The morning call. [volume] (San Francisco [Calif.]) 1878-1895, 1894-06-05
TOLD BY MAGUlRE.
Expose of Central Pacific
Methods.
DODGING OF JUST DEMANDS.
ManipuIators Enriched at Uncle
e. Sans Expense.
CONTRACTING WITH A DUMMY"
Reasons Why the Funding Bill
Should Be SheIved and Two
Roads ConfisCated.
CONTRACTING WITH A "DUMMY."

: WASHINGTON. June 4. - Congressman
: Mcguire to-day gave the House Committee
on Pacific Railroads the interesting piece
:. of Information that Uncle sam, through
% Attorney General Olney, presented TO Mrs.
Leland Stanford, about ten days ago, a
:. little bill or dun" for the snug sum of
. S14, 100000. This claim, Mcguire said, re-
cited that the Stanford estate on account
T. of the Central Pacific Railroads obliga-
!. tion would be indebted to Uncle Sam in
that amount, and hoped that Mrs. Stan
ford, as the eXecutrix, would pay up" as
the several amounts fell due. This was
under the California law concerning
''debts to fall due"
Mcguire asked to be heard in opposition
to the funding bill now being considered
before the House committee under which
it is proposed 10 ascertain the bonded debt
of the Union and Central Pacific railroads
as of the 1st of July, 1894. to provide for
a reissue of bonds and an extension of
the term of credit. Mcguire asked that a
Gay be set on which he and other members
of the delegation might be heard in oppo-
stiOn to the measure, and also that ex-
: Congressman Charles A Sumner might be
heard on the same subject
The committee thereuDon decided TO hear
Mcguire for one hour Immediately and to
decide upon further hearings at the close
of his remarks,
Mcguire objected TO any change in the
contractual relations now existing between
the Government aud the Pacific raj lroads,
upon the ground that such change would
release the Central Pacific syndicate from
their personal liability as stockholder rs
under the laws of California, and also from
their liability as involuntary trustees for
the Government, under the general rules
OF equity Jurisprudence.
He claimed that the earnings of the
Central Pacific Railroad since its compile
ton have been sufficient to pay the entire
bonded Indebtedness of that company if
they had been honestly applied according
10 law He said the FIVE promoters of the
Central Pacific Railroad constituted a CO.
partnership which had never been super
sedefrby any of the corporations through
whifn the syndicate did business, and that
the.Central Pacific Railroad Company and
all other corporations under the control Of
the syndicate were mere agencies; that
the corporation known as the Contract and
Finance Company was organized before
the completion of the Central Pacific road,
with which the Central Pacific Company
repair work and supplies at exorbitant
prices; that the Contract and Finance
Company was owned and controlled by a
syndicate and was used as a means of
diverting the real net earnings of the road
: to the syndicate for several years; that in
order to obliterate evidence Of its trans
actions the Contract and Finance Com
pany was set aside, its business closed up
and its books either destroyed or placed
beyond reach Of investigators.
MThe Western Development Company was
organized as its successor by a syndicate.
After a brief and successful business, con-
p Quoted on the same lines, it was also set
aside and the Pacific Improvement Com.
pany was. as its successor. organized for
: the same business. About this time a
: new plan was devised for dVerting the
earnings of the Central Pacific road
namely the organization of the Southern
Pacific Railway Company of Kentucky.
also absolutely owned and controlled by
the syndicate, Ito which the Central Pacific
road was leased for a rental so small as TO
leave little or nothing TO be applied upon
the bonded inde btedness of the road, as
required by law. This method of divert
ing the earnings of the Central Pacific
road is still in operation. All of the SIDE
corporations that have contracted with the
Central Pacific railroad have been pros
porous. and they have made multi-million-
aires of all the members or the syndicate,
while the Cent Pacific Railroad, which
was the basis Of the prosperity and riches
Of all, has struggled long in a. condition OF
perpetual bankruptcy. The fact is that
this Government in dealing with the Cen
tral Pacific Railroad Company was con-
tracing with dummy" behind which
stood a copartnership apprOprating the
earnings OF the company to the private use
OF the members of the firm, and actually
absorbing all of the earnings which the
company had contracted to set aside as q
sacred fund for the payment of the bonded
Indebtedness. The ultimate proceeds of
those diverted funds now appear in coIos-
sal fortunes of the individual members OF
the syndicate. Iheyihave the funds with
which the bonded debt should have been
paid. The ordinary rules of equity and
Jurisprudence afford ample means for the
protection of the Government against the
consequences of the wrong by which the
payment of the debt was avoided.
Those rules" said Maguire, "are rig
idly applied and enforced in ordinary
cases. Why should we abandon them in
case OF such magnitude? The funding
or the debt will estop the Government in
equity as well as at law from suing for the
proceeds of that wrongful diversion of
funds that should have been applied to
the satisfaction of the debt. and tie fund
ing proposition will place US in no better
position otherwise than that in whieh we
now are for the collection of the debt.''
A member of the committee here asked
Mcguire what he proposed as a substitute
for the funding bill.
Maguire-I have drawn two bills, one or
both of which l will offer in the Housees
substitute for any funding bill whiGh
may be reported. My proposition is Il
either foreclose ana apply what is left ol
the Central Pacific Railroad to the salts
faction OF second mortgage bonds. after
making provision for the payment of such
first mortgage bonds as have an equitable
precedence. or the Government should buy
In the road, provided it can be secured at