The Wheeling daily register. [volume] (Wheeling, W. Va.) 1864-1878, 1874-08-17
SAN FRANCISCO.
Suit Against the California Pacific
RaflrOad-Latham's Answers.

SAN FRANCISCO, August l5.-On the
7th inst. Michael Reese sued the Califor-
mia Pacific Railroad Company, Milton s.
Latham and others, to recover seven
million dollars on account of alleged
fraudulent transactions. To-day Latham
filed separate answers. He declares that
until within two days of the institution
of the suit, Reese had never been the
owner or holder of any stock in the CAL
ifornia Pacific Company and has been
induced to lend his name to the Central
Pacific Railroad Company in bringing
the action; that the real parties are the
Central Pacific; and that the action is
prosecuted entirely by them; that all the
allegations of fraud are UNANIMOUSLY false;
that he was never interested with Raelaf-
sen, Ryder and others in building the
roads of the California Pacific Company;
never had any shares of stock except
few issued in 1870 in order to ena-
bic him to become a director in
the company. While the California Paci-
tic Extension was constructing, Raclfeu
and Ryder, applied to the London San
francisco Bank for a loan to it and Lat
ham assisted them to obtain it elsewhere,
for which service he received twenty
eight bonds of the Company'S, realizing
therefrOm 81 900, which is all the inter-
est he ever had in either company, and
that in January 1870, the defendant be-
came member of the Board of Direc-
tors, of the California Pacific Railroad
Company consolidated; that at this time
said company was indebted to the bank
of which defendant is manager, and de-
fendant was also the agent and repre-
sentative of holders of a large amount Of
capital stock of said corporations, owned
by various persons residing in Eastern
States and Europe; that for the sole pur-
pose of procuring their interests and
without the slightest interest of his own,
direct or indirect.
Defendant Became Member OF the
Board Of Directors OF the Railroad
Company on the Sth Of June. 1874
Shortly thereafter after application was
made BY the contractors for the construc-
tion and equipment of California Pacific
Railroad Extension Company, for re-
lease from the obligations of their con-
tract. This application was based on their
offer TO surrender certain notes of the
California Pacific Railroad Company
which had been deposited in cScro,c, in
bank of which this defendant was in
charge, for safe keeping, and this defen-
dant having ascertaincd the utter inabllI-
tv of the contractors TO complete the rail-
road of the California Pacific Railroad
Extension CoTpanv, and acting with his
cO-Directors, voted for a release OF said
contractors from their contract, upon con-
dition of the surrender and cancellation
of said notes. That in March, 1871, the
Company issued bonds to the amount of
three hundred pounds sterling, known ~
the income bonds and which were
transmitted TO London, taken in good
faith bv the owners and holders of cap
ital stock of the company. The pro-
cecds amounted to Sl,352,2S4, all of
which was accounted for to the COM
panv. He gives an account of the pur-
chase of the property of the California
Steam Navigation Company, North Pa
cifc Railroad San Francisco and Hum
boldt Bay roads. The Central Pacific
directors became directors of the pur-
chased companies, and this was before the
bonds was issued, and it was understood
on their issuance all the companies would
be consolidated. Sanford X Co. were de-
termined TO own and control the Cali
forna Pacific road. though knowing its
Indebtedness of SS,G20OOO. They prom
iScd Latham. if he would visit New York,
obtain the consent of the stockholders
he represented, and personally assume
all obligations over the sum named, they
would on his return from New York give
him their vote for $25O.0OO. He went to
New York and procured the consent OF
the stockholders to the terms Of the pro-
posed sale and also the consent Of thosein
Europe. On his return the California
company issued bonds to the amount of
SI.G0N.OOO, secured by second mortgage
on the company's property, which bonds
were to be guaranteed by the California
Pacific company. After the issuance Of
these bonds
The Directors Resigned.
and Mes-rs. Stanford, Huntington, Hop
kins and others were elected directors in
their stead and its capital stock deIiv-
cred TO Mr.. Stanford and his associates
He saws with the exception Of the note
10 him Of Stanford for S250OO0 by never
paving dollar for the 7G,lOl shares Oh
tained bv them. Stanford & Co., have
refused. he saws, to pay the interest on
the bonds Of California Pacific, and have
caused the company TO confess judg-
mcnt for sl,394OOO on its promisory
note one day old in favor Of J. B. Hig-
gin. fthis city, through whom they are
trying to obtain perfect title to the
California and Pacific railroad. In round
numbers the total obligations Of the
Vallejo system may be put down to So
100000 and it has been suggested that
the best thing for bond holders will be
to foreclose and take possession Of the
roads themselves.