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 UNIVERSITY 
 
 LIBRARY 
 
Cornell University Library 
 HE2791.N53 A6 1882 
 
 Argument of Wilbert Warren Perry before 
 
 olin 
 
 3 1924 030 115 186 
 
It suffices at present to say that the task of remedying evils 
 like these, is more than half accomplished, when they are 
 brought into the fresh air and sunshine of publicity. 
 
 The testimony laid before you by the prime mover of this 
 investigation, Mr. Henry L. Goodwin, has related solely to 
 the ISTew York, ISTew Haven, and Hartford Eailroad Com- 
 pany, or, , as I shall hereafter call it, for the sake of brevity, 
 the Cousolidated lioad. Let no one think that this limita- 
 tion of the inquiry on Mr. Goodwin's part, indicates any 
 malice towards this road, or any favoritism towards other 
 roads. The thorough vivisection of one corporation fur- 
 nishes all the anatomical results that could be gained from 
 the vivisection of twenty. Furthermore, it should be re- 
 membered that the Consolidated Road is the richest and 
 strongest in the state. With a single exception, perhaps, it 
 is the only one that is rich and strong. It has an annual 
 revenue of six million dollars, — more than three times that 
 of the state, which created it, whose servant it is, in theory, 
 and whose servant it ought to be in fact ; a revenue almost 
 as large as the combined revenues of all the other railroads 
 of the state. It is the only railroad in the state, — with the 
 possible exception of its old-time vassal and tributary, the 
 !N"augatuck, — whose net earnings are large enough to farnish 
 a motive for suppressing and concealing them. It is the 
 only road that is rich enough to visit the forbidden pleasure- 
 grounds of illegal investments. There is the best of rea- 
 sons, therefore, for limiting this investigation to the Con- 
 solidated Eoad. The other roads are doubtless not blessed 
 with superior virtue. They are kept from the particular 
 kinds of wrong-doing of which we complain, by their 
 poverty. 
 
 It is exceedingly important to keep in mind the precise 
 nature of the evils under investigation. We do not charge 
 theft, nor embezzlement, nor peculation, nor anything that 
 reflects in any way upon the personal honesty of the officers 
 of the Consolidated Road. Any one who has looked for- 
 ward to this investigation Mdth the hope that it would furnish 
 interesting scandal of tjiat sort, is doomed to disappoint- 
 
ment. The investigation was not directed to any such end, 
 and, from the high character of the gentlemen in charge of 
 this road, could not possibly lead to any such result. Neither 
 is it claimed that the books of this company are not honestly 
 and correctly kept. Following the language of the resolu- 
 tion, we do claim to have proved that the officers of this 
 road have made inaccurate and untruthful returns to the 
 Railroad Commissioners, tenchng to suppress and conceal 
 the amount of its net earnings and the m'anner in which its 
 earnings have been invested ; and that they have made in- 
 vestments of its funds unauthorized by its charter and the 
 laws of the state. The question is not whether, in view of 
 all the information that may have leaked out at different 
 times and in different places from the managers of the road, 
 there has been suppression and concealment. The question 
 is, Are these returns inaccurate and untruthful, and do they, 
 speaking for themselves, tend to suppress and conceal these 
 facts which the law says must be stated fully and accurately ? 
 
 These inaccuracies and falsities in the returns, of which 
 we complain, are not mere failures to comply with techni- 
 cal requirements. They are violations of law of the most 
 serious character. These returns of railroad companies 
 which the law requires to be made and printed from year 
 to year, are of the greatest importance. Yet the President 
 of this road — to whom, as one of the recognized leaders of 
 our profession, I, as one of its juniors, most respectfully 
 bow — in this matter of railroad returns, slights the duty 
 imposed upon him by law, and speaks of it as a thing of 
 little moment. He has said, for instance, in regard to cer- 
 tain items of rents, that he could see no reason why they 
 should be reported, except to gratify curiosity. But the law 
 says they shall be reported. He sa^-s that he signed and 
 swore to the last return without examining it. Yet it goes 
 forth to the world with all the weight of his name and 
 character and oath. The public looking at the return, and 
 seeing that he has signed it and sworn to it, has a right to 
 believe that he has examined it. 
 
 Now I say that these returns, to say nothing of their 
 
statistical value, are exceedingly important for several rea- 
 sons. In the first place, they are important to stockholders. 
 They have a right to know exactly and in detail how much 
 their road is earning and how their money has been invested. 
 True, the directors report every year to the stockholders, 
 but they report as little or as much as they please. Stock- 
 holders may attend their annual meetings, and ask ques- 
 tions, — and be snubbed. Theoretically, they can get full 
 information, but practically they cannot. The law steps in 
 and says that they shall have this information. It says to 
 the bureau of autocrats who rule the road, that they must 
 tell the stockholders who own it, what they have a right to 
 know. Will stockholders lend their approval to the viola- 
 tion of a law which was made to protect them ? 
 
 Again, it is important that investors should receive accu- 
 rate information from these returns. They are made under 
 a form and in a manner prescribed by law. They have 
 been submitted to a board of state officers specially charged 
 by law with the duty of examining them and securing, so 
 far as may be, their absolute correctness. By them they 
 have been transmitted to the General Assembly, and then 
 they go out to the world, approved and indorsed by the 
 state. Have not business men the right to expect that they 
 shall be accurate and peculiarly reliable? Can the state 
 affiard to make itself, even by neglect, a party to the schemes 
 of any railroad company which may wish to " bull " or to 
 " bear " its stock by deceptive and misleading returns ? 
 
 But there is still another consideration which over- 
 shadows all the rest, though it is entirely ignored by the 
 President of this road. These returns are important to the 
 public, because, if made in compliance with the require- 
 ments of law, they give the public the information which 
 enables it to determine whether the fares and freights which 
 it is paying, are reasonable or not. A railroad corporation 
 is not a purely private corporation. It is a quasi public 
 corporation. It is created to meet a public necessity. It is 
 engaged in a public employment. It exercises, and, to exist 
 at all, must exercise, sovereign powers delegated to it by 
 
the sovereign people. It is invested with the prerogative 
 franchise of maintaining a public highway, with the right 
 to exact tolls and fares from those who use it. It is invested 
 with the prerogative franchise of eminent domain, which 
 enables it to build its road across the land of any man, no 
 matter how^ much he may object. Without this right, it 
 would be practically impossible to build a single mile of 
 railroad anywhere. Corporations or individuals engaged in 
 certain other employments, may find it convenient to have 
 the right of eminent domain, and may be allowed to exer- 
 cise it. Railroads must have it, or they cannot exist. De- 
 pendent, then, as they are, for their very existence upon 
 the possession of these attributes of sovereignty delegated 
 to them by the sovereign people, they ought to be pecul- 
 iarly subject to the will of the sovereign people. Exer- 
 cising public rights, they have public duties. They must 
 carry every one who comes to them, everything that is 
 brought to them. They must do it for a reasonable com- 
 pensation, and it is for the law, the creator, and not for its 
 creature, the railroad, to say what is reasonable. 
 
 There is, moreover, a peculiar necessity for state regula- 
 tion of railroad charges, as well as a peculiar justification 
 for it. A purely private corporation, a manufacturing cor- 
 poration, for instance, ought to be allowed to make as much 
 money as it can. It has the right to get a thousand dollars 
 for an axe, if any one is foolish enough to pay it. It can 
 refuse to sell its products at any price, if it prefers to keep 
 them. The public can never suffer from such caprices. 
 Great economic laws, which no legislature made and which 
 no legislature can unmake, take care of the prices of almost 
 everything that has value, and make them reasonable. But 
 railroads are, from their very nature, beyond the operation 
 of these laws. There can be no competition to cut down 
 excessive railroad charges, except by the act of the legisla- 
 ture; and competition, though it may do much good for a 
 time, is liable to end in combination. The wit of legislating 
 man has never yet devised any certain means for preventing 
 railroads from being practical monopolies. Since they are 
 
6 
 
 practical monopolies, their charges, when excessive, must 
 be made reasonable by the direct exercise of governmental 
 powers. 
 
 These are not the vagaries of grangers, nor the mutter- 
 ings of communists, nor the vaporings of demagogues. 
 They are the opinions of the most conservative political 
 economists, of John Stuart Mill, for instance, than whom 
 there has never been anyone more jealous of governmental 
 interference. They are the opinions of the Supreme Court 
 of the United States, the Supreme Court of Maine, the 
 Supreme Court of Massachusetts, and, indeed, of every 
 court of last resort which has passed upon these questions. 
 Thej' are opinions so well settled that my only apology for 
 taking up your time with a statement of them is that, well 
 settled as they are, they are condemned as unsound by this 
 rich corporation, which, with amazing arrogance, assumes 
 to be superior to the law whose creature it is. 
 
 The right of the state to regulate railroad charges has 
 been exercised, sometimes by directly limiting them, as in 
 the case of the ]Srew York Central Railroad, and sometimes 
 by limiting the rate of profit upon the capital invested. 
 The latter device, though a very common one, both in Eng- 
 land and in this country, in the early da3's of railroad his- 
 tory, is very imperfect, is easily evaded by the watering of 
 stock, and, to the minds of scheming railroad magnates, 
 doubtless furnished the necessity which was the mother of 
 that invention for making the transportation tax levied by 
 railroads upon the public, appear moderate, when it is, in 
 fact, excessive. In this state, the legislature has not, either 
 in its general railroad law, or in its special grants of corpo- 
 rate powers to railroads, attempted to exercise, in either of 
 the ways mentioned, this right to regulate the rates of fare 
 and freight. But the right remains, and it becomes a plain 
 duty, whenever it appears that the rates exacted by any of 
 our railroad companies are unreasonable. There can be no 
 arbitrary rule of reasonableness. There is a principle, 
 however, which should be followed, and that is this: A 
 railroad company has the right to earn enough to pay its 
 
debts, its taxes, its legitimate operating expenses, and fair 
 dividends upon the capital actually invested. When it 
 earns more than enough to do that, it follovsrs that the 
 fares and freights which it is collecting from the public are 
 excessive, and should be cut down by the legislature, either 
 by supplying competition or by direct enactment. 
 
