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BANCROFT LIBRARY 
 SUTRO. JUNE 19:. 9 
 
 BANCROFT UBRARV 
 
 EXTRACTS 
 
 FROM THE 
 
 Report of ttie U. S. Picfc Railwaj Commission J 
 
 1888. 
 
 By ROBT. E. PATTISON. 
 
 54 
 
BANCROFT LIBRARY 
 SUTRO. JUNE 1939 
 
 EXTRACTS 
 
 FKOM THE 
 
 Report of the U. S. Pacific Railway 
 Commission, 1888. 
 
 By ROBT. K. RATTISON. 
 
 Governor of Pennsylvania. 
 
 The construction companies or inside combina- 
 tions that built five of the six roads have destroyed 
 or concealed their books; the exception being the 
 Central Branch ; and the Commission has been em- 
 barrassed in its work by the refusal or failure of 
 the companies to produce the accounts relating to 
 the actual cost of construction, or to exhibit any 
 paper or documents that would enable the Com- 
 mission to ascertain the truth as to this most im- 
 portant factor in the investigation. The books of 
 the Credit Mobilier, which built the Union Pacific 
 from Omaha to Ogden; the books of tlie Contract 
 and Finance Company, which built the Western 
 Pacific from San Jose to Sacramento, and the Cen- 
 tral Pacific from Sacramento to Ogden; the books 
 of Shoemaker & Co., who built the Kansas Pacific ; 
 and the accounts of John I. Blair, who built the 
 Sioux City and Pacific Railroad — all these are 
 missing. From the minutes and accounts of the 
 railroad companies, and from fragmentary infor- 
 mation gathered from various sources, it is dis- 
 closed that the officers of at least three of these 
 companies made false statements under oath, in 
 affidavits now on file in the Interior Department. 
 From these affidavits the following has been com- 
 piled : 
 

 STOCK TABLE. 
 
 Company. 
 
 Stock act- 
 ually paid 
 iu. 
 
 Stock paid in 
 as sworn to. 
 
 Names of deponents 
 
 Date of affi- 
 davit. 
 
 Union Pacific 
 
 $400,650 
 250,000 
 760,000 
 386,700 
 
 136,702,300 
 
 5,072,500 
 
 54,283,190 
 
 C80,600 
 
 Oliver Ames 
 
 Sept. 27, 1870. 
 Sept. 28, lb72. 
 Sept. 18, 1871. 
 Sept. 21, 18G9. 
 
 Kansas Pacific... 
 Central Pacific... 
 Central Branch. .. 
 
 R. K.Carr 
 
 Leland Stanford 
 
 K. M. Pomeroy 
 
 Total 
 
 ?1,797, 350 
 
 $97,098,590 
 
 
 It is no answer to the Government that the 
 managers of these companies did only that which 
 the managers of raih^oads in other sections did. 
 These lines were built upon public credit. They 
 were public highways in the broadest sense of that 
 term. The managers were acting as trustees of a 
 national highway, and they can not plead any law- 
 ful justification for making false affidavits, which 
 state that $97,098,690 of stock was actually paid 
 for, when in fact less than two millions had been 
 so paid for. 
 
 THEIR RELATIONS TO THE PUBLIC. 
 
 The original purpose of Congress, as set forth in 
 the act of July 1, 1862, in granting subsidies for 
 the construction of the Pacific roads, was to pro- 
 mote the public interest, and the companies were 
 made trustees for that purpose; but the public in- 
 terest has been subordinated by these companies 
 to the stockholding interest, upon the claim that 
 the stockholders owned the railroads and could 
 manage their own business in their own way. 
 Nearly every obligation which these corporations 
 assumed under the laws of the United States, or 
 as common carriers, has been violated. Their 
 management has been a national disgrace. Since 
 the date of their inception they have been conduc- 
 ted upon a purely speculative basis. Their per- 
 manent prosperity has been lost sight of, while 
 their managers greedily strove for temporary ad- 
 vantage. For fourteen years the Union Pacific and 
 the Central Pacific were practically free from com- 
 petition for a stretch of 1,800 miles across the 
 
BANCROFT LIBRARY 
 SUTRO. JUt'C ' 
 
 747 1-^- 
 
 continent. They were independent of many of 
 those disturbing elements which have been pleaded 
 in extenuation of the vicious practices of railroads 
 in other parts of the country, and yet they injec- 
 ted secrecy into their affairs, inaugurated favoritism 
 and corruption in their management, and at- 
 tempted to destroy competition. They organized 
 pools for the professed purpose of securing cer- 
 tainty, uniformity and permanency in freight rates, 
 but they did not respect the pools which they 
 entered into when immediate advantages could be 
 obtained by a breach of good faith. 
 
