Evening star. [volume] (Washington, D.C.) 1854-1972, 1896-02-25
Graphic Story Of the Pacific Railroad
Frauds.
A GANG OF INCORPORATED PlRAqES'
What Representative Mcguire Has
to Say.
PACIFIC COAST PRoTEsTs

les, Will ee pleased TO give you story
on the Pacific railroads." said Congressman
Mcguire to a representative of The Star
yesterday.
"a complete history of the frauds and op-
pressions connected with their construction
and operation would be very interesting, but
even a summary of them would be too long
for the average reader. I know Of nothing
like the history of the Pacific railroads ex-
cept the history of the frauds and oppres-
sions Of the East India Company. as dis
closed in the famous trial of Warren Hast
ings. There is one striking difference be-
tween them, however, IL the popular reports
of the Hastings trial are to be credited. You
know. Warren Hastings is credited with
having said upon his trial, when admitting
long series Of charges against him: My
God! gentlemen. considering my opportuni-
ties, l 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 beginning to the end.
The Central Pacific.
Il had better confine myself to the history
Of the Central Pacific railroad, with which
am far more familiar than with that Of the
Union Pacific, but l am not aware of any
fraud or oppression committed in connec-
tion with either of these companies that was
not practiced by the other. Their systems
were the same and the results were very
similar in both cases. The Central Pacific
Railroad Company was organized as Cali
fcrnia corporation by Messr3. Huntington,
Stanford. Hopkins and Crccker on June J.,
1861. Those gentlemen really constituted a
partnership at that time and all the time
until the organization of the Southern Pa
cific Company, in 1885. The Central Pacific
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
a part OF the Pacific railroad system COM
mencing at San Jose. Cal. and building
eastward to meet the Union Pacific railroad,
which was being built westward from
Omaha
Zach company was to receive a propor-
tion of the land and bond subsidy equal to
the proportion Of the road built by each.
The act of 1862 gave to the companies
every odd numbered section of government
land lying within ten miles on each side of
Jose. Cal, AMI a further subsidy in the
form of United States bonds OF from $1,000
to $4,000 per mile. the $4,000 per mile
being given for building on level land and
siS.UDO per mile for mountain building
Practically nothing was done under the
act of 1862. In 1854 10th companies, be-
lieving. no doubt, that they had failed to
make the most Of their opportunity in 1862
asked Congress practically to double their
land and bond subsidies. The land subsidy
was doubled by giving them every ode sec
ton of land within twenty miles on each
side Of the railroad. In addition to this
land grant 1 should have said the govern
ment gave to the companies right of way
4OO feet in Width from Omaha to San Jose
where the roads were run through govern
ment land. as they were throughout most
Of tine distance. .'he companies were also
given the right TO mortgage their roads
privately to an amount equal to the origi-
mai government subsidy, the private mort
cages SO authorized to be the first mort
cages on the roads and prior to the gov
ernment mortgage. This was equivalent to
doubling the government subsidy.
Some Startling Figures.
Under these acts the Union Pacific Rail-
IL
money and United States bonds and the
Central Pacific Company about $56.UO0,OOO.
The Two companies to gether received an
empire of lana which in a solid body
would be twenty miles in width and eigh-
teen hundred miles in length. These SUBJ
sides we've far beyond the cost Of build
ing and equippipg the reads. and at once
means were dev .sed by the promoters to
divert to themselves all Of the assets Of the
companies above the cost of constructing
end eqmpping the roads. For this pur-
pose thu directors of the Union Pacific
Railroad Company organized the Credi,
Moblier Company, and the directors of the
Central Pacific Company, the CO partners of
whom l have spoken, organized the Con-
tract and Finance Company. The history of
the Credit Mobilier Company startled the
Union when 1t was disclosed in q congress
sional investigation about twenty years
ago. The Contract and Finance Company,
with precisely SIMILAR history, has been
little known east of the Rocky mountains
Well. the Contract and Finance Company
was incorporated for the purpose of taking
contracts for she construction and repa r
of railroads, rolling stock, etc. Every
share of its stock was owned by the di-
rectors of the Central Pacific RaiIroa
Company. The directors Of the railroad
company controlling the government SUBJ
sides and all moneys secured by mortgag-
ing the railroad lands, made contracts for
construction and repair. etc.. with the Con-
~-NoS NIAN iiAoASS SoiupdHy, WHICH lnGy
own absolutely. Under those contracts
they gave themselves fabulous prices for
all SUCH work, the aggregate of the con-
tracts absorbing every dollar that the Cen
trail Pacific Railroad Company had re-
ceived from all sources, including every
share OF its stock, amounting to $6S, 1000 600.
par value. most Of which was sold in the
market for IS cents on the dollar. TIE
contracts were all alike. will give you a
sample Of them in a few minutes"
fraudulent Contracts.
Were these contracts legal?" asked The
Star reporter.
'"The Pacific railway commission" con-
tinued MIR. Mcguire. appointed by the
President Of the United States in 1887 to in
vestigate 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
Contract and Finance Company they had
fraudulently diverted to themselves assets
Of the Central Pacific R,-'ro~ g v
OF the market value Of more than $62 OOO.-
coo. Every one Of those CO.. ,.s
fraudulent, and. equitably, those VINO re-
ceived the bereft of them are liable to a
decree compelling them to restore the as
sets to the company for the satisfaction
of the debts of the company. On PAGE g.
of the report Of that commission it is
Continued on Eighth Page.7