Sacramento daily record-union. [volume] (Sacramento [Calif.]) 1875-1891, 1888-04-14
ruIs covsrprcr,oy WAS 1uoopprcr


was no need of Stanford Crocker, Huntington
and Hopkins contracting with themselves TO
issue stock. They owned substantially all of
the stock of the Central Pacific roads sub
scribed for ana were the owners of the prop
erty and they could any day have stepped into
the office of the Secretary of the company and
subscribed for the balance unsubscribed for,
and there was no law in the State of California
and no Federal law applying TO that corpora
ton which required any payment TO be made
upon that stock If such subscription mad been
made True, there is a provision that before
railroad company can file its articles OF lncorpor-
alton at least s., 600 q mile must be subscribed
| for. and that 10 per cent. OF that amount must
be paid in; but after that IS done the whoIe cap
ital stock may be subscribed for by any indtvid-
ual without paying cent upon Il; Iley gained
no legal advantage whatever by the issuance OF
this additional stock. Instead OF having fifteen
or twenty thousand shsrs OF siofS - me case
might be, representing the entire clue OF the
stock, they had great number. y was pre-
cisely the same as If a man purchasing piece
of real estate should take instead of one deed
conveying the whole of it, one huucfed deeds,
conveying each one-huudredth undivided
part. The result was the same. But il has
| been said that this increase O: stock has in
creased the dividends. Not 20 No dividends
could be made under the laws Of CaliIor-
MA, except IRON profits, and no dividends were
eyec made, as this testimony elbows except
from the profits II there was u mill
| ion dollars of profit to be divided, it
msttered not whether there were 40 or
1000 COO shares Of stock. The sum total OF the
dividend would be precisely the same n either
! case. The amount per share only would be
greater. Governor Stanford, in nis statement
| before YOU, very ably said IF the stock of
| the Central Pacific road were today gathered
/ in and all excepting ten shares destroyed il
| would not make any difference to the Govern
ment, or TO anybody in the weird, eNcepi the
/ stockholders themselves" Ee luish5 nave gone
farther, and said that II all the SHARE o. Ock
now issued and outstanding were IN Che hands
! OF ten persons, holding them in equal proper
tons, and ell destroyed, and but tefi shares is
sued in their place, one to eacl Ui the holders,
| the result would be precisely The same; or, in
other words, II ten men own all the snareS OF
/ stock in q California corporation, then 1t does
not matter for any purpose whatever whether
there be ten shares or ten million shares. The
! Political Code OF California declares that the
| shares OF stock stand for ana represent the
| property in other words they are hut evidences
| of title and right. Here might ssk who was is
the Government contemplated should own the
| Central Pacific road? Why, certainly the
men who constructed it, the men who put
all they had into it, who borrowed upon their
credit, upon their security of the property
money enough to construct 1t. They are the
ones. The stockholders could dissolve the Cali
| for1ia corporations tomorrow, ana bold own
and operate that road as tenants in common,
not with as much convenience, pezhspS, as il is
operated through the medium OF q corporation,
but with the same legal effect. In common law
when corporation ceases TO exist its property
! Is subject to the payment of the
DEBTS OF THE CORPORATION.
The company was not rich when the road wa.
completed. II has been said that the promoter.
OF the Central Pacific road were wealthy when
| the Central Pacific road was completed ffom
Sacramento to the connection near Ogden If
this was true, who could have complained ifthey
had failed TO complete the road? 1t IS true they
have been the loser, but the Government would
have lost more if the pioneer line had failed
The vast dominion between the Missouri and
the Sierras would in all probability have still
been IN possession OF the savage None of the
thousands of miles of road which now runs
through that territory would now be in exist
ence. Their success meant the Governments
and fnfNY L.
men who bTaved all and risked ali had been
shareIs in the results which followed. But
what IS the truth in this respect? When the
junction was made and the road finally com
pleted ihese men had expended all their means,
all the aids granted, and were more than g .OGG-
000 in debt.
THEY WERE PERSONALLY LIABLE.
