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These certificates all give the location of the principal office of the company at 15 Exchange Place, Jersey City.

The annual report filed with the secretary of state for New Jersey shows that on November 7, 1924, the total authorized stock is $24,800,000 and that $24,800,000 is actually issued and outstanding. Now, that is the company that came into existence in connection with the transfer of the Missouri division lands in 1897. Substantially that proposition was this: At the directors' meeting of the Northern Pacific Railway Co. September 8, 1897, the chairman reported that he had sold to J. P. Morgan the Missouri division land contracts and lands for $1,755,000. Now, the money received by the Northern Pacific Railway Co. by reason of that sale was used to retire the Missouri division bonds.

Mr. HILL. Did you say land contracts and lands?

Mr. McGOWAN. Yes; land contracts and lands. Upon the redemption of the Missouri division bonds it was pointed out that under the terms of the new mortgages of the Northern Pacific Railway Co. prior lien bonds could be issued in lieu thereof. Such prior lien bonds were issued for the Missouri division bonds that were turned in to the amount of $1,755,000. These were sold to J. P. Morgan & Co. at 872, which amounted to $1,535,725.

The Northern Pacific then was in this position: The Missouri division bonds had been retired. The prior lien bonds that had been received in exchange for them had been sold to Morgan. The Northern Pacific was then in funds.

Then came the Northwestern Improvement Co. The Northern Pacific subscribed to $1,773,000 of the stock of the Northwestern Improvement Co. The Northwestern Improvement Co. thereupon purchased from Walter B. Horn, who was an employee of the house of J. P. Morgan, the Missouri division lands and land contracts. So when the whole situation was closed, the Northern Pacific Railway Co., through the Northwestern Improvement Co., had all of the lands under the Missouri division that were covered by the Missouri division mortgage, and this proposition then came on down the years in this way.

Mr. KERR. You don't mean that the general lien bonds were exchanged for the Missouri division bonds? The prior lien mortgage provided that as soon as the Missouri division bonds were retired, the trustees could certify an equal amount of prior lien bonds.

Mr. McGowan. That fact is as you have stated it. I had termed that as an exchange.

The CHAIRMAN. Were you through on that point?

Mr. MCGOWAN. Practically; yes. When I was in St. Paul I made an extract of the Walter B. Horn deeds; that is, deeds from the Northern Pacific Railway to Walter B. Horn, and also of Horn to the Northwestern Improvement Co. I offer these in a memorandum as a part of the record to be printed at the end of to-day's hearings (p. 4694).

The CHAIRMAN. Briefly, what is your criticism and objection to the transaction that you have just referred to?

Mr. MCGOWAN. Well, I think that the exchange, in so far as the Missouri division lands are concerned, is nothing more than a further step to show that at the time of the 1896 reorganization there never was intended to be, and there was not in fact, any bona fide sale of

the lands in compliance with the provisions of the joint resolution of May 31, 1870, and as far as the Missouri division lands are concerned, and the Northwestern Improvement Co., that this circuitous route was followed to consummate the purpose that the reorganizers always had in mind, that those lands as well as the others would be retained for the benefit of the railway company, the reorganized

company.

Mr. DRIVER. What was the character of the conveyance through which the title to the land in the Missouri division was placed in Horn?

Mr. KERR. That is a story I covered at length in one of the

answers.

Mr. DRIVER. I am quite sure I have seen it somewhere.

Mr. McGowAN. Well, these Walter B. Horn deeds that I now call your attention to were not in the record last spring.

Mr. DRIVER. But they were referred to?

Mr. McGowan. They were referred to, but the identity of Horn was not disclosed last spring. It now appears that Horn was in the house of J. P. Morgan & Co.

Mr. KERR. I think that was recognized at that time.

Mr. McGowAN. I think the record is not clear on that, Mr. Kerr. However, it is now.

There were seven deeds issued to Horn covering a deed for the lands of the company in Morton County, N. Dak.; Mercer County, in North Dakota; Oliver County, in North Dakota; Stark County, N. Dak.; Billings County, N. Dak.; Custer County, Mont.; Dawson County, Mont.

I took one of the deeds, the one for Stark County, from the records of the Northern Pacific in St. Paul, as being typical, and had a copy of it made for the record, and this shows that on the 18th of October, in the year 1897, the Northern Pacific Railway Co. sold to Horn for the sum of $414,665.51 the lands of the company in Stark County (p. 4694). There was then a description of those lands. It was a lengthy one and I did not include it. And that deed covered "also each and every other piece and parcel of land also in said county of Stark which now has inured or may at any time hereafter inure to the Northern Pacific Railway Co. or to the party of the first part, as the grantee or successor, as part of the lands granted by Congress of the United States under any act to aid in the construction, equipment, or operation of the Northern Pacific Railroad lying in North Dakota west of the Missouri River and in Montana coterminus with that part of said railroad commencing at the west line of North Dakota and extending westwardly from there to the station of Glendive in Montana, etc., to have and to hold the lands free and clear of liens and incumbrances, except taxes and assessments."

