64TH CONGRESS, HOUSE OF REPRESENTATIVES. 1st Session.

SECTION 20, ACT TO REGULATE COMMERCE.

MARCH 14, 1916.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed.

Mr. RAYBURN, from the Committee on Interstate and Foreign Commerce, submitted the following

REPORT.

[To accompany H. R. 563.]

The Committee on Interstate and Foreign Commerce, to whom was referred the bill (H. R. 563), to amend section 20 of an act to regulate commerce, to prevent overissues of securities by carriers, and for other purposes, having considered the same, report thereon with an amendment and as so amended recommend that it pass.

Amend the bill as follows:

Strike out all after the enacting clause and insert in lieu thereof the following:

That section twenty of an act entitled "An act to regulate commerce," approved February fourth, eighteen hundred and eighty-seven, as amended, be amended so as hereafter to read as follows:

"SEC. 20. That the commission is hereby authorized to require annual reports from all common carriers subject to the provisions of this act, and from the owners of all railroads engaged in interstate commerce as defined in this act; to prescribe the manner in which such reports shall be made; and to require from such carriers specific answers to all questions upon which the commission may need information. Such annual report shall show in detail the amount of capital stock issued, the amounts paid therefor, and the manner of payment for the same; the dividends paid, the surplus fund, if any, and the number of stockholders; the funded and floating debts and the interest paid thereon; the cost and value of the carrier's property, franchises, and equipments; the number of employees, and the salaries paid each class; the amounts expended for improvements each year, how expended, and the character of such improvements; the earnings and receipts from each branch of business and from all sources; the operating and other expenses; the balances of profit and loss, and a complete exhibit of the financial operations of the carrier each year, including an annual balance sheet. Such report shall also contain such information in relation to rates or regulations concerning fares or freights, or agreements, arrangements, or contracts affecting the same, as the commission may require; and the commission may, in its discretion, for the purpose of enabling it the better to carry out the purposes of this act, prescribe a period of time within which all common carriers subject to the provisions of this act shall have, as near as may be, a uniform system of accounts, and the manner in which such accounts shall be kept.

"Said detailed reports shall contain all the required statistics for the period of twelve months ending on the thirtieth day of June in each year, or on the thirty-first day of December in each year if the commission by order substitute that period for the year ending June thirtieth, and shall be made out under oath and filed with the commission at its office in Washington within three months after the close of the year for which the report is made, unless additional time be granted in any case by the commission: and if any carrier, person, or corporation subject to the provisions of this act shall fail to make and file said annual reports within the time above specified, or within the time extended by the commission for making and filing the same, or shall fail to make specific answer to any question authorized by the provisions of this section within the time fixed by the commission, such party shall forfeit to the United States the sum of one hundred dollars for each and every day it shall continue to be in default with respect thereto. The commission shall also have authority by general or special orders to require said carriers, or any of them, to file monthly reports of earnings and expenses, and to file periodical or special, or both periodical and special, reports concerning any matters about which the commission is authorized or required by this law, or by any other law, to inquire or to keep itself informed or which it is required to enforce, including the matter of making public, by appropriate means, any information regarding the issuance by said carriers of stocks, bonds, or other evidences of interest or indebtedness. In such periodical or special reports the commission may require of the carrier, in addition to its income account, a balanced statement of its receipts and expenditures on capital account, and of the surplus of the income account accruing during the period covered by such statement, as well as of all other financial transactions that have taken place during such period, with whom had, whether in cash, in securities, or in other valuable consideration. The commission may also require the carrier to compile for the information of its stockholders such facts in regard to the financial transactions of the carrier for its fiscal year and in such form as the commission may direct.

"Such periodical or special reports to the commission, and reports of the carriers to stockholders, shall be under oath whenever the commission so requires; and if any such carrier shall fail to make and file any such periodical or special report, or report to its stockholders, within the time fixed by the commission, it shall be subject to the forfeitures last above provided.

"Said forfeitures shall be recovered in the manner provided for the recovery of forfeitures under the provisions of this act.

"The oath required by this section may be taken before any person authorized to administer an oath by the laws of the place in which the same is taken.

"The commission shall have the power to investigate all financial transactions of said carriers and to examine into the actual cost and value of property acquired by, or services rendered to, said carriers. The carrier may be required by order of the commission to disclose every interest, direct or indirect, of the directors, stockholders, officers, agents, attorneys, employees, receivers, or operating trustees of such carrier in any transaction under investigation. In addition to the certificates and reports herein mentioned, the commission may require the carrier to furnish any further statements of fact or evidence that it may deem necessary or appropriate relating to business transactions of, for, or with said carrier.

