The New Orleans Democrat. (New Orleans, La.) 1875-1876, 1876-04-20
A HUGE SWINDLE.
ORIoFN ASD HISTORY or THE CHiTTt-
NOOG4 R4ILROfD BONDs
One of the R0ldest and Most Uarefaced
Of Frauds Suuelched.

die known as the Chattanooga Railroad
Company bonds may be Of interest to
our readers. now that it has been finally
squelohed, we herewith give the same
at some considerable length.
In 1869 October 2G) the Legislature
agreed to guarantee the second mort
gage bonds OF this railroad company to
the extent OF $12,50O per mile rs it
should complete sections Of forty miles
OF its road west Of New Orleans to the
Sabine river, provided. among other
conditions. that the first section OF forty
miles should be completed before time
limited, which expired before January
~. 1871. and the whole road prior to
January IS, 1873 Failing to do which
the right to demand the guarantee
lapsed, or in the words Of the statute.
ceased and determined The first see
ton Of forty miles was not completed un-
til after Apri II, 1871 and yet, though the
constitutional amendment Of November
7, 1870 limiting the State debt to S25,
100000, had been approved by the peo-
pie, and the limit already reached.
and tho grant had lapsed, Gov. War
moth guaranteed the company's second
mortgage bonds to the extent Of n sec
ton OF sixty miles. or $75d,Oo0, and
although the guarantee of the bonds
were to be given only MS sections Of forty
miles we're completed. yet. in 1873.
Mr.. Kellogg guaranteed bonds for
II section OF ten miles. or Sl25, 900
moro. The total bonds thus guaranteed
by these two governors were $875.OOO
the interest on which ut this date is
$3.50, 1000. of which $2l0,OO0 was fund
able, or claimed to be fundable, with the
| L.,r, I, bon, S,ltt,. l. hn t,,l
claim OF this class Of bonds as fund
able to be ~ ,OS5 900. calling fer $65l 900,
consols. and interest in cash on the LIST
Of July next $113,p25.
In 1870. October 81, the Legislature
extended this grant OF guaranteeing
second mortgage bonds, under all the
conditions Of the act Of 1863, to n branch
road from Vermilionville to Shreveport,
and under the further condition that
the branch road was to be completed by
May, 1875 This branch road was never
even begun. and the failure to complete
the first section Of forty miles in time
carried with it the forfeiture OF this
grant likewise.
II would be supposed that the first
swindle OF the State, as above, might
| have suf1iced but not SO. On April 20,
1871, act 95 OF the Legislature Of that
year was approved. by which the at
tempt was made to change this lapsed
guarantee Of second mortgage bonds OF
the railroad company into the actual
bonds Of the State. Under the speciOus
pretence Of relieving the State from its
obligations. such rs is always set up in
these legislative swiDdles the State was
to subscribe for 25, 900 shares Of stock in
a railroad which never had any stock
and to issue its bonds to the extent Of
! $2.5OO. 900 i'm lieu Of its obligation to
guarantee tho second mortgage bonds
Of the company, and under the condi-
tions Of acts 26 Of 1869, and 81 of 1870.
and the further condition that this
branch road was to commence within
six months OF the approval Of the act,
or before Oct. 20, 1871. But the road
was never commenced. There was no
subsisting obligation Of the State to
guarantees, the same having "ceased
and determined " on the 18th of Jan
uary, 1871. Yet, notwithstanding all
this, Gov. Warmoth, four days after his
approval OF the act, signed the $500
bonds, as Gov. Kellogg charges, in the
railroad cars between New Orleans and
Mobile.
| These bonds thus issued without war
rant OF law and in violation OF the con
stitution were claimed rs u valid debt OF
the state and to be funded with the other
fundable obligations. They amounted
to So, 100000, which, with $20O,0 per
annum interest, now reaches So, 400, 900,
OF which $2,50O.0 900 and $500, 900 interest,
or total Of $3,OO0000, is claimed to be
fundable, giving total OF consols Of
s., 800, 900 and interest in cash on these
consols, payable 1st OF next July, OIL
$3O9, 900.
The total OF these two swindles, then,
saved the people Of this State, by the re-
cent decisions, Is as follows.
Guarantee second mortgage bonds. con -,
Interest payable in cash ................. 1899
Stock subscripto' Of 81 10000 -copsols. 1900
| Interest nyabe in cash ................ 500 Oot
Or a total Of pa5i 900 consos. and
S422 925 interest. payable as soon aB
funded or u grand total Of %. .s73. .o2i
Or giving the face Of the bonds them
selves these decisions wipe out q debt oi
$4, ,625 900, attempted by one Of the
boldest, most barcfaced frauds, to be
imposed upon this tax burdened and
oppressed people.
Such is the history Of this bond swim
die transaction. We next propose to
show how the State was saved, follow
ing the records OF the courts.
During the last week Of December
1872, soon after the induction OF Col
Field into the office Of Attorney Gen
erHI, ne caIIeu 10 Ills bl'l MeSSI5. y. ID
Cotton and J. O. A Fellows to contest
the legality OF the enormous State debt
then, actual and contingent, ranging
from forty to eighty millions Of dollars
Indeed, no one knew within millions
! what the liability Of the State was, only
: that it far exceeded $25,0O0,0 900, the con
stitutional limit.
On December 81, 1872, these attorneys
filed a writ in the Superior Distric
Court, No. 369, attacking some $4,000,
600 Of supposed indebtedness, and pro
cured an Injunction against the Audito
and Treasurer from paying any OF tn
items enjoined. Among these were tn
!, Chattanooga Railroad bonds. declared, "a
above stated, to be fraudulent, illega
and void even in the hands ofinnocent {:
third holders. AS we propose in thi
article to deal only with these bonds, W
pass over all other items enjoined i
suit 1863.
The railroad company intervened !
that suit. claiming the S2,5O0,0OO bond
to be legal, and excepted to the form c
!. the proceeding The Judge (Hawkin;
sustained the exception, when the State
through these attorneys and the Attol
. ney General, appealed. The Judgmen
was at first affirmed, but rehearln
was granted, and on rehearing the Judl
. ment on the exception was reversed
and the case remanded for trial on tn
e merits. Then Williams & Guior
claiming to be innocent third holders
aoyaptv honda iptaryened thus Settln