 To apply this principle fairly, the public must have, from 
 time to time, full and accurate information as to the receipts 
 and expenses of each railroad. To secure that information, 
 the law has required that these returns shall be made to the 
 Eailroad Commissioners. It is manifest that, if they are 
 untruthful and inaccurate, and tend to conceal the amount 
 of the net earnings of a road, the main purpose of the law 
 is frustrated. It is also manifest that a railroad company 
 whose charges, according to the principle just stated, are 
 excessive, has the strongest of motives to conceal the real 
 amount of its net earnings, for, if they were stated truly, the 
 public would soon remedy the evil, either by regulating 
 rates, or, indirectly, by supplying competition. This Con- 
 solidated Eoad has for several years had precisely that 
 motive for concealment, and it was never stronger than 
 when it made its last return, which is now before this 
 legislature. According to figures submitted to you by Mr. 
 Goodwin, during the last fiscal year it earned sixteen per 
 cent, on its nominal capital of $15,500,000. That Mr. 
 Goodwin has not overstated the amount, is apparent from 
 the declaration of the Hon. Eenry C. Eobinsou, a director 
 of the company, that the road had earned more than seven- 
 teen per cent, during the year. That this fact did in reality 
 operate as a motive for concealment in its return, is apparent 
 from Mr. Robinson's statement, that he supposed the com- 
 panj' did not care to have the public know how much it was 
 making. President Watrous has told you, in speaking of 
 the so-called appropriation of $300,000, that, but for the 
 thought that the stockholders might think that amount 
 ought to go to them, perhaps the appropriation would not 
 have been made. In other words, the stockholders were to 
 be hoodwinked. Doubtless there was a desire to hoodwink 
 
8 
 
 both stockholders and public, but especially the latter. As 
 Mr. Robinson intimated, the managers of the road wanted 
 to conceal their enormous profits, for fear that if they were 
 known, the public would clamor for a reduction of rates. 
 They were uncommonly anxious to withhold the real facts 
 from a legislature which might be asked to grant a charter 
 to a competing road. Whenever any one is suspected of a 
 crime, the preliminary inquiry usually is. Did he have a 
 motive for committing it? That this company, when it 
 prepared this last return, had a motive for so framing it as 
 to conceal the amount of its net earnings, is perfectly clear 
 to every intelligent man. That it did, in fact, make a 
 return which concealed net earnings to the amount of at 
 least $650,000, has been made equally clear by the testi- 
 mony which we have submitted. 
 
 Let us first examine this so-called appropriation of 
 $300,000. This matter, though much talked about, is 
 really but an incident in a systematic policy of concealment 
 followed by this road for years. For years, whenever it has 
 invested any part of its surplus earnings in new land, or 
 new depots, or new equipment, the money so invested and, 
 in its new form, still a part of the assets of the road, has 
 been treated in the returns to the Railroad Commissioners 
 as if it had been expended in operating the road. But last 
 year, so much had to be covered up, that it was deemed 
 necessary to resort to the additional device of saying that 
 money had been expended, which had not been expended 
 for any purpose, but was, at the end of the year, a part of 
 the cash on hand. There is one thing which we are in 
 danger of losing sight of, and that is, that this printed 
 return of the Consolidated Road, which appears to have been 
 signed and sworn to on the 2d of ITovember, 1881, by the 
 president and treasurer of the company, is not the return 
 whicli they did in fact swear to and sign. That return, 
 which was submitted to the Railroad Commissioners and 
 accepted by them, and upon which they made their report 
 to the General Assembly during the second week of the 
 session, was, beyond all controversy, untruthful and mis- 
 
9 
 
 leading to the last degree. In that return, the officers of 
 this road reported that they had expended during the year 
 ending September 30, 1881, for repairs of road-bed and 
 track, $417,963.34; for repairs of bridges, |123,892.64; for 
 repairs of locomotives, $175,998.35; for repairs of cars, 
 $385,703.80 ; that their total operating expenses for the year 
 named had been $3,122,909.01; and that the net earnings 
 for the year were $1,972,857.04. It is now admitted that 
 the sum of $300,000 included in the total operating expenses 
 as thus returned, had not been expended for any purpose ; 
 that each of the first two items of repairs just enumerated 
 had been overstated $100,000, and each of the last two 
 $50,000 : and that the net earnings for the year had thus 
 been falsely returned at $300,000 less than their real 
 amount. In other words, this return suppressed and con- 
 cealed in this way profits for one year to the amount of 
 .^300, 000. I say further, that it concealed them, beyond 
 any possibility of detection from anything contained in 
 that return. The same falsitj^ was carried into the profit 
 and loss account as reported in the general balance sheet, 
 and the increase in surplus, as shown by a comparison of that 
 account with the same account for the previous year, was 
 made to appear as $300,000 less than it would have been 
 but for this falsity. In making up the table of total receipts 
 and expenditures, it was necessary, of course, to introduce 
 a fiction of $300,000 on the receipt side to balance this fic- 
 tion of $300,000 on the expense side, and it was accordingly 
 reported that the company had received from "increase in 
 accounts payable $346,567.17," whereas the true figures for 
 that entry, as it is now admitted, are $46,567.17. Are these 
 clerical errors? Would any subordinate ever presume to 
 take such liberties with the public accounts of his company, 
 without direction from his superiors? Is there not every 
 indication here of a deliberate purpose to cover up $300,000, 
 which had been earned, or at least exacted from the public, 
 and which the public had a right to know had been exacted 
 from them ? I have said that this company clearly had a 
 motive to conceal its net earnings. It is equally clear now 
 
10 
 
 not only that it did in fact conceal them, but that it acted 
 with a deliberate intent to conceal, which it is fair to pre- 
 sume has manifested itself in other ways as well. 
 
 Right here, let me inquire why the Railroad Commission- 
 ers did not report to the General Assembly, as they are 
 required to do by law, so plain and palpable a violation of 
 the law, as soon as it came to their knowledge ? They may 
 claim, it is true, that they were ignorant of it at the time 
 when they submitted their annual report, during the second 
 week of the session; but they certainly knew of it soon 
 after that. They knew of it before they sent in this printed 
 piiniphlet, A\'liieli contains their corrected report, with all 
 the returns of the railroad companies in fall. Why :ire the 
 Railroad Commissioners dumb.? Why is it that the fact of 
 the suppression and concealment of net earnings by this 
 railroad company has itself been suppressed and concealed 
 by the Railroad Commissioners ? 
 
 Those who speak for the Consolidated Road, have said to 
 you that there \\"as no concealment of the faets in regard to 
 this item of $300,000, because in the report of the directors 
 to the stockholders, submitted at their last annual meeting 
 on the 11th of January, it was announced that that sum had 
 Ijeeu appropriated out of the earnings of the past 3'ear, to 
 be used for permanent improvements. It is true that some- 
 thing of that sort was said in that report. It is also true 
 that in the treasurer's balance sheet given in that report, to 
 which one would naturally look for accurate information, 
 this item of |300,000 is falsely included in the transportation 
 ex})euses for the year ending October 1st, 1881. But all 
 this talk about the report of the stockholders is simply an 
 attempt to divert your minds from the real issue, which has 
 nothing to do with what the officers of the road may ha\'e 
 said upon their books, or to their stockholders, or in the 
 course of casual curb-stone conversation, biit which is simply 
 this : Do their sworn returns to the Railroad Commissioners, 
 which the law requires them to make and to make truly, 
 tend to suppress and conceal the amount of their net earn- 
 ings ? It would hardly be considered an excuse for a \vitness 
 
11 
 
 who lias made a false statement in court, that he had stated 
 the fact truly to somebody out of court. Furthermore, there 
 is tlie best oxidence in the Avorld that the return to the Rail- 
 road Commissioners was not only false in regard to this item 
 of $300,000, but that it was actually deceptive. It deceived 
 the Railroad Commissioners themselves. We have shown 
 you a rare and curious work, of which it is believed that 
 only three copies have ever seen the light. Mr. Goodwin, 
 who has a tacult}^ for digging out things, got hold of those 
 three copies, and it is fortunate that he did, for the Railroad 
 Commissioners, as soon as they knew that he wna on the 
 war-path, made haste to play another card in the fashional)le 
 game of suppression by suppressing this interesting ^\'ork. 
 The work to ^\hich I refer, is a second edition of the last re- 
 port of the Railroad Commissioners. In it, just after the 
 title page, will be found the following interesting reading: 
 
 " ERRATA." 
 
 " In the annual return of tlie New York, New Haven & 
 Hartford Railroad Company as at first made to us, there was 
 included in ' operating expenses ' $300,000, which, in fact, had 
 not been expended, but only appropriated for future expenses. 
 There was nothing to indicate this, and it ivas not known to lis 
 till after the time fixed by law for presenting our report to the 
 General Assembly. It is necessary, therefore, to make many 
 corrections in the various summaries of earnings and ex- 
 penses in the text of our report, but the return having been 
 amended before the tables and returns were printed, these 
 arc believed to be correct." 
 
 Then follows a long list of errata, all due to the false and 
 decepti^'c return of this one company. The Railroad Com- 
 missioners, then, who certainly cannot be accused of any 
 malice toward the Consolidated Road, agree with us in 
 chargins: the officers of that road witli liaving made a false 
 return, which concealed net earnings to the amount of 
 $300,000 beyond the possibility of detection from anything 
 contained in that return. It is altogether probable that 
 neither the Railroad Commissioners nor the public would 
 
12 
 
 ever have been undeceived upon this point, had it not been 
 for Mr. Good^vin'K intelligent and unflagging devotion to 
 the purpose which he formed long ago, of securing honest 
 returns fi'om the railroad companies of the State as a neces- 
 sary l)asis for proper legislative regulation of railroad i-harges. 
 He unearthed this false return of $300,000 as expended, 
 which had not been expended. He brought it to tl le atten- 
 tion of the Railroad Commissioners and of members of this 
 Legislature. At last, some time after the middle of Januaiy, 
 and after rumors of a legislative investigation liad liegun to 
 fill the air, this great corporation condescended to make a 
 " correction" in its return to the officers of the State. Rail- 
 road Commissioner Bacon and Mr. E. C. Robinson, Auditor 
 of the railroad company, took the return and "fixed it up" 
 a little, with the view of conforming, to some extent, at least, 
 to the old-fashioned notions of people wlio believe in tellino- 
 things as they are. Even ii(_)\v, the officers of this company 
 tell you that they think the return, as it originally stood, 
 would have been all right, if each of the items of operating 
 expenses wldeli were over-stated, had been marked with an 
 asterisk, calling attention to a. note at the bottom of the page, 
 the purport of which would have been, I suppose, that no 
 one should be foolish enough to believe what was stated in 
 the body of the return. Stars are commonly supposed to 
 give light, but it is a very queer kind of light which comes 
 from the stars that Mr. Watrous and Mr. Clark talk about. 
 We all know something of star routes. We have no burn- 
 ing desire for the general adoption of star returns. 
 
