The Labor enquirer., 1884-09-13
THE Y. P.,s PERU.
MIR. Edmunds Enforcing the
Rights Of the Govern
ment.
Jay aculd's Twelve Years Defiance
dtheL Law--Brought to
Terms

the relations of the Union Paci1
railroad with the government, its lor
continued defiance of law and the i
side truths of last winters legislatit
concerning it. The Times relates il
circumstances under which the director
among whom were Cakes Ames, John
Alley, Thomas G. Curant, Sidney DlIlo
Benjamin E. Bates. Oliver Ames an
Granville M. Dodge, contracted vii
themselves to build the road at an emo
nous profit.
| On reducing the bonds and stock dow
to their cash value the directors mad
$23, 1855 .3l9 as their profits from thes
contracts made with themselves. 1
other words. the actual cost of the roa
was $50, ,720,958. The corporation sol
its first mortgage bonds for $23,7IS, ,O0s
and its subsidy bonds for $27, ,145, 1853, $
that it received from these two source
$l42,2l3 more than the entire cost of th,
enterprise, even at the extravagan
prices made by.th director-contractors
and the whole issue of stock and lesser
bonds represented absolutely no invest
ment.
The committee of congress which in
yestigated the road in the winter O.
1928 made report to the effect that
the abuses were such as warranted re.
peal of the charter, but recommended
that suits be brought to deprive these
stockholders and others who held stocks
issued at less than par of their holdings.
Congress then passed a law that no
further issue of stocks or bonds shonld
be made except with the express per
mission of congress, save for refunding
bonds which might become due This
was regarded as complete barrier to
any further watering" ofthe company's
debt. Some time after this Jay Gould
obtained an interest in the road, and
finally controlling one. He also bought
up the securities of the bankrup.
Kansas Pacific, whose bonds were away
below par, and the stock hardly selling
at per cent. Union Pacific securities
were all diyidend-paying. Gould's fine
mind saw that, by consolidating the two
'oads and making the Union Pacific re-
Iponsible for the Kansas Pacific Issues,
hey would rise to par and give him al
handsome profit. In 1880 this job was
onsummated, and Union Pacific was
oaded with $14O000O0 Kansas Pacific
onds, Sl0,000,000 Kansas Pacific stock,
nd $4,0o0,o0O Denver Pacific stock. The
tock of Union Pacific was thus increased
rom $36, ,762, 800 to $50, ,762, 500. Then, to
omplete it, Mr.. Gould and his directors
sued $40, ,237 800 more, making a total
SCI 100000. Further, in direct def
nee of the law. in 1879 and 1888, over
100000 of Union Pacific bonds were
sued, and another mortgage of 5,0O0,-
10 on Kansas Pacific, a total of $47, ,000,-
70 of illegal Indebtedness on which in
.rest has been paid at government ex-
ense.
While the road was thus making inn
lense profits, little was done to pay the
lterest on the government bonds, or to
rovide for their principal when due,
nd congress, in 1878, passed the Thur
ian act, which provided under heavy
enalties and absolute forfeiture of the
larter if not obeyed, that 25 per cent of
le net earnings and the whole of the
,ceipts from government transportation
q the subsidized lines should be turned
ito the sinking fund, in addition to the
per cent demanded by the charter, and
0 dividend should be paid until these
,quirements we're duly satisfied. |,
Gould snapped his fingers at this law,
i'd for six years the Union Pacific never |
lid a cent under it into the treasury,
We a meager $780, 900 on conditions on
hlch it could not be received, and went
, dividing the money on its stock with
,rfect security apparently, for the gov /
nment officials, beyond perfunctory 8
,mand for payment once year, took {
, step to enforce the penalties provided. I
The pretext of the company for not
implying with the Thurman act has {
zen based on claim for $3,O0O,O0O for
,tra compensation for carrying the i
ails and for transportation over the
Mount allowed by the government,
hich was disallowed, and over which a
it has been In progress since 1878. ,
'nator Edmunds, who had much to do 9
th drafting the Thurman bill, was j
uch surprised that the land officers of t
e government had refused to even at
mpt to execute its provisions, and I
illions of dollars, were being paid out t
dividends and building branch lines /
I'm the money ordered to be paid into Z
. treasury. Determined that the gov /
nment had been long enough defed 9
d the law set at naught, he came back l
Washington last winter determined to !
ID out whether congress or Mr.. Gould t
Is more powerful. t
MIR. Edmunds, at the instance of the q
liciary committee, wrote a report upon t
Q subject that never reached the sem t
.. After reviewing the company's de- a
nee of law, it closed with a resolution
ling the presidents attention to these 1
;ts, and asking him to order the attor- t