chairman of the commission, presenting the
minority report, recommends, both upon principle and policy, the
institution of proceedings for the forfeiture of the charters of the
corporations and the winding up of their affairs.

I have been furnished with a statement or argument in defense of the
transactions connected with the construction of the Central Pacific road
and its branch lines, from which it may not be amiss to quote for the
purpose of showing how some of the operations of the directors of such
road, strongly condemned by the commissioners, are defended by the
directors themselves. After speaking of a contract for the construction
of one of these branch lines by a corporation called the Contract and
Finance Company, owned by certain directors of the Central Pacific
Railroad, this language is used:

It may be said of this contract, as of many others that were let to the
different construction companies in which the directors of the Central
Pacific have been stockholders, that they built the road with the moneys
furnished by themselves and had the road for their outlay. In other
words, they paid to the construction company the bonds and stock of the
railroad so constructed, and waited until such time as they could
develop sufficient business on the road built to induce the public to
buy the bonds or the stock. If the country through which the railroad
ran developed sufficient business, then the project was a success; if it
did not, then the operation was a loss. These gentlemen took all the
responsibility; any loss occurring was necessarily theirs, and of right
the profit belonged to them.

But it is said that they violated a well-known rule of equity in dealing
with themselves; that they were trustees, and that they were
representing both sides of the contract.

The answer is that they did not find anybody else to deal with. They
could not find anyone who would take the chances of building a road
through what was then an almost uninhabited country and accept the bonds
and stock of the road, in payment. And when it is said that they were
trustees, if they did occupy such relation it was merely technical, for
they represented only their own interests on both sides, there being no
one else concerned in the transaction. They became the incorporators of
the company that was to build the road, subscribed for its stock, and
were the only subscribers; therefore it is