A History of Canadian Wealth/Chapter XIII
After the disclosures of the methods used to get the Canadian Pacific Railway charter, money subsidies and land grants, an agitation set in to have the Government build the line, and parts of it were begun under Government supervision. But as shown by a Government advertisement in 1876 calling for proposals from private companies for the construction of the railway, the scheme of Government construction, operation and ownership was not held too seriously.
By 1878 only a little more than 100 miles of track were laid, and this line was a detached, isolated section running from Thunder Bay to Tetu Lake. There was also the Pembina branch over which the trains of the St. Paul and Pacific Railway entered Emerson ; as to both the Pembina branch and the St. Paul and Pacific line we shall give further details in this chapter. The great project of a transcontinental railway system still remained a project. With the recent revelations fresh and sharp in the public mind, the subject was a sensitive one to the politicians both in and out of power.
- 1 The Intercolonial Railway
- 2 Conflicting Principles
- 3 Red River Line Scandal
- 4 Charges as to Its Contract
- 5 Mr. Schultz’s Statements
- 6 St. Paul and Pacific Railway
- 7 Its Original Plundering by Sage
- 8 Farley Is Appointed Receiver
- 9 The Receiver’s Collusion
- 10 Enter Donald A. Smith and George Stephen
- 11 An Exciting Day in Parliament
- 12 More Attacks on Mr. Smith
- 13 Lease of the Pembina Branch
- 14 Hill, Smith, Stephen and Company Get the Railroad
- 15 A Troublous Bank of Montreal Meeting
- 16 Pointed Questions
- 17 Alleged Source of $8,000,000
- 18 Farley Sues for His Share
- 19 Farley Loses ; the Rest Become Multimillionaires
- 20 Notes
The Intercolonial Railway
In the eastern part of Canada the construction of a railway to the seacoast at Halifax had also been provided for in the Confederation agreement, but this railway was early made a publicly-owned and publicly-operated system.
Some portions had been purchased by the New Brunswick Government from private contractors and extended under public control ; other parts had been independently constructed by the Nova Scotia Government. After the formation of the Dominion of Canada in 1867, the Dominion Government took control of these railways, and constructed connections and extensions. On November 9, 1872, all of these Government railways were consolidated under the name of the Intercolonial Railway. These formerly separate railways were the Nova Scotia Railway, 145 miles ; the Intercolonial Railway, 118 miles ; and the European and North American Railway, 108 miles. The Government railway thus now comprised 375 miles running from Halifax to St. John with some branches.
The next move was to connect the Intercolonial Railway with the Province of Quebec. In 1874 the Government had a line of 86 miles constructed between Riviere du Loup and St. Flavie. Another section of 290 miles between Ste. Flavie and Moncton was finished by 1876. The line of the Intercolonial Railway now extended from Riviere du Loup to Halifax. From the Grand Trunk Railway Company a line of 126 miles running from Riviere du Loup to Hadlow was bought in 1879, and with the subsequent acquirement or construction of various railway sections and by securing running rights over other sections, the Intercolonial Railway system extended from Montreal to Halifax, and to St. John and the Sydneys in Nova Scotia.
While, therefore, in one great stretch of Canada the principle of public railway ownership was definitely established, the construction and ownership of railways in other great sections were turned over to individual capitalists who were allowed vast gratuities of money subsidies and land grants, and in other ways were given the fullest license to accumulate enormous private fortunes and corporate power speedily.
In the United States such an inconsistent, anomalous policy was unknown ; there all of the railway charters were given to private companies and all of the railways were privately owned and operated ; private ownership and operation and Government ownership and operation did not exist side by side as they did in Canada.
If, however, the Canadian Pacific Railway project, as originally planned, was allowed practically to lie dormant for the time, other projects were consummated. Although these projects and transactions were small compared to the Pacific railway scheme, their outgrowing powers and the profits derived were of much ultimate consequence. The chief beneficiaries of these transactions were some of the very men who developed into great railway, land-owning, bank and mine magnates, men who today stand out illustriously as among the most exemplary and foremost multimillionaire capitalists of Canada and of the United States.
