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character of the transaction is disclosed by the following clause in the agreement, namely:

Eleventh. Payments hereon shall be made to the party of the second part, bis heirs, executors, administrators, or assigns, in cash ; but if the Government bonds received by the company cannot be converted into money at their par value net, and the firstmortgage bonds of the company at ninety cents on the dollar net, then the said party of the second part, his heirs, executors, administrators, and assigns, shall be charged hereon the difference between the amount realized and the above-named rates ; pro vided the first-mortgage bonds are not sold for less than eighty cents on the dollar and if there shall not be realized from the sale of such bonds an amount sufficient to pay the party of the second part, his heirs, executors, administrators, or assigns, for work as stipulated in this contract, and according to the terms thereof, then such deficiency shall from time to time be subscribed by said party of the second part, his heirs, executors, administrators, or assigns, to the capital stock of said company, and proceeds of such subscriptions shall be paid to said party of the second part, his heirs, executors, administrators, or assigns, on this contract.

This contract was signed on behalf of the railroad company by Oliver Ames, as president pro tempore, who was the brother and business partner of Oakes Ames; it was approved by Oliver Ames, C. S. Bushnell, Springer Harbaugh, and Thomas C. Durant, as executive committee of the railroad company, all of whom, excepting IIarbaugh, were interested in the Credit Mobilier.

Pursuant to the previous understanding, that this contract was to be for the benefit of all the shareholders of the Credit Mobilier, on the 15th day of October, 1867, it was assigned by a tripartite agreement to seven trustees, namely, Thomas C. Durant, Oliver Ames, John B. Alley, Sidney Dillon, Cornelius S. Bushnell, Henry S. McComb, and Benjamin E. Bates, all stockholders in the Union Pacific Railroad Company and in the Credit Mobilier, Oliver Ames occupying the anomalous position of president of the railroad company making the contract, and one of the parties to whom it was assigned, and all of them were directors of the railroad company.

The beneficiaries of the contract under this assignment are shown by the following extract, namely:

Fourthly. To hold all the rest and residue of the said proceeds and avails for the use and benefit of such of the several persons holding and owning shares in the capital stock of the said Credit Mobilier of America on the day of the date hereof, in propor, tion to the number of shares which said stockholders now severally hold and own, and for the use and benefit of such of the several assignees and holders of such shares of stock at the times herein set forth, for the distribution of said residue and remainder of said avails and proceeds, who shall comply with the provisions, conditions, and limitations herein contained, which are on their part to be complied with.

Fifthly. To pay over, on or before the first Wednesday of June and December in each year, or within thirty days thereafter his just share and proportion of the residue and remainder of the said proceeds and avails as shall be justly estimated by the said trustees to have been made and earned as net profit on said contract during the preceding six months, to each shareholder only in said Credit Mobilier of America who, being a stockholder in the Union Pacific Railroad, shall have made and executed his power of attorney or proxy, irrevocable, to said several parties of the second part, their survivors and successors, empowering them, the said parties of the second part, to vote upon at least six-tenths of all the shares of stock owned by said shareholders of the Credit Mobilier of America in the capital stock of the Union Pacific Railroad Company on the day of the date hereof, and six-tenths of any stock in said Union Pacific Railroad Company he may have received as dividend, or otherwise, because or by virtue of having been a stock bolder in said Credit Mobilier of America, or which may appertain to any shares in said Union Pacific Railroad Company which had been so assigned to him at the time or times of the distribution of the said profits as herein provided; and this trust is made and declared upon the express condition and limitation that it shall not inure in any manner or degree to the use or benefit of any stockholder of the Credit Mobilier of America who shall neglect or refuse to execute and deliver unto the said parties of the second part his proxy or power of attorney, in the manner and for the purpose hereinbefore provided, or who shall in any way, or by any proceeding, know. ingly binder, delay, or interfere with tho execution or performance of the trust and conditions herein declared and set forth.

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It will be seen by this that, in order to secure any of the proceeds of this contract, the stockholders of the Credit Mobilier who owned stock in the Union Pacific Railroad Company were compelled to give an irrevocable proxy to these seven trustees to vote in all cases six-tenths of their railroad stock.

The stockholders in the two corporations were substantially identical. These proxies were executed and delivered to these trustees; they represented a majority of the stock, and by this means the entire control of the railroad company passed out of the hands of the stockholders of the latter company and was reposed in these seven trustees, and for two years they exercised the power thus acquired.

The management of the affairs of the railroal company during the execution of the work under this contract (and the Davis contract hereafter to be treated of) was under the control of the beneficiaries thereof. These trustees, having acquired this power by means of these proxies, were manifestly not especially looking after, or proposing in the future to very carefully guard the interests of the Union Pacific Railroad Company.

