Cornell University i HD2767.N723 1916 Minutes and teslimonyo f the Joint legis 'q;->j noo 406 050 .irtRBiiiroiU; 1 1 1 ! 1 i 1 iih i' iii; Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924002406050 (STATE OF NEW YORK fy ^^ ' ' ' ^ " I'^/vnc-- MlNUTES AND TESTIMONY OF THE Joint Legislative Committee Appointed to Investigate the Public Service Commissions (Authorized by Joint Resolution of January 21, 1915, and continued by Joint Resolution of April 24, 1915; further continued by Joint Resolution January 20, 1916 and March 6, 1916) VOLUME I TRANSMITTED TO THE LEGISLATURE MARCH 30, 1916 ALBANY J. B. LYON COMPANY, PRINTERS 1916 LIBRARY • UREAU OP RAILWAY ECONOMICS, KDaTl,A.is(Ta.\°i,a /.-M/,^. 5^.- ^/^A- '^H'' *^'=' JOINT COMMITTEE OF THE LEGISLATURE FROM THE SENATE Hon. Geobge F. Thompsoit, Chairmwn Hon. Eobbet E. Lawson, Hon. James A. Townee, Hon. Ohaexes J. Hewitt, Hon James A. FoiiST, FROM THE ASSEMBLY Hon. J. Leslie Kinoaid, Yice-Chairmcm Hon. R Huntee MoQtjistion, Secretary Hon. William C Baxtee, Hon. Aaeon A. Feinbeeg, Hon. Feedeeiok S. Buee, Hon. Chaeles D. Donohttb, COUNSEL TO THE COMMITTEE Hon. Meeton E. Lewis, Deputy Attomey-Oenercd Committee organized at tlie Hotel Biltmore, New York, on June 24, 1915. CONTENTS HEARINGS— VOL. I June 24. July 15. July July July July 16. 21. 22. 23. July 28. July 29. July 30. Aug. 2. Aug. Sept. 3. 8. Sept. 9. Sept. Sept. Sept. 10. 14. 15. Sept. 16. Sept. Sept. Sept. 17. 21. 22. Sept. 23. Sept. 28. Sept. 29. Sept. 30. Oct. 1. Oct. 6. FAOB Meeting. 11 Morning session 27 Afternoon session ... 27 Morning session 28 Morning session 28 Morning session 29 Morning session 64 Afternoon session ... 86 Morning session 106 Afternoon session .. . 114 Morning session 118 Afternoon session .. . 138 Morning session 154 Afternoon session .. . 181 Morning session 191 Afternoon session. . . 215 Morning session 253 Morning session 258 Afternoon session . . . 259 Morning session 262 Afternoon session . . . 285 Morning session 337 Morning session 365 Morning session 365 Afternoon session . . . 384 Mbrning session 420 Afternoon session . . . 435 Morning session 473 Morning session 484 Morning session 485 Afternoon session. . . 514 Morning session 514 Afternoon session. . . 534 Morning session 556 Afternoon session . . . 556 Morning session 557 Afternoon session .. . 558 Morning session 570 Afternoon session . . . 580 Morning session 604 Afternoon session . . . 646 Morning session 647 1916 Oct. 7. Oct. Oct. Oct. 8. 13. 14. Oct. Oct. Oct. 15. 18. 19. Oct. Oct. Oct. Oct. Oct. Oct, Oct. Oct. 20. 21. 22. 23. 26. 27. 28. 29. Nov. 4. Nov. 5. Nov. 6. Nov. 8. Nov. 9. Nov. 10. Nov. 11. Nov. 12. Nov. Nov. 16. 17. Nov. 18. Nov. 19. PAGE Morning session 647 Afternoon session . . . 662 Morning session 667 Morning session 669 Morning session 670 Afternoon session . . . 670 Morning session 67 1 Afternoon session .. . 671 Morning session 672 Afternoon session. . . 672 Morning session 672 Morning session 6Y3 Morning session 679 Morning session 679 Morning session 680 Morning session 680 Morning session 694 Morning session 694 Afternoon session .. . 695 Morning session 695 Afternoon session .. . 717 Morning session 766 Afternoon session. . . 766 Morning session 777 Afternoon session ... 812 Morning session 835 Afternoon session. . . 853 Morning session 882 Afternoon session .. . 910 Morning session 938 Afternoon session . . . 965 Morning session 1005 Afternoon session .. . 1039 Morning session 1081 Afternoon session . . . 1084 Morning session 1084 Morning session 1092 Afternoon session. . . 1099 Morning session 1132 Afternoon session. . . 1154 Morning session 1197 Afternoon session. . . 1219 [5] COWTBITTS WITI«ESSES —VOL I FAOB Atkinson, Paul K 810, 822, 1081 Blaney, William C 1151, 1197 Bordwell, John 793 Burr, William P 965 Carpenter, Comr. of Buildings... 114 Carpenter, Herbert L...46, 128, 148 249 Chapman, Elverton R 993 Court Proceedings (Boston)... 753 Cram J. Sargeant 931 Cropsey, Comr. of Buildings... 114 Donnelly, John D 110 Fisher, Horace M 571 Harding, Louis , 107 Harkness, LeRoy T 345, 467 Haviland, Edward W 132 Hayward, William 1065, 1121 1133, 1190, 1220 Hine, William F 1205 Hume, Arthur C 695, 739 Kohler, L. Frank 337 Larchmont Water Proposition. 647 Lessler, Congressman 29, 92 MeAneny, George 485,514, 535 McCall, Edward E. 191, 194, 199, 264 766, 836, 882, 939, 1039 Mackin, Elizabeth D 788 FAQE Mackin, John J. . . 785, 794, 812, 824 Maltbie, Milo R 420, 1247 Marsh, Benjamin C 75 Moran, William J 82 Morgan, J. Pierpont 680 Pouch, A. B 35, 104 Read, William A 558 i-teynolds, Thomas P 658 Rogers, Clarence Dewitt . . . 650, 656 Shaw, Robert Alfred 118 Sheehan, W. J 668 Sloan, Robert S 703 Smith, Herbert W..79, 84, 106, 647 651, 661 Smith, R. A. C 86 Snare, Frederick 604, 633, 662 Stevens, John F 391 Tench, Frederic 587, 623 Whitney, Travis H 180, 253, 336 415, 777, 109'3, 1132 Wilcox, Delos F 154 Williams, George V. Q 1032, 1050 1086, 1158, 1198 Williams, Thomas 44 Wood, Robert C 193, 853 Victory, Vincent 991 INDEX OF DOCUMENTS, MEMORANDA, ETC.— VOL. I Natv/re of Eaihibit PAGE Letter read by Mr. Lester from editor Wall St. Journal 33 Letters from Dock Com. offered by Mr. Pouch 37 Opinion of Corporation Counsel Polk in regard to Fulton st 61, 197 Order of Com. to P. S. Comrs. of 1st Dist., and Sec. Whitney to appear 152 . Memorandum of Com. of Bridges Kracke 182 Form of consent used by N. Y. Municipal Ky. Co .213, 254 Article X of chap. 3, of contract between P. S. Comrs. and N. Y. Munic. ^7 213 Letter of Davies, Auerbach & Cornell to P. S. Com 229 Four certificates re Second, Third and Ninth Avenue tracks, etc 264 Statement of Judge McCall, dated Sept. 9, 1915, " Memo re compensation under certificates " 290 Uocument marked "Copy," dated l>ec. 30, 1912, and marked Exhibit A.. 378 Set of rules adopted by P. S. C. governing determination of cost on or about Oct. 17, 1913 337 Order P. S. C. dated March 20, 1913, consenting under P. S. C. Law to issuance of bonds, etc 343 Proposed resolution — order authorizing contract by Interborough .... 385 Proposed resolution — order authorizing contract between Interborough and Stevens , 385 Document referring to contract between I. R. T. Co. and John F. Stevens 385 Letter dated July 21, 1913, to Hon. E. B. McCall, signed George Mc- Aneny 386 Letter dated July 21, addressed to McCall, Eustis, Cram, Williams, signed Maltbie .• 387 Memo attached to above letter, comprising 10 typewritten pages without signatures, entitled " Memorandum as to proposed contract between I. Co. and John F. Stevens " 387 File No. R. T. 6613, re proposed contract between Interborough and Stevens 387 R. T. Document No. 6418, Movement No. 15 388, 418 Memo in connection with proposed form of contract, Interborough Co. and Stevens 467 Report of Chief Engineer of July 16, 1914 474 Memorandum of Com. Maltbie 476 Memorandum of Mr. Harkness to Ch. Pub. Service Com 480 Document No. 4, found on pp. 704-731 of report of P. S. C. for 1st Dist., Vol. I, 1912 497 Contract dated June 17, 1914, between Terry & Tench Co., Inc., and T. A. Gillespie Co 596 Contract dated Feb. 13, 1914, between Interborough Rapid Transit Co. and Terry & Tench Co., Inc., and Snare & Triest Co., and T. A. Gillespie Co 593 Letter dated N. Y., Feb. 8, 1915, to Frederick Snare, signed Thos. H. Gillespie • • ^^^ Letter dated N. Y., Apr. 16, 1915, to Frederick Snare, signed Thos. H. Gillespie A," • • ;^- •^- • • V ' ' ®^^ Agreement signed by T. A. Gillespie Co., and Terry & Tench Co., Inc. dated Feb. 13, 1814 633 [7] 8 Index of DocuMEifTs, ICemoeanda, Etc. — Vol. I PAGB Contract for construction, portions Webster Ave. line, 8th Ave. and 162nd St. connection, Queensboro Bridge; line and West i'aims Subway connection. Dated Feb. 27, 1915 639 Eesolution of Investigating Com 671 Resolution by Senator Towner 673 Resolution by Senator Feinberg 675, 679 Resolution by Senator Lawson . . . : 677 Resolution for liearing, dated Jan. 6. 1914; adopted by P. S. C, being case No. 1783, F. S. C. lile 706 Order of t. S. C, 1st Uiat., dated Jan. 9, 1914; In case No. 1783, entitled Final Order 711 Evidence at hearing in case No. 1783 714 Denial order, case 1783, F. S. C. ; dated Jan. 13, 1914 722 From file of F. S. C. in case 1783; extract minutes of Jan. 9, 1914, Manhattan Queens Traction Corp., additions and repairs to rolling equipment. Final order 724 From record of testimony and proceedings at hearing held Jan. 8, 1914, P. S. C 725 Letter dated Feb. 27, 1914, to F. S. C, 1st Dist., signed Robert S. Sloan 726, 728 Letter dated Jan. 9, 1914, to Eustis; case 1783 736 Final order, case JSIo. 1783. Additional equipment and repairs to present equipment 736 P. S. 0. order. May 21, 1915, re repairs of Third Ave. Ry. Co., etc 747 Extract P. S. C. record, Oct. 27, 1915; Action on order re repairs, etc., of Third Ave. Ry. Co. and 42nd St., etc 751 Resolution of Investigating Com 753 Extract from Stock Book, Kings Co. El. Light & Power Co 776 Mackin cheeks 810, 822 Certificates, Kings Co. Company 882, 883 Extract from record of Franklin Trust Co. . . ; 887 Section 270, Chap. 62, Laws 1909, as amended 889 Application Edison Co. to acquire stock Amsterdam Co. Case No. 1554 898 Transcript proceedings F. S. C; Aug. 14, 1912; Sept. 16, 1912; Sept. 19, 1912; Sept. 30, 1912; Oct. 7, 1912 898 Letter dated N. Y., Oct. 11, 1912, to Hon. T. H. Whitney, from Hatch & Sheehan 902 Amended and supplemental petition of Edison Elec. Co., in above matter 902 Complaint, Amsterdam & Edison Companies against City 906 Answer, above case 907 Reply, above case 910 Bill of particulars, above case 911 Extract Minutes P. S. C, July 24, 1911, Case 1554 911 Extract Minutes P. S. C, July 30, 1914, Case 1554 912 Order, Case 1554, as to 122 shares stock 912 Acknowledgment, receipt of order. Case 1554 914 Entire file P. S. C, Case 1554 920 Dept. file, miscellaneous correspondence, Case 1554 920 Coleman opinion. Case 1554 920 Sheehan letter, July 23, 1914. Case 1554 921, 931 Letter from Mr. Hammerstein to Chairman Thompson 935 Dividend checks, payable to Freedman 939 Dividend checks, payable to E. R. Chapman & Co 942 Stock issued to E. R. Chapman & Co 944 Kings Co. Bl. Lt. & Pr. Co., certificates, issued to Freedman 953 Report of corporation counsel on Ikiison Elec. Illuminating Co., and pro- posed agreed statement of facta for App. Uiv., etc 969 Memo for Mr. Folk, re Amsterdam El. Lt. & Pr. Co., against the city, signed W. P. Burr, Asst. Corp. Counsel dated Mar. 19, 1914 981 Copy of letter signed by Polk, Corp. Counsel, dated Mar. 25, 1914, to B. de N. Crugar, Officer of the Mayor . ...i 984 Index op Documents, Memobanda, Eto. — Vol. I 9 PAGE p. S. C. memo, with initials " M. K. M.", dated Nov. 6, 1913 1006 Letter from W. P. Burr, to Maltbie, dated Nov. lO, 1913 1006 Letter initialed " MEM " to Polk, dated June 19, 1914 1008 Hatch & Sheehan letter to Maltbie, dated June 22, 1914 1009 Letter initialed " MKM " to Hatch & Sheehan, dated June 25, 1914 lOlO Letter initialed "MKM" to Hatch & Sheehan, dated June 27, 1914 1010 W. P. Sheehan letter to Maltbie, dated June 29, 1914 1011 Polk letter to Maltbie, dated July 10, 1914 1012 Sheehan letter to Maltbie, dated July 23, 1914 1012 Document signed A. F. Weber, Chief Statistician, to Maltbie, dated Sept. 18, 1912, re application Edison Elee. 111. Co. for authority to purchase Amsterdam stock. Case 1554 1013 Document signed Delos b'. Wilcox, to Maltbie, dated Nov. 22, 1912, in re Case 1554 1014 Application Edison Co. in Case 1554 1020 Correspondence relating to Manhattan & Queens Traction Co 1024 Letter Hammerstein to Chairman Thompson, Nov. 10, 1915 1041 Brief, case People v. Park Row Kealty Co 1047 Copy minutes of hearing. Case 1540, Oct. 5, 1915, Moritz v. Edison Co.. . 1069 Perley Morse & Co.'s transcript of McCall's acct. with Chapman 1085 Communication from Wm. A. Orr, acknowledging receipt, charges against McCall 1085 Extract P. S. C. Minutes, Oct. 22, 1915, re Hayward asking to be relieved from writing opinion in Kings Co. case 1088 Record Court of Appeals in Case No. 1273, People ex rel. Kings Co. Lighting Co. v. Wilcox et al 1092 Agreement Standard Oil Co. of N. Y. and Kings County Co 1093 Supplemental report of Perley Morse & Co., re McCall account 1099 Opinion of Maltbie in Mayhew case, order entitled. " Rate for gas in 30th Ward, Brooklyn " 1102 Order of Commission fixing maximum price for gas, 30th Ward 1103 Petition, order, writ of certiorari and return in People, etc. v. Wilcox et al. ; also volume in same case containing exhibits 1103 Order Appellate Division, April 23, 1914, directing reconsideration.... 1104 Letter Patterson to Whitney, Sept. 20, 1910, as to gas rates 1106 Opinion and order as to gas rates 1108 Minutes P. S. C, June 15, 1915 1113 Schedule cost and maintenance automobiles, P. S. C 1114 Report and decision re P. S. C. on Consolidated Railroad and Nassau Electric Railroad 1131 Record case, repairs Third Avenue, Case 1893 1132 Case No. 1456, N. Y. & Queens Gas & Elec. Cos 1132 Memorandum showing voting trust. Kings County Co 1133 Stock ownerships. Kings County Co 1133 Minutes P. S. C., May 11, 1915, as to Third Avenue Co 1135 Order, May 21, 1915, pursuant to resolution 1136 Section 57, P. S. C. Law 1141 Letter Franklin B. Lord to Chairman Thompson 1216 Letter Edward E. McCall to Gov. Whitman 1217 List holders voting trust certificates. Kings County Co 1220 Opinion, Commissioner Hayward, Case 1273 (Mayhew) 1220 Blue print, operating expenses, etc.. Kings County Co 1220 Blue print, operating ratios, Kings County Co 1220 Balance sheets Kings Co. Lighting Co 1236 TESTIMONY JUNE 24, 1915 Meeting of the Joint Conunittee of the Legislature appointed to investigate Public Service Commissions, as per resolution of Janu- ary 21, 1915, continued by resolution of April, 1915, held at the Biltmore Hotel, New York City, pursuant to call of the Chairman. Peesen T : Senators George F. Thompson, Ogden L. Mills, Kobert E. Lawson and James A. Poley. Assemblymen J. Leslie Kincaid, R. Hunter McQuistion and Frederick S. Buxr. Also Present : Hon. Merton E. Lewis, Counsel. Chairman Thompson. — I think it is up to the members of the Committee to advise as to what we shall do. Perhaps it would be a good idea to hear from Senator Lewis to see what his ideas are. Senator Lewis. — Mr. Chairman, this Committee came into existence under a resolution providing for the investigation of the two Commissions and for the purpose of administering such changes in the laws as might develop and are necessary as result of the investigation. I hadn't close knowledge of the action of the Committee in the conduct of investigations and can only judge of the results of that investigation or those investigations by the rec- ord, to which I have had access. At the completion of the investigation of the Up-state Commis- sion it was found that the work which would have to be done by someone to prepare and submit to tbe Legislature such amend- ments as might be desirable, — and that the probable discussion of such amendments and the fair and honest consideration of such amendments, would occupy very much more time than seems likely 12 Investigation of Public Seevicb Commissions to be available to the Committee and for that reason the Commit- tee asked that its existence be prolonged, with the idea that if pro- longed a suitable recommendation might be submitted to the Legislature covering such revision of the Public Service Commis- sions Law and such chauges as might commend themselves to the members of the Committee. Now, it is a fact conceded by those who drafted the present Public Service Commissions Law that the act itself is crude and cumbersome; that it should be revised and that it can be i educed so as to be concise and clear and effective. That, it seems to me, is perhaps one of the first discussions to which this Committee should address itseK. I think the iState of New York is entitled to have upon its statute books a complete and thoroughly well con- sidered Public Service Commissions Law. I think such a law can be prepared between now and the first of January and that when prepared it will commend itself to the members of the Legislature, by reason of its conciseness and by reason of its effectiveness. That, as I say, seems to me to be one of the first things to which the Committee should address its attention. I don't know what the pleasure of the Committee may 'je upon the subject of continuing, as the Committee undoubtedly has the right to do, the investigation which it conducted into the affairs of either or both of the two Commissions. I confess that I was dis- appointed by the failure of the Grovemor to act on the evidence that was submitted to him as to either of the Commissions, against whom and against the members of which, it seems to me there was abundant evidence which would have warranted ordinary action on his part. I can only account for his failure to act upon lihe theory that his time was so occupied with the numerous and important matters which always occupy the attention of the Gov- ernor of the State at a time when the Legislature is in session, that he did not have the opportunity to give, and did not give, that attention to the evidence submitted to him by this Committee which its importance warranted. I think that had he given closer attention to the evidence he would have been led to take action against various members of the two Commissions. Of course it is now an old story. The Governor has dismissed the charges against the members of the Commission of the First District and Repoet of Joint Legislative Comjiittee 13 probably would not be justified in attempting to take any action now based upon the reconsideration of the evidence against tbe Commissioners of the First District. . I don't know what the pub- lic sentiment of Wew York is upon the subject. I had supposed that there was a great deal of dissatisfaction in the Metropolitan District, due to what is usually characterized as the misconduct and inefficiency of the members of the Commission. I confess that I have seen very little in the newspapers about Governor Whit- man's failure to remove any of Vhe Commissioners of the First District. Perhaps my impression was wrong. Perhaps the public sentiment in this district does not require that action be taken against these Commissioners. Perhaps it may be that the evi- dence presented to the Committee failed to satisfy public sentiment that there was necessity for action. Whether or not there are instances of misconduct which were not presented to the Commit- tee when it was investigating the conduct of the Public Service Commission of the First District, or whether or not facts which came to the attention of the Committee were not adequately pressed or perhaps adequately investigated, — is a question with which I am not well enough acquainted to speak. Tf I was right in my supposition that the public sentiment of this district demanded a change in the personnel of the Commission in this district and if it is true that the facts which were laid before the Committee in regard to the conduct of the First District Commissioners were not of such a character as to jtistify action and if it is further true that there is evidence of conduct which perhaps might have been laid before the Committee that would justify a further inves- tigation, — then it would seem to me the duty of this Committee, under the resolution creating it, to continue its investigations and to develop these facts and perhaps subniit later to the Gov- ernor evidence which might justify him in meeting the demands of public sentiment, if this sentiment actually exists. I have been shown this morning a letter written by the United Civic Association of the Borough of Queens, which is a copy of a letter addressed tb the Governor and commenting on an editorial in the Flushing Daily Times criticising the Commission for its failure to provide adequate transit facilities for Queens Borough. Of course I have no knowledge of the facts and I am not prepared 14 Investigation of Public Service Commissions to accept the statements made in this correspondence or in the editorial, but I am inclined to the view that statements snoh as are made in this newspaper article would at least warrant, if they do not absolutely require, investigation on the part of this Com- mittee. I have been told and I think that it is probably capable of proof that there are circumstances connected with the awarding of the contract for the signal system order to be installed upon the Brooklyn Eapid Transit lines, — the Company lines, — which would warrant very close investigation. I am told that there are circumstances which affect the administration of the affairs of the Commission in the Second District, which not only warrant but require investigation. I am sorry that Assemblyman Knight is not here because he had knowledge of facts which he assured me had never come to the attention of the Committee and which demanded close and careful investigation. Of course it is for the Committee to determine the Committee's policy. I am here rather as the friend of the Court than otherwise and if I can be ci any service to the Committee in the conduct of its investigations or in the preparation of revision of the laws relating to public utilities and the corporations engaged in the work of serving the public, I am quite willing and indeed glad to be of such service. I think the Committee should proceed, if it proceeds at all, with due regard of the dignity of the members of the Committee, the dignity of the Legislature, of which these members are component parts, and with the idea of treating everyone with judicial fair- ness, with the idea of investigating to ascertain the truth, with' the purpose of acquitting anyone who may be charged with wrong- doing rather than the purpose of convicting. In other words, I think lie same rule should apply to any public servant engaged in the performance of his duties that applies to any private indi- vidual charged with wrongdoing. They should be assumed to be innocent until proven guilty. But, if the evidence justifies action on lihe part of this 'Committee; if facts shall be elicited as result of the investigations which convince the members of the Commit- tee that there has been wrongdoing, I do not know of any reason why this Committee should not act with the same ideas as would charadterize the actions of a Court, if the matter were pending in it. I don't know that I ought to go any further, although I am Rep»et of Joint Legislative Committee 15 tempted to make one further suggestion. I have been, as many of you know, connected with the Legislature in the past for a good many years. I have seen a great many legislative Commit- tees appointed, been a member of some of them, and have learned methods that are quite frequently followed. I know that there has often been a feeling on the part of the members of the Legis- lature that the appointment of a Legislative Committee was the invitation to a good time at the expense of the State. I think that is a wrong view for members of the Legislature to hold. There is serious work to be done or none to be done. If the work is serious enough to lead to the appointment of an Investigating Committee, the matter should be dealt with seriously. If it is not serious, it should not continue. Any Committee of the Legislature engaged in any Mnd of investigation is expensive to the State. We should undertake, it seems to me, to justify that existence and unless we are able to justify it we ought not to incur the expense. I don't mean this in any manner as a reflection upon this Committee or upon any particular committee, but merely as a conclusion which I have reached as result of the observation of committees for many years. Chairman Thompson. — I might interrupt you there to say that this Committee, the good time part of it, we still have that coming. I don't believe there ever will be a committee to prefer charges against this Committee on that ground. Senator Lewis. — I just threw that in because it seemed to me ii might not be out of the way at this time. As I said, I am ready to act with the Committee, help them any way I can and do anything that the Committee desires done because I want to see this Committee justify its existence and I want to see us present a report which will appeal to the sense of justice and right and to the conscience of the Legislature and the people of the State. Senator Lawson. — Mr. Chairman, in order to get a true and correct survey of this proposition and for my personal edification I would like to have some idea from Senator Lewis of the status of the Committee, for the reason that when Colonel Hayward 16 Investigation of Public Service Commissions was appointed counsel to the Committee I had no personal knowl- edge of it. I would like to know if Senator Lewis is acting for us on the same scope and same plan as Colonel Hayward. Chairman Thompson. — I think, in answer to that, Senator Lewis has been drafted by the Committee. I think he will be the Committee's counsel; that is I think his title comes from the Committee first, rather than from someone else. Senator Lawson. — ISTo, what I want to get at is how we attached Senator Lewis to the Committee, just for my personal edification. Chairman Thompson. — We did that in this way. It was on the theory of economy. When the Committee was first organized we, of course, felt that we were to investigate the economy of the Public Service Commission, — that was one of the first things for us to do, so we proceeded to make an example of the Com- mittee. "We employed Counsel whose salary was already paid by the State because it would not create anv additional salary for a lawyer to the Committee. "We also reduced the price of the stenographers, if you remember. The only cost to the State was about seven hundred dollars ($700") all told. On that same theory when Col. Hayward was appointed to the Public Service Commis- sion I asked to have the Attorney-General deputize, give us a deputy, on the same theory of State salary, so he gave us his !First Deputy. Senator Lawson. — ^I merely asked that question to know the true reason. There was no meeting wheoi that matter was taken up. "We should have been advised of it. Chairman Thompson. — It was taken up at a meeting. Mr. Kincaid was present. Assemblyman Kincaid. — It was taken up at the Ten Eyck Hotel. Chairman Thompson. — "We asked the Attorney-General to give us a man and he gave us his Pirst Deputy. Senator Lawson. — Then I am clear on that, Senator Lewis. Let me state very briefly my views on this present situation. Report of Joent Lkoislative Committee 17 When Governor Whitman issued his manifesto exonerating or dismissing the charges against the Public Service Commissioners of the First District, I, as one of the members of the Committee, thoroughly familiar with the record, having digested it very care- fully, felt a little disappointed and I think other members felt the same. At first thought, which you know, Mr. Chairman, I wrote you, with an idea of getting the Committee together to ascertain their views as to whether the record was sufficiently and properly digested and presented, and with the idea in mind that perhaps the Governor had not had time to digest it, as Senator Lewis suggests, or whether we might go further and con- tinue our investigations, which we had power to do under the resolution which created us. I want to say that T have spent eve- ning after evening since my last talk with you in Albany digesting this record and if the members of the Committee will just take the testimony of Commissioner Wood alone, peruse the admissions he made in answer to Col. Hayward's questions, I think the pre- sentation of that testimony itself, if properly presented to the Governor, with the recommendation from this Committee of the Legislature to the Governor, might be sufficient to warrant the Governor in re-opening the Committee's original charges. Now, I can also say that since that time it has come to my notice that there has been considerable in the matter of contracts, the letting of contracts, which this Committee did not probe, or in fact they did not have the time. It is my opinion that information should be collated and presented at the next meeting; of this Cnmmittee with the idea of passing upon it and bring up the question as to whether it is advisable to continue the investigation along that line. As regards the sentiment here in the Metropolitan District, the sentiment, as I find it, particularly in the borough of Brook- lyn, is very acute but it does not come to the surface because the people themselves simply do not know where they are at. Those who know what the testimony was, were familiar with it, form their own conclusions. I think that the public of the Metropolitan District has no fault to find or any reflection upon this Committee. They are lying practically dormant under the action of the Gov- ernor and are not cognizant of the fact that this Committee can render any further service in the direction of bringing more light, 18 Investigation of Public Seevjcb Commissions so that the Governor might take further action. Now, the civic bodies all over Brooklyn are very much put out at the situation. There is no question of that. I have received a number of letters on the subject, most of which wind up with the statement, " Well, I presume the Committee cannot do anything more." That is the position they are in at the present time and the situation is grow- ing more acute every day between the original four Commission- ers and Col. Hayward and it seems to me that we are right at a point of whether there is sufficient grouaids to go ahead with our investigation. Senator Lewis. — To which contracts do you refer ? Senator Lawson. — I refer to the subway contracts, construction contracts and signal contracts. Now, as regards the law itself, it is susceptible of many changes that might benefit the people of the State. Here is a situation that arose only a week or two ago in Brooklyn. I went over with Col. Hayward and District- Attorney Cropsey and Col. Hayward requested the District- Attorney to assign an assistant to take up the matter of an order of the Commission which had been constantly ignored for three or four years back and the assistant took the matter up at a pre- liminary hearing before the majority and put the Public Service Commission practically in the light of defendant rather than that of prosecutor. I think the law might be corrected in this instance. The law as a whole, as far as I am personally concerned, I think is thorough, covers the situation, if we had the right and proper men to interpret the law and enforce it. That is my opinion briefly stated. Assemblyman Burr. — Do I understand you to say there are no changes necessary? Senator Lawson. — I think a few minor changes are necessary. I think the general law as it stands is all right. It is merely a failure of the Commissioners to enforce the law. Senator Thompson. — You don't mean to say, do you, that it would not be a service to simplify the law on the statute books ? Senator Lawson. — I think it would be a great service to simplify it so that present conditions cannot prevail. Report of Joint Legislative Committee 19 Senator Mills. — It ought to be consolidated so tliat the same rule will apply to all the corporations covered by the law. It should be amended so as to avoid duplications. Assemblyman Burr. — You would be in favor of making it conform to the Interstate Commerce Law 'i 'Senator Mills. — In some features, yes. I think there are defects in the Public Service Law that the corporations can get around and escape an order and do so. Now, in regard to con- tinuing the investigation of this First District Commission, I think it would be the greatest possible mistake to go on another fishing expedition. I don't think this Committee stands very high in the public view if you want my candid opinion. I think the Governor has passed on these charges. I think he has declared this Commission not guilty. I think any attempt to reopen the whole case would be a great mistake and would meet with severe condemnation unl&ss someone shows that he has the real goods. As far as that signal contract ia concerned, anything that could be done now was done last winter because we had a direct line on what we thought was wrong. Things were written against the Commission and yet no one was able to submit any actual evi- dence of wrong-doing and there is no reason to believe to-day that you could get information from these people different than you got last winter. I don't think you could. Insofar as the con- struction contract is concerned Col. Hayward went at that very hard, as I understand it, and got a man from the District Attor- ney's office to help him. They got an engineer and they went at it and they couldn't get anything. If someone has something definite which will warrant the Committee going ahead, let us have it, but I think it is a great mistake to reopen the whole case unless some real facts are shown. I think the matter is closed. If you have definite evidence of misconduct so that we can go ahead and make good, I say go ahead, but if we haven't and should go ahead and fail we would be subject to a great deal of ridicule. At first we started with everything in our favor, now we start with everything against us. I feel just as I ielt all last winter, that we had a chance to do some real, constructive work and we still have the chance to do it and that is along the lines of eonsolidating this law. 20 Investigation of Public Seevice Commissions Assemblyman Burr. — Do you think we would gain anything by opening the case against any particular individual ? Senator Mills. — ISTo. I remember the testimony against Wood. Wood is incompetent because he is a little fellow. But what did we find against him? That he did not know certain features of the Public Service Law but so far as complaints were actually concerned Wood had done more than all the rest of them. He investigated 55 complaints, I think, and the others didn't investigate any. Assemblyman Burr. — He was only on there four or five months. Senator Lawson. — I would like to make a recommendation, ilr. Chairman, if I may be permitted, that if any additional informa- tion can be obtained through the Counsel which would warrant the Committee in continuing its investigation and the Counsel so advises after perusing the information and its source, that the Committee resume its investigation. That if the Counsel cannot ascertain what in his opinion would be sufficient to reopen the case we accept his advice and work along the lines of amendments to the law itself. Senator ilills. — That is sort of putting it up to the Counsel to go out and fish. Senator Lewis. — May I make this suggestion. We have this communication this morning. Senator Thompson suggests we are likely to receive additional communications. It seems to me if people in Queens borough are complaining as this editorial indi- cates they are generally, they should be asked at their own expense and pay their own fares to develop facts which they shoiild come here and present to this Committee and which this Committee eould then investigate and in its investigation this Committee could exercise its power of compelling the attendance of witnesses and the production of books and papers, but for this Committee to start on a fishing expedition with the hope of finding someone who had done something wrong or had made some mistake, possibly of judgment or possibly something difFerent than that, would seem to -me to be belittling the Committee. We are not a band of Bepoet of Joint Legislative Committee 21 sleuths out to find violations. We have the power to investigate charges if charges should be made and these charges should come from responsible people and should be accompanied by facts, which should at least make a prima facia case, sufficient to justify the Committee in expending the money of the State in prosecuting further investigations. Senator Mills. — I mention one very well known thing of which yoTi all remember. The people of this city were well aware of our presence in New York for a period extending over two months and were notified that the Committee would gladly receive com- plaints and I think it is fair to say that not one from the outside came forward with any definite, valuable information. There were many complaints, based usually on misinformation and lack of study. Two papers at least for over a year and a half have worked with great energy and with the ability which they have at their command (that is the World and the American) to pick up some- thing on this Commission and that material was all brought out last winter and didn't amount to much. You take the subject which has been brought out here, whether you should strengthen that bridge or build a tunnel. That is a very big question. It is largely a question of judgment and probably the subject matter of that editorial merely gets down to a question of judgment and then you follow to the question of ability and that was all gone through last winter. Assemblyman Burr. — You remember during our investigation in the City Hall that Mr. Hayward had the assistance of Mr. Clark. He practically spent all his time investigating complaints in Queens, particularly Flushing District, yet he was not able to show anything that would help hold Cram. Senator Mills. — Unless these people that have had dealings with these Commissions will come forward with the goods this Com- mittee is helpless. Senator Lawson. — You will agree with me that we did get on the trail of certain evidence with regard to that Federal Signal system. We just simply scratched the surface. Senator Mills. — I heard rumors. I heard no proof. 22 Investigation of Public Seevioe Commissions Senator Lawson. — There are men in existence to-day who had dealings who could, if they would, give us the information. Senator Mills. — If there is any such information laid before this Committee it is our duty to go ahead. Lacking that infor- mation I think we should go ahead and devote ourselves to pre- paring amendments to this law. If we do that and do it intelli- gently I think the Committee will more than justify its existence by the first of January. After all Commissioners come and go and these fellows' terms expire sometime. We cannot remove them, I am satisfied of that. Senator Lewis. — I think I ought to say frankly, because I don't want anything done without the knowledge and consent of the Committee; in the work of preparing of the report of the Committee, which was presented to the Legislature, this situation existed. My duties in the office of the Attorney-General were such that it was impossible for me to devote myself to the work of this report until' evenings. I may say with perfect truthful- ness, I think, that I spent pretty nearly every evening fro^i the time I was named as Counsel to the Committee until the report was finally requested, in the work of framing the report. The report was framed with the assistance of a lawyer from Rochester, in whom I had the utmost confidence and he has practised in the Public Service Commission a great deal and is very familiar with the public service law. I called him to my assistance because of my confidence in him and his ability and integTity. He spent all of his time, day and night, in digesting the evidence taken by the Committee. He worked daytimes and worked with me evenings until midnight every night, I think. Now if any con- crete result is to be accomplished I think I should be permitted to have the assistance of that man in the work of forming such legislation as may be thought to be desirable. I should want authority to hire him. He is not a high priced man but is very competent. Mr. Shuster is his name, of Rochester. Senator Lawson. — I so move. Motion seconded and carried. Senator Lewis. — I don't ask for anyone else. If we want to pursue any further inquiry he could do that. Repoet of Joint Lecuslative Committee 23 Chairman Thompson. — Now there is another thing that I was going to bring to the attention of the Committee. Here is this water situation. Up-iState anyway, I don't know how it is down here; there is considerable clamor to have these water companies brought under the Public Service Commission. The bill was vetoed a year ago because it included New York and this year it was vetoed because it didn't. There is the situation at Seneca Falls, in Buffalo, and in Rochester, each one presenting a different situation, and I guess the same thing at Watervliet. The point of view in Buffalo is that the Buffalo Company wants to go into the country and compete with the water company. I think we should have a Sub-Committee to work with the Senator on this work. We cannot work every day. We must work from time to to time. Senator Lewis. — What would you think of this ? Suppose I ask Mr. Shuster to draw a skeleton of the Public Service Law, consolidating all these provisions of the separate act and have it in shape to submit at a future meeting of the Committee? Senator Mills. — I think that would be a good suggestion and a good idea • — have the various suggestions which we met during the course of our investigation and I think partly, if not wholly, embodied in the report which you prepare, and they should be taken up and considered by members of the Committee and they should investigate on their own account. Assemblyman Kincaid. — Don't you think that perhaps all of the Transportation Law can be combined with the Commissions Law. Isn't that the proper place for it. Senator Mills. — That will come up later. I wonldn't be pre- pared to say. Assemblyman Kincaid. — Our resolution provides that we take up the Transportation Law. Senator Mills. — I do think we should consider these questions so that we will be prepared to pass on them. I mean individual members. ■ I 24 Investigation oe Public Seevice Commissions Senator Thompson. — There is another thing I want to call to the attention of the Committee, that is the question of the stenog- rapher. I had authority from the Committee to take Mr. O'Brien and pay his expenses and I never before was obliged to pay his salary as the Legislature was paying him at that time and his salary stopped when the Legislature adjourned. I will have Mr. O'Brien do all the stenographic work and now pay him. Assemblyman Kincaid. — That is very proper, I should think. Senator Lawson. — There is no objection as far as I am con- cerned. Assemblyman ilcQuistion. — The stenographer is the only em- ployee we have now ? Senator Thompson. — Outside of Mr. Shuster, the only one we have. We had several but I discharged them the 20th of April. Assemblyman ]\IcQuistion. — You know down here we have a great deal of criticism on the expense of this Committee. Senator Thompson. — I think our Committee was very econom- ical. There is no Committee that ever did the work we did less than $100,000. Then followed a general discussion, after which Senator Lewis made the following statement : Senator Lewis. — Let me call attention to various subject which might properly be studied by members of the Committee. For instance we have the question of stockholder's liability. We all know that in certain classes of corporations, the stockholders are subject not only to the liability of the loss of the stock, if the corporation fails, but also the statute provides liability in addition to the loss of the stock, double liability, so called. There are those in this State who feel that every Public Service corporation should be classified with the bank and money corporations and that the stockholders of these corporations should bear that double liabil- ity. We know that public service corporations have been exploited in the past to the great advantage of stockholders. We have fresh in our minds the Whitney connections with the stock of the sur- face railroad companies in New York city. I think this subject Rbpoet of Joint Legislative Committee 25 might well be committed to a Sub-Commitee to study and investi- gate and inform themselves. Then there is the subject of the par value of stock, shares of stock without a par value. We have that now in stock corporations. It is a provision of the stock cor- poration law but it does not apply to a Public Utility corporation. That subject is one that might be studied and some views presented for the information of the Committee. There is one other subject I wanted to suggest to the members of the Committee and that is one of the subjects that was discussed in the report relating to the delay and the very considerable cost of investigating the facts in relation to a proposed stock or bond issue by a Public Service corporation. I had a very pleasant visit and I think most of you knew thoroughly after I began the work of preparing the report with Mr. Harris, of the New York Central Railroad, a man whom I have known for thirty years. He told me that one of the great difficulties that the Public Service corporations have to face is the difficulty which arises from the inability to take advantage of a favorable market condition. He gave me a concrete case. Sup- pose we want to build a new station at Utica or Schenectady or any other place. We have our plans approved by our architects and engineers. We get an estimate of the cost and determine upon making that improvement and we go to our brokers and say we will require the sale of $3,000,000 bonds for that purpose. We may have some other improvements that we desire to promote at the same time, probably making an issue of $10,000,000'. We say to the broker, we want to sell these bonds. He may offer us such and such a price to-day. We say we cannot offer them to-day. We have got to go to the Public Service Commission and get their approval for the issue of these bonds. The broker at once advises us that he does not know the conditions when we get through the Public Service Commission. We get no satisfaction from the broker. We have to go to them and they refer the matter to their experts. Their experts investigate and it causes long delay and perhaps much more money. It often takes months and often prevents us where we could have accomplished a sale of the bonds to great deal better advantage. I think Mr. Harris remarked that the law in Pennsylvania works out to better advantage. Their statute provides that Public Service corporations may issue its 26 ImrESTIGATION OF PuBLIC SeEVIOE COMMISSIONS bonds and securities as it sees fit. When it makes sucli an issue it has to report, or is about to make sueb an issue, specify the amount of the issue and the purpose for which it is issued. After the completion of the improvement a detailed report of the expendi- tures is required and any balance that may be on hand available from that capital issue must be reported and held for some future capital purpose. The net result is a very considerable saving of expense on the part of the corporation, often-times a considerable saving of a loss that might otherwise occur and not only that but a very important saving on the part of the State due to the expense of investigating any defects of the issue, the necessity and pro- priety and probable cost of the same. ISTow, if an act of that sort is found to be practicable in Pennsylvania I don't see myself why it isn't likely to be equally practicable in this State. If it is practicable then it seems to me that this Committee might very well make a recommendation, at least, to the Legislature for the adoption of that system. If it would result in the saving of money to the corporation and in the reduction of the expense of the maintenance of the Commission, both are results which are entinely desirable to obtain if possible. I am not prepared to recommend the change in the law but I think it might very well be referred to a Sub-Committee to make investigations, study the situation and ascertain for themselves and see if that system does work out in Pennsylvania. I think it might be very desirable if one or more members of the Committee could go to Pennsylvania and see the members of that Commission and discuss the matter with them. These three subjects at least are subjects which might very well be submitted to Sub-Committee. I think I can put Mr. Shuster to work on this matter right away and in a month he ought to have a skeleton of a bill drafted. Informal discussion then followed as to the date of adjournment and the probability of securing the rooms of the Bar Association at ISTew York for meeting purposes. Senator Lawson volunteering to take this matter up with the proper officials. Chairman Thompson submitted the matter to the members as to their choice of hotels and for the present at least it was decided to make the Biltmore Hotel the headquarters of the Committee while at New York. The meeting was then adjourned until July 15, 1915, at 10 o'clock A. M. at the Biltmore Hotel. Repoet of Joint Legislative Committee 27 JULY 15, 1915 Meeting called to order by Chairman Thompson at the Biltmorc Hotel at 11 o'clock a. m. Present : Senators Thompson and Lawson. Assemblymen Kincaid, Burr, Baxter and Feinberg. Also Senator Merton E. Lewis, Counsel to the Committee. By Chairman Thompson: I suggest that we adjourn to the rooms of the Bar Association at 2 p. M. to-day. Before we adjourn I will announce the vacancy of the office of Vice-Chairman to this Committee, owing to the resignation of Hon. William J. Maier, who held that office and has been assigned to another Committee. By Assemblyman Feinberg: I nominate Mr. J. Leslie Kincaid for the office of Vice- Chairman. By Assemblyman Baxter: I second that nomination. Assemblyman J. Leslie Kincaid was thereupon duly elected to the office of Vice-Chairman, all members of the Committee voting in the affirmative. On motion duly made and seconded the Committee took a recess until 2.30 p. M. at the rooms of the Bar Association of the city of New York. AFTERlSTOOlSr SESSION Meeting called to order by Chairman Thompson at 2 :30 p. m. Same members present. Informal discussion was thereupon had as to various phases of the Public Service Law and the interpretation thereof. By Chairman Thompson: I have made up my mind that tli^ situation here, if the Com- mittee don't object, is important enough so that whenever aay 28 Investigation of Public Seevice Commissions member of the Committee desires to bring up any subject that ought not to be published at the time, on indication to the Chair- man we will go into Executive Session. So, when we are not in Executive Session I hope every member of the Committee will expect that the public are entitled to whatever they hear. If no objection, we will follow that course. On motion duly made and seconded, meeting adjourned until Friday morning, July 16th at 11 o'clock, at the same place. JULY 16, 1915 Committee met at the rooms of the Bar Association of the city of New York, JSTo. 42 West 44:th St., at 11 a. m., pursuant to adjournment. Peesent : Senators Thompson and Lawson. Assembljnnen Kincaid, Burr, Baxter and Feinberg. Also Senator Merton E. Lewis, Counsel to the Committee. The Members of the Committee indulged in a consideration of the Public Service Law and after further discussion recommenda- tions as to various questions to be decided next week were type- written and given to the various members of the Committee. The Committee continued in session until 1 p. m., whereupon motion was made to adjourn until Wednesday, July 21st, at 11 A. M., at the rooms of the Bar Association of the citv of ISTew York. JULY 21, 1915 Committee met at the rooms of the Bar Association, 42 W. 44th St., at 11 A. M., pursuant to adjournment. On motion, adjourned until July 22, 1915, at 11 a. m. at the same place. Repoet of Joint Legislative Committee 29 JULY 22, 1915 Held at the Rooms of the Bar Association, "West 44:th St., New York City Present : Senator G-eorge F. Thompson, Chairman, Robert R. Lawson. Assemblymen J. Leslie Kincaid, Vice-Chairman, Aaron A Feinberg, William C. Baxter, Frederick S. Burr. Chairman Thompson. — The President of the Anierican Dock Company and his Counsel, Mr. Lesler, and Delegates from the iStaten Island Chamber of Commerce and other civic bodies were to be here this morning at 11 o'clock. Mr. Montague Leslee appeared for the American Dock Company and made the following statement: I represent the dock company referred to and Mr. Doyle of that concern is here present to-day. We have been for several years fighting the discrimination against Staten Island, the truckage rates on the municipal ferry. The distance to South, Brooklyn and the distance to Staten Island are exactly the same and yet i lie rate for trucks ajad automobile trucks is just double to Staten Island to what it is to South Brooklyn. The result is that the Bush Terminal Company, which does the same business, has a very great advantage over the American Dock Company. Eacli dock commissioner has agreed that the thing is wrong and the present dock commissioner has formally admitted it is wrong and says that he will make report to the board of estimate. This he has never made. We feel that if the Public Service Commission could regulate this condition as it does other discriminatory rates, why we would get justice, but it seems impossible for us to get any recognition from the dock commissioner. I hope the committee won't construe what few words I have to say as an argument. It ie almost a place of last refuge for our people and the people 1 represent. I live on Staten Island and have lived there for a num- ber of years. Our only means of getting to the mainland of the city is by ferry, which for some years has been municipally owned and controlled, that is, the municipality of .New York has gone into the business of running a ferry. For a matter to my knowl- 30 ImrESTieATioN of Public Seevice Commissions edge of six years an effort has been made by business interests, whose very life is dependent upon a decent communication with the city, to get a rate not specially designed to help us, but which shall be equitable at least, on an equal plane with other interests similarly situated. I want to say in general words a word about your Committee. To my judgment it is a great body, that there cannot be a greater publicity, a greater thought, a greater care and a greater interest in the work you men are doing. We have been too haphazard in our legislation. My experience, cov- ering a matter of twenty years, is that our laws in the State of ~Sew York, even our ordinances and our national l^islation, is not well thought out ; it is too haphazard. The average legislator has not had the experience. Now, to our immediate problem. One of my clients is the American Dock Company. They have been there a great number of years. They have a great number of docks at the foot, right next door to the ferry on Staten Island. They load and unload steamer ships. So far as the dock itself is concerned, so far as the business facilities, the problems of the great steamers coming in there, there isn't any place and I say it with great respect for the great port of !N"ew York, there isn't any place that has finer facilities for doing this work. What is the trouble? In the first place, our natural trouble; we are six and a half miles away from the mainland and they are suffering from a discrimination in the rate of cartage that must be paid to get across the ferry. A truck that would bring these people to Staten Island would cost $1.40. The same truck bringing the same people on a ferry, if run by the city, to South Brooklyn, 39th street, would cost TO cents. Senator Lewis. — Same distance ? Mr. Lesler. — A little further. Now, then, when you come to the freight on the ferries around the city, over to Brooklyn, over to Jersey, the disparity is very much greater. Now, under the law — I think it is 827 of the Charter — the Commissioner of Ferries has the right to make the rate by and with the permission or approval of the Sinking Fund Committee in the Board of Estimate. You go to the Commissioner to present your problem; briefs have gone in enough to load this library building up. He Repoet of Joint Legislative Committee 31 refers you back. It is then referred to a Committee of tlie Board of Estimate and of the Sinking Fund. The head of the American Docks is a man who is up to " snuff " a little bit and who is prob- ably to be admired for his ingenuity. But, to get down to the question of the Public Service Commission. If the city of Kew York undertakes to go into any sort of a business, the city of Ifew York must conform to things just as any other individual does. As I understand it, under the Public Service Law there is a statute on our books that allows a municipality to go into busi- ness — for instance, to sell eleetricity or gas for its own purposes. If that is covered by the Commission I don't see how a munici- pality can get away from it. ISTow, Judge Blackman of the Supreme Court, in an opinion, held that the Commission had no jurisdiction over ferries not connected with railroads. I think that is the law. I pointed out to your counsel that an appeal to the Interstate Commerce Commission would probably bring the same result. Senator Lewis. — Uo you intend to include in your statement municipally owned water systems, for instance? Mr. Lesler. — I think they are included today. Senator Lewis. — Gas and electricity? Public water supply? Mr. Lesler. — Senator, I have given this case the thought — this direct question. If you are going beyond that, I should say yes. lOhairman Thompson. — Perhaps Mr. Lesler is not acquainted with legislation on this matter for the last two years. It seems that in the Legislature of 1914: there was introduced by Assembly- man Maier from Seneca county a bill to bring within the jurisdic- tion of the Public Service Commigeion the regulation of water companies. That was brought about by the local situation at Seneca Falls. It passed both Houses of the Legislature and when it came to the notice of the Mayor of New York city, he pointed out that that bill would give to the Public Service Commission the right to regulate certain private water companies within the jurisdiction of the Greater City and in behalf of the citizens of your Greater City, the Mayor criticized that legislation very seri- ously and the New York city newspapers joined in that criticism, 32 Investigation of Public Seevice Commissions so that the Governor vetoed the bill because it gave the PubHc Service Commission control over certain water companies within the city of New York. Again in 1915 Assemblyman Baxter, who now sits on this 'Committee, having been confronted with a condi- tion in the little city of Watervliet, presented another bill to give them the same rights and Mr. Baxter, profiting by the previous experience with the bill of Assemblyman Maier, expressly omitted from his bill any regulation of the companies, privately or pub- licly owned, by the city or otherwise within the city of Greater ISTew York and it passed both houses of the Legislature, but the Governor vetoed it because it did not include the city of New York. By Senator Lewis: Q. Your corporation, or the corporation which you represent, is engaged in a public utility — the dock business ? A. Well, only in a modified way. We get the right from the city to build our docks, for which we have to pay the city. Q. You serve the general public? A. Certainly. Q. It gets down to this. You are engaged in the service of the general public and as such, in that capacity, you have the right to say that you will take business from this man at this rate or you will take business from that man at that rate. A. Dock freight don't work out that way. Senator. Q. Well, but that situation really does exist ? A. Yes, that is true. Q. That being so, is it desirable to include within the jurisdic- tion of the Public Service Commission the regulations of dock traf- fic, that are used for the service of the public, as your company's are used ? A. It could not be done. For instance, if you did that, you would have to include the steamship lines all over New York. You would have to include the freight line elevators ; you would have to include a great number of things. We are regulated. We are a corporation and have to comply with the corporation law and have to make our reports to the State. Q. Yes, but you are not regulated op the subject of rates. A. There is no such provision of law. Q. You have no set regulation of law as to the question of rates that you shall charge to your various customers ? A. Only in so Kepokt of Joint Legislative Committee 33 far as the decision of the Supreme Court of the United States affects the International Merchant Marine — that is, on our ship- ments that come in to us from abroad, the China and Japan trade, for instance. Q. I take it that a great deal of freight is delivered on yout docks which originates in New York State and is loaded from your docks to the steamship ? A. Oh, yes. We are building new docks. We are extending them two hundred feet. That we had to do with the consent of the State, the War Department and the city of Ifew York. Our docks have to be built according to the regulations. Q, This Committee is authorized to revise the Public Service Commissions Law and one of the first questions which demands consideration from the Committee is what public utilities shall be regulated. Shall all public utilities be regulated or shall only certain public utilities be regulated? A. To me the present dis- crimination between the up-State and the dovm-State Public Serv- ice Commissions is all wrong. It is undesirable; it is bad; it has raised overlapping questions. It is likely to produce a variety of decisions. Chairman Thompson. — Isn't the first question for this Com- mittee to determine what is a public utility ? A. I have not con- sidered that at .ill. I think the first question is the one I have outlined, that of equalization. So that you may get my idea I will read, with your permission, a letter I received from the Wall Street Journal editor. (Mr. Lesler read a letter from the editor of the Wall Street Journal, which he presented to the Committee and which was made a part of the exhibits.) A. I am going to close by saying that such a discussion as this don't mean very much from a man who has no given, specific idea, cannot give you specific reference to things, — can only give his idea from his experience and from his general knowledge. ■Chairman Thompson. — What I am trying to make clear is that while we want to hear your particular version that you have of a personal subject, yet that subject does bring up the larger one which we will have to determine. Vol. 1 — 2 34 INVESTIGATION OF PuBLIC SeEVICE COMMISSIONS Senator Lewis. — This letter indicates a desire on the part of the Law Journal that this Committee formulate a general, broad, complete definition of a public utility. Is that your view or do you feel that the converse should be done ; that the Public Service Commissions Law should specifically state in terms the precise character of the various classes of public utilities which are to be subject to the jurisdiction of that Commission ? A. I should say the latter. You take these changes will come. Twenty-five years ago wireless telegraphy was regarded as a dream. But I won't detain your Committee with any further remarks. I would like to introduce Mr. Pouch, ilr. Pouch employs a number of men. He brings to our shores or his company is responsible for bring- ing to our shores the products of the nations of the world. Chairman Thompson. — Before Mr. Pouch is heard, Mr. Shus- ter desires to ask Mr. Lesler a question. Mr. Shuster. — Your specific problem here is one of the regula- tion of ferries ? A. Yes. Q. Is it your idea that by placing the municipal ferries of the city of ISTew York under the jurisdiction of the Public Service Commission you will find a greater relief than you do at the hands of the local authorities ? A. Isn't that a question of the personal equalization. May we not be placed under the broader plan? That the broad proposition, that we are a municipality engaged in financing and should we not be controlled in the same manner as any other set of men who go into the same class of financing? Q. Is the discrimination of which you complain arbitrarily im- posed upon you by the city or as a result of income operations? A. It is arbitrarily imposed. Senator Lewis. — You suggest two or perhaps three separate Commissions to regulate and control the various classes of public utilities. Is it your idea that each Commission should have State- wide jurisdiction ? A. Yes. I think they should have State-wide jurisdiction and be in the position of a court of appeals, — after all the other fellows have made up their minds what the law ought to be, they say what the law is. The problem that affects the city of Buffalo may not be the same problem in New York but the rule should be the same for both. Repoet of Joint Legislative Committee 35 Ohairman Thomrison. — Isn't the whole question here that this discrimination in rate discriminates in favor of one community of the Greater City as against another ? A. That is true. Q, It gives one better facilities than another ? A. That is very true. Q. Of course this discourages the building of docks in Staten Island in favor of building somewhere else ? A. Yes. There is no telling with the building of bridges, with the building of tun- nels, the city of i^ew York may have to take over the rest of the ferries on the East river at least and go into the ferry business wholesale. Assemblyman Eeinberg. — You cannot get any bridges or tun- nels in Staten Island ? A. I am afraid not. A. B. Pouch, of the American Dock Company, appeared before the Committee and made the following statement: I think Mr. Lester has given you the impression that this entire matter is a question of what I want. We are a small dock com- pany. The Bush plant, which you probably know about, is ten times more than our size. I don't want to address you gentlemen as President of the American Dock Line alone. I want to bring the question to you of a community that is up against a stone wall. I have represented the Staten Island Chamber of Commerce for about ten years at least, and I have been to all the various admin- istrations during that time and, being up against a stone wall, so to speak, I am delighted at this opportunity to get somebody to tell my troubles to, with the hopes that if we can get this regula- tion of the Staten Island ferry before the Public Service Com- mission or before anybody that will do something, I will have accomplished something worth while at least. Chairman Thompson. — You haven't taken it up with the Coroner and Board of Health yet, have you ? Mr. Pouch. — Not quite. They regulate the Interborough, you know. However, I am delighted at this opportunity to present the question and I would like to burden you with some of the details which will bring out the discrimination that exists. It is not solely a question of discrimination between the Dock Company 36 Investigatiox of Public Service Coiniissioxs on one side of the bay and the Dock Company on the other side. I own property, residential property, in addition to the dock prop- erty, that has nothing to do with the business part of it. Every person that conies to Staten Island has to contribute ; your grocer, your baker is tied down by this outrageous rate. ISTow, if the city of ISTew York finds it necessary in its poverty-stricken way to compel one set of citizens, because they happen to live on an island, to pay double and almost two hundred per cent, (if you are for- tunate enough to own a motor car) more than people in other sections of Greater !N"ew York living an equal distance away, and it seems to me it is a most unjust proposition. If you go down there in your car you will pay sixty cents for it. By the way, there is a private company to-day carrying an automobile from the foot of Broadway or Whitehall street to Sandy Hook, twenty- five miles, for the same rate that the city of ISTew York is charging to Staten Island. There is no justice in this discrimination, admitted by at least three Dock Commissioners, at least three Mayors and as many more Comptrollers. The present administra- tion has admitted it. They say, " Yes ; it is wrong." I have it in writing from the present Dock Commissioner. There is a dis- parity there that should not exist perhaps, he says, but his object seems to be in seeing how much he can reduce the cost of opera- tion, for which we thank him as taxpayers. But I would just like to have you bear this in mrad. Here is a municipality that is running two divisions. It costs no more for the captains, the oil, etc., on one than it does the other. The 39th street division loses money. Eecently it has been shown that the Staten Island division has made money, has paid its expenses. They charge five cents for a passenger. A man who is unfortunate enough to own a truck motors his truck down there and he is penalized double the rate. Senator Lewis. — How can this condition be relieved ? Mr. Pouch. — I don't know. I don't want to leave this question to my children to work out. I would like to work it out myself with somebody. We don't pay any extra however for educating our children on Staten Island against people who educate their chil- dren in New York. Now, some argument has been made about the distance. Thirty-ninth street is probably a mile shorter. Eepoet of Joint Legislative Commit'Teb 37 When the city charged for crossing the Brooklyn bridge and all the other bridges, the same little ten cent rate was charged against the Queensborough bridge, fifty per cent, longer than the Brooklyn bridge, and now it is there. So you see that you can help us by new laws or some way whereby we can go before a board or a board of men who will listen to this thing and take it up in a fair, busi- ness-like way and will not be influenced by one thing or another. I don't know what influences the Dock Commissioner that he don't recommend to the Board of Estimate that some change should be made. He talks to me personally, he writes to me per- sonally, he writes to the Comptroller, he writes to the Mayor that he is investigating the matter and hopes soon to be able to say something on the subject. Senator Lewis. — I wondered if you would like to file with this Committee some of the letters you have from the Dock Commissioner ? Mr. Pouch. — I should be delighted. I should like to file a copy of these letters (indicating). (Mr. Pouch offered in evidence several letters from the Dock Commissioner, which were incorporated and made a part of the exhibits. ) By Mr. Lewis: Q. Have you called the attention of the Dock Commissioner or any of the city authorities to the fact that you planned to attend a hearing of this Committee on this subject? A. I went to see Commissioner Smith on another matter. We are certainly regu- lated by them because we are under them and he referred to this very question. He said, " I suppose you have heard that some effort is being made to bring this whole question under the Public Service Commission ? " I said, " Yes, I expect to attend that meeting." Q. Did he express himself as to whether he would attend? A. Yes ; he said I would welcome any relief from the operation of the ferry. He don't like that at all. Q. What I was wondering was, Mr. Pouch, whether the Dock Department is in any way reluctant in coming before this Com- mittee and give to the Committee the benefit of its views on the 38 Investigation of Public Seevice Commissions subject ? A. I don't know whether they were specially requested or invited. Senator Lewis. — It would seem to me, Mr. Chairman, that it might be desirable to invite the Dock Department or the Dock Commissioner to attend the hearing tomorrow or at some con- venient time. Chairman Thompson. — We already have invited him and if he don't come, we will give him a stronger invitation. 111'. Pouch. — The arguments on this discrimination might be emphasized by comparing it a little bit with some privately operated railroad, operated as ferries. I could and would be glad to submit some figures to substantiate my argument. ISTone of the private roads make any discrimination. The average rate of these private ferry companies, a single truck, 30 cents, against Staten Island's 60 cents, and Thirty-ninth street's 40 cents, showing that even the Thirty-ninth street ferry that we are considering is even higher and it may be necessary under municipal ownership to have a higher rate. We are not trying to accomplish this to put money in our own pockets primarily. It is simply that we are burning with indignation to think that the city can, discriminate against one class of citizens because he lives in Staten Island and another citizen that lives in Brooklyn or any other place. We will willingly bow to any change in rate which does away with this unjust discrimination, providing you raise Thirty-ninth street ferry rates on a parallel with it. By Mr. Lewis: Q. Do I understand, Mr. Pouch, that the Thirty-ninth street ferry is operated at an annual loss ? A. Yes. Q. And your claim is that the Staten Island ferry has had the losses ? A. Yes. Mr. Shuster. — The company which you represent, is that a Dock Company, or does it own warehouses ? Mr. Pouch. — Both. They are leased to companies the same as the entire water front of Brooklyn and the warehouses are used for storing purposes. Report of Joint Legislative Committee 39 Q. What would you say as to the propriety and feasibility of regulating corporations like yours? A. I don't think you could unless you made it broad enough to cover hotels and apartment houses and any other building that leases space. The warehouses around the entire harbor here, it would be a very difficult thing to regulate them. Assemblyman Feinberg. — Is your company incorporated under the general law or a special act of the Legislature ? A. It was incorporated in 1872. The city gives you nothing at all, and you operate as a private company relying upon competitive methods for procuring business. Q. What is your idea, Mr. Pouch, as to what enterprises should be regulated? A. I am not in position to argue the general question. Senator Lewis. — You are furnishing facilities that is inci- dent to transportation, are you not ? A. Xo, sir. Q. Your dockage and your warehousing are used for the pur- pose of handling freight and passengers, are they not? A. We handle no passengers. Q. Well, freight ? A. The freight that is landed at our docks is divided about in this proportion. I give you this just to give you a general description of it. Of the dockage that is dis- charged at our wharfs by the various steamers that come there; it is distributed about seventy-five per cent, by railroad, rail- road lighters and railroad floats, and a very small proportion by Staten Island Eapid Transit private siding, seventy-five per cent, by tramp shipment, fifteen per cent, by trucks and ten per cent, goes into warehouses, not necessarily our warehouse, because you can see the Bush lighters down there any day taking merchandise over to Brooklyn for their customers and likewise we send lighters to Bush for our customers. So that the bulk of the freight that arrives there we have no voice in whatever. Eighty-five or ninety per cent, is trans-shipped without our say in any way, shape or form. We are simply a landlord so far as the shippers are concerned. We have no W9,y to favor custom- ers who wish to store in our warehouse. 40 INVESTIGATION OF PuBLIC SeEVICE COMMISSIONS Mr. Shuster.— With regard to your docks, you control the policy of the operation of those docks? A. Not after we lease them, no. Q. Tour company simply lease the docks ? A. We lease them to the steamboat companies. We rent them to the company. Q. So that you are the connecting link between the transfer of freight from Liverpool or Chicago or from any European port to any American city ? A. In a way, yes ; but we have no special control, as above explained. Q. The ownership is in your dock corporation ? A. Yes. Q. You operate these docks yourself or you may lease them to the steamship company? A. You might ovra your own railroad. Q. If so, and if you operate those docks in connection with your railroad for the delivery of freight from steamships, which perhaps you may or may not own, through your own docks and for your own railroads, to Chicago or Detroit or some other place, that would form a part of the transportation facilities to the general public, would it not ? A. If all those facts were realities, yes. They are not. Q. Was that any different than from the situation which may exist where freight unloaded from a steamship upon your docks, is turned over by you to a railroad corporation which stands its cars and its lighters for that freight, delivers it at Jersey City to the station or the train, and then the company which owns the lighters and the cars ships it perhaps to Cleveland, or Indian- apolis or Detroit or some other place ? Isn't your dock property a part of the transportation facilities just as much as the rail- road from Cleveland to Columbus part of the transportation facilities for the delivery of that freight ? A. No, sir. We have no more jurisdiction over that freight than I would over your Chairman, or as to whether you went to the theatre or whether you went some other place. AVe have no jurisdiction over that freight whether we rent the wharf — Q. You might have if you did not rent it ? A. No, sir. We have no interest whatever in the merchandise or the steamer and we cannot have. Senator Lewis. — There are a good many municipally owned docks in Xew York ? A. Yes. Repoht op Joint Legislative Committee 41 Q. Most of them ? A. Practically all. Q. How about South Brooklyn? A. There are at present two municipally owned docks. There are three now being built. Q. The rest of them privately owned? A. Yes. Q. These Bush docks are all private? A. Yes. You see I just wanted to explain about that. The Bush Company is the official agent of all the railroads and thereby receives all orders from the consignees for trans-shipment of that freight and he puts it into the cars and -floats it across the Bay. We are not the agent of the railroad. The Pennsylvania, the Lehigh Valley, the Jersey Central and the rest of them send their lighters to our place, whereby they do not send their lighters to the Bush Company because the Bush Company operates a float system, so that we have no voice in that trans-shipment. We have no float system. Q. Would you think it desirable that the jurisdiction of the Public Service Commission be extended to include the regula- tion of the transactions of the Bush Terminal ? A. I should not think so. I don't see what object could be obtained. They do not have a monopoly in any way, shape or form. They lost trade in competition with little warehouses. Q. Would you limit then the jurisdiction of the Public Service Commission to that class of corporations engaged in business which because of its peculiar character might be said to con- stitute a monopoly? A. I think that's the only way the public can receive any relief from monopoly. Q. You think such regulation is justifiable only for the pur- pose of preventing the existence of monopoly ? A. Yes. Mr. Shuster. — Do any of the railroads entering and serving at the ports own docks? A. Oh, yes. On Staten Island they own most all of the water front. Q. You know the policy of the State has been to include under the jurisdiction of the Commission baggage and transferring from railroad stations and at railroads stations and parcels and baggage. Wherein is there any distinction between handling baggage and transferring baggage in this matter we have been considering, that is, from a view of State regulation ? A. I should 42 Ia'vestigation of Public Seevice Commissions say baggage was a personal matter for personal comfort for the traveling public. Merchandise is entirely different. There ia no class of freight regulation that would govern a freight train with the same regulation that would cover a passenger train. Q. "WTierein is there any difference between the docking facili- ties and the sleeping or dining car from the point of State regu- lation ? A. The dining car and the sleeping car companies opposed State regulation upon the theory that they were really hotels on wheels and yet the policy of the State has been to place them under State regulation. Chairman Thompson. — ^T\Tiereupon, the State did place them under regulation and they immediately charged ten cents for bread and butter. Senator Lewis. — The trend of all these last questions is to ascertain your idea of just what should be classified as a public utility and come under the jurisdiction of the Public Service Commission. That is the purpose of all these questions. A. I think if it were given such jurisdiction as ILxing rates, for instance, that it might be very good for the warehouse, but very poor for the general public. I will cite an instance. The Balti- more & Ohio Eailroad have a very large warehouse at 26th street, some ten stories high and covers more than a block. I believe they operate, whether willingly or otherwise, under the Interstate Commerce Law, which provides giving thirty days' notice after making a rate. If the warehouses were compelled to do that, they would be compelled to fix rates that would not be governed by supply and demand. If we have some vacant warehouse room and a steamer is discharging at Bush docks or private docks, and we want that dockage, we retain our rate low enough to get it. The Baltimore and Ohio warehouse couldn't do that. Their rate has no elasticity. In other words, the con- dition existing among a number of privately operated companies impresses me that it is far better than any regulation, far better for the public than any regulation. Q. Tour answer is that in reference to docks there is suffi- cient competition to-day so that regulation is not required ? A. It is worse than sufiicient. I understand the city of ISTew York Repoet of Joint Legislative Committee 43 today is building three new docks on the finances of JSTew York. They have some fifteen or eighteen hundred feet of land in Brook- lyn between the JSTew York Dock Company and the Bush Com- pany and they are renting this to various parties at 5^^ per cent, of the gross cost of the land and the improvement. Can Bush or the ISTew York Dock Company or ourselves, who are compelled to issue bonds, 5 per cent, bonds, with the fee of the broker to sell them and pay nearly 21^ per cent, taxes and repairs and d'epreciation — can we compete with the city of ISTew York ? There is your competition with the city of JSTew York. Q. Isn't that a reason why all public utilities, whether munici- pally owned or otherwise, should be regulated by the Public Service Commission? A. I wouldn't say so. The city of ISTew York, in my opinion, sooner or later, will be compelled to operate the wharfs the same as Liverpool has been compelled to do. That Liverpool system is gradually getting around into England more and more every day. The commerce of the port of 'New York has increased 100 per cent, in the last fifteen years. Mr. Shuster. — I was very much interested in your illustration of the theory of the Baltimore & Ohio warehouses. As I under- stand it, their rate was fixed by the Interstate Commerce Com- mission A. Yes. Q. Isn't that a maximum rate, one beyond which they may not change A. No. That is the minimum and the maximum. They cannot change it without thirty days' notice. Q. If all were under the same control they would be subject to the same rules and general rates, would they not A. Yes. Don't you see what a disadvantage that would work to the public ? Q. What we are immediately considering is this. If you do not, the question comes down to what is a public utility, and shall all public utilities be regulated by the State. I think, Mr. Lesler, you have already stated in your opinion all public utilities should be regulated. ilr. Lesler. — Yes. sir. Senator Lewis. — I wondered if you wo'uld undertake to pre- pare and send to the Committee an opinion of your idea of the meaning of the word " utility." A. I will do the best I can with it. 44 Investigation op Public Service Commissions Me. Thomas Williams appeared before the Committee and made the following statement : I think we come before you, gentlemen, this morning, in des- peration, almost despair. We have gone officially endeavoring to obtain relief from the conditions that prevail in transfer to Staten Island. We have had sympathy from city officials. We have had words of coanfort from his Honor, the Mayor. We have had from the Dock Commissioner, who is my personal friend, and I think the best man who ever occupied the position, a frank statement that he was really at his wits' ends to know what to do. They are confronted with tremendous problems. They have got to face a budget of two hundred million dollars a year and it is very hard for them to be sympathetic when we go to ask for a reduction in the amounts that are paid to the city for service. I don't want this morning to ask for any thing of the kind. I do feel that we are entitled to justice and that there should not be discrimination between the different boroughs of the Greater City. I am engaged in a business in the borough of Richmond. I am obliged to do a great deal of trucking to the borough of Manhattan, the borough of Queens and to ErookljTi. It costs me $1.00 for every truck- load that I send of raw material — not the finished product, but the raw material, rough lumber — to these various places I am obliged to deliver it. If I was operating in any other borough, I would not have that expense and it would be appropriated by the city and it would be included in the general budget of taxation. I was asked some two or three years ago to appear before the Com- mittee on Taxation with relation to the valuations of property on the water front and Staten Island. He treated me very well. He said he could see no good reason why the water front property on Staten Island should not be assessed the same way as that in Queens and Brooklyn. It presents more natural advantages, but it presents a great many ordinary disadvantages, of which this nec- essarily is one. We are assessed and we pay taxes just exactly the same as the rest of them, but we don't get the same treatment, and this condition, gentlemen, raises a sense of injustice in the minds of people in Staten Island. I have no plan, but I come to you because you are a court of last resort. I simply appear before Repoet of Joint Legislative Committee 45 you to ask for relief. I wouldn't say lower these charges on the ferries. My plan would be to make everybody carry their own expense. If there was a bridge I would see that the interest, at four per cent., or whatever it might be, was paid by the traffic that used it. I would run the ferry boat in the same way. I have heard the question asked here if this problem was one of general application and I should hardly think so. I should say that it" was a problem that might be called a transfer one, and that, there- fore, the Public Service Commission may properly take cogni- zance of it. Senator Lewis. — As I understand your situation down there, you have one that competition cannot eradicate, because the city is doing business at cost or less ? A. It certainly is doing business. Q. For that reason you couldn't be answered by competition. You would be perfectly satisfied if such a regulation was had as would result in an increase in 39th street and such places as would be consistent with your rate. Is that your position, Mr. Williams ? A. Yes. I think one of our counsel, Mr. William E. Wilcox, has presented facts which you would be perfectly wel- come to take. I think he made some proposed changes which might be of interest to this Committee. Another matter has come up, and that is cur engineers feel that it might be advisable to have one real estate man, one engineer, one business man, in addi- tion to two lawyers. I talked with Mr. Wilcox about it and he said he thought it would be practically impossible to get them for the salary which you pay now. It seemed to me a suggestion that might be brought up for consideration. Q. Your idea is to notify these various organizations that we would be glad to hear them? A. I think that would be a good idea. I feel they might be able to give some suggestions of value. lOhairman Thompson. — The Committee will now take a recess until 2 p. M. 46 IlS-VESTIGATION OF PUBLIC SeEVJCE CoMMISSIO^-'S AFTEK EECESS Heebeet L. Caepentee, of No. 165 New York avenue, Brooklyn, 'N. Y., chairman Fulton Street Protective Leag'ue, appeared before tke Committee and made the following statement: Developments have been very rapid and effective in the last forty-eight hours, placing some grave responsibility upon the Board of Estimate and also upon the Public Service Commission, and suggestions which I made to Senator Thompson in Albany before are being substantiated very clearly by the evidence now shown in the- referee's hearings before Hon. Charles Brown in this litigation and also in the Corporation Counsel's report yesterday. Senator Lewis. — What is the nature of the hearing before the referee? A. The New York Municipal Railway Corporation entered into a contract with the city of New York for the dual system of transit in Brooklyn, which involved an expenditure by the city of about one hundred million dollars and an expenditure by the railroad company of about sixty-one million dollars. There were a great many ramifications of that contract and it is now pretty well toward completion. Some parts of the construction have so progressed that some of the subways and elevated con- nections are in operation and we have felt from the beginning that there were forces operating by the railway company which were so far superior to the forces which were at the beck and call of the people that the railway company in these contracts had acquired tremendous advantages over the city and that these advantages never should have been acquired by the railway com- pany if the Public Service Commission had exhibited reasonable and fair judgment in seeing that that contract was equitable on both sides, and we have felt right along that there are influences at work in the Public Service Commission which should be inves- tigated and eliminated. Whether those influences are the result of negligence or a lack of knowledge or too close an association with the railroad interests, why that this Oommitttee probably could find out, with its facilities for investigation, but we have enough information now to show that the approval of the Public Hepoet of Joint Legislative Committee 47 Service Commission to certain elements of this contract and their loose methods in approving action by the railway company under the contract as drawn is creating a loss to the city of millions of dollars which it never can recover and that must be stopped, and, as we see it, it is only going to be by the forces of this 'Com- mittee and, perhaps, Senator Brown's Committee on the question of finances of the city, that these conditions are going to be brought to light. The property owners are in such condition to-day that they are very fearful of the very, very serious condition, particu- larly the sacrificing of equities all over the city, and still this con- tract is allowed to go on. There isn't a question of doubt but that if the Public Service Commission continues their actions, as has been continued during the past year or more, this city is going to be burdened with charges of these many millions of dol- lars and the outcome is fearful, to say the least. Senator Lewis. — Do you want to make any concrete statements ? A. Yes. Of course I naturally would like to be represented by counsel before this Committee, but I thought it was better to represent the Property Owners' Association in the form of some suggestions, giving you such information as is of record now, up to this time, and then let you use your judgment as to the merits of the proposition. The litigation now pending is in the case of the New York Municipal Railway Corporation v. Kaplan. Assemblyman Kincaid. — -What is it, a condemnation proceed- ing ? A. Yes ; that came from an original proceeding of Kaplan against the New York Municipal Railway Corporation for injunc- tion to prevent the building of this great steel viaduct down through the main thoroughfare of Brooklyn. Senator Lewis. — What street is this ? A. Fulton street. This is the main thoroughfare. The dual contracts were signed and Brooklyn anticipated, as a result of this $161,000,000, that it was going to get some good transit and with good transit would come enhanced property values and developments all over the city, but when the property owners realized the situation that developed as soon as this contract work began, they saw only one very concrete point and that is very important for this Committee to bear in mind ; that the Brooklyn Rapid Transit interests have •18 INVESTIGATION OF PUBLIC SeEVICE COMMISSIONS for years and years absolutely dominated the transit conditions in Brooklyn. Their principal source of revenue has been from the highly congested surface lines which radiate from the center of Brooklyn to practically every section. Senator, I asked them to wait a little while when these dual contracts between the New York Municipal Kailway Corporation and the city of ISTew York were promulgated and approved, but the railway company seemed to absolutely dominate the situation from every standpoint, and a survey of the condition, as we now see it, shows that in every detail of that contract the railroad company, instead of perform- ing — I won't say the railway company, but I will say the con- tracts- — instead of performing their social function, which was to give the best possible facilities to the city and people, they have brought about congestion and completely ignored the rights of the people. The old Eapid Transit Commission of a few years ago provided, in laying out what was called the tri-borough system, provided the Manhattan bridge and a tunnel under Montague street, and that constituted what was supposed to be a tri-borough subway facility to carry the Brooklyn people into the borough of Manhattan. They terminated on Fulton street with eight tracks, but the idea was that ultimately the people of Brooklyn would have direct subway transit to New York. The first con- sideration was Central Brooklyn, and four tracks were provided by the old Eapid Transit Commission for Central Brooklyn. Instead of connecting Fulton street line, which was the main line of Brooklyn, into that subway, which was the intention of the old Rapid Transit Commission, the B. E. T. realized that if they did that thing that it would give such excellent through transit to its population of about 800,000 people, that it would detract from the profits of their surface lines for that entire section, and they started a people's campaign to try and prove that it was bad for Brooklyn to make it too easy to get to New York. Chairman Thompson. — What I think this Committee should do — I think the first bright afternoon we should take a couple of automobiles and cover that transit condition. The whole Committee never has done that. I was over there with the Public Service Commission. Report of Joint Legislative Committee 49 Witness (continuing). — The railroad company immediately exerted all their forces to conceal the fact that there were eight tracks built in Fulton street available for Central Brooklyn and, until very recently, nobody, except a few engineers and men in public life, know that these tracks were there built and finishecf; Senator Lewis. — Built by the railroad company itself? A. Built by the city. The railroad company, however, had pro- vided that the Fulton street line should be third-tracked, so-called, and their contract specifically stated that there shall be an addi- tional track built upon the existing structure, but provided for express traffic one way at night and the other way in the morning, but if you can just picture a fanlike device in Brooklyn. You have 800,000 people there and 3,000,000 here. They take this great subway facility with two tracks over the timnel and four over the Manhattan bridge terminating at this point and, instead of connecting Fulton street to this subway, as was the original intent and apparent purpose, they ignore us on this connection entirely. Another point I would like to call to the attention of this CoTnmittee; under the dual contracts the city does not participate in any way in the profits of the surface lines, but in the profits of these overhead lines and subways they are supposed to participate in one-half of the profits over all of the charges and operating expenses, and we know that these charges and operating expenses will not, for ten or fifteen years, equal the revenue. Q. You don't mean equal the revenue? A. I mean the rev- enues vidll not equal the charges. Q. Is it claimed there are any physical reasons why this Fulton street connection should not be made ? A. Why they made some, yes. Q. What were they? A. They were that if the Fulton street line would run into these tubes that it would congest them if added to the traffic coming over the Fourth avenue line system and the Brighton line but we have conclusively proven by statistics that is not true. Q. They have eight tracks there at Ashland place? A. Yes. If the Fulton street traffic was put in there with the other two 50 I^-vESTIGATIO^- of Public Seevice CoiIl^ssIO^-s lines then you probably would not untilize over 33% per cent, of the capacity of those tracks over the existing facilities and that within the nest three or four years. Q. If utilized they would be carried under the river, through the tunnel and over the Manhattan bridge? A. Direct to the Broadway subway and uptown Xew York for a five cent fare, direct transit from this populous section if the railroad com- pany's interests had not prevented it. Q. Your contention is that the carrying out of the plan of a through route from the section which you characterize as the eight hundred thousand section, without change into STew York, would have resulted in effect in the destruction or depreciation at least of the capital values of the surface lines ? A. I wouldn't say the capital value. It would reduce the profits of this line of the railroad company. Q. And the reason you feel is that the city does not participate in the profits of the surface line and does participate or will par- ticipate in the proposed new line? A. I assume that is prob- ably so. Q. And the city will participate after the earnings exceed the operating expenses ? A. Yes. Chairman Thompson. — Since these dual contracts have been signed and practical construction in relation to the system con- templated by these contracts has been fixed, is there anything that can be done to meet your criticism ? A. Absolutely, yes. And that appears in the communication which I have sent to ilr. !McCall and also Mayor Mitchel. The contracts provided specifically that the essence of the contracts was to give adequate service to the people of the city of Xew York. Senator Lewis. — And to the borough of Brooklyn ? A. All bor- oughs. Yes. And it provided that if at any time the demands of service required extensions, connections or changes in the existing system that the Public Service Commission shall have the authority to direct the construction of those extensions, con- nections or changes, with the approval of the Board of Estimate of the necessary funds to build them and upon further approval by the Public Service Commission and the Board of Estimate of Repoet of Joint Legislative Committee 51 the earnings and distribution of receipts if such additions or changes made such division necessary. So that gives them an absolute right under the terms of the contract to do what we have suggested that they do, to build an incline and connection at Cum- berland street and Fulton street surface tracks, without interfer- ing with the franchise rights of the road in any way, thus provid- ing an incline into this subway at Ashland place, which would be about fifteen hundred feet. That would cost the city about $900,- 000 and would then give this great population the service to which they are entitled. Q. What section do you call that ? A. It is what they caU the central section of Brooklyn. However, that is just a general idea that if the Public Service Commission was in a receptive mood to serve the people it would consider this very seriously, but the pressure of the railroad company against it seem^ to be stronger than the demand of the people for it. I have a letter yesterday from Mr. MeCall saying that the matter was in the hands of the engineers and they would report on it at an early date. That is just the detail. What I came for was this. When the dual con- tracts were drawn up the essential figures on which the forms of the contract were based were the estimated cost of construction of the subways and elevated additions ; the cost of reconstruction and the estimated receipts from the various lines. These figures were most important factors in determining on the equitable terms of the contract. !N'ow for some unforeseen reason these figures prac- tically came from the railroad company and were prepared and drawn and submitted by the railroad company. Q. And accepted by the Commission ? A. We will assume they were checked and accepted by the Commission as being reasonably correct. We now find that these figures if carefully investigated will be found to be so far wrong as to have created a condition which will give the railroad a tremendous benefit over the city permanently. We find that at the time when these contracts were ready for approval that several suits were brought by individuals through the agency of the railroad company to determine the con- stitutionality of the contract. Both the right of the city to enter into a partnership arrangement with the railroad company, a public service corporation, and also the right of the city to assume 52 I^-VESTIGATION OF PUBLIC SeBVICE COMMISSIONS certain obligations as to the charges of construction on railroad owned lines and various other features. These contracts were carefully scrutinized by the court and in an opinion given by Justice Blackburn it was clearly shown that inasmuch as the deficits in the operation of these new subways and elevated systems are not cumulative there is no evidence of unconstitutionality of the railroad company over the city. Q. What do you mean when you say cumulative ? A. I mean that if they spend a lot of money to build these subways and ele- vated and there are certain fixed charges created the earnings of the road perhaps will not pay the fixed charges. We are practi- cally sure now that the earnings of this road, in which the city is going to participate, will not be able to pay the fixed charges for fifteen years. If this year they only pay 75 per cent, that would be a deficit of 25 per cent. If that was eliminated. Judge Black- bum holds, there would be no constitutional advantage to either party, but if it was cumulative, if that 25 per cent, was charged up to the next year's deficit, which may have been 24 per cent., making 49 per cent., it gives the railroad company an unconstitutional advantage. Q. Well, how could they get these contracts approved? A. Because it was just a matter of whether they were cumulative or not. Q. Who was to pay the tax ? A. They were divided even if it was not cumulative. Of course if it was cumulative it had to be paid by the city. Subsequent to these decisions, which were the decisions asking the constitutionality of these contracts, the con- tracts went back to the Public Service Commission and to the Board of Estimate and they were changed to make the deficits cumulative. Q. How recently was that ? A. Just before they were signed. Q. About when? A. In February, 1913. Q. So that the contracts are in force signed and after the decision of Judge Blackburn? A. Yes. And these deficits by reason of the fact that the estimated receipts of these subways and elevated are going to be tremendously less than those esti- mated at the time the contracts were drawn, are going to make these deficits amount to a great many million dollars. Repoet of Joint Legislative Committee 53 Q. For wMcli the city has assumed responsibility? A. Yes. Q. Was this matter gone into at any previous investigation ? Chairman Thompson.- — It was not. Witness. — Then another thing which is a point that would bear very careful investigation — Chairman Thompson. — Whose action was it by which the city assumed to stand for the cumulation of these deficits ? A. That you will have to find either by investigation or I can get it and advise you. Q. Is there any reason for us to suspect that it was the action of the Public Service Commission, First District? A. I think there is. Q. Would it not have been the Board of Estimate ? A. I think that was equally reasonable. I think they are equally responsible. Senator Lewis. — I think you have made a very clear statement and it seems to me that it is very important and it strikes me that before this Committee goes any further that your counsel should' prepare and submit to this Committee a statement embodying the substance of what you have related to the Committee and that we have in writing and submitted to the Committee, and a copy should be sent to the Public Service Commission and to the Board of Estimate and an explanation asked. Do you think so Senator Thompson ? Chairman Thompson. — I think we probably should investigate it ourselves. Witness. — I wish you would. Our counsel is very reluctant to submit information to this Committee. Senator Lewis. — Isn't this statement likely to be met with the reply that if any mistake has been made it is an error of judgment? A. Yes. Q. That's the answer to be made isn't it? A. It is. The important point is what created that error of judgment. Q. Your idea is largely that when they do commit these errors of judgment they always commit them on the side of the railroad ? 54 Investigation of Public Service Commissions A. They do, consistently. I think from what I know that the railroad company and the Public Service Commission were very much concerned about the possibility of these facts being taken up at the previous investigation, very much more so than they were certain matters which were investigated. Q. Were these facts given to anyone at the last investigation ? Senator Thompson.— ISTo. The first I ever heard of it. A. You remember I sent you a statement ? Chairman Thompson. — I turned that over to the counsel A. In fact I had a talk with Col. Hayward and he said he had so much on the Commission it wouldn't be necessary. Senator Lewis. — Is my suggestion pertinent or proper ? Chairman Thompson. — I think it should be done. I, however, think possibly there are reasons why this gentleman might not want to undertake the burden of investigation, whereas, we ought to do that. The most we might ask would be to assist our inves- tigator. A. Yes. I think I can submit a brief which will outline the proposition as we see it. Q. You said there was a decision yesterday by the Corporation Counsel ? A. Yes. I will try and get a copy of it for you. We believe the Public Service Commission should have verified all of the estimates submitted by the railroad company as to the con- struction costs and estimated receipts very much more carefully than they did at the time the contracts were approved by them. Now we come to the point in question, which has been lecently decided upon by the Corporation Counsel, — that is the building of this line on Fulton street. There is the Pulton street elevated, which was the only means of transit at the time that was built twenty odd years ago. It goes up through the main highway of Brooklyn. The contracts with the railroad company specifically stated that in order to provide additional facilities they were going to add an additional track to this structure. Q. For express service? A. Yes. ISTow the original franchise rights and the dual contracts and the certificate of March 19, 1913, says that all construction, changes or additions shall be of the same type of construction as that authorized in the original franchise. Eepoet of Joint Legislative Committee 55 (At this point a representative of the Commissioner of Docks appeared before the Committee and Senator Thompson made the following statement:) Chairman Thompson. — This morning some people on behalf of dock owners in Staten Island appeared before the Committee and made statements before the Committee which practically- showed that the city was discriminating against Staten Island in its ferry charges to Staten Island from Manhattan in favor of South Brooklyn, substantially the same distance. That, for instance, a charge of $1.40 made for transportation of a truck from Manhattan to Staten Island, whereas the same truck could be transported by the city, on a city owned ferry, to South Brook- lyn for 70 cents and that there was sUch a discrimination as could not be met by competition for the reason that the business between Manhattan and Staten Island was done by the city at no greater than cost, possibly a trifle less than cost, but pretty nearly a paying proposition and business for the city from Manhattan to South Brooklyn was done for a great deal less than cost. The contention is that this condition results in a discrimination in favor of the people of South Brooklyn as against Staten Island. They ask as a remedy that we recommend that the ferries, municipal and otherwise, in the city of New York be brought under the jurisdic- tion of the Public Service Commission that they may be clothed with authority either to fix their rates of ferry, and they ask, sub- stantially, not that the Staten Island rate be reduced, but that the South Brooklyn rate be increased. ISTow, under the circum- stances, we are unwilling as a Committee to make recommenda- tions on this subject without having heard from the Dock Department of the city of New York. I might say that so far as the Committee is concerned they believe the people of Staten Island have presented a prima facie case. We don't ask you to appear right now, but when it is convenient for you. Auy time that will suit you best. Say to-morrow at eleven o'clock? A. Just on that point alone? Q. If you have anything else you think we should know, why we would be glad to receive it. A. Of course there are a great many reasons on this subject, which would probably take a long 56 INVESTIGATION OF PUBLIC SeEVICE COMMISSIONS time to tell, and if you like I will submit it in the form of a brief. I can have our Superintendent of Ferries appear before the 'Committee and possibly Commissioner Smith, or both. Q. Yes. I think that would be better. A. We have gone into this thing for the last three years and, if you wish, I will get up a memorandum of the facts and submit them to your Committee. (Mr. Carpenter, continuing). — The third track was to revert back to the city at the end of the term of the contract without rights to operate. In other words the city agreed that this third track would revert back to them at the end of the term on the contract. Q. What is that term ? A. Forty-nine years. Instead of doing as they specifically agreed to in the contract they have, as I say, spent in the road already done about $600,000 a mile in actual construction and it is estimated that about $350,000 a mile is a minimum estimate of the easement damages which will have to be paid, all of which under the contract is chargeable to the preferential fund, so that they are building the structure at a total cost of $950,000, directly in violation of the terms of the contract. Q. The city pays a part of the easement damages also, does it ? A. All of it. It is chargeable against the city's tax earnings. Q. Wasn't it the original intent and idea of the taxpayers to have subway facilities? A. Yes. We don't believe it has the money now but it was the intent and understanding of the people that this would be a temporary structure to handle the additional service. What they have done is to build a structure on the main highway of Brooklyn, giving them absolute permanent control of the highway and damaging property in the city to a tremendous extent. We saw that condition and we started an action against the railroad company to enjoin. That was the action of Kaplan against the IS^ew York Municipal Railway Company and an injunction was granted on the ground that the property owner has the right to protect his domain. Then the Eailway Company started an action entitled JtTew York Municipal Railway Company against Kaplan. That action is now pending before Hon. 0. F. Brown, Referee, and there have been a great many hearings and Kepoet of Joint Legislative Committee 57 a lot of testimony submitted and tliat testimony has developed, we believe, a system of gross misrepresentation of the railroad company to get these consents. It shows that they have used a plan or a system to get away with anything they can get away with. In fact some of the people who gave these consents after- wards revoked them on the ground of gross misrepresentation. The unfortunate part of this is that these plans come up to the Public Service Commission. They come to the Engineering Department of the Public Service Commission. That fact should be borne in mind by this Committee. For instance, these plans were approved although the Engineering Department should have known at that time that they were going to cost two or three times more than the contract estimates. They should have known all the details which are being developed in the court proceedings. There were never any proper hearings to the public by the Public Service Commission or the Board of Estimate. They changed the stations at will. They took stations on old lines which used to be about 250 feet long and added to them so that they were 550 feet long and of such a character as to put upon the most valuable business intersections terminals, mammoth stations there, which never can be used in twenty-five years. Q. What do you conceive was their intention ? A. We conceive their intention has been to spend as much money as possible, make the structure just as permanent as possible at the city's expense and to become their permanent franchise property, so that if the city buys it back again it has to pay all that money out again. Q. Well, all this has been done under the supervision of the Public Service Commission ? A. We don't believe those plans ever went to the Commissioners. We have every reason to believe that Mr. Turner, the Chief Engineer of the Public Service Commission and the Secretary of the Commission,— we believe that these two men have consistently tried, — Q. Who is Mr. Turner? A. He is the engineer of the Com- mission. He might better be the engineer of the railroad company 80 far as the people are concerned. Q. You think these plans were never examined by the members of the Commission ? A. This is only a belief. We believe they were never told anything about the details of these plans which 58 Investigation of Public Seevice Cojoiissions were approved by the engineer and if they were told, that they were grossly negligent and we do feel that the railroad forces have been very strong and persistent in the presence of Mr. Turner and Mr. Whitney. I don't wish to be libelous or cast any reflections on the integrity of these men. Another thing is they have a legal department and the legal department should have very thoroughly scrutinized the rights of the railroad company. In this case these plans were in direct variance with the franchise rights of the railroad company and they should have discovered these things. This is only one example of where the Public Service Commission allowed this to slip through another situation — that although the Eapid Transit Act provides that these plans for any construction which may encroach upon the rights of the property owners or shall affect the finances of the city, that these shall also be approved by the Board of Estimate at the time they are approved by the Public Service Commission and yet none of them ever were. This suit that I speak of was carried through and is now before Mr. Brown. We found a peculiar situation. We found tremendous pressure being brought to bear, first of vhich I will mention. It was divided into sections, one section from Sackman street to ISTostrand avenue and another section from Nostrand avenue to the Brooklyn bridge and for some peculiar reason they only approved the plans from Sackman street to JSTostrand avenue and I had our attorneys at an important hearing before the Commission, at which time we submitted a brief, a copy of which I have here, which goes very carefully into the legality of the matter and in which we oppose the approval of the plans of that section of the line. We also told the Commission that the matter was now in the hands of the court and asked that they make no approval of these plans until that action was deter- mined on. We have found a persistent determination on Turner's part to do anything that is possible to do to get these plans approved. Q. How long has this matter been under consideration ? When were these plans approved? A. The original plans or the ones subject to approval now? Q. The ones that have been approved. A. I presume these plans were approved in 1914. Report of Joint Legislative Committee 59 Q. When was that with relation to the date when the dual con- tracts were signed ? A. March, 1913. And the railroad company consumed that time in trying to get consents and they used all sorts of methods which we alleged are illegal and unjust in obtain- ing these consents and as it is, they have just got enough to give them a majority. They used every conceivable method and fraud in many cases. Davies, Auerbach & Cornell are our attorneys. Q. Who in that firm represents you individually? A. Mr. Hotchkiss represented us before the Public Service Commission. Mr. Toles and Mr. CuUen and Mr. Squires represent us in this action. Mr. Squires is an alderman who has had sense enougE to fight in our behalf. The matter developed until last week. We had a hearing before the Board of Estimate in which I told Mr. — Q. Let me interrupt. Do I understand that plans were approved by the Public Service Commission and the work of execution has gone forward without the formal approval of the Board of Esti- mate? A. Yes, sir. This is one of our allegations; makes the structure unauthorized and illegal. Chairman Thompson. — How did you find out they were doing that ? A. We woke up one morning to see this great structure on Fulton street. Q. It was perfectly obvious to you when you saw the first joint what the cost was going to be ? A. Yes. Q. How can you say the Public Service Commissioners knew anything about it ? A. I don't say that. Q. Wasn't it such a perfectly obvious thing, wouldn't it be per- fectly obvious to any ordinary intelligent man that they were extending the terms of the contract ? A. Absolutely. And that is the reason why we complained that they were negligent. Q. Then they must have known it? A. We will assume they did. Q. It is possible to establish the fact that they have not seen it ? A. They have seen it. The railroad company's influences in this situation are so diversified that they dominate the situation. We have had the greatest difficulty in even getting any legal talent to come out in the open in our behalf in this matter. The real estate men are appointed on condemnation commissions by the 60 Investigation of Public Service Commissions railroad company, so that it isn't any wonder that these influences are dominated but it remains, in my opinion, the duty of this Committee is to find out why it should enter into the policy of the Public Service Commission to the extent that it does. It should not. The primary purpose of this Commission, in my opinion, is to protect the interests of the people and that they have not been doing. Mr. Shuster. — In these matters that you have been referring to here, are they susceptible of legal proof that you have any knowl- edge of ? A. Yes. We can submit evidence in that action to show these facts. Here is an opinion which I would like to read to you. I know their ability to suppress anything because the Board of Estimate tried to find me yesterday to recover this copy of this Corporation Counsel's opinion because it was derogatory to its position and also the Public Service Commission. Before I read I want to say this, that I went to the Board of Estimate and told them that we had gone to the Public Service Commission to insist upon the conservation of the finances of the city in this matter and the preservation of the property rights of the people and we had no relief. Mr. McAneny asked me why and I gave him my opinion of the proposition, although I didn't think it would do any good, although I might say that the Engineering Department had persistently given evidence that they wanted this thing done and that it was through their influence that it had been done. I explained to Islr. McAneny that the courts had been appealed to but that the railroad company seemed to have a wonderful founda- tion, a successful control, so that every step we made they had an equally good one against us in the courts. We found that not- withstanding the competency of our legal talent that they were just a little bit better and we have learned to highly respect the legal judgment of the Brooklyn Rapid Transit. There is not a better organized outfit. I demanded from Mr. McAneny that this matter be referred to the Corporation Counsel and after a great deal of controversy one of the members of the Board of Estimate, Mr. Matherson of the Bronx, insisted that such action should be taken ; that there was something wrong and that we were right, so iilr. McAneny wrote a communication to the Corporation Coimsel. (Letter shown to members of the Committee.) Repoet of Joint LKcnsLArivE Committee 61 (Witness continuing.) Mi. McAneny said in open meeting that the Board of Estimate was not legally obligated to supervise the expenditures of money or the appropriations on these contracts or on construction. Mr. Shuster. — That is the interpretation by the board of their powers? A. Exactly. Q. In other words that they had no responsibility or no powers and that it was entirely up to the Public Service Commission? A. I claim that they had powers and duties and that they were very specific. Q. They didn't cite you any court authority? A. Absolutely none, except that they had not exercised any powers and that they had none in the matter. Senator Lewis. — When was this communication to the Corpora- tion Counsel? A. Dated June 29th. I insisted that our counsel confer and advise them specifically as to the points of law as we see them and give them the benefit of anything that had devel- oped. That (indicating Corporation Counsel's opinion) was handed to me from Mr. McAneny's ofiice yesterday. Q. You insist somebody attempted to suppress this yesterday? A. They certainly did. They wanted to get it back in the worst way. They scanned heaven and earth to get it back. They sent down to Wall Street to get it. I understand they criticized our counsel for letting it get out and yet it was a public record going as a communication from the Corporation Counsel to the Transit Committee of the Board of Estimate. Our counsel says it is a public record and there is no reason why it should not be given out. (At this point witness read to the Committee the opinion of Corporation Counsel Polk.) Now in view of these conditions we believe that the railroad company will do almost anything. They were told by Mr. Justice Benedict in the condemnation proceedings that if they proposed to go ahead in the light of the evidence already presented that the court might be inclined to insist upon a contract between the city and the railroad company to remove this structure after it was 62 Investigation of Public Service Commissions proven it was illegal. Now, we have seen this structure proceed up to this point, knowing that the Board of Estimate's approval of the plans was legally necessary. Q. That approval has been had ? A. It never has been received. It was never given by the Board of Estimate. Q. Not for any part of it ? A. No. sir. To answer that ques- tion briefly, the certificate and contract requires that the plans of construction shall be approved by the Public Service Commission and by the Board of Estimate. When the original certificate was submitted for approval, embodying this third-tracking, the rail- road company submitted the plan of Fulton street with three lines on it, giving no plan of construction or any idea of the extent to which this structure would likely encroach upon the street or upon easements. Q. Do you mean to say there were no detailed plans ? A. There were no plans of any kind ever submitted to the Board of Esti- mate and we believe the railroad company may have, with their highly efficient legal organization, plans in view which may enable them to go ahead and build this structure, believing, as they do, that the damages which will result to abutting property owners will have to be paid out of this preferential fund, so that if they can avoid the general legal liability as to the legality of the structure they don't stand to lose anything. We think they feel that the damages would have to come out of the preferential fund according to the contract and be paid out of the tax fund of the city. Q. Have you been advised that if one of them were to be allowed to commence construction tomorrow that any property owner, any abutting property owner, would be entitled to injunc- tion to restrain such work on the ground that it is a nuisance, not having been authorized and approved by the Board of Estimate and Apportionment? A. I have not been. We believe that a prop- erty owner would have proper right of injunction and that it would be granted. We believe an injunction would have been granted before. The reason it was not granted by the Supreme Court in a motion was, that the papers did not conclusively show that the structure was illegal and any order, if made, was granted the railroad company pending the determination of the legality of the structure, which proved to be a long and varied proceeding. Eepoet of Joint Legislative Committee 63 Q. You made one broad statement that I want to bring light on, Mr. Carpenter. Your counsel before the Public Service Com- mission made the statement that the Commission itself had powers to restrain this construction. Upon what is that based? A. I presume upon his legal judgment. Q. Upon any opinion that you know of? A. I think I can answer that by reference to the brief. I don't see any mention thereof, but I can get it by referring to our counsel. Q. Has it occurred to you, Mr. Carpenter, that it would be entirely proper for your counsel to come here and participate in this discussion or this hearing? A. I believe he would if he was called by the Committee. Q. The situation as I find it is as follows: The Committee is being asked to take some action for the relief of property owners in Brooklyn whose rights are to a greater or less extent already the subject of litigation in the courts. The only justifi- cation for the request to this Committee must be found, it seems to me, in the fact that the damages, injury to property rights, will have been accomplished before the courts will have reached a determination, as to the legal rights of the parties in the action. Now, the statement is made before the Public Service Commis- sion by your counsel that the Commission has power to restrain the action on the part of the B. R. T. and the Commission is asked to exercise its restraining power and has neglected to do so. A. Has neglected to do so or give us the reason why they have done so. Q. N"ow, it seems to me that in view of that situation it would be at least desirable for your counsel to appear before this Com- mittee and enlighten the Committee upon his view of the power of the Public Service Commission and use its restraining force in the prevention of the injury to property rights along Pulton street. Can you reach him by telephone do you think? A. I think so. Q. It strikes me if it were possible it would be feasible to get him here this afternoon. Mr. Shuster. — The testimony of the witness is based largely on the brief of counsel. Committee adjourned until 11 o'clock a. m., July 23, 1915. G4 LWESTIGATIOX OF PuBLIC SeEVICE COMMISSIONS JULY 23, 1915 The Committee Met at the Booms of the Bae Association, 42 West 44th Street, ISTew York Cominittee met pursuant to adjournment. Mr. Heebeet L. Caepentbe continued with his statement, as follows: I was going to take this up this morning as to why Mr. McAneny ought to be very carefully interrogated as to his gen- eral attitude in the whole matter. Senator Lewis. — You still insist that they tried to suppress this explanation? A. I absolutely do, and furthermore that a careful summary of that opinion does not substantiate Mr. McAneny's attempt to belittle the importance of Mr. Polk's opinion. I have read Mr. McAneny's letter and you will see that he asks specific questions of Mr. Polk and the most important one is whether the Board of Estimate has the legal authority and is legally obli- gated to take action to conserve the finances of the city and the rights of property owners during the process of this construe- tural work. He made a definite statement that they were not so obligated. We contended that they were and Mr. Polk's decision indicates clearly that the Board of Estimate has very important supervisory powers which they should exercise in conserving the finances of the city during the process of the completion of these contracts. That is what they have failed to do absolutely. Just because the terms of the contract allows the railroad company latitude is no reason why the city and the Public Service Com- mission should allow them to exercise that latitude to an unlim- ited extent. Mr. Shuster. — Are Mr. McAneny's statements of the inter- pretation of their powers a matter of record at some hearing? A. Probably are. because it was in an open meeting of the Transit Committee of the Board of Estimate. Q. When was that meeting held, do you know? A. It was a very heated argument and one which should bring out very Repoet of Joint Legislative Committee 65 clearly the lack of knowledge of Mr. McAneny and certain other members of the Board of Estimate as to their clear duty in the supervision of the expenditures under these contracts. But, answering your question — Mr. Polk says : " I am in receipt of your communication of June 29th." The meeting I refer to was held on the 28th, I should say. Q. That was at a meeting ? A. That was a public meeting of the Transit Committee of the Board of Estimate. Q. Last month ? A. Yes ; and upon the demands that he obtain legal advice of the Corporation Counsel as to his powers I had submitted to him a very extensive brief prepared by our counsel, in which it was clearly outlined both the legal duties and powers of the Board of Estimate in the supervision of the contracts in so far as the finances of the city are concerned, and also the importance of obtaining the approval of the Board of Estimate to any plans or changes approved by the Public Service Com- mission in connection with these contracts. That seems to be a point in law or the Rapid Transit Act which has been absolutely disregarded by both the Public Service Commission and the Board of Estimate. These plans were never approved by the Board of Estimate and there is no question or doubt that the affable asso- ciations which has existed between Col. Williams of the B. R. T. and Mr. McAneny have in some manner created in the mind of Mr. McAneny a great obligation of the city toward the railroad company, and that has gone so far that any opposition to Mr. McAneny's opinion is accorded with very little consideration by Mr. McAneny. Senator Lewis. — Mr. Carpenter, tell me this : You are using in your defense of the condemnation proceeding all of the legal defenses that you have and one of these legal defenses is the fail- ure of the Board of Estimate to approve these proposed changes. I assume you are using that as well as others ? A. We are. Q. What answer does the counsel for the B. R. T. make to that proposition? A. To answer that question would be to give a lengthy repetition of the testimony given at this condemnation hearing. Vol. 1 — 3 G6 Investigation of Public Service Commissions Q. You have raised that question? A. Oh, yes. Q. And have they made any reply to that ? A. They may have made replies, but we do not believe that they are valid reasons. We have shown that when the dual contracts were submitted to the Board of Estimate for approval, that a plan was submitted to the Board which showed simply an additional track added to the existing structure through this central section of Brooklyn. We claim very properly that that is not the plan of construction of the structure and does not give in any way the extent to which this road will encroach upon the highway or upon abutting ease- ments or gives to the Board in any way an idea of the estimate4 cost of this improvement. It gives them no idea whether it is as the certificate required, — whether it is an additional track to the existing structure or whether it is entirely new structure. So that it is very clear that the requirement of the law requiring the railroad company or the Public Service Commission to submit to the Board of Estimate the changed plan of construction was never submitted to them or never approved by them. Q. But they contend, I suppose, that this is not such an improvement as was contemplated by the act, which required the approval of general plan of construction by the Board of Esti- mate and Apportionment? A. I don't know. Not being an attorney, I don't know. Q. Any reason why you should not have an attorney in this matter ? A. I have given it a great deal of thought. Q. The question is what is the attitude of the B. E. T. in this litigation. Do they admit that the approval of the Board of Estimate and Apportionment was required? A. They don't admit that. We feel, however, that our contention before Judge Brown is very strong. Q. The B. K. T. attorneys are not on record, then, as to the effect of the raising of this legal question? A. Well, what do you mean? Q. In this litigation. A. In rebuttal to our contentions, yes, they are on record in the proceedings before the referee. Q. What is their answer, their reply, to your legal objection based upon the failure of the Board of Estimate and Apportion- ment to approve this change in the plan of construction? A. I cannot tell you that. It is on the record of the referee. Report of Joint Legislative Committee 67 Q. So that they did make a reply ? A. Yes. I might say that before this referee a great many important points have been raised that should have been considered in the Legal Department of the Public Service Commission and there is no evidence that they were considered before they approved these plans and specifications. Q. I suppose you expect to win in this condemnation proceed- ing ? A. We do. Q. If you win, that destroys the whole plan of the B. E.. T. ? A. It destroys their legal right to add in that road. Q. And an injunction would then issue to any abutting owner ? A. We believe so. Q. That being so, you are likely to get out of this litigation all you desire? A. That is a question whether we will or not, for the reason that the legal forces of the railroad have unlimited financial resources. This litigation is a very expensive matter and involves the expenditure of a great deal of money and the retain- ing of counsel that is expensive, and the funds of property owners in these times of depression are decidedly limited and although I wouldn't attempt to weaken our case to the extent of saying our funds are limited, we feel that the advantage is with the railroad company. We have most urgently placed this matter before the Public Service Commission in our brief of April 23, 1915, setting forth all the points in which we claimed the railroad company had not conformed with the law, pleading with them that this matter was most important to them in the interests of the public that they should utilize such legal forces as they had to determine in the interest of the public and to stop that structure where it was and use the legal forces of the Commission to see that justice was done. They have absolutely taken no action whatever to ascertain the rights of the railroad company to build. Q. Well, Corporation Counsel Polk in his advice to Mr. McAneny, contained in the opinion, recommended that no action be taken by the Board of Estimate and Apportionment now and recites the fact that the matter is subject to litigation, does he not ? A. He does, but unfortunately this opinion should have been written three months ago when this great and damaging structure was under construction. This court proceeding, which is slow and 68 Investigation of Public Seevice Commissions which is opposed by the most competent legal forces in the comity, has so delayed the determiaation of these facts from the couxt that the railroad company has practically with the acceptance and permission — at least, implied permission — of the Board of Estimate and Public Service Commission by reason of their exercising their authority to stop it — the whole condition has, allowed the railroad company to proceed and build this structure. Q. Where is your injimction? A. In the Knapp case we obtained the injunction on the ground that they could not proceed by the premises of Knapp, basing our contention on a case, I believe, that was called the Rothchild case here in New York, namely that they could not build by this man without acquiring these easements legally by condemnation, and the court granted that injunction. The railroad company then immediately moved that they be given an order for immediate possession on the insti- tution of condemnation proceedings, and in view of there having been no determination as to the legality of this road or the wrong- ful procedure of the railroad company, either by legal advice from the Public iService Commission or by any court proceedings, the court had nothing before them to prevent their giving immediate possession to the railroad company on their filing of a bond and our only proceeding then was to take action in the condemnation proceeding and submit an answer, in which we outlined aU the other legal objections to the road and compelled them to prove their legal right and that they were a legal road before they could condemn and that is the proceeding now pending before Judge Benedict. Q. Did you take an appeal from the order granting the right to immediate possession? A. We did. Q. Is that pending ? A.' I say we took an appeal. If I knew a little more about the procedure of the court, I would know what it meant. Q. You know what it means ? A. Yes, but we made no objec- tions to the order. We made a motion that the order he set aside. Q. The order was granted and entered, I assume, but have you served a formal notice of appeal ? A. I don't think we could under the circumstances. I think we had to get an order to set aside this order for immediate possession. Q. Is that an appealable order? Repoet of Joint Legislative Committee 69 Chairmaii Thompson. — It is appealable, but the Appellate Division has already decided it. I know I had a proceeding along these lines. It comes up under section 3300 of the Code. Senator Lewis (continuing) : Q. Wow, as I understand, then, Mr. Carpenter, you have no remedy, in your opinion, which will be effective in the prevention of this structure in that street? A. Not so far as plans have already been approved and contracts given. Q. Leaving that outside. There is no present immediate available remedy to prevent them going on and building that structure? A. Yes, there is. The structure on that street was divided and the contracts were divided into two sections, one from Sackman street to ISTostrand avenue. Plans were submitted and approved by the Public Service Commission. These contracts were given out to the contractors and the work has been practically completed, but the plans for the other section between ITostrand avenue and the Brooklyn bridge, which is the most valuable sec- tion of the city, have not been approved by the Public Service Commission for the reason that we appeared before them on April 23 d, 1915, at the hearing given for the approval of these plans, or a iew days prior to this date, and at that hearing there were a great many very prominent men present and at that hearing many of these important points which I have outlined as illegal, were brought up at the hearing and the Public Service Commission was asked not to approve these plans, and in this brief — it now appears the hearing was on April 14th ■ — at that hearing we agreed to submit a brief giving these points and on April 23, 1915, we submitted the brief. It was a lengthy brief, which was summarized as follows: To summarize we requested that the Commission hold a hearing and take evidence upon the following matters : First. — Whether the structure now being built upon Fulton street is authorized by the certificate granted by this Commission to the New York Municipal Railway Corporation, dated March 19, 1913. Second. — Whether the burden imposed upon Fnlton street by the proposed structure is permitted by law or by an act of this Commission. 70 Investigation of Public Seevice Commissions Third. — Whether the public interests do not demand, that the Fulton street tracks be changed into a subway and whether there is any good and lawful reason why this cannot be directed. I would like to say there that that is one suggestion as to the future, the building of a subway not being in any way a part of the present proceedings. Fourth. — Whether the structure now being built is unsafe and whether there is any reason why Central Brooklyn should be denied the subway facilities which the other parts of the city have. Fifth. — Whether the applicant has the proper number of con- sents of property owners and how they were obtained. As I mentioned yesterday, a great deal of evidence has been presented to show or to prove a systematic plan on the part of the railroad company to obtain these consents by any method whatso- ever and it is clearly shown that the majority of the consents obtained from property owners was obtained by gross misrepre- sentation, both as to the damage which would accrue to the prop- erty and as to the character of the structure to be built and the wording of the consents themselves clearly stated that it was to be the adding of an additional track upon the existing structure. Q. Has there been any effort, Mr. Carpenter, made to procure the information of the consents which were granted under mis- representation ? A. Between two and three million dollars in con- sents have been revoked and annulled by the most prominent men in the city, on the ground of absolute misrepresentation of facts by the railroad company. Some of these consents were revoked by the unanimous votes of the board of directors, showing that the fact was that they obtained their consents on a misrepresentation of facts. Chairman Thompson. — I think, Mr. Carpenter, we under- stand this situation now. I am very sure that we do. W^e cannot try this out to-day. We will have to look into this further and we would like both sides of it when we do. I think we can assure you, Mr. Carpenter, that we will look into this matter. D'on't you think we can. Senator Lewis ? Senator Lewis. — Yes, I think so. I think we ought to have a concise, detailed statement filed with the Committee as to just the Repoet of Joint Legislative Committee 71 respects in which it is claimed the law has been violated and as to who has been guilty of such violation. Chairman Thompson. — Yes. We would like that. Senator Lewis. — Then I should like to have a copy of that pre- sented to the people who are charged with having violated the statute and I would like these people given an opportunity to come in then and make their explanation. Chairman Thompson. — I think we can take that up after we hear from these people. I want to settle my own mind on some things. You represent the so-called Taxpayers Association of Brooklyn? A. Yes, sir. Q. And what is the name of it? A. Fulton Street Protective League. Q. How many members have you ? A. We have probably four or five hundred members. They are most representative people. Q. Are the members of the association owning property over there ? A. No, not all of them. They ai-e men of prominence in every activity of the central section of Brooklyn. Q. There are some property owners ? A. Oh, yes. Q. Where is their property located? A. Located all over the entire city of Brooklyn. There are two classes of property, prob- ably two hundred share property in the congested district and the others own property outside. Q. Now, you spoke of subway facilities for Brooklyn and said that you mentioned it merely as a suggestion, it being no part of the proceedings now pending — A. It isn't the desire or the inten- tion of the interests that I represent to insist upon the building of the subway at this time. The move is to conserve that which we have and prevent great losses both to property and to the finances of the city by the action of the railroad company. Q. Well, now. Isn't it a fact that there is a certain opposition among the business interests of Brooklyn against the subway for the reason that it would mitigate against the congested section and make their business location a little' less valuable ? A. I don't believe there are a handful of people in Brooklyn opposed to it. They are the owners of three or four dry goods stores in Brooklyn that don't want the Brooklyn people to go to New York. 72 IlVVESTIGATION OF PuBLIO SeEVICE COMMISSIONS Q. Because the more congestion they have, the more businesa? A. Exactly. What we are working for over in Brooklyn is develop- ment; in fact, we realize that about a hundred and fifty million dollars probably have been spent without success so far as the existing public is concerned, but simply developed the outlying section. I might state that we feel in connection with present difficulties in Brooklyn, we feel that the Public Service Commis- sion is responsible and we feel that Mr. McAneny of the Board of Estimate is gTavely responsible for his attitude in suppressing anything which was derogatory to the railway company and in refusing to take any action derogatory to the railroad company in acknowledging before the Board of Estimate that they had no powers to protect the finances of the city or the property rights of the people against the railroad company, which is an admission which will place Mr. McAneny in the light of serious criticism, particularly after Mr. Polk has clearly shown that they have the right and duty and it is a condition that is so because the funds of the people are limited. We have employed counsel and done the best we could but there is a limit. We feel that there is no influence more forceful in bringing these men to time, the men on the Public Service Commission and the Board of Estimate, other than a legislative body. Senator Lewis. — Will some of your clients come here and tell us their personal views on this subject? A. We will. Yes. They will have to, I suppose. As far as I am concerned, I oppose sub- poenaing anybody. Q. It should not be necessary? A. No. Q. If anybody has a grievance growing out of the misconduct or what they allege is misconduct, either of the Public Service Commission or of the Board of Estimate and Apportionment, it seems to me that it is up to those taxpayers or banks, represen- tatives of banks or trust companies, which you say are fearful of the destruction of the property upon which they loaned their money, to come here and specifically state to this Committee their ideas and reasons for their grievances. W^ill they do that ? A. I think some of them will. Hepoet oe Joint Legislative Committee Y3 Chairman Thompson. — It is fair to state Senator Lewis is voicing the sentiment of the Committee. We don't want to take sides in these matters. A. We don't want yon to. Chairman Thompson. — We are perfectly willing to take up any subject. I don't believe we are afraid of anything. I never saw any of them that were. We are here to be fair and we don't like to take the position of advertising something and if I say something I don't mean to make any criticism, but there are a great many organizations in the city of ISTew York that continu- ously annoy the Legislature. I say " annoy " differentially. There are organizations that are created for the purpose of paying a salary to some of the officers of the association. A. I agree with you exactly. Q. They keep on scolding so as to get publicity because they think that is the only way to get it. By publicity they get con- tributions which enables the organizations to live and pay the sec- retary a salary. A. We think so. Q. Of course your organization is not one of those? A. I think that is a good suggestion. This association is made up of the most prominent men in the entire borough. Its officers receive no pay and have all contributed very largely to bring to the surface facts which are beneficial to the general public. ISlobody has ever received a penny remuneration for their services and never will and they have all been liberal contributors in the litigation which is started in order to preserve the finances of the city. Q. I wanted to state that position because I didn't want you to misconstrue this Committee. A. I appreciate that. Chairman Thompson. — We will notify you later in the after- noon as to our plans, Mr. Carpenter. Some day next week we will take this up when we will notify Borough President McAneny to be present and we will also have no objection to notifying him if he wants to say anything to-day. He can come here to-day if he wishes. Senator Lewis. — T don't think I would to-day. I want to say before this matter is dropped and for Mr. Carpenter's benefit and the benefit of those whom he represents and that is this. My 74 Investigation of Public Service Commissions understanding of the purpose of the continuance of this Com- mittee in existence is that it was the intention of the Legislature to commit to this Committee the propriety of revising the Public Service Commissions Law. The primary purpose of this Com- mittee is to ascertain whether, if any, changes should be made in the law and to consolidate the law into a comprehensive, and, at the same time, simplified bill that will be readily acceptable and that will not be subject to constant attack and constant liti- gation. Now I don't believe that this Committee cares to have the idea go out that the work of this Committee is along the lines — well, I don't think that this Committee should under- take the investigation of the complaints of every person who comes before us. Should we do that, we would never complete the task for which the life of the Committee was extended. If there is a real situation which requires actual investigation in order that any abuses may be prevented and if it be made appar- ent to this Committee by the presence and complaint of respon- sible taxpayers, whose interests are being jeopardized, and if these competent and prominent taxpayers see fit to come here and present to this Committee the facts upon which they seek action by this Committee, then I think we should hear from them and I think we should then hear the explanation of those who are responsible in official positions for the present condition of affairs and it was with that in mind that I suggested to you that the representatives of your banks and trust companies and the owners of the real estate, whose interests are likely to be injured by this construction of which you speak, should come here personally and lend to this Committee the weight of their influence and their standing and their personality, before this Committee should go any further into' this matter. If they are willing to come I should say that it is the attitude of the Com- mittee to hear what they have to say. I start with the proposi- tion just as old as any in our law, that a public official is presumed to have done his duty and the burden is upon those who contend that he has not to substantiate their contention by evidence. Chairman Thompson.— We will fix the time later in the day and let you know. A. Senator Lewis, I am very glad you make Report op Joint Legislative Committee Y5 that statement, but my purpose in coming here yesterday was not to give the information which I gave, but simply to bring to your attention that there was evidence now being given in a careful court proceeding to show negligence on the part of both the Board of Estimate and the Public Service Commission and to show that these bodies were waiving responsibility at the very time when the lack of action by them was creating a continuance of this condition. Senator Lewis. — JSTow, Mr. Carpenter, the taxpayers will be protected by the court. A. Very slowly. Q. Now if this Committee is to be asked to interfere at this time in a situation which is at present the subject of litigation in the courts, then there should be some substantial reasons advanced for such request. Q. Should this come voluntarily from these people or at your request? A. They should come not at our request, but because these people feel that they are entitled to have the services of this Committee in bringing about an accurate understanding and knowledge of the truth. A. How are they to know what the duties are until you tell them. Q. Well, you have been here and you represent them. Chairman Thompson.- — I don't know of anything further on that subject. A. Then I will await further developments. If our attorneys submitted to you a copy of the brief submitted to the Public Service Commission and previously referred to by me to-day, would your Committee care to accept the brief ? Chairman Thompson. — Surely. We want to give you every opportunity, — anything you thinlc ought to be brought to the attention of the Committee. I will fix the day for you next weel?. Assemblyman Baxter. — Anything you have, bring it along. A. Thank you. Benjamin C. ]\rARsii, of ]Vo. 320 Broadway, appeared before the Committee and made the following statement: I understand that the purpose of this Committee is to revise the Eapid Transit Act and I want to go into the situation. 76 Investigation of Public Service Commissions Senator Lewis. — Don't misunderstand us. I don't think it is the purpose to revise the Kapid Transit Act. It is the purpose of the Committee to revise the laws relating to the operation of public utilities. Chairman Thompson. — This is a part of it. A. I want to take up conditions obtaining here a little but ajid in relation to the investigation which you are making and make several sugges- tions, some of them I have in writing and will submit them to you to incorporate in your record if you wish. (Witness then offered typewritten statement to the Chairman, which was accepted and made a part of the record, being marked Exhibit A.) In the first place it is really illogical to have this Public Service Commission appointed by the Governor subject to confirmation of the Senate because it is a local matter and should 'be appointed by the Mayor and become a part of the city government. Of course we elect the Mayor and we can get the recall on him before very long. Then we have the Board of Estimate elected by the city who have to act on franchises and also we have the Public Service Co mm ission acting too, but they don't act in the slightest degree to the people. That is another point that I want to make and that is the Public Service Commission and the Board of Estimate cannot be trusted. No franchise should be granted in ISTew York city except after a referendum by the people. The dual subway contracts were worse than anything the forty thieves ever saw fit to do. I don't say that the gentlemen who signed them were, but all the results were the same. I was talking yesterday with Mr. Delos F. Wilcox. He said he would come. He was chief of the Bureau of Franchises at the time these contracts were made. He is now Deputy Commissioner of Water Supply, Gas and Elec- tricity. I claim the financial interests control the Public Service Commission and the present Board of Estimate absolutely. Forty thieves would blush before they did that. Chairman Thompson. — Well, the forty thieves were asleep up in the hills in some way, weren't they ? A. No, worse than that; they were living in Manhattan. Eepoet of Joint Legislative Committee 77 Q. Well, your Board of Estimate is elected by the people, is it not ? A. Yes, but I say that we cannot trust the Board of Esti- mate. Of course, they get campaign contributions from the gentlemen they serve. Chairman Thompson. — I am going to make my position clear. I don't believe the city of New York has the right to appoint men to come down and take your State money and build purely munici- pal improvements with it. I think you think the city should have such a right. I think your municipal improvements should be constructed by men appointed by your municipality. A. That is, responsible to the men we elect ? Q. Yes, sir. And I have stated that heretofore, but the ques- tion that came up then was if you take that power from the Public Service Commission appointed by the State, what are you going to do with it ? Here you are in the midst of construction, spend- ing millions of dollars a year, about seventy-three million a year, I believe. You have entered into contracts under dual contracts that have been complicated to some extent. Is it a good idea to trade horses when you are crossing the stream ? A. You evidently thought so because you kicked out Mr. Maltbie and put in Col. Hayward. Q. His term expired and I didn't fix his term then. A. Oh, the people well knew you thought it unwise and I assume you did not vote for Col. Hayward's confirmation. Chairman Thompson. — Oh, yes, I did. I advocated it on the floor of the Senate. A. Then you are not logical. You put out Commissioner Maltbie, who knew the situation and followed the contracts from the beginning, and put in a man who — I am not impugning his ability — but he was not in touch with the situation. I don't think it is wrong to swap the horses. I don't think you have to swap. I think it should be turned over now, this whole thing, all this subway construction before it becomes worse than it is, if that is possible. There is a complete engineering force that could be turned over that costs over two million dollars a year to maintain. 78 Investigation of Public Seevice Commissions Q. Do you know that the cost of the engineering force of the Public Service Commission is $2,300,000 a year, which is more than double the cost of the engineering forces of the Panama Canal at the present time ? A. Well, in any event, you have got a complete organized force that can be turned over in its entirety to whoever takes charge of this construction for the city and I figure it can be turned over without delaying the work one week and without costing anything to the city. Chairman Thompson. — Who are you going to turn it to, because even the Mayor stated on the stand that he didn't think at the present time it could be turned over. He thought it should be, but not now. A. Well, let me say that there is now another big proposition pending, the South Brooklyn Marginal Railway and indications are very good that it is going to be the same sort of a steal as this dual subway system. Chairman Thompson. — I didn't vote for that. A. The storj that a former Senator is going to be a big beneficiary doesn't increase my admiration for the deal. He has a record for legis- lative turning. That is Senator Reynolds. Senator Lewis. — Mr. Chairman, it strikes me that if I would be consulted on this proposition that it might be limited to con- crete propositions that will help us to cure this legislation. I don't myself care to sit and listen to Mr. Marsh's reflections upon public officials and intimations that they have been guilty of mis- conduct if Mr. Marsh has no evidence. If he has evidence of any misconduct I think this is not the form in which charges should be made. If Mr. Marsh has any propositions which is backed by evidence, I think we will be glad to have them. Chairman Thompson. — His proposition goes to that ? A. I want to make it clear that I have made this statement understand- ing that I could. I think you should limit yourself to my pro- posal. The Committee is not going to tell me what to say. I am here to make my own statement, unless the Committee don't care to hear. Chairman Thompson. — In the second place Ave are going to hear you anyhow. A. New York State should have the power Eepoet of Joint Legislative Committee 79 to terminate perpetual franchises. We had, when the dual subway system came up, this proposition. I am going to make it clear that this is a situation which cannot be helped, it seems to me, by the Legislature in any way except by granting us home rule and power to deal with these local questions ourselves. Wow, this statement that I submit to the Committee I believe explains my views in detail and I hope will be of value to you. There are some quotations in it from Mr. Wilcox and I trust, by the way, that Mr. Wilcox will appear before your Committee and state his views personally. Assemblyman Baxter. — What is your particular objection to that marginal railroad? Some one man going to get the best of it ? Is he the only man ? A. No ; there are several others. Q. Is it going to benefit the people some ? A. It will benefit them some. Herbeet W. Smith, of Larchmont, New York, appeared before the Committee and made the following statement: I appear here not in the same capacity that I appeared in Albany at the time the Baxter Water Bill was passed, because at that time I appeared officially as counsel for the village of Larch- mont in Westchester county. I have been succeeded by Mr. Rogers as counsel to the village, having been so succeeded on July 1st. but nevertheless I am exceedingly interested in the proposition of placing private water companies under the jurisdiction of the Public Service Commission, and I appear here as one of the local committee of the Larchmont Welfare Society" which has already committed itself in favor of legislation along these lines. We have availed ourselves of every opportunity up in Larchmont in respect to our water service. We feel that we have been sub- jected to too high rates, if not excessive rates, and for a long time we have been eager to have the private water companies placed under the jurisdiction of the proper commission. Water is about the only remaining commodity which is not subject to supervision under our laws, and I think it is the most important of all com- modities and should have been one of the first to have been brought under the eye of our Public Service Commissions. It has been 80 Investigation of Public Service Commissions a subject which has refteived a great deal of interest in Larch- mont for a long time, and a few years ago our board of trustees appointed a committee and they made a very interesting and exhaustive investigation and made a report which we will submit here and the recommendations of the chairraan and the recom- mendations of that committee are set forth in that report. The State has committed itself to the policy of service and there is no doubt that this has got to come about soon and should come about immediately. Eepresentatives of the village of Larehmont and other municipalities in Westchester county appeared in Albany during the procedure of this bill before the Governor in favor of it. Assemblyman Baxter. — Yes ; I remember you were there. A. We were interested in the matter purely from the standpoint of citizens. They should receive an adequate supply of water at reasonable rates and our only resort is to seek relief in courts, which is impossible to the ordinary consumer. Our rates in Larehmont at the time these investigations were made averaged $50 a year for each consumer. Q. Fifty dollars a year? A. Yes; and since that time that this report was made the Larehmont Water Company saw fit to increase the rates. Q. Do you mean that each individual member of a family, or do you mean each house? A. Each house. Q. Each consumer of water? A. Each house paid on an average of $50 a year. Q. Tell me what is their schedule of rates, per thousand rates ? A. Their schedule of rates under the old were $1 for the first 25,000 gallons, payable in advance. You paid $25 in advance at the installation of the service. During the balance of the year, after the 25,000 gallons of water had been consumed, you paid at the rate of 35 cents for each additional thousand, but under the rates which were established about two years ago the schedule which increased the rates, the first 25,000 gallons was mentioned at $1 at the thousand, the second 25,000 gallons was increased from 35 cents to Y5 cents and the next 25,000 gallons, I believe, 70 cents, and I aggregated the center point either 50 or 55 cents Report of Joint Lkgislative Committee 81 a thousand as the minimum and many of us, however, by careful use of water do not get advantage of the minimum rate, and in addition to that we have been sulfering somewhat from the purity of the water. That I understand is up to the State Board of Health. Take the structure of the Westchester and Boston rail- way, and since it has been constructed we have been seriously threatened. This railway has gone right through the water shed and the purity of the water was greatly impaired during that period and it has been the subject of consideration by the State Board of Health for some length of time and reference is made frequently in this report as to the condition prevailing on that watershed. I think, however, conditions are somewhat improved, but that is, perhaps, outside the provisions of the Baxter bill. Q. What is the source of supply for the Larchmont water works? A. The geographical location you mean? Q. Some lake, or what ? A. They have constructed a natural reservoir up there which is up from the hills about twelve or thirteen miles north of Larchmont. Q. I suppose they would pump it from the reservoir to the mains ? A. I think it comes dovm through gravity. Q. Do you know what their investment is ? A. You will find out from the report which the chairman of the investigating com- mittee will speak on to a certain extent. I am afraid it is not very complete. Q. Of course you see, Mr. Smith, there may be circumstances where the rate may not be extravagant. I don't think in this case it is. We can imagine localities so remote from a good, adequate source of supply that the transportation of water from that remote source to the point of consumption could incur a large investment in the original installation. A. That is very true. We are in a very unique position. It seems that the Larchmont Water Company claims an exclusive franchise from the village of Larchmont, and it seems the village received a deed from the old company on incorporation of the streets, subject to the tights of the Larchmont Water Company. The village accepted this deed with that provision, and then again you may find some infor- mation in the report with respect to the issue of the bonds. Mr. Murray, of the water company, was asked to appear before that 82 Investigation of Public Skkvice CoMitissioNS committee and answer certain questions. Other questions lie refused to answer. 1 want to merely state that most of tJie municipalities in West<_'hester county, I am sure, would have been glad to come here to-day had we had means of notifying them in time. I ^^'as unable to got them yesterday. We are all very anxious for such supervision by the Public Service Com- mission. AA^'e think it is needed, and it has become imperative, and we are subjected to hardships at the hands of the water com- panies which could be cured were they placed under such supervision. Q. Ts there any question about the adequacy of the supply t A. There was two or three years ago during the dronght. but there seems to be a very ndei]uate su}iply. Q. What is the population of Larchniont i A. It is about two thousand and it has a very big summer population, nearly double that. Assemblyman Baxter. — I might state that the representatives of most of these small jilaccs when they appeared at the hearing were in favor of the bill. AA'iLiAAM J. MoEAN, President of the Larchniont Welfare Society, one of its leading organizations, appeared before the Conunittee and made the following statement: This water report is purely a local grievance, I wouldn't dai-e to submit it to you except tliat it contains two or three suggestions that might interest vour Comniittco. Our local srriovanco, of course, you are not interested in particularly. You must view the situation from the standpoint of the State i Our local griev- ance is sutticiently set forth in the report. That is not tlie point I think on two occasions the Legislature has fairly well committed itself that it wishes to include private water companies and it would seem to me the only thing left to do is for those people interested in the extension of that jurisdiction to aid the Oommjs- sion in some particular suggestion. TS'ow the bill was vetoed by tlio Governor for one reason and then the ^iayor found another I'cason, neither of which reasons seems to go against the principle that the law ought to be extended. Now I think you will tiud some data in the report which 1 have submitted as to mv reasons for the Report of Jotnt Legisi,ativk ('Ommittiok 83 extension of this law. One point I would like to liriiij^' out, wlicn we were ffoio^' ahead with this little grievance committee wo dis- covered in a little village which was being supplied by a concern known as the luterurban Water Company that the law quite specifically states now that an aggrieved community could go into court im the question of rates. Q. On the question of rates? A. Yen. Judge Guy in such an opinion says that the law requires the water ctompanies to furnish pure and wholesome water at reasonable rates, quoting section '21 of the Transportation Law. In this ])articular case the president of the villager I refer to brought his suit and he got the prelimi- nary injunction against raising the rates, which they threatened to do. The Supreme Court granted the injunction and then he tried to interest his friends and neighbors to contribute a fund to carry on the litigation. The company appealed to the Appellate Divi- sion and the Appellate Division very pi'omptly knocked out the injunction. They said, No, you will have to pay this increased rate during this litigation, but if the respondent is ultimately successful and proves that the increase is unreasonable, that the company would be obliged to return the money. Well then they tried to get ready for trial. The Appellate Division directed that the case should be tried at the succeeding term of court and unless it was, the complaint should be dismissed. Then they started to get ready for trial and they found all the facts and records of the company. The company seemed very much inter- ested and it cost five or six hundred dollars to get ready for the trial. There were only a few who were willing to aid the plain- tiff in the preparation of the case and the result was that the com- plaint was dismissed at the following term because they could not got ready. They could not I'aise a su,in sufficient to hire experts on real estate, giving valuations, etc., and besides that had to pay a big bill of costs. Senator Lewis. — I suppose you moan by this. Air. Moran, that the State should bear the cost, you mean the State should provide a tribunal vested with sufficient power to take an investigation with somewhat less of the formality that would prevail in a court of law? A. At least that and maybe a little further. It may be that I don't know this present organization of the Public Service 84 Investigation of Public Seevice Commissions Commission but, for instance, if little Larchmont should go before the Public Service Commission and say we would like to have you investigate this situation, we want your engineers to give all the necessary aid. I understand the Public Service Commis- sion has not — Assemblyman Baxter. — That is just what the Public Service Commission is for, the electric light, telephone and railroad. You simply file your complaint and they look after it. A. Now on the question of experts on valuation of water lines and real estate, etc., I thought I could estimate on this class of intellect, but I found it vastly more costly when you get into court at the hearing. The cost of collecting the necessary fund in order to hire expert talent, especially engineers, would add to your water bill for the next three or four years. Chairman Thompson. — You found that expert talent was more costly than lawyers ? A. Yes. I don't think it is necessary to argue with you that you should extend the jurisdiction. We heard your Committee was in session and Mr. Smith and myself took the liberty of coming here and appearing. Chairman Thompson. — We are very glad you did and we wiU surely give this matter our careful consideration. A. At the end of that thing there is a schedule that we gathered together with some care and put the figures in order. It gives a little informa- tion. We asked for data from a number of villages about our size and they all sent it down and you would be surprised to see how eager they were about it. Some of them wrote to know the result of our investigation and what we did about it. The whole State was vitally interested in it. Assemblynaan Baxter. — It shows that they were interested. A. Of course that kind of stuff is not very good evidence, because any one village is quite different from any other village. Me. Smith again appeared before the Committee and made the following supplemental statement: I might state that the village of Larchmont has recorded itself in favor of this supervision and have no doubt would have appeared here to-day and recorded itself with your Committee Report of Joint Legislative Committee 85 had the village attorney been in town. lie is away on his vaca- tion. There is a new Board of Trustees in Larchmont but they all favor it; in fact, there is a united sentiment for it in Larch- mont. Let me say another thing. The water companies should have a fair deal. It struck me that in the rather careful reading of the Baxter bill last week that the Legislature should have brought to their attention more particularly two or three addi- tional propositions along these lines. Under the Baxter bill the present water company was given virtually a monopoly, subject only to the Public Service Commission giving a certifiicate of necessity for allowing some other company to come into the vil- lage. It may be that was one of the objections to the bill. jSTow, that question is involved largely in local conditions. You take our conditions up in Westchester county. The city of JSTew York has come in and taken all we have, giving back to us under the statute the right to tap the Croton mains for local use at a rate — Q. Under certain conditions? A. Yes. I venture to say that all our little local plants, in view of the rapid increase in popu- lation up there, are going to soon prove quite inadequate and in view of this condition, Mr. Chairman, even if the Coromission may be given the power to exercise control, isn't it fair to assume that they will exercise that power with discretion? Chairman Thompson. — In the interests of the people of the community ? A. Yes. Chairman Thompson. — It depends upon the calibre of the men on the Public Service Commission ? A. No doubt of that. Chairman Thompson. — You cannot legislate to make men honest. Chairman Thompson. — I believe there is a representative of the Commissioner of Docks present. Senator Lewis. — I think that if the villages of this State were to prepare and submit to this Committee in as brief and as con- cise form as possible a schedule of the rates, I think each schedule should contain, if possible, a statement of the capital values rep- resented by stocks and bonds of the respective companies. I think 86 Investigation of Public Service Commissions that schedule should contain also an annual statement, if it can be obtained, of the gross annual earnings of the companies and a schedule of the rates charged. Operating expenses, of course, is a question that can be ascertained reasonably close. A. Many of these are municipally operated. Q. A good many of them are private companies. A. Here is a list, for instance, that contains a partial list of private and municipally owned water companies. (Witness indicates.) Senator Lewis. — ISTow, that is a very excellent document. Chairman Thompson. — We will now take a recess until 2 o'clock p. M. AFTEE:^TOON" SESSION Meeting called to order by Chairman Thompson at 2 o'clock p. M. R. A. C. SmitHj Commissioner of Docks of ISTew York city, appeared before the Committee and testified as follows: Senator Lewis. — At the hearing of the Committee yesterday, as I said a few minutes ago, the purpose of the Committee is to ascertain what public utilities should be included under .the regu- lation of the Public Service Commission and it has been suggested that ferries and docks are proper subjects of regulation by the Public Service Commission. In support of that suggestion Con- gressman Lesler and Mr. Pouch and Mr. Williams, of Statem Island, appeared before the Committee to tell us of what they called the discrimination that exists in the operation of the municipal ferries as between Staten Island and South Brooklyn and Thirty-ninth Street ferry. From the statements made it appears that the charge is exactly double for the transportation of loaded trucks from Manhattan to Staten Island and return, double the charge made for transportation of the same truck for substantially the same distance to the Bush tei-minal. The Com- mittee, I thinlc. Commissioner, would be glad to have any expla- nation that you would desire to present. A. You said ferries and docks. You mean the entire dock situation of the harbor? Report of Joint Legislative Committee 87 Q. I don't think so, Commissioner, but as to this particular suggestion, on the part of Congressman Lesler and his clients, it deals only with the ferry charges. A. I understood you to say ferries and docks. Q. Well, the Committee is considering the propriety of includ- ing both ferries and docks as subjects properly for regulation by the Public Service Commission. A. Now, about two years ago — to be exact, I will give you the dates — at the instance of the Merchants' Association a hearing was held at the Dock Depart- ment on July 7th, 1914. At that hearing there was present every employee or every manager of the ferries of the entire harbor. This hearing was held pursuant to a statement which I made then. This hearing was before me. March 18, 1914, the Mer- chants' Association handed me a document stating that a com- plaint had been received from one of their members with respect to charges charged by railroad ferries across the North river. That the rate on an automobile truck is greatly in excess of the price charged for a truck drawn by horses. That the rate one way is sixty cents against twenty-five cents for a horse truck. Subsequently on June 15th the Merchants' Association suggested that a hearing be held. Accordingly notice was sent by the De- partment to the representatives of the various ferries and the Merchants' Association or its members interested in the matter and the public hearing was held at the Commissioner's office, Pier A, July 7, 1914. I don't know that you care for me to read for your records here the entire proceedings of that hearing, but I should be very glad if you desire it to have a copy of this par- ticular hearing filed with you. At various times this matter has been very carefully under my consideration, having held con- ferences with the various parties interested and with our various officials of the Department iintil we reached the latter part of the year 1914. On February 9, 1915, we held another hearing, at which all the various representatives of the railroads were present and at that hearing it was brought out very clearly that inasmuch as the Erie Railroad of its own accord had undertaken to inaugu- rate a new manner or a new way of fixing the rate by weight that we should await the result of their venture. It was demonstrated at this hearing that we had better wait until the Erie Railroad 88 Investigation of Public Service Commissions had completed a full month's operation and I might say that at that time we met with the same proposition that we meet here and that is the question oi the rate and on what to base the charge — should it be by weight or by measurement and I have discussed that with the men "ivho have been in the business for years and years and I have not felt secure that I can make an answer that is satisfactory and so that I can make a report to the sinking fund. As you all know the automobile is changing the situation very gTeatly. The trucking business, as I understand it from the records, which you may also see, has been greatly increased be- cause the haul of the truck today is by three horses, all big horses. The trucks are larger and all of that was shown in the hearings. That is, therefore, a question that must be handled with a great deal of care. I didn't feel warranted in making any recommenda- tion for any change in rates until we had thrashed out and reached a conclusion in reference to the unit of measurement, either by weight or by measure or some other means. The Erie Railroad withdrew this changed operation by orders of the Interstate Com- merce Commission and the Interstate Commerce Commission is now holding hearings on that question. In fact, one was held last week or the week before and was adjourned subject to call, so that the matter has not been disposed of so far as the Erie Eailroad is concerned. On that point I hope I have made myself perfectly clear. I am speaking at random. That is one of the difficult problems that presents itself to us. I would like now, if I may, correct Mr. Pouch on a statement which appeared in the papers last evening that the city has disposed of one of its ferry boats and that that ferry boat is carrying automobiles a greater distance than Staten Island at the rate of sixty cents. I don't believe Mr. Pouch wants to make any false statements and I think he would like to make the record what it is. The rates are $2 for the ordinary small Ford car, $2.50 for the usual, ordinary cars and $3 for the large touring cars. I would like to make that correction of Mr. Pouch's statement, that is all. Senator Lewis. — "Well, Commissioner, I don't believe Mr. Pouch made any such statement before the Committee. Assemblyman Baxter.— But that is the rate which you have just read, Commissioner? A. That does not include the charge Repoet of Joint Legislative Committee 89 for each passenger and it does not even include the chauffeur in that rate. In other words the chauffeur and passengers must pay on the rate, which is ten cents per passenger. The ferryboat, of course, was sold at auction after two days of endeavor to dispose of it, but so far as that is concerned I don't believe it is material to this matter. Senator Lewis. — The material question, Commissioner, is, should the Public Service Commission have the power to regulate the transportations of either the municipally or privately owned ferries in order to prevent discrimination in favor or against any particular locality oi class of traiSc? A. Yes, sir. I see. T would just like to call attention, as I have said before, this is a jnatter that requires careful consideration. It not only involved the management and operation of the ferry but also the question of a profitable income to the city. This question will be con- sidered in detail and more comprehensively later, but at present a short statement of the facts will be of service. In a communica- tion from the Corpoj'ation Counsel to the President of the Board of Aldermen, dated October 23, 1909, the Corporation Counsel states as follows: (Witness reads communication above referred to, which is received and marked Exhibit " B.") Senator Lewis. — The proposition as the Committee under- stands it is hardly as you understand it. The Committee under- stands the proposition to be a proposition to confer upon the Public Service Commission the power which it now has of so many public utilities, viz. : power to regulate the rates and the character of service, not to take from any railroad corporation or any other corporation or from the State or city itself the power to manage but simply to regu- late in order that there may be no discrimination in favor of one class of customers or of one community as against another. That is as far as the State had undertaken jurisdiction. The Public Service Commission under those circumstances might say you must raise the Thirty-ninth street rate to agree to the Staten Island rate. What do you say to that? These people ask you to raise your rate to South Brooklyn, make them both equal. 90 Investigation of Pitblic Service 'Commissions What do yoTi say to that ? A. As I have stated, Mr. Chairman, this entire question has devolved upon the sinking fund. Just before you came in, Mr. Chairman, I just stated that this matter since last year has been the subject of hearings before our Depart- ment and I am going to file with you a copy of the proceedings of these hearings. That involved the entire question of the fer- ries operating in the port of ^ew York and brought about at the instance of the Merchants' Association on a protest that they had received from someone whom I don't know in reference par- ticularly to this motor vehicle rates and we have been trying since the early part of last year and are still trying and our last hearing was held in February and on this matter of rates, the method of computation of the rate, — that is whether it should be by measurement or by weight and all that, — we have got every- body at work on it. A subcommittee was appointed at the Feb- ruary hearing and their report is very interesting and I shall have copies sent you. This will show the fact that these rates have been in effect since 1849. There has been no change of rates upon horsedrawn vehicles in the harbor of ISTew York and the Hudson river, practically since 1849. Assemblyman Feinberg. — What is the approximate distance between the South Ferry and Thirty-ninth street? A. About three miles and a fraction. to Thirty-ninth street and we call it five miles to St. George. Chairman Thompson.^ That disagrees with your statement, Mr. Pouch. Mr. Pouch. — I said there was about one and three-quarters miles difference. The longer difference was to Staten Island. You may have confused that with the reference I made to the ferry up the river. Commissioner Smith.— The rates are shown in our pamphlet covering the ferries. I want to show these gentlemen how we have gone at this thing. Senator Lewis. — How does the volume of business appear as between the St. George's and the Bush Terminal, for instance. How do your boats travel ? Are they loaded as completely in one Repoet of Joint Legislative Committee 91 direction as in the other ? A. The boats are now at the present time right up to their full capacity, so much so that the super- intendent has to take off one of the other boats to help out St. George. That is the present condition we are going through because of the congestion of !N"ew York. Q. What would be the normal comparison ? A. I should refer you to our superintendent of ferries here for that. He would be able to give you more accurate information, but I should figure about equal to 60 per cent. Under the present conditions it is about 50 to 55. Q. What is the present condition of the Thirty-ninth Street? A. The present condition of the Thirty-ninth Street ferries, we are obliged to take out the two passenger compartments down- stairs in order to meet the vehicle traffic condition in that divi- sion. In other words it is just giving three times the amount of business we had heretofore with the three boats. We operate four on the St. George division and three on the Thirty-ninth Street division. The vehicle traffic at the present time is really up to the capacity of the four on the St. George line and three boats on the Thirty-ninth street line. Of course there is a dif- ference in the rates. Q. What do your records show as to the earning capacity of the two lines? A. I can give you that right now, sir. I would just like to give you a little part of this particular statement. The total deficit of the Staten Island ferry for the year 1912 was $279,436. That is the difference between the actual operat- ing expenses and the revenue received. Q. For how long ? A. For the year. Q. How is that deficit met ? A. It went into the tax. Chairman Thompson. — Everything goes in New York. A. Yes. The South Brooklyn division lost $185,262 or a total of $464,698, as the annual deficit in the operation of the two divisions. Q. Now, are the operating expenses substantially the same per ton mile ? A. I don't believe that you would be able to get exactly that answer that way. I will show you exactly what I mean in a moment. In 1915 when I took office in the early part of the 92 Investigation of Public Seevicb Commissions year, so that this reflects about nine months of the year of opera- tion, I brought down the deficit of Staten Island to $121,712. In 1914 just passed I wiped off all the deficit and turned the corner with a $15,576 surplus for Staten Island. Notwithstand- ing that my friends from Staten Island are constantly objecting and pounding. Chairman Thompson. — They haven't pounded you. Commis- sioner. A. They don't give a fellow a chance. Chairman Thompson. — They even in fact admitted you were with them. That's the reason I asked you the question. Senator Lewis. — What was the record for Thirty-ninth Street ? A. JSTow for the last six months Thirty-ninth Street showed a deficit of $167,912, making a total deficit for 1914 of $152,336. ISTow the six months passed, ending this year, I have a surplus of $33,228 for Staten Island and a deficit of $15,673 for Brooklyn, making a net operating profit of $17,555. That is respectfully submitted. Q. Isn't it wise to include in that your dock receipts with the ferry, showing how much the city paid for that. That would be another profit? A. Yes, sir; it would be nearly $100,000. Congressman Lesler. — That is what I referred to yesterday. It would have shown a profit of nearly $100,000. A. This is one matter that I can really make a comparison. We have worked this thing down to a fine point. When I took office — I have already referred to our superintendent, — ^I found him there and I found that he understood his work but he never had the oppor- tunity and I simply put him to it and I have been with him and he responded very efficiently, so much so that he is now super- intendent of ferries and in the next budget we expect to give him his full salary of $5,000. The division vehicular traffic might be interesting 'to you. There was 83,423 for St. George for these last six months and 57,887 for South Brooklyn. The passenger was 263,187 for St. George; 41,714 for South Brooklyn. In this connection I am looking foi-ward very seriously to the Brooklyn situation as purely a freight situation. The passenger service will likely be ended within not many months because of the com- E-EPOET OF Joint Legislative Committee 93 pletion of tlie Fourth avenue subway and the other two which are now under construction will necessarily serve to divert all the passenger traffic by these tubes and then we shall get down to the freight question and I am seriously considering now and trying to work out the very best type of boat that would be used for that service, a boat to carry nothing but trucks and freight and built of such calibre that they will stand these tremendous loads that they bring to us. Every one of these ferry boats have had to be strengthened by reason of these weights. It takes four horse teams to draw them. They are heavy, you know. I don't believe you were here, Senator Thompson, when I was stating the other matter. The Erie Railroad had undertaken to estab- lish a new system of rates by weight and they had progressed for about twelve or fifteen days as near as I recall it, when we were ordered by the Interstate Commerce Commission to stop and I believe file their tariffs, something that had to be done but that has called forth a hearing on this very question and that hearing was had last week, the first one. It has been adjourned subject to the call of the Chair. That hearing would be very interesting for you gentlemen because it bears on this question. Chairman Thompson. — It appears then that the ferries owned by the Erie Eailroad are the subject of regulation by the Inter- state Commerce Commission? A. The railroad ferries are, yes, sir. That is because they failed to file their tariffs and the question of tariffs is the one that is involved now. Assemblyman Eeinberg. — You say you contemplate operating these ferry boats as purely freight boats ? A. Thirty-ninth street, yes. Q. Isn't that giving Brooklyn a decided advantage over Staten Island, which is in reality sustaining the deficiency and Staten Island is not a party to that deficiency at all? A. I don't think you can say that we are operating on the generosity of Staten Island because the service to Staten Island is an express service, which is the highest type of service. Q. That isn't the point. I admit that your service is good. The point that I make is that Staten Island is getting very little in the way of rates when compared with the other divisions. A. 9i Investigation of Public See vice Commissions Staten Island has always suffered somewhat on account of its physical situation. Aiy aim is to give a service that is required and one that is self-supporting and 1 want to give it to Staten Island just the same as the rest. Q. Don't that work out to be a disadvantaga Suppose you were in the lumber business or the machine business over on Staten Island and you had to pay more to get your materials to New York than the man in BrookljTi, don't that put the man in business on Staten Island at a great disadvantage i In other words, Brooklyn has a better way to get over here than they do from Staten Island i A. That may be possibly compensated by better facilities for loading and unloading at Staten Island. This ques- tion as to whether or not everybody is getting what is due them is pertinent only to the termination of the question as to wheliier or not there should be jurisdiction over the municipally owned ferries just as there is over the ones owned by the railroad. Doesn't it come back to this, that to give — that is to place this In the hands of the Public Service Commission — involves or means a duplication of works and additional expense which is borne by the city and State alike. Chairman Thompson. — That criticism is like the criticism of the operations of the railroads of the country have developed. It is claimed and the fact is that the Government has seen fit to regulate the operation of the great tr^^nk line railroads by means of the establishment of an Interstate Commerce Commission ■\yitli jurisdiction over the rates and the State has undertaken to regu- late the regulation of Interstate Commerce for the protection of the people of the State and the prevention of discrimination as between localities and as between the State and individuals doing business within the State. A. It comes down to the question, if it is proper to regulate the operations of railroads which operate for the accommodation of the people of the State and the trans- portation of freight and passengers, is it proper to regulate tlie operation of the ferry companies, both municipnlly owned and privately owned, in order that there may be no discrimination as between individuals and localities in the sovvice which such ferries are called upon to render. RlCI'OK'r oil' floiNT Li'KIIHI.A'I'lVE CoMMI'l'TieiO 95 Senator Lewis. — Mr. Oommissioner, in answer to your ques- tion, JHii't it I'liir to say that tho only time the Conunissions would iiitcirrorc. is when then; is iiii ii|)|)(?;il to thciii ''. A. Don't you have your appeal to the sinking fund ? Congressman l^esler. — Then they send us back to you and it has been going on since 1910 to my knowledge and the rat© is still in existence that was there in 1849. A. I don't think that is so. Congressman Loslor. — 1 appeared before the Commissioner in lino. Senator Lewis. — What we want to know is this. We know you are very efficient, Commissioner, and this Committee would value your opinion a great deal if we can get it. Senator 'J'iiompson. — But frequently it so happens that the CommissioiuM' is unable to give his opinion, but if he could I would value his opinion very much in reference to whether or not — the question as stated by Senator Lewis is — as to whether we should make ii change in the law to bring in all ferries, privately owned and municipally owned, to be regulated by the Public, Service Commission. How many ferries around New York are owned privately outside of the railroad ferries? A. Well, you might as woU stiift at the north end. There is the Dykeman street ferry, the li'ort Lewis ferry, then you run into the railroad fcM'rios and the inuniciipal forries. Q. You have tliree? A. We have two. (J. Dtui't yi)u iiiii that Dykcmiin sii('(vl one'^ A. No. Q. You don't regulate the rate? A. All these rates are regu- lated under this department. They are all reviewed and passed on. Some are subject to losses which I don't thinlt could be ono(d;(v1 wiUiout iilVcctinf;' tlio (Mitii'o (|ii(wl,ion. Let me {^x})liiin to you about this Fort Lewis ferry. The city made a lease for the terminal which belongs to the city based upon a percentage of receipts, a certain percentage on so many thousands of dollars. At no timo during Ihis cntiio oporntion of tho Fort, Lowis ferry has tiic rcvcmio o(]iiiilod llio valuo of llio loruiiini]. Tho ojioration of that fovi'y possibly has helped that territory. Now that is involved in a lease. Tho I'nilroad forries are involved in leases, 9C lyVESTIGATIOy OF PuBLIC SeEVICZ CoiIMISSIOyS where thev cannot increase their rat^ and, as I said before^ liiis is a matter that is receiving very careful consideration. I want to be perfectly frank with joil My plan, Mr. Chairman, is iias — that the complicated questions and the r^ulatioii questicRi, which I am not competent to pass on, may be said that instead of accomplishing a good result we might just do the reverse. Xow, there is no one that charges discrimination except our good friends from Staten Island about the Brooklyn situation and that might properly become a question as between some of the privatdy owned or private interests. But we are after it and if we could solve the problem of the unit of measnrement to be carried by tiie ferries it would then be a subject properly settled to cover all ferries by one r^ulation. Q. You have no right to regtdate the railroad owned ferric? A. I think so. Senator Lewis. — In, I think, 29 U. S. Keports, it says that they are subject to the Interstate Commerce Commission. A. Of course you know that I am not a lawyer. Q. Isn't it a fact that a certain truck pays Sl.iO to Statai Island and pays 70 cents to 3yth street i A. Trucks loaded or light under 25 feet pay 70 cents. The same vehicle on the 23rd street is 40 cents. Q. What is it to Staten Island ? A. Sevenfv cents. Q. What is it to Thirty-ninth i A. Forty cents. ilr. Pouch. — C.vnimiisioner. how much of regtdation. or how much thought must be given to the proposition of making the rate on Staten Island and the rate on Thirty-ninth street more equal ; A. As I am telling you. we want to arrive at the unit of measnrement. Mr. Pouch. — You charge 40 cents one way to Thirty-ninth street and 70 cents to Staten Island. What we complain of is that we have been at this for years and we say that if we could so to the Public Service Commission, just as they do in the case of railroad rates, we would so.m solve the problem. A. You ignore the distance of operation. Mr. Pouch. — S.n do the other ferries ignore it. Just take the West Shore schedule, if you will, and see what they eha^e. tvioroHT OK Joint tiHGisi.ATivF Oojoottek 9? A. W'lvst. Slunr, 50 eoiits londed ; lO light. Ovor fifteen feet, 50 wilts liii'lit aiul 00 wills loadod. Thnt'a ii milo. Q. I low docs that conipare with their rate for the downtown delivery^ A. Same rate. To t'oi'tlaudt street is four and a quarter miles and all trucks t>ver fifteen feet are 40 cents, light. Q. Isn't the 1)., L. & \\'. the same thing to Hoboken as it is to New York'^ A. The H., L. >!i: W., operating one and sixty-seven one-huiidiedths miles to Hoboken from l^arelny street, their rates ruu from U) to 70 cents for veliicles not over twenty feet in length, and over that 10 cents for each three ftx^t. That would be -iO cents more on the LH)-ceiit rate, which would make it 90 cents on the basis of twentv-tive feet. Mr. Siiuster. — As 1 uiulerstajid it, the law places the reg'ulatiou of rates, the municipal rales in the harlxir, under the control of the Sinking Funil (\nniiiissioiiers. A. Yes, sir. Q. IK) you think that is necessarily an unbiased tribunal to pass upon the question of reasonable rates ^ A. 1 don't thiulc so. 1 think tliat the Sinking Fund C\>mmissiou, fi-oni my experience, gave tiie matter verv careful consideration and, in nianv instances, have siiown a disjiosition towards the entire city, irrespective of boroughs. It lias been very well shown in my experience. Q. .Vre you familiar with the method iu vogue before the Public StM'vice (.\immission in the matter of rates and regulation of rates < A. I am; yes, sir. Q. They sit largely as a judicial tribunal on the question, and they take into account every phase of the question that is before ttieiu, and if your ferries were placed under their control the city or the department would tiave th(> same opportunity to demon- strate that their rates were reasonable as tlie complainant has to demonstrate that the rates are unreasonable, and they simply pass in judgment upon those versions that are before tliom, and 1 don't quite see your point here of objection to placing the ferrying under the rublic Service (\)iiuiiission, and T would think the Oommitttv would like some light on that proposition. They would value your opinion as to wherein there would be serious conflict or reasons why the ferries should not be placed under Vol.. 1 — -1 98 Investigation of Public Seevice Commissions the jurisdiction of the State board. A. Speaking simply for myself as an individual, because I have no right to speak for the officials of the city, personally I see no objection; in fact I might say that it would relieve me of tremendous lot of cares and respon- sibilities which are entailed in these very questions, because a matter of this kind would be presented by the city; if presented by the city I should say, as a public service corporation would present it, it would be shown that the city was not getting any- wheres near what it was entitled to receive for the service ren- dered. So far as the rate regulation is concerned, if it didn't entail any additional expense to the already tremendous expense to the city, personally I see no very serious question involved, because the presentation of the case could b© properly done and the facts placed before the board for their consideration. We will assume, then, that we were operating under that particular point and that the public was protesting before the Public Service Commission and I have to appear before the Public Service Com- missioners. Of course if this large question could be settled peacefully that would be all right. We will try and settle that at once. Then the question would simply be with the city — how much per ton weight or per hundreds weight shall be charged. Q. That is their duty, to discover the reasonable rate ? A. Yes. I know there is no discrimination or desire to discriminate in any way. This question of rates was referred to the Board of Estimate and they referred it to me for consideration. So you see they are satisfied of the fact that we are at work. This means I shall make report to the Board of Estimate covering this ques- tion, setting up the schedules, and if the board deem it wise to instruct me to readjust the schedules I shall do so, naturally. Senator Lewis. — Are you not chargeable with responsibility, in the first instance, of suggesting the proper rates for the various ferries to the Sinking Fund Commissioners to be approved by the commissioners, rather than that you wait and allow the Sink- ing Fund Commissioners to instruct you to readjust the rates? A. That operates both ways, because it all depends on how the matter comes up. A communication that came directly to our department would receive immediate consideration, and if it is Report of Joint Legislative Committee 99 a subject that requires action by the Sinking Fund it is imme- diately placed before the Sinking Fund. The reverse is also the fact, that some matters come direct to the Sinlting Fund and, of com-se, are referred to us for report. The facts are that the schedule, as now in operation, was the subject of communication, as I have stated before, in 1912, with the proviso that I have already stated. I am simply dependent upon the directions of the Sinking Fund. I might report to-morrow any change and they might refer it to a committee of the Finance Department, and their committee might report adverse to it. I always try to reach a conclusion, if I can, before, and only had hoped that this entire ferry question could have been brought up clearly and defined so that we can make a comprehensive report for all time to come. Senator Lewis. — Now, this situation, as it looks to me, is some- what like this. Two concerns are doing business, one at St. George and the other at South Brooklyn, one by the St. George ferry and the other by the Thirty-ninth street ferry. They are the same lines. It is necessary for each to depend upon trucks for the transaction of the business, and the Staten Island ferry charges the Staten Island concern 70 cents. It charges the South Brooklyn concern 40 cents. It follows, does it not, that the South Brooklyn concern has an advantage of pretty nearly one- half saving in the trucking charge in the course of the year as against the St. George concern, doing business in the same aggre- gate and in the same way ? Isn't that true ? A. Well, there is that difference; yes, sir. Q. As I understand the Staten Island ferry is just now for the first time operating at a profit, which demonstrates probably that the rate charged for Staten Island traffic is not excessive. The South Brooklyn ferry has always operated at a loss and is still operating at a loss, which demonstrates, it would seem to me, that the charge for service for the South Brooklyn ferry is less than it should be. Might it not be desirable and proper to increase the rate on the South Brooklyn ferry in order that the city might have the benefit of the increased earnings and might it not result that the discrimination which now exists between the two and 100 Investigation of Public Seevice Commissions in favor of the Brooklyn mercliant or dealer be discontinued? Understand we don't presume to ask tlie Dock Commissioner to take any action one way or the other, but the business of this Committee is tO' ascertain whether, under conditions which exist without regulation by the State, discrimination is possible and not only possible, perhaps, but is in actual existence, in favor of one class of individuals or one locality and against another class of individuals doing business in jSTew York in another locality — can that discrimination be remedied by State regulation and should it be regulated ? A. Why you heard when I expressed my personal views on the matter. I am a great believer in a method of regula- tion because I have experienced some of it and it has always been my aim in business. Q. Of course we all know and you know. Commissioner, as a business man that prior to present regulation it was within the power of a railroad to make one rate to one individual and another rate to another individual and it enabled one individual to operate his business at a profit and the other to operate at a loss. It was within the power of a railroad corporation to make one man and break the other man. It was within their power to say whether or not industries of a certain character should be carried on and regulation has been inaugurated for the purpose of protecting the individual against the discrimination of corporation. Now this comes down where it is seriously suggested that Government regulation should be exercised over the ferry operations of the City of JSTew York ? A. It would apply to all ferries ? Q. Yes. This particular instance of what was said to be dis- crimination was brought to the attention of the Committee, not with the idea that the city has no power to prevent that discrimina- tion by any act of its own but in order to illustrate to the Com- mittee the necessity and desirability of the extension of Govern- ment regulation of ferries in order that discrimination may not be possible. I was making this observation as merely a side-light on the proposition. A. I was going to suggest that it might be advisable that the essential points broiight out by your investiga- tion should be placed before the Sinking Fund Commission with a view to looking up the entire local record, etc. Q. AVho is the Chairman? A. The Chairman is the Mayor. Eepoet of Joint Legislative Committee 101 And Curran of the Board of Aldermen is Chairman of the Board of Aldermen. The Comptroller is also a member of the Com- mittee. Mr. McAneny is President of the Board of Borough Presidents. Q. Is there a Secretary ? A. Mr. Calder. I doubt if he would want to express any views on account of his being Secretary and having the custody of the records. Senator Lewis. — I suggest then, Mr. Chairman, that the Secre- tary of the Committee be requested to ask the Sinking Fund Com- missioners to designate one of their number to appear before the Committee for the purpose of expressing views officially as to this matter. Commissioner Smith. — We have a meeting on the Sinking Fund Commission on the 30th. Q. You say the volume of the Dock Department's work comes before the Sinking Fund and that you can only recommend regard- ing change in methods, leases, questions involving leases, etc. ? A. I can lease or give a permit for a year only or I can lease by special action without consultation with the Sinking Fund. Under all other conditions the Sinking Fund must approve them and the securing of necessary funds to carry out the work. How soon would you require an answer to this proposition of meeting with a designated member of the Sinking Fund? Chairman Thompson. — Kext week. A. I only ask that for this reason — I would make it a special point to have the Sinking Fund meet me and let me express to them exactly how this has come about and then communicate with you. Possibly the Cor- poration Counsel would have to be called into the matter. Senator Lewis. — You spoke something about the funds of the ferry going into the city. Don't the Dock Department issue its own bonds ? A. 'No. Q. Was that the old way of doing it? A. That was back in the old dark period times and it is done away with. Everything goes in and they cannot get them out either. 102 Investigation of Public Service Commissions Mr. -Shuster. — Are you of the same mind as to docks and ware- houses and these incidental facilities of transportation in con- nection with the ferries ? A. I don't think that would he possible, sir. I think that has to be very carefully considered because it is involved with leases and I don't see where the Public Service Commission would be of any material benefit. I think you would tie up the whole problem because there is nothing involved in that regarding rates. Q. ISTothing that affects the making of rates and service? A. No, because it is a question of improvement of property. We have no jurisdiction over these warehouses and incidental trans- portation facilities that yon refer to as to rates or regulation or anything else but we have as to the character of structures, as to the maintenance, as to the upkeeping of the structures, etc., so that they will conform to the ferries. We merely have general supervision over them. Now these steamship people come to us and say that they are crowded for space and on investigation, of course, it is shown very clearly that even though they have a little room, that they never use it except for lighters. Would you mind my relating a little matter that has been a source of no little anxiety on my part. I charge no one or blame no one. The city of New York is building, as you know, two tunnels in Brooklyn, one going through Clark street and the other through Montague and another ■ through Gain — street. All of this is private property on the Brooklyn side. The Gain — street tunnel was placed right through Piers 17 and 18, as I recall the numbers. That is right in the middle of the slip and the city paid for an easement, destroying that slip for all time to come. Therefore, that piece of property is dead for all time to come. I go down a few feet to the east and I find that the Public Service Commission, without any consultation vdth our Department at least, and without any knowledge on our part, is condemning that property and going to repeat the very same thing that is occurring at Gain — street. Senator Lewis. — They cannot do that without the approval of the Board of Estimate and Apportionment ? A. I don't know. Q. As a matter of law I think that is true. Repoet of Joint Legislative Committee 103 Senator Lawson. — That is true. A. jSTow, the Clark street tube destroys that slip and if the planning had been carried out as I looked at it this entire section would have been the subject of condemnation and this pier would have been built over the tube. Chairman Thompson. — Regarding the approval of the Board of Estimate in this matter, what I started to say was that the Board of Estimate and Apportionment when they make plans and specifications they also make estimate of the amount of money required and simply pass on and approve the amount of money. Senator Lawson. — They have to approve the plans. Chairman Thompson. — They certainly do that. Senator Lawson. — Relative to this proposition that the Com- missioner speaks about, I know from the plans that it is going to make the water unavailable for any more docking purposes out- side of lighters. Now, as I understand it the Public Service Commission lays out the route and then submit to the Board of Estimate to have it passed upon so that the Board of Estimate joins in with the Public Service Commission in asking the Cor- poration Counsel to apply to the Supreme Court for Commission- ers of Appraisal to take the fee to that property, including dock property. The reason I am very much interested in that is, I am Commissioner of Appraisal to investigate that very property there. That brings up the question as to the value of docking privileges in the city of ISTew York. A. What I mean, Senator, is this, that there are so many instajaces where the damages to the adjoining, — for instance, the damages that were claimed for the adjacent propei"ty there were so great that you could afford to take the entire property, even at a little higher price, by the city, I mean, and then plan and build your pier and get the rental. I could recommend a type there that would be more than self- supporting. Senator Lawson. — I would suggest that you as Commissioner of Docks get in touch with the Public Service Commission and have them changed before they settle. A. I didn't know it would involve the purchase of the two piers. 104 Investigation of Public Seevice 'Commissions Senator Lawsoii. — Is tlie law such that the Public Service Commission can go on and take docks privately owned but under the jurisdiction of the Dock Commissioner without investigation of the Dock Commissioner '( A. Oh, yes. I had the same thing up with the Chairman. In building the tubes they wanted a cer- tain lot of dock property for use during the construction. They said this is the site that we want and that is the site we want. I said you don't need that. " Oh, yes; we want it." I said, " You don't need it." The first thing they were going to invoke the law on me. I wrote back a nice letter saying that I didn't think that there was any law that would destroy commerce on this port, which this would do, when there were other things to be done and suggested that they look further into the details of it. Assemblyman Feinberg. — What occurred ? Did they give heed to your proposition ? A. They said, "All right, we will take all their property." They claimed that the steamship line that was there should be thrown out. In other words, they didn't give it the consideration that we have to give ourselves to the subject. I told them I could give them better facilities and I had to prove it to them pretty conclusively. They tried to dispute that and I simply called in the contractor and they said, " Yes." All this is probably immaterial to youx particular investigation but it bears on the question of docks. There is a conflict there at once and the Public Service Commission would have to get an enor- mous staff, engineering staff, specially adapted to this particular work. Congressman Lesler. — Will you recommend to the Board of Estimate to equalize the rates on the Thirty-ninth Street and Staten Island ferry ? A. I don't know whether I will or not. Mr. Pouch. — The object in trying to bring this before the Pub- lic Service Commission is just this. Your Dock Commissioners since the inauguration of municipal ferries has given us the same beautiful promise that the present Commissioner is giving. I have a letter before me here h\ this present Commissioner in May, 1913, moTe than two years ago, promising to investigate. I have another one in January, 1914, where he says there is entirely too much disparity. We have not only bound this Commissioner Kbpoet of Joint Legislative Committee 105 to do something, but he cannot do it and he admits it. He cannot do it alone. The Sinking Fund must take that action. Eor some reason the Sinking Fund don't take action nor the Sinking Fund for several seasons prior to it, and for that reason we ask that this matter be brought before some tribunal that will give us relief, "Now, the Erie Railroad has been referred to as being under the Interstate Commerce Commission. They have tried to make some different form of charge and the Interstate Commerce Commission for some reason or other stopped it or changed it. Now, the details that the Commissioner brings up as to whether it shall be measr- urement or weight or what not overreaches the main question that we bring up. What you charge to Brooklyn, charge it to Staten Island. We will pay our share. We are not kicking against the rate. It is the discrimination. We pay more taxes on the per- centage rate on Staten Island than they do in Brooklyn. We pay our share. We are willing to pay, but Ave do not see why Staten Island should be penalized, as the Commissioner admits that dur- ing the year 1914 he has been able to make the Staten Island divi- sion profitable. If that ferry was under the Interstate Commerce Commission, and it is admitted that the Interstate Commerce Commission say that railroads should operate for a consideration, for a profit — he gives us these figures from 1912 down to the present date, for three years, and the average was $170,000 loss on the Thirty-ninth Street division — wouldn't the Interstate Commerce Commission say raise your rate on Thirty-ninth Street ? That is our question. It isn't whether the charge shall be one way or another; whether we wait two years for another Commis- sioner or another Board of Estimate to investigate. We think we can get quicker service from the Public Service Commission and that is what we have not been able to do on these matters. I have been at it. It isn't this Commissioner. It seems to be the custom in effect at the present time that we cannot get justice through the Board of Estimate for a long length of time and sometimes not then. I believe we would get better and quicker service through the Public Service Commission. Chairman Thompson. — I think that is true taking into account ten years. It has been our experience that they take five j'ears before making determinations. 106 Investigation of Public Service Commissions Oommissioner Smith. — I think in answer to Mr. Pouch he must realize that at no time, so far as I have known, has there been any question involving Staten Island that has not been carefully con- sidered by the Sinking Fund because questions come up in refer- ence to the operation of boats, where they even want a change of itinerary or where they want a boat to run which I sometimes do not think necessary. We simply present the facts. We simply state there is the itinerary and there is the number of passengers carried by that boat. Congressman Lesler. — The city made the lease with the Fort Lee for the purpose of helping somebody 'i A. I don't know wliat the purpose was. Is there anything more you desire of me, Mr. Chairman ? Chairman Thompson. — Does any member of the Committee desire to ask any further questions of the Commissioner? We thank you very much Commissioner for your appearance here to-day and may call upon you again. A. I should, be glad to come any time, Senator. Chairman Thompson. — We will now take an adjournment to Wednesday, July 28, 1915, at 11 o'clock a. m., at this place. JULY 28, 1915 Held at the Rooms of the Bae Association West 44th Street, New York City Present : Senators George F. Thompson, Chairman; Robert R. Lawson. Assemblymen Feinberg, Baxter and Kincaid. Senator Merton E. Lewis, 'Counsel to Committee, and Mr. Shuster, Assistant Counsel. Wm. Herbert Smith, of Larchmont, ~S. Y., appeared before the Committee and made the following supplemental statement : I appeared before your Committee the other day when Mr. Moran was representing the Larchmont Welfare Society in rela- tion to the question of having private water companies placed Report of Joint Legislative Committee 107 under the jurisdiction of the Public Service Commission, and since that time I have been endeavoring to get in touch with other municipalities in Westchester county and some of them prom- ised to have somebody here to-day. However, I have communi- cated with Mr. Harding of Marrina, IST. Y., who is here to-day ■ and also another of the trustees of the village of Marrina, Mr. Donohue, and Mr. Reynolds of Hastings, but he has not appeared yet. He said he would have a representative here this morning if possible. Mr. Louis Harding, of Marrina, IST. Y., appeared before the Committee and made the following statement: I am one of the trustees of the village of Marrina and we feel up there very strongly that the water companies should be under the control of the Public Service Commission. The Legislature passed a bill last year putting the water companies under the con- trol of the Public Service Commission, but at the eleventh hour the Governor vetoed the bill. A committee from my town appeared there urging the Governor to sign the bill and we appear before your Committee to-day and ask that you might recommend legis- lation along that line. Probably no county in the State has the villages and municipalities that feel the reason for the water com- panies being under the Public Service Commission to the great extent that Westchester county does, on account of its close prox- imity to the city of ISTew York, where they occupy a very large proportion of the area of the whole county for their water-shed, so that the smaller cities and villages in Westchester itself have great difficulty in getting water at all. The water companies have the citizens and the municipalities practically absolutely under their control. As I said, we asked the committee at Albany and asked the Governor to sign the bill that placed the water com- panies under that control. We have had a vast experience in Mar- rina. There is only one company that can supply the village with water and that is the Interborough ^Vater Company. Two years ago right out of a clear sky they jacked the rates up for the citizens of the village 20 per cent. There is no way that we can get any redress from them at all. 108 Investigation of Public Service Commissions By Senator Lewis : Q. What did you say was the increase ? A. Twenty per cent. Q. AVhat were you paying per gallon ? A. Forty dollars a year, which accounted for about a minimum of 1,300 cubic feet per the quarter. Q. You mean $40 a year ? A. Yes. Q. Ten dollars a quarter ? A. Yes. We used to get a minimum of 1,300 cubic feet. Q. That is approximately 8,000 gallons for $10? A. Yes. IvTow we get 1,000 cubic feet for $10. Q. To get into thousands of gallons, that is 1,000 cubic feet, (3,000 gallons. You pay for 6,000 gallons ? A. Yes. ilr. Smith. — About seven and one-half gallons to the cubic foot. Chairman Thompson. — Where is this town ? A. It is in West- chester county, twenty miles out. Q. How large a place is it ? A. It is a village of about seven or eight thousand inhabitants. Q. You are served entirely by a private water company? A. Yes. By Senator Lewis: Q. What does that get your village in the way of fire protec- tion and for public uses? A. That is what I am going to say. We had a contract to supply the fire hydrants at $30 per year. Last spring they served notice that all hydrants hereafter would be $40, and they jacked it up. Q. Thirty-three and one-third per cent, increase? A. Yes. There is no way at the present time that the village can do any- thing. Of course we have to pay. Q. What do you say. as to the adequacy of the supply? A. It is somewhat limited during the dry season. Of course this season we have had no trouble with that. During a dry summer we have a very poor supply, and two years ago the water was only turned on for about two hours a day for a period of two months. Q. What about your protection from fire? Is the pressure sufficient? A. At times it is and at other times the pressure is very limited. Report of Joint Legislative Committee 109 Q. Is there any other source of supply available for this com- pany ? A. I don't think so, without they could induce New York city to supply water to the municipalities up there in Westchester county. Q. It is an artificial supply? A. Yes. They have pumping stations and reservoirs. Q. Is the delivery by steam pressure or is it gravity? A. To the houses, of course, it is gravity. Q. They have pumping facilities? A. Yes. Q. For increasing the pressure? A. Yes. I think, probably, that is about all I have to say. I think Mr. Donnelly can give you some further information on the subject. Q. Have you had any correspondence on the question of rates ? A. Yes. The village of Marrina two years ago undertook to compel the company to stick to the old rates and then finally the village board advised the citizens not to pay these advanced rates, but they went to court and they were beat. Q. They really had a litigation ? A. Yes. Because the Public Service Commission or nobody else had anything to say. Q. Is this is a locally owned company ? A. I believe the home ofiice is in Philadelphia. By Chairman Thompson: Q. What is the reason your village don't establish a municipal plant ? A. As I say, that when you stop to think that ISTew York city, its water-shed occupies about three-fifths of the entire land area of Westchester county, there isn't much room for the small municipalities to have their OAvn plant. Q. The source of supply which is available to serving each village, that source of supply is occupied by a water company? A. Yes. We don't object to that. We would like to have some- body that we could go to for relief. By Senator Lewis: Q. These companies have the right to condemn ? A. Yes. The Village Law gives them that right. Chairman Thompson. — My personal opinion is — of course, it is only one vote — I am entirely in with your request. 110 Investigation of Public Service Commissions Mr. John D. Donnelly, 69 Jefferson avenue, Marrina, ^. Y., appeared before the Committee and made the fol- lowing statement: I have heard Mr. Harding and he has covered the ground fully. Of course there is only one thing with this interborough company. They could increase their facilities to the village by increasing their storage facilities, which they have never done. By Senator Lewis: Q. How long have they been in operation? A. About fifteen or eighteen years. The only thing that they have installed is a filtering plant and a pumping station. They still retain the reservoir. Q. Of course, this is not important for our inquiry, but as a matter of satisfaction, I would like to inquire how many hydrants do they supply in your village ? A. Well, now, I could not tell you the exact number. Q. You have probably a hundred or more? A. Easily that. If we ask them to supply water in a street they will not do it unless the village pays for a hydrant for every 500 feet. Q. Whether you get the hydrant or not ? A. Yes. Q. How much of a pressure have they got ? A. I couldn't tell you. Q. They get the water from some spring ? A. Their source is from a spring in Eye lake. Q. They pump it from there into a reservoir or standpipe? A. They have no standpipe. They have a pumping plant that pumps this into the reservoir. Q. They then supply it by gravity system and they probably have got a large pump that they use in case of heavy fire to force the water faster than gravity will do it? A. That is what they are supposed to do. They also supply Mount Vernon. Q. Same company? A. Yes. Mr. Smith. — The company charges so much per foot, so much per cubic foot. Q. Have a meter in each house ? A. Yes. They charge addi- tional for the water used in sprinkling our streets, that is in addition to the hydrant service. Eepoet of Joint Legislative Committee 111 Q. What do they charge for that water for public purposes? A. Same price. That is in addition to the $40 per year for the use of the hydrants. Q. Are there any stockholders that are residents of the village of Marrina? Mr. Donnelly (continuing). — Not that I know of. Q. You don't know what dividends this company pays? A. I don't know. That time we had this litigation we tried to get at that, but we couldn't do it. Q. Can you give me the exact name of that concern ? A. The Interborough Water Company of Marrina. Q. Do they operate under the same name in Mount Vernon? A. Yes, sir. By Mr. Shuster: Q. Do they serve just these two places, Mount Vernon and Marrina ? A. I believe they alsc operate in Eye and Harrison. Chairman Thompson. — ■ I would say, for the benefit of you gentlemen, that a bill giving the Public Service Commission jurisdiction over water companies was introduced in the Legis- lature of 1913 ; also another bill to give the Conservation Com- mission of the State jurisdiction. Some of us thought the Con- servation Commission should not have jurisdiction and others thought that the Public Service Commission should not have. Between these thoughts and the two bills neither one passed. In the Legislature of 1914 a bill was introduced to give the juris- diction to the Public Service Commission and, by leaving it that way, it passed both houses, but it seems that they gave jurisdic- tion also to water companies in the city of Greater New York and the Mayor of Oreater New York said he thought that would be a bad thing for the city, because he was afraid it would pre- vent the city from prolonging the leases of water companies in the city of Greater New York. Anyhow, he protested the bill and it was vetoed by the Governor on the ground that it covered the city of Greater New York. Another bill was introduced in 1915 which eliminated Greater New York and the Governor vetoed the bill after it passed both houses because it did not cover 112 Investigation of Public Seevice Commissions New York city. A. I was very much surprised, because I attended that meeting and the opposition seemed to be from the city of New York and Syracuse, where these municipalities were endeavoring to supply water to some other smaller municipali- ties. The Governor in his talk to those gentlemen who appeared gave most everybody at the hearing the impression that he favored the bill. Senator Lewis. — Before Mr. Smith goes away I want to talk about the Larchmont situation. I don't think the record shows the cost of water to the consumer. Mr. Smith. — My recollection is that something was said on that but I would be very glad to enlighten the Committee in person. Q. Let me ask you this : What is the name of the corporation which supplies Larchmont? A. The corporation is Larchmont Water Company. Q. Is that owned locally? A. That is owned locally, chiefly by the Murray family. George Murray was the treasurer and I think he is now the president. Then there is a William Murray, who died about six or eight or ten months ago. They have an oiEce in ISTew York. Q. Are they residents of Larchmont ? A. They have been but I don't think George Murray is living there now. Q. At what price per thousand gallons is the water sold? A. Water is sold to the consumer at the rate of $25 for the first 25,000 gallons — $1 a thousand. That has been the rate for several years for the fir^t 25,000 gallons, but up to two years ago the rate for additional water was 35 cents a thousand gallons. That is shown in the report of the special committee to investigate the water situation in Larchmont — the committee appointed by the board of trustees. The record has been filed here. The aver- age householder paid under the old rates about $50 a year and I know individual instances where the rate goes up to $220 a year where water is given to private residences. But the water company after the filing of this report and investigation by our Committee saw fit to increase its rate whereby the initial 25,000 remains the same — $1 a thousand, but after the 25,000 they Eepoet of Joint Legislative Committee 113 charge, instead of 35 cents for each additional thousand, 75 cents and then on the sliding scale down, 50 or 55 cents or else 75-70-65. I cannot give the exact figures now. The rates have more than doubled on the excess over the first 25,000 and I have figured that based on the same average of consumption as here- tofore under the old rates, the average householder pays about $75 a year for his water. Q. What is the reason you don't have competition? A. That question has been considered in this Committee's report and they concluded that it was very improbable, because they don't think there is a sufficient number of houses in Larchmont to warrant. Q. How large a population have you ? A. We have about two thousand during the winter months; about double that in the summer. Q. Is there any available source of supply that is not already utilized ? A. That I am not sure of. The water company went on record in answer to certain questions — and others they refused to answer — and they claimed that they could supply a certain number of additional houses. I think there were about two hun- dred more. We always have an adequate supply. Q. -What about hydrant service in Larchmont? A. My recol- lection is that we have been paying about $30 a year. I was in hopes that our village president would be here to-day. I would like very much to advise the village officials at Larchmont of the hearing and when you could hear them at some convenient time when you adjourn. Q. We will be glad to hear you although I think the Com- mittee is pretty well made up on the question. I think there should be a record of the situation in a good many of these vil- lages. If a record of that kind were laid before the Legislature and before the Governor the result might be more satisfactory. A. I will get in touch with the village officials as soon as pos- sible and — Chairman Thompson. — We will let you know. Senator Lewis. — Did you ever have any litigation with this Larchmont company ? A. ISTo, we have not. We considered that and the expense was so great that nothing was concluded. Mount 114 Invkstioation of Public Seevioe Commissions Veriion, 1 uiiderstmid, by information, has started un ac'tion. My information is that it cost them nbont $30,000. Q. That was with the Iiiterhorongh company ^ A. Yos. Vou sei^ the tincertainty of litigation is such that it makes it prac- tically impossible for the consumer to swk his relief. AKTEKNOON SESSION. Meeting called to order by Chairmiui Thompson, 2.15 r. m. Alii. OiiOPSKY, Commissioner of Bridges, appeared before the Conunittee and made the following statement: I liaven't any prepared statement but shall be glad to answer your questions. I shall be pleased to send a prepared statement covering as many facts which I have here. It will require a day or two to do this; then you can incorporate it in your record if you wish. C^liairman Thompson. — If you will send us a copy of such statement we will be glad to incorporate it in the record. A. As I understand my talk with you, you want to have my views on this section of the special franchise tax law, in particular section 48, as it applies to the tolls collected by the department of bridges and rebates that are given to the railroad companies. Beginning with the year 1900 there was collected $274,462.05 of tolls and rentals by the city. In the year 1913, ending December 31st, there was collected $9C7,51'7. 14, and in 1914 it was over a million. I have not the exact figures at hand to-day. Senator Lewis. — That was collected for tolls ? A. Tolls and rentals. Q. What part of that is tolls from the oiH>rntiug com- pany, iConimissioner < A. Of the tolls for r.M4, well 1913-1914, 1 will give yoxi that later. This is from the n^port of Comptroller Prc^ndergast. These figures are taken from our own books. The Brooklyn Heights Eailway, the Nassau Klectnc and the Brooklyn & Queens, the Coney Island, South Shore, Third Aveiino, Three Eepoet of Joint Legislative Committee 115 Cent line smd North Eiver line, the total received by the city 1912-1913, $343,107.80. Q. Tliat item was paid into the treasury by the railroad com- panies at the rate of live cents per car for each car crossing that bridge 't A. Five cents per car for each car crossing the bridge and ten cents per car for each elevated. Q. That is all for the use of property belonging to the city? A. All for property belonging to the city. C^. Now, as I gathered' from newspaper stories, the aggregate amount received by the city both from the charge of five cents for elevated cars and also for the rentals of the property belonging to the city and paid by the companies which used that property, the aggregate amount was put into the treasury and deducted from the amount left under the special franchise tax provision of the Tax Law. Is that so ? A. Yes, sir. Section 48. Q. Can you tell us when that deduction began, when it first began to be made? A. The brief figures that I have here and the figures that we will give you will answer that question fully. The figures I ,have here show thai refunds were made from bridge tolls and bridge revenues in 1905 and others were retained by the city in 1905. For instance the Coney Island road in Brooklyn paid its tolls and it was retained by the city. Q. In 1905 ? A. Yes. While the Brooklyn Heights Eailroad and the Nassau Electric Railroad had theirs returned to them. Q. Do you know under what authority that refund has been made from year to year ; that is you say it is under the provisions of section 48. Did someone render an opinion to the effect that section 48 required a refund or was there some legal action or proceeding of some sort which resulted in some direction by some court of competent jurisdiction providing for such refund? A. It was the Brooklyn Heights Railroad, or that company by that name or some other naiue, that carried this question to the Court of Appeals and the 'Court of Appeals gave that construction. Q. AVas it a regular judicial determination of that question. A. It was determined upon. If it was paid in as a rental deducted from the franchise tax that amounts to the same thing. Q. Could you give us a reference to that case. Commissioner? That is before vou leave? A. That I haven't here. 116 Investigation of Public Service Commissions Senator Lawson. — ISTow, Commissioner, for the record prior to the time the B. R. T. and the other railroads made the agreement to pay the city five cents per car for surface cars, ten cents for elevated cars, the city itself operated trains on the Brooklyn Bridge? A. Yes. Q. JSTow, did these trains produce a profit to the city; that is the bridge alone, that cable line ? Have you any figures to show what the receipts were ? A. Yes. We have those very complete. I will incorporate that in the memorandum that I will send to you. Q. Then at the time the city operated its own line of cars on the Brooklyn Bridge, did it produce a profit to the city ? A. Yes, that is my impression. Q. Since the time the city turned over to the B. R. T. the use of the Brooklyn Bridge to operate its own train and take these city owned trains, the receipts have been turned back to the B. E. T. under a special franchise tax and the city has obtained no profit ? Is that not correct ? A. The tolls received by the city had to be returned to them under this decision and the mockery of it all is that we must employ men who observe the record and who can make observations and keep the record of the number of cars passed and do the deducting and collecting, etc., that are carried on the city's payroll as its regular employees doing this work and at the end of the year that work for which they are employed, and this money is collected, returned to the city and the city itself is the loser, or rather loses the money that has come in and must pay the salaries of these employees who are doing this work. Q. How much does that mean a year ? A. That would be hard to say. Senator Lewis. — Commissioner, do I understand that this refund is allowed as the result of a litigation in which the precise question as to this particular road is involved was submitted to the court ? A. Yes. Q. In this railroad? A. This Brooklyn railroad. Q. The Annotated Consolidated Laws don't show a reference to that case ? A. It shows a reference to the City ex rel. West Railroad v. Hite. Eepoet of Joint Legislative Committee 117 Q. I have sent for that but there is no reference to the B. R. T. or to the other Brooklyn roads. Senator Thompson. — When was that action decided? A. I don't recall the exact time, Senator. Senator Lewis. — Do I understand at the present time that the B. E. T. intends to refuse to operate its cars on bridges unless they are allowed these rebates? A. They have received a notice from me that the contract which they have had, — by that I me.an — Q. They had with the city? A. By that I mean that four companies have a contract, one contract, with the city, a contract that was made now nearly eleven years ago and it carried with it a clause that the city desiring to terminate this contract must give the company one year's notice at the expiration of the ten years and in view of the changing conditions and of the enormously large profit made by the company, more than one hundred per cent, profit — because of that large profit — and the city not sharing adequately in that large profit — I gave a notice that the contract would terminate in accordance with the provisions of that clause at the expiration of this year and then two or three months ago, between two or three months ago, I notified the several companies that were parties to the agreement or contract to meet me for the purpose of negotiating a new contract. I might say here that the New York railways are now in the courts asking for the same privilege being enjoyed by the Brooklyn companies. They are running the elevated now along Broadway and over the Williamsburg bridge and when the connection was made with the Centre street loop it terminated at the Municipal Building, and then they ceased paying tolls for the elevated and we now have that up. The Corporation Coimsel is taking that into court to sue them for the tolls but they ceased paying the tolls. Q. Under what excuse? A. Because, as I am informed, — I have not seen the reply of the Corporation Counsel to my inquiry — because they are making a thorough operation from the bridge into the Centre street loop. Q. Do you have counsel of your own or do you have to rely upon the Corporation Counsel ? 118 Investigation of Public Seevice Commissions Chairman Thompson. — I move you that the Counsel to our Committee be instructed to advise the Corporation Counsel that this matter has come to our notice and that we are of the opinion that the law or the construction of the courts has not authorized the return of these moneys paid to the railroads in excess of the amount charged for franchise taxes for property located on the street and owned by the railroad company, if there is such, and if there is any such, that the whole amount refunded in past years has been refunded without authority of law and without authority of the city officers to refund it. Senator Lawson. — I second that motion. (Motion carried unanimously upon roll call.) Chairman Thompson. — We will now adjourn until tomorrow morning at 11 o'clock. The hearing tomorrow will be here at the same place. I want to express our appreciation, Commissioner, for your appearance here today on behalf of the Committee. These disclosures are very interesting to me. JULY 29, 1915 Meeting at Bab Associatioit Rooms, West Mth Street, New York City, Meeting called to order by Chairman Thompson at 11 o'clock A. M. EoBEET Alfred Shaw, of 343 Carlton avenue, Brooklyn, IST. Y., appeared before the iCommittee and made the following statement: You intimated to Mr. Carpenter the other day that you would like to have someone come here on the Brooklyn matter and I have come in that connection. I am Chairman of the Committee of One Hundred of Brooklyn. Chairman Thompson. — In reference to this Fulton street matter ? A. Yes, sir. I understood from the Chairman of the Committee that he desired to know whether there was any Eepoet of Joint Legislative Committee 119 Brooklyn sentiment anxious to secure the removal of the elevated structures from the central part of Broadway and I have come in response to that ruquiry as Chairman of the Committee, what is known in Brooklyn as a Committee of One Hundred, which was organized about a year ago, to present to the Board of Estimate and Public Service Commission the economic and civil necessity of removing the elevated railroad structures from Central Brook- lyn. That Committee has about 150 members thoroughly repre- sentative of the entire borough, as to its civic aspects and its business and social aspects and I shall submit here a list of the members with the officers showing whom they are. This matter has received a great deal of attention from the 'Committee of One Hundred. We have been working since its organization to find a way of removing the elevated structure before it was too late. Q. That is the structure in Fulton street ? A. The Fulton street structure and the structure on Flatbush avenue. We have given special attention to that on Fulton street for the reason that there is under way the rebuilding, the spending of some six hun- dred thousand dollars a mile in operating the same and we all felt that if that was ever done it would mean that it would be at least twenty-five years before any steps were taken towards its permanent removal. I would submit in connection with the organization of our Committee the resolutions which were adopted by it at a meeting of citizens, offered by the late Professor Franklin W. Hooper, Director of the Brooklyn Institute. Do you want me to go on and say what we have done ? Q. I was going to suggest to you, Mr. Shaw. This additional construction of which Mr. Carpenter told us the other day is being carried out under some resolution adopted by the Public Service Commission ? A. It is part of the dual contract and has been approved by the Board of Estimate and Apportionment, I take it. The structure itself has not been approved. Q. Plans were approved? A. Not yet. That is to say that the operation which remains to be completed from ISTostrand avenue weet to the Brooklyn bridge have not yet been approved by either the Public Service Commission or the Board of Esti- mate. They are now before the Public Service Commission. The part that is east of Nostrand avenue presumably has been approved because it is mostly all completed. 120 Investigation of Public Service Commissions Q. That was authorized at any rate by the Public Service Com- mission, was it not? A. Surely. Q. Did your organization appear before the Public Service Commission in connection with the approval or the rejection of their adoption of the plan? Plave they approved west of ISTos- trand avenue? A. Tes. Q. And have they approved east of ISTostrand avenue ? A. No. We were not in existence at the time. Q. Was the attention of the Public Service Commission called by your organization to the provisions of the franchise of the B. R. T. which limits construction work in the street? A. !tfo, sir. We have not proceeded along those lines. Our work has been constructive. In other words we have investigated transit conditions in Brooklyn with the view to finding a way to avoiding the rebuilding of the structure in the central part of the borough but of finding another way of accommodating the railroad com- pany and permitting the city to carry out its dual contract into which it has entered with the railroad and to that end we have submitted plans for the building of a subway in lieu of the build- ing of this elevated and we have presented the matter to the city along the lines of what was best from a transit point of view as well as what was best as an investment point of view. We have not proceeded merely to gain a way of criticizing all they have done but to show them a better way of doing what they are obliged to do. Q. And were your plans submitted to the Public Service Com- mission ? A. Our plans have been before a joint conference participated in by Judge McCall, the engineers of the Public Service Commission, the Transit Committee of the Board of Esti- mate, the Comptroller and the officials of the B. R. T. We have had several su.ch conferences throughout the winter, in which this whole subject has been discussed at considerable length. Q. But these plans were all approved subsequent to the execu- tion of the dual contract, were they not? A. Surely. Q. And the matter was not called to the attention of the Pub- lic Service Commission prior to the execution of that contract? A. Isot by us. Q. Since the construction of the heavy plate girders additions to the elevated structure in Fulton street has the attention of the Eeport of Joint Legislative Committee 121 Public Service Cominission been called by your organization to the fact that such work was being carried on in violation of the terms of the franchise? A. I would have to look among our records to see whether we had specifically referred to that matter. I would be glad to submit to you a copy of a brief that was sub- mitted by the Committee of One Hundred in support of plans to remove the elevated. There are five copies of that brief, which was submitted by Mr. McMahon, Chairman of our Law Com- mittee, with Wm. K. Wilcox, who is our consulting counsel. I will indicate to you the form in which we have made protest and I will with your permission, sir, send you a copy of another brief filed with the Public Service Commission since then, which I intended to bring and which perhaps will refer to the point which you spoke of. I would rather refer you to this brief. Q. Do you know, Mr. Shaw, of the fact that the question of the right of the B. R. T. to erect the structure which it has erected east of JSTostrand avenue and which it plans to erect between jSTostrand avenue and the bridge or the river, wherever it ter- minates, is the subject of litigation ? A. I do know that. Q. Do you know whether the fact that it is the subject of liti- gation has been called to the attention of the Public Service Com- mission ? A. I feel confident it has. Yes. I know it has. Q. And in that litigation it proved that a temporary injunc- tion was obtained restraining the Public Service Commission, the B. R. T., from erecting the type of structure which it has erected east of ]!^ostrand avenue — west of ISTostrand avenue. Was that east of ISTostrand avenue, the Kaplan case ? A. My impression is that it is east. Q. Was there an injunction issued in that matter ? A. I have been so informed. Q. Following the issuing of that injunction condemnation proceedings were taken? A. I have been so informed. Q. Do you know whether the answer of the defendant in the case of the B. R. T. against Kaplan sets up the provision of the franchise granted to the B. R. T., limiting the character of the structure to be erected in the street to the lattice type, so called ? A. I understand so. I cannot testify to that of my own knowl- edge. 122 Investigation of Public Seryice Commissions Q. Do you know whether that fact has heen brought to the attention of the Public Service Commission ? A. I cannot testify of my own knowledge, no, sir. Q. You understand that litigation is stiU pending, do you? A. I do. Q. Anything else you think of, you would like to say to this Committee, Mr. Shaw ? A. I assume that you would like to know what our plan is to accomplish the necessities of the dual con- tract and yet remove the elevated structure from Fulton street, Brooklyn. Q. I think that would be a matter of interest to the Committee. Whether it is within the jurisdiction of the Committee to attempt to overrule or to seem to attempt to overrule the exercise by the Public Service Commission of its discretion in determining whether or not there should be a subway constructed or whether the B. R. T. elevated should be ended is a question. The purpose of this Committee, of course, Mr. Shaw, is to investigate the weak- nesses of the present law, if there are any, and the conduct of the Commissioners now in office in the administration of that law. I don't comprehend that the Committee should feel justified in attempting to review the discretion or the judgment of the Com- mission in the determination of a question of policy, although it would be interesting, of course, to know whether or not there is a feasible plan by which the people of Brooklyn can be served with adequate transit facilities and at the same time relieve the prop- erty owners along Fulton street of the burdens which the elevated structure imposes upon that property. A. Neither the Commis- sion nor the Board of Estimate have passed finally on this proposition. Q. Yes. A. Our investigation brought about the discovery that in the original installation of subways in Brooklyn at Fulton street and Flatbush avenue a very large investment had been made in order to accommodate future travel. In other words, that there was at the junction of Flatbush avenue and Fulton street eight preliminary tracks to accommodate traffic. Perhaps there is no such other situation in the entire city of New York. Four of these tracks are under ground connecting through the Fourth avenue subway. The other four were intended to serve the traffic Eepoet of Joint Legislative Committee 123 of Uie most populous part of Brooklyn, east of Flatbush avenue, that is that portion of Brooklyn which is served by Fulton street and its tributaries. Therefore, it was a simple matter to see that if the elevated railroad was submerged somewhere east of Flatbush avenue it then could be carried with a subway down Fulton street and connect with these four tracks now in existence. That would then eliminate the elevated railroad from Fulton street from the point at which it was submerged, west as far as the river, through the central part of Brooklyn and would prevent the rebuilding in the most important parts of Brooklyn of that liae, that six hundred thousand dollar a mile line. We submitted that as a simple problem of clearing up the situation but the B. R. T. said we will not agree to that proposition unless the city recognizes, our franchise which carries us with two tracks to the Brooklyn bridge. Q. Two elevated tracks ? A. Yes. Q. They want to maintain the existence of the franchise whether they use it or not ? A. They not only want to maintain the existence of the franchise but they want to maintain the tracks in some form. Now we asked them, under chapter 514 of the Laws of 1913 will you accept such a plan in place of your elevated lines on Fulton street ? The B. E. T. subsequently said "Yes " and of course we then asked the city to meet our Committee and representatives of the B. R. T. along these lines. Then the ques- tion came up, how is the money to be provided ? It was agreed by experts that it would cost five and one half millions to do these two things. From the point nearest to Flatbush avenue east to that point at which the lines would come to the surface, the city has agreed to put in a million dollars and leaves us to find four and oue-half millions and we are now interrogating property owners to find out whether they will stand an assessment of property for this four and one-half millions ? That is our problem today. The city has given us time to discuss — Q. And the Public Service Commission is aware of all this? A. Yes, sir. This will show yon what will be gained by Brooklyn if they carry out that plan. In other words that the city will be improved. 124 Investigation of Public Service Commissions Chairman Thompson. — Do you think there is any imposition to the people of Brooklyn, especially the property owning inter- ests along Fulton street, by the present contract v?hich is now contemplated and going on there in Fulton street, changing over these subways ? A. I consider it practically a crime against Brooklyn and against the city as a whole to permit that structure to go through, which is not needed in any way as it is contem- plated because the Brooklyn bridge vsdll not stand the traffic which such a structure will carry and that it is a misapplication of public funds to permit it to go through. It is a misapplication of public funds because, although the railroad puts up the money the — Chairman Thompson. — The city pays it back ? A. The rail- road has a first lien on the earnings to pay interest before the city gets any return on this one hundred million dollars which it has in there. Not only that, we have to pay interest for amortization. Chairman Thompson. — So that they get the money back with interest from the city? A. Yes. Q. Although apparently the railroad company is paying it? A. Yes, they get one per cent, in addition to their interest. Chairman Thompson. — I am going to say to you, Mr. Shaw, when the matter was presented to us first, it was stated that when the dual subway contracts were drawn and executed it was con- templated that any improvement to this structure would be com- paratively temporary in its nature and contemplated to cost about $300,000 a mile and that the agreements might be construed to authorize such an improvement to this structure. With that as an excuse the railroad company have gone on and increased this structure to upwards of a million dollars a mile, making it very permanent, not only repairing it, but completely rebuilding it. A That is substantially correct. Yes, sir. Q. The result of that is that it incumbers the street so thoroughly as to make the property along the street considerably depreciated in value and it also adds to the burden of cost, and isn't it also true that owing to the permanent character of this structure that Eepoet or Joint Legislative Committee 125 the action of the city in the future will be very reluctant to tear it out and install a subway in its place ? A. That is exactly correct. Q. And that the cost at the present time of constructing a subway would not greatly exceed the cost of this structure which they are now building? A. Hardly that. Q. What would be the cost of a subway? A. The cost of the subway such as we propose would be five and one-half million dollars. Q. A mile? A. No, for the whole structure, two tracks on Livingston street and a three track connection at Ashland place. Q. If your scheme were accepted would it be greater or less than the cost of putting through the improvement now commenced ? A. The subway will cost vastly more than this reconstruction of the elevated. The elevated construction which will be saved by that subway, which will be put down for five and one-half millions, would not be in excess of a million dollars or something under a million dollars. Q. But it would eliminate this heavy construction through Fulton street ? A. Let me correct that. It would eliminate the heavy construction on Fulton street up to the point where it comes to the surface. Bixt the saving would be something under two million dollars because the city has to invest a million dollars in relocating on Adams street. That million dollars plus what the railroad company would save would be something over a couple of million. Senator Lewis. — Do you think that present elevated structure, that portion which has not been reconstructed, is safe for the travel that goes over it now ? A. I am informed by experts that it has the capacity of carrying a much heavier traffic than what it is now carrying both in the number of trains and character of the cars. Senator Lawson. — Did you see the plans for this reconstruction of the Kings county elevated prior to their beginning the con- struction work, the reconstruction work? A. I testified a few moments ago that when the plans for that portion east of ISTostrand avenue were presented to the Public Service Commission our 126 Investigation of Public Service Commissions committee was not in existence. We liave come into existenct about a year ago. Tlie plans for the portion west of Ifostrand avenue were submitted several months ago. The Public Service Commission advertised a hearing on them and we appeared officially and in large numbers in protest as against the adoption of these plans. Q. When was that ? A. That must have been two months ago. Q. Did the Public Service Commission take any notice of your protest in any tangible form? A. We filed a brief, a copy of which I have promised to send you, in which we have asked for delay in order to submit to them perfected plans for doing this work and they have thus far taken no action on these plans. Q. In the meantime and after your protest they permitted the B. E. T. to go ahead with this construction ? That is on the line west of ISTostrand avenue ? A. I don't understand they have given any permission to do anything west of Nostrand avenue. Q. They are operating now, are they not ? A. I don't under- stand so. It is all east of Nostrand avenue. Senator Lewis. — Has this reconstruction work affected the light and air, taken it away from the property along that part of Fulton street, any question about that ? A. It is being built right up in the line. I hope you gentlemen will look at it. Chairman Thompson. — I have been out there and agree with you. A. (Witness exhibits picture of parts of Fulton street elevated, indicating the close proximity of structure to adjoining property.) I appeared before the Commission and showed them where this structure would come, I think, within three feet of the buildings, as it was then planned. Mind you, Mr. Chairman, the only excuse for doing that thing in Brooklyn is that Brooklyn is of so little consequence that it will do no harm to give it a black eye as a residential and commercial center. Senator Lewis.— It is the sense of your Committee of One Hundred that the Public Service Commission has been derelict in its duty in not protecting your Committee and the residents and taxpayers and property owners along Fulton street, Brooklyn? What is their attitude in the matter ? A. I think, sir, if this structure was allowed to go through the central part of Brooklyn Eepoet of Joint Legislative Committee 12Y that the officials of New York, either city or State, will be guilty of being derelict in duty. Q. Have the Public Service Commission afforded you or your Cdmmittee any relief thus far under the protest made? A. Yes, sir. They have given us time by thus far holding up approval of the plans of the B. R. T. for the structure west of Nostrand avenue. Q. They have made no decision ? A. None rendered. Q. Would you say they had adequate time in which to render a decision? A. We have not asked them to reach a decision. We have asked them not to because we wanted the time to find the money to do this thing. Raising this money has been given up by officials and it is up to private citizens to show where an assess- ment could be placed to get the necessary funds to accomplish this other improvement. Q. 'Now the point I am trying to make is this. The plans, as you originally understood them, were to add a third track to the present structure and you would be satisfied with that if you could get nothing else because you have protested to the Public Service Commission against the reconstruction as the plans now appear. On that the Public Service Commission has taken no action. That is true ? A. Yes, sir. Q. Now while you are trying to find this money to build a subway would you deem it reasonable that the Public Service Commission should come to some decision to have the B. R. T. adhere to the original plans? A. I would have to explain my answer by saying that I would have to refer back to the dual contract to learn what that original plan is, as it is expressed in the contract between the two parties. Q. You say that the B. R. T. has consented to the third track on the present structure? A. It may be that the dual contract gives the B. R. T. that right. As I say I would have to see the contract. Q. Your protest was against reconstruction instead of addi- tional third track? A. Yes. Q. You have now taken into consideration or gone into the question of a subway on top of the present agitation ? A. What do you mean ? Q. I mean on top of the protest made against the reconstruction 128 Investigation of Public Seevice Commissions of the elevated operation? A. We have deemed reconstruction unwise and in addition to our protest we have come before them to show a way out. We say this is what we object to and this is the way you can cure it. Chairman Thompson. — I am going to ask another question. It is construction east of ISTostrand avenue that yon are now try- ing to hold up? A. West of Nostrand avenue. Q. And it is east of ISTostrand avenue which they are now con- structing ? A. It has been completed, pretty nearly. Q. That work that is now being constructed, nearly constructed, was constructed by the B. E. T. pursuant to a certificate granting leave by the Public Service Commission. Is that right? A. I understand so. Q. And that certificate was only granted by the Public Service Commission after complete plans and specifications of the struc- ture that is now being completed was before them? A. That is the assumption. Q. If it wasn't before them they were mightily unjustified in granting the certificate, were they not? A. 'No question about that. Chairman Thompson. — Do you say that a Public Service Com- mission with these plans and specifications before them, showing the work that is now constructed there ; with dual contracts having been executed, which they were presumed to know, calling for the repair of that street sufficient to carry this third track — do you say that a Public Service Commission with these plans before them and with these dual subway contracts in their minds was an efficient Public Service Commission when they granted that certificate to the B. P. T. to build that line that is now constructed ? A. I would say that it showed extreme inefficieney in that particular action. Hebbeet C. Caepentee appeared before the Committee and asked permission to make the following supplemental statement : The other day I was unable to answer several questions asked by the Chair and in answer to several of your questions, which Kepoet of Joint Legislative Committee l^S you put, I would like to say this. That the citizens of Brooklyn who were alert to the damaging influences on Fulton street or in central Brooklyn were not properly notified of the time these plans were before the Public Service Commission for approval. We understand unofiicially that there was a hearing and that there was one man present at that hearing and that one man has been many times in public meetings and been referred to as a staunch advocate of the railroad company. These plans were approved by the Public Service Commission and on April 14th, pursuant to the request of a great many property owners, the Public Service Commission had a hearing, at which time they would receive opinions of the approval of the plans west of !N"os^ trand avenue. At that hearing — that hearing was the first public opportunity to voice their sentiment against the structure east of ISTostrand avenue. There was practically no opportunity for that part west. Q. To voice their opposition ? A. East of Nostrand avenue and against the approval of the plans west of ISTostrand avenue. I have before me the official record of that hearing. That hearing was in the form of a specific complaint by the people of Brooklyn against the work under construction and the approval of the work contemplated west of Nostrand avenue. We were repre- sented, I mean the Fulton Street Protective League, by Davies, Auerbach & Cornell, through their Mr. Hotchkiss. Mr. Hotchkiss very ably presented both the material and the legal aspect of the whole matter, outlining the duties of the Public Service Commis- sion, under the Public Service Law, under the Rapid Transit Act and under the pending certificates of the Public Service Commis- sion to forthwith stop that construction east of ISTostrand avenue, which was then progressing. If the Public Service Commission had ever acted along the lines indicated by Mr. Hotchkiss at that hearing this great structure could have been effectually stopped. We made the request that a brief be presented to the Public Service Commission outlining their legal powers and the basis on which this present or constructed work east of Nostrand avenue should be stopped. That brief was very complete, giving reference to the Rapid Transit Act, the Public Service Law and of the duties of the Public Service Commission and it plead with that Vol. 1 — 5 130 Investigation of Public Seevice Commissions Commission to accept and receive evidence and to call another hearing at which these facts could be argued for the purpose of stopping the work then under construction. To my knowledge at no time since that date, which was April 14, 1915, has the Public Service Commission taken any action in this matter. The work has progressed without any opposition from them. They have called no further hearing and although we have sent them official notices by counsel from time to time as to the progress of the court litigation they have refrained from taking any action what- ever or giving any opinion as to their plan which they could easily have done with their great legal force and department. They could have at least determined some of the points which the people at their expense were attempting slowly to determine in the courts. When the question came up of getting information from the Public Service Commission for use in the court as evidence we found it very difficult. There was every evidence on the part of the Commission ' to withhold information from the property owners. We were attempting in the courts to prove that the railroad company had used a systematic plan to obtain these consents from the property owners on the basis of fraud and misrepresentation and the Public Service Commission at great expense to the city and the State had obtained a great deal of valuable information concerning these consents and the type of consents and they practically were excluded from the benefit of that information obtained by them at great expense, which has been of great disadvantage to us. Senator Leiwis. — ^Mr. Carpenter you say " They." I assume, of course, you mean some one individual or perhaps more than one connected with the Public Service Commission. Do you recall the names of any of the Commissioners to whom you made application for this information? A. I should refer more par- ticularly to that member of the Commission which the public usually approaches for information, viz. — Travis H. Whitney, the Secretary. Q. Did you make any requests of any members of the Commis- sion itself for this information? A. I think our counsel would have to answer that question because most of these requests came through counsel. Report of Joint Legislative Committee 131 Q. Is your counsel here ? A. JSTo, sir. The fact remains, the fact I want to bring out is that the records clearly show that on April 14, 1915, a large number of organizations, including the Fulton Street Protective League, Committee of One Hundred Property Owners, Committee of Manufacturers' Association and other organizations appeared in vehement protest. Q. Before whom? A. Before the full Public Service Com- mission, before Hon. Edward E. McCall, Hon. Eobert C. Wood, Hon. J. Sergeant Cram, Hon. William Hayward and Hon. George V. S. Williams, all present. There were some very pertinent facts brought out at this hearing. Q. Have you the record of the hearing? A. That's an official report of the hearing. (Witness exhibits same to Senator Lewis.) Q. This is about two months ago? A. In April. It would only take a minute, I would like to state that the substance — Q. The substance of the protest was to stop the work ? A.' Was to stop the work of the building of this great viaduct inasmuch as it was not contemplated by the contract. Q. Did the contract say that? A. Yes. The consents which the Railroad Company sent out for the signature of the property owners said substantially : " Being an additional track to the existing structure." The contract and the certificate itself sub- stantially state that it shall be an additional track. Senator Lawson. — Now, Mr. Carpenter, you say that the con- tract, specifically pointing to the form of consent and to the certificate, called for a third track to the present structure? A. Yes. Q. What reference, if any, can you make to the dual subway contract under which the B. R. T. is working. You specifically state the contract between the property owners and the. railroad roads that it shall be a third track to the existing structure ? A. I think that is a provision of the contract. In the legalizing of the third track on Fulton street it was necessary under the Rapid Transit Act to obtain the consents of the majority in value of propeirty abutting on Fulton street and these consents came from the railroad company. 132 Investigation of Public Seevice Commissions Q. That is the form of consent ? A. Yes. Q. That had nothing to do with the dual subway contract? A. I did say subsequent to that that the contract and the certifi- cate issued by the Public Service Commission specifically said that it was to be an additional track added to the existing structure. Senator Lewis. — Would you mind coming again this afternoon and in the meantime would you like to select from the record which you have, other parts which you would like to have read into the record of this Committee ? That would be a very simple way of doing it. A. Then I would like to present copies of the official brief submitted to the Public Service Commission bearing on this subject. Senator Lawson. — Mr. Chairman, do you want to ask Mr. Wilcox any questions? Chairman Thompson. — I think if Mr. Wilcox could appear tomorrow morning at eleven o'clock it would be better. Mr. Wilcox. — That will be satisfactory to me, Mr. Chairman. Mr. Carpenter. — Mr. Chairman, I would like to introduce to your Committee Mr. Edward W. Haviland, a large real estate operator of Brooklyn, who would like to make a statement to your Committee regarding the Pulton street situation. Edwaed W. Haviland, of No. 403 Grand avenue, Brooklyn, ]Sr. Y., appeared before the Committee and made the following statement: I am a member of a real estate firm of Brooklyn, N. Y. We are located at 982 Fulton street, Brooklyn. Senator Lewis. — And you have been engaged in real estate business for some time? A. Upwards of thirty years. Q. You are familiar with real estate and real estate values along Fulton street ? A. I have been in business for that length of time and have a knowledge of real estate values there. Q. You want an opportunity to express your views of the third tracking of the elevated structure in that street? A. I would like to do so. Eepoet of Joint Legislative Committee 133 Q. Proceed and dictate to the stenographer just what you care to say. A. It is my understanding that the charter of the elevated railroad on Fulton street states positively that it is to be a two- track road. The people who were approached to give consents were, in many instances at least, informed that it were merely a spreading out of the rails and adding a third track in the middle and the consents were obtained on that representation. Q. For the third tracking ? A. To the existing structure. Yes, sir. There was no movement of the property owners until they discovered what was being done. Q. State just what is being done ? A. They removed the posts and replaced them with heavier ones, removed the cross girders and put in new solid cross girders instead of the open lattice ones. Some of the new ones are nine feet in height. Q. Cross girders? A. Yes, sir. Others are six and seven feet in height. They are raising the road in consequence of that so as to give head room and they are putting on girders from one cross girder to the other and solid girders on the outside, putting them on nearer the buildings than the old ones. That necessitates widening the space between the supports. There would have been ample room for a third track on the existing structure as it exists west of Nostrand avenue by spreading out the tracks as they said that they were going to do. There were different organizations formed and the Public Service Commission was appealed to. Q. Did you participate in any conference with the Public Serv- ice Commission members ? A. I did. Q. What Commissioner? A. I was at the general meetings that were held either by the different committees, public meet- ings, and I was at a conference held with President McCall and Mr. Williams. Q. Was this matter explained fully and in detail to the Chair- man of the Commission, Judge McOall, and to Mr. Williams? A. That was after a meeting we had had with the Board of Esti- mate. We were pretty much discouraged at our meeting with the Board of Estimate. Q. Whom did you see ? What members did you discuss the mat- ter with ? A. I did not enter into the discussion. Q. It was in your presence? You say you felt discouraged 134 Investigation of Public Seevice Commissions with, the result of the hearing; now who was there? A. There was Borougli President Pounds, Mr. McAneny, and at one meet- ing Comptroller Prendergaet and our only hope, Mr. Matthewson of the Bronx. Q. After that meeting you saw the members of the Public Serv- ice Commission ? A. The Chairman and a part of the time Com- missioner Williams was there. Q. And the effect upon real estate values called to their atten- tion ? A. Yes, sir. And at tbe meeting of the full Board it was called to their attention. Q. Who were present at the meeting of the full Board of Com- missioners ? A. All. the Commissioners. Q. Was the fact that the structure was being constructed in violation of the terms of the consents originally granted called to the attention of the members of the Commission ? A. It was and we also claimed that they lacked the proper number of legal consents. Q. Was the fact called to the attention of the Commission that the original franchise obtained by the company from the city limited the character of the structure to the lattice girder type? A. It is my recollection that that statement was made by Mr. Squires, our attorney, and also the statement that they claimed they did not have the proper number of legal consents and of the representations made to the people when some of the consents were obtained. I would like to say tbat before the Board of Estimate the statement was made that the plans for thisi road had never been up before them and they claimed that it had and that was the plan. Q. Who claimed tbat it was ? A. Mr. McAneny claimed that the plans had been up before them and said he could give a copy of the plan. It merely showed three lines. They set the two outside ones with the existing structure and tlie other one was the new track and that is the only plan that was ever submitted to the Board of Estimate, as I understand it. Q. It was prepared by the Engineering Department ? A. That is my understanding of it. Q. That was at the meeting of tbe Bo^rd of Estioiftte? A, Zee, Repoet of Joint Legislative Committee 135 Q. Was this plan submitted at tlie meeting before the Public Service Commission of which you have been speaking ? A. The question was raised as to the plan being submitted by the Board of Estimate. Q. I know, but was this plan submitted at the meeting of the Public Service Commission to which you have referred? A. I cannot state positively on that. It is my recollection it was. I wouldn't say positively. It was referred to, I am sure of that. Q. Do you recollect what was said by any member of the Pub- lic Service Commission? A. 'Ko. I don't think I can. They seemed to try to shift responsibility from the Public Service Com- mission to the Board of Estimate and from the Board of Estimate to the Public Service Commission and I came to the conclusion at the meeting of the Board that the Public Service Commission would grant anything the B. E. T. wanted. Q. You are unable to state what, if anything, was said on the subject which led you to reach that conclusion? A. We have the statements made at that meeting, part of the minutes, and I prefer to have it exact as it was said and not from my recollection as to the substance of it. Q. What is your opinion, what is the efFect, probable effect, upon real estate values if the Public Service Commission sihall fail to prevent the completion of the structure as planned ? A. At the present time our tenants — some of them month tenants — it is' impossible in many cases to secure tenants at any terms. I am speaking now about west of l^ostrand avenue because they seem to expect that the B. R. T. can get anything it pleases and they do not want to move it where they would have the noise and nuisance that would come from it. Q. How close to the average structure will the north track on Fulton street be ? That is, generally speaking ? A. I have not the exact measurement but I think Mr. Carpenter has it. Q. Can you give it approximately ? A. It is over the sidewalk. Q. And the same on the south side ? A. The same on the south side, both the same. Q. And at what height in reference to each story of the apart- ment houses ? A. It comes in front of the second story. I think it is a raise of about three feet from its present h^iglai, 136 Investigation of Public Sebvioe Commissions Q. What do you say, Mr. Haviland, as to the effect upon the assessed valuation of that property if this structure should be completed ? A. To my mind it would be ruination to the street and the assessment will fall from 25 to 33% per cent, at least, which will redlice the income to the city from taxes. Q. And that would be due entirely to the construction at this addition to the elevated road in that street ? A. That is what I am speaking of. Of course there would be a greater difference than that if we had a subway instead of an elevated. Q. Do you think of anything further? A. I don't know of anything. Q. Any question, Mr. Shuster ? Mr. Shuster. — No, 1 think not. Chairman Thompson. — Of course we are not a Committee to diagnose the tax situation that affects the city of New York by which they are jjaying too much taxes. We heard that all winter but there are three .subjects that have boon befoi'o the Committee, at least, about this diHcrimination in ferry c-harf;;oM between Staten Island and Manhattan and Brooklyn, the rental on the Brooklyn bridge and this Fultnn Street elevated. Sometimes it seems to mc as though perhaps I should write a letter, which maybe I will, calling the attention of the city to a few items of taxes they have been paying that they might save, put in better shape at least. For instance I think of a matter called up in the ferry proposi- tion, that the city is now spending a million dollars a year that they could save in time of officials in writing letters to each other and to you citizens, saying that they will take the matter up tomor- row or will give it consideration and at some future time put it off. I think that is costing the city a lot of money. A. Personally I have not caused much of that. Chairman Thompson. — Anyhow you have heard of passing the buck. I think they brought one to New York. I think your officials in the city of New York is evidenced by the number it has. They pass it to the Board of Estimate and then they pass it back to the Public Service Commission; then they pass it to the engineer and department of counsel. It has been costing the city, Iv:iiii' (iii;!;iii('(ir of {\\(\ I'liblid S('r\'ic.(i ( ImniiiiHHioii in (inn of Uio iiiomI, iuii'iuwI, woi'kiM'H lliiil I li;i\'o dvnr Mdoii In doinfi; iiiiylJiiii^- iJio It. i:. '1'. wmmLm. ( 'liaii'Miiiii 'riioiii|iMoii. \\'(i lni\'(i nol, linen iiblo l,o lind wIku'o Uio liuck in iinil I l.liink lliiil, in ii|i|iiii'(nil,l_y wliiiL you wani,. 'I'luu'O in II (Min{il(^ ol' Miillion (IoIIiu'h ii Mi'oniM MJioiild bo siivotl, iiiui of (•oni'Hi* IIkm'o Ih tJio (|n(iHl.i()n of IJkv LoIIh and I'cnLMJM on iJm brid^o, II larf','o iniilioii Iohh, ( 'oniinJHMioiKM' ( VoiiHoy found voHl.oi'dny, nn I.e^'iMlnlure. Senator l.iiWHon. — 1 iini \ovy conrKlenl, from my (ixperienoo, hiniiii;; been down in lirooklyn iind lived t.lier<( nil my lif(< and having;' an iiilimalc kiio\vled;;e of the city and iln workiui;-, tJial, (ireal,t>r New \'oi'k in more ripe for Iumiu\ rule today than it. has been for i(Mi year^ pa-if and won"!