as the representative of the new subscribers in the management of the syndicate." "That the reconstrustion trustees be increased to thirteen members by the addition of A. Sully, R. D. Dow, John Wannamaker, and Charles L. Borie." Certain changes were made in the plan of reorganization, one of which was that "the voting trust," which votes the whole stock of the Reading Company, "to be for five years and to consist of five persons, of whom four shall be Mr. Morgan, John Lowber Welsh, Henry Lewis, and John Wannamaker, who shall select a fifth"— Mr. Corbin; "that the syndicate secure the immediate appointment of Austin Corbin as an additional receiver, and that the presidency be offered him."

The same day, September 17, Mr. Gowen resigned the presidency. Mr. Morgan approved the subscription and accepted the plan, and the deal was consummated. The Morgan and Corbin interests had become one. Three months later the Reading passed out of the hands of receivers and into the hands of the syndicate, with Austin Corbin as its president. The full correspondence is of record by the examiners, page 234.

The evidence before the examiners shows beyond all dispute that the anthracite roads were formally pooled from January to August, 1876; from January to December, inclusive, 1878; and from 1884 to the date of the examination, January, 1887, with every reason to believe that an equally effective "understanding" exists to-day.

It shows that the syndicate controls, directly or indirectly, all of the tide-water lines from the Schuylkill and Lehigh regions, excepting only the Pennsylvania Railroad, and more than half of the whole anthracite tonnage; that competition between carriers as to rates is eliminated, and that a meeting of the several freight agents established rates for all the Philadelphia roads; that the freight rates on competitive coal change with every sale made, being about 38 per cent. of the price received; that the carriers can and do restrict the production of coal and advance its price to the public; that the people of Philadelphia pay 50 cents a ton more than the people at competitive points farther from the mines; and that the Southern buyer pays a greater freight rate than the New England buyer. It is difficult to imagine how the carrier could commit greater depredations upon national commerce, more flagrant violations of law, or greater abuses of individual and public rights. That such wrongs require immediate redress and prevention at the hands of Congress is certainly apparent.

ACQUISITION OF COAL LANDS BY READING RAILROAD COMPANY THROUGH ITS COAL AND IRON COMPANY.

Where a railroad company has unrestrained ability to determine what share of the operator's profit it wants, sooner or later it will take all the profit and the property itself. The Reading Company is expressly prohibited by the limitations of its charter from engaging in any other business than that of a carrier. First, it was incorporated as a railroad company only, and possessed no other powers than those expressly conferred by its charter; second, this grant of power was limited by and dependent upon the following proviso:

Provided. That nothing herein contained shall be considered as in any way giving to the said corporation any banking privileges whatsoever, or any other liberties, privileges, or franchises but such as may be necessary or incident to the making and maintaining of the said railroad, and the conveyance of passengers, and the transportation of the mail, and of goods, merchandise, and commodities thereon.

An open attempt to repeal these provisions would have been certainly defeated. Accordingly, President Gowen procured the passage of an act chartering the Laurel Run Improvement Company, May 18, 1871, which provided that its stock might be taken by an existing railroad company. The hand of the Reading was concealed. The name was changed by a decree of court to the "Reading Coal and Iron Company," and the whole stock, all water, is held by the railroad company. The transaction was a fraud, because by indirection conferring upon the railroad company a power which its charter expressly stipulated that it should not exercise.

In the annual report of 1871 President Gowen says that various reasons" have directed the attention of the managers of the company to the necessity of exercising some control over the production of coal." That was frank, to say the least! It was not the transportation of coal, which was the only act the Reading could legally perform, but the "production" of coal that it intended to control. "And it is be

lieved that the best way of accomplishing this result was for the company to become the owner of coal lands situated upon the line of its several branches."

The report for 1872 states that the Coal and Iron Company "has continued to increase its ownership of lands, and now controls over 80,000 acres of coal lands, upon which there are 98 collieries, most of them worked by lessees, but 27 of the largest of them are now owned and worked by the company." In 1874 the lands aggregated 100,000 acres. Additional collieries were acquired in subsequent years; for example, 2 in 1880, 14 in 1883–84, and 4 in 1885–286, making over 120 in all. Yet, in 1887 only 34 of these were worked by the company, together with 11 that it leased from other parties, a total of 45. In that way" some control over the production of coal" has been exercised with a vengeance.

Article 17 of the constitution of Pennsylvania, adopted in 1873, provides:

No incorporated company doing the business of a common carrier shall, directly or indirectly, prosecute or engage in mining and manufacturing articles for transportation over its works; nor shall such company, directly or indirectly, engage in any other business than that of common carriers, or hold or acquire lands freehold or leasehold, directly or indirectly, except such as may be necessary for carrying on its business; but any mining or manufacturing company may carry the products of its mines and manufactories on its railroad or canal not exceeding 50 miles in length.

