Senator TALIAFERRO. You read from the minutes a moment ago that the resolution authorizing the payment of a dividend had been amended by inserting the word "special."

Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. What dividend was that?

Mr. DRAKE. That was the dividend of 1901, I think. [After examining book.] That was the dividend declared at the meeting of February 28, 1901.

Senator TALIAFERRO. Read that again.

Mr. DRAKE. "Resolved, That a special dividend of 2 per cent be, and is hereby, declared this day upon the capital stock of the company, payable on Monday, March 25, 1901, to stockholders of record, or their legal representatives, on that day.'

Senator TALIAFERRO. Why was the word "special" put in that resolution in 1901 and omitted in 1903?

Mr. DRAKE. I do not recall, Senator. I do not remember. I will endeavor to find out.

Senator MORGAN. You will have to ask Mr. Cromwell, will you not, in order to find out?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. You had no fixed dividends?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. You declared dividends as the company felt. able to distribute the money and the stockholders desired it?

Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. Does it not strike you as peculiar that the word "special" is inserted there?

Mr. DRAKE. There must have been some reason for it, sir, and I ought to remember it, but I do not.

Senator MORGAN. Do you recollect the date of the passage of the Spooner law?

Mr. DRAKE. No, sir.

Senator MORGAN. Was it the 30th day of June?

Senator KITTREDGE. It was approved the 28th day of June, 1902. Senator MORGAN. 1902-yes. I want to put that down. Do you recollect the date of the conclusion of the Hay-Concha treaty?

Mr. DRAKE. No, sir. I am very forgetful as to dates now. I have become so. I used to remember all of them, but I can not now. Senator MORGAN. Do you recollect the date of the signing of the Hay-Concha treaty?

Senator TALIAFERRO. The Hay-Concha treaty?

Senator MORGAN. Yes.

Senator KITTREDGE. That was ratified by the Senate in December, 1901. I am unable to give the date of its negotiation.

Senator MORGAN. Have you a copy of it there?

(Senator Kittredge handed a pamphlet to Senator Morgan.)

Senator MORGAN. No; this is the Pauncefote treaty. I did not say "Pauncefote;" I said "Concha." That afterwards became the HayHerran treaty. Do you recollect the date of that?

Senator KITTREDGE. That was negotiated in January, 1903, and was ratified in March, 1903.

Senator MORGAN. Yes.

Senator TALIAFERRO. Was not this dividend of December, 1903, essentially a special dividend?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. Where two had already been declared previously in that year?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. Could not the word "special" have been more appropriately used, as far as you know now, in connection with a third dividend within a year, than in the case of the dividend of 1901, where only one dividend had preceded it?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. You think not?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. Will you let the committee know, Mr. Drake, why that word "special" was used in connection with that dividend and omitted in the others?

Mr. DRAKE. Yes, sir. If I write a letter, will that be sufficient? Senator TALIAFERRO. That will be sufficient.

Senator MORGAN. Before the passage of the Spooner law Mr. Hay had negotiated with Mr. Concha, the minister from Colombia, a treaty which was to become operative, according to a note from the President, whenever Congress passed upon the subject and authorized the adoption of such a treaty or one equivalent to it. That was some time between the date of the passage of the Spooner law and the 1st of January of the same year. I will get the date and put the treaty in the record.

I will state to the committee, and in Mr. Drake's hearing, that my belief is that as soon as ever the consent of Congress had been acquired, as manifested in that treaty, to a sale of the property of the canal company to the United States, that principle being established by the consent of Colombia, this company commenced to rob its treasury for the purpose of having as small an amount of money and assets on hand as possible fall into the hands of the United States whenever they got the possession of the property; and that these different dividends were carrying out that exploitation, robbing themselves of all cash assets that were possible on every occasion and under every excuse, in order that the railroad property, when it was turned over to the United States, should be depleted below its actual value.

Senator KITTREDGE. Is the treaty to which you refer the one between this Government and the Republic of Colombia?