 Mr. Huntington testified before the Commission 
 that '' competition is killing," and that there ought 
 to be only one railroad for the whole country. 
 The aided companies combined with others to tax 
 the communities which they served, and they 
 forced the consuming classes in all sections of the 
 country to contribute to the payment of interest 
 and dividend upon the fictitious capital which 
 they had created. They increased the cost of 
 living. They laid proprietary claim to the traffic 
 of large sections of the country. They squandered 
 millions of their money to ^'protect" their terri- 
 torial claims, while expending other millions in 
 encroachments upon the territory claimed by 
 other companies. They constituted themselves 
 the arbiters of trade. They attempted to dictate 
 the channels that trade should follow and fixed 
 rates of transportation that were extortionate. 
 They charged all that the traffic would bear, and 
 appropriated a share of the profits of every in- 
 dustry by charging the greater part of the differ- 
 ence between the actual cost of production and 
 the price of the article in the market. They dis- 
 criminated between individuals, between localities, 
 and between articles. They favored particular 
 individuals and companies. They destroyed pos- 
 sible competitors, and they built up particular 
 
localities to the injury of other localities, until 
 matters had reached such a pass, that no man 
 dared engage in any business in which transporta- 
 tion largely entered without first soliciting and 
 obtaining the permission of a railroad manager. 
 They departed from their legitimate sphere as 
 common carriers and engaged in mining articles 
 for transportation over their own lines. They ex- 
 erted a terrorism over merchants and over com- 
 munities, thus interfering with the lawful pursuits 
 of the people. They participated in election 
 contests. By secret cuts and violent and rapid 
 fluctuations in rates they menaced business, para- 
 lyzed capital, and retarded investment and devel- 
 opment. 
 
 THEIR RELATIONS TO THE GOVERNMENT. 
 
 During the five ^^ears from 1864 to 1869, upon 
 the claim that their roads were fully completed, 
 these companies obtained bonds from the Govern- 
 ment; but when the Government called upon them 
 to pay a percentage of their net earnings into the 
 Treasury, as was stipulated in the original contract, 
 they contended that their roads were not fully 
 completed until 1874, and refused to make any 
 payments to the Government, though one of 
 them, the Central Pacific, had been declaring divi- 
 dends in the mean time. They resisted the claims 
 and demands of the Government at every point, 
 and resorted to every device their ingenuity 
 could invent in their efforts to evade the plain 
 requirements of the law. In transporting troops and 
 supplies for the Government, they violated the 
 contract obligation to charge reasonable rates by 
 charging more than they charged to private shippers 
 for the same kind of service. The reports of the 
 Union Pacific show that the average rates paid by 
 the Government to that corporation were higher 
 than those received by that company from other 
 sources. The same is more or less true of the 
 
BANCROFT LIBP^nv 
 
 other bond-aided companies. The overcharges 
 upon the Government by the Central and Union 
 Pacific Companies since 1880, are estimated to 
 have been as follows: 
 
 Union Pacific $802,407.33 
 
 Central Pacific 167,558.63 
 
 PROFITS OF $278,023, e357.63 in operating the roads. 
 
 The reports of these companies show the follow- 
 ing figures relating to operation, disclosing a profit 
 or'net earnings of $278,023,357.63, equaling fi'fteen 
 million dollars a year. 
 
 EAENINGS TABLE. 
 
 Koad. 
 
 Gross earn- 
 ings. 
 
 Operating 
 expenses. 
 
 Net earnings 
 
 Union ond Kansas Pacific. .. . 
 
