stance of the transaction will more fully appear when we come to speak of a subsequent arrangement of the same nature, but on a larger scale. That in making this contract the interests of the Union Pacific Railroad Company were utterly disregarded, your committee do not doubt. That it was deliberately done we do not hesitate to believe. That belief is founded upon the following summary of the evidence in addition to the facts heretofore stated. Peter A. Dey, esq., then the engineer-in-chief, testifies that before this contract was made he had surveyed and estimated the one hundred miles embraced in it, and that upon a full estimate he made the cost not to exceed $30,000 per mile; that after this Mr. Reed, an agent and director of the company, came there and directed him to make a larger estimate, putting heavy embankments where none were required, which he did, making an estimate of about $50,000 per mile. When the Hoxie contract was submitted to him he objected to it, and when he found that it was to be executed and the work done under it, he resigned his position as chief engineer, as appears from the following written resignation and private letter addressed to the president of the company: ENGINEER'S OFFICE, UNION PACIFIC RAILROAD, Omaha, December 7, 1864. DEAR SIR: I hereby tender you my resignation as chief engineer of the Union Pacific Railroad, to take effect December 30, 1864, one year from the date of my appointment. I am induced to delay until that time that I might combine the results of surveys of the present year and present them to the company and to myself in a satisfactory manner. My reasons for this step are simply that I do not approve of the contract made with Mr. Hoxie for building the first hundred miles from Omaha west, and I do not care to have my name so connected with the railroad that I shall appear to indorse this contract. Wishing for the road success beyond the expectation of its members, I am, respectfully, yours, Hon. JOHN A. DIX. Mr. Dey further testified as follows: PETER A. DEY. Question. Did you send the letter of which this is a copy to General Dix? Q. Was your resignation accepted? A. Not that I know of. Q. Did you write any other letter to General Dix? A. On the same day that I wrote the letter I have just read to you I wrote and inclosed in the same envelope the following: OMAHA, December 7, 1864. DEAR SIR: With this I send you my resignation as chief engineer of the Union Pacific Railroad Company. My reasons I have given. I received the contract nearly a month ago. When I first read it I felt that it was made against my known views, and I could not be held in any measure responsible for it, but it has since been a constantly recurring subject of thought to me, and I am not now satisfied that I shall be able to acquit myself of all blame if I become an instrument of its execution. You know the history of the M. and M. road, a road that to-day could be running to this point if its stock and bonds only represented the amount of cash that actually went into it. My views of the Pacific Railroad are perhaps peculiar. I look upon its managers as trustees of the bounty of Congress. I cannot willingly see them repeat the history of the M. and M. by taking a step in the incipiency of the project that will, I believe, if followed out, swell the cost of construction so much that by the time the work reaches the mountains the representative capital will be accumulated so much that at the very time when the company will have need for all its resources, as well of capital as of credit, its securities will not be negotiable in the market. From my boyhood I have associated Mr. Cisco and yourself with Mr. Bronson and Mr. Flagg, men whose integrity, purity, and singleness of purpose have made them marked men in the generation in which they lived. Of course my opinion remains unchanged. You are doubtless uninformed how disproportionate the amount to be paid is to the work contracted for. I need not expatiate upon the sincerity of my course when you t reflect upon the fact that I have resigued the best position in my profession this coun- With respect, PETER A. DEY. The parties above named having procured the assignment to them- selves of this contract, were liable individually as partners for all debts incurred in the joint undertaking. They therefore took steps to pro- cure corporate powers as a shield against such risk, and secured for that purpose the control of a corporation afterward known as the Credit Mobilier of America. The following is a brief history of the cor- On the 1st day of November, 1859, the State of Pennsylvania granted a charter for the incorporation of the Pennsylvania Fiscal Agency. That charter gave powers of so extraordinary a character that your commit- tee deem it important to insert it here in full. It is as follows: An act to incorporate the Pennsylvania Fiscal Agency. SECTION 1. Be it enacted by the