Omaha daily bee., 1888-01-18
PACIFIC RAILROAD ROBBERS.
Cleveland's Message Accompanying
the Commission Reports.
VOTED MONEY TO THEMSELVES.
Over-Generous Statesmen and Crooked
Corporation Contractors - Settle
mcnt Recommended Accord
ing TO the Majority's Views.
Corporate Crime Recalled.

NAHHlNGION, Jan IL nc presHItHl otuI
TO congress to-day message transmitting the
Pacific railroad reports. The president said
The commissioners have prosecuted their
inquiry with commendable industry, intel
ligence and thoroughness. They have, how
ever, been unable to agree upon the manner
in which these railroads should be treated
respecting their Indebtedness to the United
States to unite upon the plan best cal
culatcd to secure the payment OF such in
dcbtcdness. This disagreement has resulted
in the preparation of two reports. The
reports exhibit transactions and schemes
connected with the construction of aided
roads and their management and suggests
the invention of such devices on the part OF
those having them in charge for the apparent
purpose of defeating any chance for the gov
ernmcnts reimbursement that any adjust
ment or plan of settlement should be pre-
dicatcd upon the substantial interests of gov
ernment rather than any forbearance or gen
crosity deserved by the company.
The majority report, while condemnng the
methods of those who formerly had charge
of the Union Pacific, declares that since its
present management was inaugurated III 1884
Its affairs have been fairly and properly con-
Quoted and that the present administration
has devoted itself honestly and intelligently
to the herculcan task of rescuing the Union
Pacific from the insolvency which seriously
threatened it at the inception of its work
That 1t has devoted itself, by rigid economy,
by the application of every dollar of the earn
ing capacity of the system to its improve
mcnt and bettermcnt to place that company
on Il sound and enduring financial founda-
ton. The condition of the present manage
mcnt of the Union Pacific company has an
important bearing upon its ability to comply
with the terms of settlements of its indebt-
edness which may be offered by the govern
ment
II have been furnished with statement or
argument in defense oftransactions connected
with the construction of the General Pacific
road and its bradch lines, from which it may
not be amiss to quote for the purpose of show
ing how some operations of the directors of
such road, strongly condemned by the com
missiOners, are defended by the directors
themselves After speaking of the contract
for the construction of one of these branch
lines by corporation called the Contract and
Finance company, owned by certain directors
OF the Central Pacific railroad, this language
is used: at may be said of this contract, as
of many others that We're let to the different
construction companies in which the direct
Ors of the Central Pacific have been stock
holders, that they built the road with money
furnished by themselves and had the road for
their outlay. In other words, they paid to
the construction companies bonds and stock
OF the railroads so constructed and waited
until such time as they could develop suffi-
cient business on the road built to in
duce the public to buy the bonds or
stock. If the country through which
the ~ roadl u ran developed sufficient
business, then the project was success If
1t did not, then the operation was loss.
Any loss occurring was necessarily theirs
and of right the profit belonged to them.
But, it is said, they violated the well-known
rule of equity in dealing with themselves;
that they were trustees and that they were
representing both sides of the contract. The
answer is that they did not find anybody who
would take the chances of building the road
through what was then almost unnhabited
country and accept the bonds and stock of
the road in payment, and when it is said they
Mere trustees, if they did occupy such rela-
ltion it was merely technical, for they repre-
Sented only their own interests on both sides,
here being no one else concerned in the tran
action. They became the incorporators of
he company that was to build the road,
subscribed for its stock ~, and
fore, it Is difficult to see how any one was
wronged by their action. The rule of equity
invoked, which has its origin in the injunc
ton that no man can serve two masters, GER
tainly did not apply to them, because they
were acting in their own interests and We're
not charged with the duties of caring for
others rights, there being no other persons
Interested in the subject matter,
''ln view of this statement and facts devel-
Opcd in the commissioners report, it seems
proper To recall the grants and benefits de-
rived from the general government by both
the Union and Central Pacific for the purpose
OF aiding the construction of the roads.
'By an act passed in 1852 it was provided
there should be an advance to said companies
by the United States to aid in the construc-
ton, bonds of the government and lands from
the public domain and that to secure the re-
payment of the bonds advanced said bonds
should constitute a first mortgage on the
whole line of their road, and on their prop
crty of every kind and description.
The liberal donations, advances and privi-
leges provided for in this law were granted
by the general government for the purpose
OF securing the construction of these roads,
which would complete the connection be-
tween our eastern and western coasts, and
they were based upon consideration of the
pubic benefits which would accrue to the
entire country from such construction.
but the proiectorh of these roads were
not content, and the sentiment which then
seemed to pervade congress, had not reached
the limit of ITS generosity Two wears after
the passage of this law it was supplemented
and amended in various important particu-
lars IN favor of these companies by an act
which provided, among other things, that
the governments mortgage should become IL
junior lien and be subordinated to a mort
gage which the companies by an amenda-
tory act, We're authorized to execute to Sc
cure bonds which they might from time to
time issue in sums not exceeding the amount
of the United States loans which should be
advanced To them.
The immense advantages to the companies
of this amendatory act are apparent, and in
these days we may well wonder that even
the anticipated importance of the cOnstruc.
tion these roads induced what must now
appear TO be rather reckless and un-
guarded appropriation of public funds
aud public domain. II is almost
needless to state that the companies have
availcd themselves, to the utmost extent, of
the permission given them TO issue their
bonds and to mortgage their property to Sc
cure the payment of the same 1y an encum-
brance having the preference of the govern
ments lien and precisely equal to it III
amount When the relations created between
the government and these companies by the
legislation referred to is considered, it is as
tonshng that the claim should be made that
the directors of these roads owed no duty en-
cept to themselves in their construction; that
they need regard no interests but their own
aud that they are justified in contracting with
themselves and making such bargains as re-
suited in conveying Ia their pockets all the
assets of the companies.
As leinor the government was vitality in
torested in the amount of the mortgage to
which its security had been subordinated,
and II had right to insist that none of the
bonds secured by this prior mortgage should
be issued fraudulently or for the purpose OF
division among these stockholders, without
consideration. The doctrine of complete
independence on the part of the directors
Of these companies and their freedom Of
any obligation To care for other interests
than their own in the construction of these
roads, seems TO have developed the natural
consequences Of its application, portrayed as
follows in the majority report of the com
missioners. The result is that those who