 Let us examine somewhat in detail this pretended "cor- 
 rection," the results of which are before us in the printed- 
 return, sometimes spoken of as the amended return. Under 
 the head of "Statement of Operating Expenses," on page 
 93 of Railroad Returns, the four items of repairs of which 
 I have spoken, have been reduced $800,000 in the aggregate. 
 On page 95, the "total operating expenses" are yiven as 
 $800,000 less, and the "net earnings" as $300,000 more, 
 than in tlie original return. Under the head of " Statement 
 of Total Expenditures," on page 95, the figures for " oper- 
 
13 
 
 iiting expenses, as stated," have been reduced $300,000, and 
 a new entry has been made: "Appropriation for additional 
 land, new hridi^e and new er^uipment, $300,000." These 
 are the only eliani^-es made which are connected in any way 
 with this item of $300,000. You will obstTve that this 
 amount is still treated as an expenditure, both in the state- 
 ment of total expenditures and in maldng up the profit and 
 loss aecDunt, which appears in the balance sheet on page 96. 
 In other words, the return, in its present form, still su}i- 
 ^iresses that amount of profit. One would naturallj- suppose 
 that it would make some diflference with a balance sheet 
 whether $300,000 had been expended or was still a part of 
 the cash on hand. But it is the boast of this company that, 
 whether it makes uji its return on the theory that it has 
 spent $800,000, as it did originally, or on the theory that it 
 has not spent it, but still has it on hand, which is the theor}- 
 of the " amended "' return, the balance sheet will be precisely 
 the same. The profit and loss balance was originally re- 
 porte<l, and still stands, at $2,030,269.89. Those figures 
 were e\'idently arrived at by the following computation: 
 
 Net earnings as originally reported, . . . $1,972,857 04 
 Admitted profit from Shore Line Division, as 
 
 given on page 95, 13,366 74 
 
 $1,980,223 7^ 
 Deduct payments as given on page 95: 
 For taxes, ^ . . . ^. . . $238,642 12 
 
 " interest, 143,333 33 
 
 " dividends, 1,550,000 00 $1,931,975 45 
 
 Profit for the year, $54,248 33 
 
 Add profit balance of profit and loss account 
 
 as it stood in last year's report, .... 1,976,021 56 
 
 $2,030,269 89 
 
 But it is now admitted, and reported on page 95, that the 
 net earnings are $2,272,857.04, in other words $300,000 
 more tban the amount which has entered into the profit and 
 loss account. Is it not perfectly obvious that a " correction " 
 
14 
 
 wliicli makes tlie net earnings $300,000 more, should make 
 the prolit lialance of the profit and loss account $300,000 
 more ? 
 
 Look at it in another \vaY. Assume, for the sake of argu- 
 ment, that the tahle of receipts and expenditures on page 95 
 is true. There is an entrj- there under the head of receipts 
 to wliich I have already referred : " From increase in ac- 
 counts payable, $346,567.17." The accounts payable, as 
 given in the balance sheet in last year's report, were 
 $328,431.14. Add this reported increase, and the sum is 
 $674,998.31, which we should expect to find under the head 
 of accounts payable in the balance sheet now before us. 
 Instead of that, we find "accounts payable, $361,664.98;" 
 or, if we include "interest unpaid, $13,333.33," as we prop- 
 erly may, in accounts payable, their amount will then be 
 only $374,998.31, or $300,000 less than they should be, if 
 the item of increase fi'om accounts payable on page 95 is 
 correct. The officers of the road have told you that the 
 "appropriation" of $300,000 for permanent improvements 
 to be made during the current year, was treated as an ac- 
 count payable, and that it appeared on the liability side of 
 the balance sheet in those mysterious items, " IvTew equip- 
 ment, $100,000; new lands and bridges, $200,000." That 
 is the way in which they account for the missing $300,000 
 of accounts payable. The mysterious items to which I have 
 just referred, according tf) this explanation, are not a part of 
 the real profit and loss balance, but a part of the accounts 
 payable. But, as I have said, the present figures of the 
 profit and loss account are based upon the theory that the 
 $300,000 had in fact been expended, and, it now being ad- 
 mitted that that amount is still on hand as an unexpended 
 appropriation, those figures should be increased $300,000. 
 The book-keeping jugglers of this company will say that that 
 is impossible, because the balance sheet will not admit of 
 any such increase. It will not only admit of it, but ^Yi\\ de- 
 mand it, as soon as the asset side of the balance sheet, as 
 well as the liability side, is brought into conformity with the 
 entries on page 95. The meaning of the " approjiriation " 
 
15 
 
 entry of $300,000 under the head of expenditures on tliat 
 page, is precisely the same as that of "hills and acuounts 
 receivahle this date," or "cash on hand to halance;" that 
 is, it is put in there not as an expenditure, hut to halance the 
 excess of receipts over expenditures. While the other items 
 of this sort have heen carried into the Ijalance sheet as 
 assets, this has not heen. It plainly helongs there, and its 
 presence there, of course, would increase the profit and loss 
 halance on the other side $300,000. It will not do to say 
 that this item of $300,000 is included in the cash item already 
 in the table of assets. That may lie true in fact, but if a fic- 
 tion is adopted in book-keeping, it must l)e followed out 
 consistently. This company in its original return, to cover 
 up a fiction of $300,000 in its statement of operating ex- 
 penses, introduced a fiction of $300,000 into its statenn'ut of 
 receipts, under the head of " increase from accounts pay- 
 able." The latter fiction being retained in the amended re- 
 turn, it became neccssar}- to adopt, in place of the former 
 fiction, the fiction that the company still had on hand 
 $300,000 in addition to what it had on hand according to 
 the original return. A fictitious increase of accounts pay- 
 able, necessitates a corresponding fictitious increase, either 
 of expenses or of assets. The persons who "fixed up" the 
 amended return, calmly ignored this rule, when they left the 
 table of assets in the balance sheet unchanged. Of course, 
 the true amendment would have In-en to strike out the fic- 
 tion altogether. They neither did that, nor were they con- 
 sistent in adhering to fiction. It is impossible to esca[ie 
 ft-om the conclusion that the return which A\e are consi(k'r- 
 ing, even after its i)retended correction, leaves t]ie profit 
 l)alance of the profit and loss account $800,000 less than it 
 should be according to admitted facts, and tbat thus, by a 
 shallow trick of book-keeping, it suppresses that amount 
 of net earnings. 
 
 There are at least two other instances of suppression of 
 net earnings in the last return of the Consolidated Road, of 
 which there has not been even a pretended correction. I 
 
16 
 
 will first call your attention to the suppression of about 
 $100,000 of the net earnings of the Shore Line division of 
 this road. The earnings and expenses of this division are 
 reported separately on page 135 of the Returns under the 
 title " Shore Line Railway." The Shore Line Railway is 
 practically owned by the Consolidated Road by virtue of a 
 perpetual lease made in 1870, and what is earned from it, 
 and expended upon it, are a part of the earnings and ex- 
 penses of the Consolidated Road, and should be reported 
 with its other earnings and expenses.' This separate report 
 is not contemplated by the law, and its only effect is to 
 facilitate the bare-faced suppression of net earnings of which 
 I am about to speak. On page 136, under a little transparent 
 fiction, the fact appears that the net earnings of the Consol- 
 idated Road from its Shore Line division were |212,981.28 
 less $100,000 paid as rent to the Shore Line Railway Com- 
 pany. It follows that in the table of receipts of the Consol- 
 idated Road on page 95, there should be an entry showing 
 that that road had received $112,981.28 as profit from the 
 Shore Line division, and that amount should enter into the 
 profit and loss balance on page 96. "What we do find on 
 page 95, is this : " From profit Shore Line Railway 
 $13,866.74 ; " "From decrease Shore Line division balance 
 $99,614.54." As I have already shown, only the former 
 item is carried into the profit and loss account. The latter 
 item, which constitutes the greater part of the net earnings 
 of the Consolidated Road from its Shore Line division, is 
 not treated as net earnings at all, but as money received by 
 the Consolidated Road in payment of a debt. A debt? 
 Who is the debtor ? The Consolidated Road itself. What 
 is this debt ? It is the debt of one pocket to another for 
 money paid out of that other pocket as an investment for 
 the benefit of the man who owns both pockets. It has ap- 
 peared from testimony before you that the Consolidated 
 Road has invested a great deal of money in permanent im- 
 provements upon its Shore Line division. It Las virtually 
 reconstructed it, and has thus added hundreds of thousands 
 of dollars to its permanent assets, though that fact has been 
 
17 
 
 concealed from the public by the ingenious, but not ingen- 
 uous, device of calling money invested in permanent im- 
 provements an operating expense. For a time, the actual 
 net earnings from this division did not furnish all the funds 
 needed for this work of reconstruction, and the excess of 
 the money thus invested over the actual net earnings from 
 this division, has been treated as a debt from this part of 
 the Consolidated Road to itself, to be wiped out by the net 
 earnings of future years. President Watrous in his last re- 
 port to the stockholders says that the net earnings of this 
 division for last year, canceled the balance of this indebted- 
 ness, and left a small balance in its favor. It is bad enough 
 to cover up the net earnings of any given year by using 
 them for permanent improvements made during that year, 
 and then saying that they have been expended in operating 
 the road. But to cover up net earnings by treating perma- 
 nent improvements made and paid for in previous years, as 
 a debt from the road to itself to be paid out of the profits of 
 the present, is a most daring imposition upon the public. It 
 means that the public have been made to pay, without 
 knowing it, every dollar that hae been invested in the work 
 of reconstructing the Shore Line division. I beg that you 
 will observe the true meaning of this debt fiction. The 
 party really treated as the debtor is the public. They have 
 had to pay the Consolidated Road in the shape of excessive 
 fares and freights, for these permanent improvements. The 
 hand of the public has not been raised to stop this imposi- 
 tion, because its eyes have been blinded with the dust 
 thrown by these false and deceptive returns. The last re- 
 turn now before us, clearly suppresses, by this debt fiction 
 which I have described, about one hundred thousand dollars 
 of the net earnings of the year. 
 