 ?315,S03 504.66 
 
 274,139.116.27 
 
 9,187,359.50 
 12,849,463.47 
 
 $169,916,078.90 
 
 149,199,102.40 
 
 6,423,596.82 
 7,917.o08.15 
 
 $145,387,425.76 
 
 121,940,013.87 
 
 2,763,762.68 
 4,932,155.02 
 
 Central Pacific Railroad, from 1863 to 
 December 31, 1886 
 
 Sioux City and Pacific Railroad, from 
 July 80, 1869, to Juno 30, 1887 
 
 Central Branch Union Pacific 
 
 
 Total 
 
 $611,470,443.90 
 
 $333,456,080.27 
 
 $278,023,357.63 
 
 OVER $25,000,000 FOR POOLS, rebates, and over- 
 charges. 
 In addition to the gross earnings given as above, 
 the bond-aided companies received the following 
 sums, w^hich they subsequently paid out on account 
 of pools, subsidies, rebates, overcharges, etc. : 
 
 POOLS, REBATES AND OVERCHARGES. 
 
 Road. 
 
 Pools. 
 
 Rebates and 
 overcharges. 
 
 Total. 
 
 Union Pacific ) 
 
 $4,004,512.48 
 
 $11,577,091.62 
 
 
 Kansas Pacific . ...\ 
 
 $15,581,604.10 
 
 Sioux City and Pacific 
 
 401,832 01 
 
 Central Pacific. ... 
 
 
 
 9,882,799.61 
 
 
 
 
 Total 
 
 
 
 $25,866,235.72 
 
 LOSSES SUSTAINED BY THE GOVERNMENT. 
 
 The Central Pacific and Union Pacific, between 
 them, have paid over $4,000,000 to the Pacific 
 Mail Steamship Company to maintain high rates. 
 To branch lines the Union Pacific, since 1881, has 
 
also given various amounts estimated at $2,400,000, 
 and the Central Pacific $520,762.97, on account of 
 constructive mileage. All of the sums paid out for 
 pools, rebates, overcharges, etc., amounting to 
 $25,866,235.72, were deducted by the companies 
 from the gross earnings actually received by them 
 before stating the amount which was reported to 
 the Government as their gross earnings. In other 
 words, they refused to consider and designate this 
 sum of $25,866,235.72 as part cf their gross 
 earnings because they subsequently paid it out for 
 pools and rebates. In this respect, as well as in 
 respect to charges for general expenses that should 
 have been charged against auxiliary companies, 
 the reports, as made by the Union Pacific Com- 
 pany to the Government, were erroneous. For the 
 same reasons and also because the Central Pacific 
 Company was charged for and paid expenses in- 
 curred by and for the Southern Pacific Company 
 (the case of Senator Norwood being a conspicuous 
 illustration), the reports made by the Central 
 Pacific Company to the Government were errone- 
 ous. The losses sustained by the United States on 
 account of erroneous reports and overcharges 
 amounts to over $8,000,000. 
 
 PAYiMENTS FOR IMPROPER PURPOSES. 
 
 Large sums were also applied to improper jmr- 
 poses. In the accounts of the Sioux City and 
 Pacific Railroad Company this item amounted to 
 $263,81-2.08 for losses incurred in operating the 
 Fremont, Elkhorn and Missouri Yalley Railroad, 
 in which the directors of the Sioux City and 
 Pacific Railroad were interested. 
 
 In the accounts of the Central Pacific Railroad 
 Company, this diversion of earnings amounted to 
 many millions through contracts made by Messrs. 
 Stanford, Huntington, Hopkins, and Crocker, with 
 themselves, for construction, leases, repairs, etc. 
 They constructed 1,171 miles of adjunct lines, at 
 
•^CROFT LIBRARY 
 SUIRO. JUNE I93P 
 
 a cost of $2T,216,931.01. On account of that 
 construction in addition to a small cash payment 
 they issued bonds to themselves to the amount 
 of $33,722,000, and stock to the amount of 
 $49,005,800, making a total issue of $82,727,800, 
 of which $55,539,554 represented inflation. 
 
 Then, as directors of the Central Pacific, they 
 took leases of their own lines for the Central 
 Pacific for $3,490,828.81 per annum; which was at 
 the rate of nearly 1 3 per cent. 
 
 Fifteen months ago three of these directors con- 
 tracted with themselves to build an extension of 
 the California and Oregon division of the Central 
 Pacific from Delta to the boundary line of Oregon, 
 a distance of 103 miles. In payment they issued 
 stock to the amount of $8,000,000 and bonds to 
 the amount of $4,500,000, the market value of the 
 stocks and bonds at that time being $8,340,000. 
 The actual cost of construction was $3,505,609, so 
 that they personally profited by their own votes 
 by that single transaction to the extent of $4,834- 
 391. Mark Hopkins is dead, but his interest is 
 still maintained for his estate and heirs. 
 