Red River Line Scandal
One of these transactions was a certain contract given by the Canadian Government to the Red River Transportation Company. This corporation was an outgrowth of the activities of Donald A. Smith, under whom, as Chief Officer of the Hudson’s Bay Company, the use of steamers upon the lakes and rivers of the North West Territories was first projected in i87I.
The circumstances of this contract and of another contract led to some extremely vigorous talk in the Dominion House of Commons in 1877 and 1878. Sir Charles Tupper, strong in his aptitude for delving into financial transactions, had critical remarks to make of a certain payment by the Dominion Government of $223,884 to the Red River Transportation Company for conveying rails from Duluth to St. Boniface, near Fort Garry. The contract, he charged, had not been given by public tender, and the rates charged were enormous. A few days later — on April 24, 1877 — Tupper said that Mr. John Christian Schultz, M.P., who represented Manitoba, had informed him that Donald A. Smith held a third interest in the Red River Transportation Company.1 It may here be repeated that Schultz later became Lieutenant-Governor of Manitoba.
Schultz arose to amplify Tupper’s comments. He read certain correspondence of the Red River Transportation Company (of which N.W. Kittson was General Manager), and analyzing the payments by the Government, asserted that they were exorbitant. The fact that the Government had paid some hundreds of thousands of dollars to this line, he said, made easy the explanation why that Company could divide 80 per cent. on its stock among its shareholders.
Charges as to Its Contract
“ But how came about this enormous waste of the public money ? ” Schultz inquired. “ How was it that, when an opposition steamboat line was known to be in operation on the Red River, tenders were not asked for ? And why was it that the enormous price . . . originally promised should have been extended . . . ?
“ The honorable member for Selkirk [Donald A. Smith] said he had nothing to do with the Kittson line ; but certain it was that rumor gave him the credit of owning indirectly a large quantity of its stock. Certain it was that Mr. Kittson merged the agency of the Hudson’s Bay Company into the management of the Kittson line, which was commenced mainly with the boats of the Hudson’s Bay Company. Of course, it was not at all likely that the name of the honorable member for Selkirk [Smith] appeared on the stock books of the Kittson Company, for that would vitiate the right of the company receiving bonded goods ; yet there were other ways of holding stock than the open one of having names in full in the stock books of the company.
“ If,” Schultz pertinently asked, “ no one deeply interested in the success of this line vouched for Mr. J.J. Hill, who so deftly manipulated the contract, how was it that the Premier chose to jump at the offer of a stray American, who came along with his offer to carry rails at twice the price the transportation was worth, and at least one-third more than it would have cost the Government had tenders been asked for from the rival line on the Red River and others ?”
Here it may be parenthetically remarked that this charge made by Schultz was subsequently confirmed by the testimony before the Royal Commission on the Canadian Pacific Railway.
Toussaint Trudeau, Deputy Minister of Railways and Canals, testified before that Commission that on April 16, 1875, Fuller and Milne, steamboat competitors of the Red River Transportation Company, had previously made a much better offer for the transportation of rails than had Kittson, but that James J. Hill had appeared in Ottawa, and after an interview with the Minister, the contract had been hurriedly given (without competition being invited) to Kittson. In its “ Conclusions,” the Royal Commission on the Canadian Pacific Railway reported that the rates offered by Fuller and Milne would, had their tender been accepted, have meant a very considering saving to the Government ; that the direct difference between the whole quantity at Kittson’s rates and those of Fuller and Milne was about $44,000 American currency ; and that even although it was getting exorbitant prices, the Red River Transportation Company did not fully carry out its contract.2
Mr. Schultz’s Statements
We shall now return to the debate in the House of Commons, on April 24, 1877. Concluding his remarks as to Red River Transportation Company transaction, Schultz said that he firmly believed that Donald A. Smith was precisely what Tupper, had stated — a participator in the profits of the Red River Transportation Company. When the Speaker called Schultz to order saying that Donald A. Smith had positively denied being a shareholder in the Company, or participating in its profits, Schultz reiterated his statement, saying that he based his belief mainly on public documents, and especially on letters that he read. Schultz declared that J.J. Hill had had a very strong backing in his dealings with the Government.3
The J.J. Hill here referred to was James J. Hill, that great present-day railway magnate of the United States. A Canadian, he had gone to Minnesota to seek his fortune ; and of some of his methods in accumulating his enormous wealth, we shall have more to say presently.
