, 1888-02-09
THE U. P: RAILROAD.
Annual Report of the Govern
ment Directors
To the Secretary of the
Interior.
Louis Krohn Relates How He
Was Deceived.
The Union Pacific Railroad.

The Union Pacific Railroad.
WASHINGTON, Feb. S.-The following
is the text of the annual report of the
government directors of the Union Pa
cifc, Just received by the secretary of the
interior:
SIR:-The government directors of the
Union Pacific Railroad company have
recognized their duties to be twofold,
First-To keep watch over and examine
! the conduct of the business of the COM
pany that the interests OF the government
might at all times be carefully protected.
Second-To make to the secretary of
the interior such communication as might
be within the province of the duties de-
volved upon them.
In their annual reports for several years
past they have earnestly recommended,
First-That the government should
adopt some course which would effect a
definite settlement of the subsidy debt of
this company on a basis of greater Sc
curity to itself, and which should be. within
the ability of the company to meet, and
second, that when a settlement should be
made the present relations of the govern
ment to the current management of the
property should cease.
In their last two reports the govern
ment directors have specifically recon-
mended the r%efunding of the debt and its
extension through a period Of years of
sufficient length TO admit of its final ex-
tinguishment by the company and an ex-
change OF the present security, which is
inadequate, and might easily prove value
less on an attempt to enforce payment for
security covering all unencumbered assets
and all equities of the company and which
would give the government, in case of
forfeiture, not some helpless pieces of
railroad, but a completed and profitable
system. This had come to be the unani-
nous view Of everyone connected with the
government who had officially considered
the subject, and all had arrived at this
same point by Independent inquiry.
Similar recommendations have been
made by the present commissioner of
railroads and by his predecessor. The re-
ports of this board had the warm endorse
ment of the secretary OF the interior last
year. Bills embracing the same plan have
several times been reported favorably
after most deliberate consideration by
both houses Of congress. These general
views lave now in q very decisive man
ner been adopted, enlarged and strength
ened by the able and exhaustive report of
the commission appointed under the act
vi 4ldlSh ~ 1901 II lOM oGCllS 70 lDG
government directors that there can be no
longer any reasonable doubt as to the in
terest and duty of the government toward
the Union Pacific railroad and they begin
to express the earnest hope that no
further delay will occur in passing such
settlement through congress. We cannot
too strongly urge the great harm which
delay is doing, both to the Union Pacific
and to the security of the government
debt. Every consideration which we be-
lieyc is pertinent to this subject urges its
immediate settlement.
The plan proposed by the report of the
commission contains some new features
which strike the government directors
%favorably, and to which they will briefly
call attention.
The suggestion of a mortgage to secure
the bonds to be given by the company is
fully endorsed. Heretofore the lien of
the government has been purely statutory,
and its enforcement has been subject to
all difficulties, uncertainties and inconsis-
tencies inseperablc to liens of that char
acter.
1t is, for various reasons set out in the
commission s report, desirable that there
should be an acknowledgment in writing
in the usual form by the company of its
Indebtedness to the government, thus
placing the mortgage in the same position
as regards the reinforcement of It's rights
in a court OF equity as mortgages gencr-
ally occupy. There would be an advaut-
age also in that feature of the plan which
permits a debtor of the company to re-
deem its bonds in whole or in part SO long
as they remain in possession and under
the control of the United States. The
provision of the commissions plan which
makes possible at the option of the gov
eminent some action against those persons
who may have tempered with property of
the road and thus diminished the security
Of the government, Is eminently proper.
To what extent any effort to have JUS
tice done after SO long a period may be
effectual the board will not attempt to
discuss. This question is one of import
ance and should be left for the decision
of the legal adviser of the government, if
the time shall arrive when it may be
placed before him. To leave the company
free to attend to its own business. and as
part of this plan to abolish the office of
government director, and to make the
government in all respects an ordinary
mortgage creditor and the company an
ordinary debtor, so long as the provisions
of the act are carried out, meets with the
approval of the board and has been the
prominent object in the plans hitherto
recommended.
With security made practicable and
greatly increased, with a gradual reduc-
ton of the debt and with the provision
for a foreclosure constantly ready to act,
the government can well afford to let the
stockholders conduct the affairs of the
property as other railroads are conducted
and especially in view of the notorious
fact thatits present relationship to the gov
eminent is nothing short OF mischievious
and destructive.
The government directors do not pro
pose to discuss at any length the plan
submitted by the minority report OF the
commission, the objective point of which
Is not so much the recovery of the money
due to the government, as the punish
ment OF those who are supposed to be
guilty of having unlawtully diverted the
property of the company. Our business
is with the Union Pacific railway alone,
and as that company wishes to pay its
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