 In following up the dealings of these directors 
 with the Central Pacific Railroad Company and 
 its adjunct companies, it is found that Messrs. 
 Stanford, Huntington, Hopkins, and Crocker re- 
 ceived over $142,000,000 in cash and securities 
 through the Contract and Finance Company, the 
 Western Development Company, the Pacific Im- 
 provement Company, and dividends of the Central 
 Pacific Railroad Company. In addition to this 
 sum of $142,000,000, they also made large profits 
 in the operations of fifteen or more other com- 
 panies, which were directly or remotely sapping 
 the revenues of the Central Pacific Company. The 
 total payments by the Central Pacific on account 
 of rentals amounted to $29,912,373.49. 
 
ACCOUNTS AND VOUCHERS OF THE AIDED COMPANIES. 
 
 The same company also expended $-1,818,355.07/ 
 of which the managers decline to give any expla- 
 nation or to permit others to explain. As the re- 
 sources of the company have been diminished to the 
 extent of these expenditures, and as the road itself 
 will not yield sufficient to satisfy the Government 
 claim, it is apparent that the United States are 
 eventually the losers by those disbursements, most 
 of which, as shown by the Huntington letters, 
 were applied to corrupt public men and influence 
 legislation. 
 
 In the accounts of the Union Pacific, it was found 
 that $38,000,000 of the funds of that company had 
 been expended for the construction of branch lines, 
 that many millions additional were squandered in 
 purchases of bankrupt branch lines at excessive 
 prices, and that the earnings of the express and 
 telegraph service of that company, as well as of 
 the other bond-aided companies, were, in violation 
 of law, placed under the control of express and 
 telegraph companies in which some of the mana- 
 gers of the Union and Central Pacific Companies 
 were largely interested and of which they were 
 the main beneficiaries. 
 
 The balance sheet of the Central Pacific for 18 86 
 should have shown a deficit of over $14,000,000 
 in the profit and loss account, but by omitting 
 from the debit side the accumulated interest which 
 the Government had advanced* amounting to 
 $31,869,475.20, and by marking up its lands in its 
 asset column to $23,500,000, when the actual 
 value was $12,500,000, as appears from the testi- 
 mony of the company's land agent, the company 
 made a showing of an apparent surplus of over 
 $28,000,000. 
 
 The early accounts of the Union Pacific disclose, 
 among other interesting items, the following: 
 
BANCROFT LIBRARY 
 SUTRO. JUNE 1939 
 
 9 
 
 September 12, 1871. 
 
 First-mortgage bonds for $247,000, which should be on 
 
 hand, but which are not $247,000 
 
 United States 110 6 per cent, currency bonds, which 
 should be on hand, but are not 110,000 
 
 $347,000 
 
 The book accounts of the Union Pacific prior to 
 1880, are frequently unsupported by vouchers, 
 and for some years there are practically no 
 vouchers to establish the correctness of the books. 
 Since 1880, there were expenditures, in connec- 
 tion with legislation in Western States, which 
 were not properly vouched for. 
 
 The Central Pacific Company also loaned its funds 
 to its officers to enable them to construct the South- 
 ern Pacific, a competing line, across the continent. 
 
 The accountants of the commission report that 
 no vouchers exist to show disbursements by the 
 Central Branch of the Union Pacific, and that all 
 the vouchers of the Sioux City and Pacific, from 
 1864 to 1880, are missing, with the exception of a 
 few cash vouchers. 
 
 LEGAL EXPENSES. 
 
 Large sums were also squandered by some of 
 the bond-aided companies to pay for the services 
 of lawyers to influence legislation, the total legal 
 expenses of the companies being as follows: 
 
 Union Pacific and Kansas Pacific $2,349,554 00 
 
 Central Branch 333,661 65 
 
 Sioux City and Pacific 37,287 75 
 
 Central Pacific 2,361, 154 88 
 
 Total $5,081,659 08 
 
 A large sum which had been expended by the 
 Central Pacific for legislation was posted under 
 the head of ''general expenses." The addition of 
 that sum would materially increase the total pay- 
 ments on account of legal expenses. 
 