Mr. DRAKE. Yes, sir; executed by Concha, minister.

Senator KITTREDGE. That was negotiated January 22, 1903, as I recollect. I know it was in January, 1903, and was ratified

Senator MORGAN. That treaty was before the passage of the Spooner Act.

Senator KITTREDGE. With the Republic of Colombia?

Senator MORGAN. Yes, sir; shortly before--within a month or two. Senator KITTREDGE. Of course I am giving simply my recollection. Senator MORGAN. Well, I know about it; I will get the treaty and put it in the record.

Senator KITTREDGE. I have asked the clerk of the committee to get that instrument.

Senator MORGAN. It is here in various prints; it has been printed several times.

Senator TALIAFERRO. Referring to that dividend of 1901, in which the word "special" was employed, will you look in your minutes and

see if, in declaring the preceding dividend, the word "special" was used?

Mr. DRAKE (after examining book). How far back would you like me to go?

Senator TALIAFERRO. Just go through that period when you were not paying dividends.

Mr. DRAKE. I am going through that period. The dividend of 1901 was the first dividend that we paid, sir, for a considerable period. Senator TALIAFERRO. See if the word "special" was used in the second dividend of 1901.

Mr. DRAKE. There was no second dividend, I think, sir.

Senator TALIAFERRO. That was the only one declared in 1901?
Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. Was the word "special" used in the first dividend in 1902?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. It was not used after that?

Mr. DRAKE. No, sir.

Senator TALIAFERRO. Do you know whether it was used prior to the dividend of 1901?

Mr. DRAKE. I do not recall that it ever was; I do not know that it ever was, sir.

Senator TALIAFERRO. Will you look through the book at the recess hour?

Mr. DRAKE. I will, carefully, sir.

Senator TALIAFERRO. And let us know at the afternoon hearing, if you please?

Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. You have been connected with the railroad company since 1888, I think you said, Mr. Drake?

Mr. DRAKE. Yes, sir; in different capacities.

Senator TALIAFERRO. What has been the market value of the stock? Mr. DRAKE. It never has had any market value, sir-a mere nominal value, because there has only been a small amount of stock outstanding.

Senator TALIAFERRO. Have you ever known of any sales of the stock?

Mr. DRAKE. Yes, sir; at times there have been small sales. I have known of sales of one or two shares at 65 and at 75. There was a broker in New York by the name of John B. Manning who used to buy up lots of stock. We used to send anybody that had single shares to sell to him, and he would buy them as cheaply as he could. He would pay in the neighborhood of 65 or 70 or 85.

Senator TALIAFERRO. How lately have you known of sales of the stock; down to what period?

Mr. DRAKE. Do you mean public sales?

Senator TALIAFERRO. Any kind of sales.

Mr. DRAKE. The last transactions that were made in the stock were when all of the minority stock was bought up.

Senator TALIAFERRO. I mean exclusive of that.

Mr. DRAKE. Oh, well, exclusive of that, I think within a period of six months before that time there were single sales, sales of one or two shares; something like that.

Senator TALIAFERRO. At not to exceed 65 cents on the dollar?

Mr. DRAKE. At not to exceed 65 to 80.

value; it was whatever he would pay for it.

There was no market

Senator TALIAFERRO. Do you know of a sale at 80?

Mr. DRAKE. No, sir; not definitely.

Senator TALIAFERRO. Why do you name that figure then?

Mr. DRAKE. Because I have an impression that Manning did buy stock as high as that; but it is only an impression, sir.

Senator TALIAFERRO. What is the highest price at which you have known the stock to sell?

Mr. DRAKE. Seventy-five.

Senator TALIAFERRO. You have known of a sale at 75?
Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. And you are prepared, on that knowledge, to state to the committee, I presume, that 75 was the maximum market value of this stock prior to the purchase of this French property by the United States Government?

Mr. DRAKE. No, sir; not at all. May I enlarge just a little on that? Senator TALIAFERRO. Certainly, certainly.

