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ISTHMIAN CANAL.

COMMITTEE ON INTEROCEANIC CANALS,

UNITED STATES SENATE,

Washington, D. C., Tuesday, April 24, 1906. The committee met at 10.30 o'clock a. m.

Present: Senators Millard (chairman), Kittredge, Dryden, Hopkins, Morgan, Taliaferro, and Simmons.

TESTIMONY OF EDWARD A. DRAKE, ESQ.

(Mr. Drake had been duly sworn at prior hearings of this committee and was informed that the oath then administered was still binding.)

The CHAIRMAN. Mr. Drake, will you please state your name, your address, and your occupation?

Mr. DRAKE. My name is Edward A. Drake; my address is 322 West One hundred and first street, New York.

Senator MORGAN. Mr. Chairman, I would like to state at this point that this committee examined several of the witnesses that have been examined at this time, and many others, on this same subject, two years ago or three years ago, whenever it was; and all of those examinations bearing upon the same topic ought to be open to be used in the Senate without the necessity of their being repeated here.

The CHAIRMAN. Yes.

Senator MORGAN. It would save a great deal of time and trouble if we could consider that all of these examinations that apply to this case and any testimony that has been taken before this committee for the use of the Senate may be used in the same way as if they had been taken at the present hearings.

(The committee ordered that Senator Morgan's suggestion be adopted.)

Senator MORGAN. Mr. Drake, you spoke, before the committee came to order, of some duties you had to perform to-morrow. Are they in connection with railroad affairs?

Mr. DRAKE. Entirely so, sir.
Senator MORGAN. What will you have to do to-morrow?

Mr. DRAKE. On the 24th and 25th, in addition to the ordinary business of the company, of which I am the operating officer, I have to make an award under the invitations for bids and proposals submitted for the supply of coal for the railroad company for the ensuing twelve months--it is approximately 125,000 tons--and the transportation of the 125,000 tons to the Isthmus. Then I have to consider and pass on the placing of an offer that we have for the insurance of the fleet-the five vessels of the Panama Railroad Company-an offer involving insurance of two millions and a half of dollars. Both of those matters,

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of course, have to be done subject to the approval of the president of the company and have to be prepared to be submitted to him for his approval. Senator MORGAN. Who is the president of the company?

Mr. DRAKE. Mr. T. P. Shonts, the chairman of the Isthmian Canal Commission.

Senator MORGAN. Has he been elected president?
Mr. DRAKE. Yes, sir.
Senator MORGAN. By whom?
Mr. DRAKE. By the board of directors.

Senator MORGAN. The board of directors elected Mr. Shonts president?

Mr. DRAKE. Yes, sir:
Senator MORGAN. And all of these transactions of yours, to-mor-
Mr. DRAKE. And the next day, sir.

Senator MORGAN (continuing). And the next day will be subject to approval by Mr. Shonts as president of the company?

Mr. DRAKE. Yes, sir. I should have stated, perhaps, what my position is in the company, sir; it would make it clearer. I am the secretary and treasurer of the company and assistant to the president; and in the last capacity, under his authority, I am exercising all the functions of the operating officer. I am the officer in charge.

Senator MORGAN. Is there any such office provided for by the by-laws as assistant to the president?

Mr. DRAKE. The board of directors have the power, under the by-laws, to appoint such additional officers as may be necessary,

Senator Morgan. Have you been appointed by the board?

Mr. DRAKE. My appointment was reported to the board and confirmed.

Senator MORGAN. By resolution of the board?

Mr. DRAKE. That I do not recall, sir. The president reported to the board that he had appointed me assistant to the president.

Senator MORGAN. There was no resolution of the board on the subject?

Mr. DRAKE. No, sir; that is, not of record. He reported it to the board.

Senator Morgan. I am speaking now of matters of record. Nothing of that kind is worth anything unless it is of record.

Mr. DRAKE. I have been exercising all the functions of assistant to the president for a number of years.

Senator MORGAN. As assistant to the president you are in charge of the business operations of the railroad in New York?

Mr. DRAKE. Yes, sir.
Senator MORGAN. And elsewhere?

Mr. DRAKE. No, sir; the vice-president and general manager, Mr. Stevens, who was elected at the last board meeting, and who was appointed general manager by the board of directors and elected a director and vice-president at the annual meeting, is in charge of the operation of the railroad on the Isthmus. I have no authority over him at all, sir.

Senator MORGAN. Is there any resolution to that effecti
Mr. DRAKE. Yes, sir.
Senator MORGAN. You have it here?

you mean?

Mr. DRAKE. Yes, sir.
Senator Morgan. I wish you would let me see it.

Mr. DRAKE (after examining minutes). No, sir; the report of the action of the board by which Mr. Stevens was elected to succeed Mr. Wallace is in the draft of the minutes of the annual meeting that was held in April last. That has not yet been approved. Those minutes have not been submitted for approval and are not entered in the book. The fact is that we got into trouble once before by sending out an unapproved draft of minutes, and now we do not send forward and do not emit any draft of minutes until they have been approved by a subsequent meeting and are entered in the book.

