Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1888-01-18

10 the Senate and House Of Representatives
On the third day of March last an Act wss
passed authorizing the appointment of three
commissioners, who should investigate the
affairs OF snch railroads as have received
aid from the United States Government.
Among other things contemplated, the in
vesA2Htlon included the history of the con-
structlon Of these roads. their relations and
Indebtedness to the Government and the
question whether, i'll the interest of the
United states, any extension of time for
the performance of the obligations of said
roads 10 the Government should be granted
and II so, the said Commissioners were di-
rected to submit q scheme for such extern
sion.
HE commissioners were further directed
BY the said Act 10 report in full to the Pres
ldent upon all matters submitted to them,
and ne vas by said Act required to for
"aru said report 10 Congress, with such
recommendation or comments as he should
see fit to make in the premises.
The Commissioners, Immediately after
their election, started upon the discharge
OF their duties, and have prosecuted their
inquiries and recommendations wi indus
try, intelligence and thoroughne=s. A
large amount OF testimony has been taken,
and all the facts been developed which ap-
pear to be necessary for the consideration
OF questions arising from the condition Of
these aided railroads and their relations to
the Government.
Ihe Commissioners have, however, been
unable to agree upon the manner in which
these railroads should be treated respecting
their Indebtedness 10 the United States, or
to form plan best adapted for the secure
payments OF such Indebtedness. The dis
agreement has resulted in the preparation
OF two reports. which are herewith submit
ted to Congress.
These reports exhibit such transactions
and schemes connected with the construc.
ton OF the aided roads and their manage
ment, and suggest the invention of such
devices on the part of those having them
III charge for the apparent purpose of de-
feating any chance for the Government s
reimbursement that any adjustment OF
plan OF settlement should be upon the sub
stantial Interests OF the Government rather
than the torbearance or generosity deserved
by the companies. The wide publication
which has already been given to the sub
stance Of the Commissioners reports obyi-
ates the necessity of detailing in this COM
munication the facts found upon investiga-
ton.
The majority report, while condemning
the methods adopted by those who former
ly had charge Of the Union Pacific Rail
road, declares that since its present man
agement was iuauguTated in 1884 its affairs
have been fairly conducted, and that the
present administration has devoted itself
honestly and intelligently to the hercuIean
task of rescuiDg the Union Pacific Rail
way from insolvency, which seriously
threatened it ON inception Of its work :
that 1t has devoted itself by rigid economy.
by intelligent management, and by an ap-
nl1PNfIOn n Il cf +bn
paclty of the system to lis improvement
and betterment, to place that company on
a sound and enduring financial foundation
The conductlon of the present manage.
ment of the Union Pacific Company has
been an improvement upon its ability tc
comply with the terms Of any settlement
| OF lis indebtedness which may be Offered
by the Government. The majority of the
Commission are in favor of an extension
| OF time for the payment of the Govern.
lnenf Indebtedness Of these companies upon
certain conditions. But the Chairman of
| the Commission, presenting minority re-
port, recommends, both upon principle
and policy, the institution Of proceedings
Tor the forfeiture Of the charters Of the cor
porations and the winding up Of their af-
fairs.
have been furnished with the statement
or argument in defense of the transactions
connected with the construction OF the Cen
al Pacific Railroad and its branch lines,
from which il may not be amiss to quote,
tor tbs purpose of showing how some of
lne operations of the Directors of such
road, strongly condemned by the Commits
sioners are defended by the Directors
themselves. After speaking of q contract
for the construction Of enc of these branch
lines by the corporation called the Contract
and Finance Company. owned by certain
Directors of the Central Pacific Hailroad
this language is used:
1t may be said of this contract. as of many
others that were let to the different construc-
ton companies in which the Directors of the
Central Pacific were stockholders that they
built the road with money furnished by them
selves, and had the road for their outlay In
other words, they paid to the construction COM
pany bonds and stock of railroad SO constructed
ana waited until such time as they could de
Yelop sufficient business on the road built to in
duce The public TO buy the bonds or stock If
the country through which the road ran devel-
oped sufficient business then the project was a
success. If it did not, then the operation was q
loss Those gentlemen took all The response
bllity and the loss occurring was necessarily
thelis, and OF right the profit belonged to them
but It Is said that they violated the welI-known
rule OF equity in dealing with themselves But
they were the trustees and that they were rem
resenting both sides of the contract. The an
swer Is that they did not find any body else to
deal with who would take the chance of build
ing 4 road through what was then sn almost
unlnhabited country, and accept the land and
stock OF the read in payment, and when it is
said they were the trustees, if they did occupy
such relation it was merely technical for they
represented only their own interests on both
sides, there being no one else concerned in the
transaction. They became the incorporators of
the company that was to build the road sub
scribed for its stock aud were the only subscIib-
ers. Therefore, ii is difficult to see how any one
was wronged by their action. rhe rule OF
equity invoked, which has its origin in the in
junction that no man can serve two masters
certainly did not apply to them, because thev
We're actusted in their own interests and were
not encouraged with duty caring for others
rights, there being no other persons interested
in the subject matter
In view of the statement Of facts devel-
oped in the Commis sioners' report, it seems
proper to reclll the grants and benefits de
rived from the General Government by
both the Union and Central Pacific Com
panies, aiding in the construction of their
roads. BY an Act passed in 1852 il wss
provided that there should be advanced the
companies by the United States. to aid in
the construction, bonds of the eGovernment
and lands from the public domain, and that
to secure the repayment of the bonds so
advanced, and interest, said bonds should
constitute mortgage on the two lines Of
their roads, and on their property of every
description. The liberal donations, ed
vances and privileges provided for in the
law were granted by the General Govern
ment for the purpose of securing the con-
struction of the road, which would COM
piete the connection between the Eastern
and Western States, and they were bonded
upon the consideration of public benefits
which would accrue to the entire country
from such construction. Two years after
the passage Of this law it was supplemented
and amended in various important partic-
ulars, in favor of those companies, by an
Act which provided, among other things,
that the Governments mortgage should be
come Junior lien and be subordinate to
the mortgage which the companies were
by the amendatory Act authorized to
execute, to secure the bonds which
they might from time to time issue, in
sums not exceeding the amount of the
United States bonds which should be ad-
vanced to them. The immense advantages
to the companies by this amendatory Act
are apparent, and in these days we may
well wonder that even the anticipated pub
lie importance of the construction of these
roads induced what now must appear to be
the rather reckless and ungusrded appropri-
alton of public funds and public domain.
1t is almost needless to state that the COM
panies have availed themselves 10 the ut
most extent of the permission given them
to issue their bonds and to mortgage their
property to secure the payment of the same