line, and everything lying inside of this line belongs to the Zone. Everything outside of it pertains to the harbor of Colon, except as I will state a little later on.

From that point the line of delimitation follows the shore line at low water until it arrives at the intersection of a certain street in the city which is described in the agreement. It follows the center line of that street for that short distance [indicating] and crosses the Panama Railroad track. It then follows on a line parallel with the Panama Railroad track

Senator KITTREDGE. On which side of the track?

General DAVIS. On the east side of the track-the city side; the Manzanillo Island side, as I remember-always at 150 meters from the center line of that track, until it reaches the shore of the Fox River here; then following around the shore of the Manzanillo Island back here to the light-house.

Now, what is inclosed is in the city of Colon and not within the jurisdiction of the United States. What is on the south side of that line, including all these railroad tracks and this Cristobal Point and a considerable corner of the city itself, where all the shops and the new wharves are here, is in the Zone.

It also provided in the same agreement that a zone 660 meters wide, from the open sea, passing through this harbor on any line that the canal may ultimately take, even the part that passes through the harbor of Colon, shall be under the exclusive jurisdiction of the United States, so that under this agreement a vessel can enter the Zone and always be entirely within the United States jurisdiction, even though it traverses the harbor of Panama.

I thought that was a very important matter to secure perpetual control over ships entering the canal and not have any dispute about right in regard to that matter, so that is covered by that agreement. So wherever the entrance to the canal is, a zone 2,000 feet wide through the harbor of Colon, Republic of Panama, will be under United States jurisdiction.

The map on the Panama side contains a description of the Zone lines also; but it is rolled up now, and if it is printed you can always consult it.

There was a subject mentioned in the statement of Governor Magoon about a dispute that occurred in the city of Panama, in which the Panama police intervened, and I received a letter from the chairman of the Commission saying that you would probably wish to ask me some questions in regard to that. It was a sort of a riot that occurred in the city of Panama during my time there. Was that the case, Mr. Chairman?

The CHAIRMAN. Yes, sir.

General DAVIS. As bearing upon that, I have here a copy of a letter that I wrote to Mr. Wallace on the 3d of May, 1905, in which there is a description of the incident referred to, and all of the facts concerning it are there stated. I do not know that it is a subject that you care particularly about.

Senator HOPKINS. Let it become a part of his testimony.

The CHAIRMAN. It might become a part of the record unless the General wishes it read.

General DAVIS. I do not care to say anything about it.

(The paper referred to will be found printed at the end of to-day's proceedings.)

General DAVIS. There is one other small matter:

When I went to the Isthmus, under the order of the President of May, 1904, one of the duties imposed upon me was to announce in a public manner the purposes for which the government of the Zone was established. I arrived on the 17th day of May and paid my respects to the President of the Republic, and on the 19th of May I made a publication to the inhabitants of the Canal Zone, which was in print; and this is the document in my hand. It is the first public announcement of the purposes for which the government of the Zone was being established by the United States.

Senator KITTREDGE. I think that might as well be printed in connection with the statement.

(The paper above referred to will also be found at the end of today's proceedings.)

General DAVIS. There is one other small matter. It is as to a description of the functions of the officials who are transacting the business of the Government on the Zone in an engineering way, or in any other way that involves the use of property, and as respects the designation of that property. It is the custom now to speak of it as the property of the Isthmian Canal Commission.

The locomotives, the dredges, the steam shovels, and the cars are all marked "I. C. C.," and it is in the common language of the day that that is the property of the Isthmian Canal Commission. It is a custom that grew up from the very beginning. What its origin was I have no idea of, only that it has been confirmed by constant usage. It seems to me that such a description of that property is inaccurate. If there is any mark on a car or a locomotive or a steam shovel it seems to me it ought to be marked "U. S.," as the property of the United States.

