Mr. SHONTS. I have been engaged both in the construction and oper ation of railroads.

The CHAIRMAN. Well, you could not have been engaged in the con struction of railroads for twenty-five years?

Mr. SHONTS. Well, no; I have not been engaged in the construction of railroads for twenty-five years, but I meant to cover the point by saying that I have both built roads during the twenty-five years and operated roads during that period.

Senator HOPKINS. To what extent? Go on, in your own way, and state to what extent.

Mr. SHONTS. My first construction work was in southern Iowa building part of what is known as the Keokuk and Western, owned by the Burlington system; also with the Albion and Centerville, which is still independent property; afterwards, in the construction of portions of what is now part of the Iowa Central; later, much of the Indiana, Illinois and Iowa Railroad, almost all of which was built under my personal supervision. I operated that railroad for a number of years and then sold it out. Then I purchased a large interest in the Clover Leaf, which I still have. I found that road in very poor physical condition, and began rebuilding it and reequipping it and putting it into shape for economic operation. That work is still going on.

The CHAIRMAN. That work is still going on now?

Mr. SHONTS. Yes, sir.

The CHAIRMAN. You have been connected with the Clover Leaf up to the time that you became chairman of the Commission?

Mr. SHONTS. Yes, sir; I was actively engaged in railroad work when I came with the Commission.

Having to do with your next inquiry, as to whether that interferes with my present duties, I will say that I turned over the active management of those properties when I came with the Commission to the vicepresident, who had formerly been traffic manager of the railroad, and he has been in entire charge of the operations since. I have only been on the road four days, all told, since April 1. I have been consulted occasionally about matters of general policy, but of late months I have given no attention to it except to look over the monthly statements of earnings and expenses as they were sent to me once a month.

The CHAIRMAN. But you are still president of the road?

Mr. SHONTS. Yes, sir.

Mr. HOPKINS. But there is nothing in that that interferes in the slightest degree with your present duties?

Mr. SHONTS. No, sir; all the attention I give it is purely nominal, to-day.

Senator GORMAN. Why retain it, then?

Mr. SHONTS. Because of my large personal interest in it.
The CHAIRMAN. You are largely interested in the property?
Mr. SHONTS. Yes, sir.

Senator GORMAN. How does your retention of the presidency of the road promote your interest in it, if you do not give it any attention? Mr. SHONTS. I will explain that to you. There are times when you might protect your interest by being president, while if you were not president you could not protect yourself.

Senator DRYDEN. You have the right officially to call for certain reports and papers, which as a mere stockholder you would not have? Mr. SHONTS. Yes; and no trade could be made, or no disposition of

the property, or anything of that kind, where my interests could suffer; or that could not be done so easily while I am president as it might be if I were not president.

Senator HOPKINS. There is a moral influence upon your subordinates that would not exist if you were entirely separated from the road?

Mr. SHONTS. Yes. Then, in addition to the purely selfish motive to which I referred in response to Senator Gorman's question, other people became associated with me at the time that I did because I became identified with the property. The effect of my name on the personnel of the organization, as well as on the market value of the securities, was such that I felt that I ought not, in the interest of those who put their money in at the time I went in, to give up the nominal presidency.

The CHAIRMAN. Mr. Shonts, you, of course, know enough about railroad business and about your present position to know whether your connection with the Clover Leaf road in any way interferes with your business here in connection with the canal?

Mr. SHONTS. Yes. I can say absolutely that it does not.

The CHAIRMAN. That it does not?

Mr. SHONTS. Yes, sir; that it does not.

Senator SIMMONS. You say that you look over the pay rolls every month?

Mr. SHONTS. No, sir; not the pay rolls, but the results of the operations of the road.

Senator SIMMONS. There is a general statement sent to you each month, embodying the operations of the road for that month?

Mr. SHONTS. A statement of the earnings and expenses is sent to me, showing the results of the operation each month. That is the same statement as all other roads have.

Senator SIMMONS. What is that for?

Mr. SHONTS. Every road has that statement of operating expenses and earnings made up each month, together with the statistics showing the results accomplished.

Senator SIMMONS. How much of your time does it take to attend to that?

Mr. SHONTS. About an hour.

Senator KITTREDGE. Where are the headquarters of that road?
Mr. SHONTS. At Toledo.

Senator KITTREDGE. How many miles of road has it?