senate and house of representatives of the Commonwealth of Pennsylvania in general assembly met, and it is hereby enacted by the authority of the same, That Samuel J. Reeves, Ellis Lewis, Garrick Mallory, Duff Green, David R. Por- ter, Jacob Ziegler, Charles M. Hall, Horn R. Kneass, Robert J. Ross, William T. Dougherty, Isaac Hugus, C. M. Reed, William Workman, Asa Packer, Jesse Lazear, C. S. Kauffman, C. L. Ward, and Henry M. Fuller be, and they are hereby, appointed commissioners to receive subscriptions and to organize a company, by the name and style of the Pennsylvania Fiscal Agency; and the owners of the shares herein author- ized to be issued, when the company is organized, shall, under the name and style aforesaid, have perpetual succession; and may purchase, hold, and acquire, by any lawful means, estate, real and personal, and the same may use, sell, lease, let, mort- gage, transfer, and convey, and otherwise dispose of; and may sue and be sued, plead aud be impleaded, contract and be contracted with, and have and use a common seal, and the same may change at pleasure; and may make by-laws and regulations for the government of their affairs, and may have and use all the rights, powers, and privi- leges which are or may be necessary for them to have as a company incorporated for the purposes herein stated: Provided, That the said company shall not at any time hold, in this State, more land than may be requisite for the convenient transaction of their SEC. 2. That the purpose of this act is to organize an incorporated company, and to authorize them, as such, to become an agency for the purchase and sale of railroad bonds and other securities, and to make advances of money and of credit to railroad and other improvement companies, and to aid in like manner contractors and manu-, facturers, and to authorize them as a company to make all requisite contracts, and es- pecially to receive and hold, on deposit and in trust, estate, real and personal, including the notes, bonds, obligations, and accounts of States, and of individuals, and of com- panies, and of corporations, and the same to purchase, collect, adjust, and settle, and also to sell and dispose thereof in any market in the United States, or elsewhere, with- out proceeding in law or in equity, and for such price and on such terms as may be agreed on between them and the parties contracting with them, and also to indorse and guarantee the payment of the bonds and the performance of the obligations of individ- uals, of corporations, and of companies. SEC. 3. That the capital stock of said company shall consist of fifty thousand shares of $100 each; and the commissioners aforesaid, or a majority of them, may, in person or by proxy, open books of subscription at such times and places as they deem expe- dient, and when five thousand shares shall have been subscribed, and five per cent. thereon shall have been paid in, the shareholders may elect five or more directors; and the directors of the said company, when it shall have been organized, may, and they are hereby authorized and empowered to have and to exercise, in the name and in be- half of the company, all the rights, powers, and privileges which are intended to be herein given; and may, from time to time, increase their resources by borrowing money on a pledge of their property, or without such pledge, or by new subscriptions, not ex- ceeding fifty thousand shares; and any citizen or subject, company or corporation, of any State or county, may subscribe for, purchase, and hold shares of the said company with all the rights and subject only to such liabilities as other shareholders are subject to; which liabilities are no more than for the payment to the company of the sums due or to become due on the shares held by them; and when new subscriptions are made, the shares may be issued at par or sold for the benefit of the holders of the shares here- 式 SEC. 4. That the by-laws shall prescribe the manner in which the officers and agents of the company shall be chosen, and designate their powers and duties, and their terms of service and compensation; and the principal office of the company shall be in Philadelphia, but the directors, under such rules and regulations as they may prescribe, may establish branches and agencies in Europe and elsewhere, and may deal in exchange, foreign and domestic; but the said company shall not exercise the privilege of banking, nor issue their own notes or bills to be used as bank-notes or as currency. SEC. 5. That three-fifths of the directors of the said company shall be citizens of the United States, and the majority of the whole shall reside in this State. SEC. 6. That the said company shall pay to the State treasurer, for the use of the State, a bonus of one-half of one per cent. on the sum requisite to be paid in previous to the organization, payable in four equal annual installments, the first payment