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hardly a doubt but that most of those officials have long been much more intent upon paying themselves princely salaries and manipulating the stock of the company than they have been in reducing its debts or realizing dividends for its stockholders.
In this connection the following testimony from the last president of tbe Reading Railroad before it commenced mining (Charles E. Smith, pages 219, 220, and 221) sheds a flood of light upon how, at least, $15,000,000 of the $160,000,000 of the existing bond and first-mortgage debt of the company was contracted.
Q. Were you president of the Philadelphia and Reading Railroad Company?-A.
Q. Have you had any official connection with that company since your presidency ceased !--A. I was a director. I gave up the presidency some time in the summer of 1869 and went to Europe. I was gone a year, and when I came back I was elected a director. I was a director until Christmas, 1876, when I resigned, and I have had no connection with the company since.
Q. Why did you cease to be president of the company ?-A. My health broke down and the doctor told me I should either resign or be in the grave within six months.
Q. Why did you resign your directorship ?-A. I did not resign. Yes, I did; I resigned. I made an investigation as director of that report which was made to the board about the 20th of November or December, I have forgotten which--the 20th of December, I think it was, and the annual meeting took place the second Monday in January, and I resigned between the date of tho report and the annual meeting; I think just about Christmas, 1876,
Q. What was it you were investigating 1-A. The crookedness of the company's accounts in these reports.
Q. Was your resignation the result of that investigation ?-A. Yes.
Q. In what way?-A. The amount of that business was that the reports which were to be put in the bands of the annual meeting, which was to take place in a week or two, sought to suppress certain facts, and I thought it would be dishonest, and I therefore resigned.
Q. In what particular dishonest ?-A. Suppression of the truth. If the report of the directors means anything it means to tell the truth.
Q. I do not mean the dishonesty in the suppression of the truth, but in wbat way were those accounts dishonest ?- A. The value of the debt had been suppressed and a dividend had been declared and the money bad not been earned and was borrowed to pay it, and the accounts were made up so as to represent the money had been earned'; that is, if you did not read between the lines.
Q. What was the purpose of borrowing money to pay a false dividend ?–A. Mr. Gowen's object was, no donbt, to make a fine showing, and some of the directors who had a hand in it were gambling heavily in stock, and their object was plunder.
By Mr. CHIPMAN: Q. You say the money was borrowed to pay the dividends ?-A. I do; amounting to about $15,000,000.
Q. How did they secure these $15,000,000 1-A. Borrowed them.
Q. You say that fact was suppressed in the report?-A. If you will give me a report I will show you how it was suppressed.
Q. For what year :---A. Between 1871 and 1872 and 1876. The loans to the coal and iron company were represented to be earnings of the railroad company, because the railroad company has paid the loans of the coal and iron company, and this money for the payment of those avances was represented as money earned and received.
Q. You were a director of the railroad?-A. I was.
Q. Could you say of your recollection that the loans of the coal and iron company were represented as protits of the railroad company?-A. I will show you how it was worded. This is the report for 1274, dated Jannary, 1875. On page 9, transportation and income account. These are the receipts of the company. One large item at the bottom to make it come out right is $1,2-0,000. There yon have half a dozen items to be added together or subtracted to make that one item. This is the amount put in the accounts, and that is cooked.
By Mr. STONE: Q. In point of fact, was it right or wrong ?-A. It was wrong, both morally aud as a matter of book-keeping. Q. Who suffered by it?-A. The stockholders.
Q. Who profited by it?-A. I do not kuow any body profited by it except those who Were gambling in the stock.
Q. In what way did they profit?-A. They profited very much, because they could get the money to purchase the stock and they could get it carried at 6 per cent. intertst, and they got a 10 per cent, dividend, and so they cleared 4 per cent, by doing nothing and without advancing a dollar.
Q. That report is calculated to advance the market valne of the stock?-A. Yes, and keep it up. They were paying dividends of 10 per cent. and in reality there was no money earned.
Q. Were you managing the coal and iron company at the same time?-A. Do you speak of me personally or the company? Q. The company ?-A. The company was managing both at the same time.
Q. Wben did the railroad company acquire control of the stock of the mining compaupi-A. At its creation.
Q. Was the mining company created at the instance, or was it the creation of the railroad company?-A. Yes; under Mr. Gowen's presidency the iron company was btarted in May, 1871.
Mr. CHIPMAX. That was the Laurel Run Improvement Company ? The WITNESS. Yes; the name was changed. The applcation was made shortly after the organization to change its name from the Laurel Run Improvement Company to the Philadelphia aud Reading Coal and Iron Company. It is in that record there.
Nor do the evil effects of blending the carrying and mining of anthracite stop with robbing the public and involving the railroad company itself inextricably in debt. The laborers in the mines likewise share in the general abuses and pecuniary losses of the vicious system. The avaricjons grasping at a monopoly of both carrying and mining by such à gigantic concern as the Reading Railroad and Coal Mining Company causes it to treat the miners and their help with gross injustice in many ways. The business of anthracite mining is overdone, because the few huge carrying companies engaged in it can not find a market for their output at the monopoly price they want for it. The capacity of the Reading to extract double the quantity of coal it now actually mines is conceded on all sides, and the capacity of the public to consume largely more than the present output of anthracite if it could be had at a competitive price, as it was formerly, is also conceded; yet the company rather than let the output, the transportation, and the price regulate themselves by fair competition, prefers to buy or lease mines at fabulous rates and then either sliut them up or work them on short time, if necessary, to limit the output and at the same time to charge both exorbitant royalty and freight to swell the price.
Then, again, ås no coal mine can be successfully worked except fullbanded - that is, with a full complement of experts and laborers--the railroads which both carry and mine anthracite always retain an abundant supply of lielp on hånd, which help they purposely keep in ignorance as to when operations will be suspended, and for how long. If the knowledge of when they shall be required to work short time or no time were not deliberately withheld from the miners and laborers till theast moment they would doubtless seek employment elsewhere, but as it is they not only lose wages for short time or no time, but they
pay rentalso, as nearly all the houses at nearly all the mines by to the mire operators and not to the laborers, which latter are mere tenants at will, and have to sigti a written lease to that effect before they are permitted to occupy a house, especially in the Lehigh region. Rent goes on all the while against the employés, but wages are paid only in proportion to work actually done in short time, and of course no wages are paid during a lockout or strike, while rent of the miners' houses never
50TH CONGRESS, HOUSE OF REPRESENTATIVES. REPORT
I No. 4147.