- be for f(Mi yeai's hence unle.sn we jiftit, Hom(< kind of active ollicialn, compefent, oIlii'ialH, w)io can adniinislci' (he nlTairs id' the city. Mr, lliniland, I know a new as8ecialic>ii ovim' in Hrooklyn in whioh the I!. Iv. T. biiH taken Iwenly live meinbersbips in it, t,o Ht,art, with, 'riiiif .sliows flu^ir pow(>r. 138 Investigation of Public Seevice Commissions AFTERNOO^T SESSION Meeting called to order by Chairman Thompson at 2:30 p. m. Eev. Father Beleokd, of Brooklyn, N. Y., appeared before the Committee and made the following statement: Chairman Thompson. — Father Belford, this Committee has been taking up various things in ISTew York. We came down here last winter to investigate the Public Service Co mm ission, Public Service Commissions Law, Public Service in general. We were to report back to the Legislature and report in our judgment whether the Commissioners were conducting themselves as they should and also whether the law needed any change or was perfect or had proven to be a necessary part of our statute. Starting in with that investigation, before the adjournment, the Legislature was adjourned before our task was completed, almost all of the time having been taken up in questions of personnel of the officers, so that the Legislature continued our existence with the same powers as we originally started out with and some additional privileges. Coming to the Bar Association, where they had law books, we determined because there were so many requests in various ways that we would investigate any inatter that came to our attention if it was within our power. Among other matters was the one on Fulton street in reference to the construction of the new elevated line and we have gone into that to some extent. We have to keep in mind in our investigation that we are concerned with Public Service and the Public Service Law ; also whether or not there has been any remiss or inefficiency or anything of that sort. This particular subject is only one in many. We are going into this matter to whatever extent seems necessary. We cannot sit here in New York long for several reasons. Of course state- ments are necessary to some people. I would like to sit and listen to them all, but I have another Committee next week and I will be back in September and finish what we don't do now. We have heard some merchants from Brooklyn and we would be glad to hear from you and the Committee will deem it a favor, of course, if you can enlighten us on any subject that seeks to benefit the Public Service. A. I would be very glad if you think it is worth while. Repoet of Joint Legislative Committee 139 Senator Lewis. — We would be very glad to hear from you, Father. Chairman Thompson. — Senator Lewis ia our Counsel, Father. By Mr. Lewis: Q. I suppose, Father, you are a resident of Brooklyn and of that part of Brooklyn affected by this Fulton street construction work that is going on ? A. I am. Q. You have knowledge of the conditions that exist there ? A. I think I have a thorough knowledge. Q. Won't you then be good enough to tell the Committee in your own way what you know of the situation and your views thereon and what in your opinion should be done to correct con- ditions which may not be what they should be ? A. Well, of course, I am not a transit expert. I don't know a great deal about it. I know this, that the section in which I live is one of the oldest in Brooklyn and a very thickly populated section. Q. Would it not be well, Father, to state your address? A. Our address is on Clawson avenue and Madison street. It's called the Bedford section of the city and the church of which I have charge was built in 1&71, so you see you can say that sec- tion has been built up for a good while and we are counting on a new church. The other churches of the neighborhood have been there since the forties. The population, as I said, is very large and we have several transit lines that are running right through the section, the means of communication with down town and practically with Manhattan. 'Now it is almost impossible for us at the time of day when these roads are crowded to get even standing room on any of the cars at the rush hours, as they are called. The people get on in such large numbers to the east of us in the morning that when they reach our neighborhood we havo to wait sometimes for two or three cars before we can even get standing room. At night it is the same way when they are coming back from New York. We can hardly get on them at all. Then we have the IN'ostrand avenue, the Ocean avenue, the Franklin cars running north and south going to the beaches, and to the ball grounds, which of course is a great attraction. It is impossible 140 Investigation of Public Seevioe Commissions to get on one of these cars when they reach our neighborhood. I go to the ball game every day when there is a game. I never go when there isn't one. I regularly have to wait and get a chance to stand on the rimning board of a car. We have complained to the Public Service Commission over and over again. That is the greatest reservoir of kind words that I have ever heard of in this world, the Public Service Commission. They never put you off with a sore heart. They say they know these conditions exist and they are doing their best to remedy, but nothing is done. Now, in regard to the elevated, that is something I know a little about. The elevated lays two blocks from my house and there is no ques- tion about it running. We know that perfectly well ; also probably the worst elevated construction to-day, that structure on Fulton street, the old structure. They are rebuilding now and they claim it is the latest structure. I believe unless there is something done to strengthen it that they will have a calamity on Fulton street before very long. It was understood that they were to add a third track to the existing structure there. The construction which they propose is a destruction to light and air and it is a real detriment to property, particularly to the tenement houses along that street. The result has been to drive out a very desirable middle class of people who occupy apartments. Their homes have been taken away and pass into the hands of tenants, Jews and ISTegroes who will go wherever they get a roof over their head. For some time we have been working as far as we were able to go to do away with the erection of the third track on Fulton street because we believed that if the railroad were rebuilt and adapted for the third track, that it would make that railroad permanent. It has been the fond hope of some of us that we might be able to get a subway through that section and do away with the elevated. When this third tracking project came on, we hoped that we would be able to perfect it. We went to the Public Service Commission and protested it on the grounds which I have just mentioned and that it was detrimental to property and was a nuisance. Q. What Commissioners were present, Father ? A. We began with the Public Service Commission when Mr. Wilcox was the Chairman, but that third-tracking was not then the prominent feature. We were then opposing the extension of the elevated Eepoet of Joint Legislative Committee 141 railroad through Franklin street. Then the third tracking was taken up with Mr. McCall, Mr. Cram, Mr. Maltbie, Mr. Williams, I am not sure that the present Chairman of the Commission was then present at the meeting. He was present at one, I think. Q. Mr. Hayward ? 'Chairman Thompson. — Mr. Hayward is not Chairman. Mr. McOal'l is still Chairman. Father Belford. — I thought Mr. Hayward was Chairman. Anyway, they were all present, and while they attempted- — By Senator Lewis: Q. Excuse me, Father, did yon mention Mr. Wood ? A. I don't remember him. IsTo, sir. Q. He is at present one of the Commissioners and has been for the past year. A. He must have been presemt at the last hearing that we had on the third tracking because we have had hearings, I think, in April ; we had one or two and very earnest heaTings they were, too. Q. Mr. Wood wasn't there? A. I don't know anything about that. I don't know the gentleman. At these hearings we insisted on what they were doing. We told them they were building a new railToad. That promises had been given to add a third track to the existing structure and that the existing structure then had a third track from another point to T^ostrand avenue. We told them that we saw the misrepreisentation as soon as they began building the road; that instead of lattice girders they were installing the heavy plate girders and that was obstructing the light and air, and further that we thought they were prepared to operate a railroad system there not only for passengers but for freight. Q. On that phase of the situation, Father, what basis is there for the supposition that the road is likely to be used for freight? I wonder what the basis is? A. The only reason I have to say that is T believe there is nothing in the franchise that positively excludes it and that there is in their franchise something that does permit it. T have never seen a copy myself. Q. I suppose it is conceded that it will be possibly a physical connection with the new proposed marginal railroad ? A. They can have connection with the new marginal railroad and they caD 142 Investigation of Public Seevice Commissions have a physicail connecitioai witihl the Long Island Railroad at Atlantic avenue. We act on the STi'pposition that anything that will bring in revenue is not only probable but almost certain for the B. E. T. This structure has been erected through the largest part of the city and our worst fears have been realized and they obtained consents of the property owners for this structure under fails© pretenses. I think we have a large number of affidavits. I think Mr. Carpenter can tell you. Q. Do you know how many ? A. Aggregating over two million, dollars. There were nearly three hundred, were there not, Mr. Carpenter ? Mr. Carpenter. — I don't know the exact number. (Witness continuing). — I made the statement that a number of good 'Straight people who were willing to make affidavits' when I was called a liar by Mr. Bullock, of the B. E. T., but we took it up in a regular official way and these affidavits all declared that the situation was absolutely misrepreseaited to them. They were told it was' simply to add a third track to the existing structure. Q. Who made these statements? A. The attorneys for the B. E.. T. who went around to the property owners to get their con- sents. ISTow I believe that the Corporation Counsel has declared that this thing is a nuisance aud that the Board of Estimate had no right to give permission for its erection. Q. Isn't it because the Board of Estimate has not given per- mission that the Corporation Counsel 'holds that it is a nuisance? A. I don't know. Our position has been that of a " shuttle-car". We go to the Board of Estimate and they tell us that the matter is in the hands of the Public 'Service Commission, thereafter send it back and say, " Gentlemen, we agree with you, really this thing should not be, and as soon as the Board of Estimate furnish the facts we will eliminiate this condition." That is the way they do and in the meantime nothing is done. Q. Has there been any action on the part of the Public Service Commission to prevent the erection of this structure ? A. I don't think so. Q. Has the fact that the B. E. T. is erecting an improper structure there been called to the attention of the Public Service Commission ? A. It has been thrust upon it, fotced upon it day Repoet of Joint Legislative Committee 143 and night by opinion, by public meetings and by public hearings, mass meetings, all that sort of thing been forced upon it. The Public Service Commission cannot ignore the fact that this has been forced upon it. Q. That is the fact that the structure as being erected now is not in conformity with the plans as approved by the Public Service Commission was called to their attention ? A. We had no knowl- edge that these plans had been approved by the Public Service Commission until we saw the structure in course of erection. When we discovered what was going on, we cried out against it. They then said, " You are right, but you are too late." Q. Has the attention of the Mayor been called to this situation ? A. I think it has throug- sioner may in his discretion put meters on water services, on business premises, and tbat with the consent of the Board of Aldermen will not require meters installed on residence premises, and wihere meters are installed under the act the sale of water shall be by meter rate. That was to be determined by the Board of Aldermen, so that we have a double system of rates and are unable to get away from it in our own discretion. Q'. The charter, however, was formed by a commission com- posed of individuals appointed by the Governor. I know that the Greater New York charter was adopted over tihe veto of some of the municipalities included in Greater New York. So far as any individual provisions of the charter is concerned, it would take unlimited research to find out whether it was formed by citizens of New York. Q. Is there as a matter of fact a general use of meters within the city ? A. No. In lie exercise of his discretion tihe Commis- sioner of the Department of Water Supply has required the prop- erty owners to install meters on practically all business premises except th'Ose where the consumption was very small, so that the installation' of a meter was regarded as an imposition upon the property owner and as not bringing any additional remedy to the city. There are about 100,000' meters on the city service and ■about 250,000 frontage rates accounts. Q. How many services are unmetered? A. About 250',0O0'. Q. Are you able to state what the approximate average con- sumption per capita per day in New York city is at the present time ? A. 'Our engineers estimate that tihe amount of water con- sumed, that means used for domestic or industrial purposes or for free public use or loss through leakage, is about one ihundred gallons petr capita per day. Vol. 1 — 6 162 Investigation of Public Service Commissions Q. What proportion of that one hundred gallons per capita per day is metered? A. What proportion of that total' amount of water is paid for under the meter rates ? Q. Yes. A. I cannot tell you offhand. It would take a little time. The total amount of water, if the city received pay at meter rates for the entire year of 1914, was about 6,4:00',00'0,0O0 cubic feet, which means 48,0O'0,00O,0OO' gallons. Q. Will you give me those figures again. Commissioner? A. The total amount of water to be paid by meter if meters installed entirely was about 6,4:00',00'0,{)O0 cubic feet Q. That means in gallons ? A. That means seven and one-half times as many gallons, or approximately 48,00'0,000,00'0 for the entire year. Q. Approximately five million people in the city? A. Tes. There are supposed to be somewhat more. Q. Figuring on the gallons per capita per day for five million people would make about 182,500',00'0,0'00 gallons and forty-eight would be about one-fourth of that. And the most of this you are serving without metering ? A. Yes. Q. And the consumer uses as miuch or as little as he pteases? A. An effort is made, which is more or less successful, by Inspec- tors of Leakage and Waste to check waste through leaky fixtures, and whenever a campaign for Testricting the use of water is carried on through these inspectors the consumption is inevitably decreased for the time being at least. By Senator Lewis : Q. About what rate per thousand gallons is metered water paid for ? A. The rate is ten cents per thousand cubic feet, which is equivalent to 13 1/3 cents per thousand gallons. Q. What is the rate to the non-metered consumer ? A. That is a very complex printed scheduled rate which depends upon the width of the houses, the number of stories, and so forth. Q. Now, what I want to know. Commissioner, is this : Doesn't the fact that three-quarters of the consumption of water in 'Hew York city is unmetered furnish opportunity, at least, foT dis- crimination for or against individual consumers ? A. It does not furnish opportunities for discrimination for or against individual consumers. It furnishes opportunity, as every system of that kind does, for individuals to waste water. Report of Joint Legislative Committee 163 Q. Does it furmsli an opportunity for an inspector, wiliose duty it is to ascertain, for instance, the number of fixtures in one house, to report a lesser number than actually exists while Teporting the actual naimber in some other houses ? A. Of course that is true, and. ronist necessarily be true, and has to be guarded against, but that is also true with the meter system because the meters have to be read every so often, and the man who Teads them might report wrong readings, might tamper with the meter. Q. But the register would be there and would furnish a means of discovery and change of meter might have been made, would that not be so — A. We do not. The department is strongly in favor of extending the meter system sufficiently to enforce meter- ing. We are trying to work out a plan through which that can be done. This will require legislation, and I hope you gentlemen will' keep that in mind when we come to ask you next winter. Chairman Thompson. — I think the city of New York has usually found the Legislature very considerate of their requests for legislation. By Senator Lewis : Q. As a result of your experience during the many years that you have devoted to the study of public utility questions you would favor uniformly meter systems, would you not ? A. I would favor uniform metering with the possible exception of a Telatively small niumber of premises where the use of water is very small and the cost of maintaining the meter would be expensive. In a general way I say yes to your question. Q. Would you expect by the adoption of a uniform metering sys- tem to reduce the possibilities of discrimination ? Is that not so. Commissioner ? A. We would. Yes, sir. Q. And you would expect to reduce the waste ? A. Yes. Q. iN'ow, what do you know about municipally owned ferries of the city of New York, Commissioner ? A. ISTo, not anything about them personally. Q. Would you feel that a ferry is a public utility when owned by a private corporation? A. Yes, sir. Q. And should be subject to regulation by the State? A. Yes, sir. Q. Would you feel that a municipaHy owned ferry ope!rated in 164 Investigation of Public Seevice Commissions competition with a privately owned ferry should be regulated ? A. I can answer the question a little more at length. Q. Answer it in your own way. A. In the first place, we in New York have no municipal ferries operating in competition with privately owned ferriea There is no competition between them. In the second place, when a city undertakes a utility service under authority from the Legislature, which must have that authority, it seems to me that it ought to be legal to operate the utility according to its own financial plan. For example, the ferries to Staten Island all were taken over some years ago, had been operated at a loss by private companies with poor service. The city as a part of the policy of developing Staten Island, which is somewhat remote from the other portions of the city, took over these ferries, and have been, as I understand it, operating them at a loss, as a part of a system to equalize conditions between the out- lying sections of the city. Now, if the city wishes to maintain the ferry either to pay for it entirely out of taxes, or to pay for it partly out of taxes, I think it should be allowed to do so. It does not in this case, however, come into competition with' any other ferries. Q. Assuming that the municipally owned ferries were operating in competition with privately owned ferries, wouid you think it desirable to regulate the municipally owned ferries in the same manner as the privately ovraied ferries ? A. The result of compe- tition between municipally owned and private companies, under competition, of course would necessarily be disastrous to the private company, and the private capital invested. Q. Your answer to that question would have to depend upon the circumstances? A. That condition does not exist in New York. Q. It might, however, assuming that municipally owned ferries were operating in competition with privately owned ferries, it might be possible that the municipally owned ferry could drive the privately owned ferry out of existence ? A. Yes. It might be so. Q. And would, I think, regulate privately owned ferries for the purpose of insuring adequate service, reasonable rates, and for the prevention of discrimination, would you not? A. Yes, and for safety. Q. Now is there any reason w^hy municipally ovmedi ferriea Report of Joint Legislative Committee 165 should not be subject to the same requisition for' the puTpose of insuring adequate service, reasonable rates and for the prevention of discrimination? A. There is every reason, because a munici- pally owned ferry is subject to the control of the people who have the seTvice just the same as the Public Service Commission, which you would have to appoint, is subject to the control of the people of the State. Q. That is, the people of the State, would have control as a mass? A. The people of the city, having the election of their officials who operate the ferry, are in a position to correct the evils, the discrimination, or to effect charges or inadequate service because their officials are resjponsible to them. Q. And it must be necessary, of oourso, to call to the attention of the people of the city responsible for the selection of the officials who administer the affairs of a municipally owned ferry the fact that there is inadequate service, or that the rates are unreasonable, or that there is discrimination ? A. That would naturally be the case. Q. Is that an entirely practicable solution in a city of five mil- lion inhabitants? A. I would say yes, for the reason that you cannot get any easier or any different way, because if you refer it to Public Service Commissioners or any other public body, then, to be sure, we are dealing with not only the five million in New York City, but the ten million people in the State. Q. How long have you been connected with the city govern- ment ? A. I have been connected with the city government for about a year. Prior to that time I was connected with the Public Service Commission. I had nothing to do with the matter of the operation of the municipal ferries, and the complaints in regard to the ferries would not come to me officially. Now, it may be that there have been complaints with refeTence to discrimination between different sections of the community not getting the same rates. That is quite possible. Q. During the past eight years, at least, you have devoted a good deal of your time to the study of this public utility problem, have you not ? A. Yes. Q. And prior to that time, had you made a study of the sub- ject? A. I had been interested in city government generally, including public utilitie.9. 166 Investigation of Public Service Commissions Q. Do you know of the fact that a mimicipally owned ferry operates between South Ferry and St. George, Staten Island ? A. Yes. Q. And you know of the fact that a municipal'ly owned ferry operates between South Ferry and 39 th' street, Brooklyn, Bush Terminal, so-called? A. Yes. Q. What would you say as to the propriety of the same rate for the two lines? Are the natural conditions such that the rate for these two lines should be one, or that there should be a greater rate for one ferry than the other ? A. I hate to answer that ques- tion, because I think I have been on the 39th street ferry about twice in my life, and perhaps a dozen times on the other, and have never studied the situation from that standpoint. I don't at this moment, I wouldn't at this moment say what the difference in mileage is. Q. Does the question of the difference in mileage enter into the matter in practical operation among ferry companies ; that is, does it make any real difference whether it is font miles or five miles ? A. I should think so. Q. Do the rates vary as to the length of the haul? A. As I understand it, they do among the private ferries. Q. Among the railroad ferries, you mean ? A. I have not gone into the ferry situation sufficiently to give you very much information on the subject. Q. Is there anything in the situation, Commissioner, so far as you know of the situation, that would justify a charge of double the amount for the transportation of a loaded truck from St. George to South Ferry and return of that truck empty over the chaTge for the transportation of the same truck from Bush Ter- minal from South Ferry and return of the empty truck to Bush Terminal ? A. I hesitate to go much further into the details of the ferry business, because I have never given it any study and don't know the conditions. Q. It is your opinion, that municipally owned ferries should not be subject to the jurisdiction of the Public Service Commis- sion, except as to the methods of accounting, perhaps? A. I would say that where they are not, certainly where they are not operating in competition with private ferries, that the municipality should be allowed to operate them according to its own financial policy. Eepoet of Joint Legislative Committee 167 Q. Even though it may happen that the municipal policy results in a double charge for the sei-vice running between South Ferry and St. George over the charge for the same service between South Ferry and Bush Terminal ? A. Yes, that might be so, because the question of the charge for carrying both passenpers and especially for carrying freight is, and may properly be, largely a matter of cost, and that is a question for the municipal authorities who oper- ate the ferries and are responsible to the people who elected them to determine. Q. Can you say whether or not, Mr. Wilcox, that a municipally owned ferry would be managed in such a way that those respon- sible for the opeTatioEs of that ferry would be able to state cor- rectly the cost per ton mile of freight transportation ? A. I would expect that the official responsible for the operation of the munici- pally owned ferries would be able to furnish, without hesitation, information as to the cost per ton mil© for the transportation of freight upon those ferries. Q'. A privately owned corporation would be apt to know the cost per ton mile for freight transported, would it not ? A. I cannot say. Q. If regulated by the Public Service Commission, it would be required to know? A. If regulated by the Public Service Com- mission, you would have reason to expect that the accountant, the chief accountant of the Public Service Commission, upon inquiry, would be able to answer that question. By Chairman Thompson: Q. I want to ask you la question, Commissioner. Do you think the City of New York should be permitted to ran itself without any regulation, or, as everybody else, should be regulated? If they operate a public utility, do you think the city should be allowed to regulate that utility, and thereby cause discrimination according to the facts which have been placed before you in con- nection with the St. George and South Ferry proposition? Do you think that should be permitted ? A. That is covered in the general law. Q. Yes, it is provided in the law, but they don't seem to enforce it. That is the reason why we have Public Service Commis- sioners. A. We have no certainty that the Public Service Com- mission will enforce it, and the reason why the city should not 168 Investigation of Public Seevice Commissions be subject to the same control in the operation of a public utility is that the city itself is a public body that is responsible to the people the same as the Public Service Commission. By Mr. Lewis: Q. Mr. Wilcox, do you think it is entirely safe to leave to the municipal authorities the question of saying whether ot not there is discrimination? A. On municipal ferries? Q. Yes. A. Why, I think it is safe. Yes. Q. I want to call your attention, Mr. Wilcox, to some corre- spondence that has passed between the American Dock Company doing business at Staten Island, and the various city authorities, in relation to this question. On August 28, 1908, the American Dock Company wrote asking for regulation of equalization of traffic charges between the Staten Island Perry and the ferry- operating in Bush Terminal. The assistant secretary of the Commissioner of Docks and Ferries at that time replied under that date, saying that the communication had been received, and the matter would receive attention. On June 25, 1909, the Secretary of the Commissioner of Docks and Ferries acknowl- edged the receipt of a letter on that subject and saying " your communication will receive due consideration." On February 17, 1910, the Commissioner of Docks and Ferries himself replied saying that " Your letter has been received, and I shall be glad to give this matter my attention later on. On March 11, 1910, the Secretary of the Commissioner writes that the Conmiissioner directs him to acknowledge receipt of the communication of the 10th and that " I will give my careful consideration to the mat- ter." On August 2, 1910, on receipt of another letter, it is acknowledged, and in reply the statement is made that the matter will be brought to the Commissioner's attention upon his return. On October 5, 1911, a letter is written by the Comsmissioner him- self, advising that a public hearing will be held upon the subject. On April 15, 1912, the Commissioner replies that the informa- tion which came on the subject of rate on municipal ferries will be given careful consideration. On March 6, 1913, the second deputy commissioner acknowledges receipt of a communication and says that " I shall send it to the Superintendent of Ferries for a financial report." On May 20, 1913, the Commissioner of Repoet of Joint Legislative Committee 169 Docks and Ferries replies, in reply to a letter of April 25tli, " I intend going thoroughly into the details of this complicated ques- tion." On May S-i, 1913, the Commissioner of Docks and Ferries replied acknowledging the receipt of a letter containing further argument for the equalization of rates, in which he says, " I will carefully consider what you say." On January 16, 1914, the Conuiiissioner of Docks and Ferries acknowledges receipt of a letter on the subject, and in reply says, " There is entirely too much disparity in rates between the 39th Street division and the St. George division." On January 21, 1915, the Commissioner of Docks and Ferries replies that " The matter has been receiving my attention for some time past." On January 27, 1915, the Secretary of the Commissioner replies, " The Commissioner is now giving this matter his careful attention." On February 2, 1915, the Secretary of the Commissioner replies that the Com- missioner is considering the question and will be able to make a report upon it in a short time. On February 1, 1915, a com- munication was addressed and mailed to the Mayor. A reply on the 10th of March, a matter of forty days, was received, stating that the matter would be referred to the Commissioner of Docks for report. On the 22d of March, 1915, the receipt of a letter is acknowledged and the secretary advises that the Mayor has asked for a report and that he expects that a report will be made within a very short time upon the subject. On April 12th, the City Comptroller advises that he has received a letter upon this sub- ject, and in reply states, " I will confer with the Commissioner of Docks upon the subject." On April 12th, the Executive Secre- tary of the Mayor replies that the Mayor directs him to acknowl- edge receipt of your letter and to say that he has asked for a report on your suggestion. On April 14, 1915, the Secretary of the President of the Borough of Manhattan replies that the mat- ter has been brought to his attention and is receiving his earnest attention. On April 22, 1915, the Commissioner of Docks and Ferries replies to the Comptroller, in which he said that he will prepare and submit a report upon the entire subject in the near future. April 30, 1915, the Secretary of the Mayor replied that the Department, referring to the Department of Docks and Ferries, will be in position to report to the Sinking Fund Com- missioner within a short time. On May 19, 1915, the Chief 170 Investigation of Public Service Commissions Clerk in the office of the Board of Estimate and Apportionment replies that the matter has been brought to the attention of the Board of Estimate and Apportionment, and has been referred to the Committee on Tax Budget, and on July 21, 1915, the Ameri- can Dock Company of Staten Island is advised that the report of the Committee on Docks have referred the question of equitable ferry rates to Staten Island and South Brooklyn, to the Commis- sioner of Docks. That is where the matter started in 1908. 'Now the American Dock Company comes to this Committee and asks that the Committee recommend legislation providing for the regu- lation by the Public Service Commission of the operation of the municipally owned ferries in order that that company, engaged ia the transportation and the maintenance of docks for the loading and unloading of ocean-going freight, may obtain relief from what it claims to be a discriminatory rate of $1.40 imposed upon freight passing through its docks, as against a rate of what it claims to be 70 cents for the same kind of freight business through the docks of the Bush Terminal. Do the facts disclosed by this correspondence in any degree operate to change your views upon the subject of the desirability of the prevention of discrimi- nation in municipally operated ferries by State regulation? A. If my recollection of the newspaper reports of your investigation last winter is correct, this record is comparatively short aid sim- ple, as compared with the record of delay which was brought, out in regard to some public service matters. I don't know the merits of the case and I really don't know that there would be any objection to having a State body or any impartial body have the right to investigate the question of discrimination between localities, and yet you can readily see that this primary question of policy of the city of New York in operating these ferries as to whether it shall charge the same rate for a ferry where the distance is longer, and therefore the cost greater, in order to give complete equalization of conditions in these different parts of this territory. Now that is the real question. Q. You would expect that if the rates are different for the transportation of freight between South ferry and to different points, that there would be some information, at least, which would lead to a determination of the cost per ton mile for transportation of that freight in order that a rate could be fixed ? A. Yes. Eepoet of Joint Legislative Committee I7l Q. Let me ask you if it be made to appear to you that the ferry operating to St. George is operated at a small profit to the city, •while the ferry operating to Bush Terminal is operated at an annual deficit of $100,000, would that make any difference in your view as to the propriety of regulation? A. It would be a fact which should be, and which I have reason to believe would be taken into consideration, certainly in the long run by the munic- ipal authorities, in establishing and re-establishing rates of ferries. Q. You mean by the long run, a reasonable time? A. Yes. Q. What would you regard as a reasonable time? A. When I say in the long run, I mean in the course of the changes of administration. If it were established as the fact that the St. George ferry has been operated at a profit annually since 1908, while the other ferry has been operated at a loss all of that time, I would say that the municipal authorities were derelict in not making a readjustment of rates unless it is shown that there is good reason. It would be my judgment that they were derelict in their duty if they did not make a readjustment long before that time. But there is no proof, we have no proui, that decision would be reached quicker or that any change would be made under regulation by the State Commission. Q. But a proper measure placed upon the statute books might be expected to provide for a determination of a question of this character within a reasonable time, otherwise it would not be a proper measure? A. That may be done just as readily in the Charter of the city of ISTew York, as in the Public Service Com- missions Law. Q. And you think it would be applied just as readily by local authorities? A. Yes. Q. And with just as little outside influences ? A. Yes. Q. Let me ask you this question. Just let me say this. Do you claim that any person charging discrimination against munic- ipal ferries would have the right to appear before the Sinking Fund Commission and make his complaint? A. I understand they &K. the rate. Q. Does the fact that no request has been made for a reduction in rate by the Staten Island people, but that the request is rather for an increase in the rate of the Bush Terminal, have any effect. to 172 Investigation of Public Seevioe Commissions in your mind, in reaching your conclusion ? A. Why, I wouldn't think so. Q. Does it indicate, in your mind, that any political influences have been potent in keeping down the rate for transportation froin Bush Terminal to South ferry, so that the operation of that ierrj in New York entails an annual loss of $100,000, have any effect? A. If we assume the fact that the one ferry has been operated at a profit while the other has been operated at a loss, through these series of matters, and that the people who were paying sufficient rates so that the ferry can be operated at a profit, cam- plain because the rates of the other ferry were too low, on the ground of unjust discrimination, if these were shown to be facts, it would be a matter, I think, which would properly be investi- gated to say whether they were or not. Q. If Commissioner Smith were to admit in your presence that the ferry to St. George is now operating and has been for a year or two, at a profit, while the ferry operating to Bush Terminal has been operated at an annual loss of $100,000, what would you say on that subject? A. Well, I would say — well, I would like to go through the correspondence. Q. Well, a year or two is a short time as compared with the seven years covered by that correspondence. By Chairman Thompson: Q. The ferry to Staten Island and the ferry to 39th street, Brooklyn, both operated at a loss, and a considerable loss, until Commissioner Smith took charge. Since he has taken charge, the matter of loss has been less in each line until finally the Staten Island line operates at a profit, and the others at a greatly reduced loss. I did not understand how this came about until I learned the other day for the first time that Commissioner Smith is a Republican. A. I hesitate about going into this ferry matter, because it is a subject of which I have only newspaper information. I never had any official responsibility, and have never used the ferries except as I stated. By Senator Lewis : Q. Now, generally speaking, you are opposed, I take it, to the regulation of municipally owned ferries, that is. State regulation ? Eepoet of Joint Legislative Committee 173 A. Generally speaking I am opposed to tlie regulation of munic- ipally owned utilities by a State body, except to the extent, as I have stated, to the regulation of their accounts and reports, so that all the facts may be known. I should qualify that in this way. I am not opposed to a considerable degree to administrative control over various activities of the State. But there is no great reason why a public utility operated by a city should be subject to control any more than there is reason why the police department or the fire department of the city should be subject to control by the State. Q. Of coui'se that opens up a wide range of discussion which we have no time to go into, much as I should enjoy it. From your general statement, I take it that you would be willing to see the State regulation extended to all classes of municipally owned public utilities, so far as requirements for accounting and reporting are concerned ? A. Yes. Q. That includes regulation of the municipal water supply of iSTew York? A. Yes. Q. As well as ferry operations? A. Yes. By Assemblyman Burr: Q. Do I understand you to say that there is no competition, so far as land transportation is concerned, as against water trans- portation to Brookh-n ? A. The competition of the transit lines of South Brooklyn would naturally prevent a great many people from taking the South Brooklyn ferry who might take it if they could not get there by laud. Q. It would not apply to freight business ? A. I suppose not. By Senator Lewis: Q. The 39th Street ferry to the nearest bridge, how much of a haul is that ^ A. I couldn't tell you. Q. I have just one other question. Would you or would you not be willing to provide for the power in the State to enforce such provision as you might think it desirable to incorporate in the act relating to the regulation of accounting and reporting? A. What do you mean? Q. You would be willing that the State should be in position to compel changes in matters of accounting and reporting, would 174 Investigation of Publio Sbevice Commissions you not? A. Certainly. There is no reason why you should have a law controlling certain things and not be able to enforce it. Mr. Lewis. — I think that is all, Commissioner. Is there any- thing further, gentlemen, that you wish to ask? Mr. Wilcox. — You said you wanted to ask me about private water companies. I have given that some little study and would like to express my views. Senator Lewis.— We would be delighted to hear anything you have to say, Commissioner. Mr. Wilcox. — I believe, of course, as a matter of course, that private water companies generally throughout the State should be subject to public service regulation. By Senator Lewis: Q. As all other public utilities ? A. ISTot to the same extent. What I mean to say is that you cannot take the public utility law applying to other utilities and apply it to private water companies and have a correct public policy with reference to it. The situ- ation with reference to New York is this, and it is, I assume, in other communities where the city has a municipal plant, and there are possibly some small private companies serving certain outlying portions of the city. I don't know whether that applies materially or not to the supply of water and the complete control of the supply of water, as is essential to the performance of the functions of fire protection and health, that it seems to me they should never be deprived by any legislative act of the right to go into any section of the city with its own system and render this public service, and the objection, the main objection, as I under- stand it, is that the city of New York had to the so-called Maier bill two years ago, was the prohibition against a municipality putting its main into a territory where a private company had mains, without first getting the consent of the State Water Con- servation Commission. To illustrate our situation, I will show you this map. (Witness indicates.) I cannot leave this with you, but I will show it to you. This is a map of the borough of Queens, showing the territory covered by the franchise and in part by the services of four private water companies. This map shows the Eepoet of Joint Legislative Committee 175 territory served by the city. The city now has traffic mains in there worth probably $700,000. Now, if that law had passed we would be in a position where we would be unable to use these traffic mains, our own investment, except for a through service going across the territory, except on the basis of purchasing these companies' property with the practical exclusive franchise which it does not have. We do not object to the purchase of the prop- erty. We are willing to purchase it at a fair valuation. Q. You had the right to condemn the plant of that company and go to the courts if you couldn't agree with them as to the value of their property ; you had the right to go to the courts and take it, did you not? A. We had that right; we have it now. We don't want to harm them. We have shown no intention that we are trying to run them out of business. We might very easily and quickly say that they have not shown any intention of giving a public service. When you make a law, it must be fair to both sides. I might say unofficially that their rates are higher than the city, and are discriminatory. It is my idea that when you come to make a law, it must be made with fairness and equity to both sides. You know perfectly well that this company has a franchise there which is not exclusive. The city has a fran- chise there and why should the city of ISTew York have its fran- chise taken away from it? Q. Let me ask you, 'Commissioner, was that territory developed originally by the Citizens' company? A. Yes. Just prior to consolidation. Q. And when the territory was annexed to the city it came with the knowledge of the city authorities that the company operated and existed in that territory and served the inhabitants ? A. Some of them. Q. Served everyone by whom the service was desired? A. I don't know that. Q. In any event, the investment of private capital in that con- struction preceded its annexation of that property? A. To a very limited extent. Q. Investment was to a very limited extent? A. Yes, sir. Q. But whatever investment was made preceded it? A. Oh, the investment has been increasing right along. It was a small. 176 Investigation of Public Seevice Commissions almost insignificant plant at the time of annexation, and the city of New York has bought water from the company and has con- tributed very largely to its earnings, so that the cost up to the present time and during its period of development has been con- tributed to a large extent by the city of New York. Q. And the city has had no measure of regulation of the rates ? A. I don't care to go into the details of it. I want to refer you to the sections of the charter. Q. Just a moment. Kegardless of whatever the provisions of the charter may be, there is nothing to prevent the city at any time from taking any line in that territory under the law as it stands? A. To a certain extent, yes. Q. Then what is the objection to the city taking over these plants at a reasonable price, at an equitable price? A. Well, we are now working on the matter of the reasonable price and it depends on who is going to determine what is reasonable. Q. Had there been a gas company operating in that territory when it was annexed, and had the law in relation to municipal competition of existing gas companies been at that time as it now is, would not the situation be parallel to the situation of the water company ? A. If there had been a gas company operating at that time and if the city were operating a municipal gas plant, it would to a certain extent, but much less so because the supply of gas can hardly be compared in its vital importance to the funda- mental functions of municipal government of the supply of water. By Chairman Thompson: Q. You don't see any objection whatever to requiring regula- tion so far as cities or villages may be subject to service by a private company alone, from which they get all their service? A. In all cases of that sort, there certainly should be regulation, and there should be adequate regulation somewhere. It is even more important than it is to protect us, because the city of New York would have a certain remedy anyhow. Q. All I want to see is an act that wiU relieve conditions in other localities and not harm the city of New York beyond what is well and honest and fair. A. The Baxter bill, as passed by the Legislature, was not opposed by the city before the Governor, and in view of the fact that the city made its charter, and by its charter Ebpoet of Joint Legislative Committee 177 has been given the regulation of private water companies as well as its own regulation, the city, I think, I would think it would be desirable to eliminate from such legislation the private water companies that operate in the city of New York. We are endeavor- ing to handle this situation as fairly as possible. That is the report (witness indicating) which we just made out, which fixed the Queens County Company's rate. We fixed the rates under the charter and they accepted them. Chairman Thompson. — I see your position, Mr. Wilcox, and thank you very mu-ch for appearing here to-day. Senator Lewis. — I want to acknowledge on behalf of the Com- mittee the value of the experience before us this morning, and I want to ask you a favor to have you appear again, and as we get a skeleton of the act drawn we will submit it to you. As we draw a skeleton, I will have some copies made of it and submit them to various people, and I think you would like to have one. By Assemblyman Burr: Q. Has the city any water mains in Rockland ? A. Wot at all. Rockland is en-tirely cut off by water from the rest of the city. The only way we can get there by water mains is either by submarines or going around through Nassau county. Q. These rates that they charge there, are they satisfactory? A. The rates were very high, higher than anywhere else. Com- plaint was made last year. Previous complaint had been made four or five years, and dismissed after somewhat incomplete inves- tigation, but upon the complaint made last year, we made our investigation as thoroughly as possible, and this report which T have handed to the Chairman, is the result of that investigation. We fixed that rate, which indicates the thoroughness with which the Department is attempting to deal with these private water com- panies — we found the city was paying much less than the actual cost of fire protection, and we added some twenty-four thousand dollars per annum to the charges which the city will have to pay for water in that district, and took off thirty thousand dollars from the private charges, because we thought it too much. 178 Investigation of Public Seevice Commissions By Senator Lawson : Q. Have the Queens County Water Company accepted? A. They have. Chairman Thompson. — Now, yesterday a motion was made, and in accordance with that, the Sergeant-at-Arms was requested to request the Public Service Commissioners of the First District, and the Secretary of the Commission, to be present this morning at eleven o'clock, and the Secretary is here, and I recognize Com- missioner Hayward is present. Was the Sergeant able to get into communication with the other Commissioners ? Sergeant-at-Arms Charles R. Hotaling. — 'No, sir. Chairman Thompson. — Perhaps the Secretary can answer that question. Senator Lewis. — Mr. Chairman, certain statements have been made to the members of this 'Committee by people interested in property which it is claimed is being adversely taken by the con- struction of the Fulton Street — reconstruction of the Fulton Street elevated road. The character of these statements is such that when they had been spread upon the record of this Commit- tee, it seemed to me only fair and proper that the Commission, having the power to arrange and enter into a contract under which that work was being done, and which it executed, the contract pro- viding for the work, should have an opportunity to be present at the meeting of this Committee, and it seemed to me that they would welcome the opportunity to be present and make such reply to the statements which appear upon the record as they might think proper in the way of explanation and justification, if justi- fication is required. It is my information that the Chairman of the Commission was advised yesterday of the fact that such an opportunity would be afforded him this morning at eleven o'clock, and it is my understanding that the Commission, that the Chair- man of the Commission, has seen fit to disregard that invitation, and that he has absented himself from the city for purposes of his own, and, as I understand it, not upon public business, and I don't know, Mr. Chairman, that this Committee owes any fur- ther courtesy to the Chairman of the Commission. It is a matter for the Committee to determine. I feel this very strongly, that Eepoet of Joint Legislative Committee 179 no further action should be taken by the Committee, in connection with the matters of record in relation to Fulton Street elevated, until such time as the Chairman of the Commission shall have appeared here and made such explanation as he may choose to offer, unless the Chairman of the Commission shall definitely advise the Committee that he does not desire an opportunity to appear for that purpose, and I therefore hope that this Committee will not enter at this time upon the consideration of any matters connected with the Fulton Street elevated structure until we have either the presence of the Chairman of the Commission, or a state- ment from him that he does not desire the opportunity which the Committee has seen fit to offer him. Chairman Thompson. — I found yesterday that they had a buck, what I call the buck, that they passed around down here. I found that there is a week-end that all the officials of ISTew York observe with great care, and that week-end begins just as quick as they can get away and leave the city and stay as long as they can before they come back, and I found that all the Public Service Commissioners except Colonel Hayward were in pursuit of that thing, and Judge McCall didn't start until this morning, and made up his mind last night. I saw him this morning, and he said that he had to get out at eleven o'clock. If we have week- ends up the State, we don't talk about them, and my own personal situation is that tomorrow I had several business engagements that I thought I had a right to take care of, and Monday morning I agreed to meet with the Committee of the Legislature at Magara Falls, which is quite important, but all that can be delayed if I am assured that this whole matter can be taken up Monday morning. Senator Lawson. — Mr. Chairman, I move that we hear the Secretary and the Commissioner that is present. Chairman Thompson. — I am going to make my statement. I am going to continue this observation. Under the circumstances, why, I am willing to take this matter up Monday morning, and stay here to the end that the Commissioners may be present. As I understand it, this is a matter that has not come within the observation of Commissioner Hayward at all. Commissioner Havward is the only one of the Commission present. It is a 180 Investigation of Public Seevice Oommissions matter that goes back a matter of two years. I am willing to stay here if the rest of the Committee are willing, and take this matter up Monday morning. Secretary Whitney. — ■ Mr. Chairman, isn't it a fact that you as Chairman of this Committee had a conference with the Chairman of the Public Service Commission, a conversation with him last night and this morning, in respect to this matter ? Chairman Thompson.- — That's where I got my information. Secretary Whitney. — It was my understanding that I could appear here in respect to this matter, inasmuch as I have a general knowledge of the facts. I assure you there is no intention on the part of any Commissioner to give any disrespect to the Committee. Chairman Thompson. — We have made no charges, but I simply stated facts. Anybody is at liberty to draw such inference as they see fit. Mr. Whitney. — Mr. Chairman, as I understand it, there was no conference. I was present when you met Chairman McCall informally, and, as I understand it, he said he could not be present. Chairman Thompson. — Senator Lawson was there all the time I talked with him. Mr. Whitney, will it be possible to have the presence of all the Public Service Commissioners on Monday morning ? Mr. Whitney. — I will inform them. Chairman Thompson. — But do you think it will be possible ? Mr. Whitney. — I think so. Chairman Thompson, — Is there any public business that will interfere with it, so far as you know ? Mr. Whitney. — Not that I know of. Chairman Thompson. — We will take this matter up in execu- tive session, and advise you, Mr. Whitney. Assemblyman Burr. — Mr. Chairman, I would like to have it appear on the record that we do not — that this Committee does Repoet of Joint Legislative Committee 181 not accuse Chairman McCall of any discourtesy in not appearing here this morning. I think from the statement of our counsel, it would seem that Mr. ]\IcCall did. not avail himself of the invitation to appear here this morning, and that it was due to his desire not to come. I think it should appear that Mr. McCall had a con- versation with you and what that conversation was. Chairman Thompson. — I do not charge Chairman McCall with any discourtesy. It just happened that I met him in the lobby of the hotel last night, and he talked with me, and I told him about the complaint that had been made by the Brooklyn people, and asked him if he could be present this morning. He said he couldn't hardly be here, as he was going to be in the city only until ten o'clock. There is nothing serious about the situation, and I don't know where Chairman McCall has gone. My week- end proposition came from the Secretary. He said he had gone for the week-end. (The Committee thereupon withdrew from the hearing room for the purpose of holding an executive session.) The Committee will now take a recess until 2 p. m. AFTEElSrOON SESSION Meeting called to order by Chairman Thompson. Feedbeick J. H. Keacke, Commissioner of Bridges, appeared before this Committee, and made the following statement : 'Senator Lawson. — Mr. Chairman, Commissioner Kracke is present, and has some more facts and figures in reference to this bridge matter, which we had up the other day. Chairman Thompson. — We would be very glad to listen to whatever you have to say, Mr. Kracke. Mr. Kracke. — In order to present to you what I have gathered from your information, pursuant to statement I made on Wednes- day that I would look up certain facts and figures and submit 1S2 I2^TESTIGATI0^- OF PrBLIC SeEVICE COMMISSIONS them to you today, I have a brief memorandum here which sets forth the situation as I thought you wanted it. (Witn^s delivers memorandum to Chairman, which is accepted and made part of the record.) !ilr. Kracke (contiauing) — $9,879,650.26, that represents the rentals and tolls received. Q. That is for how long a period I A. From 1900 to 1913. For 1914 it was a million dolhvrs, s;iy you call it a million dollars, added to this figure of $9,579,650.26. That is for tolls and rentals received from the railroad companies and telephone company. By Chairman Thompson: Q. Commissioner, what is the tax budget for a year in the city here ^ About what I A. It was in 1914, the tax budget was $199,000,000, about $200,000,000. By Senator Lewis : Q. What is the taxable property valuation hei-e ? A. The rate is 2 per cent That is fifty times the amount of the tax budget Please don't attempt to put me in the position of a tax expert Q. What percentage of that was from the railroad companies? A. iSTinety-five per cent of that was from the railroad companies. The other 5 per cent was from companies such as telephone con- cerns and others. Xow that is not all for bridge tolls. Through some error en "Wednesday, the newspapei-s carried that it was ah for bridge tolls. Q. I noticed that, and it was specifically stated by you that it was not all for bridge tolls. A. I want that to be sure on the record. Q. jSTow, Coramissioner, let me add : Is there a written agree- . ment between the city and the several companies using the bridges for which those companies pay at the rate of five cents per car? Is there such a written agTeement in existence? A. Oh, yes. Q. Have you a copy of it? A. Yes, I have. I will send it to you. I will send you a copy of the wi-itten agreement between the city and the several railroad companies that operate over the Brooklyn bridge and over the Williamsburg bridges. Ebpoet of Joint LEaiSLATivE Committee 183 Q. Are there any other bridges that these cars operate on under the written agreement? A. Yes. This agreement was made directly with the Board of Estimate. Q. Does this agreement provide for five cents a car ? A. Yes. Q. A little more for the elevated? A. Ten cents for the elevated. Q. Now, Commissioner, this report or memorandum that you have submitted, is this a document signed by you? A. I will sign it if you want me to. Q. This is a document that you are responsible for? A. Yes, sir. Q. Are you willing to stand for this statement ? A. Surely. Q. You say all the figures are of the nature of special fran- chise taxes. Isn't it true that that is the claim by the various railway companies, and isn't it also true that whether or not they are of the nature of special franchise taxes is the very question which is now receiving attention? A. These figures come from the Comptroller's office and have been credited to the railroad company. Q. Was the whole of that $9,000,000 rebated, or only a part of it? A. Comptroller Prendergast reports that the whole of it was rebated. Q. The whole amount was rebated? A. I am quoting you Comptroller Prendergast's report. Q. Even the rental for car track facilities? A. There is the report. In relation to the statement that was published in this morning's paper, Mr. Chairman, which made reference to the case before Judge Gaynor, when he gave his decision in the Nassau Electrical Railroad Company, in which Mr. Leeraft made affidavit that he was including the Brooklyn bridge assessing on valuation of the franchise of that railroad. I have not read that decision, but my knowledge and by reason of the work with which I am connected, causes me to state that the assessment of a franchise tax or the placing of a valuation of a part of the value of a fran- chise, as far as a railroad company crossing the bridge, is not just, because the structure, the bridge structure, is entirely the property of the city. The rails and the equipment used by the railroad company are the property of the city. 184 Investigation of Public Service Commissions Q. With, the exception, of course, of the cars? A. With the exception of cars. Q. Do you think the right of way is a valuable propei-ty right. Commissioner ? A. And the railroad companies when they come up to the bridge, when they get to the bridge property, for which the city has fixed the toll for the use of that bridge, and, therefore, is not part of the railroad franchise, and no part of the railroad's tangible or intangible property. Q. Would it be possible for you to deliver or send to your office for a copy of the contract, so that we migbt have it this afternoon ? A. Yes. JSTow, I have a letter from the officers of the railroad companies that cross the Williamsburg bridge. They are the New York Railway Company, successor to the Metropolitan Railway Company, the Coney Island and Brooklyn Railway, the Brooklyn Heights Railway Company, the ISTassau Electric Company, and the Bridge Operating Company. The letter is signed by the president of these various companies, and in that letter they state this : '' In the first place, it should be clearly understood that this whole matter is one which concerns surface car operations only and there is no franchise obligation upon these companies to operate surface cars across the Williamsburg bridge." Q. I take it, Commissioner, that that letter was written in con- nection with the proposition that they will cease to operate unless certain concessions are made. A. I take it that may be the construction. Q. Well, now, will you be good enougb to state just what your understanding is of the concession which the railroad companies are now insisting upon, the refusal of which will result in the abandonment by the railroad companies of the operation of cars upon these bridges ? A. According to this letter, an excerpt of which I have just been reading to you, they state that they will continue operation under the same conditions that they now enjoy, but will refuse to do so if a contract more rigid than that which they now have is imposed upon them. Q. Do they specifically state, or have you any knowledge as to the particular features which they object to as more burdensome? A. In the course of the negotiations that I had with them, my first proposition was that a new contract should include the elim- Eepoet of Joint Legislative Committee 185 ination of the privilege they enjoy under section 48 of the Special Franchise Tax Law. Q. And is that the only condition to which they object? A. The Associated Eailroad Companies likewise operate the bridge local, which has accumulated a net surplus on a capitaliza- tion of $100,000, has accumulated a net surplus above the bridge charges and interest charges of over $600,000 in six years. Q. What do you say as to the capitalization? A. According to their statement, it is $100,000, which statement has been chal- lenged as being correct Q. Does the city own any interest in the stock of that operating corporation? A. It does not. Q. That corporation operates cars just on the bridge ? A. On the bridge. Q. One end of the bridge to the other? A. One end of the bridge to the other. Q. And has that corporation paid a rate of five cents per car? A. It has. Q. And has the money so paid by that corporation been included in the amount deducted from the special franchise tax? A. It has not. Q. It has not been, of course, for the reason that there had been no special franchise tax assessed against that corporation, for the reason that that corporation has no property or franchise which was taxable ? Is that so ? A. According to the information from the Comptroller's office, there was no effort made by the Franchise Board to levy a tax on a valuation of thirty thousand dollars on each side, a tax amounting in round figures to $500, and that was resisted on the theory that they operated this Bridge Local under a permit and that it had no franchise and therefore was not subject to the franchise tax, and successfully resisted it. Q. In the courts ? A. Yes, sir. Well, now, I am not sure whether they went to the courts or not. Q. That assessment was levied, I suppose, upon the special franchise values in the terminals on the bridge, one probably in Brooklyn, and one probably in JSTew York; is that so? A. I couldn't tell you what was in the mind of the assessor when he levied that tax. 186 Investigation of Public Seeviob Commissions Q. Now, we will assume tliat the cars operate like this (indi- cating) . ISTow, this is one side of the river, and this is the other. Is it or is it not true that on the shore end in Brooklyn of this bridge, the tracks enter upon or cross various streets, in making the loop, so as to get back upon the track upon which the cars operating to Manhattan run ? In other words, isn't that the fact ? A. ISTo, it is not. Q. Where do the cars turn ? A. The cars turn under the street in a subway built by the city, paid for by the city money on the Manhattan* side. On the Brooklyn side, they run out and turn around on the bridge plaza, which property was paid for by the city, owned by the city, and track laid by the city. Q. And don't cross any public streets under your jurisdiction ? A. Yes. By Assemblyman Burr: Q. They never leave the bridge property, do they ? A. "No. By Senator Lewis : Q. Then the rate of five cents per car includes not only the privilege to cross the bridge, but the privilege of using the prop- erty belonging to the city at either end of the bridge ? A. It does, but in the agreement made with the Associated Company, together with the Bridge Local, there was a rental of ten thousand dollars fixed, and that ten thousand dollars has been also charged exclusively to the Bridge Local, and that has been paid by the Bridge Local, but beyond all that they seem to have made this six hundred thousand dollars surplus in six years. Q. Do I understand, then, that as far as the Bridge Operating Company is concerned, there is no special franchise tax assessed by the city? A. There is not. Q. Now, then, how does this compare with the Manhattan bridge, the three^cent line, which operates exclusively on the Manhattan bridge? Are they assessed a special franchise tax? A. I take it that they are. I do not know. In their franchise there is a clause which makes them exempt from a special fran- chise tax. Q. The privileges of section 48 are not enjoyed by them? A. No. Report of Joint Legislative Committee 187 Q. Still the Manhattan bridge three-cent line operates exclusively on the bridge and on the city property. Is that right ? A. Yes. Q. Why don't the other company enjoy the same as that other company? A. Because the contract was made earlier. Q. Does the Bridge Commissioner have the authority to execute the contract, under section 48 ? A. It is made by the Board of Estimate over the Manhattan bridge, but my contention is now that the construction to be made by the Bridge Commissioner that the contract over the Williamsburg bridge shall contain a clause similar to that which obtains over the Manhattan bridge. Q. That would be to prevent the rebating of these rentals ? A. Yes. By Chairman Thompson: Q. I notice in your statement that the refund in 1905 and 1906 to the companies, is $173,000, and it appears that in 1905 alone the Comptroller rebated $599,000; 1913 and 1914, $25'9,000, and the Comptroller rebated $967,000. What makes that discrepancy? A. That is just the bridges, Senator Thomp- son. That report was from the railroads to the entire Greater City. Q. That is what is rebated from the bridges? A. From the bridges alone. Q. What is the other rental received there that they return? A. Rentals for sidings and other special privileges given to the railroad companies for which they pay a rental to the city. Q. That is on the street? A. Yes. Chairman Thompson. — Commissioner, I haven't very much reputation as a lawyer in ISTew York State, but I am willing to state for the benefit of the record that the decision of Justice Gaynor based on his opinion, which was afterwards confirmed in the Appellate Division and in the Court of Appeals — Mr. Kracke. — Not confirmed in the Appellate Division. 'Chairman Thompson. — Confirmed by the Court of Appeals, is a correct decision, based on the facts before him, but the facts were not before him as they have existed in relation to this bridge, 188 Investigation of Public Service Commissions and the decision is not an authority for the rebating to the rail- roads during the past since 1900 or any other time, of any of these sums which have been rebated to the railroads by the city. It is not an authority for that, and there is no authority for that. The railroad people have embarrassed the city, in my judgment, with this decision as a subterfuge or an excuse on which to base these rebates. I think some of the city officials, especially the Law Department, must have been under a twilight sleep, to have not read this decision carefully. The law does not contemplate, and this decision don't contemplate, that rentals on the bridge could be charged against a franchise on the bridge in Brooklyn, on the theory that they are not in the nature of a tax. They have no right to do it. It has been used as a subterfuge. In my judg- ment the city could, and should, institute proceedings to recover back from the railroad companies those moneys which I think are lawfully due them- Senator Lawson. — There are only two decisions in the State of New York, recent decisions, that bear on the question involved. One is 128 JST. Y. 297, and Miscellaneous Kep., 72. Assemblyman Baxter. — That is in regard to a private corpo- ration. Chairman Thompson. — I don't think it makes any difference whether it is a public highway or not. That bridge must be taken into account and credited to the streets of Brooklyn. I want to add this: That the loss of all this amount of money each year, which has failed the notice of all the city officials employed down here in the city of ~Kew York, I want to say that Commissioner Kracke is perfectly right. He has taken a proper official stand, and should be congratulated for having brought it to the attention of the proper officials, and I think it is your duty. Commissioner, to not only stop this, but to recover those back so far as you can. On behalf of the Committee, I will commend your official activity, and congratulate you on the interest that you have taken. ~Mr. Kracke. — I thank you very much, Mr. Chairman, for your kind remarks. I have found a railroad or two to be honest, and I have met several whom I thought absolutely honest fellows. I Eepoet of Joint Legislative Committee 189 just want to read a little from an agreement that might be of interest to your iCommittee, Mr. Chairman. " This agreement this 8th day of November, 1894. The Trustees hereby lease for the term of ten years the right to have 'passengers seeking and leaving the railroad of the company, and its officers and services, ente]' upon and pass over all portions of the city elevated passenger terminal platforms and stairways which are within the red lines upon the diagram hereto annexed." " The Company agrees that it will during said period pay to the trustees and company the sum of four hundred dollars in equal quarterly installments, commencing from the time when the premises shall be completed." By Senator Lewis : Q. That lease runs out in ten years ? A. Yes. Q. It has been continued, I suppose ? A. I think so. Q. ^yhat are you reading about, the Brooklyn or the New York side? A. Brooklyn. Q. Xow, this agrfement is dated May 21, 1904, between the City of New York, the Brooklyn Heights Eailway Company, the Coney Island and Brooklyn Eailway Company, the New York City Eailway Company and the Bridge Operating Company, and recites. — " Whereas the City is the owner of the Bridge and approaches thereto substantially but not yet entirely completed across the East river, known as the Williamsburg bridge, which, together with the approaches and appurtenances thereto, is herein- after called the bridge. " The parties to this agreement, in consideration of the mutual covenants herein contained agree, the city that it will complete as soon as practicable; that the Bridge Company shall pay for the use of the electrical equip^ment, routes and terminal facilities, a rental of ten thousand dollars per annum, payable quarterly. The City agrees that it will permit the Bridge Company, the Brooklyn Company, the Coney Island Company and the New York Company to operate its cars on the surface tracks with the electrical equip- ment thereon, for ten years from September 1st, 1904. The City imposes and will exact the sum of five cents per round trip for each and every car operated or transported by each of said four companies respectively across the bridge." How much has that 190 Investigation of Public Service Commissions revenue amounted to, Commissioner? A. From 1905 to 1914, it has amounted to $2,119,000 plus. That was rebated. It has amounted to more than that when you take into consideration the rental of $10,000 per annum above referred to. By Senator Lawson: Q. Is it your contention. Commissioner, that in addition to this amount that the city of New York has lost by rebating, you have had for that same period an average loss, for the purpose of checking up and maintaining help, about fifty thousand dollars a year ? A. I couldn't tell that, because I have not ascertained it. Q. That is true, though ? I just wanted it on the record. That doesn't appear in the figures at all. A. I am not prepared to say that, because I would have to make some study and close observa- tion to state that, so that it would be beyond the possibility of con- tradiction. I should say that there are a good many men em- ployed in the Bridge Department and on the two bridges in ques- tion now, who do other work in connection with this work, and that, therefore, it is somewhat difficult to give an oflhand determination of how much it cost to divide up the pro rata shara Senator Lawson.- — I read a statement in one of the papers the other day that the loss for 1914 was about fifty thousand dollars. That is where I got my information. By Senator Lewis: Q. From your experience, are you prepared to express an opin- ion upon the propriety of State regulation of municipally owned public utilities ? A. I am not prepared to give an opinion of that or an extensive opinion ; but, from my knowledge of the city, the city of my birth, I am confident that the municipality, if it has the right powers given it under the charter, and they allow it to fully exercise those powers as it desires, I feel confident that the municipality could regulate all these municipal activities. Q. Do you regard the contracts, the existing contracts between the city and the railroad companies as having been well considered contracts? A. To which do you specifically allude? Q. Those contracts in existence now? A. They were made eleven years ago, and the atmosphere - — by that I mean the public conditions that obtained then very likely have changed, and are Report of Joint Legislative Committee 191 very much different today, and as I am not aware of all that entered into consideration at that time, I am not able to give a competent expression of opinion on that subject. By Senator Lawson: Q. Who was the Bridge Commissioner when these contracts were made ? A. Commissioner Best, I think. Chairman Thompson. — If there is no objection, we will now adjourn until Monday morning at 11 o'clock, the meeting then to be held at the hearing room of the Public Service Commission, in the Tribune Building. The hearing Monday will not be here. The meeting thereupon adjourned until 11 a. m., Monday, August 2, 1915, at the Tribune Building, ISTew York city. AUGUST 2, 1915 Heaeijsig Room oe the Public Service Commission^ First District Tribune Bldg., New York City Present : Senator George F. Thompson, Chairman. Senator Robert R. Lawson, Assemblyman Frederick S. Burr, Assemblyman J. Leslie Kincaid, Assemblyman William C. Baxter, Assemblyman Aaron A. Feinberg, Senator Merten E. Lewis, Counsel to the Committee. Mr. Shuster, Assistant Counsel. Edward E. McCall, being duly sworn, testified as follows: Examination by Senator Lewis : Mr. McCall. — I assume, Mr. Chairman, that this proceeding is to be carried on under the existing facts, and I have assumed from the treatment always received at your hands, that I would be accorded the same courtesy at this time. However, a statement 192 Investigation of Public Seevice Commissions appeared in all of the papers on Saturday morning that no mem- ber of the Public Service Commission was here or could be found on Friday. Now, as a matter of fact, I was here all day. I had several public hearings and settlement of some cases. That is a matter of record and the hearings were all held, and I trust that this statement gets the same publicity as the false statement was accorded. Chairman Thompson. — Commissioner, the Committee, and cer- tainly the Chairman have no stock in any newspaper in the city of New York, and consequently no control over the amount of publicity that we get on certain things. It was not intended on the part of the Committee or the Committee's Counsel to criticize the Public Service Commissioners last Friday at all. We only made up our mind to ask your appearance on Friday afternoon before we adjourned, and I will say that at that time it was after the business hours of the Commission, and we could not get in touch with many here. Commissioner Hayward was out on an inspection trip, as 1 understand it, with the Secretary of the Conamission, and I eould not get in touch with the Secretary until the next morning, and so the notice was a little short and we didn't criticize at all. I made certain statements in reference to week- ends, because I felt particularly grieved to think I had to stay in New York, and while I am very pleased with the treatment that we get in New York, I am frank to say I don't like to stop here in the summer time as well as I do up in Niagara; and besides that, another Committee of which I am Chairman, meets at Niagara Falls today, and I did not want to stay here. Commissioner Me Call. — Then. I may assume, Mr. Chairman, as far as I am concerned, no such statement was made by you? Chairman Thompson. — No such statement was made by me at all. Commissioner McCall. — Because it is absolutely untrue. I do not wish to be charged with studiously flouting this Committee, and T have been ready and willing at all times to attend any hear- ings that I might be asked to attend by you or any member of the Committee. Eepoet of Joint Legislative Committee 193 Senator Lewis, — There were certain statements made in regard to this Fulton Street proposition and so because of the fact that I had that information, and because of the fact that no member of the Commission v^as present, that I made a statement at the meeting of the Committee which was published in the news- papers. I intended no reflection upon the Commission. The invitation to the Commissioners was extended at my suggestion. I suggested it because of the fact that certain statements had been made to the Committee and appeared upon the record of the Com- mittee's hearing, which it seems to me the Commissioners of the First District would desire to either explain or controvert, and it was because of the fact that 1 felt that the Commissioners should have the opportunity to explain or controvert these state- ments and I suggested the invitation being sent. When the Com- missioners refrained from accepting the invitation, it seemed to me that that was a matter entirely within their own discretion and control, and T felt that until they should appear and should make such explanation as they might see fit to present, there was nothing further to do. Commissioner McCall. — Mr. Chairman, it is absolutely untrue that invitation to meet this Committee reached me at any time, and you know that 1 would have come with great pleasure if it had. Chairman Thompson. — I think so. Commissioner McCall. — I have been at the service of the Chairman or the members of this Committee at any time. Commissioner Robert C. Wood. — I never received any invita- tion or any information in regard to such a hearing, and I was here until quarter past one. Chairman Thompson. — I don't think that makes much differ- ence. It is not within the province of the matter at all. We are not here in New York to get anybody. I don't think this matter of invitation, question of whether it was received or not, is of any material importance at all. If ISTew York city wants anything that is within the province of our Committee, we want them to have it, Vol. 1 — 7 194 Investigation of Public Service Commissions and we are here under the resolution to go through, with the propo- sition, and we are going to pursue it wherever it takes us. It isn't that we have got anything on anybody. We have gone on with this investigatioa and tried to make them fair to everybody, and this we will continue to do. Commissioner MeCall. — I have a statement to make, and I want it for the record. The article in the newspapers to which I have referred carry the intimation that myseH and the Com- mission that I represent were studiously flouting this Committee. I resent that, because I do not want to be known as a man who would not observe the dignity of a Committee of the Legislature or any other properly constituted body of the State of New York, and one who would not accord it the courtesy which is due it. I might state that at quarter past five on Thursday night, while sitting at my desk in my office, the telephone rang, and I answered. A party on the phone informed me that Mr. Henry Thompson wanted to talk with me. I was asked to hold on for a monient, and I waited a half hour and received no further communication and then went to the hotel where I stopped. Later in the day, or the evening, rather, I met Senator Thompson and had a conver- sation with him, explaining the fact that I waited for his tele- phone, and he explained to me that he was busily engaged in an executive session of the Committee. He then told me that several people from Brooklyn appeared before the Committee and made certain revelations regarding third-tracking proposition on Fulton street, and he said he thought the Public Service Commission should have the chance tO' answer. I said that was all right, and would make a reply at any time that suited the Committee's con- venience. He said, " We would like to have the Commissionera appear to-morrow." I said, " Senator, I don't believe you can get them to-morrow." I told Senator Thompson that I had planned on leaving early in the morning, but suggested that I would call the Secretary of the Commissioi;' on the telephone and ask him to give all the written data that he had on this subject, and for the Secretary to appear personally before the Committee on Fri- day, and then if he wanted the entire Commission to be present, that I would have them there Monday morning. I again met the Senator the next morning with Commissioneif Hayward in the Eepoet of Joint Legislative Committee 195 lobby of the hotel, and Commissioner Hayward and Senator Thompson went over this matter from start to finish, and again I told him that I had been in communication "with Secretary Whitney, and instructed him to appear before the Committee with all the data that was required, and be prepared to answer any question that might be put to him bearing upon this investigation. The Senator said, " I don't want to stay over until Monday, Judge, and won't you come to-morrow," and I told him that would bring me back 104 miles, but, I said, " If you really want me I will come." Then, the next thing I know was this public charge stating that I was guilty of disrespect and discourtesy to the Committe© investigating the Public Service Commission. Chairman Thompson. — I think you 'should get a copy of the paper. Commissioner, and I think you better take the matter up with the newspapers. Commissioner McCall. — No, excuse me. Chairman Thompson. — Because I think, if you read the whole record, I don't think you would feel so bad. Commissioner McCall. — The point I want to make I want to make it for public record. Chairman Thompson. — It is in the record. Judge. Commissioner McCall.— I didn't intend to show any dis- courtesy to the Committee. Chairman Thompson.— That is true. No charges of disr courtesy up to the present moment against any member of the Public Service Commission up-state or down. Senator Lewis.- At the outset, Mr. Chairman, I desire to em- phasize that it is not and has not been the purpose of this Commit- tee to conduct any investigation of the conduct of the Public Serv- ice Commission or any of its members so far as I know, i he pur- pose of this investigation as now being conducted is to inlorm the minds of the Committee upon the subject of such changes m the law as may be desirable for the purpose of giving to the people of the city and the people of the State a comprehensive 196 Investigation of Public Service Commissions Public Service Conunissions Act under which the rights of the people may be safeguarded and the burdens of the corporations may be so adjusted as to work out a less expensive administration of their affairs and at the same time a more satisfactory result for the people. I take it that the people of the State desire ade- quate supervision chiefly on the subject of rates aud service. I take it that there are public utilities which perhaps should be subjected to the jurisdiction of the Public Service Commission which are not now subject to the law. The evidence taken before this Committee, therefore, during its recent hearings, has tended to establish, I think, in the minds of the Committee the necessity for maintaining the terms of the law and including public utit ities that are not now regulated. In the course of the investiga- tions which have been had responsible citizens of Brooklyn, men occupying high positions in the business and social world of Brooklyn, have appeared before this Committee and have made statements — Chairman Thompson.- — And without any invitation on the part of the Committee. Senator Lewis (continuing) — which do seem to me to call for explanation on the part of the Commission. The statements made on Thursday morning and Thursday afternoon by Rev. Patter Belford, by Mr. Haviland and by Mr. Shaw, I think that was his name, were of such a character and coming from such a source that I felt that the Committee should not ignore these statementa and I also felt that the Committee was not in position to act upon these statements without first hearing the members of the Com- mission affected thereby and because of the feeling which I had upon that subject, I suggested to the Committee the propriety of inviting the Public Service Commissioners to attend the hearing on the following day and, as I have said, I had understood that notice had been given to each Commissioner and that each Com- missioner was advised on Thursday of the fact that the Committee would hear such explanation at its session on Friday morning. I do not desire that the record should show and I did not think that the record showed any imputation from me of any dis- courtesy toward the Committee by any member of the Commisr sion. The only point I had in mind while making the state- Repoet of Joint Legislative Committee 197 ment which I made aad which does appear upon the record was that the members of the Commission perhaps felt that the state- ments as made were not such as to warrant expenditure of time or efforts for meeting or answering these statements, and so far as the record shows that, I think, is all that can be spelled out from what I said. With that explanation I desire to ask Judge McCall if he is familiar with the opinion rendered by the corpora- tion counsel, Mr. Polk, to Mr. McAneny, the president of the Board of Aldermen and chairman of the transit committee of the Board of Estimate, dated July 16, 1915, relative to the third track on Fulton street and the relocation of tracks on Adams street ? A. I have not read the opinion, sir. I have what is said to be a copy of the opinion as filed with the Committee by Mr. Carpenter, representing the Fulton Street Pro- tective League, which I will read into the record for the informa- tion of all concerned. Senator Lewis thereupon reads the following opinion by Cor- poration Counsel Polk: " I have examined the brief submitted to the Board of Estimate and Apportionment of counsel for the Pulton Street Protective League, and section 24 of the Eapid Transit Act requires the Public Service Commission to obtain the approval of the Board of Estimate and Apportionment before it can authorize any railroad company to lay any additional tracks. The approval of the board is also required by that section of the plans for the construction of the tracks and facilities of any rapid transit railroad. If, therefore, neither the contract between the New York Municipal Railway Cor- poration and the city, contract number 4, nor the certificate issued to the railway company by the Public Service Com- mission,, both of which were approved by the Board of Esti- mate and Apportionment, authorizes, expressly or impliedly, the use of white girders, the use of such girders in the struc- ture erected upon the city's streets, since it is forbidden by the franchise of the company, is unauthorized and consti- tutes a nuisance. People ex rel. Sibley, 205 N. Y. 24. The Board of Estimate and Apportionment has the power under 198 Investigation of Public Service Commissions the charter to direct the corporation counsel to institute pro- ceedings to abate a nuisance. If the use of such girders i^ unauthorized the city may sue the Public Service Commis- sion, object to the allowance of the costs of such girders as part of the actual cost of the client and property of the exten- sion and additional tracks authorized by the Commission by such certificates, upon which the preferential payments through the company have to be made. In case the Public Service Commission improperly refuses to file such objec- tions, the city itself could object to the allowance of sucli items. The objections urged by the Fulton Street Protective League to the use of white girders upon the Pulton Street line are now being considered in the case of Kaplan v. l^ew York Municipal Eailway Corporation, which has been referred to Judge Charles F. Brown. In view of the fact that these matters are the subject of litigation I would sug- gest that the Board of Estimate and Apportionment take no action upon them until the determination by the court of the questions raised. The approval by the Board of Estimate and Apportionment of the Adams street relocation would not, however, authorize the use of white girders. The determina- tion as to whether the New York Municipal Eailway Cor- poration is authorized to use white girders in the reconstruc- tion upon Fulton street is therefore not pertinent to the ques- tion whether the Board of Estimate and Apportionment should approve the Adams street relocation or not. How- ever, since it is claimed in preventing relocation of the rail- road upon Adams street the Board of Estimate and Appor- tionment will impliedly authorize and ratify the use of white girders upon Fulton street, I would suggest that the Board of Estimate and Apportionment in its resolution approving such relocation state that it does not thereby intend to authorize the use of white girders instead of lattice girders or to ratify the use of such girders in the part of the structure already constructed on Fulton street or in any way to amend the franchise of the company." By Senator Lewis: That opinion is signed " KespectfuUy yours, Frank L. Polk, Ebpokt of Joint Legislative Committee 199 Q. ISTow, Judge McCall, may I ask whether you are familiar with the provisions of the certificate of incorporation of the Kings County Elevated Railway Company, which under the cer- tificate constructed the present elevated structure on Fulton street ? A. 1^0, I would not say that I was familiar with that. Q. Have you any knowledge as to the character of girders authorized by that certificate to be used in the construction of the Brooklyn elevated railway? A. You mean in the recon- struction ? Q. No, in the original construction ? ■Q. You knew of that fact, didn't you? A. Yes. Q. Will you tell the Committee, Judge, what the plans as approved by the Public Service Commission relating to the recon- struction of the elevated structure on Fulton street provides in connection with the number of tracks authorized and the character of girder to be used? A. Of course the plans will speak for themselves and they are the best evidence to be in the record. I would not attempt to give the details of whatever construction is going on there, and the reason for that is that not only under the certificates but under article 12 or 13 of contract 4, were any construction that is necessary to meet the standard operation of the city, now is permissible. Q. Is the contract which you speak of, contract 'No. 4, does that supersede the provisions of the certificate of incorporation of the Kings County Elevated Company? A. That is a matter of law. I wouldn't want to express my opinion of this litigation that is now going on before Judge Bro%vn. I don't think it should be brought up. Q. Does it not seem proper. Judge McCall, for you to express whatever may have been in the minds of the Commission at the time contract 4 was signed relating to the power of the Commis- sion to provide in the contract for provision at variance with the terms of the certificate of incorporation? A. There was no pro- vision or no thought of doing anything at variance with the law. Q. Whether the law gave you authority to change the pro- visions of the certificate of incorporation is a matter that they are now litigating, is it not? A. That is just the point they are litigating on, yes sir. 200 IxTESTiGATiox OF PrBLic Sertice CoMiassioxs Q. While this litigation is being conducted by an individual, is it not i A. Yes, by a citizen. Q, And if the citizen is correct in his interpretation of the law then the action of the Commission in entering into a contract authorizing the construction which is now objected to was without authority ? A. That would naturally follow if the decision sliould be in his favor. Q. Is it true that the Ooniuiission took no tliought of that as you stated A. I didn't so state. Q. I understood you to say that you took no thought of that. Was it thoiight of and discussed I A. Of course it was all dis- cussed and thought of. Q. And was it then the opinion of the Connnission that in making, in entering into contract -i, it could provide for a type of construction in Fulton street other and different from that provided for in the certificate of incorporation of the Kings County Elevated Railway ^ A. The idea of it was in the mind of the city when it entered the contract was that it should be fixed within the provisimis of the teruvs of the contract and I think in this very litigation, Judge EroAni has ruled, — Q. I didn't understand that Judge Brown dofcriuined any of the questions of the litigatiim? A. I didn't say that he did. I said he made a ruling on some facts which arose. Ey Senator Lewis: Q. Then, as I understand, you are not prepared to state at this time what the Commission determined to bo the suitable and proper type of construction on Fulton street, as to the number of tracks to be used on that street ? A. I don't say anything of the kind. I haven't said anything of the kind. I said that it detei^ mined that. They specified it in their contract. Q. Did a provision of the coiitract express in words the con- clusions of the Connnission on the subject of the type of struc- ture ? A. It embraces in a general sense. Q. Do you understand. Judge, that the third track now being constructed in Fulton street is authorized by the contract? A. Yes, certainly. Q. And do you imderstaud that tlic provisions, conditions pre- cedent to the right to construct tliat structure, have been com- nlied with bv ihp. pmistrnptiivo' r-mTinnnv? A rioT+oinl-ir Rbpoet of Joint Legislative CoMMttTiii! 201 Q. The statement was made at the hearing of this Committee on Thursday, that the elevated structure-, I think I am quoting practically the words of the gentleman who made the statement, that the elevated structure in process of erection on Fulton street, is not the structure that was authorized by the certificate that was granted by the Public Service Commission to the New York Municipal Eailway Corporation, dated March 19, 1913. That an unauthorized and unlawful burden is being imposed upon the property owners owning property on Fulton street; that under the franchise granted to the company operating the Fulton Street Elevated Kailway, the character of construction provided for therein has been and is being disregarded. That the estimated cost of three hundred thousand dollars per mile has been and is being greatly exceeded. That the increase in cost involves a heavier interest burden than was contemplated under the con- tract. That from the gross earnings there must first be paid the interest charges, operating expenses and other expenses before any division of earnings can be made, and that the increase in interest charges on the increased investment operates to postpone the time when the city should be permitted to share in such earn- ings. Have you any suggestion or statement to make in response to these statements appearing upon the record of this Committee at its meeting held last Wednesday? A. I would deem it entirely improper for me to give an opinion on it at this time. I have refrained from making any statement as to the legality of the proposition inasmuch as this entire matter is now in process of litigation. Any man can get up and make these statements. I don't question the honesty of these gentlemen at all from their own point of view, or I don't question the honesty or sincerity of their action now pending in court. But the point is this, that must be decided in the court. That is just what the courts are for. These questions cannot be decided through state- ments made out upon the street corners. By Senator Lewis: These statements have not been made upon the street corners, Judge McCall. It was because they were made to a responsible Committee of the Legislature engaged in a responsible duty that I felt that the Commission, a Commission responsible to the people. 202 Investigation ot Pubxio Seevioe Co^mmcssions for the condition which exists, whether properly or improperly, should impel this Committee to ask the Commissioners to come before it and make such explanation as they might see fit to offer. All of these questions have been presented to the 'Commission by different people, have been very carefully considered but you must remember that this is a quasi-judicial body and when you ask us to make a judicial determination of some fact which is pending in a court, we cannot do it. Q. These statements embody or include the statement that the structure being constructed is not in conformity with the plans as approved by the Commission. What, if anything, has been done by the Commission for the purpose of determining the truth or falsity of that statement ? A. They have come to the conclusion that that is not so. Q. Has any investigation or explanation been made upon which the Commissioners base this conclusion ? A. I don't suppose there is a Commissioner who has not been there and we have had con- ference after conference with our engineers and our lawyers, and we have come to that conclusion only after very careful considera- tion of the matter. But when they come to us and ask for a judi- cial determination we will have to refuse to do it. We tell them to apply to the court. Let me give you the history of all this third-tracking and all of this elevated extension. That was before the Legislature under the Wagner Act, so-called. Hearing after hearing was given and they were attended up there by repre- sentatives from Brooklyn and particularly one gentleman whom you have mentioned here. Father Belford, was there. They pro- tested against the Franklin avenue construction and they obtained withdrawal of that and there was not even a whimper about Fulton street. Q. Were the plans in existence? A. That was the act which contemplated this construction, which gave permission to go on with the work and there was never a protest against the Fulton street proposition. When I came on to the board I gave an addi- tional hearing in the city and this entire matter was considered again and only one man appeared at that hearing. He protested but there was no other protest from Brooklyn. Then the contracts were solemnly entered into by the city and certificates were issued Eepoet of Joint Legislative Committee 203 both for third-tracking and for extensive construction, and then the work contemplated in this proposition would start, and at the eleventh hour, all this commotion about Fulton street would start, and in fact, they submit another proposition as to building a subway. By Chairman Thompson: Q. So far as the Public Service Commission is concerned, I think sometimes they make up their minds to do such things and that they should take the public into consideration a little more than they do. A. I don't know of any instance where they don't. ISTame any one, where is it^ There isn't a single thing that the public M'as not notified of and can have any information they want. I have said more on this subject than I intended, because I have steadily kept aloof from it. I might say, however, that we had conferences, I don't know how many, with the Board of Aldermen, with the President of the the Board of Aldermen, with the Board of Estimate, and the President of the Muaicipal Railway Com- pany was there. I then said there were two propositions to be considered in this matter. First, the Municipal Railway Company have franchise rights for this elevated operation. The question then came up as to whether or not they would relinquish their rights. I put that up to the railway company, and they stead- fastly refused and said no. Then I said the second proposition is the subway that you are now talking about building. That will cost from four to eight millions of dollars. A^Tiere are you going to get the money ? I said, " You can best answer that question. You know it cannot be done. You have to get it. These gen- tlemen should have told you about that. They had knowledge of the reply on the franchise question and they know all about the question of finances. That is the situation." Then there was some talk to me that assessments should be raised. I think j\Ir. Shaw was delegate of his committee, spoke to me about assess- ments. I explained to them my opinion of the utter impossibility of raising this amount by assessments, and in reference to that question stated to them that they must never say it was suggested by the Public Service Commission. Then they said they would take it up of their own initiative, and see what they could do. They are now struggling with that proposition. I have talked 204 Investigation of Public Service Commissions with Senator Thompson about assessments. There is the situation in a nutshell. The other is that with a subway in Brooklyn, they want the removal of the elevated railroad structure in Fulton street. The city cannot do it, because it has not the financial capacity to do it. By Senator Lewis: Q. I don't care to investigate, or want to investigate or have the impression go out that this Committee has any purpose to investigate the exercise by the Public Service Commission of its discretion in the execution of the dual contract. That, I take it, is beyond the power of this Committee to investigate. They have been executed, they are binding on both parties to the contract, and to all parties. Any investigation which this Committee might conduct, any legislation which this Committee might recommend, if warranted, could not be of the slightest benefit in accomplishing the change of these contracts. The only possible question for this Committee to consider is the question as to whether or not the Public Service Commission is giving to the construction going forward under the terms of the contract, that supervision which the citizens of Fulton street have the right to demand, and whether the type of structure authorized by the contract is being erected, and that no other additional burdens than those provided for in the contract are being imposed on the property owners. A. These people are asking for an answer of this question judicially. We cannot do that. Q. Permit me to suggest this. Judge. Isn't it proper for the Public Service Commission, being a party to the contract, as the agent and servant of the city — has it not this power to insist upon a strict compliance with the terms of the contract relating to the construction? A. Undoubtedly so. Q. And in the event of any violation or any attempt to violate any provision of the contract relating to the construction, it would, when called to the attention of the Public Service Commission, become the duty of that Commission to immediately interfere for the protection of the property o-wners, being a part of the city of New York, for whom the Public Service Commission is acting as agent? A. Undoubtedly, if they were convinced that a violation had actually occurred. Eepoet of Joint Legislative Committee 205 Q. Am I to understand, and is the Committee to understand that the matters set forth upon the record on Wednesday and Thursday last, the summary of which I have read to you, have been heretofore presented to the Commission, have been consid-, ered and investigated by the Commission, and that the Commis- sion has reached the conclusion that there has been no violation of the terms and provisions of the contract relating to the structure in Brooklyn, on Fulton street, now in course of erection? A. Why, in answer to that, I prefer to have the attitude of the other Commissioners expressed by themselves. I certainly can say that this matter has been considered by me and given a great deal of thought, and as I stated before, many conferences were held. There is no question but what it has been considered fully. Whether or not there are formal documents filed, I am not prepared to say. Q. May it also be true that they have been considered by the Commission, and that the Commission has investigated and has reached the conclusion that there has been no basis for the statement? A. It is true in this respect. The contracts were from the legal department and the engineer, and we say that it is a question to be decided by the courts, the interpretation of this contract, and we are not to do it. As I have already explained, it is now a matter of litigation pending in the courts. Q. Well, as a party to the contract, as the agent of the city, it would be entirely within the proprieties for the Commission to take exception to any features connected with the construction now going on, of which formal complaint is made and notice given to the Commission, would it not? A. If, after investiga- tion by our engineering department, they would report to us that in their judgment the terms of the contract had been violated, it would then be our duty to investigate it. Q. And you would then take action in a quasi- judicial manner, would you not? A. According to whatever powers we have; yes, sir. Q. As a matter of fact, I take it that the Commission has the power under the contract to forbid and prevent violations of the contract, has it not? A. Undoubtedly so, of all contracts. Q. The principle of the Eapid Transit Law, as I remember, gives to the Commission the power to restrain and prevent 206 Investigation of Public Seevioe Commissions unlawful structures being erected? A. To apply for restraining authority. Q. Well, what, in your opinion, does the Corporation Counsel mean when he says in his opinion to Mr. McAneny, that the structure is unauthorized and constitutes a nuisance? A. He doesn't say that. Q. Well, I will read a part of the opinion to you. " If, there- fore, neither the contract between the JSTew York Municipal Rail- way Corporation and the city, nor the certificate issued to the railway company by the Public Service Commission, both of which were approved by the Board of Estimate, authorized expressly or impliedly the use of plate girders, the use of such girders in the structure erected, since it is forbidden by the fran- chise of the company, is unauthorized and constitutes a nuisance." A. I think one mistake they make about that is that they don't take into consideration general contract ISTo. 4. Q. He refers to that. He says : " J^either the contract between the New York Municipal Railway and the city, contract Xo. 4, nor the certificate." Then that's all right. His statement, as I construe it, is that the Public Service Commission has no right to enter into a contract that would authorize plate girders. A. Well, I don't see how you can construe that. You have to read all the things with the " ifs " on and then come to the conclusion it is all " ifs." Q. What is the fact about it? A. The fact is, we can reach the conclusion that he reaches there — the word "if" — that that "if" is going to be answered by the court. Q. Are you claiming that the franchise authorized plate gird- ers? A. No. Q. That is, the franchise of the railroad, the original fran- chise? A. Yes. Q. Does the contract authorize plate girders? A. Now, that is a question, that is the very question to be determined. It is a legal question; it is a question whether under section 12 they have the legal right to use these plate girders. Q. Are they using plate girders? A. Of course they are. Q. Is it not the duty of the Public Service Commission to prevent the use of plate girders, the use of which is contested as Eepoet of Joint Legislative Committee 2,07 illegal, until the determination of tliat question by the court? A. ^0, sir; no, sir. And particularly is that so in the light of the fact that these gentlemen applied to the Supreme Court in their original application for a stay and were refused a stay by the court. It is not for us to determine. Supposing this liti- gation should go to an end and be decided against these people, and we had stopped this company from doing this work. There is no telling what amount of damage would follow. Q. Is the use of plate girders necessary there i A. I would not want to express an opinion. I think you will find with the addi- tional weight that it is essentially necessary to have a structure that will bear that weight. Q. J^ow, is this the situation. I will try to state it as I under- stand it. I don't want to state it unfairly. The original fran- chise of the Kings County Elevated Railway Company limits the construction on Fulton street to the lattice type of girders. That is the provision of the franchise of the Kings County Elevated. jSTow, the B. E.. T., or New York Municipal Railway Company, which is operating the subway and providing for the reconstruc- tion of the system, is now reconstructed with plate girder type. There is no specific authority in the contract or in the certificate for .the use of plate girders ? A. I don't know about that. Q. I understood you to say that you didn't know of any? A. I didn't say that. I say there is a very serious question involved in this question under article 12, whether or not they can use any kind of construction that will bring them up to the safe operation of this railway. That is the question for the coui't to decide. Q. Now, the legality of the use of plate girders in the recon- struction is contested. If legal, the legality must depend upon some provisions of the contract No. 4, whicsh will require a judicial construction in order to determine its legality. That pending the determination judicially of that question, the work of con- struction and the use of plate girders carrying on the construc- tion is going forward? A. Yes. Q. Notwithstanding the opinion of the Corporation Counsel written to the Board of Estimate and Apportionment or to the Transit Committee of that Board, to the effect of such construc- tion is a nuisance ? A. I don't think you can put it in that way. 208 Investigation of Public Service Commissions Of course, I don't think it is a fact that he stated that in his opinion, that it is a nuisance, or, in other words, that he regarded it as such. Q. I don't know what other conclusion can be drawn. A. You have got to read it. He says " if " these conditions are so. Q. Do you know the character of construction of the so-called existing railway, whether they are the lattice type girder, or the .steel plate girder? A. You mean in Brooklyn? Q. Yes. A. I think they are the lattice type. Q. Mr. Whitney has called my attention to a contract to which reference has been previously made. Will you please look at page 14 of the certificate, about a third of the way down the page? (Witness examines certificate and follows reading by Senator Lewis.) Q. " The structural detail employed in constructing the addi- tional tracks shall be substantially similar to the structural details authorized in the construction of the existing elevated railroad." Plave you found the place. Judge, and will you just follow along with me while I read the remainder of the para- graph? Is it your opinion. Judge, from your inspection of the construction work which has taken place in Fulton street, that the provisions of this paragraph which you have just read are being complied with by the Construction company building that road ? A. Of course that brings me again to an expression of an opinion of this litigation I would have to say from my personal opinion, it is. Q. Does the language in the second line, " substantially similar to the structural detail," does that convey to you any idea that the lattice type of construction is to be employed rather than the plate girder? A. ISTot at all, taking the whole thing into con- sideration. You have got to take the whole thing into considera- tion. Q. What does that language mean, then " substantially simi- lar ? " Isn't your construction of that section a general applica- tion of it ? Don't you think that so far as possible there should be specific compliance with the terms of specific provisions? A. Eepoet of Joint Legislative Committee 209 I thini; it is a general provision and that we must take into account immediate conditions. Q. jS'otwithstandiug the language I have read? A. Yes. Q. Isn't it true, Judge McCall, that the use of the language, to which I have called your attention, on page 14, was employed by reason of the fact that the drafters of the contract, of the cer- tificate, had in mind the provision of the franchise of the Kings County Elevated Eailway? A. I wouldn't say that. Q. Were details, plans and specifications of these contracts sub- mitted to the Commission prior to the delivery of the certificate and contract on March 19, 1913 ? A. I think the detail plans were available. I don't think they were brought down at the time of the certificate. Q. And were they prepared to such an extent as to disclose to the Commission, the members of the Commission, the intention to use plate girders in the Fulton street construction? A. I couldn't answer that. Chairman Thompson. — Why not ? I think that is fair ? A. I cannot remember what their plans were. By Chairman Thompson: Q. Did you think, when you passed on these things. Judge, these things could you pass on probably from the records, did you think when you passed on it that it was going to result in the erection of the kind of structure that you now see over there ? A. I think they have a proper structure over there that can operate the size of these cars. How can I answer your question as to whether the structure over there is exactly like the original structure ? Q. This structure is entirely different from the one that was there? A. That is a question. Q. Is it because you do not recollect, or because you do not know ? A. I cannot recall. If the engineer said to me that it was necessary to have these girders, the plate girders, I would vote for them. Q. It was the intention, was it, to permit of the erection of a structure in Fulton street that should be of such capacity as to' enable the transportation of freight as well as passenger ? A. That would depend upon their charter right. 210 Investigation of Public Seevicb Commissions Q. You tliink they have the right to carry freight over ifjhat line? A. I don't want to express an opinion on that. I dcm't think you can deprive them of any of their charter privileges. By Senator Lewis : Q. Whether or not it was in the charter law itself ? I see the following language in the contract. " Together with authority to reconstruct or replace under existing franchise, to provide for or accommodate the erection of additional tracks and stations herein authorized to transfer over and by. means the same pas- sengers or freight or both, by the power or force of electricity or compressed air, so used as to involve no combustion or," and so forth. ISTow, is that so, whether or not the certificate of incor- poration or the original franchise of the company gave the com- pany the right to operate cars for the transportation of freight, there can be no question about the right so far as the Commis- sion itself is concerned, granted by the certificate of the Com- mission, can there? A. If you have read that resolution cor- rectly, freight could be handled, perhaps. Q. Well, it recognizes the right for them to transport freight? A. They have had all franchise rights. Q. Was the question as to whether or not they had the right investigated before the certificate was granted ? A. It must have been. Q. Have you any recollection on that subject? A. I cannot recall it now. Q. Who investigated it? A. The engineer and law depart- ment. Q. Did they make a report on it ? A. They must have. Will the Secretary please provide that information for Senator Lewis? Mr. Travis 11. Whitney (Secretary). — Why, Judge MeCall was not a member of the Commission until after the contracts were completed. Senator Lewis. — Who signed the contract? Can you get me the report on that proposition? Mr. Whitney. — I will get all the papers. Commissioner McCall. — Yes, I wish you would submit those Daroers to Senator Lewis. Ebpoet of Joint Legislative Committee 211 By Senator Lewis: Q. Am I to understand, Judge, that tlie question as to tlie right of the B. R. T. or the Xew York Municipal Railways Com- pany to transport freight was considered by the Commission, prior to the signature of the certificate from which I have read into the record ? A. I suppose it must have been necessarily. Q. Have you any knowledge of the prepai-ation of any facts by your legal department on that question ? A. I cannot recall any now. Q. Do you know whether the matter was ever referred to the legal department for the Commissioners for examination and report? A. I cannot answer that. Q. Do you know w'hether the matter was ever referred to the engineering department for examination? A. It is my natural assumption that it went to both departments. Q. If the new structure in Fulton street be completed in accord- ance with the design of that portion of the structure already com- pleted, will it provide a physical connection between the so-called 'New Marginal and Long Island Railway, as has been stated to this Committee, at Jamaica? A. It would extend to Jamaica, no connection w'hatever with the Marginal Railway. Q. Will this railway have any physical connection with the Marginal Railroad, so-called? A. None at all. Q. Judge, won't this Marginal Railroad come right along to Fulton street there? A. It runs up south. It has no physical connection whatever with that road. By Senator Lewis: I propose to read into the record, Mr. Chairman, part of page 10 — Chairman Thompson. — Page 10 of what ? Senator Lewis. — Of the certificate. Chairman Thompson. — That is the certificate granted when ? Senator Lewis.— March 19, 1913, New York Municipal Rail- ways. " Shall become void unless within one year's time of the acceptance of this certificate by the company." " That company shall furnish and in due and legal form obtain and submit to 212 Investigation of Publio Service Commissions inspection by the Commission the consent of the owners of one- half in value of tlie property Iwunded on each portion of the streets, avenues or highways upon or over which the railway or any part thereof shall cross and is authorized to the construction and operation of the railway, or such part thereof, or in case the consent of such property owners cannot be obtained, then the determination, pursuant to law, of Commissioners to be appointed by the Appellate Division of the Supreme Court of the proper department that such portion of the railroad ought to be con- structed, that said determination of such commissioner, when con- firmed by the court, to be taken in lieu of such consent of prop- erty owners." No determination of the Appellate Division was ever had, I assume, and because of the fact that the consents were filed. It has been claimed that consents were filed which were fraudulent upon their face, and which an inspection would dis- close the fact of the fraud. iWhat do you know on that subject? A. As a matter of fact, we have nothing to do with that. We don't obtain the consents. They are obtained by the company. That work was done by the agents of the Municipal Eailway Com- pany. The Public Service Commission had nothing whatever to do with the securing of them whatever. By Senator Lawson: Q. Who passes on these, Judge ? I mean who of the Commis- sion passes on these consents ? A. All there is about that is that the lawyers figure up the requisite amount and report that that has been obtained. Q. Whose lawyers ? A. Our lawyers. Counsel for our Com- mission. Q. Who turned them over to you ? A. The B. E. T. That is, they kept them themselves. We have nothing to do with them. By Senator Lewis: Q. Under the terms of the certificate the company shall furnish and in due and legal form obtain and submit to inspection by the Commission consents of the owners of one-half in value of the property. That is true, is it not ? A. I believe so. Q. Did they ever obtain and submit to you or any Commis- sioner that you have knowledge of consents of the property Rbpoet of Joint Legislative Committee 213 owners only on&-half of the property? A. The consents were inspected by the legal department and upon tbeir report we granted this certificate. Q. Were they ever submitted to the Commission itself? A. They were possibly submitted to find out about the requisite amount. Q. Is there a record of the fact that they have been submitted ? A. There must be. I have no doubt about it. Q. There necessarily must be? A. What I want to impress upon you is that no member of this Commission had anything to do with the obtaining of this certificate. Q. I don't suppose they did. I want to know whether the Commission had an opportunity to inspect these consents and ascertain from such inspection that such consents were in due and legal form as provided for in the law. A. I find that on May 10, 1914, counsel submits consents reaching $331,000. We received that information in tJhe form of a communication. Q. Commissioner, what was done with this communication when it was received ? Have you any knowledge of that ? A. I cannot recall now. The records will show. Q. Will you examine it and tell us what was done ? A. I find the letter here from tbe secretary addressed to Mr. Williams, president of the New York Municipal Railway Company, acknowl- edging receipt of a certain number of consents. For the informa- tion of the Committee I should be glad to submit a form of con- sent as used in this matter. (Witness delivers copy of consent to Senator Lewis which is accepted and made a part of the record.) Senator Lewis. — I propose to read Article X of chapter 3 of the contract between the city of New York by the Public Service Commission of the First District, with the New York Municipal Railway Corporation, being Contract No. 4. "Article X. — The city agrees that if the lessee will con- tribute toward the cost of construction of the railway as hereinafter provided, it will construct the railway with reasonable diligence, provided, however, that as to the fol- lowing routes this contract is upon the condition that it shall 214 Investigation of Public Service Commissions not become party or go into effect as to tlie city regarding the following routes wluch the city may be xtaable to acquire the right to construct by obtaining the consent required by the Kapid Transit Act." The routes following are the ones mentioned in the article above referred to: " 59th street, Woodside and Astoria, Whitehall street, East river, Montague, street, Brown and Whitehall streets, Flatbush avenue, Eulton Street route. Western District route, Gravesend Avenue route, and JSTew Bedford Avenue Elevated line." " If such consents cannot be obtained for any route or routes referred to above, the Commission will in respect to such route or routes for which consents shall have been refused establish another route or routes of nearly similar location and extent, and endeavor to secure such consents for such substituted route or routes, and the provisions of this contract as to the routes referred to above shall be applicable to substituted routes." Does not that provision which I have just read, Judge MciOall, seem to imply that the obtaining of the consents for the construc- tion of the Fulton Street Koad falls upon the Commission itself rather than upon the railroad company? Mr. McCall.— ISTot at all. By Senator Lewis: Q. Permit me to read once more, leaving out the unimportant matter. " If such consents cannot be obtained, the Commission will, in lieu of such route, adopt another route or routes, and endeavor to secure such consent for such substituted route or routes." Doesn't that specifically state that the Commission will endeavor to secure consents ? A. ISTot at all. Q. What do you consider ? A. It means that if we fail to get that route, we will have to start another route. Q. And when you have established another route, does not this language imply the Commission will endeavor to secure such con- sents for such substituted route or routes ? A. JSTo, it does not follow the route. Q. I am satisfied, Mr. Chairman, that the provision which I read from Article X of the contract does in reality, while upon Repoet of Joint Lbgislative Committee 215 its face it seems to relate to Fulton street, it does not relate to that part of Fulton street route whicli has been under considera- tion here. Chairman Thompson. — We will now take a recess, until two o'clock. The meeting thereupon adjourned until 2 p. m. AFTERNOON SESSION Meeting called to order by Chairman Thompson at 2 p. m. Edwabd E. McCall, resumed the stand. Chairman Thompson. — What does this contract No. 4, which refers to Fulton street, in here, what does that mean ? How is it that it refers to Fulton street ? Secretary Whitney. — That covers a space of five or six hundred feet, and it refers to the subway and not to the elevated. By Senator Lewis: Q. This contract No. 4 does not refer to elevated lines? A. No. There is no contract in reference to this third track on the elevated line. This certificate is whatever contract there is. Q. How could that refer to the certificate? A. Just look at Article XIII of contract No. 4. Q. Isn't that reconstruction any part of the dual contract? A. That certificate is granted pursuant to the same authority of the Public Service Commission that they have in granting certificates of convenience and necessity. Q. Certificates of convenience and necessity are granted under the Railroad Law. What is this certificate? A. This is a cer- tificate granted under the provisions of section 9, as amended in section 53 of the Public Service Law. These contracts 3 and 4 and the certificate for elevated extension and — By Chairman Thompson: Q. Well, this is handled under the provisions of the Rapid Transit Act, is it not ? A. Yes. 216 Investigation of Public Service Commissions By Mr. Harkness (Counsel for Public Service Commission) : Mr. Chairman, I would like to ask if Senator Lewis would per- mit at this time for me to make a statement regarding some matter which he read this morning from an alleged copy of the articles of incorporation of the Kings County Elevated, two provisions, one relating to plate girders and I have forgotten what the other one related to. On reading these two specifications one would prob- ably give the impression that these were necessarily important parts of that charter. I want to call attention to the fact that these articles of incorporation include fifty-three specifications of which those which were read this morning constitute two. Chairman Thompson — We are aware of that. Mr. Harkness (continuing). — In order that the record should be complete it should contain all of the fiity-three specifications that are in the articles of incorporation and I make that request with the further statement that the questions that were asked of Chairman MeCall this morning are equally applicable to the other fifty specifications in addition to the two which were read. Chairman Thompson. — You may call the attention of the Chairman to any particular specifications other than those read by Senator Lewis and if they look to be pertinent to this inquiry I will see that they are added to the record. I am not going to load up the record with a lot of this information that is foreign to the inquiry. Mr. Harkness. — In a certain private litigation that is now going on they are laying great emphasis on one of these provisions and claim that it is highly essential to the inquiry. These are only two of the large number of specifications and if one of these goes into the record they should all go into the record. Chairman Thompson. — ^You may call my attention to any specifications which you think may be important. Mr. Harkness. — I ask that the entire articles of incorporation of the Kings County Company be included in the record. Chairman Thompson. — The application is denied until they are proven to be necessary for the purpose of this inquiry. Kbpoet of Joint Legislative Committee 217 Mr. Harkness. — May I borrow the same copy that was used this morning ? Senator Lewis. — Does the chair desire to take up this phase of the matter at this time ? Chairman Thompson. — No. Senator Lewis (continmng examination of Mr. Mc'Call) : Q. Judge McCall, are you able to state whether at the time the plans for the reconstruction and enlargement of the structure in Fulton street were approved what the estimated cost of that improvement was? A. There was a lot of tentative figures, Senator, purely tentative. I don't know where this seven hun- dred thousand dollars per mile came from but I think it is a mistake. Q. Was it your understanding and the understanding of the Commission at the time the contracts were approved and executed that the reconstruction would be accomplished for three or four hundred thousand dollars a mile ? A. No. ISTo sane man would have come to such a conclusion. Q. Was there any sum in the minds of the members of your Commission or in your mind as to the probable cost per mile of that reconstruction? A. The only way I can answer that is to say that there were several conferences and several amounts dis- cussed as to the probable cost and it was something, I think, like three hundred thousand dollars a mile. Q. Have you any information as to what it has actually cost thus far? I mean, approximately? A. I believe something over five himdred thousand dollars a mile. Q. That is due, is it not to the heavier construction represented by the plate girder patent construction ? A. Not necessarily. It represents construction that is necessary for operation of that road whether it is operated with plate girders or not. Q. The plate girder construction is more expensive is it not than the lattice construction ? A. Yes. Q. Then the use of the plate girders is actually costing a larger sum per mile than the lattice construction would have cost? A. As a matter of fact, that is not so. Q. You think it is not so ? A. I guess as a matter of fact it 218 IirvESTiGATiON OF PuBuc Seevice CoMin^OHS is not so from what I am informed. All sncli questions as this couM better be answered bv the engineer. Q. Of com-se that is true if we want the exact figures, but what this Committee is interested in is the knowledge of the members of the Commission because it is charged by those who have appeared before this Committee that the Commissioners have been negligent of the duties imposed upon them by law in the supervision of the construction of this railroad- I don't know that that is so of course. A. These charges are always made by certain men and I am now going to include in that class this so-called Committee of One Hundred. This Committee who having personal axes to grind go to your Committee and mate a lot of noise about the Public Service Commission and foimd their voices loud. Q. Is that so of all the members of this Committee ? A- That is not generally the question. Q. We have been hearing from a lot of people over there, Judge? A. Xow this Committee of One Hundred, Senator Thompson, has been prodding all aroimd on this question and trying to force this Commission and the only reason we won't do it, at least so far as I am personally concerned is, that I don't believe we are in position to do it ; have the legal power to do it. These men have been consulted and they have been treated with courtesy. I have actually refrained from expressing my per- sonal opinion, so that I would not hurt their litigation. It is accepted by a spirit of coercion, in the hope that they may influ- ence us or for such taken action that would help them in this. Q. You think that is true of all this Committee of One Htm- dred ? A. I speak of the men who have been before your Com- mittee, that is true. Q. ^Ir. Carpenter has appeared before this Committee? A. TTell, there are some very conscientious and estimable citizens in that Committee. I don't deny that. ^Xlr. Whitney. — Mr. Chaii-man, I would Kke to make this statement which may have some bearing upon the questions that are being asked of Judge McCall, and which form an important part of this record and that is that the exact questions that are now beiag asked by Senator Lewis are questions which counsel Eepobt of Joint Legislativb Committee 219 for private litigants, who are defendants in a law suit, have been endeavoring to ask and get the answers to from various officials of the Public Service Commission for several weeks past. The questions that the}' are trying to get answers to from us are exactly the same as the ones which Senator Lewis is now asking of Chairman llcCall and it is my opinion that these people are endeavoring to secure these facts for the purpose of aiding their private litigations. I think you may well take under advisement the question of whether it is being used for the purpose of dis- covery. Chairman Thompson. — As long as we are in confidence and we are aU here I might state that the counsel to this Committee made up these questions, expressed these ideas himself, in my presence before he had any conference with these gentlemen at all and I know they originated with the counsel to this Committee. If they happen to coincide with something you wish to attempt avoiding we cannot lielp that, but in any event the counsel to the Committee and the Chairman of the Committee think they are perfectly plain questions for the Public Service Commissioner to answer. I have no objections to these questions. I will go further. If there is any question that I can ask that will aid these people in their litigation, that is the litigation that is now pending. T will gladly ask it. Senator Lewis. — I don't see any reason why the Public Service Commission as representing the city of New York, apply to the contract which is the subject of litigation should not be of such assistance to any taxpayer whose personal property rights are being infringed or encroached upon or who represent that they are being infringed or encroached upon, should not furnish to the individual such information as that individual may desire so that it is a matter of public record. ]\rr. Whitney. — ■ ^Ir. Chairman, in order that there may be no )nisunderstanding, I want also to say that the officials of the Com- mission have furnished all the possible evidence they could at the request of these litigants in this pending litigation. ]\Ir. McCollum who is attorney for these litigants has raised the ques- tion as to whether we had actually furnished everything we could. 220 Investigation of Public Seevice Commissions Senator Lewis. — I never saw him. I never had any conversa- tion with him whatsoever. Chairman McCall. — As far as I am personally concerned I want to say that I have the same idea in mind. I have no per- sonal interests of any kind, no desire to hurt any individual in this matter at all. I have a great desire that in the performance of my public duty I shall not do anything that will precipitate injury or damage upon the city, that's all. Senator Lewis. — That's a very lofty purpose. ISTow this case of Kaplan against The Municipal Railway Company was dis- missed. The litigation now pending is the Municipal Railway Company against Kaplan and they are now in process of estab- lishing their rights to the appointment of Commissioners in condemnation. Q. Has there been any adjudication of condemnation in that proceeding thus far ? A. itTo, sir. Q. ISTotwithstanding the fact that there has been no adjudica- tion of condemnation there has been an order for immediate possession issued by the court under which Kaplan's property has been maintained by the construction of this structure, the legality of which he sought to question in the court ; is that not so ? A If what you say is true, that is something I won't discuss. That is an order of the court. If he don't want to abide by the treat- ment of that court he has the right of appeal. That is the very point I want to impress upon you. That is what I want to impress upon this Committee of One Hundred. I am on record without any reservation whatsoever as against elevated railway operation. ITo question about. Q. JSTow, Judge, right there on that statement, let me see if I understand your position correctly. You were desirous of enter- ing into some kind of an arrangement by which the B. R. T., or the company owning the Fulton Street Elevated Line, should sur- render their probable franchise for the operation of that road on Fulton street and take in exchange the subway franchise that would have a life of twenty-five years only. I think you said that you discussed that matter. That is true, is it ? A. I was desirous of having the views of these gentlemen particularly in ridding Fulton street of the elevated structure, as it should be. That is, if it Eepoet of Joint Legislative Committee 221 was within the range of physical possibility so to do. To that end, I attended conference after conference, at one of which this sub- ject of elevated transit was considered, and the possibility of sub- way construction was gone over in detail. I saw no objection to that if it could be accomplished, but two things stood in the way. First, there was the reluctancy of the B. R. T. to relinquish its rights in this property, and, second, the requisite funds to build with. Anyway, so there cannot be any mistake, I say right here now that it is absolutely absurd to think, to even think, let alone to try to put into operation, that the city will spend or can spend or is able to spend four to eight million dollars in money for the construction of additional subways, so much so am I impressed with that, and have been for the last nine months, that I have been protesting and protesting as to these different new stations, and I am on record to-day that I will vote against any proposition, no matter what its character may be, that seeks to add to present con- struction of subways. I am imalterably opposed to any effort, com- ing from whatsoever source it may be, that seeks for one moment to delay the completion of the present plan of dual subway transit. Let me say that they have made the suggestion of assessments. They must know how futile that idea is itself. They are repre- sentative citizens of Brooklyn. I would not impute nor thought- lessly say a word against any of these men. I respect them, and I know a number of them intimately and personally. They had called and suggested assessments. I talked and explained the matter to Mr. Shaw. I said, " You may do this if you want to, but it looks to me like an impossibility, and you must never say that the Public Service Commission has suggested assessments, because it never will." Now, when you consider the question of assessments, you know as a lawyer that no assessment agreed to by some citizens would affect them all. Of course, some of the people in Brooklyn seem to think that out of a budget of $199,000,000 once a year, that eight million is not much money. Every day we have some man come in and make requests for some five or six hundred thousand dollars; those are considered mere trifles. Senator Lewis. — ^Notwithstanding your attitude. Judge, and what I assume is probably the attitude of the members of the 222 Investigation of Public Service Commissions Commission, the Commission lias actually recognized the validity in perpetuity of the franchise of the elevated structure in Fulton Street and has strengthened and enlarged the terms of that fran- chise to such an extent as to malse it possible to double the capacity of the structure in Fulton street, increasing its carrying capacity to such an extent as to be available for the use of both passengers and freight accommodations, and involving the expenditure of so large a sum of money that probably will never be abolished. Isn't that so ? A. I don't know. You have a sort of conclusion to which I think I would have to answer as I stated before. Q. ISTow, to get back to the question of cost per mile. The $550,000 cost of construction per mile, which I think you stated the road has already cost, does not include damages to property rights, or do you know anything as to the probable cost of the property rights ? Was that question taken into consideration by the Commission ? A. It had to understand that there would prob- ably be damages for light, air and easements privileges. Q. Was there any estimate prepared as to what the probable cost would be ? A. There couldn't possibly be. No man on earth can estimate that. There is some fixed rule here in I^ew York. Generally the Commissioners desire light upon that question in order to reach an intelligent determination. All of these details were entirely gone into formally and studied by these people as to the form of these contracts. Q. Did you give them any attention after you became Chairman and before your execution of the contract ? A. I did. Q. Did you have before you at that time anything in the way of possibility of cost of those property rights ? A. I probably had some information on the subject. Q. Do you know anything about what these property rights have cost per mile up to the present time ? A. I couldn't tell you. Q. Do you know whether any estimate was made by your engi- neers as to the probable cost ? A. That I couldn't answer. Q. What length of time expired after your appointment as Chairman of the Commission, and before the execution of the dual contract? A. About six or eight weeks. Q. Well, the city ultimately is to get a return upon this money invested in this construction, is it not ? A. Yes. Eepoet of Joint Legislative Committee 223 Q. Can you state approximately the amount of the city capital that is to go into this construction ? A. Into what construction ? Q. This general construction on the Brooklyn elevated ? They are doing that entirely at their expense ? A. Yes. Q. The city is contributing nothing ? A. ISTot to their line. Q. Is the city ultimately to take it over, the property under the contract? A. Yes, except some terminals, that they don't have the right Q. Is there any arrangement or understanding as to the amount that the city shall pay for that property when taken over? A. Their right to take it commences in ten years. That will all have to be determined. Q. The cost has to be ascertained, has it not ? A. Yes. Q. And in ascertaining the cost, the increased cost due to the use of plate girder type, will be one of the elements ? A. Of course an element. Q. And the damages to property rights will be another right? A. Surely. Q. And the cost of obtaining consents will be another ? A. A charge, yes. Q. And all these charges will aggregate the sum which at the end of forty-nine years the city will have to pay for the acquisition of the property and that right ? A. Well, no. Q. Well, at the end of forty-nine years, it comes back to the city without contract? A. Yes. Q. Both structures and equipment? A. Yes. Q. In the meantime, what does the city get in the way of financial consideration for the benefit which the city is conveying to this company? A. Nothing at all. After certain deductions are made, after they get on a paying basis, then. the city com- mences to share. Q. That is the preferential fund that has to be divided in equal parts ? A. Yes. Q. That, of course, will not be divided until such time as the income shall be sufficient to pay interest upon the investment? A. Yes, sir. Q. Operating expenses? A. Yes, sir. Q. And amortization fund created? A. Yes. 224 Investigation of Public Seevice Commissions Q. And depreciation fund? A. That is provided for. Q. So that the cost at this time per mile, the share, the bur- den upon the gross earnings each year, and the longer the period of time before the company will be expected to be upon a profit- sharing basis. By the way, Commissioner, is it the belief of the Commission, or has it been the belief of the Commission, that under this contract the city would at any time during the life of the contract, receive anything in the way of dividend from the preferential fund? A. Oh, sure. Q. You think that is true ? A. Yes. I have heard it expressed at different figures. Senator. I believe it is practical. I have heard it figured down as close, in reference to the -B. E. T., as ten years. I myself have no strong confidence as to that. Q. That matter was discussed, was it, by the Commissioners,, and considered ? A. It was, and considered. Q. Do you mean. Judge McCall, to have the Committee under- stand that at the end of forty-nine years the entire property rights of the owners of the present elevated structure on Fulton street, together with the structure that may be constructed as a part of the improveiuent and enlargement, will revert to the city ? A. I amended that statement by saying with the exception of cer- tain terminals. Q. Will the existing tracks and structure carrying these tracks revert to the city? A. At the termination of the prescribed period they revert to the city. Q. The present structure, as well as those that are being con- structed under authority of this certificate, all revert to the city? A. No, sir. Q. The present ownership will continue as to the presently used property? A. Yes. Q. And all that will revert to the city will be the structures that are now authorized by this certificate? A. Yes. Q. And then we will have when that time comes a joint owner- ship between the city and the present ownership, or its successor, with the assets and structures owned by the present ownership, and subject to the use of the city, only upon terms that may be agreed upon between the two parties? A. My opinion is that these contracts will be amicably adjusted when the time comes. Eepoet of Joint Legislative Committee 225 Q. Judge McCall, do you know about a litigation in which the question of cumulative deficits was under consideration and in which it was held that the city would not be liable for a cumulative deficit ? I think Judge Blacklock was counsel for the Commission here at that time, before he was made judge. After he became judge, I am told that the question under the contract as it was formulated prior to its execution was the subject of litigation in an effort made to restrain the Public Service 'Com- mission from executing the conti-act, and that a charge was made ; in that litigation Judge Blacklock held,. I am told,, that the city would not be liable for the cumulative deficit.. TJiat after the decision of Judge Blacklock, the Commission in co-operation with the ofiicials of the New York Municipal Railways Company, agreed upon a different provision which was inserted in the. cer- tificate, under the terms of which the city specifically assumes and agrees to pay the cumulative deficit. Do you know about that ? A. No. Q. That was prior to the time that you became connected with the Commission? A. Yes. Q. Now, you have referred in your testimony to various liti- gations that were pending in which various questions were the subject of litigation, and you have said that you did not care to commit the Commission to the use, either in words or substance, you said this for the purpose of not helping either party to that litigation. You said substantially that,, didn't you? Do you recall what you said on the subject of pending litigation? A. What I said is this: That I will not, if I am able and strong enough, that this Commission will not undertake to judicially determine, judicially construe these contracts where questions are raised as between parties and are pending in court. I believe that the court is then the only proper place to decide them, because, as I said before, they are strictly judicial questions and not for consideration by quasi-judicial bodies. Q. That is, when there is litigation pending, you won't inter- fere? A. Yes. Q. Well, now, on April 14th of this year, was there any liti- gation pending of your knowledge in which any question involv- VoL. 1 — 8 226 Investigation of Public Seevice Commissions ing the construction of this structure was at issue? A. I cannot recall just now. Q. 1 hold in my hand the memorandum, the record of the Fulton Street Protective League, in the matter of the application of the ISTew York Municipal Kailway Corporation and New York Consolidated Railway Company, for the approval of plans for the construction of an elevated railway on Pulton street in the bor- ough of Brooklyn, from Nostrand avenue west to Adam street. This appears to have been prepared by the firm of Davies, Auer- bach & Cornell, with Mr. Hotchkiss, Mr. Squires and Mr. McCollum, of counsel. Do you know of a copy of this brief hav- ing been filed with the Commissioners ? A. I have a recollection of such a brief. Q. I am told that a hearing was had in this matter then pend- ing before your 'Commission, and that this brief was filed in this matter so pending, and that page 25 contained certain requests to which I am told the Commission has given no attention. I propose to read them and to ask you to state what, if anything, has been done in connection with this request. The Commission was requested first whether the structure now being built upon Fulton street is authorized by the certificate granted by this Commission to the Kew York Municipal Railway Corporation, dated March 19, 1913. Was that question pending at that time? A. I cannot recall. They were asking us to answer that question. Q. Was any action taken upon this request by the Commission? A. I don't know whether there was any formal action taken. The secretary will tell you. If there was any litigation pending I would take action on that and refuse to answer the question. Q. I am told there was no litigation pending at that time. Second, the question was asked whether the burden imposed upon Fulton street by the proposed structure is permitted by law or by any act of this Commission. I am told that no answer has ever been given to this question. Q. Do you recall whether or not any action has been taken? A. I cannot recall offhand. Q. Another request is that the Commission hold a hearing and take evidence in the Consolidated or combined proceedings upon this question. Has there ever been any such hearing ? A. It is not necessary to have that kind of a hearing. Eepoet of Joint Legislative Committee 227 Q. Was there any litigation pending? A. If there was, the matter would not have been adjusted, for reasons stated before. Q. Was it your thought then that these questions were prop- erly to be answered in court? A. That was the only possible place to test them. Q. Now, I would like to get some information about this Kings County Elevated. Perhaps I can explain it. Now, the Kings County Elevated apparently had a charter and was the original owner and builder of the elevated structure in Fulton street? A. Yes, sir. Q. The routes of the Kings County company passed, by some process, to the Consolidated. The Consolidated exercised these rights by reason of its ownership under the franchise originally issued to the Kings County Elevated. The New York Municipal Railways Company applies for and obtains a certificate from the Public Service Commission, and approved by the Board of Esti- mate and Apportionment, for the construction of additional tracks in Fulton street, to be used by the New York Municipal Eailways Company, in connection with the rights and structures owned and thereafter operated by the Consolidated company? A. Such property rights they had acquired. Q. Now, we have two railway companies in Fulton street at the present time. The Consolidated company, which has by means of conveniences succeeded to all the rights of the Kings County Elevated, and you have the New York Municipal Eailway Com- pany, a new corporation, to which has been granted the privilege of erecting additional tracks in Fulton street and the use of these tracks in connection with the theretofore existing tracks, belong- ing to the Consolidated company, and operated by the Municipal Railways Company, under an agreement with the Consolidated company, I assume. Is that your understanding? A. That is my understanding. Q. That agreement must have been approved by the Public Service Commission? A. Of what agreement? Q. The agreement between the two companies. You have to approve all of them ? A. We have that. Q. Now, wasn't there pending, Judge MeCall, on the 14th of April, an application before your Commission for approval of 228 Investigation of Public Seevice Commissions the plans for the construction on Fulton street, for work which had not then been complained of ? A. I think that is true. Q. And the hearing on that day was upon that appUcation. I think that is correct. And upon that application these various requests were made to the 'Commission, at a time when there was no litigation whatever? A. That was only a section; Their question is the whole line. Q. They say, to summarize, we request under the consolidated or combined proceeding, referring to the title of the proceeding under the consolidated or combined proceeding, even suggested that the Commission hold a hearing and take evidence upon the following matters: " First, whether the structure now being built upon Ful- ton street is authorized by the certificate granted by this 'Com- mission to the New York Municipal Eailway Corporation, dated March 19, 1913. " Second, whether the burden imposed upon Fulton street by the proposed structure is permitted by law or by any act of this Commission. " Third, whether the public interests do not diemand that the Fulton street transit be sunk into a subway, and whether there is any good or lawful reason why this cannot be provided. " Fourth, whether the structure now being built is unsafe, and whether there is any reason why central Brooklyn should be denied the subway facilities which the other parts of the city have, and whether the Fulton street property and the city's tax interests do not require the replacement of the elevated by a subway. " Fifth, whether the structural details of the new structure are substantially similar to those of the old one. " Sixth, whether the applicant has the bona fide consents of property owners and the city to the third-tracking, which is now taking place upon said street. " Seventh, whether the injury to the city's interests, both through access and through the preferential payment, do not ^ require that the company at least be limited to a third track Eepobt 01' Joint Legislative Committee 22'9 on the existing structure, if this 'Commission after investiga- tion shall determine that the elevated should not be replaced by a subway. " 'Eespectf ully submitted, "(Signed) DA VIES, AUERBAOH & CORNELL." Mr. Travis H. Whitney (Secretary to the Public Service Com- mission). — Mr. Chairmaji, do I understand from counsel that this brief was filed before the Commission ? Mr. McOall. — It is my understanding that it was. Mr. Whitney. — -What is the date of the brief? Mt. Lewis. — April 23 d. Mr. Whitney. — Application was made to the court on April 19th, and papers were given to us, read on the tearing on April 14^. Examination by Mr. Lewis: Q. Was it a fact that these requests, as set forth in the brief and filed on the 23d of April, were made verbally at the time by these people personally and represented by counsel ? A. I hav(? not the testimony here. Q. Was any attention given to these requests ? A. There would be no attention given to them if there was litigation pending. ■Q. It appears now upon the record, from the statement of Mr. Whitney, that the litigation was commenced on April 19th, while this hearing took place on April 14th. Was any attention given :by the Commission to this request between the dates named — April 14rth and April 19th? A. They were given ten days to file briefs. Q. Jfo attention was given until they filed briefs, and subse- quent to the filing of this brief, which the Commission asked for, the Commission granted its approval to a section of this construc- tion, did they not ? A. Just what section do you mean ? Q. From Wostrand avenue west. A. There are a number of these plans. I think there is a communication from the counsel, that is my recollection, on this very question. 230 Investigation of Public Service Commissions Mr. Harkness. — The brief of the Fultoii Street League was referred to counsel for opinion. The counsel answered advising the Commission of the Kaplan suit being in progress before Judge Brown, and the counsel advised the Commission of the pendency of the Kaplan suit, which had gone to reference before Judge Charles Brown, and further advised the Commission that the Commission should not take action about the Fulton street propo- sition that might affect the decision of Judge Brown. Q. Has there been any appeal in the granting of the application for the construction from ISTostrand avenue west to Adam street on account of the litigation ? A. That is one of the things that was considered. Q. Do I understand, then, that the plans which were the subject of the consideration by the Commission at the time this hearing was had, on April lith, have been approved ? A. No. Q. From Nostrand avenue to Adam street? A. l^o, sir, not yet. That approval has been withheld. Q. ISTow, this Kaplan suit that you speak of, is the action brought by the New York Mimicipal Railway Company against Kaplan ? A. No, that was the action brought by Kaplan against the New York Municipal Railway Company. Q. That was on the 19th? A. Kaplan brought an action for an injunction. Q. To restrain construction? A. His action was dismissed, then the Municipal Railway Company brought this action for condemnation of the right, and have vacated Kaplan's property. That would bring the matter before the court, all of these ques- tions for settlement. Every one of them were involved in the Kaplan suit. Q. Isn't it a fact that Kaplan brought the action to restrain construction in front of his premises, upon the ground that his consent had not been given, and that upon the further ground that a sufficient number of valid consents had not been authorized? A. That may have been one of his allegations. Q. And that the railway company immediately filed this peti- tion in condemnation proceeding, and the court denied the injunc- tion because of the pendency of the condemnation proceeding in Report of Joint Legislative Committee 231 whioh the questions included, which involved Mr. Kaplan's, right, could be determined in the condemnation proceeding? A. Yes. Q. Well, temporary possession seems to have been granted, but the condemnation proceeding itself has not been determined; is that not so ? A. The matter has been referred to Judge Brown, and that question is before him at the present time. Q. Is it the purpose of the Commission to act upon this appli- cation for approval prior to the determination of this litigation? A. What have you reference to ? Q. The pending application for the approval of the plans for the construction of an elevated railway on Fulton street from Nostrand avenue to Adam street. A. Yes, sir. I will fight against delay, no matter what the cost may be, and just as soon as the Adam street structure is determined upon and agreed to we shall pass the approval of the plans from Nostrand avenue to Adam street. I want to say that the man who is responsible for delay m the completion of the present system of subways, or the man who was responsible for it, will have a very severe day of reckoning with the people of this city. Q. How are you consistent, that' you won't wait for the deci- sion of the court if it affects the railroad, but you will wait if the decision of the court affects the other fellow ? A. I haven't done that. Q. I know you haven't; then why do you want to do it? Didn't you say today, in answer to my question, that it had been suggested by counsel that this matter should not be disposed of by the Public Service Commission during the pendency of the action in the court ? A. I don't agree with counsel. I take issue with counsel on that, and will say that the matter will be disposed of by this Commission if my views prevail, because this question should be determined now or as soon as possible, because I do not care to be in any way responsible for delay in the present subway construction. Q. I should agree with you if you are willing to leave both sides to the court. A. I am willing. I won't interfere on the part of either one of these litigants. I don't care whether it is the Municipal Eailway or any other railway company. I don't know any difference between these companies. The thing that I 232 Investigation of Public Service Commissions rm anxious about is that these matters shall be concluded so as to benefit the city. Chairman Thompson. — Supposing, Judge, this is a nuisance, supposing that the pajdng of $1,000,000 a mile is a nuisance, and it turns out to be a nuisance by the judgment of the court, and the city has to take the nuisance out of the street, where would the expense come and the delay ? Mr. McCall.-^ The responsibiiity is with the court. I hesitate in believing the court could do anything like that. Chairman Thompson. — I think the Public Service Commission should take the responsibility of deciding this or not. Mr. McCall. — ~No, you don't believe that. Chairman Thompson. — I may not when I get through. Mr. McCall. — You would take any responsibility for that. Examination by Senator Lewis: Q. Is it your purpose. Judge, to approve the plans for this construction from ISTostrand avenue west to Adam street in Fulton Street, in accordance with the more expensive type of construction -which has been submitted to you? A. It will be our plan — I don't say that it will be approved. I am only one member. They will all act on their own conscience. I don't know whether my views shall be sustained. I cei-tainly do not want the Com- mission to have responsibility for the delay and for whatevea" approval we will give. 'Q. Judge McCall, Mr. Whitney suggests it is proper ror me to ask you a little more definitely as to the type of construction. Yoa are prepared to approve individually the plan now pending before the Commission involving, as I understand it, an expendi- tare at the rate of $550,000 per mile, instead of $300,000 per mile, as was originally thought to be the probable average cost per mile. Is that so ? A. That is best answered by stating that when the estimated cost of $300,000, or whatever it may have been, was before me, it was in a measure conjectural or problemat- ical. There is no one who could tell what the cost would be. They could only give a fair approximate estimate. Kow, as they Eepoet of Joint Legislative Committee 233 go along, they find this additional cost to the mile. If the engi- neers of this department approve of that and say that the plan, although it costs that money, means a keeping of this contract, I wiU favor its passage. Q. Notwithstanding the cost may be eighty per cent, greater than the estimate? A. Well, of course, so far as that is con- cerned, you can answer it in that way, if you wish. I would rather have it eighty per cent, beyond this approximate estimate, and know it was safe and would carry that transit rather than for the purpose of saving money. Q. Before approving of these plans. Judge McGall, will the Commission talce any steps to ascertain the probable land dam- ages due to the approval and construction on this particular sec- tion? A. I don't think they can take any steps that will give them definite knowledge of these damages, but we will certainly take into consideration the cost that will probably result by dam- ages to light and air easements. Q. These damages can only be ascertained in one of two ways, by agreement between the parties, or by condemnation ? A. That is right. Q. Have all consents been obtained on this section which it is said you propose to approve at the first opportunity? A. The consents have all been approved, according to the records of our Commission. Q. If the consents have been obtained, then they mu^ have been obtained upon agreement with the railroad company as to the amount of damage? A. I don't know what their agreement was. Q. I am speaking about the consents of the property owners. A. Well, one is not dependent upon the other. They may give the consent without binding themselves to any future damages. Q. The fact that they have the consent does not imply that they arrive at any agreement as to the amount of daanages to which they may be entitled ? A. JSTo. Q. Now, has there been, or do you know whether any steps have been taken to ascertain the probable amount of land dam- ages that will be incurred as a result of the approval of the plana and construction under these plans, of this section ? A. Only so far as we endeavor to approximate it. 234 Investigation of Public Seevice Commissions Q. Are you prepared to state what that estimate is? A. No, I am not. Q. Was it one hundred thousand dollars or two hundred thou- sand dollars or what? A. I couldn't say. Q. What do you mean by the statement that you formed an opinion as to what the amount would be? A. Why, we simply formed an opinion only so far as we could approximate it. As I have stated before, no man on earth could give the definite amount. Q. And have you any information as to what the amount of this approximate estimate was ? A. I cannot give it to you. Q. Will your Commission examine and investigate before approving these plans, and reach some conclusion as to the prob- able cost of these land damages? Will you do this as an official act ? A. Of course we will, undoubtedly, study that work. Q. You will get some information on that subject before approving these plans? A. Undoubtedly so. Q. Has that been the custom before approving these plans, to get that information as to land damages as their way of estimat- ing the probable amount required in the way of expenditure for these damages ? A. Only an approximate estimate, no definite estimate, because definite figures cannot be obtained. Jlo man would attempt to give that. Q. Do your engineers submit records as to the probable cost of the land damages, the probable amount of land damages on any of these propositions? A. No. Q. Is there anything, any fact to show in advance of the approval of the plans what the probable amount of land damages will be ? A. I imagine there may be, if there is anything referred to in reference to making that particular estimate. I suppose that is a problematical cost. Of course that will be considered. Q. And it should be a matter of record in your ofiiee, should it not ? A. Well, I wouldn't say that. Q. Judge, will you tell us what steps have been taken by the Commission to supervise and estimate the costs that have been incurred in the purchase of material and the employment of labor in the construction work that has already been done? A. The engineering department have that entirely in charge, aud when Eepoet of Joint Legislative Committee 235 a certain point is reached, there is a report made by the Chief Engineer. That is after inspection and examination, not only of the work, but of the vouchers and the cost of the work as expressed in the voucher will furnish information as to the cost. His department has statutory power that is vested in him. The only position the Commission occupies in reference to that matter is the same right that a party would have in an appeal if we are not satisfied with his determination. Strange to say, the Commission itself has been an appellant from one of his determinations. T don't mean in this particular casa That is a matter solely vested in the engineer, and the Commission has no power to overrule the Engineer's Department. Q. Save by appeal from his determination? A. Of the Chief Engineer. Q. You cannot overrule him? A. ~No, sir. It is a statutory power. Mr. Harkness. — It is under the dual contract. Senator Lewis. — Isn't it in the Public Service Law ? Will you cite it to me ? Mr. Harkness. — It is page 39 of the contract. You will find it before the various provisions for approving contracts, and of course this work is all under contract. By Senator Lewis: Q. Has the Commission exercised its power reserved in the certificate to object to expenditures as unreasonable or improper? A. Not in this particular contract, no, sir. Mr. Harkness. — Does not that apply to operating expendi- tures ? Mr. Lewis. — Maintaining and operating. Yes, it does. There is supervision, however, as to contract. Mr. Harkness. — The construction, of course, is subject to the determination by the Engineer, by the Chief Engineer. That is undoubtedly so. 236 Investigation of Public Service Commissions By Senator Lewis: Q. And the Commission has no power to overrule the Engi- neer's estimate on cost of constr action? Mr. Harkness. — No power to overrule him. Senator Lewis. — This relates only to operation and mainte- nance. Now, in regard to cost of construction, has your Com- mission the power to object to the use in the construction of expenses, material, material more expensive than you should have employed ? Mr. 'McCall. — Of course we have that right, the inherent right,— By Mr. Lewis: Q. The Commission would accept the advice of the engineer on this subject ? A. Of course it would. Q. Does the Commission accept all the advice of the engineer in all matters, and act upon his advice at all times ? A. ISTo. Q. It does have independent views, then ? A. Yes. Q. And exercise its independent judgment, regardless of the Engineer? A. Yes, sir. Q. And regardless of the lawyers? A. Yes. Q. In other words, if the Commission don't agree with the opinion of counsel, they say so by their votes? A. Yes. Q. Then in this matter of the more expensive construction, the plate girder construction, it would be entirely proper for the members of the Commission to overrule the engineer as to the necessity of the plate girder construction, would it not ? It would be entirely within the power of the Commission to overrule that? A. There is nothing to prevent them from doing that,, if they want to do it. Q. Has the Commission ever overruled the Engineer on any of these details ? A. There might be some difference of opinion. Q. Have the plans and specifications as submitted ever been subjected to criticism by the Commission and amended as a result of that criticism in some matters of detail? A. Not on any engineering proposition. Q. Do you know what steps the engineers take to determine the question of quantities of material that go into a structure? Eepoet of Joint Legislative Committee 237 I suppose there is a great amount of concrete construction for foundation? A. Yes, and there is concrete overhead. Q. Does the engineering force exercise any supervision for the purpose of determining quantities employed in that? A. Of course. It is entirely within their province. Q. And who is the source that attends to that duty ? A. It is within the supervision of the Chief Engineer ; that is, there are certain branches of the department, and this would be referred to one of the branches, subject to the approval of the chief engineer. Q. Is that work being done by the Municipal Railway Com- pany itself, acting through its employees, or is it done under the contract awarded by the Municipal Railway? A. I don't know of any instance of it not being done under contract. It has always been under a contract. There may be some minor instances where some of it may have been done that way, but I don't recall any of the B. R. T. or the Municipal Railway. Q. Do you know where the steel is being purchased for use in this construction ? A. Several places. We have our inspectors down there. Q. Your inspectors are inspecting that personally all the time ? A. Yes. We have been scattered all over. Q. Do these inspectors make written report to the Commission ? A. Yes. Q. On file in the engineering department? A. Sure. Q. I read from paragraph at the bottom of page 16 of the cer- tificate : " The lessee shall except in such cases where permis- sioji to do otherwise is expressly granted from time to time by the Commission, by a resolution, in six weeks before entering into any contract, agreement, or undertaking having to do with the con- structing or equipping of the railway system, submit the same to the Commission for its approval, and the Commission may as a condition of approval require the insertion of such terms and con- ditions therein as it may deem necessary." Do you understand that that provision, which I have just read. Judge, applies to the construction on Fulton street, which has been going forward? A. In a general sense, that seems to apply to subways. You see the certificate does not have to do with the third tracking extensions. 238 Investigation of Public Seevice Commissions Q. Then, I suppose it is true that the various contracts and agreements relating to the constructing of the railroad heretofore entered into, have been submitted and approved by the Commis- sion, and I suppose they are submitted to the Legal Department first for approval as to form? A. Yes. Q. And to the Engineering Department for approval as to terms and specifications ? A. Yes. And to the Electrical De- partment for expression regarding the equipment, but there has been no contract made for equipment so far. Q. Will the records of the Commission show that fact? A. In every instance where it is done. Q. l^ow, will it be possible, Judge, for you to arrange to have at the hearing to-morrow morning, if the Committee shall assem- ble to-morrow morning, the consents in writing by the property owners on Eulton street, for the construction of this additional work on Fulton street, which were obtained, as I understand it, by the Railway company and submitted to the Commission for its inspection, and what became of them afterwards I do not know. I wonder what became of them. A. Mr. Whitney's letter showed they are returned to the Railway company. Q. Should they or should they not be a record of the Public Service Commission? A. We concluded that they were not nec- essary to be filed here at all. Q. Are they filed or recorded in the ofiice of the County Clert? A. I should imagine they should be. Q. As the provision of the statute, requiring that they should be ; but is there any record of the Commission of the consent, of the majority of consents, that has been made and filed anywhere? A. Yes. Q. Where is the record? A. I have it here. Senator Lewis: Q. Let me see it, please. Q. This report to counsel that a majority of the consents for that section and Eulton street have been obtained? A. Yes. There is no provision of the constitution or the statute requiring anybody to pass on the question of whether a majority has been obtained. Repobt of Joint Legislative Committee 239 Q. Your certificate provides that they shall be submitted to the Conunission for inspection? A. For inspection and they were submitted and inspected. Q. Who inspected them ? We would like to have whatever the record shows on that subject. A. They were referred to the Legal Department. They file a report in reference to it, the law stating that with the consent attached they must show the track and the name and state that they are in amount $331,000. Q. That was just one of those consents that was handed in this morning ? A. That was just one of the average consents submitted this morning, which was offered in evidence. Q. I would like to have produced if it can be without too much inconvenience all of the consents for the Fulton street construc- tion. A. You mean reports on consents? Q. Your reports on consents. I would like to see the original consents signed by the property owners. You can ask the B. E. T. to produce them. They are probably in the office of the registrar of the county. Q. Your Law Department did not see to it that they were recorded in any way. A. No. Q. You simply sent them back to the B. E. T. ? A. 'No obli- gation on us to see that they are registered in the Eegistrar's office. Q. There is no obligation on the Commission to see that they are registered ? A. I don't know that there is. Q. What test, if any, is made to find out whether these con- sents are valid and legal that you know of ? A. Both the consti- tution and the statute are absolutely silent as to who shall determine whether a majority was obtained and that has to be determined in litigation and I understand it is now in litigation. Under the certificate requiring the submission of the consents to the Conunission they were examined by counsel as to the form of execution to see whether they were properly executed as to whether the total exceeded fifty per cent, of the total assessments on Fulton street. Q. How do you know about that assessment ? A. By inspection of the general assessment roll. Q. How do you know what process the counsel to the Commis- sion went through ? A. That's done according to law. 240 Investigation of I'ttblic Seevice Commissions Q. Yes, but what I want to know is do you know that it was dose according to the law. A. I knew what they were doing. Q. Well, did they make any report? A. There is a report showing how it is done. 'Q. What I want to find out is whether your counsel passed on the validity of these consents outside of the assessment propo- sition ? A. He contented himself with the receipt of the various consents, figured out their assessed value that they had a majority, passed on the form of the consent and then reported that it was siufficient. Q. Did not pass on the validity ? A. No. Q. l^ow, Judge, you seem to have provided in the certificate the something more than either the constitution or the statute required. You have required that the authorizing or license hereiby granted shall be determined after due hearing, shaU, except as in this paragraph otherwise provided, become void unless within one year from the time of the acceptance of this certificate by the subway company, that company shall forward and in due and legal foi-m obtain and submit to inspection by the Commis- sion the consents of the owners of one-half in value of the prop- erty founded on each portion of the street. That language was undoubtedly for a purpose and the right is reserved to the Com- mission to declare the license and authorization of the certificates void unless the subway company shall obtain and submit to inspec- tion of the Commission the consents of one-half the owners of the property and I think it is only fair the validity of these consents, having been challenged by individuals who are of themselves reputable and responsible citizens, and I think it is only fair that this Committee should have presented to it and have before it the particular and precise consent to which objection is made. A. I haven't any doubt as we had them you could get them. Q. If the Commission has not go them we will have to find a way tio oibtain them. A. There isn't one here. If they were here I should be delighted to hand them over to you for your inspection. Q. Is it true that the consents when submitted to the Commis- sion are referred to the counsel or do they go to the counsel and does the counsel write a letter to the Commission, which is the course? A. The usual course is to submit them to the Commis- sion and refer them to counsel. Kbpoet of Joint Legislative Committee 241 Q. Is there any investigation made or comparison made with the last preceding assessment roll for the purpose of determining whether or not the consents are signed by individuals who are assessed for property down there ? A. I suppose there is some question of some evidence of the title ajid then the assessment roll will be resorted to for the purpose of ascertaining whether the proper portion of assessed valuation has been secured. There is such an investigation made. That is necessarily so, in fact, that was what I was jast speaking about. There was a very serious question whether a trustee could give a consent and we had quite a discussion about it and just now, well now the city owns a great deal of property, — By Senator Lewis : Q. Well now the city owns a great deal of property on this street, does it not? A. Yes. Q. Did the city give -its consent ? A. Undoubtedly so. Q. It has been contended that the city has never formally con- sented within the meaning of the statute. What have you to say on that subject? A. I have to say that they gave, there was a written consent executed by the city. Q. By the approval of the Board of Estimate and Sinking Funds ? A. There is a tacit consent. Q. The contention is made that that isn't sufficient and that there should be a written consent signed by the city. Would you think that was a proper question for this Commission to pass upon, I mean legally? A. If there had been any such consents signed I would like to see them. Would you believe that the Public Service Commission, such as it is a quasi judicial body, should take unto itself the power to decide as between these liti- gants, to determine whether this was a valid agreement or not. By Senator Lewis : I don't think so as between litigants but I think the duty is imposed upon the Public Service Commission to ascertain and determine under the provision of the certificates, ascertaining aad determining judicially whether or not a legal majority or at least one-half of the property has consented under the terms of the certificate which you have executed. A. I will agree it is their duty 242 Investigation of Public Seevice Commissions to act upon the question as to whether or not in your judgment a majority of the requisite property has been obtained but when questions, technical questions relating to the obtaining of consents arise, the proper tribunal is the court. Q. Does the city assess its own property ? A. Yes. Q. Every city assesses its own property? A. Yes. Q. All cities own property. They are assessed but pay no taxes. What do you value it for then? A. Well, it gives the taxpayer a knowledge of the amount of the property and the total amount of exempt property. Q. ISTow the only form of consent executed by the city is the implied consent contained in the contract and in the certificate? A. That is quite true. Q. The authorizing of the certificate is whatever is in the contract ? A. That's right. Q. The only thing the city signs is the contract ? A. Yes. Q. It strikes me, Mr. Chairman, that it may be a very simple matter for the Secretary of the Commission to obtain from the railway company all the consents which have been used in this matter. Secretary Whitney. — Mr. Chairman, it woiild really be very much easier to send the sergeant-at-arms of your Committee to obtain these consents. As far as the Commission is concerned, in view of all this trouble that has come out, this question of whether the Commission wants to assume responsibility for having them in its possession is considerable and I would therefore ask that the sergeant-at-arms of your Committee be directed to secure them from the railway company if they are desired by your body. By Chairman Thompson: I want to know whether anybody representing this Commission has taken these things and gone through them with a list of all the property and the schedule of all the set valuations along this street and checked them up and ascertained whether the con- sent of a suificient number of property owners had been secured. Secretary Whitney. — It is safe to assume that was done by or under the supervision of Mr. Coleman. I don't think there is any objection to state that that was done under his personal direction. Repoet of Joint Legislative Committee 243 By Chairman Thompson: Q. Where is the report, that is what I want to see ? Chairman McCall. — I have asked for a report made by the secretary showing that he had examined the consents and that they were 0. K. and that a sufficient number had been obtained. Chairman Thompson. — Is there any certificate that shows that these consents were finally held to be legal by some department of the Commission? Secretary Whitney. — The counsel made a record somewhere. It is on record. (Secretary Whitney exhibits to Chairman Thompson a paper purporting to be a report showing the approval of the consent.) Chairman Thompson. — That is made up of a half dozen cer- tificates, and I won't receive it. Secretary Whitney. — You are simply refusing to receive some- thing. Chairman Thompson. — I am not going to take these consents and then compare it with the tax-roll. I want to know if this question of consents is made a matter of record, and if you, have that record, I would like to see it. Secretary Whitney. — You don't mean to say you are going to reject that report that I have just delivered to you ? Chairman Thompson. — I want the report which I have already described, and which should be a matter of record, with this Com- mission. WTiat I want is the report or the record upon which the Commission based its action approving these consents. Mr. ITarkness. — I think there are certain streets having to be considered separate. Chairman Thompson.— Let me see a report on one street. Secretary Whitney.— Here is one on Lily street and Williams place. Here is a report on Fulton street ; here is one on Fulton street, Euclid avenue and Bowen avenue. 244 Investigation of Public Service Commissions (Witness exhibits several reports to Chairinan Thompson which are inspected by the Chairman and Senator Lewis and delivered to the Secretary of the Public Service Commission.) Mr. Harkness. — In order that the record may be complete on this, the proposition is that the consents, the original consents are compared with th© reports of the Tax Commissioner, showing the valuation and also the assessed valuation on these properties. The consents are checked against that on each street, and from that we gather the information as to whether or not a sufficient num- ber has been secured. I might say, as a matter of interest, that the Fulton street consents were turned down by counsel first, because of not being sufficient, and the company had to get addi- tional consents. That shows how carefully they were gone over. Secretary "W'hitney. — I may state further, Mr. Chairman, in view of the request that I be asked to get these consents, that my information at the present time is that the original consents are now before Judge Brown, where the company is in process of defending the litigation, and the validity of the consents. Senator Lewis. — I think I have finished questioning Judge MeCall, as far as I am concerned. By Senator Lawson: Q. I have got several questions to ask Judge McCall. I am very much interested in the matter of these consents. I would like to know whether the form of consent used was properly inter- preted to the people who signed it, and whether it was before the property owners in the foi-m in which the contract, the dual con- tracts, were executed for this reconstrUjCtion ? A. That is the question. We had nothing to do with that. Senator Lewis. — I call the attention of Senator LaTvson to the fact that it appears that at the meeting of the Commission, held on April 14, the Commission was requested to investigate the character of the consents that had been obtained prior to the approval of the plan for the construction, the application for which was then pending, from ISTostrand avenue to Adam street, if I recall the streets correctly, and my recollection is that Judge McCaU has testified here this afternoon that he has no knowledge Repoet of Joint Legislative Committee 245 of any investigation having been made in conformity with that request. Commissioner McCall. — That is true, and I will state still further that in my judgment it will be a mere fable and useless thing for this Commission to make any such inquiry, because the proper steps to take, this thing having been brought into court, is to abide by the decision of the court. As I have stated several times, this is a matter calling for a judicial decision, and is not subject to the decision of a quasi judicial body. Senator Lawson. — Yes, Mr. Chairman, I think Judge McCall will agree with me, if he won't he can say so, under the law the Public Service Commission is a quasi judicial body. Now, if I as a property owner sign a consent to the construction or recon- struction of a railway in the city of New York, running past my property, and that consent is signed based on a statement given to me at the time that my signature is requested, and I afterwards ascertained that the statements made are false and misleading, and that I came into the Public Service Commission as a property owner, and asked that that consent be revoked or be passed upon by the Commission in the light in which I gave it, that the Pub- lic Service Commission under the law has the right, and it is its duty to pass upon that consent and to say whether it is valid or invalid without any resort to the court. The only answer that I can give in this proposition is that if we intended to reach a decision in the matters referred to, that we would be told very clearly by the court that it was not our business to pass on it. Then where are you ? I would like to ask this. Senator Lawson : Our Excise Department now has the right under the law to draw up a consent signed by property owner within 300 feet of an entrance to a saloon, where an applicant talves application for license without resorting to any legal body of any kind. The Public Service Commission has no jurisdiction over that. Senator Lawson. — The Public Service Commission is a quasi judicial body, having jurisdiction over just such matters as this, and if I as a property owner, cannot appeal to the Public Service Commission, then I would like to know what is the benefit of the law at all ? From the paragraph that has been read I would say that they did have the power. 246 Investigation of Public Service Commissions Senator Lewis. — The 'Coininission, when it passed upon these consents, as it has here,, has determined legally and judicially that they are in legal form; having passed upon them and deter- mined that they are in legal form implies in the power ia the Commission to pass upon them and determine that they are in legal form. If you^ have the right to determine that they are in lawful form, it doesn't seem to me that the Commission has exer- cised its power so to determine in these various cases. In other words, it seems to me that the Commission, when these consents are submitted, should adopt a resolution reciting the fact that they were submitted, and that they appeared to be in lawful form, that they had been submitted in conformity with the provisions of the certificate, and to put on the record a judicial determination of the fact that they are in lawful form and sufficient in number. Mr. McCall. — We do that by legalizing the route. We cannot do that until the requisite number of consents are furnished. By Senator Lewis : Q. That is done by inference? A. That is based on consent. Q. Have you any opinion of your counsel that the city's con- sent must be accounted for ? Is that filed as a matter of record ? A. I know he has held that. Secretary Whitney. — Mr. Chairman, may I ask a question? This morning Senator Lewis read a certain summary of what he said was the statement made to this Committee with respect to the action of the Commission on this Fulton street elevated, and made certain statements -that would leave the inference in the record that all of the statements made by these gentlemen would stand at their face value unless denied. ISTow, in order that there may not be any misunderstanding about that, I desire to ask that a full transcript of all of this testimony with respect to this matter be furnished to the Commission, in order that the Commission may have the opportunity of answering their statements in detail. Chairman Thompson. — We will be glad to furnish you with a copy of the record as soon as possible, but we have been taking this with one stenographer. We came here to draw the Public Service Law, and our inquiry has led us further than we had expected. Repoet of Joint Legislative Committee 247 Secretary Whitney. — I ask that the Cominission be given the opportunity to reply in detail to the various statements made by the representatives of this Committee of One Hundred and others with relation to the Fulton street elevated. Chairman Thompson. — I might say, too, on the side, that the Public Service Commission, First District, has not yet paid for the record heretofore furnished. Secretary Whitney. — 'So far as that is concerned, I want to say for the record that I deny that the Commission is under any obligation to pay for the transcript of the record of an investiga- tion carried on by any legislative body. Chairman Thompson. — That was agreed to by the secretary of this Commission and the chairman. If that's the way the Public Service Commission keep their word, perhaps we had better know that. It was agreed between the secretary of the Public Service Commission and the chairman of this Investigating Committee that the Public Service Commission should have a copy of the minutes. The secretary wanted three copies of the minutes, or two, I am not sure which. I told him he could have them and he could pay the same charge that would be made for one copy. That was agreed upon and everybody else has paid except this Commission. They owe $720. Secretary Whitney. — That is an alleged expense that has been incurred as the result of legislative action. The Commission has no special appropriation with which to pay any such expense. The Committee was given an appropriation and its appropriation was afterward doubled for the purpose of paying these expenses. Chairman Thompson. — Yes, but we didn't have to make three copies of the record for you. 'Now, if that's the way you look at the matter, why, all right. Chairman MoCall. — Do you say, Senator, that there was an understanding that thei-e was to be a payment made ? lOhairman Thompson. — The understanding was that we were to furnish three copies and we only charged for the price of one. That amounted to about $720. It had to be paid by the State Si's Investigation of Public Service Commissions Treasurer. I don't suppose it makes a great deal of difference one way or the other and I don't care whether you pay it or not. You should pay it because you got it for one-third of what other folks have to pay. The other money has been paid into the State Treasury. Secretary Whitney. — That amounts to this. That the Legisla- ture authorzies the State Treasurer to draw a voucher of $720 to himself in payment of a transcript furnished to the Public Service Commission for the First District. Mr. Harkness. — Senator Lawson has stated some figures in connection with the Brooklyn third tracking of $300,0i00 a mile and named $550,000 a mile. I would like to ask where the fig- ures were obtained. Senator Lawson. — Judge McCall in his testimony said that at the time the plans were prepared and while they were con- sidering the approval of these plans there was a general approxi- mate estimate which was around $300,000 as the probable cost per mile and that in the process of construction it had developed it was actually costing about $555,000 per mile. Mr. Harkness. — The reason I ask is that it is a figure that hns been used by the people contesting the third-track. This Com- mittee of One Hundred has been using it. Senator Lewis. — You will find by looking over the record to-day that Judge MoCall used that statement himself. Mr. Harkness. — There is one other matter Senator Lewis referred to and that was the meeting held April 14th on the adoption of the plans, where the Brooklyn people asked the Com- mission to delay action. It was pointed out afterwards that the litigation did not start until April 19th. I think it should appear on the record that the papers were all prepared for the litigation and that injunction was going to be asked then. By Senator Lewis : Q. Judge, you have approved plans down to Nostrand avenue? A. Yes. Q. Don't you agree with me when you have very substantial Eepoet of Joint Legislative Committee 249 citizens, good citizens, make the claim that this construction is done down to ISTostrand avenue, that when it continued two more blocks to Franklin avenue the B. E. T. will have gotten all it wants, namely, a connection to the marginal railway in con- nection with the Long Island railway, which is really what they want; that that construction will be had during the month of August if the Public Service Commission approved the new plans but they cannot get any further than Nostrand avenue until the Public Service Commission do something more. When the claim is made in that way and they cannot act until you do approve the plans and you say that certain parts of this road are the subject of litigation, don't you think you should hold up the approval of the new plans for a reasonable time to enable this litigation to be decided ? A. That would be the correct view if you did not care for the responsibility that must follow. I don't want to get into a discussion over things. I am not going to be responsible and I am not going to have the Commission responsible for delay in this matter. Q. Lf the court, should finally decide that these consents were not valid and that that construction was a nuisance, would the responsibility not be greater and would the condition not be worse ? A. Why didn't these people who are active now in mak- ing these charges, why were they not a little bit active at the time we had control of the matter so as to bring it to our attention? I never heard them. Mr. Carpenter knows that every time he has been over here I have always tried to extend to him every attention and courtesy. Mr. Herbert C. Carpenter (representing the Fulton Street Protective League of Brooklyn, 1^. Y.)— Mr. Chairman, I would like to make a statement. I will say that Chairman McCall has always given our organization every courtesy and consideration, but that the pending litigation has nothing to do with the ques- tion of replacing of elevated with subways. If the demand of property interests in central Brooklyn to prevent the erection of a damaging, altogether unnecessarily heaA'y and pei-manent struc- ture through the valuable section of central Brooklyn. Judge McCall and Mr. Williams, President of the B. R. T., and others equally and vitally affected in this matter, have publicly stated, 250 Investigation of Public Service Commissions because as soon as the large investment of the city of !N'ew York in this system, aggregating about one hundred million dollars, becomes self-supporting, that the city will then have funds to replace this elevated structure in the popular section of the city. Our contention, therefore, is that as long as the railway company and tlie Public Service Commission realize that these structures must of necessity be of a temporary character, that to build them in this permanent form, probably to last fifty years or more, that it only adds permanent expense, added cost against the city's finances and a probable loss of what is estimated at from thirty to forty million to central Brooklyn. We claim that the Public Service Commission should not, in view of the statements made to it, on April 14, 1915, approve these plans, and should leave the matter without action. We believe they should have made a care- ful survey of the entire question of the legality of the style of girders. We believe that the structure with the lattice type of girder adequately strong and could have been built to conform strictly to the terms of the contract. It could have been built in a semi-temporary form at a lesser expense and with perfect safety, and that by doing that it would have saved millions of dollars in property losses and would leave the way open to the future conversion of the elevated railroads to submerged lines. We believe that if the present structure as planned and built between Sycamore and JSTostrand avenue is completed and that a similar structure is allowed to be built from Nostrand avenue to the bridge at Fulton street, the main traffic and business highway, the Broadway of Brooklyn, will be permanently ruined, and that Judge McCall's good wishes and President Tim Williams' sug- gestion as to th6 future replacement of elevated on Fulton street will never be realized in the memory of the present man. We believe that if the Public Service Commission had on April 14th ever made a thorough investigation of the property rights, of the rights to use the lattice type of construction, had they not approved the railroad company's plans and had they stopped tbe construction at that time and endeavored to use their authority to compel the railway company to build an adequate but not permanent structure by the reconstruction of the existing structure and by continuing their construction in the form of adding an addi- tional track to the existing structure, which was in accordance Eepokt of Joint Legislative Committee 251 with the consent given by property owners and in accordance with the back on which the road was legalized, — that Brooklyn would have been saved an inestimable loss. We believe that action by the Public Service Commission at this time in obtaining advice from their legal department as to the necessary or compulsory use of lattice construction west of Noa- trand avenue and the bearing in mind of the point I have set forth, would be a great and permanent benefit to the city of New York financially and from every othei- standpoint and would leave open the opportunity for future development, all of which the railway companies seem to be intent on realizing. I would like to make one other observation and that is this, that the only criticism we really have to make is that we believe the B. R. T., in their determination to maintain and increase the congestion so profitable to them on the surface lines throughout central Brook- lyn, have concluded that the permanent elevated structure on Fulton street connected with the bridge will establish their domi- nation of the entire community. We believe the Public Service Commission can obviate this by bearing in mind and taking action on the point now before them and also now before the court. We believe the Public Service Commission should take action in behalf of the property owners for three reasons. Chairman McCall. — Let me ask you, Mr. Carpenter, suppose ing that Judge Brown would decide against your contention, is it then your purpose to ask the Public Service Commission to prose- cute the railway company? Mr. Carpenter. — Yes. Because the point of issue before Judge Brown is not the only point at issue in this matter and was not the only point brought before the Committee on April 14th. Judge Brown and the Supreme Court have both held that this matter of complaint of the property owners is a matter to be considered by your Commission and for that reason the ruling before Judge Brown will not be conclusive. Chairman McCall. — Then, as a matter of fact, you are not going to be content with the outcome of the litigation before Judge Brown and you are going to try to come before the Com- mission and have them decide. 252 Investigation of Public Seevice Commissions Mr. Carpenter. — We believe there will be sufficient in the determination of Judge Brown to warrant tbe action taken. Senator Lewis. — Have you any idea wben a decision will be rendered ? Mr. Carpenter. — I doubt if he will render a decision before September. Ohairnian Thompson. — Judge, if your Commission does not approve further plans there cannot be any more work done in Fulton street. Chairman McCall. — JSTo. Chairman Thompson. — So you can stop it if you want to ? Chairman McCall. — Yes. That is, we can ai-bitrarily do some- thing ; but who is going to do it ? Chairman Thompson. — They cannot continue without you approve these plans ? Chairman McCall. — Yes. By Chairman Thompson: Q. And there is no damage if you don't approve them for sis weeks or two months, is there ? A. Yes. Q. What is it ? A. We stop their work. Q. Are they any better than the people in Brooklyn? A. Not one whit, but in the line of the obligation we have to the city we have to go ahead. You people are just as responsible for this a? we are. You had the bill passed in 1912. You were a ricmber of the minority then, I believe, Senator Thompson. In any event in 1912, whether you were there or not, it was passed by the Legislature and there was no objection to it. Chairman Thompson. — I want to do what I can for' these peo- ple over here in Brooklyn to relieve the condition which they have represented to this Committee. We have not adjourned yet and we cannot give this one proposition our total attention now. I have called attention to it as far as I can. We will investigate it further in September. Rbpoet of Joint Legislative Committee 253 Senator Lawson. — Mr. Chairman, I move that if the Public Service Commission or the Secretary to the Public Service Com- mission desires a copy of the transcript of the testimony taken by this Committee of the Legislature that same will be delivered to them upon the proper payment, which according to law should be paid by the city of New York as part of the expenses of the Public Service Commission. Secretary Whitney. — We will save trouble. We will have our own stenographer. Chairman McCall. — I would suggest Mr. Chairman that a bill for the three copies of the transcript furnished to the Public Service Commission be rendered to the Secretary and payment be demanded from the city of New York. As it behooves the city to pay the expenses of the Public Service Commission outside the Public Service Commissioners' salaries acording to law, I have no doubt it will be paid. Chairman Thompson. — We will now adjourn until to-morrow morning, August 3d, at 10 o'clock, the meeting to be held in these rooms, and I ask that all the 'Commissioners except Commissioner McCall will be present at that time. AUGUST 3, 1915 Hearing Eoom of The Public Service Commission, First District, Tribune Building, New York City. Quorum being present, Chairman Thompson called the meeting to order at 10.30 a. m. Travis H. Whitney (Secretary of the Public Service Commis- sion. — At the session yesterday, your Committee asked the Com- mission, the Secretary of the Commission, to ask the New York Municipal Railway Company to produce the original consents for the third track on the Fulton Street Line. That request has been made and a representative of the New York Municipal Railway 254 Investigation of Public Service Commissions Company is here witli the original consents. Mr. C. L. Woods assistant counsel of the B. R. T., appeared before the Committee and made the following statement : I have here the original consents, and they are at your disposal. By Chairman Thompson: Q. May I see them ? A. Certainly. I also have a number of affidavits here in regard to these consents which will show that the property owners executed these consents and also intended to execute them and that there is no misrepresentation about it. After you have inspected them, Mr. Chairman, I would be very much pleased if you would return them, inasmuch as there is a proceeding now pending before Judge Brown by a gentleman named Kaplan and it will probaJbly be necessary to have these papers with us during the pendency of this action. I might say further that the property owners over there have taken every technical objection possible and have required and have forced the railway company to produce every possible proof. Chairman Thompson (interrupting). — Of course, Mr. Woods, I don't know that there is any need of that on the record, because I don't think you need that. We cannot try this question. We have no authority to do so. AVe don't intend to do so. Mr. Woods. — I just simply want to state that the consents are at your disposal, but temporarily I would like to have them, because I am trying this reference. I will produce them at any time you ask for them and will submit to you any testimony that has been taken on the proceeding. (Mr. Woods of the B. R. T., The JSTew York Municipal Corpo- ration, thereupon produced the consents obtained on Fulton street to the chairman of the Committee.) Chairman Thompson. — The Committee does not desire to take these consents and for the record it is sufficient to set forth the printed portion of the blank consent used. I might state further that the same is a uniform consent. The following is the printed portion of the blank : " We the undersigned, owners of land bounding on Fulton Street between the Brooklyn Bridge at Tillary Street and a Eepoet of Joint Legislative Committee 255 point between East Broadway and South Broadway, City of New York, hereby respectfully consent to the construction, easements and operation of an additional track to the exist- ing railway over, through and along said Fulton Street, with the necessary appurtenances. Said additional tracks is to be constructed, maintained and operated by the New York Municipal Eailway Corporation at its own expense." Chairman Thompson. — I do not believe it is necessary to read all of the consent, but I will conclude with the following phrase : " The giving of this consent, however, shall not be con- strued to effect any rights of the undersigned to compensa- tion for additional damages by reason of the construction, occupation and operation of said tracks in front of the premises of the undersigned and the signer of this convey- ance shall be left unaffected by this instrument. "In witness whereof, etc. "(Signed) " The consents then include the street number, the frontage, the lot valuation, the signature of the property owner, the signature of the witness, the residence of the witness and the date. All these consents were exhibited to me and I am told by the railway company that they were all recorded in the office of the Register of Kings county and that they were brought here from the office of the Register and that they are, therefore, public records of Kings county and we will leave them there. Chairman Thompson. — Now, gentlemen, in reference to the matters of controversy, in order to make the position of this Com- mittee plain, we have no right to try things and we cannot try the controversy that exists between the propery owners along Fulton street, who have complained, and the railway, or if any controversy exists between them, or will exist between them, and the Public Service Commission. We are here to investigate the Public Service Commissions Law. That is our primary duty, and if we think there is need of an amendment to that law we will recommend it to the next Legislature. Incidentally, we have the right to investigate the Public Service Commission or 256 Investigation of Public Service Commissions Commissioners and report to the next Legislature, 'liow, we are liere in New York and your situation, especially your transit situation, is a very complicated thing. You have got a great city, and I think you are endeavoring to take care of the trans- portation difficulties down here, and, of course, involving such an important contract as it does, it isn't any wonder that the public officers and the public are liable to make some mistakes and I wouldn't be surprised to find that some representatives of the railway company might even have made mistakes. Those things are likely to occur and besides that it may be that property owners and ordinary people who patronize the line may have just grievances, and when these things come to our attention, it is up to us to do whatever we can. If it looks as though a wrong might be righted, in order to bring about the right conclusion, and if there is some- thing we can do to call public attention or to call attention of the Public Service Commissioners to what appears to be wrong, we feel it our duties to do so. !Now, on this matter of this struc- ture that was being erected and constructed on Fulton street, was brought to our attention and when it was stated to us that the original structure did not contemplate the erection of a struc- ture of that size we felt it our duty to look into the matter. We also felt it our duty to look into the situation when we were advised that the cost of the structure, as originally contemplated, and the structure that was really being constructed was being exceeded two or three times. It was alleged that the consents of the property owners were not properly obtained and that at the present time the contractors were operating contrary to law in view of the fact that they did not have a sufficient number of con- sents. Under the circumstances we felt it our duty to call it to the attention of the Public Service Commission, to ask them to explain their situation, to explain their attitude, thinking, perhaps, they might not know. Then, perhaps, possibly the property owners were wrong. We did not know. In any event, with the explanation that the work might be completed, might be accom- plished, before we can be back in 'September, that the harm, if any was to be done, could be accomplished by that time, we felt it our duty to call it to your attention before we left town. Now, yesterday we had a very illuminating explanation of the situation Eepoet of Joint Legislative Committee 25 Y and also the attitude of the Public Service Commision by your chairman. We have whatever information on the subject we think is material to our purpose at this time. We believe also that we have done our duty in calling the matter to the Public Service Commission so that they may do whatever they see fit. We claim nothing for them. The facts are the facts, and regard- less of the allegations of the property owners or the city or the Public Service Commission, the facts still remain the facts. The Public Service Commission now understands the thing thoroughly. It's up to them to act in whatever manner they think, and their attitude, of course, is something that is up to them. Now, we have pointed out to you how it looks to the property owners. Here is your original contract, there is your original franchise, here is your certificate granted after the time of the contract, and here is the work being done over there and Chairman McCall says that the city of New York has outgrown the time when elevated structures should be permitted in its streets, and you understand that, and without the most dire necessity I doubt the wisdom, at least, of Public Service Commissioners permitting the erection of such a structure as the property owners complain of on Fulton street. The property owners should be taken into account, the railroads should be taken into account, and you know what your attitude is with them. It is entirely in your power, these plans and specifications. It is entirely in your power to stop this work ; it is within your power to suspend this work until the court acts upon this question. I have no right to give my thoughts, and it is only given as a citizen, but I think the proper thing for the Public Service Commissions to do would be to allow this work to stop for a month or more until this proceeding is determined. In reference to these dual contracts, we have learned from Chair- man McCall that he was not a member of the Commission when these contracts were executed and Commissioner Cram voted against the contracts themselves, so the records show. Commis- sioner Hayward was not on the Commission when these contracts were signed, so that leaves no one who can give us any informa- tion, except Commissioner Wood, and we assume that Commis- sioner McCall has gone over the situation and, as I said yesterday, we are not here to get anybody. Under the circumstances we have Vol. 1 — 9 258 Investigation of Public Service Commissions thought it over and we feel that we are entitled to a vacation and we are going to adjourn until the 6th of September, at which time we will come back to ISTew York at the Bar Association rooms and proceed and try to draw this law. Chairman Thompson. — Is there anybody who has any sug- gestion, any criticism of this Committee or the Chairman of this Committee, or do you think the chairman of the Committee has not realized the great hospitality of the people of ISTew York, as shown to the Committee since we have been here? Mr. Travis H. Whitney. — May I call attention to the fact that the 6th of 'September is on a holiday ? Chairman Thompson. — The 5th of September is a holiday. Mr. Whitney. — The 6th of September is Monday, Labor Day. Chairman Thompson. — Then we will adjourn until the Yth of September, 1915. We will call the meeting to order at 11 a. m. on that day at the rooms of the Bar Association, West Forty-fourth street, New York city. (For index of exhibits, see last page of this book.) SEPTEMBER 8, 1915 Rooms of the Bae Association, jS^o. 42 West Forty-Fourth Street, iS^ew York City. Meeting called to order at 11 o'clock a. m. Peesent : Senators Thompson, Mills, Lawson and Foley. Assemblymen Kincaid, Feinberg and Donohue. After the meeting was called to order Chairman Thompson made the following statement : Matters having come to the atten- tion of the Chairman of this Committee, which he desires to sub- mit to the Committee, and, of course, the Committee as a whole, the Chairman thinks it wise to submit it to the Republican mem- bers of the Committee. While it is not particularly a partisan Eepoet of Joint Legislative Committee 259 question, and all of the members of the Committee will in due time have complete information in detail. If there is no objection we will adjourn this meeting, and it will be held here at 2.30 p. M. In the meantime I would at once like a conference of the Republican members of the Committee. Therefore, if we could have an executive session of the Republican members it will stand adjourned to 2.30 p. m. The Committee met pursuant to recess at 2.30 p. m. at the place designated, with a quorum present. By the Chairman: jSTow, gentlemen, there have been various matters brought to my attention as Chairman of this Committee, since I have been here in the city, of various situations in the city of JSTew York, which we have tried to investigate one way or another. We have come here from time to time pursuant to a resolution of the Assembly and Senate, to continue an investigation, for which we were origi- nally appointed in January, but specifically to examine the Pub- lic Service Law, transportation act, and other corporation acts that in any way affect public utilities, to the end that we should recommend to the Legislature of 1916 such reorganization of the laws relating to public utilities as we think the present state of those functions in the State of Xew York require. The public service idea of supervision and regulation of public utilities seems to be an established function of the State, and it started here some time ago, seven years ago or eight, as an experiment, there being only two states at that time that had a public service act. Now, I think, all the states but two have it. 'Now, the only way our act has ever been amended is by adding new subjects of regula- tion. And the question as to whether or not public service regula- tion has been a success is very important to the State, and the only way that we can properly frame or draw laws is to investi- gate every subject that looks likely to affect the law or its admin- istration, and if anything comes along that might be in the nature of a criticism of the administration of the public service act, why it is the duty of this Committee to investigate it. Wow, we were very anxious to make clear to the public all the time what our 260 Investigation of Public Service Commissions real function is — to give people future good and as perfect regulation and supervision of their public utilities as possible, and being a Legislative Committee our remedy is always by tbe passage of some law, either mandatory or otherwise. The investi- gation as to criticism on this Committee will be practically col- lateral, and has been so far. We have opened up various things that have come before the Committee. We took up the question of the Staten Island ferry as compared to the ferry to South Brooklyn. We found a subject there that seemed to call for criticism on the face of it, and called it to the attention of the Department of Docks and Ferries. We found complaint from the citizens of Brooklyn in relation to the construction of the elevated roads, and we asked for substantial citizens to come before us and corroborate the situation, and we then did exaimne the Public Service Commission, or the Chairman of it, and called the matter to the attention of the public, and to the Public Serv- ice Commission, and we understand now that the courts are being permitted to work that situation out, which is as it should have been in the first place. We also derived valuable information which is of value to the Public Service Commission, or the law, in their giving latitude to public service commissions, as that circumstance called to our minds. Now, in that very connection questions came up that affected the subway contracts themselves. In the city of New York it seeins to be the signing of the subway contracts so called was an impoTtant undertaking for the city. Take Subway Contracts Number 3 and Number 4 : Those pro- vide for the construction by the city, at the expense of the city, of certain lines of subway underground railways. At the same time there was also made and signed four certificates, in addition to the contracts, of the various existing railroads. Those four cer- tificates provide for betterments or improvements, or additional facilities to certain existing transportation lines in the greater city to different railways. Now, through those matters the sub- way contracts themselves and these certificates seem to be in some ways inconsistent with each other. The certificates appear to provide that the city may after forty-eight or fifty years, or some considerable period of time, own these structures that are being improved under these certificates. Now, these improvements are Kepoet of Joint Legislative Committee 261 made at the expense of the railroad. But we, as a Committee investigating public service, can hardly make a distinction, between an expenditure by a public service corporation, the funds of the corporation, and the expenditure by the city, for the reason that in the end the customer, which is the citizen of the city, pays anyhow. He pays for the means of transportation or the lack of facilities; he pays for every improvement that is made by the public service corporation, even though there is no particular specific benefit to run to the city at large. And for that reason all those matters are subject to regulation by a Public Service Commission, which represents the public. And we find that these additional facilities which were approved under these certificates, the four that I mentioned, apparently provided that the city could buy and own them at the end of a certain time, and could pay for them what they cost. But with careful reading it looks to us as if the city could not acquire anything only the improvements. They could not acquire the original structures which were improved. It looks on the face of it to be a sort of lack of failure of consideration to buy a third track up in the air that you have not any other track or facility to get to and cannot operate after you get it. The consequence being, at the end of fifty years, the city would find itself in the position that it could not own any- thing, and it would not want to buy. And it looks without expla- nation that their purpose the city did not know or perhaps did not appreciate. Now, that whole situation comes up in that way. And with this explanation there have been other facts brought to my attention, and until there is further private investigation I do not care to make a public statement in reference to them, because I want to be very sure of my ground in any public state- ment I make, even though it is based on rumors. I will say that these matters call for this Committee — so that they can thor- oughly understand it — an explanation on the part of the Public Service Commissioners of these subway contracts, and some other documents which we have, and to that end the Committee, a majority of the members in session, think the wise policy to pur- sue would be to begin to-morrow morning and have Chairman McCall explain the situations we have in mind. It is not with the idea of subjecting Chairman McCall or the Public Sei-vice 262 Investigation of Public ysEvicE Commissions Commission to annoyance or accusation of any kind. The Chair- man of this Committee comes from the country, and a good ways, back, and he don't know and he is not accustomed to the ways of the large city, and these situations he may misunderstand on first statement of the thing, and we think that the explanations are due us, and we probably will, and I hope that we will, get to see that the situation is right, and is properly entered into. And to that end, as I say, we have determined to call Chairman McCall to-morrow morning, and ask him to give us such enlightenment on this subject of these subway contracts, aad on the certificates,, that were entered into by him in March, 1913, as he will be good enough to give us. We call Chairman McCall because we under- stand that after his appointment as Public Service Commissioner, before these contracts were signed, that he spent two or three weeks and read them very carefully and studied them before and is probably more familiar with them for that reason than any- body else. So, if there is no objection, the Sergeant-at-Arms is requested to get into communication with Chairman McCall, and ask him if he will be present at the meeting of the Committee to-morrow morning at 10.30 at the rooms of the New York County LaAvyers' Association, 165 Broadway. If there is no objection we will adjourn until to-morrow at the County Lawyers' Association rooms, 165 Broadway, Ifew York city. Whereupon the Committee adjourned to meet at the above men- tioned place on September 9, 1915, at 10.30 a. m. SEPTEMBER 9, 1915 Bae Association Rooms, 165 Broadway, New York City Meeting of the Committee called to order at 11 a. m. Appearances same as before. A quorum being present. By the Chairman: Matters have come up, Mr. Chairman, in relation to contracts. For some reason or other some of the good citizens in this town won't let the Chairman of this Committee alone. They insist on Report of Joint Legislative Committee 203 calling to his attention questions he don't know anything aboul, and at the same time they seem to require him to find out. And as one of the newspapers said this morning " Up in Niagara county, why we thought that certain things happened at the end of fifty years, and whe.n attention was called to reading the contracts we cannot read them that way." But maybe we only went to the common school and did not get the education we ought to have had. There are certain things about these contracts, Senator Lewis will take up with you and the Senator will be obliged to you if you will give him that information. By Mr. Lewis : Mr. Chairman, at the outset I want to say that it is my under- standing that this Committee in pursuing its investigations for the purpose of obtaining information upon the subject of the revision of the Public Service Commission Law, with which duty the Committee was charged by the resolution of the Legislature continuing the existence of the Committee, has had its attention called to the terms and provision:j of the various certificates issued by this Commission under the provisions of the dual contracts, so called. It has been claimed that variations exist between the cer- tificates, the reasons for which are not apparent, and an explana- tion of which seems to be desirable. Not with a view to enable the Committee to formulate criticisms or charges against the mem- bers of the Commission, but for the purpose of ascertaining what, if any, amendments to the law may be necessary for the complete protection of the public interests. The Committee realizes that there are great public interests involved and that there is a strong desire in the public mind for the early completion of the construc- tion in order that adequate facilities may be furnished and that it may be possible that conditions exist of which the public has no knowledge and that evidence may be offered which will fully satisfy the minds of individuals disposed to criticise such variations. It is with this idea in mind that the Committee has regarded it desira- ble that the Chairman of the Commission, whose knowledge of the terms and provisions of the certificates is doubtless greater than any other individual, be requested to offer such explanation of such variations as may suggest themselves to him. 264 IXATSSTIGATION OF PuBLIC SeKVICE COMMISSIONS The Committee lias, therefore, invited Chairman McCall to attend at this time and furnish such explanations as may be available. Edwaed E. McCall presented as a witness. Examination by Mr. Lewis : Q. Judge McCall, the four certificates, the Second, Third and ISTinth avenue tracks, the Broadway-Fulton street, and Myrtle avenue additional tracks, the Jamaica line and Liberty avenue line, the Webster avenue line. Eighth avenue and 162d street connection, Queensboro bridge line and West Farms subway con- nection, were issued on the 19th of March, 1913, were they? A. Yes, sir. Q. And what, Judge McCall, was the date of the resolution of the Commission authorizing the issue of those certificates; do you know whether it was contemporaneous ? A. I am not so sure about that. On the same day or about — approximately that I think it was the 19th of March, and perhaps the 18th. At least it was contemporaneous. Q. Practically contemporaneous ? A. Yes. Q. The resolutions of the Commission authorizing the issue of the certificates were adopted almost at the same time or substan- tially contemporaneously with the issue of the certificates them- selves. By Mr. Harkness: Well, long enough before the final action to let the matter go before the Board of Estimate and Apportionment. By Chairman Thompson: I haven't any objection to Mr. Harkness appearing if he wants to, if he only states that he wants to appear as Counsel for the Commission. By Mr. Harkness: I so desire. By Mr. Lewis : Mr. Chairman, I offer in evidence a copy of each of the four certificates referred to in my question to Judge McCall. (Eeceived in evidence.) Repoet of Joint Legislative Committee 265 Q. Was it your impression, J udge McCall, at the time these certificates were executed, that they were, so far as they related to the protection accorded to the public interests, substantially uniform ? A. Practically so, with the exception of the third track- ing of the Interborough. There was a practical uniformity. Q. But do you recall variations between the certificate authoriz- ing the third tracking of the Interborough or Manhattan lines and the third tracking and doing similar work on the Broadway- Fulton lines ? A. Yes. Q. There were such variations? A. Yes. Q. And will you be good enough to tell us what you may be able to from your memory of those variations? A. Well, the Inter- borough could do the third tracking on their own line of their own motion without submitting to the Public Service Commission the contracts themselves. Q. They had the legal right, do you say ? A. They did. Q. Anything else that you call to mind ? A. No. Q. Was that legal right to do the work recognized in any formal way by the Commission? A. Why, during the negotiations be- tween the parties to this dual system every kind of endeavor was made to have the work of all kinds done under contracts approved by the Public Service Commission. They could not meet with the Interborough on that. There was a third company there, you recall. The Interborough Company is nothing but the lessee. The Manhattan Company is the owner and they did not have con- trol over them, and it was a question of doing it the way they wanted or splitting. They did the best they could and got the extensions approved under the form of contract approved by the Commission and gave the third-tracking right to the Interborough. By Chairman Thompson: Q. What do you mean by " they " ? A. Those conferring on the dual system contracts. By Chairman Thompson: Q. You came in on the Commission in February, 1913 ? A. Yes. Examination by Chairman Thompson : Q. And these contracts and four certificates were executed on March 19, 1915? A. Yes. 266 Investigation of Public Seevice Commissions Q. And negotiations and conferences that led up to these con- tracts were had largely before you were on the Commission ? A. Oh, no ! All that antedated my coming. Q. Were these contracts printed by the time you came on ? A. Yes. Q. You went through them all ? A. I was about six or eight weeks on the digest of them. Q. You did nothing else but study these contracts for six or eight weeks? A. That's all. Q. Then you must have been pretty familiar with them when you signed them ? A. As fairly so as a normal man could be. Q. You will excuse us if we think a ISTew York judge of the Supreme Court is not as acute — A. A man is entitled to his own opinion whether he comes from up-State or down-State. Examination resumed by Mr. Lewis: Q. Judge McCall, one of the variations to which the attention of the Committee has been directed is the difference between the methods of compensating the city provided for by the two certifi- cates, the one known as the Manhattan certificate, and the other as the Broadway-Fulton. It is true, is it not, that as to the Manhattan certificate the basis of compensation is a percentage of the gross earnings. A. Yes. Q. As to the Broadway-Fulton, Broadway line, the basis is a division of the net earnings. Is that true? A. Yes. Q. Will you tell the Committee the reasons why a different system or method of compensation was adopted in those two certificates? A. Well, the only answer can be given to that is it was the result of long conferences between these people and the very best possible attitude to be assumed by the city was taken by the city officers and that was the best conlusion they could reach and they accepted it. Q. By that is the Committee to understand that the Commis^ sion endeavored to obtain the same basis for both the Broadway- Fulton and the Manhattan line — apply the same mle ? A. The Committee may understand that eveiything that was possible on the part of the conferees representing the city was done looking towards getting all the advantage for the city. Report of Joint Legislative Committee 267 Q. Now, will you tell the Committee which was regarded as the more advantageous rule to be applied -for the benefit of the city and its interests? A. I do not think you can get into an analogous statement under those circumstances. They were prob- ably both on the same plan and both endowed with equal merit for the benefit of the city. Q. They were both enlargements of elevated structures then in existence, were they not ? A. Yes. Q. And both provided for additional tracks, third and addi- tional tracks, so that to that extent, at least, they were identical propositions from the standpoint of construction and from the standpoint of increasing the transit facilities of the city — is that not so? A. Yes. Q. And the one provides for a two per cent of the gross earn- ings, compensation of two per cent of the gross earnings to be paid into the city treasury annually while the other provides for a dis- trbiution merely of the excess of the earnings over operating expenses and fixed charges? A. Share of the net. Q. Share and share alike, as I remember. ITow was there any discussion on the subject as to which of those two methods was likely to prove most advantageous to the city ? A. It did not seem as though there was going to be any advantage at all. They seemed to be about on a par. Q. Was any estimate — what, if anything, was done, Judge, within your knowledge in relation to the examination of the books of the t^vo companies for the purpose of informing the minds of the Commissioners as to which of the two methods would likely prove most advantageous? A. Well, you see, that was all con- ducted before I came in. I was not in the conference leading up to that. That is the best answer I can give. Q. Did you make any investigations yourself? A. Except an investigation to this extent; of course, my investigation was limited. I had merely to do with the terms. That of the research that was made, I could not possibly go into that, except to inter- rogate the Comptroller and President of the borough, now Presi- dent of the Board of Aldermen, and others, as to just what led their minds to this or that. By Chairman Thompson: Was that Mr. Prendergast at that time? A. Yes. Comptroller. 268 Investigation of Public Service Commissions By Chairman Thompson: He was Comptroller then of the city of New York ? A. Yes. By Chairman Thompson : And Mayor Gaynor was Mayor at that time? A. Yes. Examination resumed by Mr. Lewis: Q. Did you observe in your examination of these certificates the difference between the two methods and give consideration to that? A. I went over every point that suggested itself, or charged my mind with being a natural reason for inquiry. Just whether this was accomplished I cannot say yes or no to that. I studied these contracts for three days in my own house. Q. Have you any present recollection of this particular varia- tion occupying your thought at that time ? A. No, but I have my notes on all that. Q. You have your notes on it? A. Yes. Q. Do you recall having made any inquiry of the other mem- bers of the 'Commission as to the reasons for the provision of the two distinct methods in the two separate cases? A. I have no distinct recollection on that particular feature, but I did have conversations with every one of the Commission, both those that were in favor of the contracts and those opposed to the contracts. Had conferences with all of them, particularly with those who opposed them. Q. Were there some members of the Commision who opposed the issue of the certificates? A. Yes. Q. Would you mind stating, or is it proper for you to- state who those members were? A. Mr. Maltbie, I think, was the only dissenting Commissioner. Mr. Cram was opposed to the dual system of contracts, but on the question of the extension of the elevated system he voted with the majority. That is my recollection. Q. ISTow, did Mr. Maltbie, in any conversation that you had with him on the subject of the execution of these certificates, give as a reason for his objection that the two certificates contained different provisions relative to the compensation of the city out of the earnings of the two different companies ? A. I can't recall, Senator. Q. You don't recall ? A. No. Eepoet of Joint Lkgislative Committee 269 By Chaii-man Thompson: Q. Wlien you went on the Commission, Judge, you found that the four other members were split equal, two and two, on the gen- eral subject of the subway contracts and you had to decide the thing? A. Yes, that is on the adoption of the dual system. By Chairman Thompson : Of course that carried the whole thing. If you hadn't had the contracts you would not have the certificates in the system. A. That is practically so. One was dependent on the other. But there was not any reason why the elevated could not have extended even if the dual system did not go through. By Chairman Thompson: Q. I was getting at how they were treated. That put on you an additional burden ? A. I approached it with the full knowledge of the full responsibility I had. Of course I knew that my vote was the casting vote. Examination resumed by Mr. Lewis: Q. If Commissioner Maltbie had regarded the difference in the methods of compensation as of sufficient importance to warrant his basing his opposition upon that difference you would have been likely to remember that fact? A. Commissioner Maltbie's opposition was not based upon that alone. There was not any emphasis upon any particular feature. He was generally opposed to the dual system. He did not signalize any particular points that I can recall now with any emphasis at all. Q. He did not point out any single objection which might have been discussed or was discussed in your presence that you recall ? A. ~No, except of course that I can recall that he wanted the city to build the subway. Q. He wanted the city to build the subways ? A. Yes. Q. Yes, I suppose he was one of the leading advocates at the time of municipal ownership. Was he not ? A. Now, Senator, I would like to be excused from answering that. I do not want to place Commissioner Maltbie in such a position as that. I do not know whether he was an advocate of municipal ownership or not. I know his attitude assumed to be that he was in favor of the city 270 Investigation of Public Seevice Commissions attempting — if this rapid transit system of any kind was to go through, for the city to do it. I think you will find a brief filed with me of about seventy pages in which he advocated some sort of a bond issue. By Chairman Thompson: The question was not exactly a question of municipal owner- ship in fifty years or eighty-five years. A. That was not the question with me at all. It was a question of whether you were going to have rapid transit in ISTew York now or fifty years hence. By Chairman Thompson : You will pardon us if we inquire in reference to the other, because we are led to believe it means the municipal ownership of these utilities at some time, that was the general theory of these contracts; that some time in the futuro you were going to get municipal ownership. A. It is not a theory. That is the contract- ural obligation in these very contracts that the city is going to become possessed of the road. The city is not to be the possessor of the roads only but the entire rolling stock. By Chairman Thompson : You speak of the morals of the governing officials of the city of ISTew York. Fifty years from now the morals of the city ofiicials may be up to that point. A. I do not believe the morals of the officers of the city of ISTew York can improve to any degree at all over the morals of the present administration. No, sir, not a cent's worth. I think you have a high standard of morals in the city officials now in this city. By Chairman Thompson: It is a long time to wait to see the government of New York on the same plane as it is in Niagara county. A. Well, I hope we would have to wait a long time for that. Never mind. Senator, you and I understand one another. Examination resimied by Mr. Lewis : Q. This contract ties the city up for a long period of time on the basis of the 2 per cent, of the gross earnings in the case of the Manhattan, and division of the net profits in the case of the Broad- Eepoet of Joint Legislative Committee 271 way-Fulton. Now wasn't it a part of your — didn't you regard it as a part of your duty or as of sufficient importance to warrant careful investigation for the purpose of obtaining as accurate an estimate as might be possible, as to the probable annual payment into the treasury of the city under the terms and provisions of these contracts. A. Why certainly. Q. Well, now, if you did make such an investigation, will you tell us what your sources were, or to what sources you went for that information? A. I went to the men who were the conferees in the preparation of these contracts. I interrogated them on every point that was of any account. Q. Gives us their names for the record. A. Mr. Prendergast, Mr. McAneny. I had a day with the present mayor of the city, who was then President of the Board of Aldermen. I received a memorandum from him. I talked with Commissioners Maltbie, Eustice and Williams. Q. Which Williams is that ? A. Present Commissioner — Pub- lic Service Commissioner. Commissioner Wilcox. I propounded a series of questions which they all answered, and these questions were predicated upon what to me presented questions to my mind to be satisfied on. I cannot say now. You are asking me off-hand to remember these things of two or three years ago. There was a full memorandum kept of that and is there fully outlined in that memorandum. But I made what I believe to be a very careful examination of the terms of the contract in the time that I had to act. Q. Do you recall any of the information that was furnished to you as a result of that interrogation by you ? A. I cannot remem- ber except in a general way. There were a lot of things that every- body conceded that you might better on in a degree, but you could not get to that point without breaking and having the whole thing fall down. Q. Well, was the question of the amount of compensation to be paid to the city one of those questions upon which there was dan- ger of a break between the negotiators ? A. Not as to the amount but as to the methods of its collection ; how it was to be worked out, whether on the gross or on the net. There would be a difference in the net. I remember one particular thing in the contract that I 272 Investigation of Public Sekvioe Commissions did not like at all, and it comes to me now as a matter that delayed me and made me hesitate for a considerable time whether we could or not recapture the terminals of the B. K. T. By Chairman Thompson: Q. There is one thing which occurs to me ; isn't there something in the State law which requires payment of gross earnings when there is an extension of franchise ? Does that apply to New York? A. No ; we are really governed by the terms of our contract. By Mr. Harkness: You have to follow the terms and provisions of the Rapid Transit Law, and that controls. I think there is a provision in the Railroad Law that applies, that it shall not affect the operation of the Rapid Transit Act. Examination resumed by Mr. Lewis: Q. Do you recall, Judge, whether, in determining to adopt these two different methods, there was any conclusion reached by you and your associates that the net result to the city would be approx- imately the same? A. That was my impression. As I said before, it was worked out. The way they figured, of course, it was on a problematical basis, as nearly as they could get. There would be hardly any difference in the two systems under the different conditions. Q. If the net result to the city were likely to be substantially the same, just what excuse could have been given by the railroad company for not agreeing on the same method of determining that amount? A. If you could only have participated in these things as it had been pictured to me — they were not advancing very many reasons. They were standing out for their demands and both were clawing at each other like a set of tigers — both sides. It was not any question of advancing any reasons at all. Q. Do I understand that the 2 per cent, of gross earnings, pro- vided for in the Manhattan certificate, was the offer of the Inter- borough company as the lessee of the Manhattan ? A. No. Q. And that it was accepted by the city ? A. No ; that would not be the way to put it. The better way would be to put it: That was the result of all the argument and talk as to the method of their compensating, and it was the only basis that could be Kepoet of Joint Legislative Committee 2T3 reached on an amicable understanding and it was accepted on that basis. Q. And is the Committee to understand that the New York Municipal Eailway Corporation adopted the other method of paying a percentage of the net earnings and drove their stakes and refused to yield? By Chairman Thompson: Pardon me; there is a long distance telephone call for Mr. Lewis. We will take a recess for five minutes. (A recess was taken to give Mr. Lewis an opportunity to answer the telephone.) (After recess was closed, the stenographer read the last question.) Q. And is the Committee to understand that the New York Municipal Railway Company adopted the other method of pay- ing a percentage of the net earnings and drove their stakes and refused to yield? What was your answer to that? A. The answer is the same as I made before. You cannot take that as a basis. That is not just the way to say — "drove their stakes." Q. I will change the form of question. I do not want to ask a question in an unfair way. A. I understand that. Q. Does the Committee understand that the New York Munici- pal Railway Company asked for and secured a different method of determining the compensation to be paid to the city from that asked for and secured by the Interborough for the Manhattan? A. Oh, no ; not at all. I said. Senator, that before, that you can- not make an analogous situation between the two companies. That will become apparent to you when you see that the B. R. T. put their elevated into the system. Q. Put what ? A. Put their elevated into the system and just like the Interborough over here put the subway in. It fell into the system, and then they took their 2 per cent. net. It works out practically the same way, just exactly the same way in both instances. Of course you take the 2 per cent, of the Manhattan in New York on gross, and that is merely the Manhattan end of it, with the third-tracking, predicated on some returns from express stations. 2^4 Investigation of Public Seevicb Commissions Q. It does not include earnings from local stations. It is local on extensions? A. Only on the third-tracking. Q. And on the extensions, doesn't it? A. Yes; afterward. Afterward you take extensions and whole earnings on the exten- sions, and they go into a pool which practically brings about the same result on a net as the B. R. T. was treated in Brooklyn. . Q. You say practically brings about the same results. I sup- pose you mean it is estimated that it will bring about -the same results? A. That is, in method. By Chairman Thompson: Q. You said each side was trying to get what they could get in the conferences. Did you understand, in the conference with the Interborough people, that when the Interborough people finally said, " We won't do any more," that the conferees on the other side conceded to the Interborough position because they thought they had to ? A. JSTo ; I mean this : But let your mind go back, if you can, to the history of that transaction. There was an absolute break on the original proposition. When the Inter- borough people absolutely and totally withdrew. That is how far their break went, and they went and negotiated with the B. E. T., and through the instrumentality of ex-Mayor Low and President Ilea of the Pennsylvania railroad, the matter was taken up again and the Interborough invited to another consideration. By Chairman Thompson: If the Interborough had not played that time, and if they went off and sat down, there wasn't anything you know of to prevent the city fro'in building subways in other streets and in the same streets? A. I think there was. By Chairman Thompson. What? A. Financial conditions. By Chairman Thompson : Question of money? A. Yes. By Chairman Thompson : The city is putting up all the money anyhow ? A. No. Kepoet of Joint Legislative Committee 27t By Chairman Thompson: Take it between now and eighty-five years, doesn't the city pay all of it? A. You are talking in the perspective. By Chairman Thompson: I concede that the city of ISTew York never pays a cent if it can borrow it. A. You will have to have that on the record as your opinion, but not with my acquiescence in it. Of course, you see, in making reference to the city officials, I wish you to observe my position is a delicate one. I was a candidate against the present Mayor and I do not want to, in any way, shape or form, have it intimated that I sanction any criticism of these public officials. By Chairman Thompson: I am frank to say that the present Mayor is not any better than you are. A. I do not know whether that is a left-handed compli- ment or not, but I will take it for what it is worth. I merely make the suggestion and I vsdsh you would recognize that. By Chairman Thompson : We don't want to get anything on the present Mayor. A. My own opinion is it would be a very difficult matter to do that. Examination resumed by Mr. Lewis : Q. Is that true. Judge, that it was estimated to bring about practically the same resvilt ? A. I will say this : It was estimated to try to get the same treatment from both companies. Q. Not by the same method, but the same general result, by different means. I think it will finally work out about the same when you take it into consideration. A. '^'our premises are wrong, a little bit wrong. I think your premises are a little bit wrong. You are taldng two per cent on the gToss, which supplies the third- tracking in the Manhattan, and overlooking the fact that the exten- sions are ultimately put in when it reverts to almost the same basis as the two per cent net. Q. ISTow, do you state that. Judge, as a result of investigation that you made ? A. As my memory serves me. Q. As the result of investigation which you made at the time of the execution ? A. That they ultimately will work out on the same basis. 276 Investigation of Public Sekvice Commissions Q. Have you any recollection as to the probable annual income of the city from these sources formed at the time the certificates were signed by you ? A. Within a period of what time ? Q. Well, did you at the time of the execution of the certificates have in your mind an amount which seemed to be the amount that the city would receive annually from this source of income and be available for the use of the city in its general expenditure ? A. Oh, no. We did not have any such thing as that in mind. You couldn't expect that on the plan of amortization which ultimately led to the ownership by the city and with the well-stated knowl- edge on the part of everybody that was conversant with it, that operation must ensue with a deficit. Q. At the outset — at the commencement ? A. Yes. Must for a period of years. Q. Well, it is not expected that the ctiy will derive any annual revenue from these certificates at the outset ? A. Oh, no. Q. But that, of course, does not apply to the Manhattan which must pay two per cent of its gross receipts without any deduction into the city treasury. A. Well, that has reference again. You do not encompass within your question all the factors which ought to be in there. You take two per cent of the gross which has nothing to do with the third-tracking on the elevated, and you must take into consideration the extensions. Q. Tell us what you understood the two per cent, of the gross, just upon what the two per cent, gross rule is to apply. A. Upon the third-tracking of the Manhattan predicated upon the returns made by certain express stations. Q. ISTow, those returns are the returns in excess of the actual receipts from those stations on a certain date specified in the certificate, are they not? A. Yes. Q. If the receipts at a given station on a certain date in the past were, for example, $Y50 that day, and if after the completion of the third-tracking and the application of the rule laid down in the certificate for the payment of two per cent, of the gross receipts, shows that the receipts at that station averaged $775 a day, then the application of the rule would result in the pay- ment into the treasury of two per cent, upon the $25 excess of gross earnings from that station, would it not, under the reading Eepoet or Joint Leghslative Committee 277 of the certificate? A. That question is pretty well involved. Of course, whatever the rule is, it is stated in the certificate there. Let me see that certificate. Q. With that to refresh your recollection and the contract. A. That has reference, of course, to the third-tracking. Q. We are agreed, I take it, that the city is entitled only to two per cent, of that portion of the earnings of the given station in excess of the earnings of the same station on the 30th of June, 1911 ? A. When you read this certificate. That is now having reference to express stations which encompass merely the third- tracking. Q. I understand, but that, of course, in the light of your rea- soning after just now reading of that provision, would tend to change your mind that there was an understanding at the outset that there would be no revenue for a long term of years, doesn't it? A. When I said that, I meant there would be no revenue, but there would be corresponding deficits which would cause the operation of the entire system under a deficit. I did not mean to confine it to that particular portion. Q. It is a fact that the city is bound to get some revenue from the third-tracking of the Manhattan lines, is it not ? A. I should sincerely hope so. Q. Some revenue from the third-tracking of the Manhattan lines, is it not ? A. Yes, I would say so. I hope so. Q. That is almost a certainty, is it not ? By Chairman Thompson: Do you think anybody took into consideration that there was likely to be after these third tracks on the Third avenue got into operation, there would be a falling off in the switchback at Coney Island — they operate just like switchbacks going up and down on Third avenue, don't they; A. Where? By Chairman Thompson: Along Third avenue. A. I am not aware of any such con- struction as that. There is one place in particular there is a necessity for raising the structure where the third-tracking comes. You see that particularly, I should judge, around Fortieth, north of Forty-second street. 278 Investigation of Public Service Commissions Examination resumed by Mr. Lewis: Q. Then it is almost a certainty, is it not, that there would be some revenue from third-tracking of the Manhattan structure? A. The best I can answer that is, I hope there will be. Q. Is there any possibility of there being a revenue for the benefit of the city from the third-tracking of the Broadway- Fulton under the certificate providing for a division of net profits? A. My own judgment is, the city will get a quicker return from the operation of the Brooklyn Rapid Transit than from the Inter- borough. I am expressing my own opinion. That the city will get a quicker return from the operation of the New York Municipal Railways than it will from the Interborough. That is, the deficit under operation will cease earlier on the Municipal than on the Interborough. Q. How can there be a deficit on the Interborough under the Manhattan certificate? A. Because you are only confining yourself to these express stations, you see. You have to take the whole system. I am treating the matter now as one great rapid transit system, in which the city figures as either being a bene- ficiary immediately or a loser immediately. Not a loser, except in the sense of carrying a burden for the present. Now, there never was a thought in any man's mind who ever took part in this creation of rapid transit in ISTew York, that there was the remotest possibility for years of anything like an earning. It must operate under a deficit. Q. Do you in speaking of the deficit mean to be understood as the result to the city, as the result of the investment by the city of its proportion of the cost of this third-tracking and addi- tional tracks of the Manhattan line, and that the earnings to which the city will become entitled, as a result of the inclusion of this provision, which you have just read, .will be insufficient to meet the interest charge incurred by the city in its contribution towards the cost of that construction ? A. I mean to be distinctly understood as saying that in the operation of the new transit system, that there is no hope and there never was any hope or never any thought or hope tliat the operation of that system would work towards a surplus for a number of years. Now, you can speak of one little factor or an integral part by which an earning Eepoet of Joint Legislative Committee 219 will be made, but when you tal?;e into consideration the entire operation of the system, the loss is so great it eats up any little profit that may come from a portion of it. Q. The city does not have to share in the loss on the operation of the elevated system to any extent whatever, except possibly the loss of income of return upon its investment of extensions or additions. A. The whole thing taken into consideration as going into a pool, and ultimately you have the same basis of division of the pool as in the New York Municipal Railways on a net result. There is where your premises are wrong in the first interrogation as to the two per cent. Q. Where in the contract, or of the two certificates, did you find any calculation to convey that? A. You find it in the creation of the pools. There are three distinct pools. Q. Where are those pools referred to in the certificate? A. They are referred to in the different certificates that have to do with the different works. You will find so much is deducted for this and so much for that, and after these payments; are made, the city comes to share in the net result. Q. Is that true. Judge, as to the determination of the amount of two per cent, on the gross earnings from the express stations over and above the amount of the earnings at the same stations on June 30, 1911 ? A. Certainly, Senator. Your question is perfectly pertinent, if you take that up as an isolated feature and confine yourself to two per cent, on third-tracking, but you must go further. Q. I want only information which will be controlling and con- vincing and the trut]i. We do not any of us want anything that is not so. A. That is why I am trying to get you straight on the question. Q. Now, will you, fcr the purpose of setting me straight upon the question, state to the Committee tmd for the stenographer's record the exact aTangcment between the city and the Interborough Company relative to the third-tracking of the 'Second, Third and Ninth Avenue Elevated lines, relative to the proportion of the gross earnings payable into the treasury of the city as compen- sation ? A. You have it in the third-track certificate in the clause 280 Investigation of Public Seevige Commissions that has just been read from the certificate. Two per cent, upon the gross earnings expressed in that certificate, as it is put there with reference to the express stations ; that a sum that will exceed an amount that that station earned prior to June 30, 1911, will he expressive of the amount upon which two per cent, is to he paid. On the third-tracking. Now, if you stop there you have got what you have said is a practical certainty of a return, because there cannot be anything else if you are going to take a percentage of the gross, because the obligation to meet expenditures is on the obligator to that extent. But you must not stop there. But, when you go to the operation of the extension, you have the locals and the expresses. Q. Is the city called upon to bear any part of the expense of operation of the local and express trains ? A. Only to the extent that they deduct the cost of operation before the city will share in the pool. By Chairman Thompson: Does that come out of the revenue derived ? A. Certainly, and they cut down — By Chairman Thompson: When I get on at a local station and when I arrive at an express station, is it going to be so arranged I can take an express train the same as on the subway? A. Certainly. Q. And I pay at the local station and change cars at the express station, without paying anything? In that case you would not get two per cent, of that nickel ? A. There is no record of fare having been paid and hence you would not get a record upon which to base your return. Senator Lewis is perfectly right in taking up that section and figuring the two per cent, gross. There is no question that spells that out. Then he takes that section and compares it with the operation standard of the lines he men- tions in Brooklyn. First, he should take into consideration that the Municipal Eailways Company are putting their structures into the contract just the same as the Interborough are putting their subways in the contract. It is a contribution. That fact is also overlooked. Eepoet of Joint Legislative Committee 281 By Chairman Thompson: When did the Interborough get ownership of those subways? A. They never had the ownership, but they had a lease which they shortened and made cotemporaneous with the other. Examination resumed by Mr. Lewis: Q. How much did they shorten ? A. Something like twenty or thirty. Q. I have not been able to get my idea clarified on the subject of deductions to be met before the two per cent, of the gross earn- ings are to be paid into the treasury. A. Well, I have stated them as clearly as I can to you. Q. Do I understand and do you desire the Committee to under stand that the language which provides for the payment of two per cent, of the excess of the gross receipts at the express stations over the gross receipts at the same stations on the 3'Oth of June, 1911, does not mean what it says ? A. I do not want any such impres- sion to be had. There cannot be any such impression, because this is the idea: When you ask that question, you are confining yourself to the third-tracking or expressage on the Manhattan system, and you are overlooking the fact that ultimately it goes into the net basis when you take into consideration the operation of the extensions and, in other words, it is swallowed up. By Chairman Thompson: In other words, two per cent, is not paid over, but it is credited to the city ? A. It is an integral factor. It is the same as if you had a station at 149th street and you got on at 149th street and paid ten cents fare. On every other station the charge was three cents. You could not balance up profits on a ten cent fare, where it only contributed to one station. You would have to take the entire system of collections and average them. By Chairman Thompson: In other words, it represents a credit and not a transaction with money paid into the city treasury ? A. Certainly. (At this point Mr. Harkness interrupts to volunteer something.) By Chairman Thompson: I think, Mr. Harkness, you ought to confine yourself as appear- ing for the Commission, and if you have any communication that you would like to make, to make it. 28'2 Investigation of Public Service Commissions By Mr. Harkness: I just want to point out to the Chairman ■ — Examination resumed by Mr. Lewis: Q. The division of the net result is payable quarterly? A. Just as soon as the pool goes into operation. Q. After 1917 — as a matter of fact, the two per cent, is cred- ited to the city ? A. Yes. Q. Credited to the city? A. Two per cent, on the gross of Manhattan, — third-tracking. Q. When you come to detemiine the net, that 2 per cent, is deducted, same as an expense? A. Yes. Q. But that 2 per cent, must accrue to the city? A. Certainly, as a benefit. Gets credit for it. It won't get it, because it ain't there to be had. Q. If they don't get it, they get it in the reduction of some obligation to the city ? A. A^es. By Chairman Thompson: Like the B. E. T. paying for cars to cross the bridge. They do pay it to the city, but the city gives it back some time after. Q. What I want to get this information for, Judge McCall, is to compare the net results under the Manhattan certificate with the probable net results under the Broadway-Fulton certificate, and to ascertain whether or not there is likely to be, in your opin- ion, a similar deficit accruing out of the separate and quite dis- tinct provisions of the two certificates, relating to compensation to the city ? A. That would be an exceedingly difiScult question to answer. That would be entirely problematical and purely con- jectural. You could not answer that. Q. There is not any provision in the Broadway-Fulton certifi- cate which guarantees to the city any percentage whatever of the gross receipts, is there? A. Of the gross receipts? Q. Yes. A. It says in express language, " net receipts." Q. And there is no provision in that certificate under which the city can ever hope to get any percentage of the gross receipts as gross receipts? A. ISTo. Q. And there is a provision in the Manhattan certificate under which the city ultimately probably will get a percentage of the Eepoet of Joint Legislative Committee 283 gross receipts, and perhaps thereafter a percentage of the net receipts — is that the idea? A. You make that question alto- gether too large. It is specific in its terms that they will get a 2 per cent, benefit or credit from the gross receipts in the operation of the express stations in the Manhattan certificate. Q. And no such provision in the Broadway-Fulton certificate ? A. There is no such provision in the Municipal Railways. By Senator Mills: Both contracts ultimately depend, or at least the revenue to the city ultimately depends on net revenue? A. Entirely so. By Senator Mills: Only the net revenue in the Manhattan system is determined on a different basis than the net revenue in the Municipal sys- tem, in that figuring the Manhattan there is a provision of 2 per cent, in the express stations? A. Yes. By Senator Mills: That is a fact that enters into the Manhattan contract, but does not enter into the Fulton? A. Yes. By Senator Mills : But both ultimately rest on a net basis system. A. Yes. And then, of course, you understand, the distinctive feature exists with the Municipal, that they are the owner and contributed where the Interborough is the owner and did not contribute. By Chairman Thompson: Is the Manhattan a party to the contract? A. In the sense the certificate is issued to the owner and not to the lessee. I do not know whether your minds will remember there was a difficulty at the time of the issuance of the Manhattan certificate. All stood in the way of the certificate. Of course, the desire of the Com- mission and desire of the city authorities was to issue the certifi- cate to the owner, but the Manhattan stood in the way and blocked it for some time, and it took a rather serious aspect, and we deter- mined rather than have delay in the matter to issue the certifi- cate, and we issued the certificate to the lessee, which was the Interborough, and ultimately that was all ironed out and the cer- tificate was issued to the Manhattan. 284 Investigation of Public Service Commissions Examination resumed by Mr. Lewis : Q. You have spoken of the various pools. How many pools were there ? A. Three or four. Q. Now, will you tell us what you mean by the term " pool " ? A. Well, it was a setting aside or dumping of all the earnings into a pot out of which — Q. That is, we are speaking of the Manhattan lines now. A. I am speaking of the subway system entirely. Of course, that con- siders the Manhattan. Q. Taking in the Brooklyn, and everything? A. Every one of them. But, after certain deductions, which are outlined in the general contract, payments would be made first to the companies for this and that, and wherever it was specified in the contract, and then if there did result a residuum or surplus, then the city would come in and share in that result. Q. Of the whole dual system ? A. As controlled and operated by the two separate entities that were operating the system. Q. Now, where under the contracts or under the certificates is there any provision providing for that arrangement? A. I wUl tell you ; I will give you a memorandum of that, setting forth the whole thing to you, showing you the deductions to be made, and everything, Senator. I will give you a short memorandum. Well, assuming ■ — where, under the contract or under the cer- tificate, do you find any provision authorizing the payment into the pool or the treasury of the pool of the earnings of the express stations of the Second, Third and ISTinth avenue elevated lines, in excess of the earnings on June 30, 1911, upon which excess two per cent, is guaranteed by the certificate to be paid into the treas- ury of the city, without any deductions whatever ? A. Without any deductions whatever? Q. Yes. A. That is only a species of earnings that takes its feature as an earning and must be credited and goes into the gen- eral pool, and the operation of the entire system. Q. Does that mean what it says? Doesn't this language on page 18, " Provided, however, in no event shall any amount so readjusted be less than an amount equal to two per cent, of the excess of such gross receipts over such gross receipts from trans- portation of persons and property upon said line, for the year ending June 30, 1911 ? " A. Yes, sir. Eepoet of Joint Legislative Committee 285 Q. Now, does not that mean that the amount of the gross re- ceipts is to be ascertained and reported, and that two per cent, of that amount is to be paid into the treasury regardless of any pool or of any deduction ? A. Not at all. It takes the form of a credit. Q. Where is there any authority for taking a form of a credit ? A. Contractual obligations of the city with these companies and the operation of these roads to determine the result to the city and to them. Q. A careful study of the contract has failed to make that appear to me. A. I will point it out to you in a very short mem- orandum, giving you the whole thing, so that you will see it in a glance. Q. A provision in the grant which nullifies the payment of two per cent? A. ISTo. I won't say it nullified it at all. It is in through harmony and keeping. By Chairman Thompson: Q. Can you do that between now and two o'clock ? A. Yes. At this time a recess was taken until 2 p. m. AFTEE EECESS Edward E. McCall, again takes the stand. Continued examination by Mr. Lewis: By Chairman Thompson: There are two or three things I want to say as Chairman. In the first place I want to scold the Chairman of this Committee, paiticularly because of a sort of a natural impulse that he has sometimes to interrupt things, and ask a lot of fool questions that he probably would not ask if he would think a minute, and we are going to try and prevail upon him to stop that to some extent when he breaks in, and I also want to say to the Judge that the stenographer complains because you talk a little low. I want to say to all the rest of the counsel and rest of the Committee that their deportment up to now has been entirely satisfactory. There is one fellow here with a kodak, and wants to take a picture, and 286 Investigation of Public Service Commissions ■ if you will all look pleasant, we will get Lira out of here before we go any further. Q. I understand from Judge McCall that the statement which he will submit in explanation of the question asked of him before recess is not yet ready, but will be here very shortly. Judge McCall, ill response to a question asked you by the Chairman of the Committee, relating to the fares to be collected at local sta- tions from individuals who subsequently made changes to an express station, at an express station, I think you stated that no attempt was made to obtain for the city any proportionate share of the amount that might be thus received, did you not? 'A. Ifo, I did not say it that way. The question was asked if a man took a train at a local station, under the existing conditions, and trans- ferred to an express train at an express station, there was no way of keeping a record of his transfer to the express, and there is not. Q. And the city then loses, at least the city does not get, any portion of the fare received by the corporation operating the road from that class of passengers? A. What do you mean by that question, as a general question ? Q. Yes. A. Oh, no; that is not so. Q. Does the city get any part of that fare? A. You use the words " do they now ? " Q. Or will the city ? A. Yes, they will. Q. Will the city get any portion of that fare paid by the pas- senger who enters a local train and transfers from the local to an express train at an express station ? A. Certainly they will get a benefit of that ride as figuring in the results of the operation of the road ultimately. Q. But not in the determination of the two per cent, upon the gross revenue? A. That is based upon embarkation at express stations. Q. Would it not have been possible to have provided a method by which the fare or some portion of the fare paid at the local station by a passenger, subsequently transferring to an express train at an express station, shoxild be considered in determining the two per cent ? A. It is, and will be. Q. In determining the two per cent? A. No. Not the two per cent. Mark you, that has reference only to the elevated railroad. Eepoet of Joint Legislative Committee 287 Q. I appreciate that. Would it not have been possible to have made provision under which the city would be in a position to receive some part of that five-cent fare? A. Certainly not, be- cause we are dealing with the construction in which the city was interested — new construction. Always bear that in mind, Senator. Q. Well, we are getting from that two per cent, upon the excess earnings of the additional tracks used for express service over the earnings of the same stations on the date fixed in the contract. Now, we will get, of course, or the city will get, a percentage of the excess ? A. Yes. Q. Under the terms of the certificate, but that excess will come only from passengers entering the trains at express stations. Now, ^ras it not possible to provide, by some method, for including in the amount upon which the two per cent, was to be figured, a share of the five cents paid by the passenger at the local station, who may ride three blocks and then transfer to the express station? A. It has all been provided, and the city will share in that. It is just simply, or exactly the situation as I told you to-day, before recess, that the practical treatment of the Interborough is upon a net basis, just precisely as the Brooklyn Rapid Transit is, and that is so, and that is what this statement shows you. Q. There is not any Brooklyn Rapid Transit agreement to pay two per cent, of the gross receipts anywhere, is there? A. No, there is not. Q. Then, it is not exactly the same basis ? A. Yes, it is exactly on the same basis, and I am going to show you why. You remem- ber I told you to-day it would work out the same. Q. Yes. A. I could not keep in mind the precise situation. The extension certificate covers the whole thing; and it provides for a division on a net basis, precisely as the B. R T., and the 2 per cent, distinction had to do with the Manhattan, because we were dealing with a separate and distinct entity, the owners of the road. So that the provision was not only comprehensive enough to provide for the Manhattan, but to include the Interborough, and if there came a time that there was a breach of the lease between the Interborough and the Manhattan, we could fall back on the Manhattan, and the proceeds can- never fall below two per cent., as expressed in the Manhattan certificate. But when they 288 Investigation of Public Seevice Commissions operate the extensions, the entire earnings of the road, the Man- hattan end of it, the third^;racking, the operation of the exten- sions, is put in a joint pool from which is deducted these allow- ances made in the contract, and on a net basis, there is the same percentage as in the B. R. T. Q. And that is all covered in the contract and certificate relating to the Webster avenue and the extensions? A. Yes, and the extensions. Q. Now, is the Manhattan company a party to those extension agreements at all? A. No. Q. That is the Interborough ? A. The Interborough and City. Q. Well, is there anything in that contract advantage of which may be taken by the Manhattan Comany, for the purpose of avoid- ing the payment of the 2 per cent, upon the gross receipts? A. No, sir. Q. Then this provision of article 8, which I now read, is still in force, I take it : "As compensation, there shall be payable by the Manhattan Company to the city on the 30th day of June, after the beginning of the operation of each line of the railroads herein- before provided for, for the year or portion of year. then ending, and upon the 30th day of June of each year thereafter, for the year or portion thereof then ending, from the gross receipts from the transportation of passengers and property for such year or portion thereof, of each station served by express trains, upon such line, whether such station be a new station, an enlargement of an existing local or express station, or a re-location of reconstruction of such station, a sum equal to two per centum of the excess of such gross receipts over the gross receipts of the same station from the transportation of passengers and property upon said line for the year ending June 30, 1911, or for a corresponding portion of such year." And farther down on the same page I read : " The said rental as hereinbefore determined shall thereafter be paid to the Comp- troller within sixty days after said date, for such year or portion thereof, and for each succeeding year or portion thereof, for a total period of twenty-five years from the date when any part of any of the railroads is first put into operation." Q. That provision is effective or in operation ? A. It is, yes, sir. Eepoet of Joint Legisxative Committee 289 Q. Then, instead of being a mere matter of bookkeeping, as I think YOU have testified to this morning, a matter of credit, it -will be a matter of annual payment in cash to the Comptroller -within sixty days upon the excess of t-wo per cent, of the gross receipts, -will it not? A. Yes. Instead of my ackno-wledgment or agreeing -with you that it is not a system of bookkeeping, I insist that is all that it is, and all that it -will be. Of course, there is a tangible sum paid. But the duty of the Comptroller is to imme- diately provide for the interest on the bonds, -which the city has raised and put into this investment. Q. And he -will perhaps use that t-wo per cent, in the creation of a fund to meet that interest ? A. That -will be a part of it no doubt. Q. Well, that provision -was put in undoubtedly for the purpose of aiding the city in the creation of the fund for meeting the interest on its contribution for the cost of construction ? A. J oint operation. Q. Why -wasn't the provision put in the Broadway-Fulton street ? A. Because you have an entirely different situation. There is not an analagous feature that you can point your finger at in the t-wo situations. In the first place there are t-wo parties to deal -with in the Manhattan situation. The Manhattan, the o-wner, and the Interborough, the o-wner of the lease. They -were never contributors to the system. There -wasn't a single paper but had to pass through Judge Dillon and Mr. Gould, and all through it the three parties had to be considered. On the other hand the B. R. T. contributed its lines to the system and then entered into a contract -with the city to pay for the new. There is your justification. Q. That is the reason I take it, for failing to ask the ISTew York Municipal Eailways Company to pay a percentage of its gross receipts as was required from the Manhattan Company. A. You can take my assurance there was not a failure on the part of the city officials to ask for anything. They asked for every- thing in sight. Q. I hope that is so and I haven't any reason to doubt it. A. As a mater of fact that was the result of their negotiations. Vol. I — 10 290 Investigation of Public Seetice Commissions Q. jSTow do YOU want your statement you have prepared put into the record ? A. I will give it to you and you can do with it as you choose. By Chairman Thompson: Q. Who prepared that ? Counsel ? A. No, sir ; I dictated it, that statement. Mr. Lewis. — I think we understand the situation, and I offer it as an exhibit and desire to have it included in the record. / Septemher 9, 1915. Mejmoeandum Ee Compensation under Certificates of March 19th to Manhattan Railway Company and Interboeough Rapid Transit Company. Two certificates were issued, one to the Manhattan Railway Company for additional tracks on the existing Manhattan Sys- tem, and one to the Interborough Rapid Transit Company for elevated railroad extensions to the present Manhattan System. Because the Manhattan Railway Company, the owner and lessor of the existing elevated system in Manhattan and the Bronx, was not interested in the Dual System Contracts Nos. 3 and 4. The third-tracking certificate, therefore, provided for a rental as follows : "Article VIII. "As compensation there shall be payable by the Manhattan com- pany to the city of the 30th day of June, after the beginning of the operation of each line of the railroads hereinbefore provided for, for the year or portion of year thereof ending, from the gross receipts from the transportation of passengers and property for such year or portion thereof, of each station served by express trains upon such line, whether such station be a new station, an enlargement of an existing local or express station, or a relocation or a reconstruction of such station, a sum equal to 2 per centum of the gross of such gross receipts over the gross receipts of the same station from the transportation of passengers and property Eepoet of Joint Legislative Committee 291 upon said line for the year ending June 30, 1911, or for a cor- responding portion of such year, but no percentage of the gross receipts of intei-mediate local stations, whether enlarged or not, shall be required to be paid. If a station be relocated, the increase shall be calculated by comparison with the earnings of the changed or abandoned station for such year or portion thereof. An express train, within the meaning of this article, is any train which, operated pursuant to its schedule or orders, regularly omits to stop at any station." The Interborough Rapid Transit Company, however, has a long term lease of the iEanhattan System, and the new elevated extensions are to be operated in conjunction with it. In order to get the matter of compensation for the elevated extensions upon the same general basis as set forth in the subway contracts in the case of the subway, provision is made in the extension certificate to Interborough Rapid Transit Company which materially affects (during continuance of joint operation) the rental provisions of the third-tracking certificate. Article XII of the extension certificate provided, in part, as follows : "Article XII. "As compensation. The Interborough Company, shall pay to the Comptroller for the period beginning on the day when any part of any of the Railroads is put into operation and ending on the day when the Interborough Company shall cease to operate the railroads in conjunction with the Manhattan Railroad, (in which event the compensation shall be readjusted as hereinafter provided at the time such joint operation is discontinued) a sum which shall be determined as follows: "After the beginning of operation of any part of any of the railroads, the net profits upon all elevated lines operated by the Interborough Company (the same including the Railroads, the existing Manhattan Railroad, and the railroads or additional tracks authorized by a certificate, granted to the Manhattan Rail- way Company bearing even date herewith which taken together are referred to as Company Lines) in excess of the average annual net profits of the existing Manhattan Railroad for the two years. 