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228 BETWEEN THE OCEAN AND THE LAKES
a new Erie Protective Committee in London. From $7,000,000, and that the salable value of property
its quarters he issued a letter June 30th, which was that could be made available to pay that debt was
sent to the London Directors of the Erie Railway not more than $3,000,000, all the remainder of the
Company, and to the foreign exchanges, declaring Company's property having been mortgaged to its
that the management of the Company had adopted full market value; that the promissory notes of the
and was then engaged in following the Gould and Company could not be negotiated for less than a dis-
Fisk method of issuing new stock which was to be count of from 30 to 40 per cent, per annum; that the
sent to Europe for sale. This caused great depres- Company had created a new mortgage in violation
sion in Erie stocks abroad, and hastened the decline of the charter; that the Atlantic and Great Western
of confidence in the management. To overcome Railroad, which the Directors had leased, was an inthis
assault, Frederick William Smith, Secretary of solvent concern, not producing enough net earnings
the London Directory, acting on instructions, caused to pay the amount of the annual interest required by
the arrest of one Wortner, an associate of McHenry, the existing mortgages upon its property, and the
on July 17th, and began proceedings against him terms of the lease were such as would involve the
before the Lord Mayor on charge of libel of the Com- Erie Railway Company in further financialcomplipany.
Wortner said he was prepared to prove every cations, one of which was in the Atlantic and Great
charge he had made. Nothing ever came of the Western's purchase of a large amount of stocks and
prosecution.
bonds of the Cleveland, Columbus, Cincinnati and
The lease of the Atlantic and Great Western Rail- Indianapolis Railroad Company, in the raising of the
road had scarcely been signed and come into force, money for which purpose the Erie Railway Company
when it was announced that that company, on July had endorsed the Atlantic and Great Western Railist,
had defaulted in London in the payment of the road Company's obligations.
interest on its firstconsolidated mortgage bonds. Dunan, in his affidavit in support of the charges,
Following this discouraging news the situation of deposed that the current expenses for 1872 should
Erie was further disturbed by the instituting of pro- have been further reduced $400,000, the value of
ceedings against the Company, before Attorney-Gen- equipment destroyed during that year, no portion of
eral Pratt, by John C. Angell, claiming to be a stock which was ever made good in the equipment account;
and bondholder of the Company, praying for the that Duncan, Sherman & Co. were charged with
intervention of the State, for the benefit of the $750,000 in notes of the Erie Railway Company
stockholders and bona-fide creditors, in procuring a given to that firm, which were ultimately paid in
dissolution of the Company, and the organization of cash, and the charge stood unexplained on the books
a new corporation, free from its existing embarrass- of the Company nearly twelve months, when Dunan
ments.
was instructed to credit Duncan, Sherman & Co.
At the hearing at Albany July 7th, Angell was against said charge by the purchase of 5,000 shares
represented by John M. Hill as counsel. Ex-Judge of Buffalo, New York and Erie Railroad stock, at
William Fullerton appeared as the legal represent- $150 per share. The stock of this Company was
ative of the Erie Protective Committee of London, selling during 1873, when the Erie purchase was
the head and adviser of which was James McHenry. made, at 90, and Dunan declared that the shares
The Erie Railway Company's counsel were Hon. were purchased by the Directors of the Erie Rail-
William M. Evarts and ex-Judge W D. Shipman. way Company for $450,000, or $300,000 less than the
The proceedings were founded on the affidavit of amount charged the Company, which " was divided
ex-Auditor Dunan, wherein the charges he had made between some persons to the deponent unknown " ;
in his exposures of March, 1S74, were reiterated, that Mr. Watson bought coal lands in his own name
Angell declared in his deposition, besides recounting and sold them to the Pennsylvania companies leased
the story of the alleged false dividends, that the by the Eric, the Company having no legal right to
floating debt of the Company was in excess of make such purchases; that the purchases were made