The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1892-04-13
RICH INSOLVEN rs.

THE CALL has before directed public
attention to the anomaly Of a bankrupt
company, the members Of which were
classed among the richest men in the coun-
try. How is this done? BY what trick Of
law do men who cannot pay their company
debts pose before the community as multi
millionaires? This question is answered
by q speech delivered in the House of Rep
reSeniatiYes year or more ago, which THE
CALL now reprints. Let US say at the out
set that the facts stated in that speech were
embodied in a report submitted to Congress
some years ago by commission instructed
TO inquire into the relations existing be-
tween the United States Government and
the Central Pacific Railroad Company. The
facts stated in the report have never been
disputed and may, therefore, be accepted
without question.
Mr.. DalZelI. in his speech, says that the
Central Pacific Railroad Company cost in
cash and in bonds SIS, 000,OC0 The four
men constituting the stockholders con-
tracted with the Central Pacific Company
with such success that they realized S62,-
10000 by building the road. This profit of
So. o00.CO0 they turned into what they call
pald-up capital stock, upon which the road
is expected to pay dividends. a property,
therefore, which actually cost SIS, coo, 600
apparently cost SI20,000,0G0. Now, how did
these four men get the money which en-
abled them TO contract so pr0ftably with
them selves? Mr.. Dalzell says, and he takes
his facts from the report of the Congressional
commission, that under the acts of 1862
and 1864 The United States Govern
ment gave tie Central Pacific Company
in bonds. equivalent to cash, S27, $751;
ESQ.," Interest en- the bonds Up to
the date Of maturity will amount to
$50. 140. pa. The Government has paid their
interest besides indorsing the bonds. Con-
seQGently the Central Pacific Company owes
fhe Government the original bond issue of
S27, $50, $50 and the interest of $50, lac, 224,
with small offsets in the way Of services
rendered and payments on account of the
sinking fund as provided in the Thurman act
The actual debt of the Central Pacific Com
pany is, as TIE CALL has before stated, in
round numbers $4,000, 600 We see, there
fore. that the Central Pacific was provided
with the money TO build the road with and
has been allowed to owe the interest on the
bonds Issued for that purpose. 1t appears
also frOm the Congressional report that be-
tween 1863 and the 31st day Of December
1863, the Central Pacific Company, consist
ing Of four persons, declared dividends
amour ting to S34, 1908, 055. In other words,
while the road was being built with Gov
eminent money the four stock FOLDERS divided
among themselves S34. 900 which they
made out of contracts with themselves. 1t
becomes plain now how the owners of the
road became rich while the company prop
erty was unable to pay its debts. At the
present time the total funded debt of the
company is in round numbers S90, 0OO, 600
Government experts in the employ Of the
Congressional commission have estimated
Its value at 10000, 900. The road, therefore,
is worth S40,o00,000 less than its bonded
cebt, and tho security Of the Government is
a second mortgage. The money which the
Central Pacific Company has divided among
themselves in the form Of dividends is not
considered as security for the debt. The
money becomes the personal holdings of the
four stockholders. By letting the interest
accrue and dividing profits out as fast as
they appeared the stockholders have became
multi-milionaires while members, directors
and managers of an insolvent company.
There is term which in our criminal courts
is applied to getting money in this way.
Mr.. DalZell, however, does not apply this
term 10 the Central Pacific managers. He
is content with the assertion that the Cen
tras Pacific Company is not only insolyent
Extraordinarily irsolyent