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Senator MORGAN. With whom?

Mr. DRAKE. Last year they bought coal for the Isthmus from the Pocahontas Coal Company and coal for its steamers in New York from the Berwyn-White Coal Company-two classes of coal, one for consumption on the Isthmus and the other for the consumption of the steamers.

Senator MORGAN. That coal was not bought under biddings?
Mr. DRAKE. Oh, yes, sir; always.
Senator MORGAN. I thought you said they had a standing contract?

Mr. DRAKE. The contract was entered into in the spring of each year for the ensuing twelve months. Now that that contract is about to expire or has expired, because we have used the maximum quantity, we have invited bids for the supply for the coming year, and those bids are to be opened to-morrow.

Senator MORGAN. And you have no standing contract for another

year?

Mr. DRAKE. Not now; but we are getting our supply, fortunately. The strike threatened to cause trouble about the coal; but I was able to arrange with the coal companies to continue furnishing us coal, and with the carrying company to continue carrying coal, under authority from Mr. Shonts, until we were able to make a new contract. That covers a period of a week or two weeks.

Senator MORGAN. Either that purchasing agent or yourself has the control of the supply of coal for Isthmian consumption through and through, have you not?

Mr. DRAKE. No, sir.

Senator MORGAN. Have the Isthmian Canal Commission resolved in any way or given any intimation or notice that they will buy coal for themselves from any body else except the railroad?

Mr. DRAKE. They did last year. The Commission invited bids for 50,000 tons of coal, to see whether they could do better than they had been doing with the railroad company and they accepted a bid of the Fairmont Coal Company. That contract gave them the right to use a minimum quantity of 10,000 tons or take the whole 50,000 tons. The cargoes were sent down at $3.70 per ton delivered down there, which was about 30 cents a ton cheaper than the cost of the coal we had been sending down.

After very exhaustive tests of the result of operating with that coal, the general manager advised that, if possible, the contract be canceled. It had meanwhile been transferred to the railroad company by the Commission, and by agreement with the Fairmont Company it was canceled. The conclusion, in a very exhaustive report from the general manager, Mr. Stevens, was that to be equal in value to the Pocahontas coal, that was costing $1.95, the Fairmont coal should have cost $3.48 instead of $3.70; so that the higher-priced coal was more effective, and it has continued to be used.

Senator Morgan. So that you gave up that contract and went back to the Pocahontas coal?

Mr. DRAKE. The Commission gave up the only coal contract it had and resumed the practice of buying coal from the railroad company.

Senator MORGAN. If the railroad was purchasing on its own account and for sale to private parties, as well as to the Isthmian Canal Commission, why would it give up that advantage?

Mr. Drake. There is no reason why it should, sir.

Senator MORGAN. Is it not a fact that the railroad company under your administration is absolutely under the control and direction of the Isthmian Canal Commission?

Mr. DRAKE. The Isthmian Canal Commission constitutes a majority of our board of directors.

Senator MORGAN. I am not asking you that. I just asked if what I have stated is not actually the fact?

Mr. DRAKE. Yes, sir.

Senator MORGAN. You are practically under the control of the Isthmian Canal Commission?

Mr. DRAKE. Absolutely.

Senator MORGAN. You would feel obliged to obey any order that they give you?

Nr. DRAKE. Why, of course.

Senator MORGAN. That seems to identify the two establishments pretty closely so far as you are concerned.

Mr. DRAKE. Of course, Senator, you will understand that it is an effect. The seven members of the Commission are members of our board, which consists of thirteen members

Senator MORGAN. I can see the effect, all right, but I can see the cause just as well, and I do not lose sight of the cause by looking at the effect.

Mr. DRAKE. If I received an order from the Isthmian Canal Commission to do anything in the railroad company I would not do it until I received it from Mr. Shonts as president.

Senator MORGAN. I only wish to say that I do not see any common sense or business sense, or any fairness in keeping up this phantasm, this imaginary corporation, to stand in the way and to do all the business that the Isthmian Canal Company should do for itself. That is my opinion about that situation, and that is what I am trying to prove. Senator TALIAFERRO. May I ask a question here, Senator? Senator MORGAN. Certainly.