It is not a matter of great importance, but it seemed to me to be quite anomalous, inasmuch as the Commission does not own anything, has no ownership whatever, and as the brand on it indicates ownership, it struck me as more appropriate to speak of a contract being made between the United States as party of the first part and John Smith as party of the second part rather than as between the Isthmian Canal Commission as party of the first part and John Smith as party of the second part. It is only a very small matter.

I have nothing else that I care to refer to.

Senator MORGAN. There was a charter party for the two ships that were bought by the Isthmian Canal Commission between the Canal Commission, representing the United States, and the Panama Railroad Company?

General DAVIS. I have understood so.

Senator MORGAN. Yes. I had copies of that charter party published the other day. That is equivalent to a contract by the United States with itself?

General DAVIS. It seems so to me.

Senator MORGAN. If it should get into a court, it would be, of course, imp ible to enforce it. The transactions that have been conducted by the railroad company there, or the railroad directors and their superintendent or general manager, or whatever it is, have

PC-VOL 3-06-25

been nominally between the railroad company and the Isthmian Canal Commission. Now, in the direction of the operations of that railroad-in the fixing of freight rates, in the transportation of goods across the Isthmus, and in the connections that are made with the commercial ships that come into either of the bays-is it a fact that the railroad directors and managers have the exclusive control and charge of those matters, or are they regulated and controlled by the Isthmian Canal Commission?

General DAVIS. The board of directors of the Panama Railroad, as I understand, are all nominees of the stockholders-all represented by one individual-the Secretary of War. The board of directors of that railroad therefore must, as a matter of necessity, carry out the policy of its stockholders. In other words, the Secretary of War has the right and the authority to dictate to those directors what policy shall be pursued in the management of the railroad, since every share of stock, as I understand, stands in his name.

It so happens that all the members of the Isthmian Canal Commission are members of that board. They have two duties. One duty is to perform what is assigned to them as members of the Isthmian Canal Commission. The other is to do their duty as directors of the Panama Railroad. I think all the members of the Commission are members of the board of directors at least I have understood so.

Mr. Shonts, who is the chairman of the Isthmian Canal Commission, is also the president of the board of directors of the Panama Railroad. An executive committee has been formed among those directors. I think it has three members, but I am not quite sure about it; and that executive committee has delegated to it by the board certain functions which enable it (the committee) to dispose rapidly of any questions that may arise.

Senator MORGAN. Who comprise that executive committee?

General DAVIS. I could not tell you offhand, for it never has been of any concern to me. I only know that Mr. Shonts is the chairman of the board of directors and is also chairman of the executive committee, and I think Mr. Drake, the vice-president of the Panama Railroad Company, and who has been for many years, is also a member of that executive committee. Who the other members are I do not know. I presume Mr. Cromwell is a member, although that I do not know of any personal knowledge. But there is an executive committee consisting of either three or five members, I am not sure which, and they meet weekly, I think, as a matter of rule, and may ineet oftener. The board of directors only meets monthly; once a month.

Senator MORGAN. This board of directors and this executive committee of the railroad company transact and control all of the business of the railroad company, unless the Secretary of War or the Isthmian Canal Commission undertake to give special directions about some matter?

General DAVIS. I suppose that in the transaction of the business of the board it is like all other boards-that somebody makes a motion, and then that motion is seconded, and it is discussed and voted upon.

Senator MORGAN. The point I was getting at is more particularly this I perhaps did not indicate it clearly enough: The Isthmian

Canal Commission, as a commission, does not undertake to direct the board of directors of the railroad company?

General DAVIS. No, sir; not as it now exists. Under the orders of the President, which were made in May, 1904-that was a direction that he then gave-that all the members of the Isthmian Canal Commission should be elected on the board of directors of the Panama Railroad, and that the policy of the railroad should conform to the policy of the United States. But as I understand, under the modified orders of the President, issued since I left the Commission or about the time I left it, about which I have no personal knowledge, that has been changed. That is, that method of procedure has been changed, although I am not quite sure about that; I do not want to assert that as a fact.

Senator MORGAN. What method, do you understand, has been substituted for it?