292 Investigfation of Public Seevice Commissions one ending June 30th, 1910, and the other June 20, 1911, shall be ascertained, and one-haK (%) of the amount remaining of the said excess of net profits after deducting therefrom the rental for additional tracks (authorized by the Commission by certificate bearing even date herewith) shall be deemed to be the compensa- tion payable to the City by the Interborou^ Company (in addi- tion to said rental) under this certificate j provided however, that the total payment to the city under both certificates shall not be less than the amount of the aforesaid rental." The article then goes on to provide for the ascertainment of the net receipts by substantially the same method as is provided in the subway contract for ascertaining subway net receipts. ' Q. I think you said this morning, Judge, that it is your belief, or your opinion, that the city will derive no actual profit from the operation of those roads for perhaps a good many years. I do not know that you said a good many, but for a considerable period of time? A. A number of years. Q. A considerable period of time ? A. I say it is my opinion that the operation will be under a deficit for a number of years. Q. And during that period, of course, it will be necessary for the city to contribute by the usual methods of raising money toward the expense of the investment-payment of the interest on its investment? A. Have to provide for that. Q. ISTow, the deficit, as I understand the matter, is cumulative, is it not? A. Yes. Q. That is, the deficit, if I understand correctly, if the deficit for the first year is set up, and the deficit of the second year is added to it, and so on, as long as the operation results in a deficit? A. That is right. Q. JSTow, at the beginning of the period when the operations result in a profit, those profits are to be set aside as an offset against the cumulative deficit ; is that so ? A. Of course they will first meet that, I suppose. That will be the proper sound financial policy to follow. Report of Joint Legislative Committee 293 Q. Do you remember any litigation, Judge, in which the ques- tion as to whether or not the provision relating to the deficits was adjudicated, and resulted in the decision from the court, that, as the contracts then stood, the deficits were not cumulative, and that subsequent to that litigation change was made in the form of contract so as to make it definite and certain that the deficit should be regarded as cumulative? I am told that there has been such a litigation and such a decision and such a change in the character of the provisions of the contract or certificates I suggest. A. No such a thing transpired. Q. Doubtless it was before your incumbency; there is not any such thing is there ? A. I never heard of such a thing. By Mr. Harkness : Do you care for a statement of counsel on that? Mr. Lewis. — I think Mr. Harkness can make a statement on that that would clear that. Mr. Harkness. — I don't know the basis for counsel's informa- tion, but the matter was up before the Court of Appeals in rhe Admiralty Case — three cases — Ryan against "Wilcox — the proposition of the Interborough and the B. R. T., in respect of deficits being cumulative, were all placed before the court. That is, on the record of the various propositions submitted by the operating companies to the city ofiicials and the Public Service Commission, and the provisions in the operating contracts in regard to the deficits being cumulative, were substantially as those contained in the propositions of company. Mr. Lewis. — Was that the determination of the court ? Mr. Harkness. — The determination of the court was the whole arrangement as set forth in the proposals and the report of the Public Service Commission was constitutional. Mr. Lewis. — And as to the cumulative or noncumulative proposition ? Mr. Harkness. — I don't know as that was discussed, but the whole arrangement involved that cumulative feature. I have the record of the entire proceedings. 294 Investigation of Public Seevice Commissions Mr. Lewis. — Has there been any adjudication at any time on any form of contract to the effect that the provision was non- cumulative rather than cumulative, to your knowledge ? Mr. Harkness. — Of course the record in the Admiralty Eealty Case clearly indicated that the deficits were cumulative. What was presented to the court in effect was not the contracts, but all the proposals and preliminary report of the public officials were included in the report to the court in those three cases. That ^^■as in the spring of 1912. That was just before Judge McCall assumed the Chairmanship of the Commission, the Hopper case was presented. That was carried to the Appellate Division and was decided in favor of the city. Practically the same questioM were raised in that case as raised in the former case, and decided on that basis except for this : The Appellate Division in that case had the contracts before them in practically the same form. Q. That was the case that was submitted pro forma by the Special Term justice to the Appellate Division. Mr. Harkness. — In substantially the form they are before you now were before the Appellate Division. Q. You do not know of any judicial determination at any time under any form of proposed contract the deficit would not be cumulative ? Mr. Harkness. — No, sir ; on the contrary. Mr. Lewis. — While you are about it, Mr. Harkness, would you mind stating the purpose of this litigation; how it arose. I am speaking of the three cases that went to the Court of Appeals? Mr. Harkness. — There were three suits. The first one was brought in Brooklyn by one Pyan, a taxpayer, to determine the constitutionality of this proposed arrangement. The second suit was brought shortly afterward by the Admiralty Eealty Com- pany, which had similar litigation some time before in Man- hattan. That was also brought by a taxpayer to determine the constitutionality. Mr. Lewis. — You mean the constitutionality of the statute, authorizing the making of the contracts ? Eepoet of Joint Legislative Committee 295 Mr. Harkuess. — It raised two questions : first the constitution- ality of the proposed arrangement, and secondly whether it was covered by provisions of the Eapid Transit Act. The Admiralty Eealty Case was the second one started. Mr. Justice Shearn was counsel for the plaintiff. That was also a taxpayer's suit for an injunction and raised the same question. That was the latest suit of the three and contained all the documents. It contained in full the Interborough proposition of February 12, 1912, which was finally accepted. And those three cases were carried up through the Appellate Division to the Court of Appeals together. Before the matter was decided by Mr. Justice Blackmore in Special Term, the Rapid Transit Act was amended by the Wagner legislation in 1912, which expressly authorized the arrangement contemplated by the proposals. Mr. Lewis. — Did the Wagner legislation have anything to do with dealing in any way with the matter of deficits ? Mr. Harkness. — I don't know whether it mentions it expressly. I would have to look at the act. It covered the proposals in pretty definite terms, and provided for this pooling and distribu- tion of receipts, but left or conferred the complete power in the Commission, to make any arrangement as to details to be carried out. Chairman Thompson. — Were these litigations started before the Wagner legislation? Mr. Harkness. — Yes, sir. Chairman Thompson. — Did the legislation in your opinion have any effect on the determination of the suits ? Mr. Harkness. — It did not have any effect on the claim made at Special Term that the actions proposed were ultra vires. In other words, the Rapid Transit Act as it existed prior to 1912 would not permit the arrangement. We told Justice Blackmore we would not argue the question of statute, because it was pro- posed by the city officials to apply to the Legislature for an amend- ment, and Mr. Justice Blackmore's opinion referred to the amendment and said they contemplated the com,pany's arrangement. 296 Investigation of Public Service Commissions Exaruination resumed by Judge Lewis: Q. Judge, I read from page 16 of the Broadway-Fulton cer- tificate, near tlie bottom: " Tbe lessee shall (except in such cases where permission to do otherwise is expressly granted from time to time by the Commission, by a resolution entered in its min- utes) before entering into any contract, agreement, mortgage or undertaking, having to do with the constructing or equipping of the railroads, submit the same to the Conmiission for its approval, and the Commission may as a condition of its approval require the insertion of such terms and conditions therein as it may deem necessary. The Conmiission may require the Subway Company before entering into any agreement having to do with the con- struction or equipment of the railroads to ask for proposals upon form of contracts satisfactory to the Commission, in a specific manner and for a specified time." I have been unable to find any provision of that chai'acter in the Manhattan certificate, and I would be glad, and I think the Conmiittee would be glad if you would tell the Committee of the reason for the omission from the Manhattan certificate of that provision ? A. Well, that same provision governs the Manhattan except in the construction of extensions. Q. Well, except in the construction of extensions? A. Of extensions. Q. Construction of extensions? A. Yes, sir. Q. Well, does it govern on the third-tracking ? A. ^STo. I am wrong about that. It governs except the third-tracking. Q. Well, the Manhattan- hasn't anything to do with any exten- sions ? A. No. I say they cannot make any contract without our approval except for third-tracking. Q. Well, they can make contracts for third-tracking without your approval ? A. Yes, they can. Q. And why are they permitted to do that without the approval of the Commission? A. Because they insisted upon that being done and it was acceded to them. Q. Well, did the ISTew York Municipal Eailways Company object to the supervision by the Commission to the awarding of contracts for the construction, or object to the supervision of con- struction by the Commission? A. We were dealing with the Eepoet of Joint Legislative Committee 297 company that had to do with the contracts, and one of the parties in the contract. In the Manhattan we were dealing with a sep- arate and distinct body. Q. Would that supply a reason for the failure on the part of the Coimnission to reserve to itself the right to supervise the awarding of contracts in order that the Commission might have a check upon the expenditure of money, a part of which the city was to contribute, and the cost of which is to be returned to the city, or in some one way or another the property itself turned over? A. Their negotiations led to controlling everything, only lie third-tracking. Q. I suppose you mean — A. I mean the conferees of the city, the Interborough and the Municipal. They could not get them to accede to it, and they would not accede to it, and they were given the privilege of third-tracking without submitting contract. Q. And, of course, the Commission realized when it granted the certificates and authorizations for the third-tracking, that it would have no control over the expenditures, did it ? A. It would have control over expenditures. Q. How ? A. They could not pad the expenditures. We did not have any right to disapprove or approve their contract. Q. Well, suppose they should pad the expenditures, how would the Commission discover the fact? A. They would have to get past our checking on it. Q. Well, your contract does not give you the right to check the cost ? A. Yes, we have the right to do that. Q. Well, is there any provision in the contract or certificate which gives you the right to supervise construction in any way? A. Certainly. It must be along the plans we dictated. Q. Supervision of cost of construction and approval of con- tract? A. I cannot answer that question just now offhand. There is an absolute right for them to make a contract without their submitting it for our approval so far as third-tracking goes. Q. Was anything said or did anything develop at the time of these negotiations which indicated the reason for the desire on the part of the company? A. Certainly. Q. And what was the reason ? A. Their operation had to go on while the road was being built. 298 Investigation of Public Service Commissions Q. And was that given as the reason ? A. Certainly. Q. And did the Commission regard that as a sufficient reason? A. Why, certainly; it was a controlling reason. Q. Isow the New York Municipal Railways and the Brooklyn Eapid Transit is in exactly the same situation, is it not. They are building and carrying on traffic conditions ? A. But that is a company that is a partner in the city subways and the Manhattan is not. The Manhattan is a separate entity. Could not get them to relinquish it, that's all. Q. And you were able to retain that supervision as far as the Brooklyn Rapid Transit contracts were concerned, but you were not able to retain it over the Manhattan ? A. I should have to spell that out, because it was acceded to. Q. Was that one of the matters to which you gave attention dur- ing the period of six weeks that you have testified to? A. All matters that were of any essential moment. What I looked at was, was there anything to give me a justifiable reason in refusing to put my name to these contracts. jSTow I did that in the light that I knew that the city wanted rapid transit. There was a lot of things if we had the time or could run the risk. By the Chairman : Q. I don't think you have answered the question. A. I think I have. Q. That you were engaged in examining the contracts? A. I gave attention to all the essential features that were necessary for me to give my attention to, and I say now after the light of my experience it is just what they should have been allowed to do. Q. You think they should be allowed without provision of the contract ? A. Yes, without going to the Commission for their contract. Q. Was that your opinion at the time you were examining the contracts ? A. Undoubtedly it was or I would not have approved of it. Q. Well have you any present recollection of the fact, Judge, that you did consider this question and discuss it ? A. Not, except in a general way. I discussed all the points I regarded of any moment in the contracts. Kepoet of Joint Legislative Committee 299 Q. I suppose your statement that you think it was proper that the Manhattan lines should be constructed without supervision by the Commission over its contracts — A. You have a pretty gen- eral question. I do not say they should do their construction. In this particular instance there were features that warranted it being done. Q. Weren't there similar instances in the third-tracking of the Brooklyn Rapid Transit ? A. The point about it was this : If they acquiesced, well and good; hut if they refused. That was some- thing about which judgment had to be exercised. Q. Now did it get to the point ? A. In this' particular instance they were out in the hallway fighting with them about the proposi- tion. They had already left the room. Q. The Brooklyn Rapid Transit did not make any fight? A. They made fight enough but they bended. Q. They yielded, did they? By Senator Lawson: Q. That was one of the occasions when the B. E. T. was very easy there. The B. R. T. — There weren't many occasions ? A. I can't say the B. R. T. is the subject of being very harsh. Q. What I mean — the B. R. T. usually adhered very strictly to anything they can get? A. Yes. They are very tenacious of their rights. I must say this in justice to them ; I have found any business I have had to do with the executive officers of the B. R. T. they were very tenacious of their rights, but were open to discussion. Examination resumed by Mr. Lewis : Q. Now the city's compensation will be affected will it not by the expenditures in connection with the third-tracking of these elevated structures? A. Certainly. It will be an item to be deducted. Q. And also the city's right to take over the property? A. As an element in the cost of course and in the appraisement. Q. I propose to read from article 8 on page 16, the following: "Inasmuch as the city compensation for the authorization or licenses hereby given, and its exercise of its right to take over the plant and property of the railroads will be affected by the 300 iNVESTiGATioisr OF PuBLio Sbbvioe CoMinSSIONS amount of the Subway Company's expenditures on account of con- struction, equipping, maintaining and operating the railroads, the Subway Company shall strictly comply with the provisions hereof for assuring to the Commission by it of all operations of the Subway Company." That is in the certificate of the ISTew York Municipal Railway Corporation as to the Broadway-Fulton Street and Myrtle Avenue lines. ITow the language in the Manhattan certificate governing the same subject reads as follows : " Inasmuch as the City's exercise of its right to take over the plant and property of the railroads as hereinafter provided vidll be affected by the amount of the Manhattan Company's expenditures on account of con- structing, equipping and maintaining the railroads, the Manhattan Company shall strictly comply with the provisions hereof for assuring to the Commission supervision by it of all operations of the Manhattan Company in and about such enterprise," but not in any degree the construction, or supervision of the contracts of construction ? A. Not construction. Supervision of the third rail. All construction is entirely under our supervision. Q. 'Now, in the Brooklyn Eapid Transit certificate you make the recital, or the Commission made the recital, in the same form as in the Manhattan and in the Brooklyn Rapid Transit. There is an effective remedy given, but do you regard the remedy in the Manhattan certificate as equally effective in the protection of the city's interests, having in mind the compensation of the city, and also the right of the city to ultimately retake the prop- erty ? A. Certainly. Q. Well, you do not claim, of course, that that is a contractural right that you have, by which you get that effective supervision, because you have deprived the Commission of the right to super- vise the awarding of contracts in the one case, as to their thu'd- tracking, and in the other case you have asserted it ? A. As to the third raiL Q. But that is an element that enters into the cost? A. Tes. Q. And toward which the city contributes ? A. Yes. Q. And you have not reserved, or the Commission has not reserved, any right of supervision over that expenditure ? A. Cer- tainly they have, in the determination of the chief engineer. Eepoet of Joint Legislative Committee 301' Q. In that same provision ? A. The provision covers the pro- visions and terms of the contracts, and where they have not the right to make their contract for third rail the Manhattan has. Q. J^ow, let us find out the facts. I take it that there has been a contract awarded, has there not? A. Yes. Q. By the llanhattan or o'WTiing or operating company? A. Yes. Q. I don't know just who. A. Yes. Q. And that contract provides for all the work to be done on the Second, Third and Ninth avenue third-tracking, does it not ? A. Yes, sir. Q. And was that contract submitted to the Commission for approval? A. !No. Q. And it has not been approved? A. There is no necessity for approval. Q. In the Broadway-Fulton street reconstruction or consti' ac- tion of a third track, has there been any contract awarded? A. Certainly; it is going on. Q. Are they going on under contract ? A. Of course they are; certainly. Q. And were those contracts submitted ? A. Well, they must have been, of necessity. Q. Do you know as a fact whether they were approved by the Commission? A. Yes; the work would not have progressed if they had not. Q. By the method of providing for the submission of those contracts, and the approval by the Commission of the contracts in form, the Commission has reserved a certain measure of power to itself to control the expenditures under those contracts? A. Certainly. Q. And does not reserve that same measure of power as to the Manhattan ? A. On third-tracking. Always a reserve of power in so far as that is concerned through the determination of the chief engineer. Q. Yes, you may have that power, but that was not prior to the making of the contract, was it ? 302 Investigation of Public Seevioe Commissions By Chairman Thompson: Q. Chief engineer of whom ? A. Of the Public Service Com- mission. It is his determination on which these amounts are recognized. Q. Isn't that after the expenditure has been accomplished, rather than before? A. Yes. His determination will end it, except on appeal or under arbitration. Q. In the one case of the Broadway-Fulton street, in actual practice the corporation cannot let a contract, or award a contract, without first submitting that contract to the Commission for approval; that is so, isn't it? A. That is right. Q. And it cannot incur any expense without first submitting its proposal to incur such expense to the Commission? A. They can go on under the terms of the contracts and then submit their expenditures for determination. Q. Outside of the contract it cannot be done. It must first submit any proposal that involves the payment of money not pro- vided for in the contract to the Commission for approval? A. Yes. Q. In advance to the expenditure? A. Yes. Q. ISTow, as to the Manhattan, the company goes ahead and makes the expenditure without asking for the approval of the Commission; incurs the expense and submits its vouchers after the expenditure has been accomplished? A. For construction on third rail. Q. And then it is up to the Commission to disallow these items or not as it sees fit ? A. Up to the chief engineer. Q. The Commission acts on the advice of the chief engineer? A. Yes. It is his determination. We have a right to appeal and they have a right to appeal. Q. Did you realize at the time that the certificates were being executed that the Commission was depriving itself of the power to object, and turning that power over to the chief engineer, and that the Commission's only remedy was by an appeal from the allowance of its own engineer? A. Yes, sir; that was perfectly well understood. Q. Perfectly well understood at the time the certificate was signed? A. Yes, sir. Eepoet of Joint Legislative Committee 303 Q. Did it appeal to you, when that was first made apparent to you, that that was a wise provision? A. Yes; undoubtedly so; because of the conditions existing. It was either that or no transit facilities under the conditions. Q. Was that ultimatum served by the Manhattan Company? A. It was their protest and their attitude all through their con- ferences. Now mark you these contracts — I was not in these conferences. The result was reached and that result was approved by the city officials. Q. Well then, Judge, are we to understand that the city per- mitted the Manhattan Company to dictate terms upon which it would start the third-tracking? A. I wouldn't want any such understanding as that. The understanding would be, you had the city officials up against this exigency and this proposition, and trying to make a solution of a very menacing and difficult problem, and they did the best under the circumstances that they could. That is what I want to have understood. You take this instance, where there might be a feature of their standing on their rights and winning out. You take innumerable instances where the city stood on their rights and won out on their point. I will give you a striking illustration of it now. Take the Steinway tunnel which the city bought for three million dollars. There isn't any doubt in the world but it cost the Interborough eight millions, and yet they forced them into a sale of three million. K"o ques- tion on earth about it. Q. And it is your understanding that one of the inducements for the concession which the — A. It was give and take. It was to get to a point of approval solution. Q. The Steinway tunnel was a concession? A. I would not call it a concession. If I was looking around — I would call that garroting. Q. The victim was the Interborough ? A. I don't know who the victim was. The victim was the man who spent the money. Q. Had it been profitable up to that time ? A. That is another situation. The city stepped in and said they had not operated under their charter rights and declared it null. Q. It had forfeited its charter rights ? A. So the law said. Q. And as a result where was the ownership ? A. Somewhere between heaven and hell, I guess. 304 Investigation of Public Service Commissions Q. Well, the city must have assumed the ownership was in the Interborough if it paid three million dollars to the Interborough ? A. That was a question of the process of getting rid of these knotty questions. There was a tube over to Long Island City lay- ing idle for eight years, all built, and all constructed, waiting just some minor and additional construction to put it in effective operation. Through their clawing at one another and their fight- ing it lay there useless, just as the Fourth Avenue Subway in which Senator Lawson is interested. By Senator Lawson : Q. The Fourth Avenue Subway does not run through the eastern district? A. I am inclined to think that Fourth Avenue Subway shut out the eastern district subway. I never could understand while these negotiations were going on where you people were. You must have been asleep somewhere. I think the eastern dis^ trict of Brooklyn has been the worst treated neighborhood, taking into consideration business, than any portion of New York city, by virtue of these transit problems? By Chairman Thompson: Q. ^Youldn't they have the right to think that the Public Service Commission would take care of them ? A. How would they think that the Public 'Service Commission would take care of them. That is where you get erroneous ideas by these statements. That was a city proposition. The Public Service Commission is a mere constructing body ; after the city gives the finance and conditions to construct these things. You have a place over there in the eastern district which has often been likened to a modern Pitts- burg. I have been all through it and around it, and have studied every wqy to change that route. It is almost impossible to work out a point there. Statement by Senator Lawson, as to his district being the worst treated section of the city. Examination by Chairman Thompson : Q. Who is operating the Steinway Tunnel now? A. Thel Interborough. Q. The city owns it and operating it ? A. Yes. Q. And that five millions that they lost in that operation, why thev took it out of the traveling public in some wav? A. Inas- Eepoet of Joint Legislative Committee 305 much as it has only been operating ahout three months, I would like to know the process by which they did it. Q. "Whatever a public service corporation spends they get it back from the public ? A. I don't know. Q. Isn't that the real reason for th,j establishment and mainte- nance of the Public Service Commission? A. What? Q. Because of the well defined and well known idea now that every public service corporation's expenditures comes out of the people, and the people have a right to supervise that expenditure ? A. Are you asking me the question, what the State predicates its right to supervise the constructing feature ? Q. Yes. A. Isn't any doubt but it is a supervising body. Q. Whatever a public corporation spends, whether it divides with the city or locality in form or not, it comes out of the people of that locality ; the people that travel on its lines of necessity, on account of their owning the public franchise ? A. Don't the cor- porations give them anything for that? Q. I am not getting at that. I am just wondering if you see the thing as I do ? A. No, I do not. Q. I am changing my mind, but I thought public service com- missions were created for the purpose of supervising expenditures of public service corporations, because of the fact that the people got to know that whatever they expended it came out of the public ? A. I haven't any doubt that is the basic principle of the State's right, not only to supervise expense but also operation. Q. This five million of a loss that came out of the public just the same? Mr. Harkness. — The company that built that road went into bankruptcy and lost all they put into it. Examination resumed by Mr. Lewis : Q. Are there any other concessions that were made by the Interborough or the Manhattan in return for the concessions made to the Interborough or the Manhattan, notably, the conces- sion that the Commission should not have the right to supervise the awarding of contracts for construction? A. I do not want to be misunderstood by saying that this body who had this con- ference with these men were controlled by the fact that the Inter- hnr nno-b Company, or the Municip al Kailway Company demanded 306 Investigation of Public Service Commissions anything and by reason of the demand they got it. It was aa element considered from all the facts, and coupled with the fact that they were trying to reach a conclusion, by a fair and honor- able give and take policy. Q. Well we have found now two somewhat important conces- sions that were made by the Commission and the Board of Esti- mate and Apportionment, I assume at the demand of the com- pany, and the statement from you, if they had not been conceded, negotiations would have ended right there. Now will you teU us what concessions were made by the company in the give and take plan other than the Steinway tunnel? A. There are innu- merable instances where there was give and take on both sides. My mind cannot run now so I can single out the striking in- stances. Take the case of the Interborough where there was an abridgment of their present contract of the present subway, where they made it all fall in with the terminals, with the process of the dual system. Q. Which was another concession? A. It was a concession in the sense that it was corkscrewed out of them by the demand of the city authorities. It was not a love feast by any manner of means, these conferences. It was a battle from A to Z. Q. I do not suppose you yourself participated in the confer- ences and negotiations which led up to the preparation of the contracts and certificates ? A. The contract was printed — the contract was actually printed and I think ready to be signed, when the litigation that Mr. Harkness has spoken about, that last litigation, came up, the Hopper last case. Mr. Wilcox was then Chairman. I had been appointed and confirmed by the Senate and appointed Chairman to succeed him, and I had to stay and finish some work before I took my oath, and I think at my sug- gestion and on the application of Mr. Justice Shearn, then counsel for this petitioner, Mr. Wilcox gave Mr. Shearn, or the Com- mission gave Mr. Shearn, a copy of the contract, and I think that contract was embodied in the proceedings before the Special Term justice. So I understand the contracts were prepared and printed before I went into office. Q. I understood that, but who do you understand acted for the city in conducting these negotiations throughout this period of giving and taking? A. The Rapid Transit Committee of the Kepoet of Joint Legislative Committee 307 Board of Estimate and Apportionment, consisting of the Pres- ident of the borough, the Comptroller, President of the Board of Aldermen, now the Mayor, and Chairman Wilcox, and his col- leagues on the Commission, and the Corporation Counsel, and the attorneys for the Public Service Commission. Q. I suppose, before you executed these contracts, you dis- cussed them with some one or more of the various personnel? A. All of them. All of the men. Q. You know that they were aware of the fact that the Com- mission had not reserved to itself the right to supervise the awarding of the contracts for the third-tracking? A. They were to be executed by the Public Service Commission. Q. They were in conformity with the contracts based on the agreements which had then been made and which were then in printed form? A. Yes. Q. You, of course, are aware that the provision I read from the Brooklyn contract, Broadway-Fulton street contract, is contained in the Webster avenue certificate and in the Jamaica line certifi- cate? A. The extensions. Q. Yes. So that the only certificate from which this power of supervision, this reservation by the Commission of the power of supervision of the awarding of contracts is omitted in the Man- hattan certificate ? A. Because of its separate entity, of the Man- hattan road. You know. Senator, I might just as well say here that the Public Service Commission regarded and accepted in the light of an absolute antagonist to the dual system of the Man- hattan Elevated Bail road. Q. That is the public officials regarded the Manhattan as an absolute antagonist ? A. To the consummation of the dual system. Q. Opposed to it ? A. Did everything in the world to create barriers and fight it. Eight down almost to the transmission of the certificate, which I have said before in the hearing here, it became necessary to almost tran-:fer the issuance of the certificate from the owner to the lessee. As a matter of fact, if my memory serves me correctly, we were up to the point of issuing the certifi- cate, where we actually passed the resolution giving the certificate to the owner instead of to the lessee, so the work would not be delayed. I am only stating that to show how they were regarded by my predecessor as opponents of this dual system. 308 Investigation of Public Sehvice Commissions Q. And that predicated, of course, the purpose of the Manhattan Company as a company, to have its own way in the construction, in the awarding of cojitracts for construction without supervision by the Commission ? A. It was one of the elements which they had to meet ; they had to meet with stubborn resistance all along. Q. Judge McCall, I will read now from page 17 of the Broad- Avay-Fulton certificate as foUows: "Any contract, agreement or undertaking having to do with the maintenance or operation of the railroad extending beyond a period of one year or involving an expenditure of fifty thousand ($50,000) dollars (and any other contract, agreement or undertaking, having to do with the maintenance or operation of the railroads which the Subway company shall desire to make subject to the approval of the Com- mission) shall be entered into by the Subway company subject to the approval of the Commission, which approval shall be evidenced by entries in its minutes. Any payments made under any such contract as approved by the Commission shall not be subject to objection under the provisions hereinafter contained, unless the payments thereunder shall not be in accordance with the terms of such contract. The provisions of this paragraph shall also apply to all contracts, agreements, or undertakings of the character specified in this paragraph, entered into after the date hereof which are to continue in force after the beginning of operation."' Substantially the same is foimd in the Webster avenue and in the Jamaica line certificate, but is not found in the IManhattan certificate. Will you explain why it is omitted from the ilanhat- tan contract ? A. Certificate, you mean ? Q. Yes. There is not any contract there. I do not mean the contract. I mean the certificate ? A. There is not anything on the Manhattan certificate except the third line. All those that you speak about are extensions. Q. ISTo. I am speaking of the Broadway-Fulton, that is third tracking ? A. That is owned by the company and part of the sys- tem. You will find exceptions made where they figure alone. Q. I do, and I found so many of them it seemed desirable to have an explanation of them. A. That is an explanation. Q. It is I take it another concession to the Manhattan ? A. And was expressive of the desire to get the contracts through. Of course there could not be any such expenditures as that amount. Eepoet of Joint Legislative Committee 309 except under the coutractural exception which, they had, of not submitting their contracts. Because there was no construction on the Manhattan except third tracking, and reconstruction on the Bowery, which takes the line off the street and puts it in the road. Q. The question of compensation of course is affected by the question of the cost of maintenance and operation. The right of recapture is a feature there too, affecting the cost of maintenance and operation, and notwithstanding that fact the Commission con- ceded the right to the Manhattan Company to make expenditures for maintenance and operation by omitting to include in the cer- tificate to the Mardiattan Company, the provision which I have read, and the result of which omission leaves the Manhattan Company free to make those expenditures regardless of the ap- proval of the Commission except as it may ultimately submit its vouchers for the consideration of the Commission ? A. Wherever it has to do with third railing that is true. Mr. Lewis. — E"ow make that statement, Mr. Harkness, as to the provisions of the contract. In order to determine the rights of the companies and the city you have got to read, not only the certifi- cates but the contract for the extensions. Mr. Harkness. — Senator Lewis referred to the provision in the elevated extension certificate to the Interborough Company, and to the third-tracking and elevated extension certificates of the Xew York Municipal. The third-tracldng and elevated cer- tificates to the Xew York and Municipal Kailway corporation provided that contracts extending beyond the period of one year, and involving an expenditure of $50,000, had to be submitted to the Commission for its approval. The counsel to the Conmiission asked the liberty to point out that the Interborough certificate contained this provision, and applied not only to the elevated extensions but by the definition of the v/ords " Company Line " applied as well to the third-tracking arrangements, so long as it was operated by the Interborough Kapid Transit Company under the Manhattan lease. In other words, to get all the terms rela- tive to the operation of the third tracks it is necessary to read, not only the certificate to the Manhattan Company, but also the supplementary certificate to the Interborough Kapid Transit 310 Investigation of Public Service Commissions llr. Lewis. — Will you show me where " Company line " was defined ? The Witness. — We ought to point out to the Senator that there is a paragraph of that lease — Mr. Harkness. — For a definition of "Company line" I refer to Article XII of the Interborough extension certificate, which provides in the second paragraph: "After the beginning of operation of any part of any of the railroads, the net profits upon all elevated lines operated by the Interborough Company (the same including the railroads, the existing Manhattan railroad, and the three railroads or additional tracks authorized by a cer- tificate granted to the Manhattan Eailway Company bearing even date herewith, which taken together are referred to as company lines) in excess of the average annual net profits of the existing Manhattan railroad for the two years, one ending June 30, 1910, and the other June 30, 1911, shall be ascertained, and one- half (Yo) of the amount remaining of the said excess of net profits, after deducting therefrom the rental for additional tracks (authorized by the Commission by certificate bearing even date herewith) shall be deemed to be the compensation payable to the city by the Interborough Company (in addition to said rental) under this certificate; provided, however, that the total payment to the city under both certificates shall not be less than the amount of the aforesaid rental." Which taken together are referred to as Company lines. But a carefiil distinction is made between the use of the word " railroads," which means extension, and the use of the word " company lines," which includes the third-tracking as well as extension. Mr. Lewis. — But that does not refer to construction contracts ? Mr. Harkness. — As Judge McCall said, we were enabled to get that right as far as construction was concerned, but unable so far as third-tracking was concerned. Examination resumed by Mr. Lewis: Q. Judge McCall, I read from page 18 — still reading from page 18, as follows: " No payment, credit, compensation or con- cession, of whatsoever character, having in any way to do with Eeport of Joint Legislative Committee 311 the construction or equipment of the railroads shall be included in the actual cost, unless the Interborough Company upon making such payment, credit, compensation or concession forthwith file with the Commission a duplicate voucher, credit slip or other original evidence thereof." We do not find that provision in the Manhattan certificate, and we would be glad of any explanation of its omission. A. You will find it in the extension certificate ■ — in the clause in the exfension certificate that governs construction on those lines. By Mr. Shuster: Q. Your counsel says that this is not covered or included as part of the Company lines — this particular phrase that has been read ? A. It refers to the right to supervise — Mr. Lewis resuming: Q. ]Srow, that provision which I have read, appears in the Broadway-Fulton Street, Myrtle Avenue line certificate, but does not appear in the Manhattan certificate. Is there any good reason why it should have been omitted from the Manhattan cer- tificate? A. If that is not covered by the Interborough certifi- cate on extension, then the only reason for it is just as I have explained before, that it has to do with the third-tracking of the Manhattan elevated line, and they stood upon their rights to do that work, without submitting their contract and vouchers. Q. And that was another concession to the Manliattan Com- pany apparently then. What provision. Judge, is there to be found anj^vhere in the certificate of the Manhattan Co^mpany equivalent to this provision in the Broadway-Fulton certificate? A. There would not be a provision equivalent to that in the cer- tificate, unless it was in so many 'words. You would not find it in the Manhattan certificate unless it was embraced and covered by the certificate, and then it reverts back to the question of deter- mination on the allowances. Q. Then doesn't it follow there is no power on the part of the Commission to compel the filing of vouchers or estimates of cost as required by the Broadway-Fulton certificate? A. JSTo; that would not necessarily follow, because there would have to be a determination made on expenses, and allowance based on the determination. 312 Investigation of Public Seevice Commissions Q. That comes on the opinion of the chief engineer, rather than on the subject of the contracts ? A. He is the man to determine. Q. And from his determination the right of appeal exists? A. On every stage. Q. The Commission may appeal if it chooses ? A. That is right. Q. And was this feature of the contract one of the features to which you gave attention before you executed it ? A. Certainly; it must have been if it was in the contract. Q. Well, have you any distinct recollection ? A. No ; I cannot recall now the distinctive features of these things which I passed on. Q. Can you point out anywhere, Judge McCall, in either the contract or the certificate for the Manhattan additional construc- tion, any provision which gives to the Commission the right to object to any item of the cost of construction? A. Of the cost of construction? Q. Yes. A. Except, unless it is particularly providable by provision, it would all revert to the determination of the engineer in allowing the amount. Q. And that is the only protection that the city has or that the public has on the subject of the cost, as it is affected by the right to recapture, or affects the right to recapture ? A. On the construction of the third rail. Q. Well, now, if the engineer has the right which you suggest, will you be good enough to show us where it occurs in either the Manhattan contract or Manhattan certificate ? A. Do you want me to search through now? Mr. Harkness. — The provision referred to by Judge McOall is 'in page 23 of the Manhattan certificate and provides: "No expenditure made by the Manhattan Company, in or about the acquisition or construction of the plant and property of any of said railroads shall be included in or made a part of the actual cost of plant and structure or of equipment thereof, unless as soon as any of the railroads or any additions thereto or any equip- ment thereof or additions thereto are completed or put in opera- tion, or in respect of any thereof which may be finally determined to be subject to the provisions of this certificate under Article IV Report of Joint Legislative Committee 313 thereof, within three months after such determination, the Man- hattan Company shall present to the Commission a statement in' writing in which shall be included such expenditure, showing the actual cost of the plant and structure of each of the railroads, or of such equipment or additions thereto from time to time of the same including any such modifications, reconstructions, improvements, or betterments of said existing structures, and in case of additions the date of the making of the same. If any expenditures are incurred by the Manhattan Company in con- nection with the acquisition or construction of the plant and property of any of the railroads, or any addition thereto subse- quent to the filing of any such statement, the Manhattan Com- pany shall include such expenditures in a supplemental statement or statements to be presented to the Commission within six months after the making of such additional expenditures. If such state- ment or statements are approved by the Commission, both parties shall be estopped from raising any question that the same is the actual cost or date of presentation, the actual cost, and in case of additions the date of making the same, shall forthwith be deter- mined by arbitration as hereinafter provided in Article XIII." That is in certificate relating to Second avenue. Third avenue and Ninth avenue additional lines? Mr. Harkness. — Yes. The chairman was slightly in ei-ror when he said — By the Chairman: Why didn't you think that was good enough for the Brooklyn road? Mr. Harkness. — Because the provision in the Brooklyn road was better, and we could not drive it in these contracts. Mr. Lewis. — Where, in this matter you have read, does it appear that the engineer — Mr. Harkness. — It is not the engineer. It is lodged in the Commission subject to review by arbitration. Mr. Lewis. — Instead of the supervision by the engineer, and the passing by the engineer on the propriety of the charges, that duty devolves upon the Commission? 314 Investigation of Public Seevice Commissions ilr. Harkness. — With this difference, as I remember the pro- vision or. statement in the case of the Manhattan third-tracking certificate and the Interborough extension certificate, statemeiit of cost is to be submitted within three months after any part of the line goes into operation, and then goes to the chief engineer. In the third-tracking and certificates, the amount is determined quarterly as the work proceeds, by the engineer, subject to arbitration. Q. And that applies to maintenance and not construction ? A. Those all apply to construction and equipment. By the Chairman: When this statehient is made it is then three months after the work is all done ? Mr. Harkness. — Any time after the road goes into operation. By Chairman Thompson: That might be after the work was all done? Mr. Harkness. — Xo. It would go to operation different parts. By Chairman Thompson: They do not have to operate by any provision in this contract? Mr. Harkness. — Any time the Commission declares it ready for operation. By the Chairman : Suppose it is not ready for operation, they can make it ready all at one time. There isn't anything in this contract to make them operate ? By the Witness: Yes, there is. By the Chairman : They can build it so it is not possible to operate it. They can put. it up all at once and have it ready for operation at the same time. The question I had is this: three months after it is com- pleted then they make this statement. Now at that time they have already issued their bonds to raise the money for this work ? Eepoet of J<>int Legislative Committee 315 Mr. Lewis. — They may have. By the Chairman : And obligated the road to pay these bonds absolutely. At that time they may have issued their bonds, obligated the road to pay them and spent the money ? By the Witness: ISTot at all. You are going too fast. The proceeds of the bonds are in the hands of a trustee, who won't pay the money out until after determination is made. The trustees have something to say here. The trustees are liable to the bondholders. By the Chairman : How do they get th6 work done ? By the Witness: The work is being done. The Commission reserve a check on this under the Public Service Law. There is a trustee stands right there. Statement by Mr. Whitney. — The order of the Commission allows the issue of securities and then the proceeds are not allowed to be formally applied to the expenditures until there has been filed monthly with the Commission a statement of the actual con- struction done. That construction work is checked up by the engineers of the Commission. Mr. Lewis resuming: Q. The significant difference between the provisions of the two certificates is found in the fact that as to the Manhattan Com- pany expenditures may be made in advance of notice to the Public Service Commission, and as to the Brooklyn Rapid Transit Com- pany the language of the certificate is this : " 'No expenditure made by the Subway Company in or about the work of construc- tion of the plant and property of any of said railroads shall be included in or made a part of the actual cost of plant and struc- ture or of equipment thereof, for any purpose under this certifi- cate unless the detail plans are approved as provided in Article V of the cost of respective commodities determined as provided in this Article." The apparent situation is, and it seems that there 316 Investigation of Public' Seevice Commissions should be an explanation of it — the apparent situation is, that as to the Brooklyn Rapid Transit, no expenditure can be made with- out first securing the advance of such expenditure, the approval of the Commission, while as to the Manhattan Company and the Interborough it appears that expenditures may be made, vouchers submitted to the Commission, which may or may not approve of them, and if it declines to approve then the propriety of the expenditures is determined by arbitration? A. Always having in mind the fact that in construction work precisely the same rule obtains with the Interborough as obtains with the Brooklyn Rapid Transit and Municipal Railways Company, except there is a difference in the certificates where the Manhattan is con- cerned on third-tracking. Xow that has got to be kept sharply in mind. Q. That difference consists in the omission of the provision requiring the Manhattan to submit its proposed contracts in advance of the award thereof to the Commission for its approval, where as to the Brooklyn lines those contracts must be first sub- mitted and approved? A. And also the plan of construction. Q. Now any explanation that may be made of that situation will be welcome ? A. The explanation has been fully made as far as the Commission is concerned. Q. And I take it that that is the explanation that was made as to concessions for the purpose of getting together, the give and take proposition ? A. Of course you must always bear in mind and never lose sight of the fact that we were .dealing with two parties on the Manhattan proposition and one party as concerned in the Brooklyn. And so that there may be no erroneous impres- sion gained from any of this questioning on the contracts, there was no hope of any legislative amendment. The best proof of the efficiency of the thing is in testing the expenditures that have been made. Q. That is the light of experience ? A. It is the actual results. By Senator Mills: Q. To what extent have expenditures been checked up on the part of the Commission so far as this construction is concerned? A. There has not been a dollar of it that has not been checked up on construction. There may be some at present. Eepoet of Joint Legislative Committee 317 Mr. Lewis resuming: Q. 'Now, to take up a somewiiat different line, Judge McCall, I am reading from page 4 of the Manhattan Certificate: "Whereas, it is aflSrmed by the Manhattan Eailway Company that by virtue of certain franchises granted under the Laws of the State of ISTew York it possesses the power to construct, main- tain and operate in connection with its existing elevated railroad structures third or additional tracks over and along its said routes, but that the public interests require that a more compre- hensive express service should be provided by the Manhattan Railway Company than under its power so affirmed is specifically authorized, and that third or additional tracks as hereinafter authorized should be laid along the elevated lines of the Man- hattan Railway Company at points not specifically covered by its power so affirmed relating to additional tracks, and that the right of the Manhattan Railway to construct and maintain third or additional tracks throughout the entire route hereinafter described should be secured." Then turn over to — now, on page 6, at the top, I read : " ISTow therefore, without any prejudice to any right that may exist in the Manhattan Railway Company, to construct, maintain or operate a third or additional track, so affirmed as aforesaid, and without admitting the existence of any such right in the Manhattan Railway Company to operate its railroads as they now exist in the event that the authorizations and license granted by this certificate should be terminated as hereinafter provided, the Commission has authorized and does hereby author- ize, but subject however to the approval of the Board of Estimate and subject to the terms, conditions and requirements hereinafter set forth, the Manhattan Railway Company, as follows : " The reading of those two paragraphs, one from the recital, and one from the granting clause, indicates the existence of a claim by the Manhattan Railway Company of certain franchise rights, the validity of which apparently is not conceded by the Commis- sion. Will you explain what the situation is about that subjej_ way of intejrruption : At the time the contract came before the Committee of the Whole for approval, when, as you have testified, you understood that the Commission was prepared to approve it had the rate been agreed upon at ten per cent., or was that an open question at that time, or did you understand at that time that the rate was to be ten per cent. ? A. As I recall, I understood at that time that the amount which would be put in the contract if it were approved, would be ten per cent., and therefore I used ten per cent, in my memorandum. Q. Now, if you will continue. A. jSTow, the memorandum doubtless gives the details, but as I recall the contract, it was so drawn that Mr. Stevens was put to practically no expenses, which could not be included in the cost, as it was defined. That is, all the expenses which he incurred in connection with the work could be charged as cost. Consequently, a ten per cent., or the fifteen per cent., or any per cent, that he got over and above that, would be practically all profit to him. There might be some very small and very minor expenses which would be possibly excluded from cost, but they would be so small that practically he would get a clear ten per cent, profit upon the amount of work done, and that, as he contributed no organization, no men, no materials, no sup- plies, that an allowance of ten per cent, in addition to cost, the way the contract was drawn, was wholly unreasonable, was unfair to the city and would result in the loss of a considerable sum of money to the city annually. This is wholly aside from any 426 Investigation of Public Service Commissions objection whicli might be raised to the expenditure of funds by tbe Public Service Commission as a regulatory body of the State of I^ew York. Q. Was it your understanding, Commissioner, that Mr. Stevens was not to be required to contribute men and materials and so forth ? A. Those would be all included in cost. That is, all salaries paid to the men, materials that were furnished, would be all a part of the cost of construction. Q. Have you any further suggestion to make along that same line ? A. Well, I also refer to the fact that the contract had not been awarded publicly at — even as objectionable as that idea might be, that responsible contractors had not been asked to bid on a contract of that sort; that it had been let to Mr. Stevens apparently privately, and that no attempt, so far as I know, or so far as we knew, had been made to secure from other responsible persons a bid upon the basis of cost, the percentage of profit being varied. And it is not an uncommon thing even where a contract is prepared upon the basis of cost plus a percentage to secure bids from responsible contractors. Q. To interrupt again, did you understand that the contract had been let by the Interborough to Mr. Stevens at the time that you were considering the approval of the contract ? A. ISTo. It could not be legally. All they could do, and as I understood what had been done, was to agree with ]\Ir. Stevens, subject to the approval of the Commission, and that if the Commission approved the con- tract would be put in proper legal form and signatures attached. But, as I recall, there were no signatures attached to the form as submitted to the Commission. And, if there had been signatures attached, it would not have been a legal, binding contract without the approval of the Commission. Q. Would not have been effective ? A. ISFo. By Chairman Thompson : Q. Do you think it is in any way within the bounds of propriety for a Public Service Commission to pass on a public contract where the minds of the contracting parties have not met yet ? A. Well, if I understand you, Mr. Chairman, I think, as I under- stood it, I think the minds of the contracting parties had met — they had agreed. Repoht of Joint Legislative CoiuiiTTEE 427 Q. If they had not met, it would be an unusual thing for a Public Service Commission to pass upon something which they had not agreed upon yet ? A. Most certainly. Q. And would hardly be within the purview of the Public Service Law ? A. And the Eapid Transit Act. Q. Or any, other law? A. Yes, sir. Q. Or bounds o^ decency. A. Oh, certainly. Examination continued by Mr. Lewis : Q. Did you understand at the time that this matter came before the Committee of the Whole that the contract, if approved by the Commission at that time, would be consummated, that is, executed by the Interborough and Mr. Stevens ? A. Oh, certainly. That was distinctly my understanding. Q. ITow, let me ask you one other question, since I have inter- rupted you with that. In your consideration of the propriety of the approval of the contract, did you regard yourself as acting in your capacity as a Public Service Commissioner, or as a Eapid Transit Commissioner ? A. Well, primarily as a Eapid Transit Commissioner, although, as I said just a moment ago — primarily as a Commissioner acting under the Eapid Transit Act, because it was under the clauses of a certificate adopted under the Eapid Transit Act that we were acting. Of course similar objections lie if the contract were to be approved by the Public Service Commis- sion acting as the agent of the State, but the matter would have come before the Commission probably in a somewhat different form. That is, companies ordinarily, where they are not required to do it by the Eapid Transit Act, do not submit their contracts for construction work in advance of their execution. They may come to us later for the issuance of securities to secure money to pay obligations or to reimburse funds from which the obligations have been paid, but ordinarily they did not come to us for approval of contracts in advance of the work being done. Q. But the submission of this contract to the members of the Commission, in whatever capacity they were acting, gave notice to the members of the Commission of the proposed allowance of a commission or percentage over and above cost upon all expenses of every description, and charged the Commission as Public Service 428 Investigation of Public Service Commissions Comamriissioners -with, that knowledge, and with the duty of protect- ing the general public, regardless of the city and its interests against an unnecessary investment, thereby increasiiig the burden upon the customers or patrons of the line in the matter of rates — is that not so ? A. Yes, quite right. What I had in mind a moment ago when I said that the matter was considered primarily from the point of view of the action in the Kapid Transit Act, and as rapid transit authority, was that the same objection would lie, although perhaps of a somewhat different nature. Same objections would' lie to the capitalization, or, rather, to the expenditures of funds unnecessarily, for the production of a public utility property, because the- public would be reqtiired to pay the cost charges, and it is clearly contemplated by the Public Service Commission Law that the Public Service Commission was established partially, at least, to see that the public did not pay, either through fixed charges or pro-fits an undue amount for its service. Q. And jiast one other question. Commissioner — acting even in the capacity of rapid transit commissioner, the approval by the Commission of that contract would have operated or might have operated as an estoppel upon the Commission whenever subse- quently an application might be made for the capitalization, for the cost provided for in the contract, is that not so ?' A. Yes, and I take it that that was one of the reasons for the submission of this contract, and also for the submission, for the request for approval of the later contracts with the three companies for the third-tracking, because under the certificates, they were not obliged to submit the later contracts with the three contractors for our approval for the third-tracking. This contract had to be sub- mitted for the approval of the Commission. Could not have been legally entered into without the approval of the Commission, because it covered the extensions. They could have entered into it without the approval of the Commission, if it had related alone to third-tracking, as they did later with another contract. Q. YoTi understand that later the Interborough did enter into what is known as the Gillespie contract, without such contract hav- ing had the approval in advance of its execution by the Public Service Commission ? A. I so understand. Q. But do you a' so understand that a copy of the contract iRePOET iOF JonSTT LsGlKLATrWE CoMMBTTEE 42.9 entered into between the Interborough Comipany and the Gilles- pie Gompany was filed with the Conmnissiom, ajid notiae of its provision was thereby given to the Commission. A. I so understand. Q. And in your opinion, does that in any way tend to create an estoppel on the part 'of the Commission from refusing t© approve the capital issue based upon the cost of the comtract as awarded to the Gillespie combination? A. Well, there may be some force to that, but if I were a member of the Commission, I would throw it out if I considered it unreasonable, and fight it out. By Senator Foley : Q. Did the Commission approve of the issue of stock covering the cost of this ? A. 'No, it did not. Q. I mean the issue of the stocks and bonds? A. I don't believe they had come to it. Senator, before I ha.d left the Com- mission, for the approval of the specific items. Action had been taken back in 1913, in the spring of 1913, approving the mort- gage and approving the financial plans — approving the general terms ; but, as I recall, neither the Commission nor the chief engi- neer had, up to the time I left, approved the 10 per cent, item or any percentage in addition. I may be mistaken about that, but that is my best recollection. Q. It is not a question about the 10 per cent., but whether they had approved the securities to pay the 10 per cent., and, in addi- tion, the third-tracking? A. In a general way you could say yes. I think that action was taken in March, 1913. Examination by Mr. Thompson: Q. Was your approval made on any condition as to submitting expenditures? A. I do not recall whether there was any pro- vision in the order of the Commission at tliat time covering that point, but the point was covered, in part, at least, by the pro- visions of the certificates which required tbem to submit their expenditures for the approval of the Commission. Examination continued by Mr. Lewis: Q. That related to the extension only, did it not? A. jSTo. That related to the third-tracking. I am speaking now of the actual expenditures, counsellor, not of lhe contracts themselves. 430 Investigation of Public Seevice Commissions There is a difference as to the contracts. Of course, after you have approved a contract, every expenditure made in accordance with that contract has virtually had your approval. Q. Well, is it or is it not your understanding that the Com- mission had the right to require, under the certificate issued for the third-tracking aud the Second, Third and Ninth Avenue lines, the submission in advance of the expenditure of the items, or any proposed expenditure ? A. Yes. I think the Commission might have called for estimates, if that is what you mean. Q. But, under the terms of the certificate, did the Commission reserve that right to itself, as to the Second, Third and ISTinth Avenue lines — that is, the Manhattan certificate ? A. I think the Commission could have done that under the broad powers that the certificate reserved to it, and that would be calling, if I understand you correctly, for estimates of expenditures. In fact, I think generally estimates of expenditures were submitted, but you understand — Q. I do not refer to those so particularly. Commissioner, as I do to the character of expenditures which are specifically covered in the certificate issued to the Broadway- Fulton, for the construc- tion of the Broadway-Fulton line — in that certificate, as I recall, is found a provision which requires that before any expenditure is made, a detailed estimate and statement of the character of the expenditure, its purpose and amount, shall be submitted to and receive the approval of the Commission. Now, as to the Second, Third and Ninth Avenue elevated structure, pure and simple, third-tracking of those structures, the certificate does not contain that provision? A. No. Q. Now, was there something in the certificate authorizing the issue of securities granted by the members of the Commission acting as a Public Service Commission, which reserved to the Commission the right to scrutinize and reject, if found objec- tionable, any items of expense incurred and paid from such issue? A. I am not sure that there was in the certificate relat- ing to the issuance of bonds, but in the certificate itself items could not get into cost of construction — of course, the company could not issue securities to pay for other things, without going through a procedure which is outlined in the certificate which Eepoet of Joint Legislative Committee 431 called for the approval of the engineer and the submission to the Commission. Q. You are referring now to the certificate issued to the Man- hattan? A. Yes. Q. For third-tracking only? A. Yes. You see, there is this point which perhaps ought to be called to your attention — if a contract is submitted for approval to the Commission and is approved, and to make a concrete case of it, if that contract calls for cost plus 10 per cent, payment, the Commission could not afterwards challenge the propriety of that 10 per cent, payment, because it has given its approval morally, and I think, legally. Consequently — Q. Yes. A. Consequently we would have been virtually plac- ing beyond our reach and control that 10 per cent, item, if we had approved this contract, notwithstanding the provision in the Manhattan certificate that all items had to be submitted and approved by the Commission, and they would have said, " That is your approvval," and probably have been right, and if they had sulffliitted those items to the chief engineer, certainly the chief engineer would say, " Well, I am acting under the contract which was approved by the Commission and protected by the United States Constitution. Consequently 10 per cent, is O. K." Q. Then that would be true. Commissioner, whether the approval of the proposed contract was executed by the Commis- sioners acting as the rapid transit commission or as a public serv- ice commission, would it not — you would be bound by the knowledge? A. Yes. Although the point might be raised that the parties were entirely separate and some combination presented a contract for the approval of the Commission that was outside of our functions. Q. But the question of the Rapid Transit Commission and Public Service Commission having the same knowledge of the terms of the contract, conveying to the members of the Commis- sion, as Rapid Transit Commission, would be imputed to the mem- bers of the Public Service Commission, would it not ? A. Quite true. Q. Now, will you proceed, Mr. Commissioner, as to your :analysis of the memorandum which you filed ? A. Well, the next 432 Investigation of Public Service Commissions point, or one of the points, that I called to the attention of the Commission, was that under such a form of contract there is no incentive for economy or care upon the paii; of the person who secures the contract. That is, he gets, he is reimbursed for all expenditures, and, indeed, his 10 per cent, increases with the increase of cost. Q. Then it is really to his advantage to make the work cost as much as possible ? A. It is. Under this one contract to make the work cost as much as he can, and that consequently there has been removed one of the great incentives in all construction work, and without that incentive the form of contract is as favorable to large expense, to waste, even to delay, and tends to irresponsibility and general dissatisfaction. Q. And ultimately to an increased burden upon the traveling public? A. Yes, and the taxpayers of the City of New York. Both of them are interested in this question. Q. Both as taxpayers and as patrons of the lines ? A. Precisely. I think I referred to the electrification of the Third Avenue line, the surface line which was done under this plan of cost plus per- centage. And it is well known that the expense incurred was tre- mendous ; that it was one of the factors for throwing the IMetro- politan system into the hands of the receivers and it is one of the burdens under which the road still labors. And with that con- crete instance before us, of rather recent time, and with the incen- tives in the case of the Third Avenue line, which did not exist in the case of the elevated line, it was extremely unwise for the Com- mission to approve of a contract of this sort. Q. You may proceed. A. Then I also suggested that if there was any difficulty in securing one person who would undertake to do all of this work, and for other reasons, the thing to do was to break the work up into four or five sections and to allow diii'erent con- tractors to bid on it just as we have done with subway work, and just as the company has done with other work. Q. Was any such difficulty anticipated, Commissioner, do yon know ? A. I don't believe I understand your question. Difficulty in getting one contractor? Q. To do the work — because, I suppose, of the magnitude of the proposition, was that the idea ? A. Yes, but that is more or less Repqet of Joint Legislative Committee 433 theoretical, as I feel, because there are many persons, many firms, that will take contracts of this size. It is a large contract, but not uniicard o£ Q. What do you estimate, if you made any estimate, what was the estimate in your mind of the probable cost of this work ? A. Why, if I recall, it was between twenty-five and thirty million dol- lars for the third-tracking, and for the extension. Q. Aggregate ? A. Yes, about that. Then I also raised the ques- tion — asked why the Interborough Company did not do the work itself directly by employing its men, purchasing its material and performing the work and doing it, therefore, at actual cost and saving 10 or 15 per cent., whatever it might be. Q. They already had an organization and all ready for that purpose ? A. In fact, they have a subsidiary construction com- pany which has obtained work from the Public Service Commis- sion in open "bidding, and they could either have done it themselves with tkeir own organization, or they could have done it through the subsidiary and saved the percentage. Q. Do you happen to know the name of that subsidiary com- pany. Commissioner ? It is not important, but I thought it might be well to have it on the record, if you know the name. A. I think the Rapid Transit Construction Company. Of course, there would be several advantages from the point of view of cost, if done that way, because with the large amount of material and supplies which the Interborough Company would be purchasing, it could probably secure the supplies at as low and perhaps a lower figure than some one on the outside could do. Now, I also sug- gested that if tlie engineers of the Interborough Company were so swamped with work that they could not take on this, that it would be perfectly easy to hire a competent engineer and pay him a salary, that it would not be necessary to pay at the rate of a mil- lion and a quarter, or a million and a half dollars a year, in order to get a man to do it. Q. Was it ever suggested to you that the only purpose of this contract was to enable the employment of Mr. Stevens, nominally under the contract, but really as the engineer to have charge of the work under the terms of the contract ? A. I don't believe I under- stand your question. 4:34 IxVESTIGATION OF PuBLIC SeEVICE COMMISSIONS Q. (Question repeated.) Was it ever suggested to you that the only purpose of this contract was to enable the employment of Mr. Stevens, nominally under the contract, but really as the engineer to have charge of the v7ork under the terms of the contract? A, Well, the excuse that v^as offered was that they needed a high-class, competent engineer, and that by this means they could secure the services of Mr. Stevens, and that 10 per cent, was a fair allow- ance. But, as I said a moment ago, when you look over the con- tract, and see that it gets practically everything under cost, or the ■words are used in the contract which mean cost, the 10 per cent. which he gets which would amount to from two million and a half to three millions of dollars, assuming that is the correct figure for the cost, and assuming that he will do it in two years, and the company said it could be done in eighteeen months, meant that he would get from a million and a quarter to a million and a half dollars a year for the work, and out of that he would have unim- portant expenses to pay, and it goes without saying that services of Mr. Stevens or any other competent man could be secured at a considerably less sum. By Chairman Thompson: Q. Than a million and a quarter a year, even in New York City ? A. Yes ; even in ]N"ew York City. By Mr. Lewis: Would you prefer to come back this afternoon, or would you prefer to continue now? The Witness. — Doesn't make any difference to me. Examination continued by Mr. Lewis : Q. Have you any further suggestions ? A. I also suggested that under this arrangement the control over the expenditures them- ■ selves would not be as complete as if the work were done by the Interborough Company because the control over the Interborough Company as a public service corporation, and as a party to the contract, was complete, practically complete, at least, and that it would be possible to get at the records and what had been done, what expenditures had been made, and the contracts and every- thing of that sort, whereas with a sub-contractor, with individuals Eepoet of Joint Legislative Committee 435 working separately under this form of contract, it might be exceed- ingly difficult, and they might claim with success that the Com- mission had not the jurisdiction over him and over his sub-con- tractors that it had under the certificate over the Interborough Company itself. And consequently, the Commission would find itself, the engineering department, would find extreme difaculfy in checking up the expenditures to determine that they had actually been made, and that they were reasonable and proper under the contract, where it would not have so much difficulty under work being done by the Interborough Company itself directly. "Well, in glancing this over, I see that I refer to a number of clauses in the contract which in my opinion were loosely drawn, and that the contract was so drawn that the contractor could do practically everything, buy equipment, for instance, which the Interborough Company could buy just as well from a manufacturer as he could buy, and that it might even extend to the operation of the road, although perhaps that was a rather extreme interpretation. But the contract was in many ways loosely drawn. By Mr. Lewis: I think perhaps, if it is agreeable. Commissioner, we will suspend now until two o'clock. The Chairman. — If there is no objection, we will suspend until two o'clock. Whereupon, The Commission took a recess until 2^ p. m. AFTEE^TQON SESSION The Committee reconvened at 2 f. m. Me. Maltbie, recalled. Examination continued by Mr. Lewis : Q. Commissioner, in the examination of the proposed form of contract, between the Interborough Company and Stevens, did you confer with any of the members of the Board of Estimate and Apportionment in connection with it? A. I don't know 436 Investigatiow of Public Service Oommissions that I did before the memorandum ^as completed, hut if I did not before the memorandum was completed, I did afterward, and it maj have been before. Q. With which members? A. I think with — certainly with Mr. McAneny. Q, You discussed the matter with Mr. MeAneny, .did you? A. Oh, yes. Q. And tell us what points you discussed with Ihim, if any par- ticular points. A. Well, somewhat on the objecti©ns to the cfln- tract. That is, the various objecftions in (detail that might be raised to it, but soon found that we were both va^greed as to the objections to it, and the inadvisability of having the .coaitpaet dis- approved or at least no action taken upon it — that is, we aoroed that the Commission ought not to improve the contsraet. And I think our discussions related moTe as to how its .approval -eaiald be avoided or prevented. Q. In those discussions, was ithere anything .said .cm the sub- ject of opposition on the part of :any of the directors of the Inter- borough to the approval of the contract ? A. Well, if I recall correctly, Mr. McAneny said that he had been informed about the proposal and its features, and informatitm liad come from some one prominently connected with "the company. I do iicrt recall that he said that a director of the company had spofcrn to him. I do not recall that he said that it was or was not a direotoir of the company. Q. Did he tell you the character of the information that bad come to him? A. AVell, in a general way that he was faiailiar with the proposition, its general terms, and that there was some opposition to it in the company itself. Q. Did he tell you which, if any, of the directors opposed its approval ? A. Xo, ho did not. He did not say *&mt 'be had re- ceived liis information from a director. Q. Did he tell you Avhether or not any individual had given him the reasons why he opposed the approval by the Conunissioii? A. That is, the person who spoke to him opposed its — Q. Yes. A. No, he did not. Q. Did you acquire any information in the course of your investigation of this proposed form of contract as to any purpose for which a fund represented by the fifteen per cent, was to be used by anyone, to whom it might be paid ? A. No definite facts. EupoET OF Joint Legislative Committee 437 Q: Well, WHS anything said to you' on that subject ? A. Some oae m the- process — I dbn't recall now who- it was that came to m-e an.d ra'ther- well, T think before I had learned of this matter coming to' the Commission officially — and stated that a contract was to come befor© the Commission which would provide for a large payment, and that he had heard the rumor that the money, at leas-l in part, was to be used to pay or adjust certain obligations that bad feeen assumed in the course of the subway negotiation in carrying through th'e subway contracts. Payments which could not appear on the — in the cost of construction, and which could not be submitted in the regular way to the Commission, and he suggested that I watch very closely for any opposition which would allow the payments of a considerable stim of money without the submission of vouchers for the precise amounts. And I remember later I also- heard' — this is pure hearsay — I said a moment ago 1 am simply answering your question in respoise to what I heard, and that some of this money was to be used to retire those obligations, Q. Did you understand the character of the obligations ? A. Wot in detail, no ; except in a general way which had been stated. Q. Well, have you stated as specifically as you can the purpose for which that money was to be used? A. The only statement that was- made to me in the course of this conversation was that it was to be used to retire or to pay off obligations that had been incurred in the execution of the contract and of the securing of the legislation which had to precede the execution of the contract. Q. And were you advised in advance of the submission of the proposed form of contract that a cost plus a percentage for profit allowance would furnish a method by which the obligations referred to could be made good or refunded ? A. I don't know whether it was in advance of submission of the contract, or after it had been submitted, but it was about that time. It was in connection with this contract. Q. It was before you prepared and submitted your memo- randum, was it, before you prepared and submitted the memo- randum? A. Of July 9th? Q. Yes, of July 9th. A. Yes, I heard it later, but it wag before the memorandum was submitted. 438 Investigation of Public Service Commissions Q. Was anything said to you by anyone as to this precise method of awarding a contract being well calculated to enable tlie payment of political obligations, or the carrying out of a gentle- man's agreement ? A. Well, it is included by the statement that I made that it had been done to provide the funds to retire obli- gations that had been incurred, and that the large amount whicli was larger than would be needed to secure the services of a com- petent engineer, was to be used for that purpose. That is the rumor. That was the story that was told me. Q. jSTow are you able to tell who made that statement to you? A. I don't recall. You understand, counsellor, that any com- missioner in that position gets a great many suggestions from various sources, and they are coming all the time, and that we do not usually remember who it is. Q. Did the suggestion appeal to you as a reasonable excuse for the framing of the contract in the way in which it was framed, reasonable explanation, instead of excuse? A. Well, if there were obligations incurred that had to be met, it would furnish a veiy good way of taking care of them. Q. Did you mention to any of the members of the Board of Estimate the fact that this suggestion had been made to you? A. I could not speak positively, but I may have mentioned it in my conversation with Mr. ]\IeAneny. It would be probable that I would, but I don't know that I did. Q. Haven't you any recollection of having mentioned that fact to Mr. McAneny ? A. Well, as I recall it, I presume I did. Q. Well, now, will you be good enough, Commissioner, to tell us as nearly as you can recollect the conversation that you had with Mr. McAneny, in which the statement was made by him that you have referred to about information having been received by him that there was opposition in the Board of Directors of the Interborough to the approval of this contract ? A. Well, I haven't said anything, and he did not say anything that would intimate, that indicated directly that it had come from the Board of Directors. Q. Well, any person who had knowledge of the fact? A. 1 went to Mr. McAneny some time last spring or summer — I don't recall — well, I probably saw him several times about the proposition, but the first time that I went to him regarding the Report of Joint Legislative Committee 439 matter, to tell him about the facts, I found that he was already familiar with them. And in the course of the conversation, he stated that he had heard of it, and heard of it from a responsible source. I can't say that Mr. McAneny ever said it was a director of the Interborough Company or an official of the Interborough Compauy, but the language he used left me with the definite impression that it was someone who was connected with the Interborough Company and in a responsible position, such as a director or an official of the company would hold. It was not simply a rumor or gossip. I do not think I ever asked him who it was. I do not recall asking him who it was. Q. He did not mention any names ? A. He did not. Q. Did he say it was more than one person that had come to him with that suggestion ? A. I don't recall that he said more than one. He may have; but certainly one. Q. The conversations that you had with Mr. McAneny, to which you have referred, were all prior to the date of the memo- randum which you filed ? A. Not all of them. Q. But, with relation to the objections to the memorandum, were they or were they not ? A. No. We had conferences after that. "We had conferences, I know, right up to the time that I left for my vacation that summer. I think we had some after I returned in the fall. Q. Did the Commission ever take any action officially in con- nection with the so-called Stevens contract and the memorandum so filed by you ? A. I believe not. Q. Did you have any conversation with any of the Interbor- ough Company's directors on the subject of the Stevens contract, at any time ? A. I do not recall having mentioned it or discuss- ing it with a single director. Q. Never talked with Mr. Shonts about it ? A. We may have had some words about it, but I don't recall any discussion or anything of that sort. There might have been casual references to it when we were in conference. Q. Did you make any investigation or institute an investiga- tion of any character to acquire more definite information on the subject of the proposition of refunding or creating the fund from which payments could be made ? A. Why, I made some inquiry 440 Investigation of Pubeio She,vicb CoanmissiONS as I went abont from time to time to see if anyone knew anything about them. Q. What did you learn from such inquiry? A. I did not leam anything definite. Q. Did you have any opinion at the time as to the truth of this story that came to you in the way that you have suggested ? A. I may have had. Q'. Can you tell us what it was ? A. Well,, it was that it was at least a possible way, if there were such oblagations, of paying them off, without submitting any voucher, and getting them into the cost of construction, sO' that they would be paid and become a part of the cost of the road. By Chairman Thompson: Q. Could you think of any other reason for the leaving of the certificate to the Manhattan Railroad Company -in the way that it was left, only the making of this Stevens contract that was pre- f:ented for approval ? A. The reasons that were urged in the con- ference on that point, back before the certificates were adopted, were these, and they apply to the third-tracking only — they do not apply to extensions at all. Q. ISTo. I understand they only apply to the third-tracking. A. The reasons urged were that it was the third-tracking of an existing line ; that it would be dangerous work ; that it would be (liflicult work; that the company could, being the operator of the i-oad and feeling and having the legal responsibility for its safe operation, wotUd be more concerned in the construction of the third tracks in a safe way than would anyone — than anyone could possibly be — more so than any contractor could be, and, consequently, it should be left so that the work could be done by the Interborough Company. And, of course, if the Interborongh Company did the work, there would be no contract for approval, Ijecause it would do the work and submit the bills for the actual cost to the Commission, and that it would be impracticable also to have a public letting of the work for the third-tracking and the awarding of that work to the lowest bidder, a man who might not be responsible, or certainly a man who might not take as> great care in the constiiiction of these additional tracks as the company Eepoet of Joint Legislative Committee 441 itself would, and consequently that a public letting contract sys- tem was an impracticable one and ought not to be forced upon the company. And, further, that if the company did the work itself, as was contemplated at that time, so far as I learned in the conferences, at least, that if the company did the work itself, the Commission would have access to all of the vouchers, to all of the expenses ; they could be examined by the accountants or the engineers of the Commission, could be checked up, and conse- quently there was no necessity of having the same provision upon this point that was found in the certificate for the extensions. Those were the arguments that were urged by the Interborough Company for the provision in the Manhattan certificate. Q. Yes, and all those arguments were equally applicable to the Brookh-n line where the certificatpv'; did not make that omission ? A. I so consider. Q. And so, when I ask you in the light of the stuff in the Manhattan certificate, and in the light of the submission of this Stevens contract, asked by them, could you think of any other reason than the rumor that you heard ? A. I don't know that I can think of any. Examination corjtinued by Mr. Lewis : Q. You suggested in one of your answers that you had heard 'gossip to the effect tliat there had been expenditures in the matter of obtaining legislation — did yon know of any legislation that had been obtained in which such expenditures might have been incurred? A. Well, there was legislation obtained prior to the signing of the subway contracts ar.d the certificates. Q. What legislation was that ? A. Well, I can't recall it now, but Mr. HarknesR— - By Mr. Harkness: There was legislation obtained in 1912. There was legislation ■obtained in practically every year. Q. Well, do you know of any legislation obtained in 1912, in any of the subway contracts ? A. Well, I can't tell you now. But there were amendments to the Rapid Transit Act obtained. Whether they were obtained — 1 think they were obtained in ]9il2, or the contracts would not have been possible. 442 Investigation of Public Seevice Commissions Q. Do you remember the so-called Wagner legislation, Com- missioner ? A. No, I don't recall it by that name. That was a matter that I had very little — practically nothing to do with. Q. You are sure that subject of legislation was mentioned by you in the gossip that you heard, or in the talk that came? A. Yes. By Mr. Whitney : I did not hear him say that in the statement, that the rumor was that expenditures were made for legislation. A. In connec- tion with legislation. Q. How many conferences did you have with Mr. McAneny on this subject, have you any recollection? A. I could not recall the number. There were several. Q. There were several? A. Yes. Q. And do you know whether he made any investigation to ascertain for the purpose of informing himself as to the truth of this statement that was coming to him? A. I do not. Q. Well, now. Commissioner, you were a member of the Com- mission when the application was made for the approval of the so-called Gillespie contract, covering extensions and additions, were you not ? A. Yes. Q. That was substantially a year later, was it not ? A. Yes, a year later — a year after my memorandum was filed, do you mean? Q. Yes. A. It was some time later. I don't recall whether it was a year or not. Q. I show the witness document entitled " In the matter of the application of Interborough Rapid Transit Company for per- mission to enter into a contract for the construction and equip- ment of the railroad, described in the certificate of March 19, 1913, for the Webster and other lines, addressed to the Public Service Commission of the First District, and signed by the Inter- borough Rapid Transit Company by T. P. Shonts, President." Do you recall the presentation of that application to your Com- mission ? A. I recall that such an application was made. Q. Was there subinitted with that communication, a formal contract, do you know ? A. Well, there was a form of contract. Whether it came at that time or earlier, I can't say. There was a form of contract under consideration about that time. Ebpoet of Joint Legislative Committee 443 Q. I show the witness docket No. 6418, movement No. 24, offered in evidence yesterday, for his inspection. Do you find in that document, Commissioner, proposed form of Gillespie con- tract ? A. I do not find the form of contract. Q. Well, from the application which you examined a moment ago, file No. 6418, it appears that a communication from the Interborough Company states — rather, requests, permission of the Commission to enter into a contract with the said contractor upon the same terms and conditions except as to compensation which shall be fixed by the Commission as aforesaid, as the exist- ing contract of February 13, 1914, so far as the same may be applicable to extension work. I show the witness a document entitled " Interborough Rapid Transit Company and the Terry & Tench Company, Incorporated, the Snare & Triest Company, and the T. A. Gillespie Company, for the constructioji of additional tracks, etc., Manhattan Elevated Lines, dated February 13, 1914." That contract, I take it, had been approved prior to the presenta- tion of the application of July 14, 1914, after consideration by the Commission, had it not? A. No, I don't understand that that contract that you have handed me had been approved by the Com- mission at all. Q. Doesn't it provide for extensions ? A. I shall have to look at it. Q. That is the additional tracks ? A. Yes, that is my under- standing. Q. Did you know of the existence of this contract in the files of the Commission \ A. I think I had a copy of that contract when I was considering the proposition made by the company to which you have just referred. Q. "Well, did you know that that contract had been filed with the Commission prior to the application of July 14, 1914? A. T don't recall whether at that time I knew or whether it had been filed after that letter. I knew that there was some such contract in operation. Q. Do you know — A. That is, I know i1 from the newspaper reports. ■ Q. Did you know of the terms and provisions of that contract prior to the time it was submitted, in connection with the applica- tion of the company ? A. I may have known it in general terms. 444 Investigation of Public Seevice Commissions It w-as reported that they had — made a contract with the Inter- ■foorough Company on the basis of cost pkis a percentage, but 1 did not know the details. Q. Did you know the rate of percentage? A. I think I ktie^ at that time, or I had heard the report that it was cost plus ten per cent ISTot in the terms of the Stevens contract, but somewluii modified of the Stevens contract. It may have been twelve and a half. It may have been fifteen. Q. Will you examine the contract and see what it says on the subject of percentage? You will find in section 5, page 2 — A. Yes, I have it. It says " The actual necessary cost hereinafter specified incurred by the contractor except as hereinafter pro- vided in addition thereto, a sum equal to fifteen per cent." Q. Will you tell us, Mr. Commissioner, what occurred afja* the presentation of the application referred to, as you recalll This document file there contains a history of what took place, and that may refresh your recollection more exactly. A. Accord- ing to the rapid transit file 6418, the Secretary of the Commissioii tiansf erred under date of July 15th a copy of the application for his opinion to Mr. Coleman, the counsel to the Commission, and under same date transferred a copy to Chief Engineer Craven for his attention and prompt report. Q. WTiat subsequently occurred? A. According to that same file, this was submitted to the Public Service Commission, under date of July 16, 1914. Q. In addition to the file number, you want to give the move- ment number, do you not, Mr. Commissioner? A. Movement number, Xo. 15. It says, "A discussion took place among tbe Commissioners, and at Commissioner Maltbie's request, a further consideration of the matter was laid over for one week." Q. Is that your recollection of what took place at that time? A. Yes; I would say it agreed with my recollection. Q. What ultimately was done with that application. Com- missioner ? A. There is nothing in that. Q. In the other file I think you will find what you want. A. There is a stamp entry in the same file, which indicates that this application was again submitted to the Public Service Commis- sion upon July 23, 1914, and bears the entry " Consideration laid over." The other file which you have handed me which bears the Eepoet of Joint Legisilative Committee 445 number " B. E. T. 6418, movement No. 24," contains certain other papers. But, so far as — it contains certain other papers and a record of what took place in the Commission. That is a quotation from the minutes. Q. It all appears on the first three or four pages of the min- utes ? A. The action of the Commission does, yes. Q. So that accords with your recollection as to what was done there? A. I thini; that is a correct copy. It does not contain a reference to the discussions then. Q. Now, will you state what final action was taken so it will appear in the testimony after refreshing your recollection? A. As I recall it, even without referring to this, the action taken was, to disapprove the contracts so far as the elevated extensions were concerned, but to permit the company to make a contract similar to the one which they had asked for approval for the whole work, for merely the connecting work between the ends of the present elevated lines, and the extensions which were to be constructed. Q. What was the magnitude of those connections for which approval was given ? A. Oh,, as we discussed it, while there were no plans definitely before us, they were unimportant. Simply connecting between the end of one line and the beginning of the other line. Q. Involve large or small expenditures ? A. Oh, it would be a small expenditure. Q. And the final action of the Commission was to approve the application so far as it related to the connections, and disapprove for the construction of the additions ? A. Yes. Q. And that approval was on the basis of cost plus fifteen per cent, as to the extensions only? A. Well, I think they agreed except as to the percentage. The percentage made in their letter was that the percentage — Q. Doesn't the contract say fifteen per cent? A. Yes; but their letter states that the contract proposed, that is, their original proposition was that the form of contract to be the same except that the percentage was to be twelve and a half or not to exceed twelve and a half.. Q. Did it approve on the agreement that the percentage was to be twelve and a half ? A, That is my recollection. 446 Investigation of Public Seevicb Commissions By Chairman Thompson: What is that, the extension? By Mr. Lewis : Q. The extensions. A. I should so interpret the action here taken. By Chairman Thompson: Q. I suppose the extensions were approved on a bid propo- sition? A. The connections. These were small contracts. You understand that in this case there was no specific form of contract submitted. It was simply a contract that you have handed me a few moments ago as to type — a form. Examination resumed by Mr. Lewis : Q. As the type of contract ? A. Yes. Q. And that was to be on the same terms and conditions except as to compensation? Now, did the Commission take any action as to the amount of compensation that was to be fixed, extended for the construction of the connections. A. I recall none except that when we had agreed to throw out the extensions, there was considerable discussion as to the additions. And I had opposed the plan from the start, but said that if they were going to limit it merely to the connections, that it was such a small matter that I had no special objection; that the amount of money was not large, and while the principle was not right, as far as I was con- cerned, if they would throw out the rest, I was willing to let the tail go with the hide and let them have the extensions on that basis. Q. They already had a contract for the third-tracking in existence and which was in process of construction? A. Yes. Q. And did you understand that at that time, that they were paying fifteen per cent, above cost on the third-tracking? A. I presume so. I must have, in fact. Q. And that the approval of these connections, carrying with it twelve and a half or fifteen per cent., was of so small conse- quence in amount, as to be not worth while objecting to? A. Especially having secured the annulment of the contract for the extensions, which was the big thing. Eepoet of Joint Legislative Committee 447 Q. Now, you said that you had opposed the approval of the contract for the additions — will you tell us the reasons for your opposition ? A. I filed a memorandum on that point some time in the fall of 1914. By ilr. Lewis : Have you that? He says he filed a memorandum showing his position. (Memorandum produced by Mr. Schuster.) A. Yes, it is in the file. Q. ISTow, from your memorandum which you filed at the time, will you refresh your recollection and state the grounds of your opposition to the approval of the contract for the additions which you have testified you opposed- — extensions and additions. A. Do you care to have me go into a review of the facts ? I did that in the opinion. Q. All I ask is that you set forth concisely the reasons which led you to oppose the approval of that contract. A. Well, the memo- randum, of course, contains them in full. But, in the first place, as I did in the memorandum, I wish to refer to action taken by the Commission in the trial of 1913. By Mr. Schuster : Q. Do you refer to the time of the dual contracts? A. No. The action to which I refer was a resolution or a communication which was adopted by the Commission, and which the secretary sent to the company as a result of that action, which reads as fol- lows : " With reference to the provisions of the Rapid Transit contracts and certificates issued under date of March 19, 1913, requiring submission of contracts to the Commission for its approval, I am requested to inform you that the Commission sug- gests that in order that there may be no further delay in construc- tion-equipment that you submit at the earliest possible moment, any section or portion of the construction or equipment which you believe it is impracticable to put up for public bidding, with your reasons for such belief." JSTow, one of the reasons for the approval of the Stevens contract which was presented by the company — M8 Investigation of Public Seevige Commissions ExamixLation resumed by Mr. Lewis: Q. Rejection, you mean — you said adoption. A. Approval. So that the work could proceed rapidly and aidvantageously. Q. That was a reason urged by the Interborough Company, was it not ? A. It was. So as nothing further had been done or submitted, it occurred to me that notice should be sent to the companies specifically stating the position of the Commission to the effect that it did not favor the letting of contracts for public bidding and if there were any reasons such as had been intimated to us why it could not be done they ought to submit and file at once so we might know those reasons and could take them up. In other words, that having given them warning, we could be in the position to say to them if they came in with the contract later, and urged' that it ought to be done immediately and promply, we could say we believed in public bidding and public letting- — Ey Chairman Thompson: AYe will take a short recess, in recognition of the fact that we have Lieutenant-Governor Wagner with us. By Lieutenant-Governor Wagner: You may proceed, Mr. Chairman. By Chairman Thompson: Inasmuch as the gentleman displays more modesty than I ever heard before from him, we will now proceed and pay no more atten- tion to him. The Witness. — This notice was sent to the company, and in my memorandum I called attention to the fact, and consequently as they had waited for so long a time after our notice had been sent before sending any communication to us, it was impossible for them, or illogical for them to claim that this contract should be approved, or that this course should receive the sanction of the Commission on the grounds of haste. Consequently that argu- ment could not be considered. I called attention to the fact that it was over a year after the communication had been received before they submitted for our approval, or submitted this proposition in relation to the extensions of the lines. Eepokt or Joint Legislative Committee 449 Q. That was one of the reasons why you objected to the approval of the contract at that time, was it 'i A. Yes. Q. 'Now, will you state any others ? A. I also called attention to the fact, and quoted, in fact, Mr. Craven's report, and also the report of the counsel to the Commission, Mr. Coleman, both of which did not approve the proposition. Q. Their reports as submitted specifically recommend or disap- prove of the application ? A. Well, that was the substance of them. I will glance them over and see if they used specific language. Perhaps I should quote Mr. Craven's langniage. Q. Perhaps it would be well for you. A. That best sets forth his point of view. " In conclusion, therefore, for the reason cited above, I am unable to find any sufficient reason why the Commis- sion should not adhere to its policy already established in the case of the ]^. Y. M. Ry. Corp. and New York Municipal Railway Corporation — contracts for similar work, and require the Inter- borough Company to invite competitive bids for constructing and equipping the extension and connecting lines referred to in their application." Mr. Coleman said, " I agree with the views expressed by the Chief Engineer. I might add, in addition, that some time ago, complete forms of unit price contracts for competitive bidding on these lines were submitted to and revised by this department, and returned to the Interborough Rapid Transit Company." Then I proceeded to discuss somewhat the practice of letting large con- tracts by public bidding, and pointed out that that was a practice which had been followed by the Commission and had been found entirely practicable in its extension of the subway lines, both underground and elevated, and there was no reason apparent why the same plan could not be followed by the Interborough Com- pany in the extensions of its elevated lines. That is, having noth- ing to do with the operation of the existing roads, being entirely separate and consequently having no features which could be urged by the company as the company had urged in the case of the ele- vated tracks. And I also — (At this time Senator Lawson assumed the Chair.) — I discussed the reasons which had been presented by the Interborough Company for the approval of the proposition, and I Vol. 1 — 15 450 Investigation of Public Seevice Commissions don't know that it is necessary to go over tliat in detail. But my conclusions were that there was no reason which they had urged which was adequate to justify such a contract in the case of exten- sions. I also pointed out that the question of delay could not be charged against the Commission. If it disapproved the plan because the company had not yet obtained the necessary consents, property owners' consents, or, in lieu thereof, the Appellate Divi- sion. Consequently if the contracts were approved at that time, they could not be expressive with the construction of the laws. Q. For that reason, that the property owner consents had not been obtained? A. I presume so; yes. Q. Or, in lieu thereof, the approvg-l of the Appellate Division? A. Yes; precisely. Except, I think, in the case of the Queens- boro Bridge extension; I think they had the consent for that line, but that was a minor matter. Then I made the point that if these three contractors were able to do the work more cheaply than anyone else, upon public bidding, their bids would be the lowest bids. Because, if they had the facilities, if they had the experience, if they had the ability, then their bids would be lower than anyone else, and they could be awarded the contract, and I said that my objections did not run against these contract- ors because, if they were the lowest contractors, when it came to accept bids upon this work, unless something developed, I would vote for the award to these persons as the lowest bidders. Q. Have you anything further to suggest in the way of reasons for your opposition ? A. Well, I discussed also the question of the city's interest in this matter, which is the same that I have spoken of in connection with the Stevens contract. Q. And did you also have in mind and give expression to the view that the method proposed would have an effect upon the question of rates that would be charged or which might be charged? A. I think I spoke both of the effect upon the city financially and effect upon the public as well. Q. And your attitude was from the fact that you regarded yourself not only as a Eapid Transit Commissioner, but as a Public Service Commissioner of the State of New York ? A. Yes; precisely. I see here that I called attention not only to the effect upon the financial returns to the city, but to the amount which. Eepoet of Joint Legislative CoMiiiTTEE 451 the city would have to pay in the event of recapture. I do not think I mentioned that point in speaking of the Stevens contract. I am quite sure I spoke of that in the memorandum. But, as my eye runs over the heading here, of course, any increase in the con- struction over and above what was reasonable and necessary, would have to be paid by the city in the case the city took over these lines at some future time. I think those are the principal points covered in the memorandum. Q. Well, now, from your knowledge of the proposed form of contract between the Interborough and Mr. Stevens, which was not approved by the Public Service (.Commission, and your knowl- edge of the contract which was actually entered into between the Interborough and the Gillespie gToup of contractors, ai'e you able to point out to the Committee the differences between those contracts < A. I could not do that off-hand. Q. Have you ever made any examination of those contracts with the pui'pose of discovering the differences ? A. I think at the time that I prepared the memorandum on the Gillespie con- tracts, which was in the summer and fall of 191-i, I looked over both of them, particularly the language, which has to do with defining cost, and what the percentage would cover. I believe I have in my papers somewhere a comparison of the two contracts. Q. Do you recall in a general way the net result of your inves- tigation of that part of the dual contract ? A. My recollection is hazy on the details, but generally they were similar except, as I recall, that in the case of the Gillespie Company and Terry & Trench, and Snare & Triest contracts, there is also a little limita- tion upon which could be included any cost, and that the pro- visions of the contract are not quite so generous in their terms as the provisions were in the Stevens contract. That is a general recollection which I have. Q. Does that suggest to your mind a reason for the allowance of 15 per cent, commission over the cost in the Gillespie con- tract as against the proposed 10 or l^l/o per cent, in the Stevens contract ? A. It might be a reason. Q. What do you know, Commissioner, of the three concerns, Terry & Tench Company, Snare & Triest Company, and T. A. Gillespie Company ? A. Why, in the case of two of them, at 452 Investigation of Public Service Commissions least, Terry & Tench and Snare & Triest, as I recall, examina- tions were made by the chief engineer prior to an award of con- tracts which they have of rapid transit work, and it was on those reports, which were favorable to them as far as their financial and engineering standing was concerned, that the Commission has approved contracts to them. Q. Had the Gillespie Company ever done any work under contracts awarded by the Commissioner ? A. My recollection is that it had not, but I am not positive of that. Q. Had the Terry & Tench Company ? A. I thought so. Q. You said they had investigated to ascertain. A. I thought so. If upon careful examination it would be found they had not, I would not be surprised, because my recollection is not positive. Q. Your recollection is that they had ? A. My recollection is that they had. Q. Had the Snare & Triest Company ? A. Yes. Q. Which of the three concerns was regarded by you as the largest and best equipped for the performance of the contract — have you any opinion to express ? A. I don't recall having formed an opinion. Q. Have you any opinion now on that subject, except what you know of your general knowledge? A. l^o. I never differen- tiated on their ability. Of course, the way the question came before the Commission would be on the approval of the contract, and an investigation would be made to determine their financial ability and ability from an engineering point of view to carry out the contracts. These investigations would be made by the engi- neering department, and the report of their finance would be made to the Commission. Q. I call the attention of the witness to paragraph 50 on page 18, which reads as follows : "All the work hereunder to be done by the contractor shall be done under the guidance, supervision and administration of the T. A. Gillespie Company, which shall, from time to time, present the estimates and receive all payments due the contractor hereunder." I notice that the T. A. Gillespie Company is named after in the contract — ■ in the body of the contract, after the Terry & Tench Company, and also after the Snare & Triest Company, and I notice also that the Terry & Repoet of Joint Legislative Committee 453 Tench Company sign the contract first in order, the Snare & Triest Company second in order, and the T. A. Gillespie Com- pany third in order. Do you know any reason for the provision which I have quoted from page 18 'I A, I do not. Q. I call the attention of the witness to paragraph 8, at the bottom of page 3, which I read: "On or about the 15th day of each month, ninety per centum of the amount appearing due by such estimates, together with the contractor's percentage thereof, shall be paid to the contractor in cash at the office of the company, upon delivery of receipts satisfactory to the company." Eeading that paragraph 50, in connection with paragxaph — read- ing that paragraph S in connection with paragraph 50, on page 18, I ask the -^vithess, do you know of any reason why this provision was made ? A. That is provision 8 ? Q. Yes ; provision 8. A. I know of no reason. Q. In reference to the payments being made in cash, sup- plemented by provision 50, providing that all such payments shall be made to the T. A. Gillespie Company ? A. I don't know why that provision was inserted. Q. Are those provisions usual and ordinary in such contracts? A. Not the payments in cash. Q. Did you, in your examination of the contract prior to the time that you submitted a memorandum in opposition to its approval, notice the fact that paragraph 8, on page 3, calls for the payment in cash, monthly payments, and that paragraph 50, on page 18, provides that all payments shall be made to the T. A. Gillespie Company? A. I presume I did. I went over the contract rather carefully. Q. Have you any recollection as to what impression that made upon your mind, if any, at that time A. Well, the paragraph 8 is a very unusual provision in a contract. There are other fea- tures of the contract that are very imusual, too, but that is a most unusual one. (At this time Senator Thompson returned to the Chair. ) Q. Well now, Commissioner, is this the fact, that a proposed form of contract between the Interborough company and Mr. John F. Stevens was submitted for the approval of the Commission 454 Investigation of Public Service Commissions which provided for the doing of the work and the furnishing of the materials by Mr. Stevens for the Interborough companies, and that that proposed form of contract was not approved by the Commission, and that subsequently a contract was entered into between the G-illespie companies, so-called, for the doing of sub- stantially the same work upon substantially the same terms, except that the percentage to be paid over and above cost was greater than that asked for in the Stevens contract, and in relation to the proposed Stevens contract, and that the work is now progress- ing under the so-called Gillespie contract without ever having received the approval of the Public Service Commission, except as to the connections referred to in your testimony ? A. I believe that is a correct statement. It is rather long, but I think that is correct. There is one thing that just occurs to me, counsellor, that perhaps I should call your attention to. I did not mention it in speaking of those — the objections to the Gillespie contract. Of course you have the entire memorandum, so you can refer to it. But at the time that was before the Commission, the engineers of the Commission, and, I believe, in conjunction with the legal department of the Commission, had been working with the Interborough company, and had substantially agreed upon a form of contract for the public letting which, in my mind, was strong evidence that it was perfectly practical to work out a scheme of public letting, and the fact that they had agreed upon the form showed it could be done and could be done without any delay. Q. ISTotwithstanding that fact, it was not done — notwithstand- ing the fact that they had agreed upon a form ? A. It had not been done up to that time. It was done later, as to the extension, because the Commission refused its approval. Q. Did you at the time you examined the provisions of the proposed form of contract with Mr. Stevens, did you observe that paragraph 9 provides as follows: "On or about the 15th daj of each month, ninety per centum of the amount appearing due by such estimates, together with the contractor's percenta2;e thereon, shall be paid to the contractor in cash at the office of the company upon delivery of receipts satisfactory to the company? A. T think you will find a reference to that in my memorandum — I believe so. Eepoet of Joint Legislative Committee 455 Q. Did you regard that at the time that you found that in the proposed contract as a significant — as having any significance 1 A. Well, it is a very unusual provision, and I don't recall ever having seen it in a contract before. Payments are not ordinarily made in cash and are not ordinarily made in such large amounts. Q. I show the witness printed copy of what appears to be an order consenting to mortgage and of issuance of bonds thereunder to the amount of $160,957,000, entitled "In the matter of the application of Interboroug-h Rapid Transit Company for authority to execute its proposed first refunding mortgage, securing its gold bonds and for the consent of the Commission to the issuance of certain bonds thereunder." Will you be good enough. Com- missioner, to state what bonds were presently authorized to be issued under the provisions of that order? A. If I understand your question, .the amount is $160,957,000. Q. That is the total authorization ? A. Yes. Q. "Now, does that provide for the issue at the time this order was granted, for the immediate issue of some portion of those bonds — there were some of them that were to be issued for refunding purposes, were there not? A. But I did not quite understand your question; yes; do you wish those amounts? Q. Yes, if you will state it, I would like it for the record. A. Thirty-four million five hundred forty thousand and eight hundred dollars in face value of bonds to discharge or refund the bonds of the Interborough company issued under the mortgage of 1907 — part being for principal and part being for premium of 5 per cent. Q. Thirty-four million — A. Thirty-four million five hun- dred forty thousand and eight hundred dollars. Fifteen million dollars to discharge or refund the renewal notes of the company, dated 1913. Q. Those were issuable at the time, were they? A. Yes. They could be issued right away. And the other bonds and notes could have been paid off so that these bonds and notes would hava taken the place of the other bonds and notes in the balance sheets of the company. Well, the remaining — if I understand your question correctly, the remaining bonds were to be issued in connection with the subway contracts and certificate. 456 Investigation of Public Seevice Commissions Q. As the work progressed ? A. Yes, to provide the funds as the work progressed. Q. How were those remaining bonds divided ? A. You mean for what pvirpose ? Q. For what purpose were they to be issued? A. Fifty-thxee million dollars face value, to meet the company's obligation to contribute towards the cost of rapid transit lines under contract between the Interborough Company and the city, dated March 19, 1913. Twenty-one million dollars face value to pay the cost of equipment of the Rapid Transit Railroad for initial operation. Ten million eight hundred thousand dollars to pay the cost of the plant and structure and equipment of the third-tracking. Thir- teen million one hundred and fifty-four thousand dollars to pay for the cost of the extensions and equipment thereof under the certificate of March 19, 1913, and $3,000,000 to pay for the cost of improvements, reconstructions and changes in the power house and transmission lines and electrical apparatus, for the operation on the third tracks. And $10,462,200 for discounts and expenses connected with the issuance of the bonds heretofore enumerated, making a total of $160,957,000. Q. Total of $167,000,000? A. $160,957,000. Q. ^Tqw, of that $160,000,000, $103,000,000 were for bonds, notes and contributions to the cost of the rapid transit lines, bonds and notes outstanding, and for the cost of the preparation of contribution to the rapid transit lines. Q. That leaves about fifty-sever millions of dollars to be issued from time to time as moneys are needed for the payment of the cost of third-tracking, the cost of the extensions, the cost of addi- tions to the plants, and for additions to power house and the cost of issuing bonds and discounts, etc., is that so ? A. Perhaps 1 don't quite understand you, but I should say that nearly fifty millions, well, somewhat over fifty millions — about fifty-three millions — fifty four millions, would be issued to retire notes and bonds and discounts thereon. Q. More than that, wouldn't there — there would be thirty-five millions to refund or retire the bonds ? A. Yes. Q. Which is fifty ? A. Yes. Q. jSTow, ten millions down below the last item you gave for discount? A. Yes, but that ten millions is pro rata on all of the Kepoet of Joint Legislative Committee 457 bonds, so that if those bonds weie issued at a discount of about seven per cent., the fifty millions would bear a discount of three millions and a half, and the other seven millions would be a dis- count on the remaining bonds to be issued from time to time. Q. Precisely. Then approximately it is fifty millions of bonds to be issued under the terms of that order, for the cost of third- tracking, cost of the extensions and additions, cost of equipment, the cost of improvement in power house and the cost and expenses of issuing the bonds, isn't that so '< A. Yes. If I understand the way you gave that, you subtract what is issued from the company bonds and notes from the total amount and out of that you fur- ther deduct the amount for the subway part of it, and the remain- ing is the part for the elevated lines. That is correct. There is $21,000,000 there you have not figured Lor the equipment of the subway. I think you are wrong about that, come to look it over. Q. I don't want to be wrong — I want to get it right. A. There is $21,000,000 of equipment on the subway, which you put in, I think, into the elevated lines. Q. Between twenty-six and twenty-seven millions ? A. Take twenty-three off of the fifty, and that is twenty-seven plus the dis- count and gives it. Q. Xow, the statement stands at substantially twenty-three mil- lions of bonds, authorized for purpose of constructing the third track, with extensions and equipment and connection and the addi- tions to the power house ? A. Yes. Well, perhaps you could state it this way. TJiere is about twenty-seven million which would go for third-tracking, extensions, equipment therefor, rebuilding the power station and the discounts thereon, which amount to twenty-seven to twenty-eight millions. Q. And those bonds could only be issued after specific authority to issue is granted from time to time as the work progresses, could they ? A. Let me look this order over just a minute, if you will, p'ease. Why, hastily glancing over the order, as I recall, the plan was slightly different, Q. (Question repeated by stenographer.) And those bonds could only be issued after specific authority to issue is granted from time to time as the work progresses, could they ? A. I should prefer to state it this way: That the authority to issue the bonds had been granted ; that the bonds could be issued and the proceeds 458 Investigation of Public Service Commissions secured, but that none of the proceeds could be paid out without the submission of estimates to the Commission. Q. Estimates or expenditures ? A. Estimates, I believe. Just a moment — yes, estimates. Then there is also a provision in the order that if any amount is paid out in accord presumably with these estimates, and that amount is disallowed afterwards in the cost of construction, the company must reimburse from some source the funds obtained by the issuance of the bonds. Q. Where is that money held. Commissioner ? A. What ? Q. Where is that money heM, in the treasury of the company? A. I suppose so, or with the bankers. Q. Well, was there any provision for money to be held by a trustee ? A. I am not sure about that, but • — • Q. Does the mortgage provide that the moneys derived from the sale of the bonds shall be held in the hands of a trustee and he paid out only by such trustee tipon a certificate of approval? A, It was — it is my recollection — this may be wrong, but it is the best of my recollection, that the bonds were to be issued or to be — financial arrangements were made and the money to be held by the trustee under the mortgage; that the funds were to be secured as needed on these estimates, and that payments were to be made. Then, if in the process of determining the cost of cen- struction, any specific item which had been paid and which was not put into — was not allowed to go into cost of construction, the company would then be obliged to reimburse the fund from some source — they must return the money to the fund, so it could he used for cost construction purposes under the contracts or in accord with the contracts. By Chairman Thompson: Q. Where are they going to get the money to return ? . A. Wei], the idea was that if they should make an expenditure and it should be found to be a charge against the operating expenses of the company, rather than the cost of construction, and yet if they paid it out of the fund provided to defray the cost of con- struction, and the Commission did not allow it, then they would have to take that money out of their operating receipts and put it into the fund. Q. It would come out of the public just the same, though, Eepoet of Joint Legislative Committee 459 wouldn't it ? A. Yes. In the sense that it comes out of operating revenues. Q. What do you say to the proposition — I put this question to Chairman McCall the other day, in about this form : Assuming that the city has no interest in this third-tracking, or no chance to get it back, or no interest in the revenues to be derived from it. Just assuming that the Interborough is a public service corpora- tion, spending as they say, its own money, and operating here for the benefit of the public, is the public interested in the amount of money that they put to the capital account, and on which they have to earn ? A. I should say it was. Q. And is that the province of a Public Service Commission, to scrutinize those expenditures on behalf of the public ? A. It is, under the Public Service Commissions Law. Q. Which is one of the fundamental reasons why the Public Service Commission was created in the first place, was it not ? A. I so consider it. Examination resumed by Mr. Lewis : Q. It gets down to this, doesn't it, Commissioner: That the Stevens contract was rejected, or was not approved; that without interference on the part of the Public Service Commissioners of the Pirst District, a contract was entered int-o between the Inter- borough Company and the Gillespie Company, which provides for the payment of monthly estimates in cash to the Gillespie Company, and provides for the pay of fifteen per cent, over cost, without any approval on the part of the Public Service Commis- sion, except as such approval may be applied from the fact that the Commission did approve a contract for the construction of the connections applied for by a letter which referred to the con- tract under which the work was being carried, the contract for third-tracking, under which the work for third-tracking is being carried on. A. Well, I think that is correct, but perhaps the answer should be supplemented. Under the certificate, the expenditures that are being made for the third-tracking, which is covered by this Gillespie contract, must be approved before they can get into cost of construction. Before they can affect either the public or the city. And in that way, the Commission, through 460 Investigation of Public Seevicb Commissions its various departments, will have a check upon those expendi- tures. And I should also add that with the adoption of the Man- hattan certificate relative to the construction of third tracks, it had specifically permitted the company to make a contract snch as they made with Gillespie. And consequently, having per- mitted, having giving the company the right to make such a con- tract, the Commission could not, as a Public Service Commissidn, refuse to accept the expenditures in accordance with their con- tract afterwards. Of course, it can object to them — well, that is not quite right — it can object to the expenditures as being improperly in the cost of construction, but it cannot prevent the company from making the contract itself. I think that is correct, Q. Well, the Commission is in no position, as it stands to-dav, to object to the payment by the trustee of a portion of the moneys derived from the issue of the bonds represented by the fifteen per cent, over the cost of labor and materials, is it ? A. Well, I fear that is so, but if I were a member of the Commission, I would not admit it for a while. By Chairman Thompson: Q. You would get busy ? A. I would not admit it for a while. Q. You would get busy to see what you could do with it under those circumstances ? A. I think so. Examination resumed by Mr. Lewis : Q. Have you any information as to how far the work of third- tracking has progressed ? A. N'o, I don't know. Q. Have you seen any statements in the newspapers as to the cost of the work already accomplished or admitted? A. I think I have seen some statement that a considerable amount of money had been expended. I should expect that was the case. Q. Do you know, or have you any knowledge of the fact that up to the present time, that substantially nine million dollars had been expended in the third-tracking of the Second, Third and l^inth Avenue elevated structures ? A. I have no personal knowl- edge, but I should not be surprised if that or more money had been spent at this time. Q. Do you regard it as a duty of the Public Service Commis- sion to know about those matters, and to be informed as to the Eepoet of Joint Legislative Committee 461 progress of the work and the amount of money expended? A. Perhaps not personally, but through the departments that are created, that the Commission has, and personally, so far as it is possible to do it. Q. Do you regard it, as one of the Public Service Comiras- sioners, to see to it that the moneys allowed, that the moneys derived from the sale of the bonds of the company be applied strictly to the purpose for which they are allowed? A. Oh, certainly. Q. You would care, then, whether it was nine million or nine hundred million dollars expended in the work of third-tracking? A. Yes. And, of course, whether it is nine million now or nine hundred thousand now is immaterial, in that all of it must be and ought to be checked up, of course. Wbether it is their money, or whether it is the city's money doesn't make any difference. The city is virtually a partner in the enterprise, and its return for the valuable rights given is dependent on the earnings. Q. And even if it is their money that is being expended, the expenditure of that money imposes a burden on the company which can only be met by the imposition of a rate equal to the — a rate based upon that expenditure to some extent ? A. Yes. By Chairman Thompson: Q. Mr. Maltbie, you said the 'Stevens contract first came to your attention, as I understood you, because it was on the calendar for approval — A. Officially; yes. Q. What do you call that sort of a meeting, an informal meet- ing ? A. I think that was a committee of the whole. Q. And that was on the calendar ; that was when you first knew about it officially; you knew about it before, though? A. It is quite possible that I knew of it before, and my recollection may be erroneous on some of these things, because I have had no way of refreshing it at all. Q. Well, that's the way I understood you to testify before, and before the contract came before you officially for approval that you had heard some rumors about it, somebody talked with you about it — people dropped in and talked with you, I suppose, when you were on the Commission, just the same as they drop in and talk with me now ? A. I presume so. 4r62 Investigation of Public Service Commissions Q. And some one had dropped in and talked with you about this before the contract ever came ? A. I think that is correct. Not necessarily about the contract, but about the plan. Q. And they gave you certain rumors, you say, that there were obligations incurred — did you mean legal obligations of the Interborough by that statement? A. ]\'ot as a corpora- tion; no. Q. Well, what did you mean by that — what was the idea? A. Well, as I have said, that there were expenses connected with the drawing of the — connected with the subway and elevated contracts and connected with the legislation that was necessary to legalize them. Q. By legislation, do you mean State or local legislation, or both I A. Well, principally State. I don't recall whether they had to get any local ordinances or not. I don't think so. I don't think that was necessary. Q. And such obligations, or, rather, you mean obligations not of the corporation itself, but of the individuals who were inter- ested in the corporation ? A. Yes ; although it might have been for the benefit of the corporation. Q. And you were told that something might come along under what I term a hole in the Manhattan certificate by which a fund could be created to retire or pay those obligations? A. Yes. Q. And that was the information that came to you before this contract came for approval ? A. As I remember it, it was before the contract came in. Q. So that when the contract did come in you were naturally suspicious of it? A. Well, I naturally had in mind the story that I had heard. Q. And you were familiar with the fact that the Manhattan certificate was different than any of the others? A. Yes. Q. And that the others required the most complete supervision of all expenditures for this class of work by the other companies? A. Yes, sir. Q. And that this class of work was not different from the class of work that the other companies had to perform under their certificates? A. Not different from the third-tracking on the Brooklyn line. Report of Joint Legislative Committee 463 Q. And you say that when this came on the calendar, all of a sudden you were fui-nished with the fact that a majority of your Commission were ready to put it through? A. I was so informed — that a majority of the Commission were favorable to it. Q. Well, was it your understanding that it was to be put over that day? A. That is my recollection. Q. And, as I understand you, you said you wanted a chance to write a memorandum on the proposition? A. That is the best of my recollection. Q. So, after awhile, they did give you a chance to iile this memorandum ? A. Yes. Q. And then, after that, you went and talked with Mr. McAneny? A. Yes; I may have talked with him before. Q. Now, when you talked with Mr. McAneny, you had a pri- vate consultation, didn't you — just you and he present ? A. Yes, sir. Q. You doubtless told him the things you had heard about this ? A. I presume I told him all I had heard and all I knew. Q. And all the rumors ? A. I presume so. I can't be positive, but that would be the natural thing to do. Q. ]^ow, as I understand you, Mr. McAneny immediately informed you that he had had some information from some one — some one from the inside of the Interborough ? A. He informed me that he had some information regarding the same thing which came veTy directly, but I gathered the impression that it was some one either on the board of directors or officially connected with the company, but he did not say that. Q. You can't remember his name ? A. I cannot. Q. Did he give you the impression it was either a director or a high officer that had been talking to him about the very thing ? A. I gathered that impression. Q. And your impression is also that he had in his mind that it was to take care of a fund which could not be legally taken care of ? A. I couldn't say what was in Mr. McAneny's mind. Q. Well, what was your impression ? A. Well, I imagined if I had heard of it, he might have heard of it. Q. Well, what was your impression then ■ — you know McAneny pretty well? A. Yes, sir. 464 Investigation of Public Service Commissions Q. You wanted his assistance in beating this thing ? And that's the reason you went to see him ? A. That's it. Q. You knew he was a man of considerable substance here in the community? A. Precisely. Q. And that a great many people relied upon him ? A. Yes, sir. Q. And if he came out with a public statement, it would help you to beat this thing in the Public Service Commission? A. Yes, sir. Q. And you knew if you could not get help of some kind, the thing would go over ? A. I rather expected that. Q. And that's the reason you went to McAneny ? A. Yes. Q. And you wanted his help ? A. Yes. Q. And after all these conferences, you got his help ? A. Yes. Perhaps not as a result. I might have had it anyway. Q. And he came back with this letter to the Public Service Com- mission, and you, with your memorandum, and when both of those guns were fired, they did not put it over, is that right ? A. Well, that was the result ; it did not go over. Q. Am I stating it fairly ? A. I think fairly. Q. But you say Mr. McAneny did not tell you the name of the man that had been to him ? A. No. Q. But his ideas in reference to it were in sympathy with yours? A. Well, they agreed with mine, in that the contract ought not to be approved. I can't say that he agreed with every reason I had for it. Q. Well, between you and he both, if the contract was to cover legal matters or matters proper to be expended, and the real benefit of the Interborough or Manhattan or its directors, you nor Mr. McAneny would have opposed it, would you ? A. Well, the form of the contract was bad. It doesn't guarantee that only such matters will be expended. Of course if I understand your point, neither Mr. McAneny nor I believed — I am not speaking authori- tatively for him, but I know him well enough to say that neither Mr. McAneny would oppose the disbursements by the Interborough Company out of the proceeds of its bonds of the legitimate expendi- tures for the construction of this road. Q. Or proper expenditures for the road ? A. No. Q. You would not have opposed them ? A. No. Eepoet of Joint Legislative Committee 465 Q. And if you thought this contract only contemplated proper expenditures, you would not have opposed it ? A. Well, that is a difficult question to answer, because the form of the contract is bad. It is a kind of contract which does not conduce to limiting expenses to those amounts. Q. Well, the form of the contract is such that if there was a fund that was a proper fund, that it could be raised by operation of this contract in some manner ? A. Why Mr. Stevens or anyone else who got that ten or fifteen per cent, could do with it as he pleased. Q. I say that is the real objection to it? A. Yes, sir. One of my objections to it. By Senator Foley : Q. What is your idea after all this good work you did for the people you were not re-appointed? A. I have my opinion about that. Q. The ingratitude of the public? A. (ISTo answer.) By Chairman Thompson : Q. It was probably for the same reason that such things as this can be put across in open daylight in the largest city in the United States. A. I should prefer not to express or refer directly or indirectly to my personal opinions on that subject. By Senator Foley : Q. This was not put over in New York — it was put over in Albany. A. I am not sure that New York did not have something to do with it. Q. As you understand this Gillespie contract, it is open to the same objection so far as that thing is concerned ? A. Yes. Q. Ajid unless there is some moneys to be raised or charged to capital account through this form of contract, can you conceive, from all you have heard or rumors that came to you., of any reason why the Interborough should have at the time of the execution of these subway contracts insisted on leaving the Manhattan certifi- cate different than the other three certificates in regard to the expenditures for third tracking ? A. Well, I cannot conceive of a good and adequate reason that will stand public investigation for 466 Investigation of Public Service Commissions the putting througli of a contract of that sort. My imagination sometimes is a little lame. I cannot conceive of any. By Senator Foley: Q. All these facts that had to do with the Stevens contract, these rumors that you heard, I mean prior to the Stevens contract, and prior to the writing of Mr. McAneny's letter of July 21, 1913 ? A. I may have heard of them afterwards, too. Q. But I mean — A. I think they all did antedate Mr. Mc- Aneny's letter. Q. Did your conference with him antedate that date, the writing of the letter ? A. Some of them did. Some of them may have come afterwards, but there were conferences before the date of that letter. Q. Well, in that conference, was it thought of sufficient import- ance to include the rumors that you had heard in the statement of objections to Mr. MoAneny, of the letting of the contract or approval of the contract ? A. I don't think. Senator, we discussed as to what he should put in his letter. The framing of it was only a general discussion. Q. I don't find any mention of legislation or any matter that you had discussed with him about these rumors contained in his let- ter. A. I am not surprised that that is so. Q. Was it mentioned in your report ? A. I don't know whether it was mentioned in my memorandum or not. Q. Was there any discussion as to why it should not have heen made public at that time, 1913 ? A. Well, as I stated to the Com- mittee before, that was merely a rumor. I said that there were no facts given to me at that time upon which to base the statement. It was merely a rumor. Q. And no investigation made ? A. Ko. Outside of inquiries as you go about. Q. And those inquiries did not discover facts sufficiently to be made public ? A. Did not disclose any facts. Q. Any sufficient ground to make known to the public the existence of these alleged facts or rumors ? A. Well, I considered that the rumor M^as not sufficient for me to state in a memoran- dum against the contract that the fund was to be used for that purpose, because I couldn't. I had no facts to say that it was to be used for that purpose. Eepoet of Joint Legislative Committee 467 Q. You stated your grounds sufficiently on your report ? A. I thought I did a fairly good job on that at that time. By Mr. Lewis: In view of the fact that it appears from the testimony of Com- missioner Maltbie that Mr. McAneny had some information on the subject of these rumors, I suggest the propriety of your extending an invitation to Mr. McAneuy to attend the session to-morrow of this Committee or such time as the Committee will sit, in order that he may advise the Committee of any facts within his knowledge. By Chairman Thompson: Well, if there is no objection, it will be ordered that an invi- tation be extended to Mr. McAneny to appear before this Com- mittee to-morrow morning at 11 o'clock at this place. The sug- gestion is made to the officer to get in communication with Mr. McAneny in time to produce his appearance. By Mr. Lewis: Before adjournment, I will ask Mr. Harkness to take the stand for a moment. Leroy T. Haekness recalled. Examination by Mr. Lewis: Q. Mr. Harkness, in connection with the proposed form of con- tract between the Interborough Company and John F. Stevens did you prepare and submit to the Chairman of the Commission a memorandum of your views upon that subject ? A. I did. Q. And did you do that at his request ? A. I did. Q. And who at the time was Chairman ? A. Judge McCall. Q. Have you that memorandum with you ? A. I have. Q. Will you produce it ? (Memorandum produced by Mr. Harkness.) Q. Do you desire to have it read into the record ? A. I think it better, to complete the record. That was not in the Secretary's files and was not produced by him. It v/as taken from the Legal Department files. 468 Investigation of Public Service Commissions Q. Is it satisfactory to turn it over to the stenographer and have it put in the record? By Mr. Lewis: I will offer it in evidence, and if it is desirous I will read it. By Mr. Harkness: It is the memorandum dated May 12, 1913. Dear Mr. Chairman: I have examined the application of Interborough Rapid Transit Company for permission to enter into a contract with John F. Stevens for the construction and equipment of the third tracks and elevated extensions authorized under the certificates of March 19, 1913, and asking that the Commission waive approval of such a contract in advance of its execution. In accordance with your oral instructions I submit the following views in respect of such application: The Interborough (but not the Manhattan) certificate provides: " The Interborough Company shall (except in such cases where permission to do otherwise is expressly grajited from time to time by the Commission, by a resolution entered in its minutes) before entering into any contract, agreement, mortgage or undertaking having to do with the construction or equipment of the railroads submit the same to the Com- mission for its approval and the Commission may as a con- dition for its approval require the insertion of such terras and conditions therein as it may deem necessary. The Com- mission may further require the Interborough Company before entering into any agreement having to do with the construction or equipment of the railroads to ask for pro- posals upon forms of contracts satisfactory to the Commis- sion, in a specific manner and for a specified time." The granting of the application of the Interborough Company will have this effect, that in the construction of the third tracking and elevated extensions — estimated to cost about $25,000,000 there would be no contractual " guard " as contemplated by the certificate. It might be noted that the work is required to te Eepoet of Joint Legislative Committee 469 done by contract and the contracts approved in advance by the Commission " except in such cases where permission to do other- wise is expressly granted from time to time by the Commission, by a resolution entered in its minutes." The intention plainly was that in certain more or less exceptional cases this approval might be waived but not that by one blanket resolution the entire clause in the contract should be rendered nugatory. The Interborough Company in effect ask for a blanket approval of an agreement to be entered into by it with John F. Stevens for doing $25,000,000 worth of work on a cost plus percentage basis. The percentage arrangement is the most dangerous type of con- tract and peculiarly subject to abuse. Although there are pro- visions in the certificates for strict supervision the most effective guard was that contained in the clause abc>ve quoted requiring work to be done under contract approved by the Commission. It is, of course, of great importance to the city to keep the amount expended down to a minimum since the city's rental is dependent upon the amount of the company's capital expenditures. With- out the guard against extravagance contained in the provision quoted above, it is my belief that the other provisions of the con- tract are not adequate to protect the city's interest. The pro- vision quoted above was one of the last two points at issue between the city and the Interborough Company in the transit negotia- tions and a determined effort which failed was made by the com- pany to secure its elimination. It now looks as though the com- pany, having failed to secure its elimination, is attempting through this blanket approval to render it ineffective. It might be noted in passing that the certificates contain stringent provisions against a subsidiary company making profits out of construction. It is possible that for this reason the Inter- borough Company has not asked permission to make arrange- ments with its subsidiary, the Rapid Transit Subway Construc- tion Company. The arrangement proposed is not to be made with Jno. F. Stevens Construction Company, but with John F. Stevens. Mr. Stevens has no organization of his own and the transaction is at least open to the suspicion that Mr. Stevens intends to use the Rapid Transit Subway Construction Company to do the work and thereby render it possible for it to do the work 470 Investigation of Public Seevice Commissions " for the actual costs and expenses, plus a reasonable ( ?) percentage." In view of the fact that a considerable part, if not all, of the third-tracking work will have to be done while the road is being operated, there seems to be justification for a somewhat different treatment of that situation than would be deemed necessary in case of extensions. It may be that there a percentage contract of some type is advisable to the extent of covering the labor cost of erection. Material for that work can be bought in the market or under competitive bidding, the same as for any contract. Even though a percentage arrangement were permissible under these circumstances, it should be upon the basis of a carefully prepared contract. The application of the Interborough Company states that delay will be avoid|^ by not waiting for the preparation of such a contract. The 'fact is, however, that the Interborough Company has not as yet obtained the consents for this work and cannot begin work until such consents are obtained. Pending the securing of the consents, this contract can be prepared. Per- centage contracts with guards against extravagance have been developed and have been put into quite extensive use on private work in the past few years. The form used by Westinghouse, Church, Kerr and Companj^, known as the " master and servant " type, is an example. It might be that such a form could be adapted to this work. The doing of work under the complication of maintaining train operation does not, however, apply to the elevated extensions. So far as construction is concerned, they are as separate a part of the work as the construction of the elevated extensions in Queens that are now under contract. I can see no reason in this case for departing from the contemplated procedure of letting this work under the usual type of construction contract. The application of the Interborough Company alleges that a saving would be made under the scheme proposed by it in that the materials and supplies for both the third-tracking and exten- sions could be ordered at the same time. There is nothing to pre- vent this even with the most rigid application of the certificate provision above quoted. The Interborough Company can divorce the item of material and supplies from that of labor and make Eeport of Joint Legislative Committee 471 separate contracts for the material and labor items. This is prac- tically what was done by the Interborough subsidiary, the Rapid Transit Subway Construction Company, in the construction of the present subway, in that separate contracts were then made by it for the major material items. I may add that I have discussed this matter with the Chief Engineer and he agrees with the views above expressed. Respectfully yours, (Signed) LeROY T. HARKNESS, Assistant Counsel. LRTH/LEN The above has been devoted to a consideration of the construc- tion features alone. Attention is drawn to the fact that the application covers equipment as well, so that if such a blanket approval were given, the company would not be required to sub- mit any contract either for construction or equipment. A. I call the attention of counsel of the Committee to this, especially, because this morning in his testimony Mr. Maltbie said that prior to writing his report on the Stevens contract, he had read the report of counsel and chief engineer. There are no formal reports on this matter either of counsel or chief engineer, and I think that Commissioner Maltbie really referred to this memorandum. I recollect giving a copy to him either at or rather shortly after giving the original to Judge McGall. Q. Wow, at any time after the failure to approve the Stevens contract, were you asked to write an opinion or express any opinion on the subject of the Gillespie contract? A. I am not sure. I have an idea that I did write a memorandum on that. I haven't found it, though, but my recollection is that I did. Q. Have you looked for it? A. Not especially. This was found in looking up papers on the Stevens contract. Q. You have examined the Gillespie contract, I suppose? A. I read it after it was entered into by the Interborough and a copy filed. Q. And have you formed an opinion as to the character of the Gillespie contract, as related to the Stevens contract — in com- parison with the Stevens contract? A. Why, they* are both 472 INVESTIGATION OF PuBLIC SeEVICE COMMISSIONS percentage contracts, and without comparing the two, I thought they were very much along the same lines. The Gillespie contract being something like and somewhat like draft of final draft of the Stevens. Q. Is the Gillespie contract subject to the same criticism made in the Stevens contract substantially ? A. Well, the main point of objection to the Stevens contract was attempting to include the extensions in it. I suggested in that memorandum that some sort of a percentage contract might be necessary in the case of third- tracking, but suggested some sort of a guard on it. Q. Well, the net result is that they were doing the third-track- ing and building the connections, but that the contract for the extensions has never been approved? A. The form has been approved, but the work not called for. Q. The unit price form ? A. The form of contract which had been approved by the Commission for extensions is radically dif- ferent from the form. It is a unit price form and very similar to our subway contract. Q. But the work has not been commenced under that contract? A. No. By Chairman Thompson: Q. As I understand your criticism here of the Stevens con- tract, so far as it referred to the third-tracking part of the Stevens contract, applied with equal force to the Gillespie con- tract ? A. Yes ; except that it is indicated in the memorandum that percentage contracts might be justified in case of third- tracking. Q. Will you look up that opinion, Mr. Harkness, you wrote in the Gillespie contract ? A. I am not sure I wrote one, but my recollection at the moment is I did. By Senator Lawson: Q. If you did write an opinion, it was in answer to a request of the Commission ? A. It was probably a memorandum I wrote in answer to a similar request of Judge McCall. Q. The same as you wrote the opinion as to the Stevens con- tract? A. Yes. Report of Joint Legislative Committee 473 By Chairinan Thompson: If there is no objection, we will suspend now until to-morrow morning at 11 o'clock at this place. Whereupon the Committee adjourned to meet at the county attorney's rooms in the City Investment Building, 165 Broadway, New York city, on September 17, 1915, at 11 a. m. SEPTEMBER 17, 1915 New Yoek County Lawyers' Association Boaed Eooms, 165 Broadway, New York City TheCommitteemet at 11 o'clock A. M., pursuant to adjournment. Senator Thompson. — The Committee yesterday afternoon, prior to adjournment, concluded to request the presence before it of President McAneny of the Board of Aldermen to-day at the opening of our session. The Sergeant-at-Arms reports to me that he was unable to get into communication with Mr. McAneny last night, although he tried until very late. 'Mr. McAneny arrived in the city about 7 o'clock, but he was unable to find him. He did get into communication with him this morning, and was informed that there was a meeting of the Board of Estimate and Apportionment this morning, beginning at 10 :30, which would require his attention through the day, and for that reason it would make it impossible for him to attend a meeting of this Committee to-day. My information is that he will be willing to attend next Tuesday. Under those circumstances we will adjourn this hearing now until next Tuesday morning at 10:30, at the same place, but before adjourning Mr. Harkness has a memorandum he would like to produce for our information and we will take it. Mr. Harkness. — At yesterday's hearing Senator Lawson asked me to hunt for any report on the Gillespie contract, upon the application of the Interborough company to let their extension work under the Gillespie contract. I find, under date of July 22, 1914, Mr. Coleman rendered a short report, and that might be 474 Investigation of Public Seevioe Commissions copied into the record. It refers to a report of the chief engineer of July 16, 1914, which is already in evidence. Mr. Shuster. — Yes; it is in evidence. The report is as follows: " Public Service Commission "July 22, 1914 "Public Service Commission for the First District " Sirs : " I have the Secretary's letter of July 15th which is as follows : " ' I beg to refer to you herewith a copy of an application from the Interborough Rapid Transit Company dated July 14, 1914, requesting permission to enter into a contract for the construction and equipment of certain railroads, includ- ing Webster Avenue and other lines. " ' It is requested that your opinion in the matter be fur- nished at your earliest possible moment.' " I have also received from the Chief Engineer a copy of his report dated July 16th on this matter. " I agree with the views expressed by the Chief Engineer. I might add in addition that some time ago complete forms of unit price contracts for competitive bidding on these lines were submitted to and revised by this department and returned to Interborough Rapid Transit Company. " Respectfully yours, " GEO. S. COLEMAN, Counsel." Mr. Harkness. — I stated yesterday afternoon that prior to Commissioner Maltbie's making his memorandum on the Stevens contract I had submitted to him a copy of the memorandum I gave to the Chairman of the Commission under date of May 12, 1913, and in looking over the papers for the opinion referred to by Senator Lawson I find copy of a memorandum dated July "> 1913, which I gave to Commissioner Maltbie, and to whicli I attached a copy of the memorandum to the Chairman of May 12, Eepoet of Joint Legislative Committee 475 1913. This memoranduin goes into the various questions at issue in the Stevens contract in somewhat more detail. I suppose it might be copied in the record the same as the other, without bothering to read it. I will leave it and your stenographer can copy it and retm-n it. I think it might be fair for me to state I put this in particularly for the reason that Commissioner Malt- bie's testimony, perhaps unwittingly, had a squint to it that he was the only one in the Commission who was looking out for the public interests, and I think this memorandum indicates there were others, including Commissioner McCall, who were looking into the matter very carefully; and it simply supplements the record in that respect. Senator Thompson. — I ought to say, in behalf of the Chairman of this Committee, I try to be as fair as I possibly can, and still human nature is peculiarly subject to an unwitting prejudice sometimes that it ought not to be subject to. Mr. Harkness. — I had no reflection on the Committee at all. Commissioner Maltbie unwittingly colored his own testimony. Senator Thompson. — I never did have personally any makeup that made me think I had to stay as I was in order to be right when I was wrong, and if I saw a place where I thought I bad been wrong I wanted to take a very public attitude and show that I changed my mind. I am frank to say that I did feel, to begin with, that there were some things in the records of the Public Sen'ice Commission that were not available as quick as they ought to have been and I felt they should have been, but I am frank to say now that such feeling on my part was entirely without any cause or excuse for it, and I want to say to Mr. Harkness especially that I feel that he has treated this Committee entirely properly and with the proper respect for the public that he represents and the position he is in, and the Chairman of the Committee appre- ciates his position. Mr. Harkness. — I might say that the instructions which have been given to all of us are to produce every bit of information that will possibly help the Committee. Senator Thompson. — This investigation is not trade on any theory that this Committee has got to get a particular result. It 476 Investigation of Pttblio Service Commissions is made on the sole theory that we axe a Oommittee to investigate, and everybody will be satisfied with the result whatever it is. We hope it will be a ' result showing that nobody is entitled to be criticised. That is the best result an investigation can possibly have, and if it can attain that result it will be more worth while than if it had for its end somebody's discomfort. Mr. Harkness. — I express thankfulness to both yourself and the members of the Committee for putting into the record the memoranda that both Mr. Whitney and I thought should be put into the record. Senator Thompson. — That permission is and will be open all the while. We feel that we are going to do what it is our duty to do as the matters come along, one thing after another, and we will take the road we are on and will have to follow the guide-boards. The memoranda submitted by Mr. Harkness is as follows : " MEMORANDUM FOR GOMMISSIOJSTER MALTBIE " July 7, 1913 Mr. Harkness " In response to your request for information in respect to the proposed contract between the Interborough Rapid Transit Company and John F. Stevens for the construction and partial equipment of the additional contracts and elevated extensions under the certificates granted to the Manhattan Railway Company and the Interborough Company, I beg to submit the following: " When the Interborough Company some time ago asked the Commission to waive the right accruing to it under the extension certificate to pass upon all contracts for extension construction and equipment, I submitted a memorandum to the Chairman at his request which covers part of the ground. I attach hereto for your information a copy of such memo- randum. "After such request of the Interborough Company had been denied, Mr. Quackenbush, the attorney for the Interborough Company, submitted info-rmally to the Chairman a draft form of contract which is probably identical with the one trans- mitted with your letter of June 29. The Chairman sent for Eepoet of Joint Legislative Committee 477 me and in my presence told Mr. Quackenbush to take the matter up with me. I went over the situation with Mr. Quackenbush, first objecting to any plan whereby the con- tracts for constructing the elevated extension were not to be advertised and made the subject of competitive bidding. Mr. Quackenbush took the position that this was a question of policy for the Co mm ission and was not open to discussion by us ; that what we were to do was to pass upon the legal form upon the assumption that the Commission would allow the extension work to be lumped with the third tracking work under a contract to be given directly to ilr. Stevens. On this basis I went over the form of contract and suggested to Mr. Quackenbush that a measure of protection against extravagance might be secured by means of the so-called ' participating ' feature. The ' participating ' form is the type of contract under which Westinghouse, Church, Kerr Com- pany has done considerable work, notably the Boston terminal for the Boston & Maine, and involves agreeing upon a pre- liminary estimate for the work, which if exceeded results in the contractor being penalized, while if the work is done within the estimate, the saving is divided between the con- tractor and the one for whom he is doing the work, in some agreed proportion. Mr. Quackenbush seemed to think favor- ably of this and later I sent him a draft of such a provision. In the meantime, I talked the matter over with Mr. Craven, who thought my suggestion hardly practicable because in his opinion it would be impossible for him to reach an agreement with the officials of the Interborough Company and Mr. Stev- ens on the preliminary estimate. On reconsidering the matter it seemed to me that in order to meet the Interborough Com- pany on this a very heavy responsibility would be placed upon Mr. Craven in that if anything went wrong with the work, so far, at least, as cost is concerned, Mr. Craven would be tied up to it through his approval of the preliminary estimate. Later Mr. Quackenbush came to see me and said that Mr. Hadley had found it impossible to get a reliable preliminary estimate ; that the various estimates made by the Interborough Company had differed widely because of the uncertainties 478 Investigation of Public Seevicb Commissions attendant upon the third tracking and asked that the ' par- ticipating ' feature be not insisted upon. Because of my talk with ilr. Craven, I told Mr. Quackenbush that I would not insist upon this feature. " The contract therefore comes down to a pure percentage contract. It is unnecessary for me to enlarge upon the dan- gers of such a form of contract since you already know of them. If the parties co-operate and act in good faith such a type of contract works well, but if there is not co-opera- tion and good faith the contract furnishes practically no gTiard. For a percentage contract, I think the form submitted by Mr. Quackenbush is pretty good. " In response to your request for my opinion ' upon the whole plan,' I must say that I think the lumping of the extension work with the third tracking work under a per- centage contract would be unfortunate. We have not the gniard in the Manhattan and Interborough certificates that we have in the B. K. T. certificates, namely, the determina- tion of the Chief Engineer as the work goes on. The Man- hattan and Interborough Companies may wait until the work is completed and then submit a statement of cost which, if not objected to within a certain period, is deemed to be the cost of construction and equipment. If objected to within the period specified, the matter goes to arbitration. This is radi- cally different from the complete control resting in the Chief Engineer through the provision in the subway contracts and the B. E. T. certificates wherein the Chief Engineer, with complete information, as the work progresses, makes a deter- mination and then the onus is thrown upon the party appeal- ing to override the Chief Engineer's determination. Under the proposed percentage contract, if the Interborough Com- pany shows the expenditure of certain money, it will tie impossible, in my opinion, to upset the charge on the ground of extravagance unless there is such waste as to justify the implication of fraud or bad faith. In the case of the third tracking work the company is not required by the certifi- cates to submit contracts for approval. The Commission is therefore under no responsibility, so far as those contracts Report of Joint Legislative Cojijiittee 479 are concerned. JSTaturally the third tracking work is compli- cated by all sorts of uncertainties and there is good reasou for the company having a free hand in making such contracts as it deems wise for that work. In the case of the extensions, however, the Commission is not only given the power, but it seems to me, is placed under the duty of approving contracts and seeing to it that through those contracts a proper gaiard is placed against extravagance. The extension work is clean, straight work — just as clean and straight as the elevated work now under way in Queens — and lends itself especially to competitive bidding. Aside from the physical features of the work, there is another reason for stringent supervision in the case of extensions, since the probability of the city taking them over under the recaption clause is far greater than in the case of the third tracking. There is, of course, a strong public sentiment in favor of competitive bidding and as there is a large number of contracting firms who are ready and anxious to do this work, it might be that they could work up quite an agitation over the Commission's permitting the withdrawal of all this work from competitive bidding. " As I understand ft, the reason given by the Interborough Company for lumping the third tracking and extension work under a percentage contract is that the work can be done cheaper through the purchase of supplies for both and the ability to shift working forces from one point to another. It seems to me that such an argument is weak. So far as shift- ing forces is concerned, there is such a large amount of third tracking work that there should be no difficulty in keeping the forces employed, iloreover, if the extension work were put up for bids and Stevens had the contract for the third tracking work, he would be in a position to bid cheaper on extension work because of having his plant already provided and also for any incidental advantage there might be through shifting the working force. So far as purchasing materials is con- cerned, I can see no good reason why the Interborough Com- pany could not purchase material for both the extension and third tracking work under competitive bids in the open 480 Investigation of Public Seevice Commissions market, letting competitive contracts separately for the erec- tion of extensions. This is substantially the course that was followed in the construction work under contract No. 1, the Interborough Company making contracts directly for the large material items and supplying them to the contractors having the excavation and erection contracts. " If the proposed contract be approved, I do not know that I have any suggestion to offer as to detailed changes in the form. There may be some, but these I think I could arrange with Mr. Quaekenbush. A percentage contract is so depend- ent upon the manner in which it is carried out that the form of it and the various provisions inserted are of relatively little importance. " L. R T. H., "Assistant Counsel." LRTH/LEN" MEMOEAITDUM FOR THE CHAIRMAlSr " May 12, 1913, Mr. Harkness " Dear Mr. Chairman : " I have examined the application of Interborough Eapid Transit Company for permission to enter into a contract with John F. Stevens for the construction and equipment of the third tracks and elevated extension authorized under tiiC! certificates of ilarch 19, 1913, and asking that the Comniis- sion waive approval of such a contract in advance of its exe- cution. In accordance with your oral instructions I submit the following views in respect to such application, — " The Interborough (but not the Manhattan) certificate provides : " ' The Interborough Company shall (except in such cases where permission to do otherwise is expressly granted from time to time by the Commission, by a resolution entered in its minutes) before entering into any contract, agreement, mort- gage or undertaking having to do with the construction or equipment of the railroads submit the same to the Commis- sion for its approval' and the Commission may as a condition Rbpoet of Joint Legislative Committee 481 of its approval require the insertion of such terms and condi- tions therein as it may deem necessary. The Commission may further require the Interborough Company before enter- ing into any agreement having to do with the construction or equipment of the Railroads to ask for proposals upon forms of contracts satisfactory to the Commission in a speciiic manner and for a specified time.' " The granting of the application of the Interborough Com- pany will have this effect, that in the construction of the third tracking and elevated extensions — estimated to cost about $25,000,000 — there would be no ' contractual guard ' as contemplated by the certificate. It might be noted that the work is required to be done by contract and the contracts approved in advance by the Commission ' except in such cases where permission to do otherwise is expressly granted from time to time by the Commission, by a resolution entered in its minutes.' The intention plainly was that in certain more or less exceptional cases this approval might be waived but not that by one blanket resolution the entire clause in the contract should be rendered nugatory. " The Interborough Company in effect ask for a blanket approval of an arrangement to be entered into by it with John E. Stevens for doing $25,000,000 worth of work on a cost plus percentage basis. The percentage arrangement is the most dangerous type of contract and peculiarly subject to abuse. Although there are provisions in the certificates for strict supervision the most effective guard was that contained in the clause above quoted requiring work to be done under contract approved by the Commission. It is of course of great importance to the city to keep the amount expended down to a minimum since the city's rental is dependent upaa the amount of the company's capital expenditures. Without the guard against extravagance contained in the provision quoted above, it is my belief that the other pro- visions of the contract are not adequate to protect the city's interest. The provision quoted above was one of the last two points at issue between the city and the Interborough Vol. 1 — 16 482 InvEvStioatton ov PrniLui Skrvkho CoMMiaRtws Company in the transit negotiations and a determined effort which failed wns made by the (•(imi)imy to swuihi its elimiiin- tion. It now looks as though the C-oiiipiiuy, having failed to seciire its clinrniutidii, is iiUcmpliug through this blanket approval to render it ineffective. " It might be noted in i)iisHing that the certificates contain stringent pruviHiims iigainst a subs id in 17 company making protits out of construction. J t, is possible that for this roasoii the Interborough Company has not asked permission to malce arrangements with its subsidiary, tlu^ Rapid 'i'nnisit Subway Construction Company. The iirrangonicnt |)rt>|)osod is not to be made with the Jno. F. Slovens Consi.i'iiction Conipiuiy, but with John F. Stevens. Mr. Stevens has no organization of his own and tiio transaction is at least ojxmi to t,iio suspicion that Mr. Stevens intends to use tiu^ Jiapid Transit Subway Construction Company to do the work and thereby render it; possible for it to do the work ' for the actual costs and expenses plus a reasonable ( 'i) jior'ccMitago.' " In view of the fact liuit a considerable |)ai't, if not all, of the third tracking work will have to be done while the road is being operated, there seems to hv justilfitoation for a some- what dilTcrcnt treatment of that situation than would be deemed nocosaary in case of extensions. It may be that there a percentage contract of sonu; type is advisable to tlie extent of covering the labor (!Ost of erection. Malci'ial for that work can be bought in the market or under (iompetitive bidding, the same as for any contract. J<]von iJiougii a percentage ari'ango- ment were permissible under those circuniHtances, it should be upon the basis of a carefully prcpa nul contriu'l,. The appli- cation of the Interborough Comj)any stat-cs that delay will be avoided by not waiting for the ju'ojiaration of such a contract. The fact is, however, that the interborough (Jornpany has not as yet obtained the consents for this work and can not begin work until such coriisents are obtained. I'onding the gecltiring of the consents, this (contract (!an bo propartsd. l'(;rcontage contracts with guards against extravagance! have been devel- oped and have been put into quite oxtorisive use on private work in the past few years. The form used by Wostinghouae, Ebpoet of Joint Legislative Committee 483 Church, Kerr and Company, known as the ' Master and servant ' type, is an example. It might he that such a form could be adapted to this work. The doing of work under the complication of maintaining train operation does not, how- ever, apply to the elevated extensions. So far as construction is concerned, they are as separate a part of the work as the construction of the elevated extensions in Queens that are now under contract. I can see no reason in this case for departing from the contemplated procedure of letting this work under the usual type of construction contract The application of the Interborough Company alleges that a saving would be made under the scheme proposed by it in that the materials and supplies for both the third tracking and extensions could be ordered at the same time. There is nothing to prevent this even with the most rigid application of the certificate provision above quoted. The Interborough Company can divorce the item of material and supplies from that of labor and make separate contracts for the material and labor items. This is practically what was done by the Interborough sub- sidiary, the Eapid Transit Subway Construction Company, in the construction of the present subway, in that separate contracts were then made by it for the major material items. " I may add that I have discussed this matter with the Chief Engineer and he agrees with the views above expressed. " EespectfuUy yours, " (Signed) LEROY T. HAEKNESS, "Assistant Counsel." " LETH/LEN " The above has been devoted to a consideration of the construc- tion features alone. Attention is drawn to the fact that the appli- cation covers equipment as well, so that if such a blanket approval were given, the company would not be required to submit any contract either for construction or equipment. Senator Thompson. — If there is nothing further to come before the Committee, we will adjourn until Tuesday morning at 10 :30. Proceedings adjourned to 11 a. ii., Tuesday, September 21, 1915, at the same place. 484 Investigation of Public Seevicb Commissions SEPTEMBER 21, 1915 New Yoek iOountt Lawyeks' Association Boaed Room, 16'5 Broadway, New York City The Committee met at 11 a. m., pursuant to adjournmeiit. Appearances the same as before, a quorum being present. Chairman Thompson. — When we adjourned lasit week, it was adjourned until to-day, to the convenience of the appearance of Mr. McAneny before the Committee this morning, and it turns out this morning that Mr. McAneny is engaged in a meeting, I think, of the Court House Board, which will take him into the afternoon as I have just been advised by telephone, and he asks that the Committee accommodate him until to-morrow, at whidi time he will be present at 11 o'clock. Is there anything else that we can take up ? Mr, Lewis. — I have discussed with Mr. Shuster and 'he says hie has made some requests for some documents that he wishes to examine, and I don't know of anything until we get Mr. McAneny, under the circumstances. Mr. Thompson. — Mr. McAneny assures me he will be present at that time. Do you know what documents he wants? Mr. Whitney. — I understand the request is for copies of the construction contracts. S&me of those contracts are out of print TheTe are quite a good many of them, but I will furnish copies where there are available printed copies, and make the originals of the others available. 'The Chairman. — That is in entire compliance with your request, I should say. Will you go to the office and get them, Mr. Sliuster! Mr. Lewis. — I have some engagements I can attend at the Attorney-General's office, and if there is nothing further, I will go over there. The Chairman. — If there is nothing further to come before the Committee, on motion of Senator Foley, we will adjourn until to-morrow at 11 o'clock at thia place. Whereupon, the 'Committee adjourned, to meet September 22, 1915, at 11 A. M., at the same place. Eepoet of Joint Legislative Committee 485 SEPTEMBER 22, 1915 IfEW York County Lawyers' Association Board Eoom, 165 Broadway, New York City The Committee met at 11 a. m., pursuant to adjournment, a quorum being present. The Chairman. — Is there anything you can take up before Mr. McAneny appears ? Mr. Lewis. — I have not prepared to take up anything. Have you heard from him ? The Ohaitman. — ISTo, I have not heard from him since yesterday morning. He said then he would be here at quarter after eleven. Mr. Lewis. — I think he is liable to be in pretty quick. Might it not be well for the sergeant-al^arms to telephone and ascertain if Mr. McAneny is coming? (At this time Mr. McAneny arrives.) The Chairman. — ■ Gentlemen, the Committee will please come to order. George McAneny, called as a witness. Mr. Lewis. — Has Mr. McAneny appeared heretofore as a wit- ness before this Committee, in this investigation. The Witness. — ^In your earlier sessions I believe I appeared. (At this time the witness was duly sworn.) Examination by Mr. Lewis: Q. Mr. McAneny, you are a member of the Board of Estimate and Apportionment ? A. I amt Q. By virtue of your position as President of the Borough of Manhattan? A. I am President of the Board of AldeTmen at present. Q. And prior to your election as President of the Board of Aldermen, you were a member of the Board of Estimate and Apportionment, by virtue of your position as President of the Borough of Manhattan ? A. I was, yes, sir. 4:86 Investigation of Public Seevice Commissions Q. When did your ooxmection with the Board of Estimate and Apportionment begin ? At what date ? A. On the 1st of January 1910. Q. 1910 — so that you have been a member of the Board now for approximately five years ? A. Nearly five years, and the major fraction of another one. Q. Yes, six years, — that period is substantially the period cov- ered by the negotiations which led up to the approval of the so-called dual contracts, is it not ? A. They commenced about a year after we went to ofiice — in January of 1911. Q. And the negotiations for the so-called dual contracts began during your term of office as a member of the Board of Estimate! A. Yes. Q. And you have had to do with the negotiations leading up to the execution — A. I served as Chairman of the Board of Esti- mate's Committee — so-called Rapid Transit Committee. Q. What do you call that — special committee on pending transit proposals? A. Yes, it was termed at the time. It has since been re-named as the Transit 'Committee, and I still hold the chairmanship. Q. So that you probably are as familiar as anyone with all the terms and provisions of the so-called dual contracts? A. S'ubject to the fact that I have not read them recently. Q. We have not had, Mr. McAneny, from anyone a statement for the record as to the general scheme of the dual contract, and 1 have thought that it might be desirable for us to ask you to ^ve us in as brief a form as possible the general outline of the scheme of the dual contracts? A. You mean to prepare — Q. ISTo. If you can state it — I do not meat to elaborate it or give the details, but the general framework, if you will ? A. Well, I would very much prefer if it suits the convenience of the Com- mittee to take a little time upon that, rather than to undertake to recall offhand the general structure of these contracts. Q. Well, can we — A. It is an impossibility where there are so many, many ramifications. Q'. I know it is, but I wondered if we could get at this time perhaps a definition of the term " dual contracts " — that might m useful for the investigation ? A. I am afraid I cannot Tecall just how that term originated. It was rather a natural description of Eepoet of Joint Legislative Committee 48Y the negotiations covering two systems of railroad, more or less initerlocked in the service that they gave — not in their business relations. Q. Now, will you tell us which were the two systems, and how they were known and designated ? A. Well, the first application for opportunity to extend the then transit lines came, of course, from the Interborough Company. Q. And the Interborough Company is the Manhattan operating company, I take it? A. Operates the Manhattan system under lease, yes. Q. Do its lines extend into any other boTough ? A. Yes, they extend into the Borough of Brooklyn and the Borough of the Bronx. Did before these negotiations commenced. Q. And to what extent did the Interborough operate in the Borough of Brooklyn? A. Its subway line ended at Atlantic avenue. Q. And Borough Hall ? A. No — at Atlantic avenue station. Q. And that was the extent to which the Interborough was operating in the Borough of BTooklyn, was it ? A. Yes. Q. And to what extent did it operate into the Borough of the Bronx? A. Its subway system terminated at the Bronx, at the Bronx Park, and of course its Manhattan elevated lines. Q. ISTow, the Interborough 'Company operates and has operated since their construction all of the subway constructions on Manhattan Island — am I correct in that ? A. Yes. Q. And in addition, it operates all of the lines of the Manhattan Elevated Railroad Company, under lease, does it not ? A. It does. Q. And does it have under its control either as owner or lessee the surface lines or any part of them operating on Manhattan Island? A. That I feaT I could not answer exactly. Mr. Harkness,— I see he has gone. Q. I thought perhaps it might be well for the record if we could get that. We can get it later. 'Now, the Interborough Company, then, i-s one of the parties to the dual contracts, so-called, and am I to understand that the New York Municipal Railways Company is the other farty, second party, and that the City is a third party? A. No. Of course, they are two entirely separate contracts, which in the one case the Interborough is the first party and the City the second, and in the oiiher case the New York Municipal Railways, 488 Investigation of Public Seevioe Commissions which is the Brooklyn Kapid Ttansdt Company, under its new incorporation for this purpose, is the first party, and the City the second. Q. And the contracts between the City and the two companies constitute what are known! as the dual contracts ? A. Exactly, yes. Q. Well, I think that is a pretty reasonably satisfactory defini- tion. Now, will yoTi tell us what lines are owned and have been operated by the Brooklyn Rapid Transit Company and which passed to the ITew York Municipal Railways Company at the time that company was incorporated ? A. I am afraid I could not do that. Q. Weill, does it include all the elevated lines? A. There are numerous lines, elevated and surface, and I cannot recall them. Q. Does it cover all of the elevated) lines? A. It covered the elevated system of Brooklyn. Of course, their surface lines had no relation to the matter. Q. And they were o^wned, the surface lines, or any part of them, by the Brooklyn Rapid Transit Company? A. That I couldn't say with authority, just what the character of their ownership was oT control. Q. Was it under its control as operating lessee? A. There is no question about that. Q. iSo that the Brooklyn Rapid Transit Company substantially operated the transit facilities' for the Borough of Brooklyn at the time of this contract? A. Yes, with the exception of the Interborough lines to Atlantic avenue. Q. And these contracts between the City and the Interborough, and between! the City and the Brooklyn' Rapid Transit are some- what lengthy? A. They are. Q. And we have been told by some of our friends who have appeared before the .Committee that they are very complicated — is that your opinion ? A. Not in any avoidable sense. They are complicated in that they deal' with a vast amount of detail, of course. The principles that run through them are perfectly clear. No complication there. Q. Are they of a character, in their structure and in the detail embodied in those contracts, readily understandable by the average citizen, in your opinion? A. Well, I have never tested out tihe average citizen on the construction of a contract. I am afraid I cannot give you more than a sruess at that. Eepoet of Joint Legislative Committee 489 The Ohiainnan. — You mean by that you do not want to give us a definition of the average citizen of New York ? Examination resumed by Mr. Lewia: Q. The contracts were given wide publicity ? A. The most con- stant and widest sort of publicity for two or three years. Q. And have you any opinion as to 'how well informed the general public may have been at the time the contracts were exe- cuted as to the general terms ? A. I cannot believe th^at there was any doubt in the mind of any citizens who usually paid attention to such things of the exact nature of the contracts. Q. Was it in your opinion., Mr. McAneny, reasonably feasible for the average citizen to examine those contracts and inform, him- self as to the length of time that might be required foT the con- struction and the time (within which the Oity might expect to obtain a return upon its investment? A. I should say there was no question about that. The reports that were submitted from time to time, the debates in the Public Service Commission and the Board of Estimate, which were public ; constant stream of state- ments from various sources, left no doubt at all as to what was expected of the contracts. Of course the text of a contract itself does not necessarily disclose the exact theory as to how' long it will take to make money out of it. Q. ISTow, there was a time when the City contemplated entering into what was called the tri-borough system of rapid transit, was there not ? A. Yes, in the sense that that system had been devel- oped by the Public Service Commission, and very much under discussion. It never reached the Board of Estimate. Q. Will you tell us briefly what was contemplated by the so- called tri-borough plan ? A. Yes. That contemplated the estab- lishment of a separate system, with a separate set of fares. The main system of vi^hich would be the so-called Broadway-Lexington Line, with branches in Brooklyn, by way of the Manhattan Bridge, proceeding to Coney Island on the one hand, and to Fort Hamilton on the other, and the branches in the Bronx, proceeding to Jerome avenue and up Westchester avenue in the direction of Pelham Park. I don't know that the line Tan all the way to the park; perhaps it did. That was the skeleton plan. Q. And that was contemplated before the so-called dual contract 490 Investigation of Ptjblic Seeviob Commissions system was broiogli't forward, was it not ? A. Yes. That is, it was under disciasision. Q^ Who was the originator, do you know, of the tri-borough sys- tem ? A. That I don't know. It grew and developed in the PubHc Service Commission. Chairman Thomipson. — That tri-borough system contemplated the construction of whatever was in the plans by the City, to be owned by the City ? A. Yes. Examination resumed by Mr. Lewis : Q. There was no partnership about that at all ? A. Well, the plan contem'plated the lease of the lines, of course, by the private operator. Q. Afterward ? A. Under whatever private partnership agree- ment the City might make, or whatever leasing arrangement the City might make. Q. By that scheme the City was to own the result of their con- struction ? A. Yes, just as they are doing in the case of the present siubway. Q. Now, you tell us, Mr. McAneny, what part of the system operated by the Interborough Company is owned by the City. A. That is the subway system. Q. Was anything else operated by the Interborough Company? A. All of it, except the 'Manhattan line®, which, of course, is an entirely separate thing. Q. Then the Interborough Company as a company actually owns no railroad transportation facilities in the City of New York? A. None. Q. It operates the subway system under its arrangement witt the City? A. Under its lease with the City. Q. And it operates its elevated lines' under its lease with the Manhattan Comipany? A. Under its lease with the Manhattan Company. Q. Does that lease from the Manhattan Company cover all of the elevated roads operating in Manhattan ? A. I believe that it does, yes, except, to be exact, except those sections of the subway that happen to be elevated'. Q. That would embrace, then, Second, Third, Sixth and Ninth Avenue Elevated lines ? A. Yes. Kepoet op Joint Legislative Committee 491' Q. ifow, does the Oity own any part of the railroad lines in the Borough of Brooklyn ? A. None, excepting — well, yes — all of the subways that had been built or are now building, owned by the City. Q. At the time this contract was entered into, was the City the owner of any railroad operating lines in the City of Brooklyn, except the subway to Atlantic avenue? A. No. Q. Had no intetest whatever in the elevated strueturesi? A. None whatever. Q. I think you said that you were not prepared to say whether the Interborough operates any of the surface lines in Manhattan? A. I say that merely from the fact that I am> not familiar with the inter-relation of those lines, whatever they m^ay be, although, of course, they have at the pTesent time, the same administrative group of officers there. Q. At what time after you became a member of the Board' of Estimate and Apportionment was this transit committee of which you are chairman appointed ? A. I think it was in the latter part of January, 1911. Q. And was the tri-borough system undei- consideration by the Public Service Commission at the time of the appointment of that committee? A. It was there — I can't recall just what stage they were under consideration. Q. Had the dual contract system been suggested up to that time ? A. No. By the Chairman : Q. Well, up to that time you had the so-called tri-borough plan under development in the Public Service Commission, and the offer of the Interborough Company submitted immediately preced- ing to build and operate extensions of its own system ? A. Those were the two things then before the City. Examination resumed by Mr. Lewis': Q. What did it mean by offer to build and operate extensions of its own system ? A. Its' own operating system. Q. That is the system that it was then operating as the lessee of the City? A. Yes. Q. And did that 'contemplate also the building and the operation of extensions of the elevated system, operated' by the Interborough 492 Investigation of -Publio Service Commissions on its lease from the 'Manhattan ? A. Thetre was a separate propo- sition, so^alled, for the third^tracking of this elevated system. Q. And for any extensions of that system, do you recall ? A. I do not recall exactly, whether the extensions were in that proposi- tion or not, or whether tihey developed later during their negotiations. Q. Well, now, I suppose from the fact that your committee was appointed, that ithe entire subject matter of transit facilities for the entire City was referred by the Board of Estimate and Appor- tionment to your committee ? A. In so far as the power and. action of the Board of Estimate were concerned. Q. Yes. A. The committee, I might add, was appointed at tlie instance of the Public Service Commission. A great deal of time had been wasted for several years before in the exchange of notes and conferences and what not between the two boards, and they had not, up to that time, really got down around the table, as it were, and applied themselves in joint fashion to the solution of these problems. The Board of Estimate received a letter from the Commission signed by Mr. Wilcox, and in the course of which it was suggested that if a committee might be appointed to confer with them, that it would be much better to come to agreement before any complete scheme had been perfected in the one place, and sent to the other where it might be disapproved or defeated, and it was out of that — Q. In other words, it was thought wise that the two bodies co-operate in the formation of and acceptance of a plan for develop- ing the transit facilities of the city ? A. Exactly. And out of that grew the conferences or the negotiations conducted practically hy the committee with the two boards or by my committee and the full committee of the Public Service Commission. Q. And so practically the entire subject of transit facilities for the entire city was committed to your committee at the time that committee was appointed? A. In so far as development of tie subject — development of the plan and submission of that plan to the Board of Estimate was concerned. Q. And that committee consisted of yourself and what otiher members? A. The President of the Bronx, Mr. Miller, and President of Richmond, Mr. Cromwell. Eepoet of Joint Legislative Committee 493 Q. Is that committee still in existence? A. Inasmucli as Mr. MiMer and Mr. Cl-oinwell have gone out of the board, the oom- mittee was reorganized at the opening of the present administration under the name of the Transit Committee. I was appointed as ohainnan with President Pounds of Brooklyn and President Mathewson of the Bronx as my associates. Q. And your committee, I presume, co-operated with the Public Service Commission in the ni^otiations leading up to the execution of tlie dual contracts ? A. Yes. Q. ifTow, in the conduct of those negotiations was there any understanding, either express or implied, for a division of the work or responsibility as between the two bodies, the Public Service Commission and the Board of Estimate and Apportionment ? A. Practically none. Of course the matter the confeTence committee had before it in the matter of engineering data and plans and everything of that nature came entirely from the Public Service Commission. Other papers, related to the financial side, might come from the financial department of the city. Except foT the natural division of the work it was a common undertaking. Q. Was there any arrangement that in the consideration of the problems affecting, relating to the financial questions to be deter- mined in the preparation of the dual contracts, by which the respon- sibility iot the results arrived at was lodged with the Board of Estimate and Apportionment rather than with the Public Service Commission? A. No understanding. Of course naturally and l^aily the Board of Estimate accepted the final responsibility for the financial terms and approving of the contracts. Q. Well, was there anything that might be said to be an abdica- tion on the part of the Public Service Commission of its powel-s so far as the exercise of those powers related to the financial, the pro- priety of the financial provisions of those contracts? A. I recall none. Q. Was there an arrangement under which the Board of Esti- mate and Apportionment conceded to the Public Service Commis- sion the responsibility for the determination of the detail, plan and construction work, etc. ? A. Well, that required no concession. Of course, under the law that is their function. Q. The Board of Estimate, then, made no effort to interfere with the exercise of the discretion of the Commission as to the plan 4:94 Investigation of Public Seevice Commissions of consttuction that should be adopted ? A. No. There was no stage of the negotiations — anything that developed that could be so described. Of course, w© simply worked together. There was almost no division of line between the members of the committee and the other. One body working together to get at the result Q. The Public Service Commission had its own engineering force, and that force, I assume, was charged with fhe responsibility of the preparation of the plans of construction ? A. Naturally. Q. Now, did the Board of Estimate and Apportionment have an engineering force ? A. Not engaged upon this work. Q. And no expert advice as to the propriety of the plans as pre- pared by the engineers of the Public Service Commission? A. None. Q. And no expert advice as to the wisdom of the expenditure of the amount estimated as the cost of the construction under the plan pTepared by the Public Service Commission ? A. There was no attempt of the Board of Estimate to check the engineering work of the Public Service Commission, if that is what you mean. Q. And if a more expensive plan were prepared under the direction of the Public Service Commission than was necessary for the purpose, no limitation was placed by the Board of Estimate upon that expense, but the plan was adopted or accepted and appi-oved by the Public iService Commission without question? A. That is substantially true. Q. By the Board of Estimate? A. Yes, as far as I am con- cerned I am of the complete conviction that they were correct. Q. Was the Board of Estimate and Apportionment of one opin- ion as to the propriety of the execution of the dual contract ? A, Mr. Mitchel, then President of the Board of Aldermen, voted against them. The othet members of the board voted for it. Q. He was alone in his opposition ? A. He was alone, yes. Q'. The press discussed the propriety of the dnal contracts at considerable length ? A. Great length. Q. And there was a division among the newspapers of New York as to the wisdom of the dual contracts ? A. There were two, I think, that were doubtful. Q. And' hearings had upon the subject as to the wisdom of the execution of the dual contracts open to the public ? A. Innumera- ble heatings. At every stage of the development of the plans, and, Repoet of Joint Legislative Committee 495 of course, more or less co-operation from outside bodies, sucli as the Chamber of Commerce, in interesting their own members and acting through their own committees on this subject. Q. Well, now, the committee of which you were chairman, I assume, made a close study of this subject ind presented a report ? A. The reports were submitted jointly signed by my committee and by the members of the Public Service Commission. Q. And do you recall the date of the report submitted ? A. The first report was submitted, I think, under date of June 5, 1911, although I am not sure of that exact date. Q. And was there a final Teport submitted in 1912, Mr. McAneny ? A. Yes, a further report. Q. And that was the last report submitted prior to the approval and execution of the plans, was it not? A. iNo, there were other reports not so comprehensive, because the framework had been discussed in these earlier reports, and there were other reports from time to time. Q. I show the witness bound volume entitled "Annual Eeport, Volume I, 1912, Public Service Commission for the First District ", at page 731. Will you tell the — lOhairman Thompson. — I want to congratulate the Public Service Commission of the First District in that their report is printed in final form and ready for reference. Q. Will you tell the Committee the date of the report signed by you, with your signature, appearing on page Y31 ? A. I don't know as I can find it. Q. That was the trouble with me. A. No, I haven't looked at these things for a long time. That is why I believe if you really want light it would be right for me to prepare this thing with more care. Q. We really want light, but we wasited to make a little progress to-day. A. This is dated May 22, 1912. The Chairman. — Mr. Whitney sent word in from the Public Service Commission that he is unable to be here to-day on account of that wreck on Seventh avenue — it is taking his time. Mr. Lewis. — I am sorry not to have Mr. Whitney with us, but I don't know as it necessarily prevents the conduct of the examination. 496 Investigation of Public Service Commissions The Chainnan. — His idea is he could be available for our assistance if we wanted him, but we appreciate the fact that he is busy somewhere else. Examination resumed by Mr. Lewis : Q. Was the report to which reference has been made dated May 22, 1912-, published in the volume wfhich you have been shown, beginning at page 704, and ending at page 731, the repoi't upon which the dual contract was based substantially? A. Ifow, 'as I recall it, yes. But I must repeat that it will be almost impossible for me to remember the significance of these dates wherein the series of a particular report fits unless I reread them. These are matteTs that occurred four or five years ago, and I have not refreshed my memory about this whole sequence of reports. The Ohairman called on me a few days ago, 'and I gained the impression from him that you wished to question me to-day about a particular matter. On that I am prepared to go ahead, but as to a narrative of the entire histoTy of these negotiations for the last four or five years, I would not attempt that to-day. The Ohairman. — We appreciate your anxiety to come here and tell 'about that particular matter, and no doubt you will get a chance before Mr. Lewis gets through. A. I will do anything you desire. Examination resumed by Mr. Lewis: Q. I thought perhaps it would be well while we have you with us. A. I will come back again at any time, but I would like to reread that book. Q. Do I understand that you prefer not to have the examination continued along these lines to-day ? A. I think it would be full of difficulty, 'Senator, if you expect me to remember the detail of these things, and examination of them. Q. Well, I thought it desirable to have — for instance, this docu- ment identified and offered in evidence as a part of that woidd be easy enough. Then we will be able to study it with the expectation. A. But I think that the more profitable way 'would be for m© to reread this series of Teports and refresh my memory about the whole sequence of facts, and then 'gladly answer 'any of your questions. As I say, these things run three or four years back. Q. I have no doubt that would be a desirable plan to follow. Eepoet of Joint Legislative Committee 497 Mr. Lewis. — I want to offer in evidence, Mr. 'C'bairman, Docu- ment ISTo. i, found on page 704 to 731 of the repott of the Public Service Commission for the First District, Volume I, 1912. The Chairman. — Do you want that extended into the record, or just as an exhibit? Mr. Lewis. — No, I don't think it worth while to extend it in the record. This volume is available so it can be submitted to the Legislature in its printed form. (Document l-eceived, to be marked in serial number.) Q. I^ow, out of deference to Mr. McAneny's wishes, as I under- stand them expressed, I think that it may be well to defer a carry- ing out of the line of investigation, which I rather anticipated carrying out to-day. A. You see I have had no suggestion of that at all. Q. And come to the proposition which he understood he was to be questionedi upon at this hearing. Under the dual contracts, Mt. McAneny, the Public Service Commission entered into an agree- ment with the Manhattan Elevated 'Railroad Company, as I understand it ? A. Not under the dual contracts. Q. Well, as a part of the negotiations for the additional transit facilities? A. Yes — Q. It was a separate — A. The matter of the extension of that system was discussed as we ran along with the othe*, but it of course was contained in a separate contract. Mr. Lewis. — And that contract with the Manhattan Company has already been offered in evidence. Q. And it really, instead of being a contract, is in the form of a certificate issued by the Public Service Commission authorizing the iSeciond, Third and Ninth Avenue additional tracks, Manhattan Railroad? A. Wasn't there a separate certificate for the exten- sions — this covers third-tracking ? There is a separate certificate for the extensions. Q. Did you have any part, Mr. McAneny, in the negotiations of the tel-ms under which the certificate was issued to the Man- hattan Company ? A. Yes, exactly the same relation to this as to the other. 498 Investigation of Public Seevice Commissions Q. And did you have any part in the negotiation of the tenns of the arrangement between the Public Service Commission and the Intetborough Company under whicih the certificate for the construction of the Webster Avenue line and other lines was authorized ? A. The same relations. Q. Other extensiions, connections and extensions — is this the certificate, and do you recognize it? A. Yes. Q. And I show the witness also a certificate issued to New York Municipal Railways Corpoi-ation for the Broadway-Fulton and Myrtle Avenue additional tracks — do you recognize this also, Mr, McAneny? A. Yes. Q. And did you have paTt in the negotiations which led to the execution and delivery of these ? A. The same. Assemblyman Maier. — You do not make it clear on the record what certificates the witness is testifying to. Mr. Lewis. — I read to him the title of the certificates, so I think it is clear on that subject. Q. Well, now, referring to the Manhattan certificate for the Second, Third and Ninth Avenue additional tracks, will you explain, Mr. McAneny, why the certificate does not contain the requirement found in the Broadway-Fulton certificate providing for the submission to the Public Service Commission of any con- tract or proposed contract to be entered into for the work to he done on those three lines by private arrangement? A. Well, so far as I recall the discussion of that item in the negotiations — of course, difference was constantly recognized between those two contracts — the Brooklyn elevated lines were incorporated in the dual system. The Manhattan lines were to be operated separately upon another basis. In the course of our talk with the two com- panies we commenced by taking away from the Interborough the right to construct its share of the new subway system. That was the first proposition, and it took considerable pefsuasion to bring them around to the view that the city would build all of these lines, and that we would take their check over the Comptroller's desk and let the contracts and pay for the work, simply taking the check for their share. That was the first concession that was made. Repoet of Joint Legislative Committee 499 Q. That is their shai-e for the cost of construction ? A. Their half. The same thing was yielded m the Brooklyn upon the dual contracts. When it came to the elevated railroads here — while we pressed for the same application, the Interborough Company was unwilling to yield it except in the matter of the extensions. Not exactly the same way, because, under the dual plan, w« were actually to build the road, and under our own contracts, but as to the approval of their contracts, where they were permitted to pro- ceed with their work independent, under their own' contracts, was the point. Q. That was a concession demanded by the Interborough Com- pany acting for the Manhattan C&mpany ? A. ISTo. It was a denial on their part of the concession we asked of them. We got as far as we could. Q. It amounts to about the same thing, does it not? A. 'JSTo. Frankly, I am a bit surprised that we gained as much as we did in the matter of the right to approve the contracts let by these companies themsielves, and the right to investigate their books from time to time upon questions of expenditure, we gained greatly in that respect. I might say against their constant opposition. Q. You gained that in your negotiations with the New York Municipal Railway companies, did you not ? A. We did. Q. But you were unable to gain that from the Interborough? A. Yes. Q. And was there any discussiion as to the propriety of the sub- mission to the Public Service Commission of any proposed form of contract for the extensions or connections authorized in the cer- tificate for Webster Avenue and other avenues ? A. Oh, yes. The company agreed that its contracts for the extension work should be let subject to the approval of the Commission. In the matter of the third-tracking, they contended that inasmuch as that work would have to proceed during the operation of theil- road, it would be attended with constant danger and was of a delicate nature and sort that they should be permitted to select their own contractors. And while we were unable to get any further in that direction, I do not recall that there was any seTious opposition to that plea from any quarter. Q. Then the matter, then, was rather conceded to the Manhattan Company that they should, because of that fact, have the right to 500 Investigation of Public Service Commissions let their contracts ■without supervision by the Public Service Com- mission 'as to the third-tracking of the 'Second, Third and Ninth Avenue? A. They were granted the certificate without pressiiig that demand, as they would not have it otherwise. Q. But as to the extensions and the connections, contracts are required to be submitted under the certificate? A. Yes. Q. To the Public Service Commission for approval, and it gets do\vn, then, to this, does it not, Mr. McAneny, that the only con- struction work authorized under any certificate issued by the Public Service Commission that can be carried on anywhere within the limits of the city, without the proposed contracts being first submitted to and approved by the Public Service Commission, is the construction work on the third-tTacking of the Second, Third and Mnth Avenue elevated? A. Well, I would not express it that way. Here are three different contracts — three differmt systems under negotiation at that time. In the case of the two subway systems, that was included — was yielded and granted. In the case of the Manhattan system, which was on an entirely dif- ferent basis as to the ownership of the property and as to the character of the division of the returns, the company would not have yielded, and would not have, according to their declaration of the work that they were required to yield. Of course, on the third-tracking contract — ■ the third-tracking work would have cov- ered the m'ajor part of their work on the elevated system, the extension being considerably the lesser part. There on our claim, that there would be ultimate ownership of the extensions by the city, that they at least were very much nearer the basis of the subway contract, we did gain that point. Q. As to the extensions ? A. Yes. Upon the other we did not gain it. Q. Now, didn't you have an argument that the city would be entitled ultimately to recapture the third-tracking construction, which the company proposed to build, and with that 'argument employed in an effort to obtain a supervision of the letting of con- tracts for that construction ? A. I don't know to w'hat degree that argument was employed. I do Imow that the difference m basis between the two systems was, of course, recognized. Q. I say it was an argument that might have been employed and urged with considerable force, do you think ? A. I think that Report of Joint Legislative Committee 501 there is a very great difference between the two plans in that respect. Of course, the recapture of the third-tracking lines, while nominally reserved to the city, would be an extremely improbable thing. Of course, the third tracks, without the other two, would be of no use to us. Q. And there was also, was there not, some reason why the approval of those contracts should first be had growing out of the fact thiat the city is to share ultimately in the earnings of that third-track construction? A. Yes. We finally worked out the contract the city was to share, and that was the great big concession that we got from them at the beginning. Their proposition was very different. Q. Well', was not that fact an argument for the supervision by the Public Service Commission of the form of contract that might be entered into ? A. So far as I am concerned, it would not have been an argument for discontinuing negotiations. Q. Well, was the argument employed to the extent that it became lapparent that, if pressed, it would result in the discontinu- ance of the negotiations ? A. I think that was the practical situation, yes, but I want to say. this : That this point did not take up very much of the time of our negotiations. There was not any objection to the company taking care of its own work on its own structure; was not urged by any one that I recall. It was not considered important. Q. Well, it got down to the point, I judge, from your testimony, where, had the Commission insisted on the right to supervise the form of contract for this third-tracking, the Manhattan Company would have terminated negotiations? A. I do not think that they so declared, but that grew to be their position about that time as to any further concession. Q. And it was your impression that that would result, if the demand were persisted in ? A. I think it would have resulted, or delayed the work considerably. Of course, to understand the rela- tion of the city to the Manhattan work, one really ought to go back to their proposition of this third-tracking and extension. As we received it, it was that they would take the certificate and do this work and operate the system, and in return for the additional grants of the city, they would give us two per cent of the gross l-eceipts at the express stations on the lines. I think one — 502 Investigation of Public Seevice Commissions Q. That was the excess gross receipts, was it ? A. No. Of the gross reoeipts at the express stations, two per cent, which was figured out to be 'about seventy thousand dollars a year on that one, and I am pretty sure I had the support of the conference, declining absolutely to consider any such basis. When they asked what we wanted I told them we wanted fifty per cent of the net increase on the entire system. Inasmuch as it was calculated that the exten- sions and additions would add about forty per cent to the capacity of the system, it was also figured that it would mean about half ^ million dollars to the citv as against the seventy thousand. It was not until very late in the negotiations that the company was induced to yield to that demand. We next — Q. Well, did they yield to that demand of yours, and is the city to have fifty per cent of the net earnings ? A. Yes. That is, fifty per cent of the net of all increase over the amount they were earning at the time that the contracts weTe negotiated. Q. Not of net earnings, but fifty per cent of the net increase? A. Yes, which we figured out on the statistics of the system to he about half a million of dollars. Q. That is on the entire system of the elevated railroads, is it? A; That is the Manhattan. Q. And is that provision found in the Manhattan? A. Yes, very much so. Q. And that is in addition to the two per cent of gross earnings? A. No. It is in place of that. No — the two per cent clause was retained. That is quite true. It is in addition to that. That was retained in order to meet some technical point as to the amount of the expenditures. The fifty per cent is in addition to that. It is possible that may be deducted from the fifty. I don't recall that. Q. That two per cent is on the gross earnings in excess of the earnings on the 30th of June, 1911, at express stations, is that the fact? A. I think the two per cent was on the gross receipts at the express stations, old and new. By Mt. Shuster : Q. That is treated and is a deduction before division of the net profit? A. Yes. I should say that was deducted, 'and fifty per cent was the real return to the city. But to proceed, the next con- cession that we demanded of them was that the city, inasmuch as Report of Joint Legislative Committee 503 we ihad gained this share in the future earnings, that the city should have the right to examine their books and 'accounts at any time, not merely construction work and opeTation of the road, but to question any items that were considered to be unfair, with pro- vision for arbitration in cases of difference of opinion, and so on. That was yielded pretty late in the negotiations. I recall that Mr. Shonts was rather disturbed by that and said, among other things, " Great Scott ! You want to run our railroad ; you are getting it anyhow, and now you want to run it for us ! " I said " No, we do not want to run your railroad but to the extent that our partnership in your future profits will bear we must have that right." Chairman Thompson. — In other words, you would like to know how he run it ? A. You might put it that way. At any rate, while they declared they would never yield that point, they did. Now, as to this question and the work, they yielded on the question of construction work and extensions. As to this other work, they raised the questions of the uses of their present structure; raised the question of safety, and so forth, and so on, and insisted abso- lutely upon th'Et; that was recognized, I believe, by every one in the conference as a point we could not press any further. In other words, we got ninety-five per cent of what we wanted, and what we set out to get, and we were not able to get the additional five per cent. But there was no discussion in the conference at that time to indicate any particular objection to leaving the matter at that point. G-enerally recognized that there we would rest. Q. Well, now, you succeeded pretty well in your demands from the Interborough and the Manhattan, and got substantially all the concessions that you asked except the right to supervise the letting of the contract for construction on the Second, Third and Ninth Avenue elevated structure, did you? A. Yes. That certainly is the fact. And as I recall it, first I was — Q. And you were under the impression that if you persisted in your demand for the right to supervise that construction, that such persistence would result in the termination of the negotiations? A. I think that was perhaps the general impression of the mem- bers of the conference, although there was no flat declaration to that effect. 504 Investigation of Public Service Commissions Q. Did you know of the submission to the Oommission of the so-oalled Stevens contract or proposed form of contract with John F. iStevens? A. Yes. I was advised that it had been submitted' at the time that it was submitted. Q. And do you recall about the time when that proposed form of contract was submitted ? A. Roughly I should say in July of 1913, although I haven't got the exact date. Q. Do you recall the first information and its source that came to you on that subject? A. I am rather inclined to think that it came from Mr. Maltbie, with whom I had been in very close touch about a number of these details, including this. Q. And do you recall the occasion when that information came to you from Mr. M'altbie? A. No, I do not. I met him quite frequently along about that time, and I do not remember the exact occasion. Q. That was the first information that you had of the fact that the proposed form of contract had been submitted to the Public Service Commission for approval by the Interborough Company covering the construction of the third track on the Second, Third and Ninth Avenue structures, as well as the construction of the connections and the extensions, was it ? A. Yes. Of course, natur- ally I would not have been advised in any event, as these matters do not come to the Board of Estimate and Apportionment Q. I realize that. Do you recall the conversation that you had with Mt. Maltbie at the time that he brought the matter to your attention ? A. Not with any exactness. Q. You have a recollection, I suppose, of the substance of that conversation ? A. I remember that he referred to the fact that it had been submitted. Q. Now, will you tell me, Mr. McAneny, the substance of the conversation, and, if you can, where that conversation took place — we would be glad to have that, and the substance of the conversa- tion. A. Why, I am afraid I cannot do that, as I said, with any exactness. It amounted to the fact that Mr. Maltbie told me that this contract had been submitted in blank form, covetring both the third-tracking and the extension work, and that it was on a cost plus percentage basis, which in his judgment would not prove to be the most advantageous basis for the city when it came to the charging of cost and expense. I promptly agreed with him. And had some Report of Joint Legislative Committee 505 further talks -with him, the result of which, or folloTving which I addressed a lettet to the Commission, under date of July 21&t, I found, in 1913, expressing my opinion of the contract at some length, and my objections to it, and urging that it be not approved. Q. Was this the first information that you had had of the sub- mission to the 'Commission of a proposed form of contract? A. Yes, quite the first. Q. Had you prior to that time had information bjs to the proba- bility that a proposed fotm of contract on a cost plus a percentage plan was likely to be submitted for the approval of the Public Service Commission ? A. Wo. I had no infonmation whatever until Mr. Maltbie spoke to me. Q. And when with reference to the date of your communication did the conference with Mr. Maltbie take place? A. Well, I should judge within the several days preceding the 21st of July. Q. Well, about how many, Mr. McAneny ? A. I can't say, I am sure. Q. A week, in youf judgment? A. I haven't the slightest recollection as to how many days it was. Q. Well, now, between the date of the conversation you had with Mr. Maltbie in which he informed you that an application had been made to the Public Service Commission for approval of a cost plus percentage form of contract took place, and the date of your communication, did you have any conversation with any one on the subject of that proposed form of contract? A. 'So, unless it might have been with the Mayor or some one else in relation to Mr. Maltbie's suggestion. Q. Do you recall any conversation with the Mayor on that sub- ject? A. ISI'ot particularly, no. Put, of course, all these matters were of rather frequent consultation. Q. Did you have any additional conferences with Mr. Maltbie between the time he first bTought it to your attention and the date of your communication ? A. I think quite likely, i Q. Do you recall anything about it? A. What is that? Q. Do you recall any other conversation ? A. There might have been two or three references to this matter in my talks with Mr. 'Maltbie. As I said, I saw him quite frequently about a number of matters that we're then pending, in which I was naturally much : interested. 506 Investigation of Public Seevice Commissions Q. Do you know the date on which the matter came up on the oalemdar of the Public Service Commission — the calendar of the Committee of the Whole of the Public Service Commissioii? A, No, I do not. Q. Did Mr. Maltbie tell you that the matter was on the calendal of the Committee of the Whole of the Public Service Commission at the time he talked with you ? A. I think that he did, or that it was before them in some way or other, but I do not recall that, eitheir. Q. Did he tell you the fact that that was the first infonnation that he had received of the submission of that proposed form of contract or an application for the approval of the proposed form of contract ? A. I can't recall exactly what he said in regard to the matter. Q. Did you evei- see the application, Mr. McAneny, that was presented to the Public Service Commission in connection witk the approval of the proposed form of contract ? A. I do not think that I did, no. Q. And your only information on the subject came from Mi. Maltbie ? A. Yes. Of course, when Mr. Maltbie referred to such a contract my general understanding of the subject was sufficient to equip me to write a letter about it, which I did. I do not imagine he went much into detail. My letter was an argument. I presume you have that. Q. Yes, we have that. A. Was an argument against the approval of the contract. Q. Well, had you seen the contract, or the proposed form «' contract, at the time you wi-ote that argument ? A. I think I had seen the proposed form, yes. You spoke of the application. Q. But you had not seen the appli-cation ? A. No. Q. When, if you recall, did you first see the proposed' form of contract ? A. Well, it must have been during those same several days preceding the date of my letter. Q. And the first information that you had of the submission ^ the Public 'Service Commission of any application relating to the pfoposed form of contract came to you from Mr. M^altbie? A. Yes. Q. And "between that time and the time that you wrote yo™ communication you obtained no information on the subject, and Kepoet of Joint Legislative Committee 507 discussed the matter with no one else? A. No, except as the examination of that draft revealed further information. Q. Did you talk, Mr. McAneny, with any officer of the Inter- borough Rapid Transit Oompany on the subject at any time — on the subject of this proposed form of contract? A. Yes. Q. And when did that conversation take place ? A. During the several days following the publication of my letter. Q. And have you any — can you give us anything more precise as to the date of that conversation ? A. I am afraid not — not as to the exact date. Q. And with whom did you talk on that subject? A. In answer- ing that, let me state, first, so there shall be no misunderstanding about this gentleman's position in the matter, that a man did call upon me in relation to another matter — in relation to the then affairs of the New York Dock Company — who at that time was 'a director of the Interborough Company, 'and who had read my letter in the newspapers, and his attention therefore had been attracted to my interest in these contracts, and who said in passing that he was exceedingly glad that thete was opposition to these contracts; that there had been opposition also in the board of the Interborough Company. That, of course, however brief and trifling his word to me might have been, was given under the implication of confi- dence. It happened to be a man whom I have known for a great many years intimately in older days, and he rather naturally referred to this thing in the course of his talk. But, as I say, it was under the implication of confidence. I mentioned it to no one else except in the same passing way, and Mr. Maltbie a few days later, when he spoke of this incident, and I referred to this talk as con- firmatory of the fact that there had been opposition in the board of the Interborough Company. Nevertheless, your Chairman asked me whether I would mention his name, and I am extremely reluctant to do so, merely because I say it was a confidential matteT. But I asked him whether he had any objection to my referring to the matter here, and although he naturally had the same reluctance to have a reference made to a chance thing that he had dropped in the course of another talk, he told me I was at liberty to mention his name. This was Mr. Young, who was at that time a director of the company — Geofge W. Young. 508 Investigation of Public Service Commissions Q. Of the American Dock Compaiiy ? A. I don't know — Q. I thought I understood you — A. No. He had called on me several times ■ — half a dozen times along about that time, about the application of the New York Dock Company for a — Q. And did 'Mr. Young give you any information as to the reasons for the opposition of the members of the board of directors of the Interborough Company to this contract ? A. Yes. Q. Will you state what he said on that subject? A. He said, generally speaking, that they did not consider it an advantageous contract; that the allowance of percentage was greater than need be ; that under the head of cost there might be included the cost of sub-contracts upon whioh a profit would have been gained by the sub-contractor and an additional percentage profit by the major contractor, and so forth and so on. iSiubstantially the things that had been made quite patent in what had been previously said. Q. Did he state in any conversation with you anything upon the subject of expenditures which had been made by the Inte^ borough Coonpany against the wishes of some of the directors of the company in connection with the bringing about of the execution of the dual contracts ? A. No, he did not. I cannot recall in the course of that conversation very exactly what Mr. Young said to me. I remember that I gained the imp'ression from what he said that there might have been soispicion in his mind las to the exact use of this unnecessary margin of profit, but he made no statement of fact in relation to it, and I cannot remember Ms exact language. Q. Did he say anything in that conversation about the use by the Interborough Company of fund® belonging to that company for the purpose of bringing about legislation in connection with dual contracts ? A. No. Certainly the word " legislation " was not mentioned in Mr. Young's — Q. Was there anything said in that conversation upon the sub- ject of the nse of any funds of the Interborough Company in the work of obtaining permits and consents, and so forth? A. No. In fact, as I repeat, no reference to any particular expenditure by anybody. Q. Was there anything said on the subject of the use of money by the InteTborough Company in connection with the bringing about of the execution of the dual contracts which could not prop- erly be allowed to appear upon the books of the Interborough Company? A. No, I recall none. Report of Joint Legislative Committee 509 Q. Did he suggest that there had been at any time any improper use of funds of the Interborough Company which it was desired to reimburse to the Interborough Company out of the fifteen per cent margin of profit upon the award of the contract ? A. I recall none. Q. Did you state to Mr. Maltbie in words or in substance that you had information from a director of the Interborough Com- pany that there had been moneys of the Interborough Company employed in the work of obtaining legislation, procuring permits and consents and other work in connection with the brii^ing about of the execution of the dual contracts, which moneys could not properly be set up upon the books of the Interborough Company ? A. ISTo, I did not. What I said to Mr. Maltbie I can give you in a phrase. In a case of one of his talks with me about that time he referred, as I see, by an examiaation of his testimony here — he also stated to you he referred to rumors that had reached him about some of these matters. I do not think that he was explicit either in the statements, but simply as to rumors of the use of part of this profit for other than bookkeeping purposes. And I said to him then that I had had a word from some one who had been closely connected with the company that was a bit confirmatory of that position ; that this gentleman had stated his own general suspicion somewhat to that effect, but I said nothing, in detail further than that to Mr. Maltbie, as I had none. Q. And Mr. Maltbie brought the matter to your attention, rather than your bringing it to his attention ? A. Yes, he referred to it in the course of one of those talks. I think he stated that. Q. Did he say anything to you in any of those talks about any fund that had been so used as you describe ? A. I do not recall he went into any particulars. Q. Did he mention any fund that had been used which it was desired to reimburse to the Interborough Company through this medium? A. No, I do not recall that; his reference was to a general rumor about these things, and I replied by referring to another general ruanor which I heard. Q. Have you talked' with Mr. Maltbie since his testimony was given to the Committee here last week ? A. While he was in my office the other day. 510 iNVESflGATION OF PuBLIC SeEVICE COMMISSIONS Q. On the subject of the discussion that you and he had had at the time that you speak of i A. Yes, unquestionably. I referred to his testimony. Q. You have read his testimony taken before the Oommittee last week ? A. Yes. Q. When did you read that, Mr. McAueny ? A. That I read on Friday morning. Q. His testimony was taken on Thursday ? A. Yes, sir. Q. Will you tell us where you obtained the copy of his testimony which you read on Friday ? A. Why, it was handed to me, put on the desk of the secretary. I think it came from the office of the' Public Service Commission. Q. Did you ever have any conversation at any time with any director or sitockholder of the Intetrborough 'Company on the sub- ject of the proposed form of contract with John F. Stevens? A. JSTo, not with any. May I repeat with a bit of emphasis that the impression must not be gained that Mr. Young as a director in that Interborough 'Company came to me to make any statement about this company ? His statement was as casual as I am giving it to you, and his visit was one of a series of perhaps half a dozen visits running along about that time about this altogether different matter, and I presume he spoke with me then with that muoh freedom because I happened to know 'him quite intimately. Q. Well, in explanation, Mr. McAneny, I want to assure you that this Committee is seeking only the truth of the matter. A. Quite naturally. Q. There is no disposition on the part of this Committee to fasten — A. If there was anything behind, it strengthened, I must say, the vigor with which I continued to oppose those con- tracts, and as far as they them'selves were concerned, were eventually defeated. Q. Well, just one other question. From the discussion or the talks or the different statements made with or by Mr. Young, did you get the impression that this Stevens contract was the subject of controversy in the board of the Interborough Company? A. Yes, distinctly so. In fact, I think he said at that time that the contract had not as yet been approved there. Q. By the Interborough board? A. Yes. And that he doubted very much whether it would be, whether they would not succeed in Kepoet of Joint Legislative Committee 511 disapproving it. That the copy that had gone to the Public Service Commission had gone without the formal action of the Inter- borough board behind it. Q. You knew about the Gillespie contracts — (Question withdrawn for the moment.) Q. Did you get the impression from your talk with Mr. Young that any discussion was had upon any illegal or improper use of money, any discussion in the Interborough board? A. No, I did not. He did not go into that. Q. Now, you knew about the fact that a contract subsequently was let, known as the Gillespie contract, did you, by the Inter- borough Company? A. Y«s. Q. Have you ever examined the Gillespie contract ? A. I think that came up. Q. Have you got a copy of it ? A. I have a copy of it here. (Copy presented by Mr. Shuster to witness.) A. It ia substantially the same thing. When my letter was sent to the Public Service 'Commission and published in the newspapers at some length, and a good deal of editorial comment about it, and so on, I had an interview with Judge McCall shortly after that referring to the transmission of my letter, and the Judge said that nothing whatever would be done in the board until there had been every opportunity for us to analyze and confer upon detail; that the matter had not gone to any formial stage there. I remember a short time after that, possibly a week or two, he stated to me in his office, " Of course in that shape it would never get through his board." It lay dormant for a long time after, some months, I imagine. And nearly a year later — Q. It never was actually approved, was it? A. No. Q. That is as I understand it. A. I find that nearly a year later there was a resubmission of a general contract in the same form', covering third'-tracking and extensions. Isn't that the case, an application covering extensions — I mean the Gillespie con- tracts included the extensions, too. The third tracks, and then an application was made to cover the extensions under the third tracks. It was constructive — it amounted to a renewal of the old proposition ? 512 Investigation of Public Sbevice Commissions Mr. Harkness. — Practically. Q. JSTow, isn't this the fact, for the purpose of having it clear upon the record ; isn't it the fact that subsequently, several montk subsequently, a contract was entered into between the Interborough Company and the ,sa<;alled Gillespie contractors which was not submitted to the Public iService Commission for approval, and which provided for the third'-tracking of the Second, Third and Ninth Avenue Elevated roads, and that later on an application was made to the Public Service Commission for the approval of a contract for the construction of the extensions and connections in terms the same as the Gillespie contract, except as to the amoimtof the percentage ? A. I so understand ; yes. To complete, however, the statement that I was making, I think that this contract came about a year later and constructively, at least, as you put it, ¥r. Harkness, it covered about the same ground as the earlier one. I then renewed my opposition to the new one, and had a number of conferences with Judge McCall. As a result of which, when the company pressed for a decision, it was agreed that the extension contract would be rejected upon those terms. What remained of the contracts was not, of couTse, before the Public Service Com- j mission, and the company, no doubt, privileged to let the contracts in its own way, not at that point being required to secure any of our approval. To the point they raised in the Stevens contract of couTse, the only hole we had to get hold of was that it applied to these extensions. They had blanketed in one contract provisions of the two classes, those that required approval and those that did not require approval, and therefore it gave me and others a cliance to get in our opposition. When the Commission formally rejected the new contract, in so far as it applied to the extensions, we tta got as far as we could go under the law. Q. Do you know whethe'r construction work is going forward on the extensions and connections ? A. Oh, yes ; I have no doubt of that, but I could not tell you exactly. I Mr. Whitney. — Not on the extensions. The Witness. — Then I am mistaken. Only on the tliir^- tracking. Mr. Whitney. — Yes, there may be a little of the connection w at 155tih street. Report of Joint Legislative Committee 51§ Q. There was some of that approved by the Commission ? Mr. Whitney. — The Commission approved of the three con- tracts doing that connection work, but I am not sure that any of it has been done, except, peThaps, at 155th street. The Chairman. — The connections were a small matter, weren't they? Mr. Lewis. — Yes. Commissioner Maltbie explained that the other day. I think if it is agreeable we might take a recess for lunch. The Witness. — Gentlemen, we have got a special meeting of the Board of Estimate for 2 :30 and arranged with a great deal of difficulty in getting all of them together on a very important matter. Can my return here be adjusted to cover that? The Chairman. — What time do you get through with your special meeting ? Mr. Lewis. — Will it be more convenient for you to come in to-morrow morning? The Witness. — It would be, a good deal. Mr. Lewis. — I think it would be agreeable to let the matter rest until to-morrow morning. The Witness. — You see this is our first session on the budget. The Chairman. — It seems to me as though I have heard of that before. The Witness. — • Your altogether unreliable Chairman told me you would need me about an hour, and I have made my arrange- ments accordingly. Mr. Lewis. — I am afraid our unreliable Chairman did not realize the difficulties under which I am laboring with a subject with which I am not especially familiar. The Witness. — Then I will return to-morrow morning at 11 o'clock, or, if you are in session this afternoon and I find I can break away earlier, I would come down later. Vol. 1 — 17 514 Investigation of Public Seevice Commissions The Ohairman. — I thought perhaps if they could get along without you until 3 o'clock. The Witness. — It is just the other way. The Chairman. — ■ You ale likely to be tied up the balance of the afternoon ? The Witness. — I am afraid so. The Chairman. — Then we will adjourn the Committee until 2 o'clock p. M., and Mr. McAneny is excused until to-morrow at 11 o'clock A. M. Whereupon the Committee adjourned until 2 o'clock p. m. at the same place. After recess the Committee met pursuant to adjournment. The Chairman. — Well, gentlemen, counsel informs me that he had intended this afternoon to proceed with the further examina- tion of Mr. McAneny and that the unexpected continuation of his testimony will be taken up again to-morrow at 11, leaves nothii^ for the Committee to do this afternoon. Under those circum- stances, if there is no objection, we will adjourn until to-morrow morning at 11 o'clock at this place, and if there is nothing further to come before the 'Committee it is so adjourned. SEPTEMBER 23, 1915 !N"ew Yoek County Lawyers' Association Boaed Room, 165 Broadway, New York City The Committee met at 11 o'clock a. m. pul-suant to adjournment, a quorum being present. Examination by Mr. Lewis resTimed : Q. Mr. McAneny, I think you stated yesterday that before giving the name of the director of the Interborough Company from whom you received information, you obtained his consent so to do, did you ? A. Yes. Q. That was Mr. Young's consent ? A. Yes. Eepobt of Joint Legislative Committee 515 Q. Wkeri did you see Mr. Young last ? A. I saw him yestetday morning. Q. Here in New York ? A. Yes. Q. At your office ? A. No, sir ; he called at my hotel. Q. When had you seen him previous to yesterday or communi- cated with him ? A. The evening before; he had been in Trenton, I believe, serving on the Federal Grand Jury, as I told your Ohaii- man^ that morning, and he was expected back in the evening, and I had arranged' with his office to let me know when he came back, and he let me know in the evening. Q. He has an office at 59 Cedar street ? A. I am afraid I don't know the exact address. Q. He has an office as banker and broker? A. Yes, sir; I looked him' up in the telephone book, to call his office. Q. Had you seen him mole than the two times you mention within the past few days ? A. No, sir. Q. Did you communicate with him directly and ask for the opportunity of seeing him ? A. You mean prior to this call ? Q. Prior to his calling you the night before last? A. I com- municated with his office, and I believe they got word to him I wanted to see him and to call me at the hotel, and he called me, I im^ne, shortly after he got back from Trenton. Q. Do you know where his home is ? A. He has a home at Deal in New Jersey, and I don't know whetheT he has a city house or not. Q. He is a resident of New Jersey, is he ? A. I think so. Q. Did he give you any information as to where he could be seen or reached if you wanted to coonmunicate with him at any time? A. During the day, for instance? Q. At any time, in the event you should want to reach him. A. No, sir. I did not press him for that. I telephoned him yester- day after I had testified here and told him I had done so, as I had indicated. Q. Whefe did you reach him by telephone yesterday? A. I don't know. I called his office and they told me that he was not there, and' that they thought they could reach him and have him call me, and a short time after that he calledi me, and I don't know where he talked from. 516 Investigation of Public Seeyice Commissions Q. Would you object to making the effort to react Mm at this time tlie same way you did yesterday ? A. Not a bit. Have you been trying to reacb bim and failed ? Mr. Lewis. — The Sergeant^at-Arms has. I suggest that the Sergeant-at-Arms be directed to call Mr. Young's office, and with Mr. McAneny's consent say that Mr. McAneny would like to speak to him, and if we succeed in getting him, I would be glad to have Mr. McAneny advise him that the Committee would be glad to have his presence here as soon as possible. Mr. McAneny. — I should be very glad to. I do not care to act as a subpoena server, but if the Chairman thinks it is proper to ask me to do it, I haven't any objection. Chairman Thompson. — We would like to have him appear. I assume he is a very busy man anyway, and it is pretty hard to get in touch with busy men in New York, for ordinary people. Mr. McAneny. — It was two or three days before I was able to find him myself. Mr. Lewis. — I wish the Sergeanf^at-Arms to state what he has done in the way of attempting to make service upon Mr. Young. Sergeant-at-Arms Hotaling. — I received the subpoena from the Chairman and went to Mr. Young's house address, and everythiag indicated that there was no one residing there, and there was a sign " To Let," and I rang the bell and also tried the lower base- ment door, and nothing doing. This morning I went to his office on Cedar street, and it was stated there that they had not seen him for some time, and it was stated — Mr. Lewis. — Did they state how recently he had been in the office? Mr. Hotaling. — I think they said something like a couple of moai,ths since he was in, and they gave me a telephone number in Deal, New Jersey, and I called there and the telephone operator informed me that the line was disconnected. Examination resumed by Mr. Lewis: Q. Mr. McAneny, I think you said that in the negotiations leading up to the execution of the Manhattan certificate, the City Hepoet of Joint Legislative Committee 517 obtained numerous concessions! ; is my recollection correct ? A. It is; yes, sir. Q. Was the elevated system, Second, Third and Ninth Avenue Elevated tracbs system regarded as being of great importance in connection with the dual contract proposition pending before your Board and the Public Service iCommission ? A. Yes, sir ; it always had been considered a very important detail in the proposed extension of transit facilities. Q. Can you state briefly just what function the elevated system is designed to play in the general scheme under the dual contracts and in connection with the dual contracts? A. It has no relation with the dual system as such, or the dual contracts. It is entirely separate. The part it is to play is to carry as many passengers as it can over those extended lines. The laying out of the subway routes is affected more or less by the presence of the elevated routes in particular territories. Q. And was it expected that the third tracking of those lines would lead to greatly increased travel by elevated ? A. Yes. Q. And, of course, that would lead necessarily to a substantial increase in the operating revenue, would it not ? A. Undoubtedly, yes, sir. Q. And the cost of the third'-tracking was considered by the Board of Estimate and discussed, I presume, with the Manhattan people, the probable cost? A. You mean with the Interbol-ough Company ? Q. I suppose the Interborough Company, acting for the Man- hattan? A. Yes, sir. I don't recall that we had the exact estimates before us at that time. Q. And do you know if any exact estimates were ever prepared ? A. I cannot say how exactly they were. Mr. Harkness can remem- ber, maybe. The estimates we had in relation to the dual lines differed from the estimates of the Manhattan work. I presume we naturally would have done so. Q. Do you recall what you bad in mind as the probable cost of the work to be done by the Interborough Company on the elevated structures? A. I cannot recall exactly. I presume roughly it was between twenty-five and thirty millions. Q. I wondered whether your recollection would be along the lines of Commissioner Maltbie's recollection on that subject; I 518 Investigation of JfuBLic Seevice Commissions think he testified from twenty-five to thirty millions ; I think there were some estimates by either members of the Public Service Com- mission or the Board of Estimate at the lower figure, and I won- dered which of the two views you held ? A. I don't recall that there were two sets of estimates about the elevated work. Q. Of course you regarded the — ? A. May I add a word ? Q. Yes. A. The estimates in any event wouH naturally be those of the company's engineers checked up and 0. K.'d by the engineers of the Public Service Commission. That was the natural process, and I don't imagine there were two sets. Q. Db you know whether they were checked up by the engineers of the Public Service ? A. I couldn't say positively. Q. Did the BoaTd of Estimate have before it at any time any thing official as to the probable cost? A. I cannot recall that, either. Of course that undertaking was entirely different and did not affect our action so far as the city's outlay was concerned. Q. But it did and does affect the cost of the ultimate recapture, does it not ? A. Yes, sir. Q. And it does affect the question of the length of time that must elapse before the city will begin to shaTe in the net earnings? A. Yes, sir. I did not mean that the Board did not consider those elements, but I mean we would not naturally have required the estimates as the basis of our preparation, and therefore not in the exact form we did require the subway estimates. Q. Did it or did it not occuT to the Board of Estimate it was the duty of that Board to check up the work of the Public Service Commission engineers in the preparation of the estimates for the third-tracking of the elevated lines in order that the city might be reasonably sure that there be no unnecessary expenses added to the cost of that work, and theTeby delay the period, the arrival of the date upon which the city would begin to get a revenue? A. No, sir. The Board of Estimate did not, as I said yesterday, under- take to check up any of the engineering estimates presented to us by the Public Service Commision. That whole matter lies exclu- sively in their jurisdiction, and the figures were of interest only as they might be the basis of our preparations or approval of the certificate issued' to the company. Rbpoet of Joint Legislative Committee 519 Q. Did the Board of Estimate and Apportionment regard tlie Public Service CommisBion, as a co-ordinate city body, for tbe pro- tection of the city's interests in connection with this work? A. Although the Commission is a State establishment, nevertheless, in its rapid transit construction work, it appeared to us necessarily as a city body for all practical purposes, a body composed of city men, and engaging to spend city funds, and subject in its action at many points to approval of tbe city government. I should say practically in the rapid transit work that we regarded it as a city body although we had no control over its action, except approving or not approving of certain things. Q. Did you make any calculation as to tbe time when the city would begin to share in the net earnings of the various third-track- ing propositions? A. I do not recall whether that was worked down to the basis of tables or not. In the case of the dual contracts it was. Mr. Harkness. — You had some estimate by wbicb you I tMnk figured out eventually there would be some $'r00,0€O to divide? Witness (continuing). — We estimated that when the capacity of the new system was reached there would be 40' per cent, addi- tional carrying capacity and therefore 40' per cent, additional gross revenue, with whatever net it might yield, but I don't think we undertook to estimate the exact net that might come because ele- vaed railroads are now operating, and there would be a period of two oi" three years' sag when the new lines are opened, and par- allelling in many respects, and the return to the present basis would be rapid, but would be rather difficult to estimate as to the exact tim'e when that would occur. Q. Did you have any unofficial opinion as to the time when the city might reasonably expect to derive a revenue from this third" tracking construction? A. None that I could identify, although I think the general understanding was that after two or three years of sag, the present rate of traffic would be resumed, and after that there would be continuous progress, but it would be impossible to say what the surplus of subway traffic would be, and how disturbed by the elevated and the surface lines. Q. You regarded the third-tracking proposition as of value to the Interborough Company, did you not? A. Yes, sir. 520 Investigation of Public Seevice Commissions Q. In the granting of the certificate, you felt that the Inter- borough Company was getting a valuable concession, did you not? A. Undoubtedly. Q. That third-tracking could not have been accomplished except with the consent of the Public Service Commission and the consent of the Board of Estimate and Apportionment, could it? A. No, sir. They put in a trifle of thitd-tracking before that, without anybody's consent particularly. I think that matte* is still in the courts in some shape or other. I cannot say about it. Q. In the certificate which was issued to the Manhattan Com- pany, there seemed to be some saving clause designed for the pur- pose of preserving the status qiw in relation to the claims of the ilanhattan Company on the legality of the third-tracking construc- tion which had previously been accomplished ; did you know about those claims that were specified and mentioned ? A. The claims of the Manhattan Company? Q. Yes. A. I think we agreed in the certificate that whatever third^tracking they had already built would be absorbed in the new system and under the new terms, but any claims that the city might have pending prior to the negotiations of the contracts should he kept alive. I think that was it. Q. I read from page 6 of the Manhattan certificate : " Now, therefore, without prejudice to any right that may exist in the Manhattan Railway Company to construct, maintain or operate third or additional track, so affirmed as aforesaid, and without admitting the existence of any such right in the Manhattan Eail- way Company, but without derogation to any existing right of the Manhattan Company to operate its railroads as they now exist in the event that the authorization and licenses granted by this cer- tificate should be terminated as hereinafter provided, the Commis- sion has authorized and does hereby authorize, but subject, how- ever, to approval of the Board of Estimate and subject to the terms, conditions and requirements hel-einafter set forth, the Manhattan Railways Company, as follows:" The language which I have read seems to imply that a controversy exists or did exist at the time this certificate was issued as to the validity of certain rights which the — or certain conditions which the Manhattan daimed to be entitled to maintain; what I wanted to inquire was, the city was not in a place to determine the claim in the courts as to the Kepoet op Joint Legislative Committee 521 case of the Manhattan Company ? A. That whole matter, Senator, ran through a number of years, and under the eye of the Public Service Commission, and I am not at all familiar with the origin of it, and how it proceeded from year to year, but I would have to refer you to Mr. Wilcox for an authoritative statement about that. All we knew was when we came to the certificate, there was such a situation, and we insisted that the status quo should be main- tained in continuing the third-tracking privileges, and the com- pany would gain no release of liability from any claim that might be runnii^ to the city. Q. Has it occurred to you, as a member of the city government, that it devolved upon you, or any measure of responsibility de- volves upon you to undertake to see that the rights of the city as claimed be adjudicated before such time as that the situation may have developed which will prevent the couTts from acting on those claims? A. They do not put all of these things on me, Senator. Matters that have to do with litigation which the city is interested in proceed through the Mayor's office and the Corporation Counsel, usually, or if they have to do with the Public Service Commission, they proceed there. I am really at a loss to say just how this stands between the two bodies, but I think the proceedings were initiated by the Commission. Q. Is there a proceeding pending now? Mr. Harkness. — No, sir ; there has nothing been started. Q. Will you state, Mr. McAneny, what your understanding of the situation is as to the rig'hts that were claimed and not conceded from the paragraph of the ceTtificate which I have read ? A. As I understand it, the company built certain sections of third-track- ing, here and there, a piece-meal sort of work without connections that made them particularly valuable, but they built them under a claim of theirs that they had the right under their charter to do so, and that claim was resisted by the city. I supposed it had got to a stage of proceedings of some kind, but if it has not, I am mis- taken; but as the fact was known in the conferences, there was such a physical situation on the parts of Third Avenue, for instance, we did insist that the certificate should give the company nothing that would interfere with the city's right to press any claim that might accrue to the city. 522 Investigation of Public Sebvioe Commissions Q. Tte Manhattan Company has asserted' its claims for years, has it not ? A. I think so ; yes, sir. Q. Is there any danger of the rights of the city becoming lost because of the failure to contest in the courts the claims which the Manhattan Company has made ? A. I don't know. I did not fol- low that matter with any closeness at all. It appeared to me merely as a detail of tbe situation which I was called upon to handle. Q. Do you regard those rights as valuable? A. I am sure I cannot say. It depends on how far they are capable of operation. Whatever they were, they would be merged with the third-tracking privileges under the contract. Q. Would you think it desirable for the city to institute litiga- tion for the purpose of determining judicially the rights of the city and tbe company ? A. I could not say that without a real examin- ation of the situation and the facts, with which I am not familiar. Q. You made the statement that these rights would merge with the third-tracking authorized under the certificate; were you advised of that fact? A. Merged, so far as the future was concerned. Q. Were you advised to that effect ? A. ISTot only advised, but that is stated in the certificate, isn't it? Q. It struck me that was hardly the construction to be placed on it. A. It was proposed to give them the right to third-track the lines in their entirety, and that was to run to tbe future without any reservation, of course. The clause which you read was intended merely to preserve any right the city or anybody else might have developed prior to the beginning of operations under the new plan. Q. I read now from page 4 of the Manhattan certificate: " Whereas, it is affirmed by the Manhattan Eailway Company that by virtue of certain franchises granted under the laws of the State of New York, it possesses the power to construct, maintain and operate in connection with its existing elevated railroad structures third or additional tracks over and along its said routes, but that the public interests require tbat more comprehensive express service sbould be provided by the Manhattan Railway Company than under its power so affirmed is specifically authorized, and that third or additional tracks, as 'hereinafter authorized, should be laid along the elevated lines of the Manbattan Railway Company at points not specifically covered by its power so affirmed, relating to Report of Joint Legislative Committee 523 additional tracks, and that the right of the Manhattan Eailway Company to construct and maintain third or additional tracks throughout the entire route hereinafter described, should be secured." I read that in connection with the " now, therefore " clause, which I read previously; does that in any way alter your opinion on the subject? A. It does not, from my lay interpreta- tion of it, but I think it might simplify it if Mr. Harkness gave his construction. It is purely a legal construction, I assume, and I cannot undertake to give that. Q. It was within the power of the Board of Estimate — A. I think, if I may add a word, retracing that matter ; in my recollec- tion at the time the Manhattan Company insisted upon a larger return from the Interborough for the use of their rights in this matteT, and the question of the status of those old tracks did come up, and I think I brought it up myself in the Board of Estimate and intimated publicly, too, that if the Manhattan Company — that here was a situation that might modify the value of the claims of the Manhattan Company. One certificate said they would receive, I think, something like the equivalent of $25,00€ for the surrender of certain concessions to the lessee, the Interborough Company, and at the last moment they modified that claim and run it up toward a million. Q. The Manhattan Company is claiming a million dollars ? A. They receded from that position. It was discussed publicly for two or three weeks, and in the Board of Estimate I took a pretty strong position about the matter, and it was tossed between the two directorates for a while, and they receded from the position and accepted the certificate in the original form. Q. With the reservation of the question in status quo, which I have read ? A. Yes, sir. The question was as to the amount of money. If the Interborough Company had yielded to them, and produced the additional million, it would have added to the cost, and we opposed it. Q. It was within the power of the Board of Estimate, was it not, to impose such conditions upon the granting of its consent for the third-tracking of the elevated lines as the Board might have seen fit to impose ; isn't that so ? A. In the sense that it had power to reject any certificate that did not contain pToper provisions, yes. 524 Investigation of Public Service Commissions sir. It had no power to modify a certificate, and only to approve or disapprove what was sent out by the Public Service Commission. Q. The Board of Estimate had it within its power as a condi- tion to granting its consent to the third-tracking of the elevated lines, to say upon what terms it should be? A. Yes, sir, within that, to that extent. Q. And the Public Service Commission had it within its power to say upon what terms the certificate should be issued ? A. Yes, sir; the theory has been that the Public Service Commission handles these matters because it is part of the public work, and they will negotiate a proper contract and certificate, and then as prescribed by law, it would come to the Board of Estimate for approval or disapproval but not for modification. If we disagreed with anything in it, we would have the right to disapprove and send it back. That is what these conferences were for in part, to avoid sending documents that would be disapproved. Q. You understood it to be not only within the power of the Public Service Commission, but its duty to impose such conditions as it might regard as reasonable and proper ? A. Yes, sir. As a matter of fact, we did finally approve the certificate that they sent to us. Q. Did it appeal to you as reasonable, a reasonable condition, to require of the InterboTough Company the submission of its con- tract for construction for the approval of the Public Service Com- mission and the Board of Estimate and Apportionment? A. As I said yesterday, when that was proposed at the time and declined by the company, the circumstances of the negotiations were such that I think in the minds of practically all of us, it would not have been a reasonable thing to approve it, because of further delay and doubt as to the ultimate issue of the whole negotiations. Q. I got the impression yesterday from' your testimony that you felt that the iManhattan Company or the Interborough Company conferred a favor upon the city by its agreement to construct these third tracks ; was that your thought, yesterday ? A. Oh, no. Of course it may be put that way. The city wanted the railroads, and wants them now, and wants them badly. In building them, the company confers no favor upon the city. It is a matter of business. Q. You stated that the city obtained concesaions from the rail- road company, did you not ? A. Concessions in a negotiation, yes. Repokt of Joint Legislative Committee 525 Not concessions of favor. They were concessions they had to yield in order to get their certificate. Q. It would have been necessary for the Interborough to con- cede the submission of its contract for the approval of the Public Service Commission, if the Commission had got its back against the wall, as some one said the Interborough did, would it not ? A. The Commission apparently did not get its back in that position. Q. I was wondering why it should not have taken as strong a ground on that as the Interborough. A. I cannot say much more definitely than I have on that. The certificate finally granted to the Interborough Company for the operation — for the extension and third-tracking of its system, was as different as day from night from the certificate they submitted in the beginning. The very fact that at the beginning they asked that we accept as a return to the city 2 per cent, of the — I was incorrect yesterday — of the increase in the gross receipts of express stations, is an evidence of that. If that had been accepted as a basis, there would have been no question at all about what they might do with regard to the letting of their contracts, because the return to the city would have been fixed at about $7'0,000' a year. At the very opening of the negotiations, I for one announced that they would never get a cer- tificate on such terms, and when I was asked what we desired, I told them 50 per cent, of the net increase on the entire system, which I say we have figured at $5'0O,00'0. When you are working between those two points, and when you have innumerable other things, the last question left is whether or no they might let a con- tract at a figure that would represent some margin over another figure, and the city's income be shortened or put off to the extent of thirty or forty or fifty thousand dollars a year, whatever it might be, that would become an element in the final exchange in trading. My recollection of the incident is, in the first place, that while it was pressed, it was not pressed in an urgent or important way; the claim of the company it should maintain the right to select its own contractors and to supervise itself the alterations to its own structures during the operation was accepted as a pretty valid claim, and rather than delay any further, that point was not pressed any further. "When we got them to yield at least the approval of contracts for the constrTTction work on the extensions, we forced the last possible thing out of them, and we got on the 526 Investigation of Public Seevice Commissions whole a certificate for the operation of the new elevated system that was vastly to the interests of the city. Q. What I am wondering at is this,, and I will see if I can make it understandable ; the Interborough Company offered to pay into the treasury of the city 2 per cent, upon lie excess of the earnings of the express tracks at certain stations annually ? A. The excess of receipts at the express stations, which, by the way, might fluctu- ate with ten or twenty years, from something to nothing, as the traffic of the town changed in its direction. Q. That did not satisfy the city authorities, that proposition, and the city authorities came back with the proposition that the city should have one-half of the net receipts from the third-track- ing? A. One-half of the increase in the net receipts upon the entire elevated system. Q. And the Interborough 'Company said, " We won't stand for that, and we won't concede that, unless we are to have the power of awarding contracts for this third-tracking without supervision by the Public Service Commission." ? A. ISTo, sir. It was not that way at all. The question of the terms arose early in lie negotiations, of the financial terms, and the 50 per cent, basis in itself had been accepted long before this thing was ever suggested. This was one of the things that arose in the latter part of the negotiations. It arose not only in this instance, but the several dual changes. Q. Was there originally in the certificate as originally prepared a provision for submission of the contracts to the Public Service Commission for approval? A. No, sir. Q. Never was in? A. 'No, sir; not even in the subway contracts. Q. May not that fact have had its effect upon the minds of the Interborough people in inducing consent to the payment of one- half of the net excess earnings ? A. No, sir. It had never been suggested by anyone at that time. It was not in the debate or discussion at all. Mr. Harkness. — May I make a suggestion ? Mr. Lewis. — Yes, sir. Mr. Harkness. — What Mr. McAneny speaks of as the financial returns was threshed out in 1911 and 1912, and the contracts were Report of Joint Legislative Committee 527 not formulated until the summer of 1912, and it was between the summer of 1912 and March of 1913 that these various questions in regard to the phraseology and detailed contract provisions came before us. Chairman Thompson. — The question of supervision of public utilities is about tbe last thing they think of down here in New York, anyway, isn't it? 'Mr. McAneny. — I am not an authority on last thoughts. Examination continued by Mr. Lewis : Q. Did you ever state to anyone that the 15 per cent, arrange- ment in the Stevens contract would furnish an easy method for the payment of political obligations and the carrying out of gentle- men's agreements ? A. I don't recall any statement of that kind. Q. Anything to that effect? A. No, sir 3 although it is quite possible that in various private conversations of the day I might have stated, as I certainly felt, that an excess of profit would be provided there that might easily be employed for other than the immediate compensation of the contractor. I have not the slightest bit of evidence, however, upon which to base any such suspicion. Q. You had no knowledge of the existence of any political promises or gentlemen's agreements ? A. Not the slightest. Q. None had ever been called to your attention or suggested to you? A. No, sir. Q. Do you remember having made any statement in conversa- tion with Mr. Maltbie, at any time, of that character ? A. I had him in mind when I spoke of the private discussions I sometimes had with him. Q. Is it now within your recollection that you made that state- ment in words or substance to Mr. Maltbie? A. No, sir; I can- not recall anything of the sort in any definite shape. My oppo- sition to those contracts was based upon the very clear fact that they were not to the advantage of the city; if they could be defeated — it would be to the advantage of the city if they could be set aside and a different basis established. That was sufficient in itself, without paying attention to additional rumors of any kind floating around, without apparent basis. That was not 1'5 per cent. It was 10, was it not? 528 Investigation of Public Sbkviob Commissions Q. There was no amount specified in the application ? A. They sent the certificate to the Commission with a blank for the per- centage, but I had been informed by Mr. Maltbie, I think, at the time, that ten per cent, was the figure they were talking about. Q. There was apparently considerable talk of fifteen, and Mr. Stevens himself testified that that was the price he was asking, that he never consented to the use of any other figure as the basis? A. I don't think they ever got to the point of proposing any definite percentage, but in my notion, the better method was to let through competition. Where the additional hold was given, as for instance, the incorporation of the extension contracts in this blanket con- tract, I was ready enough to catph hold there and see what we could do. Q. In your examination of the proposed Stevens contract do you recall the paragraph nine, reading as follows : " On or before the 15th day of each month, ninety per centum of the amount appearing due by such estimates, together with the contractor's percentage thereof, shall be paid to the contractor in cash at the office of the company upon delivery of receipts satisfactory to the company." ; did that clause strike you as being unusual in any respect ? A. I do not recall the clause in particular unless I men- tioned it in my letter to the Commission. If that is here, I can answer the question. I do not recall it. You have got that letter, and about everything I thought about the contract was put in that letter. Q. Have you been advised or informed that in the Gillespie contract the same provision is found requiring that there is to be paid to the contractor in cash at the ofiice of the company upon de- livery of receipts satisfactory to the company? A. No, sir; I have heard nothing about the detail of that contract, and I have not examined it. It passed beyond my interest in a sense, when we lost any control of it. Q. Did you ever have your attention called to the provision of paragraph 50^ on page 18 of the contract, dated February 13, 1914, which reads as follows : "All the work hereunder to be done shall be done by the contractor and shall be done under the guid- ance, supervision and administration of the T. A. Gillespie Com- pany, which shall from time to time present the estimates and Eepoet of Joint Legislative Committee 529 receive all payments due to the contractor hereunder " ; was your attention ever called to that ? A. No, sir. Q. There was a time, was there not, when, at about the time it was expected to close this dual contract and procure its execution, a hitch occurred; do you remember about that? A. I recall a great many hitches, but I don't know the particular one you have in mind. Q. A hitch occurred by reason of the Manhattan company refus- ing to go on with the work ? A. Yes, sir ; that is the incident I referred to a few moments ago. Q. Did you know at the time, and do you know now the reason for that interruption and threatened abandonment of the propo- sition by the Manhattan company ? A. I was pretty familiar with it at the time, but I — if I re-read the papers, I could answer the question. Q. Is it true that there was a controversy between the Gould and other interests in that company which was adjusted by some method, and which, after adjustment, led to the execution of the contracts? A. That I don't know anything about. Q. Did you hear the Goidd interests mentioned as being responsible for the preventing of the execution of the Manhattan contract at the time it was prevented ? A. Yes, sir, I think it was a matter of newspaper notoriety. Q. Did you know what the other interests were which opposed the Goulds and favored the execution of the contract ? A. No, sir ; I had no information at all, except that which probably reached everyone through the press. I knew merely that it was proposed to increase a charge which would affect the city very considerably, and I therefore opposed it. Q. I read from page 14, paragraph 46, of the proposed form of contract with John F. Stevens : " The Company reserves the right at its option to execute with its own organization, or to engage others to execute such portions of the work as it may deem advisable, because of its or their greater familiarity there- with, or as a matter of convenience in connection with its ordinary other business. In general, such excepted work will be changes in foundations, signalling, power appliances and electrical matters, including car wiring and such similar things of a technical nature 530 Investigation of Public Service Commissions as may best be done in that manner. The cost of all which excep- ted work is estimated to be a sum not exceeding two mUlion dol- lars, but the contractor agrees to leave all such questions to the judgment of the Company acting by its chief engineer or either of its superintendents as the case may be." ; did that paragraph strike you as in any way peculiar ? A. I do not recall that para- graph particularly, but if I had a clear notion of the theory of your questions, T perhaps could answer you better. Are you seek- ing the reasons why I opposed this contract ? Q. No, sir; was one of the reasons of your opposition the inclusion of that clause in the contract ; what impression did that clause make upon your mind, if any ? A. I would have to rest it upon the fact that I read the draft at the time, and my opposition was based upon three or four principles which ran through it, and expressed in my protest in the letter to the Chairman of the Pub- lic Service Commission, but I could not recall clause by clause the reasons enumerated in that letter. I opposed the contract from principle. Q. I read paragraph 45 from the so-called G-illespie contract, which reads : " The company reserves the right at its option to execute with its own organization or to engage others to execute such portions of the work as it may deem advisable because of its or their greater familiarity therewith, or as a matter of conven- ience in connection with its ordinary other business. In general, such excepted work will be changes in foundations and tracks and such other things as in the opinion of the chief engineer may best be done in that manner, but the contractor agrees to leave all such questions to the judgment of the company acting by its engineer " ; has that paragraph ever been called to your attention? A. No, sir; I don't think I read a draft of the Gillespie contract. Q. I have read that paragraph into the record for the reason that it appears that a similar paragraph limited, however, to the withdrawal of two million dollars' worth of work from the con- tractor, which work might be done by the Company, is omitted ; as that paragraph was included in the Stevens contract, and is omit- ted from the Gillespie contract, and for the purpose of having the record show that under the contract it is perfectly feasible for the Interborough Company to do substantially all of the work with its Repoet of Joint Legislative Committee 531 own organization; I did not know whether yonr attention had been called to that fact or not. A. I do not recall that it was, speci- fically. Mr. Maltbie can tell you that better. Pretty much every- thing that was called to my attention about it was called to my attention by him. After it passed the stage of the action upon the Gillespie contracts, which offered me no basis for getting in, of course I did not give it the same attention. Q. I think that you testified yesterday, Mr. McAneny, that the first information you had of the existence of the proposed form of contract, known as the Stevens contract, came to you from Mr. Maltbie ? A. Yes, sir. Q. You have read Mr. Maltbie's testimony, have you not, since it was taken here ? A. I have. Q. Did you notice in Mr. Maltbie's testimony, and I read from page . 27, this statememlj : " Wiell, if 1 ireoaU correotiy, MJr., McAneny said that he had been informed about the proposal and its features, and information had come from someone prominently connected with the company. I do not recall that he said that a director of the company had spoken to him. I do not recall that he said that it was or was not a director of the Company."; did you notice that statement in Mr. Maltbie's testimony? A. Yes, sir. Of course, that couldn't have related to his first word to me on the subject. It must have preceded that by some time. I think there are several references in his testimony to that. Q. Did you notice this statement in Mr. Maltbie's testimony: " Q. Now, when you talked with Mr. McAneny, you had a pri- vate consultation, didn't you — just you and he present ? A. Yes, sir. Q. You doubtless told him the things you had heard about this ? A. I presume I told him all I had heard and all I knew. Q. And all the rumors ? A. I presume so. I cannot be positive, but that would be the natural thing to do. Q. Now, as I under- stand you, Mr. McAneny immediately informed you that he had had some information from someone, someone from the inside of the Interborough ? A. He informed me that he had some infor- mation regarding the same thing, which came very directly, but I gathered the impression that it was someone either on the Board of Directors, or ofiicially connected with the company, but he did not say that " ; do you recall that testimony, Mr. McAneny, of 532 Investigation op Public Service Commissions Mr. Maltbie ? A. Yes, sir. As I say, that must all have rfelated to one of his talks with me, as there are several which he refers to in the opening of that testimony. If the point is who spoke to me first, Mr. Maltbie or someone else, there can he no question about that, because Mr. Young, in his reference to this matter, referred to the proposition of my letter as the thing that was the occasion of his remark about it. My letter was certainly pub- lished after Mr. Maltbie had spoken to me. Mr. Maltbie was frequently in communication with me about a number of things every day or two, and spoke of this, no doubt, just as soon as it reached him. Q. What I would like to settle is, whether Mr. Maltbie is cor- rect in his statements that he got his first information on the sub- ject of a controversy in the Interborough Board from you or from someone else ; I gathered from his testimony given here last week that he felt that he got his first information upon that sub- ject from you. A. I gathered a very different impression from it, and if you re-read it I think you will gather the same. It starts out by reference to people who had been talking to him. Q. Mr. Maltbie testified further : " Did he tell you the char- acter of the information that had come to him ? " — Continuing the testimony in relation to his discussion with you — "A. Well, in a general way, that he was familiar with the proposition, its general terms, and that there was some opposition to it in the com- pany itself. Q. Did he tell you which, if any, of the directors opposed its approval ? A. 