The contention of the Reading is, that since the coal company was ebartered in 1871 and the constitution was not adopted until 1873, the latter is er post facto and null as to the former. Waiving this point, and assuming that the constitution is legal and operative since 1873, is it not apparent that the "holding or acquisition" of lands by the Reading is squarely in violation of the mandate, "nor shall such company directly or indirectly engage in any other business than that of common carriers, or hold or acquire lands freehold or leasehold, directly or indirectly." The Reading Company is either directly holding and mining coal lands as the owner of its coal company, or else it is indirectly so doing through the coal company. Since the adoption of the constitution it has acquired eighteen collieries, either freehold or leasehold, and it certainly is still holding all the coal lands previously acquired. The prohibition to hold at all, while it may not be retroactive, is certainly operative as to a continuance of holding. No alleged vested right derived from a charter, whether procured by a trick or fairly, can deprive the State which granted it of the power to torbid the company

to continue to hold coal lands, or of the power to require it to dispossess itself of them. There can be no question of the right of the State to at least prohibit a railroad company from acquiring additional land.

EFFECT OF RAILROAD OWNERSHIP OF MINES.

In 1872 individual operators worked 71 of the original 98 collieries. In 1886 only 13 were operated by individuals, a decrease of 58, or nearly 6 to 1. The effect upon miners and their wages is evident. Before the lands were purchased over 90 different employers were in competition for labor. Now there are but 14 employers, and 13 of these are absolutely in the power of the other one. The reports show the number of mines idle to have been, in 1880, 15; 1882, 9; 1883, 8; 1884, 12; 1885, 10; 1886, 15. This inevitably forced a steady reduction of wages.

Another mode of restricting the production was that of running the collieries only about half the time when operated. The miner was kept in ignorance beforehand as to what days he could not work, and his wages for the month were affected accordingly. In the report for 1883 President Gowen shows the "idle working days" to have been, in January, 6; February, 9; March, 9; April, 6; May, 9; June, 6; July, 6; December, 9; and adds "an arrangement has already been entered into by all the anthracite companies for the suspension of mining during 39 days in the months of January, February, and March (1884). As the winter is the proper time to suspend work, and as the 39 days of idleness already provided for, in addition to the 9 days of idleness in December, 1883, should be sufficient to avoid surplus production prior to the end of the present fiscal year, the prospect of a very remunerative business for eight months' full work during the coming as against the four months' full work during the past year is a very fair one. 29 The reports state that "mining was suspended by agreement" in 1881, 51 days; 1882, 48; 1883, 39; 1884, 106. Instead of 310 working days in the year, the days actually worked were as follows, omitting fractions: 1878, 167; 1879, 243; 1880, 171; 1881, 198; 1882, 206; 1883, 227; 1884, 191; 1885, 220; 1886, 233; 1887, 237.

RESTRICTION INCREASES THE COST OF MINING.

This system, which is in force now as much as it ever was, besides being a terrible hardship to the miner, is injurious to the operator. Mr. Whiting, for years the superintendent of the Reading Coal Company, reported in 1880: "The increased cost per ton of mining is very largely due to the restricted production and to the method of restriction, namely, running alternate three days, and keeping all the collieries in working condition with all the standing expenses, instead of stopping part of them and working the balance full time." Mr. J. S. Harris testified before the examiners: "We can produce coal 30 to 40 cents a ton cheaper when running full than if at one-half capacity." Mr. Gowen, in 1883: "When the company is relieved from the burden attending the suspension of mining during stated periods of the year, the profits of share-holders must be very large."

George de B. Keim, president of the Reading Railroad Company, in 1884 reported:

It can not be denied that the system of mining coal under which this company has been operated, in consequence of its relations to other mining companies for several years, for various reasons, has deprived it of its proper share of the coal output. It is believed that under amicable arrangements with rival companies (railroad) its

proper share of tonnage can be alone secured by such arrangement as will give to the companies a fixed proportion of the total output, thereby enabling this company to reduce the number of its collieries, and concentrate its operations at the most profitable, working them full handed all the time. By doing this the expenses of mining can be decreased so as to render this branch of the business of the company a source of revenue instead of outlay!

Mr. Gowen, in a speech to the stockholders in 1884, said:

The traffic of the railroad company has fallen off under the system that required it to work half time, or nearly half time, for two-thirds of the year.

At the same meeting Mr. Lawson said:

Each company can realize what it desires without having to break in upon the time two weeks now, or a month then, or another week at another time, thus disorganizing its labor, throwing out of employment its laborers, and putting them all on the anxions bench. (Reading report, 1884, p. 40.)

In 1885, Mr. Whiting (p. 73) said:

The plan of allotting the tonnage for the year to each interest has enabled us during the year 1885 to decrease the number of working collieries, and increase the working time of those in operation, thus decreasing the proportion of fixed charges or expenses for pumping, ventilation, repairs, etc. The result of these and other economies that have been enforced this year shows a decrease of 23.8 cents in the cost per ton this year as compared with 1884.

