The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1906-01-08
CLEARED UP.
Secretary Taft Turns in Canal
Commission Report
With a Letter of Explanation to
the President.
THAT SALE OF BONDS
And Deal With Markell Excused
and Justified.
Roosevelt Gives Both Trans
actions His Approval.
THAT SALE OF BONDS

nal commission and of the president Of
the Panama Railway company together
with the reports were received by the
two houses of congress today. The re-
port of the canal commission has been
made public. Secretary Taft in his let
ter advised the president that there is
to be a majority and minority report
from the board of consulting engineers
as to the type of canal to be recon-
mended and that he expects soon to re-
ceive by cable from General Davis,
chairman of the board who will meet
the foreign members in Brussels on
January 9 a confirmation of the major
ity report. The minority report is be
ing prepared he added and he hoped
that the whole matter may be presented
for submission to congress by the first
of February.
The secretary takes up the report of
the president of the railroad company
and discusses two transactions referred
to in the report-the issue of bonds and
the repurchase by the company and the
market contract for feeding employees
on the Isthmus. OF these the secretary
says:
There are two transactions referred
to in the report of the president of the
railway of which special mention should
be made. In December at a time when
the creditors of the railroad company
were urgent in demanding the payment
of the bills and when the railway was
not able to meet its obligations because
the canal commission were unable to
pay the railroad company what was
due it, the president and directors sold
628 one thousand dollar Az per cent
- ~.
of the corporation ever since the Uni
ted States acquired a controlling inter
est in its shares. The bonds had been
placed there by the former management
for the purpose of using them in order
to improve the equipment of the road.
On November 8 last the directors auth
orized the executive officers to issue
the bonds, and after written invitations
to several probable purchasers they
were sold on the 18th day of November
to Mackay & Co, bankers, as the
highest bidders. One hundred and
seventy-five thousand dollars of the
purchase price was paid on November
IL though the bonds were ont delivered
until oath Of November. The purchas-
ers paid par and premium of per
cent for the bonds.
Bond Sale Explained.
sit has been suggested that as the
government owned all the shares of the
railroad company and was in fact the
owner of the road, the sale of the com
pany's bonds was in effect to increase
the indebtedness to which the govern
ment property might be subjected and
in this way indirectly to increase the
that such power ought not to be exer-
cised without special authority from
congress. On the other hand it may
be pointed out that the company still
oh
by the acquiescence of congress and
that under the charter the directors
had the power to issue the bonds and
bind the company no matter who
owned the shares.
1.-THE question of issuing the bonds
was not submitted to you or me be
fore final action was taken by the
board of directors. The policy of sell
ing the bonds was a doubtful one and
should not have been adopted until
after a conference with this govern
ment. have not the slightest doubt
that the president and directors of the
company acted in entire good faith in
what they did, and as they tn ought for
the best interest of the government;
but owing to the anomalous and pecu-
liar relations between the directors and
the company and the government the
bonds should not have been issued
without your approval or mine. In
view of this fact, by your authority 1
instructed the president of the railway
to proceed at once to reDurchase the
bonds. The bonds themselves contain
ed a stipulation providing that they
might be redeemed either on the first
of october or the first of April by the
payment of the previous six months
interest, the principal and a premium
of ner cent.
arrangements were made with the
purchasers by which the bonds were
bought back at the premium paid, los,
and accrued interest to date or repur-
chase from first of October. To make
the repurchase it was al first thought
necessary 70 the railway to borrow
100000 from the canal commission.
1.-The acting attorney general held
that the commission had the authority
to lend the money to the railway COM
pany for that purpose, but it was found
that the Indebtedness of the canal com
mission to the railway company was
quite large enough to supply the rail-
road company with the needed funds
for taking UP the bonds without Dor
rowing from the commission.
Shown Their Error.
'"The executive officers of the rail
road company have been advised of
their error" says the secretary in his
letter to the president, and hereafter
questions of this chara eter will not be
acted upon finally by the commission
or the directors of the railroad COM
pany until after conference with the
proper authorities"
Another matter calling for comment -
Secretary Taft says, is the cancellation
of the sO-called Markell contract and
subsequent settlement. In March 1905
It became an urgent question how the
employees Of the canal commission and of
the railway company on the Isthmus
could obtain proper food at reasonable
prices. Chief Engineer Wallace knew
J. z. Markell of Omaha, as a contract
engaged by railway companies to feed
boarding camps and to cater for railroad
hotels and restaurants. Mr.. Marley had
been in the business for fifty years and
had carried out large contracts of this
kind in construction work done by the
Union Pacific railroad. the Illinois Cen
trail road and other large railway sys-
TENS of the west. Mr.. Wallace in March
last wrote to Mr.. Markell and invited
him to come to the Isthmus and look
the ground over with a view to making
an arrangement to feed all the emDIoXes