Civil War and Reconstruction in Alabama Part 36

George B. Holmes, of the firm of Holmes & Goldthwaite, bankers, testified that Gilmer, president of the South and North Alabama Railroad (Stanton had all the roads in need of "boodle" working with him), asked him for $25,000 to be used at the capitol. Gilmer told Holmes that the banker of the road had refused it, as had also the Farley bank. Finally, Farley and Holmes each agreed to furnish $12,000 to Gilmer. John Hardy, the chairman of the committee, had asked for $25,000 to oil the bearings of the political machine, and for that amount had agreed to have the bill pa.s.sed.

At the last moment Hardy demanded $10,000 more, which Holmes obtained from Josiah Morris. The committee was thus gotten into condition "to report within fifteen minutes," and the legislature made ready to accept the report.[1661] Two years later, Governor Lindsay stated in his message that the Alabama and Chattanooga $2,000,000 bill had not pa.s.sed the legislature by the two-thirds vote as required by law.[1662] The law provided for the issue of the state bonds for $2,000,000 from time to time as the road was completed. Instead, however, they were issued in reckless haste, within a month, and hurried away to Europe for sale. The proceeds were used to build a hotel and an opera house in Chattanooga, where Stanton was accused of trying to imitate Fiske and Gould of Erie.[1663]

When Governor Lindsay went into office, he could not find the "scratch of a pen" relating to railroad indors.e.m.e.nt. Governor Smith, as later developments showed, had become careless with his bond indors.e.m.e.nt and kept no records, or else destroyed them or carried them away. Auditor Reynolds reported in 1871 that his office had official knowledge only of the indors.e.m.e.nt of the Mobile and Montgomery road.[1664] In his message of January 24, 1871, Lindsay said, "To what extent bonds under the various statutes have been indorsed and issued by the state it is impossible to inform you. No record can be found in any department of the action of the executive in this regard." None of the securities required by law could be found. Lindsay was unable to ascertain even the form of the indorsed bonds, except those of the Mobile and Montgomery and the Montgomery and Eufaula roads. Lindsay telegraphed to Smith's secretary, who replied that there was no record of the bond issues except the certificates of the railroad presidents. Lindsay found some of these, which were plain certificates: "This is to certify that five more miles of the (----) railroad has been finished." On each five-mile certificate, like the one above, the road drew $80,000. Yet the law was strict in requiring proof of completion, of good rails, bridges, road-bed, and equipment. At this time 45 or 50 miles of the Alabama and Chattanooga road had not been completed, and 50 miles more had only a temporary track hastily thrown together in order to get the indors.e.m.e.nt. Governor Lindsay believed that the road as planned promised great success, and was of the opinion that had the bonds been issued according to law the road would have been completed. He had to correspond with the railroad officials in order to ascertain the amount of the bonds.[1665] A few days before Smith went out of office he reported $4,000,000 indors.e.m.e.nt on 244 miles of the Alabama and Chattanooga road.

Lindsay found no record of this. Almost immediately (January, 1871) the Alabama and Chattanooga road defaulted in payment of interest, and Lindsay was authorized by the legislature to go to New York and provide for the payment of interest on 4000 bonds legally issued and held by innocent purchasers.[1666] Statements were constantly appearing in the state press that fraudulent issues had been made, and the Democratic papers were warning purchasers against them, declaring that when the people of Alabama again came into power, they had no intention of paying them.

The carpet-bag regime had numerous financial agents in New York, Philadelphia, Boston, London, Germany, and elsewhere. Most of the agents in New York gave Lindsay a.s.sistance in his investigations. Souter & Company stated they had sold 4000 first mortgage Alabama and Chattanooga bonds (all that were legal), and 2000 state bonds for the Alabama and Chattanooga Company, all for more than 90 cents on the dollar. Erlanger et Cie., of Paris, had purchased the state bonds at 95 cents in gold. Lindsay soon discovered that 1300 Alabama and Chattanooga bonds in excess had been issued, 580 in excess of what the road would be ent.i.tled to when completed. Braunfels of Erlanger et Cie. testified that he had loaned $300,000 on 500 bonds numbered between 4000 and 4720. The trustees under the first deed of trust held bonds 4720 to 4800 and had refused to sell them, knowing them to be fraudulent; 344 bonds of the fraudulent excess had been partly sold and partly hypothecated to Drexel & Company of Philadelphia; thirty had been hypothecated to a firm in Boston for locomotives. Lindsay saw some of these fraudulent bonds, which were signed by Governor Smith and sealed with the seal of the state.[1667] Lindsay, through the state agents, Duncan, Sherman, & Company, recognized as legal the first 4000 of these indorsed bonds and the 2000 state bonds and ordered interest to be paid on them. All the others were rejected as fraudulent.[1668]