"The commission may, in its discretion, prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers subject to the provisions of this act, including the accounts, records, and memoranda of the movement of traffic, as well as the receipts and expenditures of moneys, and it shall be unlawful for said carriers to keep any other accounts, records, or memoranda than those prescribed or approved by the commission.

"In case of failure or refusal on the part of any said carrier to keep such accounts, records, and memoranda in the manner prescribed by the commission, said carrier shall forfeit to the United States the sum of five hundred dollars for each such offense and for each and every day of the continuance of such offense, such forfeitures to be recoverable in the same manner as other forfeitures provided for in this act.

"The commission shall at all times have access to all accounts, records, memoranda, correspondence, documents, papers, and other writings, and indexes thereto, regardless of the dates thereof, relating to financial transactions of, for, or with said carriers, and kept or preserved by or for, or in the custody or under the control of

subject act;

"(8) Any director, stockholder, officer, agent, attorney, employee, receiver, or operating trustee of said carrier;

"(c) Any other person, persons, corporation, joint-stock company, or corporate combination having, or having had, any financial transactions with or for said carrier.

"The commission may employ special agents or examiners, who shall have authority under the order of the commission to inspect, examine, and take copies of any and all accounts, records, memoranda, correspondence, documents, papers, other writings, and indexes thereto to which the commission has the right of access as above provided. Failure or refusal to afford such access shall constitute an offense for which the offender shall forfeit to the United States the sum of $500 for each such offense, and for each and every day of the continuance of the offense, such forfeitures to be recoverable in the same manner as other forfeitures provided for in this act.

"Any person or persons, natural or artificial, who shall willfully make, or cause to be made, any false entry in any accounts, records, or memoranda kept by a carrier subject to this act, or who shall willfully neglect or fail to make, or cause to be made, full, true, and correct entries in such accounts, records, or memoranda of all facts and transactions appertaining to the carrier's business, or shall keep or cause to be kept any other accounts, records, or memoranda of said business than those prescribed or approved by the commission, or who shall willfully file, or cause to be filed, any application, certificate, or other paper, required under this act containing false or erroneous statements of fact, or who shall willfully destroy, mutilate, alter, or by any other means or device falsify any accounts, records, memoranda, correspondence, documents, papers, or other writings to which the commission has the right of access as above provided, shall be deemed guilty of a misdemeanor, and shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not less than $1,000 nor more than $5,000 or, if a natural person, to imprisonment for a term of not less than one year nor more than three years, or to both such fine and imprisonment, in the discretion of the court. In construing and enforcing the provisions of this section, the act of any director, stockholder, officer, agent, attorney, employee, receiver, operating trustee, or other person acting for or employed by any carrier, corporation, joint-stock company, or other corporate combination, acting within the scope of his employment, shall be deemed the act of the carrier, corporation, joint-stock company, or other corporate combination, as well as that of the person so acting. The commission may, in its discretion, issue orders designating the operating, accounting, or financial papers, records, books, blanks, tickets, stubs, documents, or other papers or writings to which the commission has the right of access as aforesaid, which may, after a reasonable time, be destroyed, and prescribing the length of time that all or any of the same shall be preserved.

"Any examiner who divulges any fact or information which may come to his knowledge during the course of such examination, except in so far as he may be directed by the commission, or by a court or judge thereof, shall be subject, upon conviction in any court of the United States of competent jurisdiction, to a fine of not more than $5,000 or to imprisonment for a term of not exceeding two years, or to both such fine and imprisonment, in the discretion of the court.

"The district courts of the United States shall have jurisdiction, upon the application of the Attorney General of the United States at the request of the commission, alleging a failure to comply with, or a violation of, any of the provisions of said act to regulate commerce, or of any act supplementary thereto or amendatory thereof, by any common carrier, to issue a writ or writs of mandamus commanding such common carrier to comply with the provisions of said acts, or any of them.

"And to carry out and give effect to the provisions of the act to regulate commerce or any amendment thereof the commission is hereby authorized to employ special agents or examiners, who shall have power to administer oaths, examine witnesses, and receive evidence.