10 
 
 LAND PATENTS AND TAX PAYMENTS. 
 
 The refusals of the Central Pacific to pay its 
 taxes to the State of California have been so per- 
 sistent and so flagrant, and extended over so long 
 a period of years, that the Governor of California, 
 on March 24, 1884, issued a proclamation setting 
 forth the fact that for four years the railroads of 
 the State (the Central Pacific) had refused to 
 obey the laws imposing taxes upon their property 
 and calUng a special session of the legislature to 
 devise methods for enforcing a compliance with the 
 laws of the State. The Central Pacific had resis- 
 ted State taxation on the ground (see p. 102, Re- 
 port of Railroad Commissioners of California for 
 1883), that it had been constructed under act of 
 Congress of July 1, 1862. When the Commis- 
 sioners examined Mr. Leland Stanford, in San 
 Francisco, he insisted that the Central Pacific Com- 
 pany was a State, and not a Federal corporation. 
 
 The Central Pacific has selected only one-half of 
 its land grant in California that has been surveyed, 
 and it has failed to select 180,000 acres in that 
 State that have been surveyed since the completion 
 of the road. 
 
 Of the grant to the Central Pacific in Nevada, 
 700,000 acres were surveyed at the date of the 
 completion of the road, and about 2,000,000 acres 
 are now surveyed. The company has selected 
 about one-fourth of its land grant in that State. 
 
 Of the grant to the Central Pacific in Utah, of 
 which 250,000 acres were surveyed at the date of 
 the completion of the road in 1809, no lands were 
 selected until February, 1884, nearly fifteen years 
 after the completion of the road. 
 
 Because of the vicious methods actually pursued 
 by the bond-aided companies the Government has 
 been defrauded of the bulk of its advances, ship- 
 pers have been taxed to the extent of over $248,- 
 000,000, and liabilities to the amount of $389,517,- 
 
BANCROFT LIBRARY 
 SUTRO. JUNE IP3C 
 
 n 
 
 265 have been heaped upon the properties; the 
 total Habilities of these companies to the pubUc and 
 Government on Dec 31, 1886, being as follows: 
 
 Union Pacific, including St. Joseph and Grand 
 
 Island guarantee $203,379,555 00 
 
 Central Pacific 171,908,784 GO 
 
 Sioux City and Pacific 7,392,447 17 
 
 Central Brancli 6,836,470 16 
 
 $389,517,205 33 
 
 These companies have paid out the following 
 sums in interest and dividend : 
 
 INTEREST AND DIVIDENDS. 
 
 COMPANY. 
 
 INTEREST. 
 
 DIVIDEND. 
 
 Union Pacfiic \ 
 
 Kansas Pacific J 
 
 Central Branch 
 
 Sioux City and Pacific. 
 Central Pacific 
 
 882,742,850 28 
 
 1,882,826 10 
 
 1,700,618 67 
 
 53,877,031 15 
 
 $28,650,770 
 
 150,000 
 
 180,280 
 
 31,308,055 
 
 $140,212,332 20 $63,298,105 
 
 It is not, therefore, a matter of surprise that 
 they are unable to pay the Government debt and 
 that their resources have been diminished to such 
 an extent as to give the Government very little 
 return for its loans. 
 
 The officials of the Central Pacific said that the 
 aided portion of that line was not worth more 
 than the first mortgage of $27,855,680, which is 
 prior to the Government lien, thus leaving the 
 Government without any return for its advances. 
 The majority of the Commission recommended an 
 extension of the time for payment of the debts of 
 all the companies for fifty years on certain terms. 
 The testimony shows that, except the Union Pa- 
 cific, none of these companies have agreed to or 
 will or can accept the terms recommended by the 
 majority. The traffic manager of the Central Pa- 
 cific testified that his company could not pay the 
 debt and that an extension for an indefinite time 
 would not be sufficient to enable it to do so. The 
 fact is that as to all the companies except the 
 
