I was charged with the duty upon that subject under the following letter of the Secretary of War, dated January 16, 1905 [reading]:

WAR DEPARTMENT, Washington, January 16, 1905.

MY DEAR MR. CROMWELL: We have secured from the New Panama Canal Company 68,887 shares of the capital stock of the Panama Railroad Company, and since that time have purchased 100 shares additional, leaving a balance of 1,013 shares.

The President is desirous of obtaining the remaining shares of stock for convenience in the administration of the railroad as an instrument in the building of the canal. As you negotiated the sale of the property of the New Panama Canal Company to the Government and have been general counsel for the Panama Railroad Company, you will doubtless have greater facility in reaching the minority stockholders than anyone else who could assist us in the matter.

I therefore authorize you to buy all the shares of stock of the Panama Railroad Company outstanding at a price of par and 5 per cent in lieu of dividend, agreeing, on behalf of the President and the Government of the United States, to make you whole in all the reasonable expenses which may be incurred in the negotiation and purchase of these shares.

It is my purpose to invite Congress to pass an act authorizing the Attorney-General to begin a proceeding to condemn the outstanding shares in a Federal court in the State of New York, because the shares have their legal situs within that jurisdiction, but of course if we are able to obtain the shares by negotiation it will save all parties in interest expense and annoyance. I add this that those who now hold the shares may understand the attitude of the Government with respect WM. H. TAFT, Secretary of War.

to them.

Very respectfully, yours,

WM. NELSON CROMWELL, Esq.,

49 Wall Street, New York City.

Senator MORGAN. Turn back in that letter and repeat that remark "as you negotiated," etc.

What was that?

Mr. CROMWELL (reading): "As you negotiated the sale of the property of the New Panama Canal Company to the Government and have been general counsel".

Senator MORGAN. Is that a fact; did you do that?

Mr. CROMWELL. I assisted in the negotiation.
Senator MORGAN. Did you do it by yourself?

Mr. CROMWELL. Yes, sir.

Senator MORGAN. In what capacity?

Mr. CROMWELL. As general counsel of the Panama Canal Co
Senator MORGAN. That was the sale, now, of the pop

Panama Canal Company, of every kind and charact

States that you negotiated?

Mr. CROMWELL. It was the sale as the offer describes; a sale of the totality of the proper Senator MORGAN. The totality?

Mr. CROMWELL. Yes, sir.

offer of the ran

C. 1902

Sir LORA But that is not the one unde which we took th

propert

MONTELL. It was in pursuance of that that we took the per

Serator MORGAN. How in pursuance of it'

Mr. CROMWELL. In consummation of it.
Senator MORGAN. In consummation?

ited.

e way

pref

nce or

| any stion

ions

Mr. CROMWELL. Yes.

Senator MORGAN. Then that offer of 1902 and the later it

lom

parts of the same transaction, and the one was in con

other!

Senator MORGAN. We will test that privilege somewhere or other that will have some authority to it.

Mr. CROMWELL. I hope so, Senator. Then you will learn more law than you know now.

Senator MORGAN. I want to know, Mr. Cromwell, and I will ask you the question again. Did you participate in that negotiation of the proposition, the offer, and the contract, which I believe was not finally closed at that time, between the New Panama Canal Company and the United States?

Mr. CROMWELL. I respectfully decline to enter into a discussion-
Senator MORGAN. You already stated that you did it.

Mr. CROMWELL. I decline to enter into a discussion of it.

Senator MORGAN. I am not discussing anything with you; I am asking you questions.

Mr. CROMWELL. I refuse to answer, sir.

Senator MoRGAN. You refuse to answer?

Mr. CROMWELL. Yes, sir.

Senator MORGAN. Very good. Whatever you did-you state that you did something-did you do that as the employed counsel of the Panama Canal Company?

Mr. CROMWELL. I have already answered that question many times. Senator MORGAN. Will you please answer it again.

Mr. CROMWELL. I do, by refusing.

Senator MORGAN. Were you acting in any sense in your own right? Mr. CROMWELL. I again decline to answer.

Senator MORGAN. You refuse to state whether you had any interest in the transaction personally?

Mr. CROMWELL. I refuse to discuss it any further than I have. Senator MORGAN. You are not discussing it. I am asking you a question, and I want an answer.

Mr. CROMWELL. I make the same answer.

Senator MORGAN. What is the same answer?

Mr. CROMWELL. That I refuse to reply.

Senator MORGAN. At that time you were a stockholder in the Panama Railroad?

Mr. CROMWELL. I was; to the extent of 25 or 30 shares.

Senator MORGAN. And that contract or offer transferred your inter est, along with the interest of all the other stockholders?

Mr. CROMWELL. No; it did not.

Senator MORGAN (continuing). To the United States?
Mr. CROMWELL. No: it did not.

Senator MORGAN. Were your interests still remaining in the old Panama Canal Campany?

Mr. CROMWELL. The Panama Railroad Company, you mean ! Senator MORGAN. No; I mean the old Panama Canal Company. Mr. CROMWELL. I had no interest in the old Panama Canal Company.

Senator MORGAN. You had none at all?

