Fifty years in Wall Street
than was in it. For $15,000,000 a road could be built where it
had cost the Union Pacific $75,000,000.
“You were not devoted to the interests of the Government?”
“I wanted to protect them. Their legislative action hurt their
own interests and put those of the stockholders in jeopardy. The
Government repudiated their own contracts. Cash was offered to
pay the Government the Union Pacific debt. I had the debt
reckoned up and offered to pay it. In 1877 or 1878 I made the
offer to the Judiciary Committee, of which Mr. Edmunds was
Chairman. I made the offer myself. The debt was estimated at
$15,000,000 or $17,000,000. But the Government would not concede
that interest terminated with the bonds. No action was taken on
the proposition.”
Mr. Gould thought he wrote his own resignation as Director of
the Union Pacific. He resigned because he ought not to deal with
the company while one of its directors. He put it in President
Dillon’s office. Mr. Dillon knew what it meant.
“What did it mean?”
“That if the consolidation went through it involved large
transactions with Jay Gould, and if I had stayed in it would
have complicated things. Before January 10, 1880, no bargain was
made to pay par for St. Jo. and Western bonds, nor Kansas
Central, nor 239 for Central Branch stock. That came afterward.”
The Colorado Central lease was canceled on account of a State
law against consolidating competing lines. Mr. Gould did not
know that the Dodge and Humphreys letter was to be presented to
the meeting of January 24. He was probably informed of the
consolidation on the day it took place. He was also probably
present at the first meeting of the new company on January 24.
Mr. Gould’s resignation from the Kansas Pacific Board was gone
over, and in summarizing his reasons for resigning Mr. Gould
said he did not want to be mixed up with trusteeships and
directorships. When he was not a Union Pacific director he felt
at liberty to take care of himself. There was a chance that the
properties might be made hostile to him, and then it would have
been improper for him to be a director. He did not know that
Russell Sage was to move the acceptance of his resignation.
“At the Kansas Pacific meeting a list of the branch lines
obtained from you was read. President Dillon said the company
had bought them. What did he mean?”
“Possibly he referred to the directors’ agreement with me.”
“But we can find no record of this in the books. Don’t you think
he referred to the agreement with the Boston gentlemen?”
“Very likely, but it had no authority until it was accepted or
rejected.”
Mr. Gould was set to explaining some discrepancies between the
accounts of his dealings in branch securities, handed in on
Tuesday, and the list submitted by Controller Mink. Mr. Mink
gave 15,162 shares of St. Jo. and Western stock, and Mr. Gould
8,119. The difference was explained by Mr. Gould’s getting some
stock for building the Hastings and Grand Island. He retained
control of the $150,000 St. Jo. Bridge bonds he sold Dillon and
Sage and turned them over with his own. His $479,000 Kansas
Central bonds and 2,521 shares of the stock cost him $431,820.25
at the time he bought the Missouri Pacific. They all went into
the consolidation for $479,000. Mr. Gould bought the Central
Branch of the Union Pacific from Oliver Ames and President
Pomeroy, who came to New York and induced him to go and look at
the property.
“I thought it was doing a big business,” said he. “Afterward I
learned they had kept the freight back for a week to impress me.
So I saw a freight train at every station when I got there. I
bought the road anyway.” Its total cost to Mr. Gould was
$1,826,500. Over the Central Branch, whose stock was disposed of
by Mr. Gould for 239, there was a little stir in the hearing,
but the witness tranquilly explained that the road was
practically stocked at only $2,500 a mile, and therefore the
stock ought to range way above par.
“Has the road earned dividends?” he was asked.
“I don’t think so.”
“Have the aggregate earnings exceeded the fixed and Government
charges?”
“I never figured it out. Stock doesn’t always depend upon
dividends altogether. I paid 750 for my Missouri Pacific—4,000
shares at that figure. You pay more for rubies than for diamonds
and more for diamonds than for glass.”
Then the examination turned to the days just after the
consolidation, and the witness was asked if there was any
corporate action of the new company before the stock was turned
over to him.
“All I know,” he said, “is that the stock of the new company was
delivered.”
“Was the new company bound to carry out the Kansas Pacific
obligations of this sort?”
“Well, I suppose it assumed the Kansas Pacific obligations.”
“Why were you not paid in Kansas Pacific consols instead of
stock?”
“I suppose they preferred stock to bonds. I was clever to them
and took stock.”
Another turn carried questions and answers to other differences
in the accounts, but the commission got little light. “It’s safe
to say the lawyers got the difference,” chuckled Mr. Gould, at
the end of the set of questions. He had made large cash
advances, at different times, to the Kansas Pacific to meet the
floating debt, and very likely these would have to be counted in
to explain matters in all cases. There was one point upon which
the witness strongly insisted, and that was that all through the
negotiations and transactions no class of people nor any
particular holders of securities experienced any discrimination
in their favor, as compared with the treatment given everybody
else.
