able, the clause giving the trustees an irrevocable proxy to vote on sixtenths of every man's stock enabled them to obtain the consent of both the nominal parties to its abandonment.

They were to have their bonds of both classes for each twenty miles when that twenty miles was completed, and, on the certificate of the chief engineer and commissioners, a proportionate share for uncompleted work. They were entitled by their contract to about $3,000,000 profits on the portion of the road which had been completed under a previous contract, but was included at a higher price in theirs. All they put at risk, therefore, was what they had to advance to build each twenty miles of the road, and this risk only lasted until that sum was re-imbursed on the completion of such section of twenty miles. This, at the rate fixed for the first hundred miles under the Oakes Ames contract, would amount to $840,000 for twenty miles, supposing there were no profits, and at the rate for the last hundred miles, to $1,920,000. But they divided among themselves on the 12th of December, 1867, less than two months after they got the contract, as before shown, a large amount in first-mortgage bonds and a like amount in stock par value, and from time to time made the other dividends hereinbefore set forth. Thus it appears that they divided, December 12, 1867, among themselves as profits at that date, a larger sum than they ever put at risk in the whole transaction.

6. This claim that no unreasonable profit has been made is not supported by the testimony. The risk, as has been shown, was wholly that of the Government.

7 and 8. The gentlemen making these excuses, though invited, have failed to furnish the committee with any evidence that such a legal opinion was given them.

9. It is true that the construction of the Pacific Railroad has saved large expenditure, both in postal and military transportation and the maintenance of troops, and has been of great public advantage. But it has been built chiefly with the resources of the Government.

10. The answer to this is to be found in figures disclosed in this report.

It is also said that it is unjust to look at this question in the light of the present; that we should go back to the condition of things before the road was built, when the whole scheme seemed, to the prudent capitalists of the country, visionary and perilous. This is true; and if these gentlemen assumed great risks from which others shrank, and thereby great benefits inured to the public, they should have all due credit. But we think they differed from other capitalists, not in taking a risk, but in having discovered that the road could be built at vast profit without risk, the resources furnished by the Government being more than ample for the purpose.

The committee do not conceive it to be their duty to express or to form an opinion as to the degree of moral blame that attaches to the persons engaged in these transactions, except so far as that may rightfully affect the exercise of the discretion of Congress in dealing with their franchises. Congress cannot accept the general intentions of persons combined as an excuse for a deliberate violation of its laws, if it expects them to be obeyed or respected hereafter. But we do not like to close our narrative of this case, and pronounce judgment upon these illegal transactions, without observing that there are many persons connected with the Credit Mobilier who held their stock openly and without concealment from the beginning, and who seem to have had no share in its management, and no knowledge of the wrongful use of its

stock or of the funds of the railroad. Some of these persons are persons of eminent character, holding high public positions. It is difficult to believe that they had any consciousness that they were doing wrong, or saw the whole proceeding in the light in which the committee now state it. Mr. J. M. S. Williams's statement probably correctly represents the exact feeling of this class of persons: "they thought they were only dealing with their own property; they did not think they had any. thing to do with the Government."

The result of these proceedings was this:

1. While the charter of the Credit Mobilier required its affairs to be managed by a board of directors and its principal business office to be in Philadelphia, the actual conduct of its affairs was wholly by the men acting as a board of trustees and in the city of New York, so that this unlawful arrangement attempted to disguise, and did in effect disguise, these persons by means of a fictitious and pretended and not a real use of the corporate powers of the Credit Mobilier.

2. While the charter of the Union Pacific Railroad Company required its corporate powers to be wielded by a board of fifteen directors, ten of whom should be bona-fide holders of stock and should be elected by stockholders representing capital which had been actually paid in full and in money, this contrivance virtually placed all the power and control of said railroad corporation, its property and franchises, in the hands of the same persons, and beyond the management provided by law, thereby disguising and intending to disguise an unlawful seizure of the powers of the company, an unlawful use of its name in the issue of stock, bonds, and scrip, and an unlawful distribution of its property among the parties.

3. While the United States subordinated its own lien to secure reimbursement of the loan of its bonds to a mortgage to secure the bonds of the company for a like amount for the purpose of constructing the road, moneys have been in fact borrowed under the privilege so conferred and distributed as dividends.

4. The statute requiring the capital stock to be paid for in money at par, it has in fact been paid at not exceeding thirty cents on the dollar in road building, excepting, perhaps, the sum of about $400,000.

5. Instead of securing a solvent, powerful, well-endowed company, able to perform its important public functions without interruption in times of commercial disaster and in times of war, and able to maintain its impartiality and neutrality in dealing with all connecting lines, it is now weak and poor, kept from bankruptcy only by the voluntary aid of a few capitalists who are interested to maintain it, and liable to fall into the control of shrewd and adroit managers, and to become an appendage to some one of the railroad-lines of the East.

