The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-12-13
WRECKING OF THE WABASH.
A ScOundrelly Operation by Which Jay
Gould and Others Made S50,000,000.
a Succinct History of One of the Many Swim
ding Schemes by Which the Great WALL
Street Magnate Has FIeeced the Public.

New York World Interview with Prominent Chicago
''Along in November, 1879, Gould and mis- as
eociates obtained possession of what is called the
main line of the Wabash, extending from To
ledo, o., to Decatur. H. From Decatur they
secured lire 10 st. Louis, and also the line of
the St Louis, Kansas City e. Northern, extend
ing from st. Louis to Kansas Cty-in all, with
their lateral branches, about one thousand five
hundred miles Having already acquired certain
roads in Illinois and Indiana that were bankrupt
under foreclosure proceedings. they proceeded to
attach those roads and all others connected with
the Wabash lines where they could secure
bankrupt road cheap This went on until they
had gotten about g, 500 miles of road which they
called The Wabash system This Wabash
system was aptly described as bearing the
appearance of cobweb wrecked by gale of
wind, with one end fastened at Toledo and the
fragments scattered over four or five States and
at the fir st glance at it all idea of system van
tshes. 1t was an organization of predestned
bankruptcy. In the testimony taken in the
matter before Judge Gresham, Scion Hum
phreys, one of the directors of the Wabash, and
one Of the gentlemen whom Judge Gresham re-
moved receiver, testfes that seventeen of
these railroads thus acquired had never earned
the operating expenses, still less the interest
the cost of construction AS an excuse for vot-
ing to acquire these seventeen roads he says he
was mistaken in his Judgment, although every
one Of them had been constructed for period
of years before their acquisition. and their his
tory we'll known to the railroad world as
bankrupt lines Why, these roads were saddled
with underlying mortgages, subject to which
they were acquired They were all put into
'the Wabash system by way of long leases or
consolidation.
'Then the financial scheme, to which all this
was preparation was put in operation. Hav-
ing acquired this system of railroads, subject to
prior mortgages more than their vaiue the Wa
bash Railroad Company, in 1880. executed
general mortgage on all its property TO secure
an issue of bonds amounting TO 500 000 000 Of
this, $l7 600 900 were issued and outstanding at
the time of she application for the receivers, $l2.
100000 being held in England The character
of the lien of this mortgage is we'll described
In tho London Financial News date of July IL,
1885,
I'm the general mortgage was no mort
gage at ALL 1t simple security upon a meta
physical reyersion supposed to be owned by the Wa
bash company In network of lines, every mile of
which had already been bonded up to the eyes.
''They then proceeded to issue, Cd a mileage
basis, at so many thousand dollars per mile pre-
ferred and common stock. 1t will be remem
bered that in the years 1880-81 there was
great boom in railroad securities and generally
IN the financial and business world. and this con-
tinued up to about the time of the assassination
of President Garfield, July 2, 1881. By that
time they had got out to the public through
the stock exchanges of New York and Europe
substantially al Of the $i7, 900 900 of the gen
eral mortgage bonds ont of $4,000 000-$23. 000,-
600 of preferred stock and $27, 600. 600 of com
mon stock.
How was this done? By means of the Eek
celient showing made by the Wabash company
for the years $1,000. as such excellent show
ing appeared by the report Of the Wabash Off
GERS. At the end of 1880 the officers announced
that the road had earned, over and above all its
operating expenses and fixed charges about
$780, 00O In February 1881, the board of direc-
tors authorized the payment of dividend on
the preferred capital stock of the Wabash road
of per cent. which took from the Wabash
treasury 1890, 600 Note the result At the
close of the year 1881. by reason of the payment
of this dividend and ether causes, there was a
deficit In the Wabash treasury of ST. 100000; at
the end of 1882 the deficit was So 500 600; at the
end of 1883 the deficit was 81 900,0 600. Since the
administration OF the receivers in May 1884,
This deficit has been piled up SO that at the end
of 1885 it was $40, 558, 000 No part of these def
icits. however, was allowed to get to the know-
edge of the public until after the assassination of
Garfield and the inability of the railroad wreck
ers manipulating these stocks and bonds to sell
any more
I'm April, 1883, the Wabash Railway Com
pany, with floating debt of So GOO, 600 leased
al of its property-aggregating 3, 500 miles-for
n period of ninety nine years to the st. Louis
Iron Mountain 81 Southern Railway Company.
At the date of the execution of this lease the
st. Louis, iron Mountain Il Southern had not
operated a mile of road for over three years. all
of its stock being owned aud its operation being
managed by the Missouri Pacific Railway Com
pany. Jay Gould was president of both the
Iron Mountain and Wabash companies at the
time of the execution of the lease. The mileage
of the Iron Mountain road, bear in mind, was
never 700 miles, and this lease suggested the
flea swallowing the camel. The administration
of the Iron Mountain road continued from April
1888, to the receiyership in 1884. during which
time the Iron Mountain road increased the deficit
nearly SIS. 900, 900.
''By virtue of the terms of the lease the Iron
Mountain simply guaranteed to pay the Wabash
whatever surplus remained Of the earnings of
the Wabash after all the operating expenses and
fixed charges paid The Iron Mountain
had the privilege under the lease of electing to
advance, IL it so chose such sums as might be
required in addition to the net earnings of the
road to meet the interest on the bonded debt.
The advance made during the year of its ad-
Enipistration and the payments it assumed in ad-
1ition to the int srest charges amounted to about
i've million dollars The Missouri Pacific COM
pany was also under the control of Gould and
MS associates, who were also manipulating the
Wabash deal
About the timc Of the execution of this lease
to the Iron Mountain the Wabash road executed
q new mortgage, known its collateral trust
mortgage, to secure an issue of bonds amount
ing to $lO0OOOOO. The property pledged under
the collateral trnst mortgage consisted of the
stocks and bonds owned by the Wabash company
In the various acquired bankrupt lines already
spoken of. II was in effect simply chattel
mortgage 1t amounted practicaliy'-to con
tinue the simile of the London Financial News
ITO a contingent remainder of the metaphys-
seal reverson.' The object of the execution OF
this mortgage was to secure the Iron Noun lain
road and Mr. Gould and his associates for their
advances, and all of this So 600 600 of bonds
were issued to the Iron Mountain company or
TO Mr. Gould and his associates. Owing to its
financial necessities the Wabash company be-
fore its application for receivers, had executed
its notes and other commercial paper to the
amount of over $4,000 600 OF this sum over
81, 900 had been guaranteed by Gould, Sage,
Dillon and Humphreys.