The matter of the Red River Transportation Company did not end with this day’s enlivening proceedings. It came up again in the House of Commons on April 4, 1878, when in the course of a vitriolic debate, Schultz resumed his heated attack upon Donald A. Smith and his methods. After Smith had given a long defense of the Red River Transportation Company, Schultz described at length what he termed its greed, and told how settlers going to Manitoba were “ huddled like sheep and treated like hogs on the lower decks of those very steamers.” It was a notorious monopoly, he said, and paid big dividends ; its freight charges were a gross imposition.4
But was Donald A. Smith connected with the Red River Transportation Company which profited so highly from Government contracts ? One of his eulogists, Alexander Begg, wrote assertively that “ although his name does not appear, he was a powerful factor in building up the steamboat facilities on the Red River. . . .”5
St. Paul and Pacific Railway
There was, however, another transaction which caused a much greater stir in and out of Parliament. This was the acquisition by Donald A. Smith and associates of the St. Paul and Pacific Railway, and the later leasing to it by the Canadian Government of the Pembina branch of the projected Canadian Pacific Railway.
The early history of the St. Paul and Pacific Railway was full of scandals.
Its original promoter was Russell Sage, a Troy, New York, grocery merchant. After he and his partners had successfully concocted a certain swindle, Sage has successfully cheated his own partners out of the proceeds of that swindle.6
The City of Troy had built a railroad called the Troy and Schenectady Railway. Sage was a leading member of the Troy Common Council and one of Troy’s directors of that railway. He manipulated matters so that the City of Troy was persuaded into selling the road, and it was his own vote that decided it. Sold for $200,000, the Troy and Schenectady Railway was promptly bought in by a syndicate, headed by Sage, paying only $50,000 in cash. It was subsequently sold by Sage and partners for $900,000 to the New York Central Railroad syndicate. Sage then had himself elected and reelected to Congress in 1853 and 1854, and was busy during the years when Acts directly or indirectly giving immense land grants to railways were lobbied or bribed through that body.7
Its Original Plundering by Sage
One of these railways was the Minnesota and Pacific Railway. Robbed into insolvency by the plundering of construction companies composed of the identical men who promoted the railway, it was foreclosed, and was bought in by the very men who had looted it.
In order to cover their lootings by legal artifices, and thus prevent defrauded creditors from recovering, they caused an Act to be passed by the Minnesota Legislature reorganizing the railroad into two divisions, one called the St. Paul and Pacific, and the other the First Division of the St. Paul and Pacific Railway Company. At the head of the group controlling both of these apparently separate roads was Russell Sage. In exchange for mortgages on the line and on its land grant, Dutch capitalists were wheedled into advancing $13,380,000 for the completion of the line, and thus avert the forfeiture of its land grant, as threatened by the Minnesota Legislature. Great parts of the sums advanced by capitalists in Holland were fraudulently diverted by the promoters,8 and the entire road in 1875 went into bankruptcy.9
Farley Is Appointed Receiver
Judge Dillon in the United States Circuit Court appointed one Jesse P. Farley receiver. James J. Hill now stepped in. He discerned the opportunity of getting for almost nothing at a forced sale a railway of 500 miles with a land grant of more than 2,500,000 acres.
