the General First, the Pend d'Oreille and the Missouri division mortgages were not foreclosed in 1896, but the Northern Pacific took the property subject to these mortgages. According to Poor's Manual and the itemized statement which I will now put into the record, it is stated that the amount of the Missouri division mortgage, the amount issued, was $2,500,000; that there was outstanding in 1896 of these bonds $1,834,500. With reference to the Missouri bonds you will recall that those were the bonds that entered into the transaction with the Northwestern Improvement Co., which was organized in 1896 or 1897, or concurrently, practically, with the reorganization of the Northern Pacific Railway Co. The CHAIRMAN. Entered into the transaction in what way? Mr. McGOWAN. The Northwestern Improvement Co. was formed and provision was made to take the lands into the Northwestern Improvement Co. that were covered by the Missouri division mortgage, and the Northern Pacific Railway Co. owned and still owns 100 per cent of the stock of that Northwestern Improvement Co. The CHAIRMAN. The Northwestern Improvement Co. owned the bonds? Mr. McGowan. I would have to go back to the record on that to get the details just exactly straight. The CHAIRMAN. I did not quite get your point as to why you referred to the Northwestern Improvement Co. in this connection. Mr. McGOWAN. Well, the point was this: That as far as these lands were concerned that were covered by the Missouri division mortgage, those lands passed into the Northwestern Improvement Co. at about the time of the foreclosure of the mortgage in 1896, and virtually there was a wiping out of the Missouri River mortgage at that time, because, as I understand it, those bonds were taken up by the Northern Pacific Railway, and in any event the Northern Pacific Railway owned the whole business of those remaining lands. The CHAIRMAN. Well, our inquiry is directed to the bonds. I do not just get the connection of why you refer to that, how that affected the bonds-their relations with the improvement company. bonds had to be paid. The Mr. McGowAN. And they were in fact paid by the Northern Pacific Railway Co., and the lands which supported the bonds were taken over by the Northern Pacific, which virtually wiped out the Missouri division mortgage. So the lands covered thereby were still the property of the Northern Pacific, in substance. The CHAIRMAN. Well, the question is, Did the Northern Pacific pay off the bonds? Mr. McGowAN. I would have to ask Mr. Kerr for the details on that. Mr. KERR. Certainly. You will recall, Mr. Chairman, that when Mr. Williams was sitting on the committee, during the statement of Mr. Hughes, the land commissioner for the Northern Pacific, this transaction with respect to the Northwestern Improvement Co. and the Missouri division bonds and the lands between Bismarck and Glendive came up for consideration, and I undertook to present to the committee a narrative covering that whole transaction, and I stated that I had no personal knowledge of it, but that it was my understanding that the lands were sold and the proceeds of the sale were turned in to the sinking fund in the hands of the trustee under the Missouri division mortgage and the bonds thereby retired. Mr. McGowan. But the lands were sold to the Northwestern Improvement Co. Isn't that a fact? Mr. KERR. Yes. Mr. RAKER. Isn't it a fact-and the record can be ascertained and not take up much time on this-that as a matter of fact on the reorganization, the reorganization provided for the three mortgages not foreclosed, and that they issued the stock and the bonds for all of these before the sale and the papers were in the possession of J. Pierpont Morgan & Co., which was part of the transaction, and abiding by the sale with the agreement that they were to buy all the road in, and that wiped out the three prior mortgages? Isn't that the truth of the situation? Mr. McGowan. Well, I want to go as far with you as I can on the evidence that I have, and then if we can get the rest of it, well and good. Let me complete this now. I just wanted to show that as far as the Missouri division mortgage was concerned and the Pend d'Oreille division mortgage was concerned and the general first mortgage, that they, in substance, were wiped out almost concurrently with the foreclosure of 1896. Now, the amount of bonds issued by reason of the Pend d'Oreille division mortgage amounted to $4,500,000, but of this amount there were only $369,000 outstanding at the time of the foreclosure of the Northern Pacific in 1896. So that was a very inconsiderable amount. Now, as to the general first mortgage, which was not foreclosed in 1896, we have this information-and I read now from volume 29 of the Land Office decisions, from page 317: Since the forwarding of said relinquishments, however, there have been filed in this department examined copies of special masters' and receivers' deeds, dated September 22, 1899, conveying to the Northern Pacific Railway Co. all the rights of the Northern Pacific Railroad Co. in and to lands east of the Missouri River, whether under the grant expressed in the act of Congress of July 2, 1864, or under any subsequent grant, by way of indemnity or otherwise, subject, however, to a certain mortgage or deed of trust dated the 1st day of January, 1881, and known as the general first mortgage of said Northern Pacific Railroad Co. and executed by it to the Central Trust Co. of New York as trustee; also a certificate of satisfaction of said general first mortgage, said certificate having been executed by the Central Trust Co. of New York on the 13th instant. That decision is dated November 21, 1899, so I take it there that the 13th instant refers to the 13th of November, 1899, so not later than that date at least the general first mortgage was a thing of the past. I would like to introduce this tabulation, Mr. Chairman, as a part of the record. These figures are from Poor's Manual of 1896 with reference to this foreclosure. They are quite lengthy, and I have just made extracts from it. (The matter referred to follows:) |