'No, he did not. He did not say that he had received his information from a director. Q. Did he tell you whether or not any individual had given him the reasons why he opposed the approval by the Commission? A. That is, the person who spoke to him opposed its — Q. Yes. A. ISTo, he did not. Q. Did you acquire any information in the course of your investigation of this proposed form of contract as to any purpose for which a fund represented by the 15 per cent, was to be used by anyone to whom it might be paid? A. No definite facte. Q. Well, was anything said to you on that subject ? A. Someone in the process — I don't recall now who it was, that came to me and rather, well, I think before I had learned of this matter com- ing to the Commission ofiicially — and stated that a contract was Kepoet of Joint Legislative Ooicmittee 533 to come before the Commission which would provide for a large payment, and that he had heard the rumor that the money, at least in part, was to be used to pay or adjust certain obligations that had been assumed in the course of the subway negotiation in carrying through the subway contracts. Payments which could not appeal' on the — in the cost of construction, and which could not be submitted in the regular way to the Commission, and he suggested that I watch very closely for any opposition which would allow the payments of a considerable sum of money with- out the submission of vouchers for the precise amounts; and I remember later I also heard — this is pure hearsay — I said a moment ago — I am simply answering your question in response to what I heard, — that some of this money was to be used to retire those obligations."; was that the subject of discussion between you and Mr. Maltbie at the time ? A. I do not recall that it was. Q. And in his statement that he is unable to say from whom he obtained this information, are you prepared to say that he did not obtain it from -you ? A. I should say yes, quite decidedly. I think the simpler method might be to recall him and ask him. Q. I asked him and his testimony was that he could not remem- ber from whom he obtained it; he admitted, however, on the stand, that he had had numerous conferences with you and left it in such a position that it might easily be possible that his conversation to which he referred was with you, and I wondered whether you would have any recollection of any such conversa- tion. A. A^o, sir. My recollection I have given you, and that is that Mr. Maltbie gave me the information I had in relation to this matter and upon which my letter was based, and I think he had prepared a memorandum of his own about that time, and I imagine you will find more or less similarity between the points, his and mine. Q. On page 32 of the testimony of Mr. Maltbie appears this answer: " I went to Mr. McAneny some time last spring or sum- mer — I don't recall — well, I probably saw him several times about the proposition, but the first time I went to him regarding the matter to tell him about the facts, I found that he was already familiar with them. And in the course of the conversation he stated that he had heard of it and had heard of it from a respon- sible source." Do you recall that testimony in your reading of 534: Investigation of Public Service Commissions Mr. Maltbie's testimony, and is he mistaken in his statement the first time he came to you you told him that ? A. I think he must be mistaken, for the reasons I have already told you. I shall freshen his memory and mine as soon as I can get hold of him. It is not of great importance, of course, as far as the subsequent events are concerned. Q- I read further from the testimony : " I can't say that Mr. McAneny ever said it was a director of the Interborough Com- pany or an official of the Interborough Company, but the language he used left me with the definite impression that it was some one who was connected with the Interborough Company and in a responsible position, such as a director or an official of the com- pany would hold. It was not simply a rumor or gossip. I do not think I ever asked him who it was. I do not recall asking him who it was." ; your understanding of Mr. Maltbie's testi- mony, as refreshed by my reading now, is different from what it was a few minutes ago ? A. No, sir. Q. You think Mr. Maltbie's testimony bears the construction that he did not attempt to say he got his first information from you ? A. I think that must have been a slip on his part. Q. The testimony as read indicates — A. He seems to say one thing in one place and another thing in another, as far as I can gather. I will re-read his testimony during the recess, and then I will give you my impression of it. Mr. Lewis. — It is a quarter of one, and perhaps the Chairman would like to take a recess for lunch. Chairman Thompson. — We will suspend until two o'clock at the same place. Whereupon, a recess was taken. AFTERNOON SESSION Chairman Thompson. — I have had a whole lot talked to me about this subway accident, and I assume that it is as serious an accident as has occurred in the subways since they have been constructed. A whole block went in. I think it is the province Eepoet of Joint Legislative Committee 535 of the Public Service Commission, the coroner, the district attor- ney, and whatever constituted authorities there are here, regularly, to investigate this thing. I think I know from intuition what is the matter down there. I think they have so many engineers in this $2,300,000 outfit, they crowd each other, and crowded against the false work and crowded it down — to be serious, I think I do know. I have had certain information given me from a friend who called at the hotel, one man in particular, but in line with what I have said, I have given that information this noon at lunch to Colonel Hayward of the Public Service Commission, and I have no doubt that the investigation will be carried out, and the truth will prevail in the end, and if it does not, we will come down to New York some day and tell them what is the matter. I think with that, unless some one else has a suggestion, that is as far as we had better go into it now. Mr. Harkness. — The pictures pretty accurately show the situation. Chairman Thompson. — I saw them. Of course, on the face of it, it is a criticism on the Public Service Commission because they have such a large, populous and expensive organization, the most expensive and populous engineering organization in the world down to date, and on the face of it, the criticism, if there is any, would go to them, of course. Mr. Lewis — I would ask you to instruct the Sergeant-at-Arms to see where the missing witness is. Chairman Thompson. — He told me he was very busy, and would be here as soon as possible. Mr. Lewis. — I am fearful if he were to come now we could not complete his examination this afternoon, and I wondered if it would not be better to take an adjournment until some later date. Chairman Thompson. — I would not do that just yet. We will wait a short time and see if he comes. Here he is now. Me. McAneny resumes the stand. Examination resumed by Mr. Lewis: Q. Mr. McAneny, you expressed in your communication to 536 Investigation of Public Seevice Commissions Judge McCall, under date of July 2l8t, your opposition to the so-called Stevens contract, did you not ? A. Yes, sir. Q. And you gave in that communication the reasons why you opposed its approval by the Public Service Commission ? A. Yes, sir. Q. In your communication you state that you have examined carefully the draft of the proposed contract ? A. Yes, sir. Q. Did you subsequently file a protest against the so-called Gillespie contract? A. No. The Stevens contract came witLiii the purview of the Public Service Commission. There was an opportunity there for them to disapprove, and therefore I urged them to do that. The Gillespie contract, as I understand it, did not require that approval. Q. I was under the impression that when the application was made subsequently for the approval of the Gillespie contract cov- ering the extensions and connections and referring in that applica- tion to the then existing contract between the company and lie Gillespie — between the Public Service Commission and the Gil- lespie — between the Interborough Company and the Gillespie Company, that you addressed a communication to the Public Serv- ice Commission in which you stated that you renewed your objec- tions to the proposed letting of the contract for the construction work on the percentage basis and referred to the letter of July 21st? A. Yes, sir. I do not recall at the moment whether I made that request in writing or verbally. Very likely it was in writing. I do find in a note I sent to Mr. Maltbie July 21, 1914, this clause: ■' I have read carefully the text of the company's contract of February last for the third-tracking work, as well as their present application and report of the chief engineer. There is, of course, less to the point than there was at the time the Stevens proposition was up, but the principle remains the same." It comes in a little ahead of that ; "I shall take the same position in relation to the present Interborough proposition for construction work on the ele- vated lines as I did to the Stevens contract for the same thing. I have asked Judge McCall to fix a date for a hearing at which the members of the transit committee can attend, and I suppose he can do so, as he has always been very courteous about these thinga, Report of Joint Legislative Committee 537 and then follows this matter I have previously read. When it came back in tiie third form, without the extension work, I said nothing further. Q. You regarded the Gillespie contract as substantially similar and identical — perhaps not identical, but very much like the Stevens contract ? A. In its first form. Q. In the form in which it was finally entered into between the Interborough company and the Gillespie company? A. In so far as it related to the third-tracking, I assumed it was the same, although I did not examine that final draft. Q. A period of about a year elapsed from the date of the writing the communication on the subject of the Stevens con- tract to the date of your communication to Mr. Maltbie in 1914, relating to the Gillespie contract; during that period did any additional information come to you from any source on the sub- ject upon which Mr. Young had previously spoken to you? A. JSTone whatever. Q. You had had no conferences with Interborough directors on that subject? A. With no one. Q. Or Interborough ofiicers? A. l^o, sir. Q. Had you taken any steps to ascertain what, if any, truth there was in the statements which may have been made to you by Mr. Maltbie and which Mr. Maltbie rather inclines to say were made by you to him, in relation to a fund ? A. Subject to rereading his testimony during the recess, confirms what I said to you before the recess. I would say I naturally took no steps. I had no evidence and no information, and no power, and nothing whatever, except I had heard a rumor which I had repeated in a general reference to Mr. Maltbie. Q. Wouldn't it have been a proper act on your part to have called upon some of the members of the Interborough Board to ascertain the facts about what Mr. Young had said to you? A. I think not. Q. Did you ever call the attention of any of the members of the Public Service Commission officially to the statement made to you by Mr. Young? A. No, sir. Q. Was it not at least a proper thing for you to have done so ? A. I think not, quite decidedly so. If there had been any pro- priety in the use of a mere rumor in that way no doubt it would 538 Investigation of Public Seevioe Commissions have been used by Mr. Maltbie directly within his permission, he having had directly the same rmnor, and I do not understand that he made any such move, and, I dare say, for the same reason that applied to my own action. Q. Did you discuss the matter in any way unofficially with any member of the Public Service Commission except Mr. Maltbie? A. E"o, sir. As I have explained, my repetition even of the fact of a statement of the suspicion of a director was made to Mr. Maltbie alone, as it happened we were in close relation to this matter at the time and was made to no one else, and was made naturally, not in declared confidence, but under an implied confidence, and a reference to a rumor anyone might make would naturally go no further in the absence of any evidence or con- firmatory statement from any source. Q. Mr. McAneny, to shift the subject now — Mr. McAneny. — May I interrupt a moment? Are you leav- ing the detail of this subject now? Mr. Lewis.- — Yes. Mr. McAneny. — In that case I would like to recur to Mr. Maltbie's testimony of the other day which I have reread during the recess, and I find that he states quite definitely that these rumors of which he speaks came to him before the contract was submitted to the Public Service Commission by the Interborough company. That it was after that that he talked to me, although he adds that he might have talked to me before, and says: "As I remember it, it was before the contract came in. " Chairman Thompson. — So that when the contract did come in you were naturally suspicious of it? "I naturally had in mind the story I heard. " Chairman Thompson. — You are familiar with the fact that the Manhattan certificate was different from all the others ? « Yes. Repokt of Joint Legislative Committee 539 " Chairman Thompson. — And the others all required the most complete supervision of all the expenditures for this class of work by the other companies? "Yes. " Chairman Thompson. — And this work was not different than the class of work the other companies had to perform on the certificates? " Not different from the third tracking on the Brooklyn lines. " Chairman Thompson. — And you say that when this came on the calendar all of a sudden you were confronted with ihe fact that the majority were ready to put it through, the three votes? "That is my recollection. " Chairman Thompson. — And you said you wanted to write a memorandum on it? " That is my recollection. " Chairman Thompson. — And they did give you a chance to file the memorandum? "Yes. " Chairman Thompson. — And after that you talked to Mr. McAneny ? "Yes, I may have talked with him before. "Chairman Thompson. — When you talked with Mc- Aneny you had quite a consultation? "Yes. "Chairman Thompson. — You doubtless told him the things you heard about this contract? " I presume I told him all I heard. " Chairman Thompson.— All the rumors ? "I presume so. I cannot be positive, but that would be the natural thing to do. " Chairman Thompson. — As I un derstand you, Mr. Mc- Aneny immediately informed you that he had some infor- mation from some one from the inside? 540 Investigation of PtjBLio Seevioe Commissions "He informed me that he had some information regard- ing the same thing which came very directly. I gathered the impression that it was some of the Board of Directors, but he did not say that. "Chairman Thompson. — You cannot remember his language ? "No. " Chairman Thompson. — He gave you the impression it came from one of the Board of Directors or a high officer? "I gathered that impression. "Chairman Thompson. — And on your impression he also had in his mind that it was to take care of some fund that could not be legally taken care of? " I could not say what he had in mind. "Chairman Thompson. — What was your impression? " I imagine if I heard of it he might have heard of it." That confirms my own recollection of the sequence of events. Q. In addition to what you have read, I read the part of Mr. Maltbie's testimony in which he says, " But the first time that I went to him regarding the matter to tell him about the facts, I found he was already familiar with them." ? A. I am quite convinced from the context of his testimony that that referred to the additional rumors about the suspicion of a misuse of this profit. To my statement- — Q. He means by the first time, the first time he had been to you and talked about the same with you ? A. Yes, naturally. As I said, my first information regarding the objectionable character of the contract came from Mr. Maltbie, and in his statement that he came to me in the manner I have just read, he adds that he came to me after he had heard these rumors, and he naturally told me all about them, Q. And he found, as he says, that you were already familiar with them ? A. Yes, but he had had them first. Q. Mr. McAneny, did you ever hear any of these so-called rumors prior to the time that Mr. Young came io you? A. I Repoet of Joint Legislative Committee 541 think not. In the course of time, I have heard rumors about various things. I recall no rumors, as you call it, that I ever heard with sufficient definiteness — Q. Do you recall anything being published in the papers in the way of charges or suggestions that there was a method being provided by which a fund might be raised for some purpose that would not be regarded as a proper expenditure? A. 'No, sir; I do not recall anything definite about that at all. Of course there may have been, and undoubtedly may have been some talk of that kind, but if there was, in the absence of any evidence, I certainly paid no attention to it. Q. Do you know, and are you able to give the name of any human being with whom you talked upon the subject of the differ- ences existing in the Interborough directorate, other than Mr. Young and Mr. Maltbie? A. To be exact, I think I said some- thing to Mr. Harkness about it, that is, about the differences in the Interborough, and about the same time I spoke to Mr. Maltbie. Q. Do you recall any other person that you talked with on the subject under discussion? A. I don't recall any other. It is possible I may have spoken to somebody else about the differences in the Interborough, although I spoke to nobody else, naturally, about any suspicions of Mr. Young. Q. At the time Mr. Young made this statement to you, you were aware of the fact that there were rumors, were you not? A. No, sir; not specifically. Q. Had not Mr. Maltbie called your attention prior to that time, in his discussions with you ? A. I don't know whether he had or not. I don't recall any rumor with particularity, or any time that it was stated to me, nor that I ever attached any import- ance to any such matter, because I did not know that there was any evidence behind it anywhere. Q. I understood you to say you did not believe there was any evidence? A. No, I said I recall no rumor to which I attached any importance, for the reason that I believed there was evidence behind it, or anything more than gossip of that kind. Q. You realized if there were an excessive allowance being made in the way of profits upon the contract that was being awarded, or which it was proposed to awa'i, that that excess of 542 Investigation of Public Seevice Commissions profit would operate against the interest of the city ? A. Gener- ally speaking, if there were any excess of profit, no matter what form the contract, naturally it would affect the city. It was because I believed there was an excess of profit in this contract that I opposed it. Q. You believed there was an excess of profit? A. Yes, sir. Q. And, therefore, it aroused your opposition? A. Yes, sir; naturally, after having been convinced by Mr. Maltbie there was excessive profits. Q. That was on what you understood to be a ten per cent basis of profit, I think you said, to Stevens ? A. Yes, sir ; I might put it this way. In the first place, the form of contract used in quasi public work seemed to be objectionable, that is, in cost plus per- centage work, as against a competitive system. That would have been my objection in any way to form, and in the second place, a contract of this magnitude, I was convinced that the percentage basis would, in any event, yield an excessive profit and one which we ought to oppose. Q. And still the Gillespie contract of a year later was entered into without the approval of the Public Service Commission, and without submission to the Board of Estimate and Apportiomnent, and without any protest on the part of either the Public Service Commission or the Board of Estimate and Apportionment; isn't that so? A. You mean the contract which, under the contract, did not require approval ? Q. Yes. A. Yes, sir ; I stated that. Q. There was no protest made by the Public Service Goimnis- sion or the Board of Estimate and Apportionment, notwithstand- ing the fact that a profit of fifteen per cent, was provided for in that contract upon an estimated expenditure of from twenty-five to thirty millions of dollars, and that there is not in existence today active protest on the part of anyone representing the city towards the execution of that contract, and the payment of that bonus, is there ? A. Except as protest had been filed against the principle in the previous communication, there was no protest from any member of the Board of Estimate or member of the Public Service Commission, or anybody outside. In other words, no one assumed there was any use in protesting against anything we had nothing to do with, I assume. Report of Joint Legislative Committee 543 Q. Is that because the assumption has been it was not worth while to protest against anything the Interborough wanted? A. ISTo, sir. I wouldn't put it that way, but there was no usefulness continuing a protest after a thing passed beyond our control. Chairman Thompson. — Don't you think if the Public Service Board had called in their chief engineer, and given him orders to convey the information to the Interborough, that if they persisted with this contract, it would meet with obstacles in the Public Service Commission, they could, by that means, have prevented it, if they wanted to ? A. I would not like to answer for the Com- mission. Chairman Thompson.': — Don't you think so, as a citizen and offir cial of the city of New York, they could have taken that means and beat the contract ? A. I don't think so, the way the contract is drawn. Chairman Thompson. — The engineering department had the right of inspection in the last instance ; you are not of the opinion that they could have stopped it if they had taken the bull by the horns? A. I would not care to offer an opinion. Chairman Thompson. — With the other great powers they exer^ cise here? A. I would not care to offer an opinion about their powers or duties. Chairman Thompson. — You stopped the Stevens contract almost alone, and you were not a member of the Public Service Commission? A. That contract required the approval of the Commission. Chairman Thompson. — But not of the Board of Aldermen or the City of New York? A. My protest was delivered through the Commission that had the power. In this case, the Commis- sion did not have the power. Chairman Thompson. — By means of your other official powers, you did that and really did it, and there is a chance anyway, that even in New York, they could have stopped this ; don't you think so? A. I don't think I care to enter that field. 544 Investigation of Public Seevice Commissions Examination resumed by Mr. Lewis: Q. Was there any attempt made to inform the public of the fact that this contract had been entered into carrying a bonus of fi-fteen per cent, upon an estimated expenditure of from twenty- five to thirty millions of dollars? A. I think as to the figures, that they came down to eighteen or seventeen. It did not include the extensions. Our point there was made and carried. Q. What would you say - — A. I forget what he did say, but I should imagine there were about sixteen or eighteen millions of the third track, but that is pure guess, though, something like that. Q. But the same contract ultimately did get to apply to the extensions and connections, did it not ? A. Not to the extensions. Q. Just to the connections? A. Yes, sir. Q. That was about how much in amount? A. About one- third of the original total. Q. Don't you think a public sentiment might have been aroused, with proper effort, which might; have operated upon the Public Service Commission, to exercise its moral influence with the Interborough company to prevent the consummation of that deal with the Gillespie people ? A. Well, that, again, would call for my opinion about what the Commission might do through its moral powers, and I had rather leave that to them, I think. Q. As a member of the Board of Estimate, of course you have some knowledge as to the ability of that organization to arouse public sentiment? A. Yes, sir. Q. Might it not have been regarded as a proper action on the part of the Board of Estimate to have called the attention of the public to this contract carrying a large bonus ? A. I don't think so. In the first place, my own action previously had been taken independently of the Board, and I don't think the Board of Estimate ever acted formally on that. Q. Might not the Board of Estimate have acted with perfect propriety ? A. They could have passed some resolutions if they had chosen to go into the matter, but they apparently did not. I do not think it would have done the slightest bit of good. Q. Do you know whether the members of the Board of Esti- mate and Apportionment had knowledge, other than yourself, of Eepoet of Joint Legislative Committee 545 the proposed contract and the fact it had been entered into ? A. I think so. They were familiar with the points made from time to time, and the iirst protest I had made was against the blanket contract including third-tracking and extensions, and the second pr6t6st a year later against a substantially similar contract, and the result of that protest was the Public Service Commission rejected the Interborough form for the extensions, and did compel that to go to competition, and what remained was that part of the contract that under the dual agreement had been left for the independent determination of the Interborough company, and that was all well known by the members of the Board. Q. And not only well known, but the Board took no action to advise the public or create a sentiment that might operate upon either the Public Service Commission or the Interborough Board of Directors? A. No, sir; the Board or no one else. Q. Again, the real damage, if any, done to the city's interests, was done when the certificate was issued, without the provision for the submission and approval of contracts for construction, was it not ? A. I, of course, do not put it that way. You might argue that every additional advantage that the city failed to secure, up to the point of taking all the profit, not having been secured, was disadvantageous. We simply did not gain that additional coiicession in our business agreement with the com- pany. The advantage of the city was not damaged in failing to secilre it, for we never had it. Q. The city had the right to say upon what terms this third- tracking should be done, and it might have said that it should be done upon the following terms and conditions: First, that all contracts for construction work shall be submitted to the approval of the Public Service Commission before being binding upon the Interborough company; it failed to make that provision in its certificate, and when it failed, it lost the right which I have just suggiested, to prevent the entering into the contract carrying this bonus arrangement, between the Interborough company and the Gillespie company. A. It did not lose that right, because it never possessed it. Q. It never possessed it, because it never imposed that as a condition. A. That is quite true. Vol. 1 — 18 546 Investigation of Public Seevioe Commissions Q. Which it had a right to impose. A. You might argue that the city might have put up a score of other demands, which it failed to get, but having failed to stand ouf, and get them, it lost an advantage. When the first report was put in on the dual subway in June of 1911, the city laid down the terms upon which it would grant the franchise to the Interborough company and to the B. R. T., and to the elevated railroad system and all else, but the companies did not accept those terms, and we did not argue for that reason that we should cease our effort to get sub- ways. On the contrary, we proceeded and accepted from stage to stage such modifications of the original plan as we were bound to accept if we were to get to an agreement. Even then this poiat arose after the final report was put in, and when we were still endeavoring to get everything we could beyond the terms the Public Service Commission put out as its draft of a contract. We got considerably more after that and we did not get this particular thing because we were not willing to go on with our negotiations indefinitely, and press various things we were satis- fied we couldn't get, and we lost nothing. We failed to get one hundred per cent, advantage where we did get ninety-nine, but we were negotiating an agreement for the operation of these rail- roads, and we got all we could get. Q. Is there any record anywhere of any one having asked that the certificate contain the provision that the contracts for construc- tion be approved by the Public Service Commission ? A. That I don't recall. I think not unlikely suggestions were made by Mr. Maltbie, for instance, and Mr. Mitchell, things beyond what we had been able to get. This may have been included, but I don't recall. Q. Do you remember any occasion when the matter was under discussion with the negotiators representing the Interborough Com- pany ? A. When it was under discussion ? Q. Yes. A. Not an exact occasion, but it must have been discussed. Q. Have you any knowledge of the fact that it was discussed ? A. I think there is no doubt of that at all. There is no question about that. Q. You think the effort was made to get that imposed as one of the conditions ? A. 0h, yes. Kepoet of Joint Legislative Committee 54Y Q. Did you participate in any discussion with anyone repre- senting the Interborough upon that phase of the contract? A. Only in the conference, of course. Mr. Harkness.^ — Mr. McAneny did ask that that be put into the contracts. The drafts that were advertised by the Public Service Commission — the Eapid Transit Act did not contain this right of approval provision in the third-tracking and extension certificates. My recollection is very clear that Mr. McAneny, as Chairman of the sub-committee of the Board of Estimate, addressed a letter to the Commission, setting forth various points in which he thought changes should be made, and included in that list was the point that the certificate should be modified so as to include the right of approval of construction contracts in both third-tracking and extension certificates. Mr. McAneny. — I am glad Mr. Harkness refreshes my memory. The evolution of the thing was somewhat this way: After the negotiations had practically closed, and the Public Service Com- mission withdrew to frame the form of the contracts with the two companies, they produced the forms of contract, and advertised public hearings upon them, and I presume by most of the town those drafts were accepted as the forms that would be put through. It was then that I filed with the Commission a letter enumerating various things that did not appear in the contract that I thought ought to be in it, and then I think that was before the hearing, and then they held a hearing at which I renewed my points. That really sent the forms of contract back into a new negotiation. I, for one, and my associates, were unwilling to accept the forms as they had been produced there, and we went into a new negotiation on the other things that I continued to demand. We got a good many of those things. I imagine we got pretty nearly all of them. This was one of the things that we did not get. When I have had the opportunity to refresh my memory, by going over the corre- spondence and reports, I can answer the questions a good deal more satisfactorily, perhaps. Examination continued by Mr. Lewis: Q. The omission of that provision furnished the opportunity for the Interborough Company to enter into the contract known as 548 Investigation of Public Seevice Commissions- the Gillespie contract, did it not? A. Yes, but please keep in mind my point that that omission occurred in the form of contract produced after negotiations by the Public Service Commission, and I put this among other things that I continued to demand and worked for, but apparently I didn't get it. If I could take you back into those negotiations, I presimie you would understand more clearly. They consumed a great deal of time, and we sat up very late nights. I will repeat that we got a good many of the other things in my list. Q. I appreciate the fact that you got a good many of the other things, but whether in balancing up the city did not get the worst of it is a question that I am not clear upon; now Commissioner McCall testified here the other day as to his view, and in his testimony he stated that he did not regard the fifty per cent, of the net earnings as of the slightest consequence in the world, and he thought that it would be a great many years before the city would get any appreciable sum from that source. A. That sur- prises me. It does not agree with his transit department, does it ? Q. If that is Commissioner McCall's opinion, and if for the sake of getting a provision into the contract which would bring about on the face of the contract a division which would not in fact be of any particular advantage to the city, the city has con- ceded a provision which prevents the eity^s supervision of the awarding of contracts, and thereby permits the execution of con- tracts which are distinctly against the city's interests. A. Then it may be a bad bargain — that the bargain was not a good bar- gain. As I stated yesterday, .there was no relation whatever between those two things. As I stated yesterday, the agreement upon the fifty per cent, of the net was reached months before this matter was mentioned, and the fifty per cent, net set, and there was no suggestion that there should be any change, and it stood all through. This was an extra matter, an afterthought. Q. Let me interrupt you; why should it have been an after- thought, in view of the fact the same provision is in the Broad- way-Fulton contract? A. Introduced at the same time this was, perhaps ? Q. And accepted by the New York Municipal Kailways and rejected by the Interborough ? A. Yes, although they did not Report of Joint Legislative Committee 549 want to accept it, as you may well imagine. They protested against it. There was a situation where we could insist upon it, and we did. As to the advantages about future traffic on the Elevated Railroad system, I profoundly disagree with him. Any- one who would argue that when you have increased the capacity of that system forty per cent, that there would be no increase in the number of passengers it carries — Q. That is not what Judge McCall said, but he said that because of the deductions, at least, this may be fairly inferred, I think, from what he said, but he did not say it in those words, possibly ; bacause of the deductions to be made from the gross earnings and the payments that must be taken care of before any division could be had, he did not regard it as likely that there would be for a good many years any real financial return flowing to the city from that provision of the contract ; let me ask Mr. Harkness if I have substantially and fairly quoted Judge McCall. Mr. Harkness. — That does not quote it, according to my recollection. Mr. Lewis.^ That is my recollection of his testimony. Mr. Harkness. — I think, perhaps, you are thinl^ing of two different things the Judge testified about. I think he stated the two per cent, of the increased gross revenue he did not pay any attention to, and went on speaking of the dual subway contracts in answer to some questions of the Chairman about the five^cent fare being sufficient. He said he thought with the burden of those contracts he did not know as five-cent fare was enough. It jiut a heavy burden on the City, and they had to pay the interest on the bonds out of the tax levy, for some years to come. Mr. McAneny. — These deductions you talk about would be the usual deductions in operating expenses from their gross returns, deductions based upon the corresponding deductions in the present system, and it would be nothing new. The million a year addi- tional net of which we would get half was net based after the allow- ance for all deductions from the gross. As matter of fact, we have regarded the city's share, annual share, in the returns of the ele- vated system, as the thing that will come first, and that will come very promptly and run up to a maximum of about one-half a million a year. 550 IXVKSTIOATIOX OV PoBLIC SkkVICK CoMM1S«IOHS Exammatioii resumed bv Mr. Lewis: Q. Is it tnio that a lieduotiou is allowed to the Xew York Mimicipal Railways Conipaiiv of apprvvximatelv one per cent, as a basis for amortizing the bouds issued by that oompanv before the city will get any share of tbe net earniugs t A. Yes, sir. That is common to every one of thos;e eontraots:. Q. It is common to tbe Interborough, because, as I imderstand the matter, the cit^- owns the subways and included them in the general operating scheme, and the shai"e in the net earnings of the whole system, but does the city own anything in Brooklyn which offsets or coxmterbalances the situation in Xew York? A. The very fact that it does not own in one place and d^x-s in tbe other, makes tbe onlj difference, but the allowance of interest and amor- tization on the investmfflit of the two companies in either place as a first charge follows an entirely different principle. It was not a question of who owns, but who was to invest and where the cost of the investjnent conios out of the returns. Q. On the lines of the Brooklyn Eapid Tranat. certain moneys are to be expended by that company, whicb ai"© to be do^i^•ed from the sale of bonds ; am I right there ? A. Yes, sir ; unquestionably. Q. And the property remains tbe property of the railway com- pany? A. Yes, sir; although the re^Tuues are to be pooled with the rest of the system. Q. But in New York and Maiihattau, there are railroads owned by the Interboreugb Company and railroads owned by the city, and the Interborough Company is allowed to deduct for tbe amortiza- tion of its bonds because the city insisted uptm tbe right to deduct for the amortization of tbe city's bonds, whereas in Uroi^klyn an allowance is made for tbe amortization of the bonds issued with which to obtain funds to pay for tbe cost of the construction of the Brooklyn elevated system, the third-tracking of the Brooklyn elevated system, and the Brooklj'n conipany is permitted six per cent upon its investment there, being probably at the rate of tiw per cent, for interest on the bonds, and one pov cent, per annum for sinking fond requirements, without any contribution of earn- ings from any soiiroe by the city, and without any deduction for similar amortization moneys to meet city bonds, because there are no ciiy bonds. A. If this agi'eement had been based upon owner- Report of Joint Legislative Oommitteb 551 ship of lines, there might be something to that point, but it was based upon the operation of lines. The Brooklyn company hap- pened to own its part of the system that would go into the pool, and the Interborough Company did not. As to the allowance to the Brooklyn company of their carrying charges on the same basis allowed here, that is a question of the disposition of revenues, and what would be their relative place and the city's relative place, but we limit their revenues in this very contract. If we had said, " You can make only so much on your old business before we begin our division," and required them to make the new invest- ments as a part of their contribution, and allowed them no method of carrying them, except at a loss beneath the limited figure, we never in the wqrld would have got them to agree to that. Senator Lawson. — Do I understand from that that the B. R. T. owns all of their lines as compared with the Interborough ? Mr. MoAneny. — They own the elevated lines, the elevated lines which will be contributed to the new Municipal Railways system. It will not own the new subwpys or the elevated lines that proceed in South Brooklyn to Coney Island, excepting the Sea Beach line. All the extensions will be on the basis of recapture by the city, or eventual ownership by the city. Senator Lawson. — Isn't it a matter of fact that the Brooklyn Rapid Transit is a part of the Brooklyn Heights as a holding company which has a long term lease on the Brooklyn City, and the Union elevated, and the Kings County elevated, and all the other railroads, so that instead of being owners in fee, they are lessees similar to the Interborough in New York on the elevated lines ? Mr. McAneny. — I think that is probably true, but that would have nothing to do with our acceptance of the lines, either owned in fee or under lease. Senator Lawson. — The only reason you said there was a differ- ence, the Brooklyn owned their lines and the Interborough did not. Mr. McAneny. — I mean they are owned privately by the rail- road companies, whatever their situation, may be with reference to whether under lease or not. I only speak as a citizen of Greater 552 Investigation of Public Service Commissions New York, and not as an official of tlie city. It is my knowledge that the situation, in so far as the Brooklyn Rapid Transit lines are concerned, they are similar to Manhattan, with the exception of the New York suhway. The Manhattan elevated did not go into the dual subway plan, and the lines that did go in the city owns or will own. In Brooklyn, they are the lines we own or will own, plus the ones they will own. Mr. Lewis." — Before we take a recess, I desire to read from the testimony of Mr. Harkness, taken week before last, beginning at page 15, as follows: "Chairman Wilcox, and the Public Service Commission vigorously objected to the allowance to the company of inter- est payments, of sinking fund payments on this expenditure, ahead of city bonds, unless the city should also have the right of recapture. I can say from my own knowledge that, had the matter been one entirely within the control of the Public Service Commission, the contention of the demands of the Municipal corporation in this particular would never have been complied with, even though it would have meant a break- ing of the entire negotiation. It was, however, largely a finan- cial matter. President McAneny had, after the first report was made, negotiated with the B. E. T. officials on this matter. He and his associates in the Board of Estimate considered it a fair arrangement under all the circumstances and stated if it came to an issue, that the Board of Estimate would express its approval of this provision. As the Board of Estimate, as the financial body of the city, directly concerned with these financial questions, was agreeable to this provision, the Com- mission acquiesced, although with its position thoroughly understood that it yielded to the wishes of the Board of Esti- mate, and not because it thought the provision was justified in principle." Q. Were you aware of that attitude on the part of the Public Service Commission? A. I was aware of that attitude on the part of the Chairman, Mr. Wilcox, and Mr. Maltbie, but — in fact, I think that was the only point of the negotiations where Mr. Wilcox failed to agree with me. Our position was affected by the Report of Joint Legislative Committee 553 fact the B. R. T. once more would not have yielded upon a point like that, and did not yield, and we were negotiating a eon- tract. As to their reasons for not yielding, I have already stated we limit their future income upon a basis of their present investments and carrying charges. If we had first limited and then deducted the charges, they would have started on a distinct losing basis, and would not have accepted it. Not only did we limit their income in terms, but we induced them to adopt the five-cent fare to Coney Island. I had — perhaps I had a good deal to do with that, and I pressed it pretty insistently. That meant an estimated loss in revenue under the operation of the new plan of five hundred thousand dollars a year to the B. R. T. They accepted that loss on the one hand, and we conceded something on the other, and what we did concede was that they should have their present earn- ings and be permitted to carry the carrying charges on their new investment as the first charge, as we offered here in the Interbor- ough Company. After that, would come the city's charges and the even division of profits. Chairman Thompson. — Senator Lawson suggests that five-cent fares to Coney Island will never go into effect. Mr. McAneny.. — Yes, it will ; just as soon as the construction work reaches a certain point, that fare will go into effect. That is already fixed in the contract, and has been since the beginning, that for all future time, they are to carry them for five cents. Examination resumed by Mr. Lewis: Q. That allowance in the aggregate will equal the sum of from ten to twelve million dollars, will it not ? A. You mean annually ? Q. ISTo, in the aggregate. A. Their capital investment, you mean? Q. What I mean, the allowance of 1 per cent, for sinking fund requirements during the complete time. A. During the complete amortization, I dare say it will be, during the fifty years, or what- ever the period is. Chairman Thompson. — Do you know anything about whether it is a custom for these public service corporations to employ men on their work at the behest of politicians ? Mr. M cAnenv. — T>n^^ who ftuiplov them ? 554 Investtoation op Public Service Commissions Ghairman Thompsoii. — Public service corporations. Mr. McAneny. — That I don't know. Chairman Thompson. — Did your Committee, in making these contracts, ever consider the possibility that that might happen ? Mr. McAneny. — I do not recall distinctly that that as a sepa- rate thing had any consideration. It would be a very difficult thing to regulate, I think. Chairman Thompson. — Do you know whether that thought entered the mind of your conferees ? Mr. McAneny. — I do not recall that, as a matter of discussion. Chairman Thompson. — Looking at the contracts, now that they are done, any moneys that were paid to men employed simply because they should be employed, without rendering good service, the cost of that would come in ahead of any share the city would ever get, wouldn't it? Mr. MeAneny. — You mean the cost of excessive payments made to employees employed for political reasons ? Chairman Thompson. — Yes, suppose I asked you to put on a watchman who is decrepit, and has but one leg and one eye, that would come out of the city's interest, wouldn't it ''. Mr. McAneny. — If you care to have a case in point, I can give you one. I think in such cases there may be a good deal to your point. Chairman Thompson. — If there was any of that, it would come in ahead of the city's interest, to be paid as an expense ? Mr. McAneny. — If unnecessary people were put on. In sup- port of your point, I may say, when I was elected president of the borough of Manhattan, and took office not quite six years ago, within the first week or two, I think, of my service, a man presented himself to me and said that he would like fifteen or twenty laborers' tickets, and in my relative innocence at the time, 1 asked him what that meant, and he said, " Your office will be entitled to between perhaps seven or eight hundred laborers' tickets Repoet of Joint Legislative Committee 555 from the various companies operating here in town, and our people supported you, and we would like this much as our share, and I have already spoken to the agent of the company and he said he would send ours to me," and I asked for more detail, and he gave me the detail. I said, " You mean the fifteen or twenty tickets are to be sent to you and charged to me and charged to the borough ? " And he said, " Yes." I said, " You get those tickets back as quick as you can, and I don't propose to have one of those tickets issued in this borough while I am in oiSce." That word went back and the matter was dropped. My predecessors had no doubt had the appointment of several hundred laborers or others on work of that description. I expect that such a system had existed, but so far as I am concerned, I know nothing about it, as I declined to have anything to do with it. Chairman Thompson.: — Did you think of that, in making these contracts ? Mr. McAneny. — I would know of no contractual clause tl would cover such a point. If you make it a misdemeanor for a public service corporation to dispose of appointment for political reasons, I think that would accomplish a very good thing. I would imagine it could only be done through statute, and not through the companies. Senator Lawson. — Is that what you term corporation in- spectors ? Mr. McAneny. — No, sir. That was quite aside from the corporation inspectors. I found about a hundred of those, and I was able to dispense with them, and appointed twenty-five young engineers who did the work. I imagine the institution as such lias not yet perished. Mr. Lewis. — I suggest that the Sergeant-at-Arms be instructed to make every effort to locate and subpoena Mr. Young for next Wednesday's session. Mr. McAneny. — I do not imagine you will have any difiiculty in reaching him if he knows that you want him. 556 Investigation of Public Seevicb Commissions Chairman Thompson. — It will be so ordered by the Committee, and we will adjourn this Committee meeting to next Tuesday morning at eleven o'clock at this place, l^ext Tuesday is official primary day throughout the State, and any members of our Com- mittee who are interested in the primaries, next Tuesday, will he excused from attendance here in order that they may attend the primaries, and we will then expect them present on Wednesday. That means all the attaches of the Committee except those who may be told otherwise. If there is no objection, we will now suspend until next Tuesday morning at 11 o'clock. Whereupon, an adjournment was taken to 11 o'clock a. m., Tuesday, September 28, 1915. SEPTEMBER 28, 1915 New Yoek County Lawyees' Association Board Room, 165 Broadway, New York City Pursuant to adjournment, the Committee met at 11 o'clock a. m. In the absence of Chairman Thompson, Sergeant-at-Arms Hotaling called the meeting to order. Sergeant-at-Arms Hotaling. — ^ Owing to the absence of the Chairman, this meeting will stand in recess until 4 o'clock this afternoon, if there is no objection. Hearing none, it is so ordered. Whereupon, a recess was taken to 4 o'clock p. m. AFTERNOON SESSION 4:40 r. m. Sergeant-at-Arms Hotaling. — By direction of the Chairman, this meeting stands adjourned until to-morrow morning at 11 o'clock, at the same place. Whereupon, a recess was taken to 11 o'clock a. m., Wednesday, September 29, 1915. Eepoet of Joint Legislative Committee 557 SEPTEMBER 29, 1915 New Yoek County Lawyers' Association Board Eoom, 165 Broadway, ISTew York City The Committee met at 11 o'clock a. m., pursuant to adjourn- ment, a quorum being present Mr. Lewis. — The understanding, Mr. Chairman, when the Committee adjourned last week, was that every effort would be made to locate Mr. George W. Young, and, if possible, obtain his presence at this session of the Committee. I want to say that every effort has been made to locate him, but without success. It has occurred to me that if you. as Chairman of the Committee, would call at Mr. Young's office and formally advise the people in his olSce of the fact that you desire his presence it may be that it would have some effect upon the people that you may find there. The >Sergeant-at-Arms has been utterly unable to get any information as to where Mr. Young can be found. I therefore suggest that the Committee take a recess until 2 o'clock, and that you go to the office of Mr. Young and see what you can do in the way of obtaining information as to Mr. Young's whereabouts. Chairman Thompson. — I am willing to do that. Not only that, if Mr. Young does not want to come to ISTew York and we can find out where be is in New Jersey, our resolution permits us to sit in New Jersey, and the Committee will be willing to go to New Jersey and take Mr. Young's statement, if he volunteers it. The position I understand Mr. Young now occupies in this community is such that I think that if we can get information to him through his organization, business organization, he would feel it his public duty to give a statement to this Committee, and to that end, as Chairman of this Committeee, I will be glad to call at his office, or call on him wherever he is, if he is in New Jersey, or Pennsyl- vania, or anywhere within decent reach. That course will be taken and we will suspend now until 2 o'clock. 558 Investigation of Public Seevicb Commissions AFTERNOON SESSION 2 o'clock p. M. Pursuant to subpoena, Mr. William A. Eead appeared before the Committee. Mr. Lewis. — You understand, Mr. Read, this is a joint com- mittee of the Legislature, authorized by a joint resolution to investigate the Public Service Commissions and the operation of the Public Service Law. It is customary for witnesses to be sworn. I presume you have no objection. Mr. Read. — None at all. Chairman Thompson. — I called at Mr. Young's office, and was advised by the clerk in charge that he was in Bridgeport, Con- necticut, and that he telephoned in once a day. He stated he would communicate to him my desire to communicate with him, and communicate with me later in the afternoon. William A. Read, being first duly sworn, testified as follows : Examination by Mr. Lewis: Q. Your business, Mr. Read? A. Banker. Q. Was there a time in the year 1913 when you were a member of the Board of Directors of the Interborough Rapid Transit Company? A. I think so. I am not positive when I resigned, but that will show from the records of the company. Q. How long were you a director of the company? A. From its formation until I resigned. Q. Until approximately what time? A. I should think some time around 1913. Q. And during your period of service as a member of that Board of Directors, do you recall any discussion upon the propo- sition of the awarding of a contract to one John F. Stevens, pro- viding for the construction of three tracks upon the Second, Third and Ninth Avenue lines of the Manhattan Elevated Railroad Company? A. I recall discussion in regard to a contract and for the — yes, I think so. Just whether Ninth avenue or not, I don't know. Eepobt of Joint Legislative Committee 559 Q. It was for the third-tracking, was it not ? A. Yes, sir. Q. Have you any recollection as to the approximate date when that discussion took place ? A. I have not. Q. Was it shortly before your resignation or some time prior? A. Some time, I should think. Q. Can you fix with any degree of accuracy the date of your resignation in the year 1913 ? A. I can ascertain it for you and let you know, but I don't know. Q. You did not serve out your full term; you resigned as a director, did you ? A. Yes. Q. Have you any recollection as to the time of the year in which that discussion occurred '5 A. I would not want to be bound by this, but as near as I can recollect, it was in the early summer or late spring, something of that kind. Q. Did that discussion take place at a meeting of the Board of Directors ? A. At a meeting of the Executive Committee. Q. Were you a member of the Executive Committee? A. I was. Q. Will you be kind enough to tell us who the other mem- bers of the Committee were? A. I can tell you some of them. Whether I can tell you all of them or not, I can't say; Andrew Freedman, George W. Young, Gardner W. Lane, Cornelius Van- derbilt, E. J. Berwind, and that is all I think of for the moment. Q. Was Mr. Belmont a member of the Executive Committee? A. Ex officio he was. Q. Was Mr. Belmont present at the meeting at which the dis- cussion took place ? A. That I cannot say. Q. Will you tell us what the nature of the discussion was, Mr. Head ? A. A proposed contract was presented and voted down. Q. By the Executive Committee? A. As I understand it, yes, sir. Q. Do you remember the vote by which the resolution disap- proving it was adopted ? A. No, sir. Q. Did the Committee, as a Committee — ? A. I don't know that it was voted down. I don't know that any action was taken. It may have been laid on the table and no action taken. I don't remember. I should like to correct my statement as to that. Q. Were minutes kept of the meetings of the Executive Com- mittee? A. I presume so. 560 Investigation of Public Seevice Commissions Q. Do you remember what objection, if any, was offered to tbe approval of the proposed contract ? A. Some of us felt we did not knew enough about it, and it was brought up very suddenly, and we felt we did not know enough about it. Q. Did you examine the contract at all ? A. I did. Q. Did any particular feature of the contract impress you as undesirable to approve '( A. It seemed to me that the charge was very full. Q. You mean the charge for the cost of construction? A. I believe it was to be, as I remember it, we were to retain somebody to do that. Q. Was that Sir. John F. Stevens ? A. As I remember it, yes, sir. Q. Do you remember what, if any, percentage over and above cost that was to be ? A. I have forgotten what it was. Q. Was fifteen per cent, discussed as a percentage? A. I couldn't tell you that. Q. Do you recall whether Mr. Young was present at that meet- ing ? A. I think he was. I think he — no — I was going to say I thought he was a member of the Executive Committee, but I don't think he was. Pie was present either at that meeting or at a subsequent meeting. It may have been a board meeting, and the board met after the Executive Committee. Q. Was the matter discussed at the meeting of the full board? A. I don't remember. Q. You knew J\Ir. Lane pretty well, did you ? A. Very well indeed. Q. His home was in Boston, if I am correctly informed? A. Yes, sir. Q. He is not living now ? A. No, sir. Q. Did you discuss the matter with Mr. Lane privately? A. I did. Q. Do you recall what was said in those discussions ? A. We disapproved of the contract. He agreed with me. Q. Did he express any reason for his disapproving of the con- tract in that conversation ? A. There were various features of it we did not like. Q. Will you enumerate them? A. I think Mr. Lane and I felt there was no reason why anybody should be retained to do that. Report of Joint Legislative Committee 561 Q. You thought, I take it, the company might purchase the materials and employ the labor and do the work under its own engineers? A. Not so much that, but put it out at competitive bidding, and make a contract in that way. Q. Was that matter discussed at the meeting of the Executive Committee? A. I don't remember. Q. Competitive bidding? A. I cannot tell you that. I rather fancy it was. Q. Do you recall whether it was discussed at any meeting of the Board of Directors ? A. I cannot tell you. Q. Was there any resolution offered by anyone furnishing debate on the competitive bidding plan? A. Yes, sir; it was thought that the work, particularly the third-tracking, was dan- gerous work, and that the road had to be kept running while it was being done, and involved large risks, and they wanted a man who was a thoroughly competent engineer to do it. Q. Was the subject of the employment at a salary of a thor- oughly competent engineer discussed ? A. Only in a general way. Chairman Thompson. — Who advanced that argument? Mr. Eead. — I have forgotten. Chairman Thompson. — Did Mr. Shouts ? Mr. Eead. — I don't remember. By Mr. Lewis : Q. Was Mr. Shouts present at the meeting of the Executive Committee ? A. He was. Q. Do you know of Mr. Lane calling upon Mr. Morgan in rela- tion to the subject? A. I believe he did. Q. And do you know, did Mr. Lane advise you thereafter as to the result of his conference with Mr. Morgan ? A. I went to see Mr. Morgan with Mr. Lane. Q. Did you explain the proposition to Mr. Morgan as it was then in mind ? A. We did. Q. Will you tell us what interest Mr. Morgan had in the matter which led you to go to Mr. Morgan ? A. What do you mean by what interest he had, why we should have gone to Mm ? Q. Yes. A, Mr. ]\Iorgan was placing the bonds of the company. 562 Investigation of Public Service Commissions Q. And was regarded as the financial adviser of the company ? A. Yes, sir. Q. Do you recall what Mr. Morgan's attitude was at the con- ference which you had with him? A. He listened and said he would send for Mr. Shonts and have a talk with him. Q. Do you know whether he did see Mr. Shonts or not ? A. I don't know. Q. Was anything said by Mr. Morgan on the subject of writing a letter to Mr. Shonts ? A. Wot to my recollection. Q. Do you know whether Mr. Morgan ever did write a letter to Mr. Shonts ? A. I don't. Q. Did you know, Mr. Head, of any statement being made by anyone in the Board of Directors that a fund had been raised by voluntary contributions for the purpose of promoting the execution of the dual contracts, so-called ? A. No, sir. Q. Did you ever hear that subject discussed ? A. No, sir. Q. Either in or out of the Board ? A. 'No, sir. Q. Did you have any reason to suppose at the time that propo- sition was presented for the approval of the Executive Committee, that any such fund had been created and expended ? A. No, sir. Chairman Thompson. — What Mr. Morgan was it you talked with? Mr. Bead. — The son. Chairman Thompson. — It was J. Pierpont Morgan, Jr. ? Mr. Bead. — J. Pierpont Morgan, the living. By Mr. Lewis: Q. Can you tell us how many times the matter was discussed in either the Executive Committee or in the Board of Directors prior to your resignation ? A. Only once. Q. It was not a matter of frequent discussion, then ? A. No, sir. If it was, it was not discussed when I was present. Q. And you are not able to say definitely whether that discus- sion took place in the Executive Committee or in the Board, did I understand you to say ? A. I think probably it was a meeting of the Executive Committee at which some of the members of the Board of Directors stopped in, before their time of meeting, tgi listen to the discussion, which they probably did. Eepoet of Joint Legislative Committee 563 Chairman Thompson. — The names you gave were the names of the Executive Committee? A. As I remember them. You can get them easily enough from the records. By Mr. Lewis : Q. You did not continue as a member of the Committee until the end of your term of office? A. 'No, sir. Q. And your term of office would have expired, had you remained, some time in 1914? A. I don't know. Q. You were not a member of the Board, I presume, at the time the contract, known as the Gillespie contract, was awarded ? A. I don't know anything about the Gillespie contract, I don't remember it. Chairman Thompson. — Were you on the Board in February, 1914? Mr. Read. — I don't know. I should say not. I think I resigned in 1913. I wouldn't swear to it. You can tell by examining the records of the company, or I can find out for you and let you know, if you wish. Chairman Thompson. — Did Mr. Young resign from the Board, or did his term expire ? Mr. Read. — I believe Mr. Young was dropped when his term expired. I think so. Chairman Thompson. — Did Mr. Lane resign from the Board ? Mr. Read. — I think Mr. Lane resigned from the Board, but I am not positive. By Mr. Lewis: Do you remember which of the members of the Executive Com- mittee agreed with your view as to the impropriety of the approval of the contract ? A. Mr. Lane did, and I think there was a good deal of discussion against the contract and not much in favor of it. Q. You said, I think, that Mr. Shonts presented the contract ? A. Mr. Shonts presented the contract, yes, sir. 564 Investigation of Public Service Commissions Q. I take it from the answer that you have made that no reso- lution was adopted at that meeting of the Executive Committee, or at any time when you were present, at any meeting, authoriz- ing the submission of the proposed form of contract to the Public Service Commission for its approval? A. Ifot as I remember it. Q. Do you recall, Mr. Read, whether or not any particular percentage was discussed as the percentage to be paid to Mr. Stevens under the form of the contract submitted? A. Yes, sir; there was. Q. Do you recall what it was ? A. Well, inasmuch as I am testifying under oath, no. Q. Have you any recollection on the subject? A. I have a recollection, yes, sir. Q. Will you give us your best recollection as to the subject? A. I ought to testify to what I know. I don't know. Q. I am asking for your best recollection. A. As I remem- ber it, it was ten per cent. Q. Do you remember who made the statement that the per- centage would be ten per cent ? A. I think there was a form of contract presented, and that amount was discussed. Q. Did that amount appear in the contract itself ? A. I don't remember whether it did or not. If it did not appear, it must have been suggested. Q. Do you remember whether it was discussed by Mr. Shonts or not ? A. Undoubtedly was mentioned, as he was the only man could answer the qu^estion. Q. Do you recall any discussion as to the character of service for which the skilled engineer was to be paid this ten per cent. ? A. I just told you supervising all the work and carrying it on. Q. It was well understood by the members of the Committee, was it, that the company was to pay for all of the cost of labor, materials, rentals, expenses, cost of the bond to insure the faithful performance of the contract, and to indemnify the contractor for costs and expenses incurred in defending any action that might be brought against him? A. I never heard all of that discussed. Q. Did you examine the contract and discover that all of those items were to be reimbursed to Mr. Stevens, plus a ten per cent, allowance ? A. I don't remember. I know the allowance, what- ever it was, was to be paid for the sei*vices of the engineer, in Eepoet of Joint Legislative Committee 565 protecting the company's interests, and supervising the work in every way. Q. Was there some understanding in the Committee after the discussion, or at the time of the discussion, that the work was really to be done by the company with Mr. Stevens to supervise that construction? A. No, I think not. Q. Will you tell us just what your recollection is of the arrangement that was to be made ? A. My recollection was that where he had to give out contracts for doing work, he was to retain coiitractor. Q. And by ''he," you mean Mr. Stevens? A. Yes, sir; Mr. Stevens. Q. Have you told us the names of all the Committee whom you recollect as being opposed to the awarding of the contract ? A. I know Mr. Young was opposed to it, and he was not a member of the Committee, and to the best of my recollection, Mr. Lane was opposed to it. Q. Do you recall any others? A. Well, the matter was dis- cussed in such an informal way, apd was turned down, that there was not any positive opinion called for, and everybody expressed their opinion that so-and-so was not right, and so-and-so was not right, and that was the end of it, and it was dropped. Q. How many months after that would you, say that you con- tinued as a member of the Board of Directors? A. I don't know. It was a number of months. Q. Was the matter ever again brought to the attention of the Board or of the Executive Committee during your term of being a member of the Board ? A. !N"ot in my recollection. Q. Were you accustomed to attend the meetings? A. Very regularly. Q. How frequently held? A. Executive Committee meetings held regularly once every week and oftener upon the call of the Chair. Q. And the meetings of the Board itself ? A. After the meet- ing of the Executive Committee. Q. Regularly? A. Yes, sir. Q. And during all the period you continued as a member of the Board and of the Committee, the matter never again was 566 Investigation of PtrBLio Seevioe CoMMissioiirB brought to the atteution of the Committee or of the Board? A. It was never discussed in my presence, and I don't believe it was ever brought to the attention of the Committee. Q. Do you recall whether the board of directors at any time ever adopted a resolution authorizing the president to submit the proposed form of contract with Mr. Stevens to the Public Service Commission for its approval, and to sign an application in the name of the company by him as president ? A. To the best of my knowledge and belief, they never did while I was present. Q. Did you know of the fact that an application subs.equently was made to anyone by Mr. Shouts acting for the company ? A. No, sir. Q. Did you ever discuss the matter with Mr. Maltbie of the Public Service Commission ? A. ISTo, sir. Q. Or with Mr. McAneny, a member of the Board of Estimate and Apportionment ? A. No, sir. Q. Did you know of the fact that George W. Young discussed the matter with either of those gentlemen ? A. No, sir. By Chairman Thompson: Q. Mr. Read, did you understand the amount involved in that contract at the time it was presented ? A. No, sir, I don't remem- ber what it was. Q. Well, it was as you understood, from ten to twenty million dollars, or something of that sort ? A. Something like that. Q. And a percentage, such as you understood, would give to Mr. Stevens from a million to two million dollars ? A. Yes, sir. Q. What did you understand — what service did you under- stand, or what benefit did you understand the Interborough was to receive for that million or two million dollars Mr. Stevens was to get? A. Mr. Stevens was to act as supervising engineer, as pur- chasing agent, and to have his staff do everything that was necpssary, Q. Did you understand Stevens' staff was to be paid by the Interborough ? A. I did not. Q. You thought that was to be paid out of the percentage ? A. Yes, sir. Q. Did you understand that Mr. Stevens was to be required to furnish any plant ? A. I did not understand so. Repoet of Joint Legislative Committee 567 Q. That was to be furnished by the Interborough and paid by the Interborough ? A. I do not know who was to furnish it. Q. If it was furnished by a contractor, Mr. Stevens retained, the Interborough would have to pay for that contractor's plant? A. Undoubtedly. Q. That is the way you understand it? A. I understood Mr. Stevens was to get 10 per cent, and render all the service he could render as an expert. Q. Did you understand how long a term that contract was to run ? A. Until the work was completed. Q. Didn't you understand there was a limit on it ? A. I have forgotten. Q. Assuming there was a limit in the contract of eighteen months, do you think Mr. Stevens was able to earn a million dol- lars in eighteen months ? A. I did not. Q. Did you ever know in your connection with the Interborough railroad, where they went out of their way to try and force on some outsider a million dollars for a like amount of service? A. I don't remember of any such case. Q. The Interborough never has been in the habit of overpaying anybody voluntarily? A. I don't think that was a fair way to look at that, because it was open to discussion as to whether if you had an accident while the work was being done, you couldn't lose a good deal more than a million dollars. Q. Did you understand Mr. Stevens was to run the risk of acci- dents ? A. ISTo, sir ; but he was an engineer in whom Mr. Shonts had the greatest confidence, having served with him in Panama, and this was ticklish work, and he would be relieved in the situa- tion if he had the benefit of his services. Q. Did you ever hear of Gillespie? A. No, sir. Q. Has he any such reputation as that ? A. I don't know any- thing about him. Q. If he had any reputation like that, you would probably have heard of him some time before? A. Not necessarily. I don't know everybody. Q. By retaining a contractor, you meant that Stevens was to employ a contractor at the expense of the Interborough ? A. As I understood it. 568 Investigation of Public Service Commissions Q. Did you read this contract as presented at that time? A. Yes, sir. Q. Didn't you see here that all Mr. Stevens' assistants in the "way of organization that he might have would be paid by the Interborough, by the terms of that contract ? A. I don't remember. Q. Isn't it a fact that that contract provided that that per- centage was entirely for the service of Mr. Stevens, and everybody else's services were i:)rovicled for ? A. That is as I understood it. I cannot remember about it, however. Q. It did not contemplate Mr. Stevens paying out anything for an organization of his own, and for supervision, and that was all paid and everything except Mr. Stevens' personal services was paid by the Interborough ? A. We understood it that way. Q. And you thought that was an improper contract? A. I did not care to vote for it. Q. Do you remember anybody who attempted to get the approval of the executive committee or of the board of directors of the Interborough Company to that contract, except Mr. Shonts ? A. ISTo, sir. Q. Did Mr. Vanderbilt acquiesce in it ? A. As I remember, Mr. Vanderbilt was in Europe at the time. Q. I thought you said he was present at the meeting ? A. IS! o, sir; you asked me who were the members of the executive com- mittee, and not the members present. Q. Was Mr. Berwind present ? A. I think he was. Q. Did he acquiesce in that? A. I don't think he said very much. Q. Was there any expression made there as to why they wanted to give a percentage contract beyond what you have stated, it was ticklish work? A. ISTo, sir. Q. Was there anybody made any suggestions or statements that a million or two million dollars was too much money, and it must be used for something else? A. ISTo, sir. Mr. Lane and I both felt that the contract was exorbitant and would not vote for it. Q. Didn't you feel, Mr. Kead, that Mr. Shonts had some other object than to pay all of this money to Stevens ? A. No, sir. Q. You knew Shonts and Stevens were close personal friends at that time, didn't you ? A. No, sir. I knew they acted together in Panama. Eepoet of Joint Legislative Committee 569 Q. Did the stispicion occur to you that there might be something behind the presentation of a contract like this to Mr. Stevens? A. I never go into suspicions. I did not like the contract, and Mr. Lane did not, and he did not want to vote for it, and the matter was dropped so far as we were concerned. Q. It impressed you so much you wanted to beat it ? A. Yes, sir: we discussed it and said we wouldn't vote for it. We felt that Mr. Morgan should be advised, and throw his influence against it Q. And you went to Mr. Morgan to get him to help you beat it? A. Yes, sir. Q. Because he had the most power of anyone you could think of to help beat it ? A. Yes, sir. Q. And you went to him to get him to help beat it ? A. We told him what we thought of the contract, and he ought to be advised. Q. What did Mr. Morgan say about it? A. He said he would talk to Mr. Shonts about it. Q. Did he say it was bad ? A. I don't think he did. He didn't say. Q. Did you see him after that? A. I don't think so. Q. Do you know whether Mr. Morgan wrote a letter on the subject? A. I don't. Q. You say the matter did not come up in any future meeting of the Board of Directors at which you were present ? A. No, sir. Q. Why did you resign ? A. I resigned for my own private reasons, some time after that. Q. Did it have anything to do with this ? A. No, sir. Q. Did you pick the fuss that caused your resignation, or was that picked by Mr. Shonts ? A. Neither. Q. Did it ever occur to you that in the light of the fact that you and Mr. Young and Mr. Lane were directors at this time and you all opposed this contract — did it ever occur to you that there was any significance in the fact that the Gillespie contract, which they are now operating, was made after all three cf you were off the board ? A. I never thought about it, and did not know until yesterday when a reporter told me that there was a Gillespie con- tract. I dropped the Interborough out of my mind. 570 Investigation of Public Service Commissions Q. You are not a stockholder any longer? A. All I ever did own, ten shares of stock — not all I ever did own, no. Q. Mr. Kead, you appreciate the fact that this is a public service this committee is attempting to perform, and it is not pleas- ant at all for us to send subpoenas and take business men away from their work, and it is not pleasant always to have to do what you think you ought to, and doubtless unpleasant for you to have to come before the committee, but there may be something arise by which we may want your presence again. May we ask for it and get it, if desired? A. Certainly, if I can come, I will, if I happen to be here. I am going to California, if I can get away, in about ten days or two weeks. I do not know if I shall be able to go or not. If you do call me, I wish you would call me and put me on the stand, as you have to-day, and not keep me here kicking my heels together. Chairman Thompson. — We will do that. Mr. Eead. — I am very much obliged to you. Chairman Thompson. — Is there anything more to come before this committee before we adjourn? If there is no objection, we will adjourn the proceedings of this committee until to-morrow morning at eleven o'clock at this place. It is so ordered. Whereupon, adjournment was taken to September 30, 1915, at 11 o'clock A. M. SEPTEMBER 30, 1915 New Yoek County Law;yees' Assooiation Boaed Eoom, 165 Broadway, New York City The Committee met at 11 o'clock a. m., pursuant to adjourn- ment. Chairman Thompson. — Are we ready to proceed ? Mr. Lewis. — I understand, Mr. Chairman, that a subpoena wad to be served upon the Secretary of the Interborough Company this morning for the production of the minutes of the meetings of the Interborough Board of Directors, and the minutes of any of the Report of Joint Legislative Committee 571 meetings of the Executive Committee, if any, of the Interborough Board of Directors. That subpoena was returnable at 11.30, and I supposed that the Secretary might be here, but I presume the service may have been late and it is likely that he will be in pres- ently. The officer in charge of the service has not reported yet. Chairman Thompson. — I assume we had better take a recess, and we will stand in recess for a few minutes. Mr. Lewis. — The Sergeant-at-Arms reports that the Secretary of the Interborough Company is in attendance at a meeting of the Board of Directors of the Interborough Company, and there- fore he has been unable to make service of the subpoena upon him. There is not any certainty as to how long that meeting will con- tinue, and I have advised the Sergeant-at-Arms to subpoena the Secretary to appear here at twelve-thirty, and produce the records and minutes of the meetings of the Board that are desired, and the Sergeant-at-arms will make the effort now to subpoena the Secre- tary to appear at twelve-thirty. There is nothing we can do until that time. Whereupon a recess was taken to 12:30 p. m. AFTERNOON SESSION 12:30 o'clock p. m. HoEACE M. Fisi-iEE, being first duly sworn, testified as follows : Examination by Mr. Lewis : Q. Mr. Eisher, you are the Secretary of the Interborough Rapid Transit Company? A. Yes, sir. Q. Were you such secretary during tte years 1913 and 1914? A. Yes, sir. Q. Have you produced and have you present the records of the meetings of the Board of Directors of that company ? A. Yes, sir. Q. Can you state without reference to the records as to whether or not any resolution was adopted by the Board of Directors author- izing applications to the Public Ser vice Commission in the spring 572 Investigation of Public Service Commissions or summer of 1913 for tlie approval of the so-called proposed form of contract with Mr. John F. Stevens ? A. There was not. Q. Was there any resolution adopted at any time by the Executive Committee of the Board of Directors of that company authorizing the application to the Public Service Commission for its approval of the so-called proposed form of contract with John F. Stevens ? A. ISTo, sir. Q. Was the matter of the approval of that proposed form of contract submitted to the Board of Directors at any time for its approval? A. It was submitted for discussion and approval, yes, sir. Q. To the Board of Directors ? A. To the Board of Directors. Q. And was any action taken upon the submission ? A. No, sir. Q. Was it previously submitted to the executive committee of the Board of Directors for action? A. I should prefer to refer to the minutes before answering that question. Q. Will you be good enough to refer to the minutes ? A. I have here copies of the minutes which I will refer to with your permission. Q. Yes. A. It came before the Board for discussion on June 24, 1913. It came up again on June 25, 1913. At this meeting a special committee was appointed to consider and report on the contract. The special committee met on June 30th. Q. Will you give us the names of the members of that Com- mittee? A. The Committee consisted of Edward J. Berwind, William A. Bead, Gardner M. Lane, F. DeC. Sullivan, and Andrew Freedman. This Committee met, as I stated before, on June 30th. The matter was discussed but no action taken. Q. Was there any further action taken by the Board or by any Committee of the Board in relation to the matter at any time ? A. IS'ot in respect to the Stevens contract, no, sir. Q. Have you the minutes of the Board present relating to any action taken by the Board on the so-called Gillespie contract ? A. Yes, sir. That contract was brought up at a special meeting of the Executive 'Committee, on December 15, 1913. A resolution was adopted directing the proper officers to prepare specifications and procure bids from the following firms for the construction of the Eeport of Joint Legislative Committee 573 third tracks and improvements on the Second, Third and Ninth Avenue Elevated lines of the Manhattan Kailway Company, covered by certificate of the Public Service Commission, dated March 19, 1913. The firms were the Grillespie Brothers Incorpo- rated, Pittsburg Contracting Co., Bradley Contracting Co., Snare & Triest Company, Kent Engineering Co., and Terry & Tench Co., Inc. Q. What was the action, if any, taken by the Board or by the Committee? A. It came up again at a special meeting of the Executive Comnaittee on January 20th. At this meeting the bids of the firms previously referred to were submitted as follows: William Bradley, for cost plus eighteen per cent. ; Pittsburg Con- tracting Co., for cost plus eighteen per cent. ; the Snare & Triest Company, for cost plus fifteen and three-quarters per cent. ; the Terry fr Tench Co., Inc., for cost plus fifteen and a half per cent. ; Henry B. Kent, for cost plus seventeen and a half per cent., and T. A. Gillespie Company, for cost plus fifteen per cent. Q. Will you tell us at this point who were the members of the Executive Committee at this time ? A. Yes, sir ; this was a special committee. Messrs. August Belmont, Edward J. Berwind, Andrew Freedman, Theodore P. Shonts, Cornelius Vanderbilt, and Mr. Bead had resigned from the Board prior to the meeting of this special executive committee. Chairman Thompson. — When did he resign ? Mr. Fisher. — He resigned Decembeap 29. Q. Was Mr. Lane a member of the Committee? A. He was not a member of the Executive Committee, and never was. Q. The names which you have last given us are the names of the members of the Executive Committee ? A. Yes, sir. Q. 'While the names given at first were the names of a special committee? A. Yes, sir. Q. Have you the resolution creating the special committee in your minutes? A. Yes, sir. Meeting of June 25, 1913, regular meeting of the Board of Directors. " Eesolved, That the Presi- dent appoint a committee to consider and study the subject " — " The President brought up the matter of letting the contract for the construction of the elevated third-tracking and extensions, and, 5Y4 Investigation of Public Service Commissions on motion, duly seconded, it was resolved: That the President appoint a committee to consider and study the subject and to report their conclusions back to the Board. The President there- upon appointed as such committee Messrs. Edward J. Berwind, Willian. A. Read, Gardner M. Lane, P. deC. Suilivan, and Andrew Freedman." Q. Did that committee ever mate report, that sub-committee? A. Not to my recollection. Q. You have no record of any report ? A. No, sir ; nothing en the minutes. Q. Were you present at the meetings of that special committee ? A. At some of them. Q. Were minutes kept of the discussions? A. Not of the detail of the discussions ; simply general discussions. Q. And no stenographic record made ? A. No, sir. Q. How many meetings of that committee were held? A. I have scheduled only two. I think there were some others, but I am not sure. Q. Was Mr. Read present at all of those meetings, do you know ? A. Yes, sir. Q. And Mr. Lane ? A. No, sir ; Mr. Lane was not present. Q. Do you recall the — A. May I make a correction in my testimony ? I say I have scheduled only two. Make it one. Q. You have but one meeting scheduled ? A. Yes, sir. Q. Do you recall the discussion that took place at that meeting as to the propriety of the awarding of the contract to Mr. Stevens? A. No, sir; I don't. As I recall it, there was no discussion on that point whatever. Q. Was there any discussion as to the propriety of making a contract of that character, cost plus a percentage? A. No. sir. It was the opinion, it seemed to be the opinion of the members of the Board in all of their discussion, that a contract of that character was necessary. Q. Speaking of the members of the committee? A. Yes, sir; that a contract of that character was necessary and would prob- ably have to be made. Q. What, if any, ground was offered for opposition to a favor- able report upon that proposed form of contract ? A. There was Eepoet of Joint Legislative Committee 5Y5 no particular ground. The question seemed to be getting the best terms and the most responsible contractor. Q. Do you remember what the attitude of Mr. Read upon that subject was? A. As near is I can recollect, it was Mr. Read's opinion that the terms for an ordinary contract might be con- sidered high, but he was not prepared to raise any objections, considering the magnitude of the work and the fact that it had to be carried on under difficulties at a time when the company was operating their full schedule, and that extraordinary pre- cautions had to be taken to prevent accident. Q. Did he state that that was his view upon the proposition ? A. Yes, sir ; words to that effect. Q. Do you recall what Mr. Lane's attitude was upon the propo- sition ? A. It was somewhat similar, Q. Do you recall the attitude of Mr. Sullivan upon the propo- sition? A. Wo, sir; I do not. Q. Do you remember Mr. Berwind's attitude as he expressed himself, if at all ? A. It was Mr. Berwind's sole idea of getting the best contractor and the best terms. Q. Did you know of the fact, Mr. Fisher, that Mr. Lane and Mr. Read called upon Mr. Morgan in connection with this pro- posed contract? A. No, sir. Q. Was there any correspondence on the subject of which you have ajiy knowledge between Mr. Morgan and the Interborough Company, or any of its officers ? A. None whatever. Q. I suppose you mean by that that you don't know of any? A. I don't know of any. There is none in any of my files. Q. You are not prepared to say there may not have been some correspondence of which you have no knowledge? A. No, sir; I am not. Q. Did Mr. Lane resign from the Board of Direotors at any time prior to the awarding of the Gillespie contract? A. Mr. Lane's resignation as a director was accepted on May 13, 1914. Q. What was the date of the execution of the Gillespie con- tract, if you are prepared to give us that ? A. I am not prepared to give you that. Q. Had the contract been executed prior to Mr. Lane's resig- nation, do you know ? A. That I am unable to say without getting the papers. 576 Investigation of Public Service Commissions Q. Did not Mr. Lane and Mr. Read express themselves as opposed to the doing of the work of third-tracking by contract? A. Not to my knowledge. Q. Did you know of the fact that an application signed by the Interborough Company, by T. P. Shonts, President, was pre- sented to the Public Service Commission, asking for the approval of the Stevens contract? A. I understand that before he sailed for Europe on his vacation, that he sent a contract up to the Public Service Commission for the purpose of saving time and getting them familiar with it. Q. And did you understand that he signed an application for the approval of that contract in the name of the company by himself as president ? A. I could not tell you what form it took. Q. Do you recall the date of Mr. Shonts' sailing for Europe? A. On July 8th. Q. Nineteen hundred and thirteen ? A. Nineteen hundred and thirteen, yes, sir. Q. And was this proposed form of contract transmitted to the Public Service Commission just prior to his departure? A. That I couldn't say. Q. Or some time prior ? A. That I couldn't say. His records will show that. Q. But, at no time, prior to Mr. Shonts' departure for Europe, had there been any resolution of the Interborougji Board of Directors, authorizing him to make application for the approval of the so-called Stevens contract? A. Wo, sir. Q. And no resolution of its executive committee to that effect? A. ISTo, sir. Q. Was the special committee created to consider the Stevens contract ever discharged ? A. No, sir ; they were not discharged as a committee. Q. Have you any resolution — I think you did read a resolu- tion, did you not, conferring the authority upon the Executive Committee to consider the Gillespie contract? A. The proper officers were authorized to prepare specifications and secui'c bids. Q. "Was that before the matter was considered by the Executive Committee, or after ? A. This was the Executive Committee. Q. This was the Executive Committee? A. Yes, sir. Eepoet of Joint Legislative OommItteJ; 57? Q. And was thai; action reported to the Board of Directors? A. The minutes of the Executive Conunittee are approved by the Board at each meeting. Q. Was there a resolution? A. I should say read and approved. Q. Was there a resolution adopted by the Board of Directors, awarding the contract to Grillespie? A. That resolution was adopted by the Executive Committee, and the minutes of the Executive Committee were approved by the Board. Q. That is the only action taJcen by the Board of Directors in connection with the GiUespie contract ? A. That is quite a cua- tomary action, under the circumstances. Q. But no other action was taken on the subject ? A. No, sir. Q. Do you know of any reason why Mr. Stevens was not solicited to bid upon the contract at the time the other contractors were solicited? A. Only that I understood he was financially embarrassed. Q. When did his financial embarrassment become apparent? A. That I am unable to say. Q. It was known to the members of the Board, was it, at that time? A. Probably so; undoubtedly was. Chairman Thompson. — He got financially embarrassed some time between July and December ? Mr. Fisher. — I rather think so. I am not sure. My present recollection is that occurred during the summer. Chairman Thompson. — His ability as an engineer had not suffered any embarrassment in that time, had it ? Mr. Fisher. — !N"ot to my knowledge. By Mr. Lewis: Q. Were you aware of the fact that Mr. Bead testified before this Committee yesterday ? A. I read it in the papers this morn- ing. Chairman Thompson. — It is a good deal safer to read the testi- mony, I take it. Mr. Bead stated, in answer to this question : " Was there any Vol. I — 19 ' 5Y8 Investigation of Public Seevice Commissions resolution offered by anyone furnishing debate " — that " furnish- ing" -should be "causing" — "on the competitive bidding plan? A. Yes, sir ; it was thought that the work, particularly the third- tracking, was dangerous work, and that the road had to be kept running while it was being done, and involved large risks, and they wanted a man who was a thoroughly competent engineer to do it;" do you remember any discussion as to the propriety of engaging the services of a competent engineer to supervise the construction work rather than to award a contract for the doing of that work? A. That was the understanding, that our own engineers were to have supervision of the work. There was no discussion of engaging an outside engineer, to my recollection. Q. Was that the understanding that Mr. Read had, as you recollect his attitude, at that time ? A. He understood that per- fectly, yes, sir. Q. Do you recall, Mr. Fisher, of any discussion in connection with the Stevens contract, as to the percentage that was to be allowed over cost ? A. Only in the manner that I have already stated, it was considered by some members of the Board that for an ordinary contract the percentage was high, but that it might not be considered so for the contract under discussion. Q. What, if any, percentage was mentioned by any of those who thought the percentage was high? A. I think twelve per cent, was meaitioned by some one ; who, I could not say. Q. Was any lower percentage mentioned at any time? A. Not to my recollection. Q. In the discussions of this proposed Stevens contract, do you know of any suggestion that a ten per cent, profit would be regarded as ample ? A. In the general discussion, it is quite pos- sible that that suggestion might have been made. Q. Were you present at any discussions, between Mr. Shonts and Mr. Stevens, upon that question? A. JSTo, sir; I was not. Q. Were you aware of the fact that the proposed form of con- tract as submitted to the Public Service Commission for its approval did not contain a percentage, the exact percentage to be allowed, that there was a blank space left in which the amount of the percentage was to be filled ? A. I might have been aware of it at the time, but it had no special meaning to me. Repoet op Joint Legislative Committee .5Y9 Q. Did you know, that Mr. Shouts talked with Mr. Stwens on the h^-sis of a seven-and-a-half per cent, over cost ? A. I never heard of that. Q. Did you know that there was talk hetween Mr. . Shonts and Mr. Stevens of ten per cent ? A. No, sir. Chairman Thompson. — I understand you have the minutes here of 1913 and 1914? Mr. Fisher. — Yes, sir. Chairman Thompson. — When you come this afternoon, will you bring the minutes of 1912? Mr. Fisher. — Yes, sir. By Mr. Lewia: Q. Have you any date that was submitted to the various con- tractors whose bids were solicited on which they were asked to base their bids? A. The specifications are usually iiled by the engineers. Q. Were they in this case? A. I presume they were. Q. Was there a proposed form of contract submitted to each of the prospective bidders as a basis for their determining the amount of their bid? A. That I am unable to say. I did not see the specifications. Q. Will you investigate that, and if you find any, will you produce them at two o'clock? A. Yes, sir. Q. Were the bids that were submitted in writing? A. Yes, sir. Q. Can you, without too much trouble, produce those bids at two o'clock? A. I think so; yes, sir. Chairmaji Thompson. — We will suspend now until two o'clock. Whereupon, a recess was taken until 2 o'clock p. m. Chairman Thompson. — I call the Committee, to order for a moment. Dr. Feinberg, the Coroner, is conducting an investi- gation into the question of the Seventh avenue subway accident which, recently occurred, and this morning he extended an invita- tion to ipie, as Chairman of this Committee, to be present with 580 Investigation of Public Seevioe Commissions him in his investigation as Coroner, at half-past two this after- noon. I assume it will be a wise thing to accept that invitation, as there mght be something of importance to our inquiry that might develop that would be of use to us. It will be impossible for me personally, under the circumstances, to leave, but if there is no objection, I will designate Senator Lawson as a sub-com- mittee of one, to attend that investigation, representing this Committee this afternoon. It is so ordered. AFTEENOON SESSION 2 o'clock p. M. HoKACE M. FisHBE, recalled for further examination. By Mr. Lewis: Q. Mr. Fisher, I think you said that the bids were submitted on the 20th of January, 1914? A. I do not think that referred to the date the bids were submitted, because I didn't have that knowledge when I testified before. The invitation to bid is dated December 16, 1913. Q. Didn't you testify that on January 20th, bids were sub- mitted to the Committee? A. Yes, that is right. Q. What action was taken by the Committee? A. Shall I read the whole resolution and preamble? Q. Yes. A. " The President stated that a form of contract had been submitted and bids requested for the construction of the addi- tional tracks on the Second, Third and Ninth Avenue lines of the Manhattan Eailway Company, covered by certificate of the Pub- lic Service Commission, dated March 19, 1913; that the form of contract required the contractor to undertake the performance of all of the construction obligations imposed by the acceptance of said certificate, with exceptions noted, under the supervision and to the satisfaction of the Chief Engineer of this Company, the Interborough Rapid Transit Company to pay to the Contractor the actual and necessary costs incurred by him, plus a sum to be agreed upon for his services and for furnishing and maintaining the necessary plant, tools and machinery and for all obligations and risks assumed by him. Bids for doing this work, he stated, Ebpobt of Joint Legislative Committee 5&1 had been received from, William Bradley for cost, plus 18 per cent.; Pittsburg Contracting Co. for cost, plus 18 per cent.; The Snare and Triest Company for cost, plus 15% per cent.; The Terry & Tench Co., Inc., for cost, plus 15% per cent. ; Henry K. Kent for cost, plus 171/^ per cent. ; T. A. Gillespie Company for cost, plus 15 per cent. None of these bids, he stated, were per- fectly satisfactory to the Company; that the work was of such importance and had to be performed with such care that in his opinion it was necessary and advisable to secure a combination of the best engineering and construction talent available; that this opinion had been communicated to the T. A. G-illespie Company, the lowest bidders, and that as a result they had submitted, under date of December 31, 1913, an amended proposition whereby they agreed to associate with themselves in doing the work. The Terry & Tench Co., Inc., and The Snare & Triest Company, and to enter into a contract on the basis of cost plus 15 per cent., the contractors to furnish all of the plant, tools, and machinery necessary in connection with the performance of the work, without charge, provided this Company would accept instead of a surety company bond the bond of The Terry & Tench Co., Inc., and Messrs. Terry and Tench individually. The Snare & Triest Company and Messrs. Snare and Triest individu- ally, and the T. A. Gillespie Company and T. A. Gil- lespie individually. The combination of these three com- panies, he stated, was undoubtedly the strongest combi- nation of experienced men that could be secured to perform the work requiring the skill necessary in this particular instance ; that the three firms named were equipped with the necessary plant, skill and facilities to meet all of the onerous conditions required. He recommended therefore that the contract be awarded to the T. A. Gillespie Company upon the condition that that company associates with it The Terry & Tench Co., Inc., and The Snare & Triest Company, on the basis of cost plus 15 per cent, and that the bonds of the respective companies and individuals enu- merated be accepted. Whereupon, on motion, duly seconded, it was Resolved, That the President be, and he hereby is authorized to award the contract for the third-tracking above described, to the T, A. Gillespie Company, upon the condition that that Company 582 Investigation ob' Public Seevice Commissions associates -v^ith it The TeWy & Teiicli Co., Inc., and The Snare & Triest Company^ on the basis of cost plus 15 per cent., and that the' bonds be acceptfed as proposed;" Q. Was that resolution adopted by the Committee? A. Yes, sir. Q. And subsequently reported to the board of directors? A. Yes, sir. Q. Did the board of directors take any action subsequently? A. They approved it at the next meeting. Q. When was the contract authorized by that resolution exe- cutfed? A. February 13, 1914. Q. When did the work under that contract begin ? A. That I am uiiable to say. Q. It is going on now, is it ? A. Yes, sir. Q. T)t) you know what the amount was of the estimated cost of the work covered by that contract? A. My knowledge as to the division of the cost of third-tracking and extensions is very general, and I do not think it would be of any particular advantixge to you. Q. D6 you know whether any actual estimate was made prior to the awarding of the contract ? A. There were estimates made, but I could not say what they were. Q. You were to. inform yourself on some subjects and bring in some additional information, were you ? A. Yes, sir. I have here the invitation to the contractors for the construction of the elen vated railways improvements, comprising additional tracks and facilities under certain certificate issued by the Public Service Commission for the Pirst District to the Manhattan Elevated Kail- road Company, dated March 19, 1913 ; a copy of the contractor's proposal and schedule of rates, a form of contract, specifications, and form of bond. Q. Those were all prepared' prior to the application for the approval of the Stevens contract? A. Ko, sir; I should say not. Q. I thought the date was March 19, 1913. A. That is the datfe of the original contract with the city. Those are the bids received in response to that invitation. Q. Mr. Pisher, have yoii a copy of the contract that Was actu- ally entered into pursuant tb the resolution adopted ? A. I have it in my files, I haven't it with me, Kepoet of Joint Legislative Committee 583 Mr. Quackenbush. — I will furnish you with anything of that sort that you want. Q. Have you given to the Committee, Mr. Eisher, all of the entries contained in the minutes, relating either to the proposed Stevens contract or the so-called Gillespie contract ? A. Yes, sir. Q. The memorandum which you prepared and from which you read was prepared, I assume, to avoid the necessity of turning from page to page ? A. Yes, sir. Q. And does the memorandum show the pages of the minutes from which the extracts are taken ? A. No, sir ; it does not, but I can very readily give them to you. Q. Does it show the dates? A. Yes, sir. Q. Can you leave us a copy of the memorandum which you read to us? A. Yes, sir. Mr. Lewis. — I do not think I have any further questions to ask Mr. Fisher. By Chairman Thompson: Q. Mr. Fisher, you say the first record of this Stevens contract having been brought before the board of directors or the executive board, was on June 24, 1913 ? A. Yes, sir. Q. That is the first the matter was brought up at all that you have any record of ? A. Yes, sir. Q. Do you know whether this matter was discussed in directors' meeting before that ? A. Not to my knowledge. Q. Would you say that it was not ? A. I think I can safely say it was not. • * 1 ;-'-i|Hr;Wl Q. Was it discussed in a meeting of the executive board? A. No, sir. Q. So that if an application was made by the president of your company to the Public Service Commission, on May 21st, then that application was made before the matter had been submitted to any of the directors or executive officers ? A. That is, if the application was made on May 21st, it was made before I have any record of its having been submitted. There may have been informal discussion by members of the Committee or executive board when the Committee or the board were not in session, and which I would not know anything about. 584 Investigation of Public Sbevice Commissions Q. That is, they might have some street talk? A. I don't know whether you would call it street talk ? I don't recollect of any discussion in the sessions. Q. What authority has that executive board, what general authority; have they any authority delegated by the Board of Directors of your Company. A. Yes, sir ; the same authority as the Board when the Board is not in session. Q. This authority is contained in your by-law? A. Yes, sir; that is of record. Q. And they have authority to bind the company? A. Yes, sir. Q. Whether their action shall be subsequently approved by the Board of Directors or not ? A. Yes, sir. Q. Aad in 1913, I understand the Executive Board was Messrs. Berwind, Behnont, Shonts and Freedman? A. And Vanderbilt and Bead. Q. Was Mr. Vanderbilt present at any of those meetings? A. He was not. Q. Mr. Bead testified yesterday that it was his recollection that Mr. Vanderbilt was in Europe at that time. Do you have any recollection on that subject ? A. No, sir. He was not present, I know that. Q. Is there any way by which the company can be bound either by a majority of the members of the Executive Board or the Directors, without the matter being brought to the attention of a meeting of the Executive Board or Board of Directors ? A. ITot that I know of. Q. So that if an application was made to the Public Service Commission to approve a contract prior to the 24th of June, it was made without authority, was it not ? A. So far as I know. Q. Don't you know ? A. It was made without authority of the Board or Executive Committee. Q. There could be no other authority, could there A. No, sir. Q. Now, where these certificates — and there was a certificate granted on the 19th of March, 1913 — was that a subject of debate before the Board of Directors ? A. Yes, sir. Q. When ? A. For about seven years off and on. Q. Was the particular question as to the leaving out of the Eepoet of Joint Legislative Committee 585 Manhattan certificate the requirement that contracts for exten- sions for third-tracking, or either one of them, should be approved by the Public Service Commission, was that subject discussed in your Board of Directors? A. I think it was; yes, sir. Q. Of what meeting? A. There is no record of it, and the discussion was informal. Q. Tliere is no record of it in your minutes ? A. That particu- lar subject is not referred to in the minutes, so far as I recollect. The negotiations were carried on by the President, and he reported from time to time to the Board the progress made. Q. That would be in the minutes of the year 1912, or some time in 1913, prior to the 19th of March? A. No, sir. There is nothing in the minutes relating to that particular feature. That would be preliminary discussions to making the contract. Q. Then there is nothing in the minutes relating to the sub- ject for the year 1912 or 1913 prior to the 19th of March? A, Not to my knowledge. I did not examine the minutes with that object in view. Q. I would like to have you do that, if you will. A. Very well. There is nothing in the minutes of 1912. Q. Or 1913, prior to March 19th? A. Or 1913, no, sir. Q. Was Mr. Lane a heavy stockholder in the company? A. He held very considerable stock originally. Whether he was at that time or not, I am unable to say. Q. Mr. Read testified yesterday that he had ten shares ; is that correct A. That is correct, I think. Q. Who are the five principal stockholders in the Interborough, the largest stockholders? A. The Lnterborough Consolidated corporation owns ninety-six per cent, of the stock, practically ninety-six per cent. The largest stockholder outside of that is John 0. Wilson of Washington, D. C. The next largest stock- holder is Frederick Ayer of Boston. The next one is the Wana- maker Estate of Philadelphia, some Wanamaker Estate, I don't know which one it is. The others are in lots of three or four hun- dred shares and miscellaneous. Q. How, many shares of stock of the company all told ? A. Three hundred and fifty thousand. Q. Now, was Mr. Pegram your engineer in 1913, the same man you have now ? A. Yes, sir. 586 Invectigation of Public Seevice Commissions Q. Do you regard him as a thorouglaly efficient engineer ? A. Yes, sir. Q. Is there any question but what Mr. Pegram is as thoroughly efficient as any engineer that could be employed in relation to work like this ? A. None whatever. Q. You could not hope to go outside and find an engineer who woTild be more efficient than Mr. Pegram ? ? A. Absolutely not, because he would not have the experience on that particular class of work. Q. ISTow, there is one other question, and that is, you said you thought Mr. Shonts sent this Stevens contract to the Public Serv- ice Commission for the purpose of saving time; what did you mean by thai ? A. I understood it was sent there for the purpose of getting the Public Service Commission aquainted with it, and with the various terms, and become familiar with the contract, so discussion could be entered into without unnecessary delay. Q. Mr. Shonts went to Europe on the 8th of July ; do you think on July 8, 1913, Mr. McCall, and Mr. Williams and Mr. Cram, Public Service Commissioners, were entirely familiar with this matter? A. That I don't know. He may have had discussions with them. Q. His object in sending it was so that they would become familiar with it? A. That was my understanding, and ;t was only from hearsay. By Mr. Lewis: Q. Do you know whether at the time Mr. Shonts communicated with the Public Service Commission the form of contract had actually been prepared? A. No, sir; I could not answer that question. Q. Have you any record showing the date of the submission to the Public Service Commission of the actual form of the Stevens contract ? A. ISTo, sir. That would be in the President's files. Chairman Thompson. — Have you any objection to leaving these bids and these minutes with our Committee ? Mr. Fisher. — I should not like to leave the original minutes. Mr. Lewis. — I do not think we care for the original minutes. Repoet of Joint Legislative Committee 587 We have his transcript which he says is all the minutes contain on the subject of the two contracts. Chairman Thompson. — There would be no objection to our counsel calling and examining such of them as we wish ? Mr. Fisher. — No, sir. Mr. Quackenbush. — Inasmuch as our offices are right in this building, on the twelfth floor, and these are original documents, we could keep them in our files, and Mr. Lewis or any member of the Committee can call and examine them. 'You can see them or anything else you wish, and they will be available. Mr. Lewis. — Thank you, Mr. Quackenbush. Chairman Thompson. — The Committee will be in recess for fifteen minutes. AFTER RECESS FEEiDEEic Tench, being first duly sworn, testified as follows : Examination by Mr. Lewis : Q. Mr. Tench, you are the Mr. Tench of the Terry & Tench Company? A. Yes, sir. Q. Will you give us the full corporate name of your company ? A. The Terry & Tench Company, Incorporated. Q. That is a New York State corporation? A. It is. Q. Will you tell us what is its general line of business? A. Contracting, principally steel construction. Q. Did your company receive from the Interborough Rapid Transit Company an invitation to bid on the work of the third- tracking of the Manhattan elevated lines. Second, Third and Ninth avenues? A. It did. Q. And did you submit a proposal for doing the work? A. We did. Q. And did your proposal carry the item of 15^ per cent, over and above cost? A. Yes, sir. 588 Investigation op Public Seevioe Commissions Q. Subsequently did your company eoater into a contract with the Interborough Company, under the terms of which the Gillespie Company, so-called, Snare & Triest Company, and your company agreed to do all the work required in third-tracking all the elevated lines ? A. Of the three elevated lines, yes, sir. Q. Have you the formal contract entered into? A. I have. (Witness produces contract referred to.) A. (Continued). The specifications are in the back of that. Q. The date of this contract is February 13, 1914? A. Yes, sir. Q. What action was taken, if you know, by the Interborough Company, upon the bids of the various companies which sub- mitted bids in response to the invitation? A. I don't know further than we were requested to take the matter up, and we did take the matter up with a view to making the joint contract. Q. By whom were you requested? A. I" think by Mr. Gillespie, Mr. T. A. Gillespie. Q. Can you state when that was ? A. That was about the end of December, 1913, as near as I can remember it. Q. Do you remember when the bids were submitted ? A. Yes, sir; they were submitted on the 23d of December, I believe, 1913. Q. Did you talk with Mr. Shonts upon the subject of entering into a contract with the Snare & Triest Company and the Gillespie Company? A. No, sir; I did not. Q. And the first time that subject was suggested to you was by Mr. Gillespie himself ? A. Mr. Shonts told us when we took our bid he wanted us particularly to do the work, and the matter of the joint contract was taken up by ourselves with Mr. Gillespie. Q. Mr. Gillespie was the low bidder, was he not ? A. Yes, sir. Q. Was any action taken, to your knowledge, of awarding the entire contract to Mr. Gillespie at any time? A. None other than the contract did. I never heard of any other. Q. What do you know of the reason for including the Snare & Triest Company in the combination between yourselves and the Gillespie Company ? A. I assume it was on account of the large amount of work that had to be done and wanting to take in two responsible concerns. Report of Joint Legislative Committee 589 Q. At the time the bids were submitted, did you have the necessary drawings, estimates of quantities, specifications, etc., to enable you to iigure accurately the cost, approximately the cost, of the doing of the work ? A. We might have — we had all the plans and specifications and drawings, but there were so many questions came in that it was an awfully difficult thing to deter- mine what the cost would be on account of the maintenance of traffic. Q. Did you ever make any estimate yourself of the cost of the work to be done? A. Yes, sir. Q. Do you remember what that estimate amounted to? A. About eleven million dollars, the work we had to do, according to my recollection. Q. You were bidding for the whole work, were you not ? A. Yes, sir, we bid for the whole work. Q. Do you remember the estimate for the entire contract that you had in mind when you bid ? A. Yes, sir ; about eleven mil- lion doUaxs, as near as I can remember it. Q. That was all that was to be done ? A. All the third-track- ing. Q. Did that include the construction of extensions? A. Yes, sir. Q. And it was upon the estimate that you arrived at of about eleven million dollars that you proposed to receive fifteen and a half per cent. ? A. Yes, sir. Q. Did you have any conversation with Mr. Gillespie prior to the submission of your bid in relation to the bidding upon the work ? A. Prior to our bid ? Q. Yes. A. I think we had. . I am very certain we had. Q. When did that take place, can you recall? A. It took place some time in December. Q. After your invitation to bid had been received? A. Yee, sir. Q. And before you submitted the bid ? A. Yes, sir. Q. Did you have any conservation with Snare & Triest Com- pany on the subject? A. 'No. Q. Did you advise Gillespie & Company as to the percentage which you intended to bid? A. No, sir. Q. Did he have any information on that subject from you ? A. 590 Investigation of Public Sbeviob Commissions Q. Did you know the percentage which the Gillespie Company proposed to bid ? A. I did not. Q. Mr. Gillespie teld you he was intending to bid? A. Yes, he did. Q. What was the subject of the conversation that you had with Mr. Gillespie at that time ? A. A question of the amount of the contract, probable amount of the contract, and the possibility of our bidding and his bidding and the magnitude of the work. Q. Any thing else? A. Wo, sir; that was the general — that was all there was to it. Q. Do you remember anything Mr. Gillespie said on the sub- ject? A. iN'othing more than talking over the size of the contract and the responsibilities of it. Q. At that time, did you regard yourselves as competitors with Mr. Gillespie for this work ? A. Yes, sir.. Q. There had been nothing up to that time on the subject of a combination ? A. No. Q. When was the combination first suggested ? A. I think the combination was suggested shortly after the bids went in, as I recollect. Q. Who was the first to suggest that to yoil ? A. Gillespie, Mr. T. A. Gillespie, as near as I could recollect ■ — I am sure it was. Q. Did you confer with Mr. Shonts upon that subject? A No, sir. Q. In that conversation, did Mr. Gillespie tell you tiat he pro- posed to take the Snare & Triest Company into the combinatioii ? A. ISTo, sir. Q. Did he express to you any reason for taking that company in ? A. Yes, the same as I have said, on account of the magnitude of the work, it was thought advisable to divide up a part of it. Q. Was this regarded by your company as peculiarly a latge and difficult task ? A. Yes, sir ; decidedly so. Q. Was it large in dollars and cents as compared with other work that you had previously done? A. Yes. Q. Had you ever had a contract single-handed, your company, as large as this, prior to that time? A. Well, we have had as much work to do spread over a much longer time. We built prac- tically all the steel work in the Grand Central terminal, under operation. We also built the — change over the Second Avenue Eepoet of Joint Legislative Committee 391 elevated in order to permit of the passing under the Manhattan bridge, taking out all the old structure and putting in an entire new structure during the operation of trains. Q. How did the New York Central terminal contract compare with this proposed contract as to magnitude and diflaculties? A. Well, I would say that one was about as important as the other. We would have to carry trains on the temporary work in the Grand Central, and shift constantly from track to track. Q. But you had no combination there ; you did that yourselves ? A. Yes, sir. It did not require the amount of naoney there, for one thing. We were ten years in doing that work, and the con- tract was — we made more out of that than we did out of this, but took a longer time. We also built all the elevated railroad in the present subway, but that was not under traffic. Q. Did you have a percentage contract with the ISTew York Central ? A. We had many of them, but the general contract was a unit price contract. Q. Were the percentage contracts large in amounts involved? A. Some of them were quite large. Q. What was the time limit fixed by this contract, if any, for its performance ? A. Eighteen months. Q. Was there any penalty provided or understood to be likely to be imposed for failure to complete within the eighteen months' period ? A. I think there was a clause providing that the contract could be cancelled, but there was no money penalty, as I recollect it. Q. The contract provided for 90 per cent, estimates monthly, did it not ? A. Yes, sir. Q. Are we to understand, then, that the actual amount of capital reqnired to carry the work along from month to month was so heavy that in this case it was regarded as necessary to have a combination ? A. We would have had to have a bank behind us if we done it ourselves, it required so much money. Q. Did it require more money monthly than jonv operations at the Grand Central terminal ? A. Tes, sir, very much more. The principal part of the work was done inside of a year, while o\j: work at the Grand Central took ten years, 592 Investigation of Public Sekvioe Commissions Q. After the suggestion made to you by Mr. Gillespie, that a combination of contractors be effected, what happened next ? A. We came to an agreement. Q. Did Mr. Gillespie suggest to you the terms upon which he would enter into an arrangement with you ? A. Yes. Q. Was that a matter of discussion, or was it simply an ofEer and acceptance ? A. It was an offer on the amount of work which we were to do, and on the amount of what he was to receive on account of his administering the work and obtaining the contract. Q. Will you tell us what proportion or what part of the work was discussed as being the part that he would ask you to do ? A. All of that work, he talked it over with us, and we agreed that we would undertake to do all of that south of 14:7th street on Second, Third and Ninth avenues, with the exception of the station work for four stations on Ninth avenue. Q. And did that include the bases or concrete work to be done ? A. No, sir; the structural steel work. He preferred doing the foundation work himself. Q. What portion of the work was it arranged that the Snare and Triest Company should do ? A. The structural steel work north of 147th street on Third avenue, extending to Fordham, and the stations at 145th, 125th, 116th and 65th streets on Ninth avenue line. Q. Of the entire work what percentage was it understood that your company should perform ? A. Approximately about 42,000 tons out of 52,000 tons, 75 per cent. Q. Percentage of the whole contract? A. About 75 per cent. Q. About seventy-five per cent, of all moneys to be earned in the performance of the contract would be earned by your com- pany? A. Yes, I think I will say between seventy and seventy- five. I am not positive. Q. And what proportion was the Snare & Triest Company to have ? A. They had about fifteen per cent., between fifteen and twenty per cent. Q. And the balance to the Gillespie Company? A. Yes, sir. Q. Approximately ten per cent., would you think ? A. Between ten and fifteen per cent., as near as I can remember. Q. Who was to furnish the plant for this work ? A. Each con- tractor was to furnish his own plant. Eepoet op Joint Legislative Committee 593 "'Q. And was the arrangement entered into between the three companies reduced to writing and put in the form of a contract ? A. It was. Q. Have you that contract with you? A. Yes, sir; I have our copy. (Witness produces copy referred to.) Q. Do you object to my reading this into the minutes ? A. ISTo objection whatever. Mr. Lewis. — " Memorandum of Agreement made this 13th day of February, 1914, by and between Terry & Tench Company, Inc., the Snare & Triest Company, and The T. A. Gillespie Com- pany. " WiTKESSETH, That whereas the parties hereto have hereto on this day entered into a contract with the Interborough Eapid Transit Company to which reference is had as though same was specifically herein set forth for doing of certain work therein specified, and " Wheeeas, The parties desire to adjust and specify as between themselves their several duties, responsibilities, and interests, and arrange for a comprehensive and uniform plan for carrying out the entire work, " Wow, Thekefoee, In consideration of the premises and the sum of one dollar by each to the others in harid paid, the receipt of which is hereby acknowledged, and the mutual covenants and agreements herein contained, the parties agree as follows : " First. — The T. A. Gillespie Company is hereby constituted the general administrator of the entire work with authority to represent all of the parties hereto with the Interborough Eapid Transit Company in everything relating to said contract, to purchase materials and supplies requisite for the several portions of said work, to procure the necessary insurance, permits, consents, licenses, to present estimates from time to time as often as may be under said contract, 594 Investigation of Public Seevioe Commissions to receive all sums which all or any of the said contractors may be entitled to receive under said contract, and gen- erally to manage and administer the entire contract and the work to be done thereunder. " The T. A. Gillespie Company shall be entitled to receive and retain for its services as such general administrator one-third (%) of the Contractor's percentage upon all work by whichsoever com- pany done, otherwise The T. A. Gillespie Company immediately upon its receipt of any moneys due under said contract, shall pay over, or retain as the case may be, the same to the Company party hereto entitled to receive same by reason of work done, moneys expended, or materials purchased for the specific portions of the work to which the same relates. " This agreement shall be extended to and apply to all further work that may be assigned to the parties hereto or any of them by the Interborough Rapid Transit Company under either certifi- cates heretofore issued by the Public Service Commission to the Manhattan Eailway Company or the Interborough Eapid Transit Company. " This agreement shall inure to the benefit of the parties hereto, their successors, and assigns, " In Witness Wheeeoj', The parties hereto cause these pres- ents to be duly executed as of the day and year first above written. " " TEERY & TENCH COMPANY, Inc. SNAEE & TEIEST COMPANY, W. G. Triest, V. P. THE T. A. GILLESPIE COMPANY, T. A. Gillespie, Prest." Q. This is Mr. Gillespie's signature to this contract, is it? A. Yes, sir, I am sure it is. Q. And it is the signature of Mr. Triest also ? A. Yes, sir. Q. When did the work begin under the contract awarded by the Inteiborough Company? A. It began almost immediately after that, getting plant and getting orders for steel and getting the plans prepared for the work. The actual work in the field commenced early in March. Q, Were the working plans ready for operation at the time the Repoet of Joint Legislative Committee 595 contract was awarded ? A. The working plans were not ready at all. The plans for material were practically ready. Q. And the working plans were prepared so that work began in the spring of 1914? A. Yes, sir. Q. Has this contract been modified to any extent by any of the parties thereto ? A. This contract has not. Q. Has there been any supplemental contract, supplemental to this, as between your company and Gillespie ? A. Yes, sir. Q. Have you a copy of that contract ? A. Yes, sir. (Witness produces contract referred to.) A. (Continued) There is one which is void. Q. Here is one which was executed, and was there ever any operation under this contract ? A. No payments made under that. Q. This was entered into and subsequently was superseded by another contract ? A. Yes, sir. Q. And this contract has had no force or effect from the time it was entered into ? A. That is right. Q. You have the superseding contract also, have you? A. I have. There it is. Q. Have you any copies of these contracts? A. I have not. I can give them to you later if you wish. Q. This contract is dated the lYth of June, 1914? A. Yes, sir. Q. And is between the Terry & Tench Company, Incorporated, of the first part, and the T. A. Gillespie Company of the second part ? A. Yes, sir. Q. Will you tell us in your own way, Mr. Tench, what this contract was designed to accomplish, and its relation to the original contract entered into between the three parties thereto? A. This was intended to jointly do the foundation work, and the steel erection, steel construction, by ourselves and the Gillespie Company, and to divide our share and their share of the profits, •after having deducted the five per cent, provided for in the original agreement between the three companies, and to provide for the Gillespie Company financing the whole of it. Q. Will you tell us, then, what under the present contractual relations the Terry & Tench Company receives over and above cost of labor, materials, expenses, etc., for its profit upon the work which it is performing in the third-tracking of the Second, 596 Investigation of Public Sekvicb Commissions Third and Ninth Avenue Elevated Kailroads? A. It receives one-half of the ten per cent, less the cost of one-half of the plant account. The other half being paid by the Gillespie Company, and less the cost of the borrowing of any money which is paid for by the Grillespie Company. They had as much as a million dollars employed at one time. Chairman Thompson. — You take out the expenses and split fifty-fifty with Gillespie ? A. And the expenses of the contractors, that is of supplying plants, each paying his own general expenses, is deducted from the profits, and the balance of half of the ten per cent, is paid to each. By Mr. Lewis : Q. The balance of the half ? A. Five per cent, goes to each, less the cost of the plant, each paying his own general expenses and executive office expenses. Chairman Thompson. — You mean cost of supplying plant or additions as you go along? Mr. Tench. — The cost of the plant is charged to the profit. Chairman Thompson. — The plant you brought to the construc- tion work ? Mr. Tench. — Yes, sir. It is charged in at an accepted valua- tion. Chairman Thompson. — When you get through you will put a valuation on, and charge the difference ? Mr. Tench. — It is the property of the two companies at the present time, and when we get through, we will either sell it or split it up. Mr. Lewis offered the contract last referred to, which is dated June 17, 1914, between Terry & Tench Company, Incorporated, and the T. A. Gillespie Company, in evidence. 'Same was received and marked Exhibit D of date September 30, 1915, and is as follows: " Memokandum oe Agkebment, made this 17th day of June, 1914, between The Terry & Tench Co., Inc., of the Kepoet of Joint Leqisi,ative Committee 597 first part, and The T. A. Gillespie Company of the second part. " Wheeeas, a contract has been entered into under date of February 13th, 1914, between the Interborough Eapid Transit Company, The Terry & Tench Co., Inc., The Snare & Triest Company, and The T. A. Gillespie Company, for the construction of the work for the Interborough Eapid Transit 'Company, known as the third tracking of the Second Avenue, Third Avenue, and Ninth Avenue Railroads, and " Wheeeas, on the 13th day of February, 1914, the parties hereto and The Snare & Triest Company entered into an agreement providing that the party of the second part should act as general administrator of the contract, and should receive certain compensation for its services, viz., one-third of the contractor's percentages, which contract is hereby con- firmed and continued in full force and effect, " Now, Theeefoee, it is mutually agreed that the parties will divide equally the remaining ten per cent profit accruing to the parties hereto upon the construction work to be performed imder said contract of February 13, 1914, excepting that portion of the construction work to be per- formed by The Snare & Triest Company and in which last referred to portion of the work, the party of the first part has no interest. " The plant furnished by each party and used in connec- tion with said work is to be considered a part of the cost of construction. The value of the respective plants is to be determined by agreement of the parties, and if they are unable to agree within thirty days from date upon such value, the parties are to agree upon some disinterested person, who will value such plants, and the conclusions of such disinter- ested person with respect to the value shall be binding upon the parties hereto. " The above division is to be applied on the ten per cent. (10%) of the 'cost plus ten per cent. (10%) ' referred to in the joint contract between The Terry & Tench Company, Inc., The Snare & Triest Company, The T. A. Gillespie Com- pany and the Interborough Rapid Transit Company, dated February 13th, 1914. 598 Investigation of Public Seevice Commissions " In the event of the insolvency of either of the parties hereto, or the appointment of a Eeceiver of its property or assets, the other party shall be entitled to carry on and com- plete the said work imder said contract of Fehruary 13th, 1914-, to be done jointly by The Terry & Tench Co., Inc., and The T. A. Gillespie Company, . and shall then be entitled to receive the entire amount of the profits on such work done after said insolvency or receivership. " This agro>JTiaent abroga'.es and takes the place of a prior agreement betwen the parties hereto, made the 20th day of February, 1914. " In Witness Whereoe, the parties have hereunto set their hands and affixed their seals by their respective offixjers this the date first above written. " THE TEKKY & TENCH CO., INC., " By E. F. Terry, President. " THE T. A. GILLESPIE COMPANY, " By Thos. H. Gillespie, V. President." By Mr. Lewis : Q. In effect, the Terry & Tench Company and the T. A. Gilles- pie Company are copartners in doing all the work in the third- tracking of those lines, except the work now being done by the Snare & Triest Company ? A. Yes, sir. Q. And the Terry & Tench Company contribute to the co-partnership fund its plant, its services, and anything else? A. The plant is charged to the joint companies. The plant which we supply. Q. You supply a plant which you contribute? A. No, sir; we are credited with that, the two companies, and what plant Gillespie supplied of his own was credited to him. Q. Then the plant that you supplied continues to be your property? A. No, sir. Q. It was turned over to the co-partnership? A. At a price, yes, sir. Q. And is now the property of the co-partnership? A. Yes, sir. Q. Did Mr. 'Gillespie supply a plant? A. Yes, sir. Eepoet of Joint Legislative Committee 599 Q. And that was turned over in the same way ? A. Yes, sir ; at a price. Q. And at the completion of the contract, the properties remaining as plant in plant account will be divided or their value ascertained, or sold and the proceeds turned into the fund? A. That is right, together with all new plant purchased. Q. Xow, from the fifteen per cent, allowed by the Interborough Company upon the work done by either your company or by the GiUespie Company, or perhaps we may better say by the co-part- nership existing betwen your company and the Gillespie Com- pany, there is first deducted one-third which is paid over to Mr. GiUespie as the successful bidder ? A. Yes, sir ; that is right. Q. And the balance, two-thirds of the fifteen per cent., is retained as a co-partnership fund, and from that fund is deducted the expenses of the Gillespie Company in the operations which it conducts and the expenses of the Terry & Tench Company in the operations which it conducts; is that true? A. Not the general expenses, but the expenses directly chargeable, the expenses of carrying on the work, but no executive office expenses. Q. Not the salaries of the ofiicers? A. No, sir. Q. Are there any other' deductions ? A. No, sir. Q. And the remainder, after such deductions, is then divided between the Gillespie Company and the Terry & Tench Company equally? A. That is right. Mx. Lewis offered in evidence a contract, dated February 13, 1914, between the Interborough Rapid Transit Company and the Terry & Tench Company, Inc., and Snare & Triest Company, and the T. A. GiUespie Company. The same was received and marked Exhibit E of date Septem- ber 30, 1915. Q. Your company has been operating since what time in 1913 ? A. Since immediately after the signing of the contract. Q. And that was in what month ? A. Thirteenth of February, 1914, Q. What percentage of the work has been completed? A. I would say between 90 and 95 per cent., more than that. Q. The eighteen months period has practically expired, has it not? A. Yes, sir. 600 Investigation of Public Seevice Commissions Q. And the work is practically complete ? A. With the excep- tion of a small amount on the Bowery, changing the old tracks over. Q. Do you happen to know about the Snare & Triest portion of the work, whether that is completed or not? A. It is very nearly completed. Q. Do you know what the cost of the work has been up to the present time? A. It has been about, including the per cent, of profit, in the neighborhood of nine millions. , Q. Eor the work already done ? A. Yes, sir. Q. And that includes the 15 per cent., does it? A. Yes, sir; the profit. Q. Then the work is being done for less than the estimated cost? A. It is done all together, I think, within the estimated cost. Q. Have the stations been built? A. They are nearly all completed. Q. Under the terms of the contract who was to construct the stations ? A. We were on part of them, and Snare & Triest had part of them. They had all the stations on their section, and the four stations on Ninth avenue. Q. What proportion of the work in dollars has your company done, are you able to state approximately? A. I cannot tell exactly. Ours and Gillespie's will amount to about four-fifths of the whole. Q. About 80 per cent. ? A. Yes, sir; between 80 and 83 per cent., as near as I can state — very close to it. Q. And of that, yours is 75 to 15 as compared with Gillespie's ? A. No, sir; ours is 80 to 20. Q. Eighty to 20 of Gillespie's ? A. Yes, sir. Q. What do you say will be the ultimate actual cost exclusive of the percentage of the whole work in round numbers? A. Between eight and a half and nine million. You mean on the whole work ? Q. On the whole work ? A. Eight and a half and nine millions. Q. Now, of that, assuming that it is nine millions, for easy figuring, of that, your proportion of the work is, I think you said, around 70 per cent. ? A. Yes, sir; between 70 and 75 per cent. Eepoet of Joint Legislative Committee fiOl Q. Your proportion of the work, then, would be upwards of six millions of dollars? A. More than that — yes, about that; between six and seven millions. Q. Upwards of six millions of dollars ? A. Yes, sir. Q. The Gillespie proportion would be what? A, Between a million and a million and a quarter is my recollection of what it was estimated the foundation work would be. Q. Your work would be pretty close to $7,000,000 ? A. Yes, sir, including the profits ; I am wrong on that ; six million, with a million and a quarter to a million and a half for Gillespie makes it seven millions and a little over, and then Snare & Triest would run in the neighborhood of pretty close to two millions, I think. Q. Then, of the seven millions that your company and the Gil- lespie Company has earned and will earn in the completion of the contract, five and a half millions will have been earned by your company ? A. Between five and a half and six. Q. And between one and a half and two will have been earned by the Gillespie Company. A. A million and — Q. Between five and a half and six by yours ? A. And a mil- lion and a half will make it up pretty close to seven millions, and Snare & Triest's work will run pretty close to two millions, mak- ing it around nine millions. Q. Under no circumstances can your company get more than five per cent, above cost for the work, labor and services and skill which your company furnishes in the carrying on of this work, can it? A. On our portion, not Gillespie's, that is. Q. Yes. A. That is right. Q. N'ot to exceed five per cent ? A. Yes, sir, that is right. Q. As a matter of fact, it will be less than five because of the dediictions that have to be made for expenses and plant ? A. Yes, sir, that is right, whatever that is. ' Q. And the iSnare & Triest Company, so far as you know, give ten per cent, upon the work which they do ? A. That is right. Q. And Mr. Gillespie gets five per cent, upon all the work your company does, to start with, and five per cent, upon all the work that his company does ? A. Yes, sir. Q. And five per cent, upon all the work Snare & Triest Com- pany does, and in addition gets one-half of the net profit earned 602 Investigation of Public Seevice Commissions by the co-partnership existing between your company and Ms com- pany ? A. That is right. Q. What is the capitalization of your company ? A. Seventy- five thousand dollars. Q. And the ownership of the stock, how is that distributed? A. It is all owned by the Terry & Tench Company of New Jersey. Q. What is the capitalization of that company ? A. A million dollars. Q. And is that stock widely distributed ? A. No, sir. Q. The Terry & Tench Company of New Jersey ? A. No, sir. Q. Do you mind telling us who the principal stockholders are of that company ? A. Mr. Terry and I own all but less than $5,000 of it. Q. Did you tell us the capitalization of iihe Terry & Tench Company of New Jersey ? A. One million. By Chairman Thompson: Q. Are you and Terry equal owners? A. Equal ownership, yes, sir. Q. Did you say Mr. Gillespie did the foundation work? A. Yes, sir. Qv And that is down in the street ? A. That is the excavation for the footings of the columns, the shifting of all underground pipes and conduits and sewers, and that is practically what it consists of. Q. His work, the question of maintaining traffic, did not affect the work the Gillespie Company undertook? A. No, sir. Q. The work that you had is the work that most affected traffic conditions on the whole line, is it not ? A. Yes, sir. Q. You had the down town end of it where the most traffic exists, below 147th street? A. Yes, sir. Q. What you had to contribute was the responsibility to main- tain that traffijc ? A. Yes, sir. Q. And you had to contribute that ability that was necessary and requisite in this contract to keep traffic conditions going, too ? A. I think that was the most important thing the railroad company thought of. Report of Joint Legislative Committee 603 Q. And that was all contributed by your company? A. Yes, sir, excepting that we were joint partners in doing the work finally. Q. You had to assume the responsibility for that ? A. Yes, sir. Q. Aiid were paid for that; your remuneration for that was included in this half of the 10 per cent., after deducting the expenses that you have mentioned? A. Yes, sir. I don't know how many millions were carried during the time, but we never delayed a train at all. Q. These invitations for bids, were they advertised, or were they sent to you ? A. They were sent to us. Q. How? A. By mail from the Interborough Company. Q. So that it was not a general invitation to all contractors to bid? A. I don't think they would have thought of doing such a thing. Q. They simply sent out the invitation to such contractors as they thought best? A. As they thought responsible for doing the work. Q. Do you know whether all the people who received invitations responded with a bid ? A. I don't. I know when I took in our bid, Mr. Terry and I took in the bid to Mr. Shonts, and there were three or four bids he had there sealed. Q. Do you know the Pittsburg Contracting Company ? A. Yes, sir. Q. Who controls that ? A. I don't know. I think it was Mr. Flynn. I just know of them because we have sold them a plant. Q. Do you know the Bradley people ? A. Yes, sir. Q. Who controls that? A. William Bradley. Q. Who is Kent ? A. I don't know. By Mr. Lewis: Q. Has any part of the work been withdrawn by the Inter- borough Company under that provision of the contract which permits withdrawals? A. ISTo, sir. Q. Nothing? A. Nothing at all. Chairman Thompson. — There being no objection, these pro- ceedings will be adjourned to 11 o'clock tomorrow. Whereupon, at 4 o'clock p. m., an adjournment was taken to 604: Investigation of Public Seevioe Commissions OCTOBER 1, 1915 Niiw YoBK County Lawyees' Association Board Room, 165 Broadway, New York City The Conunittee met at 11 o'clock a. m., pursuant to adjoum- ment. Feedeeiok Snare, being first duly sworn, testified as follows : Examination by Mr. Lewis : Q. Mr. Snare, you are identified with the Snare & Triest Company? A. I am the president of that company. Q. And you were connected with that company in 1914? A. Yes, sir. Q. And prior thereto ? A. Yes, sir. Q. Your company was one of the bidders for the contract for third-tracking the Second, Third and Ninth Avenue lines of the Manhattan Elevated Company, was it not ? A. Yes, sir. Q. Do you recall when you were asked to bid ? A. I think it was the latter part of 1913. Q. Do you remember who asked you? A. Received from the Manhattan Company. Q. By mail? A. My recollection is an invitation issued by the chief engineer. Q. Pegram? A. I think so. Q. And you presented a bid, did you ? A. Yes, sir. Q. Did you consult with anyone in connection with your bid before presenting it? A. No. Q. You conferred with Mr. Pegram probably. A. Oh, yes. Q. Did you have the necessary plans and specifications to enable you to prepare your bid ? A. Complete and voluminous. Q. Did you prepare an estimate of the probable cost of the work? A. It was impossible at the time. It would have taken weeks to have made an estimate as to the total cost of the work. Q. You formed some opinion as to the probable cost ? A. Very general. Q. Do you recall what your opinion was at the time as to the probable total cost? A. Something about nine or ten millions, according to my recollection. __ Report of Joint Legislative Committee 605 Q. I>id you see Mr. Gillespie during this time ? A. Oh, I saw him. Q. Did you tell him you were going to bid ? A. I might have. Q. Did he tell you he was going to bid ? A. He may have; Q. Did you see Mr. Tench or Mr. Terry of that firm? A. Yes, sir. Q. Did you tell them you were going to bid? A. I have no recollection of that at all. I see all of those gentlemen in the course of our business. Q. Did they tell you they were going to bid ? A. I don't think so. Q. You knew, did you, or didn't you, that both Gillespie and Terry and Tench had been invited to bid ? A. I think I had that knowledge, yes. Q. You had a copy of the resolution authorizing the submis- sion of the work to competition? A. No, sir, I did not, unless that was part of the specifications ; I don't think so, however. Q. Did you see Mr. Shonts of the Interborough Company ? A. No, sir; I did not. Q. Did you have any talk or communication with him? A. None whatever. Q. And no written communication? A. None whatever. Q. Do you recall the amount of your bid ? A. I don't. I think it was lY per cent. That is my recollection. I suppose I should have looked that up. Q. Was that the lowest price at which you figured you could safely undertake to do the work? A. Considering the volume of the work, and the hazard of the work, and the financial situa- tion at that time, yes. Q. Did you regard the work as peculiarly difficult ? A. I did then and I do now, the most hazardous piece of work ever done in New York city, I think. Q. Did you regard it as an unusually large contract ? A. Well, it was large — it would have been the largest contract if we had secured it that the Snare & Triest Company ever had, the largest single piece of work. Q. But not exceedingly large, as contracts go, for steel con- struction and otherwise, was it? A. It is rather a distinctive contract in size. 606 IlTVESTIGATION OF PuBLIC SeEVICE COMMISSIONS Q. How did it compare in size with the subway cojitracts ? A. They seemed to go in lots of about three or four million dollars, excepting in the case of the tunnels. Q. At what price did they go? A. My recollection is about ten miliions of dollars. lOhairman Thompson. — Ten millions of dollars will make you stop and think for a moment? Mr. Snare. — At times like this, when the money market was like it was. In spite of the fact the pay was large, it would need large financing. By Mr. Lewis : Q. You say the contract you regarded as a hazardous contract; will you explain what you mean by that? A. It was very hazardous, and, by the way, I hope you gentlemen, if you have not already looked, will look at the work and you will perhaps see better than I can explain to you. We have the traffic on the street to maintain, and the traffic overhead to maintain, and there must be no interference with the operations of the Interborough above or of the traffic below, and the very evidence of the hazard of it is that the record shows that within a year or a little over, fifty men have been killed on that work, workmen. Chairman Thompson. — Do you mean on your job? Mr. Snare. — On the various contracts, all three. By Mr. Lewis: . Q. About how many men were being employed during that time ? A. I could not give you any figures. Q. A very large number, wasn't it ? A. A very large number ; yes, sir. Q. Do I understand that you have never, up to the time you bid on this contract, had a contract involving as much as this con- tract was likely to involve ? A. I think our largest ^ contract preceding that was about four million dollars, the largest individual contract. Q. Was that a percentage contract, cost plus? A. N.o, sir; that was a contract. Eepoet of Joint Legislative Committee 607 Q. Unit price? A. Both unit prices and lump sum. It was a railroad terminal. Q. Had you had, previous to bidding upon this contract, any percentage contracts recently? A. Yes, sir; quite a few. Q. Large matters? A. No, sir; nothing very large that I recall at the moment. Q. Do you recall any contracts involving a million or more on which you had a percentage contract? A. itfot previous, at that amount. Q. What, if you can tell us, is the largest contract you had ever had previous to this time in which the percentage above cost was the basis of the contract ? A. I think the largest was about six hundred thousand dollars; five or six hundred thousand dollars. That was a dam. Q. Was that a hazardous proposition? A. Not excepting tie natural dangers from water during construction. Q. Were there any physical difficulties to overcome in the construction? A. ISTo, sir. Q. Do you mind telling us at what percentage you took that contract ? A. I think it was about ten per cent. Q. Would you regard the third-tracking as 70 per cent, more hazardous than the dam proposition ? A. I don't know how you can make an exact comparison. It is a pure guess. Q. You did regard it as a more hazardous proposition than the dam proposition ? A. Yes, sir. We are not through with it. Q. How recently had you had the dam contract? A. Well, that has been stringing over the last three years, I think, and still doing some work on it. Q. And the financial conditions were perhaps about the same at the time you took that contract as they were when you bid for the elevated contract? A. Yes, sir; very much the same. In that case, if my recollection serves me right, the people, for whom we were doing the work, paid for all the plant involved and they paid us a lump sum for all the major plant involved when we started on the work and equipped it. Q. And gave you ten per cent, above the cost of materials and labor ? A. Yes, sir ; I say ten per cent. It was thereabouts. Q. Was it more or less ? A. It would not be more, and it may have been a little less. 608 Investigatioit of Publio Seevioe Commissions Q. It may have been as low as eight ? A. I should say in that vicinity. Q. JSTot as low^ as seven and a half ? A. No, I don't think so. Q. You submitted your bid in writing, did you ? A. Yes, sir. Q. And when did you next hear of the proposition ? A. Well, I don't carry these dates. Q. Did you hear soon afterwards ? A. I think it was very soon afterwards. Q. And from whom did you get your information ? A. I can't say, reaUy. Q. Have you any recollection on the subject ? A. Not the slight- est, as to the sequence of events that followed. Q. Did you get any information from the officers of the Inter- borough Company ? A. Personally I did not. Some of our peo- ple may have been in to see them, and probably were in to see them. Q. Did you learn from them through some of your people that your bid was high? A. JSTo, sir; I don't think so, although I must say that I have a very faint recollection of the events that transpired, excepting those connected with the final signing up of our contract. Q. Was it your part of the work, and did you have the authority for your corporation, of looking after the negotiations ? A. It was my part to finally conclude in regard to it, yes, sir. Q. Did you see Mr. Gillespie after you submitted your bid ? A. Yes, sir. Q. How soon after ? A. I can't say ; I suppose shortly after. Q. A day or two, or two or throe days ? A. No, sir; I can't say exactly. It may have been within a very short period, I think. Q. The bids were submitted on December 20th, were they not? ^. I have forgotten the date. I think it must have been in December. Chairman Thompson. — The bids were submitted the 23rd of December. Q. Do you Imow when the bids were submitted to the Board for action ? A. I have no knowledge on that. Q. Have you any recollection as to the date when the contract was awarded? A. No, sir; but it would precede the date of the signing of the contract. Kbpoet of Joint Legislative Committee 609 Q. The contract bears date of F'ebriiary 13, 1914; now, of course, you knew prior to that date that your bid was high ? A. Yes, sir. Q. And can you tell us when prior to that date, with reference to that date, you learned of the fact that your bid was not the low bid ? A. I have no recollection of dates at all. I can simply refresh my mind from the fact it was in December we made a proposition, and it was a certain date later on when we signed the contract. Q. Do you recall any conversation with Mr. Shonts between the time you submitted the bid, and the time you executed the con- tracts ? A. No, sir ; I never had any conversation with him. Q. Do you recall any conversation you had with Mr. Gillespie between the time you submitted the bid and the time you signed the contract? I think there were several conversations with Mr. Gillespie about that time. Q. Can you fix the time of the first conversation you had with Mr. Gillespie after you submitted the bid ? A. I can not. Q. ^Yas it within three or four days, do you think? A. I should say in that neighborhood. Q. And was the subject of the bids a subject of conversation? A. Yes, sir. Q. And did you at that time tell Mr. Gillespie the amount of your bid ? A. I cannot say. Q. Did Mr. Gillespie tell you the amount at which he had bid ? A. I can't say. Q. You have no recollection on that subject? A. None what- ever. I will say, however, from the subsequent events that un- doubtedly it was discussed. Q. And did you learn from your discussion with Mr. Gillespie that his bid was lower than yours at any tinje prior to the execu- tion of the contract ? A. I can simply assume that I did. I don't know. Q. Can you say whether you learned that within three or four days after the bids were submitted ? A. I can't say that, Senator. Q. Have you any recollection on the subject at all. A. If that date is important to you, I really cannot say, because I have no way of fixing it at all. Vol. 1 — 20 610 Investigation of Public Seevice Commissions Q. This is all the importance it has; there was a time subse- quent to the submission of the bids when there was an arrange- ment entered into between the Gillespie Company, and your com- pany and the Terry & Tench Company, and can you give us the date, of that arrangement ? A. I have no way of fixing it at all. Q. No recollection whatever as to whether it was three days or three weeks afterwards? A. No. sir; I should say it would be something in between the two. It was a big contract, and of course these people were interested in it, and I have no doubt there was not any time wasted. Chairman Thompson. — WJio do you mean by " these people ?" Mr. Snare. — Gillespie, Terry & Tench and ourselves. Q. Yon had some discussion with the Terry & Tench people, did you, on the subject of the tripartite agreement ? A. I may have, and doubtless did have. Q. Do you remembei when the arrangement was made which was subsequently reduced to writing and signed by the Gillespie Com- pany, the Terry & Tench Company and yourselves ? A. That is a matter of documents. Q. I know the record shows the date when it was signed, but do you know when the arrangement was made? A. No, sir; my recollection is that at that time I was in Cuba, when the final papers were signed. Q. How long prior to the signature to the final papers had you taken your departure for Cuba ? A. Unfortunately I had no opportujiity to look up the various dates, nor did I know that you v/ere going to ask for them, or perhaps I could be able to locate them. Q. Did you confer with the Terry & Tench people and the Gillespie people before leaving for Cuba upon this subject? A. Yes, sir. Q. And had you reached an agreement upon the terms of the contract you would enter into ? A. Yes, sir. Q. And all that remained was to reduce the agreement to writ- ing and sign it ? A. Yes, sir, as I recollect it. Q. And it was signed by Mr. Triest, was it? A, Yes, sir. Q. In your absence? A. Yes, sir. Report of Joint Legislative Committee 611 Q. But you have seen the document, I assume, since your return ? A. Yes, sir, and I signed it in some capacity later on, I think, on the bond, or something. Q. And the document embodies the arrangement made with you? A. Yes, sir. It is made with me. Q. Have you with you your copy of the contract ? A. Yes, sir. Do you mean the contract with the Interborough ? Q. JSTo. The contract between the three parties. A. Yes, sir, there it is. Q. This contract does not specify the location of the work which you were to do ? A. No, sir. Q. That is specified in the — A. That is specified — Is there any reference made ? Q. Tell me where is the arrangement in writing under which you were to do the work. A. I think that was in the shape of a letter. I would have to get that for you. Q. You can tell us, I presume, about what the arrangement was ? A. Yes, sir ; we were to do sections 6-C and 7. Q. You have a letter on the subject, have you? A. Yes, sir. Q. From whom ? A. I think the T. A. Gillespie Company, as managers. Q. Do you know whether you received that letter prior to the execution of that contract ? A. No, sir ; it must have been follow- ing this, or simultaneous with this. Q. Cotemporaneously with this contract ? A. I think so. That is my recollection. Q. You knew at the time you entered into this contract, the amount of the work that you were to perform under it, did you ? A. Yes, sir. Q. What is the date of this contract? A. Thirteenth of Feb- ruary, 1914. Q. And that was the same date that the main contract was executed — A. I was just looking to see. Q. ■ — with the Interborough Company? A. Yes, sir; the same date. Q. It is apparent that the arrangement between the Gillespie Company, yourselves and the Terry & Trench Company had been made prior to that time ? A. Agreed to, yes, sir. Q. And the amount of the work apportioned ? A. Yes, sir. 612 Investigation of Public Seevice Commissions Q. Now, if you will, tell us what work you were to do under that arrangement? A. We were to do the station work on the Ninth Avenue line, 66th street, 116th street, 125th street and 145th street. Q. The four stations ? A. Four stations, and we were to do all the third-tracking from 149th street to Fordham road. Chairman Thompson. — One Hundred and Forty-seventh street, wasn't it ? That is what Mr. Tench said yesterday. Mr. Snare. — One Hundred and Forty-ninth is my recollection. That involved the third-tracking, and reconstruction, and the sta- tions, ten stations. By Mr. Lewis: Q. Prior to the execution of this contract, had you known of the amount of work that you were to have under the contract ? A. Yes, sir ; prior to the execution of this. Q. How long prior to the execution? A. If I could fix the date that I went to Cuba. Q. Was it a week or two weeks ? A. I think it must have been further back than that. Q. Three weeks or such a matter ? A. Something like that. Q, Did you estimate the probable cost of the amount of work that you would be called upon to do ? A. We made a rough guess on it. Q. Do you recall what it was? A. It looked like a million, five or six hundred thousand dollars. Q. Did you know what part of the work the Terry & Tench Company was to have? A. I did not. Q. You probably did not know, then, what part the Gillespie Company was to retain for its own performance? A. ISTo, sir; I simply had a general idea the Gillespie Company was doing all the foundation work. Q. And did you have a general idea that the Terry & Tench Company would do the balance of the third-tracking? A. That was my recollection ; yes, sir. I should have mentioned, however, that our work involved foundations also. Our work on sections 7 and 6-C involved the foundations as well. Q. You had to finance your own construction under this agree- ment? A. Yes, sir. Eepoet of Joint Legislative fJoMMiTiEB 613 Q. And under the terms of this agreement you are to allow the Gillespie Company one-third of the fifteen per cent, payable upon the work which your company performs ? A. Yes, sir. Q. And you were to retain the other two-thirds for your own services? A. Yes, sir. Q. What proportion of your work have you concluded ? A. We are pretty well done with it. I should say, without making any actual figures, ahout 80 per cent. Q. What has been the cost of the work that you have done up to date, if you have any approximate idea ? A. I think about a million and a half, between four and five hundred thousand dollars. Q. And the total cost is likely to exceed your estimate? A. Yes, sir. Q. Will it amount to as much as two million dollars? A. I should say in that vicinity. Q. And have you received your monthly estimates from month to month on this work? A. Yes, sir. Q. And has there been deducted from those monthly estimates the five per cent, to be retained by Mr. Gillespie? A. Yes, sir. Q. And have you received the balance of the compensation above cost to yourself ? A. No, sir. Under the terms of the con- tract, that is payable on the completion of sections. We have received a partial payment on account. Q. Have you an approximate idea of how much you have received on this work ? A. Yes, sir ; we have received fifty thou- sand dollars. Q. As commission, part of your ten per cent? A. Yes, sir. Q. You have made no supplemental agreement with the Gilles- pie Company, have you, since the date of this one ? A. Yes, sir, one with reference to — not an agreement, it is simply a letter. It is in rather ragged form here, a letter from the Gillespie Com- pany in reference to two or three extensions ; sections 10-A, 4-B, 6-B and 9. There is something wrong about tliat. There arc only three, and a letter from Mr. Gillespie advising me of a mis- take in that letter. Mr. Lewis. — I will read this letter into the record. It is dated New York, February 8, 1915. 614 Investigatiok of Public Service Cojimissioxs " Mr, Frederick Snare, " President, Snare & Triest Company, " New York City. Personal. " Dear Mr. Snare. — I give you below my understanding of our talk on Saturday last outlining what I will try to do towards getting you some of the present work and also some of the new work relating to the Interborough Third Track ing contracts : "A. Take sections 8-B and 8-C of the present contract from the Terry & Tench Company and award them to you at five per cent. (5%) on the cost. " B. Give you the percentage part of the new contracts, which are now contemplated by the Interborough and which are designated as sections 10-A, 4-B, 6-B, and 9. As you know, some of this new work has to be bid upon and part of it will be let on a percentage basis at cost plus twelve and one-half per cent. (12%%) and it is this latter part which is included in this arrangement and which you are to do at four and one-half per cent. (41/2%) on the cost. " It is understood that you are to take care of all plant and financing out of such percentages and, of course, carry out all the regulations imposed by the Interborough. " Very truly yours, " THOS. H. GILLESPIE, " Vice-President. " Confirmed : " The Snaee & Teiest Company, " President." Mr. Lewis. — I a^so read a letter of April 16, 1915, as follows: '•' New Yoek, April 16, 1915. Mk. FeEUEEICK S^fAEE, The Snare & Triest Company, Woolworth Building, New York City. Deae Me. Snaee : Mr. Govern wrote you a few days ago with regard to be- ginning the new work, but this will confirm my understand- Rbpoet of Joint Legislative Committee 615 ing with you, namely that the arrangement as outlined in our letter to you of February 8th is changed in that (A.) as outlined in that letter is now taken out, the rest of it remain- ing the same. It is my understanding that the West Farms Section is ready for you to go ahead on immediately and that the balance of the work will be ready within a very short time. Please confirm, and oblige, Yours very truly, THOS. H. GILLESPIE, Vice-President." Q. Did you confirm that arrangement? A. I presume so. I would correct that in one respect. Four sections are apparently referred to, but actually there arc three sections. Q. Paragraph A in the letter of February 8th was nullified by the letter of April 16th ? A. Yes, sir. Q. I presume you had not undertaken at the time the letter of AprU 16th reached you any portion of the work covered by par- agraph A ? A. Oh, no, sir. Q. Can you tell us approximately what the cost is likely to be of the work covered by paragraph B and awarded to you? A. ISTo, sir. I can tell you approximately, without having made any esti- mate, a general understanding was that the three sections would amount to about four hundred thousand dollars ; from four to five hundred thousand dollars. Q. And Section 10-A ? A. That includes 10-A, 9 and 4-B. Q. 6-B is an error, is it? A. Yes, sir. Q. As specified in this letter? A. Yes, sir. Q. ^^'ere those known as connections or new constructions ? A. 4-B is the connecting link between the Second avenue L and the Queensboro Bridge, the plans for which have not been settled upon yet. The other, the other bit of work, over Sedgwick ave- nue, cornecting up with the bridge, and the other, the connection from Fordham Eoad station up Webster avenue. Q. Is that work regarded as difficult or hazardous in any way ? A. The only hazardous part is that on the connection of Queens- boro Bridge, where, by reason of the public, there is some hazard. 616 INVESTIGATION OF PuBLIC SeRVICE COMMISSIONS Chairman Thompson. — Where was the other million dollars' worth of work ? Mr. Snare. — Third avenue raid Ninth avenue. This is in addition. Mr. l.ewis. — These are the so-called connections. Q. Were there any negotiations between you and Mr. Gillespie prior to the date of the letter of February 8th on the subject of your doing this work ? A. Yes, sir. Q. Verbal discussions ? A. Yes, sir ; verbal discussions. Q. And had Ihe figure four and a half per cent, been agreed upon ? A. Agreed upon verbally previous to writing that letter. Q. And did you know at the time that the Public Service Com- mission had approved award of a contract to Mr. Gillespie for the doing of this work at cost plus twelve and a half per cent. ? A. The Public Service Commission ; Q. Yes. A. I did not know of the approval. Q. Uid you know at the time that Mr. Gillespie was to have twelve and a half per cent, on the work that you were to do for four and a half ? A. Yes, sir. The only information I had was such information as I had from Gillespie about it. Q. Did he offer an explanation of the reason as to why he should expect you to do the work for four and a half for which he was to be paid twelve and a half ? A. He seemed to think, and evidently I agreed with him, too, that we had our plant available for this work and the hazard was not particularly great except in the one case I mention. Q. Did you know, Mr. Snare, that the Interborough Company had limited its request for the submission of bids to the Gillespie Company, the Terry & Tench Company, and your company on these particular connections ? A. No, sir, I didn't, but there is one thing that might explain that, I think. Our contract with the Interborough Company stipulated that any additional work was to go to this combination. Q. CJf Gillespie Company ? A. That is my recollection. Q. Tljat was a provision of the contract between the Interbor- ough and the three contractors ? A. I am quite sure there is that provision here to cover additional work. Report of Joint Legislative Committee 617 Q. You had no knowledge of the fact, you say, at the time that the letter of February 8th was written to you, and previously at the time that you had conversations with Mr. Gillespie, that the Public Service Commission had authorized the making of a con- tract at twelve and a half per cent, above cost ? A. Well, if I had any knowledge, it was probably a knowledge from the newspapers. Q. Was it discussed at all between you and Mr. Gillespie ? A. It must have been discussed between us, yes, sir. Q. And no reason suggested for the retention by Mr. Gillespie of eight and a half per cent, of the money ? A. ISTone whatever. Mr. Smith. — Eight per cent. Q. I should say eight per cent. A. None whatever. Q. Had you ever seen or hoard of the application made by the Interborough Company in July, 1914, for its approval of a con- tract for the doing of this work, in which the statement appears that, " Your petitioner is informed that for this, among other reasons, the contractors are willing to do the extension work upon a fair percentage basis, to be determined by the Commission, which shall be not less than twelve and a half per cent, of the costs, as defined in the contract. Your petitioner estimates that the cost of the extension work to be done by the contractors will be approximately $2,200,000 ; " did you ever hear of that provi- sion in the application ? A. 'So, sir. Does that apply to the sec- tions we have reference to ? Q. Yes, the application covered not only the connections, but the extensions. A. T had knowledge from the newspaper reports of the acts of the Commission that there were certain resolutions introduced, or something of that sort, I recall. Q. Mr. Gillespie furnishes none of the material for the work which was awarded to you in the letter of February 8th? A. He acts as purchasing agent for it. Q. He acts as the purchasing agent ? A. Yes, sir. Q. He determines where the material shall be purchased? A. Yes, sir. Q. And the price at which it shall be purchased? A. Yes, sir. We have had consultation with him on the subject from time to time. Q. And he negotiates the purchase? A. Yes, sir. 618 Investigation of Public Seevice Commissions Q. And the materials when delivered are billed direct to you ? A. ISTo, sir ; they are billed to the Gillespie Company, manager. Q. And paid for by you at the invoice prices ? A. Paid for by the Gillespie Company, managers. Q. And at the invoice prices ? A. I have no knowledge of that. Q. And they are subsequently billed to you by the Gillespie Company ? A. No. sir ; but there is an accounting. There is a system of accounting which is for the observation and knowledge of the three contractors interested. This business is run in a separate office. Q. You are paid on this proposition at cost plus — that is, you undertake to do this work at cost plus four and a half per cent. ; have you any knowledge as to what the cost is ? A. There has been very little of that work done. Q. Will you have any knowledge as to what the cost of those materials is to be ? A. Yes, sir ; absolute knowledge. Q. You will have absolute knowledge as to the cost to the Gillespie 'Company ? A. Yes, sir. Q. Will it be billed to you at the same price as billed to the Gillespie Company ? A. There will not be the mechanical process of billing, but they charge to our contracts for everything pur- chased for that particular work. Q. And at the same price charged to the Gillespie Company? A. Yes, sir; at the same price. Q. Does the Gillespie Company carry a set of books covering all of this work? A. Oh, yes, sir. Q. And does — A. I speak of the Gillespie Company, and I refer to the Gillespie Company as manager, as manager under the original contract. They have a separate offiee, and a separate accounting-, and separate bookkeeping, and separate auditing. Q. That is, the Gillespie Company, as manager, purchases all the materials used in third-tracking as well? A. Yes, sir; all the materials. Q. And does it also purchase all the materials used by the Terry & Tench Company ? A. Presumably so. Q. As well as all the materials purchased by the Gillespie Company? A. Yes, sir. Q. Do you know where the office of the Gillespie Company, as Eepoet of Joint Legislative Committee 619 manager, is ? A. It is on the corner of Park row and Church street, Park place. Q. Is that in charge of Mr. Gillespie personally ? A. jSTo, sir, the manager, Mr. Govern. Q. And your negotiations and dealings are with Mr. Govern in reference to these details, are they ? A. In reference to details, yes. Q. All moneys paid out by the Interborough for work ren- dered and performed by you are paid to the Gillespie Company as manager ? A. Yes, sir. Q. And the Gillespie Company simply retains the cost of the materials furnished to you? A. Yes, sir. Q. And you are not required to finance the purchase of those materials? A. No, sir. Q. And you are paid — do you pay your pay rolls yourself ? A. We pay those ourselves. Q. You have to finance that yourselves ? A. Yes, sir. Q. And each month you are paid ninety per cent, of your pay rolls? A. Yes, sir, ninety per cent. Q. And each month you are paid a proportionate part of your four and a half per cent ? A. ~No, sir ; that comes on completion. Q. It does not specify as to when that is paid ; that is what I wanted to get at? A. That is it. Q. What was meant by the paragraph in the letter of February 8th, " It is understood that you are to take care of all plant and financing out of such percentages and, of course, carry out all the regulations, imposed by the Interborough." ; is there anything you had to finance other than your pay roll? A. No, sir, and such plant as was necessary. Q. Have you a plant there ? A. Yes, sir, we are working on two of the sections at the present time. Q. Is that plant an expensive plant? A. No, sir, very inexpensive. Q. Does Mr. Gillespie have any plant in use on any part of the road, do you know ? A. He must have, in putting in the founda- tions. Of course he had nothing to do with our work. We put in our foundations ourselves. 620 liS'VESTIGATION OF PuBLIC SeEVICE COMMISSIONS Q. And he has no use for his plant in doing any part of your work? A. No, sir. Q. Did you know of the fact that the Interborough Company had applied for the approval of the Public Service Commission on the extension work, Webster avenue extension line ? A. I had no personal knowledge of it. Q. Had you any idea at any time that there was to be a $2,200,000' contract awarded for additional work — the work additional to the third-tracking? A. I know that the plan con- templates some new sections of new work not third-tracking. Q. Did you understand that under the contract with the Inter- borough 'Company, the three companies doing the third-tracking were to have the contract for that new work ? A. No, sir. Q. You did not find the provision in the contract which you were looking for ? A. No, sir. I think it must be in this agree- ment with the Gillespie Company. " This agreement shall be extended to and apply to all further work that may be assigned to the parties hereto or any of them by the Interborough Eapid Transit Company under either certificates heretofore issued," etc. Q. What would you understand that " further work " to mean ? A. I take it to be the small sections or any change in plans in connection with the same work. Q. Did you know of the fact that a certificate had been issued for the construction of the extension work too? A. No, sir; I did not. Q. For the Webster avenue extension ? A. I had no knowledge of that. At the time of this contract ? Q. Yes, at the time of that contract. A. No. Q. Then your understanding of the expression " further work," as used in the contract between your company and the Gillespie Company, was limited to the connections? A. 'Or changes, or any new work of the same character which would properly come under this contract. Q. Didn't you have any agreement with Mr. Gillespie, by letter or imderstanding or otherwise, in relation to your accepting a smaller percentage then ten per cent, on the work that vou were to do on third-tracking? A. Nothing further, only what is cov- ered by that letter. Kex'okt of Joint Legislative Committee 621 Q. This contract is in full force now, is it not ? A. Yes, sir. Q. ^Miat is the date of that? A. February 13. Q. It has never been modified and no verbal arrangements of any sort ? A. No, sir ; none whatever. Q. And it has been carried out in all its terms and provisions up to the present time. A. Yes, sir. Q. Explain, if you will, Mr. Snare, what hazard there was, what peculiar hazard there was, in the construction of these connections ; I think you started on that. A. I said that the only peculiar hazard is that in connection with the work at Queensboro bridge. The definite plans have not yet been settled upon. Q. That work has not been commenced? A. Not yet, no, sir. The hazard there is the great mass of people who are crossing the bridge over which this work must be done. Q. Will that involve maintaining any trafiic while the work is in progress ? A. Yes, sir, traffic above and below, the same as on the other work. Q. What is the distance over which that traffic must be main- tained ? A. It is a matter of a few hundred feet. Q. Only a very short distance? A. Yes, sir. Q. Have you any further explanation to offer as to your willing- ness to undertake to do this work for 4% per cent, over cost? A. As against ten ? Q. Yes, — as against the ten that you get for the third-tracking ? A. ISTo, sir; I don't know of any explanation to make, excepting it is additional work and we had the plant and organization. Q. Did you offer to do it for this figure or were you told this would be the figure you would be allowed ? A. It was a matter of negotiation in the the usual way of backing and filling. Q. Did you ask for a higher price at any time? A. I have no doubt of it. Q. Didn't you realize that the further work specified in that contract would entitle you to the same price for the doing of that further work? A. Well, I don't know whether it would or not. The Gillespie Company under this contract, I think, had the right to distribute, did they not ? Q. There had been an agreement covering the amount of work that you were to do prior to the execution of that contract, and 622 Investigation of Public Service Commissions did that agreement extend to the further work specified in that contract ? A. Yes, sir, I presume it would, under the distribution to be made by the Gillespie Company. Q. Wouldn't that have entitled you to at least a proportionate share of the 12% per cent, authorized by the Public Service Com- mission and provided for in the contract between the Interborough and the Gillespie Company, yourselves and the Terry & Tench Company ? A. Well, I think that is a matter of more or less con- trol by the Gillespie Company. I don't think there is anything in this contract where I could demand that part of the work. I think the Gillespie Company could have done the work itself. Q. If any further work was allowed by the Interborough, it would come under the language of this paragraph, would it not: " This agreement shall be extended to and apply to all further work that may be assigned to the parties hereto or any of them by the Interborough Rapid Transit Company under either certifi- cates heretofore issued by the Pviblic Service Commission to the Manhattan Railway Company, or the Interborough Rapid Transit Company ?" A. It seemed to, but I think • — Q. Well, did you call Mr. Gillespie's attention to the fact that under this language, you felt that you had a legal right to your share of that work at the price at which it was awarded to him? A. I think not. Q. You made no claim as to a legal right to it ? A. I think not. Q. You say that you had no actual knowledge of the applica- tion by the Interborough to the Public Service Commission for the approval of the doing of this additional work? A. No, sir, I did not. Q. Did you execute as one of the original contractors, a con- tract for the doing of this connection work there? A. I don't think so. Q. Has there ever been a contract executed? A. My recollec- tion is not very clear on that. Q. Have you any other written contracts with the Interborough Company other than the one that you have produced here? A. As between the Gillespie Company? Q. Any contract in which you and the Interborough Comp"rv are parties, either singly or otherwise ? A. I have no recollection of any other contracts. Eepoet of Joint Legislative Committee 623 Chairman Thompson. — I thought you said when you first came in here that there was a letter that you forgot to bring with you amplifying this contract of February 13th. Mr. Snare. — Yes, sir. Q. Have you such a letter ? A. I haven't it with me, no. I supposed I gathered up all of those papers. It was where you asked me the question in regard to the division of the work, as to the assignment of the work to us, six and seven, and there is a letter which is really a part of that contract. Q. Your office is in the Woolworth building. A. Yes, sir. Q. Is there anyone there to whom you could telephone in relation to it? A. I don't think there is. Q. ilr. Tench is here, and I wish to ask him two or three questions, and would you mind stepping over to your office and bring that letter back ? A. JSTo, sir ; I will go and get it for you. Eeedeeick Tench, being recalled for further examination, testified as follows: By Mr. Lewis : While I think of it, have you had any part of the work of the connections awarded to your company? A. The connections referred to in your asking Mr. Snare? Q. Yes. A. !N"o, sir; we have not. Q. Your contract with Mr. Gillespie, or the Gillespie Company and the Snare & Triest Company, contains this provision : " This agreement shall be extended to and apply to all further work that may be assigned to the parties hereto or any of them by the Interborough Rapid Transit Company under either certificates heretofore issued by the Public Service Commission to the Man- hattan Railway Company or the Interborough Rapid Transit Company." ; did you know that other work had been assigned to the parties or to any of them? A. I know that the two exten- sions at Queensboro bridge and 143rd street had been awarded to Snare & Triest Company, after a talk with Mr. Gillespie. Q. Did you know that that had been first awarded to the origi- nal contractors ? A. Only in a general way. I was not brought into it in any way at all. 624 Investigation of Public Service Cojimissioxs Q. Did you know of the fact that an application was made to the Public Service iCommission for the approval of a contract with the same contractors for the doing of the work involved in the connections ? A. Yes, sir. Q. And did you know that that contract provided for the fixing of the percentage by the Public 'Service Commission at a figure at least 12y2% of cost? A. Yes, sir, I knew that. Q. Did you regard yourself as — your company, as entitled to any portion of this additional work? A. We did, but after going over the matter with Mr. Gillespie, we waived our claim to that. Q. Did you waive it in writing? A. No, sir, just a verbal understanding. Q. And did you consent that that work be done by the Snare & Triest Company? A. Did we consent? Q. Yes. A. We did not. Q. You were not asked to consent ? A. Wo, sir. Q. Did you know of the fact that this work was awarded to the Interborough Company at 121^% above cost? A. By the Interborough Company? Q. By the Interborough Company to the Gillespie Company, at 121/2% above cost? A. I did. Q. And did you know of the fact that it was turned over by Gillespie to Snare & Triest Company at 4%% ? ^- ^0, sir; I did not. I had no knowledge of that. Q. When did you begin, Mr. Tench, the negotiations which resulted in the execution of the three-party contract, that is, the contract of February 13, 1914, between yourselves and the Snare & Triest Company and the Gillespie Company ? A. In December, 1913, is my recollection. Q. After your bid had been submitted ? A. Yes, sir. Q. Had there been any talk prior to the submission of the bids on this subject? A. ISTot that I am aware of. Chairman Thompson. — Have you got any correspondence in your ofiice, any letters or correspondence in your office, that will fix the date when you began negotiations toward this tri-party contract between you, Gillespie and the Triest Company? Mr. Tench. — I might possibly have. Eepoet of Joint Legislative Committee 625 Chairman Thompson. — Will you look for that? Mr. Tench. — I shall gladly. I don't think there is any cor- respondence. The negotiations occurred in Mr. Gillespie's office, and just after bids had been put in. By Mr. Lewis: Q. When did you first learn of the fact that your bid was not the low bid ? A. Almost immediately after we put it in. Q. Did you learn at that time who was the low bidder ? A. I did almost immediately afterward, but not at the first. Q. About when with reference to the date of the submission of the bids did you learn that Mr. Gillespie was the low bidder ? A. Within a week. Q. When did the negotiations begin between Gillespie, yourself and the Snare & Triest Company, which led to the execution of this contract? A. Between the 23rd of December and the end. I can't. say just exactly when. Q. And before the bids were submitted -to the Board of Direc- tors of the Interborough Company, do you know ? A. No, sir ; after. Q. The bids were put in, but they were not submitted to the Board of Directors for approval until the 20th of January ? A. That I don't know. Q. It was between those two dates, was it not? A. Yes, sir. Q. And was the arrangement subsequently reduced to writing and the contract of February 13th practically agreed upon as between your company and the Gillespie and the Snare & Triest Companies before the award was made by the Interborough Board on the 20th of January ? A. No, sir, my recollection is that the agreement was practically completed on Lincoln's Birthday, which was the 12th of February, the day before the signing of the con- tract. We were together for maybe the 11th and 12th, and finally signed the contract, negotiating up to that time, and signed the contract on the 13th, but it had been a matter of discussion for some weeks prior to that. It was towards the end of December that the question was brought up and it had been practically arranged that we would get together, but we negotiated on the 11th and 12th of February. 626 Investigation of Public Service Commissions Q. That was as to terms only, I suppose, the negotiations ? A. It was thoroughly talked over from every point of view as to the method of the arrangement between ourselves, and the terras, and whatever questions came up or ideas came up. Chairman Thompson. — Wio was present at those negotiations ? Mr. Tench. — The two Mr. Gillespies, Mr. Snare, and I don't remember whether Mr. Triest was there or not, and Mr. Terry and myself. Q. ^Ir. Tench, did you hear Mr. Snare's testimony that the materials which he has used in the work which his company has been doing have all been purchased by Mr. Gillespie? A, No, sir. I didn't hear that. Q. What have you to say as to that matter in relation to the materials used by your company ? A. It is the same. Everything was purchased through the Gillespie Company as the executive company. Q. As the manager ? A. Yes, sir. Q. And all billed to the Gillespie Company ? A. Yes, sir. Q. And charged, I suppose, upon the books of the Gillespie Company to you or your company, or to the Snare company or to the Gillespie company, as might be? A. I don't know just how they charge them on the books. They were charged against the sections for which the material is required. Q. And statements rendered to you from time to time? A. Yes, sir ; from time to time. Q. That was necessary in order to enable you to ascertain the percentage that you would become entitled to ? A. Yes, sir. Q. And those materials were not actually billed to you, were they? A. JSTo, sir; they were not. Q. Aud the financing of the entire transaction was practically in the hands of the Gillespie company ? A. For our part, and the part that we did with them, all together. Q. And the purchase of steel was all arranged by the Gillespie Company ? A. In consultation with ourselves as. to the most ad- •^-isable shops in which to put the work, together with the Inter- borough. Eepoet of Joint Legislative Cohmittee 627 Q. Do you know whether the proposals for the sale to the Gilles- pie Company as manager of materials required were ever sub- mitted to the Interborough Company for its approval? A. They were. Q. They were 1 A. They were. Q. And all purchases made were made with the knowledge and approval of the Interborough Company? A. I won't say all, but all the important ones were. Q. That was the practice, was it? A. Yes, sir, for all the im- portant ones. Q. Do you recall what officials of the Interborough Company were consulted on this matter ? A. The purchasing agent, and Mr. Hedley and Mr. Pegram. Q. Do you know the name of the purchasing agent? A. Mr. Eoss, E. W. Eoss. Q. You had no knowledge, I take it, from your statement, of the fact that an application was made to the Public Service Com- mission bearing date the 14th of July, 1914, for the approval by the Commission of the extension work and the connections? A. ISTo, sir ; I had no knowledge of my own. Q. Did you hear of anything of the sort ? A. Yes, sir ; I knew that thej" were going to — I understood they were going to, but I had no consultation with any of the Interborough people on the subject. Q. I read from page 3 of the communication of the Interbor- ough Company, signed by Mr. T. P. Shonts, President : " The Company entered into a contract dated February 13, 1914, (a copy of which i-s on file with the Commission) with the Terry & Tench Co., Inc., the Snare & Triest Company, and the T. A. Gillespie Company, for the construction work described in the Manhattan certificate for the actual and necessary costs incurred Dy the contractors, and in addition thereto, a sum equal to fifteen per cent, of such costs as compensation to the contractors, as will nore ful'y appear by said contract. The contractors have been ictively engaged for several months in the execution of the work mder the Manhattan certificate, to the entire satisfaction of your '^titioner. The work of constructing the elevated extensions described in the Interborough certificate, does not involve the 628 Investigation of Public See vice Commissions complications incident to train operation while the construction proceeds, as is the case under the Manhattan certificate, and youi- petitioner is informed that, for this, among other reasons, the contractors are willing to do the extension work upon a fair per- centage basis, to be determined by the Commission, which shall not be less than twelve and one-half per cent, of the costs, as defined in the contract. Your petitioner estimates that the cost of the extension work to be done by the contractors will be approx- imately $2,200,000 ;" had you at any time expressed your willing- ness to do any part of the work estimated herein, in the communi- cation, to cost $2,200,000, at twelve and a half per cent. ? A. Yes, sir, I had. Q. You talked that over with Mr. Gillespie, had you? A. We did. Q. Prior to July, 1914 ? A. I am sure it was prior to that. Q. Did you make that statement to any of the Interborough Company ofiicials ? A. I don't remember having done so at all. It was not expected, in view of the contract we had, by which the Gillespie Company was to act between the Interborough and our- selves and the Snare & Triest. Chairman Thompson. — Your negotiations were all with Gilles- pie, anyway, weren't they, and not with the Interborough — from the time you filed the bid, all the negotiations you had were with Gillespie? Mr. Tench. — All after that, yes, sir. Q. All with the Gillespie Company ? A. Yes, sir. Q. But you did not know of the fact that this communication had been sent to the Public Service Commission? A. 'So, sir, I had no personal knowledge that it had been sent at all. Q. Did you know at the time that the application was opposed by any member of the Public Service Commission? A. Only what I saw in the newspapers. Q. Do you recall Avhat that was ? A. That in their discussions some of the members objected to a percentage contract. I do not know who they were, but I remember in a general way reading in the newspapers about it. Eepoet of Joint Legislative Committee 629 Q. And did you know that the Public Service Commission had approved that portion of the application relating to the connec- tions? A. To the connections, yes, sir, I knew that. Q. A ad you knew, of course, that under your contract, you would have the right tc a portion of that work, did you ? A. Yes, sir. Q. Under that paragraph which I have just read? A. Yes, sir, I knew that. Q. But you did not care for any part of that work, is that it ? A. Well, we had an arrangement which was satisfactory to our- selves, with the Gillespie Company. They argued that they wanted to make an arrangement otherwise than had been done in the main contract, and we consented to it. Q. And did they tell you what the details, the Gillespie Com- pany, did they tell you what the details of that arrangement would be? A. They did not. Q. And you did not know at any time that the Snare & Triest Company was to do this work of the connections for four and a half per cent. ? A. I did not. By Chairman Thompson: Q. Did you ever make any investigation as to the cost of the materials that Gillespie furnished you for your work ? A. B'id I ever make any estimate ? Q. Any investigation of it? A. I never have had the bills audited. Q. You simply accept whatever Gillespie's information to you is as to the cost, you accept that ? A. We have access to the esti- mates rendered to the Gillespie Company. Q. I ask you if you ever did investigate? A. Not further than by the estimates of the Interborough Company. Q. You accept whatever the statement is that Gillespie fur- nishes you, you accept it ? A. Yes, sir, we do, until the final set- tlement, at which time the bills will be audited. The contract is in force yet. Q. All you have is the contracts you showed us yesterday ? A. Yes, sir. Q. And under those contracts, when you come to a final settle- ment, you will be governed very much by the advice of Gillespie 630 Investigation of Public Seeyice Commissions as to what you will do ? A. 'No, sir ; by the statement rendered by the Interborough. Q. If you disagree very much as to details, do you think your lawyers would advise you to go to law ? A. Unless we could come to a satisfactory settlement, we might have to resort to the courts. Q. And in such a resort Mr. Gillespie would have a great advantage over you, wouldn't he ? A. No, sir. Q. You are in the habit of taking all these big contracts, and your connection with this is substantially by a contract drawn on four sheets of paper, all told ? A. We have had some pretty big contracts, simply a letter. Q. You take a contract drawn up in fifteen minutes and have them write you a letter or take their word for it ? A. There is no need taking word for this. It is embodied in the agreement between ourselves, which specifies what we are to do. Q. All the agreements you have got we have got here ? A. Yes, sir. Q. How much of the work was material — how much in value is material in this work of yours? A. I couldn't answer that exactly. Q. Give it approximately. A. The materials would amount, on our portion of the work, to probably three millions of dollars, and maybe a little more. I couldn't say positively now. By Mr. Lewis : Q. That is only for material ? A. Yes, sir. Q. Labor is not included there ? A. ISTo, sir. That is material. Q. I think you testified yesterday that the percentage of the total work which you are doing would be approximately 70 to 75 per cent ? A. That was the proportion of ours to the whole, including the labor and material. Q. That is as I understand it ? A. Yes, sir. By Senator Lawson : Q. Did you have any negotiations with the Interborough on any of these contracts prior to the consummation of the contract as it stands at present ? A. Not with the officials other than the chief engineer. Q. What negotiations did you have with the Chief Engineer? A. AVo worked with the Chief Engineer for many years off and on, Report of Joint Legislative Committee 631 in coiiiiection with the third-tracking work, as far back as 1897 and 1898, with a view to details in the field. Q. Were you invited prior to the consummation of this present contract to bid on this work as a whole ? A. Ho, sir ; excepting as I understand you to mean to the bids that we put in in December. That was the first and only bid we put in personally. Q. I understand the Interborough solicited bids from your company, as well as Snare and Triest, and Gillespie and others? A. Yes, sir. Q. Did you put in any — did you file any bid on the specifications — Mr. Lewis. — That all appears on the record, and it was all cov- ered yesterday. A. We only put in one bid. Q. Did you put that bid in for all the work that is being done now ? A. Yes, sir ; all the work. By Mr. Lewis : Q. Each bidder bid on the entire contract, did he not ? A. As far as I know. By Senator Lawson : Q. Have you any understanding as to why your bid was not accepted, or why the work was split up as it was? A. No, sir; only from the talk I had after the bids were received. Q. In other words, you were not the successful bidder on the entire work, and you were willing to take part of it ? A. Yes, sir. By Senator Foley : Q. Did anybody supervise this work that you did? A. Yes, sir. Q. Who ? A. Mr. Pegram, as the Chief Engineer of the com- pany ; Mr. Gardner as the principal assistant ; the inspectors of the Interborough Company ; the inspectors of the Public Service Com- mission, and the resident engineers on the different divisions. Q. Eesident engineers of the Interborough or Public Service ? A. Both — well, I won't say about the resident engineers of the Public Service. I think it was altogether under Mi. Powers, as an engineer of the Public Service Commission, and his engineers, 632 Investigation of Public Service Commissions I don't know whether they were called division engineers or what. Q. Yon don't know whether the city checks up the cost? A. Absolutely they do. Q. And materials too? A. Yes, sir; that is my understanding. Q. Have you any records filed with the Public Service Commis- sion as to the cost? A. That I would have to refer you to the Executive Committee. They handle all of that. Q. You think they are approved ? A. I am very positive they are. Chairman Thompson. — How many Public Service Engineers and inspectors and assistants and junior assistants have you got over there ? Mr. Tench. — I couldn't answer that. Chairman Thompson. — A couple of thousand ? Mr. Tench. — 'No, sir ; there is none more than is required. Senator Lawson. — Your records will show that ? IVIr. Tench. — No, sir ; ours will not. Chairman Thompson. — Do you think there are several hundred of them ? Mr. Tench. — No, sir ; I would say offhand in the whole work I wouldn't think there were a hundred. Chairman Thompson. — One hundred occurs to you ? Mr. Tench. — It just occurs to me, as there is a large amount of work, and I would think one hundred would not be in excess of the requirements to look after and check up. Chairman Thompson. — When you say the city, you refer to the Public Service Commission? Mr. Tench. — Yes, sir. Chairman Thompson. — You have no checking of the Board of Estimate of the city ? Mr. Tench.— Not that I know of. Eepoet of Joint Legislative Committee 633 Frederice; Snare, being recalled for further examination, testified as follows : By Mr. Lewis : Q. This document is an original document, is it ? A. Yes, sir. Q. You know the signatures of the T. A. Gillespie Company ? A. Yes, sir. Q. And the Terry & Tench Company ? A. Yes, sir. Mr. Lewis. — I will read the instrument into the record. Whereas, a contract has this day been executed between the Interborough Rapid Transit Company and the T. . A. Gillespie Company, and the Terry & Tench Company, Inc., and Snare & Triest Company, for work on the elevated railroads of New York. It is now understood and agreed that the chief engineer of said railroad company be and he is hereby authorized and empow- ered and required to apportion and award to Snare & Triest Com- pany, those two sections of said contract which are designated therein as section 6^C and section 7. It is further understood and agreed that in case of the dissent of Mr. Frederick Snare from the terms of this contract the Snare & Triest Company will be relieved therefrom and their part of said contract will be assumed by the other parties to this contract. Witness our hands and seals, this thirteenth day of February, A. D., 1914. THE T. A. GILLESPIE COMPANY, By T. A. Gillespie, President. THE TEREY & TENCH CO., INC., E. F. Terry, President. Q. This instrument was executed co-temporaneously with the memorandum of agreement of the same date read into the record earlier in this session, was it ? A. Yes, sir. Q. And section 6-C and section 7 constitute the portion of the elevated structures assigned to your company for the purpose of third tracking? A. Yes, sir. Q. The construction of third-track work ? A. Yes, sir. Q. The Chief Engineer did apportion and award these sections to your company ? A. Yes, sir. , 634 Investigation of Public Service Commissions Q. And your company accepted them and lias practically com- pleted them ? A. Yes, sir. Mr. Lewis. — I think that is all. By Senator Thompson: Q. You made this bid December 23rd; did you take personal charge of that ; did you have personal information in reference to it ? A. As to the signing of the bid ? Q. As to the transaction ? A. I certainly took a very prominent part in the discussion. Q. What investigation did you make of this work before you submitted that bid ? A. I consulted with our various people as to the details of it. Q. With your people? A. Yes, sir; people in our office. We had the plans and specifications. Q. That is, you had those attached to your bid ? A. Yes, sir. Q. How long did you have those in your hands before you made the bid ? A. Well, it wasn't very long. Q. How many days ? A. I don't know. Q. Two or three days ? A. That ought to be a matter of record, as to the time the plans were issued. The invitation bore a cer- tain date, and the bid bore a certain date, and I haven't the data here. Mr. Lewis. — We have the resolution, if you remember, in Mr. Fisher's testimony of yesterday. That was January 20th. Chairman Thompson. — I want the date of the invitation to bid. That couldn't be it. Mr. Snare. — The invitation, as I recall it, was a letter from the Interborough Company of a certain date. I think I have already stated that was issued by Mr. Pegram, and my recollection is it was several weeks. My recollection is that it was several weeks. By Chairman Thompson : Q. Several weeks before the 23rd of December ? A. I think so. Q. You say you had a talk with Gillespie before you submitted the bid ? A. No, sir. Eepoet of Joint Legislative Committee 635 Q. You did not have a talk vs^itli him ? A. Only in a general way. Q. And in this race, you and Terry & Tench and Gillespie finished neck and neck — Gillespie beat you out by a nose, and Terry & Tench by a shoulder, that is fifteen, fifteen and a half, and fifteen and three-quarters ? A. I think ours was about sixteen. Mr. Lewis. — Mr. Fisher testified as follows : " Q. Have you the minutes of the Board present relating to any action taken by the Board on the so-called Gillespie contract ? A. Yes, sir. That contract was brought up at a special meeting of the executive com- mittee on December 15, 1913. A resolution was adopted directing the proper ojB&cers to prepare specifications and procure bids from the following firms for the construction of the third tracks and improvements on the Second, Third and Ninth Avenue Elevated lines of the Manhattan Railway Company, covered by certificate of the ublic Service Commission, dated March 19, 1913. The firms were the Gillespie Brothers, Incorporated, Pittsburg Con- tracting Co., Bradley Contracting Co., Snare & Triest Company, Kent Engineering Co., and Terry & Tench Co., Inc." By Chairman Thompson : Q. Eeally, you could not have had over eight days on this according to the records? A. Well, those seem to be the proofs in the matter. Q. Eeally, this is the biggest bid that you ever made? A. Yes, sir. Q. How long have you been in business ? A. Well, as Snare & Triest Company, about sixteen years. Q. Is it a ISTew York corporation ? A. Yes, sir ; a New York corporation. Q. How much is it capitalized for? A. Our capital issued is three hundred thousand. Q. And the stock is owned by whom ? A. Principally l)y Mr. Triest and myself. Q. When you say principally, what percentage? A. Well, I think I must have about sixty or sixty-five per cent. 636 Investigation of Public Seevice Commissions Q. And Mr. Triest the other thirty-five ? A. !N"o, sir. Some of our people hold some stock, some people in our employ. Q. Who are they ? A. The names ? Q. Yes. A. Mr. Skillon, vice-president; Mr. McjSTiohol, engi- neer; Mr. ITolan, manager of our Cuban business; and Mr. But- ton, secretary and treasurer. Q. These men all give their v?hole time and attention to your service? A. Yes, sir. Q. And all the stock is owned either by you and Mr. Triest, or by men whose time and attention is given to your service, and who are in your employ ? A. Yes, sir. Q. About what percentage of the stock is owned by Mr. Triest ? A. He must have about — I think I will have to revise those fig- ures. I did hold sixty-five per cent., and that would leave Mr. Triest with thirty-five per cent. We made a distribution among these men of stock around in about that proportion. Q. I want to get at about the proportion of the stock the men hold ; five or ten per cent, to the men ? A. Yes, sir ; mors than that; fifteen or twenty per cent. Q. And the rest is owned by you and Mr. Triest ? A. Yes, sir. Q. This being the biggest bid you ever made, and you testified that you had a rather faint recollection of events, I wonder why you didn't charge your mind more carefully with it; it is only a matter of a year. A. These papers will show you I immediately left for Cuba, and was there the entire winter. This document the Senator just read says this is subject to the approval of Mr. Snare, and I was in Cuba, and there for some months afterward. Q. When you submitted the bid to the Interborough, you did not expect to get it anyway, did you ? A. I don't know why you should say that. Q. You did not charge your mind very carefully with it, and went to Cuba ? A. The past events are all superseded by the sign- ing of the contract. We are bidding continuously on all kinds of work. Q. Did you ever talk with any of the Public Service Commis- sioners about this ? A. No, sir. Q. Not any of them. A. I don't know them. I know Mr. McCall, I have met him. Kepoet of Joint Legislative Committee 637 Q. So far as you know, did you ever make any investigation, either you or any member of your company, as to the details involved in this enterprise ? A. JSTo, sir. Q. And so far as you know, they never talked with you at all about it ? A. No, sir. Q. Did you ever make any investigation of the cost of this material furnished you by Mr. Gillespie? A. I did assist in the placing of the steel contracts. Q. That is, as to where they were manufactured? A. Well, not only as to where manufactured, but the price, and so forth. It was rather an important contract, in respect to some fifty thou- sand tons of steel. Q. How much would that cost? A. That would be something like two and a half million dollars. That was the largest single item of materials furnished. Q. Your contract was only one and a half million dollars? A. Of course I took an interest in that, knowing where the steel came from. Q. Did you make any investigation as' to the cost ? A. I not only did that, but I also consulted the Gillespie Company before they placed the contract. Q. Your investigation was limited to a consultation with the Gillespie people? A. The people who actually furnished the steel, and their ability to furnish the steel, and the price. Q. You did investigate the matter of the price at which they sold to Gillespie ? A. Yes, sir. Q. How much in value of material went into your million and a half contract? A. I should say — I can't fix that exactly, but I should say five or six hundred thousand dollars. Q. You have not had any accounting from the Gillespie Com- pany as to your profit, and you cannot ? A. "No, sir ; we cannot until the contract is finished. Q. Aside from this contract and the letters you have shown us, have you any other security from the Gillespie Company as to the final payments they will make you? A. ISTone whatever. Q. No security at all ? A. No, sir. Q. You say you get ten per cent. ? A. Ten per cent, excepting in the case of this additional work. 638 Investigation of Public Service Commissions Q. What do you furnish for that ten per cent. ? A. A plant, the major plant, and we furnish the labor and furnish the super- intendence and do the job and furnish the money for the pay roll. Q. And you take all the responsibility for the maintenance of traffic? A. All the responsibility is provided for in the con- tract between the Interborough Company and the three parties. Q. Who inspects your work? A. Well, I can simply repeat what I heard Mr. Tench testify here, the Interborough inspectors, and the engineers, and also the Public Service people. Q. How many Public Service inspectors have you got up there ? A. I couldn't say. Q. One hundred ? A. ISTot on our work. Q. As many as fifty? A. I can't say. Q. Do you know anything about their ability or efficiency? A. Of this particular man, Mr. Powers, who I think is in charge of the whole work, we have known him in connection with work we have done before, and I think they are all very efficient men. Q. Mr. McAneny said something about having some labor tickets given to him that would permit a laborer who had possession of one of them to be employed on public work ; do you ever issue any of them ? A. JSTo, sir. Q. Do you employ anybody at the request of public officers or public officials? A. No, sir. Q. Or politicians ? A. No, sir. Q. Or people outside? A. No, sir. I think there have been some letters which have come in the office recommending some- body ; only one or two of them, however. Q. Do you pay any attention to them ? A. None at all. By Senator Lawson: Q. You made your original bid on this work with the idea of securing the entire contract ? A. Yes, sir ; in accordance with the specifications. Q. How soon after you rendered your bid did you learn from the Interborough that it was not acceptable, owing to the percentage you asked ? A. Well, I attempted to say something about that previously. I couldn't recall. Q. It was, however, rejected, was it? A. Yes, sir; and I think Eepoet of Joint Legislative Committee 639 we were notified officially by letter that it was rejected. I am not sure as to that, but I assume we were. Q. Then were you invited to participate as a sub-contractor ? A. Not by the Interborough Company, but by T. A. Gillespie. Q. And when your original bid was rejected by the Interborough, you presumably thought you were all through ? A. So far as our original bid was concerned. Q. Then did the Gillespie Company solicit you to participate ? A. Yes, sir. Q. And the result of that is the present joint contract ? A. Yes, sir. Mr. Lewis. — I do not think we have any other witnesses for to-day. Mr. Shuster. — I offer in evidence a contract for construction of portions of the Webster Avenue line. Eighth Avenue and 162d street connection, Queensboro Bridge line and West Farms sub- way connection, dated February 27, 1915, being a copy of the contract for the connections submitted by Mr. Quackenbush, coun- sel for the Interborough Eapid Transit Company. The same was received and marked Exhibit F, of date October 1, 1915. Exhibit F above referred to is as follows : 1. This supplemental contract is made between INTERBOE- OUGH EAPID TKANSIT COMPANY, a New York corpora- tion, hereinafter called the " Company," party of the first part, and THE TEEEY & TENCH COMPANY, INC., a New York corporation, THE SNAEE & TEIEST COMPANY, a New York corporation, and THE T. A. GILLESPIE COMPANY, a New Jersey corporation, who have associated themselves together for the purpose of doing the work herein referred to, and who are hereinafter called the " Contractor," parties of the second part. 2. This contract is supplemental to a certain contract made and entered into between the same parties, dated February 13, 1914, for the construction of additional tracks, etc., on lines of the Manhattan Elevated Eailroad. 640 Investigation of Public Seevice Commissions 3. The Company is the lessee and operator of the elevated rail- roads of the Manhattan Eailway Company in the City of New York. On March 19, 1913, the Public Service Commission for the First District delivered to the company, and the company accepted, a certificate for the construction and operation of certain extensions and connections designated as the Webster Avenue line, the Eighth Avenue and 162d Street connection, the Queensboro Bridge line and the West Farms Subway connection. The orig- inal of that certificate is on file with the Commission and is made a part of this contract so far as it may be applicable. 4. Under date of July 14, 1914, the company applied to the said Commission for permission to enter into a contract with the con- tractor for the construction of the elevated extensions and connec- tions described in .said certificate of March 19, 1913, upon the same terms and conditions of the said contract of February 13, 1914, except as to compensation. 5. On December 11, 1914, the Commission adopted a resolu- tion, which resolution was amended by a further resolution adopted December 31, 1914, approving the application of the company as to the construction of certain portions of the Webster Avenue line, the Eighth Avenue and 162d Street connection, and the West Farms Subway connection referred to in said resolu- tions " to be constructed under trafiie conditions " and as to the Queensboro Bridge connection, and fixed the compensation there- for. Brief description of the said portions and the Queensboro Bridge connection are as follows : WEBSTEE AVENUE LINE (Section No. 9-A) Commencing at Bent 630 of the suburban line of the company, located 555 feet north of the north building line of Fordham road measured along the center line of the structure and running in a northerly direction, crossing the right of way of the New York Central and Pludson Eiver Eailroad Company, and crossing the east building line of Webster avenue to Bent 635, extended in a westerly direction located 117.7 feet north of the north building line of 194th street. (See Interborough Eapid Transit Company's Drawing No. 9077). Report of Joint Legislative Committee 641 EIGHTH AVENUE AND 162D STREET CONNECTIOJST (Section No. 1-A) Commencing at a point in Eighth avenue at or near the north building line of West 157th street; thence running in a northerly direction along Eighth avenue to a point midway between 157th and 158th streets; thence curving in an easterly direction across private property and public streets to the west end of the present Putnam bridge; thence crossing the Harlem river on the Putnam bridge; thence continuing in an easterly direction over the prop- erty of the New York Central & Hudson River Railroad Company, and thence Sedgwick avenue, terminating at a point at or near the east building line of Sedgwick avenue one hundred and eighty (180) feet, more or less, north of the north building line of West 161st street. (See Interborough Rapid Transit Company's Drawing No. 10122.) WEST FARMS SUBWAY CONNECTION (Section No. 6-B) The work included on this connection is divided into two por- tions. The first portion commences at Bent No. 125 of the Suburban Line of the Company, located about sixty-five (65) feet north of the north building line of East 143d street, and runs in a northerly direction to Bent No. 126 of the same line. The second portion commences at a point in 149th street about four- teen (14) feet south of the portal of the West Farms Branch of the' company's subway, and runs in an easterly direction over the open cut of the present subway, and through private right of way, and across Brook avenue into Westchester avenue, and ter- minates at Bent No. 67-S of the elevated connection between the Third Avenue Elevated Railroad and the present West Farms Subway Line. (See Interborough Rapid Transit Company's Drawings Nos. 6004 and 6071.) QUEENSBORO BRIDGE CONNECTIONS (Section No. 4^B) Commencing at Bent 427 of the Second Avenue Elevated line, located in the centre of 51st street, and following the Second Vol. 1 — 21 642 Investigation of Public Seevicb Commissions avenue line, running northerly to Bent No. 476 at or near 59th street ; thence curving in a northeasterly direction and terminating at a point midway between 59th and 60th streets about 16.5 feet east of the east building line of Second avenue making connec- tion with the two upper deck tracks on the Queensboro bridge. The work comprises the addition of one (1) track to the Second Avenue line from 51st street to Bent 476 near 59th street, and two (2) tracks from 59th street to the point where a connection is made with the Queensboro bridge tracks. The work also includes reconstruction of the Second Avenue line between Bent 427 and Bent 491, involving the raising and widening of the structure and the reconstruction of the 57th Street station. (See Interborough Rapid Transit Company's Drawing No. 4035.) 6. The Contractor undertakes and agrees to construct and com- plete the portions of the extensions and connections above described under and in accordance with the terms and conditions of and for the compensation specified in the said contract of February 13, 1914, as the said contract has been construed and explained by the parties thereto, as if the said work had been originally included in said contract, except that the Contractor's percentage as defined in subdivision 5 of said contract shall in respect of the said portions of said extensions and connections be twelve and one- half per centum (12%%) of the actual and necessary costs as defined in subdivision 6 of said contract upon which a Contractor's percentage is allowed under said subdivision 6. 7. If as a condition of any agreement or arrangement which the company may enter into or make with the New York Central Railroad Company that company reserved the right or privilege to do any work or to furnish any materials or provide station or other facilities in connection with or incident or appurtenant to the construction of the said Eighth Avenue and 162nd Street Con- nection, then this contract shall be subject to any such reservation. 8. This contract shall not be or become binding until consented to in writing by the sureties on the bond executed by the Con- tractor and said sureties under said contract of February 13, 1914. In Witness Whereof, the parties hereto have caused their respective corporate seals to be hereto affixed and attested by their Eepoet of Joint Legislative Committee 643 respective secretaries or assistant secretaries and these presents to be signed by their respective presidents or vice-presidents the 27th day of February, 1915. USTTERBOEOUGH RAPID TRANSIT COMPANY, By T. P. Shonts, , [Seal] President. Approved as to form J. L. Q., General Attorney. Attest : H. M. FiSHEK, Secretary. THE TERRY & TENCH COMPANY, INC., By E. F. Terry, [Seal] President. Attest: Frederick Tench, Treasurer. THE SNARE & TRIEST COMPANY, [Seal] By W. G. Triest, Vice President. Attest : A. W. Buttenheim, Secretary. THE T. a. GILLESPIE COMPANY, By Thos. H. Gillespie, Vice President. Attest : R. A. Johnston, Assistant Secretary. Approved as to execution : General Attorney, 644 Investigation of Public Seevioe Commissions STATE OF NEW YOEK, County of New Yoek, On the 16th day of March, 1915, before mw personally came T. P. Shonts, to me known, who, being by m© duly sworn, did depose and say, that he resides in the City of New York, that ho is the President of the Interborough Rapid Transit Company, one of the corporations described in and which executed the foregoing instru- ment ; that he knows the seal of said corporation ; that one of the seals afhxed to said instrument is such corporate seal; that it was so aiiixed by order of the Board of Directors of said corpo- ration, and that he sigTied his name thereto by like order. [Seal] J. C. NOERIS, Notary Public, New York County, No. 2777. rCertificate filed Register's Office, New York County, No. 5029. STATE OF NEW YORK,, County of New Yoek, On the 27th day of February, 1915, before me personally came E. F. Terry, to me known, who, being by me duly sworn, did depose and say, that he resides in Yonkers, N. Y., that he is the President of The Terry & Tench Company, Inc., one of the corpo- rations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that one of the seals affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. [Seal] HUDSON N. MASON, Notary Public, Bronx County.. Certificate filed in New York County. STATE OF NEW YORK, ) County of New Yoek, j On the 27th day of February, 1915, before me personally came W. G. Triest, to me known, who, being by me duly sworn, did depose and say, that he resides in New York City ; that ho is the Eepoet of Joint Legislative Committee 645 Vice-President of the Snare & Triest Company, one of the corpo- rations described in and which executed the f OTOgoing instrument ; that he knows the seal of said corporation ; that one of the seals affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. [Seal] HUDSOiff N. MASOW, Notary Public, Bronx County. Certificate filed in New York County. STATE OF NEW YOEK, ) r SS ' County of New York, ) On the 27th day of February, 1915, before me personally came Thos. H. Gillespie, t® me known, who, being by me duly sworn, did depose and say, that he resides in "West Orange, N. J. ; that he is the Vice-President of The T. A. Gillespie Company, one of the corporations described in and which executed the foregoing instrument; that he knows the seal of said corporation; that one of the seals afiixed to said instrument is such corporate seal ; that it was so affixed by order of the Board of Directors of said corpo- ration, and that he signed his name thereto by like order. [Seal] HUDSON N. MASON, Notary Public, Bronx County. Certificate filed in New York County. Consent of Sureties The undersigned, being sureties upon the bond in the sum of five hundred thousand dollars ($500,000) executed by The Terry & Tench Company, Inc., The Snare & Triest Company and The T. A. Gillespie Company, as principals, and the undersigned as sureties, to Interborough Eapid Transit Company, as security for the faithful performance of the said contract of February 13, 1914, referred to in the foregoing agreement, hereby consent to the making of the foregoing agreement, and hereby agree that the said bond shall apply to and be held by the said Interborough Eapid Transit Company as security for the faithful performance 646 Investigation of Public Seevice Commissions of the work referred to in the foregoing agreement as if the said work had been originally included in said agreement of February 13, 1914. [l- s.] FREDEEICK TENCH, [l. s.] E. E. TEREY, [i. s.] W. G. TEIEST, [l. s.] T. A. Gillespie Co., By Thos. H. Gilllespie, Attorney in Fact. [l. s.] STATE OF NEW YOEK, I ss. .' • CouNTsr OF New Yobk, ;k, I On this 27th day of February, 1915, before me personally came E. F. Terry, Thos. H. Gillespie, attorney in fact for T. A. Gil- lespie, W. G. Triest, Frederick Tench, to me known, and known to me to be the individuals described in and who executed the fore- going instrument, and they thereupon severally duly acknowledged to me that they executed the same. [Seal] HUDSON N. MASON, Notary Public, Bronx County. Certificate filed in New York County. Chairman Thompson. — ■ We will now take a recess until two o'clock. Whereupon, a recess was taken to two o'clock p. m. AFTERNOON SESSION. Chairman Thompson. — If there is no objection, we will sus- pend now until Wednesday morning, at 11 o'clock, at this place. Whereupon, an adjournment was taken to Wednesday, Octo- ber 6, 1915, at n o'clock a. m., to meet at the same place. Kbpokt of Joint Legislative Committee 647 OCTOBER 6, 1915 New York County Lawyers' Association Board Room, 165 Broadway, ISTew York City The Committee met at 11 o'clock a. m., pursuant to adjourn- ment. Assemblyman Kincaid (Acting as Vice-Chairman) — I will call the meeting to order and also at the same time adjourn the meeting until to-morrow morning at 11 o'clock, at the same place, by reason of the enforced absence of Chairman Thompson and Mr. Lewis. Whereupon, the Committee adjourned to meet October 7, 1915, at the same place, at 11 a. m. OCTOBER 7, 1915 New York County Lawyers' Association Board Room, 165 Broadway, New York City The Committee met at 11 o'clock a. m., pursuant to adjourn- ment. The Chairman. — Gentlemen, this morning, according to agree- ment last week, we will give the preference to the question coming up in Westchester county, as to water situations up there. Mr. Lewis. — Mr. Smith, have you any witnesses you want to testify this morning? Mr. Smith. — I have, yes. The Chairman. — Herbert W. Smith, representing the Larch- mont Welfare Society. The Chairman. — • That sounds very much like Greater New York. Mr. Smith. — I appeared before your Committee last winter on behalf of the Larchmont Welfare Society and stated the general proposition with respect to the condition of our water supply 648 Investigation of Public Service Commissions within the limits of our village situated on Long Island sound, in Westchester county. But I understand the minutes either have been lost of that hearing or they have not been secured, or there is some difficulty in obtaining them, and with your permission, I thought I would occupy just a few minutes in order to record on the minutes to-day the situation which I presented last winter, and I have requested Mr. Moran, who also appeared at that time, to appear this morning again, and he said he would do so. I expect him any moment. Mr. Lewis. — Suppose you go ahead, Mr. Smith, and just dic- tate to the stenographer what you liaAe to say upon the subject. Statement of Herbert W. Smith: Examination by Mr. Lewis : A. Mr. Rogers, who is here representing officially the village of Larchmont, Avill follow me, and all I can say is something on behalf of the Larchmont Welfare Society of which I am a member of the Legal Committee, with Mr. Rogers and Mr. Moran. Our water supply has been a very important question with us for a long period of time. We feel that we have been subjected to extremely high rates — higher than those of any other munici- pality of our size within the State. Q. It would be well to state the rate right there, Mr. Smith. A. Prior to 1912, we paid per thousand gallons, one dollar a thou- sand up to twenty-five thousand gallons. We were obliged to pay for that first twenty-five thousand gallons in advance. After the consumption of that amount of water, we were required to pay during the balance of the year at the rate of thirty-five cents a thousand. By the Chairman : You had to pay for the first twenty-five thousand gallons whether you used it or not ? A. Whether we used it or not. By the Chairman: The ordinary householder would not use that amount of water, would they? A. If a consumer discontinued the use of water or did not consume his prescribed quantity up to twenty-five thou- sand gallons, he was allowed a rebate or allowance on the next EEPOEt OF Joint Legislative Committee 649 year's bill, but even then under those old rates, we felt ourselves somewhat burdened, and the village authorities, trustees at that time, I being counsel for the village, appointed a special com- mittee to look into this question, and that committee was composed of Mr. Moran, who will be here later, and Mr. Higgins, and Mr. Hooker. And they gave a very careful attention to this situation. They gathered very interesting statistics from all over the State, and our neighborhood, and l^ew Jersey and Connecticut with respect to our supply, and rendered a printed report which has already been filed with you. I am not sure whether that has been mislaid. I can produce another copy. Soon after this report was rendered, the water company saw fit to increase its rates, and those rates are still prevailing. Those rates are a dollar a thousand for the first twenty-five thousand gallons. For the second twenty- five thousand gallons, seventy-five cents. Examination resumed by Mr. Lewis: Q. More than double? A. Yes. For the third twenty-five thousand gallons I think seventy cents. For the fourth twenty- five thousand, we paid sixty-five, and for the balance, if one con- sumes that much water, we pay fifty cents a thousand. Q. Those rates applied to all consumers whether for business or domestic purposes ? A. I think in the case of large institutions, for instance like the Larchmont Yacht Club, they may receive some lower rate under special arrangement. The village itself is charged twenty-two dollars, I think, for each hydrant. Mr. Rogers, I think, can confirm me in that respect. Q. Just what does the hydrant charge represent in the way of consiunption ? A. You mean quantity of water per year ? Q. For what purposes is the water permitted to be used from a hydrant? A. For watering the street and also use in our fire department. ISTot only in case of fire, but also in drills. ISTow, under the old rates that I spoke of, our Committee found that the average consumption per household cost about fifty dollars a year. But under the new rates, assuming that the consumers are using as much water today as they did at that time, the average cost per consumer for household would be upwards of seventy-five dollars a year for water. And of course in some instances I know 650 Investigation of PnBLio Service Commissions that certain consumers pay between three and four hundred dollars a year and one hundred and fifty dollars is a very — Q. ITot unusual? A. Very usual. By Mr. Eogers : The average among most of us is $100 or more. Now, you see, during the course of the Baxter hearing, with which you are all familiar, in the Legislature last year, which bill passed both Houses and went to the Governor, who vetoed it, Larchmont was much interested in that. Up to last year I represented the village as counsel. We were in favor of that bill as well as other municipalities throughout Westchester county and followed it through the Legislature carefully, hoping it would become a law because we believe that the water supply should be under the jurisdiction of the Public Service 'Commission. Water probably is the most important commodity there is which is not under Public Service jurisdiction. We have our telephone and we have our gas and electricity which to perhaps the poorer class of people are luxuries, and they do have full charge. But here is water which is consumed by everybody as a necessity of life, is not yet under the jurisdiction of the Public Service Commission, and we advocate that the jurisdiction of that commission be extended to include this very important commodity. It is of as much interest to the State as a whole to have that jurisdiction extended as it is to Westchester county. They are as much interested in the western part of the State in our water supply as we should be in theirs. Because a water compa,ny today possibly might say, " Well, we will discontinue furnishing you with water " after establishing a system, and try to imagine what that situation would be. It would be such that we might be subjected to an epi- demic which might be extended throughout the State, and there- fore the State as a whole is just as much interested in having our supply regulated and continued as we are in Westchester county ourselves. And we trust that your Committee will recommend to the Legislature in its report that the jurisdiction of the Public Service Commission be extended to include private water companies. Report of Joint Legislative Committee G51 Examination resumed by Mr. Lewis : Q. And what do you know, Mr. Smitli, of the rates charged by other companies in Westchester coimty? A. The village of Mamaroneck has already appeared before your Committe-j here, and I do not recollect at this moment what those rates are. I think Larchmont suffers very high rates, more than any other municipality in the county and throughout the State. Q. What have you to say as to the character of the service rendered by the Larchmont Company as to the sufficiency of the supply, etc. ? A. Well, we have had abundant supply, continu- ously. There was a period in the great drought of three or four years ago when we were requested to be very careful of our water. Q. Generally speaking, then, you have had an abundant supply ? A. Yes, sir. There is also another question which has also affected us very seriously, and which has been a question before the Public Health Department for some time, but I presume that is a question of health which might not be invoked in any bill regarding water supply being extended to the Public Service Com- mission. Our watersheds extend two or three miles north of Larchmont on the uplands, and is brought down to us merely by gravity force. Through this water supply which supplies our vil- lage runs the Westchester and Boston railroad, and during the construction of that road we had to supervise and inspect that watershed continually. We felt we could not rely on the inspect- ors employed for that particular purpose by the water company itself. And in addition, the village of Larchmont hired its own inspectors, not only to check up the work itself, but the general inspectors of the water company, and our health officers had that matter in hand in Larchmont and kept continually at it in order to protect our purity of water. That is a fast-developing com- munity and as long as that water company and watershed is main- tained, we feel we should receive an adequate amount of water at reasonable rates, and that the supply should be pure and wholesome. Q. What is the source of supply ? A. iSmall streams running down from the hills and watersheds into a sort of a natural reservoir. Q. Artificially perfected ? A. Yes. 652 Investigation of Public Service Commissions Q. Natural reservoir? A. Yes. I think it may be dammed at one corner in order to give a better keigbt of water. Q. The investment in the plant cannot nnder the circumstances be heavy — that is, there is no pumping plant required ? A. No. Q. There is a natural reservoir which holds the water, accumu- lates, impounds it until it is needed for use, and that reservoir has not been an expensive proposition for the company to perfect for the purposes for which it is used. A. I should say not, com- pared with other water supplies. Q. Practically, then, the only investment of your company is in the distribution service, the system of pipes from the reservoir to the consumer? A. Yes, I should say so, and also includes the filter station which is situated near the reservoir. Q. What is the character of the filter station ? A. I think they have installed a hypo-chloride plant. Q. It is a gravity filtration? A. It is a gravity filtration, plant that has been recently installed, but there has been a filtra- tion plant up there for many years. I do not know the exact nature of it. Q. Has the company any investment in pressure filtration plant which puts water through the filter under a high pressure? A. No, I think not. Q. The water flows into a sand filtration bed ? A. I think it does. There is no power up there used in order to create pressure, in order to drive the water through the filtration plant. Q. Now your village is a customer, of course, in that it pur- chases water for use of public buildings and various public purposes? A. Yes, sir. Q. I suppose so far as that water is used for fire protection, it is covered by the hydrant charge ? A. Yes. Q. So far as its use for street sprinkling, it is covered by the hydrant charge? .A. I think it is. Q. But for the purpose of public buildings and use in public offices and institutions, does the village pay at the same rate as the other consumers ? Mr. Eogers. — I am under the impression that is under separate contract. It was made at the time they got the franchise. I speak simply from memory. Report of Joint Legislative Committee 653 Examination resumed by Mr. Lewis: Q. Have you any knowledge as to what that rate can be ? A. I have no recollection of it, but I could furnish it to you. Q. Do you know what the capitalization of that company is, Mr. Smith ? A. That is set forth in that report, but my recollec- tion is that there is a capital stock of fifty thousand dollars, and a bond issue of three hundred and fifty thousand dollars. Q. Do you know anything about the gross earnings of the com- pany? A. They have maintained that they have been such, that is, before these new rates went into effect, that they could never pay a dividend on their stock, and they also ran the plant at a loss. I think their gross earnings they reported at that time through their voluntary appearance before this special committee I spoke of, amounted to about twenty-one thousand dollars a year, and that their interest charges amounted to about fourteen thou- sand dollars a year. Q. Now did they advise the Welfare Society or its committee of the purposes for which the proceeds of the bond sale had been em- ployed ? A. ISTo. They refused to answer that question. I speak from recollection. I might add there that in this report are the questions and answers which they put to the officer of the watei company at that time. Q. And for the purposes of this record, did it furnish you with any information as to the consideration for which the stock itself was issued ? A. No, I think he refused to answer that question. Q. Was any information furnished to the Committee as to the actual cost of construction of the distribution system and filtration bed ? A. I think not, unless set forth in that answer. Q. Have you any information on that subject either exact or approximate ? A. ISTo, I haven't. Q. How long has the company been in existence, operating in that section ? A. I think before the incorporation of the village of Larchmont in 1891. Q. Is there any competitor in existence ? A. ISTo competitor. Q. Is it possible for the village to obtain the supply elsewhere by installing its own plant ? A. Not in the immediate vicinity. And that raises some very interesting questions. We hope some day under the Catskill Aqueduct we will get our water supply as 654 Investigation of Public Service Commissions the rest of Westchester county will likely do, Srom the ~Sew York city water supply. But the water company maintains that it has an exclusive right to the streets in Larchmont for the purpose of running their water mains. It seems that these streets were taken over. Q. Superior to the rights of the corporation ? A. Superior to the rights of the village of Larchmont. For the reason that they operated prior to the village's incorporation, and the streets at that time were taken over by the village in the grant to it subject to the grants of the rights to this water company, exclusive rights, and the village accepted the streets under that condition. Q. That is a matter, then, more or less of contract that would have to be litigated ? A. Have to be litigated. Q. Do you know of any attempt made by the company to increase its capital stock by additional bond sale? A. I hadn't heard of any such increase or attempt to increase it. Q. And the capital shows aggregate of four hundred thousand dollars bonds and stock, represent the original issue at the time the company was incorporated, does it? A. I don't know when the bonds — at what period the bonds were sold, but my impression is they were sold — Q. Do you know where the bonds are 'held ? A. Not altogether, I understand that the Murray family which founded this water company and controlled it have most o^ the bonds and also other residents — one or tAvo in Larchmont that I happen to have heard of, but I am not sure. Q. Does the Murray family own the controlling interest in the stock ? A. Yes. That is my understanding, that they do. ' Q. Do you know the rate of interest at which the bonds are issued ? A. I think it is four per cent. My calculation is based on my recollection of what the bond issue was — three hundred and fifty thousand dollars, and that their interest amounted to fourteen thousand dollars a year, which would make just four per cent. Mr. Lewis. — I think that is all, unless you have something further to volunteer. Mr. Smith. — Mr. Eogers will address you officially. Kepoet of Joint Legislative Committee (555 By the Chairman: Q. As I understand you, Mr. Smith, this corporation that fur- nishes you water is a private corporation and they own all the available practical source of supply around your vicinity? A. That is correct. Q. So that rather eliminates an opportunity of the village or city to establish a municipal water system ? A. Yes, that is true. And if they should attempt to do so, we might get into a litigation with it. Q. You have no machinery to ascertain the expense or profit of this corporation that is supplying you, and no way of regulating their charges? A. l^o. Q. Or their service? A. And again I would like to say this: That our only remedy to-day is in the courts, and it would be such an expensive proposition to find out whether water rates were reasonable, that no individual consumer could afford to get into such a litigation or even possibly a group of individuals. It would cost upwards of thousands of dollars to employ competent experts. Q. And would be years of litigation? A. Would be years of litigation at expense, and perhaps in the end meet with defeat. Q. You have struck the real reason for creation of public service supervision in the beginning of your history ? A. I think so. Examination resumed by Mr. Lewis: Q. What penalties are provided for failure to pay water bills when due, Mr. Smith ? A. The penalty of having the water cut off. Q. Has that step been taken on any occasion that you know of ? A. I know when it was, and there was some litigation over it, but I don't know the result. Examination by the Chairman : Q. Are they operating under an unlimited franchise in your town ? A. What do you mean by unlimited — in point of time ? Q. Yes. A. No, I don't think there is any point of time at all — it is unlimited. Q. And your contracts for the water supply of the city, how long do they run ? A. They run for, I think, a period of — run from year to year, or a period not more than three to five years. 656 Investigation of Public Service Commissions Q. And when those contracts run out, and they come along for renewal, hasn't your city an opportunity to try and regulate them or withhold the contract? A. That contract only relates to the supply of water to the village itself. Q. If this company should arbitrarily cut off the water supply, you would be entirely without fire protection? A. We would, and we wanted a tribunal we could go to to prevent any such contingency. 'Clarence Dewitt Kogees, village attorney of the village of Larchmont, appeared before the Committee, and made the following statement, subject to examination: I can only second what Mr. Smith has said, excepting with some little details that I have noted here that may be of interest to you. One point was as to whether or not this shutting off the water had ever been enforced. I have a personal experience as attorney for some clients that tlirows a little light on that sub- ject. That may be a little bit interesting to you. By Mr. Lewis : Q. !N"o doubt of it. A. In one instance a party had owned a house, and failed to pay his water bill. The mortgage on his house had been foreclosed by my client, and my client had to buy it in. Before we could get water turned on in this house, we had to pay all the old bill of the outgoing one. As a practical proposi- tion. In other words, it was not worth our while to litigate it. But they held us up for the money. That is the way they handled the thing as a practical proposition. They have got us by the neck and they know it. Examination by the Chairman : Q. Who owns that company? A. Well, we know it as the Murray Company. George Murray is the man that is the head of it. He is the son of William Murray recently deceased. Wil- liam Murray is the practical one, but Greorge Murray is the manager. Q. Supply water to any other village ? A. None whatever. Eepoet o'f Joint Legislative Committee 657 Examination by Mr. Lewis : Q. To whom axe the bills rendered in the case of tenant? A. They are rendered to the occupant, the tenant himself, and every time there is a change of tenancy they require a deposit of twenty-five dollars. Otherwise, we do not get any water. Q. The meter furnished by the company or owned by the property owner? A. My recollection is — have lived there now seven odd years — that they charged me ten dollars for my meter when it was put in. Q. All metered, are they? A. Yes. Everything is metered there, except in one instance I happen to know of an old resident, and he has rather defied them in putting in a meter, and he rejoices in his victory, but he is the only man that has gotten ahead of the water company in the village. Now, you were speak- ing of the adequacy of the supply. That possibly would interest your board. The water is undoubtedly of good quality, excepting it is menaced by the Italians working on the new railroad and possibly by seepage from sewer connections nearby. That of course is due to the growth of the community about the watershed. But there is a defect that is quite a patent one in the mains which supply our streets. They are so small that they are inadequate for any large fire and an ordinary engine will piimp them dry and won't be able to get enough water to supply a fire ■^- sufficient. Q. Has that matter been taken up at any time with the officers and directors of the company? A. It has been called to their attention and the new pipes are of larger size, but the old pipes remain the same, and the water company contends that it has an exclusive right to do as it pleases. Q. Do you know what the pressure is usually? A. I am informed it is thirty-five pounds, but I am not sure. That is the last statement I got from our fire chief. By Mr. Baxter: Q. That is a low pressure.? A. That is a low pressure. Now, another thing we had — I used to be counsel for the village before Mr. Smith was counsel, and at that time some three or four years ago — at that time we had the matter up with the water company to see what could be done to readjust the rates, and they advanced 658 I^'TESTIGATIOX OF PuBLIC SeBVICE COMMISSIONS rather a remarkable proposition, as to the value of their plant They said, " Well, this runs through residential country; we can- not value this as water property, we value it as residence prop- erty, so we have a great deal of money invested there; it may not have cost us much in the first place, but it is worth a great deal of money today." That was the argument they advanced in showing the propriety of continuing their present attitude. Per- sonally I want to say that the village feels it ought to have relief and is heartily in favor of the bill suggested. Q. Is there anything else? A. There is nothing else I can say. Mr. Smith: I would like to introduce Mr. Reynolds of Hastings. Thomas P. Reynolds, president of the village of Hastings, appeared before the Committee, and made the following statement, subject to examiaation: Examination by Mr. Lewis : Q. Proceed, Mr. Eevnolds, and tell us what you will of the Hastings water supply. A. I am glad I do not live in Larchmont, from what I have heard. TVe as a board of trustees are heartily in favor of the water companies being put under the purview of the Public Service Commission. We have been up against it with the Consolidated Water Company. Two years ago they raised our rates 33% per cent., and another raise is staring us in the face. The reason they have put that raise on us is to extend their reservoir, to enlarge their storage. Q. Will you tell us what the rates were and what they are now ? A. They haven't given out their threatened rate. Their rate was 22% cents per hundred cubic feet Q. In gallons what does that amount to ? Mr. Smith : About 7.48 gallons to a cubic foot Our company fixes it at 7%. A. They raised it from 2210 cents to 30 cents. Q. Xow 30 cents per 100 cubic feet — that is $3 per thousand cubic feet? A. Yes. Kepoet of Joint Legislative Committee 659 Q. What have you to say as to the character of the supply of the water itself? A. The supply is very inadequate. For the last five years, every year, either in August or iSeptember, the lake went dry, and this company was compelled to purchase water from New York city to supply the villages in our vicinity. Q. Is it a power proposition? Does it pump its water, or gravity ? A. Pumps its water. Q. And from what source ? A. Pocantico lake. Q. And to what point, to what height does it lift it by pump- ing? A. I don't know in feet. Q. Pump it to a standpipe, is that the idea? A. No. The water is pumped down through the mains down through the dif- ferent villages. Q. Is it a reservoir system? A. It is a reservoir system, I should say. Now they have an adequate supply, Mr. Chairman, but it is the lack of storage we are up against, and the excuse for the raise in rates was to increase their storage capacity, which they have failed to do. Q. You say they are threatening now to increase the rates ? A. There is no threat from the company, but the president of the company, in talking with me, said they were not making any money, and were not able to pay any interest on their bonds or investment. Q. Do you know what their bonds are? A. Their stock is a million dollars, and their bonds a million and a half. Q. How large a community do they serve? A. They serve, I should imagine, twenty-three or twenty-four thousand people. Q. Do they serve more than one village ? A. Yes. They supply the villages of Hastings, Dobbs Ferry, Ardsley, North Tarrytown and Scarsdale. Q. Have you any knowledge of the number of miles of distri- bution pipe owned by the company ? A. No. Q. Do you know the size of the distribution pipes ? A. No. I should like to be permitted to file a brief. Q. A brief would be very welcome. Prepare if you like and submit to the Committee data upon all those propositions. A. I should be very glad to, with your permission. 660 Investigation oe Public Seevice Commissions Q. What is your franchise, do you know whether it is perpetual ? A. It is perpetual in this way, that the village has a right to dis- continue at the end of any five years with the company. Q. What is the situation as to competition? A. No competi- tion. Q. Is there any opportunity for competition ? A. ISTo. There is no supply. Q. Could the village acquire a source of supply and construct its own system? A. No. New York city own all the waters in that section, lakes, ponds and streams. Q. And all sources? A. All sources. As Mr. Eogers said, we are only looking forward to the time when the Catskill bill, what- ever that is called, will be so framed that we can get a supply from the city. Q. You have heard the testimony of Mr. Rogers and Mr. Smith, as to the condition of the franchise in the various streets of the Larchmont company? A. Yes, I heard it. Q. Have you any such restrictions or conditions ? A. No, sir, not in our village. I do not know what the other contracts were. Q. What about your meter situation, is your supply metered to you ? A. No. There is another unfortunate thing. I suppose eighty per cent, of the consumers on the meter service and the other on the house charge. Q. On a house charge ? A. On a house charge. Q. What rate is charged to the village for water used for public purposes ? A. We pay forty dollars a year for each hydrant that is in the village. That is about the only water we use in the village. Q. And any public buildings supply? A. No. Q. And that water includes sprinkling and fire protection? A. Sprinkling and fire protection. Q. And sewer flushing ? A. Sewer flushing — for any village purpose. But they won't extend their mains and any new develop- ment in our village or any new street, unless the village agrees to tiike a hydrant from them at forty dollars a year. Q. Did your village appear at the hearings before the legis- lative committee last winter on the Baxter bill ? A. I don't know as we appeared, but we sent a resolution up. E.EPOET OF Joint Legislative Committee 661 Q. You were represented there? A. I am not familiar with whether counsel went up or not. I think he did — Mr. Sethburn. We favored the Baxter bill and opposed the Maier bill, putting it in the Conservation Commission. Q. What about the service from the distributing pipe in the street to the house ? Is that furnished by the company or by the householder ? A. The householder pipes to the street line. Q. And the company makes the tap and connection ? A. Makes the tap. Q. You don't know the capitalization — you did state that ? A. Yes. About two million and a half. Q. Does the company charge you for the meter it supplies ? A. No. Q. They are owned by the company? A. Owned by the com- pany. Q. Kept in repair by the company ? A. Kept in repair by the company. Bills furnished quarterly with the usual threat to shut it off if not paid. Q. Have there been any examples ? A. I have never known one to be carried out yet. Q. Does the tenant pay or the property ? A. The tenant pays. Q. What happens if the tenant moves out and leaves an unpaid water bill ? A. That is why the capitalization is so high — unpaid debts. Q. You don't know of any instances ? A. I don't know of any instance where the company has held the proprietor for the debt. I think it is entirely in the tenant. I thank you and I shall file a brief. Mr. Smith. — If you will permit me, I desire to make just a few more remarks. Heebeet W. Smith further stated as follows: Our village of Larchmont is supplied with meter rates only. We have no frontage rates at all. There are about four hundred houses in Larchmont, but it is growing in certain sections quite rapidly, and the supply is only rendered to the village of Larch- mont with the exception of perhaps two small adjacent communi- ties, real estate developments which have grown up just outside 662 Investigation of Public Seevice Commissions our village line. I think they supply Larchmont Gardens, but I am not positive. They may supply the Suburban Water Com- pany which supplies Mamaroneck. It also supplies the Woods of Larchmont, a small real estate development adjacent to our village. Now, Larchmont has a 'population of about two thousand people, but in the summer time it is increased between three thousand and thirty-five hundred, and our meter registers per cubic foot, and the water company calculates seven and one-half gallons per cubic foot instead of 7.48, which in itself seemed slight, but when a great quantity of water is consumed that slight difference is in favor of the company rather than in favor of the household. Then the company pipes only to the lot line, and the householder has to furnish his piping from his house to meet the company's pipes at his lot line, and the company owns all the meters and keeps them in repair. I think I am the only one in Larchmont that ever had anything on the company. When I built my house and installed my meter, the meter was put in gratuitously. By Mr. Lewis: Q. Do they extend their lines at request, Mr. Smith, without opposition? A. I do not think they do unless the conditions warrant it. If a man lived at the end of a long street, my impression is they would refuse to extend the pipe along the high- way to his house, unless there were other houses which would warrant the company in doing so and going to that expense, or unless the individual arranged to pay part of the expense. But I have nothing but recollection. I have a recollection that that was done in one instance, but I do not recall now what it was. Q. Do you have printed rules ? A. The company has printed rules which are attached and made part of its contract when you commence taking water from them. At this time the Committee took a recess until 12.30 o'clock, and proceeded to the office of Snare & Triest, at N'o. 1075 Wool- worth Building, where Mr. Frederick Snare was recalled before the Committee. Feedeeick Snare, recalled. The Chairman. — Mr. Snare states that there is a correction to be made in his testimony from the last time he appeared before Repoet of Joint Legislative Committee 663 the Committee, in whicli he inadvertently stated that the capital- ization of his company was three hundred thousand dollars, and which he corrects as follows. A. Four hundred thousand common, and two hundred thousand preferred. Examination by Mr. Lewis : Q. And did you testify as to the holdings of that stock's A. Yes, unless I was astray on the proportion. Referring to the preferred stock of which sixty-three thousand nine hundred is issued. You have got four hundred thousand common and two hundred thousand preferred, and of this latter sixty-three thousand nine hundred is issued. Now, of this stock, I hold twenty-three hundred and seventy-four shares and Mr. Triest fourtee.u hun- dred and ninety-one shares, and the balance is divided among employees of this company. I guess that covers it. Q. We are at liberty to make a transcript of this, are we ? A. No, not the cost. You want the moneys. Q. Yes, we want the moneys and we want to know how much of that is applicable to the ten per cent. ? A. And how much the other? Q. Yes. A. That is all the ten per cent. Q. Then you testify, do you, Mr. Snare, that the following items had been received on the dates specified ? A. Yes. Q. July 10, 1914, $3,371.77; July 31, 1914, $7,420.96; August 20, 1914, $13,143.57; September 18, 1914, $50,402.57; October 17, 1914, $51,016; October 20, 1914, $78.74; November 19, 1914, $60',660.33; November 30, 1914, $76.37; December 18, 1914, $52,113.34; January 19, 1915, $66,051.25; January 19, 1915, $677.65; February 18, 1915, $61,754.19; March 17, 1915, $58,553.08; April 16, 1915, $80,090.51; April 16, 1915, $643.19; May 6, 1915, $50,000; May 19, 1915, $87,335.88; May 19, 1915, $862.43; June 17, 1915, $65,510.82; July 19, 1915, $60,164.36; August 19, 1915, $63,244.37; September 16, 1915, $54,428; October 4, 1915, $50,000; total, $937,599.38. A. Yes. Q. Then on the contract for the construction of the connections, you have received the following payments, have you ? A. Yes. Q. June 2, 1915, $763.25; June 25, 1915, $1,653.77; July 19, 1915, $1,891.17; August 23, 1915, $2,563.52; September 22, 1915, $2,711.21 ? A. Yes. 664 Investigation of Public See vice Commissions Q. Now, I think you testified the other day, Mr. Snare, that you had received on account of the ten per cent, over cost, about fifty thousand dollars? A. Yes. Q. Is that included ? A. Yes, sir. We have received an addi- tional fifty thousand dollars since. One on October 4th, since I testified. By the Chairman : Now, give us all those items or amounts that apply on your commission. A. Fifty thousand dollars and fifty thousand dol- lars. Examination resumed by Mr. Lewis: Q. One item of fifty thousand, received on May 6, 1915j and one item of fifty thousand received on October 4, 1915. Received on account of retained percentage ? A. That is right. Q. They pay you ninety per cent, of the amount of moneys ex- pended for labor and material ? A. After adding on our per- centage. Q. After adding on your percentage? A. Yes. Examination by Chairman Thompson : Q. Your contract provides in the first place that you have cost plus ten per cent. ? A. Yes. Q. Now, these items in youx books arrived at as you have gone along, you have made up an invoice of the cost ? A. Adding ten per cent. Q. Now, your contract further provides that they retain ten per cent, only, paying you 90' per cent, of your estimate? A. Precisely. Q. And that retained per cent, last mentioned by me is what you meant by a retained percentage ? A. That is it, exactly. Q. And those have been kept back from time to time, as you made your invoices ? A. Yes. Q. Your contract also provides that these retained percentages may be released from time to time, and have been released, and these items of fifty thousand dollars are paying you those retained percentages as explained as release ? A. Yes. Kepoet of Joint Legislative Committee 665 Exammation by Mr. Lewis : Q. The item of $937,599.38 represents all moneys that you have received on account of the third-tracking contract, does it? A. It does. ' Q. What part of that $937,599.38 represents the allowance over cost for the services which you have rendered and for the use of your plant under the terms of your contract with the Gillespie Company? A. I should say one hundred thousand dollars. Q. You have got invoices which show the exact amount? A. One hundred thousand dollars. We do not render any bills. The Gillespie Company has' an ofSce established for the purpose of bookkeeping of this entire contract. Now, we do not know in detail the bills for materials, without reference to the main office, whose function is to keep the accounts of these various contracts. The Accounting Department does all the bookkeeping. Q. That is the Gillespie ? A. The Gillespie Company manage- ment. By Chairman Thompson : Q. So when you make an invoice, Mr. Snare, which you have to do with the labor, you do not keep a copy of it ? A. That is done entirely through our field office. We in turn run this job sepa- rately. We have our field office and our field office makes up the pay-roll in conjunction with the Gillespie people, the Gillespie Company managers. Q. Where is your field office? A. One Hundred and Fortieth street. Now, if we have any doubts about the accounting, we simply go down to the office there and look over the accounts. But these accounts in turn are audited carefully by the Inter- borough people, and the force of that is that the Interborough people see that a proper 'separation of the expenses on these three contracts are carefully divided. Q. So in this office, all you have with relation to this contract is this? A. Record of moneys received. Q. This one page in your book which you now exhibit to us ? A. Yes. 666 Investigation of Public Seevice Commissions Examination resunaed by Mr. Lewis: Q. You say you have had $100,000 to apply on your commis- sions. Of the total, then, $843,839.44 represents cost and $93,759.94 represents commission or profit, isn't that so? A. Yes. But here — now you have not in this — you mean how do we get at that figure, where do we get $100,000 ? Q. Yes. A. I testified recently that we have completed on this work one million seven hundred thousand, so that we really have earned $1Y0,000. The difference in the cost is the materials. Q. Do you mean to say that there has been paid to you, then, $937,599.38 for labor alone? A. For labor alone. Q. And you are still to be charged, then, with the cost of all materials for the construction? A. Yes. I have already testi- fied that the total cost of this work up to date is about $1,700,000, so that "we have earned $170,000 on this contract against which we have received $100,000. Q. You will produce, then, will you, Mr. Snare, a transcript of page 246 on contract No. 889, dated February 13, 1914, with the Interborough Rapid Transit Company of 'New York City, for additional tracks, and so forth, Manhattan Elevated Line, New York City, price plus 15 per cent. ? A. I will. By 'Chairman Thompson: JN^ow, before the item of January 19, 1915, appears the words, " bills deducted," item $677.65. Now, before the item of April 16, 1915, $643.19, appears "bill deducted." Before the item of May 6, 1915, of $50,000, appears the words " account retained percentage." Before the item of May 19, 1915, of $862.43, appears " bill deducted from pay," and before the item of October 4, 1915, appears the words " account retained percentage." In the middle of the sheet there are a number of items which total $858,750.86. Q. In your field office, which is located in the neighborhood of 140th street, is there a record of the invoices that preceded these payments submitted to the bookkeeping department of Gillespie ? You go ahead and do a certain amount of work, and you receive a certain amount of material, and then somewhere or other Gil- lespie, the bookkeeper, would have to know how much you paid Eepoet of Joint Legislative Committee 667 out, and so you furnish him that information in some way? A. Copies of pay roll are filed in that ofiice. Q. You merely furnish periodically copies of your pay roll, and they go from the field office ? A. Yes. Q. And in your field office do you keep copies of that ? A. Yes, copies of all pay rolls. Q. And that information is furnished to Gillespie who simply arbitrarily sends you a check for payment on account of which you credit here ? A. Yes. Q. And go ahead with it awaiting final adjustment? A. Precisely. Q. And any further information with reference to it you would have to get from the bookkeeping department under the Gillespie ? A. Yes. At this time the Committee repaired to County Lawyers Asso- ciation rooms, 165 Broadway. The Chairman: Have you any statements to make for the benefit of the Committee? Mr. Lewis : I think not. I think the Committee may as well adjourn until tomorrow, as we have no witnesses now, and the room is to be occupied by the Bar Association. The Chairman : Then, if there is nothing more to come before the Committee, we will suspend now until tomorrow morning at 11 o'clock. Whereupon, the Committee adjourned to meet at this place, at 165 Broadway, October 8, 1915, at 11 a. m. OCTOBER 8, 1915 New Yoek ■County Lawyers' Association Board Room, 165 Broadway, 'New York City The Committee met at 11 o'clock a. m., pursuant to adjourn- ment, with a quoTum present and the same appearances. Mr. Lewis. — A subpoena was served yesterday on Mr. J. Pier- pont Morgan, duces tecum, and I understand that Governor Sheehan is hetre representing Mr. Morgan, and an application has 668 Investigation of Public Seevice Commissions been presented to the Committee and suggestion that he appear here. Governor Sheehan. — I ask on behalf of Mr. Morgan, that the time for his examination be postponed. As is well known, for several weeks he has been engaged in matters of very great public concern, and have occupied all of his time, and. the time of the various members of his office, and those labors are not yet com- pleted. He has not had the opportunity to give to this subject the examination which you gentlemen want made of the records and files. But so far as they have gone, and which is presumably com- plete, although it will necessitate further examination, there are no letters or correspondenice that have passed on this subject. I thought yesterday there probably had been, but it tui-ns out that the examination discloses nothing in the way of correspondence. Mr. Morgan is very glad to appear and tell the Committee all that he knows about this particular matteT, but he has completed his arrangements, leaving the city to-day, to get a few weeks of very much needed rest, and I am going to ask the Committee if it will consent to a postponement of the taking of his testimony, with the assui-ance that he will be here, and will be glad to tell you allthat he knows about this particular transaction, and in the meantime if I do discover anj' correspondence T will send it, Senator, to you and the Chairman. Chairman' Thompson. — But so far as there has been any letters or correspondence of any kind that has been discovered, dui-ing his absence you will have charge of that matter. Governor Sheehan. — Yes, and if anything transpires in that matter I will be very glad to suggest it to you. Mr. Lewis. — What adjournment do, you suggest ? GovernoT Sheehan. — Three weeks. Mr. Lewis. — Does that mean three weeks, or three weeks from to-day. Governor Sheehan. — Or if this day would not be agreeable to the Committee. Chairman Thompson. — It ought to be three weeks from Wednesday — thrfie weeks from last Wednesday at 11 o'clock. Report of Joint Legislative Committee 069 Mr. Thompson. — ^We undetstand you agree that 'Mr. Morgan ■will appear under that subpoena, and if anything occurs to change it Mr. Lewis will take the matter up with you. If there is no objection, Mr. Morgan's request made through 'Governor Sheehan will be acquiesced in. Mr. Lewis. — The understanding is that Mr. MoTgan will appear on the 27th of October for examination. Chairman Thompson. — It appears that the plans of the counsel are in such shape, that the unexpected turn of affairs in respect to Mr. Morgan's absence leaves nothing to be done by the Committee to-day, and to-day is Friday. I did not know it, but we have a holiday next Tuesday, and Monday is the day before the holiday, and I suppose week ends begin earlieT, and end later than usual this weekj and under the circumstances if there is no objection we will adjourn until Wednesday morning at 11 o'clock, at this place, October 13, 1915, and if there is no objection why we will suspend accordingly. OCTOBER 13, 1915 New Yoek County Lawyers' Association Board Eoom, 165 Broadway, ISTew York City The Committee met at 11 a. m., pursuant to adjournment, a quorum being present. Mr. Shuster. — Mr. Chairman, it is deemed essential that the Committee take some testimony of witnesses in Boston, and as we will hav« to go to Boston to get the testimony of the Boston wit- nesses, I would suggest that the Committee adjourn to the Touraine Hotel, in Boston, to-morrow morning. Chairman Thompson. — There is nothing to be brought before the Committee to-day? Mr. 'Shuster. — Not here, no. 'Chairman Thompson. — If there is no objection, and there is none, the Committee will adjourn to the Tourain© Hotel, at Boston, Massachusetts, to convene to-morrow morning at 11 o'clock. Whereupon, an adjournment was so taken. 670 Investigation of Public Seevice Commissions OCTOBER 14, 1915 TouRAiNE Hotel, Boston, Mass. The Committee met at the Hotel Touraine, Room 304, at 11 A. M., pursuant to adjournment, and immediately adjourned to the office of Arthur Black, Esq., an attorney, at 53 State street, Boston, Mass., to convene at such office at 11 :30 o'clock a. m. Office of Aethue Black, Esq., 53 State St., Boston, Mass. The Committee met at 11 :30 o'clock a. m., pursuant to adjourn- ment, and further adjourned to meet at the same place at 3 o'clock p. M. AFTERNOON SESSION The Committee met at 3 o'clock p. m., pursuant to adjournment and the Chairman announced that a summons had been issued requiring the attendance of Mr. Charles E. Cotting, being a sub- poena duces tecum, to produce certain books and papets in his possession as executor of the estate of Gardiner M. Lane, deceased, which summons was returnable at 3 :30 p. m. iThe 'Committee then took a recess until 3 :30 o'clock p. h., and at 3:30 p. m., convened, and Mr. Cotting failed to appear. The Committee thereupon waited until ,4 p. m., for the appearance of Mr. Cotting, whereupon, upon motion, the 'Committee adjourned to meet at Room 426, MuTray Hill Hotel, New York City, on Friday, October 15, 1915, at 10 ©''dock a. m. Before the adjournment above referred to, the counsel of the Committee, Hon. Merton E. Lewis, was authorized to take up the matter in conjunction with Mr. Black and prepare proper petitions and proceedings to enforce the appearance of Mr. Cotting before the Committee. Report of Joint Legislative Committee oYl OCTOBER 15, 1915 MuKEAY Hill Hotel, Room 426, ISTew York City The Committee convened at 10' o'clock a. m., pursuant to adjournment. No witnesses being present, an adjournment was taken to Mon- day aftetnoon, October 18, 1915, at 3 o'clock p. m.^ at tbe same place. OCTOBER 18, 1915 Murray Hill Hotel, Room 426, New York City The Committee met at 3 o'clock p. m., pursuant to adjournment. Mr. Lewis made tbe following statement, and asked if there was any objection on the part of any of the members present, to which each member responded that there was none : It is the sense of the members of the Committee present that the Chairman of the Com- mittee be, and he is, so far as the members are able to do so, hereby authorized to institute such proceeding or proceedings as he may be advised by counsel to the Committee are necessary for the pur- pose of compelling the production of such correspondence, mem- oranda, or documents, as may be in the possession of the executors of the estate of GaTdiner M. Lane, deceased, late of the city of Boston, Massachusetts, before this Committee, and to compel also the appearance of such executors or either of them, for the purpose of testifying before such Committee ; and, further, to employ such counsel as may be necessary in the State of Massachusetts for insti- tuting and prosecuting such proceeding or proceedings. Senator Lawson stated that if a copy of the resolution was sent to him at 192 Montague street, Brooklyn, he would take it to Mr. McQuistion and secure his signature thereto. Because of the absence of a quorum, the Committee adjourned to meet at Room 426, Murray Hill Hotel, Tuesday morning, October 19, 1915, at 10 o'clock a, m. 672 Investigation of Public Seevice Commissions OCTOBER 19, 1915 MuEEAY Hill Hotel, Room 426, New York City The Committee met at 10 o'clock a. m., pursuant to adjourn- ment. The meeting was further adjourned to 5 o'clock p. m., at the same place. ArTERNOOlSr SEiSSION The Committee met at 5 o'clock p. m., pursuant to adjournment and further adjournment was taken to Wednesday, October 20, 1915, 10 o'clock A. M., at the same place. OCTOBER 20, 1915 MuEEAT Hill Hotel, Room 426, New York City The Committee met at 10' o'clock a. m., pursuant to adjournment. A further adjournment was taken to 10 o'clock a. m., Thurs- day, October 21, 1915, at the same place, and counsel to the Com- mittee instructed to prepare the proper papers necessary to the issuance of a commission for the examination of Charles E. 'Cotting and Lane, executors, of the estate of Gardiner M. Lane, deceased, in the State of Massachusetts ; also for the issuance of a commission for the examination of Geoi-ge W. Young, in the ■State of, New Jersey or elsewhere. Whereupon an adjournment was taken to Thursday, October 21, 1915, at 10 o'clock a. m., at the same place. Report of Joint Legislative Committee 673 OCTOBER 21, 1915 MuEEAT Hill Hotel, Eoom 426, New York City The Ck)ininittee met at 10 o'clock a. m., pursuant to adjoummenit and was called to order. The Chair ordered a roll call of the members present. Upon such roll call, the following members of the Committee were found to be present, to wit, the Chairman and Senators Towner and Lawson, the Vice-Chairman and Assemblymen Fein- berg, Baxter and McQuistion, Secretary. Senator Towner offered the following resolution: Wheeeas, This 'Committee appointed pursuant to the joint reso- lution of the Legislature of the State of 'JSTew York, passed January 21, 1915, the powers of which Committee were conitinued during the recess of the Legislature by a further joint resolution thereof passed April 24, 1915', for the purpose of conducting an investiga- tion of the administration of the Public Service Commissions Law of the State of !N"ew York, and for the other and further purposes specified in said resolutions; and Wheeeas, This Committee in the exercise of its powers and duties aforesaid and for the purposes of its investigation now in progress relating to certain authorizations granted by the Public Service Commission for the First District of the State of New York to the Interborough Rapid Transit Company of the City of New York, and of certain contracts entered into by said corpora- tion in pursuance of said authorizations to it aforesaid, requires the examination of certain witnesses who reside and now are with- out the State of New York, namely, Charles E. Cotting and Lane, executors of the estate of Gardiner M. Lane, deceased, late of the City of Boston, State of Massachusetts; and Wheeeas, This Committee is informed and believes that the aforenamed executors now have in their custody or under their control as such executors certain correspondence, memoranda, writings and other documents belonging to the estate of Gardiner M. Lane, deceased, all of which are material and necessary to the Vol. 1—22 674 Investigation op Public Service Commissions investigation hereinbefore referred to and a proper deterininatioE and report on the subject matter thereof; and Wheeeas, The Committee desires the ptoduction and examina- tion of such correspondence, memoranda, writings and other docu- menits aforesaid, and the testimony of the aforenamed witnesses, and that said witnesses furnish evidence in regard thereto; now, therefore. Resolved, And ordered that puTsuant to the authority vested in this Committee by the Legislature of the State of New York, by its joint resolutions duly appointing, creating and continuing said Committee, a commission issue out of and by this Committee in accordance with section 60 of chapter 37 of the Laws of 1909, con- stituting chapter 32 of the Consolidated Laws of the State of New York, and known as the Legislative Law, and such other laws and statutes of the -State of New York relating thereto, in the aforesaid investigation directed to Charles M. Davenport, Esq., of the City of Boston, Mass., authorizing him to examine under oath the said Charles E. Cotting and Lane, and any other witnesses who may be produced before him, the commissioner named in such commission, together with the correspondence, memoranda, writ- ings and other documents hereinbefore referred to, on or before the day of , 1915, at a time and place within the State of Massachusetts to be specified by due written notice to either or any of said witnesses upon oral questions to be put to such witness or witnesses when he or they are produced relating to the subject matter of this investigation, and particu- larly to the matters hereinabove specifiealfy referred to, and to take and certify the deposition of each witness on or before the day of , 1915, and to make and certify copies of any and all correspondence, memoranda, writings or other documents produced before him under said commission, and attach the saiile to such depositions and return the same by mail with the commis- sion immediately upon the completion and certification of such deposition or depositions. Further Resolved, That the action of this Committee in the issu- ance of such commission be evidenced by the signature of the Chair- man of the Committee and attested by the signature of its Secre- tary, and that such commission when issued be signed by the Chair- man of the Committee as and for the act of this Committee and Eepoet of Joint LegislaI'ive Committee 675 that the same be attested by the Secretary and this Committee does here and now so order. The foregoing resolution was adopted by the following vote: Ayes, Towner, Kincaid, Feinberg, Baxter, Thompson, Lawson>, McQuistion. Noes, none. The following resolution was offered by Vice-Chairman Kincaid: Resolved, That the Chairman of this Committee be and he heieby is authorized and empowered to employ such counsel as may be necessary in the State of Massachusetts for the purposes of procuring the attendance of witnesses residing or being within said State of Massachusetts, and to take and institute such other and further proceeding or proceedings as he may be advised by the counsel to the Committee for the purpose of compelling the attend- ance of such witnesses and the production of such coTrespondenee, memoranda, writings or other documents as may be deemed neces- sary or required in relation to the investigation being conducted by this Committee. The foregoing resolution was adopted by the following vote: Ayes, Towner, Kincaid, Feinberg, Thompson, Baxter, Lawson, and McQuistion. Noes, none. The following resolution was offered by Mr. Feinberg: Whereas, This Committee appointed pursuant to the joint reso- lution of the Legislature of the State of New York, passed January 21, 1915, the powers of which Committee were continued during the recess of the Legislature by a further joint resolution thereof passed April 24, 1915, for the purpose of conducting an investiga- tion of the administration of the Public Service Commissions Law of the State of New York, and for the other and further pTirposes specified in said resolutions ; and Wheeeas, This Committee in the exercise of its powers and duties aforesaid and for the purposes of its investigation now in progress relating to certain authorizations granted by the Public Service Commission for the First District of the State of New York to the Interborough Rapid Transit Company of the City of New York, and of certain contracts entered into by said corporation in pursuance of said authorizations to it aforesaid, requires the 676 Investigation of Public Service Commissions examination of a certain witness wlio resides or now is without tte State of New York, namely, George W. Young, now at , in tlie State of Connecticut ; and Whereas, This Committee is informed and believes that the aforenamed George W. Young now has in his custody or under his control certain correspondence, memoranda, writings and other documents, all of which are material and necessary to the investi- gation hereinbefore referred to and a proper determination and report on the subject matter thereof; and Whereas, The Committee desires the production and examina- tion of such correspondence, memoranda, writings and other docu- ments aforesaid, and the testimony of the aforenamed witness, and that said witness furnish evidence in regard thereto; now, therefore. Resolved, And ordered, that pursuant to the authority vested in this Committee by the Legislature of the State of 'New York, by its joint resolutions duly appointing, creating and continuing said Committee, a commission issue out of and by this Coihmittee in accordance with section 60 of chapter 37 of the Laws of 1909, constituting chapter 32 of the Consolidated Laws of the State of jSTew York, and known as the Legislative Law, and such other laws and statutes of the State of New York relating thereto, in the aforesaid investigation directed to , of the City of , Connecticut, authorizing him to examine under oath the said George W. Young and any other witnesses who may be produced before him, the commissioner named in such commis- sion, together with the correspondence, memoranda, writings and other documents hereinbefore referred to, on or before the . . : day of , 1915, at a time and place within the State of 'Connecticut to be specified by due written notice to said wit- ness or witnesses upon oral questions to be put to such witness or witnesses when he or they are produced relating to the subject mat- ter of this investigation, and particularly to the matters' herein- above specifically referred to, and to take and certify the deposition of each witness on or before the day of , 1915, and to make and certify copies of any and all correspond- ence, memoranda, writings or other documents produced before him under said commission, and attach the same to such depositions Kepoet of Joint Legislative Committee 677 and return the same by mail with the commission immediately upon the completion and certification of such deposition or depositions. Further Resolved, That the action of this Committee in the issu- ance of such commission be evidenced by the signature of the Chairman of the Committee and attested by the signature of its Secretary, and that such commission when issued be signed by the Chairman of the Committee as and for the act of this Committee and that the same be attested by the Secretary, and this Committee does hei-e and now so order. The foregoing resolution was adopted by the following vote: Ayes, Towner, Kincaid, Feinberg, Baxter, Thompson, Lawson, McQuistion. Noes, none. The following resolution was offered by Senator Lawson : Wheeeas, This Committee appointed pursuant to the joint reso- lution of the Legislature of the State of New York, passed January 21, 1915, the powers of which Committee were continued during the recess of the Legislature by a further joint resolution thereof passed April 24, 1915, for the purpose of conducting an investiga- tion of the administration of the Public Service Commissions Law of the State of New York, and for the othef and further purposes specified in said resolutions; and Wheeeas, This 'Committee in the exercise of its powers and duties aforesaid and for the purpose of its investigation now in progress relating to certain authorizations granted by the Public Service Commission for the First District of the State of New York to the Interborough Eapid Transit Company of the City of New York, and of certain contracts entered into by said corporation in pursuance of said authorizations to it aforesaid, requires the examination of a certain witness who resides or now is without the State of New York, namely, Ceorge W. Young, now at , in the State of New Jersey ; and Wheeeas, This Committee is informed and believes that the aforenamed George W. Young now has in his custody or under his control certain correspondence, memoranda, writings and other documents, all of which are material and necessary to the investiga- 678 Investigation of Pdblio Seevioe Commissions tion hereinbefore referred to and a proper determination and report on the subject matter hereof; and Wheeeas, The Committee desires the production and examina- tion of such correspondence, memoranda, writings and other documents aforesaid, and the testimony of the aforenamed witness, and that said witness furnish evidence in regard thereto; now, therefore, Resolved and Ordered, That pursuant to the authority vested in this Committee by the Legislature of the State of New York, by its joint resolutions duly appointing, creating and continuing said Committee, a commission issue out of and by this Committee in accordance with section 60 of chapter 37 of the Laws of 1909, .constituting chapter 32 of the Consolidated Laws of the State of New York, and known as the Legislative Law, and such other laws and statutes of the iState of New York relating thereto, in the aforesaid investigation directed to , of the City of , New Jersey, author- izing him to examine under oath the said George W. Young and any other witnesses who may be produced before him, the commis- sioner named in such commission, together with the correspond- ence, memoranda, writings and other documents hereinbefore referred to, on or before the day of , 1915, at a time and place within the 'State of New Jersey to be specified by due written notice to said witness or witnesses upon oral questions to be put to such witness or witnesses when he or they are produced relating to the subject matter of this investiga- tion, and particularly to the matters hereinabove specifically referred to, and to take and certify the deposition of each witness on or before the day of , 1915, and to make and certify copies of any and all correspondence, memoranda, writings or other documents produced before him under said com- mission, and attach the same to such depositions and return the same by mail with the commission immediately upon the com- pletion and certification of such deposition or depositions. Further Besolved, That the action of this Committee in the issuance of such commission be evidenced by the signature of the Chairman of the Committee and attested by the signature of its Secretary, and that such commission when issued be signed by the Repokt of Joint Legislative Committee 6Y9 Chairman! of the Committee as and for the act of this Committee and that the same be attested by the Secretary, and this Committee does here and now so order. The foregoing resolution was adopted by the following vote: Ayes, To'wnet, Kincaid, Feinberg, Thompson, Baxter, Lawson, McQuistion. iN'oes, none. Mr. Feinberg offered a resolution) to the effect that the Chairman be authorized to take whatever steps may be necessary to carry the resolutions in reference to George W. Young into effect. The same was adopted by the following vote: Ayes, Towner, Kincaid, Feinberg, Thompson, BaxteT, Lawson and McQuistion. An adjournment was taken to Friday, October 22, 1915, at 10:30' o'clock a. m. at the same place. OCTOBER 22, 1915 MuEEAY Hill Hotel, Eoom 426, New York City The Committee met at 10:30 a. m., pursuant to adjournment. There being no objection thereto, a further adjournment was ordered to 10 o'clock a. m. Saturday, October 2i3, 1915, at Eoom 712, the BiltmoTe Hotel, JSTew York city. Whereupon an adjournment was taken to 10 o'clock a. m. Satur- day, October 23, 1915, at Eoom 712, Biltmore Hotel, New York city. OCTOBER 23, 1915 BiLTMOEE Hotel, Eoom 712, New York City The Committee met at 10 o'clock a. m., pursuant to adjournment. On motion, adjourned to Tuesday, October 26, 1915, at 10 o'clock a. m. at the same place. 