 I pass now to a third item of suppression in this return. 
 If you will turn to the act of 1878, which prescribes the 
 form for these railroad returns, you will observe that under 
 the head of " Statement of Total Expenditures " each com- 
 
18 
 
 pany is required to report, among other things, the amount 
 expended dilring the year " for construction, equipment, or 
 property account, giving each separately." In this last 
 return of the Consolidated Road, that question is stricken 
 out, and, if you will look at the second section of the act 
 referred to, you will see that the meaning of that is that 
 nothing was spent for those purposes. But a comparison of 
 the number of locomotives and cars owned by this company, 
 as given on page 99 of the Returns, with the number owned 
 at the close of the previous year, as given in the return for 
 that year, shows a large net increase of equipment. More- 
 over, the directors say in their report to the stockholders that 
 they " have expended for additional grounds, permanent 
 improvements, and new equipment, over and above all ordi- 
 nary operating expenses, about $250,000 during the year." 
 The officers of the road come in here and tell you that this 
 amount is distributed, in their return, among various items 
 of " repairs " in the statement of operating expenses ; and 
 yet they claim that they have not violated the law. They 
 say that they do not keep construction, equipment, and 
 property accounts. We do not care what accounts they 
 keep, nor how they keep them, provided they keep them, as 
 they doubtless do, in such a way that they can report what 
 the law requires them to report. If they do not so keep 
 them, their attention is called to the fourth section of the act 
 of 1878, which says that no company shall be excused for not 
 giving the required details, because it does not keep its 
 accounts in such manner as will enable it so to do. Money 
 invested in additional land, or new depots, or permanent 
 improvements which add to the value of the road, or in new 
 cars and locomotives which do not take the place of old 
 ones, but are an addition to the equipment, is not money 
 expended for repairs of any sort, and to so return it, is a 
 palpable violation of law. It is idle to say that in Massa- 
 chusetts some railroad companies have made their returns in 
 this way. That is true, but the Railroad Commissioners of 
 Massachusetts have strongly condemned the practice, and 
 have done their utmost to stop it. If you will take the 
 
19 
 
 trouble to rnu through our Connecticut returns, you will 
 observe that the Consolidated Road is almost the only one 
 which reports that it has expended nothing during the year 
 for construction or equipment. The Naugatuck makes the 
 same report, and improperly puts money spent for depot 
 land and dock under the head of operating expenses, but it 
 does have the frankness to state in so many words that it 
 was spent for those purposes. But in the return of the 
 Consolidated Road there is absolutely nothing to indicate 
 the expenditure of a single dollar for construction or equip- 
 ment. 
 
 The Railroad Commissioners knew that this return was 
 false in this respect. On page 34 of their report they say: — 
 
 " Among the improvements on the line of this [the 
 Consolidated] road during the past year we note the new 
 and commodious passenger stations at Meriden and Milford, 
 the new freight-house and engine-house at Middletown, and 
 the raising of the track and building of a substantial bank 
 and river wall in connection therewith." 
 
 Again, on page 20, they say : — 
 
 " It will be seen, however, that of the 23 new passenger 
 cars, 18 baggage cars, 1262 merchandise cars and 19 loco- 
 motives added to the equipment of our companies, the cost 
 of 3 passenger cars, 1 baggage car, and 506 merchandise 
 cars was included (if paid) in operating expenses, which 
 would add nearly 50 per cent, to the increased net earnings, 
 //' the cost icas charged under the f roper head of equipment." 
 
 The three passenger cars referred to were the cars of the 
 Consolidated Road, and of the 506 merchandise cars, 460 
 were theirs. Why did not the Railroad Commissioners 
 require that their cost should be charged " under the proper 
 head of equipment ? " Why did they not require that the 
 cost of the new buildings and permanent improvements of 
 which they speak, should be charged under their proper 
 heads ? 
 
 That astute railroad man, Vice-President Clark, — who, if 
 he had entered our profession, would have ornamented that as 
 he now ornaments his own, — has said a great deal to you 
 
20 
 
 about the constant depreciation of railroad property. His 
 claim seems to be that, as everything connected with a rail- 
 road except land, wears out, it is fair to say that money 
 expended for new things, whether much or little, is ex- 
 pended in keeping up the value of the road, and may 
 properly be returned, under the head of operating expenses, 
 as money expended for repairs. This is charmingly indefi- 
 nite. It may be true that money expended in keeping up 
 the structure and equipment of a railroad may properly be 
 included in operating expenses. For instance, the actual 
 outlay in case of a renewal of ties, or a substitution of new 
 cars for old ones, no longer fit for service, and which must 
 be sold for what they will bring, may fairly enough be 
 classed as an ordinary operating expense. A railroad may 
 be kept forever young by repairs in the strict sense of the 
 term, and by the substitution of new things for old ones 
 when the old ones can no longer be profitably repaired. In 
 the latter case, the true course would seem to be to charge 
 construction or equipment account with the cost of the new 
 things, which may be more valuable than the old ones ever 
 were, and to credit it with the original cost of the old ones. 
 But, as I have said, it is perhaps fair enough to include the cost 
 of substitution in the expenses for repairs. When, however, 
 there is a positive addition to the property of the road, as, for 
 instance, additional land or additional rolling stock, it is 
 manifestly not an operating expense. The directors of this 
 road admit that they " have expended for additional grounds, 
 permanent improvements, and new equipment, ove7' and 
 above all ordinary operating expenses, about $250,000 during 
 the year." The cost of keeping up the structure and equip- 
 ment of the road is an ordinary operating expense. It fol- 
 lows that they have made additions to the property of the 
 road of the value of $250,000. More than half of that 
 amount, they say, was for new equipment. Call it $135,000. 
 According to their last return to the Railroad Commissioners, 
 they spent during the year for " repairs " of locomotives and 
 cars $461,702.15. Take out the $135,000 for new equip- 
 ment, which they have included, and we still have $326,702.16 
 
21 
 
 for " repairs," which is over fifteen per cent, of the reported 
 cost of their equipment. That ought to be quite enough to 
 keep up the value of the equipment, and, if so, there has 
 been an addition to its value of at least $135,000 during the 
 year. Is it not perfectly obvious that the property of this 
 road, with a net increase of 460 in the number of its freight 
 cars alone, with its additional land and new buildings, was 
 worth at least $250,000 more at the end of the year thaii it 
 was at the beginning? No officer of the road denies it. 
 You remember how Mr. Clark evaded the question. 
 
 The effect of the falsity which we are now considering is 
 to make the operating expenses $250,000 larger, and the 
 net eai'nings $250,000 smaller, than they would be if the 
 return conformed to law in this respect. To say that 
 $250,000 has been spent in operating the road, when it has 
 Ijeen invested and is still owned by the road in another 
 form, is to suppress that amount of net earnings of the 
 year, and to make the balance sheet correspondinglj- false 
 in its statement of assets and of the profit and loss account. 
 
 This particular form of suppression has been practiced by 
 this road for years. According to its returns to the Rail- 
 road Commissioners, it has not expended a dollar for con- 
 struction or equipment in six years, with the exception of 
 about $40,000 in one year for equipment. Figures sub- 
 mitted to you by Mr. Goodwin show that during those six 
 years it has in fact expended for those purposes about 
 $1,500,000. By the particular form of falsity in its returns 
 which we are now considering, it has concealed $1,500,000 
 of net earnings, and its actual surplus is almost twice as 
 large as its reported surplus. Obviously no one can com- 
 plain of the course of this company in using its net earn- 
 ings to build up and develop its road. The evil is that, by 
 its false returns, it has concealed the fact that it was so using 
 them. If the public had known that, under the guise of 
 fares and freights, it was in fact paying in capital to be used 
 in building up the road, it would have interfered long ago, 
 and would have sought to reduce rates either by direct 
 legislative action, or indirectly by chartering a competing 
 
road. Fresli vi\\>\ti\.] actually subscribed and paid in, would 
 have been madr to do the \\ork whiclj the public was doing 
 without knowiiiii' it, and without receiving- any equivalent 
 for it. Presi(hMit Wutrous says that there are only two 
 ways to raise money for improving- a railroad — to borrow it 
 and to earn it. There is a third way, and that is the true 
 one — to increase the capital stock. The public ought to 
 pay for the use of a railroad enougli to yield a fair profit 
 upon capital a<'tnally in\-ested. It ought not to bear the 
 additional bur(hMi of paying- in the capital itself, and it 
 would soon free itself from that burden if there were uo 
 concealment of its real nature. It apjicars from the testi- 
 mony of President Watrous that, when tlie directors of this 
 road found, at the close of last year, that, after paying their 
 usual dividends, they would still liave more than $300,000 
 on their hands to (hspose of, tbcy resolved, -with a 
 mao-nificent burst of generositv, not to divide it among their 
 stockholders, but to give it to the public. How did they 
 g-i\e it? They "appropriated" it for permanent improve- 
 ments to be made during the coming- year, and then told the 
 public that they had ah-cady spout it in operating the road, 
 thereby concealing the fact that so mucli capital had been 
 given tf) them by the }>\d)lic. During the last year, the pub- 
 lic jiaid the legitimate operating expenses of this road, its 
 disbursements for interest and taxes, and ten per cent, di-vi- 
 dends upon a capital of $!;">, 500, 000, of which about 
 13,000,000 arc pure \\ater. Thei-c I ought to be able to 
 stop. Any railroad company which exacts from the public 
 more than that, is committing robbery, or, let me say rather, 
 larcenj', since the crime is committed not by force, but by 
 stealth. But over and above all that I have mentioned, the 
 public paid into the treasury of the Consolidated Koad in 
 this one year $100,000 used by this company in previous 
 years as capital in building up its road; $250,000 used b}^ 
 this company last year as ca^iital in building up its road; 
 $300,000 to be used hy this company during the current 
 year as capital in building up its road. The public have 
 been made to contribute capital to the extent of $650,000 in 
 
a single war; and yet this road makes a return to tlie 
 offieer^^ of the state Avhieh eoneeals this faet al>solntel\', l)y 
 making it appear that every dollar of that amount lias gone 
 to operating ex}ienses. The gri-at e\-il, I re})eat, is this eon- 
 eealment, which pre\ents the puhlie ii'om interfering to ^iro- 
 tect itself. 
 
 But there is another evil growing out of this, which will 
 sooner or later manifest itself, unless railroad companies 
 become in the future very different creatures from what they 
 have been in the past. Within a few years, the agents of 
 this great corporation will be found here under the gilded 
 dome, saying to the Eailroad Commissioners and to the 
 Legislature that for years their assets have beeii steadily in- 
 creasing in value, though they have not repiorted the increase; 
 that they have now marked up their assets, and, therefore, 
 their surplus, to their true figures; and that they want to 
 capitalize that surplus, and divide it among their stock- 
 holders. This prayer when made, must prevail. The cap- 
 ital is there, contributed, it is true, by the public under the 
 guise of fares and freights, but none the less a living fact. 
 There has been an evil, it may be said ; but having been 
 permitted, it is too late to remedy it now. 80 the stock will 
 be watered, and the long-suftering public will then have to 
 pay dividends on the very capital which it has itself con- 
 tributed. 
 
 It may be suggested that the same thing would happen if 
 the returns were what they should be. The suggestion is 
 without weight. If expenditures for construction and equip- 
 ment were so reported, the actual net earnings would appear ; 
 the reported assets and surplus would show their actual in- 
 crease ; the fact of excessive rates would stare the public in 
 the face; and public opinion and legislative action would 
 soon force rates down to their true level. To roll up a large 
 surplus under cover is one thing. To roll it up under the 
 very eyes of people who take a lively interest in knowing 
 what it is, and in keeping it down, and who have the power 
 to keep it down, is quite another thing. 
 
