“I never had the least intimation of objecting to the dividend until some time after it was declared. Governor Stanford informed me that you had telegraphed him, advising relative to this October dividend. We discussed it some time afterward in the Board meeting and found the whole matter of dividend had been written up in the books, and had gone so far before it had been brought before the Board that it was considered best to let the matter stand as it was.... I did not give the matter any attention outside of the Board meeting, for I felt it was a matter that Governor Stanford was personally attending to.
“I do not, however, see the matter in just the light you do, and think so few will know of it that it cannot hurt us in Washington, for if you who are one of the largest stockholders, have not found it out, I do not see much show for outsiders. That there were ample surplus earnings to declare it there is no doubt. So it was a question of policy.... I would think in a business way the Government would be glad to see us doing well and prosperous, and evincing ability to pay dividends and all of our debts.” (Colton case, pp. 7533-34, Colton to Huntington, November 24, 1877.)
[255] Colton case, pp. 7608-14, Colton to Huntington, January 31, 1878.
[256] In 1885 the Central Pacific directors authorized the issue of $10,000,000 in bonds to pay off the floating debt. (United States Pacific Railway Commission, p. 3019, testimony C. F. Crocker.) There is some reason to suspect that Stanford was individually embarrassed in 1878, as a result of the financial stringency in California. Huntington telegraphed Colton in September of that year to let him know Stanford’s financial condition as near as he could ascertain it, and proposed to have the Western Development Company assume Stanford’s indebtedness, taking Southern Pacific bonds from Stanford in exchange, at 65. Colton replied that the Western Development Company would have to take about $3,000,000 in Southern Pacific bonds under such an arrangement to cover Stanford’s obligations. The French bank in San Francisco had just closed its doors, and he, Colton, was anxious about Stanford’s collaterals. He thought that Stanford had $800,000 of United States bonds in that institution. Michael Reese’s executors were calling for money. It does not appear what conclusion was finally reached.
[257] Colton case, pp. 704-705.
[258] Colton case, p. 112, deposition J. D. Probst.
[259] Ibid., pp. 146-47, deposition A. L. Thompson.
[260] Laws of California, 1875-76, Ch. 515. For a readable account of the history of the California Railroad Commission up to 1895, see Moffet, “The Railroad Commission of California—A Study in Irresponsible Government,” (Annals of the American Academy of Political and Social Science, March, 1895).
[261] Report of the Board of Commissioners of Transportation to the Legislature of the State of California, December, 1877.
[262] Laws of California, 1877-78, Ch. 641.