680 Investigation of Public Seevice Commissions OCTOBER 26, 1915 BiLTMORE Hotel, Eoom: 712, New York City The Committee met at 10 o'clock a. m., pursuant to adjouTnment. On motion, adjourned to 11 o'clock a. m., Wednesday, October 2'7, 1915, at the 'New York County Lawyers' Association, 165 Broadway, New York city. OCTOBER 27, 1915 New York County Lawyers' Association Board Koom, 165 Broadway, New York 'City The 'Committee met at 11 o'clock a. m., pursuant to adjournment. J. PiERPONT 'Morgan, being first duly sworn, testified as follows : Examined by Mr. Lewis: Q. Mr. Morgan, were you acquainted with Mr. William A. Bead, a banker, during the year 1913 ? A. Yes, sir. Q. And were you also acquainted with a Mr. Gardiner M. Lane, of Boston ? A. Yes, sir. Q. And do you know that during 'the year 1913 both of those gentlemen wexe directors of the InterboTough Rapid Transit Com- pany? A. Yes, sir. Q. Do you recall an occasion when they called upon you in reference to the proposed contract to be entered into between the Interborough Company and one John F. Stevens for the third- tracking of the lines of the Manhattan Elevated Eailroad Com- pany ? A. I remember their calling on me in connection with that matter. Q. Will you state what was said and done by all of the parties to the conference? A. May I go ahead and tell the story? Q. Yes. A. Of course at that time we had had a long negotia- tion with the Interborough, with the Interborough and the city, Report of Joint Legislative Committee 681 and "we 'were present at those negotiations for the purpose of sup- plying the necessary private capital part of the money to build the new subway and for third-tracking the elevated, and worked with Mr. iShonts for three years and held a great number of inteTviews and conferences of all kinds, and while not directors of the Inter- borough were still purchasers of one hundred and sixty odd millions of bonds. Our position in the matter 'was, we were deeply inter- ested in the success of the company. 'Mr. Lane and Mr. Eead came in to see me and told me that they could not approve of the contract which was proposed. The whole reasons for it, I don't remember those. It is two years ago, and I have no papers or documents or letters in reference to this matter at all, and I have been through the files most carefully. They said they had not been able to persuade Mr. Shonts not to make the contract which they did not approve of and they wished me to see what I could do. I asked them why they thought I had the right to interfere, and they said being interested as a purchaser of the bonds it was very much to my interest that there should be nothing done to interfere with the credit of the road or the credit of the popularity of the bonds which were still to be sold, and they thought I had a right to see Mr. Shonts on that line, although not a director of the road. After they had gone out, I asked Mr. Shonts to come down and see me. Chairman Thompson. — Do you remember the date of that interview ? Mr. Morgan. — ISTo, sir ; I haven't an idea. Q. . Did Mr. Lane or Mr. Eead say, to you that the proposed Steyens contract would, in their, opinion, operate to the injury of the Interborough bonds or to the credit, of .the Interborongh Com- pany .? A. . They said it would make the Interboroug-h pay too much money for the certain third-tracking on the Manhattan. That was the point they took in the matter. Q. Did they give you any details or reasons why it would pay too much money ? A. My understanding was they felt the work could be done by the superintendence of the Interborough engineers as well as by Mr. Stevens'. Q. Did they say anything to you abont a proposition to award the contract without competition ? A. I don't recall that they did. 682 Investigation of Public Service Commissions Ohairman Thompson. — Their idea was the ten per cent, or whatever it was that went to Stevens, was a loss ? iMr. Morgan. — Their idea was, whatever went to Mr. Stevens was too much, and he should not he paid so much money. Q. You may proceed. A. Then Mr. Shonts came in to see me, and I told him that these gentlemen had been in and that they had felt that this contract was too expensive for the company to enter into, and that I was asking him as a purchaser of the bonds, I being the purchaser of the bonds, for his assurance that nothing was going to be done which was going to interfere with the popularity or the desirability of the bonds or to hurt the credit of the company in any way, and I think, my recollection is, I said to him, " I want you to assure me under the circumstances this contract is like all other contracts where you always said where quality and price were right friendship began ", and he gave me that assu'rance ; and I have had a great many assurances from Mr. Shonts in the course of the last three or four years and I always found them correct, and I accepted that. Q. Did you get any idea from his suggestion that " quality and price being equal friendship began ", there was a competition between Stevens and any one else for the opportunity to do this work ? A. I did not go into that. He said he was very anxious to have Stevens do the work, because in the third- tracking of the elevated and the change of the line which was to be done, and keep the elevated running at the same time, it was a matter of enormous liability and full of engineering difficulties which I am not com- petent to pass upon, and liability for accident in case of accident, and he felt that the Interborough i-oad must have in control of that a man in whom he himself had great confidence. Stevens worked under him in Panama, and he had great confidence in his ability and capacity, and he thought the ten per cent was not too much, or whatever the price was. Q. Did he mention ten per cent ? A. I don't know what he said. That is in my mind, but I can't remember. Q. Was any other figure mentioned ? A. I don't recall. Q. Was there anything said about competition, as between Stevens and any one else? A. My recollection of the interview is nothing was said. Eepoet of Joint Legislative Committee 683 Q. Did Mr. Lane or Mr. Eead say anything on the subject of the desirability of having competition? A. I don't recall; very likely, but I don't know. Q. Did Mr. Lane or Mr. Eead say anything to you on the sub- ject of a fund which had been created at the time that the dual contracts were under consideration fot the purpose of accomplish- ing the getting of those contracts? A. I don't know anything about that. Q. Nothing said on that subjisct? A. I don't recall anything on that subject. Q. Was there anything said about any items of expenditure having been made by the Interborough Company which could not properly appear upon their books ? A. N^o, sir. Q. Did you see Mr. Lane subsequently at any time in connection with the matter ? A. I don't recall. I saw Mr. Lane about once a week most of the time. Q. Tou do not recall any conversation with him at any date subsequent to the date of the call he made in connection with Mr. Read ? A. I haven't the sequence in my mind. Q. Do you recall having any conversation with Mr. Lane or Mr. Eead on more than one occasion ? A. With Lane, I recall several conversations with him, but the day or month I don't remember. Q. And on this subject ? A. Yes, sir. Q. In any of those conversations was there anything said about the propriety of competition for the construction of the third- tracking ? A. I don't recall it. Q. Was there anything said in any of those conversations as to the ability to procure the construction of the third tracks for cost plus a smaller percentage than ten per cent ? A. That was not my affair, and I don't remember it. I was not a director of the company, and had no responsibility in those matters. Q. Can you be any more specific than you have been in stating the language of Mr. Lane upon the subject of the effect the award of the 'Stevens contract might have upon the bonds which you had purchased and which at that time remained unsold, as I understand you ? A. N^o, sir ; I don't think I can. I had a great many inter- views with Mr. Lane on a great many subjects, and I can't remember the wording at all. 684 Investigation of Public Service Commissions Q. Did Mr. Lane ever show you any memorandum or document he had prepared in relation to this matter ? A. I don't remember; I don't recall any. Q. Did he ever tell you of any he had prepared on the subject? A. I don't think so, no, sir. I don't remember it, if he did. Q. Did he tell you of any discussion -which took place in the board of directors of the Interborough Company on this subject? A. 'No, sir. He said he had talked, he and Mr. Eead both had talked on the matter, but I don't think he went into the details. Neither of us had very much time. Q. Did he say anything about the discussion of the executive committee? A. I don't Tecall any special statement as to the executive committee or board. Q. Did he mention any other director than Mr. Eead ? A. I don't remember that he did. Q. Who agreed with him ? A. I don't remember that he did.' Q. Did he mention Mr. Young's name as a director ? A. I don't think he mentioned Mr. Young's name at all. Q. Was there anything said to you, Mr. Morgan, in any of the conversations that you had with Mr. Lan6 or Mr. Read, or with both of them together, ot with Mr. Shonts, at any time, as to the provisions of the certificate issued by the Public Service Commis- sion relating to the third-tracking of these lines ? A. I imagine — I can't recall anything. The matter was discussed frequently, but at what interviews and wheti and in what connection I don't remember. Q. I suppose the negotiations which preceded the sale by the Interborough Company to you or to your firm of the bonds of that company lasted for a considerable period of time ? A. A very long time, yes, sir. Q. In those negotiations did you have any occasion to examine the terms'of the certificate issued by the Public Service Commission Authorizing the third-track work to be done? A. No, sir; our counsel went over the papers undoubtedly. Q. Did he call to your attention any lack of similarity between the certificate issued to the Manhattan Company and the certificate issued to the New York Municipal Eailways Company, that one certificate c6ntained provisions which did not appeal in the' other? A. I don't remember. Eepokt of Joint Legislative Committee C85 Q. Did you know that the certificate issued to the ISTew York Municipal Railways Company contained a proTision that any con- tract which might be awarded for the construction of the third tracks on the Brooklyn elevated lines should contain a — did con- tain a provision that any contract which might be awarded for such construction work should be submitted to the Public 'Service Com- mission for its approval before execution ? A. I may have known it at the time. I have forgotten it since. Q. Did you know of the fact that the certificate issued to the Manhattan Company for the performance of the same identical character of work did not contain that provision ? A. I probably knew it at the time, but I don't remember it now. Q. Do you recall having heard any reason offered by any one for the omission of that provision ? A. jSTo, sir. Q. Did Mr. Lane say to you in any conversation which you had with him that the risk of accident, the risk of expense of defending claims for damages growing out of accidents occurring while the work of third-tracking was in progTess was to be borne by the Interborough, and ten per cent added to the expense for the benefit of Mr. Stevens ? A. I do not recall the details of this inteTview. It was some time ago, and there have been many since, and I have really told you all I know about it. Q. You knew that Mr. Lane ceased to be a member of the board shortly after that, did you not ? A. Yes, sir ; he told me he was going to get off, and he did get off. Q. Did he state what his reasons were? A. ISTo, sir; one reason he gave me, he lived in Boston, and he could not go on and watch the thing as close as he thought he ought to if he was going to be a director of it, and his health was not good at the time. Q. Did he indicate to you he thought it was necessary for him to watch the board of directors closely? A. ?^ot more than any board of which he was a member. Q. . Did you know that Mr. Read ceased to be a member of the board shortly after ? A. Yes, sir ; and I did not know him as well as Mr. Lane, and did not follow it closely. Q. Did you hear any reason, offered for Mr. Read's withdrawal ? A. No, sir. Q. You never had heard Mr. Young was one of those directors who opposed the Stevens' contract. A. No, sir ; I don't remember t'h!i+ a+ oil 686 Investigation of Public Seevice Commissions Q. And I presume you may not tave known that Mr. Young also was eliminated, or eliminated himself, at about the same time Mr. Lane and Mr. Read ceased to be members ? A. No, sir ; I did not know that. Q. Dlid you know of the fact that after the time when Mr. Lane, and Mr. Eead and Mr. Young ceased to be members of the Inter- borough board a contract was awarded by the Interborough Com- pany known as the Gillespie contract? A. I ne?er heard of the Gillespie contract. Q. At a fifteen per cent advance over cost ? A. 'No, sir; I didn't know that. Q. You knew of the fact that the third-tracking was progressing ? A. Yes, sir ; because we have had to pay certain money for it as it went along, under our contract. Q. Did you know of the fact that work was progressing under any form of contract, or did you suppose it was being done by the Interborough Company itself? A. I did not bother over it, but the Interborough has the right to so much money from us as the work progresses. Q. You paid that money, I suppose, on certificate? A. Yes, sir ; of the company, that they wanted that money for the tracking. Q. Did you require any certificate of the engineering force? A. Ho, sir. Q. Of course you said you did not know of any contract; you had no knowledge of the fact that the work of third-tracking was sublet to a large extent to the Terry & Tench Company ? A. No, sir. Q. And you never heard of the fact the Terry & Tench Company was actually constructing the greater part of the third track for the Second, Third and Ninth Avenue lines on a basis of less than five per cent over cost of labor and materials? A. No, sir; I knew nothing about that. Q. The bonds of the Interborough of course are secured by a trust mortgage, I suppose ? A. No, sir ; secured by the — It is a mortgage of a leasehold only. There is a trustee named in the mortgage. Q. What trustee is there? A. One of the trust companies, I don't remember which one; the Bankers' or Guaranty, and I cannot tell you which one it is. Repoet or Joint Legislative Committee 68Y Q. Do you pay over to the Interborough Oompany moneys, when requested, without any consent or certificate or instructions from the trustee under the mortgage ? A. Our contract with the Inter- borough is that they have the authority to issue so many bonds, and we have to take them so many a year, and that money is credited to the Inte'rborough and drawn out by them as they need it. They have to pay one-half of the cost to the city as the city pays out money for the Interborough extensions, and they have to pay the cost of the third-tracking of the Manhattan. ■Chairman Thompson. — At the time Mr. Eead and Mr. Lane came to you you had had negotiations, but you had not entered into the contract for furnishing the money and taking over the bonds ? Mr. Morgan. — Yes, sit ; we had. Chairman Thompson. — The contract had been signed before? Mr. Morgan. — Yes, sir ; by which we had to buy the bonds, so many a year. Chairman Thompson. — You can furnish us the date of that contract, can't you, Mr. Quackenbush ? Mr. Quackenbush. — Yes, sir. Examination by Mr. Lewis l-esumed : Last question repeated, as follows: Q. Do you pay over to the Interborough Company moneys, when requested, without any con- sent or certificate or instructions from the trustee under the mort- gage? A. We paid money as called upon by our contract, Mr. Lewis. Q. You do not know of your own knowledge whether those bonds before delivery to you were certified and countersigned by the trust company ? A. Yes, sir ; they are. Q. Do you Imow what investigation the trust company made prior to the certification of the counter-signing to ascertain whether the work was being done and the moneys being expended according to instructions ? A. No, sir ; the trust company makes the investi- gation called for under the trust deed ; I am assuming it does, and the trust company signature is a certificate for me that they have fulfilled their patt of the duties. 688 Investigation op Public Service Commissions Q. You do not recall what trust company that is ? Mr. Morgan. — Do you know what trust company it is, Mr. Quack enbush ? Mr. Quackenhush. — It is the Guaranty. A. It is the Guaranty. These are matters I have not ptepared on. Q. I appreciate that. You have made a search for correspond- ence, documents, etc., have you, Mr. Morgan? A. Yes, sir. Q. And you do not find any ? A. I found nothing in connection with the third-tracking contracts. Q. Do you recall who your counsel was for the examination and preparation of the conttact with the Interborough ? A. Mr. Stetson. ' i; ' ■ ■;' '■''■" :i^\ Chairman Thompson. — Francis Lynde .Stetson? Mr. Morgan. — Yes, sir ; Francis Lynde iStetson. Q. Did Mr. Lane ever make any charges of bad faith against Mr. Shonts in connection with this matter to you or in your presence ? A. I don't think so, no, sil. Q. !N"ever charged any collusion or collusive agreement or arrangement to make a collusive agreement ? A. I did not go in with him to the grounds of all his complaint. He said, " What I want to say to you is I don't like this thing, and I don't want it to go on." Q. Did you ask him his reason for not liking it? A. I didn't want to go into that. It was not my business. I am not a director of the company. Q. Would it have been unnatural for you when he said he did not like it to have asked him what his reasons were ? A. He said it was an extravagant contract. I don't remember his using the term " bad faith ". Q. You think he did use the term it was an extravagant con- tract ? A. Yes, sir ; I think he might have used that term. That is the impression he conveyed to me at any tate. Q. Was Mr. Lane connected with your firm in some way ? A. No, sir ; he was a member of Lee, Higginson & Co. of Boston, and we work with them in many things. Eepokt of Joint Legislative Committee 689 Q. And he was a member of that board during all the time the negotiations were being conducted for the purchase of the bonds ? A. Yes, sir ; and he was interested in the purchase. Q. As a member of the firm of Lee, Higginson & Co. ? A. The firm of Lee, Higginson & Co. was interested. Chairman Thompson. — They were closely affiliated with J. P. Morgan & Co. ? Mr. Morgan. — We have worked closely on many things, and still do. Q. Did you rely to any extent on your close acquaintance with Mr. Lane and his integrity and high character, in your negotiations for these bonds ? A. Oh, yes, of couTse we relied on the company, and Mr. Lane was part of the company. Q. Did you feel safer in dealing with the company because Mr. Lane was a director ? A. I was glad to have him a director, but I felt perfectly safe with the company. Q. When Mr. Lane told you he thought the contract was an extravagant contract, you do not recall that you asked him for any reasons ? A. I do not recall 'asking him for any reasons. That was enough reason, wasn't it ? Q. I can easily understand you may have regarded it as suffi- cient, if Mr. Lane regarded it as extravagant ? A. I wanted him to understand it was. Q. Did you take Mr. Shonts' unsupported word it was not extravagant ? A. Mr. Shouts thought that what he was to pay Mr. Stevens was well eatned. Chairman Thompson. — The further fact that he did not enter into the contract anyway made it more sufficient ? Mr. Morgan. — ^As the contract was not entered into aftei-wards, the question does not arise. Q. Did Mr. Lane tell you subsequently the contract had been abandoned? A. I don't remember who told me. Somebody told me. Q. Have you any recollection as to the time you learned it had been abandoned ? A. Xo, sir ; I don't remember. 690 Investigation of Public Service Commissions Q. Did you know of the fact that the approval of the contract by the Public Service iCommission was opposed by Mr. Maltbie, one of the 'Commissioners ? A. I don't recall whether I did or not. Q. Did you ever read oT hear of the memorandum prepared and submitted by Mr. Maltbie to the Public Service Commission in opposition to the approval of the contract? A. No, sir; I don't think I ever did. Q. Did you hear of the fact such a memorandum had been pre- pared and submitted ? A. I don't remember. There have been so many meetings of the Public Service Commission, and answers and rejoinders, I don't remember about it. Q. Did you know of the fact Mr. McAneny, of the Board of Estimate and Apportionment, opposed the approval of the iStevens' contract? A. 'So, sir. Q. And you did not know of the fact that he prepared and filed a memorandum ? A. ISTo, sir. Q. Did you ever heat from any source a suggestion that a. fund had been expended by the Interborough Company for the purpose of bringing about the execution of the dual contracts, and that that fund by reason of its nature could not be allowed to appear upon the books of the Interborough Company? A. No, sir; I never heard that. It is the same answer to the same question again. ChaiTman Thompson. — You say you never heard of this Gillespie contract ? Mr. Morgan. — I don't recall that I did. Chairman Thompson. — Nobody ever came and talked to you about that? Mr. Morgan. — I don't think so. Q. Do you know of the fact Mr. Shouts went abroad in the early part of the summer of 1913 ? A. I knew he had gone abroad at one time around that time, but I don't temember when. Q. Was this conversation you had with Mr. Shouts as a result of your interview with Mr. Lane and Mr. Read prior to his departure ? A. I don't know. I don't remember when he went or the date of the conveTsation. Q. Would you be able to say whether in the early part of the year 1913 or the latter part of the year? A. It was after May, I Report of Joint Legislative Committee 691 should say. It was after May, or during May. I am trying to locate it, but I saw those two gentlemen in the Mills Building, and when we tore down our old building, whidi was in May, 1913, and that was the place, and that helps to fix the time. Q. Was it prior to the summer vacation that you saw them ; have you any way of fixing tbat? A. I sbould say probably it was during tie summer, but I don't know. Q. Could you say it was in the early part of the summer rather than the latter part? A. I couldn't tell. I was seeing Lane all the time. But surely, if I may suggest, the books of the directors' meetings of the Interborough would show when the matter was discussed. Q. They do not show when they called upon you ? A. It would be about the same time. Chairman Thompson. — Mr. Morgan may have a recollection as to how long it was after Mr. Bead and Mr. Lane called upon him he talked with Mr. Shonts ? Mr. Morgan. — It was within a few days. Q. The talk you had with Mr. Bead and Mr. Lane in your office was in the Mills Building ? A. Yes, sir ; I think after May. It was after the first of May. Q. It was after the first day of May ? A. Yes, sir. Q. It appears from the minutes of the meeting of the directors of the Interborough Company that the board considered on the 24th of June the proposed contract for the third-track construction work, and that no action was taken thereon; it appears that the following day at a meeting of the board the president appointed a committee to consider and study the subject and report their con- elusion back to the board, and that Mr. Bead, Mr. Lane, Mr. Ber- wynd, Mr. Sullivan and Mr. Friedman were the members of that committee; did you know of the fact that such a committee had been appointed? A. I do not recall it. Q. Did Mr. Lane mention the fact to you that he was a member of the committee ? A. I don't remember his doing so. Q. Did Mr. Lane or Mr. Bead tell you of the fact that a com- mittee of which they were members had held a meeting for the 692 Investigation of Public Sekvice Commissions purpose of considering and studying the proposed contract for third-tracking and extensions, and that no action had been taken at that meeting ? A. I don't recall it. Q. Did you know Mr. Fisher, secretary of the Interborough ? A. Mr. Fisher, yes, sir. Q. In his testimony he states that Mr. Shonts sailed for Europe on the 8th of July ; is it your recollection that the discussion which you had with Mr. Shonts preceded his departure? A. It must have, in that case. If they canie to me in June and talked with me about it I saw Mr. Shonts within a very few days. Q. At the time Mr. Shonts came to see you, did he say to you anything on the subject of the submission by the Interborough ■Company of the proposed form of contract for the approval of the Public Service Commission ? A. I don't remember his doing so. Q. Did you at the time you purchased the bonds, or entered into the agreement to purchase the bonds, have any understanding on the subject of the supervision of the Public Service Commission over the issue of the bonds and the expenditure of the proceeds? A. Except so far as regarding the third track, which I don't i-emember about; my recollection is he said he was to build the new subways. I am quite sure of that. Q. I am speaking of the elevated structure ? A. ISTo, sir; I don't remember about that. Q. You do not recall whether you understood the Public Service Commission was to have supervision or not? A. I don't recall it. I always thought the Public Service Commission had supervision over everything that ever was. . Q. Including the approval of the contracts for the third- tracking? A. I don't know about that. That is another question. Q. Including the expendituTo of the proceeds for the cost of construction in the Manhattan ? A. My recollection is they were not to have that, because the Interborough was so responsible there for damages they thought they must have the right to select their contractors, as I understood. That is my recollection, but it is hazy a little. Q. Did you understand the Brooklyn Rapid Transit Company had the same liability for damage? A. I didn't know anything about the Brooklyn Rapid Transit at all. Eepoet of Joint Legislative Committee 693 Q. And the conteactor was to assume the same kind of liability ? A. I knew nothing about them at all. I had nothing to do with the Brooklyn Rapid Transit contract. Chairman Thompson. — Of course I imagine there are other things on your mind, so you are not able to go into the details of these things? Mr. Morgan. One covers the details when you start the transaction. Chairman Thompson. — I understand you had confidence in Mr. Lane, and you might not question him closely when he stated it was extravagant? Mr. Morgan. — That is all I wanted to know. Chairman Thompson. — If a man like Mr. Lane had been actu- ated to come to you at the time of the Gillespie contract and told you the same thing, you would have attempted to interfere with that? Mr. Morgan. — I would have asked Mr. Shouts to justify the alleged extravagance of the company. Chairman Thompson. — If it appears that Teri-y & Tench con- structed the New York Central terminal depot here, and they have got eight-tenths of this constructed for four per cent and take all the responsibility for danger, and stopping trains, you would think a fifteen per cent contract was extravagant, wouldn't you ? Mr. Morgan. — I would have to look into the conditions. I would think it ought to be looked into by the directors of the company. Chairman Thompson. — And if that situation comes up to a legis- lative committee, it is pretty near up to them to look into it, isn't it ? Mr. Morgan. — I cannot direct a legislative committee. Examination by Mr. Lewis resumed : Q. Will you tell us how you communicated with Mr. Shonts at the time you asked for the interview ? A. Probably by telephone. 694 Investigation of Public Seevice Commissions That is the way I often did when I wished to see him and talk with him. Chairman Thompson. — Representing the State, we feel the State is entitled to your appearance in a matter like this, but as individuals we thank you very much for your appearance and courtesy. Mr. Morgan. — I wanted to get an opportunity to thank the Committee for permitting me to wait over for ten days or a couple of weeks, that I might get away to the woods, for that was an opportunity I was anxiously waiting to get. Upon motion an adjournment was taken to 10' o'clock a. m, October 28, 1915, at Eoom 426, Murray Hill Hotel, New York city. OCTOBER 28, 1915 MuEEAY Hill Hotel, Room 426, ISTew York City The Committee met at 10' o'clock a. m., pursuant to adjournment. On motion an adjournment was taken to 10 o'clock a. m. October 25, 1915, at the same place. OCTOBER 29, 1915 MuEEAY Hill Hotel, Room 426, New York City Upon motion an adjournment was taken to the IsTew York County Lawyers' Association, 165 Broadway, New York city, at 11 o'clock A. M. Eleven o'clock a. m., New York County Lawyers' Association, 165 Broadway, New York city. Upon motion further adjourned to meet at 3 o'clock p. m. at Room 426, Murray Hill Hotel. Eepoet of Joint Legislative Committee 695 AFTEENOON SESSION Upon motion further adjourned to meet at 5 :30 o'clock p. m. at the same place. Five-thirty o'clock p. m., Room 426, Murray Hill Hotel, ISTew York city. Upon motion an adjournment was taken to 11 o'clock a. m. Thursday, November 4, 1915, at the New York County Lawyers' Association, 165 Broadway, New York city. NOVEMBER 4, 1915 New York County Lawyers' Association Board Eoom, 165 Broadway, New York City The Committee met at 11 o'clock a. m., pursuant to adjournment. Arthur C. Hume, being first duly sworn, testified as follows : Examined by Mr. Shuster : Q. Mr. Hume, you are an attorney and counselor-at-law, prac- ticing in the State of New York and the city of New York ? A. I am. Q. And you were counsel for the South Shore Traction Com- pany from its inception ? A. Yes, sir. Q. That was when ? A. To the best of my recollection, early in April, 1903. Q. And that South Shore Traction Company covered what terri- tory, its franchise territory? A. It ran from a point about six miles east of Patchogue, through Patchogue, along the south shore of Long Island, taking in the large villages, such as Bay Shore, Babylon, Amityville, Eoekville Center and Freeport, in to a point where Central avenue crosses the New York city line. Q. Those franchises were procured from the communities there ? A. Yes, sir, from the town boards, and in cases of the incorporated villages, from the village trustees. G96 Investigation of Public Sebvice Commissions Q. And no part of the franchises were within the city of Brook- lyn or I^ew Yorlc ? A. Not as originally obtained. Chairman Thompson. — That was before the Greater New York charter was passed that these franchises were obtained ? Mr. Hume. — It was before the franchise granting power in tlie city of New York was taken aWiay from the Board of Aldermen and. vested in the Board of Estimate and Apportionment. Q. You procured authorizations frord the old railroad commis- sion, I take it, or ceTtificates ? A. We secured a certificate of necessity, and also an authorization to issue bonds. There was no necessity of securing an authorization with regard to stock at that; time. Q. Was there a time in the year 1908 when the South Shore Traction Company applied to the Board of Estimate and Appor- tionment of the city of New York for a franchise to construct and operate a street railroad from the Queensboro bridge over Thomp- son avenue and Hoffman boulevard, and through that section of the city formerly known as the village of Jamaica to the city line? A. Yes, sir. Bather, I think the application was filed in Decem- ber, 1907, and thereafter the original application was withdrawn once or twice, and new applications put in, owing to the fact that at the outset there was some doubt as to whether the jurisdiction to grant the franchise to cross the bridge 'was vested in the Bridge Commissioner, or in the Board of Estimate and Apportionment, ■and that question made it necessary for us to amend our applica- tions once or twice. Those applications also involved a slight difference in change of route, nothing radical, however. Q. And your franchise included the right to cross the Queens- boro bridge ? A. As ultimately granted, yes, sir. Q. Will you state what was done with your application in the Board of Estimate ? A. The application was- pending, to the best of my 'recollection, in the original form, or modified form, from December, 1907, until the 2'0'th day of May, 1909, when the fran- chise was finally granted by resolution of the Board of Estimate and Apportionment. In the meantime, the time had been taken up' with investigations of our application, made by the Board of Esti- mate and Apportionment, or the Bureau of Franchises, and with Kepokt of Joint Legislative Committee C97 the necessary legal procedure, as provided fffr in the charter of the city of Wew York. Q. Will you now state what further steps were taken to exercise those franchises on the part of your company ? A. Immediately, upon the same day, when the franchise was formally signed by the Mayor and delivered to the officer of the company, an applica- tion was made to the Public Service Commission, First District, for the right to exercise the privileges contained in that franchise. ^. hearing was had upon that application, and the matter was sub- mitted to the Commission. That was on the 20th day of May, 1909. The matter remained in the hands of the Commission, as T remember it, for a month or six weeks, when a decision and opinion written by Commissioner Bassett was handed down deny- ing our application. Q. You have not a copy of that opinion with you ? A. No, sir. It appears in the regular opinions of the Commission. Mr. Shuster. — Wo have sent for the file on this proceeding and it will probably be here in a few minutes. Q. They denied your application, and then what did the com- pany do about it? A. The company made an immediate applica- tion for a rehearing, as required by the Code of Civil Procedure, before such a decision could be reviewed on a writ of certiorari. The rehearing was granted, and the same decision rendered as upon the original hearing. Immediately thereafter a writ of certiorari was obtained and was heard by the Appellate Division, First Department, to the best of my recollection, at the very end of June, 1909, and the Appellate Division deemed the matter of such importance that it convened expressly after the members of the court had disbanded for the summer. They came back and gave ns a hearing, because there was a very urgent necessity for some transit facilities across the Qneensboro bridge, and a very great public demand. Q. Did the city officials, representing the Poard of Estimate and Apportionment, co-operate with your company ? A. They did, most heartily. Q. What disposition, did the Appellate Division make of your application? A. The Appellate Division on the 29th of July, 190'9, I think, rendered a decision reversing the decision of the Investigation of Public Seevice Commissions Public Service Commission and directing that that Commission issue the permission asked for by the company. Q. And that was to exercise the franchise? A. Yes, sir; to exercise the rights contained in the franchise. Q. You may state what followed. A. Thereafter the Commis- sion appealed to the Court of Appeals from the decision of the Appellate Division. The matter was argued as soon as the Court of Appeals convened that fall, and a decision was rendered, if I remember rightly, in the first week in l^ovember, 1909, affirming the opinion of the Appellate Division and directing the Public Service Commission to grant the permission asked for. Chairman Thompson. — Who opposed your application before the Public Service Commission ? Mr. Hume. — Counsel for the Public Service Commission, Mr. Coleman. Chairman Thompson. — Any one else? Mr. Hume. — Not that I remember of. I think Mr. Coleman appeared. Chairman Thompson. — Did he appear for anybody ? Mr. Hume. — On behalf of the Public Service Commission. Chairman Thompson. — The Public Service Commission did on their own volition actively oppose this ? Mt. Hume. — Yes, sir, and there was a very important principle involved there as to whether the Public Service Commission had the povi^er to disapprove the terms and conditions contained in a franchise granted by the Board of Estimate and Apportionment, and the Corporation Counsel took the position that it was practi- cally a denial of the constitutional right of the city of New York to grant ftanchises and to control the terms and conditions of those franchises. By Mr. Shuster : Q. Did the Court of Appeals pass upon that proposition at all ? A. No, sir ; dismissed it on the ground it was unnecessary to pass upon the question whether the Public Service Commission had that Eepoet of Joint Legislative Committee 699 right or not, inasmucli as the groTinds assigned for the denial were trivial. Chairman Thompson. — Is that case reported ? Mr. Hume. — Yes, sir. I cannot give you the reference. It is People ex rel.- South S'hore Traction Company v. Willcox, and it is reported in the Appellate Division and the Court of Appeals. Q. At this time there vi^ere no transportation facilities across the Queensboro bridge by way of trolley ? A. 'No, sir, there were none. Q. Were there any competitive interests that your franchise affected ? A. Yes, the ISTew York and Queens County Road were operating at that time approximately seventy-one miles of street surface railroad in the borough of Queens. Those roads, practi- cally all of the branches of those roads practically converge on Jackson avenue at a point at or near the entrance to the Queens- boro bridge. At the time that franchise was granted to the South Shore Traction Company in May, 190'9, the New York and Queens County Railroad Company had, as I remember it, refused to apply for the right to operate across the Queensboro bridge, notwith- standing the fact that they passed the plaza of the bridge on Jackson avenue. Q. They had been requested to run cars across this bridge ? A. I was so informed by the Bureau of Franchises of the city of New York. Q. And they refused to do so ? A. That is my understanding. Q. Have you any knowledge of the reason why they refused? A. My knowledge is entirely — or, rather, my belief is based entirely on my general knoAvledge of the other interests, of the interests controlling the New York and Queens County. Q. Will you state what interests you refer to there? A. The Belmont interests were at that time the owner of what is known as the Belmont tunnel, and there were then, as I remember it, nego- tiations on between the Belmont interests for the sale of that tunnel to the city. Q. Is that the tunnel also referred to as the Steinway tnnnel ? A. Yes, sir. Q. Was there any active opposition to your franchise from the city, granted by the city, from the Belmont interests, or the YOO Investigation of Public Seevioe Commissions competitive interests or tunnel interests ? A. Those interests were represented by attorneys at all of our hearings. As to whether they actively opposed the granting of that franchise, I cannot say offhand. There were various people who appeaTed and opposed, but exactly whom they represented I cannot say. Q. Did their representatives at the hearings before the Public Service Commission take active part in the examination of wit- nesses and represent the company as a matter of record ? A. Not to my recollection. To the best of my recollection, they did not. Q. They were simply present and observing? A. Yes, sir; observing. Q. Pending the appeals, was there an arrangement entered into between your company and the city for the operation of cars on the bridge ? A. There was. Q. Will you state just what there was to that ? A. In the latter part of September, or early in October, 1909, the head of the Bureau of Franchises sent for me and stated that there was a very great popular demand on the part of the residents in the borough of Queens for the installation of a trolley service across the Queens- boro bridge ; that numerous letters had been addressed to the Mayor and to members of the Board of Estimate and Apportionment, asking that some arrangement be made to give the people of that section trolley connections with New York city over Queensboro bridge, and he asked whether, pending the decision of the appeal then before the Court of Appeals, the South 'Shore Traction Com- pany would be willing to buy cars and other equipment necessary to install a local trolley service across that bridge and permit the cars and other equipment so purchased to be operated by the Bridge Commissioner until the decision of the Court of Appeals was ren- dered. I put the matter up to the directors of the South Shore Traction Company, and they said they were willing to hazard the investment in those cars, even prior to the decision of that appeal. The cars and other equipment necessary for that operation were purchased, I think, within four or five days after the request was made of the company and turned over to the Bridge Commissioner to be operated by him. They were so operated until the decision of the Court of Appeals was rendered and the requisite authority given to the company by the Public Service Commission to operate the line, and the company took over the operation. Report of Joint Legislative Committee 701 Cliairman Thompson.^- Db you know what montli that decision was rendered ? Mr. Hume. — In November, 1909, I think, the first week in November. Q. After the Coutt of Appeals had rendered its decision affirm- ing the Appellate Division decision your company then proceeded to exercise its franchise and construct its line ? A. The line upon the Queensboro bridge was immediately put in operation, as I have explained, and then the company took up the work of trying to get property owners' consents. Up to that time it had been absolutely impossible to get property owners' consents on Thompson avenue and Hoffman boulevard, partly due to the fact of la,tent opposition and partly to the fact that the property owners took the position — there was a certain amount of opposition owing to the uncertainty whether, owing to the opposition of the Public 'Service Commission, the line would be put in operation, and they were loath to give consent until our rights were assured. As soon as the decision was rendered, however, the right of way men were put to work, and we began to do the preliminary work necessary before actual construction could be begun. Q. How long after you procured your rights through the Court of Appeals to exercise the franchise was it until your company went into the 'hands of a receiver ? A. The receivers were appointed on the 30th day of December, 1910. The intervening time had been occupied in endeavoring to get property owners' consents, and also in endeavoring to get the necessary permits to enter. upon Thompson avenue and Hoffman boiilevard, and also upon the road that is now a part of the new Queens boulevard con- necting Thomas avenue and the bridge plaza, that is, the road over the viaduct extending the Sunnyside yards. The city did not take possession of that viaduct until December, until the latter part of December, or early in January, 1910; Q. December, 1910', or January, 1911? A. Yes, sir, and no permits were issoied. The city was unwilling, pending the taking' over of that structure, to issue permits. Q. That Structure was a temporary structure ? A. No, sir, the structure as it now stands. It had been practically completed, and a considerable period of time before, but there was a question as 702 Investigation or Public Seevice Commissions to the way in which the conveyance should be made to the city. It was a very long agreement, and involving the transfers of prop- erties in or near the five viaducts cTossing those yards. The viaduct we had to cross was physically coonpleted eight or ten months before it was actually taken over by the city. Q. Your corporation continued to operate over the Queensboro bridge from the time of the decision of the Court of Appeals until the receivership ? A., Yes, sir, and until the transfer of the prop- erty to the parties it was sold to, under the direction of tile court appointing receivers. Q. Did your company make application, for the issue of securi- ties after the procuring of your franchise for the purposes of con- structing any part of your road and line ? A. Not after the grantr ing of the New York city franchise. It had at that time the right to issue three million of bonds on its line generally, including any extensions, and that was deemed sufficient. Q. And that authorization of issue of securities, was that granted by the Public Service Commission or the railroad ? A. That was granted by the State Board of Railroad Commissioners in the year 1904, July, 1904. Q. The Belmont or Steinway tunnel subsequently was acquired by the city through the dual contracts, was it not? A. So I understand. Q. What is the name of the corporation that purchased the Queensboro bridge and other portions of the line from the receiver ? A. The Manhattan and Queens Traction Corporation. Q. And that corporation is now operating on the Queensboro bridge, and suck properties as it acquired from the receiver ? A. It is; yes, sir. Chairman Thompson. — Tkey took over and absorbed the South Shore Traction ? Mr. Hume. — No, sir; tkey purchased the franchise and physical assets of the South Shore Company located in New York, but not the assets of the company lying outside of the city of New York. Q. You are not counsel for the Manhattan and Queens Traction Company? A. No, sir. I have at times acted with the counsel, and as one of the counsel, but I am not the regular counsel. Repoet of Joint Legislative Committee 703 Q. Were you representing the Manhattan and Queens Traction Company at a time when an order was served upon that corpora- tion in regard to the character of the cars they were using ? A. I was consulted with regard to that matter and appeared with Mr. S'loan, the attorney for the company, in that connection. Mr. Shuster.: — I am not sure, but at this point, for the sake of chronology, it might be well to suspend with Mr. Hume and call Mr. Sloan, the counsel, and let him give the history of the transactions which occurred there. Chairman Thompson. — The order of examination is in your hands. Egbert S. Sloan, being first duly sworn, testified as follows : Mr. Shuster. — Mr. Whitney, have you brought with you the file of the Manhattan and Queens Traction Company ? Mr. Whitney. — Yes, sir, I have, and I ask if it is to be used as an exhibit. Mr. Shuster. — It may be. I wish to examine it. By Mr. Shuster : Q. Mr. Sloan, you are a counselor-at-law, practicing in the State of New York and the city of ISTew York ? A. Yes, sir. Q. And you are counsel for the Manhattan and Queens Traction Company ? A. Well, Mr. Charles Frueaff is the counsel and I am the president of the company. Q. You ate a corporation, the Manhattan and Queens Traction Company, and you acquired certain of the properties and franchises of the South Shore Traction Company at a receiver's sale? A. 'No, sir; not at a receiver's sale. We were offered the franchise and assets of the South 'Shore Traction Company under an order of the United States District Court, such property being solely within the city of ITew York, and I may say the franchise, the one dated October 29, 1912, and not the one referred to by Mr. Hume, that was granted later. He referred to the franchise dated May, 19'&9, but it was subsequently amended. I don't know whether extended or not, but it was amended. Y04r Investigation of Public Service Commissions Q. Did your company acquire the franchise which the Board of Estimate and Apportionment granted, and the exercise of which was denied by the Public Service Commission, and later ordered approved by the Appellate Division and affirmed by the Court of Appeals? A. Yes, sir; but that franchise was subsequently amended and the one we took was dated May 29, 1912. Q. And that franchise was subsequently approved as amended by the Public Service 'Commission and its exercise authorized? A. Yes, sir. Q. And you are now operating under that franchise? A. We are. : \ ; Q. And you acquired the physical properties and franchise of the South Shore Traction Company within the city of Greater New York only ? A. Yes, sir. Q. Those were acquired when? A. We acquired those on December 27, 1912, and began operation at midnight of that day. Q. The Manhattan and Queens Traction Company was a new corporation? A. Yes, sir. Q. And it was not the holder and operator of railroad properties until it had acquired these referred to? A. No, sir. It was a new company. Q. Has your corporation made application for any capital issues since its organization to the Public Service Commission? A. It has. Yes, sir. Q. What was done with that application ? A. The application was — Q. First, tell us when your application was made? A. The application was made in March, 1912, and hearings continued under that application for practically a year, and then certain stock and certain bonds were granted to us which we did not accept. Q. The authorization of securities was not acceptable to your company ? A. No, sir. Q. Would you care to state the reasons why? Mr. Frueaff. — I think the witness is mistaken on that. There was no order entered on that, was there ? Mr. Sloan. — No, sir. We withdrew our application. We with- drew it on the ground that from our knowledge of the opinion we could not use the securities. JIepoet of Joint Legislative Committee t05 Q. Your application went through the process of hearings down to the filing of an opinion by the Commission, did it? A. Our application was withdrawn before, as I understand it, any techni- cal opinion was finally issued. If I may refresh my memory, I may tell you the dates. Chairman Thompson. — Did you know what the opinion was before we withdrew our application. Mr. Sloan. — We knew the opinion of Commissioner Williams before we withdraw our application. Q. And your knowledge of that opinion was the reason of your withdrawal of your application ? A. Yes, sir. Q. Have you a copy of that opinion — The- grounds of that opinion are fully stated in the opinion, are they not ? A. Yes, sir, in the reports of the Commission of the First District, February 28, 1914 Q. Now, since that time, has there been any other application made for capital ? A. No, sir. Q. And you are operating your road at this time ? A. Yes, sir. Q. Have you had to expend any considerable sums for construc- tion of lines and equipment? A. The road has been built from the Plaza in Long Island City, out as far as the Long Island Rail- road Company station in Jamaica, and that was built under a eontract. Q. And you are financing your capital expenditures without issues of capital stock or bonds ? A. Yes, sir ; the only stock that has been — there has no stock been issued, but there has been the usual shares subscribed for under the Railroad Law, and those out- standing subscriptions are the only stock we have. Q. And under the law, you can only isffue securities with the approval of the Commission ? A. Yes, sir. Q. Mr. Sloan, there was a time when your company was cited before the Commission on a hearing on motion of the Commission, on a question of repairs, improvements, changes and additions in and to the rolling equipment of the Manhattan and Queens Trac- tion Company, and the regulations and practices of the company in relation thereto? A. Yes, sir. Q. And that was on resolution for a hearing under date of January 6, 1914 ? A. Yes, sir. Vol. 1—23 To 6 Investigation of Public Seevice Commissions Q. And I take it a copy of that resolution was served upon your company ? A. It was. Q. By the Public Service Commission ? A. Yes, sir. Mr. Shuster put in evidence resolution foT hearing dated Janu- ary 6, 1914, adopted by the Commission, being case No. 1783, Public Service file, which is as follows : At a stated meeting of the Public Service Com- mission for the Pirst District, duly held at its office, No. 154 Nassau street, in the Borough of Manhattan, City and State of New York, on the 6th day of January, 1914. Present: Edwaed E. McCall, Chairman, Mild E,. Maltbie, John E. Eustis, J. Saegent Ceam, Geoege V. S. Williams, Commissioners. (EndoTsed as follows) : Submitted to Public Seevice iOommission, FlEST DiSTEIOT, Jan. 6, 1914. Action taken: Adopted. Teavis H. Whitney, Secretary. In the Matter of the Hearing on the motion of the Commission on the question of repairs, im- provements, changes and additions in and to the rolling equipment of the Manhattan and Queens Traction Corporation, and the regula- tions and practices of said company with refer- ence thereto. Additional equipment, and Tepairs to present equipment. Case No. 1783. Resolution for Hearing. It is Hereby Resolved, That a hearing be had by and before the Commission on the 8th day of January, 1914, at 3 o'clock in the Repoet of Joint LEoisLAtivE Committee 707 afternoon, or at any time or times to which the same inay be adjourned, at the rooms of the Commission at JSTo. 154 Nassau street. Borough of Manhattan, City of iNew York, to inquire and determine : (1) Whether additional rolling equipment for use by the Man- hattan and Queens Traction Corporation in the transportation of passengers within the State of New York ought reasonably to be provided, or whether any repairs or improvements to or changes in any thereof in use ought reasonably to be made, in order to pro- mote the security or convenience of the public or in order to secure adequate service and facilities for the transportation of passengers ; and if it be so found to then to inquire and determine what repairs, improvements, changes and additions should i-easonably be made and the manner in which and the time within which the same should be made. (2) Whether the regulations and practices of said Manhattan and Queens Traction Corporation with reference to repairs and improvements to and changes in its rolling equipment are unreason- able, imptoper or inadequate, and if it be so found then to inquire and determine what changes in such regulations and practices should be made and the time within which the same should be instituted. All to the end that the Commission may make such order or orders in the premises as shall be just and reasonable. Resolved Further, That at least one day's notice of said hearing be given to said Manhattan and Queens Traction Corporation by service on it either personally or by mail of a certified copy of this resolution. BY THE COMMISSION", Tbavis H. Whitney, [L. S.] Secretary. Q. This was upon the motion of the 'Commission itself, that this hearing was held ? A. As far as I know. The order had no copy of a complaint attached to it, which is usual in such cases. Q. Was there any appearance at the hearing; did you appear in response to this notice ? A. Yes, sir. Q. Was there at that hearing any repTesentation on the part of persons other than the Commission in opposition, or complainants, or -anything of that character ? A. As I remember, no. 708 Investigation of Public Service Commissions Q. iSo that tlie proceeding was initiated by the Commission 'and not upon any complaint of citizens or users of the road ? A. So far as I know, yes, sit. Q. Were hearings held? A. One hearing was held on the matter. Q. And that hearing was held January 8, 1914? A. Yes, sir. Q. Before what Commissioners? A. Commissioner Eustis. Chairman Thompson. — • This application was in March, 1912, and they didn't get around to the opinion, until February 27, 1914. Mt. Sloan. — Two years. Q. Following the Chairman's suggestion, how many hearings were held resulting in this opinion in regard to your capital issues ? A. There were a great number of hearings had. I note from my diaries the first hearing was Match 24, 1913, and the last Septem- ber 16, 1913. The minutes will show how many hearings were had. I don't remember, but there were quite a number. Q. They were numerous? A. Yes, sir; numerous. Q. Were those heaTings extended in their investigation? A. About four or five of them were quite extended. Q. And testimony taken ? A. Yes, sir. Chairman Thompson. — That is, in this same application far stock, you mean ? Mr. Shuster. — Yes, sir. Chairman Thompson. — The hearings closed September 16th. They failed to state in their exhaustive opinion when the applica- tion was filed. Mr. Sloan.— That waa March, 1912. Mr. Whitney. — May I ask a question of you ? Chairman Thompson. — Yes, sir. Mr. Whitney. — Apropos of your statement with respect to the period of time which elapsed between the application and the filing of the opinion, I want to suggest that if the Committee is investi- gating for the purpose of ascertaining facts, it is really important that all the facts should be on the record, and not merely selected facts which are unfavotable to the 'Commission. Keioet of Joint Legislative Committee 709 'Ohairman Thompson. — ^It looks as though they selected their facts when they do not print in their opinion the time when the application was made. Mr. Whitney. — On that score, I simply want to suggest the opportunity of including whatever additional facts may be neces- sary in respect to this statement which you made which would seem to imply that that was an unreasonable period of time. Mr. Shuster. — I think we had better take this up in an orderly way. Chairman Thompson. — ^If I have made a mistake, I am per- fectly willing to be corrected. I do not ihink I have. I do not think there is anything in that opinion which shows when this application was made. Mr. Whitney. — That may be. Q. In going back to the hearing in regatd to additional equip- ment and repairs, Mr. -Sloan, that was a hearing before Commis- sioner Eustis ? A. Yes, sir. Q. And he was the only Commissioner present at your hearing ? A. Yes, sir. Q. And there was only one hearing held in regard to that mat- ter? A. Yes, sir; as I remember it. Q. And that hearing was held on JanuaTy 8, 1914? A. Yes, sir. Q. "Kow, at that hearing, was testimony taken? A. Yes, sir. There were two experts, I think, from the Commission, put on the stand, who testified that they had examined some of the cars of the company, and testified about what they found. Q. Was any statement made at the opening of that hearing by the Commissioner, or any one representing the Commission, as to the grounds upon which their order for a hearing had been granted or made? A. I don't rem'ember that. Theire may have been. The minutes will show. T did not get a copy of the minutes. Q. These minutes are more or less voluminous here. Mr. Whitney. — They are verbatim. Q. At the conclusion of this hearing, was any action taken on the part of the Oommission, or Commissioner Eustis? A, We 710 Investigation of Public Seevioe Commissions offered at that time to go ahead and fix up our cars as fast as we could and there was an understanding arrived at between the coun- sel for the Commission in attendance and ourselves that he would recommend that we be permitted to fix up two of our cars every three days, as I remember it, and they would be inspected and if the inspectors were satisfied, we would be permitted to run them, and under that understanding, the hearing was closed, as I remem- ber it. I do not remember whether it was formally closed, but that ended the hearing, and we went out. Q. Was any formal stipulation or order entered into setting forth the agreement and understanding between your company and the Commission ? A. I think not ; simply what appears upon the record. Q. Was there an order to be entered at the conclusion of these hearings, and was any arrangement made for an order to be entered, on the part of the Commission ? A. I don't think at the close of the heafing. It Tvas closed with that understanding, and we assumed an order was to be entered in accordance with that agreement. Q. State what did take place and give us the time when the transactions took place. A. May I refresh my memory from the diary ? Q. Yes, sure. A. (Witness referring to memorandum). On January 9 th — Q. Your hearing was on January 8th ? A. Yes, sir. On Janu- ary 9th, about 2':55 o'clock in the afternoon, I received a telephone call from a newspaper reporter, who said he was a reporter, and wanted to ask me about an order prohibiting our further operation, and I said I didn't know anything about that, and I went out and started for the Commission's rooms, and was served with an order on Broadway, in front of about 165, that afternoon, which in effect said we should stop all operation that night at midnight. Q. 'Stop all operation of cars on the line at midnight that night ? A. Yes, sir. I would like to have the order for the exact terms, but that is the way I remember it. Q. Will you see if that is the order that is referred to there? A. Yes, sir ; that is the order, or a copy of it. Mr. iShusteT. — I want to read thie into fhe fecoj-d, T)iis order i§ (Jated January 9, J914 Eepoet of Joint Legislative Committee 7 11 Ghairman Thompson. — How long was that after that hearing you had ? , Mr. iSloan. — The next day. ' "■'"" '" ' " Q. What time did your hearing close on the 8th, what time of day? A. I don't know what time it closed, but I remember I attended at 3 o'clock. The testimony will show exactly. Q. It shows that at 3 p. m., on January 8th the meeting was convened ; your hearing was convened at that hour ? A. That is my memory, yes, sir. Q. And were you there for an hour or two hours in the hearing ; it appears here the hearing closed at 4 :4:5 p. m., January 8th. A. Yes, sir. Q. Did you say what time of day January 9th you were served with this order, the day of January 9th ? A. At 2 :5'5 p. m. Q. Do you recall what time you were called up and notified that such an order had been entered ? A. Some city reporter called me up some time prior to 2:55, and I don't know how long. Q. About how long? A. I remember it was in the afternoon, but I don't remember the exact time. Q. It was prior to the service of the order on you ? A. Yes, sir. Mr. Shuster put in evidence the order of the Public Service Commission, First District, dated January 9, 1914. Present, Edward E. McOall, Chairman, Milo E. Maltbie, John E. Eustis, J. Sargent Cram, and George V. S. Williams, Commissioners. In ease No. 1783, and entitled Final Order. In the matter of the hearing on the motion of the Commission on the question of repairs, improvements, changes and additions in and to the rolling equip- ment of the Manhattan and Queens Traction Corporation, and the regulations and practices of said company with reference thereto. Sub-title, additional equipment and repairs to present equipment. Signed by the Commission, Travis H. Whitney, Secretary. A hearing having been duly had by and before the Commission in the above entitled matte* on January 8th, 1914, Commissioner Eustis presiding, Eobert S. Sloan appearing for Manhattan and Queens Traction Corporation, Edward M. Deegan, assistant coun- sel, attending for the Commission, and it appearing at the hearing that said company has ordered a pupiber of jiew carp to be deljvprpd T12 Investigation of Public Seevicb Commissions in tte neaT future, but the Commission being of the opinion after said hearing that the rolling equipment now in use by said com- pany is not in a safe operating condition, and that certain repairs, improvements and changes should reasonably be made in such roll- ing equipment in order to promote the security or convenience of the public, Ordered, That said Manhattan and Queens Traction Corpora- tion shall cease to operate its existing equipment at or before 12 o'clock midnight, January 9, 1914, and shall overhaul all its said rolling equipment and make all repairs necessary to put said equip- ment in a safe operating condition, and to maintain same in such condition until supplanted by new cars. Said equipment shall be overhauled and the necessary repairs thereto shall be made before said cars shall be again operated. All such work to be done to the satisfaction of the electrical engineer, C. W. Wilder, of the Com- mission, who shall certify that such cars are in safe operating condition. Further ordered, That said order shall take effect immediately, and shall continue in force until changed or abrogated by further order of the Commission. Further ordered, That by 6 v. m., January 9, 1914, the said company shall notify the Public Service Commission for the First lyistrlct whether the terms of this order are accepted and will be obeyed. By the Oto-mmlssion, Travis H. Whitney, Secretary. (Seal of the Commission.) Q. That order was entered and served upon you within how many hours after your agreement and understanding with Com- missioner Eustis of the day before ? A. Well, about one day. Q. About twenty-four hours ? A. About twenty-four hours. Q. It was less than twenty-four hours, was It not ? A. Yes, sir. Chairman Thompson. — How long after the proceeding was initiated was the hearing had on the 8th of January ? Mr. Sloan. — As I remember, the proceeding was initiated on the 6th of January. Eejoet of Joint Legislative Committee 713 Q. The 6tli of January tlie resolution for a iearing was dated, and I presume that was served on you the same day ? A. I think that was served on me on the 6th. Q. When you received the order of January 9, 1914, what did you do ? A. I called on Mr. Hume who had helped me, and was familiar with the property of the iSouth Shore, etc., and Mr. Hume and I went to the Commission and went to see Mr. Coleman, chief counsel of the Commission, and Mr. Coleman called in Mr. Deegan, the counsel in charge, and asked him about the order, and Mr. Deegan at that time produced an order which he had prepared, I suppose, which was in accordance with our understanding had at the meeting on the 8th. Q. That order was exhibited to you ? A. Mr. Deegan brought it up. Mr. Coleman sent for it. Q. Did you read the order ? A. I don't remember that I read it, but I looked at it. Q. How did you know it was an order upon this hearing ? A. I think we looked it over. I am not clear on that. Q. Did counsel for the Commission, or his assistant, tell you it was their proposed order upon the hearing,? A. Yes, sir ; Mr. Deegan said that he prepared the order in accordance with the understanding on the 8th. Q. You have no copy of that in yout files ? A. No, sir. Mr. Shuster. — Have you a copy of that, Mr. Whitney ? Mr. Whitney. — What is that? Chairman Thompson. — You went there on the 8th ? Mr. Sloan. — Yes, sir. Chairman Thompson. — And you showed them certain things ? And you say that you had ordered new cars ? Mr. Sloan. — Yes, sir. Chairman Thompson. — And you had them in the shops being built? Mr. Sloan. — Yes, sir. Chairman Thompson. — And you said you woidd repair the cars just as fast as it could be physically done ? 714 Intestigation of Public Service Commissions Mr. Sloan. — We entered into an arrangement. Cliainnan Thompson. — You entered into an arrangement, by which you were to prepare two cars every three days? Mr. iSloan. — Yes, sir. 'Chairman Thompson. — And that was a stipulation in the record at the meeting ? Mr. Sloan.- — That was the talk. 1 don't know whether the stenographer took it down. Chairman Thompson. — We are trying to show all the time the investigation went on. It appears there were cases the Commission never acted within a reasonable time, and we are willing to show both sides, and here is a case whei-e the Commission acted very prompt, and it is our duty to show it. I am trying to get this thing ■ raveled out. This man says that on the 8th he came in on a pro- ceeding initiated on the 6th, and he showed the actual conditions. and they were accepted by the attorney for the Commission prose- cuting this, and it was arranged they should prepare two cars every thfee days, and that arrangement was entered into the form of an order by Mr. Deegan, and that was produced by Mr. Deegan at the time Mr. Sloan appeared with Mr. Coleman on the 9th, and the question is, where is that order. Can you produce that order, Mr. Whitney ? Mr. Whitney. — I don't know. Chairman Thompson. — I want to Imow about this order, and if we can have it. Mr. Whitney. — With an explanation. Chairman Thompson. — I don't want any explanation. I want to know if you will produce the order. Mr. Whitney. — I don't know anything about the order. Chairman Thompson. — I direct counsel to prepare a subpoena. Mr. Shuster. — I wish to read into the evidence from the record of the hearing in this matter, held January 8th : " Commissioner Eustis. — But there is always a time when you run one day too long with a dangerous equipment or an unsafe Repoet or Joint Legislative Committee T15 car; however, as long as we are going to recommend the issuance of am otder to give them time, we will close the hearing. You do not care to cross-examine the witnesses now, after that recommendation ? " Mr. Sloan. — No, the idea is we shall run through two cars as fast as possible. "Commissioner Eu&tis.— Two cars every three days. If you cannot do it, show that you cannot to Mr. Wilder, and we may recommend an easing up, but he says that you can do it. "Whereupon, at 4:45 p. m., January 8, 1914, the hearing in the above entitled matter was closed." Q. And it was upon that instruction, Mr. Sloan, just read, that this proposed order which was shown to you by counsel to the Com- mission was prepared ? A. Well, I suppose it was. Q. And that was your imderstanding of the arrangement between your corporation and the Commission ? A. Yes, sir. Q. And the order that you cease operation of cars at midnight, on the 9th of January, was the order ultimately entered and served upon you ? A. Yes, sir. Q. And not the pToposed order which was shown you by the Commissioner's counsel ? A. Yes, sir ; that is right. Q. State, if you will, what you did from the time the order was served upon you, and give us in detail as much as you can recall. A. As I say, after our conference with Mr. Coleman, Mr. Hume and I and Mr. Coleman went down to see Commissioner Eustis, and Commissioner Eustis says, " Yes." He admitted that was the undeTstanding there, but he said that the Commission would not have it that way, and they thought we ought to stop, and they entered this order. Q. Did he mention the Commission, or certain Commissioners ? A. Yes, sir, he said the Commission, and principally the Chairman. Q. Commissioner McCall ? A. Yes, sir ; Commissioner McCall. After that we went in to see the Chairman, Chairman McCall, and told him the situation, and he called in Commissioner Maltbie and Commissioner Eustis, and the result of that conference there was that they extended the time of this order from midnight of that night, January 9th, until midnight of January 11th, Sunday. 716 Investigation of Public Seevice CoMMissloiirs Chairman Thompson. — Tlie Qtli was F'riday ? Mt. Sloan. — I think it was; yes, sir. (Witness continuing.) They extended the order until Sunday night at midnight, and we went out and borrowed some cars, and we did comply with the order of the Commission in every particu- lar, and the manager, of the road at that time had Mr. Wilder come over and look over the ca'rs, and no car was put into service after January 11, at midnight, other than after certified by the Commission's engineers, as being all right. Q. Was there an order entered and served upon you extending your time, or did you tely upon their verbal promise ? A. I relied upon their verbal promise. I don't think there was any order entered on that. By Chairman Thompson : Q. The stopping of all of your cars, that is the compliance with this order of the 9th, by midnight, would that have affected your franchise in any way? A. That was my opinion and that vras discussed thetre. Q. Would the stopping of traffic on your road, would that have affected your franchise ? A. Our franchise provides that we must run cars every so often at all hours, except between 1 o'clock in the morning and 5 o'clock, at that time. Q. Would that have avoided your franchise or annulled it, if you complied with the order ? A. I don't know as it would have avoided it. By Mr. Shuster: Q. It would have made it forfeitable at the option of the fran- chise-granting body, at their option? A. I presume it would. Q. And you say that was discussed at the time of your confer- ence with the Commissioners ? A. Yes, sir. I think it was on that ground that they gave us an extension of time, and Chairman McCall asked Mr. Maltbie about that, and Mt. Maltbie said he thought it would make the franchise subject to forfeiture, and under that arrangement they were willing to extend the time. There being no objection, at this time, 12:4-0' p. m., a recess was taken until 2 o'clock p. m., and the witnesses directed to appear at that time. Eepoet of Joint Legislative Committee 7l7 AFTEENOON SBSSION The Committee convened at 2 o'clock p. m., pursuant to recess. Examination by Mr. Siuster Tesumed : Mr. Sloan, you testified this morning that after you had received the ordeT, peremptory order, requiring your company to cease operation of cars at midnight, on the 9th of* January, you first went • to the ofiice of the counsel of the Commission ? A. Yes, sir. Q. Will you state what took place there, giving the conversations as near as you can recollect them? A. As near as I remember, Mr. Coleman sent for Mr. Deegan, who was in charge of the pro- ceedings, and Mr. Deegan brought up with him the file, and in that file he showed us an order which he had prepared, which car- ried out the understanding reached with Commissioner Eustis and the engineers. Then I showed Mr. Coleman the older that had been served, and after that we all went down to see Commissioner Eustis. Q. Was there any conversation had other than that between you and Mr. Coleman, or you and Mr. Deegan? A. Yes, sir, Mr. Deegan or Mr. Coleman said that the legal department had no knowledge of the older that was entered. Q. Do you know who prepared the order that was served upon you ? A. I don't, no, sir. Q. And it was your understanding that neither Mr. Coleman nor Mr. Deegan had prepared that order ? A. Yes, siT, of course. Many times orders come out that are not prepared in counsel's oflBce, I understand. Q. You understand that to be the practice? A. I understand after a heating, counsel in charge proposes an order, but I under- stand, of course, that is not binding on the Commission, and they can change it afterwards, if they desire. Q. Did you propose this order that was served upon you ? A. 'No, sir. Q. Who did propose it, do you know ? A. I haven't any idea. I was not there. Q. Was that order based upon any hearing? A, Why, pur- ported to be based upon this hearing. Y18 Investigation of Public Sbevice Commissions Q. Purported to be based upon tbe hearing where you made your agreement with Commissioner Eustis and the counsel? A. Yes, sir. Q. Did Mr. Coleman or Mr. Deegan express any surprise at the order when you showed it to them? A. Yes, sir, their attitude was one of surprise. Q. Mr. Deegan was the counsel for the Commission, who repre- sented the Commission at that hearing, where this agreement was entered into ? A. He was ; yes, sir. Q. And still it is your understanding that he knew nothing about the order until he saw it in your hands? A. That is the impression he gave us from the conversation ; yes, sir. Q. When you met Commissioner Eustis after the order, per- emptory order, had been served upon you, I believe you testified the Commissioner admitted that he had made such an an-angement as is referred to in the testimony of the hearing for the three cars a day ? A. Yes, sir. Q. Did he at that conversation indicate that he knew anything about this order ; was there anything said by him in regard to this ofder, and why it was entered ? A. Yes, sir, he knew about it, and he said that the Commission would not stand for the arrangement there, and his attitude was that he wouldn't either. Q. Did he give you any reason for his change of mind ? A. He simply said — I don't think he expressed any reason there. He simply said they would not stand for that arrangement. Q. The fest intimation that there was any change in the mind of the Commissioners in regard to the arrangement and agreement made at the hearing was when you received the order? A. Yes, sir, Q. Have you told us all that you can recollect of the transactions beginning with the hearing and ending with the modification of the peremptory oTder, until midnight of Sunday, instead of the 9th? A. T think so. Only I can say Commissioner Eustis took us in before Commissioner McCall, and he called in the others, and they discussed the matter, and the Chairman asked Mr. Maltbie if it was his opinion that this would subject the franchise to a forfeiture, or some kind of an action, and Mr. Maltbie said he thought it would, and the Chairman said, " Under those ciTcumstances, we don't want to do anything like that," or words to that effect, and Eepoet of Joint Legislative Committee Y19 they said that under those circumstances they -would be willing to give these people a little more time, and it was agreed to and all done orally, and that is about all that transpired. I might say that in the hearings here we relied as much upon what the engi- neers said as anything, and we thought if they were satisfied with what we -we're going to do, the Commission would follow that out. Q. Commissioner Enstis had approved of that, had h© not, at the hearing? A. Yes, sir. Q. In your hearing before Commissioners McCall, Eustis and Maltbie, was there anything said by you or those interested with you, as to bringing the matter to the attention of the courts ? A. I think Mr. Hume and myself said in effect that we simply could not comply with this ordet, and we would have to take the matter up with the courts if it was carried through, in other words, that we would — we could not submit to something that would forfeit our franchise unless somebody's life was in danger, and our engi- neers gave us to understand that we were not tunning any such risk as that. ' Q. What was the particular and specific reason given by 'Oom- missionel- McCall, if any, for this peremptory order? A. He said that these cars, running them over the trestle we had over the Long Island Railroad tracks worried him, and he thought they ought to be stopped. " " ' Q. That was the reason that he was opposing it, because of the trestle? A. That is what he said, and I had no other reason to believe there was any otheT motive in the matter. Q. What was done to make the trestle more safe at that time ? A. We promised him at that time and afterwards did give general orders to have a man stationed at the trestle to see that the motor- man shut off the power and had on brakes as he went down, and no other cars approaching it ; stationed a man theTe all the time. Q. Is there anything in the order that requires you to do any- thing in connection with the trestle itself ? A. 'No, sir, nothing. Q. And was that subject a matter of testimony or argument in the hearing? A. 'ISTo, sir, I don't think it was. That was the discussion in the room, solely. Q. And that subject was taised by Judge McOall at the lat§ hearing — at the late conference, rather? A, Yes, sir, 720 Investigation of Public Service Commissions i Q. It wasn't a hearing, it was a conference, wasn't it? A. It was a conference, yes, sir. Q. ISTow, you continued to run cars over that same trestle? A'. Yes, sir. Q. And the only difference in your operation was you stationed a man there to regulate the speed of the care ? A. We had given prior to that time general orders that no motorman should go down that trestle with the power on, and he should stop before making the descent, and have his car under perfect control, and orders of that kind, and after this hearing we stationed a man to see the motorman carried those instructions out. Q. Was Judge McCall's objection because of the insecure con- dition of the trestle or your manner of operating over the trestle? A. His objection was he was afraid of the cars going over that trestle. Chairman Thompson : Who was Mr. Wilder who wasi present at that hearing ? Mr. Sloan: He was an engineer of the Public Service Commission. Q. Was any reason or explanation given for this confusion of orders or disposition of the hearing between Commissioner Eustis and Commissioner McOall? A. No, sir, I don't think that was discussed. We took the attitude of what we should do under the present order. Q. Your discussion of the probability of litigation on this mat- ter, was that one of the things that influenced the Commission to extend your time, was that so? A. I don't think so. Q. You were not asking time for that purpose? A. No, sir, we were simply asking for time to do what we could, and I think that was the only discussion that came up. Q. The question of your franchise rights was a controlling thing? A. Yes, sir, and they were also willing at that hearing to give us a little more time to get cars to put on the road. Q. 'Subsequently an application was made to have this order rescinded, was it not ? A. Yes, sir. Q. Do you recall when that was made? A. I will have to refresh my memory on that. It was February 27th I wrote the Kepoet of Joint Legislative Committee 721 Commission and asked them to rescind the order and be allowed to rehabilitate the old cars we had. We were doing that under the direction of the Commission's engineers, and I thought it would be well to get this order off the record, but the Commis- sion answered that inasmuch as the order provided that we were — there is a letter on that — inasmuch as it did not prohibit operation if the cars were in order, they thought it was all right to leave the order stand, as we were putting them in shape, and were operating them under the certification of their engineers, and therefore the order covered it as it was. Q. And they declined to enter an order rescinding the per- emptory order ? A. Yes, sir. Q. That was in the form of correspondence? A. Yes, sir. My application was in correspondence. Chairman Thompson: The record of the testimony in this case, on January 8th, shows that the hearing was conducted by Commissioner Eustis alone, and that Mr. Weaver, who appeared to be an officer of this company, asked several times during the testimony to be permitted to make a statement, and every time he did that, he was interrupted, and all through the record, it does not appear he ever got the opportunity to make the state- ment, and they were given no opportunity to swear any witnesses, nor was there an opportunity given Mr. Sloan, although he reserved it, to complete cross-examination, and at the last end on the last page. Commissioner Eustis stated, " However, as long as we are going to recommend the issuance of the order to give them time, we will close the hearing." And he says, " You don't care to cross-examine the witnesses now, after that recommendation ? " Mr. Sloan said " no." So that this order was made on an under- standing all through the record that it was to rest on this order, and the company was not given an opportunity to have a hearing on the order, which was finally made final on the next day. Mr. Shuster: I ask that the final order which wag previously read into the record, be marked Exhibit B of this date. Mr. Whitney: I ask that the original documents be not marked. (The document referred to was not marked.) 722 Investigation of Public Seevice Commissions Mr. Sinister : Will you give us copies of the documents, then, that we wish, the resolution and the final order ? Mr. Wtitney : I wiU give you copies of anything. Q. (Copy of order sliown witness under date of January 13, 1914.) Is this tlie order denying the rescission that you refer to, Mr. Sloan? A. Yes, sir, that is the order, and that states the reason why they would not rescind the other. Mr.' Shuster : It is as follows : At a stated meeting of the Public Service Commission for the First District, duly held at its office, JSTo. 154 Nassau street, in the borough of Manhattan, city and State of New York, on the 13th day of January, 1914. Peesent : Edward E. McCall, Chairman, Milo E. Maltbie, J. Sargent Cram, George "V. S. Williams, Commissioners. In the matter of the hearing on the motion of the Commission on the question of repairs, improvements, changes and additions in and to the rolling equipment of the Manhattan and Queens Traction Corporation, and the regulations and practices of said company with reference thereto. Sub-title: Additional equipment, and repairs to present equipment. Entitled: Case No. 1783, Denial Order. An order having been duly made in the above entitled matter on January 9, 1914, directing the Manhattan and Queens Traction Corporation to overhaul all its existing rolling equipment and make the necessary repairs thereto, and to complete the overhaul- ing and repairs before the cars were again put into service, after midnight of January 9, 1914; and the Manhattan and Queens Traction Corporation having made application in writing, dated February 27, 1914, for a rescission of the said order, and that it be permitted to put in operation such of its single-truck cars as it was able to overhaul and put into a safe operating condition ; and it appearing that the provisions of the said order do not forbid Repoet of Joint Legislative Committee 723 the operation of the company's single-truck cars, provided that they are in safe operating condition and that the electrical engineer of the Oommission certifies that such cars are in safe operating condition, it is Ordered, That the said application for a rescission of the said order of January 9, 1914, be and the same hereby is denied. By tbe Commission, [Seal] JAMES B. WALKEE, Acting Secretary. In rubber stamp on the face of this order, " Submitted to Public Service Commission, First District, March 13, 1914. Action taken : Adopted. JAMES B. WALKER, Acting Secretary." Mr. Shuster. — I wish further to read from the mandatory order of January 9, 1914, the wbole of which order is now in evidence, this clause : " Further ordered that said order shall take effect immediately and shall continue in force until changed or abrogated by further order of tbe Commission." Mr. Shuster. — Here it appears they refused to abrogate it or change it, although it is proved they complied with the order. Mir. Shuster. — The following appears from the record. " Mr. Wilder. — May I make a statement for the record, which is right along Mr. Weaver's lines. " Commissioner Eustis. — Yes. " Mr. Wilder. — I came here to the hearing with the idea of asking the Commission to make an order to require this committee to put these cars through their present shop, at the rate of two every three days, and to make the minor repairs which can be made in that time, and which will eliminate a great deal of the dangerous conditions. I realize that they cannot overhaul them with their present facilities, and the present number of cars, and would not ask that, but it does not take long to put asbestos over resistances. It takes no time, hardly, to put new resistances in. It is ordinary course 724 Investigation of Public Service Commissions of maintenance to keep controllers clean, and they can prob- ably eliminate most of the conditions that we claim are dangerous, but they have to get the material, and they will need two or three men, but that will not keep more than one car out of service, and it can be done by doing it at night time, by keeping practically no cars out of service during the rush hours, and I ask the Commissioner to make that order, because this equipment has not been kept up in the condition it could be, and the company has not done all it could to maintain it, and I ask that the order be made for them to do it." Q. The Mr. Wilder here was the railroad engineer of the Public Service Commission? A. Yes, sir; he is the electrical engineer. Chairman Thompson. — He was the engineer in charge of the equipment ? Mr. Sloan. — Yes, sir ; for the Commission, as I understand it. Q. And it was in conformity with that recommendation of Mr. Wilder that Commissioner Eustis — A. We agreed to that recommendation. Chairman Thompson. — Mr. Wilder was the man through whom any complaint of such service would come to the Public Service Commission, anyway, wasn't he ? Mr. Whitney. — He might make reports on it, yes, sir. He would not be necessarily the sole source of the report. Mr. Shuster. — I now read into the evidence from the file of the Public Service Commission, in case 1783, the following marked copy of extract from the minutes of January 9, 1914, Manhattan and Qiieens Traction Corporation, additionfj and repairs to rolling equipment. Final order. On motion duly seconded an order in case No. 1783, was unanimously adopted directed the Manhattan and Queens Traction Corporation to cease to operate its existing equipment by twelve o'clock midnight, January 9, 1914, and to overhaul all its rolling equipment, make all repairs necessary to put the same in a safe operating condition in the manner therein specified before again operating the same, Report of Joint Legislative Committee 725 and to maintain said rolling equipment in such condition until supplanted by new cai-s. The order to take effect immediately. Q. Mr. Sloan, had your company ordei-ed any new cars prior to the time of this hearing, January 8, 1914? A. New ears had been ordered, yes, sir. Q. And was that fact brought to the attention of the Commission at the hearing ? A. Yes, sir ; I think Mr. Weaver presented tele- grams there with reference to that. Q. And do you know how long before that time they had been ordered by the company ? A. I believe — Chairman Thompson. — The telegrams from the car builders ill that record show to the eff'ect they would deliver a portion of the cars the following Saturday, and that would be January 10th. As I understand it, and it appears right at the beginning of the testimony, the telegi-am was dated January 7th, in which they said, I think, they would send eight cai-s on the following Satur- day if they did not have any delays. They said they had an order for thirty cars. Mr. Shuster. — I read from the record of the testimony and pro- ceedings at a hearing held on January 8, 1914, in this case " ILr. Sloan " I received the order yesterday, and with reference to the new cars, I desire to state that they have been ordered as the Com- mission has been advised, in accordance with the plans and speci- fications which have heretofore been filed with the Commission, and I will now read some telegrams from the St. Louis Car Com- pany, showing the progress with reference to that order, which I think will be very well for the Commission to know, '■ Commissioner Eustis. — You may state that you have not got the cars yet, and state the substance of the telegrams, that they will be done, and when. ■ Mr. Sloan. — Wendell & MoDuffy, of 165 Broadway, who are the agents here of the St. Louis Car Company, have been telegraphed to on January 7th, by John I. Beggs, who is the President of the St Louis Car Company, as follows: 'Please advise Manhattan-Queens people we are working overtime as authorized. I have been and am now and will continue to give active personal supervision to the completion and shipment their cars. Barring unforeseen and emtirely 726 Investigation of Public Seevice Commissions unexpected occurrences, will ship five Saturday next as promised. Entire twenty-five through steel shop this week.' " We have another one dated Januaxy 7th, to McArthur ' Barring unforeseen unexpected delay, five cars go forward at St. Louis : ' Flats.' (That is flat cars for shipment) ' have been ordered; five fenders ordered shipped to Eighth street, Long Island City.' " We have another one here, dated January 8th, to Wendell & McDuffy, from the St. Louis Car Company, stating: ' Barring unforeseen unexpected delay, five cars go forward next Saturday.' This is this coming Saturday. ' Yesterday night letter explains more fully.' This is the letter I have just read. In other words, the cars have been ordered as the Commission has been advised, and they are coming on as fast as possible, and we are using every effort to get these cars, and under the — " Commissioner Eustis. — Are you an expert ? " Mr. Sloan.— No, sir. " Commissioner Eustis. — What we want to find out at this hearing is the condition of the equipment that you are using now." Mr. Shuster put in evidence letter dated January 14, 1914, addressed to Travis H. Whitney, Esq., .Secretary, Public Service Commission, First District, signed Kobert S. Sloan, President, and stamped : " Public 'Service Commission for the First District, Received January 16, 1914. Electrical Engineer's ofiice." The letter above referred to is as follows : MANHATTAN AND QUEENS TRACTION CORPOEATION, (Sixty Wall iSteeet, New York Executive Office, New York, January 14, 1914. Travis H. Whitney, Esq., Secretary, Public Service Commission, First District, 154 Nassau Street, New Yorh, N. Y.: DbsAE Sir. — We acknowledge receipt of your letters of January 9th and 13th, and of the order in Case No. 1783, dated January Repoet OS Joint Legislative Committee 727 9tli, 1914, and enclose a formal acknowledgment of the receipt thereof as required by Section 23 of the Public Service Commis- sions Law. We haye not made written acknowledgment of the receipt of the order until this time, that we might be in a position to report to the Commission the progress we have made in overhauling our equipment; but as you probably know, personal acknowledgment of the receipt of the order was immediately made to the Chairman of the Commission, and at an informal meeting of a majority of the Commission on the afternoon of January 9th, the time at which we were ordered to cease operation was extended to January 11th at midnight. We are glad to be able to report to the Commission that the order was strictly adhered to, and S. B. Severson, our General Manager, reports this motning that all cars not approved by Mr. Wilder were out of service by Sunday, January 11th, at midnight, and we shall be glad to submit the affidavits of Mr. iSeverson and Mr. Winslow, a starter, to this effect, if it is desired by the Commission as a matter of record. On the morning of January 12th, 1914, we had ten cats in service, all of which had been approved by the Cttmmission — one on the Forest Hills shuttle, four on the bridge local line, and five on the main line. Mr. Severson also reports that he had a man posted at the Wood- side trestle, and one at the Manhattan slope of the Queensboro Bridge at all times during which cats were running and until one o'clock A. M. January 13th, to forestall careless operation. Five of the cars we are now using are double-truck cars which we have rented for use pending the receipt of our new cars. We are also very glad to be able to report that we have been advised that four of the new cars have been shipped and are now on their way to New York by fast freight ; that they left Logans- port, Ind., at about 6 :30' p. m. January 12th, 1914 ; that a special agent is coming through with the cars, with instructions to see that they are not delayed, and to telegraph from day to day the progress they are making. We are also advised by the car company that seven more cars will be shipped this week. We have spared no time oT money in an earnest endeavor to meet the Commission's wishes in this matter, and to protect the traveling public, all of which was actuated -not only by the desire to "comply 728 Investigation of Public Seevioe Commissions with the orders of the 0<)mmissioii, but also to meet our own responsibility. Very truly yours, RSS/ABS EGBERT S. SLOAE", President. WOW C. W. W. (Endorsed as follows) : PUBLIC SERVICE COMMISiSION EOR THE FIRST DISTRICT. Received Jan. 16, 1914. ELECTRICAL ENGINEER'S OFFICE. Mr. 'Shuster also put in evidence letter dated February 'iH, 1914, addressed to Public Service Commission, First District, signed Robert S. Sloan, President, stamp mark : " Public Service Com- mission for the First District, Received March 3, 1914, Electrical Engineer's Office." The letteir above referred to is as follows : MANHATTAN AND QUEENS TRACTION COMPANY, Sixty Wall Steeet, New Yoek. Executive Office, New York, February 27, 1914. Public Service Commission, First District, 154 Nassau Street, New York, N. Y. Re Order in Case No. 1783. (Endorsed as follows) : SUBMITTED TO PUBLIC SERVICE COMMISSION, FIRST DISTRICT, March 3, 1914. Action taken: Order adopted denying Application for rescission — See Case 1783. JAMES B. WALKER, Act. Secy. On January 9th an order w'as made by your Commission in the above case, providing im. part that this corporation shall cease to Eepoet of Joint Legislative Committee 729 operate its existing equipment, and shall overhaul the same and make all repairs necessary to put said equipment in a safe operating condition, and to maintain the same in such condition until sup- planted by new cars. Ful-ther, that it shall be overhauled, and the necessary repairs thereto shall be made before said cars shall be again operated. A number of our new cars, as you know, have arrived and are in operatioin ; and we will soon be in a position to thoroughly rehabili- tate certain of the single-truck cars referred to in said order. These single-truck cars are well adapted for the local service main- tained on the Queensboro bridge and we believe that some of them can be rehabilitated and put in a thoroughly safe operating condition. It is not our understanding that this order was intended to pre- vent us from ever using the single-1*uck cars again, even though they were put in safe operating condition. We will soon have the time to devote to such a purpose, and we would like to avail ourselves of it, and place a number of these single-truck cars in good condition satisfactorily to your engineers, and after they are placed in such a condition, to have your 'permission to operate the same. Further, as we are now principally operating new cars, we believe that the above order ought to be amended or rescinded. With these two points in view, we respectfully request that the said order in Case 'No. 17&3 be rescinded, and that we be granted permission to put in operation such of our single-truck cars as we are able to rehabilitate and put in a safe operating condition satisfactory to your engineers. Eespectfully awaiting your disposition of this matter, we are Very truly yours, ROBERT S. SLOAN. BSS/ABS D. H. Jr. 3/3 W 0. W. C. W. W. (Endorsed as follows) : PTTBLIO SERVICE COMMISSION FOE THE FIRST DISTRICT. Received Mar. 3, 1914. ELEOEEIOAL JEJStGBSCEEE'S OFFICE, 730 Investigation of Publio Seevioe Commissions By Cbairman Tlhompson: Q. When you got there, the first you knew of this thing at all was on the 6th ; the first you knew there was any complaint against you ? A. The first we had any formal complaint. Q. Infoirmally, did you know it ? A. I knew the inspectors were there before. Q. When first ? A. They are there all the time. They inspect all the time. Q. This evidence shows they inspected way back in September ? A. Yes, sir. Q. But they did not see fit to make any complaint after the inspection in iSeptember ? A. No complaint, as I remember. Q. And Mr. Mason testified the condition he found the cars in in January was the same as in September ? A. I think so. Q. But there was no complaint made after the September inspection at all ? A. INo, sir. Q. And that was made suddenly on the 6th of January? A. Yes, sir. I say no complaint, perhaps the inspectors of the Com- mission had recommended to the manager of the road, but I don't know. Q. When you got there on the 8th, you started in on the hearing, and they practically gave you no opportunity to be heard? A. After we made the stipulation, I did not care to examine. Q. Your contention was, as I take it, that you never had had any accidents, serious at all, and never had but two anyway? A. Yes, sir. Q. But you did not go into that for the reason they made this order ? A. Yes, sir. Q. And that order was suggested in the first place by Mr. Wilder, the engineer ? A. Yes, sir. Q. And you accepted it ? A. Yes, sir. Q. And the Commissioner accepted it, and the proceeding was closed ? A. Yes, sir. Q. And the next you knew about it, the order was served on you peremptorily the next day, putting you out of business at mid- night? A. Yes, sir. The next was the service of the order, the next day, in the afternoon. ' Q. When you went back there after that order, you asked Mr. Puptis ^bout it^ ^nd he s^id Mr, McCall would bo|; §tw(J for it? Repoet of Joint Legislative Committee 731 A. He said the whole Oominission would not stand for it, and particularly the Chairman. Q. And you went in and talked with the Chairman about it? A. Yes, sir. Q. Did he give you amy leniency at all until you told him you would not comply with the order? A. He was perfectly willing to discuss the matter at the hearing. Q. Did he make any suggestion about extending the order until you told him you would not comply with it ? A. We did not say we wouldn't, but we couldn't, and asked for a reasonable time, and he called in the other men, and the time was given to us. Q. And the only time given was Saturday and Sunday? A. Yes, sir. Q. Saturday being a half holiday, and Sunday a whole holiday ? A. Yes, sir. Mr. Whitney. — ■ Do you want documentary evidence as to whether this is an accurate statement or not ? ■Chairman Thompson. — I think Saturday is a half holiday and Sunday a whole holiday. I think the Public Service Commission, and the Chairman, in this case was extraordinarily diligent, and it causes considerable surprise to this Committee to find them so extraordinarily diligent on this case. I make a public criticism on that ground. On the face of the thing, I think it needs explanation and considerable of it. Mr. Whitney. — On the subject of whether complaints went to the company he does not recall whether informal matters were submitted between September and January. Mr. Sloan. — I said no formal complaints were made. I don't know what recommendations — Mr. Whitney. — If the Chairman wants information, the condition of your equipment was called to your attention many times. Mr. Sloan. — I do not know what complaints the inspectors made to the manager of the road. I believe they made some. Mr. Whitney.— The way the record stood, it looks as though the first real notice you had was thp o?-4ej' fof 3- hearing thp B^St 732 Ihtestigation or Public Service Commissions Mr. Sloan. — That is the first real, notice I had. Mr. Whitney. — The company did. Mr. Sloan. — Through the operating department they probably did. By Ml". Shuster : Q. Mr. Sloan, when was it that your company acquired this property? A. December 27, 1912'. Q. So that you had operated this road at the time this order was entered against you, about thirteen months? A. Tes, sir, about that time. Q. And after you acquired the properties, was it necessary for you to construct any part of that road ? A. Yes, sir. It was neces- sary to construct all the road from the plaza, Long Island plaza of the Queensboro bridge, out to the Long Island Railroad station in the village of Jamaica, except certain tracks over the viaduct over the Sunnyside yards, which were constructed by the receivers or the South Shore Traction Company, I don't remember which, and which we acquired when we took the property. Q. During the thirteen months' ownership, you constructed a large part of that system, did you ? A. The construction was going on during that time. Q. And you had ordered new rolling stock? A. Yes, sir; that is, the contractors had. Q. And were the cars which were under complaint here, the cats which you had acquired to help out the city pending your litiga- tion ? A. We never had any litigation, our company. These were the cars we acquired from the South Shore Traction Company's receivers. By Mr. Whitney: Q. At this time when the formal case came up, how far were you operating into Queens? A. We were operating out beyond that trestle over the Long Island Railroad Company's tracks. I think perhaps we were operating, I will say, out beyond that trestle, but I don't know how far. Q. What is the grade on that trestle? A. That I don't know. I can get it for you, but I don't know. It is quite a steep grad«- Eepoet of Joint Legislative Committee 733 Mr. Shuster. — I shall have to object to couinsel's cross-examining on anything that may have been outside of the direct examination. It appears here that nothing was done about that trestle, and there was no complaint against the trestle, and no part of the proceedings which moved the Commission to make the ordeT. Chairman Thompson. — Objection sustained. Q. What was the grade on the Queensboro bridge ? Mr. Shuster. — ■ I object, upon the same ground. Mr. Whitney. — It has a bearing on the question of whether the brake equipment was adequate to hold the oats on that grade. ■Chairman Thompson. — The record shows nothing about the grades or trestles, and does not go into a thing except the condition of the cars, and there is not a fact in the record except the condi- tion of the cars, and consequently there could not have been any- thing before the Commission upon the lines you are examining ahout when the Commission made the ordeT. By Mr. Whitney : Q. Did you have any accidents on the Queensboro bridge ? A. We have had accidents on there. Q. Had you up to the time of the formal case ? A. I think we did have one, yes, sir. Q. Do you recall whether December 16, 1913, when a car ran down the incline of the bridge ? A. From my memory I believe there was an accident at that time. Q. Was theTe another accident after the formal case? A. We have had lots of accidents ; I can't remember. Chairman Thompson. — After you complied with this order ? Mr. iSloan.- — ■ Yes, sir. Chairman Thompson. — I do not think that is material. Q. Was that accident on December 16th the only accident before the formal case ? A. I wouldn't say that. There may have been two on the bridge. 7S4 Investigation of Public SeevicIe Commissions Mr. Whitney. — I want to present the report of Mr. "Wilder, dated December 22, 1913, which is really the basis of the Oommis- sion starting the formal case on its own motion. 'Chairman Thompson. — We will have to have the record, and I will not take a statement of that kind. The basis shows in the proceeding, and they refused to hear the statement of these people in reference to their accidents there, and I should like to see the complaint and the repoTt based upon it, and if it was served upon these people with an opportunity to be heard. Mr. Whitney. — ■ That will make it possible for me to call atten- tion to the different times the condition of the property was brought to the attention of the company. Chairman Thompson. — Very well. I am not going to send for the Commissioners to explain this occurrence at all, but we will be glad to hear any explanation they have to make if they wish to come and make it. Mf. Shuster. — I think it should appear that a request was made upon the Secretary of the Commission to produce the files in rela- tion to this whole transaction, and he produced a file here which I assumed was the whole record, and if there is anything that he has not produced, I call on him now to produce it, and let us examine it. Mr. Whitney. — I produced what I was asked to produce exactly. There were various informal complaints of this company, with respect to its equipment, and the unsatisfactory results from that correspondence was the cause of the starting of the formal case. Chairman Thompson. — I would like to see the record of that, and I would like to see how complaints on the motion of the Com- mission get started against poor, weak concerns or individuals, and the attotneys for the Commission can take them up and go through the courts to the Ctourt of Appeals without anybody furnishing money or expert services or anything else, and if a large or power- ful corporation, they cannot hear a complaint of a citizen against them unless they have money and power and influence and everything else. Mr. Whitney. — That statement is not true. Eepoet of Joint LEoisLAtiVE Oommittes Y36 Mr. iSiiuster. — I think that should be expunged from the record. Chairman Thompson. — In connection with this, I would like you to produce this afternoon an order made by the Public Service Commission last week in reference to a vote of three to two in reference to enforcing an order for equipment against the B. E. T. or some of their subsidiary lines, and I would like it to go into the record along with this, for the purpose of comparison. It is some line in which Commissioner Hayward attempted to get an order enforced, and I only get it from the public print, and the Com- mission voted not to enforce it. I would like a copy of the order and the vote. Mr. Shuster. — Have you produced that unexecuted order, or draft of an order, that Mr. Sloan referred to this morning in his testimony ? Mr. Whitney. — I found a document or papetr which apparently, as in quite a number of cases, counsel submits a formal order which the Commission may adopt in the condition submitted, or may modify after meeting. It is only a form. It is like an order sub- mitted to a court which the court may change. This apparently is what Mr. Sloan had ref eTence to this morning. I can only assume this is what he had reference to. I find on comparison of the final order with this paper, as corrected in writing, that the final order follows this thing with the pencil corrections. Mr. Shustet. — Is this the whole record of the matter, or the balance of the record of this matter ? Mr. Whitney. — Those are various informal matters applying in general to this case. Mr. Shuster. — Is this all there is of them ? Mr. Whitney. — Excepting in addition there are the various correspondence I spoke of a moment ago in reference to equipment. Mr. Shuster. — Is this a part of the secretary's records, or of the counsel's records ? Mr. T^itney. — Secretary's records. The leaf in front, the one you hold, is a letter from counsel. T36 lirvEsTtGATiol^ Ot Public Seevice CoMMlssiolifa Mr. Sloan. — I do not state ttat no complaints about tlie rolling stock were made to the corporation. I want to be clear on that. Mr. Shuster. — These gentlemen are not here voluntarily, and we sought them instead of them seeking us. I will read in the evidence a letter dated January 9, 1914, addressed " Honorable John E. Eustis, (Commissioner, Case No. 1783. Manhattan Queens Traction Corporation. Repairs to roll- ing equipment, that is sub-title. Sir: As orally requested, I transmit herewith proposed final order in the above entitled matter. Eespeetfully yours, George S. Coleman, Counsel." Initialed in the left-hand corder, EMD/LEIST. Pencil note, " Form of order changed." " THW." Mr. Shuster. — " EMD," I suppose those are the stenographer's initials ? Mr. Whitney. — The lawyer's initials, and LEN is the stenographer. Mr. Shuster. — I also read into the evidence the following order : At a stated meeting of the Public Service Commission for the First District, duly held at its office, No. 154 Nassau street, in the Borough of Manhattan, City and State of New York, on the . . • • day of January, 1914. Present : Commissioners. In the matter of the Hearing on the motion of the Commission on the question of repairs, improvements, changes and additions in and to the rolling equipment of the Manhattan and Queens Traction Corporation, and the regulations and practices of said company, with reference thereto. 'Sub-title: Additional equipment and repairs to present equip- ment. Case No. 1783. Final order. A hearing having been duly had by and before the Commission in the above entitled matter on January 8, 1914, Commissioner Enstis presiding, Robert S. Sloan appearing for the Manhattan and Queens Traction Corporation, Edward M. Deegan, Assistant Repoet of Joint Legislative Committee 737 Counsel, attending for the Commission, and it appearing at the hearing that said company has ordered a number of new cars to be delivered in the near future, but the Commission being of the opinion after said hearing that the rolling equipment now in use by said company is not in a reasonably safe operating condition, and that certain repairs, improvements and changes should reason- ably be made in such rolling equipment in order to promote the security or convenience of the public, Ordered, That said Manhattan and Queens Traction Corpora- tion shall overhaul all its rolling equipment now in use and make all repairs necessary to put said equipment in a reasonably safe operating condition, and to maintain the same in such condition until supplanted by new cars. Said equipment shall be over- hauled and the necessary repairs thereto shall be made at the rate of two cars in every three days, the first car to be overhauled and tepaired not later than January 24, 1914. All such work to be done to the satisfaction of the 'Commission. Further Ordered, That this order shall take effect immediately, and shall continue in force until changed or abrogated by further order of the Commission. Further Ordered, That within . . days after service of this order upon the said Manhattan and Queens Traction Corporation, said company shall notify the Public Service Commission for the First District whether the terms of this order are accepted and will be obeyed. By the Commission, Secretary. Mr. Shuster. — There is written in ink across the front page in •the right-hand margin, " Draft 1-9-14, J. W.' E." Mr. Whitney. — You will find the formal order in. the case already read in is an exact copy of that with the corrections. Chairman Thompson. — All there is about this, after they ,«hanged their mind, you took this and with lead pencil changed it. Mr. Whitney. — As a matter of fact, the Commissioners had that . before them at the time of the meeting, and changed it themselves at the meeting. Vol. 1 — 24 738 Investigation of Public Seevice Commissions Chairman Thompson. — Whose handwriting is it in ? Mr. Whitney. — This writing is Commissioner Maltbie's, and this writing on the first page is mine. This " stet " with the date is my handwriting, and that " before said cars shall be again operated " I am not absolutely sure whose handwriting that is. The phrase " before said cars shall be again operated " is in the handwriting of Commissioner Williams. By Mr. Shuster : Q. The proposed order above read into the evidence is the order which you referred to as having been shown to you by Mr. Deegan as prepared by him to carry out the instructions and agreements entered into between your company and Commissioner Eustis at the end of the heaa'ing of January 8th ? A. You refer to this form that you have just read? Q. I have ignored the pencil and pen corrections. A. To the best of my belief that is the order. The order that he presented was in substance the same as that. Mr. Shuster. — The final order of January 9th was copied from the above proposed order and changed in th« manner indicated in that final order ? Mr. Whitney. — Was copied from that, and with the changes indicated in writing. Chairman Thompson. — And without any further or other hearing ? Mr. Whitney. — No. By Mr. Shuster : Q. As I recall, Mr. Sloan, you testified this morning that you had complied with this order in every particular? A. Yes, sir; we satisfied the Commission's engineers. Q. And satisfied the Commission's engineers that you had com- plied with it, and so notified the Commission ? A. Yes, sir. Chairman Thompson. — And then after that you had more accidents than ever? Mr. Sloan. — I don't know about that. The Commission has records of all the accidents reported to them. Repokt or Joint Legislative Committee 739 Q. Do I understand this order is still standing against your com- pany ? A. I do not want to give a legal opinion. It is academic as to us. We did not do any more, I suppose, and we let it go. I suppose, as a matter of record, it is still outstanding. Arthur C. Hume, being recalled for further examination, testified as follows : By Mr. Shuster: Q. Mr. Hume, you were consulted by the Manhattan Traction Company or their president at the time this final order was served upon Mr. Sloan ? A. Yes, sir. Q. And did you accompany Mr. Sloan in his travels to the Com- mission and their counsel, and were you present at the conferences that he detailed ? A. I did and was. Q. You heard all of Mr. Sloan's testimony in regard to those various conferences ? A. I have, yes, sir. Q. Is there anything that you recall having taken place that this Committee should be apprised of that Mr. Sloan has not recalled? A. 'No, I think not. I think Mr. Sloan has given a very complete statement of what took place. Q. And your recollection as to the transactions are the same as Mr. Sloan has testified to here? A. Yes, sir. Q. Do you recall the matter of Teference to court proceedings; Mr. Sloan's testimony was that the Commission were informed that his plant could not comply with their orders, and that they would be forced to resort to the courts for relief to protect their property and franchise rights ? A. Yes, sir ; I remember that. Q. Would you detail your recollection of what took place at that time, and what was said ? A. My remembrance is that Mr. Sloan brought to the attention of the members of the Commission present at that conference the possible injury that might be done to the franchise rights of this company, and stated that the company could not afford to jeopardize the possible life of their franchise by discontinuing operations, even under order of the Commission, and that therefore it was necessary to determine this matter very quickly, as in case the Commission was unwilling to modify the terms of its order, or extend the time that it would be necessary to apply to the couTts for relief in some form or other, presumably V40 Investigation of Public Sbevice Commissions in the form of an order restraining tlie Commission from inter- fering "with the operations of the cars, and enforcing the then provisions of the order. Q. Was there any comment to that on the part of the Commis- sioners, or any of them ? A. Well, there was a long general dis- cussion, and this conference, I think, lasted somewhere between an hour and half and two hours. That is my recollection. It is a long time ago, and I have not thought about it since that time. Q. 'This franchise that you were fearful would be affected hy this order is the same franchise that the Commission had refused the power to exercise to your company, the original taker of the franchise ? A. It is the same franchise with certain minor modifi- cations. Those modifications mainly limited as to time of con- struction, and so forth, after the Commission took the action which I have described in my earlier testimony. Q. In its main provisions and purposes, it is the same franchise to which the Commission was opposed from the beginning? A. It is. Q. The Steinway tunnel or Belmont tunnel serves the same terri- tory relatively that the Queensboro bridge lines serve, does it? A. Well, it reaches the surface at a point very near the Queensboro bridge plaza and presumably much the same people use it that use the traction lines now extending across the Queensboro bridge. Q. And the tunnel is capable of serving substantially the same facilities to the same territory? A. Practically, yes, sir. Of course it goes out at a different point in Manhattan. Q. At the time of your fight in the courts with the Commission against you the Steinway tunnel was owned by the Belmont inter- ests so-called, :and they were seeking to dispose of that to the city ? A. That is my understanding. Q. At the time your company furnished cars and equipment, so that the city or the Bridge Commissioner could operate a line over the bridge, pending your litigation, was there any effort made on the part of the competing interests to render that same service when they found that you were willing to do it? A. When the opera- tion was 'actually installed by the Bridge Commissioner, the New York and Queens Company made application, I think, within four days from the time that that service was either announced — when the announcement was made that that service was to be installed, Repoet of Joint Legislative Committee 741 or within fout days from tlie time that that service was actually given, for permission to run theit cars over under a temporary certificate or license. Chairman Thompson. — Who owns that company ? Mr. Hume. — The Belmont interests. Chaitman Thompson. — Interborough ? Mr. Hume. — It is now. Q. That is the same corporation which refused to enter into any such arrangement at some time prior with the city ? A. Yes, sir. Chairman Thompson. — They had the opportunity to operate cars over the QueensboTo bridge before your corporation was given opportunity to do it ? Mr. Hume. — They were in the position of having about seventy- one miles in Queens in operation at the time the Queensboro bridge was completed, but up to the time when the operation ajcross the Queensboro bridge started on our equipment they had refused to run their cars across the Queensboro bridge. Chairman Thompson. — They had been given an opportunity to run them, but actually refused to do it ? Mr. Hume. — That is my understanding. Q. When jou were willing to do it, they rushed to the front and were ready to give the service ? A. That is the fact. Q. They did not get the permission from the Board of Estimate to opeTate ? A. Yes, their application for a temporary permit, was granted. Q. The Belmont lines, the competing lines with your line, their application was not accepted by the Board of Estimate, was it? A. It was. They are operating and have ever since that time, have operated their through service across. There are two opera- tions acl-oss that bridge, one known as the local service, which is a service rendered for three cents and two tickets for five cents, and there is an arrangement whereby the New York and Queens Com- pany, and the Third Avenue Eailroad Company, and the Man- hattan and Queens now all operate across the Queensboro bridge. 742 Investigation of Public Seevice Commissions By 'Ohairman Tihompson: Q. That is, since the city took over the Steinway tunnel? A. Yes, sir. Q. Before the city took over the Steinway tunnel there was no one operating but you? A. The 'New York and Queens had refused to run their cars across the Queensboro bridge until this operation was started by the Bridge Ooinmissioner, with our equip- ment, and then within four days they came in and asked for a temporary license to run their cars across there. Q. How soon were they given that license? A. Almost immediately. Q. Did the Public Service Commission approve of that license? A. I don't think they were required to approve it, as it was temporary. Q. Has it never been approved ? A. After operating for a short time under the temporary license they secured a franchise follow- ing the regular procedure, and that franchise was approved by the Public Service Commission, as I understand it. Q. When did they get that franchise, before or after January, 1914 ? A. Before, and their proceedings to secure a permanent franchise followed almost immediately after the application for a temporary license. By Mr. Shuster : Q. And that permanent right has been approved by the Commis- sion ? A. As I understand it. Q. How long after the right was granted by the city did it take the Commission to approve of that? A. That I cannot tell you. I was not interested in that. There was practically no opposition to that. I don't think I even attended the hearings. I was not interested. Chairman Thompson. — The testimony said the cars were twenty-one years old. Did you try to get old cars to operate when you first started that ? Mr. Sloan. — We simply took the old cars we found operating on the line. Chairman Thompson. — If you could get old cars would you go after them ? Eepoet of Joint Legislative Committee 743 Mr. Sloan. — I don't know. I am not a oar purchaser. I don't know. By Mr. Shuster : Q. Mr. Hume, I understand you have given some study to the Public Service Commissions Law, particularly to their financial provisions, and also their franchise provisions, and that you have in time past prepared quite lan elaborate memorandum on that; is that a fact, and are you the Mr. Hume who has prepared that and given study to those provisions with a view of recommending amendments to the law ? A. I have had charge of a number of applications made by different street railway companies for per- mission to issue bonds and stock under the provisions of the Public Service Law, and have therefore natuTally been interested in the subject. I have had those applications before the Commissions of both districts, and I was requested a few months ago to make some suggestions with regard to what, from my practical knowledge of such applications, might I consider would be or was needed to make the Public Service Law more beneficial to the railroad inter- ests and to the interests of the public at large. I have prepared such a memorandum. Q. Would it be asking too much of you to furnish the Committee with a copy of such memorandum ? A. I would be very glad to. The original was sent to the people who requested it, and I undoubt- edly have copies, and I should be very glad as soon as I have opportunity to do so to look it up and send it to you. Chairman Thompson. — Is it possible, under the present prac- tice, for a public service corporation, about to issue bonds, to issue them and expect to get them approved at any time within a knowledge of what the bond market will be when you have to put them on the market for sale ? Mr. Hume. — I don't think it is safe to assume or for the ofiicers or directors of a railroad company to go ahead on the assumption that they will get a decision from the Public Service Commission within any specified length of time. The decision may come very quickly, or be a great many months or years. Chairman Thompson. — Usually the decision comes later than you could possibly prophesy the condition of the bond market ? 744 Investigation of Public Sbevice Commissions Mr. Hume. — One ptoposition, I remember it was rendered eigh- teen montlis after the application was made. When it was rendered. it was a very satisfactory decision for the company, but the road would have been in the hands of a receiver if it was not for the fact that the contractors were friendly with the road management. Chairman Thompson. — Is it a real harm — the delay the prac- tice seems to make inevitable, when you make your application for the bonds, don't that put you into such a distance in the future that you cannot tell what your bond market will be when the bonds are ready for disposition ? Mr. Hume. — Yes, sir. Chairman Thompson. — Doesn't that work a hardship in many instances ? Mr. Hume.— It practically prevents, in my judgment, i*ailroad construction, street railroad construction, in the State of ISTew York at the present time. Chairman Thompson. — There is another thing, isn't there? Neither Public Service Commission, up-.State or down-State, has ever granted a certificate for new railroad building, and railroad building has practically ceased since the Public Service Commis- sions were instituted ? Mr. Hume. — I understand the Manhattan and Queens Traction Corporation is practically the only one built since that law went into effect. By Mr. Shuster : Q. Is it feasible to make financial arrangements in advance of the granting of authority to issue the securities ? A. I should say, as a practical question, that in most cases it was not. It depends — ' there are certain bankers who may be so willing to build a line and consider the line intrinsically would be so valuable and profita- ble that they are willing to tie up their money and take the risk and wait until the decision is arrived at — until the Commission ultimately arrives at a decision. Q. Do you know of any such lines or any such bankers in the State of New York ? A. No, sir. Eepoet of Joint Legislative Committee 745 Q. If tiere is anything along this line which you wish to sug- gest upon the record, in addition to your memorandum, we would be glad to have it. A. Thank you. I don't think of anything that would be worth taking the Committee's time on. By Mr. Whitney : Q. I think you gave the impression that the Manhattan and Queens serve practically the same territory as the other company over there ; that is true only as to the bridge itself, isn't it ? A. My recollection of my statement was that the tunnel came to the sur- face at a point very near the Queensboro plaza, and that the people served at that immediate point going to Manhattan were pTacticaily the same people that would use the railroads on the bridge. Q. How far is the end of the tunnel from the plaza? A. I cannot give you the exact distance. About quarter of a mile, isn't it ? Q. Over a half a mile. A. Those are matters of record, and I am not very familiar with them. Q. The Manhattan and Queens have no franchise going down into Long Island City, have they ? A. They do not run down in it. Q. Isn't it true the franchise of the Manhattan and Queens from the bridge out goes through a territory not served by any other trolley line ? A. I should say at one point it was in competition with one line of the ISTew York and Queens 'County out near New- town. The lines are only a short distance apart at one point. Q. There is no other line extending to Jamaica, is there? A. Not extending all the way. By Mr. Smith : Q. You say the tunnel goes out at a point very near or near the end of the Queensboro bridge, half a mile or something of that kind ? A. I should say within that. Q. What the Committee desires to know is as to whether or not either one of those propositions, the tunnel or the bridge, by having proper railroad facilities, with its variations and extensions, would not he capable of serving identically the same territory ? A. With the proper extension facilities, I should say so. Q. You understand there is a great territoTy to be served beyond the opening of the tunnel and beyond the end of the bridge? A. Yes, sir. 746 Investigation of Public Service Commissions Q. With proper facilities, either one of those propositions, the bridge or the tunnel, would be capable of serving that territory? A. That is unquestionably true in the sense that before either the bridge or the tunnel were opened the people of Queens were com- pelled to reach the borough of Manhattan either by taking a long trip into Brooklyn and going across Williamsburg bridge, a round- about way, or taking the ferry over. Q. As an abstract proposition, the tunnel and the bridge are competing propositions ? A. In that sense you have indicated, yes, sir. Chairman Thompson. — At the time you started operations the people were very anxious for some sort of transportation over the bridge ? Mr. Hume. — Very, extremely anxious. Chairman Thompson. — And the Belmont people would not give that? Mr. Hume. — That is my understanding. Chairman Thompson. — ■ What I draw from this in my own mind, and the way it impresses me, is the Belmont interests had this tunnel and did not want to finish it, and did want to sell it, and there was not any customer, only the city, and if a lot of people were trying to get over the bridge and wanted accommo- dation, and they could prevent the giving of those accommodations over the bridge, they could force the city to buy the tunnel, and after the city did buy the tunnel, with the subway contracts, after they got it, and these fellows are on the bridge, if these fellows could be butted off the bridge and into the river, it would be a very nice thing for them. Mr. Whitney. — It may aid you to know that while theoretically Mr. Hume's answer is correct, that the tunnel and bridge are com- peting, on the theoretical question asked him, it may aid you to know that an additional tunnel is to be built at Sixtieth street, and that will also be a competing line to Queens, and you talk with anyix)dy in Queens county and they will tell you the Queens bridge and the Steinway tunnel and the .Sixtieth street tunnel will not be adequate for their interests. Report of Joint Legislative Committee 747 Mr. Smith. — It is not a question of being able to carTy the passengers, but it is a proposition that at the time of the discussion on the sale of the tunnel a franchise over the bridge would be a competing proposition. Mr. Whitney. — On that remark, when Mr. Hume was getting the South 'Shore Traction franchise there was not any discussion or thought on the subject of a purchase of the tunnel by the city, and the only reason the people who built it did not operate it them- selves was they did not get it completed within the franchise time, and they had no franchise to operate it. The tunnel was taken in to the dual plan, and taken in at a low price. It cost nine million dollars and was taken in at three. By Mr. Shuster : Q. The fact remains that until your company, Mr. Hume, was ready and willing and anxious and procured rights to cross that bridge with the service, the New York Company was preventing and refusing ser\'ice on that bridge by trolley ? A. That is the fact, as I understand it. Q. And after you got the rights they were eager to and did pro- cure similar rights ? A. That is correct. The local service had been offered directly to the New York and Queens Company and they refused to take it over. Mr. Whitney. — By the city authorities. ■ Mr. Hume. — By the city authorities, yes, sir. Chairman Thompson. — The litigation in reference to franchises and opinions appears in the, case on appeal in the action entitled People ex rel. South Shore Traction Company vs. Willcox and others, reported at 196 N. Y., at p. 212. The case and points will show the whole record. It appears in an order made by the Public Service Commission, First District, in relation to the matter of the hearing on motion of the Commission to determine whether an order should be made requiring the Third Avenue Railway Com- pany and the Forty-second Street, Manhattanville and St. Nicholas Avenue Railroad Company to relay, repair or alter the rails on any lines operated in the city of New York, being Case No. 1893, and order made May 21, 1915, by (present) Edward E. McCall, 748 Investigation of Public Service Commissions Chairmaii, and J. Sargent Cram, George V. S. Williams, Robert C. Wood and William Hayward, Commissioners. Among other things, that order provided : " 2. To make (referring to the railroad) such repairs and replacements as are necessary to put in first-class condition the tracks on which it operates on Forty-second street, from the ISTorth river to the East river. This work shall be begun immediately, shall be diligently prosecuted and completed not later than October 1, 1915. " These repairs and replacements shall, among other things, eliminate the following defects reported in Exhibit 1 on the hearing herein as existing in October, 1914: Beginning at Twelfth Avenue Broken rail at ferry crossing, over 6 inches in the head gone. Spot welding tried ; no good. Rail broken at point of the switch. Eastbound rail: Broken rail head opposite N^o. 649, also corrugations. Broken rail opposite l^o. 609. Westbound rail: Not so bad. There are many corrugations all the way to Eleventh avenue. Eour tracks crossing double track at Eleventh avenue is in very bad condition. ISTeeds immediate repairs. Eleventh Avenue to Tenth Avenue Corrugations opposite Iso. 5'61-565. Two broken rails opposite Park & Tilford Eastbound track: Corrugated for almost the entire block to Tenth avenue. Special work at Tenth avenue where this company crosses its own tracks is in very bad shape. Rail head split and four feet of the head gone near the heel of the switch. Joints in bad shape. EiEBOKT OF JoilfT LEGISLATIVE COMMITTEE 749 Tenth Avenue, Ninth Avenue Eastbound track : Broken rail opposite 'No. 467. ■Spot welding tried ; no good. This track badly corrugated and very noisy in spots for the whole block to Ninth avenue. Westbound track not in such bad condition. Ninth Avenue to Eighth Avenue Two bad joints east of the crossing. Corrugations opposite Nos. 355, 351, 323, 321, 313, 307. This track is corrugated in spots all through the block. Westbound track: Corrugations opposite No. 312-308. Tongue loose on the crossover opposite No. 304. General condition of this track fair. Eighth Avenue to Seventh Avenue Westbound track: Corrugated in spots and many noisy joints. Eastbound track, fair. Seventh Avenue to Sixth Avenue Condition of eastbound track ' B ' : Corrugations opposite Nos. 51, 29, 17. Bad corrugations opposite No. 13. Westbound track: Corrugations opposite Nos. 51 to 47, No. 17. Bad corrugations opposite No. 13. Sixth Avenue to Fifth Avenue Corrugations on both tracks very few feet. Quite noisy. Fifth Avenue to Madison Avenue Fairly good condition. Some low joints at the special work, but not serious. A slight i-everse curve at Vanderbilt avenue. 750 Investigation of Public' See vice Commissions The rails on tlie curve are both worn. The outer curve at Fourth avenue into Forty-second street is in bad condition. Spot welded along the surface to make repairs. The corrugations at Grand Central Station is in bad condition. From there to Lexington avenue, condition fair. Some corrugations. Crossing' at Forty-second street and Lexington avenue bad and noisy. No hard centers installed. Broken rail, south frog of the inside rail of the northbound track. Lexington Avenue to Third Avenue Both tracks worn, many corrugations and 'loose joints where three-foot pieces have been put in. Special work at Forty-second street and Third avenue, many haTd centers broken, sections loose. Generally in bad condition. Third Avenue to Second Avenue General condition 'C ' : Corrugations and loose joints. Holes in rail of eastbound track from spinning wheels. Second Avenue to First Avenue Through cut in tunnel. Corrugations, broken rail and loose joints. Eastbound track: Very bad shape. Worse than the westbound track. First Avenue to the Ferry Condition ' B ' : Special work at First avenue poor. Further ordered, that this order take effect at once and within ten days after service thereof the Third Avenue Railway Com- pany and the Forty-second Street, Manhattanville and St. JSTicholas Avenue Railroad Company notify the Public Service Commission for the First District whether the terms of this order are accepted and will be obeyed." Service admitted May 24, 1915. Report of Joint Legislative "Committee 'TSi It appears from the records, an extract of minutes of the Com- mission, on October 27, 1915, that the following action was had by the Public Service Commission on that order : " THIRD AVENUE RAILWAY COMPANY AND FORTY- SECOND STREET, MANHATTAN AND ST. NICHO- LAS AVENUE RAILWAY COMPANY — IMPROVE- MENTS IN TRACKS — HEARING AS TO COMPLI- ANCE WITH FINAL ORDER — MOTION EXTEND- ING TIME FOR COMPLIANCE "A hearing was had pursuant to the notice in Case No. 1893 directed to be transmitted to the Forty-second Street, Manhattan- ville and St. Nicholas Avenue Railway Company at the meeting of the Commission on October 2'2, 1915, with respect to the com- pliance with the final order therein adopted May 21, 1915, which directed the Third Avenue Railway Company and the Forty-second Street, Manhattanville and St. Nicholas Avenue Railway Company to make certain improvements in their tracks. " Edward A. Maher, Jr., Assistant General Manager of the Company, appeared in person and asked for an extension to Decem- ber 1, 1915, of the company's time within which to comply with section 2 of paragraph B of said order. " It was moved and duly seconded that the company's time to comi^'ly with section 2 of paragraph B of the order adopted May 21, 1915, be extended to December 1, 1915. Commissioner Hay- ward thereupon made a motion, which was duly seconded, that the above motion be amended and that the counsel to the Commission be instructed to resort to whatever legal remedies were appropriate iiiider the Public Service Commissions Law for the violation by the Forty-second Street, Manhattanville and St. Nicholas Avenue Railway Company of the above mentioned order. " On the amendment the following vote was had : " Ayes, Commissioner Hayward. " Noes, Chairman McCall, Commissioners Williams, Wood. " Motion lost. 752 iNVESTiGATioiir OF Public Seevice Commissions " On the original motion to grant the extension of time to December 1, 1915, the following vote was had: " Ayes, Chairman McCall, Commissioners Williams, Wood. " J^oes, Commissioner Hayward. " Motion carried." On motion, duly seconded, the following resolution was adopted by unanimous vote: " Whereas, This Committee, pursuant to its resolution adopted on October 21, 1915, did issue a commission to Charles M. Daven- port of the city of Boston, State of Massachusetts, directing him to summon Charles E. Cotting, also of the city of Boston, on o'r before the 2'9th day of October, 1915; and " Wheeeas, a summons was duly served upon the said Charles E. Cotting by which he was directed to appear before the said Charles M. Davenport, 'Commissioner, at 11 o'clock a. m. on the 25th day of October, 1915, and to bring with him certain books, letters and other documents named in said summons ; and " Wheeeas, Said Cotting has refused to appear before said Charles M. Davenport, or to produce said books and letters as directed in said summons; and " Wheeeas, The testimony of said Charles E. Cotting and the production of the books, letters and other instruments called for in said summons are material to the proper conduct of the investi- gation which this Committee is directed to make; " Now, therefore, it is Resolved and Ordered, That the Chairman of this Committee, George E. Thompson, be, and he hereby is, authorized and empowered, on behalf of this Committee, to petition a Justice of the Supreme Judicial Court of the Commonwealth of Massachusetts to compel the attendance of said Charles E. Cotting and the production of said books and letters before said Commissioner. " It is further Resolved, That the action of this Committee, in the adoption of the foregoing resolution, be evidenced by the signa- ture of the Chairman of the Committee, and attested by the signa- ture of the Secretary, and the Committee does here and now so order." Report of Joint Legislative Committee 753 Chairman Thompsoii. — Is there anything more to come before the Committee before we proceed to adjourn ? There being no objection, an adjournment was taken to 11 o'clock A. M. November 5, 1915, at the same place. Teansceipt op Peoceedustgs Befoee Supeeme Judicial Couet, Boston, Mass. The following is a transcript of proceedings taken by the stenographer of the Committee, which proceedings were had before the Supreme Judicial Court, Mr. Justice Pierce presiding, in the City of Boston, Massachusetts, November 5, 1915 : Commonwealth of Massachusetts, 1 Suffolk, J ■Supreme Judicial Court George F. Thompson, Petitioner, V. Charles E. Cotting, Eespondent. Boston, Mass., Nov. 5, 1915. Appearances : Mr. Arthur Black appeared in behalf of petitioner, with Hon. Merton E. Lewis, Deputy Attorney-General of the State of New York, counsel, and Clarence E. Shuster, Esq., associate counsel. Mr. Wright appeared for the respondent, Mr. Justice Pierce presiding. 2 o'clock p. M. Mr. Black.— May it please the Court, I have here a petition brought by George F. Thompson of New York State, who is the Chairman of a joint Committee of the Legislature of the State of 'Em York. That Committee was appointed by a resolution of the Senate and Assembly on January 2lBt of this year to make an 754 Invjcstigation of Public Seevice Commissions investigation of the Public Service Commissions of the First and Second Districts with reference to their organization, powers and duties, together with their administration of the same. That Committee, by resolution of April 21, 1915, was author- ized to continue its investigations until the first Monday of Febru- ary, 1916, and by the terms of that resolution was clothed with all the powers which it had in its original creation. In the course of the investigations conducted by this Committee, particular atten- tion has been paid to certain contracts awarded by the Inter- borough Company of New York for the construction of third tracks along some of its elevated lines, and the Committee has been informed, from reliable sources, it believes, that there is in the possession of Mr. Charles E. Cotting, who is the executor of Gard- ner M. Lane, deceased, certain valuable documentary evidence per- taining to the merits of this investigation. The Committee, by virtue of powers which we believe can be established, have issued a commission to Charles M. Davenport of this city, directing him to take the testimony of Mr. Cotting, and to examine such documents as may be required. A summons has been made out and issued, and it is admitted it has been properly served upon Mr. Cotting. Mr. Cotting has refused to appear, it is admitted. This proceeding is brought to get the decision of the Court as to what Mr. Cotting's rights are. I desire to state now, to avoid any misapprehension, that we have been informed by Mr. Cotting and by his counsel that the apparent contest to this proceeding is not from a desire to be unfriendly or to withhold anything that is of public interest, but only to protect Mr. Cotting and the estate he represents. If this Court should hold this order should be granted, Mr. Cotting will cheerfully comply. I think I perhaps better first offer the authenticated copy of the two resolutions of the Senate and Assembly. Then there is the resolution of the Committee under date of October 21st, which authorizes the Chairman on behalf of the Committee to issue the commission to Mr. Davenport. Then we have the original commis- sion -which has been issued to Mr. Davenport, the original sum- mons, with the officer's return, and the return of Mr. Davenport, which states the facts as I have outlined them, and which are admitted. I have also a resolution which I should have appended to the petition, had I had it in my hand in time, but which came Eepoet of Joint Legislative Committee 755 in this morning, attested by the Chairman and the Secretary of the Committee, which authorizes the Chairman, on behalf of the Committee, to institute these proceedings. If the Court will per- mit me to apologize for the form in which it is presented, I will put it in with the other exhibits. I think that constitutes whatever is necessary in the way of proof of the facts. Mr. Wright. — I wish to modify a statement you made, as to Mr. Cotting's position, but I will do it in my reply. Mr. Black. — You may do it now, if you will. Mr. Wright. — I will do it later, after you have concluded. Mr. Black. — The resolution of January 21st, which creates this Committee, gives to it all the powers of the legislative law, and also certain enumerated powers given in the resolution. The legis- lative law of the State of New York, which is applicable to com- mittees of this character, and which is admitted by Mr. Wright for the purposes of argument here to-day, section 60' of the Consoli- dated Laws, which is chapter 37 of the Laws of 1909, provides as follows: "A legislative committee may require the attendance of witnesses in this State whom the Committee may wish to examine, or may issue a commission for the examination of witnesses who are out of the State or unable to attend the Committee or excused from attendance, which commission, if directed by the House or Legislature by which the Committee is appointed, may be executed during the recess of the Legislature. A commission issued as pro- vided in this section shall be in the form used in the courts of record of this State, and shall be executed in like manner. Unless otherwise instructed by the Committee appointing them, the Com- missioners shall examine privately every witness attending before them, and shall not make public the particulars of such examination." Mr. Wright. — Will you admit that the Legislature is now in recess ? Mr. Black. — Yes, sir. It will be contended that this clause of the act which I have just read, " which Commission, if directed by the House or Legislature by which the Committee is appointed, 756 Investigation of Public Seevicb Commissions may be executed during the recess of the L^iskture," prohibits the execution of the Commission at this time. If your Honor will look at tihe resolution of April 21st, which continues the existence of this Committee, and whicl. in terms clothes it again with all the powers conferred upon it by the Legis- lature, and by the resolution creating it, I think you will find a basis for the finding that the Committee is not now attempting to exercise a power which it has not. When the Committee was first appointed by the resolution of January 2'lst it had all the power conferred upon it by the legislative law. That power under this act unquestionably gave it the right to issue commission. We contend that by the resolution of April 21'st, which continued in that Committee all the powers with which it was originally clothed, is intended, though not specific, as an authority for exercising its right unde'r this statute, and that the issue of a commission to Mr. Davenport is in compliance with the legislative law and the resolu- tion under which it is given. That being so, we come to the ques- tion whether the courts in Massachusetts will recognize this commission. At the outset, I must say that I have been able to find no pre- cedent. It is, of course, obvious that the matter is of grave public importance. The wisdom of a law which permits a State or a municipality to investigate the administTation of its laws, and to investigate the expenditure of public moneys, cannot be questioned. At this day, more than ever before, it is wise to strengthen every instrumentality which may be available to that end. Under chapter 175 of our Revised Statutes, sections lO' and 11, which are practically identical, it is provided that " a justice of the Supreme Judicial Court of of the Superior Court, upon the appli- cation of a tribunal which is authorized to summon but not to compel the attendance of witnesses and the giving of testimony before it, may, in his discretion, compel the attendance of such witnesses and the giving of testimony before any such tribunal, in the same manner and to the same extent as before said courts." Section 11 is the same except it refers to a tribunal which may summon and compel. In other cases it appears the power is given to a justice of this court in the exercise of his discretion to compel the attendance before snch a tribunal as in his judgment is wise. This petition is brought by such a tribunal clothed with the dignity Eepoet of Joint Legislative Committee 757 of enactment by the Legislature of the State of New York. It is engaged in the pursuit of an important public duty, and it comes to this State having complied with the statutes and laws of its own State, and it asks foT the exercise of that discretionary power which I believe is granted under one of these sections. The Court. — I suppose that statute was passed to meet a situa- tion which constantly came into being in this State, as it had come into existence in other States, and in the 'States at large, and in the nation, where a body like a legislative committee was given authority to take testimony, that they needed the arm of the court to make it available, in the way of punishing for contempt if the witness did not attend. That was the Thomas case, and the Hitch- cock case, and the Lawson case and others. But this is not a case of a commission sitting under letters rogatory. It is a case wheTe a body which is not a sovereign body, but acting as a delegation of the sovereign authority, sends somebody over into this sovereignty without asking permission of the sovereign of this State to appear, and without any suggestion in the way of previous rules and practices that it has any right. That is the case, isn't it ? Mr. Black. — That is the case. There is no precedent for the proceeding which we have brought here. It seems that in the exercise of a discretion the .State could well help out the sister State in a matter of this importance. We help litigants for use in the other States. The Court. — Those in other States, that is true. Mr. Black. — It is a question whether the court can go as far as to help out the Legislature. There has been no statutory means provided for that help unless it appears in this statute. The Court. — If it exists at all, it must exist in the inherent powers of the court to enforce a hearing before a quasi judicia'l tribunal. The question is whether there can be a quasi judicial tribunal which is not created or recognized by the sovereign. Mr. Black.— The decision in the State of New York which I can cite does hold that the Legislature may invest its committees with a quasi judicial power, and that as such they do not violate the terms of the Constitution which keeps the branches separate. 758 Investigation of Public See vice Commissions We come, I think, finally to the exercise of the discretion of this court, whether, in deference to the policy of comity which exists between our States, you will recognize this inherent ^wer to help a body which is quasi judicial. The Court. — The question is whether or not he has the power, but not whether or not he will. It appears to me to be a very laudable endeavor, so far as the surface shows, and I do not understand that anybody contests that feature of the situation. Mr. Black. — 'No, sir. The Court. — I cannot see how it differs in principle from three or five men getting together in Boston from Fitchburg, my town, it used to be, and saying : " The necessities of the State in refer- ence to the enforcement of the prohibitory law up in our town and adjoining towns seems to require us to take testimony as to the way they conduct the business here. We have an extreme law here, and we have an extreme law there, and we would like to find that out" And they come in before me and talk for an hour or two, telling how desirable it is to have the locked doors unlocked, and allowed to peep in and see what it is, and they say : " Won't you order these witnesses to appear, and if they won't appear, won't you send them to jail ? " The last question is not whether I will order a sale of property, but whether or not M.r. Cotting, if he will not come, if I know of a comfortable place for him to stay in at the •Charles Street Jail. That is the principle, and if I should not feel that I had the power to hand him over, as I say, to a comfortable place in the Charles StTeet Jail, then I have not the power to act. Mr. Black. — If your Honof will permit, I should like to have Mr. Lewis, a deputy from the Attorney-General's office in the State of New York and counsel to this Committee, make a brief statement. The Court. — Certainly. Mr. Lewis. — I only thought it perhaps wise and proper to sug- gest to the court that inasmuch as this is an entirely new question in this State, it might perhaps be desirable for the Court to take the papers and examine them. Kepoet of Joint Legislative Committee 759 The Court. — I am going to do that. It has been my habit to sit here, and instead of concealing what thoughts ran in my mind, talking them out and letting them have the benefit of it. Some lawyers do not like it and others do. Mr. Lewis. — Most of us have found it helpful to have sugges- tions from the bench. I cannot refrain from expressing, now that I am on my feet, the very great importance of this application, if it can be found within the power of the Court to grant it. The investigation which is in progress was undertaken in the early days of the last session of the Legislature, and at the conclusion of the session in April a committee charged with the duty of conduct- ing the investigation had not completed its labors, and its existence was continued formally with all the powers it had theretofore pos- sessed. It makes probably little difference in this State what the provisions of the statutes are in New York State, but the statute clearly confers upon the Committee the power to issue a commis- sion to be executed in anothe'r State. As to whether or not the other State shall recognize the commission and aid in the execu- tion of the purpose for which the commission is issued, depends, it seems to me, as your Honor has suggested, largely upon the question of comity or co-operation as between the States. Of course there are instances — The Court.- — Let me make a suggestion that occurs to me for a moment. In ISTew England, I don't know about it in New York, but most of the States here have what we call comity statutes in reference to obtaining the testimony of witnesses who are desired in a foreign State. For instance, Vermont has one, and New Hampshire has one, and Maine has one and Rhode Island, and I don't know about Connecticut, in which perforce of the statute the courts lend their assistance to the compulsory attendance of wit- nesses in Massachusetts, for instance, from Vermont or New Hampshire, upon the happening of certain things, as, for instance, the payment of double trial fees, etc. The fact that the Legisla- tures in the various New England States have found it necessary to pass such a statute is rather ■ — or, perhaps the fact they have passed such a statute raises at least a suspicion it was thought that the courts without that authorization had not any such power. 760 Investigation of Public Seevice Commissions There cannot be anything any stronger than the assistance of the State of Massachusetts, for instance, which has a murder case of great importance getting witnesses from the State of ~New Hamp- shire, which is only a short distance away. But without that statute I do not think anybody ever thought it possible to get such witnesses. Mr. Lewis.— Does your statute compel the attendance of witnesses ? The Court. — Most of the States do, upon certain conditions. Mr. Lewis. — Of course, in this precise situation, our courts — The Court. — I do not mean to say that those conditions are the same as getting witnesses in Massachusetts, but there is a statute which confers authority to compel their attendance. Mr. Lewis.— I haven't any doubt but that weTe the situation reversed, and were a legislative committee of the State of Massa- chusetts seeking to take the testimony in New York State by a committee upon a resolution authorizing the taking of it, I have no doubt of the power or willingness of the courts of 'New York State to assist in the taking of that evidence and procuring the ■attendance of that witness. It may be that the courts of New YoTk State have inherent powers under the Constitution of New York State that the courts of Massachusetts do not possess. I am not prepared to say that, but I think it is safe to say that were the situation reversed, our courts would issue an order requiring the attendance of the witness, and perhaps, to emphasiize the peculiar propriety in this particular case for the exercise of discre- tion, if the power to exercise discretion be found to exist, is found in the fact that Mr. Lane, a resident of Boston, was a director in the Interborough Rapid Transit Company, a >New York city cor- poration, and that all the transactions concerning which the docu- mentary evidence relates ocxjurred within the city of New York, and the discussions that were had, and which are believed to have been reduced by Mr. Lane into written form, took place in New York, and it is more than pTobable that the documents themselves were prepared in New York city ; at any rate, they relate to New York city conditions and conditions which involve enormous sums Report of Joint Legislative Committee 761 of money, and conditions which, if they are as it has been charged, or as it is believed the documents may support, ought to be reme- died. They can only be remedied by act of the Legislature. The Legislature can only act upon the recommendations of its com- mittees. It has created this Committee for the purpose of recom- mending such action as may be desirable. Nothing in Mr. Lane's conduct is in the slightest degree subject to criticism. On the contrary, those who know of the attitude which Mr. Lane took in connection with this transaction have only words of the highest piaise for his share in the transaction, and it is believed that such memoranda and such documents as this Committee is now seeking in this State will disclose the fact that he was animated by a righteous indignation at the proceedings and the purpose the board of directors was attempting to accomplish, and that these documents and these memoranda were prepared for the purpose of preventing the accomplishment of that purpose. The information of the Committee, as obtained through the testimony of Mr. J. P. Morgan, is to the effect that Mr. Lane's communications, verbal communications, to him, operated to prevent the consummation of the plan, to which Mr. Lane objected. It becomes, therefore, as your Honor will readily see, a vety important matter to the people of the State of New York, and in view of the fact that our courts would unquestionably do in New York what we are asking the court of Massachusetts to do, I want to ask your Honor to take that fact into consideration in the determination of the application. The Court. — When it comes to the exercise of my discretion, if it does, then the fact that the sister State would exercise the dis- cretion favorable to Massachusetts, if standing in the same situa- tion, ought to have some effect. Mr. Lewis. — I think so. The Court. — I agree with you. Mr. Wright. — If your Honor please, as my brother Black has stated, this matter comes before you, I assume, under section 10 or 11 of chapter 175. So far as I know the authority of this court is confined to the provisions of this statute, and I think your Honor tas well said, when you interrupted Mr. Black, that there are doubts in your mind as to any authority which the Legislature may 762 Investigation of Public Service Commissions give you whereby you can compel the attendance of Mr. Cotting. You Tvill note that the precise language of the statute, section 10, is that this court " upon the application of a tribunal which is authorized to summon but not to compel the attendance of wit- nesses and the giving of testimony before it, may, in its discretion, compel the attendance of such witnesses." My first argument is that this body is not a tribunal in Massa- chusetts. Whether or not it is a tribunal in New York I am not prepared at this moment to argue. I have attempted in running through and making my examination of the law to find whether or not the word "tribunal" has been adjudicated in this common- wealth. I have been unable to find that it has. In l75th of Massa- chusetts, in a case which was brought by three creditors, in bank- ruptcy, under this statute, the court there raised a question as to whether a commissioner was a tribunal, but it did not pass on the point. Our position is that therefore, in determining your powers here, you will have to examine the provisions of the statute, and we say that in the first place the bill, or petition, is defective, for certainly the Chairman of this Committee, even if he had been appointed in this State, I doubt would be considered .a tribunal, and my brother, in reply, will doubtless say that this proceeding was authorized by a resolution of the entire Committee authorizing and directing the Chairman to bring this action. Be that as it may, I shall contend, nevertheless, as a matter of strict pleading, that the Chairman cannot be a tribunal himself. iSecond. If your Honor does not agree with me as far as I have gone, it certainly must be obvious that while this body, this legisla- tive Committee, is clothed with full powers, and I deny that they have powers to come here or to issue a commission, which I will refer to later, that nevertheless, when they come to Massachusetts, they do not come as a tribunal, but rather upon crossing the State line and coming to Massachusetts, they leave behind them their robes" of authority, and while I have no doubt that all of them are very estimable citizens, and while we are all glad to see them here in Massachusetts, we do not recognize them in Massachusetts as being a tribunal, and we also deny that under the statute here in Massachusetts they have the right to compel the attendance of witnesses or to compel them to give testimony. Eepokt of Joint Legislative Committee 763 Our position in this case is perhaps a little different, from the fact that Mr. Cotting is not an individual, in this case, but the executor of a dead man's estate. We do not know, and we assume that the investigation which this Committee seeks to make is friendly, but on the other hand, it must be perfectly obvious that we would not appear and give testimony in this matter for fear we might later through some ramification of this matter be held to have been volunteering, and that, of course, we desire to avoid. I will therefore say to you, in all fairness, that I do not see how this case comes within the provisions of sections 10' and 11, which my brother has referred to. Let me go a little bit further, however, and say to you that this, after all, is the taking of a deposition pure and simple. That is what they attempt to do, and possibly I might for a moment review the history of what has transpired. Some two or three weeks ago the Committee appeared here in Massachusetts, and upon consultation with our office, asked Mr. Cotting to appear and testify, and practically the same position was taken by Mr. Cotting then as I take now. Later on, as Mr. Black has said, the Committee went back to New York and issued its commission directed to Mr. Davenport here in Massachusetts, who, by a justice of the peace, served a summons duces tecum upon Mr, Cotting, which summons, by the way, we claim was beyond the power of the commission to direct the justice to issue, or to ask him to issue by reason of the fact that the authority given by the Committee to the Commissioner, did not authorize the Commisr sioner to have Mr. Cotting bring books, papers and other docu- mentary evidence which the summons duces tecum demanded him to do ; but, however, going back to my argument, what they want to do is to take the testimony of Mr. Cotting before a Commis- sioner. That isi what I think, although in this petition they say they want to take the testimony themselves, but, however, the matter seems to me reasonably clear. Keally, if the Legislature desires Massachusetts citizens to answer the inquiries of foreign bodies, it would have said so, or so stated in its statutes. •Section 46 of chapter 17'5 provides for the taking of deposiitions of witnesses on commissions issued out of the State, and let me call your Honor's attention to the language of that statute : "A person Diay be summoned and compelled, in like manner and under the 764 Investigation of Public Seeviob Commissions same penalties as are provided for a witness before a court, to give his deposition in a cause pending in a court of any other State or government. Such deposition may be taken before a justice of the peace, or special commissioner in this commonwealth, or before a commissioner appointed under the authority of the State or gov- ernment in which the action is pending. If the deposition isi taken before such commissioner, the witness may be summoned and com- pelled to appear before him- by process from a justice of the peace, or special commissioneT in this commonwealth." So far as I know, from my examination of the statutes, that ia the only statutory provision, and I think, inasmuch as what they say this petitioner is seeking, which is, after all, only the deposition of Mr. Cotting, that your Honor's construction of sections 10 and 11, which I heretofore referred to — ^ that you must also regard section 46, which I have just referred to. This is not a matter before a court. I do not think any inter- pretation of law would ever make this Committee a court. Neither is it a cause pending, and so we say that the Legislature of Massa- chusetts has not as yet, by reasons of comity, decided that its citizens must respond and testify to any kind or sort of a tribunal which is organized or constituted outside of its borders, and if this wef e true, it would seem to me that it would lead to a rather com- plicated state of affairs. I think we would have strike committees possibly appointed by Legislatures. We would have meetings of councils of city governments in foreign jurisdictions issuing com- missions and coming over here and compelling attendance in Massachusetts and furnishing information to go abroad or outside of this iState. So I say to you that I believe that the only provisiion whereby a commissioner will have the power within this .State to take testimony is where the commission issues to him in matters which are before a court and a cause penddng in a court of another State or government. That " pending in a court of another State or government ", that situation does not arise here. However, I wish to even go further. Tour Honor will particularly note the language of the legislative law of the State of New York. I will just read this provision: "A legislative committee may require the attendance of witnesses in this State whom' the committee may wisli to examine, or may issue a commission for the examination of witnesses- who are out Report of Joint Legislative Committee 765 of tte State or unable to attend the committee or excused from attendance ", and then this very significant language : " which Sommission, if directed by the House or Legislature by which the committee is appointed, may be executed during the recess of the Legislature." Mt. Black has read correctly to you the extracts from the resolutions of the House and the Senate of New York, but your Honor will note that the resolve is that such committee have and maintain during its continuation as a committee all the powers conferred upon it by the Legislature, the resolution on which such committee was created. Had the Legislature of the State of New Yol-k intended that this 'Committee should have the power to issiue commissions during the recess, at the time that this continuation of the Committee during recess was authorized, it would have added the direction that a commission may be directed by this Committee to a commissioner outside of the iState. That they failed to do, and the legislative law of New York, in my opinion, would not have contained this provision, " which commis- sion if directed by the House or Legislature by which the Com- mittee is appointed may be executed during the recess of the Legis- lature," unless they intended those words to have some meaning. It is simply surplusage, and if those words were not in there, of course this Committee could have exercised or rather directed a commissioner to take testimony in Massachusetts. Had they even done that, we would say the commissioner in Massachusetts has no power to summon a witness because it is not a cause pending before a court. I have in my pleading in this matter framed it under section or rule 13, whereby I plead this as special matter. I think that it is unnecessary for me to say anything further. I might, of course, say that we do mot know what the far-reaching effect of this testi- mony might be. While the commission to the commissioner states that it muy be kept private, if in the Committee's discretion, I am somewhat in doubt as to whether or not the proceedings of the Committee itself, being public proceedings, might not be open to investigation later on by any citizen of New York State. I think I have now pointed out to your Honor our grounds for saying that, while, if this court had discretion, it might compel the attendance of Mr. Cotting, we feel that the Legislature has not provided for a case like this. There are only two cases that I 766 Investigation of Public Service Commissions know of that are in exact point, and those are the two cases referred to in the sidenotes of the statute, one being 141 of Masisachusetts and the other 175, -which referred to a case brought up in Lawrence, where a boy was expelled from school — I forget the name of the parents,. As Mr. Black has said, it is a novel question, I think, here. In both of the cases which I have referred to the court denied the petition. Mr. Black. — I do not think I can add anything. The matter has been very clearly presented by all hands, I think. Mr. Wright in his discussion of the possibilities of such a ruling, seems to fear the invasion of the rights of Massachusetts citizens. It seems to me there is no danger of that kind, because if this order should issue, it would be in the exercise of a discretion, and it would estab- lish no precedent- except in cases involving the same facts. The Court. — I think I had better examine the papers carefully. (Papers handed up to the Court.) Memoranda to be submitted by respective counsel Tuesday next. NOVEMBER 5, 1915 New York County Lawyers' Association Board Eoom, 165 Broadway, New York City The Committee met at 11 o'clock a. m., pursuant to adjournment. Kecess until 12 o'clock noon. The Committee convened at 12 o'clock noon. Eecess until 12 :30. AFTEENOON SESSION The Committee met at 12 :30 p. m., pursuant to adjournment. Edward E. McCall was called as a witness and testified as follows : Chairman Thompson. — The Committee will come to order. We will assume that the gavel sounded, because there are not many present this morninsr. . Report of Joint Legislative Committee 767 Judge, Mr. Smith wants to interrogate you somewhat in refer- ence to a matter that turned up before you, back when you were Judge of the Supreme Court. You know Mr. Smith, don't you. Judge ? Mr. McCall. — I have seen Mr. .Smith. The Chairman. — Proceed. Examination by Mr. Smith: Q. Prior to your appointment as Public Service Commissioner, you were Justice of the Supreme Court ? A. That is right. Q. And when were you appointed Public Service Commis- sioner? A. February, 1913. Q. And you had been Justice of the Supreme Court about how long? A. About ten years. Q. Ten years ? A. About. Q. You have a recollection, I suppose, of an action pending in the Supreme Court between the Amsterdam Electric Light, Heat and Power Company and the Edison Electric Illuminating Com- pany of Brooklyn, the plaintiffs, against the Mayor of the City of New York and others, to restrain the Board of Estimate and the city of New York in passing or adopting any resolution or resiolu- tions declaring forfeited or revoking or terminating or repealing or in any manner affecting the resolution of the Common Council of the city of Brooklyn, granting a franchise to the State Electric Light, Heat and Power Company? A. Well, of course I don't recall the corporate names, but I remember an action of that character. Q. You remember an action of that character ? A. Yes. ■Chairman Thompson. — ^As I understand the action — perhaps I can recall it to you rather better — it was afterward referred to Delancey Nicoll as referee ? The Witness. — I don't know anything about that. I don't know about the actual referring. I believe it did go out of the court. Q. This action which was originated by these companies to restrain the city from forfeiting this franchise came before you in different ways preliminary to trial, did it not, as Justice of the Supreme Court? A. I don't recall that. Different ways? 768 Investigation of Public See vice CoM^iiissiONS Q. In preliminary proceedings ? A. I can't recall that. Q. You can't recall ? A. No. Q. Do you know -when that action was instituted ? A. IN'o. No. I don't know anything at all about the institution of the action or about what its merits were, oT even what the pleadings were. My recollection is that it was on the equity side of the court, and I was tryin'g a case — I can't recall what it was — a very long case, and this case came in from the calendar to be taken after that trial that we were engaged on was finished. By Chairman Thompson : Q. It appears this action was instituted in 1911, in December. A. I have no recollection. Q. It appears in January they came before you — why, the fact was alleged and the date not having been alleged — A. I don't know about the preliminary stages. Q. Of course the record is the evidence, anyway. It finally came before you — By Mr. Smith : Q. Do you recollect that it did come before you in the year 1912, on or about May 6th, as ready for trial? A. Yes, I remem- ber an action coming before me, being sent in to my part for trial. Q. And on that occasion you found yourself disqualified? A. That is right. Q. By reason of ownership of stock in the Kings County Electric Light and Power Company ? A. Correct. Q. And do you recollect that upon an invesitigation or examina- tion of the books of the company it showed that youT name did not appear as a stockholder? A. I don't remember of any examina- tion. I remember their saying they couldn't find out where I was a stockholder. They had, I guess, preliminarily convened in the action so as not to get before a judge who was a stockholder — not especially my attitude in the matter. When I said I was disquali- fied they said they didn't think so. Q. And the fact that your name did not appear as a stockholder was explainable, and you explained it by saying that the stock was in the name of your secretary ? A. I don't know what I said. I know I said my name did not appear upon the list. It was in either my secretary's or officer's name. Repoet of Joint Legislative Committee 769 Q. As a matter of fact your name not appearing on the list, in whose name was that stock ? A. Mr. Maekin. Q. Who ? A. Mr. Maekin. Q. What is his full name ? A. John J. That is my 'recollection. Chairman Thompson. — How is that spelled ? Mr. McCall. — M-a^k-i-n. Q. How long had you been a stockholder on May 6, 1912, in that company? A. Well, I should judge — I can't tell accurately, but I should say eight or nine years. Q. To what extent were you a stockholder ; in what amount, or numbei of shares ? A. I can't say. The history of it is this : I bought a small number of shares, and the ultimate holding , was accretions ; that is, by stock offered to stockholders — Chairman Thompson. — Stock dividends, you mean ? Mr. McOall.— Yes. Q. Give your best recollection — or have you any recollection ? A. At that time? Q. Yes. A. I couldn't tell you. Q. Were all of your holdings in the name of Mr. Maekin? A. Yes. By Chairman Thompson : Q. What company was it. Judge ? Was it the State Company or the Amsterdam or the Edison? A. Electric Light and Heat Company — Kings County Light and Heat Company. Q. There are two — one the Kings County Lighting Company — it is the Kings County Electric Light and Power 'Company ? A. Kings County Electric Light and Power Company. By Mr. Smith : Q. How long did you remain a stockholder in that ? A. Until just previous to my becoming Chairman of the Public Service Commission. Q. This action, as a result of your disqualification, under those ciTcumstances was not tried at that time ? A. No, sir, not by me. I don't know what became of it. Vol. 1 — 25 770 Investigation of Public Sbevice Commissions Q. Was tlie reference — do you know that it was subsequently referred to Delancey NicoU? A. No; I don't know that was a fact, except that in some way I had the knowledge of its going to a referee — I think by consent ; I don't know. Q. Was it by your act as Justice of the Supreme Court ? Chairman Thompson. — ISTo, it was — Mr. Smith. — Some other Justice ? Chairman Thompson. — Another Judge. Mr. McCall. — I was trying this case, as my mind serves me — I was trying this first case, and the title was — I can't tell, I can't recall. They were sent in for trial. I said, " This case will take, in my judgment, five or six days. It better go back to the calendar and get some other assignment." And they said the calendars were all congested, or something of that kind, and preferred to stay. I said, " Then you need not wait to-day. There is no possible chance of it being heard." Chairman Thompson. — The record shows this : It shows that the case came up for trial. You called the attorneys to the bar and after consultation Judge Hatch made the statement that you had stated you were a stockholder in the company, but on examination of the books your name did not appear, and then you stated that you were a stockholder in the name of your secretary. Mr. McCall. — That is right. Then I asked the question if this company which I believe did not appear in the pleadings was in any way connected with this litigation, and in some way it was stated that they were a constituent part of it. I was disqualified, and one company — Chairman Thompson. — The Kings County Company — Mr. McCall. — I am speaking from my 'recollection. By Mr. Smith: Q. What position did Mr. Mackin hold, an officer ? A. Ck)urt ofiicer; my officer. Q. He was your court officer ? A. Yes, sir. Q. And to whom was the stock transferred just prior to your transfer as Public Service Commissioner ? A. Mrs. McCall. Eepoet of Joint Legislative Committee 771 Q. And is she still tlie owner and holder of the stock? A. She is. Q. And you say you have no recollection of the amount and no present knowledge of the amount of this holding ? A. Yes, I think 387 shares. Q. Three hundred and eighty-seven shares ? A. I think so. Q. Has there been any increase in the number of shares since it has been held by Mrs. MoCall ? A. No. Q. So that the 387 shares were the number held by Mr. Mackin ? A. That is right. By Chairman Thompson : Q. Now, Judge, do you remember any proceeding before the Public Service Commission since you have been on, in behalf of the Edison Company, for consent of the Public Service Commission to acquire stock in the Amsterdam Company ? A. No. Q. That has never come before you? You don't recollect anything? A. No. Q. Have you had any stock in any of these corporations in any other name except Mr. Mackin's ? A. Those ate the only shares of stock I held. Mr. Smith.— That is all. Chairman Thompson. — ^Are there any other questions? Judge, I am very much obliged to you. Mr. McCall. — Not at all. I'm obliged to you for keeping this open until my meeting was finished. Another matter : The ques^ tion of Kings County — this was yesterday, this Queens and Manhattan Company ? Chairman Thompson. — Yesterday. Mr. McCall. — And there was a report made by Mr. Wilder, which Mr. Whitney says he asked to put on the record — Chairman Thompson. — Mr. Whitney got into an altercation yesterday with our attorneys as to his propensity to interrupt while the attorneys were examining a witness. So I insisted that tiie Chairman here, having settled all the up-State political ques- tions last Tuesday, had very little to do now, and there were some things — 772 Investigation of Public Seevicb Commissions Mr. McCall. — Are you going to take the responsibility of settling tie political questions of the State ? 'Chairman Thompson. — ■ I insisted, as Chairman of the Com- mittee, that they permit me to' regulate the order in which the different people interrogated the witnesses, and so I informed them that our attorneys would have the first preference, and then Mr. Whitney might ask any question he wanted. At the end of this he didn't ask anything about it. I think possibly he intended to, but he forgot it. Mr. Smith. — He did examine. Chairman Thompson. — He asked such questions as he wanted. He forgot to ask to have the report put in. Mr. MoCall. — You will include that record under the circum- stances? I want that report in the record. Chairman Thompson. — I am glad to have any explanation of any of these things that come about, but of course the examination will have to be orderly, in that counsel on one side has the witness and the other side then take the witness. Mr. McCall. — Nobody has an exception to that. My reason foT asking that the order go in is that I want to take the full respon- sibility myself for that order that stops cessation — or caused cessation of operation — Mr. Smith. — That is the second order ? Mr. McCalh— Yes, sir. Mr. Smith. — The executed order ? Mr. McCall.— Yes. Chairman Thompson. — The responsibility according to yester- day seems to be with you, anyway. Mr. McCall. — I want to take that. The reason I want that report in — I sat at my desk one day and this report was laid on it by Mr. Wilder. I don't know whether you saw it or not, SenatoT. Mr. Smith. — December 23d; the report, you mean, in the form of a letter ? Report of Joint Legislative Committee 773 Mr. McCall. — December 23d, I think. Mr. Smith. — That is my recollection of the date. Chairman Thompson. — Mr. Harkness, suppose you send for the report. Mr. McOall. — When do you have another session ? Chairman Thompson. — To-morrow morning. Mr. McCall. — Have it sent down, then. Chairman Thompson. — All right. Mr. McCall. — The minute I got that report I made inquiry of what this proceeding was, and found that Commissioner Eustis was in touch with it. I then asked Commissioner Eustis to go with me over that route. And it would not be a bad idea for you gentlemen to go to that route. First, you get a grade on the bridge, then a grade on that Hillside avenue, until you come to an impro- vised structure which constitutes a safe carrying of the Long Island trains over the road — a wooden structuTe. A grade as precipitous as that (illustrating), almost. A small levd where they start to go down again.' Chairman Thompson. — We appreciate those things, and I have been over there several times, both on business and on pleasure, and am fairly familiar with the situation ovei- there, as familiar as a man can be who doesn't live here. ISTow, the criticism here goes to the record. Commissioner Eustis took a record, and the complaint came from the engineering department that the cars were not in propel- shape. The entire complaint was on the cars themselves and nothing else. Mr. McCall. — On the equipment. Chairman Thompson. — The equipment. And as the thing progressed the president of the concern, Mr. Sloan, and his lawyer, Mr. Hume, were there, and Mr. Sloan tried to examine the wit- nesses, but his examinations ot cross-examinations, or his side of the case was postponed by interruption sometimes and by arrange- ment at other times, until the record shows that Mr. Wilder said, " What I hoped to get while here was an order giving these people 774 Investigation of Public Seevice Commissions reasonable time to put cars in shape, and it can be done by allowing tliree days for every two cars." Then Commissioner Eustis turned and asked if they would accept that order, and they did, and Sloan said if that was to be the disposition of the case he would have no further questions to ask and no further appearance in the case, and didn't make the statement in the record. The case was sub- mitted — a rather one-sided submission — on the understanding, on the record — appearing from the record that this order giving three days for every two cars, or else it was three cars every two days, I have forgotten which — and the case was closed on a record of that kind. The Public Service Commission next day arbitrarily made an order and disconnected — Mr. McCall. — That is right. I would not take the responsibility of being charged with manslaughter. I take full responsibility for that. I don't want a record that doesn't have its full amplitude of the situation. That is the reason I was disturbed that you would not let that order of Wilder's in. Chairman Thompson. — The criticism doesn't come from the order in that case at all, but in reference to the other case. Mr. McCall.— What is that ? Chairman Thompson. — Here is an order, out last May, in reference to the Third Avenue. Mr. McCall.— Yes. Chairman Thompson. — Pretty nearly similar. Mr. McCall.— Not at all. Chairman Thompson. — And they get considerably longer than nine hours. Mr. McCall. — ISTo; it is not so at all. Chairman Thompson. — What about it ? Mr. McCall. — I will tell you what about it. And I think you are justified in asking the question because of these newspaper reporters. Do you know how much money they spent since May 15th? Report of Joint Legislative Committee 7Y5 'Ohairman Thompson. — • No. Mr. McCall.— $185,000. Chainnaii Thompson. — ■ That is not much in New York. Mr. McOall. — I know, but you are talking about this particular thing. Every piece of work called for by the order will be done in four or five days. Work they are given to December 1st on, it is finished now. Outside of what was required in the order, they have spent over $22,000 on things not asked of them to do. When you come to know the facts. Senator, there is a little different color to it. That is the point. You must not take these things for granted. Chairman Thompson. — I don't. Mr. MoCall. — It is just simply this: If you are expecting perfectioa in these things, you are better versed than any man on earth to know that you can't get it. You can get as near it as possible, and then exercise common sense. Chairman Thompson. — I only expect the same quality of per- fection in New York that we have in Middleboro. Mr. McOall. — You and I aren't going to fight over Middleboro. Mr. Smith. — Judge, I think you can say your order as pre- sented at the next hearing, or report of Mr. Wilder, can take its place in the record. Chairman Thompson. — Judge, in referring to this same matter : This order that I read in reference to Third Avenue, there were certain things to do by October 1st and certain things to do by November 1st and certain other things by December 1st. Mr. McCall.— Right. Chairman Thompson. — And some other things by December 1, 1916. Now the matters for November 1st, they have not been performed. Have they been postponed? Mr. McOall.— I don't know. 776 . Investigation of Public Seevice Commissions Mr. Smitli. — October 1st was postponed. (Here ensued discussion off the record.) Chai'rnian Thompson. — If there is nothing further, we will suspend. By Mr. Harkness : Q. Judge McCall, in reference to the questions Mr. Smith asked you about the Kings County Electric Light and Power stock, since that was given to Mrs. McCall, have you ever had anything to do with it ? A. ISTo. Mr. Smith. — We can assume that. By Mr. Harkness: Q. And, further, do you remember any case since you have been Chairman of the Commission in which the Kings County Electric Light and Power Company was involved ? A. No. ISTo. Q. You don't remember ? A. I don't remember any, and if there was, even though I felt that there was not a disqualification, I should have refused it. Chairman Thompson. — You would not think you ought to act if the stock were in Mrs. McCall's name any quicker than if it were in Mr. Mackin's ? Mr. McCall. — That is a question of motals. There would be no legal disqualification, but I would not act. Chairman Thompson. — We will suspend until to-morrow morn- ing at 10 :30 at the same place. Whereupon an adjournment was taken to 10':30' o'clock a. m. Saturday, November 6, 1915, at the same place. Note. — Later the stock books of the Kings County Electric Light and Power Company, which were in the hands of the transfer clerk of the transfer agent, viz., the Franklin Trust Company, were produced before the Committee, showing that since December Repoet of Joint Legislative Committee 777 21, 1908, John J. Mackin never had any stock in the concern except the following : 1908. December 21, John J. Mackin, County Court House, New York City. From Andrew Freedman, the following stock: Dr. No. Cr. No. Shares 773 998 100 774 999 100 775 lOOO lOO A 2824 A 3884 87 Total 387 ■This stock is still in the name of John J. Mackin and never has been transferred since December 21, 1908, on the books of the company. NOVEMBER 6, 1915 New Yoek County Lawyers' Association Boaed Room, 165 Broadway, New York City The Committee met pursuant to adjournment at 10:30 o'clock A. M., Chairman Thompson presiding. Tea VIS H. Whitney, being recalled for further examination, testified as follows: By Mr. Shuster : Q. What records have you brought in response to my request? A. I only brought some cards which are index cards of cases, that is, against the various companies. If you want more detailed information than that I will have to send to the office for it. Q. You do find there are some proceedings pending? A. Yes, sir. Q. You might state the proceedings in each case, starting with the Kings County Electric Light and Power Company. A. The Kings County Light and Power Company is a lessor company, and is therefore not an operating company itself. I will give you the 778 Investigation of Public Seevice Commissions cases in which the Kings County Electric Light and Power Com- pany have been to us. I do not know whether they are the cases that you are interested in or not. I find there have been five mat- ters, formal matters, affecting Kings County, that Kings County Company. Case 1174, an application to issue five million dollars of convertible debenture bonds. Q. What is the date of that ? A. Octobe'r, 1909. That case was before Commissioner Maltbie. There was an order and opinion, and an order adopted in that January 24, 1910. Q. Was that before the full Commission? A. I have not the minutes of the Commission here, but I assume the full Commission acted on it. An order would have to be acted upon by the full Commission. There was an order approving in patt the applica- tion. I don't remember the amount allowed. Case 1304 was merely the adoption of the form of the annual report the company was to make and was similar to the annual report of all lessor com- panies. 1477 was before Commissioner Maltbie, an application foT approval of a million dollars of additional bonds. That was made December 30', 1911, and the case was discontinued August 6, 1912, apparently without any order allowing the bonds. 1542 — By Mr. Lewie: Q. Is there any record of the application being withdrawn? A. I cannot tell from these. I can get the full papers if you wish. 1542 is merely a question as to compliance with the uniform system of accounts. 1575, before Commissioner Maltbie Novem- ber 6, 1912, application foT the issuance of two and a half million dollars additional bonds ; opinion and approval order December 17, 1912. Those are all the formal cases against the Kings County Electric Light and Power Company. By Mr. Shuster : Q. What was the occasion for special proceedings against this company in regard to the matters as to uniform system of accounts ? A. There wasn't any. 1304 was adoption of the annual report for 1910, and that simply was the uniform form of annual report, hut it is noted as a case against that company in order to be able to serve that company. Report of Joint Legislative Committee 779 Q. Will you get the records on the bonding transactions in shape where we can have those available when we want them ? We would not want them to-day. A. Yes, sir. Q. Can you tell us the names of the subsidiary companies, or the companies owned or intercorporate relations? A. I cannot undertake to give you all of them because I have not had any opportunity to look this matter up at all. I recall that the Kings County Electric Light and Power 'Company, I think, in 1899, was leased to the Edison Electric Illuminating Company of BTooklyn, which is the present operating company, and I may say in that ooimection, because I think there has been some confusion in the newspaper stories, some of them using the name of the Kings County Lighting Company, and that is a separate company oper- ating in a particular part of Brooklyn and has no corporate relations with either of these two companies. Q. Any directors in common ? A. I understand not. I under- stand it is entirely independent financially as well as corporate. Q. If you will, go' on and tell us of the proceedings, if any, against the Edison Electric Illuminating Company of Brooklyn — that is the lessee of the Kings County Electric Light and Power Company? A. Yes, sir. Well, I will give you these without having looked them over previously. 1304 was a form of annual report. 1351 was a case started May 26, 1911, as to special rates for electricity, and discontinued Aptil 1, 1913. The ease was before Commissioner Maltbie, and as I recall it, that case was discontinued because there was a larger case started. 1478 was an investigation as to the discontinuance of service in connection with the construction of the Fourth avenue subway. That was a dispute between the company and a subway contractor over a contract for the supply of electricity. Q. And that was when? A. That was in MaTch, 1912. Com- missioner M'altbie — Q. What disposition was made of that? A. They had discon- tinued the rendering of service to the Bradley Contracting Com- pany, which is constructing two big sections in the Fourth avenue sutway, on the ground that they had not paid a bill due to the Edison Company, which bill was not for electric service, but was for some construction work which the Edison Company was doing as a sub-contractor for the Bradley people, and in view of the fact Y80 Investigation of Public Service Commissions the Conimissioii — in view of the fact that this electric service was being used to run pumps where the subway construction work was below sea level and required constant pumping, the Commission had 'an immediate investigation of that and ordered the company to restore the service. 1542, before Commissioner Maltbie, and is the saane case in reference to the compliance with the uniform system of accounts. 1564 is an application of the company for approval of the acquisition of 122 shares of the capital stock of the Amsterdam Electric Light and Power Company. August 12', 1912, before Commissioner Maltbie, approval ordered July 30, 1914. Q. That application was allowed? A. Yes, sir. Q. For the purchase? A. Yes, sir, and approval otder, as I stated. Q. That was doubtless approved by the whole Commission, was it ? A. I assurhe so, yes, sir. Q. If you will, get that record for us. A. Yes, sir. 1540, complaint of Albert Moritz and others against the Edison Electric Illuminating Company of Brooklyn. That is on a question of rate foi electricity charged by that company. That case is still pending. That was being held before Commissioner Maltbie until the time he left the Commission, and since that time it has been heard by Commissioner Hayward. It was started July 16, 1912. 1565 was an application by the Edison Electric Illuminating Company of Brooklyn and the Manhattan Bridge Three-Cent line for the approval of an agreement between the two companies as to the furnishing of electricity for the opei-ation of the Manhattan Bridge Three-Cent line. That was in August of 1912. 1571, the com- plaint of Holbrook, Cabot & Rollins Corporation, G. B. Erye and T. B. Bryson as to the maximum demand charge for electric current. That is dated October 18, 1912, and an opinion of the Commission December 2'0', 1912, and a supplemental opinion and dismissal ofder April 22, 1913. That case related to the price for electricity in wholesale quantities for subway work. Q. That was before the whole Commission ? A. The testimony in that case was heard by Commissioner Maltbie. The disposition was before a majority of the Commission. 1575, application for approval of two and a half millions of stock; testimony heard before Commissioner Maltbie. Started ISTovember 6, 1912, and Report of Joint Legislative Committee 781 opinion and approval order December 17, 1912, by a majority of the Commission. Q. Does it show who the Commissioners were ? A. This memo- randum I have here does not. Q. You will have to get that later? A. Yes, sir. Oase 1975, the complaint of Bittman and others as to alleged refusal to furnish service. That started June 18, 1915, before Commissioner Hayward. Q. And is still pending ? A. I am quite sure it is still pending. 1983, Phillips against the company, as to the Teplacement of a pre- payment meter; Commissioner Hayward. These are mere minor cases, as to meters or something of that kind; June 20', 1915. Case 2000, complaint of the Atlantic Amusement Company, before Commissioner Hayward, as to the unreasonableness of a provision m their contract requiring five-year term; July 27, 1915. 2026, Koehler, as to overcharges for electric current. This is a dispute as to an individual bill, before Commissioner Williams; October 5, 1915, before Commissioner Williams, and is still pending. 2027 ,• Dale & Son, October 5, 1915, befoi-e Commissioner Williams, and still pending. 20'38, complaint of Ardover village, for poor service, pending, and just started. Q. That comprises all the proceedings had and now pending against the Edison Electric Illuminating Company of Brooklyn? A. Yes, sir. Q. Are there any proceedings pending as to the Citizens' Elec- tric Illuminating Company? A. No, siT. Q. Or the Municipal Electric Light Company ? A. No, sir. Q. Do you know whether those two corporations were merged in the Edison Electric Illuminating Company of Brooklyn ? A. Well, I really don't know, but they are certainly not operating companies. Q. They appear to have meTged in 1899. Chairman Thompson. — Which is the big company in Brooklyn ? Mr. Whitney. — The Edison Electric Illuminating Company of Brooklyn. Chairman Thompson. — What is the holding company ? 782 Investigation of Public Service Commissions Mr. Whitney. — I do not know where the majority of the stock is held. Chairman Thompson. — What relation is the Kings County Electric Light 'and Power Company to the Kings County Illumi- nating Company — the Kings County Electric Light and Power Company — and there is the Kings 'County Lighting Company, and what relation is there between them ? Mr. Whitney. — The Kings County Lighting Company has abso- lutely no relation with the Edison group of companies, as I understand. Chairman Thompson. — There is no directors interlocking ? Mr. Whitney. — No, 'sir ; there is no corporate i-elationship, and as I understand, there is no financial relationship. Chairm'an Thompson. — Isn't it a fact Mr. Brady is a director of both companies ? Mr. Whitney. — My impression is he is not in the Kings County Lighting Company. Mr. iShuster. — I have a list of the directors here. James C. Brady is a director of the Kings County Lighting Company. Mr. Whitney. — My impression was the Kings County Lighting Company was 'a company largely held by Chicago people. Mr. Shuster. — He is also a director of the Kings County Elec- ,tric Light and Power Company, and also vice-president of that company. By Mr. Shuster: Q. The AmsteTdam Electric Light, Heat and Power Company, is that owned by either the Kings County Electric Light and Power Company or the Edison Illuminating Company of Brook- lyn ? A. I really don't know. I have not looked that up. I could get a chart here in 'a very few minutes that would show those relationships. Q. It might be well to have such a chart filed with the Com- mittee, if you will; that would show any other subsidiary com- panies ? A. It would show all the companies of Brooklyn that have been organized at any time and show their present corporate Report of Joint Legislative Committee 783 relationships so far as leases or mergers or consolidations are con- cerned, and there is also filed with the 'Commission from time to time the list of directors of these various companies. I do not look them over personally, but I can get them fo¥ you. Q. Can you get that chart by telephone ? A. Yes, sir. Chairman Thompson. — Another thing that occurred to me; a week or two ago there was some decision in reference to the Edison Company, permitting them to .use the old-style lights as against the use of the new Tungstens which would take less power. Is that catalogued in the list of your cases that has been given ? Mr. Whitney. — No, sii- ; that is a case against the New York Edison Company. Chairman Thompson. — Aren't they some relation; aren't they part of the same family of lighting companies ? Mr. Whitney. — I imagine you will find from the directors there whether they are related or not. Chairm^an Thompson. — What was thefe about that decision — it was a decision where, for instance, the lights they served were the old-fashioned incandescent lights, and all I wanted to know was whether Commissioner McCall participated in that decision. Mr. Whitney. — Yes, sir, he did. Chairman Thompson. — That was a case where Commissioner Maltbie had it in his hands four or five years, oT a long time ? Mr. Whitney. — Yes, sir, and a decision and an order were made in that case shortly before he left ofiice. Chairman Thompson. — And the decision was not in accord with the determination Mr. Maltbie had arrived at ? Mt. Whitney. — The order was changed from his recommenda- tion. The other Commissioners outvoted him. The new case was started against the company as to some details of that order, and that was the matter that was acted on a short time ago. By Mr. Shuster: Q. Mr. Whitney, have you given us all the information you brought with you in regard to cases and proceedings pending 784 Investigation of Public Service Commissions against any of these companies ? A. I brought along the caTds with regard to the Kings County Lighting Company. Q. I think while we are at it, we may as well have those, since you brought your records. A. Case 1110, May 14, 1909, before Commissioner Maltbie, application for approval of $450,000 of bonds. Opinion and approval order, July 2, 1909. Case 1144, complaint as to rate foT gas; that is August 6, 1900. Q. What disposition was made of that ? A. That case was dis- missed because of defectiveness in the papers. There was another case started on the same subject. 12'73, Kings County Lighting Company, Mayhew and others, against the company, as to the rate for gas ; opinion and final order, and that started January 4, 1910, and opinion and final order October 20, 1911. I think that is the ease that was taken up on certio'rari by the company, and where the Commission was defeated in the Court of Appeals. Chairman Thompson. — That is the Kings County Lighting rate case? Mr. Whitney. — Yes, sir. Chairman Thompson. — And that has been pending for how long? Mr. Whitney. — There was an order made there in 1911. By Mr. Shuster : Q. Orde* made in 1911 and reviewed on certiorari ? Mr. Whitney. — You asked whether that is still pending ? Chairman Thompson. — Yes, Mr. Whitney ; if I am sure as to this particular case, that case went up to the Court of Appeals and was ordered back and is now still pending before the Commission. 'Chairman Thompson. — How long has that been pending before the Commission ? Mr. Whitney. — The case originally stai-ted January 4, 1910. Chairman Thompson. — When was it ordered back ? Mr. Whitney. — I have not the record of that. Chairman Thompson. — I understand it has been pending at least two years. Eepoet of Joint Legislative Committee 785 Mr. Whitney. — I think that is about Tight. By Mr. Shuster : Q. That is, pending before the whole Commission, or some par- ticular Commissioner ? A. Cotnmissioner Williams, and I think Commissioner Hayvvard has sat some in that case. Q. Do you know whether any hearings have been held since it was sent back from the Court of Appeals? A. Yes, sir. 1276, that is an application by the company for approval of the sliding scale foT reduction in charge of gas; September 22, 1910, and dis- continuance order December 22, 1911. 1'280' is a complaint of Valtz as to the rate for gas. In Thirty-first Ward, started Novem- ber, 1910, 'and discontinued in September, 1911. Q. How did that happen to be discontinued ? A. I assume it was probably discontinued because the entire question as to the rate of gas is included in the Mayhew ease. 1304 is a form of annual repoft. 1344 is against all the lighting companies as to installing gas meters and setting, indexed uniform order requiring them to set gas meters. 1474, an application March 2, 1912, for approval of the issuance of $729,000 of bonds, and August 31, 1912, order authorizing the issuance of $625,000. 1577, the case against all the gas companies with reference to fegulations as to gas pressure. November, 1912; an order made in July, 1913. 1916, February 16, 1915, a complaint of McMahon as to alleged refusal to return a deposit made upon a gas contract. 2013, started October 17, 1915, an application for appfoval of issue of $675,000 of bonds. Q. That last is still pending ? A. Yes, sir. There are only two cases pending. By Mr. Smith : Q. Is that return meter charge still pending ? A. I don't believe it is pending. JoHK J. Mackin, being first duly sworn, testified as follows : Examined by Mr. Lewis : Q. Where were you last night ^at 5 o'clock ? A. Five o'clock ? Q. Yes. A. I was home, I guess, I think. Q. Where is your home? A, 10'27 Ogden avenue. Y86 Investigation of Public Service Commissions Q. Where were you at six ? A. Around that neighborhood. Q. Did you have any communication, or discussion or conyersa- tion with any one between five and six ? A. Between five and six ? Q. Yes, telephoning, or written or verbal ? A. I don't know. Q. Were you in your house ? A. Yes, sir. Q. All the time between five and six ? A. Yes, sir. Q. Did you leave youT house ? A. Yes. Q. What hour ? A. I should judge about 7 o'clock or around there. Q. Did you have any communication, verbal, telephonic or writ- ten with any person between six and seven, or between six and the time you left your house? A. I left my house about 7 o'clock, I think. Q. Did yon hear from anybody or talk with anybody between those hours? A. I went to Washington Heights .to a chiropodist to get my feet fixed. Q. Did yon have any talk with anybody in the meantime? A. Wot that I remembel'. Q. Anybody telephone you ? A. No, sir, I don't remember. I came from Washington Heights back to Highbridge. Q. Where did you go then ? A. I went to the Highbridge Club. Q. How long did you stay there ? A. About 'an hour, I guess ; something like that. Q. Where did you go then ? A. I went home. Q. How long did you stay ? A. About half an hour, I guess. Q. What time did you leave? A. I don't know what time it was I left. I got back to my house around 10 o'clock ; something like that, I think. Q. What time did you leave? A. About ten minutes after ten; something like that. Q. Did you have any conversation with anybody between the time that you Teturned and the time that yoa left, verbal, written or telephonic ; did yon talk to your wife ? A. Yes, sir, I talked to her. Q. Did she give you any message ? A. No, sir. 0. Did she say anybody had been there to see you ? A. No, sir. Q. Did you see any one approaching your house at any time? A. Why, no. Report of Joint Legislative Committee YS'Z Q. Where did you go when you left ten minutes after ten ? A. I think I went around to Nelson avenue, one block east of where I live. Q. How long did you remain there? A. I passed Dr. Hitch- cock's house to see if thei'e was a light, and there was none, and I went back home and had a hot bath and went to bed. Q. Were you home all night from that time on ? A. Yes, sir. Q. Did you know any one was looking for you to serve a subpoena upon you ? A. ISTo, sir. Q. At any time during the evening, last evening, did you know any one was looking for you to serve a subpoena upon you? A. No, sir. I was around there all the time. Q. Did your wife tell you any one was looking for you for any purpose? A. This moTning she did. Q. She didn't tell you last night ? A. No, sir. Q. What time this morning did she tell you? A. When the man served her. Q. Were you in the house? A. Yes, sir; I was upstairs, and just after getting dressed. Q. Did you see him coming? A. No, sir. Q. Did you hear the dooTbell ring and go upstairs ? A. No, sir ; I was upstaits. Q. Have you had 'any communication since 5 o'clock last night with any person other than the members of your family or the people you met casually around the places where you visited? A. No, sir. Q. No message and no word or no advice ? A. No, sir. Q. No suggestion ? A. No, sir; only just talked of what was in the paper last night ; that is all. Q. Did you read what was in the paper last night? A. Yes, sir. Q. Did you see your name mentioned ? A. Yes, sir. Q. In what connection? A. In connection with some stocks. Kings County Electric Light, or whatever it is. Q. Did it occur to you that you might be wanted as a witness this morning ? A. iSure. Q. Did you leave word that you were not at home ? A. No, sir. Q. Did you tell anybody that if any one called for you to say you were not at home ? A. No, sir. 788 Investigation of Public Service Commissions Mr. Lewis. — Is Mr. Bordwell here ? Ml". Smith. — 'No, he is not here. Q. Is your wife here ? A. Yes, sir ; she is in the other room. Chairman Thompson. — I will state this, at one-thirty-five this morning, Mr. Bordwell, one of our process-servers, reported to me that he went to the house of this witness on Ogden avenue and attempted to gain admission, and was fef used admittance, and that he talked with a woman out of a window, and she informed him Mr. Mackin was not at home and had not been home since after- noon, and had not returned, and she did not know where he was, and did not know when he would come back. Mr. Mackin. — That is what she told me this morning. (Witness temporarily excused.) Mrs. Elizabeth D. Mackin, being first duly sworn, testified as follows: Examined by Mr. Lewis: Q. Did a man call at your house last night? A. Yes, sir; I could not say what time it was, but somewhere around midnight, and my husband was not home. Q. What did he say to you ? A. He asked me was Mr. M'ackin home, and I said no, he wasn't. Q. Was Mr. Mackin at home at that time ? A. No, sir ; he was not. Q. He was not at home ? A. No, sir. Q. What time had he left the house ? A. That I couldn't say. It was just after supper. Q. Did he return from that time on ? A. JSTo, sir. Q. Until when ? A. I couldn't say what time. I was asleep in bed. Q. When did you first know of his return ? A. This morning. Q. What time did you retire last night? A. It w^as about 11 o'clock I retired, but about 10 o'clock I came in with both my daughters. Q. And Mr. Mackin had not returned at that time, not when you retired ? A. No, sir. Report of Joint Legislative Committee Y89 Q. What did you tell the man who called and inquired for Mr. M'ackin ? A. I told him he was not home, and. that is all. Q. Did you tell him what time he left home? A. No, sir. Q. Did you tell him where he had gone ? A. No, sir ; he didn't ask. Q. Did you know wheTe he had gone ? A. JSTo, sir. Q. The same man called to see you this morning, did he not? A. Yes, sir. Q. "What did you tell him this morning? A. Mr. Mackin was not in. Q. Was he as a matter of fact in at the time ? A. No, sir ; he was not in. Q. He was not at home ? A. No, sir. Q. At what hour did the man call this morning ? A. I couldn't say. It was just about 9 o'clock. I was going to church and I had my hat and coat on. Q. And had Mr. Mackin been in at that time? A. Not that I know of. I don't know. I don't really think he had. I had my coat and was going out. Q. Did the man who called upon you leave a paper with you to appear here? A. Yes, sir. Q. Did you have any conversation with him ? A. No, sir. Q. Did he say anything about leaving papers for Mr. M^ackin ? A. No, sir ; he said nothing about papers to me. He just handed me the paper. Q. Anything said about any papers for Mr. Mackin or bringing any papers? A. No, sir; he just handed me the papef. Q. What did you do with it? A. I took it and kept it until Mr. Mackin came in, and T gave it to him. Q. What time did he come in ? A. T don't really know. Q. It was after the paper was served upon you ? A. Yes, sir. By Chairman Thompson : Q. Didn't, you tell the process-server you could not take any papers for Mr. Mackin ? A. No, sir. He handed me the paper and I said, " What is this for ? " And he said, " That is for you," and that is all he said. Q. Didn't you tell him, when he handed you the paper, that you must not take any papers for Mr. Mackin ? A. I might have, but I don't remember it. 790 Investigation of Public Seevice Commissions By Mr. Lewis : Q. Did you have any instructions not to take any papers for Mr. Mackin ? A. No, sir. Q. Did you have any conversation with Mr. Mackin during the night, or telephone? A. No, sir. Q. Or otherwise ? A. No, sir. This morning, after he returned, I told him there was a man to see him, and the gentleman didn't say what he wanted, and I looked out the window and he asked was Mr. Mackin in, and I said no, and that was around 1 o'clock this morning. Q. This morning at 9 o'clock Mr. Mackin had not returned? A. He had returned, but he was up again, and I don't know whether out or in, or where he was. Q. He was not in when the man called? A. I don't think he was. Q. Did Mr. Mackin tell you not to take any papers? A. I didn't know the man had 'a paper, oT what he wanted. The man did not say what he wanted when he came. Q. Did you see Mr. Mackin between the time the paper was handed to you and the time you returned from church? A. I didn't go to church when I got the paper. Q. Did you have any conversation with anybody about any matter connected with this investigation last evening, or during the night or this morning? A. No, sir. Q. At any time did youT husband call upon you at all ? A. No, sir. Q. Or call you on the telephone, or anything? A. No, sir; nothing, whatever. Q. Whom did you see between the hours of 6 o'clock last evening and 9 o'clock this morning ? A. I didn't see anybody but my own family. Q. Your children, do you mean ? A. Yes, sir. Q. Do you have a telephone in your house? A. Yes, sir; and no one called me up. Q. No calls on the telephone? A. No, sir. Q. And no messages delivered in writing? A. No, sir. Q. Did any messenger boy come to the house with any message? A. No, sir; none whatever. Report of Joint Legislative Committee 791 Q. What is the gentleman's name seated by the window there? A. Mr. Kenney. Q. Did you see him during those hours you were in ? A. Yes, sir; he was in my house when I came from church, with my son. Q. When was that? A. About — well, I guess about five minutes to ten last night. Q. Did you talk with him ? A. Yes, sir. Q. Did he ask where Mr. Mackin was ? A. No, sir, he did not. Q. Did he tell you whether he knew where Mr. Mackin was? A. 'No, sir. Q. Anything said about Mr. Mackin ? A. ~No, sir. Q. Did he say anything about the fact that Mr. Mackin's name was in the papers yesterday ? A. ~So, sir ; he didn't mention it. Q. Did you see the papers with Mr. Mackin's name in yester- day ? A. I didn't have time. Q. Did you ? A. No, sir ; I did not. Q. Did you know at any time Mr. Mackin's name was in the afternoon or evening papers ? A. No, sir ; I did not know until this morning. Q. Who told you then ? A. I don't know ; some of my family. Q. Did you read it yourself ? A. No, sir ; I didn't have time to read the paper. Q. Which one of your family told it to you ? A. I couldn't say which one. Q. This gentleman here? A. No, sir. Q. Did you know it before you saw Mr. Mackin this morning, that his name was in the paper yesterday? A. No, sir; I didn't see the paper. Q. Some one told you ; did that one tell you whether they had seen him this morning ? A. Well, I don't remember. Q. It is not so long ago, is it? A. I know, but I don't remember. Q. You want to leave it like that, do you, that you don't remem- her? A. Yes, sir; I don't remember. Q. Mr. Mackin did come in later this morning and you did give him the paper ? A. I told him this morning the paper was given to me. Do you mean the service paper ? Q. The subpoena that was served upon you. A. This morning I got it. 792 Investigation of Public Service Commissions Q. And when did lie come in ? A. I came from the kitchen and I told him this gentleman had been here again, and he gave me the paper. Q. You had told him he was there previously ? A. Yes, sir ; I told him he was there this morning again, and there last night about 1 o'clock in the morning. Q. When did you tell him that? A. This morning. Q. What time ? A. I couldn't say what time. I can't remember facts so closely as that. Q. What time did you first see him this morning? A. When he ate his breakfast. Q. What time was that? A. I guess we had breakfast around between half-past eight and nine o'clock. Q. And that was the first you had seen him this morning? A. Yes, sir. Q. And the first you had seen him since last night ? A. Yes, sir. I didn't see him last night when he came home. Q. When had you seen him previous to this moTning at break- fast ? A. When I called him for his breakfast. Q. I thought you said you saw him first when you came in from the kitchen and found him in the dining room; didn't you say that? A. I might have said it. I don't know that I did. Q. What is the truth about it ? A. The truth is I seen him this morning. Q. At what hour ? A. I couldn't say what hour. Chairman Thompson. — Supposing you tell us the truth about this transaction ; begin over and tell us the truth and we will let you go. r Mts. Mackin. — I am telling the truth. Chairm'an Thompson. — That is all he wants. Mrs. Mackin. — I am telling the truth. At least I think I am telling the truth. Mr. Lewis. — I think that is all I want of this witness for the present. By Chairman Thompson: Q. How big a house do you live in? A. Well, they are three stories high. Eepoet of Joint Legislative Committee 793 Q. And does Mr. Mackin sleep on the same floor that you do? A. Yes, sir. Q. Second floor? A. Yes, sir. Q. Same floor out of which you talked with the man who came last night ? A. Yes, sir ; out of the window. Q. You talked loud enough so that the fellow out on the street oould hear you? A. Yes, sir, and he didn't say anything only, " Is Mr. Mackin in the house ? " Q. And he was in, wasn't he? A. No, sir; he wasn't in at 1 o'clock. Q. He wasn't in, then ? A. No, sir, he wasn't. John Boedwell, being first duly sworn, testified as follows: Examined by Mr. Lewis: Q. Did you have a subpoena delivered to you for service upon Mr. Mackin yesterday ? A. I did. Q. At what hour? A. About 11 o'clock last evening. Q. What did you do with it? A. The Sei-geant-at-Arms and myself went to Ogden avenue, 10'2'7, where Mr. Mackin resided. Q. Tell just what happened. A. I stood on the sidewalk and Mr. Hotaling, he went up and rapped at the door and rang the bell. The window was raised, and it sounded like a woman's voice, stated Mr. Mackin was not -at home. Q. At what hour was that precisely, if you can recall ? A. One- ten, I think, about that. Q. What further efforts did you make to serve the subpoena? A. This mofning — last night, do you mean ? Q. From that time on ? A. We inquired in the neighborhood if Mr. Mackin had been seen, and the policeman on the beat stated that Mr. Mackin never was out at that hour of night, and he very seldom saw him out at that hour, and he stated he would be on his beat until 8 o'clock this morning, and if Mr. Mackin came in, he would notify Mr. Hotaling or myself, and I gave him my address and also Mr. Hotaling's. This morning we called at the house sboTtly after 8 o'clock. Mr. Hotaling went to the door, and she stated that she could not receive any paper for Mr. Mackin, and Mr. Hotaling stated that it was 'a subpoena for her. Q. Did she say that she could not or that she had been told to not receive? A. I understood her to sav she rrmld not receive any 794 Investigation of Public Sbevice Commissions paper for Mr. Mackin. I didn't particularly notice. That was the purport of her remark. Q. And did you then serve a subpoena upon her? A. Mr. Hotaling served it. Q. In your presence? A. Yes, sir. Q. And was there any further conversation on the subject of the subpoena ? A. ISTo, sir. Q. You left then ? A. Yes, sir. Q. And have you succeeded up to the present time in serving a subpoena on Mr. Mackin ? A. I have not. By Chairman Thompson; Q. You made an inquiry this morning of the woman for Mr. Mackin? A. Mr. Hotaling inquired. Q. And she said what? A. Mr. Mackin wasn't there, and she could not receive any paper for Mr. Mackin. Q. Did she say he had not been there since last night ? A. Not that I heard. By Mr. Lewis : Q. She stated specifically that Mr. Mackin was not there, did she? A. She did. John J. Mackin, recalled for further examination, testified as follows: By Mr. Lewis : Q. What is your business, Mr. Mackin? A. Insurance; real estate and insurance. Q. Are you a lawyer ? A. N^o, sir. Q. How long have you been in the real estate business ? A. Oh, about eight or ten years. Q. Which is it, eight or ten ? A. Well, I don't know; it is more insurance business than it is the real estate business. Q. Very well. When did you go into the insurance business? A. Oh, about ten years ago, I guess. Q. Where is your office? A. 154 JSTassau street and 1027 Ogden avenue. Q. Office, both at your residence and down town ? A. Yes, sir. Report of Joint Legislative Committee 795 Q. Have you maintained an office at 154 Nassau street for ten years regularly ? A. No, sir ; I am only there about three months in the office. My home was my office previous to that. Q. You had your office at your home ? A. Yes, sir. Q. Is 154 Nassau street the office in vehich the Tribune is, the Tribune Building ? A. Yes, sir. Q. The building where the Public Service Commission is ? A. Yes, sir. Q. And you have had your office in that building for the past three months ? A. Yes, sir. Q. And prior to that you had you* office in your residence ? A. Yes, sir. Q. Have you devoted all your time for the past ten years to the insurance business? A. No, sir; I have been an attendant in the Supreme Court. Q. When were you an attendant in the Supreme Court? A. Between that and the Surrogate's Court, I was twenty-six yeats there. Q. When did you begin your service as an attendant in the Supreme Court? A. I think in '90. Q. Ninety what? A. 1890. Q. That is twenty-five years ago ? A. Well, I know, I had — I can explain it, I had twelve years and a half in the Surrogate's Oourt, and the balance of the time in the Supreme Court. Q. And when did you begin as a court attendant in the Surro- gate's Court? A. 1889, the 15th of March, I think. Q. And you served twelve and a half years in the Surrogate's Court, which carried you to 1901 ? A. Yes, sir. Q. And since 1901, you have been an attendant in the Supreme Court? A. Yes, sir. Q. Are you still an attendant now ? A. No, sir. Q. When did you cease to be? A. I think December 31st. Q. Of what year ? A. Last year. Q. 1914? A. Yes, sir. Q. You served during the year 1914 as an attendant, did you ? A. Yes, sir. Q. What were your duties as an attendant, Mr. Mackin? A. Oh, attending to the court duties, keeping order, and taking out jurors, that is, previous to going with Judge McCall, taking out 796 Investigation of Public Sebvice Commissions juTors to and from the jury room, taking them out to lunch and back. Q. Was there a time you went to Judge McOall ? A. That was previous to my going with him. Q. There was a time when you went with Judge McCall ? A. Yes, sir. Q. When was that? A. When he was elected. Q. When was that? A. It was in 1912, or 1902, I think. Q. What were your duties as an attendant with Judge McCall ? A. Why, taking him off the bench and on the bench, and doing anything that was wanted by hini for me to do. Q. As a personal attendant ? A. Yes, sir. Going to the house in the morning, and going down with him, and staying down there until he got through in the evening, and going home with him, and carrying his papers. Q. A geneTal assistant ? A. Yes, sir; general assistant. Chairman Thompson. — Did you have charge of his bank book ? Mr. Mackin. — No, sir. Q. Was there a time when you were named as receiver in any matter? A. Yes, sir. Q. When was that? A. I don't know. There was all during the time I was with him I had lots of receiverships. Q. How many receiverships did you have during the time yon were with Judge McCall ? A. I couldn't say now. Q. Two or three? A. Oh, no, ten times that many, I suppose. Q. Twenty or thirty ? A. Yes, sir ; more than that. Q. Fifty? A. Yes, sir. iSome of them materialized and some of them didn't. Chairman Thompson. — What do you mean by materialized ? Mr. Mackin. — They never got anywhere. Thefe was no order. Q. What was youf salary? A. $1,200 a year, and $1,500 a year and $1,800 a year. Q. How many years did you draw it at the rate of $1,800 a year ? A. About four years. Q. How many at $1,500 ? A. About six, T guess. Q. And all the rest of the time at twelve? A. Yes, sir. Q. ISTow, duTing the period from 1901 until the end of 1914, do you think you had as many as >fe^ ' yMB B r-.w'wrff1^ i.Bg4rj^From what? Eefoet of Joint Legislative Commii-tee 79T Q. Erom 1902, when you went with Judge McCall ? A. Yes, sir, whenever it was. Q. To 1914, the end of 1914, you had as many as fifty receiver- ships ? A. I think so. Q. What were some of the important receiverships that you had, do you recall them ? A. One was the Eeal Estate Fire Insurance, I think it was. Q. Who appointed you to that receivership ? A. Judge McCall. Q. What compensation did you get for your services in that case ; do you recall ? A. No, I don't know exactly. Q. I don't care for it exactly. A. I think it was around about eight hundred dollars, I think. I am not sure, but maybe two or three or four hundred dollars out of the way. I know it was around that figure. It may be two hundred dollars one way or the other. Q. It may have been a thousand dollars ? A. It may have been a thousand dollars, yes, sir. Q. Do you remember who made the ordet allowing your fees ? A. ISTo, sir, I don't. Q. Did Judge McCall make the order ? A. I don't know. I don't think so. Q. Give us some other of the receiverships which you had. A. The only very large one I had was the Seymonr Hotel. Q. What were your fees in that case ? A. Five hundred dollars. Q. Who appointed you to that receivership ? A. Judge McCall. Q. Did he make the order granting you an allowance for your services ? A. No, I don't think so. Q. You don't know who did ? A. ISTo, sir ; I don't. Q. Who were the attorneys in those cases ; the Seymour Hotel case, who was the attorney? A. I was trying to think of him, 258 Broadway was on one side and one of the Metropolitan Life attorneys was on the other side. Q. Which one did you have business dealings with ? A. I didn't have any business dealings with either of them in my life, and I didn't see them before I was appointed. Q. Did you see them after you were appointed ? A. Yes, sir ; certainly. Q. You were meeting them during the time you were receiver ? A. Yes, sir ; it only lasted about a month. T98 Investigation of Public Seevicb Commissions Q. Which ones did you meet? A. This one that represented the plaintiff — I can't think of his name. I know Judge Wad- hams was my counsel in the matter, who is now up in the General Sessions. I can't think of the attorney's name. One side was the people connected with the Metropolitan Life Insurance, down in Wall street at that time, and the other counsellor was at 268 Broad- way. Judge Wadhams was my counsel. Q. Dto you remember how much of an allowance Ju^ge Wad- hams had for his service? A. No, sir. Q. Did you ever know ? A. Yes, sir ; I suppose I did know. Q. You paid it to him as receiver, did you not? A. As I received it, yes, sir, sure. Q. You don't Temember how much it was ? A. No, sir. Q. Do you know who made that allowance to Judge Wadhams ? A. No, sir. Q. What other receiverships did you have? A. That is the only large one. Q. You had others ? A. Yes, sir, tenement houses for collecting of rents, and flat houses, like, and small two-family houses, and that is the only two large ones I ever had. Q. What fees did you get out of those receiverships ? A. Eive per cent. Q. What would they amount to, do you recall, in any particulal case, what you received in any such case ? A. No, sir ; run all the way from $25 to $5€. Q. Sometimes more than $50 ? A. Sometimes. Q. A hundred or two hundred? A. I don't remember going up around a hundred that I can recall now. Q. Weren't there any such cases? A. There may have been, but I don't remember them now. I don't remember getting the pay; there may have been. Q. Would you average a hundred per case, do you think, for tie fifty cases that you had ? A. I don't think so. Q. Did Judge McOall ever appoint you to any position other than receiver ? A. Yes, sir ; he appointed me commissioner. Q. Commissioner for what? A. Condemnation proceedings. Q. When was that? A. From time to time. Q. A good many times? A. Yes, sir. Report of Joint Legislative Committee 799 ■Chairman Thompson. — Did you get one of the fifty-dollar-a-day cases ? Mr. Mackin. — No, sir. Q. What was your compensation per day in those cases? A. Ten dollars an hour. Q. How much did you draw as compensation as commissioner on the average in condemnation cases ? A. In all the time I was with the Judge ? Q. Yes; you had a pretty fair income, didn't you? A. Yes, sir ; pretty fair. Q. And pretty steady ? A. Yes, sir. Q. And a pretty regular income ? A. Yes, sir. Q. And what do you estimate may have been the amount of your annual income from commissionerships and receiverships during that service under Judge McCall ? A. I don't know, two or three thousand dollars a year, counting my salary; I don't know. Q. It is more than that? A. It must be. It may be, it is all on record. I cannot think of it. Q. Didn't you have an income of at least $5,0O0' a year on the average during the time you were with Judge McOall, from your salary, youT commissionerships and receiverships, taking commis- sionerships at the rate of ten dollars per hour ? A. I don't know ; I may have. Q. What cases were you commissioner in ? A. West 134:th street. Q. What was that, a street widening or street opening? A. Street opening, yes, sir. Q. Who were the other commissionel-s in that case, do you remember? A. There was William Graemer. Q. Who else ? A. And William Quinn. Q. Was one of them an attorney? A. I don't know whether Mr. Graemer is an attorney or not. I couldn't say that. Q. Are you an attorney? A. No, sir. Q. Did you act as an attorney in those commissions ? A. No, sir. Q. Who passed upon the questions of evidence or made the rulings upon the law? A. Generally the attorney. Q. Who was the attorney? A. In this particular one? 800 Investigation of Public Seevice Commissions Q. Yes. A. It must have been Mr. Graemer. I don't remem- ber whetheT he is an attorney or not, it is so far back. Q. How long ago is that ? A. It is about — it must be about thirteen years ago, somewhere around there. Q. You know it was Mr. Graemer, if it was anyone ? A. Yes, sir. I know it wasn't Mr. Quinn. Q. And you know it wasn't yoursellf ? A. Yes, sir; it wasn't myself. Q. Have you ever held yourself out as an attorney? A. No, sir; never. Q. Never attempted to practice law in any capacity? A. No, sir. Q. Did Mr. Graemer get ten dollars an hour as a commissioner? A. Yes. sir. Q. And did Mr. Quinn get ten dollars an hour as a commis- sioner ? A. Yes, sir. Q. And what did your fees amount to foT your services you rendered in that case ? A. I couldn't tell you. ■Chairman Thompson. — What was Mr. Quinn's business ? Mr. Mackin. — Mr. Quinn is a court attendant now, but he was not a court attendant at that time. Q. What was his business at that time? A. I think he was connected with the gas company. Q. Which gas company ? A. In New York here. I don't know what gas company it was. Q. What was Mr. Graemer's business ? A. He was a newspaper man. Q. And he was not a lawyer, was he? A. No, sif; but lots of newspaper men are lawyers. Q. Go back and think that over, and tell me how much you received as your compensation in that case. Chairman Thompson. — I suppose the Committee ought to take time enough to congratulate Assemblyman Burr upon his re-elec- tion, and also upon his re^appearance in this Committee. Q. I will ask you again how much did you receive as compensa- tion? A. I cannot think of it. Q. Did you receive as much as $100? A. Oh, yes. Q. Two hundred dollars? A. Yes, sir. I don't know whether $.500 or $600. Eepoet of Joint Legislative Committee 801 Q. May it have been $500' ? A. Yes, sir. Q. May it have been as much as a thousand ? A. It may have, but I doubt it. Q. Did the others receive the same amount ? A. Yes, sir. Q. How much of an award did your Commission make in that ease? A. I could not tell you about that. Q. You have no recollection of it? A. ISTo, sir. Q. Did you sit through the hearing and listen to the testimony? A. Yes, sir. Q. Who drew the report of the commissioners which was pre- sented for confirmation, fixing the amount of the award ? A. The corporation counsel draws up the report, after we give the figures. Q. Did you read it ? A. Certainly. Q. Haven't you any Tecollection as to what the amount of the award was? A. No, sir. Q. Was it as much as a thousand dollars ? A. I couldn't tell you. Q. Was it as much as $25,000 ? A. Oh, no. I couldn't tell you how much it was. Q. Tell us another commissionership, condemnation, which you held. A. There was Lane avenue. Q. When was that ? A. I don't know when I was appointed on that, but — Q. Who appointed you to that? A. Judge Leventritt, I think. Q. About how many commissionerships did you have during this period of your incumbency of court attendant ? A. About five or six, I think. Q. Any very large ones in which you were commissionef ? A. Yes, sir, the Lane avenue. Q. That is the one you have told us about ? A. Yes, sir. Q. Is that the largest one? A. Ludlow avenue is a large one. Q. Do you remember what the award was in that ? A. No, sir. Q. Was it larger than in the Lane avenue — it was a street opening, was it? A. Yes, sir. Q. Did you get as much compensation for yourself out of that case as you received out of the Lane case ? A. Out of the Lane ? Q. Yes. A. I don't remember. Q. Was it a profitable case for you ? A. Yes, sir ; it certainly was a profitable case. Vm. T_9R 802 Investigation of Public Seevice Commissions Q. And profitable for the other commissioners also? A. Yes, sir. Q. Do you recall who they were in that case? A. The Lane avenue ? Q. ISTo, Ludlow avenue. A. I don't know that. That is funny — I will tell you in a minute. Q. How long ago was it? A. Crawford. Q. What Crawford was it ? A. Up in the Bronx. He is retired. I don't know what business he is retired from. He is quite an elderly man, about fifty years old, I should think. Q. Was he a lawyer ? A. No, sir, he was no lawyer. Q. Who was the other one? A. I was just trying to think who was the other on there. Q. Was the other man a lawyer? A. Yes, sir, I think so. I am trying to think of his name. At the time, I cannot seem to think of it. Oh, I have it. Oliver. He is dead. Q. James Oliver? A. No, sir, his brother, Francis V. Oliver, and he died and his son succeeded him on the commission. Q. He died during the pendency of the matter ? A. Yes, sir. Q. And his son was appointed to succeed him ? A. Yes, sir. Q. Was his son a lawyer? A. Yes, sir. Q. Where is your real estate; you own some real estate? A. Yes, sir. Q. Whereabouts is it? A. 1025 and 10'2i7 Ogden avenue, where I live and the house adjoining. Q. Do you own the property there ? A. Yes, sir. Q. What is it worth ? A. Well, its assessed valuation is, I think, $8,500 apiece. Q. About $17,000 assessed valuation ? A. Yes, sir. Q. What is the actual value ? A. Now, I couldn't tell you. Q. Worth $20,000 for the whole property ? A. No, sir, it isn't worth what it is assessed at. Q. Is it $15,000 ? A. Well, yes, I guess so. Q. Is it mortgaged ? A. Yes, sir ; it is mortgaged. Q. How long have you owned it? A. I owned one about ten years, and the other about five years, I think. Q. Did you own it at the time you were commissioner in these cond'^mnition pr'>ceedings? A. Yes, sir. Eepoet of Joint Legislative Committee 803 Q. How much is it mortgaged for? A. Except 134:tli street, the one I spoke of. Q. You did not own any real estate at tbat time ? A. No, sir. Q. None at all ? A. No, sir. Q. How much is this property morigaged for ? A. Eight thou- sand five hundred dollars, I think. Q. Apiece ? A. No, sir ; on both of them. Q. Do you own any stock of any corporation ? A. Only what was mentioned in the paper is all. Q. How much is there of that? A. I don't know how much it is. Q. Did you ever see it ? A. I may have, I don't know. Q. Hav€ you it in your possession ? A. No, sir. Q. Did you ever have it in your possession? A. I may have had for a minute or two. Q. Do you recall ever having had it in your possession? A. No, sir. I may have. Q. You have no recollection of it? A. No, sir. Q. When did you first hear of the existence of that stock in your name? A. I knew it all along. I was getting dividend checks every three months. Q. Yoi have been getting those checks right along regularly? A. Yes, sir. Q. Up to what time ? A. I don't know ; up to a month or two ago. Q. What did you do with them ? A. I have been endorsing them over payable to the order of Ella Gaynor McCall. Q. Who is she? A. That is Judge MeCall's wife. Q. When did you start doing that ? A. Oh, about three or four Q. Three or four ? A. Yes, sir, I don't remember exactly. Q. As much as four? A. I don't remember; I don't know exactly. Q. May it not have been five ? A. Oh, no. Q. Sure about that? Sure it wasn't -five years ago ? A. I don't .think so. ■ Q. To whom had you been endorsing them prior to that time three or four years ago ? A. I suppose to the Judge. 804 Investigation of Public Service Commissions Q. What do you know about it; it isn't what you suppose, but we want to know what you know. A. That is my best recollection, which is the best I can give you. Q. Did you endorse them to the Judge's order, or just write your name on the back of them ? A. I don't remember exactly. Q. What did you do with the last one you had? A. I gave it to Mrs. McCall. Q. Personally ? A. Yes, sir. Q. Whereabouts? A. In her house. Q. And it was drawn to your order, was it ? A. Made out to me, John J. Mackin. Q. What was the first thing you did with it after you received it ? A. The first thing, I went up to the house — Oh, the last one, that was sent to Easthampton, and I wrote on it, " Pay to the order of Ella Gaynor McCall," and signed my name to it. She was down in the country. Q. How much was it? A. They are all the same, $750; Q. How often do they come ? A. Every three months. Q. And you say you began writing, " Pay to the order of Ella Gaynor McCall " about three or four years ago ? A. Yes, sir. Q. And prior to that time, what did you do with them? A. I don't know. I know I turned them over to the Judge, but as to how I endorsed them, I can't remember. Q. Just write your name across the back of them, and hand them to him ? A. I don't remember that, sir. Q. Was that during the time he was on the bench as a Supreme Court Judge? A. Yes, sir. Q. And did it continue down to the time he became a Public Service Commissioner ? A. Yes, sir. Q. And that was in January or February, 1913, wasn't it? A. I don't know. It was whenever he went there. Q. You continued to turn the checks over to him until he was appointed to the Public Service Commission, did you ? A. That is my recollection of it. Q. Do you remember what instructions you had on the subject of these checks at that time, at the time you changed ? A. 'No, sir; T don't. Q. How did you happen to change from the old endorsement? A. It was up in the house there. I don't recollect the conversation. Repoet of Joint Legislative Committee 805 Q. Up in what house ? A. The Judge's house. Q. Who was present ? A. Mrs. McCall. Q. What was said ? A. I have no idea what was said. Q. Anybody else present besides Mrs. MoCall ? A. The Judge may have been there. I don't recollect now whether he was or not. Q. Did Mrs. McCall tell you to endorse the checks to her from that time on ? A. If I remember rightly, she did. Q. That was Mrs. McCall ? A. Yes, sir. Q. And not the Judge ? A. My best recollection is it was Mrs. McCsll. Q. Did the Judge tell you he had sold the stock to her, or to anybody at that time ? A. My impression is that he told me that the stock belonged to Mrs. MeCall. Q. When did he tell you that? A. That day, that morning up there. Q. I thought he wasn't there ? A. I say, if he was there. Chairman Thompson. — If he wasn't there, he never did tell you? Mr. Mackin. — I don't know whether it was that morning, or whether he was there or not. Q. Did he tell you how it happened to belong to Mrs. McCall ? A. If I remember rightly, it was on account of him going over to the Public Service Commission. Q. Did he tell you that was the reason ? A. I wouldn't say he told me that or not, but he may have 'and he may not. Q. Did he tell you he could not hold the stock in his name any more, or in your name, that he couldn't receive the checks in his name any more ? A. ISTo, sir, I don't remember that. Q. He didn't say anything about that? A. I wouldn't say he didn't say anything about it. Q. When did you first know of this stock being put in your name, Mr. Mackin ? A. I don't know. Q. A good many years ago ? A. Yes, sir. Q. Can you recall 'any incident as the first you remember about the stock ? A. ISTo, sir ; I cannot, no. Q. Do you remember ever having any talk with the Judge on the subject of that stock ? A. No, sir. 806 Investigation of Public Service Commissions Q. Do you remember when he told you it was in your name, and it belonged to bim ? A. No, sir. Q. Did anybody tell you that tbat stock was in your name ? A. I don't remember. Q'. The first tbat you remembeT about it is receiving a check payable to your order for $750 ? A. Yes, sir. Q. Did that make any impression upon your mind that led you to make inquiry or investigation? A. I presume it did, but I don't recollect it. Q. Did you speak to the Judge about it ? A. I don't remember. I presume I did, of coursf, — $750. Q. Do you remember anything he said to you upon the subject? A. ISTo, sir ; I haven't the slightest idea. Q. Do you know who turned that stock over to you ? A. No, sir ; I don't. Q. Do you know who owned it before it was turned over to you ? A. No, sir, I don't. Q. Did you ever see the certificate that was turned over to you ? A. I don't know. I may have. I don't remember. Q. Do you know anybody that does know anything about this transaction? A. No, sir; I don't, other than the Judge himself and Mrs. McCall. Q. Those are the only people that you Imow anything about? A. That I know know anything about it. Q. As far as you Imow ? A. Yes, sir. Q. Did the Judge ever say anything to you about wanting to put this stock in your name? A. I don't remember that. Q. Did he ever give you any reason why the stock was put in your name? A. Not that I know of. Q. That was during the time that you were his attendant, while he was Supreme Court Judge ? A. That is right, yes, sir. Q. There was nothing said about the reasons for putting it in your name? A. Not that I remember. Q. Did there any other stock stand in your name — is there any other corporate stock of a corporation of any description ? A. Not a corporate stock. I have a little stock in the Elks' Lodge up there, that is all, $50' or $100' worth, something like that, is all. Q. Does that belong to you ? A. Yes, sir, that belongs to me. Report of Joint Legislative Committee 807 Q. Is this real estate you speak of the only real estate you own ? A. That is the only real estate I own. Q. Is there any other real estate standing in your name on the records anywhere? A. Not that I know of. Q. Would you be likely to know of it if there were any ? A. I certainly would. Chairman Thompson. — You know a dividend check when you receive it, by this time? Mr. Mackin. — Yes, sir. Q. Are you collecting rents for anybody at this time ? A. No, sir. My agent collects the rent. I don't collect them. Q. Who is your agent ? A. Dugan & Hubert. Q. From what propetty do they collect the rent ? A. Different pieces that I am appointed receiver in. Q. You are now acting as receiver for properties, are you ? A. I think I have one or two tenement houses. Q. How long have you held those as receiver ? A. About two months, I guess. Q. And an agent collects the rent, does he? A. Yes, sir. Q. And pays them oveT to you ? A. Yes, sir. Q. And you carry them in a bank account somewhere ? A. Yes, sir. Q. In your name as receiver ? A. In my name as receiver, that is right. Q. I suppose you see Judge McCall occasionally, do you ? A. I see him every morning, mostly. Q. Business with him every morning ? A. ISTo, sir, I go to his house just the same as I did when he was on the bench. Q. What is the purpose of that? A. I don't know, to see if he wants anything. Q. Social call ? A. No, sit ; see if he wants anything. Q. You are not in his employ now, are you ? A. No, sir. Q. Did you see him this morning? A. No, sir. Q. How did it happen you did not go this morning? A. He is out of town. Q. Whereabouts? A. In Baltimore. Q. When did he go away ? A. Yesterday afternoon. 808 Invbsiigation of Public See vice Commissions Q. After this investigation ? A. Yes, sir. He goes there every year, I suppose, to play golf with some other gentlemen in Baltimote. Q. You are not still a court attendant ? A. No, sir. Q. Are you employed in any capacity now anyivhere ? A. No, sir. Q. Just simply an insurance agent? A. Yes, sir. I am with the American Shorthand Company in that same ofEce. Q. What company ? A. American Shorthand Company. Q. What company is that ? A. It follows up these referees, and gets business that way. Q. What do they do, employ stenographers ? A. They employ stenographers, yes, sir. Q. What is your connection with that company ? A. I just get twenty-five per cent, of whatever business I turn in. Q. Do you find that profitable and lucrative ? A. Not so far. Q. How long have you been connected with that company ? A. Two or three years. Q. Does the Public Service Commission employ any of those stenographers? A. No, sir. Q. Never ? A. Never. Q. Have you succeeded in getting any business for that com- pany ? A. I have got some, yes, sir. Q. From whom ? A. From different lawyers. Q. Do you recall any of them by name? A. Yes, sir; there is William C. Arnold, and then I got some of these — I got two matters from the railroad company. Q. Are you a stockholder in the American Shorthand Company? A. No, -sir. Q. Just an employee on commission? A. Yes, sir, on commission. Q. Did you ever have any assurance from the Public Service Commission that they would use the services of the stenographers from that company ? A. No, sir. Q. Nor from anybody connected with it? A. No, siT. Q. Do you know who the officers of that company are, the American Shorthand Company? A. No, sir, I don't. There is Mr. Davis, for one. Q. What' is his first name? A. Harry K. Davis. Eepoet of Joint Legislative Committee 809 Q. What is his oifice ? A. I don't know whether it is incorpo- rated or not. I know it is not an incorporated company. Q. Who else is there with him ? A. A man named Boyce was in it. He is not in it any more. Q. He is not there any longer ? A. ISTo, sir. Q. Anybody else there ? A. That is all that is there. Q. How many operators have they ? A. They haven't any, only just when they get in work, they send out for them. Q. Do they do reporting for the condemnation commissions ? A. ISTo, sir. Q. Have they done any ? A. 'So, sir. Q. You are not now a commissioner, are you, in any matter pending? A. Yes, sir, I am. Q. What case ? A. Van Ness Avenue. Q. Van ISTess Avenue? A. Yes, sir. Q. In New York County? A. ISTo, sir; in the Bronx County. Q. Who are the other commissioners ? A. Max Bendit and John L. Goldwater. Q. Either of them a lawyer? A. Yes, sir; Mr. Bendit. Q. Where is his office ? A. I don't know the number. I think it is 162nd and Third Avenue, near the Bronx 'County Court House there. Q. How long has that commission been in existence? A. A couple of years. Q. How many hearings has it had ? A. I don't recollect now. We are not through with it yet. Q. Have you been giving a good deal of attention to it? A. Yes, sir, but we have not had any meetings in I don't know how long, two or three months, I guess. Q. Is your compensation at the rate of ten dollars an hour there ? A. Yes, sir; ten dollars an hour. Chairman Thompson. — Who appointed you in this case? Mr. Mackin. — I am trying to think. It was Judge Guy, if I remember right. 810 Investigation of Public Seevice Commissions Paul R. Atkinson, being first duly sworn, testified as follows : By Mr. Lewis : Q. Mr. Atkinson, will you tell us your official connection with the Kings County Electric Light and Power Company? A. Treasurer. Q. And you have been for some time ? A. Yes, sir. Q. About how long? A. As treasurer since 1906 or 1907. Q. And in the performance of your duty, you have issued checks for dividends to the various stockholders ? A. Not in recent years. We do it now through a transfer agent or trust company. Q. Do they require your signature as treasurer ? A. No, sir. Q. Are the checks returned to you as treasurer of the company after payment? A. No, sir. Q. Go to the transfer company ? A. Yes, sir, transfer agent. Q. Have you in your possession as treasurer, any checks, can- celled checks, that were issued in payment of dividends on stock owned by stockholders of record? A. Only in this particular instance that you have asked me to produce. Q. And you have obtained those from the transfer agent ? A. I have obtained the last three. Q. Have you them with you ? A. I have. Q. Will you produce them ? A. There they are. (Witness produces checks called for.) Witness. — (Continuing.) I might add that I take the Trust Company's word for it that these are the checks you want. I have not seen them myself yet. (Mr. Lewis put in evidence check No. 655, dated March 1, 1915, drawn by the Franklin Trust Company, 166 Montague St., Brooklyn, upon the Kings County Electric Light & Power Com- pany, dividend No. 60, $774, payable to the order of Mr. John J. Mackin, County Court House, New York, N. Y., and endorsed on the back thereof, " Pay to the order of Ella Gaynor MoCall." Signed, John J. Mackin. Further endorsed, " Pay to the order of Produce Exchange Bank," signed Ella Gaynor McCall. Check cancelled 3-4-15.) (Mr. Lewis 'also put in evidence a similar draft No. 661, $774, dated June 1, 1915, drawn to the order of Mr. John J. Mackin, as above, and end orsed in the same wav. and cancelled 6-10'-15.) Report of Joint Legislative Committee 811 (Mr. Lewis also put in evidence a similar cheeky No/ 674, $,774, dated September 1, 1915, same parties, and same endorsements, and cancelled 9-13-15.) Q. All previous dividend checks for tlie payment of dividends upon the capital stock which these checks represent are now in the possession of the Franklin Trust Company ? A. No, only for two or three years back. Q. Where can the checks previous to 1912 or 1913 be found? ' A. That I couldn't tell you. They should be in the company's possession, because the company paid the checks, unless the com- pany does not keep the checks. Chairman Thompson. — What was the date the Franklin Trust Company was created your agent ? " Mr. Atkinson. — I don't know. It was two or three years ago. Chairman Thompson. — You can get the date very readily ? Mr. Atkinson. — Yes, sir. Mr. L«wis. — We would like very much to have you produce whatever checks you may be able to obtain, either from the Frank- lin Trust Company or from your own files for dividends upon stock standing in the name of John J. Mackin, and can you tell us when it will be convenient for you to produce them ? Mr. Atkinson. — Suppose you give me for the Franklin Trust Company a day, and for our files a week. Mr. Lewis. — Suppose you get what you can from the files of the Franklin Trust Company and produce them Monday. Chairman Thompson. — Your books in the hands of the Franklin Trust Company are all under subpoena ? Mr. Atkinson. — Yes, sir. Chairman Thompson. — And they should be able to produce the cheeks very readily ? Mr. Atkinson.-— Yes, sir. Chairman Thompson. — Can't they do it this afternoon ? Mr. Atkinson. — I hardly think so. 812 Investigation of Public Service Commissions Mr. Lewis.— Suppose we ask to have them brought in at i o'clock from the Franklin Trust Company. I think that can be done. Chairman Thompson. — Can't you take and telephone now and let us know the date of the beginning of the duties of the EranHin Trust Company as transfer agent ? Mr. Atkinson. — Yes, sir ; I probably can. By Mr. Lewis: Q. Do you know as a fact that your cancelled checks have been retained and are still in the possession of the company? A. I don't know it, and I doubt if it is so. Q. Will you make an examination and ascertain whether they have them? A. Yes, sir, I will. Q. And do you object to leaving these checks with me for the present? A. 'No, sir, as long as I have the numbers to complete their records. Chairman Thompson. — The mtnesses are required to be here at quarter past two, and that will give you an hour, and we will suspend now until 2:15. Whereupon a recess was taken to 2:15 o'clock p. m., at the same place. AFTERITOOW SESSION The Committee was called to order at 2 :15 p. m. John J. Mackin, recalled for further examination, testified as follows : By Mr. Lewis : Q. How many years have you been getting these checks ? A. I don't know, I couldn't tell you. Q. A good many years, haven't you? A. Yes, sir. Q. Always come to the County Court House, did they? A. Yes, sir, and come there yet. Q. Have you an office there? A. No, sir; my mail goes there yet. Report* of Joint Legislative Committee 813 Q. Whereabouts ? A. Eight where all the mail goes for any of the employees. They have one big box there. Q. Your mail goes right there to the court house ? A. Yes, sir, and if I ain't there, they genetally re-address it. Q. How many years did you tell me you had been in the employ of the county or the city ? A. Twenty-six years and a few months. Q. Ketired now, have you ? A. Yes, sir. Q. On pension ? A. Yes, sir. Q. How much does your pension amount to ? A. Nine hundred dollars. Q. Did you retire voluntarily ? A. Yes, sir. Q. And went on the pension list voluntarily, did you ? A. Yes, sir ; oh, yes. Q. I show the witness check No. 672', read in evidence; whose handwriting is that on the back of that check, Mr. Mackin? A. This is my writing on the top, and I think that is Mrs. McCall's. I am not sure. Q. You did not see her write it ? A. No, sir, not that I know of. Q. Did you ever see her write her name ? A. Yes, sir. I have seen her wTite her name, and I have seen her address envelopes, and I think that is her writing. Q. You think it is ? A. Yes, sir. Q. Whose handwriting is that? The same? A. Yes, sir, I think that is her handwriting. (Referring to No. 655.) Q. (655 still under discussion.) Did you write all of that, " Pay to the order of Ella Gaynor McCall, John J. Mackin " ? A. Yes, sir. Q. It is all in youT handwriting? A. Yes, sir. Q. Would you mind taking a pad and copying at my dictation ? A. Yes, sir. Q. Write, " Pay to the order of ". (Witness writes as requested.) Q. What was your custom, to endo'rse these checks before you went to the house or after ? A. I think I endorsed them at the house sometimes. Q. After you got there ? A. Yes, sir. I don't think I endorsed them down town. Q. Always did it at the house, did you? A. I wouldn't say 814 Investigation of Public Sebvice Commissions Q. Your custom was to ? A. My custom was to do it at the bouse. I would have the check with me and when I would stop at the house in the morning, then I would endorse it or something. Q. Did you always see Mrs. McCall there when you stopped at the house ? A. Every morning neatly I see her. Q. Did you always deliver these checks to her personally? A. As 'a rule I did, yes, sir. Q. Sometimes did you deliver them to the Judge ? A. No, sir. Sometimes I would send them up with one of the girls, if she wasn't down to breakfast; As a rule she was generally to breakfast. Q. Sometimes give them to the Judge to give to his wife? A. Yes, sir. Q. Sometimes give them to him at his court toom, or at his chambers, to give to his wife ? A. Yes, sir. Q. Always endorsed them before giving them to him ? A. Yes, sir, as 'a rule. I don't remember ever doing anything else. Q. Did you take the check of September 1st, just a couple of months ago, to the house, and deliver it to Mrs. McCall, do you remember ? A. No, I didn't. Q. What became of that check ; what did you do with that check ? A. I think that check was mailed down, to Easthampton. Q. Long Island, is that? A. Yes, sir, that is their country home. Q. They have a summer home down there ? A. Yes, sir. Q. To whom did you address it; who was the letter addressed to? A. I didn't send the letter myself. Q. Who did ? A. I think it was the Judge ; I am not sure. Q. You think the Judge sent it down himself? A. Yes, sir; I think so. Q. You gave it to the Judge ? A. Yes, siT ; I signed it and gave it to the Judge. Q. The September 1st check? A. Yes, sir; I think that was the one mailed down there. Q. I notice your endorsement on the September 1st check is in different ink than the usual ink used ? A. Well, I don't know — the only way I could account for that there is there may be two colored inks on his desk, or — Q. You were in the Judge's office when you endorsed that ? A. Yes, sir, that last check, yes, sir. Report of Joint Legislative Committee 815 Q. The Public Setvice Oommission rooms ? A. Yes, sir. Q. Have you drawn any compensation from the Public Service Commission for services? A. JSTo, sir. Q. Have you ever had any compensation or any employment from the Public Service Commission in any capacity ? A. Never in any way, shape or form. Q. You have never rendered any sei-vices to the Public Service Commission? A. No, sir. Q. Did you ever have charge of the Judge's bank account in any way ? A. Never. Q. Writing checks for him, or anything of that sort ? A. Never. Q. Did you ever take his bank book and go and make deposits for him ? A. I have done that, yes, sir. Q. Accustomed to do that, were you ? A. Off and on, but not regularly. I was not accustomed to do it. Q. Did he ever hand you any of these checks after they had been endorsed by Mrs. McCall for deposit to his account? A. Never that I know of. Q. What bank does the Judge keep his account in ? A. In the Hanover. Q. Did he keep any account at the Produce Exchange ? A. Not that I know of. Q. You never went there for him ? A. I never went there for him; no, sir. Q. How frequently have you been accustomed to go to the Han- over Bank for him? A. I don't suppose I have been there four times in a year. Q. Make deposits then, did you ? A. I think so. That is the only reason I would have for going there. Q. Do you remember whether the deposits were in cash or in checks? A. No, sir; I don't. Q. You have no recollection? A. No, sir. Q. Did he ever send you there with any cash for deposit? A. He may have, a hundred dolla'rs, or something like that, or two hundred dollars. Q. Did he ever send you there with any checks for deposit ? A. Yes, sir. SIG lA'VESTlliATIO.N OF PuBLlC SeEVICE COMMISSIONS Q. Do you remember whose cliecks they were^ A. No, sir. Q. You have no recollection on that subject^ A. Ko, sir. Q. You are sure you never took any of these dividend checks for deposit to his account? A. Not that I know of, and I think 1 would remember one of them. Q. Did you see the Judge yesterday t A. Yes, sir. Q. What time? A. Eight ai'ter he left here. Q. What time was that 'i A. It must have been about 1 o'clofk, or something like that, when you took a recess. Q. Did you talk with him yesterday t A. Yes, sir. Q. Talk about this stock in your name ? A. On our way from the Public Service over, yes. Q. What did you say to him? A. I said, "What was it all about," and he said, " That stock that is in your name. There is nothing to it," he said. Q. Is that all he said ? A. That is all he said. Q. Did you tell him that you might be called to explain it i A. No, sir, I didn't. Q. Did he say you might be called 'as a witness '? A. He said he thought I might be called as a witness. ■Q. Did he say when you were likely to be called '? A. No, sir. Q. Do you remember just what he did say on the subject? A. That was about all. It was only a few -svords. Q. Did he say you were likely to be subpoenaed ? A. No, sir. Q. Just likely to be called '? A. Called, yes, sir. Q. And was it because of what he said on that subject that you told youT wife not to let anybody in ? A. No, sir. I Avould have come down here in a minute on a telephone. Why would I do anything like that ? Q. Really, were you in the house last night when the subpoena server was there? A. Certainly. I was in and out, and early in the evening. Q. Which were you, in or out, at half-past one? A. I was in at half-past one. Q. Did you tell your wife to tell the subpoena server you were out? A. No, sir. Why would I? I'd just as soon come down here to-day as Monday. Q. Judge McCall didn't tell you to stay away ? A. No, sir. Report of Joint Legislative Committee 817 Q. Anybody tell you tbat ? A. ISTo, sir. I walked to Washing- ton Heights and went around to the High Bridge Club, and stood on the comer for a little while. Q. Did you see the policeman on the beat? A. Not as I remember. Q. Do you know the policeman on the beat? A. I know their faces, but I don't know their name. Everybody knows ine. Q. You have lived there a good while ? A. Yes, sir. Q. Well, four or :^ve years ? A. Along about ten years. Q. You were not subpoenaed to come here this morning? A. 1^0, sir. Q. What was your object in coming here? A. I came right down as soon as the wife told me. Q. Where do you keep your bank account ? A. My bank account ? Q. Yes. A. Up in the Fifth IsTational Bank, 23d street and Lexington avenue. Q. Do you make your deposits there for fees that you receive as receiver and commissioner ? A. Yes, sir. Q. And check out the money from that bank for the payment of your bills, do you? A. Yes, sir. Q. How many years have you kept your account there ? A. Oh, ever since I had an account, I guess. Q. How long have you had an account ? A. About ten or twelve years. Q. Did you begin it about the time you began to get receiver- ships ? A. About that time, yes. I may have had an account a little before that, but it didn't amount to anything. Q. Were you ever appointed referee in any matters? A. ISTo, sir. Q. Never acted as referee? A. No, sir; just commissioner and I'eceiver. Q. Let us see if I understand you correctly ; the last five or six years, you have drawn a salary of $1,8€0 ? A. Yes, sir. Q. And prior to that, for five or six years, a salary of $1,500'? A. Yes, sir. Q. And priot to that a salary of $l,200i for the period you served as a court attendant? A. Yes, sir, as a court attendant, and I 818 Investigation of Public Service Commissions want to correct that. I think the first five years, I think, was a thousand dollars, and then $1,200', and then $1,500', and then $1,800. Q. For twenty-five years your salary has averaged between twelve and fifteen hundred dollars a year, then ? A. That is right. Q. How much would you say you have received in the way of fees and commissions as a receiver during the period since Judge Mc'Call was made a Justice of the Soipreme Court ? A. Oh, maybe twelve or fifteen thousand dollars. I don't know the exact amount. Q. As a receiver ? A. As the whole thing. Q. As a receiver and a commissioner both ? A. Yes, sir. And maybe more than that. Q. Twenty thousand dollars, maybe? A. No, sir. Q. Haven't you averaged a thousand dollars a year for the last fifteen or twenty years ? A. No, sir, it is only — I have only been up there twelve years. Q. In 1902, you went up there as Judge McCall's attendant? A. Yes, sir. Q. And you have averaged better than a thousand dollars a year since that time? A. Yes, sir. Q. Two thousand dollars a year ? A. Yes, sir. Q. About $2,000 a year? A. About $2,000 a year, I should think. Q. For fees as commissioner and referee, and that makes around $25,000? A. No, sir; I am way off. I meant to say on average about, I should think, I made about twelve thousand dollars, between twelve and fifteen thousand dollars in all that time. Q. As receiver and commissioner ? A. Yes, sir. Q. In addition to your salary? A. In addition to my salary, yes, sir. Q. You are still rendering substantially the same service to Judge McCall now that you did while he was on the bench, aren't you ? A. No, sir ; I go there in the morning, and come after him in the afternoon. Q. You do not drive the machine for him ? A. No, sir. Q. You go and meet him and walk up and down with him ? A. Yes, sir. Q. Just a social visit, I suppose? A. Yes, sir. Q. Do you render any service for Mts. McCall ? A. No, sir. Eepoet of Joint Legislative Committee 819 Q. Or the family about the place ? A. No, sir. Q. Do you receive any compensatioii from Judge McCall ? A. No, sir. Q. Whatever you do is just out of gratitude, I suppose? A. Gratitude, that is the idea. Q. You are not related to the Judge in any way, are you ? A. No, sir. Q. Or to Mrs. McCall ? A. No, sir. Q. Had you known him a good while before he appointed you as an attendant? A. I just know him by sight about three or four years, that is all, the same as anybody else. Q. He was practicing then ? A. Yes, sir. Q. Used to see him in court ? A. Yes, sir ; once in a while. Q. Did you get acquainted with him in that way? A. Yes, sir. Q. ^Vhat other judges have appointed you as commissioner or receiver other than Judge McCall? A. Judge Guy and Judge Leventritt, Judge Davis, Judge Blanchard and Justice Bischoff. Q. Any others ? A. That is all I can think off. Q. Did Judge McCall ask these other judges to name you as receiver or commissioner in those matters ? A. I don't know. I suppose some of them he did. Q. Don't you know he did ? A. I know he did ; yes, sir. Q. Did he tell you he was going to ask them to appoint you commissioner? A. I forget. I suppose he did. He must have told me. He may not have asked some of them. They may have named me of their own accord. They knew I was Judge McCall's man. Q. Did you render any services to any of those judges? A. No, sir., Q. Pretty well acquainted with them, were you ? A. Yes, sir. Q. With those judges ? A. Yes, sir. I knew thepi very Avell ; yes, sir. Q. Prior to the time that you began to turn these checks over to Mrs. McCall were you in the habit of endorsing them in blank, just writing your name across the back ? A. To the best of my recollection I think I just signed my name, but I don't remember. Q. And were you accustomed in those days to take them to the 820 Investigation of Public Service Commissions bank and deposit them for the judge ? A. I don't know whether I did or not. I may have and may not. Q. You did go to the bank for him? A. Yes, sir, and they may be amongst the other checks. I don't remember. Q. What do you remember now of what was said at the time that you changed your custom of endorsing these checks — there came a time when you did not do that? A. Yes, sir, that was about when he was going over to the Public Service Commission. Q. What was said about that time on that subject by him ? A. I cannot think of what was said, for the life of me. Q. Do you remember where you were at the time he told you ? A. I think in his house. Q. Anyone else present besides himself and you? A. Mrs. MoCall, I think, and maybe Mrs. MeCall and myself. I think the three of us were there. I am not sure. Q. You cannot recall what was said on the subject? A. No, sir. Q. Did Mrs. McCall participate in the conversation in any way? A. I don't remember. Q. Do you remember anything Judge McCall said to her on the subject? A. !N"o, sir, only just in a general way, that was all. ' : Q. What do you mean, in a general way? A. About him going over to the Public Service Commission. Q. Did he say he was going over to the Public Service Commis- sion? A. Yes, sir, and whether he was over there or going over I don't remember. Q. Was that before or after he was appointed? A. I don't remember. I don't remember Avhether this happened before or after. Q. Do you remember when it was he was appointed? A. I think it was in February. Q. 1913 ? A. Yes, sir. Q. The next cheek after his appointment would be dated the first of March, wouldn't it, March 1st? A. Yes, sir. Q. And was that the time, about that time, that you had this conversation with the Judge and Mrs, McCall at the house? A. I think so. Report of Joint Legislative Committee 821 Q. It was not before that ? A. I would not say whether before or after. Q. Was it as long before that as the first of December ? A. I don't remember. Q. It was at a time when there was a check for delivery for deposit, wasn't it? A. Yes, sir; that is right. Q. That was when it was ? A. Yes, sir. Q. And it was either on the first of December prior to the time he was appointed or the first of March after ? A. I wouldn't saj- it was at the time of a' cheek. Q. You said it was? A. I know. Q. What is your reason for changing your mind ? A. Because I wanted to be honest. Q. I supposed you were telling your recollection, if you have any recollection on the subject. A. I wouldn't say it was at the date a check was there. Q. Was it at a time a check was there, and did Judge McCall say it was because he was now on the Public Seiwice Commission ? A. 'No, sir ; I couldn't say that. Q. Where is Mrs. McCall now ? A. I don't know. Q. Is she at Easthampton ? A. ~No, sir. Q. Where did you see her last ? A. Yesterday morning. Q. Where ? A. In the Judge's house. Q. Is she in the city now ? A. I couldn't say. Mr. Lewis. — I think we will have to subpoena Mrs. MoCall to find out about this. Q. Was there one of those chet-ks in your hand or Judge MeCall's hand at the time you had this conversation ? A. I don't remember whether there was or not. Q. You said a few minutes ago there was, and you said after- wards you did not recall ; what do you mean by it ? A. I don't recall, and I want to be honest. You don't want me to say Q. I don't want you to say anything that is not the truth, but tell the truth. A. That is what I am telling. Q. You think that over fifteen minutes, and see what your recol- lection will be about it then. A. All right. (Examination of witness temporarily suspended.) 822 Investigation of Public Seevice Commissions Paul R. Atkinson, recalled for further examination, testi- fied as follows : By Mr. Lewis: Q. Mr. Atkinson, have you ascertained, and are you now able to testify, to the date when the Franklin Trust Company began issuing the dividend checks ? A. Yes, sir. Q. What was tliat date, please? A. January 25, 1910. Q. Have you produced all the checks that you have been able to find ? A. Yes, sir. , (Witness hands package of checks to Mr. Lewis.) (Mr. Lewis put in evidence check drawn by Thornton Geiiish, check ]>lo. 398, dated March 1, 1910, $774, payable to the order of John J. Mackin, endorsed John J. Mackin. Further endorsed, " For deposit, Bankers Tmst Company, Edward E. SIcCall." Also check Xo. 394, drawn to the order of John J. Mackin, dated June 1, 1910, $774, signed George Switzer, Assistant secre- tary, and endorsed John J. Mackin. Further endoirsed, " For deposit Bankers Trust Company, Edward E. McCall." Also check ISTo. 398, dated September 1, 1910, drawn to the order of John J. Mackin, $774, signed G-eorge Switzer, and endorsed John J. Mackin. Also cheek Xo. 405, dated December 1, 1910, payable to the order of John J. Mackin, $774, endorsed John J. Mackin; further endorsed, " For deposit Bankers Trust Company, Edward E. McCall." Also check dated March 1, 1911, same amount, same form, same endorsements. Also check dated June 1, 1911, 'No. 409, same amount, same payee, same endorsement. Also check dated September 1, 1911, check No. 415, same amount, endorsed John J. Mackin, Edward E. McCall. Also check dated December 1, 1911, No. 418, payable to the order of John J. Mackin, endorsed John J. Mackin, same amount, " For deposit Bankers Trust Company, Edward E. McCall." Also check No. 426, dated March 1, 1912, payable to the order of John J. Mackin, $774, endorsed John J. Mackin, and further endorsed, " For deposit to the Bankers Trust Company, Edward E. McCall." Eepoet or Joint Legislative Committee 823 Also check I«fo. 4-41, dated June 1, 1912, payable to the order of John J. Mackin, $774, endorsed John J. Mackin, and further endorsed as above. Also check ISTo. 449, dated September 3, 1912, payable to the order of John J. Mackin, $774, endorsed as preceding. Also check dated December 2, 1912, check No. 448, same payee, same amount, same endorsement. Also check No. 460, dated March 1, 1913, same payee, same amount, endorsed John J. Mackin, and further endorsed, " Pay to order of New York Produce Exchange Bank, Ella Gaynor McCall.") Chairriian Thompson. — That writing is a little different ink from some of the other writing. (Mr. Lewis also put in evidence check No. 530, dated June 2, 1913, same amount, same payee, endorsed, " Pay to the order of Ella Gaynor McCall, John J. Mackin." Further endorsed, " Pay to the order of Produce Exchange Bank, Ella Gaynor McCall." Also check dated September 2, 1913, check No. 548, same payee, same amount, same endorsement. Also check dated December 1, 1913, check No-. 559, same payee, same amount, same endorsement. Also check No. 582, dated March 2, 1914, $774, same payee, endorsed John J. Mackin, and further endorsed, " Pay to the order of Produce Exchange Bank, Ella Gaynor McCall." Also check No. 617, dated June 1, 1914, same amount, same payee, check No. 617 endorsed, " Pay to the order of Ella G. McCall, John J. Mackin. Pay to order of Produce Exchange Bank, Ella G. McCall." Further endorsed, "Ella Gaynor McCall." Also check dated September 1, 1914, check No. 630, same payee, same amount, endorsed, " Pay to the order of Ella Gaynor McCall, John J. Mackin. Pay to the order of Produce Exchange Bank, Ella Gaynor McCall." Also check No. 625, dated December 1, 1914, same amount, same payee, endorsed, " Pay to the order of Ella Gaynor McCall, John J. Mackin." Further endorsed, " Pay to Produce Exchange Bank, Ella Gaynor McCali.") 824 Investigation of Public Service Commissions Mr. Lewis. — That brings us down to date. Q. Have you any further checks? A. ISTo, sir; no more yet. Q. I think that is far enough back, and we won't ask you to bother with any more. A. That will be a great comfort to me, for the rest would be hard to find. Mr. Cole. — Will these checks be returned to us ? Mr. Lewis. — Yes, sir, all the checks delivered to us will be relurned to you. The stenographer has made a record of the numbers, dates, etc., of all the checks, and the originals will be returned to you within a few days. John J. Mackin, being recalled for further examination, testified as follows : By Mr. Lewis : Q. Mr. Mackin, I show you check No. 460, dated March 1, 1913, drawn to your order, and endorsed by you in blank; can you tell us anything about what happened when you received that check, and what you did with it ? A. No, sir, I cannot. Q. Do you know what you did with it ? A. No, sir. Q. Did you give it to Mrs. McCall ? A. I don't remember of giving it to Mrs. McCall, but I presume I did. I gave her all the checks. Q. You had not given her any up to that time ? A. From that time on I mean. Q. What about that check; did you give it to Judge McCall? A. I don't remember. Q. Now, that was March 1, 1913, and you were still in the employ of the county as a court attendant? A. Yes, sir. Q. You received that at the County Court house in the regular course of mail, did you not ? A. Yes, sir. Q. And up to that time, you had regularly received the checks and delivered them to Judge McCall? A. Yes, sir. Q. tiad you not ? A. Yes, sir. Q. At the time you received this check. Judge McCall had ceased to be a justice of the Supreme Court, and had become a Public Service Commissioner, had he not? A. Yes, sir. Eepoet of Joint Legislative Committee 825 Q. And his office was no longer in the court house, but was in the Tribune Building, was it not ? A. Yes, sir. Q. 'Now, didn't you take that check when you received it and endorse it in blank and take it to Judge MoCall at the Tribune Building? A. I don't remember. Q. And didn't Judge McCall say to you then that you were to deliver it to his wife? A. I don't remember. Q. And didn't you then go to the house and deliver it to Mrs. McCall? A. I don't remember. Q. I suppose you are willing to admit that you . received the check, are you? A. Yes, sir. Q. And you endorsed it ? A. Yes, sir. Q. You did not write anything on that except your name, did you? A. This looks like my writing here. Q. But that is below your signature. A. Yes, sir, and that looks like my writing there. I don't know whether it is or not. Q. Why would you be writing that below there? That is an instruction of Mrs. McCall, " Pay to the order of the Produce Exchange Bank." Do you think you wrote that? A. ISTo, sir, I don't. Q. You don't think you did ? A. 'So, sir, I don't think I did. Q. You know Judge McCall's handwriting pretty well, I sup- pose? A. Yes, sir. Q. Is that in his handwriting, that endorsement ? A. No, sir. Q. Whose handwriting is that, do you know ? A. I can't think whose it is. That is — I will tell you in a minute. That is Mr. Perrin's handwriting. Q. Who is Mr. Perrin? A. He is the Judge's bookkeeper. Q. He is accustomed to endorse checks for him, is he? A. I think that is his writing, but I wouldn't swear to it. I haven't seen much of his writing, but I think this is his writing. Q. I show you check 415, dated September 1, 1911; is that Judge McCall's handwriting? A. That is mine up there. I think that is his handwriting. Q. You think that is his handwriting? A. I think so. I am not much of an expert, and I don't know. Q. Do you remember cashing any checks, and giving the money to Judge McCall ? A. Yes, sir ; I have cashed lots of them. 826 Investigation of Public Seevice Commissions Q. Some of these dividend checks ? A. ISTo, sir. Q. Do you think you ever did ? A. I don't think I ever did. Q. I show you check No. 398, dated September 1, 1910; that checli seems to have been delivered to you and cashed by you. A. I never cashed it. Q. Do you loiow anything about it ? A. No, sir. Q. What did you do with it ? Have you any recollection or any idea ? A. I have no idea, no, sir. Q. Did you turn these checks over from time to time to the bookkeeper, Mr. Perrin, were you accustomed to turn the checks over to the bookkeeper from time to time ? A. Which checks ? Q. The dividend checks as they came in ? A. No, sir. When Ihey wanted my own endorsement on alone, and like that ? Q. Yes. A. I gave them to the Judge. Q. Always gave them to the Judge, did you ? A. Yes, sir. Q. Until you began to turn them over to Mrs. McCall? A. Yes, sir. Q. Didn't it make an impression on your mind at the time that the Judge told you that he didn't own this stock any more, and that you didn't own it, and never had, and that it belonged to Mrs. McCall? A. No, sir. Q. It didn't ? A. It didn't make no impression on my mind at all. I know I never owned it. Q. You knew you never owned it? A. Yes, sir, I never owned that much stock. Q. Did you ever see the oertificaite ? A. I don't remember. Q. Was there more than one, or was it all in one certificate? A. I don't renaember. Q. Did you ever turn any of the certificates over to the company to be re-issued in any different form ? A. No, sir. Q. Do you remember ever endorsing a certificate, writing your name on the back of the certificate, so that it could be surrendered and cancelled, and a new certificate issued? A. I may have. I don't remember now. Q. You don't recollect anything about that, either ? A. I may have done it, but I don't remember it. Report of Joint Legislative Committee 827 Q. Do you know this stock still stands in your name on the books of the Kings County Electric Light and Power Company ? A. Only as I read in the paper, is all I know about it. Q. You don't know whether you have ever transferred it to Judge McCall or not ? A. ISTo, sir. Q. If it was issued to you, 387 shares, if it was issued to you in one certificate, it still continues in that form, does it not, as far as you are concerned ? A. As far as I am concerned. Q. You have never signed any power of attorney, have you, to authorize anyone to transfer that stock on the books of the company from your name to anybody else's name ? A. iSI"ot that I know of. Q. You know what a power of attorney is, don't you ? A. Yes, sir. Q. You have seen lots of them ? A. Yes, sir. Q. You would know it if you had signed one, wouldn't you ? A. I don't remember signing one. I wouldn't say I didn't. Q. J suppose you signed most anything the Judge told you to, didn't you ? A. I think I would, yes, sir. Q. And perhaps you may have assigned this stock to him pos- sibly? A. Possibly, yes, sir. Q. You don't know where the certificates are now, do you ? A. Xo, sir ; I don't know a thing about them. Q. Did the Judge tell you, at the first time he spoke to you about that, be owned the stock, but that it was in your name? A. I don't remember. Q. Do you remember anything he said to you on the subject? A. S"o, sir ; I don't. Q. You have heard a good many lawsuits tried ? A. Yes, sir. Q. You have heard a good many witnesses say, " I don't remem- ber," haven't you ? A. But I honestly don't remember. Q. I wonder if Mrs. McCall would have a better recollection of the transaction than you have. A. I am sure I don't know. T am giving you my best recollection. Q. I am afraid, in view of your lack of recollection, or remembrance of anything that took place there on that first of March, or about the first of March, I am afraid I will have to subpoena Mrs. McCall. A. I cannot help that. I am giving you my best recollection. 