MASSACIirsriTS. 



471 



Boston, Hartford, and Eric Railroad. In 1807 

 and 1868, that corporation dad, upon it* appli- 

 cation to the Legislature, obtained aid which, 

 with iiii additional subsidy voted l>y the I 

 hit lire in 1869, amounted to $5,000,000. For 

 tliis amount, scrip was issued from time to 

 time upon the approval of the Governor and 

 Council. It was stated by the directors, in their 

 application to the Legislature in 186!), that tin-, 

 amount, together with the funds in hand, 

 would be sufficient to complete the road to 

 I'ishkill. Early in January of this year it was 

 ascertained by the Governor that the directors, 

 owing to heavy losses sustained in speculating 

 in the stock of the company, were about to 

 apply for further State aid, and to an amount 

 much larger than had been generally supposed 

 necessary to complete and equip the road. 

 Under these circumstances a committee of the 

 Council was appointed to investigate the affairs 

 of the company. The Governor, in his message 

 transmitting to the Legislature the report of 

 this committee, says that this report shows 

 conclusively that, at the time the grant of 

 $5,000,000 was passed, the statement of the 

 directors, that it would be sufficient to com- 

 plete the road to Fishkill, was correct ; but that 

 at that very time a portion of the money was 

 invested in the bonds and stock of the corpo- 

 ration, which were held in the expectation and 

 hope of an advance in price ; that, in addition 

 to this, the directors had pledged a large amount 

 of the bonds for advances, instead of selling 

 them in the usual way; that in November, 

 1869, many of the bonds had been sold at re- 

 duced prices to pay the advances, and the re- 

 sult was a larger loss to the corporation than 

 if they had been sold in the market at the 

 time of their issue ; that this loss, however, 

 did not affect the State so directly as the loss 

 arising from the speculation in the stock, which 

 in one item alone was shown to be $1,500,000 ; 

 that the authority of the directors, by the act 

 of incorporation, to take this course, was at 

 least doubtful, and as trustees of a great corpo- 

 ration they certainly had no warrant for thus 

 employing the money placed in their hands. 

 " Under these circumstances," says the Govern- 

 or, " I feel bound to continue to withhold my 

 assent for any further issue of the bonds of the 

 State until the whole matter has been passed 

 upon by the Legislature, and the Council have 

 fully concurred with me in this decision." Up 

 to this time scrip to the amount of $3,600,000 

 had been issued in aid of the company. The 

 affairs of the company are set forth in the re- 

 port of the investigating committee, as follows : 



Cash In Bank $2,000.000 



Acceptances of the Erie Railroad 1,574,000 



Berdell Mortgage Bonds, after deducting $4,000,- 

 000 for deposit with' State Treasurer, and 

 $533,000 for redemption of outstanding bonds, 



estimated at 80 per cent 8,632,000 



If to these amounts we add State loan, which, If 

 granted, will be available from time to time as 



flu- work progresses 8,000,000 



Fifty thousand shares of capital stock, at 20 

 cents .^J.000.000 



We hare $11,208,000 



available mean* of the company in July, 1868, upon 

 which tlu-y relied to enable them to complete the 

 road. 



This exhibit is made the starting-point 

 of the investigation. The Berdell mort- 

 gage, before referred to, a mortgage dated 

 March 19, 1866, of the entire road and fran- 

 chise of the company to 1C. II. Berdell and 

 two others, trustees, for $20,000,000 of bonds 

 of $1,000 each, to be invested by said trustees 

 for the purpose of providing for and retaining 

 all existing mortgage debts and prior liens, 

 and completing and equipping the road. < >ne 

 provision of this mortgage is, that the tru.-t< > > 

 shall retain enough of said bonds to take np 

 all the old prior mortgages on the road. It ap- 

 pears that on July 30, 1868, the company had 

 exchanged 



Berdell bonds for prior mortgage bonds. . . . $5.068.000 

 Sold to Erie Railroad 5.000.000 



Making $10,988,000 



Leaving to company and held to take up all un- 

 derlying bonds, and for general use of the 



company $9,037,000 



It appears on page eighteen of said document 

 seven, that the old bonded debt not then re- 

 tired was 2,790,800 



Leaving $6,346,200 



Which by the terms of the Berdell mortgage 

 could be applied to the general use of the com- 

 pany, out of which must be taken bv the 

 terms of the act of 1867, to secure the State. 4,000,000 



Balance to be used In construction $2,246,200 



Value at that time estimated at 80 per cent. . .. $1,796.960 



Subsequently three directors of the compa- 

 ny were substituted as trustees, thus making 

 the company substantially both mortgagor and 

 mortgagee of its own property. These trustees 

 did not retain Berdell bonds enough to take up 

 the remaining prior mortgage bonds amounting 

 to $2,790,800, but issued the whole $9,037,000 

 to themselves, and used them solely for the gen- 

 eral purposes of the company, viz., $3,600,000 

 of them were deposited in the State Treasury, 

 and the balance, $5,437,000, were pledged as 

 collaterals at fifty instead of eighty per cent. 

 The actual cash receipts of the company since 

 July 1, 1868, were $10,899,155.35; the actual 

 cash payments for the same period were $11,- 

 394,633*16, of which $6,063,172.63 were ex- 

 penses incurred in the construction of the 

 road. 



The matter was taken up in the Legislature, 

 and a bill was introduced for a further loan of 

 $3,500,000 to the company, in addition to the 

 original loan of $5,000,000, which, with certain 

 resolves relating to the foreclosing of the so- 

 called Berdell mortgage, was referred to the 

 Committee on Finance. The committee re- 

 ported adversely; but the bill, with several 

 alterations, passed both Houses a few days be- 

 fore the adjournment of the Legislature, but 

 was vetoed by the Governor. The bill failed 

 to pass over the veto of the Governor. A sub- 

 stitute was immediately introduced, but the 

 two Houses failed to agree on its provisions, 

 and the adjournment of the Legislature pre- 



