The Caucasian. (Clinton, N.C.) 188?-1913, 1897-09-30
Lease Fraud
Investigation.



pany, and by operating the Company
only A. division OF their own d stem.
ana not as . ,eparste entity. they seem
now 10 have regarded a. = practical un-
neieioD.l sale of the property 10
them on The ms ailment plan
Mr. "siton. tbs Secretary and Treas
urer of .h. North Carolina Railroad
produced vouchers which show an ex.
penditure OF over $2,70O BY the old
Board OF Directors Of the MORT Caro-
hna Railroad for their ate n d nce pou
The Legislature OF 1897, 20 defeat
legislation, whose purpose was to
TEST this iease In the courts of North
carolina and TO generally investigate
the powers of the parties thereto and
the motives OF the parties thereto in
making the same. 1t was also shown
at this hearing that the only security
the State has for the payment Of lite
lease money AZ present are the bonds
OF the Southern Railway Company,
deposited at the First National Bank.
at Charlotte, the value Of which We
have offered to prose is. fiuctuatinp
and uncertain, aud the acceptance Of
which as security for payment of rem
tai by the leasee, We claim have been
an unprecedented thing in the history
OF railroad leases and
GROSS MALPRACTICE
In the making of this contract. 1t also
proved That the inventory Of property,
Ior which the Southern Railway Com
pany agreed in 1896 to become respou-
slb!e, under it's $4,000 Trust Com
pany bond, WAS an inventory of ore.
ciseiy the same property as the Rich
mono DaBville Railroad agreed to
become responsible for in 1871, the
ouik OF which property We now know
20 oe non-existent and beyond the
power OF this lessee to duplicate and
replace In like good condition a. when
they received it. We also proved that
the records of the North Carolina
railroad do not show that their Board
OF Directors ever voted for the 80 year
lease at all, and that the last record
showed vote on the 80 year lease.
followed by the recital of the terms
OF the so year lease, and nothing more.
Ihfs fact is significant in showing
mat there ia no record as to how the
Drectors individually voted, upon
which point there 10 considerable con-
f1ict among themselves.
| Az this hearing we offered to prove
freight determinations by the South
ern Railway Company to parties re-
sident IN the State of North Carolina,
IN consideration of services rendered
IN sitting an investigation of the lease
OF 1896 In the Legislature Of 1897
Some OF these witnesses are officers of
the Southern Railway, who forgot to
bring their books when supposed to
do SO and were therefore excused.
| At the first New York hearing, Mr..
j. Pierpont Morgan was subpoenaed
to prove his interest in the Southern
Railway, one of the contracting par
ties of this lease, his domination of the
same and an admission by him that he
had declared that when certain condi-
| ton were complied with his financial
| support would be withdrawn from the
Southern Railway, in which case we
are prepared to prove that we will be
| able to prove by expert testimony that
1t Is beyond the limit of financial posi-
blllties for it to maintain it's fixed
| charges and remain sOlvent until the
| expiration of this contract, which we
| claim it is b0und to do.
Mr.. Morgan declined to appear and
sent statement by counsel that he
knew nothing whatever of the North
Carolina Railroad lease other than that
there was such lease aud that it was
| in litigation. 1t was admitted by the
Central Trust Company that Morgan
& Co. had =
| HANDLED THE BULK OF THE BONDS
based in part upon this lease, and that
| 1t was very valuable asset upon which
to base such bonds.
Mr.. E. Francis Hyde, from New
York newspapers facetiously termed a
gentleman with CDR. Jakyl and Mr..
| hyde memory" Vice President of the
| Central Trust Company, who are par
ties to this suit. confessed that he knew
nothing of the allegations made by the
Central Trust Company in the plead
lngs in which they asked the Federal
Court to prevent our scrutiniZing in
our own courts this contract; that he
did not know from where the Central
Trust Company derived the informa-
ton upon which was based their ALE
CATION in their pleadings and that he
did not know that the mOrtka which
covers this lease-hoId interest for the
Southern Railway bondholders, for
whom they are trustees, made mention
of it's value. He admitted, however,
that the assignment to the Central
Trust Company by the Southern Rail.
way of this lease-hOld interest was not
made until August. 1897, after the suit
in which they claimed to be parties in
interest, bad been begun.
Col. Huidekuper, who was Vice.
President of the Richmond & Danville
Railroad, afterwards receiver of the
Richmond & Danville Railroad, and
is now President of the C. P. & st.
Louis Railroad, and q gentleman of
high character, admitted that he had
knowledge which sustained the States
contention, on the betterment pr0po-
sition, and that his co.Receiyer, Mr..
lSpencer, must haYe had and did have
the same knowledge which be had
upon this subject.
The Secretary of the New York
Stock Exchange is another gentleman
who did not have the books we asked
for. He declined to admit there was
any official list showing the prices at
which the Southern Railway bonds
have sold since their deposit to secure
the State for the payment of it's lease
money. We proved this, however, by
the affidavits of Mr.. Hook, of the
New York Examiner. We then offer
ed witness as to certain admissions
by Mr.. Morgan, In the presence of NE.
fSpencer and others, but in defsrence
to the Master and counsel for the other
side we held him for the time being
III aueyd4Ce: 81" {
At this hearing We also offered the
Georgia lease and other leases, as show
ing the
USUAL METHODS EMPLOYED
by States in leasing their railway
properties and as proving the NAL
practice of the Directors Of the North
Carolina Railroad in making their
lease without complying with any of
these customary requirements.
We also offered . Virginia lease,
which showed that the Southern Rail-
way, as purchasers of the old Virginia
Midland and Great Southern road,
from Manassas to Strasburg, Va. and
lessons of that road to the Baltimore
& Ohio, had refused the Baltimore &
Ohio, their lessee. the right to remove
betterments and Improvements placed
on this property and that they had ad-