Mr. CROMWELL. None, sir.

Senator MORGAN. They owned a piece of property, and the majority of the stock, in which you had stock, called the Panama Railroad Company ?

Mr. CROMWELL. The canal company owned 68,534 shares of the Panama Railroad Company, and I owned 25 or 30, as I have said so many, many, many times.

Senator MORGAN. That is a statement of a fact. Therefore, did you not have a personal interest in the transference of the control of that railroad from the French company to the United States?

Mr. CROMWELL. No, sir. My shares remained absolutely unaffected by it.

Senator MORGAN. Why do you say that?

Mr. CROMWELL. Because it is a fact.

Senator MORGAN. Had you no preference in the matter of transferring the ownership from the Old Panama Canal Company to the United States?

Mr. CROMWELL. My preferences are of no consequence, Senator. Senator MORGAN. We will ask whether you had them or not.

Mr. CROMWELL. I do not testify to preferences. I am testifying to facts.

Senator MORGAN. Well, I am not discussing this question with you. I am asking you questions.

Mr. CROMWELL. I am answering questions.

Senator MORGAN. And they will be serious answers, too, that you are making. I want you to understand that.

Mr. CROMWELL. I appreciate the seriousness of them.
Senator MORGAN. You refuse to answer that question?

Mr. CROMWELL. I do not refuse; I say that I have already stated.
Senator MORGAN. What have you stated?

Mr. CROMWELL. That my preferences make no difference one way or the other.

Senator MORGAN: Suppose I think they do? Did you have a preference?

Mr. CROMWELL. I do not recollect whether I had any preference or not.

Senator MORGAN. You really do not recall whether you had any preference or not? There is nobody who can answer that question but you.

Mr. CROMWELL. Well, I should think, Senator, that my inclinations were in favor of the sale to the United States

Senator MORGAN. I should think so myself.

Mr. CROMWELL. Although I had very grave doubts of the wisdom of the canal company disposing of its property.

Senator MORGAN. So it was a question debated, but your preference was in favor of disposing of it to the United States?

Mr. CROMWELL. Yes, sir; I should think so, upon the whole. Senator MORGAN. Was that for the protection of your personal interest or just for the general glory of the situation?

Mr. CROMWELL. The personal interests you must see, Senator, were absolutely insignificant.

Senator MORGAN. Well, I know. Matters of insignificance are still legal matters, oftentimes. Did your preference have any reference at all to what should become of you as a stockholder of these 24 or 34 shares or whatever you had?

Mr. CROMWELL. Certainly not.

Senator MORGAN. If that had been all the property you had in the world, it would have involved your entire estate, would it not? Mr. CROMWELL. Oh, well, Senator-

Senator MORGAN. But, being a rich man, you could afford to neglect the situation. Was that it?

Mr. CROMWELL. I do not suppose you expect a serious answer. Senator MORGAN. I really think I am very much in earnest, sir. I want to get at the fact whether your preference was based just upon some idea of the magnitude of the situation and your controlling it, or whether it was based upon your interest in that stock.

Mr. CROMWELL. The interest in the stock had not the least influence upon my judgment or preference.

Senator MORGAN. You stood above that?

Mr. CROMWELL. Certainly.

Senator MORGAN. Now you may go ahead with your statement. Mr. CROMWELL. Pursuing, then, the topic under consideration, the purchase of the minority holdings: After the letter of January 16, 1905, of the Secretary of War, I prepared and sent to all the minority stockholders a circular letter, of which the following is a copy:

NEW YORK, January 17, 1905.

To the stockholders of the Panama Railroad Company:

In connection with the consummation of the transfer by the New Panama Canal Company to the United States, which included about 98 per cent of the capital stock of the Panama Railroad Company, the President of the United States and the Secretary of War have authorized me to afford the outstanding minority interest an opportunity to realize upon their holdings.

The Isthmian Canal Commission, in their official reports to the President, valued the capital stock at $7,000,000, its par value (which comprehended allowance for all bonded indebtedness and other obligations having priority in liquidation).

Accordingly, you are hereby offered until the 23d day of February, 1905, the privilege of selling and transferring to the United States of America your holdings of the capital stock of the Panama Railroad Company at the par value thereof, payable in United States gold coin, upon compliance with the following conditions:

(a) Any dividend, up to 5 per cent, in the meantime declared by the company, shall belong to the selling stockholder.

(b) The shares to be duly assigned, with seal affixed, by the registered stockholder to "William H. Taft, Secretary of War of the United States" (either by execution of the form of assignment engraved upon the back of the certificates therefor or by similar separate stock transfer forms).

The assignment by the stockholder to be witnessed by two responsible persons, with their addresses and occupations added (not necessarily a notary or other official).

(c) In the cases of estates, trusts, guardianships, bankruptcies, or other fiduciary relations satisfactory documentary and official evidence to be furnished of the title of the signatory parties and of their power to transfer.

(d) The certificates for shares so assigned, to be delivered to the Bankers' Trust Company, No. 7 Wall street, New York City, United States of America.

(e) Payment will be made by said Trust Company, as my agent, upon such assignment, execution, and delivery.