 I want to read a short extract from the Report of the 
 
24 
 
 Eailroad Commissioners of Massachusetts for the year 1875. 
 (^harles Francis Adams, Jr., who is an expert in these mat- 
 ters if any one is, was one of the board which made this 
 report, and he doubtless wrote that part of it from which I 
 shall read. I read from page 13 : — 
 
 " The necessities of [railroad] development should be pro- 
 vided for, as the original construction was provided for, by 
 the investment of fresh capital. Upon the capital required 
 for it, that development should pay a fair profit; — if it could 
 not do so, it should not be ventured upon ; but the commu- 
 nity ought not to be called upon, as it now is, to pay in that 
 capital itself under the disguise of surplus earnings ; these 
 surplus earnings should be left in the pockets of the people. 
 Instead of paying interest on an increased railroad system 
 built by private capital, the community is itself furnishing 
 the capital to develop roads which are the property of the 
 private corporations. Under the system called ' stock- 
 watering ' a similar practice is pursued, but in that case the 
 surplus earnings are represented in the increased value of 
 the property, and are from time to time capitalized, and 
 divided in the form of new securities among the stock- 
 holders. Thus the community not only itself paj's in the 
 capital required for the development of its railroad system, 
 but it afterwards is taxed, through necessarily heavy rates, 
 to pay the dividends on the very capital thus paid in ; in the 
 other case, it continually pays in new capital, which, how- 
 ever, only improves the original property of the corpora- 
 tions, as on it new dividends are not paid. Unless railroads 
 are in no respect public corporations, both systems are 
 false, though the last is a much less flagrant abuse than the 
 first." 
 
 One point not noticed by Mr. Adams, but which seems to 
 me to have special importance, is that the last abuse, in an 
 insidious and therefore dangerous way, lays the foundation 
 for the first. In leaving this subject, I repeat that the great 
 cure for these evils is publicity, and that will be secured if 
 the railroad companies are compelled to make their returns 
 honestly and in strict conformity with law. 
 
25 
 
 But the returns of the Consolidated Road conceal not only 
 the amount of its net earnings, but also the manner in 
 which those earnings have been invested. I have already 
 shown how they conceal the investment of net earnings in 
 the structure and equipment of the road. I refer now to the 
 concealment of investments in the stocks of other com- 
 panies. 
 
 Not a word was said in the last return as originally made, 
 to show that during the year this company had in fact ex- 
 pended $1,229,800 in the purchase at par of 12,298 shares 
 of the stock of the ISTew Haven and Northampton Company. 
 Mr. Watrous says there ^^'as no more reason for stating that 
 fact than for reporting the purchase of so many wheel- 
 barrows. The law, when it requires under the head of 
 " Statement of Total Expenditures," a statement of certain 
 specified expenditures, and then a statement of expenditures 
 " for any other purposes (in detail)," makes an explicit de- 
 mand for just the information which Mr. Watrous says 
 there was no reason for giving. Moreover, the law, in its 
 form for the " General Balance Sheet," after specifying cer- 
 tain assets which are to be reported, then calls for a state- 
 ment of " other assets (in detail)." Mr. Woodruff, Chair- 
 man of the Board of Eailroad Commissioners, in his letter 
 to Mr. Watrous, called his attention to the failure of his 
 company to report the purchase and ownership of the 
 Northampton stock, referring particularly to the necessity 
 of its appearing in the balance sheet under the head of 
 " other assets in detail." But Mr. Woodruff did not insist 
 upon compliance with this plain requirement of law, for the 
 balance sheet of the " amended" return is still silent in re- 
 gard to this important fact. The officers of the company 
 have told you that this stock is included in the item of 
 "loans and bills receivable" in the balance sheet, at sixty 
 per cent, of its par value. In their " amended" statement 
 of total expenditures, they report that they paid par for it, 
 and they have told you the same thing. Here, then, is an 
 admitted loss of forty per cent., or, in other words, of about 
 half a million dollars, which they have sedulously concealed 
 
26 
 
 in their return from their stockholders and the public. 
 There is nothing in the return to indicate the fact of the 
 loss, and there is nothing there to show what profit, if any, 
 there has been to counterbalance this loss. Mr. Clark has 
 told you that the Consolidated Road received last year 
 $1,000,000 in bonds of the Harlem River and Port Chester 
 Railroad in payment of advances made to that road, which, 
 with interest thereon, amounted to about that sum. The 
 interest on these advances, amounting to about $500,000, 
 had never been carried into the accounts of the Consolidated 
 Road until last year, and it is that interest, it is said, which 
 makes up for the loss on the Northampton stock and leaves 
 a balance in favor of the company of $19,756.79, reported 
 in the table of receipts as received "from increase in con- 
 tingent accounts." You can take this explanation for what 
 it is worth. It is enough to say that no book-keeper in the 
 world could ever arrive at that explanation, or at any other, 
 from anything contained in the return. Mr. Groodwin has 
 prepared and handed to you to-day a table showing the 
 " total receipts and expenditures " as they were in the origi- 
 nal return, as they are in the " amended " return, and as he 
 claims they ought to be. From that table, you can see 
 clearly how the alleged receipt of a million dollars was 
 omitted from the original return, and how, after its inser- 
 tion, the bills and accounts receivable on the other side, 
 including the "loan," on the Northampton stock, were 
 marked up one million dollars. 
 
 It has further appeared in the course of this hearing that 
 the Consolidated Road has for several years owned stock in 
 the New England Transfer Company to the amount of 
 $37,500 ; that it has long owned all the stock of the Harlem 
 River and Port Chester Railroad, upon which ten per cent., 
 or $42,160, has been paid in ; and that the latter road is the 
 nominal, and the Consolidated Road, the real, owner of 
 1965 shares of the wildcat Harlem River and Port Chester 
 Rapid Transit Company, upon which five per cent, has been 
 paid in from the treasury of the Consolidated Road. Yet 
 there has never been a syllable in any of the returns of this 
 
27 
 
 road to the officers of this state to show that it owned any 
 of these stocks. Could there be a plainer case of conceal- 
 ment of important facts which the law says must he reported ? 
 
 Passing now to the subject of unauthorized investments, I 
 first call your attention to the pooling contract with the 
 Boston and New York Air Line Road. That contract pro- 
 vides, as you know, for the payment of the gross earnings 
 of the latt,er company into the treasury of the Consolidated 
 Road and for the periodical payment to the Air Line of a 
 certain portion (now fixed at five per cent.) of the combined 
 gross earnings of both companies. The result is that the 
 Air Line receives annually, over and above its own gross 
 earnings, about $125,000, which, of course, comes out of the 
 earnings of the Consolidated Road. ISTow I say that this is 
 an illegal use of the funds of the Consolidated Road, because 
 the contract under which these payments are made is against 
 public policy, and, therefore, unlawful. The manifest reason 
 for the existence of this contract, and, at the same time, the 
 thing that poisons it and renders it void, is to be found in the 
 second article, which gives the Consolidated Road the abso- 
 lute right to regulate the rates of freights and fares of the 
 Air Line Road, and which further enables the former to 
 dictate as to the number, the hours, and the running time of 
 all the passenger and freight trains of the Air Line. This 
 Air Line Road, with its present line, would, if unfettered, 
 o-ive the public the benefit of those cheaper rates which come 
 from competition. It is, moreover, in a position to become 
 a part of a competing through line from New York to 
 Boston. The Consolidated Road, being fully alive both to 
 the reality and to the possibility, has made this contract, 
 whose obvious effect, and, I might almost say, whose avowed 
 purpose, is to deprive the public, to a certain extent, of the 
 more direct transportation over the Air Line from New 
 
 & 
 
28 
 
 Haven to Willimantic, and to deprive it absolutely of the 
 cheaper rates upon both roads, which unchecked competition 
 must inevitably have produced. By this contract, the exclu- 
 sive control of the Air Line Road, in everything affecting 
 the facilities and the prices of both passenger and freight 
 transportation, is completely surrendered to the Consolidated 
 Road. Could there be a stronger instance of a contract 
 against public policy ? I want to call your attention to a 
 few out of many authorities on this point. I read first from 
 Green's Brice's Ultra Vires, page 427 : — 
 
 " Corporations may make all necessary arrangements for 
 cheaply and expeditiously developing or carrying on their 
 particular business; but it is another thing going beyond 
 this, to enter into contracts, for instance, by which the ex- 
 clusive control, or the exclusive right of working the line, is 
 handed over to other parties. All such arrangements, what- 
 ever their form, however disguised, are ultra vires and void." 
 / 
 
 In 1850, the ISTew York and New Haven Road and the 
 Hartford and Kew Haven Road entered into a contract 
 which provided, among other things, that the Canal Road, 
 then leased by the New York road, should not be extended 
 north of Granby ; and that the Hartford road should not run 
 its trains to or from the steamboat dock at New Haven, but 
 only to and from the Chapel Street station. The purpose 
 and character of these provisions are well stated in the 
 opinion of our Supreme Court in the case of State v. Hart- 
 ford and New Haven R. R. Co., 29 Conn., 546 :— 
 
 " What right have they [the Hartford company] to cove- 
 nant with that corporation [the New York company] that 
 they will not run cars to tide-water, as the charter provides 
 that they shall, and as the public accommodation requires, 
 especially when they enter into that covenant to secure to 
 that corporation a monopoly of the public travel to and fi'om 
 New York, and, as an equivalent, to secure to themselves a 
 like monopoly of all the travel in the Connecticut valley, to 
 the prejudice of every other corporation that might have an 
 interest in those routes ? The whole proceeding, from first 
 to last, seems to us to be in contravention of the charter 
 obligations of both these companies, and to present a ease of 
 
29 
 
 odious monopoly, if not of positive oppression and wrong, 
 which can receive no countenance from an impartial tribu- 
 nal." 
 
 The same contract was held to be void by the Superior 
 Court of the City of New York in the case of H. & IST. H. 
 R. E. Co. vs. K Y. & N. H. R. R. Co., 3 Rob., 415. The 
 court says : — 
 
 " Such competition and rivalry it was not lawful for these 
 parties to prevent, or attempt to prevent, and any contract 
 to effectuate such a purpose is void. Public policy is 
 opposed to any infringement of the rights of travel, or of 
 any of the facilities which competition may furnish, and the 
 law will not uphold any agreement which does or may inju- 
 riously affect such rights or facilities." 
 