George de B. Keim, president of the Reading Railroad Company, 1885, in the annual report, says:

It is probably true that more resolute and decided action on the part of all producers would have secured better prices, but this company had the alternative of adhering to the agreement made at the beginning of the year, upon the principle believed to be the best that could be adopted for the regulation of the trade, or of engaging in a contest which would have led to still lower rates. By that arrangement a proportionate share, namely, 38.85 per cent. of the total anthracite coal tonnage was allotted to this company. Thereupon the coal and iron company arranged to reduce the number of its collieries in active operation, and to work only so many of the most profitable.

All of which shows that the original design of controlling the production of coal, as stated by Mr. Gowen, has been completely executed as to the Schuylkill region.

THE INWARDNESS OF JOHN DOE'S BOOK-KEEPING.

An important effect of this auxiliary company is that while the coal of the railroad company pays bare cost of transportation, that of the individual operator pays in addition thereto the profit charged by the carrier. To illustrate: A man named John Doe years ago engaged in the business of a wagoner between Reading and Philadelphia. He was the only one. He also owned cows and made butter, as did many of his neighbors, for which there was little demand in Reading and a good market in Philadelphia. The profits made by Doe as carrier went into the pocket of Doe the individual, as did the profits on butter. If, as a matter of book-keeping, Doe as carrier charged Doe as butter-maker 10 cents a pound for hauling butter, the only effect was that he made 10 cents less on butter and 10 cents more as carrier, but added nothing to the cash in John Doe's pocket. Either way the expense of transportation was bare cost, while the expense to his neighbors who shipped butter was bare cost plus the profit Doe charged as carrier. He could sell it at a less price in Philadelphia and do well, while they lost, for he had just the advantage over other butter-makers of the profit charged by him as carrier.

Hence, it is quite immaterial to him whether or not John Doe as the Reading Railroad Company charges John Doe as the Coal and

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Iron Company for hauling his own coal. An amount equivalent to the freight which he fails to make as operator, because increasing the cost of his coal at Philadelphia, he makes as carrier. Either way the company gets the money all the same, and either way it has just the advantage over other operators of the carrier's profit. If for any reason Doe wished to show that he had lost money in mining coal, and had made money as a carrier, or vice versa, an increase or decrease of the freight rate would accomplish that object without affecting his pocket. For years the incorporated John Doe has gone through this farce with himself as railroad company and as coal and iron company.

In the report for 1887 President Corbin shows that the profit of the Coal and Iron Company in 1884 was $341,923; the loss in 1885 was $124,679. The loss in 1886 was $1,147,053; the profit in 1887 was $1,448,482, or a change in these two years of $2,595,535.

ess.

In 1886 Mr. Corbin as receiver makes a doleful report. time the thumb-screw was being applied to the share-holders to force them to subscribe 10 per cent. cash, or else have all the stock destroyed At that by a foreclosure of mortgage; and $12,463,942 were raised by that procThe syndicate was also bringing pressure upon the junior securities preparatory to floating a new general mortgage of $100,000,000, at 4 per cent. interest, as prior to the first, second, and third preference income mortgages at 5 per cent. interest, which was to be paid if earned, otherwise not. A very nice arrangement for the debtor company. And so in 1886 the objective point was to show the general worthlessness of all of the company's property. He said:

This decrease in net earnings, $1,147,053, was mainly occasioned by the decrease in the price received for coal. The receipts from the sale of coal were 11.5 cents per ton less in 1886 than in the year 1885, and were 27.4 cents below the price per ton received in 1884. The average prices obtained for coal at the mines were, in 1884, $1.81.1; 1885, $1.65.2; 1886, $1.53.7.

These were the prices after John Doe, carrier, had deducted his charge for hauling the coal. Mr. Corbin (p. 123) says:

Who fixes the price at Schuylkill Haven?-A. "Nobody. The price of coal at Schuylkill Haven is fixed by the result of the coal business for the month. The price at Schuylkill Haven is what it nets to the company, less the tolls to the various points. We take five, six, or seven collieries of our own mines and draw from the earnings of the various collieries a given number of collieries, and we take the result." Has the railroad company in any way guarantied the payment of the coal companies' indebtedness? "I think they practically owe that indebtedness by reason of the ownership of the stock; besides, when the coal company is stuck, the railroad company has trusted them for the tolls and never got their money!"

Q. Then in that case the railroad company has hauled their coal for nothing, and at the same time charged individual operators, which has been a discrimination in freights-A. No, sir. not have money enough to pay. Last year they paid their tolls promptly. In one case we lost money in mining. The coal company did

Q. How much is the indebtedness of the coal company to the railroad company for tolls which were not paid? Can you furnish these statistics?-A. Yes, sir; I think I can [but did not]. I want to say this: We have never intentionally lost any money by the coal company. We got stuck once, but it was unintentional and impossible to avoid it. We do not intend to let them stick us any more.

RAINBOW BOOK-KEEPING.

In 1887 the report is rose colored. The object was to float the bonds in the United States and Europe. The price of coal at the mines jumps from $1.53.5 in 1886 to $1.84.9, making a difference of $2,595,535 in the two years. The floating debt of $29,779,273 of the two companies is wiped out thus:

The spirit of concession which prompted the creditors of the companies to assent to the plan of reorganization, and the promptness with which the assessments were