Mr. DRAKE. I do not want to be discursive. I had been a stock broker and banker for twenty-seven years or thirty years before I came to the Panama Railroad Company, and the opinion that I express now is that that was all that the minority stock was worth in the market. It was no object to anybody to buy up the few odd shares that were offered for sale.

Senator TALIAFERRO. I would just as soon have the statement in that form, Mr. Drake. Then you would state to the committee that the maximum value of the minority stock was not to exceed 75 cents on the dollar.

Mr. DRAKE. That was all that could be obtained for it.

Senator TALIAFERRO. The market value-that is all.

Mr. DRAKE. Mr. Chairman, I would like to say, if I may, that if it is possible I would like to get to New York this afternoon. There are matters of very important business there.

The CHAIRMAN. Yes; I think the committee will get along with you as rapidly as possible. I presume Senator Morgan wishes to ask you some further questions. You have not finished, have you?

Senator MORGAN. No; I have not. The country and the Senate are pressing upon us for a report upon these questions, and I want to get the evidence before the committee.

The CHAIRMAN. I understand that, Senator; I simply did not know ow far you wished to go.

Senator TALIAFERRO. I would like to ask one more question while Senator Morgan is getting ready, Mr. Drake. What official position in the Panama Railroad Company did you hold prior to the purchase of that property and the canal property by this Government?

Mr. DRAKE. I held every position but that of president, sir. I have been assistant secretary and secretary, and secretary and assistant general manager, and vice-president and secretary, and second vicepresident and secretary.

Senator TALIAFERRO. So that you are thoroughly familiar with the affairs of the company?

Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. And you had been a stock broker for twenty or thirty years prior to your coming to the Panama Railway Company! Mr. DRAKE. Yes, sir. I left Wall street to come there.

Senator TALIAFERRO. So that you were thoroughly familiar with the stock market?

Mr. DRAKE. Oh, entirely, sir.

Senator TALIAFERRO. And if any of this stock had been bringing a higher price than that, you would in all probability have known about it?

Mr. DRAKE. Oh, yes, sir. The stock of the Panama Railroad Company was stricken from the list of the Stock Exchange a good many years ago under its policy. When the bulk of the stock of a company passes into the ownership of one interest, and leaves only a minority in the hands of the public, they suspend official dealings in that stock to prevent people being caught in large transactions that they could not fulfill without there being available stock to make deliveries of. The stock of the Panama Railroad was stricken from the official list of the exchange a great many years ago, and what I know of the stock is in the outside market.

Senator TALIAFERRO. So that your knowledge of it may be termed expert?

Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. Now, Mr. Drake, when you conceived and put into operation this plan of contracting with the Cramps to repair these ships and to create a permanent interest-bearing obligation against this railway company, what were the surplus earnings of the company! What was the amount standing to the credit of surplus account? Senator MORGAN. Do you mean in money or in betterments? Senator TALIAFERRO. I mean in surplus-whatever the surplus may represent.

Senator MORGAN. Yes.

Senator TALIAFERRO. The net surplus.

(At the request of the witness, the pending question was read aloud to him by the stenographer.)

Mr. DRAKE. On December 31, immediately after the date of the contract-the contract was dated November 30-the balance of assets over liabilities on December 31, 1903, is shown by the annual report to be $4,191,929.91.

Senator TALIAFERRO. And what was the amount of cash in the banks and on hand?

Mr. DRAKE. On what date shall I give you that?

Senator TALIAFERRO. That date.

Mr. DRAKE. December 31?

Senator TALIAFERRO. Yes.

Mr. DRAKE. The amount of cash on hand December 24, 1903-that is the last meeting of the board of which I have the report-was $719,039.96.

Senator TALIAFERRO. So that with over four millions of net earnings standing to the credit of your surplus account and with over $700,000 cash in hand you recommended the creation of this permanent interest-bearing obligation against this company rather than paying the Cramps in cash?

Mr. DRAKE. Yes, sir.

Senator TALIAFERRO. Those are the facts?