Omaha daily bee., 1896-02-29
The PACIFIC FUNDING BILL
A Measure Calculated to Oondone Fraud
and Perpetuate Monopoly.
HOW THE CENTRAL PACIFIC WAS PlUcKED
succinct Review of the Operations OF
Huntington and Associates nnd
Their Grip on the Neck of
California Commerce.

railroads have done to enrich themselves at
the expense of the people, the Washington
correspondent of the ST. Louis Republic
procured from Representative Mcguire OF
California a succinct history of their
| operations.
The California congressman said "I know
| OF nothing like the history of the Pacific rail-
| roads. except the history OF the frauds and
| opposition of the East India company as
disclosed in the famous trial of Warren
Hastings. There is one striking difference
| between them, however, II the popular
| reports OF the Hastings trial are to be
credited. You know Warren Hastings is
credited with having said upon his trial
1 when admitting a long series of charges
against him. My God, gentlemen, consider
ing my opportunities, am surprised at my
moderation. The manipulators of the Pacific
railroads can hardly look back over their
careers with any such feeling. They were
never guilty of any moderation in availing
themselves of their opportunities. They
| acted like incorporated pirates from the be-
| ginning to the end
| II would better conine myself to the
| history OF the Central Pacific railroad, with
which l am far more familiar than with
| that OF the Union Pacific, but I am not
aware OF any fraud or oppression committed
in connection with either of these COM
panes that was not practiced by the other
The Central Pacific Railroad company was
| organized as California corporation by
Huntington. Stanford. Hopkins and Crocker
| In 1861. Those gentlemen really constituted
| partnership at that time and all the
| time until the organization of the Southern
Pacific company in 1885, The Central Pa
cific Railroad company and some thirty other
corporations organized by these men were
| really corporations only in name, used as
| mere agencies of the co-partnership. The
company. as you know, was authorized by
| the Pacific Railroad act of 1862 to construct
| part of the Pacific railroad system, com
| mencing at San Jose. CAL, and building
eastward to meet the Union Pacific rail
| road. which was being built west from
Omaha.
| Each company was to receive a propor-
1 tion OF the land and bond subsidy equal 70
the proportion Of the road built by each.
The act of 1862 gave the companies every
odd-numbered section of government land
lying within ten miles on each side of the
| railroad between Omaha and San Jose and
a further subsidy in the form of United
States bonds from SIG, 900 to $48, 900 per mile
for mountain building. Practically nothing
was done under the act of 1862. In 1864
both companies, believing no doubt that
they had failed to make the most of their
opportunity in 1862, asked congress prac-
tically to double their land on both sides
and bond subsidies. The land subsidy was
doubled by giving them every odd section
Of land within twenty miles on each side of
the railroad. In addition to this land grant
should have said the government gave to
the companies a right-of-way 400 feet in
width from Omaha to San Jose.
Under these acts the Union Pacific Rail-
road company received about $67 900, 900 in
money and United States bonds and the
Central Pacific company about $56, 900 OOO
The two companies together received an
empire Of land, which in a solid body would
be twenty miles in width and 800 miles in
length. These subsidies were far beyond the
cost OF building and equpping the roads.
At once means were devised by the pro-
mOters to divert to themselves all of the
assets of the companies above the cost of
constructing and equipping the roads
For this purpose the directors Of the Union
Pacific company organized the Credit Mo-
bilier company and the directors of the Cen
trail Pacific company, the co-partners of
whom l have spoken, organized the Contract
and Finance company. The history of the
Credit Mobiler company startled the union,
when it was disclosed in a congressional in
vestigation about twenty years ago.
1.-THE Contract and Finance company, with
precisely similar history, has been little
known east Of the Rocky mountains. The
Contract and Finance company was incor-
porated for the purpose Of taking contracts
for the construction and repair of railroads,
rolling stock, etc. Every share OF its stock
was owned by the directors of the Central
Pacific Railroad company. The directors of
the railroad company controlled the govern
ment subsidies and all moneys secured by
mortgaging the railroad lands, made contracts
for construction and repair, with the Con-
tract and Finance company, which they own
absolutely. Under those contracts they gave
themselves fabulous prices for all such work,
the aggregate Of the contracts absorbing
every dollar that the Central Pacific Rail-
road company had received from all sources,
including every share OF Its stock, amount
ing to S6s000 900 par value, most OF which
was sold in the market for rs cents on the
dollar. The contracts were all alike.
"The Pacific railroad commission, appointed
by the president of the United States in 1887
to investigate these matters, reported to con- |
gress, presenting the testimony which they |
had taken at the same time. that by these
fraudulent contracts made by the directors
with themselves under the name OF the Con- |
tract and Finance company they had fraudu-
ently diverted to themselves assets OF the |
Central Pacific Railroad company of the mar |
ket value OF more than $62, 600, 900. Every |
one of those contracts WAS fraudulent, and |
eQuitably, those who received the benefit OF |
them are liable to decree compelling them |
to restore the assets to the company for the |
satisfaction of the debts OF the company.
'In the report CT the commission 1t Is |
shown that under these contracts the Central |
Pacific Railroad company paid to the Con- |
tract and Finance company for construction |
$120, ,872 ,000 that the cost Of construction was
S58, ,302. .000 leaving a surplus of over $62,- |
SIC, 900, to be divided among the directors of
the Central Pacific Railroad company. whose
duty to the government of the United States |
and to the stockholders Of that company was |
to save the company the amount which they |
divided as profit.
"Of these payments the commission says |
All of this consideration was paid TO Stan
ford, Huntington. Hopkins and Croker, and
was voted to themselves by their own votes.
That contract was mado Cor the construction
OF branch road from the town OF Delta, in |
California, to the Oregon state line These |
men, as directors Of the Central Pacific Rail
road company, let contract to themselves as
the Contract and Finance company for the
building OF that section Of road for the sum
of s. $40. 900. The total cost OF building the
road was only s3505. .0O0 leaving profit TO !
them of nearly s5.OOo.OOO on that $4,000, 900
contract
But that was not all. They afterward |
mortgaged the entire California & Oregon |
road from Roseyllle Junction to the Oregon |
line for 81 800, 900. and gave no account Of
the money secured on this mortgage to the |
Central Pacific Railroad company, out OF the !
assets of which the road was built.
"When the Credit Mobllier Investigation
was commenced here and was arousng popu-
lar Indignation throughout the entire union.
the Contract and Finance company was dis
innornnratad In California and its hnnkl |