They had given nearly nine years of their time
in the service, What had they? They had the
road to Ogden the aided lines. subject to liens
securing the Government first mortgage bonds
and over three millions of other Indebtedness
representing their equity in this road. They
hel all the stock, but this stock was not then
worth nor could it have been sold for one-third
enough to discharge the $500 COO of unsecured
Indebtedness. They had this stock, their in
domitabe will their credit and their faith in
the ultimate success of the enterprise of all
these assets their credit alone was available, and
that alone bIidged the chaSm of bankruptcy
open before them. Their stock represented
their interest in the aided line and no more Ii
had no commercial value. They could neither
y
states that the time this aided liue was consol-
idated with the other no more valuable line,
there was no one who would purchase a share
OF the Central Pacific stock if he had 10 nav any
thing Tor it." Testimony, vol. ). D. 239i0 After
the consolidation, after various paying branches
had been built on their credit, the Directors
brought into the system the Crocker
brothers, who sold all their stock, and with it
went without extra charge all Their interest in
the branch lines and other enterprises al l3
cents on the dollar to their associates and on
credit at that. Later their associates hsd To re
turn this stock because they were unable to
carry It.. still later Huntington, Hopkins and
the Croker brothers offered on the market all
the stock they held as controlling interest in
the roads, aided and nOn-sided, the later lines
c.rrying with it their interest in Ell other en-
terpriseS in which the associates were engaged.
for 20 cents on the dollar, and 10 enc would
buy. II was not until about 1850 that the stock
mad marketable value, but it then represented
not the aided lines, but all the valuable prop
eity branch lines aud terminals which the Di-
rectors had brought III, and which constituted
on Inc basis of Its earnings, tw9tkirds OF the
value OF the whole system. It was out of these
properties which the Directors had created and
not out OF the aided line that two-thirds OF the
S3AOOWO of dividends declared were earned
The stock representing all these properties to
day is worth in the markets Of the world bur
SIC 20O,0o0 and is only worth this because the
DEsTIHrEs OF THE COMPANY
Are controlled by men who have built mora
miles of railroad than any other association of
men have ever built and have never failed
Eliminate their reputation and credit aud this
stock would to-day be of no more value than
the stock which they earned III the construction
on the aided lines. GO true is this that il i were
known that the Directors OF The company lad
put their own stock on the market there would
be no market. Well did Commissioner Auder-
son speak when he said before q committee Of
TINS Congress that TO take the aided line ont of
the hands OF the present Directors would he to
Destroy H. This was deserved tribute both 10
Their ability ana integrity. This faith !. shared
alike by bondhOlders and Stockholders This is
Il capital more secure than a money one 1t can
never be lost but by their own act ana consent
On the subject OF the dividends made bv the
Central Pacific road l have said something
before, but in another connection. 1t appears
from the testimony, and 1t is true, THAI from
the time OF incorporation down 10 the present
date. the Central Pacific road has declared
dividends amounting to about S34 900 coo
This action has been severely criticised, be
cause IL is said the company should save that
money to meet its obligations If
TINS IS the correct proposition
very few dividends would ever
be made by the companies, for very few rail
road companies ever expect to pay their bonded
debts IL represents iii part construction aud is
considered permanent Investment, to be re-
newed from time to time. Where the men who
riSked their lives and fortunes, who were indi-
vidualiy and personally responsible for the
twenty odd million dollars borrowed from phi
waite parties put into that road, never To receive
any benefit from it The United States has re-
ceived directly benefits TO more than hundreds
OF millions, while its constructors aud their as
signees have received but S34, 90 600. The Coy
eminent has received this benefit on an invest
ment of S27 600, 000-on an investment which *
TO be returned to 1t with interest and hich il
secured by lien on this property IL has re-
eeived directly at least many hundred per cent
in return, while the projectors have made diyi.
dends amounting TO a little over per cent. per
annum In a country where the average rate of
interest from the day the road was commenced
to this has been fully up to Is per cent per an.
mum. But one third of these dividends was
earned on the aided lines. The other two-thirds
were earned out of property which
THE DIRECTORS HAD CREATED
And which was as much her own as II IL had
been gold mined out OF the earth We have
also been providing for the payment If this
debt. our private sinking fund will amount
when it natures, to 81, 900 Co., We had estab,
lished a sinking fund TO pay the Government
debt, but the Thurman Act was passed taking
IL out of our hands and relieving Us entirely
IRON all responsibility. In that direction the
Thurman Act although it was unnecessary ex-
pressly authorized these dividends to be made
Senator Thurman himself in reporting the hill
which bears his name, stated that the commit
tee in preparing it had recognized the fact that
IL If for the interest of the company and the
public that the stockholders should receive
some reasonable dividends. They are ALWAYS
better managed then than when they paw none
Most of these dividends were made after the
passage Of the Thurman Act, but this does NOT
affect their action. Mr.. Adams tells you that II
the roads cease for a long period TO pay divi-
dends 70 their stockholders, not only will the