2d Session.

No. 4147.

INVESTIGATION OF LABOR TROUBLES IN PENNSYLVANIA. [To accompany bill H. R. 12654.1

FFBRUARY 27, 1889.—Referred to the House Calendar and ordered to be printed.

Mr. TILLMAN, from the Seleet Committee on Existing Labor Troubles in Pennsylvania, submitted the following report, with the separate views of the minority:

The resolutions of the House authorizing the appointment of the committee are as follows:

On the 17th of January, 1888,

Mr. ANDERSON, of Kansas, offered the following resolution; which was read and referred to the Committee on Commerce:

Resolved, That the Committee on Commerce is hereby empowered and directed to investigate forthwith the extent, causes, and effect upon interstate commerce of the continued failure by the Reading Railroad Company to transport such traffic, and to report to the House by bill or otherwise for consideration at any time such legislation as is necessary to secure to the public the regular and complete execution by a railroad company of its obligations to serve as a common carrier of interstate commerce. Such investigations may be made by a subcommittee at such places as it shall deem proper, and the said committee, or subcommittee, is hereby authorized to send for and examine persons, books, and papers, and administer oaths to witnesses, and to employ a messenger and stenographer; and the expenses of said investigation, not to exceed $5,000, are hereby authorized to be paid out of the contingent fund of the House in the manner now provided by law.

The Committee on Commerce kept the matter under consideration until February 2, 1888, when it reported the resolution favorably to the House, but suggested amendments which, after discussion participated in by Messrs. Anderson of Kansas, Clardy, Brumm, Rayner, Randall, and others, resulted in the passage of the resolution in the following amended form:

Resolved, That a special committee of five of the House of Representatives be appointed to investigate forthwith the extent, causes, and effect upon interstate commerce of the continued failure by the Reading Railroad Company to transport such commerce, and to report to the House, by bill or otherwise, for consideration at any time, such legislation as is necessary to secure to the public the regular and complete execution by a railroad company of its obligations to serve as a common carrier of interstate commerce, and to investigate the difficulties existing in the Schuylkill and Lehigh coal regions of Pennsylvania between the corporations mining coal and the miners, and to further investigate all the facts in relation to the mining corporations and individual miners of anthracite coal in connection therewith, and all the facts in relation to the matter, and report the same to the House, with such recommendations as the committee may agree upon; and that said committee be authorized to sit during the session of the House, and at such places as it may find necessary; to employ a stenographer, to administer oaths, examine witnesses, compel the attendance of persons, and the production of books and papers; and the expense of such investigation shall be paid out of the contingent fund of the House.

On the 9th of February, 1888, the Speaker announced the followingnamed members as the select committee authorized by the foregoing resolution:

G. D. Tillman, of South Carolina; W. J. Stone, of Missouri; J. Logan Chipman, of Michigan; John A. Anderson, of Kansas; and A. X. Parker, of New York.

On February 10, 1888, the following additional resolutions were introduced by Mr. Anderson, of Kansas, and adopted by the House:

Resolved, That a sum not to exceed $5,000, sufficient to pay the expenses of the special committee of the House appointed to investigate the extent, causes, and effect upon interstate commerce of the continued failure of the Reading Railroad Company to transport such commerce, etc., shall be immediately available and payable out of the contingent fund of the House on the order of the chairman and one member of said committee, in sums not exceeding $1,000 at one time; and all vouchers for any sneh expenditures shall be likewise certified to by the chairman and one member of the committee.

Resolved, That sail special committee be authorized to employ a clerk.

The committee proceeded at once to organize and get to work. Testimony was first taken at Washington, and then at Philadelphia, Pottsville, Shenandoah, and Hazelton, in Pennsylvania; and after returning to Washington, one witness-Hon. Eckley B. Coxe, of Drifton, Pa.whose evidence was deemed very important, was summoned to the National Capital and a whole day spent in his examination. Three entire days were consumed in taking testimony at Washington and eight whole days were occupied in examining witnesses in Pennsylvania. Thirty-seven witnesses were carefully questioned and cross-questioned and six of them were recalled for further questioning, besides which a good deal of germane documentary and statistical evidence was procured.

The provisions of the resolution creating the committee are very comprehensive and imposed three onerous duties upon it:

First.-To investigate forthwith the extent, causes, and effect upon interstate commerce of the continued failure by the Reading Railroad Company to transport such

commerce.

Second. To investigate the difficulties existing in the Schuylkill and Lehigh anthracite regions of Pennsylvania between the corporations and individuals mining coal and the miners, and to further investigate all the facts in relation to the matter. Third. To report the same to the House with such recommendations as the committee may agree upon [and also] to report to the House by bill or otherwise, for consideration at any time such legislation as is necessary to secure to the public the regular and complete execution by a railroad company of its obligation to serve as a common carrier of interstate commerce.

The testimony taken by the committee is here with submitted in full.. After careful investigation and reflection your committee is unanimously of the opinion that most of the recent labor troubles in the anthracite regions of Pennsylvania arise from the railroads in that section being permitted to mine as well as transport coal.

