Morning journal and courier., 1889-02-28
THE ARGUMENT BEGUN.

ters. HARTFORD. Feb. 27. Special Correspondence of the JOURNAL AND CoUR.
 IER.l
 The arguments in the great railroad fight began to-day in the Senate chamber at 1:30 ,'clock. The railroad war was begun by Attorney Charles E. Perkins of Hartford who represents dissatisfied stockholders of ution of inquiry as to whether the Housa- tonic company has not illegally issued about s1, ,O00, 900 of new bonds. Parts of MT. Perkins arguments and points were as fol- lows:
 'tIn the year 1887, sundry New Workers bought large majority of the common and preferred stock of the Housatonic railroad company and obtained complete possession of the corporation. According to the annual report of September 1887, it appears that the whole capital and bonds $3, 120, 900. By the report year later, it appears that the capital stock was $3, 150, 400. Bonds issued $3, ,0s0,OO0, total of $6,230, 400, an in- crease during the year of President Star bucks control of $3, 110,40O. It further appears that since that date, the corpora tion has guaranteed $500, 1000, of the bonds of a joint stock company got up by the same persons, making the total increase of liabili- ties of the company during the year 1888, $3, ,910, 400.
 What has become of this vast sum of money? Of this sum the gentlemen divided among themselves and other stockholders $1, ,175, 400 in cash, and a similar amount of full paid stock was also divided, thus in- creasing the liabilities of the company $2,- 350, 800 for the personal benefit of the pres IL AL recovered nothing. What has become of the avails of these bonds the officers are unwill- ing to state. The resolution of inquiry pre- sents two questions for the consideration of the committee, one as to stock and the other as to bonds. As to the issue of stock it ap- pears by the return made by the company, under oath September 30, 1888. makes the capital stock actually issued, $3, 150, 400, an increase in year of over s million dollars. The only pretence or authority for issuing this stock, which is set up by the company, is an act of 1870, which has been referred to. This act authorized an increase of the capi- tai stock, and if action had been taken under it in time, the increase would have been valid, but in 1878 the legislature passed an act, part of which was as follows:
 ''No railroad company shall increase it's capital stock except by special authority of the General Assembly, nor shall such author- ity be given except by the recommendation of the railroad commissioners" All acts or parts of acts inconsistent herewith are here by repealed.
 1t would seem too clear for controversy that this public act repealed the private act of eight years before and all other acts author izing an increase of stock. It also provides that this act of 1878 shall be an amendment to the charter of every railroad in the State. This whole act therefore becomes at once a part of the charter of the Housa.onic com- pany and had the same effect as if it had specified the company by name. If then the act of 1870 was thus repealed it is unnecessa- ry to consider this matter further, for there is no pretense for any other authority for the issuing of the stocks and bonds in question. Even if the act of 1870 had not been repealed the actual increase of stock was in great part illegal and authorized according to the stockholders vote. According to this vote shares of new preferred stock were to be issued for the old preferred at the rate of two for one, and shares of the new preferred were to be issued for the old common at the rate of one for three. AS there were Il 500 shares of old preferred, 23,600 of new pre- ferred were to be issued for them, which would amount to $2, 360, ,00o; and as there were S,sO0 shares of common one for. three would be 2,733 shares Of new preferred, amounting to $273, ,000, added to the other amount would make the total authorized by the stockholders' vote $2, ,633, 300, whereas their report shows that the capital stock is- sued is 31 ,504 full shares of $100 each, amounting to $3, 15O, 400, showing an increase of $517, 100 over what was authorized by the terms of the stockholders' vote. There is is ty only ,e one way s+.,sn. Of aoc91nt- punt wick and Macauley own large amount of this common stock, more than majority, it is evident that they are the persons who have not exchanged their common stock for preferred, and it is reasons able to suppose that they and their friends own this 2, ,825 shares. Why have they not surrendered it?
 It seems that Messrs Bostwick, Starbuck and Macauley, holding these 1895 shares of old common stock. have now got to agree with themselves as directors on what terms they will exchange either for bonds UT stock and how much of either they will take. 1 submit that the committee cannot but find either that all or 8 very large amount of the new stock was issued without any authority and contrary to law.
 As to the issue of bonds The law is that no railroad shall have outstanding bonds to the amount of more than half of the actual cost of the construction of such road. This is the clear obvious meaning of the law plain to anyone, although it is easy for an ingenious Wall street lawyer like Alger- non s. Sullivan by assuming that the Act contains expressions which are not in it, to destroy the effect of it altogether. So MT. Sullivan in labored argument called an opinion assumes that the act ot 1882 was only designed to refer to bonds which were issued for the general purposes of the railroad. By what authority can any one say that the legislature intended the limitation should read "the whole amount of bonds issued for general purposes out. standing at any one time shall not exceed one-half of the actual cost of the construction of the road2" If that was what the legisla- ture meant it would have said so. Accord ing to MT. Sullivan there is nothing to pre- vent any railroad from issuing all the bonds it wants for any special purpose. Mir. Sulli- van does not appear 10 have noticed the re- pealine the clause of 1882 or at least says nothing about it nor does he speak of the act of 1878 in any way. Perhaps he did not know of it. If the view of the act of 1882 is correct it is admitted that there has been an over issue far beyond half the amount of the construction account of the Housatonic road, even as now made up and to the amount oi at least $1, ,175 400.
 Furthermore, submit that even had the act of 1870 not been repealed the method adopted of increasing the construction ac- count as showing the cost of the road Is en tirely unwarrantable and improper, and the certificate filed with the controller that the cost of the road was $4 ,423, 129.94 is untrue. This increase mostly consists of two items one a resolution of the construction and rea estate account amounting to $763, ,374. .63, and the other an increase of the construction ac count made by MT. Bulkeley and amounting to $9O3, ,O14.1s. As to the item of revalus- tion of $763 ,374. 63, this is clearly no part oi the cost of the road. The statute is express that the amount of bonds shall not exceed one-half of the actual cost of the construc ton of the road. Now the "cost" is ons thing and the s'value" is entirely different thing. The legislature fixed the "actual cost" because it was definite sum which could be easily be found from the construc- tion account, and which would not vary from year to year, except as it is increased. The fsvalue" of road is mere matter of opin. ion unstable as water, varying with views of every man who looks at it.
 If the committee should allow such 6 claim as this all that any railroad need to dc would be to find sanguine appraisers from year to year to increase the value of the road a million or so a year. The increase oi $9O3, ,O14 IS is equally enormous. The sole object of MT. Bulkeley, whatever he was em ployed for, seems to have been to increase the construction account so as to allow ar increased issue of bonds. Another very large item is an addition to the construction account of 6 gross sum of $334, ,216.S1 which
 H.