Mr. SHONTS. Four hundred and fifty-one miles of Clover Leaf proper and 70 miles of the Detroit & Toledo Shore Line.

Senator KITTREDGE. That represents the main-track mileage?

Mr. SHONTS. Yes, sir; the main-track mileage.

Senator KITTREDGE. How often do you go to Toledo?

Mr. SHONTS. I have been four days on the road since the 1st of April, all told.

Senator KITTREDGE. A year ago?

Mr. SHONTS. Yes, sir; since the 1st of April.
Senator KITTREDGE. For what purpose?

Mr. SHONTS. I went over the property.

Senator KITTREDGE. When was that?

Mr. SHONTS. I spent a portion of three days in September and one day since, in November.

Senator KITTREDGE. Do you draw any compensation for your service as president?

Mr. SHONTS. Yes.

Senator KITTREDGE. Do you object to stating what it is?

Mr. SHONTS. No; if it is necessary. I will say this, that when I made the change, and put the active management in charge of the vicepresident, I said to him: "I will swap salaries with you. So I gave

him my salary as president, and I took his salary as traffic manager, which was $12,000 a year.

Senator KITTREDGE. And what service do you perform for that compensation?

Mr. SHONTS. Just as I tell you. The only service I perform is when they consult me in regard to matters of broad general policy.

Senator KITTREDGE. The officers of the company occasionally visit Washington?

Mr. SHONTS. Mr. Ross has been in Washington twice, I think, and has met me in New York once or twice.

The CHAIRMAN. Mr. Shonts, will you proceed, now, and state to the committee your present position, and what you are doing with the Commission, since you have taken charge, please.

Mr. SHONTS. Of this canal work?

The CHAIRMAN. Yes.

Mr. SHONTS. I was appointed chairman of the Commission April 3, 1905. I immediately began the reorganization of the forces. We created in Washington what we called the "office of administration," in order to have a headquarters where all reports from each department would come and where the general results could be given out. The office of administration consists to-day of an assistant chief, who has charge of the general correspondence, of the appointment division, of the records, and then we have the office of the general auditor.

The CHAIRMAN. What is the name of that particular officer you spoke of?

Mr. SHONTS. The assistant chief is Mr. W. L. Pepperman.

The CHAIRMAN. Please give the name of each one of the different heads as you proceed, Mr. Shonts.

Mr. SHONTS. The general auditor, Mr. E. S. Benson, has his office here. Mr. Benson has charge of the accounts of every department of the Commission and also of the Panama Railroad. Mr. Benson has in his office here an assistant, Mr. Lewis. He has a deputy auditor of the Panama Railroad in New York, a deputy auditor of the Panama Railroad on the Isthmus, and a deputy auditor of the Isthmian Canal Commission on the Isthmus.

Next is the general purchasing office, with Mr. David W. Ross as general purchasing officer, with headquarters here. Mr. Ross had an assistant purchasing officer here, who has been relieved and is now about to depart for the Philippines. I refer to Major Gallagher, an army officer, who was, when I came here, general purchasing agent for the Commission. I felt that, while he was an earnest and honest and ambitious man, he had not had the necessary training to fit him for the particular duties of this office. I told him frankly that I expected to make a change, but he worked on just as loyally as if it had been the intention to retain him; and he leaves us now because of orders from the War Department. His place will not be filled.

Mr. Ross has a deputy purchasing officer in New York by the name of A. Anderson, who buys for both the railroad and the Commission, under Mr. Ross's instructions. He has a deputy at New Orleans, or an assistant purchasing agent, Mr. S. E. Redfern, and one at Tacoma, Mr. F. H. Haradon. We have also been using an army officer at San Francisco, Mr. Carroll A. De Vol, depot quartermaster at San Francisco. While the title of these gentlemen is "assistant purchasing agent," their duties are almost exclusively those of forwarding agents to look after the forwarding of the supplies through their ports.

Then, we have a disbursing officer here, Mr. J. G. Jester, who disburses the funds paid in the United States.

The CHAIRMAN. He is located here?

Mr. SHONTS. Yes, sir; that completes the office of administration. The Commission has its engineering committee here, consisting of Generals Ernst and Hains, Major Harrod, and Admiral Endicott, four members of the Commission who are all engineers. In our organization we appointed them as an engineering committee.

