The committee met, pursuant to call, at 10.30 o'clock a. m., in room 326, Senate Office Building, Senator Francis G. Newlands, presiding.

Present: Senators Newlands (chairman), Pomerene, La Follette, Brandegee, and Clapp.

The committee proceeded to consider the bill (S. 3947) entitled: "A bill to amend section twenty of an act to regulate commerce, to prevent overissues of securities by carriers, and for other purposes,"

which is as follows:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section twenty of an act entitled "An act to regulate commerce, approved February fourth, eighteen hundred and eighty-seven, as amended, be amended so as hereafter to read as follows:

"SEC. 20. That the commission is hereby authorized to require annual reports from all common carriers subject to the provisions of this act, and from the owners of all railroads engaged in interstate commerce as defined in this act; to prescribe the manner in which such reports shall be made, and to require from such carriers specific answers to all questions upon which the commission may need information. Such annual report shall show in detail the amount of capital stock issued, the amounts paid therefor, and the manner of payment for the same; the dividends paid, the surplus fund, if any, and the number of stockholders; the funded and floating debts and the interest paid thereon; the cost and value of the carrier's property, franchises, and equipments; the number of employees, and the salaries paid each class; the amounts expended for improvements each year, how expended, and the character of such improvements; the earnings and receipts from each branch of business and from all sources; the operating and other expenses; the balances of profit and loss, and a complete exhibit of the financial operations of the carrier each year, including an annual balance sheet. Such reports shall also contain such information in relation to rates or regulations concerning fares or freights, or agreements, arrangements, or contracts affecting the same, as the commission may require; and the commission may, in its discretion for the purpose of enabling it the better to carry out the purposes of this act, prescribe a period of time within which all common carriers subject to the provisions of this act shall have, as near as may be, a uniform system of accounts, and the manner in which such accounts shall be kept.

"Said detailed reports shall contain all the required statistics for the period of twelve months ending on the thirtieth day of June in each year, or on the thirty-first day of December in each year if the commission by order substitute that period for the year ending June thirtieth, and shall be made out under oath and filed with the commission at its office in Washington within three months after the close of the year for which the report is made, unless additional time be granted in any case by the commission; and if any carrier, person, or corporation subject to the provisions of this act shall fail to make and file said annual reports within the time above specified, or within the time extended by the commission for making and filing the same, or shall fail to make specific answer to any question authorized by the provisions of this section within the

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time fixed by the commission, such party shall forfeit to the United States the sum of $100 for each and every day it shall continue to be in default with respect thereto. The commission shall also have authority by general or special orders to require said carriers, or any of them, to file monthly reports of earnings and expenses, and to file periodical or special, or both periodical and special, reports concerning any matters about which the commission is authorized or required by this law, or by any other law, to inquire or to keep itself informed or which it is required to enforce, including the matter of making public, by appropriate means, any information regarding the issuance by said carriers of stocks, bonds, or other evidences of interest or indebtedness. In such periodical or special reports the commission may require of the carrier, in addition to its income account, a balanced statement of its receipts and expenditures on capital account, and of the surplus of the income account accruing during the period covered by such statement, as well as of all other financial transactions that have taken place during such period, with whom had, whether in cash, in securities, or in other valuable consideration. The commission may also require the carrier to compile for the information of its stockholders such facts in regard to the financial transactions of the carrier for its fiscal year, and in such form as the commission may direct.

"Such periodical or special reports shall be under oath whenever the commission so requires; and if any such carrier shall fail to make and file any such periodical or special report within the time fixed by the commission it shall be subject to the forfeitures last above provided.

"Said forfeitures shall be recovered in the manner provided for the recovery of forfeitures under the provisions of this act.

"The oath required by this section may be taken before any person authorized to administer an oath by the laws of the place in which the same is taken.

"The commission shall have the power to investigate all financial transactions of said carriers and to examine into the actual cost and value of property acquired by, or services rendered to, said carriers. The directors, stockholders, officers, agents, attorneys, employees, receivers, or operating trustees of any carrier may be required by order of the commission to disclose every interest. direct or indirect, which they have in any transaction under investigation. In addition to the certificates and reports herein mentioned, the commission may require the carrier to furnish any further statements of fact or evidence that it may deem necessary or appropriate relating to business transactions of, for, or with said carrier.

"The commission may, in its discretion, prescribe the forms of any and all accounts, records, and memoranda to be kept by carriers subject to the provisions of this act, including the accounts, records, and memoranda of the movement of traffic, as well as the receipts and expenditures of moneys, and it shall be unlawful for said carriers to keep any other accounts, records, or memoranda than those prescribed or approved by the commission.

"In case of failure or refusal on the part of any said carrier to keep such accounts, records, and memoranda in the manner prescribed by the commission, said carrier shall forfeit to the United States the sum of $500 for each such offense and for each and every day of the continuance of such offense, such forfeitures to be recoverable in the same manner as other forfeitures provided for in this act.

"The commission shall at all times have access to all accounts, records, memoranda, correspondence, documents, papers, and other writings of the carrier, regardless of the dates thereof, relating to transactions of, for, or with said carrier kept or preserved by or for, or in the care, custody, or control of said carrier, or of any person for said carrier: Provided, That all communications between attorney and client giving or seeking professional advice shall be deemed privileged.

"The commission may employ special agents or examiners, who shall have authority under the order of the commission to inspect, examine, and take copies of any and all accounts, records, memoranda, correspondence, documents, papers, and other writings to which the commission has the right of access as above provided. Failure or refusal to afford such access shall constitute an offense for which the offender shall forfeit to the United States the sum of $500 for each such offense, and for each and every day of the continuance of the offense, such forfeitures to be recoverable in the same manner as other forfeitures provided for in this act.

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'Any person or persons, natural or artificial, who shall willfully make, or cause to be made, any false entry in any accounts, records, or memoranda kept by a carrier subject to this act, or who shall willfully neglect or fail to make, or cause to be made, full, true, and correct entries in such accounts, records, or memoranda of all facts and transactions appertaining to the carrier's business, or shall keep or cause to be kept any other accounts, records, or memoranda of said business than those prescribed or approved by the commission, or who shall willfully file, or cause to be filed, any application, certificate, or other paper required under this act containing false or