In 1871 it fell under the control of the active managing men of the Pennsylvania Central Railroad Company; and its present control and the manner in which it was procured are sufficiently shown by the following testimony of Hon. Horace F. Clark, the present president. After stating that he had purchased twenty-five or thirty thousand shares of the stock, and with some friends forty thousand shares in all, (which he purchased at thirty cents,) and had made a call or contract for twentyfour or twenty-five thousand additional shares, his testimony proceeds as follows:

Q. What object did you have in view in making this purchase of stock and in becoming president of the Union Pacific Railroad Company?

A. I am connected with a line of railroad leading from the Missouri River, through Chicago, Cleveland, and Buffalo, to Albany and Boston. I was president of the

Lake Shore and Michigan Southern Railway Company, which fills up the gap from Chicago to Buffalo. I was a director in the New York Central and Hudson River Railroad Company, which fills up the gap between Buffalo and New York. Mr. Scott had previously been the president of the Union Pacific Railroad Company. He represented the Pennsylvania Railroad, which is an opposition line to the lines with which I am connected. From Chicago they reach the sea-coast by Philadelphia, by the Fort Wayne road. My object in interesting myself in the Union Pacific Railroad Company was to share in the traffic arrangements. We might get none of the traffic of the Union Pacific Railroad Company by the way of our lines if the control of that road was in the hands of a competing line. That was the inducement. My inducement to make the call was that (never taking any compensation in the way of salary) I wanted the advantage which would result from a participation in the traffic of this railroad. Boston is reached by rail through our lines; it is not reached by continuous rail through any other lines. It seemed to me as if tea and silks, and various articles of merchandise, could be carried to Boston, which is a great point of consumption, and a great point of export by rail, if the rail-line to the sea-board was open.. My object in making the call was that I might share in the prosperity of the road, which would result from the opening of this rail-line; and I made the call. Whether the parties who sold me the call had the stock or not, was a point which I did not inquire about. They were responsible parties, and if they did not have the stock they were bound to buy it in the market. My object in having anything to do with the line was in connection with railroad traffic. I knew nothing about the Credit Mobilier. I had heard that there had been a construction ring in that road, but what had been the effect of it I did not know. My object in taking the call was to get the advantage, which some thought might result from the increase in the value of the stock, from the change of administration.

Q. Was it your purpose in making that purchase of stock, or was there an arrangement when the stock was purchased, that you should become president of that road? A. There was.

Q. By whom was that arrangement made?

A. I think the negotiations for that arrangement were made between Mr. Morton and Mr. Banker.

Q. Who were the parties behind them?

A. I do not know them all. I think that among these parties were some of the Boston parties. Mr. Morton only became responsible under the call to a limited amount. The Messrs. Ames joined in the call, but in what sums I do not remember. The total amount was twenty-four or twenty-five thousand shares, at 30.

Q. The arrangement which was made for that purchase of stock resulted in your coming into the presidency of the road?

A. Yes; because then I said to the stockholders that I would take their proxies, and the stockholders sent their proxies to me. I had not, with my friends, stock enough myself to control the election, or anything like it.

Q. Do you know whether, the year preceding, Mr. Scott became president of the road under a similar arrangement?

A. I know nothing about it. I have heard statements about it, but I have no knowledge on the subject.

The division of the substance of the corporation has so weakened it as to make its control by capitalists and powerful railroad corporations in the manner above described, easy. It is now helpless and dependent.

6. The right of the Government to regulate fares when the road pays 10 per cent. on its cost is rendered nugatory or difficult of exercise by recording a fictitious and not an actual statement of the cost of the road.

Before proceeding to discuss the question of remedy, your committee take occasion to say that, in making this investigation, they have labored under great disadvantages. The books containing the records of these transactions are voluminous and complicated. The estimates of engineers made before the letting of the various contracts cannot be found. The presence, as a witness, of General Granville M. Dodge, the chief engineer, under whose supervision the principal part of the work was done, could not be procured, although diligent efforts were made to that end. Telegrams were sent to him, inviting his attendance as a witness, and a deputy sergeant-at-arms was sent for him, who has diligently sought him for weeks, but has been unable to find him. Your

committee have information from which they feel warranted in stating that they believe that he has been purposely avoiding the service of the summons.

Mr. John J. Cisco, who was treasurer of the Union Pacific Railroad, Company, was unable to attend by reason of illness.

Governor John A. Dix, who was president, could not be present by reason of his executive duties as governor of the State of New York. Having had these difficulties to encounter, your committee do not present the foregoing figures in relation to the money value of profits and in relation to dividends as being exact.

Many of the incidents to these transactions have not been investigated as thoroughly as was desired, for want of time.