The acts of February 25 and March 8, 1871,[1669] authorized the governor to pay interest on the Alabama and Chattanooga bonds which were in the hands of innocent purchasers on January 1, 1871. At that date at least 500 of the fraudulent issue had not been sold. The other 700 or 800 bonds numbered above 4000 were declared fraudulent by Lindsay on the ground that the part of road which called for the extra bonds simply did not exist. At this time he paid interest on the railroad bonds, amounting to $545,000,[1670] and later to $834,000. No interest was paid on bonds held by the road or hypothecated by its officials. The governor was authorized to proceed against the road, and, in July 1871, Colonel John H. Gindrat, the governor's secretary, was ordered to seize the road and act as receiver. The road had ceased running two weeks before. Stanton claimed that the default had been caused by the threats of repudiation, and when Gindrat went to take charge every possible obstacle and embarra.s.sment were imposed by the company. Besides, at the Mississippi end of the line the employees had seized the road in order to secure their pay. Gindrat pacified them, and went slowly along the road toward Georgia, where he was stopped at the state line. Not only had Alabama indorsed that part of the road within Georgia and Tennessee, for $16,000 a mile, but Georgia had also indorsed it for $8000 a mile, and the part within her boundaries she seized. The governor was forced to employ a large number of attorneys and inst.i.tute legal proceedings, not only in Alabama, but also in Georgia, Tennessee, Mississippi, and in the Federal courts. Bullock, the carpet-bag governor of Georgia, would not run the road in Georgia in connection with the Alabama section, and not until there was a new governor (Conley) could connections be made over the whole line.[1671]

For his action in repudiating the fraudulent bonds and in seizing the road, Lindsay was much abused by all the railroad interests, by the hungry promoters who wanted more money from the state, and by a section of his own party which was influenced by prominent Democrats who were officers of the road,[1672] and especially by influential Democratic lawyers. This fact was important in weakening the Democratic cause in 1872. There were some who opposed the seizure of the road because they believed that in the then unsettled condition of affairs the state would not be able to manage the road successfully; there were others who believed that the state should not acknowledge the legality of the indors.e.m.e.nt by seizure of the road. The Debt Commission in 1876 reported that, although the laws were strict, yet they had been violated in letter and in spirit before indors.e.m.e.nt. But though many (including the Debt Commission) believed the issues illegal, yet by the seizure of the road the state acknowledged the obligations.[1673]

The history of the road while in the hands of the state authorities was not pleasant to Democrat or Radical. The state had first seized the section of the road that was in Alabama, and had gone into the state courts to get the remainder. The litigation promised to be endless, and the case was taken to the Federal courts. Finally the road was sold at a bankrupt sale, and Lindsay purchased it for the state, paying $312,000.

The Circuit Court reversed this action, and there was a new case in which Busteed, district judge, adjudged the company bankrupt. In May, 1872, the Federal court placed the road in the hands of receivers for the first mortgage bondholders, who were to issue $1,200,000 in certificates to run the road,--this to be a _lien prior to the claim of the state_. August 24, 1874, the same court placed the road in the hands of the trustees of the first mortgage bondholders.