Now, it appears on the face of this deed that there was a real consideration there of $414,655.51. It is quite possible that that money might have passed, but under the circumstances and the other facts surrounding it, if it did pass from the house of Morgan, of course, he got it back.

The CHAIRMAN. I will ask the committee to excuse me for a moment. I have to be on the floor of the House. Mr. Winter will preside.

39564-26-PT 826

Mr. HILL. Well, this transfer of land applies only to the Missouri division?

Mr. MCGOWAN. Just the Missouri division lands; yes, sir.

Mr. WINTER. There is no similar transfer of lands on the other divisions?

Mr. McGOWAN. Yes; there was on the Pend d'Oreille division, only without the involved part as far as the Northwestern Improvement Co. is concerned. But that was a direct sale of the Pend d'Oreille division land contracts to J. P. Morgan, where he put up the money for the retirement of the Pend d'Oreille bonds, and thereafter those land contracts were repurchased by the Northern Pacific. Mr. HILL. That is, they were transferred to Morgan by the railroad company and then back to holding companies of which the railway company owned practically all of the stock? That is true as to the Missouri division, I understand?

Mr. McGOWAN. Not the railroad company. The statement in connection with the Pend d'Oreille is covered by this memorandum that I submitted this morning.

Mr. HILL. Well, don't go back over that. I will read it in the record.

Mr. KERR. The difference, Judge Hill, between the two transactions is this: In respect to the Missouri division both lands and land contracts were sold; on the Pend d'Oreille division only land contracts were sold, and not lands.

Mr. HILL. Well, the point I had particularly in mind was that the railroad company transferred these lands and land contracts, or the land contracts, as the case may be, and then they were transferred back to the railway company.

Mr. KERR. NO; this was after the foreclosure, and the railroad company had long before that been divested of its title.

Mr. DRIVER. All transactions were on the part of the railway company?

Mr. McGoWAN. Yesterday we were discussing the question of syndicate profits by reason of the 1896 reorganization, and I referred to Mr. Gray's testimony in the Minnesota rate case (p. 4605). When I was in St. Paul last fall I made an extract from the testimony in the rate case which showed that the total profit to the syndicate was $22,202,393 in 1896. When I was in St. Paul last fall I made an extract from the minutes of the Northern Pacific rate case that is, the Northern Pacific file copy-and incorporated the data in a brief momorandum which I would like to submit for the information of the committee and have printed at the end of the hearings of to-day (p. 4697).

I desire to point out in this connection just one thing, that the Exhibit Y of Gray's testimony, in which he stated that the total profit to the syndicate was $22,202,000, was under consideration as early as July, 1908, when Mr. Gray was under cross-examinationand that the financial history of the Northern Pacific which was printed in the record of yesterday-was subsequent in time to Mr. Gray's testimony on the other point. The financial history was introduced when Gray was on the stand on September 18, 1908.

Mr. KERR. I find, referring to the testimony of Mr. Gray introduced yesterday, and Exhibit Y referred to therein, that Mr. Gray did not prepare that exhibit.

Mr. McGowan. But you seem to question the authenticity of it in some way?

Mr. KERR. It was offered by the other side. It is shown here as defendant's Exhibit Y, Gray. Now, that was not prepared by Mr. Gray. And, as I said, the record in the Minnesota rate case is very much confused and no such conclusion as is sought to be shown here can be derived from that testimony.

Mr. MCGOWAN. Mr. Chairman, in order that there may be no misunderstanding on that, may the clerk call for the exhibits that are on file in the Supreme Court so that we can take a look at them right here in Washington? I know that these extracts that I have made are correct, because I went over them with considerable care.

Mr. KERR. There is no dispute about that at all. The point is that we say that Mr. Gray has not testified that the profits were as you say there. It is true that the other side in the Minnesota rate case introduced an exhibit and sought to draw some such conclusion as you seek to draw here, but there is no testimony in that case by Mr. Gray that the profits of the syndicate were $22,000,000.

Mr. McGowAN. Well, Mr. Kerr, I think there is a very sharp conflict between us on that point and we can settle that, I think, in a very few minutes by getting from the Supreme Court Library the exhibits that were in the Minnesota rate case and let me show to the committee just exactly what the situation was.