 The investment of the funds of the Consolidated Road in 
 the Northampton stock is illegal, because it was made for 
 the purpose of preventing competition, and is, therefore, 
 against public policy. It is also against the rights of stock- 
 holders, any one of whom has a right to object to the use of 
 his money in any enterprise other than that expressly author- 
 ized by the charter. There is a very interesting case in the 
 Georgia reports. It was brought for the purpose of enjoin- 
 ing two railroad companies from the purchase of a controll- 
 ing amount of stock in a third and competing road. I refer 
 to the case of the Central Railroad Company et al. ^-s. 
 Stephen Collins et al., 40 Georgia, 582. At page 617, the 
 court says : — 
 
 " If the charters do not give to these companies the right 
 to go into this new enterprise, any one stocldiolder has a 
 right to object. * * * Jt may be that it will be to his 
 advantage, but he may not think so, and he has a legal right 
 to insist upon it that the company shall keep within the 
 powers granted to it by the charters." 
 
 This case also holds that any contract made by a railroad 
 company, with the view of securing a controlling interest in 
 a competing road, is contrary to public policy. Many other 
 authorities might be cited on both of these points. 
 
 One of the most interesting chapters in the history of the 
 
30 
 
 Consolidated Road is its connection with the Harlem River 
 and Port Chester Road. This road started in life ten or 
 twelve years ago with nothing but a charter. The Consol- 
 idated Road, with its chronic apprehension of competition, 
 got control of it, took a perpetual lease of it, and, with its 
 own funds, built it, at an expense, it is said, of about 
 $2,500,000 for 11.8 miles of road. Look at that road, take 
 into account the costly terminal facilities, and then tell me, 
 if you can, how it is that it cost over $200,000 a mile. This 
 little road has issued bonds for $3,000,000, and from the 
 proceeds of these bonds the Consolidated Road claims that 
 it has re-imbursed itself for its advances. But, in order to do 
 so, it has had to guarantee the bonds, and will have to pay 
 them. It all comes to this, that the Consolidated Road has 
 invested about $3,000,000 in twelve miles of railroad, in 
 which it had no authority whatever to invest a dollar of its 
 funds. It acted without the sanction of law, both in origi- 
 nally advancing the money, and then in guaranteeing the 
 bonds. Chancellor Zabriskie says : — 
 
 " The power of a railroad corporation chartered to con- 
 struct and operate a railroad between designated termini, to 
 engage or aid in constructing or operating any work beyond 
 these termini, has been frequently discussed and adjudicated, 
 both in English and American courts. It is well settled that 
 such corporation cannot contribute its capital or lend its 
 credit to aid in the construction of works auxiliary to its own 
 line, but beyond its limits. * * * jf ^j^jg contract was to 
 advance money to build complainant's road or to guarantee 
 its bonds, it would be clearly ultra vires and void." 
 
 Sussex R. R. Co. vs. Morris and Essex E. R. Co., 19 
 N. J. Eq. Re'p., 19. 
 
 I am reminded of the old saying, " Put a beggar on horse- 
 back and he will ride to the devil." A few years ago this 
 Harlem River and Port Chester Road was wandering about 
 the streets of New York in a state of mendicancy, wearing 
 upon its breast, in place of the usual beggar's placard, a rail- 
 road charter. It was picked up by somebody, and put on 
 the back of the Consolidated Road, and it is now pretty 
 
31 
 
 firmly seated on that proud and ].irancing steed. This old 
 beggar has lately taken up behind him the little Eapid 
 Transit beggar, and they are now galloping faster than ever 
 in the direction indicated by the old saying. 
 
 It is plainly the determination of the Consolidated Road 
 that, no matter how much it may cost, it will remain un- 
 paralleled in its line. To prevent the creation of a parallel 
 and competing road, it is paying every year |125,000to the 
 Air Line; it has bought Northampton stock confessedly 
 worth half a million dollars less than the price paid for it ; 
 it is paying annually $170,000 as interest upon the Port 
 Chester bonds ; it will sooner or later have to pay the bonds 
 themselves, amounting to $3,000,000 ; and it has saddled 
 itself with all the liabilities growing out of the ownership 
 of the stock of the Port Chester Road, and its offspring, 
 the Rapid Transit Company. In addition to the illegality 
 of all these transactions, there is this to consider : If this 
 road cannot afford to do all these things for the sake of 
 preventing competition, its stockholders are suffering ; if 
 it can afford to do them, because it thereby prevents com- 
 petition, the public are suffering from exorbitant rates. 
 
 The rich railroad corporation is the highwayman of to- 
 day. Like the English highwaymen of the good old days, 
 he plunders politely, but he plunders. Under the bland 
 pretext of collecting fares and freights, he is every day 
 committing robbery upon the public highways. He moves 
 in good society. In other states, it is said, — but it has 
 never been said of Connecticut, — he is the bosom friend of 
 the governor, and goes with the judges into their consulting 
 room. In every state in the Union, even in Connecticut, 
 he enters legislative halls, brandishing, not a brace of pis- 
 tols, but a free pass in one hand, and a check book in 
 the other. He takes the innocent legislator, not by the 
 throat, but by the button-hole, and whispers to him per- 
 suasively, not " Your money or your life," but " We want 
 your vote." It is high time for this highwayman to put off 
 plundering and return to honest ways of living. To com- 
 pel him to do that, is one of the most pressing duties which 
 
32 
 
 the public owes to itself. Our present system of state 
 supervision of railroads is defective in theory, and lament- 
 ably defective in practice. In reforming the law, and in 
 enforcing the law as it stands, it should be remembered that 
 the great remedy for the evils of which we complain, is 
 threefold : publicity, publicity, publicity. If this investi- 
 gation shall do no more than to fully acquaint the public 
 with the facts which we claim to have proved, it will have 
 done much towards securing the reforms so imperatively 
 demanded. When the facts are thoroughly understood, 
 public opinion will solve all of these complicated problems. 
 To that tribunal I appeal; not to the sullen prejudice of a 
 discontented proletariat; not to the short-lived madness of a 
 hot-headed mob ; but to clear-sighted, dispassionate public 
 opinion, which, once deliberately formed, moves onward to 
 the attainment of its purpose with a majestic force, against 
 which not even the mightiest of monopolies can stand. 
 
SUPPLEMENT BY H. L. GOODWIN. 
 
 THE RETURNS 
 
 OF THE 
 
 New York, New Haven and Hartford Railroad Company 
 
 TO THE RAILROAD COMMISSIONERS, 
 IPor tlie Year Encliiia Septeinlaei' 30, 1881. 
 
 Are the Amended Eetums Correct? 
 
 In the "Statement of Operating Expenses" are the following items: the 
 first column being the amounts originally reported to the Railroad Commission- 
 ers and the second column showing the amounts reported in the so-called 
 "amended returns," made after the president of the company had learned that 
 an investigation was impending : 
 
 Original Amended 
 
 Return. Return. 
 
 For repairs of road-bed and track, • • • ■ §417,963 34 ii317,963 34 
 
 For repairs of bridges, 123,892 64 23,892 64 
 
 For repairs of locomotives, 175,998 35 i2o,99,S 35 
 
 For repairs of cars, .. ■- ■• •■ ^85^3^ 335,703 80 
 
 rpQ|.^j 51,103,558 13 5803,558 13 
 
 Total operating expenses, 53,122,909 01 52,822,909 01 
 
 Net earnings, 1,972,857 04 2,272,857 04 
 
THE REPOETED NET EARNINGS. 
 
 The net earnings as originally reported, were, . . . . . . - ■ $1,972,857 04 
 
 Add admitted profit from operating Shore Line Road, as shown 
 
 on page 95, Railroad Commissioners' Report for 1882, . . . • 13,366 74 
 
 Total profit for the year, $1,986,223 78 
 
 Deduct : 
 
 Taxes, $238,642 12 
 
 Interest, 143,333 33 
 
 Dividends, 1,550,000 00 1,931,975 45 
 
 Surplus for the year ending 30th September, 1881, $54,248 33 
 
 Surplus on September 30, 1880, see Eailroad Commiasioners' Re- 
 port for 1881, page 105, 1,976,021 56 
 
 Total Surplus, 30th September, 1881, 12,030,269 89 
 
 This Total Surplus corresponds with the reported " Profit and Loss " account 
 in the Balance Sheet for 30th September, 1881, as will be seen by reference to 
 the Railroad Commissioners' Report for 1882, page 96. 
 
 But, as is now admitted by the amended returns, the operating expenses 
 were over-stated $300,000, and the net earnings were under-stated $300,000 ; con- 
 sequently the Company had on hand $300,000 more than its original statement 
 of earnings and expenses called for. To cover this up there was made, in the 
 returns, another false entry, which appears to have been designed to convey the 
 impression that this $300,000 had been borrowed. This entry will be found on 
 page 95 of the Railroad Commissioners' Report for 1882, and is as follows : 
 
 " Increase in Accounts Payable, $346,567 17 " 
 
 This was a false entry, as will appear from the following exhibit : 
 
 The amount of "Accounts Payable" on 30th September, 1881, as 
 shown by the Balance Sheet, page 96, Railroad Commission- 
 ers' Report for 1882, was, $361,664 98 
 
 Add Interest unpaid (see same Balance Sheet), 13,333 33 
 
 Total, $374,998 31 
 
 Amount of Accounts Payable on September 30, 1880, as shown in 
 Balance Sheet on page 105 of Railroad Commissioners' Report 
 for 1881, 328,431 14 
 
 Actual increase of Accounts Payable for the year ending 30th Sep- 
 tember, 1881, only, $46,567 17 
 
 Increase in Accounts Payable, as reported on page 95, Eailroad 
 
 Commissioners' Report for 1882, . . . . $346,567 17 
 
 Over-statement of "Increase in Accounts Payable," . . . . $300,000 00 
 
HAVE THE RETURNS BEEN CORRECTED? 
 
 We come, now, to the question : Whether the false returns of this Company 
 have been corrected ? 
 
 The amended returns show that the operating expenses were 1300,000 less 
 and the net earnings $300,000 more than originally reported. From this it would' 
 naturally be inferred that, if a correction of the returns had been made in good 
 faith, the surplus for the year would be increased $300,000, and that the Profit 
 and Loss account in the Balance Sheet would also be increased $300,000. This is 
 not the case. The Profit and Loss account remains unaltered, as does the entire 
 Balance Sheet. 
 
 The returns have merely been altered, not corrected. The false entries 
 originally distributed through four separate items in the " Statement of Operating 
 Expenses," have been aggregated into one item and transferred to page 95, where 
 it will be found under the head of " Statement of Total Expenditures," as fol- 
 lows : 
 
 "Appropriation for additional land, new bridge, and new equipment, 
 $300,000." This was not in the original return made to the Commissioners. 
 