The road, while in the hands of the state receiver, was either badly managed or was unsuccessful because of the obstruction by the other roads and by capitalists. Several attempts were made, by Governors Lindsay, Lewis, and Houston, to sell the road, but with no success. Finally, in 1876, the Debt Commission arranged with the holders of the first mortgage bonds to turn over to them the whole claim of the state to the road, the state paying $1,000,000, besides the interest, to be out of the business.[1674]

Governor Lindsay had paid $834,000 interest on the Alabama and Chattanooga bonds, and in 1874 there were arrears amounting to $1,054,000.[1675]

Congress had made a grant of land, six sections per mile, amounting to 1,000,000 acres, for all the roads within the boundaries of Alabama, and the state held a mortgage on this land. Much of it was sold fraudulently by the railroad company, and t.i.tles were given where there had been no sales. One railroad agent pocketed $33,447.97 received from fraudulent sales of this land. The state never received a cent.[1676]

Other Indorsed Railroads

The story of the other roads that applied for aid is similar, though shorter and of a meaner nature. The Savannah and Memphis road was the only one that failed to default.[1677] It was indorsed for $640,000, but when the House committee was investigating, in 1871, as there was no record of any indors.e.m.e.nt, the president refused to appear or to give any information.[1678] Later it was ascertained that at the time that the road was worth only $263,000 it had been indorsed to the extent of $320,000.[1679]

The South and North Alabama Railroad was a persistent applicant for legislative favors. On December 30, 1868, the available portion of the "two and three per cent fund," amounting to $691,789.43, was turned over to the South and North road.[1680] The road secured indors.e.m.e.nt at the rate of $16,000 a mile along with other roads, but this was not enough, and, on March 3, 1870, the legislature increased its indors.e.m.e.nt to $22,000 a mile.[1681] Governor Smith knew so little of what he did in regard to railroads that in his last message he stated that the South and North road was indorsed for $1,440,000, that is, for ninety miles at $16,000 a mile,[1682] while he raised the indors.e.m.e.nt of the Selma and Gulf to $22,000 a mile, thus confusing the two roads. The House Railroad Committee declared that by means of bribery the road had secured one hundred miles of indors.e.m.e.nt, amounting to $2,200,000.[1683] When Lindsay was asked to indorse more bonds for this road, he made an investigation which convinced him that too many bonds had already been issued, and he refused to sign any more. Under the law the road was ent.i.tled to 1900 one-thousand-dollar indorsed bonds, but had received 2200,[1684] an indors.e.m.e.nt of $2,200,000, while the road equipped was valued at only $1,625,200.[1685] When it became known that fraudulent issues had been made, the Investigating Committee called before them the ex-treasurer of the state, Arthur Bingham, of Ohio. He claimed and was allowed the const.i.tutional privilege of refusing to testify on the ground that his testimony would tend to incriminate himself.[1686] In 1870 it was estimated that including the "three per cent" fund the road had received from the state $2,000,000 more than the cost of building it.[1687]

Governor Lewis, in 1873, reported that the South and North road was indorsed for $4,026,000, including $2,200,000 that was not recorded on the books of the state.[1688]

[Ill.u.s.tration: SOME RECONSTRUCTIONISTS.

GOVERNOR L. E. PARSONS.

GOVERNOR WILLIAM H. SMITH.

GOVERNOR D. P. LEWIS.

NEGRO MEMBERS OF CONVENTION OF 1875 are on the left. The white man in the back row is Sam. Rice.]

The East Alabama and Cincinnati corporation consisted of Governor W. H.

Smith, three senators (two of whom were J. J. Hinds and J. L. Pennington), and two members of the lower house. Stanton of the Alabama and Chattanooga was also connected with it; in fact, he was connected in some way with nearly all the schemes to secure state aid. The road was mortgaged to Henry Clews & Company for $500,000. It had no money of its own, but secured state indors.e.m.e.nt for $400,000 and a bond issue of $25,000 from the town of Opelika. This indors.e.m.e.nt by Governor Smith was not discovered until 1871, when Lindsay was accused of issuing the bonds.

This he flatly denied, and he was correct. The Tennessee and Coosa rivers road had $33,513.25, if no more, of the "two per cent fund." On March 2, 1870, that road was released from its indebtedness to the state (part of the "two and three per cent funds") on condition that it apply for no further aid. But now, in order to get the indors.e.m.e.nt, a part of this road was transferred to the East Alabama and Cincinnati road, to pa.s.s as a new road. With an indors.e.m.e.nt of $400,000 besides the $25,000 Opelika bonds, the road equipped was valued at only $264,150.[1689]