Now, Mr. Chairman, at the hearings of last spring, when the Crow Indian Reservation matter was under consideration, I referred to the decision in 2 Land Decisions, page 520, in which a reference was made to a letter of November 1, 1881, from the Secretary of the Interior to George Gray, general counsel for the Northern Pacific Railroad Co., N. 2 Nassau Street, New York, in which the Secretary of the Interior at that time stated that the Crow Reservation under the treaty of 1868 was not the creation of a new title, but it was nothing more than the affirmation of a title in the Crows that was already existing, and I desire to offer that letter to go with the accompanying letter of transmittal from the Acting Commissioner of the Land Office of September 17, 1925, to be printed at the close of the hearings for to-day (p. 4698).

There has been considerable discussion in the record concerning Mr. Smalley and his history of the Northern Pacific. Mr. Smalley was on the pay roll of the Northern Pacific at the time he wrote Smalley's History, and in Henry Villard's Memoirs, volume 2, page 309, it is stated that Mr. Villard himself had printed Smalley's History of the Northern Pacific and that the chapter relating to Villard's presidency was dictated by Villard to Smalley.

Senator KENDRICK. You say that statement was made by Mr. Villard?

Mr. McGoWAN. That is what the Memoirs of Henry Villard show with reference to the item that I have just referred to.

The CHAIRMAN. What statement did you say, Senator, was made by Villard?

Senator KENDRICK. The statement that Villard authorized this record made by Smalley in his history in connection with Villard's relationship with the Northern Pacific Railroad.

Mr. McGowAN. Yes; and these memoirs of Henry Villard even go so far as to say that the chapter relating to Villard's presidency was

dictated by Villard to Smalley, and that reference is on page 309 of the memoirs of Henry Villard, volume 2.

Senator KENDRICK. In other words, he wrote the history of his own record with the road. He himself wrote that part of it to be included in Smalley's history.

Mr. McGowan. That undoubtedly would be the substance of it. The reason I make this reference is that Smalley's history of the Northern Pacific is an authentic document in that it was written by Smalley at a time when he was closely connected with the Northern Pacific and, as the memoirs of Henry Villard show, the chapter pertaining to Villard's presidency was dictated by Villard himself. Senator KENDRICK. How much of the history of the Northern Pacific does his record deal with?

Mr. McGowAN. It goes down to about 1883, I think. I am not sure exactly as to the final dates, but along about that period.

Senator KENDRICK. It does not have to do with the reorganization of 1896?

Mr. McGoWAN. No, sir. Mr. Chairman, in the hearings of last spring considerable discussion was given to the decision of the Secretary of the Interior in the case of Heath v. The Northern Pacific (38 L. D. 77-84), and the request was made by the committee-and I will insert the page reference later-in connection with this Heath decision.

The Secretary of the Interior on December 10, 1925, addressed the following communication to Chairman Sinnott:

DEPARTMENT OF THE INTERIOR,
Washington, December 10, 1925.

Hon. N. J. SINNOTT,

Chairman Joint Committee Northern Pacific Railroad Grant,

House of Representatives.

MY DEAR MR. SINNOTT: My attention has been directed to a request of your committee that this department advise whether, in its opinion, departmental decision in case of Heath v. Northern Pacific Railway Co. (38 L. D. 77), has been overruled or modified by the decision of the Supreme Court of the United States in the Oregon & California land grant cases.

The question arose upon the suggestion of the Forester, Department of Agriture, that there be deducted from the Northern Pacific grant an area equal to the acreage sold under the 1875 foreclosure proceedings at private sale in violation of the public-sale provision of the joint resolution of May 31, 1870. In his report the Commissioner of the General Land Office expressed the view that under the departmental decision in the Heath case authority for making the deduction is entirely lacking. In reporting to your committee this department said, "In so far as the decision of the department in the Heath v. Northern Pacific case, supra, is in conflict with the principles laid down by the Supreme Court in the Oregon & California cases, or with action taken by Congress in said matter, it, of course, no longer controls."

"In the opinion of the department the question raised in paragraphs 18 and 19 should be made the subject of investigation and consideration by your committee * ** There were but two things determined by the department in the Heath case, supra, which were germane: First, that the Northern Pacific Co., under the facts in that particular case and relating to a specific tract of land in the State of Washington, had not been guilty of laches or unwarranted delay; second, that admitting the construction sought to be placed by appellant on the Northern Pacific grant and acts amendatory thereof, this department was without authority to issue regulations or to provide for the entry of the lands covered by the terms of the grant, the question as to whether there had been compliance by the company or a forfeiture being determinable only by proper judicial tribunals. Aside from these two matters, the alleged statements of fact and conclusions of law were entirely outside of the issue

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