr right, and wo had the Southern Pacilic, and the Atlantic and I'uciflc, and the AMiison, Topeka and Santo F6. There wero livu or uix mcmberH of it. Q. llow weie the operations of that pool cotitlucted with ref'c^reiice to deteiininiriK the porceiitaKO of each member I — A. That was manageil as all pools were managed, by agreement and arbitration, Q. Who were the perBons ihat met together lor that puri>ose} their names, please! — A. Mr. Clark, on behalf of the Union Pacifio; Mr. Town. I take it that sometimes the preshlents would meet here — Mr. IJnntingtou, Mr. Uouhl, Mr. Dillon, and the president of the Pacific Mail. Theu again the general traffic managers would meet. I noTer met the pool but once. The presidents then met in order to make a la«t effort (a year ago February) to prevent the thing from breaking up. We failed in our efforts, and it did break up. There is a certain eU- qnette in railroads, and when tlie presidents meet they always meet tba presidents, and when tbo general managers meet they meet tlie Kenenl managers, and when the general traffic managers meet it ia the geQ««t, traffic managers. METHODS OF DIVISION IN POOLS. (J. On what basis is the percentage arrived at ; has it any relation to the actual bnsiuess done by each member T — A. Yes ; for several years five years — I was arbitrator of the trunk-line system here in New York, including all the railroads from the Ohio to the Lakes, and the same rule prevailed there. It is universal. It is dictated by common seuee. That is, you take the tstatistics of the business, and the direction of tbo lines, and all the data that can be snpplied to you, and yon then sit dowu Aud ascertain as nearly as possible how the business would How if left to itself regularly at equal rates and equal aecum modal ions, and if you can you agree on tlie percentages; if you cannot, you refer tbcni to arbitration. The basis is always how the business would naturally How if lellto itself. Q. Was tlmt the rule which prevailed in the Transcontinental iwoll— ' A| It was. Q. Do you know what facts or flgnres the members of the pool bad before Ihem to determine the natural flow of business t — A. They hadi the general data of the business which had been going on ; and when- ever they failed to agree, theu they all cut the rates and the busiuew went at a cut rate. We were guided to a certain extent by that. ' Q. I am simply addressing yon with regard to thoelemeuts that were placed before the different members of the pool as proving what eaoU member would have been entitled to if left to the natural ordexof thiogs. What particular evidence was placed before you as to the freight acta- ally carried, or which would be actually carried, by the Pacifio Mftit Steamship Company ! — A. We knew that at an equal rate the Pacific Steamship Company would carry nothing at all. Owing to (he trans- shipment and the greater length of passage, &c., it could only carry by reducing the rate. At equal rates it would not carry any freight any mart) than it would carry paaacngtrs-, butlUen it could reduce the rata^ carrjiiiff iu baUiiat, &c., until it wo«\d mokii V^na W^wVii^a 'KQ\:\J:i»is,' as, and yet makt- sometUiug itBe\t". CHABLES FBANCIS ADAMS. Ill Q. How closely did you examine this subject yourself? — ^A. This sub- ject bad passed out of its earlier stages long before I had anything to do with the company. rAOIPIO MAIL SUBSIDY. Q. When you became president of the company what did you find that your company was paying to the Pacific Mail Steamship Com- . paoyf — A. I think our company was paying its proportion. Q. No; what did you find the pool was paying to the Pacific Mail t — A. I think it was about $80,000 a mouth. But when I say that the eompanies paid that, you must understand that there was a regular oootract-, which had been before Congress, before committees, &c., and which was perfectly well known, under which, in order to prevent the demoralization of the rates, the payment was in form that the companies agreed to take the whole freighting capacity of these steamers, which was to be estimated at so much — say, $85,000 a month, or whatever it might be, and then they sent whatever they saw fit by the steamers; they QB^ to send the heavier and coarser freights, which were not desirable to carry by rail. In that manner the balance that was paid was in the nature of a subsidy over and above the freight money earned on what was actually sent. Q. It is not true that you have officially stated that this through busi- ness, as far as the Union Pacific is concerned, is a decreasing quantity, and becoming of less importance every year? — A. CTudoubtedly. Q. The interest of the Union Pacific, as connected with this pool — as influenced by this pool — solely relates to through business t — A. Yes ; nndonbtedly. COMPABISON OF BAIL AND WATER TEANSPOBTATION. Q. What is the time of transit from Eastern points, say New York to San Francisco, by the Pacific Mail t — A. It is a month; thirty days. Q. Is it over twenty-five days t — A. I believe so ; I never went by that route. Q. What is the time by the railroad t — A. For freight or passengers 1 Q. Freight. — A. I think freight is about a fortnight or three weeks, except the fast freight. Q. Do you regard the Pacific Mail as being a possible competitor for any of those kinds of freight as to which time is important? — ^A. It depends upon how important time is. People will delay a good deal for the sake of getting a lower rate ; and on all these subjects yofi have me rather out of my sphere. The general traffic manager can en- lighten you as respects them much more than I. Q. Under the arrangement made, what proportion of the $80,000 a month was paid or chargeable to the Union Pacific t — A. About a quar- ter to a third. That has all been reported to the Bailroad Commis- sioner and is in print. We should be very happy to give you a copy. Q. I desire to ask whether the payment of as large a sum as $30,000 a mouth from your company to the Pacific Mail would not naturally cause yon to make a close examination as to the reason which justified such a payment t— A. It was a perpetual subject of examination and discussion while it lasted. EFFECT OP DISEUPTION OF POOL. Q. Have yon ever reached aay conclusion yourself, foimd^ on ^o\a Jt^gmmt in tbia matter, aa to whether it was an advantiekg^ \xi Xku^ 112 V. S. PACIFIC RAILWAY COMMIBSION. Uuiou I'uuillc ami to tlie Guvoruinoiit to piiy tliU Hiibmdy or uott — A, I have reached a most decided opinion since tbe thing wont to pieocti. There ia no qnestion that it was an a^lvantage in a money point of view; lui immenHo one. The results since have proved that. Q, Please describe the results that you refer to. — A, It is in the re- port of 1886, on page 21. This pool went to pieces ia the begiuiitu? of the year 1880. As compared with the previous year, we earned mxty million more tons oue mile, and we earned for so doing $463,000 lew than we bad carued the year before. It was an appalling Btat«mont III other words, we carried 35 per oent. heavier tonnage for 20 per cent. less money. It was an appalling demoustratiou of resnlts. Q. In comparing these two statementa together iu the yeiir boforfr the disruption of the pool, is tbe subsidy deducted as part of the oper- ating exiMsnsesf — A. Ytis; it was every year. Q. In the comparison yon put thoaetwostatemeuts together t — A. It< was dttducted from the earnings in both years. Q. In the year before the disruption 1 — A. Yes. (J. Ko a» to compare tbe actual net earnings of that year with tb« actual net earnings of the transcontineutal business iu the following year! — A. Yes. DEOEEASE IN KATES AJTEg DISBUPTION OI-- POOL. By the ChajbMAK : Q. The decrease of rate was general througtiout tbe country, was ft iiott — A. Nothing like what I have Just stated. Q. Not in the same proportion, but there was a decrease 1 — A. Tbero ia alwii}« a steady decrease; there has been year after year. On pagft 20 of the report you will And every month of the year how tho thing* affected us, and tho rati.