828 Investigation of Public Sekvice Commissions Q. Do you know when the Judge expects to return ? A. Mon- day. Mr. Lewis. — I am inclined to think we have accomplished all that we can accomplish to-day. By Chairman Thompson : Q. You had a talk with Judge McCall yesterday ''. A. Yes, sir. Q. Weren't you waiting for tlie Judge in the corridor oai the fourteenth floor of the Tribune Building when I was in there about 1 o'clock? A. Yes, sir. Q. And you went out with Judge McCall at the time ? A. Yes, sir. Q. And didn't the Judge send for you when he came back — when the Judge came from here did he send for you ? A. No, sir. Q. How did you happen to be waiting for him? A. I didn't know he was down here, and I was going to the ferry with him. Q. Why do you do those things ; do you say you always go there ? A. If I am around, I go there. Q. You had a good long talk with him yesterday noon ? A. Xo, sir ; I didn't. Q. You went to the ferry with him ? A. Yes, sir. Q. And you and he were alone ? A. Yes, sir. Q. Didn't he tell you that you better not be subpoenaed? A. Why, no. Q. You don't expect that anybody in the room here believes that you stayed asleep in your house last night and let your wife talk through the window to some strangers without your knowing it, do you ? A. Yes, sir. Q. You expect us to believe that ? A. Yes, sir. Q. And you lay there asleep on the same floor, and she with the window open shouting to the people that you were not there ? A. Yes, sir. Anybody is liable to come around at 1 o'clock and ask if I was there, and she wasn't going to say yes at 1 o'clock in the morning. Q. They said, " Is Mr. Mackin there," and she said, " jSTo," and this morning she said the same thing ? A. Yes, sir. Q. Why do you suppose she did that ? A. I don't know. Senator. I was over on Washington Heights and all around the Eepoet of Joik-t Legislative Committee 829 neighboi-hood last night. If I wanted to dodge a subpoena I wouldn't be walking around High Bridge. Q. The officers would not be likely to be looking up on High Bridge for you, would they? A. They might say I was around the High Bridge Club. jVssemblyman Burr. — • You belong to a local club there ? Mr. Mackin. — Yes, sir, president of it. Q. You were there in the house this morning ? A. Yes, sir. Q. And had breakfast with your wife before the men called ? A. Yes, sir. Q. And yet your wife told them that you were not there? A. That is true. Q. Do you think your wife was telling the truth when she said she was on her way to church ? A. Yes, sir. Q. Do you think she was on her way to church to make a little confession for the lies she had told in reference to this matter ? A. No, sir. She has been a sick woman for four years. Q. Did you ever have any experience in serving subpoenas ? A. IsTo, sir. Q. You never did when you were a court officer ? A. 'So, sir. Q. To get back to yesterday, have you told us all the conversa- tion you had with Judge McCall ? A. Yes, sir ; that is all the con- versation I had. Q. He told you about the stock, you say ? A. What is that ? Q. H© told you about the stock ? A. Yes, sir. Q. What did he say ? A. I said, " What was going on down at the investigation ? " And he said, " Oh, that Kings County," or whatever it is, electric light thing. He said, " It don't amount to anything," and that is all he said. Q. j^ow, you say you don't remember what the transaction was when the stock was taken in your name ? A. ISTo, sir, I don't. Q. Did you ever see the certificate ? A. I may have, but I don't remember it. Q. Do you remember the first check you got by mail for divi- dends ? A. I don't remember that first check, no. Q. Didn't somebody tell you you were likely to get a check, and were you surprised when you got a cheek for $750, or did you 830 Investigation of Public Seeviob Commissions thiult it was another commissionership ? A. I suppose I was sur- prised. I knew it was not a eoiumissionea-ship. Q. You took it in to the Judge ? A. I don't remember whether I did nor not. Q. All the checks for all that time you simply wrote your name on the back of the checks and gave them to the Judge? A. All what time? Q. All the time that you wrote — during all of these years while the Judge was a Supreme Court judge, you wrote your name right across the back of the check, wrote your own name across the back of the check, and gave the check to the Judge ? A. Yes, sir. Q. And that is all you did ? A. Yes, sir. Q. And after the Judge talked to you at the house about turning it over to Mrs. McCall after that, you always wrote, " Pay to the order of Ella Gaynor McCall," and signed your name? A I don't remember whether he spoke tO' me about it or she did. Q. After that conversation, you always wrote on the bacli, " Pay to the order of Ella Gaynor McCall," and signed your name ? A. Yes, sir. Q. And before you had that talk, you always just signed your name on the back of the check ? A. Yes, sir. Q. And all the checks where you signed your name only, you gave the checks to Judge McCall ? A. I presume so, either him or his bookkeeper. Q. You know you did ? A. Yes, sir. Q. Those checks, " Pay to the order of Ella Gaynor McCall," didn't you give some of those checks to Judge McCall? A. No, sir. Q. Are you positive about it? A. Yes, sir; positive about it. Q. You have testified about the September check ? A. Yes, sir, that was a country cheek. Q. You endorsed them to Mrs. McCall, and it was perfectly safe, you could give them to Judge McCall to take them to her? A. Yes, sir, I could. Q. And you did that ? A. ISTo, sir ; T always made it a practice of endorsing them and giving them to lior at breakfast, and she has breakfast with the Judge. Report of Joint Legislative Committee 831 Q. You go there every morning? A. Yes, sir, at 9 o'clock, except Saturday. Q. What do you go there for? A. Whatever he wants me to do. I take a ride down town, or walk down. Q. How did you come to meet him yesterday ? A. Because I knew he was going away. Q. When did you find that out ? A. In the morning, when 1 went to his house. Q. Since the Judge went off the bench, did you ever get any favors from him as a Public Service Commissioner ? A. ISTo, sir, never. Q. You never had any receiverships or anything of that sort? A. From the Public Service ? Q. ^'es, or from the judges? A. I thought you meant from the Public Service. I have had them from the judges. Q. Pie has asked the judges to give you references and such as that ? A. I wouldn't say he has lately. They know me and they give them to me. Q. In your work for this shorthand company, you get twenty- five per cent ? A. Yes, sir. Q. Is that a customary thing in New York, to pay everybody for everything they do to bring in business ? A. You ,have to run around, yes, sir. Q. It is customary, to be paid when you are able to use your influence to get business, and the shorthand company, they pay you? A. Yes, sir. Q. Is that true of everything here ? A. I don't know about other things here. Q. When you get a commissionership, do you pay anybody a part of your fees, or anything of that sort? A. Of my commis- sionership fees ? Q. Yes. A. No, sir. Q. You never paid anybody part of that ? A. No, sir. Q. Did all the other court attendants up there fare as good as you did, with the receiverships and that sort of thing? A. No, sir. Q. Why not ? A. I don't know. Q. Is it a custom do'wn here to make court attendants receivers ? A. The personal attendants. 832 Investigation of Public Seevice Commissions Q. The personal attendants get receiverships and commissioner- ships ? A. Some of them do. Q. And fees ? A. Yes, sir. Some of them do. Q. And a compensation besides? (No answer.) Q. Did you ever have any other stock ? A. ISTo, sir. Q. You never did ? A. No, sir. Q. Were there ever any other checks that came to you that you turned, over ? A. In my name ? Q. Yes. A. Not that I know of. Q. Did you make contributions to campaigns, personal contri- butions? A. Yes, sir. Q. Whose campaign ? A. Whoever was the candidate, to the organization. Q. Who did you make do that? A. I would make it to who- ever was the leader of the district. Q. You mean the last campaign you contributed to the leader of the district? A. JSTo, sir; I didn't contribute. Q. The campaigns when you were court attendant, yon did con- tribute to the leader of the district ? A. Yes, sir. Q. Kepublican or Bull Moose or Democrat leader ? A. Demo- crat leader. Q. Is there more than one kind of a Democrat leader in your district ? A. No, sir ; there is only one Democat leader. Q. What they call Tammany? A. No, sir, it was not Tam- many. It is the regular organization. Q. It is the same thing, isn't it ? A. The same thing. Call it Tammany if you like. Q. You contributed regularly to that ? A. Yes, sir. Q. How much did you contribute ? A. I think I gave $100 last year. Q. How much did yon contribute when you were court attend- ant? A. $25. Q. $25 a year? A. Yes, sir. Q. Did you ev&r pay out anything more ? A. No, sir. Q. Only $25 a year? A. Yes, sir, that is all. Q. One of the Senators wants to know if you contributed to MeCall's campaign for mayor ? A. No, sir. Eeport of Joint Legislative Committee 833 Q. Were jou against him for mayor ? A. I was up night and day for him for mayor, and I paid my own hotel expenses. He wanted to pay for that, and I wouldn't let him. Q. Did you make a contribution to Sulzer ? A. Hardly. Q. You are not one of those who did not get mentioned in his campaign statement? A. ISTo, sir. Q. Won't yO'U tell me all that you did, everything you did, in relation to changing your rule of payment of these dividend checks from endorsing them with your own name and handing them to Judge McCall, when you changed around and endorsed them " Pay to the order of Ella Gaynor McCall," and signed your name; tell me everything you did to bring that about? A. I can't think of it. Q. You didn't sign any paper except these checks ? A. I don't remember that. If I remembered it I would tell you. Q. This is the only stock you ever had anything to do with ? A. Yes, sir. Q. These are the only dividend checks you ever had in your life? A. Yes, sir. Q. You must remember if you signed any paper in relation to them, don't you think ? A. I cannot. Q. You say you cannot ; isn't it because you think it is danger- ous to remember now ? A. ~So, sir ; I don't see why it would be dangerous. Q. But you say you don't remember signing any paper at all ? A. ISTo, sir, I don't. Q. Did you ever see the stock certificate? A. I don't remem- ber seeing it. Q. You don't remember ever seeing it ? A. No, sir. Senator Lawson. — Would you know that certificate of stock if you saw it? Mr. Mackin. — Yes, sir. Senator Lawson. — Are you familiar with the forms on which corporations issue stock? Mr. Mackin. — Yes, sir. Vol. 1 — 27 834 Investigation of Public Seevice Commissions Senator Lawson. — If you did see such a certificate, you would remember it? Mr. Mackin. — I wouldn't remember if I signed it. Senator Lawson. — You were asked if you had seen it. Mr. Mackin. — ■ I don't remember seeing it. Senator Lawson. — You would know if you saw it, would you ? Mr. Mackin. — Yes, sir. (By Senator Thompson, resuming) : Q. Do you know how many shares of stock you did have ? A. Wo, sir. Q. And you never did know ? A. I never did know. Q. You can remember all the conversation you had with Judge McCall yesterday, can't you ? A. Yes, sir. Q. Give it again, and detail the whole of it, all the talk you had with Judge MoOall yesterday, from the time you met him on the fourteenth floor of the Tribune Building until the time he took the boat. A. We were talking upstairs about something. Q. Tell us what you were talking. A. I wasn't talking. I think you were there. I wasn't talking then. I went down in the elevator and got in the machine and came across to one of the side streets. Q. Didn't you have any talk with him before you got in the machine? A. No, sir. Q. How did you happen to get in the machine ? A. To go to the ferry. Q. How did you know that ? A. I knew it in the morning. Q. And did he tell you in the morning to get in the machine and go down with him ? A. Jfo, sir, but I always do whenever he is going any place. Q. You didn't say, "Are you ready to go ? " or anything else. A. I probably said, "Are you ready. Judge? " or something like that. Q. Did you say that ? A. I don't remember whether I said that or not. Q. Tell us all you said from the time you went down the ele-' vator, everything that you said, and all that he said. A. We got Eepoet of Joint Legislative Committee 835 in the machine and got across oyer towards the other side of Broadway, and I says, " What is the investigation about?" And he says, "About that Kings County stock. It don't amount to any- thing." Q. That is all the talk you had with him on the way down ? A. That is all about that. Q. About anything? A. About anything. Q. When you got there, what did you have to say ? A. We got off and got his stuff off, and he went inside and on over to Jersey. Q. Did you go with him ? A. No, sir. Q. And you had no other talk with him ? A. 'No, sir. ilr. Lewis. — We may want you to testify again next week. Mr. Mackin. — On the phone, at any time. Chairman Thompson. — You will come on telephone call ? Mr. Mackin. — Yes, sir, at any time. Chairman Thompson. — We will direct you to appear here Mon- day morning at 11 o'clock. Mr. Mackin. — All right. Chairman Thompson. — Is there anji;hing more to come up to- day? If there is no objection on the part of those members of the Committee present, we will adjourn until Monday morning at 11 o'clock, at the same place. Hearing none, it is so ordered. Whereupon, an adjournment was taken to 11 :30 o'clock a. m., Monday, ]S^ovember 8, 1915, at the New York County Lawyers' Association Board Eoom, 165 Broadway, ISTew York city. NOVEMBER 8, 1915 New Yoek County Lawyers' Association Boaed Room, 165 Broadway, New York City The Committee met, pursuant to adjournment, at 11:30 o'clock A. M., Chairman Thompson presiding. 836 Investigation of Public Sekvice Commissions Edwaed E. McCall, being recalled for further examina- tion, testified as follows: By Mr. Lewis : Q. Judge McCall, in whose possession are the stock certificates of the Kings County Electric Light and Power Company which you fo'imerly owned, as you testified on Friday last? A. Mrs. McCall's. Q. In Mrs. McCall's possession now ? A. Yes, sir. Q. Do you know whether she has them at her residence or whether — A. I can't tell where they are. Q. Is she in the city ? A. She is. Mr. Lewis. — I suggest that — Q. Would Mrs. McCall come down and produce those certifi- cates ? Chairman Thompson. — I do not think we had better ask her to come. Can't you produce them. Judge McCall ? Mr. McCall. — Yes, sir ; certainly. Q. At what time ? A. Will to-morrow do ? Q. I would like them to-day, if possible. A. I will get them to-day if I possibly can. Q. You said in your testimony on Friday last that you bought a small block of the stock of the Kings County Electric Light and Power Company, and that that was increased by accretions; is that your recollection now ? A. Yes, sir ; that is right ; the origi- nal purchase. Q. Do you remember how many shares it was? A. I don't know whether a hundred or 125 ; something like that. I am try- ing to get that data complete for you and get the whole thing. I think, Senator Thompson, you questioned me that that was stock dividends or something like that. It was issues of stock which holders of stock had a right to buy at par. Chairman Thompson. — You used the statement that it was stock with accretions, and I think I used the word " stock divi- dends." Mr. McCall. — The process was that we had the right to buy the stock at par. Repoet of Joint Legislative Committee 837 Q. You say you thought you bought a hundred shares? A. 100 or 125. I cannot recall the exact amount. It was a small amount of stock. Q. You acquired it, I think, on the 21st of December, 1908 ? A. Oh, no ; it was long before that. Q. Prior to 1908 ? A. Yes, sir, my recollection serves me that it was much earlier than that. Q. And that was acquired from Andrew Freedman, was it not ? A. No, sir. Q. From whom ? A. If I recollect right, Baches. It was in 1903 or 1904. That is what I complain of, bought from Freed- man. That put it in a very bad color. I don't know whether purposely or not. It was not bought from Freedman at all. Q. This transcript appears in our minutes of last Friday. A. I never said I bought it from Freedman. If that record says that it is wrong. Chairman Thompson. — It is only what the books of the Frank- lin Trust Company show. Q. This statement appears from the minutes of Friday's meet- ing : " The Franklin Trust Company books were produced before the Committee, showing that since December 21st, 1908, John J. Maekin never had any stock in the concern except the following : 1908, December 21, John J. Maekin, County Court House, New York City. From Andrew Freedman, the following stock : 773, 100 shares; 774, 100 shares; 775, 100 shares; A2824, 87 shares; total, 387 shares. This stock is still in the name of John J. Maekin, and n^ver has been transferred since December 1, 1908, on the books of the company." A. That is quite true. That list shows you the accretion of the stock. Q. When did that accretion occur ? Chairman Thompson. — That also shows the name of Andrew Freedman. Mr. McCall. — That is where the erroneous impression comes in. Chairman Thompson. — It is not an erroneous impression. 838 Investigation or Public Service Commissions Mr. McCall. — Yes, sir, it is. Senator Lewis' question carries that. He says I bought it from Andrew Freedman. Mr. Lewis. — I am stating what the record shows. I got the impression from this transcript of the record. Chairman Thompson. — Whatever impression the Committee got, they got from the transfer books of the transfer agent of the Kings County Electric Light and Power Company as it appears on the books. I am not going to allow the Committee to be criti- cized for using the name of Andrew Freedman. Mr. McCall. — I am not criticizing them for using that, ^ut I will criticize the Committee or anyone for saying I bought it from Andrew Freedman. By Mr. Lewis : Q. Will you tell us from whom you purchased the stock? A. The first purchase, as my recollection serves me, was from Bache & Company. Q. And that was when? A. I think 1903 or 1904. All the stock was acquired long before the Freedman incident. Q. That was how many shares, in the first purchase? A. I think 125. Q. Were there some subsequent purchases? A. Only by the offer of the sale of stock at par to the then holders of stock at the pro rata right to buy. Q. That was 1905 ? A. I think 1903 or 1904. I am not sure as to that. Q. Poor's Manual of Corporations, I have a memorandum sent from it, and I have sent for the book itself, shows that in March, 1907, the capital stock of the Kings County Electric Light and Power Company was increased from $8,200,000 to $10,000,000 by an issue of 18,000 additional shares for liquidating floating debt of the Edison Company and for construction work; is that your recollection of the time you acquired additional stock? A. I don't know anything about it. All I know is there was an in- crease of stock when this stock was purchased, and I was notified as a holder that I was entitled to my pro rata lot at par, and could take the stock or sell my rights. Eepoet of Joint Legislative Committee 839 Q. Do you remember how much you took? A. Based on the amount of about 125 shares. Q. Do you think that was prior to March 1, 1907 ? A. Yes, sir ; I am inclined to think it was. Q. At the time of the increase provided for, referred to in Poor's Manual, on March 1st, 1907, did you get an allowance of stock under the increase provided therein? A. I don't know. I don't know. I don't know what my rights to the issue of stock were. Q. Was there more than one occasion? A. Yes, sir; there were three or four occasions. Q. Between 1903 and 1904? A. Between the time I first acquired the stock and the time I got the final holding; there was three or four. Q. You had title to the stock, or to considerable stock, prior to 1908, and in whose name did that stand on the books of the company? A. I cannot recall whether my name or not. I had possession of the stock, though. Q. Was it in Mr. Mackin's name prior to that? A. That I don't know. I am not sure about that. I do not know in whose name it was. Q. Did it ever stand upon the books of the company in your name? A. That I would not be able to say. I cannot recall. Q. Did the dividend checks come to you ? A. Yes, sir. Q. And were they payable to you upon their face ? A. That I don't know. The checks will show that. Chairman Thompson. — How long has the stock paid a dividend of $750 every three months ? Mr. McCall. — I think it has been an eight per cent, stock ever since I had it. Chairman Thompson. — That is $750 every three months ? Mr. McCall. — $774. It was two per cent, each quarter. Q. You did not get a check for $774 each quarter, as might be inferred from your answer to Senator Thompson's question ? A. 'So, sir ; I got whatever the check was at the rate of two per cent. 840 Investigation of Public Service Commissions Chairman Thompson. — I meant to ask whether it was two per cent, all the time you had it. Mr. McCall.— That is my recollection of it. I don't know, of course. Q. Will you tell us what the circumstances were which led to the placing of the stock in the name of Mr. Mackin ? A. I^othing at all. He was there, and my confidential officer, and I put the stock in his name. Q. And you do not recall in whose name it was prior to that? A. No, sir; I cannot recall. Q. Do you remember the occasion, or the reason for transferring it from somebody else's name to Mackin's name on December 21st? A. The only reason I could think about was there was a loan of that stock held by Mr. Freedman, and paid off on this date. I paid it off and I found he had taken the collateral and trans- ferred it to his name, and there was a necessity of retransferring. Q. It originally stood in another individual's name? A. Yes, sir; I am not sure. Q. And was pledged for a loan made to you by Andrew Ereed- man ? A. Yes, sir. Q. And by him transferred upon the books of the company, and the certificates were issued to him ? A. Yes, sir. Q. And those certificates were held by him until the loan was extinguished, and the certificates were changed and re-issued in the name of John J. Mackin ? A. That is quite right. Q. Were you present at the time of the transfer of that stock being made to Mackin ? A. Present at the time of the transfer ? Q. Yes. A. ISTo', I probably sent it down. Q. Were you present at the time the certificates were sur- rendered by Mr. Preedman ? A. Yes, sir ; they were surrendered to me because I paid him. Q. Did you send them to the office of the company with instruc- tions ? A. I think so. Q. Were those instructions in writing, do you know? A. I don't know whether by letter or whether I went over. There must have been some other way, because I don't know where their offices are, as I sit here. Eepoet of Joint Legislative Committee 841 Q. Would your letter files show whether the company was in- structed by correspondence upon the subject ? A. I do not know what has become of the letters. There was probably no file kept. Q. From the time the certificates were issued to John J. Mackin, in the name of John J. Mackin, the dividends were received by him, were they ? A. The checks were made payable to him and received by me. Q. Eeceived by you ? A. Yes, sir. Q. That is, up to the time of the transfer ; they came addressed to him, did they not ? A. Surely. He was the stockholder. Q. And he delivered them to you, did he not ? A. Yes, sir. Q. And they were addressed to him at the County Court House ? A. That is quite right. Q. And he endorsed them and turned them over to you? A. Yes, sir. Q. Did he have any further connection with them from that time ? A. He didn't know any more about it than a child in the cradle. Q. I suppose at the time this stock was issued to Mr. Mackin, it was immediately assigned by him in blank, was it not? A. That I am not so sure about. I think it was assigned in blank when the transfer was made, just prior to being given to Mrs. McCall. I am not sure about that. Q. Do you think you left it standing in his name on the books of the company without an assignment during all these years? A. Yes, sir. Q. And without any power of attorney to transfer it during that time ? A. No. Q. Is that rather unusual? A. I don't think so. It is a measure of confidence, that is all. Chairman Thompson. — Did you have him examined in refer- ence to his health ? Q. Suppose he might have died, his estate might have — It might have been embarrassing, in the event of his death? A. I don't think it would have. Q. Creditors' rights intervened in any way ? A. I don't think he had any excepting myself, probably. Q. Did he at that time ? A. Yes, sir ; I am quite sure. 842 Investigation of Public Sbevice Commissions Q. What individuals knew of the circumstances that this stock in his name belonged to you, other than yourself? A. I don't know as anybody, and nobody else's business other than my own. Q. In the event of your death, it might have been embarrassing ? A. I would have taken care of that all right. Q. Do you mean you had made some testamentary disposition ? A. I knew just exactly what to do. Q. And you did it ? A. I would have done it. Q. Except in the event of accidental death, perhaps ? A. Sure. Q. There is always that risk? A. Yes, sir. Q. When did you make the transfer of this stock to Mrs. McCall ? A. That was in the cleaning up process about the last week or ten days, when I was in the Court House. It was done because of the statute. Q. Had you then been assigned to the position? A. I don't know that I had. I am not sure about it. Yes, sir, I must have been. Q. Had been appointed ? A. Yes, sir, but not qualified. Q. What method was employed in the transfer of the stock? A. That is what I am in doubt about, whether he signed his endorsement in blank then or prior to that time. That I am not sure about. Q. Have you read Mr. Mackin's testimony taken on Saturday ? A. 'No, sir. Q. And haven't seen it ? A. No, sir. Q. Judge j\rcCal], where were the dividend checks received by Mr. Mackin and delivered to you ? Usually delivered to you at your office, at your house, or where? A. When do you mean? Q. From lime to time Mr. Mackin would receive the dividend checks ? A. Yes, sir. Q. And they were always mailed to him at the County Court House? A. Yes, sir. Q. And he turned them over to you endorsed in blank, and whereabouts did such delivery take place usually? A. I suppose in my office in the Court House. Q. Did they take place at any time at your house ? A. I don't recall any such thing. Naturally it would be, I should think, Repoet of Joint Legislative Committee 843 right in the Court House. He would receive them there and give them to me. Q. "Was Mr. Mackin aware of the fact that you had transferred this stock to Mrs. MoCall ? A. Yes, sir. Q. And when, in your judgment, did he acquire that knowl- edge? A. When did he acquire it? Q. Yes. A. When I told him I was going to transfer it. Q. During this period of the last week or two? A. If my recollection serves me, it was when I came back from the inter- view with the Governor, in which I had consented to receive the appointment. Q. Then you proceeded to straighten up your office and close up the work, I suppose ? A. Yes, sir, that is right. Q. Was there any notification given by you or by Mrs. McCall to the Franklin Trust Company, of the fact of a change in the ownership of that stock ? A. ISTo, sir. Q. Did you know that the dividend checks continued to come to Mr. Mackin from the time of your appointment down to the present time as formerly? A. Naturally I presumed that would be so, because there was no transfer of the stock on the books. Q. And you think Mr. Mackin had knowledge of the fact of that transfer prior to March 1, 1913 ? A. I don't think, I know he did. Chairman Thompson. — What was the date of your appoint- ment? Mr. McCall. — Around February 12th, I think. Chairman Thompson. — You say you know he did not ? Mr. McCall.— Know he didn't what ? Chairman Thompson. — Know he didn't have knowledge ? Mr. Lewis. — He said he knew he did. Q. At the time Mr. Mackin was advised of the change of the ownership in the stock, did you give him any instructions in refer- ence to his duties from that time on ? A. In reference to what ? 844 Investigation of Public Seevioe Commissions Q. In reference to the dividend checks. A. I don't know as any instructions. I told him that stock had to be transferred to Mrs. McCall, and hereafter whatever dividend checks came, to deliver to her. Q. And that is all you told him, speaking from recollection now? A. Correct. Chairman Thompson. — Did you arrange with him to endorse them over ? Mr. McCall. — No, sir. I told him the checks would have to go there. They were payable to his order. Q. The dividend check of March 1, 1910, No. 398, appears to have been endorsed by Mr. Mackin in blank, and then a further endorsement for deposit ? A. Yes, sir. Q. Is that further endorsement in your handwriting? A. No, sir. Q. In whose handwriting is that ? A. This is my bookkeeper's. Q. That is endorsed in blank ? A. Yes, sir. Q. Will you give us the name of your bookkeeper? A. Mr.. Perrin. Q. What is his first name ? A. Henry 0. Q. The next check for June 1st appears to be endorsed in the same way for deposit? A. Yes, sir. Q. And the third check, September 1, 1910 — A. These are all 1910? Q. Yes. The third check for September 1, 1910, bears Mr. Mackin's endorsement and no other ? A. Yes, sir. Q. And fourth — A. Wait until I see. There is an endorse- ment here, " Pay to — " Q. It was not deposited, is what I mean. A. The Bankers Trust Company is on here. Q. That was cashed there, was it not? A. I don't know. Q. I think from the appearance, it was cashed at the Bankers Trust Company, and Mr. Mackin got the cash on it or someone? A. It evidently was paid. Q. All these cliecks which I now show you, beginning December 1, 1910, bear the endorsements of John J. Mackin individually, Eepoet of Joint Legislative Committee 845 and for deposit in the Bankers Trust Company? A. These are all 1910 and 1911. Q. And here are some more just like them ? A. Yes, sir. Q. I now show you dividend cheek 460, dated March 1, 1913; will you examine the endorsement on that; that appears, does it not, to have been endorsed in blank by Mr. Mackin and afterward to bear a further endorsement ? A. Yes, sir. Q. What, if anything, have you to say as to what the endorse- ment indicates ; does it indicate anything to your mind ? A. What do you mean ? Q. Does it indicate anything to your mind as to the manner in which that check is endorsed ? A. No, sir. Q. Isn't it true it is endorsed by Mr. Mackin in precisely the same form as all the preceding checks, as far as Mr. Mackin is concerned ? A. Yes, sir ; in blank. Q. And the further endorsement, " Pay to the order of Produce Exchange Bank, Ella Gaynor McCall," is in somebody else's hand- writing ? A. Yes, sir ; Mrs. McCall's handwriting. Q. Is it all in Mrs. McCall's handwriting ; is " Pay to the order of " in Mrs. McCaJl's handwriting ? A. I don't think so. " New York Produce Exchange Bank, Ella Gaynor McCall " is in Mrs. McCall's handwriting. " Pay to the order of," I don't know whose handwriting that is. Q. Do you remember at the time this dividend check of March 1, 1913, was received by Mr. Mackin, do you remember Mr. Mackin being at your house with you and Mrs. McCall, and his turning this check over to Mrs. McCall in your presence ? A. You ask me if I remember it ? Q. Yes. A. He is there practically every morning of the year. I have no distinct recollection of that incident at all. I want to say right now I have no knowledge of any checks after that date. Q. After which date? A. After the date of my going in the Commissiom I never received one of the checks. Q. Did you receive the check of March 1, 1913 ? A. I did not, no, sir. Q. Do you know in whose handwriting the words " Pay to the order of " are ? A. No, sir ; I don't. 846 IxVBSTIGATION OF PuBLIC SeRVIOE COMMISSIONS Q. It is not your handwriting? A. It is not, no, sir. It may be somebody's in the bank. She probably sent it over there and somebody put it on. Q. It is not Mrs. McCall's ? A. I would not say it was. Q. Were there ever any checks turned over after the time you went upon the Public Service Commission, any check turned over by Mr. Mackin to you and delivered by you to Mrs. McCall ? A. Not that I can recall. Q. Was there any check he delivered to you which you mailed or sent by letter to Mrs. McCall ? A. I do not recall such an incident. If it was, that is what I would do, undoubtedly. Q. Mr. Mackin testified that the check of September 1, 1915, was received by him and turned over to you, and that you mailed it to Mrs. McCall. A. Maybe so, if he gave it to me. Q. That was only a couple of months ago. A. We were in the country at that time. Q. I think he said that you mailed it to Mrs. McCall at East- hampton. A. Possibly I may. I don't know anything about any such thing, but if he gave me that check, that is what I would do. There is nothing on this check that would indicate I ever saw it. Q. Do you notice the difference in the ink on the check? A. What ink? Q. The difference in the ink in the endorsements ; he accounted for it by the fact he wrote this. A. I should think he would. He had to write it. Q. He wrote this, and he said he thought he wrote it in your office in that colored ink, and he gave it to you and you mailed it to Mrs. McCall, and she endorsed it with a different colored ink ? A. I don't know anything about that. He had to sign it to have it transferred. It was made payable to Mackin's order. Of course, in the transfer of that check, he had to endorse it. He made it payable to Mrs. McCall, and all of this is in his handwriting. Of course it had to go to Mrs. McCall, and I may have made it. This " Payable to the order of the Produce Exchange Bank " is in Mrs. McCall's handwriting. Q. He testified he was accustomed to call at the house and de- liver the checks to Mrs. McCall whenever he received them, and from the endorsements on the most of the checks, it appears they Repoet of Joint Legislative Committee 847 were endorsed by him and Mrs. MeCall in the same ink, and may have been endorsed at the house. A. Probably. Q. This checls having a different ink for his endorsement, led me to ask him where he was when he endorsed that check, and he said he thought at your office, and he said he ,gave you the check which you mailed, and I wondered if you had any recollection about it. A. I have not, but the check must have been mailed at his office. He had to endorse on them, and if he endorsed it and put it in my desk, and that belonged to her, like anything else, probably I would forward it to her. Chairman Thompson. — You had just as much interest in it if it was !Mrs. McCall's as you could have had if it was yours, didn't you? Mr. McCall. — Just as much. I do not know what the purpose of that question is. What do you mean by that question ? Chairman Thompson. — Well, I haven't any particular defini- tion. Mr. McCall. — That is all right, then. Q. Mr. Mackin testified that — I asked him this question: "And were you accustomed in those days to take them," meaning the checks, " to the bank and deposit them for the Judge ? A. I don't know whether I did or not. I may have and may not." Wli&t is the fact of that ? A. You will find on the back of the check the explanation of that. The bookkeeper signs my name and deposits the checks. Q. Does Mackin sign your name, or Perrin? A. Perrin. Q. I asked Mr. Mackin yesterday, " Do you remember where you were at the time he told you ? " meaning at the time you told him of the fact that you were going to the Public Service Commis- sion, "A. I think m his house." Is that true ? A. I don't know. Q. I asked him this question: "Any one else present besides himself and you 'i " and his answer was, " Mrs. McOall, I think, and maybe Mrs. McCall and myself. I think the three of us were there. I am not sure." Do you recall that? A. I haven't any recollection. 848 Investigation of Public Service Commissions Q. Then I asked him this question : " You cannot recall what was said upon that subject ? A. No, sir. Q. Did Mrs. McCall participate in the conversation in any way ? " and the answer was, " I don't remember." A. Senator, Mackin was merely my con- fidential officer. He knows no more about the transaction than your child, if you have one. What was the use of catechizing him along sueli lines as that ? I don't know who asked those questions, but the idea of such questions. Q. Perhaps I ought not to have asked them. A. Do you think it was a fair question to ask him? Wasn't it apparent what he did ? I could have answered all those questions, and the fact was this — Chairman Thompson. — Could you determine whether he was home that night, inasmuch as his wife and he disagreed ? A. No, sir, but you saw him that afternoon, and if you had told him you Avanted him, he would have been here. Chairman Thompson. — I didn't know him. Mr. McCall. — Mr. Mackin is here, and I didn't know there was any such refereiice. He tells me your men came there at half- past two in the morning. Chairman Thompson. — It was one-ten. Mr. McCall. — Whenever it was. He came here the next day^ didn't he ? I want the fullest going into of the questions. I am going to put a statement on this record, so there cannot be any doubt about it or miscoloring of it. You cannot imagine how it has been miscolored or what misimpressions have been gotten from it. You yourself have manifested the very thing that has been spoken of to me a dozen times since I came back to New York, did Freedman sell me stock. Chairman Thompson. — That is your fault. Mr. McCall. — Why should you say that ? Chairman Thompson. — You allowed the Pranklin Trust Com- pany to have that record. If you had the stock in your own name, it wouldn't have come up. We are entitled to know the facts. Eepoet of Joint Legislative Committee 849 Mr. McCall. — You will get the facts from me. Chairman Thompson. — The Chairman upholds the counsel in the questions asked. Mr. McCall. — I only say to you the role he played should be very apparent to you. He knew nothing about it, more than a child in the cradle. Mr. Lewis. — If you will permit the suggestion, I want to say a word and exculpate myself, if exculpation is necessary. I was absent from the session of this Committee Friday, and when I re- turned, I found you had testified that you were the owner of a block of the stock of this company, and that it stood in the name of John J. Mackin, and he was your confidential clerk or secretary, or something, and I said at once that we had better subpoena Mr. Mackin, and I was told that had been anticipated, and an effort made to subpoena him, and that he could not be found and had not been found, but that Mrs. Mackin had been subpoenaed, and we came to the session Saturday morning and found Mr. Mackin here, and he was put upon the stand and testified he was in his house at the time the subpoena servers were endeavoring to serve him. Mrs. Mackin had stated to the subpoena servers that he was not in the house. Mr. McCall. — - Senator Thompson has had all of that explained to him. Mr. Lewis. — I put Mrs. Mackin on the stand, and she testified, as I have said, and there was a plain confiict of evidence as to a fact that must have been in the knowledge of both of them, and one or the other of them could not have clearly told the truth. With that staring me in the face, I felti justified in asking Mr. Mackin a considerable number of questions tending in many re- spects to go to the credibility of the witness, and to find out whether he or his wife had told the truth. Not only that, but the fact you had put the large block of stock worth forty or fifty thousand dol- lars in the hands of Mr. Mackin, and allowed it to remain there several years, seemed to me of sufficient consequence to warrant tbe asking of the various questions which I did ask ; and the further 850 Investigation of Public Seevicb Commissions fact that the record of the Franklin Trust Company, a transcript of which appears in the record of this Committee, carries on its face the statement that the 387 shares as to which you had testified that you were the owner, were transferred from Andrew Freedman on the 21st of December, 1908, warranted the conclusion in my mind that you had purchased that stock from Mr. Freedman at that time. Mr. McCall. — Why didn't you ask me about it ? Mr. Lewis. — You were out of town. i\Ir. McCall. — I was to be here. Mr. Lewis. — I had Mr. Mackin here. I knew nothing about Mackin or his testimony. I want to say, in addition, I felt in tak- ing the position I did and asking the questions of Mr. Mackin I did Saturday, that I was performing my public duty in a proper and j ustifiable way, and I am sorry if it has interfered with Judge McCall's peace of mind or occasioned irritation on his part. I am not responsible for the evidence and the record shows that the shares of stock were transferred from Andrew Freedman to Mr. John J. Mackin. Chairman Thompson. — As far as the case is concerned, what- ever criticism there is, if any, for producing Mr. Mackin, is with the Chairman of the Committee. The Chairman ordered the process-server to serve a subpoena upon the wife, and the subpoena upon the wife brought the man. Mr. McCall. — ■ JSTobody has criticized you for subpoenaing Mr. Mackin. Chairman Thompson. — It makes no difference if you did. We have to go ahead, anyway. Mr. Lewis, resuming: Q. I asked Mr. Mackin this further question, as to whether this conversation in which he stated he and Mrs. McCall and yourself were together at your house, whether that occurred at a time when a dividend check was in hia possession for delivery, and he stated Eepoet of Joint Legislative Committee 851 that to the best of his recollection, that was on the occasion of the receipt by him of the dividend check for March 1st; have you any suggestions to offer in connection with that matter ? A. Nothing at all, except I suggest now that I was never present at any time a dividend check was handed to Mrs. McCall by Mr. Mackin, and he must be in error when he makes that statement. Mr. Lewis. — I am reluctant to continue the examination of Judge McCall in connection with this stock certificate matter until we can have the stock certificates produced. Q. Can't you produce them this afternoon ? A. I don't think it is possible to do it in that time. Q. See if you cannot get them by three o'clock and bring them in. A. Very well. By Senator Foley: Q. When with respect to the time of your taking the official oath of a public service commissioner of the first district was the trans- fer of that stock made to Mrs. McCall? A. Long before it. I did not take the oath until, if I remember rightly, a week after con- firmation, and probably ten days, and this took place, as my recol- lection serves me, prior to that. It took place prior to the appoint- ment, and in between the handing of the name in to the Senate and the interview with the Governor. It was before the handing of the name in to the Senate, and after the last interview with the Governor. By Mr. Lewis : Q. Can you give us the day of the month as to either of those dates? A. No, sir, I cannot fix the date. It was around prior to February 12th. It was around that time. Q. Around February 12th? A. Yes, sir. Q. Do you recall the date upon which you took the oath of office ? Mr. Harkness. — It is my recollection that was around Febru- ary 12th. A. I did not take the oath for a week or ten days, after the con- firmation, as my recollection serves me. 862 Investigation of Public Service Commissions Q. You actually became a member of the Public Service Com- mission on the 13th, did you not? And you had qualified and assumed the duties of the office ? A. I qualified when I took the oath. Q. Wasn't it February 13th you actually took up the duties? A. My recollection is it was around February 12th or 13th. Q. How long prior to that was it that you had your conversa- tion with the Governor that you have referred to? A. Prior to the date of taking the oath ? Q. Yes. A. About fifteen days. Q. And the latter part of January, was it? A. The last of January. Chairman Thompson. — Ate you sure about the date of con- firmation, February 13th? Mr. Harkness. — I think that is it. Chairman Thompson. — You could not have been appointed until after the first of February. Mr. McCall. — No, sir ; that is right. Mr. Wilcox's term did not expire until that time. I think it went the day after the expi- ration of his term of office, or the day it expired. I am not sure which. Mr. Lewis. — I think we had better take a recess until 2 o'clock. We may be able to take up something else, if Judge McCall cannot be here at that time. Mr. McCall. — Do you wish me to come back here this after- noon ? Mr. Lewis. — Yes, if possible, be here at 3 o'clock. Mr. McCall. — ■ I will get them for you and have them here at that time, if I can. Whereupon a recess was taken until 2 o'clock p. m., at the same place. Repoet of Joint Legislative Committee 853 AFTERFOON SESSION Pursuant to recess, the Committee met at 2 o'clock p. m., Assemblyman Burr presiding. Eobeet C. Wood, being recalled for further examination, testified as follows : Examined by Mr. Lewis : Q. I think, Commissioner, you testified before this Committee at the hearings held last winter ? A. Yes, sir. Q. And you were sworn as a witness at that time? A. Yes, sir. Q. What were you doing last week. Commissioner, in the per- formance of your duties ? A. Last week ? Q. Yes. A. I think I held several hearings. Q. MTiich hearings were they ? A. I think I sat in a hearing on the petition for the establishing of a station at 150th street and Eighth avenue on the Manhattan L. Q. ^Viiat day was that? A. I think it was Monday. I am talking from recollection. It is all a matter of record. Q. I appreciate that ; how long did that hearing continue ? A. We have had several hearings. Q. On that day, how long did you continue on that day? A. I think it took an hour or so. Q. ^^Tiat else did you do that day? A. I think I went over the subway work on Monday. I went over it one day last week. I went to 42nd street and Eighth avenue and went into the sul> way and walked up through to the connection with the new Seventh avenue subway, and walked down that to 38th or 39th street, and then I came up and walked down into the Broadway subway at 38th street, and down to 36th street, and came up and ■went over to Seventh avenue and walked down there and looked at the work. Q. Who was with you, anyone? A. Yes, sir, Alexander, assistant engineer. Q. Was that before or after the hearing ? A. I am not sure I held a hearing that day. I may have. It is a matter of record in the Commission. 854 Investigation of Public Seevioe Commissions Q. I want your recollection upon it. A. Then Mr. Kronsky was witli us, too, I think, a section engineer. Q. You think that was on Monday, as you recall it? A. I think it was ; yes, sir. Q. After the hearing or hef ore ? A. After the hearing. Q. Hearing in the morning, was it ? A. If it was held it was in the morning. Q. And this is in the afternoon ? A. Yes, sir. Q. What did you do on Tuesday of last week? A. I played golf. I voted, I should say, first, and then I played golf. Q. What did you do on Wednesday ? Mr. Harkness. — May it appear Tuesday was election day ? Mr. Lewis.' — Yes. A. Wednesday I came down town and attended to my duties. Q. What did you do in the performance of your duties on that day ? A. There was a regular meeting of the Commission on that day, and I think we had a — on Wednesday there was a meet- ing of the whole Commission, and I think it was in relation to B. K. T. matters, and we had our regular meeting afterwards, and then I was busy preparing some opinion, and other matters. Q. Who was present at the meeting there? A. The whole Commission were. Q. All the members ? A. As I recollect it, yes, sir. Q. That was on Wednesday ? A. Yes, sir. Q. You were engaged all day at the office that day ? A. As I recollect it, I was all day at the office, yes. Q. Do you remember just what those B. R. T. matters were? A. Let us see. I say a B. R. T. matter. Let me think a moment. Thursday we had the ISTew York Central hearing on the five-cent fare. I remember that. I was there then. Q. Do you recall what B. E. T. matters were on Wednesday? A. No, ?ir, I don't. I know we had some matters up about the contract for steel. Q. How long did the meeting last ? A. Last Wednesday ? Q. Yes. A. It couldn't have lasted over an hour, if it took place. As I said before, if you will allow me to refresh my recol- lection, it might be better. Report of Joint Legislative Committee 855 Q. I thini it may be better to have your recolleotion just as it is now, and we can produce the record later ; Thursday, what did you have ? A. Thursday we held a New York Central five-cent fare hearing. Q. What time was that ? A. Set down for ten-thirty, and met about a quarter of eleven, and that meeting lasted about three- quarters of an hour. Q. Who was present at that meeting ? A. Commissioner Wil- liams and Commissioner Hayward. Q. And yourself ? A. Yes, sir. Q. Was the Chairman absent? A. Yes, sir; the Chairman was absent. Q. What did you do after the completion of that hearing ? A. We had the general meeting of the Commission. Q. The same commissioners being present ? A. No — pardon me, we didn't have a meeting, a general meeting, until Friday, of the Commission^ Q. And the same commissioners present Friday as on Thurs- day ? A. No, sir. The full 'Commission was present on Friday, and the Judge there for about half the. meeting, and then he went out. Q. What did you do Thursday after the conclusion of the meet- ing? A. Thursday I think I had some office work to do, as I remember it, and worked all. afternoon at the office. Q. The nature of which was what ? A. I was preparing some papers and looking up some opinions. Q. In connection with your public service matters? A. Yes, sir, entirely. Q. Friday, after your meeting, the general meeting of the Com- mission, what happened ? A. On Friday I think I answered my correspondence and worked on Commission matters there until about — then I think I looked over some of the elevated work on my way up. Q. What time did you leave the office, do you recall ? A. I don't know, about 5 o'clock, probably. Q. How many meetings of the Commission have been held dur- ing the month of October; have you any notion? A. Do you mean the whole Commission meetings ? 856 Investigation of Public Service Commissions Q. How many meetings of the Commission ? A. We hold two a week. Q. That is, regularly ? A. Yes, sir. Q. On what days ? A. Tuesdays and Fridays. Q. How many of those meetings have you attended personally ? A. I have attended every one of them as far as I know. Yes, I have attended every one of them. Q. What other Commissioners have been in attendance? A. They are always — they are practically always there, all of them. Q. All of them always there ? A. Yes, sir. Q. How many hearings have you conducted during the month of October or participated in ? A. Every hearing that has beea assigned to me, and I couldn't say offhand. Senator, how many there were. Sometimes I will have two a day and sometimes three a day, and again might not have any. Q. How long do the meetings last, as a rule? A. Sometimes last all the morning and go on again in the afternoon, and some- times an hour or half an hour. Q. You were in the brokerage business before you were ap- pointed to the Commission,, were you not ? A. Yes, sir. Q. And your firm name was what? A. Wood & Havemeyisr. Q. Did the firm deal in public utility securities ? A. Yes, sir. Q. Did the firm own any such securities ? A. At times. Q. Did you individually own public service utility securities? A. At times. Q. And you dissolved ? A. The firm dissolved, I think it was in the fall of 1913. My partner was sick for some time before that, and we were not active in business for about six months or a year. Q. At the time of the dissolution, did the firm own any public utility securities? A. No, sir. Q. Did you own any personally yourself at that time ? A. No, sir; to the best of my recollection I did not. Q. Did you own any at any time thereafter, and before your appointment as a commissioner? A. No, sir. Q. Did you ever own any stock in the Interborough ? A. I owned stock in the New York City Interborough. Q. In the Interborough Eapid Transit? A. No, sir. Eepoet of Joint Legislative Committee 857 Q, Did you ever own any stock in the Brooklyn Kapid Transit ? A. No, sir. Q. Or in the Consolidated Gas ? A. I don't think so ; not in late years, anyhow. Q. Or in the Metropolitan Street Eailway Company ? A. ISTo, sir. Q. Or in the Manhattan lines ? A. No, sir. Q. Or the New York municipal railways? A. I never owned any of that stock, and there is none of that stock outstanding, anyway. Q. And yon never owned any Kings County Electric Light and Power Company stock, did you ? A. No, sir, not that I recollect. Q. Anj^ electric light company stock of any company in Brook- lyn ? A, Not that I recollect. Q. Or in the Bronx ? A. No, sir. Q. Did you deal in those stocks when you were in business ? A. Used to years ago. Q. Have you transacted any business as a broker since the dis- solution of the firm of which you were a member ? A. Very little. You mean since the time of the dissolution of the firm, up to the time of my appointment? Q. Yes, sir. A. Very little indeed. Q. Have you transacted any of that class of business since you were appointed? A. No, sir. Q. You have devoted all of your time to the duties of the posi- tion? A. Yes, sir. Q. How large an engineering force has the Commission ? A. I liiink they have approximately nineteen hundred men. There is a chief engineer, and his chief office assistant, and Mr. Eidgway, the chief man in the field, and there are the chief engineers, one in the Bronx, one for Queens and part of Manhattan, and one for Brooklyn, and I think five or six all together, and we have the section engineers, and, of course, they have their assistants under tiiem. Q. You think there are 1900 names on the payroll of the eii- gineering force ? A. It is approximately something like that. Q. Do you know what the annual cost for engineering is, for 858 Investigation of Public Service Commissions engineering service ? A. About five or six per cent, of the total, about six per cent, of the total amount of the contracts. Q. What is the total amount, do you know? A. That varies from time to time. Q. Does the percentage of cost for engineering vary from time to time ? A. I suppose we are laying them off and putting them on ; as the work is completed they are laid off. Q. Can you give us any statement of the amount of the en- gineering payroll for the month of October ? A. I don't know exactly how much it was, no, sir. Q. I would not expect you to know to a dollar, but could you tell us approximately what it amounted to ? A. Unless I was sure, I would not care to make a statement. Q. Do you have any duty in connection with the payrolls ? A. Yes, sir. Q. What is that duty ? A. To see that the money is properly expended. Q. Do you have any duty in the matter of making up the pay- rolls ? A. The chief engineer certifies that the men are employed, and the chairman signs the payrolls, and if he is not there, the commissioner next in rank signs them — I mean next in seniority. Q. That is Commissioner Cram? A. Yes, sir. Q. And if Commissioner Cram is not there, who signs them? A. Commissioner Williams. Q. Do you know how many payrolls Commissioner McOall has signed ? A. He is practically always there. He has signed most of them, I presume. Q. It has not become necessary for any other commissioner to sign them ? A. Occasionally we have to sign them. Q. Have you ever had occasion to sign any of them ? A. I have signed them, yes, sir. Q. Do you recall the amount of any payroll which you signed ? A. I have not signed any lately, as I recollect. Q. You are not prepared to give any estimate as to how much it costs per month for engineering service ? A. I would like to refresh my recollection upon it before I make a statement as to that. Eepoet of Joint Legislative Committee 859 Q. Do you know what the cost of maintaining your legal depart- ment amounts to annually? A. I believe that something like sixty-five thousand doUars a year, sixty-five or seventy thousand. That is my recollection. Q. I do not care to have your recollection refreshed by anyone ; sixty-five to seventy thousand dollars a year, is that your state- ment ? A. Yes, sir, that is as I understand it. Q. How large an office force has the Commission? A. Why, there is the secretary and the assistant secretary, and the clerks in the office. Q. How many stenographers? A. How many stenographers? Q. Yes. A. I should say there were ten or fifteen of them; I should say about that. Q. Aren't there as many as thirty or forty ? A. They probably vary with the work that comes in. If there is a great deal of work, probably get extra ones, and if not so much, let them off. Q. Have there been any laid off recently? A. I couldn't say as to that. The number varies, but I don't keep track of them. Q. Do you know of any having been laid off at any time ? A. In looking over the employees' resolutions I see there are resigna- tions and dismissals, but those are details. Senator, that I would like to refresh my recollection on. Q. I want to know how famiKar you are with the duties of your position. A. I understand. I have endeavored to familiarize myself in every way, and see that the work goes on properly. Q. How much time do you spend in the office daily on the average? A. About all day long, unless I am going over the work. Q. That is what I want to know ; how do you divide your time ? A. I spend a good deal of time going over the work lately. I am very anxious to see the work pushed and brought to completion, and I think White Plains Avenue line and the Bronx will be the first line in the section where I live put into completion in the new subway lines. I have spent time on that, and got after the contractors up there, and endeavored to push that work in every possible way. The steel work is largely completed on that, and there is a question there of completing that line, about half a mile 860 Investigation of Public Seevice Commissions Q. Has that been awarded ? A. Yes, sir, and working on it, and a question about getting the steel, and a question about agTee- ing with the city as to the exchange of land for the park. In other words, what has been described in the Bronx as the famous twenty- three feet of land ; we are endeavoring to get the city to make an exchange for some property -that was bought with Rapid Transit funds from the Westchester and Boston for a car yard, and I hope we will bring that to a conclusion shortly. Q. Let us get that clearly in our minds; a section is rapidly approaching completion in the Bronx? A. Yes, sir. Q. And that is north of the park ? A. No, sir ; it runs parallel to the park. It starts at 179th street and Boston road and runs diagonally across to 180th street, along the embankment that we acquired from the Westchester and Boston Railroad, to Sagamore, and northward along the former embankment purchased from the Westchester and Boston Railroad with Rapid Transit funds, to about Birchell avenue and Sagamore street, and along the new White Plains avenue, and north along there to 241st street, and to Wakefield. Q. How long is that section ? A. About three and a half miles. Q. About what is the cost of that ? A. The cost of that, I think it was about a million dollars and a half. There are two con- tractors there, and I think they run about a million dollars and a half apiece. Q. And the three miles cost approximately three million dol- lars ? A.- I may be a little high on that. It is a three-track ele- vated structure, and I should say two or two and a half million. Q. About what percentage complete is it? A. The northerly section is complete with the exception of finishing the stations and laying the rails and the equipment. Q. That is seventy-five or eighty or ninety per cent, complete? A. As far as that particular contractor goes. I think he has to put his abutments back in the avenue and relay some of the pave- ment along the street railway tracks, and just what percentage, I don't know. I should say it was pretty nearly eighty-five or ninety per cent, complete, and the contract for building the stations has been let, and the contractors promised to start work to-day. The detail drawings for six of the stations have been sent up from the Eepoet of Joint Legislative Committee 861 office here, and they are going to start Allerton street to-day, and the contract for laying the rails, the Commission authorized the advertising of the contract for laying the rails at the last meeting. That is on the White Plains avenue. Q. Take the whole contract and it aggregates two and a half millions for the three miles ? A. Approximately. Q. What proportion of that two and a half million as an aggre- gate, what proportion of that has been completed ? A. It has not been completed. Q. What is the percentage of work accomplished ? A. I should say ninety per cent, there north of White Plains avenue or about ninety-five per cent, of the steel work is up. Q. What I want, and I don't know that I have the ability to make myself clear about it, but I would like to know about what percentage of the two and a half millions the work is ultimately to cost has been expended, either actually paid out or in process of completion to the point where it will be paid out ? A. You see the way it is, one contractor erects the steel, and another contractor eomes along and finishes the stations, and then another contractor, or at least another contract, it might be the same contractor, but another contract is let for laying the rails, and the company itself then puts in the equipment, that is, laying the contact rails. Q. Which company do you mean? A. The Interborough, and they are putting up a new sub-station at 211th street and White Plains avenue. Q. Is this the new construction for the Second, Third and Ninth Avenue lines ? A. No, sir. Q. This is independent of that work ? A. Yes, sir. Then there are four different contracts there. Now, the first man, or, rather, the steel man on the upper section from Park street north to 241st street, I should say he has ninety per cent, completed, and I think he has to fill back some of his abutments, and to put the pavement in repair, and relaying some of the street railway tracks, and they have taken the traveling crane the sub-contractor used, and run it down over the structure to White Plains avenue, and are now working putting the structure in place southerly on about three- quarters of a mile, and not as yet finished. 862 I^•vESTIGATION OF Public Seevice Commissions Q. With what line will that construction connect when finished ? A. The existing subway at I79th street and Boston road. Q. And that is part of the subway now operating? A. Yes, sir, station at 180th street. Q. Will the completion of this contract you have spoken of, give you the physical connection with the subway at I79th street? A. Yes, sir; can be put in immediate operation. Q. Where has the delay occurred ? A. Due to negotiations for the acquisition of some land. This elevated structure runs into an embankment and then it runs along an embankment for about 1500 feet, roughly speaking, or 2000 feet. Q. That is subway? A. ~^o, sir, it is on top of an embank- ment, and then there is a joint station of the Westchester and Bos'ton, and the subway extension here at 180th street near Morris Park avenue, and the mezzanines are going to connect so the Westchester and Boston will have a connection with the present subway station, and the passengers can transfer from that road, or vice versa, and come downtovTn on the subway. That is to be one of the connections, and another connection at the Lex- ington Avenue subway at Hunt's Point avenue. This is coining down as a three-track road, but at one point on this embankment purchased from the Westchester and Boston by Kapid Transit funds, it is too narrow to run three tracks, and they have to extend the embankment over, I notice, some places perhaps ten or fifteen or twenty feet, and there is a little more there we have to get from the park land, and just below there the city for rapid transit pur- poses has purchased two and a half acres, and there is a jog to it here in the park line, and the land has been purchased for the car yard, and is in this jog, and the Commission offered to exchange an equal amount of the land further down for this land further up,, so that we can make a straight line of the park and put in the third track. Q. How long have the negotiations been carried on for the acquisition of that land ? A. We have been talking about it three or four or five months past. Q. You cannot very well award the contract for construction until you acquire that land, can you? A. Yes, sir, it has been awarded, and the contractor is going ahead and putting up a Eepoet of Joint Legislative Committee 863 retaining wall on the side of this embankment between the em- bankment and the park, but he cannot put up the permanent retaining wall until such time as the twenty-three feet is acquired, and if we cannot do anything else, we will build a temporary trestle there and carry the three tracks on two tracks, gauntlet them, and expand into three tracks when further down. We hope before that time to reach an agreement with the city. Q. With whom are your negotiations carried on, on the part of the city ? A. The chairman told me he talked with Mr. McAneny and also with the mayor, and I think we will reach an agreement on it within a very few days. Below there we have in most of the abutments and most of the steel work is on the ground, and as soon as they finish putting up the steel work, they will rush the traveling crane down and finish the lower end. Q. Did you know the fact that you would require this land in exchange for lands you now own, at the time you awarded the contract for construction ? A. Yes, sir, I think that was before I came in. The White Plains Avenue line was let before I came into the Commission, but in order to obtain land, so we can legally obtain it we petitioned the Legislature or we had introduced a bill authorizing an exchange of land, to exchange between the sinking fund and the Public Service Commission, if the land was held for public purposes. Q. And the legislation was obtained ? A. Yes, sir. Q. When was that obtained ? A. I think last April. Q. And still the consummation of the exchange has not been accomplished ? A. No, sir, but we have been carrying on negotia- tions for it. Q. What negotiations are there to be accomplished ; it is a mere exchange of a little piece of land over there for a little piece of land over there ? A. That is the amount of it. ■ Q. And it all belongs to the city, doesn't it ? A. Yes, sir. Q. And it is all going to remain the property of the city when you get through, isn't it? A. Yea, sir. The park department wanted us to give them — the park department asked us to give them two and a half acres for this twenty-three feet, and we couldn't do it. 864 Investigation of Public Seevicb Commissions Q. Driving a sharp bargain with you, were they? A. I think they suggested it, yes, sir. Q. Has the matter hinged upon those terms, and has the delay been caused by the fact that the park department was asking for a larger amount of land than you are asking the park people to turn over to you ? A. Yes, sir, very largely. I know we felt ■vre certainly could not justify any such exchange, from our point of view. Q. How many months do you say have been going on since the Legislature authorized this exchange ? A. I don't know when the Governor signed the bill, but I think it was last April or May, and of course we have been endeavoring to get this exchange straight- ened out over since. Q. , Who has acted for the Commission in that matter ; in whose charge has it been? A. Why, just what form of proceedings we took, I know I have discussed it several times with Commissioner Whittle, and the Judge. Q. Commissioner Whittle of the Park Department? A. Yes, sir; of the Bronx; and the Judge has had conferences with Mr. McAneny and the mayor on the subject, and the mayor said he was going to take it up with the park board, and I think we will reach ■ a conclusion in a very few days. Q. It gets down to the fact that the Legislature authorizes a change of one parcel for another parcel ? A. No, sir, they pass a general act, not a specific act, allowing an exchange of land held by the city as agreed upon by the Public Service Commission and the city. Q. And that legislation was obtained last April ? A. Or .there- abouts, yes, sir. Q. And all that was necessary to do was for the Public Service Commission to sit down with the park commission, or commis- sioner, and execute such papers as might be required to effect that exchange; is that true? A. No, sir; it would not have been with the park department, but with the sinking fund commissioners. Q. Who are they? A. The sinking fund commission con- sist of the mayor, comptroller, president of the board of aldermen, and I think chairman of the finance committee of the board of aldermen, and I think five of them all together, and the city cham- berlain. Eepoet of Joint Legislative Committee 865 Q. Has there been any meeting of the sinking fund commission- ers and the Public Service Commissions ? A. We have had it up very frequently. Q. Has there been any joint meeting of the two bodies ? A. We have communicated with them and put the proposition up to them formally, and they sent back a communication requesting the giv- ing of the two and a half acres for this gore of about three thousand feet. Q. When was that, do you recall ? A. I think it was last sum- mer. I know I have been anxious about this and very anxious to see this go through and push the thing. Q. Has the matter been specifically referred to any Public Serv- ice Commissioner ? A. I think it was referred to the Judge, and the Judge has taken it up. Q. Was it! specifically referred to him to take it up ? A. I don't know whether any formal action specifically referring it to him, but he has had it up, and he told me several times that he had had it up with President McAneny, and that President McAneny talked with the mayor, and I expect we will settle it up within a very few days. Q. What do the people of the Bronx think about the delay ? A. They want the road in operation. Q. What do they think about the delay ? A. You could hardly call it a delay, because the finishing of the stations is going right ahead. Q. This part beyond the point where the exchange is to be ac- complished won't be of any use until they have it below? A. They could run two tracks there temporarily. Q. But that would involve additional expense or lack of accom- modation ? A. It would not be as good as three tracks. Q. And it would cost a considerable amount of money to make the temporary construction ? A. Not a considerable amount, but it is not as desirable operation as three tracks, certainly not. Q. It gets down almost to this, doesn't it, that that three miles of new construction will not be of very much value for the travel- ing public until a little strip of a few hundred feet of land owned hy the city is freed from restrictions imposed upon it by law, and Vol. 1 — 28 866 Investigation of Public Seevice Commissions the use of it allowed for rapid transit purposes ? A. Well, it might get down to that in the end, but if it can be settled before the work actually is hindered, it won't hinder it. Q. It has actually been hindered, hasn't it ? A. Hardly as yet, because, as I said before, the contractor on the steel work is hardly down yet, and there is a question of finishing the stations and lay- ing the rails and a considerable amount of work to be done on the other end before you get so that would actually hold the work up. Q. The stations won't be of much use until the structure is com- pleted, will they ? A. No, sir, but it takes time to finish the struc- ture, and if the station structure can be finished before the stations, or at the same time Q. As a matter of fact, you are finishing the stations before the structure starts at the southerly part ? A. Yes, sir. Q. That has cost a lot of money ? A. It takes money to build. Q. And that structure is valueless, as far as earning capacity is concerned, because of the fact that below that point there is a mile or less that the right to construct upon has not yet been obtained ? A. You can hardly say that, because there is room there for two tracks. Q. But whether it has been obtained or not, the construction has not commenced for the reason that you hope to get the necessary land to enable you to lay three tracks, and you are letting two miles of practically completed work lie idle? A. No, sir; you could hardly say that, because construction is going right along, just as fast as they can push it, and I have been up there a number of times, and had the division engineer after the contractors, and told them they would have to put men on there and push the work. Q. You have a pretty definite notion as to who is responsible, haven't you, for the delay in accomplishing these negotiations for the exchange of land ? A. I think there has been a difference of opinion between us and the park department. Q. What does iti all amount to, when you get through? A. Well, from our point of view, I don't think it amounts to a great deal. You mean, about the objections that they raise? Q. Yes. A. I don't think they amount to a great deal, hut I know this has been one of the things that the Commission has pushed very vigorously. Eepokt of Joint Legislative Committee 867 Q. Two and a half acres the park commission want turned over to the park department, and are those lands essential to the opera- tion of this system ? A. Yes, sir ; we are under contract, under the dual subway agreement, and we have agreed to furnish a yard there for the Interborough, and it is the only place that I know of along the line Q. A yard for the Interborough ? A. A yard for the operating company, a storage yard for the operating company. Q. Part of the subway system, is it ? A. Yes, sir ; you see that is an extension of the present subway system. It is elevated at 149th street and Westchester avenue, and runs as elevated along Westchester avenue and Southern boulevard, and along Southern boulevard to Boston road, to 180th street. This extension leaves the Boston road, I79th street, and runs diagonally across to 180th street, and along the Westchester and Boston right of way. By Senator Lawson : Q. Did I understand you to say the city is giving two and a half acres of ground to the operating company for a storage yard ? A. No, sir ; I said the land had been acquired by rapid transit funds for a storage yard for this route. Q. Does the operating company in any way object to giving that? A. The operating company does not own it The city is under contract to furnish this in connection with the route. Q. Is that one of the reasons why the Commission refused to give any part of it to the park in exchange for the twenty-three feet ? A. I don't think the Commission could logically give up two and a half acres for twenty-three feet. Q. Any part of it ? A. JSTo, sir ; the Commission is willing to give up part of it, for the twenty-three feet, and willing to effect a fair exchange. By Mr. Lewis : Q. How long a strip is the twenty-three-foot-wide strip ? A. I should say about 150 feet long. Q. Not more than that? A. No, sir, 150 or 200 feet. Q. It involves, then, twenty-three times 150 ? A. It is about three thousand feet in all. . Q. Three thousand square feet? A. Yes, sir. 868 Investigation of Public Service Commissions Q. And in exchange for that, the park department wants two and a half acres ? A. That is right Q. The matter has been the subject of negotiations since last spring ? A. Hardly since last spring ; since last summer. Q. And the legislation authorizing the exchange was enacted as long as last April, or thereabouts ? A. April or May. Q. And the completion of the line has been delayed? A. I won't say the completion of the line has been delayed, because we are working on it right along. Q. Had there been no question involved of an exchange of lands would the line have been completed at an earlier date than is likely under present conditions? A. The line can be completed at present. It may have delayed it a little, but not much. Q. Had there been no complications about title to land, might not that extension have been completed at the present moment? A. ISTo, sir. Q. What would have prevented? A. They have not the steel there, all of it. Q. When was the contract awarded? A. I think it was awarded before I came on the Commission. I guess it was awarded in the spring of 1914. I am only tialking offhand. Yes, I think it was in the spring of 1914. Q. The contract was awarded in the spring of 1914? A. Yes, sir. Q. Who is the contractor ? A. The Oscar Daniels Company. Q. And they have not the steel on the ground yet? A. Yes, sir ; it is all there now. Q. I understood you to say they had not. A. They are just getting their steel there now. Q. It has taken them eighteen months to get their steel? A. I think it did, yes, sir. Senator Foley. — Wasn't there a bankrupt failure in one of tht; contractors ? Mr. Wood. — That was a contractor further down the boulevard. Q. Connected with this? A. l^o, sir; it was another section. Senator Foley. — The same extension ? Eepoet of Joint Legislative Committee 869 Mr. Wood. — ISTo, sir. That is part of the Lexington Avenue route. It runs out 138th street and the Southern boulevard, and to Pelham Bay Park. Q. Do you know when that steel was ordered, Commissioner ? A. Xo, sir. But that is on the part of the contractor. That would be up to the contractor to order the steel. Q. The contract was awarded to him a year and a half ago; would you expect he would order steel as soon as the contract was awarded ? A. Ko, sir ; he ought to have awarded it as soon as he could make his calculations, and as soon as he got his working drawings, and send them to the steel mills, and they have to come back to the Commission to be checked up, and he could send out and order his steel then. Q. Was the contract awarded before the working drawings were prepared? A. Yes, sir; not before the working drawings, but before the detailed drawings were prepared. Q. What is the diiference between the working drawings and the detailed drawings ? A. As I understand it, they send it to the manufacturer, and he gets up the detailed drawings, and sends it back, and we have them checked up by our engineers to see that everything is all right, and then the contractor gets bids and awards the contract for his materials. Q. You mean the detailed drawings are prepared by the steel mills? A. I think they axe, and submitted to the Commission's engineers for approval and checking up. Q. And the nineteen hundred members of the engineering force do not prepare the detail drawings ? A. I am not just certain how that detail work is worked out, but they have got to figure on every joint, and every nut, and see that the structure is strong enough for the strain put on it, and everything done under their supervision. Q. That is all after the contract is awarded, is it? A. Yes, sir, that has to be done and worked out, the details. Q. Do you think that with the organization of the Public Serv- ice Commission as it now is, that this particular piece of work has been progressed as it would have been progressed — as it should have been progressed? A. Yes, sir, I think it has been 870 Investigation of Public Service Commissions pushed in every way. I have been after them in every possible ■way myself. Q. Do you suppose if the New York Central Kailroad Company had to do a piece of work such as is being done on this extension they would tolerate such delay as has been permitted by the Pub- lic Service Commission? A. I do not think the Public Service Commission has permitted any delay. I think they have done everything in their power to push this work, and I can say so per- sonally because I have been after it myself. Q. Don't you think that if Commissioner McCall had gone to the mayor and insisted iipon an immediate action in connection with the exchange of land, it would have been accomplished six months ago ? A. No, sir ; I think Commissioner McCall did everything in his power to do this, and Commissioner McCall has made every effort to do it, and he has told me re25eatedly that he has done so. Q. And the blame, if any, is upon the mayor ? A. I won't say there is any blame upon anybody. Q. Do you hold anyone responsible for not having accomplished this transfer of land ? A. The Park Department had their ideas and we had ours. Q. There is not a dollar involved anywhere, is there, in this exchange ? A. No, sir; I can't say there is. Q. And the city neither gains nor loses a penny by the ex- change, does it ? A. No, sir, I don't suppose it does. Q. And the legislation permitting the exchange was granted by the Legislature more than six months ago, wasn't it? A. It is November now ; yes, sir, it is just about six months ago. Q. And the Public Ser\'ice Commission, with its magnificent organization, vyith an engineering force of nineteen hundred indi- viduals A. Approximately that, between seventeen and nineteen hundred. Q. And the Sinking Pund Commission, with ample power, has omitted to exercise the power which it possesses and has omitted to consummate the legal requirements necessary to enable the Pub- lic Service Commission to forward the work of constructing this extension ; is that so ? A. The exchange has not been made, and I assure you that it has been through no fault of the Public Serv- ice Commission. Eepoet of Joint Legislative Committee 871 Q. Then the fault lies with the mayor and the Sinking Fund Commission, in your opinion ? A. I can state the facts. Q. Have you any opinion on the subject ? A. I think it should have been done. Q. You think it should have been done six months ago ? A. I don't know that it should have been done six months ago. It might have been done three months ago. Q. Shouldn't that have been done three months ago? A. In my opinion, yes, sir. Q. Who is to blame for its not being done ? A. My opinion is it should have been done. Q. By whom ? A. The transfer should have been made. It has been no fault of the Commission it has not been done. Q. It follows, then, that it is the fault of the city administra- tion and the Sinking Fund Commissioners, doesn't it ? A. It has not been done. Q. You knew, of course, before that legislation was enacted, that you had to have this land, and the legislation was obtained for the purpose of getting it ? A. Yes, sir. Q. And the negotiations for this land began long before the legislation was granted ? A. No, sir ; we could not begin negoti- ations because we did not have the power. Q. You discussed it and you found you must have it, and you would have to get legislation ? A. Yes, sir. Q. And it has been a matter for discussion for perhaps if not pretty nearly a year, hasn't it? A. It has been a matter of dis- cussion since about last February or March, March or February. Q. Well, ten jnonths ? A. Whatever that amounts to, nine or ten months. Q. I suppose there was a survey made of this route, was there not, long before the contract was awarded ? A. Yes, sir. Q. Your engineers made a map, I suppose, of the route? A. Yes, sir. Q. And that map showed that this particular piece of park land was necessary? A. I think we thought we could slope the em- bankment down there, but when we come to find out, we found we couldn't do it. Q. Who thought that, thought it could be sloped down? A. Why, I think — it was supposed if we could have got permission 872 Investigation of Public Sebvice Commissions of the Park Commission, tliat we could simply slope the banlc down. It is only a few feet. Q. You knew at the time the map was made you required A. It was before my time. Q. It was known before your time ? A. I am not sure of that. It was before my time. Q. You know the map was made before your time ? A. It was made before I came on the Commission. Q. And the map showed the land was necessary? A. I pre- sume so. Q. And it was the business of the legal department and engi- neering department to set in operation the machinery for the acquisition of that land? A. I think they did everj'thing they could in that matter. Q. When do you think that was accomplished ? A. I think that resulted in having Q. The map was made before your time ? A. Yes, sir. Q. And you began in May, 1914? A. No, sir; June 1, 1914. Q. And the map was made prior to June 1, 1914? A. Yes, sir. Q. And it was known then that that land would be necessary prior to June 1, 1914? A. Yes, sir, it must have been. Q. And that being so, negotiations were delayed pending the obtaining of the necessary legislation ? A. Yes, sir. Q. And the legislation was obtained at the legislative session of 1915 ? A. I think former Commissioner Eustis thought it could be arranged with the Park Department. Q. Without legislation ? A. That is what I have heard ; I am not sure about it. Q. Who prepared this legislation, do you know ? A. Why, our legal department. Q. Of the Public Service Commisaion ? A. Yes, sir. Q. Was it prepared as a result of an agreement between the Public Service Commission and the Sinlving Fund Commissioners ? A. 'No, sir ; there has never been an agreement. Q. Did the Sinking Fund Commissioners know that the legis- lation was being prepared and that it had been introduced ? A. I don't know whether they did or not. Eepoet of Joint Legislative Committee 873 Q. The bill required the approval of the mayor, did it not, before it could become a law ? A. It was, as I understand it, a permissive bill. It was not mandatory. Q. And it required the approval of the mayor, did it not ? A. Yes, sir, it must have. Q. Wasn't there some kind of an agreement, with the Sinking Fund Commissioners, before this legislation was prepared and sent up to Albany, covering this proposed transfer of land ? A. I never heard of any. Q. You simply went ahead and prepared the legislation with- out discussing it with the Sinking Fund Commissioners, did you I A. As far as I know, yes. I think President McAneny knew about it ; that is my impression. Q. Have. you ever personally gone to the Sinking Fund Com- mission on this subject? A. No, sir; because I have understood that the Judge did, and I have taken it up with Commissioner Whittle several times. Q. And do you know personally of Judge McCall having gone to the Sinking Fund Commissioners in that matter ? A. I know he has told me he spoke to President McAneny about it, and told me three or four different occasions he spoke to President McAneny about it, and he told me that on two occasions he spoke to the mayor about it, and I have taken it up with Commissioner Whittle several times. Q. Have there been any written communications sent by the Public Service Commission to the Sinking Fund Commission on the subject of this exchange? A. I think there have. We have re- ceived a communication from the Park Department asking for the two and a half acres in return for the twenty-three feet; I know that; and the Sinking Fund Commission are governed — I say governed — ^but they would naturally listen to the Park Depart- ment. Q. Take the advice of the Park Department rather than the advice of the Public Service Commission ? A. Apparently they have so far. By Assemblyman Burr: Q. Do you know anything about the bill itself that went to the Legislature? A. I know the bill allows the exchange of public 874 Investigation of Public Seevice Commissions lands held for rapid transit purposes at the agreement of the Sink- ing Eund Commission and the Public Service Commission. Q. Do you know as a fact that it said anything about an ex- change, or did it simply give you a power to acquire the piece of property? A. No, sir; it gave us the power to exchange. Q. You are sure of that, are you ? A. Yes, sir ; positive. By Mr. Lewis: Q. Is there any other construction work going on to which you have given your personal attention? A. Yes, sir; there is the Jerome Avenue line, and there is the — Q. Suppose we take up the Jerome Avenue line first; what is the situation there ? A. The steel work is all up, and the contract for the stations is let, and we will shortly let the contract for lay- ing the rails on that. Q. Where is that line, what part of the — is that in the borough of the Bronx ? A. Yes, sir, it goes up Lexington avenue, and runs under the Harlem river in a tunnel, and then it comes out at 135th street and Park avenue, and runs up Mott avenue to about 156th street, and runs over to River avenue and up River avenue to the junction with Jerome avenue, and up JerO'me avenue to Woodlawn. Q. How long a stretch is that ? A. I should say about three miles. Q. When were the contracts for this construction work let ? A. I think they were let in the fall of - — ^ I guess about January 1, 1914. Q. Nearly two years ago? A. Yes, sir. Q. What do you say as to the percentage of the entire contract; what percentage of the work has been done ? A. I should say the contract for the steel work is about ninety per cent, complete, and possibly ninety-five per cent, complete. Q. What percentage of the whole contract does the steel repre- sent ? A. Well, as I said before, there are • — ■ the same things I said about the White Plains avenue hold good on Jerome avenue. The station finish contractor has to follow the steel work con- tractor, and the track-laying contractor has to follow the station finish contractor, and the operating company comes in and lays the contact rail and puts in the feeder system and connects with the sub-station before vou pen Kepoet of Joint Legislative Committee 875 Q. You have not given me any proportion of the total cost represented by the steel construction; can you do that? A. I think the contract for finishing the stations on Jerome and White Plains avenues is about $963,000. Allowing that, they were half and half, or about that proportion, and there would be about $480,000 for finishing the stations. Q. What does the total contract amount to for the whole three miles? A. There are two contractors; one on the northern end and one on the southern end. Q. Which is more nearly complete, the northern or southern? A. Well, I think it is about a stand-off now. I thint they have the steel work practically up in both contracts. Q. Is the tunnel under the Harlem river complete ? A. I think it is about 97 per cent, complete. I walked under that about two months ago, and again about a couple of weeks ago. Q. Is there anything liable to interfere with the operation of that line soon? A. The diagonal station under the site of the former Grand Union Hotel has not been completed yet. Q. That is part of that line? A. Yes, sir; and a section be- tween 53rd and 43rd street is not as far along as some of the rest of it. Q. When was that contract awarded ? A. I think about a year ago. Q. The award was made for the section up in Bronx two years ago, and the award for the section between 53rd and 4:3rd was not made until a year later ? A. Approximately that. Q. The portion in the Bronx cannot be used until the comple- tion of the section between 43rd and 53rd streets? A. Yes, sir; it can be used, or could, if the extension of the Manhattan ele- vated under High Bridge hill was completed. Q. Is that completed? A. ISTo, sir; that is part of the Man- hattan elevated extension, and there has been a delay there owing to the negotiations between the Interborough and the New York Central. Q. And that contract has not been awarded yet, has it? A. No, sir ; not yet. Q. It comes down, does it not, to this, that a section is com- pleted or nearly completed in the Bronx, and a section awarded a 876 Investigation" of Public Service Commissions year later between 43rd and 53rd streets — A. It may not have been a year later, about a year later. Q. A section between 43rd and 53rd streets awarded pretty nearly a year later ; and the net result is that the work north will be completed and paid for and won't be in a position to earn a dollar until the completion of the section which was awarded pretty nearly a year later, will it ? A. It cannot be operated until all the sections are completed, or connecting links. Q. What was the occasion for the delay in awarding the con- tract from 43rd to 53rd streets ? A. Pardon me. The work is not completed yet. Finishing the stations takes some time and laying the rails takes some time. Q. Let us get at this proposition; the part of the construction in the Bronx will be completed long before the part between 53rd and 43rd streets ? A. No, sir, not long before, but probably six months before. Q. And if so, it won't have any earning capacity until the com- pletion of the section between 43rd and 53rd streets? A. Ifo, sir ; but I think the section there will be completed as soon as the diagonal station will be. Q. When will that be completed? A. The working time on that is a year from next March. They have twenty-eight months to complete it. Q. There will be a period of a year or more after completion that it will lie idle until the completion of the diagonal station? A. Not a year or more. It may be a few months. There is con- siderable work to be done, and that diagonal spacing is the greatest piece of engineering that has been done in this country, I think. Q. I am trying to find out whether this commission has exer- cised ordinary business judgment in awarding contracts, or awarded them in such a way that the city's money will be tied up in unproductive construction work for a period of time, which which might have been avoided by an earlier award of the more difficult propositions; you realize that, do you? A. I see what you mean. Q. Isn't it true that the city will lose the interest upon a very substantial amount of money, because of the fact that the awards were made of contracts for construction which cannot be used until Repoet of Joint Legislative Committed: 877 the eompletion of other work -which was not awarded until long after this Bronx award was made ? A. Well, I could hardly say that. I think the whole thing has been pushed as rapidly as possible. Q. Has it been pushed with sound business judgment, in your opinion ? A. As far as practical, yes. Q. You are willing to rest on that statement, are you? A. I do, yes, sir. Chairman Thompson presiding. By Senator Lawson : Q. Can you tell us any more than you could last spring about the eastern district situation A. I want to tell you that I have been trying to get word with Mr. Bruff of the comptroller's office, and the contract for the 14th Street tunnel will be let to-morrow by the Commission, if he will agree on article 12. Q. What kind of a subterfuge is article 12 ? A. We agreed to confer with the board of estimate before we put in extra work. Q. Have you been over to Brooklyn any more than you were? A. I had the pleasure of making the opening speech on the Liberty Avenue extension. Q. Have you been around where the proposed route is laid out — you have been giving your attention to the Bronx you testified, and you testified to that before, but have you been giving any attention to the conditions in Brooklyn ? A. I have been pushing conditions in Brooklyn in conjunction with Commissioner Wil- liams all I could. Q. Tell us about that. A. The Fourth Avenue subway is open, and that is running to Coney Island, and the Liberty Avenue ex- tension is open, and the 14th Street eastern district, the plans of the 14th Street eastern district tunnel will be passed, I think, calling for bids. Q. Haven't they already been legalized? A. Yes, sir, if they had not been legalized, we could not ask for bids. Q. Are you familiar -with what the legal department has done ? A. In what way ? Q. Preparations to present to the Appellate Division for per- mission to condemn these lands up in Brooklyn. A. I know the work is being pushed. I don't know the details. 878 Investigation of Public Service Commissions Q. Has the application been presented to the Appellate Divi- sion for permission to go ahead ? A. I am not sure about that. Q. Then the matter stands just as it did here some months ago? A. I know that we are very active in that, and pushing that. Q. You can't be active — it is up to your legal department to make application to the Appellate Division to overcome and con- demn the two pieces that stand in the way of having a legal eastern district subway route legalized, and the last I heard from your legal department was that the papers were being prepared, have they been presented to the Appellate Division? A. I have not heard. Q. You do not know very much about that situation? A. I have not given so much attention to it as I have to ~New York. I know how you people feel about it over there, and we are doing everything we can in regard to it. By Chairman Thompson: Q. Do you really know anything about the eastern district situa- tion ? A. Yes, sir ; I told the Senator we expect to authorize the contracts for the eastern district tunnels to-morrow. Q. That is an expectation ; I asked you what you knew about it. A. They are over to the comptroller's office now looking it over. Q. I have a letter from a party over there, and he says you don't ever intend to operate it. A. He is a pessimist. By Mr. Lewis : Q. Does your wife own any stock in the Interborough Rapid Transit Company ? A. I have never been fortunate enough to be married. Q. Any member of your family own any stock in it? A. No, sir. Q. Or in any public service corporation? A. I don't know whether they do or not. Q. You have not any knowledge of the ownership of any mem- ber of your family ? A. ISTo, sir. Q. You have given us the White Plains Avenue extension dis- trict and the Jerome Avenue; are there any other extensions up in the northern part of the city that you have paid attention to? A. There is the Westchester Avenue extension running from Whit- lock avenue to Pelham Bay Park. Eepoet of Joint Legislative Committee 879 Q. How long an extension is that? A. I think that is also about three miles. Q. Is that all under contract ? A. No, sir ; unfortunately it is not. Q. What part is under contract? A. The contract from the Harlem river under 138th street to Alexander avenue, and then along 138th street to the Southern boulevard, and up the Southern boulevard to Whitloek avenue, and up Whitlock avenue to West- chester avenue. Q. That is the part that is under contract ? A. Yes, sir. Q. Is there a part beyond that that is not under contract ? A. Yes, sir; that is the elevated extension where it comes out as an elevated structure at Whitlock avenue, and runs up Westchester avenue to Pelham Bay Park. There was a delay there on account of not effecting an agreement with the War Department, as the tide affected the height of the bridge over the Bronx river, and that took some little time to settle those details, and until those details were settled we could not go ahead and prepare the plans and specifications. Q. Consequently no contract was awarded for any construction beyond the Bronx river ? A. Yes, sir ; that is it, and I hope the plans will be passed to-morrow, that is, calling for the advertise- ments, will be passed to-morrow. Q. Is the work under construction at the south of the Bronx river progressing? A. Yes, sir, it is largely completed as far as 138th street and Alexander avenue. There is a contract there from the Harlem river runs out in a Y, and the same contractor has a section that ran under 138th street at Alexander avenue, and a section along Watt avenue to 149th street and River avenue. Then there is another contractor has from 138th street and Alex- ander avenue along 138th street to the Southern boulevard and up the Southern boulevard to about 148th street. Q. Which work is more advanced, the work to the north or the work to the south ? A. The work to the south is more advanced. Q. Where will that connect with the existing subway? A. Under the diagonal station at 42d street and Lexington avenue. Q. Can that be completed before the completion of the diagonal station? A. No, sir. 880 Investigation of Public Service CoMMissfONS Q. And it cannot be of any use, even though completed, until the completion of the diagonal station ? A. No, sir. Q. What percentage of work has been done on this extension? A. There are three or four different contracts there. Q. Taking it by and large, is it three-quarters done ? A. The section from the Harlem river from 138th street to Alexander ave- nue is about 95 to 97 per cent, complete, and the next section, I think, is about 70 per cent, complete. The section above that, I should say, approximately, was 65 to 70 per cent, completed, and the balance of the section about that, the contract for the section above that has not been let as yet. Q. Will that work that is 95 per cent., and 75 per cent, and 60 per cent complete be completed before the diagonal station will be completed ? A. I think it ought to be completed about the same time. Q. And when do you anticipate the diagonal station will be completed? A. The working time is twenty-eight months, and that would bring it down, I think, to March 3d. They are work- ing three shifts of men on it. That would be March, 1916 — not 1916, but 1917, Q. Won't these contractors on the three sections above have their work done before 1917 ? A. Yes, I think they will. Q. Will they get it completed by the spring of 1916 ? A. No,, sir ; I should not think so. Q. By the summer ? A. I should think about a year or a little over. There is considerable work to be done there yet. Q. Then there will be several months of time which will elapse after the completion of that line before it can be put in operation ? A. Perhaps the diagonal spacing can be put in operation very shortly after the construction contractor is through. They may not have to wait so long for that station finish there, and I know there are three shifts of men working there a day, and they have made wonderful progress on that excavation. Q. Do you know what the contract time is for the completion of these various sections ? A. They have about eighteen months, as a rule, to run. Q. What part of that eighteen months has expired? A. Well I think — one of those contractors failed, and they had to relet Kepoet of Joint Legislative Committee 881 the contract. That is the one between 138th street and Alexander avenue, and the Southern boulevard and 147th street. Q. About what time will the contract expire by its terms, each of those contracts ? A. I don't carry that exactly in my head. Q. It will expire, won't it, quite a number of months prior to the expiration of the contract for the diagonal station ? A. Yes, sir, and the station finish contract has to be let, and the laying of the rails has to be let, and the equipment has got to be put in. Q. And you think there will be a period of several months, more or less, during which the investment will lie idle, do you not ? A. I won't say several months. There might be a short time there. Q. What contracts were awarded first, for the construction or for the diagonal station? A. The other contracts were let first before the diagonal station. Q. Wasn't it known that the diagonal station would be required in connection with this line, before you awarded the con- tracts for the construction of the lines themselves? A. Yes, sir, but these were there before I came on the Commission. Mr. Lewis. — I do not think of anything more I want to ask Mr. Wood. Chairman Thompson. — Have you drawn any dividends out of stock? Mr. Wood. — N"o, sir. Chairman Thompson. — 'Ho dividends coming to you ? Mr. Wood. — No, sir. Chairman Thompson. — Pretty hard luck, when you haven't any wife in whose name to carry them, isn't it ? Mr. Wood. — Oh, yes. Mr, Lewis. — Mr. Chairman, I have just had a talk with Judge McCall on the telephone, and he tells me that he has been unable to get possession of the stock certificates which he was to produce this afternoon, and asks that further examination be postponed until to-morrow morning at 10 :30, at which time he assures me 882 Investigation of Public Service Commissions that he will appear and produce the certificates. Under the cii^ ciimstances I suggest that the Committee take an adjournment now until to-morrow morning, at half-past ten. Chairman Thompson. — Is there anything more you want to put on the record to-night ? Mr. Lewis. — I don't think there is anything more to-night. Chairman Thompson. — If there is no objection, we will sus- pend now until to-morrow morning, at ten-thirty, at the same place. Whereupon, an adjournment was taken to 10 :30 o'clock a. m., November 9, 1915, at the same place. NOVEMBER 9, 1915 jSTew Yoek County Lawyers' Association Board Room, 165 Broadway, New York City. The Committee met, pursuant to adjojumment, at 10:30 o'clock A. M Edward E. McCall, being recalled for further examination, testified as follows : By Mr. Lewis: Q. Judge McCall, have you the stock certificates with you? A. Yes, sir. Q. Will you produce them ? A. Yes, sir ; there they are. (Witness hands stock certificates to Mr. Lewis.) (Mr. Lewis put in evidence stock certificate No. 998, for 100 shares. Kings County Electric Light and Power Company, issued to John J. Mackin, dated December 21, 1908, and endorsed upon the back thereof as follows : " For value received I hereby sell, assign and transfer unto shares of the capital stock represented by the within certificate, and do iereby irrevocably constitute and appoint Report of Joint Legislative Committee 883 attorney to transfer said stock on tlie books of the within named company, with full power of substitution in the premises. Dated December 28, 1908. John J. Mackin. In presence of Edward E. McCall." Mr. Lewis also put in evidence certificate No. 999 of the same company for 100 shares, issued to John J. Mackin, dated Decem- ber 21, 1908, with an assignment on the back thereof identical in form and substance. Mr. Lewis also put in evidence certificate No. 1,000, for 100 shares of the capital stock of the same company, issued to John J. Mackin, dated December 21, 1908, and endorsed in the same manner and the same form, and the same in every respect as the preceding certificates.) Mr. McOalL— It is the usual printed form on the back of the certificates of stock. Mr. Lewis. — Yes, sir, the usual printed form on the back of certificates of stock. (Mr. Lewis also put in evidence stock certificate No. A-3884, for 87 shares of the capital stock of the same company, dated the 21st day of December, 1908, and endorsed on the back thereof in the same manner as the preceding certificates, bearing the same date and all as the other certificates.) Q. You testified, I think, yesterday, that it was your impres- sion that the certificates were not assigned in blank by Mr. Mackin at the time they were issued to him ; you were mistaken, I take it. A. I didn't say that, did I ? Q. That is my recollection. A. If I did, I was mistaken, of course. Q. Yesterday I asked you this question : " I suppose at the time this stock was issued to Mr. Mackin, it was immediately assigned by him in blank, was it not ? " And your answer was, " That I am not so sure about. I think it was assigned in blank when the transfer was made just prior to being given to Mrs. McCall. I am not sure about that." A. I was not sure when it was assigned. 884 Investigation of Public Seevice Commissions Q. I then asked you, " Do you think you left it standing in his name on the books of the company, without an assignment, during all these years ? " and your answer was " Yes, sir." " Q. And without any power of attorney to transfer it during that time? A. ISTo." I notice. Judge, that the date of th.ese certificates is the 21&t of December, 1908, and tbe assignment is the 28th of December; those are the correct dates, are they, upon which the transactions occurred, according to your recollection? A. Yes, sir. Q. I notice, also, that no stock transfer tax stamps are affixed to the certiiicates ; have you any suggestion or explanation to offer for that omission ? A. 'Oh, no, sir. Transfer tax ? Q. Under the statute, a transfer of stock certificates required at that time the payment of a tax of two cents per share to the State — A. Do you mean the transfer to Mackin ? Q. ISTo, sir, the transfer from, Mackin in blank, in order to comply with the requirements of the statute. A. The statute requiring those things was probably overlooked. Mr. Harkness. — Wasn't that provision that the stock would not be transferred on the books of the company without the payment of the transfer tax ? Mr. Lewis. — I think not. We will have the statute and see what it is. Q. Where were these certificates kept by you from December 21, 1908, dowQ to the time of your appointment as a Public Ser- vice Commissioner ? A. In my possession ; I don't know whether in the safe or not. Q. In your safe ? A. I think so. Q. What, if anything, was done at the time of your appoint- ment as Public Service Commissioner in connection with the cer- tificates ? A. They were talten and given to Mrs. McCall. Q. Handed to Mrs. McCall ? A. Yes, sir. Q. By you ? A. Yes, sir. Q. Can you tell us just when that was done ? A. I cannot fix the time. It was occasioned by the statute, and done for that purpose. Eepoet of Joint Legislative Committee 885 Q. Do you remember where you were at the time? A. At home. Q. !N"o written instrument or assignment of any character was made by you? A. My best impression is there was a pencil memorandum, but I cannot be positive about that. I have an idea that I wrote a memorandum why it was done, and the pur- poses of it. Q. And you think that was in pencil? A. Yes, pencil, or a short little bit of a memorandum. Q. There was no consideration, I suppose, paid in cash for this transfer to Mrs. McCall ? A. No, sir. Q. And no payment of a stock transfer tax upon the transfer by you to Mrs. McCall. A. Entirely overlooked, if it was required. Q. Do you know where Mrs. McCall kept the certificates ? A. No, sir. Q. Have they been in her possession all the time, do you know ? A. I cannot answer that. Q. Will you tell us where you received them from her? A. Yes, sir, I got them from a drawer at the house this morning. Q. How long had the stock been in the possession of Mr. Freed- man? A. I think about a year, as my recollection serves me, and I am speaking entirely from recollection. It was about a year, I should judge. Q. And do you remember in whose name the certificates stood that were delivered to Mr. Freedman? A. ISTo, sir; I don't. I suppose that could be easily ascertained. Q. Were they in the name of E. E. Chapman & Co. ? A. I don't know. Q. Do you know E. K. Chapman & Co. ? A. ISTo, sir. Q. Ever have any business relations with him ? A. There was a man named — now Chairman of the Stock Exchange Commit- tee, Van Antwerp, it is, and if he was with that firm, I did. Q. Was he with the E. E. Chapman Company? A. I think he was. Q. These shares were not in the name of Van Antwerp, were they ? A. I can't recall. Investigation of Public Seevicb Commissions Chairman Thompson. — You did not take any loan from E. E. Chapman & Co. ? Mr. McCall.- — 1 think it was purchased by odd shares and he took them up for me. They were purchased on margin. Q. Purchased on margin? A. Yes, sir. Q. And were they carried on margin for some considerable time by E. R. Chapman & Co. ? A. Yes, sir, they were, assuming that is the firm, and I think it was. I don't know the firm. I knew him personally. Q. Did you know the certificates were ever in the name of Paine & Van Antwerp ? A. That is the name. Q. Whom did you purchase them from, Paine & Van Ant- werp? A. ISTo, sir, they purchased them for me, and in the exercise of these rights. Q. Purchased them from the Kings County Company, I sup- pose? A. Purchased them from whoever had the power giving the pro rata share of stock. Q. Did you make the original purchase from J. S. Bache & Company ? A. No, sir ; the stock was bought, and I was notified so many shares were mine, and took them up, and Bache was the purchasing house. Q. Bache was the purchasing house? A. Yes, sir; that is my recollection. Q. Originally there were 118 shares purchased by you, were there not ? A. Something like that, 100 to 125 shares. Q. And the original purchase, if you are correct in your recol- lection, must have been in 1900, instead of 1902 ? A. Some- wheres around 1902 or 1903. I don't recall the exact date. I know it was long antedating 1908. Q. And from time to time, as participation rights accrued, you exercised the rights which belonged to you as the owner of those certificates ? A. Yes, sir. Q. Are you able to state how many times those rights accrued during the period that you owned the stock ? A. No, sir ; I cannot tell you, only I know it resulted in those 387 shares. Q. Do you remember the price that you paid for the exercise in the participation ? A. Of course, speaking entirely from memory. Eepoet of Joint Legislative Committee 887 I think it was around 120, somewhere in the 20's, I have for- gotten what it was. I know it was very heavily margined, and it was a stock that was not listed. I have forgotten just what it was. Mr. Lewis. — Mr. Chairman, I think that for the purpose of the record I will have it appear that the records of the Franklin Trust Company show the following transactions in relation to this stock : Chairman Thompson. — For the information of Judge McCall, a week ago Friday a subpoena was served on the Franklin Trust Company to produce these books, the Franklin Trust Company being the transfer agent of the Kings County Electric Light and Power Company, as required by the rules of the stock exchange, and those books I was informed would require the services of a dray to produce them before the Committee, there are so many of them, and it seems there are over 1400 stockholders, and the stock is now listed on the stock exchange, and while an inactive stock exchange stock, it is much more active than if not listed, and I made an arrangement that the Committee should have access to the books at any time at the offices of the Franklin Trust Com- pany, and that is the only information the books there contained, and the books are not before the Committee physically, although they are really befoTe the Committee in the office of the Franklin Trust Company. If you desire the books themselves to be pro- duced, the Committee will produce them. Mr. McCalL— ISTot at all. Mr. Harkness. — These notes Senator Levns is going to read from, I presume, were made by the representatives of the Committee ? Chairman Thompson. — I called at the office and received them from the hands of Mr. Weisberger, of the Trust Company. Mr. McCalL— That is all right. Mr. Lewis. — I want this to go on the record, and it is perfectly proper it should. The record of the Franklin Trust Company shows that on the 21st of May, 1900, J. S. Bache & Co. transferred to Paine & Van Antwerp, certificate l^o. A-408, 50 shares of the stock of the Kings County Electric Light and Power Company, 888 IlVVESTIGATION" OF PuBLIC SeEVICE COMMISSIONS and certificate ISTo. A-409, for 45 shares, and that on February 14, 1902, Paine & Van Antwerp transferred the same certificates to E. E. Chapman & Co., that such certificates were surrendered and re-issued in one certificate, No. A-1024, for 95 shares. Mr. McCall. — Your statement is in reference to the original shares. Mr. Lewis. — It works down, you will see, in a moment. Mr. Lewis. — That at the same time a certificate was issued to E. E. Chapman & .Co., No. A-1141, for 23 shares, making 118 shares. That was February 14, 1902. Mr. McCall. — That probably follows one of the accretions of stock, and the original proposition was probably 95 shares. Mr. Lewis. — That on February 14th, new certificates were issued to E. E. Chapman & Co. as follows : No. 309, for 95 shares; No. A-1358, for 18 shares, and a certificate, the number of which does not appear on this memorandum, for 5 shares, making a total of 118 shares; that on May 1, 1903, certificate No. A-1557 was issued to E. E. Chapman & Co. for 29 shares. Mr. McCall. — What year was that ? Mr. Lewis.— 1903. Mr. Lewis. — That on November 2, 1903, certificate No. 1657 was issued to E. E. Chapman & Co. for 30 shares ; on October 1, 1904, certificate No. A-2041, for 59 shares, was issued to E. E. Chapman & Co. ; that on March 1, 1906, certificate No. A-2621, for 51 shares, and certificate No. 379, for 100 shares, were issued, making a total of 387 shares. On January 29, 1907, E. E. Chap- man & Co. transferred the certificates to Andrew Freedman. The certificate numbers of the certificates issued to Andrew Freedman in exchange for the certificates surrendered by Andrew Freedman, and received by him from E. E. Chapman, appear to be certificates 773, 774, 775, and certificate A-2824. On December 21, 1908, these certificates were surrendered, and new certificates issued as follows: Certificate 998, for 100 shares; 999, for 100 shares; Eepoet of Joint Legislative Committee 1000, for 100 shares, and A-3884:, for 87 shares, all of the certifi- cates being issued to John J. Maekin, in whose name they now appear to stand upon the books of the Franklin Trust Company. Mr. McCall. — I think that is all correct, with the exception that Chapman, of course, I didn't know Chapman or their firm, and Mr. Van Antwerp I knew personally. As the thing strikes me, however, as you read off the list, that is the thing I wanted to get myself, showing the transfers. It is exactly what I stated. There was a small purchase of stock, and it accrued in these parti- cipations afterwards. That statement, as you read it there now, as I recall it, is exactly correct, except that Chapman, through Van Antwerp, bought the stock, and carried it along, and was paid off, and they were not the transferees, except the stock remained the same — the script remained the same. That is my impression of it. Q. There seem to be new issues each time ? A. Yes, sir, there had to be; but that is exactly the situation. I am very glad you got it. Q. We want the truth about it, and that is all we are after. A. That is all I want. Mr. Lewis. — I now purpose, Mr. Chairman, tO' read into the record, section 270 of chapter 62 of the Laws of 1909, entitled "An Act in relation to Taxation, constituting chapter 60 of the Consolidated Laws, as amended by chapter 252 of the Laws of 1911." Section 270 : Amount of tax. There is hereby imposed and shall immediately accrue and be collected the tax as herein provided on all sales or agreements to sell or memoranda of sales of stock and upon all deliveries or otherwise of shares or certifi- cates of stock in any domestic or foreign association, company or corporation, made after the first day of June, 1905, whether made upon or shown by the books of the association, company or corpora- tion or by any assignment in blank, or by any delivery or bv any paper or agreement or memorandum, or other evidence of sale or transfer, whether intermediate or final, and whether investing the holder with the beneficial interest in or legal title to said stock, or merely with the possession or use thereof for any purpose, or 890 IxVESTIGATIOX OF PuBLIC SeEVICE COMMISSIONS to secure a future payment of money or the future transfer of any stock, on each hundred dollars of face value, or fraction thereof, two cents. It shall be the duty of the person or persons making or effectuating the sale or transfer to procure and affix the stamps and pay the tax provided by this article. It is not iatended by this act to impose the tax upon an a^eement, evidence or deposit of stock certificate, as collateral for money loaned thereon, which stock certificates are not actually sold, nor upon such stock certifi- cates so deposited, nor upon mere loans of stock or the return thereof. The payment of such tax shall be denoted by an adhesive stamp or stamps affixed as follows: In the case of a sale or a transfer, where the evidence of the transaction is shown only by the books of the association, company or corporation, the stamps shall be placed upon such books and it shall be the duty of the person making or effectuating such sale or transfer to procure and furnish to the association, company or corporation the requi- site stamps, and of such association, company or corporation to affix and cancel the same. Senator Foley. — Would you mind reading the portion of the article relating to stocks not on the books of the company ? Senator Lewis. — I am comiag to that. ■■ Where a transaction is effected by the delivery or trans- fer of the certificate, the stamp shall be placed upon the sur- rendered certificate, and in case of an agreement to sell, where the sale is effected, by the delivery of the certificate assigned in blank, there shall be made and delivered by the seller to the buyer, a bill or memorandum of such sale, to which the stamp provided for by this article shall be affixed, from such biU or memorandum of sale or agreement to sell, shall show the date of the transaction which it evidences, the name of the seller, the stock to which it relates, and the number of shares thereof, and no further tax is hereby imposed upon the delivery of stock, or upon the actual issue of a new certificate, when the original certificate of stock is accompanied by the duly stamped memorandum of sale, as herein provided." Report of Joint Legislative Committee 891 By Mr. Lewis : Q. Judge McCall, did you make any written memorandum of the transfer of this stock as required by the provisions of the section? A. There was a memorandum made of that transfer. There was a written or pencil memorandum made. That I am not positive of, I want to say frankly, not in connection with any legal obligation, but as information of the facts. These things had to be done hurriedly, don't you know. Q. Do you know where the memorandum is? A. I couldn't find it among my papers. Q. Did Mrs. McCall have it ? A. No. Whatever she had was among the papers. Q. Were any stamps affixed to the written memorandum ? A. No, sir, there were not. Q. Did you examine the provisions of that section, Judge, at the time ? A. Wo, sir ; I did not. Q. Is it your recollection that the memorandum which you pre- pared conformed to the requirements of the statute, as I have read them ? A. I cannot recall that. I know there was a statement of that transfer. By Chairman Thompson. — The next time you make one of these transfers, you will hire a lawyer. Mr. ]\IcCall. — I suppose I will have to. Q. And is it your recollection that you delivered that memorandum to Mrs. McCall? A. I recall the papers were handed, and in the papers was that memorandum. It was more of an instruction. Q. Well, do you recall what the instructions were? A. Just stated what it was, what the purpose of it was, and what it was done for. Q. You will notice. Judge McCall, from the reading of the statute, that the statement appears which I now call to your atten- tion: " It is not intended by this act to impose a tax upon an agreement evidencing the deposit of such stock certificates as col- lateral security for money loaned thereon, which stock certificates are not actually sold, nor upon sticIi stock certificates so deposited. 892 Investigation of Public Seevice Commissions nor upon mere loans of stock, or the return thereof." This was not regarded by you at the time as a mere loan ? A. Not at all. Q. From the time these certificates were delivered by you to Mrs. McCall, have you had them in your custody at any time until this morning? A. l^o, sir. Q. Have you seen them at any time ? A. No, sir. Q. And I think you have already stated that you did not know where they had been kept? A. That is right. I did not know just where. I know they were in my possession or her possession for her. Q. Well, have they been kept in your possession for her? A. No, sir. I never have seen them at all. Chairman Thompson. — Where did you say they were ? Mr. McCall. — In a bureau drawer. In her drawer or box, where she kept her papers. Q. Judge, did you intend at the time that this stock was issued to Mr. Mackin to take the title of it in your O'wn name at any time ? A. Now, Senator, it was just sending down and doing it. It was just an offhand transaction when it was taken from Freedman to go down and get that stock and take it in Mackin's name. Chairman Thompson. — It was your stock ? Mr. McCall. — Yes, certainly. Q. Did you, at that time have any thought that you would have it re-issued to you at any time ? A. I had no separate thought about it. Chairman Thompson. — What was the object in carrying — Mr. McCall. — There was not any object. It was a common, ordinary transaction. It was a common transaction. Chairman Thompson. — Why was it done ? Mr. McCall. — I don't know why it was done. Chairman Thompson. — Us farmers would think it would be to save taxes. Eepoet of Joint Legislative Committee 893 Mr. McCall. — I can't lielp what you farmers do. Chairman Thompson. — That is what they do up the State. To save taxes. That is all they think of. Mr. McCall. — Be sure to have that record say Senator Thomp- son said that. Chairman Thompson. — I will call it the State — I will say all over the State the same way. I am suspicious. I wondered why you should carry that stock in the name of somebody else. Mr. McCall. — It was in my possession with his endorsement in blank. Chairman Thompson. — Of course, if your recollection is en- tirely at fault, that you were trusting Mackin in any way, because you had his endorsement on the back of the stock. Mr. McCall.— That's the way it is done. Q. I assume Mr. Mackin signed these in your presence? A. Certainly he did. Q. And you certified to the fact that he had signed them in your presence? A. Yes, sir. Q. Did it occur to you, Judge, that by so doing, it might be difficult for yo-u and perhaps impossible for you to ever have these certificates re-issued to you in your name ? A. No. Q. Having witnessed Mr. Mackin's signature? A. Why, certainly not. Q. Did it occur to you that it would cause you any embarrass- ment? A. ISTot the slightest. How could it, and why should it? Q. Well, suppose when these certificates were actually delivered to the transfer agent for cancellation, and for the issue of new certificates to you in your name, the transfer agent should say, " I don't know Mr. Mackin's signature ; you appear here as a witness to this transaction, and you ask that the certificates be issued to you, the witness to Mr. Mackin's signature." A. Yes. Q. " I think I must ask you to produce some one who knows Mr. Mackin's signature." A. That would not be very difficult. Q. But did it occur to you? A. No. I never stopped to analyze such a thing at all. It was my stock. 894 Investigation of Public Service Commissions Q. You see the proposition — it might require — A. If the transfer stock agent would take such an attitude as that, he could annoy you to the extent of making you transfer the stock. That is all. What earthly question could be raised on that. Chairman Thompson. — If anything happened to Mrs. McCall, you could take the stock and take it back yourself. Mr. McCalL— No, I wouldn't. Why should I do that ? Chairman Thompson. — Well, you could do that. Mr. McCall. — I wouldn't do it, nor I couldn't do it. Chairman Thompson. — Why not ? Mr. McCall. — Because it would not be a proper thing to do. Chairman Thompson. — The stock is left now where you can do anything you want to with it. Mr. McCall. — No, it is not. That all depends on the man in whose possession it is. Chairman Thompson. — I cannot understand why you leave it that way, Judge. Mr. McCall. — Well, what is the difference ? Here is one thing you are entirely overlooking. You must remember I had but very few days in which to act. It was not a question of that. I had to do a lot of cleaning up and a lot of work. It is a strange thing to me that I even thought of that proposition. Chairman Thompson. — Of course I may be wrong, but my idea of the difference is this: When this Public Service statute was passed, it was under the administration of Governor Hughes. Now they put a provision in the law that no Public Service Ooia- missioner should own any stock in any public utility corporation that might be regulated or supervised by the board. Now, the object of that was to prevent the Public Service Commissioner from being tempted to exercise his personal interests in his official duties in regulating or supervising a public utility in which that stock was held. Mr. McCall. — There is no doubt what the purpose was. Report of Joint Legislative Committee 895 Chairman Thompson. — Now, this matter becomes important because you say yourself that it was just the same with Mrs. McCall holding it as with you holding it yourself. Mr. McCall. — I didn't say anything about Mrs. McCall. That was your question. I said, " Yes, it was the question of mailing a check." I asked you to define what your question was, and you said you wouldn't define any question. If that was the purpose, no such answer would ever be made to your question. I asked you to give the definition at the time, and you wouldn't do it. I didn't know what the purpose of your question was. I didn't sup- pose you were sitting here to trap me by questions. Chairman Thompson. — I did not assume you would. Mr. McCall. — I asked you what the meaning of that question was and you would not tell me. I took the question to be if I had as much interest in having the check reach Mrs. McCall as I would myself and I said surely. Chairman Thompson. — Do you think there is a difference from the angle of outsiders as to whether a man carries this kind of stock in his own name, or whether he carries it in his wife's name, as to the interest he might have, or the temptation it might be to some man to make orders? Mr. McCall. — I don't know what the angle of the outsiders is, but it wouldn't make any more difference to me than if I never heard of the company. Chairman Thompson. — Didn't make any difference in which name it was held ? Mr. McCall. — ISTo, not a particle in the exercise of my official duties. Mr. Harkness. — The testimony is to the effect that Mr. McCall was holding it in his wife's name. The testimony is he gave it to Mrs. McCall. Chairman Thompson. — The testimony is he transferred it to Mrs. McCall. I think you testified the other day that this was the only stock you held. 896 Ia^vestigation of Public Seevice Commissions Mr. McOalL— Yes. Mr. Lewis. — I return the stock to you, Judge. Q. Judge McCall, in some litigation that came before you when you were upon the Supreme Court bench, you stated that because of your ownership of the stock of the Kings County Electric Light and Power Company, you felt you were disqualified from acting as the trial justice in that litigation — do you remember the title? A. I don't remember the title. Ton had it here the other day. Q. I was not here the other day when that matter came up. A. That litigation was between different corporations. E'ot enumerated in the title was this company. This company was not enumerated in the title. Now, I myself asked the question if there was any relation borne by this company to the litigants. There was no record of my name as a stockholder at all. It was purely a voluntary thing, and a moral thing for me to do, if they were interested in the litigation. The stock was then in Ma^kin's name, and they said yes, the Kings County Electric Light and Power Company was in some way indirectly interested in the liti- gation. I never read the pleadings after that question was answered. I simply said, " I am disqualified. I am a stockholder in the company, and I will not hear the case." They then, both sides, were anxious I should try the case. I think the city was a litigant. Q. Did you know at that time, or have you known since as to what the nature of that action was ? A. If o, I do not. I do not remember that I even got to the pleadings. Senator. Q. Do you know of any matter having come before the Public Service Commission since you have been a member of that Com- mission, in which the affairs of the Kings County Electric Light and Power Company were involved, either directly or indirectly? A. Well, I would not be able to answer indirectly, unless I knew of their participating directly. Chairman Thompson. — Before you come to that, I would like to ask a question. The record shows you made orders amending the pleadings on various occasions. Mr. McCall. — Senator, those kind of things are probably ex parte matters where they come with piles of paper that high. Eepoet of Joint Legislative Committee 897 I don't know what that is. The motion is gi-anted without opposition. Chairman Thompson. — I understand there was opposition be- cause of the insertion of a date to the amendment causing a delay in the case. Now, if you had taken the case up and tried it on the 6th of May before you, the decision would have been made in the ordinary case within sixty days, at least ? Mr. McCall. — I don't know, because I don't know what the liti- gation was about. Chairman Thompson. — Well, litigations before the Special Term are usually decided some time within six months, anyway. Mr. MoCall. — I should say yes. I have one case myself. The very trial itself took over four months aotual trial. Chairman Thompson. — Even then you made a decision in less than six months after it was submitted to you ? ilr. McCdl.— Yes. Chairman Thompson. — Now, this case, the history of it has been, since you refused to try it — it was referred, and is still pending before a referee of three years ago ? Mr. McCall. — ■ I don't know anything about it. I terminated my official connection with it when I refused to try the case, which I was morally compelled to do. I would not try the case, and announced I was a stockholder. They tried to prevail on me ; I was, and I would not. That is where this record comes before this Conmiittee. That I volunteered myself. Brought about by this young lady sitting on the right of the Senator here. (At this point a colloquy took place between Mr. McCall and MissLoeb.) Mr. Lewis. — I ask that the record made by the stenographer of the conversation between Judge McCall and Miss Loeb be stricken out. Vol. 1 — 29 898 Investigation of Public Seevice Commissions Chairman Thompson.— Strike it all from the record except the statement that this information was brought to the attention of the Chairman of this Committee by Miss Loeb. Mr. Lewis. — Judge McCall made that statement and that may stand. Q. ISTow, do you recall, Judge McCall, the matter of the appli- cation of the Edison Electric Illuminating Company of Brooklyn for authority to acquire certain stocks of the Amsterdam Electric Light, Heat and Power Company ? A. ISTo, sir. Mr. Lewis. — I offer in evidence the petition entitled as above, addressed to the Public Service Commission of the State of New York, first district, dated August 10, 1912, signed by Edison Electric Illuminating Company of Brooklyn, by P. K. Atkinson, treasurer. Verified by P. K. Atkinson, August 10, 1912, and submitted to Public Service Commission, first district, August 14, 1912, bearing stamp showing that the action taken thereon was as follows: "Hearing ordered. See resolution, case 1554, Travis H. Whitney, Secretary." I read the prayer of the peti- tion as follows: " Wherefore your petitioner asks that your Hon- orable Commission will authorize the acquisition by your peti- tioner of the remaining capital stock of the Amsterdam Electric Light, Heat and Power Company, not now owned by petitioner, and amounting to 122 shares of the total par value of $12,200." I offer in evidence transcript of part of the proceeding of the Public Service Commission, taken on the 14th day of August, 1912, relating to this matter, known as hearing resolution. " On motion, dtily seconded, a resolution in ease !No. 1554 was there- upon unanimously adopted, directing a hearing on the foregoing application, on September 16, 1912, at two-thirty p. m., and the publication of notice thereof. The Chairman designated Com- missioner Maltbie to conduct the hearing." I offer in evidence the fonnal resolution of the Public Sendee Commission, case No. 1554, adopted on the 14th of August, 1912. I offer in evidence memorandum of hearing in the matter of the application of the Edison Electric Illuminating Company of Brooklyn, for authority to acquire certain stock of the Atasterdam Light, Heat and Power Company, case No. 1554, held on the Eepoet of Joint Legislative Committee 899 16th day of September, 1912, before Milo T. Maltbie, Commis- sioner. Appearances, H. M. Chamberlain, Assistant Counsel for the Public Service Commission for the First District. Messrs. Parker, Hatch & Sheehan, attorneys for the Edison Electric Illu- minating Company of Brooklyn, by William F. Sheehan, Esq., and Ashley T. Cole, Esq., of counsel. I read from the concluding paragraph of the minutes of the hearing. " Commissioner Maltbie: I ana not sure whether there are any questions upon which the Commission will need any fur- ther information, but there may be, and I suggest that an adjourn- ment be taken, and then if there is nothing more, the case will be closed on that day. If there is anything more that we need, we can advise you, and the information can be stated upon that day. Adjournment will be taken to Thursday, September 19, at 2:15 p. M." Chairman Thompson. — What year was that ? Mr. Lewis. — • 1912. I offer in evidence record of the proceed- ing had upon a hearing in the same maitter, case JSTo. 1554, of September 19, 1912. Same appearances as before, except that Mr. Victory, Assistant Corporation Counsel for the city of New York, appeared and stated : " If your Honor pleases, in that case, I appear for the city of Jlew York, and wish to say that an action has been pend- ing for some time between the Edison Company and the Amsterdam Company, as plaintiff, against the city of New York, -to restrain the Board of Estimate and Apportionment from passing a resolution revoking the franchise of the Amsterdam Company. The Bureau of Franchises of the Board of Estimate and Apportionment made a thorough in- vestigation of the Amsterdam Company and came to the con- clusion that it no longer possessed a franchise to operate in the Borough of Brooklyn of the city of New York, and a resolution was introduced into the Board of Estimate and Apportionment which revoked that franchise. That was a matter of form, in order to clear up the calendar, so that 900 Investigation of Public Service Commissions there could be no mistake about the existence of tbe fran- chise. It had already been forfeited through the non-operat- ing clause in the franchise. JSTow a copy of the report of Mr. Nichols, of the Bureau of Franchises, and a copy of the proposed resolution, was served on the Amsterdam. They immediately began a suit to restrain the passage of that law, and that suit is now pending. It is before the Honorable Delancey ISTicoU as referee, and we are taking hearings on it. Among the defenses we set up is the contention that the Edi- son Company deliberately secured control of the stock of the Amsterdam Company, in order to put it out of business, and we say that we have complete proof, in our judgment, and which we will present in that record. In the beginning of this case, a preliminary injunction, pending the hearing of the action, was asked for. After various hearings at Special Term, it was finally agreed to between the attorneys, Messrs. Parker, Hatch and Sheehan, representing the Amsterdam and Edison companies, that the injunction order would be granted, but as to the other matters, they would stand in statu quo. M.T. Nichols, of the Bureau of Franchises, de- clared at that time that we ought to bring a separate suit to restrain the merging of the Edison Company with the Amster- dam Company, and declared, in his belief, that it was the intention and design of the Edison Company to gradually get the complete stock, to secure the complete ownership of the Amsterdam Company, and to bring about a merger, and prob- ably thus defeat our suit, if the passage of this resolution made it ineffectual. Mr. Burr, as I miderstand it, spoke to Mr. Sery, of Messrs. Parker, Hatch and Sheehan, who was then the representative of that firm, about this matter, and it was understood that between them that nothing would be done in regard to buying this stock, or merging these com- panies. Now, Mr. Burr is on his vacation, and he will not be back until the 25th of this month. After he comes back, he will want a short while to refresh his recollection as to these facts, and I therefore ask your Honor to put this mat- .ter over until the latter part of next week, or the beginning of the week following." Report of Joint Legislative Committee 901 Chairman Thompson. — There wasn't any trouble about putting it over ? (No answer.) Mr. Lewis. — Mr. Victory further said in the course of the dis- cussion, as follows: " You can see that we contend that the Am- sterdam Company has not operated since 1899, and has done no business, and after amending its complaint four times, it came in and made the contention that it was operating through the Edison Company. We had the clearest contention that that was not so." I read further from Mr. Victory's statement: " The law says that if a company is not operating for one year, it must come in and ask permission to operate." The memorandum further shows as follows — I read from Mr. Victory : " Mr. Commissioner, I would like to submit for your consideration the pleadings in this case, which we had printed, and also the printed report of Mr. Nichols in this matter." Commissioner Maltbie: "I will look at the papers. I will not accept them in evidence now." Mr. Lewis. — From this record it appears that the hearing still stands adjourned, until Monday, September 30, 1912, at 3:30 p. M. Proceedings under the hearing ordered in case No. 1554 in this matter, on September 30, 1912. Milo E. Maltbie, Commissioner. Appearances the same as before, except that Mr. William P. Burr, Esq., and Mr. Victory, assistant corporation counsel for the city of New York. Mr. Cole asked for an adjournment, and adjourn- ment was granted until Monday, October 7, at 2 :30 p. m. Proceedings under hearing ordered, case No. 1554, October 7, in the same application. Milo E. Maltbie, Commissioner. Same appearances. Application by Mr. Cole for an adjournment, for one week for the convenience of counsel, granted. Commissioner Maltbie announced the hearing would be adjourned until the 14th of October, at 11 o'clock. Mr. Lewis. — I offer in evidence a letter dated New York, Oc- tober 11, 1912, addressed Honorable Travis H. Whitney, secre- tary, Public Service Commission, 154 Nassau street. New York city. 902 Investigation of Public Service Commissions " Dear Sir. — We hand you herewith amended and supplemental petition, in ease JSTo. 1554, being the petition o£ the Edison Elec- tric Illuminating Company of Brooklyn, for authority to acquire certain stock of Amsterdam Electric Light, Heat and Power Com- pany, together with five copies of the petition, as required by your rules. "A hearing is set on the original petition for Monday next, but owing to the engagements of counsel, we have to-day written the hearing Commissioner, Mr. Maltbie, asking for an adjournment of two weeks. " Very truly yours, "Parker, Hatch & Sheehan." Mr. Lewis. — I offer in evidence the amended and supplemental petition of Edison Electric Illuminating Company of Brooklyn, in the matter above referred to, which I find will be necessary to read into the record : " To the Public Service Commission of the Stat© of New York, First District. " The amended supplemental petition of Edison Electric Illuminating Company of Brooklyn respectfully shows: " First: That your petitioner is an electrical corporation, duly organized' and existing under and by virtue of the laws of the State of New York for, and is engaged in, the business of generating, transmitting and selling electricity for light, heat and power in the Borough of Brooklyn, city of New York, under franchises therefor, owned by petitioner, which were granted by the former city of Brooklyn. " Second : That Amsterdam Electric Light, Heat and Power Company, hereinafter called the Amsterdam Com- pany, is a corporation duly organized and existing under and by virtue of the laws of the State of New York, for the pur- pose of generating, transmitting and selling electricity for light, heat and power purposes in the borough of Brooklyn, city of New York, under a franchise therefor, owned by said Amsterdam Company, which was granted by the former city of Brooklyn. Eepoet of Joia^t Legislative Committee 903 " Third : That said Amsterdam Company is incorporated for the same business as transacted by your petitioner. " Fourth : That the authorized capital stock of Edison Electric Illuminating Company^ of Brooklyn is five million dollars, consisting of fifty thousand shares of common stock of the par value of $100 each, all of which is issued and out- standing, and the authorized capital stock of the Amsterdam Electric Light, Heat and Power Company is five hundred thousand dollars, consisting of five thousand shares of com- mon stock of the par value of $100 each, all of which is issued and outstanding. " Fifth : That there is a mortgage upon all of the property of petitioner to the State Trust Company, now the Guarantee Trust Company, by merger, as trustee, dated October 1, 1898, and made by this petitioner to secure an issue of ten million dollars par value first consolidated four per cent, gold bonds, due January 1, 1939, of which bonds four million, two hun- dred seventy-five tliousand dollars par value are now issued and outstanding; said mortgage was recorded in the office of the register of the county of Kings on December 6, 1898, and a copy thereof was filed with the Public Service Commis- sion on the 23d day of September, 1907. " Sixth : That there is a mortgage upon all of the prop- erty of Amsterdam Electric Light, Heat and Power Company, to Central Trust Company of 'Sew York as trustee, dated September 1, 1897, to secure an issue of one million dollars par value, first mortgage, five per cent, gold bonds, due Sep- tember 1, 1939, of which bonds three hundred thousand dol- lars par value are now issued and outstanding. Said mort- gage was recorded in the office of the Eegister of the County of Kings, on September 12, 1897, that no interest has been paid upon any of said bonds during the fiscal year preceding this application. " Seventh : That no dividends have been paid during five years previous to this application by the Edison Electric Illuminating Company of Brooklyn, or by the Amsterdam Electric Light, Heat and Power Company. 904 Investigation of Public Sebvige Commissions " Eighth : That detailed statements of earnings and ex- penditures and balance sheet showing the financial condition of the Edison Electric Illuminating Company of Brooklyn, and of the Amsterdam Electric Light, Heat and Power Company, at the close of the last fiscal year are already filed with your Commissioner, as part of the respective annual reports of the said companies. " ITinth : That your petitioner has been since, prior to July 1, 190T, the owner of $487,800 par value capital stock of said Amsterdam Company, out of a total authorized and out- standing issue of $500,000. " Tenth : That your petitioner is desirous of acquiring the remaining capital stock of the Amsterdam Company, not now owned by it, and amounting to 122 shares, having a par value of $12,200, so that petitioner, upon acquiring the whole amount thereof, may merge said Amsterdam Company as provided by section 15 of the Stock Corporation Law. " Eleventh : That the names of the present owners of the stock to be acquired are Louis B. Grant, Alexander H. Laid- law, and C. Edwin Butz, and the price to be paid for the said stock is about and not exceeding $8,500; that the terms of payment for the same are cash in full upon the delivery of the certificates ; that there is no market value for the said stock, and that the highest price was $100, and the lowest price was $25, for one year prior to this application. " Twelfth : That certified copies of the certificates of in- corporation of your petitioner, and of said Amsterdam Com- pany, has heretofore been filed with your honorable Com- mission. " Wherefore, your petitioner asks that your honorable Com- mission will authorize the acquisition by your petitioner of the remaining capital stock of the Amsterdam Electric Light, Heat and Power Company, not now owned by petitioner, and amounting to 122 shares of the total par value of $12,200. " Dated October 11, 1912. " Edison Electric Illuminating Company of Brooklyn. " By P. E. Atkinson, Treasurer." Eepoet of Joint Legislative Committee 905 Mr. Lewis. — I offer in evidence proceedings under hearing ordered in case No. 1554, dated October 14, 1912. Same appear- ances as before, except that Mr. Burr did not appear. Mr. Cole appeared and asked for an adjournment of two weeks. On that request the hearing was adjourned to October 28th, at 2 :30 p. m. Proceedings under hearing order in case No. 1554, October 28, 1912. Same appearances as before, with William P. Burr, cor- poration counsel, also appearing. I read from the proceedings: " Mr. Burr: I want to ask leave before closing to offer the pleadings in the pending action. Mr. Hatch : I object to that." Mr. Harkness. — The date of that. Mr. Lewis.— That is October 28, 1912. Mr. Harkness. — Of course it is not necessary to put on the record that Judge McCall was not in the Commission at that time. Mr. Lewis.- — Oh, yes. Chairman Thompson. — The putting of the year on the record answers that. Mr. Lewis: " Commissioner Maltbie. — Well, the Commission will take cognizance of the pending suit, but I do not think it proper to accept this in evidence — this entire document — from the point of view that the facts, or the alleged facts therein should be considered as a basis of fact upon which this case should rest. " Mr. Burr. — But as evidence of what issues are now being tried before the referee in that action. " Commissioner Maltbie. — As evidence of the issues, but not as to the facts that may be alleged or set forth or disputed. " Mr. Hatch. — I except to the ruling of the Commission. 906 Investigation of Public Seevice Commissions " Commissioner Maltbie. — That will be marked for that purpose. "(The copy of the pleadings was received in evidence and marked Exhibit No. 3 of this date. ) " Mr. Hatch. — I renew my objection in that connection, that the city is without interest in the matter and therefore has no right to intervene. " Commissioner Maltbie. — Until the 6'th of November, will that be suiBcient ? I will give you a long time, because it is a long case. " Mr. Hatch. — I think I will have it ready, and perhaps before. If I can get it in this week, I will do it. I suppose as soon as I send it in, the case will be regarded as submitted. " Commissioner Maltbie. — Unless, as I intimated a moment ago, the decision on that legal point may affect the facts that the Commission thinks it should or should not have. " Mr. Hatch. — It might want some more facts. " Commissioner Maltbie. — The decision of that legal point may determine whether we shall want any more facts or not, and I do not say that it will, but it may, so that I do not want to indicate that this is absolutely closed. We have the right to re-open the case, anyway. " Mr. Hatch. — And then you will notify us ? " Commissioner Maltbie. — Certainly. This hearing will be declared closed. " Whereupon, at 4:15 p. m., on the 28th of October; 1912, the hearing in the above entitled matter was declared closed." "'b Mr. Lewis : I now offer in evidence the complaint in an action in the Supreme Coui-t, New York county, entitled, " Amsterdam Electric Light, Heat and Power Company and Edison Electric Illuminating Company of Brooklyn, plaintiffs, against William J. Gaynor, as Mayor of the City of New York; William Prender- gast, as Comptroller of the City of New York; John Purroy Report of Joint Legislative Committee 90Y Mitchel, as Presideut of the Board of Aldermen of the City of New York, and others, including the presidents of the varioiu boroughs, constituting the Board of Estimate and Apportionment of the City of ISTew York, and as, members of such board, and the City of New York." Chairman Thompson. — Is that the record yon have there ? Mr. Lewis. — Xo, these are the pleadings. Chairman Thompson. — You want to offer all the pleadings ? Mr. Lewis. — Yes, I want to offer them separately. I read the prayer of the complaint as follows: "Wherefore the plaintiffs demand judgment: " First: That the defendants be enjoined from passing or adopting any resolution or resolutions declaring forfeited or revoking or terminating or repealing or in any manner affect- ing the resolutions of the Common Council of the City of Brooklyn, granting a franchise to the State Electric Light and Power Company, passed December 30th, 1895, and from prosecuting a bond given under said franchise; " Second : That the plaintiffs have an injunction of similar tenor and effect, pending the determination of this action ; " Third : That the plaintiffs have judgment for the costs of this action, and such other and further relief as to the court may seem just and proper in the premises. " Signed, Paekee, Hatch & Sheehan, " Attorneys for Plaintiffs." Mr. Lewis. — I offer in evidence the answer of the city of New York, verified on the 29th day of December, 1911, George L. Sterling, assistant corporation counsel. I read from the answer — Chairman Thompson. — As soon as this record is in, we will suspend. Mr. Lewis. — Paragraph No. 13 : " That the Amsterdam Electric Light, Heat and Power Company has failed to comply with the conditions and pro- visions of the said resolution numbered nineteen; it failed 908 Investigation of Public Seevioe Commissions to furnisii an accurate map at its expense showing the posi- tion of all its wires laid, their branches, detours and exten- sions, up to July and January 1st, each year, with the Com- missioner of City Works, on or before the 10th day of Janu- ary and July of each year ; it failed to pay $500 on December 31st, 1910, as an advance payment for the year 1911, to the successor of the treasurer of the City of Brooklyn, failed to pay one per cent, of its gross receipts every six months, and to keep books for the purpose of determining the amount of its receipts ; it did not construct one mile of conduit between July 1st, 1896, and July 1st, 1897; one mile between July 1st, 1897, and July 1st, 1898; one mile between July 1st, 1898, and July 1st, 1899 ; or one mile between July 1st, 1899, and July 1st, 1900; that on information and belief, it did not supply arc lights, 1200 candle power at a price not exceeding thirty cents per day wherever its conduits or lines extended." Paragraph 14: " That on information and belief, said Amsterdam Electric Light, Heat and Power Company did not file a bond as required by section 9 of said resolution of December 30th, - 1895, until May 29th, 1897, nor obtain a permit to construct conduits in the streets of Brooklyn until June 12th, 1897." From Paragraph 15 : " That said Amsterdam Electric Light, Heat and Power Company never constructed more than 14,200 feet of conduit, linear measurement, in the streets and avenues of Brooklyn, and in the year 1899 abandoned its plant and sold same as scrap iron, and also the conduits it had constructed in the streets and avenues of Brooklyn, and abandoned its franchises and property, and surrendered said franchises to the people of the State, and abandoned the purposes for which it was organized and for which the said concern of December 30th, 1895, was granted by the Common Council of Brooklyn, and has since 1899, failed to supply the people of Brooklyn and of the Borough of Brooklyn of the City of New York, with electricity for light, heat and power, as promised in said Eepoet of Joint Legislative Committee 909 charter and said resolution, and its acceptance thereof, and also failed to supply the Municipality of Brooklyn, and the City of ISTew York with electricity, in accordance with the public duty and obligation it had, through its charter and said resolution assumed." Mr. Lewis. — I read from Paragraph 20 : " Wherefore defendants demand judgment that the com- plaint herein be dismissed with costs, and for the further judgment and decree: "First: That the Amsterdam Electric Light, Heat and Power Company has abandoned and surrendered the pur- poses and business which were the object of its organization and creation of supplying electric light, heat and power to public and private consumers. That the State Electric Light and Power Company of the State of New York, and the Amsterdam Electric Light, Heat and Power Com- pany, have abandoned and surrendered the purposes and business of supplying electric light, heat and power to public and private consumers in the old City of Brooklyn, and in the Borough of Brooklyn in the City of l^ew York, which was the object and purpose of the assent to the State Electric Light and Power Company of the State of ISTew York of the Common Council of the City of Brooklyn, given on December 30th, 1895, and therefore have abandoned and surrendered said assent or secondary franchise if same ever existed. " 4. That the Edison Electric Illuminating Company of Brooklyn, and its successors and assig-ns, have no right, authority or power to operate under the said assent of December 30th, 1895, of the Common Council of Brooklyn, made to the State Electric Light and Power Company of the State of New York. " 6. That the Edison Electric Illuminating Company of Brooklyn be enjoined and restrained from consolidating or merging with the said Amsterdam Electric Light, Heat and Power Company, and that the said Amsterdam Electric 910 Investigation of Public Service Commissions Light, Heat and Power Company be restrained from consoli- dating or merging with the Edison Electric Illuminating Company of Brooklyn. " 7. That the defendants have such other and further relief as to the court may seem just and proper. " Archibald R. Watson, Corporation Counsel, " Attorney for Defendants." Mr. Lewis. — I will suspend if the Chairman is willing. Chairman Thompson. — ■ Well, then, we will take a recess until two o'clock, and the witnesses will return at that time. AFTERlSrOOjSr SESSION. Edward E. McCall resumes the stand. Mr. Lewis. — I offer in evidence the reply of the plaintiffs in the case of Amsterdam Electric Light, Heat and Power Company and Edison Electric Illuminating Company of Brooklyn against William J. G-aynor, as mayor of the city, and others, verified January 22nd, 1912. I read from paragraph 12 of such reply: " Referring to the allegations contained in Paragraph 13 of said answer, plaintiffs admit that the Amsterdam Electric Light, Heat and Power Company failed to furnish and file with the Commissioner of City Works maps showing the posi- tion of all its wires laid, their branches, detours and exten- sions up to July and January 1st, each year, on or before the 10th day of January and July of each year; and admit that it did not construct one mile of conduit between July 1st, 1896, and July 1st, 1897; one mile between July 1st, 1897, and July Ist, 1898 ; one mile between July 1st, 1898, and July 1st, 1899, and one mile between July 1st, 1899, and July 1st, 1900, but plaintiffs deny that said company failed to pay $500 on December 31st, 1910, as an advance pay- ment for the year 1911, and deny that it failed to pay one per cent, of its gross receipts every six months, or to keep Report of Joint Legislative Committee 911 books for the purpose of determining the amount of its receipts, and deny that it did not furnish arc lights of 1200 candle power, at a price not exceeding 30 cents a day wherever its conduits or lines extended, whenever and wherever demanded by the city of Brooklyn." ilr. Lewis. — I offer in evidence a bill of particulars in the same action, dated December 20th, 1911, signed Parker, Hatch and Sheehan, attorneys for the plaintiffs, and verified on the same day. Mr. Lewis. — I offer in evidence copy of extract, dated July 24th, 1911, from the minutes of the proceedings of the Public Service Commission, reading as follows : " Commissioner Cram moved that the presiding Commis- sioner in case ISTo. 1554, upon the application of the Edison Illuminating Company of Brooklyn for the approval of the acquisition of 122 shares of capital stock of the Amsterdam Electric Light and Power Company, be requested to report his recommendation for a decision upon the ' application at the meeting of the Commission on July 30th, 1914. Com- missioner Maltbie stated that he had long previously referred to the Committee of the Whole with regard to this application, and explained the reason why a decision upon the application had been deferred. Commissioner Williams suggested that this case would, as a matter of course, be included in the calendar of matters to be acted upon by the Commission at the meeting on July 30th, 1914, under the motion carried at the meeting of July 23d, 1914, with reference to the disr position of pending matters before the Commission. It was then understood that the application of the Edison Electric Illuminating Company of Brooklyn, in case No. 1554, would be included in the calendar of the matters to be acted upon at the meeting of the Commission on July 30th, 1914." Q. Do you recall being present. Judge McCall, at the meeting at which that ma.tter was acted upon, this meeting of July 24th, at which Commissioner Cram offered the resolution which I have 912 Investigation of Public Seevice Commissions read? A. I do not recall offhand whether I was there or not. July 24th, 1914 ? Q. Yes. A. What was done, Senator — what was done on his motion ? Q. I read it just now. A. Just as it was ? Q. Yes. A. There had been a disposition made previously that also came up on the 23rd, is that it ? Q. ISTo. It seems that on the 23rd some action was taken to include upon the calendar for July 30th aU undisposed of mat- ters. A. I was not there. Q. You were not there on the 24th? A. " Milo E. Maltbie, Acting Chairman." Mr. Lewis. — I offer in evidence copy of extract from the min- utes of the Public Service Commission, July 30th, 1914, case ISTo. 1554, as follows: " It was duly moved and seconded that an order in cases No. 1554 be adopted, authorizing the Edison Electric Illu- minating Company of Brooklyn to purchase, acquire, take and hold the remaining shares of the capital stock of the Amsterdam Electric Light, Heat and Power Company, pro- vided, however, that the purchase price thereof should not exceed $10,000, and the amount of the purchase price should not be capitalized, but should be paid out of the surplus, and directing that nothing contained in the order should be con- strued as authorizing the merger of the Amsterdam Electric Light, Heat and Power Company, by the Edison Electric Illuminating Company of Brooklyn. The order to take effect immediately. Ayes — Commissioners Maltbie, Cram, Williams and Wood. ISToes — None. Present but not vot- ing — ■ Chairman McCall. Carried." Mr. LevTis. — I offer in evidence order granting application, case ISTo. 1554, reading as follows: "At an adjourned meeting of the Public Service Commis- sion for the first district, duly held at its office, 154 Nassau street, in the Borough of Manhattan,. City and State of New York, on the 30th day of July, 1914. Present, Edward E. Eepoet oi' Joint Legislative Committee 913 McCall, Chairman. Milo E. Maltbie, J. Sargent Cram, G-eorge V. S. Williams, Eobert C. Wood. In the matter of the application of Edison Illuminating Company of Brook- lyn for authority to acquire certain stock of Amsterdam Electric Light, Heat and Power Company, under section 70 of the Public Service Commissions Law. "Application having been made to the Public Service Com- mission for the First District by the Edison Electric Illumi- nating Company, under the provisions of the Public Service Commissions Law, for authority to purchase, acquire, take and hold 122 shares of the capital stock of the Amsterdam Electric Light, Heat and Power Company; and a hearing having been duly held upon said application before the Com- mission, Honorable Milo E. Maltbie, Commissioner, presid- ing; and it appearing that the total authorized and outstand- ing capital stock of the Amsterdam Electric Light, Heat and Power Company is five thousand shares, of the par value of $100 each, of which total the Edison Electric Illuminating Company of Brooklyn is already the owner of all except the 122 shares which it now seeks to purchase, and it appearing that said Edison Illuminating Company of Brooklyn can now acquire all said remaining shares for not to exceed $10,000 in cash, and intends to pay for said shares out of surplus; and it being now the opinion of the Commission that authority should be granted to said Edison Electric Illumi- nating Company of Brooklyn to purchase said remaining shares provided the purchase price of all said remaining shares shall not exceed ten thousand dollars cash, and pro- vided also that said purchase price shall not be capitalized, but shall be paid out of surplus, it is " Ordered : First, that the Public Service Commission for the First District does hereby authorize the Edison Elec- tric Illuminating Company of Brooklyn to purchase, acquire, take and hold said remaining 122 shares of the capital stock of the Amsterdam Electric Light, Heat and Power Company, provided, however, purchase price of all such shares shall not exceed $10,000, and provided also that the amount of said 914 Il^VESTIGATION OF PgbLIC SeEVICE COMMISSIONS purchase price shall not be capitalized, but shall be paid out of surplus. '' Second : That nothing herein contained shall be con- strued as authorizing, permitting or approving the merger of said Amsterdam Electric Light, Heat and Power Company by said Edison Electric Illuminating Company of Brooklyn, pursuant to the provisions of subdivision 3 of section 61 of the Transportation Corporations Law, or otherwise. " Three : That this order shall take effect immediately and shall continue in force until changed or abrogated by fur- ther order of the Commission. " Four: That on or before the 10th day of August, 1914, said Edison Electric Illuminating Company of Brooklyn shall notify the Commission in writing whether the terms of this order are accepted and will be obeyed. By the Commis- sion. Teavis H. Whitney, Secretary." Mr. Lewis. — I offer in evidence the document entitled " In the Matter of the Application of Edison Electric Illuminating Com- pany of Brooklyn, for authority to acquire certain stock of Amster- dam Electric Light, Heat and Power Company, under section 70 of the Public Service Commissions Law, reading as follows : " Case 1554. Acknowledgment of receipt of order grant- ing application. Public Service Commission: You are hereby notified that a certified copy of an order in the above- entitled matter, adopted by the Public Service Commission for the First District, on July 30th, 1914, was received by the Edison Electric Illuminating Company of Brooklyn, on the fifth day of August, 1914, and that the said order is hereby accepted, and will be obeyed. " Dated August 7th, 1914. ' ' P. E. Atkinson, Treasurer." Q. From the record. Judge McCall, it appears that you were ( (( present at the meeting of the Commission at which action was ■ ; taken, and did not vote on the adoption of the resolution. Have j jj Eepoet of Joint Legislative Committee 915 you any — do you recall what your reason was for not voting at that time ? A. Very distinctly ; very distinctly. Q. Will you state it, please ? A. These proceedings were pre- cipitated, as you have shown by the record, in August, 1912, and I knew nothing about them at all dovm to the time I came on the Commission in 1913. At the meeting of the Committee of the Whole, which you read here, to which Commissioner Maltbie made reference. When the matter came up — what I am really surprised at is that I was not voting, because there is nothing there in that proceeding to indicate to me, as far as the title went, the interest of any Kings County Electric Light and Power Com- pany. Chairman Thompson. — There were votes enough without yours, anyway. Mr. McCall. — Why, certainly there was. But when that was discussed in the Committee of the Whole, I asked Commissioner Maltbie if the Kings County Electric Light and Power Company had anything to do with this, or was affected by it, and he told me it had some effect on the Kings County Electric Light and Power Company. I said I was a stockholder of shares of stock in that company before I came on the Commission, and I transferred it to Mrs. McCall, and I do not think that under those circumstances, while there is no legal objection to my participating, I would not do it, and I did not do so. Q. Were you aware at any time that all of the stock of the Edison Illuminating Company of Brooklyn was owned by the Kings County Electric Light, Heat and Power Company? A. No, sir. Q. You had never been advised of that fact ? A. ISTo. Q. And did you know that all of the stock of the Amsterdam Company was owned, with the exception of 122 shares, was owned by the Edison Company ? A. No, sir. Q. Did you know that an action was pending in the Supreme Court, to restrain the city of New York from adopting a resolu- tion or ordinance declaring void and null the franchises of the 916 Investigation of Public Sbevice Commissions Amsterdam Company the stock of which the Commission was au- thorizing the purchase by the Edison Company? A. I knew nothing about that, save as I told you. That was the case that came before me, when I did not even read — got no further than the caption, and so consequently did not know. If that is right. I presume that is the case. That is the case, is it not, Senator ? (Question repeated.) " Did you know that an actiooi was pend- ing in the Supreme Court to restrain the city of ISTew York from adopting a resolution or ordinance declaring void and null the franchises of the Amsterdam Company, the stock of which the Commission was authorizing the purchase by the Edison Com- pany ? " You answer that. A. That is the case that was before me. Q. Did you have before you at that session any report from Commissioner Maltbie upon the propriety of the adoption of the resolution which authorized the purchase of that stock? A. The Committee as a whole? Q. No. At this meeting the proceedings of which I have read. A. I did not hear and discussion about it at all. The resolution is usually prepared in accordance with the Commissioner who hears, by the counsel. Q. Was the matter discussed at a meeting of the committee of the whole ? A. I think in this one case it was. When I asked questions, all these cases were brought up for discussion. Q. Do you recall this particular case? A. Not except as I have related them to you. Q. Do you recall anything that Commissioner Maltbie may have said at the meeting of the committee of the whole ? A. No. Q. Your answer is no ? A. Yes, I can't remember. Q. Was a stenographic record kept of the discussions of the meetings of the committee of the whole ? A. No. Q. No record whatever? A. Not that I am aware of. Q. Was it the practice to hold meetings of the committee of the whole without keeping a record ? A. Yes. It was during all the informal meetings. It was not a meeting that we have for record. It was a general house discussion before they went down stairs to go into a public meeting. Something in the nature of an executive session. That is what it was. Eepoet of Joint Legislative Committee 917 Q. How ? A. Something in the nature of an executive session. Q. Have you the volume of proceedings of that year, Mr. Hark- ness? Mr. Harkness.— You want to turn to that page ? Q. July 30th, or along there. Mr. Harkness.— That is the entry for July 30th, the page on your left. Q. This volume contains anything of the meetings of the com- mittee of the whole ? Mr. Harkness: That is the volume containing the formal meetings. Chairman Thompson. — Was there ever any record made of the statement that Judge McCall says he made there ? Mr. Harkness. — I don't know of any. Mr. Lewis, resuming: Q. There is, then, no record in existence of discussions that have taken place in meetings of the committee of the whole in matters of this character ? A. l^ot that I am aware of. Q. Was it customary to have a stenographer present at such meetings ? A. No. The secretary or the assistant secretary, who- ever was there, would make notes, longhand notes. Q. That only as to determinations, I assume ? A. Practically — what disposition is made. Q. ISTot as to anything that may have been discussed or the discussion on any proposition? A. If, for instance, we were discussing a matter, and were not prepared to vote, and there was a division — memorandum made on that for a calendar to pass over, and he would take the calendar and mark on the calendar, "Over for a week." Chairman Thompson. — Up to the time that you came there, it was a custom to have a stenographer and take the discussion of every meeting of the Commissioners ? Mr. McCall. — I don't know. Whatever custom prevailed when I came there continued after I came there. 918 Investigation of Public Seevice Commissions Mr. Harkness. — - That was not a fact. Chairman Thompson. — When was it discontinued. Mr. Harkness. — It never was the practice. Chairman Thompson. — We have some here now taken by a stenographer, but not extended. Mr. Harkness. — You will find at the meetings of the Com- mission, formal meeting, the stenographer takes down discussions, but they are not entered up in the minutes, but those stenographic minutes are kept. Mr. McCall. — There are other instances, too, where the Com- mission is meeting when some proposition is offered, for subway matters or other matters where delegations from outside are in, and then we have stenographers. There was no disturbance of the routine when I came in. Q. I show Judge McCall proposal for decision upon applica- tion July 24 — from what source does that come, Judge McCall ? From a meeting of the whole, or a meeting of the full board in open session ? A. This is the meeting. Q. Meeting of the — A. That date you asked me about that I was present, July 24th, that was a public meeting. Q. That was a public meeting ? A. Yes. Q. Would there be a record of that, then, in this volume ? A. There ought to be, yes. You see there was no formal action taken upon this, because I asked the question, and there it seems to have ended. There was not any discussion taken up. Q. Do you suppose you can find in the meeting of July 24th, if any action was taken on that question ? A. That is about what you will find to be the result of that. He made this suggestion — Williams made the suggestion that that case would come up on this calendar; that it was to be an anomalous calendar, and then to make sure that this company case would come up on this calendar. That was the end of it. Q. Do the minutes of the Commission show that a report was made by Commissioner Maltbie upon this application of the draft- ing or recommending its approval? A. You will probably find an opinion in it. Report of Joint Legislative Committee 919 Q. Find an opinion? A. More than likely. That was the way he disposed of his matter. He writes an opinion. Q. Will you see if you can find it? A. I would not know where to find it if he did write it. Q. Will you rely upon Mr. Harkness to find it ? A. It would be in the volume of opinions, whether Maltbie in writing, or dis- posing of his matter, wrote an opinion. That is the way he would dispose of it. They would be published in the volume of opinions or reports. Mr. Harkness. — If I may interrupt. The usual course would be for the sitting Commissioner to make a draft or memorandum or report and send it around to his fellow commissioners, and that was certainly done in this case, because it set forth a colloquy be- tween Commissioners Cram and Maltbie, and if it was a formal opinion, it would be in the printed opinions. Chairman Thompson. — There would be a stenographic record kept of that ? Mr. Harkness. — There would be no record. Q. That report would be in writing? A. Yes. Q. I wonder if Mr. Harkness wo'uld go to the ofiice and get such a report ? Mr. Harkness. — I have not been able to get Mr. Whitney, but Mr. Goetz who has charge of that matter tells me that no formal opinion was filed. Q. There was no formal report or opinion by Mr. Maltbie? Mr. Harkness. — No formal report or opinion. Q. I inferred as much from the order which was made. Mr. Harkness. — I assumed that everything was in that record you had before you. Q. I assumed that there was no formal opinion presented to the committee of the whole because of the statement in the minutes of the meeting of July 24th by Commissioner Maltbie to the effect that he had long previously reported to the committee of the whole with regard to this application, and explained the reason why a decis ion nnnn the pmnlica.tio Ti Viiid heen deferred. 920 Investigation of Public Seevice Commissions Mr. Lewis. — Now, if the Chairman please, I offer in evidence the entire file of the Public Service Commission, in case 1554, including the exhibits constituting the pleading in the action brought by the Amsterdam Electric Light, Heat and Power Com- pany, and Edison Electric Illuminating Company, against Wil- liam J. Gaynor as mayor, and others. Chairman Thompson. — Those will be received and they will be marked as exhibits, and will not be extended by the stenographer. But I want either the originals or copies of them furnished for the stenographer to keep, so they can be bound in as exhibits when the report is made. Mr. Harkness. — Do you want that whole record copied ? Mr. Thompson. — Yes. We only want one copy to bind in as an exhibit in the report. Mr. Lewis. — JSTow I offer in evidence the department file Mis- cellaneous Correspondence in case 1554. By Chairman Thompson. — Now, I will charge the responsi- bility of looking after these exhibits as they are offered to the stenographer, and keeping them in his possession. Mr. Lewis. — I offer in evidence statement of Mr. Harkness upon the record, that this is the entire file in that ease. Mr. Harkness. — That is my understanding, sir. Mr. Lewis. — I desire to call the attention of the Committee to the fact from the 6th day of JSTovember, 1912, to the 23d day of July, 1914, there appears to have been no correspondence and no action of any description in connection with the application of case 1554. Included in the department correspondence I call at- tention to the fact there is found an opinion dated November 18, 1912, addressed to Honorable Milo K. Maltbie, Commissioner, case No. 1554, on the subject of the legal effect of the granting of the application for the purchase of the 122 shares of the stock of the Amsterdam Company, by the Edison Company, and as to the question of the power of the Commission, after having granted such application, if it should grant it, to interfere in any way to Eepoet of Joint Legislative Committee 921 prevent the merging of the Amsterdam Company with the Edison Company. Signed by George F. Coleman, counsel to the Com- mission. Mr. Lewis. — I also call attention to the fact that the. miscel- laneous correspondence file contains this letter, which I will now read: " New York, July 23d, 1914. " To Hon. J. Sargent Cram, Public Service Commissioner, 154 Nassau street, New York city. " Dear Commissioner. — Eegarding my talk with you yes- terday, I call your attention to the fact that an application on behalf of the Edison Electric Illuminating Company of Brooklyn has been pending before Commissioner Maltbie for about two years. The Edison Company ovstis all excepting a few shares of the stock of the Amsterdam Electric Light, Heat and Power Company, and the application was made to secure the authority of the Public Service Commission to purchase the remaining 122 shares. The application to purchase the stock was opposed by Mr. Burr of the Corporation Counsel's office, upon the ground, as the City is attacking the validity of the franchise held by the Amsterdam Electric Light, Heat and Power Company, that until a decision is made in that case, the Public Service Commission should not decide our case. Mr. Burr has no legal position whatever in the contro- versy, and I submit that he should not even have been heard. But aside from this, all we ask is, that there be a decision one way or the other made. Commissioner Maltbie refused to make a decision, and I have given instructions to prepare papers for a mandamus directing the Commission to decide the case. It is an outrage that my client should be so treated, and I sliall so denounce it in open court. We are entitled to a decision, and while I should prefer that our petition bo granted, if the petition is denied I should not be worried, be- cause tbe Appellate Division will immediately reverse it. " Very truly yours, " W. F. Sheehan." 922 Investigation of Public Service Commissions Q. Was that letter read at the meeting of the Commission? A. I have not the slightest recollection of it. Q. Did you ever see the letter before? A. Not that I remem- ber. I never recollect it. Q. Was the subject of the communication of Mr. Sheehan dis- cussed at the meeting of the Commission on that day ? A. I can't recall that, Senator. I can't recall that. Q. In your opinion, was the action of the Commission on that date due to the letter of Mr. Sheehan ? A. I would not be a bit surprised, without knowing a thing of the facts. I know if I received such a letter as that, saying a matter had not been acted upon for two years, I would want to know why. Q. Had you in any way made yourself familiar with the objec- tions to the granting of the application during the year and five months, or four months, during which you had been a Commis- sioner ? A. That is the old story over again. We have gone into that before. I was giving my undivided attention to the subways. These matters were in the hands of the respective Commissioners who held the hearings. Commissioner Maltbie had that until he would report on that. We probably would not have agitated him to have it brought up until he sent his report to the Committee of the Whole. Q. Commissioner Maltbie says in the meeting of the Commis- sion on the 24th of July that he had " long since reported the results of the hearing." I quote directly from the official pro- ceedings : " Commissioner Maltbie stated that he had long pre- viously reported to the Committee of the Whole with regard to this application, and explained the reason why a decision upon the application had been deferred." Have you any recollection. Judge McCall, of the reasons which he gave ? A. No, sir. Q. At any meeting of the whole ? A. No personal recollection at all. The only recollection I have of meeting of the whole was when this matter and other matters were brought up, to see if they could not make an anomalous calendar, to clean up, and the only recollection I have of this case is the instance I spealc of. Because I tell you very honestly I would not have traced any connection whatever of the company I held stock in. I don't know what Eepoet of Joint Legislative Committee 923 prompted me to ask the question and get the answer of Commis- sioner Maltbie that it did affect me. That ended my connection with the case. Chairman Thompson. — Are you familiar, Judge, with the gen- eral situation in connection with the lighting companies, both elec- tric and gas — are you generally familiar ? Mr. McCall. — ISTo, not at that time. By Chairman Thompson: Q. "When you were on the Commission? A. I couldn't even tell you, now. Q. Don't you know in a general way how the Edison Company is connected with the gas company, and they in turn are connected with the other company ? A. Yes, in a general way, but I would not know of any controlling interest unless I was brought right smack up against the fact, because I had no interest in knowing. Q. Judge, isn't it a general custom there, when matters are referred to one Commissioner, to let him conduct it to the close? A. Yes, absolutely. By ilr. Lewis: Q. You felt a delicacy, then, did you, about voting on this proposition ? A. I felt no delicacy of any legal inhibition. Q. Ethically ? A. I felt that I should not vote on it, but there was no reason why I shouldn't vote on it. Q. Supposing, Judge McCall, that the board had divided, and that two of the Commissioners had been prepared to vote in favor of the adoption of the resolution and two against it, what then would have been your attitude? A. Well, I don't know what I would have done. I can't say. That is a hypothetical question. Q. You see the pertinency of that question? A. In such a case as that I know what I would do if I was required to vote, but I say without reservation there was no legal inhibition on me to vote. Q. You realize that one of the duties of this Committee is to revise, suggest a revision or amendment of the law. Irom an examination of the law it appears that while a Commissioner may 924 Investigation of Public Service Commissions not legally hold capital stock of a public service corporation, there is no inhibition against the stock being held by the members of the family of the Commissioner. Now, a situation might easily arise vs^here, in a matter of this character, two of the five Commis- sioners might vote one way and two the other. A. Yes. Q. Should or should not the law be amended so as to free the fifth member from any possible ethical objection to vote one way or the other upon every possible proposition that can come before the Commission ? A. Well, I am not prepared to say about that. That is a pretty far-reaching question. I don't see how you could legislate and do that. Q. Did you, prior to assuming the office of Public Service Com- missioner, make and file any certificate of any description that you were not the owner of any capital stock of any corporation? I don't know of any provision of law which requires the making and filing of any such certificate. Would you think it desirable that such a certificate be required as a condition of assuming the office by any person appointed to that office? A. Tes. I wouldn't see any objection to it. Q. Would it not be a desirable amendment to the law? A. Yes, perhaps it would. Chairman Thompson. — You said you knew what you would do in case they needed your vote — what would you do ? Mr. McCall. — I would request the sale of the stock. In face of the situation, I was perfectly warranted in voting. Chairman Thompson. — You would have taken the stock down to the Stock Exchange and sold it ? Mr. McCall. — I would not have done anything of the kind. Chairman Thompson. — Well, you would have sold it ? Mr. McCall. — No. I Avould have requested the sale of it. Chairman Thompson. — What do you mean by that ? Mr. McCall. — By the owner of the stock. Chairman Thompson. — You would have requested the owner to sell it ? Eepoet op Joint Legislative Committee 925 Mr. MeCall.— I would. That is one way I would see my way clear to let me vote, and at the same time I think, in an exigency such as this, if a question of that kind arose, it would be my duty to vote on the thing, whether the question of ethics arose or not, and I would vote for it — if I reached that conclusion that I found there was no legal objection to my voting. I did what I thought was the proper thing for me to do. I did not vote. I didn't know that. I was the first man to vote. Chairman Thompson.— I have sat on several legislative com- mittees. Mr. McCall. — We conduct our business a little bit different. Mr. Thompson. — I should hope so. There is more expected of you. Mr. McCall. — I wouldn't think so. Q. I think you stated that you have never read the pleadings in this action ? A. I think that is quite true. Senator. I think at the beginning of that — of course I am speaking, when I am answer- ing your question, entirely from recollection. I think that situa- tion was just this : Mr. Burr or Judge Hatch — as I recall they were both there — and they were both urging the trial of the case, and as I picked up the pleadings I saw this heading or caption, and I asked if the Kings County Electric Light and Power Com- pany had anything whatever to do with this. I don't think I ever got beyond that, because it was immediately answered that they were. Has there been a decision of that case at all ? Q. I don't understand that there has been. In the determina- tion of the question as to the propriety of the approval of the application by the Public Service Commission, for the purchase of this stock, was it or was it not your duty to inform yourself by an examination of the record taken before Commissioner Maltbie as to the rights of the city and rights of the public in connection with that purchase ? A. If I were going to pass upon it by vot- ing, yes, it would have been. Q. Well, as Chairman of the Commission, did you or did you not regard it as your duty to advise and inform yourself as to the 926 Investigation of Public See vice Commissions merits of the pToposition before permitting it to be acted upon by tbe Commission of which you were chairman ? A. I would not have taken any part in it by voting or by persuasion if I believed ethically or morally I should not have done so. I could not do it. Q. Well, wasn't it your official duty, before permitting a vote to be taken upon that application, to know for yourself what the facts were, what the legal questions were that were involved ? and what action ought properly to be taken by the Commission upon that application, even though you yourself did not intend to vote either way upon it? A. That would only necessitate the taking of the ease and reading it, inquiring about it, manifesting an inter- est in it, for the purpose of disposition. All of which, had I voted, I would now be confronted with the vote, and subject to criticism for having voted on it. Q. Shouldn't you have informed yourself, so you could have voted in such a way as to make a proper explanation of your motives for voting ? A. No, I think the proper way for me to do was just as the judges on the bench do. That is precisely the course I took in this matter. Very often, time and again, judges will come out on the bench and appear in court and fi^nd some ele^ ment by which he is disqualified, and leave the bench. Q. You did not leave the — A. Of course there was no legal disqualification. Q. You do not mean there could have been any other disqualifi- cation? A. No, except as I stated it myself in what I thought was an exercise of good judgment, that there should not be even a suspicion. Q. Because of the fact that the Kings County Company had been transferred by you to Mrs. McCall? A. Precisely. Sup- posing — now let me put it to you as a fair man, of the reading of this voluminous record you have put in here and accuse me of not voting, and had confronted me with the fact of voting. Look at the measurement of criticism that would be poured out on me then. Q. Any more criticism than perhaps might be poured out on you in permitting an application of this character to be passed on by the board over which you were presiding, of which you had no information at all? A. Why, there were four men there with Eepoet of Joint Legislative Committee 927 equal power to mine. Suppose I wanted to record myself and voted in the negative, it would have been a useless vote. Q. *Did you inquire whether Commissioner Maltbie had pre^ pared and submitted any report on the subject? A. I had not, except as he made it in that Committee as a whole. Q. You don't remember what he said ? A. No, I can't remem- ber. I remember the case was discussed because it led up to my inquiry, because as I said, if it wasn't for the fact I made the in- quiry and found by my' outside inquiry that the Kings County Electric Light and Power Company were interested in the thing. There is nothing in that caption in the world that would have put me on my guard, and I would probably have found myself voting upon it. Q. Did you know that by permitting the acquisition of this stock by the Edison Company, that the Kings County Company became absolutely in control of all the electric lighting in the borough of Kings? A. No. Q. That there was nothing outstanding whatever ? A. How are you going to stop it, even if they did ? Q. Well, I wondered if the Public Service Commission had any data in connection with that matter to know that fact before acting on the application. A. I have no doubt they were aware of that fact before acting on it. Q. You were not aware, you say ? A. I was not aware, because of the fact I had made up my mind I was not going to take a part in the case. Q. But had you made up your mind that you would permit the balance of the other members of the Commission to act in favor of the application ? A. I bad made up my mind not to influence their action. I would not interfere. It would not have been a legal act to have influenced them. That I would not do. The manly act was to stand out for myself. It would be much more so if I voted for it. Q. You did not know then that the city of New York had inter- posed an answer alleging that the Edison Electric Illuminating Company is not a public service corporation, and does not possess the franchise, right, power or authority to use the streets, avenues, highways and public places of the borough of Brooklyn for the 928 Intestigation of Public Service Commissions purpose of supplying electricity to public and private consumers ? A. ISTo. And another thing, Senator, let me tell you : On an applica- tion of that character, the purchase of stock, the holding of tBe bal- ance of 122, I think, or 500 shares, if we were sitting as a commis- sion on an application of that character, and we found it — a hypo- thetical question if you choose, for the purpose of illustrating what I mean — and the city should come in and in an answer to a com- plaint allege these things, you do not suppose that would deter us from voting on it in reaching a legal conclusion, because they al- leged it, any more than an individual alleged it. We would have to have a judicial decision on that. Q. Wasn't it Commissioner Maltbie's conclusion that action on the application should be deferred until the judicial determination of the issues raised in this action ? A. I don't know what motive caused him, but I should judge from the phraseology there that he was controlled more by the fact that he was fearful of the action being construed into a consent of amalgamation. The order itself recites that it shall not be concluded as a consolidation. Chairman Thompson. — • I take it your idea is that as a public service commissioner, you would permit capitalization or -bond issue. Mr. McCall. — That was not a question of capitalization. This was the right of an existing corporation, as I glean it, to buy stock of another corporation against which the allegation was made. Chairman Thompson. — Do you think that a public service commission should permit the capitalization or a bond issue of a corporation, and give the public an opportunity to purchase the capital stock or the bonds while the city which granted its fran- chise questions that franchise ? Mr. McCall. — That is not an analogous situation at all. This was the application of a company to buy the stock of another company. Chairman Thompson. — Will you please answer my assump- tion? Mr. McCall. — No, of course I would not. Eepoet of Joint Legislative Committee 929 Mr. Lewis, resuming: Q. Isn't this the fact: An action was pending to restrain the city from declaring null and void a franchise upon which capital issues of the Amsterdam Company were based, pending the deter- mination of that action, and with an answer of the city before the Commission formally in which the city asserts as a fact and as a matter of la^v that the franchise of the Edison Electric Illumi- nating Company is void ; that that company has no franchise right or authority to use the streets, avenues, highways and public places of the Borough of Brooklyn — with that information be- fore the Commission, which if true must necessarily have a very material effect upon the value of the stock, which it is proposed to purchase, the consent for the purchase of which is asked of the Commission, the Commission passes a resolution authorizing the Edison Electric Illuminating Company to expend its money in the acquisition of stock when it has no power, if the city is right, to exercise any franchise whatever ? A. Yes. Q. And is that in conformity with your idea of the propriety on the part of the Public Service Commission ? A. Not at all — not the way you put it at all. What ought to be done: They were litigants — ■ whether the city or an individual is involved — these allegations of attorneys as officers of a corporation, or out- side of the municipality are mere assertions as to belief or conclu- sions. They are not judicial announcements. ISTow come the other side and assert they have not this right, and this corporation is a sound corporation, and they assert their belief in it, and they are willing to buy this stock. Now the proper thing to do under these circumstances would be to say to the party, " We won't act on this until you have time to go to the Supreme Court and get an injunction to restrain us from acting. Do not try to make out of us a judicial tribunal, because we are not. We are willing to stay our hands to give you a proper opportunity, but do not take the steps that would make us judicially utter these things. Chairman Thompson. — ■ Well, did you take that course ? Mr. McCall. — ■ I don't know what was done in the matter, but that is what I would have done. Vol. 1 — 30 930 Investigation of Public Seevice Commissions Mr. Lewis, resuming: Q. But the whole litigation was in the court ? A. Yes, that is true. You are reading from the complaint. Q. I am reading from the answer served by the city. A. Yes. Q. And I call attention to the fact that the city had intervened and appeared in the action by its counsel — appeared in the pro- ceedings before the Public Service Commission, by its counsel, and had set up the fact that this franchise was null and void, and had called the attention of the Committee to that fact, and had left with the Commission a copy of its pleading, showing that it had legally pleaded that fact. A. That is all true. That don't make it any stronger than if they asserted it without pleading. It was their assertion. Q. And the city was before the Commission, urging the Com- mission not to grant the application of the Edison Company ? A. The Commission acting on allowing a sale of stock would not in any way affect the validity of that franchise. Q. Assuming the stock in the litigation — it should be ulti- mately held that the Edison Company had no franchise to do business in the city of ISTew York ? A. Yes. Q. What would be the effect upon the stock ? A. Why, the corporation that came before us asking to buy that stock would have bought a worthless stock. Q. No. It is the corporation that came before you, asking per- mission to buy that stock, which would be deprived of the right to use that stock because of the fact that the courts in the Amster- dam have held it had no right. A. They were simply granting their petition to do something. Mr. Lewis. — I think if Judge McCall would be good enough to step aside now, I would like to ask Commissioner Cram a few questions. Mr. Harkness. — 'Does it appear on the record from what you read that this payment of this expenditure of not exceeding ten thousand was to be made out of surplus ? Mr. Lewis. — Out of surplus. Eepoet of Joikt Legislative Committee 931 J. Sakgent Ceam called to the sand. Examination by Mr. Lewis : Q. Conmiissioner Cram, did you have a talk with William F. Sheehan on July 22nd, 1914, in relation to the application of the Edison Electric Illuminating Company of Brooklyn for permis- sion to purchase the stock of the Amsterdam Electric Light and Power Company ? A. I dare say I did. I don't remember. Q. Do you remember having had any conversation with Mr. Sheehan upon that subject at any time? A. ISTo, I do not. Q. Prior to the 24th of July ? A. I do not. Q. You were' aware of the fact that the application which I had mentioned was pending before the Commission at that time? A. Undoubtedly. Q. Have you any recollection on the subject ? A. Well, it was not before me — it was before another Commissioner. Q. It had been made to the Commission ? A. Undoubtedly. Q. Have you any recollection on that subject? A. No, I have no recollection. I probably saw Maltbie's opinion. I think he was the sitting Commissioner. Q. Did you see a written opinion of Maltbie? A. He always sent to me. I do not recollect when they sat in that case. They sent opinions to each of the Commissioners, but I don't recollect. Q. That is on the assumption he prepared an opinion ? A. He probably did. Q. Do you know he did in this case prepare an opinion? A. He probably did. He was very fond of writing opinions. Q. You have no information on the subject? A. I have no recollection. Q. I have already read into the record a letter, dated July 23rd, 1914, which I will proceed to read again as follows: "Honorable J. Sargent Cram, Public Service Commis- sion, 154 Nassau Street, New York City. " Dear Commissioner.— Kegarding my talk with you yes- terday, I called your attention to the fact that an application on behalf of the Edison Electric Illuminating Company of Brooklyn has been pending before Commissioner Maltbie for 932 Investigation of Public Service Commissions about two years. The Edison Company owns all excepting a few shares of the stock of the Amsterdam Electric Light, Heat and Power Company, and the application was made to secure the authority of the Public Service Commission to pur- chase the remaining 122 shares. The application to pur- chase the stock was opposed by Mr. Burr, of the Corporation Counsel's ofSce, upon the ground that as the city is attack- ing the validity of the franchise held by the Amsterdam Elec- tric Light, Heat and Power Company, that until a decision is made in that case, the Public Service Commission should not decide our case. Mr. Burr has no legal position what- ever in the controversy, and I submit that he should not even have been heard ; but aside from this, all we ask is that there be a decision one way or the other made. Commissioner Maltbie refuses to make a decision, and I have given instruc- tions to prepare papers for a mandamus directing the Com- mission to decide the case. It is an outrage that my clients should be so treated, and I shall denounce it in open court. We are entitled to a decision, and while I should prefer that our petition be granted, if the petition is denied, I should not be worried, because the Appellate Division will immediately reverse it. " Very truly yours, " W. F. Sheehan." Do you remember receiving that? A. Of course I must have received it and handed it to the Commission. Q. Did you rea d it after receiving it ? A. Undoubtedly. Q. And did you note the fact that Mr. Burr, the corporation counsel — A. I read the letter and noted everything in it. Q. You recall ? A. I do not recall. I know I did my duty at the time. I can't recall every matter. Q. Did you investigate to ascertain in any way the attitude of the city on the subject? A. I don't recoUect. Q. Did you call attention of any of the members of the Com- mission to the fact that you had received this letter? A. I un- doubtedly handed it in at a regular meeting of the Commission. 1 always hand all my letters to the secretary. Repoet of Joint Legislative Committee 933 Q. And did you suggest that the matter be taken, up at the next meeting of the Commission ? A. I probably suggested action. I do that always — always before I make a resolution that all undia- posed-of matters be put on the calendar and disposed of. I un- doubtedly did it then. Q. Has the reading of this letter refreshed your recollection in respect to the conversation referred to as having been had the day before? A. I undoubtedly saw Mr. Sheehan. I got him confused with his brother who occasionally appeared before the Commission. I undoubtedly saw him, but I forgot all about it. Q. You have no recollection now of the conversation you had with him the day before ? A. Not at all. Q. Did the fact that the application was opposed by Mr. Burr of the corporation counsel's ofSce create any impression on your mind as to the propriety — on your mind of the action on the part of the Commission ? A. I have always held and decided, in fact, that we had no jurisdiction over franchise, and if that question came up, I can see that Burr's position was important. The com- pany already controlled all the stock other than these few shares, and in acquiring these few shares I would have voted whatever the sitting commissioner reported, because it would not alter the exist- ing facts. Q. Did you agree with Mr. Sheehan that Mr. Burr had no legal position whatever in the controversy, and he should not even have been heard ? A. As a matter of courtesy, we always hear counsel representing anybody who chooses to appear. I do not disagree with that part. He undoubtedly was heard. Q. Did you ask Commissioner Maltbie the reason for his reason for having refused to make a decision? A. I probably did not. 1 don't remember doing it at all. I asked him to report, which he did. Q. But the record does not show that any report was made ? A. Well, I have forgotten. It must be — he must have reported either negatively or affirmatively. He may not have written an opinion. Q. Mr. Sheehan says Commissioner Maltbie refuses to make a decision. A. That was probably at the request of Mr. Sheehan, but when requested by the Commission, he undoubtedly reported. 934 Investigation of Public Service Commissions Q. But the record does not show any report was made. A. I did not make it. Better ask the secretary. Q. I am entitled to know what you know about it. A. I know nothing about it. Q. Do you want to leave it that way? A. Yes, leave it that way. Q. The record does not show that any report was made. A. There is no desire- to be fair or truthful in the matter. Q. Upon what do you base that statement, we have no desire to be fair ? A. Because you are not stating facts. Q. I am stating from the correspondence. A. I know per- fectly. Senator Lawson. — Does the Commissioner want the record to show that the Committee is not fair in these proceedings ? Mr. Cram. — Yes. Q. And will the Commissioner state on what ground he bases that statement ? A. I think you are trying to confuse the witness about material matters. You have the papers before you — why don't you state it and ask my opinion instead of asking my opinion of what Maltbie reported ? You are trying to make a damn fool of me. Q. Does the Commissioner mean to infer that the Committee is unfair ? A. Yes, I do. Q. Have I failed to treat you with courtesy on the stand ? A. I won't answer unless I am, I will tell you that. Chairman Thompson. — ISTow the whole fabric of the Public Service of the city of New York is based upon a mass of details of technicalities, isn't it? Mr. Cram. — Yes, largely. Chairman Thompson. — And some very fine distinctions exist between what shall be permitted and what shall not be permitted, and it involves large sums of money ? Mr. Cram. — Yes. Report of Joint Legislative Comiiittee 935 Chairman Thompson. — l\ow, don't you think a legislative com- mittee coming here in this matter are not only justified, but it is their duty, to find out the facts from going into the details ? Mr. Cram. — Undoubtedly. Chairman Thompson. — That is what Senator Lewis is trying to do. Mr. Cram. — He has not asked my opinion of the record. He has asked me to remember a record of a thousand pages. I won't make any effort to do it, because I couldn't. Chairman Thompson. — He is perfectly right in his idea here — he is attempting to show what the truth is in the situation, and it is our experience up the State that it is details that show the truth of a transaction. I don't think he wants to confuse you. My experience with you is he won't, anyway, because I think you are able to take care of yourself. Mr. Lewis. — I think I am quite content with the examination of Commissioner Cram. If he has nothing further to suggest, I am prepared to let him step aside. I think, Mr. Chairman, it may be well to adjourn now until to-morrow morning. Chairman Thompson. — I received a letter that was handed to me this afternoon from Hammerstein's Victoria Theatre. Mr. Hammerstein writes me a letter to the effect that you have been practicing law against him. Mr. McCall. — I don't care to see it. Chairman Thompson. — He says several weeks ago as president of the Hammerstein Company, owners of the leasehold property at 4:2iid street, he began action against the United Booking Office, asking for an injunction before Supreme Court Justice Lehman. " The action was based on indirect damages done by the construc- tion of the subway. Though our claim was made against the contractor of the subway, testimony of those engaged or employed in the work was most difficult to obtain. When the case was argued, Judge Lehman subsequently decided against me. Mr. E. E. McCall, president of the subway commission, appeared 936 Ikvestigation of Public Service Commipsioxs as counsel for the defendant, using intimate knowledge and influ- ence in the subway matter for the benefit of his clients. Can a member of tbe subway commission assume a position as Mr. McCall did ? " I would like to know what there is of that. Mr. McCall. — There isn't anything. Chairman Thompson. — Have you appeared in court against him lately ? Mr. McCall.— I have. Chairman Thompson. — Whom did you appear for? Mr. McCall. — I appeared for the Palace Theatre Company. Chairman Thompson. — Did that involve any question which came up in the subway construction? Mr. McCall. — The thing goes back to a retainer that I had when I first went on the Commission about a contract which involved my defending that contract. He was paid $225,000. The pleadings when they were first offered on his application for an injunction set up the right to take any other theatre in that district. He did not set out his contract at all, as expressed in the $225,000. He amended subsequently, and alleged that his inability to give a performance in the Victoria Theatre was due to the casualty occasioned by the subway. That is all I know about the- subway in any way, shape or form. I had nothing to do with the preparation of the papers at all. I, in agreement with his own counsel, arranged to have the case argued at half-past five in the afternoon, in the chambers of the Judge. I was under obligation to perform under my retainer, which I had received a year before. Chairman Thompson. — The reason I bring that up — the state- ment was made before this Co^mmittee last winter as to the ques- tion of recommending a change in the law that a Public Service Commissioner ought to be debarred from practicing, the same as a justice of the Supreme Court now is. I think it was, your recommendation to the Committee that such a course be followed. Eepoet of Joint Legislative Committee 937 Mr. McCall. — No, you are mistaken. I never made such a suggestion. What I did make was this, and I renew it : that I did not think there was any need of legislation, because a Public Serv- ice Commissioner would not have time to practice law, and there was no need of it. I do not say now there is any analogy between a justice of the Supreme Court and a Public Service Commissioner, and it is a matter of utter indifference to me whether a law is passed to permit the Public Service Commissioners to practice law or not. It seems to me if that were so, the same inhibition ought to apply to the senators. Chairman Thompson. — I will agree that senators work harder than Public Ser^dce Commissioners. Mr. McCall. — I don't agree with that. I don't think you will, either, when you get through. Senator Lawson. — You don't think there is equalization between $15,000 and $1500 ? Mr. McCall.— ISTot at all. I thinlc there is a disparity as between the services rendered. Chairman Thompson. — You say that a commissioner don't find time to practice law. Mr. McCall. — That's true. Chairman Thompson. — But you have. I think Commissioner Cram stated that it did not require all a man's time to be a Public Service Commissioner — am I correct about that ? • Mr. McCall. — My recollection don't go back. Chairman Thompson. — I guess I will quit, too. Is there any- thing more to come before the Committee ? Senator Lawson wants to be heard. Senator Lawson. — Mr. Chairman, I would like to make the suggestion that as Commissioner Cram has explained to me, he does not think this Committee has been unfair, and would like to have that criticism expunged from the record. Mr. Cram. — I only spoke for myself. I will disclaim any discourtesy to me. 938 Investigation of Public Service Commissions Senator Lawson. — There being no objection, I move it be stricken from the record. Mr. Lewis. — There is objection on my part. Senator Lawson. — This refers to the Committee entirely. Mr. Lewis.— If I have no voice in the matter, very well, but let it be understood that it is against my objection. Chairman Thompson. — We will defer the whole matter until to-morrow morning at 10 :30. At this point a recess was taken until Wednesday, ISTovember 10, at 10 :30 a. m. NOVEMBER 10, 1915 New York County Lawyers'' Associatiobt Board Eooms, 165 Broadway, ISTew York City After the recess, the Committee met at 10 :30 a. m. '') Mr. Harkness. — By arrangement with Senator Lewis, I would like to make one or two corrections on the record. Senator Lewis and I the other day were under the impression that Judge McCall qualified as Chairman of the Commission on February 13, 1913. On looking the matter up, I find that Judge McCall was appointed and confirmed by the Senate on February 3d, and qualified on February 7, 1913. Yesterday Senator Lewis asked me about original minutes of the Commission, and I said that the original minutes were the bound volumes of printed minutes. I find that in that I was in error ; that there are printed original minutes of which the bound volumes are duplicates, and these printed minutes are made up by months and signed by the secretary and are on file in his office. Mr. Lewis. — May I ask, Mr. Harkness, are there any printed minutes of the meetings of the committee of the whole ? Mr. Harkness. — No. Eeport of Joint Legislative Committee 939 Edward E. McCall, at this point, was recalled. Examination by Mr. Lewis: Q. Judge McCall, I understood you to say a day or two ago that you received the dividends on the stock during the time that Mr. Freedman — that the stock stood in the name of ]\[r. Freed- ma-n ; is that true — did you so testify ? A. The interest was made payable to him until he transferred it on the books. Q. And during the period from 1907 when you acquired it, and Mr. Freedman held the stock, during the period from January 29, 1907, to December 21, 1908 — is it? A. Whatever appears his holdings were. If those are the dates, that is correct. Mr. Lewis. — I offer in evidence, Mr. Chairman, dividend — Mr. McCall. — Of course those checks were the dividends or were given to Freedman in payment of the interest on the loan. Q. Well, those cheeks? A. I don't know whether they came from me or from the company; whether they were paid directly to him or not. It was interest on the loan, and the difference between the amount of interest as represented by the checks was paid by myself. Mr. Lewis. — I will offer these in evidence and make whatever explanation you like about them. I offer in evidence dividend check ITo. 28, dated March 1, 1907, payable to the order of Andrew Freedman, $774, signed Kings County Electric Light and Power Company, W. W. Freeman, treasurer, and endorsed " Pay Windsor Trust Company, Andrew Freedman." I also offer in evidence check of the Kings County Electric Light and Power Company, drawn upon the People's Trust Com- pany of Brooklyn, dated June 1, 1907, dividend check No. 29, payable to the order of Andrew Freedman, $774, endorsed " Pay to the Windsor Trust Company, Andrew Freedman." I also offer in evidence check of Kings County Electric Light and Power Company, drawn on the People's Trust Company, borough of Brooklyn, dated August 31, 1908. L 940 Ikvestigation of Public Sekvice Commissions Dividend check Wo. 30, $774, endorsed " Pay to the order of Windsor Trust Company, Andrew Freedman." I also offer in evidence check of Kings County Electric Light and Power Company, on the People's Trust Company, dated De^ cember 2, 1907, dividend check No. 31, drawn to the order of Andrew Preedman, $774, and endorsed, " Pay Windsor Trust Company, Andrew Freedman." I also offer in evidence check of Kings County Electric Light and Power Company, drawn upon the People's Trust Company, borough of Brooklyn, dated March 2, 1908, dividend No. 32, order of Andrew Freedman, $774, and endorsed, " Pay Manhattan Trust Company, Andrew Freedman." I also offer in evidence check of Kings County Electric Light and Power Company, People's Trust Company of Brooklyn, dated June 1, 1908, dividend check No. 33, drawn to the order of An- drew Freedman, $774, endorsed " Pay JSTational Bank of Com- merce of New York, Andrew Freedman." I also offer in evidence check of Kings County Electric Light and Power Company, on the People's Trust Company, borough of Brooklyn, dated September 1, 1908, dividend check No. 34, pay to the order of Andrew Freedman, $774, endorsed " Pay National Bank of Commerce of New York or order, all prior en- dorsements guaranteed, Windsor Trust Company." Endorsed by Windsor Trust Company, Andrew Freedman. I also offer in evidence check of Kings County Electric Light and Power Company, on the People's Trust Company, borough of Brooklyn, dividend check No. 35, dravru to the order of An- drew Freedman, $774, endorsed " Pay National Bank of Com- merce, New York, Andrew Freedman." Chairman Thompson. — That is all the dividend checks that were paid during the time that the title was in Freedman ? Mr. McCall.— Yes. Mr. Lewis. — That covers the entire period. Do you care to examine them ? Mr. McCalL— Not at all. Eepoet of Joint Legislative Committee 941 Q. Have you ever seen these before, Judge McCall? A. I don't believe that I have. Q. You do not believe that you have, you say ? A. No, sir. Q. They were not sent to you ? A. ISTo. Sent to the name of the man that held the stock with my knowledge. Q. You had knowledge of the facts? A. Oh, yes. That was the understanding of the matter. He was to take the stock and take the dividends as part payment of the interest. Mr. Lewis. — I now offer in evidence, Mr. Chairman, dividend check ~So. 20, dated March 1, 1905, drawn by the Kings County Electric Light and Power Company, on the People's Trust Com- pany, to the order of E. K. Chapman & Company, $472, endorsed " Pay to the order of National City Bank, E. R. Chapman k Company." Also check of Kings County Electric Light and Power Com- pany, dated June 1, 1905, upon the People's Trust Company, dividend No. 21, drawn to the order of E. P. Chapman & Com- pany, $472, endorsed " Pay to the order of National City Bank, E. E. Chapman & Co." Also check of Kings County Electric Light and Power Com- pany, dated September 1, 1905, upon the People's Trust Company, drawn to the order of E. R. Chapman & Company, $472, dividend cheek No. 22, endorsed " Pay to the order of the National City Bank, E. E. Chapman & Company." Also check. Kings County Electric Light and Power Company, upon the People's Trust Company, to the order of E. E. Chapman & Company, $472, dividend No. 23, endorsed " Pay to the order of the National City Bank, E. E. Chapman & Company." I also offer in evidence check Kings County Electric Light and Power Company, dated March 1st, drawn upon the People's Trust Company to the order of E. E. Chapman & Company, $472, divi- dend No. 24, endorsed " Pay to the order of the National City Bank, E. E. Chapman & Company." Also Kings County Electric Light and Power Company check upon the People's Trust Company, dated June 1, 1906, to the order of E. E. Chapman & Company, $774, dividend No. 25. 942 Investigation of Public Service Commissions Also Kings County Electric Light and Power Company check on the People's Trust Company, dated September 1, 1906, to the order o£ E. E. Chapman & Company, $774, endorsed, " Pay to the order of JSTational City Bank, E. R. Chapman & Company." Also check Kings County Electric Light and Power Company, upon the People's Trust Company, dated December 1, 1906, drawn to the order of E. R. Chapman & Company, dividend No. 27, $774, endorsed " Pay to the order of the Consolidated ISTational Bank, E. E. Chapman & Company." Mr. Lewis. — The treasurer of the Kings County Electric Light and Power Company has been unable to produce the dividend checks for the first three-quarters of the year, 1907, but has pro- duced a check of the Kings County Electric Light and Power Company upon the — ■ Chairman Thompson. — Haven't you the wrong year there, Senator ? 1907 ? That was when Mr. Freedman had it. Mr. Lewis. — He got it January 29th. But there is a check of December 2, 1907, for $170. I think they made some mistake, but still it is dividend check JSTo. 31. That does not relate to "this transaction. Strike out all reference to $170 check. Chairman Thompson. — Is there anything on these checks by which you can tell what particular stock they pay the dividend on? Mr. Lewis. — ISTo, I don't think so. Mr. Shuster. — We subpoenaed 2621, instead of 2628. Q. Judge MeCall, did you ever see the checks drawn to the order of E. E. Chapman & Company ? A. No, sir. Q. Did you ever receive the proceeds either of the checks drawn to the order of E. E. Chapman & Company, or to the order of Andrew Ereedman? A. Ever receive the proceeds of? Q. Yes. A. Except that they were credited as interest charge* on the account. Q. Now, will you tell us in your own way just how that matter was handled ? A. Of course I have no objections to these checks Repoet of Joint Legislative Committee 943 going into evidence, provided they apply to these shares of this stock. Q. They appear to be because the amounts they represent ap- parently the stock ? A. I haven't any doubt myself, but with that reservation. I don't know what other transactions they may hav(. had. Of course I had made more or less payments directly of the dividend to these mortgagees or loaners on this stock, and the dividends went in payment of the interest. Chairman Thompson. — I understood you yesterday that you borrowed no money of E. R. Chapman. Mr. McCall. — Chapman bought the stock. Chairman Thompson. — I understood you said you had no loan with Chapman. Mr. McCall. — It was on margin. That's the way stock houses do those things. I did not buy a share of the stock directly. It was bought through Mr. Van Antwerp. The stock was bought by Mr. Van Antwerp originally, as the record shows. I don't know whether his firm is Shone & Van Antwerp, or Paine & Van Antwerp, but when he went into Chapman, he transferred the account. Chairman Thompson. — Do I understand you simply went in to E. E. Chapman & Company, and had them as brokers buy some stock for you and you dealt in margin? Mr. McCall. — That is right, exactly. Chairman Thompson. — And these shares of stock were there floating, the stock they carried as brokers to cover marginal trans- actions. Mr. McCall. — That is correct. Until they were paid their loan on the stock. Chairman Thompson. — But I understand these brokers have certain stock in their name which are floating which they could credit to anybody's margin. 94-i- Investigation of Public Seevice Commissions Mr. MeCall. — No, they could not do that, not with this stock. They could carry the account or notify me to take it up or sell it, but they could not float it around. That was my transaction. Chairman Thompson. — Did you have any book at any time anywhere that showed that credit to your account of these par- ticular shares of stock? Mr. McGall. — No. What account would I have? Chairman Thompson. — Did you know of the shares of stock ? Mr. McCalL— Certainly I did. Chairman Thompson. — The numbers ? Mr. McCall. — No, I didn't know the numbers. I knew I had so many shares of stock. Chairman Thompson. — Did you have any account or meico- randum of it anywhere? Mr. McCall. — The way to get that satisfactorily replied is to subpoena those people. Chairman Thompson. — I understand, but I wondered if you had an account. Mr. McCall. — No. Why should I have an account ? Chairman Thompson. — I don't know. That's why I am asking. Mr. McCall. — That is the usual transaction. Chairman Thompson. — It is the usual marginal transaction, as I understand it. Mr. McCall. — Well, that is what this was. Senator, can I see these ? Mr. Lewis. — Certainly. Do you want to see the certificate ? Mr. McCall. — Yes, thank you. Mr. Lewis. — I now offer in evidence certificate No. 309, Kings County Electric Light and Power Company, for 100 shares of the Eepoet op Joint Legislative Commit-j-ee 945 capital stock of that company, issued to E. E. Chapman & Com- pany, dated the 14th day of February, 1903, countersigned and registered by the Central Trust Company of New York on "the 14th day of February, 1902, endorsed E. E. Chapman & Com- pany, dated February 17, 1902, to Andrew Freedman, bearing a two-doUal- stamp in payment of the tax on 100 shares; cancelled January 20, 1907. Witnessed by G. A. Bramley. Surrendered and cancelled on January 29, 1907, and other certificate issued in its stead, namely 773 — and the following certificate issued in its stead, namely, 773. I also offer in evidence certificate No. A-1358, for 18 shares Kings County Electric Light and Power Company, the napie of E. E. Chapman & Company, dated the 14th day of February, 1902, countersigned and registered same day, bearing the follow- ing endorsement. I think I will read the entire endorsement. " For value received hereby sell, assign and transfer unto Andrew Freedman .... shares of the capital stock repre- sented by the within certificate, and do hereby irrevocably con- stitute and appoint . . . ., attorney to transfer said stock on the books of the within named company, with full power of substitution in the premises. Dated February 17, 1902, signed E. E. Chapman & Company, in the presence of C. A. Bramley." This certificate bears tax stamps amounting to 36 cents, all of which were cancelled on January 30, 1907. And also the follow- ing endorsement : " Brooklyn, January 29, 1907, surrendered and cancelled, and the following certificate issued instead, namely A-2824." I also offer in evidence certificate A-1557, Kings County Elec- tric Light and Power Company, 29 shares of the capital stock in the name of E. E. Chapman, dated May 1, 1903, countersigned ■ and registered May 14, 1903. Central Trust Company of New York, bearing the following endorsement : " For value received, hereby sell, assign and transfer unto Andrew Freedman, shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint attorney to transfer said stock on the books of the within named company, with full power of substitu- tion in the premises. Dated February 15, 1904. Signed E. K. 946 IxVESTIGA.TION OF PuBLIC SeEVICE COMMISSIONS Chapman & Company, i,n the presence of E. P. Bramley." This certificate has stamps amounting to 58 cents affixed; cancelled on January 30, 1907, and bears the following endorsement: " Brook- lyn, January 29, 1907. Surrendered and cancelled, following certificate issued in their stead, namely A-2824:." Also certificate jSTo. A-1657, for 30 shares Kings County Elec- tric Light and Power Company stock, in the name of E. R. Chap- man, dated the 2d day of November, 1903, countersigned, the 9th day of JSTovember, 1903, bearing the endorsement which has al- ready been read into the record, dated Eebruary 15, 1904, signed E. R. Chapman & Company, in the presence of K. P. Bramley. Stamps affixed amount to 60 cents, cancelled January 30, 1907. Also the certificate ISTo. A-2041 — 59 shares, issued to E. P. Chapman & Company, dated the 1st day of October, 1904. Coun- tersigned and registered 7th day of October, 1904. Endorsement on the back thereof reading as follows: " For value received. . . . hereby sell, assign and transfer unto Andrew Freedman, 52 Wil- liam street, New York City, shares of the capital stock represented by the within certificate, and do hereby irrevocably constitute and appoint attorney to transfer the said stock on the books of the within-named company, with full power of substitution in the premises. Dated October 13, 1904. Signed, E. R. Chapman, in the presence of R. P. Bramley." This certificate bears $1.18 in stamps, and can- celled January 30th, 1907. Also certificate ISTo. 739- — -100 shares issued to E. R. Chap- man, dated the first day of March, 1906, countersigned the 5th day of March, 1906. Endorsed as the preceding ones. Dated March 13, 1906. Signed E. R. Chapman & Company, in the presence of R. P. Bramley. This has a stamp on the back thereof, cancelled January 20th, 1907, and bears the further en- dorsement, " Brooklyn, January 29, 1907. Surrendered and can- celled, and the following certificate issued instead, namely, 774." Q. I show you the certificates. Judge McCall, and ask you whether you have ever seen them before? A. ISTo. I can't say that I have, except that the probabilities are that I had them when I delivered them to Mr. Freedman when I borrowed the money Report of Joint Legislative .Committee 94Y from him. That is the only — unless I had them when I bor- rowed the money from Freedman. Mr. Lewis. — A certificate which was omitted because not called for in the subpoena has been produced. Certificate No. A-2628 — 61 shares E. R Chapman & Company, dated the 1st day of March, 1906. Countersigned and registered, 5th day of March, 1906. Assigned as indicated on all the other certificates. Dated April 23rd, 1906. Signed E. E. Chapman & Company, in the presence of E. P. Bramley. Stamps amounting to $1.02 affixed and can- celled, January 30th, 1907 ; bearing the endorsement : " Brooklyn, January 29, 1907. Surrendered and cancelled and the following certificate issued instead, namely, A-2824: — 10-77541." Q. Do you know where these certificates were held during the period from the date of their issue until they were turned over to Mr. Freedman on January 29, 1907 ? A. At the office of Mr. Chapman. Q. "Well, have you any knowledge on that subject? A. Noth- ing except they were the holders of the stock, and I know the loan was paid off. Q. Do you know, Judge, whether the firm of E. E. Chapman & Compaay used the certificates in any way from the time they were purchased, until they were finally delivered ? A. No, sir. Q. Is it possible, do you suppose, that they may have used them as collateral themselves? A. I can't tell. I don't know as they would use them except in the customs of the Stock Ex- change. I don't know what they may be. Q. I call your attention to the fact that certificate No. A-1358, dated the 14th day of February, 1902, was assigned by E. E. Chapman & Company on the I7th of February, 1902, apparently to Andrew Freedman. A. Assigned ? Q. Yes. Apparently to Andrew Freedman — will you offer any explanation — A. Why, no, I can't offer any explanation about it at all. Q. Mr. Freedman had never owned any stock of the plaintiffs that yoTi were interested prior to January 29, 1907 ? A. Not a share. 948 Investigation of Public Service Commissions Q. And that endorsement seems to have transferred the title to Andrew Freedman? A. I don't know. Whoever did it, you will have to get the explanation from them. This I do assert: That it was my stock; I was accountable for the stock. I don't know what Chapman & Company did with it any more than what you would know. I don't know. You will have to get that explanation from whoever did that, or what it means. I don't know. Senator. Q. I want to know what the Judge knows about it, if anything. A. I don't know anything about it. How would I have any knowledge of that ? Q. I don't know. Of course they were your agents, were they not? A. Yes. They purchased the stock under my direction. Mr. Van Antwerp did it. The history of the transaction is very plain, as you put it on the record. Q. I have tried to make it plain and perfectly fair. A. You have put it absolutely plain on the record. It must not be com- plicated by such questions as that, because I don't know anything about it. Q. I simply asked you what the papers themselves showed. A. Bring the man up here who knows. Chairman Thompson. — ■ It is not the question that compli- cates it. Mr. Lewis. — I think the Judge has answered it perfectly frank, that he doesn't know. Mr. McCall. — ■ I will say still further, I do not believe the house of Chapman & Company would do anything except that was per- missible under the rules of the Stock Exchange. Chairman Thompson. — Do you know that they did ? Mr. McCall. — I know that — I know that they kept that stock as my stock in my account, and I know their loan was paid off.. That I do know. What they did with the stock while it was in their possession you will have to ask them ; I don't know. Q. Let me ask you this question: Isn't it quite possible that Eepoet of Joint Legislative Committee 949 the stock was actually assigned in blank on the dates not speci- fied, February lY, 1902, immediately after it was issued? A. Signed in blank ? Q. Sig-ned in blank. A. More than likely that is so. I don't know. Q. And isn't it possible that the words " Andrew Freedman " were inserted at the time that the stamps themselves were can- celled, 190Y ? A. That is probably the history of it, but I can only assert that on conjecture. You ask me if I know. I don't know. That would be a reasonable explanation of it, and I sup- pose they would give you that, whoever put that name in there. Q. K"ow, isn't it quite possible that between February 17, 1902, and January 29, 1907, the stock may have been used under the blank assignment as collateral by E. E. Chapman? A. I don't know, Senator, whether it was or not. I don't know whether it is possible to be done. I would not think it was, without my per- mission. Mr. Harkness. — Wouldn't that be conversion ? Mr. Lewis. — ■ Why, Mr. Harkness, it would be if Judge McCall were the actual owner of the stock, but on the face of the certifi- cate the stock belonged to E. E. Chapman & Company. Mr. McCall. — But, Senator, so there won't be any doubt about that, let me say positively that all of these shares of stock from the date of the purchase of 118 and handed E. E. Chapman, was my stock, and was bought under my order. There is no shade of doubt about that, and cannot be. ISTow, whatever they have done, of course you will have to elicit your information from the house of Chapman & Company. I don't know. It was in their pos- session. Chairman Thompson. — Well, Judge, didn't you give some per- sonal attention to this matter at that time, some personal thought ? Here is a nice dividend coming in every three months. Mr. McCall. — Yes, and there was a nice interest amounting on it. 950 Investigation of Public Service Commissions Chairman Thompson. — I understand that, but wouldn't it bo a matter you would pay some unusual attention to ? Mr. McCall. — I wouldn't pay any unusual attention to it. I was notified of my obligation. I would pay attention. I was notified I must take up the stock or it would be sold. That's the way they do it. They cannot sell your stock without giving you notification of their desire to be relieved fi'om the loan that they advanced on it or take it up. Chairman Thompson. — They had the stock all the time. Mr. McCall — Surely. They had the loan on it. Chairman Thompson. — ; And they could do just as they pleased with it ? Mr. McCall. — No, they couldn't. Chairman Thompson. — You didn't have any paper from them f Mr. McCall. — Yes, I did. I had my account. That is the usual way of these things being done. Chairman Thompson. — Didn't you have an account or a paper t Mr. McCall. — They had the account. Chairman Thompson. — Didn't you have it ? Mr. McCall. — iN'o. Why should I have it? Chairman Thompson. — Well, if everybody down here is honest, there wouldn't be any use of it. Mr. McCall. — I am assuming everybody down here is honest. Chairman Thompson. — That is further than I would go. Mr. McCall. — That is your responsibility. You will have to take the responsibility for it. That is not mine. Q. Let me ask you to examine the certificate and say whether or not the certificate on the back thereof does not carry what ap- pears to be an assignment, dated at the date of the issue of the certificate or thereabouts, to Andrew Freedman ? A. Why, these things speak for themselves, and the date is February 15th. Eepoet of Joint Legislative Committee 951 Senator Foley. — It is a waste of time. The facts are on the record. Mr. McCalL— The certificates are dated February 17, 1902 ; in one instance, February, 1904; in two instances, 1904, and another instance, October 13, 1904; and another, 1906, 7 and 8; another is dated April 23rd, 1906, I think. ISTow, the assumption of that is that those dates — of course my answer is entirely con- jectural, you understand? Q. Yes. A. The assumption of those dates, as I read them, that they make the date as the certificate is endorsed in blank by Chapman & Company. Q. That is why — if those certificates belonged to you and were issued in the name of E. E. Chapman & Company simply as security for the unpaid balance of the purchase price, why should E. R. Chapman & Company have assigned them and dated the assignment at any time prior to the time when they were finally turned over to j\Ir. Freedman by your order ? A. That you will have to ask them. I don't know. I don't know whether the rules of the Stock Exchange compel them to do' that, so that while there, they were in the account of someone else. You will have to get that information from them. Q. I say do you know of any ruling of the Stock Exchange that does compel them ? A. Xo, I do not. I don't know anything about it. Hence the wisdom of calling those men here and asking them to explain those things. Senator Foley. — There is no use of our going into that. It is a well-recognized rule of Stock Exchange houses taking them by blank and endorsing them when they make a transfer to another individual they fill in the name of the different owner. Mr. Lewis. — Does Judge McCall put upon the record the statement of Senator Foley as his remarks ? Mr. McCall. — Judge McCall puts upon the record the remarks he makes himself. I am under oath. Chairman Thompson: It is very important to know what Judge MoCall knows about his own stock, and it is not unim- portant, and it is not a waste of time. 962 Investigation of Public Seevice Commissions Mr. McGall. — I can say that in a very few words. I know this: I know at my request that Mr. Van Antwerp, whatever his connection is with this iirm of Chapman, none of whom I know, but Mr. Van Antwerp I did know personally, and for a number of years. In fact he was connected with me. He went down to the Stock Exchange. I don't know whether it was Paine & Van Aatwei-p. But when this stock was to be taken up from Bache & Company, I requested him to take it up and then as each accretion of stock of my holding — to purchase a number of shares at a price, I would notify him to buy or leave alone, and he bought, and these different fractions of. shares are expressive, in my judgment, of the amount of stock I got under that option, and in each instance they bought for me and under my direction and on margin. Now the whole account must be in Chapman's. The whole account must be there, and I would suggest, Senator — I won't attempt to advise — the way to clarify this account is to get the account of Chapman up here and let these men who are conversant with Stock Exchange rules. I think you will find these respective dates on these things mark the time of the giving of this stock to Chapman to be the date exercised by this option. I think you will find the name of Mr. Ereedman was put in there by somebody not at the time of these dates at all. That does not look to me to be his signature. Q. Those are not Ereedman's signatures at all? A. I don't know. I was going to say I did not believe that was his signa- ture. Eind the man that wrote that in. Q. Will you appreciate the fact that I never saw them myself until this morning ? A. Certainly. But there is the history in a nutshell. A man would not know anything at all about it that was dealing vnth a stock house. All he wO'uld know was his obligation was there. He would have been notified quickly if he was lax in the payment of interest or other demands. Q. I don't know anything about the Stock Exchange houses. ISTever dealt with them. A. I think you are too modesit. Q. No, I never dealt with a stock house. A. This is my first attempt that I can recollect anything of. That's all there is to it. Q. Are we to understand from your testimony that there was Eeport of Joint Legislative Committee 953 an account in your name on the books of E. E. Chapman & Com- pany? A. There must be; there must necessarily. They were bought on margin. I mean with reference to this transaction. I have got no account with Chapman & Company now. Q. Will you give your permission, written consent, that E. K. Chapman & Company produce their books before the Committee i A. Certainly, and if you want me to I will make that request. You can send the sevj^-eaxit-at-arms, and say that I make the request to send the books up here now. You may say it is not only with my permission, but at my request. Mr. Harkness: — May I make the further request that with these books come somebody from Chapman & Company who can explain the ordinary course of the papers and handling of stock bought on margin? Mr. Lewis. — I am quite content. Mr. McCall. — Chapman is a prominent man down there on the Stock Exchange and chairman of the executive committee. You can take my assurance without any knowledge of mine or any thought about it, was Freedman to have anything to do with this until such time as he made the loan on the stock. Mr. Lewis. — I suggest the account of Chapman & Company be sent for with reference to these stocks and account with Judge McCall and Andrew Ereedman. Mr. Harkness. — Would there be any objection to asking Mr. Van Antwerp to come here ? He dealt with Mr. Van Antwerp. Mr. McCall. — ■ The whole thing right from the start. Chairman Thompson. — Will someone call Mr. Van Antwerp on the 'phone, and Judge McCall will talk with him. Call the Stock Exchange library and have Judge McCall talk with him. Mr. Lewis. — I offer in evidence certificate No. 773, Kings County Electric Light and Power Company, 100 shares, issued to Andrew Freedman, dated January 29th, 1907, countersigned and registered, January 30, 1907, Central Trust Company of 964 IxVESTTGATION OF PuBLIC SeEVICE COMMISSIONS America, bearing the following endorsement: "For value re- ceived I hereby sell, assign and transfer iinto John J. Mackin, 100 shares of the Capital stock represented br the within certificate, an'd do hereby irrevocably constitute and appoint attorney to transfer the said stock, books of the within named company, with full power of substitution in the premises. Dated December 21st, 1908." This certificate bears a two-dollar stamp, cancelled apparently on December 21, 1908. Also bears the following endorsement: "Brooklyn, December 21, 1908. Surrendered and cancelled and the following certificate issued in its stead, namely 998." Also certificate 774, 100 shares, Andrew Freedman, dated same day, countersigned January 30, 1908, and endorsed in the same manner as the previous certificate, and same date. Signed Andrew Freedman, in the presence of Edward E. McCall. Both of these certificates witnessed by Edward E. McCall, bearing a two-dollar stamp and similar endorsement as to surrender and cancellation. Certificate A-2824, for 87 shares, and issued to Andrew Freed- man, dated January 29, 1907, countersigned and registered January 30. Endorsed as the preceding certificates; signed Andrew Freedman. Witnessed, Edward E. McCall. Bearing stamps amount to $1.74. Cancelled December 21, I think it is, 1907. Q. I show the witness the certificate just read in evidence and call his attention to the fact that the assignments are witnessed by him. A. Yes, sir. Q. Will you tell us. Judge McCall, where the transaction repre- sented by those assignments occurred? A. They occurred in the bank where Mr. Freedman has his vault — his — Q. Safe deposit box? A. Yes. I was trying to think whether it was the Hanover ISTational Bank. I am not sure. Whenever he keeps his strong box. Q. Who was present? A. He and I. Q. And Mr. Mackin? A. ISTo, sir. Q. In whose handwriting were the blank spaces in the formal assignment on the back of the certificate filled ? A. I don't know, Senator. Report of Joint Legislative Committee 955 Q. Is tbat your handwriting? A. I don't think it is. It is something like it, but it is not mine. Q. Was the name John J. Mackin inserted there prior to the time it was signed by Mr. Freedman ? A. Prior to the time ? Q. When Mr. Freedman signed those assignments, did the name of John J. Mackin appear in the body of them ? A. That is my impression, I am quite sure. What is the date of the issuance of ilie stock to Mackin ? That you can tell, then ? Q. December 21, 1908. A. What date is this? Same date. Q. You say that Mr. Mackin was not present then ? A. ISTo. siT ; he was not. Q. And they were delivered to you, were they ? A. They were, yes, sir. Q. And what did you do with them? A. 'Now I don't know what I did, but my impression is that I sent them over to have the stock issued in Maekin's name. Q. By whom did you send them ? A. I don't know. I can't recall that. Q. By Mr. Mackin himself ? A. No, I don't think so. Q. Did Mr. Mackin know of the fact that you were sending them over? A. Mackin knew no more about thisi than a boy in your office, except to just use his name, that was all. Q. Was Mackin asked if he would permit the use of his name? A. ISTo, thefe was nothing said. Chairman Thompson. — He had to. Mr. McCall. — I won't put it that way. I know he would. Q. And to whom were the certificates issued in exchange for these surrendered certificates delivered ? A. I can't recall whether they were delivered then or whether they were mailed or what was done with them. They came into my possession, however. Q. Would it have been likely that they would have been mailed ? A. I don't know, Senator ; 1 can't recall. It may be I went over and got them, or they were delivered right there and then. I don't know. Q. Do you know who receipted for them upon delivery? A. €an you find if there is any receipt there — I don't know. 956 Investigation of Public Sebvice Commissions Q. Is it customary -when certificates are surrendered and new certificates delivered for a person taking them to receipt for them, do you know ? A. l^o, I don't know. Q. AVould it be required that Mr. Mackin himself receipt for the new certificates on the books of the company? A. I don't know. If it was, he probably went over and got them. I don't know. Q. When did you first see the new certificates ? A. When they were delivered. Q. To whom ? A. To me. Q. And when with reference to the surrender of these old cer- tificates did that take place ? A. That I can't tell. It must have been immediately or whenever they could vrrite out the certificate. Q. What' did you do with them ? A. I kept them. Q. But before putting them away for safe keepingj you pro- cured the assignment by Mr. Mackin of those certificates in blank, did you ? A. They speak for themselves. His signature is right on there. Q. And where were they put for safe keeping ? A. Why, some place — in the safe or in a box. I can't recall. Q. Have you any recollection wheTe they were kept? A. Not the slightest. Q. And when did you next see them afteT having put them away for safe keeping ? A. When I gave them to Mrs. McCall. Q. And where were they when you gave them to Mrs. McCall ? A. In my house. Q. And have they been at your house during the period from the date of their issue until they were delivered to Mrs. MeCall ? A. I can't say whether they -we're or not. I don't recall. They may have been, and may not. I don't know. Q. You had a definite purpose in presenting those certificates to Mrs. McCall ? A. I had indeed. Q. And you went to the spot where the certificates had been kept for safe keeping, obtained them, carried them with you into the presence of Mrs. McCall, and delivered them to her ? A. That is absolutely correct. Q. And you are unable to say where they had been kept? A. I cannot say definitely where they were kept. They may have been Eepoet of Joint Legislative Committee 957 in the safe in my office, or in the safe in the house. I don't know just where they were. Chairman Thompson. — Do you keep a safe at your house ? Mr. McCall. — Yes, a small safe. Chairman Thompson. — It would be very necessary to keep these in the safe all the while, wouldn't it ? Mr. McCall. — That is a matter of judgment. Chairman Thompson. — ^"Well, they were endorsed in blank, weren't they? Mr. McCall.— Yes. Chairman Thompson. — If anj-thingi should happen the certifi- cates, it would cause considerable complication ? Mr. McCall. — I don't know what complication it would occasion. Chairman Thompson. — Because you wouldn't have any evidence that the stock belonged to anybody but Mackin. Mr. McCall. — That was a. chance, whatever is in that. Chairman Thompson. — It would be very natural to keep them in a safe — you would not keep them in a bureau drawer if you had a safe in the house ? Mr. McCall. — I don't know wihether I would or not. Chairman Thompson. — Well, I wondered. Q. Judge, the other day, in your testimony, you stated that you took such precautions as your intelligence and experience sug- gested for your protection against loss of the value of the certifi- cates standing in Mackin's name, in the event of Mackin's death. A. Well, I didn't state I took such precautions. I s.aid I felt perfectly safe. I state right now it wouldn't make any difference to me if his name remained blank or if he had signed them. I wouldn't pay any attention. Q. My question is you said the other day you had taken pre- cautions ? A. The evidence is I did because I made him sign it. 958 Investigation of Pcblic Service Commissions Q. Well, that is what you had in mind ? A. No, I didn't have it in mind. I didn't know. Q. I think you testified on your first examination that Mr. Mackin did not assign them in blank at the time. A. I don't know. It is pretty hard for a man to go back that far. Q. I quote from your testimony, Judge McCall, of November 8th : " What individuals knew of the circumstances that this, stock in his name belonged to you other than yourself ? A. I don't know as anybody, and nobody else's business other than my own. Q. In the event of your death, it might have been embarrassing ? A. I would have taken care of that all right. Q. Do you mean that you have made some testamentary disposition ? A. I knew just exactlj what to do. Q. And you did it ? A. I would have done it. Q. I suppose at the time this stock was issued to Mr. Mackin, it was immediately assigned by him in blank, was it not? A. That I am not so sure about. I think it was assigned in blank when the trans- fer was made, just prior to being given to Mrs. McCall. I am not sure about that. Q. Do you think you left it standing on the books of the company without any assignment during all ttose years? A. Yes, sir. Q. And without any power of attorney to transfer it during that time? A. No. Q. Is that rather unusual? A. I don't think so. It is a measure of confidence, that is all." I put that now in order to call up the question that I had just previously asked you. I was mistaken in what you said in reply to what I asked. A. That is the reason I answered that. I could not recall ; it was impossible to recall. Q. Judge, have you made any further search for the pencil memorandum which you spoke of yesterday? A. Yes, I did. Senator. Q. Did you find it ? A. No, I didn't. Q. Judge, your first purchase was in the name of Bache, wasn't it, was from Bache? A. Yes, Bache bought the stock. Q. Bache sold it? A. Bought it. Q. Bought it for you? A. I think he bought more than 118 shares. That was my allotment. I was told that was my share to take up. Q. Was there a syndicate formed to purchase a block of stock? A. I don't know anything more about it than the amount. All the Eepoet of Joint Legislative Committee ',}[>9 information I got about it was this stock was bought and it was niy share, and they thought it was a good thing. Q. Was it bought pursuant to your order ? A. No, sir ; it was not. Q. You were let in on it ''. A. Yes, I was. I am glad I was, as far as the stock is concerned. Q. Now you paid either the whole or a part of the purchase price at that time? A. A marginal price, whatever it was. I knew it was exceedingly heavy. Chairman Thompson. — ■ Ten points. Mr. j\IcCall. — More than that. It was an unlisted stock. The margin was surprising. Q. Well, you made a substantial cash investment ? A. I thought I made a mistake when I was looking at 118 shares for the margin ? Q. I say you made a substantial cash investment ? A. Yes, sir. Q. At the time it was puTchased by Bache ? A. Yes. Q. What reason have you to suggest for not having taken the stock in your own name at the time instead of in the name of Paine & Van Antwerp ? A. ISTothing in the world except Paine & Van Antwerp took it over from Bache at my request, to Mr. Van Antwerp. Q. Your money had paid for it to the extent it had been paid for, and your obligation was in existence for the balance ? A. That is quite true. Q. And still the stock was not taken in jouT name? A. ~No. It was a transfer of the account practically from Bache & Company to Van Antwerp, if that is the firm, Paine and Van Antwerp. I only know Mr. Van Antwerp. Chairman Thompson. — As I understand this, pTior to the 21st of December, 1908, you never saw or had in your possession any of these certificates nor any of these dividend checks on them ? Mr. McCall. — I won't say that. I can't say that. Chairman Thompson. — I think you have said it. Mr. McCall.— I haven't said it. My recollection is I have not. Chairman Thompson. — What is the fact ? 960 Ikvestigation of Public Service Commissions Mr. McGall. — My recollection ia I have not. I can't. Ohairman Thompson. — Your recollection is that prior to December 21, 1908, when they were assigned to Mackin, that you never had in your possession or saw any of these certificates or the dividend checks on them ? Mr. McCall. — My recollection I did not. I won't say I did or did not. The best of my recollection is I did not. Q. Now, Judge, have you any recollection as to the purchase price of the 118 shares? A. Wo, not now at this moment; no distinct recollection. Q. Any approximate idea? A. My impression it was around 119, somewheres around that. Q. And 118 shares at 119 amounted to somewhere around twelve or fourteen thousand dollars, did it not? A. That is a question of mathematics. Q. Fifteen thousand dollars, approximately — have you any recollection as to the amount of cash deposit that you made at that time? A. No. Q. Did you give a promissory note for the balance of the purchase price? A. No. Q. But you were legally liable ? A. Whatever was requested to keep the account I gave, I don't know what it was. Q. And the stock was taken in their name rather than yours, at that time? A. As is the customary business transaction of stock houses. Q. Now, when the account was turned over to E. E. Ohapman & Company, there were still 118 shares — there had been no increase, had there ? A. I don't know about that. I guess that is so, though. You have got the list there. Q. There is no increase, according to the record. Now, during the period that E. R. Chapman & Company carried the account — during the period that E. E. Chapman & Company carried the account, there were certain participation rights accrued which brought the holdings up to 387 shares ; is that so ? A. I guess that is right. Q. And you are notified from time to time of your right to participate? A. Yes, sir. Eepobt of Joint Legislative Committee 961 Q. And do you remember the price at whicli you were permitted to take the stock offered ? A. At par is my recollection. Q. At pat? A. Yes, sir; that is my best recollection. Q. And did you from time to time, as you exercised your right of participation, make further deposits of cash ? A. The account would show Ihat. I can't recall that. I most undoubtedly did. My best recollection is I did. Q. And increased the amount of your cash investment? And increased the amount of your personal obligation, and allowed the stock to remain in the name of E. R. Chapman & Company? A. Yes. Q. And it so continued down to the time that the oeTtificates were issued to Andrew Freedman on the transfer from E.. E. Chapman & Company ? A. That is right. Q. You testified, I think, that Mr. Ereedman made a loan to you at the time of the deposit of these certificates with him? A. That is right. Q. Was a portion of that loan used for the purpose of paying the balance due to E. E. Chapman & Company ? A. The purpose of the loan was to take out the accoimt from E. R. Chapman & Company, as I recall it. Q. Did it occur to you that for your own protection the stock should have been issued to you and assigned by you in blank or otherwise to Andrew Ereedman as collateral security for the amount of the loan that he made to you ? A. ISTo. Q. Did you feel that you were taking any risk in allowing the stack to remain from 190'2 to 1'90Y in the name of E. R. Chapman . & Company ? A. Wot the slightest. Q. You have known of the failure, have you not, of banking houses and brokerage houses? A. Oh, yes, and I have known lightning to hit houses too. Q. And haven't you known and didn't you know as a matter of law that the certificates standing in the name of E. R. Chapman & Company and belonging to you would have beeai taken over by a trustee in bankruptcy or a general assignee for the benefit of cred- itors, and that it would be necessary for you to establish your ownership ? A. Well, that is a question that has got to be answered in two parts. I don't know the first proposition, and I know the Vol. 1 — 31 962 Investigation of Public Seevice Commissions second is true. I know you never could get away from the fact that the title of that stock was mine. You never could get away on the legal proposition that that was my stock. Q. It would have involved legal proceedings ? A. It might and might not. Chairman Thompson. — If I had as good a title of a farm as you had to this stock, and came before you as a judge, I would have some trouble in getting you to make a decision in my favor. Mr. McCall. — ISTo, you wouldn't. Chairman Thompson. — Well, I think you are a good judge. Mr. McCall. — Well, I have been in the habit of getting that kind of compliments from better sources than you, and no judge that was ever fit to hold the office, if a man establishes his title to a farm or anything else, should hesitate to give him that title. Q. Judge, did the interest on the loan from Freedman equal or exceed — did the interest on the loan that Mr. Freedman made to you exceed three thousand dollars annually ? A. You ask me if it exceeded the dividend ? Q. Yes. A. My impression is it did. Q. At what rate of interest did you make that loan? A. My impression is it was five per cent. I am not sure. Q. Then your loan must have exceeded fifty thousand dollars? A. I don't know. Chairman Thompson. — Do you remember the amount of the loan? Mr. McCall.— I do not. Chairman Thompson. — Can you tell us within ten thousand dollars of how much it was ? Mr. McCall. — It was some fifty thousand dollars. Q. Fifty thousand dollars at five per cent would be twenty-five hundred dollars annual interest? Chairman Thompson. — Sixty thousand dollars would be three thousand dollars. Q. Sixty thousand would have been three thousand at five per Eepoet of Joint Legislative Committee 963 cent. Do you think the loan may have been sixty thousand? A. No. Q. Less than sixty ? A. That is my recollection. Q. Did Mr. Freedman account to you during the period from January, 1907, to December, 1908, nearly two years for the excess of dividends ovel: interest on the note ? A. Whatever was due Mr. Freedman was accounted for and paid at the time. 'Chairman Thompson. — I thought you just said there wasn't any extras? Mr. McCall. — I didn't say so. Q. If the loan was less than sixty thousand dollars, the interest was less than the dividend. A. Mr. Freedman can give you that. I can't sitting here. I would have to acquaint myself with the facts. What is the use of asking for conjecture? He has got the account. It was figured up when the stock was taken, and it was paid. Q. Was there a cash payment made to you at the time the stock was made out in the name of Mt. Mackin ? A. What ? Q. Was there a cash payment made to you when the stock was turned over to Mackin ? A. I don't know what way it was balanced. I cannot recall it. Q. Was any money paid to you by Mr. Freedman in the form of surplus dividends upon this stock between January 29, 1907, and December 21,1908? A. ISTo, sir, except at the end. What- ever payment was made may have been expressive of that or not. I don't know. Q. And was there a payment made to you at the time the stock was tuTned over to Mr. Mackin ? A. I can't recall. Mr. Lewis. — By the way, before we go any further : A gentle- man asked if he might be permitted to photograph the assignment of one of the stock certificates showing the name of Andrew Freed- man as the assignee. I told him I had no control over them, and it was for Judge McCall and the treasurer of the Kings County CWpany to deteTmine that question. Chairman Thompson. — I think it is for the Committee. I think we have control over them. 964 Investigation of Public Sebvioe Commissions Mr. Lewis. — If the Committee chooses to exercise its power. Mr. McCall. — I disavow any control over them. I have nothing to say about it. Chairman Thompson. — Can anybody suggest any harm that might arise from it ? Mr. McCall. — I did not bring them here and I don't knoTV anything about them. Mr. Thompson. — Unless somebody can suggest to me some harm that would come from it, the Committee will consent to it. We will suspend now until 2 o'clock. Just a moment. Mr. Lewis. — At the request of Senator Lawson, Judge McCall, ■will -you state when it was that you received a retainer from the Palace Theatre? Mr. McCall. — I don't know the exact date of that. It was fixed hy an agreement. Senator, that was dtawn. If I recall it, it was in 1913. Chairman Thompson. — 1913 ? Mr. McCall. — I think it was. I am not sure. Q. Prior or subsequent to your appointment as a Public Service Commissioner? A. Subsequent. Mr. Lewis. — Let me suggest to Mr. Atkinson. It won't be necessary for you to come back unless because of the fact that these certificates are in possession of the Committee. Now, if you choos© to come back for that reason, why, do so. Mr. Atkinson. — When can I get them back ? Mr. Lewis. — I understand that the Chapman people will not be here until to-morroW. Cbairm-an. Thompson.— They say their books are in a barn down on Long Island somewhere and it will take them a day to get them. We will suspend until 2 p. m. Eepoet of Joint Legislative Committee 965 AFTEENOON SESiSIOJST Senator Lawso'ii acting as Chairman. Senator Lawson. — The Committee will come to order. WiLLiAii P. BuEKj called as a witness. Examination by Mr. Lewis: Q. Mr. Burr, you are a lawyer? A. I am, since 187D. Q. And have been an assistant to the Corporation Connsel of the City of New York? A. I have. Q. During what period? A. From 1904 to 1914. Q. And during that period what class of work in that office of the Corporation Counsel have you performed? A. I had charge of the division of franchises in the law department dimng that time. Having to do with all the public utility corporations of the city, and their relations with the city. Q. And continued in that office until what date ? A. First of July, 1914. Q. And during that time, will you give us some of the important matters which you conducted as the representative of the city ? A, Why, I conducted, among other thi^igs, the SO^cent gas litigation. Q. That involved the constitutionality of the act of the Legisla- ture fixing the price of gas at 80' cents? A. And 15 cents by the city. Q. That case went to the Supreme Court of the United States ? A. It did. Q. And the city was successful ? A. It was. Q. Did jou argue that case in the United States Supreme Court? A. I prepared the briefs and was associated with Judge Alton B. Parker, who was retained as special counsel at that time. I tried the case before the Maker. Q. Did you have charge of the city's interest in an action brought against the city during Mrjot Gaynor's administration by the Edison Electric Illuminating Company — by the Amster- dam Light, Heat and Power Company, and Edison Illuminating Company of Brooklyn, against William J. Q-aynor, as Mayor ? A. 966 Investigation of Public Service Commissions I did. What I want to say in answer to your previous question — I also had chaTge of the Death Avenue litigation, and carried that to the Court of Appeals, and also had charge of the action brought by the city against the Consolidated Telegraph and Electrical Sub- way Company — Empire City Subway Company, in an accounting involving the cost of construction of the subways in the city, and I did have charge of this case that you now speak of. Q. Will you tell us the nature of the action, the title of which I have just read to you ? A. Well, that action grew out of a settled policy which the city arrived at about 1906. That was that an earnest effort should be made to recapture all the perpetual fran- chises which had theretofore been granted in this city, and which were unused, and in furtherance of the advice of the law depart- ment in 1906, the Board of Estimate and Apportionment rescinded the franchise of the 'New York Electric Lines, which was a coTpora- tion organized in 1884, and which had received! a franchise to con- struct electrical subways underground, but which had done nothing for twenty years, and we held that that constituted a practical abandonment, and advised the Board it had the right to rescind its consent, the consent of the city, and that was done. And the case got into court and the Court of Appeals sustained that action of the Board of Estimate and Apportionment, and subsequently the United States Supreme Court, through Mr. Justice Hughes, sus- tained the action of the Court of Appeals. Now, it was in further- ance of that policy that this action was brought. This involved a franchise which was given to the old State Electric Light and Power Company in Brooklyn, which was avowedly and expressly given to that company for the purpose of creating competition. The franchise described certain conditions, which must be complied with by that company. Among other things, it was required to construct a mile of conduit, linear measure (as they were careful to put in) each year for four consecutive years. It was required to pay so much percentage of its earnings, to file a map, to get the consent of the city, and to do its construction in accordance with the instructions and conditions of the city officers. That company failed. Q. Let me ask you: Was there also a condition that the com- pany should file a bond with the city ? A. Give a bond. That was Eepoet of Joint Legislative Committee 967 done a little later. The campaiiy failed and the Amsterdam Elec- tric Light and Power Company was organized and took over the property of the State Company. The time within which the first mile of conduits were to be constructed had expired, all but eigh- teen days, when the Amsterdam Company took this over. And the contention of the Amsterdam Company in this case was that it did construct one mile within that time, although proper marks were never filed, as required. But, at all events, from that time, 1895 and '96, up to the time when this official action was started by the Board in 1910, no more construction we claim had been done under this original franchise, by anybody other than 2.175 miles of conduits. The Edison Company of Brooklyn claimed the right undeT certain arrangements as a stockholder of this company — Q. Of the Amsterdam Company ? A. Of the Amsterdam Com- pany — to operate its franchise in the streets of the city. Q. That is the franchise of the Amsterdam Company ? A. Yes. The Board demanded of the Edison Company that it make a report — that is, the Board of Estimate — showing under what authority it claimed to operate in these outlying districts, the Thirtieth Ward, among others, and in that report which was made by the Edison Company, it appeared that it claimed the right to act under this old State franchise, which was absorbed and taken over by the Amsterdam, and then later on became, as the Edison Company claimed, its property. So then the Board of Estimate and Appor- tionment directed on the opinion of the 'Corporation Counsel, who held that they had no valid franchise — directed the removal of the pipes from the street, or in other words, it proposed to pass a reso- lution rescinding the consent which had previously been granted. This action was thereupon brought by the Amsterdam Company and the Edison Electric Illuminating Company of Brooklyn, to restrain the Board of Estimate from' taking such action. Prior to the action having been commenced, an effort was made to arrive at an agreement as to the facts, so that for the purposes of the com- pany and the city both, time might be saved, and the matter pre- sented to the Appellate Division upon an agreed statement of facts. That was referred to me and after considerable negotiations with the representative of the company, I finally concluded that we 968 Investigation of Public Service Commissions could not agree on the facts, and in tihe paper whieli you have sub- poenaed, my report to the CoTporation Counsel, I said : " I there- fore recommend that the proposition to submit an agreed statement of facts should be rejected, and the city authorities be left uniham- pered to take such action against the encroachment of this company in a territory in which it has no franchise, as may be just and proper, and that the company be left to seek such remedy in law or equity as it may be advised. The questions at issue between the city and company can be handled best at arm's length." There- upon, the company broug'ht this action. Mr. Lewis. — ISTow, may I offer this in evidence ? I offer in evi- dence, a report to the Corporation Counsel on the Edison Electric Illuminating Company of Brooklyn, and the proposed agreed state- ment of facts to be submitted to the Appellate Division, and recom- mending the rejection of the said proposed agreement. Q. This was delivered, was it, or a copy thereof to the Cor- poration Counsel, Mr. Watson? A. Mr. Watson. Chairman Thompson. — Was that in evidence in the Commis- sion's proceedings ? Mr. Burr. — I presume not. That is merely the data I had as to the history of this case. 'Senator Lawson. — How did the new Amsterdam Company get control of this old franchise, through a receiver's sale ? Mr. Burr. — Well, through a bill of sale and subsequently through a sale under a judgment. Q. Now, you proceed, Mr. Burr. A. Our contention being that the State Company never organized or commenced the transaction of business as required by the statute, within the year or even two years after its incorporation. It was incorporated in 1892. ChaiTman Thompson. — Did you have charge of this litigation in the Corporation CounseFs of&ce ? Mr. Burr. — I did. Chairman Thompson. — And then it was turned over to Mr. Watson ? Kepoet of Joint Legislative Committee 969 Mr. Burr. — Mr. Watson was the Corporation Counsel; I was Assistant Corporation Counsel. Chairman Thompson. — Mr. Watson has charge of it now ? Mr. Burr. — No. Mr. Watson is no longer Corporation Coun- sel. Mr. Lyman Hardy is now Corporation Counsel. Chairman Thompson. — -This paTticular case is farmed out in the Corporation Counsel's office. Mr. Lewis. — ISTo. It is, Mr. Burr. Mr. Burr. — • I am now in charge of this case under a special retainer, which I received afteT my resignation in July, 1914. Q. Proceed, Mr. Burr. A. Well, then the action was brought in Kings County — this 'action was brought in Kings County and we moved to have it transferred to ISTew York County. Q. The action was in the nature of an injunction ? (The following is a copy of the report to the Corporation Coun- sel on the Edison Electric Illuminating Company of Brooklyn, and the proposed statement of facts, to be submitted to the Appellate Division, and recommending the rejection of the said proposed agreement) : On January 21, 1910', one John J. Gordon wrote to Hon. John Purroy Mitchel, President Board of Alddrmen, that the company above named was invading 17th avenue, Bath Beach, Brooklyn, putting up its poles and drawing heavy wires through the branches of valuable trees, to the damage of the trees and the danger of the people on the avenue. On May 2, 1910, Mr. Mitchel requested information Tegarding said company from^ the Division of Franchises of the Board of Estimate and Apportionment. On May 7th, the Division of Fran- chises rendered a report and on that report being presented before the Board it was resolved that the Board of Estimate call on the Edison Company to furnish proof of its authority to operate in the Thirtieth WaTd of Brooklyn and also to submit certified copies of all muniments of title before May 31, 1910. On May 31, 1910, the company replied giving the grounds of its claim. 970 Investigation of Public Seevice Commissions On June 3, the opinion of the Corporation Counsel was requested by the Board as to the yalidity of the claims of said company to franchise rights in the Thirtieth Ward of Brooklyn. On June 23, 1910, the Corporation Counsel advised the Board that the Edison Electric Illuminating Company of Brooklyn had not a valid franchise in the Thirtieth Ward of the Borough of Brooklyn. It was thereafter agreed between the Corporation Counsel and counsel for the company that the question of the legality of the alleged franchise rights of the company should, if possible, be pre- sented for a decision to the Appellate Division, in the form of an agreed statement of facts as this would facilitate a speedy final decision of the questions involved, and meanwhile the Borough President of Brooklyn was authorized to issue temporary permits to the company to erect its poles, the company agreeing, and the permit being issued on the express condition, that in the event of a final decision by the Court adverse to the claims of the company, the company would remove said poles and restore the streets to their previous condition at its own expense. On July 26, 1910, Parker, Hatch and iSheehan, attorneys for the Edison Electric Illuminating Company of Brooklyn, submitted a short statement of facts and a copy of record in book form, the original of which had been submitted to the Public Service Commission. This was done as a preliminary to the agreed statement of facts. Defects in this statement were pointed out by this Division and, on October 6, 1910, a new statement of facts were submitted. Again, defects were shown in such statement. On October 2.9, 1910, a revised statement was submitted. This statement, it was pointed out, was also incomplete and a new one submitted. Again, on December 16, 1910, a final statement of facts was sub- mitted. Many defects in this statement of facts were also pointed out and said attorneys agreed to revise the same in accordance with suggestions made by this Division. However, owing to the pro- tracted illness of Mr. Searing, who had charge of this matter for the company, nothing has since been done in the direction of an agreed statement of facts between the city and the company and Eepokt of Joi:s;t Legislative Comjiittee 9Y1 I am now of the opinion that this question cannot be decided on an agreed statement of facts for the following reasons : (1) It is impossible to agree on the necessary facts for a proper submission of this matter or for a submission which will not be prejudicial to the city. The attorneys for the company include the complete! alleged title of the company in this proposed statement. They have not been able to submit any written assignment of the original franchises to 'Cooper & Company and fromi Pope, Sewell & Company to the Municipal Electric Light Company and the Citizens Electric Light Company, through which source of title they claim such franchises are derived. Neither have they been able to submit to us contracts or copies thereof which they claim were. made with the Edison Electric Illuminating Company of BrooMyn, under which they claim electric lighting was permitted by the old City of Brooklyn in the Thirtieth Ward of the now Borough of Brooklyn. Section 1279 of the Code provides: " The parties to a question in difference, which might be the subject of an action, may agree upon a case containing a statement of facts upon which the controversy depends ; " It is said in Marx vs. Brogan, 188' JST. Y. 431, that on an agreed statement of facts the Court can only consider a pure question of law, and that they will not touch or dispose of conflicting or equivo- cal inferences of fact, and that in such case the Supreme Court is without jurisdiction. Mr. Justice Werner in the above case stated an agreed statement of facts submitted to the Court was intended where there was no dispute of fact involved, and that the Court will not act therein where the controversy necessarily involves the duty of drawing inferences from inconclusive, equivocal or evidentiary facts. (2) An injunction suit would be most advantageous to the com- pany as it might result in giving it a judgment on an equitable foundation and not upon a strictly legal basis. That is to say, an application for this equitable remedy would be more advantageous to the company than would manda'mus proceedings against the 972 Investigation of Public Sbevice Commissions ■ConunissioneT, for in the latter proceedings it would have to show a clear legal right. In an equity proceeding or action the Court would undoubtedly take cognizance of a situation which had developed as the result of a long series of acts on the part of the oompany, none of which apparently had ever been questioned by the city authorities. A Court of Equity could (and very likely would) enjoin the city from interfering with a public service company it has permitted to carry on business in the street of the city for many years and to invest a large amiount of capital in that business^ particularly where great public inconvenience would result from such inteirfeTence. See Knoth vs. Manhattan Railway Co., 187 N. Y. 252. ' For this reason the company insists on having a statement in its agreed statement of facts as to the amount of money it has invested under its various alleged franchises and of the public service it has and is rendering to the people of Brooklyn. (3) The statement insisted upon in the proposed statement of facts that the city intends to and has threatened to tear down the company's poles' is outside the truth. From it the Court would be led to believe that it was the intention of the city to destroy the whole system of the company in Brooklyn for supplying the people with electric light. As a matter of fact, all the city need do under the circumstances is to refuse a permit for further construction or extension of the company's lines and this would compel the com- pany to apply for a mandamus. In such a proceeding the city would have the advantage. (4) Where great public interests and rights are concerned the Courts axe apt to view submissions of controversies with disfavor. Moreover, they are always regarded by the public with great suspicion. I therefore recommend that the proposal to submit an agreed sitatement of facts should be rejected and the city authorities be left unhampered to take such action against the encroachment of this company in a territory in which it has no franchise, as may be Eepoet of Joint Legislative Committee 973 just and pToper, and that the company be left to seek suoh remedy at law or in equity as it may be advised. The question at issue between the city and the company can be handled best at arm's length. Dated, New York, July 19, 1911. WM. P. BUER, Assistant Corporation Counsel in Charge Division of Franchises. The Witness. — And the action as I say, removed to ISTew York County, on motion of Corporation Counsel, and then we proceeded to get ready for trial. I prepared the case for trial. It involved examination of the rela- tions existing between the EdisiOn Company, the Kings Ck)unty Light, Heat and Power Company, whatever th« official name, it has escaped my memory now, and the old Citiaens' Com- pany, and Municipal Company of Brooklyn, and all the other com- panies which had been consolidated or amalgamated with the present Edison Illuminating Company of Brooklyn. And then the case being ready, we appeared before Mr. Justice McCall at the equity branch of the Supreme Court in tlie County of New York. And when that case was called for trial at that time, former Judge Batch, who appeared for the company, for plaintiffs, made a motion to be permitted to amend, and that amendment being a very serious on©, I objected, and claimed that the City was taken by surprise, and that if the amendment was granted, we would have to ask for an adjournment. The previous complaint, the original complaint 'had alleged that t!he Amsterdam Company had comj)lied with all the terms and conditions of the franchise origi- nally granted to the State 'Company. Under the amendment pro- posed then, it was claimed that the terms and conditions had been oomplded wilih, and were then being complied with by the Edison Coiapany, under a lease, which on a certain date specified in the complaint, had been made, and entered into, between the Edison Company and the Amsterdam Company. That was the first inti- mation we had of any such claim, and thereupon, an adjourrmnent was taken. Q. Now right there, — in the discussion of the propriety of the allowance of the application for an adjournment, and the serviee 974 Investigation of Public Service Commissions of an amended complaint, were the facts in relation to the action and the character of the action and the interests involved, brought out for discussion and consideration by the Court? Mr. Harkness. — Would it be convenient for me to interrupt at this time? Senator Lewis has very courteously told me what he wished to prove by this witness. It seems to me an objection prop- erly lies that the province of this Committee is to examine into the acts of the Public Service Commission, and that it does not extend to examinations into what Judge McCall may have done when he was on the bench several years ago. Mt. Lewis. — I take it, Mr. Harkness, in objecting, you object on behalf of Judge McCall ? Mr. Harkness. — Why, no, not necessarily. I am appearing here for the Commission, and it seems to me that appearing for the Commission, it is proper that I should object if the inquiry gets beyond the lines of what the resolution of the Legislature — Mr. Lewis. — ■ Then you want the reeoTd to show that you object on behalf of the Commission ? Mr. Harkness. — • Yes, and also on behalf of Judge McCall, if you wish. Chairman Thompson. — Now, do you appear for the Commis- sion as a function or do you appear for the personal Commissioner ? Mr. Harkness. — I had not considered that point at all. I will appear for — I appear for the Commission as a function. Mr. Lewis. — In answer to the objection that has been raised, Mr. Chairman, it seems to me that in view of the subsequent action of Judge McCall as a member of the Commission, and in view of the testimony which he gave yesterday, that at the time this action came before him for trial, he knew nothing of the merits of the controversy, and had no knowledge of the character of the plead- ings, and that as soon as the title'of the action was announced, he asked the question as to whethe'r or not the Kings County Com- pany of which he was a stockholder was interested in any way, it seems to me that the evidence of Mr. Burr is admissible for the purpose of showing knowledge on the part of Judge McCall at the Eepoet of Joint Legislative Committee 975 time that lie acted in his capacity as Public Service Commissioner, derived from the application that was made before him for 'leave to amend the complaint. Mr. Harkness. — Would not that follow, or shouldn't that come with some proof, that Judge McCall kept this in his mind along with thousands of other cases that must have come before him as Supreme Court Judge. Chairman Thompson: Objection overruled, although I think — some of my colleagues think that Mr. Harkness, in view of the manner of his appearance, that he has not any particular right to be recognized by the Com- mittee in making this objection on behalf of Judge McCall personally. Mr. Harkness. — I can. Chairman Thompson. — This is a personal proposition — that Judge McCall made certain statements as to matters within his knowledge, and offeted for the purpose of showing that Judge McCall had knowledge at the time he acted as Public Service Com- missioner when the order was finally granted, on the 30th of July, 1913. Objection overruled. Q. (Repeated) " Now right there — in the discussion of the propriety of the allowance of the application for an adjournment, and the service of an amended complaint, were the facts in Telation to the action and the character of the action and the interests involved, brought out for discussion and consideration by the Conrt ? " A. Why, naturally. Judge Hatch made a formal motion of great meaning and seriousness in the trial of the case, and he had to explain his reasons for it, and I had to answer and object, and state my reasons. Q. And in the course of your answer, did you explain the atti- tude of the city and the interest of the city in this matter ? A. Why, I undoubtedly explained to Judge McCall all that I thought was necessary, so that he might fully comprehend the importance of this litigation, and the necessity for an adjournment. And 976 Investigation of Public Seevioe Commissions having heard me^ why, he said, " Certainly, you are entitled to an adjournment," and we got it. Chairman Thompson. — Now, in that discussion, was the con- nection of the Kings County Electric Light and Power Company mentioned ? Mr. Burr. — I couldn't say as to that. I couldn't say as to that. Senator Lawson. — Was the merits of the case gone into in any way, shape or form ? Mr. Burr. — The merits of the case were fully before the judge, so that he might intelligently dispose of it. And he used his best judgment in doing what he did, I presume. Q. Was the amended answer served? A. Then later on an amended answer was served, and reply was demanded, and then a bill of particulars, and then the case was again prepared for trial, in view of the amendment, and on a certain day — I have a memorandum some place of the time. Q. Several months later ? A. Several months later we again appeared before Judge McCall. Q. And right there, had Judge MeOall retained control of this action during that period? A. Yes, yes. Q. Proceed. A. He said that he would retain control of it so that we would not be put to the inconvenience of it going back on the general calendar. As soon as we straightened up the amend- ment we could appear before him if we gave him some due notice. And when we were ready for trial, we agreed to appear before him, and we did, and we were both ready, and the pleadings were printed in the form that I have them here, and I see you have a copy. And when the case was called we handed up the pleadings to Judge McCall, and then he inquired, having glanced through the pleadings, whether the Kings County Electric Light and Power Company had any interest or whether it was involved in this case. And I said it had a great interest in it because if the city's con- tention was correct 'and he should so find, why, the companies that were allied or subsidiary to the Edison Company would be affected, and their securities affected. And Judge McCall responded on the other hand that he did not think that the Kings County Company Kepoet of Joint Legislative Committee 977 was affected at all in tliis litigation. However, Judge McCall said that lie did not think that he oould act — he thought he was dis- qualified and he stated the reason why he thought he was disquali- fied was the fact that he was a stockholder in. this Kings County Electric Light and Power Company. And Judge Hatch looked at the stock book and said, " Why, your Honor, your name does not appear here," and Judge McCali said, " Why, no; my name does not appear because I carry that in the name of my court officer, Mr. John Mackin." Well, we were both very much disappointed, and the Judge said he would try to help us out and go and see if some other judge could not take the case. So he left the bench and went out to see Judge Greenbaum, I think it was, and finally came back and said he was not able to make any arrangement with Judge Greenbaum or any other judge whereby the case could be immediately taken up. Therefore we went out of court, and later on the case was sent to a referee. Q. Who "was the referee ? A. Mr. Delancey Nicoll. Q. What has happened since that time ? A. Well, we have been proceeding before Mr. NicoU since his appointment. Q. Can you state approximately the date of the order of refer- ence ? A. I have here the letter which you subpoenaed me to pro- duce, which is the report made to the Corporiation Counsel and by him transmitted to the Mayor with regard to the case. If you would like it, I will read it. Q. I think if you will proceed, Mr. Burr, with your history first, of the litigation. A. Well, Mr. Watson named Mr. Delancey Nicoll, and that was acceptable to the other side, and then shortly after that we began the hearings. Chairman Thompson. — ■ Do you know how ? Mr. Burr. — I do not recall. I know it was on consent of the Corporation Counsel and the other side. And tbat has been going on ever since until the 25th of March last, when we finally con- cluded tie case before Mr. ISTicoll. Q- Has the case been decided by Mr. ISlicoll ? A. It has not. Mr. NicoU was a delegate to the 'Constitutional Convention, and lie obtained sixty days' extension of time. Chairman Thompson. — He wasted a lot of time up there, didn't he? 978 Investigation of Public Service Commissions Q. Have there been any other extensions granted? A. There have been three other extensions of thirty days each. Q. Xow, Mr. Burr, when did you first know of the fact that an application had been made to the Public Service Commission by the Edison Company for permission to acquire 122 shares of the capital stock of the Amsterdam Company ? A. Why, that application was made pending the trial before Delancey NicoU. Q. After the order of reference to Mr. Nicoll? A. Yes. Q. And when did you first know of it? A. We received a notice, I do not recall the date, but it was probably two years ago. And on behalf of the city I appeared before Commissioner Maltbie, who then had charge of the matter, and vigorously protested to him against the granting of the consent sought, and stated what I have stated here, that the city was trying to carry out a policy to recover these abandoned franchises, and that this company,' the Amsterdam Company, had, as appeared by the pleadings, abandoned its plant in 1899 ; it had no business; it had no assets of any nature or kind, and it defaulted in its interest, and that for those reasons the Com- mission should not grant this com'mission to acquire this stock. I said to him that it was an anomaly, that the Law Department should be recommending one policy and the Public Service Commission adopting another, both getting pay from the same people. And I felt somewhat worked up about it. So Commissioner Maltbie said that he would defer action, and he did defer action. Q. Well, now, you had numerous hearings before Mr. Maltbie, did you ? A. I wouldn't say numerous hearings. Q. Several? A. I think we had several hearings. We sub- mitted a memorandum to him and Judge Hatch submitted his views to him, and he was quite as earnest in applying for the application of the consent as I was in opposing it. Q. Do you recall when the matter was finally submitted to Com- missioner Maltbie ? A. Well, it was — well, I had been out of the Law Department twenty months. Q. November, 1912, about the time that you would fix? A. I don't recall, Senator. Q. I think that is the date. A. The records in the Public Service Commission should tell that. Q. October 28th appears to be the last meeting. Did you see Repoet of Joint Legislative Committee 979 or talk with Commissioner Maltbie after the matter was submitted to him, and did he express to you his views upon the propriety of a decision on his part? A. He had no hesitation in saying to me from his standpoint that the consent should not be granted until the end of the litigation between the city and these companies. Q. Did he make any written report, to your knowledge? A. Not to my knowledge. Q. Or write lany opinion in connection with the matter ? A. Not to my knowledge. Q. And you understood that the matter was being held by him pending the determination by Mr. NicoU of the issues referred to him ? A. That was my understanding. Q. When did you first know, Mr. B'Urr, of the fact that the Public Service Commission had entered an order granting the application to purchase these 12'2 shares of stock ? A. Yesterday morning when I read it in the newspaper. Q. Had you in the meantime been retained specially in this action, the action in which Mr. Niooll is referee ? A. I had been retained after I left the department by the Corporation Counsel in the New York Electric Lights case, which I spoke of, and this case, both involving the same principle to which I made reference. And I have finished the New York Electric Lights case and I am still in control of this Amsterdam case until it is decided. Q. Your connection with the Corporation Counsel's office as an assistant terminated on the 1st of July, 1914? A. First of July. Q. And on the 30th of July, 1914, the order was granted by the Commission ? A. Well, I have seen the copy here to-day for the first time. Q. This franchise that you are seeking to recover for the city was r^arded as a valuable franchise, Mr. Burr ? A. Well, speak- ing from the record and my brief, it was regarded by the people who got it as the most valuable franchise that has ever been granted in the city of Brooklyn — I mean electric light franchise. Q. Was it the purpose of the city — what was the purpose of the city in its attempt to recapture that franchise ? A. Why, to carry out the original purpose, and I presume to effect real com- petition, to cause real competition to exist. In other words, it would have a territory to dispose of to some one else. 980 Investigation of Pttblio Sbevice Commissions Q. For wliicii the city might have obtained compeasation ? A. Undoubtedly. Under the law to-day it is required to obtain com- pensation land required to obtain very substantial compensation under the terms of the charter. Q. jSTow, the city appeared formally before the Public Service Commission, and was recognized by that Commission formally as a party to that proceeding, was it? A. I have appeared many times before the Public Service Commission, and there was no diiference in my appearance in that matter than there was in any other proceeding. I appeared there aa a representative of the Law Department, on behalf of the Corporation Counsel, and urged that the Commission should not grant that consent. Q. And under instruction from the Corporation Counsel ? A. Certainly. Q. Was your appearance objected to by the counsel for the appli- cant. Judge Hatch? A. Yes, I think Judge Hatch claimed we were merely interlopers; that we had no business to appear there at all, and if we were there at all, we were there merely by courtesy. Q. Did you from time to time receive notice of heating before Commissioner Maltbie ? A. Well, we received notice of whatever hearings there were. I think there were three or four. I am not quite certain of that. Q. The city continued as a party — did not withdraw at any time? A. I^ever to my knowledge. Q. Before the Commission, and you were still in charge of this proceeding on the 30th of July, or were you in charge of this pro- ceeding on the 30th of July, 1914? A. No, I was not in charge of the proceeding on the 30th of July, because I ceased my con- nection with the Law Department on the 1st of July, and was not retained in that case until the following September. Q. And you we're out of office from July 1, 1914, to September 1, 1914? A. I was out of any official relation to this ease from July to September. Q. And the order was granted during the time that you were not representing the city ? A. That speaks for itself. Q. And you had, of course, for that reason, no notice of the fact that such an order had been granted ? A. No, but I have never Repoet of Joint Legislative Committee 981 had any notice since that time, although I have been conducting the case to a conclusion on the 25th of March. Senator Lawson. — Was this one of the franchises originally granted by the old Common Council of Brooklyn in perpetuity? A. Yes. Chairman Thompson. — -If I remember correctly, it was not a perpetual franchise. Mt. Burr. — Yes, it is a perpetual franchise. It was obtained by a man named Cochu. Q. Have you any knowledge, Mr. Burr, as to whether or not the Corporation Counsel's office had notice of the meeting of the Commission on July 30, 1914 ? A. I called up the department this morning, and they were to ascertain and let me know, but I have not heard as yet. Mr. Lewis. — ■ I offer in evidence, Mr. Chairman, memorandum for Mr. Polk re Amsterdam Electric Light and Power Company against the City, signed William P. Burr, Assistant Corporation Counsel, dated March 19, 1914. I will read it into the record: This case came on for trial before Mr. Justice McCall in Decem- ber, 1911. At the opening of the trial, and without any previous notice to the city, Judge Hatch, counsel for the plaintiff company, moved to amend the complaint in a very important and m-aterial respect. This motion was granted by Justice McCall. The city being taken by surprise, having prepared the case for trial on the issues raised by the existing pleading, asked for an adjournnient until plaintiff served an amended complaint, and defendant served an amended answer. On December 11, 1911, an amended com- plaint was served by plaintiff, and the city demanded a bill of particulars. A bill of particulars was served on December 21, 1911. On December 29, 1911, the city served its amended answer to the amended complaint. The case was then set down for trial at the February term before Justice McCall, who, meanwhile, had maintained control over the action. The city having made a motion to compel the plaintiff to reply to its amended answer, when the case came up in February, 1912, plaintiff applied for an adjourn- ment, and the case was set down for April 15, 1912. When the 982 Investigation of Public Seevice Commissions ease was called for trial before Mr. Justice McCall in April, and the city had subpoenaed all its witnesses and the books of the plaintiff companies and other subsidiary companies, including their stock books, Judge McCall discovered that he was disqualified from trying the case, being a stockholder in the Kings County Lighting Company, one of the companies affected by this litigation. The trial of the case was then put over until some other judge could dispose of it. Thereafter, Mr. Watson, the then Corporation Counsel, arranged for a reference of the issue to Mr. Delancey Nicoll as referee. The reference began before Mr. 