According to Farley’s repeated statements in subsequent Court proceedings, Hill and Norman W. Kittson entered into a conspiracy with him (Farley) to betray the United States Courts, and that at the same time John S. Kennedy, of New York City, the representative of the Dutch bondholders, conspired with him to betray those bond-holders. Hill denied these allegations, but Farley asserted and reasserted them in many court proceedings.10 Farley was an ignorant man who had seen some railroad experience in Iowa ; that he was recommended to the Court as receiver by Kennedy is definitely stated in the Court decisions.”11
The Receiver’s Collusion
If Farley’s sworn statements may be believed, he was to mismanage the affairs of the railway so that the price of the bonds would be reduced, and he was to inform Hill and Kittson of every move that he made. At the right time Hill and Kittson were to come forward, and get control of the railway. Neither Hill nor Kittson had the necessary money to do this, but according to Farley they were to give a two-fifths or 40-per cent. interest to anyone supplying the funds. Farley asserted that this agreement further provided that a three-fifths or 6o-per cent. interest was to be reserved for himself and for Hill and Kittson,—one-fifth for each of the trio.12
In view of threatened forfeiture of the St. Paul and Pacific Railway’s franchises and land grants, the urgent, immediate consideration was to construct the extensions at once. But from where were the necessary funds to come ?
Enter Donald A. Smith and George Stephen
This contingency was soon provided for. Kittson brought in two fellow Canadians. One was Donald A. Smith, connected like himself with the Hudson’s Bay Company ; the other was George Stephen, President of the Bank of Montreal.
Hill and his associates now bought in the whole of the $28,000,000 of the St. Paul and Pacific Railway bonds at an absurdly low price. In some cases only three per cent. of their value was paid ; in other cases from 13¼ to 75 per cent. of their par value. Hill and his partners, however, were not required to pay in immediate cash. The bonds were chiefly acquired on the understanding that they were not to be paid for until the railway was finally reorganized.
The funds in hand were spent in a hasty effort to construct the extensions, and so forestall the forfeiture law. “ Under these circumstances,” the Court record states, “ the receiver at the instance of Mr. George Stephen and other large bondholders (James J. Hill, Donald A. Smith and Norman W. Kittson) hurried to Court, and got an order on April 18, 1878, to get authority to issue debentures to complete the extensions.”13 Under the authority of the Court, Farley, from the funds advanced by the Hill-Stephen syndicate, caused 125 miles of railway to be constructed at an aggregate cost of $1,016,300. This extension gave an unbroken connection between the city of St. Paul, Minnesota, and the railway system in Manitoba.
The next step was to get from the Canadian Government a lease to the St. Paul and Pacific Railway Company of the Pembina branch of the Canadian Pacific Railway, the construction of which had been done at Canada’s expense. On March 7, 1878, a dispatch had been published in the Toronto Globe stating that the St. Paul Pioneer Press had editorially asserted that the purchasers of the St. Paul and Pacific Railway bonds were Hill, Kittson, Smith and Stephen. The editorial further affirmed that they had effected a lease, on favorable terms, of the Pembina branch, and warning “ antagonistic parties ” not to waste valuable time in trying to get that branch, the lease of which, it was averred, was thus already secured.