After the consolidation Mr. Gould said he had few transactions
in Union Pacific branch lines. He had an interest in the Denver
& South Park, however, a minority interest at first, but
subsequently he bought the whole road from Governor Evans. “I’m
showing you my whole hand,” he said, cheerfully, at the end of
the catalogue of the branches. Of the Union Pacific’s legal
expenses he knew of none which were not perfectly legal.
“Who were the road’s counsel in Washington?”
“Messrs. Shellabarger & Wilson were the only ones, as far as I
knew.”
“Have you ever been to Washington on business of the company?”
“Yes. And I paid my own hotel bills.”
“Do you recall persons sent to Washington from other places in
the interest of the road?”
“Judge Usher and Mr. Poppleton.”
“Who represented the Kansas Pacific?”
“Judge Usher. I don’t know that they had anybody in Washington.”
“How often did you go to Washington for the road?”
“I was there while the Thurman bill was pending. It passed, and
I haven’t been there since. No, I take that back. I was down
before the Labor Committee. I got rather disgusted.”
“Do you know whether anything was spent to influence
legislation?”
“No, sir. I know of no such expenditure.”
“Where could we find records of such transactions?”
“I don’t think such transactions exist.”
“Do you remember advising, at a meeting, that Mr. Ordway, of
Washington, be employed in the interests of the Kansas Pacific?”
“No, sir.”
Mr. Anderson read from the minutes of a Kansas Pacific meeting,
in 1876, and Mr. Gould remembered that Senator Rollins, a great
friend of Mr. Ordway, asked him to write a letter about it. He
knew of nothing coming from the letter.
“Do you remember any talk of fighting the Credit Mobilier?”
“I saw some of their stockholders and they said they would turn
in their stock to us. Others wouldn’t. The Credit stockholders
alleged that the Union Pacific owed their company a great deal
of money. I succeeded in getting the great bulk of the stock
turned over before a judgment was obtained.”
“You remember your address to the Union Pacific president and
directors.”
“I wanted to put myself in a position to bring a suit.”
“Who opposed this proposed action of yours?” asked Mr. Anderson,
reading from the minutes of a directors’ meeting that Mr. Dexter
moved “to decline to bring suit, as requested by Mr. Gould.”
“I think the directors declined, and I brought the suits
individually.”
“There is another letter of yours to the directors, requesting
them to begin suit against the Credit for a full accounting of
all profits, under certain alleged contracts,” etc.
“I think that was on a different set of contracts.”
Mr. Frederick L. Ames, the first witness called, testified that
he was formerly a stockholder in the Union Pacific Railroad, and
is a cousin of the Hon. Oliver Ames, Governor of the
Commonwealth. He was familiar with the relations of this road
and the Kansas Pacific Road prior to 1877. “I personally
attended,” he said, “to the affairs of the road under the
direction of my father, Oliver Ames. The first dividend of the
road was paid in 1875 or 1876. I do not remember the rate paid.
I was somewhat familiar with the condition of the Kansas
Pacific. I did not think the stock of much value in 1877. Mr.
Jay Gould was instrumental in buying up the Kansas Pacific
securities in 1876. I understood that he owned a large amount of
the funding bonds and unstamped incomes. I never knew what the
respective interests of any of the gentlemen interested were. I
owned no securities that entered into that pool. I received two
certificates for $50,000 each. I have not these in my possession
now. They were turned over to somebody. These certificates were
probably issued to every member of the pool. I think I paid
$100,000 to the Farmers’ Loan and Trust Company.”
Mr. Anderson—Have you been able to find those certificates, Mr.
Mink?
Controller Mink—They are not in our possession, sir.
Mr. Anderson—It is very strange that we cannot get any clue to
these certificates.
Continuing, Mr. Ames testified as to the manner in which the
business of the pool was conducted, a copy of the consolidated
mortgage being introduced in evidence.
“I do not remember,” he said, “that I ever contributed the
$388,000 funding bonds named in this mortgage. My connection
with this pool was limited to the advancement or the $100,000.
The pooling rates and mortgage rates were identical. I was a
director in the Kansas Pacific Road in 1879. I cannot explain
why bonds were issued to persons having claims against the road
at a rate which would exaggerate its indebtedness more than
$1,000,000. I exchanged my bonds for Kansas Pacific bonds. I do
not remember that, in 1880, $2,950,000 of preferred stock was
issued to Jay Gould at 75 when the bonds were worth 94. I do not
know of any other transaction of the kind. I do not know how the
Kansas Pacific Road came to be indebted to Jay Gould for
$2,000,000 at this time. All the directors were in favor of the
consolidation except Jay Gould. He was unwilling to accede to
any such terms as we thought we were entitled to, and seemed
very much agitated at the course we had taken. The final
consummation was reached at Mr. Gould’s house. I do not remember
that we would not let Mr. Gould leave the room until he had