>. Commissioner AnDRRBON. The commission have not had an opportO^ nitjj" to examine this report yet. Tlie Witness. In Jaunary we got 1^ cents a ton a mile on the traus^ uoiitiucntal (Veigbt— 1.26 cents, in April we got 0.41 of a cent. Just ouc-thini as miicb. Tliat is, two-thirds of the rate had disaiipuared is tbe straggle, And for tbe yeiir we averaged thrco-fonrtbs of a oent a ton per mile, as against 1.22 cents the year before. That was tbe ro< snlt of the struggle. Q, Were there not a great many irregularities in tbe rate for the difr fcrent months of the year t — A. At times there was no rate whateveri' it' woA a simple struggle to do business for nothing; they paid foroa^ rying goods. Commissioner Andebson. We find it stated that iu January, 186t^ tbe rale was only 0.77, Tlie Witness. I don't know what that is due to. Yery likely it WM due to ii pool settlement made during that month. H. SpcciiLl eouipetitiou T — A. No, it could not hare been any Bpeoid com[icLition; it must have been something or other, you cannot tdt what) that took place that montb. It was abnormal. Q. Tbe average for 18»6 is 0,74 and for 1886 1.221— A. That is it ea aetly. You will find there the analysis of the whole result of breakini up that pool. I'0(J1. BB'JTLKMKSTS. By the (JUAiUMAN; Q. Wi/i j-oii ])lL'«8e oxplaiu whore, iu ^o\iiv*»^' »s*»'''i*.'»^'^'»V'»S----- a au hicotuQ, you carry it in yoat accouuVa^ \a\.VTO>i).sni^T4>isvit' OHARLES FBANCIS ADAMS. 113 pensesf Where is the dedaction made. For instance, if it is from gross receipts, where do you deduct for the amount paid out in any pool ar- rangemeutf — A. That is made in what we calleil the pool settlement-s. It goes into the gross earnings. Q. From which you deduct the surplus earnings to ascertain the net eaniiugs f — A. Yes, we deduct the operating expenses to ascertain the net earnings. Q* That is in the operating expenses f — A. It is in the earnings; it never goes into the operating expenses at all. That is, the gross earn- ings are so much less. For instance, when the earnings are about to be reported for a month and there is a pool settlement of $20,000 against ns, and the earnings are $100,000, there is reported $80,000. We earn 80 much less. We pay our pool settlement before reporting gross earn- ings. Q. They do not enter into the gross earnings f — A. They do not enter into the gross earnings. AFTERNOON SESSION. GHABLES FBANGIS ADAMS, being further examined, testified as follows : By the Chairman : Question. There is only a general question that I wish to ask. Qow do yoa make up your total gross receipts from all sources 1 — Answer. That is income, apart from earnings! INCOME ACCOUNT. Q. Yes. — A. It is made tip in the regular way. Whatever comes in which belongs to the income, general income, is added to the gross eamiDgs. Q. How many income accounts have you ! — ^A. That you will have to ask Mr. Mink. There is only one income account, but that is derived from various sources. B.v Commissioner Anderson : Q. It has a great many branches t — A. It has a great many branches. By the Chairman : Q. Do you carry the coal profits into the general income account 1 — A Yes. Q. And also the stone company's account ? — A. Yes. Q. Then they are all carried into one gross sum, from which the op- eratiDg expenses are deducted and from which result the 5 per cent, calcolation !— A. It is not quite that. Q. What is it! — A. A railroad company has two distinct revenues; one ftom earnings and the other general income derived from miscella- neous sources. The net earnings of the company are wholly distinct from the general income of the company ; the net earnings of the com- pany are derived from deducting operating expenses from gross earn- ings, not from gross income. You have those two things, earnings and income, net earnings and net income. THE government's PERCENTAGE OF NET EARNINGS. Q- Then when you ascertain the amount due the Goveiiime{ii\» ^ou^ DO^ dedact from the gross receipts the operating expeiiBe&)\>ut^ou\i»r SPB I'. H. PACIFIC RAILWAY COMMISSION. jilreHily mudo u ili-diii^lioii rroin wliiuli yon ilotliict tlio mHtmtiiit; ^ixtwn- m>hT — A. Tlw iDiyniuiit to llio (lovcnitiitiiit it* cstablisuod on it wbollj ilill'uroiit buHJH ; it is I'stulillHlied by law. It w fw tuuub, 5 or 25 |i ^iit., ol'tliu uia uimiiiigs of tbo roiul — not tlio net inoomu of the com* |>aiiy. Mr. John V. DtixoN. Net enruiiigH or tbu roodl Tbu WiTNKRS, Net curiiiugH of tbu ruiul, not tbu iivt inuomu of tbo uoiiipauy. (J. Wb»t do you do witb the iixMniu reu^iiv&d from tbu huIo uf lanill In lliitt Mirric'U bitu tbo gross rt'ci-iptM ! — A. No ; tbnt coiintittiU'H, us I ■•xgibiincMl ycMttinliiy, u wholly ai^iuir^tto in'c^iiinl, nod io bi>tli roiidn it is paid ovtir to tniHti'fH ; it ui-vcr coIIll^'4 into tlii^ IihikIh of tli« <;i>iii|miiy ; Ibu compaDy never tonidu'M ii ibilliir of i( ; it in foiwjiribd hy tb«« lanu iijjoiit, iimlor tbd tciiiiH of tlio nioil;;ii[;('s, lo lln- IihhU'cs dironMy; it doca iiftt enter on onr Iwuktt and cutx no Ugine tben? ; we cb> not biuidl^ it In any way. Q. Will yoii exjibiin, tben, wby tlut income lutcoiint from tbo latiil siu fmm Hie enni coriipaiiy, tlic invc«tm('iit«of tbe Union I'ariiie (Jompatiyt' are not;! [i;ir!. (it'il[<>^'MPWsri'reJ|iiHlViirn wliii-li ilii'liovi'i nriu-iil. »lirniblKet i1«I.fn-<-Iil;i;;f.irili'.liicli.,t. !-^.\. I!,T;mM'lli;Li ispifM-i ili.'ii liy l;nv ; tUvn in a 1;l\v •h'llniti;: » l.^il ix't I'^u'tiih^s aii', mxl v liuw hoitiiir;; wliatcvvr loilo with il; It. JH all <l•1>1<^ III WaHliiii;;ton, and Ikik been pa^wd upon by the i-uai'lK; w« havo notbin^ to nay alioiit it. Tlii> (]ii AIRMAN. These qaemiunxHroHiibniilte-d loii«iii tbe bill. Tbat in why we iwk. The WiTNKsa. I imderstftiid. .IITOICIAL DKCISI0N8 AS Til NKT IIAU.MNCS. Mr. John V. Dilion. If yon will allow ine Io Ntak-, lliero liuvu iHifuru tbo Hiiptenie ('omt ul" tlir I'nited yialen l^s■<l vatwn (tbreu in till U, H.) ill u'liicii i1h',\ ih-iiili'd Imw you urn vu ul nut inuomu and carniuK; and thiy ilei-iiled in llml oihu Ibat thu ineonio uf a from lands was a Houree of revenue ou whieh tbo Uovenimvut had n! rigbt to the 0 or afl ptr cent. Tbo Chaibhan. In this aut there in Hiibmitttul (o us Ihc Mtme qu< lion. Tlio Witness. All thoso tbings wo Imve nothitig wbalorer Io do wil Wo never touub tbem. r.y CommisBioucr ANUKRSON: (j. la your ouly autbority fur disporting of the proeeedH of bind tbrousb your -truHtceti in satisfaction of junior incumbrances or the ^atisfactioit of whatever tboy use tbo proceeds for us afruinat tbc Government lieu,, tbo section in the act which directs, aftor Btating tbat the issue of the bonds shall constitute a mortficago on tbu road, tbat nothing in tbe contained shall prevent you from selling the projierty of the road in tb» ordinary course of business T — A. AH this was done long bel'om tiM passage of the act of 1ST8 or the act of 1873. (Commissioner Anderson. But that provision is in the lust of Tbe Witness. Then I shall bavo to refer yon to Judge Dillon. Mr. John F. DILLON. Xo; there is no snch provision there. The WiTNKss. I don't know auytbing about it. Q. Under what provision of law do yon claim that the proceeds land sold are free from the lieu of the Goveniinent mortgage T — A. cannot te)lyoa^ it has beeu decided by tbe courts. Mr. John F. Dillon. Let me teU jou V\iA\. IV^ Wco. ^1 "Oafe 116 U. S. PACIFIC RAILWAY COMMISSION. Q. They aro bought at a considerable premiam t — A. No; they ma- tared ; they are paid off at par — a part of them. Q. Have you bought any of them outside? — A. We have nothing to do with that. That is done by the trustee under the terms of the mort- gage. Q. Who are the trustees f — A. The trustee of that mortgage is F. L. Ames. We have nothing whatever to do with his trust money, which comes from the proceeds of the land grant with its accumulations. Q. In the deduction of these payments from the gross sum to asoertam the percentage that the Government is to get, of course it diminishes the Government claim just that much. That is true, is it not f — A. How is thatf I dou't take it in. Q. In deducting payments to anticipate, or in deducting funds that are made to anticipate, junior liens, it is deducted before the amount ui)on which you figure the 5 per cent, to the Government is deducted t— A. That has nothing to do