to be made in one year after the payment on the capital stock shall be made, and also a like bonus on all subsequent payments on account of the capital stock of the said company, or any increase thereof, payable in like manner; and, in addition to such bonus, shall pay such tax upon dividends exceeding six per cent. per annum as is or may be imposed by law. W. C. A. LAWRENCE, Speaker of the House of Representatives. Approved the first day of November, anno Domini, one thousand eight hundred and fifty-nine. WM. F. PACKER.' On the 3d day of March, 1861, Thomas C. Durant, vice-president of the Union Pacific Railroad Company, purchased this charter for the purpose of using the corporation for the construction of the Union. Pacific Railroad. On the 26th day of March, 1861, by an act of the legislature of the State of Pennsylvania, the name was changed to "The Credit Mobilier of America." By the terms of purchase of the charter, an agency was to be established in the city of New York, and when the subscription was made it was upon the condition that the full powers of the board of directors should be delegated to the New York agency, and that a railway bureau should be established at said agency, of five managers, three to be directors of the company, (afterward changed to seven managers,) who should have the management of railway contracts, subject to the approval of the president. By these means this Pennsylvania corporation, so far as the management of its affairs was concerned, substantially expatriated itself, and, clothed with the extraordinary powers acquired from the State of Pennsylvania, it proceeded to take upon itself the control of the Union Pacific Railroad Company in the manner following: It purchased the outstanding stock of that corporation, amounting to about $2,180,000, on which about $218,000 had been paid to the railroad company, the Credit Mobilier paying for this stock the amount already paid. At the time of this purchase the shares of Union Pacific stock were $1,000 each. After the act of 1864 was passed these shares were canceled, and a re-issue was made in shares of $100 each. The re-issue was made to the stockholders of the Credit Mobilier, and by this process the stockholders of the two corporations were made identical. By this means the persons who under the guise of a corporation that was to take the contract to build the road held complete control of the corporation for which the road was to be built. These things accomplished, they took charge of construction under the Hoxie contract, and the portion of the road lying between Omaha and the one-hundredth meridian was constructed under it. This contract cost the Union Pacific Railroad Company It cost the Credit Mobilier.. Profit....... $12,974, 416 24 7,806, 183 33 5,168, 233 91 This profit is a profit in stock and bonds estimated at par. Their actual value will appear hereafter. The next event in this history is as follows, and it is stated here to show the animus of those who were managing this great trust: The Hoxie contract had been- completed, finishing the road to the one-hundredth meridian, a distance of two hundred and forty-six and forty-five hundredths miles. An agreement was then made, (November 10, 1866,) by Thomas C. Durant, vice-president of the Union Pacific Railroad Company, with a Mr. Boomer for the construction of one hundred and fifty-three and thirty-five hundredths miles west from the onehundredth meridian. By the terms of this agreement Boomer was to be paid $19,500 per mile for that portion between the one-hundredth meridian and the east bank of the North Platte, and for that portion lying west of the North Platte within the limits of the agreement $20,000 per mile; the bridge over the North Platte, and station-buildings equipment, &c., to be an addditional charge. This contract was never ratified by the company, but under it the work progressed, and fifty-eight miles of road had been completed and accepted by the Government. The books of the company fail to show what this fifty-eight miles had cost the company; but from the best evidence that could be procured your committee believe that the cost had not been to exceed $27,500 per mile for construction and equipment, the excess over the contract price being for station houses, equipment, &c. Inasmuch as the charter required that the station-houses, equipment, &c., should be built and furnished before acceptance by the Government, and inasmuch as the records of the Department show that the fifty-eight miles had been accepted, your committee feel warranted in finding that this had been done and that the cost of the whole was not to exceed $27,500 per mile. But notwithstanding this, on the 5th day of January, 1867, the board of directors by a resolution extended the Hoxie contract over this fifty-eight miles of then completed road, thereby proposing to pay to the Credit Mobilier the sum of $22,500 per mile