An Exciting Day in Parliament
On April 4, 1878, Schultz inquired in the Dominion House of Commons whether any such arrangement had been made. Premier Mackenzie replied negatively. If, said Schultz, the Premier’s statement was true, then Hill and associates must have been “ using the grossest falsehoods for the purpose of preventing the Northern Pacific and other railroads from asking that connection with our line which they [Hill, etc.] were seeking for themselves.”14 Referring to Hill and Smith, Mackenzie Bowell said that care should be taken as to the placing of such power “ in the hands of the same parties who have exacted enormous freight rates from the people of the Northwest — rates so enormous that they almost doubled the cost of goods taken into that country.”15
In fact, Bowel more than implied that Donald A. Smith was using his position in Parliament for the personal benefit of himself and associates. If, Bowell said, the dispatch from St. Paul was true, then “ we have the extraordinary spectacle in the House of the champion of this proposed lease using his power and influence as a very humble and obedient supporter of the Government to secure to himself and his partners the advantage of a lease. Either it was true, or it was not true.” Bowell declared that he was inclined to infer its truth from the fact that Smith had not denied a charge of this kind made twice in the House.16
More Attacks on Mr. Smith
Sir John A. Macdonald accused Smith of more warmly and strongly advocating the lease Bill, “ which is in his own interest and which will put money in his own pocket,” than the Minister who introduced it. Macdonald termed it a fraudulent measure.17 More opposition came from another House member, Mr. White. “ There seems,” said White, “ to be a party in the House — a very prominent party — who cares more for the Hudson’s Bay Company, the Montreal Bank and private matters than for the interests of the people of Manitoba. . . . No one will believe that the honorable member for Selkirk [Smith] cares as much for the interests of the country generally as he does for his own pocket. . . .”18
When during this debate Smith made a defense of his actions, Schultz said in reply that he (Schultz) “ would content himself simply with commending to that honorable gentleman [Smith] the story of a gentleman in New York, who, when wishing to state directly his opinion of the veracity of a person he believed to be a consummate liar, said of him, ‘That all he could say was if he should meet him going down Broadway with Annanias and Sapphira he should take all three to belong to the same family.’”19
When, on May 9, 1878, Premier Mackenzie served notice for adjournment, and denounced the Senate’s action in throwing out the Pembina Branch Bill, Sir John A. Macdonald scored Mackenzie and commended the Senate’s action “ which would put a stop to their [the Government’s] bargain with the honorable member for Selkirk to make him a rich man and to pay him for his servile support. . . . The circumstances of an honorable gentleman [Smith] getting up and advocating a proposal in which he was interested was suspicious.”20
Lease of the Pembina Branch
The Mackenzie Government, however, did make a lease with George Stephen, on August 3, 1878, granting exclusive running powers for ten years over the Pembina branch, extending from Pembina to Winnipeg, to the St. Paul and Pacific Railway (or as it was later termed, the St. Paul, Minneapolis and Manitoba Railway).
But Mackenzie’s Government was soon put out of power ; and its successor, taking advantage of a certain clause, gave a contract to Upper and Company to equip and operate part of the road. A queer transaction now developed. One of the partners of that firm sold out to a Mr. Willis who ; according to rumor, was in fact an employe and agent of the St. Paul and Pacific Railway coterie.
Various complications now set in of too involved a nature to describe here. It was complained that the St. Paul and Pacific Railway Company formed a compact for a uniform tariff of rates, and that in defiance of its agreement with the Canadian Government, the St. Paul and Pacific Railroad Company was interchanging traffic with the steamboats of the Red River Transportation Company, thus lessening the chances of Upper and Company making their undertaking pay.21 The sequel was that Upper and Company came to an understanding by which the St. Paul and Pacific obtained running rights.
Hill, Smith, Stephen and Company Get the Railroad
On April 11, 1879, a final order of foreclosure was decreed, and on June 14, 1879, the St. Paul and Pacific Railway was sold to Hill and associates composing what was called the St. Paul, Minneapolis and Manitoba Railroad Company, which Hill and associates had organized a month before the sale for the express purpose of buying the St. Paul and Pacific Railway under foreclosure. The total sum for which the road was sold was $6,780,000, and they were allowed to turn in receiver’s debentures and bonds in payment.
