Rock Island daily Argus. (Rock Island, Ill.) 1886-1893, 1888-01-18
CLEVER, BUT INADEQUATE
A DEFENCE OF THE PACIFIC RAILWAY
OPERATIONS

Congress ON the subject-The LOWRY
White Contest - MaII-wrappers and
"Ads''-CarIIsIo Much Better.
WASHINGTON CITY, Jan. ls.-A special
message from the president was sent TO con-
gress Tuesday in which the executive con-
siders the Pacific railway reportA He first
rectes the appointment OF the commission
OF investigation and briefly states the
substance Of the reports of the ma
1 jority and minority thereof, both of
Of which accompany the message. In con-
/ sidering the reports the pith of which has
been published in these dispatches the presi-
dent quotes from statement furnished to
him in defense of the operations Of the di-
rectors OF the railways In which, after speak
| OF a contract for the construction Of one of
the branch lines OF the Union Pacific by a
corporation called the Contract and Finance
company, owned by certain directors Of the
| Central Pacific railroad, this language is
| used:
1t may he said Of this contract, as OF many
others that were let to the different obstruction
| companies In which the directors OF the Central
Pacific have been stockholders, that they built
| the road with the moneys furnished by them.
| selves and had the road for their outlay. In
| other words, they paid to the construction com
pany the bonds and stock of the railroad so con-
structed, and waited until such time as they could
develop sufficient business on the road built to in
duce the public to buy the bonds or the stock II
| the country through which the road ran devel-
oped sufficient business, then the project was n
success; If it did not then the operation was a
loss These gentlemen took all the responsibility;
any loss occurring was necessarily theirs, and OF
| right the profit belonged to them.
| But 1t is said that they violated n well-known
| rule of equity in dealing with themselves that
| they were trustees and that they represent
| ing both sides Of the contract
| The answer is that they did not find anybody
| else TO deal with. They could not find any one
wAo+w0uld rake tho chance Of Building road
| through what then almost uninhabtsd
country, and accept the bonds and stocks of the
road in payment. And when 1t is said that they
were trustees, ii they did occupy such relation
| il was merely technical; for they prese nted
only their own interests on both sides, there be-
ing no else concerned in the transaction
They became the incorporators of the company
that 10 build the roads, subscribed for its
stock and were the only subscribers. Therefore,
it is difficult to see how any one was wronged by
their action. The rule of equity invoked which
has its origin in the injunction, mo man can
serve two masters" certainly did not apply TO
them because they were acting in their own in
terests, and not charged with the duty OF
caring for others rights there being no other
persons interested in the subject matter.
The president, in view OF this statement,
calls attention to the grants and benefits re-
ceived from the government by the COM
panies among which were advance of
government bonds to the amount of $40, 900
per mile of constructed rail way, to be paid
at the completion of each forty miles built
(which was afterward changed to every
twenty miles,; the grant of five sections of
public land for each mile until (afterward
changed to ten sections) the application of
all charges against the government for
transportation to the payment of the debt
Changed later to half the chargesl, thus re-
quiring the government to pay to
the railway the other halo; and the making |
of the government lien second mortgage
instead of a first mortgage, and various
other favorable concessions by the govern |
ment, which the president saws now appear |
to have been more reckless than pruduut. All
these concessions the companies availed them |
selves of to the fullest extent. In view of
these debts, created under the law, to the |
government and others, and the relations
resulting therefrom, the president says
at is astonishing that the claim should be
made that the directors of these roads owed
no duty except to themselves in their con-
struction; that they regarded no interest but
their own, aud that they were justified in
contracting with themselves aud making
such bargains as resulted in conveying to
their pockets all the assets of the COM
pany."
The government alone, the president says, |
had right to insist that none of the bonds |
secured by the prior mortgage should DO is
sued fraudulently or for the purpose of di- |
vision among these stockholders without con- |
sideration. The result of this doctrine of |
complete independence of the directors is
that the government finds itself without adj |
equate security for the repayment of its
loans. The great lberality of the govern |
ment to the roads was conceded in the ex-
pcctation that the business would be- con- |
Quoted in fairness and honesty, with a
proper care for the interest of the gov
eminent, something that can not be
said OF the operations of the companies,
and "for the purpose of saving or improving |
the security afforded by its junior lien, the
government should have the right now to
purge this paramount lien of all that is
fraudulent fictitious or unconscionable
If the transfer to innocent hands of bonds Of
this character secured by such first mortgage
prevents their cancellation, it might be well
to seek remedy against those who issued
and transferred them. If legislation is
needed to secure such remedy congress can
readily supply it."
The president then recommends that if the
violations OF the contract are such to for
felt the right of any of the companies to any
of the granted lands, the lands should be for
feited by congressional action, as executive
power is probably not broad enough to reach
the case.
In this connection the president says he
has in his hands the report OF the commits
sioners appointed to examine the completed
sections of the California & Oregon railway,
part of the Central Pacific, and if the reports
are approved the company will be entitled to
a large quantity of public land. The road,
according to the investigation which is the
subject of this message, has been built in the
same questionable manner the other por-
tions OF the system, and the president asks
congress to say whether the company shall
have the land.
The president closes by earnestly urging
that action be taken upon this subject, at
the same time opposing any arrangement by
which the government shall take possession
of the roads He says irritation and indig
nation against the companies methods does
not justify action that will make the govern
ments advances less liable of repayment, but
while not condoning the wrong-doing in
volved in the case, the action taken should
be practical and effective always remember
ing that its success depends upon its accept
ance by the companies. He suggets that the
ma jorty report contains remedy that
might be applied to a part of the roads, and
emphasizes the fact that congress only can
decide the best coruse of action, which public
interest urges should be efficient and prompt |
The aggregate debt OF the roads to the
government with interest calculated to the
maturit of the bonds is SITS SS4 759 so of ,
which the companies have repaid $50, $685.
O396..
Potters Want Protection.
WASHINGTON CITY, Jan. iS.-The twelfth
annual convention of the National Potters'
association opened hers Tuesday. H s
Knowles of East Liverpool, o., president, l
called the convention to order and in his ad- I