Senator TALIAFERRO. Mr. Drake, I notice in the minutes of the board of directors' meeting of April 29, 1903, this authorization [reading]:

"General Counsel Cromwell presented the following resolution, which, upon his motion, was duly and unanimously adopted, namely:

Résolved, That the first and second vice-presidents of this company be, and they are hereby, appointed a special committee to inquire into all matters of unsettled account, claims, demands, or liabilities of any nature whatsoever, if any exist, upon the part of the Panama Railroad Company against the New Panama Canal Company, or upon the part of the said company against said railroad company, and to audit, adjust, state, and agree upon with the said canal company any and all such unsettled accounts, claims, demands, or liabilities, and agree with said company upon the method of payment or discharge of the same, if any exist, and to report to the board their action in the premises."

Mr. DRAKE. Yes, sir.
Senator TALIAFERRO. Do you recall that?
Mr. DRAKE. Yes, sir.
Senator MORGAN. What was the date of that, Senator?
Senator TALIAFERRO. April 9, 1903.
Senator MORGAN. A year before we got possession?
Senator TALIAFERRO. Yes. Has any report been made, Mr. Drake?

Mr. DRAKE. Yes, sir. The members of that committee were Mr. Whaley, the vice-president, in Paris, and myself, the second vice-president, in New York. The report was made and filed. Before that report was adopted it had been well established that there were no claims existing. It was with the purpose of absolutely establishing the fact by verification of accounts, by the rendition of accounts by and between the two companies covering all classes of items, and with the hope of establishing the fact that that had been done, that this committee was appointed. The committee acted and made a report which is on file, showing that all claims of every kind between the two companies had been absolutely settled and that no claim existed one against the other of any nature whatever. Senator TALIAFERRO. Where is that report?

Mr. DRAKE. It should be embodied in the minutes there. Is it not? Have you looked?

Senator TALIAFERRO. I have not examined them.

Mr. DRAKE. It should be embodied in the minutes, and I presume it is. If it is not, it is on file with all the reports.

Senator TALIAFERRO. Will you look over the minutes at your convenience and see if it is embodied in them, and if it is not, will

you see that the committee receives a copy of it?

Mr. DRAKE. Yes, sir.

(The committee thereupon took the usual noon recess until 2 o'clock p. m.)

AFTER RECESS.

TESTIMONY OF EDWARD A. DRAKE, ESQ.-Continued.

Senator Morgan. Mr. Drake, you have mentioned the terms upon which this coal was furnished by the railway company to the Isthmian Canal Commission--you mentioned the terms?

Mr. DRAKE. Yes, sir.
Senator Morgan. What were they?

Mr. DRAKE. It was sold at cost at Colon, plus a slight percentage for handling on the railroad-cost delivered at Colon to the railroad, plus 20 cents, I think it is, for cost of handling.

Senator MORGAN. By that you mean the charge for freight?

Mr. DRAKE. The cost of the coal plus the cost of the freight to Colon, and 20 cents.

Senator MORGAN. Twenty cents a ton?
Mr. DRAKE. Twenty cents a ton; yes, sir.
Senator MORGAN. That was to cover expenses?

Mr. DRAKE. To cover expenses of taking it from the ship, putting it on cars, and carrying it-that is, at Colon. Along the line of the road and at Panama, which is beyond Colon, the price is $6 a ton.

Senator MORGAN. The price was fixed at $6?
Mr. DRAKE. Six dollars along the line of road and at Panama.
Senator MORGAN. And at Panama; and what was it at Colon?

Mr. DRAKE. At Colon it is the cost delivered at Colon, plus about 20 cents. That is, if the coal cost $2.65 f. o. b. at Norfolk, and cost us $1.65 to carry down, there would be 5 cents for insurance and loss, and that would make the coal cost us $1.35 delivered. The coal would be sold to the Commission at $4.55 at Colon, and it would

for years.

pe sold to the Commission at Panama at $6 and at any point between Colon and Panama. That would be the difference to cover the cost of the loading on the car and the hauling to the point where it is delivered, the purpose being to have the coal delivered to the Commission as near cost as possible.

Senator MORGAN. As near what you paid the mines for it as possible? Mr. DRAKE. Yes, sir; and the expense of carrying it down there.

Senator MORGAN. I suppose you are familiar with all of these purchases of coal ?

Mr. DRAKE. Yes, sir; I have made them, or superintended them, Senator MORGAN. Are your contracts with the mines?