 A ONE MILLION DOLLAR CORRECTION! 
 
 The law requires the payments reported under the head of " Statement of 
 Total Expenditures" to be given in detail. The Company, in its original return, 
 reported in a single item, on page 9, " Bills and accounts receivable, this date 
 (30th September, 1881), $1,531,077.43." These will be found in detail in the Bal- 
 ance Sheet, page 96, as follows : 
 
 Due from agents. 
 
 Due from connecting roads. 
 
 Due from H. E. & P. C. R. E., 
 
 Loans and bills receivable, 
 
 Making a total of 
 
 $141,107 81 
 145,623 32 
 14,299 84 $301,030 97 
 
 . . 1,230,046 46 
 
 . . $1,531,077 43 
 
 In the amended return the "bills and accounts receivable this date," Sep- 
 tember 30, 1881, are reported on page 95 at ,$1,301,277 43 
 
 And there has been added the following item, which was not in 
 
 the original return, namely : 
 "Loan on New Haven and Northampton Company's stock, . . 1,229,800 00" 
 
 These two items together make 
 
 $2,531,077 43 
 
 From this it appears that one million dollars more of "Bills and accounts 
 receivable on hand this date " (September 30, 1881), are reported in the amended 
 return than appeared in the original return, and one million dollars more than 
 now appears in the Balance Sheet on page 96. The question arises: "Which is 
 the correct amount of bills and accounts receivable on hand September 30, 1881 
 —the $2,531,077.43 given on page 95, or the $1,531,077.43 given in the Balance 
 Sheet on page 96 of the Railroad Commissioners' Report? 
 
ANOTHER MILLION DOLLARS INTERPOLATED! 
 
 As an offset to this increase of $1,000,000 in the expenditures, made in the 
 so-called "amended returns," 11,000,000 was, at the same time, added to the re- 
 ported receipts, as will be seen by the following item (not in the original return), 
 reported under the head of "Total Expenditures," on page 95 of the Railroad 
 Commissioners' Report for 1882, as follows : 
 
 "From Harlem River and Port Chester Railroad Company, |1,000,000." 
 
 The second item under the head of " Statement of receipts from all sources'' 
 (on page 95), reads as follows : 
 
 " Bills and accounts receivable at date of last report, September 30, 1880, 
 §1,152 535.44." 
 
 Included in this $1,152,535.44 was the sum of $530,468.21 due from the 
 Harlem River and Port Chester Railroad. (See Railroad Commissioners' Report 
 for 1881, page 104.) And included in the $l,301,277.43'of " Bills and accounts re- 
 ceivable this date " (September 30, 1881), reported on page 95, is the sum of only 
 §14,299.84 as- due from this Harlem River and Port Chester Railroad Company. 
 (See Balance Sheet, page 96.) 
 
 This statement of the accounts alone, necessarily implies that §516,168.37 has 
 been received from the Harlem River and Port Chester Railroad, and added to 
 the cash on hand. No other entry to that effect is needed. In fact, an entry in 
 the "Statement," representing that $516,168.37 had been paid by that Company, 
 would, necessarily, imply that twice that sum had been paid. The remainder of 
 the $1,000,000 received from the Harlem River and Port Chester Railroad ($483,- 
 831.03) was for some ten years' interest on the amount due from that Company, 
 which had been charged, for the first time, in May or June, 188? . 
 
 Instead of returning $1,000,000 as received from the Harlem River and 
 Port Chester Company, the New York and New Haven Company should have 
 returned $483,831.63, as received for interest from that Company ; and the inter- 
 est thus charged and received should have been added to the profits of the year. 
 
Tlie Discrepancy Explaiued. 
 
 Extract from the testimony of Railroad Commissioner Bacon before 
 the Railroad Committee, March IQth, 1882. 
 
 " * * * After the [amended] report was printed, we found that the ag- 
 gregate amount of the loan on the New Haven and Northampton stock, and the 
 amount of the bills receivable under the " Statement of Total Expenditures," 
 was $1,000,000 more than in the Balance Sheet; that not having been changed 
 at all. * * * After finding the discrepancy, I found there was an explana- 
 tion of it. The account is right [on the books], but the manipulation of this 
 account in that way [that is, in the way it now appears in the amended returns] 
 made the discrepancy. After finding this discrepancy, I rather felt it my duty 
 to go to New York. I went down, and found where that 11,000,000 was ; and I 
 found, in the first place, that Mr. Ooodwin's idea in regard to the Harlem River and 
 Port Chester account is correct. Instead of 11,000,000 actually received from that 
 company, there was, to oflfset that, an account of 1508,080 against the company, 
 which went in to make up the $1,000,000. That accounts for about half of it. 
 Now, where is the other half? The loan on the New Haven and Northampton 
 stock was entered on the Balance Sheet at 60 per cent, of its cost ; that is, instead 
 of being [entered] for $1,229,800, it was [entered at] 1737,880, which leaves 
 1491,920 remainder, which, added to the $508,080, makes up the $1,000,000, which 
 is the [amount of the] discrepancy. I presume that matter will be brought out 
 more clearly by the bookkeeper [of the company]." — {See Hartford Courant, 
 March 17, 1882.) 
 
 For reasons best known to the officers of the company, they did not put the 
 bookkeeper on the witness stand, where he could have been subjected to cross- 
 examination. 
 
 Extract from the testimony of President Watrous, March 21, 1882. 
 
 " The interest [12,298 shares] in the New Haven and Northampton Com- 
 pany's stock was transferred to a friend of ours. We furnished the money 
 'C$1,229,800] ; he gave his note for it, and we hold the certificates and his note. 
 We call the note worth only the present value of the stock [$60 per share, or 
 ^737,880]."— (&e Hartford Courant, March 22, 1882.) 
 
 From the foregoing testimony it is evident that $491,920 (forty per cent, on 
 the loan of $1,229,800) has disappeared from the assets of the company— and is 
 not to be fonnd in the Balance Sheet: and yet, notwithstanding the disappear- 
 ance of nearly half a million of dollars, the Profit and Loss account is m no 
 manner afi'ected thereby. How this loss, which exceeds three per cent, of the 
 total capital of the company, could have been sustained without having it ap- 
 pear on the books of the company, or in the returns to the Railroad Commis- 
 sioners, is one of the mysteries of railroad bookkeeping yet to be explained. 
 
THE "MANIPULATED" RETURNS 
 
 OF THE 
 
 NEW YORK, NEW HAVEN AND HARTFORD RAILROAD CO,; 
 
 Made to the Railroad Commissioners of Connecticut. 
 
 TOTA.IL. RECE1IE»TS .A.VII> EXIFEN-JDITTURBS. 
 
 Year Bn.d.ing Septem'ber 3Q, 188X. 
 
 STATEMENT OF EECEIPTS FEOM ALL S0UBCE8. 
 
 Cash on hand at date of last report, 
 Bills and accounts receivable at 
 
 date of last report, 
 From gross earnings as stated. 
 From profit Shore Line Railway, 
 From decrease Shore Line Divis- 
 ion balance. 
 From Harlem River & Port Chester 
 E. E., balance to June 1, 1881, . . 
 From increase in accounts payable, 
 From decrease in materials, 
 From increase in Conting't Accounts, 
 From interest Harlem Eiver & Port 
 Chester Railroad Company, 
 
 As originally 
 reported to the 
 E. E. Commis- 
 Bioners before 
 the returns 
 had been 
 "manipulated." 
 
 As " manipu- 
 lated" and now 
 reported and 
 published by 
 the E. E. Com- 
 missioners. 
 
 As it is claim- 
 ed the returns 
 ought to be^ 
 pure and 
 simple. 
 
 $542,429 82 $542,429 82 1542,429 82. 
 
 1,152,535 44 
 
 5,095,766 05 
 
 13,366 74 
 
 99,614 54 
 
 *346,567 17 
 75,601 19 
 19,756 79 
 
 1,152,535 44 
 
 5,095,766 05 
 
 13,366 74 
 
 99,614 54 
 
 1,000,000 00 
 
 *346,567 17 
 
 75,601 19 
 
 19,756 79 
 
 1,152,535 44 
 
 5,095,766 05 
 
 112,981 28. 
 
 46,567 17 
 75,601 19. 
 
 511,676 79. 
 
 Total, 
 
 7,345,637 74 $8,345,637 74 $7,537,557 74 
 
 * This sum Includes a false entry of $300,000, as is evident from the following statement: 
 
 The Balance Sheet of September 30, 1881, shows ;— Accounts payable $361,664 98- 
 
 Interest unpaid 13,333 33. 
 
 Total $374,998 3L 
 
 The Balance Sheet of September 30, 1880, shows :— Accounts payable 328,431 14 
 
 This shows that the increase was only $46,567 ITT 
 
STATEMENT OF TOTAL EXPENDITUEES. 
 
 As originally 
 reported to the 
 R. E. CommlB- 
 Bioners before 
 the returns 
 had been 
 "manipulated." 
 
 As "manipu- 
 lated" and now 
 reported and 
 published by 
 the E. R. Com- 
 missioners. 
 
 As it is claim- 
 ed the returns 
 ought to be, 
 pure and 
 simple. 
 
 For operating expenses, as stated, 13,122,909 01 $2,822,909 01 $2,572,909 01 
 For construction, new lands and 
 
 depot at Meriden 115_000 qq 
 
 For equipment, balance of cost of 3 
 
 additional locomotives, and 465 
 
 additional cars, . . . . . . jg^ qqq qq 
 
 For taxes, 238,642 12 238,642 12 238,642 12 
 
 For interest, 143,333 33 143,333 33 143,333 33 
 
 For dividends (number 2, rate per 
 
 cent., 5 per cent.), 1,550,000 00 1,550,000 00 1,550,000 00 
 
 *Appropriation for additional land, 
 
 new bridge and new equipment, *300,000 00 
 
 Loan on New Haven and Northamp- 
 ton Company stock, . . . 1,229,800 00 1,229,800 00 
 Bills and accounts receivable this 
 
 date, 1,531,077 43 1,301,277 43 • 793,197 43 
 
 Cash on hand to balance, . . . . 759,675 85 759,675 85 759,675 85 
 
 Total, $7,345,637 74 $8,345,637 74 $7,537,557 74 
 
 The difference between the operating expenses, as stated in the first column 
 and in the second, was made by deducting $300,000, which the Company first 
 reported as expended for repairs, and which it now admits had not been ex- 
 pended, but merely appropriated to he spent at some future time. 
 