"The evils which result from such inconsistent joint business are many and grievous. All classes of the community are injured by it. A coal operator disconnected with coal transportation will naturally put out all the coal he can at a reasonable profit, which tends to cheapen the article to the public. So, too, a coal carrier having no connection with mining will seek to move all the coal he can at a fair profit, which operates to keep coal at a just price to the consumer, whose interests should be paramount to all others. But the functions of coal extracting and coal carrying when blended in the same person or corporation are antagonistic to the interest of both the coal consumer and the coal operator, where the latter has no transportation facilities under his own control, because the man who combines the double business of

carrying and mining has a virtual monopoly of the output, the trans. portation, and the price.

It was by getting possession, almost without regard to cost, of nearly all the routes of transportation by water or rail from the mines to market and then freezing out the private mine operators, either by putting down the price of coal at the mines or by limiting the supply of cars or by charging high freights, that the Philadelphia and Reading Railroad Company has been enabled within, say, the last eighteen years to obtain practical control of the Schuylkill Canal and Navigation Company, also of the Susquehanna Canal and of about 1,700 miles of railroad, as well as of about one-third of the whole anthracite coal fields of Pennsylvania, and at the same time to put up the average price of coal at least 50 per cent. to the consumer. In fact, seven coal-carrying railroads, which are at the same time coal miners, may be said to own or control all the anthracite of the United States.

It is true a few private coal operators still doggedly cling to their property and their business, but the testimony taken by your committee abundantly shows that the Reading devil-fish," as Congressman Brumm calls it, has been steadily branching out throughout the whole region, absorbing both coal mines and railroads. Other carrying Companies in Pennsylvania are doing the same thing, and your committee believes it has good cause for saying that more than one, if not all, of the anthracite monopolies run several of their mines in the name of private operators to quiet the general clamor against carrying compa nies having a monopoly of mining also.

In order to rob the public by controlling the price of coal through limiting its output and charging an exorbitant freight for its transportation, the Reading has both purchased and leased many of its coal lands at "speculative" values on credit, giving bonds of the railroad for security as well as a mortgage on the coal lands, having no sufficient amount of cash to pay down so as to let the coal land be its own security. In this way the bonded debt of the Reading Railroad has been increased to one hundred and sixty million dollars, although the capital stock of the company is only about forty million. The company has twice been in the hands of receivers, and after recently collecting an assessment of about twelve millions upon the stock it is even now by consent of the stockholders in the custody of trustees for the benefit of its bond-holders. It has not paid any dividend for twelve years, although its average annual dividend for a long while immediately preceding the time it commenced to mine coal was over 10 per cent., frequently 15, sometimes 20 per cent. Many sagacious railroad experts think it never will pay another dividend to the present stockholders, so that the railroad company itself has been a great sufferer financially as well as the public by the unity of the two inconsistent pursuits of coal carrying and coal mining, which, while tempting to speculation, stock gambling, and affording monopoly an opportunity to advance the price of coal by charging an extortionate royalty for mining and an unjust freight for transportation, yet in the end punishes itself.

This experiment has entailed upon the stockholders a loss of $60,000,000, according to one expert witness, John Norris. (Testimony, p. 294.)

From the day that the Reading Railroad Company first fairly entered upon the joint business of mining and carrying coal in 1871 down to the present hour, it has been rapidly sinking more hopelessly into bankruptcy. Judging from the evidence taken, and especially from the ter giversations, evasions, and general conduct of the present controlling officials of the road while testifying before your committee, there is

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 the 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. I was.

Q. During what years?-A. 1861 to 1869; during the whole period.

Q. When did you cease to be a share-holder of that company?-A. About two weeks ago.

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 the report and the annual meeting; I think just about Christmas, 1876.

Q. What was it you were investigating?-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 hands 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 what 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 doubt, 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?-A. Borrowed them.

Q. Well, did the company borrow the money?-A. Yes.

Q. How did the company secure it?-A. They gave bonds.

Q. Mortgages?-A. Yes.

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 advances 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 profits of the railroad company?-A. I will show you how it was worded. This is the report for 1874, dated January, 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 $1,250,000. There you 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 and as a matter of book-keeping.

Q. Who suffered by it ?-A. The stockholders.

Q. Who profited by it?—A. I do not know anybody 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, interest, 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 value 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. When did the railroad company acquire control of the stock of the mining company-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 started in May, 1871.

Mr. CHIPMAN. That was the Laurel Run Improvement Company?

The WITNESS. Yes; the name was changed. The application was made shortly after the organization to change its name from the Laurel Run Improvement Company to the Philadelphia and 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 avaricious grasping at a monopoly of both carrying and mining by such a 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 Luge 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 shut 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, as no coal mine can be successfully worked except fullhanded-that is, with a full complement of experts and laborers-the railroads which both carry and mine anthracite always retain an abundant supply of help on hand, 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 the last moment they would doubtless seek employment elsewhere, but as it is they not only lose wages for short time or no time, but they have to pay rent also, as nearly all the houses at nearly all the mines belong to the mine operators and not to the laborers, which latter are mere tenants at will, and have to sign 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