with it. Q. That is a separate account! — A. It is entirely separate. The two accounts do not bear on each other. We have nothing to do with the Government payments. They are computed for us ; we do not compute them. The Chairman. There seems to be a great dift'erence of opinion aboat the payments. The Witness. I know there is, but it arises from ignorance. The facto are plain. All these payments are gone over by the Government^ and we have very little option about it. We contend that the Government has treated us in a harsh and arbitrary manner, deciding all sorts of doubtful questions, and questions which were not doubtful, against os summarily, and our remedy has been a very poor one, when we have had any remedy at all. They make out their own bill, and about all we have to do is to pay it, and then see if wo can get our money back tlirough the Court of Claims. That is a correct statement, is it not, Mr. Mink ! Mr. Mink. Oh, yes. The Witness. Mr. Mink deals with these things far more than I do. The Chairman. It was a general question I wanted to ask with refer- ence to the accouuti^ ; that is all. I do not know that there is any other question now. Commissioner Andkrson. I move that the further examination of Mr. Adams be suspended until such future time as may bo convenient to him and to the Commission. The Witness. I think you would find your work very much facili- tated if you will allow mo to make a suggestion, which may saveyo^ a great deal of trouble. I see you have Mr. Norris as your expert 1* you send him to Boston to familiarize himself there with our account:** on the spot, and to see Mr. Mink, I think it would simplify matters. The Chairman. We would be pleased to have any suggestions yo*^ have to make. ^ The Witness. Wc have all the documents there. Of course weshonl^ be delighted to furnish you with any documents and statistics and an 3^ returns we have. Commissioner Anderson. Wc intend to do that. The Witness. Mr. Norris could put in several days' work there *^ very great advantage alone, merely familiarizing himself with nh^^ we have. The Chairman. Have you any further suggestions t ABTEMAS H. HOLMES. 117 The WITNBS& NoihiDg whatever. Of coarse I need not say to yoa that our aoconnts are exceedingly complicated, owing to the fact that onder the law we have to have so many organizations. They are not at all simple. They give me a great deal of trouble, all of which would be unnecessary if we could only proceed in a simple, direct way, as otiier companies do. The Uhaibmaiy. K there is no further question, we will suspend the examination. Mr. John F. Dillon. I have brought down the opinions of counsel eiHitained in tijis printed pamphlet in regard to the collateral trust bonds, if you would like to have it. The Ohaibuan. Yes. Mr. John F. Billon. It discusses other things, but nothing tliat is OQtside of your investigation. Commissioner Andebson. In regard to all opinions as to consolida- tioos and trust deeds, and anything of that kind, have you all of them in your office? llr. John F. Dillon. I think they are most of them here in these Tirious documents. I have the articles of consolidation. The Chairmen. And the yearly report of the commissioners t Mr. John F. Dillon. Yes. Commissioner Anderson. As to any papers of the company which we would like to see, to whom are we referred in Mr. Adams's absence t Bie Witness. I should think the best person you could go to would be Uie United States Railway Commissioner. Commissioner Anderson. He has not your private contracts; and there are other matters that we may want to see. Ike Witness. Send to us in Boston. Mr. Lane will attend to it, or Mr. Mink either, in my absence. Mr. Anderson. We will probably go to Boston before you return. The Witness. I shall be sorry not to be able to extend to you the hospitalities of the place. The Chairman. We are very much obliged to you, and will suspend jour examination until a future day. CHAKLES F. ADAMS. The Commission then adjourned to Wednesday, May 4, 1887, at 11 a. m. No. 10 Wall Street, Wednesday^ May 4, 1887. IheOommission met