 The difference between the operating expenses, as stated in the second 
 column and in the third, is caused by deducting from the operating expenses (as 
 now voluntarily reduced by subtracting the $300,000 of false entries) the $250,000 
 admitted! to have been paid for new lands and depot at Meriden, and for the 
 balance of the cost of three additional engines and 465 cars added to the equip- 
 ment the past year over and above old cars sold, worn out or disabled ; for all 
 of which new cars have been substituted. 
 
 *An appropriation of money to be spent in some future year is not an "expenditure" for the 
 year ending 30th September, 1881, and should not have been returned as such. The suggestion, to 
 so report it, was made by Mr. George M. Woodruflf, Chairman of the Railroad Commissioners. See 
 his letter to President Watrous, admitted in evidence and published in the Hartford Courani and 
 Evening Post, March 1.5, 1882. 
 
 tSee report of the directors to the stockholders January, 1882, top of page 6. 
 
General Balance Sheet, Sept. 30, 1881. 
 
 NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY. 
 
 Construction account, 
 
 Equipment, 
 
 Eeal estate, 
 
 Docks and wharves, . . 
 
 Materials on hand. 
 
 Materials Shore Line Divis'n, 
 
 Balance of permanent im- 
 provements Shore Line Ed., 
 
 Due from agents, 
 
 Due from conneiting roads, 
 
 Advance to Harlem Eiver & 
 P. C E. E., 
 
 Loans and bills receivable, . . 
 
 Cash, 
 
 Total, 
 
 ASSETS. 
 
 As reported by 
 the Company to 
 the E. B. Com- 
 missioners. 
 
 $12,889,584 40 
 
 2,154,454 71 
 
 560,274 67 
 
 128,688 31 
 
 358,176 26 
 
 15,354 66 
 
 141,107 81 
 145,623 32 
 
 14,299 84 
 
 1,230,046 46 
 
 759,675 85 
 
 As it is claimed 
 it should be if 
 the last year's 
 Balance Sheet 
 had been correct. 
 
 $13,004,584 40 
 
 2,289,454 71 
 
 560,274 67 
 
 128,688 31 
 
 358,176 26 
 
 15,354 66 
 
 99,614 54 
 141,107 81 
 145,623 32 
 
 14,299 84 
 
 1,230,046 46 
 
 759,675 85 
 
 As it is claimed it 
 should be if the 
 cost of the addi- 
 tional equip- 
 ments of theper- 
 rn a n e n t im- 
 provements had 
 been included in 
 the construction 
 and equipment 
 accounts. 
 
 $13,247,174 81 
 
 2,942,954 71 
 
 560,274 67 
 
 128,688 31 
 
 358,176 26 
 
 15,354 66 
 
 349,838 71 
 141,107 81 
 145,623 32 
 
 14,299 84 
 
 1,230,046 46 
 
 759,675 85 
 
 $18,397,286 29 $18,746,900 83 $19,893,215 41 
 
 Capital stock, . . 
 Bills payable, . . 
 Accounts payable. 
 Contingent accounts, 
 Interest unpaid, 
 Profit and loss. 
 New equipment, 
 New lands and bridges, 
 
 Total, 
 
 LIABILITIES. 
 
 3)15,500,000 00 $15,500,000 00 
 
 3,000 00 
 
 361,664 98 
 
 169,261 30 
 
 13,333 33 
 
 2,699,641 22 
 
 3,000 00 
 .361,664 98 
 189,018 09 
 13,333 33 
 2,030,269 89 
 100,000 00 
 200,000 00 
 
 $15,500,000 00 
 
 3,000 00 
 
 361,664 98 
 
 000,000 00 
 
 13,333 33 
 
 4,015,217 10 
 
 $18,397,286 29 $18,746,900 83 $19,893,215 41 
 
The difference between the Profit and Loss in the first column of the fore- 
 going Balance Sheet and in the second (1669,371.33) shows the amount of net 
 earnings for the year ISSl suppressed and concealed. The items which go to 
 constitute this difference are : 
 
 1. The false entry of $300,000 00 
 
 2. Admitted expenditure for additional equipment, lands, and new 
 
 depot at Meriden, "a6o«<" 250,000 00 
 
 3. The profits of the Shore Line Road used to wipe out the bal- 
 
 ance of charge for improvements on that line, . . . . 99,614 54 
 
 4. Interest received and credited in Contingent account, . . . . 19,756 79 
 
 $669,371 33 
 
 The difference between the Profit and Loss account in the first column and 
 in the third (§1,984,947.21) shows the amount of net earnings suppressed and 
 concealed during the last six years. The items which go to constitute this sum 
 are: 
 
 1. The false entry of $300,000 00 
 
 2. Expenditures for permanent improvements on the main line, 
 
 reported under the head of operating expenses as repairs, 357,590 41 
 
 3. Expenditures for permanent improvements on Shore Line, . . 349,838 71 
 
 4. The estimated cost of 12 locomotives, 30 passenger cars, 913 
 
 baggage and freight cars, added to the equipment and 
 
 charged to operating expenses, 726,500 00 
 
 5. New tug and four barges, admitted cost, 62,000 00 
 
 G. Profits credited in the Contingent account, 189,018 09 
 
 $1,984,947 21 
 
10 
 
 EARNINGS, EXPENSES AND SURPLUS 
 
 OF THE 
 
 New York, New Haven and Hartford Railroad Company 
 
 For the Year Ending Sept. SO, 1881. 
 
 Net Earnings for the Year, $2,512,261. Equal to 16 Per 
 Cent, on the Nominal Capital, and to 20 Per Cent, on 
 the capital actually paid in. Amount of Net Earn- 
 ings for the Year 1881 suppressed and concealed, 
 $669,371.33. 
 
 STATEMENT OF GROSS EARNINGS. 
 From passenger transportation (main line), . . . . *$2,g6'j,48^ 38 
 
 From passenger transportation (amount paid Air Line 
 
 and deducted from receipts), . . . . 67,914 00 
 
 From passenger transportation Stiore Line division, . . 1308,827 07 ^3,344,226 45 
 
 From freight transportation (main line), .. .. *gi,93o,725 14 
 
 From freight transportation (amount paid Air Line 
 
 and deducted from receipts), . . . . . . 44,919 00 
 
 From freight transportation Shore Line division, . . f77,oi8 32 2,052,662 46 
 
 From United States mail and express (main line), . . *3i3,243 41 
 
 From United States mail and express (amount paid 
 
 Air Line and deducted from receipts), . . 6,966 50 
 
 From United States mail and express Shore Line 
 
 "division, t27,389 78 347,599 69 
 
 From rents (main line), . . . . . ■. . . ;858,449 19 
 
 From rents (amount paid Air Line and deducted 
 
 from receipts), . . . . . . . . . . 534 00 
 
 From rents Shore Line, tS'S^S 54 72,368 73 
 
 From interest, . . . . +100,927 55 
 
 Miscellaneous (amount paid Air Line and deducted from receipts, . , 412 00 
 
 Total gross earnings, . . . . ;?5,9i8,i96 88 
 
 * See Report to the Stockholders for 1882, foot of page 10. 
 f See R. R. Commissioners' Report for 1882, page 135. 
 
 t This amount of interest is obtained by adding the two items of interest which will be found in the 
 report to the Stockholders^ namely : 
 
 The last item on page ro, ** Interest gg^ ^ g,» 
 
 Andthelast item in the right-hand column on page 3, "Balance "orinterestHariem'^^ *' , 7 7 
 
 Port Chester R. R. Company j^^^^g ^^ „ 
 
 Tot^' $iooi927 55 
 
 The first item of interest is added to the income of the year, and goes to increase the Profit and Loss 
 
 account; the second Uem (t^g,J5B-79) >5 added to the credit side of the Contingent account 
 
 In the report to R. R. Commissioners of Massachusetts, this item of «iq,756.7Q is included in the Profit 
 
 and Loss account. 
 
11 
 
 STATEMENT OF OPERATING EXPENSES. 
 Total operating expenses as they appear on page 95, 
 
 R. R. Commissioners' report for 1882, . . ^2,822,909 01 
 
 Add for four items omitted from the footings, . . *629,386 66 
 
 Add expenses operating Shore Line division, . . 1203,639 43 
 
 1*3.655,935 10 
 
 Deduct the admitted cost of 465 additional cars 
 an(^ 3 additional locomotives, land and new 
 depot at Meriden, included in the reported 
 operating expenses, "afo«; " ^250,000 00 
 
 Total operating expenses, ^3.405,935 10 
 
 Net earnings for the year, .. .. 12,512,261 78 
 
 Deduct taxes ^238,642 12 
 
 Deduct dividends, 1,550,000 00 1,788,642 12 
 
 Surplus for the year, over and above dividends and taxes, . . $723,619 65 
 
 Admitted surplus Sept. 30, 1880, (see Railroad Commissioners' 
 
 report for 1881, page 105), .. .. .. .. .. 1,976,021 56 
 
 The surplus 30th Sept., 1881, should have been returned at . . . . ^2,699,641 22 
 Surplus, or Profit and Loss, 30th Sept., 1881, as returned (see Railroad 
 
 Commissioners' report for 1882, page 96), .. .. .. 2,030,26989 
 
 Amount of net earnings for the year suppressed and concealed, . . $669,37 ' 33 
 
 * These four items will be found returned, on page 94 of the R. R. Commissioners' Report for 1882, 
 under the head of Operating Expenses, as follows ; 
 
 For rents paid other roads — 
 
 Harlem Railroad $265,307 83 
 
 Shore Line Railway 100,000 00 
 
 Harlem River and Port Chester R. R. Co I43,333 33 
 
 Boston and New York Air Line R. R. Co 120,745 50 
 
 These make a total of , $629,386 66 
 
 f See R. R. Commisfioners' Report for 1882, page 136. 
 J See Report to the Stockholders for 1882, top of page 6. 
 
12 
 
 THE ADMITTED EARNINGS 
 
 OP THE 
 
 NEW YORK, NEW HAVEN AND HARTFORD RAILROAD COMPANY, 
 
 For the Year Ending 30th Sept., 1881. 
 
 Extract from the testimony of the Hon. George G. Sill. 
 
 I have for ten years held stock in the New York, New Haven and Hartford 
 Railroad Company as trustee. I inquired of the Hon. Henry C. Eobinson [one 
 of the directors of the company] about the SpSOO.OOO item. Mr. Robinson did not 
 seem to understand it. He said they had made a good deal of money, some 
 seventeen per cent., and he supposed the company did not care to have the 
 public know they were making so much money. — (See Hartford Courannt, March 
 22, 1882. 
 
 No attempt was made to rebut this testimony in regard to Mr. Robinson's 
 admission, although he was in Hartford at the time, and might have been sum- 
 moned as a witness. 
 

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