Senator MORGAN. Approved by a meeting of the board of directors,

Mr. DRAKE. Approved by a subsequent meeting of the board of directors.

Senator MORGAN. So that this order that you speak of, I suppose, was drawn up in writing?

Mr. DRAKE. Oh, yes, sir; it was drawn up in writing and signed.

Senator MORGAN. But Mr. Stevens's appointment has not yet been confirmed by the board of directors?

Mr. DRAKE. By a later action of the board; he was appointed by the board. The action was taken at that meeting. The record of the action has not yet been approved by a subsequent meeting, so that it is not entered in the book yet.

Senator MORGAN. He is in charge of the operations of the railroad on the Isthmus?

Mr. DRAKE. On the Isthmus; yes, sir.

Senator MORGAN. That includes everything relating to seaboard transportation in that vicinity-in the bays, etc.?

Mr. DRAKE. Absolutely. He is in charge of the property of the company-in charge of its operation on the Isthmus; he holds a power of attorney from the railroad company here, issued in regular form, as required by our contract of concession, vis-a-vis of the Republic of Panama, and authorized in every way to represent and operate the railroad company in its capacity as a separate corporation and vis-a-vis of the Isthmian Canal Commission as well. He conducts all the business of the railway on the Isthmus.

Senator MORGAN. Does that include the regulation of the steamers that belong to the railroad company?

Mr. DRAKE. The steamers are operated, Senator, under the charterunder the certificate of incorporation-which allows the railroad to operate such steamers as may be necessary and convenient in connection with the road. The steamers are of American registry, are domiciled in the United States, and are operated from this end. He has charge of the steamers when they are at that end. The captains, with their letters of instruction, sail from here. Their sailing letters direct them to report to the vice-president and general manager of the road at Colon, by whom they will be dispatched on their return voyage.

Senator MORGAN. Yes; so he has no control of it except there!
Mr. DRAKE. No, sir.
Senator MORGAN. He receives whatever is sent out?
Mr. DRAKE. That is right, sir.

Senator Morgan. And then he dispatches the vessels on their return voyage?

Mr. DRAKE. Loaded; he handles them there in the harbor.
Senator MORGAN. Where ars these steamers controlled?
Mr. DRAKE. They are controlled from here, sir.
Senator MORGAN. From New York, you mean?
Mr. DRAKE. Yes, sir.
Senator MORGAN. Do you mean Washington or New York?

Mr. DRAKE. New York. They are controlled by the board of directors.

I act for the board of directors; they are operated by me as the operating officer.

Senator MORGAN. Is there anybody in control of you in that matter? Mr. DRAKE. Absolutely, sir; I am subordinate to the president.

Senator MORGAN. You are supposed to take your orders from the president?

Mr. DRAKE. Yes, sir.

Senator Morgan. But in fact you do what you think is proper, and then you report your action to the president for his confirmation or his disapproval ?

Mr. DRAKE. Yes, sir. That ought to be a little differently stated, if you please. I have been in charge of the operation of the line since it was inaugurated, in 1893, and I am operating the line now; and whatever I do that meets with his disapproval I learn it very quickly. He is constantly informed of what is going on.

Senator MORGAN. I have no doubt that they are very fortunate in getting you.

Mr. DRAKE. Thank you, Senator; that is very kind.

Senator Morgan. But I simply wanted to get at the situation. Now, who prescribes sailing days and rates of freight for all steamers?

Mr. DRAKE. The traffic manager, under my approval.
Senator MORGAN. Who is the traffic manager?
Mr. DRAKE. Mr. R. L. Walker.
Senator MORGAN. Is he in New York?

Mr. DRAKE. Yes, sir. He regulates the traffic of the railroad; he establishes the rates; that is, he performs all of the functions of a traffic manager, always subject to revision. We have traflic arrangements, working arrangements, with nine or ten lines--nine lines on the Atlantic side and three lines on the Pacific side— besides our own line. Recently (unfortunately, from my standpoint) two of the wealthiest foreign lines have been admitted to competition with the company's own line between New York and Colon. That has been in the development of the “open door” policy; and they are sharing the business with us now that used to belong to us absolutely.

I have always felt that no court in the land, except for reasons of policy, would compel a line to admit outside lines to competition with its own branch. But under the policy of the United States of the "opening of the door” on both sides of the Isthmus, which is now tb policy of the railroad company, these two lines have been admitted, and they are carrying a large portion of the high-grade passenger business, because our ships are so often so nearly filled with employees of the canal.

Senator MORGAN. To what two lines do you refer?

Mr. DRAKE. The Atlas Branch of the Hamburg-American Line and the Royal Mail Steam Packet Company.

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