The Selma and Gulf was another road without resources of its own, and, so far as it was completed, was built with state aid. Governor Smith, in clear violation of the law, the committee reported, indorsed the road for $480,000. Some one, probably Smith, though Lindsay was accused of it, raised this amount to $640,000, $160,000 of which was not recorded. At this time the road was valued at $424,900, and the company threatened to default unless further aid was extended. Smith thought that the road was indorsed for $22,000 a mile and reported $660,000 indors.e.m.e.nt.[1690]

The Mobile and Alabama Grand Trunk road, valued at $704,225, was indorsed by the state for $800,000. The city of Mobile also issued $1,000,000 in bonds for this road.[1691] There was no record of an application for aid from the New Orleans and Selma Railroad. Neither Smith nor Lindsay reported it, yet its financial agent had secretly secured an indors.e.m.e.nt of $320,000, contrary to law. The road was valued at $255,350. It had no resources except $140,000 in Dallas County bonds, and its president, Colonel William M. Byrd, resigned rather than be a party to the stealing.[1692]

The promoters of the Selma, Marion, and Memphis road placed General N. B.

Forrest at the head of the enterprise, and for three years he worked hard to make the road a success. Governor Smith indorsed the road for $720,000, or $18,000 a mile, when only forty miles were completed. In 1873 the road was valued at $738,400. When the company failed, as was intended from the first, General Forrest gave up every dollar he could raise in order to pay debts due on contracts, and he himself was left a poor man.[1693]

The Montgomery and Eufaula road obtained something over $30,000 of the "three per cent fund" from the state, and in 1868 the governor was authorized by the legislature to indorse the road, notwithstanding this debt to the state, which was considered simply as an indors.e.m.e.nt.[1694]

Under this act the road was indorsed for $1,280,000, and in addition state direct bonds to the amount of $300,000 were issued to the company in 1870.

For this loan there was no security. Lewis Owen, a former president, refused to answer when it was charged that bribery had been used to secure the pa.s.sage of the bill. At this time the road was valued at $825,289. In 1873 capitalists offered to lease the road for enough to pay the interest on its bonds, provided the state would release the road from all claims and give to it the $330,000 already loaned. This was done. Later it was seized by the state and eventually sold for sufficient money to cover losses caused by the indors.e.m.e.nt.[1695]

The Mobile and Montgomery road secured $2,500,000 by special act of the legislature.[1696] The road was valued at $2,516,250[1697] and was already built, hence the indors.e.m.e.nt was safe.

The total indors.e.m.e.nt was about $17,000,000.

VALUE OF ALL RAILROADS IN THE STATE (FROM THE AUDITOR'S REPORTS)

1871, 1496 miles $25,943,052.59 1872, 1629 miles 29,580,737.64 1873, 1793 miles 25,408,110.76 1874, ---- miles 22,747,444.00 1875, ---- miles 12,033,763.39 1875, (returns from railroad officials) 9,654,684.99

SUMMARY

======================================================== NAME OF ROAD LENGTH VALUE INDORs.e.m.e.nT VALUE PER PER OF MILE MILE ROAD -------------- ------ ------- ----------- ------------- Alabama and Chattanooga 295 $15,000 $16,000 $4,018,388.00 E. Alabama and Cincinnati 25 10,000 16,000 264,150.00 Mobile and Alabama G.T. 50 12,000 16,000 704,225.00 Montgomery and Eufaula 60 13,000 16,000 1,157,071.60 Mobile and Montgomery 10,600 16,000 2,516,250.00 Savannah and Memphis 40 10,000 16,000 498,810.00 Selma and Gulf 40 10,000 16,000 424,900.00 Selma, Marion, and Memphis 45 14,000 16,000 738,400.00 New Orleans and Selma 20 12,000 16,000 225,350.00 South and North Alabama 100 15,000 22,000 2,877,730.00 ========================================================

======================================= INDORs.e.m.e.nT PRESENT REMARKS OF ROAD ROAD ---------------- ---------- ----------- Ala. Great Seized by $5,300,000[1698] Southern state.

Completed.

Never 400,000 ---- completed.

Mobile and 880,000[1699] Birm'gh'm ---- Central of Seized and 1,280,000[1700] Georgia leased by the state.

L'sville and 2,500,000[1701] Nashville ---- Did not 640,000 ---- default; never completed.

640,000[1702] ---- Never completed.

Never 765,000[1703] ---- completed.

B'ham, Never 320,000 Selma & completed.