Mr. DRAKE. Not directly; our contracts are with the representatives of the miners, the agents. That would be indirectly with the mines.

Senator MORGAN. That is what I mean.

Mr. DRAKE. Yes, sir. Our contracts have been to deliver us any amount of coal we call for during twelve months between a minimum amount and a maximum amount aboard ships that we send there for it at a contract price.

Senator MORGAN. Between a minimum and a maximum?
Mr. DRAKE. Of quantity.
Senator MORGAN. Of quantity?

Mr. DRAKE. Yes, sir.. We need not take any more than the minimum if we want to. If we can do better during the year after we reach the minimum, we are at liberty to do so.

Senator Morgan. How many mining companies did you have contracts with?

Mr. DRAKE. One only, sir.
Senator MORGAN. What was that?
Mr. DRAKE. The Pocahontas Coal Company.

Senator MORGAN. Has that been so ever since the Commission went into possession of the railroad?

Mr. DRAKE. Yes, sir.

Senator Morgan. You have bought your supplies entirely from the Pocahontas company?

Mr. DRAKE. Yes, sir.
Senator MORGAN. Was that done under biddings!
Mr. DRAKE. Yes, sir.
Senator Morgan. Were there competitors in the biddings?
Mr. DRAKE. Always.

Senator MORGAN. How many years has the Pocahontas company had the control of this business?

Mr. DRAKE. We have bought Pocahontas coal almost exclusively for six or eight years, because it is established-we supply coal to the vessels of the United States Navy, we supply coal to the Isthmian Commission, we supply coal to steamship lines on the other side, and they all require a high-grade coal; and the Pocahontas coal is recognizedly the highest grade or the best quality, the most effective steam coal to be obtained in this country.

Senator MORGAN. Now, commencing from May, 1904, down to the present time, taking the annual arrangements, how much coal have you bought each year from the Pocahontas Company

Mr. DRAKE. I think we bought up to 50,000 tons in the year 1904–5, and we have bought 65,000 tons in the year 1905–6.

Senator MORGAN. Was that the entire supply that you made to the Isthmian Canal Commission?

Mr. DRAKE. That was the entire supply that we purchased for the railroad company, out of which the Isthmian Canal Commission was supplied.

Senator MORGAN. Did the steamers on the other side get some of that coal?

Mr. DRAKE. Yes, sir.
Senator MORGAN. And it was all covered in this 65,000 tons?

Mr. DRAKE. Yes, sir; so far. But the rapid increase in consumption has come within the last few months, because the canal operations have been more active.

Senator MORGAN. In the biddings that you are going to open tomorrow what amount of coal do you call for?

Mr. DRAKE. We call for up to 125,000 tons, because we expect that during the coming year we will require more than we have at any time heretofore.

Senator MORGAN. Has the Pocahontas company maintained regularity of prices with you?

Mr. DRAKE. Yes, sir; they have a uniform price at the time they make the contract.

Senator MORGAN. What is that?

Mr. DRAKE. The price last year was $2.60 from April to October and $2.65 from October to April.

Senator MORGAN. Delivered where?
Mr. DRAKE. At Norfolk; on board steamers at Norfolk.
Senator MORGAN. Norfolk, Va.?
Mr. DRAKE. Yes, sir.
Senator MORGAN. On board of whose steamers?

Mr. DRAKE. On board of the steamers that we send there, under our transportation contract, to carry to the Isthmus.

Senator MORGAN. You send your own steamers there?
Mr. DRAKE. Not our steamers; no, sir.
Senator MORGAN. You charter steamers?

Mr. DRAKE. No; we make a tonnage contract with a firm that have steamers, and they send their steamers there under that contract

Senator MORGAN. What firm is that?

Mr. DRAKE. For the last two or three years it has been with the Earn line--the Earn Steamship Line.

Senator MORGAN. Is that a line sailing under the American flag? Mr. DRAKE. No, sir. Senator MORGAN. It is a foreign line? Mr. DRAKE. It sails under a foreign flag, sir; different nationalities; whatever ships they have under charter.

Senator MORGAN. Do you charter these ships, or get the contracts for freights, under biddings?

Mr. DRAKE. Yes, sir.
Senator MORGAN. Annual biddings
Mr. DRAKE. Yes, sir.
Senator MORGAN. You let out a contract for a year?
Mr. DRAKE. Yes, sir.

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