When I came with the Commission the duties had been divided up, giving me as chairman direct charge of the finances, of the accounting, and of the purchasing; giving Governor Magoon direct charge of the government and the sanitation on the Isthmus; giving Chief Engineer Wallace charge of construction and engineering. I had also general charge of all of the departments.

After Mr. Wallace resigned, or about the time of his resignation, the President said to me, "I will expect you to appoint your own engineer and organize on your own lines." I therefore hired Mr. Stevens as chief engineer, and since that time the chief engineer reports directly to me.

Senator GORMAN. You selected Mr. Stevens, did I understand you to say?

Mr. SHONTS. Yes, sir; I selected Mr. Stevens myself, and he has been since that time chief engineer in charge of the engineering and construction work on the Isthmus. He has not been made a member

of the Commission as yet.

Governor Magoon, on the Isthmus, has direct charge of government and sanitation. He has Colonel Gorgas who, under him, is the active man in charge of the sanitation or sanitary work.

Formerly the material and supplies department, as it was called, which we now call the material and supplies division, was under a gentleman by the name of Tobey, who reported at the request of Chief Engineer Wallace to Chief Engineer Wallace, in our division of the duties, when I first came with the Commission. Mr. Tobey was a naval officer, and another one of those splendid, hard-working, honest, well-meaning men, but he had not been trained for the very arduous duties connected with the receipt and distribution of the immense amount of materials arriving on the Isthmus. That is the last department that we have been reorganizing.

Senator SIMMONS. Is he located on the Isthmus?

Mr. SHONTS. He is located on the Isthmus.

When Mr. Stevens came with us I made a change (and Mr. Stevens was thoroughly in harmony with my views on the subject), only for the purpose of correct organization, and put the head of the material and

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supplies division under the general purchasing officer, so that the supplies from the time the first requisition was made up through what we would call in railroad parlance the general storekeeper, or through the head of this material and supplies division to the purchasing officer, were purchased and sent back and distributed so that all passed through one channel. It was for the purpose of organization only that we put the storekeeper or the head of the material and supplies department under the general purchasing officer, where it is now.

Mr. Tobey was recalled by the Secretary of the Navy. We have secured the services of Mr. Tubby to take his place. Mr. Tubby was general storekeeper of the Great Northern Railroad, and I am told that he was the only man in that position on a great railroad in the United States that reported direct to the president. He was in line for the purchasing agency of the Great Northern Railroad and was considered by many men as in a class by himself in storekeeping work. People laughed at us when we undertook to get him: but we finally secured him and secured him for a salary of $9,000 a year. Mr. Tubby has already demonstrated the correctness of our theory that a man should be specially trained for any special work if he is going to make a success of it. His savings in every weekly report since that time have been a great deal more than his yearly salary, I think, in the reduction of forces and expenses, and it is going on all the time. Yet the accumulated work on hand that he inherited has been almost cleared up, so that his last letter says that in two or three weeks he will have the back work disposed of.

The disbursing officer on the Isthmus, Mr. E. J. Williams, we secured from the Chicago and Northwestern Railroad. The vicepresident of the Northwestern road, under whom Mr. Williams worked, thought so much of him that he gave him a year's leave of absence in order to accept this position with us. He went down to take the place of another naval officer, who was recalled at the same time Mr. Tobey was--Mr. Shafer.

Senator SIMMONS. Does that mean that at the end of the year he is going to quit your employment and go back to this railroad?

Mr. SHONTS. No, sir; I meant that as a testimonial of the high regard his officers on the Northwestern had for him.

Senator SIMMONS. They gave him a year's salary?

Mr. SHONTS. No, sir; but they gave him a year's leave of absence, so that if he did not meet our requirements, or anything went wrong that we did not keep him, he would have a place to go back to at the end of the year. Of course he would not have left his position and come with us if he had not intended to stay with us, provided he suited us. I only mentioned that, as I say, in order to show the high regard in which the Northwestern company held him.

The CHAIRMAN. Now, Mr. Shonts, in a general way, will you give to the committee your understanding of the conditions, and your knowledge of the conditions down there at the present time, or from the time you took possession to the present time, as chairman.

Mr. SHONTS. It took me about two months and a half to get the organization here to a point that I thought I could leave it. I was ready to go down, and had my reservations made to go down on the steamer sailing June 20. We had threshed out not only the organization of our forces, as I have described it to you here, but we had