Senator LA FOLLETTE. Yes; I should think that might go in in connection with this testimony.

(The advertisement referred to is as follows:)

A MOVE FOR LOWER PASSENGER AND FREIGHT RATES.

The railroads of Pennsylvania want to reduce passenger and freight ratesthus stimulating business and travel and helping to hasten the return of normal conditions.

But in order to make any reduction in rates, all unnecessary expense must be eliminated.

Three million five hundred thousand dollars of the money now paid each year to the railroads of this State is paid out by them again, by law, for unnecessary work.

The so-called "full crew" law of Pennsylvania which compels the spending of these excess wages has cost the people seventeen and a half million dollars since its enactment without giving them any compensating value in return.

A bill is now before the State legislature which will remove the present arbitrary requirement to employ trainmen in positions where they are not needed and in which they perform no real service either for the safety or efficiency of train operation.

This bill does not empower the railroads to judge how many men shall be used on a train.

The compulsory power is vested in the public service commission of Pennsylvania. That commission is to decide any question with due regard to individual train requirements rather than through a blanket law that applies regardless of conditions and which consequently results in waste of public money and is a distinct factor in maintaining high rates for freight and passengers. What is now proposed by the railroads in the State of Pennsylvania, where business depression is being so severely felt, directly concerns every shipper, every passenger, every man, woman, and child.

It affects the whole economic problem, making for its constructive solution. It makes a substantial step to set things going, to restore that general activity which will make hundreds of jobs in productive work for every trainman-in all some 1,700-displaced from a position where he is contributing nothing of value to the public benefit.

Railroad service must be performed efficiently. Every dollar expended needlessly or wastefully is a public loss.

Upon such grounds the railroads earnestly ask all citizens of Pennsylvaniawomen and men-to support the proposed legislation by letter or personal interview and to urge their legislative representatives to vote for the bill soon to be on passage.

EXECUTIVE COMMITTEE OF THE ASSOCIATED RAILROADS OF PENNSYLVANIA. G. LE BOUTILLIER, Chairman.

(Philadelphia Public Ledger 4-8-21.)

Mr. WARNE. Mr. H. G. Wells, in his The Outline of History (vol. 1, p. 427), states that "men who scorn to tell a lie in every-day life. will become unscrupulous cheats and liars when they have given themselves up to propagandist work," and his comment is that this "is one of the perplexing absurdities of our human nature." It results in distortion and misrepresentation of facts vital to the public in coming to an understanding of problems upon which it is to pass judgment. In consequence economic fallacies have their origin amid these weeds of untruths and they grow and flourish and poison public opinion. Each new twisting of the facts by the railway propagandist merely adds to the confusion until the goal of the public good becomes but sickly imaginations and vile forgeries of this corrupted brain.

Most assuredly it is not only in the interest of the public welfare that freight and passenger rates paid by the shipping and traveling public should not be used as operating expenses in meeting such

"advertising" charges, but it is, on the contrary, distinctly against the public interest to so dissipate operating revenues.

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In connection with the concerted movement on the part of all the railroads of the country to compel a "legalization" of their property account, as well as incidentally in the matter of wages of railway employees, similar publicity bureaus have been organized and are being liberally supported by the railroads to "inform the public as to the "merits" of and the "facts" in the situation. The "stuff" or copy" these bureaus are giving out in "statements" to the "public" are as misleading as their "publicity campaign" already described. Not infrequently in these propaganda drives the railroads seduce university and college professors to lend their names for pay to the use of the corporation, and then the publicity material appears in the newspapers and magazines as the product of this expert. There is the case of the Harvard University professor who, masked as a publicist working for the public welfare, while at the same time he was drawing a salary from the New Haven Railroad. The importance of this subject is not to be measured by the limited space I have given to its treatment here. It is deserving of a much more extended presentation of facts, not alone because of the effect of such expenditures on the income account of the railroads, but also because of its great public importance in the preservation and safeguarding of a healthy public opinion.

These very expensive publicity campaigns of the railroads, whether they are for higher freight and passenger rates, or for the legalization of their alleged property investment, or for reducing the wages of their employees, and so on, should be met, if they are permitted to continue, not as a part of the cost of conducting transportation: that is, out of the revenues the shipping and traveling and consuming public pay for transportation service, but out of income after the rate of return has been determined. In brief, these expenditures should be met by the railway out of its profits of the business and not, as at present, out of revenue before those profits are determined.

EFFECT ON INCOME OF POLITICAL AND PUBLICITY CONTRIBUTIONS.