Farley later testified that this railroad thus sold for $6,780,000 was then worth, at the very least, $15,000,000. In fact, in the suit in 1880 of Wetmore vs. the St. Paul and Pacific Railroad Company, to set aside the sale, judge Miller, in the United States Circuit Court, estimated the 565 miles of railroad and the land grant of 2,586,606 acres to be worth $20,000,000 or more.22
Hill and associates not only owned the St. Paul and Pacific bonds, but they apportioned the stock among themselves. Hill and Kittson each received 57,646 shares of stock, and the other members of the syndicate their share.23 From a part of the land grant alone, aside from the railroad property itself, Hill and associates at once obtained more than twice the sum that they had paid for the whole property. Immediately after the foreclosure sale, they sold the greater part of the land grant for $13,068,887.
There now remains a large and vital question. How and where did Hill, Kittson, Smith and Stephen get the funds with which they consummated the St. Paul and Pacific Railway transaction ?
A Troublous Bank of Montreal Meeting
In 1879, financial circles in Montreal were excited by the report that many millions of dollars had been taken out of the Bank of Montreal, without the consent or knowledge of the directors, and put into the St. Paul and Pacific Railway. The meeting of the bank’s shareholders, on June 4, 1879, was a stormy one. The official stenographic published report of that meeting contained this paragraph :
“ Mr. John McDonald said that he coincided to what had been said in regard to bank losses. . . . There never was such a melancholy statement offered to the shareholders as this one. The advances to directors towered far beyond a million dollars. He would like to see men at the head of the institution who would not require such accommodation. (Applause.) It had been rumored outside that some of the directors were largely interested in a road in the West, and required a large amount on that account.”
Similar comments were made by other shareholders. Donald A. Smith, who had become a Bank of Montreal director in 1873, denied that the railway referred to was indebted to the bank. General Manager Richard B. Angus said regarding the Directors’ loans that “ it would not be judicious at any time to give even a detailed statement of those accounts.”24
Commenting on this meeting, the Monetary Times said editorially, June 13, 1879 : “. . . The recent meeting of the Bank of Montreal presented a remarkable contrast to what has been customary on those occasions for many years back. . . . Some rather pointed questions were put with reference to certain large advances said to have been made by the Bank for railway purposes which, however, were only met by the statement that although the advances were large, undoubted security was held for them. This is not an uncommon phase with bankers when inconvenient questions are put by inquisitive stockholders, and it might have been well to be a little more precise. Certain advances to directors of the Bank were also the subject of criticism. These were met by the somewhat bluff statement that if these advances were required to be paid off, the Bank could have its money in a short time. This answer, though it amounted to very little, appeared to have the desired effect, and no further questions on the subject were asked. With regard to certain large accounts, the information was given that the Bank had only four in which the advances exceed $400,000 ; but by how much these accounts exceed this sum was not informed. . . .”
Alleged Source of $8,000,000
Much mystery was maintained as to precisely what had happened. But a few years later John Charlton represented the case thus in the Dominion House of Commons when describing the composition and antecedents of the personnel of the chief owners of the Canadian Pacific Railway Company :
“ A member of this Company was once President of the Bank of Montreal — a responsible position. When in that position he [Stephen] took $8,000,000 from the chest of the Bank of Montreal without the consent or knowledge of the directors of that bank,— at least he is reported to have done so. He is reported to have invested it in the St. Paul and Minneapolis Railway. Now, supposing this gentleman when he removed the money from the bank, and invested it, had lost the money, he would have been a defaulter to the extent of $8,000,000 ; but I hold that although the investment was successful, though he was enabled to return the money, morally his conduct was just as reprehensible as if he had lost every cent. I say he had no business to take $8,000,000 belonging to a corporation of which he was president, without the knowledge of the directors, and use that money in any speculation whatever.”
Charlton might have added, by way of contrast, that, in 1876, one Barber, a clerk of the Bank of Montreal under President George Stephen, had been sentenced to five years in the penitentiary for embezzling funds with which to speculate in stocks.