If any one doubts that this railroad company's interests were to be disregarded and the interests of the contractors vigilantly cared for, that doubt must be speedily dispelled by reading the following agree. ment entered into by these trustees the next day after the Oakes Ames contract was assigned to them. It was as follows:

Memorandum of agreement maile this 16th day of October, 1867, between Thomas C. Durant,

Olirer smes, John B. Alley, Sidney Dillon, Cornelius S. Bushnell, Henry S. JcComb, and Benjamin E. Baies, witnesseth as follows :

The undersigned, being the owners of shares and holders of certain proxies of the shareholders of tbe Union Pacific Railroad Company, and expecting hereafter to hojd other shares and proxies for other shares therein, for the protection of our mutual i nterests and the interests of our constituents, do hereby mutually agree each with the other, at any and every election of directors of the Union Pacitic Railroad Company, to vote upon the shares of stock then standing in our own names respectively, and upon such shares as we hold or may hereafter hold proxies therefor for such persons as directors of the said Union Pacific Railroad Company as may be nominated at or before each annnal stockholders' meeting of said company, by a majority of the then existing board of directors, not appointed by the President of the United States, and no others. And on failure of such nomination for any reason by the said existing board of the Union Pacific Railroad Company, we then agree to vote for the re-election of the elected members of the then existi board. It is further agreed, that in case any one or more of the parties hereto fails or neglects to perform and stand to any of the agreements and covenants herein contained, that he shall not be entitled to or claim any benefit or right under or by virtue of any of the trusts or agreements contained in a certain memorandum of agreement beretofore made and concluded by and between Oakes Ames of North Easton, Massachusetts, party of the first part, the parties hereto parties of the second part, and the Credit Mobilier of America, a party of the third part, but the said shares and proportion of the said party so in default shall become the property of and be divided among the said several remaining parties, for whose benefit said trusts in said agreement are declared.

In witness whereof the said parties lave hereunto subscribed their names, this day and year first above written.

OLIVER AMES.
JOHN B. ALLEY.
CORNELIUS S. BUSHNELL.
SIDNEY DILLON.
H. S. McCOMB.
THOMAS C. DURANT.

B. E. BATES.
Signed, sealed, and executed in presence of

CHARLES BELL.

Comment upon this is unnecessary. It is plain that the men who made this contract on the part of the Union Pacific Railroad Company,

as

through Oakes Ames with themselves, were determined to hold the control of the railroad company until their purposes were accomplished.

In addition to all this, your committee find that the wife of the engineer-in-chief, General Granville M. Dodge, who was appointed to succeed Mr. Dey, whose letter of resignation has been given, was the owner of one hundred shares of stock in the Credit Mobilier, which was issued in her name when the capital stock of that corporation was increased from $2,500,000 to $3,750,000. This stock was paid for origiually by John Duff, and General Dodge was written to by Mr. Ham, secretary of the Credit Mobilier, to forward $10,000 to re-imburse Duff. Whether Dodge paid for this stock with money of his own, or whether it was paid for with moneys of his wife, is of little consequence. Whether it was the one way or the other, it placed him in a position where his pecuniary interests were adverse to the interests of the railroad company he was representing in this most vital capacity.

In making this contract the stock of the Union Pacific Railroad Company to be subscribed for by the contractors, in pursuance of the eleventh section, above quoted, was deemed worth not more than thirty cents to the dollar, and the price of the work was increased accordingly. If it had been treated as worth par in cash the price of the work woulu have been lower by the amount of at least 70 per cent. on the par value of so much of the stock as was to be subscribed for. The subscription was never paid in in money, but checks were taken for amounts due on construction, and these checks were passed back by the contractors to the railroad company in payment for stock.

The effect of this is stated by Mr. Oliver Ames in his testimony, follows:

By Mr. HOAR: Q. When these subscriptions were made by the Credit Mobilier trustees to the capital stock of the Union Pacific Railroad Company, what was the process? What happened at the time of the payment? Was there any absolute payment in cash on these subscriptions, or was it a mere payment in road-making ?

A. It was a payment in road-making. We paid cash for building the road, and then we took stock from the company in payment of the expenditures.

Q. But you would not have considered that stock as equivalent to so much cash in payment for your expenditures ?

A. No, sir; we would not.

Q. Therefore you do not consider the amount of expenditure in road-building which you paid in for the stock as equivalent for so much cash, did you !

A. No, sir ; I would have been loth to have taken it.

Q. Then, so far as the subscriptions of the Crelit Mobilier were concerned, there was no cash payment for subscriptions except so far as this might be considered equivalent ?

A. We actually paid cash. The Union Pacific Railroad Company agreed to pay to contractors so much money; when the contractors came to us with their bills we, the Union Pacific Railroad Company, if we had not bonds to pay them, paid the balance in stock; we sold our bonds and paid in cash as far as it wonld go, or we paid them in bonds, which, by the contract, they were obliged to take; and the balance due on the contract we were obliged to pay in stock.

Q. My question is whether $100 in stock, so subscribed for and so paid, was deemed by either party of the transaction as equivalent to $100 in cash.