12 
 
 Union Pacific their bankruptcy is so complete and 
 irretrievable that no part of their indebtedness can 
 ever be recovered by the Government except by 
 immediate compulsory legal process. Extension 
 of time for payment therefore means in reaUty but 
 an increase of the amount of the debt and the 
 making of its recovery the more hopeless. The 
 bonds of the Union Pacific provided for in the ma- 
 jority report would sell fjor about 50 cents on the 
 dollar, and the bonds of the other companies would 
 not be negotiable. The actual effect, therefore, of 
 the report of the majority of the Commission, is 
 that its recommendation of extension of the time 
 for payment is impractical and impotent as to all 
 these companies except the Union Pacific, and, if 
 adopted, could only result in the failure of the 
 Government to realize any portion of the indebted- 
 ness and would be su l3S t ant i ally a gift of that 
 sum to those companies. For this reason, there- 
 fore, the recommendation of the majority will be 
 considered only so far as it applies to the Union 
 Pacific Railway Company. 
 
 The people of the West should be freed from 
 the incubus of this enormous load. Eventually 
 the consuming classes, and not the stockholders, 
 must pay this bill if extension of time be granted, 
 and it will be ruinous to the communities which 
 are dependent on the Union Pacific if they are 
 forced to bear their share of this great burden, 
 while communities on other roads bear only the 
 burdens of moderate capitalization. So long as the 
 Union Pacific Railway Company is forced to carry 
 this debt, enterprise and development along its line 
 will be measurably repressed. 
 
 The extension being unwise and impracticable, 
 there is only one course open to Congress, and that 
 is an immediate winding up of the affairs of all 
 the companies, enabling the Government to with- 
 draw at once from all connection with the running 
 
BANCROFT LIEHARY 
 iUTRO. JUNC 1939 
 
 13 
 
 of railroads, or sharing in the profits of their man- 
 agement. There ought to be an end to the part- 
 nership between the Government and the Pacific 
 raih'oads; a speedy and absolute divorce. 
 
 The only method by which this result can be 
 reached is that which was suggested by Justice 
 Hunt in the Credit Mobilier cases. It is the alter- 
 native pointed out by the Wilson committee of 
 Congress in the event of 'the failure of the equity 
 proceedings in the United States Courts. It is the 
 course that Congress directed the Attorney-Gen- 
 eral, by resolution of April 10, 1869 (section 4), 
 to take against the Union Pacific — that is, the 
 forfeiture of the charter. 
 
 The beginning of proceedings at this time to 
 cause the forfeiture of the charters of these com- 
 panies because of their violations of law and fail- 
 ure to keep their contract with the Government is 
 only to anticipate by a few years the result which 
 will be inevitable when the bonds mature in 1895 
 and 1897. To wait until then before instituting 
 legal proceedings would not avert the result, but 
 would further jeopardize the interests of the Gov- 
 ernment and increase the amount of the indebted- 
 ness. It should be borne in mind that it is a fact^ 
 admitted by every officer of these roads who tes-^^ 
 tified before the Commission, and overwhelmingly . 
 proved by the evidence submitted, that the pay- 
 ment of the debts at maturity, in 1895 and 1897, 
 can under no circumstance bo expected. The rail- 
 road officials, the Commissioners and every intelli- 
 gent citizen, concur in the correctness of this state- 
 ment. Upon forfeiture, the appointment of a re- 
 ceiver should be applied for to provide for the im- 
 mediate settlement of the Government's debt. 
 This course involves no actuarial computations or 
 involved legal problems. It is the direct path to 
 the complete solution of a tangle into which the 
 Government should never have been drawn. This 
 
n 
 
 14 
 
 course is not recommended for the purpose of pun- 
 ishing this company, or its stockholders, for the 
 willful and continuous violation of obligations im- 
 posed by law, but to withdraw the Government 
 from further connection with private enterprises. 
 The stockholders would have the same right to buy 
 that others would have. 
 
 In this way the Government would cut loose 
 from all participation in' railroad management; it 
 would recover its debt, and put its seal of condem- 
 nation upon the multiplied wrongs that have 
 marked the administration of that trust. 
 