"That any common carrier, railroad, or transportation company subject to the provisions of this act receiving property for transportation from a point in one State or Territory of the District of Columbia to a point in another State, Territory, District of Columbia, or from any point in the United States to a point in an adjacent foreign country shall issue a receipt or bill of lading therefor, and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it or by any common carrier, railroad, or transportation company to which such property may be delivered or over whose line or lines such property may pass within the United States or within an adjacent foreign country when transported on a through bill of lading, and no contract, receipt, rule, regulation, or other limitation of any character whatsoever, shall exempt such common carrier, railroad, or transportation company from the liability hereby imposed; and any such common carrier, railroad, or transportations company so receiving property for transportation from a point in one State, Territory, or the District of Columbia to a point in another State or Territory, or from a point in a State or Territory to a point in the District of Columbia, or from any point in the United States to a point in an adjacent foreign country, or for transportation wholly within a Territory shall be liable to the lawful holder of said receipt or bill of H R-64-1-vol 2-3

lading or to any party entitled to recover thereon, whether such receipt or bill of lading has been issued or not, for the full actual loss, damage, or injury to such property caused by it or by any such common carrier, railroad, or transportation company to which such property may be delivered or over whose line or lines such property may pass within the United States or within an adjacent foreign country when transported on a through bill of lading, notwithstanding any limitation of liability or limitation of the amount of recovery or representation or agreement as to value in any such receipt or bill of lading, or in any contract, rule, regulation, or in any tariff filed with the Interstate Commerce Commission; and any such limitation, without respect to the manner or form in which it is sought to be made, is hereby declared to be unlawful and void: Provided, however, That if the goods are hidden from view by wrapping, boxing, or other means, and the carrier is not notified as to the character of the goods, the carrier may require the shipper to specifically state in writing the value of the goods, and the carrier shall not be liable beyond the amount so specifically stated, in which case the Interstate Commerce Commission may establish and maintain rates for transportation dependent upon the value of the property shipped as specifically stated in writing by the shipper. Such rates shall be published as are other rate schedules: Provided further, That nothing in this section shall deprive any holder of such receipt or bill of lading of any remedy or right of action which he has under the existing law: Provided further, That it shall be unlawful for any such common carrier to provide by rule, contract, regulation, or otherwise, a shorter period for giving notice of claims than ninety days and for the filing of claims for a shorter period than four months, and for the institution of suits than two years: Provided, however, That if the loss, damage, or injury complained of was due to delay or damage while being loaded or unloaded, or damaged in transit by carelessness or negligence, then no notice of claim nor filing of claim shall be required as a condition precedent to recovery."

SEC. 2. That the act to regulate commerce as amended be further amended by inserting therein a new section, to be designated section twenty a, to be placed after section twenty and before section twenty-one, to read as follows:

"SEC. 20a. That from and after the passage hereof it shall be unlawful for any common carrier subject to the act to regulate commerce, as amended, to issue any capital stock or certificate of stock or any bond or other evidence of interest in or indebtedness of the carrier (hereinafter collectively termed "securities"), or to assume any obligation or liability as lessor of another carrier, or as lessee, guarantor, surety, or otherwise in respect of the securities of any other person, natural or artificial, if connected with or relating to that part of the business of such carrier governed by the act to regulate commerce as amended, even though permitted by the authority creating the carrier corporation—

(a) unless it be for some purpose within its corporate powers and in the public interest, necessary or appropriate to the proper performance of its service for the public, and not intending to impair the financial ability of the carrier to discharge its duty to the public; and

(b) unless and until, and then only to the extent that, upon application by the carrier, and after investigation by the commission of the purposes and uses of the issue and the proceeds thereof, such issue is approved by order of the commission as reasonably necessary or appropriate for the purposes stated.

'Each such application shall be made in such form as the commission may from time to time determine and prescribe, and shall set forth such matters as the commission may require, including:

"First. (a) The total amount of proposed issue, and how authorized by or on behalf of the carrier;

"(b) The number and amount of all of its securities outstanding at any time prior to the date of such application, the amount thereof retired prior to said date, the amount thereof then undisposed of, and whether such amount is held in the treasury of the corporation as a free asset or pledged, and, if pledged, the terms and conditions of such pledge;

"(c) The number and amount of securities then to be issued, and whether to be sold, pledged, or held in the treasury of the corporation as a free asset, or otherwise disposed of or applied, as the case may be, specifying number and amount in each case; if any such securities are to be sold, the terms and conditions of sale; if any part of the consideration to be received therefor is other than money, an accurate and detailed description of such consideration; if any such securities are to be pledged, the terms and conditions of pledge; or if other disposition or application is to be made, a full and detailed explanation thereof;

"(d) The number and amount of its securities so authorized, but not then to be issued;