'Nicoll June 7, 1912. It has been pending before him ever since. The plaintiffs have not yet closed their case. Thete have been twelve or fifteen adjoummients. Most of them were at the request of the plaintiffs. The others were upon motion of the referee. There has been no delay in the trial of this action on the part of the city. The city has always been ready. Since my last talk with you a week or ten days ago regarding this case, I have impressed the counsel for the plaintiff with the necessity for proceeding to conclude this case without further delay, as you were determined to bring it to a speedy close. This has resulted in the teferee fixing March 26th and 2'7th, at 2 o'clock, for further hearing. I have notified Messrs. Hatch and Sheehan that they must finish their case at these hear- ings. I was informed by Mr. Condon that they would undoubtedly do so, and would probably finish in one hearing. When the plaintiff has definitely closed its case and rested, it is my intention to move for a short adjournment, so that we may gather together the volu- minous documents, oificial and otherwise, which are necessary to be subpoenaed, and then proceed without any delay whatsoever. I should add, perhaps, that during the pendency of the reference an application was also made by the Edison Company of Brooklyn to acquire all of the stock of the Amsterdam Company. This application was vigorously opposed by the city, amd no decision has ever been rendered by the Public Service Commission. The reason for that being, I believe, that the Commission cannot come to 'an agreement on the subject. Eespectfully submitted, William P. Burr, Assistant Corporation Counsel. D'ated jSTew York, March 19, 1914. Senator Lawson. — Is that a memorandum, can I ask the wit- ness — was Frank L. Polk the Corporation Counsel ? Report of Joint Legislative Cojimittee 9S3 Mr. Burr. — It is. I might say in answer to your previous question that ■Commissioner Maltbie was entirely familiar with this situation, because he had sat in the proceeding brought to increase the capitalization of the Kings County Company. Q. And when was that application made? A. That was in 1911. And in the proceeding of the Kings 'County Electric Light and Power Company for the approval of the issuance of convertible debenture bonds of the par value of five million, he says to date no portion of the $405,000 invested in stock, bonds and coupons of the Amsterdam Company has been written off, but, as already pointed out, the. securities represent 'practically no property except a franchise, and have earned no income for at least twelve years. The Edison Company is not operating undeT the franchise, and practically its only present value arises through the fact that while the Edison Company controls the Amsterdam 'Company, no person or corporation can use the franchise, and competition is thereby prevented. , Q. Do you care to state, Mr. Burr, any reasons of which you have knowledge for your having resigned as Assistant Corporation Counsel ? A. I do not care to discuss that. Q. Was it in your opiiiion in any way connected with this litiga- tion, or in any matter pending before the Public Sendee Com- mission? A. I would not care to express any opinion upon the subject. I would like to say that Judge McCall is a friend of mine ; a man whom I highly Tespect, and what I have said here is in response to the subpoena which you served on me at 12 o'clock to-day, and is in the form of the record already made bv me in reports to the Corporation Counsel. Q. And that you are not a volunteer in this matter ? A. By no means. ■Chairman Thompson. — Unless you are in the same category as everybody else. Everybody is very modest about producing any evidence here. That is our experience up to date. Mr. Lewis. — Is there a representative of the Corporation Counsel's office in the ■room ? Mr. Victory. — There is. 984 Investigation of Public Service Commissions Mr. Lewis. — Can you furnish from the Corporation Counsel's office, and advise this Committee what, if any, notices have been served upon the Corporation Counsel's office relating to the hearing before the Public Service Commission since Mr. Burr's retirement from the office of Assistant Corporation Counsel July 1, 1914? Mr. Victory. — In answer I would like to state I have received a telephone message from the Acting Corporation Counsel, Mr. Louis Hahlo, that he has just received a subpoena from this Com- mission calling for certain papers, and that he is sending those down here. I will go over them and produce any of them that you want. Q. Can you give us a copy of this ? A. No. I have only that one copy. (Copy left with stenographer which has been inserted at page 969. Mr. Lewis. — I offer in evidence copy of a letter signed by Prank L. Polk, Corporation Counsel, dated March 2'5, 1914, reading as follows : B. de ]Sr. Crugar, Esq., Office of the Mayor. Dear Sir : Replying to your letter of March 18th in regard to the com- plaint of the New Utrecht League of Improvement Association in the matter of the Amsterdam Electric Light, Heat and Powet Com- pany suit, this case, as you know, has .already been reported on by this office under date of February 14, 1914. To go into greater detail, the facts are as follows: This case came on for trial before Mr. Justice McOall in December, 1911. At the opening of the trial and without any previous notice to the City, Judge Hatch, counsel for the plaintiff companies, moved to amend the complaint in a very important and miaterial respect. This motion was granted by Justice McOall. The City, being taken by surprise, having prepared the case for trial on the issue raised by the existing pleadings, asked for an adjournment until plaintiff served an amended complaint and defendant served an amended answer. Report of Joint Legislative Committee 985 On December 7, 1911, an amended complaint was served by plaintiff and the City demanded ■&, bill of particulars. A bill of particulars was served on December 21, 1911. On December 29, 1911, the City served its amended answer to the amended com- plaint. The case was tben set down for trial at the February Term before Mr. Justice MoCall, who, meanwhile, had maintained control over the action. The City, having made a motion to compel the plaintiff to reply to its amended answer, when the case came up in February, 1912, plaintiff applied for an adjournment and the case was set down for April 15, 1913. W'hen tbe case wias called for trial before Mr. Justice McCall in April and the City had subpoenaed ^all its wit- nesses and the books of the plaintiff companies and other subsidiary companies, including theii- stock books, Judge McCall discovered that he was disqualified from trying the case, being a stockholder ia the Kings County Lighting Company, one of the companies affected by this litigation. The trial of the case was then put over until some other judge could dispose of it. Thereafter, Mr. Watson, the then Corporation Counsel, arranged for a reference of the issues to Mr. DeLancey Nicoll, as referee. The references began before Mr. Nicoll on June Y, 1912. It bas been pending before bim ever since. The plaintiffs have not yet closed their case. There have been twelve or fifteen adjourn- ments. Most of these were at the request of the plaintiffs. The others were upon motion of the referee. There has been no delay in the trial of this action on the part of the City. The City has always been ready. Since my letter of February 14th, referred to before, counsel for the plaintiff have been impressed with the necessity of proceeding to conclude this case without delay. This has resulted in the referee fixing two dates for further hearings and the attorneys for the plaintiff have been notified that they must finish these hear- ings. One of the attorneys informed me personally that they hoped to be able to finish in one hearing. When the plaintiff has definitely closed its case land rested, it is the intention of this office to proceed as expeditiously as possible to close the case. I should add, perhaps, that during the pendency of the reference, an application was also made by the Edison Company of Brooklyn 986 Investigation of Public Service Commissions to acquire all tlie stock of tbe Amsterdam Company. This applica- tion was vigorously opposed by the City and no decision has ever been rendered by the Public Service Commission. The reason for that being, I believe, that the Commission cannot come to an agreement upon the subject. I return the papers. Very truly yours, FEANK L. POLK, Corporation Counsel. (Enclosu'res) Q. Will you tell me, Mr. Burr, who Mr. de IST. Cruger is or was ? A. I believe he is the secretary to the Mayor. Q. And this letter w^as written in reply to a letter from the Mayor to Mr. Cruger, his secretary, because of a complaint made to the Mayor of the New Enteric League, a civic association ? A. Yes. Q. So that in March, 1914, the Miayor's ofEce was fully informed of the importance of this case and its status? A. Oh, yes, no doubt about that. Q. Mr. Burr, was the city's policy on the subject of recapturing unused franchises given wide publicity here in New York city? A. Why, I think so. Q. It was an established policy, was it? A. Yes, it was the result of very careful investigation, both by the Bureau of Fran- chises connected with the Board of Estimate and the Division of Franchises connected with the Law Department, and it was deemed a salutary and wise thing to do, in view of the require- ments of the charter, to get in all those old perpetual franchises as fast as possible, where they had been unused. Q. All that could be recovered ? A. All that could be recovered. The policy of the present charter being to limit the franchises as opposed to perpetual franchises. Q. Was the fact that the city had entered upon such a policy disclosed to the Coiiimission or to any of the Commissioners at the time the application of the Edison Company was pending before the Commission ? A. It was certainly disclosed by me to Commissioner Maltbie. Eepoet ov Joint Legislative Committee 987 Q. And Commissioner Maltbie was the presiding hearing Com- missioner, was he not, on this application ? A. He was the Com- missioner having chaTge of this matter. By Mr. Harkness. — Is there any objection to my asking Mr. Burr a few questions? Mr. Lewis. — Not at all. Examination by Mr. Harkness: Q. In connection with this, Mr. Burr, did you ascertain what holding of stock the Edison Coanpany had in the Amsterdam Com- pany ? A. Yes, I have spread it in my brief which I have submitted to the referee. I do not recall exactly what the amount was. Q. A majority interest, was it not? A. Yes, and there is no doubt about that. Q. Would it be something like 18,000' shares? A. I couldn't tell you, Mr. Haikness. Q. I don't think that is material, if you haven't it handy. A. I know it was a very small amount of stock that was necessary to be acquired in order that they might have all the holdings, and it was for that very purpose that I objected to the acquirement of that stock, no matter how small it was, because I wanted to prevent any claim of merger. Q. JSTow, the suit that you were handling, which has been referred to, was an attack by the city on the franchise of the Amsterdam Company? A. Yes. Q. Now, that being so- — A. And an attack upon the use of that franchise by the Edison Cbmpany of Brooklyn. Q. Based again on the 'assumption, though, was it not, that the franchise itself was invalidated? A. And that the Edison Com- pany had no authority to use that franchise, or any other. Q. And that being so, and the Edison Company having already a vast majority of the stock of the Amsterdam Corporation, what difference did it make to the city whether the Edison Company acquired the 122 shares outstanding or not ? A. For this reason : They had no standing in couTt at all, the Edison Company, as a mere stockholder, and therefore it, in its amended complaint, sought to sustain its position by alleging that a lease from the Amsterdam Company, the terms of which were never formulated, 988 Investigation of Public Seevice Commissions so that on tte trial and up to the present time we have never known what the terms of that lease ate. They have never been written, and they have never been uttered; no eye has seen them •and no tongue has told. But if they had got the consent of the Public Service Commission originally to merge with the Amster- dam Company, then, as you know, it would have had the right to operate its franchise if it had got the consent of the Public Service Commission. Q. Assuming it had got the consent to merge, how could that have affected 'any invalidity in an underlying franchise of the Amsterdam Company ? A. It was not a question of curing any invalidity. It was a question of the Public Service Commission flying in the face of a positive policy announced and well under- stood, which had been adopted by the city authorities for the purpose of recapturing perpetual franchises which had been abandoned. Chairman Thompson. — In other words, it would have if allowed to merge, it would have accomplished the same object as though they had their franchise ? Mr. Burr. — It would have been the same thing. I would have contested that. Mr. Harkness. — You would not contend a merger wOuld ratify or make good any undel-lying invalidity of the franchise ? Mr. Burr. — It would put the Public Service Commission in the position of holding in its report that these stocks and bonds were absolutely worthless, and authorizing other stockholders in other companies to pay for worthless stocks. Q. Do you know how much this outstanding purchase amounted to? A. I don't know. I have already said it was a very small amount. Q. Do you know out of what account it was paid ? A. I do not. Q. Do you know there was a requirement on the part of the Commission that account could not be capitalized? A. I have heard nothing further in regard to that matter until I read it in the paper yesterday morning. Q. You say you knew nothing aboiit it until yesterday morning. Eepoet of Joint Legislative Committee 989 Wben the suit was going on before Delancey HkoW, the action of the Commission liaa not been introduced in the reooid ? A. ITo. Q. You .also said that Commissioner Maltbie told you that he was opposed to the Commission granting an application ? A. That is absolutely so. Q. Do you know that Commissioner Maltbie voted to grant the application ? A. I was not aware of that. I was speaking of nearly two years ago when I spoke to him about it. His view then was that nothing would be done by the Commission as far as he was concerned to interfere with the policy of the city in that respect. Chairman Thompson. — That was what justified Mr. Maltbie in holding back any decision. Mr. Burr. — That was what he had in mind, and delayed his action. Mr. Harkness. — Did you ever talk with Judge McCall or any other Commissioner outside of Mr. Maltbie? Mr. Burr. — ISTo. I never spoke to anybody about this matter except the man that had it in charge. Examination resumed by Mr. Lewis : Q. And you relied and have relied since your re-entry into this litigation on September 1, 1914, upon what you suppose was an understanding between yourself and Mr. Maltbie that no action would be taken by the Public Service Commission 'upon the appli- cation for leave to purchase the stock until the determination of the litigation before Judge Delancey JSTicoU ? A. I have so far as my knowledge of all the facts and circumstances connected with this case is concerned, I relied on this : that no approval had been given by the Commission to that application for the consent to acquire that stock. Q. And no information had come to you from the Corporation Counsel or from his office to the effect that the application had been granted during the time of your absence from the office ■ — that is, between July 1 and September 1, 1914? A. As I have previously stated, I had no knowledge ooi the subject until yesterday when I read it in the paper. 990 Investigation of Public Seevice Commissions Mr. Harkness. — You say you have looked at the order this morning. Mr. Burr. — I saw in the hands of the counsel copy of an order which purports to be the copy which was sent to the Corporation Counsel. Mr. Harkness. — Did you notice in that a proviso that the action of the Commission should not be deemed in any way an approval of the merger ? Mr. Burr. — I have not read it. I never saw it. I simply saw the letter acknowledging the receipt of it. Mr. Lewis, resuming: Q. And you saw that to-day for the first time ? A. I saw that to-day for the first time. Chairm^an Thompson. — ISTow, has there been a decision at all in this reference? Mr. Burr.— No, there has been no decision as yet. We gave an extension of time to Mr. NicoU from the 9th of this month and thirty days further time from the 9th. Chairman Thompson. — And he has had three years ? Mr. Burr. — That is the fact. That is, the case has been — being tried that time. Chairman Thompson. — Has Mr. Nicoll any relations or other- wise with any one in the Corporation Counsel's office, or Hatch and Sheehan on the other side ? Mr. Burr. — I don't know. There is no one in the Corporation Counsel's office. Chairman Thompson. — Or was in the Corporation Counsel's office — wasn't he associated with Mr. Watson ? Mr. Burr. — I have heard so. I have understood Mr. Watson was originally from the office of Mr. Nicoll. Chairm'an Thompson. — Now, were all these collateral motions in this case, amendment of pleadings and granting of the motions, were those all before Judge MoCall ? Eepoet of Joint Legislative Committee 991 Mr. Burr. — The motions I 'have testified Tegarding the amend- ing of pleadings were before Judge McCall. Examinatioii by Mr. Lewis : Q. Do you know, Mr. BuTr, by whom the injunction was granted ? A. No, I don't recall that. Q. A judge in Brooklyn, was it not ? A. I don't recall. Q. That injunction is still in foTee? A. The injunction is still in force. Q. And has been at all times since the action was begun ? A. Yes. Vincent Victoet, called as a witness. Examined by Mr. Lewis: Q. Mr. Victory, what is your connection with the Corporation Counsel ? A. I am Deputy Assistant Corporation Counsel. Q. And have you the custody of records, or any part of them ? A. Not exactly the custody of them. Q. Do you appear here in res.ponse to a subpoena served on the Corporation Counsel ? A. I do. Q. And under his direction ? A. I do. Q. That subpoena required the production of any papers in the custody of the Corporation Counsel relating to the hearings before the Public Service Commission on an application for leave to pur- chase the stock, did it ? A. I have not seen the subpoena. Q. Have you produced some papers in response to the subpoena ? A. Yes. Q. Among them do you find any notice from the Public Service Commission, or from any one representing the Edison Electric Illuminating Company, or the Amsterdam Electric Light, Heat and Power Company of a meeting of the Public Service Commis- sion to be held on July 30, 1914 ? A. I do not. Q. Did you have any knowledge, Mr. Victory, of the fact that the application had been granted by the Public Service Commission on July 30, 1914? When did you have knowledge of it for the first time ? A. I think when I saw it in the paper this morning. But I may have had knowledge previously, because we had a copy of the order granting the application on our files, and mostly all 992 Investigation of Public Service Commissions papets are handed to me. I may not remember the fact, because that order came in some time. Q. You were associated with Mr. Burr in the hearings before the Public Service Commission, were you not ? A. I was, yes. Q. I show the witness communication from the files of the Public Service Commission, Case No. 1554. That is a receipt by the Co'rporation Counsel of a communication dated August 4, 1914, transmitting and serving upon the city of New York a certified copy of an order in Case No. 1554 authorizing the Edison Electric Illuminating Company of Brooklyn to acquire 122i shares of the capital stock of the Amsterdam Electric Light, Heat and Power Company, is it not ? A. Yes. Q. And this is signed by Mr. Ilahlo, the Acting Corporation Counsel ? A. Mr. Hahlo. Q. And is dated August 17, 1914? A. Yes. Q. Had you ever seen this receipt until to-day ? A. I may have. Q. Have you any recollection of having seen it ? A. No. Mr. Harkness. — Perhaps if Mr. VictoTy can look at it from the usual numbers on that he might tell who dictated it. Mr. Lewis. — ■ Quite well. Mr. Victory. — May I answer your question ? Q. I thought you did. A. This letter I find was dictated by Mr. Arthur Keams, a young man in our office, and bears the num- ber 1'6, which is usual for him to have 16 put on these ordinary letters acknowledging papers, and it was signed by Mr. Hahlo and 0. K.'d undoubtedly by Mr. Samuel J. Eosenzone, Mr. Burr's successoT. Mr. Harkness. — ilr. Eosenzone was Mr. Burr's successor ? Mr. Victory. — Yes. Mr. Harkness. — Did the city in this case ever make an applica- tion to the Public Service Commission for a rehearing on this order of July 3€th ? Mr. Victory. — ■ No. The city never thought it was sufficiently important. Report of Joint Legislative Committee 993 Elveetoit E. Chapman called as a witness. Examination by Mr. Lewis: Q. Mr. Chapman, you were a member of the firm of E. R. Chapman & Company ? A. Yes. Q. Engaged in the brokerage business ? A. Yes. Q. Is that company still doing businesSj Mr. Ohapmian ? A. It has tetired from the stock brokerage business proper. A firm of E. R. Chapman & Company is still in existence, but it is not engaged in Stock Exchange operations. Q. Was there a time when the firm of E. R. Chapman & Com- pany, of which you are a member, had stock transactions with Edward E. McCall, in which the stock of the Kings County Elec- tric Light and Power Company was the subject of such negotia- tions? A. Of my own knowledge I could not have answered the question. Since I came to the Committee room I have been shown certain certificates in the name of E. R. Chapman •& Company, and I assume that we did. We had an account with Judge McCall. Q. And that account appealed upon the books of the company ? A. It would. Q. And have you produced the books showing that account at this time ? A. I have not. Q. Can you produce them? A. I will have to explain. The books of that concern, which were very numerous — fill probably half a car — were sent to my farm on Long Island and stored in various places ; part of them over a stable and a part of them in a house which was not occupied, and the stable has been burned and everything that was in it was lost. A large number of books and papers, however, were stored in the house that are still there. I presume that there could be found in that house all of the data that you would probably require in this investigation. Q. You think that data was not in the stable that was burned ? A. I don't think so, for the reason that I have had occasion to have those books examined and have found certain classes of books that would probably develop this information, in the house, and I presume — Q. Are you willing to make an examination of those books, or cause an examination to be made, foT the purpose of ascertaining ? A. I will. Vol. 1 — 32 994 Ikvestigation of Public Sekvice Commissions Q. And if you find the account of Judge McCall, will you have a transcript made of it and submit it to this Committee ? A. I will. Chairman Thompson. — Or you could bring the book. Mr. Chapman. — It would run through a large number of books, probably, because it was several years. It would probably be equally as useful to have a transcript of it made. Q. Would you object to the Committee furnishing a man to assist in the making of that transcript, Mr. Chapman ? A. No, sir. Q. And when would it be practicable for us to designate a man to make that investigation — that is, any man that we may desig- nate, would it be practicable fot him to go and make the investiga- tion and transcript with your representative ? A. I will endeavor to get one of the bookkeepers who had charge of that class of a;ccounts. Just whenever he can be obtained, I don't know. He is employed by another firm, and I should think possible the day after to-morrow I can have it arranged. Chairman Thompson. — Can it be done to-morrow morning ? Mr. Chapman. — I don't suppose it could. I haven't control of this other gentleman. Q. Will you advise this Committee ? A. I will. Chairman Thompson. — : Is there any objection to sending a man down with our man to-morrow ? I would like to stay in New York always, but I can't. Mr. Lewis. — Well, I don't see that we can ask anything more of you, Mr. Chapman. Mr. Chapman. — I could arrange it for to-morrow — I perhaps could arrange it by to-morrow afternoon. Chaii-man Thompson. — We will designate Mr. Perley C. Morris. Mr. Chapman. — ■ If he will come to my office to-morrow I will see if I can send a man. Mr. Harkness. — Was Mr. Van Antwerp connected with your firm ? Eepoet of Joint Legislative Committee 995 Mr. Chapman. — He was one of my partneTs. Mr. Harkness. — And his name is what ? Mr. Chapman. — William C. Mr. Harkness. — He was connected with your firm during the period from 19'01 or '02, for some years? Mr. Chapman. — Yes; from about 1901, I think. It was until about 1908 or 1909. Mr. Harkness. — Do you remember what his firm was prior to going into partnership with your firm ? Mr. Chapman. — I think it was Paine & Van Antwerp. Mr. Lewis. — ^I have asked Mr. Smith to ask CommissioneT Williams to attend. I don't know whether we will be able to reach him this afternoon. (At this point Mr. Victory announced that he would like to correct his testimony.) By Mr. Lewis : Mr. Victory, do you want to correct your testimony ? Mr. Victory. — Yes, I want to correct that testimony. Mr. Lewis. — Mr. Victory, you wanted to correct the testimony which you gave a few moments ago in reference to the files ? Mr. Victory. — Yes. The man who brought down these papers tells me that he took them out of the files of the Amsterdam papers. I am in charge of those papers, and this order could not have gotten in there without my knowing something about it and having put it there, and I suppose I should have sent it down to Mr. Burr. I either thought it was not sufiiciently material to send it down to him, or else he was not retained at that time, and when he was retained later I suppose I forgot about it. But the main purpose of our position was to prevent the merger, and the order does not permit the .merger. Mr. Lewis. — That is the correction you desire to make ? 996 Investigation of Public Sebvice Commissions Mr. Victory. — Yes. So I must ihave known about it because the pajDers are all first banded to me. Robert Woob called as a witness. Examination by Mr. Lewis : Q. Commissioner, you were present, I notice from the proceed- ings of the Public Service Commission, at a meeting of tbe Com- mission on the 30th of July, 1914? A. The records are usually correct, Senator. Q. And at that meeting a resolution. Strike that out. I read from the proceedings of that meeting as follows : " It was duly moved and seconded that an order in Case No. 1554 be adopted authorizing tbe Edison Electric Illuminating Company of Brook- lyn to purchase, acquire, take and bold the remaining shares of tbe capital stock of the Amsterdam Electric Light, Heat and Power Company, provided that the purchase price tbereof should not exceed ten thousand dollars, and the amount of the purchase price should not be capitalized and should be paid out of the sur- plus, and directing that notbing contained in the order should be construed as authorizing tbe merger of tbe Amsterdam Electric Light, Heat and Power Company by the Edison Electric Illuminating Company of Brooklyn, the ordet to take effect imme- diately." Do you recall the adoption of that resolution? A. I recall such a meeting, yes, sir. Q. Will you tell us wbat you know of wbat took place at that meeting? A. Well, I don't remember the details of what took place at the meeting, but I remember that tbe Amsterdam Com- pany is a corporation; I believe it bas $500',0'0'0' capital stock — 5000 sbares. All of tbe 5000 shares but 122 shares were previously owned by the Brooklyn Edison Company, and tbey desired to pur- chase 122 sbares, and they also owned, as I remember, all the bonds of that company, and we authorized the purcbase of tbat out- standing 122 shares with tbe restrictions sucb as you bave read. Q. Did you know at that time of the fact tbat an action was pending in wbicb tbe Amsterdam Company and tbe Edison Com- pany were plaintiffs, and tbe city and its officers were defendants, to restrain the city from passing any resolution to annul tbe fran- cbises owned by tbe Amsterdam Company? A. Well, I am not sure whether I did or not, but I can't see what — Kepoet of Joint Legislative Committee 997 Q. JSTow you have aniswered my question!. Have you any recol- lection as to whether you knew at that time of the existence of that action ? A. You see it is over a yeaa* ago — sixteen months ago. I haven't any recollection. Q. Did you know that the application for this leave to purchase was pending before Commissioner Maltbie, the hearing Commis- sioner? A. I did hear something to that effect; yes, I remember. Q. Did you talk with Commissioner Maltbie on the subject of the propriety of taking it out of his hands ? A. I do not think it was taken out of Commissioner Maltbie's hands. Q. Had he made any decision or determination on the applica- tion ? A. As I remember, he voted for it. Q. I know, but prior to the date of the meeting at which action was taken, had Commissioner Maltbie made any report or decision on the application, to your knowledge ? A. As I remem- ber it, he had not made any written report, but as I also remem- ber it, he also said that as long as the order was properly safe- guarded, there was no objection to it. Now, I say that entirely from hearsay. That is my recollection. Q. Did he say that to you? A. I think he said it in opem meeting. Q. In open meeting? A. I won't say that. He said that in general conversation. Q. To you? A. I was present when he said it. That is my recollection. Q. Did Commissioner Maltbie tell you that he had held the matter from November, 1912, until July, 1914, because of the fact that the rights of the company were the subject of litigation ? A. I remember that something was said about a long-pending — that the matter had been pending for some time. Q. Did you know that the city had been represented before the referee in that action, and had alleged that the — A. I didn't know the details of it. Senator, and I can't say what effect our action — Q. I don't care about the details. I want to know if you knew about it, that the city was represented in that action? A. The referee — 998 Investigation of Public Seevice Commissions Q. I want to know if you knew the city was represented in the action before the referee? A. I can't recall now whether I did or not. Q. Did you know that there had been no decision in the action before the referee? A. I can't recall now whether I did or not. At the same time I would like to say I cannot see what effect our action could possibly have as to prejudicing any interest the city might have, and I think every safeguard was taken in that order to protect the interests of the city in the action that we took. In the first place, there were only 122 shares outstanding. They owned the balance of the 5,000, and we put every safeguard we could in that order to provide against any possible contingency. Q. But you still permitted the company to acquire the stock of a corporation which in the action it was claimed had no right to a franchise whatever, didn't you ? A. And that stock was to be amortized out of surplus — not to be capitalized, the purchase price. Q. But who owned the surplus ? A. The company. Q. And who owned the company? A. I suppose the stock- holders did. Q. Yes. Then you permitted — the Public Service Commis- sion permitted the investment of cash belonging — A. Less than ten thousand dollars. Senator. Q. Will you permit me to state my question ? You permitted the company to use the assets belonging to the stockholders in the acquisition of stock of a corporation which in a litigation it was claimed was worthless because of the fact that its franchises were void, did you ? A. We permitted the company to purchase it, but I do not say we permitted the company to purchase worthless stock. Q. You permitted it to purchase it, didn't you ? A. The direc- tors are the best judges of their stockholders' interests, in a great many instances. Now, there have been instances, Senator, when worthless stock, as you say, have been a very big nuisance value, and somebody might have got hold of that stock, and it might have cost the company a good deal more than we allowed them to buy it. Q. Will you tell me the function of the Public Service Commis- sion, unless it is to protect the stockholders against the dissipation Kepoet of Joint Legislative Coiimittee 999 of the assets of the corporation? A. I believe the stockholders should receive a fair and adequate return on the investment of their property, and they should make sufficient allowances for depreciation and renewal and replacement, and the credit of the company should be such that when they come to make extensions they should be able to ask outside capital and be able to obtain it at a reasonable rate. Q. Do you think it was wise to permit the use of the company's funds in the acquisition of the corporation, the only assets of which it was claimed was worthless? A. I understand they had ducts there. Q. How? A. I understand they had about $50,000 worth of ducts. Q. Where did you get that information? A. I think I saw that in one of our reports. I think our statistical bureau told me that. Q. Who in your statistical bureau gave you that information? A. I think Dr. Webber did. Q. When did he give it to yoii? A. I talked to him about it the last few days. Q. How long have you known former Governor Sheehan? A. Fifteen or sixteen years. Q. Pretty good friends with him — known him intimately ? A. N"o, sir. Q. Have any business relations with him ? A. ISTever. Q. Well, tell us how intimately you have known him ? A. I know him as I do hundreds of other men; just have a casual ac- quaintance with him ; just a byeing. Q. ISTo social intercourse ? JSTo business relations ? A. No, sir. Q. He has never been your counsel in any way ? A. No, sir. Q. You know of his being a member — what is the firm name ? A. Why, I believe it is — Q. Who is that Chief Judge of the Court of Appeals — ■ A. Judge Parker, I think. He belongs to the Oakland Golf Club. Q. Do you belong to that club ? A. Yes. Q. Do you see him at the club frequently ? A. I have seen him there. 1000 Investigation of Public Seevicb Commissions Q. Did you talk witli him — any talk about this matter ? A. No, never have. Q. Did he write you letters on the subject ? A. No. Q. Do you know of his writing any letters on the subject ? A. I heard he wrote a letter to Commissioner Cram. Q. When did you hear that ? A. It was produced at the meet- ing. Q. Did Commissioner Cram produce it at the meeting? A. I think he did. Q. Did he read it to the Commission? A. I don't know whether he read it to the Commission. Q. Was it read ? A. I don't know whether it was read. Q. Did you see it ? A. Yes, I saw it. Q. And having seen it, you voted to grant the application ? A. No, I did not vote on that letter at all. Q. You voted after you had seen the letter, didn't you ? A. That would have no effect on me. I don't form my opinion on letters. Q. Did it have any effect upon you? A. No. I did what I thought was the proper thing for the company to do, and I would like again to call attention to the fact that that order is safe- guarded in every possible way. Q. We have a copy of the order. A. I thought perhaps you would like to have my opinion on it. Q. Did your counsel for the Commission ever advise you on the subject of the granting of that application ? A. I don't know whether he did or not. I don't remember. Q. Did it occur to you to confer with your counsel as to the propriety of that order ? A. Why, counsel doubtless prepared the order. Q. What counsel ? A'. The counsel of the Commission. Q. Mr. Coleman ? A. Well, he is the chief counsel there. Q. Well, have you any knowledge of the fact as to whether or not he did prepare the order? A. Well, the order came down from the legal department. Q. Did you see it come down from the legal department ? A. No, sir, I did not see the actual — Report of Joint Legislative Committee 1001 Q. When did it come down from the legal department? A. At that meeting. Q. On which day ? A. ISTow, Senator, you are asking me al;ont details eighteen months ago. Q. You seemed to be quite familiar with detail 'i A. I try to keep myself posted as well as I can. Q. I read to you a copy of the proceedings which you seemed to recall with great clearness? A. Well, naturally, after you read them to me. Q. You stated that you recalled the fact of the conversation and discussion there, did you — at the meeting at which this order was granted ? A. I had a recollection of it. Q. Well, now, do you recall whether or not at the time of that meeting you had ever received, prior to the time of that meeting, you had ever received from the counsel to the Commission, any communication on the subject of the propriety of allowing the purchase ? A. I don't remember that. Senator. Q. Did you make any inquiry to ascertain whether the advice of the counsel had been sought upon that question? A. I don't remember whether I did or not. We naturally would not pass an order unless it had been approved by counsel. Q. Well, did you know it had been approved by counsel when you voted to pass it? A. Well, I would not vote to pass any order unless it had been approved by counsel. Everything is ap- proved by counsel before we pass the order. Q. Well, did you know in this case before you had voted to approve that order, do you know in this case you had the approval of the counsel ? A. Why, yes. Q. When did you get that approval ? A. Well everything must have been approved by counsel. Q. You are merely relying on the general practice, are you not ? A. It is the invariable practice. Q. ISTever has been departed from? A. The orders are ap- proved by counsel. Q. I say that practice has never been departed from? A. I won't say that. I don't recollect of any instance where it has been departed from. 1002 Investigation of Public Seevice Commissions Q. Do you recall any of tlie things that Governor Sheehan said in the letter to Commissioner Cram ? A. He said, as I recollect it, that there had been a delay, and he wanted to have a decision one way or the other. Q. Have you seen the letter since the day of the meeting? A. ISTo. Q. Did you read a copy of the letter in the morning papers to- day ? A. I didn't know there was a copy in it. Q. Have you talked with anyone about the production of the letter at the hearing before this Committee ? A. No, sir. Q. Haven't heard anything about what took place before this Committee? A. You mean about the Amsterdam gas case? Q. Yes. A. Yes; but I did not see a copy of the letter. Q. Did you read the morning papers on the subject of what took place here yesterday ? A. I glanced them over. Q. Did you glance them over or read them ? A. I don't know how far I read. I was in a little hurry to get my breakfast. I didn't read them very fully, but I glanced them over. Q. Did yovi see that a letter was read here yesterday from Gov- ernor Sheehan to Commissioner Cram ? A. Yes, I saw that. Q. But you did not read the letter ? A. ISTo. I did not know the letter was published. I remember what Governor Sheehan wanted was a decision. He said he would go to the Appellate Division, as I recollect it now. I may be mistaken. This is en- tirely from memory eighteen months ago. Q. Do you recollect that in the letter from Governor Sheehan " Commissioner Maltbie refused to make a decision and I have given instructions to prepare papers for a mandamus directing the Commission to decide the case ? " A. I have a vague recollection of that. Q. Did that operate on your mind in getting you to approve of the application ? A. ISTot the slightest. Q. Do you recall in his letter Governor Sheehan said, " Mr. Burr has no legal position whatever in the controversy, and I sub- mit that he should not even have been heard " — do you recall that? A. ISTo, I don't remember. Q. And you doubtless knew of it at the time you voted, didn't you? A. If the letter was a matter of record there I probably did. Eepoet of Joint Legislative Cojimittee 1003 Q. Well, was it a matter of record ? A. Well, you seem to have it incorporated in the record. I imagine it must have been. Q. Well, was it before the Commission ? A. I don't remember whether it was or not. Q. If it wasn't then you didn't know about it ? A. Unless I saw it before. I have a recollection of seeing the letter. Q. At the time it was delivered to Commissioner Cram or there- abouts ? A. I think he showed it to me. Q. Did the fact that Mr. Burr had appeared in the action and had also appeared before the Committee as the representative of the Corporation Counsel, and the further fact that he had opposed the granting of the order make any impression on your mind? A. ISTo, because I thought we were taking every precaution to pro- tect the city's interests. Q. Well, did you rely upon your judgment in opposition to the judgment of the representative of the corporation counsel? A. 1^0, sir. As I said before, I thought we were taking every pre- caution. Chairman Thompson. — Answer counsel's question. Q. You can answer that question yes or no, or say you cannot answer one way or the other. A. I would like to state my reasons. Q. Answer the question, and then — A. My judgment was supplemented by our order drawn by our counsel, which I thought amply protected the city's interest in every way, and naturally Mr. Burr would oppose it because he had his lawsuit pending. Chairman Thompson. — Then your answer is no — you did not rely on your judgment, nor you did not rely on the judgment of the corporation counsel ; is that correct ? A. Well, I have just stated my reason. Senator. Chairman Thompson. — I did not ask you for your reason — I wanted an answer to the question. Mr. Wood. — I am relying on the judgment of our counsel. Chairman Thompson. — Then your answer to Senator Lewis is no. Mr. Wood. — I did not rely entirely on my own judgment, no. 1004 liSVESTIGATION OF PuBLIC SERVICE CoJIMISSIONS Chairman Thompson. — Nor the judgment of Mr. Burr. Mr. Wood. — I did not rely on the judgment of Mr. Burr, no. Mr. Lewis, resuming: Q. Did you think you were better qualified to determine whether the rights of the city were being protected than Mr. Burr was ? I want an answer to that, yes or no. A. Mr. Burr - — Q. You are not answering. A. No. I do not put my opinion against the legal opinion of Mr. Burr. Q. And you knew that Mr. Burr had been opposing the action in which you voted in favor of ? A. No, I did not. Q. But you had seen Commissioner Cram's letter? A. Wait a moment, Senator. The action of Mr. Burr was not opposing the action we were voting in favor of. He was prosecuting his own action, and we took every care that our action would have no effect on Mr. Burr's action. Q. But you knew that Mr. Burr was opposing before Commis- sioner Maltbie the granting of this application? A. I am not sure whether I knew that or not at the time. Q. Mr. Sheehan said so in his letter. A. Well, I thought our action took care of the objection of Mr. Burr there. Chairman Thompson. — Did you know what was in this letter of Sheehan's at the time it was read there ? Mr. Wood. — I have a general idea. Chairman Thompson. — Was it read there ? Mr. Wood. — No ; it was not read, as I remember. Chairman Thompson. — You had seen the letter ? Mr. Wood. — I had seen the letter. Chairman Thompson. — You had enough ability to comprehend what was in the letter ? ^Ir. Wood. — Well, I hope so. Mr. Lewis, resuming: Q. Do you recall. Commissioner, that Mr. Sheehan in his let- ter said, " It is an outrage that my client should be so treated, Eepobt of Joint Legislative Committee 1005 and I shall so denounce it in open court ? " A. I have a general recollection of the letter. Q. Did that threat operate upon your mind and induce you to vote in favor of the granting of the application ? A. I would not have paid the slightest attention to it. Chairman Thompson. — Well, what was it that you paid atten- tion to — what was it that made you act ? Mr. Wood. — What was it ? Chairman Thompson. — Yes. Mr. Wood. — Because I thought it was the proper thing to do. Q. You still think it was the proper thing to do ? A. Yes. Q. Do you have thoughts very often in relation to these cases that are dragging before the Commission ? A. I certainly would not act unless I did think so. Chairman Thompson. — Do you suppose you can ged; to Phila- delphia and help out some down there ? Mr. Lewis. — I think there is nothing further, Mr. Chairman. Chairman Thompson. — ;-Well, if there is nothing further, sus- pend until to-morrow morning at 10 :30, and have the meeting some time between that time and 11 o'clock. Whereupon an adjournment was taken, as indicated. NOVEMBER 11, 1915 New Yoek County Lawyers' Association Boaed Room, 165 Broadway, New York City The Committee met, pursuant to adjournment, at 10 :30 o'clock A. M., Chairman Thompson presiding. Mr. Lewis. — Mr. Chairman, I am under obligations this morn- ing to Mr. Harkness, of the Public Service Commission, for hav- ing produced and submitted to me the correspondence file of the legal department, as I understand it, containing correspondence 1006 Investigation of Public Service Commissions passing between Commissioner Maltbie and the Corporation Coun- sel, and between Commissioner Maltbie and Mr. William F. Shee- ban, on the subject of the application of the Edison and Amster- dam Companies for leave to purchase the 122 shares of stock of the Amsterdam Company. I offer in evidence an unsigned memorandum bearing the ini- tials M. E,. M., and dated November 6, 1913, which reads as fol- lows: " Public Service Commission, ISTovember 6, 1913. " Mr. William P. Burr, Assistant Corporation Counsel, Hall of Eecords, New York City. " Dear Mr. Burr. — I have still upon my calendar the ap- plication of the Edison Company of Brooklyn for authority to acquire 122 shares of the capital stock of the Amsterdam Company. If possible, I should like to dispose of this pro- ceeding within the near future and would like to know whether you have progressed so far with the case that you had that you can withdraw your opposition to this applica- tion, or at least indicate when the other case is likely to end. " Very sincerely, " Commissioner." (The same was received.) Mr. Lewis also put in evidence the following letter : " City of New York, Law Department, Office of the Corporation Counsel. New York, November 10, 1913. " Hon. Milo E. Maltbie, Public Service Commission. "My Dear Commissioner. — Your note of the 6th inst. regarding the matter of the application of the Edison Com- pany of Brooklyn for authority to acquire 122 shares of the capital stock of the Amsterdam Company which you still have on your calendar was duly received. " You say : ' If possible, I should like to dispose of this proceeding within the near future, and would like to know whether you have progressed so far with the case that you Report of Joint Legislati-s'e Committee 1007 had that you can withdraw your opposition to this applica- tion, or at least indicate when the other case is likely to end.' " In reply I beg to say: " The next hearing in the case to which you refer now on trial before Delancey JSTicoU, Esq., has been set for ISTovember 20, 1913. Counsel for the Edison Company of Brooklyn and the Amsterdam Electric Light and Power Company, plain- tiffs in that action, have announced that they will close their case at that hearing. I will then move to dismiss. If that motion is denied, the city's case will be presented and finished within a week or ten days thereafter. So the end of this month should see the close of the case. " The stock of the Amsterdam Company, according to the sworn statements of its ofiicers, is worthless. In the matter of the Kings County Electric Light and Power Company (case ISTo. 1174), tried before you, you found and stated in your opinion: " ' The Edison Company is not operating under the (Amsterdam) franchise, and practically its only present value arises from the fact that while the Edison Company controls the Amsterdam Company, no other person or cor- poration can use the franchise and competition is thereby prevented from this source.' " This was in 1911. " The Edison Company, as a mere stockholder, has no standing in court to enjoin the threatened action of the city to rescind the franchise granted to the State Company, which was subsequently acquired by the Amsterdam Company. So, by the amended complaint they alleged, and by the testimony adduced on the trial, have sought to prove that on January 12, 1900, the Amsterdam Company leased its franchise and property to the Edison Company, the terms of which lease have never been formulated in writing, and at the last hear- ing, under cross-examination, the secretary, W. W. Freeman, was unable to state the terms of such lease or to name anyone connected with either company who could do so, although the claim is made that under such lease the Edison Company has 1008 INVESTIGATION OF PuBLIC SeEVICE COMMISSIONS ever since operated and is now operating the property and franchise of the Amsterdam Company. Yet, on the hearings before you in re Kings County Light and Power Company, in 1911, Mr. Freeman testified there was no lease and that the Edison Company was not operating under the franchise of the Amsterdam Company. " I fail to perceive that any good reason has been presented in the matter now pending before you to justify the expendi- ture — some eight thousand or ten thousand doUaxs — neces- sary for the purchase of the 122 shares of stock of the Amster- dam Company. ■'At all events, I would request that no action be taken until after the conclusion of the case now pending before Mr. Nicoll, as referee, the end of this month. " Very respectfully yours, " WILLIAM P. BUHE, "Assistant Gorporaiion Counsel." Mr. Lewis also put in evidence the following letter : " Public Service Commission, June 19, 1914. " Hon. Frank L. Polk, Co'rporation Counsel, Hall of Records, New York. " Dear Mr. Polk. — Some time ago the Edison Company of Brooklyn applied to the Commission for authority to pur- chase a few shares of the Amsterdam Company, for which, I believe, they are to pay eight or ten thousand dollars. At that time, a certain litigation was pending between the city of ISTew York and the Edison Company, relative to the fran- chises of the Amsterdam Company, and we were requested by Mr. Burr, who was then counsel in charge of that matter, to withhold action upon this request pending a settlement of this litigation. This I did, and yet, from time to time, the Edison Company has urged and insisted upon action. No action has yet been taken, although a long time has elapsed since the hearings were closed, and they have just renewed their request for immediate action. I have spoken with Mr. Burr oyer the telephone, and he hesitates to act, as he is not Ebpoet of Joint Legislative Committee 1009 sure that this matter comes within his province. I, there- fore, am sending you this note with the suggestion that I would like to talk with you about this matter as soon as you can familiarize yourself with it. If there is any way whereby we can dispoise of the case without injuring the rights of the city, I would be glad to do so. " Very sincerely, " Commissioner. " MEM " Mr. Lewis also put in evidence the f ollomng letter : " Hatch & Sheehan, 14 Wall Street, " New York, June 22, 1914. " Hon. Milo R. Maltbie, Public Service Commission, First District, 154 Nassau Street, City. " Dear Sir. — We respectfully call your attention to the fact that on August 12, 1912, there was filed with the Public Serv- ice Commission, First District, a petition of the Edison Electric Illuminating Company of Brooklyn, for permission to acquire the few remaining shares of stock of the Amsterdam Electric Light, Heat and Power Company, not already owned by it. This petition was referred to you, and after several hearings, the matter was finally closed on ISTovember 12, 1912. " The only opposition that developed was by Mr. Burr, representing the Corporation Counsel's office, who claimed that as the city was then in litigation with the Amsterdam Electric Light, Heat and Power Company, involving the validity of the franchises of the Amsterdam Company, no decision should be made by the Public Service Commission until the litigation with the city was determined. You will recollect that we took the attitude that the Corporation Coun- sel had no right to intervene in the matter. In any event, whether the Corporation Counsel had the right to intervene or not, the pendency of the litigation between the city and the company had nothing whatever to do, as it seems to us, with this application. So far as the litigation with the city is concerned, the matter has been referred to Mr. Delancey 1010 Investigation of Public Seevice Commissions Nicoll, as referee, and the Amsterdam Company rested its case on May 5 last and an adjournment was taken at the request of Assistant Corporation Counsel Burr to May 19, when the matter was again adjourned, at Mr. Burr's request, to June 2. On that day Mr. Burr stated that the summer vacation was beginning and that he would be absent from the city for at least a month, and as the referee was to sail on June 20, the matter was finally adjourned to October 5. " You can see from this that it is more than likely that several months will intervene before there is a decision by the referee, and many more months will intervene before a deci- siou on appeal can be rendered. We are, therefore, of the opinion that it is the duty of the Commission to decide our application, and we respectfully urge that disposition of this question may be made by you with all conveniecat speed. " Yours truly, " HATCH & SHEEHAN." Mr. Lewis also offered in evidence the following copy of letter: " Public Service Commission, June 25, 1914. " Messrs. Hatch & Sheehan, 14 Wall Street, "JSTew York City. '"Dear Sirs. — Your letter of Jvme 22nd received, and I had already talked with Mr. Burr over the phone and written to Mr. Polk regarding the case. Mr. Burr did not wish to give his consent to a decision of the case without the matter being taken up with Mr. Polk, and I hope to hear from him very soon regarding the matter. If I do not, I shall call upon him personally. " Very sincerely." No signature and the initials " MEM." Mr. Lewis also put in evidence copy of letter as follows: " Public Service Commission, June 27, 1914. " Messrs. Hatch & Sheehan, 14 Wall Street, New York City. " Dear Sirs. — I saw Mr. Polk yesterday and spoke to him about the Amsterdam matter. It had not been called to his Ejepoet of Joint Legislative Committee 1011 attention before lie received my letter, and he said he would look into it and let me know very soon whether he would be willing to withdraw the city's opposition to aotion by the Commission in your case. " Very sincerely, " Commissioner. " MRM." Mr. Lewis also put in evidence the following letter : " Hatch & Sheehan, 14 Wall Street, " New Yoek, June 29, 1914. " Hon. Milo R. Maltbie, Public Service Commission, First District, 154 Nassau St., City. " Dear Commissioner. — Replying to your letter to us of June 27, to the effect that Corporation Counsel Polk would let you know very soon whether he would be willing to with- draw the city's opposition to decision in the matter of the pur- chase of the Amsterdam Electric Light, Heat and Power Company stock, I desire to say that I should be pleased to hear that Mr. Polk had taken the very sensible attitude that this matter did not concern the city authorities, but it may well be that his attitude will be that he does not desire to over- rule his predecessor in office. Frankly, I can conceive of no reason why the city should be heard in this matter. It has no interest whatever in the particular application that is before you ; but, assuming that it has, we are nevertheless entitled to a decision for or against us. We naturally prefer a decision in our favor, and confidently expect one on the record, but rather than have the matter stand as it is, it would be better that our application be denied, for in that event we can review the decision. " I again submit that we are entitled to have this matter disposed of without additional delay. " Yours truly, "W. F. SHEEHAN." 1012 Investigation of Public Service Commissions Mr. Lewis also put in evidence the following letter: " Corporation Counsel, City of New York, July 10, 1914. " Hon. Milo R. Maltbie, Public Service Commissioner, 154 Nassau Street, New York City. " Dear Mr. Maltbie. — I saw Mr. Burr and Mr. Walker in regard to the application of the Edison Company to purchase the stock of the Amsterdam Company, and they are still of the opinion it would be just as well to wait until a decision was rendered in this matter in the fall. The case is com- pleted except for the filing of objections, which will be done as soon as Mr. NicoU returns from the other side. " Yours sincerely, " FHANK L. POLK, " C orporaiion Counsel.'' Mr. Lewis also put in evidence the following letter: " Hatch & Sheehan, 14 Wall Street, " New Yoee, July 23, 1914. " Hon. Milo R. Maltbie, Public Service Commissioner, 154 Nassau Street, New York City. " My Dear Commissioner. — I have your letter of July I7th. I am sorry you have reached the conclusion not to make a decision in the stock purchase case until fall. I regret that I will have to proceed by mandamus to compel the Com- mission to decide the case. I respectfully submit that it is no affair of the Public Service Commission to consider what effect the performance of the strict statutory duty upon you will have upon pending litigation between the Amsterdam Company and the city of New York. Any attitude you may take in the matter has absolutely no relationship to the litiga- tion in question, and even if it did, as the Public Service Commission is not a party to the litigation, it should proceed to give effect to the law of its creation. " I personally regret that we have come to the parting of the ways. I do not desire to take an attitude which will Kepoet of JonsTT Legislative Committee 1013 surely subject your ComiQissioii to what I consider a merited judicial rebuke, but I must safeguard the interests of my client. " Yours truly, "W. F. SHEEHAlSr." Mr. Harkness. — I wish to make a slight correction at this point. Mr. Lewis. — Certainly you may do so. Mr. Harkness. — ■ You stated in opening that these were pro- duced by me from the legal department files. Striotly, the papers you have are not a part of the legal department files. They were turned over by Commissioner Maltbie to Assistant Counsel Cham- berlain, with a draft opinion for Mr. Chamberlain's consideration, but the papers should have been properly in the Secretary's files. They were not put there because Mr. Maltbie evidently did not send them there. I wanted to correct that impression. Mr. Lewis. — I was under the impression that they came from the Legal Department. Mr. Chairman, I offer in evidence the following : "Date, September 18, 1912. " To Hon. Milo E. Maltbie, Commissioner : " In the matter of the application of the Edison Elec- tric Illuminating Company of Brooklyn for au- thority to purchase 122 shares of stock of the Amsterdam Electric Light, Heat and Power Company. Case 1554. " If the Edison Company obtains the 122 shares desired, it will hold all of the stock of the Amsterdam Company, and will then be in position to merge the latter. Although the consent of the Commission would be required for such action, it seems advisable to consider the possible effect of consoli- dation before consent is given to the Company to acquire the remaining stock outstanding. " So far as the supervision of accounting and reports is concerned, it would be a distinct advantage to eliminate the 1014 Invkstigation of Pubuc Service Commissions Amsterdam Company, which is only a ' paper ' company. This would be an advantage to the Company, as well as the Commission. It is possible that the Company also seeks additional advantages in the perfection of its franchises, especially in wards 30 (New Utrecht) and 32 (New Lots), as there is considerable doubt as to the Company's right to operate in those wards at present. The Company takes the position that it has such rights under other franchises, and has not therefore caused its subsidiary, the Amsterdam Com- pany to assign to it the lattcr's franchise rights, which impose more onerous conditions in favor of the city than do the other franchises held by the Edison Company. Assuming that the Commission would assent to an assignment of the Amster- dam Company's franchise to the Edison Company, I think the Commission may well give its consent to the stock trans- fer now applied for. " The securities of the Amsterdam Company appear among the assets of the Edison Company at an excessive valuation, namely, $400,000 more than the Amsterdam Company values its property in its own report. This is a matter that will require rectification when the consolidation takes place, and the Edison Company acquires title to the property of the Amsterdam Company. " I see no objection to the granting of the application in this case. " Appended is a statement of facts concerning the Am- sterdam Company in some detail. "A. F. WEBER, " Chief Statistician." Senator Towner presiding. Mr. Lewis also put in evidence the following document: " Date, November 22, 1912. "To Hon. Milo E. Maltbio, Commissioner: " Memorandum for use in opinion in Case 1554. " The Corporation Counsel appeared for the City at the hearings and called the Commission's attention to the fact Eepoet of Joint Legislative Comjeittee 1015 that certain litigation is now pending between the Amster- dam Company and the Edison Company, as plaintiffs, and the Mayor and other members of the Board of Estimate and Apportionment as defendants, in which the City's interests, in the Corporation Counsel's opinion, might suffer if the application in this case were granted and the companies should proceed to merge according to their declared inten- tion. It seems that in January, 1910, a complaint was made to the Board of Estimate in relation to the stringing of wires by the Edison Company in the Thirtieth Ward of Brook- lyn, formerly New Utrecht. This complaint led to an in- vestigation of the franchise and rights of the Edison Com- pany and its affiliated corporations, which resulted in a re- port of the City Division of Franchises, dated January 16, 1911, in which the Board of Estimate and Apportionment was advised that neither the State Company as original grantee, nor the Amsterdam Company as its assignee, had lived up to the provisions of the original resolution of the Common Council of the City of Brooklyn granting the so- called State francliise. Accompanying this report were cer- tain proposed resolutions recommended by the Division of Franchises to be passed by the Board of Estimate, specifi- cally revoking the State franchise. While this report was under consideration the Amsterdam Company and the Edison Company secured a temporary injunction, forbidding the Board of Estimate to adopt the proposed resolutions pending an inquiry into the merits of the case by the court. The evidence shows that this litigation has been dragging on for nearly two years, and is now in the hands of a referee who is engaged in taking testimony. It appears that in the City's answer to the plaintiff companies it not only alleges the in- validity of the State franchise but also attacks the franchises of the Edison Company itself. Wherefore after demanding that the complaint in the case be dismissed with costs, the City asks for further judgment and decree as follows : " ' 1. That the Amsterdam Electric Light, Heat and Power Company has abandoned and surrendered the pur- poses and business which were the object of its organization lOlG Investigation of Public Service Commissions and creation of supplying electric light, heat and power to public and private consumers. " ' That the State Electric Light and Power Company of the State of New York and the Amsterdam Electric Light, Heat and Power Company have abandoned and surrendered the purpose and business of supplying electric light, heat and power to public and private consumers in the old City of Brooklyn, and in the Borough of Brooklyn in the City of New York which was the object and pur- pose of the assent to the State Electric Light and Power Company of the State of New York of the Common Coun- cil of the City of Brooklyn, given on December 30th, 1895, and therefore have abandoned and surrendered said assent or secondary franchise, if same ever existed. " ' 2. That the State Electric Light and Power Com- pany of the State of New York and the Amsterdam Elec- tric Light, Heat and Power Company have failed to com- ply with Section T of the said resolution or assent of De- cember 30th, 1895, and that their right to further exten- sions of conduits in the streets and avenues of the Borough of Brooklyn of the City of New York, Wards 1 to 32, in- clusive, has ceased and determined. " ' 3. That the State Electric Light and Power Com- pany of the State of New York and the Amsterdam Elec- tric Light, Heat and Power Company have failed to com- ply with the conditions and provisions of the resolutions or assent of December 30tli, 1895, and that the privileges, rights and powers thereby granted have ceased and de- termined, and that the said companies have no longer the right and power to operate their wires throughout the Borough of Brooklyn, City of New York, Wards 1 to 32, inclusive. " ' 4. That the Edison Electric Illuminating Company of Brooklyn, and its successors and assigns, have no right, authority or power to operate under the said assent of December 30th, 1895, of the Common Council of Brooklyn made to the State Electric Light and Power Company of the State of New York. Eepoet of Joint Legislative Committee 1017 " ' 5. That the assent of the said Common Council given to the said State Electric Light and Power Company by said resolution of October 28th, 1895, which was vetoed by the Mayor and repassed over his said veto by said Common Council on December 29th, 1895, be declared forfeited, and that all privileges, rights and franchises thereby granted have ceased and determined, and that there exists no longer under it, and that there did not exist under it on January 19th, 1911, any right or power to operate wires throughout the Borough of Brooklyn in the City of New York, Wards 1 to 32, inclusive. " ' 6. That the Edison Electric Illuminating Company of Brooklyn be enjoined and restrained from consolidating or merging with the said Amsterdam Electric Light, Heat and Power Company and that the said Amsterdam Elec- tric Light, Heat and Power Company be restrained from consolidating or merging with the Edison Electric Illumi- nating Company of Brooklyn. " ' 7. That the defendants have such other and further relief as to the Court may seem just and proper.' " In considering whether or not the Commission should give heed to the City's request that the pending application be denied under the circumstances above outlined, we note in the first place that if the so-called State franchise has been forfeited and become void because of non-compliance of the grantees or their assigns with the conditions of the grant, the purchase of the remaining shares of the Amsterdam Com- pany by the Edison Company and the subsequent merger of the former by the latter could not in any way have the effect of reviving or putting life into franchises or rights that were already lapsed and dead. It appears, therefore, that if this particular contention of the City were sustained by the court the approval of the pending application could not in- juriously affect the City's rights at issue in the present suit. The plaintiff companies, however, contend that even if the State franchise has not been properly complied with by the grantee and its assigns nevertheless in the absence of a defi- nite proceeding for forfeiture instituted by the Attorney 1018 Investigation of Public Sekvice Commissions General the franchise still lives. It is obvious that if the companies' contention in this respect proved to be correct the formal merger of the Amsterdam Company by the Edison Company would enable the Edison Company immediately to commence operating under the State franchise and by that means forfend itself against the danger of a future action by the State for forfeiture on the ground of alleged non-user. It is also to be noted that if the State franchise has not al- ready been forfeited and become void by operation of law, the merger of the Amsterdam Company by the Edison Com- pany and the commencement of active operation by the Edi- son Company under the State franchise while the present liti- gation between the companies and the City is pending and the Board of Estimate is prevented from taking action by the temporary injunction referred to, would prevent tho Board of Estimate from exercising its right of revocation of unused franchises as such right is set forth in the New York Electric Lines Case, 201 N. Y. 321. Moreover, if the Commission authorizes the purchase of the outstanding shares of stock by the Edison Company its action in so doing might be construed as a recognition of the existence of intrinsic value in the Amsterdam property and by inference of a find- ing of fact that its so-called franchise had been exercised and was regarded as valid. It can readily be seen that any such construction of the Commission's order approving the pend- ing application might seriously embarrass the City in any subsequent attempt to revoke or rescind the State franchise, or might embarrass the State in any action for the forfeiture of the franchise brought at the request of the City at the conclusion of the pending litigation. The Commission's ac- tion might even be urged upon the Court in the suit now pending, with the result of embarrassing the City's case. " In view of all the circumstances the Commission should decline to grant its approval of this application, at least until the pending litigation between the City and the companies is concluded. This is not a case where the applicant will suffer undeserved hardship by reason of the denial for the Keport of Joint Legislative Committee 1019 present of its request. The companies have been in the same position thev now are for the past thirteen years, and it wouUi not seem proper for the Commission to aid in embar- rassing the City in its attempt to get rid of a perpetual fran- chise covering the entire Borough of Brooklyn, except pos- sibly one ward, when the companies holding such franchise have been so obviously negligent in its exercise for many years past. The application is, therefore, denied Avithout prejudice to its renewal subsequent to the conclusion of the pending litigation with the City over the revocation of the State franchise. " Ees^iectfully submitted, •• DELOS F. WILCOX, " Chief of the Biirea}i of Franchises." Mr. Harkness. — That is evidently a draft of an opinion for Commissioner ]Maltbie prepared by the Bureau of Franchises, but in the draft opinion we have discovered and turned in this morn- ing there is a discussion of the effect of the decision in the Am- sterdam case upon the city's case in which the contrary position is taken, and I am informed that was prepared by the assistant coun- sel. The position is that one counsel takes one position, and another counsel takes another. ilr. Shuster calls my attention to the fact that with this draft there are practically tAvo conflicting statements. There is one state- ment that the approval of the application will not prejudice the city's rights, and clipped to that is ^Ir. Wilcox's statement that Senator Lewis has just read, ily understanding is the first was prepared by the assistant counsel in charge of the case, and the second by Dr. Wilcox. In view of the situation of these papers, I think I will withdraw my first statement, that tliis represented ilr. ilaltbie's position. I think ^Ir. ilaltbie is the only one who can clear that up. Mr. Lewis. — The first statement is withdrawn, then ? ^Ir. Harkness. — The second statement qualifies the first state- ment. 1020 Investigation of Public Service Commissions Mr. Lewis. — Mr. Chairman, from the file of correspoadeaice and documents submitted by Mr. Harkness, I have the following, which is entitled " State of New York. " Public Service Commission for the First District. " In the Matter of the Application of Edison Electric Illuminating Company of Brooklyn for authority to acquire certain stock of Amsterdam Electric Light, Heat and Power Company. Case 'No. 1554. " Maltbie, Commissioner. — This is an application by the Edison Electric Illuminating Company of Brooklyn, imder section 70 of the Public Service Commissions Law, for con- sent to the acquisition of 122 shares of an aggregate par value of $12,200 of the capital stock of the Amsterdam Electric Light, Heat and Power Company." Mr. Lewis.— The opinion itself is lengthy. It is a public record, and will always be on file in the Public Service Commis- sion office, and for that reason, and in order that the record of this Committee may not be unnecessarily extended, I shall only read into the record the concluding paragraphs of the opinion, if it be an opinion, of Mr. Maltbie. Mr. Harkness. — It is understood to be a draft, whatever it is. Mr. Lewis. — And never submitted, so far as I know, to the Commission for approval, and of value only as disclosing the mind of Mr. Maltbie at the time it was prepared, and I will ask Mr. Shuster to read the paragraphs, if he will. Mr. Shuster read as follows : " Obviously the value of the property of the Amsterdam Company depends principally upon the validity of the fran- chise claimed by it. As already shown, the status of the franchise is a matter of dispute. The applicant did not see fit to introduce evidence to identify and prove the Amsterdam Company's title to the physical property claimed by it, or to Rbpoet of Joint Legislative Committee 1021 establish the present status or value of the franchise. It can- not be said, because the amount to be paid for the stock in- volved in this case is small, the number of shares few, and the cost to be taken out of surplus, that thereby the Commis- sion loses all discretionary jurisdiction as to giving its con- sent to the transaction. If the company could spend a small amount of its surplus for the purchase of stock, without the Commission's being able to say it nay, it could, by the same right, spend a large amount, and since, if the price of the stock purchased were to be capitalized, the question of such capitalization would have to come before the Commission in a separate proceeding anyway, it cannot be that the merd an- nouncement of the applicant's intention not to capitalize the purchase in this or any either particular case deprives the Commission of its right to inquire carefully into the purposes and results of the proposed transaction. " Moreover, as already shown, the Amsterdam bonds held by the applicant and the unfunded obligations of the Amster- dam Company are far in excess of the claimed value of any physical property alleged to be owned by that company. Why, then, should the applicant sink additional funds in this decrepit property, if by the foreclosure of the bonds it now holds it could acquire all the assets of the Amsterdam Com- pany without further payment? " If the company had seen fit to submit further evidence in this case, the Commission might have gone into an elaborate and painsitaking examination of the facts relative to the status and value of the Amsterdam Company's property and franchises; but inasmuch as these very questions are being tried in the course of the litigation between the companies and the city, to which the Corporation Counsel called the Com- mission's attention, it would have seemed futile for the Com- mission to go to the expense and trouble of making an inde- pendent investigation of those matters at this time, especially as its findings must have been based primarily upon an inter- pretation of laws other than the Public Service Law, and which it is the particular function of the courts to intetrpret 1022 Investigation of Public Service Commissions " If tihe applicant had seen fit to stipulate that it would not merge the Amsterdam Company vsdthout first asking the approval of the Commission for such merger, and if the applicant had seen fit to prove the status and value of the Amsterdam property and franchises! in this case, the Com- mission might have been persuaded that the application could be acted upon favorably, but in view of the fact that the status and value, and indeed the very existence of the Amster- dam Company's property and franchises are to be determined in litigation now pending in the courts, and in view of the damaging effect that the merger of these companies at the present time might have upon the interests of the city of New York and the public, the Commission denies the application." Mr. Harkness. — I think as long as that part has^ been read into the record, the last paragraph might be read in, too. It is part of the same papers. Mr. Shuster. — What do you contend that this is ? Mr. Harkness. — This last conclusion. It is part of that draft, whatever it is. I think Mr. Maltbie is the only one, probably, who can clean up the situation. Mr. Shuster.^ It would seem to me to need some cleaning up, in view of the subsequent action. I am inclined to think that the whole thing is in the reco^rd, as a part of Mr. Coleman's opinion. Mr. Harkness. — I^o, it is not in issue, and he does not consider that question, and only considers the question of whether a merger requires the approval of the Commission. Mr. Shuster. — Whose draft is this ? Mr. Harkness. — My understanding is that was a draft prepared by the Assistant Counsel in charge of the case. Mr. Shuster. — ■ Assistant Counsel to the Public Service Commis- sion? Mr. Harkness. — Yes, Mr. Chamberlain. Mr. Shuster. — And the recommendation to Commissioner Malt- bie? Eepoet of Joint Legislative Committee 1023 Mr. Harkness. — That is included in that, and also the recom- mendation to Commissioner Wilcox, which follows after. Mr. Shuster. — You want that read in, do you ? Mr. Harkness. — Yes, sir. Mr. Shuster. — You may read it. Mr. Harkness. — There is this conclusion, after referring to the litigation between the city and the Amsterdam Company : " In these circumstances, I am of the opinion that it is unnecessary for the Commission upon this application to con- sider the merits of the controvei*sy between the city on the one hand and the Amsterdam Company and the Edison Company on the other hand. If in the action pending between said parties it shall be determined that the franchise of the Am- sterdam Company would cease to exist by reason of the failure of that company, or its predecessor company, or its successor company, to comply with any of the requirements of the con- sent or franchise granted to the State Company by the for- mer city of Brooklyn, under date of October 28, 1895, the position of the city will be just as favorable after the acquisi- tion by the Edison Company of the remainder of the capital stock of the Amsterdam Company as it would if no such acquisition had taken place, and will be just as favorable after the merger of the Amsterdam Company into the Edison Company as it would if no such merger had taken place. I therefore recommend that the application of the Edison Com- pany to acquire the remainder of the capital stock of the Amsterdam Company be granted." Mr. Shuster. — ■ Mr. Harkness, that is, as you believe, extracted from an opinion or recommendation by the Assistant Counsel to the Public Service Commission ? Mr. Harkness. — ■ I wiU answer that this way, that all of these papers were clipped together. The first part, in the small, seems to be some material more or less stating the facts prepared by Mr. Maltbie, and attached to that, and two unsigned sheets of paper 1024 Investigation of Public Service Commissions with the conclusion I have just read, and then some manuscript by Mr. Maltbie, in his handwriting, and then following that un- signed pages would seem to include the matter of Dr. Wilcox's recommendation, which is read into the record by Senator Lewis, and my understanding is that the conclusion I read was the con- clusion prepared by Mr. Chamberlain, assistant counsel in the case, and submitted to him by Mr. Maltbie, and all the papers clipped together and sent up by Mr. Maltbie for his consideration. What Mr. Maltbie's ideas are in that matter I think he is the only one can explain. Mr. Shuster. — Mr. Chairman, Mr. Harkness, counsel to the Public Service Commission, requests that we accept in the record as iiled this bunch of letters which relate to the Manhattan and Queens Traction Company matter, that was before the Committee several days ago. There is no objection to that. Chairman Thompson resumes the chair. The letters above referred to are as follows : First : " Copy." December 3, 1913. " Kobert S. Sloane, Prraident, Manhattan & Queens Traction Company, 60 Wall Street, New York, N. Y. " Dear Sir. — A general inspection of your cars made re- cently shows certain conditions which should be remedied at once. This especially applies to motors and controllers. " The motor shells around the commutator and back of the brush holders are covered with a coat of grease and dirt. Most of the brush holders are set high and show signs of recent flashing. The controllers are in a very dirty condition and badly in need of general overhauling. "As a sample of what was found, car 215 had badly worn wheel flanges ; controllers dirty ; motor shells very dirty ; com- mutator shoAving signs of flashing; broken resistance grids, tied together with wire; grease running out of broken gear case, and motor oil well covers missing. " Please give this matter your prompt attention and advise the Commission of your action. While it is realized that Repobt of Joint Legislative Committee 1025 these cars are quite old and it is difficult to maintain them in the best operating condition, also that you have on order new and up-to-date equipment, it is necessary that the present equipment be maintained in a safe operating condition and our inspection shows that they are not so maintained. " Very truly yours, " Secretary." WCW/DH. Inv. 13,033 Second : "Copy." Manhattan and Queens Traction Corporation, Queens Plaza Court, Long Island City, IST. Y., December 5, 1913. " Travis H. Whitney, Esq., Secretary Public Service Commis- sion, 154 Nassau Street, New York City. " Dear Sir. — We are in receipt of your letter of Decem- ber 3rd to Mr. Eobert S. Sloan, relative to your inspection of our cars. " We will have this matter attended to just as soon as pos- sible and try to get these cars in as good condition as they will allow. " Yours very truly, " S. B. SEVEKSON, " Manager. " SBS/w." Third: " Copy." October 17, 1913. " Mr. Eobert S. Sloan, President, Manhattan & Queens Trac- tion Corporation, 60 Wall Street, New York City. " Dear Sir.— r- An inspection of some of your ears made on October 14th shows many defects which should be corrected without delay. Vol. 1 — 33 1026 Investigation of Public Seevicb Commissions " Car No. 267 was observed in operation with no wheel- giiards on either end. One pedestal was practically resting on journal box, the spring being either broken or so weak as to be of no effect. " Car Iso. 278 had one apron tied tip with rope and on the other end the gate was 8 inches above rail; one journal box cracked; wheel flanges in badly chipped condition; cut-out switch in one controller was loose and the general condition of controllers bad ; a number of resistance grids were broken, being connected up with wire, axle bearings were consider- ably worn. " Car iSTo. 203, there was a loose connection in one con- troller, wire being held in place with tape; screw missing from one controller finger ; both gear cases were cracked and the grease running out; axle bearings were worn. " Car No. 216, one gear case broken; axle bearings badly worn ; one pair of wheels had badly worn flanges and one con- troller in very bad condition; wires were used to connect up broken resistance grids. " Car No. 228, one circuit breaker would not open ; grease running out of one gear case. "Car No. 262, three journal box covers missing; axle bearings are worn ; one circuit breaker would not open ; wires used to connect broken resistance grids. " Will you please have these matters attended to, as soon as possible, and take steps to have cars maintained in a proper operating condition in the future. " Very truly yours, " Secretary." WCW/AJO Inv. 13033 Eepoet of Joint Legislative Committee 1027 rourtli: " Copy." Manhattan and Queens Traction Corporation, Queens Plaza Court, Long Island City, IST. Y., October 18, 1913. " Public Service Commission, 154 ISTa^au Street, New York City. " Mr. Travis H. Whitney, Secretary. " Gentlemen. — I am in receipt of your letter of October 17th to Mr. Robert S. Sloan, relative to inspection of our cars, ■which was made on October 14th. "We note what you have to say regarding these cars and will immediately issue orders to have these defects repaired as soon as possible. We will endeavor to maintain same in operating condition in tbe future. " Yours very truly, "(Sgd) S. B. SEVEESON, " General Manager." SBS/w Fifth: " Copy." " Public Service Commission, Travis H. Whitney, Secretary. " September 10, 1913. Manhattan & Queens Traction Corp'n, Condition of Equip- ment. " Gentlemen. — Tbe Soutb Shore Traction Company, of wbicb the Manhattan & Queens Traction Corp'n is successor, began operation on the Queensborougb Bridge -with ten (10) single truck cars, purchased from the Third Avenue Railroad Company. These cars alt the time of the purchase were about eighteen (18) years old. With no permission of which I have knowledge, they have extended operation out into Queens county with these cars and added to their service three (3) more single truck cars purchased from the Third Ave. Ry. 1028 Investigation of Public Service Commissions Co. similar to the original ten, and six (6) single truck cars, somewhat similar in construction, from a Providence com- pany. Regarding these cars, we have no knowledge, but from the type, they are probably &s old as the cars purchased from the Third Ave. E.y. Co. " During the period since the South Shore Traction Co. began operation to the present date, that company and its successor has had practically no facilities for the proper maintenance of their rolling stock equipment, with the result that the original equipment has greatly deteriorated. The equipment obtained from Providence was in very poor con- dition when put into operation and has also deteriorated, until at present their entire rolling stock is in a deplorable state. ISTo positive action has been taken by this department heretofore because it had been expected that new equipment would be put into operation either in July or August of this year, this statement having been given us verbally by officers of the company at various times. " These conditions cannot be allowed to continue, and in view of the company's refusal to inform the Commission when the contracts for new equipment were placed and when the cars will be available for service, as stated in my letter to the Commission of even date, I am forced to recommend that operation of the present equipment be prohibited in view of its unsafe condition and improper design for the service in which it is being used. I also recommend that an order be issued prohibiting any extension of their service with the present equipment which extension the company apparently contemplates. ; " Very truly yours, "(Signed) CLIFTOIT W. WILDER, " Electrical Engineer." OWW/DH Eepoet of Joint Legislative Committee 1029 Sixth: " Copy." " Public Service Commission, Travis H. Whitney, Secretary. September 10, 1913. Manhattan & Queens Traction Corporation — ■ Failure to comply with Commission's Orders " Gentlemen : " The Manhattan & Queens Traction Corporation have failed to comply with the Commission's Orders in Cases 1210 and 12Y8. The Order in Case 1210 requires, among other things, that within five days of the placing in service of additional cars, the company shall file a statement on a pre- scribed form giving certain information for the use of the Commission. The Order in Case 1278 requires, among other things, that before, or within five days after, the day on which any contract for the purchase of any new car equipment is entered into, the company shall furnish to the Commission a memorandum, including general drawings, showing the char- acter and type of said car equipment so contracted for or about to be contracted for. " The company's attention was called to the Order in Case 1278 by a letter dated February 14, 1913. Acknowledgment of the receipt of the Commission's letter was made under date of February 18, 1913, with a statement that the coutract had not yet been signed. On June 30, 1913, the company's atten- tion was again called to their failure to comply with Order in Case 1278 and also to the Order in Case 1210. This letter was acknowledged under date of July 1, 1913, with a statement that the company would take up the matter. On August 25, 1913, the company submitted specifications and one blueprint of certain new equipment which they stated had been ordered. It is apparently the intention of the company that this plan and the specifications, together with a general blueprint of the truck received September 9th, are to com- ply with the Order in Case 1278. 1030 Investigation of Public Seevice Commissions " Since the Manhattan & Queens Traction Corporation took over the South Shore Traction Company, they have put into operation six (6) single truck cars which they obtained from a company in Providence, K. I. No report of- these cars, as required by the Orders referred to above, has been made to the Commission. An employee of the company .being asked why these cars have not been reported, stated that the Commission's orders specified " new equipment " and the cars in question were second-hand. No explanation has been given as to why they have failed to comply with Order in Case 1210 which could not possibly be miscon- strued as has been the Order in Case 1278. " The company has been asked to inform the Commission when the contract was placed for the cars as described in the specifications submitted with their letter of August 25, 1913, which their president has verbally refused to do. He further refuses to inform us from who'm the cars were pur- chased and when they expect delivery. " In view of the Company's persistent refusal to comply with the Commission's Orders, I recommend that they be sued for penalties in both cases. " Very truly yours, " CLIFTON W. WILDER, CWW/DH Seventh : Electrical Engineer. " Copy." " Public Service Commission, " Travis H. Whitney, Secretary. "December 22, 1913. " Manhattan & Queens Traction Corpi'n — Deplorable Condition of Equipment — :Also relative to Accident 8956, December 16, 1913, Dropping of Brake Eigging on Car 216. " Gehtlemen : " On September 10, 1913, I made a report to the Com- mission in regard to the condition of the cars of the South Eepoet of Joint Legislative Committee 1031 Shore Traction Company, of which the Manhattan & Queens Traction Corporation is successor, from which report I quote as follows: " * * * at present their entire rolling stock is in a deplorable state." And further " * * * J j^j^ forced to recommend that operation of the present equipment be prohibited in view of its unsafe condition and improper design for the service in which it is being used." " Numerous letters have been written to the company since that time calling their attention to the defective equipment, all of which have been respectfully replied to, the company reiterating its statement that every effort would be made to get the cars in a safe operating condition. " They have failed to do this, however, and on December 16, 1913, the brake rigging on a car operated across the bridge gave out, part of which falling to the track, and the car coasting down the bridge incline at a high rate of speed, it being brought to a stop only when it had reached Loop ISTo. 2 of the ISTew York Terminal of the bridge. The fact that a serious accident and possible loss of life did not result, was due to the fact that a slight delay on the ITew York & Queens County Railway had occurred just prior to this, leav- ing the track clear at this particular time. Investigation of the accident shows that the brake rigging was entirely at fault, being improperly maintained and supported. The car had only just been overhauled but the evidences indicated that the overhauling had been wholly inadequate. " The present condition of the equipment indicates that similar accidents are liable to happen at any time. " Very truly yours, " CLIFTON W. "WILDEE, " Electrical Engineer." CWW/DH Inv. 13,033 1032 Investigation of Public Service Commissions George V. S. Williams, being recalled for further examina- tion, testified as follows : By Mr. Lewis : Q. Commissioner Williams, were you present at a meeting of the Commission, held on the 24th of July, 1914? Chairman Thompson. — You were sworn in this matter before, weren't you? Mr. Williams. — Not in this matter, but before the same com- mittee. Q. Were you present at a meeting of the Commission held on July 24, 1914, at which a resolution was adopted directing that case No. 1554 be placed upon the calendar for final action on the 30th of July, 1914? A. If the records show I was there. I don't remember the dates. Is that the Amsterdam case ? Q. Yes. A. I remember of an occasion at the time of the dis- cussion in the Amsterdam case. Q. The record shows that a meeting held on July 24th, " Com- missioner Cram moved that the presiding commissioner in case jSTo. 1554, upon the application of the Edison Electric Illuminat- ing Company of Brooklyn, for the approval of the acquisition of 123 shares of capital stock of the Amsterdam Electric Light and Power Company, be requested to report his recommendation for a decision upon the application at a meeting of the Commission on July 30, 1914." Do you recall that fact? A. I don't recall it, no. Commissioner Cram was quite in the habit of asking that — he would say, " I move that all undisposed-of matters be put on the calendar for such a meeting," or " I move " such and such a case " be put on for disposition." It was quite a common occur- rence for Commissioner Cram to do that. I have no definite recollection of that motion of Commissioner Cram's. Q. I read further from the record of the meeting. ^' Commis- sionr Maltbie stated that he had long previously reported to the committee of the whole with regard to this application and ex- plained the reason why a decision upon the application had been deferred ; " do you recall that fact ? A. Not at that time. I would not fix a date. I do recall Commissioner Maltbie's making a statement about it at some time. Eepoet: of Joint Legislative Committee 1033 Q. I read further from the record: " Commissioner Williams suggested that this case would, as a matter of course, be included in the calendar of matters to be acted upon by the Commission at a meeting on July 30, 1914, under the motion carried at the meeting of July 23, 1914, with reference to the disposition of pending matters before the Commission; " do you recall that fact? A. I don't, but very likely I did say that. Commissioner Cram made those motions from time to time. Q. I read further from the record : " It was then understood that the application of the Edison Electric Illuminating Com- pany of Brooklyn, in case No. 1554 would be included in the calendar of the matters to be acted upon at the meeting of the Commission on July 30, 1914;" do you recall that fact? A. 'So, sir; but no doubt it is so. Q. I read from the record of the meeting of the Commission of July 30, 1914: " It was duly moved, and seconded, that an order in case JSTo. 1554 be adopted authorizing the Edison Electric Illuminating Company of Brooklyn, to purchase, acquire, take and hold the remaining shares of the capital stock of the Amster- dam Electric Light, Heat and Power Company, provided that the purchase price thereof should not exceed ten thousand dollars and the amount of the purchase price should not be capitalized, but should be paid out of the surplus and directing that nothing con- tained in the order should be construed as authorizing the merger of the Amsterdam Electric Light, Heat and Power Company by the Edison Electric Illuminating Company of Brooklyn ; the order to take effect immediately. Ayes : Commissioners Maltbie, Cram, Williams and Wood. ISToes, none. Present but not voting, Chair- man McCall. Carried." Do you remember the action ? A. Yes, sir. I remember some such action as that. Q. How familiar were you, Commissioner, with this proceed- ing which had been pending and upon which this action was taken ? A. I cannot recall that I ever knew that the proceeding was pend- ing until there was a discussion about it shortly before the passage of the resolution. Q. And at the same meeting? A. ISTo, sir; I think not. I think it was in the Committee of the Whole room. We had a conference. 1034 Investigation of Public Sbevice Commissions Q. A meeting which was held on the 23d? A. I wouldn't say. Q. As referred to ? A. No, I should say it would be later than that. Probably it was on the same day of the passage of the resolution. Q. In a meeting of the committee of the whole ? A. In a con- ference. I would not call it a committee of the whole meeting. I take it from your reading there that there was probably a num- ber of cases to be acted upon, and it was the custom of the Com- mission to have a conference before the regular meeting of the Commission and discuss these with the various commissioners who had had the cases, and I cannot remember that I knew of the ap- plication until that time, as it was handled entirely by Commis- sioner Maltbie. Q. Do you remember any statement that Commissioner Maltbie may have made in this conference which you speak of as to his attitude upon this proceeding mentioned ? A. The main thing that has impressed itself upon my mind is the fact that Chairman McCall did not vote. He asked Mr. Maltbie if there was any con- nection between this company and the Kings County Company in which he had previously had stock. Commissioner Maltbie said yes, there was indirect connection between them. Chairman Thompson. — Don't you think Commissioner McCall knew that previously ? Mr. Williams. — I don't know. Q. That conversation did take place A. Yes, sir. Q. And do you recall what Commissioner Maltbie said? A. He said yes, that it did indirectly, or something of that sort. I knew that the Edison Company was the lessee of this Kings County Company's property at the time. Q. Do you recall anything else that Commissioner Maltbie said at that time ? A. I remember he said that he had safeguarded the interests of the stockholders or of the Commission, or something of that sort, by providing that this did not act as a waiver of their coming before us in case they Avere intending to merge, and he said he could see no other object in owning the rest of the shares, E.EPOET OF Joint Legislative Committee 1035 and he provided they could not merge without coming to the Commission, or something of that sort. Chairman Thompson. — What was the use of the order allow- ing them to buy the stock ? Mr. Williams. — I don't know. I have seen the testimony since the matter was brought up in this Committee, and I have gone over the testimony, and I cannot see any advantage in owning all of this stock, if it was held in friendly hands, unless it was with the intent some time or other to merge, and I think that was stated in the evidence. Q. Did you know that Mr. Wilcox, the Chief of the Bureau of Franchises in your Commission, had written an opinion recom- mending the denial of the application ? A. 'Eo, sir ; but if I had known it, I would have been very careful to look into it further, because I had very little respect for Mr. Wilcox and his opinions. Q. Did you know that Mr. Burr, the Assistant Corporation Counsel, had repeatedly recommended that the application be denied? A. ~Ro, sir; I did not know there was any correspond- ence. Q. Had you known of that fact, would it have operated upon your mind, or had any effect ? A. It seems to me that any action we could have taken would not make the least difference to the city's case. Q. Did you know of the fact that a litigation was pending unde- termined in the Supreme Court before Delancey Nicoll as referee. in which an injunction had been obtained against the city restrain- ing the city from revoking and annulling the franchise represented by this stock ? A. I don't think I ever heard of it until recently. I don't think I ever heard of it until the last three months. Q. Had you known of that fact, would it have made any dif- ference with your action? A. Yes, sir; if that 'fact — if one of the questions in that case was being injured in any way by our approval, or if the city was being injured, I certainly would have felt that our action should have been withheld, but as I look at it now, I cannot see where I would have acted any different, or looked at it any different if I had known of it. 1036 Investigation of Public Seevice Commissions Q. Did you know Corporation Counsel Polk had asked for a withholding of the decision pending the determination of the liti- gation ? A. 'So, sir. Q. Had you known of that, would it have made any difference in your attitude ? A. If it would have prejudiced the city's case in any way, it would have, of course. Q. Was there any discussion before the Committee of the Whole there or the full Commission in which reference was made to any reasons for the delay or excuse furnished for the delay in deciding the application by Commissioner Maltbie? A. I don't remember whether there was anything said about the city's opposition or not. Q. Was there anything said at either the meeting of the Com- mittee of the Whole or in the conference which you have men- tioned, or at the meeting of the Commission as a Commission, about any correspondence which had been had between any of the members of the Commission and any of the attorneys for the com- panies making the application? A. I don't remember any such thing. Q. Did you see or hear of the letter of Mr. William F. Sheehan, dated July 23, 1914, addressed to Commissioner Cram? A. No sir. Q. Have you ever seen the letter or any copy of it? A. Only as I have read it in the newspapers the last few days. Q. And you have read the copy which was produced here at a recent hearing, in the newspapers ? A. Yes, sir. Chairman Thompson. — I thought Commissioner Wood testified it was read in the meeting. Mr. Williams. — I don't remember it being read in the meeting. Q. Did you know that Mr. Sheehan was the attorney for the applicant in that case ? A. No, sir. Q. That fact was not discussed. A. I don't think the fact as to who was the lawyer was discussed in any way. It would not have made any difference to me either way. Q. You have never had any information as to the fact that Mr. Sheehan was counsel for either of those companies? A. 'No, sir; not in this case. Eepoet of Joint Legislative Committee 1037 Q. Are you acquainted with Mr. Sheehan? A. Yes, sir. Q. You have kno-wn him how long? A. I have known him since he was a memher of the Assembly, and when I was in Law School in 1889 and 1890 in Albany. I do not know that he has known me that long, but I remember him at that time, and remem- ber meeting him. Q. How intimately are you acquainted with him? A. I worked for him at one time in his office. Q. When was that? A. From about 1896 to 1899. Q. Were you ever in the employ of this Kings County Com- pany or the Edison? A. ISTo, sir. Q. Or the Amsterdam? A. ISTo, sir. Q. Was Mr. Sheehan counsel for those companies, or any of them, during the period that yo'U were in his office? A. I really don't know. I was connected with the Brooklyn office, with Thomas L. Hughes at the time, and we had almost nothing to do with his general work at all. Q. Do I understand you voted in favor of granting this applica- tion, without any knowledge of the fact that a litigation in which the validity of the franchise, the basis of the stock for the pur- chase of which this application was made, was pending and with- out any knowledge of the fact that Mr. Sheehan was counsel in that litigation and counsel for the companies in this application? A. I certainly had no knowledge Mr. Sheehan was counsel for it. Whether there was anything said about any litigation, I have told you all I can remember. There may have been something else said by Commissioner Maltbie at the time, but whatever it was. Commissioner Maltbie had come to a conclusion in the case, and on his statement of the case I was satisfied to vote for it. Q. And you had no knowledge at the time of the fact that the corporation counsel's office had opposed and had succeeded in hold- ing up a decision in this matter for a period of twenty months? A. I cannot remember that that was mentioned at all. Q. Had you any knowledge, aside of whether or not it was mentioned? A. No, sir; I had no knowledge aside from what was discussed at the time. Q. And you had no knowledge of the fact that the chief of the Bureau of Franchises in the Public Service Commission had 1038 Investigation of Public Seevice Commissions rendered an opinion recorninending the denial of the application ? A. No, sir; I had no knowledge of that. Q. And did you take any steps- before casting your vote, upon the adoption of this resolution to ascertain any of the facts which appeared of record in the office of the Public Service Commission, as a guide as to how you should vote? A. Only discussion with Commissioner Maltbie, who was the sitting commissioner. Mr. Lewis. — I think that is all I care to ask. By Chairman Thompson: Q. You did not make any investigation before you voted for this at all, personally? A. Only as I said before. Q. It came up in a formal meeting? A. It finally came up in a formal meeting. Q. Did it come up in an informal meeting where there was dis- cussion? A. Yes, sir. Q. How much time did you take on this case? A. I don't know. Q. Ten minutes? A. I wouldn't want to- say. Q. Half an hour? A. We were probably in conference more than half an hour. The cases at that time were assigned around to the different commissioners to take evidence and to make a report. Q. You say you have read this letter of Sheehan's ? A. I read it in the newspapers. Q. If you were a judge in the Supreme Court and some ordi- nary litigant you did not like should write a rather impudent letter like that, that you didn't like, what would be your attitude of mind? A. It would not make any difference in the decision of the case, but if an impudent letter, I, of course, would not relish it. Q. That letter where he said you had to make a decision in his favor or he would appeal and reverse you if you didn't, wouldn't you be inclined to bring him in for contempt of court? A. We have no such power as that, of course. Q. You would be pretty apt to give him a chance to appeal and try it out, wouldn't you ? A. No, sir. Repoet of Joint Legislative Committee 1039 Q. You would think it was a very discourteous letter to a judi- cial tribunal, wouldn't you ? A. Yes, sir. I suppose many times judges get such letters, but they ought not to let them influence them in the decision of the cases before them ; that is all. Chairman Thompson. — We will suspend now until 2 o'clock. Whereupon, at 1 o'clock p. m., a recess was taken to 2 o'clock p. M., at the same place. AFTEENOON SESSION". The meeting was called to order at 2 o'clock p. m., pursuant to adjournment, Senator Lawson presiding. Edwaed E. MoCall, being recalled for further examination, testified as follows: By Mr. Lewis : Q. Senator Thompson called your attention the other day, to some communication or suggestion about your having been engaged as counsel in some action in which Mr. Hammerstein was inter- ested ; do you mind telling us what there is about it ? A. ITot at all. I think it was in April, 1913, I was called into a conference on a question of a contract. Q. Between whom? A. Between three parties; the Palace Theatre Company, Keith Amusement Company, I am not sure about it, though, and Hammerstein, as to some differences that had existed between them, and I advised them. Ui)on my advice a settlement was made, and an agreement entered into. When the contract was made, my understanding with the parties was that upon any question arising out of that contract, I could be called upon to advise and take part. That was in April, 1913. Q. Has anything occurred since? A. Yes, sir, this present year there came an alleged breach of the contract on the part of the United Booking Company — instead of the Keith Amusement Company, and Hammerstein precipitated an action looking towards an injunction, and my impression was the Palace Theatre 1040 Investigation of Public Seevice Commissions Company was not in tlie original action, but to make the litigation complete and end it, they were moved in. Q. They intervened? A. Yes, and a preliminary motion for an injunction was brought. Q. Just which of the defendants did you act for. Judge? A. The United Booking Company. Q. And what was that company, the United Booking Company ? A. I was not the attorney of record. Q. It was against the United Booking Company, the action by the Hammerstein Amusement Company was originally brought, was it ? A. That is right. Q. Are you able to state when that action was brought? A. JSTo, sir. Do you mean when the complaint was served ? Q. Yes. A. No, sir ; I am not. It was this year. Q. I have before me a copy of the amended complaint in the action, and it seems to have been verified on the 8th day of September of this year; is that in accordance with your general recollection of it ? A. I cannot recall it. I had nothing whatever to do with the pleadings, but it is around there some time. That pleading was used as the basis of the application, wasn't it? Q. I think so — the answer of the United Booking Offices of America seems to have been verified on the 15th day of Septem- ber, 1915, and it seems to have been prepared by one Morris Goodman, attorney for the defendant, with of&ces at ISTo. 1564 Broadway, who appears as the attorney of record in the action; did you act as counsel for Mr. Goodman in that matter, have you acted for him in that matter ? A. ISTo, sir ; I acted for the United Booking Company. Goodman is the attorney of record. Q. Did you have any part in the preparation of the answer? A. IsTo, sir ; I had no part in the preparation of any of the papers at all. I simply argued the motion. Q. That was the motion for the injunction? . A. Yes, sir. Q. And what was the result of the argument of that motion, granted or denied? A. It was denied. Chairman Thompson presiding. (Witness continuing.) There was a cross motion also on our part, which was also denied. Report of Joint Legislative Committee 1041 Q. So that the action is at issue now with no injunction re? straining either or any of the parties; is that right? A. That is right. Q. Of course you sought to obtain a denial of the injunction, did you not ? A. Just rely on it I did, and sought hard, too. Q. Can you tell the Committee generally what the nature of the action was and what the injunction was — what was the pur- pose of obtaining an injunction which it was sought to restrain? A. The application was made on an alleged breach of contract in keeping out a representative of Hammerstein's from the Booking Office, from access to the Booking Office, and that is about as far as I know, as I can recall now. I cannot recall all of these things. Q. Is it expected that upon the trial of the action, upon its merits, you will participate? A. That will depend, altogether, upon whether I am able to do so or not. Q. Does your retainer cover anything of that sort? A. If I did not want to try the case I would be excused. Q. I have a letter, Judge, dated November 10th, addressed to the Thompson Legislative Committee, which is written by j\Ir. Hammerstein — A. Is that the letter that was offered in evidence ? Q. ISTo, sir; this is another one, subsequently, and it says: " Dear Sir : Mr. E. E. McCall claims, according to a report in the Times, in answer to my statement of yesterday, that the matter went back to the time when he first went on the Commission, and that he was then interested in the case, and followed it up later " — I cannot read the handwriting ; maybe the Senator can — Chairman Thompson. — I am not any better acquainted with Mr. Hammerstein than you are. However, I will try and read it: " Mr. E. E. McCall claims, according to a report in the Times, in answer to my statement of yesterday, that the matter went back to the time when he first went on the Commission, and that as he was then interested in the case, he followed it up later. This cer- tainly is another spell of somnambulism Mr. E. E. McCall seems to be a victim to. The case (it means the order of yesterday) of 1042 Investigation of Public Service Commissions yesterday was begun two months ago. There existed no claim or controversy with the party Mr. E. E. McCall legally represented before that time. " Respectfully yours, " OSCAE HAMMERSTEIN." That is as near as I can make it out. Q. Judge, are you aware that upon the trial of this action, when it comes to trial — A. Are you going to ask any questions about that letter ? Q. Well, I will ask any questions you want me to. A. He says it has no relation to the earlier transactions. Q. Make any statement that you wish. A. The action was based on the contract of April, 1913, upon an alleged breach of the very contract I am telling you I advised on. I do not think there is any necessity for answering crazy screeds, but I want that on the record. It is the basic principle of the litigation, both for the injunction applied for and for the cross-injunction applied for by the defendant. Chairman Thompson. — Did you draw the contract ? Mr. McCall. — No, sir. Chairman Thompson. — Does that contract involve the construc- tion of the subway ? Mr. MoCall. — Certainly not. Mr. Lewis. — If you will allow your counsel to develop the record, we will try and have it in an orderly way. Q. There is being constructed under the jurisdiction of the Public Service Commission a subway along and upon the premises, or the street fronting upon which the Victoria Theatre fronts, is there not ? A. Yes, sir ; Seventh avenue. Q. Is it or is it not true that some time prior to May 1, 1915, a notice was served by the Public Service Commission of the First District upon the ITammerstein Company to the effect that it would be necessary for the company to remove its boilers which were under the sidewalk in front of the building, and which, under the Eepoet of Joint Legislative Committee 1043 law with respect to theatres, had to be maintained outside of the theatre building and underneath the sidewalk? Do you know about that ? A. Your question is involved. I do not know about the necessity of maintaining boilers outside of the wall. I do not know that such a notice was served, but I presume that it was if the boiler was occiipying vaults in front of the building. Wherever the line of the subway goes that necessitates its penetrating that line, they have to get out. They only occupy the vaults by a license, and they have to get out. Q. Have you any information or did you ever hear, Judge, that a notice was served by the Public Service Commission, requiring the removal of this particular boiler ? A. I never heard or knew of it or had any conscious knowledge of it until it was alleged in the newspapers. Q. Did you see it alleged in the complaint, at the time it was brought to your attention ? A. I rather think it was. Q. In the construction of the subway underneath the street and along and under the sidewalk in front of the Victoria Theatre, has there been more or less blasting done ? A. If there has been any removal of rock there. I think the Holbrook, Cabot & EoUins Company's section runs down to about that point, where the Inter- borough subsidiary company takes it up and runs it down Seventh avenue. I am not cleai' whether there has been any excavation in the immediate front of it. Mr. Wilson would know. How about it, Mr. Wilson? Mr. Wilson. — There has been a little there. There was no excavation at the time he alleges and no blasting. Q. In your examination of the amended complaint, did you discover this clause: " Fifth: During the years 1914 and 1915, the City of New York has been constructing a rapid transit subway underneath the street and sidewalk in front of said Victoria Theatre, and during such construction has carried on almost con- tinuously blasting operations in the street adjacent to said Theatre, and by reason of such blasting operations and other causes unknown to the plaintiff and without its fault, the Victoria Theatre building became unsafe for occupancy as a theatre?" A. Yes, sir, there was such a clause as that. 1044 Investigation of Piiblio Seevice Commissions Q. And what do you know of the facts as to whether or not the Victoria Theatre became unsafe for occupancy as a theatre by reason of such blasting? A. What do I know about it? Q. Yes. A. I knew nothing about it, and cared less, as far as the litigation was concerned, because the law is very distinct on the point that the construction of a subway is not a casualty, or work of that kind. He could not make his claim unless he showed his claim to be made upon a casualty, and there was no incidental facts bearing upon it at all, and only a legal question. Q. Upon the trial of the case, will it or will it not be necessary, in your opinion, for engineers and experts in the employ of the Public Service 'Commission to testify as witnesses? A. If they are subpoenaed, certainly it will. Q. Will it or will it not be necessary for the plaintiff in the action to rely upon the evidence of engineers and experts in the employ of the Public Service Commission? A. I do not know. I will not pass any judgment upon what is necessary to support this case. Q. Mr. Hammerstein's theory upon which he bases his com- plaint to this Committee appears to be that because of your position as a Public Service Commissioner, it would be difficult, if not impossible, for him, as plaintiff in the action, to obtain the expert engineering evidence from the employees of the Public Service Commission to enable him to support the allegations of his complaint. A. I would not dignify it by answering it — not your question, I don't mean. I would not dignify what he says by attempting to make an answer to it. It is too absurd. 'Chairman Thompson. — Is it true ? Mr. McCall. — It is not true. Of course, it is not true. Do you think it is necessary to ask me that question ? Chairman Thompson.- — I am not to blame for the kind of citi- zens of your city that become prominent. Mr. McCall. — Oh, pshaw ! Chairman Thompson. — You don't know. I know there are a good many things you don't care anything about. Eepoet of Joint Legislative Committee 1045 Q. Is it or is it not true, that the Hammerstein Amusement Company is seeking acts and actors for service and production in the 44th Street Theatre which it is claimed by Mr. Hammer- stein has been leased to take the place of the Victoria Theatre which, as he claims, has been destroyed by the blasting operations conducted in the progress of the construction of the subway ? A. I don't know it as a fact, and would not deny it or affirm it. Q. Isn't that one of the issues in the action in which you are counsel? A. The only issue I know of was his representative was prevented from getting into the Booking Office. Q. Have you read the complaint? A. Yes, sir, but I cannot recall it, and did not pay any attention to the substance of it. My advice would be to my client under those circumstances not to permit him to go in, because in going to the 44th Street Theatre and trying to open it, he distinctly, in my judgment, breached a contract for which he had received $225,000 in pay- ment, and my advice then, now and to-morrow, or any other time, sought upon that proposition, would be to reject any offer coming from him. Q. Of course, this 'Committee has not any interest in the litiga- tion or interests of the litigation; the only interest this Com- mittee has is to ascertain whether, in view of the fact that a Public Service Commissioner is not specifically prohibited by law, whether or not the act should not be amended so as to provide that a Public Service Commissioner shall not be permitted to practice law. A. You will have to exercise your own judgment on that. Chairman Thompson. — There is a further interest, and that is, that it is important whether or not you as a Public Service Com- missioner would be of more benefit as. an attorney for one of these litigants on account of your influence with the Public Service Com- mission than you would be if you were not a Public Service Commissioner ? Mr. Mc'Call. — Do you think my influence as a Public Service Commissioner could stop the construction of the subway up Sev- enth avenue, or do you think the subway there could be constructed without blasting ? 1046 Investigation of Public Seevice Commissions ■Chairman Thompson. — I am asking a practical question. Mr. McCall. — Do you suppose I could stop the construction of the subway up Seventh avenue ? Chairman Thompson. — I think you could have it constructed at a proper time or could have the work delayed, if you wanted to exercise the power of delay. Mr. McCall. — I would not do that, and you know it. Chairman Thompson. — I do not suppose you would, but it becomes important from that angle, that is all. Mr. McCall.- — You come to New York and advocate a delay in the construction of the subway and you would be chased back to Lockport so quickly you couldn't see your coat-tails dis- appearing. Chairman Thompson. — We have had enough of delay, every- body writes me. Mr. McCall. — Who are the everybodies writing you ? Chairman Thompson. — I got letters from here and there. Mr. McCall. — Let me tell you as a Public Service Commis- sioner, there has been no delay in the construction of that sub- way that was not occasioned by barriers and obstructions that could not be legally or physically overcome. There is not in the civilized world a work of that magnitude or mammoth nature that has gone on with the perfection of the work that can be found in the construction of the subway in New York to-day. Chairman Thompson. — I think it ought to. You have the high- est paid and most numerous force of engineers in your organiza- tion. Mr. McCall. — At any time you want to meet me on the plat- form in debate in public I will discuss that question with you. Chairman Thompson. — I do not know that I care to do that, but I will have something to say about it in the Senate next winter. Repoet of Joint Legislative Committee 1047 Mr. McCall. — I will have something to' say outside about it, too. Chairman Thompson. — The incident is now closed, with an exception to the Chairman. By Mr. Lewis: Q. In testifying before this Committee at a session held at the City Hall, on the 5th of February last, you were asked about your participation in an action entitled, " The People of the State of K"ew York against Park How Realty .Company, im- pleaded with others ; '' what I shall read now is from the steno- graphic minutes of that hearing: " Q. The case where the meet- ing of the Commission was held on Friday, and you were absent, and the next day argued the case, that was the Park Row Realty case? A. That case went way back in the summer of that year. Q. And you had been preparing it in the summer? A. No. I had not any preparation of that case at all. Q. Then what had been going on back in the summer ? A. I had no preparation. I had conferences in that case with the attorney who prepared the demurrer, and he prepared the brief and I happened to be in Albany on official business on that Saturday, and I agreed to argue it for him. Q. And you did argue it gratuitously. Judge ? A. I did." ; that was a demurrer, was it not. Judge ? A. It was. Q. Did you prepare the brief yourself ? A. ISTo, sir, I did not. There is not need of my looking at it ; I did not. Let me see it, please. 'No, sir; I did not. Mr. Lewis put in evidence brief in the case. The same was marked Exhibit 1 of this date. Q. Your name appears signed to the brief as counsel, does it not? A. Yes, sir. By Chairman Thompson: Q. This brief was printed before the case was submitted, wasn't it ? A. Of course it was. Q. Do you allow folks to sign your name to briefs without some understanding that you are to appear in the case ? A. Have I said I was not to appear in the case ? 1048 Investigation of Public Seevioe Commissions Q. Your statement, as I understood it last spring, was tliat you just happened to be in Albany on official business, and that is the reason you argued it. A. That is not what you should infer from that at all. I will put a statement on the record in this case right now, so it will be clear. Mr. Charles Stuart Davison, one of the leaders of the New York Bar, was the attorney of record in that case, and it was a tax question. I had prepared a case myself when I was practicing at the bar, which involved a very great tax question, and Mr. Davison came to Easthampton to consult me about that case, and in reference to his own case, and it was a question of a tax in his case upon a recorded mortgage, the ques- tion arising — speaking from memory and largely off-hand — I think the first question was whether or not it was a mortgage or a deed. By Mr. Lewis : Q. Drawn in form absolute, as a conveyance ? A. Unless there was a supplemental agreement, and as my memory serves me, there would be no means of telling whether a deed or not. There was a supplementary agreement so there could be no ambiguity at all about the reference to that document, and it was a mortgage. It was for a large amount, and what it is, I cannot now recall. The question of stamps on the mortgage was the question that was brought up, and the register was held responsible for not exacting stamps before the instrument had been canceled. Q. Before it was recorded ? A. Before it was canceled. Chairman Thompson. — You were entirely familiar with the case before you argued it ? Mr. MeCall. — You don't suppose I am lacking in sense enough to get up and argue a case unless I have knowledge of it, do you? If that is the practice in Middleport, it is not in New York. Senator Lawson. — The Court of Appeals is not located in Middleport. Mr. McCall. — That was not the Court of Appeals. You wiU have to look up matters, as well as the Chairman. Chairman Thompson. — The highest judicial office I ever was elected to in Middleport was justice of the peace. Report of Joint Legislative Committee 1049 Mr. McCall. — I think that is as high an office aa they ought to have elected you to. From that time on a newspaper which I am not going to mention has held me out to the world as August Bel- mont's attorney. One time I was visited for an interview as to whether or not I was August Behnont's attorney, and I said if they would go to the county clerk's office they might find docu- ments which would make me appear as Croesus' attorney. I do not know as I have ever spoken over twenty-five words with August Belmont in my life. I have never had any relations with him, good, bad or indifferent, in business, social life, or otherwise, and I do not say that in any disparagement to Mr. Belmont at all, but it is a fact. I have never had any relations with him whatever. There was never a talk between Mr. Charles Stuart Davison and myself as to compensation, and I have never received a dollar compensation and would not take a dollar of compensation. I thought I made that pretty plain on the record before. Chairman Thompson. — This corporation of 1,000 shares, 979 shares belonged to August Belmont? Mr. McCall. — I don't know about that. Chairman Thompson. — Wasn't it printed in the complaint ? Mr. McCall. — I don't know. Chairman Thompson. — That was in the complaint which you had before you when you argued the case? Mr. McCall. — It may be. Chairman Thompson. — That was in the complaint, and the 21 shares making up the balance were owned by other people. Mr. McCall. — That may be. So that there cannot be any doubt, Mr. Harkness suggests, in putting in that brief — there can be no doubt as to my relations in that case, and the consultation with Mr. Charles Stuart Davison, and I did argue the motion in Albany before Mr. Justice Chester. Mr. Lewis. — That brief that has been put in explains it suffi- ciently, and it is only put in for the purposes of the record. 1050 Investigation of Public Service Commissions (Mr. McCall asked that his reference to Senator Thompson's holding the office of justice of the peace and what was said in connection therewith be not considered as a part of the record.) Chairman Thompson. — I will take care of that. Geoege V. S. Williams, being recalled for further examina- tion, testified as follows: By Mr. Lewis: Q. Mr. Williams, are you able to tell us the date of the execu- tion of the so-called dual contracts ? A. March, 1913 ; March 19th, I think. Q. You were a member of the Commission at that time, were you ? A. I was. Q. And had been for how long a period ? A. Since the year before, just about a year. I think my appointment was the last day of March, 1912. Q. Did you participate in the work of preparing those con- tracts ? A. ISTo, sir ; not in preparing them. Q. Were you familiar with the provisions of the contracts ? A. Yes, sir ; at that time. Q. Do you recall, Commissioner, that in the certificate issued to the New York Municipal Railways Company for the third track- ing of the Broadway, Fulton and other lines in Brooklyn, there was a provision which required the submission to the Commission of any proposed contracts for the doing of the work of third-track- ing on those lines? A. There was a provision that on all con- tracts, as I remember it now, over $100,000, they should be sub- mitted before they were entered into, and that as regards contracts less than $100,000, to be approved by the Chief Engineer, but I think we do not look into them, as I remember it. They all have to be approved in some way in the end. Q. The Commission reserved the right to scrutinize and super- vise and reject, if thought necessary, any proposed contract of the Brooklyn lines in excess of $100,000 ? A. Or any other work the companies were to do in the way of equipment, or buying of cars, or general work. Repoet of Joiitt Legislative Committee 1051 Q. What have you to say as to whether or not a similar provi- sion was contained in the certificate issued to the Manhattan Com- pany? A. The certificate issued to the Manhattan Company for the extension of their lines did contain a similar provision, as to the extension of their lines. Q. As to the extensions and additions and connections ? A. Yes, sir. Q. As to the third-tracking of the Second, Third and Ninth avenue lines ? A. That was .not exacted on the Second, Third and ISfinth avenue lines, as I recall. Q. Will you tell the Committee the reasons for not exacting it at that time ? A. There was a good deal of argument about it, I remember, at the time. The fact of the matter is that as far as the contracts were concerned, the scheme and all of that was con- cerned, the thing was practically settled before I came into the Commission, the dual scheme, and the Board of Estimate and the Public Service Commission entered into a joint report very shortly, I think it was in May after my coming into the Com- mission in April that was published. Q. You came into the Commission in April, 1912? A. Yes, sir, 1912 ; but that whole year was taken up by the lawyers putting into words what the Board of Estimate and the Public Service Commission agreed to prior to that time, and there was some dispute over the wording of the contracts at the very last, and it had to be a number of times printed, I remember, before they finally got it done, but I can't remember after I became a member of the Commission, that there was any discussion between the members of the Commission and the Board of Estimate and the Manhattan or the Interborough Company as to that proposi- tion of their letting their own third-tracking, which was their own money, and really did not come in as a part of the dual proposition, because the' city does not have the same interest in that Manhattan property as it does in the other property, the tunnels and the sub- ways, which the city itself furnished the money for. There is this distinction between that contract, however, and the Brooklyn contract. The Brooklyn contract all comes in — the Brooklyn lines all come in as a part of Contract ISTo. 4, and the Brooklyn company puts in all of their lines and pools it with the city 1052 Investigation of Public Sbevice Commissions interests, and the city builds the new lines, and the Brooklyn com- pany puts in their own lines to get five cents all through the city of Brooklyn, instead of having it confined to one line running from the bridge to Coney Island. Q. But the Manhattan contract does provide for a division of certain net receipts from the third tracks ? A. Yes, sir ; after a million and half dollars a year, sort of preferential, is taken out. Q. And the greater the cost of construction of those third lines, the greater the interest charge which would first be deducted before ascertaining the amount of net earnings, would it not ? A. Quite naturally. Q. Then, to that extent, the city has an interest in getting it done as cheaply as possible ? A. Yes, sir ; and as well as possible, and as expeditiously as possible. Q. And in addition to the interest of the city in that connection, the stockholders of the company have an interest in having the work done as cheaply as possible? A. Yes, sir; and as good as possible. Q. And one of the functions of the Public Service Commission is to protect the stockholders of the corporation from extravagant, wasteful expenditure on the part of the directors, is it not? A. As a Public Service Commission, yes, sir. Q. Did you, after you became a member of the Commission, discover, or was the fact called to your attention, that the Man- hattan certificate did not contain that reserve power to the Com- mission? A. Why, yes; certainly. Q. And did you discover that the provision was in the Brooklyn contract, the Brooklyn certificate? A. Yes, sir; in the Contract iNo. 4. I do not think it is in the Brooklyn certificate, as I remem- ber it, but it may be. I know it is in Contract No. 4, that all of their contracts are to be submitted. I am quite sure it is in the Brooklyn certificate also. Q. Did you investigate or cause any investigation or ask for any explanation as to the reason for the omission of that provision from the Manhattan certificate? A. I cannot remember that I was ever present when it was discussed. The Board of Estimate and Commissioner Wilcox and the older Commissioners had gone Ejepoet of Joint Legislative Committee 1053 all over that, and I think they could tell you about those dis- cussions, because I cannot remember as to discussions at all on that subject. Most of the discussion, after I became a member of the Commission, was on the method of financing, and the amount of the preferential. All the salient and main facts, as you might say, had been decided at that time, and when I became a member of the Commission the question uppermost in my mind and the question that was being thrown at me from all sides was whether I was going to stand for the dual system of contracts or the tri- borough, as it was called, the vote standing two for one, and two for the other and in the Commission itself. Q. And did you know of the subsequent application by the Interborough Company for the approval of the so-called Stevens contract? A. Yes, sir. Q. And were you present at the meeting of the Committee of the Whole at which the so-called Stevens contract was under dis- cussion, and opposed by Commissioner Maltbie ? A. I am not sure about that. I am not sure about that. I discussed it with Com- missioner Maltbie a number of times, and I also discussed it with Judge McCall, and while we were discussing it Mr. Stevens failed. Q. That was subsequent, was it not, to the date of the meeting at which it was formally under consideration ? A. I am not sure about it. I don't think that it was ever formally under considera- tion. We had a report on that contract from the counsel, and I think from the chief engineer. As I remember it, that contract not only covered their third-tracking which they had a right to do under the certificate, without the approval of the Commission, but it covered some work requiring the approval of the Commission, and it was a sort of a contract where he was to receive a percentage above the amount it would cost him to do the work. Q. Do you recollect what the amount of that percentage was? A. I don't think it was in the contract, and I have paid more atten- tion to it since the matter was a subject of inquiry before this Committee than before. Upon inquiry I learn that it was left blank. Q. Was there any discussion as to the amount that should be inserted ? A. I don't remember that, I am sure. Mr. McAneny, the President of the Board of Aldermen — George McAneny — 1054 Investigation of Public Service Commissions asked that the matter he held up until he had a chance to see the Chairman about it, and we talked it over, and Judge McCall agreed, and my impression now is, and I may have a long recol- lection, but my impression is before they had a conference, and I know it was before any decision was made, Mr. Stevens failed on a contract he had for a section of the Bronx he had with the city, and also on a contract he had with the State. Q. So there never was a decision made? A. I don't know whether it was withdrawn or dropped there. We certainly could not have let him a contract then if we had wanted to. Q. Wasn't there an occasion when there was a meeting of the Commission, either in Committee of the Whole or as a Commis- sion, at which Mr. Maltbie stated that he desired time in which to consider the proposed contract, and stated that that occasion was the first occasion he had known of the existence of any appli- cation for the approval of such a contract ? A. I am sure I don't remember that. Q. You do not recall being present at any such meeting? A. ISTo, sir. Q. Do you recall any meeting at which the statement was made that four members of the Commission were prepared to vote for the approval of the contract, and that Mr. Maltbie stated that he desired further time in order to prepare an opinion or memo- randum in opposition to approval ; that the statement was made to him that he might prepare and file his memorandum after the vote was taken ? A. ISTo, sir ; I don't remember that, I am sure. That would not have been hardly like a meeting, a man putting in his memorandum after the vote was taken. Q. Do you recall a time Commissioner Maltbie filed a memo- randum in opposition to the letting of the Stevens contract ? A. I think he did. Q. Do you recall any meeting at which the matter was the subject of discussion prior to filing the memorandum ? A. I recall a conference, I think, with Mr. Harkness, or with the Chief Engi- neer, at which the legal department of the Commission, and that was before, I am sure that was before Commissioner Maltbie wrote any opinion, in which it was the opinion of Mr. Harkness and of the engineering department that the contract with Mr. Stevens Eepoet of Joint Legislative Committee 1055 sHould not be approved. At first, as I recollect it now, at first there was no contract before us with Stevens. There was a letter from the Interborough Company, asking for permission to enter into a contract with Mr. Stevens. Am I right, Mr. Harkness ? Mr. Harkness. — That is correct. The Witness (Continuing). — And we had no form of contract at all, and some little time elapsed, I don't know how long it was, and a contract was finally submitted, and I don't think I ever saw that contract that was finally submitted by the Interborough Company, but Mr. Harkness saw it, and we had an opinion from our legal department and the Chief Engineer to the effect that that contract, for various reasons, as I remember it, should not be approved. Q. Wasn't that memorandum filed after the memorandum from Mr. Maltbie was filed ? A. I think long before, or a while before. Q. Do you remember a time a memorandum in opposition to the awarding of the Stevens contract was filed by Mr. McAneny ? A. I don't remember whether a memorandum was filed, or was in the form of a letter. I think it was given out to the press, as I remem- ber it. Q. And a copy of it sent to the Commission? A. I think so. I know I read it gomewhere. Q. Do you recall how much was involved in that proposed con- tract, or did you make any estimate of the probable cost of the work to be done under that contract? A. I really could not tell you that. The reports, the joint report of the Board of Estimate and Public Service Commission, before I became a member, had that all itemized as to the probable cost of all those various items. Q. Do you remember what that item was ? A. No, sir ; I don't remember. Q. Did you know of the presentation for approval by the Com- mission by the Interborough Company of an application for the permission to enter into a contract for the construction of the exten- sions, additions and connections ? A. Yes, sir. Q. And prior to the presentation of that application, did you know of the fact that a contract had been awarded for third-track- ing the Second, Third and Ninth avenue lines, which had not 1056 Investigation of Public See vice Commissions received the approval of the Public Service Commission, because it was not necessary that it should ? A. I saw in the — the first I knew of that was in the public prints. I noticed there had been a contract awarded to three different firms, I think Snare & Triest, and I have forgotten the others. Q. Terry & Tench and the Gillespie Company? A. Yes, sir. I think those were the three companies; and then the company sent to us a request that we allow those same contractors to do the balance of the work on the extensions in the Bronx, and some little work. Q. But that was not connected with the operation? A. I do remember that- — I do remember this, that in 1913, at one time, at some conference, of hearing Mr. Shonts or Mr. Hedley or some- body connected with the Interborough Company, say that -they did not want every contractor in town, or every Tom, Dick and Harry, I think they expressed it, working on the structure while they were running their trains. We all knew they were running their trains to their capacity, and it wouldn't do to take any of the trains off, and I think that was one of the reasons advanced for letting the contract to somebody who would not hold up the trafiic on the road, and they had absolute confidence in, and when the questions came up of the extensions, the Chief Engineer held there was no such question, and he thought they should get the idea of different contractors, and he didn't see but what they would do it as reasonable as anybody else, but he thought we might be able to do better on some pieces. Q. You made a motion on some of those things, at one of the meetings, didn't you ? A. I don't know ; I might. Q. Do you remember you made a motion that the proposed contract be approved in part? A. The Chief Engineer, as I remember it, said there were some connections — I don't know whether I made a motion or not. Q. Question withdrawn. Mr. Shuster advises me that that motion was made by Mr. Wood. Do you remember the occasion of Mr. Wood making that motion ? A. I don't know who made the motion, but the Chief Engineer made a report that some portions like connecting the Second Avenue Elevated at Queensboro bridge, he thought being that the contractors were there, they should have Report of Joint Legislative Committee 1057 a chance to make tlie connections in there, rather than get another contractor with another plant, and save money by it. It was only something like $250,000, and that part of the application was approved. Q. Do you remember the amount allowed as percentage over end above cost of labor and materials ? A. As I remember, it was twelve and a haH per cent. Later somebody from the Interbor- ough wrote a letter they had made an arrangement with their contractors to pay 15 per cent, and we had only allowed 12% in our order for the extra work. Q. That was the Gillespie contract, in which 15 per cent was allowed, was it not ? A. Yes, sir ; he had the three companies. Q. Do you know the amount of the estimated cost of the third- tracking of the Second, Third and Ifinth avenue lines ? A. I have it in my head somewhere around six or seven million dollars. I may be wrong about it. I could tell you if I had the book here. Q. Did you know that upon that contract the three contractors, on the face of the contract, were allowed a percentage of 15 per cent? A. Yes, sir; I have heard that. I have never seen the contract. I do not think it is on file with us. I never have seen it. Q. Did you ever know of the fact that after the award of the contract to T. A. Gillespie & Company, Snare & Triest and Terry & Tench, the work was parceled out between them? A. Only as I have read the reports of the proceedings before this Committee, published in the daily press. Q. And you did not know, then, of the fact that nearly three- quarters of the entire work of third-tracking is being done by Terry & Tench Company ? A. Wo, sir ; I did not know how they were dividing it. Q. And you did not know of the fact that the Terry & Tench Company entered into an agreement with T. A. Gillespie & Com- pany and Snare & Triest under which they assume to do all the third-tracking from the Battery to 147th street, on the basis of 10 per cent of cost over labor and materials? A. l^o, sir; I never heard that. Q. And that the total cost of the work to be done by the Terry & Tench Company equalled approximately three-quarters of the Yo-L. 1 — 34 1058 Investigation of Public Service Commissions amount to be done under the entire contract ? A. 'No, sir ; I don't know how they divided or who does the work. Q. I suppose you did not know of the fact that subsequently a contract was entered into between the Terry & Tench Company and T. A. Gillespie, under the terms of which Terry & Tench agreed to perform all the work and furnish all the materials for the third-tracking from the Battery to 147th street, or thereabouts, at an actual cost of 5 per cent over the cost of labor and materials ? A. ISTo, sir. If we had, we would never have allowed them 123^ on those little odds and ends of construction. Q. In view of the evidence presented to this Committee in documentary form and identified by Mr. Tench of the firm of Terry & Tench from which it appears that that company has been engaged in the construction of the third tracks of the Second, Third and Ninth avenue lines, aggregating practically three- quarters of the work awarded under the contract known as the Gillespie contract, on a basis of 15 per cent, and were actually' receiving for their services in the performance of the three- quarters of the aggregate amount of work a percentage somewhat less than 5 per cent, would that have raised in your mind a con- clusion that the Public Service Commission should have embodied in the certificate a provision similar to the provision embodied in the certificate issued for the third-tracking of the Brooklyn lines ? A. Why, certainly. If there had been any idea in my mind, at least, that the Interborough or any other company would attempt to make any contract or benefit to the expense of the city by having a larger percentage, I certainly would have looked into it. Q. Might that have been anticipated? A. To tell the truth about it, the Interborough Company have a contracting company of their own, the Eapid Transit Subway Construction Company, or something of that sort, and I had an idea that while they were so particular, they wanted to do that work themselves. The Brook- lyn Company has done some work themselves for us. I supposed likely they would do it with their own contracting company, be- cause they were so particular all the way through about the ques- tion of operating and doing the constructing under operating conditions. Report of Joint Legislative Committee 1059 Q. Was there any talk to that effect ? A. ISTo, sir ; I cannot say that there was. Q. Might it not have been provided in the certificate that the work should he done by the company, without awarding any con- tracts ? A. I suppose it might have been. Wasn't there something in the contract about the companies doing their own work, Mr. Harkness ? Mr. Harkness. — No, sir ; simply the omission of these provi- sions. By Chairman Thompson : Q. If you had put the provisions in the Interborough certificates that you put in all the others, if they had wanted to do it, with their own contractors, you could have consented to it as a Public Service Commissioner ? A. Yes, sir. Q. And there would not have been any question about it, if they wanted to do it at cost ? A. ISTo, sir. Q. There could not have been any object in leaving it out, then, for that reason ? A. !N"o, sir. My impression was they would try to do that work themselves. Q. If that was all they wanted, they could have left the pro- visions in? A. Yes, sir. The Interborough Company have re- fused to construct for cost right along, while the Brooklyn Com- pany has done it. They have taken some contracts, and done it at cost, like facing up 39th street cut, and 36th street station, and the work in Center street loop was all done, as I remember it, at cost. The Interborough insisted that if they did any work with their construction company they should receive profit, and they came in and bid on various sections. By Mr. Lewis : Q. Was this company owned by the Interborough Company? A. I so understand it. It is owned by the company or the directors of the company. I think the stock is all owned by the Interborough Company. Q. And any profit that might be made by the Interborough Construction Company and paid to that company from the funds of the Interborough Eapid Transit Company would return to the 1060 Investigation of Public Sbevice Commissions stockholders of tlie Interborough Rapid Transit Company in the way of dividends ; is that right ? A. Yes, sir. Q. That being so, what advantage could there be, or could there be expected to be, by an award of a contract by the Interborough Rapid Transit Company to the Interborough Subway Construction Company? A. ISTot any. I had an idea they would want to do this work themselves, in order to keep traffic going, because it is very important to keep their trains running through the construc- tion to themselves, and as I remember, that was the argument that Mr. Shonts, or whoever it was, made in the letter that they sent to us asking us to approve the Stevens contract, that he had abso- lute confidence in the fact that Mr. Stevens could do the work without interfering with traffic. Q. You knew of the fact that Mr. Stevens had been Chief Engi- neer of the Panama Canal during the incumbency of Mr. Shonts as Chairman of the Commission, did you not ? A. Yes, sir. I did not know it at the time, but after the letter came in I was told by Commissioner Maltbie or somebody else. Q. Was there any understanding that Mr. Shonts desired to provide a method by which Mr. Stevens would really act as the supervising engineer of that construction, and that the Stevens contract was prepared with that idea in mind ? A. I do not know what idea they had in mind when they prepared the Stevens con- tract, but I cannot remember any talk on that subject. I never talked to Mr. Shonts or Mr. Hedley about it, and I don't remember ever being in a conference where the thing was mentioned, except one time Mr. Quackenbush was in the office there, at one time, and he just dwelt on the necessity of getting busy and getting the work done, and there was something said about getting the proper consents, and I think to this day they have not the proper consents for the Bronx extensions from the ISTew York Central. Q. Is there any contract for those extensions to this day? A. IsTo, sir. Q. Is there any proposed contract before the Commission for those extensions? A. I don't think so. I think we approved a form of contract for those extensions, but I don't think the bids have been received. Report of Joint Legislative Committee 1061 Q. Might not what happened in connection with the allowance of 15 per cent upon the cost of constructing the third tracks have been anticipated by the Commission? A. That is a pretty broad question. Q. It was anticipated and provided against in the Brooklyn certificate, wasn't it? A. Whether it was anticipated that any company would try to spend any more money than they thought they ought to, it was not certainly anticipated by me. Q. Wasn't that the occasion for putting into the Brooklyn cer- tificate the provision that all contracts should be submitted to the Commission for approval? A. I don't think there was any sus- picion or expectation in anybody's mind anybody would try to give away money on this proposition, and from my experience of three years on the Commission I don't know of any case. Q. What do you think of the allowance of 15 per cent on the third tracking by the Interborough when the work is being done for less than 5 ? A. I didn't know it could be done, and our engineer, as I remember, reported that 12% per cent, was reasonable. Chairman Thompson. — Where is that report ? Mr. Williams. — Either he reported it in writing or verbally. I have heard Mr. Craven say he thought that was reasonable. Chairman Thompson. — I would like that report ; I understood him to say there was never any investigation made on the subject. Mr. Williams. — Yes, sir ; there was. I am under the im- pression that that was declared by the chief engineer to be reasonable. Q. The chief engineer was Mr. Craven ? A. Yes, sir ; Alfred Craven. Q. You stated this morning that you were for a period of several years, I don't remember just how many, connected in business with Mr. Sheehan ? A. Yes, sir. Q. And in charge of the Brooklyn A. Not in charge, but I was connected with Mr. Hughes in his Brooklyn office. Q. Was Governor Sheehan at that time counsel for the Brook- lyn Rapid Transit Company? A. Yes, sir. I could go back of 1062 Investigation of Public Service Commissions that a little. Governor Sheehan fell heir to me, like, because I was connected with Morris & Whitehouse before Governor Sheehan and his partner. Professor Collin, became counsel to the Brooklyn companies. Whether it was the Brooklyn Rapid Transit at that time or not, I don't know. I was connected with JVEorris & Whitehouse for some time and was familiar with the courts and procedure, and around the courts when he took the Brooklyn busi- ness over of the Brooklyn railroads, and it is now known as the Brooklyn Eapid Transit, or part of them, and they asked me to come into that firm as an assistant trial lawyer. Q. And you continued with Governor Sheehan for how long in that capacity? A. I am not sure. I should say from 1896 to 1899, something of that sort, and maybe 1900. Q. How long did Governor Sheehan continue as counsel for the companies? A. I think he is still counsel. I think he still has some work for the companies, although I am not sure. Q. Was there a time when you were counsel for the Brooklyn Hapid Transit Company? A. There was a time I was paid directly by the company for trial work, and not paid through Sheehan & Collin. After 1899 or 1900, and I am not sure of the date, down to June, 1903, that was. Q. Between June, 1903, and the time of your appointment to the position of Public Service Commissioner, had you been in the employ of the Brooklyn Rapid Transit Company? A. ISTo, sir. I was trying cases against them. I formed a partnership with Judge Daly and from that time on all the cases I had were cases against them, and I had a good many. * Q. When you became Public Service Commissioner, did you examine the proposed dual contracts in connection with the deduc- tions to be made from gross earnings of the Brooklyn companies before the division of net earnings between those companies and the city ? A. Did I examine the figures, do you mean ? Q. Did you examine the provisions in relation to the deductions to be made from the gross earnings before the division of the net earnings should take place ? A. I dare say I did. Q. Do you recall what deductions were made under the terms of the contract ? A. No, sir ; I don't recall them. Report of Joint Legislative Committee 1063 Q. You recall, do you now, that the entire cost of construction was to be paid as to a portion of these lines by the Brooklyn Eapid Transit Company, or general Municipal railways, as to the cost of third-tracking ? A. If I get your question right, the Brooklyn Rapid Transit Company, I think, put in $13,000,000, or $13,- 500,000, and the city is to put in sufficient money to construct certain lines, and the Brooklyn Rapid Transit Company, in addi- tion to the money that they put in, also have to equip lines, and they themselves pay for the third-tracking, that is, they have to furnish money to pay for the third-tracking and extensions and work in East ISTew York, and Coney Island Terminal. They also, as I remember, paid for the construction or advanced money for the construction of the turn-out at Center street, and things of that sort. Q. In the allowances and deductions, were they allowed 6 per cent, upon their investment ? A. The two contracts were identical with the Interborough and B. R. T. They have a 5 per cent, interest and 1 per cent, sinking fund. Q. Were the conditions identical? A. Practically, as near as could be made with the conditions. The physical conditions might be different, but as near as possible to the scheme, neither company should have the advantage over the other. Q. Didn't the Brooklyn Company get an advantage to the ex- tent of about 1 per cent, on $12,000,000 over the Manhattan? A. I don't think so. Q. Do you recall the fact that Commissioner Wilcox, shortly before he retired from the Commission, was engaged in a contro- versy over the subject of those allowances, and insisted that an excessive allowance was being made to the Brooklyn companies? A. If he did, I did not hear it, because most of those talks on financial matters were done with the Board of Estimate and Chair- man Wilcox, possibly with a representative of the bankers, and our own counsel and force. I do not remember any discussion of that sort. Q. Did you ever know of the fact that the Brooklyn companies " put their backs against the wall," to quote from testimony here- tofore given, and refused to execute the contracts until they were given what has been characterized as a bonus of from ten to twelve 1064 Investigation of Public Sebvicb Commissions millions of dollars in tlie way of an allowance by deduction before they would execute the contracts ? A. No, sir ; I don't remember that. I remember a conference at Commissioner Wilcox's house, where we thought the whole scheme was off about two o'clock in the morning, but that was with the Interborough, and I was present at that conference. I don't remember what that was about now. Chairman Thompson. — It was about, leaving out this same pro- vision ? Mr. Williams. — I don't think so. Chairman Thompson. — You would not say that was not the reason ? Mr. Williams. — I wouldn't say so, but I don't remember it now. I know it was at Commissioner Wilcox's house late one night, and finally things were patched up, and we went on negotiating, but that was some minor thing, as I remember it, in the contracts. I know it was not that, no matter whatever any other witness said, and the representatives of the bankers were there, and it was. in regard to the terms of the mortgage and the terms upon which the Interborough was to get $150,000,000. That was the first time in my life I had seen representatives of the Morgan House, and that was the things that were being discussed were financial matters. Q. Did you ever hear the suggestion that there was a substantial financial allowance to the Brooklyn company, as an inducement to obtain their agreement to execute the subway contracts? A. jSTo, sir ; the only thing that I ever heard in regard to that was the Brooklyn company, way back before I was appointed to the Com- mission, a year or so, had come in, and that they had forced the Interborough Company to act. If that is what you have reference to, but I never heard that they were to be recompensed for it in any way or to receive a bonus of any ten or twelve million dollars. What is there about that, Mr. Harkness ? Mr. Harkness. — In the reconstruction of existing railroads for the B. R. T., the company to expend, I think, ten or twelve million dollars, and the controversy did arise as to whether it would be Eepoet of Joint Legislative Committee 1065 allowed 1 per cent, on that, and that was not to be recaptured by the city, and the allowance was to be made on that that was only to be subject to recapture. Mr. Williams. — I may have known about it at the time, but it is all out of my mind at the present time. Q. That constituted, as I think the testimony heretofore ofFered shows, a practical bonus for the purpose of procuring the execution of the contracts- — (question not finished). Mr. Lewis. — Have you any questions to ask, Mr. Chairman ? Chairman Thompson. — !N"o, sir. Mr. Lewis. — I think that is all, Mr. Commissioner. (Few minutes recess. ) William PIaywaed, being first duly sworn, testified as follows : By Mr. Lewis: Q. Tou are one of the Public Service Commissioners of the First District, are you ? A. I am. Q. And have been since what date? A. I think the 31st of March, or the 1st day of April, 1915. Q. You were designated at some date after you took office as the hearing Commissioner in the Case ISTo. 1540, Albert Moritz against the Edison Electric Illuminating Company of Brooklyn? A. I was. That was one of the cases that Commissioner Maltbie, my predecessor on the Commission, had been hearing for a number of years, and I think on my coming on the Commission the Chair- man assigned all of his cases to me. That is the record that Senator Thompson asked me for. (Referring to the Moritz record.) Q. What is the nature of the proceeding ; how did it come before the Commission ? A. It is a rate case, and on complaint of Albert Moritz and others, as to discrimination in the rates, and as to the maximum rate for the retail customers. It has been going, I think, three years or more, perhaps. Q. What was the condition of the case A. I may say it was a sister case to the New York Edison, a case called the Stat- lander case, decided by the Commission last spring some time. 1066 Ikvestigation of Public Seevice Commissions Q. What was the condition of the case when referred to you; how much had been done on it ? A. I think Commissioner Maltbie had had the case about three years and taken in the neighborhood of a thousand pages of testimony. Q. How many hearings had been held? A. I cannot tell you before that. Q. How many hearings have you held on this case? A. Some less in the six months than he held, but they must have been longer, because I have taken between eleven and twelve hundred pages of testimony. Q. Has the hearing been completed ? A. No, sir ; it has not, but it is very near conclusion. I hope to get through with that, as well as the other rate cases, by the first of the year. This is my last one. Q. What is the Edison Electric Illuminating Company, what do you know of it and its relation to the other companies in Brooklyn ? A. It is a lessee company of the Kings County Electric Light and Power Company, which latter owns all the stock, as I understand it, of the Brooklyn Edison Company, and has a lease — personally. Commissioner Williams told me what the terms of the lease are, and I did not look it up myself. I think it is accurate, however. The Kings County Electric Light and Power Company own the stock of the Brooklyn Edison Company, and under the lease all of the returns, the net returns, of what we call the Brook- lyn Edison Company, are paid as rental to the Kings County Elec- tric Light and Power Company. Q. And was this proceeding a proceeding to accomplish a reduc- tion in rates to private consumers ? A. Yes, sir ; of the Brooklyn Edison Company, and also to determine whether or not there were discriminations in the different classes of customers and the so- called riders, and which I thought in the New York Edison case were discriminatory. Q. Has this case recently been before the full Commission ? A. It has been before me since I came in the Commission, and once within, I would say a month or six weeks, it has been before the full Commission. Q. Will you tell me the circumstances and occasion for going before the full 'Commission? A. I don't know as I can, except Repoet of Joint Legislative Committee 1067 that Mr. Moran, who has appeared as counsel for the company since I have had the case, told me he had a witness he was very anxious to have the entire Commission hear, a former member of the St. Louis Commission, a Mr. Allison, and he came into my room one day and asked if I would make any objection if he invited the rest of the Commission to sit for this particular evidence, and of course I said I had no objection, although I did not think the testimony that he wanted to ofFer was material or ought to go into the record. Chairman Thompson. — You had refused to permit that testi- mony in the record ? Mr. Hayward. — JSTot formally. It had not been tendered or offered. I think it could be made clear that I did not think this evidence ought to go in. The record speaks for itself, and in my opinion the witness reverses the New York Court of Appeals, and that was my theory of it, but of course at that time no formal objection had been made by counsel to the Commission, and so I made no objection whatever, and, in fact, I think I stated I would be glad to have all the assistance I could get as it was a very important case. Q. Was there a hearing before the Public Service Commission as a body ? A. Yes, sir. Q. When did that take place? A. I think that is the record that was taken from the office. October 5, 1915, the date seems to be. Q. And in that hearing was Commissioner McCall present? A. There were present Chairman McCall and Commissioners Hayward, Williams, Wood and Cram, all the Commissioners. Q. Did Chairman McCall participate in the conduct of the hearing ? A. Chairman MdCall presided as he would in a hearing of the full Commission. Q. And was the evidence of what you have spoken offered? A. It was. Q. And received? A. It was. Q. Under objection ? A. Yes, sir ; by the counsel to the Com- mission, Mr. H. H. Whitman, and the complainant made the 1068 Investigation of Public Sebvice Commissions objection after the preliminary evidence had gone in, and the record, of course, speaks for itself here. They made the first objeetion. Q. Was there any difference of opinion among the members of the Commission as to the admissibility of the evidence ? A. There was a very marked difference of opinion between myself and the other Commissioners, and between the counsel to the Commission and the other Commissioners. I agreed with the counsel to the Commission that the evidence had no place in the record whatever. Q. And it was admitted? A. Yes, sir; it was, over the objec- tion of the counsel to the Commission. Q. And over your objection? A. Yes, sir; and over my objection. Q. Was there a formal vote upon the question of sustaining the chairman? A. I think several times, yes, sir. As new lines would be developed, I think the record wiU disclose that I stated I thought the objection of Mr. Whitman, counsel for the Commis- sion, should be sustained, and I think in each instance the chair- man put it to a vote, and after the hearing was perhaps half or two-thirds over, the chairman left, and the other four of us remained. I think toward the end of the proceeding. Commis- sioner Williams rather came around to my view, and I think at one point, you will find, toward the end of the proceeding, he thought they were going too far, and so states in the record, but there is no formal vote at that time. Chairman Thompson. — This record does not record the number of ayes or the number of noes. It says simply, " Those in favor say Aye. Opposed, JSTo." And the chairman announced the motion was carried. Mr. Hayward. — I have a very clear recollection of at the time it was put to a motion, the fact that all the Commissioners were against me until after the Judge had left, and as I say, Commis- sioner Williams once stated he thought they were going too far, and I said that in my opinion that was no different than the previous testimony that had been offered. Chairman Thompson. — Wherever the ayes were called for there were ayes, 4 ; and noes, 1 ; and yours was the one no ? Kepoet of Joint Legislative Committee 1069 Mr. Hayward. — Yes, sir. Chairman Thompson. — The vote is always put, " Shall the Chair be sustained," I think. Mr. Hayward. — The chair was sustained. Mr. Lewis. — I oifer in evidence this copy of the minutes of the hearing on case JSTo. 1540, dated October 5, 1915, Albert Moritz against the Edison Electric Illuminating Company of Brooklyn. (The same was received and marked Exhibit 2 of this date.) Q. Has there been any subsequent hearing upon that matter? A. I have held a large number of hearings since, and I hold just as many as I can possibly make them come to. Q. There have been hearings since this one of October 5th? A. Yes, sir. I wouldn't say how many, but several. Q. Has any other Commissioner been present since that time 1 A. 'No, sir. Q. Prior to that hearing, had there been any of the other Commissioners present at the hearings? A. E'ever in my time. Q. I was speaking of this particular proceeding. A. I was speaking of this particular proceeding. Commissioner Maltbie had it several years before I took it, and I read the transcript of the minutes of the previous hearings, before Commissioner Maltbie, and I do recall that on one previous hearing before Com- missioner Maltbie there was present the chairman and perhaps two or three other Commissioners, but I don't remember what the issue was at that time. Q. Do you know when this proceeding was commenced ? A. I don't, ofEhand. I could find out very easily. Chairman Thompson. — Have you forgotten your past, as coun- sel to this Committee ? Mr. Hayward. — Yes, I have forgotten. Mr. Whitney. — I think it was at the end of 1911; either December, 1911, or the first part of 1912. Q. And it is a rate case ? A. Yes, sir. Q. And it has not yet been decided? A. No, sir. 1070 Investigation of Public Seevice Commissions Q. How many customers are involved, the rights of how many customers are involved ; have you any information ? A. I hesitate to give those figures offhand. There are many thousands, I should say. I keep the tables at my elbow all the time. Q. What is the rate now being paid? A. Eleven cents; a schedule, from a small amount to a higher amount. One of the principal complaints was the difference between the wholesale rate and the retail rate. There was not a fair allocation for the demand and the cost to the company under the schedules. Chairman Thompson — That is, the smallest consumer pays the highest rate on the schedule ? Mr. Hayward — Yes, sir; and the objection was that there was too great a margin between wholesale and retail, and the rates all too high, the retail rates were all too high. Q. Does this company occupy the entire field in Brooklyn ? A. I think practically so. It is the biggest company over there. Q. You say the biggest company over there; are there any other companies ? A. I don't know ; I think it practically occupies the entire electric field. Commissioner Williams can tell you more about that, I think, because he has had some of the other cases involving the other companies. Q. This practice of the other commissioners sitting with the hearing commissioner, has that been a frequent practice in the past?. A. I don't think so, although it may have been in times past on the Commission. I think this is the only time I ever knew of it, except where the hearing has been before the entire Com- mission. Very often Commissioner Williams and I have sat and heard a case, and commissioners have been assigned by the Chair- man, and then sat together in that case, but I know of no other like this. Q. And the witness who was called was called by the Edison Company, was he ? A. Yes, sir. Q. How many hearings have you participated in since you became a member of the Commission ? A. I had it looked up, and I think one hundred and eight of my own, where the cases have been assigned to me individually, and I think of the hearings before the full Commission, seventy-nine, and in some instances the meetings conflict, and that is also true in the case of Commissioner Repoet of Joint Legislative Committee 1071 Williams, sometimes one or the other of us would have an indi- vidual hearing at the same hour that the Commission vrould be holding a hearing, so we necessarily could not be at both places. Q. Do you know how many hearings Commissioner Williams has attended ? A. I had that looked up. Q. You may state. A. Of hearings held before single commis- sioner, since April 1, 1915, the record shows the following totals for each Commissioner, reading them in the order: Hayward, 108; Williams, 99; Wood, 61; Cram, 62; McCall, 1. Of course it should be said, in explanation, that these are individual hear- ings before individual commissioners, and it is not the practice for the Chairman to conduct individual hearings. I do not know what the occasion was for this. Of the hearings before the whole Commission, there is a total of 119. These were attended by all commissioners, as follows: All commissioners, 15 ; Hayward, 79 ; Williams, 79 ; Wood, 70 ; Cram, 35 ; McCall, 30'. Q. This summarizes all of the meetings of the Commission, and all the hearings held by individual commissioners ? A. I think that does not include the stated meetings as such. That is taken from the hearing record. I may say that very often a hear- ing before the full Commission would be set at 12 :30 on the day when a stated meeting was to be held at 12 :15, and the Commis- sion having finished its regular business of a stated meeting would then sit there and conduct this hearing and perhaps hear a summing up, but that would be only such stated meetings as were followed by a hearing on a particular complaint. I have not the record of the stated meetings. Q. The one hundred and nineteen hearings before the whole Commission, that is all the hearings that have been scheduled before the full Commission ? A. Yes, sir. Q. Of the one hundred and nineteen, at fifteen of those all the commissioners were present? A. Yes, sir. Q. And out of the one hundred and nineteen, Commissioner Hayward was present at seventy-nine? A. Yes, sir. Q. And Commissioner Williams at seventy-nine ? A. Yes, sir. I think Commissioner Williams will bear me out on that, as I have tried to explain before. I know he had a great many hearings set before him at the same hour the Commission met, and I had 1072 Investigation op Public Sbevice Commissions likewise, and we used to pass back and forth from the big hear- ing room into the little hearing room adjacent, and spell each other back and forth. Q. And Commissioner Wood attended seventy of the one hun- dred and nineteen ? A. Yes, sir. Q. And Commissioner Cram thirty-five of the one hundred and nineteen ? A. Yes, sir. Q. And Commissioner McCall, thirty of the one hundred and nineteen ? A. Yes, sir. I might say that, as I stated before, the Chairman is not supposed to hold individual hearings, and that one meeting was perhaps when some Commissioner was absent Chairman McCall went down to take his place for that meeting. Q. I was speaking about hearings for the whole Commission. A. Senator Lawson asked me about that, and I was making that explanation. Q. You undertook to enforce compliance with orders of the Commission in some case in Brooklyn since your term of office began; will you tell us about it? A. I presume you refer to the one criminal case in which I filed complaint against Mr. John J. Dempsey. Q. Tell us what there was to that complaint, and what it was about ? A. A couple of years ago the Commission made an order directing one line of the B. E. T. system to stop its Bay Eidge express trains at the Third avenue station, and there was corre- spondence back and forth between the Commission, and the road concerning other trains than the Bay Ridge trains, which were not involved in the ultimate proceeding at all. I may say I had made my position, I think, clear, that the orders were not being enforced with sufficient vigor and by the means given by law. I had criticized the other Commissioners for not resorting to the means given by the law, including the misdemeanor section of the statute, and I got a report from the chief of the transit bureau stating the road was not complying with the order, and had not and that the thing had gone along a year and a half or two years, and the chief of the transit bureau said, " It is recommended action by the Commission be taken accordingly." I knew of no better way than to bring it to the attention of the district attorney, and I went before Mr. Cropsey and stated that there had been Eepokt of Joint Legislative Committee 1073 a cleax infraction of the Commission's order over such a period of time, and I swore to the complaint, and the case was heard before Magistrate Dodd, over in Brooklyn. He took the case under advisement after the testimony was in for several days and then he finally dismissed it. Dempsey was, in my opinion, the responsible operating head, and it was dismissed on a technicality. Q. There had been a warrant issued for his arrest? A. I don't think there was ever a warrant issued for his arrest. I think the district attorney told him to be present before the magistrate upon a certain morning. Q. It was a notify order, then? A. Yes, sir; it was equivalent to that, and as long as that is the only judicial determination on that misdemeanor section of the statute, it might be interesting to put in the record the slant the magistrate took on it. I think I will not be in contempt if I say I did not agree with him and his theory of the law. The law provides that the Commission may make an order against the person or corporation. This order was directed against the coa^oration of which Dempsey was an officer, and the law provides that a copy of the order shall be served upon the person or corporation to be affected thereby. My com- plaint against Mr. Dempsey was under the misdemeanor section of the statute which provides that any officer or agent of one of these railroads subject to the Commission's jurisdiction, who aids or abets or assists a corporation in the violation of the order, shall be guilty of a misdemeanor, and my complaint against Dempsey was for aiding and abetting the corporation against which the order was issued for a violation not by Dempsey, but by the corpo- ration, and the magistrate in his opinion stated he could not hold Mr. Dempsey because the Commission had not served Dempsey individually with a copy of the order entered against the company, and dismissed it, and we went before the Grand Jury of Kings^ county, the Grand Jury and the district attorney, and they evi- dently did not agree with the magistrate, because Mr. Dempsey was indicted, and there is a demurrer to the indictment pending now. I may say that it created a good deal of interest, and a good deal of hard feeling, and it was not a particularly easy thing to do. When the complaint was first filed, the B. K. T., I am informed, pretty reliably, went to Stephen Baldwin and retained 107i Investigation of Public Service Commissions him to bring a damage suit against me for fifty or a hundred thousand dollars — either amount is very flattering to me — for malicious prosecution. Then when the magistrate dismissed Dempsey on a technicality, I heard less talk about the damage suit, and after the Grand Jury indicted him, I didn't hear any further talk of the damage suit at all. Q. What has been the effect upon the operations of the' road, in your opinion ? A. I think the other Commissioners will fully bear me out that the effect has been that since that time, if there was any order against the B. E. T. companies, they have been most solicitous to have an extension of the order granted by the Commission, rather than be in default of the order, and I think it has had a very good effect, and I think it would continue to have if that practice were followed in the future where there seemed to be a willful disregard of the Commission's orders by the company. I think that is the only way we can ever get results. I may say that during the hearings before the Police Court, the President of the B. E. T. and the entire legal department were there several days, which, in my opinion, would ultimately result in its being easier to obey the orders than to disobey them. Q. It shows they took the matter seriously, then, does it not? A. It seems so. I know I took it very seriously. Chairman Thompson. — What firm is Mr. Moran connected with? Mr. Williams. — It is the Sheehan firm. Mr. Hayward. — Mr. Moran is in the firm with Mr. Sheehan. Chairman Thompson. — Who called this meeting that was held at the time this testimony was taken over your objection in the Moritz case? Mr. Hayward. — I presume the Chairman. I don't think there was a meeting called. I had previously adjourned the hearing to this date, October 5th, and I think on that date the other Com- missioners simply came down and sat. Mr. Lewis. — The appearances on that date were : In the matter of the complaint of Albert Moritz against the Edison Ebpoet of Joint Legislative Committee 1075 Electric Illuminating Company of Brooklyn. H. H. Whitman, Esq., Assistant Counsel for the Public Service Coromission for the First District; Albert Moritz, Esq., the complainant, in per- son; Messrs. Hatch & Sheehan, attorneys for the Edison Electric Illuminating Company of Brooklyn, by Ashley T. Cole, Esq., and S. F. Moran, Esq., of counsel; William Sheehan, Esq., of counsel. Chairman Thompson. — This testimony that was offered, was that offered in favor of the company or in favor of the com- plainant ? Mr. Hayward. — It was in favor of the company. This man wanted to practically do away entirely with depreciation, and I thought he wanted to reverse the New York Court of Appeals. Chairman Thompson. — Just how did Judge McCall talk when in the case at that meeting ? Mr. Hayward. — I think the record itself would be the best evidence of that. Objection was made by Mr. Whitman for the Commission, " I think I should object to this line of testimony as incompetent and irrelevant, upon the grounds that these ques- tions are questions of law to be decided by this Commission, upon judicial decisions and the record in this case," and the Chairman did not agree with Mr. Whitman. Chairman Thompson. — The Chairman overruled the objection and submitted it to the Commission whether or not to sustain the Chair, and they did, and that was about the situation when those objections were taken. Mr. Hayward. — Yes, sir. Chairman Thompson. — As I understand it, this case had been left to you without interference and you had presided at all meet- ings before this since you were on the Commission, and since. Mr. Hayward. — Yes, sir. Here it is stated by me, " I want to be recorded as in accord with sustaining the objection." Chairman Thompson. — In these meetings of the whole Com- mission called by the Chairman, there were several meetings 1076 Investigation of Public Service Commissions consecutively held where there was Act a quorum present ; is that a fact ? Mr. Hayward. — There are a great many meetings held where there is not a quorum. I do not think it is conceded we ever have to have a quorum except to open bids. I know Commissioner Williams and I hold meeting after meeting for the Commission, and very often one held for the other for the Commission when he had a hearing of his own. Chairman Thompson. — How many times do you think you and Commissioner Williams held meetings by yourselves ? Mr. Hayward. — I don't know. Sometimes there would be two, and sometimes three. If Commissioner Williams or I had a hear- ing of our own, one of us would take the hearing for the Commis- sion, but I couldn't tell you how many. Chairman Thompson. — ^Would it go along as many as ten con- secutive days without your having a quorum for a hearing ? Mr. Hayward. — I think not. Chairman Thompson. — But it would go along several days ? Mr. HajTvard. — Yes, sir. Mr. Lewis. — Commissioner Williams makes the following state- ment as to the electric lighting companies in the borough of Brooklyn: The only other company is the Flatbush Gas Com- pany, and that is controlled by the Brooklyn Edison as wellj although it operates separate. Senator Lawson. — What effect, in your opinion. Colonel Hay- ward, has resulted from the action taken by the full Commission stepping in and sitting with you to hear this particular testimony, what effect has it had upon the examination of this case? Mr. Hayward. — To be frank. Senator, I do not think it has had any effect. I think that any lawyer who will read that record and will read the testimony through will come to the conclusion I think Commissioner Williams did before it was over, that it had no place there, and did not belong there, and simply a man brought here to lecture the Commission, and the theory we had been going Eepoet of Joint Legislative Committee 1077 ahead on was all wrong, and we ought to abandon everything and accept a theory of the case we did not appreciate, and unless men were crazy, I do not think it would have any effect. Senator Lawson. — In your opinion, it was merely to befog the real issue ? Mr. Hayward. — I think the purpose of the company was to get me and get us away from the lines the case had gone along on, which I feel sure, if followed, the Court of Appeals would sustain, because they have sustained two big eases before. By Mr. Lewis: Q. You have not yet rendered a decision in the rate case? A. Xd, sir ; the evidence is not entirely in. I am hoping to get it in within two weeks, and an opinion will be ready very shortly after that. Whether the Commission will get together before the first of the year and finally decide this, I don't know. Senator Lawson. — ^Would this hearing by the full Commission finally influence you at all? Mr. Hayward. — JSTo ; not at all. Senator Lawson. — Has it delayed the final rendering of a decision ? Mr. Hayward. — ISTo, sir ; only it took that day. Mr. Williams. — I want to explain my idea of the admissibility of that testimony in the Moritz case. Our electrical engineer, Mr. Wilder, has a new theory of depreciation, that is, he has a theory of his own which we have not followed, and which has not been followed, as far as I know, in this State, and when Colonel Hayward told me they had a man in the west somewhere who had been a member of some public service commission, who said he had elaborated on Wilder's theory, and who had some new theory, I felt that the subject was so important we ought to at least hear Him, but I will confess that before he got through I felt that what he said did not enlighten us ; in other words, it was largely elementary, and things we ought to know or have known long before he came on to tell us about it, and I felt that the only harm done was to take the number of pages of typewriting, and it will 1078 Investigation of Public Service Commissions have no effect in the case, because the Public Service Commission will follow the law. Chairman Thompson. — It is just as necessary for you to know the value of property of a corporation of this kind when you pass upon an application for capitalization as it is when you pass upon an application for the rate, isn't it? Mr. Williams. — ^Well, no. We pass upon capitalization cases a good many times, where we find they have enough property to more than allow the capitalization. We don't go into it with the same detail and exactness we do for the rate. Chairman Thompson. — The capitalization cases you pass on in a short time? Mr. Williams. — ^We do sometimes. Chairman Thompson. — But for a rate case, it takes years and years for putting in the testimony and holding the hearings. Mr. Williams. — We appraise the property for the purpose of capitalization to charge a liability of four or five millions, say, dollars, and we don't go into the stuff under the ground. Mr. Hayward. — I think I have made very good progress for this case, but not as good as I hoped to make. I was rather impatient with Commissioner Maltbie for the progress he had made, but I found it impossible to go along in the rate case as in other lawsuits. A man comes along and puts in stacks of charts, and I think no counsel could turn loose and examine all the figures as you would do in other cases. The counsel for the Com- mission has frequently asked for a week's time, and to have the assistance of the statistical bureau to analyze the figures. Chairman Thompson. — You think a matter of years is too long a delay ? Mr. Hayward.^ — Yes, sir ; but another thing which distingiiishes a rate case from a capitalization case, as I tried to say before, I think it is just as important to correctly allocate the charges and do that with the different rates as to determine what a fair return on the entire company's property would be, and more so, because greater relief might be given to the public where properly dis- Eepoet of Joint Legislative Oomjiitteb 1079 tributed, the differences between the various wholesale and retail rates, than would be obtained if you reduce the maximum rate two or three cents a kilowatt hour, and that is why there is a lot of testimony given on the relative rate. Mr. Williams. — Take a company already in existence and working, and it makes additional expenditures to the capital, where only going into the additional expenditures. By Mr. Shuster : Q. It is clear to you, is it, that from experience delays are necessary for a proper consideration in all rate cases ? A. Well, yes, sir. I don't think you can grind on in a rate case with cer- tain classes of the testimony day after day as you would in another case. Q. Is there any remedy for that that you suggest, out of your experience ? A. Yes, sir ; I think there is. I think better prepara- tion by counsel, .and I think a firmer hand on the part of the Commission and the Commissioners. There is no doubt in my mind, and I do not wish to impugn the motives of anybody that while to a certain extent the delays have been for the legitimate purpose of looking into the figures, but back of it all has been the big proposition the longer the case can be put off and the determina- tion deferred in a rate case, the better off they are, and there is no question but that has entered into it in a number of cases before this Commission. Q. Were a system of reparation taken, would it correct the delays any? A. Yes, sir; I think so. Another reason for the delay, I have noticed where the sitting Commissioner files an opinion in a rate case or in any other case it is sometimes very diificult to get the entire Commission to consider that opinion and either agree with it or dissent from it, and I think Commis- sioner Williams will bear me out on that, that it has been difficult to get the Commission together after some one Commissioner has come to his conclusion and is ready to have it approved or over- ruled. Chairman Thompson. — Ought there to be a legislative limit after a case is finally submitted in which the decision should be filed? 1080 Investigation of Public Seevice Commissions Mr. Hayward. — There is on a rehearing. Thirty days is the limit there. I think it would be a hindrance to have an arbitrary period fixed in which a decision must be rendered. I have no doubt but what if the limit was there, they would perhaps try harder to get to the limit. Mr. Williams. — I think that item of delay will largely dis- appear as soon as we have a valuation of these different companies. There was no valuation when we started in. In the case of some of the largest companies, they did not know what they cost, and others because of fire, and in these Edison companies they have had to appraise every bit of wire underground and every bit of machinery and piece of conduit, and once that is done we have a system of keeping track of the monthly additions, and that comes in every month to the Commission, and we can tell by just adding up the items what the valuation is at any given time. That is useful in both rate case and bond issue matters. Mr. Hayward. — I did not realize how absolutely dependent on the price of oil is the price of gas, and that has entered into the case as a marked factor. For instance, the price of oil carried out into the price of gas per thousand between 1914 and 1915 might necessitate a difference of as much as seven cents a thousand cubic feet for gas. Once the Commission has determined a valuation on these cases and fixed a rate predicated on the then price of oil and coal and overhead charges and all such matters as that, it will be a very simple matter to base a cost on the price of oil, and so forth. By the first of the year, we ought to be in a position to take up almost any rate case and get rid of it expeditiously. Mr. Williams. — I think it would help if the State would have a valuation made of all these companies. By Mr. Lewis : Q. Do you own any stock in a public utility corporation in this State, Mr. Hayward? A. I do not now, and never have owned any stock or securities in any public utility corporation in the State of New York, either directly or indirectly. Chairman Thompson.^ I am going to take the responsibility of asking the last question; did you ever think of sending your engineers out to make a valuation of these things? Report of Joint Legislative Committee 1081' Mr. Hayward. — That is the way we do it. We have a large force doing this very thing. Chairman Thompson. — If there is no objection, we will now take an adjournment to 10 o'clock a. m., to-morrow morning. Hearing none, it is so ordered. Whereupon, at 5.10 p. m., an adjournment was taken to 10 o'clock A. M., November 12, 1915, at the same place. NOVEMBER 12, 1915 New Yoek County Lawyers' Association Board Eoom, 165 Broadway, New York City The Committee met pursuant to adjournment at 10 o'clock A. M., Chairman Thompson presiding. Present : George F. Thompson, Chairman. Senators Towner, Lawson and Foley. Assemblymen Kincaid, Baxter, Feinberg, Donahue, and Burr. Paul E. Atkinson, being recalled for further examination, testified as follows: By Mr. Lewis: Q. Mr. Atkinson, you knew of the granting of the application to purchase the 122 shares of the Amsterdam Company, did you ? A. Yes, sir. Q. Have those shares been purchased ? A. Yes, sir. Q. And paid for? A. Yes, sir. 'Chairman Thompson. — I am sorry to dispense with the able assistance of the public and the press for a few minutes, but the Committee will be obliged to go into executive session, and we will retain the stenographer and the counsel. 1082 Investigation of Public Service Commissions EXECUTIVE SESSION Senator Lawson. — I move that the Chairman and counsel be instructed to prepare charges, whatever the evidence, in the judg- ment of the Chairman of the Committee and counsel of the Com- mittee, justifies, and forward those charges at once to Governor Whitman; and that the Chairman and counsel also follow up those charges ^s soon as possible with a resume and brief of the evidence, and that the Committee prosecute the charges before the Governor as well, and the charges to be signed by the Chairman and counsel. Chairman Thompson put the motion to a vote, which resulted as follows: Chairman Thompson, aye; Senator Lawson, aye; Senator Towner, aye; Senator Eoley, present but not voting; Assemblyman Kincaid, aye; Assemblyman Baxter, aye; Assem- bljTnan Feinberg, upon the statement that the counsel says there is sufficient evidence upon which to base charges, aye; Senator McQuistion, not present; Assemblyman Donahue, present but not voting; Assemblyman Burr, aye, vote accompanied by the following statement : I believe the public today should have these charges before it, and the Governor should have the charges and Judge MoCall should be given an opportunity to exculpate him- self, and that is the only reason I am voting with the majority. Chairman Thompson. — I declare the resolution adopted. As to the other matters, unless action is pressed, we will hold the disposition of them until next week. Hearing no objection, it is so ordered. The Committee rose from executive session and resumed its sitting in open meeting. Chairman Thompson.— The Committee in executive session have voted in relation to a motion made that upon the evidence before this Committee, the Committee deem it their duty to present the record to the Governor of the State, and do that today, so far as it relates to the misconduct in office or neglect of duty of Commissioner McCall. This action was taken upon a motion by Senator Lawson, the vote being as follows. The Chairman, Senators Lawson and Towner and Assemblymen Kincaid, Baxter, Feinberg and Burr voting in the affirmative; Senator Foley and Report of Joint Legislative Committee 1083 Assemblyman Donahue present but not voting, and Senator Mills having resigned from the Committee last week, and Assemblyman McQuistion not being present, he being out of the State, and we being unable to get into communication with him. In relation to these matters, charges will be prepared this after- noon, and the Chairman and Counsel of the Committee have been authorized to make and sign them and forward them to the Governor and prosecute the charges. As Chairman of the Committee, I have not any particular further statement to give, except that I feel that perhaps it is my duty to explain a matter of yesterday to some extent. This Committee have not any authority to demand anybody's resig- nation, and that course has not been followed. I felt yesterday, from what I knew of the case, that the action which this Com- mittee has just now taken, would be taken today, and I felt that in justice to Judge McCall, he should be informed of that fact, so yesterday afternoon, I asked for a confidential interview with him, and while the duty was unpleasant to perform, I did so inform him. In relation to the rest of the interview, it was per- sonal, and I regard it as confidential. If Judge McCall desire.« to give out any part of it, he has my entire consent, but I shall regard the rest of it as entirely confidential. This duty that the Committee feel they should perform is an unpleasant one. We have no personal antagonism against the men or the man that is the subject of this action, but our duty is the duty of the State, and we feel that the administration of the Public Service Law has been at fault, and we feel that our duty to the people requires us to take such action as will be for the benefit of the better administration of the law, and if some one suffers some personal discomfort on that account, the interests of the State are so great in comparison with that, that we cannot delay or falter in relation to the matter. For that reason, this course will be followed. The charges will be prepared today and forwarded to the Governor tomorrow against Commissioner MoCall. Other matters before the Committee will be taken up next week, and the Committee will adjourn to this place next Tuesday morning at eleven o'clock. Has any other member of the Committee any statement he desires to make ? 1084 Investigation of Public Seevice Commissions Assemblyman Eurr. — My voting to forward these cKarges in no way expresses my opinion as to Judge McCall's guilt or inno- cence. It is based entirely upon the evidence brought out before the Committee and upon the statement of the counsel that he has legal evidence enough to support the charges, and I think the public are entitled to hear the charges in full and I think the only way for Judge McCall to exculpate himself is before the Governor of this State. Chairman Thompson. — If there are no other remarks, the Chairman and the counsel will take up the matters this afternoon at three o'clock, and they can be found at any time at the rooms of the counsel in the Murray Hill Hotel, and we will take the matters up about three o'clock. If there is no objection, we will now adjourn to next Tuesday. We will take a recess for five minutes. AFTER EECESS: Mr. Lewis. — There is nothing further. Chairman Thompson. — The Committee will now adjourn until Tuesday, !N"ovember 16, 1915, at 11 o'clock a. m., at this place. Whereupon, at 12 :45 p. m., an adjournment was taken to the Board room of the ISTew York County Lavsyers' Association, Ifew York City, at 11 o'clock a. m., November 16, 1915. NOVEMBER 16, 1915 New York County Lawtoses' Association Board Eooms, 165 Broadway, New York City The Committee met at 11 a. m., pursuant to adjournment. The Chairman. — The Committee will please come to order. Mr. Lewis. — Mr. Chairman, the understanding was after Judge McCall's testimony on the subject of the Kings County stock, 387 shares of which he had testified belonged to him, although in the. name of Mr. Mackin — it was the understanding that he desired the account of E. K. Chapman & Co., or his account Eepoet of Joint Legislative Committee 1085 with E. R. Chapman & Co. to be examined and a transcript made, and it will be remembered, I think, that he called Mr. Chapman on the telephone and asked him to examine the books showing that account, and submit a transcript of it. It was sug- gested, too, that the Committee have a representative present at the examination. That examination has been completed and the Com- mittee's representative, Messrs. Perley Morse & Co., have pre- pared and submitted the results of such investigation. I offer such communication in evidence with the understanding that it is presented at Judge MdCall's request. Chairman Thompson. — It is presented as a result of Judge MoCall's request. Mr. Lewis. — As a result of Judge McCall's request. Chairman Thompson. — It may be marked and kept as an exhibit. Mr. Lewis. — I also offer for the record communication from William A. Orr, Secretary .of the Governor, acknowledging the receipt of the charges against Judge McCall. The Chairman. — Received and marked. Mr. Lewis. — Is Mr. Williams here ? Mr. Smith. — He said he would be here about twelve-twenty. Chairman Thompson. — Now I want to make a statement in reference to charges that have been given to the Governor from this Committee — I want to impress the public that these charges are now in the hands of the Governor and this Committee has nothing further to do wdth the question of the issues that might arise, and the Chairman, of this Committee believes that he should not be interviewed in reference to matters affecting those charges or collaterals which might arise in reference to them, and will not be. Now, the information contained in our record is per- fectly and legitimately a matter of public concern, if the public desires, and will be available, but I desire a request be made from our attorneys in that respect. All the information that our records disclose will be available from that, and I shall have no statements to make whatever as Chairman of the Committee. The Com- 1086 Investigation of Public See vice Commissions mittee will proceed with its investigation just the same as if no charges had been preferred. That is simply an incident in our investigation and came because we as citizens felt that it was incumbent upon us, and in our duty to refer the matter to the Governor at the time we did. And as those matters proceed, why, they will be given publicity at the meetings of the Committee here in the regular way, and the Committee of course will have its lawyer for this week busy with the duties that remain incum- bent upon us in relation to the charges which are now in the hands of the Governor, and that is to prepare the testimony and the facts which have come to light in our Committee proceedings so that they may be used on the hearing, and for that reason our attorneys will be quite busily engaged for the next two or three days, and will be available at their rooms in the Murray Hill Hotel. Matters in investigation and those that come along will be heard here at these rooms, and adjournment will be taken each day to eleven o'clock. The extent of the hearing we cannot give out, because we do not know. They will simply be heard accord- ing to what happens to be necessary to be taken up. Anything further ? Mr. Lewis.- — - 1 don't think for anything, except we are waiting for Mr. Williams. Mr. Williams. — I was in a meeting of the Commission and I had some important matters. Geoege V. S. Williams, recalled. By Mr. Lewis: Q. You have been engaged, have you not, Mr. Williams, in the consideration of the rate case and the price question of the Borough of Brooklyn lately ? A. What was that ? Q. Kings county ? A. Yes. Q. Have you reached a decision in that case? A. I have. Q. Have you a copy of it ? A. Well, I have a copy. We make a practice not to make those copies public until after the other Commissioners have had a chance to examine them, because they may be changed either by the other Commissioners, or by the sitting Commissioner. It is not final, and I don't know, I think it is the first time that one has ever been made public before it was acted upon. Eepoet 0¥ Joint Legislative Committee 1087 Chairman Thompson. — No, Mr. Maltbie's opinion in the New York Edison Company was given to us. A. That was filed about ten days ago. Q. As a report to the full Commission? A. As a report to the full 'Commission. Q. And no action has been taken on it by the full Commission as yet ? A. It was on the calendar today and Mr. Commissioner Cram said he had not had an opportunity to go over it yet, and it was laid over until the next hearing. Q. And you desire this not be made public until • — A. That has been rather the rule of the Commission because it may be changed. We may have made a mistake. I want to explain about this case in view of something that was stated in one of the papers on Sunday about it, and I know Commissioner Hayward and the Secretary and everybody else will bear me out in it. In fact, I have taken the pains to have the minutes of the meeting at which I was assigned to write this opinion written up. Commissioner Hayward, as he testified the other day, took over Commissioner Maltbie's cases, and he had two or three cases going at the same time, when he asked me if I would take one, and I said yes. One was in one room, and one the other, and I don't know whether Commissioner Maltbie had adjourned one over to that time, but Commissioner Hayward had been holding some hearings. At any rate, they were on at the same time and he told me to go in and take this case and listen to the argument. I think the evidence was all in. I did, and I think there were two different days I listened to arguments in that case. Possibly some of the other Commissioners were with me at times. Then there was one ques- tion that was to me very interesting, and that was the question of going value, and the Court of Appeals having reversed the case on the ground that the Commission had not taken into considera- tion going value in fixing the value of the plant and property of the lighting company. I read the Court of Appeals decision very carefully, and went over the facts in the case carefully before Commissioner Hayward asked to be relieved of writing the opinion in the first instance, and came to the conclusion that there was no going value. I don't mind stating that, because I have stated it publicly, and I have set my reasons out as best I could 1088 Investigation of Public Seevice Commissions in that opinion, and for that reason I was more or less familiar with the case, there having- been a decision of the Court of Appeals and having been sent back to us for that purpose, and I wrote on that. So that, after Commissioner Hayward asked to have it given to somebody else, and it was assigned to me, I finished up the opinion and I have filed it or sent it around to the other Commissioners. Now, in connection to that I want to put in evidence, if you will allow, an extract from the stenographer's minutes of the sitting Commissioner held October 22, 1915, when Commissioner Hayward asked that this be given to some one else for the writing of opinion in the first instance. Our scheme, I stated, is the sitting Commissioner writes the opinion in the first instance, and passes it around, even though it is a rough draft, and if any of the other Commissioners want to write a dissenting opinion, which may or may not be a dissenting opinion finally, why, he has the chance. Mr. Lewis. — I do not see any objection to this stenographic report. You would not care to have this made public ? Mr. Williams. — Yes. That was a public hearing. That trans- pired at a public meeting. I will just show you the essential part of that, that is, what I think is the essential part. There had been a number of these cases, we had a number of rate cases on that were more or less complete as far as the evidence was concerned. Commissioner Cram had made a motion that all these rate cases be disposed of speedily at the next meeting, or something of that sort. And Commissioner Hayward stated why it could not be done, and this is the part that I wish to call attention to specifically : " Commissioner Hayward. — I suppose it is customary for the presiding Commissioner to file an opinion, and if that opinion is satisfactory to the other Commissioners, it pre- vails, and if it is not, there are other opinions. Everybody knows I have a lot of those cases. I think Commissioner Williams took hearings at a point where they were set on the same day. Commissioner Williams took the Fourth Ward case for me because I could not hold two at a time, but I must confess I have not started an opinion in the Kings County Report of Joint Legislative Committee 1089 case. I would be glad if some one more familiar with the case would undertake it. I mean I would be glad to waive my priority as sitting Commissioner, if someone else would take the opinion in the Kings County Lighting case, and I say that because I am closing the Brooklyn Edison case, and I ought to have two or three weeks to tackle the Brooklyn Edison case. " Chairman McCall. — Let Commissioner Williams take the Kings County case and that will relieve you. " Commissioner Hayward. — Yes, that will relieve me. "'Chairman McCall. — Let the rest of those go on next Wednesday." Chairman Thompson. — How long have these matters been pend- ing before the Commission since it came back from the Court of Appeals ? Mr. Williams. — I couldn't tell ; I did not have anything to do with it. By Chairman Thompson: Q. I didn't mean to insinuate. A. I knew there was a case, but Commissioner Maltbie and Commissioner Hayward had it. Q. Do you remember when it did come back, the Kings County case ? A. I couldn't tell you when it came back. Do you remem- ber, Commissioner Walker, when the Kings County Lighting case came back from the Court of Appeals ? After it came back from the 'Court of Appeals, there was another valuation of what had been added to capital, and what should be allowed as valuation of the plant from 1913 I think practically down to 1915. Q. Back some time in 1913 ? A. I am not sure about that, but I think the value in the other order stopped about 1913, as I remember. Q. The first valuation stopped December 31, 1912 ? A. The case began in 1910. Q. The order in the first place provided that for the remainder of 1911 it should be 85 and the remainder of 1912 it should be Vol. 1 — 35 1090 Investigation of Public Seevige Commissions 80 cents ? A. I remember saying this, without your contradiction, because it is a matter without any delicacy of having any opinion published; that if the 1910 opinion of Commissioner Maltbie had prevailed, our stations and gas experts tell us that the company would have received on its annual sales only something like 3% per cent, return, where he meant they should receive Y%, because the output and sales of the company did not come up to the expectations that Commissioner Maltbie had. In other words, the stopping of growth in that section, or else it was not as great as he expected, and the expenses were very much larger on account of the high price and contract for gas that they entered into on account of this war. Q. They never suffered any loss? A. I have gone into that very fully. I have shown they paid 6 per cent. Of course they did not put that rate into effect. Q. If they had they probably would have sold more gas ? A. I don't know about that. My experience is that gas bills are about the same, no matter what the rate is. Q. Do you know in the city of Buffalo, when the Public Service Commission reduced the rate of electricity 25 per cent., that the profits of the company were greater than they were on the old rate ?' A. I have not been in Buffalo, but I have heard in regard to this Canadian-Hydro scheme, that in Toronto the company at a Y^ rate were making more than they were at 15. Q. In Toronto the rate is two cents? A. It may have been reduced since that time. I listened to a discussion when I was on the 'Conservation Commission. Q. Have you gone into that hydro-electric transmission in Ontario? A. In 1912 I went into it very thoroughly, because I was counsel for the Conservation Commission in the State of !N"ew York at that time, and I was very much in favor of jSTew York State going into some such scheme as the Canadian government had. Q. Did you find that the city of Ottawa, the rate of 10 cents was reduced by the Hydro-Electric Power Commission to 4 cents^ and immediately jumped from 10 to 4, and the competing com- pany met that rate, and made more money than they did the year before ? A. No, I didn't, because I must confess since my appoint- Report or Joint Legislative Committee 1091 ment to the Public Service Commission, I did not follow the Hydro-Electric. Q. Don't you think, Commissioner, hydro-electric tests made up there should be received in evidence by you in making rates here? A. They get their power very cheap in Canada. They only pay something like $9 a horsepower at the Falls, as I remember it. That is what was claimed at the time. Q. One cent a kilowatt. Commissioner, means approximately $60 a horsepower? A. I don't laaow. Q. Don't you know that? A. No. Q. How long have you been on the Commission? A. On the Public Service Commission? Q. Yes. A. Since 1912. Q. Been on the Commission three years and did not know the amount one cent a. kilowatt makes in horsepower value ? A, I never figured it out. It is a mathematical calculation. Q. It is quite material to know, isn't it, in fixing rates ? A. I can't see any materiality at all. The rates are fixed by the kilo- watt hour. Q. Isn't it quite material in fixing a rate at ten or eleven cents a kilowatt, to know that means from $650 to $750 a horsepower? A. Yes, but I don't figure it. The cost in New York on horse- power. Q. The New York Edison Company figures the cost of its pro- duction by the horsepower ? A. I don't think so. Q. Don't you ? A. Never heard that. Q. Did you ever investigate to see? A. Our experts do not figure it that way on the Commission. Chairman Thompson. — In reference to my statement I made some time ago, I do not mean to criticize anybody for having quoted me, but I feel that some cases where matters appear and quotations from myself that have been entirely matters of record, and it is the record, and I do not want to be put in the position of making quotations from the records. The records are avail- able, and I want you to get them from the custodian of the records, and that is our attorney. I do not criticize anybody for what has been done except myself, and I simply take the position that I won't do it any more. 1092 Investigation of Public Seevice Commissions Senator Foley. — I would like to have that same thing on the record. I was quoted last Friday, the day of the meeting, as having stated something with reference to the guilt or innocence of Judge McCall, where, as you know, no statement was made by me to anybody. Chairman Thompson. — l^o. Of course from a political stand- point we would know how to quote you without asking. Senator Foley. — As long as you were so careful, I thought I would be. 'Chairman Thompson. — We will suspend until tomorrow at 11 o'clock. Whereupon, the Committee adjourned to meet at the same place, at 165 Broadway, November 17, 1915, at 11 o'clock a. m. NOVEMBER 17, 1915 New Yoek CotrNTT Lawyers' Association Board Room, 165 Broadway, New York City. The Committee met at 11 a. m., pursuant to adjournment. Chairman Thompson. — If there is any of the Committee here, please come to order. A quorum present. Mr. Lewis. — Mr. Chairman, I have here which I think should be admitted in evidence, the record of the Appellate Court — Court of Appeals, in case No. 1273, entitled The People ex rel. Kings County Lighting Company v. Wilcox and others. I offer it in evidence. Received and marked. Chairman Thompson. — That also — the opinion of Commis- sioner Maltbie upon which that is predicated, ought to appear, hadn't it ? Mr. Lewis. — Yes, but I haven't the copy of it here. Chairman Thompson. — Send for it. Mr. Lewis. — Yes, I will have that produced — that will be produced, and I will have it later. Report of Joint Legislative Committee 1093 Chairman Thompson. — Does that show where that was reported, Senator? Mr. Lewis. — No, but I have a copy of the opinion itself. Chairman Thompson. — That appears to he a record of the Pub- lie Service Commission; they have reprinted that opinion. Mr. Lewis. — Yes. It doesn't show where it is printed in the Court of Appeals reports. I also have a copy of the agreement between the Standard Oil Company of New York and the Kings County Lighting Company of Brooklyn, on the subject of the sale of oil for manufacturing gas. Now, I ask Mr. Whitney to produce and he will be here presently with the full record of the charges and the hearing upon the charges in the Kings County Lighting Company case, and I will ask Mr. Hayward to come and he will be here within a short time with some records also which we have asked him to produce. Until they get here, the Committee might as well be in recess. Chairman Thompson. — We will take an elastic recess of not exceeding ten minutes. (At this point Senator Foley arrived and took his seat in the Committee. ) Chairman Thompson. — The Committee will come to order, please. Teavis H. Whitney takes the stand: Examination by Mr. Lewis: Q. Mr. Whitney, have you in your files the minutes of the various meetings of the Committee of the Whole held during past two years, that is, during 1914 and 1915 ? A. Well, it cannot properly be said, Senator, that I have minutes. I have kept from time to time memorandum of things that were discussed by the Commissioners. Q. Subjects, I suppose? A. Subjects, yes. Q. And conclusions? A. Yes, but those cannot be said to be minutes because they were never submitted to the Commissioner for approval or anything of that kind. 1094 Investigation of Public Service Commissions Q. Is there a stenographic record of the proceedings of the Committee of the Whole ? A. No, sir. Q. Has there ever been any stenographic minutes kept of the minutes or proceedings? A. No, sir. For the most part, Sena- tor, I was the only — ^if anyone outside of the Commissioners, I was the only one present. Q. The stenographers were never present? A. They were never present. Q. Will the records which you have show the attendance at those meetings of the Committee of the Whole? A. They will show the attendance at the time when I kept memorandum, yes, but it very frequently happens that Commissioners will get together and discuss a case or a matter where I would not be present, but where I might be present, where I would keep any memorandum of it, because they would give me the directions to counsel or engineer about the matter that was discussed. Q. Well, were meetings of the Committee of the Whole held without previous notice ? A. For a long period of time meetings of the Committee of the Whole were held on the day that the Commission held formal meetings preceding the formal meeting. That was a regular practice for a considerable — Q. Those were regular meetings of the Committee of the Whole? A. Yes. Q. And at those you were present ? A. Yes, sir. Q. And are you able to say that that there is a record of the attendance at those meetings ? A. Yes. Q. And other meetings of the Committee of the Whole were held, of which no previous notice had been given, I suppose? Just chance meetings ? A. I assume you mean by Committee of the Whole, you mean meetings of the Commissioners to discuss matters which are not meetings of the Commissioners at which formal action is taken. Q. Meetings of which members had notice that such meetings would be held — are there any others than those held on the day that the Commission held, of the Commission? A. Well, prac- tically no notice as far as that is concerned. It might be, which- ever chairman it was, would send word that he would like to have the Commissioners come in and discuss one or more matters. That is the only kind of notice there would be. Report of Joint Legislative Committee 1095 Q. And at such meetings, of course, only those would be present, those who happened to be about the office, I suppose ? A. Or were needed because of the subject matter. Q. That were easily reached? A. Or in the staff, who were needed on that subject matter. Q. I suppose the record of the meetings of the Commission, the formal meetings, is available? A. All of them? Q. During the period of two years? A. Yes. Q. And will that record show the attendance of the Commis- sioners? A. Yes. Those are printed, Senator. Q. Is there a record of the hearings scheduled by the individual Commissioners from time to time during the past two years? A. Yes. Q. And that shows the proceedings had on each day at which a hearing was scheduled ? A. There are records from which such information can be obtained. Q. Well, assume that a hearing is set down before Commissioner Hayward, for instance, for Thursday of next week, and assume that Commissioner Hayward should be absent from the office on that date, would there be a record made of the fact that such a hearing had been scheduled and that Commissioner Hayward was absent ? A. Well, there would be a record showing that that hear- ing had been set down- before Commissioner Hayward at that time. And the stenographer's record of the hearing would show whether there was a hearing held or not, or if the case had been simply adjourned on account of the absence of a Commissioner, the stenographer would note it. Q. And that would be preserved, would it? A. Yes, sir. Q. Now, will you endeavor to assemble and produce fOr the benefit of the Committee the records of the Commission in relation — the records of the Committee of the Whole at those meetings of the Committee of the Whole that were regularly held — that is, the day on which the Commission as a Commission was to meet, show- ing the attendance at those meetings of the Committee of the Whole ? A. Well, that has not been true for some time that there have been such meetings. Q. There have not been such meetings for some time ? A. ISTo. Q. Were there in the earlier part of the year ? A. No. I said 1096 Investigation of Public Service Commissions the Commission for a long time — I was speaking of the Commis- sion from the date of its creation, but it cannot be said that such so-called meetings of the Committee of the Whole preceding the full meetings of the Commission have taken place as a regular matter for a period of three years or so. Q. Well, they were from time to time held during 1914, weren't they? A. There were undoubtedly occasional meetings of Com- missioners to discuss matters, yes, sir, but — Q. But not a regular weekly meeting — how frequently are the regular meetings of the Commission held ? A. Twice a week — Tuesdays and Fridays. Q. Tuesdays and Fridays? A. Yes. Q. And for the past three years, you say it has not been a regular custom to hold a meeting of the Committee of the Whole previous to the meeting of the Commission ? A. No, sir. That is, a general statement. Q. Then there is no record of the attendance at the meetings of the Committee of the Whole for the past three years, that is, no complete record or no partially complete — it would be simply a casual record, would it not ? A. I would not put it that way. I would say a record of casual meetings. Q. Yes, a record of casual meetings. Will you attempt to get together a record of any such meetings that may have been held during 1914 and 1915 ? A. From the point of view of attendance ? Q. Yes, and also a record of the attendance of each Commis- sioner at the regular meetings of the Commission, held during 1914 and 1915 ? A. Yes. Q. Can you give us also a record of the hearings that have been scheduled, with the names of the Commissioners designated to preside at such hearings, and the record of the attendance of such Commissioners at such hearings on the scheduled dates? A. I can give you that. It may take a little time to check that up. Q. Yes. I assume it will take some little time. Now, are you able to state approximately how many rate cases have been before the Commissioner during the past three years, for instance, since 1910 — perhaps since the creation of the Commission? A. That will take some little time, I assume, to compile such a statement, would it not ? A. No, I could give that to you very readily. Report of Joint Legislative Committee 1097 Q. Will you prepare such a statement and submit it for the use of the Committee? A. Yes, sir. Chairman Thompson. — Showing the date of the complaint and the date of the final — Mr. Whitney. — Yes, sir. Mr. Lewis. — I assume he will j2;ive us the record called for. b'- Q. Now, have you produced here, that the sergeant-at-arms asked you to, the record of the Kings County Lighting case? A. Yes, sir. Q. You have that with you ? A. Yes, sir. I have here. Senator, the formal papers in the Kings County Lighting Company case, iacluding the exhibits and testimony and the printed case on appeal in the Court of Appeals, and the docket which shows the entry as to various dates of the case. Q. The complaint in that case was made by one John G. May- hew, was it not ? A. He was, as I recall, the first signer of the petition. Chairman Thompson. — Is he still alive ? Mr. Whitney. — I don't know that he has ever appeared, Sen- ator. I don't recall that Mr. Mayhew ever appeared in the case. Q. When was that complaint made, Mr. Whitney? A. Well, the Commission, on October 4, 1910, adopted an order directing a hearing in that case. Q. And does the record show when the complaint or petition whichever it may have been, was filed — anything to show how long a time elapsed before the matter — A. Just before that hearing order was adopted, there was some correspondence during the preceding month of September with respect to a proposed approval of a sliding scale, and that correspondence and con- ference was participated in by the representatives of the people in that portion of Brooklyn with Commissioner Maltbie. Q. What can you tell us of the history of that conference and the reasons for it ? A. I cannot because I was not present. Those conferences with Conrimissioner Maltbie. Q. And you had no knowledge of the discussions that took place? A. ISTo, sir. 1098 Investigation of Public Service Commissions Q. Did you have any knowledge of any plan suggested by the Kings County Company? A. As to sliding scale's Q. Yes. A. Only as I learned of it from the correspondence at the time. Q. Have you any of that correspondence? A. I think it is here, yes. Q. By the way, will you put upon the record the names of the Commissioners in ofBce at that time ? A. William R Wilcox was Chairman; William McCarroU; Edward M. Bassett; Milo E. Maltbie; John E. Eustis. Q. What do you find on the subject, Mr. Whitney, of corre- spondence ? A. I find a letter from Howard 0. Patterson, Secretary. Q. He is secretary of the company ? A. No, — of the civic association, dated September 20, 1910, which recites that there had been a conference between representatives of the Civic Asso- ciation of that section of Brooklyn and representatives of the Kings County Lighting Company looking towards practically a sliding scale of prices on gas, and that they were not aware at the time of that conference that there had been filed with the Commission a petition of one hundred or more consumers, and they therefore state in this letter, " Since that time, the repre- sentatives of the gas company and the Committee above named have learned of the filing of the petition and consequently feel that it is not possible for them to enter upon any arrangement of the situation without the sanction in some form of the Public Service Commission, and therefore respectfully request that the Commission either permit the aforesaid petition to be withdrawn on the understanding that the same may be promptly refiled in case the Committee is unable to present to the public meeting to be held in the near future an agreement satisfactory to said meet- ing, or that the Commission refer the question of an adjustment of gas rates in the Thirtieth Ward to the above-mentioned, in order that it may endeavor to agree with the representatives of the gas company upon a scale of charges." Q. What action did the Commission take upon that application or suggestion ? A. A letter was sent which stated that the Com- mission had no authority to refer that question to private parties, but it had no objection to the withdrawal by the representatives Eepoet of Joint Legislative Committee 1099 of the complainant of the petition which had been filed, which as a matter of fact liad been filed by the counsel, one of whom had participated in this conference spoken of in a letter from Mr. Patterson. Senator Foley. — When was the date of that letter ? Mr. Whitney. — September 20, 1910. Q. Well, was the petition withdrawn ? A. ISTo, sir. Q. The Commission retained the control of the subject matter ? A. On the date that I remember, it adopted a hearing order. Q. To whom was it referred for a hearing ? A. Commissioner Q. And was it subsequently heard by Commissioner Bassett? A. It was heard by Commissioner Bassett for a considerable number of hearings. Q. When did the hearings begin? A. The first hearing was October 17, 1910. Q. How many hearings were held by Commissioner Bassett? A. Thirty down to and including June 7, 1911, at which time. Commissioner Maltbie began presiding in the case. Q. How did the case happen to be transferred to Commissioner Maltbie, if you are able to state ? Chairman Thompson. — In order to get an opinion, wasn't it ? (No answer.) Q. Due to the expiration of Commissioner Bassett's term ? A. To the retirement of Commissioner Bassett. Chairman Thompson. — We will suspend until 2 :15 p. it. AFTEE RECESS The Committee met at 2:15 p. m. Tea VIS H. Whith^ey on the stand. By Mr. Lewis: Mr. Chairman, the report of Perley, Morse & Co., dated today, is before me, and I offer it in evidence in justice to Judge McCall. 1100 Investigation of Public Service Commissions The statement contained in the earlier report of Perley Morse & Co., showed that eighty-five shares of the capital stock of the Kings County Electric Light and Power Company had at one time belonged to Judge McCall, and this report was asked for for the purpose of determining whether he is still the owner. From this report it appears that he ceased to be the owner of this stock in December, 190iY. I think it only fair that the report be offered in evidence, and that such publicity be given to it as may be necessary or desirable. Chairman Thompson. — Of course it is the name in whose name the stock is carried. You do not care to have the Committee to decide that he was the owner simply because it was carried in his name. Mr. Lewis. — I do not like to have the record show anything excepting that that is proper to be made public. Dated today, and addressed to this Committee. " Gentlemen : Pursuant to the instructions received from your Committee yesterday, we have investigated the record of Waterman, Anthony & Co., afterwards Waterman & Co., and now Carpender, McClave & Co., 67 Exchange Place, New York City, to trace certificate No. A3052, 85 shares of Kings County Electric Light and .Power Company. The books of E. R. Chapman & Co. show that this certificate was delivered to Waterman, Anthony & Co. on December 27, 1907. " The books of Waterman, Anthony & Co. show that this certificate was received by them on December 27, 1907, and a check given by them to E. K. Chapman & Co. for $8,470- .70. No notation appeared on Waterman, Anthony & Co.'s books as to the number of this certificate. The blotter entry in this connection was as follows: Bought of E. H. Chap- man & Co. ; Securities, 85 K. C. E. L. & P. Co. ; Amount, $8,470.70; Report of Joint Legislative Committee 1101 Tor the account of J. C. McCall, Spl. You will note that the entry first read ' E. E. McCall ' and that afterwards the ' E. E.' was crossed out and ' J. C writ- ten in and ' Spl.' added (meaning Special.) " The account of J. C. McCall, Spl. (which contained numerous other stock transactions) was charged with $8,- 470.70, on Ledger Folio 175, and the 85 shares of Kings County Electric Light & Power Company were carried in this account from this date to September 8, 1908, when they were sold to Hallowell & Henry at 1231/^ — $10,497.50. After deducting commissions and revenue stamps, the net amount is $10,485.00. The delivery of these shares. Cer- tificate No. A3743, was made the next day. " You will note that the Certificate delivered was different from the one received. This is probably accounted for by Waterman, Anthony & Co. receiving Certificate A3 05 2, which stood in the name of E. K. Chapman & Co., and its being transferred to the name of Waterman, Anthony & Co., and Certificate N"o. A3 743 issued in its place. " The dividends on this stock were all credited to J. C. McCall Spl. account. There is no record in the J. C. McCall Spl. account of payments made, if any, in this trans- action to Edward E. McCall by J. C. McCall. Therefore if E. E. McCall received remuneration in this matter, it was a private transaction between himself and John C. McCall. The profits in this matter amounted to $2,014.30. " The following is a copy of a letter which we found in the files of Waterman, Anthony & Co., written on their stationery and signed by E. E. McCall. "December 27th, 1907. " Mess. Waterman, Anthony & Company, " 67 Exchange Place, " New York City. " Gentlemen : This will serve as your authorization to accept from E. K. Chapman & Company my account which containa 85 shares of Kings County Electric Light, Heat & 1102 iNVESTiaATioN OF Public Seevice Commissions Power Company. When same is received by you you are further authorized to place the same in the account of Mr. John C. McCall. "Yours very truly, "(Signed) EDWARD E. McCALL. " If your committee desires, we can verify, at the office of the transfer agent, the Eranklin Trust Company, these ("er- tificate numbers, to wit: Ko. A3052 and A3743, and ascer- tain in whose name they were made out. " Respectfully submitted, " PERLEY MORSE & CO., " Certified Public Accountants." (Last question and answer read by stenographer to the witness.) Q. When did that take place, if you can give us the date, Mr. Whitney, that transfer? A. The record here shows that Mr. Bassett presided June 7, 1911, and the next hearing is June 13, 1911, when Commissioner Maltbie — Q. l^ow, how many hearings did Commissioner Maltbie hold on this matter ? A. Seven at that time. Q. And at the conclusion of the seventh hearing, or thereafter, did he prepare a decision? A. Yes, sir, October 20, 1911, he presented an opinion to the Commission which was adopted, as well as an order. Q. On that date ? A. Yes, sir. Q. Have you a copy of that opinion and decision on your files ? A. Yes, sir. Q. Have you it here ? (The witness produces a copy.) A. I can get you a more convenient form. That is bound so half of the pages are upside down. Mr. Lewis. — I offer in evidence the opinion of Commissioner Maltbie in a proceeding entitled " John G. Mayhew and others against Kings County Lighting Company." Order entitled, " Rate for gas in Thirtieth Ward, Brooklyn." (Received and marked.) Repoet of Joint Legislative Committee 1103 Mr. Lewis. — I also offer in evidence the order made by the Commission fixing the maximum price for gas to be chai'ged by the Kings County Lighting Company for gas in the Thirtieth Ward, Brooklyn, as follows: From and including ISTovember 1, 1911, to and including December 31, 1912, 85 cents per thou- sand cubic feet; from and including January 1, 1913, to and including December 31, 1913, 80 cents per thousand cubic feet. Mr. Lewis. — I offer these in evidence, and you will supply copies. Assemblyman Donohue.— Will you give the date of the order and opinion on record? Mr. Lewis. — I think it was given by Mr. Whitney, October So, 1911. Q. As I understand the matter, the Kings County Lighting Company reviewed in the courts the determination and order of the Public Service Commission, did it ? A. Tes, sir. Q. By writ of certiorari, I suppose? Yes, sir. Q. And the decision was rendered in the Appellate Division of the Supreme Court, First Department, at what time? A. The Appellate Division, May 9, 1913. Q. May 9, 1913 ? A. And the Court of Appeals, March 24, 1914. Q. The decision of the Appellate Division was that the order made by the Commission be set aside, was it not, and a new hear- ing ordered ? A. I don't remember just • — Q. Have you a copy of the decision in your papers ? A. Well, I have the case on appeal here in the Court of Appeals, that would contain the opinion. Chairman Thompson. — -Also the order, and the whole business. Mr. Lewis. — It would contain the opinion and appeal from the decision ? Mr. Whitney. — Yes. Mr. Lewis.- — We will put that entire record in evidence. I offer in evidence the petition, order, writ of certiorari, and return in the case, entitled " The people of the State of New York on the relation of Kings County Lighting Company, Eespondent, 1104 Investigation of Public Sekvice Commissions against William E.. Wilcox and others, composing the Public Service Commission, First District." Also the volume entitled in the same case containing the exhibits. (Keceived and marked.) Q. When was the decision of the Court of Appeals finally ren- dered? A. March 24, 1914. Q. And in the Court of Appeals the Commission was the appel- lant, was it not, — appealed from the judgment of reversal or order of reversal ? A. Yes, sir. Q. March — what did you say? A. Twenty-fourth. Q. ISTineteen hundred and fourteen ? A. Yes, sir. Q. What happened after the reversal — after the affirmance of the Court of Appeals of the order of the Appellate Division in connection with this matter? A. It came back to the Appellate Division which on April 23, 1914, made an order directing the Commission to reconsider the matter. Q. Have you a copy of that order? A. I have it in the files, yes, sir. Whether it is actually here — I assume it is. Mr. Lewis. — We will offer it in evidence, and if you haven't it here, you can produce it and put it in. Q. What happened after the service of the order upon the Com- mission? A. That order was in April 23, 1914, and the Commis- sion on April 28, 1914, adopted a resolution reopening the pro^ ceeding and assigning it — it was assigned to Commissioner Maltbie. The first hearing was held May 7th. Q. ISTineteen hundred and fourteen ? A. Yes, sir. Q. How long did he continue in charge of that proceeding? A. Well, on January 14, 1915, Commissioner Maltbie adjourned the case to April the first. He had been presiding until that time. Q. Had there been hearings from time to time during the period after it was again referred to him ? A. He had held nine hearings. No, wait a minute. Q. And was it concluded by him before his term of office expired — had it been concluded by the time his term of office expired? A. No, sir. ' Q. And who has had charge of the case since the expiration of his term? A. Well, he had adjourned it until AprU 1st, Repoet of Joint Legislative Committee 1105 and it was further adjourned until April 15, and then from April 15th Commissioner Hayward presided. Q. Until what time? A. Six hearings down to and includ- ing June 2d. Chairman Thompson. — Don't any commissioners there ever read the record taken by their predecessors ? Mr. Whitney. — I can't answer that, Senator. Chairman Thompson. — When it is reassig-ned they always begin away back at the beginning and take testimony all over again ? Mr. Whitney. — I don't know, Senator. Mr. HajTvard. — Mr. Lewis. — I am perfectly willing to have you answer. Mr. Hayward. — Well, I read the record of the proceedings in all the cases I have that had been taken by my predecessor before I started. ■Senator Thompson. — Well, you created a precedent. Mr. Hayward. — I don't know. Q. And have there been any hearings since June 2nd? A. Yes, there have been other hearings. June 2nd and June 4th, Commissioner Williams presided. June 15th, June 22d, June 24th, hearings with all the Commissioners present in the summing up of the case. Q. What became of the case? A. June 28th, Commissioner Williams and Wood, at which time the hearings were closed. Q. And has there been a decision rendered in the case? A. 'No, sir. Q. You understand, do you, or do you not, that Mr. Commis- sioner Williams has prepared his opinion on the subject? A. I understand he has prepared an opinion, yes, sir. Q. And that it is pending now before the entire Commission ? A. It is in the hands of the other Commissioners, yes, sir. Q. Was there any action taken upon the — did the ma,tter come up for action at the meeting of the Commission held yesterday? A. Yes, sir ; and I had it on the calendar for a week before and it went over both times. 1106 Investigation of Public Seevice Commissions Q. For what reason, if you are able to state? A. Both times because the Commissioners had not been over the opinion suf- ficiently to act on it. In their statement. Q. So stated by them ? A. Yes, sir. Q. And by which Commissioners was that statement made? A. That statement was made yesterday by Commissioner Cram. Q. And the week before ? A. I think the meeting at which it was up before Judge McCall stated that. I would not be abso- lutely sure as to just who made the statement the week before. I think it was Judge McCall. Q. When will it again come u.p? A. It will be on the calendar again on Friday. Q. Of this week ? A. Yes, sir. Q. Which Commissioner has been given a copy of the proposed decision as prepared by Commissioner Williams? A. I under- stood Commissioner Williams to state that he had given a copy to each Commissioner. Q. Now what was the occasion for the full Commission sitting on one or two occasions to which you referred ? A. Yes, sir. I assume that was due to the fact that there was a summing up, and there were representatives of the party in the case. Q. Does your record show what took place at those meetings ? A. The transcript does, yes, sir. Q. Have you the transcript with you? A. I don't believe I have got that here. I thought I had in these papers the testimony down to date. I will have to telephone the office. Mr. Lewis : All right, will you do so ? Mr. Lewis. — Mr. Chairman, I think it desirable to read into the record of this Committee from a letter dated September 20, 1910, to Honorable Travis H. Whitney, Secretary of the Public Service Commission, New York City as follows : " Dear Sir: Eeplying to your communication of the 16th instant, I beg to advise you that at a meeting of the Com- mittee hereafter referred to, held on the 19 th instant, I was instructed to lay before you the following facts: A public meeting was held on the evening of September 12th, under the auspices of the West Brooklyn Board of Trade, Repoet of Joint Legislative Committee 1107 for the purpose of discussing a possible reduction of the rates charged for gas by the Kings County Lighting Com- pajiy, at which meeting there were represented by invitation the following political and civic bodies :" Then follows tlie names of twelve organizations it is not nec- essary to read into this record. " There were also present by invitation the Secretary and General Manager of the Kings County Lighting Company. At the meeting, a general discussion was had on the question of rates, and among other proceedings Mr. Reeves, represent- ing as delegate and attorney the South Side Board of Trade, under whose auspices the petition was filed, suggested, that a so-called step down rate was the fair and proper solution of the question before the meeting. In response to this sugges- tion, the representatives of the Gas Company stated that they agreed with ^Mr. Reeves and would cordially join in an effort to reach a satisfactory adju.stment of the rate case without the expense and delay of litigation. Thereupon, a committee consisting of the follomng was appointed to confer with the gas company and report back the results of their conference at a public meeting to be held at a later date." Then follows the names of seven men representing the various organizations as a committee. " Since that time the representatives of the Gas Company and the Committee above named have learned of the filing of the petition and consequently feel that it is not possible for them to enter upon any arrangement of the situation without the sanction in some form of the Public Service Commission. We, therefore, respectfully request that the Commission either permit the aforesaid petition to be withdrawn on the under- standing that the same may be promptly refiled in case the Committee is unable to present to the public meeting to be held in the near future an agreement satisfactory to said meeting, or that the Commission refer the question of an adjustment of gas rates in the Thirtieth ward to the Commit- tee above named, in order that it may endeavor to agree with the gas company upon a scale of charges." 1108 Investigation of Public Sbevice Commissions This letter, portions of which I have read into the record, is signed by Howard 0. Patterson, Secretary. Mr. Lewis.^From the opinion and order of the Commission bound together, from the opinion of Commissioner Maltbie, I read the following: " Present rate. The rate complained of is one of per thou- sand cubic feet of gas supplied to private consumers. This is also the rate charged for gas furnished to the city for municipal buildings. The street lighting rate is $28 per lamp under a contract which does not expire until 1916. " The Kiiigs County Lighting Company has never volun- tarily reduced its rates, and they have never been reduced by statute, except as the act of 1905 applies to gas furnished the city for other than street lighting." And the following paragraph also : " While the petition was pending before the Commission, negotiations were carried on between the Company and inter- ested civic associations. The Company proposed to reduce the rate to 90 cents per thousand cubic feet for 1911, and 1912; 8,5 cents for 1913; and 80 cents for 1914; and 1915. These terms did not meet with the approval of the complain- ants, and the Company was unable finally to put it into effect without an oider from the Commission giving its sanction to the proposed settlement. The Commission having made no investigation to determine what rates would be reasonable, and the hearings proceeded." Also, quoting from the opinion or finding as follows : "As a result of the thorough investigation which has just been completed, the Commission finds that the maximum rate charged per thousand feet of gas in the Thirtieth Ward of Brooklyn, should be as follows: From November 1st, 1911, to December 31st, 1912, 85 cents per thousand cubic feet; from January l.st, 1913, to December 31st, 1913, 80 cents per thousand cubic feet." Q. What do you know of the ownership of the Kings County Lighting Company, Mr. Whitney, the stock ownership — any- thing? A. ISfo, sir, I do not. Repoet of Joint Legislative Committee 1109 Q. Is it a non-operating company itself ? A. Which ? Q. The Kings County Lighting Company ? A. Yes, sir. Q. It acquired, did it not, the control and ownership of the assets of the Kings County Gas and Illuminating Company ? A. Commissioner Maltbie in his opinion there gives the predecessor company. Q. And is it the plant of the Kings County Gas and Illuminat- ing Company that is being operated, or is it the plant that is oper- ated and owned by the Kings County Lighting Company — has there ever been a merger in other words, of the two corporations, to your knowledge? A. Well, I can't tell you offhand. I think there is a short history there of the company. Q. Yes — a merger was filed. I hadn't noticed that. You don't know of the ownership of the stock ? A. ISTo'. Q. Has this company any connection with the Kings County Electric Light and Power Company, for instance, to your knowl- edge ? A. I believe there is no corporate relationship between the two companies. The only thing that might show anything as to stock ownership is the annual report of the company only, I think 1910 or 1911. The companies that are required to give the names of the ten largest stockholders. Chairman Thompson. — Do you know the name of the largest stockholder of this company? Mv. Whitney. — No, sir. Q. Have you — I don't know but I asked you this question before the noon I'ecess — have you any idea of the approximate number of rate cases pending before the Commission? A. You asked me to give that list. Q. Did you express any opinion as to the number ? A. l^o, sir. I understood yon to ask me to give you a list. Q. You have not any opinion as to the number of those cases, or have you ? A. Well, I should say approximately around twenty- five. Q. Has it usually taken as much time in those rate cases as has been consumed in this case ? A. Tlie rate cases have usually taken considerable time. I think considering the time that has been taken in the rate cases, the period that elapsed in this case down 1110 Investigation of Public Service Commissions to the final order was a comparatively short time as a relative matter. Q. As compared with other cases ? A. Yes, sir. That is, down to the order of 1912. Q. That is the order upon which the reversal was had ? A. Yes, sir. Q. Do you know about the prices of gas in Brooklyn, generally speaking, Mr. Whitney — at what price gas is sold ? A. Oas is sold at 80 cents v/ith the exception of this ward. Q. And what company sells at SO cents — what company 'sup- plies the territorv other than this ward ? A. The Brooklyn Union Gras Company and the Flatbush Gas Company, the Brooklyn Bor- ough Gas Company, and the Coney Island district. Chairman Thompson. — How large a ward is this? Mr. Whitney. — Well, the territory is rather a considerable ter- ritory, generally speaking, the area in the section. Chairman Thompson. — Large area ? Mr. Whitney. — Yes, sir. Chairman Thompson. — Scattered population ? Mr. Whitney. — It is largely a scattered population. Chiefly private-house section. Just now in some portions of it there is considerable development of block houses or two-family houses. Chairman Thompson. — Population of 125,000? Mr. Whitney. — Well, I should say so. More than that — I should say, roughly, around 200,000. Mr. Lewis resuming : Q. And this is the only section from Brooklyn in which the con- sumer is not able to hwj gas at 80 cents ? A. Well, the Thirty-first ward has a higher price — that is, the Brooklyn Borough Gas Company. I think that is a dollar there, too. Q. The gas there ? A. Yes. Q. Is that a densely populated section or sparsely? A. Well, it is more sparsely settled than this ward, the addition to which — 'it contains the (^oney Island district which, of course, consumes gas only for a portion of the year — seasonable use. Report of Joint Legislative Committee 1111 Q. Mr. Whitney, how many automobiles are owned by the Pub- lic Service Commission, if you know ? A. I was going to say five automobiles and three Fords. Q. Eight in all ? A. And a truck. Q. How long- has the Commission owned this number — has there been any recent purchase, in other words ? A. There was a Ford purchased about a year ago. Q. And that the only purchase within the past year ? A. Yes, sir. Q. Does each Commissioner have a car for his own private use ? A. No, sir. Q. In the tran.=action of the public business, I mean, but desig- nated for his particular use? A. No, sir. Chairman Thompson. — Q. Whatever he uses it for. A. No, sir. Q. And where are these automobiles kept ? A. The three Fords are kept in garages nearest to the men who particularly use them. There is one in Queens for the use of the divisional engineers in charge of the Queens work. One kept up near 125th street for the divisional engineer's use up there. The third one is kept near where the tunnel engineer lives — man in charge of the construc- tion of the tunnels. There is one of the larger automobiles kept uptown in the garage nearest the residence of jMr. Ridgeway, the engineer in subw:iy construction, who has charge of the field con- struction work, in order that it may be immediately available to him. There is another car kept in a garage at 83rd street, and the others are kept in the municipal garage under the Brooklyn end of the Brooklyn bridge. Q. Is there any one of these machines set apart for the use of any one of the Commissioners ? A. Well, there is one of the cars that is used practically exclusively by the Chairman. Q. And where is that kept? A. 83rd street. Q. And is that supplied with a chauffeur? A. Yes, sir. Q. And is it used exclusively by the Chairman ? A. Practically exclusively. Q. And for private as well as public ? A. Well, he uses it — I don't — 1112 Investigation of Public Sekvicb Commissions Q. Well, is there a record kept of the trips or trip records of the automobile by anyone ? A. The chauffeurs are expected to turn in cards showing certain data with respect to the use of the car. Q. Is there a rule to that effect ? A. Yes, sir. Q. Has it been complied with ? A. Yes. Q. Religiously and regularly and persistently ? A. Well, so far as I know, the chauffeurs have turned in cards for each day's use of the chauffeurs. I do not actually see those personally every- day or even pei'iodically. Occasionally I look at them. They vary as to the details that are given on the cards. Q. How? A. The car that is used by the Chairman, I have noticed that those cards simply say " Chairman McCall." Q. And do not give the details of the uses to which the car is put ? A. K"o, sir, other than the mileage. Q. It does give the mileage, does it ? A. Yes, sir. Q. It doesn't show the destination of the car or the trips that it makes ? A. No, sir. Q. Does that car carry upon it in any way the letters " P. S. C." or anything to indicate that it is a Public Service Commission car? A. JTo, sir. Q. Do the others ? A. Yes, sir. Q. That is the only exception, is it ? A. Yes. Q. Can you prepare or have prepared from the records of the office the statement showing expense of the maintenance and oper- ations of the several cars owned and used by the Public Service Commission and its employees ? A. Yes, sir, I have that. Q. Have you that in form now ? A. Down to a comparatively recent date, yes, sir. Brings it down to July 1st. Q. For a period of how many ? A. Prom the date of purchase of each car. I mean we have got the data after that date, but it simply is not in this tabu.lation. Q. Is not tabulated. Can you get that by telephoning for it? A. Yes, sir. Mr. Lewis. — Perhaps if you would telephone for that — I would like to have it. Q. Have you the testimony now, Mr. "Whitney? Before you take that up, Mr. Whitney, let me ask you one other qtiestion — are the contracts between the gas companies and the oil companies Report. OF Joiis't Legislative Committee 1113 from whicli oil is purchased for the manufacture of gas a matter of record in the office of the Public Service Commission ? A. Not as a matter of couj-se. They might introduce them in evidence in a rate case, but only in that. Q. They would not be filed there, of course, or for the approval of the Commissicn, or anything of that kind ? A. Wo. Chairman Thompson. — What is Judge MdCall's residence; 83rd street ? Mr. WTiitney. — Eighty-sixth street. Chairman Thompson. — That 8ord is garage, is the nearest garage to his residence ? Mr. Whitney. — I don't know whether it is the nearest to it. Chairman Thompson. — I asked that for Senator Towner. Q. JS!'ow, have you the record of the rest of the hearings 'i A. Yes, sir. Q. The first meeting at which the entire Commission was pres- ent after the matter was referred ? A. June 15 is the first one at which they were all present. Q. And the matter was at that time pending before which Commissioner — June 15th, you say? A. Well, Commissioner Williams had held the two preceding hearings. Q. Do you know what the occasion was for sending the request for an adjournment, and asking that it be considered by the full Commission ? A. Xo, I do not. Q. How? A. JSTo, I do not. Q. This appears to be the record of that meeting: "A. Mr. Maltbie, who was representing the Commission, stated that counsel for the company, Mr. Eicks, has sent me a telegram stating that he will be unable to be here to-day, owing to an engagement in Topeka, Kansas, and requesting that the matter be adjourned until* Tuesday, June 22, at 12.15 p. m., before the whole Commission. I took that mat- ter up with Commissioner Williams and Commissioner Hay- ward, and on their direction notified Mr. Eicks that that matter would be adjourned to the time requested by him. I therefore request that this matter stand over until June 23, 1915, at 12.15 p. m., to be heard by the whole Commission." 1114 INVESTIGATION OF PuBLIC SeEVICE COMMISSIONS Mr. Whitney. — That in June 22nd. Mr. Lewis.— Did I say 23rd? "Commissioner Cram. — Let the case be adjourned as requested. "Whereupon an adjournment was taken to June 22nd, 1915, at 12.15 p. m." Q. Was there any particular reason why there should be a full attendance of the Commission, do you know, any controversy? A. It very frequently happens in cases, however, that there is an attendance of the fuil Commission on the summing up of cases particularly if requested. I imagine the testimony of the last preceding hearing will show a request. Q. I shall examine the last preceding hearing for the purpose of seeing. Yes, it was down for a summing up on that day, the 15th, and that's the reason, in your opinion, why the entire Com- mission was asked to be present, was it ? A. I assume so. Q. ISTow, was there a subsequent session of the entire Commis- sion for the summing up ? A. The 22nd and 24th are given there. Q. That was the occasion — on both occasions they were sum- ming up ? A. I presume so. Q. Have you that schedule? A. Yes, sir. Q. Ma:y T see it ? This is the schedule that you referred to, Mr. Whitney, of the total cost of automobiles and maintenance to June 30, 1915, owned by the Public Service Commission? A. To June 30. Q. To June 30, 1915 ? A. Yes, sir. Q. Will you indicate which of those cars you referred to was the one used by the Chairman? A. The Locomobile. Q. This covers a period of twelve months or covered a period from the time of purchase as to each car ? A. It covers a period from the purchase of the car down to June 30, 1915. Q. Does any other Commissioner have a car that is specifically designated for his use? A. l^o, sir. Q. Does any other Commissioner use any particular car when- ever he has occasion to use any at all ? A. Well, if he wants a car, he uses the most available that is at the office at the time. Report of Joint Legislative Committee 1115 Chairman Thompson. — Do you mean he uses the Chairman's car? Mr. "Whitney. — Occasionally, I believe, that has been used. Chairman Thompson. — That has been known, has it'^ Mr. Whitney. — Occasionally it has been used. Q. What does Commissioner Williams, for instance, do if he wants a car this afternoon at four o'clock, for a public purpose in the performance of his duty ? A. He will either speak to me or one of my clerks in regard to having a car at that time. Q. And what happens then ? A. We find a car for him. Q. By telephoning to the — A. If it is not at the office avail- able, then, why, we telephone for one. Q. And do you always telephone for the same one for Commis- sioner Williams? A. Well, we try to keep one at the office available. That is usually the case. It may be said that one of those cars is practically assigned to me. I attempt to keep that car at the office during the day. Q. And a chauffeur in charge? A. Yes, sir. I undertake to hold that car in reserve. Q'. And that, then, would be available for any member of the Commission ? A. Yes, sir. Q. Who might have occasion to use it during the day ? A. Yes, sir. Q. I notice that the oldest car in point of service is the Cadillac purchased May 29, 1912 ? A. Yes, sir. Q. I notice the total mileage of that ear since its purchase, to June 30, 1915, is 24,946 miles. Chairman Thompson. — Who had that car, that old Cadillac, — who used that ? Mr. Whitney. — For some two years that car has been assigned to the sixth division, which is located in Brooklyn. Chairman Thompson. — Is that the one operated by Eidgeway ? Mr. Whitney. — ISTo, sir. Chairman Thompson. — That is used by the engineer ? Mr. Whitney. — That is used by the engineers of Brooklyn. 1116 Investigation of Public Service Commissions Q. I notice tliat the Locomobile purchased May 5, 1913, had a mileage established of 30,534 miles in two years, and a few days over. Chairman Thompson. — What is that figure ? Mr. Lewis. — 30,534. Q. The cost of operating the Cadillac for three years and one day was $2,399.70, while the cost of operating the Locomobile for two years and twenty-five days was $4,907.60. Chairman Thompson. — Whose car was that Locomobile — to whom was that assigned ? Mr. Whitney. — Judge McCall. Chairman Thompson. — Was that the McCall car ? Mr. Whitney. — Yes. A. You misunderstood the heading of that cohimn. Q. I thought that was the original operating expense of the car. A. That is. the original cost of the car. Q. Suppose you tell what the cost of the operating of the car, — the Cadillac, has been from its purchase, to June 30, 1915. Chairman Thompson. — I would like to understand. The Cadillac cost $2,300, and the Locomobile cost $4,900 ? Mr. Lewis. — Yes. I misunderstood the headings. A. You want the expense of operation. The total expense of operation including the chauffeur's salary and garage supplies and repairs, Cadillac, $7,067.12, and Locomobile, $7,036.13. Q. One for the period of three years — A. Three years, one month and two days. Q. And the other for the period of two days — A. One month and twenty-six days. Mr. Lewis. — I offer this schedule in evidence. (Received.) Q. Can you compile in this form, Mr. Whitney, and have ready for us at a subsequent hearing the data covering the period from July 1st to November 1st, for instance ? A. Yes. Q. If you will do that, please. A. Yes. Repoet of Joint Legislative Committee 1117 Chaii-man Thompson. — I would like to know the assignment of all these cars, — the total mileage, because you said you figured it out in operation per mile cost for each of these cars. Mr. Whitney. — Yes, sir. Chairman Thompson. — And you have put in here the Fords and all ? Mr. Whitney. — Yes, sir. Chairman Thompson. — Of course those are the cheapest oper- ated cars of all of them. Mr. Whitney. — Yes. Chairman Thompson. — The next on the list after Locomobile is Ford ? Mr. Wliitney. — Yes. Chairman Thompson. — With original cost of $636 ? Mr. Whitney. — Yes, sir. iChairman Thompson. — And an operating cost of $1,641.82? Mr. Whitney. — Yes. Chairman Thompson. — And the mileage is 13.9 cents, l^ow, who operated that Ford car ? Mr. Whitney. — I can't tell which is which on those Ford cars from the numbers. One is assigned to the second division of Queens. Chainnan Thompson. — And operated by the engineer ? Mr. Whitney. — No, sir, by a chauffeur, and the other one is assigned to the division of Upper Manhattan and the Bronx. Chairman Thompson. — And that is used by the engineer ? Mr. Whitney. — Yes, sir. Chairman Thompson. — And that Ford cost was the same? Mr. Whitney. — Yes, sir. 1118 Investigation of Public Service Commissions Chairman Thompson. — And the operating expense was a little less? Mr. Whitney. — A little less. Chairman Thompson. — $1,235.87, and the mileage is 12.87 cents. Mr. Whitney. — The mileage is less. Chairman Thompson. — This Cadillac A, who is that assigned to, who runs that ? Mr. Whitney.^ — That is the car that at the present time I am holding as a reserve car at the office. By Chairman Thompson: Q. That is the one you use and hold at the office, and it is practically under your charge, and you use it for the Commis- sioners as they desire it, the other Commissioners, and use it yourself when they are not calling on you ? A. Well, when I can. Q. And that original cost was $2,238.94 ? A. Yes, sir. Q. That car? A. Yes, sir. Q. And the operating cost, $2,746.76, and average cost is 23 cents a mile. ^Now, this Cole car, the next car, who had that ? A. That small Cole is being used by the engineers from the Trib- une building, so far as possible. Q. That car's original cost was $1,400 ? A. Yes, sir. Q. What is it, a small 30-horse Oole? A. Five-passenger car. Q. The operating expense $2,791.44, and average mileage of 17 cents? A. Yes. Q. Is that correct? A. Yes, sir. Q. ISTow, the other Cole car, who has that ? A. Mr. Ridgeway. Q. That is the car operated by Ridgeway ? A. Yes, sir. Q. Where is 'Cram's car? A. Well, this car is used by Mr. Ridgeway at the present time. It was originally used generally by Mr. Cram. Q. That is the ear that has a historical record of running into ditches on Long Island ? A. Yes, sir. At that time Mr. Ridge- way had this Cadillac. Chairman Thompson. — Original cost, $2,165 ? A. Yes. Q. Operating, $2,734.47, average cost 18% cents a mile? A. Yes, sir. Kepoet of Joint Legislative Committee 1119 Q. And the only other car is a Ford car? A. Which is used by the tunnel engineer. Q. Must have been bought second-hand — $300 ? A. Yes, sir. Q. And a total cost of operating is $161 ? A. Yes. Q. It has only been since last May ? A. Yes. Q. And cost less than 17 cents a mile ? A. Yes,— that is for two months' operation. Q. That comprises the list of all the cars? A. There isn't on here the truck. Q. I mean all the passenger cars ? A. Yes, sir. Q. With their general uses? Now, practically all the other Commissioners have the use of is this Cadillac that you operate, and this Cole, and the small Cole ? A. Yes. Mr. Lewis resuming: Q. Mr. Whitney, has the Commission found it necessary ta often hire the use of automobiles in addition to those owned by the Commission? A. Very seldom. Q. Tell me, if you can, if there has been a consolidation by the Consolidated Gas Company since your connection with the Public Service Commission, by which smaller companies have been absorbed by that company — do you recall any such ? A. They acquired by stock ownership a company in Queens county. Q. Do you recall the name of that company? A. JSTew York and Queens County, I think. I forget the rest of the title. Q. Do you remember in what year that consolidation occurred, Mr. Whitney? A. Nineteen hundred and twelve or 1913. I wouldn't say consolidation. (At this point Senator Towner assumed the Chairmanship.) Q. Well, acquisition by stock ? A. Yes. Q. I used the word " consolidation " rather inadvisedly. A. That is the New York and Queens Electric Light and Power Oompany. Q. In what year was that acquisition ? A. This was an adopted order authorizing the acquisition May 20, 1913. Q. What is the ease number on that, Mr. Whitney ? A. 1453. Q. Will you give us that case ? The records in that case, to-mor- row ? A. What do you want ? 1120 Investigation of Public Service Commissions Q. The case number, the file. And will you also give to the Committee to-morrow from the reports on file in your office the names of the ten largest stockholders of the Kings County Light- ing Company? A. Yes. Q. Do you know under whose orders the letters " P. S. C." were removed from the car used by Judge McCall ? A. No, sir. Q. Do you know of any instructions from anyone to remove those letters? A. JSTo, sir. Q. And do you know whether the chauffeur who drives Judge McCall's ear has had any instructions not to turn in the mileage, — destination, rather ? A. I don't know. Q. Can't you tell when the removal of those letters from the car took place? Have they ever been on a car and subsequently removed? A. Yes, sir. Q. And about when was the removal ? A. Well, I really can't tell. They have been off for some months. Q. Were they off prior to the first of January of this year? A. No. Q. Been removed since the first of January ? A. Yes. Q. Since the first of April, probably ? A. Well, I should think the absence of them goes back to around that time. Q. I notice, Mr. Whitney, that from the computation of mile- age of Judge McCall's car, he has averaged approximately forty miles a day. Does that indicate the extent to which he has used the car for business purposes, in your opinion ? A. Well, that is merely an average for the whole period of time, isn't it? Q. Yes, substantially. A. Well, I really can't say, because there would be occasions when that car would make rather a high mile- age on inspection trips. Q. But can it be possible that it has been used for any such number of miles on the average, including Sundays, for every day covered by its ownership? A. Well, I really can't say, Senator, because I don't know the actual use or actual trips of that car, because I have very seldom been in it. Q. You haven't any information on the subject, I suppose, have you ? A. I have veiy seldom been in it. Q. Now, will you produce to-morrow, Mr. Whitney, the files in case No. 1893, if you will? A. Yes, sir. Mr. Lewis. — I think that is all for to-day. Repoet of Joint Legislative Committee 1121 CoMMissioNEK Haywaed On the stand. Examination by Mr. Lewis: Q. Commissioner Hayward, you, since your appointment to the Public Service Commission, have had something to do with the ISTew York Edison rate case? A. Yes, sir. Why, Senator, it would be more accurate to say that I had to do with the schedule — the approval or disapproval of the schedule filed by the ISTew York Edison Company, following the determination of the rate case, known as the Stadtlander case by the Commission on it. The case was finally determined by the Commission during the incum- bency of Commissioner Maltbie, who asked for a 6-cent rate, and the prevailing opinion of Commissioner Williams called for an 8-cent per kilowatt hour maximum rate. That had been deter- mined before I became a member of the Commission. But there were extensive hearings and extensive deliberation on the schedule necessarily filed by the company pursuant to the order made in the rate case proper. Q. Suppose you tell us what you are able to tell of the history of the I^ew York Edison rate case. A. Well, I don't know how much of it you want and how much you don't want. Q. Well, we want the essentials. Y"ou ought to be a good judge of what is essential ? A. I can't tell what the number of hearings was on the schedule. Q. "Well, I wouldn't care for that. That was a petition by a consumer ? A. It was a petition filed by the company pursuant to the determination in. the rate case to which objection was made by a number of complainants. Q. To whom was it referred ? A. The entire Commission sat on it part of the time, and I don't know but all of the time the entire Commission was supposed to sit in this matter. Q. Was that during the period since you were appointed to the Comanission ? A. Yes. That was all since I was appointed to the Commission. Q. What was the result of the protest against the schedule of rates ? A. Well, as I say, there were hearings held and testimony taken on the question largely of what were alleged to be or claimed to be the discriminatory riders provided for in the schedule as filed by the company. Vol.. 1 — 36 1122 Investigation of Public Service Commissions Q. JSTow, right there, tell us what those discriminatory riders were, if you will ? A. Well, of course, Senator, the Commission determined they were not discriminatory riders. Q. What were they alleged to be? A. They were alleged to be and I held in my opinion that they were briefly the so-called conjunctional service rider. Q. ISTow, describe that, — what is meant by that term ? A. The conjunctional service rider was a rider in the Edison schedule providing for a special rate in the case of buildings under com- mon leasehold or common ownership within one hundred feet of each other, served not necessarily from one service. The rider provided that they might be and that in case it was possible for all those buildings to have been served under one service, that the current required by the group of buildings should be taken collec- tively in determining the rate to which the several men were entitled. Q. It was alleged that that was discrimination ? A. I thought it was a discrimination. Senator, against other people. Q. Well, there was a charge made, and you, sustained that charge so far as your personal action was concerned? A. Yes, sir. Q. That resulted necessarily in a reduction in price to that particular customer, did it not ? A. Yes. Q. And what was the determination of the Commission upon that subject? A. Well, the determination of the Commission on that subject was that it was not discriminatory and that practice might be allowed — might continue, whether served by one service or a dozen services. Briefly, my theory was: If there had been a separate service, there were separate services, separate meter readings and separate accountings for each of these buildings — in one case a group of 52 buildings all were getting a wholesale rate, on the theory that they were all one, under the rider which provided that such a rate could be given in the event that all the buildings might be served by a single service. I said if they all were actually served by a single service to a single customer, and he in turn served the others, it was none of our business to pass the original customer; if he consumed a sufficient quantity of current, that he was entitled to this rate, but that the rider as it ■Repoet of Joint Legislative Committee 1123 stood was originally wholesale and was made for the purpose of ' preventing that same group of buildings putting in their own isolated plant, and that was the disagreement set forth in the opin- ions of Commissioner Williams and myself. Q. ]^ow, to whom was the writing of the opinion referred by the Commission, — was it referred specifically to any one or sev- eral Commissioners? A. I think it was. I would not say posi- tively, but, at any rate, the burden of the hearings had fallen on my shoulders and I undertook to write the opinion, and did write the first opinion and prepared an order pursuant to my oavu opin- ion. Before we go do you want these other riders ? Q. Yes, but I wanted to dispose of this one first. Now, what action was taken upon your determination of that particular ques- tion by the Commission? A. That was voted down, and the opposite determination was adopted by the Commission. Q. Resulting in the allowance of the wholesale rate to the com- mon owner? A. Yes. Well, the wholesale rate went to the individual. Q. That is the common owner ? A. Individual owner or tenants. Q. And the individual tenants ? A. Yes, Q. 