N.O. L'sville and 4,026,000[1704] Nashville ---- =======================================

County and Town Aid to Railroads

An act of December 31, 1868, authorized the counties, towns, and cities to subscribe to railroad stock. The road corporation was to be voted on by the people. If "no subscription" was voted, a new election might be ordered within twelve months, and if again voted down, the matter was to be considered as settled. If a subscription was voted, an extra tax was to be levied to pay the interest on the bonds; the taxpayer was to be presented with a tax receipt which was good for its face value in the county or city railroad stock.[1705] Several of the counties and towns issued bonds and incurred heavy debts which have burdened them for years.

No one seems to have profited by the issues except the promoters.[1706]

The counties that suffered worst from Reconstruction bond issues were Randolph, Chambers, Lee, Tallapoosa, and Pickens. These were hopelessly burdened with debt and became known as the "strangulated" counties. There was, after the Democrats came into power, much legislation for their relief. The state gave them the state taxes to a.s.sist in paying off the debt and also loaned money to them. Several cities and towns, notably Mobile, Selma, and Opelika, were so deeply in debt that they were unable to pay interest on their debts. They lost their charters, ceased to be cities, and became districts under the direct control of the governor.

There are still several such districts in the state. The const.i.tution of 1875 forbade state, counties, or towns to engage in works of internal improvement, or to lend money or credit to such, or to any private or corporate enterprise.

It is impossible to secure complete statistics of the railroad bond issues of counties and towns. Some issues were made in ignorance, without authority of law, others were made under the provisions of a general law.

Naturally, the counties that suffered most were those of the Black Belt under carpet-bag control. The following is a summary of the issues made under special acts:--

================================================================= COUNTY OR TOWN DATE AMOUNT ROAD AIDED AUTHORITY VOTE ---------- ---- --------- --------------- --------- ------------- Barbour ---- ---- Vicksburg and Act, Dec. ---- Brunswick 31, 1868 Chambers ---- $150,000 East Alabama Act, Dec. and Cincinnati 31, 1868 ---- Dallas ---- 140,000 New Orleans and Act, Dec. Selma 31, 1868 ---- Greene 1869 80,000 Selma, Marion, Act, Mar. and Memphis 3, 1870 1011 to 550 Hale 1869 60,000 Selma, Marion, Act, Mar. and Memphis 3, 1870 2260 to 301 Lee ---- 275,000 East Alabama Act, Dec. and Cincinnati 31, 1868 ---- Madison 1873 130,000 Memphis and Act, Mar. Charleston 27, 1873 Also earlier Pickens 1869 100,000 Selma, Marion, Act, Mar. and Memphis 3, 1870 1212 to 607 Randolph ---- 100,000 ---- Act, Dec. 31, 1868 ---- Tallapoosa ---- 125,000 ---- ---- ---- Eutaw 1869 20,000 Selma, Marion, Act, Mar. and Memphis 2, 1870 98 to 35 Greensboro 1869 15,000 Selma, Marion, Act, Mar. and Memphis 3, 1870 164 to 1 Mobile 1871 1,000,000 Mobile and Act, Mar. Northwestern 8, 1871 ---- Mobile 1873 200,000 ---- Act, Mar. 7, 1873 ---- Opelika ---- 25,000 East Alabama and Cincinnati ---- ---- Prattville 1872 50,000 South and North Act, Jan. Alabama 23, 1872 ---- Troy 1868 75,000 Mobile and Act, Oct. Girard 8, 1868 ---- =================================================================

CHAPTER XIX

RECONSTRUCTION IN THE SCHOOLS

School System before Reconstruction

The public school system of the state of Alabama was organized in 1854, and was an expansion of the Mobile system, which was partly native and partly modelled on the New York-New England systems.[1707] By 1856 it was in good working order. The school fund for 1855 was $237,515.00; for 1856, $267,694.41, and the number of children in attendance was 100,279, which was about one-fourth of the white population. For 1857 the fund amounted to $281,874.41; for 1858, $564,210.46, with an attendance of 98,274 children.[1708] The schools were not wholly free, since those parents who were able to do so paid part of the tuition.[1709] In 1860 there were also 206 academies, with an enrolment of 10,778 pupils, and in the state colleges there were 2120 students.