pursuant to adjournment, all the Commissioners Wng present. KANSAS PAOIFIO CONSOLIDATION. ABTEMAS H. HOLMES, being duly sworn and examined, testified m follows : By Commissioner Anderson : Question. What is your occupation ! — Answer. I am a lawyer. Q. How long have you been in practice t — ^A. I was first admitted to Ae bar in 1871. Q. Have you practiced in this city f— A. Yes, sir ; since 1%1%, ^ Toar ofBee at present is where f— A. In the Mills \niM\Yis^ IT. a. PACIFIC RAILWAY CMailSSION. FAMILIABITV WITH RA.1LB0AD OONSIBUOT lOK WEST OP THE UUaOVBi. Q. lluvv I'liiuiliur have yuu Ixit'ii with tlic subji'cl of tbt^ cou.-ttrucMon of iiiiy iiortioiis of tho Pacific UntlroatU lying west of tho Miiwouri Kiv- (.^rt — A. I liav'ti been cotiiiHiil fortliu KniiHaisl*u(!ilicaii(l Duiivit Pttcifie anil Uniou Padfic and NortluTn I'acilic aud the On-gon Uivilwiii' Navi- tialiuii Cuiupauy, and obtained Hucb familiarity lutiuy prufcHsioua] cou- ne^tion gave nie with tlie buHtni;s8 of the conatmelion duriiig the periods when 1 was ctmnected with those roads. Q. How hmg ban thnt connection existed in one form or aoothurf — A. Since 1870. Q. Wliat knowledge of tlie construction of the KanssiH Pacl&e ba<l you prior to tliiit (lat«t — A. Little or uoue; ouly aa one keeps generally informed. Q. Iliid you beon iu tho Western country yourselft — A. I wa» brought n)> as a boy in Saint Louis, and I hare traveled more or leas in llie Western country, particularly along the lines of the Kun3fl« PaclBo. Q. Were vou the owner of any securities of the Kansas Padtlc prior lo I«7(it— A. Yes, sir. (j. Bo that you had a personal interest in acquainting yourself with the facts relating to itsconatrnctionit — A. Yea, sir. COSSTEUCTION OF TUB K4M8AS PACIFIC. Q. Please give us, in a general way, not calling uiHin yon now for at^tual personal knowledge solely, such information as you can in ragant to the origin of this Kansas PaciHc construction by ittt earlier names^ A. In the fall of 1870 I became one of the cnmmitlee of Iwndhoklent thti Denver Extension mortgage of the Kansas Pacitlc Company. Tliei meeting uf the bondholders was catliMl by one of the niceiverH of tJiav roiul, who had just been appointed, Henry Villard : and 1 shortly nfter became couufiel of the committee and of Mr. Villard, as rocciver of tliat road. The senior couuacl was Charles F. Southmayd, of this city. At' moat immediately X was required to go to Baint Louis, which wiw then the- henilquarters of the Kansas Pacific Compnu.v, and theace to the line of tlie road, and was chargetl with the duty of removing the foreclosure suit from Shawnee County, Kansas., in a local court, to the cireuib <'oni't of the United States forthcdislrict of Kansaa. From that t'ime< liirwiinl niitil the decree of foreclosure was entered and Ihe road reor^ giiiiii^t'il, 1 wivs more or less continually present along the line of tlitt mud, attending the circuit court of that circuit wherever it might bei Kitting, for the purpose of obtaining orders and defending ootiona in relation t« that forei^losure suit. (j. liufore prooeeding to that will yon refer us to the records tual givtf' as such information as you have to enable us to understand tho origia of the structure which exists from Kansas City to Denver, and a rel'er- cnce to the various mortgages that were from time to time i»ut uimui the pnqierty t LKAVBN worth", PAWNEE AMD WESTERN BAILEOAD. A. My professional business required me almost immediately to familiariee myself with the history of that railroiHl. Ilegitining at (be lime of the charter, and commencing at the beginning, the Leaveu- wortli, Pawnee and West*'rn Railroad Company wnn organized by tlie Icffislatiirti of Kansiu in the ye4ir 1X.''m. Itnt Ultlu whs done for sotnr tiiiw hi (lie w.'*y of actual rai\v"in\\nu\<\\«?.. \\\v\v>-'.\\\v\V \\\.\,W ABTEMAS n. HOLMES. 119 done until the final passage of the act of 1864, amending tbe act of 1862, known as the Pacific Bailroad acts. Q. Tbe act of Congress t — ^A. Tbe acts of Congress. Those acts, taken together, famished the means with which to eqaipand bnild and operate