General DAVIS. Simply that the Secretary of War, as the only stockholder that is, the United States as the only stockholder, the Secretary of War as its trustee-indicates to the board of directors of the Panama Railroad the policy that he wishes pursued.

Senator MORGAN. And that takes it out of the reach of the Commission?

General DAVIS. Not out of the reach of the Commission, because every member of the Commission is on the board.

Senator MORGAN. I understand that; but it takes it out of the reach of the Commission as a commission?

General DAVIS. I should think so; yes, sir; I should think so. Senator MORGAN. And transfers that power of general control and direction to the Secretary of War?

General DAVIS. I do not know that it transfers it; it inherently lies in him.

Senator MORGAN. It leaves it in him, then?

General DAVIS. Yes, sir.

Senator HOPKINS. That is simply a conclusion of yours, is it not, General? All you know about it is that the members of the Commission are directors?

General DAVIS. I only know that by public report.

Senator HOPKINS. Yes.

General DAVIS. I do not know that officially.

Senator HOPKINS. And as to whether they are subservient entirely to the Secretary on every question that comes up on the road, or whether they have independent opinions is a matter you do not know of?

General DAVIS. No, sir. I presume that he trusts those men as wise men, and he wants their judgment, and relies upon them to act wisely.

Senator MORGAN. But you do know that as a commission, as an Isthmian Canal Commission, a body called the Commission does not undertake by any resolution or otherwise to control the board of directors of the Panama Railroad.

General DAVIS. I know that by common report. I have no other knowledge.

Senator MORGAN. You were familiar with the records while you stayed there?

General DAVIS. When I was on the Isthmus I never attended a board meeting of the Panama Railroad directorate.

Senator MORGAN. Although you were one of the directors?

General DAVIS. Although I was one of the directors; but their meetings were in New York, and I was in the Tropics.

Senator MORGAN. But while you were governor there and a member of the Commission, was any order passed by the Commission to the board of directors of the railroad company that they should do any particular thing, or do thus and so?

General DAVIS. No, no; no, sir.

Senator MORGAN. That is, no control was attempted to be exercised by the Isthmian Canal Commission over the board of directors of the Panama Railroad?

General DAVIS. No, sir; I think not.

Senator MORGAN. Or over its superintendent or general manager? General DAVIS. No, sir. Mr. Wallace was elected or appointed superintendent of the Panama Railroad during my time. He did not wish to serve in that capacity, but

Senator MORGAN. But the two establishments, in all their transactions and in their accounting and everything of that sort, are entirely separate?

General DAVIS. Entirely separate and distinct; yes, sir; although now, I think, their accounts are audited by the auditor of the Isthmian Canal Commission.

Senator MORGAN. They come under the Canal Commission?
General DAVIS. Yes, sir.

Senator MORGAN. But there is a separate audit for their accounts? General DAVIS. I think they have an auditor of their own in New York; but of that I am not sure.

Senator MORGAN. Yes; but the accounts in their origin and in their payment of demands and liabilities and whatever takes place, including purchases for the railroad, are all conducted through that corporation?

General DAVIS. I am afraid you are getting beyond my knowledge. I have an impression-I have heard it said that the purchasing agent of the Isthmian Canal Commission is also purchasing agent for the Panama Railroad. I think one of your witnesses here stated that. I think I have read it here.

Senator MORGAN. I have a different impression. I thought they had a purchasing agent for the Panama Railroad there who sometimes acted for the Commission.

General DAVIS. I think I have read it that way, although I do not know; I am not quite sure.

Senator MORGAN. The coal supply, for instance, that goes into the Isthmus over the railroad and is conveyed by its steamers, is a separate account between the Canal Commission and the railroad company, the railroad company furnishing the coal at a certain price to the Commission?

General DAVIS. Yes, sir.

Senator MORGAN. That applies to pretty much all the coal that has even been used there?

General DAVIS. I think to all, except one cargo, or something like

that.