for this fifty-eight miles, amounting to the sum of $1,345,000, without any consideration whatever. The following is the resolution of date January 5, 1867: Resolved, That the Union Pacific Railroad Company will, and do hereby, consider the Hoxie contract extended to the point already completed, namely, three hundred and five miles west from Omaha, and that the officers of this company are hereby authorized to settle with the Credit Mobilier at $50,000 per mile for the additional fiftyeight miles. That it was proposed to give the Credit Mobilier this profit, if that is the proper word to be used in such a connection, is verified by the fact that subsequently the sum of $1,104,000 was paid to the Credit Mobilier on account of this fifty-eight miles, for the construction of which it never had even the semblance of a contract. Of this $1,104,000 further mention will be made hereafter. Against this proposition Dr. Durant filed the following protest: To the board of directors of the Union Pacific Railroad Company : GENTLEMEN: I protest against the passage of the resolution appearing on your minutes as passed January 5, 1867, purporting to treat and consider the Hoxie contract as extended to the point already completed, namely, three hundred and five miles west of Omaha, and authorizing the officers of the company to settle with the Credit Mobilier at $50,000 per mile for the additional fifty-eight miles. Said resolution was moved and adopted while I was absent from the meeting of the board on necessary business of the company. I make this protest on the ground that said fifty-eight miles has been constructed at much less cost than $50,000 per mile, and has been accepted by the United States Government as complete, and that it was not constructed under the Hoxie con tract, and that a considerable portion of the cost thereof had been paid by the company before the adoption of said resolution, and that said resolution does not provide any compensation or advantage to the company by requiring stock subscriptions, or stipulations for the construction of additional portions of the company's railroad, or by any other means or stipulations whatsoever, but leaves the company to sustain a very great and unrequited loss. Respectfully, yours, THOMAS C. DURANT. Durant afterward procured an injunction against this extension of the Hoxie contract over this fifty-eight miles. The next step was on the 24th day of June, 1867. At this date there had been completed and accepted by the Government ninety-eight and a quarter miles of road west of the one hundredth meridian, at a cost to the railroad company of about $27,500 per mile. Mr. J. M. S. Williams then proposed to build and equip two hundred and sixty-seven and fifty-two hundredths miles west from the one hundredth meridian at $50,000 per mile, and his offer was accepted. At the same time he proposed to the railroad bureau of the Credit Mobilier to assign that contract, if accepted, to that corporation. Here was another attempt to give the Credit Mobilier a profit of about $22,500 per mile on constructed and accepted road, this time on ninety-eight and a quarter miles. Mr. Williams was asked this question with reference to this proposed contract: Q. Then what purpose had you to propose to build a road that had already been built by the company at a cost to them of less than the amount mentioned in your proposition? A. We were identical in interest. The Credit Mobilier and the Union Pacific Railroad Company were the same identical parties. We were building it for ourselves, by ourselves, and among ourselves. There was not $20,000 outside interest in it. Q. Was this understood at the time? A. Yes, sir. It was understood that we were dealing with ourselves to get the control in the right hands. The consummation of this project was defeated by legal proceedings instituted by Durant. Construction was continued. Durant had declared that the Credit Mobilier should never have another contract. Then a new device was resorted to, which will be explained in what follows. On the 16th of August, 1867, the "Oakes Ames contract" was entered into. At this time one hundred and thirty-eight miles of road had been completed and accepted west of the one hundredth meridian, at a cost of about $27,000 per mile. The portion of the road embraced in this contract began at the one hundredth meridian, and extended westwardly six hundred and sixty-seven miles, and by the terms of the contract the railroad company was to pay, as follows: For first 100 miles, $42,000 per mile... For next 167 miles, 45,000 per mile.. $4,200,000 667 47,925,000 At the time this contract was made there was an understanding that it was for the benefit of the shareholders of the Credit Mobilier. Mr. Ames was only the medium through whom these shareholders should receive the benefits accruing from it. By this contract Ames was to be paid nominally in cash, but the actual |