Another practice of the railroads, although it is very difficult to secure the evidence of proof, as shown by the experience of the Interstate Commerce Commisison, which practice disadvantageously affects the operating income account through direct expenditures from operating revenues, is that class of expenditures which, for convenience, may be grouped under political and publicity contribu

tions.

A series of searching questions as to such contributions of money made by the Louisville & Nashville Railroad Co. was put to its president, Mr. Milton H. Smith, in the recent investigation of the affairs of that company by the Interstate Commerce Commission. President Smith refused to answer the questions. They were certified by the attorneys of the commission to the United States district court with the object of compelling answers to them. Among the questions which President Smith refused to answer are these:

Did you confer from time to time with your directors as to the policy of using the railroad's funds for political purposes?

Did you personally ever make expenditures, or were you ordered to make them by your directors?

Do you justify taking funds of the Louisville & Nashville, partly owned by the Republicans, to help Democrats?

Are political contributions made by the Louisville & Nashville with a view to purchasing official favor?

Is it the policy of the Louisville & Nashville to help Democrats in Democratic districts and Republicans in Republican districts?

If these campaign contributions are not reported to your stockholders or directors, to whom are they reported?

Once before during its investigation of the affairs of the Louisville & Nashville, the commisison had been compelled to have recourse to the courts because of obstacles placed in its way by officials of this company. This previous occasion had to do with the question raised by the officials as to the jurisdiction of the commisison over the "correspondence" of the company, they refusing to permit investigators of the Federal body to have access to its letter files. The United States Supreme Court held that the words "accounts, records, and memoranda " in the law do not include "correspondence" and that the commission has no power, under the act to regulate commerce, to inspect the letter files of interstate carriers.

These files are the only source of information as to some and the best source as to other activities of the railroads. Consequently the commisison has been baffled in this direction. Besides, the accounts of a railway company can not be fully interpreted unless they are complete, and the Louisville & Nashville refused to submit to the commisison for examination any of its acounts made prior to August, 1906. This situation naturally prevented the commission from making a thorough investigation of the company's affairs, especially matters having to do with contributions for maintaining political or legislative agents, for political campaigns, and for creating public sentiment in favor of any of the plans of this railway company and its subsidiaries. These were matters the commission was specifically directed by a Senate resolution to report upon.

Notwithstanding the numerous obstacles deliberately and intentionally placed in the way of the commission to prevent its ascertaining all the facts, it was able to lay bare sufficient information that is indicative of the existence of a disgraceful state of affairs as to these "contributions" by transportation corporations identified with the Louisville & Nashville system. The ascertained amounts only reached $96,591 from September, 1906, to July, 1914. But that this total is an insignificant part of the sum of money spent for this purpose is suggested by the following statement in the commission's report:

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A large number of vouchers, aggregating, between September 1, 1906, and July 1, 1914, approximately $295,000, were issued by the Louisville & Nashville to various persons, as to which the accounts contained no information other than the expenditures were for "special" services and expenses. Although a number of these vouchers bore the notation as per statement on file in the general manager's office," a request that such files be submitted for inspection was denied. Numerous other vouchers issued between September, 1906, and July, 1911, and aggregating $67,722.50 are recorded as having been issued under the direction of the legal or executive department without the purpose being stated. These were for amounts in excess of $1,000; one such voucher, made in February, 1910, is for $20,715.06. Whether such sums were spent for the purpose referred to can not be determined.

71942-21-VOL 3- -18

The character of some of the special ledger accounts recording large expenditures, the purpose of which could not be learned from the accounts, is outlined as follows by the commission:

An account was opened in the name of the Immigration and Industrial Association of Alabama in January, 1907. This records cash advance to George W. Jones, assistant district attorney at Montgomery, Ala., made under the authority of the first vice president; $13,068.80 was charged to this account; $7,868.86 was re-collected from other carriers who were parties to the association and credited to this account. The balance of $5,199.94 remaining was charged to operating expenses by authority of the first vice president. The nature of this account is indicated by notations on the treasurer's statements of each receipt entered therein, such as "proportion of expenses, account adjourned session of Alabama legislature."

Suspense account No. 10 was opened in February, 1913, to record an amount of $1,000 furnished to first vice president W. L. Mapother, which account was still open December 31, 1913. No information could be obtained as to the purpose for which this money was used.

A suspense account in the name of the National Bank of Commerce of Louisville, Ky., was opened in June, 1912, to record amount of checks issued under authority of President Milton H. Smith in favor of the National Bank of Commerce of Louisville, Ky., between June 7 and October 5, 1912. Amounts aggre agting $249,994.91 were paid to the bank in the form of such checks. The ac count was cleared in January, 1913, by a deposit of a similar account placed in the bank to the credit of the Louisville & Nashville. No information whatever could be obtained in regard to the purpose for which these payments were made nor from whom the amounts placed to the credit of the carrier by the bank were received.