A. By the Union Pacific Railroad Company of course it was equivalent to $100, but the man who took it would have been very glad to sell it for thirty or forty dollars.

Q. As contractors you got cash, bonds of the company, and Government bonds for building the road?

A. Yes.

Q. You did not regard that, in paying you for building the road, $100 in stock was worth its face to you?

A. No, sir.

Q. You expected to get something else besides that $100 in stock as your $100 worth on your contract !

A. Yes. The stock was really not worth to the contractor who took it at par by any means, because it could be always bought in the market as low generally as from thirty to forty dollars.

Q. Then, if the $100 in stock was only worth about thirty or forty dollars to the contractor to whom it was paid, in proportioning what he rendered to the company between what was given as an equivalent for its stock and what was given as an equivalent for its Government bonds, and what was given as an equivalent for its own firstmortgage bonds, he did not render to the company $100 in value for every $100 in stock, did he?

A. No, sir.

Q. Was there any actual going through the ceremonial of paying in cash on those subscriptions to the treasurer of the Union Pacific Railroad Company?

A. Yes, there was always a check given.

Q. But the money never got into the treasury of the Union Pacific Railroad Compapy, I suppose ?

A. The Union Pacific Railroad Company gave the trustees a check for the amount dne, and the trustees turned over that check in payment to the Union Pacific Railroad Company for stock.

Q. There never was any interval between the payment of this check for stock and handing of it over again in payment of the contract ? A. Probably not. Q. When you made, in behalf of the Union Pacific Railroad Company, the contract with Mr. Oakes Ames as contractor, you expected that the transaction which you have now described would be the substance of the transaction that would take place, did you not? A. Substantially.

This contract extended over one hundred and thirty-eight miles of road completed and accepted. No work was done under it until after its assignment. That portion already completed had cost not to exceed $27,500 per mile, and by embracing this one hundred and thirty-eight miles in it, these trustees derived a "profit," if such a term is admissible in such a connection, which enabled them to make a dividend among the stockholders in less than sixty days after the assignment, namely, on the 12th of December, 1867, as follows: Sixty per cent. in first-mortgage bonds of the Union Pacific Railroad Company, $2,244,000; sixty per cent. in stock of the Union Pacific Railroad Company, $2,244,000.

This was mainly, if not entirely, derived from the excess of the contract price over what the one hundred and thirty-eight miles had cost.

The trustees proceeded to construct the road under this contract, and from a balance sheet taken from the books it appears that the cost to the Railroad company was....

$57, 140, 102 74 And the cost to the contractors was..

27, 285, 141 99

Profit......

29, 854, 141 99

The nature of this profit, as in case of that on the Hoxie contract, will appear hereafter. The next step in construction was under what is known as the

DAVIS CONTRACT,

This was a contract made with J. W. Daris, a man of but little, if any, pecuniary ability, (and not expected to perform the contract,) for the construction of that part of the road beginning at the western terminus of the “Ames contract,” and extending to the western terminus of the road, a distance of one hundred and twenty-five and twenty-three hundredths miles. It was upon the same terms as the Ames contract, and was assigned to the same board of trustees. Under it the residue of the road was constructed, and, from a balance sheet taken from the books of the railroad company, it appears that it

Cost the railroad company.

$23, 431, 768 10 And, from a balance-sheet taken from the books of the trustees, that it cost the contractors

15, 629, 633 62

Profit

7,802, 084 48

Your committee present the following summary of cost of this road to the railroad company and to the contractors, as appears by the books:

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42, 825, 328 34

To this should be added amount paid Credit Mobilier on account of fifty-eight miles ......

Total profit on construction....

1, 104, 000 00

43, 925, 328 34

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The balance sheets, from which the foregoing results have been obtained, were made out by Mr. Crane and Mr. Ham, accountants familiar with the books and with most of the transactions. Your committee bave earnestly endeavored to get the exact cost of the road to the company and to the contractors; and if they have failed, it is because those who should know, and have had the opportunity to inform the coiniittee, have failed to give the information. The books have been kept in such a way, and the transactions have been of such a character, as that their true nature has been very much disguised.

It is a matter of no little importance to know what the cash profits of this construction have been, and in this connection the following summary is presented on that subject.

The attention of Mr. Ham was called to the fact that the balance sheets above alluded to showed an aggregate profit ou the Ames and Davis contracts of $37,657,095.43, and he was asked the question bow much of it was money, how much bonds, and how much stock. His answer gave the following exhibit : $3,777,000 first-mortgage bonds, at 90.

$3,399, 300 $1,400,000 certificates for first-mortgage bonds, afterward converted into income-bonds, at

4,425, 000 $5,841,000 income-bonds, at 60.

3, 4-6, 600 $24,000,000 stock Union Pacific Railroad Company.

24,000,000 $2,346,195 cash

2, 346, 195 Total...

37, 657, 095

From this it will appear that in making up this , rofit all the securities are estimated at their cash value, except the stock, which is estimated at par.

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