'Making it possible for the individual tenant occupying the house of the common owner to get a better rate in the consump- tion of current than his neighbor who might occupy a house owned by some other owner ? A. That is right, but not based — the rate not based on his consumption, but on the total consump- tion of the group. Q. On the total consumption of the group of houses owned by the common owner ? A. Yes, but you said the tenant in the building. This was for separate buildings so long as they were within one hundred feet of each other. There is another rider having to do with the tenant within the building to which I will refer later. Q. !N"ow, we have cleaned that one up, give us the next dis- criminatory rider that you speak of. A. Well, there was a rider provided to a similar effect in the case of inter-communicating buildings. That is where buildings or parts of buildings owned by common leasehold or ownership are intercommunicating by 1124 Investigation of Public Service Coaoiissioxs means of a door or passagev^ay permitting a person to pass from one to the other without going outside of either building, — elec- tric current consumed in each or in such intercommunicating parts as was owned under common ownership or leasehold might be supplied jointly under a single contract. Q. That would be a single service, would it not ? A. It was not a single service. That was my objection. The separate services to separate people and merely the intercommunicating feature by a door, linking those two customers together, to get a wholesale rate. Q. And was that also, in your opinion, provided for the pur- pose of discouraging the installation of a privately-ovmed plant? A. It was. I thought it was unjust, because I thought that it was improper for an owner of a building or parts of buildings, whether they were intercommunicating or not, to receive a greater number of services than another person who used the same amoujit of current and only had one service. As long as. Senator, — as the cost to the company of rendering that service was not reduced in the slightest degree by the intercommunicating feature of the system. ; Q. Yes, that was the test was it, in every case? A. Yes, I thought it ought to be. Q. What other discriminatory rider have you in mind? A. Well, a rider called the owners' and lessees' service rider, I thought was not only discriminatory, but against the law. Q. Describe that. A. Against the decisions of our own courts in this State. That the owner and lessee service rider was a rider, — I will read this rider literally, I have it here : " It is further understood and agreed, in view of the exclusion of all other elec- tric service from the building and of a private plant for light or power during the term of the contract, that the electric current consumed by the tenants shall be credited to the consumption of 75,000 kilowatt hours annually by the undersigned. The accoiunts of the tenants shall have no other relation with this contract." Which means if a man had a building and had allowed, tenants in that building, he would agree never to put in a private plant, not to put in a private plant, or not to use electricity from any other company, that he could add up the amount of current used Eepoet of Joint Legislative Committee 1125 by all of his tenants and credit to the extent of the consumption of 75,000' kilowatt hours annually, for the purpose of getting a better rate, not for the tenants that used this rate, but for himself. Q. To make a profit on the current sold to and consumed by his tenants ? A. Yes. He did not sell the current to the tenants. Each had a separate service and each dealt separately with the company, and each paid his own bill at a rate based on his own consumption, except if the landlord would agree to keep an isolated plant out, he could use the tenant's consumption in making up his total consumption on which his rate is based. Now, those were the riders that I thought were discriminatory. Q. And were you overruled by the Commission on that? A. Yes. The Commission did not agree with me. Q. On your objection to that discriminatory rider? A. Yes. Other cases have held that the company must furnish service, and therefore I thought — I mean under reasonable conditions, they must. I thought the consideration of this contract being an exclusion of service by their company to a private plant, made it unlawful. Q. And contrary to public policy ? A. Yes. Q. What have you to say on the Edison case ? A. Well, I felt that in a way that some headway, considerable headway was made by the opinion as finally adopted by the Commission, on the ques- tion of lamps. It did not go as far as I thought it should go, and think" it should have gone, but think it undoubtedly furnished relief to the people and relief to which I think they were entitled. During the hearings we had very accurate testimony — not testi- mony by the company at all — that there were two classes of lamps, speaking generally, Gem lamps and Tungsten lamps; the commercial names of the Tungsten being Mazda and some others. Now, it was shown that the Tungsten lamps were about twice as efficient as the Gem lamps. ISTow, the Edison company, under the determination of the rate case fixing 8 cents as the maximum rate given to the customers, an alternative of 8^/^ cents per kilowatt hcoir, with free lamp renewals. The lamps furnished under the lamp renewal agreement were Gem lamps or lamps that consumed, twice as much current per candle power as the standard lamps on the market in drug stores and grocery stores and available to 1126 Investigation of Public Seevice Commissions everybody. I took the position that under the Public Service Commissions Law, article 4, section 66, it was not only the power, but it was the made the duty of the Commission to fix from time to time standards for the measurement of illuminating power of gas, and also to prescribe from time to time the efiiciency of the electric supply system, of the current supplied and of the lamps furnished. I am reading literally from the law, and under that section of the law, knowing that there were commercially available lamps twice as eflScient as the lamps being supplied under the renewal agreement of the company, it was our duty to forbid the furnishing of Gem lamps. The evidence showed that the Gem lamp had an efficiency of 21/2 watts a candlepower, while the Tungsten had just one-half — one and a quarter or less, perhaps, watt per candle power. Q. In other words, the Gem lamp consumed twice as much cur- rent involving as great a charge per given amount of candle power as the Mazda or other Tungsten lamp ? A. Yes, or perhaps some of the newer nitrogen lamps which are becoming available now. So I had my way about that one feature of this case. That is, the Commission did fix the efficiency of lamps where they were furnished by the company, under renewal contracts, the efficiency to be at least one and a quarter or less per candle power. Q. Watts? A. Watts. And, of course, that, if lived up to, eliminates the Gem lamps. Q. ]^ow, did the order of the Commission or the contract offered by the company provide for the use of 50-watt lamps ? A. Yes. The 25-watt Tungsten lamp furnishes just as much light as the 50-watt Gem lamp. Now, the company wanted to furnish the large Tungsten lamps free — lamps of 50 to 60 watts and up- wards, free, giving twice as much light and costing just the same money. Q. But consuming twice as much current as the Gem ? A. No, — consuming the same current as a Gem lamp, but giving twice as much light. They wanted to furnish it, were and still are furnishing the large sizes free, and I thought that that was unfair to the public; that the public was not educated to it, and that it was a premium ; that the company was putting a premium on the use of lam.p3 that were twice too big in light-giving power, Eepoet of Joint Legislative Committee 1127 and I wanted the Commission to establish a standard for domestic and general use of a 25-watt Tungsten lamp, which would give as much light as a 50-watt Gem lamp at half the money. In other words, I wanted that eliminated, the giving away of extraordinary large Tungsten lamps free. I wanted to give the customers of the company — perhaps I was not justified in trying to do it — I wanted them to have the same light they were now getting and had been using, the same number of lamps, and so forth, at half the money that they had been paying. Q. By the use of the improved character and type of lamp ? A. The light was twice as efficient, but giving the same light. By leaving this, in my opinion, the result will be the customers will get about twice as much light and probably twice as much as they need, but their bills will not be reduced, or their consumption of current reduced. I wanted to establish that standard and print it in conspicuous letters written on the bills to the customers. I thought it the duty of the Commission to enlighten the people as far as it could on that subject. Q. What action did the Commission take on that subject? A. Well, the Commission voted me down on that, and directed that the company furnish big Tungstens under their renewal agree- ment free. Q. When did you take ofiice, Commissioner ? A. April 1, or March 31. Last of March or first of April, I forget which. Q. What staff do you have in the way of employees? A. I now have a private secretary and a confidential stenographer. Q. What staff has each of the other commissioners? A. The same. Q. What, if anything, did you do or attempt to do at the time of your appointment in order to reduce the number of employees on the payroll? A. Well, I came on the Commission, Senator, with the idea that there had been extravagance, and with the firm resolution to reduce it if I could. And of course I didn't know anything about the engineering department, and do not now know very much — I mean as to whether a larger number are employed than are necessary. But the first matter with which I became familiar naturally was my own personal staff. I thought that the private secretaries and confidential stenographers were 1128 Investigation of Public Service Commissions overpaid. I also tliouglit that each Commissioiier outside of the Chairman could very well get along with a private secretary who was able to do stenographic work. In other words, that those two positions might well be consolidated. I went for a number of months without a secretary and had a stenographer. And when 1 employed my stenographer I put her on the payroll at, I think, eleven or twelve hundred dollars a year instead of the fifteen that the others were getting, with the understanding with her that I was doing it because I expected to ask the Commission to reduce all of the salaries, and of course with the understanding that if that was not done, in justice to her she should have the same as the other stenographers doing the same kind of work. And I never put it to a formal motion, but I spoke to the Chair- man and I spoke to some of the other Commissioners, and it was frowned down on, or perhaps disapproved to such an extent that I could not go any further than I had without being discourteous, and so forth. On my proposition to eliminate one or the other of them, the same thing resulted. So I don't know when, I should say three or four months, perhaps, after I came on the Commis- sion, I then secured the services of a private secretary, so that now I have, of course, just the same, and they are being paid just the same as other Commissioners. Q. Do you remember to which, with which Commissioners you discussed the proposition? A. I think I discussed it with the Chairman and Commissioner Wood and Commissioner Williams. I don't believe I ever discussed it vrith Commissioner Cram. Com- missioner Wood said it was out of the question. His stenographer was at that time, and had been for many months, absent on sick leave. I thought that was a pretty good indication that it could not be done. Q. And has this stenographer returned now? A. I don't know; I think not. Q. And is Commissioner Wood getting along, then, with the services of a private secretary who is also a stenographer? A. I think so, with the assistance of the other stenographers. I think this man has been away, and very ill, and I think the Com- mission has from time to time voted to extend his leave of absence. Once since I was on the Commission I voted for that extension on Eeport of Joint Legislative Committee 1129 the representation that this fellow was dying somewhere, and also with the understanding that it did not conflict with the Civil Service rules, and with the law, and that we had the right to do it. Q. What action did you take when you went upon the Com- mission in connection with the complaints of citizens ? A. Well, I tried to give as much personal attention as I could to the indi- vidu,al complaint, informal complaints, we call them. And I moved that a special committee of the Commission be appointed to give particular attention to the informal complaints of citizens, which motion was cheerfully adopted by the Commission. Q. And was such a committee appointed? A. The Chairman appointed Commissioner Williams and me on that committee. Since that time I think complaints have been more expeditiously taken care of. I mean by that it has been more expeditious to determine whether relief could be given or could not be given. Each day I have a resume of the complaints as they come in, and Commissioner Williams has the same. If upon an examina- tion of that, we conclude that the personal attention of a Com- missioner would expedite the relief asked for, it has been our effort to give it, and if not by personal attention, if that effort has failed, it has been put down as a formal question for proceed- ing before the entire Commission, thus obviating the possibility of an informal complaint being before the Commission without definite action one way or another. Q. What was done in connection with the enforcement of orders? A. Well, on my motion, the same Commissioners were appointed. I moved that a committee be appointed to go through all the orders of the Commission, and find out what were obsolete and what were unnecessary and what were inaccurate for the purpose of having the same either abrogated or modified or taken up with a view of more accurate prosecution. Co mm issioner Williams and I were put on that Committee and have endeavored, with the assistance of the legal department, engineers and transit bureau, to sort out the orders, as it were. Q. Both committees named by the Chairman? A. Yes. Q. What has been the result in the way of outstanding orders — are you able to state ? A. Well, we found — there aren't many 1130 Investigation of Public Service Commissions orders outstanding, as a matter of fact — some have been abrogated, some have been modified, some we are at an impass with the companies. I think. Senator, that the Commission has a responsibility beyond the mere making of an order. I think it has a continuing responsibility to enforce an order that it has made, and on that theory alike I think all the Commissioners have voted to abrogate some orders that might have been unjust and unfair to attempt to enforce by the means given by the law. In my opinion, the most important orders that the Commission has ever issued have been upset by the action of the courts. There is a service order outstanding against the B. E. T. lines, and the Com- mission sought to enforce that order by a mandamus — I don't want to cumber up your record if that is the matter you want in here. Q. We want to know if anything should be done in the revision of the law to bring about a better administration ? A. The service orders have uniformly at the insistent request of the companies, transit lines, contained in addition to a minimum number of cars or trains to be operated, an alternative allowing the roads to run less than that number, provided they gave seats for passengers at more or less diversified periods. That was put on, I say, at the request of the railroads. Members of the Committee who were on the Committee last spring will remember that when I made the suggestion to Mr. Shonts that the Commission make up a schedule of trains and cars which would fairly carry the people in com- fort under normal conditions and stop there, Mr. Shonts said that that would not be regulation, that would be operation, and of course he was bitterly opposed to that, as they have all been, and it was on that theory as alternatively, that this " seats for pas- sengers " was- put in these orders. ISTow, Mr. Justice Crane, in the Brooklyn case, has held that our order was unenforceable because of this alternative which made it too indefinite and uncer- tain, and too much depending on conditions as they might come up. Then in case, division 1706. I have clippings from the New York Law Journal which might be interesting to put in your record. The Interborough service order, not entirely on all fours with the B. E. T. order, but in the motion, suit, application for liEPOET OF Joint Legislative Committee 1131 mandamias in that case was likewise denied by Mr. Justice Wtitaker in this county. He takes a very similar view to Mr. Justice Crane. I sought to get into the Appellate Division on one or the other of these two opinions, before the Appellate Division adjourned last spring, and Judge McCall and I were both trying to get that into the Appellate Division for determination, but were unable to do so, and it is on the calendar up there now, one or the other — I don't know which. Q. Both cases have been appealed ? A. I think only one case has been appealed, Senator, on the theory — at least, one case has been made on the real question on the theory that would determine both — the test case. Q. Is that the First Department or Second ? A. Yes, that is here. Q. That must be the Interborough case? A. Yes, I suppose it is. Mr. Lewis. — I offer in evidence report from the New York Law Journal in the matter of the People ex rel. Public Service Commission against the Interborough Rapid Transit Company. Also the decision from the New York Law Journal in re Public Service Commission against the Consolidated Railroad and l^assau Electric Railroad. (Received and marked.) Q. Now, can you come to-morrow. Commissioner ? At what hour would be most convenient for you to come? A. Any time that is convenient for the Committee I will make it convenient to come. Mr. Lewis. — Perhaps you better drop in at 11.30. I think that is all for to-day. Chairman Thompson. — We will suspend now until to-morrow morning at 11 o'clock. Whereupon the Committee adjourned to meet at the same place November 18, 1915, at 11 a. m. 1132 Investigation of Public Sekvice Commissions NOVEMBER 18, 1915 JSTew Yoek CorriTTT Lawyers' Association Boaed Eoom, 165 Broadway, ISTew York City The Committee met at 11 a. m., pursuant to adjournment. Chairman Thompson. — ^Will the Committee please come to order? I will have this class reinforced after awhile. Teavis H. Whitney on the stand. 5y Mr. Lewis: Q. Mr. Whitney, have you produced the record of the case relating to repairs of the Third Avenue line ? A. Yes, sir. Mr. Lewis. — I will offer it in evidence. You do not want to stop this morning, and we will talk with you a little later about it when we have more time. (Received. ) Senator Thompson. — Just refer to it, that case No. so-and-so is offered. Mr. Lewis.— This is Case IS^o. 1893. Q. jSTow, have you produced also the record of the consolidated gas companies, and their acquisition of the Consolidated Gas Com- pany of the stock of the New York and Queens Gas Company and the New York and Queens Electric Light and Power Com- pany, Case No. 1456. Mr. Lewis. — I offer this in evidence also. (Received.) Q. You have not been able to produce the record of the hear- ings which were asked for? A. I won't have that ready for several days. Q. And you have prepared and submitted a record of the use of the automobile since May 30th ? A. No ; that is not ready this morning. Eepoet of JonsTT Legislative Committee 1133 Q. Will that be ready later in the day or will you have it ready to-morrow ? A. Yes ; I think that is the only thing I can- not have ready for to-morrow. Q. You have the record of the stock ownership of the Kings County Lighting Company. Is this the record that you brought with you? A. With respect to the Kings County Lighting Com- pany, a memorandum showing the voting trust of the trustees, C. K. Billings, Frederick Johnson and J. C. Brady. Mr. Lewis. — Offered in evidence. (Eeeeived.) Q. Is this the record of the ten largest stockholders of the Kings County Electric Light and Power Company? A. From the annual report of that company to the Commission, Decem- ber 31, 1908, showing the ten largest stockholders in that company. Mr. Lewis. — Offer this in evidence. (Eeeeived.) Commissioner Haywaed takes the stand. By Mr. Lewis: Q. Commissioner Hayward, you have before you the record of the Third Avenue repair case to which reference was made yester- day. Will you examine it and tell us what you know about it? When was the proceeding instituted? A. The proceeding was instituted in the first place by numerous complaints preceding December, 1914, and interest was focused and hearing was ordered December 21, 1914, and interest was focused on it both by the Commission and the public by reason of the revelation of this Joint Committee — I mean when Senator Thompson's Com- mittee were in the city regarding the Spillane switch, which became a case celebra at that time, which concerns this same case and was afterwards incorporated in the repair order which the Commission issued. Senator Thompson. — That's the switch which kept going up the street and up the street, until it finally got out of the city. 1134 Investigation of Public Service Commissions Mr. Hayward. — The hearings were held, I don't know how many, over a period of time before Commissioner Wood, and con- cerned the Third Avenue Eailroad and the Forty-second Street, Manhattanville and St. JSTicholas Avenue Railroad Company. Q. How many hearings were held. Commissioner, on that mat- ter ? A. Well, I could tell approximately — I guess half a dozen, approximately, and then the interest was again centered in this thing, because of a colloquy about which there was a good deal in the newspapers, between Edward A. Mahar, Jr., one of the managers of the railroad, and myself, regarding the fixing of a rail on Broadway, also a part of this work, and on April 27, 1915, the counsel to the Commission was directed to prepare an order. It was postponed from time to time at the request of the road, or for some other reason, until May 21st, when an order which had been prepared by counsel, but after conference with the railroad itself, the officials of the road, as I recall, that they asked modifi- cation and extensions of time before the order was made, and in every case, I think every request of the railroad was granted. Q. For an extension of time? A. Yes. Q. And for modification ? A. And for modification. So when the order was finally adopted, I think it was on — this order was adopted May 21, 1915. It provided primarily that the track should be put in first class condition over certain territory. Q. The order is in the file, is it ? A. The order is in the file, yes. Q. Is it long? A. It is pretty long, because it provides on different sections. Perhaps if you will let me look, at it : Part of it is on the 42d Street, Manhattanville and St. Nicholas Avenue. The 42d Street, and the other is Third Avenue and the Broadway line. In addition to the provision, Senator, that these tracks were to be put in first class condition, which was the one primarily probably in the order. In addition to that, there were several hundred defective points, I think something over three hundred defective places on the routes. The various routes affected were set out by our engineers, which must be repaired. A part of the work was to be done by October 1, 1915, to wit: That part of the work directed to the 42d Street, Manhattanville & St. Nicholas Railway Company, which is the Third Avenue line operating east Eepoet of Joint Legislative Committee 1135 and west on 42d street. Another part of tlie order provided that other of the repair work was to be done by November 1, 1915, and still another part that other work was to be done by December 1, 1915. It included re-railing in some instances — perhaps TO per cent, of the items enumerated in the order were for corrugation, which are waves that appear in the tracks. Nobody knows where they come from, and they cause the most terrific noise when the cars go over the rails, and those corrugations, together with the broken joints and the little short pieces of rail that are put in which are called Dutchmen, were the cause of the difficulty which the public had, especially when they opened their windows last spring. It created a great excitement in the city because of the terrific pounding of the cars over the rails. All those things were 'embodied in the order, which was a very long order. Q. Was there a resolution for the issue of this order ? A. Yes. It was unanimously adopted. Senator, on May 21st, as I recall the date. Then I think there was a modification asked for of that order and subsequently granted, which I agreed to vote for in case they would fix the Spillane switch. Chairman Thompson. — Has it been fixed yet ? Mr. Hayward. — They had not up to this time. Mr. Lewis.- — ■ I think I will read into the record the resolution adopted by the Commission May 11, 1915 : " The Commission had under consideration the adoption of a proposed final order directing the Third Avenue Eail- way Company, and the 42nd Street, Manhattanville and St. Nicholas Eailway Company to make certain improvements in their tracks. On motion of Commissioner Hayward, duly seconded and unanimously carried, action on the matter was postponed and a stated meeting to be held on May 14th, 1915." I also read from the record of May 14, on motion duly seconded and unanimously carried, action in this matter was further post- poned to a stated meeting to be held on May 18th. On May 18th, the following appears in the record: Motion duly seconded and unanimously carried, action in the matter was further postponed 1136 Investigation of Public See vice Commissions to the stated meeting of tlie Conunission to be held on May 21st. On May 21st, the following appears in the record as of May 21st: On motion, duly seconded, order in case 1893 was unanimously adopted directing the Third Avenue Railway Company, owner, rerail with new rails all its northbound tracks on Third avenue, between 125th street and 34th street, and all its southbound tracks between 125th street and 28th street, except such portions as had been completely rebuilt since January 1, 1913. IsTot less than one- third of which should be completed by December 1, 1915, and the balance by December 1, 1916. (2) Make various repairs and replacements on its tracks on Manhattan street between 125th street and Fort Lee Ferry, which should be begun immediately and completed not later than November 1, 1915. (3) Eemove all corrugations and make various repairs in its tracks on St. jSTicholas avenue and Broadway, between Manhattan avenue and 225th street, which should be begun immediately and completed not later than November 1, 1915, and further directing the 42d Street, Manhattanville & St. Nicholas Avenue Railroad Company (owner), to make various repairs and replacements on certain portions of its tracks on Broadway between 46th street and Man- hattan street, except the tracks between 65th street and 72d street, maintained by the New York Railways Company, which should be begun immediately and completed not later than November 1, 1915, and to make various repairs and replacements on its tracks on 42d street from the North river to the East river, which should be begun immediately and completed by October 1st. (Received.) The Witness. — I will say, Senator, that there was about a week or ten days there when these continuances are shown, perhaps they were at my request each time, because Commissioner "Wood had held these hearings and prepared the order, and at the same time I had been in a controversy with the railroad and I wanted to go over the territory myself, and see that all the things went into the order, and there was a negotiation, as I have said before, for a week or ten days, in which I believe every request for time or a reasonable modification was granted that the railroad asked for. Eeport of Joint Legislative Committee 1137 Mr. Lewis. — Now, I am not going to read, but I think it should be copied into the record, the order made on the 21st of May, 1915, pursuant to the resolution which was unanimously adopted. Chairman Thompson. — Cannot a copy be furnished and be put in as an exhibit? Mr. Hayward. — Yes. Mr. Lewis. — If you will have a sufficient number of copies made, perhaps you better have eight or ten. Chairman Thompson. — Furnish seven copies, then. Q. Was this order served upon the companies affected, Commis- sioner? A. Yes, sir. Q. Do the records of the Public Service Commission show such a service ? A. Show such a service and it was accepted by the road. There was, however, a subsequent application for a modification of the order which did not affect any part of the order except the rerailing part on Third avenue. They were given, as I recall it, three years to do that rerailing in, and under the original terms of the order, the progress of the work would have gone along a little more rapidly than the proposed repaving that the city was under- taking on the same street. I have not looked at the record lately, but as I understand it, they came and asked for a modification of that part of the order so their rerail work might progress concur- rently with the city's work on the pavement, which seemed a reasonable request, and economical, to save tearing the streets up twice, and I think that was granted unanimously by the Commis- sion, but that did not affect any part of the order of the Manhat- tanville, 42nd Street & St. Nicholas Avenue, or any action of the repair order for corrugations and repair. Q. That all appears in the record ? A. Since then there have been no controversies about the rerailing of the Third avenue part. Mr. Lewis. — I think in the light of what Commissioner Hay- ward has stated, it would be well to have a copy of an order amend- ing the order of May 21st, which amending order was issued on the 15th of June. A. We can have copies made. 113S iNVESTIGATIOISr OV PuBLIC SeEVICE COMMISSIONS Q. JSTow, Commissioner, will you tell us wliat part of the order required to be complied with by October 1st has been complied with, if any ? A. Well, part of the order to be complied with by October 1st has, been complied with and part of it has not been. Q. Specify which part. A. More has been complied with now than had been October 1st. The order required — I will say the 42nd street line to grind out the corrugations, repair the joints, put in first-class condition the track between Third and Lexington avenue, and put in two pieces of special work, one at the east end of ttSnd street and the other at the west end. On October 1st — some of the broken joints have been fixed of the specific items, excepting the big work between Third and Lexington avenue; of the smaller items, of which there were fifty-five, some thirty, as I recall it, had been completed. Q. By October 1st ? A. By October 1st. Q. What part, if any, of the work required to be completed by ISTovember 1st, was completed by ISTovember 1st? A. Oh, a very inconsiderable part. There was one stretch of 65 blocks. To go back to October, first part of October. I think it would be more understandable to say that by October 1st, the only section of the 42nd street work which had been done was that section between Fifth avenue and Broadway. Out of the full line and of the work to be done November 1st, perhaps half of it. But in one stretch, 65 blocks, as T recall it, where it had only been done on two blocks out of 65. Q. Where were those 65 blocks ? A. I do not mean to say, Sen- ator, there were repairs on each block, but over a stretch of 65 blocks required repairs every so often. They had started on two blocks of the 65. Q. That was ISTovember 1st or October ? A. That was the ISTo- vember 1st part of the order. Q. And no other work had been done in compliance with the terms of the order ? A. Some work had been done which it after- wards developed from the admissions of the officers of the com- pany they had planned to do anyhow. They had to do some work to keep their cars on the track. Q. ISTow, what portion of the work required to be done by De- cember 1st was actually completed in compliance with the terms of the order ? A. I have not a report on that yet, because we have Repoet of Joint Legislative Committee 1139 not gotten down to cases on that yet. I mean we have been thor- oughly engrossed with other sections of the order. Q. Are you prepared to say that any part of the work required to he completed under the tei-ms of the order actually had been completed by December 1st, and actually will be completed ? A. Yes, I think so. Q. Has been completed up to the present time ? A. Yes, I think some of it has been done. Q. And is the company proceeding with the work required to be completed by December 1st? A. Yes, sir. Q. Now ? A. Yes. In their own way, they are. That is, they are doing work, Senator, on their lines part of which was included in this order. Q. But not in conformity with the terms of the order ? A. Not in conformity with the terms of the order. Q. Xow, what occurred, if anything, at any meeting of the Com- mittee subsequent to October 1st, in reference to the failure to comply with the terms of the order ? A. Well, the report was filed of the electrical engineer of the Commission, pointing out these parts of the order on which work in many cases had not even been commenced, and we all had that report, of course. On a meeting about the middle of the month — I don't know whether the tran- script is there or not — I have a transcript of it. What I stated, that record was not complete. I raised the question that they were in default, and Commissioner Cram — I should say that was the meeting of October 14th — and Commissioner Cram moved that counsel be instructed to enforce the order, and no action was taken on Commissioner Cram's motion, but the Chair- man directed that Commissioner Wood who had held the original hearing hold a conference with Mr. Edward A. Mahar, Jr., im- mediately, to see what he had to say about it, which meeting was held in Commissioner Wood's room after the meeting, and the Commissioner was particularly instructed at that meeting not to give them any extension of time, or not to waive any of the rights of the Commission, that suggestion being made by Secretary Whit- ney after the Chairman had directed him to hold this conference. And I went along down to Commissioner Wood's room and was present at least at the first part of that conference, and I thought 1140 Ikvestigation of Public Service Commissions no adequate excuse or no excuse at all was given, and nothing was done until the meeting of October 27th, when there was a long statement made by myself and also by Mr. Mahar, representing the railroad, in which, among other things, he said that their hopes in connection with complying with this order were limited, to some extent, by their pocketbooks. It was pointed out that the stockholders of the railroad had given him two million dollars to effect these repairs, as an extra fund, no part of which had been touched for this purpose. And then following his con- ference with Commissioner Wood, he had made an application for an extension of time on the October 1st part of the repairs to De- cember 1st. At the meeting he stated clearly that he did not want this extension for the minor repairs on 42nd street, but only for the work of re-railing and for two large pieces of special repair work. But tlie order as it was finally extended to December 1st, of course included the little work on 42nd street, which he said he would do in ten days anyhow. Well, I objected to the extension as severely as I could, and moved that instead of an extension that the counsel to the Commission — this was on October 27th, twenty-seven days after they were in default — I moved that the counsel to the Commission be instructed to immediately resort to all of the remedies given us under the law for past failures to comply with the ojder, and also to begin proper action to compel future obeyance to the order. The past remedies, of course, among other things, included penalty actions of five thou- sand dollars, and took off twenty-seven days at that time. A criminal action under the misdemeanor section of the statute and the future remedy given under the law set forth in section 57, which seems to me to be mandatory, which directs that the Commis- sion shall instruct its counsel whenever it fails to obey an order. Commissioner Cram was not present at that meeting, but he had recorded himself at previous meetings as being in favor of that action. The vote was taken, and my motion to instruct counsel was lost three to one, whereupon the motion to extend the time to December 1st was carried three to one. Q. What Commissioners being present? A. McCall, Williams and Wood voted against my motion, and for the motion subse- quently made to extend the time. Q. Commissioner Cram absent ? A. Commissioner Cram absent. Eepoet of Joint Legislative Committee 1141 Chairman Thompeon. — Q. Was this the same order that Judge MoCall informed us the other day in some spirit, that the company had spent $185,000 ? A. Yes. I would like to tell about that later on. That does not indicate anything, the amount that this road spent, as such a sum. They have got four hundred miles of track. It don't mean anything, unless it is compared with what they were spending previous years, and what they spent as a result of this order. As a matter of fact, they did not spend any more than they did last year. They did not spend an extra cent on account of this order. They did not hire an extra man on account of this order, and they are no farther ahead than they were a year ago today. To say that they did spend $185,000 does not spell anything. Q. And is the general condition of the lines of the company better or worse than a year ago, in your opinion ? A. Well, that is a very difficult thing to say. Senator. It would take an expert. Q. I wondered if you had an opinion on the subject ? A. I have an opinion. I have an opinion that it is just about the same. ISTew defects have developed since last year which are not included in this order. I do not think they are any farther ahead. Perhaps they are a little ; I don't know. And their expert admitted they were further behind in 1914 than in 1913, and further behind in 1913 than they had been in 1912, and so on. Q. Which amounted to a condition of general deterioration, did it not ? A. Yes. In spite of the fact, as I have said, the stock- holders had given these men two million dollars which they have got in cash for this particular purpose, for fixing this road, which they are sitting on — trying to hatch it out — I don't know what else they are doing. Q. Is that a matter of record in the office of the Commission ? A. I think it is a matter of record. It has been stated at the public meetings of the Commission that is a fact. There is no question, it is a fact. Mr. Lewis. — I think it would be wise to read into the record section 57 of the Public Service iCommissions Law. " Section 57 : Summary Proceedings. Whenever either Commission shall be of the opinion that a common carrier railroad corporation or street railroad corporation subject to 1142 Investigation of Public Service Commissions its supervision, is failing or omitting or about to fail or omit to do anything required of it by law, or by order of the 'Com- mission, or is doing anything or about to do anything or permitting anything or about to permit anything to be done contrary to or in violation of law, or of any order of the Com- mission which shall direct counsel to the Commission to com- mence an action or proceeding in the Supreme Court of the State of ISTew York in the name of the Commission, for the purpose of having such violation or threatened violations stopped and prevented, either by a mandamus or injunction. Counsel to the Commission shall thereupon begin such action or proceeding by a petition to the Supreme Court alleging the violation complained of, and praying for appropriate relief by way of mandamus or injunction. It shall thereupon be the duty of the Court to specify the time not exceeding twenty days after the service of a copy of the petition, within which the common carrier, railroad corporation or street rail- road corporation complained of must answer the petition. In case of default, in answer or after answer, the court shall immediately inquire into the facts and circumstances in such manner as the court shall direct them, through the formal pleadings, and without respect to any technical requirement. ■Such other persons or corporations as the court shall deem necessary or proper to join as parties in order to make its order, judgment or writs effective, may be joined as parties upon application of counsel to the Commission, and final order or judgment in such action or proceeding shall either dismiss the action or proceeding, or direct that the writ of mandamus or an injunction, as prayed for in the petition, or in such modified or other form as the court may determine will afford appropriate relief. Q. Has there been any direction given pursuant to section 57 to the counsel of the Commission, for the commencement of any action either by injunction or mandamus ? A. No, sir. Q. For the failure to comply with the terms of the order? A. No, sir. Q. And no action has been commenced either by injunction or mandamus by the counsel to the Commission against the company Eepokt of Joint Legislative Committee 1143 which has failed to comply with the terms and requirements of the order ?' A. 'No, sir. I may say, Senator, in connection with that, that some time during the month of October, about the middle of October, the road made application for an extension of the November 1st part of the work, asking for additional time to November 15th. No action was taken on that application. In the meantime Mr. Witridge, representing the Third Avenue Railroad Company, came down and had an interview with me and was not satisfied with it, and asked to have an interview before the other Commissioners, and that was held in the meeting of the Commit- tee of the Whole, in the Chairman's room, on the 15th day of' November, I believe. There were present the Chairman and Commissioners Williams, Wood and myself. Commissioner Cram being absent. Mr. Witridge was there with Mr. E. A. Mahar, Jr., the manager of the road, and their maintenance of way superin- tendent, a Mr. Ryder, and this whole matter was up and Mr. Wilder, the electrical engineer of the Commission, was there with me, and the upshot of it was Mr. Eyder admitted to us the fact that I tried to tell the Committee ; that they had not employed any more men this year than last, and that they had not spent any more money. And it also developed that after the Commission extended the time to December 1st, on the October 1st part of the work, including the corrugations and what I have called the lesser work, that he agreed, nevertheless, to do in ten days, but which was incor- porated in the extension to December 1st, he took all of the grind- ing machines off the 42d Street and put it up on the work that was to be done on November Ist. Chairman Thompson. — In other words, they did not pay any more attention to this order which was made last May than if it had not been made? A. In my opinion they did not, and that was also the opinion of Mr. Wilder, the electrical engineer of the Commission, which he had expressed. And then they also admit- ted that previously — I don't want to put too much in your record — if you want it I will tell it to you. To go back to the earlier part of the summer, after the Commission made this order, and after the railroad accepted it and promised to obey it, I caused an investigation to be made to see whether they had sufficient men and sufficient machinery to do the work, and experts of the lli-i Investigation of Public Sebvice Commissions Conunission reported to me that it was absurd to suppose that they could do the work required by this order, which they had accepted, within the time set out in the order, with their equipment, and so I directed the attention of Judge McCall to that fact, and he sent for Mr. E. A. Mahar, Jr., who is general manager of the road, and had a conference in the Chairman's room. JVLr. Eyder, their maintenance of way man, was there then, and he made all these admissions that were charged that they could not possibly do it with their equipment, although they had accepted the order. And it was like getting them to pay the national debt, or some- thing, and I was in very bad odor with Mr. Mahar, and if names could have been called, I would have been well perforated, but the upshot of it was that Ryder admitted they could not do the work with their equipment, and Mr. Ryder .finally agreed — gave his personal promise to Judge McCall that they would buy sufficient equipment to do this work, particularly grinding machines, which grind out these corrugations by power. It was brought out then that these corrugation-grinders could only work at night when there was no traffic on the road, and that there was a method — it developed that the system before these grinding machines were invented and which is in use by many of the roads was a system of hand files, which work a great deal on the principle of a cross- cut saw. These so-called hand files require only the employment of labor. They can be used on the tracks during operation, because they can be lifted readily to one side when a oar comes along and immediately put back and put into work. It was agreed at this conference that I am telling you about early in the summer between Mr. Mahar and the Judge, that if they could not get enough grinding machines they would hire the additional men and put back these hand files. Well, at the meeting of the Com- mittee of the Whole, on ISTovember 15, that question was brought up. Mr. Ryder said that he had the hand files in stock and that none of them had been used, and the reason that he had not used them was because he did not want to hire the men to do the work, lie said the grinding machines, the power machines, were a little more economical than the hand files, and therefore he had not put into use his hand files. Mr. Witridge told us they had this two millions, no part of which had been used, to comply with the Eepoet of Joikt Legislative Committee 1145 Commission's order, although adopted for -that purpose, or for the purpose of making repairs, and that they were trying to get along with their current fund regularly set aside for making repairs. Mr. Eyder said the road would have done just about what it did do, anyhow, even if there had not been any order, and their opinion was that some of the work on upper Broadway was more important than we had ordered them to do on 42d street. And I objected to that because of the theatrical people on 42d street, west of Broadway, had been on my back all summer about these corrugations in the hot weather. They said they had to close their doors because the people could not hear what was going on on the stage because of the noise. And Mr. Johnson of the Transmission Bureau, they had come and got him to go over to listen to what was going on on 42d street. And I thought it was rather unfair on the part of the company that they should over- rule the Commission as to which part of this work they should elect to do first. [NTovember 16th the Commission had another meeting, and at that meeting the application of the road for the extension of the November 1st part of the order to ISTovember 15th, was up, although it was a day after the extension had been applied for. Commissioner Williams stated at that meeting that, in view of what had transpired the day before, at the meeting of the Committee of the Whole, that he wanted to move that the application of the road for an extension be denied, and I called attention to the fact that it was a silly performance, because the application was for an extension to November 15th, and here they were taking this action November 16th. Q. The time had expired? A. The time had expired even under their application. Chairman Thompson. — Tie forgot all about moving, as section 57 seemed to make it his duty, to turn this over to counsel at that time? A. Yes, there was no motion made. Q. I want to say this: At subsequent meetings of the Com- mission, I made no motion to instruct counsel to enforce this order, because I had gone clearly on record. I had made the motion October 27th, on the October 1st part of the order. I had told the Judge and other people had told me that criminal com- plaint was going to be filed against these men by the theatrical 1146 Investigation of Public Seevice Commissions people on 42d street, under the misdemeanor section of the statute, and I stated clearly that unless some of those theatrical men did make such a complaint, that I was going to see the dis- trict attorney myself as I did in the B. E. T. case. That was in the month of October, after these theatrical men were on my back. So the action taken by the meeting on October 2'7th, voting down my work — I do not think the Commission had any right to ■ — I mean I do not think they had any legal right to. They gave a retroactive extension of time which waived the city's right of action for five thousand dollars, and after that twenty-seven days, gave the officers of the road immunity from any criminal prose- cution, and I do not think where an order had been accepted by the road and where the application for an extension is not made within the time or before the order is due to be performed, I do not think the Commission had got any right to give that immunity and take that action. Senator Thompson. — Q. It is that section 57 where it says the Commission if it had the opinion the corporation is failing to com- ply with an order, shall direct counsel to the Commission to com- mence an action or proceeding — your idea, that is mandatory? A. It is written in the English language. Chairman Thompson. — • Q. And when an order is made by a Commission an opportunity is given before that order is made to the railroad company or common carrier to be heard ? A. Yes, sir. Chairman Thompson. — Q. And again, after the order is made, thirty days are provided by this law for them to move to reopen and reconsider, and after that thirty days has expired and another motion has been made for a reconsideration, then this law becomes absolute, and the thing gets beyond any powers given by the law to the Commission — isn't that the correct situation — in other words, if the company desires any extensions or has any excuses to make, isn't this law so drawn that they must make their excuses to the court and not to the Public Service Commission? A. Well, that is a difficult question to answer. Senator. I have my own opinion about it, but I am not certain in my own mind but what the Commission on application could extend the time or other- wise modify its order on its own motion. Kepoet of Joint Legislative Committee 1147 Q. Prior to the expiration? A. Prior to the expiration of the order where the company has accepted, of course, the order, and where there is no appeal litigation pending or no certiorari or anything like that. Q. For good cause shown ? A. I think it might be. And it is readily conceivable that there might be a case where the Commis- sion made an order through inadvertence or the happening of untoward circumstances, and afterwards it became physically impossible for that corporation to comply with that order. I think in that case the Commission has probably got the right to extend the time or otherwise modify the order. Q. You state in your opinion the Commission waived its cause of action for the penalties — do you mean that it actually waived and deprived the city, or do you mean that it was merely an attempt to waive ? A. I mean it actually did. If they had the right. I don't know whether they have or not. But to get down to the merits of it, Senator, how could you go into court and ask a jury to assess damages or to assess penalties of five thousand dollars a day for non-compliance with an order due October 1st when the Commission itself had extended that time to December 1st - — they would laugh at you. Q. Assuming that the time within which the order must be com- plied with had expired before the action granting that extension was taken ; if the cause of action accrued by reason of the failure to comply with the order within the period fixed, is it within the power of the Commission to waive accrued rights after ? A. I do not think it is, and that is what I put on the record, at the meeting, denying the right of the Commission to grant immunity to these officers, and these other waivers. JSTow, I don't know whether they did legally or not. They certainly did in effect, because you could not have — where would you be in a court seeking to enforce an order that had been extended ? Chairman Thompson. — Q. It is just such things as this that makes the Public Service Commission of this district weak, isn't it? A. I don't want to express myself on the subject Chairman Thompson. — You needn't answer that. Q. You stated there was a meeting of the Committee of the Whole on this matter. Does the custom prevail and has it 114S I:\VZSTiGATiox OF Public Sektice Comiiissio>'S prewiiled siuee voii went on the Conunission of holding meeting of the Committee of the Whole I A. Xo, sir. I have been down there seven months. I think there hare been two or tliree meet- ing's as stieh that were set in advance. It is always on the calen- dar '■ Meeting of the Committee of the Whole at 10. -lo, or 10:30 on certain days." For a long time aft.er I came on the Commission I used to go down to the end of the hall and there was not any meeting there, and after that I did not go xmless I was sent for, and told that some of the other Commissioners were in there. Very often there were informal conferences; they were hardly meetings of the Committee of the Whole. For instance, the day this Third avenue thing came up. I did not know who was going to be there. Word was sent to me that Mr. Witridge was in the Chairman s room, and I went into the Chairman's room and found the others there. It was not scheduled. I mean it was not a formal meeting at all. Xow thafs the only kind of meetings of the Committee of the "WTiole that I have ever been to. Q. Are they still being scheduled regularly ? A. I think so. Q. Without anyone attending? A. I think so. I think they are still on the calendar — aren't they, Mr. Walker ? I meant to sav the hearing before the individual Commissioners, and then you will see meetings of the Committee of the "^liole. There are none. Q. Are there conferences in advance of the meeting of the Commission for the purpose of discussing? A. I think I might have attended a conference of that sort, Senator, where for instance, a vote on a pending rate case has been discussed. I have gone to the other Commissioners" rooms individtially and argued the thing or tried to where I had wi-itten an opinion, or something like that. The only Committee of the Whole meetings that I have ever attended or known about. I don't think there have been. I don't think there is anything in the statement that the others might be having a star chjimber proceeding. I have always felt if I could not keep track of what was going on, I better get out. I don't think there has been anything of that. The only sorts of meetings of the Committee of the Whole has been on trans- fer matters, when there was coming itp a proposed route on the subject of dual system. There had been committee meetiuo-s where Ejsport of Joint Legisl.vl'ive Committee 1149 there had been present Mr. Shonts with his engineer or Colonel Williams of the B. R. T. and his engineer and counsel, with plans and blue prints of proposed routes on the table, and we have had meetings of that kind. I think that is all, those. I don't think those meetings were ever held at the time they were set down on the calendar to be held. They were inform.il conferences nt which a lot of this stuff was discussed. Q. You have a copy, I presume, of the opinion and decision of Commissioner Williams in the lighting case, the Kings County Lighting Company rate case ? A. Yes, sir. Q. And Commissioner Williams has testified that each of the other members of the Commission has a copy likewise. Has there been any conference of the members of the Commission for the purpose of discussing the opinion and decision of Commis- sioner Williams? A. Commissioner Williams and I have dis- cussed it. Q. But has there been any conference of the Commission or Committee of the Whole ? A. No, sir ; not that I know of. I don't know when that opinion was filed. It was filed a couple of weeks ago. Q. Has there been any meeting scheduled of the Committee of the Whole since the time you received the copy of the opinion and decision of Commissioner Williams ? A. I can't say, Senator. But I think on the calendars twice every week that thing is put on there — meeting of the Committee of the Whole. Now, it may surprise you when I say I can't tell you, couldn't tell you the days it is, but I think it is the same days the regular meetings of the Commissioners are held, Tuesdays and Fridays. There is no such a thing as a meeting of the Committee of the Whole. Q. Is there any plan for a conference to determine and discuss the terms of the opinion and decision of Commissioner Williams in the Kings County Lighting Company case ? A. ISTot that I am aware. Q. Have you talked with any of the other commissioners than Commissioner Williams on the subject? A. I think not. I will say that some talk about this thing coming up — not in defense of myseH at all, but as a plain statement of fact, that other rate cases aside from the New York Edison case scheduled, five altogether 1150 Investigation of Public Service Commissions of tlie gas and electric light companies. The Kings Comity Light- ing case I held, I think, some six or seven hearings the first month after I undertook it, and all these others — five others — were go- ing on at the same time, and all set before me, and it got so they were set at the same hour — and so Commissioner Williams came in, and in the Kings County Lighting case held about as many hearings, I think, as I had held. And it was a case in which the bulk of the testimony had been taken previous to the appeal to the court several years ago, and because of that, and because of the fact that these other cases and the Brooklyn Edison case were run- ning along, I think, at one time, I made the suggestion that Com- missioner Williams write that opinion, and he undertook to do so. I think he had been working on it a month or so before that suggestion was made. At any rate, that opinion was written and filed, and I have got a dissenting opinion which will be filed to-day. But as far as the other Commissioners are — but I don't think there has been anything of that kind. Q. Has anything come up at the meeting of the Commission heretofore ? A. I think at one meeting — I think at the meeting which occurred since Commissioner Williams' opinion was filed, it might have been on the calendar. No action taken. Q. Didn't it come up at the last meeting of the Commission, on Tuesday ? A. I think perhaps it was on the calendar. Q. And wasn't it postponed ? — action upon the matter post- poned at the request of Commissioner Cram? A. Well, I am unable to say, Senator. The record would show that. I think I stated that I was going to file an opinion right away, or something like that. Q. You have prepared your opinion in the case, have you? A. Yes, sir. Q. You expect to transmit it to each of the Commissioners to- day? A. Yes, sir. Q. Will you be good enough to give this committee a copy ? A. Yes, I will be glad to. Mr. Lewis. — I think it is desirable to have a copy. The Witness. — I would like to put in this record. Senator, because it has been said that I went perhaps to great length in this Third Avenue railroad case. Now, I want to say that I don't Eepoet of Joint Legislative Committee 1151 think I did, and I have the word of the electrical engineer of our Commission, who says that this Third Avenue case is the best case, the cleanest case and the best case for prosecution either crimi- nally or for penalties or for mandamus that has ever been before the Public Service Commission in his recollection, and it seemed to me such a willful disobedience of the order that I made myself very disagreeable on the subject, because that action seemed to be warranted. I have not got any grudge against the Third Avenue particularly, at all. Mr. Lewis. — ^Well, your characterization of your own conduct is binding upon you only. William C. Blaney, called as a witness. Direct Examination by Mr. Lewis : Q. Mr. Blaney, what is your business? A. Secretary to the Public Service Commissioner, J. Sargeant Cram. Q. And how long have you held that position ? A. Since July 23, 1914— July 23d or 24th. Q. And what are your hours of duty at the office of the Com- mission? A. Sometimes I get here at nine — nine-thirty, and sometimes I leave at four or five. Q. Commissioner Cram at the office today ? A. No, sir. Q. Has not been there? A. ISTo, sir, not today, sir. Q. Was he there yesterday ? A. No, sir. Q. Was he there on Tuesday ? A. He was there on Tuesday. Q. What time did he arrive? A. Well, I don't know. He was there before I got there. I have been sick for two weeks, and the first day I was out and I did not get down there until about eleven o'clock myself. Q. Generally speaking, what time does Commissioner Cram arrive on the days that he attends the Commission, at his office ? A. You mean meetings of the Commission ? Q. No, at what hour does he arrive at the office of the Commis- sion, generally speaking ? A. Sometimes he is there at ten ; some- times it is ten thirty. Q. And at what time does ho leave, generally speaking? A, Sometimes — it all depends. He has been there as late as four o'clock. 1152 Investigation of Public Seevice Commissions Q. Frequently ? A. Well, frequently — I say he probably leaves sometimes at two o'clock, or half past two. ISTo stated — Q. B'oes he leave sometimes at one ? A. He has left at one. Q. Frequently ? A. I wou.ldn't say frequently, no. Q. Does he sometimes leave at twelve? A. Not to my recol- lection, unless he had some tour of inspection that he wanted to make. Q. Does he take tours of inspection ? A. He has taken, yes, sir. Q. Do you know of his tours of inspection ? A. I have never been on them with him. Supervising inspectors go with him. Q. You mean speaking of subways ? A. No. Some hearing he might have had on some outlying matters. Q. How recently has he taken a tour of inspection ? A. As far as I understand, within the last two or three weeks. Q. One? A. I don't know. Q. More than one ? A. Coming in in the morning to go over some. Q. Does he make tours of inspection going over very much? A. Yes. Q. Do you know of them? A. The inspector has been with him. Q. Recently? A. I think within three weeks. Q. More than once ? A. He has went to meet him, and went on a tour of inspection with him. I don't know how often it has occurred. Q. Mr. Blaney, you have been Commissioner Cram's secretary since July, 1914, a period of iifteen months — will you tell this Committee what the average of number — what number of hours Commissioner Cram has attended at the office of the Commission daily during that period, to the best of your recollection ? A. The average number of hours that he remains daily at the office ? Q. Yes. When there. A. Well, as I say, it will vary. Q. Does it exceed three hours a day on the average ? A. Oh, yes. Q. Ten to one ? A. Yes. He has taken no vacation. Q. I haven't asked you that? A. About three hours a day. Q. Three hours a day ? A. Yes, would be three hours, at least. Sometimes, as I say, he has been there longer. Q. Will it average more than three hours a day? A. Some- times. Average more ? Report of Joint Legislative Committee 1153 Q. Yes. A. I think so. Q. Will it average four hours a day ? A. Probably four. Q. In other words, he will arrive at ten and remain until two ? A. It all depends upon the — Q. What is your recollection of the matter ? Chairman Thompson. — He is not asking you what Commis- sioner Cram does. All he wants to find is how long Commis- sioner Cram stays there, what time he comes and what time he goes. He doesn't want to know why. Just answer the question. Q. About what time does he arrive? A. I couldn't say. Q. Do you think he arrives at ten and stays until two, on an average four hours a day every time he comes there ? A. It will average about that, I think. Q. 'Now, how many days a week is he absent, on the average ? A. Not over two. Q. In other words he averages not to exceed four days a week at the office ? A. Well, as I say, Tuesday and Friday. Q. He is never there on Saturday ? A. He has been. Q. Well, is he generally ? A. ISTo, not on Saturday. Q. Is he usually there on Friday ? A. Meeting there on Friday. Q. And is he usually there on Thursday ? A. And Thursday, too. Q. Usually there on Thursday? A. All depends, of course, if he had a meeting. On the meeting days Tuesdays and Fridays. Q. Does he make it a business to spend any time there except on hearing days ? A. Oh, yes. Q. He does visit the Commission office, does he, on days other than hearing days ? A. Oh, yes. Q. But he is not there regularly on days other than hearing days, is he ? A. Why, some days, I say — it may be four days, and maybe put in the fifth day. Q. And sometimes not more than two or three? A. He is always there two or three. Examination by Chairman Thompson : Q. Is there any record kept over there, of the time that you put in, of your time ? A. I don't know. Vol. 1 — 37 1154 Investigation of Public Sekvice Commissions Q. Do you keep a record of anybody's time, of when they come to work and when they quit ? A. They say they do. I don't know. Q. Ought to recommend a time clock over there for all of you, I guess. A. I think the time is kept by one of the clerks. Q. Do you tell anybody when you come in the morning, or when you go out in the afternoon? A. No. Chairman Thompson. — Senator, isn't there some record over there of the attendance of these people — something in the record which shows ? Mr. Lewis. — I asked Mr. Whitney yesterday if he would pro- duce the record of the attendance at the various hearings and meet- ings of the Committee of the Whole, and I was told that they had not been holding those meetings in recent months. Of course, the record itself of the meetings of the Commission shows the attend- ance at those meetings. Chairman Thompson. — It seems to be about as hard to find out when a Commissioner works as it is to find out who owns the stock in these corporations down here, that's all. Mr. Lewis. — Well, perhaps the witness will be better informed this afternoon in order to advise us as to what amount of time Commissioner McCall gives to the office of his duties. Chairman Thompson. — You mean Commissioner Cram. Mr. Lewis. — Yes, Commissioner Cram. At this time the Committee took a recess until 2 o'clock. AFTEE EECESS Meeting of the Committee at 2 p. m. William C. Blanet on the stand. Chairman Thompson. — I would like in this Kings county case — of course this record of the Court of Appeals contains all tes- timony taken up to that time, but when it came back there was more testimony taken, and I would like that. Mr. Walker. — Well, I will get that down here. Kepoet of Joint Legislative Committee 1155 Examination by Mr. Lewis : Q. What are your duties, Mr. Blaney, specifically ? A. Taking care of the mail and telephone calls and individual communica- tions come to the Commission ; opening the mail and taking care of the mail and filing any communications and referring them to the different bureaus that Mr. Cram wants them referred to. Q. Do you do that under his direction or your own? A. No, under his direction. Q. Are you a stenographer ? A. No, sir. Q. Have you any knowledge whether Commissioner Cram takes matters pending before the Commission to his home for considera- tion? A. I have not. Q. Did you ever know him to take any books or records or docu- ments to his home for study and consideration ? A. Well, at times, I think he has. Q. Frequently or rarely? A. Well, no, not so rarely. Quite frequently; he has taken them with him and brought them back the next morning. Q. His matters ? Do you recall any particularly ? A. ISTo, I do not. Q. Do you know of the fact that a copy of a decision and opin- ion by Mr. Williams in the Kings County Lighting case was deliv- ered to Commissioner Cram about two weeks ago ? A. No, sir. Q. Do you. know whether it has been delivered to him at any time ? A. Well, so far as two weeks — I haven't been at the office. I have been sick since November 1st, and it was within that time. Q. Do you know of any such opinion being delivered to him prior to November 1st ? A. Decision or opinion ? Q. Decision and opinion of Commissioner — proposed decision and opinion in support of Commissioner Williams? A. I don't recollect of it. Q. Do you know whether he has any of the records of the Commission or any of the correspondence or any of the documents at his house at the present time for his consideration ? A. I do not Q. Has he an office down tovni other than at the Commission's offi'ce? A. Yes, sir. Q. Whereabouts is that ? A. 47 Cedar street 1156 Investigation of Public Seevicb Commissions Q. Is lie engaged in business there ? A. Just has an oiSce there. Q. What is his business ? A. He is a lawyer. Q. Has he practiced law ? A. I don't believe so. Q. In recent years ? A. I don't believe so. Q. Do you know of his having had any cases, any legal cases in his private practice, since your connection with him whatever? A. None whatever. Q. Has he transacted any legal business for clients at the office of the Commission during your connection with him ? A. If ot to my knowledge. Q. Are you called upon to go to his house from time to time in connection with the performance of your duties ? A. 'No, sir. Q. He has a stenographer, I suppose ? A. Yes, sir. Q. And what is the name of the stenographer ? A. Miss Seagrave. Q. Miss Seagrave? A. Yes. Q. How long has she been in the employ of the Commission, as Commissioner Cram's stenographer, do you know ? A. I think possibly about two years and a half. Q. There before you became connected with his office? A. Oh, yes. Q. Is she steadily employed? A. At the Commission? Q. At the Commission ? A. Yes. Q. Is her time fully occupied there ? A. Apparently, yes, sir. Q. Commissioner Cram dictates to her every day? A. Yes, sir. Q. And does he give enough dictation to her to occupy her entire time for the day after he leaves ? A. Well, there is quite a little work after he leaves that she has to attend to. Q. What are her hours — what time does she usually arrive at the office? A. Well, she is there sometimes at nine — nine- thirty. Usually in the neighborhood between nine and nine-thirty. Q. And what time does she leave in the day ? A. Well, she is there until four o'clock, and sometimes later than four — some- times until five. Q. Always until four ? A. Well, I don't say always until four. Sometimes she may leave a little earlier. Q. Sometimes as early as three ? A. She has. Eepoet of Joint Legislative Committee 115Y Q. Has she done that frequently ? A. No, I couldn't say that. Q. Is she fully occupied from the time she arrives at the office until she leaves in the afternoon ? A. She appears to me to be. Q. At stenographer work ? A. Yes. Q. Does she do any work for any other Commissioner or any other official than Commissioner Cram ? A. l^o, nothing than he. Q. And does he dictate to her upon his arrival sufficiently to keep her employed for the balance of the day ? A. She seems to keep quite busy while he is there. Q. What salary do you get? A. Two thousand dollars. Q. Do you know what salary Miss Seagrave gets ? A. Yes, sir. Q. What ? A. One thousand five hundred dollars. Examination by Chairman Thompson: Q. What do you have to do besides what she does ? A. That is all. Senator. Q. And when she is there, there isn't anything for you to do, is there? A. Depends upon who may come in to see the Commis- sioner. Q. If somebody came, you would have to welcome him and take his coat off, and sit him in the corner and say " the Commissioner will see you in a few minutes " — that's all you would have to do ? A. If you put it in that way. Q. That's about what the other secretaries do there, isn't it? A. They are kept quite busy. Mr. Lewis. — I think that is all from Mr. Blaney. Chairman Thompson.— Q. Of course you have to every two weeks sign your voucher ? A. No, sir. Chairman Thompson. — You don't do that ? Mr. Blaney. — No, sir. Chairman Thompson. — Once a month ? Mr. Blaney. — Yes, sir. Examination by Mr. Lewis : Q. That is not a civil service job? A. No, sir. Q. What did you do before that? A. In the Department of Taxation. 1158 Investigation of Public Service Commissions Q. What do they pay for that ? A. Two thousand five hundred dollars. Chairman Thompson. — Leader of your district, are you ? Mr. Blaney. — It is a dual leadership. Chairman Thompson. — Are you part of the dual ? Mr. Blaney. — Part of the dual. Q. What is your district, Mr. Blaney ? A. Eighteenth Assem- bly district. 'George V. S. Williams on the stand. Examination by Mr. Lewis : Q. Mr. Williams, you produced at the meeting of the Com- mittee on Tuesday a copy of your proposed decision and opinion in the case of Mayhew and others agiainst the Kings County Light- ing Company, Case No. 12'Y3 ? A. Just an opinion. There was no decision connected with it, or order. Q. That was offered in evidence with the understanding that it would be regarded as confidential by the Committee? A. Until such time as the other Commissioners had a chance to see it. Chairman Thompson. — I don't think there was any limit agreed to. Mr. Williams. — Oh, well. Q. I am afraid we wiU have to ask you to relieve the Committee from that condition — ^are you willing to do so? A. Why, cer- tainly. If the Committee want to go into the opinion, with this understanding that when I gave it to you I said it was not final ; that there were two or three items there that might be changed in case the majority of the Commissioners thought — for instance, that 7I/2 per cent return was too much, and it would be 1, that would be taken care of. I tried to get the Commission together to-day for a conference. Commissioner Hayward was down here. I asked Mr. Whitney to see if he could not get us together this afternoon. Q. When was this completed, Commissioner? A. On the day, on the date it bears. Eepoet of Joint Legislative Committee 1159 Q. It is dated ISTovember blank, 1915. Do you recall what the date was ? A. 'No, I do not. The date should have been in, and I presume it was in the original. Have you got the date, Mr. Walker ? M.T. Walker. — My recollection is it was about the 8th. The Witness. — My signature is generally filled in on the original. Q. Your signature does not appear here on this copy. iSince that time has the matter been upon the calendar for full considera- tion by the Commissioners ? A. Every meeting. Q. And what has been done when it was reached on the calen- dar? A. As I remember, the day that I handed the opinion around, or sent the opinion around, I think the next day thetre was a meeting day, and being quite long, I don't think any of the Commissioners had had a chance to see it. I know I asked Com- missioner Hayward if he had seen it, it having been his case, and I also at the same time when I turned over the memorandium to him, I gave him counsel's memorandum from which. I copied a portion of this opinion, counseil in the case, so that he could check that over. And, of couTse, the next meeting, as I remeonber, they were not able to act on it, because they were not conversant with it, and at the last meeting of the Commission it was on the calen- dar, and that was Tuesday, and I came up to this — and I left hurriedly because you had -asked for me to come up here, and in my absence I remember there was nobody to explain it. And just as I was going out, as I left the Commission, Commissioner Cram said he had not had 'a chance to go over the opinion yet, and it was 90 long I did not have a chance to stop and tell them, and it went over to the next meeting. Q. How long had Commissioner Cram had the copy in his possession ? A. I don't know. Q. How many days had elapsed since you sent it around, do you say? A. I don't know. Two meetings, I think. Commissioner Oram, I might say, telephoned me to-day from uptown some place. He said he had a bad knee, and would not be down to-day. He said he had read over the opinion and said he would be ready to act on it to-mort*ow. 1160 Investigation of Public Sbbvice Commissions Q Is the m'atter ready to go on the next meeting ? A. It is on Friday. It was passed over one meeting. ■Ciairman Thompson. — Our Committee is going to express the hope to you and through you to the Commission, that you do not pass on this case until our investigation of it is concluded. Mr. Williams. — 1 will take that word to the Commission. Chairman Thompson. — We ask the Commission not to decide this matter. Mt. Williams. — It has run along. I don't see as there can be any — a day or two won't make any difference. But I do not want you to take my expression there, as being something I am set on or anything of tbe sort, because it is merely to get the matter before the — Q. It represents your judgment? A. It represents my judg- ment combined with counsel. Q. And which particular counsel ? A. Mr. Semple. Q. Well, now. Commissioner, how long a time were you engaged in the preparation of this opinion, and in reading testimony, and in working at it? A. I should say I was four or five different evenings. Q. Did you have any assistance in the compilation of the tables, and so forth ? A. Oh, yes. Q. And who furnished that assistance ? A. Why, it came from Mr. Semple directly to me, but through Mr. Hines, the gas engineer of the Commission. Q. And Mr. .Semple is counsel to the Commission, and repre- sented the Commission in the court ? A. In this case. Q. In the court? A. I am not sure who represented the Com- mission in court, but I think he did, but possibly it was Mr. Coleman. Q. Well, the papers, of course, all bear Mr. Coleman's signature ? A. But who argued the case, I don't know. Q. Well, I have not a copy of the brief. A. Mr. Semple acted as counsel. Q. I see Mr. Semple's name appears at various places in the printed record as counsel for the Commission, for instance, on page 76, Mr. Wilder was called as a witness. A. Yes. Repoet of Joint Legislative Committee 1161 Q. " Direct examination by Mr. Semple." A. I think lie was familiar -vvitli the case all the way through. Whether he actually argued it in the court I don't loiow. Q. You haven't any information whether he did or did not? A. I don't know whether he did or not. Q And who was your chief statistician, who was responsible for the tables ? A. I don't know whether Mr. Hines, the gas engineer, I think made up these tables. Whether he did it or Dr. Webber. Q. And they were submitted to you by the gas engineer depart- ment, these tables ? A. Colonel Hayward has heard that. Q. You think it was submitted by Mr. Semple ? A. I think it was in Sempte's memorandum. I will confess about the only thing that I worked on in the case from my own writing, my own hand- writing, an.d my own thought, was the question of going value. There was that question in the case which had been sent back by Judge Miller of the Court of Appeals, and I considered it a very important question. The 'Court of Appeals practically said they reversed the case because we did not allow going value, or because we did not take it into consideration. Chairman Thompson. — I did not quite read it that way. Mr. Williams. — Or tal^e that into consideration. The Witness. — I went into that very carefully. ISTow, on the other points — the question on the price of oil, for instance: This company is paying for oil more than, for instance, the Brooklyn Union Company. . Q. We will go into the oil part of it a little later, if you do not object. A. Oh, yes. Q. You examined the tables, I assume, submitted to you by the statistical department for the purpose of informing yourself as to their correctness? A: I checked over whatever Mr. Semple had given me. I don't know. I don't think any others were put in. Q. You read the evidence produced before Commissioner Maltbie? A. Portions of it. Q. Did you read the evidence or did you take any evidence as to the actual amount of the original investment of this company ? A. Yes. 1162 Investigation of Public Service Commissions Q. Whicli did you do, i*ead tlie evidence? A. As to the evi- dence, I was present when that table was put in, as I remember it. The company claim that there was something like $60'0,0'0O should be allowed for going value. Dr. Webber or some of our statisticians had prepared tables to show that figuring at a seven per cent return to the company, that they had been paid that going value, and I so state in the opinion. Q. And what information have you in support of the proposi- tion that at the time of the first date mentioned of the table, 1891, there were $2'0'0;000' of bonds outstanding ? A. I have that from our statistical department. Q. And do you know where the statistical department obtained that idea of the amount of that investment at that time ? A. From, I think, the report of the company. 'Now, as I remember it, all of the money, and I so state in the opinion, that all of the money that has been spent by this company has been from bond issues. The stock issues which amount to something like two million dollars, as neai* as I can find, there never was a dollar paid into the treasury on account of the sale of that stock. In other words, that it was water, and I think you will find that that is derived, although I don't remember that just now — but, at any rate, it is either from testimony taken on the previous trial from the ofiiciais of the company, oT from' reports of the company which we have had access to. Q. Did you make any investigation, or did any of your prede- cessors, as shown by the record, make any investigation to ascertain the facts in relation to the increase in the bonded indebtedness from 1891 to 1892i of $2i0'0,000 ? A. Yes, that was all gone into very carefully in the same way. Whether it was from^ the repoTts or testimony I am not able to state now. Q. Well, does that item of $400,000, represented by the item known as bonds outstanding, during the year 1892, represent the proceeds at par of bonds of that amount issued that year ? A. Yes, I think so, if that is what it states, if that is there, because I have no doubt that is correct. Q. Now, had you any evidence before you, or had any of your predecessors before you, of the payment into the treasury in 1893 of an item estimated at $141,000', from^ the proceeds of bonds Eepoet of Joint Legislative Committee 1163 issued at that time? A, iMust have been, or it would not have been in the schedule. Q. Well, did you have any evidence of the fact before you ? A. I think I have another copy of that opinion heire, if I can follow- that. Q. Yes, follow it right along. A. I haven't a copy of that here. May I look at that one ? What page is that ? Q. That is on page 18, 'Commissioner. A. Yes. ISTow, I was present at a hearing when this compilation was introduced in evidence. Q. By whom? A. By our own staff; by the counsel, and I think that Dr. Webber or some of his men were on the stand. Q. Now, will you proceed? A. I was present at the hearing when this compilation was intfoduced in evidence. This was practically admitted by the counsel as being correct, except a claim that there should be added to this the increase in values of the real estate from year to year, and that the allowance of 7 per cent, or 7% per cent which we make as going value — this is all on account of the going value of the concern, this table; that the allowance we should make should be based on the allowance which I added, and which mean should be the amount of the increase in the value of the real estate. That was the only dispute, and he figuTed something like $600,000 additional should be added. Q. That was counsel for the company made that claim ? A. Counsel for the company. He did not dispute, as I remember, this compilation at all as being the amount of actual bonds, but there is one place — 1 don't know just where it is — where some money was put in which I have given to the stockholders as return, as surplus, some money paid out of surplus instead of issuing bonds, some $60,'0'0O, and there was an increase in the value of real estate, an enotmous increase on account of property this company owns along the water front. Q. And was that increase because of capital ? A. No, unless it was before my time. Q. Well, was there any evidence before you that that was capi- talized ? A. No. We do not go into capital at all. The Legisla- ture has restricted us to allowing a return' on the fair value of the property, and we do not take into consideration the amount of bonds and stocks outstanding at all, excepting incidentally I have 1164 Investigation of Public Seevioe Commissions mentioaed it here in ■connection with this going value, as a reason for not allowing going value in the case. 'Chairman Thompson. — -Isn't that another reason for getting around the 'statutory restriction ? Mr. Williams. — What do you mean, Senator ? Chainnan Thompson. — Don't that get around the statutory restriction ? Mr. Williams. — That we must take into consideration only the valTie ? Chairman Thompson. — ■ Yes. Mr. Williams. — I don't think so. In view of the Court of Appeals decisioii ; Judge Miller's opinion. He says you must allow this company a return. In other words, he must allow them in addition to the reasonable value of their plant as you find it, from valuation — you must allow them a certain amount, income from which will tend to wipe out the earlier deficiencies. In other words, to insure the investor in public service stocks and public utility plants a return — a sort of insurance. You have probably read that opinion. Chairman Thompson. — ^Actual commensurate return on the money he puts in there. Mr. Williams. — Return on the money he puts in there. Chairman Thompson. — But not on the water he puts in. Mr. Williams. — But not on the water he puts in. Chairman Thompson. — That is a definition of going value. Mr. Williams. — That is Judge Miller's definition. But I think going value goes further than that, as I have stated in this opinion. But I take into considel-ation the amount of stock outstanding. I show the bonds of the company was little more than the value of the plant, and I argued from that that the original investors had been encouraged quite all that they ought to be in the iState of New York. If they can make two million dollars out of their stock issue on the plant. It is all part of one transaction, and they Eepoet of Joint Legislative Committee 1165 have been able to pay this per cent for the last few years on that valuation. Q. Now, as you understand th« decision of the Oouai; of Appeals, it is the duty of the Commission to fix a rate which shall be fair — which shall furnish a fair and just return for the amount invested in the property? A. Yes. Q. Did you or your predecessors investigate to ascertain what amount of actual cash had actually been invested in the property S A. Yes. . Q. What investigation did you make on that subject ? A. WeM, we made an appraisal. Q. And is that appraisal a part of your report here? A. Oh, yes. Q. Your opinion ? A. Yes. Q. Give me the page of that. A. That is, the appraisal is a part of the evidence. Q. Have you set it out in your opinion ? A. I have set out the amount. Q. Appears on page 4, does it ? A. Page what ? Q. Page 4 — resume of the appraisal. A. It may. This was of December 31, 1910? Q. Yes. A. Then we added to that — Q. Let us get the tecord upon December 31, 1910, what appears to have been the value of the properties of the Kings County Lighting Company on D'ecember 31, 1910. A. Present value of plant, $2,137,579, and added to that was for preliminary and development, $260,000, and for working — Q. What is meant by preliminary and development? A. Well, that is meant for preliminary engineering and matteTs of that sort that might be included, perhaps, in contractor's profits, or some- thing of that kind. It is a figure that was set by Commissioner Maltbie, and just how it was arrived at, I don't remembeir, but that was the same thing in the Court of Appeals. Q. Was there any evidence in the evidence to show that that was a proper amount ? A. Well, that was the amount that went to the Court of Appeals, and that was before my time. What the evidence was — whether it was an actual amount or whether it was a percentage amount, which we get by averaging all these things in case the books cannot be found — I believe in this case 1166 Investigation of Public Seevice Commissions tiiel-e were some books missing, and some of these things had to be estimated. Q. Then you added eighty thousand dollars for working capital ? A. Yes. Q. That gave you $2,477,579 as of December 31, 1910? A. Yes. Q. Now, have you added to that because of anything that may have happened since December 31, 1910? A. Yes. Q. And how much ? A. Well, it is not figured as adding to that amount, because they have taken off the depreciation. We have added to it so that in 1914 the reproduction cost would be $2,491,477. Page 22. Q. What amount do you say? A. $2,491,477, with subtracting the accrued depreciation of $551,000, leaving a value of physical property othe!r than land as of this date, date of this, $1,939,513. Q. And what value have you placed upon the land ? A. The same value, as I remember, that was placed on it before it went to the Court of Appeals. I think $650,000 is it. Q. Yes. That gives a total, then, as how much is the present value on which your opinion allows earning? A. $3,0'5O,O0O, as I remember it. Q. Well, are you quite sure that that is correct ? A. Well, no. That was the total amount upon which we were going to allow a return — upon which it was figured — ■ and as provision ought to be made for additional plants, as extensions and working capital in 1915 (that should be 16), consider $3,0'5'0,00O ought to be allowed as a fair value for the purpose of the order to be made in this case. I might say in regard to that that the additional allow- ance for working capital in this case was requested and thought — in fact, it was by Commissioner Maltbie's opinion the working capital increased along. It is more important because the city is not paying its lighting bills in that district. There is a dispute about the street lights, and I think the city owes them something like a hundred thousand dollars which they have not paid. Q. And it is your purpose to allow a return on the sum of $3,050,000 at the rate of 71/2 per cent, is it? A. Well, that was the percentage that went to the Court of Appeals before. I don't know whether the Commission — Report of Joint Legislative Cohjiittee 116Y Chairman Thompson. — That don't make any diffetence — I am going to eaiforoe the same rule with you I did with Commissioner Wood about answering the questions counsel propounds. Mr. "Williams. — I think I am answering the questions. Q. What was your conclusion, and what was the amount that you are willing to make yourself responsible for ? (Question repeated by stenographeT : Q. And it is your pur- pose to allow a return on the sum of $3,0'5'0',0'00 at the rate of 71/2 per cent, is it?) 'Chairman Thompson. — That can be answered yes or no. The Witness. — Yes. ISTow, I would like to state for what reason. For the reason that is the amount that went to the Court of Appeals ; that is the amount of retuTn that Commissioner Maltbie found that this company should have on its investment two years ago — that is the amount- — -four years ago, or whenever that decision was made — that is the amount that the Commission stated that this company should have as a reasonable return on its capital invested in that locality, and I did not feel like changing it, having gone to the Court of Appeals on that theory — I did not feel like changing it. Possibly the other Commissioners will. Q. Now, what part of the three millions and fifty thousand dol- lars upon which you propose to allow a return is represented by bonds? A. More than that amount. Q. More than that amount ? A. That is their way. More than $3,0'50',000, as I remember it. I may be wrong. Q. $3,178,000 ? A. I am right about that. Chairman Thompson. — That is bonds ? Mr. Williams. — • Bonds. Q. How many bonds outstanding in the year 1914? A. I can't remember whether there was an increase in 1914 or not. I don't think so. No, apparently not. Q. Does your table on page 18 show how many bonds were out- standing during the year? A. No. There was $2,066,000 out- standing in 1914, during the year. There must have been, an increase at that time. I don't remember. 1168 IXYESTIGATIOS OF PuBLIC SeeVICE COMMISSIONS Q. $2,066,000 outstanding during the year 1914 — when were the additional bonds issued, the difference between $2,066,000 and $3,178,0100? A. I can't give you the date, but it must have been. Chairman Thompson. — ■ Was it approved by the Public Service Commission ? Mr. Williams. — Yes. Chairman Thompson. — - You ought to have a record of it. Mr. Williams. — • I can get a record of all their bond issues, because it must have been approved. Q. Well, have you any recollection of the fact whether it was approved ? A. ^No, I haven't any recollection. Q. Do you know what mortgages there are on the property of this company securing these bonds? A. Well, whether there is more than the one mortgage I don't know — I don't remember. Q. Did you know of the fact that theire was a mortgage upon the properties of the company at the time you were preparing this opinion ? A. Oh, yes. Q. And did you know the amount of that mortgage? A. No, but I think it is mucjh larger, probably, than the bonds. The way they do, they get a mortgage for a large amount, and issue bonds against it. Q. What they call an open mortgage? A. Yes. What is approved by the Commission. Q. Now, was there an application made to the Commission within your knowledge, during the past year, during the year 1915, for leave to issue $1,112,000 of bonds ? A. There is an application pending now, and the hearing is closed. I don't think they are asking to issue as much as that. Q. You say there are now outstanding $3,l78,00i0 of bonds ? A. That is what appears from this opinion. That is taken, how- ever, not from any personal knowledge, but from one of the exhibits in the case. The outstanding securities of the company amount at par to $5,178,000, consisting of $2,0'0O,00O of stock and $3,178,000 of bonds. Exhibit 49 in the case. Q. Not in these printed case? ? A. No. That is the exhibit in the case. Eepoet of Joint Legislative Committee 1169 Q. You say there is now an application pending before the Com- mission for leave to issue additional bonds ? A. Additional bonds, yes. Q. And what is the condition of that application? A. The testimony is closed. I held the hearing, and the testimony is closed, and I am now considering it. Q. How large an increase are they asking at the present time ? A. I can't tell offhand. I think it is five or six hundred thousand dollars. Q. For what purpose? A. For additions to capital account. Laying new mains. This company operates in a new section of the city. It is one of the outlying wards, and one reason of their extraordinary expense has been that they are laying pipes two or three times too large for the territory as it now exists, in order not to have to relay them. Ohairmian Thompson. — What is the reason they always refer to, that this company is only in one ward or in one locality? They tell me that two hundred thousand people live in this ward. Mr. Williams. — There is a lot of people. Chairman Thompson. — ^And it is a pretty big territory as it now stands ? Mr. Williams. — Yes, but scattered. Q. Commissioner, does the fact that you have included in your opinion a statement that $'3,0'50i,'0i0'0 ought to be allowed as the fair- value of the property, indicate that it is your opinion that an allow- ance should be made of $65'0,00'0' for appliances, extensions and working capital ? A. $65'0,00O — no. Q. Well, how much do you pl-opose by this decision to allow tbem — I see it is the difference between $2,000,000. A. $2,969,000 — Q. And $3,050,000? A. Yes. Q. Itisabout $81,000' — about $80,500? A. Yes. Q. Is that what they are applying for in additional bonds? A. E"o. Q. They are applying for more than that ? A. They are apply- ing for additional bonds for work that they have actually finished 11 To Investigation of Public Seevice Commissions now, or else for work that they contemplate doing in the near future. Of course bonds not to be taken down until the work is done and the estimates approved, or something of that sort. Q. Are you familiar with the last increase allowed from $1,069,0-00, in 1911, to $2,0'66,000 in 1912? A. As to what is that? Q. An increase in bonded indebtedness. A. 'No, I am not familiar with that offhand. I took my information here from that exhibit. Q. Do I understand. Commissioner, that you are unable to state the precise amount of additional bonds you were asked to approve in the matter now pending before you ? Mr. Williams. — Do you know what that is, Mr. Walker? Mr. Walker. — I did not hear the question. Mr. Williams. — The amount of bond issue asked for by the company. A. I don't know the exact amount. There is no dispute but what they have spent that much for capital account. The only question, as I remember it, the main question is whether they should be allowed to issue bonds, and what they should be allowed to sell them for — what discount. Q. Well, for what purpose are the proceeds of these bonds to be used ? A. Absolutely for nothing except extensions and better- ment. ISTo replacements or repairs, or anything of that kind. Q. The extensions I think you stated have all been practically made? A. The extensions I think have been made. There may be an item. It seems to me there may be an item for gas holder, or new holder, or something they are getting estimates on. Our orders always provide where we do not know the amount of money actually expended, that the money shall not be paid until that is determined and appraised by our engineer. I have asked counsel to write a report in that case, and as soon as I get it I will be glad to show it to you. Q. Well, have you given him instructions as to what is to be done with the application, -w^hat decision is to be rendered ? A. No. Q. Have you determined whether or not the application should be granted ? A. No. I have asked him for a report on it. Eepoet of Joint LsaisLATivE Committee 1171 Q. What is the amount of the outstanding capital stock? A. Two million dollars. Q. ISTow, with the bonded indebtedness as it is at present, of $3,050,000, which I think you stated is the present actual bonded indebtedness? A. ISTo^ $3,1'78,0!00. Q. $3,1Y8,0€0, with the bonded indebtedness as it is at present of $3,178,000, what would be the interest charge? What rate of interest does that bonded indebtedness bear ? A. I think five per cent. Yes. Q. It will require, then, $158,900 to pay the interest on that bonded indebtedness ? A. If that is what it figTires at five per cent. Q. It fi'gures $158,900 — at five per cent, requires $158,900 of interest. Now, the allowance of actual value upon which return is to be had is $3,050,000, I think you stated ? A. Yes, sir. Q. And upon that you propose to allow 7% by your opinion? A. That is what I thought ought to be allowed. Q. That would permit then — that would require $228,750, at 71/^ per cent, would it, or have you figured it? A. I haven't figured it. Q. Will you figure it, so it may be your testimony ? A. I will take your word for it, if you have it there. On what ? Q. $3,050,000 at 71/2- That is what is required to pay the initerest on the bonded indebtedliess ? A. $258,750, am I right? Q. I make it two hundred twenty-eight. A. Yes, I am mis- taken — $228,750'. Q. In other words, you propose to allow a return upon the actual value of the property equal to $228,750? A. Yes. Q. Of that $158,900' will be required to pay the interest upon the bonded indebtedness, will it not, as it now stands ? A. Yes. Q. And subtracting that will leave how much ? A. On page 29 you will find that carried out. Q. Wil you just carry out that computation? You have $228,750 as the amount which you propose to allow as' the return on the fair and true value of the properties, as you have had them appraised, and as you find ? A. Yes, $228,000. Q. ISTow, the bonded indebtedness is $3,178,000 — at five per cent that amounts to $158,900, doesn't it? What is your conclu- sion ? A. Why, subtracting one from the other makes $69,650. Q. Eight hundred and fifty, is it not ? A. Yes. 1172 INVESTIGATION OF PuBLIC SeEVICE COMMISSIONS Chairman Thompson. — Did you write this opinion ? Mr. Williams.- — No, not this part. This was done by the statistician and the counsel. Chairman Thompson. — Your statistician and your counsel ? Mr. Williams. — Or the gas engineer. We have a gas engineer, Mr. Hines, who is very efficient. Q. That leaves $69,850, then, as available from the earnings under the opinion which you have prepared for distribution to the stockholders, does it not, or for such other purpose as the company may wish to use it? A. There is a miscellaneous revenue of $12,0'0'0', and in this case, too, there is an extraordinary street lighting contract — Q. I will come to that. Chairman Thompson. — Is that the reason why the opinions of your Commission are usually so long, is that you have to have all your employees join in them ? Mr. Williams. — We do not have to have. I think in an opinion of this kind that the public and the courts and everybody is entitled to know exactly how the matter was figured. ■Chairman Thompson. — Don't you think that the public don't know because you make your opinions so long they can't go through them, they do not have time? Mr. Williams. — I don't think so. I never heard that complaint. Chairman Thompson. — The only complaint I heard was what Commissioner Oram said on the stand the other day. Mr. Williams. — I don't know what Commissioner Cram said. I find the opinions a little tedious sometimes, but instructive, to say the least. Senator Lewis. — I found your opinion in this case very interesting. Mr. Williams. — It is hard to follow, I will confess • — for a layman to follow these figures. Now, I heard one or two Eepoht of Joint Legislative Cojimittee 11T3 argiunents in this case. I talked with counsel about it, but when it comes to giving you the details of the why or the wherefore f or these figures on the last page, it is all I can do, to say nothing about somebody else. Q. Now, let US see — you suggested there was an income of about $12,000 for miscellaneous purposes. A. I see that on the last page. Q. What are the exact figures, $12',0i00? A. Miscellaneous revenue from lighting at $1.75 a thousand comes to $147,000. Q. That would make $81,&50 of revenue available foT the pay- ment of dividends upon the stock, would it not? A. It WQuld appear so. Q. And did you intend it that way. Commissioner ? A. ISTo, I did not. I intended that the — Q. Listen to me for a moment, please. Do you intend that the owners of the bonds shall receive or have five per cent interest, notwithstanding the fact that the bonds exceed by more than — by $128,0i0O, the actual value of the property- — do you intend that the owners of the bonds shall receive five per cent upon those bonds, and in addition, that the company shall be able to pay to the stockholder owning two million dollars of stock an annual return of four per cent, notwithstanding the fact, by your own testimony, not a dollar of that stock was ever paid for in cash ? A. No, sir. Q. Now, just a moment — isn't that the net result of the decision which you have — the opinion which you have written recommending the decision by the full 'Commission ? A. I cannot answer both of those questions at once. Senator. Q. Well, answer whichever one you prefer first. A. I will start in — I have absolutely no care whether there is a bond out or not, or whether the property is free and clear. The Legislature and the courts have told us what we have got to allow, and the Legislature has specifically said, you have got to allow a fair return on the property that you find there by an appraisal. Now, we found this property there by an appraisal, and everything has been appraised and everything has been carried out to the satis- faction, at least, of the Commission engineers. There was no question but what every item that we have allowed should be allowed in this case, and when we fixed the rate, the rate of 7% 1174: Investigation or Public Seevice Commissions peT cent on that, it is regardless of wliether there is a bit of bonded indebtedness or not. And the only reason why I took up that bonded indebtedness question was on the question of going value, to show that all the money that had been put into this concern was from the bonds, and that the stock was clear. Now, that is the very thing — Q. The stock was water? A. Yes. That was the very thing that the Public Service Commissions Law, in my opinion, was passed for. That was the idea that Governor Hughes had in mind so no such thing could happen now. Mind you, this was all done before the Public Service Commission came into existence — this increase in the capital stock, and everything, before the Public Service 'Commission. So every dollar of the stock issued by a public service corporation has to be for one hundred cents equiva- lent. There is no danger of such a thing being done now. We have had to take things as we found them, and we have not taken into consideration anything about the — Chairman Thompson. — You have made your defense and decided the law in reference to the first question. I want the second question answered. Mr. Williams. — What is that ? (Last question repeated by stenographer.) The Witness.-:— It may resolve itself into an allowance on account of the increase in the value of real estate and other things that have entered into dt. It may advance — now, you can see how that might readily be. Take one of the companies here in New York that owned real estate forty years ago, the Consolidated or Edison Gas, where it has increased enormously in val^e. We have got to allow the present value in determining values. Chairman Thompson. — We have got several lawyers here, and we don't want any enlightenment on the Public Service Law. We will get along a good deal better if you will answer Senator Lewis's question. Mr. Williams. — I ami trying to. I think Senator Lewis and I understand each other. Repoet of Joint Legislative Committee 1175 Q. Well, now, isn't it a fact, Commissioner, that you are pro- posing to allow a return upon the actual value of the property, greater than the fair rate of interest demanded, from the company by those individuals who have furnished the cash with which to acquire and construct the company's plant ? A. Well, I am sure I could not answer that. Q. Well, can't you answer it ? A. No. Q. You say, to start with, that the property is worth $3,050,000 ; you say, again, that this property is bonded for $3,178,000 ? A. Yes, sir. Q. And you say that those bonds have been issued, carrying a rate of five per cent per annum; you say that the interest on $3,178,000, which more than represents the actual value of the property, amounts to $158,900', notwithstanding which you say there shall be allowed to the company a r'ate for the sale of gas which will produce $228,750 annually, isn't that so? A. Well, that is the way it figures out. Q. And isn't that the equivalent of saying that you are allowing by your opinion an amount as return upon the actual value of the property greater than that demanded by the individuals who fur- nished the cash with which to acquire and construct the plant owned by the company? A. ISTow, I doni't know that, Senator, but my impression is that these same individuals that started this company and loaned the money and took the bonds are the same individuals that had that $2,000,000 of stock. That is the way it generally goes. Q. Does that matter either way ? A. Yes. Chairman Thompson. — Do you mean to say you have gone on and made a rate on such a proposition? Mr. Williams. — ISTo, I haven't, and you know I haven't. I decided this case as I thought was proper under the circumstances, and you have my opinion, and it isn't going to make any difference to me what amount of criticism I get from- newspapers or any^vhere else. While I am Commissioner I am going to use my judgment. But it is my judgment in this case, using the Court of Appeals decision. The other Commissioners may not agree with me. It is my judgment that this is a fair and just opinion and just presentation of this case. 1176 Investigation of Public Seevice Commissions Q. Isn't it true tliat in 1910 this company voluntarily offered to reduce the rate very much below ? A. I understand from the memorandum before me at one time — I took this case from Com- missioner Hayward. I understand from the argument that tbere was a proposition of a sort of a sliding scale, and that Commis- sioner Maltbie, who was holding the hearings, he can tell you better than I, that Commissioner Maltbie got the people who were interested in, and that the people of that district turned down the proposition of the company to have tbe sliding scale. At that time there was no power vested in the Commission under the law, as I remember, to grant a sliding scale or to make an order to that effect. That was before my time on the Commission. Q. You have read Commissioner Maltbie's opinion, have you not? A. Yes, sir. Q. Doesn't Commissioner Maltbie say in his opinion, while the petition was pending before the Commission, negotiations were carried on between the company and interested civic associations, the company proposed the rate to 90- cents a thousand cubic feet for 1911 and 1912, and 85 for 1913, and 80' for 1914 and 1915 — have you read that in Commissioner Maltbie's opinion heretofore ? Q. Then it is a fact, is it not, based on Commissioner Maltbie's statement, that the company voluntarily offered to reduce the rate by sliding scale to a minimum of 80 cents a thousand cubic feet — was that fact taken into consideration by you in your opinion, fixing the rate for 1916 at 95 cents? A. It was, the same as all the other facts in the case, and I have said repeatedly — I think I have said to Commissioner Hayward that I was sorry that I did not think we could reduce it further. Q. Now, isn't it true that dn your opinion at page 16, you say, " By the end of 1910 the total amount of money actually , returned to the investors in the form of interest and dividends was approxi- mately $1,590,000, whereas an annual return of seven per cent upon the combined capital and earnings invested in the property each year did not call for more than $l,5'5O,'000'? A. Page 10, did you say ? Q. Page 16. A. Yes. That is an explanation of this table. Q. That is true, is it not? A. That is true, according to the exhibit, but I do not, of course, know it as a fact. Eepoet of Joint Legislative Committee 1177 Q. But you make yourself responsible for that statement when you include it in your opinion, do you not? A. I certainly do, unless there is a mistake in copying figures. Q. And doesn't it appear from the time that this company began business, down to the end of 1907, there had been paid out of the treasury in actual returns to the investors annually more than seven per cent upon every dollar invested? A. Up until 190O — Q. For every year up to the end of 1910? A. No. Q. Isn't that what that statement means? A. Not for every year, but for the combined years — combined. Q. In the end it amounted to that, didn't it ? A. The end of the term? Q. I say in the end it amounted to that, didn.'t it — the pay- ments had averaged a little more than seven per cent, had they not ? A. Oh, yes. Q. That is what I meant. A. That is what this table is meant to show. Q. So that the going value, as defined by the Court of Appeals, was not an element to be taken into consideration by you in determining the rate, was it ? A. Why, yes. Q. Well, I know, but you haven't allowed anything for going value ? A. No, we haven't allowed anything. Q. That is what I mean. Now, between the end of 1910' and the present time, the company has been collecting for gas at the rate of a dollar a thousand ? A. I think that there was an arrange- ment whereby they could collect 95 cents. I think they have been collecting 95 cents. Q. And is that the price at which they have been continually selling gas since 1910? A. I think so. I don't think they increased it. They have threatened. Q. The price is 95 cents? A. That is the price they are charg- ing now, unless they have raised it. They threatened at the time of the hearing they would increase it to a dollar. TFnder the law they can go to a dollar. Q. Did the fact that they have been charging 95 cents per thousand cubic feet since the end of 1910 have any effect upon your mind in reaching the conclusion that they should be permitted to charge 95 cents for next year ? A. No, not at all. 1178 Investigation of Public Seevice Commissions Q. You have at the end of your opinion a table showing the amount of gas manufactured — for what year was that table pre- pared — are you able to state ? A. Well, it was the last year — Q. That was for 1914? A. Evidently, yes. I don't know whether it is dated from the first to the first. Q. I notice it is not dated. I assume it was for 1914. A. It was the last report we had. Q. And from that table it appears how much gas has actually been sold as appears from that table, commercial gas ? A. 774,170 thousand feet. Q. And for street lighting ? A. 84,000. Q. ISTow, for the commercial gas, the company has received at the rate of 95 cents a thousand? A. Yes. Q. Will you figure the total sales " thousand cubic feet " — isn't it caTried out there at the rate of a dollar a thousand, or doesn't that mean dollars there at the margin of the page — page 2'9 ? A. At the margin ? Q. Yes — under the word "commercial." There are two col- umns, one under the word " total " and then another under the word " commercial." A. That is sales to people like you and I, and the otheT is street lighting. Q. Now, from those tabulations there, doesn't it appear that the 774,170 cubic feet have been sold at a dollar a thousand ? A. IsTo, I don't think so. I don't think so. That 774,170' was the com- mercial number of thousand thousands feet of commercial gas, I should say. The way it is carried out here, the total, and then the percentage of street lighting gas is taken out of it in each instance. Xow, there is no dollars until you get down to production expenses. From there down it refers to dollars. Q. Well, what, from that table, do you understand to have been the earnings of the year 1914, gross ? A. Street lighting, $147,000; miscellaneous revenue, $12,000. $159,000. Q. ]\riscel']aneous revenue, $12,000? A. Making $159,000. Now the necessary revenue from commercial sales. Q. You are now estimating what would be required to pToduce iy2 per cent, when you get down into those figures, what do you understand were the sales — what does that mean, " commercial including public buildings, $774,170?" A. That that amount Ebpoet of Joint Legislative Committee 11Y9 was actually sold. There was l,00il,370 thousands feet actually manufactured and there was 14.3 loss, unaccounted forj leakages, and like that, which brought it down to 7Y4,170' thousands feet. Q. Now, that was the ajnount, 774,170' thousand cubic feet of gas sold at the rate of a dollar a thousand, and isn't it carried out that way to indicate that the company received $774,170' for commercial sales? A. Wo, I don't think so. That could be explained better by Mr. Hines or somebody else. Q. Does it mean that the sales of gas for street lighting pur- poses produced $84y0'00 ? A. E"o. Street lighting purposes, produced $147,000. Q. Well, what does the words " sales, street lighting, 84,0i0'0," mean ? A. . That was the number of thousand thousands feet sold. Q. Then the total sales, according to those figures, are 858,170 thousands, using a thousand as a unit, 858,170 units, at a dollar a unit? A. I imagine at 95 cents that will amount to $732,758. Q. Let us see if it does. A. Or make $708,561. Q. At 95? A. At 95. Q. That is based on 858,170? A. 774,170, the amount of the amount of commercial sales. Q. And there are 84,0i00 of street lighting sales, aren't there ? A. Yes, but that is a higher figure. You will notice there is two different — the relation of the percentage of the commercial sales and street lighting sales to production cost are not the same. Q. 'No^v, the commercial sales amount to what — did you get those figures? A. 774,170 thousand. Q. No. We are getting it into dollars. A. Well, at 95, I get that figure $708,561.50; Q. And then for street lighting what do you get the figures, apparently at $1.75 ? A. A hundred and forty-seven. Q. And then for a miscellaneous re^^enue of 12,000 ? A. Mis- cellaneous revenue of 12,000. I notice they have got $703,588. I don't exactly see how that is gotten here, and then they add the 12,000 miscellaneous revenue to that, making 732,758, upon which they fix the return — 94.65, it figures. Q. Well, we have agreed, I think, that they sold, according to thistable, 774,170 units at a dollar a unit? A. No. I figured that they have made it 95 here. 1180 Investigation of Public Seevice Commissions Q. At 95 cents a unit. I may have done this wrong, because evidently the figures are $70'3,588. Q. We will take your figures, $70'3,588.50 — is there a fifty there ? A. No. And they added to that — Q. $147,000 for street lighting? A. No. They added to that the $12,000. You see this has been made up separately for the street lighting and the commercial sales. Added to that is mis- cellaneous revenue, 12,000. What that consists of, I don't know. That makes $732,758 from the sales of commercial gas, and that rate would figure 94.65, nearly 95 cents, in order to bring me- — it may be that that figure, 703, is exactly what they did take in. Let me see about that. I can't explain that any better than that. Q. See if you follow my explanation, and see if I anj right. In the table or schedule, on page 29, the statement is made that the total amount of gas used and unaccounted for is 1,001,370 units. A. No, not exactly. That amount was made, and 14.3 per cent is unaccounted for. Q. That is the amount that was made, 1,001,370 units? A. Thousand cubic feet. Q. A unit being a thousand cubic feet ? A. Yes. Q. Now, we will start that as the beginning of our computation, and we will deduct 14.3 per cent to ascertain what amount was lost by transmission — isn't that the proper thing to do? A. Certainly. Q. Now, if you will compute with me — A. I think you will get that 858,170. Q. Well, do you want to coinpute it with me while we are about it, so we will check each other — 14.3 per cent — A. I would rather somebody else would do this figuring. I get 858,175. I presume this other is in round numbers. Q. I have got it 858,175. Now we will start with the proposi- tion that that is the amount of gas available after allowing for loss in transmission, from which revenue is obtained ? A. Yes. Q. Now, of that 858,170 units, we will take their figures as correct — 8'58,l70 units at 95 cents will produce how much? A. You want to take out the 84,000 street lighting first. Q. Yes, we will take out the 84,000 street lighting. A. That leaves 774,170 evidently. Report of Joint Legislative Committee 1181 Q. It is 774,170 — now has been, sold at 95 cents? A. Yes, sir. I don't know but what we are figuring that wrong. Senator. I don't know that we ought to say that is the exact amount that we are figuring this on as the necessary return for the ensuing year. Q. But isn't that the schedule of what was actually manufac- tured and sold last year ? A. As far as that is concerned, but the necessary revenue from conune'rcial sales is in a measure you will see from another part of the opinion is estimated. Q. I know, but I am trying to determine what the revenue was last year. A. Well, that will tell it. Q. That will tell it, won't it ? We start, then, with the propo- sition that the gross revenue from commercial sales last year was $705,461.50, is that right, as you figure it, 95 cents a thousand feet ? A. I figure it $708,000, at that rate. Q. Yes, that is right, $735,461.50, now we have 84,000 that was sold. A. JSTow we are wrong there. On page 24 of the opinion, you will see this, down at the bottom of the page. " There will unquestionably be an increase in this output for 1915 and 1916, but possibly not as great as in former years. We have estimated for the period, September to September, 1916, that the sales of commercial gas will not be less than 774,170 M. cubic feet." Q. But you have above the sales for 1914, the sales for that commercial gas and for street-lighting, 83,664 thousand. A. Yes. We increased our estimate on that on account of the unques- tionable gross. Q. We were talking about the revenue for last year. A. Then you have got to . take those last figures. This is the estimated revenue from September to September, which will be September, 1916. The first is of commercial sales — there is a word left out — 774,170, and for street-lighting, not less than 84,000. To supply this amount of gas the company has to manufacture an amount considerably larger, due to the percentage or unaccounted- for gas. We were both in error. I wish to correct my testimony. Instead of being the annual table on page 29, it is the expectation from September to September. Q. Now, we will proceed along that line, that it was the expec- tation for next year. A. Yes. 1182 Investigation of Public Service Commissions Q. JSTow, the estimated gross revenue, then, from gross sales next year, $735,461.66, — those are your figures. A. 147 and 12 and 703, — whatever it adds up to. Q. We have deducted from the estimated probable manufac- ture of 1,001,870, we have deducted 14.3 per cent. A. Yes. Q. That will leave 774,170 cubic feet for sale at 95 cents, which will produce $735,461.50. A. Whatever the figures are; I haven't added it. Q. You will have 774,170 for sale at 95 cents, which will pro- duce $735,461.50. JSTow you estimate there will be 84,000 cubic feet to be sold to the city at $1.75. A. One dollar and seventy^ five cents is the contract up until September. I think that con- tract expires in September, if I am not mistaken. And that is a dispute as to whether that should not have been reduced to 75 cents at the time the law was changed. Q. Well, you use that computation yourself in your opinion. A. Yes. Q. And that will produce a revenue of $147,000 ? A. Yes. Q. One hundred and forty-seven thousand dollars, and you have estimated that miscellaneous revenue. A. Twelve thousand dollars. Q. To be $12,000. A. I don't know whether that is an esti- mate as I stated before, or whether that is the actual revenue. Q. That will give a gross revenue, then, gross income of $894,- 461.50, will it not? A. Well, if that is what it figures. Q. ISTow, from that gross revenue you have estimated, it will cost for production at 33% cents per thousand cubic feet, $333,- 459, haven't you ? A. A production expense, yes. Q. Three hundred and thirty-five thousand four hundred and fifty-nine dollars, — nor for depreciation and reserve for other operating expenses, you have estimated at 23 cents per thousand cubic feet, — what did you include in the other operating expenses ? A. Taxes, uncollectible bills, excluding depreciation. Q. Well, you have got depreciation in another item there. A. Yes, and this is the fair average of the expenses of the past year, as I say. Q. What page is that? A. Page 26, "Other operating expenses." Eepoet of Joint Legislative Committee 1183 Q. Other operating expenses, including taxes and uncollectible bills, excluding depreciation for the period, will be covered by 23 cents per thousand cubic feet sold, — what other operating expenses can there be other than cost of manufacture at 33% cents a thousand ? A. I will get you all of that. I can't tell you oifhand. Q. You cannot tell offhand? A. ^o. Q. Can there be anything else to be included except salaries? A. Overhead charges like charges and administration would be . included, I anticipate, but that is made up in some exhibit in the case, and I will be glad to send it up so you will have it in detail, exactly how they arrived at that I don't remember from memory. Q. Doesn't it seem to you when you have included an item for cost, which of course means the cost of all material that goes into the manufacture of gas, and the cost of labor, which goes in the manufacture of gas, and the operating cost of machinery neces- sary to produce the gas at 33% cents per thousand cubic feet, doesn't it seem that an allowance of 23 cents per thousand cubic feet for other operating expenses, including taxes and uncollect- ible bills is very high. A. I wouldn't want to say that. I see here counsel says it is a fair average of those expenses in past years. Also covers — that is exactly what counsel says — it does not cover. The company asked for more than that. Q. Asked for more than 23 ? A. Yes ; asked for more than that, and this is what counsel said to me. I struck out part of it, because I did not think it necessary to put it in. " Other operat- ing expenses, including taxes and uncollectible bills, excluding depreciation for the period, will be covered by 23 cents per thou- sand cubic feet sold." This is a fair average of these expenses for the past year, disregarding the expenses for litigation over the rate fixed by the Commission in its previous order. Chairman Thompson. — Now, do I understand that the counsel for the company asked for anything more than they got in this opinion ? Mr. Williams. — Yes. They insisted they were entitled to charge at least a dollar, and the law would let them. Chairman Thompson. — Still, they are working at 95 ? 1184 Investigation of Public Seevice Commissions Mr. Williams. — Yes. Q. ^Vliat, in your opinion, or have you any information or data as to what the taxes amounted to ? A. It is all in the case. All in Mr. Hines's report. Q. Let us pass along to depreciation • — what is your allowance in your table for depreciation? A. Same as it was in the last case brought down to date. Q. Fifty-five thousand dollars ? A. Well, in the last case it was allowed, forty-three in 1911, forty-five in 1912, 1913, forty-eight, and for the year September first, 1916, consider that fifty-five thousand will be ample and the sum to be provided. Q. Now, did you have before you in acquiescing in the recom- mendation of Mr. Semple that $50,000 should be allowed for depreciation — the testimony of William A. Daehr, taten before you, or Commissioner Hayward, I don't know which, in which he stated that the plant is run efficiently and economically, and is now just as good as a new plant ? A. I don't doubt that was the testimony. They all try to get away from depreciation when they are after bonds, and claim there is no depreciation when they are trying to get a valuation. But we have a straight-line deprecia- tion which we follow out. You can see. Senator, how it would be when they come to us for a bond issue, there would be no question but what they would want us to allow every cent we could, and they come to us in the rate case — Q. ISTow, let's see about their coming to you in an application for a bond issue; they would wa:nt the depreciation to be figured at as small an amount as possible ? A. Yes. Q. In order to get as large an allowance in bonds as possible? A. Yes. Q. Do you suppose if they were before you asking for a bond issue, they would admit their plant would depreciate at the rate of $55,000 in a year's time? A. It wouldn't make any difference what they would admit. In this case we are following the straight line of depreciation. Q. What per cent do you allow for depreciation ? A. There is no fixed per cent. Q. What do you mean by straight line ? A. We have what we call straight line depreciation. We take the estimated life of the liKPOET OF Joint Legislative Committee 1185 property, depending on wliat it is. If it is a gas main, it is one term, and if a piece of machinery, it is another, and we have that line of depreciation right down through. That is figured on by our engineers always. Q. You have allowed for maintenance in the twenty-three cents ? A. Yes. Q. And that maintenance at twenty-three cents amounts to, with operating expenses, that other operating expenses at twenty- three cents a thousand cubic feet sold, 197,379, cannot possibly be anything except maintenance together with salaries and legal expenses ? A. Well, if it is included in that. I don't know whether maintenance is included in that. Q. There isn't any other item of maintenance charge in the production there made in this table ? A. No, it is not covered by production. Q. ilust be in that item of twenty-three cents for maintenance, does it not, because he says there, operating expenses ? A. I would not want to say that. Q. Well, if it is anywhere, it is in that item, maintenance? A. I wouldn't say that. I don't know whether it is or not. Q. It isn't in production, is it ? A. It doesn't seem to be. Q. You have got your production and other reserve? A. It may be included somewhere in production. I would hate to say that. I will be glad to get you those individual calculations if you desire. Q. I think it is desirable that we have them to-morrow. Com- missioner. A. I will be glad to get them. Q. But, as you analyze this statement that you have included in your opinion, doesn't it look as though you were allowing thirty- three and one-ha'f cents a thousand cubic feet for the cost of manu- facture — doesn't it look as though you were allowing an item of $197,379 for a period of twelve months for other operating expenses, and as though that item must necessarily include an item for maintenance, and having allowed for maintenance, are you justified in allowing a still further item of $55,000 for deprecia- tion ? A. Oh, certainly. You must not mix the two items at all. Q. Now, if a plant is maintained from year to year by the expenditure of such an amount as will keep its efficiency up to the Vol. 1 — 38 1186 Investigation of Public Service Commissions hundred per cent, standard, would you still feel that you were justified in allowing an item for depreciation? A. You talk exactly like — what was that man's name in the West — Mr. Allison, whom Com.missioner Hay ward did not want to hear ia the BrooklynJEdison case. Chairman Thompson. — Do you mean by that, you do not want to hear the Senator ? Mr. Williams. — No, not at all. But as I remember his argu- ment is exactly the same as Allison's argument. Q. Didn't the Commission, by vote of four to one, allow Mr. Allison to give that testimony? A. Yes, we did, and I have lis- tened to you, and I can't see any material difference between your theory and his. ISTow, I would have been glad to listen to you here in the same way, and while we are speaking of that, Mr. Allison had some advanced ideas on the question you have advanced. Q. Further advanced ? A. A little further advanced, he having been a member of the Commission himself. It was on that same theory. Chairman Thompson. — Allison wanted to go a little further. He wanted to capitalize good hick. Mr. Williams. — ^o, he was not as bad as some of the Niagara Power peop'e, some of whom I have heard. Take these dual con- tracts, we insist on a depreciation or renewal, something that when the property does go out, there will be something to replace it. In addition to the up-keep and the oi'dinary repair, that there shall be a depreciation account, so that finally there will be something to replace the property. Q. This depreciation account means, doesn't it — that is, you have a plant that cost a million dollars, and you write off for depre- ciation five per cent, annually, that at the end of twenty years, you will have your plant paid for out of your depreciation fund, and still have the plant in some condition or other ? A. No. That would be amortization. That would be putting aside an amortiza- tion fund. There are some companies that do that, and I think it is a very advisable thing. Report of Joint Legislative Committee 1187 Q. Now, in twenty years you not only allow for depreciation, but include an item in for maintenance sufficient in amount to maintain the plant at 100 per cent, efficiency, expending that item for the purchase of new machinery from year to year, for the put- ting on of a new roof whenever the old one becomes leaky, for the installation of new boilers, whenever the old boilers have become dangerous, for the installation of new elevators whenever the old elevators have become but of date, you will have not only appropriated money for maintenance, but you will have appropri- ated by your depreciation fund an amount sufficient at the end of twenty years, if invested and carried in a separate fund, to replace the entire plant, wouldn't you ? A. Why, if it was carried out to that percentage, yes. But these things wearing out at different times are replaced by new. Q. Are they taken care of by maintenance fund l A. IsTo, not entirely. I know of a plant in Brooklyn that is closed down where it is not turning a wheel, that cost a lot of money, because they can use another electrical — on one of the railroads — they can use another electrical plant where they can product electricity cheaper. Chairman Thompson. — You are talking about obsolescence. Mr. Williams. — You cannot convince me on that I would be very glad to ask Dr. Webber to come over here. Our uniform system of accounts calls for this. Q. This may be instructive in the matter of such amendment to the statute as may be necessary to correct the uniform system of account system? A. No doubt lots of the companies would be glad to have depreciation clauses wiped out. Q. But this is a rate case ? A. Yes. Q. And in this rate case you are allowing, by your opinion, the actual cost of the production of the gas ? A. Yes. Q. You are allowing an additional item of twenty-three cents a thousand cubic feet, amounting to $197,000 for other expenses connected with the manufacture ; now, my analysis of your table is that $197,000 represents the salaries of your officers, the mainte- nance of your plant and your legal expenses, because you have a still further item — no — your twenty-three per cent, includes taxes. A. Taxes. 1188 Investigation of Public Seevice Commissions Q. Includes taxes — no, it doesn't. Chairman Thompson. — The testimony ought to show what items it covers. Mr. Lewis. — It ought to, but it isn't here. Q. Tes, it includes taxes and uncollectible bills. Now, my contention is that you must have included to obtain the sum of $197,000, you must have included maintenance. Senator Foley. — Would maintenance be part of the cost pro- duction ? Mr. Lewis. — They figure the cost of production at thirty-three and one-half. I don't know whether they included maintenance in that item, or whether they are including it in the twenty-three cents per thousand feet for taxes and uncollectible bills. Mr. Williams. — That's the reason the Public Service Commis- sion has a hard and fast rule about this depreciation. Q. Do you find anything there you see is included in an item of twenty-three cents a thousand for operating expenses, including taxes and uncollectible bills ? A. Well, I can't say I would be intelligent about it. I rather ask Dr. Webber to do that. I did not take any of the evidence in this case. Mr. Hayward has con- fessed he cannot pick it out readily, and I would rather ask Dr. Webber, which, if you will ask, I presume, there is an exhibit in the case. Q. Suppose we pass from that subject. You propose to allow a lump sum of $55,000 for depreciation ? A. Yes. Can I have Mr. Maltbie's opinion ? It is figured exactly along the same line. I tried to make this opinion so it would not change the argument that Maltbie made. Commissioner Maltbie on pages 42 and 43 of his opinion : And we did not make any change at all in the method of figuring. Now, every one of these things went to the Court of Appeals 6n practically the same thing. Q. Well, the Court of Appeals did not determine and did not attempt to pass upon any proposition in the case except the three questions certified? A. Yes. Eepobt of Joint Legislative Committee 1189 Q. The three questions that were certified ? A. That is right. Q. Now they did not pass upon any of these other questions. Now, we have got the cost of production, $335,459, and we have got depreciation at $5i5,000 ; street lighting $45,000. You would not deduct that, would you ? That all conies in as expense. Does it cost $45,000 for the superintendent, maintenance of the street- lighting plant? A. That is the proportion that is estimated by our engineer. Q. All right, we will deduct forty-five. Now, those are the only expenses to be paid from gross income except interest, and the item of twenty-three cents for other operating expenses, are they not ? A. Except return, you mean ? Q. Well, you have got the interest on your bonded debt. A. I don't figure that. Q. I am going to figure it for the purpose of seeing where you will come out. You have got a bonded indebtedness of $3,178,000 at five per cent., which aggregates $158,900, making a total of $594,359, to be deducted from $894,461.50, leaving $300,102.50 return upon the capitalized stock from which must be deducted salaries, taxes, maintenance, if any, and legal expenses, and neces- sary office expenses ? A. If that is what it figures. I will get you those in the morning, those iteans from Dr. Webber and I think that that will show the amount of legal expenses they asked for, which we did not allow. Legal expenses for fighting the Commission's orders. Q. Now, 7% per cent, on the capital stock of two million dollars, the present capitalization, would leave $150,102.50 to cover your salaries, taxes, legal expenses, maintenance and office expenses ? A. Well, I would not say that was all that was in that. I tell you I will get that for you to-morrow. I would not want to go into details of that, because I couldn't. Mr. Lewis. — We will excuse you until to-morrow. Mr. Williams. — You would like to know the making up of those two items, other operating expenses, and how the deprecia- tion is figured. Mr. Lewis. — Yes. 1190 Investigation of Public Service Commissions CoMMissiONEE Haywaed OIL the stand: Examination by Mr. Lewis : Q. This morning, Commissioner, you suggested you would be willing to produce a copy of your opinion in the matter of this rate case. Have you it with you ? A. I haven't it with me. I left about two o'clock to come down here. I suppose it is up there. It is not quite completed. Q. Will you send for it ? A. I will send it down when I go up. Q. Can't you telephone for it? You can tell us what it is. A I can tell what it is. Q. All right, suppose you do. A. You mean the Kings County Lighting Case. Q. Yes. A. I take the same figure on value of property. Senator, that Commissioner Williams took, — perhaps fifty thousand dollars more. One figure is three million and fifty thousand, and the other is three million a hundred thousand. Q. Your figures three million one hundred thousand ? A. And his figure, three laillion fifty thousand which are made up entirely by the deductions made by the expert of the Commission, from the various exhibits and appraisals offered in evidence in behalf of the Commission and in behalf of the company. Senator Foley. — What was that difference - — what were the figures of the company ? Mr. Hayward. — Of course the company claimed more than was allowed them. I can't give you those figures. Senator, off hand. Q. Did they claim that full amount on their bonded? A. I don't remember whether it runs up to the amount of their bond issue or not. Q. Their bond issue is $3,178,000, — does that help you in any way to fix the amount? A. I don't remember but this $3,050,000 was the conclusion by Dr. Webber and the experts of the Commission, and I think it is absolutely fair. ISTow, in the cost of manufacture of the Kings County Lighting Company made a contract which I do not accept as being a bona fide contract for gas oil, and I have seven reason for doubting that contract. Q. Will you enumerate them ? A. I think I can. This com- pany has been running along and buying its oil at a little more than four cents a gallon — 4.17 perhaps. Kepoet of Joint Legislative Committee 1191 Senator Thompson. — 4.18 is what it was. A. 4.18. Made this contract for oil at 4.575. That makes a difference, reduced the cubic feet of gas of more than six cents a thousand. Now there should be borne in mind in connection with that oil contract certain facts. Commissioner Williams states in his opinion that this rate ought to prevail, only ought to prevail up to December first in 1916, when that particular contract expires. Now that contract was made by this company nearly a year before they needed any oil — eleven months, to be accurate. It was made with the Standard Oil Company when the price of oil was falling. It was made when there was no threat of any shortage of oil of any kind, and it was made for nearly a two-year supply. It was a much higher price than other companies, as shown by our record in this case, made contracts for oil between the time when this Kings County Lighting Company improvident contract was made, and the time when they would need any of the oil contracted for. Other companies, and it is in this record particularly the Brooklyn Union Company, and it is in the annual reports of still other com- panies who made a contract for a high price of oil at a certain period, not for as long a time as this company made it, went to the Company and were let out of their contract by the Standard Oil Company and put down for the supply of oil at current prices. The man who made this contract for the Kings County Lighting Company, Secretary of the Company, I forget his name, the Com- mission's counsel sought industriously to get him to take the stand to explain this peculiar oil contract. They could not get him and it was said he was in Japan for his health. Since the Commission has closed its hearings, he has returned. I say that those things are sufficient to cast a doubt on the bona fides of that oil contract. But even conceding that that oil contract was made in good faith, I arrived at a rate of eighty-five cents to be put into effect the first of January, because this rate would probably exist for, predicated on past history, for a good many years, and I do not think it is fair to allow an improvident contract of such unusual proportions and such unusual rate which will only be in effect for a few months of that possible long period of years, to prevail over the entire period. That is to say, the company can now go and make an oil contract at proper and suitable figure on which an 1192 Investigation of Public Seevice Commissions eighty-five cent rate may be based, and even now if that contract is made now it won't be as far in advance of other actual things as this improvident contract was. Q. Was when it was made. A. They made that contract eleven months before they needed that oiL I say they can make a con- tract now which won't be eleven months ahead of the time when that improvident contract will be used up. Q. And also at a lower figure ? A. Yes. And I think — it may not be strictly judicial to consider it from that light — but if rehearings are asked for by this company, this witness I spoke about is present in the United States, and on the rehearing, if any new matters a're offered before the Commission, we can get this man and have him explain the nature of the peculiar contract. Q. What was the market at the time? A. Senator,, it will astonish you that that fact was not susceptible of proof. I tried very hard — I got oil experts — and none of them would give the market price of oil containing the same number of thermo- heat units that the oil contracted under this contract gave. We got approximately to this amount but it seems there was no such thing as market price on gas oil. The nearest we could approach it was to take the prices other companies had made. Q. How did it compare with those prices ? A. Of course it was very much higher, a great deal higher, and it was very much higher than the previous contract, and very much higher than other contracts other companies made, a few months later, and very much higher than they would have to pay now, and very much higher than the price of oil paid by any other company over a period of years, which I think is a fair basis to predicate a rate on. And I may say Commissioner Williams agrees with me absolutely on that proposition, except he don't agree that a lesser rate than shown on the present contract can be put into effect the first of the year. He wants to wait until the first of the year 1916. Q. This period calls for the first of December, 1916. A. Of course, that would be three months after this improvident contract expired. Mr. Williams. — If I may be allowed : I allowed three months and in the meantime we probably would have to reopen for taking in this testimony or some other testimony as to what the new price of oil was. Eepoet of Jois-t Legislative Commq-tbe 1193 By Chairman Thompson: The Commission will allow this matter to rest now until our investigation ceases in respect to it. Q. I think you have testified, have you not, Commissioner, that in your conclusion, your opinion which you have prepared, you have reached the conclusion, or you expressed the view that the rate should not exceed eighty-five cents for a term of five years ? A. Yes. On the theory — there is an unusually high price for oil that will last for a few months. ISTow, counting the application for a re-hearing which may or may not follow, that time will soon go by. I think it is very much fairer to the public to anticipate that the Commission within a few months or a year will allow an incre^e on this rate ; that it is in the interest of the company to think that if they get a good oil contract they will reduce their rate. I mean, I think we can certainly operate more quickly in granting them an increase in their rate than we can operate in granting a decrease. Q. You think the Commission is more likely to operate in granting an increase than in bringing about a reduction? A. T go on the theory if the Commission came to the conclusion because of a continuing high price of oil, a rate fixed by the Commission had proven to be inadequate, and allowed an increase, that nobody would appeal from it, whereas if the company fixes now and paid a high rate and seeks subsequently to reduce it, owing to changed conditions, there undoubtedly would be appeal. Chairman Thompson. — How do you find the fact that the up- State Commission allowed an increase in the rate paid at Lock- port in less than two months from the time of the application ? Mr. Hayward. — Thank the Lord, I am not responsible for half of the Commission. Chairman Thompson. — The rate you arrive at is what ? Mr. Hayward. — Eighty-five cents. I think. Commissioner Williams, the rate must come down after this oil contract expires. But I say that they took advantage of eleven months to make this contract, eleven months prior to the time they needed this oil, and that was prior to the time they made the contract. Ai;id there is 1194 Investigation of Public Service Commissions another feature of the case, and that is on the wastage. The testi- mony taken subsequent to the return of the case from the courts had something bearing on that. The records disclose that the Flat- bush Gas Company and the Brooklyn Borough Company, and the ISTew York and Richmond Company, which operate in the same territory, and therefore are subject to the same climatic or soil conditions, which was probably accounted for — this loss from wastage amounts to 8, 10 and 12 per cent., respectively. Now, Commissioner Maltbie, in a previous opinion, allowed 11 per cent., and I think Commissioner Williams took 14.3 per cent, l^ow, the old figures of Commissioner Maltbie of 11 per cent., I am not sure that was before the Court of Appeals, but it was before the Appellate Division, and they did not disturb it. Q. Did not the Appellate Division pass upon other questions than that — they did not attempt to pass on that question ? A. N"o; but I will — Q. Because the Appellate Division found some other conclu- sions upon which to base a reversal? A. That is true. I say there has been no evidence in the record to warrant a change in Commissioner Maltbie's estimate of 11 per cent, for loss and leakage. Q. Should there be an allowance for loss by reason of failure to maintain the plant of 100 per cent, efficiency ? A. ISTo, sir. Q. And a further allowance for maintenance — and a still further allowance for depreciation ? A. ISTo, I don't think there should be. Q. Isn't that the fact as it appears in the opinion of Commis- sioner Williams ? A. Well, I do not feel warranted in reaching that conclusion myself. Q. Have you reached a different conclusion in your opinion? A. Well, I have allowed 11 per cent. Q. For leakage ? A. For leakage. Q. And that is due to failure to maintain at proper efficiency, isn't it ? A. I think the testimony shows. Senator, that all com- panies, no matter how efficient or how well it may be kept up, necessarily undergo this leakage in the present system. It is not entirely leakage. The experts both for and against the company testified that condensation and all sorts of things like that other Eeport of Joint Legislative Committee 1195 than leakage. I take 11 per cent, primarily because Cominissioner Maltbie took it, and because it has not been disturbed and because that is a fair average of what the other companies in the same neighborhood are allowing, and because I think it is fair to this company. Q. That is 3.3 per cent, less than Commissioner Williams has taken. Now, do you allow in your conclusion $197,0-00, or 23 cents per cubic foot for taxes and other operating expenses ? A. Well, in that item, Senator, should be included all of the expenses outside of the gas manufacturing plant. As I recall it in the prior case before Commissioner Maltbie, and what little reference there was in the subsequent hearing, the cost of manu- facture was the cost of the actual plant including the salaries of the laborers who shoveled the coal into the furnaces and all that sort of thing. Q. And cost of oil ? A. Cost of oil is the biggest item. Senator Foley. — You said the cost of the original labor that went into the capital ? Mr. Hayward. — J\"o. I say the cost of manufacture. By Senator Foley: Q. Is put into these different tables, different items, 28 cents, or 30 cents, or whatever conclusion you come to? A. That is the cost of the plant. In other words, it is the cost to the Brooklyn Union, who manufactures gas and sells to subsidiary companies. That is the manufacturing cost and includes wages and everything of the men working at the manufacture and plant, and that includes — By Mr. Lewis : Q. Does that include the delivery to the consuming company, retailing company? A. It includes the cost- — well, it depends on whether the distributing company owns the holder or any. interest in the holder or does not own the holder. In some cases they do own the holder and in some cases the manufacturing com- pany owns the holder. In this case the company owns the holder, and under the cost of manufacture the holder, as I recall it, is included in that. 'Now, on the other expense there is taxes and uncollectible bills, and I guess maintenance remains and such 1196 Investigation of Public Service Commissions overhead charges as office and office building other than the plant. There must be in that table- — Q. You will examine that between now and the morning? A. In the main that is the way those two items are subdivided. Chairman Thompson. — I did not understand you following up Senator Lewis' question. How far apart are you from each other on the $193,000. Mr. Hayward. — ■ We are very close together on all the figures, and I accept all of Commissioner Williams' figures, but I take Y per cent, as the fair return on the theory that it was set in the previous opinion of Commissioner Maltbie. A half of one per cent, was allowed for the vague thing they call going value. The court did not allow that as an offset for going value, and sent it back for determination of going value. Q. What, if any, going value that was to be considered? A. Now, we have deteiTnined there was no going value, and I do not see any reason why we should allow a half of one per cent, on the return of investment to be covered by that. I had also those figures Commissioner Williams used, as tabulated by the experts. Q. You have not sat on the Commission long enough to go into this — you did not hear the testimony ? A. No ; I only heard the testimony since I came on. Senator Foley. — Do you think this report would have sus- tained a 6 per cent, rate in this case as they did in the Consoli- dated Gas Company? Mr. Ilayward. — Well, Senator, the Federal Law — the Con- solidated Gas Company went up on the proposition of whether or not a rate was confiscatory, under the Federal Constitution. Now, our rule in this State must necessarily differ from that. That does not apply to our non-confiscatory, and fair and reasonable are not synonymous terms. I think there is a rather shadowy line between the two ; that is, that a rate might be held to be non- confiscatory by the federal courts which our State courts would not hold to be fair and reasonable, under the elements set out in our law to be considered. Adjourned until November 19, 1915, at 11 o'clock a. m. iiEPOET OF Joint Legislative Committee 1197 NOVEMBER 19, 1915 New Yoek County Lawyers' Association Board Eoom, 165 Broadway, New York City The Committee met at 11 o'clock a. m., pursuant to adjourn- ment. The Chairman. — The gentlemen of the Committee will please come to order. Mr. Lewis. — I will call Mr. Blaney for the purpose of enabling him to make a statement which he feels that he should make. William C. Blaney on the stand. Examination by Mr. Lewis: Q. You have some statement you desire to make, Mr. Blaney, in connection with your record yesterday ? A. Only in connection with Mr. Cram's absence. The question was asked whether he was at his office Thursday — Wednesday. I said he was not. Mr. Oram was under the care of Mr. George Stewart, 61 West Fiftieth street, having strained the ligaments of his knee, and unable now to get out of his home. Q. Is that all ? A. Yes. Chairman Thompson. — Mr. Cole, I asked you yesterday for some information in connection with the Kings County Lighting Company. Mr. Cole. — I have produced, Senator, a list of the voting trust certificates of the Kings County Lighting Company. I want to say that this list was requested of me here yesterday morning, by the Chairman, and as soon as he requested it, I ordered it by tele- phone, and I found it at my office when I returned from these hearings, and I produce it at the first opportunity this morning. There is no attempt to conceal. Chairman Thompson. — 1 will say as Chairman of the Com- mittee that the information is furnished just as quick as it pos- sibly could be expected, and without any objection whatever. There is no objection manifested by Mr. Cole. I don't know 1198 l:\VESTiGATios OF Public Service Commissions what he had to do. What has become of the other hundred shares ? There is only 19,900 here. There ought to be another hundred shares — two million stock. Mr. Cole. — That must be an inadvertence. These books are in the care and control of the Central Trust Company. I will call them up and call that to their attention right away, and see where that is. Mr. Lewis. — Mr. Walker has furnished at the request of the Committee, communicated yesterday, three copies of the order in case ISTo. 1893, the so-called Third Avenue case, — repairs to the Third Avenue line, offered in evidence yesterday, but were not physically present. Coit:.rissioxEii Wiixiams on the stand. Examination by Mr. Lewis: Q. Mr. Williams, have you a copy of your opinion with you? A. Xo. I used one of yours. I have got the data that you asked for, Senator. Q. Have you produced, Mr. Williams, the details of the esti- mates of an allowance of 23 cents per thousand cubic feet ? Chairman Thompson. — I want to make anothei- statement here — very brief, but I rather deplore anyone attempting to take advantage of the Chairman of this Committee, in relation to pub- lishing any alleged facts al>out how the matters have been carried on with the Committee. I refer particularly to an article in yes- terday's paper of some fellow who claims he is entirely responsible for what is going on here. In relation to that particular fellow, he has no more to do with it than somebody up in ISTiagara County, and when the proper time comes I will be glad to take those matters up, but I do hope the press won't go publishing fiction in relation to these proceedings, because it hurts everybody involved as well as the Chairman of this Committee. Q. ISTow, have you before you the details of the 23-cent allow- ance? A. Yes, I have. It figures rather more than 23 cents, but it was reduced to 23 cents for the purposes of this case. It is all that is marked in the black pencil ipark. Includes all those items marked in black pencil mark in front. -Kepoet of Joint Legislative Committee 1199 Q. By whom was this prepared ? A. By Mr. Hine or Dr. Web- ber. That is part of an exhibit in the case — 46, offered by the Commission. Q. And do you know by whom it was prepared? A. The statistician, I am told, by Mr. Hine. Q. Did you examine this with care, Commisssioner ? A. ISTo. Q. You took the statistician's word for it? A. Yes. It was an exhibit in the case. I don't know whether it was disputed or not by the company. Q. Do you know the number of customers of the Kings County Lighting Company in 1914? A. JSTo, I do not; not offhand. Q. Did you investigate to ascertain ? A. At the time we talked over the facts in the case, 1 think it was stated by counsel or some- body — although it was not so much a question of customers as it was the output and the amount of gas consumed. The question of customers would come in on the valuation of the meters. Q. I believe there is a statement in your opinion? A. There may be of the number of customers. If it was, it was in the part of the opinion that was gotten out by counsel. Q. Suppose you see if you can find it while I examine this, will you ? In your opinion, you provide an allowance of $197,379 for other operating expenses — 23 cents per thousand cubic feet sold? A. Yes, sir. Q. Will you tell us how you reached that figure ? A. Why, the actual expense — by taking the actual expense from 1914 and even reducing it a little — reducing the figures per thousand. Q. How much reduction did you make? Do you know how much reduction you made? A. This is Mr. Hine, our gas engi- neer. Can I just leave — after getting to the office last night I asked Mr. Hine to cover this, as it dealt in figures he was familiar with, and I wanted other operating expenses, 23 cents per thou- sand sold. This is the estimated cost covering the operating expenses, except street lighting, and those expenses included net manufacturing and cost. It included taxes and uncollectible bills. The estimate is based on the actual expenditure for these items during 1914, and previous years, except that legal and other expenses connected with the rate case items, which will probably iiJOO Investigation or Public Service Commissions not be again incurred, have been eliminated. It is exclusive of any interest charge. Q. It is inclusive? A. It is exclusive of any interest charges. It covers distribution expenses, commercial expenses, all general expenses chargeable to operation, repairs to mains, service, mexers, taxes, uncollectible bills, and so forth. And then it is elaborated in this memorandum v?hich is in this blue print, which is marked with a lead pencil. It covers the items that are preceded by the lead pencil mark. Q. Now, on page 26 of your opinion, you define other operat- ing expenses as appears in the table on page 29, for which an allowance at the rate of 23 cents per thousand cubic feet sold is made, and in your definition you say, " Other operating expenses, including taxes and uncollectible bills, excluding depreciation for the period, will be covered by 23 cents per thousand cubic feet sold. This is a fair average of those expenses in past years." A. Yes, sir, and less than in 1914, actual. Q. Eor the year 1914 you allowed $49,816.28 — $49,818, I guess that is — that is one of the items that goes to make up the $197,000, is it? A. Yes; that is the tax. Q. That was the tax in 1914? A. Yes. That carried out into cents per thousand, means 6.09. I have another, but I will give you that. Chairman Thompson. — Mr. Williams of Buffalo is here and he wants a conference in relation to the amendment of the law, and because he comas from Buffalo, and because I come from up that way, I have a little soft spot for him, and I would like to get him out of ISTew York, because I know it is a bad place for him, and we will suspend long enough. Mr. Williams. — We have a meeting at 12.15, and I would like to attend that meeting. Q. Now, your uncollectible bills for which you allowed for 1914 is $6,669.27 ? A. Yes. Amounts to about eight-tenths of a cent. Q. We will get at that a little later. Now, in addition to taxes and in addition to uncollectible bills, did you allow the items for transmission and distribution expenses? A. Yes. Eepoet of Joint Legislative Cojuiittee 1201 Q. And at what figure ? A. Well, you have the figures there. Q. Did you look at the figures for 1914, same figures reported? A. Well, a little less — we allowed a little less than 1914. Q. Suppose we put in the figures. A. Total transmission and distribution amounts to 7.8 per thousand. Q. Transmission and distribution, that amounts to $33,822.41. Did you allow for supplies and expenses, including repairs of mains, service meter and appliances? A. Yes. Q. Which amounts to $24,093.95, according to this table? A. Yes. Q. Did you allow the item for commercial administration? A. Yes. Q. That figures $34,309.10. Did you allow for promotion and other office expenses, adding canvassing and soliciting? A. Yes. Q. That amounts to $5,977.91. Did you allow — A. General law expenses. Q. General law expenses, $14,919.77? A. Yes. That is, exclusive of any law expense. The whole thing figures, exclusive of any law expenses, exclusive of law expenses connected witl fighting this case — which is the nonnal expense. Q. Did you allow other general miscellaneous expenses, includ- ing salaries, insurance, accident claims and expenses in connection with such claim, amounting to $26,877.90? A. Yes; if that amount is there. Q. And did you allow an item for general amortization? A. Yes. Q. Amounting to $25,290 ? A. That is in the part of the depre- ciation. If that is marked, that is a mistake, Mr. Hine says. That you will notice the part in pencil mark does not extend to that. That is the depreciation. Q. No allowance was made for general amortization, other than in the item for depreciation, then ? A. That is right. Q. And did you allow for office rent an item of $2,775? A. Yes. Q. Seems to be included here? A. Yes. Q. Two thousand three hundred and seventy-five dollars, — and you say you depreciated the aggregate of these various items to some extent ? A. Yes ; in fixing the 23 cents it was depreciated somewhat from the 1914 actual. 1202 Investigation of Public Seevice Commissions Q. And arrived' at the figure $197,379 ? A. Well, whatever it is. We arrived at the 23 cents per thousand. Q. And used as the flat basis ? A. Used that as the percentage to work on. Q. Which resulted in shrinking the allowance in order to get the flat rate of 23 cents per thousand — shrinking the allowance to the extent of $1,2-14.69 ? A. I don't know just the amount, but it did shrink it some. Q. Now, Mr. Williams, you said on page 26, " That this is a fair average of those expenses in past years." A. Well, that is what counsel stated in his draft of opinion to me. Q. Did you examine it in any way to ascertain that was the fact or not ? A. I talked it over with counsel and Mr. Hine at the time. I think they were both in the ofiice. Q. I call your attention to the item of transmission and distri- bution expenses. -A. Yes. Q. In 1910 this item amounted to $15,876.72; in 1911, to $17,821,59; in 1912, to $21,540.47; in 1913, to $35,147.42, and in 1914, to $33,822.41 — you allowed $33,822.41, subject to the shrinkage, and did you regard that as a fair average of the five preceding years? A. Well, I don't know as that was taken in particularly at all. The whole thing was added up and taken, as I remember it, and the ratio which I hold in my hand, operating cost to the thousand cubic feet made and sold, would be what we would figure on rather than the flat amount. Q. But you certified, Mr. Commissioner, in your opinion that you have allowed the fair average for the five preceding years 23 cents — no, you say, " other operating expenses, including taxes and uncollectible bills, and excluding depreciation for the period, will be covered by the 23 cents per thousand cubic feet sold. That is a fair average of those expenses in past years." A. That in- cludes everything on this blue sheet. Q. But you do not say that it is a fair average of the cost per thousand cubic feet. You say, " This is a fair average of those expenses in past years." I wondered if you took any care to inves- tigate and ascertain what the expenses had been in past years? A. Certainly. Q. And made a computation ? A. I did not do it, but it was done by counsel and Dr. Webber or somebody else. I did not say Repoet of Joint Legislative Committee 1203 it was a fair average of every individual expense, you know, Senator. And, of course, in speaking of that, you meant tlie unit cost compared with, the amount sold and made. Q. Adding the cost of transmission and distribution for each of the iive years shown on your table, gives a total for that period, 1910 to 1914, inclusive, of $134,308.63 — dividing that by five, gives an average of $26,841.72, as against an allowance of. $33,822.41, an actual increase of $6,980.69, of 1914 over 1910, that as the probable increase for the same character of service for 1915 or for the year 1916. A. No. It had something to do with it, of course, but we figured on the production and the ratio of the expense to the production or the receipts from production. You cannot take one into consideration without the other, and then these items all should be added. You will notice that some of them are quite some less in 1914 than they were in 1913. Quite a number of them. Even the ratio I have here in my hand. I don't know that the individual items were less - — I will not say that, but the ratio was less. Q. There have got to be some that were considerable less to overcome the increases to maintain the average? A. If the gas output had increased — it is the ratio between the two. The other memorandum I have here I think will explain that clearly. Q. Well, take the item of repairs of mains, for instance: In 1910 the repairs were $5,485.72; 1911, $8,121.09; 1912, $6,295.31; 1913, $17,830.24; 1914, $12,178.95? A. Yes, but you take that sum that includes main services and meters. Q. J\o; that is simply for mains; that shows an increase of approximately $2,000 above the average. A. I haven't that set forth here in detail but take the repairs to mains and meters of the transmission system in 1912, it was 4.73 cents per thousand of gas made and sold; in 1913, it was 4.31 cents; 1912, it was 4.73; 1914, 4.31; 1914 it dropped to 2.95. These are actual. Perhaps you don't understand what I mean. Q. Yes, I know what your proposition is. A. You might just as well say you paid $10 for butter without knowing the number of pounds that you buy, and then try to say whether it is reason- able or not. Q. That is not what I am trying to develop. Commissioner. What I wanted to know is that is — by your opinion you make an 1204 Investigation of Public Service CoMJvnssiONS allowance of 95 cents per thousand cubic feet of gas to be manu- factured and sold during the period from December 1, 1915, to December 1, 1916. You arrived at the probable cost of produc- tion of that gas by having before you the various elements of cost in 1914 — you state that you are allowing for the expense of pro- duction a fair average of vehat it cost in previous years — that, of course, is based upon production in thousandths of cubic feet or in units, and that element must be taken into consideration, but I wanted to know what, if any, actual study you made in arriving at your conclusion that 95 cents is a fair and just rate to be charged to the consumer — what actual study you personally made of the cost of production of previous years — now I understand you, that you made no study yourself, and that you took the figures upon that subject that were submitted to you by the statisticians and the counsel of the Public Service Commission, — is that cor- rect ? A. And exhibits in the case. These were exhibits in the case. Q. Prepared by the statistician and his assistants? A. Of course, I would have no way of ascertaining the truth of these statements without a personal examination of the books of the company and surely no one could expect that. By Chairman Thompson: Q. They did not have any books, did they? A. Yes. Q. Wasn't there for a good many years they did not have? A. That has nothing to do with it. By Mr. Lewis, resuming: Q. That has nothing to do with this period. A. They have very complete books, I am informed. By Chairman Thompson: Q. And I remember, there were a good many years they pro- ceeded without any books at all. A. That was away back before the Public Service Commission was originated. By Mr. Lewis : Q. You may stand aside now, Mr. Williams. A. Just one more thing I would like to put in about this 14.7 per cent, of unaccounted gas. Eepoet of Joint Legislative Committee 1205 Q. You want to get away? A. I want to go in the next five minutes. I can do this in a minute. Q. I would like to have an opportunity to talk with you when I would have more time — five minutes would not be enough time. By Chairman Thompson: Q. This is very important and, of course, we do not want to interfere with your work any too much. There are some things over there from our present information we would be glad to interfere with, but we want to get this thing done, and when it gets done we hope to go along in the regular way. WiLLAED F. TIisTE takos the stand. Examination by Mr. Lewis: Q. Mr. Hine, what is your position in the employ of the Public Service Commission of the First District ? A. Chief gas engineer. Q. And how long have you been employed in that position? A. About four and a half years. Q. Where were you employed before that? A. With the Velaque G-as Lighting Company of Missouri. Q. An operating company ? A. An operating company. Q. Have you had any experience in the manufacture of gas? A. I have. Q. State what it is, if you please. A. Well, the Velaque Gas Lighting Company, I was with them some four years and went through the various manufacturing departments of both coal and water gas manufacture. I do not recall the time I was in each department. I was directly in the work for two years and with the chief engineer for another two years, where my work was in connection with the works' distribution, transmission and other engineering departments. Q. Were you a graduate of an engineering school ? A. Univer- sity of Wisconsin. Q. Degree of ? A. Bachelor of science and electrical engineer. Q. Have you acted as the expert in connection with the investi- gation of the rate case known as the Kings County Lighting Com- pany case ? A. The last part of the case I was on the stand and testified. 1206 Investigation of Public Seevice Commissions Q. What do you mean by the last part of the case, — after its return from the Court of Appeals ? A. Yes. Q. And did you make a study in order to qualify yourself to testify ? A. I certainly did. Q. And did you examine the books of the Kings County Com- pany for the purpose of informing yourself as to the cost of pro- duction as figured by that company ? A. I was testifying in this case as to values, not as to cost. I do not believe I was put on to cover operating costs. Q. Well, did you prepare this schedule of comparative detail operating expenses, taxes, and so forth, for the years 1910 to 1914, inclusive ? A. I did not, but I understand that is taken from the books of the company, and I know it is just taking figures that appeared in the annual reports of the company to the Commis- sion. I have seen those and studied them in various ways. Q. That is in the reports ? A. In the reports. By Chairman Thompson: Q. It is company's figures and not yours? A. They are the company's figures and not mine. We could not have figures on operating expenses. Q. Well, you were quite certain when you started off and I expected quite a little certainty from that answer. A. I did not testify. I did all the things I testified to, yes. Examination by Mr. Lewis resumed: Q. Were you aware of the fact that in the opinion prepared by Commissioner Williams allowance is made of 14.3 per cent, for loss of gas and transmission? A. I became aware of that last night, I believe. Q. For the first time ? A. For the first time, that he had used it in his opinion, yes. Q. You did not furnish him the information, then, jipon which he made the estimate or made the allowance of 14.3 per cent, for loss in transmission ? A. Well, I furnished him with considerable information when we were going over this matter some time ago, and in checking it over last night I found it was practically the figure for 1914. Eepoet of Joint Legislative Committee 1207 Q. That was the amount lost by transmission in 1914 ? A. That was the unaccounted for gas in 1914 — unaccounted for in every way. By Chairman Thompson: Q. Where did you get that, from the books of the company? A. From the books of the company. Question by Mr. Lewis (resuming) : Q. Did you make any investigation to ascertain whether those calculations of the company were correct or not? A. Yes. I made several calculations. Just subtracting the amount of gas accounted for from the meter registration at the works and the difference would be the unaccounted, for gas if you made allowance for street lighting, and dividing that. Q. You have made that calculation ? A. I have made that calculation. Q. And you reached the 14.3 ? A. Yes. I made a rough calcu- lation. Between 14.2 and 14.3, as I remember it. Q. And did you recommend the allowance of that percentage? A. I do not believe I made any recommendation as to the allow- ance of that at all. I suggested it. Q. How in your experience does that compare with the allow- ance in loss in transmission unused ? A. I don't know as you can say there is a usual allowance for loss in transmission. You will find in any company there is a certain amount of unaccounted for gas. Q. And what in your experience has been the average percent- age of unaccounted for gas ? A. Depending on the company, the number of consumers per mile of main, of kind of distributing system they have and the accuracy with which they keep up their station meters and consumers' meters. This will vary anywheres from — I have seen figures as low as 2 and 3 per cent, and up to 25 and even 50 per cent, of the total gas manufactured. Q. And that depends largely on the question of the efficiency of its administration, does it not ? A. In some cases, but I believe that even with equal efficiency of distribution conditions are a great factor. The number of consumers per mile of main has a 1208 Investigation of Public Service Commissions tremendous influence, and the amount of condensation in tlie mains is very large if you have high pressure distribution. Q. And what do you mean by the term high pressure distribu- tion ? A. Why, I was applying that to pressures between two and five pounds. By Chairman Thompson : Q. That has something to do with the amount of air they put in the main ? A. I am not familiar with any air going into mains any place I have been. Q. You were not responsible for that statement that the gas bills were the same whatever the price of gas was? A. I have made some very interesting computations to see what happened, and it seems the people get used to a certain bill ; they burn more gas and bum more light and pay as much. That is not saying they do not get any more. They get more service if they want it. Q. Your experience is they pay the same amount of money? A. Within reasonable limits. I made figures for one case I remember — the Queensborough Gas and Electric Company — where the rates went down from 135 to 115 per thousand, and the sales per service were practically the same ; they would go up and down a little, and I have seen other cities where there was consid- erable reduction in the price of gas and the average bill of con- sumers would go up, due to the fact that it could afford to use it for other purposes it could not use it for before. But that is not saying he was not getting a great deal more for his money. Examination by Mr. Lewis, resumed : Q. (Last question by Mr. Lewis repeated.) A. I was referring to what is sometimes called intermediate high pressures of between two and five pounds for distributing gas at higher pressure and I was not referring to those higher pressures then. Q. What is the usual and ordinary pressure gas as used by — A. Is somewheres between two and six inches of water, pound pressure. Q. What is that in pounds? A. As I remember, 28 inches of water pressure are equal to one pound and can be reduced back. Q. Two to six inches would be ? A. Yes, — very normal pres- sure as we think of pressures. Eeport of Joiwt Legislative Committee 1209 Q. Is high pressure, two to five pounds, a usual pressure in the distribution of gas to consumers? A. That is used by certain companies that have a certain kind of system. It is now becom- ing quite usual. They have transmission mains in which they carry these high pressure, and feed from these mains through governors into the regular distributing system. Q. And is this Kings County Lighting Company operating by that method? A. It has a high pressure distribution system at present in which they carry pressure of the ordinary pressure into distribution mains. They can go as high as five pounds. Q. That generally is in use by that company, usually and con- tinually ? A. I think it has been in use by the company between two and three years. Q. And that operates, as I understand you to say, to increase the condensation? A. It would increase the condensation, yes, sir. Q. And you say that companies have distributed with a loss even as low as two per cent. ? A. That is not loss, and it is not right to say a loss. I said unaccounted for gas. Their station meter might be wrong. I have seen one company where they sold more gas than they made. If their station meter is not correct that would account for the difference. Q. I take it you mean the aggregate of the meter readings of the consumers exceeded the aggregated meters at the plant? A. Yes, that is correct. Just fooled themselves. Q. Well, did they fool themselves or did they fool their cus- tomers ? A. In this particular ease it was manufactured Pintsch gas and they could not fool their customers and so they were fool- ing themselves. Q. Do you regard 14.3 per cent, as a reasonable allowance for unused gas manufactured under the conditions which prevailed at the plant of the Kings County Lighting Company? A. I could not answer that question without the most detailed study that would take a very, very long time. It would be caused by 101 considerations. I do know that their average unaccounted for during the past few years has been somewheres in excess of 15 per cent. Q. As shown by their books? A. As shown by their books, their records and meter readings and sale for street lights. If 1210 Investigation or Public Seevice Commissions the governors on the street lights were in error and allowed more gas to pass than they figured to pass, that would account for it. Q. You say you know that by reports made by the company? A. From their books. Q. JSTot from any actual knowledge of your own? A. There would be no way of getting any actual knowledge of that subject except by looking at the books. Q. There would be a way of getting at your knowledge by testing their meters? A. By reading their meters and testing every individual meter and knowing it would be right would be a practically human impossibility. Q. And there is no practical way of telling whether or not 14.3 per cent, is an equitable allowance for unused gas in this particular case ? A. Oh, yes. That could be done by making a study of the station there. A detailed and long exhaustive study. You could find out whether there was anything wrong. That naturally would be very complicated and would have to be gone into with considerable detail. Q. And was any investigation made as a basis for this decision ? A. K"ot by the Commission. The company introduced a witness at the hearings who testified at considerable length on a case of the Kings County Company case. Q. And was his testimony in any way controverted ? A. There was no way of controverting it. Q. Accepted, was it, as the basis for this determination? A. ~No, I don't know as it was accepted. I don't know what was done. E'obody said anything against it. Q. Well, what was the substance of his testimony? A. The substance of his testimony was that he had made an examination of the plant there. It was necessarily hurried in that case but he had gone over everything as hurriedly as he could but he could not find out anything out of the way, and he testified they cer- tainly had that unaccounted for as shown by the books. Now what caused that unaccounted for gas he could not detennine. That would be a separation of various elements. He also testified to the fact — Q. Now did he testify that the unaccounted for gas equalled 14.3 of the production ? A. No, he did not testify to that. Q. Did anybody testify to that ? A. That their figure ? Report of Joint Legislative Committee 1211 Q. Yes. A. I don't remember that figure at all. Q. Do you remember any figure testimony in support of which was given? A. He testified to the figures as shown by the com- pany's record. Q. Do you remember what they were ? A. I do not. ^. Were they greater or less than 14.3 ? A. I think some were greater and some were less. I think their average figures for the last four or five years were something in excess of 15 per cent. Q. Isn't it true that with the proper allowance for maintenance and the expenditure of the allowance under proper direction, the percentage of unaccounted for gas would be reduced? A. I cer- tainly could not say anything like that. Q. Well, let me ask you this then : Isn't it true that a consider- able part of the unaccounted for gas may be due to leaks in the main? A. Certainly may be. Q. And isn't it more than likely that a percentage of the unac- counted for gas is due to the leaks in mains ? A. Certainly, — a certain portion of that is due to leaks. Q. Isn't it possible to discover those leaks and correct them? A. To a certain extent it is. Q. Have you had any experience that enables you to testify as to what part of that 14.3 per cent, may be due to leaks? A. Wo experience whatsoever. It is a practical impossibility to deter- mine just what percentage of the unaccounted for is just due to leaks. Q. It would be impossible to determine just what but it would be possible to determine approximately? A. I have seen the attempt made. It is very difiicult and would be probably accurate within 50 or 100 per cent of the results. Q. That is as close as it can be made? A. Yes, there are so many factors that enter into the calculations it is almost im- possible to say what the leak is. Q. Did the Velaque G-as Company have any such percentage in unaccounted for gas while you were in their employ? By Chairman Thompson: Q. You will have to do just as other witnesses in answering questions. 1212 Investigation of Public Service Commissions Q. Did it or did it not? A. I couldn't answer that question in that way. Impossible. Q. Do you know? A. I happen to know what their leakages were, and I cannot answer it in that way. Q. You can answer that yes or no ? A. I can't answer it. Q. What do you know of the percentage of unaccounted for gas while you were employed by the Velaque Gas Company ? A. I know very greatly. Q. From a minimum to a maximum what was the range? A. Of course I am now testifying from memory. It varied on the yearly average from somewhere around about 10, a little above, up to as high as 14 per cent. And the monthly average of it even brings the half year, would be much greater than that. Almost unexplainable at times. Q. Have you ever been employed by any other gas coinpany? A. I have not. Q. Your experience, then, has been limited in this matter to your services with the Velaque Gas Company, is that true? A. I have had experience with other companies, doing work for them while in the employ of the Velaque Company, and the experience I have had here. Q. What other companies? A. I don't remember the names of some of the companies. I would be sent out on special work by the engineer of the Velaque Gas Company in that country — various little western towns. Q. Do you regard 14.3 per cent, unaccounted for gas as a reasonable allowance to be made in this particular case? A. I don't know. I could not answer that question. Q. Did Mr. Williams have any more information on the sub- ject that you know of than you have? A. Not that I know of, no. Q. Then isn't it true that his allowance is more or less a matter of guess-work ? A. It must be an estimate. Q. Well, is it an estimate or is it a guess? A. I would say it was an estimate on the experience of the company, and on the experience of the company it must be a conservative estimate. Q. Did you have any duty in the preparation of the opinion by Commissioner Maltbie when he prepared an opinion in this case, and decision ? A. I did not. This was some time ago and Eepoet of Joist Legislative Committee 1213 I believe I sent in a few reports on various factors, but I don't know just what they were now. Q. Did you send any report on the proposition of unaccounted for gas ? A. I think I did. Q. Do you remember what ? A. I do not. Q. Was it 11 per cent. ? A. I would be sure it was not 11 per cent. Q. Was it more or less ? A. I don't know as to that. Q. Haven't any recollection on the subject? A. I have no recollection of the details. I just remember sending in a report. Q. Are you prepared to say that you did not recommend to Commissioner Maltbie an allowance for unaccounted for gas of II per cent, of the production? A. I don't know, but I would not believe that I had made any such recommendation because I would be surprised if I came to some even figure like that, and I do not remember my report. Ey Chairman Thompson: Q. It would not be becoming an engineer to make a statement in even figures ? A. It is very seldom that figures will come right out with no fractions unless yon make them that way. By Mr. Lewis (resuming) : Q. You understood that this matter was in Commissioner Wil- liams' hands for decision, had been referred to Commissioner Williams for decision? A. I did not know it had been referred for decision. Q. Didn't you know that Commissioner Williams desired the information afforded by these blue prints for the purpose of enabling him to reach a conclusion as to the- rate which would be properly allowed to the Kings County Lighting Company ? A. I know that he asked me several times in connection with other people to come up to his room and we would go over this matter. Q. And you did ? A. And we did. Q. And you knew at the time that it was the Engs County Lighting matter ? A. I did. Q. And you knew that these figures which I understand were prepared and submitted by you to Commissioner Williams were for use in that case ? A. I did not prepare them and did not have 1214: Investigation of Public Seevioe Commissions anything to do witJi them and just got them from the statistician's office today. Q. I understood Commissioner Williams to say that these were prepared and submitted by you. A. l^o. Those were submitted by the statistician of the Commission. I have seen copies of those exhibits and undoubtedly have them in my office and studied them. Q. Were there copies of these exhil>its in Commissioner Wil- liams' possession at the' time that you were called into conference by him? A. I don't know. There had been copies of exhibits and boiling down of exhibits there and I know that they were in the possession of counsel, the original exhibits are in possession of counsel and the counsel had all his papers down there at some time. Q. Did you have this particular schedule before you at the time you and Commissioner Williams were in conference upon this subject? A. I don't remember. I wouldn't think we had that particular one because other sheets contain in the same report the information in such shape that it could be used more handily, and it is just a mathematical calculation from these basic figures. For instance, that sheet is part of the siame exhibit. Q. In the opinion of Commissioner Williams and the table which he submits and which appears at page 29 of his opinion, he allows an item of $335,459 for production expenses at 331/2 cents per thousand cubic f^t, — what have you to say as to the reason- ableness of that allowance? A. I would say from the study I have made of this question that in view of the cost during 1914 and the prices at which they were under contract to pay for materials during this year and next year that that was a reasonable estimate. Q. And just what do you understand to be the meaning of the term production expenses ? A. That covers all operating expenses, such as labor and material used in the production of gas, superin- tendence at works, holder, maintenance, repairs of all works, apparatus, tools, buildings and so forth, repairs, of holders, main- tenance of holders. That is about all. Q. Those are the items which you think would be covered by the terms production expenses ? A. Yes. That is defined by the uniform system of accounts of the Commission. They are defined in great detail. Report of Joint Legislative Committee 1315 Q. Repairs of mains included in production expense ? A. No. Q. Any cost of transmission included in production expense? A. None whatsoever. Q. You think 23 cents a thousand feet should be added then to the SSy2 cents for the cost of transmission and general adminis- tration, do you, taxes, and so forth ? A. To get all the other costs exclusive of return on capital and amortization I think another 23 cents would have to be added in view of an analysis of the cost per thousand during 1914 and previous years. Q. Is there a table similar to this showing the items which went into the estimate of 33% cents per thousand cubic feet under the head of production expenses ? A. That would appear in the top of the table you have there. Q. These are production expenses, are they? A. Production expenses. Q. Well, I think we will excuse you until this afternoon. By Senator Thompson (to Chairman Towner) : May I ask a question? Q. Now you get your facts, in the first place you get your facts from what the company supply you ? A. No. I make my detailed investigation to see if they supply me with the facts. Q. You have to go to the company for all that ? A. I go to the company in connection with property; go to the company and see what property that is put in and examine the vouchers and books. Q. You get all the information from the company? A. Not from the company. I get it myself. Q. But you go to the company and get it ? A. The property is installed on the company's lands. Q. The company knows you are coming when you come? A. Not usually. They know I am there when I get there. Q. They know all about it before they let you in? A. No, I, walk right in to the plant. No one has ever stopped me. Q. What salary do you draw? A. Three thousand six hun- dred dollars. Q. Your position is what? A. Chief gas engineer. 1216 Investigation of Public Seevice Commissions Q. You came here from wliere ? A. St. Louis. Q. Been here how long ? A. Four and a half years. Q. How old are you ? A. Thirty-two. Q. Now when you get all through with this investigation what difference does it make as to how much loss there is of gas in fixing the rate anyway? A. Well, if a company had a pipe and left it wide open and a great deal of gas was lost and the con- sumers had to pay for that loss, it would make a considerable difference in the rate. If we will say the station meter is inaccurate and the company is not making as much gas as the records show, why then the percentage of unaccounted for does not make any difference. Q. You base your rate entirely on the difference between what it costs the company to supply the gas and what they actually get for it ? A. Correct. Q. And that is obtainable from the books of the company — you have always got the power to inspect these gas meters and see they do not waste gas? A. Yes, sir. Q. Eegardless of a rate case ? A. Yes, sir. Q. And the principal object of an engineer in one of these rate cases serves to complicate matters and talk about things in detail and to stop an adjudication of a case, don't it? A. This is the first time I talked about these matters. I did not talk about these matters until this morning. Chairman Thompson. — I am in receipt of a communication of the Governor through his counsel which I will hand to Senator Lewis and ask to spread on the record. Mr. Lewis. — I offer for the record letter dated November 18, 1915: " Honorable George F. Thompson, Chairman Joint Com- mittee of the Senate and Assembly, Hotel Biltmore, ISTew York City. Dear Sir : By direction of the Governor I trans- mit herewith a copy of a letter addressed to the Governor by the Honorable Edward E. MoCall and also a copy of a letter sent him by the Governor today. Very truly yours, Franklin B. Lord, Counsel to the Governor." Eepoet of Joint Legislative Committee 1217 Accompanying is the letter of Edward E. McOall, dated November 17, i915, 154 Nassau street, to the Governor: " To the Governor: I am in receipt at the hands of your secretary of your notice and summons dated November 15,, 1915, and accompanying charges preferred against me as Chairman of the Public Service for the First District. " Paragraph fourth of the first subdivision of the charges preferred by the Joint Committee of the Senate and Assem- bly reads as follow^ : Fourth : While the owner of capital stocks in a corpora- tion or corporations subject to the supervision of the Public Service Commission of the State of New York, First District, of which he was at that time a member, the said Edward E. McCall knowingly and wilfully, in violation of the statute in such case made and provided, performed and still continues to perform the duties and exercise the prerogatives of a Public Service Commissioner.' " Paragraph fourth of the second subdivision of the charges reads as follows: " ' Fourth : That the said Edward E. McCall, as a member of such Commission and as its Chairman, has knowingly and wiKuUy, and in violation of his duties, omitted to protect and safeguard the interests of the City of New York and of its inhabitants and the interests of the stockholders of the cor- porations subject to the jurisdiction of the Public Service Commission of which he is Chairman, and has exercised his powers as such Commissioner, and as Chairman of such Commission for the particular advantage and benefit of cer- tain stock interests, and has failed properly and adequately to supervise the corporations subject to the jurisdiction of such commission, and has failed to enforce the orders of such commission, and to properly and effectively administer the provisions of the Public Service Commission Law.' " The final charge reads as follows : " ' The said Joint Committee of the Senate and Assembly appointed to investigate the Public Service Commission of Vol. 1 — 39 1218 Investigation of Public Seevice Commissions the State of ISTew York, further charges Edward E. McCall with misconduct in office, neglect of duty, and inefficiency, as a public service commissioner, in that in divers and several instances he faiJed to attend meetings of the Commission of which he was a member; and by improper official actions at meetings attended by him, and failure to perform his duty at meetings of the Commission attended by him; that he has consumed time necessary to be employed in his official duty for the benefit of the State, in pursuing private law practice for hire; that he has failed to give sufficient and adequate service in the supervision and regulation of corporations sub- ject to the supervision and regulation of the Public Service Commission, within the district of which he is a member; and has failed and neglected to maintain a proper, efficient and economical organization of the Public Service Commission of said District; and that said Edward E. McCall has been guilty of inefficiency in the supervision, control and disposi- tion of the funds entrusted to his charge as Public Service Commissioner for the purpose of creating rapid transit facili- ties in the City of ISTew York ; and has delayed proper action by said Public Service Commission and divers and several matters and things which it was proper to be disposed of by said Commission.' I think a mere reading of the above quo- tations from the charges will convince you as a lawyer that they are so absolutely indefinite and devoid of specification as to make it impossible for me to make other than a general answer. This T think is unfair both to you and to me in that the joint committee in formulating charges should make them sufficiently specific so that you, as the official charged with holding the hearings, may understand the precise nature of the complaint, and I, as the official complained of, should have the charges in such form that I can answer them speci- fically and in sufficient detail. " Certain statements have appeared in the public press in the last few days purporting to be made by the Chairman of the Joint Committee to the effect that there may not be proof to sustain some of these charges and that I may have a bill of particulars if I request it. I am compelled under the Report of Joint Legislative Committee 1219 present status of the matter to make this application to you. I cannot understand what the province of a ' bill of particulars ' is in such a proceeding as this, but I do believe I am entitled to have whatever charge is made against me clearly expressed and not as to leave me groping among generalities. " It is perhaps unnecessary for me to state that in making these suggestions I have no desire either to delay or embarrass the hearing that you have set for the thirtieth of this month. I desire that the hearing be held on the date set and that this matter be promptly disposed of. " I have therefore called these matters to your attention as soon as practicable after the receipt of the charges and I respectfully urge that the necessary information be promptly vouchsafed to me. " Respectfully yours, (Signed) EDWARD E. MoCALL, Chairman." Chairman Thompson. — I will state on behalf of the Committee, that information, whatever is reasonable in that respect, will be furnished. Mr. Lewis. — I suggest that we suspend now until 2 o'clock. The Chairman. — We will suspend until 2 o'clock. AFTER RECESS Chairman Thompson. — The Committee will please come to order. Mr. Cole, attorney for the Kings County Lighting Com- pany, in relation to the stock I called his attention to before lunch, to the fact that the list of certificates only accounted for 1,900 shares and there was 100 shares that was not accounted for, and he has furnished me with such information. That is all the shares there is in the voting trust, and that Mr. Maitland F. Griggs, of 'No. 32 Liberty street, owned the remaining 100 shares and the reason why it does not appear on that list, because Mr. Griggs would not consent to put his shares of stock in the voting trust and so he holds them as stock certificates. 1220 Investigation of Public Service Commissions Mr. Lewis. — I offer in evidence, Mr. Chairman, the list of the holders of voting trust certificates for the stock of the Kings County Lighting Company submitted by Mr. Cole as attorney for that company. I also offer in evidence opinion of Commissioner Hayward in case JSTo. 1273, Mayhew and others against the Kings County Lighting Company, rate case under investigation at this time. I also offer in evidence blue print showing the comparative detailed operating expenses, taxes, and so forth, the Kings County Lighting Company for the years 1910 to 1914 inclusive. I also offer in evidence blue print showing the operating ratios, unit cost per thousand cubic feet, made and sold years 1910 to 1914, inclusive. Kings County Lighting Company. Chairman Thompson. — Is that all ? Mr. Lewis. — That is all until we get a witness. I told Commis- sioner Williams that I thought we might not be ready for him before three o'clock. He said he would go back to the office and would come on a telephone and I telephoned for him. Exhibits offered in evidence received. The Chairman. — We had a Public Service Commission stenog- rapher in all our hearings. Perhaps we ought to send our stenog- rapher up and take theirs to-day. Mr. Lewis. — Perhaps that would not be a bad idea. Chairman Thompson. — Wow, gentlemen, you will please come to order. CoirMissioNEE G. V. S. Williams on the stand. Examination by Mr. Lewis: Q. Commissioner, annual reports are filed by these corporations, lighting, and so forth, regularly, are they ? A. They are filed every year, yes. The time of their coming in is not regular, but they are filed every year some time. Q. And are they reasonably prompt in making and filing their reports ? A. Well, I would not say that they were reasonably prompt, no. Sometimes we have to give them extensions. Repoet of Joint Legislative Committee 1221 Q. Is there a rule on the subject of when reports shall be filed ? A. Yes. Q. What is that rule ? A. I don't know. I don't know the exact day. I think within three months or something of that sort. Q. !Now when a report is filed what happens to it if you are able to state ? A. Why, it is sent to the statistician's office. And first it is filed and then sent to the statistician's office and he makes extracts from it. We keep it; we incorporate that in our annual report to the Legislature. That is part of the duties of the Com- mission to report all those things. Q. Well, what use is made of the information contained in the reports of these companies to the Commission? A. Why, they are public records. Q. And what use does the Commission make of the reports ? A. La all cases, all the issues of rate fixing or anything of that sort, they are very frequently put in evidence as proof of the facts therein stated. Q. And accepted as proof ? A. ISTo, not as positive proof. Our rule has been rather, I think, to accept them as statements against interest where we have used them mostly. It has been in that par- ticular. There are some things, though, that we verify that I can- not remember now of, but one case where the company sought to introduce those reports and they were some old reports away back in 1865 or something of that sort, when they had to report to the State Board of Railroad Commissioners, and where the books in the meantime had been lost and the claim was that was the best record they had and that was put in as something to be corrobo- rated by other testimony. Q. Does the Commission conduct any independent investigation based upon the record and reports made — based upon the reports made by the Public Service utilities companies for the purpose of ascertaining whether or not companies are charging a higher rate than is justified by such reports ? A. Why yes, there have been. There are cases started on the order of the Commission or on the request of the Commission and those have generally been started on the complaints described in the Public Service Commission of the property owners. Q. Has there been any instance where the Commission itself has examined a report of a corporation under its supervision for 1222 Investigation of Public Seevice Commissions the purpose of ascertaining whether or not the public is paying a much higher rate than the circumstances justify? A. I am not able to answer that. I don't know. I think there has been on complaint of the Commission as to some rider or something of that sort. Whether it took on the features of a rate case or not I am unable to say. That is, I am unable to recollect any now. •Q. Has there been any investigation of the reports made by the companies to the Commission to determine whether or not the affairs of such companies were being economically administered? A. Why, I think so. I think you will find that all of these reports of most of these companies ran back farther than the Public Serv- ice Commission Law, and most of these reports on their face will show that the company is not earning an excessive amount. Q. Well, is there any investigation on the part of anyone con- nected with the Public Service Commission to determine the accuracy of the statements made in the reports ? A. Oh, yes. Dr. Webber has complete charge of that and I think he is a very effi- cient man. By Chairman Thompson: Q. Have you got any sort of an instrument over there that will test the eificiency of the men in your organization, in the whole organization of two to three thousand souls, is there any thing over there by Avhich you test the efficiency of the men over there ? A. You do not mean an instrument ? By Senator Lawson: Q. A method. A. There are efficiency rating and promotions conducted on examination. By Chairman Thompson: Q. That's before they go in ? A. l^o, after. . Depending on their standing and efficiency all the way through. I think it is the only department in the city and so far as I know out in the State that has any such arrangement. Mr. Whitney can tell you more about that. Chairman Thompson. — If you had is all I wanted to know. By Senator Lawson: Q. Would that apply to this Mr. Webber ? A. Why, I don't Eepoet of Joint Legislative Committee 1223 suppose there is a better man in the United States than DV. Web- ber und I do not believe anybody will gainsay when I say that his staff is the best staff of the kind that has ever been gotten together. By Senator Lawson : Q. Nobody endeavors to measure his efficiency or competency ? A. Why, his efficiency and competency is so far beyond any ques- tion to my mind — T never have heard it questioned. By Senator Lawson : Q. He is an exception, is he? A. No, he is not an exception to the rule in our office. By Chairman Thompson: Q. It may be that is the trouble, that the efficiency is so far beyond the people down here they cannot understand it. A. We ought not to be charged with incompetency if that is the case. By Chairman Thompson: Q. You do not think you ought to be held responsible for the acts of your subordinates ? A. Yes. If there are fair — Examination by Mr. Lewis : Q. What would .you say in answer to a hypothetical question of this character, Commissioner, as applied to the Kings County Lighting Company, would the cost of production per unit natu- rally decrease as the quantity of units produced increases ? A. I should say after the plant and the expenses were complete, yes, but I would not think without reference to the figures at all, I would not think in this case that would be a fact, because of the territory which it supplies, as I explained the other day. It was ia very large territoiy and covering a very large amount of acreage. By Chairman Thompson: Q. How large is it ? I have heard very large here right along and small ward — how big is the ward ? A. I don't know how many square miles, but just a glance on the map. By Chairman Thompson: Q. It is a part of the city of Brooklyn ? A. Yes, sir. 1224 Investigation of Public Service Commissions By Chairman Thompson: Q. It is a congested neighborhood because there are 200,000 people there ? A. ISTo, it is not congested. By Chairman Thompson: Q. It is as large as the city of Eochester ? A. I am not familiar with the city of Eochester. I should say not, though. The build- ings are not high except very recently. By Chairman Thompson: Q. It is part of the city of Brooklyn ? A. Part of the city of ISTew York, rather. Borough of Brooklyn. Examination resumed by Mr. Lewis : Q. Would you think that there would naturally be an increase in the cost per unit as the production increases? A. !N"o, not normally unless it was some such thing as that price of oil which did figure in this case for the last two years. Q. From the blueprint which you submitted to me this morning showing the production ratios, unit cost per 1,000 feet made and sold for the years 1910 to 1914, inclusive, it appears that in 1910 the company made and sold 686,522 units of 1,000 feet each; that in 1914 the company made 954,996 units of 1,000 feet each. It appears that the cost of production per unit in 1910 was 60.67 cents per 1,000 cubic feet, and that the cost in 1914 was 70.37 cents per 1,000 cubic feet. Have you any suggestion or explana- tion or have you heard of any suggestion or explanation as to why the cost per unit were increased upwards of 15 per cent while the actual quantity manufactured had increased around 30 per cent ? A. Excepting the price of the oil. That oil contract that Com- missioner Hayward and I have both spoken of, and possibly there has been an increase in the price of labor. I think probably there has. Q. Do you Imow of any other possible explanation ? A. No, I can't think of any at the present. Q. Do you know as a fact that labor cost has increased from 3.20 per thousand feet to 3.26 cents ? A. 'No, I did not. It appears on there but I did not remember it. Eepoet of Joint Legislative Committee 1225 Q. Did you know that the fuel cost as shown by this statement increased from 2.66 cents to 3.13 cents, boiler fuel, fuel for the boilers ? A. Coal or coke, whatever is used. I knew it from his blueprints that you have shown me. Q. Did you know that the generator fuel had increased from' 6.10 cents per thousand feet to 7.33 cents during that period ? A. Well, if that is what it figures. It has increased here. Q. From the table before me it appears, the exhibit which you gave me this morning, it appears that the cost of production in the following items has materially increased between 1910 and 1914; labor, business, promotion, boiler fuel, oil, general expenses, generator fuel, uncollectible bills, supplies and expenses and repairs in the transmission system and that there had been reduc- tions in the repairs at the works, in commercial administration, in general law expenses, in taxes and in office rent: In other words in 1910 the taxes upon the property of the corporation equalled 6.6 cents per thousand cubic feet of gas produced and constituted one-tenth, approximately, of the entire cost of that production — in 1914 taxes constituted 6.09 cents per thousand cubic feet, a very material reduction I think, which might or might not go a long way toward offsetting the increase in water gas oil, would you think that true? A. Well, I notice that the taxes decreased- — the annual taxes decreased between 1912, 13 and 14. How that came to be decreased of course I can't tell. These figures are actual and that was the amount of the taxes. I see here the actual taxes dating back as far as 1911 commenced at $56,893 plus in 1911. In 1912, they were $57,203. In 1913 they were $60,408, and then in 1914 they dropped to $49,818. There was a big actual drop in the taxes of over $11,000 between 1913 and 1914. Of course we have no way of knowing why that was. I do not think they had sold any property or anything. I do not think they had any less property but there might have been some adjustment or may be some suits that were decided. I don't know how that was. Q. Did you take into consideration in determining the rate which you have recommended to the Commission, 95 cents, the facts set forth on this blueprint ? A. Yes. Q. And did you in any way attempt to verify the figures set forth upon this blueprint, which as I understand from Mr. Hine 1226 Investigation of Public Service Commissions ■were taken from the reports of the company? A. Well I don't know what Mr. Hine testified to. But these all have to be checked, up and verified as well as being taken from the reports. Q. Well now, who checked them up and verified them, if you know? A. Well, either Mr. Hine or Dr. Webber. Q. Mr. Hine declared on the stand he never saw these blue- prints or had no recollection of seeing them until last night, as I recall. A. Then it was Dr. Webber's determination. I see the initials here G. W. S. I don't know who prepared them but they were prepared from exhibits in the case. Q. That is it, but they were exhibits produced by the company, were they not ? A. I think not. Exhibit produced according to Mr. Hine for our exhibits. I think I tried to make myself plain yesterday or the day before on this ; that what I did was to send for Mr. Hine and for the counsel w*ho had the case, Mr. Semple, and go over these things with them. There were certain funda- mental things that counsel had to have before he could write any opinion or suggest any opinion. I remember one of the things was asked whether he had the estimate of 11 cents for expense for leakage or whether to take the annual leakage, w'hich amounted to 14.3. And I told him that personally I felt for purposes of writing this memorandum at least, that where we had the actual leakage that we ought to take it. It was then explained to me that that actual 14.3 per cent. — that this company would run fifteen on their leakage on an average, perhaps 14.3 was just about what they did the year before, and I think it is testified in the case, if I am not mistaken. Q. By the company's expert ? A. I don't know whether by the company's or by ours. Q. Mr. Hine was your engineer, was he not ? A. Yes, sir. Q. Mr. Hine's testimony this morning was as I recall, that he had not himself made any actual tests, to determine whether or not the 14.3 represented the unused and accounted for gas. A. Well, I don't know. He could not, as I take it, say what item, because that would be the difference of the reading of the meter as it goes into the holder and combined reading of all the meters as shown from the Company's report. Q. Then it follows, does it not, that the only information which you had in preparing this opinion was information furnished by Eepokt of Joint Legislative Committee 1237 the company itself as to the difference between the aggregate readings of consumers' meters and the meter of the company at the plant ? A. Which was not disputed in the case. Chairman Thompson. — Now, Commissioner, I do not want to have to educate you people every day how to answer questions. I think you ought to answer the counsel's question without making an argument and make your argument after. Mr. Williams. — If there is evidence in the case uncontroverted and uncontradicted, aren't you bound to take that evidence ? Chairman Thompson. — That's all right, but you are here under examination by a committee of the Legislature, which has prob- ably got somewhere more power than the Public Sefrvice Commis- sion of the First District, and they ask certain questions and I think you ought to answer them, and then if you have any explana- tion to make afterwards, I think you ought to explain. I think it is due to the dignity of this Committee that you should do it. Mr. Williams. — Now, if there is any time that I have given the impression that I have sought to evade a question of this Committee, I want to get that out of your mind right now. Chairman Thompson. — I think that is one of your big assets you people have down here, of either talking under your breath or evading questions. Mr. Williams.^ I have answered and I will answer to the very- best of my ability. Q. Xow, the case was conducted for the complainants by Mr. Semple, was it not? A. Conducted on behalf of the Commission by Mr. Semple. Q. Did Mr. Semple offer any evidence to dispute the statements on the subject of the amount of gas unaccounted for ? A. I think not. Q. Then when you say the uncontradicted testimony, you mean the testimony or evidence supplied by the company itself, which neither the Commission, its experts or its counsel attempted to contradict, do you ? A. I wouldn't say that. Q. Isn't that the fact? A. There may be something — you saw the size of the testimony taken here. There may be some- thing in there tending to corroborate that, but that was not raised 12'28 Investigation of Public Service Commissions by Mr. Semple at all in any hearing that I heard, or in my con- versation with him. It was taken as the actual loss between the holder and the customer. Q. As reported by the company itself ? A. It was taken as a fact — as one of the facts in the case. Q. It was taken as a fact because the company declared it to be the fact ? A. ISTo, not at all. Q. Well, didn't the company declare it to be the fact? A. ISTow, if you knew — Q. I want to be perfectly fair — didn't the company declare it to be the fact ? A. Yes. I think they declared it to be more than that. Q. And didn't Mr. Hine state that because it was the fact ? A. I think so. Q. And didn't Mr. Semple accept that statement of Mr. Hine ? A. I wouldn't say that Mr. Semple said so in so many words. My opinion was it was taken for granted, yes. Q. Did he by his conduct of the case accept that ? A. I don't know. I did not see him in the conduct of the ease. Q. Well, was it taken for granted that was the fact ? A. Yes, I should say so. Q. I^ow, if as a matter of fact that statement is not true, then the company should not be allowed for that deduction, should it ? A. Certainly not. Q. Well, the Commission has an engineering force of con- siderable numbers ? A. Yes. Q. The deduction allowed for of 14.3 per cent, means 143,000 units of a thousand feet each, does it not ? A. I don't know. If that is the way it figures. We figured it yesterday, but the figures are out of my mind. Q. And that at 9'5 cents a thousand feet means tipwards of $130,000 of credit against income, does it not? And operating expense, practically? A. That would be on manufacturing cost rather than on sales cost. Q. That is true. You are right about that. And at 70 cents, it would amount to approximately $100,000, at manufacturing cost, wouldn't it? A. The 33%, the cost of the material. Q. The cost is figured at 70.37 — that does not include trans- Eepoet of Joint Legislative Committee 1229 mission, does it? A. This includes transmission and tliat does not. I think the 33 would be probably the cost of manufacture. Q. Why shouldn't that bear some part of the expense of the transmission system if it is lost more or less of it in transmission ? A. Well, I suppose it would be hard to tell just where it was lost when it comes to that. Q. In the course of delivery? A, Condensation and leakage and all that. Q. Well, in any event, it constitutes a very substantial deduc- tion from income, doesn't it ? A. Oh, yes. Q. A very substantial deduction ? A. That is well recognized that leakage does. Q. And except for that deduction the rate established by your opinion would have been materially lower, would it not? A. Well, I don't know just how much. Let's see; 14.3 would make in the rate — Q. I am not speaking of the difference between the eleven that was allowed by Commissioner Maltbie? A. If there had been nothing at all allowed, of course, it would make a difference, a substantial difference. Q. And would have made a substantial difference in the rate determined upon by you in your opinion? A. Oh, no doubt about that. Q. And still in the consideration of the question as to what was a proper rate to be charged, you took the statement of the com- pany, practically, without verification, and allowed a deduction which resulted in a very naaterial increase in the rate to the con- sumer ? A. I can't answer it yes or no. Q. Make any answer you like. A. I have tried to say that these things are checked every way possible. JSTow, Senator, if you doubt me on this, you have only got to send out after some of these people. Q. I don't doubt you are telling the truth. A. I am telling the facts. Q. Biit what I want, Commissioner, is this: I want to know whether or not this Commission, in a matter of this importance, has devised and applied all reasonable and practicable methods for determining whether this rate is a just rate or not ? A. I would rather that would come from the people who now do this. This 1230 Investigation of Public Seevice Commissions thing is cliecl-ced and checked and cross-checked by Dr. Webber and by the engineer in the Commission, and I am telling you now all you have got to do is to ask some of these companies that are filing these reports of the care that we take in that. We have had complaints we go into too thoroughly, that we waste time on, but it is checked and checked, and cross-checked in every way possible, so when a statement comes in from a public service company in one of the rate cases or in a bond issue case, without contradiction, I will bet anything I have it is straight, or it would be contra- dicted. ISTow, there is no getting axound that at all, Senator. Q. This case has been pending since 1910, has it not? A. Yes. Q. The decision of Commissioner Maltbie was made in 1912, if I recollect right ; is that true ? A. I don't recall. If that was the date. There were two opinions, one upon the rehearing which was a short time after the original, November 17, 1911. Q. When was the appeal taken from that final decision ? A. The record will show. The record is here. Must have been very soon, because they do it very quickly after an order denying a rehearing. Chairman Thompson. — They have to do it within thirty days ? Mr. Williams. — Forty days, I think. Q. Is there any significance in the fact that operating expenses, cost of production, practically every item that enters into the cost of manufacture and delivery of the gas, so far as such items were under the control of the company, showed a material increase in 1912, from 1911, and a still further increase in 1913, and almost universally a still further increase in 1914, during the time that ' the appeal to the courts was pending, and during the time that elapsed after the determination of that appeal, and while the second hearing was on ? A. Is there any significance in the fact ? Q. Any significance in that fact ? A. Why, I wouldn't think so. It may be a coincidence, but I would not think it was pos- sible to pad those expenses in such a way that our engineers and our accountants would not discover it. I will go further than that, and say it would not be possible to do, knowing the men as I do. I might say Commissioner Maltbie has known these men and known their work longer than I have, and I think he will verify what I say about them. Repoet of Joint Legislative Committee 1231 Q. This blueprint as I read it sliows that there were sold dur- ing the year 1914, 818,392 units of a thousand feet each. We haven't the figures and of course they are not available, of the total sales for 1915. Did you have any date before you on which to base your estimate of a million, one thousand three hundred seventy units of a thousand feet each ? A. Shall I read ? Q. Yes. A. " The company shows for the first four months of 1915 that there was very little increase over the same months of 1914 — Q. Very little ' increase ? A. "Very little increase over the same months of 1914, but this is too short a period upon which to predicate an opinion as to the year's output, while the war abroad may have affected conditions to some extent in 1915." I did not hear the testimony to that effect, but the argument that there were people out of work, and at that time we were going through hard times that summer that seemed to affect them in their average bill; that they were a little more careful of the turning on the gas than before. " While the war abroad may have affected con- ditions to some extent in 1915, an estimate for the future should also take account of the increase in rapid transit facilities in the locality which has just been put in operation. The sales in 1914 were for commercial gas 735,748 M. cubic feet, and for the street lighting 82,644 M. cubic feet, or a total of 818,392 M. cubic feet. There will unquestionably be an increase in this output for 1915 and 1916, but possibly not as great as in former years." The company claimed there would be very little increase. That is not as much as Commissioner Maltbie estimated. That did not come up to Commissioner Maltbie's expectations in 1912 and 1913. Q. I will state the question in different form. The actual sales of gas in 1914 aggregate 818,392 units, as shown on the blue- print in evidence? A. I think that includes the street lighting. Q. That includes the street lighting. The actual sales which you have estimated for the period beginning December 1, 1915, is 858,170 unit?, an increase of practically but forty thousand units. A. Well, if that is the figures there. Does that latter amount include the street lighting, too ? Q. Yes. A. The street lighting was increased, too. Our present commissioner of gas and electricity has set down a lot of our lights especially in Brooklyn. 1232 Investigation of Public Seevice Commissions Q. If a larger consumption than you have estimated should actually be accomplished, the result would be to increase the eam- iugs ? A. Why, certainly, but I can't see how it could within the short time I have recommended the order to be issued for. Q. For the period of a year, within that time you think 40,000 units increase would be reasonable expectation? A. Well, I thought so, and that was the advice I had from our experts, that unless there was a great amount of new building which won't come in all probability until we get our rapid transit lines down there running properly, and that will be some time yet; that that won't really take place because it takes a year to get the buildings up and get them occupied. (At this point Senator Lawson took the chairmanship.) A. I would say right here if counsel should advise that we can take a longer period past the time when this little time runs out^ no one will be quicker to want to grant a reduction in the rate down there than I would, because all of my friends are down there and all of my people. But here is a contract — I wish you would think of this, Senator — here is a contract stands out where there are some things that look as though it was too much, but where there is absolutely no evidence that there was any collusion or anything of that sort, and as long as that contract stands, why, as far as fixing the rate, unless I am very much mistaken as a law- yer, unless, as I say, it can be extended beyond that time, so it will average up, I do not see how we are going to get around it. Q. Just what, if anything, did you do to determine the bona fides of that contract ? A. I believe that Commissioner Hayward and the counsel did everything in their power to get evidence on that. I understand that the man that made it — Q. Did you understand the market price of oil? A. There is no market price for that kind of oil. It is whatever they have to pay for it. In the Brooklyn Union Company, I was told they gave their company cheaper than the Consolidated because of the large interest of somebody in the Brooklyn company that also was in the Standard Oil. But there is no market price. I heard the argument. They said they got this oil when the market was rising, and they thought it was going higher. Chairman Thompson. — I cannot hear you, even where I sit. Eepoet of Joint Legislative Committee 1233 Q. Did you take any steps so as to ascertain what other com- panies were paying at the time for oil used in the manufacture of gas? A. Yes. I think there is an exhibit in the case, as I remember it, showing that the Brooklyn Union Company is pay- ing 3.005 at present. Q. I have the table here copied from that exhibit into Com- missioner Haj'ward's opinion. If it is agreeable I will read it into the record. A. I think that evidence was adduced before Commissioner Hayward. Q. "Kings County Lighting Company pay 4.575 cents per gallon for oil ? " A. Yes. Q. " The ISlew York and Eichmond Company paid 3.325 cents per gallon." A. Yes. Q. " The Brooklyn Borough Gas Company paid 3.5 ; the Queens- boro Gas paid i; the Brooklyn, 3.0'345; and the Consolidated, with its enormous consumption, paid 3.035." A. I was under the impression the Brooklyn got theirs a little less than the Con- solidated, but I may be wrong about that. Q. A mere fraction less, a half a mill ? A. Of course they use enormous quantities. Q. You say these facts were in the exhibit before you in pre- paring your opinion ? A. Yes. And I also heard that argued, and as I remember it was prepared on a little tabulation, as I remember it, but at least it was in evidence, and it was argued, I know, at length. Q. Did you know of the fact that the contract for the Kings County Company was made almost a year prior to the commence- ment of deliveries thereunder ? A. Yes, I know that was stated. These contracts were made at different times, however. There is no contract that you have mentioned that was made at the time of the Kings County contract, — this case we have got under con- sideration. They were all made at different times, and the argu- ment was that Jhey were unable to get the oil at anything except this price at that time. Chairman Thompson. — The Kings County had to hurry to make this contract at that time, or else they would have got it for less? 1234 In^'estigation of Public Seevice Cojimissioms Mr. Williams. — I don't think so. I think the testimony was quite to the contrary; that the price was increased, or that they feared it would. Q. Commissioner Hayward seems to have a different opinion on that subject. A. I know he stated yesterday the price was decreased. He may be right about that, bu.t it is my recollection that the testimony was that they feared it would decrease, or that it was increasing at the time. The testimony is here. Q. Commissioner Hayward says the price of oil was falling when the Kings County Company made this contract, and it was intimated that the company — that it was going to stop falling and feared it might rise. A. Well, my recollection was of that testimony, that the oil had been higher and that they took advan- tage and that it dropped a little, and that they thought it was as low as it would go, or something of that sort, and for that reason they made the contract. Q. Did you have the evidence of any of the officers on that subject ? A. I think you will iind the evidence in the testimony. Chairman Thompson. — Didn't you also have before you that the Kings County before that had paid less than this contract that they made? Mr. Williams. — Yes, and they paid less for labor. Chairman Thompson. — But we were not talking about labor. I am not going to argue with you every time a question is asked, if you are going to argue. I think you ought to _answer the ques- tion. Mr. Williams. — I have answered yes. Q. Have you produced the record on the application for bond issue? A. That is the record. Q. Have you the application itself? A. No, I haven't the application here. I have a letter here from Mr. Hine, stating the facts, though. Q. May I see the letter ? (Letter produced by witness.) Q. From this letter, it appears that the company has open mortgage of five million dollars, I think it figures here, did it not ? Eepoet of Jomx Legislative Committee 1235 A. I don't know. I don't remember. I can tell by looking at the letter if it is in there. Mr. Lewis.— You may strike that out. I do not see that state- ment here. I thought I did. The Witness.— I may have asked that question, if it was a new mortgage or the old mortgage. Q. Yes, I knew I had seen it somewhere. Five million dollars is the amount of mortgage upon the company's properties, and appears by the record of the testimony in this application, testi- mony given upon this application. Chairman Thompson. — When was that put on ? Mr. Lewis. — The date of the mortgage does not appear in this record. Chairman Thompson. — Do you know, Commissioner ? Mr. Williams. — It is an old mortgage. Chairman Thompson. — I know, but when was it put on ? Mr. Williams. — I don't know. Do you know when that mort- gage was put on ? Mr. Cole.— July 1, 1902. Q. There is five millions of dollars secured by that mortgage against which had been issued — I think your testimony — A. Two million, one hundred and seventy-eight thousand. Q. Three million, one hundred and seventy-eight thousand? A. Yes. Q. Three million, one hundred and seventy-eight thousand dol- lars. This is an application for leave to issue six hundred and seventy-five thousand additional. The proceedings under this application have been closed, have they? A. Subject to reopen- ing, if there is anything that we want to put in. Q. The rate of interest is five per cent ? A. I think so. Q. Which will require one hundred ninety-two thousand, six hundred and fifty dollars annually in interest at five per cent. That, of course, must be deducted from earnings. A. In order to be paid, yes. Or from surplus. 1236 Investigation oe Public Seevice GoMMissiONtj Q. And that additional bond issue will provide additional facilities for manufacture, will it not? A. Yes. Q. Only a comparatively small portion, one hundred thirty-five thousand, in other words, is to reimburse the treasury for capital expenditure according to the statement of Mr. Hine ? A. Accord- ing to that. Q. Does the record disclose any facts upon which to predicate the conclusion that the granting of this application will result in a greater economical production of gas, than has been heretofore the case ? A. I don't think so. I thint that is not necessary. Q. How ? A. I thinli that the evidence is that it is necessary for the purposes of the company to have it. Mr. Shipway of the Bureau of Statistics and Accounts, under Dr. Weber — Mr. Ship- way testified as to the repairs of the company and the like of that, and Mr. Hine testified as to the amount of expenditures and to the necessity of the bond issue. Q. Was there anything before you at the time of the hearing showing the financial condition of the company at that time ? A. Yes. Q. Financial statements ? A. The annual report always before us. Q. And do you recall what the financial condition of the com- pany was as shown by its annual report for 1914:? A. I have a balance sheet here. This is an exhibit. I would like to keep these together because in case of an appeal they are necessary. Mr. Lewis. — I offer in evidence the balance sheet, Kings County Lighting Company, June 30, 1915; because of the Com- missioner's desire to keep this in his possession, I will read it into the record. " Cash, $38,696.54, being exhibit dated 9/28/15, applica- tion 2013, Xo. 3; sinking funds, uninvested, $9,938.09; other special deposits $62,750; bills receivable, $1,629.06; account receivable with City of New York, $113,002.03 ; con- sumers accounts receivable, $122,867.93 ; other accounts receivable, $4,865.47; materials and supplies, $77,024.02; fixed capital, December 31, 1908, $4,917,845.93; fixed capi- tal installed since December 31, 1908, $847,493.24; prepay- ments, $4,824.52; unamortization debt, discounts and expense, $23,237.95; total, $6,224,174.78. Liabilities: Report of Joint Legislative Committee 123T Taxes accrued, $5,803.'76; consumers' deposits, $125,034.00; miscellaneous accounts payable, $84,060. (iO; interest accrued on funded debt, $72,125.00; interest accrued on unfunded debt, $13,217.04; otber unfunded debts, $394.88; mortgage bonds, $3,178,000.00; unamortized premium on debt and other required reserves, $8,176.04; accrued amortization of capital, $108,548.37; common stock, $2,000,000; corporate surplus, $628,815.01 ; total, $6,224,174.78." Q. Did you have this financial statement before you at the time the opinion, at the time you prepared your opinion in the rate case, Commissioner? A. Let me see it. I never looked at this financial statement until very recently. No, I did not have it before me, but it had been introduced in evidence at that time. I had not seen it, but I remember of it. Q. I think you have testified that no cash whatever has ever been received in the treasury of the company from the issue of two millions of dollars of the capital stock of the company? A. I stated that we were unable to trace any cash. Q. I think you state in your opinion. A. Yes, in my opinion there was some, from stock, you are right. There was some cash received from surplus of undivided profit, some $69,000, accord- ing to Dr. Weber. Q. But no cash was paid in from subscription of stock ? A. I wouldn't say that. I would say if there was, it did not go into the plant and property, according to Dr. Weber's table, that was introduced in evidence in the rate case. Q. Then we have here — see if I state this correct ■ — a cor- poration with two millions of dollars of capital stock, which has been paid for entirely out of earnings, haven't we? A. I wouldn't say so. Q. Well, there is cash and other assets in the treasury to offset that capital stock liability of two millions ? A. Yes. Well, that is what they say, but there is the surplus and the amortization funds scattered all through there. I would rather not discuss it until a day or two, until we get a report from Dr. Weber. Counsel thinks from the fund before I came down here, and took it up with Dr. Weber with a view of getting a report, on it, and I would rather not discuss that. 1238 Investigation of Public Service Commissions Q. Will you go so far as to say tliat the cash, the sinking fund uninvested and bills of accounts receivable, materials and supplies, the fixed capital and prepayment, unamortized debts, discount and expense, as shown on this statement, equals six million, two hundred twenty-four thousand and odd dollars ? A. These figures add up that amount. Whether there is something about those figures that can be analyzed differently I don't know. Q. Then it appears against that amount of assets is charged a liability of two millions of dollars? A. On account of stock. Q. On account of common stock? A. Yes, that appears. Q. And in addition there is a corporate surplus of $628,000, an accrued amortization of capital of $108,000, cash on hand? A. Ought to be. Q. And that the stock excluding the amortization of capital has a book value according to this statement of more than $125 for every $100 of par value? A. Well, if it figures that way. I would not want to say that. Q. And that that book value has resulted from the operations of the company since the commencement of business substantially in 1891, and as the result of the conduct of business carried on exclusively upon capital borrowed, for which • bonds are issued ? A. I think that can be fairly deducible from my opinion in the other case. Chairman Thompson. — Then I want to ask you why you were sorry for them the other day, because they only earned three and a half per cent on that watered stock. Mr. Williams. — I was not sorry. Chairman Thompson. — You called our attention to it. Mr. Williams. — I called your attention to this : That from what our counsel told me, if Commissioner Maltbie's opinion had stood based on the last year's output and the last year's sales, it would have been only 3% per cent. Examination by Chairman Thompson : Q. On common stock? A. No, not on their stock. Nothing on their stock. We did not take the stock into consideration at Report of Joint Legislative Committee 1239 all on the value when the law says we must state rather than on the amount of stock and bonds. Q. Did you ever find out how much actual money these stock- holders ever did put into this concern? A. No, I never found that out. Q. Did you ever try to find out ? A, I think Commissioner Maltbie tried to find out. Q. I asked you if you did ? A. No. Q. That did not concern you in making this investigation as to rate ? A. Under the statute this was — Q. l^ow you took into consideratio:^ all these things in refer- ence to the company's claims ; now did you take into consideration anything in relation to the people's side of this? A. Certainly. Q. Did you take into consideration in fixing this seven per cent, that you people saw to it that there was no competition allowed in this territory ? A. That we saw to it ? Q. Yes. It is your theory that there should be no competition of these companies, isn't it ? A. It is not my theory at all. Q. That is the theory of the Public Service Commission, First District ? A. It may have been. Q. Can you point to a case where you have allowed competition since it was instituted ? A. Yes. Q. Where? A. The Long Acre Electric Light and Power against the Edison. Q. Where is that ? A. New York. Q. ISTew company ? A. It is an old company with a perpetual franchise. Q. They had the franchise before they came to you ? A. They did not come to us. They had it before ; they came to us for the right to exercise that franchise and were fought bitterly by the Edison Company, and they were fought through the courts back and forth to the Court of Appeals, and finally came back to us, and we granted them what they asked for in the way — Q. Can you point to a case where a franchise has been granted and permission has been granted for any new competing public utility companies since the institution here of the Public Service Commission ? A. Oh, yes. Q. What ? A. Eailroad companies. 1240 Investigation of Public See vice Commissions Q. ■\^^lat one? A. I remember two, the North and South Shore in competition with the Long Island. The Manhattan and Queens. Q. That's the one that crosses the Queensboro bridge ? A. Tes. Q. And you made an order requiring them to make their repairs in nine hours or get out of the field? A. We exercised our judgment there. Q. You were not very friendly, were you? A. I certainly was; I helped them in every way. The records will show that when they came to us for a permission to exercise their franchise, I even went so far as to telephone to the Comptroller in Albany, or to the State Treasurer, rather, to see if they had made their deposit, so as not to hold them up a day extra in granting their certificate. r Q. They had their franchise before your Commission was insti- tuted ? A. I don't think so. Q. There is testimony before us they did. A. I don't think they did. They got the old Eobin franchise for which this Com- mission before my time refused them the consent. Q. But they had the franchise before you were instituted, according to the record ? A. No, they did not. Q. But you proceeded against them very much faster than you are now proceeding against the 42nd street and Third avenue ? A. Not at all. Q. You have given these people six months, and you gave them nine hours. A. That was because of their cars. They ought not to have had one hour. They ought not to have had the cheek to run a car like they run on the street. Q. They were competing with the Interborough ? A. I resent that, and I will not go on with an insinuation of that kind, and I do not think you ought to ask me to. The Interborough is no more to me than it is to you, and the people in this town know it. Q. All I can tell. Commissioner, is by analyzing your votes. A. You can analyze my vote, and you will find my vote has been straightforward every time without regard to anybody. Q. Perfectly consistent, I think. A. And the people of this town know it, too. Q. I think that is true. Now, Mr. Hine says that experience has demonstrated that a decrease in the price creates a greater Eepoex of Joint Legislative Committee 1241 use, and consequently a lack of reduction in the earnings. That is, when you decrease the price of a commodity like gas, the people will use more and consequently cause a lack of reduction in the earnings of the company. A. That is what I state here. Q. Now, do you take that into consideration in fixing the rate ? A. Yes. Q. Where is it ? A. It is in a general part of the opinion. Q. You can't point to it ? A. No, we cannot give an estimate on that at all. It is a fact. Some newspaper took exception to what I said the other day. I took the pains to have one of the companies of which we have very complete records written out, and I find although there is twenty-one cents reduction in the rate from 1908 down to 1914, that the reduction in the gas bill amounted to less than ten cents a month on the average, because the people use a great deal more when they are getting it for less. Q. Now, all there is to a rate case, all there is for you to find, how much actual money the corporation has got invested in the first place, isn't it ? A. No — Q. You don't have to find that ? A. No. Q. Don't you have to find that in order to get going value ? A. The law says — the act says very clearly that we must find what is the fair value of the property. Q. I was going to ask you that. In the first place, you should find the actual money invested in order to find the going value, don't you ? A. Why, if it is necessary, yes. Q. You have got to consider going valije under this decision of the Court of Appeals ? A. Yes. Q. You cannot consider going value under this decision of the Court of Appeals, unless you know how much actual money they had put in there ? A. Of course not. Q. The next thing to consider is the present value of their property — they are entitled to earn on the value of their prop- erty, provided it equals or exceeds the amount of money in the enterprise, and that is all; isn't that true? A. Providing it exceeds — Q. Equals or exceeds the amount of money invested, then the only question to find is the value of their property and let them earn on that ? A. That is the way we try to do. Q. That is all there is to it ? A. Yes. 1242 Investigation of Public Seevice Commissions Q. If the amount of money exceeds the value of the property, you must take that into consideration for going value — isn't that all there is to fixing that side of a rate case? A. I don't think so ; I think other things according to decision. Q. What I am getting at — I have read this decision in the Court of Ap'p^als. A. With all due respect to the Court of Appeals, I do not think it meant that was all to be taken into consideration. Q. You find the value of their property and you add to that the amount of money that the stockholders have paid in more than the value of the property? A. Yes. Q. And that is all there is to finding that side of it, and let them earn on that? A. ISTo, I don't think so. There are other things to be taken into consideration. Q. If there are other things to be taken into consideration, it might explain why you take so long to go into details as to the use of gas? A. Wouldn't you go into details far enough to know you were right; what the value of their pipe underground. There is a lot of property. You have to go away back. The courts say we have got to allow them on money spent as an experiment. Q. No matter what the money is spent for, you can easily find what it is ? A. JSTo, you can't. Take the Queens County gas plant. They used to manufacture with coal. They had a coal gas plant, and that was scrapped. Now, we have to go back and find out what that old plant was worth, and when you come to figure depreciation and all of those other things, it is no easy matter. Q. Why, isn't it an easy matter to find out the actual amount of money they paid in ? A. It is the easiest thing if they have got their books to find out how much money has been paid in. Q. Now, when a corporation , is either negligent enough or fraudulent enough to lose or destroy their books, you give them the benefit of that? A. Not at all. Q. Ought not you, as a Public Service Commissioner, refuse to recognize books lost or destroyed, or not brought before you ? A. No. You know we would be promptly upset by any court in the land. Q. Did you ever try it to see ? A. We have been upset so many times on things of less importance than that. Eepoet of Joint Legislative Committee 1243 Q. Tliat's exactly what I was going to show you. The idea I am getting at. It does seem as though you go a long ways to protect a corporation that refused to give you information. A. Not at all. Q. And a complainant comes before you and you require the complainant to furnish you his lawyer and his information at his own expense? A. We do not. We take it straight from the Commission. Q. Now, the other side of a rate case, as I see it, is this : It is a question to find out the net earnings, which is the gross amount received, deducting the amount paid out. You ought to find that from the books of the company with a proper investigation within a fairly reasonable time. A. That is not the hardest part. Q. What is it? A. The hardest part, as Commissioner Hay- ward said the other day, the appraisal and allocation cost. Q. But that only applies to an electric case ? A. Yes. Q. Practically all there is to find, the net earnings. A. Well, that seems very simple. Like a lawyer I used to know, used to say " I will go over to the court house and try a case." It sounded very simple at the time, but when you get into the intricacies of these things, it is not. There is no wish to delay. It is furthest from my thought to delay. I never did that in my own business, and I have not done it in the public. Q. Did you maie any investigation in reference to this oil contract ? A. In the oil contract ? Q. Yes. A. Not outside the testimony that Commissioner Hayward took. Examination by Mr. Lewis: Q. You have on that statement of the financial condition of the company as liability, an item of $125,000, represented by deposits made with the company by consumers ? A. Yes. Q. Tell me if you know whether the company allows the con- sumers -anything in the way of interest on those deposits ? A. The State law requires six per cent. Q. I was under the impression there was a statute of that sort. A. And we have recently issued an order whereby anybody is not heard of for a certain length of time, that they are to trj' and fiud the people. 1244 Inyestigation of Public Seevioe Commissions Senator Lawson. — Just like the savings bant ? Mr. Williams. — Just like the savings bank. Mr. Lewis. — Q. Did you know of the rebate allowed to the Brooklyn Union Company by the Standard Oil Company of several hundred thousand dollars? A. No, I didn't. Q. Didn't know anything about it ? A. I never heard. Com- missioner Hayward spoke of it yesterday, and said he heard of some such a thing. Q. Did he say when it was allowed ? A. No. Q. You don't know whether there is any record in the office of the Commission on the subject? A. I don't know. Possibly Commissioner Maltbie would know. It must have been back of the time of the 80-cent gas litigation. Chairman Thompson. — I understand there is a record in your office after the 80-cent gas ease was disposed of, a Standard Oil, paid to the Brooklyn $800,000. Mr. Williams. — I never seen it. Chairman Thompson. — That is a matter of public record in the Commission of which you are a member ? Mr. Williams. — I don't know. Chairman Thompson. — Don't you think it would b© quite material in reference to the oil contract in this case ? Mr. Williams. — I don't think so. Chairman Thompson. — You don't think a Co mm issioner ought to know? Mr. Williams. — I would like to have known it. Chairman Thompson. — The idea is to accept anything the com- pany says and give them credit for it? Mr. Williams. — Not at all. Examination by Senator Lawson : Q. Commissioner, during the investigation last winter, the scope of our inquiry, if you will remember, was vnth reference Eepoet of Joint Legislative Committee '1545 to the regulatory exercises of the Commission. At that time, you went into it in detail. Now, can you tell me whether you are familiar and know any more about the conditions as they exist of the crowded traffic of Brooklyn than when you were examined last winter ? A. Why, I have kept pace with it and I have seen every complaint that comes in. Commissioner Hayward — per- haps you were not here the other day — he and I were appointed on the committee to take up those complaints and see how they were treated, and go through them carefully and so I get copies of the complaints daily, and keep a file of them, and we go through them together and decide whether they have been properly handled, whether the complaint has been satisfied, or whether there is something that could not be satisfied, and then we make a report to the 'Coinm.ission for such action for making a formal case as we think should be made formal. Q. Are you receiving very many of those complaints just at present ? A. I don't think we are receiving as many from Brook- lyn lately. We used to receive a great many on the transfers. Q. I am speaking particularly with reference to the over- crowding of the trains. A. On the Broadway lines ? Q. On the Lexington Avenue line. You will recall I had that up once before? A. They are very much overcrowded, these trains are. On the Broadway line especially. They are more crowded than any line we have. In going through the loop, that traffic has increased enormously since the Center Street loop is open. I will tell you what we are doing. We have taken some cars from the New Utrecht line and other cars and put them on to that eastern district, and I hope about the 1st of January we will have forty more cars that can be sent over there which will make quite a perceptible relief; as soon as the third tracking and the structure is strengthened sufficiently we will have the big wide cars, the new steel cars on that service. That will be next service from Eidgeway into the Center Street loop. Q. What do you do when you receive these complaints? Do you send inspectors? A. A great many of them do not need verification. A great many of them are cases where the condi- tions are known to exist, and a great many of them are like a conductor being uncivil. 1246- Invmstioation oi' Pijbi40 Sjomviou Oommimions Q. Did you make any roprosentatioiii to tlie, Brooklyn Bnpld Transit Company alter yoti reoeiVed tliQBe oomplalxiti and you verified them — you admit knowledge of tlaem without v6ri£oft» tion — did you take any Btepi with the B, B. T. to eliminate tliemS A. AlsBolutely. Q. What did you do, please ?* A. Mr. Johnson's department attends to that with Mr. Daggett, Ohiel Olerk; letters written or' personal visits made, and if it is possible, for instance, like n complaint at the non-rush-hour the oars are crowded, more oars lire put on. If they do not put them on, why, there is an order for a hearing, hut generally those things are arranged in that way. Q. Have you issued any order to the Brooklyn Eapid Transit Oompany that woilld compare in like manner with the order issued by the Board of Health on the trolley cars, that ,after the elevated cars have received a certain number of passengers, they are to stop taking on any more and go along on their route ? A. No. Q. Why can't ybu do that? A. We could issue an order of that sort. I don't know whether it could be enforced or not. Q. For the purpose of the record, I want to say this -r- A. Ait- other thing about the order — I think the Oommissioi^er explained that, too, about the courts upsetting our order. We made nn order to the ef ect that at certain hours of the day there must b« seats for passengers. They did not furnish seats for passougeri, and we went into court on it. Judge Orane upset the order, and said that wo could not enforce it, and Judge Whitaker in New York upset a similar order on the Interborough. We have appealed. We don't Imow what kind of an order to issue. Q. Now, Commissioner, for the purpose of the record I want to make this statement. I believe it is due to the people of Brooklyn, because it depicts an absolute statement of fact that is true. From constant us© of the Tjexington Avenue elevated T want to say I left here the other evening and boarded a train at the New York end of the Brooklyn Bridge. When that train left the bridge it was then crowded with as many people standing as there was seated, and all along the line at every station, they jammed them in until they could not got any more, and they could not shut the gates, and it was absolutely unbearable. I Eepoet of Joint Legislative Committee 1247 asked the guard if he had any instructions from his superior, and asked him who his superior officer was, and he said Dempsev, and I asked him if he had received any orders when the cars become crowded to a certain degree he must keep the gate shut and go on. He said no, that the policy of the company as far as he was aware was to crowd everybody in that he could get. Now, that is a disgraceful proceeding, you will admit that as against the people of Brooklyn. A. Like the conditions all over New York at the rush hour. Q. I am particularly referring to Brooklyn. Don't you think with the power that the Public Service Commission gives you, you know all about its transit conditions, don't you think if you wanted to take action with your brother Commissioners, you could issue orders entirely within the power given to — that the same rules would apply to those elevated trains, not only on Lexington avenue, but other lines, that the Board of Health now applies to the trolley cars whereby not over 30 per cent, of the seating capacity — there shall be standees, or something to that effect. Don't you suppose you can do that ? A. I suppose we can, but we have got the court's instruction that such an order would be unenforceable. Q. The Board of Health does it. A. I don't know whether they have been to court or not, but we have been to court on our order, as Commissioner Hayward said the other day, and we are right flat on it. That's the very order we had on the Interborough. Q. That's one of the very general reasons why you receive so many complaints and why the public cannot understand ? A. The complaints are not so much in the rush hours. That's the very reason, and that's the only reason that I have voted to spend three or four million dollars of money to improve conditions. Chairman Thompson. — We will take up the further investiga- tion of transit conditions on jMouday morning. Coimnissioner jMaltbie cannot be here next week. Mild R. Mat,tbie on the stand. Examination by ^Mi: Lewis: Q. Did you have in charge the rate case of the Brooklyn Edison Company 'i A. I did until I left the Commission. 1248 Investigation op Public Service Commissions Q. When was that? A. April 1st of this year, Candlemas day. Q. And virhen you left the Commission, had you rendered a decision? A. I had not. That case was not closed when I left the Commission. Q. What was its condition? A. On March 2d, the company had been given an extension of sixty days. I think certain hear- ings had been held after March 1st, but hearings were to be held at the time I left. Q. When was your last hearing? Are you able to state? A. I believe there was a hearing scheduled for the 1st of April. T am not sure whether I was present, or whether my term of office had expired before that time. Q. Let me ask you was there a time when an application was made to you at about the time that the hearings were completed before you for sixty days adjournment ? A. I believe there was an application made of that sort in the last days of February. Q. Who made that application ? A. The counsel representing the company in that case. Q. And that was ^l^ho ? A. I believe Mr. Cole made the application. It may have been Governor Sheehan. Q. Mr. Cole of Governor Sheehan's office? A. Yes. Q. What was the result of the application? A. I believe in the morning before the application was made. Governor Sheehan was in to see me and stated that they wanted an adjournment of sixty days or thereabouts, and I told him that I did not favor an adjournment, and did not think they ought to have it, but of course I would not dispose of any matter until the application had been made in the regular way in the hearings where the counsel or the persons representing the complainant also had an opportunity to be heard. Q. Was there such a hearing scheduled for that particular day ? A. I believe there was for that particular afternoon. Q. And what occurred? A. The application was made, and I believe the complainants were heard and they opposed it, and I told him that I did not favor the applicatiorl, but as he had told me in the morning that they would make the request to go before the Commission, in case I refused it, I told him they could come up on the following meeting day. Eepoet of Joint Legislative Committee 1249 Q. And did they go before the Commission ? A. They did go before the Commission. Q. On the following meeting day, and what was done? Chairman Thompson. — What date was that ? Mr. Maltbie. — The day they were before the Commission ? Chairman Thompson. — N"o, the date this matter came up before you. Mr. Maltbie. — I believe that was ia the afternoon of February 6th. That was Friday. Q. That was the day on which the Commission met ? A. Yes. But they had met in the morning, and this hearing was held in the afternoon. Q. And when was the delay asked for granted? A. On the second of March, the following Tuesday. Q. That was by the vote of the Commission ? A. That was. Q. Did you acquiesce or did you vote against it? A. I voted against it. Q. And your term expired before the expiration of the sixty day period ? A. It did. Q. Do you recall, Commissioner, a meeting of the Public Serv- ice Commission, in connection with the purchase by the Brooklyn Edison Company of 122 shares of the capital stock of the Amster- dam Company? A. I recall the case. Q. Do you recall the meeting at which that purchase was authorized ? A. In a general way. Q. You had according to the records opposed the granting of that application, had you not? A. I had. Well, perhaps that does not quite state my attitude. Q. State what your attitude was on the subject. A. The appli- cation of that company was made, as I recall, and I refreshed my recollection today, by looking at the records in the case. In the summer of 1912, the city was heard in that case, and had opposed any action which would permit the Amsterdam Company to merge or be merged with the Edison Company, and I had taken the posi- tion took the position throughout, that inasmuch as the city asked Vol. 1 — 40 1250 Investigation of Public Service Commissions that action be not taken, and as the city had urged that any action taken approving the merger might prevent the city from prosecut- ing to a successful termination a case vs^hich they had before Mr. JSTicoll as referee, and as the amount of money involved was small, and any possible injury by delay that would come to the company would be small, — Q. That is to the Edison Company ? A. To the Edison Com- pany, — the matter should be held in abeyance imtil they had had a reasonable time within which to secure the adjudication. Q. That is, the final determination of the litigation pending before Nicoll ? A. Yes. Q. Now, you wrote an opinion on that subject, did you not I A. I never had completed an opinion. I prepared certain notes after the case was closed, but I do not recall having prepared and completed an opinion. Q. You never actually signed any opinion? A. ISTo; as I recall, the opinion was never completed. Q. You had as a basis for your opinion a part of the records of the case and opinion of Mr. Willcox, the chief of your Bureau of Franchises? A. Yes. Q. His attitude was in conformity with yours ? A. I believe so. Q. The Assistant Corporation Counsel had opposed before you the granting of that application, hadn't he ? A. Yes. Q. Mr. Burr, — and you had a letter from Mr. Polk asking that the matter be held in abeyance until after the determination of the litigation? A. Yes. Q. jSTow, tell us what led up to the final granting of the appli- cation by the Commission itself? A. Well, from time to time, after the case had closed, the lawyers representing the company and I think the officials of the company had spoken about the matter, from time to time, and said that the matter ought to be disposed of. I frankly told them my position on the matter as I have stated it here, and that I did not think in fairness they could insist on the case being disposed of within a reasonable time. Q. You mean disposed of prior to the determination of the litigation? A. Well, I did not take the position that the case should be held up indefinitely, but that it should be held up to give the city a reasonable time within which to complete its case. Report of Joint Legislative Committee 1251 In the spring of 1914, counsel for the company got more insistent that action should be taken on the case. Q. Do you mean Governor Sheehan or Mr. Hatch, or who ? A. I think in the latter part of the case Goveimor Sheehan and Mr. Cole represented the company. In the earlier part of the case Mr. Hatch appeared at some of the hearings, perhaps at all of them. Q. Judge Hatch you mean? A. Yes, Judge Hatch. About that time I consulted with Mr. Polk as he was the Corporation Counsel under Mayor Mitchel, and had acquainted him with the situation, and had talked it over, and he thought that we cer- tainly should protect the merger; that we should not permit any merger to take place; that while it might not embarrass the city, he did not want the merger to be approved for fear that it might in some way or other embarrass the city, and I agretd with him. In July of 1914, as I believe you have in the record, cer- tain letters were written, one by Governor Sheehan to me, and I believe one by him to Commissioner Cram, and about that same time, I had another talk with Mr. Polk — I think before these letters came I had a talk with Mr. Polk. I believe it was after these letters came, but it might have been just before they came that I had the last talk with Mr. Polk — that is, the last talk I had before action of the Commission regarding the situation, and I believe he conferred with men in the department as he had not had charge of the case previously, and had been consulted by his subordinates only in a general way. I informed him that the companies were getting very insistent; that I considered their attitude wholly unjustifiable in view of the amount of money involved, and the issues involved, and yet I told him that we had held the case nearly two years, and that while the Commission had agreed with me at one time that it ought to be held, and as I had had a talk with Chairman McCall, and he thought there was no injustice to the company being don© in holding it, that I was not sure how long the situation would be held in that condition, and that there might be a demand for action. In fact Governor Sheehan was very insistent and using very forceable language that action should be taken, and while so far his insistence had not accomplished anything, I did not know how long he would be unsuccessful. And Mr. Polk, as I recall, on talking the matter 1252 Investigation of , Public Service Commissions over and going over the case, came to the conclusion that as he had been advised by his subordinates that the fundamental question was the question of merger and that if we did not give our approval to the merging of the two corporations, or to the merging of the Amsterdam Company into the Edison Company, and safely guarded it in any order that might be adopted by the Commission, that the interests of the city would be adequately protected and that an approval of the purchase of the stock would not jeopardize the attitude of the city or the success of the city in this litigation. Biit as I said to him, and as I said to Judge McCall at that time, that while I thoroughly agreed with that, and while we had had counsel's opinion, that is, opinion of our own counsel to that effect, that I thought we ought not to be put in the position, even the position of appearing to interfere with the litigation of the city, and that we bught not to pass on it although, as I said to him, as I said to Mr. Polk, and as Mr. Polk had said, if we did not approve the merger, the interests of the city, in my opinion, were adequately protected. Well, in the latter part of July, 1914, and I believe after the letters had been written, to which I referred, that is the letter from Governor Sheehan to me and the letter to Commissioner Cram, I had a talk with the Judge, Judge McCall, regarding the situation, and in his opinion he said he thought action ought to be taken in the case. And I said I thought the interests of the city would be safeguarded provided we did not approve the merger, and provided the order indicated specifically that nothing done at that time in any way or could be construed in any way as approving the merger, particularly in view of the corporation counsel and the opinion of our own counsel on the legal points involved. May I interrupt here to say that in looking over the record in the case, it will be found that Judge Hatch admitted that the two things were separate, and that an approval of the ownership of the stock did not and would not act as a per- mission to merge the two corporations. So, finding that that was the position of the Judge, and knowing that probably would be the position of the other members of the Commission, we prepared an order and it was passed out. Chairman Thompson. — Where did you get your information from, the Corporation Counsel's office? Who was it? Eepoet of Joint Legislative Committee 1353 Mr. Maltbie. — I talked with Mr. Polk personally. And the order was adopted on the 30th — Q. Were you present at the meeting? A. And I was present and voted for the order. Q. At that meeting was anything said by Judge McCall as to his ownership of the stock of the Kings County Electric Lighting Company? A. I don't recall anything. Q. You were present at the meeting ? A. Yes. Q. Did he make any explanation for his failure to vote in adop- tion of the resolution ? A. I do not recall any explanation that he made. In all of the cases affecting the Kings County Electric Light and Power Company, and the Brooklyn Edison Company, I usually called his attention specifically to those cases when they came up so he would not overlook the fact that those were corpora- tions that he wanted particular attention called to. Q. Did you have a reason for that ? A. I don't know whether he ever said what the reason was. He may have expressed it to me at some time or other. Q. He did not on that particular day ? A. I do not recall so. Chairman Thompson. — Commissioner, the record of March 2, 1915, shows this case No. 1540, Edison Electric Illuminating Company of Brooklyn, Albert Moritz and others, complainants, rate for electricity in Brooklyn. Chairman McCall, Commission- ers Maltbie, Cram and Williams were present, and Commissioner Cram made a motion, which was duly seconded and unanimously carried, that the Edison Electric Illuminating 'Company of Brook- lyn be granted an adjournment of sixty days within which to present testimony in its behalf, with the understanding that the electrical engineer of the Commission had given certain testimony in that hearing, the request by the company for the adjournment might be withdrawn if it did not desire to present any further testimony. Adjourned to March 5, 1915, at 2.30 p. m. Are you familiar with that record ? Mr. Maltbie. — I have looked at that record to-day. Chairman Thompson. — Now, was that called to your attention and do you still say that you did not vote for that ? 1254 Investigation of Public Seevice Commissions Mr. Maltbie. — I had made a note to refer to that because I thought as the record stood in response to counsel's question, the issue of the fact between the record and myself was not brought out. My attention has been recently called to the fact that the record in that case shows that I seconded the motion and the motion was carried, Commissioners McOall, Williams, Maltbie voting in favor of Cram's motion. It is only recently that I knew that the record so stated, and the record is incorrect in that respect. Chairman Thompson. — How was the vote ? Mr. Maltbie. — The vote as I recall it — I am not so sure as to the vote, except for my own. I know that I was opposed to that motion and I believe the other members were in favor of it. Chairman Thompson. — All of them? Mr. Maltbie. — There were only four present. Chairman Thompson. — But it took three votes to put it over. Mr. Maltbie. — It would take three votes to carry. Chairman Thompson. — So the other three voted in favor and you voted against it? Mr. Maltbie. — Yes, sir. That is my recollection. Chairman Thompson. — And the records, you say, in that respect are false ? Mr. Maltbie. — The records in that respect are incorrect. In that connection I want to call attention to the fact that the records themselves contain evidence of supporting that, because immedi- ately prior to the taking of the vote the record shows that I said that I thought the application ought not to be granted, that they did not need sixty da.ys to go on ; that they ought to proceed at once putting in their testimony with short adjournments as were found to be necessary, and you will find reference to that not only in the few pages preceding the vote, but throughout the discussion, and at the very opening of that hearing, which was especially for this purpose. I tried to recall the situation, and as I recall it, it was Eepoet of Joint Legislative Committee 1255 something like this : That after the discussion, there was a con- ference between the members of the Commission, that is, -as we sat there. And that the Chairman announced the decision, and I said to the stenographer to record me as voting against that motion, or words to that effect. There is no reference made to those words, and it may be and probably is true that he misunderstood what I said, although I cannot, for the life of me, see how he could mis- construe a statement of recording me against it into words equiva- lent to a seconding of the motion. I will add this, however, when some commissioner has made a motion with which other commis- sioners do not agree, it is sometimes customary to second the motion to bring it up and get a vote, and it is possible in that case, but I have no recollection whatever of seconding the motion. I do not believe I did second the motion, and I do know I did not vote for it. Senator Foley. — In the Amsterdam case. Commissioner, there was an application for the purchase of 122 shares ? Mr. Maltbie. — Yes. Senator Foley. — There was a provision inserted that it was without prejudice to the rights of the city. Chairman Thompson. — The order is a matter of record. Mr. Maltbie.- — I do not recall those words. Senator Foley. — You voted for the order, finally ? Mr. Maltbie. — I did. Senator Foley. — Was the inclusion of a provision in the order that it was without prejudice to the rights of the city a satisfac- tion in your mind that it was not an admission or recognition of the franchise ? Mr. Maltbie. — Well, I do not recall that there are any such words in the order. The order does provide that permission to — it is just as it is here, that nothing herein contained shall be con- strued as authorizing, permitting or approving the merging of said Amsterdam Electric Light, Heat and Power Company by said Edison Electric Illuminating Company of Brooklyn. 1256 Investigation of Public Service Commissions Senator Foley. — Who drew that ? Mr. Maltbie. — Counsel drew that order. Senator Foley. — Counsel for the Commission or for lihe city ? Mr. Maltbie. — Counsel for the Commission. Senator Foley. — And was that shovm to the Corporation Counsel ? Mr. Maltbie. — I couldn't say ; probably not. Senator Foley. — Well, was that a sufficient point in your mind to vote for the approval of the order, that the city was not giving up any of its rights ? Mr. Maltbie. — Yes. Senator Foley. — Was it done on any opinion of Mr. Coleman or anyone in the Law Department? ]\Ir. Maltbie. — Yes, there was an opinion by Mr. Coleman. Chairman Thompson. — ■ The Commissioner has already testified to this, and said he went to Mr. Polk, and it is all in the record. Senator Foley. — I don't think that provision of the order was called attention to. Chairman Thompson. — Yes, it is a matter of record. Mr. Maltbie. — Yes, it is a matter of record. It was called attention to and questioned about and inquired about. Examination by Chairman Thompson: Q. Now, Mr. Maltbie, in reference to the Kings County Light- ing case — that was before you ? A. Yes. Commissioner Bassett had originally, and when Commissioner Cram was appointed to succeed him, I took the case. Q. itTow, in that case you wrote an opinion in 1911, some time in November? A. I did. Q. In which you provided for an 85-cent gas rate in 1912, and 80-cent in 1913 ? A. I think something to that efFect. Q. And in your opinion that you wrote you recited that an offer was made by the company itself to reduce the price of gas Ebpoet of Joint Legislative Committee 1257 about the time of the institution of those proceedings, to 90 cents, and then 85, and finally to 80 for the year 1914 and 1915 ? A. That is correct. Q. JSTow, there was a time when Mr. Morgan J. O'Brien appeared in these proceedings before you, wasn't there? A. I am not positive whether he appeared at the hearing, but we had conferences with him regarding the case. Q. And you had a conference with Mr. O'Brien ? A. Yes. Q. Do you remember having a conference with Mr. O'Brien, in reference to trying to make an agreement by which the com- pany would concede a rate? A. Very well. Q. When was that ? A. I cannot state positively, but inasmuch as the opinion was adopted by the Commission on the 31st — well, in the latter part of October, 1911. Probably the conference took place just 'before that, but it was about that time. Q. Will you state what it. was? A. After going over the case and working up conclusions which I had reached, as set forth in the opinion, and after talking with the Chairman, Chairman Wil- cox at that time, regarding the case, I said I didn't know whether the company would contest the order or would accept it ; that they themselves had made an order which was opposed by certain com- plainants before the Commission had made its investigation, and the Commission considered that in view of the fact that certain of the complainants had opposed any statement before an investi- gation was made, and in view of the fact that we had made an investigation, we might see whether the attitude of the company would be in opposition to the rate that had been reached, or they would accept it. Because if they would accept it, it might save considerable litigation and trouble. Judge O'Brien came to the office — I think we had two or three conferences regarding the matter — and I suggested to him, asked him what the attitude of the company would be upon a rate such as outlined in my opinion, which called for a rate of 85 cents for the remainder of 1912, and at 80 cents to January 1, 1913. The Judge said that the matter would be taken up with the company, and they would consider it and let us know what their attitude on it would be later. We were later informed that the rates which we had suggested would not allow them an amount of money which they considered sufficient. 1258 Investigation of Public Service CoMMissior\s Q. Informed by wtiom ? A. We were informed by Judge O'Brien. Well, I asked him then what the difference was — how much difference there was between their figures and our own figures, the idea being to see whether we could get a settlement of the case or whether we were so far apart that a settlement was out of the question. Judge O'Brien informed us either at that time or at a later date, but in the fall of 1911, after the figures had been made, that there was a difference of about two thousand dollars in the income; that our rates would provide according to the estimates of the company and the estimates prepared by the company themselves as to the net income that they thought they ought to have. It might not have been exactly two thousand dol- lars, but it was around that figure. Well, I expressed myself at once that if the difference between us was only two thousand dollars, we would dispose of that at once and grant them the two thousand dollars. That is, fix the rate so they would get two thousand dollars more income. That I considered that such a minor matter, it would be exceedingly wise to agree with my ad- versary quickly, and I so stated so far as I was concerned I would recommend a modification of the rates which would give them that two thousand dollars which they thought they ought to have. And I was more hopeful than the facts justified, because when they went back to consider it with the company, the company decided that they would not take the proposition, and which in my opinion then and which I think I expressed, was wholly unjus- tified, and there must be something more in the situation than two thousand dollars, because if they wanted two thousand dol- lars, and we said we would fix the rate, certainly that matter was wiped out. The idea was, instead of having an 85-cent rate apply on the first of October or first of ISTovember, it would -apply on the first of the year, and two months is such a minor matter, it would not have been of great importance. Q. But they would not consent to that? A. They would not consent, and I told him I guessed they thought they could make more money in litigating than they could in settling it, and T have not since changed my opinion. Q. It evidently pretty nearly paid them, according to the records up to date. A. I think the figures would show that even after paying counsel very generously they had money to spare. Eepoet of Joint Legislative Committee 1259 Examination by Mr. Lewis: Q. Commissioner, in that Amsterdam case, to go back to it for a moment, the resu;t of the order which the Commission made was to give the right to the company to acquire all of the outstanding stock « A. To acquire the remaining 122 shares, and when they acquired that, they had all outstanding. Q. And by reason of that ownership they had all that a merger could possibly give them ? A. I do not believe it. Q. What disadvantage are they still under ? A. A merger, you mean an elimination, of course, of the Amsterdam Company, in- cluding the franchise, which is the principal thing in the case of that company? Q. Precisely — all there was in that company practically. A. Well, they claimed they had some property in the streets, and the city disputed that, and I never made up my opinion. I never knew whether they had or had not. But if there had been a mer- ger, the franchise of the Amsterdam Company would then have become the franchise of the Brooklyn Edison Company, and like all other property would have been co-mingled and the Brooklyn Edison Company could have said, " We have secured that fran- chise" that they were operating under the Amsterdam franchise, or under the other franchise which they had, just as they pleased, whereas, as long as the franchise was the franchise of the Amster- dam Company, and not the property of the Brooklyn Edison Company, it was impossible for the Brooklyn or Edison Company to say that it was operating under the franchise of the Amsterdam Company, because it did not own the franchise and did not have the "franchise, and it did not have any right to oper- ate under the franchise, but the moment they were merged and they got the franchise, then they could say that. Q. Do you suppose they are not operating under that franchise at the present time ? A. I do not know what they are doing, but in my opinion or opinion of counsel, unless the Commission has taken some action since, they have not any right to operate under that franchise. Q. Have you any idea that the city will ever recover that fran- chise or recapture that franchise? A. Well, I suggest that you ask ]Mr. NicoU that. He has been sitting on that case for about 1260 Investigation of Public Service Commissions two years, and talk about the speed limit being violated or not being considered at all, perhaps the referee might be investigated. Q. Well, isn't it true that the chances of the city recapturiiu the franchise would be better to-day if it had not been for the allowance of that order ? A. I do not believe so at all. Chairman Thompson. — The allowance of that order certainly was not helping the city any. Mr. Maltbie. — Did not hinder it. 'Chairman Thompson. — Didn't help it any? Mr. Maltbie.— Didn't hinder it. Didn't help or didn't hinder it. Senator Foley. — That provision in there did not make any difference — you were sufficiently conscientious for that ? Mr. Maltbie. — I stand on that vote. Any criticism that is coming may come. Any credit that is coming may come. Usually that is so small as to be disregarded. Chairman Thompson. — My idea of that case is that the cor- poration counsel's office of this city deserve more criticism for that action than the Public Service Commission. Mr. Lewis. — I should like if Commissioner Maltbie could go into this matter further, but I understand he cannot be here. Mr. Maltbie. — I have engagements in Washington and Phila- delphia that are such that I ought not be here to-day, but the Senator requested that I come over, and I told him I would do so. 1 do not want to dodge in any way any inquiries that the Com- mittee may wish to make, and if the Committee wishes me to come later, I will arrange it to be here. Chairman Thompson. — Are you to be here the early part of next week ? Mr. Maltbie. — I do not plan to be here before Thanksgiving, if then. Maybe I shall have to work on that day for being here to-day. Chairman Thompson. — We will suspend now until Monday at 11 o'clock. DATE DUE GAYLORD PRINTED IN U.S.A. Cornell University Library HD 2767.N723 1916 Minutes and testimony of the Joint legis 3 1924 002 406 050 i 1! Il 1 j ! i. ( . f 1 Hii