This report does not embrace all the matters committed to the committee, and the report is only in part. The present report is made because of the desire of the committee to submit it to the consideration of the House without that delay which would be unavoidable if the report should be attempted to be made complete before any part of the matters submitted to the committee are presented to the House. It is the purpose of the committee to proceed at once to consider and report upon the residue of the matters referred.

The committee have given much consideration to the question of remedy. To discuss it fully would extend this report, already too long, to an undue length. We will briefly state our conclusions. It is proper further to state that nothing has been disclosed in the evidence indicating any misappropriations of the moneys of the company by the present management.

We think the facts we have stated would furnish ground for judgment of forfeiture of all the franchises of the corporation, including the prinipal franchise, to be a corporation on proper process. According to the American decisions, judgment of forfeiture on quo warranto is not followed by an absolute forfeiture to the Government of all the property of a corporation, as was the earlier English practice; but a court of equity in such case has jurisdiction to divide the assets among the creditors or stockholders. We have no doubt also of the right of Congress to repeal the charter, which is expressly reserved in the act of 1862, and that on such repeal equity would distribute the assets in like manner. But the objection to either proceeding is twofold: first, it would be harsh and unjust to forfeit the rights of the present stockholders, a large majority of whom have bought their stock in good faith in the market, for the wrong-doing of their predecessors; second, in either case above supposed, equity could only distribute the assets as in case of bankruptcy or death; neither court nor Congress could compel the present owners to embark their property in continuing the exercise of the same franchise under a new organization. The railroad must then stop or be operated by the Government, or be sold at a forced sale in the market. To either of these proceedings there are grave public objections. The committee have then sought for a remedy which would compel the recovery of the property of the road from those persons who have re ceived it wrongfully, and its application in future to the purposes of the road and the payment of its debts, including that due the United States. The question of the right to such recovery is of course purely judicial. We cannot by act of Congress impose upon any man a legal or equitable obligation to pay money into the treasury of the company. But we have the right to make provision for as simple, speedy, and ample a remedy as possible.

Can this remedy be by suit, in the name of the United States? The United States sustains several relations to this corporation. First, it is the sovereign which created the corporation. It may proceed by quo warranto at common law for forfeiture of the franchise. The objections to this proceeding have been stated. The sovereign in England has a visitorial power over certain public corporations, which is exercised through the chancellor. But it has been held that this is a power which the chancellor exercises as the king's servant or representative, and is not a part of the powers of a court of equity as such, and does not reside in the national courts of the United States. It is doubtful whether the equity power to regulate charities, though it has been extended over certain trusts created for the public interests which are not included within the popular, and perhaps not within the technical, definition of a charity, would extend over a corporation which, though created for a public purpose, conducts its business for private gain. The United States also sustains the relation to this corporation of creditor. But as an ordinary creditor it cannot go into equity for relief against the equitable assets of its debtor until it has first obtained judgment at common law. Whether any present debt exists, due and payable to the United States from this corporation, is a matter of grave debate, which is already before another committee of this House.

But we think the corporation and the United States sustain the relation of trustee and cestui que trust. The United States have placed in the hands of the corporation large properties to be managed for a public purpose, for which management the corporators are to be compensated by the gains lawfully made in the employment. After the completion of the road, 5 per cent. of the net earnings of the business are to be applied to the payment of the debt of the United States. Bonds of the United States, payable in thirty years from their date, are issued to the company, and on the refusal or failure of the company to redeem said bonds, or any part of them, when required so to do by the Secretary of the Treasury, in accordance with the provisions of this act, the said road, with all the rights, functions, immunities, and appurtenances thereto belonging, and also all lands granted to the said company by the United States which at the time of said default shall remain in the ownership of the said company, may be taken possession of by the Secretary of the Treasury for the use and benefit of the United States. (Statute 1862, section five.) The statute of 1864, section ten, "subordinates the lien of the United States to that of the bonds of the companies authorized by that act to be issued." This is not a mere mortgage or lien on existing and ascertained property. It is a right to have a fund intrusted to the corporation for management applied at a future day to the benefit of the United States, and to have in the mean time a share of the profits of such management also so applied. A trust is an obligation on the part of the legal owner of property to manage and apply it for the benefit of another.

If the United States had reserved, as it lawfully might, the right to 5 per cent. of the net earnings and to enter upon the whole property at the end of thirty years for its own absolute benefit, it would have presented a state of facts which would serve for a clear and simple illustration of a trust. It can be no less a trust that the benefit the United States are to receive is limited to the payment of a debt. Its security for the payment of the debt is the equitable property reserved to it by the act which creates the corporation, endows it, and defined the terms on which the endowment shall be held.

Both the grant of the land and the issue of bonds to this company were made for the purpose and on the trust expressly declared in the