Wood County reporter. [volume] (Grand Rapids [i.e. Wisconsin Rapids], Wis.) 1857-1923, 1888-01-05
CORPORATE CREEP
Remarkable Disclosures Made IN -,
Report ofthe Subsidized Rail
way Commission.
The Rings and Cliques That Have
Preyed Upon the People
For Years.
The Commissioners Report
\,

counts, ana neLnOOS OF TdllFOdC5 WHICH
have received aid from the United States,
and for other purposes" the president
appointed Messrs Robert E. Patti5On of
Pennsylvania, Z. Ellery Anderson of New
York, and David L. Littler of Illinois,
commissioners to carry on the lnVestlga-
ton. Two reports have been submitted
to the president, a majority report by
Messrs. Anderson and Llttler, and a min
GRITTY report by Mr. Pattlson.
THE MAJORITY REPORT.
The majority report opens with state
ment of the methods pursued by the com
missioners. showing the laborious nature
of the work, and setting forth that owing
to the fact that none of the reports were
completed before the month of November,
and that the final report and tables affect
ing the Union Pacific railway were not
received until near the close of that
month, it was impossible to make any
critical examination of the results reach
ed by the accountants and inspecting
engineer of the commission. The com
mission itself examined the directors and
officers of the respective roads and all
witnesses whom they judged possessed
of knowledge of the subject matter of the
investigation. They subdivided the re-
lates to the present condition of the com
panies, their relations with the United
States, and the remedial measures to be
adopted; the second part reviews the
financial operations of the com panies,
and the third part contains answers to
the various interrogatiOns contained in
the bill under which the commission was
constituted
The Union Pacific railway is first con-
sidered, it's total mileage, exclusive of
branches, being stated at l,815.17 miles
including railways formerly known as the
Kansas Pacific and Denver Pacific, while
the tosal mileage of the connecting
branches, according to the company's re-
port for 1886, is 2,761.93 miles.
THE TOTAL FUNDED DEBT
of the Union Pacific company Dec. 81,
1886, was $81, 1863, 127 80, exclusive of its
obligation to the United States, of which
$33,532,000 was prior to the United states
statutory lien. The present balance of
obligations of the Union Pacific road to
the government is $50, III 1892 Sc.
To secure the payment of this sum
and interest the commission offer a bill
providing for a mortgage upon which
tho Union Pacific company: for the first
ten years, will pay the sum of $4776, 495
annually, this being 3 per cent. on the
present worth OF the debt to the govern
meIt, and IL of l per cent. o. the out
standing bonds ; and, after that an annu-
al payment of 81 030,28O. The commits
sion show that the sinking fund provided
by the Thurman act of 1878 is not as
large as it was expected it would become
when the act was passed owing to de-
crease in the net earnings Of the road and
the failure of the fund to earn compound
interest at the rate of 5 per cent. as was
expected, and the commission therefore
concludes that the road cannot pay its
Indebtedness to the government at matur-
ity under the present laws relating to
the subject.
THE HISTORY
of the Union Pacific railway, as developed
in the second part OF the report, will, 1t is
claimed, ''show that its assets have been
in former years largely misapplied, and
that its financial ability to meet its just
obligations has been largely impaired by
the action of men who held fidiciary re-
lations TO the corporation"
The commission refers to the decision
of the supreme court which held that the
government could not of its own motion
or through acts of congress successfully
institute any suit or proceeding by which
officers of this corporation, who had APP
propriated its assets to their own use,
could be compelled to refund the same
either TO the corporation itself or to APP
ply the value of such converted assets to
the satisfaction of the claims of the gov
eminent, aud without intending to criti-
else their decision, which is the law of
the land, we cannot forbear saying that
the conclusion reached was great pub
lie misfortune. 1t seems to leave the
wrongs com implanted of without any effici-
ent remedy. The wrong was done TO the
United States as the creditor of the COM
pany. The court does Lot seem to have
considered that the loan made by the
government to the company was, in a
large measure made on the
COMPANIES PROMISE TO PAY
as distinguished from the security taken
by the statutory lien and that the value of
this Promise To Pay was substantially
destroyed by the acts complained of. The
extent to which the court failed to recog-
nize the enormously different result to
the Government arising from the finan-
cially weak state of the corporation can
be judged from the remark made by the
court at page els. After referring 70 the
right to appropriate one-half of the
transportation service and per cent. of
the net earnings, the court says:-It is
not wholly unreasonable to suggest that
the amount which the company may be
compelled to pay annually under these
two provisions will be sufficient, as sink
ing fund to pay the entire debt, princi-
ms Ipf r oil
The Committee have therefore inser-
ted in the bill which we recommend sec
ton requiring the Union Pacific Railway
Company, in accepting he terms of the
adjustment offered, to consent that as to
all causes of action existing Or to exist
against any trustee, director, or officers
of the Company, for any cause whatsoev-
er, the company shall, on the application
OF the Department. of Justice of the Unit
ed States, bring any suit or take any
proceedings that shall be directed by
that department, and prosecute such suit
or proceedings, ander its direction, to
final consunmation."
THE CENTRAL PACIFIC RAILROAD
is next taken. The bonded dent Is fip-
ured at S62, 3S7 900 and the government
lein at 27,S55,6S0 making total funded
debt of $50, pa, $50. Besides the road it.
self there are $4,570,00O land grant bonds
and to some extent the fifty year bonds
which are q lein on the land grant, to
bear this burden. As the Indebtedness is
greater than the cost of reproducing the
roads the commission reach the couelus-
ION that present mortgage given by the
Central Pacific railroad, embracing the
entire 1929 miles of the railroad, as
now consolidated, would therefore give
but little additional security TO the pres