The morning call., 1892-04-13
an INSOLVENT COMPANY.
The Central Pacific and Its Alb.
surd Claims.
The Corporation Scored by Congressman
Dalzsll-It Is Entitled to
Nothing.

items authorizing payment to the Central
Pacific Railroad Company for services per-
formed for the Government by that COM
pany ard its leased lines was under consid-
Grafton in the House of Representatives i n
March Of last year Mr.. DalzelI of Pitts
burg. Pa. spoke in favor of the amendment
as follows:
Mr.. Chairman: The real question in
this discussion, as / understand ii, is
whether under existing circumstances it is
incumbent on the committee TO appropriate
certain moneys for services rendered 10 the
United States over and upon the non-aided
Pacific railroads. For such services in part
the Central Pacific Railroad Company al
ready has a judgment rendered by the Su-
pieme Court of The United States against
the Government.
Any argument against this appropriation
must successfully meet. / recognize, that
aspect OF the case. 1 shall cOniine myself
to the Central Pacific Railroad C0mpany's
claim, because 1t is easier TO gather the
facts with respect TO one particular CON-
pany, and because the principle that applies
10 the Central Pacific Railroad Company
applies to all the others. The first PROPOSE
ton 10 which l call the attention of tie
committee is this: That no relation of
debtor aid creditor exists, or can by any
possibility exist, between the United States
Government and the non-aded railroads.
The relation Of debtor and creditor exists
simply between the aided railroads and the
United States Government for the reason
That the non-aided railroads belong to the
aided railroads, either by virtue OF pro-
prietorship Of stock or by virtue Of lease.
or by virtue OF an operating contract. So
that we may just as well now dismiss the
non-alded railroads from our discussion, so
far as the question of debtor and, creditor
Is concerned.
Let me illustrate: The Pennsylvania
Rallroad Company owns the line from Pitts
burg 10 Philadelphia. 1t leases the line
from Philadelphia TO New York. For serv-
ices rendered over the line between Phila-
delphia and New York you are debtor 10
the Pcnnsy .vania Railroad Company, not
to the United Railroads of New Jersey. So
that the only party We have 10 deal with
here now in this discussion is the Central
Pacific Railroad Com aDy. The question
then is. what is the relation existing, and
what are the equities between the Central
Pacific RAILROAD Company and The United
States Government?
BoND-AIDED RAILROADS.
Some years ago Congress authorized the
President of the United States TO appoint
commission TO examine into the relations
existing between the United States and the
bond aided railroads. That commission
made report. and that report. together
with message from President Gle veland.
was transmitted to Congress, and is now
before this House. In the discussion OF this
question l shall rely upon the facts TO be
found in that report, and | shall therefore
be in position where nobody can question
my statement Of facts. What then, ask, is
he relation OF the Central Pacific Railroad
Company TO the United States Government?
Well, tirst and foremost il owes it about
SU,C0O,0OO. Under the acts OF 1862 and 1864
the United States Government gave to tie
Central Pacific Railroad Company in bonds,
equivalent to cash. S27, S55.650.
The interest account that will accrue up 10
the date OF the maturity of those bonds
amounts to S5O,l40,224, and giving credit
for the bond and interest account it appears
that at the maturity If the bonds the Cen
tral Pacific Railroad Company VIII owe the
l nited States Government. ST., 792, 524 60.
IL owes 1t in round numbers S70,000.000 to-
day, present debt, though payable in the
future, as every lawyer knows.
Such being the case, my next proposition
is that the Central Pacific Railroad COM
pany is insolvent. not only insolvent, bur
lraudulently inSOlvent. to the detriment Of
the United States Government and of the
people of the United States. TApplause.l
Let me show you how. And these are
facts In 4 no man can blink. The company
IS lnsolyent, IL the first place, as result Of
the difference between the apparent and the
actual expense Of construction, a matter
that affects the capital stock, and / want TO
odS HClc nbn tliab lHtIt Is no SUCH
story of political and commercial crime In
all the 100 years OF our history as is to be
found in connection with the construction
of these railroads. Applause
COST OF THE CENTRAL PACIFIC.
The Central Pacific Railroad cost in cash
and l use only round numbers-S41, 0O0,-
600; il cost in bonds S18 CO., 600; il cost in
stock 500 ,ooO-a total of $40, OoO, 900, ap-
parently. 1t actually cost SIS, 900, co., and
four men constituting the stockholders
of the Central Pacific Railroad Company,
and at the same time the directors of the
Central Pacific Railroad Company. and at
the same time the construction company
that built the Central Pacific Railroad,
pocketed of the money of the people of this
country, aud have it to-day, SCI 000 COO of
profits that they added to their capital stock
account. Loud applause.
That is not all. They built a number of
other roads. the total cost of which appar-
emily was $50. COO, 000 but the actual cost Of
which was S27. 900, coo. aud they pocketed in
that connection $50. coo, 0o0. And wien you
read the ffuding of his commission of these
disinterested men. acting in a judicial ca
pacity-and am quoting from the report
of the majority OF the commission, who
found as much as they could in favor of
these railroad companies-you will read
this. i quote:
In general, IL may be said 10 be established By
The evidence that all The construction contracts
ana ali The important contracts for materials
and supplies were made between the Central
Pacific Railroad Company and companies con-
troiled by Stanford, Huntingdon, Hopkins and
Croker. These four persons determined the
terms OF all these contracts, aud The result has
been that through the payments made by the
Central Pacific Railroad Company they have re-
ceiyed as profits 4 vast amount Of stocks aud
bonds. Those resulting from the construction
contracts above stated represent over 500 ,O0O-
600 In stocks aud over S5,000.000 in bonds.
That is the first reason why, in MY iudg-
ment, this railroad company is hopelessiy
and fraudulenuy insolvent.
The second reason / now proceed 10 give
you: From 1863 10 the 31st of December.
1868, the Central Pacific Railroad COMPANY
the sum of S34, 30S. COS. Between 1868 and
1869 Stanford, Huntington, Hopkins and
Croker were substantially the only stock
holders of the Central Pacific Railroad.
Nearly the entire amount Of dividends de-
clared during these years was, therefore
received by these four persons
Now. let me give you the conclusions OF
the commission with respect to that:
Tested by The simple question of earnings 1t Is
true that all oil tie above mentioned dividends
appear by tie income account OF The company 10
have been earned, But The distribution of this
vast SUM OF money 10 these four persons. whose
stock represented substantially no contribution
whatever 10 The actual value OF the railroad was
most improvldent and was In plain disregard Of
the obligation incurred by the company to The
United States. The company had agreed to re-
pay The debt and Interest at the expiration OF 80
years. How could IL be possible, IL the stock
represented no actual contribution TO the arm
Ing power OF tie company and the ear nings
themselves were divided up among the stock
holders, that adequate security could be found
for The debt due 10 The United States, increase
by The vast amount OF its deferred interest at The
maturity OF tie debt?
lie actual amounts put into the enterprise
were the proceeds
Mark you
the proceeds OF the frst-mortgage bonds and of
the United States loan In all about $40 coo, 900.
BY what magic was II expected that this prop
city, alter the wear and tear OF 80 years use.
could afford any sufficient security for the re-
payment oil Its extravagant cost, Increased by
The interest accfuug on large portion OF fts
debt, II ali lis current earnings were distributed
TO its stockholders without making provision
for the constantly Increasing obligations? The
ordinary dictates OF prudent and honest manage
ment should have impelled tho directors of this
a fala aio Of N