The above are illustrative of numerous suspense accounts opened prior to 1913, in which the entries were of such a vague character as not to disclose the purpose for which they were kept. Under the accounting rules prescribed by the commission the keeping of such vague accounts at the present time would subject the carrier to prosecution.

For the above reasons it could not be determined what the purpose of all these large unexplained expenditures was. It seems clear, however, that for some reason the officials who were responsible for these entries deemed it expedient to conceal not only in the original entry but from those engaged in this investigation, the real purpose for which these expenditures were made.

The commission states that during the period under review, the Louisville & Nashville spent more than $53,000 "in a publicity campaign in Alabama in the endeavor to mold public opinion through the medium of the press." This company also contributed to a fund made up by numerous carriers "to finance a campaign in Louisiana to prevent the change of tax laws." In order that the railroads concerned might preserve an outward appearance of indifference in regard to the legislation in question, the contributions for this purpose were placed in the hands of a bank to be disbursed by it as if in furtherance of banking interests. "If the commission's examiners had been accorded access to the correspondence files of this carrier and to its accounts prior to 1906, there seems no doubt that information as to other substantial expenditures for the purpose referred to would have been secured."

The Louisville & Nashville was one of the railroads which formed the Tennessee Railroad Association for the purpose of combating adverse legislation in Tennessee. It paid at least $120,198.44 for use by the association, and also made other large unknown expenditures in connection with that association. The records of the Nashville. Chattanooga & St. Louis Railway show payments to the Louisville & Nashville by the former aggregating $132,792.44 as its proportion of direct expenditures which the Louisville & Nashville made in connection with the Tennessee Railroad Association.

Referring to the political contributions of the Nashville, Chattanooga & St. Louis Railway, a subsidiary of the Louisville & Nashville, but operated separately, the commission's report states that while expenditures aggregating $13,993.73, which were entered on the accounts of this carrier, appear to have been for the purpose referred to, at the same time the accounts do not disclose the purpose of numerous other large expenditures. Among the accounts was one providing entertainment for various State, county, and municipal officials. As to the concealed accounts, the commission says that "the accounts disclose other disbursements aggregating $599,668.92, the purpose of which are concealed. Of these payments, $233,025.73 was collected from other railroad companies." These expenditures as to which detail is lacking are discussed in the commission's report under the headings of expenditures incurred in connection with the Tennessee Railroad Association and expenditures to prevent the city of Nashville from aiding in constructing the Nashville & Clarksville Railroad, now the Tennessee Central.

The records generally as to the association contain little detail regarding the entries. Certain of the items, however, are quite specific. For example, $8,100 was expended for campaign subscriptions. Various items were for special trains transporting legislative bodies over foreign lines. Other items are for "legislative services," but most of the large items are merely stated to be for "special expenses" or sundry expenses. Items of such general character aggregate over $300,000 of the amounts charged in the ledger account.

A new ledger account in the name of the American Publishing Co. was opened by transferring $40,300.70 from Tennessee Railroad Association account. Among the charges made to this account was an item of $24,750 for the purchase of the bonds of the American Publishing Co. This company, it appears, owned a newspaper known as the American, published in Nashville, the official organ of the railroads operating in Tennessee. The carrier evidently never received repayment of the advances made to this newspaper company, since its account was finally cleared by charging the balance of $42,633.99 due from it to profit and loss.

The various payments made on account of the Tennessee Railroad Association by the Nashville, Chattanooga & St. Louis and the Louisville & Nashville were to a large extent made to State officials and legislators of Tennessee, municipal officers of Nashville, politicians, lobbyists, and attorneys. Investigation showed that payments made by the Nashville, Chattanooga & St. Louis in this connection aggregating over $20,000 could be definitely assigned to persons formerly or at present holding public office, but the total amount paid to such persons was no doubt much in excess of this sum.

Examination of one of the ledger accounts disclosed that the Nashville, Chattanooga & St. Louis in the joint interest of itself and the Louisville & Nashville expended large sums in an attempt to prevent the city of Nashville from aiding in the construction of the Nashville & Clarksville Railroad, now the Tennessee Central. This was done by financing a suit brought by nonresident taxpayers contesting the validity of a special election held in Nashville by which that city was authorized to purchase $1,000,000 of the capital stock of the Nashville & Clarksville Railroad. An analysis of this account disclosed expenditures amounting to $47,767.98 and receipts to the extent of