“ He is reported,” Charlton went on, still referring to George Stephen, “ to have invested that money, as I have said, in the St. Paul and Minneapolis Railway, and through collusion with the Receiver of that road, it is said he procured a report as to the condition of its affairs which was sent to Holland, where the stock was held, which report induced the Dutch bondholders and stockholders to part with their interest in the road at less than it was worth, thus enabling them to buy the road at less than its value. And having used the Receiver as his tool, he forgot the old adage, that there should be honor among thieves. He is charged with having forgotten to give the Receiver his share of the plunder, and the Receiver is said to have brought suit in the United States Court at St. Paul. The Court refused to entertain the suit on the ground that it would not degrade itself by giving a decision as to how plunder should be divided among different members of a gang. . . .”25 Charlton omitted to add that Richard B. Angus, General Manager of the Bank of Montreal, had resigned in 1879 to take charge of the financial management of the St. Paul, Minneapolis and Manitoba Railway. At the same time, Donald A. Smith ceased to be governor of the Hudson’s Bay Company, and Charles J. Brydges became Land Commissioner of that Company.26
In truth, Receiver Farley did bring suit against Kittson, Hill and associates, in the Minnesota Supreme Court, and did claim one-fifth of the capital stock of the railroad and one-fifth of all other securities and property acquired by that syndicate, which claim he based upon his assertion that they had got the property by reason of his collusion. But Judge Gilfillan, in the absence of the production of any written agreement, decided that Farley had not proved his case.27
Likewise, Farley sued the St. Paul, Minneapolis and Manitoba Railroad Company in the United States Circuit Court. The attorneys for the railway had an effective plea ready. They urged that the case be non-suited on the ground that a court official — which the Receiver was — who had betrayed his trust had no standing in court. To rid themselves of Farley’s claims they admitted his contention of collusion ! Here was fine candor ! In this plea Judges Treat and Nelson, in 1882, concurred, saying in part “Courts will not and ought not be made the agencies whereby frauds are in any respect recognized or aided. They will not unravel a tangled web of fraud for the benefit of anyone enmeshed therein through whose agency the web was woven. Especially must that be a rule where a trusted officer of a court, whose position is both advisory and judiciary, seeks its assistance to compel alleged confederates to share with him the spoils acquired through his concealments and deceits, which he admits were deemed by his confederates and his confederates necessary to their success through his betrayal of his trust.”28
Then followed other parts of the Court’s decision practically confirming Farley’s statements that he had entered into a conspiracy of collusion with Hill, Kittson and their partners, on the one hand, and Kennedy, on the other. “ The plaintiff,” continued the decision, “ conceived a scheme to wreck the vast railroad interests which it was his duty to protect. Through a betrayal of his trust under such circumstances, according to his version of the facts, these vast railroad properties have been secured, and a profit realized Of $15,000,000 or more.”29
Farley Loses ; the Rest Become Multimillionaires
Farley carried his suit twice to the Supreme Court of the United States, but after thirteen years of litigation the final decision was adverse to him on the ground that he had not proved his claims.30
But what of the men whom Farley alleged conspired with him, or who were alleged to have profited by his betrayal of duty ? It is almost superfluous to describe their rapid ascent. The capitalization of this particular railroad was gradually run up to $210,000,000. Hill became the great multimillionaire railway autocrat of the north-west United States. Kennedy became a multimillionaire ; when he died, in 1909, his fortune was estimated at from $30,000,000 to $60,000,000, according to the estimates put upon the value of his enormous pile of railway stock. George Stephen, as we shall see, was, before many years, created a Sir, and then raised to the peerage as Lord Mount Stephen. Donald A. Smith, in 1886, was created a Knight Commander of the Most Distinguished Order of St. Michael and St. George, and subsequently Lord Strathcona and Mount Royal.