 The capital and indebtedness of the purchasing 
 companies should be limited to the estimates of 
 the cost of reproduction as made by the inspecting 
 engineer of the Commission — 66f per cent, in 
 bonds and 33 J per cent, in stocks. THq pur- 
 chasing company should bo confined solely to 
 the business of a common carrier, operating rail- 
 road and telegraph lines, and should be forbidden, 
 directly or indirectly, to invest in the bonds or 
 securities of companies other than railroads, or in 
 railroads that are parallel or competing, or to 
 acquire by purchase or otherwise, any interest or 
 control in any competing or parallel line. The 
 officers of the company should be prohibited from 
 being interested in any competing or parallel lines, 
 and such company should not be permitted to 
 hold any real estate, except such as may be neces- 
 sary for its legitimate business, and it should be 
 allowed to issue stocks or bonds only for money, 
 labor done, or money or property actually received. 
 The sale should also be made upon the condition 
 that the franchises should be exercised thereafter, 
 subject to the regulation and control of the Gov- 
 ernment, in the public interest. 
 
 Such a course would force other transcontinental 
 lines to a similar basis, and would benefit consu- 
 mers in all parts of the country. Transportation 
 
 1 
 
BANCROFT LIBRARY 
 SUTRO. JUNE I9CQ 
 
 15 
 
 would be cheapened; the companies would be 
 liberated from the crushing weight of their debts 
 and made useful arteries of commerce, and a rea- 
 sonable profit would be yielded to honest invest- 
 ments. In addition to the recommendation of the 
 forfeiture of the charters, I would suggest that, 
 through the receiver to be appointed for the Union 
 Pacific, a suit be instituted with like purpose to 
 that begun in 1873, against the Credit Mobilier, 
 and that the Attorney General be instructed to 
 institute proceedings, either civil or criminal, 
 against all persons who have rendered themselves 
 liable for their participation in the issue of stock 
 or the making of mortgages or pledges upon the 
 property or future earnings of the Union Pacific 
 Company without leave of Congress ; against those 
 who violated their trusts in connection with the 
 consolidation of the Kansas Pacific, Denver Pacific 
 and Union Pacific in January, 1880; against all 
 persons who have rendered themselves liable 
 through the maladministration of the Central 
 Pacific, Sioux City and Pacific, and Central 
 Branch Union Pacific ; against telegraph and ex- 
 press companies, to secure an accounting to the 
 Government for earnings on business done on 
 bond-aided lines, and to require an accounting for 
 lands improperly acquired from the Government, 
 and to force the patenting of lands already granted 
 to the companies. 
 
 In applying the remedies necessary for securing 
 the Government indebtedness, the Attorney Gene- 
 ral should proceed against all persons and corpora- 
 tions who in any way were parties to or partici- 
 pants in the results of any of the illegal and fraudu- 
 lent acts which characterized the management of 
 these corporations and resulted in the waste and 
 misappropriation of the funds of the companies and 
 consequent depreciation of the government security. 
 
 If this recommendation should be adopted, the 
 population of the great West through which the 
 
16 
 
 lines of road extend would have these pubHc high- 
 ways existing and managed as it was intended by 
 law they should be, in the interest and for the ben- 
 efit of the people, and not as subjects for stock 
 gambling and speculative practices through which 
 enormous fortunes are amassed by railroad officials 
 and favorites, while communities are burdened 
 and private industry repressed. In other words, 
 these roads, as a result of legal purgation, would 
 be free, clear, and clean public highways, honestly 
 and lawfully managed. 
 
 The time of the Commission was so limited that 
 it had no opportunity to visit the various localities 
 that are served by the Central Pacific Railroad 
 Company but from the reports of the railroad 
 commission of California, it is apparent that the 
 abuses of power which have characterized the 
 management of the Union Pacific Company w^ere 
 also practiced by the Central Pacific Railroad 
 Company in its relations with shippers and com- 
 munities. Its conduct in this respect provoked 
 serious political contests in California, and im- 
 pelled the people of that State to adopt amend- 
 ments to the State constitution regulatnig railroads 
 and creating a State commission to protect ship- 
 pers against the discriminations of the Central 
 Pacific Company. In that State, as in the terri- 
 tory tributary to the Union Pacific, there was in- 
 terference with the lawful pursuits of the people; 
 and as appears in page 128 of the State railroad 
 commission's report for 188B, there were fears 
 entertained by merchants of retaliation by the rail- 
 road company if complaints should be made against 
 it. With the Union Pacific Company, it devised 
 the special-contract system and also attempted, by 
 investing in other enterprises than those of trans- 
 portation and by pools and combinations, to control 
 
 trifiG 
 
 Robert E. Pattison, Commissioner. 
 
 Washington, Becemher 1, 1887. 
 
7 '• %