The herald., 1894-02-04
NORTHERN PACIFIC LITIGATION
Receivers File Their Answer to
Ives Petition.
Exhaustive Replies to the Charges
Against Them.
Insinuations as Well as Specific Accus-
ations Explained and Refuted.
Rejection of the Branch
Lines Leases.


BY the Associated Press.
MlLwAUKEE, Wis, Feb. 3.-There were
fled today by the Farmers Loan and
Trust Co., Sheldon & Co., P. B. Winston,
and Receivers Cakes, Payne and Rouse,
in the circuit court OF the United States.
six separate answers to Ives petition
for the removal of the Northern Pacific
receivers. The answers present ex-
haustive replies to every charge made,
and comprise over 500 printed pages.
The answers not only meet all the
specific charges, but explain and refute
insinuations. 1t is shown that the
branch line policy originated during the
IvesHarris administration, and the re-
ceivers bring proofs to show that by
rejecting the branch line leases they
have saved more than $1,000,000 per
year. The receivers have already paid
s5.0O0.0O0 preferential debts and about
$4,000, 900 interest, with important econ
omies in operation.
Cakes answers every charge specially,
filing exhaustive documents and proofs.
He denies that he was partner in or
profited by the construction of any lines
or the guarantee of the bonds of the
same. He also denies that the directors
profited thereby. He shows that under
his management the gross earnings in
creased from $4,000 900 to $24, 000, 900,
until the recent extraordinary depres-
sion which caused the bankruptcy OF the
company.
He reviews the history of the pur-
chase or lease of various railroads. The
answer shows that they were necessary
for meeting competition snd controlling
business and protecting territory. The
Northern Pacific directors and stock
holders unanimously adopted this policy
in 1881. readopted it in 1886 and 1882
Pursuant to this policy branch roads
were constructed or acquired to meet
particular exigencies. In each instance
the subject was carefully examined, re-
ferred to special committees, reported
upon by various departments to the
board, and all of the % branches now in
operation with the exceptian of five)
were commenced or authorized by the
Ives Harris board. The acquisition of
branch lines was necessity in the rail-
roads management, and upon the whole
beneficial to the system. The branch
the period Cakes was director fur
nished business to the Northern Pacific
Railroad company OF over $4,000, 600.
The Central Washington, Green River
and Northern, the Spokane and Palouse
and the Northern Pacific and Montana
roads all were constructed, or their can
struction provided for, under the Ives
Harris management. On the Spokane
and Palouse the business last year ex-
ceeded $350,000. The net revenue paid
all interest ON the bonds issued on &C.
count OF its extension. The Green River
and Northern was authorized by the
Ives Harris faction of directors and the
contract for it's construction was signed
by Robert Harris.
The answer shows that no director
WAS interested in the construction OF
the united railroads of Washington.
They cost the total amount of bonds
issued thereon, and no profit was made
in construction. The answer shows
that not cent Of money was paid the
Oregon and Transcontinental company
for services in purchasing the Seattle,
Lake Shore and Eastern. Four directors
OF the company were interested in the
syndicate which owned and controlled
the Rocky Fork mines, and the railroad
company purchased stock in the COM
pany and made contract with the
Rocky Fork company for 800 tons of coal
daily for so years at $3.50 per ton, with
certain rebates. For the three fiscal years
ending June 30th last, the company
saved, by virtue of said contracts, over
$1,000 600, or a sum equal to about
$1,000 day.
As to the Northern Pacific and Man
itoba railroad, the answer shows that a
syndicate was organized by Willard to
construct this road, but he had no per-
sonsl interest in it. The entire road, in
Guiding terminal properties at Winni-
peg, Portage la Prairie and the Brandon
and Winnipeg transfer road, cost S., 000,-
600, and the profit for the year ending
June 80, 1892, was over $3,000,000
As to Chicago terminals and the Wis
consin Central lease, the answer shows
that before the lease or any traffic con-
tract was entered into, the value of
properties was thoroughly and care
fully examined by independent experts,
not only representing the company, but
also representing bankers who expected
to make a large Investment in Chicago
terminal bonds. These experts uni
formly placed the value of the leased
properties largely In excess of the value
on which rental was paid under the
leases. The Ives-Clews report last year
placed the value of the Chicago termi-
nails at about $29,000,000. While they
we're acquired under the lease by the
Northern Pacific on a rental value OF
about $lS,000,O00, and Cakes had no
interest, direct or indirect, in the acqui-
aition and control of these properties.