1. Debates in the House of Commons, Dom. Parl., 1877, Vol. III, pp. 1689 and 1772.
2. See Report of the Royal Commission on the Canadian Pacific Railway, Vol. II, p. 969, and Vol. III, pp. 276-284.
3. Debates in the House of Commons, etc., 1877, Vol. III, pp. 1800-1801.
4. Ibid., p. 1685.
5. History of the Northwest, Vol. III, p. l00.
6. The specific details are related in the History of the Great American Fortunes, Vol. III, pp. 14-16, citing the records of the Supreme Court of the United States.
7. See full details in Chapters I and II, Vol. III of the History of the Great American Fortunes, giving the facts from official documents.
8. These fraudulent methods are described in Dillon’s (U.S.) Circuit Court Reports, Vol. V, pp. 451-459 and 519-536 in which judge Dillon states the facts.
9. This necessarily is merely an outline of the looting of this railway by Sage and associates. The full narrative, citing from the facts as set forth in the United States court records, is given in Chapter II, Vol. III of the History of the Great American Fortunes.
10. See Farley vs. St. Paul, Minneapolis and Manitoba Railroad Company, Federal Reporter, Vol. XIV, pp. 114-118 ; United States Reports, Vol. CXX, pp. 303-318 ; Farley vs. Hill, Federal Reporter, Vol. XXXIX, pp. 531-532 ; Farley vs. Norman W. Kittson et. al., Minnesota Reports, Vol. XXVII, pp. 102-107.
11. Federal Reporter, Vol. XXIX, p. 516.
12. Farley vs. Norman W. Kittson et. al., Minnesota Reports, Vol. XXVII, p. 103.
13. John S. Kennedy et. al. vs. The St. Paul and Pacific Railway Company, et. al., Dillon’s Circuit Court Reports, 1879-1880, Vol. V, p. 527.
14. Debates in the House of Commons, etc., 1878, Vol. IV, pp. 355 and 1680.
15. Ibid., p. 1681. Mackenzie Bowell was later Dominion Minister of Customs and Minister of Trade and Commerce.
16. Ibid., p. 1689.
17. Ibid., pp. 1690-1691.
18. Ibid., p. 1692.
19. Ibid., p. 1686.
20. Ibid., Vol. V, pp. 2556-2557.
21. Monetary Times, May 9, 1879.
22. Dillon’s Circuit Court Reports, 1879-1880, Vol. V, p. 531.
23. United States Reports, Vol. CXX, p. 308.
24. See Toronto Globe and other newspapers of June 5th, 1879. Lord Strathcona and Mount Royal is still one of the largest shareholders in the Bank of Montreal ; he holds 2,777 shares.—See, List of Shareholders in the Chartered Banks of Canada (published by the Dom. Gov’t.), p. 48.
25. Debates, House of Commons, Dom. Parl., 1884, Vol. I, pp. 390-391.
26. We have repeatedly referred to Brydges’ railroad career. A word more as to his bank activities. He was president of the Mechanics’ Bank which suspended in 1879 with only $2,500 actual cash on hand to meet a circulation of $168,000 payable on demand ! “ Well knowing,” commented the Monetary Times, January 6, 1879, “what slender resources were at its command for meeting liabilities, the managers have pushed its notes into circulation by the most improper methods. ... The bank had several agencies in the country districts of Lower Canada, and almost the sole business of these agencies was to force the notes of the Mechanics’ Bank upon the unsuspecting people of the locality. Not content with paying out the bills of the bank over the counter in the ordinary way, its agents would visit hotels, board steamboats and employ other persons to do the same thing, solely to gather in the bills of other institutions and exchange them for bills of the defunct bank. . . . It is notorious that many banks, generally the smaller ones in the Province of Quebec, are pursuing precisely the same tactics to get out their bills. . . .”
27. Minnesota Reports, Vol. XXVII, pp. 102-107.
28. Federal Reporter, Vol. XIV, pp. 114-118.
29. Ibid., p. 117.
30. See United States Reports, Vol. CXX, pp. 303-318 and Ibid., Vol. CL, pp. 572-577
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